Douglas Emmett, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Q4 Performance: Good new office demand and high retention, achieving 100,000 square feet of net positive office absorption. Multifamily had full occupancy and 5%+ same property cash NOI Y/Y.
• 2025 Capital Market Progress: Acquired 10900 Wilshire, close to starting construction on mixed-use residential and office building; strengthened joint venture relationships; started Landmark Residences construction; converted Studio Plaza to multitenant office with leasing progressing; executed almost $2 billion in debt transactions.
• 2026 Plan: Primary focus on office leasing (retenanting Studio Plaza); continue refinancing and extending maturities; construction of Landmark Residences and 10900 Wilshire; plan additional residential development sites on West Side; seek high-quality office acquisitions where valuations offer discounts to long-term values.
• Development Portfolio: 10900 Wilshire expected to commence construction in 2026; Studio Plaza common area upgrades complete with lease-up construction underway; Brentwood redevelopment started; Honolulu conversion project successful demonstrating coexistence of office and apartments.

Segment Performance

• Office: In the fourth quarter, achieved 100,000 square feet of net positive office absorption. Signed 224 office leases covering 906,000 square feet in Q4 (274,000 square feet new leases, 632,000 square feet renewal leases). Office leasing costs were $5.76 per square foot per year, well below benchmark. For the full year 2025, signed 896 office leases totaling 3.4 million square feet.
• Multifamily: Strong demand led to full occupancy, with same property cash NOI up almost 5% compared to the prior year. For Q4, same property cash NOI decreased 1.4% due to higher office operating expenses, but multifamily NOI grew. The residential portfolio remains essentially fully leased.

Guidance

• 2026 net income per common share diluted expected to be between negative $0.20 and negative $0.14; FFO per fully diluted share expected to be between $1.39 and $1.45, primarily reflecting increased interest expense.
• No assumption of occupancy growth, but will monitor it closely. Guidance does not assume impact of future property acquisitions/dispositions, common stock sales/repurchases, financings, etc.

Risks

• Political and regulatory risks impacting operations, particularly in California.
• Potential impact of industry consolidation on tenants, though not seen as a negative for Douglas Emmett.
• Risks related to execution of development projects and debt management, including leverage and maturity profile.

Question and Answer

Q: Alexander Goldfarb asked about stock vs acquisitions/buybacks. Jordan Kaplan responded that not inclined to increase leverage via buybacks, prefers acquisitions with joint ventures as it allows getting good properties at good prices without stretching balance sheet.

A: Jordan Kaplan said, 'When you talk about stock buyback at a time like this, one of the problems for it, which I like, I mean, I understand what you are saying, because it does seem like quite an opportunity. Is that for the company to buy back stock, mathematically and every other way, it means I am increasing our leverage. And I am just con I could I will say right now for everybody, I am not working to increase our leverage much other than where I know it would really be need to be judiciously used to protect the company...' Q: Alexander Goldfarb asked about market demand shift. Jordan Kaplan responded that pipeline is strong, hopeful for recovery but needs multiple quarters to confirm solid path.

A: Jordan Kaplan said, 'One point does not create a line. But but but I mean, I am I I am I am obviously hopeful that that is the case. Our pipeline today is equally as strong as it was last quarter. Now we need to you know, perform well for many quarters in a row for us to say that we are, like, solidly on the path to recovery...' Q: Andrew Sakwa asked about UCLA leasing and industry consolidation. Jordan Kaplan said UCLA leases are independent, consolidation not impacting negatively.

A: Jordan Kaplan said, 'When you look at UCLA, I know you are looking at, like, that you know, largest tenant thing and all the leases together. They really do operate as completely separate groups. Leasing or not leasing based on the departmental or whether it be the medical center or whatever's needs And and they are just just many independent divisions that could be or not be leasing. I I think that in general, I do not see them substantially trying to shrink anymore...' Q: Andrew Sakwa asked about residential development and yields. Jordan Kaplan said planning started on additional sites, yields expected to be high, no below 8% cap rate.

