Good day, ladies and gentlemen. Welcome to the Extra Space Storage Inc. Q4 2016 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. If you require operator assistance during the program, please press star then zero on your touchtone telephone. As a reminder, today's conference is being recorded. I would now like to introduce this conference call. Mr. Jeff Norman, you may begin.
Thank you, Kevin. Welcome to Extra Space Storage's fourth quarter and year-end 2016 earnings call. In addition to our press release, we have furnished unaudited supplemental financial information on our website. Please remember that management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in the company's latest filings with the SEC, which we encourage our listeners to review. Forward-looking statements represent management's estimates as of today, Wednesday, February 22nd, 2017. The company assumes no obligation to revise or update any forward-looking statements because of changing market conditions or other circumstances after the date of this conference call.
I would now like to turn the call over to Joe Margolis, Chief Executive Officer.
Hello, everyone. It was another strong year for Extra Space. We executed at a high level and produced great results coming off 2015, the best year for storage. 2016 same-store revenue increased 6.9% and NOI grew 9.2%. FFO per share, as adjusted, increased by 23%. For the fourth quarter, same-store revenue growth was 5.2%, and we were able to decrease year-over-year expenses by 2.1%, resulting in NOI growth of 7.9%. FFO per share, as adjusted, increased by 18%. Our FFO growth was driven by property performance, accretive acquisitions, joint ventures, third-party management, and an optimized balance sheet. We are focused on using all of these tools to continue to grow shareholder value.
As we expected, revenue growth moderated throughout 2016 as the benefit from growing occupancy went away and street rate growth trended from peak levels to more historically normal levels by year-end. Despite the moderation, the fundamentals of the storage sector remained positive. While we saw a deacceleration of revenue growth in certain markets, we are also encouraged to observe re-acceleration in other MSAs, demonstrating the cyclical nature of markets. We continue to enjoy the benefits of a well-balanced, diversified portfolio and operational scale. In the fourth quarter, we acquired 27 wholly owned stores for a total purchase price of $316 million. This includes the buyout of a joint venture partner's interest in 11 stores, which we announced on our last call. For the year, we invested $1.1 billion in acquisitions.
Thanks, Joe. The large majority of these transactions were not broadly marketed and came from joint ventures, our third-party managed portfolio, or through other relationships. I would now like to turn the time over to Scott Stubbs.
Thanks, Joe. Last night, we reported FFO as adjusted of $1.03 per share, exceeding the high end of our guidance by $0.05. The beat was the result of three factors. First, outperformance by our 2015 acquisitions, including SmartStop and our C of O deals. Second, timing of our Q4 2016 acquisitions that closed earlier than anticipated. Third, lower property and G&A expenses. For the year, FFO as adjusted was $3.85 per share, also exceeding the high end of our guidance by $0.05. Occupancy for the same-store pool ended the year at 92%, an 80 basis point decrease from the end of 2015. This includes the impact of six expansion projects which were completed during the quarter. Excluding the additional vacancy created in these six stores, our ending occupancy would have finished 20 basis points higher at 92.2%.
During the quarter, we completed a $1.2 billion unsecured credit facility. To date, we have drawn $662 million. The five and seven-year tranches have delayed draw features, and we will access the remaining available term balances as needed to finance future acquisitions and to pay off debt. The unsecured facility further diversifies our capital structure and reduces our average interest rate. Our goals include having access to multiple types of capital, laddering our maturities, and maintaining financial flexibility. This credit facility helps accomplish these goals. Last night, we provided guidance and annual assumptions for 2017. Our new same-store pool will increase by 168 stores for a new total of 732. We expect the change in the same-store pool to positively impact our revenue growth by an average of 50 basis points over the year. For 2017, our acquisition guidance includes $325 million in wholly owned stores.
