Feb 4, 2015
Executives
Marty McKenna - IR David Neithercut - President and CEO David Santee - COO Mark Parrell - CFO
Analysts
Nicholas Yulico - UBS Investment Bank Nicholas Joseph - Citigroup David Bragg - Green Street Advisors Jana Galan - BofA Merrill Lynch Alexander Goldfarb - Sandler O'Neill Andrew Rosivach - Goldman Sachs Dan Oppenheim - Zelman & Associates Richard Anderson - Mizuho Securities Tom Lesnick - Capital One Securities Vincent Chao - Deutsche Bank George Hoglund - Jefferies Haendel St. Juste - Morgan Stanley Michael Salinsky - RBC Capital Markets
Operator
Good day, and welcome to the Equity Residential Fourth Quarter 2014 Earnings Call. Today's conference is being recorded.
At this time, I would like to turn the conference over to today's speakers. Please go ahead.
Marty McKenna
Thanks Noah. Good morning, and thank you for joining us to discuss Equity Residential's fourth quarter 2014 results and outlook for 2015.
Our featured speakers today are, David Neithercut, our President and CEO; David Santee, our Chief Operating Officer and Mark Parrell, our Chief Financial Officer. Please be advised that certain matters discussed during this conference call may constitute forward-looking statements within the meaning of the federal securities laws.
These forward-looking statements are subject to certain economic risks and uncertainties. The company assumes no obligation to update or supplement these statements that become untrue because of subsequent events.
And now I'll turn it over to David Neithercut.
David Neithercut
Thanks Marty. Good morning, everybody.
Thanks for joining us today. As reported in last night's earning release, 2014 was another very good year for Equity Residential.
Full year normalized FFO grew to $3.17 per share, an 11.2% increase over 2013 and amongst the highest year-over-year increases in our history. Clearly we continue to enjoy very strong public demand across our core markets.
Much of this demand is generated from the creation of new households. Now like many we think that last week's report on fourth quarter household formations overstays what actually happened in the quarter.
It was more likely an indication of the strong household growth that has been taking place through the entire year which has driven demand for good quality rental housing like that owned by EQR in our core markets across the country. We also benefit from the continued decline in single family home ownership rates across the country that was also reported last week.
Now it remains to be seen if returned in a long term historical average of 64% becomes a bottom or not. But across our portfolio, we continue to see fewer residents leave us to buy a home either due to the lack of desire to actually own one or the financial inability to do so.
All-in-all, multi-family fundamentals remain very strong and we continue to see no end in sight for above trend operating performance. Like last year when we saw same-store revenue growth 4.3% which exceeded not only our original expectations, but even our most recent ones due enlarge part to a very strong fourth quarter that delivered exceptional revenue growth of 4.9%.
You may recall David Santee saying on our most recent call that if the sight we were seeing early in the fourth quarter continued, that we could beat our revenue estimates for the quarter and the results speak for themselves. And I want to acknowledge the great work of our team's across the country that delivered such terrific results last quarter and last year.
And we're pleased to report the very strong performance these teams delivered in the fourth quarter of last year has carried over into the first quarter of 2015, which has given us confidence that the low end of the same-store revenue growth guidance range we gave you in late October is no longer in the cards. So with that said, I’ll let David Santee give you a little bit more color on what we’re seeing across the markets today.
David Santee
Thank you David, and good morning everyone. Today I’ll review our fourth quarter operating results, provide some additional color on our revised 2015 revenue guidance, detail out our 2015 expense outlook, and then end my remarks with brief updates across our core markets.
On our Q3 call, I said that if elevated demand and subsequent occupancy continued through November and December, that we would exceed or we could exceed the 4.1% full year revenue growth target and that's exactly what happened. Occupancy increased quarter-over-quarter by 60 basis points.
However, many of our higher average rent markets like LA, Seattle, New York, Orange County, San Diego, realized 80 basis points of increase, while San Francisco led the way delivering over 140 basis points of increased occupancy versus the same period last year. December, typically the lowest point of the year, was a solid 100 basis points higher than the previous year.
Even Washington DC delivered 30 basis points of improved occupancy. Now while demand certainly picked up during mid-year as a result of improving job growth, many of our internal initiatives provided an even stronger foundation and position of strength in Q4.
Typically, our softest quarter of the year, we reported turnover for the quarter increased by 1.6% or 194 units. However, the real story lies in resident retention netting out a 23% increase to same property transfers.
During Q4, resident turnover decreased 50 basis points with more than 60% of these transfers electing for larger or more expensive units. For full year, resident turnover adjusted for same and inter property transfers declined 160 basis points from 48.9% to 47.3%.
With the scale and variety of living options we offer across all of our core markets, it's clear that we are developing a strong following with our existing residents and delivering on our internal brand commitment. We also made tremendous progress in our day-to-day management of lease expirations .
Our pricing teams worked diligently to integrate and better organize the Archstone portfolio explorations, while fine tuning legacy assets to account for close proximity of these competing assets. Today, the combined portfolios position for optimal seasonal performance, and we are seeing that play out in Q1 across all key drivers of revenue growth.
Strong demand coupled with a successful execution of our internal initiatives created a Q4 environment that allowed us to perform just as strong in Q4 as we did in Q2 and Q3 with both new lease based rent and achieved renewal rent growth holding strong in the upper 5% range. More importantly, the strong drivers of revenue have carried through to Q1.
Today, we continue to see occupancy that is 100 basis points higher than same week last year and exposure that is 100 basis points lower allowing for both renewal and new lease rates to accelerate versus a slow and steady climb from a much lower seasonal starting point. Renewals achieved in Q4 were 5.7%, although 20 basis points lower than Q3 based on normal seasonal expectations, it did average 25 basis points higher than Q1 and Q2 of 2014.
January renewals bounced back to 5.9% achieved and February and March should easily exceed 6%. Given this trend, which is the material departure from our historical seasonal norms, we would expect Q1 revenue growth to almost near, if not exceed Q4, driven primarily by the 100 basis points of improved occupancy that we enjoy today and higher new lease rents.
As we move closer to the peak leasing season, we would anticipate the favorable occupancy spreads to compress as we are mindful that 2015 deliveries remain elevated across many of our markets with occupancy always peaking during this period. For all the above reasons, we are comfortable with tightening our full year revenue guidance, increasing the bottom end of our previous range to 3.75%.
Expenses for the quarter were extremely favorable at 2.2%, allowing us to achieve full year results that were 40 basis points below our stated expectation of 2.2% on the Q3 call. During our Q4 call last year, we said that we would mitigate the impact of real estate tax growth of 5.25% and a 7.5% expected utility expense growth by leveraging the integration of the Archstone portfolio through the reengineering of our leasing and advertising costs, onsite payroll, and a more efficient management company, and we did just that.
