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 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, V P 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. I will now turn the call over to Jordan. Good morning, everyone. Thank you for joining us. For Douglas Emmett, 2022 was a year of real accomplishments in the face of notable challenges. In our markets, during the first three quarters, the impacts of COVID dissipated. We leased 3 million sq ft, and office utilization rates rebounded to over 80%. During the fourth quarter, as economic concerns grew, we saw a slowdown in new and renewal demand from large tenants. Fortunately, we continued to see good activity from the small tenants who dominate our markets and leased 770,000 sq ft during the quarter. Overall, our absorption was slightly negative for the year. Given the macroeconomic climate, we believe it is prudent for our guidance to assume no meaningful recovery in office occupancy during this year. During 2022, the value of both our residential and commercial leases increased. Our straight-line office rates were up 5.8%, and our residential rents increased an average of 7.8%. In addition, our two multifamily development projects added 505 units to our portfolio. Remote work, oversupply, the reliance on large tenants, and concerns about reduced urban appeal seem to pose additional obstacles for some office CBDs. Fortunately, our markets, supply constraints, smaller tenants, short commutes, and low reliance on public transit have supported relatively high leasing volume and utilization during the pandemic. This recent experience, combined with our industry diversification and strong operating platform, gives us confidence in the long-term prospects for our markets. With that, I'll turn the call over to Kevin. Thanks, Jordan, and good morning, everyone. Our multifamily development projects continue to exceed pro forma. In April, we delivered The Landmark Los Angeles, a new 376 unit residential high-rise in Brentwood, and have already leased over 60% of the units. In addition, we have now delivered and leased over 350 of our eventual 493 units at Bishop Place in Honolulu, and we expect to substantially complete the conversion by year-end. Asset sales in our markets have remained slow, though we continue to search for opportunities. Regarding our balance sheet, we have no outstanding debt maturing until December of 2024, and almost half of our office portfolio remains unencumbered. With that, I'll turn the call over to Stuart. Thanks, Kevin. Good morning, everyone. We did a substantial amount of leasing this quarter, primarily driven by the small tenants that support our markets. We signed 218 office leases covering 772,000 sq ft, consisting of 244,000 sq ft of new leases and 528,000 sq ft of renewal leases. For all of 2022, we signed 924 office leases covering 3.7 million sq ft, including 1.3 million sq ft of new leases and 2.4 million sq ft of renewals. During 2022, our lease rate declined by 53 basis points to 87%, and our occupied rate declined to 83.7%, driven mostly by the slowdown in activity during the fourth quarter and recapturing space from non-paying commercial tenants as local moratoriums expired. Our leasing spreads during the fourth quarter were positive 1.8% for straight line and negative 9.9% for cash. As I've been saying in recent quarters, we remain focused on occupancy at this point in the cycle and expect rent spreads to remain choppy until our lease rate climbs back near 90%. Our leasing costs this quarter were $5.80 per sq ft per year, in line with our recent trends and well below average for other REITs in our benchmark group. Our multifamily portfolio remains essentially full at 99.4% leased. We saw continued strength in rent growth during Q4, with average rent roll-up for new tenants over 5%. We assume the extraordinary 7.8% increase in multifamily rents during 2022 will moderate somewhat in 2023. We are pleased that the residential rent moratoriums in our markets are ending, although the payback periods have been extended into 2024 for some of our residential tenants. 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 fourth quarter of 2021, revenues increased by 6.4%, FFO increased by 7.2% to $0.51 per share. AFFO decreased 11.1% to $81.2 million, reflecting more tenant improvement expenditures as a result of our robust leasing in Q2 and Q3. Same property cash NOI increased by 1.4%, primarily as a result of higher rental revenue and parking, partly offset by inflationary impacts on expenses and lower office occupancy. For all of 2022, FFO increased by 9.4% over the previous year. Our G&A remains very low relative to our benchmark group at only 4.4% of revenues. Turning to guidance, as Jordan said, our guidance assumes that office occupancy growth may not start in 2023. We elected to allow interest on one loan to float when the related interest rate swap expired on January first. Our guidance also assumes we will do the same when two other swaps expire in March. Due to increasing interest rates, expiring swaps, and the new residential acquisition loan, we expect interest expense in 2023 to be between $192 million and $196 million. Overall, we expect FFO to be between $1.87 and $1.93 per share, with higher NOI more than offset by approximately $0.16 per share of additional interest expense in 2023. 