Q4 2019 Earnings Call
looking
Head that was seven has ever been better positioned. Our balance sheet is stronger than ever our supply constrained markets continue to have robust tenant demand from a diverse Industries and our unique operating platform dominant market share and development opportunities have us very excited about growth in 2020 and a decade ahead now. I'll turn the call over to Kevin.
Thanks, Jordan and good morning everyone in November. We acquired 16% of the equity in one of our unconsolidated funds which owns 6 Class A office properties totaling 1.5 million square feet and our submarkets.
The net purchase price was approximately $91 which we paid through a combination of cash and operating partnership units. We now on 89% of the equity and what would be treated as a Consolidated JV?
Mentioned we completed it successfully step of our 500-unit Moanalua development this year our to multi-family development projects and construction are also progressing well off in Brentwood. We remain on track with the construction of our 376 high-rise apartment Tower which when completed will be one of the most exceptional residential development in Los Angeles and Honolulu, we are developing five hundred apartment units at our office conversion project. We are currently building out for floors and expect to deliver those units in 2028 in addition to the growth of our development efforts. We expect more acquisition opportunities in our submarkets than 20/20 with that I will now turn the call over to Stuart.
Thanks, Kevin. Good morning. Everyone you for we signed 178 office leases covering 791 thousand square feet including three hundred twenty six thousand square feet of new leases month leasing spreads for the fourth quarter were 28.6% for straight-line rent roll up and 8.6% for cash rolled-up increase the lease rate for our total office portfolio to 93.3% off and our occupancy to 91.4% We were pleased to see that at least rate and Warner Center moved up two hundred twenty basis points from a year ago and Ry portfolio occupancy finished the year at 94.5%
frog
2019 Jeep straight line rental level 28% in cash rent roll up to 10%
On the multifamily side our portfolio remain fully leased at quarter-end over the past year. We have increased our multifamily portfolio by 16% or 566 units while increasing our monthly rent per unit by 6.3%
Before I turn the call over to Peter we'd like to address the split roll initiative expected to be on the November ballot. For those of you not focused on California split rolls, the term used to describe a ballot initiative commercial but not residential property reassessed every three years for property tax purposes under current law property taxes for all property types are increased upon sale and increases are limited to 2,000 thereafter.
Proposition 13 is very popular all prior attempts to we can prop thirteen have failed and we feel that this initiative will also be rejected indeed even before the substantial voter education program is starting now. I'm partisan polls show only 46% support for split roll.
Hello, likelihood of Passage. Some of you have asked about the potential Financial impact. It doesn't send it are just too many variables and unknowns to quantify an impact at this time. In addition. It is a highly political issue and speculation. It's not productive having said that we can't provide some observations.
All properties in California already get reassessed on a sale. So split role is not expected to impact asset pricing nav or sales transactions. The county assessor's office responsible for evaluations has said that they would not have sufficient resources and it would not be practical to implement split roll.
Although the rules involved are not clear buildings with small tenants, which we think should include most of our buildings would not even be subject to reassessment until mid 2025.
For two all of our LA office leases require tenants to reimburse us for expense increases
moreover some analysts expect that split roll will trigger rent increases to transfer some or all of the burden to tenants.
now
Turn the call over to Peter to discuss our results.
Thanks Stuart. Good morning everyone. We are pleased with our Q4 results compared to a year ago in the fourth quarter of 2019. We increase revenues by 7.8% wage be increased ffo 7% to $110 or $0.54 per share.
The increased 12.8% to $91 we increased our same property Cash In A Lie by 7.3%
We're all of 2019 we increase revenues by 6.3% We increased ffo 6.3% to 425 million dollars or $2.10 a share. We increased a f f o 18% of $365 million dollars. We increased our same-property cash noi by 7.5%
that only 4% of revenues are GNA for the fourth quarter remains. Well below that of our Benchmark group.
As Kevin mentioned the increased our stake in one of our previously unconsolidated funds to 89% and it is presented on a Consolidated basis as it November 21st, the effect of this transaction included recording again on our investment of about 308 million dollars, which affects net income but not FFF.
