Essex Property Trust Inc at Citi Global Property Conference

Mar 02, 2020 PM UTC 查看原文

ESS - Essex Property Trust Inc
Essex Property Trust Inc at Citi Global Property Conference
Mar 02, 2020 / 03:20PM GMT

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Corporate Participants
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* Michael J. Schall
Essex Property Trust, Inc. - President, CEO & Director

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Conference Call Participants
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* Michael Jason Bilerman
Citigroup Inc, Research Division - MD, Head of the US Real Estate & Lodging Research and Senior Real Estate Analyst
* Nicholas Gregory Joseph
Citigroup Inc, Research Division - Director & Senior Analyst

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Presentation
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Michael Jason Bilerman, Citigroup Inc, Research Division - MD, Head of the US Real Estate & Lodging Research and Senior Real Estate Analyst [1]
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CEO conference. I'm Michael Bilerman. I'm here with Nick Joseph. We're extraordinarily pleased to have with us Essex' Mike Schall. This session is for investing clients only. If media or other individuals are on the line, please disconnect now. Disclosures are up here and available on the webcast. For those in the room or on the webcast, you can sign into liveqa.com and enter code citi2020 to submit any questions or you can raise your hand in the room.

Mike, I'll turn it over to you to introduce Rylan and introduce your company and provide the audience with 3 reasons why investors should buy Essex' stock today, and then we'll begin Q&A.

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [2]
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Okay. Very good. I guess, to start, I would like to thank Michael and Nick and Citi for this great conference. It's one of our favorites, for sure, and thank you all for joining us today.

Introduce Rylan. Rylan Burns is our Head of IR. Normally, we have a much larger cadre of people. They decided to remain on the West Coast and not have all the senior executive team in one place and do some contingency planning surrounding our famous coronavirus or COVID-19 outbreak.

And so by way of background, I'll comment that Essex is an S&P 500 company that owns and operates over 60,000 apartment units along the West Coast. These are the coastal urban markets from Seattle to San Diego. These are areas with continuing housing shortages, recently estimated by McKinsey & Co to be 3.5 million in California, the same number that our Governor, Governor Newsom, has pledged to produce between now and 2025. There are also significant constraints to the production of housing, especially in California but really up and down in the West Coast. And the economies continue to be very robust, especially the tech-oriented markets of Seattle and Northern California.

And in terms of the 3 reasons to own the stock, I would say number one would be the huge shortage of housing on the West Coast, and the fact that the constraints to build new housing are so extreme in California. The NIMBY movements and a variety of other factors limit the production of housing. Number two, I'd say, is the robust economies. The -- certainly, the tech markets tend to pretty significantly outperform the U.S. average in terms of job growth and produce high-paying, very high-quality jobs. And so it's pretty difficult sometimes to get exposure to those jobs, and we have perhaps more than our fair share of them. And then finally, I would point to the track record of the company, which over 25 years-plus, we have, I think, produced a compounded annual return to shareholders of around 17%. Actually, I think it was around 17%. Now it's 16.5% given last week or something like that, but the company has done, I think, extraordinarily well over a very long period of time.

And as Rylan just said, he said you can throw in a fourth one, which is given what happened last week, we're cheap, too. So -- which...

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [4]
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Bonus point. So if I -- can I make a couple of comments or we go right ahead?

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Michael Jason Bilerman, Citigroup Inc, Research Division - MD, Head of the US Real Estate & Lodging Research and Senior Real Estate Analyst [5]
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Yes. No, go ahead.

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [6]
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Okay. So I was going to comment on a couple of things. One, just to bring you up-to-date with respect to recent company events. So we received notice from S&P earlier this year that we have become a S&P 500 Dividend Aristocrat, and having, of course, raised our dividend each year for the last 25 years. And recently, we announced a 26th dividend increase, this time 6.5%. And as noted on our Q4 conference call, we bought out our partners' 45% interest in a portfolio of apartment buildings that was valued -- total value of just over $1 billion. And then in February, we issued $500 million in 12-year notes yielding 2.7% as part of the financing, and we'll delever that transaction in the months ahead. And then finally, we've provided a preliminary revenue update through February on Page 32 of our February-March investor presentation, which, of course, is available on our website under the Investor tab. And then there's a presentation sub-tab under that where that presentation is located.

