Q1 2022 Douglas Emmett Inc Earnings Call
Ladies and gentlemen, thank you for your patience. This call is true to starts in a couple of minutes time.
[music].
Okay.
Ladies and gentlemen, thank you for standing by welcome to Douglas Emmett closely earnings call. Today's call is being recorded at this time all participants are in a listen only mode. After the management's prepared remarks, you will receive instructions participating in the question and answer session.
I'll now turn the conference over to Jim Mckinney, Vice President 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 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.
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 they are not guarantees of future performance and some will prove to be incorrect.
Therefore, 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 to our SEC filings, which can be found in the investor Relations section of our website.
When we reach the question and answer portion in consideration of others. Please limit yourself to one question and one follow up thank.
Thank you I will now turn the call over to Jordan.
Good morning, everyone.
Thank you for joining us I'm pleased to report that 2022 is off to a good start.
Compared to a year ago, <unk> was up over 15% and <unk> is up over 20%.
We continue to see strong demand from our affluent small tenant base and increasing interest from larger tenants.
Leased almost 900000 square feet last quarter, including more than 325000 square feet of new leasing.
I was very pleased to see positive absorption for the third consecutive quarter, especially considering our typically high role during the first quarter each year.
In addition, our leasing spreads meaningfully improved.
After quarter end, we acquired one two to one Ocean Avenue in Santa Monica, one of the most prestigious and best located multifamily assets on the West Coast.
Panoramic ocean views from every unit.
Looking forward rising interest rates and inflation, what percentage with both challenges and opportunities. We are prepared for the challenges and remain ready to take advantage of the opportunities with that I will turn the call over to Kevin Thanks, Jordan and good morning, everyone.
As Jordan said on April 26, we acquired 12, 21 Ocean Avenue and iconic apartment property overlooking the beach in Santa Monica. The property is currently 98% leased and includes a 120 units with an average unit size of 1500 square feet.
The purchase price of $330 million, which works out to $2 $75 million per unit.
Well $1800 per square foot.
The purchases made by the joint venture that we manage and in which we own a 55% interest.
The joint venture obtained $175 million secured non recourse interest only term loan that matures in April 2029.
The loan bears interest at the cell therapy, plus one 5%, which we fixed at three 9% through April 2026, with an interest rate swap.
Turning to development, we continue to see strong tenant interest in rents above our pro form us at both 11 32, Bishop in downtown Honolulu, and a landmark Los Angeles in Brentwood.
When completed these projects along with 12 21 Ocean add almost a thousand units to our portfolio.
As I mentioned last quarter. We are also working on repositioning a number of properties that should substantially boost rents.
At our recently acquired 12 21 Ocean Avenue.
We'll be continuing a major renovation project, which includes significant upgrades to every unit as well as the common areas we.
We have plenty of dry powder and strong JV relationships I remain hopeful that 2022 will bring more transactions to the market.
Stuart.
Thanks, Kevin and good morning, everyone leasing demand was strong during the first quarter.
Q1, we signed 246 office leases covering almost 900000 square feet.
Including 571000 square feet of renewal leases and 326000 square feet of new leases.
As Jordan mentioned, we achieved our third consecutive quarter of positive absorption with our office lease rate increasing to 87, 7%.
Our leased to occupied spread increased to three 1% an all time high.
I'm happy to report that our leasing spreads this quarter improved to positive nine 4% for straight line and negative three 7% for cash.
We remain focused on recovering occupancy at this point in the cycle and expect rent spreads to remain choppy.
Our multifamily portfolio remains full at 99, 7% leased and rents continue to rise at a strong clip.
With that I'll turn the call over to Peter to discuss our results.
Thanks, Stuart good morning, everyone.
Turning to our results compared to the first quarter of 2021.
Revenues increased by 10, 4%.
Same property cash NOI increased by 10, 7%.
<unk> increased by 15, 4% to <unk> 50 per share, mostly driven by both office and residential revenue increases partly offset by higher expenses.
And <unk> increased 22% to $94 $1 million.
Our G&A at only four 7% of revenues remains very low relative to our benchmark grip.
Turning to guidance, we are raising our <unk> guidance for 2022 by one.
To be between $2, <unk> and $2 eight per share, which reflects an increase from our recent acquisition, partially offset by higher interest rate assumptions.
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 acquisitions dispositions or financings.
I will now turn the call over to the operator, so we can take your questions.