For full year 2015, which accounts for 97,911 units, L&A costs declined 10.5%, onsite payroll was down 20 basis points, and property management costs declined by 5.2% year-over-year. In the fourth quarter, we received a modest benefit from declining energy prices, as well as a year-end favorable accrual to employee overheads.
For 2015, expense guidance is 2.5% to 3.5%. Real estate taxes, payroll, and utilities now account for almost 72% of total operating expense.
With a complete reversal in energy, we would expect full year utility costs to be negative. That will help offset another five plus handle for real estate taxes which account for 36% of total expense.
With an improving labor market and property staffing fully optimized, we anticipate total payroll costs to grow 2% to 3% for the full year, with all other line items in the 2.5% to 3.5% range. Now moving on to the markets.
We'll start with Washington DC metro, which has seen record absorption in spite of anemic job growth during 2014. Despite another 13,000 units to be delivered this year and the tail end of 2014 deliveries in various stages of lease-up, the metro area remains very stable with solid occupancy and good pricing discipline.
The district itself continues to see outsized population growth and 25% of our district move-ins were from folks moving closer in from Virginia and Maryland. With the budget deficit improving and many government retirees being replaced with younger workers with a higher propensity to rent, our positive year-over-year revenue growth that we see today and I'm not prepared to call a bottom, but it sure feels like we could be there.
Assuming no change in direction, we're cautiously optimistic that DC could end the year flat to positive. Seattle will be measured by degrees of grade by submarket for 2015.
The CBD Bellevue submarket will see a 30% decline in deliveries from 3200 to 2000. Capitol Hill and Redmond will experience similar levels of delivery although these deliveries are small in unit count and easier to digest.
South Lake Union the geographical center of Seattle and home for Amazon, has been master planned to meet the transportation, recreation, and sustainable living needs for up to 50,000 jobs in this neighborhood area. And we expect this submarket to do extremely well next year and in future years.
Bellevue on the other hand with the elevated deliveries with large unit counts that can weigh on performance for longer periods. With those operators in Snohomish, Everett and all other markets north, 2015 should yield above average results.
With 2015 deliveries equal to 2014 and based on the location of those deliveries, we would expect Seattle to produce another year of outsized results. San Francisco continues with epic pace with significant acceleration in Q4.
In one of the most under housed cities in the country, deliveries are miniscule and simply don’t seem to be relevant. With January occupancy up 250 basis points versus 2014, at 97.2% today, and net effected base rent up 13% since in last January, it’s easy to envision another year of 8% to 10% revenue growth for full year 2015.
Los Angeles, Orange County and San Diego continue to show signs and strength with Orange County expecting to produce the better revenue growth of the three, on fewer deliveries and quality job growth. Now Orange County can deliver a six plus percent revenue growth then I would expect LA and San Diego to trail by 50 basis points based on elevated deliveries alone.
Broad based job growth across all markets and resolution of court of Los Angeles labor dispute are all positives in addition to the expanding Silicon Beach movement, and West LA down to Playa Del Rey. If there is a market that will benefit from lower gasoline costs, it will certainly be SoCal, and we would expect to see the spreads tightened between ask and achieved renewal rents over the course of the year.
Jumping over to Boston, a glut of high end deliveries in the urban core and the financial district is beginning to weigh on this submarket and subsequently our portfolio. With a 35% increase in delivered units for 2015, net affected base rents remain flat, however occupancy is stable and demand remains solid.
With such large concentrations of high end product within a very small radius we would expect pricing pressure throughout much of 2015. New York City specifically Manhattan remains stable with only slight concentrations of new deliveries on the upper west side.
Jersey City and Brooklyn will both deliver large institutional type product, which will weigh on pricing power over the next year. However with population in the metro achieving the new high of 8.4 million people, a pick up in business and professional service jobs and the continued growth in jobs away from financial services, New York should produce four-handle revenue growth supported by an expected 155,000 new jobs in 2015.
As we discussed last call, South Florida claims continue to grow like weeds with over 12,000 condos in various stages of development. Concentrations of the apartment deliveries were mainly in the Miami Brickell submarkets with most deliveries in Broward and Palm Beach being east of 95 that will demand a much higher price point versus the EQR portfolio.
With the Cuban thaw and growing South American business influence, we expect South Florida to have an exceptionally strong year. Revisiting our three buckets of revenue growth, we still see San Francisco, Seattle, Denver and Orange County in our plus 5% revenue growth bucket.
New York, LA, San Diego and South Florida remain in the 3% to 5% revenue bucket. However Boston will do well to achieve 3%, but today looks more or like a high 2%.
Washington DC at 18% of NOY remains in its own bucket and as I said earlier we are cautiously optimistic that we could potentially end the year in flat for positive territory. I too would like to thank everyone across EQR for delivering on our commitment to both our residents and shareholders and look forward to another fantastic year at EQR.
David?
David Neithercut
All right, thanks, David. On the transaction side as expected we did nearly 63% of our full year disposition activity in the fourth quarter for the sale of seven properties containing nearly 2200 units for $332 million.
Five of these assets were in Orlando, which left us with only three properties at the end the year that should all be sold in the first half of 2015. We also disposed of a small property in southern California and recently completed and stabilized unconsolidated Arch stone asset in Phoenix owned in a joint venture with a local developer.
We acquired two stabilized assets in the fourth quarter both in Seattle at a blended cap rate of 4.8% and our partner’s 95% interest and is; soon to be completed project currently in lease up in Emeryville California at a stabilized yield for 4.8%. Now as noted in last nights release for the full year acquisitions totaled $557 million so that includes all the stabilized assets, properties of lease up and the one owned in a joint venture and dispositions total nearly $530 million, which includes the one held in a joint venture, and that was all done in a cap rate spread of about 113 basis points.
Now as indicated on page 27 of the supplements and materials in last night’s press release, our guidance for 2015 assumes a similar level of activity at 100 basis point spread. Now we continue to have assets that we would like to sell, but we are in no rush to do so.
So, if we can source good acquisition opportunities relative to the assets we’d like to sell, we’ll go ahead and make that trade. Now at the present time there is product available for sale in our core markets that we would be pleased on, but the wall of capital anxious to acquire those assets remain significant, pushing cap rates down and pricing up the levels that will likely leave us on the sidelines.
