DEI - Earnings call 4 2023 | Douglas Emmett, Inc.

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Douglas Emmett's Quarterly Earnings Call. Today's call is being recorded. [Operator Instructions].

the Relations to for turn President McElhinney, now Investor of Douglas will conference Stuart over Vice I Emmett.

Stuart McElhinney

Thank you.

Joining Crummy, Peter call and call for us are Jordan be and live XX days. replay webcast Kaplan, the today from available our is our being CEO; our our Seymour, Kevin and CIO; CFO. This during will next on website President the

Relations find section earnings the of website. also package our can Investor You our at

call today's the non-GAAP financial measures You earnings can find during package. reconciliations of discussed in

During of These by, us. course of, on this the to make call, made forward-looking forward-looking the we statements. and assumptions based available will information currently statements are beliefs

Our uncertainties predict. ability actual unknown to affected that and control known risks, and or results trends, will are be by factors beyond our

that expected they our Although our differ future to our guarantees of will reasonable, be and Therefore, expectations, be those incorrect. may assumptions can not to are performance, results be are some material. prove differences from and future we actual believe

a Investor others, For which one in in the of of found portion, please yourself risks, limit follow-up. our be can SEC potential the to question-and-answer some our question section When refer and we filings, of consideration website. reach detailed to one please Relations more description

I the will call now turn over Jordan. to

Jordan Kaplan

and thank In XXXX, fears. higher joining morning, you Good us. recession for interest rates fueled

slowed office As reversed. our leasing and a immediately cautious, gains the result, leasing became were tenants following pandemic more

stable fixed large the increases, but rental and revenue. declined, rent markets occupancy in office mitigated low rates Our impact on concessions our

to our does demand Interestingly, from seem not reduced meaningfully work remote have tenants.

pandemic of our X-year lease signed typical more current after due X/X actually to than addition, our In leases were began. the terms,

of costs. as Barrington XXXX lower FFO vacating apartments, interest expiration higher large lease you, guidance tell the our a will X Peter of the As and Plaza anticipates result

end, after we am does the tenant that early even for an feet. shortly increases. guidance recovery tenants largest for I confidence leasing of any pleased into our that one potential significant signed account take quarter though renewal in see square not Our as XXX,XXX demand,

grow to residential continue portfolio. our We

added strongest Barrington apartments now from revenue. residential the have XX% X almost Despite removing our the in portfolio market, last rental our our of We Plaza over provides X,XXX years almost markets.

not In major seen experienced boom in have residential other we markets. the building addition,

So fully growth the normalizing. There That the rapid said, ahead. our challenges apartments pandemic during remain and to leased. rent are opportunities be seems

prepared both, for We I markets. the confident our in of are long-term am as prospects

U.S. Our supply/demand dynamic the is the among in best

tenants overwhelmingly Our submarkets our office work. to are vibrant, returned have and

corporate debt We of on level have significant cash free half unencumbered. and our office almost hand, properties flow, no remain cash meaningful

will I With Kevin. to that, turn the call over

Kevin Crummy

Thanks, mention Jordan, and the our quickly. expected, moment the to XX to Landmark leasing would L.A. to lease-up good our that a finished Honolulu, conversion office in apartments and conversion the we residential new Brentwood. we I everyone. take another of of office XXX-unit like just property are in have completed floor, At morning, as

few units As remaining add X the over XX will vacate that the final office project. years, next to the we complete floors

opportunities new JV and Otherwise, in us finding opportunities our in to we're office. those and of cash residential take and strong on position advantage focused Stuart? our relationships markets both

Stuart McElhinney

Kevin. Thanks, everyone. morning, Good

feet million we XXX,XXX X.X office of For totaling XXX per for an of square feet average signed all leases square XXXX, quarter.

the the end, leases built fourth results annual year, leases. XXX,XXX an down and per including average office in our foot X.X%, not REITs the renewal include fourth Hills, Beverly feet new quarter only the XXX,XXX years through square X.X%. our XX average by costs These square square well office XXX for the reflecting foot quarter square in signed of other During increases in per rent remained $X.XX of square benchmark after extending we during group. Cash we for At feet, of XXXX. The leases quarter, renewal increased into were XXX,XXX strong the signed covering do feet leases below leases. quarter overall term signed the our XXX,XXX new value spreads of leasing

continued ending leased. With the quarter, perform properties to to at turn during well the call to I'll residential discuss that, Peter Our fourth XX.X% our the results. over year

