Douglas Emmett Inc

NYSE:DEI

Earnings Call Transcript 2019-Q3

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to Douglas Emmett's quarterly earnings call. Today's call is being recorded. [Operator Instructions] I will now turn the conference over to Stuart McElhinney, Vice President of Investor Relations for Douglas Emmett. Please go ahead.

[Stuart McElhinney, executive]

Thank you. Joining us today on the call are Jordan Kaplan, our President and CEO, Kevin Crummy, our CIO; and Peter Seymour, our CFO.

This call is being webcast live from our website and will be available for replay during the next 90 days. You can 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 of, assumptions made by, and 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 believe that our assumptions are 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 may be material. For a more detailed description of some potential risks, please refer to our SEC filings, which can be found in the Investor Relations section of our website. [Operator Instructions] I will now turn the call over to Jordan.

[Jordan Kaplan, executive]

Good morning, everyone. Thank you for joining us. Tenant demand for our office buildings is robust. We leased 1 million square feet during the quarter, including a record 461,000 square feet of new leases. Our success drove a 50-basis-point increase in occupancy and increased our lease 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 NOI. Overall, our tenant demand is supported by a wide range of industries and healthy regional economic trends.

On the 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 tight lending 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 5 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 FFO for the third quarter by $0.04 per share due to onetime noncash and cash loan costs as well as equity dilution. The loan costs from our most recent financing will reduce our fourth quarter FFO by an additional $0.01, bringing the total reduction of FFO in 2019 from these activities to $0.05 per share.

Even with this impact, we grew FFO this quarter by 3.7%. Excluding this impact, we grew FFO by over 9%. Our AFFO growth was even stronger as we grew AFFO by 14% compared to the third quarter of 2018. This reflects both our conversion of noncash revenue to cash as well as our low recurring turnover costs resulting from our unique operating model.

While leasing up, a few large spaces have slightly elevated our turnover costs. Those costs represented only 12% of our NOI, still significantly below our benchmark group average of 25%. With that, I'll turn the call over to Kevin.

[Kevin Crummy, executive]

Thanks, Jordan, and good morning, everyone. As Jordan mentioned, we are very pleased with the results of our strategic debt program. We now have the strongest balance sheet in our history. Our net debt-to-enterprise value stands at only 29%. We have no debt maturing before 2023, and our pool of unencumbered properties available for future financings now constitutes 41% of our office portfolio.

We don't anticipate any more refinancing activity this year, although we would continue to monitor rates and spreads into 2020 for further opportunities.

Turning to development. In Honolulu, we still expect to deliver the first batch of new apartment units in 2020 at our office to residential conversion project. Eventually, we plan to have almost 500 units there.

In Brentwood, construction of our 376-unit high-rise apartment tower is progressing well. Our deal pipeline is picking up, and we've been looking at a number of potential office and residential acquisitions. While we remain disciplined in our underwriting, the strength of our balance sheet and the available of OP units for tax-advantaged deals gives us lots of optionality in closing deals.

With that, I will now turn the call over to Stuart.

[Stuart McElhinney, executive]

Thanks, Kevin. Good morning, everyone. In Q3, we signed 209 office leases covering 999,000 square feet, including 461,000 square feet of new leases, a record high for new leasing in a quarter. Leasing spreads for the quarter were 29.1% for straight-line rent roll-up and 10.7% for cash roll out. The lease rate for our total office portfolio increased by 94 basis points to 93.1%. Our overall portfolio occupancy increased by 50 basis points to 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 to 92.6%. Our remaining lease expirations over the next 4 quarters total only 10% of our portfolio, well below our recent historical averages. With 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. I'm pleased to report that our new apartment units at Moanalua, are now fully leased. We are continuing our successful program to upgrade the existing units there.

I'll now turn the call over to Peter to discuss our results.

[Peter Seymour, executive]

Thanks, Stuart. Good morning, everyone. We are pleased with our Q3 results. Compared to a year ago in the third quarter of 2019, we increased revenues by 6.6%. We increased FFO 3.7% to $103.9 million or $0.51 per share. As Jordan mentioned, our third quarter FFO was reduced by $0.04 per share as a result of our strategic balance sheet activity.

We increased AFFO 14.3% to $94.3 million. We increased our same-property cash NOI by 6.7%. Our G&A for the quarter was less than 4% of revenues, well below that of our benchmark group.

