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Douglas Emmett Inc (NYSE:DEI)
Q4 2019 Earnings Call
Feb 12, 2020, 2:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

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]

After management's 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 of Investor Relations for Douglas Emmett. Please go ahead.

Stuart McElhinney -- Vice President of Investor Relations

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. When we reach the question and answer portion, in consideration of others, please limit yourself to one question and one follow up.

I will now turn the call over to Jordan.

Jordan L. Kaplan -- President & Chief Executive Officer

Good morning, everyone. Thank you for joining us. A successful fourth quarter capped off a very strong year and a great decade for Douglas Emmett. During 2019, we grew our FFO by 6.3%, our AFFO by 18%. Our same property cash NOI by 7.5% and raised our dividend by 8%. The straight-line value of our office leases signed during the year was 28% greater than the prior leases for the same space. We significantly strengthened our balance sheet during the year, refinancing approximately $2 billion of debt, which added almost five years to that debt average term. At year-end, we had no floating rate debt and no maturities before 2023. Our weighted average interest rate is only 3% and our pool of unencumbered assets has increased to 41% of our office portfolio. We purchased a fantastic multifamily asset in Westwood and completed a very successful lease-up of our first multifamily development in Honolulu.

Taking a moment to reflect back on the entire decade. We grew our office portfolio by 38% from 13.3 million to 18.3 million square feet. We grew our multifamily portfolio by 45% to over 4,000 units. We grew our FFO per share by 65% and our AFFO per share by 95%. As a result, our total shareholder return for the decade was 304%, 45% higher than the RMS Index and more than double the SNL US Office REIT Index. Sustainability remains a key commitment for us. In 2019, we reduced our electrical usage per square foot by another 2%. This is our 12th consecutive year of reductions, bringing our total savings to more than 22%. As most of you know, there was a fire last month at our Barrington Plaza apartment property. We currently expect that our insurance will cover our damages.

Looking ahead, Douglas Emmett has never been better positioned. Our balance sheet is stronger than ever, our supply constrained markets continue to have robust tenant demand from a diverse set of industries and our unique operating platform, dominant market share and development opportunities have us very excited about growth in 2020 and the decades ahead.

Now, I'll turn the call over to Kevin.

Kevin A. Crummy -- Chief Investment Officer

Thanks, Jordan, and good morning everyone. In November, we acquired 16% of the equity in one of our unconsolidated funds, which owns six Class A office properties, totaling 1.5 million square feet in our submarkets. The net purchase price was approximately $91 million which we paid through a combination of cash and operating partnership units. We now own 89% of the equity in what will be treated as a consolidated JV. As George mentioned, we completed a successful lease-up of our 500 unit Moanalua development this year.

Our two multifamily development projects in construction are also progressing well. In Brentwood, we remain on track with the construction of our 376 unit high-rise apartment tower which when completed will be one of the most exceptional residential developments in Los Angeles. In Honolulu, we are developing hundred apartment units at our office conversion project. We are currently building out four floors and expect to deliver those units in 2020. In addition to the growth from our development efforts, we expect more acquisition opportunities in our submarkets in 2020.

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

Stuart McElhinney -- Vice President of Investor Relations

Thanks Kevin. Good morning everyone. In Q4, we signed 178 office leases, covering 791,000 square feet including 326,000 square feet of new leases. Leasing spreads for the fourth quarter were 28.6% for straight-line rent roll-up and 8.6% for cash roll-up. We increased the lease rate for our total office portfolio to 93.3% and our occupancy to 91.4%. We were pleased to see that the lease rate in Warner Center moved up 220 basis points from a year ago and our Hawaii portfolio occupancy finished the year at 94.3%. For all 2019, we achieved straight-line rent roll-up of 28% and cash rent roll up of 10%.

On the multifamily side, our portfolio remains fully leased at quarter end. Over the past year, we have increased our multifamily portfolio by 16% 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 role initiative expected to be on the November ballot. For those of you who are not focused on California, split roll is the term used to describe the ballot initiative to have 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% thereafter. Proposition 13 is very popular. All prior attempts to weaken Prop 13 have failed and we feel that this initiative will also be rejected. Indeed even before the substantial voter education program has started, nonpartisan polls show only 46% support for split role.

Despite the low likelihood of passage, some of you have asked about the potential financial impact to Douglas Emmett. There 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 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 assessors who are responsible for valuations have said that they would not have sufficient resources and it would not be practical to implement split role. Although the rules involved or 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. Virtually all of our LA office leases require tenants to reimburse us for expense increases. Moreover, some analysts expect that split role will trigger rent increases to transfer some or all of the burden to tenants.

