Please stand by. We are about to begin. Good morning ladies and gentlemen and welcome to AvalonBay Communities' Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following remarks by the Company, we will conduct a question-and-answer session.

Thank you Eli and welcome to AvalonBay Communities' fourth quarter 2020 earnings conference call. Before we begin, please note that forward-looking statements may be made during this discussion. There are variety of risks and uncertainties associated with forward-looking statements and actual results may differ materially. There is a discussion of these risks and uncertainties in yesterday afternoon's press release as well as in the Company's Form 10-K and Form 10-Q filed with the SEC. As usual, this press release does include an attachment with definitions and reconciliations of non-GAAP financial measures and other terms, which may be used in today's discussion. The attachment is also available on our website at www.avalonbay.com/earnings and we encourage you to refer to this information during the review of our operating results and financial performance. With that, I'll turn the call over to Tim Naughton, Chairman and CEO of AvalonBay Communities for his remarks. Tim?

Thanks Jason and welcome to our Q4 call. With me today are Kevin O'Shea, Sean Breslin, Matt Birenbaum and for the first time Ben Schall. Sean, Kevin and I will provide commentary on the slides that we posted last night. And all of us will be available for Q&A afterwards. Before turning to our prepared remarks I would like to take a minute to introduce Ben who many of you have met either during his previous job or since the announcement in early December. Most recently Ben served as the CEO and President of Seritage Growth Properties where he led the company from its inception and oversaw the transformation of the company from a portfolio of stores into a mix of shopping, dining, entertainment mix these destinations. Prior to Seritage Ben was COO of Rouse Properties and owner of regional shopping malls and before that he was SVP with Vornado Realty Trust. Ben brings a deep background developing, operating, activating real estate in addition to broad experience in many markets in which we do business. This is only Ben's second week on the job. So he will likely a limited role on the call today, but I thought I'd given the floor for a couple of minutes to share a few comments. Ben?

Thank you Tim. It's terrific to be here and I'm truly honored by the opportunity to join this team and organization. Avalon Bay is one of the rare private group of companies in my mind, led by Tim and the senior team that has been able to successfully shape, build and grow an enterprise of this quality and scale and do so with a core culture with a focus on integrity, caring and continuous improvement that remain a real differentiator for the organization.

Great. Thanks Ben and great to have you and welcome again. Our prepared comments today will focus on providing a summary of Q4 results and some perspective on 2021, and how it impacts our plans for this year. Before I getting started on the slides maybe just offer a few introductory comments on the quarter and the year. The fourth quarter was a tough end to what was already a very challenging year for the company and the business. The normal effects of an economic downturn on the apartment sector were magnified by work from home mandates, civil unrest in our city centers and the growing strength of the sale market.

All right. Thanks Tim. Moving to slide 7, you could see the impact of the pandemic on physical occupancy and the absolute effective rent we achieved over the past year broken out between urban and suburban submarkets. Chart 1 reflects our suburban submarkets which makes up about two thirds of our portfolio. We experienced some deterioration in both occupancy and rate during the spring and summer of 2020, but have recovered most of the occupancy over the past four months and as of January, effective rental rates were up about 1% sequentially from December and a roughly 4% below where we restarted 2020. The primary driver of the weakness in our suburban portfolio has been the performance of assets located in job centered hubs where employers have adopted extended work from home policies and transit oriented developments with use of mass transit has declined materially during the pandemic. Some examples include assembly row in Boston, Tysons corner in Northern Virginia, Mount View and Cupertino in Northern California and Redmond in Washington State.

Thanks Sean. Turning to slide 9 we highlight our financial outlook for 2021. Although we prefer to provide our traditional full year outlook the uncertain resolution of the pandemic and the related regulatory orders including evictions moratorium across our footprint has reduced our visibility on a performance later this year. Consequently, for 2021, we are providing operating earnings outlook for the first quarter only and we are providing guidance for development, capital activity and other select items for the full year. Nevertheless, to assist investors in driving their own perspective on our outlook for the year we have enhanced our disclosure and expected performance in the first quarter 2021. Specifically we identified actual residential revenue performance in January, 2021, for our same-store communities which reflected a year-over-year decrease of 7.8% and a sequential decrease of 40 basis points from December 2020.

Thanks Kevin. Turning to slide 15, I thought I might provide some longer-term perspective on this downturn in our business. This slide shows an index for same-store based rental revenue since 1999 or over the 22 years and plus or minus since the Avalon and Bay merger. A couple of things worth mentioning here, first you can see the long-term trend is positive and reflects a healthy business. Over the last three cycles annual compounded same-store revenue growth has been roughly 3%. Rents have grown a little faster than that during the expansionary phase of the cycle generally contract for one to two years during a downturn as they're doing now and then re-accelerate during the recovery phase at the start of the next cycle. Housing has been a consistent performer over many cycles as demand has generally grow in tandem over the cycle with net completions roughly matching the pace of household formation most years except during recessions with a number of households temporarily contracts. During the downturns it can be difficult to project operating performances. No two downturns and recoveries look exactly alike. Just to demonstrate that the downturn in the early 2000s was reasonably deep for the apartment sector. In fact, it took almost 5 years for rents to recover back to their prior peak across our footprint. And rents didn't fully recover for 15 years. The downturn in the late 2000's was comparatively steeper as the economy and labor market was significantly impacted by the financial crisis and while it was steeper it was also shallower for the apartment sector as rental demand benefited from the correction in the for-sale housing sector. The current downturn brought on by the pandemic has been the steepest yet for the economy after the apartment sector and while we are…

Of course. Thank you. And we will go ahead and take our first question from Nick Joseph from Citi. Please go ahead.

Hi, it's here for Nick. I wanted to ask you sort of on development underwriting and ultimately bring that into the conversations because it's a little bit about mixed-use about you're now underwriting these projects, how are you thinking about those ancillary service locations that are going to be part of the community whether they be retail or even office and historically Avalon has partnered with others to do those. I think about the deal you bought in Virginia where Regency took the retail I think about assembly where federal obviously brought you to do the Reggie how do you think it's going to revolve? Can those pieces stay capitalized separately or will it require someone to come in and take a loss on retail or loss on office to support the multifamily rental effectively you have to get higher returns on multifamily to make the math work.

