Douglas Emmett Reports Q1 2026 Results: Full Earnings Call Transcript
On Wednesday, Douglas Emmett (NYSE: DEI ) discussed first-quarter financial results during its earnings call. The full transcript is provided below. Benzinga APIs provide real-time access to earnings call transcripts and financial data. Visit https://www.benzinga.com/apis/ to learn more. View the webcast at https://event.choruscall.com/mediaframe/webcast.html?webcastid=pMisSuT1 Summary Douglas Emmett reported positive absorption of approximately 100,000 square feet for the second consecutive quarter and executed a record 450,000 square feet of new leases. The company acquired a portfolio of medical office properties in Beverly Hills for $260 million, aiming to expand its portfolio at a significant discount to long-term value. Strategic redevelopment projects in Brentwood, Westwood, and Burbank are progressing, with Studio Plaza leasing underway. Q1 office leasing costs averaged $6.30 per square foot, below the benchmark for other Office REITs, and the residential portfolio reported a 4.2% increase in cash same-property NOI. Douglas Emmett's guidance for 2026 expects diluted net income per share between negative $0.20 and negative $0.14, with FFO per share between $1.39 and $1.45. Full Transcript 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 participants are in 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 McElhenney, vice president of Investor Relations for Douglas Emmett. Please go ahead. Stuart McElhenney (Vice President of Investor Relations) Thank you. Joining us today on the call are Jordan Kaplan, our Chairman 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 90 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 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. Thank you. I will now turn the call over to Jordan. Jordan Kaplan (Chairman and CEO) Good morning and thank you for joining us. Our operating results were once again exceptional. First, we recorded approximately 100,000 square feet of positive absorption for the second consecutive quarter. In the last six months we delivered our best results since 2019, growing our lease rate by over 1%. Second, we executed over 450,000 square feet of new leases, our best quarter ever for new leasing. Third, we posted record leasing to tenants over 10,000 square feet and fourth, we did all this while realizing meaningful straight line rent roll up. We understand that everyone is watching our leasing for signs of a sustained recovery. While two quarters is not sufficient to call a bottom, we are becoming increasingly hopeful. We believe that this part of the cycle presents a rare opportunity to expand our portfolio at a significant discount to long term value. Thus far we have made two acquisitions, including an April acquisition in which we and our joint venture partners paid $260 million for a portfolio of premium medical office properties located in the Beverly Hills Golden Triangle encompassing Almost the entire 400 block block of Bedford Drive. I am proud of the outstanding job done by our operations team and our capital markets group. These results reflect their sustained hard work. As we have discussed, we remain hyper focused on growing earnings through leasing acquisitions and the redevelopment of Studio Plaza, the landmark Residences and 10900 Wilshire. We have also been successful extending our debt at lower rates than are available to the broader market. Before I finish, I can't help but mention recent referrals and in the media to Jevons Paradox, which compares the impact of AI adoption on job growth and office demand to past transformative technologies such as personal computers, the Internet and cloud computing. With that, I will turn the call over to Kevin Thanks Jordan and good morning. This April a new joint venture managed by us acquired the Bedford Collection, a five building 246,000 square foot medical office portfolio located in the Beverly Hills Golden Triangle. We hold a 13% stake in the joint venture's $150 million of equity. The joint venture also borrowed $130 million secured by a non recourse interest only first trustee loan maturing in April 2031. The loan bears interest of SOFR plus one hundred and seventy basis points which we have effectively fixed at 5.26% per annum through April 2030. The three development projects that Jordan mentioned are progressing nicely in Brentwood. Our multi year redevelopment of the 712 unit Landmark Residences continues in full swing at 10900 Wilshire in Westwood. We expect to commence construction this year to convert the property into a 323 unit apartment community at Studio Plaza in Burbank. The redevelopment is completed and leasing is well underway with some tenants already taking occupancy. With that I will turn the call over to Stuart. Kevin Crummey (Chief Investment Officer) Thanks Kevin. Good morning everyone. During the first quarter we signed 218 office leases totaling 909,000 square feet, including a single quarter record of 461,000 square feet of new leases. We signed 448,000 square feet of renewal leases and as Jordan mentioned, leasing was particularly strong from new tenants over 10,000 square feet. Tenant retention remains strong consistent with our historical average. Our first quarter office demand was diversified across many industries with legal, financial services, entertainment, real estate and accounting representing the top 5. Our leasing spreads also improved in the first quarter as we continue to sign new leases that are more valuable than the expiring lease for the same space. The overall straight line value of new leases we signed in the quarter increased by 5.3%. Cash spreads are lower by 7.7% as a result of our very healthy fixed 3 to 5% annual rent increases over the life of the expiring lease, first quarter office leasing costs averaged $6.30 per square foot per year, significantly below the benchmark average for other Office REITs, though slightly elevated for us due to exceptional new and larger leasing, which typically require more tenant improvement costs. Our residential portfolio continues to perform well with cash. Same property NOI up 4.2% compared to the first quarter of last year. Demand remains very strong across our markets and our portfolio remains over 99% leased. With that, I'll turn the call over to Peter to discuss our financial results. Thanks, Stuart. Good morning everyone. Compared to the first quarter of 2025, revenue remained essentially flat at $251 million. FFO decreased to $0.37 per share and AFFO decreased to $49 million, reflecting higher interest expense and lower partly offset by strong multifamily performance. Same property cash NOI decreased 1.4% for the quarter at approximately 5.4% of revenue. Our G&A remains the lowest among our benchmark group in terms of guidance. We still expect our 2026 diluted net income per common share to be between negative 20 and negative $0.14 and our fully diluted FFO per share to be between $1.39 and $1.45. We expect the FFO gains from the Bedford acquisition to be largely offset by higher assumed interest expense, reflecting the flattening interest rate curve. 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. OPERATOR We will now begin the question and answer session in consideration of other participants. Please limit your queries to one question and one follow up. To ask a question, you may press Star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, please press Star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Steve Sacwa with Evercore isi. Please go ahead. Steve Sacwa (Equity Analyst) Yeah, thanks. Good morning out there. I don't know, Jordan or maybe Stuart. Could you guys maybe just expound a little bit on the leasing volume? Obviously, the new leasing was quite strong and we're just trying to get our arms around whether there were any larger leases that might have kind of skewed the quarterly volume here. If you could provide any maybe insight on how many over 10,000 got done this quarter versus historically done, just to kind of gauge the breadth of the leasing activity. Stuart McElhenney (Vice President of Investor Relations) Yeah, Steve, it's Stuart. Yeah, as we said, it was record amount of leasing in that over 10,000 category, the most we've ever had. So really strong. There were a number of deals between 10 and 20,000 square feet, and there were a few deals over 20,000 square feet that were in so very strong a bunch of industries, entertainment, legal. So it was a wide variety of industries in that larger category, but it's the strongest leasing we've had of that size ever. Steve Sacwa (Equity Analyst) Okay, thanks. And then maybe a follow up. Jordan, can you provide any just additional, I guess, valuation metrics, kind of yield, return on equity, stabilize yield on the Bedford transaction? Obviously we can back into a price per foot, but any kind of going in cap rates or return on equity that you could share for Douglas Emmett would be helpful. Jordan Kaplan (Chairman and CEO) Thanks. Well, we agreed with the seller not to give out that information, although you don't even have to back on the price per foot. I think we gave it to you. Isn't it around $1,000 a foot? Nine, very high nines. It's a portfolio that, as odd as it sound, I've been trying to buy since the 90s, ... Full story available on Benzinga.com
