Stuart McElhinney - VP, IR Jordan Kaplan - President and Chief Executive Officer Kevin Crummy - Chief Investment Officer Mona Gisler - Chief Financial Officer.

Craig Mailman - KeyBanc Capital Markets Michael Bilerman - City John Kim - BMO Capital Markets Alexander Goldfarb - Sandler O’Neill Jamie Feldman - Bank of America Merrill Lynch John Guinee - Stifel Nick Yulico - UBS Jed Reagan - Green Street Advisors Dave Rodgers - Baird.

Ladies and gentlemen, thank you for standing by. Welcome to Douglas Emmett’s Q3 Earnings Call. Today’s call is being recorded. At this time, all participants are in a listen-only mode. 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. Mr. McElhinney, the floor is your, sir..

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

Good morning, everyone. Thank you for joining us. During the third quarter, we sold an additional 6.6 million shares under our ATM for $250 million and completed our debt reduction program by paying off a $342 million loan bearing interest at 4.46%.

Overall, we reduced our pro forma net debt to enterprise value to 32% and lowered our weighted average annual fixed interest rate to 3.08%. Over one third of our total office portfolio is now debt free and only about $650 million less than 18% of our pro forma debt matures before 2022.

Our office fundamentals remain strong with same property, cash, NOI up a healthy 5.3% as we continue to experience strong rent roll ups. We are pleased with the underlying strength of our multi-family portfolio, as rents for new apartment leases were up a robust 4.3% over the expiring rents.

In Hawaii last week, we welcomed the first tenants to our newly completed apartments at Moanalua. The rental rates exceeded $5 per square foot. As you may recall Moanalua has been subject to a regulatory agreement requiring half of the existing 696 units to be income restricted in exchange for certain tax exemptions.

Because that agreement expires at year end, we are also in the process of repositioning the existing Moanalua buildings. In the long run, we expect the shift to market rent will increase multifamily revenue by over $1.2 million annually and the operating expenses by about $800,000.

The expenses will impact us at the beginning of 2018, but it will take some time to transition to income restricted units to market rent. We are already seeing rising vacancy in those units in anticipation of the 2018 rent increases. This along with construction disruption increased vacancy at Moanalua during the third quarter.

One other Hawaii residential properties experienced some short term vacancy caused by lower enrolment at a nearby university. Vacancy in these two Hawaii properties reduced the lease rate for our entire multi-family portfolio to 98.5%, even though our Los Angeles multifamily properties remained over 99% leased.

These issues and higher utility rates have impacted our 2017 guidance for FFO and same property cash NOI. And as you know, our previous guidance did not include impacts from completing our debt repayment program. Our balance sheet is stronger than ever and we have identified a number of investment opportunities to foster our continued growth.

First and foremost, we plan to acquire more office properties and to continue residential development on land we own. But we also have plans to significantly increase rental rates at existing properties by repositioning buildings and by investing in community amenities to transform submarkets where we own large concentrations of assets.

I will now turn the call over to Kevin..

Thanks, Jordan and good morning everyone. As discussed in our last call in July one of our joint ventures purchased 9665 Wilshire in the heart of the Beverly Hills triangle. I walked through the details of that transaction in the last call, so I won't spend more time on it now.

Our acquisitions pipeline remains active and we expect more trades in our markets before year end. At our Brentwood development, we have completed the entitlements and plan to start construction of our 376 unit tower in the next few months. This is the first high rise west of the 405 freeway in over 40 years.

So we've decided to upgrade the amenities to match its uniqueness. This decision, along with escalations and construction costs has increased the estimated project budget to between $180 million and $200 million. As Jordan mentioned, the first tenants moved into our newly completed apartments at Moanalua last week.

Even with major construction continuing, we had pre-leased 30 units at above pro forma rents with average rental rate exceeding $5 per square foot. We expect to deliver all 238 units of Phase One by early 2018. Phase Two including 237 additional units and a new fitness center and pool is on track to open in late 2018.

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

Thanks, Kevin. Good morning everyone. We signed a 199 office leases for a total of 710,000 square feet in Q3. Our leasing spreads for Q3 were a healthy 23.2% for straight line rent roll up and 8% for cash roll up. These numbers would have been even higher but for two factors.

First, a disproportionate amount of our leasing was in Honolulu where there has been less rent growth in our portfolio as a whole. Second, we had rent roll down from a number of expiring long-term leases where rent had grown by an average of 42% from the prior peak in 2007, ’08.