For the 2 months ended February, revenue growth was 3.4%. That's versus the guidance midpoint of 3.1%. Scheduled rent, the scheduled rent component or the majority of that was -- grew at 3.2%, and other income grew at 11%. From these results, we conclude that essentially, we are on plan for the year, considering the inherent lumpiness of other income, which is a big contributor to the 3.4% growth rate. And we'll have some tougher comps for the next several months.

So -- and then maybe -- and to some extent of that, we should comment on coronavirus and COVID-19, a couple of comments there. First, we haven't seen any impact at this point in time in our leasing operations. I guess, second, it's too early to tell whether there will be an impact to job growth this year. And obviously, job growth drives demand for apartments and housing in general. And so it's key to our rent growth expectations. Three, the counties of San Francisco, Santa Clara, Orange and San Diego have declared a state of emergency, and that automatically triggers some rent caps at 10%. L.A. and Ventura counties already had a state of emergency declared because of the wildfires last year. So unless things continue to deteriorate significantly, I would expect us to have a very small impact on our outlook for 2020.

And finally, I'd say the -- our cost of capital has changed pretty dramatically in the last week. And it's -- we're not quite that nimble to change the machinery all that quickly. It remains to be seen exactly how that will impact transactions that we might be interested in. And essentially, we will throw away our game plan and create a new game plan going forward.

So with that, Michael and Nick, I'll turn it back to you.

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Questions and Answers
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Nicholas Gregory Joseph, Citigroup Inc, Research Division - Director & Senior Analyst [1]
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Great. So I appreciate those opening comments. We've been opening each session talking about ESG, which is of increasing importance for all company stakeholders. We want to know what is the one thing Essex is doing to improve your overall ESG score over the next 12 months.

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [2]
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Well, our ESG score actually has improved quite dramatically in the recent past. I think we just got an update from ISS, and I think -- see, I think we're a 6 on governance, mainly tied to the Maryland law issues, and that's not dissimilar from other REITs. And I think we're a 3 on each social and governance by ISS. Again, this is brand new. And so there's been pretty dramatic improvement. I would say that we started long ago with programs to -- for more efficient energy usage, lighting programs, et cetera, 10 to 15 years ago. We've been at GRESB Green Star, their highest rating, for the last 4 years. So it's something that we have definitely integrated into the company. I think the reason why our scores improved so significantly in the recent past is largely because we published a CSR report, and we just got through the process of uploading all the data that is required. And so finally, we've hit the radar screen of the rating agencies. And so those scores are looking much better.

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Michael Jason Bilerman, Citigroup Inc, Research Division - MD, Head of the US Real Estate & Lodging Research and Senior Real Estate Analyst [3]
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Mike, you talked a little bit about in your opening comments, one of the reasons why investors should buy your stock is the shortage of housing in your core West Coast markets, the cost also of housing. You look at what Jack Dorsey came out last week on San Francisco, saying this has gotten to be effectively insane from a competitiveness, from a talent, a cost of living and a whole bunch of other things. How does that -- how do you think about that from a competitive city perspective, having a lot of assets within San Francisco?

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [4]
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Yes, Michael, I would say that, yes, we don't have a huge concentration in San Francisco itself. I mean, our strategy is really to own property that's in proximity to the major job nodes. And so whether you commute into San Francisco, so we have a pretty broad portfolio throughout the major metros on the West Coast. But I wouldn't say it's necessarily centered in San Francisco, per se, but really in the surrounding Bay areas. I think we cover the Bay Area as well. Strategy-wise, we invest in property with qualities from B- to A+. Most of our portfolio, given that California produces less than 1% of its housing stock per year, that means in 20 years, you will have 20% of the housing stock is 20 years or less old. So by definition, we're more a reflection of the overall housing markets, which means 80%-plus of our properties are Bs and, again, reflecting the overall housing markets.

And we look at this affordability issue, let's say, by recognizing both pieces. So yes, we're expensive on a relative basis compared to other nonconstrained housing markets. That is for sure true. But actually, affordability is improving along the West Coast, and there's a chart in our book, our investor update that I just referred to, that makes this point. From 2010 to 2015, our rental growth was approximately 2x income growth. And I think everyone in this room would agree that over long periods of time, rents and incomes have got to grow somewhere similar to one another. Or else, you end up with an affordability problem.

