Essex Property Trust, Inc. (ESS) Q2 2026 Earnings Report, Transcript and Summary

Good day, and welcome to the Essex Property Trust Second Quarter 2026 Earnings Call. As a reminder, today's conference is being recorded. Statements made on this conference call regarding expected operating results and other future events are forward-looking statements that involve risks and uncertainties. Forward-looking statements are made based on current expectations, assumptions and beliefs as well as information available to the company at this time. A number of factors could cause actual results to differ materially from those anticipated. Further information about these risks can be found on the company's filings with the SEC. It is now my pleasure to introduce you to your host, Mrs. Angela Kleiman, President and Chief Executive Officer for Essex Property Trust. Thank you. You may begin.

Thank you for joining Essex's second quarter earnings call. Today, I will cover performance in the first half and outlook for the second half of the year, then conclude with an update on the transaction market. Barb Pak will follow with prepared remarks, and Rylan Burns is here for Q&A. We are pleased to report a solid first half of 2026, highlighted by a substantial outperformance led by strong executions from our operations team in delivering results exceeding our original expectations. While national economic and employment growth have been measured, West Coast multifamily fundamentals continue to demonstrate durability with limited housing supply across our markets and affordability favoring renting. As such, we are meaningfully raising our full year expectations for same-property revenues and core FFO per share, which Barb will cover in a moment. As for regional highlights, starting with Seattle, operating conditions improved in the second quarter with 2.6% blended rent growth, representing a 340 basis point sequential increase from the first quarter. Consistent with normal seasonality, market rents reached their peak around early July and are expected to moderate through the balance of the year. Performance has been stronger on the East Side, a benefit to our portfolio allocation, which achieved a 3.2% blended rents, a considerably higher growth rate than the 1% in the urban core. We are also encouraged by recent office expansion announcements from several notable companies. These trends are consistent with prior innovation cycles and reinforces Seattle's long-term position as a leading technology market. While it will take time for these commitments to translate into meaningful hiring, they represent a positive signal for future demand. More importantly, favorable outlook for this region is supported by declining supply deliveries, which continues to moderate. Turning to Northern California, which remains our strongest performing region and the leading multifamily market in the country, delivering blended rent growth of 6.5%, while concurrently maintaining strong occupancy. This performance is attributable to two key factors. First is the compelling supply-demand backdrop with limited housing deliveries and continued investments across the Bay Area from technology sector propelling demand. Second, positive migration trends as talent and entrepreneurs are drawn to the unique concentration of capital and innovation. As a result, we are experiencing growing momentum of demand for housing throughout the broader region. These fundamentals have translated into pricing power and outperformance relative to our original expectations, including peak leasing momentum extending beyond typical seasonal patterns. On to Southern California. The region remains closely tied to national economic trends with job growth generally in line with the U.S. average. Against this tempered employment backdrop, limited new supply has supported relatively stable operating conditions. Accordingly, we generated a 1.4% blended rent growth in the second quarter, led by Orange County, while Los Angeles lagged. Looking ahead to the second half of the year, we expect the broader economy to unfold generally consistent with our initial forecast for the year with modest job growth and continued macroeconomic and geopolitical uncertainty. While demand is highly correlated to the pace of job growth, West Coast multifamily fundamentals remain well positioned with attractive affordability for rental housing, combined with new apartment deliveries moderating across most of our markets. Lastly, on the transaction market. Investor interest in West Coast multifamily assets remain healthy with transaction volume increasing throughout the year across our markets despite a higher interest rate environment. Cap rates for institutional quality assets have generally remained in the mid-4% range, while the majority of transactions in Northern California pricing in the low 4% range. Overall, the strength of private market valuations reinforces the value of the capital we deployed in Northern California over the past several years. We will continue to evaluate acquisitions, dispositions and other investment opportunities based on the highest relative return with a focus on maximizing growth, NAV and FFO per share accretion. With that, I'll turn the call over to Barb.