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. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Again, in consideration of other participants, please limit your queries to one question and one follow-up. Thank you. At this time, we will pause momentarily to assemble our roster. Our first question is from Blaine Heck with Wells Fargo. Please go ahead. Great. Thanks. Good morning out there. Just starting with guidance, can you guys provide the assumptions for retention in 2023 and rent spreads on executed leases during the year, if possible? Hey, Blaine. We, you know, we have never given guidance on those particular items. I think for retention, our retention rates have historically stayed in a pretty tight band in kind of the mid-sixties. I think you could assume that, you know, this year will probably be like most years before it. For trying to predict rent spreads, it's been impossible. We've tried that in the past. We're not very good at predicting them ourselves. It's nothing we've ever provided guidance on. You know, as I said, we're focused on retaining occupancy and growing occupancy. I think you should expect spreads to be kind of how they've been. You know, it's hard for us to make predictions quarter to quarter on how they're gonna play out. Okay, fair enough. Second question. Jordan, I think you've been pretty focused on getting your development team working on some new projects now that Landmark is done and Bishop is wrapping up. Is there anything you can talk about on that side of your initiatives? Have you identified the next project or projects? You know, does the increase in cost of capital make you any less likely to move forward with development projects at this point? The next big thing I think we're gonna be focused on is construction at Barrington Plaza, where some years ago we had a fire. We've gone through a lot with the city trying to get it worked. We have a lot we're going through and have gone through with the city on insurance and with the insurance companies and with the city to get positioned to be able to start work there and do all the work that we need to do, including putting in fire sprinklers. That's probably the next big step, though although I will say this may not be the exact right time to do this, some changes in state law have made it much easier for many of our sites, very good sites that we have up in Mid-Wilshire, whether Wilshire, Beverly Hills, and in the Valley, to made it more cost-effective, less time-consuming in terms of entitlements. I mean, it's just fixed a lot of stuff. Those changes, to make sure we really understand their impact, we were waiting. We thought we were actually gonna get some guidance, like, this month or next in terms of how it was actually gonna be executed, we heard we weren't gonna get any guidance till June or July. We're waiting to hear that. you know, there's no version of guidance that isn't gonna come out pretty positive for us on some of those sites. Okay, great. Thank you. The next question is from Michael Griffin with Citi. Please go ahead. Great. Thanks. I wanted to ask on the Warner Bros. Discovery leases expiring over here in 2023 and 2024. Just curious, the demand that you're tracking on that space, and I know the lion's share expires in 2024. Is there a sense that that's weighted toward the first or the second half of 2024 for that? Any other color you could provide would be helpful. I think there's only two leases, and one of them is a whole building, which is the Thirty-Four Hundred Riverside Drive. That building's about 450,000 sq ft, and the lease expires in the second half of 2024. You know, as I know, I mean, everybody's anxious to know what they're gonna do, and I'm anxious to know what they're gonna do. I mean, I'm not, I'll tell you, I'm not optimistic, considering what's going on with the economy today. You talk about the economy two years from now, and I don't know what they will do. Or will wanna do. They don't have any more options. Of course, I don't think they even know what they wanna do at this point. I mean, their, the real estate group that we made the original deals with, which I think did have an expectation of keeping the building, all of them are gone. I mean, so we don't even have a good way to get I mean, we're reading the same stuff you're reading. They're cutting expenses, I know that, but I don't know where they'll be in two years. Gotcha. That's helpful. I wanted to turn to your thoughts just on capital allocation for 2023. Obviously, with the announced dividend reduction and share reauthorization program at the end of last quarter. I mean, could we potentially see you being more acquisitive if the right opportunities came about, be they for either office or multi-family? Or do you think it more pragmatic to stick to potential share buybacks? Well, just a general answer, 'cause share buybacks, multi-family, office buildings are all being acquisitive, I guess, acquiring. I