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

Peter D. Seymour -- Chief Financial Officer

Thanks, Stuart. Good morning, everyone. We are pleased with our Q4 results. Compared to a year ago, in the fourth quarter of 2019, we increased revenues by 7.8%. We increased FFO 7% to $110 million or $0.54 per share. We increased AFFO 12.8% to $91 million. We increased our same property cash NOI by 7.3%. For all of 2019, we increased revenues by 6.3%. We increased FFO 6.3% to $425 million or $2.10 per share. We increased AFFO 18% to $365 million. We increased our same property cash NOI by 7.5%. At only 4% of revenues, our G&A for the fourth quarter remains well below that of our benchmark group.

As Kevin mentioned, we increased our stake in one of our previously unconsolidated funds to 89%. And data is presented on a consolidated basis as of November 21st. The effect of this transaction included recording a gain on our investment of about $308 million, which affects net income but not FFO. Finally, turning to guidance, we are assuming same property cash NOI growth will be between 4.5% and 5.5% and 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, 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.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And today's first question comes from Jason Green with Evercore. Please go ahead.

Jason Green -- Evercore -- Analyst

Hi, good morning. Just curious what you're seeing on the rent growth side from Hawaii office. We're hearing that year-over-year rent growth could be in the 20% to 30% range and just curious of that lines up with what you're seeing?

Jordan L. Kaplan -- President & Chief Executive Officer

Hey, Jason. Yes, look, there's a lot of things going on downtown that have been very good for that market, not just what we're doing with our conversion project there. We had Hawaii Electric just signed a large lease down there for almost 200,000 square feet to consolidate their space, like Pacific University also took almost 100,000 feet downtown recently. So a lot of things putting pressure on that market and rents are definitely moving up.

Jason Green -- Evercore -- Analyst

Got it. And then just on the multifamily cash NOI 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 component that we should be thinking about?

Peter D. Seymour -- Chief Financial Officer

Hi, it's Peter. Look, we always have some noise quarter to quarter. We had reasonable first three quarters. We're disappointed with this quarter. The issues are concentrated on a couple of properties and we're focused on improving those results.

Jason Green -- Evercore -- Analyst

Got it. Thank you very much.

Peter D. Seymour -- Chief Financial Officer

Thanks.

Operator

And our next question today comes from Alexander Goldfarb, Piper Sandler. Please go ahead.

Alexander Goldfarb -- Piper Sandler -- Analyst

Hey, good morning out there. So, definitely appreciate you guys being upfront on the Prop 13. But just sort of curious as you're seeing the opposition to the split role build. Are you seeing it more come from the business community given it would seem like they would obviously shoulder huge burden of this or are you seeing most of the opposition being driven by the real estate industry?

Kevin A. Crummy -- Chief Investment Officer

It's really broad based opposition and thanks for pointing that out. Yes, the business community I think it's going to come out in a 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 broad opposition base.

Jordan L. Kaplan -- President & Chief Executive Officer

I'd like to add, I think you're actually already even seeing homeowners say, forget about it, I don't want to hear any trickery about modifying Prop 13. So I've actually heard a lot of homeowners say I already know I'm against that, that what you wouldn't classify as business owner, real estate owner or whatever.

Alexander Goldfarb -- Piper Sandler -- Analyst

Okay. And then on the acquisition front, just as you guys are looking at what's brewing for this year, do you think that you will, there is a potential to add to your multifamily in Hawaii or do you think most of your acquisition activity will be in LA?

Jordan L. Kaplan -- President & Chief Executive Officer

Well, I think in the multifamily side, the challenge in Hawaii is, there just aren't that many large projects that are institutional. So that -- we're adding to the portfolio there through the 1132 conversion. And the acquisition pipeline in LA is, it's looking pretty good. We, I think I mentioned last call that we were looking at a couple OP unit deals and those tend to take a little longer, they're harder to make, you are dealing with long-standing partnerships, sometimes multiheaded decision making. So -- but I feel pretty good about the pipeline.

Alexander Goldfarb -- Piper Sandler -- Analyst

Thank you.

Operator

And our next question today comes from Craig Mailman at KeyBanc Capital Markets. Please go ahead.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

Hey guys, just curious, I appreciate the comments on the Barrington and the insurance coverage. But if 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 cost you guys in CapEx and kind of downtime in some of these buildings?