From 2015 to current, that has really changed or it has really changed quite dramatically. So now incomes are growing at 1.5x rents from 2015 to 2020. So we see affordability actually getting better and recognize that there -- again, there are 2 variables to those things. You have incomes and you have rents. And so we think the ratio is actually improving, and we're seeing that in our operations because we have a little bit more strength this year than we had last year. And again, I think that the key question is, do you have industries that are able to pay more? Or how do you build in higher incomes, wage inflation, in effect, and will that be a factor here? And we think that it will be a factor, and we think it's a key factor given not only shortages, I think our employment rate in most of California markets is 2.5% -- 2% to 2.5%. And so you have that factor. I think it's going to push wages higher. And I think that, that largely fixes an affordability issue. At the same time, we don't argue that some of the tech companies will expand into other markets. We expect that to happen. And notably, $1 billion campus for Apple in Austin, but they're also expanding along the West Coast as well. And we -- every quarter, we give a whole list of recent major transactions, either property purchases or major leases involving the tech companies, and it appears to be pretty robust to us and sort of is it a confirming factor we keep our eye on how much commercial space, office space is being produced and who's creating those office buildings, because we need the new office supply in order to support continued job growth and continued housing development. And those relationships seem to make a lot of sense to us. It appears that the commercial development that should proceed housing development is occurring and is really a leading indicator and something that makes us feel pretty comfortable about the West Coast markets.

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Nicholas Gregory Joseph, Citigroup Inc, Research Division - Director & Senior Analyst [5]
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Maybe to Michael's broader question there. 35% of exposure to Northern California, Seattle has obviously been a beneficiary of some of that out-migration of job growth from California. And I know you reconsider other markets. But what would make you actually execute there, if it was an Austin or a Portland or any of the other markets that maybe are beneficiaries of out-migration from Northern California?

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [6]
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It's a discussion that we have with our Board once a year as part of our strategic planning process. And so there is a list of other markets that we would be interested in that they will follow some of the similar dynamics. Let's say, the problem with Sacramento or Phoenix or some of the other markets is as soon as apartment rents hit a certain point, because the single-family homes are so inexpensive, people say, "Okay. I'll just go buy a house." And we have plenty of homes being built. We've looked at those markets. We've been in Portland, for example, and have exited Portland for the same dynamic, the same reason that, yes, you get good rent growth for a period of time off a very low base, and then conditions tend to -- effectively, rents are capped as people make a different choice as it relates to housing. That really doesn't happen on the West Coast. So we would look to markets that are similar in dynamic to the West Coast. So that would take us mostly -- Portland is on that list, candidly, because it is changing somewhat. And -- but there are some other markets, mostly on the East Coast, that would be on that list.

And so there's always a dialogue and a discussion about the -- comparing the California markets against some other markets. And because at the end of the day, we're here to produce a total return to shareholders. And hey, if we think the West Coast is not competitive or is not going to generate some of the highest rent growth, then we're compelled to go somewhere else, is what I would argue. We've increased our exposure to Northern California largely because of the tech community there, the incredible expansion of Facebook. If you look -- if you drive up the Bayfront Expressway, Facebook originally bought the Sun Campus and then started building across the street. And it's continued to just add on. And I think the buildings are now about a mile long, still under construction. It seems to be never ending.

So to say that the techs -- tech companies' exposure to Silicon Valley is diminishing, I'd argue that because I think that, of course, it all comes back to talent and where are you going to find the right people to build your company. And I look at -- Google has -- or the Alphabet companies have 100 or so ideas that are still in production. And again, their plans in San Jose nearby Diridon Station, pretty impressive and pretty extensive, and it doesn't appear that it is slowing down. If anything, it's improving. And actually, maybe this would be surprising to everyone. The best affordability in our portfolio is actually in, if you just look at relationships, long-term historical averages between relationship between rents and incomes, it's actually best in Northern California not because rents have underperformed but because actually, wages have done really well in Norther California.

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Nicholas Gregory Joseph, Citigroup Inc, Research Division - Director & Senior Analyst [7]
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Then the first reason you mentioned was just the lack of supply in your markets, and Governor Newsom has been pretty active in terms of proposing some different housing policies. Is there anything that you think is realistic that could actually be implemented, that could change the supply equation in California?

