Q2 2020 Douglas Emmett Inc Earnings Call

Ladies and gentlemen, thank you for standing by welcome to Douglas and its quarterly earnings call today's call is being recorded at this time. All participants are in a listen-only month 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 Stewart-Haas vice president of investor relations for Douglas Emmett, please go ahead thank you joining us today on the call our president and CEO wage are our CFO. This call is being webcast live from our website and will be available for replay during the next ninety 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 were 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 something to be incorrect there for 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 SEC filings, which can be found in the investor relations section of our website. When were you reached the question and answer portion and consideration of others. Please limit yourself to one question and one follow-up home now turn the call over to Jordan.

Good morning, everyone. I hope you're staying healthy.

Or rent collections continue to be negatively impacted by the pandemic and our markets very tennis oriented lease enforcement moratoriums, which are considerably out of sync with the other Gateway markets.

However, our second quarter collections or somewhat better than the numbers we previously disclosed for April as of today. We have collected 91% of our second quarter of things including 96% from residential 93% from office and 35% from retail. These numbers are based on our current tenants prepend em rent obligations at the end of the second quarter pursuant you Gap do you wrote off certain receivables that reduced our second quarter ffo by about $0.04 per share most of which related to the retail and Hospitality tenants in our portfolio. We also wrote off all non-cash straight-line balances wage to those tenants which further reduced ffo by six cents per share. Of course any collections from those receivables will be included in future quarters ffo.

The pandemic also reduced second quarter ffo by about $0.05 per share from lower parking income.

Over all the cash and non-cash write-offs and the lower parking income related to the this crisis reduced our ffo for the second quarter by about $0.15 a month to $0.41 per share.

As the commercial moratoriums are amended and expire we should see improved collections during past downturns free from government intervention or actual tenants fault have been just under 2%

Despite the current uncertainties driven by the pandemic during the quarter. We executed 125 office leases for over six hundred fifty thousand square feet long only a notch behind q1 and with longer average lease terms. This is a remarkable accomplishment and a testament to our investment in virtual tours and remote leasing package. She we don't know exactly how the present challenges will impact our local economy, but having managed through three prior recessions our strategy and platform are built to withstand downturns. We own a dominant share of the best buildings in the best markets in Los Angeles.

I'm like some other markets we do not fade significant potential Supply overhang from new buildings.

We believe that our small tent and focused diversifies our risk and prior downturns the impact of personal guarantees and the small business owners commitment to their business page kept our default very low. We have a robust vertically-integrated operating platform and you have no debt maturities before 2023.

Our buildings have remained open and available to our tenants throughout the pandemic fortunately. We do not have the significant mass transit parking or vertical Transportation concerns faith. In other markets. We are proud of the customer service. Our team has provided and the safety protocols. We have implemented in response to this crisis.

With that I will turn the call over to Kevin.

Thanks, Jordan, and good morning. Everyone. I'm in development front construction is continuing on our two large multifamily development projects demand for the new apartments that are converging project Hulu has exceeded expectations by quarter end. We had completed the first ninety eight units and two days. We have least 61 units that are pro forma rental rates month. We began construction for our next phase which involves four floors and is comprised of 76 units and building amenities delivery of those units is expected to begin later this year.

Construction is progressing steadily at our 34 story 376 unit apartment Tower in Brentwood. This project will be the first residential high-rise west of the 405 and more than four years. The development includes a one acre Park fronted Wilshire Boulevard. We still expect to deliver our first units and twenty twenty-two

It's 15 20 20. We refinanced a loan for one of our Consolidated joint ventures. The noon secured non-recourse 450 million dollar interest only loan will mature in 8027 and bears the interest at Libor Plus 1.35%

We entered in the interest rate swaps it effectively fix the rate at 2.26% following the expiration of the current swaps an average fixed interest rate of 2.6% per annum through April 2025.

We use part of the proceeds to pay off a $400 loan secured by the same properties that was scheduled to mature in July 2024.

Your volume is significantly below normal, but going forward. We hope to see more offerings as deferred transactions. Come to Market. We in our joint venture partners of ample liquidity to capitalize on opportunities that match our investment criteria.

I will now turn the call over to Stuart.

