Good day, ladies and gentlemen, and welcome to the Third Quarter 2015 American Assets Trust Incorporated Earnings Conference Call. My name is Tracy, and I will be your operator today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. And now, I’d like to turn the call over to Mr. Adam Wyll, Senior Vice President and General Counsel. Please proceed.

Good morning. I'd like to thank everyone for joining us today for American Assets Trust 2015 third quarter earnings conference call. Joining me on the call are Ernest Rady and Bob Barton. These and other members of our management team are available to take your questions at the conclusion of our prepared remarks. Our 2015 third quarter supplemental disclosure package provides a significant amount of valuable information with respect to the company's operating and financial performance. The document is currently available on our website. Certain matters discussed on this call may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any annualized or projected information as well as statements referring to expected or anticipated events or results. Although we believe the expectations reflected in such forward-looking statements are based on reasonable options, our future operations and our actual performance may differ materially from the information contained in our forward-looking statements, and we can give no assurance that these expectations will be attained. Risks inherent in these assumptions include, but are not limited to future economic conditions including interest rates, real estate conditions and the risks and cost of construction. The earnings release and supplemental reporting package that we issued yesterday and our annual report filed on form 10-K and our other financial disclosure documents provide a more in-depth discussion of risk factors that may affect our financial condition and results of operations. Additionally, this call will contain non-GAAP financial information, including funds from operations or FFO, earnings before interest taxes depreciation and amortization or EBITDA, and net operating income or NOI. American Assets is providing this information as a supplement to information prepared in accordance with generally accepted accounting principles. Explanations of such non-GAAP items and reconciliations to net income are contained in the company's supplemental operating and financial data for the third quarter of 2015 furnished to the Securities and Exchange Commission, and this information is available on the company's website at www.americanassetstrust.com. I’ll now turn the call over to our Chairman, President and CEO; Ernest Rady to begin our discussion of third quarter results. Ernest?

Thanks, Adam, and good morning everyone. Thank you for joining American Assets Trust third quarter 2015 earnings call. The performance of our premier portfolio of retail office and multifamily assets continue to provide industry leading returns for our shareholders, which we believe will continue into the foreseeable future. Approximately two months from now, American Assets completed five years as a public company. When you look back on our diversified strategy of high quality coastal West Coast properties, combined with our focus on creating net asset value for our shareholders is our first priority, it looks like has been correct strategy. We have grown the net asset value of your company from approximately $22 a share at the IPO to over $45 per share today, which are also reflected in our strong shareholder returns. As of the end of October, last Friday, the annualized compounded total shareholder returns since the beginning of 2011 has been just shy of 20% per year. Our FFO growth, CAGR or compounded annual growth rate has been approximately 14% since 2011. Consistent and predictable NAV and FFO growth per share along with an increasing dividend is our focus, and the board has voted for 7.5% increase in the dividend for the coming quarter. Many of you have heard me say that we hope to deliver a 10% or better total shareholder return per annum over the coming decade, not every year, but over the next decade. When you look at real estate over the long-term, anyone who is been in real estate for a long time knows that there will be cycles, both up and down, which is why we're focused on high quality coastal West Coast real estate. We have seen that even during the great recession that our cash flows were flat or up.…

Good morning, and thank you Ernest. Overall conditions in our core markets; Seattle, Portland, San Francisco, San Diego and Oahu continued to show a significant signs of strength in all three of our asset classes. We expect this to continue into the foreseeable future. In Hawaii, our Beachwalk project continues to post impressive results. As of September 30, the property was 100% leased with sales per square foot over $1,000 per square foot. In September our Embassy Suites, the number one ranked Embassy Suites in North America as reported by Hilton Hotels once again exceeded its competition in ADR and RevPAR for the month. According to the Smith Travel Research report for the month of September in comparison to the competitive set, the property achieved an occupancy index of 96.5%, ADR index of 127.3% and the RevPAR index of 122.8% and actual numbers for the month of September that index translates into an actual occupancy of 89.8%, ADR of $305 and RevPAR of $274. Let’s talk about our developments for a moment. In San Diego, construction commenced on Torrey Point on July 15, this two building approximately 90,000 square foot project is expected to be completed in the first quarter of 2017. We expect this to be the crown jewel of office space in San Diego County combined with a strong development yield ranging from 8.25% to 9.25%. Thank you to all of you that participated in our Investor Day in Portland on October 15. It was an excellent turnout and it has been great to hear all of the positive feedback on our portfolio and in particular excitement about the Lloyd District redevelopment from participants. Our Hassalo on Eight projects in the Lloyd District portfolio welcome its first residence on July 2. Our initial leasing pace on the first…

