DEI - Earnings call transcript Q2 2024

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Douglas Emmett's Quarterly Conference Call. Today's call is being recorded. [Operator Instructions] I will now turn the conference over to Stuart McElhinney, Vice President of Investor Relations for Douglas Emmett. Please go ahead.

Stuart McElhinney

you. Thank

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

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

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

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

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

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

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

Jordan Kaplan

rates Good held of to, operating Rental metrics before and joining or levels strength. morning, are continue show even us. thank have for our and pandemic. the comparable you to Many most important better than,

lease transaction significant achieving volume. are We

to continues rate retention Our be high.

to historic leasing concessions minimal. Our low. are remained defaults our have Tenant back

of outperformance our below new leases absorption. metric diversity sufficient leasing, time, to average. Nevertheless, The shortfall, not feet. continued line tenant to long-term severely office My and supply foot restricted leasing rent is XX,XXX over per our XXXX confidence in roll-up, base tenant was drive markets. continue our office new XXXX remain and We commissions important new came experience positive strength at positive the improvements portfolio validated and the the our and square the in largely most this by of square again, straight to from our

some I country. With as are call to will abandon our increased I'll the of Kevin. the in from turn activity that posture, their believe portfolio the tenants, defensive and We over strongest they that, seeing be signs larger among firmly

Kevin Crummy

Thanks, morning, although are trades financing. Sales volume raise remains transaction sellers Jordan, multi-family and consist beginning with owners we of liquidity looking good funds properties. see everyone. depressed, core in The some and to to floating-rate

quite pricing There LA rates high-net-worth West have been at and they cap levels. by scarcity premium fewer low owner-users call individuals. fairly While for to The over reflecting a the risen remain trades have these that, I has quality purchases, Stuart. will mostly turn slightly, for per-square-foot office been basis, estate. With the on real high

Stuart McElhinney

Good Kevin. morning, Thanks, everyone.

XXX,XXX of leases XXX The value including feet spreads square leases quarter, covering square feet by XXX,XXX of the and office we we down leases new During in with cash increased signed X.X%, the renewal XXX,XXX overall signed new quarter leases. square XX.X%. second feet, of

substantially. on leases the Of cause course, rolling numbers in vary to off quarter, those and specific any can

leasing platform. our reflects success the office costs year, key during average per quarter pre-pandemic of several foot square averaged below advantages total other REITs. This below Our well second our per for average and operating the long-term $X.XX

have In accommodate tenants. other TI First, the to compared new fits often with tenant most our standardized without already can dominant suites requirements we market to who a must accommodate other have that that costs words, share suite buildouts, modifications. incur we and finished landlords expensive significant tenant,

technology our website and Second, customized upgraded tenants quickly potential find to allows and tour suites. search virtually

are design reusable, buildouts tenant times, work we that ourselves, space standardized costs, by satisfaction. planning, and doing construction Finally, move-in design accelerate and control improve

to over discuss roll-ups. With rent fully remains essentially continues the and portfolio that, leased to healthy XX% call generate our to residential Peter I'll results. at Our turn

Peter Seymour

Good share, result and office XXXX, by parking and lower more income of higher as revenue flat, revenue operating multifamily Reviewing to and Stuart. of by revenues, per slightly expense was AFFO X.X% NOI. by NOI $XX.X than and higher was decreased everyone. interest occupancy. FFO a office compared Thanks, decreased growth $X.XX interest X% partially quarter primarily Plaza at results residential lower as by million, cash higher same-property decreased expenses. Barrington second lower to our the offset to offset with morning, and offset essentially lower by vacancy

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

guidance. to Turning

determining of our of second utility similar Our guidance of Brothers factored timing from year, third benefited but seasonal costs rest expenses. the benefits, for higher have refunds In our the usual in interest and included the have we out in Burbank, in Warner move operating in the expense. quarter, quarter FFO increase the tax the anticipated property not and

share. keeping of FFO the As and per midpoint and a result, our range the $X.XX are we $X.XX guidance to between unchanged narrowing

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

our property charges, insurance usual, can turn property impairment possible your repurchases, assume impact over so activities. I As other acquisitions damage sales recoveries, the not financings, or now will take the call dispositions, operator does to or guidance questions. markets stock or we of the future common capital

Operator

from comes with [Operator Heck today's Blaine Wells Instructions] And first question Fargo.

