Douglas Emmett at Citi Conference: Navigating Real Estate Shifts

On Tuesday, 04 March 2025, Douglas Emmett (NYSE: DEI) presented at Citi’s 30th Annual Global Property CEO Conference 2025. CEO Jordan Kaplan outlined the company’s strategic positioning amid both opportunities and challenges. While expressing optimism about leasing momentum and acquisitions, Kaplan also highlighted concerns about the potential impact of de-globalization on the real estate sector.

Key Takeaways

• Douglas Emmett is experiencing increased leasing activity, especially in high-end markets in West LA and Honolulu.
• The company acquired 10900 Wilshire, expecting a 10% cap rate, with plans for residential development.
• Transitioning from floating to fixed-rate debt to mitigate interest rate risks.
• CEO Kaplan voiced concerns about the negative impacts of unwinding globalization on the real estate market.
• Positive regulatory changes in Los Angeles are aiding development efforts.

Financial Results

• Leasing activity rebounded in late 2024 after a downturn in Q4 2022 due to Federal Reserve rate announcements.
• Studio Plaza is leasing faster than expected post-Warner Brothers’ departure, with rents nearing previous NOI levels.
• The acquisition of 10900 Wilshire in December saw strong investor interest, with a total investment projected between $150 million and $200 million.
• Douglas Emmett is managing its debt by shifting to fixed-rate loans, reducing exposure to interest rate fluctuations.

Operational Updates

• Studio Plaza’s leasing progress is robust, benefiting from multi-tenant occupancy, reducing risk.
• Douglas Emmett is focusing on attracting large tenants, over 10,000 square feet, to enhance net absorption.
• Utilization rates have normalized post-COVID, signaling a strong recovery in tenant engagement.
• Regulatory improvements in Los Angeles, driven by Governor Newsom, are expediting rebuilding in fire-affected areas.

Future Outlook

• Kaplan expressed concerns about the potential economic impacts of de-globalization, which could affect tenant decision-making.
• The company aims to continue its strategic acquisitions, focusing on properties that enhance earnings.
• Douglas Emmett is optimistic about political developments that may create a favorable environment for growth.

Q&A Highlights

• Interest rates are not expected to significantly impact leasing success due to prior adjustments to floating rates.
• The acquisition of 10900 Wilshire was a strategic move, with Douglas Emmett prepared to be aggressive bidders.
• Market consolidation is anticipated, with potential for fewer office REITs in the future.

For more detailed insights, readers are encouraged to refer to the full transcript of the conference call.

Full transcript - Citi’s 30th Annual Global Property CEO Conference 2025:

Michael Griffin, Citi Research, Citi: five Global Property CEO Conference. I’m Michael Griffin with Citi Research, and we’re pleased to have with us Douglas Emmett and CEO Jordan Kaplan. This session is for Citi clients only, and disclosures have been made available at the corporate access desk. To ask a question, you can raise your hand or go to live QA and enter code GPC 25 to submit questions. Jordan, I’ll turn it over to you to introduce Emmett and the team, provide any opening remarks, tell the audience the top reasons an investor should buy your stock today, and then we’ll get into q and a.

Jordan Kaplan, CEO, Douglas Emmett: Okay. Thank thank thank you. So to my right is Peter Seymour. He’s our chief financial officer. And to my left is Stuart McElhenney, and he is our vice president in charge of investor relations.

So that that I’m happy to say the top reasons to buy our stock. I do feel a little bad that it seemed like more people were here for Maestroich than they’re here for us. I mean, do we have a bad time slot?

Michael Griffin, Citi Research, Citi: We we we can go get more people in the in the lobby.

Jordan Kaplan, CEO, Douglas Emmett: Okay. I’m gonna go get Jackson Shea to come back and just hang. So so so, so, Douglas Hemet, about 18,000,000 feet, around 5,000 apartment units, totally focused in West LA, LA area, high end markets in LA and then in Honolulu. And we so and we obviously we own residential and office, a little bit of retail. Why am I excited about our prospects and what’s going on?

The reason I am is that, and and this is barring I you know, there’s a lot of action right now in the federal government and a lot of activity. So when I left to come to this event, our leasing was really doing quite well and, you know, accelerating, and we felt great about it and what was happening. Our on the acquisition front, we’re doing quite well. On the development front, we’re doing quite well. We’re doing we’re in multiple construction situations now.

