Earnings call transcript: Douglas Emmett Q1 2025 beats earnings expectations

Douglas Emmett Inc. (DEI), a $2.94 billion market cap real estate company, reported its first-quarter 2025 earnings, significantly surpassing analyst expectations with an earnings per share (EPS) of $0.24 against a forecast of -$0.03. The company also reported revenues of $251.54 million, exceeding the forecasted $246.31 million. Following the announcement, Douglas Emmett’s stock rose by 3.35%, closing at $14.49 from a previous close of $14.02. According to InvestingPro data, the company trades at a P/E ratio of 108, reflecting high investor expectations despite recent market challenges.

Key Takeaways

• Douglas Emmett’s EPS of $0.24 significantly outperformed the forecast of -$0.03.
• Revenue increased by 2.7% compared to the same quarter last year.
• The stock price surged by 3.35% in after-hours trading.
• The company is undertaking significant redevelopment projects, including Barrington Plaza.
• Strong leasing activity with nearly 800,000 square feet signed.

Company Performance

Douglas Emmett displayed robust performance in Q1 2025, with revenue increasing by 2.7% compared to Q1 2024. The company has been successful in maintaining stable rental rates and a high occupancy rate in its residential portfolio, which stands at 99.1%. The Los Angeles real estate market, in which Douglas Emmett operates, continues to show resilience, supporting the company’s steady performance. InvestingPro analysis reveals the company has maintained dividend payments for 20 consecutive years, currently offering an attractive 5.42% yield, demonstrating long-term financial stability.

Financial Highlights

• Revenue: $251.54 million, up 2.7% year-over-year.
• Earnings per share: $0.24, significantly above the forecast of -$0.03.
• Funds from operations (FFO) decreased to $0.40 per share.
• Adjusted funds from operations (AFFO) decreased to $62.3 million.
• General and administrative expenses remained low at 4.5% of revenue.

Earnings vs. Forecast

Douglas Emmett’s Q1 2025 EPS of $0.24 exceeded the forecast of -$0.03 by a significant margin. This represents a positive surprise of approximately 900%, which is notable compared to previous quarters where the company faced challenges in meeting expectations. Revenue also surpassed forecasts, indicating strong operational performance.

Market Reaction

Following the earnings announcement, Douglas Emmett’s stock price increased by 3.35%, reflecting investor optimism. This positive movement contrasts with broader market trends, where real estate stocks have faced pressure. The stock’s performance is notable as it moves away from its 52-week low of $12.39, approaching a more stable range. InvestingPro’s Fair Value analysis suggests the stock is currently slightly undervalued, with additional insights available in the comprehensive Pro Research Report covering this and 1,400+ other US equities.

Outlook & Guidance

Douglas Emmett provided a net income per share guidance for 2025 between $0.07 and $0.13. The company expects FFO per fully diluted share to range from $1.42 to $1.48. Despite anticipating an increase in debt costs by 100-200 basis points, the company remains optimistic about potential rental rate acceleration as the economy recovers.

Executive Commentary

CEO Jordan Kaplan emphasized the company’s resilience, stating, "Our operating platform is built to weather storms." He also highlighted the company’s strategic focus on redevelopment projects, saying, "We are working on four solid avenues for restoring and then exceeding our pre-pandemic FFO."

Risks and Challenges

• Potential macroeconomic uncertainties could impact market stability.
• Rising debt costs may affect financial flexibility.
• Higher market vacancy rates could pressure rental rates.
• Economic recovery pace may influence leasing demand.
• Continued redevelopment projects may face execution risks.

Q&A

During the earnings call, analysts inquired about the company’s leasing demand across diverse industries and the outlook for Studio Plaza. Management expressed confidence in the positive leasing trends and highlighted the potential for office market recovery through ongoing reconstruction efforts.

Full transcript - Douglas Emmett (DEI) Q1 2025:

Conference Operator: Ladies and gentlemen, thank you for standing by. Welcome to Douglas Emmett’s Quarterly Earnings Call. Today’s call is being recorded. At this time, all the participants are in a listen only mode. After management’s prepared remarks, you will receive instructions for participating in the question and answer session.

I will now turn the conference over to Stuart McKelney, Vice President of Investor Relations for Douglas Amich. Please go ahead.

