Equity Residential

Good day and welcome to the equity residential second quarter 2020 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Marty McKenna. Please go ahead.

Good morning, and thank you for joining us to discuss equity residential second quarter 2020 results. Our featured speakers today are Mark Perel, our President and CEO, Michael Manelis, our Chief Operating Officer, and Bob Perichana, our Chief Financial Officer. Please be advised that certain matters discussed during this conference call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. The company assumes no obligation to update or supplement these statements that become untrue because of subsequent events. Now I will turn it over to Mark Perel.

Good morning. Thank you all for joining us today. During one of the most challenging periods in our country and industry's history, We feel that our business showed considerable resiliency. We continue to be pleased with the financial strength of our customer base with their average annual household incomes of $164,000. Data suggests that only 4% of workers making more than $150,000 a year have recently lost their jobs compared to the low teens for lower income categories. We have collected about 97% of our residential rents during the second quarter, and attribute this to a customer base that remains well-employed and capable of meeting their obligations. July is trending similarly. We also demonstrated strong expense results. While the pandemic both added and subtracted costs from our operations, the innovations around leasing and service that we've described in prior calls have really taken hold, and we expect a durable reduction in our expense growth rate even after COVID is in the rearview mirror. And while our 90 basis point decline in same-store residential revenue was our first quarterly revenue decline in 10 years. Our residential business held up reasonably well under very trying circumstances. We also believe that we have stabilized our physical occupancy in 95%. In a moment, Michael will give you some color on what is going on in each of our markets, and Bob will address our expenses, non-residential operations, and balance sheet, and then we will welcome your questions. But before I turn it over, I want to highlight a couple of things. First, in the quarter, we stabilized two development properties, one in Cambridge, Massachusetts, and another in Seattle, Washington. The Cambridge asset is a 64-unit property adjacent to an existing asset of ours and was built for $47 million and stabilized at approximately a 5% yield on cost. This property complements our large existing Cambridge portfolio of six properties with about 1,100 units and is ideally suited to house the biotech employees working in that area. The other property consists of 137 units and is located in the Capitol Hill neighborhood of Seattle and cost $65 million to build. It stabilized at about a 5% yield on cost. In terms of transactions, we're pleased to close on two dispositions during the quarter and have sold more than $750 million in assets during 2020. We feel that we received strong pricing on this quarter's sales. as both sold assets were over 50 years old, and our combined disposition yield was 4.4%. But we note that these sales were priced prior to the pandemic, and so shouldn't be seen as a look through on current pricing. We have not acquired anything this year. But we like to think of ourselves as professional opportunists and have a balance sheet that is as strong as it has ever been, which will allow us to take advantage of opportunities when they present themselves. And now a bit about our capital allocation strategy. We have spoken on prior calls about the company broadening its portfolio by expanding into Denver and into the dense suburbs of our markets. For the last few years, we have been actively pruning our exposure in some urban locations, including Manhattan, and buying more dense suburban assets. Our current portfolio mix stands at about 55% urban and 45% suburban. We will continue to build and buy apartments in locations both urban and dense suburban, where affluent renters wish to live and in markets where we feel long-term returns will be maximized. We believe that our strategy is sufficiently flexible to retain high-quality urban properties while adding some breadth to the portfolio over time so we can continue to produce a reliable and growing stream of income for our shareholders. And now I will turn the call over to Michael Manelis.