Douglas Emmett Q1 2026 Earnings Call - Record Leasing Volume Signals Potential Office Bottom

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 McElhinney, Vice President of Investor Relations for Douglas Emmett. Please go ahead.

Anthony Paolone, Analyst, JPMorgan2: Thank you. Joining us today on the call are Jordan Kaplan, our Chairman and CEO, Kevin Crummy, 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, Douglas Emmett: 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 6 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. Fourth, we did all this while realizing meaningful straight-line rent rollout. We understand that everyone is watching our leasing for signs of a sustained recovery. While 2 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 2 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 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 Ten Nine Hundred 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 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.

Kevin Crummy, Chief Investment Officer, Douglas Emmett: Thanks, Jordan, and good morning. This April, a new joint venture managed by us acquired The Bedford Collection, a 5-building, 246,000 sq ft 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 trust deed loan maturing in April 2031. The loan bears interest of SOFR plus 170 basis points, which we have effectively fixed at 5.26% per annum through April 2030. The 3 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.

Anthony Paolone, Analyst, JPMorgan2: Thanks, Kevin. Good morning, everyone. During the first quarter, we signed 218 office leases totaling 909,000 sq ft, including a single quarter record of 461,000 sq ft of new leases. We signed 448,000 sq ft of renewal leases, and as Jordan mentioned, leasing was particularly strong from new tenants over 10,000 sq ft. 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 five. 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%-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.

Peter Seymour, Chief Financial Officer, Douglas Emmett: Thanks, Stuart. Good morning, everyone. Compared to the 1st quarter of 2025, revenue remained essentially flat at $251 million. FFO decreased to $0.37 per share. AFFO decreased to $49 million, reflecting higher interest expense and lower interest income, 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 -$0.20 and -$0.14. 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 1 question and 1 follow-up. To ask a question, you may press star 1 on your touch-tone 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 2. Our first question comes from Steve Sakwa with Evercore ISI. Please go ahead.

Anthony Paolone, Analyst, JPMorgan1: 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 10,000s got done this quarter versus historically done, just to kind of gauge the breadth of the leasing activity.

Anthony Paolone, Analyst, JPMorgan2: Steve, it’s Stuart. As we said, it was record amount of leasing in that over 10,000 category, the most we’ve ever had. Really strong. There were a number of deals between 10,000 and 20,000 feet, and there were a few deals over 20,000 feet that were in. Very strong. A bunch of industries, entertainment, legal. It was a wide variety of industries in that larger category, but it’s the strongest leasing we’ve had of that size ever.

Anthony Paolone, Analyst, JPMorgan1: Okay, thanks. Then maybe a follow-up. Jordan, can you provide any just additional, I guess, valuation metrics, kind of yield, return on equity, stabilized yield on The Bedford Collection transaction? Obviously we can back into a price per foot, but, you know, any kind of going-in cap rates or return on equity that you could share for Douglas Emmett would be helpful. Thanks.

Jordan Kaplan, Chairman and CEO, Douglas Emmett: We agreed with the seller not to give out that information, although you ended up the backing 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’s gonna sound, I’ve been trying to buy since the 1990s. I’m beyond pleased with the deal. I think that we’re particularly lucky that it came up at a time when it was a good time to buy almost anything. I’m very, very pleased with the deal. Steve, next time you’re out here, we’ll walk you around it, and you will, I think, be surprised by the amount of control we have. Anything else?

Anthony Paolone, Analyst, JPMorgan1: Those were my two questions. Thanks.

Jordan Kaplan, Chairman and CEO, Douglas Emmett: All right. Thanks, Steve.

Operator: Our next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.

Alexander Goldfarb, Analyst, Piper Sandler: Sure, good morning out there. Jordan, you mentioned Jevons Paradox. I had to Google that to look what that is. Are you seeing that? Were you just making that comment on its own, or do you have real anecdotes that you’re seeing in the marketplace of people saying, "Hey, because of AI and all the innovation that’s going on, we actually need to hire more"? I’m just sort of curious if it was just a comment that you threw out or you’re actually seeing it in leasing discussions.

