Feb 5, 2016
Executives
Michael Schall - President & CEO John Burkhart - Senior EVP, Asset Management Angela Kleiman - EVP & CFO John Burkart - Senior EVP, Asset Management John Eudy - Co-Chief Investment Officer, EVP, Development
Analysts
Kris Trafton - Credit Suisse Nick Yulico - UBS Nick Joseph - Citigroup Greg Van Winkle - Morgan Stanley Austin Wurschmidt - KeyBanc Capital Markets Jana Galan - Bank of America Merrill Lynch Karin Ford - Mitsubishi U.S.J Tom Lesnick - Capital One Alexander Goldfarb - Sandler O'Neill & Partners Jim Sulivan - Cowen and Company Drew Babin - Robert W. Baird Wes Golladay - RBC Capital Markets Rich Anderson - Mizuho Securities Dave Bragg - Green Street Advisors
Operator
Welcome to the Essex Property Trust Fourth Quarter 2015 Earnings Call. As a reminder, today's conference call is being recorded.
Statements made on this conference call regarding expected operating results and other future events are forward-looking statements that involve risks and uncertainties. Forward-looking statements are made based on current expectations, assumptions and beliefs as well as information available to the Company at this time.
A number of factors could cause actual results to differ materially from these anticipated. Further information about these risks can be found in the Company's filings with the SEC.
When we get to the question and answer portion, management asks that you be respectful of everyone's time and limit yourself to one question and one follow-up. It is now my pleasure to introduce your host, Mr.
Michael Schall, President and Chief Executive Officer for Essex Property Trust. Thank you, Mr.
Schall. You may begin.
Michael Schall
Thank you for joining us today and welcome to our fourth quarter earnings conference call. John Burkart and Angela Kleiman will follow me with comments and John Eudy is here for Q&A.
I will cover the following topics on the call. First, comments on Q4 and market conditions and second, commentary on investment activities.
On to the first topic. Yesterday, we were pleased to report continued strong operating results for the fourth quarter and full year ended December 2015.
In the fourth quarter, core FFO per share increased 17% compared to Q4 2014. For the full year, core FFO was $0.42 per share above the midpoint of the initial 2015 guidance range.
For the five year period from the 2010 recessionary trough, we have grown core FFO per share by 96%, increased our dividend nearly 7% per year and led the multi-family REIT industry with an annual total return of 19%. Angela Kleiman will comment on guidance in a moment which anticipates continued strength into 2016.
As widely reported, an unanticipated slowdown in rent growth occurred in Q4 in northern California. Third-party research firms have reacted by lowering rent growth and occupancy expectations for 2016.
We believe that the Q4 slowdown does not materially change the 2016 outlook for northern California for the following reasons. First, we believe that 2015 rent growth in Northern California was greater than anyone expected.
I'd say, 2015 was an extraordinary year. This context is important, when comparing results because any disruption can appear disappointing.
In this case, we expect to go from extraordinary in 2015 to strong in 2016 which is a scenario that we outlined in our 2016 market forecast in connection with our Q3 2015 conference call and we're now reaffirming that forecast. Specifically, we believe market rents will increase by 7.5% in Northern California in 2016, down from the 2015 average of 10.9%.
Our second comment relates to the typical seasonality in Q4 which in my 30 years at Essex always occurs, although in varying intensity. Demand driven by job growth moderated in Q4 which is typical as many companies wait until after the holidays to add workers.
New apartment deliveries will also vary throughout the year. And so, above average deliveries in Q4, along with lower demand can cause temporary softness until demand recovers, typically by early February.
We estimate that Q4 deliveries of apartments in Northern California represented about 44% of the roughly 10,000 apartments delivered in all of 2015, versus 35% and 25% in Q4 2014 and 2013, respectively. John Burkart will summarize January results in a moment, giving us confidence that the Q4 slowdown is not indicative of a trend.
Our final point relates to our estimation of excess demand relative to supply in 2016. In our market forecasts, again unchanged from last quarter, we project the three Bay Area counties to generate 2.9% job growth in 2016, significantly lower, but still strong relative to the extraordinary job growth of 4.1% for the comparable metros in 2015.
That 2.9% Bay Area job growth equates to around 95,000 jobs. Those 95,000 jobs will produce demand for around 47,000 housing units, assuming the typical two-for-one relationship between jobs and housing demand.
In 2016, we expect the Bay Area to produce around 18,000 homes, both apartments and for sale which represent only 38% of the demand attributable to job growth. With market occupancy around 96%, expensive single family homes and demand well in excess of supply, we believe that great pricing power will continue in 2016.
Rental affordability is often mentioned as a possible cause for lower rent growth. However, these are high income and high cost areas and fortunately incomes in the Bay Area are growing substantially.
San Jose, for example, has a median household income of around $102,000 and personal incomes grew by 7.3% in 2014 and are estimated to increase 6.5% and 7.1% in 2015 and 2016, respectively. In Santa Clara County which includes San Jose, monthly rents in the Essex portfolio average around $2,500, as compared to median rents in San Jose of around $2,200.
The median income will allow someone without a roommate to rent either the average Essex apartment or the medium-priced apartment in the metro area. Nothing in this discussion should imply that we lack concern about the U.S.
economy, recent market volatility or the resiliency of tech jobs, all of which are risk to our market outlook. If economic conditions worsen, we may not be able to achieve the macro assumptions driving our forecast, including 2.8% U.S.
GDP growth and 2% U.S. job growth.
We see nothing in our markets that would indicate that tech jobs are imploding. To the contrary, the tech markets continue to do well, as indicated by San Jose's 4.4% December over -- December year-over-year job growth.
Further, our analysis of the largest tech companies indicates that they are growing in market capitalization and generating huge amounts of cash. Who would have thought 10 years ago that Alphabet and Google would be the world's largest listed companies?
A comparison of the top 10 U.S.-based tech companies against the top 10 non-tech companies shows just how much the world has changed. The top 10 tech companies are worth around $2.8 trillion, 21% more than the non-techs and have $556 billion in cash, more than twice as much as the non-techs.
Approximately $1.8 trillion of the equity capitalization of the tech leaders was created in the past 10 years, over 3 times the non-tech. Finally, while only three of the non-tech leaders are based in the Essex markets, all of the tech leaders are headquartered on the West Coast.
We clearly don't see the end of large investments in technology in the foreseeable future and believe that our portfolio is well-positioned for this continued growth. To the second topic, investment activity.
So far acquisition markets have experienced little impact from global economic conditions, cap rates have not moved much. At this point, A quality property and locations trade at around a 4.25% cap rate using the Essex methodology, but more aggressive buyers are often sub 4%.
B quality property and locations typically have cap rates 25 to 50 basis points higher than A quality property. We're seeing three significant headwinds affecting development in the West Coast markets which we believe will moderate apartment supply going forward.
