Ladies and gentlemen, thank you for standing by. Welcome to the Douglas Emmett's quarterly earnings call. Today's call is being recorded. At this time, all 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 McElhinney, Vice President of Investor Relations for Douglas Emmett. Thank you. Joining us today on the call are Jordan Kaplan, our President 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 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. Thank you. I will now turn the call over to Jordan. Good morning, everyone. Thank you for joining us. As pandemic concerns subsided, we saw strong tenant demand in our local office markets. During the second quarter, we leased over 1 million sq ft, including 355,000 sq ft of new deals. Based on parking income and feedback from our property managers, we estimate that our office utilization has meaningfully improved and now exceeds 80% of pre-pandemic levels. Despite leasing over 1 million sq ft during the second quarter, our net absorption metric was slightly negative. With the expiration of commercial eviction moratoriums in our markets, we are finally able to replace non-paying tenants while still pursuing collection of their outstanding balances. During the second quarter, we recovered approximately 100,000 sq ft from such tenants, and that turned our net absorption metric slightly negative. We still have about 100,000 sq ft occupied by non-paying tenants, which we expect to address by year-end. Although these efforts impact our nominal occupancy, they will actually have a positive impact on our financial results as we have not been recognizing revenue from those tenants. Our growing residential portfolio is performing well. It remains fully leased and rents on new leases are increasing at a very strong pace. We added 162 units to our apartment portfolio during the second quarter through the acquisition of 1221 Ocean Avenue and our ongoing conversion project at 1132 Bishop. Our portfolio now includes over 4,500 apartment units. While tenant demand remains strong in Q2, we're closely monitoring the macro environment for recessionary impacts, and we are already adapting to the impacts of inflation. With that, I'll turn the call over to Kevin. Thanks, Jordan, and good morning, everyone. During the second quarter, we acquired 1221 Ocean Avenue, an iconic 120-unit apartment property overlooking the ocean in Santa Monica. The property is essentially fully leased. We're upgrading the common areas and the individual units as they roll, and we are achieving significantly higher rents in our upgraded units. Our development projects at 1132 Bishop in downtown Honolulu and The Landmark Los Angeles in Brentwood continue to progress nicely. With the recent spike in interest rates, we are fortunate that our program to refinance $1.3 billion last year extended our maturities and locked in the very favorable 2021 rates. We now have more than 2 years before any significant maturities. With that, I'll turn the call over to Stuart. Thanks, Kevin. Good morning, everyone. We had an extremely successful leasing quarter, signing 261 leases covering over 1 million sq ft, including 355,000 sq ft of new leases. For the reasons described by Jordan, our nominal net absorption was slightly negative, bringing our lease rate down to 87.5%. As Jordan mentioned, our lease-to-occupied spread widened to 3.7% as a result of the large amount of new leasing we did during the quarter. That number was also impacted by the permitting delays and on-site inspection delays that we have been experiencing during the pandemic. Nearly half of our current occupancy backlog is scheduled to move in during Q3. As we've been saying these past several quarters, we expect rent spreads to be choppy as our primary focus remains on recovering paying occupancy at this point in the cycle. Our leasing spreads this quarter were positive 3.5% for straight line and negative 7.4% for cash. Our multifamily portfolio remains full at 99.6% leased, and we continue to achieve very strong rent roll-ups on new leases across our various residential submarkets. With that, I'll turn the call over to Peter to discuss our results. Thanks, Stuart. Good morning, everyone. Turning to our results, compared to the second quarter of 2021, revenues increased by 9.8%. Same property cash NOI increased by 5.1%. FFO increased by 9% to $0.51 per share, driven by increases in both office and residential revenue, including improved office parking income, partly offset by higher expenses, primarily utilities. AFFO increased 15% to $89.6 million. Our G&A at only 4.7% of revenues remains very low relative to our benchmark group. Turning to guidance, we are narrowing the range of our full-year FFO guidance to now be between $2.03 and $2.07 per share. 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 acquisitions, dispositions, or financings. I will now turn the call over to the operator so we can take your questions. Again, in consideration of other participants, please limit your queries to one question and one follow-up. If you would like to ask a question, please press star followed by one on telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. The first question comes from the line of Steve Sakwa with Evercore ISI. You may proceed. Thanks. Jordan, I was wondering if you could just provide a little bit more color on the leasing environment. I certainly can understand the desire to want to take back the space, but you know, can you give us some sense as to what maybe the pipeline looks like? I know you've got a lot of space coming due both in the second half and next year. You know, just trying to sort of figure out the cadence of occupancy improvement, you know, over the next, say, 12 months- 18 months. Okay. Well, I think I focus more on leasing than occupancy, 'cause leasing is sort of the lead that tells you where you're gonna end up with occupancy. 'Cause as the market calms down, that spread just keeps shrinking and shrinking. I'm always looking for leasing. But I can tell you, obviously, we had a great quarter last quarter. I know there's, you know, there was a slight loss in the occupancy number, but it really was driven by the fact that we've started now moving people out, taking space back, there's much more turnover. It was really just impacting a stat. It didn't impact revenue. The great news is we did 350,000 sq ft of leasing. A lot of what I'm telling you is driven by the experience I saw. I mean, we've had a little bit of July, right, where all happened, and we're on, you know, on track. I'm, you know, definitely hearing a lot of the same things all of you are hearing about a potential slowdown in the economy. I can't say we're seeing that yet, obviously, but, you know, we're watching carefully for that to happen. It's hard to make go-forward predictions other than to say, assuming we don't have a recession, assuming everything goes along good. I would look at the last quarter and actually the last few quarters and the amount of leasing we've been doing and going, we're really starting to come back strong. strong we have the confidence in getting people out and saying, "Okay, let's start putting people in, and if these people don't want to pay, we're gonna sort of have it out with them, but get them out of the space. Okay, as a follow-up, you know, you sort of mentioned, Bishop and the Landmark. Can you just kind of provide any more financial commentary around the pace of leasing at, say the Landmark, where our rents are coming in versus pro forma and sort of where Bishop is in the kind of evolution of that lease-up? Sure. Bishop is. Both of them are moving quite well. Bishop is, when it's done, it's gonna be a little under 500 units, 493. 