Our occupancy in Sherman Oaks/Encino at the end of the quarter reflects a 50,000 square foot downsize, we backfilled a third of the space shortly after quarter end. Based on this and other strong activity in Sherman Oaks/Encino we expect it to recover soon. We were pleased to see Century City bounce back into the mid-90s.

Overall the annualized value of all our in place office rents per square foot has increased by 6.1% over last year. On the multi-family side, our in place rents per unit have increased by 3.8% compared with prior year.

In Santa Monica it is especially noteworthy that we recaptured 12 pre-1999 units in just the first three quarters of this year compared to 7 in all of 2016. As you may recall, rent control has prevented us from raising the rent to market on these units since 1979.

Looking ahead, although we lose current income while these units are being refurbished, the long term benefits are significant. On average, we have been able to raise the rent at each of these units by over $50,000 per year. As of September 30, we still had 214 pre 1999 units remaining. I'll now turn the call over to Mona to discuss our results..

Thanks, Stuart. Good morning everyone. Overall, compared to a year ago in the third quarter of 2017 revenues increased by 8.7%, FFO increased 8.2% to $90.8 million or $0.48 per share. AFFO increased 8.9% to $74.8 million.

Comparing our same property cash results in the third quarter of 2017 to the third quarter of 2016 office revenues increased by 4.9%, reflecting a higher average in place office rents, while apartment revenues increased 2.4%, despite the vacancy in Honolulu Jordan discussed.

Operating expenses increased by 4% reflecting significantly higher utility rates even though our sustainability programs have continued to reduce consumption. Overall, same property cash NOI increased by 4.9% and core same property cash NOI rose by 5.5%. Our G&A for the third quarter was only 4% of revenues, well below our benchmark group.

Finally, turning to guidance. We are narrowing our full year guidance for FFO to be between $1.89 per share and $1.91 per share. The $0.01 decline in the midpoint and lower cash NOI guidance reflects higher overall utility rates and residential vacancy in Honolulu.

In addition, our previous guidance does not include impact from completing our debt repayment program. As usual our guidance does not assume the impact of possible 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..

Thank you, ma’am. [Operator Instructions] The first question we have will come from Craig Mailman of KeyBanc Capital Markets. Please go ahead..

Thanks, guys. Jordan, just curious, you guys have issued a fair bit of equity here in the last two quarters and you know, lowered leverage.

I'm just curious is this just a new normalized leverage level you want to be at or should we expect you guys to lever up here in the near term in this kind of near-term capacity?.

I would say this and I said this some time ago, that I was - we were comfortable with our leverage level really just in the 30s. I think that we have a lot of good opportunities and we wanted to do some work to create some real capacity and we've done that and we've completed that program. And I just want to be real clear about that.

As we look forward now, we are comfortable, we are more than comfortable in terms of where we are on leverage.

And I think it's worth mentioning since you’re asking that question that we plan to refill the ATM not because we have any near term plan to use it, just because we feel like we finished a program we did and we want to have it out there and available. So we’ll be filing in doing that sometime in the next short term.

As we go forward now, we feel pretty good about all the various kind of avenues we have to draw equity there whatever the case may be, to continue growing on all the fronts that we're trying to grow on..

That’s helpful.

And then you had mentioned kind of more office acquisitions teed up and maybe in some apartment developments, could you just give us a sense of may be what the pipeline looks for - looks like on the acquisition side and how much development you guys want to get started here in the apartments and maybe the next 12 to 24 months?.

Well, on the acquisition side there's still and I'm going to give credit to Kevin and his group, there's still a really good pipeline of deals literally, whether it be normal cash deals, OP unit deals, office deals in West L.A, I mean - some good deal in the valley I mean he's got them going all over and obviously you know how folks we are on Honolulu's in terms of adding an office building there, which seems to be getting some traction.

So that pipeline feels pretty good..

Okay.

And maybe it's the third one, and could you go through the $60 million increase at Brentwood, kind of how much of that is the better amenities versus construction costs and if you feel like your yield outlook has changed at all with the extra money being spent?.

Craig, you're using up everybody’s questions. Now we're going to have like other people in the list drop out, going that was my super good question I was going to ask. So I'll go with it because I saw some notes on that, well, I’ll go – I can go through that with you. So for starters, it is an increase from our other estimates.

But to be perfectly fair, our other estimate was an estimate we've been sitting on for a while and was really before we had our entitlements. And once we got our entitlements we really got very focused and now this is what we can build, now what should we build.