Yes, Michael I think we talked a bit about this in the past and obviously it's probably more interested just given the events of last few quarters, yes we talked about mixed-use. We pursued in a number ways often times partnering as you suggest whether it's with federal or Regency or a number of projects where it's more of a condo structure. We may be building out the core and shell and ultimately turning back at retail to them and that's been sort of the MO in cases where it's been a pretty significant pieces of a retail. We felt like it was, we are able to reasonably sort of separate the execution and helps with the management of the two pieces. We are also feeling fair bit of mix-use that I sort of think horizontal more kind of if you will where we may be assembling maybe semi site a good example of this where you would be there may be a separate adjacent used back there would be as part of the community but it was on the free sample not a condo structure but a free sample by a different retail developer that also had a for-sale housing component. It also had a restricted and age restricted component as well. So particularly the suburban locations we will look to do that. I would say it's kind of some of the infill locations will probably contain a partner with the some of the top retailers in the country then the third category, which I think is where your question was headed was when the users are so sort of linking where it's probably in the interest of the asset that it be controlled by a single entity where that entity is a partnership or whether we control the entity a 100%. I think probably our preferred solution that case is where we are again partnering with somebody's expert area of retail and underwrite help operate that but our partners venture with us and so we be looking at the economics of the entire venture together and trying to optimize them in terms of trade off, so we inevitably make between the ground plane which is because of the retail and the residential complex. So I think if you sort of fast forward over the next 5 to 10 years I think you'll see more of the third category emerging and companies like us will be partnering with agencies federals and agencies of the worlds like that to make that happen.

And then just in terms of the rent recovery, I know you pointed out that extraordinarily the timing and strength of recovered quickly in the submarkets is difficult to project. You made a comment about the early 2000 and San Jose didn't recover from rent perspective to prior peak for 15 years. I guess when you think about New York in terms of this which you still have a fair amount of exposure to get I guess what are you trying underwrite? So I would assume having a view would dictate your capital allocation decisions about rotating capital out of these markets or trying to go deeper overall if you have a 16 year timeframe that can make it a lot more difficult. So where is your mindset today about when you take the rent recovery and had fundamentals in New York and San Fransisco return?

Yes. Thanks. I didn't use the San Jose example to suggest that's what you think is going to happen to New York City and down town San Francisco. Obviously, San Jose case was extreme because there has been a big spike during the tech run-up in the late 90s, and in 2000. So a lot of that period of gain was just before sort of the tech crash but I think your point is, I think part of the point is that some of these can be long cycles. We still believe New York and San Francisco we believe in our costal market as an investment at the I would think they are going to be centers of innovation, homes and great research universities, extend over indexing in our view in terms of the knowledge economy we’re hiring in terms and productivity and intensity of knowledge that's contained in markets it's critically valuable particularly start ups and companies getting up the ground. Now those companies continue to grow and mature they are going to distribute the workforces as we have seen over the last year to satellite, some satellite markets and other markets and with the additional work from home hybrid positions maybe perhaps all over the math. So I think it's too early to underwrite sort of what relationship between demand and supply is going to look like over the next 5 years. We don't see those markets in long term decline to be clear. When you think customer the power core in this country it's still Washington the boss on the East coast and LA to San Francisco on the West Coast and those are long cycles too. Those aren't themselves over 5 or 10 years. So inevitably we are looking to allocate capital to your some of the other markets that I think some within a beneficiaries by may be some spillover effect from New York and San Francisco to DC Seattle or Boston as well as recent expansion markets Denver and southeast Florida. But there is probably other expansion markets in our future as well that they are likely that has some of the same characteristics research university, attractive knowledge workers as particularly some of these larger mature companies disperse their workforces across a wider geography.

New York, and Texas that will be other sort of sales to do it or just rating capital to expand.

Yes. I think don't think we are at a point where we think it probably makes sense to pursue sales just given the performances of markets right now. I think we, I think all of us we are going to feel a lot better when we see how much they bounce back, I am not saying they are going to bounce 100% back from where they were a year or even two years ago. But until it is little bit more visibility there I just don't think, I think the bit ask is just going to be too wide on assets in those market. And Sean that -- in urban markets we are seeing rents down 18% down more than that in Northern California and New York South of the city side. So I think it's it’s safe to say that some work probably the next growth is going to be for the portfolio just like if your Google or Facebook your net growth is going to in Mountain View and Park. So that doesn't mean you abandon those regions. So there is going to be core to, they are going to be continue to be core of our portfolio but it's probably where the growth is going to come from as it relates to from capital allocation standpoint.

Okay. Thanks Tim.

And we will go ahead and take our next question from Richard Hill from Morgan Stanley. Please go ahead.

Hey, good afternoon guys, and Ben it's nice to hear from you on AVB earnings call. Look forward to working with you. Hey guys I wanted to spend a little bit more time thinking about the bridge from 1Q versus 4Q. I recognize that the sales in 4Q probably had a $0.04 to $0.05 hit and I appreciate the additional disclosure on capitalized interest which is another $0.01 to $0.02 but it still seems like the guide is at mid point to the little bit lower than what maybe we were expecting. So as you think about that given the green shoots is it something to do with the mix of apartments coming online or how should we think about that difference which given the green shoots I would've expected maybe the guide to be called $0.05 to $0.07 higher. Maybe I am just trying to understand like how you get there and if you can break that down a little bit more for us?

Rich this is Kevin. Maybe I will sort of take a site of that I try to walk people through that in my opening remarks. So I don't know that I have a whole lot of details. So let me begin by maybe repeating that and then if you have further questions around that we can try to dive a little bit deeper. So just as a reference point we anticipate core FFO per share to midpoint declining from $2.02 in Q4 to the $1.90 in Q1 in terms of this $0.12 sequential decline relative to our budget what we have is an $0.08 sequential decline in residential same-store NOI, $0.04 sequential decline related to dispositions that were completed in the fourth quarter. You need to bear in mind, we did sale about $450 million of assets in the fourth quarter that were present for much of the fourth quarter and are no longer present in the first quarter. So that's the $0.04 sequential decline from that line item. $0.04 sequential decline as well from increased overhead in strategic initiatives and those total call it $0.16 or so and they are partially offset by sequential increase in other community classifications primarily which include increasing lease of NOI from development and a commercial NOI which is expected to recover sequentially because that was burden in Q4 by the way straight line rent receivables. So that was kind of a backdrop for it. Again it's hard for me to reconcile against your expectations would seem to have been about $0.05 higher but that's the backdrop. I would be happy to answer any follow-up questions you may have.

That's very helpful. That's very helpful and I follow all of that. What I was trying to understand a little bit more was the $0.08 headwind the same store NOI because it seems like the quarter is going to be maybe a little bit more challenging than 4Q despite some of the green shoots that have emerged and maybe I'm just asking a naive question but I wanted to maybe understand why same store NOI is a headwind versus 4Q despite what looks like to be improving occupancy and improving effective blended rents.