First, construction lenders are sizing construction loans based on loan to cost ratios of between 60% and 65%, down about 5% from a few months ago. Second, cities continue to increase demands from developers in the form of low income housing units, higher fees and costly improvements.
Finally, construction costs have increased around 10% in each of the of past two years despite declining commodity prices, as skilled labor forces are inadequate to meet related construction activity. Obviously, this lower housing supply is beneficial to the Essex portfolio overall.
As previously announced, we sold the 296 unit Sharon Green Apartments in Northern California for $245 million or $828,000 per unit, at a cap rate in the high 3% range. We used 1031 exchanges to reinvest the proceeds of Sharon Green into three properties that are detailed in the press release.
We estimate that core FFO will increase by approximately $1 million in 2016, as a result of these transactions. Our business plan for investments is outlined in the press release.
We hope that economic uncertainty will bring more transactions to the market and that financing rates remain attractive. Depending upon the stock price, acquisitions may be funded as part of our co-investment program or on our balance sheet.
We currently have two properties in contract to be sold. Similarly, the use of proceeds from dispositions will also be strongly influenced by the stock price.
That concludes my comments. Thank you for joining our call today.
Now I'll turn the call over to John Burkart.
John Burkhart
Thank you, Mike. 2015 was a great year in the West Coast markets.
Our results exceeded our initial revenue guidance in all three regions for the combined Essex BRE portfolio and expenses were favorable to guidance leading to an exceptional 10.7% NOI growth, the highest in 15 years. Our outperformance was attributable to job growth exceeding expectations and lower than expected housing supply.
As of December 2015, our markets added 361,000 jobs, compared to December 2014, 40 basis points higher than our original projection of 2.5%. A total of 63,000 new units of supply, both multi-family and single family was delivered into the market in 2015.
That's about 6,900 units below our original forecast, largely for the reasons that Mike mentioned including, labor shortages, municipal delays, rising costs and more stringent lender underwriting. The supply/demand imbalance is the key factor behind our market strength.
We estimate, assuming two jobs creates one unit of demand for housing, that the 331,000 jobs created is equivalent to about 165,000 units of housing demand, compared to only 63,000 units of new supply delivered, meaning demand exceeded supply by over 2.5 times. The fourth quarter which is the low point in seasonal demand and rental rates in our markets, was relatively strong across all three regions, with the 7.5% increase in gross revenue, compared to the fourth quarter of 2014.
Achieved rents on new leases were up 8.6% in the fourth quarter, compared to the fourth quarter of 2014. We have made great progress in our management of the BRE portfolio.
However, we still have more work to do with respect to refining unit amenity pricing, lease expiration management and renovations. Therefore, for the purpose of comparable sequential results, the Essex legacy portfolio provides the best insight.
Adjusted for occupancy changes, the Essex portfolio achieved 1.6% sequential revenue growth in the fourth quarter of 2015, the same as 2014. We continued to find opportunities with our renovation program.
We increased the number of units renovated in the same-store portfolio143%, from 254 units in the fourth quarter of 2014, to 618 units in the fourth quarter of 2015. The scope of the unit turns are site-specific based on opportunities in the marketplace.
Now I will share some highlights for each region. The Seattle market continues to absorb new supply and push rents outside of CBD higher.
Revenues for our Seattle CBD portfolio increased 5.3%, while revenue for the majority of our portfolio which is located on the east side near Bellevue and Redmond, grew 8.3% for the fourth quarter, compared to the prior year's quarter. According to Axio, the Seattle market had the strongest year since the Great Recession, ended the year with approximately 8% year-over-year rental growth as of December 2015.
In the Bay Area, the successful technology companies continue to lease or pursue space to grow their companies. The technology-driven San Francisco peninsula and Silicon Valley markets absorbed over 1 million square feet of space in each -- in the fourth quarter of 2015 or 50% of the total absorption for 2015.
Alphabet leased space in Alameda, North San Jose, Shoreline. YouTube, a division of Alphabet leased space in San Bruno.
And Microsoft recently submitted plans for a new campus in Mountain View, with construction expected to begin next year. Southern California region continues to be strong, just driven by solid job growth in each market.
The 8.4% NOI growth rate achieved in 2015 was the highest in 15 years. We expect the momentum we saw in 2015 to continue into 2016, given the limited new supply in the Southern California region, although we do expect some challenges in the downtown LA, as that local market absorbs the planned deliveries.
Rental increases in the San Diego market have increased each year since 2010 and ended the year up 7% over the prior year according to Axio. I'm pleased with our 2015 results and although I recognize the real economic risk and concerns in the marketplace, the current conditions that we're experiencing in our markets, gives me confidence that we will achieve our plan outlined in guidance.
Our portfolio occupancy as of February 2 is at 96.1%, consistent with our budget and our net availability out 30 days stands at 5.3%. We're positioned well to take advantage of the spring rental season.
Looking forward into 2016, we again expect demand to substantially exceed supply in our markets by over 2 times, leading to continued rental market strength. In January of 2016, our average achieved rent for new leases for our three regions was 2.4% above our achieved rent in December of 2015, consistent with our budget.
I think our momentum positions us well for 2016. Thank you and I will now turn the call over to Angela Kleiman.
Angela Kleiman
Thanks, John. Today I will briefly review 2015 results, then focus on 2016 guidance and provide a balance sheet update.
For 2015, I'm pleased to report that our same-property revenue growth for the full year was 8% which exceeded the midpoint of our guidance. Same property revenue growth and NOI growth for the combined portfolio which consists of the last three quarters of the year was 7.6% and 10.1%, respectively.
Both of these also exceeded the midpoint of our most recent guidance. On to 2016.
We anticipate another strong year, with 11% projected core FFO per share growth, primarily driven by same-property growth assumptions. Top line growth of 7% at the midpoint reflects our expectation of continued favorable supply/demand relationship.
For reference, this midpoint is 25 basis points higher than our initial guidance for 2015 which was 6.75%. We're projecting higher operating expense growth of 3.75% at the midpoint.
Controllable expenses are expected to increase modestly at around 1% for the year, therefore, the two key drivers to expense increases are as follows. First, higher utility costs.
Note that 2015 utility costs increase was only 0.3%, so very muted, primarily due to water conservation and second, an increase in our allocation to property management expense. This is consistent with what we've previously communicated.
We will review this allocation on a regular basis, in conjunction with our transformation plans. The new management fee allocation equates to 2.4% of revenues which is less than 3% commonly used within the industry.
The resulting bottom line is that we're expecting another strong year, with 8.5% NOI growth at the midpoint. As for G&A, the increase by 5% of the midpoint is primarily due to our new corporate headquarters lease.
The offset to this expense as discussed on the previous call, is the yield from reinvesting the proceeds from the sale of our former Palo Alto headquarters, thereby the resulting net impact of FFO is about a $0.01 per share. For the first quarter of this year, we're projecting core FFO per share at the midpoint to be $0.03 below fourth quarter of last year.