The project we're building is going to be better than a 7 cap rate project, just as we were discussing before. So you would say well the increased cost, why is there an increased cost, how that could you still be better than the 7. And it's very simple.

We're building the project at the cost that we think is the best project to get - to build to get the best return. We've always been very comfortable above a 7. We could build the cheaper project, but we don't think that's as good a fit to this site into our entitlements and to where the market is as what we have now decided to build and planned out.

And so we did that. We planned that building. We've gotten some real estimates from construction companies and now we're giving you a number that is more in line with you know, all of those things taken into account..

Great. Thanks, guys..

Next we have Emmanuel Korchman of City..

Hey, it’s Michael Bilerman. Stuart, I wonder if you can maybe peel back a little bit on some of the Brentwood, and I know you sort of gave a little bit of an overview.

But when you first disclosed this project you were at $110 million or an incremental 290,000 a door, you know and then in the second quarter of 2015 you sort of lifted it $20 million to $130 million and that was call it 350 a door and now we're sitting here at 190 million or 0.5 million a door and over that time rents in the marketplace because you have an asset right there that you disclosed have gone from like 2300 a foot to call it $2700 a unit, sorry, a month.

So it just doesn't seem like – I guess, what are you targeting, the rents you’d have to target to offset what is a 50% increase in cost. We're not talking about $5 million or $10 million. We're talking about 60.

Can you delve a little deeper into what you're underwriting and the comfort level you have that you're going to be able to retain that type of return?.

Yes. So let's start out when we started out the project and I think even maybe you or somebody asked us and we were saying we think we can better than $4 a foot. Now we think we can get better than $5 a foot in terms of rent.

And in fact, we're even targeting a little higher end, what’s adding a lot of that additional cost is we've substantially boosted the amenities of the project and we think we could compete at a higher end of the market down there.

And you know you're asking me - if you're saying to me have costs gone up just in general, separate from amenities, yeah of course. I mean, construction costs have gone up. I don't know what was the first as you are going back to three years ago….

When you originally made the estimate you were at $110 million….

When was that?.

That must been in 20 - you must have first disclosed the project in late ‘14 and then - but in 2Q ’15, which is you know, two years ago you had increase to $20 million to $130 million. That's the last estimate you had out there. $60 million is not a small chunk, you know, it’s not a small number.

And so trying to bracket it for us to really understand what went into the $130 million versus what went into $190 million.

How much is amenities, how much is construction cost increases you know, and how much of it's just maybe you're capping interest in that number, I'm not sure for the delay in the project, how much is the part, I mean $60 million is a big number?.

Yeah. I'm not disagreeing with you, but to be fair, we were kind of looking at the project before not knowing what we'd be able to build, not knowing the size that we built, how much square footage we would build, how - you know, the whole thing and saying about this unit just to build this and target this market.

I mean, I'm not trying to offend or not defend the number, but you're comparing a number that a construction company has gone through where we've gone out and done bids to a number that was you know, a guess on a per foot basis to build an apartment. It's hard to break it down at the level that you want to break it down..

Well, I guess just what….

You know, I will say this, if the point of your question is, in the last three years have the construction cost gone up? Yes, they have gone up. And I'm sure that's a part of it. And I also know part of it is the extra amenities we decided to add and all the other work we're doing around the site..

What are you achieving for rent at the existing multifamily assets that's next door?.

I don't – its Kevin. I don’t really think that's a fair comparison because that was the last high rise project which was built 40 years ago. And so they are different animals. And so for example that project doesn't have laundry in the units and we will have laundry in the units. We've got floor to ceiling glass on this project.

We've got balconies and we've increased the size on to make them more functional, so it's not something that somebody looks at, but something that somebody can use.

So there really - it's not a fair comparison between those projects, you really have to look towards you know, other projects in the market like an 8500 Burton [ph] or 10,000 Santa Monica or some of the high rise downtown to really come up with the type of amenity package and experience that we're going to develop up on this site..

And that's what we did actually, and we designed to that quality..

And so you were still going to target a 7% yield on incremental capital?.

Actually I'm saying better than a 7% cap rate on all capital..

Okay. Thank you..

Next we have John Kim with BMO Capital Markets..

Thanks. Good morning. Jordan, I think you mentioned in your prepared remarks that you are looking to invest in amenities to significantly increase rents.

Is that on the multi-family side or on the office side?.

I think that was on this project - that was on this project..

I think he is talking about building rehab….

Oh, yeah, okay.

So community amenities is that what you’re asking John?.