Yes Rich. This is Sean. I am going to provide some high level commentary on that that I think may help and then if you're looking for additional detail we can certainly take it offline but one thing to keep in mind here is that what we're talking about sort of green shoots in terms of leveling off of rents and such we do have sort of the cumulative effect of both lease rent reductions as well as the amortization of concessions that will bleed through the P&L as we move through 2021. So in other words the expectation would be as you look forward over the next couple of months the impact from the amortization of concessions and the cumulative effect of those lease rates will be higher than it has been in Q4. So that's something that I'm not sure people always think about but one sort of broad way to look at it as an example is we granted about $47 million in cash concessions in 2020. We only amortized about $16 million of those. So there is still another $31 million of concessions that will amortize through 2021. So that will continue as Tim mentioned his talking points to impact the growth rates as we move forward over the next several months. So that provides some additional color on the headwind.

Yes. That's very helpful guys and I think the simple explanation and sorry for complicated it is there is just an earned benefit that still has to burn off over time which makes it little bit more of a of a tougher comp but that's very helpful. Hey, one more just clarification question and I'll get back in the queue but that $0.04 of strategic initiative that you mentioned is that one time or is that reoccurring as we think about modeling?

It's recurring. It's part of our full year guidance for overhead costs which includes a significant component which is investment in building out our digital capabilities and other strategic initiatives and so it's the capability that we've been adding and continue to add to our business and is therefore occurring throughout the course of the year. So it's something that you can kind of think about as continuing on.

Yes Rich just add on to that one as well, we may talk about it in more detail in the coming quarter or two but it ties into some of the information that we provided back in sort of late ‘19 in terms of our investment in digital capabilities, AI, Machine Learning things of that sort that if anything has only accelerated as we've moved through the pandemic, if you think about what's been happening with virtual tours and self-guided tours and smart access and things of that sort I think if you talk to not only us but our peers and others there's even probably more conviction in making those investments and the ROI associated with them that we would expect to continue to invest in those capabilities over the next couple of years for sure and then see those payoffs come through.

Hey Rick just to add to that as we are making those investments in innovation there's a bit of a geography issue. You get it may be hitting the overhead line but the benefit oftentimes flowing through to the assets and so when we they're able to save some payroll things like that it may not be obvious because the payroll expense is a big number the property is a big number maybe compared to what the strategic initiative number is.

Got it. Guys thank you very much. I know this was sort of wonky modeling questions but I really appreciate you spending the time to detail it out a little bit more. Thanks guys.

And we'll now move to our next question from Rich Hightower with Evercore. Please go ahead.

Hey good afternoon guys and again welcome to Ben on these calls. So my first question I kind of want to hone in again on San Grancisco and New York and the big sequential occupancy gains in the fourth quarter. Obviously a lot of that must have been driven by pricing in the market as opposed to anything related to return to office or sort of the normal seasonal leasing pattern that we might consider but in pattern that we might consider but as you think about the page and the drivers of the demand going forward as we go through 2021, what do you think the key drivers are that we should be expecting and how does that overlay which is what is normally decreasing starting in the spring and how do we fold in return to office and how do you guys think about the moving parts giving the business is going to be a strange year in all respects?

I think the first shot at that and negative, but I think the factors that we would like to monitor our first what you mentioned in terms of basically reopening their offices and clung people back to work and mix-use environment. That is obviously a key driver here. As I mentioned earlier we are quite not expecting 100% to return but certainly a very high percentage are very likely to return. The second component is what I mentioned in my prepared remarks is for the reopening of these major urban universities that really do grow in knowledge but the international too but do occupy apartments in some of these major urban centers and it's not just the student by the staff, faculty, etc. etc. So we think of New York and San Francisco and markets like that that's pretty significant phenomena and then ultimately what's going to follow that is more business activity where there was corporate demand things of that sort for such that you can make 1% to 2% of the market. So the combination of those factors will really sort of drive demand what we will likely see is people lease apartment a little before they need to be here on campus or back at work or going to some consulting assignment etc. And so the timing which that is something I think we probably all be I think our view at this point based on what's happening with the pandemic and vaccination etc. is that it's probably sometime may be in the summer when you might see that happen depending on how the vaccination of the population occurs over the next few months here. So we could see employers want people back in the summer maybe fall when people are returning to school and stuff. So I think those are the key questions the timing of which is just be determined for to have a material impact on 2021 results however, given the lease expiration that we have from quarter to quarter you really would need to see that happen probably in the late spring to early summer to have any kind of meaningful impact on 2021 compared to what occurs in the fall where we only have maybe 20% to 30% of release expirations remaining you would see the list in 2022.

Okay, that's helpful color Sean. I guess my second question here you're obviously ramping up development starts this year. What's the chance that you guys even go bigger than the 650 to 850 guidance if you think we're really on the cusp of the next multi-year recovery in multifamily?

Well, it's a good question. As I mentioned in my prepared remarks at just some of the function of what we've seen in the market is closed the real estate markets as well as the capital market at this point we're basically funding that development with plan dispositions. Just given where our leverage is right now and trying to sort of protect our credit metrics where it stand. So and I think as we said in the past it's hard to with gain ratios of around 50% it's hard to sell too much if we want to double down we'd end up having to distribution and then it's just not capital. It's not as capital efficient. So I think what would have to happen is, the equity markets. I mean we had a good start today, I guess but the equity markets would need to recover more to level which we think sort of more reflective of intrinsic value and NAV where we might have some, we might have access to those markets as well to really expand the balance sheet in order to accommodate more development. Having said that not all deals we think are sort of ready to go. As I mentioned in my remarks for the most part we're focused on in markets that haven't been as impacted from the run rate standpoint. So that the yields are still at least the current basis so often we think sort of an appropriate risk-adjusted return. That's not true of the entire development of pipeline and how these deals work. You just don't go out and pick up some land options and start the next quarter. These things take even deals that are entitled can take a year or two years to sort of fully gestate before they're ready to start. So the number's probably not going to it's probably just can't flex up too much even if market conditions were great but it's, I suspect it's going to be in this range unless market conditions move dramatically one way or the other.

Got it. Thank you.

We'll take our next question from John Pawlowski from Green Street. Please go ahead.

Thanks, Matt could you give us a sense for the two Northern California distributions? How do you think values ultimate allowed to where you what you could have gotten on the sales pre-COVID and any cap rate color for those two deals?

Sure John. We sold the two deals in northern town the fourth quarter eastern was our only asset in Marin county. That's a pretty unique asset in a very supply constrained part of the world with very little existing stock almost no new construction. So I would say that one I don't think that the value there was really impacted much at all. We think the cap rate was a high threes maybe around a 39. So I'm not sure maybe it's down slightly from where it would have been a year ago but that's just such a special asset that it's a bit of a one-off story. The other asset I think we sold at the end of the year was Eaves Diamond Heights that's an older rent-controlled asset in the city of San Francisco and we were a little bit motivated there to close by year-end because the city through about initiative increased their transfer tax to the highest in the country at 6%. So there was definitely some dollar savings by closing before year end. That deal was about a 37 cap as 470,000 units. I would say a year ago that asset probably would have sold for 8% to 10% more, although it's hard to know maybe not as impacted in terms of the NOI as some of the other assets just because it was a rent-controlled asset and so some of the rents were below market but also may be less lift for the buyer on the way out because there will be more constraints on ability to raise rent. So probably a little lower data maybe than some other assets in San Francisco.