Thanks, Angela. Today, I will recap our second quarter results, discuss key updates to our revised full year guidance and conclude with comments on the balance sheet. Starting with our second quarter results. We achieved another solid quarter with core FFO per share exceeding the midpoint of our guidance range by $0.10. The outperformance was primarily driven by operations with same-property NOI accounting for $0.05 and non-same-property NOI contributing an additional $0.03. As for the favorable variance within our same-property portfolio, it was comprised of revenue growth, which was 20 basis points ahead of plan. In addition, operating expenses came in lower than expected, which was driven by $0.03 of favorable property taxes, mainly due to successful Prop 8 appeals that are onetime in nature. The benefit from our non-same-property portfolio was largely attributable to prior year acquisitions in Northern California, which continue to perform ahead of plan due to strong rent growth in this region. Turning to our updated full year guidance. We are pleased to announce a $0.20 increase to the midpoint of core FFO per share, representing a 1.3% increase at the midpoint. Better operating performance within our portfolio is the key driver of the increase. As it relates to our same-property portfolio, we are raising the midpoint of NOI growth by 70 basis points to 2.8%. The increase is a result of 40 basis points improvement in revenue growth, which is driven by higher scheduled rent, occupancy and other income. In addition, we are lowering the midpoint of operating expense growth by 25 basis points, primarily reflecting the property tax savings previously discussed. Altogether, higher same-property growth contributed $0.12 to the full year increase. The balance of the increase to our guidance largely reflects better-than-expected performance within our non-same-property portfolio, as previously discussed. As for our third quarter core FFO guidance, we are forecasting $3.99 per share at the midpoint. The $0.09 sequential decline from the second quarter primarily reflects higher operating expenses, including normal seasonal increases in utilities and California property taxes as well as increased controllable spending during the second half of the year. As I mentioned last quarter, controllable expenses were lower than expected in the first quarter, which was timing related. And as such, we expect these expenses to be $0.09 higher in the second half of the year than the first half. Concluding with the balance sheet, we remain in a strong financial position with net debt-to-EBITDA of 5.4x, minimal debt maturities over the next 12 months, over $1 billion of available liquidity and access to multiple sources of capital. As such, we have ample flexibility to fund our commitments and capitalize on opportunities that support long-term growth. I will now turn the call back to operator for questions.

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] So that we may address as many participants as possible, we ask that you limit yourself to one question and one follow-up, and if time permitting, you may requeue to add any additional questions. [Operator Instructions] Thank you. Our first question comes from the line of Steve Sakwa with Evercore ISI.

Could you maybe just elaborate a little bit on some of the July trends that you're seeing? It feels like the market certainly improved quite dramatically from maybe the start of the second quarter to the end of the second quarter. And then I'm just curious how kind of spreads and renewals are trending in July and perhaps August?

Steve, thanks for your question. It's Angela here. Happy to. From -- maybe I'll start from the blend. I think that's a good data point. So July blends are coming in similar to the second quarter. And so I think things are moving along as planned and our fundamentals remain sound. And just for context, where July is coming in this year, it's slightly better than the same period last year. And so -- and if you want to compare from a year-over-year perspective, it's interesting how things are trending. So last year, we had a very strong first half and then a pretty significant drop in the second half. We're definitely not seeing that so far this year, and we are assuming that this year, first half and second half are quite similar.

Yes. I guess that's kind of the issue is that you're not seeing the drop-off and the market has been very strong. So I think maybe it would sort of imply that there should be more momentum into the back half of the year, but yet you're not really assuming that or maybe projecting that within guidance. So is there something holding you back on that? Or is that just conservatism on your part at this point in the year?

Yes, that's a good question, Steve. It's a little bit of both. So we are not anticipating a significant drop-off. And our base case is that we're going to land right at that 2.5% blended midpoint. And the reason we are not -- obviously, we have a range, which would point to a better performance. But what we're seeing on the ground here is that Northern California momentum remains strong. We actually haven't peaked yet, and that's fantastic. Having said that, the broad U.S. economy actually is slower this year than last year. And we are tethered to that, especially Southern California, including L.A. So a good data point I'll point you to is if you just look at job growth, job growth for the first half of this year is actually quite a bit slower or lower than the same period last year. And for those reasons and with the geopolitical uncertainty that remains, if we were 100% Northern California, obviously, our numbers will be very different, much more robust. But given that 40% of our footprint is still in Southern California, and it is tied to the broader economy, we needed to essentially make sure that we factor some of these uncertainties out there. But at the end of the day, if you look at Southern California, while it is a lag for the West Coast, it is still a solid long-term market, generating 1.4% blended rent growth with occupancy above 95%, it performs -- outperforms most of the major metros in the U.S.