Yeah..

Oh, yeah. So - and we have been doing that, so the park is a great example of that, that was brought up a second ago. So that would be a very large investment just for that apartment building. But if you look next door, we have what 700 plus units next door. We own on a well over a 1 million square feet of office within walking distance to that park.

So that’s an investment in that area. We’ve also – we’re also doing something similar in downtown Honolulu, where you’ve heard that we have a plan to buy a building, take it out of the market, generally improve the amenity base in downtown Honolulu, reduce the amount of excess office space on the market and convert it over to residential.

So those are kind of market impacting things that frankly have those and some of the rehab stuff that were doing on individual buildings have the highest returns in terms of the cash we lay out and the return we can get, because it doesn’t take a very big movement in rent and the buildings in the area to have a - to create a huge return against you know, these moves which cost anywhere from $5 million to $15 million..

So you're saying this is primarily multifamily or both?.

No, I misunderstood, so I as answering the multifamily question for so long. You're talking about communities where we have very high percentage of ownership, where we decided that we can change that many - those communities and improve the rents that we get in our projects without directly we do in one of our projects, like the park..

On similar notes, Warner Center of occupancy really hasn't moved up since you know, since Westfield recently maybe developed there.

Is that a surprise?.

John, I think we’ve actually made a lot of progress there over the last couple of years. We've seen a move up kind of from the low 80s, up to about 88 today. So we've been pleased it’s making progress. We still have our ways to go. We're working hard. I think you know, with the Westfield project has been a benefit there.

They have a lot of restaurants open and they have further plans to invest across the street from us, those are kind of longer term plan. But we still continue to like their long-term outlook for that market..

Okay.

And then Jordan, you also mentioned that one third of your office portfolio is now debt free, should we read into that that you're looking to potentially look into the unsecured debt markets?.

You know, it's funny that you asked me that, because when I said that - I wonder if all they think that I'm shifting over to the unsecured market because you have to create a situation like that to do it. But the answer is no.

No, having a debt free buildings to me is like storing capital as cost effectively as possible because then when we want to use it we could - like you know, you could buy a building in that building the financing and therefore you can drive your capital out that way instead of just having cash it on your balance sheet..

I am….

Borrowing rate as opposed to the rate that banks give you..

Absolutely, okay.

And then just one last question is the Moanalua project, will that be FFO impactful next year as far as converting the units into market rents or is there more of a 2019 impact to FFO?.

So the expenses will have an impact in 2018, on the revenue side it's going to be a bit of a slower transition..

So FFO neutral anything?.

So you're saying as a regulatory agreement rolls off at the end of the year, are we going to see a big impact in terms of the income restricted units rolling the market. And I think we'll see an impact because we get hit with the expenses right away, but we have a lot of units to roll the market. I mean, we don't want to just vacate the building.

We're are already seeing you know I mean, we had not planned January 1 to just go to everybody and whether they you know income or units and say all right you're all out here's a new rant or here's a new event and we know that's going to blow you up. We had not planned to do that.

We are seeing people actually pre-emptively knowing it's coming about and it's one of the reasons we're saying that you know substantial vacancy in Honolulu one of the big reasons because we maybe could have message to them a little better, we're not going to - we're you not going to be that heavy handed with this roll over time in terms of rolling out and moving the rents up.

But we are no longer restricted, so that's good. So net-net me and you know, it has a positive impact, but we had not planned to be very heavy handed about it, although the tenants themselves call pre-emptively or with the expectation that rents were going to move out have been moving out quickly - more quickly than we anticipated..

Great, thank you..

Next we have Alexander Goldfarb of Sandler O’Neill..

Good morning out there. Hey so just - I'll try to stick to the two question limit. So just….

Why do you want to be different..

Its just part of - part of what we do. Let me go first to the bigger one and then I'll go to the smaller one. You know you've gone through this process with Brentwood and obviously the years in the budget you know the budgeting that went through. You've had now experience working with Hawaii and the demands out there.

You mentioned looking at your portfolio doing a lot more apartment development on existing land. What are some of the lessons that you've learned. I mean, like with the Brentwood apartment you know, we all know L.A. is really tough to build in. But I mean that's been a topic on this call for you know for years.

As you go forward, do you think that we should all expect that the projects that you guys announced are going to take a similar time or are there some lessons that you learned here that can expedite some of these development projects?.

I think that we - of course, we're learning a lot with every project that we do and that learning will improve the process for us. But where we rolled out on an expedited timeframe more of these buildings, I don't know the answer to that. We may not do that. We may just take one at a time about to the system slowly.