Now turning to guidance. We are 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 $0.05 impact from our strategic balance sheet program. As a result, we are maintaining the midpoint for our full year FFO guidance while narrowing the range to between $2.09 per share and $2.11 per share. As usual, our guidance does not assume 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.

I will now turn the call over to the operator so we can take your questions.

[Operator]

[Operator Instructions] The first question comes from Jason Green with Evercore.

[Jason Green, analyst]

I know you guys have 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 assets changed at all? And should we expect more acquisitions versus development?

[Jordan Kaplan, executive]

Well, development is just a slower process because we start working now on entitlements and, hopefully, they come to fruition years away, and we are doing that. Acquisitions, we have less control over. I don't want to -- why don't you talk about what you think -- the acquisition?

[Kevin Crummy, executive]

Sure. So the pipeline is looking -- actually is 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 of wood to chop to get those things done. And so sometimes they hit, sometimes they don't. But relative to where we expected to be, we're pleased with the amount of activity.

[Jason Green, analyst]

Okay. And then on the multifamily same-store cash NOI side, that's come in around 1% the last 2 quarters. I guess when should we expect that to start to turn higher just given the positive rent in the market itself?

[Jordan Kaplan, executive]

That number has been -- I'm not sure quarter-to-quarter and even the last 2 quarters that you can rely on that as an indicator of what's coming up. Now of course, when you say turn, I still feel like those are aberrations as opposed to telling you where the market actually is. But we -- it's like, all of us, we need to play out a few more quarters and see where that all ends up.

[Operator]

The next question is from Jamie Feldman with Bank of America.

[James Feldman, analyst]

I guess sticking with the acquisition pipeline. Can you give a little bit more color about what the assets are that are in the pipeline, whether it's office or apartments and the size? What cap rates look like -- what kind of returns you'd like to see? Would you bring in a partner?

And then also, just as you think about financing, how much higher would you be willing to take leverage to get deals done?

[Jordan Kaplan, executive]

That's like the entire capital and acquisitions deck. So there -- most of -- the kind of most current pressing things is office, generally, West L.A., a little bit in the Valley. I would say more than the usual number of deals that are looking for some type of OP unit or to become part of the structure with us to take advantage of our management or our position. In terms of -- and a surprising number of deals where they kind of want to stay in, but have us take a control over the thing. I would say that 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 and broaden the number of 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 a lot of ways to do it that I don't think we would significantly impact our loan-to-value.

[James Feldman, analyst]

Okay. And then you said in the Valley. So maybe can you talk about Valley fundamentals, like what are you seeing in terms of a change in either rents or occupancy that would give you some comfort buying more there?

[Jordan Kaplan, executive]

Well, in general, the Valley -- so if you look at Encino, Sherman Oaks, that's been strong, continues to be strong. To the degree there's deals left there, we'd like to do them. And in fact, we've seen a lot of strength coming out of Woodland Hills, and you guys have seen in the numbers that we've been publishing that it's been improving. The stuff we're looking at happen to be in Encino, Sherman Oaks market.

[Operator]

The next question is from Alexander Goldfarb with Sandler O'Neill.

[Alexander Goldfarb, analyst]

First, on the balance sheet side, you guys are now 41% unencumbered. And you had comments in the release and you spoke about possibly looking at rates and spreads heading into 2020. So just from a balance sheet perspective, 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 and beyond, presumably, this would be stuff that you would not pay a prepay penalty on, it would be stuff that's naturally coming off a swap where it's a cost-free option for you? Just trying to understand your thinking, given how far out you've pushed your maturity profile.

[Jordan Kaplan, executive]

So a lot of what you said is basically right. I wouldn't say just because there's a swap. If there's a good swap -- so when we're looking at refinancing something, there are 2 benefits that we get out of that, assuming it -- one is it can be just a generally net positive deal. You can refinance some, and then I'll bring your cost down. And what stops you from bringing your cost down is if you have prepayment penalties or 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 swap can just continue on to the next loan because the next loan will need a swap too, and then we can add a swap, and what's making -- to the tail end of that to make sure that we're 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 add a tail to that swap, and it's not very expensive, giving us a very long period of time of very good fixed interest rates. And so they're still assuming that spreads and the index has stayed low -- swap rates stay low, there still could next year, be some more opportunities. None of this stuff has prepayment penalties for us to further extend our maturities and reduce our costs on the debt. And typically, when we're doing that, because of the move in values, you're able to release a few buildings. So let's say you had a loan that has 6 buildings, since we don't tend to be going for more leverage, you probably could get that same loan at a cheaper -- this is crazy. That's why this environment is so good, that same loan at a cheaper price and even release one of the buildings, giving us even more chips, if you will, for financing or flexibility in the future and another building that's in the unleveraged pool.