493 units. I think we've done about 300 of the units. We're now gotten some floors back. We're working on some more floors. You have to, you know, you have to wait for tenants to move out to finish. We've done all the common areas. It's a beautiful project. I encourage anyone of our investors when you're in Hawaii to go by and check it out. We're still working through it. It is definitely a sort of a poster child, both in Hawaii and here for an extremely successful conversion for office to residential, including maintaining a reasonable level of income 'cause we still have tenants, office tenants paying, and as they move out, we convert the floor and it shifts over. That was an engineering feat and very successful. As I said, we're over 300 units done there and still building out floors. Landmark Los Angeles, which we've been calling LMLA, it really opened for tenants in April. The leasing's gone extremely well. We've had a little bit of a lag in terms of we've leased a lot. You can't move that many people in, so there's a lag between the amount of people that have moved in and the amount of leasing we've done. I think we've done over 150 units of leasing. That project's 376 units. But we're kind of just now catching up on getting them into the project 'cause, you know, there's one freight elevator, you can only move so many people at a time, et cetera, et cetera. That project has also been very successful. The rents are so far above kind of all of our initial pro- formas about the project and even some later pro- formas that I think we've sort of abandoned the original pro- formas at this point. Did that answer your question, Steve, or? Yeah. I mean, well, yes. I mean, I think you were tracking around $9 a foot maybe. I just didn't know if that was still sort of holding or- Yeah If you had to sort of pull back on that. Yeah. Okay, great. I mean, if we hold on to the $9 number, which so far so good, that's an incredible result for that project. That's correct. Great. Thanks. That's it for me. Ken? Thank you, Jordan Kaplan. The next question comes from the line of Michael Bilerman with Citi. You may proceed. Hey, thanks for taking the question. Maybe to get back on the leasing. I noticed the lease terms at least relative to last quarter were up this quarter, both on new and renewals. Can you sort of comment on that and kind of see how you're expecting, you know, lease terms for leases signed to be trending throughout the rest of the year? You know, frankly, I think our lease terms have bounced around a little bit and while yes, I'd like seeing the longer term, particularly in the new deals, I don't take a lot out of that. You know, it depends on some larger ones, it can be longer. Yes, lease terms look longer, but I'm not sure that I would read a lot into that. Though I will say that the number that I would read a lot into is the volume of activity that we had, because that's the number that I'm looking at to try and quantify, qualify the market and the demand and what's out there for us to get to our number one goal, which is our number one goal, to get our lease rate back up over 90%. Remember, we went into this around 93%, and so that's what we're primarily focused on. The only thing that can get in our way there is if we get hit with a real recession and end up, you know, without the volume being out there that we can get people into the space. That volume number, which you saw this time in primary. The million sq ft, fantastic, a million plus sq ft, but the 355,000 sq ft of new is just a really wonderful number. I mean, it's telling you that people are really coming back in. As you heard in our prepared remarks, the other thing that's very gratifying is that we're now, I think, soundly up over 80% utilization. We're getting up into really good territory there too, all of which are very positive signs. Although I've been reading a lot of articles about the other markets and thinking that we might be looking a little bit like an outlier. Okay. No, that's helpful. Maybe for my second question, just touching on recession. I think we've seen some of your office peers come out and say potentially that a recession could be good for the office space. I think we've seen kind of how historically that may not necessarily be the case, but curious kind of to get your thoughts of, you know, what we could expect from an impact on the portfolio, you know, just given the potential recessionary environment on the horizon. Well, do you think a recession could be good for the office space or inflation could be good for the office space? Look. They've been so- The only way I would call a recession to be good is if it comes with a level of unemployment that puts employers back in the driver's seat and allows them to get all their employees back into the office. I don't think it's something our markets necessarily need. As you just heard, people are coming back in. Beyond that, you know, recessions are a revenue hitting activity. And if my tenants are feeling the impact of a recession, that's, I can't imagine how I would think that's good. Now, you could take the position that inflation, because, you know, fixed assets rise in value during time of inflation. Inflation has a long-term effect that's very positive for real estate. It has a short-term effect of the costs of running the buildings and our interest costs going up, and we're an industry that runs at some level of leverage, so the interest rates have an impact on us. I do think over the long haul, inflation has generally left real estate in better shape than when it arrived. A recession, I could only imagine maybe the thought would be that unemployment would be up and therefore employers would be in the driver's seat to bring people back in the office, which is where they want them. Other than that, I would not be pleased to have us go into a recession. Okay. That's it for me. Appreciate the time. All