Q1 2021 Douglas Emmett Inc Earnings Call
Ladies and gentlemen, thank you for standing by.
Welcome to Douglas Emmett and quarterly earnings Conference call.
Today's call is being recorded.
At this time all participants are in a listen only mode.
After management's prepared remarks, you will receive instructions for participating in the question and answer session.
I will now turn the conference over to Stuart Mcelhinney, Vice President of the of.
Of Investor Relations for Douglas Emmett.
Thank you joining us today on the call are Jordan Kaplan, our president and CEO, Kevin Crummy, our CIO and Peter Seymour Our CFO. This call is being webcast live from our website and will be available for replay during the next 90 days you.
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 and the earnings package.
During the course of this call we will make forward looking statements. These forward looking statements are based on the beliefs of assumptions made by and information currently available to us our actual results will be affected by known and unknown risks trends uncertainties and factors that are beyond our control or ability to predict although we believe that our assumptions are reasonable.
And they are not guarantees of future performance and some will prove to be incorrect and therefore, our actual future results can be expected to differ from our expectations and those differences maybe material for a more detailed description of some potential risks. Please refer to our SEC filings, which can be found and the investor Relations section of our website when we.
Reach the question and answer portion and consideration of others. Please limit yourself to one question and one follow up.
I will now turn the call over to Jordan.
Good morning, everyone. Thank you for joining us and.
And Los Angeles, we have seen a remarkable shift and the prevalence of the COVID-19 over the last six weeks.
During the first quarter L. A county, what's reported three times the infection rate of any other U S County.
By early April L. A county was reported the lowest infection rate among the nation's 10 largest counties and.
And April 5th the Lake County permitted non essential workers to return to their offices and on April 6th Governor Newsome announced plans to fully reopen and California by June 15th.
Our first quarter results still reflect the impact of the pandemic our collections during the quarter continued to improve so that during the four quarters affected by the pandemic our aggregate rent collections totaled 93, 1% income.
<unk>, 96% of our residential rent and 96% of our office rent and 44% of our retail rent.
We executed more workout of agreements with minimal rent forgiveness.
Less than 100000, and then the first quarter, mostly for retail tenants.
But the big catalyst for collections will come once the eviction moratoriums expire, which we believe will accompany the full reopening and Jen.
The median and larger tenants are starting to make leasing decisions and the first quarter, we signed leases totaling 750000 square feet.
Given our seasonally larger explorations and leasing was not enough to create positive absorption.
And as we have said, we expect to lose occupancy during the first half of the year.
I feel confident and optimistic as the pandemic subsides.
Our operations and our markets are uniquely positioned considering our supply constraints and.
The industry is driving demand.
And tenant build outs that already accommodate of COVID-19 sensitive returned to work.
Our operating platform, which is designed for the small tenants that are leading office re occupancy is the largest and most effective and our markets.
Our development and repositioning activities are progressing nicely and our balance sheet is strong.
We are pursuing refinancing opportunities that may even further lower our cost of debt and working on new acquisitions as they emerge.
Last quarter, we discussed are now completely digitized leasing experience this quarter and Kevin will describe the progress we have made on sustainability.
With that I will turn the call over to Kevin.
Yeah.
Thanks, Jordan and good morning, everyone.
We remain very pleased with the progress of our two multifamily development projects.
At 11, 32, Bishop our downtown Honolulu office and residential conversion, we have now leased 100% of the.
170 for total units we've delivered.
Validating the demand for high quality rental housing and the heart of Honolulu.
Our Brentwood high rise apartment construction has topped off and 34 stories.
Once finished of 376 units will offer stunning ocean views and the first new high rise residential tower west of the four of five freeway and more than 40 years.
We plan to begin pre leasing and the units after the summer and remain on schedule for occupancy and early 2020 two.
Property transactions and our markets remained slow with potential sellers still and I'll watch and wait mode.
And we're hopeful that the signs of recovery and planned reopening will bring some deferred sales for the market.
Our investment and sustainable systems and technology at our properties continues to produce outstanding results.
At year and more than 88 per cent of our eligible office space and qualified for energy Star certification.
During 2020, we took advantage of lower tenant attendance at our properties to aggressively accelerate our elite the lighting retrofit program.
