Ladies and gentlemen, thank you for standing by. Welcome to Douglas Emmett’s quarterly 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 Mr. Stuart McElhinney, Vice President of Investor Relations for Douglas Emmett. The floor is yours, sir.

Thank you. Joining us today on the call are Jordan Kaplan, our President and CEO; Kevin Crummy, our CIO; and Ted Guth, 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. 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. I’m happy to report that 2015 is off to a good start. Office rents in our core markets are now growing near or above double-digit rates. As a result, the starting cash rents on leases we signed during the quarter were 5.2% higher than the ending rents for the same place. And straight-line rents were up 22%. During the quarter, we achieved solidly leasing velocity, signing 715,000 square feet of leases and increasing the lease rate for our office portfolio to 92.6%. At the same time, move-ins pushed our occupancy rate to 91.1%. Our portfolio currently exceeds market occupancy by an average of 410 basis points. Our commercial leasing and construction platform has compressed the transaction timeline to a very efficient four months. We currently sign roughly three office leases every business day, averaging 45 days between the first showing and a signed lease and just over two months between a signed lease sand occupancy. The performance of our multi-family platform is also excellent with first quarter asking rents up 5.9% over the same quarter in 2014. Given the positive direction of market fundamentals and the effectiveness of our team, I'm excited about our outlook for the remainder of 2015. Our local economy is expanding across a host of diverse industries. We expect continued rental rate growth, we have excellent yield flow and we are extending debt maturities to take advantage of historically low interest rates. With that, I will now turn the call over to Kevin for a more detailed update on our markets and recent capital activities.

Thanks Jordan and good morning everyone. First, it is worth noting that the Los Angeles regional economy is now expanding and creating jobs at a higher rate than the nation as a whole. In the first three months of 2015 alone, the overall unemployment rate in Los Angeles County dropped by 100 basis points to 7.2%, that is the lowest rate since June 2008, driven by gains of almost 26,000 jobs in tech, entertainment, professional services and healthcare. West Los Angeles is outpacing the region with unemployment dropping to just 6.1% in March. This job creation has translated into the increases of market demand, office occupancy and rental rate gains Jordan mentioned earlier. Strong market fundamentals are bringing more properties to market and I feel good about our acquisition pipeline. In general, we are most aggressive on bidding on opportunity is where we can leverage our operating platform to create value. In our four recent office acquisitions of low occupancy rates at closing, we increased the lease rate by over 1000 basis points within an average of five months, while achieving higher effective rental rates than the seller. During the first quarter, we closed two acquisitions. In February, we acquired the land under our Harbor Court office building in Honolulu in exchange for $1 million of units in our operating partnership, plus the cancellation of $26.5 million of debt. In March, we completed the purchase of First Financial Plaza, a 227,000 square foot office property in Encino. That property was subject to a loan with high interest rate and a punitive prepayment fee. However, between signing and closing, we were able to substantially reduce the effective interest rate by negotiating a lower prepayment fee. Since our last call, our capital markets team also closed two financings. Both of those loans are non-recourse and interest on meaningful maturity. The first loan which we closed in March is a $102 million ten-year term loan with interest effectively fixed at 2.84% for five years. The loan is secured by the Waena Apartments. On April 15, we closed $340 million seven-year term loan secured by six office buildings with interest effectively fixed at 2.77% for five years. During the remainder of 2015, we plan to extend our maturities and capitalize on the current interest rate environment by accelerating the refinancing of one or two additional property pools due in 2016 and 2017. With that I will turn the call over to Ted.