Finally turning the guidance. We are assuming same property cache NY growth will be between 4.5 and 5.5% in the average office occupancy will be between 90 and 91 overall. We expect 2020 ffo of between $2.23 and $2.29 per share.
As usual guidance does not assume the impact the future Acquisitions dispositions are financing. For more information on the assumptions underlying our guidance. Please refer to the schedule in the earnings package right now turn the call over to the operator so we can take your questions.
Thank you. We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you're using a speakerphone. We asked you please pick up a handset before pressing the keys to withdraw your question, please press * then two in consideration of other participants. Please limit yourself to one question and one follow-up. If you have further questions you may I ask the question Queue at this time. We will pause momentarily to assemble our roster.
And today's first question comes from Jason Green. Is that record, please go ahead.
Good morning. Just just curious what you're seeing on the rent growth side from Hawaii office. You know, we're hearing that year-over-year rent growth could be in the twenty to thirty percent range and just curious if that lines up with what your name.
Hey Jason. Yeah, look there's a lot of things going on downtown that have been very good for that market. Not just you know, what we're doing with our conversion project there. We had Hawaii electric just signed a large dog down there for almost two hundred thousand square feet to consolidate their space light Pacific University. Also took almost a hundred thousand feet down town recently. So a lot of a lot of things putting pressure on that market and rents are definitely going up.
Got it. And then just on the multifamily Cash & A Y going negative in the quarter. I guess what should we read into there? Is that purely a function of same store occupancy dipping or is there another another component? We should be thinking about?
It's Peter. Like we always have some noise quarter-to-quarter. We had reasonable first three quarters of disappointed with this quarter. The issues are concentrated a couple of properties and we're focused on improving those results off.
Got it. Thank you very much.
Thanks. I don't question today comes from Alexander Gould Farm and Piper Sandler, please. Go ahead.
Hey, good morning out there. So I definitely appreciate you guys being upfront on the 13, but just sort of curious as you're seeing the way the opposition to the split roll build. Are you seeing it more come from the business Community given it would seem like yeah, they would obviously shoulder huge burden of this or you see most of the opposition being driven by the real estate industry.
It's really broad-based opposition and and thanks pointing that out. You have a business Community I think is going to come out and big way against this you have a lot of large landowners in the state that have owned land here for a long time. So it's not the real estate companies that have to be on the front lines of this. Thankfully we'll have we'll have broad opposition to this. I'd like to add I think you're actually already even seeing homeowner say, you know forget about it. I don't I don't want to hear any trickery about modifying prop thirteen. So I've actually heard a lot from home owners say I already know I'm alive. That that what you wouldn't classify business owner real estate on or whatever.
Okay, and then on the acquisition front?
You know just as you guys are looking at at what's brewing for this year. Do you think that you will you know, there's potential to add to your multi-family in Hawaii or do you think most of your acquisition activity will be in LA?
I think in a multi-family side the the challenge in Hawaii is there just aren't that many large projects that are institutional. So, you know that that we're adding to the portfolio there or the 11:30 to conversion and you know, the acquisition pipeline in La is you know, it's it's looking pretty good. We I think I mentioned last call that day. We were looking at a couple of deals and you know that that those kind of take a little longer they're harder to make you're dealing with long-standing Partnerships. Sometimes multi-headed decision-making. So, but I feel pretty good about the pipeline.
Thank you.
No, next question today comes from Craig Melvin keybanc Capital markets, please. Go ahead you guys just curious. I appreciate the comments in the Berrington and the insurance coverage. But if I get the city council were to kind of get rid of the exemption on some of these older vintage buildings not having sprinklers. I mean how much could that guy could that cost you guys in cat backs and kind of down time and some of these buildings.
Oh, let's start out with we would appreciate that. So we we want to sprinkler the buildings. We wanted to sprinkler the buildings for a long time and age. We've been sort of trapped between conflicting rules coming out of the city in terms of to actually Springfield buildings what you have to do and then some of the housing ordinances so they'd you know, figure out what cost would be we would need to know what you know, what did they put in place that allowed us to do it? Cuz that could cause things to vary a lot. They put something in place that makes it cost effective and I suspect in the end they will I hope they will then you know, it would it would be probably all around a good thing to do if they put something together. That's so expensive and it still doesn't make any sense and you know, there's no way to really get there in any kind of reasonable way. Then they'll still have problems getting people to do it.
okay, then just second on the
Positions just curious is is everything that you guys are looking at kind of new properties to the portfolio or could there be more kind of increased ownership of some of the JVS off?