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett: Thank you. Joining us today on the call are Jordan Kaplan, our President and CEO Kevin Crummey, our CIO and Peter Seymour, our CFO. This call is being webcast live from our website and will be available for replay during the next ninety days. You can also find our earnings package at the Investor Relations section of our website. You can find reconciliations of non GAAP financial measures discussed during today’s call in the earnings package.

During the course of this call, we will make forward looking statements. These forward looking statements are based on the beliefs of, assumptions made by and information currently available to us. Our actual results will be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they are not guarantees of future performance and some will prove to be incorrect. Therefore, our actual future results can be expected to differ from our expectations and those differences may be material.

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

Jordan Kaplan, President and CEO, Douglas Emmett: Good morning and thank you for joining us. Leasing during the first quarter of twenty twenty five was quite successful. We achieved positive absorption across our total office portfolio. We signed over 300,000 square feet of new leases. New leasing to tenants over 10,000 square feet was well above our historical averages.

Our Class A office portfolio has maintained stable in place and asking rental rates despite this higher vacancy market. And as we convert Studio Plaza to a multi tenant office building, our leasing there is well above expectations. In addition, looking ahead, I am encouraged by our below average office expirations in 2025 and 2026. Our multifamily portfolio enjoys very full occupancy and robust revenue growth. This reflects the appeal of our high end residential communities and the affluence of our coastal submarkets, where the need for quality housing only seems to accelerate.

We are working on four solid avenues for restoring and then exceeding our pre pandemic FFO with good progress on all four fronts: leasing up our existing office portfolio redeveloping our seven twelve unit Barrington Plaza residential property, converting our Studio Plaza office building to multi tenant use and acquiring additional office and residential properties. Of course, higher interest rates remain a drag on income. As we roll through refinancing our existing debt portfolio, I suspect that our cost of debt will increase between 102 basis points from the 3% average we enjoyed before COVID. My hope is that the higher cost of debt is matched with rental income growth as the economy recovers and the market reflects the slowdown in new development. At present, our office leasing pipeline remains healthy and our multifamily demand continues to be strong, but we are keeping a weather eye towards the broader economic landscape.

Recent volatility in national policies affecting the public markets could pose even greater challenges if they lead to a slowdown in office leasing or worse, tip the economy into a recession. Whatever happens, our operating platform is built to weather storms. Our conservative financing strategy, diversified tenant base and focus on the best supply constrained markets gives us a strong foundation to manage through periods of turbulence. With that, I’ll turn the call over to Kevin to discuss our investment activities.

Kevin Crummey, CIO, Douglas Emmett: Thanks, Jordan, and good morning, everyone. We are making good progress toward developing the new residential building at our recently acquired property in Westwood. We still expect that JV’s total investment to be approximately 150,000,000 to $200,000,000 over a three year to four year period, including the cost of acquisition, construction of the new residential building and upgrades to the existing tower. As Jordan indicated, our Barrington Plaza residential redevelopment, including installing new FireLife safety equipment is on track. In addition, the lease up and repositioning of Studio Plaza into a multi tenant office building has surpassed expectations.

During the quarter, we closed a non recourse interest only $127,200,000 loan secured by one of our residential properties that will mature in April 2030. The interest rate is fixed at 4.99% per annum. We use part of the proceeds to pay off $102,400,000 loan. We also refinanced a $335,000,000 secured office loan with a non recourse interest only loan at an effective fixed interest rate of 4.57% that will mature in March 2032. With that, I will turn the call over to Stuart.

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett: Thanks, Kevin. Good morning, everyone. During the first quarter, we signed just under 800,000 square feet in our total portfolio, including over 300,000 square feet of new leases. We also had our best quarter in more than two years for new leases over 10,000 square feet. The overall value of new leases we signed in the quarter increased by 0.9% with cash spreads down 12.6% as larger tenants skew the averages and make it hard to beat the contractual three percent to 4% annual rent bumps in our existing leases.

As we sign more leases over 10,000 square feet, we expect to see an increase in leasing costs and a widening of our lease to occupied spread. However, even with more large leases and a higher proportion of new leases last quarter, our average leasing costs of only $6.17 per square foot per year remains well below the average for office reach in our benchmark group. Our residential portfolio remained essentially fully leased at 99.1% with strong demand. With that, I’ll turn the call over to Peter to discuss our results.