We also project $225 million in joint venture acquisitions with approximately $75 million in capital to be contributed by Extra Space. This results in total investment in 2017 of $400 million, approximately half of which is currently identified. Our guidance assumes the remaining balance will be weighted to the back half of the year. Seller pricing expectations are still high, and we are committed to being disciplined and only transacting at prices that are accretive for our shareholders. Our full-year FFO as adjusted is estimated to be $4.15 to $4.24 per share. Our guidance includes $0.08 of dilution from our C of O stores, an additional $0.08 from value-add acquisitions, for a total of $0.16. I'll now turn the time back to Joe.
Thank you, Scott. During 2016, there was significant focus on new supply and deacceleration of revenue growth. The effect these issues have on same-store NOI is an appropriate topic to focus on, but not to the exclusion of FFO growth and the overall health of the industry. I will make a few comments on these areas of concern. First, we are seeing new supply. This supply is generally concentrated in certain markets, but there are many other markets that have minimal new supply. We benefit from our highly diversified portfolio, which reduces the volatility of cyclical markets. Much of the new supply delivered early in the development cycle has had minimal or only temporary impact on our stores due to pent-up demand, and not one of our MSAs experienced negative revenue growth for the year. Our heads are not in the sand.
We recognize that new supply may have greater impact as we get further into the development cycle, we have factored that into our guidance. Also, the development cycle has presented opportunities. We are adding new purpose-built assets in key markets. These stores are performing well and adding value to our portfolio. We are also managing many newly constructed assets on a third-party basis, which provide fee income, strengthen our brand, and increase our scale. Second, demand is steady. Traffic to our stores, website, and call center remains consistent, and our ability to capture customers is greater than that of the smaller operators. We expect 2017 same-store revenue growth and NOI growth in the 4%-5% range, which we believe will be better than nearly all real estate sectors. Third, we have other tools that contribute to our FFO growth.
We acquired almost $3 billion of assets in the last two years, our C of O deals will add to our growth in the future. We will continue to acquire assets, only if we can do so accretively given current capital and market conditions. We will expand our third-party management platform, and we will utilize the most advantageous forms of capital to grow the company and maintain a flexible balance sheet. This is the formula we have used to become the best returning REIT in the U.S. over the past ten years, and we will continue to execute on this strategy in a disciplined and focused manner. Let's now turn the time over to Jeff to start our questions and answers session.
Thank you, Joe. In order to ensure we have adequate time to address everyone's questions, I would ask that everyone keep your initial questions brief. If time allows, we will address follow-on questions once everyone has had the opportunity to ask their initial questions. With that, we'll turn it over to Kevin to start Q&A.
Ladies and gentlemen, if you have a question or a comment at this time, please press the star then the 1 key on your touchtone telephone. If your question has been answered and you wish to remove yourself from the queue, please press the pound key. Our first question comes from George Hoglund with Jefferies.
Hey, good morning, guys, or good morning out there. What's the current level of street rates on a year-over-year basis?
George, this is Scott. Our street rates year-to-date for January and February have been between 3% and 4%, which I would tell you is a fair amount different than some of the reports that are out there. We've seen solid street rates year-to-date.
Okay, what level of existing customer increases are you able to push through in January and February?
We continue to push at the same rates, high single digits.
Okay, just can you comment on a couple of the markets that had negative same-store NOI performance for the quarters, Houston, St. Louis, and Sarasota?
It's partly just the cyclical nature of the markets. Houston has seen some new supply. It's also a market condition in Houston in particular. I would also tell you that those markets are immaterial. Some of those have experienced taxes, but when I'm talking there, I'm talking more in terms of revenue. All of those markets, I would tell you, are immaterial in terms of our overall revenue.
Okay. Thanks.
Thanks, George.
Our next question comes from Smedes Rose with Citi.
Hi. Thanks. I wanted to ask you, your revenue increases that you're projecting same store 4%-5%, is that primarily driven by revenue increases, rate increases? Where do you sort of see occupancy going by year-end 2017 from the guidance?