Thanks, Kevin. Good morning. Everyone in Q2. We signed a hundred twenty-five office leases covering 651 thousand square feet including a hundred fifty-one thousand square feet of new leases leasing spreads for the second quarter from 19.7% for straight-line rent roll up and 6.7% for cash roll up. Our ten or attention was in line with our pre covid expectations home though, the decline in our office occupancy during the quarter was expected leasing volume would it would have to improve significantly to recover that occupancy this year?

On the multi-family side several of our Residential Properties experienced higher than usual move out at the start of the pandemic these move out came from a variety of factors, including the closing of nearby universities and Military deployments in Hawaii as a result of same property comparison reflects lower than usual occupancy during the quarter.

Fortunately, very strong leasing moved our residential portfolio back to 98.7% least like quarter in I'll now turn the call over to Peter to discuss our results.

Thanks. Good morning, everyone compared to a year ago in the second quarter of 2020 ffo declined 21.7% 84.4 million or $41 per share. This decline was a result of the Ten Cent code real good cash and non-cash write-offs as well as the five cent reduction and parking income that Jordan discussed. I declined 15.7% to 80.6 million dollars.

Same property cash in Hawaii declined by 9.4% same property operating expense Savings of 12.9% partly offset the cash write-offs and the decline and parking Revenue.

That only 4.7% of revenues our G&A for the second quarter remains. Well below the out of our Benchmark group.

Given the continuing uncertainties around the pandemic and local government ordinances. We are not providing guidance this quarter. I can say that although it's still early in the process.

so far

Q3 appears to be consistent with the trends in Q2

as moratoriums expire the expect collections to improve and to collect some of the past due amounts, but it's too soon to tell we expect the parking will stay at current levels until there is a change in utilization.

Finally a Stuart mentioned to recover occupancy later this year leasing volume would have to improve significantly.

I will now turn the call over to the operator so we can take a questions.

Thank you. We will now begin the question-and-answer session to ask a question. You may press star that one on your telephone keypad. If you're using a speaker phone, please pick up your home before pressing the keys to withdraw your question, please press * then two in consideration of other participants. Please limit your queries to one question and one follow-up at this time. We will pause momentarily to assemble our roster.

And the first question will come from Alexander Goldfarb with Piper Sandler, please go ahead.

Hey morning out there. So hey more Jordan. So two questions. The first is can you just give a little bit more perspective on the tenants and the rental options and we hear a lot that particular as you mentioned. Jordan is really is really an outlier as far as the eviction moratorium and you know that their number of people, you know, basically ghosting than Lord. So, you know across your office retail and residential. Can you give us a sense for how many people are basically ghosting you versus how many of the tenants are actually engaged in trying to do lease modification discussions.

Okay, so that's a good question. That's, so let's back up to just trying to understand the profile of tennis. So the so one thing we did is, you know, we gave you the 91% collections 9% not collected. So when you look at that, you set you would say all right, 9% of 10 inch in some way during the second quarter didn't pay us. We try to be really clear on that number cuz we used the rent at the tenant would have had to pay prior to covid-19 happening. So that's very clean number right out of that 9% We had will call 4% of that. We're tenants off amazingly aren't paying us but have such strong balance sheets such strong collateral that it makes it.

It would not be reasonable to write them off right then. What are we left with? We're left with 5% that last 5% out of that last 5% off. We have said you you guys we think that in past recessions what are real defaults have been have been less than 2% So that's that's just say that out of that last five percent. We think that sixty percent of those tenants.

And I think better are going to pay now when you look at them you go. All right, nine percent. I believe that 9% is being driven by these moratoriums wage absolutely penalty-free do not pay your rent regardless of who you are a type of moratorium. So if you're you know, you could be a 2000 hedge fund you still has nothing to do with means you still don't have to pay your rent. And when it is time to start paying you still don't have any penalties or any fees you get a free ride. That's very hard to collect against that now I will say the cities are starting to make some changes so we might see some improvements but at the same time as the governor, California keeps moving the orange the cities make adjustments to that. So it's it's it's hard to predict going forward, but we went to a lot of effort and what we prepared to try and make it clear where we wage.

Today does that answer it seem like there's a lot of questions around that you you and I wanted to really kind of hit that straight onto that answer that question.