They're they're both both could happen.
It's a great question, but both could happen right? Thanks.
Our next question today comes from John Gainey Steve hold please go ahead. Wait a couple questions first the 308 million dollar gain on the consolidation of the month Katie portfolio. Does that trigger the need to do a 1031 exchange or a special dividend? That's that's one question. Second question deal traded in Warner Center five hundred 13,000 square-foot campus at Warner Center any any thoughts on that trade? And then the third question is can you there's just a for the first time in a while a lot of products under construction in West LA including say the West Edge it Olympic and Bundy. Can you talk a little bit about the new product under construction in your backyard?
Okay, so
The first answer the first question is that's just that's just a gap accounting game that you're required to do. When you consolidate no tax impact and wage stripped out also for a f f o f f l and all of that so that that's you know, I don't, you know, almost want to say unfortunate that has to run through our income statement, but it does and that's just the impact of consolidating second one on Warner Center that hasn't closed yet. So we you know, we'll let that will let that one play out of want to comment on them, you know, the people deals and the third one, you know regarding the new construction John most of the new supply has been in life that are adjacent to us. So you've got some things going on in Hollywood and Culver City. You've got Google's campus which is uh in the Westside Pavillion, which is now called one Westside dead.
Is 100% leased I think the project that you're referring to is the Martin Cadillac?
I think it is and that's a mixed-use project. That's primarily multi-family with a small office component in a retail component to it Supermarket mostly off my family and very small amount of office. So I I wouldn't it wouldn't clicked in my mind as something you know that we would say was as being like big off competitor and and and the whole life life is more multi-family more multi-family whether we're doing it or someone else is doing it is good.
Great. Thank you.
Thanks. No. Next question today comes from Scotiabank, please. Go ahead just looking at the lease expiration schedule the next four years have you know higher than normal and in the west side and the fourth quarter of this year over five hundred thousand square feet. Can you just describe? You know, whether that includes some, you know sizable 10 a.m. And and kind of will have the conversations are going on that space.
Yeah, no, it's it's not one or two. Very large leases it spread across the portfolio with a number of leases. So pretty normal for us. Nothing unusual and you were actively working on those when you'll discussions and and feel good about feeling good about how those are going.
Okay, and then just another question on Honolulu. Can you give us a feel for how this is working from an accounting standpoint, you know taking an office to the multi-family building. I mean, you know as the entire building being capitalized right now and and you know, is it possible to get a feel for The Noy of that building as office building? So if we were just value it separately as a multi-family building we could do that.
We'll just I mean from you know from an accounting standpoint, you know, as you know, we're doing this in phases, right? So it's going to be we're maintaining office 10,000 on you know, many of the floors throughout this project and you know, and then as as we complete the residential units, you know, those those will come online and begin to go through the whole family side of you know side of our p&l, you know, we do begin accelerated depreciation on the you know on the floor floors that we plan to plan to demo. So those those will start running ever have started to run through a depreciation. Yeah, I think so if you're saying is the income and expense of the office building still running through our income statement answers. Yes, ma'am. And I I think where the impact is which with Peter just mentioned has more to do with when you make a conversion like this, but this all runs through the appreciations. I don't think you're seeing it off.
are in in any of our f f l a f f o numbers, but you right off chunks of the building that now being converted over and you capitalize what you're spending to turn into an apartment, but
Operations of it as an office building and by the way, when we start running the units of apartment buildings will flow through our income statement.
Right and is it is it possible to you know, just to get a feel for the ballpark? What what the Anna why the building is from an office standpoint. So if you want to take it out from a TV standpoint and just value she has a future apartment building we can do that.