right. Thanks. Thank you, Mr. Griffin. The next question comes from the line of Alexander Goldfarb with Piper Sandler. You may proceed. Morning out there. Jordan, you must have been pretty psyched to get that 100,000 sq ft back, and I'm guessing the same will be when you get the remainder. Maybe a two-part on that space. One, what are the steps that you need to go through to get back the remaining 100,000 sq ft? Then Stuart, if we just do simple math on the space, you know, should we just take like $40 a foot times the 200,000 sq ft and spread it out over two years and then assume that that's the income pickup over the next two years? Or is it something, you know, more to the math than that? Well, the process for getting each space back varies. Certainly you start with pay or quits and UDs, and a lot of times that's the end of it. You're in a position. The calculation about what the pickup. I mean, so we just said it wasn't gonna be negative because we're not recognizing any income from those people. I've always said, them included, that we will collect a lot of money from the people that haven't paid us, and we have collected a lot of money from the people who haven't paid us, and I've said we won't have more than 2% default, including collecting money from these people. In the end, once you make decision to get them out, a mixture of things happens, including that they kind of owe you the whole lease, but you have the obligation to mitigate and re-lease the space to figure out net what they owe you, and then you end up making some kind of deal about that. That's a pretty complicated process. It'd be hard to make a prediction. Certainly it would be hard to say you take a number and you spread it out over the next couple of years, because, you know, there are obviously people that have resisted paying. We've decided it was time to just get them out. We also believe they have money, and so they can pay. We now need to do our, you know, we'll do some mitigation. We'll try and collect from them and, you know, it'll play out just like it's been happening under California law for 50 years. Right. Jordan, I guess, maybe I made it too complicated. Just simply 200,000 sq ft, you know, $40 a foot, that's like $8 million. Should we assume $8 million of NOI pickup, you know, over the next two years? Add in $4 million next year and add in an incremental $4 million. Like, I'm just trying to think of earnings. We should think about earnings going up in 2024 by $8 million, or is it not that simple? I think that the fact that we have another couple hundred, 100 now and probably 200,000 sq ft that we'll have available for lease is obviously has value, which can be calculated in some way. The reality is we've been saying for a while, we have, I think we have 600 basis points or maybe now 500 and something basis points of pickup that I think we will pick up as the economy recovers, and that's a lot more money than you just mentioned. I would just mix this space in with the rest of it. Okay. Then moving to the balance sheet, you guys finally have some floating rate debt. I think there's about $550 million that just had swaps burned off, and I think it's due in 2027. Can you just talk about your thoughts on floating rate debt in the current environment? Are you thinking about implementing some near-term swaps? Or, you know, what are your thoughts around 'Cause you haven't had any floating rate for a while. Now that you have it and rates are rising, just trying to see what you're thinking about it. Well, hey, Alex, it's Kevin. I'll answer that. You know, our program is to borrow for seven years and swap for fivess, which gives us a lot of flexibility with a 24-month runway to refi. You know, that strategy provides flexibility, which is exactly what you need in the current market. As you're well aware, there's a lot of turmoil. Rates have gone up, and just as importantly, spreads have gapped out. It's really not an ideal time to do anything until things calm down. You know, we're monitoring the market, and we're gonna take advantage of it when it makes sense. Right now, it's just not an ideal time to do anything. Okay. We let that go to floating because it's just not a good time to lock things in right now. There's too much turmoil in the market. Okay. Thank you. Thanks. Thank you, Mr. Goldfarb. The next question comes from the line of Nick Yulico with Scotiabank. You may proceed. Thanks. Hi, everyone. First question is just going back to the, you know, the occupied versus leased number, that gap you talked about, the 3.7%. In the release, you talked about about half of that is or half of the current occupancy backlog scheduled to move in the third quarter. I just wanted to be clear. Are you suggesting that, you know, we take the 3.7%, take half of that, so you're at, you know, just under 2% of occupancy pickup next quarter just from. Is that the right way to think about that? Well, the changes to occupancy have a lot more to do with just absorbing that you have some outs and you have that going in. Actually, even though I think we'll pick up saying that half of the 3.7% will move in is simply giving you pacing for what's happening. As a matter of fact, we could end up with that number again next quarter if we do a lot of leasing this quarter, and that number could stay there. What we were trying to give you a feel for is. It was maybe in Stuart's section. Yeah. There's a couple. It's a very wide gap, and we were just trying to give you a feel for the pacing and the cause of that gap. Because when you look at it, you go, "What the heck? I mean, all these people, you know, twelve months to move in or what?" Which is why we said about half of them are actually moving in next quarter. Then we also said, "But here's what's driving this." Number one, we're doing a lot of leasing, particularly a lot of new leasing, which is obviously what drives that number. Numbers two and three both relate to just the pace at which you can get the city out to do inspections, the pace at which you can get plans approved. I mean, the world has just slowed down, and we're very good at speeding things up during tough times, but it's just the world is slower, and by the world being slower, especially in terms of getting people's TIs done and getting the final sign-off, that by itself, when you're leasing a lot, even, you know, exacerbates the gapping out. You can tell that that's what's going on because it's not even a ton of work we're having to do in these situations. They're just slowing us down so much that, as we pointed out to you, out of that 3.7%, half of it's moving in this quarter that we're now in. I know that wasn't exactly the question you asked, but I don't want you to take half the 3.7% and say, now, you know, 1.8%. Now that number will be 1.85% next quarter or now