Apartment Investment and Management Company (NYSE:AIV) Q2 2020 Earnings Conference Call August 4, 2020 12:00 PM ET

Company Participants

Lisa Cohn – Executive Vice President, General Counsel and Secretary

Terry Considine – Chairman and Chief Executive Officer

Keith Kimmel – Executive Vice President, Property Operations

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Wes Powell – Executive Vice President, Redevelopment

Paul Beldin – Chief Financial Officer

Patti Shwayder – Senior Vice President

Conference Call Participants

John Kim – BMO Capital Markets

Jeff Spector – Bank of America

Austin Wurschmidt – KeyBanc Capital Markets

Rich Anderson – SMBC

John Pawlowski – Green Street Advisors

Haendel St. Juste – Mizuho

Rick Skidmore – Goldman Sachs

Operator

Good day, and welcome to the Aimco Second Quarter 2020 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Lisa Cohn. Please go ahead.

Lisa Cohn

Thank you and good day. During this conference call, the forward-looking statements we make are based on management’s judgment, including projections related to 2020 expectations. These statements are subject to certain risks and uncertainties, a description of which can be found in our SEC filings. Actual results may differ materially from what may be discussed today. We will also discuss certain non-GAAP financial measures, such as AFFO and FFO. These are defined and are reconciled to the most comparable GAAP measures in the supplemental information that is part of the full earnings release published on Aimco’s website.

Prepared remarks today come from Terry Considine, our Chairman and CEO; Keith Kimmel, Executive Vice President, in charge of Property Operations; Wes Powell, Executive Vice President, in charge of Redevelopment; and Paul Beldin, our Chief Financial Officer. Other members of management are present and will be available during our question-and-answer session, which will follow our prepared remarks.

I will now turn the call to Terry Considine. Terry?

Terry Considine

Thank you, Lisa, and thanks to all of you on this call for your interest in Aimco. The second quarter economic contraction was the most abrupt and most severe in U.S. history. The resilient Aimco business absorbed substantial blow and is now recovering from the shock of the pandemic and the lockdown of the economy. In mid-March, the pace of Aimco leasing was cut in half. 10 weeks later, at the end of May, we were behind plan by 1,000 new leases. In June, we saw an increase in customers breaking leases because of job losses and other financial problems. With increased demand and the excellent work of our site teams produced about 100 leases net ahead of plan, leaving a shortfall of 900. In July, early terminations continued, but demand remained strong.

Leasing tours were up 20% year-over-year and we finished the month 225 leases net ahead of plan, leaving a year-to-date shortfall of 675. If this trend continues, Keith expects the bottom and monthly average daily occupancy will be either this month or the month before. In all this, Keith and his ops teammates maintained their usual high standards for customer selection. They were concerned and some rents were carefully adjusted, but they were not panicked in across the board rent reduction. They are carefully building a high-quality rent roll, which will make a solid foundation for 2021. With increasing consumer demand, Wes restarted at a measured pace, some of the short-cycle redevelopments, which have been paused in March. Wes and his team also put the finishing touches at Parc Mosaic in Boulder and continued five long-cycle developments and redevelopments, which when stabilized, will add about $30 million a year to net operating income.

In the transaction market, effectively closed in March, demand is good and increasing. In May, Aimco closed the sale of a property in Northern Virginia; and in July, accepted the hard money deposits for the sale of the second property. In both cases, prices are ahead of year ago values. Aimco’s balance sheet, designed with times of uncertainty in mind, remains safe and flexible. Our leverage consists primarily of single-asset property debt were highly liquid, currently with over $1 billion of cash and committed credit. The Aimco team, the foundation of our success, adapted to ever-changing work environments, including enhanced safety procedures and remained committed to excellence in serving our customers and each other, whether in person or virtually. As we look ahead to the second half of 2020, we remain cautious, wary of elevated unemployment and the recent resurgence in COVID cases.

Perhaps most concerning has been the assertion by government at all levels of power to disregard constitutional protections of personal liberties, private property rights, sanctity of contracts, seemingly without concern for the liabilities incurred or consideration of the damage done to the economy on which all depend. So in uncertain times, I like the stability of Aimco’s high-quality and diversified portfolio, the discipline and effectiveness of Aimco operations, the safety and liquidity of Aimco balance sheet and the commitment and capability of my Aimco teammates, bound together by our culture of customer focus, personal responsibility and working together. And on that note, I’m reminded to thank again my Aimco teammates for your initiative and hard work in the difficult circumstances over the past 15 weeks, your sense of mission to provide homes for others, your culture of caring, courage and commitment. You have my respect, affection and gratitude.