Jordan L. Kaplan -- President & Chief Executive Officer

Well, let's start out with, we would appreciate that. So we want to sprinkler the buildings, we want to sprinkler the buildings for a long time, and we've been sort of trapped between conflicting rules coming out of the city in terms of to actually sprinkler the buildings what you have to do and then some of the housing ordinances. So they -- just to figure out what the cost would be, we would need to know what did they put in place that allowed us to do it because that could cause things to bear 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 it would be probably all around a good thing to do. If they should put something together that's so expensive, that still doesn't make any sense and there is no way to really get there in any kind of reasonable way, then they will still have problems getting people to do it.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

Then just second on the acquisitions. Just curious, 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?

Jordan L. Kaplan -- President & Chief Executive Officer

They're both on -- both could happen. That's a great question. But both could happen.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

All right, thanks.

Operator

Our next question today comes from John Guinee of Stifel. Please go ahead.

John Guinee -- Stifel -- Analyst

Great. A couple of questions. First, the $308 million gain on the consolidation of the JV portfolio, does that trigger the need to do a 1031 Exchange or a special dividend? That's one question. Second question, deal traded in Warner Center 513,000 square foot campus at Warner Center. Any thoughts on that trade? And then the third question is, can you -- just for the first time in a while, a lot of product under construction in West LA including say the west edge at Olympic and Bundy, can you talk a little bit about the new product under construction in your backyard?

Kevin A. Crummy -- Chief Investment Officer

Okay. So the first answer to the first question is, that's just a GAAP accounting gain that you're required to do when you consolidate. No tax impact and it's stripped out also for AFFO, FFO and all of that. So that's, I don't -- I almost want to say unfortunate that it 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 will let that one play out. I'm not going to comment on other people's deals. And the third one, regarding the new construction, John, most of the new supply has been in markets that are adjacent to ours. So you've got some things going on in Hollywood and in Culver City, you've got Google's campus, which is in the Westside Pavilion which is now called One Westside, which is 100% leased. I think the project that you're referring to is the Martin Cadillac site. And that's a mixed-use project that's primarily multifamily with a small office component and a retail component to it.

Jordan L. Kaplan -- President & Chief Executive Officer

I think it's got supermarket, mostly multifamily and very small amount of office. It wouldn't click in my mind as something that we would say was a big-off competitor and the whole Westside needs more multifamily. More multifamily whether we're doing it or someone else is doing it is good.

John Guinee -- Stifel -- Analyst

Great. Thank you.

Jordan L. Kaplan -- President & Chief Executive Officer

Thanks.

Operator

And our next question today comes from Nick Yulico of Scotiabank. Please go ahead.

Nick Yulico -- Scotiabank -- Analyst

Thanks. Just looking at the lease expiration schedule over the next four quarters, you have higher than normal in the Westside in the fourth quarter of this year, over 500,000 square feet. Can you just describe weather that includes some sizable tenants and kind of how the conversations are going on that space?

Kevin A. Crummy -- Chief Investment Officer

Yes Nick, no, it's not one or two very large leases, it's spread across the portfolio with a number of leases. So pretty normal for us, nothing unusual and we're actively working on those renewal discussions and feel good about how those are going.

Nick Yulico -- Scotiabank -- Analyst

Okay. And then, just another question on Honolulu. Can you give us a feel for how this is working from an accounting standpoint, taking -- going from an office to the multifamily building? I mean is the entire building being capitalized right now and is it possible to get a feel for the NOI of that building as an office building? So if we were to just value it separately as a multi-building, we could do that?

Kevin A. Crummy -- Chief Investment Officer

From an accounting standpoint, as -- we are doing this in phases, right? So it's going to be, we're maintaining office tenants on many of the floors throughout this project and then as we complete the residential units, those will come online and begin to roll through the multifamily side of our P&L. We do began accelerated depreciation on the floors that we plan to demo. So those will start running through or have started to run through depreciation.

Jordan L. Kaplan -- President & Chief Executive Officer

Yes, I think -- so if you're saying the income and expense of the office building still run or income statement, the answer is yes. And I think where the impact is, which Peter just mentioned has more to do with, when you make a conversion like this, but the sale all runs through depreciation. So I don't think you're seeing it in our -- in any of our FFO, AFFO numbers but you write off chunks of the building that now being converted over and you capitalize what you're spending to turn into an apartment. But the operations of it as an office building and by the way, when we start running the units as apartment buildings, will flow through our income statement.

Nick Yulico -- Scotiabank -- Analyst

Right. And then is it possible just to get a feel for the ballpark, what the NOI of the building is from an office standpoint? So if you want to take it out from an NAV standpoint and just value it as a future apartment building, we can do that?

Jordan L. Kaplan -- President & Chief Executive Officer

Not easily. No. I mean it's not -- we don't typically take single buildings and say here's what's going on in 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 -- what we said in the past is we think in general we will be developing the building, including whatever value and everyone could subscribe to different values, but whatever value you want to subscribe to the building as it is now, and then what we have to spend to convert it to an apartment building, we think we'll be developing it out say an apartment building at an acceptable, not a knock out of the park but an acceptable developer cap rate for an apartment building.

