Douglas Emmett DEI Q4 2025 Earnings Transcript

Image source: The Motley Fool.

Date

Feb. 11, 2026, 2 p.m. ET

Call participants

• Chief Executive Officer — Jordan L. Kaplan
• Chief Investment Officer — Kevin Crummy
• President — Stuart J. McElhinney
• Chief Financial Officer — Peter A. Seymour

Takeaways

• Net office absorption -- Achieved 100,000 square feet of positive net office absorption, attributed to "good new office demand and very high retention," with "modest concessions and stable market rents."
• Multifamily occupancy and NOI -- Multifamily properties reached full occupancy, with same property cash NOI up nearly 5%, reflecting "strong demand and increasing rents" concentrated in the high-end West Side of Los Angeles.
• Debt transactions -- Executed almost $2 billion in debt transactions at "competitive rates," including refinancing over $1.66 billion of loans and reducing JV debt by $60 million; $565 million remaining fixed at 4.79% through November 2027 and maturing August 2028.
• Development pipeline -- Commenced construction for the conversion of 10900 Wilshire into a high-end mixed-use residential and office building (targeting 200 apartments and an additional 123 units), as well as started redevelopment of Landmark Residences (seven twelve-unit buildings) and Studio Plaza’s transition to multi-tenant use.
• Guidance for 2026 -- Projected net income per diluted share between negative $0.20 and negative $0.14, and FFO per fully diluted share expected to be $1.39 to $1.45, with "increased interest expense" cited as the primary driver.
• Leasing metrics -- Signed 896 office leases totaling 3.4 million square feet for the year, with 224 leases covering 906,000 square feet in Q4 (274,000 square feet new leases, 632,000 square feet renewals, 70% retention rate).
• Same property cash NOI -- Decreased 1.4% for the quarter, due mainly to "higher office operating expenses," partly offset by multifamily growth.
• Office leasing costs -- Averaged $5.76 per square foot per year for the quarter, "well below" peer group averages.
• Revenue -- Increased 1.8% to $249 million, with growth in both office and multifamily revenues.
• G&A expense -- Approximately 4.9% of revenue, described as "low," with advocacy-related costs expected to continue in election years, yet still remain below sector norms.
• Apartment development pipeline -- Management cited a pipeline of up to 9,000 apartment units for future development, "primarily on either vacant land or parking garages," currently advancing planning on two new Westside projects adding 500 to 1,000 units.
• Joint venture equity -- Acquisition of 10900 Wilshire "substantially oversubscribed" among JV partners, enabling acquisitions "without stretching the balance sheet."
• Interest rate hedging -- For the Landmark Residences construction loan ($375 million facility, $49.5 million drawn at year end, SOFR +245bps maturing December 2030), entered accreting swaps to fix interest at 5.8% on 75% of outstanding balance until January 2030.
• Leasing spread dynamics -- Average "annual fixed rent bumps" of 3%-5% per year "more than offset" the impact of starting cash rent 10% below expiring leases' ending cash rents; straight-line lease value increased 2% in Q4.
• Office demand diversification -- Leading sources of tenant demand included financial services, legal, health services, education, and real estate, with no single segment accounting for more than 20%.
• Residential project yields -- Management stated projected stabilized development yields "nothing is going to be below an eight" cap rate, referencing deals on company-owned land not including land cost.

Need a quote from a Motley Fool analyst? Email pr@fool.com

Risks

• FFO and AFFO declines -- FFO decreased to $0.35 per share, and AFFO decreased to $53 million due to "increased interest expense, and lower interest income," despite multifamily outperformance.
• 2026 earnings guidance -- Projected net income per diluted share between negative $0.20 and negative $0.14, and FFO per share below recent historical levels, "primarily reflects the impact of increased interest expense," with management explicitly not forecasting occupancy growth.
• Same property cash NOI pressure -- Same property cash NOI declined 1.4% in the quarter, attributed to "higher office operating expenses."
• Limited capacity for share buybacks -- CEO Kaplan stated, "I am not working to increase our leverage much," and "buying stock, which effectively I am doing with leverage and it is like two different ways I am I am I am increasing our our loan to value."