think it's a good time to acquire. I think we're well organized to acquire. Certainly, the dividend cut gave us even more firepower to do that. We have unleveraged buildings, cash. I mean, we have a whole list of things. You know, my goal is, you know, not to allow the opportunities in any particular recession, particularly one that's this extreme, to pass without us taking advantage of it. I wanna do that. All right. That's it for me. Thanks for the time. Thanks. The next question is from Alexander Goldfarb with Piper Sandler. Please go ahead. Hey, morning out there. Morning. Two questions. Morning. Two questions. First, just going back to the Barrington Fire, you know, the project. Jordan, you and I discussed this on the last call, just so I understand how it impacts FFO. Is any of that project in the guidance that you laid out for this year, or just based on timing, it's probably not something that would really impact FFO until next year? No, there's some in the FFO guidance for this year. It's hard. Depending on the pace at which, you know, we work things out with the city and with insurance, it's hard to know how much will impact this year. I suspect the largest impact will be next year. Even if everyone says, like, open, do whatever you want, everyone do whatever you want, we have a lot of groundwork to do in terms of installing, you know, core equipment that doesn't, you know, may not impact units as much before we can go in and start impacting the buildings. Okay. It's in guidance, but the bulk of the impact is really a 2024 event. That's the way to understand it? Yeah, I mean, even that, you, yes, that should be true, but this all relies on, like, what kind of deals we make also with insurance and the pace at which we move people out. Those are, like, giant numbers, right? I mean, if we make a deal with insurance vis-à-vis their revenue, that's one thing that maybe you guys would never see an impact. Then, of course, the speed at which we move people out. I don't... If I'm guessing now, yes, 2024. Okay. Makes sense. Second question is, appreciate your comments on the changes from the state level. Always good to hear positive things for landlords. Obviously, L.A. passed their good cause eviction, you know, recently. As you see the groundwork for your potential apartment pipeline in, which I think is mostly L.A. and Santa Monica, net-net between the advantage that the state gave you versus, you know, the negative from, you know, L.A.'s recent, you know, regulation change. Overall, does it change any of your underwriting one way or the other? Does it make it a little tougher, make it a little better? Or is it sort of a wash when you figure those two, policy changes? I mean, I don't like any limits on rent or any of the rest of it. Quite frankly, the good cause eviction stuff, I don't think runs afoul of any of our habits. I mean, someone's less than a month delinquent, we collect the money. I mean, we don't keep. You know? If you're telling me raising rent on someone that's in their unit more than 10%, I mean, anybody, and certainly anybody institutional that's been in the apartment business for a long time is smart enough not to do that anyway. I don't think I'm getting ready to pro forma more than 10% a year rent growth, and I'm trying to figure out if I'm gonna buy something. I mean, I don't think you can. Yeah, I don't like what the city passed. Not sure it's gonna have a big impact on us or any impact, quite frankly. I mention the stuff at the state level because it's like a giant impact now. I think it's. I went from telling you guys it's years to get anything entitled to potentially, if this thing goes right, that we could just kind of go at our own pace. I mean, it's a crazy change. I'm surprised it even passed. Maybe they don't know that they gave you guys a gift. Well, if they had known that, they wouldn't have passed it, 'cause there's no love for developers in Sacramento. That's done. Okay. Well, and God bless. Enjoy it. Thank you. Thank you, Jordan. Thanks. The next question is from Steve Sakwa with Evercore ISI. Please go ahead. Yeah. Thanks. Good morning out there. Jordan, I know that you guys are guiding to sort of average office occupancy, but within that range of 82-84, could you maybe just give us a little color on what you expect for new leasing volumes in 2023? I know the Q4 was probably the lowest quarterly volume on new leasing in about two years. Just any thoughts on the pace of new leasing and the pipeline that you're seeing today? Well, we've really been whipsawed by the changes in people's sort of economic outlook. I mean, I was really surprised going into the fourth quarter that things shifted so quickly as kind of attitudes went towards. I think you saw that in a lot of people, attitudes went towards, we're gonna go into a recession, and how quickly the leasing shifted. You know, one side of absorption and leasing is obviously roll, and you know, we give you that for every quarter, what the roll looks like. The other side has been so sensitive to people's kind of point of view on the economy. I mean, three incredible quarters, and all of a sudden the news