I know I can just change occupancy by 1.85%, because that's not what's gonna happen. Yeah, no, that's helpful. I'm just trying to think about the components of how you guys get to your full year occupancy guidance, which is, you know, the midpoint is roughly 100 basis points higher than where you're at right now. You have some of that occupancy pickup as a benefit, and then there's still the expirations to deal with in the back half of the year, which I guess, you know, any insight on, you know, visibility into those expirations right now? I think that's still about 6% of your square footage for the rest of the year. You know, is any of that spoken for? Just as we think about, you know, the benefit from re-leasing some of those expirations as well. Well, we're gonna have, to my recollection, we have a little bit lighter expirations in the second half of the year than we do in the first half of the year. You know, it's a calculation that has, you know, four or five points to it, and we look at all those numbers when we provide guidance, and we still think we're gonna be within that range that we gave guidance on. We said don't change that range. You're right to say, I mean, right now we're only halfway through the year, so we'll see how the rest of the year plays out. Okay. I guess saying, 'cause you didn't change your occupancy guidance, so I wasn't sure if, you know, you're now suggesting you're more likely to be at the lower end of the range because of the extra space, you know, you got back, or if you still feel like, you know, the middle of the range is possible, which assumes some occupancy growth through the back half of the year. That was kind of the point of the question. I mean, you're dealing with really small changes. I don't know that I know that in the meeting I sat in, we thought that range was still a valid range, meaning like, you know, it had a, you know, a mean bell curve standard deviation range. I mean, that's how I think it is. I mean, we will hit the dead center, I don't know, probably not, but we'll be somewhere in there. All right. Thanks, Jordan. All righty. Thank you, Mr. Yulico. The next question comes from the line of Jamie Feldman with Bank of America. You may proceed. Great. Thank you. Can you talk more about the 355,000 sq ft of new leases? You know, what kind of tenants are they? Are there certain buildings, certain submarkets? I'm just curious what the, you know, the incremental demand is looking like. As you think about the pipeline. Yeah. You know, is it more of the same? Yeah. I think it's, you know, the great thing about our markets is the diversity of the tenants that are driving it. I think we're still seeing that in our demand. We're getting good demand and kind of across the board of industries, so nothing noteworthy to point to that one industry is driving anything, more than usual. We had, you know, several submarkets go up in the lease rate and some go down, so it was kind of a mixed bag. I wouldn't point to anything submarket-wise or industry-wise that was noteworthy or new, a new trend that we, you know, felt like was worth pointing out. It's just good, healthy demand across the board. I think the same is true for the pipeline. We haven't seen anything in the pipeline that would, you know, be a noteworthy change to kind of the typical diverse demand that we get. Would you say the new or more tenants who didn't have space at all, or you're winning deals from other buildings, other landlords? It's always a mix of that. We have, you know, we have tenants moving from other buildings in the markets. We have new business creation, you know, so it's always a combination of all those factors. I mean, like you saw, we had over, you know, 261 leases, so it's a various group. All right. It sounds like no real perceivable trend or change in trend. Yeah. I think it's. And- Normal. Yeah. Okay. Shifting gears to 1221 Ocean. Can you talk about the expected yield on that or stabilized yield on that? I know it sounds like you're having great success with the, you know, the upgraded units. I guess just bigger picture, I mean, how big do you think you'd want apartments to be in terms of your total NOI stream? Well, I mean, look, I'd have apartments be however big that of the amount of projects we find that we like. It's not a calculation. I think right now it's like 15%. I mean, if it was 20% or 25% or 30%, it'd be fine with me. The problem is it's very hard in at least the markets we're focused in to find large, high-quality institutional apartment projects, and most of where we're getting them now is by building them. I mean, we aren't really doing much in the way of building office. We're primarily focused on building apartments, you know, maybe from that perspective, things will go up. If the office market goes up a little bit or if the office market transactions start coming around again, then office will catch up, and it'll go back to that, you know, 15-85 number. Your question was, are we still having success on the remodeled units at 1221? Well, no. What's your- Is that what you're asking? I know you're having success. What's the targeted yield or expected yield on that project or that investment? You mean like cap rates or? I mean, I think in general on that project, it's. You know, I would call it sort of down the center line job pretty well done would be an all-cash IRR on 10 years around 7%, maybe a hair under 7% because it's such a high-quality apartment project. I think the leverage number, it doesn't have a lot of leverage. I think the leverage number will be because now we got a good loan on that project, and we have a partner in it. I think it'll be somewhere in the 9s. Okay. Is that what you're asking, the IRRs? What are you assuming? Well, I mean, just even the yield. I mean. The building assumption. kind of if the model You mean what am I assuming in the cash flow? Right? Correct. Your cash flow. I'm sorry, what? Your earnings yield. Well, I just gave the IRRs, so you mean what's like what was it going in cap rate or? Sure. If you can give that. I think going in we were around a three. A three. Okay. Maybe a little higher. Probably a little higher. A little higher. We were a little higher than a three. I guess if you like. We're gonna say about. You know, for every incremental dollar you have to put to work, I mean, do you prefer apartments here, or do you prefer office? How do you think about that decision? If it was two equally very high-quality projects, I would be willing to do both. I've never had to make the decision to choose one or the other. We've done a pretty good job of having capital available, so I haven't been forced in that decision. If the projects aren't of equal quality, we always go towards the higher quality one. If I only had a fixed amount of money in the same