Thanks Kevin, good morning everyone. I'll begin with our results, address our office and multifamily fundamentals and finish with 2015 guidance. Compared to a year ago, in the first quarter of 2015, our revenues increased by 4%, our FFO increased 9.3% to $76 million or $0.43 per share and our AFFO decreased 6.2% to $53.5 million or $0.30 per share reflecting our investment this quarter in tenant improvements and leasing commissions related to our large occupancy gains over the last two quarters. Comparing the cash basis results for our same properties in the first quarter of 2015 to the first quarter of 2014. Revenue decreased by 0.1% reflecting high CAM reconciliations and lease termination fees in 2014 as well as some pre-rent this year associated with a large volume of tenant movements. Expenses decreased by 0.4%, a testament to our operating team. And as a result, same-store cash NOI increased by 0.1%, while core same-store cash NOI which eliminates prior-year CAM reconciliations and lease termination fees rose by 0.9%. As we mentioned on our last call, our same-store cash NOI growth will also be restrained during the second quarter but we expect the headwinds to abate in the second half of the year. We are increasing our guidance for core same-store cash NOI growth to between 2.5% and 3.5%. Our G&A for the first quarter was $7.4 million or 4.8% of revenue. By keeping our G&A percentage well below our benchmark group, we convert more of our NOI to cash flow. Other income in the first quarter included the final $6.6 million of accelerated FAS 141 income from the acquisition of the Harbor Court fee. Excluding this and absent any other unusual events, we expect our run rate for other income, net of other expenses, to be in the neighborhood…

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] The first question we have will come from Brendan Maiorana of Wells Fargo. Please go ahead.

Thanks, good morning. Hi, guys. So, Jordan, your mark-to-market moved up to 9%. You guys, for the overall portfolio, you put up plus 5% cash rent spreads this quarter and leased rate moved up a little bit but not too much. Have you guys kind of clearly moved into the phase where you’re more concerned about pushing rents rather than trying to drive occupancy higher and if so, is that the case in Warner Center as well or is Warner Center more about occupancy?

You’ve perfectly answered my question -- your question for me. Everywhere, but not own a center, we are totally focused now on rents. And I think I can see I am not pessimistic about even increasing occupancy, but for sure, we are not leasing. Even across the broader market, they are up in good territory, forget about the fact that we are such a huge beat on them, I don’t fear we’re leasing against vacant space in any significant way anymore and I think we’re pushing for higher rental rates other than in Warner Center where you’re still using its vacancy and we got to fill that space, so that we could put tension into that process.

And as a follow-up to that, so you guys -- I think you’ve been clear that you felt the market was pretty healthy for a number of years now and I think you’ve moved your ask up. But it seem like given where occupancy was in a lot of your sub-markets, maybe some of your competitors had been slower to move rents up, move asking rents. Have the competitors started to move rents up or overall asking rents moving up in addition just Douglas Emmett pushing rents because your occupancy is high?

Yeah, we are seeing it. Everybody is moving rents up and of course there are some smaller – you know, we’re over 90%, but there is smaller guys when they could smell that you can move rents actually a lot times will leap us for a little while because we have a bigger machine and we still want to make deals and all that could stop you, although we are pushing pretty hard on rental rate now, but they are all moving, everybody is moving now. So I don’t think we’re having trouble getting followers anymore, it’s apparent to everybody that when you have a space and a tenant needs it or you have a renewal, you have a lot to say of what that rate will be as opposed to going back some years when the guy had so many options, you couldn’t tell what was going on, you were just hoping to hold on to them.

Sure. Okay, all right, thanks guys.

Thanks, Brendan.

Craig Mailman of KeyBanc.

Hey, guys. I was just hoping for maybe a little bit more color on the 5.2% rents for this quarter, just in terms of whether it was pretty broad-based or are there any sort of outliers there that were a drag?

So, it was -- there wasn’t any major outliers. This number is very volatile, as you’ve seen from last few quarters it bounced around and we would expect it to, but we – it’s not like there was one lease that just pulled up, it actually is pretty broad-based, but what’s going to happen next quarter we will see.

That’s a good question though because it made such big jump into the positive direction, so we check for that and I did – it’s a good warning to tell you guys, this thing can really move around and I don’t want everyone crying on the phone, if it moves backwards next quarter, but it’s going in a good direction.

Okay, thank you. That’s helpful. And then just secondly, I heard the comments about what you guys have on the liquidity front, but also heard that deal flow is improving and given where leverage is, just curious what you guys think your dry powder is today for future acquisitions?