turns negative, and we drop off 25%. I mean, that's wild, right? Guessing about what next year's gonna be, we. I mean, I'm feeling a little burned. We didn't try and say, you know, people are gonna regain confidence in the economy and the leasing's gonna pick up again. We also said to ourselves, we're probably kinda where we're gonna be. you know, the fourth quarter's kind of given us an example of where we're gonna be or an idea. I think there will be changes next year. It was a very hard number to put out, quite frankly. Because I mean, even that rough fourth quarter, still a lot of activity, over 700,000 feet. Right. Okay. Stuart, I know you sort of guided broadly to interest expense. I know you have a couple of swaps that are coming up. The debt's not due, but the swaps are burning off, at relatively low rates. I think they're burning off relatively soon, one in March and one in April. Do you have a sense, given where the market is today, on kind of where that debt would reprice today? Well, I'm gonna answer one of these. The debt's not repricing, only the swap's burning off. Yeah. Steve, no, we're not super excited about swapping in the current environment. We think that, you know, when you look at the forward curve, that things are gonna start coming down. We're monitoring the market every day, and when we find the right opportunity, we'll swap. We set up our debt specifically for this, where we have a two-year runway to refinance an asset. You know, we're entering that with these, where we've got 24 months to figure out and replace the loan. All right. Okay. We could just assume that that is April. Go ahead, Peter. Go ahead. Just to be clear, though, we are assuming, this is Peter, that those loans float for, and that's included in our guidance. The same loan, so it's not repricing. We're just doing the same thing you could do, which is you just look at the forward curve on floating rate. We just put that in our model. Yeah. Okay. Thanks. I just wanted to clarify. You're just gonna let them float for the time being, and so they'll just go to the SOFR curve plus their spread. Yeah. I mean, there's a lot of insecurity right now around where rates are going. There's just too big of a margin to be paid in terms of swapping to cover people's kind of conservativeness. I think even though it's painful and expensive for a little bit to be unswapped, I think this is the right thing at least to watch for another little bit of time. Got it. Thanks, guys. All right. The next question is from Camille Bonnel with Bank of America. Please go ahead. Hi. Good morning. Following up on your occupancy outlook from another angle. Relative to the amount of expiries you have coming due this year, the midpoint of your occupancy guidance isn't really implying a steep drop-off, which I assume is partially supported by the leases that have not yet commenced. Just curious, like, what are you seeing on the demand side that gives you comfort here that occupancy doesn't trend below these levels? The demand side is driven by the, you know, it's our quarterly leasing. I think as I mean, we're always guessing a little bit about demand, but I think as we warned you guys going into the fourth quarter during that call, we said, "Hey, wow, we're seeing a real change in the pipeline in terms of leasing." You know, it's never nothing. I mean, there's always a lot of activity, but we're not a company that tracks individual leases. It's everything we do around this issue is, has to do with flow more than to do with an individual deal. As we saw the flow slow down, and as you saw, moderated about, you know, 25%, that was noticeable to us. Now we're looking at the activity, and we're going, "Okay, well, we seem to be at that level at the moment," and we're looking at that, and that's the information we're giving you in this guidance. Okay. More specifically, thank you for the update on Warner Brothers. Are you able to provide any comment or indication on the UCLA lease that's coming due and their likelihood to renew there? Hey, Camille. I think UCLA has, like, 25 or 26 leases with us. They're all different departments at the university, different functions. They don't act in a coordinated manner. We'll literally have quarters where they'll sign a new lease with us and then give back some other space. Those are a bunch of smaller leases. We don't have, you know, specific guidance on any of them, but they're not, it's not, it doesn't act like a large tenant. Okay. Thank you. The next question is from Nick Yulico with Scotiabank. Please go ahead. Thanks. First question is just in terms of, you know, various reports, everything we hear about, you know, the downtown L.A. office market being very weak, and, you know, firms considering moving out of that area. I guess I'm just wondering, you know, if you're seeing any impact to your portfolio, realizing that's maybe more of a larger tenant issue, but, you know, law firms or others looking to, let's say, move back to Century City, Beverly Hills, or, you know, any benefit you're seeing from a leasing demand standpoint from that? Wow, Nick, I mean, you know the issue incredibly well for