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [8]
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It's a good question. And there are many pieces to this. So let me try to take some of them apart. So Governor Newsom has, I think, a pretty pragmatic approach relative to some of the other things that we've seen in other states. So California passed AB 1482, which is a statewide rent control and -- which means that rents are capped in the state at CPI, around 3% plus 5%, or around 8%. Essentially -- so that's one part of his program, which is, "Hey, let's provide some level of protection to the renters while we're trying to fix this broader housing issue." And I think in the recent budget, there were some pretty considerable investments that were proposed for housing investments, I think $1.7 billion. And whether that ultimately how it's allocated and what happens with it, I don't have those details. But -- so there is a movement definitely toward trying to fix this problem. There were 18 bills that were signed by Governor Newsom last fall in order to produce more housing, make accessory dwelling units more available and easily permitted and a variety of other things. SB 50, which hasn't passed, which is densification along the transit districts of major -- the BART stations and the other mass transit districts, I think, ultimately, that will be something that is likely to pass. So I think that, again, it's not going to happen all at once. And the political process obviously takes time, but I think that there's movement, positive movement, in terms of trying to solve the housing issue. And it just needs time to play itself out.

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Nicholas Gregory Joseph, Citigroup Inc, Research Division - Director & Senior Analyst [9]
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You mentioned the state of emergency, which impacts additional rent caps. How do those impact AB 1482? Is it more strenuous? Or is 1482 actually capping it at a lower rate already than what would go in place with the state of emergency?

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [10]
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Yes. The difference between -- they act together. So you have to comply with both in effect. So

1482, again, mandating statewide rent control, the others that are typically shorter-term in nature, although they could be extended. So I think these are 30-day -- the countywide states of emergency are 30 days, potentially extendable, again, trying to prevent landlords from taking advantage of dislocation in the market that might happen. If there was an outbreak of coronavirus, and they've mentioned, by the way, that they're all precautionary, that nothing -- there is no state of emergency now, it is really a state of preparedness for an emergency that's starting to build out. But I think the scenario that they're thinking could happen is that there's a stigma tied to something, coronavirus spreading somewhere, and it causes a mass exodus of people that want to go rent an apartment over there. So you move -- make a move and have an impediment there. So I think it's really focused on that. Again, I think it'll have a very nominal impact. And hopefully, this whole coronavirus thing will go away in the next several months, and we won't have to pay much attention to it.

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Nicholas Gregory Joseph, Citigroup Inc, Research Division - Director & Senior Analyst [11]
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So total impact on 1482, and everything else is still about 10 basis points.

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [12]
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Yes. So we estimate a 10 basis points for 1482. So -- and that's mostly tied to the short-term rentals. And so 1482, normally, we would charge a much higher rent on a short-term, a 3-month rental, let's say, and -- than we would on a 1-year rental. And so our ability to get that big premium is no longer there. It's limited by 1482.

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Nicholas Gregory Joseph, Citigroup Inc, Research Division - Director & Senior Analyst [13]
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So we saw Costa-Hawkins pretty soundly defeated 2 years ago, coming back on the ballot again this year with some tweaks. Kind of what's the game plan? And what's your expectation relative to last time?

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [14]
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I think it's -- I expect it to play out much like it did last time, which is, I think that there was a very strong effort from a very broad-based coalition that was organized by certainly California Apartment Association and other major landlords but included lots of different groups, say, covering the entire spectrum of the political scale and that opposed that proposition, Proposition 10, which would have repealed the Costa-Hawkins law that was passed in the mid-1990s. So I see it playing out pretty similarly. There were -- there's been some mention that the new proposal is more palatable to homeowners. And when you look at the detail of that, I think that, that's questionable because some of the limits require someone to own a home in their own name as opposed to through a family trust or some other limitations that still make the proposal, I think, questionable. And I think that the politics this time will be more in our favor. So last time, the Republicans opposed Prop. 10, but Governor Newsom, who was not governor yet, opposed it. But the Democrat Party endorsed Prop. 10's passage. I think this time, given all of the activity that the government has taken, AB 1482, various proposals to fund, housing development and to pave the way for more housing, and the belief that we need time, we need to give those policies time to take hold and to have the right outcome as opposed to having a proposal that comes from someone who is not intimately familiar with housing and has probably more of a no-growth agenda, have them dictate policy in California. I think that will be a very unfortunate outcome.