These efforts will generate annual energy savings of $3 3 million kilowatt hours per year.
You can find more information about our environmental performance as well as our social and governance efforts and our recently published 2020 ESG report on our website.
I will now turn the call over to Stuart.
Thanks, Kevin and good morning, everyone and.
And Q1, we signed 199 office leases covering 751000 square feet.
200, and for thousands square feet of new leases and 547000 square feet of renewal leases.
Our leasing and recent quarters have been led by our small tenants. Although we saw some activity during the first quarter from a few media and the larger tenants.
This increase the average size of the leases, we signed last quarter, the 3800 square feet from 3100 square feet and the fourth quarter relative.
Still below our 5600 square foot portfolio average.
As a result of the seasonally high lease expirations during the first half of this year and lower recent leasing activity our office lease percentage declined 86 basis points, the 87.7 per cent.
Our leasing spreads during the first quarter were negative $9 one per cent for cash and negative <unk> three per cent for straight line.
However, we have mitigated the impact to our net effective rents by lowering of our leasing costs, 10% from Q4 as tenants remain willing to trade tenant improvements for competitive office rents.
The lease rate for our multifamily communities has fully recovered and 99, 6%.
With that I'll turn the call over to Peter to discuss our results.
Thanks, Stuart good morning, everyone.
Our first quarter results reflected the continuing impacts from the pandemic.
Compared to the first quarter of 'twenty, and 'twenty, which was largely unaffected by the pandemic.
<unk> was down 19, 6% the 44 cents per share and.
<unk> declined 21% to $78 $3 million and the same property cash NOI declined by 16 eight per cent.
When we reported our results last quarter, we noted that our <unk> per share included a net for scent gain from insurance offset by advocacy spending.
Excluding this force and our first quarter episodes per share improved by <unk> <unk> per share primarily from better collections and lower expenses.
And the only for 4% of revenues.
Our G&A for the first quarter remains well below that of our benchmark group.
Turning to guidance, we expect second quarter <unk> per share to be between 43 and 45 cents.
This reflects our belief that occupancy will continue to decline.
We expect significant improvements in collections and parking revenue and once the economy opens up and local moratoriums expire.
As usual and this guidance does not assume the impact of future acquisitions dispositions or financings.
I will now turn the call over to the operator, so we can take your questions.
We will now begin the question and answer session to rest of the question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys if at any time. Your question has been addressed and he would like to withdraw your question. Please press Star then two.
And consideration of other participants please limit your queries to one question and one follow up at this time, we will pause momentarily to assemble and assemble are older.
Our first question comes from Steve Stockpiled with Evercore ISI. Please go ahead.
Oh, Thanks, good morning, Jordan or maybe whoever wants to take it on leasing can you maybe just talk a little bit about the pipeline and I realized given the smaller nature of your tenants you know your your pipeline may not be as visible as some of your peers that are dealing with larger tenant, but I'm just sort of curious you know, what's kind of and the heart.
And for today and as you look out one the two quarters you know, what's giving you the confidence to think that occupancy may bottom out for Q2.
Well the.
What's giving us the confidence is the amount of leasing that's getting done now and the and I.
I was really happy about 750000 feet and I know, we had a little bit of negative absorption but.
The the.
Yeah. The the work that was done.
The hard work that was done to the kind of you know what we we shortened the name of the digitized our leasing experience and all of the work that was done around that and the amount of flow of we're now able to push and generate and speed up I mean, I just I keep I know I keep reiterating it on every call but as things.
And I don't I don't think you're going to see the full power of how this the system the ship shifted itself and.
And until things really start rolling up and but because of what we're seeing already against these horrific pandemic shut things down you know waiting for the economy and open headwinds is this is the show impressive and numbers of deals and score total square footage of deals and all of the rest of it and as we look for them you know you still face pandemics.
While move outs for people that are you know call and it quits or whatever the case may be but at the same time and you're seeing very strong trend of returning leasing deal flow and and and we gave you.
The work gave you some good info when we track like square footage of deals compared to our typical of square footage and and you know we were much smaller if you go back of core.