Okay. Great. Thanks. And then second question for Sean sticking with Northern California just curious your thoughts particularly in San Francisco, San Jose when a lot of your private competitors occupancy is well below your own level and it feels like the entire market's one to three months free and so the short question is are you going to be able to sustain the occupancy and sustain stable rents as your private competitors play catch up or do you feel like the floor is underneath or is it going to be a choppy few quarters here?

Yes John that's a good question and I think if you look at basically how the quarter unfolded and not just in Northern California but across some of the more impacted markets whether it's ones you referenced or a New York City or Redmond Washington state as an example is we've certainly seen rents decline as we've built occupancy and now they've sort of leveled off and the question kind of rolling forward is or do they just sort of bounce along the bottom here as we basically try to kind of hold occupancy where it is, we feel like for the most part across the portfolio we're pretty close to where we think market occupancies are and so rents should get better. The question is how much as the rest of the market sort of does what it does as you pointed out I think there's some of the other fears are going to be higher in occupancy some are lower trying to catch up but I think just given what we've seen the belief is that we probably just for the next couple quarters are going to kind of be bouncing around a little bit. I wouldn't say that we're expecting a sharp uptick, I wouldn't say that but should we expect some marginal improvement I think that's reasonable to assume given where the rents were to get the occupancy that we needed. Now we're trying to sort of stabilize a little bit so we should be able to compete without as much inventory available and therefore the rents won't need to be as soft I guess is the way I described that. Every pocket's a little bit different that was the way. I think you need to look at it in terms of what's happening. Is there new supplies or not new supply things like that do impact these sub-markets in potentially a meaningful way depending on what's going on there.

Okay. Great. Thanks for the time.

We'll take our next question from John Kim with BMO Capital Markets. Please go ahead.

Thank you. Comparing the downturn versus the prior recessions on page 14, it's very helpful, I guess one of the big similarities between now and early 2000s is the home ownership rates and the strength of the housing market and I'm wondering if you think this is a factor that's most important in terms of the pace recovery this time around or have landlords including yourselves aggressively cut the rent so that the recovery time could be quicker.

Hey John it's Tim. It's a good question. I'm definitely seeing the sell market strength. I think part of that is like the early 2000s is demography. As you start to see the kind of 30 to 34 year olds are the leading edge of the millennials come forward and start to purchase. I do think what's happening is you are seeing again just an acceleration of the folks that may have bought a year from now or two years from now three from now accelerate at first decisions because of what quality of life in the urban markets has been like over the last year. So yes we'll have to see when you look at it it's been our view, I think we've talked about this over the last two or three years that housing demand which we rent or sale is going to be more balanced over the next decade that we've seen over the last two decades. The last decade was kind of the renter decade. The decade before that was kind of the homeowner decade. There was some artificial factors driving in particularly in 2000s as you know those going on with terms of just for the home mortgage crisis. But yes , I just think just given kind of the mortgage finance system we have in place now think it's going to be driven more by fundamental factors and speculative factors and for a long time home ownership rates were just sad and it's like just 64% - 65% and they were kind level on a level and if you look at what's happening in terms of the growth and we've talked about this in terms of this growth single person or a single parent households that population is still growing. And then multi families is a better use for better housing choice for that group. So I think there's a lot of factors when you sort of put it all together to really does suggest sort of balance housing demand going forward. So today we're producing whatever close to the million around a million single family units and three or four maybe 40,000 the multifamily units that feels about right relative to marginal demand. I think it's been accelerated as we are speaking right now just because of the pandemic but as you look at over two, three, four year period it's a sort of strikes us is about sort of the right mix of supply to address marginal demand.

That's very helpful. Thank you. Second question is for Kevin, the impact in your earnings from concession to double this quarter versus last quarter, but can you remind us how the concessions have trended throughout the year last year for the average concessions be granted by each quarter.

Well, maybe Sean if you want to speak to the average concession value?

Yes. I mean I think what I can probably describe to is if you look at the leases that we signed kind of what the pace has been in terms of concession. So Q3, the average concession per lease signed was 1100 bucks. When you look at Q4, the average was 1315 but it did take down as we move through the quarter. So as an example October was 1450 a lease. November was 1400 December was 1190 and then they were down just under 1000 a lease in January. So the trend has been our balance in terms of the impact of concessions. In terms of the accounting event just one comment to reiterate what I mentioned earlier and Kevin is going to address it more clearly as well is we granted $47 million in cash concessions in 2020 but we did only amortize $16 million of them in 2020. So it's still $31 million in the deferred concessions in the book that will be amortized through 2021 and then in addition to that whatever concessions cash concessions we grant in 2021 will also prevents amortization. So hopefully that gives you some sense of sort of the headwind as we move in 2021 from the concessions that were granted that deferred 2020. I hope that answers your specific question. If you have a follow-up.

I can add a couple of things John. Kevin again. So just to give a sense to frame it if you kind of look at our earnings releases to start the discussion here for Sean mentioned on page 31 of our earnings release for the full year 2020 we granted $46.6 million of concessions. That's just the granted number. If you kind of go back in Q4 we granted about $19.5 million, Q3 granted about $15.3 million. So the difference pretty much is really what we will did in Q2. So that's going to be call it $12 million or so granted in Q2. And again what we amortized --

Is it fair to assume that quarter that year-over-year comps that will be withholding the concession going on?

It is a function of what concessions we grant in 2021 all of being equal if you just sort of stop today and you stop the concessions going to zero effective February 1, as an example what's on the books today the concession burn off amortization would be sort of in the April/May timeframe. We're still granting concessions maybe at a lower rate, but we're still granting concessions now. So it's very likely that the peak burn off for the amortization will drift into the summer some time depending on the volume of concessions that we grant and the amount of each concession over the next few months.

That's helpful. Thank you.

We will now take our next question from Austin Wurschmidt from KeyBanc. Please go ahead.

Great. Thanks guys. Just wanted to touch on sort of the occupancy rebound again and economic occupancy is now approaching kind of mid 95% range. I think you were 96% plus pre-pandemic. But anyhow, how do you change your view towards, continuing to build occupancy given I guess your view that it could be until Summer time until you start to see surge in demand as people firm up the back office dates and then into the fall for the student population? How does that kind of balance that continuing to grind down I guess on the concessions versus trying to build occupancy to give yourself, maybe some cushion as you get into the spring leasing season and the expiration start to increase?