Nick Yulico -- Scotiabank -- Analyst

Okay. I mean, I guess the $80 million to $100 million that you have on construction costs, I mean what is the, I guess what is the return we should think about on that, as we're getting to a multifamily type of NOI for that building?

Jordan L. Kaplan -- President & Chief Executive Officer

Well, OK, so I don't want to get into valuing 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 way it should be calculated is what's the value 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 will be to the acceptable level of apartment development, which is enough [Phonetic], it's a cap rate around 6%. But I mean that wouldn't be on just $80 million to $100 million, that's also saying we have an office building there that has value today. So it's that plus the money that you have to do the cap rate on.

Kevin A. Crummy -- Chief Investment Officer

And of course Nick, the whole reason we started this was to improve the office market down there which -- and we kind of already told you about what's going on with rents in office. So that's going exactly how we hoped or even better frankly.

Nick Yulico -- Scotiabank -- Analyst

All right. Thanks everyone.

Operator

And our next question today comes from Manny Korchman with Citi. Please go ahead.

Manny Korchman -- Citi -- Analyst

Hey, Stuart or Peter, the average office occupancy dip in guidance versus where you ended the year, is there anything specific driving that? Any large tenants moving out or anything like that?

Stuart McElhinney -- Vice President of Investor Relations

Well, as you said, it is as 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 do expect an early debt this year and then we should be making good progress over the rest of the year to build back up.

Manny Korchman -- Citi -- Analyst

Thanks. And Stuart, in your opening remarks, I think you commented on Prop 13, you don't anticipate any changes in the transaction market as sold properties in mark-to-market anyway. Is there the potential that that properties will come to market ahead of the proposition being voted on just as people worry about their, may be just not even their cash flow but their conversations with their tenants going into this. So private owners may want to get out and sell to a more institutional owner like yourselves?

Jordan L. Kaplan -- President & Chief Executive Officer

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 uptick in transactions around that proposition which would be a great day if there was but there isn't. And Michael has one as well here.

Manny Korchman -- Citi -- Analyst

Yes, Jordan, just in terms of, and I know you can't expect, sorry isolate how much this could impact, but I guess what percentage of your portfolio is already at market based on all of the deals that you've done, new tenant buildings you've bought?

Jordan L. Kaplan -- President & Chief Executive Officer

That's a hard question to answer for few reasons, one of which is, and I've said this before. Everyone on the outside world thinks this market has nothing to do with market and when it comes to Prop 13. Prop 13 has its own definition and if you read it, you'd be as cross-eyed as you are when you -- when we're looking at the way we do cap rates versus the way the public market does cap rates. So for starters, the number you will come out with is probably a very different number than you guys would think of and then you have -- and as I said you have, I mean, we've continued over the past few years, we've been doing Prop 8s. And 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 to that path, and then someone actually tried to do it. So it's just -- there's just no way to figure out are a real number, you know better as well as anybody what the general growth of that company has been, and all the buildings we bought recently, and I just gave you a quote about how much we've grown the portfolio. And you know that we had a chunk in the IPO. We've added another whatever it was 45% or whatever I said since [Indecipherable]. So you have all that you but you still don't even have 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 Prop 8. Meaning we've won contemporaneously arguments where that we've said your volume was too high. So it's just too hard to figure out where that will come out.

Manny Korchman -- Citi -- Analyst

Right. And I think you framed it right because it's even in implementation, it takes a long time, assessors 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. So from a financial impact I think the market may be overreacting that there's this massive FFO disruption. But I think you live in California, and I know, it's beautiful. And I know you're looking at the water and its 80 degrees. Do you think, I get lure of where you live and where your assets are and I'm jealous in the freezing cold. But do you think it leads to, if it does pass because there's polling at 46% that pulling could go up too. I mean, there's some potential even though it's failed every other time, that this is the one that 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, of a couple of pennies here and there.

Jordan L. Kaplan -- President & Chief Executive Officer

Well, I mean, I don't want to get too political on this call. But, I mean, you're on the tip of the iceberg, the stuff that state of California is dealing that creates issues. Now, I'll give you another list of the stuff they're doing that turned us into an incubator state and draws population in. But I mean, Prop 13, the income, your actual personal income tax rate, what's going on with the person, you know, the employment laws, how tough they make it to employ large amounts of people, how hard they are on matured companies that are actually employing a huge amount of middle income people which essentially almost get ejected out of the state, I mean the list goes on. If you're saying is this Prop 13 thing on the long side of it passing? I mean, I assume there's somewhere where the camel -- you break the camel's back, but I thought that when they went to 13% income tax rate, I thought that on the last set of rules that came in to play for the employment thing.