Well, I think that – actually the company is generating a lot of good positive cash flow and we have [indiscernible] which I realize it raises leverage although we just reduced it down. So for the – still the types of deals – you know, Kevin can answer some of those in terms of deal size, but for the types of deals other than very large portfolio deals where we would have a joint venture partner for the types of deals, we would think we would be working on where those [indiscernible] are of those deals. I would think we have enough money to do them, financing them conservatively and putting them into the portfolio. And our cash flow is building at a very good clip now. Also, I know, you guys saw that we pointed out in the last four deals that we did I would have otherwise thought we might have suffered through a year to 18 months of very poor cash flow because we were buying very well occupancy buildings. The cash flow just left up almost -- they don’t show up in your same-store stuff because obviously it would be great if it did because it would change things so much. But the cash flow was strong in those very quickly. So I am confident that especially we can find stuff like that, we would be comfortable buying it and then stuff that’s better leased comes with some good cash flow.

What do you think, though, as of today your total capacity to borrowers just given your leverage targets?

I think we will be comfortable using the credit line. We're probably somewhere in the -- if we wanted to go beyond $300 million to $400 million, we would probably have to look for some alternatives, capital alternatives. I like where we are on leverage. I also like the process that we're going through on debt not just to steal some of Kevin's thunder, but we are rolling through our portfolio on restacking our loans, so that we consolidate debt on to buildings at low rates and we created new pool of unlevered assets and we keep multiple pools that leverage at play so that we never doing anything. This process and doing it early and not when loans are due is one of the ways we keep the risk associated with leverage low for us, because we tend not to use loans to their better ends. We tend to re-fi them early and we tend to store our capacity in buildings without any leverage on it and we don't do anything, any type of debt that impacts the company as a whole. So it brings down the risk of that, but still I like having the leverage in the zone we’re in and I think $300 million to $400 million, beyond that would probably cause us to want to look for alternatives.

Great. Thank you.

Next we have Gabriel Hilmoe of Evercore ISI.

Thanks. Just for Ted or Jordon, just on the 9% gap on the asking versus in-place, I guess can you walk through how much of that spread is typically translating into taking rents and just some of the recent deals you signed?

Boy, that's a really tough question. I think that there's -- we tend to try to keep asking rents not very far from where we actually end up renting things. We're not a big spread in that part, because again there is sort of this machine, if you are trying to crank people through, if you make every lease a big negotiation but depending on the TIs, the space and those sorts of things, you can get different spreads on different deals. So it's hard to factor, but it's not a huge number for us.

Okay. And then, Jordan, just going back to Warner Center and then what's left to roll there, I think there is another 165,000 square feet left this year, but I guess when you look at what's expiring versus the pipeline of activity in the market, I guess how would you characterize that compared to the amount of space you have rolling for the rest this year?

Well, obviously and we've talked about this and I'm sure you, on the last call, heard it that roll is a lot more moderate this year than it was last year in Warner Center and we have a good pipeline. So we feel good about working through deals and achieving that goal of getting the lease rate, occupancies, last occupancy rate up in that market and getting to the point where we can [indiscernible] on that. I mean I'm hopeful that with the kind of medium, large, small tenants rolling around in that market now, we're able to a have a real impact over the next two, three quarters.

Okay, thank you.

Jamie Feldman, Bank of America/Merrill Lynch.

Great, thank you. You guys sound a little more energized on the acquisition front. We've got, it sounds like the EOP assets may trade in the next 12 months or so. How are you guys thinking about acceptable returns on investments both the stuff that you have in the pipeline and even bigger picture if we start to think about how EOP trades?

Well, I don't think we've changed our acceptable return threshold. So I mean, we're focusing on deals that have vacancy or some problem with the rent or something where we can apply our operating platform. Frankly a couple of deals priced in Beverly Hills recently that we looked at and we weren't excited because they were low return, so we are locked up in very core. EOP is not going to be cheap, but we don't talk about deals that are potentially out there in the horizon. So next question.

So I guess if you just think about what you’ve – well, I'm sorry, you were about to say something?

Jordan was.