With that, I will turn the call over to Keith Kimmel, Head of Property Operations. Keith?

Keith Kimmel

Thanks, Terry. I’d like to start by thanking our entire team for their ongoing commitment to serving our residents. Together, we navigated a challenging quarter with disruptions to demand, increased unemployment and unpredictable regulatory environment. Despite of these obstacles, nothing has changed in our operating philosophy. The best results come from residents who are meticulously selected and provided exceptional customer service. We continue to optimize our business using data to solve each problem with a tailored approach, and we avoid one-size-fits-all solutions and short-term fixes.

Looking ahead, I see reasons for optimism. Residents have continued to pay rent. July leasing volume exceeded last year. Turnover remains low, and our discipline and innovative approach continue to drive low expenses. The best measure of our core business is residential net rental income, which was up 1.1% in the second quarter. Average daily occupancy was 95.5%, down 140 basis points from last year. Rate growth slowed but remained positive, with new lease rates down 2.4%, renewal rates up 5.1%, resulting in blended lease rates up 1.8%, 200 basis points behind 2019. Offsetting the residential revenue growth, bad debt expense was 160 basis points, and we had headwinds in commercial and fee income. This resulted in same-store revenue decline of 1.1% from the second quarter of 2019. Controllable operating expenses were down 6.3%, with roughly half of the decrease due to improved staffing efficiency and better turnover performance.

The balance is related to timing of property repairs, which were slowed during lockdowns. These savings were offset by increased taxes in insurance, leading to total expenses down 40 basis points. As a result, same-store second quarter net operating income decreased 1.4% year-over-year. As I mentioned earlier, our philosophy is unchanged and begins with customer selection and satisfaction. Based on 15,000 surveys in the second quarter, customer satisfaction was again 4.3 out of five stars. Our satisfied customers live with us longer, leading to our lowest turnover ever, at 40%, a 500 basis point improvement over last year.

Now turning to July, as Terry mentioned, this spring’s economic collapse created a shortfall of 1,000 leases to our plan. July leasing base was 20% ahead of last year and cut the gap by more than one-third. Average daily occupancy for the month was 93.8% and given the frictional vacancy of peak leasing season, occupancy will likely remain low through Labor Day. July pricing has been mixed, with new lease rates down 5.6%, renewals up 3.4% and blended lease rates down 1.1%. We saw the most pressure in Los Angeles and Miami, while Washington D.C., Boston, Denver and San Diego, all had positive blended lease rates. Lastly, July collections were in the high 90s, consistent with recent months. Our operations team has been built for times like this in mind. And while we expect more choppy water ahead, I am confident in our team’s ability to deliver outstanding results.

And with that, I will now turn the call over to Wes Powell, our Executive Vice President of Redevelopment. Wes?

Wes Powell

Thank you, Keith. During the quarter, Aimco remains focused on the construction and lease-up of our active long-cycle redevelopment projects. In addition, we restarted select short-cycle projects and property upgrades after pausing those efforts earlier in the year. I’ll provide a few updates on second quarter activity and further details can be found within our release.

At Parc Mosaic in Boulder, Colorado, where construction was completed earlier in the year, Keith and his team have leased 84% of the property and are on pace to reach stabilized occupancy before year-end. At 707 Leahy, in Redwood City, construction resumed in early May, following a 5-week county-mandated work stoppage. To date, we have delivered 43 homes, 77% have been leased and we anticipate the remaining homes will be delivered this fall with occupancy stabilizing early next year. At the Fremont, on the Anschutz Medical Campus, 86 homes have been delivered, and about half of those have been leased. Here, we expect the remaining units to be completed around year end and the lease-up to be completed during 2021. Our town-home project in Elmhurst, Illinois continues to perform well, with 23 homes delivered to date and more than 90% of those already leased.

Construction is on track to be completed in Q4 of this year. Our final two long-cycle projects, the Prism in Cambridge and the North Tower at Flamingo are scheduled for delivery by the middle of next year. The cost to complete these long-cycle redevelopments is approximately $150 million an amount equal to just 1% of Aimco’s most recently published GAV. In the second quarter, Aimco resumes select short-cycle redevelopment projects and property upgrades. While our pace of investment will be governed by market demand and rental rate achievement, our current forecast assumes approximately $25 million of investment between now and year-end. As always, the Aimco redevelopment team continues to explore new opportunities for value-creating investment, though we are mindful of the increased uncertainty in today’s markets. With that, I would like to offer special thanks to my Aimco teammates for their continued dedication and positive results over these past few months.