Our next question comes from the line of Brad Heffern with RBC Capital Markets.

On new lease spreads, we were kind of surprised to see the new lease number so much lower than 2Q '25, just given all the strength in NorCal. You kind of covered it a little bit with your commentary about the broader economy, but I'm just wondering about the dynamic of lower new lease spreads year-over-year, but higher renewals and what's kind of driving that pricing decision?

Brad, thanks for your question. It's interesting how the different regions performance is quite a bit of variation there. And so in Northern California, we're definitely seeing very strong new lease spreads. But Southern California is not going to have that kind of strength. And of course, Seattle is somewhere in the middle. But overall, if you look at the combination of our composition of our portfolio, Southern California plus Seattle is 60%. And so that gives you a little bit more insight to the different components. And what we are seeing this year is that our renewal continues to be quite strong and coming in, in that 5% range. And with new lease, we're expecting that for the trend with that lower new lease to continue and elevated renewal to continue.

Okay. And Barb, two things on the preferred book. So you had the close to $90 million in redemptions in the quarter, but the balance is only down about $40 million sequentially. So can you reconcile that? And then just also give your broader perspective on how the current balance should evolve in the coming quarters?

Yes. No, that's a good question. So the redemptions that we had this quarter, two were in the preferred equity book, that was the $40 million. And then one was a mezz investment, which sits in the notes and other receivables on the balance sheet. And so it's in two different buckets on the income statement and balance sheet. So that's why you didn't see it fully drop $90 million in that preferred line. And then what was your second question?

Just how you expect the balance there to evolve. I think that was all the redemptions for the year, but I could be wrong.

Yes. We have one other small redemption in the third quarter, which was factored into our guidance originally, but it's offsetting by the new investment that we did. The book value that we're accruing on is $100 million. And I think that's a good run rate to use going forward for guidance purposes unless we do more investments. But at this point, $100 million seems like a good run rate.

Our next question comes from the line of Eric Wolfe with Citi.

I think you mentioned a moment ago that you're still expecting like a 2.5% blended rate growth for the year. Apologies if I misheard that. But could you just talk about what drove the increase in your same-store revenue guidance, what the various components of the change were?

Yes. I'll cover the blend and Barb will talk about the revenue growth. So, just to confirm your question, yes, we are expecting for the full year to land at 2.5%. And I talked about that first year and second half to be similar and first half is coming in about 2.6%, which would imply that the second half comes in at 2.4%. So not a huge variation there. Barb?

And then in terms of the 40 basis points improvement to our same-store revenue growth, scheduled rent and other income each contribute 15 basis points to growth and then the other 10 basis points is from higher occupancy.

Got it. That's helpful. And then you spent some time talking about Seattle as well as Northern California. And I guess I'm just wondering, if you compare those markets, is it very obvious, I guess, that Northern California has sort of seen stronger demand, and it's just that they absorbed the supply earlier, and that's why you're seeing much more pricing power? Or I guess when you look at your dashboards and you look at traffic and you look at other things that signify demand, it's just NorCal just has a stronger demand right now.

Yes, it's a good question. A couple of things. With Northern California, it had a lower supply to start with relative to Seattle. Seattle last year was closer to 1% versus NorCal was half of that. So the base is very different and certainly is beneficial to Northern California. And your point as far as the demand is spot on. Demand starts with Northern California, and that's really the center of the innovation engine. And what we have seen over multiple cycles is that it starts with Northern California and then it expands out to Seattle. And we're already seeing announcements, public announcements of expansion to Seattle. But it does take time for people -- for companies once they make the expansion announcements to then build out the office space and then hiring then follows. And so there's always a lag.

Our next question comes from the line of Alexander Goldfarb with Piper Sandler.