The last deal we did, we had a lot of buy in from our sovereign partners. They came in a deal. We were oversubscribed. And when I look around at our market, we are we stand very independently in terms of the size of our platform and our independence and ability to make deals. So I’m optimistic we’ll be able to continue to make deals.

Then we have capital. We have a good balance sheet, a strong balance sheet. So those are all great reasons over a period of time, not the quarter, but a period of time. I’m very optimistic about us getting our income back up to where we want it, where I know y’all want it, which is back up above where we were going into COVID.

Michael Griffin, Citi Research, Citi: Great, Jordan. Really appreciate that overview. Let’s just start with, the leasing front. You know, obviously for your portfolio, it wasn’t really affected by, work from home, return to office trends. It’s more been a kind of business confidence issue I think you’ve alluded to in the past.

So you seem optimistic for 2025. Maybe give us a sense of how the pipeline looks. I think some of those bigger tenants, the ones bigger than 10,000 square feet have started coming back. So then hopefully, I guess, the the goal would be to drive net absorption in in ’25 and beyond.

Jordan Kaplan, CEO, Douglas Emmett: Everything you just said, a % correct. That’s very good. You so so I don’t really believe I mean, obviously, during the depths of COVID, we were impacted by work from home, and we lost 600 basis points of occupancy. But since then, our recovery has been so strong that even when we were reporting early numbers in terms of utilization, you guys kept reasking, like, how are you getting that? How’s that happening?

I mean, but it was happening. And now our utilization is essentially almost back to normal. So that has not been an issue. But we saw in ’22 a lot of good positive absorption, a lot of good leasing as we were coming out of COVID. And then in fourth quarter of twenty two, whichever one can remember, the Fed said we’re worried about inflation.

We’re gonna start raising rates. We saw our leasing pipeline try to completely drop off a cliff, and we suffered with that through this whole period when people were expecting a recession and higher interest rates, which happened, by the way, for us. But, I mean, our our sector of real estate was in a is in a recession. So so so we went through that. I would say over the last half of ’24, we were back in recovery.

Leasing, we had a couple quarters where we were what what we had explained to you is, you know, it’s not just about doing a lot of leasing. We we were doing whatever 800 to a million square feet of leasing, but we need to do a third of that as new. We were not doing a third new. He said, well, what’s what are you missing? We said, well, it’s a tenant’s over 10,000 feet.

So we’re not getting those big tenants to back in because you lose a couple tenants and you need to get a couple of big tenants. Big for us, full floor tenants. That’s big for us. I would stay in say over the last couple quarters, they were back, fulsomely back, like, maybe more than our historical average. Right?

Why am I optimistic? Why was I optimistic? I gotta say it that way because I’m really nervous about the news I’m reading here. Probably shouldn’t come to Florida. But but, why am I optimistic?

Why was I optimistic coming here? It’s because I saw everything from showings to deal pipeline to closings ramping up and continuing to ramp up. So, of course, I felt very good about that. And then when you look at what the things we need to do to get where we wanna get, which is lease up Studio Plaza, get Barrington finished, you know, get our acquisition pipeline going, get our, you know, get get that stuff we’re developing going, buy buildings at good cost basis that are accretive. All that stuff is happening.

And and and for instance, we’re leasing up Studio Plaza, which is in the Media District, faster than I ever expected. I expect that, there’s a reasonable chance of us actually collecting rent from some tenants in, 2025. And and remember, Tom Warner just moved out at the end of last year, an entire building. And and so Ken moved in, redid all the common areas. She’s moving incredibly fast, and he’s leasing, and now he’s doing TIs at the same time.

That’s great. So we’ll get that dealt with. So I felt good about all those things, and that’s why I’ve sounded so positive.

Michael Griffin, Citi Research, Citi: Thanks for that. I want to just go back to your comments, and obviously, the the current macro situation is very in flux. But can maybe you expand on kind of this apprehension you felt as a result of the past few days and the annual announcements about tariffs? You know, is that a worry to impact your business overall?