A bit more without you know, there was made it sounds really like it's not so much the office maybe a little bit but it sounds like it'd be fair to say that the retail tenants are trying to work with you and that may be more that ghosting as in the you know, in a little bit of office and in residential that fair to think about it that way, you know, the numbers we gave you is 93% off 96% of retail and it was only and the residential and what was the refill 35% retail so, you know retail is mostly not paying and we tried not included in there when we said Hospitality. We've tried to conclude we have some what are the theaters that we in screening room and screening rooms and stuff that aren't paying to the aren't just movie theaters. So we wanted to get that in there some of the live venue stuff. But you know, we we gave you that out of the numbers that we aren't collecting when you shift over you go. Now how much done collected a we said wow.

That that's actually they actually turn out to be a majority of that number still. It's very disheartening looking at a number of that office tenants that aren't paying us if you were to look at their profiles. Okay, so I guess that leads to the second question even active and vocal and trying to you know, get the local regulations to change last time. You said you mentioned specifically about you know, getting office out of there and having more money and more times for like retail which actually meet that how are the conversations going with either Garcetti or the local officials or Newsome around trying to modify these addictions to really get it back to the people who need it versus giving a carte blanche.

So city of l a I'm not going to go after any individual politicians, but city of l a very tough very tough to get them to listen to us at all. And it's off of councilmembers, uh, and and Garcetti and getting them to pass out and do something to stop what they put in motion a very tough when you go to the cities like Beverly Hills or Santa Monica. I mean, they they want to do the right thing but figuring out what from their point of view the right things not that easy Santa Monica has wage for the most part pulled commercial office out they they still have residential and and and they still have small retail in commercial office is just coming out now like this month, so we'll see if there's some impact from that in September cuz this is just it's just ended this month. Beverly Hills had also followed suit with Santa Monica job.

but then when

And the governor extended the the Statewide agency order, right? The Statewide emergency order when the governor extended it Beverly Hills took that extension to say we should extend our order so they did so there's would have expired but they've now extended for compassion for another couple of months. Hawaii has generally done what I think most of the most of these have done it which is they just stopped evictions. And the rest of it is up to them, you know, negotiations between the landlords and tenants and there are collections have been better and we've been able to work on deals with tenants and that's that's worked out a lot better off here. It's very hard to work on deals with tenants because unilaterally they don't have to pay their rent without penalty. So until that's all it's going to be hard to make a bilateral field.

Okay. Thank you Jordan.

All right.

And our next question comes from Steve sakwa with evercore, please go ahead. Thanks. Good morning. George has interesting to see that you guys actually had a you know, a decent amount of new leasing activity. I know it's lower than normal. But you know given what we've seen from some others, you know, your number was a bit more encouraging. Can you maybe just talk about the dynamic and and the leasing investment kind of what you're hearing from kind of the smaller tenants and maybe what the pipeline looks like today for the back half of the Earth.

Yeah, so I love our operation. I love whatever operations are do it. So they when we hit this they went pretty quick and started really pressing harder on the virtual side DocuSign all the stuff allows people to lease space right off. I I have to say when we finish the quarter. I'm watching this all quarter and I saw that we had done a 125 lease transactions, even my job fixed could bounce off the floor. Now that that that's that's not an anecdotal number $125. That means the system that got put in place during that quarter literally was was was ramping up and getting working. So from that perspective if you said to me what have I seen this quarter and what have I seen in my life so far that's made me the happiest. It is the further and further refinement of the backbone of our leasing operations and the fact that they were able to do that many dead.

Now look at the same time.

We're about we did about six hundred fifty thousand feet. You would have expected us to do more higher number 750. You said 7:35 would be more typical and most of that is a fact we did about half of the new leasing you would ever would have otherwise thought you know, we would do in a normal time, but the depressive side of that is that we did a full 50% a new leasing compare to a normal time and digital a lot of renewals. So I feel look at the the pipeline is certainly slower, but I feel great about how leasing has been able to adapt to that and really Drive transactions now, we'll see how we do in the next quarter. It's very hard to predict right now. It's even harder to predict with the kind of up down. You know, we had totally stay at home. Then we have lighten up and start going in and now then we went back to stay at home and maybe now we're getting some news of lighten up again quite frankly at least in the areas. Where in New Jersey

so I don't know how that

Unpack the next couple of quarters, but certainly I'm very happy about the fact that we were able to knock out so many transactions.

