Essex Property Trust Q4 2024 Earnings Call Transcript

AlphaStreet
Provided by AlphaStreet
February 5, 2025
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Operator

, good day, and welcome to Essex Property Trust 4th-Quarter 2024 Earnings Call. As a reminder, today's call conference is being recorded. Statements made on this conference call regarding expected operating results and other future events are forward-looking -- 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 your host, Ms Angela Kleiman, President and Chief Executive Officer for Essex Property Trust. Thank you, Ms Kleiman, you may begin.

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Thank you. Good morning. Thank you for joining Essex's 4th-quarter earnings call. Barback will follow with prepared remarks and Burns is here for Q&A. Before we begin, on behalf of the entire company, I want to express our condolences to those affected by the tragic wildfires in Los Angeles. While our properties did not incur any loss, my gratitude goes to the Essex team for proactively helping those displaced as we adopted several policies to ease the transition into new housing within our Los Angeles portfolio. Thank you. As for our earnings call today, I will cover our full-year and 4th-quarter 2024 results, followed by our outlook for 2025 and an update on the investment market. We are pleased to achieve full-year same-property revenue growth of 3.3% and core FFO growth of 3.8%, both exceeding the high-end of our original guidance. Our strong performance was the result of improving demand, including return to office and migration patterns, combined with attractive affordability and delinquency resolution by our hardworking associates. With this backdrop, we experienced a typical seasonal rent curve for the first time in several years. Additionally, we successfully shifted the company into growth mode, acquiring and consolidating 13 properties at above-market yields. As for operation highlights, 4th-quarter results were generally consistent with expectations. We achieved 1.6% blended lease rate growth and concessions averaged one-week for the same-store portfolio in the 4th-quarter. First, on a more granular perspective, Orange County and Santa Clara County led the portfolio with 2.7% blended rate growth, while LA and LMEA counties land with 20 basis-points of blended rate growth. In January, demand picked-up in-line with our operating plan, lifting occupancy by-40 basis-points to 96.3% and concessions improved to less than half a week on average. Thank you. Turning to our 2025 outlook detailed on Page F16. Consensus GDP and job growth is forecasted to moderate for the US overall, but remain at a healthy level. The West Coast is well-positioned with improving economic fundamentals as job growth is forecasted to outperform the US after lagging in 2024. Job growth in the technology sector is the key driver of this outlook as we anticipate job prostings to convert into new hires in 2025, resulting in better overall growth., steady demand combined with low-level of supply deliveries at only 50 basis-points of total housing stock and attractive affordability relative to homeownership leads to our base-case forecast of 3% market rent growth. Seattle and San Jose are projected to lead the portfolio at approximately 4%. As far as the range of outcomes, the low-end of our guidance is mainly attributed to policy uncertainty and timing of this delinquency recovery. Our optimism for the high-end of our guidance is supported by solid fundamentals and based on past precedent that tech job hostings still have a runway to grow for this phase of the innovation cycle. It is notable that recent office expansion announcements demonstrate the intention that the majority of new hirings will be focused in headquarter locations, which favors the West Coast economy, particularly the northern regions. Over the long-term, we see a path for the West Coast apartment markets to continue to outperform the US average with better job growth and wealth creation driven by centers of innovation combined with limited level of supply growth. Lastly, on the investment market. In 2024, the West Coast experienced a meaningful uptick in volume, reaching a level close to the pre-COVID average. Although interest rates increased in the 4th-quarter, there remains a deep pool of capital eager to acquire properties on the West Coast and cap rates in the 4th-quarter for high-quality properties remain consistent at around mid to-high 4% range. In 2024, Essex was opportunistic in its acquisition efforts, successfully generating significant accretion by consolidating joint-ventures and acquiring several communities in close proximity to our property collections where we can enhance the yield on day-one by operating these communities more efficiently. In 2025, we expect to be net acquirers again, while optimizing our cost-of-capital. Our focus remains on being creative and opportunistic to drive FFO and NAV per share growth for our shareholders. With that, I'll turn the call over to Barb.

Barb M. Pak
Executive Vice President, Chief Financial Officer at Essex Property Trust

Thank you. Thanks, Angela. Today, I will discuss our 4th-quarter results, key assumptions to our 2025 guidance, followed by comments on the balance sheet. We are pleased with our 4th-quarter results, which were slightly ahead of our expectations, primarily driven by higher income from our joint-venture entities. As it relates to same-property operations, we saw a continued reduction in delinquency during the quarter, which improved to 60 basis-points of scheduled rent on a cash basis. For the year, we've made substantial progress on the delinquency front, reducing our bad debt by over 50% from one year-ago. As such, we are pleased to be in a position to fully eliminate the remaining accounts receivable balance during the quarter, which resulted in same-property revenue growth of 2.6% on a year-over-year basis. Without this non-cash adjustment, revenue growth would have been 3.2% for the quarter. Turning to our 2025 outlook. Same-property revenues are forecasted to grow by 3% at the midpoint. The key drivers of this growth are outlined on Page S16/1 of the supplemental. Continuing on with Angela's comments, stable economic conditions, low supply and expectations for increased hiring among key West Coast industries leads to our forecast for blended rent growth of 3%. In terms of the cadence, we expect blended rent growth in the first-half to be below the full-year midpoint and improve in the second-half of the year as hiring accelerates and translates into increased demand for housing. Our guidance assumes a 50 basis-point improvement in delinquency as we continue to make progress returning to that long-term run-rate. Rounding out the remaining components, we anticipate 30 basis-points combined contribution from higher occupancy and other income. Now moving to operating expenses. We forecast 3.75% same-property expense growth at the midpoint, a significant improvement from what we've experienced the past two years. The biggest factor driving this outcome is lower insurance expense. We renewed our property insurance in December and saw a small reduction in our premium as compared to the prior year. Regarding controllable expenses, we are forecasting growth of less than 3% as we continue to seek ways to enhance our operating efficiencies to offset wage pressures. Putting it all together, same-property NOI growth is expected to increase 2.7% at the midpoint. As for core FFO, our midpoint of $15.81 equates to 1.3% year-over-year growth. The modest increase is driven by two factors, which combined represent around 2% headwind to growth. The first relates to higher interest expense, primarily driven by the refinance of $500 million in unsecured bonds. Our guidance assumes we refinance this debt in the first-half of the year and given the current interest-rate environment, the all-in rate is expected to be meaningfully higher than the 3.5% rate on the maturing bonds. The second factor is lower structured finance income as a result of redemptions in 2024 and those expected in 2025. Our guidance assumes $150 million in redemptions at the midpoint, of which approximately 50% is expected to occur by midyear. As previously communicated, we expect to reinvest the proceeds into new acquisitions, which will offset a portion of this income and result in better NAV and core FFO growth for our shareholders over the long-term. In total, the structured finance book is expected to represent around 4% of our core FFO in 2025, consistent with our target range of 3% to 5%. Turning to investments. The midpoint of our guidance assumes we acquire $1 billion in new apartment communities. As for funding, it will be dependent on-market conditions and our cost-of-capital, utilizing the most attractive equity capital source available at the time and executed on a leverage-neutral basis consistent with our track-record of disciplined capital allocation. Concluding with the balance sheet. The balance sheet and credit metrics remain strong and with over $1 billion in liquidity and ample sources of available capital, the company is well-positioned. I will now turn the call-back to the operator for questions.