[Operator Instructions] Your first question comes from Todd Thomas from KeyBanc Capital. Please proceed.

Hi. It’s Jordon Sadler here with Todd. Just first question on yield, maybe expirations at South Bay and Waikele next year. Do you have the sense of where those are headed yet and what we should anticipate what's reflected in guidance?

Chris, why don’t answer that, please.

We are working on those now, both those leases will get renewed, they’re both fixed stores with GAAP, but I don't have any real guidance on that. We should be able to provide that next quarter.

Okay. That’s helpful. And then, a bigger picture one on leverage, I believe the commentary there Bob was on getting leverage down from 6.5 to hopefully something with the five handle longer term. Is that just the anticipation that cash flow or EBITDA will grow over time, and you hope to migrate lower or do you believe fundamentally that the business should be operated at a lower overall leverage?

Jordon, that’s a good question. We said on prior calls too, is that we hope to get our net debt to EBITDA down to approximately 5.6 by the fourth quarter of 2016. We believe that can be accomplished strictly through the lease up of Hassalo on Eighth. So we don't do anything else, no further acquisitions, our expectation is that we will be approximately 5.6 in the fourth quarter of 2016. And then in terms of leverage, you know we have three loans maturing in 2016; one is First & Main, which matures July 1st to small loan approximately $82 million to $84 million, 3.97% today. We will probably refinance that with in a private placement market and switch from secured to unsecured. The other two are smaller in some of our apartment projects in San Diego and we may pay those off which is cash flow from operations.

Okay. That’s great. And then, Ernest, one for you on sort of the succession planning here, you’re obviously a sprite 78 year old, but curious here what the board thoughts on longer-term succession planning would be and how we should be thinking about that as we look out, let’s say three to five years?

Jordon, the board and I are in complete accordion that the best person to run this company ought to be the person running it. At the moment, the board and I are in accord that I am the best person to run it. I am not interim. I love this company. And I really enjoy the job I do. And the board knows that their responsibility is for a succession and they've had discussions about that. I've not been included in those discussions and I don’t want to be. My job now is to do the best I can for all our stockholders. I am really focused on it. And God give me the health and the energy, I'll be here as long as the board wants, and as long as I'm the best person to do the job.

Okay. Is there a search ongoing do you know for another executive at the sea sweeter level?

No.

That would be a potential, no, okay.

No, no. I am not.

Thank you.

I am here, it’s my job. I can do the best I can as long as the board wants me and I want to do it, and if there is a better person to do the job, I won't do the job, but as long as I am the best person at job, I can do the job and there's no such ongoing. Thanks for the question.

I wish you the best and I hope you have a long tenure in the role. I guess my question really goes toward longer term planning, you know even if you're in the seat for let's say five years, who is behind you, you know in a three years from now who watches you do the job for two years and run the company.

We have a very confident outside board and I know they’ve had discussions of succession. I know they are aware of it. We are very confident people in the company. Believe it or not, I don't take myself so seriously that I think if something happened to me that everything would fall apart. As a matter of fact if everything happened to me, the real estate would be there, the confident people who run the company will still be there and they have devoted the company. We love the strategy we have. It’s an irreplaceable property and I think that I hope to add some of the icing on the cake that I can’t do – do if I can during my tenure. And thanks for the question. By the way, my prayers are with you. I hope I'm as this healthy and this energetic as I am now for as long as possible. And thanks for your good wishes.

Thank you.

Thank you. Your next question comes from Paul Morgan form Canaccord. Please proceed.

Good morning, Paul.