Okay, and I guess the second question. I realize it's still sort of early and there's probably not a lot that shake and lose but just anything on the transaction side that maybe is getting a bit more interesting any kind of distress in the system that would allow you and your partners to take advantage of some investment opportunities.

Hey Steve, it's Kevin. I'll take that it's it's still slow a lot got put off by the pandemic but we're just starting wage get some in bounds. And so it's a type of thing where a lot of people deferred their transactions and wanted to wait and see what happens. And so I would expect over the next couple of months. That will be seeing some things pop out whether or not they meet our investment criteria or not. I'm not sure we don't have a lot of assets where people levered up. And so I think it's more about as I said last call discretionary sellers. They can kind of tired of having to manage steer this that might take something out the market and you know a.m. And our partners have ample liquidity and for things that that we really like. We're ready to pounce.

You know next question will come from Craig mailman with keybanc capital markets, please go ahead. Hey guys, maybe just Fallen onto the the investment a little bit you guys have off in the past and pretty opportunistic with BuyBacks. Are are you at the level where that starts to make sense for investment opportunities, or do you want to keep kind of the powder dry?

Well, we want we definitely want to buy. All right. So the question is if there are opportunities that we're in our wheelhouse the right stuff is stuff, you know, we typically I would buy it and then go to the second thing are we actually doing our own Outreach trying to find stuff that answers even yes. So we are working that Avenue quite hard and and you know, there's a variety of transactions that are super appealing right now. Not that they're very plentiful but one of them is certainly Acquisitions. We believe in the Market's long-term you've heard about, you know, you've already heard from me that I believe in the tenant-based. I actually think our tenant base has a better a better track record. And in the end of the day regardless of the moratoriums will be better at paying long-term as as a more times roll roll off our default will be even lower than most. But with that said there's also

Refinancing which we're trying to keep an eye on that waiting for those Banks to open.

And you know, we're continuing on our two big development projects and they're moving a little moving along. Well, I know Kevin and his prepared remarks gave you some information on the lease. We're doing that in Hawaii. We're we're we're moving forward with another three floors there. And the last thing is putting money into repositioning on the repositioning. We're kind of watching and seeing whether we still think there's a return there we all I mean we have Capital so we you know, we don't we don't want to waste an opportunity to use it if a good opportunity comes up.

Okay, and you know you brought pre-positioning is kind of the two hundred million of spending you guys have talked about over the last couple of quarters. I mean, how should we think about the the probability of life that kind of being viable here in the next year or two as we emerge from from covid-19? Well out of that, you know, there's over a hundred of it that comes out of just developing the two buildings writing a new Equity that goes in and so and then you had repositioning to new acquisitions really the number. I mean two hundred million miles in a normal time. I would like to see us put out more than that, Um do I think that new investment we could hit a wrong rate of two hundred million probably just with the construction if we got lucky over here in about one or two things came up. We would probably have that number. But as I said, I would have to do better than that.

Like, you know, we're getting like inquiries like little like, you know, if this came out would you be interested nobody's coming out and running a new bid on Thursday and that you know, we would say, okay this deals in the market and then maybe just real quick one the 13% expense savings this quarter how much that was r&m versus kind of wage lower utilities. Just trying to figure out the kind of the what may, in the next couple of quarters that they've just been deferred a little bit.

I don't think the expense savings came from any source of deferrals. I think they're spread across all the categories and and you know, I think some of the janitorial services in there not not a whole lot on Thursday. Yeah. Yeah. I think it I think the expense savings comes from acting quickly when buildings aren't as fully occupied to not spend spend the money that gets spent on a full billing. Thank you.

The next question will be from Rich Anderson with SMBC, please go ahead. Thanks. Good morning out there. Hopefully this isn't a question. I want to make sure I understood what you said. Jordan said for Thursday the nine percent that a strong balance sheets in great collateral you it you thin thin said just write them off. I assume you meant that they would I didn't. Yeah, I we didn't write them all down. Okay, I just didn't hear you correctly. Okay. Yeah, we didn't write them off. So what happens is you have 9% didn't pay start out going down 9% They didn't pay us for three months, right? But then you look ten by ten you go. Well, wait a minute, you know, maybe you're talking about telecom companies didn't pay you go there obviously going to pay off and we have others like that. So, you know we have like I said, we might have hedge funds we have, uh, you know accountants lawyers, they might have a floor two floors down.