That's just a function of our own kind of cautiousness. Could we double down and now start using - start trying to build in some of these other locations and work in the entitlements the way we did for the last three years on this. We're probably already doing a little bit of that.

But at the same time, we aren’t planning to just you know, start stacking things up in a very tight way in terms of construction. We want to let these plays through. We have two projects playing to right now.

We're going to let them play through and we're going to learn all the lessons to be learned from the process and we do have a lot more opportunity..

But it sounds it like realistically it may be a project or two every you know maybe two to three years it's not like suddenly you're going to get a pipeline where you have one or two of these per year?.

It's hard to say, as I've said we're going to play these 3 and make decisions about how hard we want to push on this program. And I do think both of this way, it's still we’re doing - very good - they're going to be very good in - I think they're going to be very successful. So that argues to your point to put pressure on us to speed up that process.

But arguing against it is all the other things we have going on. And you know, not wanting to kind of speed things up to the point where we trip ourselves.

So we've got to just decide on the right pace for that stuff and a pace that works for our company and the pace that works for the communities and the politicians and everybody that’s involved in making it happen and we'll do that..

Okay. Second question is, the Hawaii project that you're switching from rent control to market rate. I think you said you're going to get a $1.2 million revenue pop but expenses are going up 800,000.

Why are the expenses going up so much or is part of that some CapEx in there?.

No it's just that when these regulatory agreements that went down and we were subject to – it’s very new when we bought the building, they gave you - they eliminate property taxes and GET. And I think the combination of those two things are going to start paying now is around that number maybe it's a little less I mean - but it's around that number.

And then you look at you know, just moving those units the market. We gave you that number..

Okay. Got you. I would have expected the revenue pop to be meaningfully more than the expense pop, but….

Well, I mean, we’ll see how that all plays out and as maybe as I said in prepared minds you know, we're also now reviewing those buildings. So there's a lot going on on that project and it's creating a lot of noise for us in general and the system because it's a big project..

Okay. Thank you, Jordan..

Thanks..

And next we have Jamie Feldman, Bank of America Merrill Lynch. Please go ahead..

Great. Thanks. You know when you think about the - what changed in your guidance, whether it’s the higher utility expenses or the Hawaii occupancy. I mean if we look ahead to next year is this stuff you think it will fade or are we looking at just a higher expense you know, lower margins going forward.

And it sounds like you're going to get 800,000 taxes starting January 1 without the revenue coming on line at Moanalua or is that wrong to think about it?.

I think that's the right way of thinking about it. I think that as Moanalua is just example from last call when you go – you’re going to keep going on these things. Its always unintended things to happen at these projects when you start this much construction and start disturbing the site as much.

And so for instance at Moanalua, look, you know, in the end of the day we're going to create a lot of value out of the construction work. And in the end of the day on the regulatory agreement rolls up it’s going to create I think not only just to spread revenue, but the ability to grow rents there which has been problematic in the past.

So all very good long-term things to invest in making happen. But I think the expenses are going to hit us right away because we're off the agreement.

And I don't think where - I mean, at least regard – the tenants may move themselves out faster but we don't plan to be heavy handed with the tenants in terms of the transition on the lower income unit, so that the larger income is going to take some time to get in.

In terms of the long-term look at vacancy and why these are all things that are temporary or can be explained in the way we're explaining that I don't expect to stick.

I think Hawaii in general is very, very underserved in terms of the units that we are in there and that without this you know, to this specific noise that we see going on, some of that you know, most of it that we're creating, I think it's a market that tends to be extremely, extremely fault. There's very high demand for these units.

Now the utilities is another story. You know, we've been doing a very good job at reducing our utility consumption. I would say a very, very good job, but at the same time and particularly recently they have raised utility rates substantially and that's impacting our office portfolio.

So that impact we do have more moves we're making in terms of reducing our utilization, but it's a very big job to offset the increases. I think the last increase was 10%. And I think they're going to continue increasing. So we're fighting that off, each increase, we can put more stuff in, we can fight off some of it.

But yeah, the increase in utility expenses is impacting us..

Okay.

And is any of that – can you pass any that through tenants?.

We can and we will be. But then you know, as people face year rolls then we end up owning that..

Right. Makes sense. And then I guess just thinking about market rate growth.

You know, any latest thoughts on what the effective rents are doing in the market across your major sub markets and can you talk about your 2018 mark-to-market or your portfolio mark-to-market as it stands today?.