Thank you Carl Q&A, if you'd like to ask a question. Please press star followed by one on your telephone keypad now.
And your mind, Please press star followed by too.
I'm just trying to ask a question. Please ensure your phone is on mute locally and again in consideration of other participants. Please limit your questions to one question and one follow up thank you.
Our first question today comes from Jamie Feldman from Bank of America. Your line is open.
Great. Thanks, Thanks for taking my question.
I guess I just want to go back to your first comment you said strong demand from affluent small tenant base and increasing interest from larger tenants can you talk more about the leases you did sign in the quarter and how the pipeline looks today do you think you can maintain this 800 plus thousand.
Leasing volume, especially given your exploration start to moderate going into the back half of the year.
Hey, Jamie.
Like I said, a strong quarter for leasing we signed 246 office leases, which is.
A real good number for them much like we're seeing.
Demand from small tenants.
The larger tenants for us, which I think are small for most people.
Larger for us so really good quarter and the pipeline is still still remains healthy.
We're happy about that.
I mean would you say is there anything you can tell us about who is actually signing leases now and there are different sectors are there tenants that had been on the sidelines for a while.
Especially on the larger side and then also.
Now what does the pipeline look like today than maybe this time last quarter.
I think one of the strengths of our portfolio is how diverse our tenant base and the demand drivers. We have here and that continues to be true. We put that nice pie chart in the supplemental for you guys that shows kind of all the industries that we have and we haven't seen any real material changes to those to those groups were still good demand kind of across the board.
From all of those industries that we've typically had so no no notable shift there that I would point to.
We're in kind of a slow business here, we don't we don't call out individual leases.
We're doing a lot of transactions.
Really three four office leases so that continues to be the case and we're seeing good broad based demand.
And you say the pipeline is still there.
And today it is as good as it was three months ago like you could easily put up similar numbers next quarter.
Yes, I'm not going to make a prediction for Q2 or early in the quarter, but the pipeline remains healthy.
Okay alright, thank you.
Our next question comes from John Kim from BMO Capital markets. Please go ahead.
Thanks. Good morning, I was wondering if you could share any characteristics on your new joint venture.
On our multifamily.
Any characteristics about the partner that you are with how big can this on B is it a one off acquisition or are you pursuing.
Other type of acquisitions.
Acquisitions.
Hey, John its Kevin.
The partners and existing sovereign partners that we haven't.
Our other joint ventures and.
We haven't missed anything.
For a model, where we've got a plan to go out.
I assure you a lot of multifamily.
Certainly.
And asset class.
Get larger.
Properties.
Kind of the right size of units, where we're all over it and very aggressive.
I don't think your question.
This is Jordan.
It's not a problem of having that money available. If we if we set up a fund to do additional deals and we have an obligation to feed it with deals.
More of a problem of finding the deals I don't think theres any problem, having access to the equity to do the deals.
So when we when they come up it's easier to make calls and then we have a partner.
I was just wondering.
Our more luxury higher price point.
Asset than typical in your portfolio I was just wondering if you were targeting the higher end.
On the market.
We definitely are.
We definitely are.
So all the way across our portfolio of broken office and residential.
We're trying we're targeting the high end and Thats, what is a fantastic fit for us.
We just don't sell.
The top end, we own other staff here along the coast. We're doing work on that is at the top end.
All the moves we've made have been to happen.
The highest and the most premium residential and office portfolio.
You mentioned doing renovations on the assets.
You described the timeline of that will that be as the units.
Because I would imagine that turnover in that asset it's pretty low.
The turnover was a little lower in this asset.
We're just continuing the program that the previous owner started where when we get back a unit renovation.
Spending money to upgrade it and then re leasing.
Okay.
Great. Thank you.
Our next question comes from Manny Korchman from Citi. Your line is open.
Hey, Jordan just following on that line of question about the renovation program how much money do you.
Intend to put into the asset by the time that program is done and how should we think about sort of a yield on that incremental capital.
Most.
Hi.
As I said in the past most of these deals are yielding over 20% on putting the capital into the buildings.
Just wanted to check any different.
I suspect, we'll put something less than $20 million into the project.
It'll be within that range.
There's also work for joining us.
Every time, a new deal, we just bought to the lobby.
And to the arrival experience.
Yes.
But I think well.
Small dollar should make a big difference.