Pay okay. We know they're going to

Okay, so there's a group that you have to sit there and go. Okay. We're you know modern day language is write them off. If you were to go on a few years ago. We would have said Reserve against them. Okay, but sounds more like what it feels to me, but now it's called right off. So you you don't write those people off. Now you got 5% left over and we wrote them all off or I would say reserve them.

And then I broke that down and I said that's why we keep saying to you when we looking back in history we go look are real default rate and then we left and 2% So you take that that five and you goes through that 5 or we going to collect it. I think we are and better right? That's 60% of that number. So that's why we keep getting back to this number that we keep telling you guys long-term and it's unfortunate with what the city needs done. But long-term, we don't expect our defaults to be to exceed 2% Can you talk about the range of time more times will expire I know perhaps they just kind of keep getting re you know reset particularly in the city, but I'm just curious if you can give me your expectation of how the Cadence by which moratoriums will expire over the next, you know, whatever period of time

Well, I don't have any experience. Nobody does in this I think what's going to need to happen is the governor is going to have to do something to modify as emergency vet cuz he cuz there's too many cities that are just certainly L A. I think it'd be very tough mentally suffering from what they're doing because they're getting a tremendous number of complaints and from landlords and there's you know, it's getting to be long enough that they're starting to break some landlords. I don't know though that they have the that they care quite frankly to the level which they would react to that happening. I think that the constitution of the city council is more focused, you know, heavily focused to the tenant side, Beverly Hills.

Cares about both they care tenant daycare landlords. They just want to do the right thing and I think it's unfortunate to what happened at the extended this thing for another month or two, but you know, I'll I'll say they they care about you know, both sides and they're trying to get to the right place and Santa Monica. I think actually put in place something that's very workable. They're protecting residential. They're protecting small details. They It's a larger guys. They gotta pay they said the office tenants you gotta pay.

Okay, and then finally, it's you can mention your small tenants. They sort of have a commitment to their business sort of like a it's personal to them. I guess do you do you have an idea if how much and what degree it mattered that they were able to you know, get some some of the stimulus checks, you know, small business and whatnot. Yeah, I think that the stimulus checks made a big difference to them staying current. I thought that that was a great way to say it may actually something Stewart Road and and I thought it really captured it because in past recessions if you look at you know large companies look almost bankruptcy is an option. They're like, well, what's the finance resolve that option? What's the financial result or not doing it? If we do it we get to close this 20 offices et cetera, et cetera.

The smaller tenants are on our portfolio. I I think they take personally.

That they own their companies. They are not looking at Pepsi as an option there looking as a personal decision and it slows them way down and once they drop that off as an option because it doesn't work and they're kind of framework of how they see themselves. It's not hard to make deals with that in a stretch of money, you know, maybe stretch out what they oh, they come through they pay it. That's why we keep saying that while I know that people have been characterizing are small tenants and profiling them as being less credit worthy or less likely to pay I've said on time and again, I think the reverse is true. I think they're more likely to pay and they're more interested in continuing for they all just like all of you and us there waiting for them and they want to go back to their own lives at their business and everything going like maybe someone sitting in New York that's making decisions about offices all over the country and saying close close close leave home.

And open that one was profitable. That's not what's going on here. And that's why we have a lot of confidence in the long-term prospects of our Market. Yeah, that's great. Thanks very much.

All righty.

And our next question is from Jamie Feldman with Bank of America Merrill Lynch, please go ahead great. Thank you. So it's it's impressing you guys were able to get the multifamily occupancy back up after the dip when the quarter started. Can you talk about how you're approaching rents? And was that a big factor in terms of getting people into the buildings or you know, how were you able to get that leasing done so quickly?