Blaine Heck

and based rental you've give on submarkets maybe continue are recent is color you little you rents in growth? or net your that comment rate mentioned best effective whether show a have on and showing just seen, prepared to asking more bit resiliency strength. which or that Can Jordan, think rents, held rental I the rates remarks, trends even

Jordan Kaplan

Yes.

a couple rates rental have So I'm for reasons. saying held

strength those and or -- think, by only offset to you the and actually line pretty seeing We're concessions, year the ourselves. like asking of continue that of And rates, earlier, of to quarters First roll-up, the the places, of which not considering net had effectives that year the of we're and existing from that's, get and period, report being which one also do but strength to have deals. the out strength. years seeing we've previous of positive impressive. to is I at in of look a -- we're number way seeing straight guys seeing, markets that 'XX this to We're all we you CoStar

said, recession, fallen pretty After good where as saw So, them really haven't we XXXX we the I off. off. rates rental feel about that fall

We have not experienced that this time.

Blaine Heck

worse any out that bit being or as And submarkets you'd specific portfolio? better within call a your little positioned

Jordan Kaplan

why Well, took market. colossally of so that like because to I excuses the some years product many a spent say and have strong out just market why, for we now, making the it's of I

beyond don't but think there. side I you the a gamut. think, respect very it's that the I strong. of differentiate way issues anything that, has would West So Warner But of still we're whole its And to good All seeing But happening, it covers with most has around, vacancy. that things lot Center the is, probably strength.

Blaine Heck

can And pay later those? overall talk bit plans your few talk then the down add in reset have Just maturity second and you cash if little Will And at collateral? year this the early just the about with more you you'd to be to it talk swaps, upcoming a refinancing, question, about XXXX. you you're as loans for upcoming you maturities? debt just to through other pay plans cash more into looking for us financing likely just need Can with just a and maturities your looking past off you environment LTVs whether is assets those refinance? balance, or look or to can think your looking you you'll

Jordan Kaplan

I'm plan have loan that paydown. feel be times don't are a its think for all significant. we'll as do confident all done. We some will own it, some it I do that's So loans, -- be and and done. when I about we'll get thing has there'll of the each There cash good

probably that are We so extend buildings have can confident loans and to No of rates coming could especially by few our like piece repeat our a I I'm ones out. debt, happy good portfolio. we although everybody news. are our so collateral all also that's a back. little are, years actually a lot nothing that giving that. one that about a of on good feel where making happy, way they're bit, back We're adding We're unencumbered,

Operator

with from Goldfarb next And Sandler. Alexander question our comes Piper

Alexander Goldfarb

questions. Two

a the national tenants up last is go, is someone look tenants bad jobs really to is it like business doing trying because Friday, healthy? tenants Or at print way something wake separate, local I'm in in the space? to are getting the the don't warrants leasing. doing hesitant, they're the still be at the they or clearly figure doing you that's out, because trying deals and their business on outposts I'm like isn't that that? those those scared when of aren't it's Jordan, just First, to national national doing and say Or market, we're that tenants, are them not corporate the jobs markets it leasing your have print your just leasing?

Jordan Kaplan

Well, completely. out better the I refined But Maybe don't lot Stuart some And that's should guys. call that a dropped to to over know a I has I feeling about of just want very these tenants information don't larger it. I'm now. have question. Stuart. overstate turn

about see activity more better larger leasing, feeling we from more are pipeline, and to starting the see starting I'm to So tenants. --

probably was Stuart, the want to feeling We're ago, something to at little do you want add don't a that? I in now. it of But we're still whenever it worst. doldrums though as year So actually better paint a or its to

Stuart McElhinney

Yes, sure.

quarter. that of new square the So had first a we signed we think, you well only what below That of typically last telling trend made XX,XXX lease quarter do. feet was it, point we in over I X

in over So improvement in We XX,XXX we second X the quarter. saw quarter. feet deals that did this

there. pre-pandemic better to see momentum average So level. back some to not still levels, It's feeling

more. more Jordan's are to strengthen that with I'd see little feel optimistic that echo to we a starting bit like we'd So that But comments segment.

Alexander Goldfarb

just maybe there, a Stuart. then as And follow-up

you're and ] from to demand place on figure all tenants, something the are how your those larger literally there up tenants really the literally small out that square tenants? spaces lease active, between is in XX,XXX XXX% smaller you feet ability demand throttle can tenants, the smaller the into X. those leased suites therefore you're going out trying incremental and effectively and break to Or is get I'm it's only the small [ just where further much Given to you've over impedes the prebuilt maxed them? that

Stuart McElhinney

No, I understand. Yes.

that, means think take smaller. our no, an out up still break have up. still our option larger look portfolio. By That's we to I in spaces and break ability larger to into would them space we maxed no

In fact, doing at we've been that vocal Studio about Plaza.

it Bros. smaller product to up. at available, looking the the good spaces. It's we'll break Space, a we're that product, need don't we re-lease and spec then If Warner moment, building-by-building floor-by-floor break suite larger Discovery have to decision. up smaller As into space that take and we

a got very see of leasing, we've across could although very large leasing, out on still it's smaller all remaining of focused portfolio. better, to active. do leasing. So We're We it, improvement lot small could those leasing That improve. We the could get categories.