So our occ-
-that you ended this year?
Yeah, I would tell you our occupancy assumptions for the year are that in our core pool, it's essentially flat plus or minus a small amount. In the new same-store pool, which includes SmartStop, it is up slightly, but not a material amount. The majority of that growth is coming from street rate growth a small amount from occupancy from SmartStop.
Okay, thank you. The other thing is just, could you update us on what you're seeing of total new supply across your portfolio? I guess, maybe specifically just as you look at the top five markets, which I think comprise of over 50% of your NOI, maybe if you could just drill down a little bit there. L.A., New York, D.C., Boston, and San Francisco.
Sure. Thank you, Smeddes. CoStar is reporting about 900 stores to be delivered in 2017. I'm sorry, CBRE, my mistake. That's as good a number as we can come to. We've looked at eight of our top markets in depth and tried to aggregate as many different data sources as well as our people on the ground and brokers and our partners. That accounts to a little over 40% of our NOI. We found 360 stores in those markets that were either newly completed, under construction, or in some stage of the planning process. About half of those stores competed with our stores in that market. We are certainly seeing new deliveries competing with some of our stores, and we're seeing other markets where we don't have the same level of competition.
The most difficult thing is of those 360 stores, 135 of them are somewhere in the planning process. We see a significant level of those stores fall out due to inability to get permits or financing or some other reason.
Okay, thank you.
Thanks, Smead.
Our next question comes from Juan Sanabria with Bank of America.
Hi, just following up on that supply question from Smedes. Can you help us benchmark that 360? Do you have a sense of what that was at this point last year? As part of that question, any views on how supply looks at this point for 2018 relative to 2017? Do you expect it to be flat, higher, or lower?
It's a really good question, and it varies significantly by market. For example, if you look at Chicago, where we would identify 41 new stores, 23 of those have already been delivered. You're already deeper into the cycle with more stores delivered than being planned. Dallas is maybe on the other end, where we've identified 83 stores and only 39 of them have been delivered. It really varies widely by market. Our sense is that there'll be fewer deliveries in 2018 than 2017. Certainly CBRE believes that as well. I think their number was 400. Time will tell.
Okay, great. Then just back on the same-store revenue guidance. What are the street rate growth expectations, I guess, as we go through 2017, and is there a skew in the same-store revenue growth over the course of the year? Is it accelerating or decelerating as the year progresses?
Our guidance assumes that it decelerates a little bit more. You're going to start the year slightly higher than we end the year. The SmartStop pool will actually start a fair amount higher with coming up against tougher comps at the end of the year. It will show more deceleration in that particular pool of properties. Overall, slight deceleration.
Any color on the street rate growth that you're kind of assuming as the year goes, particularly into peak leasing?
I would tell you it's going to be three to five. It's going to depend a little bit on strength of the market and your occupancy.
Thank you.
Thanks, Juan.
Our next question comes from Gaurav Mehta with Cantor Fitzgerald.
Yeah, great, thanks. Following up on that deceleration comments for same-store revenue throughout 2017, would you expect it to stabilize in second half of 2017, or would you expect it to continue to decelerate?
We would expect it to stabilize in 2017, in the second half.
Okay.
Again, the rate of deceleration has slowed. You're not seeing it drop a significant amount quarter-over-quarter, but we are estimating it will continue to decline slightly throughout the year.
Okay. I think in your prepared remarks, you mentioned that you are seeing re-acceleration in some MSAs. Can you talk about which MSAs those are, and do you expect that to be sustainable?
Yeah, the examples I would point you to in particular are Chicago, Denver, and Philadelphia. All three markets have seen re-acceleration. Denver in our same store pool was slightly negative, but in the bigger pool, it was positive, and it's come back from being negative.
Okay, thank you.
Thanks, Gaurav.
Our next question comes from Todd Thomas with KeyBanc Capital Markets.