Summary

Douglas Emmett (NYSE:DEI) reported a modest revenue increase alongside full occupancy and nearly 5% NOI growth in its core multifamily segment, while office operations achieved 100,000 square feet of net positive absorption on stable leasing economics. Strategic debt management included $2 billion of competitive refinancing activity—substantially extending the maturity profile—and direct commitments to cap interest expense via swaps. Management outlines a disciplined capital allocation stance, favoring joint venture-driven acquisitions and residential development over share repurchases, amid explicit caution for 2026 earnings due to higher interest expense and no assumed occupancy gains. Forward guidance reflects muted expectations for office market recovery and identifies increased G&A costs tied to political advocacy, but identifies continued development and acquisition opportunities in markets with "significant discounts to long-term values."

• Management expects average new residential developments to yield at least an 8% cap rate (excluding land cost), with two new Westside projects comprising up to 1,000 future units already in early planning.
• Recent leasing activity was driven by diverse demand, where no single industry exceeded 20% of new tenant business in the quarter, signaling broad market engagement.
• Future cash-releasing spread positivity for office assets is unlikely without broader market rent increases, despite contractual 3%-5% annual bumps.
• CEO Kaplan reiterated avoidance of materially increasing leverage and described the joint venture model as "the best way to go" for accretive acquisitions that preserve balance sheet flexibility.
• Studio Plaza’s redevelopment completed major common area upgrades and continues tenant suite lease-up, but NOI contribution scope for 2026 remains undisclosed.

Industry glossary

• NOI (Net Operating Income): A property's rental income after operating expenses, excluding debt service, depreciation, and capital expenditures, crucial for evaluating property performance.
• FFO (Funds From Operations): A REIT-specific earnings metric representing net income, excluding depreciation and amortization, and gains/losses from property sales, commonly used to assess cash generation.
• AFFO (Adjusted Funds From Operations): An adjusted version of FFO subtracting recurring capital expenditures and straight-line rent adjustments, intended to represent sustainable cash distributions.
• Straight-line rent: The accounting method that averages rental income over the lease term, smoothing rent escalations to present a more even revenue profile.
• Cap rate (Capitalization Rate): The ratio of a property's net operating income to its acquisition cost or value, used to estimate expected investment returns.
• SOFR (Secured Overnight Financing Rate): A USD overnight interest rate benchmark, replacing LIBOR for floating-rate debt and derivatives.

Full Conference Call Transcript

Jordan Kaplan: Good morning and thank you for joining us. During the fourth quarter, we had good new office demand and very high retention. As a result, we achieved 100,000 square feet of net positive office absorption while maintaining modest concessions and stable market rents. On the multifamily side, our strong demand and increasing rents again led to full occupancy and an increase in same property cash NOI of almost 5% compared to the prior year. You may recall that our Los Angeles residential assets are concentrated in the very high-end West Side. I am also proud of the fact that by aggressively focusing on revenue growth and expense control, we achieved positive same property cash NOI for the year.

For the full year of 2025, we also made substantial progress on several key capital market objectives. We acquired 10900 Wilshire and are close to beginning construction to convert it into a high-end mixed-use residential and office building. We strengthened our relationships with our joint venture partners and as a result, we were substantially oversubscribed for our 10900 Wilshire acquisition. We started construction at the Landmark Residences. Our seven twelve-unit redevelopment in Brentwood, in the Burbank Media District, we converted Studio Plaza into a multitenant office building and leasing is progressing nicely. And we successfully executed almost $2 billion in debt transactions at competitive rates both extending our maturity profile and further fortifying our balance sheet.

Looking ahead, we have a straightforward strategic plan for 2026. Our primary focus remains office leasing, including retenanting Studio Plaza. Our first quarter always has somewhat higher seasonal move-outs, but our overall lease expirations during 2026 are relatively low. We will continue to refinance and extend maturities at advantageous rates. Construction of our new high-end residential units at the Landmark Residences and 10900 Wilshire will, of course, be a key focus. We have begun planning additional residential development sites on our land in the West Side. And we believe we can make more very high-quality office acquisitions in our markets where current valuations offer significant discounts to long-term values. 2026 will surely present new challenges and opportunities.