Hi, good morning. Just a clarification about the guidance number, so you said for Hassalo it was a $0.09 positive FFO in 2016, and then you attributed an $0.08 hit from lower cap interest mostly from listing project. Is the $0.09 FFO gain net of that impact or is it separate?

Separate.

So, it’s sort of a $0.01, it’s a $0.01 positive impact net of that, and then in 2017 I guess because you’ve got $0.17 that will be – that’s where you get most of that.

Yeah, that’s one way to look at it. If you want to offset one against the other, you can look at that that's not how I am looking at it, but the numbers all add up based on what you're saying that would be correct. Yeah, so, 2017 is really where we expect to see that $0.09 almost double. And 2017 is also the year that we’re focused on for stabilization.

Understood. Okay. Going to the office maturities, you got about 300,000 square feet at about 32, but the expiring next year. I mean you mentioned overall your rents are 16% below market. Could you comment about what’s comprising that 300,000 and how that’s looking and kind of when that will add over the course of the year?

Paul, we are going to ask Jim Durfey to handle that who does a great job in leasing our office portfolio.

Good morning, Paul. Yeah, we actually have about 285,000 square feet of expiring leases next year. A good chunk of that is the interest coming in west lease here in the billing, the ICW building that we are sitting in, and that space will come vacant at the end of next year. We are already marketing that space to a number of users. We are very confident that when we do backfill that space, not only will it be backfilled, but it will also be backfill at higher rents than they are currently paying. Other space is coming available, is mostly in smaller pieces spread out throughout the portfolio, so the big chunk is here at ICW. But as I review our leasing activity, anything that’s currently out in the market or will be between down the end of the year is already being marketed, not only from the stand play of attempting to renew, which we hope that our renewal rate will be in the 60% to 70% for the balance of that upcoming expiration, but also in the event that we have to backfill. So we’re on top of it .We track it on a [indiscernible] going forward basis, we lease on it on a going forward basis and we continue to see the rents increase as these leases roll. So, we are very positive on the office market continuing to next year.

By the way, ICW is moving out is not a negative comment on the project, it’s moving a claim department, one of its claim apartments out because the people who work in that claim department are located in one area of the city and closer to them where we’re moving to than it is where we are now. So, it's a great space and it's just that it’s more convenient for the company and I know we've worked out a strategy that if he can lease it sooner we can move sooner.

Paul, historically we’ve had about 250,000 square feet a year, somewhere in that range on office and retail expiring each year and each year we’ve relet those spaces and – like Jim said, we approach it approximately a year ahead of time. Where our in-place versus market is the biggest differential is really San Francisco and also City Center, Bellevue. And we saw the top floor of our One Beach asset get filled up recently, and when we bought that building it was at $28 per square foot on a weighted average basis, and we replaced that top floor at approximately $48 per square foot. In the Landmark building, we keep getting approximately 10% or $2 per square foot bumps every year up there and that building just continues to have strong internal growth. And our City Center, Bellevue up in Bellevue Washington, the same thing what we bought that building, the weighted average rents were at 32 I believe, and now we’re pushing much higher than that. So, if you look over the last several quarters that's why we continue to have such strong same-store growth in our office portfolio.

Of course one thing that we’d have to add is the very, very pleasant surprise we’ve had on Bell 700 building on Hassalo, where we’ve spent a substantial amount of money to improve it. We’ve been able to increase rents dramatically. The quality of the tenants has improved dramatically and it's really added to the value of our holdings in that area.

Great. Just lastly on Embassy Suites and your guidance for next year of 2% same-store for next year. If you look at the total volumes they’ve been kind of flattish recently on Oahu, for example, and is that kind of – part of the reason why your number is low or you’ve kind of conservative by your expectations there. I guess you’d probably see a pop next quarter – down year-over-year, but I mean if you think about next year and the 2% number, is there any color there?

You know, that is the most cynical part of our portfolio is that Embassy Suites. So for us to predict what the state of travel is going to be is the probably the highest amount of uncertainty in our projections. But it's a great property. I say that over the next decade, our rents will double, but I think we hope – I hope we make conservative projections over the next 12 months because the uncertainty and the cyclicality of the travel business, but I’m told that the Embassy Suites has done much better than its peers on Waikiki because it's the right product in the right place. Bob, do you want to add something to that?