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Operator

Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick-up your handset before pressing the star keys. Please ask one question and one follow-up question. And our first question is from Nick Yulico with Scotiabank. Please proceed.

Nicholas Yulico
Analyst at Scotiabank

Thanks. Hi. Angela, I believe you said that the low-end of guidance assumes some sort of potential regulatory impact and I'm assuming that's in L.A. I just wanted to be clear on that. And also if you could provide what is the same-store revenue growth range that assumed in guidance for L.A. Specifically.

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Hey, Ned. Good morning and thanks for your question. Yes, I -- legislation is a unknown factor at this point, and it's a little too early to predict the outcome. And so as it relates to our guidance, we didn't factor that component into our guidance, but that's why we have a range. So a downside is contemplated. If something gets enacted, that's a -- that's more extreme in nature. What we are aware of is currently, there is eviction moratorium being considered in LA and a rent-freeze proposal. And in -- as far as the eviction moratorium is being -- is concerned, what we are hoping for is a more sensible approach unlike what was enacted during COVID and that the legislatures understand that eviction moratorium is punitive only to housing providers and a bad policy for LA because it deters investments in LA and housing production in an area that already has an extreme shortage in-housing because we all know that the best path to affordable housing is more just to produce more homes. And so that conversation is ongoing and we are working closely with our organization to get better visibility on that at some point. As far as the rent freeze is concerned, Governor Newsom declared a state of emergency related to the fires that triggers the existing California law to limit rent increases to 10% above pre-emergency levels. And since there's already an anti-dowging protection in-place, which we also support. We're hoping that nothing more extreme will be passed. And so once again, that's the reason for the downside scenario and that's what is -- yeah, related to the -- that impact to the lower-end of the range?

Nicholas Yulico
Analyst at Scotiabank

Okay. Thanks. That's helpful. Is it possible to get just a specific for L.A. In terms of what's assumed for the same-store revenue growth this year.

Barb M. Pak
Executive Vice President, Chief Financial Officer at Essex Property Trust

Hi, Nick. Yeah, it's Barb. So for L.A. We have assumed that it will improve from where we are in 2024. As you can see in our supplemental, we were at 2.3%. L.A. Was very challenged in '24 with low occupancy and negative rent growth. And we think that occupancy improves to a stabilized level of 96% and that rent growth is modest at about 2%. So that's what's baked-in. No impact from the wildfires has been forecasted in our numbers. It was just we had assumed the market starts to recover from some of the eviction noise that occurred in 2024.

Nicholas Yulico
Analyst at Scotiabank

Okay. Appreciate it. Thanks.

Operator

Thank you. Thank you. Our next question is from Eric Wolfe with Citibank. Please proceed.

Eric Wolfe
Analyst at Citibank

Thank you. Hey, thanks. As part of your guidance, you gave an expectation for 3.5% renewal rate growth through this year. I'm just trying to understand why it wouldn't be a bit higher given the low turnover you've been seeing. And I think you did about 4% last year with weaker market rent growth. So just trying to understand how you came up with the estimate and why it would be lower than last year.

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Hey, Eric, it's Angela here. It's a good question. And our approach generally has been to essentially be market appropriate with our renewal rates. And what that means is over-time, you would expect the renewal rates and market rents to converge. And now it could be lumpy year-over-year depending on lease terms, the concessionary environment and timing of the renewal side, which is why you saw a -- we experienced a 4% renewal in 2024, even though the market rent growth was quite a bit lower year. But net-net is that our focus has been and will continue to be on maximizing revenues rather than individual rates. And these renewal rates can be lumpy from year to year.

Eric Wolfe
Analyst at Citibank

And then you mentioned that you expect the second-half to be better from a blended spread perspective. I don't know if you want to give sort of what you expect for the first-half and second-half, but sort of what gives you that conviction that you'll see that increased hiring trends? Obviously, you can look at the listings, but just curious what gives you the confidence that you'll see that incremental demand in the back-half of the year?

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Thank you. Yeah, it's really a function of two factors. It's both demand and supply. And so as far as the cadence, we're anticipating that the first-half to be in the high-twos, so say around 275 and the second-half to be above a midpoint in the low 3s, say 3, 3% around there. Yeah. And from a supply perspective, I think that's more straightforward, so I'll cover that first. The -- we are anticipating that the first-half delivery to be heavier. So when we look at our supply cadence, about 60% or so of the supply is coming in the first-half. So that of course will impact on our pricing power. And as far as the job growth, we assume that to happen in the second-half because what we're seeing is the job postings that have been gradually increasing and have been steady, but it takes time to actually hire. And we're also seeing that especially in the Bay Area for a meaningful number of tech companies have taken on office expansion. And just from the leases signed, if you just take the actual square footage, that would imply somewhere around 5,000 new headcounts. Well, that's not all going to happen at the same time. And certainly, it's not possible for it to all happen where the most of it happen in the first-quarter because once again, it takes time to recruit and interview and put people in-place. And so that is why we're assuming the second-half. And of course, our condition is coming from the leading indicators such as job openings and of course, the office leasing activities.

Eric Wolfe
Analyst at Citibank

Thank you. Great. Thank you.

Operator

Thank you. Our next question is from Austin Wurschmidt with KeyBanc Capital Markets. Please proceed.