Jordan Kaplan, Chairman and CEO, Douglas Emmett: You know, our leasing’s really picking up, as you saw. I cannot say I’ve seen that exact thing happening. The reason I was just so thrilled to read about that is that I feel like I’ve been saying it now for 1 year or 2 years about AI. I mean, as AI empowers people to be more efficient and effective, I just think the result will be people will wanna hire more people that can do that. There’s some people, if they don’t embrace it, they’re gonna feel left behind. I’m sure that will happen. If you said to me the number of people employed or the more direct statement is that, like, your office buildings are gonna be empty because no one needs to hire anybody, I don’t believe that one bit.

If you look back at all the technologies in the past that have made that same prediction that people were gonna whether stay home or whatever the case may be, and the exact opposite has happened. I just felt like it I was so surprised to see it show up from a guy from the 1800s who was talking about coal. As things became more efficient, he thought less coal would be used, but in fact, more got used. There’s many examples since then.

Alexander Goldfarb, Analyst, Piper Sandler: Okay. The second question is, and I know I’ve asked you before about the South Bay, like El Segundo and those markets south of LAX, but, you know, just hearing recently about more demand for aerospace and defense and, you know, that community’s, you know, long history. Do you guys, as you think about acquisitions, especially you’ve shown you still have a lot of JV capital that wants into the market, would you reassess and possibly consider entering some of those markets if you feel like the aerospace defense, you know, has renewed legs over this cycle? Your view, or maybe Kevin’s view is there’s enough acquisition demand in your traditional markets, and maybe you’re not so sure how long the aerospace demand is that you’re gonna stick where you are versus possibly entering, you know, some new sub-markets.

Jordan Kaplan, Chairman and CEO, Douglas Emmett: I think the problem with those other markets that you’re mentioning is that people can still build. If aerospace really picks up down there, they’re gonna just build more facilities for them. That always worries me in a market because you don’t have to just be good at about getting in, you gotta be really careful to get out at the right time. I’m much more comfortable here, where even at a period like, you know, COVID, real estate recession, et cetera, we have, throughout it all, and I know we’ve, you know, we’ve lost lease rate over the last, whatever it is, six years, for the most part due to COVID. There’s such a durable demand here and such an extreme limit on supply that I’m just very comfortable buying here.

I look at all the other factors that the wealth here, the homes, the people that are working here, the other drivers like the universities, the places, the industries that have focused their research here, especially on like medical and medical research and tech research. I just have a lot more comfort here than making a kind of moving farther out. As you said, I do feel there are more deals, and we’re saying that to our JV partners and so on. You know, everyone’s focused on it.

Alexander Goldfarb, Analyst, Piper Sandler: Thank you.

Operator: The next question will come from Anthony Paolone with JPMorgan. Please go ahead.

Anthony Paolone, Analyst, JPMorgan: Thank you. Jordan, you talked about just finding bottom here, but can you maybe step back just to give us your thoughts on L.A. in general and how that’s playing into tenant behavior or desire to sign leases? Just a little bit more on the ground in terms of what the feedback has been from prospective tenants.

Jordan Kaplan, Chairman and CEO, Douglas Emmett: When you say L.A. in general, I don’t know if you’re saying as opposed to another one of the gateway markets. L.A. in general, in many aspects, just generally feels like it’s coming back. I mean, you see it in the leasing. We see it in the differences of policing and attitudes in the cities that we’re operating in, the way things are kinda people are done with the kind of permissiveness that was incubated by COVID. We see a lot of ways where things are coming back, and of course, we’re just seeing a lot more tenant demand. I hope it holds up.

Anthony Paolone, Analyst, JPMorgan: Okay. At Studio Plaza, you said it sounds like tenants are starting to take some space there. When should we think about that just being put to bed in terms of stabilized and up and running?