Order, but now even the average size and it's getting larger the number of deals still and that 200 range, which is very strong and they're now up to 750000 feet in terms of volume.
Oh, Okay, all of that's going and at very good direction, and and I won't say.
I'd like to say as expected as hoped as expected all of the pulp both of those works together, but and that's what's giving me the confidence.
Yeah.
Okay, and then you sort of mentioned the executive orders and L. A opening I guess June 15th can you just remind us kind of what the the dollar sizes of of the bucket of tenants that are not currently paying or you know whether the retail tenants for some office tenants that are.
Are not paying but are maybe and current occupancy how large is that bucket and and.
In dollar terms and I guess, what would be your expectations of when that may start to flow back into the P&L.
Well you know we've told you.
We've told you that we're making deals right and so and we said it's in the range of 15%. So each of each each quarter of the same guys don't pay but also we make deals. So the number is is running and the $60 million to $70 million range of what's out there that we still want to get that we've written off right and.
And you go that should be growing much faster yes.
If everyone was just not paying but we werent, making deals with people that had not been paying and the past, but we are making deals.
So depending on when you catch us in the quarter, depending on the time during the month and wherever you are it seems to be running and that range, but we stopped growing that number actually we stopped growing that number of last quarter.
So that's also a good kind of directional trend sort of sign on and all of that.
Great. Thanks Jordan.
Alright.
The next question comes from Manny Korchman with Citi. Please go ahead.
Hey, and the work can you remind us or help us think about how long.
Take once the sort of the small tenants, maybe and maybe the moratoriums burnt off small tenants decided the they do want space.
What sort of the timing from them.
Going onto your digital platform of calling you to sort of getting into that space and the becoming cash flow.
Yeah Man he went and what we've seen on average is it Michael.
And Michael that's.
That's okay Uh huh.
And on average from the time, we signed an LOI with the tenant until they moved into our spaces on average price of about four months. So it's very quick relative to probably the larger folks.
And our peers are talking to.
But and then just has there been any activity that you can share on on the space for sublease within your portfolio.
I mean, we haven't seen of material uptick and sublease space and our own.
And our own portfolio that we're tracking I know there I know the sublease spaces up generally and the market pretty materially what we've seen and those reports is that it is generally concentrated and the larger <unk>.
Tenant space.
For the attack of immediate type style space and larger footprint. So we haven't seen a material impact.
And I could be wrong, but I thought there was a couple of news reports about some specific spaces and that and that sort of medium sized space that your tenants had put up.
For sublease it was low.
Yeah.
Certainly think we've got tenants with the other space for Sublease I don't think its material and the overall, yeah, I I and when you say I see I am not sure I was surprised to see of broker listing of space and center building. That's the sublease day, all cause I mean honestly I get get all of them and.
And.
I don't think there's a ton of it compared to how much we have but what's most important is I don't think there's any meaningful competition being created by that sublease space against the direct leasing that we're doing.
And thanks, everyone.
The next question comes from Frank Lee with BMO. Please go ahead.
Yeah.
Hi, good morning, everyone.
Can you talk a bit about and what are you seeing them and in century City and Beverly Hills and tiers. Those two submarkets experienced the largest sequential decline and in terms of the lease percentage during the quarter. Thanks.
Yeah, Frank I don't you know when you look across all of our Submarkets. You know we had some of it went up a little bit. This quarter. Most went down I think that's kind of in the case, we've seen kind of a downward trajectory and occupancy throughout the pandemic, we haven't seen a read through specifically to any submarkets, where they're acting.
The trend that we notice or something different that would be worthy to point out and do you guys between the submarkets.
And there's going to be noise from quarter to quarter and like we said, we're still expecting sort of declines overall and Q2, but you know.
Nothing I would point you to and those specific submarkets that we're seeing.
Okay, and then just a follow up on the average besides being modestly higher and the quarter.
And you're starting to see any tenants, taking more space now that rents have come down a bit or even tenants, making floorplan and change it.
Whether the higher square footage allocation per employee.
I think on the of tenants taking more space you know every quarter, we look at tenants expanding kind of contracting and and obviously for a long time, we had.
Our expansion of its kind of outpacing our contractions of tenants are always kind of moving around and their space changes are shifting but.