Not easily know. I mean it's not something we don't typically take single buildings and say what's going on the building other than when we buy it. We have tried to get some numbers and thoughts about what kind of returns we think we'll get out of that process and we've said in the past if you're is what we said in the past as we think in general will be divorced being the building including like, you know, whatever value you in everyone could subscribe different values, but whatever value want to subscribe to the building as it is now and then what we have to spend a converted to an apartment building. We think we'll be developing it as a an apartment building that an acceptable not a knockout apart, but an acceptable developer cap rate for an apartment building.
Okay, I mean, I guess the the 80 to 100.
Million that you have on a construction costs. I mean what what is the I guess what is the return which you think about on that as we're getting to a multi-family type of an Illini for that building?
Well, okay, so I don't I don't want to get in evaluating individual buildings, but I will say the return on that simple number would be extraordinary but that's not probably the way it should be calculated the wage calculated as what's the value of the office building today. Then when we add this money then what all in do we have in it? And then with everything in now I'm saying to you I think is an acceptable level of a of a of a apartment development which is the what you know, it's a cap rate around 6, but I mean now would it be on just the $8,200 off and that's also saying we have you know an office building there that value today. So it's that plus the money that you have to do that cap rate on.
And of course Nick the whole reason we started this was to improve the office Market down there which and we we kind of already told you about what's going on with the rents in office. So that's going exactly how we hope or even better frankly.
All right. Thanks everyone. All righty. Next question today comes from many quarts minute City, please go ahead. Hey Stewart or Peter. The average wage. You can see tipping guidance versus where you ended the year. Is there anything specific driving that any any large tenants moving out or anything like that?
Well, as you said it is an assumption for the average for the year. We generally have more Explorations impact in q1 in any given year versus the remaining quarters of the year. So we need we do expect to an early death this year and then we should be making good progress over the over the rest of the year to to build back up.
Thanks and Stewart in your opening remarks. I think you commented on Prop thirteen. You don't anticipate any changes in the transaction Market has sold them has been marked to Market any way. Is there the potential that that properties would come to Market ahead of, you know, the proposition being voted on just as people worry about their wage maybe if it's not even a casual but their conversations with their tenants going into this. So private owners may want to get out and sell to a more institutional under like yourselves.
Manny this is Jordan.
That would be such a great day. I can't tell you but we're not seeing it. I mean we would love that. We're not seeing any update the transactions around that project which would be a great day there was but there isn't.
All right, and Michael has won his lawyer just in terms of I know you can't really have much impact what percentage of your portfolio was already at Market.
Based on all of the deals that you've done new tenant, you know buildings you thought well, I would assume they could that's a hard question a few reasons one of which is and I've said this before what everyone in the outside world thinks is Market has nothing to do with Market in when it comes up 13 prop thirteen has its own definition. And and if you read it you'd be as cross-eyed as as you are when you you know, when we're looking at the page new cap rate versus way the public market that's captured. So so for starters, the number you would come out with is is probably a very different number than you guys would think of
and then you have and
And as I said, you have a I mean, we we've continued over the past few years even doing profits now and I I can't it's very hard to know because I don't think that proposition functionally works. It's very hard to know how or what would happen. If you ever wanted to postulate that number one of the past month then someone actually tried to do it. So it's just there's just no way to figure out a real number you you know better or as well as anybody what the general growth of the company has been and all the buildings we bought recently and I just gave you a quote about you know, how much we've grown the portfolio and and and you know that some you know, we had you know, we had a chuckle in the IPO. We've been we've added another whatever it was 45% or whatever I said since being so all yep.
You have all that you but you still don't even know.
On the other side, which is where would they come out on those and on all those properties? I just mentioned including IPO properties. We've won properties.
We've won profit meaning right we've won contemporaneously arguments where that we've said your volume us too high, right? So it's just hard to figure out where that will come out and I think you framed right cuz it you know, even in implementation it takes a long time because there's can't don't have the staff yet to do it and you'll be able to recover a lot under your leases from the tenants Rachel from a financial impact the market may be overreacting that there's you know, this massive, you know ffo destruction, but I think that you know, you live in California and I know it's beautiful and I know you're looking at the wall and it's 80° do you think right I get the lure of where you live and where your assets are and I'm jealous in the full cold. But do you think it leads to if it does pass cuz there's you know falling it 46 that's only could go up to I mean, there's some potential even though it's failed every other time then this is the one that you know,
increases
Out-migration from the state and therefore growth in tenants is reduced right that to me is the bigger risk than the ffo impact, you know of a couple of pennies here and there.