Austin Wurschmidt
Analyst at KeyBanc Capital Markets

Thank you. Yeah, great. Thank you. Barbara, Angela, I know you mentioned the one-half blends will be lower than the second-half for the reasons you just cited. But I guess digging into the 2.5% new lease rate growth assumed at the midpoint of same-store revenue growth guidance, I guess, should we expect kind of another year of a gradual ramp into the peak leasing season and then kind of the shoulder periods being a little softer. And also curious in your market rent growth assumption, if any or how much benefit there is from kind of a you know, I guess, a more normal year where you don't have long-term as many long-term delinquent units coming back to-market. Just wondering if there's any kind of concession burn-off benefit in that number? Thanks.

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Hey, Austin. That's a good question. We do expect the leasing curve to continue to normalize. So in 2024, it's the first time in several years where we saw a normal leasing year. And so what we're expecting that in 2025 that it will continue. We haven't really seen anything else in the economy that would provide a meaningful disruption to that. And as far as our market rent is concerned, what happened last year is if you look at our actual market rent, it was slightly lower than our forecast, but that's really driven by LA and Elameda delinquency that created a lot of noise. And so once you factor that in, we are assuming that that's now behind us and the market rent curve is much more steady.

Austin Wurschmidt
Analyst at KeyBanc Capital Markets

That's helpful. And then just touching on the bridge from the 4th-quarter result to the first-quarter guidance. After you remove kind of the $0.04 non-cash charge in the 4th-quarter, you did $3.96 of core FFO and the 1Q guidance assumes that dips. Yet you do have some reacceleration in the blended rate growth. You cited January occupancy pickup versus where you were in the 4th-quarter. So I guess what's kind of driving that sequential decrease in core FFO? I'm just wondering if there's any items to highlight there. Thank you.

Barb M. Pak
Executive Vice President, Chief Financial Officer at Essex Property Trust

Yeah, Austin, this is Barb. So there's really two factors. It's really timing on opex. So sequentially between the 4th-quarter and the first-quarter, we're seeing a little bit more in opex spend. And then the other big driver is just higher interest expense as we have a higher line balance and various other assumptions in the guidance guidance. So that's really the two key drivers on the sequential change in core FFO.

Operator

Our next question is from Steve Sakwa with Evercore ISI. Please proceed.

Steve Sakwa
Analyst at Evercore ISI

Thank you. Yeah, thanks. I guess I just wanted to come back to that kind of blended number and really more of the spread between new and renewal. I guess many of your peers just have a much wider, I guess, delta between the new and the renewal. And I'm just wondering if there's something going on this year as it relates to the comps and whether some of these renewals are turning into new leases or lack of renewals and there's more pricing power there. I just was a little surprised at the narrowness between those two..

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Hey, Steve, it's Angela here. No, that's a good question because I think what is causing the variation from one company to another is really more related to the operating strategy. And for us, what we have been focusing on is bring in our renewal rates as close to-market as possible. And we're sending these ahead of time and there's some negotiating. So it's not going to be exact. And because ultimately, if we can price our renewals appropriately and run a optimal occupancy, then the new lease rates will benefit. And so ultimately, that all relates to how we can maximize revenues. And so what that means is for Essex, renewal and new lease spread will really -- that range or the spread is really subject to-market conditions. And in an environment where market rent growth is accelerating, that spread will be much wider. But in an environment where there's been prolonged moderate growth, that spread is going to be near order. And of course, there's other factors like concessions and timing of leases signed, which makes it, I understand hard for all of us to clean point exactly what the spread would be, but that's -- but how we're running the company is probably driving the spread difference.

Steve Sakwa
Analyst at Evercore ISI

Okay, thanks. And then just a follow-up. Again, other income for you guys is only growing 10 basis-points. I know for some of your peers that are doing more of this connectivity in the WiFi that number is more like 50, 60, 70 basis-points. So is there something kind of holding you guys back on that other income? Are you doing something differently or have you maybe not taken the same steps that they have to kind of roll this out and that's coming for you? Just trying to understand that 10 basis-points.

Barb M. Pak
Executive Vice President, Chief Financial Officer at Essex Property Trust

Yeah, hi, Steve. So this is Barb. So there's a couple of factors are at play here. So in 2024, we had some outsized what we would consider outsized lease cancellation fees and we talked about that on our last call and that we think moderates in '25 to kind of a more normalized level. So that's muting growth a little bit on the other income side. And then the second factor is in '23, we rolled-out some initiatives and we got the full benefit in '24. And right now, we're piloting a few things. We're not sure we're going to roll them out. We need time to vet to make sure it's really going to pay-off. And if we roll them out, like we will benefit '26. And so we're kind of in that piloting phase right now on a few different initiatives. So that's what's leading to that 10 basis-points growth this year.

Steve Sakwa
Analyst at Evercore ISI

Great. Thank you.

Operator

Our next question is from Jeff Spector with Bank of America. Please proceed.

Jeffrey Spector
Analyst at Bank of America Global Research

Okay. Great. Thank you. First question, Angela, in your opening remarks, you mentioned the company is in growth mode. I know you've been talking about that the past year, but really can you just dive into that a little bit more the impetus? And in terms of acquisitions, you mentioned cap rates are in the mid to-high fours again, how do you plan to, you know, acquire assets? I guess, again, if you could just talk about that as well as maybe IRR expectations? Thank you.

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Hey, Jeff. No, good question. On the -- I'll just cover some high-level strategy and then turn it over to Ryland. As far as generating accretion, of course, in an environment where our stock price isn't as attractive, if you've seen us do so in other ways. We sell -- we can sell assets, obviously, that offsets the growth. But the growth of the company, but in terms of the growth of the portfolio, it actually will benefit that. And it would generate accretion because if you see what we've done is we acquired pretty heavily in 2024 in the Northern region where we were expecting and have seen outperformance relative to the rest of the portfolio. At the same time, we sold a $250 million 1970 built property and attractive value. So ultimately, you'll continue to see us transact in a way that's going to be accretive. And as you're aware, we have multiple funding sources in addition to dispositions, we, of course, have some of cash-on-hand from operations and joint-venture opportunities. Rylan, you want to talk about returns and other stuff?

Rylan K. Burns
Executive Vice President, Chief Investment Officer at Essex Property Trust

Yeah. Hi, Jeff, this is Ryan here. I think market participants, as we mentioned, buying cap rates in the mid to-high fours for well-located high-quality properties. I think the marginal buyer today is underwriting around an eight unlevered IRR expectation and we are obviously trying to do better than that.