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Nicholas Gregory Joseph, Citigroup Inc, Research Division - Director & Senior Analyst [15]
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PropTech's been a big topic across the apartment space and investment into next-generation operating systems and platforms. I think you guys are rolling out 20,000 smart homes this year. Kind of what do you see the long-term opportunity in terms of margin expansion? And what are you doing both in apartment units and also kind of off of the system that can drive it?

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [16]
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Yes. Well, we have a considerable amount of new initiatives that we've been talking about or rolling out, and these have been a few years in production. And so we're finally, I think, at a very exciting point because the rollout, we're through a lot of the testing, and we're now in the rollout phase and -- which means they really work and -- which is pretty exciting because a lot of this has been pretty challenging to get technology into the apartment companies. It's been very slow in coming. The 2 -- there's 2 major software vendors in the space that have really, I think, not embraced some of these new technologies. And so the apartment industry has formed a consortium in effect to work through some of these technologies and invest in ones that can definitely help the industry become more efficient. So that entity is called Real Estate Technology Ventures. It's -- has a website, if you're interested, ret.vc. This is a consortium of apartment owners that own somewhere north of 1 million apartment units in the U.S. and Canada. MAA, Essex and UDR are kind of the sponsoring anchor investors. And so the significance of that is it's taken the venture capital world and found -- we've hired a CEO, John Helm, who effectively has mapped out the entire technology infrastructure and picked some areas along with our chief technology officers, who amazingly worked incredibly well together, to try to figure out what is the best technology that will help the apartment operators. And so from that has come a number of things. Both SmartRent, which is, I think of the 3 of us, we're all rolling out the same solution, SmartRent. We have an expectation of 20,000 units being rolled out this year. But last year, we completed an HR -- essentially, we're paperless on HR, and we completed a redo of our website in preparation for paperless mobile leasing, which we believe that we will be testing in the fourth quarter of this year, which effectively makes your iPhone able to execute a lease at that point in time. And that should be very exciting for the industry and much more efficient on-site.

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Nicholas Gregory Joseph, Citigroup Inc, Research Division - Director & Senior Analyst [17]
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And if you're tying that in terms of margin expansion opportunity, longer term, where do you think it could go?

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [18]
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I know there have been estimates thrown out there by some of the other apartment companies. And in terms of exactly how that plays out, I suspect it will -- it could chop 25, 50 basis points off of operating expenses on the on-site or the -- and a bigger chunk off of the administrative part of the company. But again, we're rolling it out. No doubt, we will find -- we will learn things as we go along. And so I think it's maybe a little bit too premature because we're going to also be incurring expenses along the way. We noted in the fourth quarter that G&A -- we charged off about $5 million in G&A tied to technology initiatives and website redo. So there's going to be some other costs along the way. So at the end of the day, I guess we're talking a couple of years down the road, I think there are some significant savings in the short term. There's going to be a lot of effort and time and probably some additional money spent in order to get there.

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Michael Jason Bilerman, Citigroup Inc, Research Division - MD, Head of the US Real Estate & Lodging Research and Senior Real Estate Analyst [19]
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Do you think any of it affects length of stay of your consumer or your customer?

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [20]
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Michael, length of stay has done nothing but increase. Our turnover rates used to be 70-ish percent and now are in the 40s. And so I think it's already happening. I think -- I can't tell you exactly why that's happening. I know in California markets, the transition from a renter to a homeowner is an incredibly onerous one, and that will tend to keep people renters longer. Clearly, that's a factor. And whether that continues, I suspect -- I don't see anything that would change the dynamic significantly here. We're told that millennials like to be free to move, but maybe they haven't moved as much as they thought they would.

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Nicholas Gregory Joseph, Citigroup Inc, Research Division - Director & Senior Analyst [21]
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Do we have any questions in the room? Maybe turning to external growth. You mentioned the change in the cost of capital pretty rapidly over the last week. How quickly can you kind of turn the ship in terms of what your plans were a week ago or 2 weeks ago versus where your cost of capital is now?

