Q3 2019 Earnings Call
Ladies and gentlemen, thank you for standing by.
Welcome to Douglas Emmett quarterly earnings call.
Today's call is being recorded.
At this time, all participants are any listen only mode.
After managements prepared remarks, you will receive instructions for participating in the question and answer session.
I will now turn the conference over to Stuart Mcelhinney, Vice President Investor Relations for Douglas Emmett. Please go ahead.
Thank you joining us today on the call or Jordan Kaplan, our president and CEO , Kevin Crummy, our CIO and Peter CMR our CFO .
Being webcast live from our website and will be available for replay during the next 90 days.
You could also find our earnings package at the Investor Relations section of our website.
You can find reconciliations of non-GAAP financial measures discussed during today's call in the earnings package.
During the course of this call we will make forward looking statements. These forward looking statements are based on the beliefs and assumptions made by information currently available to us our actual results will be affected by known and unknown risks trends uncertainties and factors that are beyond our control or ability to predict although we believed that our assumptions the reasonable.
They are not guarantees of future performance and some will prove to be incorrect. Therefore, our actual future results can be expected to differ from our expectations and those differences maybe material.
For a more detailed description of some potential risks please refer to our FCC filings, which can be found in investor Relations section of our website <unk>.
We reached the question and answer portion in consideration of others. Please limit yourself to one question and one follow up.
I'll turn the call over to Jordan.
Good morning, everyone. Thank you for joining us.
And it demand for our office buildings is robust.
At least 1 million square feet during the quarter, including a record 461000 square feet of new leases.
Our success drove a 50 basis point, increasing occupancy and increased our leased rate by almost a full percentage point to 93.1%.
Our leasing gains and our continued strong rent roll up drove a 6.7% increase in same property cash in Hawaii.
Overall, our tenant demand is supported by a wide range of industries and healthy regional economic trends on supply side, we don't face any meaningful new construction in our markets.
Last quarter, we told you about our strategy to take advantage of low long term rates and tightening spreads to reduce interest rates and extend maturities.
I'm pleased to say that since May we have now successfully refinanced approximately $2 billion, adding almost five years to its average term while reducing its current interest rate by nearly 35 basis points to 2.63%.
As expected our strategic balance sheet activities reduced at the focus <unk> third quarter by four cents per share due to onetime non cash and cash long cost as well as equity dilution.
Long cost from our most recent financing will reduce our fourth quarter I, followed by an additional penny, bringing the total production.
In 2019 fund these activities to five cents per share.
Even with this impact we grew at that Oh this quarter by 3.7%.
Excluding this impact we grew at that though by over 9%.
Our FFO growth was even stronger as we grew at that FFO by 14% compared to the third quarter of 2018.
This reflects both our conversion a non cash revenue to cash as well as her low recurring turnover costs, resulting from our unique operating model.
Well leasing up a few large spaces have slightly elevated our turnover costs.
Those costs represented only 12% of our in Hawaii still significantly below our benchmark group average of 25%.
With that I'll turn the call over to Kevin.
Thanks, Jordan and good morning, everyone as Jordan mentioned, we're very pleased with the results of our strategic that program.
We now the strongest balance sheet in our history.
Our net debt to enterprise value stands at only 29%.
We had no debt maturing before 2023.
And our pool of unencumbered properties available for future financings now constitute 41% of our office portfolio.
We don't anticipate any more refinancing activity. This year, although we will continue to monitor rates and spreads in the 2020 for further opportunities.
Turning to development.
Honolulu, we still expect to deliver the first batch of new apartment units in 2020, and our office to residential conversion project.
Eventually we plan to have almost 500 units there.
In Brentwood construction about 300, and suddenly 16 at high rise apartment tower is progressing well.
Our deal pipeline is picking up and we've been looking in a number of potential office and residential acquisitions.
While we remain disciplined in our underwriting.
Strength of our balance sheet and email Oh P units for tax advantaged deals gives us lots of Optionality in closing deals.
With that I will now turn the call over to Stewart.
Thanks, Kevin Good morning, everyone. In Q3, we signed 209 office leases covering 999000 square feet.
Including 461000 square feet of new it's it's a record high for new leasing in a quarter.