Angela, if I could just continue that Seattle discussion, sort of a 2-parter on Seattle. One, do you think that the East side has the potential to put up numbers like we're seeing in Northern Cal? And two, just from being out there in the market, it seems like CBD is waking up some of the office demand coming back there just because of space -- lack of space availability on the East side. So do you think we could be surprised by CBD as well as we look over the next 12 months?

Alex, it's a great question. It all hinges on demand. And the reason why it's possible for Seattle, especially in the East side to perform at a similar level as Northern California is because it does have that tailwind of jobs to come and supply is abating. Having said that, it is a market that historically produces more supply. So it does need more jobs in order for us to have meaningful pricing power, but we've seen this before. As far as CBD, that's a little -- as far as the CBD itself, that's a little trickier because CBD historically and as we look forward, does have a higher percentage of total supply for the market. And if you look at the location of the employers, large employers, it's throughout the whole Seattle Metro, not concentrated in the CBD. And so I do think that there is a recovery possible for CBD, but I'm not sure about the magnitude specific to pointing to Northern California, that level of magnitude.

Okay. And then, Barb, just a second question is I saw the RealPage litigation, but there was another litigation settlement as well. What was that? Was that also related to RealPage, or what was that?

Alex, it's Angela here. I'll cover the litigation. So we settled a separate dispute item, which has nothing to do with RealPage. And this was a litigation that was ongoing for multiple years, almost four years. And I know this magnitude is actually unusual for Essex. But after protracted litigation and considering the cost to defend, we decided it was in our best interest to just bring the matter to a resolution. But because the settlement is still subject to court approval, we've been advised to refrain from discussing additional details. But I can tell you that we don't have anything else of this magnitude.

Our next question comes from the line of Jana Galan with Bank of America.

Congratulations on a great quarter. Following up on your comments that Northern California rents have not yet peaked this leasing season. I just wanted to confirm, is that also the case for Seattle and Southern California markets?

Good question. No, that is not the case for Seattle and Southern California. Seattle peaked consistent with typical seasonality, so in the early July. And so -- and we are expecting and seeing a moderation for the rest of the year. As far as the Southern California, it's a little bit hard to describe the peak itself. I mean, technically, it peaked early, but it's a very flat curve. So it's not really much of a peak. And I'll point to my earlier comment on the soft economy and the muted job growth as one of the key driver. And so Southern California is just kind of moving along and not doing much of anything this year.

And then maybe just looking at the supply outlook for 2027, it seems very favorable, especially in some of the little bit slower markets like Seattle. Just curious if there's any early comments you'd like to make on kind of the supply you see, how competitive it is to where you guys are located.

Yes, Jana, this is Barb. Yes, the supply is going to continue to trend lower in '27 versus '26. And the backdrop is already very favorable, and it's going to get more favorable. And we're not surprised by this given what we've seen on the ground and permits and things like that for the last several years. So this is -- it's good for us. We won't need a lot of incremental job growth next year just to cover the supply. In terms of where the supply is, it is within our metros. It doesn't necessarily have to be next to our properties, but it is competitive within our submarkets that we operate in. So overall, though, I think the supply picture continues to look good for the West Coast in our markets for the foreseeable future.

Our next question comes from the line of Nick Yulico with Scotiabank.

I wanted to see in terms of the guidance for the year on same-store revenue growth, could you get a feel for what's assumed for the different regions? In particular, I'm just wondering like for Northern California, I think you're up about 4% year-over-year in the first half of the year. Is that like a similar number for the whole year? Or does it get better in the back half of the year?

Nick, yes, it's Barb. I would say in terms of the various regions, Northern California, I think, continues to improve relative to where we are today through the back half of the year given the rent growth we're seeing. And that's going to be offset by slower growth in Southern California, given the moderation in blended rent growth that we're seeing there. I think Seattle stays pretty much on par.

Okay. And then my second question is just maybe you can give us a reminder of how to think about this. I think you said Northern California blended rents were up over 6% in the quarter. We see -- look at market data, and it's all over the place, but somewhere sort of high single digit, maybe even over 10% in San Francisco specifically. So, I guess, the question is if like that type of rent growth continues in markets, how long does it take to translate into same-store revenue growth going from 4% to some higher number, 6% or more, which is where the market rent growth has been recently?