The reduction is attributed to one-time items such as favorable variance in the fourth quarter in property tax for the legacy BRE portfolio, generating $0.04 of core FFO per share. In addition, we have recently sold several properties, including Sharon Green and have not fully redeployed those proceeds.
The result is a $0.01 per share drag on the first quarter, compared to the fourth quarter of last year. Other assumptions for our guidance can be found on page 5 of the press release and S-14 of the supplemental.
Moving on to the balance sheet, we repaid $150 million of private placement bonds in January and have assumed an unsecured bond offering in our guidance for 2016. The only noteworthy maturity remaining in 2016 is the $200 million term loan in the fourth quarter.
We have several options available to refinance this debt which allows us to be opportunistic. We generally favor refinancing our maturities with unsecured debt that is 5 to 10 year in term, depending on the interest rate curve and the related spreads.
Lastly, we're ahead of our schedule in reducing our net debt to EBITDA to 5.8 times, due to substantial growth in EBITDA. Based on recent $215 stock price, our leverage or debt to market cap is at 27%.
In comparison, heading into the great 2008 recession, our leverage was 35% at the end of 2007. Therefore with our $1 billion line of credit extended to 2021 unfunded commitments of $230 million which is below 3% of total market cap and with a light maturity schedule over the next several years, we're well-positioned to be opportunistic and to weather any potential capital markets dislocation.
That concludes my remarks and I will now turn the call over to the operator for questions.
Operator
[Operator Instructions]. Our first question comes from Kris Trafton with Credit Suisse.
Please state your question.
Kris Trafton
Just wanted to dig a little bit deeper into the same-store revenue growth guidance. It looks like you're modeling about 100 basis point decrease in the revenue growth rate, but since 2015 rent growth was about 70 basis points higher than 2014.
Would it be safe to assume that maybe there's 50 or so basis points in higher loss to lease there? And then, does the -- I appreciate the San Francisco slowdown, but does that really get you all the way down, to the revenue growth rate guidance that you have for 2016?
Michael Schall
This is Mike and if I miss a piece of your question, please go ahead and correct me. But our general thesis has been that Northern California has obviously been the strongest market for a long time and Seattle right behind it.
But over time, we expected Southern California to slowly improve, while Northern California which was hitting these double-digit NOI growth rates would slowly decline. I think that we're still anticipating that process to occur, although the resiliency in the tech markets has been a little bit surprising to us, obviously a positive surprise.
And so, I think the numbers this year, we have -- again, if you go to the forecast, the market forecast -- we have Northern California at about 7.5% and our guidance is marginally higher than that. And so, we're expecting a little bit of loss to lease usage.
That would with the delta in the two different numbers. So does that make sense, as it relates to Northern Cal?
Kris Trafton
Right. It just seems like that would imply a pretty strong slowdown, given the loss lease is higher this time this year, than versus same time last year.
Michael Schall
Well, it was at the end of the year, loss to lease was 2.8% and so it decelerated a lot in Q4. Of course, Q4 was a dip and it is higher at the end of January than it was at the end of December.
Again, you have the impact of what we think happened. Again as I mentioned in my comments, we had lumpy supply hitting the market in Q4 in Northern California.
And when that happens, some people that are trying to lease up their apartment buildings become more aggressive, with respect to concessions and/or rent levels and when that happens everyone else adjusts along with it. And again, this is within a period that you always have a lower demand for a variety of reasons.
And so, you have lower demand. You have too much hitting the marketplace and owners reacting very aggressively.
I think that, that as John Burkart has pointed out has largely run the course, because demand has returned to normal levels. Some of those lease-ups have adjusted in price.
And as a result, the world looks like it's more or less on track for what we thought was going to happen. So again, from my perspective, the fourth quarter is the least relevant quarter.
And I know, seems like the analysts focus on it many times over the last 10 years and I think that they give it too much weight, in terms of the overall relevance of the quarter. It's the least relevant.
Things can happen, just given the slowdown in demand and I think that's what happened this year and it's happened many times before.
Kris Trafton
And then second, looks like you're going to be a strong net acquirer next year too. And even though you have a near historic low cost of capital and price, private valuation in apartments hasn't probably peaked yet.
Valuations are still pretty expensive. Is this mostly a function of your implied cap rate relative -- or your price relative to NAV?
And then, I guess, generally what's the rationale for being a strong net buyer this year, when peers across the board are heavy net sellers?
Michael Schall
I think we're going to be a more aggressive seller and a more aggressive -- well, not a more aggressive buyer, we're going to be consistent on the buy side and we're going to be a more aggressive seller. The question is how we fund that activity?
And we have a co-investment program, that if we don't like the stock price -- in other words, if we think the stock price implied return is higher than the asset that we buy, we're obviously not going to issue the stock in order to buy it. So we will go into a co-investment type function.
I think as I look back at many years of doing this, we do best when there's a disruption in the marketplace and assets can sometimes be mispriced. And if that happens, we want to be ready to do so.
Again, I think the chances -- of exactly where we fund it, change every day, it's change with the stock price. Based on today's price, obviously I would not be excited about using our stock.
But if you go back three months, our stock price and the markets in general have been all over the place. And we can't tell you what's going to happen in the future.
We just recognize it's a very volatile period of time. And I guess, we would ask people to trust us, to make wise decisions with respect to how we conduct ourselves in the investment markets.
It is possible that we won't do nearly that much in acquisitions, if we can't find transactions and we -- relative to our cost of capital that makes sense.
Operator
Our next question comes from Nick Yulico with UBS. Please state your question.
Nick Yulico
Mike, I think at one point you had said that, back in November when you were looking at the sale of Sharon Green, you contemplated doing a stock buyback, instead you went to 1031 acquisition route. I mean, looking at your stock today, it's lower than in November.
And presumably, you would still go out and do a sizable disposition and potentially buy back your stock. I mean, how are you thinking about that today?
Michael Schall
The answer is we can't possibly predict. It's all over the place.
And it's hard to run a business and enter into transactions that take what, 60 days to close and expect anything with respect to your stock price. As it relates to Sharon Green, you're right.
Originally, we had intended to1031 exchange around two-thirds of the proceeds, pull forward a dividend in order to create some money that we could use for a stock buyback. We changed that plan when the stock was in the $230 to $240 range and decided to 1031 exchange everything.
But that demonstrates how we think about the world. We try to again, make good decisions with our eye focused on building NAV per share and building cash flow per share.
And it's worked out for us really well over a lot of years and we'll continue doing that going forward. But to your point, it is incredibly difficult to plan exactly what we're going to do, when the world is changing so much.
And I would say the same thing is true, with respect to our guidance. We issued our market forecast last quarter.
Many may argue that the prospects for GDP growth are not nearly as good today, as they were just a couple of months ago. But the reality is, who knows?
We're using a number that economy.com, the 2.8% GDP growth, with the expectation that the economy will improve as we go through 2016. But the reality is, we don't know that either.