Well, I don't think a lot of it came out of discounting rent what it came out. Well, so what really happened was and if I was in a prepared we had some with it be universities wage at the military. We had just a little bit of a shock of move-outs right people people think they're kind of, you know, they're going to go to school universities might have blocks of rooms whatever and so Thursday all just went in one like snap of the fingers were being Hawaiian La the stuff we have a wet. So so just you know how to really amp up our own team. It's good product or type markets and you know, it's impressive that at least back up so quickly. I was very happy that by the you know, we went into the quarter good we went a million horrible. And then in the quarter we were good again, so that did impact Us in terms of overall Revenue a bit. Not not terribly but yep.

Also left us in good shape moving forward.

So you feel like you didn't really have to move rents much. You can kind of keep our current. I think I think I don't think we're increasing rents the way we were before but I don't get a lot of information that we really dropped rents.

And then what about on the office side? I mean, where would you say face rents and net effect of friends have moved since this whole thing started if they moved at all.

well

I hate even saying this but it doesn't like why they have not moved was a very tight Market. Why why in Phoenix? It's still for the plus side and m l a

I can't imagine we're going to go through this and it's not going to impact wrench. Okay, so that was a double negative. But as we sit here right now we seem to be holding off voting are wrong because they're relatively full Market, but I can't imagine that we're not going to see some of this entire, you know pandemic recession reflective rental rates.

Have you seen a change in concessions?

No, not yet. No, I don't it's not our style. We're kind of, you know your rates your rate. We don't love the method of confessions to boost up rake such long term owners. So that that's not I don't know that I would think that would be like the first sign of grateful enough. I think the first sign of rates falling off is Rachel has fallen off.

Okay. All right. Thank you.

Our next question is from Manny cordesman with City, please go ahead. Hey, it's Michael Berman here with Manny. If you wanted to come back to the whole element bulb on the rent and the collection in the reserves. So you talked about a historical about 2% that get raped historically what percentage would that be for each of the page that you operated and I would imagine that it's not uniform at least in history between office multi and Retail. So, can you just that's the first question that I had some others.

Okay, so let me start by saying if you look back at our bad debt expense when you say historically I got to be very careful because it's typically like a 20-30 basis folks. It's not 2% So what I'm saying is you go back to the recession 2008/2009 2010. That's when it was 2% Okay. I'm not saying that the number like to one year ago. Okay. So if you but there's going to be an unsatisfactory answer you because I don't know the numbers Broken Out by factors. I I you know, this is in the times of eight nine ten. I do know our default rate and we've gone back and reflecting on it looked at it but we at that time, you know, maybe we just keep getting better and better and I guess the longer we even publicly been better paying together statistics of you guys care about but I don't have that information off.

Right, I mean and the I mean the issue today is the retail and other income part, which I think is only like like 4% of your total or something. Um, you know, that is acting very sick today than at any other point in any other recession given the pandemic effect on retail. So one would imagine, you know, as you talk about that 9% nine hundred basis points is obviously an aggregate to if you could break down you talked about four hundred basis points that these well-capitalized if you can break down at nine hundred basis points of reserved by property type that would be helpful as well. And then, you know between the four and five percent I talked about. Yeah, we we did not Reserve 9%

we we were

We 4% of the 9% wasn't reserved because reserved written off whatever the right word is was not because they're you can't write off at anything that has like, like I said, I could tell that they don't pay you don't write them off. Then you do have to just then that just flows closer income. It's not enough to receivable. It becomes receivable. Okay, the 5% is what was written off. So I'm going to try and so start with you know, 9% in Pay 4% We did not write off which means dead they didn't pay us but we took it as though as revenue and put it as a receivable because they'll obviously pay they're super strong. It's a joke that they didn't pay. All right. So Thursday would be it and it just it just when we're on that four hundred basis points of the $900 that didn't pay rent of that 400 how much of that was office job.

retail and multifamily

Okay, so but let me just keep going for a sec. Okay? Okay, so then you then I don't have that exact number. I'm going to give you another number. So then now we take the 5% right off the 5% that we did write off.

Yeah, what we I think we said or I'll say it right now.

More than half of that was retail and what we probably should have given a better tile to we call Hospitality which was was the the home theaters and the screening rims and yeah live in you guys all that.