And I will now turn the call over to Paul Beldin, our Chief Financial Officer. Paul?

Paul Beldin

Thank you, Wes. Today, I will discuss Aimco’s strong balance sheet second quarter financial results and how we account for bad debt. First, Aimco completed the financing activities discussed on our May conference call. We capitalized on current interest rates and bolstered liquidity by closing $689 million of fixed rate property loans generating $370 million of proceeds. The financings have a weighted average term to maturity of 9.3 years and a weighted average interest rate of 2.9%. They lowered the weighted average interest rate of Aimco leverage to 3.69%, addressed all 2020 maturities and increased liquidity and reduced refunding risk, such that Aimco committed credit and cash on hand exceeds the $150 million cost to complete continuing long-cycle redevelopments and developments plus the $960 million of debt maturing in the next 30 months.

While Aimco’s balance sheet provides flexibility and abundant liquidity, leverage, as measured by leverage to EBITDA, remains above-targeted levels. We plan to reduce leverage to less than 7:1 through the lease-up of the five long-cycle projects mentioned by Wes and through approximately $350 million of property sales, about half of which have either closed or are under contract. Given Aimco’s abundant liquidity, we have plenty of flexibility on the timing and pricing of property sales. In May, Aimco closed on the sale of an apartment community located in Annandale, Virginia at a price of $58.9 million. And in July, Aimco agreed to sell a community at a price of $126 million, with a $5 million deposit at risk to guarantee the purchaser’s performance. Both of these properties were priced at more than 3% above the prior year estimate of gross asset value.

Now on to Aimco financial results, second quarter pro forma FFO of $0.63 per share was up 5% year-over-year, and AFFO of $0.55 per share was up 8%. These results included $0.04 per share of interest accrued on the mezzanine loan made to the partnership owning Parkmerced Apartments in San Francisco. The accrual is, one, provided for the loan; two, required by GAAP; and three, secured by more than $300 million of borrower equity junior to the Aimco loan. Our results are after subtraction of $0.05 of COVID-related costs, a summary of which can be found in Aimco’s earnings release. Next, I’d like to spend a minute discussing the Aimco rent collections and bad debt. Residential revenue includes apartment rents and also such items as storage rent, parking rent and related fees owed by residents. Residential revenue comprises 97% of Aimco revenue, and its recognition is based on the same policy described in our May earnings call.

In the second quarter, Aimco recognized 98.4% of all residential revenue, treating the balance of 1.6% as bad debt. Of the 98.4%, 97.2% was paid in cash, 70 basis points is subject to recovering by offset against cash security deposits and $1 million or 50 basis points is considered collectible based on Aimco review of individual customers’ credit. In July, Aimco also recognized 98.4% of all residential revenue, treating the balance of 1.6% as bad debt. Of the 98.4%, 95.8% was paid in cash, 30 basis points is subject to recovery by offset against cash security deposits and $1.6 million or 2.3% is considered collectible based on Aimco review of individual customers’ credit. As typical, we expect to collect about half during August and the $800,000 remainder in future months. Lastly, the Aimco Board of Directors declared a quarterly cash dividend of $0.41 per share for the quarter ended June 30, 2020, up 5% over the regular quarterly dividend paid in 2019.

With that, we will now open up the call for questions. Please limit your questions to two per time in the queue. Operator, I will turn it over to you for the first question.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question will come from John Kim with BMO Capital Markets. Please go ahead.

John Kim

Thanks. Good morning. Just looking at the sequence of occupancy and rental growth over the last four months, both rental revenue or rents and occupancy have been declining each month. So I am wondering now, which one are you prioritizing to maximize revenue?

Keith Kimmel

John, it’s Keith. I would say neither because what we saw too is total contribution. And so at the end of the day, we think that it’s a combination of both occupancy rental rates and turnover that finds its way to the bottom line in margin. And so what we do is and it’s also really market by market. And you find one market like San Diego that’s running at 97%. We are going to have a very specific strategy there, and we might have a different strategy in Northern California or Miami, where we are feeling more rate pressure. So that’s how we are approaching it.