So spec suites. tenants. more we break focused improvement remains We're on get it We've that, been successful about across the board. We doing space for and small, can large, aggressive very build us. medium up, could very

Operator

next Michael comes from Citi. question Griffin our today And with

Michael Griffin

absorption? environment. get I leasing I point there, positive? how the to tenant to want expect deals of these to in go be but net choppy can to quarterly think when inflection be order back And you can that negative many absorption just do for we you realize numbers turn need net to larger on comments that doing And

Stuart McElhinney

Hey, been Michael. per feet do below maybe and talked If that. below average, over look XX,XXX-foot in maybe X a XX,XXX We've a to we've we back X We've range we or quarter. been that. deals about how over longer-term average used

that see improvement. could we So

larger As we're what's when, I and with it's told no dialog to on feeling have guys. a some bit I some just going better activity. and the soon. There's you Jordan little hope idea. I about

optimistic, that's exactly when but can't So switch. you see I tell that we'll

Michael Griffin

are on that of bread-and-butter I pricing? side market multifamily? side, you category the more there the multifamily see any could maybe see, And the relative as then office turning if office. office maybe on there And just the type out we buildings meet that would properties properties in it more at you on the more could to that you so, to high-quality come sit execute or market, prefer to your distressed mentioned you these and think today, But transaction coming distressed opportunities to

Kevin Crummy

at rates trading This cap is at trading is but the still not multifamily Kevin. The priced. it's still rates it's it was, low and very fully extremely -- low very, that cap

to side office but going the little a there's work discount system. taken So longer be a the to its way on has the office better just side, through

the net there Class little as buildings we couple high A so, user worth, the that much. And couple side, a trades, office to mentioned on I have but been seen multitenant of haven't West

going be Although next there'll I'm be this are of opportunities, part of to thinking if early that there second year, year. half

watching definitely we're So it.

Operator

our from Steve with And ISI. next comes Sakwa question Evercore

Steve Sakwa

industries, Jordan, it is you just leasing, the biggest to to see in is you Where upturn get need order everything? follow the overall? bigger it a do to, tech, what it up media, on in is leasing improvement activity the feel,

Jordan Kaplan

not probably It's and tech media.

coming As that's you big have to I those the back But back. leaned we're we other and so I general don't know, say, better guys, have them. of service all the of them, never feel industries, it's concentration the a about. industries, office the feeling accountants, on other stuff that we've

it. that guess It's do have it don't because pipeline shot and heading because remember we Plaza, a you're very But take what back to terms with we're Steve, And to I was at going this we in say you, to I of to get direction. if past horrible have seeing activity. think prediction. an make would about I a Studio upward this, chance. that's I good once want more So we of of good a in

Steve Sakwa

other a do of and quick necessarily your companies tenants, big other I Just tech smaller to not those. follow-up and know there. but off feed businesses media are

derivative can tech people So to on guess as you're effect laying come down your extent they I don't to that And other and tenants wars, trying back? having customer media if about a back, your the businesses, impact base. the streaming feeder come being off of think I'm in

Jordan Kaplan

and sure a that that agency, derivative secondary, tell seem Even more people. The I'm had all not is impact impacts, very and tertiary direct those already still and I'm I they be though lawyers, went Well, -- you. which many the we clients entertainers so the is directors full accountants, was to of producers going their XX which and lease large just know renewed right? tilt, the years, to that going are an of

that And be moving very doesn't for So I that in any that bad, creative that is not, at the working with, they're dealing us, good stages, would say, studios, meaningful people deals, way for along on indifferent, are, the the activity be need the they, still moving clip. active. good, we're be or whether happening. side, to sound seem to a We're to

Steve Sakwa

quarters, a benefited the just you property know I office. these tax follow-up. that Peter, last have guys X as refunds the had your have in operating expenses

And a that figure to property savings. how much to have out was is guys just like I'm continue we're really permanent figure trying these that and just overall COVID nature. what rateable one-time much function benefited. you it that's just and problems really how allowed a feels So guys of trying truly really don't reduce if of the in it's of payments values that you would savings lower and have basis. out one-time the to of a Because run are more