Peter Seymour, CFO, Douglas Emmett: Thanks, Stuart. Good morning, everyone. Compared to the first quarter of twenty twenty four, revenue increased by 2.7%. FFO decreased to $0.40 per share and AFFO decreased to $62,300,000 and same property cash NOI was essentially flat. Our results this quarter reflect the acquisition of 10900 Wilshire as well as the January 1 consolidation of a previously unconsolidated joint venture, which owns two Class A office properties totaling 400,000 square feet.

At approximately 4.5% of revenue, our G and A remains low relative to our benchmark group. Turning to guidance. We expect our 2025 net income per common share diluted to be between $07 and $0.13 and we continue to expect our FFO per fully diluted share to be between $1.42 and $1.48 For information on assumptions underlying our guidance, please refer to the schedule in the earnings package. As usual, our guidance does not assume the impact of future property acquisitions or dispositions, common stock sales or repurchases, financings, property damage insurance recoveries, impairment charges or other possible capital markets activities. I will now turn the call over to the operator so we can take your questions.

Conference Operator: Thank you. We will now begin the question and answer session. Our first question comes from Steve Sakwa from Evercore ISI. Please go ahead.

Steve Sakwa, Analyst, Evercore ISI: Yes, thanks. Good morning out there. Jordan, I was just wondering if you could provide a little bit more color detail on kind of the leasing and the larger tenants that you mentioned, the over 10,000 feet. I suspect that maybe your smaller tenants are maybe less impacted by sort of all the tariff uncertainty. But just I’m just curious like the pace of leasing that maybe you saw throughout the quarter.

And did you see any real change between January, February, March on the smalls and the larger tenants?

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett: Steve, it’s Stuart. So pleased to see the new leasing increase this quarter. We had good demand kind of across all the industries. The over 10,000 guys also really strong last quarter, which is great to see diverse industries in that set as well. So we saw legal, we saw real estate, fitness, all those guys coming in.

So I’d say the core portfolio is still performing really nicely and these last three quarters in a row that we’ve seen improvement over 10,000 square feet.

Jordan Kaplan, President and CEO, Douglas Emmett: They got us kind of up to the positive territory, made a big Remember, we were saying to you, we need to get positive absorption and we need these guys to come back and they’re getting us there.

Steve Sakwa, Analyst, Evercore ISI: Okay. Thanks. And then, obviously, your apartment portfolio did far better than we had thought. I know you added two assets into the same store pool this quarter. But could you just maybe speak to kind of the pricing trends that you’re seeing in multifamily?

And how much of the NOI growth was driven by rent growth versus say occupancy gain and I guess what are your expectations for rent growth moving forward on the multifamily assets?

Jordan Kaplan, President and CEO, Douglas Emmett: Yes. So one thing to be super clear on is we have not changed our asking rents from the time before the fire to now, which is being frankly closely monitored by the state and you can check and we haven’t changed our asking rents. We are although we have people that are moving and of course they might have been at a lower rent and now it’s the asking rent of before the fire and now. So that’s obviously making a difference and we’re very full. And when I say very full, I’ll say that probably in my career, I’ve had a few times of people call, I want to get a unit here and there, but in general, nothing like now.

I get a call a week or almost every couple of days from people saying, I need to get into your LMLA Building, I need to get into Shores, I need to get into Champaign, you got can you find me a unit, etcetera. And I’m like, I’m pretty on the list. I mean, so it’s very full.

Connor Michel, Analyst, Piper Sandler: That answer your

Steve Sakwa, Analyst, Evercore ISI: I was just curious like, well, I guess you’re saying that with restrictions you can’t actually push rent. So maybe this is just a function of below market leases moving up to market rent at this point, but the I guess the SOEs stay in place through the end of this year?

Jordan Kaplan, President and CEO, Douglas Emmett: Well, you can move rents 10%. We’re probably being a little more cautious, but we’re big and we want to be clear of where we stand. And so, as I said, I mean, we literally have not changed our asking rents from before to after. Now, you probably were facing before, no fire, no nothing. You’re looking at a pretty big roll up.

The market has been was very strong and strengthening before the fire. So, I’m not sure that you can attribute the fire to a lot of this. You can probably just and maybe there’s even more coming. I don’t know that answer. But I know this, we probably were moving our asking rents in a pretty good way up until the fire.

We stopped at that point. But we’re getting those rents and we’re very full.