We feel well-positioned for both. I remain confident in the long-term fundamentals of our markets, the high quality of our portfolio and balance sheet, and our incredibly strong operating team, which has carried us through many other challenging periods. With that, I will turn the call over to Kevin.

Kevin Crummy: Thanks, Jordan, and good morning. We are making progress with our development portfolio. At 10900 Wilshire and Westwood, we expect to commence construction in 2026 to convert the existing office tower into 200 apartments and to develop an additional 123 units and a new building at the site. Our very successful phased Honolulu conversion project demonstrated that full-floor office tenants and apartments coexist quite well. At Studio Plaza in Burbank, we have completed extensive common area upgrades to transition this asset into a premier multi-tenant property. We are well into lease-up construction fully underway on the new tenant suites. In Brentwood, we have started construction on the transformative redevelopment of seven twelve-unit landmark residences.

After refinancing over $1.66 billion of loans during 2025, we had another productive quarter. In November, one of our consolidated JVs reduced its outstanding debt by $60 million and effectively fixed the interest on the remaining $565 million at 4.79% through November 2027. That loan matures in August 2028. In December, we closed a non-recourse first trust deed construction loan which will provide up to $375 million for the redevelopment of our landmark residences project in Brentwood. As of December 31, we had drawn $49.5 million against this facility. The loan matures in December 2030 with interest at SOFR plus 245 basis points.

We entered into accreting swaps that mature in January 2030 to effectively fix the interest rate at 5.8% per annum and 75% of the increasing estimated balance outstanding under this loan. Looking ahead, we are well-positioned to address our remaining 2026 loan maturities and capitalize on attractive acquisitions during this stage of the cycle. With that, I will turn the call over to Stuart.

Stuart McElhinney: Thanks, Kevin. Good morning, everyone. For all of 2025, we signed 896 office leases totaling 3.4 million square feet. During the fourth quarter, we signed 224 office leases, covering 906,000 square feet, including 274,000 square feet of new leases and 632,000 square feet of renewal leases. Office tenant demand continues to be spread across the multiple diversified tenant industries in our markets. During the fourth quarter, financial services, legal, health services, education, and real estate led the way. But no one segment provided more than 20% of tenant demand. As Jordan said, with the combination of good new demand and high retention, we achieved 104,000 square feet of positive net absorption for the quarter.

We continue to sign higher value new leases, increasing the straight-line value over the life of leases executed in the quarter by 2%. As our 3% to 5% annual fixed rent bumps more than offset the impact of beginning cash rent that was 10% lower than the prior lease's ending cash rent. At an average of only $5.76 per square foot per year, our office leasing costs during the fourth quarter remained well below the average of other office REITs in our benchmark group. Our residential portfolio, with cash same property NOI up 5% compared to last year's fourth quarter, continues to enjoy strong demand and remains essentially fully leased.

With that, I will turn the call over to Peter to discuss our results.

Peter Seymour: Thanks, Stuart. Good morning, everyone. Compared to 2024, revenue increased 1.8% to $249 million reflecting increases in both office and multifamily revenues. FFO decreased to $0.35 per share and AFFO decreased to $53 million reflecting increased interest expense, and lower interest income partly offset by strong multifamily performance. Same property cash NOI decreased 1.4% for the quarter largely as a result of higher office operating expenses, offset by multifamily NOI growth. At approximately 4.9% of revenue, our G&A remains low. Turning to guidance, we expect our 2026 net income per common share diluted to be between negative $0.20 and negative $0.14 and our FFO per fully diluted share to be between $1.39 and $1.45.

Our guidance primarily reflects the impact of increased interest expense. We have not assumed occupancy growth despite our fourth quarter results, though we will be watching it closely. For information on assumptions underlying our guidance, please refer to the schedule in the earnings package. As usual, our guidance does not assume the impact of future property acquisitions or dispositions, common stock sales or repurchases, financings, property damage insurance recoveries, impairment charges, or other possible capital markets activities. I will now turn the call over to the operator so we can take your questions.

Operator: Thank you. We will now begin the question and answer session. Our first question today comes from Alexander Goldfarb with Piper Sandler. Please go ahead.