Leasing spreads for the quarter were 29.1% for straight line rent roll up.
10.7% for cast roll up.
The lease rate for total office portfolio increased by 94 basis points to 93.1%.
Our overall portfolio occupancy increased by 50 basis points, 90.9%.
Our value assets in Los Angeles had a particularly good quarter as we increased our lease rate for that region by 220 basis points, 92.6%.
Our remaining lease expirations over the next four quarters total only 10% of our portfolio.
Well below our recent historical averages.
Less than typical expirations, we're hopeful that continued strong leasing will translate into even better fundamentals.
On the multifamily side, our portfolio remained essentially fully leased at quarter end.
Pleased to report that our new apartment units and want to Lula are now fully leased.
We're continuing our successful program to upgrade the existing units there.
I'll now turn the call over to Peter to discuss our results.
Thanks, Stuart good morning, everyone.
We're pleased with our Q3 results compared to a year ago in the third quarter of 2019, we increased revenues by 6.6%.
We increased 3.7% to $103.9 million or 51 cents per share.
As Jordan mentioned, our third quarter FFR was reduced by four cents per share as a result of our strategic balance sheet activity.
We increased.
14.3% to $94.3 million.
We increased our same property cash NOI by 6.7%.
Our DNA for the quarter was less than 4% of revenues well below that of our benchmark correct.
Now turning to guidance, we're increasing our guidance range for same property NOI growth to between 6.5 and 7.5%.
Our strong underlying operations and leasing have largely offset the five cent impact from our strategic balance sheet program.
As a result, we're maintaining the midpoint for our full year AFFO guidance, well narrowing the range to between $2, a nine cents per share and $2, an 11 cents per share.
As usual our guidance does not feeling the impact of future acquisitions dispositions or financings.
For more information on the assumptions underlying our guidance. Please refer to the schedule in the earnings package.
Well now turn the call over to the operator, so we can take your questions.
Again in consideration of other participants please limit your queries to one question and one follow up. Thank you to ask a question you May Press Star then one on your Touchtone phone.
If you were using a speakerphone please pick up your handset before pressing the keys, which.
A question. Please press Star then too.
This time, we will pause momentarily to assemble our roster.
The first question comes from Jason Green with Evercore. Please go ahead.
Good morning, I know you guys talked previously about doing more development given the pricing in the market I guess given your comment on the deal pipeline has your view on market pricing for US that's changed at all and should we expect more acquisitions first development.
Well development, just a slower process because we know we start working now on entitlements and hopefully that come to fruition years away and we are doing that acquisitions, we have less control over.
I don't want to wanting to talk about recent acquisition.
So the pipeline is looking actually surprisingly deep given the time of the year.
We're looking at a number of off market opportunities, but we've still got a lot when did shot to get those things done and so you know sometimes they had sometimes they don't but.
Relative to what do we expect it today, we're we're pleased with the amount of activity.
Okay, and then on the multifamily same store cash in a wash side that's come in around 1%. The last two quarters I guess when should we expect that to start to turn higher just given.
The positive right in the market itself.
Mm Hmm.
That number has been I'm not sure acquired a quarter or even the last two quarters that you can rely on that as an indicator what's coming up no of course or you know when you say turn.
I still feel like those are aberrations as opposed to telling you where the market actually yes, but you know we nice like all of US when you put out a few more quarters and.
See where that all ends up.
Okay. Thank you.
The next question is from Jamie Feldman with Bank of America. Please go ahead.
Great. Thank you and I guess, just sticking with that the acquisition pipeline can you give a little bit more color about you know what the assets are that are in the pipeline, whether its officer apartments in the size what cap rates look like what kind of returns you'd like to see or would you bring in a partner Yeah and then also.
As you think about.
Financing you know how much higher how much higher would you be willing to take leverage to get deals done.
[laughter] Wow, that's like that entire capital and acquisitions that so there yeah most of.
Kinda most current pressing for users office generally westell, a little but in the valley.
I would say more than usual number of deals they're looking for some time, Oh, P., then ed or to become part of a structure with us to take advantage of our management our position.
In terms of.
And and and and that's surprising never deals where they kind of want to stay yet, but have us well take a control everything.
I would say that and you know because of that in terms of financing and structure.