Havent seen like of material uptick and expansions that I that I would point of view and she wanted and the numbers it seemed pretty consistent with what we've seen historically.
And your second question about the space needs changing I think the great. You know the great thing about our portfolio and the way our space is already built out and we've talked a lot about this over the recent quarters, but we think on average our tenants are already built out the 200 plus feet per person.
If you think about the typical space. That's you know of 2600 square feet. It's a couple of window line offices. It's a couple of workstations, yeah. The kitchen conference room, everybody is pretty well distance. So we haven't had to make a material shift and how we play and our spec suites for example, and those have and leasing.
Really a tremendous pace throughout that's the really been of strong point for us throughout the pandemic those ready to the move in the.
Next week, so that we build and so we haven't seen we haven't had to ship that and I don't think we've seen kind of it's really changing now they're pretty well set up.
You know the way they've been doing it.
Okay. Thank you.
The next question comes from Jamie Feldman with Bank of America. Please go ahead.
Great. Thank you.
As your leasing pipeline starts to pick up any kind of read throughs for types of sectors of types of tenants that are either more aggressive than you thought coming back or maybe less aggressive and maybe shifting more towards a longer term work from home strategy.
Just wondering what the data is telling you.
Yeah, you know that we have that great diverse pie chart in the supplemental of our tenants and all the industry is driving demand here and it continues to be pretty broad based demand, we haven't seen any trends from industries or sectors that have shifted dramatically.
And we pointed out the one the.
The only trend we've seen is inside.
Right I mean, it's been a smaller guys come and earlier than the larger guys and that's not in the industry, it's not and market.
Okay. Good morning.
And to get out of the house I guess.
[laughter] yeah.
Shifting gears to.
The investment sales market.
I mean other can you talk about anything new you guys are looking at or interested in and then b just what's the market overall feel like are you seeing a pick up for any any changes and how people are underwriting or are willing to take risk.
The market is still fairly slow now that things have opened up I'm you know.
Hopeful that people are going to start bringing things back to the market as people get a little bit more certainty and optimistic and are on the overall market, but it's been.
That is really slow and our.
The markets and there there just hasn't been a lot we're underwriting and everything that's out there, but there hasn't been a lot debt.
The Super appealing.
And is there any change in tone from.
Neither of the brokers are competitors in terms of what people are willing to look at it.
How comfortable they are writing underwriting grants for Occupancies I.
Well I think that debt.
People are bullish on L. A long term and the industries that we've got here and the supply constraints and our markets and so I think that when.
Something does get offered it's gonna be and very competitive and.
Offering and I I, just think that were easier to underwrite of recoveries and some of the other major markets out there that are more.
Hey, good buildings more vertical a different transportation et cetera, so and when it comes and I'm anticipating the pricing that's going on.
And is gonna be a fairly aggressive.
Okay, and then do you have an appetite for to try and new Submarkets that youre, not and right now as we head into the recovery.
We're always looking at.
Eh and everything and our markets and in markets that we're not and we're tracking it and I think that are between the development platform and the Repositions that we've got going.
The you know were deploying a fair amount of capital and then you know when.
Things come out and our market I think the the opportunities there are going to be.
The more compelling and and easier to fold into the portfolio of the necessarily branching out to.
And other submarkets, but we continue to underwrite them and if something really interesting comes out you know well.
Well definitely underwrite it.
Okay. Thank you.
Yeah.
The next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.
Hey, good morning, good morning out there I.
Wanted to go back to to Steve's initial question and so I'm going to ask the yeah, Yeah standard sell side two parter on Jordan the rents that you guys are still not.
Being paid and and you're not accruing from a GAAP perspective last quarter. You said it was 6 million of mom. So one just want to confirm that 6 million is still the number and two you know given the propensity for.
And these moratoriums to get you know just sort of extended almost indefinitely. What is the local scuttle out in California, and whether or not you know new Sip and we'll stick to the June 30 extension or given his recall campaign is app to app to the content and extended like they did here in New York.
Wow.
I I I mean I.
I know, we got and New York extended I think of August but of course, they were expiring the like.
And may right.
So they had to face it I'm not sure.