But other than that, it doesn't seem to be happening. I know. And I read the same stuff you do, the very loudness of wealthy people going enough's enough. And they go, I'm making my permanent residents out of state somewhere, wherever they're going. But you know, these are -- you read about, like five different people, you go they're all leaving. It's a state of 40 million 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 any impact, the light rails passed, and there's still too many people downtown Santa Monica and all around the west side. We're seeing the population continue to densify. We're seeing a shortage of housing at all level, even expensive housing, medium expensive. So yes, the stuff they're doing should be impacting people saying, enough is enough. But they're not saying enough is enough. There's more people coming in. I'm saying enough's enough. But if you're saying for the whole state, we're not saying that. With this do it, I don't think it's going to pass, and I don't know what the straw is that breaks the camel's back.

Manny Korchman -- Citi -- Analyst

Helpful color. Thanks for taking time.

Operator

And our next question today comes from John Kim of BMO. Please go ahead.

John Kim -- BMO -- Analyst

Thank you. Good morning. Your 2020 earnings guidance includes the impact of the fire at Barrington. But I'm wondering if you could quantify what the impact would have been had you had kept that asset in your same store pool to your same store guidance?

Jordan L. Kaplan -- President & Chief Executive Officer

Well, it's we took it out of same store guidance because we think our loss is going to be insured but what happens is in the insurance, the way the insurance pays and the rules around collecting insurance and accounting around collecting insurance would make the number fluctuate a lot. Like it comes in a completely different way than what you would normally say of apartment doing same store. So we took it out to let it settle out and not because to not have the insurance proceeds worth the same store numbers. Which by the way, normally I would say they literally can work on to the plus and a minus. I mean, it's not biased in one direction or another.

John Kim -- BMO -- Analyst

But the Delta could have been, you would have even fallen below the bottom of the range of your guidance of 4.5% to 5.5%?

Jordan L. Kaplan -- President & Chief Executive Officer

I'll say again, insurance proceeds can have both a positive and negative impact. There's no way to put a range on a same store number when insurance comes in and doesn't come in. It complete can change the number and then you can equally ask the question would it impact that your range was too low? I mean, that's the results you get out of that stuff.

John Kim -- BMO -- Analyst

I agree. Okay. And then Jordan, you gave your views on Prop 13 and Prop 8, I might as well go to Proposition 10. Do you have the same level of confidence in that?

Jordan L. Kaplan -- President & Chief Executive Officer

You want me to give you my whole slate of voting?

John Kim -- BMO -- Analyst

Yes, go through all their propositions. Could you?

Jordan L. Kaplan -- President & Chief Executive Officer

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 one man one mission thing this guy out in Hollywood, but it was sadly defeated last time. And since then, literally, the state legislator, the governor all got behind the statewide rent control ordinance, which has been put in place I mean, even politicians are saying, hey, come on, you haven't even given our thing, a chance to work. And if the other one came -- kind of on the scene with low support, this one's coming on the same with even lower support with a very little backing and very little energy.

John Kim -- BMO -- Analyst

So you're not feeling the burn?

Jordan L. Kaplan -- President & Chief Executive Officer

No, well, we think about the burn and seeing this election results, but I'm not feeling it when it comes to residential rent control.

John Kim -- BMO -- Analyst

Thank you.

Operator

Our next question today comes from David Rodgers of Baird. Please go ahead.

David Rodgers -- Baird -- Analyst

Hey, guys, wanted to go back to the office occupancy that was asked about earlier understanding that there's a dip in the first quarter but you know, you ended the year I think over 93% lease. So can we dive a little bit more into maybe do you expect to do some more redevelopments which could pressure that number this year? Is it more? Is it fewer retentions? Or is it just kind of slower lease up? What's embedded because you guys have made some pretty good progress in recent quarters in terms of the lease up?

Peter D. Seymour -- Chief Financial Officer

It's Peter. So when you have the kind of lease up that we had a number of new leases that we wrote sort of it automatically implies that you have existing tenants where you'll see some of those move outs. And that's what typically happens in the first quarter. The assumption is not affected by estimates of the impact of redevelopment. This was just the straight, we had very strong leasing year and we normally see bit of a dip in the first quarter, and then we build back up over the course of the year.

David Rodgers -- Baird -- Analyst

Okay, thanks for that. And then let me ask maybe straight about the redevelopment side, Jordan, you've updated us in the past, 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 west side?