John Kim

Okay. And then the 1.6% of bad debt, I was wondering if you could provide any color as to product type or geography where this is unusually high and also how comfortable do you feel on the collectibility of the tenant based on the credit profile? You mentioned, Paul that its 50 basis points second quarter and then went to 2.3% in July. So I am just wondering, with that number going up, is it more at risk of being uncollected?

Paul Beldin

Thanks for the question, John. I’ll start and I’ll see if Keith wants to add anything. Starting with the second part of your question first on the collections, what you see is that in July, we collected 95.8% of July rent in July. That percentage is on top of what we experienced from April through June for collections in the month of billing. And so the difference is between our total second quarter collections and our July collections is the passage of time. And we expect, as time continues to pass, we’ll collect more and more of the July rent, leaving ultimately about 1.6% uncollected and that analysis that we did was based upon our past history of collections with tenants that have had similar credit profiles or guarantors with similar credit profiles. And so we feel like this is an appropriate approach. And really one that I think will serve us well because if you look back to where we’ve had more time to collect our rents and looking at amounts that are outstanding as of Q2, it’s only $1 million, and so that’s only 50 bps of our quarterly revenue. So we feel quite good about our approach. Keith, anything you can supplement there?

Keith Kimmel

Well, I would just add, Paul, John, you had a question, just sort of how we are seeing it across markets. And the most pressure we’re seeing is in two that I would point out, one being Los Angeles, where there’s a greater influence of what I’d call regulatory or city impacts of decisions around those areas. And then the second one I would point out would be Miami for us and that’s more employment-related where we have greater hospitality in sort of influence in that marketplace. So, those two have stood out. But on the flipside of that, we see some of our best collections coming out of places like Northern California and Denver as examples where we have almost very little to no impact whatsoever.

John Kim

Thanks for the color.

Operator

And the next question will come from Jeff Spector with Bank of America. Please go ahead.

Jeff Spector

Thank you. Good afternoon. My first question, I wanted to focus, please, on the pickup in demand you saw in July. You said I believe you said that leasing volumes were higher than last year, but you continue to see early terminations. I guess can you talk a little bit more about that demand is it did particular pricing, a, b versus c? And when you survey these folks, where are they coming from? If you could give us some color on that. Thank you.

Keith Kimmel

Jeff, I will take that. Listen, it’s hard to say, I think there has certainly been some level of pent-up demand where you may have had individuals who may have been in a lockdown or shelter in place who are coming out of that situation. I would also point to that we always see a pickup of demand during this time of the year. So this is peak season for us, and we see it. And what we are happy to see is that it’s outstripping previous highs. And so the 20% outperformance has been, frankly, across the board. We have seen it almost in every market, at almost every price point and we continue to believe that we will see some of that as it goes through the balance of the summer. And we are looking forward to continuing to make up ground there.

Jeff Spector

Okay, so no market differences or pricing differences?

Keith Kimmel

Not in particular. I mean, there is no question that as we look at it, we have seen our suburban portfolio performed more stronger than some of the urban assets, but even in those urban places and I will give an example in Los Angeles over the past couple of weeks, we have seen an acceleration of leasing activities that have been picking up. So as you think about how the impacts of COVID across the country are very particular to each city. They sort of go in ebbs and flows. We also see the same type of activity with us where, as things change, we see pickups where the consumer still has to live their lives and take care of their circumstances.

Jeff Spector

Thank you. And then my second question, I wanted to focus, please, on the transaction markets. I know you are it sounds like I believe you stated $350 million to sell half under contract. How aggressive will you need to be to push those sales along? I mean, what are you seeing on cap rate front? And do you expect cap rates to remain stable here? I see some very low financing rates in your sector, do you – I guess, what is your view there on both of those, please?

Terry Considine

Jeff, it’s Terry and I will take that. We see lots of demand. We see lots of interest, and we are being selective and looking for good price realization on the ones we have for sale. But I think that low interest rates have offset the economic turbulence.

Jeff Spector

Thank you.

Operator

And the next question will come from Austin Wurschmidt with KeyBanc Capital Markets. Please go ahead.

Austin Wurschmidt

Yes, hi, good morning everybody and thanks for taking the time. So I wanted to go back to John’s question on pricing strategy and certainly appreciate the answer that each market is a little bit unique right now. But I was curious if you are targeting any type of average portfolio occupancy just overall. And if demand or traffic were to slow more than historical seasonal trends, would you continue to let occupancy slide or is there a level that you are not willing to go below and you would maybe let revenue management take over and have to cut rate further?