Austin this is Sean. Good question. Kind of from strategy point over the 2-3 months as I mentioned in response to the couple of questions ago we think as we look across sub-urban market and urban market that we are in the range of consider market occupancy based on multiple data points that are available out there. We produce various other sort of like that and so we have got the ability triangulate into where we think market occupancy is that we are comfortable sort of operating around market occupancy to slightly above the 100 to 200 basis point. Anything beyond that and you're probably give it up too much rate to hold that higher occupancy. So while occupancy may drift up a little bit over the next couple of months here it wouldn't expected to spike materially somewhat of what we have seen in last four months. So for us it will be more about maintaining marginal improvements and physical occupancy and really trying to make sure we find where we can hope those rent and see sequential improvement in effective rents at that occupancy. That’s going forward for us in the sense that there is a pivot where we head in terms of macro environment that will certainly influence our strategy but that is the strategy as we see it today.

Got it. Thank you and then you referenced the 18% decline in rents. I think it was in reference to urban markets, but as we think about that recovery last quarter you did mention you've kind of gone further down in the renter pool from a credit perspective. Can you give us any type of metric to give us a sense of how that change in rental profile how significant it has been or maybe an affordability ratio comparison versus the years leading up to the pandemic?

Yes. No. Also good question. And one thing to be clear about is if any kind of our credit standards have become more stringent during the pandemic given the various regulatory orders that are out there particularly the eviction moratoria where we have deep reach down further in the rental pool is more from an income perspective and obviously rents are down. So people can qualify for apartments that maybe they couldn't qualify for last year when you go to New York City or San Francisco and the rents are down 25% but in terms of maybe where you might be going with this is their ability to pay in the future as a few rebounds and are trying to push through rent increases and while income levels are down, rents are down more than that. So actual rent income ratios have come in a little bit last few quarters which just tells us that there is more ability to absorb rent increases on the other side of the pandemic. We see a rebound and one thing to remember as it relates to concessions is well we have to amortize concession for GAAP purposes we don't amortize the concessions for the individual residents. So they may receive a month free as an example upfront but the next month they are striking a check for the full amount of the lease rent. So any renewal that we provide to them at some point in time that at least expires will typically be based off the lease rent as opposed to the base rent. So people are where they can afford what they're writing a check for as opposed to the effectiveness rent.

Right and what's the decrease in the gross or face rent if you will versus that 18%?

Yes. So if you look at it on a rent change basis as opposed to the blended values that we were talking about basically we had effective rounds that were down 112 but if you look at release rents they were down about 7%.

Yes. I saw that for the quarter. More curious I guess over the course of how that 18% number would compare and is income still down less than that face rent number when you remove the concession as you referenced?

That's correct yes. Yes. Incomes are down less than the reduction of rental rates.

Okay. Thank you.

We will now take our next question from Alua Askarbek from Bank of America. Please go ahead.

Hi everyone. Thank you for taking my questions. I know we're going a little too long. So I'll be quick but I wanted to ask a little bit more on the demand side that you've been seeing just to get a clear idea are you still seeing a lot of those bargain hardcores coming in within markets looking for the deals in your urban markets or are you starting to feel a little bit more demand coming in outside of those markets?

Yes. No. It's a good question in terms of the bargain hunters. I guess in the current environment sort of everybody's looking for a deal but as I mentioned in response to the last question and people are well qualified with good incomes that are coming in. So it's I would say that we're now looking for people that really can't afford what we're doing and so they're really trying to drive for a deep discount to make comfort for them. In terms of the question about net new demand coming in from sort of other geographies that's a good question. I don't have that right off the top of my head but I would say for the most part what we're seeing is that given the entire market in many cases has improved in occupancy that there is net new demand coming into these markets as opposed to just a recirculating of the existing demand that's already in place that would allow that to happen. So I don't have specific detail for you in terms of how much of a demand in New York City and San Francisco market occupancy to come up there has to be net new demand.

Okay. Got it. Thank you. And then just a quick question on Boston or New England overall. It looks like the effect the rent really dropped off in 4Q. Is there anything behind that other than maybe the supply that you guys have been talking about?

No I mean it's the same phenomena, I mean the urban markets in Boston are still very challenged. It's quite choppy not quite as bad as New York City or San Francisco but the urban markets are driving most of it and there and there are some sort of infill pockets, I mentioned your assembly row asset Newton Chestnut Hill pockets like that that are sort of the inner ring suburbs are also a little bit weaker. Some of them are more distant suburban towns with good school districts and things like that are performing better.

Got it. Thank you

And we will take our next question from Nick Yulico from Scotiabank. Please go ahead.

Hi thanks. I just wanted to go back to the slide in the presentation where you gave the occupancy and lending rents for the suburbs and urban environments. And I guess, I'm just wondering for those two different buckets suburbs versus urban if you had, if you can give us feel for kind of the composition of the blended rent, meaning what percentage that was renewals versus new leases for the different regions?

Yes. Nick it's good question. It's a lot of big because of the blended renewals changes five months. talking about offline as suppose to trying to walk you through that because it changes month by month.

I think to think about. I mean if you want you can just go and look at our turnover rate before we had in the earnings release to get a feel for it though. It shows that year-to-date and last couple of quarters. That will give you some feel for the mix.

Right. Okay. That was sort of I was kind of wondering if it was kind of similar to the turnover rate because I guess my question here is if you turnover is your lowest point in the year in the fourth quarter and first quarter we are looking at a blended rent number that is in some cases stabilizing or slightly picking up versus higher turnover periods. I guess I am just wondering what we should leading into this because that just means that you are starting less new leases which is where the worst pricing is and so the fact that it's starting to stabilize, but you do more renewals versus new leases and going through the period in the spring where you have a lot of new leases, I guess I am just trying to what we should really be reading into this line of improvement for January and the fourth quarter versus other parts last year.

Yes. That's a god question I think to the comment I have made John earlier, it's quite a little too early to tell in terms of calling it a bottom but we are pleased with the fact that during what is typically a sesonally lower period where we had turnover up 15% year-over-year that we have been able to slowly pull back on concessions and see slightly better blended rents sort of that effective basis for now four months basically, three-four months that gives us a sense that we're kind of pricing in the right neighborhood and that was building occupancy. So we don't need to build as much occupancy as we were attempting to do in the last three or four months. Therefore we believe we should be able to do better in terms of absolute effective rents moving forward. To your point though it does what happens in each market as we get to the spring leasing season is yet to be seen. So I think we're kind of bouncing around the bottom now and the question is will we continue to see those sequential improvements now that we're at that occupancy platform that we want to be at that is a function of just through supply and demand in these markets and what happens. So I think it's probably a little too early to call in terms of the specific question that you have whether I should read in this that this is at the bottom and it's going to bounce back I'm not sure we're prepared to say that just yet.

Okay. Thanks. That's helpful. Thanks guys.

We'll take our next question from Richard Anderson from SMBC. Please go ahead.