Yes. That's a good question. Our lease turns pretty quickly. And so it doesn't take a long time for rent growth to translate into the bottom line. That's one benefit of the multifamily business. But in terms of -- if your question is how long is this tailwind, is that what you're asking? Or you're only asking about the timing of the rent?

Well, I think my question is like we're seeing rent growth that's very high coming out of Northern California, but it hasn't fully translated into your same-store revenue growth yet. So at some point, you should be accruing that benefit. But just for everyone to kind of manage expectations, how we should think about that?

Yes. Yes, I see what you're saying. We do have -- if you look at the turnover rate, that's probably a great indication of how quickly we can capture the market rent growth and turnover or retention rate is still very high with Northern Cal in particular. And that's not a surprise, right, because as markets move quickly and keep in mind, in California, we have AB 1482. So it does prolong that recovery. But to us, that's not problematic.

Our next question comes from the line of Adam Kramer with Morgan Stanley.

I think that at NAREIT, if I remember correctly, you guys used the word sort of stabilization or stability in SoCal. Obviously, it's a different market versus NorCal versus Seattle, different employers, et cetera. But just wondering if you could maybe give us an update sort of what's the latest thinking there? Would you sort of still use that word stabilization or a different way to maybe frame what's happening fundamentals-wise there and sort of where that market is in terms of the recovery?

Yes. We would still frame it as a stable market. I mean if you look at blended lease rates at 1.4% and plan and occupancy for that region is above 95%. This is by no means a market that's fragile or broken. It's performing as you would expect in an environment of an overall slow economic environment.

Okay. That's helpful. And then just maybe flipping to Seattle. I think on the prior call, you talked about sort of positive lease growth in March and that continuing into April. Maybe just sort of how Seattle trended in terms of either new or blended through the second quarter. And I think supply there is supposed to decline pretty meaningfully over the course of this year and into next. So maybe just sort of the outlook for Seattle specifically.

Yes. I'm happy to go into a little more detail on that. And so we had talked about blended rates flipped positive in March, and it continued to increase through June, actually. And then, of course, with the peak now, it's starting to taper down. So just to give you a high level, March blended lease rate for Seattle that month was 1.4% and in June it was 2.8%. So over 140 basis points in increase. And of course, now it's starting to moderate as we would expect. Does that help give you the color you're looking for?

Yes. That's helpful.

Our next question comes from the line of Jamie Feldman with Wells Fargo.

I was hoping to get a little bit more granular on the Southern California submarkets. I mean there's been so much capital raised, especially -- and then you listen to some of the industrial calls, and they're definitely getting more enthusiastic about some of the demand drivers, especially aerospace, defense. I mean can you give a little bit more color on -- maybe a better way to ask it, like are you seeing green shoots at all in any of the submarkets? Or how -- can you give us more color on what you are seeing as we think ahead?

Jamie, sure thing. Happy to. And we talked about Southern California being generally stable market. And so definitely seeing that continue. Orange County is leading the pack and San Diego is starting to turn for the better once it started to work through the bulk of the supply. So that's all a good sign. What's really dragging our Southern California continues to be L.A. County. And once again, I had talked about L.A. hitting its trough back in 2023 when occupancy was only at -- or economic occupancy was only at 91%. So since then, it's improved and it's hovering around that kind of between that 93% to 94% economic occupancy, that is. And so it's remained steady. We are seeing green shoots, like you said, from Anduril and some of these aerospace defense, but they're relatively new. And so it is a positive sign for us, but it's too new to be able to point to what the magnitude will be.

Okay. And I guess, similarly, with all the capital being raised in Northern California, are you seeing people more interested in moving out to buy homes now that they have more capital? It certainly seems like it's helping you push rents. I'm just curious any just kind of consumer behavior you're seeing that's unique given how much those stocks have moved and how much money has been raised and wealth has been created.