I was just going to say that on a lot, Kevin is right, we haven't really made big changes to the returns we are looking at that we want to get out of these, out of good buildings, but I will say while pricing is up, there is a lot of sense in which it's a little easier to have a reasonable looking run, because fundamentals are stronger now. I mean if you'd have gone a couple of years back or even a year back, certainly a couple of years back, you had -- you sense that fundamentals were recovering and make a lot more of a leap to what was going to happen around. So and I think you will remember that a couple of years ago I said, we're not there, but I think we are ahead of our double-digit. Okay. Now I'm saying, we're in double digits. So a lot easier to really do a pro forma and have the run work with returns and all that good stuff. And if you like or not compromising returns and in your face, you're seeing your own portfolio move that a cliff, it makes -- the numbers that you are pro forming and this pro forma is going 10 years. So, there is a lot of assumptions in that, but you at least could look at the early years and go, that's super reasonable compared to what we are actually doing at this moment. So I would say that on the stuff that, it's why we are so much better bidders on this stuff of vacancy because we have the confidence in the way we will handle that vacancy from so much activity in the remainder of our portfolios, close to that, whatever our target is.

Okay. And then just a follow-up, so can you talk a little bit more about what's going on in Honolulu, I think you lost some occupancy there, it seems to be one of your laggard sub markets?

Yes. I agree with that a little bit. I think that, I like Honolulu as a market, but I don't think it's unfair to say it's been a laggard, although the economy there is showing very well, the strange thing is people always look it as an indicator of an economy, they go, oh, look how the employment is, of course for a guy that owns office space, you go walk to appointments, help them, where are my people, going to hire the people, do expand their office and we really see that, the retail is booming and business is booming out there, but every day, I mean every day in the paper, they're talking about workforce housing and we're focused on that and getting more housing in to that market and I feel like, I still feel very good about what's going on there and the banks there and all the kind of classic service providing companies there do seem to be kind of, look like they feel wealthier and they're making good moves. So -- but you're right, it's a laggard compared to the stats we see on the market and it's a laggard compared to all of our other markets, although, it's not as much a laggard as Warner Center.

I guess I am asking do you see it turning any time soon or this will be it...

I don't know soon or late or whatever, but I do see it turn, I don't feel like turning, that's not saying vis-a-vis Warner Center I don't think gets a turning to that Hawaii market, I mean it's not going to take a lot of leasing for us to move it up a couple of hundred basis points and you to be going out to find market.

I would be careful about, so when we talk about it being a laggard, why it has been in the 89%, 90% leased range forever basically in the good times and bad times, they're just there. We did have one tenant move out this quarter and it was 18,000 feet and that's enough to drive something in a market that's that small. So I'd be careful about, I wouldn't -- what Jordan I think is trying to say is in the long run, Hawaii is, it's fine for where it is, but it hasn't really picked up to the occupancy we're going to see in the other markets, but in the short run, we're going to have quarters like this one where it's going to go down and then as you saw last year, it popped back up and that's what's going to happen.

I think that's a fair statement. I expect a lot out of Hawaii and vis-a-vis my expectations, I guess I'm saying it's a laggard, but I think what Ted is saying is right.

Okay. All right. Thanks guys.

Next, we have Alex Goldfarb of Sandler O'Neill.

Good morning. Hey, how are you. Two questions. The first one actually just sort of picks up from Jamie's. When you guys talk about underwriting and it's easier now, because the fundamentals are better, so you can pencil out the -- have more confidence in what you're underwriting. At the same time, it means that we're getting longer in the cycle which means, the inevitable downturn is sort of closer. So how do you balance sort of getting more bullish on the underwriting now, even though it technically means you're later in the cycle whereas earlier on, there is more lead-time even though you have to imagine that upside because it's not tangible? How do you do that trade-off right now, especially how cap rates have come in and the bidding and returns are a lot more aggressive today than they were a number of years ago?