Alexander Goldfarb: Jordan, hey. How are you? I guess maybe we will just go to the stock first. You spoke, I think Kevin spoke about doing acquisitions, but obviously, the stock has languished on our numbers, trading around a nine cap. How do you as you I know that you want to assemble more assets, but at the same time, the stock just seems to be incredibly attractive versus buying office directly. So given the persistent depressed value that the stock is trading, are you more inclined to dial back from acquisitions and focus more on stock buybacks? Or is your view that you still want to grow assets still there?

Jordan Kaplan: Okay. So 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.

We have you know, we know we have leasing, we have debt that we have to be, you know, very careful and monitor. It is in a good place. We have a lot of we have a lot of room on it, but I do not want to let it get away. Times like this and when it can get away from you. Right? We have our development projects that have to get finished. Right? And then we have our kind of growth platform that we wanted. Build, right? So we are trying to watch all of them and moderate all of them.

But for new stuff, the growth platform in buying is very forgiving because we are able to make deals with our joint venture partners. We have done a lot of work to make sure that we have them there and we are able to get control of great properties at great prices without stretching the balance sheet very hard because we just take a piece of those deals. And so for us now, that is the best that is the best way to go.

And I am just not comfortable doing this kind of double whammy regardless of how great the price is buying stock, which effectively I am doing with leverage and it is like two different ways I am I am I am increasing our loan to value.

Alexander Goldfarb: Okay. And then the second question is, the positive absorption, clearly a good thing. You have had fits and starts before. Are you seeing a fundamental shift in market demand? Or was it just some year-end activity that drove the absorption? Just trying to understand you know, if LA is finally healing or if there is still a long way to go. Obviously, your guidance suggests know, some caution for, for the upcoming year.

Jordan Kaplan: Well, I mean, one point does not create a line. But I mean, I am I am I am obviously hopeful 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. But, I mean, I feel very good about going on and I feel great about the way the last quarter rolled out. And my hopes for this quarter.

Alexander Goldfarb: Thank you.

Operator: Thank you. And our next question comes from Andrew Sakwa at Evercore. Please go ahead.

Andrew Sakwa: Yes, good morning out there. Jordan, maybe just a follow-up on Alex's question on kind of leasing. We are obviously going through a bunch of kind of larger mergers within kind of the media business. And, I realize the large tenants per se are not your kind of focal point for leasing, but there are obviously derivatives that kind of come off of those larger companies and probably would be in your portfolio. So I guess what concerns, if any, do you have about kind of industry consolidation within kind of the media space right now?

Jordan Kaplan: Well, I am not concerned that the consolidation will impact us. Impact us if you are saying concerns with respect to Douglas Emmett, Inc. I do think the consolidation will help to kind of rejuvenate the making of movies and all of that. But because I think the guys that are buying those other platforms are not buying them to shrink them. But whether it be Netflix or Ellison's I do not see the tenants we have probably at this time are growing and making money because of consolidation because they are all the service providers of those guys and the lawyers and all the rest of it. I do not see them going down.

Now, of course, at the same time, we feel pretty good with how things are going at Studio Plaza. So maybe it is having a positive impact for us out there. I do not know. But we are certainly still leasing there.

Andrew Sakwa: Okay. And the second question, you guess last quarter, this quarter you have disclosed you have about 9,000 apartment units that you could develop, I think, primarily on either vacant land or parking garages. It really does not disrupt much of the income-producing assets that you have. I am just curious how quickly are you able to kind of put those in the service? Are most of those kind of entitled and ready to go? And it is just a question of, you know, designing buildings or what do you think the rollout of that pipeline looks like? And what are the yields that you can get on those assets if you were to start them today?

Jordan Kaplan: So I actually mentioned in the prepared remarks, there was one little short sentence. That 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 is now moving through the system. And that will represent pretty that is another pretty good amount of units, similar to what we have got going on right now. So that has been started with the architects. That is on both on Westside sites. I am excited about both of those because funded this part is fun. Every other part is not fun after this. But those have gotten going.

So to answer your question directly, we are already moving to another, I know, do not know, 500 or 1,000 units. And what was the second part of your question? What kind of yields would we get? 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 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 mean and I hope better.

And historically has been better. But I nothing is going to be below an eight. Of course, it is not including the cost of the land and you know, so I am not saying something that is so spectacular.