Jeffrey Spector
Analyst at Bank of America Global Research

Thank you. Thank you. And then my follow-up is, you've mentioned that there was a pickup in January. Can you talk about that in historical context? Was it a normal pickup that you see in January? Was it stronger than normal, weaker-than-normal?

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Yeah. Oh, yes, Jeff. This is consistent with our expectations. And so it's typical. The occupancy pickup in January was all-in Northern California, which was what we had expected because that strength is finally starting. And when we look at just generally from a new lease rates, it also gradually improved as well. And so on all fronts, January is playing out exactly as what we had planned.

Jeffrey Spector
Analyst at Bank of America Global Research

Thank you. Thank you.

Operator

Thank you. Thank you. Our next question is from Jamie Feldman with Wells Fargo. Please proceed.

Jamie Feldman
Analyst at Wells Fargo & Company

Thank you okay. Great. Thanks for taking the question. So your portfolio tilts more heavily suburban, which has performed better since COVID given some of the challenges we've seen in urban submarkets. We're wondering if you expect the same theme of suburban outperforming urban in '25 and maybe to put a finer point on it, can you talk through your views on rent growth in your urban versus suburban portfolios?

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

You. Hi, Jamie. It's -- that's a good question and a thoughtful one. As far as our portfolio allocation is concerned, we have favored the suburban location for a specific reason. Yes, from time-to-time, particular area might outperform for a short-term, but our suburban portfolio is where all the major companies are located. So unlike the East Coast or even the Midwest, you have Apple and Cupertino, Google is in Mount View and in Menlo Park. And so these major hubs are not in the downtowns. And so that is a key reason why we have favored the suburban locations. But in addition to that, the downtowns are more challenging in terms of the quality-of-life there's the homeless issue still needs to be addressed and I think crimes hopefully is getting better. And so I do think that, yes, it's a -- the urban centers should rebound, but we do not expect for those areas to outperform the suburban and because they just have not done so over the long-term.

Jamie Feldman
Analyst at Wells Fargo & Company

So can you quantify -- I know you've talked a lot about your rent growth in the first-half versus the second-half. I mean how would you compare your urban rent growth versus your suburban in your '25 outlook?

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Thank you. Oh, I don't have that final detail in front of me. We do -- we are expecting the suburban to continue to outperform the urban, but it's going to vary differently. So for example, downtown LA is going to be very different than downtown San Francisco because downtown LA has more supply. And so I don't have the exact spread.

Jamie Feldman
Analyst at Wells Fargo & Company

Okay. And then maybe for my follow-up, I mean, I think you had commented you've seen some office leasing in the Bay Area, some expected rent growth in the Bay or job growth in Bay, but we've seen a major hiccup to the AI industry with. I'm just curious, did you guys change your outlook at all for demand on that? It seems like the AI business will be in cost-cutting mode. Or just how -- did that impact your outlook? How are you guys baking that into your expectations for a pickup in the back-half of the year?

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Thank you. Yeah, the -- we don't expect to materially impact the business. And now first of all, when we look at the -- all the leases have been signed, it's not -- it's not dominated by AI. It's companies like Snowflake that's a data company. We have some fintech, we have some software companies. So it's pretty well diversed. But that said, as far as Deep Seek is concerned, we do think that ultimately more competition will spur more innovation and investments in this sector. And deep, there is a disconnect between what they provide and what the end-users need. And you still need these companies to come in and create products and tools on-top of it for the end-users. And so that business will remain robust as far as what we can see.

Jamie Feldman
Analyst at Wells Fargo & Company

Okay. Thanks for your thoughts

Operator

Thank you. Our next question is from Brad Helforn with RBC Capital Markets. Please proceed.

Brad Heffern
Analyst at RBC Capital Markets

Yeah. Thanks. Good morning, everyone. Obviously, a lot of political uncertainty right now, but can you talk about how you're thinking about the potential impact of shifts in immigration policy. And it would also be great if you could talk about how much of your demand comes from H1b visas. Thanks.

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Hi, the administration question is an interesting one because it can change from hour-to-hour from what we can see. But as far as the immigration part of it, fortunately, that's been pretty steady in terms of how the administration has communicated their stance. Their focus has been on illegal immigration. And so we don't expect that will have a meaningful impact on our portfolio, especially since we have a chronic shortage of housing at a level greater than the national average. And anecdotally, I think we've all heard of comments such as we want the best and the brightest. And so from what we gather, the administration is actually pro H1b visa and wants to provide a path for foreign college students to stay-in the country. As far as our business is concerned, in the past, we do have a small portion of tenants from. They tend to be more transient and they tend to double up more. And so once again, when they exited early-on during the Obama administration, we didn't see any impact to our portfolio.

Brad Heffern
Analyst at RBC Capital Markets

Okay. Okay, got it. Thanks for that. And then maybe for Barb, I'm looking at the 2025 core FFO walk on S16.2 you have a larger growth contribution from the non-same property NOI than you have from same-property. Can you just go through that? I think potentially maybe the non-same properties being offset some by the interest bar, but just wondering why it's so large. Thanks.

Barb M. Pak
Executive Vice President, Chief Financial Officer at Essex Property Trust

Yeah. The key takeaway there is the acquisitions that we did this year and we consolidated several JV properties and then we bought-out others. So it's really that is the contribution. It is the big component of it. So there's a lot of movement within the financials from consolidated to -- unconsolidated to consolidated and that's what's driving that.

Brad Heffern
Analyst at RBC Capital Markets

Thank you. Okay. Thank you.

Barb M. Pak
Executive Vice President, Chief Financial Officer at Essex Property Trust

And I'm happy to go offline with you on more details if you need anything else.

Operator

Our next question is from Adam Kramer with Morgan Stanley. Please proceed.

Adam Kramer
Analyst at Morgan Stanley

Great. Thanks, guys. I just wanted to ask about it. And I think Andrew, you mentioned a pickup in January, although maybe not -- maybe not so much in the LA region. And I guess just wondering first, obviously, given these unfortunate wildfires and obviously thoughts with everyone there. Maybe just if there's been any kind of contribution to the portfolio, be it on the rate side or maybe more likely in the occupancy side in January. It seems like again based on your earlier comments, that's not been the case, but just wondering there.

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Yeah. Hey, Adam, we have not seen any increase in lead volume is not from the fires. I mean, we've -- we've seen inquiries, but the actual activities have not translated. It's really because what we heard was that these fire victims are waiting for clarity from the insurance providers before making housing decisions. So it's going to -- just it's going to take a lot more time to work that through the system before it has any impact. And secondarily in terms of the tenants that may be looking for new housing, the impact were mostly single-family home and they're going to need larger units, multiple bedrooms. And so once again, I just don't see that as a huge impact in the near-term.