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett: And Steve, I’ll add the two buildings that came into the same store were 1132 Bishop in Hawaii and Landmark LA in Brentwood, both of which are performing really well. So having those in there helps.

Steve Sakwa, Analyst, Evercore ISI: Got it. Thanks. That’s it for me.

Conference Operator: Thank you. Your next question comes from Nick Yulico from Scotiabank. Please go ahead.

Nick Yulico, Analyst, Scotiabank: Thanks. Hi, everyone. So in terms of the debt refinancing that got done in the quarter, the $335,000,000 secured office loan, looks like there was an extension on that. Can you just talk a little bit more about the rate that you got? It seemed pretty good for an office loan and how we should think about being able to get sort of a similar rate for other debt office debt that you’re dealing with maturing over the next year?

Jordan Kaplan, President and CEO, Douglas Emmett: Well, I’m glad you like the rate. I got to tell you something. Those loans are very hard to get, very hard. I mean and going out and refining the asset portfolio has been really a rough run. We’re getting it done.

And thankfully, we have great relationships and that’s probably helping us a lot. And I’m glad you like the rate. I thought it was pretty good. I wasn’t getting knocked over by it. But in general, I tried to say in my prepared remarks that looking at what’s going on because we’re working on debt.

We start with stuff that’s two years away and we’re working on a lot of stuff right now. It’s one of the big agenda items around here. I kind of starting to see a little bit of light at the end and I tried to give you guys that information and said, we ran for a long time at about a 3% average in terms of our debt. And I think now we’re going to be 100 basis to 200 basis points up on that. And I think we’re kind of coming out in that range.

I mean, we’ll see. We have more to do, but we’re coming out in that range.

Nick Yulico, Analyst, Scotiabank: All right. That’s helpful. Thanks. And then second question is just on the absorption comment, which I know that that applied to the total portfolio. If we look at the in service portfolio actually sequentially, the leased rate was down a bit, occupancy was down a bit.

So is the message here that new leasing volume still needs to pick up a little bit more in order to show absorption in the in service pool? And I also wasn’t sure if there was any like early termination of space issue you were dealing with in the quarter that may have affected those numbers? Thanks.

Jordan Kaplan, President and CEO, Douglas Emmett: No, there wasn’t anything like that. And I think that I think you’re kind of right. I mean, we have our in service portfolio, which shows the occupancy of the in service portfolio. But then at the same time, we’re saying, hey, but the great news is we have positive absorption because we’re taking credit for the stuff that’s not in the in service portfolio, which is true. And but I will tell you, it each these are tiny moves getting to positive and negative on these things.

And I’m not going to tell you going forward what’s going to happen. I have concerns about the economy. You heard that in my prepared remarks. But at this moment, we’re feeling pretty good and we’re doing a lot of leasing and across in service, out of service and all the rest. So we’re feeling pretty good about what’s going on.

Nick Yulico, Analyst, Scotiabank: All right. Thanks, Jordan.

Conference Operator: Thank you. Your next question comes from Connor Michel from Piper Sandler. Please go ahead.

Connor Michel, Analyst, Piper Sandler: Hey, thanks for taking my question. I guess first, Jordan, you mentioned some of the macro uncertainty and tariff turmoil. Have you guys seen any like tenant fallout or leasing deals kind of fallout from import or export related businesses?

Jordan Kaplan, President and CEO, Douglas Emmett: So far, so good. And I really tried to say that right in the prepared remarks by saying, look, we already know this affecting the stock market. Stock market is jumping around like a cat. But have we seen it roll to our tenants and impact our tenants? Not yet.

And then even worse, which is obviously a fear is, does this roll into some version of stagflation or just recession? And like I said, we’re watching for it, but haven’t seen it.

Connor Michel, Analyst, Piper Sandler: Okay. I appreciate the color on that. And then on the acquisition of Westwood and then the related developments, did you guys mention any timing on the start of that development?

Jordan Kaplan, President and CEO, Douglas Emmett: We are already working on plans. We’re going. It’s so I hope that the timing is that we get the building built in the next three to four years completed, three hopefully. We are going. It’s by right entitlements and in our business plan of buying it, it was to build it.

Connor Michel, Analyst, Piper Sandler: Okay, great. Thank you.