Peter Seymour

Good Reviewing partly and revenue Stuart. Thanks, morning, the rent. multifamily our by results of revenues to compared quarter increased ground X%, higher everyone. XXXX, fourth from

The During result of prevailed be approximately back rent. approximately additional ground million. of rent $X.X onetime on payment $X we that reset in the a we accumulated was rent going there quarter, million fourth of arbitration land annual will a And forward, own.

primarily X.X%. benefited FFO decreased been per residential residential and have period NOI that to X.X% tax refunds by comparison decreased from items, same-property X.X% on would have positive higher Adjusting portfolio. prior overall NOI a by negative X.X%, those onetime AFFO to strong decreased a expense. cash cash $X.XX interest a NOI by would for been million, growth of cash driven and same-property share, XX%, as result a $XX.X

Our group G&A very relative remains to benchmark only of X.X% our revenue. low at

Turning guidance. to

to and expect tenant leasing of For $X.XX, Burbank, costs and assumptions. removal the from in per the the expected $X.XX large FFO share be X Barrington of rental XXXX, interest modest between higher out reflecting market, we Plaza move

to guidance, schedule For please the our on package. the in information assumptions underlying earnings refer

dispositions or guidance not acquisitions, future our financings. of assume impact does usual, the As

operator now turn will we the call your over the to take so can questions. I

Operator

first comes Fargo. The from Heck Wells Instructions] Blaine with question [Operator

Blaine Heck

in market rates shifted year be seems it the rhetoric you like on thoughts about upcoming swap of around in anything for in to And the and guess or could 'XX that maturities has changed rates your debt and longer. higher some towards how next are has the Jordan, interest handle I beyond? how X? the where back go So thinking

Jordan Kaplan

loan, us of that window typically swaps gives X and The That reason are then X-year loan. there X-year we coming the up swap is years refinance do it. a a to we

But that point we to whatever need more not worthwhile to it it X X probably So up, to try importantly, or it's years a have means means that But some refinancing. most hopefully, the view when what we time see coming whatever market year you and swap towards swaps of start refinance as are or on to swapping in up. coming loans, left, we which them, rate at then at that time. those fixed a have degree, And we're is, be will focus spread. the is they'll and of we good

Blaine Heck

on All guess, to with Plaza, just any respect on right. That's insurance expectation a guys and Then respect the and prior this Barrington proceeds. your give kind project, be that of level, of beyond? litigation Any can kind how might just With capitalized we helpful. second should to Great. a about I high update the how tenants impact question. update and year you about at talk to especially interest of thinking mechanics impact then from numbers earnings

Jordan Kaplan

Okay.

answer So go first the the can ahead, of you you I'll you -- back answer. terms section, I'll part, whatever can let and Peter don't answer in me come and well, the then But answer part. your second ask

Peter Seymour

Yes.

certain the Okay. $X.XXX remaining due assumes be XXXX. But about we It's that's interest. to tenants ] the had property. and move to interest spend. reduced of how obviously, year, mean, level our depend quickly on we Peter. And of will to much who Barrington XXXX, respect we [ of our mostly this to impact numbers in the a ] for Barrington going And in are capitalized retail in how commercial that guidance about I with then Yes. [ $X.XX

Jordan Kaplan

Okay.

to insurance, So the we insured. around insurers mean litigation then beginning well, the I the we get revolved your it's questions. have still question then and board right? And that. on with Your feel

from coming dealing that obviously, with of is and I we're is So that. And in litigation disruptive. insured, it's tenants, all but terms also then litigation ongoing mean,

that I a So we're that. -- on, mean, with but going dealing that's drag it's is

Blaine Heck

We'll an update. All tuned stay for right.

Operator

The with Citi. next Griffin question comes from Michael

Michael Griffin

Jordan, to leasing on your go you comment I back want made the front. to

during of to Or it You already this materially leases new assume is said pick years? kind the that X/X of in signed normal that should after next pandemic. just or of we have expect? couple Is to is your the fair going the that leasing up been