First of all our first choice always is to use the JV platform I just think it's important for us to keep that strong and going on and broaden the number a JV partners and sovereign partners that we have beyond that.
I don't know that many of these deals would substantially change leverage levels for us we have a lot of positive cash flow we have.
We have a lot of ways to do it that I don't think we will significantly impact our loan to value.
Okay, and then you said in the valley. So maybe can you talk about valley fundamentals like what do you know what do you think in terms of a change in either rents are occupancy that give you some comfort buying more there.
[noise] well.
In general the valley. So if you look at Encino Sherman Oaks. That's been strong continues to be strong you know you know to the degree there's deals like that we'd like you know what I can do and in fact, we've seen a lot of strength coming out of a woodland Hills and you guys Im saying in the numbers that we've been publishing that it's been improving.
There's stuff, we're looking at happens to be in Encino Sherman Oaks market.
Okay. Thanks.
Your next question is from Alexander Goldfarb with Sandler O'neil. Please go ahead.
Hey, good morning out there.
First on the on the balance sheet side. Yeah. You guys are now 41% unencumbered and you had comments in the release and you spoke about about possibly looking at rates and spread heading into 2020 or so just for a balance sheet perspective.
How would you guys or should we think about you guys continuing to unencumber more meaning reduce leverage increase free cash flow and then if you are refinancing more debt going out towards 23, m. beyond presumably this would be stuff that you would not pay a prepaid penalty on it would be stuff that's not.
Actually coming off a swap where it's called it's a cost free option for you just trying to understand your thinking given how far out you've pushed year maturity profile.
So.
A lot of way he says basically right I wouldn't say just because there's a swap it there's a good swap so when we're looking at refinancing something there are two benefits that we get added added something it you know one is it can be interested generally not positive deal you can read nets out and then I'll bring your costs down.
And what stops you from bringing your cost down is if you have prepayment penalties are those sorts of things. We don't have those so you're correct to say that now there could be a good swap in place that we like that swapping just continue onto the next loan because the next I'll need a swap too and then we can add a swap what's.
Making tend to pay a lender that to make sure that were fixed for a longer period of time, which is our goal.
What's making this such a fruitful environment to continue doing what we're doing is that the yield curve is so flat out there that you can have a good swap in place and that it tails of that swap and it's not very expensive, giving us very long period of time.
Very good fixed interest rates and so they're still assuming that spreads and the index is staying well swap rates stay low there's still could next year be somewhere opportunities. None of this stuff that's prepayment penalties.
For us too.
Further extend our maturities and reduce our costs on the debt and typically when were doing that.
Because of them move in values, you're able to release a few building. So lets say you had alone that had six buildings.
Since we don't tend to be going from more leverage you probably can't get that same loan at a cheaper and this is Craig that's why it's environment. So good that same on a cheaper price and even released one of the buildings getting us even more chance if you will for financing or flexibility in the future in another building that's in the unleveraged pool.
Okay. Okay. Then that's that's helpful. There explains that on out in Honolulu are the occupancy dropped 50 basis points can maybe just give an update on how the D. D office thing if that's a word is going with the Bisha tower that you're converting and how you think its impact.
And that overall office market and then how we should think about the occupancy bouncing around for you guys. Because I'm sure you got tenants, who are moving out of trying to find other places to move out of your existing same store assets, while you're reallocating some of the tenants out of the Bishop a property.
Yeah, so that market for more reasons, then 11 32, Bishop conversion that's become relatively tight there's some other large tenants maybe seeing the riding on the wall. The had wanted to be in that downtown area that has now moved instead.
Themselves extremely firmly there so that's rolling out that's on top of our no I think we yeah. We had about 100000 feet available on our buildings and we need to move you know 300, plus thousand beat out of 11 32. So that's great are.
Yeah, I think more important than that yes, we're moving along quite well on the conversion nonresidential and they're big game and not downtown area. If you get this workforce residential bill and occupied because that's what really converts that area and I and I'm seeing stuff literally daily.
People, if you will looking to tag onto that with improvement in other areas other buildings near our buildings and so I.
I couldn't be more pleased.
With that strategy and the impact that it's having.
Most importantly to creating that workforce housing downtown.
If you're saying, but also mentioned occupancy.