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [22]
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We're getting a lot better at that. If I think about 2019, late 2018, stock price was depressed. Interest rates were going up. Transaction markets, I would say, there was a bias toward higher cap rates, not lower cap rates. And then conditions changed incredibly dramatically in the first quarter. We ended up thinking we would be a net seller of property. We ended up buying $850 million worth of property last year, and we did it -- we originated about $150 million of preferred equity. And we had a $1 billion in development pipeline. So we have been incredibly active.

I think we can be pretty nimble because we've come to, I guess, expect at some level volatility in the marketplace. And we've just had to become pretty nimble. So we keep, for example, our internal NAV model, which we price every asset based on what's happening in the transaction market. So we think we have a very good idea of what our portfolio is worth, which is fundamental because we're not going to dilute NAV. We're -- and so we're going to be very careful about how we issue stock. And so we've learned and we have a list of properties that are -- will likely to sell, and we have a number of things that are happening. So this year, we expected to be active in the acquisition markets. And probably, I guess that's the biggest question mark is the acquisitions that we had 2 weeks ago, do we still feel the same way about them now? And I would say we are reevaluating that. And so I can't -- I have difficulty answering that question. I need another -- little bit more data in order to consider what that might mean. And so -- but maybe we will be more active. If the stock is at -- in the high -- in the mid-$2.80 range, like it is now, I would say that we'd be more active as a seller and potentially buying stock back.

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Nicholas Gregory Joseph, Citigroup Inc, Research Division - Director & Senior Analyst [23]
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Makes sense. How does kind of the volatility in the capital markets impact the availability to do those preferred deals, either mezz lending or preferred?

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [24]
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Well, I think that it's going to depend on the banks because the mezz/preferred business, where we're coming in, just by way of background. So we made a choice between we can be a direct developer or we can finance another developer's development deal. And so if we're going to finance someone else's deal, they will typically have a construction loan, about 55% loan to cost. We will come in from 55% to 85% with a preferred equity at 11% or 12%, and they provide 15% of the common equity. The reason why we do that is because we take no risk. We come in at the last minute before they start turning dirt and building the buildings. So all the costs are known at that point in time. They've executed their contract with their general contractor, and a lot of the risk is out of the equation. So I guess the key piece in that whole scenario is what will the lenders do? And how will the lenders, that construction financing, which tends to be one of the first things that if there's economic disruption, construction financing tends to be one of the first things that is disrupted. And so again, we're not tied to it directly. So -- because they have a construction loan when we are committed to those deals. And so it could affect our production level, but it's not going to have an impact on our existing transactions.

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Michael Jason Bilerman, Citigroup Inc, Research Division - MD, Head of the US Real Estate & Lodging Research and Senior Real Estate Analyst [25]
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All right. Anyone have a question before I go to rapid fire? All right. Will the multifamily sector have more or fewer public companies a year from now?

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [26]
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I'd say not fewer, so it's got to be more.

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Michael Jason Bilerman, Citigroup Inc, Research Division - MD, Head of the US Real Estate & Lodging Research and Senior Real Estate Analyst [27]
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Will -- what will same-store NOI be for the apartment sector overall, not Essex-specific, in 2021? And for reference, 2020 guidance is 3.1%.

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [28]
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Yes. I'd say for the sector, I'd say it is a little better. I'll say 3.3%.

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Michael Jason Bilerman, Citigroup Inc, Research Division - MD, Head of the US Real Estate & Lodging Research and Senior Real Estate Analyst [29]
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10-year treasury a year from now? It's currently at 1.06%.

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [30]
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I think we're really throwing darts here. I'd say 1.07%, 1.08%. 1.07%, let's say.

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Michael Jason Bilerman, Citigroup Inc, Research Division - MD, Head of the US Real Estate & Lodging Research and Senior Real Estate Analyst [31]
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What year will the U.S. enter a recession?

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [32]
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Our data vendors are starting to build recessions into their forecast, which is -- which we don't necessarily agree with. But we're starting to see it at, I will say, 2022.

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Michael Jason Bilerman, Citigroup Inc, Research Division - MD, Head of the US Real Estate & Lodging Research and Senior Real Estate Analyst [33]
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Great. Thank you very much.

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Michael J. Schall, Essex Property Trust, Inc. - President, CEO & Director [34]
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Thank you.

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