Jordan Kaplan, CEO, Douglas Emmett: I don’t want to, you know, preach or be political, but I will say this, real estate so I started in real estate in the eighties and that was a great time to start because we had the ’86 tax act which brought in pension plans, foundations, endowments, all new buckets of capital. Right? And that was a huge boost because it used to just be life companies and little LPs and doctors that needed depreciation. That brought Wall Street in. The second thing that happened is, which people don’t appreciate enough, all through the nineties and the two thousands, first decade plus, we’ve been going through a giant process called globalization.

And globalization has been a like a five factor, maybe more, in terms of capital, in terms of manufacturing, in terms of customer base, everything. And then lastly, we were also we had we had declining interest rates. We had that. But then lastly, we also had the advent of the Internet and extraordinarily good information. And as a result of that information and the fact that someone in New York can look in Beverly Hills and maybe not know as much as me, but know enough to be confident and to to to deploy capital, that that information itself derisked our asset class and reduced cap rates rightfully because it wasn’t as risky to invest.

Okay. We still have the information. But if what we’re gonna do now is try and unravel globalization, like literally just unravel it, that’s gonna be super painful, like beyond painful. And every single industry will be impacted by that. I mean, not just real estate.

So that’s my opinion of that.

Michael Griffin, Citi Research, Citi: Maybe we can touch on, Studio Plaza and and the opportunity there.

Jordan Kaplan, CEO, Douglas Emmett: You don’t wanna go back and forth on that issue? What? I mean

Michael Griffin, Citi Research, Citi: Wanted to have that one up. Like, get something more skewed toward Emmett. So, yeah, obviously, the the Warner Brothers move out last year, but that was pretty well known for some time. I think there’s probably been good traction on the multi tenant front, multi tenanting that property. So maybe talk about the demand and tenant interest you’re seeing in that building.

You’ve always talked about how that submarket kind of Burbank area has been effectively a % leased for Emmett’s history. So, you know, maybe talk about the opportunity you’re seeing at Studio Plaza.

Jordan Kaplan, CEO, Douglas Emmett: So in Studio Plaza so Studio Plaza, I have to tell you, I was more nervous about Studio Plaza than Ken was. So if you don’t know the this part of the company, Ken and I have been partners for forty years. We actually take everything we make at the end of the year and split it regardless of our titles. And Ken runs leasing, construction, property management, etcetera. I run the capital market side.

That’s why you always see me here. But we’re equal partners. We started the company together. And, I mean, just every day, you know, like light a candle towards Kent. I mean, I can’t believe what he’s pulling off there.

He got in almost immediately. He but right when they moved out, he was ready to go. He redid did an extremely appealing plan on the common areas, put in a great set of amenities. He went out and sent an army out to get tenants, and he’s getting tenants and he’s signing leases faster than I expected. And he’s doing deals, they’re like 10 to 50,000 feet, but he’s doing a heck of a job.

And, I think I expect that Studio Plaza will be less of a drag on us for a shorter time than I originally expected now.

Michael Griffin, Citi Research, Citi: And how are the new rents that you’re quoting at Studio Plaza compared to, I guess, the old rent that Warner Brothers is paying there?

Jordan Kaplan, CEO, Douglas Emmett: I think that when we’re done, we’ll be close to, if not on top of, the NOI that was being generated before, but it will be a much less risky asset. Remember, the whole time we’ve been public, every year you guys have asked me about that building because it was a 460,000 foot lease. Even if I just renewed them that year and then it was due in ten years, do you think they’re gonna renew, you know, nine years to go? So that was our largest tenant. They’re gone.

It’s now clearly gonna be a multi tenant building. It’s gonna be a much less risky asset with the same income, a little less, a little more, and the end, a lot more because we were being leveraged by a giant tenant every time we did a deal. This might not be the perfect market to lease up in, but it’s it’s multi tenant. So guys will roll and we’ll get the income back to where it needs to be. It’s an incredibly good market.

It’s where all the studios are.

Michael Griffin, Citi Research, Citi: We had a question come in from live QA kind of going back to when our topic on sort of the macro and impacts that we’ve seen in the news recently. But given how you phrase that kind of cautiously the potential impacts of unwinding globalization, how would how do you see decisions maybe getting delayed or the pipeline being reduced for your core tenant base if if this really comes to fruition as you were saying?

Jordan Kaplan, CEO, Douglas Emmett: How do I see what?

Michael Griffin, Citi Research, Citi: How do you see you know, how quickly would, you know, prospective tenants put their real estate needs on pause? Would deals get delayed? You know?