I don't have that number that you asked for but I'm able to tell you that over half of the remaining Five Guys and arguably then it just sounds like the four hundred basis points is predominantly maybe office-related tenants where you have a good perspective of the quality the remaining $500 that you that you did not write off was half of it was probably in these retail and other uses and half of it relative to multi-family that probably directionally right. I would say I would say half pack and I'd say the other half was a little mixture of office amount that you know, whatever the rest of the group and then just as a request for in 90 days when you report next quarter or any thoughts in between now and then I would just say putting out all these details similar to the office and multifamily peers in terms of collection rates and you know by property type I think Louis

The helpful to put out in the supplemental or the press release rather than trying to go through all the gymnastics on a call.

Okay, thanks where to put it. I mean, it's not like I'm not giving it to you don't like weird enough. Yeah, I think just having the just given the fact that you are multi property type and given the fact that you have other things going on. I think just getting off all the numbers in terms of Collections and deferrals and reserves and the statements from you know, I would say that the, you know, a lot of the office multifamily and Retail companies are you know putting out a lot of closure around those items so analysts and investors can have a hard copy of something rather than numbers that are going around on a call where you know God. Yeah, it's just it's not as fluid to be able to capture.

Okay. Alrighty.

I thank you. All right. All right. Thanks.

Next question is from frankly with BMO, please go ahead.

And monitoring. Just want to get your thoughts on your Sherman Oaks and one or Center Market with the all the ongoing discussions of a potential shift away from Urban markets. Do you think maybe in the media more longer-term Valley could be a beneficiary of this plays out.

Wow, that's an interesting way to ask that question. So the reverse of that question is are people going to move out of places. Like I guess for us you're saying the west side or downtown. I don't think that I think the areas in the valley more to the point are beneficiaries of industries that are moving out there for the employment base and a job. In fact that the housing is cheaper and the quality of life. I think that when you look at when this is over and you look at whether people want to be in cities or work at home or whatever, I think the thing that people don't like about going into work in the morning and being at work is the commute and I think most of the people working on the westside have a very short commute. So I don't think there's anything dating them from you know, when they're able to and feel safe coming in. I think that people in the valley sometimes are drawn to

Having to drive into the west side cuz it's such a you know, there's so much business here. But as they kind of rides up, I think more and more than make demands for us is to be out there which is why we kind of took our positions out both along Ventura Boulevard and warm Center and we're seeing it. I mean you're seeing the tension and in those markets in terms of office space build up and you're seeing those populations grow, very fast life has been apartment building out there and drink me home building like crazy and they're just they've been very successful and and very rapid absorption. So I think that's more driving the success that I discovered times. We've been sitting out in Warner Center and certainly along Ventura Boulevard. I don't see it as a shift from whether it be downtown or west l a

Okay, thank you. Then. Can you update us on how parking Revenue has been training so far? Did you see this pick-up in July or should we expect a similar similar level parking in that was in the second quarter?

Yeah, so, you know, I think but for the fact that people have mistakes and what not on parking you'd expect parking income to track occupancy in the office building and Retail is barely been getting anything done. I think our parts has been running about 50% I think that relates to mistakes, uh, but beyond that I would expect parking level to track occupancy parking Revenue to track occupancy. So we are a bit above occupancy. But from then on to the extent of occupancy increases, I think we'll get we'll get some pick up and parking.

Okay, great. Thank you.

Thanks.

Next question is from Daniel is male with Green Street advisors, please go ahead.

Great. Thank you on the acquisition front. We've seen a few of your peers by in El Segundo in Culver City historically these foreign markets on your radar. But I'm curious if we could see you guys expand into a new summer. And if or Gap positions are looking at or discoloring your existing footprints.

So well, they are markets that were following. Let's start out with that particular Weatherby Culver City and everything down to the South. I think one of the things going on is some of it, you know, we like we're not in love with buying single-tenant buildings. I mean, usually we like multi-tenant we're set up for multi-tenant and a lot of the traits that you've seen have been one or two large tenants in those buildings and that's what's trading and until those off as those markets mature and gets more multi-tenant and all that. We might be better bitters for that kind of stuff than these sort of whether it be triple net or just long-term credit leased buildings with one or two tenants that have seven eight years left on the lease. We're just not going to be winning bids on those now putting that aside is Culver City a good Market. Absolutely. I think it's a very good Market. It's got a dog

Makes a housing. They did a great job with the retail and the downtown area and there's a lot of good companies that are out there and you know, maybe similar could be said as you go farther south except farther south you don't have the supply restrictions that we're used to here on the West Side in these areas.