I don't I don't think they're meaningful the hallmark, it's pretty tight and we have a lot of tenants to move then do.
Not enough space quite frankly.
Okay.
Thank you.
All right.
The next question is from Nick you look out with Scotiabank. Please go ahead.
Oh, Thanks, I just wanted to ask you know I just give some news just came out about a.
Mayor of Los Angeles, joining a couple others now and stayed in supporting split role next year I'm thinking of pasture and you said that you didn't think split role was likely.
I mean, I have the mayor of Los Angeles supporting it.
What are your latest thoughts and he just remind us where your taxes or versus market.
That's very hard to know our taxes are versus market on believes will they'll ever even get there and I don't even think the markets the market that you're thinking of it turns and in general I still don't believe obviously wrong extremely popular it's extremely popular a prop 13 and.
Spirit split role and has.
Tons, and then Pacsun ramifications and its polling poorly I mean, but you know I know that well keep being asked that question until the election. So [laughter] yeah, well, we can keep talking about I don't have any better or greater information beyond my opinion, and where the polling as the polling at the moment is it's a complete lives or.
But you were you surprised to see the mayor of Los Angeles here come out and supports what role.
I can say that I'm surprised that he's doing something political like that I I I have a hard time really actually thinks it's a good idea.
But you know politicians do a lot of things.
I I mean, I I don't know I don't know, how they manage and decide what it's done.
The right thing for them if at any moment ties that although he's got a lot and she's honest played at the moment.
And I guess, what's the reluctance from another company hasn't come out given some sort of you know a idea about yeah, what didn't impact could be to their taxes are always it's a complicated formula but still yeah. When we look at what seems like you guys have a lot of assets that are.
Older and warrant reassessed the market and so I guess, when you're saying you're not able to you have to do the the mass on and maybe that's true, but I mean can just give us a feel for you know where do you think you're in place taxes are versus market since a year from now there could be legislation that is coming out that could be meaningfully.
Thing or property taxes in the future.
No.
So you get a content just give no information on on where taxes are potentially versus where they could be when this legislation. If it passes occurs.
That's correct I don't think that's a fruitful rather go down.
Oh, it's good for the company I don't think it's good for.
The politics surrounding that issue.
Alright. Thanks.
All right. The next question is from Rich Anderson with S.P.M.C. Please go ahead.
That's a SMBC, but close enough so what what Oh. My first question is on the same store growth profile, which is improving each quarter. It seems.
This time last year, you know the numbers were much lower I recall I'm, having you know we spent some time together you were handling a minimum wage issues in a more immediate fashion versus you know kind of leading into the system through to 2022 or whatever it was.
I'm curious if you think that that's a lot behind the re acceleration of the same store growth versus 2018 or do you think a there's it's just more of a natural sort of evolution of how things are going in your and your space do you think you're getting extra same store growth today because of how you handle same store last year.
Well, obviously not compare it's always the comparisons always meaningful they'll look back in general, though I remember when you were here. What I said is we have a lot of pending grow and up growth from a lot of programs not all me its its development stuff coming online and gains were making.
On redevelopment and redevelopment of buildings and rents moving up even though the debt going stay in same store, but redoing lobbies redoing things I said, we were getting games from that and it was gains that we were gaining we were getting from continuing to retool and work through our operating platform to you know further expedite thing.
And I said, we have a lot of strong kind of rental metric system just in the market that we think we're actually you know more better and better position take advantage of I think that probably is playing a bigger role than the fact that last year, we weren't digesting kinda fast moving minimum.
Our wage I think that's that that was more impactful than a rat residential side.
Which has more of that that need then the outside but of course that impacts the whole company.
Okay [noise].
It so I mean not to get 2020 guidance, but I mean is this is this are you kind of operating at a sort of a place where you think you'll.
Be able to stay for awhile and this kind of mid high single digit sort of range.
That's.
It's very hard to predict how the numbers are coming out are gonna come out because quarter to quarter when they get compared I can be very spotty, what I can tell you get this.
The fundamentals in the markets and the gains were making currently with and leasing and and growing our income.
They still seem as strong as we thought they were going to be last year, when we talk and they're still.