Adam Kramer
Analyst at Morgan Stanley

Got it. And that's helpful, Angela. And then just wanted to ask about kind of the same-store expense growth guide, maybe just taking the midpoint of it. If you could maybe just walk-through the -- some of the key drivers there, taxes, utilities, operating expenses, just the kind of contribution to that overall expense growth guide?

Barb M. Pak
Executive Vice President, Chief Financial Officer at Essex Property Trust

Yeah, this is Barb. So as I mentioned in my prepared comments, insurance is kind of the biggest driver of our reduction in same-store expense growth this year from 4.9% to 3.75%. So insurance, we expect to be down 2% based on our December renewal and that's a big reduction from what we saw last year. And then as it relates to real-estate taxes, we do think that they're up a little bit from where they were in 2024. Given Seattle is a wildcard, we do think Seattle may come in high again in double-digit range this year. And then utilities has also been the wildcard. We have seen outsized pressure there and above inflationary increases. We think it still is elevated in terms of increases in 2024, maybe a little bit more moderate than what we saw in '20 or a little more moderate in '25 versus '24, but overall, our real-estate taxes utilities probably went to about the same number next year in total. So core -- the non-controllable piece will be up about 4.5%, we think. And then the controllable piece will be up just under 3% is how we kind of get to our 3.75% blended number.

Adam Kramer
Analyst at Morgan Stanley

Great. Thank you, Barb.

Operator

Our next question is from Alexandra Goldfarb with Piper Sandler. Please proceed.

Alexander Goldfarb
Analyst at Piper Sandler Companies

Hey, good morning out there. And Rylan, congrats on selling a 76-year-old asset at a pretty, pretty surprising price. So well done. Just, Angela, I wanted to follow-up on Jamie Feldman's question on the urban markets and suburban. You know, the big narrative and you guys have talked about it that tech is trying to make a push to come back, return to office and people -- the tech job openings and people coming back to San Francisco, Seattle, but you also made a comment about the urban areas still dealing with crime, homeless and yet we hear positive things out-of-the changing political landscape as a result of elections in both markets. So when you cut through it, how do we interpret a rebound of those two markets versus the comments that there's still work to be done? Obviously, I know stuff takes a while, but is -- are the positive changes being -- like is that Real-time or that's the hope, but right now, not much really has changed on-the-ground as far as quality-of-life and that's why you still prefer the suburbs versus the urban?

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Hey, Alex, great question. It's really two things. One is that when it comes to talk and public policy, I think that's headed in the right direction and we are hopeful that they can get her. But I think we've all experienced this, especially you went through this in New York, once you have a political plan, then you have to set policy and you have to find funding and you have to implement it. And these things just -- it just -- it's not even a short-term, it's multiyear program. And so that's one of the reasons why our view is we are hopeful, but we believe it's going to take some time. As far as the rebound in jobs and the -- and the expansion that's taking place by these tech companies, I'll share with you what we've seen. The leasing activities have all been in the suburbs. Snowflake is in Menlo Park, Robin Hood is in Menlo Park. Ex AI and we have a couple of small companies that's in South San Francisco, which is great. But another AI companies amount you. I mean it's predominantly in the day -- in the suburbs, maybe one or two small companies in close to the CBD, not San Francisco, but close to it. And so -- and that's pretty consistent with historical patterns..

Alexander Goldfarb
Analyst at Piper Sandler Companies

Okay. And then the second question is just on the regulatory front, there's also the governor's actions with SEQA and the coastal commission, which I imagine both of those entities are very protective of their powers. As part of this larger conversation about rebuilding LA and accelerating the process, is there any discussion about dialing back the ultimate powers that both these entities have to improve construction or is the view that this is a one-time of alleviation of those of those rigorous sort of permission slips, if you will, and that once LA is rebuilt, those entities go back-in full force.

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Well, Alex, I wish I had that crystal ball. I think you know what we're -- what we're seeing right now is there is an interest and also the need to focus on a massive rebuilding effort that needs to take place. Having said that, and how to go about it is complicated. As you mentioned, there are multiple agencies in play here. And I think what I think is people want to do the right thing, but everyone has their own process. And so I think it's going to take a little bit more time to play-out on -- as far as the approval process and the rebuilding process. And the what we can hope for is that the legislatures are going to try to be more efficient, but keep in mind, LA is a very large and densely populated area. And the economy is huge. And while these -- their home lost, the jobs remain intact and it's still in the LA area. The county is the largest county in the US with close to $1 trillion in GDP. And so we are optimistic that L.A. Will figure itself out and that they will benefit from the catalyst of growth with infrastructures and investments coming for the World Cup and Olympics and film industry tax credit. And by the way, it's -- the 4th-quarter is the first time we saw jobs in the film industry improve for the first time in several years. So these things do give us hope about LA.

Alexander Goldfarb
Analyst at Piper Sandler Companies

Thank you.

Operator

Our next question is from Haendel St. With Mizuho Securities. Please proceed you. Please check and see if your line is muted.

Haendel St. Juste
Analyst at Mizuho Securities

Hey, hey, good morning. So I guess, I'm here. So I guess my first question is on the development starts here. Your first starts in about five, six years. So can you expand a bit more about the opportunity set you're seeing here in development, the markets you a bit more focused on and how we should be thinking about -- how you're thinking about yields, IRs and potentially appetite for where you might want to grow the development book to.

Rylan K. Burns
Executive Vice President, Chief Investment Officer at Essex Property Trust

Hey, and I'll Rylan here. So as you mentioned, we haven't started development over five years because the risk-reward really just didn't make sense as you're all aware, it is very challenging to develop on the West Coast. And what we're trying to do at a high-level, we're seeking with our limited capital the highest risk-adjusted returns. So we feel like we have an opportunity today. This is in a location adjacent to Oyster Point, one of the largest biotech hubs in the world, land at a very low basis. Hard costs are down in the high-single-digits from 2022 and the rents have started to show some momentum in '24. So we are looking for a least a 20% spread to where we think we can buy and we think we have that today. On untrended rents, this project is projected to achieve a mid to-high 5% cap-rate and that's with a fully negotiated GMP and a healthy contingency buffer. And we think this project will stabilize in the high 6% range.