Hi, thanks. Just following up on the revenue growth guidance. What's in the model for effective move-in rates? How are discounts and pre-rent trending, and then what's in the model?
Discounts are up slightly year-over-year, but it's probably a little bit more in line with your rate growth. If your rates are up 3%-5%, your discounts are automatically going to be up 3%-5%, but they're up slightly above that. Not a significant effect. It's mainly coming from rate this year.
Okay. Then in terms of new supply, can you talk about your appetite for C of O deals and lease-up properties here? Maybe just give us a sense for how large the 2017, 2018, and 2019 pipelines might be for Extra Space.
Yeah. As we get deeper into the development cycle, we've become increasingly more selective for C of O deals. As I said earlier, there are some markets that if we can find deals where there's barriers to entry and no or limited new supply, and we're getting compensated, we would certainly look at that deal. I would think the pace of our investment in C of O deals will moderate probably significantly, but we're very comfortable with the deals we've had. We've done very full due diligence. We've underwritten them conservatively, and performance to date has proven that out, if you look at how our stores perform. We also have a target cap of 3% on the amount of dilution C of O stores will, in aggregate, contribute or detract from our performance, so we want to keep within that cap.
Then the last thing I'd point out with respect to our appetite for C of Os is we've executed a number of these deals in a joint venture format, which both reduces the risk to us and increases our returns.
Okay. Just lastly, looking at a couple of other markets and just thinking about the occupancy year-over-year decrease that you've seen portfolio-wide. Looking at some of the other markets like Boston, L.A., San Francisco, some of your top markets, occupancy is lower year-over-year, and that year-over-year negative spread actually grew larger in the quarter, worsened a little bit. Are you thinking about occupancy differently than you have in the past as you think about maximizing revenue, or is occupancy coming down as a result of new supply in these markets? What's sort of happening here?
I think it's market by market. California had a really tough comp the prior year. I would tell you, we're not necessarily thinking any differently in terms of occupancy. It's obviously important in our model to drive revenue. I would tell you, we lost a little bit of occupancy, but we kept some rate. The fact that our street rates are up 3%-4% is a good thing. Our bottom line is to grow revenue, and occupancy is a big part of that. It's possible that going forward into the new year, our budgets and our guidance assumes that we spend a little bit more on marketing also.
Great. Thank you.
Thanks, Todd.
Our next question comes from Jeremy Metz with UBS.
Hey, guys. As you think about that sort of slowing towards the long-term average from here and stabilizing starting in the back half of the year, in terms of some of your markets where revenues and NOI have moved negative or even just below the larger portfolio average, have you seen anything in particular from revenue management to give you confidence in your ability to react faster and therefore recover quicker back to that long-term average or even just stabilize at that average versus moving below the long-term average, which is something I think a lot of people wonder about and worry about?
Yeah. We're consistently trying to improve the inputs to our revenue management system and its ability to both react and predict market conditions and how to optimize revenue in that. I think we'd be the first to say that last year in Denver, our reaction was not optimal, and we've learned from that, and we continue to try to improve.
Some of what you've learned from Denver is actually already playing out and then helping overall in terms of what's going on in the current portfolio. That's fair.
Absolutely. Yes.
Yeah. I believe so. I don't want to ever say that our learning is done, and we'll continue to try to make the machine better and make sure that when it doesn't work, there's human input. Yeah, we're better than we were last year.
Okay, great. Scott, in terms of longer-term funding plans, you have the $400 million of investment activity and guidance, plus call it another $200 million-$300 million of debt maturing. You obviously have room on the line, some capacity from the unsecured notes you issued in October that you talked about in your opening remarks. I think you still have a couple $100 million on the ATM. I'm just wondering what's baked into guidance in terms of further capital raises, if anything, and then just longer-term funding plans for some of that activity.