Yes. Yes. No, that's a really good point. A couple of things. I think affordability remains much more attractive to rent even though we've been able to increase rents, but it's really a recovery increase, right? So the way to think about Northern California is this is a market, if you look at since pre-COVID, should be well above 20% rent growth, but we're nowhere near that. And so it still has quite a bit of catching up to do. More importantly, when we're talking about buying or converting from being a renter to a homeowner, the cost to own is exponentially more expensive. And so it's not -- it's very difficult to be -- to move from being a renter to a buyer. And we've not seen that as a reason for move-out in our portfolio.

Our next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets.

Just wanted to go back to guidance a little bit. Given the 2.4% back half assumed lease rate growth versus, call it, 2% or even slightly below 2% that you had last year, is it fair to say we should start to see that scheduled rent accelerate in the back half of the year and that the earn-in for 2027 should be higher than the 85 basis points that you had heading into this year?

Well, I think that is possible, but it's way too early to predict because we will need to see the rate of deceleration. And like I said, we're not assuming a significant drop-off, but we still have a couple of more months before we can get a better -- be able to pinpoint the earn-in. I can give you a couple of building blocks on the earn-in side that -- as it relates to 2027 in that if you look at our supply, supply is getting lower, so that's good. And affordability tailwind continues. And then lastly, our preferred equity headwind is now behind us. So I do think that we have some pretty good building blocks there. But as far as the actual rate, we really do need to see how the next couple of months perform and how the rents moderate to get a better sense.

And then just when you roll up all the differing trends across your regions, is the portfolio operating at a loss or gain to lease today? And I guess where does that stand across each of the three regions?

Yes. So we do have a loss to lease, so that's good. It's mostly driven by Northern California, so no surprise there. And as far as Southern California, we have a gain to lease, also not surprise there since the curve was very flat and Seattle is kind of in the middle, slight gain to lease.

Could you give some color around the magnitude there, Angela, for each of the regions?

Yes. So, let me see. Northern California, let's see, closer to around, say, 6%. Southern California in the 2s and Seattle, 70 basis points.

Our next question comes from the line of John Kim with BMO Capital Markets.

I wanted to ask about the change in pricing strategy. I think you said in the past, you were a little bit more agnostic on pushing renewals maybe as hard as your peers because you were looking to optimize occupancy and achieve better pricing on new leases. But now as you're pushing renewal rates higher, will that suppress new lease rates going forward? I'm just wondering why this changed?

John, we have not changed our operating philosophy or approach. The goal has always been to maximize revenues. We're agnostic on where we get that from, whether it's new lease or renewals or occupancy. Those are kind of the three big ones, if you will, or the three big levers. Now one of the reasons why depending on the market, we favor occupancy, well, that's for obvious reasons. And as far as favoring renewals over new lease rates, we talked about the cost of turnover. And so in an environment where unless we're able to push rents above, say, 6%, for example, we're better off focusing on renewals and keeping that new lease rates flat and not to incur turnover because that is very expensive. And so ultimately, I will take you back to our strategy, which is to maximize revenues and not to focus on any specific rental rates as a metric.

Okay. And then maybe another subtle change, maybe not, but you did make a couple of preferred investments in your West Coast -- one of your West Coast joint ventures. And in the past, you had said redemptions will be used to buy fee simple assets. So has that philosophy changed? Or is it because it's in a joint venture that you've made these reinvestments back into the preferred?

John, Rylan here. Our overall philosophy as it relates to this business has not changed in recent years. I'd remind people that we've made a lot of money in this business over the past several decades. It's incredibly synergistic with our development and our investment businesses. So what we've done is just strategically resized this book of business, which has the benefit of reducing earnings volatility. And we're just going to remain highly selective. So when we see the best risk-adjusted returns, that's where we'll step in and lean in. And that's what we've seen more recently, and we've done another one earlier this year. So we're just going to remain highly opportunistic and making sure that we're putting our dollars to work where it's really creating value for our shareholders.

Okay. So there's not a stated strategy to reduce the preferred investment book?

As Barb alluded to, it's down to $100 million. So we think it's in a very manageable space, and we could grow that if we see the right opportunities.