Well, I mean, I don't want to get too political on this call, but I need your on the tip of the iceberg that stuff the state of California is doing that that crazy issues. Now, you know, I give you another list of the stuff they're doing that turned us into an incubator State and draw the population in but I mean, hey prop thirteen wage income actual personal income tax rate what's going on with the person, you know, the employment laws how tough they make sure to employ large amounts of people how hard they are on mature companies that are actually employing a a huge amount of middle-income people which essentially almost get a you know, ejected out of the out of the states. I mean the list goes on if you're saying is this prop thirteen thing on the long shot of a passing. I mean, I assume there's somewhere where the you know the camel you break the camel's back but dead.
I thought that when they went to 13% income tax rate. I thought that on the last set of rules that
Came into play for the employment thing. But you know, then that it doesn't seem to be happening. I know and I read the same stuff you do but the very loudness of wealthy people going not enough and they go I'm I'm making my permanent residence out of you know out of state somewhere wherever they're going. But you know, these are you you know, you know, you read about like five different people you get all leaving. It's a state of forty nine people and growing. So if you say here on the ground if you want to know you're on the ground, here's what we're seeing. We're seeing a light rail that doesn't even seem to have had an impact the light rail's past and they're still too too many people downtown Santa Monica and all around the Westside. We're seeing the population continue to densify. We're seeing a shortage of housing at all life even expensive housing medium extension Outlet. So yes the stuff they're doing should be impacting people saying enough's enough, but they're not saying enough enough your phone number.
People coming in I'm saying enough's enough. But if you're saying for the whole state, we're not seeing that with this do it. I don't think it's going to pass and and and and and I don't know what the what the straw that breaks the camel's back a couple color. Thanks for taking the time. All right, go ahead.
Thank you.
Good morning, your 2020 earnings guidance includes the impact of the fire at Berrington, but I'm wondering if you could quantify what the impact would have been had you had kept that asset in your sister pool.
Well, it's we took it out of Sanford guidance cuz we think our loss is going to be insured but what happens is and it's the the insurance the way the insurance pays and the rules around collecting insurance and accounting around collecting insurance would make the number of fluctuate a lot like it comes in a completely different way than what you would normally say is a part under insane, you know doing the same store. So we took it out to let it settle out and not because it said to not have the insurance proceeds warped The Wharf the same store.
Which by the way normally I would say they they they they literally can warp them to the plus and the minus. I mean, it's it's it's not biased in One Direction or another.
But the Delta could have been you would have fallen below the bottom of the range of your guidance before and after five and half percent.
I'll say again insurance proceeds can have both a positive and negative impact. There's no way to put a a range on a same-store number when insurance comes comes home and doesn't come in it would it completes can change the number?
I mean you could equally ask the question would it impact that your range was too low. I mean that's that's the result to get out of that stuff. I hear you. Okay, and then Jordan you gave your life views on Prop thirteen and propagate as well go to the proposition 10. Do you have the same level of confidence that if you want me to give you my whole slate of voting cuz yeah go through all the composition. Yep. Yeah.
Well, you're talking about the rent control one. I think that's there's so little energy behind it. It's kind of a you know, one man one Mission thing this this guy out in Hollywood. But but with the you know, it was soundly defeated last time and since then literally the state legislature and the governor all got behind a Statewide rent Control Ordinance, which has been put in place and even politicians are the same. Hey, come on, you haven't even given our thing a chance to work. And and and if the other one came, you know kind of came on the scene with low support. This one's coming on the scene with me even lower wage with a with a with with, you know, very little backing and very little energy.
So you're not feeling the burn?
No, well, I'm reading about the bird and seeing his election results, but I'm not feeling it comes when it comes to residential rent control.