Yeah. We have this competitive set, it includes in addition to surrounding hotels, but it also includes several the hotels on the beach. In the Embassy Suites from a rate standpoint and the RevPAR standpoint we have outperformed those within our competitive set that are on the beach. We follow it very closely, you know we talk with our General Manager, Bob Yeoman, at the Embassy Suites. They take their budgeting very seriously and we’re all aware that that the strength of the dollar against the yen sometimes will have an impact. We thought – we started to see a blip last April, but that didn't materialize the hotels along and on the beach saw more of an impact than we did. So we are still – for the Embassy Suites, we’re still on budget for 2015 in terms of cash NOI. And we think that 2% is a fair estimation for 2016. Keep in mind, the 2% is based on both the combination of the Embassy Suites and the retail, so within that 2%, really you have probably 4% for the Embassy Suites and you have a lesser amount for the retail portion of that.

Okay, thanks.

It’s a great property. It’s very difficult to predict quarter-by-quarter because of the cyclical nature of the hotel business, but great property.

Thank you for your question. Your next question comes from the line of Craig Schmidt from Bank of America. Please proceed.

Good morning, Craig.

Good morning. Thanks. Bob, on your nine assumptions, did I hear correct you’re saying retail same-store NOI next year is 2%?

Correct, that’s our initial estimation with the 2% increase in 2016 same-store retail cash NOI.

That seems lower than past years and definitely lower than some of the high quality retail portfolios. What’s the drag on that number?

Well, I think what you’re seeing somewhat is that in 2015 is that we had Home Goods come in, in the retail which was a very strong driver from that standpoint. And we also had some leases at Alamo Quarry that came in strongly in 2015. Additionally, we have Rancho Carmel out of that pool going forward. So, we did sell Rancho Carmel Plaza, which is one of our smaller shopping centers during the third quarter and we have not yet replaced that or that income in the retail pool, so that's probably $0.01 drag.

And of course you have to consider that we’re running at 98.5%, so at least they are not falling off and we’re not having to refill them. Chris, do you have some comment on that.

No, I think it’s more of a numbers issue, so 98%, we are more than 98% occupied what's on the pipeline next year, there is not a whole lot of big-box or big rent games what we’re currently seeing, so we are very stable next year is the way I see it.

And then you had given a stabilized view of – I mean a possible cap rate for Hassalo on Eighth, could you do the same for Torrey Point. What kind of cap rate do you think it will be when it’s completed and stabilized?

It’d just be a wild guess. First of all it’s under construction, second of all we’re starting to show it for lease up. So it would just be a wild guess. Bob?

It would be a wild guess, but if I had to make a wild guess, I’d have to take a look at what the cap rate was that we published last May on Torrey Reserve campus where we are speaking today. So, Torrey Point is across the river with a much better view and location. So in my opinion it would be a lower cap rate. You got great freeway visibility, the views of the Pacific Ocean.

Almost 0.5 million cars a day passing by.

Yeah. I mean – it would be, 5 or lower. And I just don’t know because we probably wouldn’t ever sell that asset.

Okay. Well thank you for that.

Thanks Craig.

Thank you. Your next question comes from Haendel Juste. Please proceed.

Hey good morning out there.

Good morning.

So first a couple of clarifications Bob, I just want to clarify that the G&A guidance you gave earlier better with the 2016 Outlook. Are you saying that the cost net of G&A savings from John's departure and then the net additional cost for Ernest is going to result in net annual savings next year about $0.025, did I hear that correctly?

Yes you did.

Okay. And then can you talk a bit more about the $10 million of cost increase at Hassalo. You discussed defensive maybe reflecting a bit stronger market competition or perhaps more offensive as you pursue higher rents to higher clientele?

I think it was offensive. I think the increased cost came from us taking steps to improve and expand the quality of the project to some extent. The FF&E was also an expenditure that was made in a first-class – first class basis. So I don't think we got nothing for something, I think we got a lot for what we spent and I think the project is turned out much better than you ever hope. Do you want to add something Bob?