Conference Operator: Thank you. Your next question comes from Rich Anderson from SMBC Nikko. Please go ahead.

Rich Anderson, Analyst, SMBC Nikko: No, Wedbush. But anyway, so in terms of your comment around absorption, it sounds like leasing velocity exceeded your expectations. But would you say that the cash releasing spread underperformed your expectations the down 12%, which so together net to sort of in line performance on a dollar basis. Is that the right way to think about it? Or do I have that wrong?

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett: Hey, Rich. No, I don’t think that we’re disappointed with the spreads or surprised by the spreads. The spreads are going to jump around. It’s obviously, it’s dependent on the mix of leases that get done. We did some larger leases and you had some longer leases rolling off.

So longer leases have higher bumps in We focus on the straight line spreads, which are still positive, which is great. But I think in this market, you should expect the spreads to be in the territory they’ve been, and they’ll be a little volatile quarter to quarter.

Rich Anderson, Analyst, SMBC Nikko: But all in meeting your expectations you would say or exceeding your expectations when you take into account the pace of leasing, the velocity?

Jordan Kaplan, President and CEO, Douglas Emmett: The comment about exceeding expectations, that’s an aside, related to Studio Plaza and the leasing there. So put that to the side, I want to add that it does and we’ve said this in a variety of ways over the last few quarters and I had it in my section. I am surprised we haven’t seen much of a change in rents considering the vacancy in the market. And now I understand the reason for it. And I understand that where the vacancy is and how it’s operating and tenants need to be where they want to be and all of that.

But I know there hasn’t been a lot written about this. I’ve talked about it, but I’m impressed that we are holding rates so well that we’ve stayed flat on the straight line, meaning like leases we did in a pretty good market, 2019, ’20 ’18, we’re still holding that rate now. And it certainly isn’t the same market. I think it’s a testament to the fact that there’s no new construction. It’s a testament to the fact of the quality of buildings that we have.

And I see that in New York, we the higher quality buildings are also holding rate and doing better. And we’re experiencing that there. I mean, can’t speak for the B and C product that’s in the market. I think they’re suffering. But we people want to be in the buildings.

And they’re well run and managed and kept clean and nice and with good amenities and all the good stuff. And it’s making more of a difference than I ever really thought that it would in terms of holding rate and being a place that people want to end up at.

Rich Anderson, Analyst, SMBC Nikko: Okay. All right. Sounds good. And Jordan, you made a comment in your remarks, interest costs up 100 to 200 basis points and you hope that NOI follows along at some point. Your guidance for same store cash NOI is, call it 1.5%, two % negative.

So that’s not happening now. But is this interest expense view like a sort of flash in the pan that’s going to what’s going to happen this year and into next year? And then you commence the catch up on the NOI line as long as we don’t fall into some sort of major recession? Is that sort of your three, four year outlook when you look at those two competing measures?

Jordan Kaplan, President and CEO, Douglas Emmett: One thing is leasing up the portfolio. That’s just straight perfect increases in NOI. Another thing is as the economy recovers, which we have seen in the past, you got to be around for a long time, because there’s no new development and as companies recover, things tighten up and you see an acceleration in rental rates. And it’s that acceleration in response to whether it be inflation and where interest rates are, it’s that acceleration in rental rates that I’m hoping will offset interest rates. Now interest rates may also come down.

I don’t know what will happen there. I know that for now the reason I made that comment is because we are centered in the process literally of doing a lot of refis. We’re refiling some stuff that’s farther out. We’re doing a lot of that kind of work, which we’ll announce when it closes. And I could see where we’re headed.

And we’re about to move a bunch of stuff out quite a period of time and I could see where we’re going to end up. So I know I’m going to end up in that generally I believe in that range that I gave you for at least the next few years. Now if the market also improves and rental rates go up, it should offset that and that was the point I was trying to make.

Rich Anderson, Analyst, SMBC Nikko: Okay. All right. Fair enough. Thanks very much. Thank

Conference Operator: you. The next question comes from Peter Abramowitz from Jefferies. Please go ahead.

Peter Abramowitz, Analyst, Jefferies: Yes. Thanks for taking the question. Just wanted to dig a little more into the comments around Studio Plaza. So when you say leasing is surpassing expectations, is that just sort of in terms of demand and interest in asset? Have you actually gotten anything signed there?

And then just maybe kind of expectations around timing of when you think you could be close to full occupancy again?