Jordan Kaplan, CEO, Douglas Emmett: Oh, pipeline. That’s what I asked you. Pipeline. Yeah. In in ’22 in the fourth quarter, I’m not trying to be mister negative, but when the the the Fed announced rate increases, the pipeline dropped off in in two weeks.

I don’t know what’s going on now. I mean, I haven’t called the office or seen what’s going on there. And I don’t know what will happen, and I don’t know if there’s something that’s, like, gonna be for one day or what’s going on. But, it’s I don’t know, I’m not even following this. The stock market must be reacting to all this.

Michael Griffin, Citi Research, Citi: We had another one come in. This is more a earnings related question. Can you talk about the potential drag on AFFO from repricing on the balance sheet? I think you have some swaps burning off, lower interest rates going up to that north of 6% range. And will this mask the recovery of the organic growth in your business?

Jordan Kaplan, CEO, Douglas Emmett: So we typically so you’re talking about the impact of interest rates on us versus the organic growth of the portfolio and earnings. So we’re you know, though debt is front center, we’re not a high leverage company. So movements in interest rate are super unpleasant and bad, but they’re nothing compared to being leased up. So you’d much rather have a good economy and and go, okay. I can deal with higher interest rates.

I mean, most of my career was in a 5% interest rate environment. Right? It’s only been for the last bit of time that we’ve been talking about twos and threes. I mean, we had actually averaged down to three, going into this. So if you say to me, we’re gonna settle in in the five to six range, for instance, maybe even six and a half.

I mean, okay. Well, we can live with that. We lived with that. Right? I can’t live well without tenants leasing space.

That doesn’t work at all. Now if you ask about floating versus fixed rate environment, we’re historically pretty much fix everything. But as we’ve gone into this really tough debt market, we swap we do a five year we do a seven year loan, swap for five, and then we have two years floating. Why do we have two years floating? So that at the five year mark, I can refi and it doesn’t cost anything.

And then I do my new loan, and then I have a lot of runway, so I’m never under pressure. We got into this environment, and I had to use some of those two years to deal with these loans, which I’ve been dealing with. Because we’re in that period, you’re seeing a lot of floating. But you just saw, we just finished a deal in December. That’s fixed now.

Now we’re working on the other deals that were up this quarter. Those are gonna be fixed now. Right? So so as we now roll this out and extend this debt, and we’re working on ’26. And when that’s done, that’ll get fixed.

We’ll go back to what you used to see. But right now, we’re floating because we don’t have enough term left on a lot of these loans, And I have to make deals to extend them, and then I’ll go back to fixed and and and swap them.

Michael Griffin, Citi Research, Citi: Has there been greater lender appetite to, you know, see more debt capital flow into the office market?

Jordan Kaplan, CEO, Douglas Emmett: I think that everyone’s having a different experience with their lenders. What I could tell right now, we’re not in this we’re not in the CMBS market. I know the CMBS market has seen some real recovery around office because I’m pitched every day about it. I don’t like borrowing from people I don’t know. We don’t issue debt, public debt from the company because I don’t like putting the whole company at risk for one loan, and I don’t like the covenants that come with it.

It seems to me like those covenants are no problem when the market’s up and who cares. And when the market’s down, those covenants beat you down worse. So I’ve tried to stay as a nonrecourse first trustee borrower, and I’ve done that. And so that’s a market I’m living in. Today, for us, that’s been good because we’ve worked very hard to have great relationships with our lenders.

We know them all. I can go right to their office. Hey. How are you, David? How are you?

And I know them. They’ve been with us for a long time. And and it’s not easy to refi them out right now. And I could say, but, you know, you’re good. We’re gonna take care of this, and I can make deals and extend these out.

And that’s what you’re seeing me do. I’m not sure what someone going in the market today is facing, especially reputationally if they’re a new borrower or maybe have more of a checkered bat past. It’s gonna be very hard to borrow, on a major office project.

Michael Griffin, Citi Research, Citi: I think there was a, you know, question that came in. I think wanted some clarification on a earlier question just around interest rate headwinds. I guess, you know, if you think about as these swaps burn off, like you said, you’ll you’ll refix it, you’ll reprice it. But ultimately, are we in this scenario where because of those higher interest rates, at least over the next few years, any leasing success that you might have could be negatively offset by those interest rate headwinds. In other words, when are we going to see a return to Yeah.