I mean, I think the core of the answer to that is, you have to be prepared and I don't care where you are in the cycle, in any cycle, you got to be prepared the way we are to operate your buildings through cycles that are good and cycles that are bad. So even if you buy buildings at the beginning of an up cycle, the middle then, you're going to operate that building through a down portion of the cycle. So you have to buy buildings that will operate well, we feel our team will be able to keep the lease, we feel our operating platform is good and we'll handle it well, I mean, if you start taking risks that are out of your kind of center line of ability and then also the market turns on you, then you probably have doubled down but I don't think we're doing that, I think we’re adding buildings that are good building that go well with our core markets and that we will -- that we expect that we'll operate these buildings certainly through another downturn as you did too, but that either you know compared to the last downturn, this will be more swallow and the floor will be kind of comparable to prior peaks and that we'll end up even stronger. Because over the long haul, when you look at what's going on in the markets that we're in not over the short kind of short cycle haul, mine has a pretty good angle, it has a pretty good angle in value, it has a pretty good angle in rental rates, it has a pretty angle in occupancy, it has a pretty good angle in terms of the industries coming in and the growth of those industries and the lack of new supply, I mean they're all good long trend numbers. So being able to add properties at prices which I admit they're not great prices but at prices that work that we think we can operate the buildings under in another downturn and then building in a stronger portfolio coming out, this is a great opportunity to do that because people are trading buildings that we want to own.

So then, so then, just following that, yes, should we expect more of the under leased acquisitions that you guys have done or should we expect more of the First Financial’s, I mean, it would seem like at this point of the cycle, the number of buildings that are 80% occupied would be much smaller than it was a few years ago. So just curious, should we expect more of those occupancy build type of acquisitions or are you now most of what you're seeing is more like the First Financial’s?

Well, it's always easier for us to buy what you call occupancy build building and harder for us to buy what you're calling First Financial buildings, simply because, in a very hot market, people will pay up for leases in place in a way we're not willing to. So of course, we look at what's coming available for sale and great buildings we will stretch for our peers because we believe in the market long term but as that little margin in terms of us being the winner versus not the winner, a lot of times that is determined by a building, still has vacancy or some work that needs to be done and the guy will show up on a fully leased deal and we will just say we just can't get there, I mean, and we don't get those. So we probably always good and bad markets will lean towards the what you call occupancy build deals through a kind of self-selection process.

Okay, thank you.

Next we have Rich Anderson of Mizuho.

Hey, good morning.

Hi, Rich.

Hey Jordan, remember when you went public and your mark-to-market was 45% positive and you said, don't start crying when that starts to moderate and I didn't, but I'm curious, leading up to that point, before you were a public company, how does this recovery resemble or not resemble that lead up, call it circa 2005ish or something?

Well, if you also want to remember, I kept saying, I’m worried about the national economy and I said that and it’s easier to remember because when you go public, you’re trailing for two weeks with I don’t even know how many meetings today, so I said it that many times, right? And I said a lot of times I don’t think our local economy has an issue but the national economy has a -- I think has an issue. I know today when people look at the national economy and all the worries that people have, interest rates can do this and worse could happen and all the rest of it, although I have to say, when I look at the national economy today and I look backwards then at what was going on, then, I really did think the world had gone insane. Now, I’m not feeling so much as the world has gone insane in terms of our national economy. In terms of our local economy, I will say that the stuff that made be bullish than plus more is in place now. So then, I was just feeling the effect of no new supply coming in. I was just feeling the effect of our -- let’s say new economy industries kind of hitting their game again having come up the dot.com shrinkage and all that stuff. So today, I’ve seen it, we don’t add supply when rents are going up, I’ve seen it flat out and I could tell you it’s not just dot.com is recovering, it’s healthcare expanding, tech coming down and expanding, entertainment expanding and frankly, tourism, foreign trade, I mean, they are all on the ride. Research and healthcare research, the university systems will lead up sales [ph] expanding and we have industries any one of which you would say if you had that in your market you go that will be like your profile industry and I feel like we have three or four of them. So, I feel very good. I feel like we have good to great fundamental ups in the next few years. I’m sure the national economy will do something to take the edge off of it, but I am not -- I don’t have as much trepidation as I did than when we were going public.

Okay, cool. And then, to Ted, what do you think the kind of the trailing off of AFFO in the form of TIs and all the rest? When do you think that that starts to sort of level off and start to grow along with FFO?