A: Jordan Kaplan said, 'We have already started on planning, architectural planning on two more projects. And we got, you know, kind of first rounds on that, and that that will represent pretty that is another pretty good amount of units, similar to what we have got going on right now... I do not think Yes. What kind of yields on cost? Yeah. So I do not like, obviously, we own the land, and you stated correctly that it is not very disruptive. Most of these sites are not very disruptive to the income-producing properties that are already on that land. And and I just cannot imagine we are going to do anything that is being be less than, like, you know, when finished in a cap rate. I I mean and and I hope better. And historically has been better. But I nothing is going to be below an eight...' Q: Nick Yulico asked about guidance and leasing math. Stuart McElhinney responded on retention rate and new vs renewal leasing.

A: Stuart McElhinney said, 'I think better than a number like $2.50 or 300 look at the percentage of leasing we are doing new versus renewal. We know pretty reliably that our retention rate is around 70%. So if we are doing 30% or more of our leasing as new leasing, when we look at those quarters, those are generally positive quarters. That was true this quarter. It was It about 30% new leasing overall. Versus new new versus renewal. So sometimes we have had quarters that are positive less than two fifty and sometimes maybe do more than $250,000 and it is still a negative quarter. But I think that kind of 30% is more reliable...' Q: Blaine Heck asked about UCLA and 2026 initiatives. Jordan Kaplan and Peter Seymour responded on UCLA leases and G&A.

A: Jordan Kaplan said, 'So when you look at UCLA, I know you are looking at, like, that you know, largest tenant thing and all the leases together. They really do operate as completely separate groups. Leasing or not leasing based on the departmental or whether it be the medical center or whatever's needs And and they are just just many independent divisions that could be or not be leasing. I I think that in general, I do not see them substantially trying to shrink anymore...' Peter Seymour said, 'We have historically had lower G and A than our office peers and we do expect that to continue even with a little bit of room for advocacy spending...' Q: Seth Bergey asked about residential development and leasing mix. Stuart McElhinney responded on renewal rates and industry trends.

A: Stuart McElhinney said, 'When we are talking about the pipeline, that is kind of only talking about new. Our renewal our renewals, like I said, very reliably gonna be that 70% range. Last quarter was a little higher, which was good. But typically, it is right around 70%. So the pipeline that Jordan referred to is on the new side. You asked about industries. Or or you asked about expansions and contractions. Last quarter, our expansions outpaced our contractions, which look at that every quarter. It is generally been more expansions than contractions the last few quarters, which is also good to see...' Q: Rich Anderson asked about Studio Plaza tenants and Honolulu market. Jordan Kaplan responded on Studio Plaza tenant size and Honolulu development.

A: Jordan Kaplan said, 'It is it is larger. My guess is we end up with, an average size of full floor. Something and maybe even bigger... I have first of all, I have never met over one million feet to rent on autopilot, which Okay. About ten if we have Honolulu. Not to mention the do we have? 2,000 or 3,000 apartment units on So it is 70, 70, 80 acres. But but so it is definitely not on autopilot. If you are talking about, like, next capital step, next steps in the capital side, not to I mean, yeah. I mean, in a sense, you gotta love autopilot because it means you are leased to the nineties, which is a it is a bright star in the portfolio. But but but the next big move there very likely is, you know, we had started and even during COVID, Kevin on on Zoom spoke to the city council. And got some special entitlements for us on with respect to residential towers You know, we have a twelve twelve acre trying to sit downtown. We have 30 acres that we have built 500 units on in that Red Hill area next to Tripler Hospital. And then we also have 30 acres out in the rural Kania area. And so so they we have significant development sites there. And so the next step as, like, cost and everything lines up there, and and, frankly, capacity and attention and all the rest, We need to move and start, you know, building out those additional units that work extremely well. They are putting the light rail in. It is very close to our projects. So there really will be a good way to get back, not not that downtown needs to help. Downtown is doing extremely well. But but, you these projects are well suited to get, like, get back and forth to the where the density of jobs are. So, I mean, it just great because we we spent so many years explaining to you guys. We thought how why I was gonna come back. And so it is I do not seem like feel like I got my due to ask the question the same amount of times now that Hawaii is doing so well. But that those are the next steps on capital...' Q: Janet Gahlin asked about residential development timelines. Jordan Kaplan responded on Landmark Residences and 10900 Wilshire timelines.