market, whether it was apartment or office, I would do the higher quality product. Okay. All right. Sounds good. Thank you. Thanks. Thank you, Mr. Feldman. The next question comes from the line of Rich Anderson with SMBC. You may proceed. Thanks. Good morning out there. On the estimate of 80% + utilization, you know, obviously a good number, and you're right. It compares well to the broader national industry, I would guess. We'd rather see more utilization than less, of course. From the standpoint of future leasing, you've got nearly 3 million sq ft expiring next year. How does utilization play a role in your ability to lease vacating space or expiring space? Is it more just optics and a good kind of coincident indicator of interest in using your space, or is there something material that you can use in the leasing process that I'm not seeing? If it's a dumb question, sorry. No, that's not a dumb question. Part of what you're saying is I think it's always better to show a building with activity and people in it and things happening. Sure because people want to be around that same thing. I will say the utilization stat is probably more used than not as much for marketing, although I think it's useful to have a building with activity, but it's more used as a predictor for the level of activity and demand we should expect going forward. You know, when utilization was very low, we had low demand. Now, utilization's higher. Now, you have a few things. You have, we did a lot of leasing last quarter. You go, "Okay, that's good." All right. You go, "Now what are other things I can link my kind of analytics around to say what I should expect for the future?" Here's another thing. The other thing would be, well, utilization is just keeps running up, which means more and more people are getting back in, and therefore they're gonna be needing space, and maybe they're reevaluating, saying, "I need a little more space," or, "I just need space because I let my space go and now I'm coming back in." Utilization is another sign, a positive sign. What's a negative sign? A negative sign would be too much discussion around recession is gonna scare tenants, and you go, "Well, we're just hearing a lot about recession." Therefore, you know, you take that and go, "Maybe I need to be a little more on guard," because maybe it isn't just clear sailing with a straight arrow up. Utilization's just one of those stats that helps us predict where we're headed. Okay. Yeah, fair enough. The second question is the 200,000 sq ft, is that everything that you can get back, or is there some amount that's out there that's, you know, particularly stingy and for one reason or another, politically or otherwise, you can't get to it at least in the short term? The way you're saying it, that can we get back? We don't wanna get space back. We wanna make a deal with the guy and have him occupy the space, just to be clear. Right. So- Yeah when you say that, it's when we go there having a guy there who's making no use. We're just gonna go legal route and collect what we can or actually have to settle out and get him out of the space. We're better off that way. That is the amount of space we think we have left. Maybe that, maybe a little less, but that's kind of what we think we have left at this point, people that we'll call just fall in that bucket. Okay. Is there anything about that space that's kind of particularly different than everything else that's expiring? Maybe, you know, non-paying rent, space gets a little bit more beaten up? Is it well located? I mean, how competitive is it relative to what you would normally see in the leasing process in terms of quality? I think it's just like the stuff we've been leasing. I don't think there's any special thing about the space that better or worse space has tenants that are, you know, so resistant to paying. It's just- Okay same as the rest of the space in our portfolio. Fair enough. Thanks very much. Thanks. Thank you, Mr. Anderson. The next question comes from the line of Dave Rogers with Baird. You may proceed. Yeah. I wanted to ask about the uncollected rent balance. I just know it's not the favorite topic, but I guess I'm curious about the 200,000 sq ft of kind of the eviction tenants you're talking about this year. How much of that balance comes from them? Maybe a second question, just to kind of layer on top of that is the tenants that aren't being evicted that still owe you money, how is that gonna start coming in now that the eviction's over? Do we see that in the fourth quarter? Are you gonna start kind of aggressively renegotiating leases with those guys early? How does that work? Maybe those two questions separately, if I could, please. They're in a number that's been decreasing anyway, but they're in the numbers that we've been saying is outstanding that's owed to us. Although their numbers can be hard to calculate now, right? If you're in space and you haven't paid us up to now, and we go, "Well, you owe some money up to now." Now, once you get evicted from the space, you owe us all the money from the whole lease. Of course, we are also obliged to mitigate, right? Now, we obviously feel that we can get someone else in there, get them out, we get someone else in there, get that money, and then we can kind of figure out what you owe us, and then we're gonna go at you and go, "You owe it." So it's hard to say these guys pull money out or expand it or do whatever. But that number's. As I've said many times, I think last time I looked at it was under $30 million. So that number's coming down. The 200,000 sq ft, it's not a very big number. All these numbers are coming down to smaller and smaller numbers. I would not. Because it's complicated to collect from those people in particular because of all of our obligations to mitigate and there might be a legal process attached to it. I think it'd be very hard to predict, you know, timing for that money particularly coming in. Although I will say in many, most of those cases, I think they have the money, and they will end up paying. They're just. It just put them in a bad habit of not paying in the past, and so it's just a bigger battle to get the money out of them. On the flip side of that, the other part of that, which, you know, the tenants that are still in, they didn't pay for a while. They owed you. Now they're paying, so you're not evicting them, but they have some time to catch up. Can you talk about what percentage of that remaining balance that is and how that comes in? Well, I don't know the split between the two groups of tenants. I could tell you that people are still in or paying some amount, probably paying current plus something, and it's slowly causing the balance to decline. This group that we're talking about are the ones that, you know, were causing the balance to