But, like last year I'm sure we will find some investment opportunities either sourced directly or with risks that we can uniquely underwrite and manage that will enable us to sell some assets and redeploy that capital into our core markets that will provide us better long term risk adjusted returns. On the development side we are excited to commence construction on two assets in the fourth quarter, one is in Seattle’s Salt Lake Union submarket where we are building 483 units for $159 million at an expected yield at today’s rents in the upper fives, and one fronting show place square in San Francisco’s, Soma district where we are building 241 units for $164 million, at an expected yield of today's rents in the mid fives.
Fourth quarter starts about the full year to $1.15 billion the highest level of starts in our history that will soon deliver as great product in Southern California, San Francisco and Seattle at weighted average initial yields at current rents for the mid fours to nearly 6%. We also completed $491 million of development projects in 2014 and we currently expect these new assets that deliver low 6% returns on current rents in markets where core product today trades in the fours such as downtown LA, Seattle and Pasadena.
In 2015 we expect to complete $846 million of properties currently under development and 1.2 billion in 2016 and our current forecast are that these deliveries will generate initial yields of the mid fives to mid sixes at current rents, which includes new product in Southern California, San Francisco, San Jose and Seattle and two terrific new developments in New York City, which we will be very proud to show many of you during the June NAREIT meetings. We are not acquiring land for new development today at the rate we are commencing construction on existing sites held in inventory by definition then future starts should decrease from the record level we saw last year.
So over the next two years we currently expect to start approximately $1 billion of new construction projects all on land currently held in inventory and at the present time expect to start $400 million of those projects this year and the balance in 2016 all of, which is self funded requiring no incremental equity capital to complete. So now, we will turn the call over to Mark Parrell who will take you through some important financial messages.
Mark Parrell
Thank you, David. Good morning.
I want to take a few minutes this morning to talk about our guidance for 2015 as well as our new commercial paper program and our 2015 sources and uses. For the year we have provided normalized FFO guidance range of $3.35 to $3.45 per share, at the mid point this equates to 7.25% growth in normalized FFO in 2015, and this is on top of the 11.2% growth we experienced in 2014, and that creates a compound average growth rate of normalized FFO of 9.25% per year.
We also expect to grow our dividend substantially in 2015, raising it from its current level of $2 per share, up to $2.21 per share, which is a healthy 10.5% increase. So, I’ll go through some quick highlights on our 2015, guidance, as David Santee, said, we expect continued growth in same store operations and that should add $0.21 per share or $81 million to our bottom-line.
We see a $19 million or $0.5 per share contribution from our non-same store assets and that does include our leased up. And in addition, we’ve seen $11 million or $0.3 penny per share, expected improvement from lower interest expense and that number is net of capitalized interest.
The interest expense improvement comes from lower expected rates and higher expected capitalized interest, and that’s offset a bit by slightly higher weighted average debt balance for the year. All those good benefits are offset by about $0.04 per share reduction in normalized FFO, and that’s due to transaction activity timing, and to be clear, this is due to the timing of both 2014, and 2015, transactions.
2014, was benefited by the fact that acquisitions occurred mostly in the beginning of the year while as David Neithercut, noted, dispositions were mostly backend loaded. In contrast, 2015, is burdened by our expectation that we will complete the majority of our dispositions in the first half of the year, while acquisitions will be evenly spaced throughout 2015.
I am now going to move on to G&A, we have bifurcated our treatment of this line item, our 2015, normalized FFO guidance anticipates our recurring G&A to be $51 million to $53 million, and that’s slightly higher at the mid point than the $51 million in G&A that we reported in 2014. In addition, our GAAP G&A will include approximately $9.7 million in charges.
We are incurring in 2015, in connection with the adoption of our new executive compensation program. We will also incur a GAAP charge of $1.3 million that will run through our property management line in connection with this program.
This new performance based plan and it’s pretty similar to those and many other REITs, covers the period 2015 to 2017. The old plan which used the time based vesting methodology terminated for executives at the end of 2014.
The accounting rules require that both the time based grant for service in 2014, and the performance based grant for service from 2015 to 2017, both be expensed in 2015. This overlapping and duplicative GAAP charge of $11 million is not included in our normalized FFO guidance for G&A or property management, and one timing note on G&A, we again have many G&A costs that are frontend loaded, and we therefore expect that 60% of our G&A expend to happen during the first six months of the year.
Now I want to take a moment to talk a bit about our new commercial paper program. This week we entered into $500 million commercial paper program, which will allow us to borrow daily, weekly, or monthly at extremely low floating rates of interest.
This will allow us to continue to reduce our already very low cost of capital. I want to take a moment though to put the CP program into the context of our larger balance sheet management strategy, as we have discussed before, the company generally expects floating rate debt to constitute 15% to 20% of total debt.
Our portion of this floating rate exposure comes from borrowings under our unsecured revolving line of credit. We expect to use the new CP program to replace a portion of the amount that we would otherwise have outstanding under our revolving line of credit.
When fully implemented, we expect the CEP program to save us approximately 0.5% or 50 basis points as compared to our line pricing. We have amended our line of credit to ensure that it will be available in the event the commercial paper market is disrupted and we need to repay our CP borrowings on short notice.
We are very pleased to be one of the few real estate companies, who through good balance sheet management have earned market and rating agencies support to do a CP program. Now I want to end with a little color on the sources and uses for 2015.
We are very well positioned heading into the year. We expect to repay approximately $600 million of debt in 2015, which consist of $400 million that’s listed on our maturity schedule as coming due in 2015 as well as about $200 million of high cost mortgage debt that’s due in 2016 that we will be repaying in 2015.
There are no pre-payment penalties associated with that. We will also spend about $700 million this year on development activities.
So, on the aggregate we see about $1.3 billion of cash usage in 2015. Our guidance assumes we fund these uses with $950 million of debt consisting of a $500 million debt due in the first half of 2015 and a $450 million debt due in the second half of the year.
The remaining $350 million will mostly come from operating cash flow, and just the few other debt related guidance assumptions for you. We have about $450 million in hedges.
They are locking an implied ten year treasury rate of approximately 2.5%. The issuance expected in the first half of the year.
We expect to have about $59 million in capitalized interests in 2015. We expect to maintain an average balance on our revolving line of credit or under our new commercial paper program of about $400 million this year, and we anticipate ending the year with outstanding revolver borrowings and or commercial paper out standings of about $400 million and that is modestly higher where we began 2015.
That will still leave us with $2 billion of capacity on our revolver that does not mature until 2018. And now I will turn the call back over to David Neithercut.
David Neithercut
Thanks Mark. So before we open the call to questions, I just want to mention how pleased we all are here at Equity that Steve Sterrett was appointed to our Board last week You all know what a smart experienced capable pro Steve is.
We also know that just as importantly he’s really a good guy. He’s going to be a terrific add to what is already a very experienced and thoughtful group of people.