Haendel St. Juste
Analyst at Mizuho Securities

That's helpful. Appreciate that color. And I wanted to follow back up on a comment I think you made about concessions. You mentioned seeing some declines there recently, but I don't think your 2025 guide reflects any improvement in concessions this year versus last year. So maybe you can give us a sense of where concessions in the portfolio are today and whether it's fair to think this could be a source of upside with the demand improvement you're seeing in Seattle and in San Francisco, where markets I think you've had a bit more concessions of late.

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Yeah. Hey, Haendel. That's a good question on concessions. Today, the portfolio is sitting at less than half a week and that's an improvement from December of little over a week. But having said that, normally, you would see concession ticked up if we have supply deliveries in the slow season like December and which we did, we saw -- we saw in San Jose and of course, Seattle. And fortunately, San Jose, it's a smaller market in terms of the number of deliveries and so it quickly abated. Seattle, the supply delivery is comparable to last year. And so we don't expect a meaningful change in terms of the concession environment. And in fact, some of the supply actually is moving to the East side where we have the bulk of our portfolio. And so even though I think Northern California will be better there is an offset with Seattle at the end-of-the day. So net-net, our concessionary position from year to year is going to be about the same.

Operator

Our next question is from John Kim with BMO Capital Markets. Please proceed.

John Kim
Analyst at BMO Capital Markets

Good morning. So your cash delinquency improved sequentially, but it looks like your gross delinquency went up. I'm not sure if the reported and gross is the same number. But I was wondering if you can comment on that. And then when you talk about the 50 basis-point improvement for the year, does that include the impact of the accounting change?

Barb M. Pak
Executive Vice President, Chief Financial Officer at Essex Property Trust

Hi, John, yeah, it's Barb. So the reported this quarter does factor-in the non-cash charge for eliminating the accounts receivable balance. So that impacted the numbers this quarter and it did show a slightly higher number than what we have been reporting. Cash, on the other hand, did improve from Q3 to Q4. And so we're seeing that consistent pattern that we've talked about over the last couple of years. And then as it relates to the impact of '25, we have assumed 50 basis-points impact to our guidance for delinquency, of which 20 basis-points is related to the accounting charge in Q4, and we expect a 30 basis-points improvement on a cash basis. So for cash for 2025, we expect delinquency to be around 60 basis-points, which is where we were in the 4th-quarter.

John Kim
Analyst at BMO Capital Markets

And remind us where it was pre-COVID?

Barb M. Pak
Executive Vice President, Chief Financial Officer at Essex Property Trust

Pre-COVID, it was around 40 basis-points. And we do expect for 2025 that the first-half will be slightly above the 60 and then by the back-half of the year, we'll be at that 40 basis-points level. So back to pre-COVID levels.

John Kim
Analyst at BMO Capital Markets

Yeah. And Barb, on the debt maturities that you have this year, can you update us on where you could raise 10-year unsecured notes today and what's incorporated in your guidance for the year?

Barb M. Pak
Executive Vice President, Chief Financial Officer at Essex Property Trust

Yeah. So in terms of where the 10-year unsecured bond market is for us today, we're in the mid-5s and unsecured debt is slightly cheaper than secured debt agencies at four, five-year paper is around the mid-5s as well. So our -- we do like the 10-year unsecured bond market, but when we go to look to refinance our debt, we'll look at all options to see what's the most attractive at that point. In terms of what's in our guidance, there's a variety of assumptions in terms of timing and rates in the numbers. I'm not going to go into that specifically, but where we are today is kind of consistent with where we were most of last year. We're kind of bouncing around the mid-5 range for most of last year as well.

John Kim
Analyst at BMO Capital Markets

Thank you. Great. Thank you.

Operator

Our next question is from Wes Golladay with Baird. Please proceed.

Wes Golladay
Analyst at Robert W. Baird

Hey, good morning, everyone. I just had a quick question on the structured finance book. I think you said you have about $150 million redeeming this year. Do you have the timing of that? And then on a multiyear look, it looks like it has about 1.6 years of term for the just under $500 million of investments. Will that -- most of that mature next year?

Barb M. Pak
Executive Vice President, Chief Financial Officer at Essex Property Trust

You. Thank you yeah, this is Barb. It's a good question. So in terms of the timing of the $150 million of redemptions, we do expect about 50% to be by mid-year. So most of that's in the second-quarter and then one maturity later in the year in 2025. And then in terms of -- that timing is obviously subject to some movement as a couple of our redemptions in '25 are early, sponsors are looking to term us out as you know, getting permanent financing is cheaper than the construction loans. So some of those -- that timing does move around a little bit or could move on us. But that's our best guess based on talking to our sponsors. And then in terms of the maturities, yeah, there is the short-duration, a couple of them are maturing in the next year, but do have some extension options. So it may or may not get redeemed. It depends on-market conditions.

Wes Golladay
Analyst at Robert W. Baird

Okay. Okay. And then do you expect to invest more? I think you mentioned you wanted 3% to 5% of the business to be in the structured finance. Will you replenish this or just timing may not be right now?

Barb M. Pak
Executive Vice President, Chief Financial Officer at Essex Property Trust

Yeah. I think it depends on the opportunities, right? So if we see a good opportunity that's appropriate on a risk-adjusted basis, we'll look at it. We haven't seen a lot of those. There is a lot of money raised for this product-type. And so it's become very competitive. And so we focus more on buying hard assets. We think that's actually better long-term for shareholders. So -- but it will be dependent on-market conditions and what we see in terms of opportunities out there..

Wes Golladay
Analyst at Robert W. Baird

Okay. Thanks for the time.

Operator

Thank you. Our next question is from Rich Hightower with Barclays. Please proceed.

Rich Hightower
Analyst at Barclays

Hey, good morning out there, guys. Thanks. I'm just -- I'm just piecing together, I guess, a couple of comments made related to the broader transaction market. So, I think you said for high-quality product cap rates in your markets are maybe in the mid-4s and if I heard correctly, agency financing perhaps in the mid-5s. So I just want to make sure that I guess that implies negative leverage going-in and maybe outsized growth as you kind of push the model forward. So is that pretty consistent with what you guys are seeing in the marketplace? And just maybe a little more color on the transaction market in general?