Our next question comes from the line of Michael Goldsmith with UBS.

This is Ami on with Michael. Given the strengthening rent growth in Northern California, are we getting close to the point where developments start to look more attractive? Or if not, what conditions need to change for development to start looking attractive again?

Ami, this is Rylan again. Development economics have improved over the past year as rent growth has outpaced cost growth. Our philosophy as it relates to new developments is we just want to make sure that we're getting compensated for the risk inherent in all developments. So we have the South San Francisco deal, which is trending very favorably relative to our initial underwriting, and we're actually ahead of schedule on that project. We're working forward another project further down the Peninsula. And we continue to underwrite all land development sites. but just trying to remain disciplined to make sure that we're fully getting compensated for the risk inherent in development. But we continue to look at everything and the economics to answer your question bluntly, have improved.

And for those deals, what yields would you be targeting approximately?

What we said publicly is anywhere from 100 to 150 basis point spread to where we can go and buy. And so these yields, I think I've said on the seven self-fed deal, historically, we expect to stabilize closer to 6%.

Our next question comes from the line of Haendel St. Juste with Mizuho Securities.

This is Mike on with Haendel at Mizuho. What has the retention rate been in your San Francisco portfolio? And are you seeing a higher retention rate given the stronger new market rent growth pricing?

Our retention rate in San Francisco has been elevated, so relative to the other regions, and it's been that way for quite some time. As far as our expectation, yes, we expect to maintain that high retention rate, especially in an environment where market rent is moving so quickly. And so that's not a surprise to us. But to us, that just means that it's a longer tailwind.

Okay. Helpful. And also, where are renewals being sent out and executed for August and September? And how much of your 3Q renewals in terms of visibility have been executed so far?

So, August, September, we're sending renewals out in the high 5s. And we expect negotiation probably around, say, 50 basis points. So we'll land in that low 5s range. How much of it is out? Well, let's see. August is done, and we're halfway through September.

Our next question comes from the line of Peter Abramowitz with Deutsche Bank. Peter, your line is on mute on my end. We can't hear you. All right. It looks like we lost him. Our next question comes from the line of Ann Chan with Green Street.

So I believe you have three 3 properties with ground leases expiring in '27 or '28. Could you give us a sense of whether we should expect either a large step-up on ground rent at those properties in conjunction with an extension of the ground lease? Or if you sell the properties, do you expect a very high cap rate?

Yes. And as you can imagine, these are ongoing negotiations that we'll have with the ground holders. In many instances, we'd love to figure out a way that we can renew, but it's going to go back to our broader philosophy, does this create value and at what rate. So still too early to say, but those conversations are ongoing. And it's a very, very small percentage of our portfolio.

And second question for me. On the JV disposition in San Jose, can you share the cap rate on the sale and maybe some color on the decision to sell versus consolidating the property?

It's a fair question. This was a mid-4% cap rate, sub 4.5%. This is a joint venture that had debt maturing. So that caused us to evaluate the property and the valuation. Unsurprising, we saw very strong interest in the asset. And in this instance, we thought we could generate better risk-adjusted rewards by redeploying elsewhere. So we made the decision with our partner to sell this asset, and we're very pleased with the execution.

Our last question comes from the line of Peter Abramowitz with Deutsche Bank.

Yes, just one question about Seattle. One of your peers called out tech layoffs as a pretty specific driver of softer pricing for the first half of the year. I know it's not something we discussed much on the call and wasn't mentioned in the release. Just kind of curious if that's something you've noticed as well? Has it had any impact in your Seattle portfolio or Northern California? And just any color you could provide around that would be helpful.

Happy to. We -- it could be depending on the specific location of the asset relative to our peers. I don't know what they're seeing. But certainly, on our end, we're not seeing that as a primary reason. As we have noted in the past that these tech announcements, vast majority of them are not in our markets. And when we look at the top 20 tech jobs, the job openings have remained steady, actually with incremental increase throughout the year, we're pretty darn close long-term average despite the layoff headlines. So it's not something that we're seeing as a major impact. I'd probably point you back to the broader economy that probably has a larger influence over all the other markets, except for Northern California.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Goodbye.