The entire Board and the entire management team really look forward to working with Steve in the years ahead. So with that Noah, I will be happy to open the call to questions.
Operator
[Operator Instructions] And we'll take our first question from Nick Yulico with UBS.
Nick Yulico
Hi, everyone. As I look at your same-store guidance, the high end of 2015 same-store NOI guidance is for growth of 5.5%, and that would roughly equal 2014.
Can you talk a little bit about some of the biggest factors that get you there? Seems like demand trends are picking up, yet maybe occupancy comps are get tougher you cited through the year, and you still have some worries about supply in relation to that?
David Santee
Well, I think it’s just the - this is David Santee. I think you just have to kind of put all that in a blender and evaluate your risks on a market-by-market basis.
Certainly, as I said in the prepared remarks, DC delivered quite a number of units last year. Many of those properties are still in the low teens or - well below 50% leased up, and you have another big crunch coming this year.
So, I kind of talked about this last year that all roads lead to DC for us. Looking at it another way, if you pull DC out of our numbers, you would have seen a 120 basis point improvement on both Q4 revenue and full year revenue.
So, I think we are very confident about our expectations across all the other markets, but DC being 20% or almost 20% of our NOI can materially move the meter either way.
Nick Yulico
Okay. And then just as what we were hearing that in New York City, you may have been quietly testing sale of an asset to test the condo conversion market.
Can you talk a little bit about whether you have been doing that and kind of your latest thoughts on your Manhattan portfolio in relation to possibly selling some assets at very low cap rates based on the strength in the market?
David Santee
Well, I guess all I can say there Nick is that in the guidance we've given you $500 million of dispositions that does not include any sales of any assets in Manhattan.
Nick Yulico
Okay. Anything as to whether you can confirm whether you were actually testing the market quietly to see how - ?
David Santee
I'd tell you that we believe everything we own is for sale all the time.
Nick Yulico
Okay. Thanks.
Operator
We'll take our next question from Nick Joseph with Citigroup.
Nicholas Joseph
Thanks. David you mentioned the wall of capital chasing deals today, do you expect any impact from a stronger US dollar on foreign demand for U.S.
multi-family assets and could that have any impact on cap rates going forward?
David Neithercut
Well, I think that there certainly is demand from foreign capital, but there’s also a lot of demand from domestic capital, but I think we’ll continue to look at good quality, multi-family assets as a good investment opportunity. And there are frankly so few assets available for sale, I’m not sure that that would negatively impact valuation.
So, that’s certainly an interesting thought, but I’m not sure that it’s one that would negatively impact the demand for asset here.
Nicholas Joseph
Thanks. And then in terms of development, you talked about not backfilling the pipeline as fast as the expected starts, but given the strong multi-family fundamentals and their runway for future growth, how does development fit into EQR's long-term strategy?
David Neithercut
Well, it plays an important part in our long term strategy, but it’s not the only part of our strategy. We continue to be very active and try and look for development opportunities and we’ll continue to do so.
But it’s just - prices have gotten very expensive, construction costs are up, and we’re just not seeing the opportunities to reload that inventory for same rate that we’re putting it into service. And we’ve got, could be opportunities to buy assets in markets, could be opportunities to buy land in markets, and we’ll continue to pursue both and execute what we think are the best risk adjustment returns.
Nicholas Joseph
Great. Thanks for the color.
Operator
And we'll take our next from Dave Bragg with Green Street Advisors.
Dave Bragg
Thank you. Good morning.
David, can you elaborate on the competitive acquisition market that might leave you on the sidelines. Question is as acquisitions have gotten more competitive, to what extent has your cost of capital, namely disposition pricing not kept up the pace?
David Neithercut
Well, I guess you’ve not seen us print any of the big acquisitions that kind of have taken place across the country. Again it's limited, but there certainly have been some.
And we’ve tended to find little opportunities here and there that might be property that are in lease up or properties maybe even under development or just ones that have got different unique risks that we might be able to manage. In addition, we are having this opportunity to buy out our joint venture partner on the field in Emeryville.
And as I said earlier, we don’t have product that we need to sell. So we’re not anxiously looking for almost anything in order to get out of stuff that we don’t want to own.
So we’re just trying to be opportunistic and make trades that make sense. The sheer volume of transaction activity that you’ve seen us experience even away from the Archstone transaction over the past half a dozen of years has come down considerably as we’ve sort of achieved our objective of transforming the portfolio, and we’re just now going to take a little bit more opportunistic approach to the investment side.
Dave Bragg
Okay. And so you target a 100 basis point cap rate spread between acquisitions and dispositions, love to hear your thoughts on what that’s the right spread and is it currently a bit wider than that today when you look across the board at the stuff you could sell and the opportunities that you are underwriting on acquisition front?
David Neithercut
Well, that’s obviously based on what we know, we’d sell if we could find the right opportunities and what we think, we’ll have to pay for those opportunities if we would have acquired some of the stuff that we looked at and underwrote,, but we didn’t buy that spread probably would have been wider because a lot of stuff have traded in the threes. We believe we can manage that business as today at a 100 or so basis point, but we did that in last year with a 113 basis point.
So the guidance is just we think we could do 500 and we think we’ll do 500 on the [indiscernible] and on the sales who knows how it will actually end up, but that’s just the assumptions are made and the guidance that Mark gave.
Dave Bragg
Okay. And the last question is that the investment activity lately specially on the development front has been largely focused on the West coast and can you talk about in general terms as to the changes that you’ve seen in terms of your underwriting of long term growth rates on the west coast versus east coast or total returns potential that seems to be steering you incrementally towards the west coast over the last couple of years away from the east coast.
David Neithercut
Well I mean I guess it’s, we found more land opportunities. Well one thing is that we acquired a bunch of assets in the Archstone spread so that was one reason why you see more on the west coast and additionally we found a great piece of property of 405 in LA.
We continue to find some opportunities in Seattle and believe me the guys on the east coast have been working awfully hard to try and find opportunities there. Very challenging in New York, it’s not impossible.
We got a couple of land sites in Washington that we’ll consider to start building on. We’ve got a couple of sites in Boston that we may build on soon.
It’s probably taking a longer time in Boston for instance to really get the things that we’ve got our eyes on actually to point where we can start construction, but I think most of the reason why we’ve been more west coast focused is the fact that we’ve got four land sites in San Francisco with Archstone.
Dave Bragg
Okay. Thank you.
Operator
We’ll take our next question from Jana Galan with Bank of America Merrill Lynch.
Jana Galan
Thank you. Good morning.