Cruising at it at a good clip now that doesn't mean that some exhaustion as things can happen with the national economy that turns everybody around or create fear in the system, but at the moment for the industries that we have in our markets.
Yeah on the speaking on the office side and the amount of supply coming on the those kind of long term that's no supply demand metrics on top of the stuff. We've been doing why buildings are all conspiring to create very good returns and I'll, even say I know the question was asked about the same store on there.
Residential, but we're seeing a lot of strength in residential so.
I'm optimistic that those numbers well, even get better and this is just an aberration more than not showing a long term trend.
Okay, and then second question I'm, you know as much as people think of you primarily as an office read just given the percentages a lot of the discussion and excitement is there is around the multifamily business without a mine im with you know multifamily being a part of your DNA going back in the longer history do you think multifamily could grow to.
Be substantially more as a percentage of the total over the next you know four or five years or are you comfortable with the sort of 90 10 types split.
Well.
We would like to do as much good multifamily as we can I just think we did we think the grade.
Asset class and we are in an incredible position with the amount a land that we own and these best markets, because we own entire blots blocks to spend the time that two years, the three years or whatever it takes to get Oh, you know that housing approved for around housing approved.
It takes a long time, it's hard for someone to buy something I'd say, they're going to go do that because a clock sticking on them a little faster than someone that has the land already making money off that and then has this additional opportunity.
So we're going we're focused very hard on that even buying and developing and repositioning existing projects.
With that said to answer your question, Gary If you don't even know we take some very solid steps forward on on multifamily.
You know you Kevin script as a few office deals when it goes right back over to the 10% to 15%. So it's hard to change the ratio, even though we're working hard to grow that aspect of the company. Because we also like the office in our markets and there seems to be opportunities coming up and those are just.
Larger deals.
Yeah, Yeah, Okay got you thanks very much.
The next question is sort of tie Okusanya with Mizuho. Please go ahead.
Yes. Good afternoon, everyone I'm could you just talk a little bit about your your your program for.
On the off decided to the standards I vision of the suites. The signature suites program kind of how you doing with the rollouts relative to expectations and on your internal plan.
Yeah. So.
[laughter], we try and happen every building and throughout the portfolio a very large stock of suites that are just ready to move and do and even in many cases, we furnished shop and and its work extremely well we control the entire capital program around that.
In terms of the T.I.s. It allows us to raise the level that were leased a little higher because if you have some maybe have some space. That's older that hasn't moved if you're willing to go in and get it right you know move in Red even if it's not enough <unk> best the spot in the building it becomes much more attractive to people and then when you first.
Inertia and show Monica look like you then becomes more attractive. So that's been a fantastic process for us and very successful and I and I think it's fair to say not only are we doing a lot of it we would be what we're working and designing our systems to be able to do even more of it.
I have because.
We have seen increasing returns not diminishing returns like the more we do the even better. It does so we we're dedicating more and more people's time and teams to getting that done in having as many of the sweet today I was possible now all that hiring in that process takes training and timing you know.
But we're pretty focused on that's been a great program for us.
A quick but just specifically talk about if you're hitting your target buildout of 30 per month, and if it's better received in certain submarkets than others, but certain types of tenants that are attracted to it.
Well I think it works, particularly well in our markets because tenants, especially the tenant that's less than 5000 feet doesn't have a real estate group. So when you give them something that's moved in ready even if it's moving ready and they say I only have one thing I need to move one wall that so much easier for them to do then it is to give them a blank slate.
I feel like they have to higher designers and all the rest for that stuff. So.
Because our our market tends to have those smaller tenants I think this stuff probably moves better and faster here than it might in another market, where the average tenant size is much larger and we have other aspects of our operating platform that also cater to that terms of very standardized leases and you know space planners that.
I don't feel that way they can just make the change you want on their eye on there I pad and we just attach it to that to the letter of intent without having to go through a lot of process we have.
Yeah design group that had some already pre matched carpet in color samples and Molly answered the whole deal. So that you don't have that you don't feel like you need a designer. So we've done a lot to make it easy for Saumen, a feel confident capable of fish and whatever you know whatever you're looking for there in terms of just leasing office space and.
Not feeling like they had a million decisions they had to make and it was just overwhelming and that's beating up that process, both gets them paying rent faster and brings down the turnover cost for us.