Hey thanks good afternoon everyone. So when I think about percentages and talk about percentage you can get sort of misleading if I don't have any jobs were lost in your markets in 2020 but you need kind of 2x growth to get back to where you were in absolute numbers just because you're growing off a smaller base and then the same logic applies to the 18% decline in your urban effective rates you got to do 30 plus off the lower base to get back to where you were in absolute per unit rent and my point is when you look at your slide on page 14 it's taken three to six years for you to just get back to where you were in whether it was the tech bubble or the housing crash. Does this environment which is somewhat more black and white it's sort of virus vaccine it's as bad as it was it's not very complicated, do you think that the recovery back to where you once were in whether you used jobs or rents whatever the metric is will be tighter than that 3% bottom end of the range that you experienced in the history.

Rich Sean here. That's obviously one of the things that they hear is to whether this is going to be either a V-shaped or -shaped in terms of recovery and that's ultimately its job, it's what's going to help propel total household formation and the deconsolidation of households that may have consolidated over the last year and while the employment rate is looking pretty good obviously the labor participation rates are pretty low. So it's going to take some really decent economic growth I think to really, I think some yes, suburbans are going to be back a lot quicker, could be a lot quicker than 3 to 5 years as we’ve seen above. I think the question here is really about urban and some of the really tech intensive suburban submarkets like Mountain View or Park as we're talking about before and that's going to take some economic growth I think. As I think you may see sort of a quick V-shape maybe for the suburban markets and the urban markets, maybe may not be back to those rents for another event three four years.

Yes. So it leads to my second question which is you're not giving full year guidance because you don't have a lot of visibility beyond 90 days, but then you're ramping development. So I just wondered if your confidence in a period of two years from now when you would like to be delivering these assets is higher than it is six months from now and I imagine it is but I am trying to pinpoint where is the development you are turning on sort of specific to those markets in those areas that maybe weren't as impacted by the COVID pandemic.

It's a lot of point that you are making. It's so I think suburban rents could be back, back to where they were in a year. They were only down 4%. It doesn't take a lot of growth to get that 4% back in those markets. And so we're focused we're kind of activating that lever and markets where we think as I said in my prepared comments where I think the risk adjusted return is make sense right now.

All right. Thank you.

Yes.

Yes. Thank you.

We will go ahead and take our next question from Anthony Paolone from JP Morgan. Please go ahead.

Yes, thanks. On the expense side is there anything for 2021 as we look out that could bring just expense growth back down to sort of an inflation number or does the turnover and some of these other dynamics just step function this up for higher growth this year?

Yes. It's good question. I think it's more the latter. I mean a lot of the stuff that we're seeing is sort of related to the pandemic and then promoted whether it's higher turnover cost, extra cleaning cost. Associates are on leave and therefore driving temporary labor contract laborers overtime, things like that. These are kind of going to play their way through and obviously it's a tough comp just given first half of the last year particularly with second quarter in a number of different areas. The turnover came, down etc. etc. So I think it's just going to put pressure on both particularly as Kevin mentioned in the first half of this year given that tough comp. It will be a little bit easier when in the second half because expenses held turnover and all that will be more comfortable particular the first half.

Okay and then just same question for Kevin. $160 million to $170 million of total overhead for 2021, do you have the comparable number for 2020 just understand the increase because I think it's a couple items and a variety of adjustments to get there?

Sorry you are referring to the kind of core expense overhead number?

Yes. I think you gave brackets around I guess it combines like SG&A and property management a few things like that.

Core expense overhead for core FFO is $160 million and $170 million. The reference point for the priory was about $150 million – $151 million. So it's about $14 million year-over-year increase where most of that is as we alluded before related to investment it's very strategic and related initiatives with strategic initiatives alone were about $7 million of that number probably 5 on the growth basis and there's an ancillary investments as well and there's some additional compensation cost including executive transition costs.

Okay. Got it. Thanks a lot.

We will go ahead and take our next question from Alexander Goldfarb from Piper Sandler. Please go ahead.

Sure. Good afternoon and Ben welcome aboard. I'm assuming that you decline the free rent incentives, so you can do your part to help earnings. Two questions here, the first just going to guidance Tim and Kevin you have laid out definitely that you think things are bottoming. You're not sure how things will go but in general you've laid out sort of a base case. So with that in mind why couldn't you provide s full year number even if it's a wide range because it seems like you're sort of tracking in the sort of 750-760 something like there midpoint and just sort of curious what prevents you from providing even if it's just a wide range something because as I say from your first quarter observations it sounds like you feel comfortable with where things are shaking and you have a general sense that if that continues then you sort of would know where you work for full year.

Yes Alex. It's a fair question. I mentioned in my kind of earlier remarks it's more than just one or two things that kind of a play here. We didn't even get into the issue of eviction moratoria where we've got call it 3% of our units were tied up and people that are paying we have essentially a federal stimulus that we may benefit from and actually help us to actually potentially even reverse some bad debts that we have taken for. Sean, terms of work from home and dates when they expire makes a big difference in terms of only might get initially a good occupancy boost but with that comes other income and other things as well. So when you put them all together you start plant these variables, it gets arranges until we just think it's not that reliable and frankly, it's I think in the past we've actually haven't given quarterly guidance. We have given annual guidance. That's how we manage our business in typical year manage it quarter-to-quarter. The reality is we’re managing it week to week, month to month, quarter to quarter right now and we feel like we got a enough visibility out about 90 days to provide reliable guidance. Beyond that we just don't think it's that reliable. That's just to be pointed out there and to always be trying to reconcile and sync up it just gets us make really adding anything to the conversation. But so others may choose to provide the outlook with a wide range. I get it and I think if you're here have a portfolio I think it makes total sense that you'd be precise guidance right now but that's not the situation we are in. Kevin I don't know if you have anything.

I mean just to add to that I think that covers Tim, can we satisfy the test to providing a reasonably reliable midpoint and a reasonably narrow and useful range. As we know anything's possible to but let me kind of play with these variables and look at the back half of the year. There were things that could be very positive or very negative and they are beyond our ability to regionally produced with accuracy. And so given that we just didn't feel like we could meet the tests of providing a reasonably reliable midpoint forecast, which ultimately would be what we, people would focus on where even if we gave a wide range and then we couldn't provide reasonably narrow range around that. So we just felt like why try to give something that range in the business and Q1 guidance seemed more appropriate.

Yes Alex maybe last thing to add that's why the reason we showed the slide 14 as well kind of put a circle around the downturns and the recovery, that's when it's hard to protect the business. I mean when you're in an expansion, it's fairly let me you feel like we can get some pretty reliable guidance in terms of how portfolio, how the pro forma over the next 12 months.

Okay and then the second question is as you guys think about ramping up the development program and using more capital how does that balance with the expansion markets and to the extent that you're looking at other markets like Nashville or Austin or some of the other sort of popular market these days? How do you reconcile your balance of capital between investing and development in your current markets versus using that capital to either in your expansion markets or to enter other new markets?

