Douglas Emmett's Q3 2025 Earnings Call: Contradictions Emerge on Leasing, Joint Ventures, and Debt Refinancing

Business Commentary:

• Office Leasing Challenges:
• Office leasing was below expectations during the third quarter, with over 300,000 square feet leased in July but a deeper-than-usual slowdown in August and September.

• The slowdown was attributed to a typical August slowdown in new leasing extending into September, with concerns about government sector struggles and budgetary issues impacting demand.

• Multifamily Performance and Development:

• The multifamily same-store cash NOI increased almost 7% compared to the prior year, with a focus on premium developments like the 1,000-unit projects in Brentwood and Westwood.

• Growth was driven by strong demand and new developments following state law changes allowing for increased multifamily units at existing locations.

• Refinancing and Debt Management:

• Douglas Emmett refinanced nearly $1.2 billion of debt at competitive rates and repaid debt encumbering The Landmark Residences, enhancing unencumbered assets.

• The refinancing strategy was part of a broader plan to extend debt maturities and maintain financial flexibility.

• Property Tax Refunds Impact:

• Significant property tax refunds from past years are ongoing, affecting Q3 office same-property cash NOI growth, which would have been essentially flat without these refunds.

• The unpredictable timing and magnitude of these tax refunds created volatility in financial reporting.

• Acquisition and Growth Strategies:

• The company is actively pursuing acquisitions and has strong engagement from joint venture partners, with plans to invest alongside partners and fund developments through free cash flow.
• The focus on acquisitions aligns with the strategic goal of growing both office and residential portfolios in strong markets.

Contradiction Point 1

Leasing Slowdown and Market Conditions

It reflects differing perspectives on the reasons behind the leasing slowdown and the overall market conditions, which are crucial for investor expectations and strategic planning.

好的，我现在需要处理用户提供的这个任务。用户希望我作为专业的金融文章作者，总结并精简美股上市公司财报电话会议中的问答环节问题。用户特别强调要保持原意，但去掉冗长和装饰词，同时符合美式英语习惯，只输出简化后的问题，并且保留问号结尾。首先，我需要仔细阅读用户提供的原始问题。原问题是关于租赁业务的，提问者提到上一季度的电话会议中公司对租赁管道有乐观预期，占用率指导仍然有效，但本季度结果不如预期，希望了解具体哪些部分没有实现。接下来，我需要识别冗长的部分。例如，“Starting off with leasing”可以简化为“Regarding leasing”，因为后者更直接。“if we go back to last quarter’s call, you had some optimism on the leasing pipeline, your occupancy guidance was still intact”这部分可以合并为“your previous optimism about the leasing pipeline and occupancy guidance”，这样更简洁。然后，“and then this quarter didn't play out as expected”可以简化为“why this quarter’s results fell short”。最后，“I'm hoping to get a little bit more detail on sort of what exactly did not materialize in the new leasing plan?”需要转换为更直接的问句，比如“what aspects of the leasing pipeline failed to materialize?”。需要注意的是保持问题的结构和逻辑，同时去除不必要的修饰词，比如“sort of”和“a little bit more detail”。此外，确保使用正确的美式英语词汇和结构，比如“fall short”而不是其他表达方式。最后检查是否保留了问号，并且问题没有遗漏关键信息。现在将这些简化后的部分组合起来，确保问题流畅且准确。可能需要调整语序，比如将“Regarding leasing, why did this quarter’s results fall short of expectations despite your previous optimism about the leasing pipeline and occupancy guidance? What aspects of the leasing pipeline failed to materialize?”这样两个问题是否需要合并？用户给的例子中，原问题是一个问题，但用户提供的示例输出是两个问题。不过根据用户的要求，可能需要保持问题的完整性，如果原问题中有多个部分，可能需要拆分成多个问题，但原问题是否是一个问题？原问题最后是“what exactly did not materialize...”，所以可能是一个问题，但用户提供的示例输出是两个问题，可能用户希望将每个子问题分开。不过仔细看用户的例子，原问题可能被拆分成两个问题，比如“Regarding leasing, why did this quarter’s results fall short of expectations despite your previous optimism about the leasing pipeline and occupancy guidance? What aspects of the leasing pipeline failed to materialize?”。但用户可能希望保持问题的结构，所以可能需要确认是否需要拆分。但根据用户提供的示例输出，他们可能希望将每个子问题分开。因此，在简化时可能需要保持问题的结构，如果原问题中有多个部分，可能需要分开处理。不过原问题中的“what exactly did not materialize in the new leasing plan?”是一个独立的疑问，所以可能需要将其作为第二个问题。因此，最终的简化版本可能包括两个问题。但用户提供的示例输出中是否包含两个问题呢？根据用户提供的示例输出，他们可能希望将问题合并成一个，比如“Regarding leasing, why did this quarter’s results fall short of expectations despite your previous optimism about the leasing pipeline and occupancy guidance? What aspects of the leasing pipeline failed to materialize?”。不过需要确认是否符合用户的要求。用户可能希望将问题精简为一个或多个问题，但根据原始问题，可能是一个问题包含两个部分，所以可能需要拆分成两个问题。但用户提供的示例输出中可能是一个问题，所以需要根据用户提供的例子来判断。在用户提供的示例中，原问题被简化为两个问题，但用户可能希望将它们合并为一个。需要仔细检查用户的要求。用户说“输出且仅输出生成的简化后的问题”，所以可能希望每个问题单独列出，但原问题可能是一个问题。因此，可能需要将原问题拆分为两个独立的问题。例如：1. Regarding leasing, why did this quarter’s results fall short of expectations despite your previous optimism about the leasing pipeline and occupancy guidance?2. What aspects of the leasing pipeline failed to materialize?但用户提供的示例输出中是否如此？根据用户提供的示例输出，可能是一个问题。例如，用户提供的示例输出是：Regarding leasing, why did this quarter’s results fall short of expectations despite your previous optimism about the leasing pipeline and occupancy guidance? What aspects of the leasing pipeline failed to materialize?这可能是一个问题，包含两个部分，用问号分隔。因此，可能需要保持这样的结构。因此，最终的简化版本需要确保每个部分都被正确精简，并且问题结构正确。现在，我需要确保没有遗漏任何关键信息，同时去除冗余。例如，“Starting off with leasing - Nicholas Yulico (Scotiabank Global Banking and Markets)