I think -- first of all, you can see our guidance for the year and you can see that we actually think that that will be happening. I think the first quarter, we had huge amount of move-ins from the leasing we did in the end of the last quarter and through this quarter. And that’s round up with a lot of TIs and leasing commissions that came into the process. On the other hand, I think you noticed that the TIs per square foot for lease and new leases are coming down, came down a little this quarter and I am hoping over time that that comes down little bit more. So, I think that the second half of the year, we’ll be seeing improvement in that impact on AFFO.

And if I can ask one quick one. Parking revenue is up. Is there anything that read in there?

No, I think it’s a similar thing reflecting the increase in rental rates. So, in effect, parking goes along with that and so, no factor really other than rental rates that matters there.

Great, thank you.

The next question we’ll have comes from Jed Reagan of Green Street Advisors.

Good morning, guys.

Good morning, Jed.

So, just to kind of follow-up on your comments from Jordan, I mean, it sounds like your maybe at bullish if not little more bullish than you were on the last cycle when we saw 15% to 20% rent growth in West LA in the last cycle. I mean, do you think that that’s a realistic expectation for this time around and you think that’s an area you could sort of push things the next couple of years?

Are you trying to get me to go on this call and say, I’m expecting 20% of rent growth? I’m not doing that, but I am very optimistic about where we’re headed in rents. I feel that we said we’re headed to double-digit and we’re now in double-digit. So, I feel that the signaling that the Company has been giving in terms of the way it will be able to push rents is actually occuring. So I feel very good. I mean, it is very rare moments when you get up above 50% rental growth no matter what's going on in the world. So I am not in a mood of predicting that, but I feel very good about where our fundamentals are headed. And by the way, you're seeing it in our numbers, so you should too.

Okay, sounds good. And on the cash re-leasing spread, I think you guys talked about obviously there will be some ups and downs from quarter to quarter. If you kind of look over the trajectory of this year, do you feel like you could finish 2015 with kind of an overall positive trend there.

I think that the trend line would suggest that the quarterly variations as you can see in the last two quarters it's almost plus 5, minus 5 at any given quarter, but certainly the underlying trends I think all of those things are good. And if -- but for a quarterly noise, yes, the answer is I expect it to be positive.

I would say spec and hope could be interchanged with each other. I mean, I got to say, that's a great question and I am super curious to see what happens at the end and when we look at the year as a whole and I am hopeful that it is, but that number has been such a wily coyote, I don't know what's going to happen with that. The trend is positive though.

Okay, fair enough. And just on the increases in occupancy and same-store NOI guidance just wondering, to what extent that's maybe a function of better than expected leasing activity versus maybe just speaking of the spread between the percent lease and the percent occupied just narrowing a little bit faster than you expected?

I'd say, we said we didn't have any timing expectations on that spread having been burnt before. But I would say that it’s more about that that the leasing was solid and -- but I think we expected it to be solid. But the spreads came in and I think that gave us a little more confidence to push it by the 50 basis points.

Okay, thanks so much.

John Guinee of Stifel.

Great. Thank you. Couple of just macro questions, Ted or Jordan. First, it looks like your FAS 141 is about $12 million a year or $0.07 a share which burns off eventually. At the same time your rent controlled restricted apartment units have about $9 million of upside once those rent controls burn off or about $0.05 a share, it is a positive. Can you walk through the timing of those two significant income streams improving or going the other way?

Well, so let's start with the FAS 141, it actually doesn't go to zero, because there actually are some acquisitions and so forth, so you are not quite clear how that all plays out, but the stuff from the IPO is coming down, it has been coming down, but it's sort of leveling off and how fast it comes down, because it's mostly associated now with some big long-term leases. I think this year, in the quarter, it was down by about $300,000 to $400,000 for the quarter. So that gives you year-over-year. So that gives you sort of a sense of how it's coming down. I think it will come down a little slower each year and then it will eventually level off to whatever the acquisitions are contributing to it.

That number for us is very low. We already had a very low number compared to anybody else’s financials you are looking at in our business. I mean, so low that down more would be crazily low. I don't know what do we compare compared to our comps then?