And then I appreciate the point on moving to sort of the higher end of the market on the resi stuff. If that's the goal why not take this one on wholly owned and JV. Some of your sort of more run rate probably go on for a while.
And have the.
Public investors exposure to the high end would be higher and the JV exposure to sort of more of the commodity market.
We don't have a lot that is commodity but I will tell you that.
Your line is open.
We also like having those projects.
VITAS allowance.
So you can compare it.
The agreement with them.
It's much harder to put a joint venture together, where I'm selling something it's much easier when we're buying something we're all going in at the same price. That's a really easy phone call. We have documents done.
Good people.
Okay, Here's what we're going to do I'm going to buy this which obviously would be one part of that I'm always going to put each other thing Ken which then have to value those and they are not trusting me to do the valuation cabana outside values.
Color just a hardware deal with LNG, Canada.
And I might've missed this but have you spoken about the cap rate valuation on on this purchase.
Okay.
Now for the past nine along with cap rates.
I think that this thing will stabilize somewhere in the mid fours, but we're going we're going in in the low threes.
Okay and then one quick question for our.
Oh excuse me for Stuart.
Stuart just the the spread between occupied space and lease space has widened a little bit.
In the past you've talked about that being attributed to sort of lighter traffic just on the tour side is there anything to note on that or or when does that inflection point come where that flips.
But you are talking about the leased to occupied spread Manny.
Right Yeah.
Yes, so yes, we have seen that gap out its kind of its all time high which I mentioned.
Obviously, I hope that we continue doing a ton of leasing all of these future orders and that stays elevated but we're probably likely to see it moderate really what we've what we've seen is that during the during the pandemic.
The slowdown.
Stretched out our build times, a little bit so it's taken us a little longer to get folks moved again, so thats caused that that gap is a little wider than we're used to.
Thanks very much.
Okay.
Our next question comes from Steve <unk> from Evercore ISI. Please go ahead.
Thanks, Good morning.
Sure and I guess I, just wanted to understand a little bit more kind of the absorption trend and I guess I was a little surprised that given the strength in the leasing you know you had over 300000 square feet of new deals and you had very good renewal activity.
I look back to your fourth quarter supplement it only showed about 475000 square feet expiring in the first quarter. So.
You did.
Almost double the amount of activity and yet absorption and and you know the lease trade only went up 10 basis points. So I'm just trying to figure out what am I missing in the math here and you know if you continue at this pace or what pace do you need to actually see more absorption than kind of 10 basis points a quarter.
Well.
But what I will tell you. This we know that the first half of the year, it's very tough I don't know.
Exactly Greg I don't want to get too much in the numbers and I don't know what number youre pulling but we knew we had a huge role first quarter and we have a pretty good road second quarter and then we have a more mild second half of the year. So if you would've told me that we were going to get it all positive during.
The first quarter with leasing I I was.
Definitely happier than you are about it I mean, I was thinking we're going to need to do a lot of leasing to get this to be a positive quarter and as Stuart said, we're still seeing a pipeline that looks that way, which is fantastic news.
So I consider the leasing that was done during the quarter and the fact that we actually have that amount of Rowley at what we did 901000 feet of a positive 10 basis points and that tells you. There was a lot of what's going on there.
Right.
It was a matter of pulling leases from other.
Are there places than you would've been a lot more but we had a tough quarter.
So.
That was a not only a fantastic quarter, great job done by that created that but also a good sign that it's a very lively market right now and that's the main thing I've been looking for is like are there people out there they're backfill until this thing up.
And we saw that we've now seen now for three quarters in a row really probably for horse in a row.
But for sure three cars now take this quarter so.
Great.
As long as the rest of the economy and everything holds in the recovery keeps growing I'm feeling very good about directionally, where we're headed in terms of doing job, one which is refilling.
Refilling up the portfolio the losses that we took.
Got it.
Okay, well, we can certainly follow up offline and go through page 19 of the supplemental in more detail I guess as it relates to the landmark.
When we toured the asset I guess in late March you were having some very early success on the rent you are achieving against your pro forma is Ken is there anything you can just sort of share with us on the volume and kind of the pricing since that time.
Yes, well.
Yes, we're still having that success.
I mean people are people are are moving an and.
And we're really pleased with the leasing that's going on there I mean, we gave you interject.
Changing it from saying, it's going to take two years to lease up the project, but all signs are that we will make it in two years or maybe we'll do a little better and I'm sure. We'll make it within two years for sure now and we're getting rates that are substantially above when we start construction until what we expected.