You know by June and I think a little and it'll be like quite and genuine and to extend it but that doesn't mean I have any particular insight into what they're actually going to do.
In terms of the Red I mean, if you you know.
When as we were getting into the pandemic.
I you may or may not remember it was actually over 7 million of market.
And then we started you know putting pressure on people and calmed down to 6 million of them off and it was really jumping around between six six to six five I remember watching that.
And then as we started making deals and the month stretch out now the numbers come that's come down and come down pretty pretty substantially I mean, if you're if you count the bad debt and people stop paying in April and you go here. We are 12 months later and I gave you a number I think it's 60% 60 something million you'd go well, obviously, that's well below $6 million of all.
And that and and that's you know.
That number for the for for better that number you would think it's just kind of keep shrinking as we make deals as people start paying again of coming back as people start something up.
We ought to be able to keep shrinking and that number and it hasn't been shrinking right and it's now down and are in the 5 million range.
Okay, and then just confirming youre still not from a GAAP assets perspective, you're not booking the accrued rents you're only booking basically what you would see about of cash basis Corrado if any.
And it's Peter everybody that you know we moved two of cash basis. It's all of you know the cash comes in we bucket, but we don't book it other than that.
Okay. So this is upside for the numbers that that's the point the.
The second question is you know on the <unk> on the Capex normally see and other markets as you know and sort of soft leasing or or soft market. You know confections rise, but here you had your lease and Capex decline is it basically of one for one because a lot of what you do or prebuilt suites. So therefore, the you know it.
Effectively our percentage of jobs or do you see that there's going to be pressure from tenant and.
And therefore, you're gonna have to increase your the leasing capex.
I would say.
Our leasing Capex has meaningfully gone down.
Now and if.
Like the the the math of the question would be rent.
Rents down and leasing Capex.
Causing that effect of it to me.
You know better than just what the rents are down by its improving the situation not not not not that bad for it and so so so right now just like you'd think right you used to from the market and everybody starts losing occupancy that starts impacting Reds and.
And then as that impact rent or rent phase for it impacted our fish rate plus the leasing capex and the leasing capex has shrunk and the face of the declining rents. So our net effect of are actually better than the reductions and just rents.
And so when you look at some of the stats, we gave you a roll down and whatnot.
You know when you start looking at net effect and should go of it looks like things are are actually not that bad now I'm, not saying not down, but I'm, saying better than they look of the just looking at roll Downs.
So basically Jordan you don't expect and.
Sections to suddenly rise absent rents rising do you view the two is moving and sort of lockstep you don't think there's going to be pressure from Pat.
Competition for tenants, where you're gonna have to increase capex before the rents rise.
Okay, So just to be.
You know narrowly accurate so you have commissions and tea ice.
And you know you've been tracking whats been happening and now we have a you know we went we digitize for our platform. We have some certain percentage and you know the that that's maybe not as much market growth driven when you say when you go over and the team the Ti side of all of that what I, what I'm, saying to you is.
Our tea ice per foot are coming down now of why are they coming down and one reason is.
We've just rolled through and we have a ton of space that generally works and it's built out for the right size and tenants want it and even one of the Guy that's what's up and it's paying carpet moving walls and that.
And that takes time to happen I mean, if you think of all the way back of the Blackstone portfolio of buying you know of millions of square feet. It takes a long time for us the roll through and get that space more standardized so that the the capex that were the Capex that we're spending is is it's not as high. So that's one thing the other thing is.
Renewals are.
Very much saying, we just want to renew and keep going and I told you guys about that a couple of quarters ago and the last thing is you know.
Now we're doing deals of smaller tenants and we all know split and there's less capex associated with small tenants. When you do big multi floor tenants they come in with big demands and that's the reality of the net effect of on March 10, and it's just not as good as the net effect of on small tenants and that's mostly because of the very demanding capex of tearing everything out and redoing it and when.
The full floor tenant and so for all of those reasons, probably and and the fact that during the pandemic we happen to be built out in ways that are already extremely user friendly and if somebody just wants to return to work, we're just saying Archie I just go down.
Okay. Thank you.
Alright.
Our next question comes from Rich Anderson with S. M. D. C. Please go ahead and thanks, good morning out there so.