increase because they weren't. Yeah. Yeah, Dave, the way you characterize it, as of now we can start aggressively pursuing is not right. We've been aggressively pursuing collection the entire pandemic. The folks that are still in, most of them we've made deals with. You know, they owe us some past due balance, and they're starting to pay that. They're paying current rent. Some of them are hanging out and paying according to what the moratorium allows. We prefer to sign a new lease with them or extend out their lease and let them pay us back what they owe us over time. We've been doing that for two years now. Yeah. We haven't been waiting till now to start aggressively pursuing those balances. Yeah, sorry for the mischaracterization. I think I was thinking about the evictions where you could pursue those now more aggressively. Last just for me, I wanted to clarify on the occupancy guidance. Both your leased and your occupied number for the end of the year, before or after these evictions, those numbers don't change. Is that correct? I mean, you've already taken them out of occupancy. They're not in the lease number, so there is no change regardless of whether they leave or not. Leased and occupied stats are impacted now by 100,000 sq ft that's left when they move out. There's been no income. None of the accounting stats are impacted by them because we didn't accrue for rent that's owed to them. We didn't take anything into revenue. We didn't do any of that. They were in the stats for the fact that that space was leased. It wasn't available for us to lease to someone else and occupied. The spread between leased and occupied is driven by you've signed a lease, but the person hasn't moved in. That's the difference between leased and occupied. There is no calculation about. Well, we've been giving you this third number that just got created by the pandemic called utilization, and that, you know, some of these people could actually be in the space utilizing it, and it's leased, and it's occupied, but they haven't paid us. Maybe many of them have. I don't know. All right. Thank you very much. Thanks. Thank you, Mr. Rogers. The next question comes from the line of John Kim with BMO Capital Markets. You may proceed. Good morning. I had a couple questions on leasing activity. You did over 1 million sq ft during the quarter. That was great. You own 440,000 sq ft expiring in the second quarter, according to your last supplemental. Then you captured another 100,000 sq ft. You know, this remaining 500,000 sq ft or so that I thought would have improved your leasing number, and instead it went down during the quarter. I was just wondering if there was some other unknown vacate or termination that offsets the lease rate. Yeah, John, it's Stuart. If you just go back one quarter before this quarter and look at what we had expiring, it does not capture nearly the population of expirations that we had in that quarter because of course, nobody waits, or most folks don't wait till the last day of their lease to renew. We're renewing tenants a year and a half in advance of their expiration, a year in advance, six months in advance, all along the way. That expiring number that we're telling you, that we're putting in supplemental, is what's left to address. Not what you know. If we've addressed it, if we've renewed it comes out of the expiration. You can't do the math the way that you laid it out and say, "Hey, you had..." You know, go back a quarter, look at what you had expiring, and then add the leasing you did and tie it out. You can't do it that way. In fact, as odd as this is gonna sound, many tenants renew after expiration. They, you know, the lease theoretically expired. They're on holdover. You're still negotiating a deal. You make a deal some months later. They go, "Okay, Put us back. Give us a refund for our holdover portion." Now you have another new deal with them. That happens with small tenants. That just... They're not, they're not as focused on the exact date. I see. You have this additional 680,000 sq ft of signed leases not commenced. That's not in your expiration schedule, and that may be part of that. Well, it's somewhere in the expiration. It just isn't necessarily in that quarter. As you... I don't know if you kind of watched it for a while, but every year as you approach the year, you know, the year, especially the year before, the next year starts shrinking in terms of its expirations because you're doing those deals. Then when you get to the year, like, you might think the next year, well, I'm making this up a little bit. I'm not. It's around 14%. Usually by the time we get to the year, it's usually less than 10%. It's, you know, 8%, 7%, because we've done a ton of deals. John, it's Peter. You were asking about the signed leases not commenced, the 680,000. What was the question about it? That's. Those are basically It's not in your, Those are the leases where. Go ahead. If we have a signed lease. Oh, go ahead, Peter. Once they are in our expiration schedule. Yeah. Those are, you know, they're essentially leases we've done recently, right? They're considered leased. They just haven't moved into occupancy yet. They will be in an expiration schedule, but you know, if it's a five-year lease, it'll be expiring five years from now, right? Those are newer leases, the signed leases not commenced, the 680,000 sq ft. That's part of that gap, the gap between leased and occupied is those leases. You know, I'll follow up offline. My second question was on seasonality. You see 1 million sq ft of leases signed this quarter and 900,000 sq ft last quarter. Is there typically any seasonality in leasing, or can this be replicable in the second year? Yeah, there's seasonality. Summer's slow. Summers tend to be slower. What about the fourth quarter? Yeah, I mean, there's a lot of leases that end the last day of the fourth quarter, so a lot of times the first quarter is one of our toughest quarters because leases ended at the end of the year, right on that day. It looks like it was in that day, but it's out, you know, immediately to the next quarter. If you say beyond that, if you're talking about seasonality, the only seasonality of people signing leases I know of is that summer's slow for all the reasons you know. Right. All right. Thank you. I'm not sure that the seasonality has held, has had a lot of validity during the pandemic, to be frank. I mean, I think the pandemic has reordered the seasonality to move in accordance with people's views on the economy and whether they think there's a tick up in COVID or COVID's relaxing. I mean, that's had more to do with shifting the pace of leasing than the seasonality that, let's say, would've been more recognizable from 2019 and prior. Appreciate it. Thank you. All righty. Thank you, Mr. Kim. The next question