being a guy in New York. Yes, people seem to be kind of finishing moving out. It's larger tenants, and they're finishing moving out or they're moving out of downtown. I think the primary beneficiary of that move to date has been Century City. There might be a little bit of activity in Beverly Hills, but, you know, the hope would be that we could take some of that also up in Westwood and Century City have been the two markets that have, like, catered to those larger institutional type tenants. Century City, I mean, has been an overwhelmingly happy beneficiary of that move. I can't, you know, we don't... I mean, I don't even know that we have space in the portfolio that could accommodate some of those more high-profile moves that have been in the press recently. That's helpful. Thanks. Then I guess just the second question is going back to the buyback. Jordan, maybe just talk a little bit about how the board is thinking about deploying that. I mean, it doesn't look like there's anything assumed in the guidance or really anything that was done so far, unless I'm missing something. You know, how you're thinking about that, you know, are you waiting to find, you know, a JV sale or some source of funds that would go towards that buyback? Presumably you think the stock is cheap because you put the buyback in place, so any thoughts on that would be helpful. Well, the buyback is one of a number of options. They all use some type of capital. I, you know, have access to capital, so that's probably not really that much of an issue. We just have to look at a variety of things. You know, it's on the list. I think while it's compelling, I mean, we obviously would rather lean towards making some great real estate deals because that, you know, that, you know, sticks with the you know, that adds great piece of real estate forever, which is always very valuable. I, you know, it's hard to ignore the stock buy. Everything's on the list. I mean, that's where we're at. All right. Thanks. Appreciate it. Bye. The next question is from John Kim with BMO. Please go ahead. Thank you. I wanted to get your updated views on resi conversion opportunities, if there are any assets or maybe some markets contemplating offering incentives that would make it more economically viable for you to pursue, you know, the change of use of a building. Yeah. It's funny because, you know, residential conversion is a basically a matter of looking at the spread between office and resi rent, and then you can get down to the particulars of a single building. You would say, "Well, God, resi rents are way up, and office rents are suffering." We're not in markets where they're suffering extraordinarily. Maybe there could be something, but it's not very obvious, and it's not something where you can walk into a market the way we did when we were looking in Hawaii and just say, "This is obvious. We should do this with one of the buildings." It's gonna be a little more. It's much more nuanced than that, but, you know, it's great that we had that experience and a great job was done. Huge pat on the back to that team, both the construction, the lease up, and everything of the 1132 Bishop building. That gives us a lot of confidence around that area. You know, you need to convince yourself or be convinced that the economics are right and the building's right. It's not so simple like the Hawaii deal. I was thinking more like a market like Warner Center, which you've mentioned in the past was, perhaps a non-core market for you, and it sits today at 89% occupancy. Yeah. Yeah. And although Warner Center, the rents there, I mean, the market there has not been destroyed. A matter of fact, there's so much new development in that area. I probably put on my list of, you know, a good, you know, starting to show a whole another round of great promise. Remember, there are buildings being pulled out of that market right now for other reasons, right? I mean, one guy for the Rams just bought a site that had 500,000 of building. That's not gonna be an office anymore. He's building, he's building practice fields, right? That's out of the mix. I think there's some buildings there that are gonna be out of the mix, frankly, you might end up in a market that's back to where it was before the LNR project was built, which in any normal economy, that was one of the best markets in L.A. It was only until LNR added 25%, 30% to the, to the size of the market that, you know, that market started suffering. If we do this reversal, everything else about that market, if you were just, sort of evaluating it for office or residential investment, would be a big plus. The most residential is being built there, and the rents are held extremely well, and all those projects are leased up. Then, in terms of amenity base, they've seen one of the more dramatic conversions. Their big mall has been broken up with two pieces of the mall that was there, having been sold to Kroenke, as well as this other site that I was talking about. one mall, that piece I think, is gonna run two pieces, two other full-size blocks that he's building this Rams practice field and a kind of sports center, right? For