Well, I don't know about 2018 because we're still in ‘17. But I can say that in terms of just rank growth in general, obviously Honolulu is going a little slower. The valley seeing more moderate - also seeing modest growth depending on where you look there and the west side is getting very strong growth..

And were you flat in Hawaii and the valley?.

Valley is not flat, and valley is till seeing growth, but I would say Hawaii is definitely flat. I mean, that's why we're looking at doing this project to take one building out of market. I mean, we’ve just been flat for too long and we shouldn't be because the economy is very good.

There's just what - you know literally I think there's one building too many as trades that down..

Okay.

And then for the west side, how much would say rents are up even in the quarter?.

I don't know, do you have an answer to that?.

No, I think it varies by market..

Okay. All right. Thank you..

Next we have John Guinee of Stifel..

Great. This is interesting, half year leases, half your office leases are about 1500 feet or less. So basically about the size of your larger units and your new development. In your office leases you are spending about $5.82 per lease year on releasing costs. Two questions.

One, is that 582 skewed towards the larger roles or do you spend that kind of money on the smaller units, office units.

And then two, do you have any idea what you're spending per lease year on CapEx in your apartment portfolio?.

Not on the office side, yes, the answer is yes. The ATIs are skewed to the larger tenants. I think the number about half our tenants are about 2600 feet or smaller That's about the median size, but you're right, we spend more GIs on larger guys and less GIs on our guys as you'd expect.

And talking about best is that we can tell you..

For three months - for nine months ended September 30 we spent $320 per unit..

For an average unit of thousand square feet?.

No, those apartment units are – yeah, average about….

Great. Thank you..

All right..

And next we have Nick Yulico, UBS..

Thanks. On the releasing rent spread in the quarter, you said it was affected - partially affected by some expiring leases signed during the prior peak.

Would you quantify what the rent roll down was on those leases, which submarkets they were in and whether any similar vintage leases are really flowing through in coming quarters?.

Hey, Nick. The leases I think were spread mostly on the west side where we had larger rent growth throughout the term. So we have - some of those large term leases that was signed at peak had 4% increases annually or even 4.5% to 5% in some of those. So 10 years of those increases.

Like I said you can get up to 42% I think on average on those few leases that rolled off. So even though we've had really strong rent growth coming off such a high ending number, it's hard to overcome and it's of the overall average for the quarter. But you know, the numbers overall have been very strong.

We still at 8% cash, 23% percent straight line and we think that that metric is going to continue to be very strong. It's just choppy quarter-to-quarter depending on the role. There may be there is still a few of those you know, vintage leases that will roll. So the good news is I think we’re past most of them and as you know we're here in 2017.

So we should be getting through most of those you know in the next year or so..

Okay, that's helpful. And then at 1299 ocean in Santa Monica, which you purchased earlier this year in JV, I was looking to get an update on the top two floors of the building that are vacant. You know, there was some talk in the L.A. brokerage community you might be moving your headquarters there.

Is that your plan?.

Yeah. Yes, it is..

And I guess how did take in that space versus leasing it, since you know, I think this is some of the highest rent space available in all of Santa Monica.

You know, I guess, wondering how you decide to take it rather than lease it and get you know those economics?.

Well, I mean, I hope that all the buildings we own on Long Ocean are the highest rent space available, I agree with that. We've outgrown where we are. We just like all the other tenants here on the west side are very particular about where - you know what market we're in. We want to be down here and frankly that was the only space that could fit us.

I mean we don't want to be in someone else's building. So that's where we fit..

And I guess, how is that sort of envisioned in when you purchased the building with your partners and the cap rate you have paid, I mean how does that factor in, I mean given up you know, two top floors which is great space, how does that affect things?.

Well, they're happy to have a very good tenant in there. I may not understand that you mean, did they – they obviously knew we were doing it, I didn't understand that question..

Well, I'm just wondering I mean, how does it - I mean, are you paying full market rents on the space.

I mean how does that work for the ultimate you know, yield you achieve on the building with your partners?.

I mean, we went through with our partners, we said we will take these floors. They said that works for us and we did all our runs based on that deal and that's the deal we made..

All right..

I mean, if you're asking me, if I give specific runs or stuff we don't talk about the exact rental rates and it wouldn't be good for the company to do that. But there was obviously a deal and they were comfortable with..

Okay. Thanks..

And the next question we have will come from Jed Reagan of Green Street Advisors..