Andrew Sakwa: Thank you.

Operator: Alright. Thank you. Our next question today comes from Nick Yulico with Scotiabank. Please go ahead.

Nick Yulico: Hi, Nick. Thanks. Good morning. Good morning, everyone. Hi, Jordan. Ken, I guess, first off, I just had a question on the guidance. Can you explain in terms of the straight-line rent this year is higher than it has been in prior years, kind of what is driving that? I was not sure if it was all related to Studio Plaza. And if you could also just tell us, you know, sort of what is assumed in terms of NOI benefit for Studio Plaza this year? If any?

Peter Seymour: Yes. Hi, Nick, it is Peter. So yes, our guidance for straight-line is higher this year. It is an of what we think it is going to be. Obviously, a lot goes into that Studio Plaza is a piece of it. You will see the last year straight line was higher than the year before. So you know, it reflects the existing leases that we have. It reflects the new leasing that we do and the occupancy that takes place. And we are not ready at this point to give a breakout on NOI on Studio Plaza.

Nick Yulico: Okay. And then the second question is, in terms of leasing and just thinking about kind of the bogey you guys have to hit each quarter. I mean, it does feel like it is sort of in that 250,000 square feet of new leasing which you did got done above that. This quarter to kind of drive absorption versus your expiration. Does that Is that kind of the right way to think about it in terms of the math of how you could keep up positive net is hitting that type of new leasing number each quarter? Thanks.

Stuart McElhinney: Hey Nick, it is Stuart. 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 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.

Nick Yulico: Okay. Thanks.

Operator: Thank you. And our next question today comes from Blaine Heck at Wells Fargo. Please go ahead.

Blaine Heck: Great, thanks. Hoping you could talk about UCLA. They obviously are still your largest expiration this year and have additional space expiring through 2033. Jordan, last quarter, you talked about some issues with government funding impacting them, but it looks like their total lease with you increased this quarter. So maybe talk about what happened there. And whether you have any updated color to provide on your ability to retain them as their leases expire?

Jordan Kaplan: 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 they are just many independent divisions that could be or not be leasing. I think that in general, I do not see them substantially trying to shrink anymore. But it like I said, to make a to make a global statement about the universe and their desire for outside office space. Is a huge mistake. I mean, you gotta look at whether individually the medical center or individually.

What is happening in the other departments that ex MBA program or whatever that had space scattered around or admin divisions. But, you know, I think have something you want to say? Yeah. Blade, I was just gonna mention that the, you know, the expirations this year, that is five lease So they are not large leases. I mean, they are around 12,000 feet on average. They are not very big. So some might go out. Got it. But some might pay, some might expand. You just do not Okay.

Blaine Heck: No, that is fair. That is helpful color. Second, I was hoping you could just provide a little color on any initiatives you guys are pursuing in 2026. I guess, what specific regulations are you kind of targeting in that process? And how is that impacting G and A in 'twenty six?

Jordan Kaplan: So over the last I do not know, six years, on the even years, which is when elections are, we have seen politics having a meaningful impact on the operation of the company, and we realized we have to get engaged in that. And so when there are things going on that can impact Douglas Emmett, Inc., we have to get engaged in it, and we are. And, therefore, we are running into these additional costs that run through G and A. In each of these periods. I hope that will I hope that will wane over time, but certainly, politics are a hot topic right now, and it impacts real estate in California. And in our city. Yes.

It is Peter. I would also just point out, 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.

Blaine Heck: Got it. That is helpful. Thanks, guys.

Operator: And our next question today comes from Seth Bergey with Citi. Please go ahead.

Seth Bergey: Hey, thanks for taking my question. I just wanted to a little bit more on the additional residential development sites that you mentioned in your prepared remarks. What is kind of the size and scope of those projects? And how do you think about funding needs for those?

Jordan Kaplan: They range from you know, 300 to 500 units for each of them, maybe as low as two fifty, but really more of 300 to 500. That, you might be able to build more, but probably kind of the type of sizing we would build. We typically fund all the early stages and then we look at the cost to do the construction.