visitors and stuff. There's like a lot of amenities, a lot of housing all going in at once. It's a pretty good bet. My second question is a follow-up to Michael's question on retained cash flow from your dividend cut and the use of proceeds. You talked about buyback as an opportunity, multifamily, but you didn't mention office, and I was wondering if you- I did. You know. I didn't not mention office. Whether it be office, residential, stock, I mean, all of those are opportunities. I think the opportunity, I think there's actually a reasonable chance the opportunity could be better in office than residential. I guess it's just a requirement. I definitely put office on the list. Maybe residential, definitely office, remember, residential's held up better. Stock, everything is on the list. Got it. Thanks for clarifying. All right. The next question is from Dylan Burzinski with Green Street. Please go ahead. Thanks for taking the question. I guess just sort of on that acquisitions piece, you know, when you look at it or in your discussions with JV partners, are they interested in deploying capital in today's environment? Yes, they are. We've been in contact with all of our partners and explained the situation and, you know, explained to them what's going on on our leasing pipeline and why we're bullish on L.A., and we consistently get a positive response that says, "Great. If you find an interesting opportunity, please show it to us. I think they get confidence in the fact that we put a lot of money into the deals, and so they go, "Well, if you like it, we like it," basically. That's helpful. Thanks. That's it for me. All right. The next question is from Tayo Okusanya with Credit Suisse. Please go ahead. Yes. Good afternoon. Thank you for the earlier comments about Warner Brothers. Just curious with some of the other larger leases that are expiring starting in 2023 into 2024, like UCLA, and also William Morris, kind of some initial thoughts on those? Yeah, Tayo, I You know, we really only have two big leases in the portfolio. It's Warner Bros. and then William Morris that you mentioned, you know, that act like large tenants. The rest of that list is multiple leases. I already spoke about UCLA. I think they have over 20 leases with us. They don't act as a single entity or unit. It's Warner Bros. Jordan already kind of gave you his thoughts on prospects for that. William Morris has a bunch of years left, so I don't think, you know, there's anything to talk about with them for a while. Everything else, like I said, all the other tenants on the list act like smaller tenants. They aren't super material. It's a bunch of leases. Gotcha. Okay. That's helpful. Also from a leasing perspective, again, with your tenants, anything changing in terms of. You know, type of terms they're looking for. Is it taking longer for them to make decisions? I mean, can you just kind of talk a little bit about just kind of some of what you're seeing in that respect? I think the notable change that we already talked about was that the average lease size for the Q4 results that we just published was down. It was smaller tenants that really held up our activity in Q4. We saw larger tenants not as active. Not surprising given kind of what's going on with the economy. Our tenants tend to, you know, generally zero in on a five-year lease because they're smaller and most of them are personally guaranteeing the leases. They don't tend to feel comfortable going longer than that. Usually what happens in a cycle is when the economy's down, they're nervous, and they tend to go a little shorter term. And then when the economy's doing well and they're feeling good about their prospects, they're a little comfortable going a little longer. We're almost always still zeroing in around that five-year average, and that's still what we saw last quarter. Got you. As you mentioned, since it's smaller tenants, they're using more of your pre-built product, or are they actually building out space on their own? We, you know, we always prefer to build space for them. We're very good at it. We do a lot of pre-built suites. We call it our Spec Suite program. We'll go in and make a suite totally move-in ready. We've had a lot of success with that product, so that's something we continue to ramp up on. But yeah, these are small tenants. They don't have real estate departments. As much as we can help them with the process, make it easy for them, and get the space built for them, that's a much better turnout. We do that as much as possible, and the tenants appreciate it. They also don't have large TI demands. Our TI costs are substantially lower than when you're leasing to large tenants. Got it. Thank you very much. Okay. Again, if you have a question, please press star then one. The next question is from Dave Rodgers with Baird. Please go ahead. Good morning out there. Maybe one question for me, just in terms of the evictions, the tenants that haven't been paying. I know last quarter you were down to the last handful, maybe 100,000 sq ft or so of tenants that you were still working through. Can you just give us an update on where you are there, how much of an