Thank you. Next question today comes from Dave Rogers a better please. Go ahead. Yeah, he guys wanted to go back to the office occupancy that was asked about earlier. I understanding that there's a dip in the first quarter, but you know you end of the year I think over 93% least. So can we dive a little bit more into maybe do you expect to do some more Redevelopment switch could pressure that number this year or is it more is if you were retentions or is it just kind of slow or lease up what's embedded cuz you guys have made some pretty good progress in recent quarters in terms of the lease up.
Yeah, so when when it's Peter, when when you have the kind of lease up that we had a number of new leases that we wrote sort of automatically implies that you have existing package where you know, you'll see some of those move-outs and that's what typically happens in the you know, in in the first quarter it the assumption is not affected by you know, estimates, uh, home of the impact of Redevelopment. This is just the straight, you know, we had we had a very strong leasing year and you know, we normally see, you know, see a bit of a dip in the first quarter and then we build back up over the course of my life.
Okay. Thanks for that and then let me
Is going to be maybe straight about the Redevelopment side Jordan you've updated Us in the past. Um, you know quick update on kind of where you're at. And do you plan to add more assets to that in 2020 from the office on the Westside?
No.
Well, it's definitely kind of where you know crowing about the last year or so. It's mostly gone and we're now on two additional assets. And of course, you know, we took the apparent Applause upon the list and and we know that that's certainly a 2021 project but that that's a program that has as long legs for like we we don't we didn't roll off those last seven and just say good we're done and do it, you know that hand swipe and walk off the table. I mean, we we just keep Thursday we're going to be rolling with that for years and years and years. I mean, it's just until the market really changes. We're those which I wish it would more Capital but those monthly higher returns those three positions that were doing. So we're we're not letting loose of that.
and the ball
Home of activity kind of in 2020 versus 2019. Is that is that pretty similar?
Would that be all the volume? Yeah dollar-volume. Yes number of buildings. I think it's probably fewer buildings. And and and but I think we are taking a consistent.
Okay. Thank you.
All right, and the next question today comes from Rich Anderson MSNBC, please go ahead. Thanks. Good morning out there. All right, thank yep. How you doing? So on the edge of the Brentwood high-rise development that is that is that a early 2021 delivery or something like that? And if regardless how much have you spent so far on the phone call $200 total cost.
Reach our construction is going to go all the way through to the end of 2021 and I don't have the number of what we spent so far, but we can get that to you. One more on that is is is there an ability to can you do some like a sight unseen type of leasing or you know, how do you prefer see that asset coming to Market will will there be zero occupancy out of the gate or will it be something much more substantial than that? Well, you know our mhar recent development we did have some pre-leasing happened before the thing even open. There was a lot of interest in that. Uh, I suspect this would be the same. This is going to be kind of an iconic high-rise new high-rise on the west side. We haven't seen in a long time. So I suspect they'll be strong in faith, and we'll we'll you know, we'll hopefully have a waiting list or do be able to do some free leasing before it opens. Okay, and then looking back a year your guidance for same-store was dead.
6% you ended up?
And I think this year so a good, you know, good beat beat and race type of year this year 4 and 1/2 to 5 and 1/2. Is there anything about how 20/20 looks versus 2015 that would preclude a similar type of event or is is there something that maybe would get in the way of your ability to sort of see your internal growth profile improve?
I I mean I don't want to limit are upside. We're trying to get you reasonable range going into the air. I mean every year we work to beat all our numbers and wage. I think that you know, certainly we hope to beat these numbers too. But I also think the range we gave you is a reasonable range for what we see going into the Year. Good. That's all God.
Our next question today comes from Wells Fargo, please go ahead.