Hey. Good morning, guys.

I think just a quick follow up on question Jamie had earlier, I think Stuart you mentioned there's sort of a range of you know, rent growth you're seeing here, some markets in West LA, if you could just kind of bracket you know, how much growth that is maybe on a year-over-year basis?.

It’s tough to say, I think depending on the market there is some markets that are probably better than double-digits and some of that are in kind of mid-single digits and like Jordan said Honolulu is probably flat and the valleys at modest growth. So you kind of have a pretty wide range there depending on the market rent..

Maybe sort of high, single digits on average type of thing?.

I don't know how precise – and we got across the whole thing..

Somewhere and there, and I don’t know….

Five, six, seven….

Somewhere in there..

Okay, that's helpful. And I think just earlier in terms of the you know incremental cost you're spending on the existing buildings.

What is the total expected spend there?.

We have it in….

We gave you the copy. Jed, you're asking about the total cost of the project. We've given you that on the new development..

No, I'm talking about the existing building, you know, the capital you are spending on the new buildings that are going to be you know, sort of reinvested with the regulation….

We haven't given a number on that Jed..

I'm just trying to get a feel for what they - you know, kind of what your yields on that on that capital is, if you could even just ballpark that?.

On the capital, you know, I got to say, I think we went in - we already told you we're already leasing and we're very happy with the answer we’re getting in the new project.

So we felt like we could do work to the other buildings and now they're going in it, I mean, that's why we're kind of - we're certainly in a sense at the moment punishing that project because we've not only got the new construction, we're going with the new ground up buildings, but now we've gone -we're going to rest the project with the construction crew and say, all right let's start getting these buildings looking more in matter in tune.

What’s the way out there, [indiscernible] Because clearly with these improvements you could pick up a pretty big rent spread. I mean, I think the existing stuff is in the twos right in terms of dollars per foot that we're getting. And the new stuff is over five.

So I mean, I don't know whether we're spending $5 million, $10 million, $15 million to redo all these other 600, 700 units. But there's a lot of room to pick up money, pick up a very solid return on those units by upgrading them and getting them a lot closer to the new stuff that we're building..

Okay. I appreciate that. And then I guess in terms of the capital that you're investing in the community amenities and redeveloping select assets.

Can you give a sense for sort of the total costs we might be talking about for that program and you know, what sort of your return on cost we might be looking at there?.

The ones that we've looked at where we said if we spend this like we do in a building, we do in one of the office buildings, it's been a you know, even more than high teens, but it could have been in 20s, okay, in terms of return on your money.

In terms of that would be rehabs buildings or community projects where we think we can move around $0.05, $0.10, $0.15, $0.25 a foot a month. In terms of the total cost of the project, I know, for the four office buildings we're redoing right now, it came for the total around $50.

By some of that is in partnerships or JVs where they have pre-funded the cash, so the impact on us is obviously small - a lot smaller number..

And the community stuff is that material in terms of cost?.

I don't think - all of this stuff tends to range from the $5 million to $15 million range. So I don't know that any of it is going to be that noticeable in cost to you know, hitting our balance sheet..

And after that those four buildings you mentioned, I mean is there 5 or 10 or 20 more after that or is that sort of rapid?.

No, there is more after that. And that's one of the things we were mentioning about going in and redoing our existing office buildings. And we are experiencing good returns from doing that kind of work.

There are more after that, but I'll still say, we need to get through 70s [ph] to get a dot and get the actual - not you know pro forma performance, actual performance on the books and hitting us. And so that's why same reason, we're not pushing to continue the construction.

We're not trying to - you know we do have more buildings that we could react, that we think we could have a big difference, but we want to do these, see if our assumptions are right, see what kind of returns we get out of the capital we spend before we keep going..

Okay. Great, thanks. I’ll hop back in the queue..

All right..

And next we have Dave Rodgers of Baird..

Good morning out there. May be Jordan or Stuart, you know in year 3Q investor overview, your occupancy for your West L.A. assets or what you call the DILA portfolio, the premium that you have today over the market is kind of low as it's ever been, at least according to your chart.

And so just to dovetail on the last question, are those renovations in rehabs kind of driving that, is a function of just pushing rents may be harder than market.

Just love to get your view of this that stabilizes and begins to widen out again?.

You know, a lot of that is - we've been pretty active on acquisitions over the last 18 months, two years. So those higher occupancy, higher vacancy acquisitions we've been doing are in that number and we've become a larger, certainly a larger share of the market over the last few years as well.