Jordan Kaplan

over next up of believe I will years. couple fully the leasing that pick

As -- fears that of our gotten of one happened cost right after lifted. is And of is got we're expenses I pick results cutting and kind to now a a make as on across of you hear recessionary don't is country some time, and point really which I country. a about expanding, we're leasing many shrinking certainly, what's just units sort fact, the amount the the that have COVID of holding lot the going up from on of particularly saw huge cutting. you here. office Everybody the But space, matter mean saying, tried here's this -- focused people right? that companies

things. new commitments So people doing making aren't big to

and going are see tenants smaller Our forward, great, it. you

it. guys I nothing ones showing around You cutting what keep another is to or we're any or do But of commitments, by cost cutting and of -- work see and just to return lot telling you one hesitant the that leasing. a large and having with you or like just staffing we're what analysts, article very they're see hear, which to frankly, COVID doing want that. I are there's seeing

nobody said, the new from high we occupancy but United wants that of you history best by And lot effectively in to it's and why research. in XX where have for reason I been that with of universities, we We have and to process entertainment, such a lightens XX, have were of medicine, ] the go. levels supply up, [ very is in when we drive expect way, we our demand. we weren't portfolio, lot acquiring or that? market buying So feel market hearing have And soon have as industries of most no keep coming supply-demand have we we the fully States. And ranging a do what we I as vacancy, at dynamic great a and of the any return to of we about XX market tech I have know to before. What's the a the

of it our seeing All And articles are today. you're those about space takers. even

where very headed of I'm into think tenants as you'll up buildings our is actually rates will like lighten the I and back the strong soon all see kind about you'll time. come as see around be market what same -- what optimistic So interest

I us. predictions don't we make but market-specific they So to And that. for -- need think about are all

Michael Griffin

Got you. JV looking more XX% this wondering acquisition this opportunities? read insights acquisition your color could proactively into then the fund. given we there? appreciate you're as the I at existing I you should if give there. have some you opportunistic on additional Or more in the was Was And relationship

Jordan Kaplan

not in then JVs, think good hold selling when to want specific all relatively that all a when think this is our is there. to the general, in provide there's same really get And a a out, that I time. want we that they material, work recommendation happy but we're But our it's be for these or this that's market should that sell, partners and we So, get deal. small the and in were to for partner mean we JV make -- very certainly always we -- liquidity of sure can hard to we X happened at liquidity. was that

Operator

The Nick next with Yulico comes Scotiabank. from question

Nicholas Yulico

pencil Maybe JV on in are investments put with right about still you acquisition out unstabilized already partners? you portfolio I levels. make with particularly they work you're if you're relation willing find those. opportunities and to question to and first dealing and thinking capital now if go mean have sense is where occupancy And some and a how to

Jordan Kaplan

to when Absolutely. an think, back it's think definitely think last rest to -- spending but time I an which turn the and the was I I did amazing of find opportunity thought trying be the case. spending Absolutely. didn't it be we're it And deals. think I out right amazing mean, the to [ And I opportunity, world now. obvious I such mean, may time ],

was -- you opportunity for all. this going back buildings just XXX of epic Chris, these got all looked don't Dan to to go and chance Ken and we company the and buy they're we're miss comes stuff and I to apparently, a can going getting way some You've on -- want with price they're said, that and wow, this at get up out XXXX, we 'XX, we at when there, years, to mean have and with the I I assuming it, what 'XX, 'XX

Nicholas Yulico

lease the worked quarter give on can rent about give learn right. the able All to to Are on extend And how us this new feel preview to extension. us any second just guess the the But you put is you any then for you get William when on I up. the in how next mean, that rent you Morris that? I to capital done? along we'll think had spread with

Jordan Kaplan

Yes.

this a extension. the So in current XX-year XXXX, expires

think current XXXX. But So say of impact that any work, we're difference. averages very will that revenues going They not a TIs while. of and but it you're it's because now current and kept impact in going be don't don't I to on significant look roll the a doubt space. up. terms doing TIs, cash I for to all at will or that. doesn't And think there building that be some their big cash There's anything straight-line I start rent any was

Operator

Evercore. with The Jay next comes question from Poskitt

James Poskitt

typically just year, how thinking percentages see if I could will occupancy you bit throughout where of kind 'XX? start was of the provide trend color of little you through the at just renewal a wondering on

Stuart McElhinney

renewal our the kind in high office XX% for and the term. is over our tenants of XXs, Jay, average yes, between long-term long rate XX%

tenants looking end. renewed on down a you're before you of role because the over the closer percentage term our X most have get supplemental If renewal or X months obviously, the that their goes the year at quarters, next

want you're high long-term the that range. you to about try to but is the like XXs something -- in talk term, more should near map if So specifically offline, average not

James Poskitt

whether just Okay. of a just as on curious That's see then you on multifamily, back well. both? helpful. anything the office maybe And you the provide distress could expect front, front to combination if that, where I'm going to it's