Jordan Kaplan, Chairman and CEO, Douglas Emmett: Well, we’ll call it stabilized when we get up into the 90s. We’re working our way towards that. Tenants are moving in. Separately, I’m very pleased with the mix of tenants. I felt like while it was definitely great to have a single tenant there that stayed for 30 years, it was always sort of a risk hanging out in our future. When Warner Bros. moved out, I will admit I was frightened. I was talking to Ken about it, happy now to see like a real good mix of tenants, good demand for the building, leasing it up, and a good mix of some tenants are provide amenity to building. Just the whole thing is working extremely well and the way we redid the building.

It’s one of my greatest happinesses and relief, to see how it’s moving now.

Anthony Paolone, Analyst, JPMorgan: I mean, do you think it’s another year to get to 90+ or two years out?

Anthony Paolone, Analyst, JPMorgan2: Tony, we’re not gonna give.

Anthony Paolone, Analyst, JPMorgan: A timeline.

Anthony Paolone, Analyst, JPMorgan2: -out there. We’re pleased with the pace so far. Like when it’s stabilized, we’ll move it back into the in-service portfolio. We don’t like to give individual building data, and we don’t wanna put a timeline on ourselves.

Anthony Paolone, Analyst, JPMorgan: Okay, thanks.

Anthony Paolone, Analyst, JPMorgan2: Thanks.

Operator: Our next question comes from Jana Galan with Bank of America. Please go ahead.

Jana Galan, Analyst, Bank of America: Thank you. Congrats on the strong start to the year. The spread between the leased and commenced occupancy continues to widen. When you think about the expected commencement, the forward pipeline, and the expiration schedule, does it seem like this quarter has been kind of the trough in the occupancy number?

Anthony Paolone, Analyst, JPMorgan2: As Jordan said in his remarks, you know, we’re not ready to call a bottom. We’re certainly pleased with the pace of leasing the last few quarters and hope that continue. We’re really pleased to see that leased to occupied spread widen out. It’s at 3.5 now. That means we’ve been doing a lot of leasing. Of course, those folks will need to move in, which will happen over the next few quarters. With the larger leases that we’re signing, that takes a little longer than our typical tenant. The commencement dates are, you know, out a little further than, you know, the typical 2,500 foot guy that we can get in very quickly. Hopefully, that spread stays wide.

We need to do a lot of leasing, and when that spread is wide, that means that we’ve done a lot of leasing and those folks need to move in.

Jana Galan, Analyst, Bank of America: Thank you. Can you give us maybe like, just rough estimates for the under 10,000? You know, that would be maybe like a 2-quarter lag, and then maybe the larger or any kind of rules of thumb for us to think about in modeling?

Anthony Paolone, Analyst, JPMorgan2: Yeah. For the typical, the 2,500 foot guy, we can get them in very quickly. I mean, we build a lot of move-in ready spec suites. That’s a program that we’re very aggressive about. We try to have all of our buildings have a couple of those suites ready to go. Those can be in extremely fast. A more typical average for that smaller tenant is a few months, so they can be moved in within a quarter or two of when we sign the lease. For the larger guys, it really depends on the level of build-out. Studio Plaza has some significant build-outs going on, so some of those folks will be moving in next year. That is really deal specific.

Jana Galan, Analyst, Bank of America: Thank you.

Operator: Our next question comes from Seth Bergey with Citi. Please go ahead.

Anthony Paolone, Analyst, JPMorgan0: Hi. Thanks for taking my question. I guess just to, you know, follow up on some of those comments on the signed not commenced spread. How much of that, you know, 350 basis points is smaller tenants that you can kinda get in quickly versus skewed by some of the larger leases that will take a bit longer to get those tenants moved in?

Anthony Paolone, Analyst, JPMorgan2: I don’t have the breakdown between small and large in that, signed not commenced. I know a lot of it is still our, you know, under 10,000 feet guys. I suspect, we’ll have steady move-ins throughout the rest of 2026, and then some of the larger guys are gonna take a little longer, like I said.

Anthony Paolone, Analyst, JPMorgan0: Great. Just as a follow-up, you know, I know you’re not ready to kinda call a bottom here, but, you know, what are you seeing in terms of tour activity or kind of the forward pipeline, that gives you confidence that things will kind of improve over the coming quarters?