[Alexander Goldfarb, analyst]

Okay. Okay. Then that's helpful there and explains it. Out in Honolulu, the occupancy dropped 50 basis points. Can you maybe just give an update on how the de-officing, if that's a word, is going with the Bishop Tower that you're converting and how you think it's impacting the 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, 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 property.

[Jordan Kaplan, executive]

Yes. So the market for more reasons than 1132 Bishop conversion has become relatively tight. There's some other large tenants maybe seeing the writing on the wall that had wanted to be in that downtown area that have now moved and settled themselves extremely firmly there. So that's rolling out. That's on top of our move. I think we have about 100,000 feet available in our buildings, and we need to move 300-plus thousand feet out of 1132. So that's created a tight situation.

I think more important than that is we're moving along quite well on the conversion of residential and they're big game in that downtown area. It's to get this workforce residential built and occupied because that's what really converts that area. And I'm seeing stuff literally daily of people, if you will, looking to tag on to that, with improvement of other areas, other buildings near our buildings. And so 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 seeing little movements in occupancy, I don't think they're meaningful. The whole market's pretty tight, and we have a lot of tenants to move into not enough space, quite frankly.

[Operator]

The next question is from Nick Yulico with Scotiabank.

[Nicholas Yulico, analyst]

I just wanted to ask you, I just get some news -- just came out about Mayor of Los Angeles, joining a couple of others now in state and supporting split roll next year. I think in the past, during -- you said that you didn't think split roll was likely. I mean now you have the mayor of Los Angeles supporting it. What are your latest thoughts? And if you could just remind us where your taxes are versus market?

[Jordan Kaplan, executive]

It's very hard to know where our taxes are versus market. I don't believe when -- they'll ever even get there. And I don't even think the markets, the market that you're thinking of. In terms of in general, I still don't believe there'll be a split roll. It's extremely popular. It's extremely popular of Prop 13 and the split roll in -- has tons of impacts and ramifications, and it's pulling poorly. I mean -- but I know that we'll keep being asked that question until the election. So we can keep talking about it. I don't have any better or greater information beyond my opinion and where the polling is. The polling at the moment is it's a complete loser.

[Nicholas Yulico, analyst]

But were you surprised to see the mayor of Los Angeles come out and support split roll?

[Jordan Kaplan, executive]

I can't say that I'm surprised that he is doing something political like that. I have a hard time reading -- he actually thinks it's a good idea. But politicians do a lot of things. I mean I don't know how they manage and decide what is the right thing for them to say at any moment in time. He's had a little -- he's got a lot of issues on his plate at the moment.

[Nicholas Yulico, analyst]

And I guess, what's the reluctance? I mean other companies have come out, giving some sort of idea about what an impact could be to their taxes. It's really -- it's a complicated formula, but still when we look at it, it seems like you guys have a lot of assets that are older and warrant reassess to market. And so I guess, when you're saying you're not able to do the math on it, maybe that's true. But I mean, can you just give us a feel for where 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 affecting your property taxes in the future?

[Jordan Kaplan, executive]

No.

[Nicholas Yulico, analyst]

So you're going to continue to just give no information on where taxes are potentially versus where they could be when this legislation, if it passes, occurs?

[Jordan Kaplan, executive]

That's correct. I don't think that's a fruitful road to go down. I don't think it's good for the company. I don't think it's good for the politics surrounding that issue.

[Operator]

The next question is from Rich Anderson with SBMC.

[Richard Anderson, analyst]

That's SMBC, but close enough. So what -- my first question is on the same-store growth profile, which is improving each quarter it seems. This time last year, the numbers were much lower. I recall having -- we spent some time together. You were handling minimum wage issues in a more immediate fashion versus kind of leading it into the system through to 2022 or whatever it was.

I'm curious if you think that that's a lot behind the reacceleration of the same-store growth versus 2018? Or do you think it's just more of a natural sort of evolution of how things are going in your space? Do you think you're getting extra same-store growth today because of how you handled same-store last year?