comes from the line of John Nickodemus with BTIG. You may proceed. Hi. Good morning out there. I know this past quarter was robust for multifamily rent growth across the country. Obviously, your markets were no exception. Now, you had an average rent roll-up over 8% across your portfolio during that time. Was just curious if you had any further detail about the rent roll-up, sort of that number that came from your market rate apartments, and how much of a drag there was from any sort of rent-controlled units you have. Thanks. Yeah. The number we're giving you is on new leases, so there's no rent control component to that. That's on new leases signed, which, you know, when we get a unit back when it's vacant, that's not subject to rent control on the new lease that's signed. We can sign a market rate deal. We're giving you the stat unblemished by rent control. Got it, Stuart. Thank you. Very helpful, and we'll definitely keep that in mind going forward. My other question was just on the 1221 Ocean Ave acquisition. I know with that you now have an entire block of frontage between that property, 1299 Ocean, and 100 Wilshire. With that entire block of frontage on Ocean Avenue, are there any opportunities you're looking at for operating synergies or any other revenue-enhancing upgrades across those contiguous sites? Thanks. Yeah. One of the things. It's good question, because one of the things that made that acquisition special for us is the 100 Wilshire and that building. Well, all three buildings were built by Lawrence Welk. Yeah, Lawrence Welk. The 100 Wilshire and 1299 have a common parking garage. When we bought 100 Wilshire, I actually negotiated that agreement, which was somewhat good for 100 Wilshire, not fantastic for 100 Wilshire. The garage is actually controlled by 1299 Ocean. 12:21. I mean 1221. They had these upper floors for valet. There was a lot of things going on there, let me just say it that way. This has totally opened up that situation. By the way, these buildings also own a lot of other parking. We have another parking garage. In parking, in management, it's making a big difference. We're redoing the buildings. I think they're all gonna look have a more consistent front. I think they're gonna have a very nice look to them. I think when we're done, I think they're pretty undisputed as the premium properties in L.A. now, but there'll be even less disputers out there, Chris. It'll be that nice. It's really gonna be a beautiful lineup of properties with incredible views, incredibly well-located, top class all the way down the line, and that's what we're shooting for. Great. Thanks so much, Jordan. Really appreciate the color. Thanks. Thank you, Mr. Nickodemus. Next is a follow-up question from the line of Michael Griffin with Citigroup. You may proceed. Great. It's Michael Bilerman here with Citi. Jordan, I want you to come back and sort of look at, you know, sort of stock price valuation and sort of firm valuation, and just how you're sort of thinking about where the shares are today. I know you're not alone in the office world trading where you are, but I suspect you're as frustrated as other office CEOs are. I know you've been reluctant to wanna do stock buybacks, you know, by taking off capacity, raising leverage, and not having that for acquisition and development. You've done, obviously, personal purchases alongside other members of management. You've also been reluctant to sell assets to joint venture partners 'cause I think you've always preferred going arm in arm on a new deal, where you're both going in at the same basis. Does where the stock trades today Hey, everything you just said is exactly right. I know. Okay. No, no, it's okay. It's totally fine. You don't have to answer it. You know, the question is like, at this point, is your mind shift? You just added 3 new board members in the last year, right? I don't know if Shirley and Sugar Ray and Doreen have different views, but you also have new views in the boardroom. I'm just, where is your and the board and, you know, Ken and Dan's view today? You know, given the shares in the low 20s, I'm sure you've never imagined that the stock could be trading at a seven implied cap, you know, almost a double-digit AFFO yield. Help me sort of understand where this is, how it's taking importance within the organization, and are there other steps that you can take to drive shareholder value? That's a great question. I don't take the share price to be a threat to the company. I will say, we had a long conversation about what kind of opportunity does what's going on present. We've had that conversation with the board, and it's a, you know, very mixed opportunity, but it does, in some sense, maybe that's what you're alluding to, present an opportunity. I know that the down the center line conversation about that opportunity is buy your stock, and you've heard all my opinions about buying the stock. I'm not saying that never should be done. By the way, we've bought back our stock. That's one of the options. The other option is that it allows us maybe to pick up some buildings like we did just get, 1221, a building I've wanted since the 1990s. Are there buildings that we can buy that, you know, are, you know, that this type of condition, especially around office, which we're still very positive on office, and we have a platform that absorbs it extremely well. Is there an opportunity to kind of finish our kind of, you know, office portfolio synergy, whatever you wanna, you know, global enhancement of our position? So it 'cause office is very negative right now, so of course, you wanna. When people are very negative about something, it's good to look at it 'cause that, you know, maybe they're right and then maybe it's an opportunity. As I've said in the past on residential, has. The opportunity that may come from that is, number one, we're still building. It might come as that I think a lot of people had residential deals that leaned more heavily than usual on interest rates and cheap debt, and is that gonna flush out some residential projects that we wanted? There is sort of an opportunity set that's out there, and you have to think about, you know, what to do with it. There's obviously always risks associated with a recession, especially, or inflation or whatever we're in right now, kind of a negative bias on office certainly. We're looking at all those things. I'm hoping that we can walk the line properly between taking advantage of opportunities to build. The company has a very strong balance sheet, and we're very well run. We have a lot of cash flow every year. Even now in the middle of everything that's going on, this company produces a lot of cash flow beyond its dividend. You know, you don't want to weaken your company during a time like this, but you also want to