Question for David Santee, I was wondering if you could touch on affordability in your markets, if you could share either the move-outs due to the rent increase in the fourth quarter or where your residents are as a percent with rent as percent of the income by market.
David Santee
Well I think we've discussed this before this that currently we really only measure residents income at time of application so just by that nature they’re going to be able to afford the rent and therefore as we’ve seen in the over the years really, the rent as a percent of income really doesn’t change. You just people making more money are replacing people that can’t afford it.
I will tell you we see a, in the area of move outs due to rent being too expensive that has fallen off significantly. I want to say probably 600 basis points for the year, but a lot of that was really centered in San Francisco that was the key drive, but even San Francisco has stabilized a lot more.
David Neithercut
So historically, we’ve seen rent as a percent of income to be about 20% so that's the way it’s been not only in the existing portfolio, but in the portfolio that we owned in the 90’s it’s a fairly consistent percentage on an average.
Jana Galan
Thank you and then I’m just curious you have had very impressive high occupancy rates. I’m curious if you think this is the results of kind of under supply of housing coming out of the recession or improvement from revenue management?
David Santee
Well I guess I would say, that we’ve never been once to buy occupancy and I think if you look back over the years relative to some of our competitors that we tend to probably run a little lower occupancy in Q4 because we try to optimizing that balance between rate and occupancy. This year we didn’t pull any levels any differently than we have in previous years so this improved occupancy was really just a true function of increased demand and one could argue that in some of these markets.
Look we said, over the past couple of years if you start sprinkling in more jobs that went from $150,000 a month, although we have to – you know, the high 2s that we could see upsized growth, and we’ve discussion recently that you know, look, if things continue the way they are then 97% could be the new 95% occupied in a quality institutional type communities.
Mark Parrell
So it’s really a combination of lots of things, Jana. It’s under supply of new product.
It’s people staying single longer. It’s people interested in living in the high density urban environment.
I mean, there’s all sorts of things that come to play. And we’ve been talking about for the past four or five years that are really now all coming.
getting to a point, Jana, it have given us great occupancy, great revenue growth and a good outlook going forward.
Jana Galan
Thank you.
Operator
We’ll take our next question from Ian Weissman with Credit Suisse.
Unidentified Analyst
Hi, guys. This is Chris for Ian.
I’m just getting back to acquisitions and dispositions and the spreads there. I mean, I get that 100 basis points which you have forecasted for this year, but do we expect that number to come down in the future as the quality of assets that you’re selling, improves, I guess, that’s one.
And then two, do you have an estimate in the terms of the spread on AFFO yield basis, because I imagine those are quite a bit tighter as the older assets are more CapEx intensive?
David Neithercut
I think that that very possible, and also that the CapEx with the percentage revenue will be higher in the disposition at risk and the asset that we’re selling. But that’s a very good point and with respect to that cap rate spread and something that we are noticing.
Having now essentially existed all of the more commodity like markets, much of what will be selling going forward are assets in our core markets that don’t fit our need going forward. We got assets in suburban Seattle for instance.
We’ve got assets to some in New England. Some assets in California that we will be able to sell a cap rates that will be much tighter to those which we will be buying, but that’s a very good point you raise.
Unidentified Analyst
Okay. Great.
And then I guess I just wanted to revisit the 4Q beat. I guess you talked about the reason for it on the resident side and then just getting back to the expense side, I mean, you talk about the initiatives you put in place, I guess what surprised you after the 3Q call that led to you beating it by 40 basis points?
Mark Parrell
Yes. It’s Mark Parrell.
I mean part of that certainly was some adjustments to reserves that we always do at the end of the year, and two of them in particular going in one direction and that was an adjustment or a medical reserve. So all year we spend Chris trying to estimate what our medical expenses will be for our employee benefit plans.
And at the end of the year we drew that up and there was a couple of million dollar benefit from that that we were not anticipating. So that would have come through earlier in the year if we have approximated it correctly, because it is a savings, but we had over estimated the expense run rate for the year for our medical expense number.
And then we had fewer casualties than we bought through the year and that also pushed some money through the system, that doesn’t affect same store, that does affect FFO. But the medical reserve does affect same store and FFO.
Unidentified Analyst
Got you. Thank you very much, guys.
David Neithercut
You’re welcome.
Operator
We’ll take our next question from Alexander Goldfarb with Sandler O'Neill.
Alexander Goldfarb
Good morning. First question is, David, going back to the initial comments on the rent gap.
In the first half you guys said its wide and that’s why you expect the first half especially first quarter to be better than historic, but in the back half you spoke about it compressing and also the impacted supply up. If the first half continues is there upside to the back half or the back half assumes sort of the same strong growth that you’ve seen in the first half or so far year to-date and therefore there is really not upside of the continues of the current trajectory?
David Neithercut
Okay. So we’ll certainly – today we’re running 100 basis points in occupancy above same time last year.
When you get into end of February that’s going to compressed down to 80, when you get down to March that’s going to go down to 60 or 40, which kind of goes back to the question is 97, the new 95? If that’s the case, so -- and depending upon what happens with the new deliveries, you could see some gaping in the peak recently period.
I mean, I think we’re running 96 and change last summer. So, to get a big pickup from 96.5 is a little more difficult than getting that big pickup from 95.
So then we had – I think we should be able to achieve in Q4 of 2015 pretty much the same occupancy that we achieved in 2014. So lot of the pickup is going to be in the first half of this year solely due to improved occupancy.
Alexander Goldfarb
Okay. That’s helpful.
And then on the development, I thought you mentioned that there is one patch that’s delivering in the mid 4 to 6 and then 6 plus on the existing pipeline, just want to clarify that?
David Neithercut
Well, we got to deal in San Francisco that we think we’ll be about – we’ll be a mid 4 delivery at current rents, so that was range from assets there, Alex.
Alexander Goldfarb
Okay. That’s helpful.
And then just finally for Mark Parrell, a two-partner, one is on the CP program is the cost advantage just because the participants in that are subject to less regulatory issues that maybe line of credit lenders on as aggressive, and the next part is as you look at your – where you always about 2015, but as you look at your 2016, 2017 maturities that are above market, some of your other large brethren have spoken about possibly addressing those in advance, so just curious your take?
Mark Parrell
Well, on the CP program, a lot of those buyers are various money funds, also corporates and just that market is very efficient market and it is a lower cost market than the bank market. I’m sure the regulatory charges play into it.
But I also just think that because REITs were not CP participants until very recently, there just wasn’t a lot of air play between and banks frankly got the price of the credit maybe a little wider especially high quality guys like us than they probably should have been to. And I think the CP program we’re going to kind of close that gap.
In terms of 2016, 2017 we have fair amount maturing. We’ll be really thoughtful about and we are already going to pull forward $200 million that are part pre-payable.