Okay. Thanks, that's it for me.
Our next question comes from Kona Mitchell from Piper Sandler Your line is open.
Okay.
Hi, Thanks for taking my question.
So given the success and outperformance in Brentwood, Bishop does it make you want to accelerate the next round of projects.
Well.
Probably always wanted to accelerate the next round of projects that unfortunately for the last periods of Covid and all the regiment that JD has been ended deceleration phase.
I'm not even sure municipalities are totally back at the office, yet even to respond to things.
We just started meaningfully having meetings again and they're often with council members and various people.
Okay.
Here in L. A so.
We're not an island, we tend to do on our own all of these things take agreements for cities and.
They're just they're just back now but of course I mean, we.
Have.
Even though.
I think with inflation and contraction caused prices have gone up we have a tremendous leap.
Pipeline.
Very low hanging fruit for particularly residential construction on property that we already own.
But getting it through the system and getting permits and getting all that done just take some time as we are.
As we've been saying all along but you are right of course business been Super successful and we love to do more quicker.
Yeah.
Okay, great. Thank you.
Yeah.
Our next question comes from Blaine Heck from Wells Fargo. Please go ahead.
Great. Thanks, Good morning, Jordan just to be clear on the initial cap rate you quoted on 12 21 into low threes does that cap rate include management fees that you guys will be paid by your partner or is that just on the NOI.
Well, it's a cap rate.
Of course, it includes property management face if Thats your question.
I mean cap rate is.
Divided by the purchase price so you take the going in NOI.
Whatever expenses are allocated one building I mean and divided that's what it is.
Understand your question.
Management fees for the venture Yeah, I'm I'm just asking.
Yeah.
Promoter in asset management fee or something like that no. It doesn't include that.
Okay. Okay. That's helpful.
And then second question can you just talk about any interesting trends youre seeing in your valley markets are you seeing any incremental demand from companies that may want to have a location in less of in an urban environment or or less density is utilization any different in the valley in and I guess you know how do you just how do you see those markets bearing during the return to office.
Relative to the west side.
Well.
Sort of that and say no.
Sherman Oaks strip is doing well.
And it's always kind of.
Followed a pattern of west the west side and extend its hard to build there. It's got really high end housing nearby.
It's got a lot of them are manageable on Ventura Boulevard area, so kind of.
Finally, and I've said that I don't know if Ive stated on calls I mean, you guys know that I spent 15 years, making excuses for Warner Center acquired a few years ago, we stopped having to make excuses for why because it came back strong basically why was probably one of our strongest markets all the way through that.
Nick.
And now finally, finally theres great stuff happening at Warner Center, we kept getting hit with.
New supply of La office, and that's over and now we're seeing.
More than one deal or multiple deals shifts some companies out there whether it be for studio space or.
Take a big plus.
I don't think it's a secret that the ramps or put you in a practice.
Right literally right next to Warner Center, we will be looking down at the practice feel that they're building.
And so that takes all of that and clean that up there is another project that was office that I think is probably going to convert to residential so that will clean that up so there's a lot of and then there is as.
As I said, there is Amazon and some others that are moving into that made commitments to that area for <unk>.
Very robust still.
It's higher a lot of people use a lot of people right around them. So.
One good piece of news after another in that area.
So I'm very optimistic and by the way, we've been saying for a while that the residential development in that area has been stunning and it's still going if you go there you will see residential being built everywhere, but now you are saying all the.
Other mandates like a lot of retail additional retail total retail centers Big Bell and then Youre seeing the fact that some larger users like I just described going out there, saying this is whether it be newswire players or those of our coaches are this is where this.
This is where the studio people are now building their facilities out there to be next to their people. So that's all going to make a huge difference for us.
That's great color. Thank you.
Our next question comes from Rich Anderson from SMB, Sir. Please go ahead.
Thanks, Good morning.
So can you.
Give us some color on the latest sort of cadence of tenet behaviors in la.
Area, you know as it relates to rent relief applications and all that all that noise.
You know whether or not this may be closing in the last time, we have to have this conversation, but just just curious what the latest.
Observations are.
Well.
We said to you quite a while ago that our defaults will be less than 2%.
At this point, we probably already less than 2%.
Still we'll collect even more.
So.
Feeling pretty good we're going to collect.
Super majority of that money, that's Oh do I send the money that's hard to answer is down to a much smaller number than it used to be so.