And you talked a little bit about.
Book, and what making deals means and what I mean by that is are you just kind of deferring rent for a period of short period of time or is there anyone coming back to you and saying look we'll sign.
Something early like we we don't renew until next year, but we'll do it early at the depressed rent and you can keep us for four of five years at that level of any of that happening anywhere or is it.
Is it not that.
That not the right way to color it.
Most of what I'm hearing is the extensions spreading what's due out come income combination deal. That's most of what I'm hearing I mean, there's the odd and believe me. This is like 31 and flavors, but most of what I'm hearing is extending leases and stretching out watch out now as opposed to being Banca and the head with it.
The.
One of the moratorium and.
Okay and.
And.
Prior to all of this you had a nice total redevelopment business as mentioned about the outlay of capital and this market.
And you know, we're doing something like 30% returns on incremental dollars.
I think last quarter, you said you you're talking about.
You know ramping that business back up once the pipeline there and are you have you started to.
Ramp that incremental business up.
We yes, we we actually returned well I guess, we returned on paper more than two quarters ago. We are turned and physically of doing for glass corridor. So we have for projects now back in the pipeline and.
What kind of is it similar in terms of and incremental return yeah, yeah, yeah. It want it and Theres a rescheduling of the building like we did at 18 of one there sat there and just all kinds of stuff going on yeah.
And you know unfortunately, fortunately whatever so if you look at the last projects, we did the the numbers for spectacular and by the way and retrospect panned out spectacular right. We looked at like how rich changed how at least in case of all of that.
It's kind of any harder to Jim during the pandemic market with all of the external noise.
Against the rents are harder to prepare and whatnot, but it was such a successful program and we're optimistic of where things are coming and returning and we don't want it and we don't want to like.
You know, putting her shoes on and when the gunfire and everyone starts racing, we wanna be like ready and and fire off the line and so.
And we said this this was just too successful and we believe the market is going to recover and the strong way and so we're just we're back at it and so we put for projects and the N and we're doing them.
Okay awesome. Thanks.
The next question comes from Craig Mailman with Keybanc. Please go ahead.
Hey, everyone cause you guys and maybe touch on the refinancing opportunities and it looks like you have some explorations here of about 600 plus million, but probably makes sense to get to is there any.
Costs associated with the swaps and you know getting rid of those and where do you think of.
You guys would price and what term would you guys looked for what what's the most interesting term at this point from a pricing perspective.
First of all of course, you're correct.
Great time to look at refinancing, we are looking and and and fully working on it and we.
You have a goal and I think I had it in and it wasn't one of ours that might've been Kevin and I thought I'd.
And I've said it that we have a goal we are looking at refinancing or our average cost of debt right. Now is that the hair under three like to 90, and 90 298, something like that I like to see that number come down and.
And I think we have an opportunity to do that your name and some there and maybe it would be more of that we have very flexible debt of typical loan for us and a seven year long and we swapped five years.
And I don't know why we would go off of that program and the.
Super aggressively and the you know the.
Michelle Aronson team World and all of the people over there are working almost spot on on that.
What what do you think would be anticipated timing of for you guys kind of pull the trigger.
Hmm.
And what I'd like to do is wait and be able to announce and then you'll have the stats and the Nashville deal. So I'm just kind of wait for that because I don't want of like sour of my Oh, we of course.
And what's gotten out of and aware of what needs and very so but lets let it play out I mean, obviously you know I wouldn't be.
You know squawking about refinancing of the thought it was gonna stay at 3% and so you know we're headed down so so let's see how much improvement of her and her team can get out of the program as of course rates of you know certainly you can look at five year swaps of where that is and you can and then you know what what can we do of spreads and and then the combine those and see how.
How much can we approve and improve our cost of debt on and and how fast can we moved and take advantage of that.
Alright, that's helpful. And then just one other one you guys you know Brentwood Rajiv developments coming on and 'twenty to what's happened to rents for that type of product and that way and do you still feel like you're and a good spot from an underwriting perspective.
Yeah, a matter of fact, you know and and I know I say this.
All the time.