A: Jordan Kaplan said, 'Got a couple years on Landmark LA. It is years out construction started. But it is you know, we are looking out you know, two, three, plus years. And at $10,900, it is a different type of conversion. So it is both building a building in the back and then converting floors, which of course, we, at the same time, are also willing to have office tenants here. So the first move that is going probably happen there is the amenities We try and get them in, and then we just start moving through full vacant floors building out and building out the apartments. It historically, once we get them built out, which has construction, expect to have start this year. We do it, the single floors tend to lease very fast. So my guess is my hope is that, you know, we will get those forward. We are going to start that later this year, and those floors will be ready and start leasing. I am not you will see much of an impact of revenue actually as compared to our whole company in 2026, but, you know, pretty hopeful for 2027...' Q: Upal Rana asked about acquisitions and LA market. Jordan Kaplan responded on LA acquisition opportunities.

A: Jordan Kaplan said, 'Well, I thought the way that Stuart drafted the first round of our script, the way he said it, that was such a good way to say it that we probably repeated it three or four times But the long and short of it is, can never argue that value today, oh, yeah, value the value we are getting today is less than the value today. Value today is the value itself for. That is the value today. But but what he said was, which is how we feel is I think that the transactions we are doing today and that we can buy today will be at, you know, are very good the pricing is very good compared to where we think the long-term value is. For these properties. And that is a reason and it is always hard in markets like this to do this. That is a reason and and I mentioned it with respect to our our our script, the way he said it, that was such a good way to say it that we probably repeated it three or four times But the long and short of it is, can never argue that value today, oh, yeah, value the value we are getting today is less than the value today. Value today is the value itself for. That is the value today. But but what he said was, which is how we feel is I think that the transactions we are doing today and that we can buy today will be at, you know, are very good the pricing is very good compared to where we think the long-term value is. For these properties. And that is a reason and it is always hard in markets like this to do this. That is a reason and and I mentioned it with respect to our our our capital our our our equity partners and the time we are spending with them. That is a reason to work double hard and make sure that even though you have a huge focus on whether it be refinancing your debt, huge focus, obviously, on leasing, You cannot take your eye off the ball of an opportunity like this. So we are working very hard to make those happen. I I am extremely confident that we will deliver more on the acquisition front to you in 2026. Of deals done that we really feel are good deals. I am not telling you they are off market. To to today. But I am telling you I think they are very good deals for companies like ours to run over over a period of time. And you will get an opportunity to see those. We are we are going to make those deals. I do not know how many, but we will make some...' Q: Dylan Brzezinski asked about Westside vs Valley demand. Stuart McElhinney responded on demand across markets.

A: Stuart McElhinney said, 'Yeah. Well, I will say that we did have positive the positive absorption we saw was a was across the board. The only market that we actually had a dip a little bit in Q4 was Hawaii, which is our which is our strongest market and our pipeline there is very good. But every other market we are in in LA moved up in the fourth quarter, so great to see that demand kind of across the board. In past cycles, we have had markets that historically were, you know, Santa Monica and Beverly Hills for a long time were our strongest markets, suspect. For you know, they have got unique aspects that drove certain tenants there. To those those markets. I suspect that those markets over the long term will continue to be some of the best But, you know, our markets were in our core markets for all the reasons we like, the supply constraints, proximity to expensive housing, amenities in these areas. So I expect them all to perform well. Over the long term...' Q: John Kim asked about occupancy trajectory and Hollywood strikes. Jordan Kaplan responded on occupancy seasonality and Hollywood strikes not impacting.

A: Stuart McElhinney said, 'John, we mentioned a little bit on the call the seasonality of move-outs. If for whatever reason more than their fair share of leases expire twelve-thirty-one, So those move-outs tend to impact the the first quarter. But those expirations are they are listed in Q4 at the twelve-thirty-one expiration. So that is that is typical seasonality for us. The overall move-outs for the year are below kind of average, the rollouts. I should say expirations, not move-outs. So the expirations relative to kind of historical averages are low. Which has us optimistic. And we do expect a little bit of seasonality always to happen for those twelve thirty-one expirations...' Jordan Kaplan said, 'I am sure for some people it will be an issue. For us, I do not view it as having any issue for us at all. We I think we barely have any even exposure, and I have not I other than knowing it is happening, I have not been following it. And believe me, I follow a lot of other things I am worried about, but that is not on the list...'