We try to again, react to the business, keep our eyes focused on the transaction activity out there and then make the decisions. We expect this to be a challenging year, from the perspective of uncertainty and volatility.
And again, I think that we generally do well in that type of environment. Certainly, with respect to transactions because things tend to become mispriced and/or there -- it could cause sellers for example, the uncertainty often can cause sellers to become more interested in selling.
So maybe we'll see more transactions hit the marketplace. I know on the development side, the construction side, there cost increases and other factors have caused development deals to not pencil the way that developers had hoped that they would pencil.
And that could lead to some other opportunities in that area. Again, I don't know what's going to happen this year.
And to any great extent, there's so much volatility out there. But we think that we have produced a scenario that makes sense, given the broader environment and we will see what happens.
Operator
Our next question comes from Nick Joseph with Citigroup. Please state your question.
Nick Joseph
You talked about Southern California improving and Northern California moderating. When would you expect Southern California to actually catch up to Northern California, in terms of absolute revenue growth?
John Burkart
You're talking year-over-year, not in 2016, not likely -- this is John Burkart, I should say. But 2017, it's a little bit early to tell, but we're seeing good strength out of Southern California.
We're pleased with what's going on out there and it's fairly solid across the markets down there.
Nick Joseph
And then in terms of maybe the relative strengthening of Southern California, versus the moderation in Northern California, would you expect without giving 2017 guidance, would you expect them to meet somewhere in between? Or would you expect Northern California to come down to where Southern California is or conversely the other way?
Michael Schall
Now you're going into the unknowables, obviously when you get into 2017. That's far enough away, that it's difficult to see that far, because the world is changing as you know rather quickly.
But I will say that, the other point that I made in my comments what is the impact of wealth, this incredible wealth that's been created by Alphabet -- and I think I said Google, I meant Apple in my comments -- the tremendous amount of cash that's there, the wealth that's been created, et cetera. What is the long term impact of that on the marketplace, as you look out two or three years?
And we don't know the answer to that. We think it's pretty positive.
And as an example, we can cite what happened when Bill Gates decided to move Microsoft to Seattle and really form that business in the Seattle market. I think it transformed Seattle in ways that we can't really understand.
There are books that are written about this and we've talked about them before. But again, this incredible wealth generation will increase economic activity, we know that.
It will bring the best and brightest people into the marketplaces and those that own these companies will reinvest those funds, in ways that are generally very, very good for the economy. So that is part of the equation that's difficult to predict, as you get beyond 2017 and 2018.
Although hey, I wouldn't count the tech markets out of the ballgame, with respect to growth rates in 2017 and 2018 because of this factor. Again, it's hard to understand it exactly right now.
But looking at Seattle as an example, I think you'll see continued development in these markets for a longer period of time.
Nick Joseph
Then just, you talked about the loss to lease in the portfolio. So if 2016 plays out how guidance in your market growth assumptions assume, what would you expect the loss to lease in the portfolio to be at the end of 2016?
Michael Schall
Typically loss to lease will peak in July and the number will be roughly half in December, what it was in July. So last July it was around 7% to 8% -- I think it was 8%.
And so, you would expect December to be around 4% and it was 2.8%. So it was a little bit less.
But again, we attribute that to the unique factors that occurred in Q4. I don't think that's a normal deviation.
So but I would expect another good year. And I think that we will peak in loss to lease probably in July and somewhere around 7% is what I would guess.
Operator
Our next question comes from Greg Van Winkle with Morgan Stanley. Please state your question.
Greg Van Winkle
Just wanted to get a little more color on Southern California. If I'm not mistaken, I think your guidance actually suggests a little bit of deceleration in same-store revenue growth there from 2015 to 2016.
So just want to understand that a little better. Are there certain sub markets driving that?
If I look at some of your peers, it looks like some of them are actually expecting acceleration. So I don't know if that's a difference in sub markets or if it's possible you guys think you'll see some acceleration too, but you're just being a bit conservative for now?
John Burkart
This is John. We tend to be a little bit conservative and try to be thoughtful in how we're looking at the world.
And so yes, 2015 was an exceptional year, no question about it. We think 2016 will be very strong.
We've laid out the numbers as far as job growth and supply and the market is still very supply constrained. So we do expect 2016 to be a very good year and I think it's very positive.
We're not anticipating that market slowing down. It's doing very well right now.
Greg Van Winkle
And then, being in the center of the tech world in San Francisco, I'm curious what your thoughts are on Airbnb? We're seeing some of your competitors, start to discuss partnering with them.
And I'm just curious whether you're viewing Airbnb as potential opportunity at this point? Or more of a threat or something you're still trying to figure out?
John Burkart
Yes, I think with -- this is John again. I think with Airbnb or any of these sharing economy type entities, what they're trying to accomplish is really deal with one of their issues which is the prohibition of the leases to sublet space.
So a lot of the discussion, people -- I think people think that they're trying to move the apartments into hotel-type situations. And that's not really the case or at least not what I've seen or heard.
It's really a matter of trying to work with the landlords that -- to encourage the landlords to allow their residents to under certain circumstances move forward and sublet some space. And that concept is in exchange for a very small fee to the landlord, that is really their goal.
From my perspective, there's a couple of issues out there that are pretty important which includes municipalities who commonly forbid this. So that would be another issue.
And really the biggest issue is, our resident satisfaction for our current resident. So weighing a relatively small fee, versus the resident satisfaction or the impact to the quality of life to our residents, really doesn't seem like a program that would make sense.
We're aware of these things, we watch these things. But it's -- I don't think it's something that you're going to see anyone jump into in a big way.
Operator
Our next question comes from Jordan Sadler with KeyBanc Capital Markets. Please state your question.
Austin Wurschmidt
It's Austin Wurschmidt here with Jordan. Thanks for taking the question.
Given your comments, I guess, on the dislocations you're seeing today in the construction lending market, I was just curious if you guys were looking at any mezz opportunities today?
Michael Schall
Yes, this is Mike, Austin. Yes, we're.
It's one of the areas that we're looking at. In the development area, we all know that there's permits that are being pulled.
And those generally speaking do not meet our underwriting criteria for, to get us excited about a development. But we're looking at some of them as it relates to a joint venture type opportunity which could include potentially a mezz type of transaction.
So yes, definitely something we're looking at.
Austin Wurschmidt
And then in kind of in a similar light, I guess, given the credit market disruptions. And then you mentioned even some supply challenges in downtown LA, is that -- are you seeing developers bring market -- bring assets to market, just looking to kind of unload today, amidst some of the disruptions?
Michael Schall
It's Mike again. We just don't see that much transaction volume out there of the property that we want to own.
There are transactions. If you look at broader transaction markets, there are plenty of real estate [indiscernible] trading hands, but we tend to be very focused on more of the urban and the higher quality suburban areas, suburban transit for example areas and so we're very selective.