So as I said as I have said and I'll say right now I don't think the rest of your collections are going to show up in any meaningful way.
Showing you guys.
That's coming in and it's causing it or it's been put into new deals or whatever the case has been but it.
<unk> been vanishing fast.
So.
I don't think I think to two big things number one but there are three things when we went into this recession.
And then this pandemic recession went out there where there were three big impacts on day one.
Obviously lots of occupancy loss of lease rate, which we've been talking a lot about on this call which we.
<unk>.
For sure it turn that corner and we're doing a lot of leasing and we need to just regained market.
That those tenants.
It was the hit we took in parking which has been coming back we.
We had a very strong come back for a while now a lot of people back, but they had a lot of months day on their on their parking spaces, they're using them now we're seeing our part D watchful and I think we'll capture the rest of that money as long as the economy keeps going the way it's going.
Reasonable good reasonable time frame.
And the last thing was the fact that you know you were.
I never imagined that the government told people not to pay their rent that was kind of craziness right.
So.
Did some bid in and even the one that the ones that did and are now paying and paying back rent on some kind of programs are we're making deals and we're down to a very we're not down to big numbers left where we have to make deals with people or do something about what they owe us. So all three of those metrics, which were they yesterday.
It took our all back we're heading in the right traction.
I recall the old rent was I don't I might have this is completely around 50 or $60 million.
What's that number now.
Or like closer to half that.
Okay.
Great.
Yes.
Okay.
Second question.
You mentioned you know we're prepared for the opportunities that inflation brings.
I wonder what that means in terms of the opportunities and specifically.
It's 12 21.
One such opportunity, meaning perhaps.
Full of people interested in buying it got smaller you can do it you had the money to do it are those is that what you mean by opportunities that you stand out relative to the competition to buy stuff or you know.
Maybe you could just kind of clarify what types of opportunities come from an inflationary environment for you.
Thank you Scott from inflation and for real estate.
The classic one instead.
Perfect hedge against inflation right, so real estate tense, because it's a leveraged asset real estate tends to early COVID-19 hit with higher interest rates, but then as things calm down again, you end up with.
<unk> growth and value, which comes from the fact that rents are up and all the rest of it is up and so so that's one opportunity that just happens inflationary environments tend to on the mid to longer term being very good real estate.
The second opportunity is property is coming available people there.
Kind of as good along with very low leverage that maybe they hadn't been run the buildings to get the maximum cash out of it and now all of a sudden the cost of that leverage not putting them in jeopardy of losing their building, but the crossover leverages going up and they are saying to themselves Wow.
G E.
Around my building better to deal with the fact that my desk to me a little more maybe I'm just tired of this and it just highlights once again.
Maybe there's an opportunity to get out of the building.
There's a lot of value there and might bring some more stuff for sale, that's what we're hoping for.
So it was 12 21.
Tethered to the environment or.
Is that why it why it why it came free or maybe not.
I take 12 20, well try 12 21 was basically no that wasn't the concert trial 21, I think 12 21.
No it wasn't.
That said the seller didn't feel it was the right fit it was a very good fit for us and we were able to negotiate a deal that made everybody happy.
Okay. Good enough thanks very much.
Yeah.
Our next question comes from Dave Rodgers from Baird. Your line is open.
Yes, good morning out there I think last quarter, you said something to the effect of expect most of the deferral to come back in the way of blend and extend transactions or at least kind of model. It out that way as you go forward can you talk about maybe the impact of those transactions on the leasing economics that are that you've quoted and I guess the second part of that question is just trying to kind of reconcile.
Same store cash revenues between last year and this year, there seemed like a bigger delta maybe of where you're collecting a little bit more on the cash side. So those two questions. Please.
Well I think the main reason, we're expecting more on the cash side is even if people owe us money pretty almost everybody's come current.
So let me so people that were paying US Japan is now and what we're dealing with is the part that they owed us.
So that's going to make a big difference.
Uh huh.
Does that is that what you're asking meaning that they are paying this month's rent and continuing to pay on a regular bed and then they have some amount that they owe us from the past this is Peter.
And.
So we're working through with that in the past amounts when you were talking a blend and extend I mean, you know what.
Typically what we do is we recognize the outstanding balance.
And come up with a payment program and then the new.
New lease is a new leased it stands on its own it at market rates.
Yeah.