Great. Thanks. Just following up on that last question. So you guys had a great quarter from a cash same store in a y perspective mostly driven by the six and half percent increase in cash revenues. Can you just talk about the drivers of that growth? So I I know you've got some occupancy growth in there and rent growth has been strong but it seems like, you know, the burn off of free rent must have been a big driver, I guess is that right? And if so should we expect cash and GAP same sort of way? I to sort of converge in the next few quarters, or does that cash benefit from you know, that free rent burn off stick around for a while.
whoa
Yeah, I don't think we I don't I haven't heard to be fair. We haven't gone in and out exactly that point but I haven't heard any discussion them at the same store growth came from freelance thrown off. I think it comes from just very strong fundamentals fundamentals and leasing that have converted occupancy fundamentals and and rental rate growth and and getting higher bumps and leases and all the stuff that you know, hopefully drives that I mean, there's always another half of the equation which is what are you comparing to, you know, the fourth quarter of the last year whatever I think you know, when you go not noisy past month to not noisy current is when you get your best and fairest comparison, sometimes we've had wildly swinging numbers because we've had prior years that were noisy. So the comparison got screwy
um
I think it was not noise either not noisy. So so it was just a comparison of fundamentals.
Okay, just seems like the I guess the five and half percent difference between gaap seems to earn and what you did on cash seems to run is a little elevated from from what you usually do, but I guess we can go through the details offline.
Okay. Thanks. Next question comes from Jamie Feldman the Bank of America, please. Go ahead. Great. Thank you. Can you guys talk more about the transaction to buy out your JV partner? What was the yield on the deal? And then just you know wire why is your partner selling and you think we'll see more of this sounds like we will see more of the space than your answer to a question earlier, but maybe why your life Partners looking to cash out?
So we had come to the you know, very close to the end of that fund that was a place where we thought there probably was also some refinancing opportunities, but frankly people came to us and said, you know, we're ready to get out. We've made pretty good money. They they got a pretty good deal. I don't think we should with their yield at home. Maybe we should all right, so they got a pretty good deal and we had been buying interests all through the last decade and then and then
So when we were buying the rest of the people out, we just went out to the cuz we were already up to 70% So we went to the last few and said if you want to sell with a friend us now and and pretty much they said yeah, I mean they we bought them out at exactly the you know, they think it's Market valued every year at the end of the year where the appraisals and wage bottom. Right right on the dot of that number of their Equity count and one guy said I want to find any way too. So it was multiple partners just wanted but one guy said I I want to find any way to stay in the market. Would you mind like keeping the thing open and and and we switch it to our to our new JV structure, which is our other large save he's off from the front structure which we had had cuz that one was, you know, ten years old and he said go switch is structure. I'm good with that and do another 30 or dealer. I want to be in it. And so we said okay you stay in and the others went out and we all share.
you know bought our interest to
To what we could get so it ended up like eighty nine eleven and it's a good vehicle. We hopefully will now use it going forward to do some other stuff. So I think our partner wants to be continued doing stuff and and growing up position.
So sorry the so the new structure is 30 year and it's just it's just like the other day. It's just like the other the jv's the last two that we did. So it's all on the modern terms, you know that we put in place and it it it's ready to go. I mean we can use it to buy stuff. We don't have any proclivity towards life or any of the others are all structured the same.
Okay, and then how large is the investment pipeline you're looking at today in terms of both Acquisitions and buying out more Davies.
And how would you finance it? Well, I think you know, I don't know and it deals are tough. I think it's overweighted by Community else in terms of the acquisition pipeline. So, you know those those have trouble going into the jv's and and it causes obscene know how well, you know, how little I like, you know, we like issuing stock like I mean how much we just like pollution. So those are tougher. I don't feel like God I you know and and from an earlier question, you know, when when it was asked whether this here in California whether there was going to be there were people were trading ahead of the potential split row. I thought I mean that would be a godsend I mean, but but it hasn't it hasn't created additional straight up sale sale deals.
Okay, and then last for me?
Yes, what are you guys thinking on rent growth in your market? Like how do you think this year is going to compare to last year across the submarkets?
You know, it depends on the markets like which is correctly you're asked a question. I mean, you know as you know, why very strong why you think the laggard side very strong parts of the valley still very strong and and Warner Center, you know, actually finally showing some good positive movement, but that's probably the strongest is Hawaii at the moment. But certainly the West side's very strong.
Like west side and Valley will be similar to this year or better or worse.