Connor Michel, Analyst, Piper Sandler: All

Jordan Kaplan, President and CEO, Douglas Emmett: three. Leasing demand, the amount of leases we’re signing and the speed at which we’ll reach a very reasonable occupancy level.

Peter Abramowitz, Analyst, Jefferies: Got it. I guess if you were to handicap when a reasonable occupancy level could be achieved, when do you think that is, I guess, for modeling purposes?

Jordan Kaplan, President and CEO, Douglas Emmett: I don’t want to make a prediction about it beyond giving you that color because I’ve made other predictions that have been thrown back at me. But I can give you my feel about it and we’re usually been right on those fronts. And I was very nervous going into it in the market and everything we’re hearing about the studios and everything else. And this building has we’re they’re doing it. I don’t have to say the team is doing a great job of leasing it.

And this building has not been available for a long time. And it’s a sought after location and an extremely high quality building. And we’ve done a really beautiful redo or remodel of all the common areas and it’s working. I mean, it’s attracting tenants. And I’m super pleased about it because I was nervous and now I’m happy.

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett: And Peter, that remodel work should be done later this year. And hopefully, we’ll have some of the leases that we’ve signed already commencing later this year as well. We

Jordan Kaplan, President and CEO, Douglas Emmett: have some done on our website.

Peter Abramowitz, Analyst, Jefferies: Appreciate the color there. And then one more. Just could you comment on entertainment industry demand, I guess, in light of some of the challenges over the last two years or so, sort of how that’s shaping up today?

Jordan Kaplan, President and CEO, Douglas Emmett: Well, we really have only that one building in the Media District. We haven’t been like a big landlord to the entertainment industry historically other than the vendors like the agents and whatnot. We renewed a giant lease with one of the big agencies and you know that we’re having a good experience in the Media District. We don’t really I don’t think we have enough interaction to comment more largely on overall demand. And we’re not in, obviously, the studio business, which is where like a lot of this discussion revolves.

Rich Anderson, Analyst, SMBC Nikko: All right. Thanks for the color, Jordan. Appreciate it.

Conference Operator: Thank you. Your next question comes from the line of Opel Rana from KeyBanc Capital Markets. Please go ahead.

Connor Michel, Analyst, Piper Sandler: Great. Thanks for taking my question. Just on the recovery in LA post the fires, how is that progressing broadly? Has there been any shifts in demand that you have noticed either by the size of tenants, industry or submarket? I know you already commented on the residential side, but just curious how it’s going on the office side.

Thanks.

Jordan Kaplan, President and CEO, Douglas Emmett: I know we’ve been asked a lot or people have proposed that we should see there’s billions of dollars moving into the market that I’m definitely saying. Now that should translate to additional office leasing and I understand why people feel that will happen whether it be architects or contractors or whatever it is that want to be here near where all this construction is going on because it’s not just houses. I mean, it’s streets and utilities being installed and tons of stuff. And I but I anecdotally only know one or two small leases and I can’t tell you we’re seeing that flood at this moment, but maybe it takes time to formulate.

Connor Michel, Analyst, Piper Sandler: Okay, great. Thank you. And then just to well into the decision to consolidate the JV?

Jordan Kaplan, President and CEO, Douglas Emmett: We redid the agreement with our partners and extended it out substantially. And as a it’s hard to call the decision one way or another. The terms of the agreement dictate whether it’s consolidated or not consolidated. And under the new agreement, obviously, we’re a very large owner and there are other terms in there that dictate that under the accounting rules now it’s consolidated. I can’t tell you I was thrilled about that.

It gave us additional interest expense. It’s kind of phantom because they act like you bought it. You want to talk?

Peter Seymour, CFO, Douglas Emmett: Yes, it’s Peter. When we go through the consolidation process, mean, obviously, it affected a lot of line items on the consolidated P and L, not to mention the gain that we had to take on which rolls through net income. So overall, probably slightly negative impact to the interest because we had to also fair value of the debt when we put it on the balance sheet and it’s obviously at a great interest rate. So we’ll see some amortization roll through interest expense, maybe about $01 impact or so overall included in our guidance.

Connor Michel, Analyst, Piper Sandler: Okay, great. Thank you.

Conference Operator: Thank you. The next question comes from the line of Seth Durgy from Citi. Please go ahead.