Jordan L. Kaplan -- President & Chief Executive Officer

Well, it's definitely kind of we're crawling about in the last year or so, it's mostly done and we're now on to additional assets. And of course, we've moved the Barrington Plaza up on the list and we know that that's certainly a 2020, 2021 project. But that that's a program that has legs for, we didn't roll off those last seven and just say good, we're done and do that, that hand swipe and walk off the table. I mean, we just keep, we're going to be rolling with that for years and years and years. I mean, it's -- until the market really changes words, those which I wish it was more capital, but those made tremendously high returns, those repositions that we're doing. So we're not letting loose of that.

David Rodgers -- Baird -- Analyst

And the volume of activity kind of in 2020 versus 2019, is that pretty similar? Will that be a steady state dollar volume [Phonetic]?

Jordan L. Kaplan -- President & Chief Executive Officer

Yes, dollar volume, yes, number of buildings, I think it's probably fewer buildings and but dollar we're kind of I think we are keeping pretty consistent.

David Rodgers -- Baird -- Analyst

Okay, thank you.

Operator

And the next question today comes from Richard Anderson from SMBC. Please go ahead.

Richard Anderson -- SMBC -- Analyst

Thanks. Good morning out there. So on the Brentwood high-rise development, is that a early 2021 delivery or something like that? And if regardless how much have you spent so far on the call $200 million total cost?

Jordan L. Kaplan -- President & Chief Executive Officer

Rich 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've spent so far, but we can get that to you.

Richard Anderson -- SMBC -- Analyst

One more on that. Is there an ability to -- can you do some sort of sight and seeing type of leasing? Or how do you foresee that asset coming to market? Will there be zero occupancy out of the gate or will there be something much more substantial than that?

Jordan L. Kaplan -- President & Chief Executive Officer

Well, our MHA or recent MHA development, we did have some pre-leasing that happened before the thing even opened, there was a lot of interest in that. I suspect this will 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 there'll be strong interest and we'll hopefully have a waiting list or do be able to do some pre-leasing before it opens.

Richard Anderson -- SMBC -- Analyst

Okay. And then looking back at your guidance for same store was 5% to 6%, you ended up 7.5% I think this year, so good beat, beat and raise type of year. This year 4.5% to 5.5%. Is there anything about how 2020 looks versus 2019 that would preclude a similar type of event or is there something that maybe would get in the way of your ability to sort of see your internal growth profile improve over the course of the year.

Jordan L. Kaplan -- President & Chief Executive Officer

I mean, I don't want to limit our upside. We're trying to get you a reasonable range going into the year. I mean, every year we work to beat all our numbers. And I think that, you know, certainly we hope to beat these numbers too. But I also think the range we gave us a reasonable range for what we see going into the year.

Richard Anderson -- SMBC -- Analyst

Okay, good. That's all I got. Thanks.

Operator

Our next question today comes from Glenn Heck at Wells Fargo. Please go ahead.

Glenn Heck -- Wells Fargo -- Analyst

Hey, thanks. Just following up on that last question. So you guys had a great quarter from a cash same store NOI perspective, mostly driven by a 6.5% increase in cash revenues. Can you just talk about the drivers of that growth so I know you've got some occupancy growth in there and rent growth has been strong, but it seems like 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 store NOI 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?

Jordan L. Kaplan -- President & Chief Executive Officer

I don't think we, I haven't heard and to be fair, we haven't gone in and analyzed exactly that point. But I haven't heard any discussion that the same store growth came from free rent burn off. I think it comes from just very strong fundamentals, fundamentals in leasing and that is converted to occupancy and fundamentals in rental rate growth and getting higher bumps and leases and all the stuff that, hopefully drives that. I mean, there's always another half of the equation which is what are you comparing to, the fourth quarter of last year whatever. I think, when you go not noisy past 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 [Indecipherable]. I think it was not noisy than not noisy. So it was just a comparison of fundamentals.

Glenn Heck -- Wells Fargo -- Analyst

Okay. Just seems like the I guess the 5.5% difference between GAAP same-store NOI and what you did on cash same store NOI is a little elevated from what you usually do, but I guess we can go through the details offline.

Jordan L. Kaplan -- President & Chief Executive Officer

Okay.

Glenn Heck -- Wells Fargo -- Analyst

Thanks.

Operator

Our next question comes from Jamie Feldman of Bank of America. Please go ahead.

Jamie Feldman -- Bank of America -- Analyst

Great, thank you. Can you guys talk more about the transaction to buy out your JV partner? What was the yield on a deal? And then just why is your partner selling? And do you think we'll see more of this? It sounds like we will see more of the space in your answer to a question earlier, but maybe why are your fund partners looking to cash out?