And that product does not come to market often. And when it does, we're obviously very excited about it.
So again, it's hard to anticipate exactly what is going to happen, given all this disruption. We hope for a more active transaction market going forward and if we find that, then you can expect us to be pretty active.
But we just don't know at this point.
Operator
Our next question comes from Jana Galan with Bank of America-Merrill Lynch. Please state your question.
Jana Galan
Just a quick follow-up on the investment market and acquisitions, as you're looking at potential market disruptions, are you considering any markets outside of your current geographic footprint?
Michael Schall
No, we're not. We have identified the markets that we want to be in and we're going to stay focused on them.
And I think our reputation as a local sharpshooter is important to us and anything outside of our existing markets would be viewed as deviation from the plan. So no, we're not looking at anything else.
Operator
Our next question comes from Karin Ford with Mitsubishi U.S.J. Please state your question.
Karin Ford
Have the unique drivers that you described in Northern Cal that drove the rent weakness in 4Q 2015 already reversed in January or is it too early to tell?
John Burkart
Yes, this is John. Let me give you some insight there.
I'm going to give you some rents here. This is year-over-year rents, so you can get a feel for what was going on there.
So in November, our achieved rents on new leases were up about 10.4% in Northern California. In December, that number dropped to 4.9% and that's what everyone has noted.
In January, we went back up to 8.9%. So January turned around and was much better for us in Northern California.
And those rents in January, of course, are above December rents and above year-over-year significantly. It's a little early to tell at this point in time, because again, there's still not a lot of transactions that go on in November, December and January.
But what we're seeing is very positive. It's consistent with our plan for the year and we feel good about things.
Karin Ford
Would you say January's back to normal seasonality or is it a sharper snapback?
John Burkart
No, it was a sharper snapback.
Karin Ford
Okay.
John Burkart
Really mirroring the drop in December.
Michael Schall
And let me just interject for a second? Sorry about that.
But consider, again, I think a lot of it was supply-driven, a lot of supply hitting the market in December and move-outs to buy homes. I think there was a piece of that in that -- with Fed interest rate increases, more people went out and bought a home.
And so, we had more move-outs to buy homes. So there were a number of supply factors again hitting in the seasonally lowest demand period.
So it makes sense -- what John said, I think makes total sense, that there was a relatively sharp snapback, as soon as those conditions normalized.
Karin Ford
And just lastly, can you talk about any trends you saw in your current lease-ups and give us any details on your planned new starts for this year?
John Burkart
I'll talk about the lease-ups and then I'll have John talk about the starts. But on the lease-ups, what we saw is really a tale of two stories.
We have the MB360, where we continue to power-on with high lease-up velocity. In that particular case, we lowered our net effective rents a little bit to keep velocity.
In Epic, we kept rents a little bit higher. We have a Phase I and phase II leasing out of the same building.
And in that case, our velocity went down a little bit, but again all of this is according to plan. So overall, we finished up the One South Market lease-up in the quarter.
Epic, we're very close, we're over 90% and MB360 is flying along as you can see. So the concern that people had, I certainly share.
We read the papers and we listen. Reached out to an awful lot of people and of course, including the managers that are running the lease-ups and had good conversations with all of them.
And their view was, this is really consistent with seasonal issues, with some level of -- as far as demand goes and then the supply impacting the rents. So hopefully that helps.
And I'll let John talk about planned development.
John Eudy
We anticipate three starts this year, around roughly in the mid $400 million to $500 million range, all three of which have older land costs and entitlement costs, that were prior to the big spike that we've seen in the last 1.5 year. We're going to be facing the current construction costs, of course, but because of our basis is much lower, that's why the starts make sense.
I can say, if I was out to go transact on the same deals today or at least over the last six months, with current land prices and fees, exactions from the cities, we probably wouldn't be able to do the deals. Hence, we have what we have in the box and we anticipate it happening by the end of the year.
Karin Ford
Can you tell us which markets they're in and what your expected yields are?
John Eudy
Sure. One is in Southern California in a prime market and one is in Silicon Valley in a property, that you're probably aware of that we bought out of bankruptcy in, right after the 2010 meltdown, at a very low land basis.
And then, the other one is in Northern California in a ground zero location.
Operator
Our next question comes from Tom Lesnick with Capital One. Please state your question.
Tom Lesnick
I guess, starting off, Angela, with regards to the balance sheet strategy, I was just wondered if you could kind of walk you through your rationale on putting out a preferred issuance to replace the redeemable preferred issuance this year? And also with regards to the Fannie Mae issue, I guess, just given the amount of capacity you have on your line of credit and the expectation for another unsecured issuance this year, what's your rationale behind all of that?
Angela Kleiman
First part of your question as it relates to preferreds, it's a very small amount. It's only $73 million.
And so, in terms of the thinking potentially to refinance, it's really to keep the flexibility of having a preferred equity tranche. We haven't decided that we would execute that plan, but it is a part of our guidance just as a base case.
And as far as this -- I wasn't sure what you are referring to in your second question. Can you repeat that?
Tom Lesnick
Well, it's the Fannie Mae credit enhanced issue from this quarter, correct?
Angela Kleiman
Okay. The total return swap on the refinancing on that, essentially it just -- it was to lower our interest rate.
It's $1.4 million in savings. The $4.3 million non-cash write-off was essentially the unamortized loan fees.
So it was just an economical decision that was in our favor, in terms of the cost of debt. Is that what you were looking for?
Tom Lesnick
Yes, I was just trying to weigh that against the cost of having a more complicated debt stack, as opposed to one that's more simplified. But just keeping it to unsecured.
Angela Kleiman
Actually, the structure itself is more simplified. And so, if you want, we can talk a little bit more after the call.
But this is a SIFMA plus 70 and the other one was a Fannie credit enhanced. So the trade-off in terms of structure, it's not more complex.
Tom Lesnick
Okay. And then my other question was just, can you provide an update on Phase III and the progress with BRE in that regard?
John Burkart
Sure. Yes, this is John.
From the BRE perspective, as far as the legacy portfolio, we've certainly come along way. As I mentioned in my remarks, some of the opportunities we still have going forward, specifically with that portfolio relating to amenity -- refining the amenity adjustments and expirations.
And the expirations have been commented on several times, but for clarity, clearly we can fix that within a 12 month period as the lease expires and force things into a certain bucket. The problem is it's not the best thing to do economically.
Typically you're better to work through that over a couple year period and not force people to take actions that are inconsistent with the market. So we just try to move it on the margin and that's what we're doing.
As it relates to the amenity adjustments, that takes several years to get right. And frankly, on the Essex legacy side, we're still refining that as well, trying to really connect with how the market perceives the different valuations of our similar unit types and make adjustments is an ongoing effort at our Company.
It just needed a lot more work on the BRE side, as they really just started that revenue management process. On the big picture, on the expense side, things are in pretty good order there.