Keith Kimmel

Austin, it’s Keith. Well, I will take it and maybe I can add some additional color to John’s question that will help walk through it. I think the thing I want to make sure that we focus on is that we are playing the long game. We solve to the bottom line total contribution margin. And so maybe I can walk you through sort of where we are at today. We are at 93.8% physically occupied. If you go back to the prepared remarks, we are talking about the 675 leases that we are still closing. That represents about 2.5% of occupancy. And so if you put those pieces together, that puts us in the mid-96s. And also, what I would just say is that this is the time of the year that by design, we have more frictional vacancy and so that really isn’t anything that we are put off by, and what we focus on is we want to be having a steady hand as we approach this, and that we are not really want to make we think the quality of the residents not having short-term fixes, short-term leases, things that today we would say, “Well, we feel more highly occupied, but we are going to pay for it later or have some other challenges as we look forward.” We know that we are going to fight through this through the balance of the summer, but we believe that we will benefit from these decisions in the way we are approaching it over the next 12 to 24 months that we are making decisions over time, and we are just really not willing to compromise against our convictions around resident quality or any of those other things. And so Austin, revenue management is like a thermostat on a wall. While if you could set it in certain ways, we have individuals who put their hands on this every single day, making decisions, building by building, unit by unit. And at the end of the day, we are very comfortable about where we are at. And we believe that as we work through call it through Labor Day, we think that we will be mudding through this, that we will start seeing some acceleration in blue skies in front as we get into the end of the year.

Austin Wurschmidt

Understood. That’s helpful detail there. Appreciate that. And then as it relates to leverage and dispositions, I was wondering if you could bridge the gap between the $750 million that you flagged to us last quarter. With Paul, I think you mentioned $350 million in your prepared remarks and how that gets you down to the target leverage of 7.0x. And I am also curious if that assumes that you have no additional funding on the redevelopment pipeline or no future starts once that $30 million of incremental NOI flows through?

Paul Beldin

Thanks for the question, Austin. And I think I will maybe start more broadly around leverage, in general. And what I would like to just say is that we are very, very comfortable with our leverage. We have as I have mentioned in my prepared remarks, we have no remaining 2020 maturities. Our maturities during the next 4 years through 2024 averaged only $260 million per year. The LTV on those properties is about 33%. So it’s a low LTV that’s readily refinanceable and we don’t have any covenants that are tied to leverage. So to a certain extent, leverage is a numerical outcome of your debt levels and your EBITDA. And so we don’t feel any pressure at all to sell assets at a quick pace or a discounted price in order to achieve a number. What we are really focused on is the safety of our balance sheet, and we feel like that our balance sheet is very, very safe at its current leverage levels. Now with all that being said, our leverage to EBITDA is higher than the peer group, and we would like to be more in line with peers, but we are going to take a very measured and disciplined approach at getting to that level. And so what I outlined was a way that we would get to 7x leverage. And we could end up going lower if the opportunity presents itself, but if we end up at 7x we will be very comfortable at that level.

Austin Wurschmidt

And then can you bridge the gap from the $750 million last quarter to $350 million, what changed in your assumptions?

Paul Beldin

Yes. I think that the conversation last quarter around that $750 million that you may have noted down was really kind of in response to some questions about how does our sales volume change with the reduction in capital spending. So I think that was more of an example rather than a target.

Austin Wurschmidt

Got it, okay. Thank you.

Operator

And the next question will come from Rich Anderson with SMBC. Please go ahead.

Rich Anderson

Hi, good morning out there everybody. So, Keith, you made a comment that a lot of your peers have made about urban-to-suburban moves. Are you seeing any of that within the Aimco portfolio or are you talking to people like if there they want to move out of the urban center, but you have this option? Are you having those types of proactive conversations with your tenants and turn the some lemons into lemonade?

Keith Kimmel

Rich, great question. For years, we have had a program called coast-to-coast program and it’s something that actually when residents move in, we immediately let them know not only about how great the community that they are at, but we know that life circumstances change and then we help them realize that we can help them do a transition to other parts of the country or in this case, as you described, if someone is in an urban environment wants to be in suburban or vice-versa that we help facilitate that. So it’s always been part of the way that we approach our business, and we continue to do that today.

Rich Anderson

Okay, great, but no more nothing more in terms of that effort. It’s sort of status quo. You are not making a particular effort in that category these days?