Gotcha.
Thank you.
Thanks next question excuse me. The next question is from John Kim with B M. O capital markets. Please go ahead. Thank you you are leased rate hit a multi year high 93% do you expect occupancy to kind of creep up towards that number.
And just giving you a 50% it really rolling over the next couple of years do you have any.
Expectation about.
<unk>.
Well I wouldn't generally say in its hard you know as the leased rate moves up.
Occupancy at least squeezed together so they can go as wide as 300 plus basis points and they can go as tight as like 150.
When they widen you're doing a lot of leasing right and then therefore, you have a bigger spread between leased and occupied.
I have never seen occupied get closer than about 150 basis points to leased I have eastern parts of our that's about that's about as tight as it ever gets.
In terms of your question about their role coming up we.
Because we have so many tenants.
Our well in terms of you know the year were in one year out two years out three years out that kind of wave is a fairly constant wave.
Hey, I haven't seen yeah, we might have like I know, we mentioned in her prepared remarks or or that we have a couple of quarters with a little lower than normal, but it will catch up to itself because that wave tend to say stay pretty steady in terms have there you know the year that we're approaching becomes what.
Relatively low because we've already renewed a lot of those people. They the one year out from that tends to be a little higher and then it trails off from there that that shape I I haven't seen in it and very long that shape change in a meaningful way.
Okay, I guess them without providing guidance Im just wondering if you haven't early indication, where we are in the cycle and where you're seeing demand. If you think at least the leased rate movie will be maintained at these levels or potentially higher mixture.
[laughter].
Well.
I when when you say rate, what we have like occupancy rate leased rate and then the amount of leasing we do on a quarter. So they're not only thing we doing a corridor is when we have more meaningful vacancy that some more meaningful number to watch to say, okay. I'm glad there's still good flow I'm not sure there's meaningful today, because we're up a pretty high.
Levels today, I I haven't seen anything that would say to me that are leased occupied rate are gonna go down and I think we still have some opportunity for them to go up.
The fundamentals and the market are good I mean camps that tenant demand again, new supply that they commit a vendor we don't really have any large spaces available at all.
My second question is not on the debt refinancing that you had done this quarter.
Your weighted average interest rate is that 3% with a six year maturity.
A year ago with a 3.7 with a 5.6 year maturity.
I'll just wondering did you get the full benefit of that refinancing this quarter.
Not that.
What did it no refinancing that we did.
You know he just got part of it 'cause it happened during the this last quarter, you'll get that well get the full benefit of this stuff. We've done this year next year.
Right, we have the costs and it happens mid year et cetera next year, you'll see the benefit of the lower interest rate on that end, but we'll also continue I know be so.
Generally noncash a little bit of cash, but generally non cash costs associated with doing that.
Got it okay. Thank you.
The next question is from Manny Korchman with Citi. Please go ahead, and it's actually Michael Bilerman with many.
He joined when you look at your lease roll.
We think about 2020, you got that 14% of the portfolio rolling another 14% in 21.
You know your average lease spreads have been running in call. It you know, 10% to 12% cash up 30 on a straight line basis last few quarters.
You talked about accelerating rent growth in your markets and a lot of demand how should we think about the mark to market.
In 2020, and if you want to wage or I guess into 2021, yeah. Your average expiring rents on a current basis or about 40 to 43 Bucks Yeah will reach 40, 345 exploration, but how should we think about.
Where mark to market could be.
In those years.
You know for a few years now and I've been a little surprised by that's our mark to markets held steady at 10%.
I think they sit with right.
Right.
So have we I mean, you would think that with the rent growth. That's been happening you would see more of that in your in the rents right did we should be accelerate yeah, well I mean, it needs were capturing at a pace that we're staying sort of somewhat caught up and and I guess, that's a function of our.
Mark to market and rent roll out don't talk relate perfectly to each other as you know because mark to markets. All of these should not just the why it's coming up and you know in the next quarter or whatever but but.
I.
Well, we're obviously capturing a lot of the just a general market gains in rental rate.
Because there have been very strong market gains and we're also you know that 10%. This disk persist durbin times than I would've thought it would because obviously there are five year leases.