Yeah, our guidance assumes $100 million of OP or some type of equity. We've just included in there as OP. From there, it assumes that the rest is with debt, and if you look at the growth in NOI, I would tell you our ratios remain the same. We're not looking to lever up, and we'll look to keep our leverage ratios similar to where they are today.
All right. Thanks, guys.
Thanks, Jeremy.
Our next question comes from Gwen Clark with Evercore.
Oh, hi. Good afternoon.
Gwen.
Going back to rate growth, I think you said it should be up 3%-5% for the total pool. Can you talk about what your expectation would be for the 2015 acquisition, such as SmartStop?
Yeah. They will be higher than that, you're going to grow your revenue with those in that portfolio from a combination of rate as well as occupancy. If you think of street rates in a portfolio where you're trying to push occupancy, you will get more from occupancy than you will from street rates, and you'll also get more from moving your existing customers up to the current market rates. It's going to be a little bit different in terms of mix, I would say overall, that's why I'm saying 3%-5%. That's obviously a range depending on market conditions. SmartStop will get more through occupancy and more from existing customers than the other pool.
Okay. That's helpful. I guess, moving on to a bigger picture question. One of the questions that I feel like everyone's been asking is the trajectory for NOI growth, and that was touched upon earlier. Can you talk about the scenario which could actually drive overall same-store NOI growth negative in, say, 2018 or 2019?
It's tough to even fathom that. I think that from our perspective, the only time we've ever been negative was in the Great Recession. It's a recession that was bigger than I think most people are going to see in their lives. We were, call it 3% negative in 2009, then we were positive first quarter the next year. Now, today's not the exact same market as that, I would tell you, I think it's going to take a pretty big event for everything to be negative for the year.
Okay. It seems like it'd be fair to say that the new supply, which is probably going to hit in 2018, isn't really enough in your mind to drive it to a hard landing of negative growth.
It's really hard to say what the level of new supply that's going to hit in 2018 and 2019 is.
Okay.
I would tell you that if there is a continued delivery of new supply, it probably means the industry remains pretty healthy.
Okay. That is helpful. Thanks very much.
Thanks, Gwen.
Our next question comes from Jonathan Hughes with Raymond James.
Hey, good afternoon, guys. Could you just talk about the level of demand you're seeing in January? One of your peers mentioned they had a really strong start to the year, a home builder this morning mentioned they've seen a release of pent-up demand for housing. I'm just curious if you're seeing a similar trend of increased demand so far this year.
Yeah. I can't really comment on what our peers have seen, I can say that we have seen demand to be relatively flat. It's stable.
Okay, no outsized growth in the first six weeks of the year.
Nothing significant.
Okay. Then just one more from me. One of your competitors quantified the impact of new store openings on projected revenue growth at about 200-250 basis points below the portfolio average. Does your guidance include a similar impact at stores exposed to new supply?
Our guidance includes the impact of stores that are being added. I can't comment on what they're seeing, but we have taken into account where we have a new store coming online near one of our existing stores.
Okay. That's it for me. Thanks, guys.
Thanks, Jonathan.
Our next question comes from Ryan Burke with Green Street Advisors.
Just a couple questions on the development pipeline. Joe, your comments earlier about slowing development probably as we move forward do contrast a little bit with the fact that the development pipeline increased in size pretty meaningfully this quarter. Can you reconcile those two dynamics? Second question is just scanning the 2018 projected openings. It does seem like there's a greater percentage of properties that are located, I don't want to call them in secondary markets, perhaps, but in maybe non-major metro areas.
Yeah. Sorry, finish your question. Sorry.
Just curious of the strategy there, if it is a strategy or if it just happens to the outcome of what was available.
Yeah. I would tell you the jump in the pipeline comes from us putting certain properties now under contract that we are doing with a joint venture partner in a couple of areas of the country. One is in the Northwest, and the other one is in the New Jersey, kind of New York City down to Philadelphia market. Those are all joint ventures that we've been discussing and looking at for 1 year to 2 years, and they actually just went under contract this quarter. We've had the kind of policy or the standing that we don't want to talk about them unless they're under contract. This was just kind of an odd quarter where many of those went under contract, even though we'd been talking about those for a long time.