I think we are now in -- we are significantly below. We're probably 60% of where the comp set is. On the issue of the pre-1999 units and their roll off in your numbers, you’re right on your numbers. We don't have a lot of control over that. It really depends on when somebody dies or they see it's having a -- or we find out that he is having it as their principal residence. I think that we have -- generally we have about little under 250 left at this point and we generally figure that we have been rolling off call it 10-ish a year of that. So it's going to come in over time, now over time people get older and older and so maybe someone…

Yeah, it can’t actually go at tenure, it has to go faster than that, plus we have a bunch of centurions living in those units. But we’ve been using it. Somewhere there has to be a bulk of these things growing out because the people in aren’t young. I’d say that.

Okay. And then the second question is clearly LA County 190 million square foot office market, West LA , Santa Monica is the epicenter of that market similar to Park Avenue and Manhattan. And it appears to us as if the market is heading east and south versus north over the Santa Monica mountains, can you kind of walk through your sort of five-year projection. Do you see the market continuing to spill east and south versus north?

East? Okay.

Towards Hollywood.

So you’re headed down to Porto Vista and towards Downtown versus…

Is that accurate in your minds or do you think it’s really heading into San Fernando Valley?

I think that in terms of population movement, it actually is headed into San Fernando valley, and in the end real estate is about population and I think if you look at what kind of retail guys and housing guys, I mean, I think you’re seeing that that’s where the activity is because they are capturing population movement. I think the reason you view east and south is east and south are the directions where you can build, and so you guys get a lot more info about east and south whether Downtown is doing programs and try and get people to develop there or a big train and airlines built and it’s building for the people there, that’s where you can do it. But if you’re talking about where we are seeing kind of population density or densify, I would say it’s Westside and over the valley and there is more – I mean, you guys have seen it in our numbers, we used to report the valley of the valley and then the Westside, and now we have been saying it for a while and by the way you see it in rental rates and occupancy that actually in seeing those [indiscernible] now started acting like the Westside, and we are seeing it in rental rate.

All right. Thank you.

All right.

Next we have Derek Van Dijkum of Credit Suisse.

Hey, good morning. Just given sort of the asset pricing environment today, and your ROIC on the Warner Center versus your other sub-markets, can you kind of walk through the, I guess the investment rationale versus holding on to the Warner Center and continuing to lease it up versus potentially selling it today?

All right. You want to just – so you’re asking why don’t we sell Warner Center today.

Correct.

Okay. I mean, in terms of outside in an investment and especially considering the question, I mean, even from your guys, you’re asking me questions of how can I buy on the Westside, pricing is high, but I want to say, hey, I love fundamentals on the Westside and I still think we could – with a view of what’s happening on fundamentals, we can make it work and you guys are asking that question because of where pricing is et cetera. When I go to Warner Center, I would say, both I like the direction of fundamentals are moving into Warner Center, I get it that you guys aren’t seeing that necessarily yet, but we are seeing and I just told you I think population is moving in there and I mean, why would I sell buildings that I think (technical difficulty) when I think all of that is ahead of me. I mean, just classically, do you want to like buy low and sell high. So I don’t know, I mean you would have the view that Warner Center is not going to recover, but I don’t have that view, I think it’s recovering and I am not the only one, right, I mean, there is a lot of people spending capital in that area because of the way the population is shifting in there and none of its on office. It’s all along apartments, housing, the apartments, other housing, retail and amenity based stuff. And we are like the island of office in the middle of all that. It seems like a classic real estate play and we have the infrastructure and everything that is needed to get the most out of that.

Great. I guess I'm looking more towards the cost of leasing to get up versus being able to lease it up, right, so is the present value of selling today?

And it's very rare that it doesn't make sense to send the money to lease property, particularly in this -- certain Warner Center and all of our markets, leases have a positive value. So leasing up a building, typically of this building is going to be worth more than that and I just said you guys, fully leased buildings at market rents, we tend to have trouble getting the numbers of buyers, other buyers will say like, purely financial buyers, not real estate buyers can get to, because it pushes the value beyond numbers a lot of times that we can live with. Now, the other side of that is you make a lot of money leasing up a building. So like the buildings we bought that add vacancy, I would say those guys like to sell the building in this market for 20% vacancy. I know they didn't have the platform or whatever to lease them up. We lease them up, we created value right away. I feel the same way about Warner Centre, I mean certainly the leases we're doing there have very good positive value and positive value not just to the building, to the market, the market itself has got a kind of energy in it. So I don't think it's, I think the cost of leasing has juxtaposed to the increase in value. I don't even think it's a close call, right, I mean those are good buildings in a very solid market with good amenities and a well-educated dense population. If those buildings were even 90% leased, I think the value shift would be dramatic. Certainly nothing in the territory of what it is going to cost us, because I expect this to happen to finish the leasing program out there and get it build out.

