Douglas Emmett Inc (DEI) Q3 2024 Earnings Call Highlights: Navigating Challenges with Strategic ...

In This Article:

  • FFO (Funds From Operations): $0.43 per share, decreased by 3.8%.

  • Revenue: Decreased by 1.8% due to lower office occupancy.

  • AFFO (Adjusted Funds From Operations): Increased slightly to $68.8 million.

  • Same-Property Cash NOI (Net Operating Income): Decreased by 5.7% due to lower office NOI.

  • Portfolio Leased Rate: Improved by 50 basis points to 82%.

  • Residential Portfolio Occupancy: Remains at 99.1%.

  • Guidance for Full-Year FFO: Increased by $0.04 to between $1.69 and $1.73 per share.

  • G&A Expenses: At 4% of revenue, remains low relative to benchmark group.

Release Date: November 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Douglas Emmett Inc (NYSE:DEI) leased over 1 million square feet of office space in the third quarter, including 350,000 square feet of new leases.

  • The company achieved positive absorption of approximately 90,000 square feet, improving the portfolio leased rate by 50 basis points to 82%.

  • Douglas Emmett Inc (NYSE:DEI) raised its full-year guidance for FFO by $0.04, reflecting improved expectations for the fourth quarter.

  • The residential portfolio remains nearly fully leased at 99.1%, with rents continuing to rise.

  • The company is seeing encouraging signs of increased tenant confidence and interest in its repositioning projects, such as Studio Plaza.

Negative Points

  • Revenue decreased by 1.8% compared to the third quarter of 2023, primarily due to lower office occupancy.

  • FFO decreased by 3.8% to $0.43 per share, mainly due to lower office NOI.

  • Same-property cash NOI decreased by 5.7% due to lower office NOI, partially offset by multi-family growth.

  • There will be a drop in occupancy next quarter when Studio Plaza vacates, impacting short-term results.

  • The company faces challenges with large tenant move-outs, such as Warner Bros, which will affect occupancy in the fourth quarter.

Q & A Highlights

Q: You continue to carry a large cash balance despite paying $34 million to extend the maturity on one of your loans this quarter. Can you talk about uses for that cash? Are you expecting any more principal paydowns on upcoming maturities? A: Jordan Kaplan, President and CEO: The cash is primarily there to ensure liquidity and stability for the company. It may be used for debt purposes, new acquisitions, and investments. We also use it for slower-paced activities like construction and property repositioning.

Q: Tenant recoveries increased significantly this quarter relative to the first half of the year. Was there anything one-time in nature in those recoveries past just normal seasonality? A: Peter Seymour, CFO: It's mostly normal seasonality. Tenant recoveries vary from quarter to quarter based on billing estimates and reconciliations, so it tends not to be smooth over the year.

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