Keith Kimmel

Well, maybe I can give you the particular, Rich, is that we call every single one of our residents individually one by one to understand their circumstances. And so if someone’s having a challenge and so when we think about when people give notices and they give maybe a self-reported reason for what they are doing, what our efforts are around is having a personal relationship, one-on-one, going to each every one of them, saying, what’s really driving it? What’s behind it and how can we help facilitate it. So I would say that’s the color that’s in addition to maybe something that would have been different some period of time ago.

Rich Anderson

Second question is, so you are not perhaps saying this specifically, but maybe this second quarter is sort of a trough period, as you described, you get beyond Labor Day and you start to feel a little bit better. Who knows, right? We don’t know how this environment happens. But everything that we are talking about here, a lot of at least is present tense observations to what’s happened through July. I am wondering can you make a comment about how this could perhaps be a trough or is it the changing dynamics, the geographical footprint of the COVID-19 and how it’s affecting now different parts country, is that causing you to perhaps have a net sort of neutral perspective about how things are changing, but that some markets are now becoming more on the radar screen and some are coming off the radar screen? Are you sort of seeing do you have any kind of color from that standpoint?

Keith Kimmel

Rich, it’s Keith. I will give you my insight and then I will see if Terry wants to add a little maybe additional. Look, I think you have it exactly right that is that it is a changing dynamic. And in my prepared remarks, I talked about how we are seeing improvement, but we are not going to confuse ourselves that there’s likely more choppy water ahead. We just don’t know where that might come. And so whether that comes from some other flare-up or some other change, those are things that we are going to be prepared for and we are ready to deal with. And so an example of that, as I think about our San Diego portfolio that’s running at 97% plus occupied, has had very little impact on some of the things that a place like Los Angeles has had, as an example or a place like Miami. And so we are not going to confuse ourselves that this can’t develop into different places across the country and we also see reemergence of strengths. I will point to our DC and Boston, Suburban portfolios that are gaining strength, and we can see them building occupancy and coming into a better position as we are coming through the peak season. So I think the point is that is it the trough. As we sit here right now without true information, we see a path in which we are going to have to mud through a couple of periods in front of us as we get through the end of Labor Day, call it. And then we can see things getting better, but we also aren’t going to be caught off guard if something changes along the way.

Terry Considine

Rich what I would add, Rich, is that just Keith’s example shows you it’s partly the economy, but it’s partly local regulation. San Diego and Los Angeles are 100 miles apart. But because of local regulation, you have different consumer behavior and different outcomes. And so what we have to forecast at this time is partly the disease, partly the economy and partly what local governments will impose on us and it’s an uncertain time. We feel it’s great to be diversified. On balance, we feel comfortable, but each of those problems can occur at any one of our markets.

Rich Anderson

Okay, great. Thanks, Terry. Appreciate that. Thanks everyone.

Operator

Mr. Joseph, your line is now live.

Unidentified Analyst

Thanks. How was Parkmerced operating performance versus underwriting in the second quarter?

Terry Considine

We have to believe this is Terry. We have to believe that they are subject to the same pressures and so forth that we are and that the economy the impacts of regulation in the city of San Francisco have to make it in turbulent time. We’re not really in a position as a creditor to comment on their operations although, as their debt is publicly held, some of that is publicly available. But what I can say is that we feel secure. We feel that it’s a great piece of ground in a wonderful city. And we’re very comfortable that either they will perform or that our remedies will make it an opportunity for Aimco.

Unidentified Analyst

Thanks I guess, has anything changed from 1Q? Because I guess, in the first quarter release, you put out that there was 98% of underwriting. So I was hoping to get that with respect to the second quarter given the disruption.

Terry Considine

I don’t have that available to me right here, but I have to as I say, any operator in San Francisco probably had a tough second quarter. And as a debt holder, that doesn’t immediately affect us or directly affect us.

Unidentified Analyst

Okay. Well, then maybe just in terms of the cash payments, I think in the first quarter, you received $600,000 and the rest was accrued. Was there any cash received in the second quarter or was it all accrued?

Terry Considine

It was all accrued, which is permitted under the note.

Unidentified Analyst

And when would you expect cash payments to resume?

Terry Considine

I don’t have the same answer as before because of the uncertainty of the future. But again, I feel as a debt holder, we’re in a very secure position.

Unidentified Analyst

Thank you.

Operator

And the next question will come from John Pawlowski with Green Street Advisors. Please go ahead.