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett0: Hi, thanks for taking my question. I was just kind of curious, would you look to do kind of future acquisitions with a JV partner or wholly owned? And where do you see the opportunity today? Is that kind of on the multifamily side or the office side?

Kevin Crummey, CIO, Douglas Emmett: It’s definitely this is Kevin here. It’s definitely on the office side is the resi pricing has backed up slightly, but not to the degree that the office market has backed up. And so the 10,900 acquisition raised a lot of eyebrows with some of our partners and other people that we’ve been talking to overseas about the opportunities. And so, we’re going to focus on finding high quality office buildings in our markets that we can apply the operating platform to and create some value and our partners are very intrigued by what they’re seeing.

Rich Anderson, Analyst, SMBC Nikko: Great. Thanks.

Conference Operator: Thank you. The next question comes from the line of Jana Gallen from Bank of America. Please go ahead.

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett1: Thank you. Maybe digging a little bit deeper into that, kind of curious around your capital allocation thinking between these opportunistic acquisitions? Would they be for the property? Could you also think about third party management and then redevelopment like in Studio Plaza or share buybacks?

Jordan Kaplan, President and CEO, Douglas Emmett: Obviously, we’ve already committed to rebuild and we’re leasing up Studio Plaza, so consider that one done. Now you’re asking me about share buyback and versus acquisitions?

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett1: Yes. And whether they would be with partners or on balance sheet?

Jordan Kaplan, President and CEO, Douglas Emmett: So we have bought back shares. I think we bought back $115,000,000

Kevin Crummey, CIO, Douglas Emmett: something like that, 115,000,000

Jordan Kaplan, President and CEO, Douglas Emmett: or something like that. But it’s done. I don’t like issuing stock and I don’t like tinkering with our stock because I don’t think we’ve been great at predicting where the price is or any of that. I mean sometimes it’s so extreme that we do it and we have a group here and we all talk about it, but you got to really be really in a clear thing. In terms of doing acquisitions, I mean, think we have an opportunity to buy stuff directly.

But if we don’t include our partners in our acquisitions, we’re going to lose the partners because they’re going to look at us like we’re cherry picking. And they’re going go, oh, yes, you come to us when you don’t want to do the deal because we obviously have money to do deals, but you don’t come to us when you really love the deal. So in general, everything we buy, we give them an opportunity to come in and historically they have. So I would expect to continue that way.

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett1: Thank you.

Conference Operator: Thank you. The next question comes from the line of John Kim from BMO Capital Markets. Please go ahead.

Steve Sakwa, Analyst, Evercore ISI: Thank you. Can I just follow-up

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett2: on Steve’s question on the multifamily growth? You had 7.7% same store revenue, not much of pickup in occupancy. You don’t have a lot of turnover in the assets, so you can’t really push rents to market. So were there onetime items in the first quarter that don’t carry on for the rest of the year?

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett: No, John, no one timers. We did have an increase in occupancy year over year in the same store pool, so that was contributing factor. And we do have pretty good turnover. We do have some rent controlled units in Santa Monica that turnover less frequently, but the rest of the portfolio besides those turns over at a pretty good normal rate. So, we had occupancy contributing as Jordan said, we’re very full and good rent growth.

Jordan Kaplan, President and CEO, Douglas Emmett: I think what is being missed and maybe I’m misleading by saying we haven’t raised rents since the fire, but rents have been really moving up. And just sticking even at that new number with the roll that’s now happening over the last few months is rolling through in terms of the 7% to 8% that you’re referring to. I think that’s probably the primary cause.

Peter Seymour, CFO, Douglas Emmett: Yes. I mean, it’s Peter. The same store includes all of last year and rent growth over the course of that year.

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett2: So I know you don’t give guidance on same store to multifamily, but high single digits, is that a good assumption?

Jordan Kaplan, President and CEO, Douglas Emmett: Well, it has been, but we don’t give guidance.

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett2: Okay. Switching gears, can I ask about Warner Center and the new Rams Village development proposal? If you’re involved at all as far as potentially selling assets to the organization or maybe overall how that impacts the office market in Warner Center?

Jordan Kaplan, President and CEO, Douglas Emmett: It’s very good for the market in Warner Center and the stuff that Kroenke and Auto and that crowd is doing is outstanding and we’re certainly in communication with them. And hugely in favor of the things they’re doing and supportive.