I think parts of the valley had been mimicking the west side for a while. But as you get farther out from you know, it's you know, Sherman Oaks. I think it's been slower than Thursdays the west side but by comparison to its past it's it's running like the Roadrunner. I mean the whole thing picked up quite well and and I saw a lot of people's notes saying well, they're finally getting rid of that 90% Mark. I think we're up at 89% there. So, you know that that's what matters document seen that actually matters across the market. I can see managing your portfolio and that's what changes the rent rates are doing. If you look at these other markets, you're like dig deep in the nineties of course rents are moving.
Okay. All right. Thank you.
Our next question comes from Belk Road Raymond James, please. Go ahead. Hey, good morning guys, speaking of joint ventures. I think it was probably six straight quarters ago. We were talking about the potential Jeff be of of Hawaii assets and and I'm just wondering whether that's off the table whether you still think about that it kind of bringing the cash back to to Los Angeles.
Well, I mean on or is always been the case when I've been asked about Hawaii. I mean obviously very strong now but we've found it said went why is a place where you know, we feel like this is this is where we want to you know, we want to characterize and and get our growth going forward prime rib out of the market which I feel is a 30-year Market which is just West Side Market where we have in L where we have a huge amount of our assets why he has created and what's going on there is created a lot of a lot of investment opportunity a lot of capital investment opportunity and and we've always said that that is an opportunity to do a JV or do some other structure like that because we want off obviously that's a great place to stay involved and it is never and it's as before it's still a good opportunity to do that. We you know, the timing has to be right is structure has to be right we have to be able
demonstrate quite clearly to our partners or whoever
Would bring you in on that that this is why we like this is why it works. We don't want you know, we don't want to sell it. You know, we we don't want, you know do anything that looks like a fire sale or just kind of sale but we also want to make a deal where it works out good for Thursday for for the JV partners and for us so that you know, that's that's tricky but that's definitely a market where we think we can pull that off one day. I'm not saying on this day but one day wage one more for me Berrington Plaza that was a sight of a another major fire not that long ago and in a lawsuit and everything else. Is there any risk the reputational risk or or longer-term impairment because of the sequence of the two fires and and the you know, all the all the publicity and press they got
You know, like I guess the answer has to be. Yes, although I don't know that we're seeing it I have to say look we were advocate of whack clearing the building.
At the last fire we're we're advocate of spring cleaning the building today. This is adding pressure to the city council to create a path for these buildings to be spring break is your sort of trapped between the rent stabilization ordinance and the permitting process for sprinkling your entire building and we hope that that is also our path. I don't think and when maybe it's a matter of the new cycle or whatever else. I don't think I actually don't think there's long-term recreational use of the these buildings. But you know, I guess you gotta play that out and see what happens over the next year. Thanks for the time. Appreciate it off. Next question comes from Daniel smell of Green Street advisors, please go ahead great. Thank you. Just a few quick ones for me. Can you provide a an update on where in place?
office rents it relative
the market these days
Yeah, Danny, it's about what it's done. We're a little over 10% on the mark-to-market.
Okay, and then you were fairly busy this year refinancing debt and doing other things on the balance sheet. Do you see the do you see twenty-twenty ending in the same spot where you guys ended nineteen on a daily basis?
Okay, that burned out my fridge 9 or 8 or something like that.
I think we have a chance. We have a chance of improving that I think our earnings are going to go up dead. I don't see dramatic increase in amount of debt that we have. So we have a chance of improving that number.
Okay, and then just last one actually for me given the expirations this year. Can you discuss the type of leasing a economics you guys are expecting in 20 specifically. Do you expect a tougher or six year for leaving concessions?
I don't I don't I don't think the expirations are that abnormal for us to any I know that there's a little bit of chunkiness in Q4, but it looks like a pretty typical year for us. We've done a very good job. I think I'm keeping our leasing costs, uh stable and at levels that are well below our peer set, which is really a function of our tenants eyes. I don't see any of that changing the transmission very good. You know, we're still getting robust demand. I wouldn't see that we'd see a major change in the concession. Okay, great. Thanks, everyone.
And ladies and gentlemen, this is the question answer session. I'd like to turn the conference back over to the management team for any final remarks.
Thank you all for joining us, and we look forward to speaking with you again next quarter. Thank you, sir. Today's conference has not concluded. We thank you all for attending today's presentation. You may not disconnect your lines and have a wonderful day.