We now have the BRE portfolio, legacy portfolio performing on a controllable expense basis, maintenance, admin and those types of expenses, on a per unit basis below the Essex portfolio. And that makes sense, that portfolio's a little newer than ours.
And so, we've done an awful lot of work and we have that in very good order. From a management perspective, we have great people and that is completely intermixed throughout the portfolio.
So there is no Essex or BRE assets. They're all Essex assets and how we manage them is almost exactly the same.
There's a few nuanced items that are getting cleaned up, but basically almost 100% the same. That's come along way and we're very pleased with where that's at.
On the renovation, the last big piece, that piece takes time. Again, our renovation program, we're pretty focused on making sure our product meets the market exactly.
It's a very asset by asset program. And so, we've mentioned we have launched it which we have.
2016, we'll have a greater focus on the BRE portfolio as a percentage, than we will on the Essex portfolio. And that's a switch from this last year and we'll continue to explore those opportunities.
Hopefully that answers the question.
Operator
Our next question comes from Alexander Goldfarb with Sandler O'Neill. Please state your question.
Alexander Goldfarb
So a few questions here. First, Mike, can appreciate your comments on tech and the jobs out there in your opening remarks.
Looking, I guess, what was a little surprising is looking at your job forecast, the latest one in your supp today, versus the one a year ago, the job growth forecasts are sort of similar. And yet obviously, the news headlines today are clearly fresher than they were a year ago.
But Twitter, Yahoo, you see some of these companies that are in the news, whether for business model issues or space giveback on their office use. And just trying to reconcile the two, what would be the things that you guys would look for that would tell you something is happening -- a red flag out there that would tell you that things may be changing?
Because the outlook that you gave in your job picture is a bit different than sort of the sentiment, if you read the newspapers or speak to folks? Not your folks, but speak to on this side of the country.
Michael Schall
Yes, Alex, it's Mike. The one point, is that we pretty dramatically outperform the job forecast last year.
So yes, this year as a forecast is pretty similar to last year, but you had the large outperformance in the middle of that which we didn't expect, obviously. So we're going back to a, what we consider to be a more sustainable job forecast.
And so, going forward, how do we detect that things are different from plan? We would use our own portfolio as being a primary source.
Typically what happens in the portfolio, when you look at 30 day forward availability and some of the other portfolio metrics, you will see dislocation happening more quickly than the data vendors will pick it up, generally by one or two months. So we would generally see that a hiccup happening right in the rental activity and the forward availability.
So we'll look for that and that will be the primary trigger to focus more effort on what's going on. In terms of what we're most concerned about, a lot of people talk about the unicorns out there.
And we're less concerned about them, more concerned about the large tech companies. Because when you look at the number of employees, it's pretty dramatically different.
Again, back to our top 10 tech public companies, there's about -- they have about 165,000 employees in the Bay Area, whereas the top 20 unicorns have about 11,000 employees in the Bay Area. So we're clearly more concerned about the top 10 or the big tech companies.
But we're also on the flip side, we also recognize that they have such tremendous financial capabilities, again the amount of cash that they have, the amount of growth that they've generated, the office space that they're leasing and the overall commercial activity. There's nothing to us that appears to be a hiccup in what their activities are.
And that is what's really driving or anchoring our forecast for next year.
Angela Kleiman
And Alex, I just want to address your comment about office space. Because we saw the same thing which was Google and Apple, they were pulling back in their office lease in the East Coast.
But when we looked at the whole -- the big picture, we also recognized that they expanded their office space here close to headquarters. So there's been a conscious decision to try to be more centralized.
But net office space as concerned, they've not decreased in that. The news about Yahoo laying off 700 employees.
But what we also saw was Sony PlayStation Entertainment moving their headquarters from Japan to San Mateo and expanding obviously their office needs and which will bring in another -- what we would expect 700 -- or hiring 700 to 800 new employees.
Alexander Goldfarb
Okay.
Angela Kleiman
So the context.
Alexander Goldfarb
The second question is you guys -- one of the 1031 properties was downtown LA. You guys had been investing in downtown LA for quite some time.
So just sort of curious, now that you've had a number of properties there, how do you view that the properties have been performing relative to your underwriting?
Michael Schall
They performed generally in line with our underwriting. There is a pretty significant amount of supply coming into the downtown.
And from our perspective that's going to require people that are working in the downtown, but living somewhere else to relocate to the downtown. And we expect that to be somewhat choppy.
But the overall supply/demand of LA is incredibly positive to us. Los Angeles County produces somewhere around 0.5% or 0.6% of its stock every year.
And it's getting demand growth that is well in excess of that, but that supply is focused really on the CBD LA, as that transitions from being a sleepy downtown to being a 24 hour city. And we believe that is on track and we believe that the long haul or long term potential is fantastic in that marketplace, even though there might be some bumps along the way.
Operator
Our next question comes from Jim Sullivan with Cowen and Company. Please state your question.
Jim Sulivan
Mike, at the risk of beating this dead horse on the demand forecast, just to make sure I understand. In your prepared comments, I think you mentioned economy.com as the source of a, I guess, as the U.S.
GDP forecast assumption and the national job growth assumption. For the individual markets, is that data also economy.com or is that based on your own research or some other local research source you look at?
Michael Schall
Do you mean the job forecast by market?
Jim Sulivan
Yes.
Michael Schall
Or the economic rank forecast?
Jim Sulivan
Well, the job forecast by market -- and I understood you to I say that the economy.com forecast was both job and GDP. Is that not right?
Michael Schall
Well, it really is a -- we use of variety of data vendors and again we prepared this forecast last quarter. So the world was a little bit different then.
And we could go through the process of changing the forecast dramatically, but the reality is the world is changing so rapidly, that you can't change the forecast every month. It -- which would almost be necessary, based on the amount of volatility we've had in the marketplace.
But what our process is, is we use the macro data for the broad macro numbers which are U.S. GDP growth and U.S.
job growth. And then we derive the more specific market forecast, based on our own supply/demand analysis.
And Angela has come up with a regression analysis, that takes into account various different factors, including supply and demand. It includes wage growth, for example, as one of the key items or affordability.
And so, the economic rent growth in our market forecast is Essex proprietary, but it's driven by macro numbers that come from data providers. I think 2.8% is the highest of the data providers, as I recall looking at the list.
There are some that are in the 1.5% range. Again, we could change this on an ongoing basis, but to what point?
I think that the forecast looks achievable. If you look at last year, we missed the GDP forecast, but outperformed on the job side.
So is this a perfect science? Obviously, it's not.
And it seems like we had resilience on the job growth side, relative to historical relationships. And again, I think it goes back to that wealth -- the incredible wealth creation that we've had on the West Coast that is really driving economic activity, that is disconnecting from a lot of the data going back 5 or 10 years.
I think a lot of things are happening. It seems to us that these are achievable numbers and again we'll see.