So you have some vacancy coming in through acquisitions and just harder to outperform as your largest - larger part of the overall market..

And the second part of that is, how these renovation programs taking a decent amount of space online or are they all occurring with space fully available?.

I don't think the renovation programs are taking any space offline the projects. We're looking at are these are not defensive moves where we have vacancy and we think we need to reposition this to get this building full.

These are moves where we're highly leased in these buildings and we think we could significantly move rates up, whether it's a new lobby or kind of repositioning the way your arrival experience works at a building or something like that.

And we see other buildings in the market that are getting significantly higher rents and we think let's spend a little bit of capital here and move rents up significantly to reposition this building. But these are essentially full buildings on the west side we're talking about for the most part..

Yeah, although I got to say, look the construction we're doing at Moanalua should do in making the vacancy, but we are feeling from that construction vacancy there and then it got off obviously regulatory agreement rolling off, it’s creating more vacancy.

So that said, when you go any of your construction building, particularly a full building because by the way you want a little salt [ph] you better be prepared for vacancy just because you know it pisses people off there while you're doing the work..

That's fair. Second question for me, and you rolled forward the lease expirations in the supplement 3Q ’18, fairly decent sized roll over in Santa Monica with a pretty high rent relative to kind of what’s before that.

Anything in 3Q ‘18 in Santa Monica watch for anything you specifically can talk about, whether it was an acquired asset or one of your existing..

Nothing noteworthy to point out. I would say that oddly where we see kind of higher expiring rents is also where we're seeing a higher roll out. So you know, we're tending to have better roll up at our strong rent market. So we kind of had a question last quarter about increasing expiring rents coming forward.

I would actually assume our roles would be stronger in markets where you have higher expiring rents..

But don't assume that..

All right. Thanks..

And next you have a follow up from Jed Reagan, Green Street Advisors..

Hey, maybe just a follow up on that.

Any kind of known move out as part of that - part of those expertise and maybe just in general the next year or so any kind of lumpier move out that you're tracking?.

We always have, you know, you saw this quarter we had a tenant downsized by 50,000 feet out in Sherman Oaks/Encino, really happy we already battled the third of that early here in Q4. So that's very normal for us. We'll have a tenant of that size rolling every quarter or 10 or two of that size rolling every quarter..

Okay. And then it looks like there's been quite a bit of movement in Culver City, in Culver City here recently and development hitting both there and in El Segundo.

I am just curious how you're thinking about dynamics over there kind of affecting your core West LA portfolio and whether those would be some markets you'd be interested in playing in?.

You know, what I haven't seen that.

I mean, you're saying tenants moving to Culver City and El Segundo are vacating space here, because we've seen a lot - we saw a lot of migration back into that area around 26 Street, where Boston Properties out in the center because there was vacancy there and people came back in from Playa Vista and areas around there because they were able to get space again.

I don't know that - I don't what tend to move there..

Apple, Amazon and HBO have been a few that are expanding over there?.

Well, I mean Amazon went into the studio and they're doing a long-term lease on the studio and taking some office space associated with that. HBO is moving into a building soon over in Culver City. That Culver City really doesn't have that much space where you can build you know, down in El Segundo they definitely have the ability to add space.

But we're not seeing a ton of West Side tenants that are moving into El Segundo, that's been more of an incubator space for some of the technology tenant; Space X has been a big driver down there that it's not really within our core tenant base..

Jed, I think just like with [indiscernible] these are larger tenant that tend to make those moves because they can't get the space on the west side that they need. So it doesn't really impact our kind of course smaller kind of here, we don't see the smaller guys moving away from the West side market..

Okay.

And these aren't selling, these are areas that you're looking at more closely now and to expand in?.

I don’t think well, there is a big trade in El Segundo. So we actually did do a lot of work there and look at that market, and you know, we're not there. In terms of Culver City, there are smaller buildings. I mean, I've seen buildings that are probably good to own, but it just doesn't have a lot – they just don't have a lot of office space there.

They kind of all revolves around what used to be MGM Studios, which is now what Sony studio..

Okay, great. Thank you..

At this time, I am showing no further questions. We’ll go and conclude the question-and-answer session. I will now like to turn the conference call back over to the management team for any closing remarks, ladies and gentlemen..

Well, thank you very much for joining us and we look forward to speaking with you again next quarter..

We thank you sir and to the rest of the management team for your time also today. The conference call is now concluded. At this time you may disconnect your lines. Thank you. Take care and have a great day everyone..