Jordan Kaplan, CEO, Douglas Emmett: For insurance? So, that should be the case, but it’s not. And the reason it’s not is the stuff I’m redoing is already gone to floating. And floating because of where live or or not live or what is it now? SOFR.

Because of where SOFR is, it’s not very far from where I’m gonna be fixing it. So I don’t think you’re going to see much of a difference, unfortunately.

Michael Griffin, Citi Research, Citi: Maybe we can shift now to kind of the acquisition opportunity set. You announced the acquisition of 10900 Wilshire back in December. I mean, it seems right in your wheelhouse, Westwood, there’s a residential development component. Can you maybe talk about how that transaction came to be? How you’re underwriting it from a yield or an IRR perspective and maybe the embedded upside not just in potential market to markets on the office portfolio, but also the resi development component?

Jordan Kaplan, CEO, Douglas Emmett: So that building so you’re talking about Westwood Market where there’s were two and now there’s one building, that we don’t own. And we own everything else other than what’s owned, two buildings, owner user of UCLA and one medical building. K? So we own everything else other than this building we just bought and one other, which that guy still owns that building. So this building was a very easy building for us to understand, to buy.

We know the tenants. We know the building. We’ve seen its history. We’ve seen what’s been spent on it. We had all that information.

So we were prepared to be very aggressive bidders to get that building, and we got it. Now something else that happened there was I think we were bidding against people and most people didn’t know this. Although, if you’ve really been listening to my quarterly calls, I’ve been saying it, which is that there was a change to state law. And under state law, they took away zoning from the cities along the major thoroughfares like Wilshire. And I’ve said in past calls, that was like the Douglas Emmett empowerment law because we own almost every major open lot, everything along Wilshire.

We’re super dominant. I suspect now we’re somewhere near 80% of Westwood and maybe more. So what happened was when we went to buy it, we knew that the back lot which was owned for parking was by right residential because of the state law, not because what you would’ve looked at pulling a report from the city. So we always knew we could build this building. We just didn’t say anything till we already closed.

And then we said, hey, by the way, we could build this building. Interestingly, our investors, which it was oversubscribed, came in initially not knowing we could build that building. So we gave you the numbers. We’ve been asked, probably reasonably not to disclose the sale price, but we knew we had to give you guys some information on the deal. So we gave you three good data points.

One, even after we’ve built the apartment building, we’re gonna be into this thing between a hundred and 50 and $200,000,000. K? And two, we’re going into this thing today at a 10 cap rate. And three, because you might think, really the building’s gonna be expensive to build, so what kind of cap rate is it? And so three is when we’re done, the entire project will be a 10 cap rate.

So that’s that’s a lot of info on that deal.

Michael Griffin, Citi Research, Citi: Thank you for that. Maybe just switching over to the regulatory environment within LA. Obviously, there was impact with kind of the wildfires and and, you know, the the follow on effects of the economy there. But, you know, how how have you seen the response from kind of key public stakeholders and engendering confidence that the market can recover and address additionally lingering quality of life issues? So

Jordan Kaplan, CEO, Douglas Emmett: the fire primarily impacted two areas, Pacific Palisades and Eaton. And Eaton needs more than what’s been done. They need a significant financial response from, city and state government because they weren’t in the same financial position as the people in the Palisades. K? Now I don’t know if they’re gonna get that.

I know that, Rick Caruso has set up a fund to do a version of that for them, and he seems to be doing it. I don’t know where the state and the city is on that front, but he seems to be doing it. Okay. Now go towards the Palisades, which is actually the market that vibes with our portfolio, which I think you guys all know. So in the Palisades, what you see there the the state and the city response have been nothing short of extraordinary.

Extraordinary understates what it’s been Understates what it’s been. In my life, I would have never said that these things would have happened. So let me give you some highlights. Our governor, Gavin Newsom, has completely eliminated the Coastal Commission under executive emergency order and said, you’d by the way, The Palisades is within Coastal Commission’s purview And it said, there’s no more Coastal Commission review of anything. Done.

Gone. Don’t even talk to them. Don’t do it. The next thing he said was, and by the way, I told you this is the same guy that rezoned all the thoroughfares and just said, cities, I’m done listening to you. You now could build residential regardless of the zoning along these major thoroughfares.