Kevin Crummy

take that. a that was the headlines, I they when where are going very I you pending candidly, I'll look combination both. mean at rate and multifamily. both yesterday very, something assets low back deep upcoming with lenders floating the see debt. were to rate on I showing it of maturities bench. multifamily cap of bought mean, just the We're taking office at pretty It's were defaults these some and on And

we're So of to that expecting I'm of both more the progresses. as year see going those

Operator

Green question next with Burzinski Street. The comes Dylan from

Dylan Burzinski

level XXX,XXX per I as occupancy it, the of embedded in appreciate think sense do earlier more representative through is guidance, on as today? call is it going be guidance of uncertainty? the economy that the think your to lot square works in sort that, year embedded leasing norm way last comments the But you the current its about foot Or your volume expectations. quarter what's more we a the longer-term here of seen is leasing what's

Jordan Kaplan

happen. hopeful, than is think of guidance, for and have Well, overall in hopefully, as be different for not I'm of a I I our leasing XXX,XXX country. everybody feet. mean, it in actually, we But economy, averaged would will us kind willing it last some or the big we year, the say the XXX watching what which we but rest I'm I'm mean recovery. guidance probably, that's won't put in now. thought just we of and gutsy to like kind I the little be we're And why, terms that's to any hopeful, square enough of you but over that said,

Dylan Burzinski

as understanding kind you that excited? And is that about about of sort thinking we of be yield guys internally, would just acquisition you sort as early about may if can And guys you But think on are in of so, opportunities, capital, innings or of really the you guys how curious, get some IRR you there things. cost deploying through think that? walk then

Kevin Crummy

out going of than the pre-interest excited then square going cost it's be metric in certainly the a what the we is foot very the on unique attractive. richer now debt each per is. IRR Look, that us going figuring opportunity are market The and be. opportunities leasing that what gets rent believe property And taking what the and they really function is based to environment hike. rate is to right But is roll, were be to

Operator

[Operator Rana Capital Instructions] The with next from question Upal KeyBanc Markets. comes

Upal Rana

the mentioned. here. rate of leases online you marginally that about back to need would rate your is required doesn't retention guidance, if retention the to most below Based range If increased. XX%, in your going retention be new seems or leases 'XX to your on which come historical new Just imply occupancy slows,

how was how on you achieve -- can that? wondering So you that I just are if curious confident and

Stuart McElhinney

Yes.

course, of which year this move So Warner footage. includes out, square our the of Discovery is X.X%

So that -- into that's we built and you. range the gave

be. year will it for of time. than The year would taken XXs a So this this that's skew But skew average long the rate, large high certainly normally retention is to So account. into historical lower that's something going period that retention average our over that's down

[indiscernible] leasing not we've line with ramp as Jordan assuming Beyond assumptions out, and of quarters, up kind here. we're the what pretty seen from last our one move of keeping mentioned, that, any we're couple in

Upal Rana

helpful. mall future get of to Okay. that next on do up want Got number it. the was years. and They've And they Pavilion couple purchase Westside made I big of pretty at your coming in That UCLA a have portfolio. then expirations your just thoughts over of the

want to your with I guys? on future like So you get looks thoughts their what

Jordan Kaplan

lot different a it's of Well, leases.

deal all -- the So not -- I it's new. cannot mall I know is

So XXX,XXX whole separate is brand-new funding for research The and brand-new new center immunology, quantum set feet the also and a whole XX,XXX then for computing. program. a center of and there's -- it's whole that research a completely a backers research feet, are state new on there's funding with

drain not anywhere. so I of campus, any from of mean in that's sense from And anything, even

those the leases those plans in just the of doing, to are UCLA's are those All hard independently very departments. and about general, tell. what people terms by they're made it's in decisions In -- leases

one about or another thing them. it's so to And say hard

Operator

Jefferies. from comes Peter question next Abramowitz The with

Peter Abramowitz

about you any conversations having or could backfilling tenant to it midsized Have anticipate leases? it you lease? Or you -- is that update. space to to do you had provide X it small as large Is Just think the wondering can in more likely do initial in Burbank? break potentially an up be you something if

Jordan Kaplan

tenants Well, are certainly when and showings there there. we're doing

think will I committing. But there's happen. that mean, reticence I to I think

not not years up not that large can about XX large talking done I'm the building. done, again spent years say leases when I all rather end there'd market. nervous we've up. lease that hope in tenants and up obviously lease every And will it I'm multiple There's be XX So came about how it's be is but about, it leasing talking be I because sure X

Peter Abramowitz

And then of one NOI there, kind there aside move sort swing other of of growth of in other the other. Besides that Discovery out consider move guidance the same-store to sort big from what are any out. factors the components

Jordan Kaplan

don't good make analysis know. calculation, Same tricky for couldn't of is store that I I a you. a

else. something could give, later if and try figure You call, I there's Peter and guess,

Peter Seymour

I there's same-store. And anything the not don't also, in is driving unique think guidance. included Studio that Plaza

Peter Abramowitz

Okay.