impact you're anticipating maybe to occupancy, and were most of those blend and extends kind of done by the end of the year? Just so we can kind of think about the run rate for that group of tenants. Thanks. That group is done. It's in the numbers. It's dealt with. There's no more... The people that weren't paying are out, the other people are paying. There's money still owed to us by some people that are paying, we work out deals that they pay over time. There's money still owed to us by some people that are out that we're still pursuing. That we're still pursuing, yeah. That we're still pursuing collection from. Yeah. But in terms of occupancy, you know, you had this, you know, strange impact on occupancy of people that were in occupancy, but they weren't paying. That was weird, right? You're used to if they're in, they're paying. That's what COVID and the moratoriums did, and that's resolved. For office. The negatives are now in... That's just all for office. In residential, it'll be resolved by the end of March. In the occupancy number. Okay. Yeah. All right. Thank you. All righty. The next question is a follow-up from Blaine Heck with Wells Fargo. Please go ahead. Great. Thanks. Jordan, just circling back to the state legislation that opened up residential zoning in certain areas in L.A. I guess, do you think that change is going to trigger a lot of additional supply in the market? Have you seen any projects announced as a direct result of that legislation? Is it, you know, just too early to tell? I, you know, I hate to say that I don't think it's gonna open a lot of new supply simply because they sort of, you know, we happen to be a developer that happens to own a lot of land in those areas. I don't think a lot, you know, for infill-type product, we're rare from that perspective. They, you know, they did make it cheaper, right? If you just went, "I like that rule, now I'm gonna go buy a piece of land because I know about that rule." I don't think that they did anything to make that land any cheaper. Probably made it more expensive. They just kind of enhanced the value of our land because so we can now kind of develop it as residential without having going through as many hurdles. It, at least in the areas where we own all this property, I don't I mean, I'd say this to them, I don't want them to repeal it, but I don't think it really did anything other than for someone like us that happen to have so many sites. It didn't do much to boost the production of apartments. All right. That's helpful. Last one for me. There were some reports that came out earlier this year that Regal Cinemas was looking to close the Sherman Oaks location. They're, I think, leasing from you. Can you just comment on that situation, the potential earnings impact and any plans you may have for that space? Well, I don't wanna talk about individual tenants. It's true. We saw that too. I don't know in the end whether that's what happens there or not, but I don't wanna... I mean, we don't talk about individual tenants. All right. Fair enough. Thank you, guys. The next question is from Rich Anderson with SMBC Nikko. Please go ahead. Hey. Thanks. Good morning out there. You know, I was intrigued by your comment in the call here, Jordan, where you thought that there was more opportunity. I think I heard you right, more opportunity office than there was in residential. First of all, did I catch that comment correctly? Yes. The question is why? I mean, like, you know, when we're in a world where hybrid office is sort of the thing, it's a not a need-based situation, but a want-based in some cases, whereas residential is quite different. You have a very unique residential platform. What is it that's making it more interesting on the office side, from an investment standpoint, from your line of sight? Well, I'll tell you. We had this one paragraph in my prepared remarks. It was at the end of my prepared remarks. Ted called it the overworked paragraph, which he said he overworked some more because I just wanted to get it right so much. Basically, what that paragraph said, which was trying to give people a feel for why I'm so positive on office in our markets, is while we have gone into, you know, for real estate, at least, a recessionary economy. The things that you just mentioned and the things that I'll reiterate for you, which is whether it be work from home or people not being as, you know, so interested in urban office or commutes or public transit, all those things that seem to be additional obstacles for people that own office buildings across the markets. I just don't see them being here. They're not here. When COVID finally lightened up a year ago, you saw our leasing booming. I mean, we were in full recovery, and I was extremely optimistic. Not optimistic because I'm just an optimistic guy. Optimistic 'cause we had, like, some of our strongest leasing quarters of our company's history, and we have multiple of them in a row, in new and in total. When you go, "That's happening," you certainly post the time that these discussions about these other items are there. I go, "Okay, that gives me a lot of confidence." That's