We can do that either by pre-funding or we can do that by hedging. And I think with the input of our board we’ll think we’ve heard about that because as you on occasion we have kind of pre-funded these maturities and locked in these lower rates and right now being able to a 30-year potentially inside of 4% is very interesting, I have to say.
So we’ll be very thoughtful about that.
Alexander Goldfarb
Okay. Thank you.
Operator
We’ll take our next question from Andrew Rosivach with Goldman Sachs.
Andrew Rosivach
Hi. Good morning, and thanks for taking my call.
I’m trying to get just to a couple of AFFO numbers and it’s got a couple of pieces. The first is that you guys give better disclosure than anybody on CapEx and you’ve got your CapEx for same-store in 2014, one of the 1800 versus 1200 the prior and that increment just called $16 million is about 4% of our same-store NOI, I was wondering is there a redevelopment component to that?
Mark Parrell
Sure. It’s Mark Parrell, so what I direct you to is there’s a little bit of guidance we’ve given on page 23 and we talk about rehabs is was we call them.
So these are not the $40,000 or $100,000 units tear it down to the studs type of things. These are kitchen and bath reworks that we do, but they do have often a revenue enhancing component and/or at least in part they’re optional, some are asset preservation, but some are optional.
So we do give you some separate guidance on that. So for example for this year there is three real pieces.
The routine piece or replacements $350 a unit and I’ve been about that number for a long time. And that’s carpets and appliance replacements.
Then we got these rehabs I’ve just spoken. And a few years ago that was $250 to $300 a unit and we expect in 2015 that will be $600 a unit.
And we’ve signaled on prior calls that we’re going to do a lot more rehab. We have a lot of opportunity.
Andrew McCulloch
We have yeah.
Mark Parrell
Yeah. So that’s part of that increase the couple of hundred bucks and then we do have a third component, we call it building improvements and that’s all the external stuff, air conditioners on top of high-rises complex to start work all of that.
And what happened really there is the last couple of years had been a bit of a ketchup. So 2014 and we think 2015 if you look at 2013 that number was pretty low much lower than usual.
And that was really us being maybe just a little bit busy integrating Archstone and not doing maybe all the capital projects we had originally budgeted. But I do think we now own more expensive assets and so I would think this 1800 plus we’ll moderate a bit in out years.
I’m not sure it’s ever going to get back to 1400 when we owned our units, which is what it was when we owned again a much cheaper portfolio one of these commodity markets.
Andrew McCulloch
So, that’s the way I guess the way to translate this is you got that 869 for 2014 I can see on the footnotes you gave a sense of where it’s going to be for 2015. So 350 would be kind of a recurring number and the above and beyond would be considered a rehab?
Mark Parrell
Yeah not all in fairness the $600 per unit for rehab some of that we have to do. Some of those are asset preservation, but I would say clear majority of those or things we’re doing with an IRR in mind or return in mind.
And for us we I know that had a mid-teens return and we generally gotten that. So the 350 routine absolutely have to do of that 600 per unit that could easily go down 200 bucks a unit or more if we wanted it to.
But we think right now it is a good use to shareholder capital.
Andrew McCulloch
Do you have the sense just to get apples-to-apples for the couple of your peers, because everybody is kind of all over on this what the burnout has been on your same-store related to that activity?
Mark Parrell
Well it varies we said before in general it will increase revenue by between 10 and 20 basis points. Now we have $2.6 of same-store or pull the revenue.
So it is the big number Andrew this year for example in 2014 on that 4.3% reported number that had no impact and the reason for that is lot of these rehabs were done in Washington DC. And a lot of these rehabs are in their early stages where they’re creating vacancy and not creating income and, because of that you just have no impact on the year.
And but it just will vary year-over-year and some years it will be 20 basis points and some years zero. And we got to reiterate we’re doing this as an asset preservation matter and we’re doing, because an investment matter.
We’re not really trying to change in fact we aren’t really changing our same-store numbers.
Andrew McCulloch
Okay and obviously the increases -- but also under the other pieces that you guys have been touching on is the you’ve been paying off the old Archstone debt and that’s the result that that kind of non-cash benefit is getting smaller. And it maybe you could just remind me a kind of how much it was helping earnings in 2013 versus 2014 versus 2015?
Mark Parrell
Yeah my chief accounting officer is smiling at me, because we spend a lot of time talking about this just in a last day or so. So I’d refer you to page 15, and this is going to be a little technical, but I’ll be very brief and we need to talk more about it we can.
There’s various premiums and discounts that are discussed at the bottom of that page the very bottom of 15. But the net result of all of this is that put aside cap interest for a moment -- but our reported interest expense for the year is within $2 million of what actual cash number is.
All of these premiums discounts plus all the amortization of financing cost and very little net impact on what we report, because some goes one way and some goes the other. So the answer on Archstone and the rest of it is the Archstone debt is certainly disappearing we only have one real large pool in 2017 left.
But in it’s net impact on the company it’s almost effectively is nothing. The interest expense into normalized FFO or regular FFO to that matter.
Andrew McCulloch
And wouldn’t happen to know what that 2 million was in 2014 to 2013, because s I recall it shrunk on much larger number?
Mark Parrell
It was and I don’t have that point of reference with me, but it was a much larger number particularly in 2013. We did from very large pay off in 2013.
And that number came down very quickly so I mean there was certain benefit in 2013 but a lot it didn’t last long I’ll say that much.
Andrew McCulloch
Great. Thanks for the time guys.
Operator
We’ll take our next question from Dan Oppenheim, with Zelman & Associates.
Dan Oppenheim
Thanks very much. I was wondering if you can talk a little bit more in terms of the thoughts on renewal rates in that you’ve done a great job lifting occupancy and I’m talking about 97% is being the new 95 sounds there a bit more focus on pushing rates here give the comments about February and March renewal increases.
Are you basically and possibly accepting that through the move outs could go up move outs due to rental increases could go up slightly more as we get to the spring and summer or is that not a worry at all given sort of the thought that at the time of move in that the affordability is strong enough that they can handle it here?
David Neithercut
Well I mean when you look at the reason to move out being too expensive. And in the whole portfolio is about 10%.
Additionally we have also as part of our some of our internal initiatives and kind of rearranging the lease expiration schedule on the Archstone portfolio. We have moved more leases into the peak months than we previously have.
But we don’t see any slowdown in demand and I mean December just as a data point we saw our leaves increase in December by 14%. So for the quarter it was up 9%, so we continue to see demand there’s been some articles recently the kids are starting to move out of the basement.