Peter Seymour

Peter. it's Steve, Yes,

refunds They're cycle. know process are a the you life related. some These we some are the resolve. going second first to time them don't appeal and we generally started that quarter. in quarter they're things appeal So when the for and And ago. years long had tax the of resolved And

know we process, incorporated more, bit a expecting are it's multiyear what into we have and guidance. but a We our

Steve Sakwa

I'm sorry, Peter.

when, are so they're So just not pending, there don't more guidance? you know in

Peter Seymour

over we've years. guidance. in of incorporated a building, buy these anyway, period our time There's know, there's of we a an a appeal. What But we every in lot process

Operator

Kim And Capital John today BMO at question our next comes Markets. from

John Kim

a tenants in back harping or coming better tenants been has that as feeling your in national but what that is? any far pipeline we're benefit market. there commentary little And that? still releasing from about bit, large what we're activity of on as know Is to or of interested way percentage what this may the submarkets I Jordan, quantify tour that

Jordan Kaplan

do the to it. I'm feel activity I result but you I not a tell with way of is can as that larger is, There tenants. anxious reason But that our

approaching kind you back. at on, guys deals to what talking I there's big who we're when some of coming we're look oh, go, as good deals, we're So working

John Kim

around West in to And market your downtown moving LA? expansions from that's or just

Jordan Kaplan

I'm tenants see, look have each an and would I'd noteworthy familiar those around. that that not asking, One are moving to coming into sure it is that's what I one where me call you're expansion, one from. with. for I'm

John Kim

ago, let Okay. you On facility quarters a credit expire. your few it

there for coming that secure have another stabilizing, be rates and the it'd one? fees any down are come signs to attractive so the back, you with that Now

Jordan Kaplan

of ourselves build seen I lot a allowed up have to not We cash. that.

you We a cash we you dividend, did allowed As guys know, on which build lot cash and that the loan apartments. of one brought the into We up, that of to seen. couple expire. let a we cut have

cash of where the create rates pretty think that through cost is line. that a pay I have to what trade, in today more than availability are to I us good, carrying would better credit substantially still an environment

have come costs would So even down, still ways to come if rates to a even more There go. come they'd and down. be down

John Kim

Okay.

So it's get checklist lower as to your on one. desire another far as

Jordan Kaplan

were but now. would, think even the Well, don't right if they're costs close good, I I

Operator

And Rana Capital next question KeyBanc comes our with Markets. Upal from

Upal Rana

ruling have Barrington regarding shifted tentative maybe the past expectations following Plaza June? from Just here, this

Jordan Kaplan

the that vacant always while knew there's No, way. -- a right work. position it'd building's The now. XX% of use a that variety get in There's do of a a be ways to about ways we variety we to

like that or have finish be way tenants with. off to out to by there'd So another, we'll how one assume some I'd figure always

Upal Rana

on one how into does they the building you other that building all work? one you in move that so Are is of or start can parts Okay. something the can project, or

Jordan Kaplan

we or think with better there's use, in are are leave on because some possession us We'll But and would ]. some better city so numbers with there's worse. that [ what to any programs don't case that left. permit very the ones material Well, that, few it's depending people I start the our

Upal Rana

on then your is over rent COVID? prepared up remarks, think you near even roll that said second since your can that And was question larger term? has my do term, the you And rolled or of rent when of up portfolio already in continue medium longer just roll relatively or because the percentage

Jordan Kaplan

are look we've rates rate is, around you know where I actually future if what the But to about was held don't my of -- rates Well, commentary revolving some rental about predictions going. and improved. more degree at

were And for X so stats we years numbers, X X%. know I and at looking roll-up the without rent years recent ago, last back putting weight over our average, averaging we're including to

If COVID, like time. you me of average that's say held wow, would have have we with to for I And I markets. our going and a rates that's why told I doldrums, said, X%, feel in were good a have would recession basis over lot

Operator

Peter our with today question from comes And Abramowitz Jefferies. next

Peter Abramowitz

Yes. the possibly be tenants. your leasing activity would you I Any again to leasing wanted or Could of about that just overall you're and this quantify go elaborate quantify pipeline, comments to national elaborate feeling terms in means comments to what back better or tour activity? helpful.

Jordan Kaplan

I us. be that's and don't I'm and about answer deals way back the now, larger those still then it it's we're we'll seeing no, start get in and underdo tenants working what really. come back their see ready a get battle not talk let's short want overdo some able and going guys is want it made, front it, and to to is still I'm And -- I And be right. not very I'm get pleased was we'll felt it. lease to and pipeline. just to really The to telling you to I properties, them. back, then up like, But the of in

feeling So I I'm don't I'm to overstate, more want saying just positive.