number one. Put that as a giant number one, though, because I don't think that those are issues our markets are dealing with. Add to that for number two, which is we're one of the only big AA markets that has true diversity around the tenant base, right? We're not just tech, just entertainment, or just finance like New York or whatever, just cars like Detroit. Whatever you wanna talk about, we really have a lot of industries that drive demand here. Then add as the last thing is that all through this pandemic period and plus plus and probably our whole careers for me and Ken, we've been strengthening our operating platform. Now our operating platform, I mean, to say it has no equal is an understatement. I mean, it's really an understatement. I mean, in our market, in our market. I just feel like that platform, the diversity of tenants, the fact that these larger issues that I'm not sure they're even gonna be correct for other markets, but I know 100% they're not correct right now for our market, okay? That those issues are living, that's creating probably a buying opportunity against a backdrop where I am totally confident long term in the performance of our office portfolio for the reasons I just said. That's why right now, apartments, which people still have a lot of confidence around apartments, maybe they're not gonna be discounted as much, but there's a lot less confidence around office. I suppose with the confidence I just told you I have, which is that over reworked paragraph that I had at the end of my speech, makes me go, that's probably where there's gonna be more opportunities. Okay. Kind of related to that, you know, you had, you know, a couple or three quarters in 2022 where things were moving along nicely, and then you had this hiccup in the 4th quarter, and that experience kind of did a lot to inform you about 2023 guidance and this flat occupancy scenario and so on. That seems like a really kind of sensitive topic in the sense that it could turn back on pretty quickly, right? Like, if the Fed gets it right and- It could. It turned off quickly. That's right. That's what I tried to say when I was asked about our occupancy guidance. That's my point. Maybe, you know, the very fact that it moves so quickly in one direction is your confidence behind office, I guess, and I guess I'm kind of parroting what you just said. Setting flat occupancy is the absolute probably worst case scenario. More likely, you probably see occupancy lift as the year goes on as long as, you know, we kind of get the macro right and we don't have a really disruptive, you know, economic scenario from Fed activity and so on. Is that the way you're thinking about it? Setting a floor? Well, no, one thing. Look, real estate's not designed to be judged quarter-to-quarter. I know that's the world we've bought into, and that's what we're doing. That's what people probably more care about. As I just said, which you just said, so we both said, so we're both in heated agreement. On the long-term, I'm very optimistic about our market. I'm not so optimistic if you're bringing your point of view back to the quarter-to-quarter view to where the economy is going and that the fix is gonna be so quick that we're like, "Okay, we're done," and, you know, wipe off the hands and move off the table. We have to see how this year plays out and probably a lot of our guidance. Our guidance is not trying to give you messaging around what we, you know, think of the long-term prospects for our market or our ability to lease up our buildings. It's giving you messaging around We don't have a good idea to how much the Fed's gonna keep increasing rates and keep tamping down. I actually think the fact that the employment numbers came in so strong and all the rest of that probably means the Fed's gonna beat on us even harder. The beating from the Fed is certainly having a much bigger impact on real estate than some other industries. It's, you know, maybe it's also beating down on tech, but somebody's doing a bunch of hiring and growing somewhere out there and therefore that's probably gonna give them confidence to beat on us even more. That's what concerns me. You're ready to start acquiring, if you can, sooner rather than later before there is any sort of recovery when entering more competition and so on, right? Like, you wanna get moving before all that starts to happen again. Well, I mean, when we do something, it has much more to do with the opportunity that's presented than my timeline in my mind. I mean, I need a good opportunity to be presented. Look, everything I'm say first of all, it's on a public call, and secondly, it's no secret that people don't own office building. If you own an office building in West L.A., you're not sitting there going, "I'm dead forever." You know, 'cause you're seeing activity. We need it. You know, we need the right opportunity to come up. Yeah. Okay, fair enough. Thanks very much. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Jordan Kaplan for any closing remarks. Thank you for joining us, and we look forward to our call a quarter from now. Bye-bye. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.