Great. Okay. I mean I guess from my perspective I look at it, I say, okay, if I have a dollar to spend, I could either spend that dollar at Warner Centre or I could funnel that dollar into my Santa Monica portfolio or somewhere else, I mean that's kind of how I look at it, right, if you're sort of capital allocated, you say okay, where can I best spend my dollar?

I understand that, I don't know, I find buildings in Santa Monica too, I don't know that I have an opportunity to spend that dollar at Santa Monica right now. Actually, I think Santa Monica, anecdotally, I think we are like 100% leased in Santa Monica, but I think, I do have the opportunity to spend that dollar in Warner Centre and I think that dollar will provide not just standard returns. Frankly in Warner Centre, I think they're going to provide outsized returns. So I'm comfortable with that investment. Now, I don't know if you said, always there are buildings in Santa Monica and that's the building where I think we will get extraordinarily good returns and only I have to choose, but we have to put the dollar. I don't know where that goes, but I don't think that's actually a decision that's being put in front of us right now.

Okay. Fair enough. Now, one last question, in terms of timing or timeframe, what do you think is sort of the timeframe where you can get to sort of 90% occupancy for Warner Centre, is it sort of end of 2016, I mean what in your mind is sort of the timeframe for that?

12 to 24 months.

Okay. All right, thank you.

Thanks a lot.

Manny Cordesman, Citi.

Kevin, if we can just dig into the acquisition pipeline you brought up at the beginning of the call, what geographies are you looking at and if you could just split for us between those properties that have the lease up potential versus the fully leased properties in our pipeline?

The majority of our time has been actually spent, underwriting opportunities on the Westside and we purchased Carthay Campus which had the lease up opportunity and there have been a couple of other deals out there that have priced beyond where we were comfortable going because we couldn't get to the space to lease it up and had our return parameters.

And Jordan, maybe to approach Warner Centre in a different way, if that was a potential acquisition today, would you still be as interested in buying it or it's just a matter of we're already there and we're invested and we think there is some upsides, we'll just stick with it.

I would consider an extraordinary opportunity to take the position to buy today the position we have in Warner Center, the control position that we have in Warner Center looking at the other demographics around it and the capital to expand around it that is all kind of amenities based and non-competitive, I would say this is an incredible opportunity to get into this market that I think is going to be a very strong market. I actually was thinking myself, funny that you asked me that because obviously from the last question, while Kevin was answering I was thinking, wow, if I had like a building come up in Santa Monica, which it would be fully leased because Santa Monica if full. And then I had Warner Center and they were both big deals and I said, which one would I do, if I did it, go check I would -- and I love Santa Monica, I love the Westside, but I would expect to make more money kind of pound for pound in Warner Center than I would in Santa Monica, because there is just that much more upside there. I think we're going to lease those buildings up and I'm as the Encino/Sherman Oaks market has converted to operating kind of better than kissing cousin to the Westside, I expect that to flow into Warner Center. I mean you guys got to remember, when Warner -- before Illinois and we got that huge sluggish [indiscernible] on the market, Warner Center in terms of the quality of building, the quality of housing around and education, the workforce, the amenities, it was one of the highest rent markets in the valley, higher than Encino/Sherman Oaks.

Thanks for that.

Well, at this time, we're showing no further question. We'll go ahead and conclude today's question-and-answer session. I'd now like to turn the conference back over to the management team for any closing remarks. Gentlemen?

Well, thank you everybody for joining us today, and we're looking forward to seeing you over the doing quarter and on the next call.

And we thank you sir for your time and to the rest of the management team. The conference call has now ended. At this time, you may disconnect your lines. And again, we thank everyone for attending today's presentation. Have a great day.