No, I think you’re right. I think big picture you’re approximately 5% or less over budget, but it really was it was a decision to create that amenity rich top two floors. And we think that really differentiates up us the hassle project from our competition and we think it will reap rewards down the road in rental rate.

And if you want to go on that website that we earlier – it shows some of those amenities that we added and I think it’s going to work out well for the project over the long run.

Okay. I appreciate the thoughts there. Can you also talk about this quarter's apartment performance. The 3.5% same store NOI is at least a couple of 100 basis points below what we’ve seen from other apartment REITs with would meaningful West Coast exposures and then the 3% same-store NOI forecast, but next year is also well below what we would expect. So maybe can you talk about what’s impacting the results and perhaps what – may be a drag on the outlook for next year.

I’m going to ask Russell Rodriguez to handle that. He handles the San Diego portfolio, which is really the number. So Russel please.

Thanks Ernest. That’s a good question and I want to speak to and give some clarity for this year and for next year. Macro numbers and the current metrics are strong as you know and so we expect 2016 revenue to be strong as well. However we are expecting some increase in expenses; payroll, taxes and another services to our residents who are expecting a higher response and a higher expectation with the new higher rents that they’re paying. So our expenses are going up and this is our initial guidance for next year Haendel and we expect to outperform that and we keep on optimizing our rental growth rate and expenses are going up a little next year. That’s concurrent and a lot of our peers are experiencing the same thing.

We constantly look to improve the properties we have and perhaps some of the expense are for improvement, which will produce increased revenue over time. We’ve owned that property for a number of years and any comparison to the property we bought to the property that we have to date is purely coincidental. It just have to be in the same location and we’re looking to reposition some of those units and we’re really. It’s a fantastic location.

I just want to close and add on that. Our product is not what our peers are bringing to market currently. The absorption that’s coming into San Diego is new product, is a lot of amenity rich product we’re in a different type of set. And like Ernest were like said repositioning and currently capitalizing those units as well to stay current.

No, I appreciate the color there, it sounds like – just to confirm that you are seeing pressure mostly on the expense side of that, what’s really causing most of the drag?

Well also Haendel, one last point on that is that like Loma Palisades which drives most of our multifamily and same-store because it is the largest number of units, I think 568 out of 900 in San Diego is that we’re dropping the occupancy to 95.5% at year-end 2016 when it’s been 96%, 99%, 98%, so I think you really talking about several things. You got number one is, it's a reduction occupancy in terms of guidance we hope to have that – we hope to realize a higher occupancy, but for guidance purposes we are putting 95.5%. And there will be some other maintenance expenses coming through, but I think the occupancy is the big driver.

And then one last one if I may Ernest for you. Just curious on your thoughts overall and for the development cycle, how much longer do you see the opportunities to development of attractive one single. Are you seeing opportunities and then can you guys talk the cost thing on the labor inflation side. We've heard labor shortages across other real estate sectors multifamily the homebuilder just curious what you might be saying.

Well, I think Jerry Gammieri who is running our construction tells me that we were to replace Hassalo on Eighth today, that the additional cost would be at least 10%, another $20 million. So there's no question there is inflation as far as construction cost goes. As far as development goes we’re always looking, we know you know we have Oregon square and we’re continuing to process that we think we've got it do you know some value engineering to make sure the project is as it should be. From a return point of view we intend to learn from the Hassalo project that has built is what type of product and what type of [indiscernible] these will command the higher rents. And as we gather that information and as we’re able to value engineer that project that's a significant opportunity for us. And then we can we keep looking – sometimes the best thing is to wait for the opportunity to arise that is compelling rather than just a tape chase opportunity for opportunities sake and that's our strategy.

Anything notable on the labor budget? Anything notable on the labor constraint side, any labor inflation, any issue that you're seeing there. What we’re seeing market wise and construction overall is an increase of about 10% in the Portland market, the Seattle market is even higher, it’s above 3% and San Francisco in today's dollars almost 34% higher than. So escalations a real thing in the building industry right now, that you're sitting across what the board.