John Pawlowski

Thanks a lot. Keith just wanted to follow-up on your comments around muddling through and I know certain operators are pulling a concession lever harder and certain are letting occupancy slide, and everybody’s pulling their levers to different degrees. But in your mind, there is muddling through these next few months, is that should we think about that as holding the line on occupancy but giving up on effective rents? And so rental rates keep deteriorating, but occupancy is flat. Is that kind of the balance that you have in your mind right now?

Keith Kimmel

John, what I would say is that we are not afraid of the occupancy that we’re at if we make the right trades that find its way to the bottom line and total contribution. So what I’m trying to convey is that there wasn’t a world even six months ago that at 93.8%, we would have said this is what we would expect. But we are where we are, and what we’re very comfortable with is our approach. And so I don’t want to solve that we wake up to say, listen, we have to be at 96% or 97% occupancy at all costs. And because we believe that if you make those decisions that you will live with those as an anchor in rate for much more than a single month, it will go over time. So we are trying to balance with what are the market pressures around us. If you think about concessions, we think of effective rent. We think those are just marketing tools about what is the ability and desire of a consumer and what they’re willing to pay, and we want to balance all those things and ensure that as we come out of peak season that we’re in a place of strength. And we can always be better, John. When I look back on things, there’s always an opportunity to fine-tune something, but I would not change our approach, and we’re going to continue to do that. And we think there’s that’s the muddling part to the next, call it, 45-plus days.

John Pawlowski

Yes. No, I am just trying to understand the market health. And so broadly, market rents and market occupancy and the term trough and floor is getting thrown around a lot in the industry. So when you put it all together, aggregate pricing power, which markets over these next few months, do you guys not see any kind of visibility on a trough? Which markets are still in the early innings of deteriorating? You referenced a few markets that have improved. Again, it’s less Aimco-specific. Is there a floor in the Bay Area right now? Is there a floor in LA, different operators have different opinions on that aggregate pricing power question?

Keith Kimmel

It’s a good one, John. Let me give you a couple of insights on that particular one. But one that I don’t think we have complete clarity on is the Bay Area, but let’s divide it because the Bay Area where we don’t have complete clarity is the peninsula at the moment when we look at the East Bay, and we look at San Jose, that’s not an issue. I don’t think we’re beyond the trough, and we are seeing strength. But in the Bay Area, the peninsula, in particular, we definitely see a much more significant pressure there. In Los Angeles, I would also separate those from those that are in Mid-Wilshire, to those that are in our, call it, Simi Valley, Ventura County sort of places like that. In Mid-Wilshire, I would say in the last couple of weeks, we think we hit the bottom because we have seen some acceleration. We are seeing an uptick, but it’s early days on that. So I don’t want to call it that we are out of the woods yet because there’s a lot of work to be done there. I might point to Philadelphia as an opportunity that continues to improve. but we’re not through it completely. San Diego is strong, Boston is strong, D.C. is strong. There’s so it says each one is a little bit different. And so I don’t think you can put a blanket answer against it all.

John Pawlowski

Understood. Thank you very much.

Operator

And the next question will come from [indiscernible]. Please go ahead.

Unidentified Analyst

Thank you for taking my question. Just looking at California regulation right now, how are you guys approaching the upcoming election and any lobbying efforts with the government there?

Terry Considine

Alex, this is Terry, and I’m joined here by a colleague, Patti Shwayder, who is on the middle of all of those efforts and has was last time and can answer. Patti, how are we doing in the election in California?

Patti Shwayder

Thank you. You are speaking about Prop 21 is on the ballot. A large coalition as last time is mobilized to fund it, raising money, working hard. We think we’re in actually a better position this time, because number one, Prop 10 was defeated by 20% last time. A couple of years ago, California Assembly passed AB 1482, which is the rent control bill, which caps rent at CPI plus 5% or 5% plus CPI for 10 years. So that provides a little cover. And as I said, the groups are mobilizing. There is over 100 different groups that are supporting this, including those that didn’t support it last time or oppose it last time, I should say. The NAACP building trades, ironworkers and labor, so it’s a broad coalition. We’re working hard and hope that we’ll be successful again.

Unidentified Analyst

Got it. Thank you very much. And sort of looking at Boston, some of your peers have reported a lot of challenges there because you were able to see some revenue growth. But just what caused the success in that area and then why? Did you have something going on there?

Keith Kimmel

Alex, it’s Keith. What we saw is our suburban portfolio in Boston really outperformed. And so we saw similar pressures when we look in the city. But we have a smaller footprint there and our suburban portfolio really played to our strengths.