And with the office leasing portfolio, where people go you know where do you think rats arc of but don't worry about rents. It's all about all of whom you know occupancy rents fall of occupancy and you know we gotta get occupancy up and then we can push rents. So as you watched us lease up the apartment portfolio, which we're now certainly out.
At or above what you would call fully occupied and now we're seeing rent Smith.
So you know we were seeing rents start moving back up again and that's that's that's that's great. If you're more narrowly asking the question and the high and the higher end market of the product that we're putting in Brentwood right now.
We don't have any reason to believe debt.
That's not gonna be equivalent of Lady or more successful than we expected going into the pandemic and of course, we've been giving you. Some good feedback on what's happening and Honolulu with the project, we did and that has been during that and leasing right now right and and we've leased 100 and whatever 175 units of 174 units.
And so we haven't really hard stats on that and we know that that's been.
That would've been called very successful not with the pandemic almost stunning with the fact that the thing is still under construction and the pandemic.
Great. That's helpful. Thank you.
Right.
The next question comes from Dave Rodgers with Baird.
Please go ahead good morning out there.
And maybe you addressed it a little bit with your redevelopment comment, but I guess I was curious in terms of kind of flight to quality, we hear it pretty much across the country as tenants come back looking for better quality space curious if outside of the leasing capex bucket tenants are asking for better air handling better air movement. Those types of things just within the portfolio and any movement, you're seeing within existing.
Submarkets within the valley versus the west side in terms of kind of a flight to quality.
Well.
Well.
It's kind of okay. So so we.
Weak, we keep looking and we look at acquisitions.
And we look at our existing portfolio and when we see something and the bottom quartile. We go how do we move into the top quartile, so I want to buy into the top quartile of.
Of quality and when we look at our buildings. We go that's in the bottom quartile what can we do it for put it to the top quartile. Okay. So that type of aggressive recycling, what you've been seeing us doing now we make you get paid for it.
And we were for sure being paid for it before the pandemic now of the pandemic has completely shaken up the table and so it's hard to go look and stature and just prove that and in the directly and we were able to do before the pandemic, but we still think as you're obviously, indicating that that exist at are bad right.
And we're more today and that's why you hear us committing the capital and restarting for for new projects I.
I mean, you know to whatever ability someone can run out of a treadmill.
I want I want 100 per cent about why we own to be in the top quartile and quality of what we own.
And and and and and whether it's through buying and our repositioning and that's our goal and and and and that goal.
You and me and the top and we're definitely and the top and and we're probably above the top quartile of.
All of our markets in terms of what we own.
Yeah.
Okay. Thanks for that and then.
Maybe just a question for Peter following up you guys mentioned a lot in terms of bad debt workouts and the like during the quarter do you have the straight line rent write off and the cash bad debt for the quarter that you specifically recorded and.
And then maybe just a quick follow up for Kevin rents and Honolulu for the conversion relative to pro forma.
Yeah, So for it's Peter for the most part.
Tenant who havent been paying are still of the tenants not paying but every quarter. You know we have had a few new tenants come on the and you know come on the list and and getting written off not not meaningful this quarter.
And then regarding the.
And the Honolulu rents, where we're nailing pro forma which.
You know and the middle of the pandemic, who would've thunk its.
Really unique product its very very high quality and you know we're a 100 per cent lease now so it's and high demand and so.
We're very pleased with how that project is progressing.
Great. Thank you all.
Okay.
The next question comes from Jamie Feldman with Bank of America.
Thanks, I just had a quick follow up you of I think for UCLA leases expiring. This year do you guys have visibility on renewal yet.
Yeah.
Yeah, you're right. There's the 65000 for you I think it's for you right there for at least as they're different departments different decision makers on the leases journey and where.
And the business economy on individual tenants and.
And Oh, how theyre going to work out but it's.
It's not all of it it's not all of this one big lease and it's not one decision and so.
No.
We'll see how those play out.
Okay, but nothing has been renewed at this point.
And if it was renewed it wouldn't be expiring this year. So none of what it would it would have changed and the industry.
Debt.
Okay alright, thank you.
Thanks.
This concludes our question and answer session I would like to turn the conference back over to Jordan Kaplan for any closing remarks.
Thank you all for joining us and we look forward to speaking with the next quarter.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.