When you bid – first bit of Torrey reserve and then the construction was delayed due to some technicalities, which were able to overcome. What inflation adjustment did you see Jerry.

I want to say the difference was about 7%.

So costs are moving up. Of course that speaks well to the value of the existing real estate?

Thank you for your question, your next question comes from the line of Brendan Maiorana from Wells Fargo. Please proceed.

Morning, Ernest. How you guys are doing?

Good.

So Bob, just to clarify lastly on interest expense. So, are you fully expensing all of the cost for Hassalo in 2016 or is there any interest capitalization protection or operating costs to capitalization that’s going out with that project at all for 2016?

For the fourth quarter, no, there will not be any more capitalization.

Okay.

So basically, our accounting policy is once we will begin to receive that first dollar of income for the specific property like as each – we got three buildings up there as income comes in day one we stop capitalization. So as of October 15th, it was leased and we opened it up and it was lease shortly thereafter when we stop the capitalization.

Okay, great. So, as you guys leasing up and I think you should be top line or the NOI contribution can be double in 2017 versus what it is in 2016 that all fall to the bottom line?

Yes.

Okay, great. And then on the office portfolio, so you gave outlook and occupancy on the same-store, just curious as to where you're likely to be for Torrey Reserve and Lloyd District on an occupancy basis as we progress through 2016?

Jim, do you want to answer that?

Torrey Reserve includes the ICW building and of course that large leases space is leased until the end of 2016, so that impact if any will be in 2017. Other leases expiring in 2016 in the Torrey Reserve project really is not significant amounts, it’s 25,000 to 30,000 feet here and there, so not big numbers coming up in Torrey Reserve. In Portland, one of the things that can excuse the look of upcoming vacancies as we’ve got 60,000 feet of Oregon Square still occupied, which will become by the end of next year vacant as we hopefully look down the road in future development. So, in that market you’ve got 125,000 feet rolling in 2016; Oregon Square, so the other 60 [indiscernible] among the other two building in smaller tranches and we have one full floor for our tenant that we’re attempting to renew as we speak in a couple of other smaller than that. So, the impact is minimal in my opinion based on actual vacancies in 2016.

The pleasant surprise there of course at the Lloyd 700 building on which we’ve invested substantial amount of capital and Jim has done a great job in obtaining leases that at current rents are significantly higher than they were, but the leases also contain escalation clauses which speaks very well to the success of the project over the coming least decade.

The Lloyd 700 building by the way only has 9,700 feet of vacant space out. It shows that we have some rolling, but a lot of those were actually been absorbed by the DEQ lease. We’re still moving...

DEQ is the Department of Environmental Quality from the state. So, when the smoke clears, when we finally figure out which floors were actually determining they will receive and that will have on March 1st the final allocation. Those potential vacancies actually will be absorbed in department, DEQ space.

I think it's safe to say that there is a problem are finding space for this new tenant of these higher rates not a problem of finding the tenant for vacant space, big difference.

Okay. Sure, that’s very helpful. And then last one probably again for Jim. So Bellevue has got three towers that I think are now under construction deliver over the next year or two, and Expedia is moving out there big tenant in downtown Bellevue. How do you feel like you're positioned with City Center, Bellevue with your existing tenants or role? And how do you feel like the building is competitively position versus you know what seems like will become a tougher competitive environment at least in the next few years?

Brendan, you're absolutely right, it's going to be a more competitive environment going forward, and in anticipation of that, we’ve spent substantial amounts of money upgrading the amenities in the building. And Jim and I have talked and we are now adopting an aggressive stance on renewal of our existing tenants so that we don't lose them. And if you're in a building and you have the opportunity to move, it's a task. So I think the tendency is to stay where you are and we’ve done everything we can to make the environment we offer competitive with any new product that comes in the market. Jim, do you want to add something to that?