Okay? Then he said, I know that CEQA gets in the way. CEQA is a favorite law of the unions to sue under CEQA and install a project. It’s California Environmental Quality Act. They install a project with it if you’re nonunion to kinda force you to go union, and they tie up in litigation.

K? So no politician has had the guts to go against CEQA. CEQA was originally developed for a real environmental thing, but it’s been completely destroyed and misused. Had to do with the nature of your environmental impact report. He canceled CEQA.

Like, no CEQA. It’s gone. I don’t even I can’t even believe he did it. There’s no CEQA. So you could build, and this guy goes, I’m swinging under CEQA.

Oh, no. There’s no CEQA. You used to go to do something in the Coastal Commission District and wait forever for a review from the Coastal Commission. Remodel your freaking house, wait for a Coastal Commission review. There’s no Coastal Commission.

The city came out right away and said, we know we’re getting in your way. So now going forward, you turn in plans for your house. You get them back in five days, and if you don’t, they’re approved. You call for an inspection. The guy doesn’t show up in three days.

It’s approved. You don’t have time to turn in plans. Your architect can self approve. Say they’re approved. Start building under your architect saying you comply with code.

That’s crazy. I never thought they’d do anything like that. Right? So you go you might say to me, well, what’s the impact of that? Right?

I’m gonna give you a feel for the impact. There’s we have a friend that we work out with. He’s already got planted. He’s waiting he’s gonna get approval. This guy’s gonna start construction in a couple months on his house.

I I mean, the fire was in January. He doesn’t have to wait for anything. There are now almost everyone I’ve talked to, when you ask them if they’re gonna rebuild, what they’ll say is, yeah, I’m rebuilding and I’m I’m seeing if I could buy the lot next to me. Buy the lot next to me. Not, I’m not rebuilding.

Not, I’m rebuilding on my lot. I’m also gonna try and buy the lot next to me. I think they put in a rule that you can’t buy more than six. Lots? Is it six?

I think

Michael Griffin, Citi Research, Citi: it’s not more than six, and you’re not supposed to make unsolicited offers.

Jordan Kaplan, CEO, Douglas Emmett: And you’re not allowed yeah. And you’re not allowed to make unsolicited offers for a lot. So let’s what’s the market done? There’s a lot that came for sale. First one, this is covered with construction debris.

A normal lot. Not a big lot. A normal lot in the area burned out. And it sold at the same price that it would have sold at before the fire. More lots came on the market.

They’re now getting bids above above the price lots we’re trading for before the fire. Now you’d say, well, that’s crazy. Why would someone do that? I just told you why. It’s because if you were a spec guy and you bought a lot, you were dealing with a nightmare to get your plans approved, to get inspections, and it would all burn up time.

And you’d go, I bought the lot and now the time’s clicking and I’ve got a couple years I gotta get plans in. It’s gonna take them six months to get back to me. Then I gotta get all these different inspections. I gotta get through fire, etcetera. Now you buy a lot, month later, if you got a set of plans you like for that size lot you’re building.

So that’s an incredible shift. I know this is like over answering a question on politics, but that’s what’s going on right now.

Michael Griffin, Citi Research, Citi: No. That was, that was very helpful. Maybe just to piggyback on that real quick. Do you think that these changes could be a microcosm for greater reform from a getting rid of red tape scenario within the LA City, LA County overall? And then are there any implications for maybe potential rent controls on the multifamily, portfolio as a result of the fires?

Jordan Kaplan, CEO, Douglas Emmett: So there’s a chance of that. But here’s what I could tell you is happening. Gavin Newsom, a committed Democrat. But to be fair to him, in the modern world of Democrat, not the twenty year ago world of Democrat, he would be a guy in the middle, on the modern world. In the twenty year ago, he’d be like an extreme not on the left.

Okay? And he came out in a speech and said, we’ve had enough. We gotta get out of our own way. We gotta lower taxes. Woah.

I had never heard him say that. We gotta lower taxes? This guy’s been on the side of raising taxes for, like, as long as I can tell you. Okay? We’ve gotta lower taxes.

We’ve gotta become more business friendly. And the MAGA right is part of our community, and we need to understand that. And I’m now gonna hold a podcast with MAGA representatives. And I’m not being political. I’m not a MAGA guy.