Unidentified Analyst

Thank you.

Operator

And the next question will come from Haendel St. Juste with Mizuho. Please go ahead.

Haendel St. Juste

Okay, thank you. So I guess another market-related question for you, Keith. The same-store revenue between your top and bottom markets this quarter Seattle knowing is about just over 700 basis points. I’m curious if you think that spread widens up further near term. And as part of it, maybe you could discuss some of your Seattle portfolio positioning and what’s driving the better relative performance there. I have seen a lot of your LA assets. I know you have a lot of high-rise, more pricy assets there, but I am curious if what we are seeing between these markets is a bit of reflection between maybe more suburban or more recent Seattle and more high-rise in LA?

Keith Kimmel

Thanks, Haendel. First, I would just point to our Seattle portfolio was really just two buildings. And so while it’s a nice marker when you look at the growth, the contribution is quite small. As we think about the spreads, I don’t know that I want to predict what the spreads will continue to be as we look forward. But at the end of the day, what we are seeing is that when we look at the urban versus suburban sort of portfolio mix, there is more strength in those suburban markets. We have both in occupancies and rates, and we also see that, that can change by marketplace and what circumstances are going on. So just I can’t predict the future, but I can tell you that you can count on us that we’re going to find a way to be the best we can every day against it.

Haendel St. Juste

Got it, got it. And did you guys disclose rent collection by A B C price on the portfolio?

Paul Beldin

Haendel, this is Paul. We did not. But what I can’t add a little bit of color, and we alluded to it earlier, is that rent collections have been most challenging in those locations where the local governments have enacted provisions that have emboldened residents not to pay their rent. And so when somebody tells you, you don’t have to pay your rent, people tend not to pay. So that would be, I think, an appropriate way to think about it.

Haendel St. Juste

Okay, fair enough. Terry, maybe you could perhaps answer one for me anything new on your mind if you stayed with Brickell? I know in the past, you have mentioned you guys have been contemplating a range of options, including maybe monetizations or bringing a partner, curious if there is any new thinking or maybe an information to do something here?

Terry Considine

Yes, Haendel, the short answer is no. The last 100 days have been action-packed, and we haven’t spent a lot of time on Brickell.

Haendel St. Juste

Okay, thank you.

Operator

The next question will come from Rick Skidmore with Goldman Sachs. Please go ahead.

Rick Skidmore

Hi, good morning. Thank you. Just a follow-up on the development pipeline and redevelopment, can you just talk about how those are leasing up? And I think you mentioned $30 million of NOI contribution over time? When you might think that, that is you hit that kind of an annualized number?

Wes Powell

Rick, it’s Wes Powell here. Thanks for the question. I will have Keith maybe provide a little bit of color on the individual lease-ups. I hit on a few of them in my prepared remarks. But overall, they are performing in line with expectations. As you can imagine, some are a bit ahead of plan, and some are lagging a little bit. But broadly, we feel very good about the locations, the customer we are designing for and plan to appeal to. And the take rate has been pretty strong on the apartments that have been delivered to date. I think what you’ll probably see is that it may take a little longer to reach some of those stabilized NOI targets, but we still feel good in the aggregate about the value creation. Keith, any other color you want to add on the lease-ups?

Keith Kimmel

Sure. Rick, I will just maybe in context, Parc Mosaic is coming to the end. I think Wes gave you some insight, we’re about 84%. I just put that’s 26 units is what’s left, and we feel quite confident if we get to a finish line thereby the end of the year and maybe a little sooner. The Eldridge project in Elmhurst, the acceptance to it has been quite good. I would say that we are leasing a little bit ahead of plan there, and we have about 25 units left to finish that one up. And then the other ones are just in different degrees of delivery. So 707, Fremont, those are ones that we’re working through delivery. But the absorption as an example, at 707, we’re almost at 80% of what units have been delivered. So we’re feeling good about it. There’s more work to be done, and we’ll keep you posted.

Rick Skidmore

Thank you very much.

Operator

This concludes today’s question-and-answer session. I would now like to hand the conference over to management for any closing remarks.

Terry Considine

Well, again, our thanks for your interest in Aimco. If you have further questions, please feel free to call Paul or Keith or me, and we’ll try to be transparent and answer as best we can. They are choppy waters, but I feel comfortable that we’re navigating them, and we’ll continue to do so. So thank you very much.

Operator

Thank you, sir. This concludes today’s conference. I would now like you to disconnect and thank you for joining today’s conference Thank you.