[Jordan Kaplan, executive]

Well, obviously, that compares -- it's always -- the comparison is always meaningful to look back. In general, though, I remember when you were here, what I said is we have a lot of pending growth -- pent-up growth from a lot of programs. Not only -- it's development stuff coming online and gains we're making on redevelopment of buildings and rents moving up, even though the billings stay in same-store, but redoing lobbies, redoing things, I said we were getting gains from that. And it was gains that we were gaining -- we were getting from continuing to retool and work through our operating platform to further expedite things. And I said, we have a lot of strong kind of rental metrics just in the market that we think we're more -- better and better positioned to take advantage of. I think that probably is playing a bigger role than the fact that last year, we were digesting kind of fast-moving minimum wage. I think that's the -- that was more impactful than the residential side, which has more of that than the office side, but of course, that impacts the whole company.

[Richard Anderson, analyst]

Okay. So -- I mean, not to get 2020 guidance, but I mean, is this -- are you kind of operating at a sort of a place where you think you'll be able to stay for a while in this kind of mid-high single-digit sort of range?

[Jordan Kaplan, executive]

That's -- it's very hard to predict how the numbers are coming out -- are going to come out because quarter-to-quarter, when they get compared, that can be very spotty. What I can tell you is this. The fundamentals in the markets and the gains we're making currently within leasing and growing our income, they still seem as strong as we thought they were going to be last year when we talked, and they're still cruising at a good clip. Now that doesn't mean that some exogenous thing can happen with the national economy that turns everybody around or creates fear in the system. But at the moment, for the industries that we have in our markets, and it's taking on the office side, and the amount of supply coming on, those kind of long term that -- those supply-demand metrics, on top of the stuff we've been doing to our 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 the residential, but we're seeing a lot of strength in residential. So I'm optimistic that those numbers will even get better, and this is just an aberration more than -- showing a long-term trend.

[Richard Anderson, analyst]

Okay. And then second question, as much as people think of you primarily as an office REIT, just given the percentages, a lot of the discussion and excitement is around the multifamily business. With that in mind and with multifamily being a part of your DNA going back in a longer history, do you think multifamily could grow to be substantially more as a percentage of the total over the next 4 or 5 years? Or are you comfortable with this sort of 90-10 type split?

[Jordan Kaplan, executive]

Well, we would like to do as much good multifamily as we can. I just think -- we think it's a great asset class. And we are in an incredible position with the amount of land that we own in these best markets because we own entire blocks of blocks to span the time, the 2 years to 3 years to whatever it takes, to get that housing approved -- for rent housing approved. It takes a long time. It's hard for someone to buy something and say they're going to go do that because the clock is ticking on them a little faster than someone that has the land, already making money off of it and then have this additional opportunity.

So we're focused very hard on that, even buying and developing and repositioning existing projects. With that said, to answer your question, there is -- it's even though we take some very solid steps forward on multifamily, Kevin's script does a few office deals, and 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.

[Operator]

The next question is from Tayo Okusanya with Mizuho.

[Omotayo Okusanya, analyst]

Could you just talk a little bit about your program for -- on the office side, the standardization of the suites -- the Signature Suites program? Kind of how you're doing with the rollouts relative to expectations and your internal plan?

[Jordan Kaplan, executive]

Yes. So we try and have in every building, and throughout the portfolio, a very large stock of suites that are just ready to move into. And even in many cases, we furnish them. And it's worked extremely well. We control the entire capital program around that in terms of the TIs. It allows us to raise the level that were leased a little higher because if you have some -- maybe you have some space that's older that hasn't moved. If you're willing to go in and get it -- move-in ready even if it's not in the best spot in the building, it becomes much more attractive to people. And then when you furnish it and show them what it could look like, it even becomes more attractive. So that's been a fantastic process for us and very successful. And I think it's fair to say not only are we doing a lot of it. We would -- what we're working and designing our systems to be able to do even more of it, and because we have seen increasing returns, not diminishing returns. Like the more we do, the even better it does. So we are dedicating more and more people's time, and teams to getting that done and having as many of those suites available as possible. Now all that hiring and that process takes training and time. But we're pretty focused on that. It's been a great program for us.

[Omotayo Okusanya, analyst]

Could you specifically talk about if you're hitting your target build-out of 30 per month? And if it's better received in certain submarkets than others? Or if it's certain types of tenants that are attracted to it?