We expect a volatile year, as I know everyone knows.
Jim Sulivan
Sure. Yes and you mentioned that a few times here so.
So the bottom line is, in the terms of the forecast that's contained at the end of -- at the back of the fourth quarter supp, it's basically as it was at the end of the third quarter. And it's -- I take the point, you don't want to be reacting to every zig and zag in the data.
And the data has been volatile itself, of course, but the regression analysis that Angela does, presumably that gets updated quarterly? Or is that where you put it in place at the beginning of the year and if reality turns out to be a little different, you may readjust, but it's not like you redo the regression every 90 days?
Michael Schall
Yes, I mean, it's impractical to do that. Obviously, the market forecast drives our budgeting process.
It isn't like we're going to change our budgets overnight or every month.
Jim Sulivan
Sure.
Michael Schall
So we try to do this in a thoughtful manner. We debate this -- we debated whether we should reduce the forecast and no doubt some people out there think that we should have.
But ultimately, we felt comfortable with it -- with the caveat that I mentioned in my prepared remarks, that there's probably greater risk to the forecast than there was a quarter ago.
Jim Sulivan
Simply because the macro data and the announcements we're hearing from companies is indicating cutbacks in capital spending and other call it, general moderation across the economy?
Michael Schall
Yes, given that, but again -- you look at what we see out here which is, again, these amount of cash and wealth that these companies have. And looking at Alphabet specifically, I think they have the financial worth to do pretty much whatever they want to do.
And in fact, are in a whole bunch of different businesses. And that I don't think is going to slow down a whole heck of a lot.
It doesn't appear to be slowing down a whole lot. And the financial wherewithal to purchase pursue multiple businesses at one time is absolutely assured.
That's part of what we're thinking as well, is the ability to continue to push forward with expansion of these various businesses, is something that we're counting on continuing going forward.
Jim Sulivan
Sure. Just finally from me, if I could, the -- your supply forecast is presumably something that your team puts together, I guess, based on your knowledge of what's happening in the market?
That's obviously a lot less volatile than potentially the demand forecast. But is that the source of that primarily, it's your own team's forecast?
Michael Schall
Well, again, we use data providers to give us the list of transactions. And then inevitably, you have the same project called three different things.
And so you try to go you through and identify -- this is what our team does -- we try to go through and we identify where each project is. And then based on that, we eliminate the duplication in the data.
And we think we get a much better forecast as a result of that, than a lot of the data providers have. We exclude from this student housing, senior housing and some of the other categories that others include in their data as well, as historically that has not proven that relevant to our overall activities.
Operator
Our next question comes from Drew Babin with Robert W. Baird.
Please state your question.
Drew Babin
Quickly, I was hoping to isolate what you are assuming in terms of ROI from the resource management initiatives implemented already, particularly within the BRE assets? And whether increased activity, being able to touch more units this year may provide some upside to the expense growth guidance that was given?
John Burkart
I think regarding our expense growth guidance, we've factored things in appropriately. But just big picture for clarity, we have our resource management and we categorize that separately than the renovation.
So on the resource management, those initiatives tend to have pretty high IRRs and they tend to be somewhere between the mid-teens,15%s to 25%s. And we found some very good opportunities in the renovations.
Those tend to be in the mid-teens or a little bit less and we're executing those as well. But the guidance reflects what our expectations are.
Operator
Our next question comes from Wes Golladay with RBC Capital Markets.
Wes Golladay
I just want to follow up on San Francisco. Can we fast forward to the next slowdown, how much do you see it playing out?
I think it's always viewed as a boom/ bust market, but you mentioned the well-capitalized companies. Its sounds like there may be pent-up demand and some good visibility for office leasing?
So your thoughts on the next slowdown?
Michael Schall
Again, let's put this in the unknowable category. And when it comes to the unknowables, I have to go back and maybe summarize what I've seen in the last 30 years, as it relates to Northern California and I've seen huge dislocation and disruption.
Obviously, the Internet period was an incredible period, in terms of that. And for example, you had I think price to sales ratios were something like 49 times in year 2000 and they're more like 7 now.
So you had an incredible asset bubble, with respect to these tech companies. And that went on for a lot longer than anyone expected it to go on and ultimately had a horrific impact on things.
I think that really is the exception, though. When you look at 2007, 2008 or 2008, 2009 recession, actually the tech world did rather well.
It was construction, government, manufacturing, et cetera, that did incredibly poorly and tanked everything. I think that's actually more of my belief, with respect to the tech world.
It's not necessarily the tech world that tends to be so volatile, in terms of employment. It's the broader economy.
So I don't have necessarily any great fear about tech itself. I have fear about just generally, what's happening in the economy on -- because I think actually tech, with the one notable exception of the Internet boom and bust period, tech has actually done reasonably well during the economic cycles and the downturns.
Wes Golladay
Okay. So on a relative basis, it could hold up the cycle.
I think maybe fears may be a little overblown, at the moment on a relative basis at least?
Michael Schall
Well, I guess, I'd ask, where else are you going to go? I mean, what are you going to -- you can stay in cash at 20 basis points or something like that.
But I mean, as we look at the industries and what's happening in the world, it seems like tech is actually pretty well-positioned, relative to some of the other choices. We know that Southern California, for example, is a more diversified economy and therefore will have less dislocation.
But again, not the same growth rate either. So if we see significant dislocation in the tech markets, we will obviously try to move more of the portfolio southward.
There is a small bias toward that, as you saw in the Sharon Green transaction, where we sell Northern California and we reinvest two-thirds Northern California, one-third Southern California. I think you'll continue to see some of that again.
But again, we're not in a mindset that we need to divest of tech, the tech market.
Operator
Our next question comes from Rich Anderson with Mizuho Securities. Please state your question.
Rich Anderson
So several years ago, I remember sitting down with Keith and he was complaining about his $100 stock price. And I thought at the time how crazy it was to think that, let alone say it out loud.
Of course, had you known your stock would have gone up to $250 or close to it a few years later, you all would have taken that in a heartbeat and your execution has been outstanding. But right now, this long list as Goldfarb pointed out of things going on, to what extent -- a lot of people are asking what are the signals and you're not seeing in your fundamentals yet?
But with all this in mind, what would you do? Forget about what the signal might be, but what would you do?
Would there be an idea of selling assets in bulk? Because one thing that you still have is fantastic asset value, you could sell assets today at incredibly low cap rates, maybe pay a special dividend, delever further and really hunker down.
I mean, what kind of action would you take, if you do see something pop up in your fundamentals?
Michael Schall
It's Mike and Keith is still here. I talked to him this morning.
He asked what happened to his $240 stock price? But yes, Keith is always with us.
Again, it goes back to that relationship between asset values and the stock price and that has been changing, seemingly every day. And we sure would like to see some consistency in stock price before we make big, strategic decisions.