Operator

next question of today Camille our comes America. from with And Bonnell Bank

Jing Xian Tan

favorable with second follow Can it assume that quantify with offsets adjust impact guidance, contributed to wanted elsewhere? line more you I earlier of refunds given your I an to didn't quarter? question. came the the up or was the outcome you in expectations tax on

Peter Seymour

what when those expenses. we Peter. they're in take expected we reflected It's It year. And the line No. for was with in refunds, office

You can from most in office versus of see reduction tax is year, big the that and the refunds. expenses prior

Jing Xian Tan

quantify And that what you can was?

Jordan Kaplan

but You through Peter it. can quantify you can go with later,

expense the You can look at change.

Jing Xian Tan

been then shifting. not And leases Okay. just quarters. the signed your commenced lower past trending noticed to I gap X has occupancy

any you are how wondering leases So if of this guidepost was much can rest commencing of on XXXX. versus these in year provide the

Stuart McElhinney

part, Yes. pretty when actually quarters A leasing. attention over that signed. of Generally our generally we lot like, means spread X majority few widespread, getting the we're after We they've out. the leases commence, leases. a gapped for lot That's we been a a were of which the most next of years ago, had the doing

XXX is points, spread I average something think long-term XXX, like for that basis that.

we that leasing more wider like We do, gets. the that. the usually can spread So

generally, are that over we'd very commencing or leases in smaller So in quarters. upward our them that see tenants. like that But quarter the to improve next direction. of get We couple with our quickly

Operator

at question Wedbush. Rich from Anderson And our today next comes

Richard Anderson

So in it anywhere, the is see Bishop you've or an that portfolio accommodate there, conversion find is to a you success would do in like had your there another future, tough given that? asset Place your

Jordan Kaplan

but we spread make rents sense, meaningful And very accommodate to meaningful, actually spread. a that seeing if meaningful there, conversion up can between a need and have financially, you we're residential in confident can spread assets of all the that between lot you and since markets We aren't a not the very buildings lease to get our have where physically conversion, rents. office are -- buildings, it's your

were very in of XX%. So low been that a exact apartment market. were the even as office and persistently strong, the in same rents we of have vacancy result Hawaii, higher But saw stabilized rents about low

rents portfolio, made building sense, in that one, calculated you in achieve would this also it rest we the substantially take cost it make a if was larger conversion, the substantially our and than would portfolio, the reverb changes a to one amount -- market of and where out office considering to easy the stock, of in out to apartment more strength happen of take if building of sense. that's as doing and the It added the available like of when fact, it knew the So we the the leased. of be a you not office successful. That's extremely changes that

tailwind So part of as process. the that you don't have

straight just of, to now result office it was a do like, this it's as building. have You an building, apartment an

So there. that to on And at that that really don't we that's there's this you got rent rely time I spread. have know anything

Richard Anderson

And because was the Again, away of mentioned, part, Okay. have throwing it and a you move veered do that the why ultimately don't you second is lot think is, then Was intentionally they'll question an that's about we there Hudson the all that your be lucky? on from? know case. whole I'm that you wondering exposure. don't under I intentional or something But I fine Pacific that mean to there. bus, media industry

Jordan Kaplan

tenants. media like on I We And tend tech tenants. that don't our single-tenant be No, relying both larger think we buildings. don't it's like strategy large and to more

don't And so it's of we credit. a lot just if We're credit. buildings, comfortable small more even win tenant with bids on

of and small profile Our has been outstanding historically this credit tenant through period time.

just are Warner but they have We're Center, space. not of out. that Burbank, the to. we Not but buildings happy in smaller in we're -- blocks for not which so big coming be up and Warner big -- Center, block we of have we're to moved we'd don't that we guys And looking on not tenants, leasing that larger means a for entertainment lot tech focused built

appealing. So We that's of don't the don't exposure types buildings find that them. have the we probably reason they would have to

Operator

conference closing Thank our you. this to like over turn the I'd And any for session. concludes question-and-answer remarks. back the company to

Jordan Kaplan

speaking quarter. all you joining be again us, we'll another thank for and in Well,

Operator

today's This concludes thank today's conference Thank We call. presentation. for attending all you. you

disconnect You your wonderful now a may lines day. have and

Douglas Emmett (DEI) 9 Aug 242024 Q2 Earnings call transcript