Rylan K. Burns
Executive Vice President, Chief Investment Officer at Essex Property Trust

Yeah, hey, Rich, that's a fair question and I think your assessment is correct. I think a lot of buyers say are assuming negative leverage in year-one and trying to solve for how quickly they can get-out of it. As it relates to the transaction market at a high-level, there was around $16 billion of transactions in California and Washington in our product-type in 2024 compared to $7 billion in 2023 and '21 and two high watermarks in the low-20s. So there was a lot more volume traded last year. It feels relatively healthy. There's a very competitive bidding process again for the product that I mentioned that we are targeting. So it feels healthy and it feels the bitter pool is deep and we just came from NMHC where there was a similar message there's a lot of capital out there looking to deploy. And people are, I think, growing more increasingly optimistic about the West Coast. So that is the challenge for us in '25 is to figure out how we can accretively grow despite the competitive market.

Rich Hightower
Analyst at Barclays

Thank you. Got it. That's very helpful. Thanks, Rylan. And then maybe just a quick follow-up on the insurance side of things. I know you said you -- Angela, you said you renewed the policy in December. And so maybe in relation to the timing of the wildfires and happening after that, but also before most, I think other companies renew their insurance policies, Essex is in a little bit different spot there. So if you guys could maybe forecast out how you feel like the next round of negotiations and pricing might go later in 2025. On the other hand, Equity Residential yesterday said they did not anticipate too much of an incremental impact to the way insurance get priced based on the wildfires alone. So just help us understand how that might play-out as we think about even 2026 at this point.

Barb M. Pak
Executive Vice President, Chief Financial Officer at Essex Property Trust

Yeah, hi, Rich, it's Barb. So you are correct. We did renew our property insurance in December. So we are locked-in for 11 months of 2025. So really no-risk on our insurance renewal to this year. It's way too early to know what the outcome will be. And we had no damage from the fire. So we're not actively in discussions with our insurance carry-on any claims or anything like that. So we'll just have to see how it plays out as the year goes on. One thing I will note is over the last two years, our insurance is up 50%. So we have -- we have seen a steep increase on unlike in the residential home market where it was more limited. So that's the only thing I would comment on. Otherwise, I would say we'll know more as we enter the fall of this year.

Rich Hightower
Analyst at Barclays

Very helpful. Thanks, Barb.

Operator

Our next question is from Julien Bluen with Goldman Sachs. Please proceed.

Julien Blouin
Analyst at The Goldman Sachs Group

Yeah, thank you. You sort of touched on this a little bit earlier, but sort of Angela, you commented that Seattle and San Jose are projected to lead the portfolio at approximately 4% market rent growth this year. Those were also the markets where you had sort of previously warned about the supply pockets. I guess as you looked at the 4th-quarter and so-far what you're seeing in the first-quarter, how is sort of rent growth compared to your expectations? And I guess what is sort of giving you confidence that those markets will sort of hold-up this year?

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Hey, Joanne. On the supply landscape, as far as San Jose is concerned, what we experienced in the 4th-quarter was that there was an uptick in -- in terms of the supply delivery, which of course put pressure on rents for about two months. And then the supply got absorbed and we are back to a normalized environment. And so what we expect is that to occur, but the difference with the Northern region is that we see a stronger demand relative to the southern region. And that of course is going to provide pricing power in an environment where there is -- there's low supply. So even though you have supply delivery, it's going to cause some interim disruption, but it's not permanent. And similarly with Seattle, what we're seeing is the supply delivery, the level is similar to 2024. And what we're expecting is that the cadence to occur in the first-half of the year, which is much better than the second-half because when supply delivery comes during a period of strong demand, that absorption happens quickly and the disruption is really minimized. It's when they come in December or November, then it lingers on and takes more concessions and takes longer to work-through it. But all-in all, net-net is that our economy and the fundamentals are quite healthy. And therefore, we expect you know, these supply deliveries to be absorbed is similar to a typical pace. And so there may be interim lumpiness from month-to-month, but overall, we are well set-up for the year.

Julien Blouin
Analyst at The Goldman Sachs Group

Got it. Thank you. That's helpful. And following-up on John's question on bad debt. So the 50 bps of same-store benefit in '25, excluding the non-cash charge, it doesn't seem like you're sort of baking in much improvement from where you ended the year. I guess just wondering if absent eviction moratoriums, if we could see some improvement in the LA Alameda delinquency levels, which still sit above 100 basis-points right now.

Barb M. Pak
Executive Vice President, Chief Financial Officer at Essex Property Trust

Yeah, yeah, this is Barb. I think that's where we need to see the continued improvement. It's taken us the longest to improve L.A. Alameda. We've made a lot of progress in 2024, but we still need to make further progress to get us back to our long-term run-rate. And so that's why we're not making as much progress in '24 relative to prior years because we've made the vast majority of it already. So we think it will be incremental, but we've had most of the tailwind already in the prior year.

Julien Blouin
Analyst at The Goldman Sachs Group

Got it. Thank you.

Operator

Our next question is from Michael Goldsmith with UBS. Please proceed.

Michael Goldsmith
Analyst at UBS Group

Good morning. Thanks a lot for taking my question. We've seen pretty good improvement in operating conditions over the last year with return to office, low supply, favorable affordability for our partners, turnover is low. Yeah, we're still forecasting blended growth of 3% at the midpoint and this growth is off of relatively muted 2024. And this 3% growth is generally in-line with kind of the long-term, yet the conditions seem pretty favorable. So over the next few years, like are we thinking about growth rates continuing to expand as it really or is this kind of like as good as it gets given the favorable environment? Thanks.

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Hi, yes, no, that's a good question. We do see that the -- the fundamentals will continue to build strength. And one of the reasons why it's more gradual and improvement this year is that the overall economy is moderating from 2024, and that's by consensus forecast. And so we can't disconnect from that too much. Now we do expect the West Coast to outperform given all the fundamentals that we talked about earlier. And that is -- we expect that to build and to be gradual. So for example, October was the first time that we saw job openings from the top-20 tech companies to reach pre-COVID average. And since then, it has remained steady. That's fantastic. But that's three months. And so you would want that to continue to build and gain momentum and we are seeing that. So it's going to be more gradual for this year and we'll see what happens in the following years.

Michael Goldsmith
Analyst at UBS Group

That's helpful context. And just a quick clarification. Are you assuming a normal seasonal curve of blends in the first-half of this year?

Barb M. Pak
Executive Vice President, Chief Financial Officer at Essex Property Trust

Yeah. Our -- our budget does assume a normal seasonal curve for the entire year.

Richard Anderson
Analyst at Wedbush Securities

Okay. Thank you very much.