20251106-2025 Q3: I can't point to an industry, I can't point to a market, I can't point to a building. There was just a slowdown. We actually did a number of deals over 10,000 feet. All of that worked, it just slowed down. - [Jordan Kaplan](CEO)

Regarding leasing, your optimism on the leasing pipeline and intact occupancy guidance last quarter contrast with this quarter’s underperformance. What exactly in the new leasing plan didn’t materialize? Can you quantify specific markets or buildings where this occurred? - Nicholas Yulico (Scotiabank Global Banking and Markets, Research Division)

2025Q3: I can't point to an industry, I can't point to a market, I can't point to a building. There was a slowdown. We actually still did a number of deals over 10,000 feet. All of that worked, it just slowed down. - [Jordan Kaplan](CEO)

Contradiction Point 2

Joint Venture Engagement and Acquisition Funding

It involves the company's strategy for funding acquisitions and the role of joint ventures, which are critical for financial planning and growth.

How do you plan to fund new acquisitions when capital is needed for development projects? - Alexander Goldfarb (Piper Sandler & Co., Research Division)

20251106-2025 Q3: We have extremely good engagement from our joint venture platform. We're not issuing stock, but historically, we haven't issued stock to make acquisitions regardless of where the stock price was. - [Jordan Kaplan](CEO)

Given your stock's 9x P/E and ongoing development projects, how will you fund potential acquisitions without issuing equity? - Alexander Goldfarb (Piper Sandler & Co., Research Division)

2025Q3: Well, as I mentioned, we have extremely good engagement from our joint venture platform. You're right, we're not issuing stock. But historically, we have not issued stock to make acquisitions regardless of where the stock price was. - [Jordan Kaplan](CEO)

Contradiction Point 3

Residential Development Opportunities

It highlights differing views on the potential for office-to-residential conversions and residential development, which are key strategic decisions for the company's growth.

Can you provide more details on the potential for office-to-residential conversions and residential development in your portfolio, and where you are in the permitting and zoning timeline? - Blaine Heck (Wells Fargo Securities)

20251106-2025 Q3: There are a number of extremely great locations that we now feel we can build meaningful additional resi. We are working on planning, talking to architects, and we are working on a lot of these sites. - [Jordan Kaplan](CEO)

What is the potential size of your portfolio’s opportunity for office-to-residential conversions or ground-up residential development? Where are you in the timeline for obtaining necessary permits or zoning approvals? - Blaine Heck (Wells Fargo Securities, LLC, Research Division)

2025Q3: There are a number of extremely great locations that we now feel we can build meaningful additional resi. And Ken and I have been talking a lot about it. I mean his -- and I've said to you guys historically, really, the gating issue for us is like kind of growing our ability to do more projects. - [Jordan Kaplan](CEO)

Contradiction Point 4

Leasing Activity and Slowdown

It involves differing explanations for the leasing activity and slowdown experienced by the company, which are crucial for investor expectations and company performance.

What specific aspects of the leasing pipeline failed to materialize this quarter compared to last quarter's expectations? - Nicholas Yulico(Scotiabank)

20251106-2025 Q3: There was just a slowdown. We actually did a number of deals over 10,000 feet. All of that worked, it just slowed down. - [Jordan Kaplan](CEO)

Why is leasing activity strong despite low occupancy and lease rate changes, and why is the gap between leased and occupied space so high? - John P. Kim(BMO Capital Markets)

2025Q2: Currently, the gap between leased and occupied space is high, indicating strong leasing activity. The company is focused on larger deals, which can take longer to complete. The company sees a strong leasing pipeline. - [Jordan L. Kaplan](CEO)

Contradiction Point 5

Office Debt Refinancing

It involves differing perspectives on the office debt refinancing process and expected interest rate impacts, which could affect financial performance and capital allocation decisions.

Is the $74 million in third quarter office expenses a good run rate, or are there one-time true-up payments in the quarter that won't recur? - Steve Sakwa(Evercore ISI)

20251106-2025 Q3: Those office refinances are tough to get. The rate we got was very good. We're starting to see light at the end of the tunnel. We expect our cost of debt to increase by 100 to 200 basis points from the 3% average we enjoyed before COVID. - [Jordan Kaplan](CEO)

Can you discuss the $335 million secured office loan refinance and its implications for future refinancings and similar debt rates? - Nick Yulico(Scotiabank)

2025Q1: We expect our cost of debt to increase by 100 to 200 basis points from the 3% average we enjoyed before COVID. - [Jordan Kaplan](CEO)