Anthony Paolone, Analyst, JPMorgan2: It’s the good activity that we’ve been seeing these last six months that’s continued. The pipeline is good. Healthy activity, tours, calls, all the metrics we look at all seem very healthy.

Anthony Paolone, Analyst, JPMorgan0: Okay, great.

Operator: Our next question comes from Upal Rana with KeyBanc Capital Markets. Please go ahead.

Anthony Paolone, Analyst, JPMorgan3: Great. Thank you. You know, on the Bedford acquisition, you know, is there any kind of mark to market.

Jordan Kaplan, Chairman and CEO, Douglas Emmett: Upal, we can barely.

Anthony Paolone, Analyst, JPMorgan2: Yeah.

Jordan Kaplan, Chairman and CEO, Douglas Emmett: We can barely hear you.

Anthony Paolone, Analyst, JPMorgan2: Yeah, you’re cutting out.

Anthony Paolone, Analyst, JPMorgan3: Can you hear me now?

Jordan Kaplan, Chairman and CEO, Douglas Emmett: Yes.

Anthony Paolone, Analyst, JPMorgan2: Yeah.

Anthony Paolone, Analyst, JPMorgan3: Okay. Yeah, on The Bedford Collection, you know, was there a mark to market opportunity there or any kinda expected rent growth that you can achieve there?

Jordan Kaplan, Chairman and CEO, Douglas Emmett: I think there’s always a small mark to market opportunity in everything we’ve been doing, but not a stunning one like with a You know, sometimes you buy a building with a bank or something in it where the rent’s like less than half, and it’s an old lease. That’s not there.

Anthony Paolone, Analyst, JPMorgan2: Upal, we own a lot of medical office. This is kind of our first foray into that product type. We own probably about 1 million feet of medical office. It’s fantastic product. We love the tenants. They’re very sticky. They invest a lot of their own money in the space. We’re very pleased to add to that.

Anthony Paolone, Analyst, JPMorgan3: Okay, great. That was helpful. Then, you know, could you maybe talk a little bit on the potential to do additional external growth opportunities that you’re seeing in the market? I know you’ve talked about developing resi and trying to buy stabilized office, which you’ve been doing, just curious what kinds of opportunities you’re seeing and the depth that you’re seeing out in your markets.

Kevin Crummy, Chief Investment Officer, Douglas Emmett: Upal, it’s Kevin. We’re seeing a lot of activity and, you know, more than half of it is off market where somebody reaches out. You know, we’re feeling pretty good about the engagement that we’re having with people. We just need to close the gap and come up with pricing that makes sense. As we’ve said, we’re focused on office.

Anthony Paolone, Analyst, JPMorgan3: Okay, great. Thank you.

Operator: Up next, we have John Kim with BMO Capital Markets. Please go ahead.

John Kim, Analyst, BMO Capital Markets: Good morning. With The Bedford Collection, you announced that you have a third of the Class A office space in Beverly Hills, and I’m wondering if you could talk about what kind of scale advantages or pricing power that provides you.

Anthony Paolone, Analyst, JPMorgan2: There are several advantages we get from the market control we have, you know, across our portfolio. On the operating side, there’s tremendous synergies. We’ve looked at, like, the last 10 or 11 acquisitions we’ve made, we’re able to lower operating expenses on average about 20%, so it’s meaningful savings. We do that because we’re so localized. We have such concentrations of buildings close to each other that we can have expensive people shared across properties. We don’t have to have a manager at every single building or a very expensive engineer at every single building. We also negotiate, you know, very large contracts, across our portfolio, so that gets us better pricing. Even more important than the operating side is on the leasing side, gives us the ability to offer space to any tenant to fit them into our portfolio.

If we’ve already got them in the portfolio and they’re growing or they’re shrinking, we can move them maybe across the street into one of our other buildings that has space that will work for them. Generally, with the small tenants that we have, our goal is not to rip out the space every time and spend $200 a foot rebuilding it. The spaces are built out pretty standardized, we wanna move tenants into a space that already works for them, the configuration with the conference room and the offices the way they like it, and spend, you know, a little bit of TIs, new paint, new carpet, whatever that is, get them in quickly and not spend a lot of capital. That’s why you see our leasing costs on average are so much lower than the other office REITs you’ll look at.