And I guess to that last point, Peter Thats, what you are really kind of quoting from a cash spread its not really reflecting kind of a higher rent and past due collections in those numbers.
That's correct.
Quoting just the lease.
Not they are not dependent on program and our spreads.
Yes, I think that answered both questions. So thank you.
We have a follow up from Jamie Feldman from Bank of America. Please go ahead.
Thanks, you may have just answered, but maybe I didnt hear it right or misunderstood dancer. So your leasing spread spiked up to kind of minus 3%.
This quarter on a cash basis, they were as low as minus 9% last quarter and they've been kind of on this sequential quarterly decline I mean, how would you explain that move.
Our leasing spreads are on the sequential quarterly increase phenomenon decline.
No I'm, saying last quarter I think it was minus 9% cash this quarter. It was minus three cash.
Your you know so there are improving too.
Yes, they are improving.
Number that number is that number tells you something but I wouldn't grab it too tight because depending on what rolls in any particular quarter that number can really jump around but generally as things recover that number hopefully it turns positive again I think more what's reflected even in the minus nine non cash but in.
And the fact that the straight line is now up.
During the pandemic.
I know you can go and beverage Jamie people kept asking what's happening with French why that's happening with rents and we said.
Rents are as far off as you might think.
And in fact.
Not sure rents.
Fell off such a huge amount.
They fell off and we gave you the best of what we could get to those numbers and that's what this is a proxy for when you do roll up roll down and all the rest of it but they haven't fallen so all of these numbers because youre doing remember our leases have very big bumps in them. So when you say ending cash and could just starting cash 3% difference that's one.
One year.
Beyond that you're saying you still got your four years of growth that you got from where that lease was signed.
So that's a good thing to tell you Hey, Pete.
People are coming back and rents are not I mean, it doesn't rents are not going not meaningfully different.
And we're seeing that you are seeing it.
And I think the straight line comparison gives you the total value of those at least compared to the prior lease.
He knows positive spreads we don't have a lot of free rent anyway. So it's really giving you pretty good measure of the change in value of the lease.
Okay, Yeah, I, just I'm thinking about your messaging over the last year or so and you kept talking about well if we can get to you know.
Extra occupancy in the portfolio, we can really start pushing rents.
Is that.
No.
No I think Ted.
Hey, Ed.
It's one thing to push rents, it's another thing to not lose ground on rents and I. Just don't think we've lost as much ground as you might have thought through that.
Over the last two years and now we just need the lease portfolio, but I will also say.
I'm happy that we arent, losing as much in rental rate.
The thing that we wanted to lease.
Lease up the portfolio.
That's the job.
Okay. So it sounds like they takeaways, it's it was definitely a better quarter, maybe its not dead.
Trying to think is written in stone for the going forward, but things do you feel better.
Yeah don't use this one quarter at a curve.
In my opening it's there.
They're going to be choppy quarter to quarter will have this number moves around a lot depends on.
We have such a mix of leases signed in the quarter. So don't yes don't use this as the curve going forward, we're happy to have improved.
It's not smooth sailing.
Very good leasing quarter.
I hope every quarter of the next quarters does this go ahead, but.
Every recovery.
No recovery, perhaps in a straight line.
Okay, and then do you have any updates on some of your larger exploration this year and next year.
Just in terms of known move outs that we didn't know about three months ago.
No nothing noteworthy we I mean, we have pretty steady roll, we always have some of our larger guys rollout so no nothing.
Nothing that's noteworthy.
Okay, great. Thank you.
Our next question comes from Bill Crow from Raymond James Your line is open.
Yes, good morning out there guys and thanks for the time that last discussion National led me into my two questions that I had in the first one is towards you talk about ramps not really going down, but do you see more tenants, leaving because of asking.
Asking rents or lack of tea is or I guess is there any reason why.
Any commonality.
The reason why tenants don't renew.
<unk>.
Our renewal rate has been pretty steady and it's been pretty good matter of fact, oddly last year it was higher than normal.
The reason for the loss.
<unk> trade has told me to do with the fact that the new tenants weren't moving around as much. So they were moving less now they're moving bar now we're getting more new tenants. That's why we you guys have gotten focused on that number but I mean, the reason I said it was such a spectacular quarter is 300, what are the 330000.
No that's fine.
Fantastic quarter.
330000, due to new so it's that new number is the key number to grow as backup.
We held steady very good on a renewal.