On average I would think you would be a larger number but we're capturing it [laughter] you know sets. So are we were getting this interesting situation, a very strong roll up and still maintaining attempt that mark to market, but.
I I don't have any I mean, I literally don't know it's as I'm on this call right now what the mark to market will be next year.
I mean, where do you think the I mean, if 50 expiring rents are at 43 Bucks Where's market for that space today.
Well the problem is when you say expiring rents it it's dependent on where those rents are expiring on what the rental rates are there I mean, something thats counter intuitive is.
Lately, the higher the expiring rents the higher the rollout because one expiring rents are high there probably in some of our hottest markets and then the hottest markets much are going up the basket.
When expiring rents are a little lower there are markets sort of run a little fault flatter and therefore, a rollup hasn't been as much.
So that doesn't give you the clue that you would think it gets you <unk>.
<unk>.
Maybe turning to the balance sheet and you talk a lot of that transactions. It sounds like maybe perhaps more balance sheet deals than some deals getting some restructuring you know if I think back last couple of years, you youth issued a bunch of equity, which you know when you have you held sacred for many years.
Following the IPO you know the share basis increased 12, 13% overtime.
Your stock is now at a discount to consensus any the at 43 versus 46 I'm sure you have a different view of what you're equity in any V is.
But I guess, how should the market think about your use of your currency.
In gross.
Going forward.
Well I don't think I'd characterize what we've done a passive issuing a bunch of equity I when I looked at that.
And I think we've issued roughly 1% a year, where this is our 13th year I don't know that that's a large amount compared to.
Others in our you know similarly situated companies.
That's on the time, we went public.
The.
ER in terms of just our general thought about issuing equity I'm not a huge fan of it which is why we've put so much.
A pressure on and we're willing even to spend money to maintain that.
Private equity platform, that's been put together and the Jvs I just think it's very important to use that and be more restricted in terms of our the equity in a public company to allow us to continue to grow and control the real estate that we want to control and <unk> and get the gains.
But not dilute because I think it is to lift issue or a stock.
Okay. So there's been times when we've had to do it I agree or that we felt.
We should do it the.
Whatever right a reasons you know I'm going back it's all this in the beginning but I don't think we've done it very much.
[noise].
Yeah. That's helpful. I mean, it hasn't been a lot I think would say it'd be more more recently run it doesn't give you didnt issue equity for a long time, and then I would say last couple of years, yeah that reach at 1000 interests, yeah that was.
We got in between two things and we did issue equity for that when whereby not apartment building a better than drop in the JV.
No that happens sometimes.
It was a couple of hundred million dollars.
Okay. Thanks.
Your next question is some Craig Melman with Keybanc capital markets. Please go ahead.
Just a little bit across your markets year to date, you've had pretty good uplift in the lease rate in all but kind of Brett one Westwood could you guys talk little about the dynamics and those two markets, that's kinda hindered our ability to truly push to lease rate.
Sure Craig I think that you know it's in Brentwood One thing we're real excited about is the park, we're building for that or for that Submarkets. So that's you know that's coming in a few years I think that'll be a great benefit for not only the apartment building. We're building there, but you know we've got 700 units next door in a couple of million feet of.
Of office in that market, so that'll be great for that neighborhood.
You're right to point out there that would has has been a little bit lower than we would've otherwise expected. It's a great Westside Submarket no reason it shouldn't perform you know it or just like the rest of our Westside Submarket. So we're optimistic about that maybe some potential repositionings and that market a in the future there.
And then that's what we've seen you know since we purchased a huge a chunk of a Westwood a few years that we still kinda digesting that it's bounced around a little bit we've made some gains but that's typical for us when we buy something it takes us a few years to kind of work through the rent roll get everybody on our lead on our leases on our credit so not not unusual.
We see some noise in the occupancy rate after we do acquisitions in the market.
That's helpful ABS spreads kept up with the other submarket from the west side or have there been any kind of headwinds on that side as well.
No we're still feeling good good spreads in those markets.
Thank you.
Your next question is from Dave Rodgers with Baird. Please go ahead.
Hey, guys during one of the asking about the office redevelopment that you're doing in kind of all our fans that you've mentioned on previous calls he was not having an impact on the occupancy in the ability to lease more quickly and I guess, maybe the point of the question is just to kind of get at the new leases you signed in the quarter and anything maybe in particular that was driving that.