And then at the time we are doing that, we gotta look at you know, our equity our cash positions and the rest of things regarding the company and you know, we can bring in it is very those are the type of deals that very easy understates how easy it is to bring in partners on those. On those deals. But, also, they are pretty high yielding deals. It is because remember I was asked before, and I said, I think it is like an ACAP and put a plus sign on that. So some and because it does not take a huge amount of capital out of the gate. Right?

Because when you are doing construction, you are leaking you are leaking equity in over a couple of years as you are doing the work. Most many times, we can fund it ourselves, but then, of course, could be a time when we have to bring in a partner.

Seth Bergey: Thanks. That is helpful. And then I guess just on the leasing, I think you kind of said the pipeline size is kind of similar to last quarter. Are you seeing any of that change between the mix of new versus kind of renewal leases? And then just broadly, kind of changes that you are seeing with tenant behavior, whether continuing to look for additional space or anything to call out with different industry groups there?

Stuart McElhinney: Yeah. Hey, Seth. Yeah. 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 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.

Seth Bergey: Great. Thanks.

Operator: Thank you. And our next question today comes from Rich Anderson at Cantor Fitzgerald. Please go ahead.

Rich Anderson: So I know you do not want to divulge too much on the process at Studio Plaza only to say that it is progressing nicely. But 450,000 square feet, obviously going multi-tenant, what do you do you think that the average tenant size at the end of the day will be still larger than your typical for the company? Or do you think it can get you know, into that sort of 5,000 square foot average range? I am just wondering what the end tenant might look like at the facility.

Jordan Kaplan: It is it is larger. My guess is we end up with, an average size of full floor. Something and maybe even bigger.

Rich Anderson: Was that equate to?

Jordan Kaplan: Not so far. They are, like, 25,000 feet. Okay. I think those floors are really bigger than that. But, yeah, we will it will start out larger. And then over time probably shrink, but it is going to start out much larger than our typical building. I do not really have a couple floors that Ken's broken up to smaller tenants. I do not think we have a lot of that.

Rich Anderson: Yeah. Okay. And then second question, sort of absent from the conversation a little bit lately has been Honolulu. And, you know, just because of everything that is going on, LA. I am curious, how you are feeling about the market today. You have got Bishop Dunn obviously. Is there anything on the priority list in Honolulu? Is it kind of running an autopilot right now? I am just curious if you have any comment at all on the market. As it stands today.

Jordan Kaplan: 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 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 the next big move there very likely is, you know, we had started and even during COVID, Kevin 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 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 they we have significant development sites there.

And so the next step as, like, cost and everything lines up there, 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 that downtown needs to help. Downtown is doing extremely well. 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 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.

Rich Anderson: Okay, great. And if I could just sneak on one quick one. Last quarter, asked about Olympics and whether there is any sort of sort of, you know, forces that were positively. And you pointed out the Olympic Village at UCLA and some other stuff going on in Santa Monica. Is there any update to is it just too short of a time, three months previous Or is there any update to anything going on that is sort of tethered to the Olympics that you are getting yourselves involved in?

Jordan Kaplan: Well, we are seeing I have been into meetings recently There is a lot of tension now that is being focused on preparing the village for the Olympics. I have been in some meetings for it. And people are definitely now taking seriously the time we have left and the stuff that needs to be done. And I see him working on it. But it is and it is coming out of the council. It is coming out of the UCLA. It is coming out of private ownership in the village. It everybody is having meetings and focused on it.

Rich Anderson: Okay. Great. Thanks.

Operator: And our next question today comes from Janet Gahlin with Bank of America. Please go ahead.

Janet Gahlin: Congrats on a nice fourth quarter. Thinking about your 2026 cash same store NOI guidance, what are the assumptions for kind of cash re-leasing spreads? Is there a range there? You think we remain in this kind of low to mid $40 per square foot and if you can maybe give a little color around which submarkets you think that may start to inflect positive?

Stuart McElhinney: Yeah. I think the I think you should assume the leasing spreads stay we have been at a pretty consistent range over the last couple of years. Our contractual rent bumps built into all our leases, we get between 3-5% increase every year. On all basically, all our office leases. So our straight-line spreads have stayed positive. The overall value of the leases has been increasing. That has been nice. That increase in cash every year is really nice to get. It makes that cash lease releasing spread metric really hard to go positive. Unless your market rents are really moving up at a good clip. But I would expect those metrics to stay pretty stable.