Jordan L. Kaplan -- President & Chief Executive Officer

So we've come to the, very close to the end of that fund. That was a place where we thought there probably were also some refinancing opportunities. But frankly, people came to us and said, we're ready to get out, we've made pretty good money, they got a pretty good yield. I don't think we said what their yield is, I don't think we should say, we're not saying it. So they got a pretty good yield. And we've been buying interest all through the last decade. So when we were buying the rest of people out, we just went out to them because we were already up to 70%. So we went to the last few and said if you want to sell, we'll buy your interest now, and pretty much, they said yes. I mean they -- we bought them out at exactly the -- they think it's market valued every year at the end of the year with appraisals, and we bought them right on the dot of that number of their equity count. And one guy said I want to find any way to -- so it was multiple partners, not just one. But one guy said I want to find any way to stay in the market, would you mind keeping the thing open? And we switched it to our new JV structure, which is our other large JVs from the fund structure which we had had because that one was 10 years old. And he said go switch the structure, I'm good with that and do a new 30-year deal, I want to be in it. And so we said OK, you stay in, and others went out, and we all bought our interest to what we could get. So it ended up like $89.11, and it's a good vehicle. Hopefully we'll now use it going to forward to do some other stuff because I think our partner wants to continue doing stuff and growing their position.

Jamie Feldman -- Bank of America -- Analyst

So, sorry, this is a new structure, it's 30-year, and...

Jordan L. Kaplan -- President & Chief Executive Officer

It's just like the other JVs, the last two big JVs that we did. So it's all on the modern terms that we put in place, and it's ready to go. And then we can use it to buy stuff. We don't have any proclivity toward that or any of the others. They're all structured the same.

Jamie Feldman -- Bank of America -- Analyst

Okay, and then how large is the investment pipeline you're looking at today in terms of both acquisitions and buying out more JVs? And how would you finance it?

Jordan L. Kaplan -- President & Chief Executive Officer

Well, I think -- I don't -- OP unit deals are tough. I think it's over weighted by OP unit deals in terms of the acquisition pipeline. So those are -- obviously those have trouble going into the JVs, and it causes obviously -- you know how little I like -- we like issuing stock. I mean, how much we just like dilution. So those are tougher. I don't feel like I -- and from an earlier question, when it was asked whether this -- here in California, whether there was going to -- people were trading ahead of the potential split roll, I thought, I mean, that would be a godsend. I mean, but it hasn't created additional straight-up sale deals.

Jamie Feldman -- Bank of America -- Analyst

Okay. And then last for me. Just what are you guys thinking on rent growth in your markets? How do you think this year is going to compare to last year across the submarkets?

Jordan L. Kaplan -- President & Chief Executive Officer

It depends on the markets, which is -- correctly you asked the question. I mean, as you know, Hawaii, very strong while [Phonetic] you see the laggard. West side very strong, parts of the valley still really very strong, and Warner Center, actually finally showing some good positive movement. But probably the strongest is Hawaii at the moment. But certainly, the west side is very strong.

Jamie Feldman -- Bank of America -- Analyst

Do you think west side and Valley similar to this year, or better or worse?

Jordan L. Kaplan -- President & Chief Executive Officer

I think parts of the Valley have been mimicking the west side for a while, but as you get farther out from Encino, Sherman Oaks, I think it's been slower than the West Side. But by comparison to its past, it's running like the Road Runner. I mean, the whole thing's picked up quite well. And I saw a lot of people's notes saying wow, they're finally getting ready to cross the 90% mark. I think we're up at 89% there. So that's what matters. Occupancy matters. Occupancy matters across the market, occupancy matters in your portfolio, and that's what changes what rent rates you are doing. If you look at these other markets, you're like deep in the 90s. Of course rents are moving.

Jamie Feldman -- Bank of America -- Analyst

Okay. All right. Thank you.

Operator

And our next question comes from Bill Crow, Raymond James. Please go ahead.

Bill Crow -- Raymond James -- Analyst

Good morning, guys. Speaking of joint ventures, I think it was probably six or eight quarters ago, we were talking about the potential JV of Hawaii assets. And I'm just wondering whether that's off the table, whether you still think about that, and kind of bringing the cash back to Los Angeles?