take advantage of opportunities because you know, opportunities like this don't come around that often, and we're talking that through. That's been the biggest subject in our boardroom. You know, does the opportunity to sell existing assets either outright or to, you know, a number of your long-standing institutional partners, has that changed at all? Like, you know, obviously, your partners have appetite, as evidenced by some of the deals you've done over the last 36 months. You know, I know you haven't liked to do that, but why not, you know, liquidate a couple assets and use that capital to either reinvest in the stock or and create NAV value that way, you know? Or just continue to reap proceeds and reinvest in a lot of those redevelopment and development activities or future acquisitions where you can earn a higher return. Well, I mean, I guess one thing I'd say is if I think there's an opportunity to buy, and this again, it'll be a long conversation. If I think there's an opportunity to buy office buildings and apartment buildings, then that kind of contradicts saying, is this an opportunity to sell my partners? The only reason you would say there's two ways to buy back your stock, and you're highlighting one of them, which is you can sell assets, which if your stock's way down, probably the asset values are down. You can sell assets and buy back stock. That doesn't change at least your debt structure. The other way is just to borrow money and buy back stock. Those are really the only two ways you can do it. If I think there's a buying opportunity right now, I'm not very inclined to sell. I mean, you know, I don't wanna be the seller in a situation where I think it's a good time to buy, and I do think it's a good time to buy. Right. You still have to come up with the money. At $22, I think you have zero, probably negative interest in issuing equity. You know, any of your private partners who you'd say, "Okay, well, take units 'cause they're valued in the 30s." You know, someone will say, "Well, I can buy from the screen at $23. And as much as I care about taxes, I'll take the half discount." I just don't know how you get out of this or whether there's, you know. Maybe it's just time. Like, I just didn't know how by having the new board members, by where the stock is, whether things have changed at all in the mindset around some of these items. Well, I can't say having new board members has changed the mindset around this. I think what's changed the mindset is saying this is its own type of opportunity, different from the opportunity that happened in 2008, different than other recessions when we were private that created opportunities, and we gotta look at this one and do this one right. In you know, in the end, I mean, there's two real simple things. Number one, when the economy's way off, it usually presents itself as an opportunity. Number two, make sure that you protect the company and don't put it at risk. Those are the two primary things I'm looking at. Yeah. I appreciate the conversation, Jordan, on that. Just one follow-up just on occupancy and lease rates just so we're perfectly clear. As you mentioned today, 87.5% leased, 83.8% occupied. That 370 basis point delta, call it about 680,000 sq ft. It sounded like half of that takes occupancy potentially in the third or fourth quarter. And then the only question is what happens with the roll, which you have about 1.4 million in the back half, about 800 basis points. How should we just think about the retention on that to really understand how occupancy and lease rate move in the back half of the year? Then obviously, 2023 is a whole different area. I'm just wanna understand that aspect of where these two numbers go in tandem over the back half. Our hope is to gain on both fronts. I don't think those are. Obviously, they're not insurmountable numbers for the next two—for the, you know, third and fourth quarter. I'm not sure beyond that, I mean, what I can say. I mean, that's. You have our guidance for the numbers and where we think we end up. You have the guidance for office occupancy 84%-86%. Did you also give an office lease rate? Because I don't see that on page 22. I see residential. Yeah, we don't give guidance on lease. Yeah, we haven't been giving guidance on leased, other than we report it, obviously, every quarter. Michael, you asked about retention. Right. That's where I'm going with it, right? Like. Yeah. Historically, our retention. Sorry, Stuart. Historically, our retention's been in the mid- to- high 60%. You know, that's typically what we've retained. No reason to think that that wouldn't continue to be the case going forward. Right. There's also new leasing for those that vacate. I'm just trying to understand what's effectively what you expect to happen in the back half, given the 1.4 million sq ft of expirations and the 700,000 sq ft of signed but not occupied, just how those two pieces move. You know, whether we expect to end the year at the same sort of spread, but occupancy and lease rates just move up, or if that spread narrows with occupancy staying relatively flat, which is the bottom end of the guidance. I'm just trying to understand the leased portion too of the equation. Yeah. Well, I think we've laid out all the components, but now we have to do the work, and we have to see how the rest of the year plays out. There's new leasing to be done, there's retention to be done, and we got a lot of folks moving in in Q3, so we know we've got those move-ins scheduled. There's a lot of unknowns in the components that we just laid out. We gotta continue doing the leasing and see how the retention plays out for the remainder of the year, so. As I said in answer to an earlier call, I'm not sure that all those factors also go along with shrinking the gap between occupancy and leased. That gap should stay open. Right. Because you're Right. Because you're pulling stuff. The reason it's leased is why it's open. Right. Yeah. Right. Because you're gonna be the next six months, you're leasing for 2023 and 2024 expirations of people coming to you, and you're getting ahead. Yeah. We can do a lot. That's part of the activity. Yeah. Yeah. Yeah. All right. Well, hope you didn't get knocked out by Ray Leonard when you told him the answers to all your questions. No, he enjoys the meetings. All right. Thank you. I think that's it. I think that was it. I think that was our last question. Thank you, Mr. Griffin. That concludes the question and answer session. I will now pass the conference back to the management team for closing or additional remarks. Well, thank you all for joining us, and we look forward to speaking with you again next quarter. That concludes the Douglas Emmett Q2 2022 Earnings Conference Call. Thank you for your participation. You may now disconnect your line.