Well, it's a good question. I think the reality is if we didn't give guidance around acquisitions and dispositions to the extent that acquisitions let's say to the extent we acquired we would just sell more and existing assets and so it's really be done more through portfolio management basically recycling capital out of certain markets and where we've been recycling largely the northeast into markets like Denver, Southeast Florida and potentially some other expansion markets to come but at this point of the cycle where capital is priced that's probably how we would fund it. If equity values recover in any meaningful way where you think it makes sense to expand the balance sheet in a creative and prudent way that'd be sort of the second alternative.

Okay and then just finally the New York development site which one was that that was written off?

Hey Alex, it's Matt. That was the investment that we had in the East 96th street RFP.

Okay that was the Cuomo De Blasio one got it. Okay. No problem thanks.

Hey Aex just to just be clear when we write it off it means it's more probable than not it's less probable than not or did I say that right. but it's more probable.

Yes. We have to do this from an accounting point of view and tip the other way and it’s been less probable.

We got it. Thanks.

And we will go ahead and take our next question from Brent Dilts from UBS. Please go ahead.

Hey thanks guys. Just one for me at this point. Could you talk about how the financial struggles of some of the largest U.S. transit agencies who are talking about permanent cuts to service might impact your transit oriented properties?

Yes Brent it's Sean. I can fix that with that one and matter, as Tim jump in but it's probably a little too early to tell right now. I would say I mean certainly ridership has fallen dramatically through the pandemic and all the major transit systems and as a result in my prepared remarks, I mentioned that one of the locations within our suburban footprint that has been most impacted is sort of transit oriented developments just because people don't need it as much. Whether that results in permanent cuts versus just the temporary protections and capacities that we've seen has yet to play out and I suspect that there probably wouldn't be decisions made around permanent cuts until we get beyond the pandemic and people see what ridership sort of normalizes that. So I think it's probably too early to call on that at this point but certainly if there are transit-oriented developments that are out there that are the residents are heavily relying upon transit system and capacity is cut dramatically this would be a negative impact on those assets. It's probably just too early to tell what that might be.

I'll just have to say that this is Matt on the other side perhaps marginally it makes the transit agencies a little more aggressive with trying to dispose of some of their land and/or go into some joint development. Actually one of the deals we just started this past quarter was Avalon Somerville which is at a NJT Stop in central New Jersey and we are looking at other sites where transit agencies are probably going to feel more pressure to monetize their land positions.

Okay. Great. Thanks guys.

We'll take our next question from Rob Stevenson from Janney. Please go ahead.

Good afternoon guys. What percentage of your 2021 development starts are locked in cost wise at this point? And what are you seeing with respect to construction costs especially lumber given what's going on there and how decent is the labor supply these days?

Sure. Hey Rob it's Matt. I can speak to that one as well. If we haven't started a job yet we have not locked in the cost on anything really except for probably the land and a little bit of the entitlement costs. So the starts that we're looking at potentially for next year, I think we own the land on maybe two or three of them and then there is a couple of others where we have, they're under hard contracts. So everything else is subject to the market. The land and the soft cost usually is around a third 25%-30%-35% of the total. Capital cost the hard cost usually around 65% depending on the product type. We had if you asked at the beginning of the pandemic I'd say we had a pretty high degree of conviction that hard costs should come down particularly in some of these markets that had seen a big run-up over the last couple years. I'd say we've less conviction around that today just seeing how the for sell market has recovered so and lumber right now is very very expensive. Unfortunately we're not in the position of really having to buy much lumber as we sit here today because we didn't start anything for three quarters last year but if lumber pricing doesn't adjust back to where we would expect it to some of those starts may be in question and my guess is like a lot of commodities there is a little bit of a self-correcting element to that that we're not the only ones that will probably find ourselves in that position. There are a number of mills that are shut down right now because of COVID concerns. So we do think supply should start to increase again here by springtime but at this point I'd say our sense is more the costs have leveled off and that except for maybe in a few markets where they were really overheated I'd say the expectation at this point is probably move towards more of a flattening than a real nominal decline in hard costs.

Okay and given that I mean where are the yields on the new start the 2021 starts relative to the 58 on the current pipeline?

Right there just about the same and when you look at our current development pipeline and you look at the mix of the current development pipeline it is mostly suburban and even the deals that are in lease up there is a couple of them that are behind pro forma but there is a couple that are actually ahead of pro forma as well. So that kind of makes sense when you look at, when you compare that to kind of near-term start.

Okay. And then last one for me where are you in terms of the mix of condo sales at Loggia is what's left skewed towards higher or lower price points or is what's left fairly consistent with what you've already sold?

Congratulations Rob. I was right if we were going to get through the call without a question about Park Loggia, so we've closed 73 units. We have another ‘15 where we've accepted offers or under contract so that would bring us to 88 total. The mix we have sold maybe a few more I think we sold three of the four penthouses. So the mix is going to start to skew a little bit more towards low-priced units just because of that but we still have a reasonable mix up and down the building and that's where we're seeing frankly some pretty good traction now is in the more modest price points in the podium of the building. Traffic's actually picked up quite a bit. We've seen 15 to 20 inquiries a week. In January we've been averaging about four new deals a month the last three months whereas on the last call it was more like three per month. So but we do have a inventory that remains is a little bit more affordable on average.

And is stuff being sold, I mean thus far been primary residents or these largely secondary residents and are you expecting any impact if New York City and state passes additional soak the rich type of tax measures?

I don't know. Again this is not billionaires row. I mean this is by Manhattan standards. This is a pretty compelling value proposition which is I think why we're continuing to see our sales face maintain pretty strongly. It is not, there's a lot of people buying condos for their kids, in many cases maybe their kids who are going to university in New York and that market obviously it's been a lot of distance learning since the pandemic hit but just may well pick up. So I don't have the exact breakdown of primary versus secondary residences but I would say that if there is a lot of lot of family type transactions.

Okay. Thanks guys. Appreciate it.

We will take our next question from Haendel St. Juste Mizuho. Please go ahead.

Hey thank you. Good afternoon. First question is on the bad debt. Remain elevated in 4Q very similar to the third quarter, I guess first of all are you expecting a similar level? Is that what's embedded within your 1Q guidance here? And second I guess when do you think you can see some improvement there and since you brought it up earlier house extension of the eviction moratoriums until March 31 playing a role into your thinking? Thanks.