[Jordan Kaplan, executive]

Well, I think it works particularly well in our markets because tenants, especially the tenant that's less than 5,000 feet doesn't have a real estate group. So when you give them something that's move-in ready. Even if it's move-in ready and they say, "I only have one thing. You need to move one wall." It's so much easier for them to do than it is to give them a blank slate, make them feel like they have to hire designers and all the rest of that stuff. So because 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 in terms of very standardized leases and space planners that don't feel that way. They can just make the change you want on their iPad and we just attach it to the letter of intent without having to go through a lot of process.

We have, design group that has some already prematched carpet and color samples and emollient and the whole deal so that you don't have to feel like you need a designer. So we've done a lot to make it easy for someone to feel confident, capable, efficient, whatever you're looking for there, in terms of just leasing out the space and not feeling why they had 1 million decisions they had to make, and it was just overwhelming, and that's speeding up that process. Both gets them paying rent faster and brings down the turnover cost for us.

[Operator]

The next question is from John Kim with BMO Capital Markets.

[John Kim, analyst]

Your lease rate hit a multiyear high, 93%. Do you expect occupancy to kind of creep up towards that number? And just given you have 15% of new releases rolling over the next couple of years, do you have any expectation of occupancy really improving?

[Jordan Kaplan, executive]

Well, I would generally say, and it's hard, as the lease rate moves up, occupancy and lease squeeze 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 therefore, you have a bigger spread between leased and occupied. I have never seen occupied get closer than about 150 basis points to leased, have you, Stuart?

[Stuart McElhinney, executive]

No, that's about it.

[Jordan Kaplan, executive]

That's about as tight as it ever gets. In terms of your question about their roll coming up. We -- because we have so many tenants, our roll in terms of the year we're in, 1 year out, 2 years out, 3 years out, that kind of wave is a fairly constant wave. I haven't seen -- we might have, like, I know we mentioned in our prepared remarks that we have a couple quarters with a little lower than normal, but it will catch up to itself because that wave tends to stay pretty steady in terms of their -- the year that we're approaching becomes relatively low because we've already renewed a lot of those people. The 1-year out from that tends to be a little higher and then it trails off from there. That shape -- I haven't seen in very long that shape change in a meaningful way.

[John Kim, analyst]

Okay. I guess without providing guidance, I'm just wondering if you have an early indication where we are in the cycle and where you're seeing demand, if you think at least the lease rate movement will be maintained at these levels or potentially higher next year.

[Jordan Kaplan, executive]

Well, I -- when you say rate, well, we have like occupancy rate, leased rate and then the amount of leasing we do in a quarter. So the amount of leasing we do in a quarter, is when we have more meaningful vacancy, that's some more meaningful number to watch, to say, "Okay, I'm glad there's still good flow." I'm not sure it's as meaningful today because we're up at pretty high levels today. I haven't seen anything that would say to me that our leased occupied rate are going to go down. And I think we still have some opportunity for them to go up.

The fundamentals in the market are good. I mean in terms of tenant demand, against new supply that they can move into. We don't really have any large spaces available at all.

[John Kim, analyst]

My second question is on the debt refinancing that you had done this quarter. Your weighted average interest rate is at 3%, with a 6-year maturity. A year ago, it's 3.07% with a 5.6-year maturity. I was just wondering, did you get the full benefit of that refinancing this quarter? Because I would have thought that your weighted average...

[Jordan Kaplan, executive]

No. The refinancing that we did -- no, you just got part of it because it happened during this last quarter. We'll get the full benefit of the stuff we've done this year, next year. Right? We have the cost and it happens midyear, et cetera. Next year, you'll see the benefit of the lower interest rate on that. And -- but we'll also continue, and there will be some generally noncash, a little bit of cash, but generally noncash costs associated with doing it.

[Operator]

The next question is from Manny Korchman with Citi.

[Michael Bilerman, analyst]

Yes, it's actually Michael Bilerman with Manny. So generally, when you look at your lease roll, as we think about 2020, you got about 14% of the portfolio rolling, another 14% in '21. Your average lease spreads have been running, call it, 10% to 12% cash, up 30% on a straight-line basis the 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 wager a guess into 2021? Your average expiring rents on a current basis are about $42, $43. They'll reach $43, $45 expiration, but how should we think about where mark-to-market could be in those years?

[Jordan Kaplan, executive]

For a few years now, and I've been a little surprised by this, our mark-to-markets held steady at 10%. And I think the pace that we're -- what?