Having the concentration in those markets allows us to do that because if we own 30% of the space in Beverly Hills, we’re gonna have an opportunity to take any requirement in that market and show them several options that should work for, you know, the amount of space they need.

John Kim, Analyst, BMO Capital Markets: Is your intention to keep this portfolio medical office, or are you indifferent and kind of lease it to any tenant that wants the space?

Anthony Paolone, Analyst, JPMorgan2: If you’re speaking about the Bedford Collection, it will stay medical office. Is that your question?

John Kim, Analyst, BMO Capital Markets: Yeah.

Anthony Paolone, Analyst, JPMorgan2: Yeah.

John Kim, Analyst, BMO Capital Markets: Okay.

Anthony Paolone, Analyst, JPMorgan2: Bedford will stay medical. We own several medical office properties in Beverly Hills. Like I said, it’s fantastic product. My comments about the synergies work across medical and just regular office.

John Kim, Analyst, BMO Capital Markets: Got it. Okay. Then when you mentioned that you’re not ready to call the bottom, is that on occupancy or leasing? I’m just wondering if the midpoint of your occupancy guidance is achievable if there’s the floor to come down even further.

Anthony Paolone, Analyst, JPMorgan2: Well, we definitely feel like it’s achievable. That’s why we left the range where it is. We’re comfortable with the range on occupancy. Q1 is typically a tough occupancy quarter for us because more than their fair share of leases expire on 12/31 for whatever reason. Anybody that moves out, that occupancy dip hits Q1. It’s not unusual for us to see a small decline in occupancy in Q1 and then ramp up throughout the rest of the year, which is what we expected in our own guide when we gave the range.

John Kim, Analyst, BMO Capital Markets: Got it. Okay. Thank you.

Operator: Our next question comes from Dylan Burzinski with Green Street. Please go ahead.

Dylan Burzinski, Analyst, Green Street: Hi, guys. Thanks for taking the question. Just maybe touching on the various submarkets. We noticed that, you know, net absorption or lease % increase in the Westside and Honolulu declined in the Valley. Any sort of discernible trends from that? I mean, should we expect the Valley to maybe lag in its recovery versus the Westside?

Anthony Paolone, Analyst, JPMorgan2: No, I wouldn’t expect that. I think we did some good leasing in the Valley. It’s just pockets here and there, and it depends on the, you know, whatever leases got signed that quarter. We would expect the Valley to increase along with the Westside. We’re getting good activity there. Sherman Oaks, Encino has had a lot of activity. Warner Center, which has typically been our laggard market out there. Also, you know, good tourist, good activity. No, I wouldn’t expect the Valley to continue to lag. We’re working hard to increase the lease rate in all our submarkets, and we definitely think that’s achievable.

Dylan Burzinski, Analyst, Green Street: Just touching back on sort of the capital markets and transaction environment. Given that what appears to be just a recovering leasing backdrop, are you seeing any increased competition from other buyers that are getting in bidding wars as you guys take a look at all these transactions that you guys have referenced?

Kevin Crummy, Chief Investment Officer, Douglas Emmett: I think the term people are using is office-curious. You know, people are kicking the tires. There hasn’t been a lot of the type of assets in our markets that we get super excited about like we did with Bedford. You know, as I believe, and you’re seeing this up in San Francisco and you’re seeing this in New York, you know, as these markets recover, more and more people start to pay attention to it. You know, right now we’re trying to buy as much as we can because the prices relative to the long-term values are at a significant discount.

Jordan Kaplan, Chairman and CEO, Douglas Emmett: You know, I think that, you know, I remember this kind of thing happening in the 1990s. I think that one of the things with office buildings, when people have been sort of exiting it for a while, the operating platforms get denuded. As they wanna come back in, they’re even more nervous because it’s operations and the income that people are focusing on more than ever now. I think it’s gonna give us an edge for a little while, ’cause I’ve seen many operating platforms sort of dissolve and shift to third party, which means you don’t really have the people and the information you need to understand and try and do deals. Now, the capital, there’s capital, but it doesn’t mean they’re super comfortable in terms of being aggressive on deals.