And the new number is also a good sign if you say, what's going on with the economy, what's going on with people going back to work, Okay Youre going to see all of that is a new number.
Well Bill when we survey our tenants moving out Theres obviously.
There's a million reasons why tenants move out, they're shrinking or growing or theyre gone out of business or they're moving.
We are a market something like that and we're getting the same list of reasons. Why you guys are moving out and there's no major shift in that.
It's still a big brand for different reasons.
Right.
And then Jordan you just mentioned you look at the new leasing of the size of the local economy. So where are we relative to 2019, whether it's based on a new leasing or backed office rates of parking revenue.
50%, 75% back of what we've lost where are you in the momentum and scale.
Well.
[laughter].
And income because a lot of the stuff we've done we're almost catching onto 2019, but we've done a lot of new business. So when the whole company is up to a full tilt, we're going to be breaking some pretty spectacular numbers, but we got it.
Okay, you can't ignore the fact that.
We're still down almost 600 basis points, and that's a lot of money and as that recovers.
That's going to make a try its gonna make a giant difference I mean park.
The rest of these all other numbers will pay an extra that number I mean, that's what we keep when I keep pointing out but it was all around the fringes as the good news is <unk>.
Huge new tenant activity rents are still there and going strong.
And you know every sign is dead.
And I keep saying as long as the economy holds but every sign is that with this economy. We're on a we're on a really good trajectory.
And you're not getting into political pushback or or.
Do you feel better about the overall environment I guess today.
Well.
But certainly the environment to improve politically in terms of removing rent moratoriums and stuff like that.
I'm not I mean I'm not alone.
The politics, but.
That's.
Not my number one problem at the moment.
Right.
Listen thanks for the time appreciate it thanks guys.
Our final question comes from Daniel Ismail from Green Street. Your line is open.
Great. Thank you, maybe just going back to the acquisition in Santa Monica.
I'm just curious is that a rent controlled building and if so how many units are.
Currently well below market, if you're able to share that in particular.
A good number of them but.
It is a rent control.
Building.
Right.
I'm not sure that rent control places bigger role in that building as it has in other buildings I mean, some of what's happened in that building is that.
Rents have just moved up very quickly so.
Even maybe deals that were done during the pandemic or earlier are pretty far off the market of where current rents are.
So as those roll will pick that up that's why there is such a meaningful spread between the going in cap and what I would call the stabilized cap.
Okay.
Got it and then Jordan I appreciate the comments on inflation and interest rates I'm just curious.
Have you guys noticed any tangible price movements, either on the office or residential side in terms of <unk>.
Cap rate movements due to the rise in rates.
I don't think there's been enough in the way of transaction I mean, this is a phenomenon that's investors two months old.
So I'm not sure Theres enough transactions just show that took place where theres a lot of transactions, where I think youre going to youre seeing in the world already slowed down is in and cash out homes.
Single family homes.
I think Dave.
That move in interest rates is effectively that's very quickly slow down the.
Trajectory.
Pricing on transactions around the single family home market.
Got it thanks for the color.
Alright.
We have a follow up question from Steve <unk> from Evercore ISI. Please go ahead.
Yeah. Thanks, just a quick one Jordan I guess there was a story of an article about a potential mansion tax in in L. A that would really go to fund homeless issues and I mean, the article weeds as if it's just on housing that's over like 10 $10 million I just wanted to be certain that that was truly on how.
Housing and nothing on commercial.
Yeah, I think that's a transfer tax so calling it a mansion taxes, a little bit of a strange name for it I think it's just like in many other cities. It's a transfer tax that was proposed and it'll have to make it through the PPP.
People are kind of negative on taxes, right now and that might be one more thing we got to look at all this stuff and see.
How to fight these various things, it's just a transfer tax.
Okay, but just on single family not on either your type of residential and certainly not on commercial is that correct.
To my knowledge and I saw what you send me, which was so which I suspect is just extremely misleading that article.
To my knowledge, it's just the transfer tax.
Doesn't matter if the house is industrial or anything else is just a transfer tax.
Right.
The way they described it in the article you sat in Maitland, so odd that.
Absolutely I Havent heard of there being something just on management's even though that's the way that newspaper happen to describe that.
Okay, great. Thanks.
We have no further questions I'll now hand back to Jordan Kaplan for closing remarks.
Okay, well. Thank you all for joining us and we will be doing that in a quarter.
Today's call is now concluded. Thank you for your participation you may now disconnect your lines.
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