Well Haendel, this is Kevin. Maybe I'll answer the first couple here in terms of the first quarter we are expecting a persistent level of bad debt expense to roll into the first quarter. So not meaningfully different from what he saw in the fourth quarter and I don't know Tim if you want to add sorry, Sean if you want to add any more about kind of –

Yes. On the eviction moratoria there is sort of various related about eviction, related to late fees, running fees and things like that. So it's not just the federal level that we have to and even local in some cases. So one example you may have noticed that California through June. So and there is Washington state and various other places CBC order as well federal overwrite. There is quite a bit of I would say in terms of what you can do at state level. at this point is that we will probably see most of the whole through mid year very likely depending on how things unfold with vaccination of the population and the economy continuing to recover that is sort of how we view at this point but there's no question that it could be extended beyond that where in some cases if things are going well people let expire sooner. So that will influence our ability to big people. We are continuing other efforts as it relates to collections that we will continue but at this point what we basically feel like it's going to happen is that bad debt that we saw the last three quarters of 2020 will likely continue with that face a little bit of a nice present January but it wasn't quite as bad but the expectation is look more like last three quarters of 2020.

Yes. I mean just to add to that and I mean so you begin to reverse from 250 to 300 basis points of revenue trends that you've seen the last few quarters is something more typical which is more like 50 to 60 basis points of revenue. Obviously we're going to need resolution of the pandemic and restoration of the kind of landlord remedies perspective to those who are not payers and that can be little wide certainly not something you expect to change materially in the first half of the year.

Got it. Got it. Very helpful. Second I have a follow-up to some earlier questions on development. You noted has been noted that all three of you development starts our Northeast suburban. So I am curious when you are thinking about new starts what can you see a few more starts in the West Coast or non-Northeast markets in a more urban locations. I'd recognize you have a couple West Coast project underway in the pipeline, but you haven't started a new West Coast project since I think it's the second half of 2019. Thanks.

Sure. This is Matt. We do have start likely in southeast Florida this year. We have start in Denver that we are planning and we have a pretty large start in Suburban Seattle. We were planning later this year. California is tough. California is where we're probably finding the most challenged economics right now for new starts but we do have starts in the expansion market in Seattle.

And with those threads on your expected development deals versus cap rates be fairly similar that call it 50 - 75 basis points spread you referring to earlier.

Again, I think the spread is more than that. I mean if you look at we said that the current book is about a 58. I mean those assets today would sell for sub 4 and half probably low 4 so I think the spread is well over 100 basis points. And it's probably just as wide given that how our low cap rates in Seattle, Denver and Florida.

Got it. Thank you.

We will go ahead and take our last question from Dennis McGill from Zelman & Associates. Please go ahead.

Thank you. Just wanted to touch on supply in your views on how it might play out in 2021 especially in urban environments. It seems from our work they're still quite a bit to deliver and maybe some of that slides out but would seemingly limit some of the pricing power once you rebuild occupancy but just wanted to see how you guys are thinking about those competing balances.

Yes Dennis, this is Sean. Good question. Happy to comment on that and hear others Ken as well as well but as it relates to output trend we are expecting deliveries in 2021 to come down about 6% to 7% compared to 2020 and represent about 1.8% of stock. All the regions are expected to be down except for the New York, New Jersey region first where the decline in deliveries and sort of New York area is going to be offset by what we're seeing in northern New Jersey particularly Jersey City increases by about 3500 to 4000 units, even though balance kind of New York City is down maybe 2200. So in terms of trade area is an increase there and then we expected to be relatively flat in Northern California. In terms of urban specific yes we did see a little bit of benefit certainly coming in as I mentioned, New York City, urban Boston a very modest increase in the district. So not terribly different. And San Francisco is basically flat. So no material change there and other market I guess it would LA where is going to be down about 1500 units. So in general the supply picture in the urban environment with exception to San Francisco and DC will be better in 2021 than it was in 2020 with all things being equal it certainly help support a recovery at this point in time.

Hey Dennis, Tim here. I think one of the things I think about with the urban supplies in ‘21 and ‘22 on stuff that's already been started in ‘19 and ‘20, but the likelihood that we are going to see starts in ‘21 and ‘22 and how that may translate into ‘23 and ‘24 performance. I think it's going to be tough for people to get deals financed just against a narrative of the whole kind of work from home, work from anywhere dispersing your workforce the satellite offices as well as kind of downtown and I think you probably little decade you could be in a position where, we could be a position where we're seeing very little supply delivered where demand maybe down a bit but for the fundamentals actually looks better quite a bit better in urban submarkets and even the suburban markets. It's almost a reverse of what we saw this last decade where at the beginning of the decade 2010 everyone thought was going to outperform and they did from a demand standpoint, but supply more than made up for such that performance, actually asset performance increased in our portfolio and in the suburbs. That story can completely reverse I think in the next three to four years.

That's helpful perspective. Thank you. And then on the share repurchase in the quarter can you maybe just talk about how you triangulate it to getting comfortable on the buyback and then how you might be thinking about that now with where the stock is if it hangs out year or higher is it likely use of capital in ’21?

Yes. This is Kevin. So there are a number of variables take into account clearly. First of all with our alternative use and development is our alternative use and as you can see that based on our outlook for the year, we do anticipate starting development and that reflection and it puts a few that at least relative to where our peers have training lately development represented more attractive use for our capital then buying back our shares although our shares do quite compelling and it is a tougher call in the most normal circumstances given how we're trading below NAV. As you can tell from when we were buying back shares we were buying back shares around $150 this year which we felt was pretty dark compelling when we ran that math and we are at different point today. So that price matters to us as well when we're looking at the alternatives. The other factors we need to take into account is not only our source of proceeds that also would be impact on our leverages and we did then and we do now still have the financial capacity and the proceeds from dispositions to engage in the major buyback if it were to make sense to do so. But every time you do so we have to think about the impact on our leverage metrics and what we knew then and what is still true today is our EBITDA has been sequentially declining over the quarters and our net debt to EBITDA was 5.4 times in the last quarter targeted is 5.6 times. When we began the pandemic our ratio was about 4.6 times and so the movement up in that ratio is really been driven not by taking on more debt, but rather by decline in EBITDA and as we pace through the balance of this year and see that the lower lease rates and concessions work into our rent roll in our EBITDA we need to be mindful of managing that ratio so that stays as possible within our targeted range. Engaging in a heavy buyback could potentially work against that a little bit but all that said we stand still ready to engage in a buyback if it made sense on a major basis mindful of our credit metrics but at the moment when we triangulate around what's the best use of our capital development still figures today to be our best use of capital.

Got it. That makes sense and I know it's been a long call. So thanks for the time and the transparency.

And with that that does conclude our question-and-answer session for today. I would now like to turn the call back over to Timothy Naughton for his brief closing remarks. Tim?

Thank you Eli and thanks everybody for being on. I know we've been off for a while. Thanks for all you that's that hung in there for an hour and 45 minutes but I look forward to seeing all of you or many of you virtually over the next two or three months. Enjoy the rest your day. Thank you.

And with that that does conclude today's call. Thank you for your participation. You may now disconnect.