And unfortunately, that's probably not going to happen this year. And so, but we will look for opportunities, much like Sharon Green, where we think we can sell an asset and either buy the stock back or pay a special dividend.
Both of them are potentially attractive to us. And but we want to see some meaningful pick-up, in terms of impact on NAV per share.
So today, that is probably there, but it wasn't there last week. And again, the -- it takes, what 60 to 90 days to actually go through the transaction process and then you have got to work through the reinvestment plan.
So we're trying to do the best we can. I will tell you that we will sell more assets this year, than we've sold for the last several years.
And I think that will continue to trend and we'll look for both -- really two different things. One, paring off the assets that we think will underperform over the longer period which will probably be in a higher cap rate type of area, but then the more opportunistic, much like Sharon Green assets that traded at a very attractive, very aggressive cap rate that we can redeploy at a positive spread.
So we'll be looking at those.
Rich Anderson
Okay. And so, you said that the fundamentals tend to give you a month or two head start.
Is it possible now that, when you look at just the craziness of the Bay area housing market, that maybe what's going on is being hidden from view? It's just a different set of circumstances right now?
Is that something that keeps you up at night as well, that maybe the indicators that we've relied on in past cycles may not present themselves the same way this time around?
Michael Schall
Well, that's always the case and we're always concerned that we're missing something. And I'll say in the fourth quarter, there were more move-outs to buy homes and that caused some availability increase.
Again, I think a lot of it was tied to the Fed action and the belief that you need to get into a house now, as opposed to wait which turned out to probably be the wrong answer. But that 30 day availability has really been the bedrock of our management of both price and where the market is going.
And it's a pretty sensitive variable, that I think it captures appropriately what's going on in the marketplace. So we're going to pay particular attention to that.
And then if that moves, then the next position -- next point is hey, is this a one-time only or is it a trend? And so, we'll be trying to figure that out, right after there's some movement in that area.
Again, as John has indicated, January bounced back so nicely, that we don't think that what happened in Q4, is anything other than an isolated occurrence.
Operator
Our next question comes from Dave Bragg with Green Street Advisors. Please state your question.
Dave Bragg
As you've discussed on the call, Mike, I think that Essex has earned a reputation as one that will adjust, as needed to the change in cost of capital. But just have a couple questions on specific things -- that I'd like to understand how you think about a couple specific things?
The first is, I think that you suggested that if the stock price is unfavorable, you would shift away from wholly-owned acquisitions and more towards co-investment. But how do you think about co-investments, relative to just making no acquisitions at all?
Michael Schall
We have to be able to add per share growth, NAV and cash flow to the portfolio. And I don't know if we've shared with you, but we have an accretion model that we run for every deal, that tries to measure those against the portfolio.
And again, we're trying to add value to the stock, not subtract value from the stock and our process is really designed around that. And so, we do not feel compelled to do transactions, just for the sake of doing transactions.
And we certainly don't feel compelled to do transactions for quote, unquote, strategic reasons. We want to make deals that make sense and that are additive to shareholder value over the long haul.
And I go all the way back to 1995, 1996 and we talked about what our long term goals were and they are as relevant today as they were back then. And we said basically, hey, if we can grow -- effectively what's core FFO was FFO back then -- at somewhere around 8% or 9% a year and pay a dividend that's in the 4%, 5% range, that's going to be a really great thing for shareholders.
And we've stayed true to that and we've added a little bit of NAV sensitivity to it as well. But that's what makes these entities do well over the long haul.
And as you know, it's worked out pretty well for our shareholders and us.
Dave Bragg
Second question, it just relates to the logistics of hypothetically selling assets and buying back stock. Would you -- if you were to tee up assets for sale and you have maybe some confidence in the private market, would you take that private market risk and buy back stock immediately?
Or would you wait the 60-ish days that it takes to close, have the cash in hand and then buy back the stock? How do you think about those decisions?
Michael Schall
We don't like them, Dave, to answer your question because the transactions markets, again they're all over the place and the ability to close with all the variables are -- make it risky. But then again, yes, we've seen this with the Sharon Green transaction, where roughly two-thirds we were going to exchange.
And we're going to pull a dividend forward and do -- buy some stock back if we saw some weakness there. And that was on the table for about 10 seconds and then off the table.
So it's a really incredibly challenging thing to do to match this -- match these off in a way that is additive to the shareholders. Fortunately, I have Angela and it's her job to make that happen.
So Angela, you want to add anything to that? Hey, it's challenging.
It's one of the most difficult things I think we have to do this year.
Angela Kleiman
Well, I think the only thing that I would add is, yes, agree that it is challenging. But we can move generally pretty quickly and we do have a very flexible balance sheet.
And so, if -- we have a track record of doing the right thing and we're going to continue to do that.
Dave Bragg
Okay. But on that specific point, it sounds like it's fluid.
You don't have a hard fast rule, that you have to wait, get the cash in the door, before you go buy back the stock. You will evaluate it on a case by case basis?
Michael Schall
Well, it's magnitude, right, Dave? I mean, if cap rates go up 100 basis points and the stock goes down, then you're compelled to do it.
And you feel like hey, under any scenario, we're going to be able to capture that difference in valuation. If the magnitudes are relatively thin, then why would you take the risk?
The risk becomes more apparent. So it's a question that really doesn't have an answer.
We do not have any pre-set biases. As you know, we try to be pretty thoughtful about looking at things and keeping risk in mind.
And not do things just because, the common wisdom is to do them, but rather do things because we can add value doing them. So again, it's going to be case by case.
And it will be an interesting year and I hope the stock does well. But if it doesn't, we'll come up with another plan.
I can assure you of that.
Dave Bragg
Okay. One last one if I may.
To what extent have you analyzed your portfolio, to determine what share of it fits within Fannie and Freddie's current definitions of affordable multi-family assets, that are outside the loan -- the caps?
Michael Schall
I don't think that we've actually done that, Dave. And so, it's only relevant to the extent that we have co-investment transactions.
And it will be something that we will have to look at as -- if we go down the co-investment path for funding our acquisitions.
Dave Bragg
Well, I thought more so, from a disposition perspective. There's more clarity on that debt capital's presence throughout 2016 than from LICOs [ph] or others, because there's no limits on the amount they can do on the affordable side.
So from a disposition perspective, it seems relevant.
Michael Schall
Yes, I'm sure it would be relevant. Again, we have not seen that enter into the equation.
We have two transactions in contract on the disposition side. That issue has not come into play for either of them.
But it's a good point. It's something that we're going to have to factor in going forward.
Operator
There are no further questions at this time. I would like to turn the call back over to Mr.
Michael Schall for closing remarks.
Michael Schall
Well, thank you all for joining the call today. We appreciate your participation.
And obviously, we're pleased with the results last quarter and the outlook ahead. And we look forward to seeing many of you at the Citi conference in March to continue the discussion.
Good day.
Operator
This concludes today's conference. Thank you for your participation.
You may disconnect your lines at this time.