Yeah, maybe a little more specifics for you Brendan on that. We have seven tenants of some size that expires in 2017 and 2018. We’ve already started conversations with all seven a month. What are your needs going forward? You need more space, you need less space. Of that space, I would say about 25% is already subleased to a new tech tenant who is on the growth edge of the world. So, our expectation is we may have some reduction in those existing seven tenants, but it maybe backfilled by the sub-tenants who are currently in space that those people are sub-leasing around those seven tenants. Yeah, there are three buildings – square feet coming on. I understand that sales force just signed a leasing one for about 85,000 square feet, which is brand new positive absorption to that marketplace. Sales force has a smaller space in Seattle and as we know sales force that the market lease is strong growth prospect in the outer markets, the Portland and Seattle. [indiscernible] has mentioned that they are moving to 2018, they now push that back to 2019, so that 300,000 feet is going to come on the market a year later than is originally expected, but yes, there are some challenges there. Our building has been position appropriately. We spent a lot of capital money on where the process of elevator remods, complete HVAC system remod, we’ve finished the lobby of remodel to bring the building up into the same standards that you were competing with what the new available, and the location can be beat, we think management can beat this. So, we are optimistic, although we expect – there will be a little bumpiness for the next couple of years.

That’s great. And then just kind of where you are at rents relative to market in that or do you feel like you guys are roughly in line or is there opportunity that move rents up as things roll?

There are opportunities to move rents up on the existing tenant. We pushed our rents up in the $46, $47 range over the last year.

From what price originally?

Well, when we bought the building, we were in the 30s. So we’ve kind of push it through the top of the market. Now obviously, we are going to compete with three brand new buildings, which means we probably won’t be at the top of the marketing, wherein the question is $47 still the accurate number when these new buildings come out. It’s going to get a lot of concessions and right upfront they are going to give ways of stuff to fill this building. So, we may not see the $47 numbers going forward, but we’re still optimistic that we’re going to be way above where we were in the mid 30's and something north of 40, it’s just can’t depend on each deal and each requirement as it comes up.

I think it’s safe to say, it's a great building and we are ready to compete. We think we have the plans in place, the amenities in place. We think we’ll do get our share in (indiscernible).

Great. Okay. Thanks guys.

Thank you.

Thank you. Our next question comes from Mitch Germain from JMP Securities. Please proceed.

Good morning, guys.

Good morning, Mitch.

So, I just want to make sure I get the ins and outs of the retail NOI correct. So this quarter you had a bit of a sequential decline and I think if I'm not mistaken that was the sax earn off and then next year you've got the Home Goods. Is that the way to kind of think about something ins and outs?

Next year, but this year we really have the Home Goods, because Home Goods came in Q4 of 2014, so you’ve seen the impact of Home Goods during 2015. In terms of 2016, I think Chris mentioned earlier is that your occupancy is up there and as tenants role we will continue to see rents – I think our in-place on a weighted average basis is probably 8% to 10% below market, and it depends from property to property. So we'll capitalize on those as they happen. But right now I think we've had most of our roles and we’ll do with the small stuff. Chris, you’ve got different opinion.

No, I think the numbers mission, so it’s 98% plus, there is not a whole lot room to go and we don’t have any big roles – there is significant next year. So just to look at is a very stable and those tops we’ve got this year are still needs to stay there, but they don’t look at the balance of next year.

Great. Thanks. And then just I didn’t hear any details on the sale I might have missed it Bob?

Rancho Carmel is our – was smallest retail shopping center, 34,000 square feet. And it was here in San Diego, but the location was not what I would call a; compared to like Carmel Mountain Plaza. It was close to that, but not in the right location. So we thought it was the best time to harvest again on that. I think we had a $7 million gain sold it for $12 million and change and I think our gain that was included in our income was approximately $7 million. So what we’ve done is we’ve put that into an exchange the proceeds are within the accommodator until we find another property. If we don’t find anything property, we will apply those proceeds towards our development spend.

It’s part of our strategy [indiscernible]. How do we improve the overall quality of the portfolio?

Appreciate it.

Thanks Mitch.

Thank you for your question. I would now like to turn the call over to Ernest Rady for closing remarks.

Okay, folks. Thanks again for your interest and coming on our call. I can't repeat what a great pleasure and an honor it is for us to manage this very significant portfolio of coastal West Coast assets and we’ll see you or hear from you next quarterly earnings call if not sooner. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a good day.