So drag leading it's the the Discovery. than but mainly of other negative occupancy growth to that's there, kind

Peter Seymour

correct. That's

Operator

from America. The with comes Bonnel Camille of next question Bank

Jing Xian Tan

we and sector conversations having Hi, media how since in trending you're its pipeline? the been the is recovery based everyone. get just resolved Can the on thoughts your have on the strikes

Jordan Kaplan

the have I don't I great that I do of a to... thoughts. you know I have they're mean, mean anything I -- lot don't have --

Stuart McElhinney

certainly Camille, entertainment the tenants. margin. I'd clients a has the on do we thing be -- say and have strikes this, to We good giving result

the the some stuff during down margin a so bit strike. did on of And little that slow

There's those mover near I think huge will a But caution Jordan's gets still us be And needle need that the grow. happy don't been I happen I economy it's here a to But think little hopefully, got going it's a for those describing. the term. as when that We know better. resolved. good forward. the in tenants that to in So thing market, are

Jordan Kaplan

tenant, think we have we know I and X leaving. they're large entertainment

I think So we big tenants. have don't any entertainment other

Stuart McElhinney

groups. see with small do We small leases groups other small. and do we But writers entertainment tenants, all

Jing Xian Tan

Yes.

has conversations, the coming are sense get trying to guys Just if looking trying changed since? start projects? the a have to of sense a to anything smaller table like to back Just get new to

Jordan Kaplan

saw I an mean Beverly that in -- I you renewed Hills tenant. the of just a saw renewal mean, Well, is tenant entertainment we you

Jing Xian Tan

my Got same-store any you're wondering it. for able second And NOI versus color provide -- the I additional to if multifamily? outlook office question, for on was just

Stuart McElhinney

between We two. don't the that out Yes. break

I pretty the about to are think helpful drag the and think occupancy has bit. going office seen that's would that we're remained you forward. you've hurt a dealing trends that -- recent Residential strong, little be with for

as So well, that will I'd be the case XXXX assume. for

Operator

James. comes next Bill question Raymond with from The Crow

William Crow

Two quick questions.

in it First Are new of In is there nonorganic, market I demand demands? real you gain actual share just still? or organic a words, other markets? all, your is guess, any seeing space

Jordan Kaplan

large I -- from usual. we seeing tenants, of I feet. think smaller are think ones as demands, space larger new but us we're XX,XXX think we're XX,XXX I of seeing from But I really we're business don't seeing for or think like a lot ones, kind over the

So it's impactful when they don't grow or don't renew.

William Crow

And but and cycle? Okay. the downtown, it's the your we downtown declining? -- market still on Have reached can downward I bottom this of is still out Or not flow market, it be on second is helpful. know

Jordan Kaplan

-- a said, my me. West side. there's but City. I'm downtown mean will the for of downtown play it probably better that people be I City, downtown next pretty not mean, I couple there's cycle to that are a right? It or recovered, was is of be to And if sure of worse, XX on went mean focused to for deals. getting have a going area not on the better you feel maybe lot in the of you're positive. positive that have I was going how years other than Century lot out. pretty Century Well, most downtown. It's a there, tenants

impact. play going that's to going know don't how out. have to So that's I certainly an

William Crow

So from out migration downtown? seeing you're still

Jordan Kaplan

a we've that I'm have markets a I we've been primary our don't mean, beneficiary. beneficiary. been sure think been -- not I

I we cannot what seeing, meaningful that particular from are we're in So say that. seeing anything

Operator

for to like conference any would over to closing turn I session. Jordan question-and-answer our Kaplan concludes the This remarks. back

Jordan Kaplan

we you and with quarter. joining forward look us, again for in to you a thank speaking Well,

Operator

concluded. for now attending conference presentation. Thank has today's The you

You disconnect. now may

Douglas Emmett (DEI) 7 Feb 242023 Q4 Earnings call transcript