Yeah, I think it has out yeah I should piece just as Clarence I kinda. So we're completing some of those projects are virtually completed you can see where they're at and I told you. The one kinda coronary we had at night and the coal mine was was it wasn't a deal where there was a good comp right in excess of rents have been going up in general.
Yeah. So the question is when we think cap all the repositioning building are we getting more than just the fact that rents are going up which is very hard to calculate we had one situation where there are building next to another building both similar views that more access them all the whole deal and where rejoined the bill it's not even.
Completed yet and what we do as we measure the gap between let's say this building that much more dated two that other building that I'd be <unk> had been read done and we say can we close that gap and on that one I can say, we close the gap and it's a lot I think we probably picked up 75 cents to a dollar up.
<unk> a month.
To close the gap that was that white and so therefore, I know that on that building a $17 million. What we spent that's going to get paid for Verizon That's a 400000 foot building.
And that was a monthly rate I gave you said so we know on our redevelopment in general when there was a gap that can be measured it's working out now and other buildings, we're just seeing or some of those refurbishing just hitting new heights and rental rate.
A lot harder to measure because the markets tight and rents are going up so it's it's harder to say to attribute some like fixed amount to the work, we're doing but it but it seems pretty instinct that the work were doing has been very helpful to the buildings, we've done the work that way.
Worked on because we're just getting such great activity on there so fall.
But we're looking for the response and rental rate not necessarily occupancy we have pretty good occupancy across a lot of that stuff.
Great. That's helpful. Thank you.
All right.
The next question is a follow up from Jamie Feldman with Bank of America. Please go ahead.
Great. Thank you I'm just curious you know since we were told its IPO have you seen any change in either the co working market. You noted a number of players that are looking or maybe smaller users looking at your portfolio more than they did in the past just you know any any noticeable change in operating conditions as a result.
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You know.
I think that's the whole time and other we works things finally kind of calming down, but I know that the whole time that there were those discussions about rework said reworks changing the way that office leasing happens I felt like.
We've been doing that for years, the anyway, having like ready to go office space for people that just wanted to move and I know I was asked that question earlier.
About our signature suites program, but in general we've been trying to appeal to people that needed kind of ready to go space. The only thing we haven't been doing is giving up the month to month leases, we've been insisting on the longer leases on this space that we've had ready to go and you know as we've been so.
Thanks for years, even before people were talking about we work. This is an extremely successful program for us and it continues to be an extremely successful program.
I guess it more successful now that it's become.
More accepted in the office environment to calm and just immediately Lisa space in the end maybe it is maybe they've read train people a little bit to be then.
The more comfortable coming and seeing a space and going that will just work for me I'm event I know I'm hearing stories are regularly now people looking at space and saying not only well take it will take it with the furniture like you know we can we can always know furniture to another specs wait and see if people you know and we use it but a lot of times.
What are saying well even take the furniture. So maybe they are being sort of trained her adapted to.
Moving away from that complete got designer and space planner model to this more expeditious model hard to believe that though the larger the full floor. The multi floor tenants are going to go to that but certainly the tenants in our market, we're already leaning that way and.
And and that program has been successful for a long time.
Okay.
Have you seen a pickup in demand since we were just slow down.
For that space or it's been I would say I mean that would be hard to split out I'd say, we just have really good demand I mean in a world of the demand it's as strong as we have today.
It'd be hard to say, we you works. We works I don't think reverses was at any point in time very impactful to our markets. Yeah. They don't have a huge presence in our markets Jamie on the on the website. We looked at that it's it's very small it's only like 1% of markets and penetrated into these markets very deeply because we don't have a lot available space.
Okay.
Alright, and then have you guys already backfill the all of a century city move outs you had because there's still more to go.
Yeah. I think you saw you know, we just supposed to the 95% leased number for us so that with a small tenet kind of nature of the portfolio. That's essentially fall, we did backfill that space that you're referring to.
Okay, alright, great. Thanks.
Thank you. This concludes our question answer session I would like to turn the conference back over to Jordan Kaplan for any closing remarks.
Hi, Thank you everybody that speak with you again in a corridor.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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