I’m not being political. But that is more extreme than the platypus. The platypus would be like a normal looking animal compared to that. That’s crazy that he’s saying that. But he’s a very good politician.

He’s good at reading the market, reading the room, and that’s what he’s saying now. These are incredible changes that are happening super rapidly. He also when that Supreme Court decision came down that said people cannot go on public rights away, of homeless people cannot hang out on public rights away. He came out and said to the cities, clear now all public rights away. On all state public rights away, he sent in state police and cleared them.

And he said to the cities, if you don’t clear the public rights away, I’m gonna cut off all your homeless funding from the state. Every city said, you got it. We’re doing it, except Los Angeles. Karen Bass said, I’m still not doing it. And then she said, well, I’m not really talking about it.

And then she went totally silent because she just people just went after. She’s doing it to some degree, not as fast as she should. But CD 11, where you guys, if you know our portfolio, know where most of our portfolios in CD 11, CD five. Most of the power sits with the council. We’re kind of a weak mayor, strong council system.

And the council representatives are clearing the decks. Come visit. You’ll see. It’s cleaned up a huge amount. By the way, same for Hawaii.

Hawaii’s cleaned the entire all of Downtown Honolulu is cleaned up. So, yeah, I’m super positive on what’s happening politically.

Michael Griffin, Citi Research, Citi: That’s great. Maybe just one real estate question to to end. Appreciate Well,

Jordan Kaplan, CEO, Douglas Emmett: let’s just stay on politics. It’s just so much more interesting.

Michael Griffin, Citi Research, Citi: Jordan, you’ve obviously been through a number of cycles in your career, both up and down. As you see the current real estate cycle we’re in, in, how do you think Emmett is best capitalized or best positioned to capitalize on a potential recovery in this cycle?

Jordan Kaplan, CEO, Douglas Emmett: So Ken and I have been together since 1986. And I was talking to him a couple weeks ago, and Ken made the comment because I’m I’m I’m gonna be 64 in a couple weeks. Ken’s gonna be 65. We’re our birthday’s a week apart. And Ken said, if we had twenty years, we would make bank.

I mean, this is an incredible environment to make money in. It’s an incredibly good environment to make money in. I mean and we’re doing a lot to make money. That’s gonna like you’re gonna see the company. It’s gonna be it’s slow rolling.

There’s still stuff on our way. I don’t know what the federal government’s doing, but we’re super set up to make money. But if I had a long trajectory, I’d even do more. Alright? What recession is this like?

It’s like the one in their early nineties. You don’t have a low interest rate chicken exit the way we did in, you know, the great recession, whatever that thing was called or the one in the .com 1 or whatever. You don’t have an overwhelming amount of capital trying to get into office. You have a hugely negative view on office and more supply coming out of you still have incredible supply constraints, but more deals are gonna come out than have come out in the past other than when East when Blackstone other than when Blackstone sold all that stuff. So how would you not do what we’re doing, which is get our debt all dialed in, which is what I’ve been totally focused on.

I’ll get that dealt with. And just have the capital to go to town and and and do deals with your partners.

Michael Griffin, Citi Research, Citi: Thank you for that, Jordan. Just real quick, two rapid fires. First one, what is your exit

Jordan Kaplan, CEO, Douglas Emmett: already on.

Michael Griffin, Citi Research, Citi: Alright. It’s what what is net effective rent growth for the office sector overall in 2026?

Jordan Kaplan, CEO, Douglas Emmett: You know, I don’t know. All these markets are different, and I don’t know what net rent growth’s gonna be for this guy and that guy. Us, you compare deals we’re doing today to the deal they’re replacing, we’re up about 4%.

Michael Griffin, Citi Research, Citi: Okay.

Jordan Kaplan, CEO, Douglas Emmett: Okay.

Michael Griffin, Citi Research, Citi: And will there be more, fewer, or the same number of publicly traded office REITs a year from now?

Jordan Kaplan, CEO, Douglas Emmett: Do you need to ask me that? Yeah. It’s fine. You have Paul and Gracia here trying to get me to buy every company every office company that exists maybe with the exception of Blackstone or or or or or Brookfield. I mean, I mean, if it’s up to investment bankers, it’s gonna be like a colossal consolidation.

There’s gonna be one office company out there.

Michael Griffin, Citi Research, Citi: Sounds good. Alright. Thank you guys so much.

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