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett2: But you’re not looking to sell any assets to their organization?

Jordan Kaplan, President and CEO, Douglas Emmett: Well, historically, we don’t talk about deals and we still and by me saying yes or no, go, you only talk about when it’s yes or no. So we really don’t talk about. I we do a deal, we’ll definitely announce it.

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett2: A few years ago, I think this was a market that you were looking to potentially exit. So I’m wondering if that’s still on the cards or this changes your view of your long term ownership?

Jordan Kaplan, President and CEO, Douglas Emmett: I don’t think I ever said I was trying to exit this market. That’s not correct. I mean, I don’t know if that was out in the world, but it didn’t come from me. Okay. Thank you.

All right.

Conference Operator: Thank you. Our next question comes from the line of Dylan Perzynski from Green Street. Please go ahead.

Connor Michel, Analyst, Piper Sandler: Okay. Thanks for taking the question. Most of my questions have already been asked, but I guess just can you touch on sort of the acquisition pipeline and if things are sort of accelerating as it relates to sellers willing to come to market and part ways with their properties?

Jordan Kaplan, President and CEO, Douglas Emmett: What do you think?

Kevin Crummey, CIO, Douglas Emmett: I think that people’s Westside assets are the family jewels. And so people will do as much as they can to hold on to those assets. We don’t have a lot of distressed bank opportunities, but there are some core funds and other people who have other more portfolio pressure that might end up selling some of their Westside assets because they don’t have liquidity in their other markets.

Jordan Kaplan, President and CEO, Douglas Emmett: It’s certainly not a flood, that’s for sure. Right.

Connor Michel, Analyst, Piper Sandler: Okay. That’s helpful guys. Thanks.

Conference Operator: Thank you. Our next question comes from Anthony Paolone from JPMorgan. Please go ahead.

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett3: Yes, thanks. Just first one on Studio Plaza, apologies if I missed this, but what is the leased rate at this point at that asset?

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett: Hey, Tony, we’re not giving we’re not tracking individual buildings or leases that way. So we haven’t provided a rate.

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett3: Okay. When you talk about your leasing the new leasing in the quarter, the difference between the over $300,000 and I think the 275,000 or whatever for the in service, is it safe to assume that the rest of it was Studio Plaza or is there something else outside

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett: We’ve got two buildings in the not in the in service portfolio. So it will be Studio Plaza and then the new acquisition in Westwood.

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett3: Okay. Got it. And then just the other question, you did a couple of debt deals in the quarter. And so I guess next up is the 2026. Any thoughts as to when you like are those on deck for near term?

Or sort of imagine they’ll have some implication on earnings for this year?

Jordan Kaplan, President and CEO, Douglas Emmett: Yes, that’s what I was alluding to. We’re working on a lot of debt right now and we do start early on stuff and yes, you’re right. That’s why I’m able to give you my prediction.

Kevin Crummey, CIO, Douglas Emmett: And just to remind you, Anthony, we typically like to do a seven year loan that swap for five years and leave ourselves a two year runway. And so those 2026 expirations, that’s the floating rate debt that you’re seeing. And so we’re working with our lenders right now to figure out new deals and we’ll announce them when we close them.

Jordan Kaplan, President and CEO, Douglas Emmett: I tried to give you guys a feel for it because I said in my prepared remarks, I think we’re going to be up 100 to 200 basis points over the 3% rate that we enjoyed pre COVID.

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett3: Right. Just to make sure I understand that those because you have been pretty clear that you want to get those done this year and you kind of gave us those brackets, but those aren’t but you didn’t put those in your guide, right? Like we would have to kind of think about that separately.

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett: That’s right. We don’t put future refinancings in the guidance. So, we’ll

Jordan Kaplan, President and CEO, Douglas Emmett: The guidance has a bump in it at the rate of floating and the curve that you guys could also figure out.

Stuart McKelney, Vice President of Investor Relations, Douglas Emmett0: Okay. Thank you.

Conference Operator: Thank you. This concludes our question and answer session. I would now like to turn the conference back over to Jordan Kaplan for any closing remarks.

Jordan Kaplan, President and CEO, Douglas Emmett: All I can say is thank you for joining us and we’ll speak to you next quarter. Goodbye.

Conference Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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