Jordan L. Kaplan -- President & Chief Executive Officer

Well, I mean, it has always been the case when I've been asked about Hawaii -- I mean Hawaii's obviously very strong now, but we've always said Hawaii is a place where we feel like this is where we want to characterize and get our growth going forward, primarily out of a market which I feel is a 30-year market, which is just Westside market, where we have -- in LA where we have a huge amount of our assets. Hawaii has created -- and what's going on there has created a lot of investment opportunity, a lot of capital investment opportunity. And we've always said that that is an opportunity to do a JV or do some other structure like that because we want -- obviously that's a great place to stay involved. And it was never -- as before, it's still a good opportunity to do that. The timing has to be right. The structure has to be right. We have to be able to demonstrate quite clearly to our partners or whoever we would bring in on that that this is why we like this, this is why it works. We don't want to do anything that looks like a fire sale or just done sale, but we also want to make a deal where it works out good for everybody, for the JV partners and for us. So that's tricky, but that's definitely a market where we think we could pull that off one day. I'm not saying on this day, but one day.

Bill Crow -- Raymond James -- Analyst

One more from me. Barrington Plaza, that was a site of another major fire not that long ago, and lawsuit and everything else. Is there any risk, reputational risk, or longer term impairment because of the sequence of the two fires and all the publicity and press they got?

Jordan L. Kaplan -- President & Chief Executive Officer

Well, 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 advocating sprinklering the building at the last fire. We're advocating sprinklering the building today. This is adding pressure to the city council to create a path for these buildings to be sprinklered because you're sort of trapped between the rent stabilization ordinance and the permitting process for sprinklering your entire building. And we hope that that is also our path. I don't think -- and maybe it's a matter of the news cycle or whatever else, I don't think -- I actually don't think there's long-term reputational risk vis-a-vis these buildings, but I guess you got to play that out and see what happens over the next year.

Bill Crow -- Raymond James -- Analyst

All right. Thanks for the time. Appreciate it.

Operator

And our next question comes from Daniel Ismail of Green Street Advisors. Please go ahead.

Daniel Ismail -- Green Street Advisors -- Analyst

Great, thank you. Just a few quick ones for me. Can you provide an update on where in-place office rents sit relative to market these days?

Peter D. Seymour -- Chief Financial Officer

Yes, Danny. It's about what it's been. We're a little over 10% on the mark-to-market.

Daniel Ismail -- Green Street Advisors -- Analyst

And then you were fairly busy this year refinancing debt and doing other things on the balance sheet. Do you see 2020 ending in the same spot where you guys ended '19 on a debt-to-EBITDA basis?

Peter D. Seymour -- Chief Financial Officer

Debt-to-EBITDA, OK.

Daniel Ismail -- Green Street Advisors -- Analyst

Or net leverage.

Peter D. Seymour -- Chief Financial Officer

That's 0.9 or 0.8 [Phonetic] or something like that. I think we have chance that we -- we have a chance of improving that. I think our earnings are going to go up. I don't see dramatic increase in the amount of debt that we have, so we have a chance of improving that number.

Daniel Ismail -- Green Street Advisors -- Analyst

Okay. And then, just last one actually for me. Given the expirations this year, can you discuss the type of leasing economics you guys are expecting in '20? Specifically, do you expect a tougher or a stable year for leasing concessions?

Peter D. Seymour -- Chief Financial Officer

I don't think the expirations are that abnormal for us, Danny. 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, of keeping our leasing costs stable at levels that are well below our peer set, which is really a function of our tenant size. I don't see any of that changing. The trends look very good. We're still getting robust demand. I wouldn't see that we'd see a major change in concessions.

Daniel Ismail -- Green Street Advisors -- Analyst

Okay, great. Thanks, everyone.

Operator

And ladies and gentlemen, this concludes the question-and-answer session. I'd like to turn the conference back over to the management team for any final remarks.

Jordan L. Kaplan -- President & Chief Executive Officer

Thank you all for joining us, and we look forward to speaking with you again next quarter.

Operator

[Operator Closing Remarks]

Duration: 53 minutes

Call participants:

Stuart McElhinney -- Vice President of Investor Relations

Jordan L. Kaplan -- President & Chief Executive Officer

Kevin A. Crummy -- Chief Investment Officer

Peter D. Seymour -- Chief Financial Officer

Jason Green -- Evercore -- Analyst

Alexander Goldfarb -- Piper Sandler -- Analyst

Craig Mailman -- KeyBanc Capital Markets -- Analyst

John Guinee -- Stifel -- Analyst

Nick Yulico -- Scotiabank -- Analyst

Manny Korchman -- Citi -- Analyst

John Kim -- BMO -- Analyst

David Rodgers -- Baird -- Analyst

Richard Anderson -- SMBC -- Analyst

Glenn Heck -- Wells Fargo -- Analyst

Jamie Feldman -- Bank of America -- Analyst

Bill Crow -- Raymond James -- Analyst

Daniel Ismail -- Green Street Advisors -- Analyst

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