Okay, pipeline's kind of in place. If things play out the way that you think they might in terms of operating fundamentals, et cetera, we should expect the pipeline to not grow significantly for the out years beyond 2018?
I think that's correct. That's my comments about increasing selectivity.
Yeah
for future years. That's what I was trying to drive at.
Okay. That's all I had. Thank you.
Thanks, Ryan.
Thank you.
Our next question comes from Wes Golladay with RBC.
Hey, everyone. Looking at the expansion projects, where are those located? Do you have much more of those planned for this year?
We have a few of those. One is on Long Island, we have one in Chicago, one in Salt Lake City, are kind of the bigger ones, we have ongoing expansions all the time. This was an odd one. Typically, you'd pull them out of your same store group, they completed quicker than we expected, part of that was just timing, we felt like rather than changing the same store group in the fourth quarter, we would just leave them in and talk to it. We always have expansions going on.
Okay. Trying to look at supply, how should we view it? We always talk about the nominal store count, what do you see as a manageable supply level on a percentage of facilities? Is it like a 4%-5%? You mentioned the pent-up demand. Are there any markets where there's large clusters that you're concerned about, the other markets you're like, "Well, it's not a big deal." How should we view it from, I guess, the cluster point of view?
Overall, I would tell you on a national level, I think that equal to population growth is healthy, and you've got to look at square footage versus store count because stores today are being built bigger than they were before. I think that there are certain markets we're clearly concerned about and watching closely, and there's other markets where you just have not seen supply come. On the West Coast, California's seen very little new supply compared to the population. Texas has seen a fair amount. Atlanta. Anywhere where it's easy to entitle things, you've seen supply.
Okay. Would it be fair to say that you're going to try and expand more in the supply-constrained markets? Is that where you guys would target those?
Absolutely.
Okay. Thank you.
From our perspective, you're always going to look for low saturation, population per square foot, or square foot per population.
Thanks a lot.
Ladies and gentlemen, if you have a question or a comment at this time, please press the star then the one key on your touch-tone telephone. Our next question comes from Todd Stender with Wells Fargo.
Hi. Thanks. Scott, I think you gave some color on SmartStop, but I just wanted to see or if you talked about how it's performing relative to plan. Just as a reminder, when does that begin to show up in the same-store pool?
It goes in January one of 2017. It's in there, and that's what's causing the outsized growth. Compared to plan, it is performing a fair amount ahead of our underwriting.
You said on the occupancy, I think you guys were bifurcating it at 1 point, maybe in a presentation.
In a presentation, we've bifurcated it. Going forward, it goes into our same-store pool this year, so 2017. Like I said, it continues to outperform our underwriting.
Okay. Thank you. Just get an update maybe on paid search costs, as much detail as you can on how much you're budgeting for Google Search this year and maybe any changes in strategy as you head into the spring leasing season.
Yeah. Our budgets assume a 6% increase in marketing, which last year we were actually down slightly, it's a tough comp it's up against. Costs, we continue to try to be more effective and more efficient, but reality is, more people are bidding, costs are going up. We need to try to keep the cost per acquisition down.
Is that a reflection of the Google, their rates are up and maybe utilization is down? How do you look at that?
Google rates going up or just there's more people bidding, which drives the rates up. Utilization, people use paid search consistently, so we found it's a good way to drive traffic. We'll continue to spend money on paid search.
Okay. Thank you.
Thanks, Todd.
Our next question comes from Vikram Malhotra with Morgan Stanley.
I wanted to just get a sense of, as new supply is coming online or the markets where you are seeing new supply, what are competitors doing in terms of maybe discounts offering? How are they driving tenants into their properties versus your existing properties or even peers' properties?