[Michael Bilerman, analyst]

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? We should be accelerating?

[Jordan Kaplan, executive]

Yes. Well, I mean, if things we're capturing at a pace that we're staying sort of somewhat caught up, and I guess that's a function of our -- mark-to-market and rent roll-up don't talk -- relate perfectly to each other, as you know, because mark-to-markets, all the leases, not just the ones coming up in the next quarter or whatever. But I -- we're obviously capturing a lot of the general market gains and rental rate. Because there have been very strong market gains, and we're also -- that 10% -- this could persist. There have been times when I would have thought it would because obviously, they're 5-year leases. On average, I would think it would be a larger number, but we're capturing it. So we're getting this interesting situation of very strong roll-up and still maintaining a 10% mark-to-market. But I don't have any -- I mean, I literally don't know, as I'm on this call right now, what the mark-to-market will be next year.

[Michael Bilerman, analyst]

I mean where do you think the -- I mean, if the expiring rents are at $43, where is market for that space today?

[Jordan Kaplan, executive]

Well, the problem is when you say expiring rents, it depends on where those rents are expiring and what the rental rates are there. I mean something that's counterintuitive is. But lately, the higher the expiring rents, the higher the rollout because when the expiring rents are high, they're probably in some of our hottest markets and in the hottest markets, rents are going up the fastest. When the expiring rents are a little lower. There are markets that have run a little flatter, and therefore, the roll-up hasn't been as much. So that doesn't give you the clue that you would think it gives you.

[Michael Bilerman, analyst]

Right. Maybe turning to the balance sheet. And you talked a little bit -- the transactions, it sounds like maybe perhaps more balance sheet deals than fund deals, given some of the structuring. If I think back last couple of years, you've issued a bunch of equity, which you held sacred for many years following the IPO. The share base has increased 12%, 13% over time. Your stock is now at a discount to consensus NAV at 43 versus 46, and I'm sure you have a different view of what your equity and NAV is but I guess, how should the market think about your use of your currency in growth going forward?

[Jordan Kaplan, executive]

Well, I don't think I have to characterize what we've done in the past of issuing a bunch of equity. We -- I've 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 -- similarly situated companies. That's from the time we went public. The -- 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 pressure on and we're willing even to spend money to maintain that private equity platform that's been put together in the JVs. I just think it's very important to use that and be more restrictive in terms of our -- the equity in the public company to allow us to continue to grow and control the real estate that we want to control and get the gains, but not dilute because I think it is dilutive to issue stock.

There's been times when we've had to do it, I agree, or that we felt we should do it for whatever variety of reasons. You know them going back, you've followed us from the beginning. But I don't think we've done it very much.

[Michael Bilerman, analyst]

Yes, that's helpful. I mean there hasn't been a lot. I think I would say it would be more recently, right? I think you didn't issue equity for a long time. And then I would say the last couple of years.

[Jordan Kaplan, executive]

Yes, that recent one, that was an interest. Yes, that was -- we got in between 2 things, and we did issue equity for that when we were buying that apartment building and then and it ends up in the JV, but that happens sometimes. That was a couple of hundred million dollars.

[Operator]

The next question is from Craig Mailman with KeyBanc Capital Markets.

[Craig Mailman, analyst]

Just looking across your markets year-to-date, you've had pretty good uplift in the lease rate in all but kind of Brentwood and Westwood. Could you guys talk a little bit about the dynamics in those 2 markets, have kind of hindered your ability to really push the lease rate?

[Stuart McElhinney, executive]

Sure, Craig. I think that in Brentwood, one thing we're really excited about is the part we're building for that submarket. So that's coming in a few years. I think that will be a great benefit for not only the apartment building we're building there. But we've got 700 units next door and a couple of million feet of office in that market. That will be great for that neighborhood. You're right to point out that, that Brentwood has been a little bit lower than we would have otherwise expected. It's a great west side submarket. No reason it shouldn't perform just like the rest of our Westside submarkets. So we're optimistic about that, maybe some potential repositionings in that market in the future there. And then Westwood we've seen -- since we purchased a huge chunk of Westwood a few years back, we're still kind of 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 leases, on our credit, so not unusual to see some noise in the occupancy rate after we do acquisitions in the market.

[Craig Mailman, analyst]

That's helpful. And have the spreads kept up with the other submarkets from the Westside? Or have there been any kind of headwinds on that side as well?