Dylan Burzinski, Analyst, Green Street: That’s helpful color, guys. Thanks so much.

Operator: Our next question comes from Richard Anderson with Cantor Fitzgerald. Please go ahead.

Richard Anderson, Analyst, Cantor Fitzgerald: Thanks. good morning. Jordan, you said when Warner Bros. left Studio Plaza, you described yourself as frightened. Don’t remember you saying that at the time, but nonetheless, I get it. I’m curious when you think about the totality of your business today, you know, Obviously, things are looking great in terms of a possible bottoming, but, you know, where is work still left to be done? Like, where are the shortcomings of the Douglas Emmett portfolio in your mind that still need your attention?

Jordan Kaplan, Chairman and CEO, Douglas Emmett: First of all, I actually was frightened, but I wasn’t frightened because I thought the building wouldn’t lease up or be able to lease up. I was frightened for how long it would take to get tenants because it was right dead center at a time when it, you know, leasing was at an incredible low. I mean, the press around entertainment was very bad. It turned out that neither of those was true with respect to this building. The redo that was done by our operations group has been very well-received and appealing. If you have a chance to come out here and see it’s extremely nice building, so it’s attracting tenants are kind of voting to be there regardless of what’s going on around.

Today, I would say, you know I have a partner that runs operations, Kenneth Panzer, so my area that I’m super focused on all the time is capital markets. Today I’m focused on kind of finishing off our debt program. There’s not a lot left to do to extend that out and kind of rightsize and get all that correct. Then finding acquisitions and getting as much capital placed as we can, while what I consider to be, and you’ve heard everybody here say it, an opportunity that, and I know Ken and I haven’t seen it for 30 years, and we talk about it all the time. That’s kind of if you know, I want the debt finished. I think our guys are I think that’s pretty much getting done.

I want to make sure it’s done and done. Debt’s nice and clean. I need to get out there and make sure we make some good acquisitions and keep talking to our partners and try and kind of shake some stuff loose. As Kevin said, a lot, you know, a lot of this stuff’s kind of become relationship-oriented, and some of the last things we are doing and close on have been people just phoning me that I’ve known for a long time. That’s been an important part.

Richard Anderson, Analyst, Cantor Fitzgerald: Okay. second question. Stu, you said, you know, the larger tenant leasing is a mix of all different types of industries. What would you say the common thread is to this happening for you guys? ’Cause this is the second time we’re, or at least the second time we’re hearing, you know, some optimism around larger leases. What is the communication from those entities sort of saying about why they’re willing to do? Is there any sort of theme around why you’re seeing more in the way of larger lease activity?

Jordan Kaplan, Chairman and CEO, Douglas Emmett: I think that, as I’ve said on the last call, a lot of what we’re seeing is sort of sideline fatigue. I mean, they’ve been holding off, holding off, holding off, trying to wait to see where things are headed. You’re able to make a lot of money in this market, and they finally have sort of started breaking and saying, "Well, we’re just gonna do deals and start expanding because we’re gonna get left behind." I mean, I’ve The last time I looked at the stats, our expansions were way above our contractions. Our new tenants coming into the market are, you know, rushing to set up shop and have some type of new business that makes them think they need more people. Maybe they’re just tired of waiting.

Maybe they’re I mean, there was an article recently that said that people just become sort of indifferent towards the wild fluctuations, and they’re gonna just do business as usual and move forward. I don’t know what mix of things that is because I think a lot of it’s just driven by the broader economy. There definitely has been a change in attitude.

Richard Anderson, Analyst, Cantor Fitzgerald: Okay. Sounds good. Thanks very much.

Jordan Kaplan, Chairman and CEO, Douglas Emmett: Thanks.

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

Jordan Kaplan, Chairman and CEO, Douglas Emmett: Well, look forward to speaking with you again next quarter.