As far as submarkets, you know, I do not want to make any predictions about submarkets and which ones in inflect. I think we have got a lot of leasing to do with the exception of Hawaii kind of across the board. And all our markets had good positive momentum in Q4. So we will hope that continues.

Janet Gahlin: Thank you. And then just following up on the residential development. When will this kind of first units at Landmark start And then maybe when is 10900 Wilshire expected to start delivering units?

Jordan Kaplan: 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.

Janet Gahlin: Thank you.

Operator: Thank you. And our next question comes from Upal Rana with KeyBanc Capital Markets. Please go ahead.

Upal Rana: Great. Thank you. Jordan, going back to the first question on acquisitions, versus buybacks, it sounds like you prefer acquisitions at the moment. Maybe you could talk a little bit the transaction market in LA and what kind of opportunities you are seeing out there and what kind of opportunities maybe would get you to transact today?

Jordan Kaplan: 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 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 I mentioned it with respect to our capital 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 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 today. But I am telling you I think they are very good deals for companies like ours to run 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.

Upal Rana: Okay. Great. That was helpful. And then could you spend some time talking about where LA stands in terms of the anti-rent gouging ordinance that was passed last year after the fires. What that could mean for future multifamily rent growth the company this year?

Jordan Kaplan: That was very odd. I mean, I do not where we stand, we actually expires again in like three months or something. Is that Yeah. I do not think it has been super impactful I do not think it is material, you know, for what we are doing. For our existing tenants, you know, the increases, we were not generally trying to go up huge amounts on we were not trying to go up that amount. And you know, you saw our multifamily growth. It has been fantastic in 2025. But the anti-gouging thing really has not had a material impact. I mean, we are calling fantastic fives and sevens and stuff. That thing kicks in at, like, 10.

I Yeah. It I it is it to me, it is it is set the worst form of just, like, political grandstanding. But it I am not sure what it is doing to actually whether it is having any impact on anyone. And by the way, the people I do not want to I do not want to spend time on it. It is not doing anything.

Upal Rana: Okay. Great. Thank you.

Jordan Kaplan: All right.

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

Dylan Brzezinski: Good afternoon, guys. Thanks for taking the question. Maybe just touching on sort of or I guess could you touch on any differences in-depth of demand across the Westside versus the Valley? Are you guys seeing any sort of outsized strength in the West Side? I know you can kinda just talk about expectations for whether or not you see the same timeline of recovery for those areas within the portfolio.

Stuart McElhinney: 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 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 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.

Dylan Brzezinski: That is it for me. Thanks.

Operator: Thank you. And our next question today comes from John Kim with BMO Capital Markets. Please go ahead.

John Kim: Thank you. I wanted to ask about how you see the occupancy trajectory during the year. Looking at your lease expirations, it is heavily weighted towards the fourth quarter. So I am wondering if you envision occupancy kind of picking up during the year until you hit that headwind.

Stuart McElhinney: 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 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.

John Kim: Okay. And just wanted to ask on your views, Jordan, on the Hollywood Union negotiations, which have started up again beginning with SAG AFTRA. Has this impacted leasing demand at all in your portfolio or for an asset like Stadium Plaza? When I look at your 2023 leasing, that was sort of a light year and that is the year of the big Hollywood strikes. So I am just wondering if view that to be a potential issue this year.

Jordan Kaplan: 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.

John Kim: But people you talk to, business leaders, are they more concerned of a Hollywood strike? I do not know. I actually I am surrounded by entertainment people. I had none of them have brought come to me and going, said this is the disaster in the making. So I do not know if that is just that units have gotten used to doing. I do not I really do not have an opinion on it. It is it has not been a subject even with the people in the entertainment business that I am talking to.

John Kim: Interesting. Okay. Thank you.

Operator: Thanks. Thank you. And that concludes our question and answer session. I would like to turn the conference back over to the company for any closing remarks.

Jordan Kaplan: Well, thank you all for joining us, and I am sure we will be seeing many of you during the quarter. Goodbye.

Operator: Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.