[Kevin Crummy, executive]

No, we're still seeing good spreads in those markets.

[Operator]

The next question is from Dave Rodgers with Baird.

[Dave Rodgers, analyst]

Jordan wanted to ask about the office redevelopment that you're doing, kind of the whole large programs that you've mentioned on previous calls, is that having an impact on the occupancy and 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?

[Jordan Kaplan, executive]

Yes, I think it has -- yes, I should speak just as clear as I can. So we're completing some of those projects or virtually completed. You can see where they're at. And I told you that one kind of canary we had in the coal mine was a deal where there was a good comp right next us. So rents have been going up in general. And so the question is, when we spend capital to reposition a 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 -- our building next to another building, both similar views, similar access to the mall, the whole deal. And we're redoing the building. It's not even completed yet.

And what we do is we measure the gap between, let's say, this building that's much more dated to the other building that had been redone. And we said, can we close that gap. And on that one, I could say we closed the gap, and it's a lot. I think we probably picked up $0.75 to $1 a foot a month to close a gap that was that wide. And so therefore, I know that on that building, the $17 million that we spent, that's going to get paid for very -- that's a 400,000-foot building. And that was a monthly rate I gave you. So we know on our redevelopment in general, when there was a gap that could be measured. It's working out.

Now in other buildings, we're just seeing some of those repositionings just hitting new heights in rental rate, a lot harder to measure because the market's tight and rents are going up. So it's harder to say -- to attribute some like fixed amount to the work we're doing but it seems pretty instinctive that the work we're doing has been very helpful to the buildings. We've done the work -- we bet that we've worked on because we're just getting such great activity, and they're so full. But we're looking for the response in rental rate, not necessarily occupancy. We have pretty good occupancy across a lot of that stuff.

[Operator]

The next question is a follow-up from Jamie Feldman with Bank of America.

[James Feldman, analyst]

I'm just curious, since WeWork pulled its IPO, have you seen any change in either the co-working market, in either the number of players that are looking or maybe smaller users looking at your portfolio more than they did in the past? Just any noticeable change in operating conditions as a result?

[Jordan Kaplan, executive]

I think that the whole time -- I know that WeWork's been finally kind of calming down. But the whole time that there were the discussions about WeWork's and WeWork's changing the way that office leasing happens, I felt like we've been doing that for years anyway, having like ready-to-go office space for people that just want to move in. 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 them the month-to-month leases. We've been insisting on the longer leases on the space that we've had ready to go.

And as we've been saying for years, even before people were talking about WeWork's, this is an extremely successful program for us, and it continues to be an extremely successful program. Is it more successful now that it's become more accepted in the office environment, to come and just immediately lease a space in the end? Maybe it is, maybe they've retrained people a little bit to even be more comfortable coming in, seeing a space and going, "That will just work for me. I'm going to move in." I'm hearing stories regularly now of people looking at space and saying, "Not only we'll take it. We'll take it with the furniture." Like we can always move furniture to another Spec Suite and see if people -- and reuse it. But a lot of times, people are saying, "We'll even take the furniture." So maybe they are being sort of trained or adapted to moving away from the complete gut designer and space planner model to this more expeditious model. Hard to believe that the larger, the full floor, the multi-floor tenants are going to go to that. But certainly, the tenants in our market were already leaning that way. And that program has been successful for a long time.

[James Feldman, analyst]

Okay. I mean have you seen a pickup in demand since WeWork has slowed down for that space? So it's been --

[Jordan Kaplan, executive]

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 that's as strong as we have today, it would be hard to say WeWork's -- I don't think WeWork's was, at any point in time very impactful to our markets.

[Stuart McElhinney, executive]

Yes. They don't have a huge presence in our markets, Jamie, on the west side. We've looked at that. It's very small. It's only like 1% of the market. They hadn't penetrated into the market very deeply because we don't have a lot of available space.

[James Feldman, analyst]

Okay. All right. And then have you guys already backfilled all of the Century City move-outs you had? Or is there still more to go?

[Stuart McElhinney, executive]

Yes. I think you saw, we just posted a 95% lease number for us. So that was a small tenant, kind of the nature of the portfolio. That's essentially full. We did backfill that space that you're referring to.

[Operator]

This concludes our question-and-answer session. I would like to turn the conference back over to Jordan Kaplan for any closing remarks.

[Jordan Kaplan, executive]

Thank you, everybody. We'll speak with you again in a quarter.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.