I think all of that continues along with even retirees wanting to relocate back into the city there’s just this huge magnet in the or urban core that is drawing everyone there that I think will serve us well and allow us to continue to ask for higher rents.
Dan Oppenheim
Great. Thank you.
Operator
We’ll take our next question from Rich Anderson with Mizuho Securities.
Rich Anderson
Thanks how much of the 4% revenue growth expected for 2015 is in the bag and how much would you say still quote-on-quote speculative? In the bag from that?
David Neithercut
The embedded it’s 2 in change it’s kind of all we’ve been that way last three or four, five years. I mean that’s just taking the rent roll and annualizing it as of January.
But so even we get about probably 40% to 50% of that growth turns into revenue growth only because most of your expirations renewals occur maybe year. So if you’re getting 8%, 6%, 7% renewal increases you’re going to pickup 40% of that on average.
Rich Anderson
Got you. Okay.
And technical question for Mark Parrell, it could what is the benefit may read FFO from the first quarter from pursuit costs?
Mark Parrell
Well refrain to that numbers on page 28.
Rich Anderson
Yes I’m.
Mark Parrell
Yeah so the benefit there actually on the net so just because married FFO defined will be higher we believe than our normalized FFO and will be higher, because we anticipate that are not certain of having a litigation recovery a payment true-ups in settlement of losses. Somewhere in the $10 million $20 million, we put that in the guidance that goes in that same line so you are seeing it there as a big positive so something on the order of $0.04, $0.05 to the positive.
And then we’ll have half the penny to a penny of these proceed cost that we always got back to the married FFO number so that’s what’s going on there. That number will throughout the year decline and more of this pursuit cost will erode that litigation settlement and that’s why the guidance for the whole year for married FFO and our normalized FFO is almost the same number just the penny differing at the mixed plate for a time being.
Rich Anderson
Okay understood. Thanks.
And then last question for me, you’ re not calling bottom yet in DC you may soon but on the counter to that, I guess my question is what’s your view on technology within industry, I mean did you see the strength right now, but to the extent that you’re declining a bottom in DC are may some day is it possible will be soon declining a top or for telling it market Seattle, San Francisco, even Boston and Denver because the technology industry is starting to just look over, over done at this point. Just comment if what you’re looking at and what you’re looking for in those markets from a technology perspective.
David Neithercut
Well, I guess I would say we spend a lot of time here just R&D and researching future opportunities, for technology so I think for the most part were in the beginning stage, just in the beginning stages of technology and the opportunities that will exist going forward. Certainly, places like San Francisco, geographically limited but I don’t see any reason to think that Seattle will slowdown, I mean when you look comparative rent levels to other major cities has plenty of rooms run.
And there is still this, again the magnet, many companies in Seattle that have headquarters or regional headquarters in the suburbs or relocating to the city become batch where the, the younger employees demand to work, so I’m not sure this technology I think it’s a broad-based urban revival.
Rich Anderson
I guess, $40 million evaluation, some DC focuses are starting to call, what’s happen in technology and worried about getting over done, you are not but you’re -- just not seeing any of that not worried about it at all at this point is that a fair statement?
David Neithercut
Well, we will be the first, we met at San Francisco’s ahead bus I’m not just, you’re not suggesting for that and want again but we will also say every time that bus which is come back stronger than had previously, so you look the demographic picture, you just look at the David noted this, the reorganization is happening and you look at as millennial generation where they want to live, work and play. We continue to be very optimistic about want from opportunities in this poor urban centers and that doesn’t mean that they want stumble or bus from time-to-time but we just think over the long term.
We are in a right assets and right markets.
Rich Anderson
Got it, thank you.
Operator
We’ll take our next question from Tom Lesnick with Capital One Securities.
Tom Lesnick
Thank you. Actually my questions have been answered.
Operator
And we'll take our next question from Vincent Chao with Deutsche Bank.
Vincent Chao
Yeah. Hi everyone.
Just a past if I miss this but just in terms of the same store performance for the quarter being ahead of expectations and I talked about the positive early trends that you saw that you discussed in the third quarter continue in nature of the upside. But by the market I was just wondering if there is any particular market, they also do well but any one market really stand out as much better than you had expected as of the third quarter?
David Neithercut
Well, I think when you look at the contribution to the overall growth, they were certainly San Francisco with what did I say 140 basis points improvement and occupancy so that was, typically we’ve seen, we’d this discussion over the past couple of years in that were at San Francisco so under house, why do we have seasonal impact. I think we just done a better job of managing explorations.
In addition to outsize demand in few force, I guess I would say San Francisco definitely surprised relative to their contribution to the occupancy and we would expect them to continue to surprise this.
Vincent Chao
Okay, so not sure that’s the surprise but I guess just couple of mile in questions just to clean up here, it doesn’t sound like equities part of the plan here this year but just curious you ended with 377 million shares, I think it’s going to 380 for the guidance and is that just sort of the equity awards or is there something else going on there.
David Neithercut
Right that just it’s per hour just the effective employee, stock option exercises that we’re predicting throughout the year.
Vincent Chao
Okay, great. And then I think I heard 60% of the G&A spend is supposed to be in the first half of ’15 was that GAAP G&A does that include the--
David Neithercut
Either way you got it. It will be in the first two quarters of year it will be 50% so whether you take our $52 million number or the GAAP 63 it will be the same kind of deferred.
Vincent Chao
Okay. Thank you.
Operator
We’ll take our next question from George Hoglund with Jefferies.
George Hoglund
Yeah, sorry if I miss this but this $0.05 per share of lower NOI from higher OpEx in One Q15 and can you sort of elaborate what’s driving that, I assume part of it’s the, the metal expense true up from 4Q that goes away.
Mark Parrell
Yes, we got a few things, we got $5 million increase in utilities and we’ve certainly noticed here in Chicago it's gotten a lot colder since the December. We’ve got a $4 million increase in payroll and that again these are all very common for us.
And that payroll increase you got raises coming through the system, you’re resetting all your accruals and about a $4, $5 million increase in real estate taxes because we’re again resetting our accrual levels for 2015 as they relate to 2014, so all of that all together is the source of that negative 5.
George Hoglund
And the reasons snow storm in north east will led impact any OpEx in 1Q.
David Santee
On a same store basis probably not, I mean the impact in New York and DC was obviously very minimal. We typically just kind of take a three year average in our budgeted numbers so Boston was the only really had a major impact but I don’t think there will be any material impact on Q1 numbers.
George Hoglund
Okay. And then just last one, looking at acquisitions for the year based on what you guys are seen in the markets, what’s becoming available any sense in terms of geography where there might be more acquisitions done and then also do you anticipate these being just stabilized assets or might there will be some recently developed assets was some lease up?