And presumably this is all the office Investments crafts not you're not looking at any more time. I was referring to office but I mean prefer to residential in a similar way me go down apply, which I'm not done quite well, but of course they've added thousands of apartment units so because there's not a lot of Supply constraint out there it's harder to say that's a good idea for us now by apartment building now in Jake Apartments in our markets trade at very low calibrate. That's why you see we've shifted over our construction platform and we're being more aggressive album building apartments with rebuilding it, you know, obviously much better off and that's most of the ground up construction most mean, you know, most is is as residential both in Hawaiian and and most of the entitlements were working on our for residential on their fiscal and we have on the website on the west side and then Valley.

And just shipping over to the Senate side. Is it your son tenant retention will be higher over the next few quarters as tenants choose to stay in place if they figure out their space planning needs or how are you seeing Behavior changes?

Well, if you say exactly what the impact the Cove in on tenant retention, I don't know that we have enough information to give that answer. I can give you like a longer-term answer which is over all the time. We've tracked tenant retention. We've had quarters that have been fluctuated highly which had to do with maybe larger tenants moving out or something like that wage. If you started to average, you know rows of quarters like four quarters at a time a lot of times you end up at that 69 to 70% So there's some other kind of force on that process that cause tenant retention 210 in on that 70% number.

A couple thanks very much.

And the next question will come from venkat common. Enemy with Mizzou. Ho please go ahead.

Good morning. This is venkata on for just a few quick ones. It looks like multi-family parking and other income doubled quarter-over-quarter. Just curious what drove at.

Yeah, it's it's Peter. So overall He he'll decide to decline in the rental Revenue. There's certain too upsetting issues associated with one property. We had a fire at a property in January. And so see you Thursday and then the insurance recoveries run through a parking and other income. So they they almost met out when you get down to Total multi gaining Revenue.

Okay, thanks. And then it looks like the least rate in the valley declined about 240 basis points. Sequentially. Can you put some color on that?

No be straight in the valley declined 240 basis points sequentially. Yeah, like I said, my prepared remarks are retention was in line with our kind of expectations retention was you know, I previously said we thought he was wanting you to we're going to be rough quarters from a move out respective. But we had posted leasing volume. We thought we recovered that throughout the year and kind of our original guidance was flat for the years. Of course, we haven't seen the new lease in volume that we expected to see the decline in those markets but none of it had to do with any like covid-19 like that. These are all known and natural terminations. We were expecting

Okay, great. Thank you.

Thanks.

The next question is from Josh Berg with Scotiabank, please go ahead. Hey, thanks. I want to go back to the uncollected rents and specifically the 4% of rents that were not collected but am still deemed collectible and book this review. It makes sense of those are straight lines and then Gap and but are those also included in cash same store noi numbers for the quarter or is there a negative adjustment made since the cash wasn't home?

Everything that comes out of the and anything that's so receivables.

I think that's in cash and I also

Yes, yes. Yes, correct. Okay, you're you're talking about the not written off guys that went to a restaurant? Okay. Thank you.

All right.

And the next question will come from Jimmy Fallon with Bank of America Merrill Lynch, please go ahead.

Hi, I just want to get some thoughts on your progress at Bishop Street the conversions. I mean, you think the the second quarter pace is about what you would expect in terms of getting lease is signed and then how do the month compared to your initial underwriting?

So so you want to Jamie it's it's got an I would say that Bishop Street has been a pleasant surprise in this whole covid-19. I mean, we're moving along at a pace that you know, you would think in the middle of a pandemic things that slowed down we're hitting our underwriting and you know, as we update it in my remarks, we're off, you know, that's a 61 units or like, you know over 60% at least. So we're very very pleased with the product or delivery and in the market is responding in a very positive manner.

Yeah, Jamie. I'm in his half of that. There's no way I thought that within you know for months. We have at least sixty one of the first ninety eight units out of I mean wage and and this is during during the covid-19 crazier. I mean, we've already launched in the next three floors for a good back in in building.

All right. Great. Congratulations

I think you so ending on the like the one great piece of news. That's good.

All right, ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over Jordan Kaplan.

Well, thank you all for joining us and we'll look forward to speaking with you again next quarter. Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may not dead.

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