Operator

Thank you. Our next question is from Rich Anderson with Wedbush Securities. Please proceed.

Richard Anderson
Analyst at Wedbush Securities

Thanks for hanging with me. So on the kind of the pie-chart of the company, I guess in terms of its geographical footprint, I wonder if you'd be leaning more into Northern regions in light of some of the regulatory things that brought up in this call-in LA and the -- with President -- President Musk, I guess, running point in driving tech potentially. I wonder if we could start to see your aggressive more offense on external growth, leaning more into Northern areas and selling out of Southern California.

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Hey, Rich, glad you hang with us as well. On our investment activities, you actually saw that our activities in 2024 and it was heavily focused in the Northern region and the Bay Area. And we -- that dominated our focus because really of the supply-and-demand and affordability drivers, it was the most favorable lowest supply relative to all the other regions. And of course, with all the centers of innovation and technology companies expanding and growing and the Bay Areak in recovery in the midst of recovery. So Southern California has grown rents by 20% 30% since COVID and Bay Area is still in the low-single digits as an average. So it has the most upside potential and you throw in affordability metrics, boy gets really compelling. And so our focus will continue to be in the Northern regions really for the reasons that it has the most upside, if nothing else just from the recovery. As far as the legislation, we've been dealing with legislation our entire lives. And so that in itself would not be a reason to significantly pivot from one region to another. And so when we're talking divestitures, which is you're asking us if we're going to just sell-out of L.A. For example, we've approached it more property-specific rather than a particular city. We like all our markets. They have all generated above US average long-term returns. And so it's going to be driven by asset-specific reasons. So for example, when we sold the $250 million asset in the Bay Area that talked about earlier it was at a attractive valuation and it was super old hopefully that helps

Richard Anderson
Analyst at Wedbush Securities

Super-duper. The second question. The other -- the second question for me is on structured finance. It was said earlier today that redeploying the proceeds from the redemptions would be NAV accretive. And you kind of said this, the shorter-term nature of structured finance is FFO accretive, but relative to fee simple ownership, not as accretive to NAV. You mentioned also that you're targeting 4% of your business in structured finance for 2025, the selling point being it's low. So if that's the case, then why doesn't that trend lower and why don't you sort of sort of step-out of this business longer-term? Or is there some reason why a rounding or amount of it in the portfolio matters to you and the firm. Thanks.

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Hey, well, let me just provide you with a little context. We got into this business at a time where construction costs were growing in double-digits and rents were nowhere near. And so preferred equity business provided a very attractive risk-adjusted yield and complemented our development pipeline because we had effectively stopped developing during those times. And that was really the primary thesis for being in that business. So it's not that we don't like the business, it's that over-time, it's grown in such a way that it's -- it's lumpy, it's not as predictable and it makes sense to right-size that platform. But we still like the business and having a small percentage of that also gives us additional visibility into the activities of the local developers as well and keep us connected that way. So overall, it's still a decent business. But in terms of be simple, I mean, I just went through the compelling fundamentals on the Northern California region. And so owning be simple and having that durable growth to our NAV per share is really the key focus for us at this cycle.

Richard Anderson
Analyst at Wedbush Securities

Okay. Okay, great. Thanks very much for that color. Appreciate it.

Operator

Thank you. As a reminder to star one on your telephone keypad if you would like to ask a question. Our next question is from Teo Okusana with Deutsche Bank. Please proceed.

Tayo Okusanya
Analyst at Deutsche Bank Aktiengesellschaft

Thank you. Yes, thanks for hanging in there. Just a very quick one. Barb, again, the AR non-cash charge-off. Could you talk exactly about why -- why you decided at this point to charge it off? Is it purely an accounting thing where aged 90 days or more? Or was there some particular reason why you kind of thought that AR was not going to be collectible going-forward?

Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust

Yeah. No, that's a good question. Let me just step-back and give you kind of our history. So pre-COVID, Essex always had a cash policy. So if the rent wasn't collected in that month, we reserved against it and had no uncollective revenue on our books. When COVID hit and we had unprecedented delinquency in 2020, we accrued a small amount of revenues that we had yet to collect because we knew we would collect revenue over-time. And that is not uncommon in the industry. I think most of our peers actually have some on their books. And over the last few years, we've slowly taken that accounts receivable balance down. And given where we are in 2024, given the improvements we've seen and we feel like this is all behind us. We felt it was prudent to take the charge and just write-off the remainder and get back to our historical accounting policy of cash basis accounting on revenues. And that was always the goal to get back there. And four years later, we're finally there. So we're pleased with it. We're happy to be back there. There's no-risk to the financials in terms of we've booked any revenues that we haven't collected. And so we feel-good about our conservative economy policy on that front.

Tayo Okusanya
Analyst at Deutsche Bank Aktiengesellschaft

Thank you.

Operator

Our final question is from Alex Kim with Zelman and Associates. Please proceed.

Alexander Kim
Analyst at Zelman & Associates

Thank you. Thanks. Hey, good morning out there. Thanks for taking my question. I wanted to ask about your assumptions for renewals and market rents to converge. Is there any timeline that you're assuming for this spread to tighten? And then I guess just with supply easing on a year-over-year basis in your markets, is there any risk into mid to late '25, even into '26 that this spread actually widens once again?

Barb M. Pak
Executive Vice President, Chief Financial Officer at Essex Property Trust

Thanks, hi. No, that's a good question. It's tough to predict on timing just because it does relate to-market conditions. So for example, if we see a much stronger demand than expected, we're actually will get better market rents. What that means is that spread will then widen the renewal and movie spreads, which is a great thing because that means we have more upside on our renewals. And but as far as it relates to our base-case, we are very confident in what we can achieve given that supply is notable and with this landscape -- supply landscape, you don't need a lot of job growth to achieve our numbers. And so I -- our view is that we are in good shape with our midpoint.

Alexander Kim
Analyst at Zelman & Associates

Got it. Thanks for the color. That's all from me you.

Operator

And that is all-the-time we have for today. Thank you. This will conclude today's conference. Essex would like to thank you for joining them for their 4th-quarter earnings call. Thank you again for your participation. You may now disconnect. Disconnect goodbye

Corporate Executives
  • Angela L. Kleiman
    President and Chief Executive Officer
  • Barb M. Pak
    Executive Vice President, Chief Financial Officer
  • Rylan K. Burns
    Executive Vice President, Chief Investment Officer
Analysts

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