David Santee
Well, again we just speculating but I would think all of the above, we all working on a deal recently completed deal in Boston and that could get done in the first quarter but other than that, it just, we will be looking at everything, it cause every market and making sure that we again -- we do by make sense related to the this position proceeds. And I would not be surprised we’ve been seen just like we did in 2014 opportunities to buy something’s have gotten a lease up risks, there is some development risk to every time from a completion stand point.
Allows us to they have a competitive advantage
David Neithercut
And if I can add its -- just another thing that’s important when you do your modeling is timing, so our guidance assumes acquisitions occur effectively ratably throughout the year for about 25% of that 500 each quarter. Our dispositions as we instead in our remarks is front end loaded, you think about $300 million that should occur in the first quarter and the last will be spread evenly.
All this can change but that’s what our guidance is premised on and that’s why you see a little bit more dilution as I said in my remarks running through the system.
George Hoglund
Okay. Thanks guys.
Operator
We’ll take our next question from Haendel St. Juste with Morgan Stanley.
Haendel St. Juste
Hi, thanks for taking my question guys. So, David a slight twist to an earlier question, you guys mentioned not ready call the bottom in DC in terms of operations.
Curious how you're thinking DC from an investment perspective at this point? Is DC on your current potential investment, are you underwriting any opportunity there, curious if you are, how you would be thinking about near term NOI or IOR's for potential investment.
David Neithercut
We’re not currently underwriting anything to buy in that marketplace. We have looked at things, we do have a couple of land sites that have been inventory for a while that we may consider moving forward with afterwards we have maybe a 17 delivery might be good timing.
But we’re not underwriting anything and I’ll tell you that we've not seen any real dimension in value at all of assets in that marketplace. We think values have held up very well.
And so I’m not sure that anyone will see any quote unquote opportunity in that marketplace.
Haendel St. Juste
Okay. Appreciate that.
And then following up from earlier comment about your trouble back building the development pipeline and translate with your - the improving outlet for LA market. Curious on your decision to sell the LA partial that you sold during the quarter.
Can you give us some sort of colors of insight of the thought process there?
David Neithercut
Sure. That was part of a four parcel acquisitions that we made in Howard Hughes complex on the 405 in -- where there were four parcels we’re building on two of them.
500 plus units and we didn’t wish to add more to our inventory in that location. And found the builder that paid us a very nice price to buy what we consider to be partial free.
And at some point in time we’ll sell partial four, which is a much smaller parcel and that disposition we did have a nice gain on a disposition relative to the value that we had attributed to that purchase.
Haendel St. Juste
Appreciate that. And then lastly you mentioned the declining home ownership rate as a tailwind there that you and your peers have benefited from the last couple of years.
Curious on the look ahead and specifically how you're thinking about the prospects for a single family recovery today as potentially a risk or a headwind for you. We’ve seen housing estimates out there calling for 20% plus year-over-year starts growth, builders are offering a bit more incentives and we’re starting to see slow improvement on a mortgage availability, which again collectively think slightly more competitive for sale dynamic.
Curious on your thoughts there and then also do you want to broaden that out to include anything else on your sort of risk list as you think about this year even to next year?
David Neithercut
We look at the single family housing national statistics as sort of an interest, and we do as I know we have seen fewer people move out of our apartments in 2014 to buy single family home. We are concentrated today in very expensive single family home market, I mean that was the part of the plan.
And it’s very expensive mortgages are hard to come by. Down payments are significant, and we’re buying many of our residents 40 some odd percent of our units are occupied by a single individual and we don’t sort of see that segment as particularly planned home buyer anyway.
A lot of our residents I mean the 30 year old range we think value of flexibility and optionality is provided by rental housing. So it’s a off a lot of things in our markets that differentiate us a little bit than what you might see in markets where the cost of single family housing is much lower not only in absolute dollars but as a multiple of income.
So I think there are other companies in single family home rentals that I think are much more risk to what you maybe seeing about more focus and ease your mortgage availability etcetera with respect to single family housing set.
Haendel St. Juste
Appreciate that. Just as a quick follow-up, do you guys have perhaps a recent stat on average tenant income or past rent as a percent of income?
David Neithercut
We covered that previously and as David Santee, said we collect that data only at the point of application and point of moving. So we know that the most recent new occupants that number is been in the 20% range.
Rent to income and that's been very consistent across our history almost regardless of the portfolio we’re running in the markets which we’re operating in.
Haendel St. Juste
Thank you for that.
Operator
We’ll take our next question from Michael Salinsky with RBC Capital Markets.
Michael Salinsky
Given the comments on DC about possibly bottoming in 2015, not willing to call a quarter yet, can you talk about what that - what you need to see in that market to give you confidence that market's bottomed whether it's job growth or supply, and then also obviously different mix submarkets there. Where do you expect the pockets of real weakness to be in DC in 2015 relative to something we could see some strength in?
David Santee
This is David Santee. I think first and foremost we have to see jobs, we have to see a greater degree of certainty and confidence from a lot of the government contractors.
That's where it all starts. As far as the supply I mean for the most part, we have a excellent handle on what's coming online this year and we track as soon as someone starts moving there, so we know what's going to probably surplus in 2016.
So, in 2015 your pockets of deliveries had shifted somewhat. So when you look up the makeup of our revenue growth, for 2014 the district for us was positive revenue growth.
For 2014 the I-270 corridor was positive revenue growth for us. This year the deliveries are going to be in South Alexandria.
It is going to have outsize deliveries I-270 corridor weather, Rockville, Bethesda, but at the same time, the RBC corridor is tailing off, so you could start seeing positive rent growth there. So, its just a matter of how strong the good pockets are and how weak the other supplied markets are and to what point in time during the year relative to improving economy and job growth.
Mike Salinsky
Okay. Then just as my follow-up.
Just given the comments about the tough acquisition environment, tough development environment as well and just the positive comments in redevelopment and we think about acquisitions in 2015. Does that make you more lean towards, maybe towards fees with a value added component or do you still see A's as offering the best up side in this point of the cycle.
David Santee
I guess we’re diagnostic, Michael. We bought properties across the quality spectrum and we’ll acquire where we think we can find the best risk adjusted return.
We bought A’s, we bought B’s, we bought C’s and turned into B’s I mean we’re really quite agnostic about that.
Mike Salinsky
Okay. Thank you much.
Operator
And with no further questions, I’d like to turn the call back over to today’s speakers for any additional or closing remarks.
David Neithercut
Thank you all for joining us. We look forward to seeing many of you around the circuit in the coming months.
Have a great day.
Operator
And this does conclude today's conference. Thank you for your participation.