I can tell you how we react, and I would tell you that that depends on a little bit of the velocity. If the store comes in and, for instance, we opened a store in Venice, California. The store filled up in six months. I would tell you, a store that competes with that store shouldn't have done anything. They should have just weathered the storm. Typically, when we open a new store, a C of O store, we'll open it with rates 10%-20% below market, and we'll discount every single rental. It really depends on velocity, on lease-up velocity, when you make a decision on what you're going to do with the store.
Okay. That makes sense. Then just your comment on supply having sort of minimal impact, I guess, so far. Either tactically or from the revenue management system, what factors could drive street rate growth materially lower from here and vice versa? Could you see re-acceleration, post 2017?
street rate changes, I would tell you, are just one of the factors in the model. If you want to drive occupancy, the way you drive occupancy is you lower rates, you increase paid search spend, and you increase discounts. It's just one of the levers. It's going to depend, obviously, on your occupancy and your revenue growth. It's just one of the factors in that.
Okay, great. Thank you.
Thanks, Vikram.
Our next question comes from Neil Malkin with RBC Capital Markets.
Hey, guys. Thanks for taking the question. First, what is the premium to move-outs above move-ins in the fourth quarter, and then what are you seeing in January?
Yeah. When we talk about premium on move-outs, we don't talk about the rent roll down. What we're talking about is our average in-place rent compared to our average street rate. I would tell you that on average for the year, it's mid to high single digits, depending on the time of the year. In other words, when we're raising rates in the summer, that roll down or that negative mark is lower. Everybody does not move out. What I'm saying is you have more churn. Our median length of stay is six to seven months, but our average length of stay is 14 months. You have a group of units that are constantly churning that have a very short length of stay.
Many of those customers never received a rate increase or received one rate increase, and some of those moved in below street rates. When they move out, it's actually very little impact, and also you have a large number of those that churn all the time. Our negative mark to market is different than our in-place rents compared to our street rates.
Okay, do you have a sense at all what your portfolio gains or leases, just kind of putting into terms the in-place versus market? Would you say it's mid-single digit, or?
I'm not sure I understand the question, Neil.
If everyone were to move out and replace with marketing your portfolio, what would the roll-down look like?
I would tell you our average leases are fairly close to market. It's property by property.
Okay. Oh, go ahead, sorry.
No, go ahead.
You guys have commented for probably about 24 months now that the pace of lease-up on development and your C of O deals are well ahead of long-term trends. Are you seeing that abate at all, or is lease-up still the pace is pretty aggressive? Just given the new supply coming on, are you seeing those timelines elongate?
Yeah, that's a good question. The earliest C of Os we delivered leased up within a year, most of them. Just way ahead of historical norms in underwriting. The more recent deals are leasing up between one and two years on average. Certainly the pace of lease-up has slowed down, but we've underwritten all of these deals at 36-42 months. They're not leasing up as fast as they were, but they're still leasing up generally ahead of projections.
Thank you.
Thanks, Neil.
Our next question comes from Gwen Clark with Evercore.
Hi. I just have two hopefully quick follow-ups. On G&A, can you remind us how much, I guess, it costs when you put a managed asset into the pool?
We actually have not just put that out in the public. It's something we'll consider looking at. We put a management fee into our properties that is what we consider a cost to manage when we underwrite.
Okay, that's helpful. Just next, can you just walk us through the performance of the New York City boroughs?
Sure. The five boroughs, as opposed to our New York MSA, which includes Northern New Jersey and Long Island, had revenue growth in the fourth quarter under 2%, and for the year under 5%, about 4.7%.
Okay, that's helpful. Thank you.
Thanks, Gwen.
I am not showing any further questions at this time. I'd like to turn the call back over to our host.
Thank you everybody for joining our call. We appreciate your questions and look forward to speaking next quarter. Thanks.
Ladies and gentlemen, this concludes today's presentation. You may now disconnect.