Douglas Emmett, Inc. (NYSE:DEI) Q2 2023 Results Conference Call August 2, 2023 2:00 PM ET

Company Participants

Stuart McElhinney - Vice President of Investor Relations

Jordan Kaplan - President and CEO

Kevin Crummy - CIO

Peter Seymour - CFO

Conference Call Participants

Steve Sakwa - Evercore

Alexander Goldfarb - Piper Sandler

Blaine Heck - Wells Fargo

Michael Griffin - Citi

John Kim - BMO Capital Markets

Camille Bonnel - Bank of America

Dylan Burzinski - Green Street

Bill Crow - Raymond James

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Douglas Emmett's Quarterly Earnings Call. Today's call is being recorded [Operator Instructions].

I will now turn the conference over to Stuart McElhinney, Vice President of Investor Relations for Douglas Emmett.

Stuart McElhinney

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 Web site 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 Web site. 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 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 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 Web site. When we reach the question-and-answer portion in consideration of others, please limit yourself to one question and one follow-up. I will now turn the call over to Jordan.

Jordan Kaplan

Good morning, and thank you for joining us. Since we last spoke, we took two very positive strategic steps toward enhancing the long term health of the company and ensuring meaningful growth. First, we have formally begun the process of reconstructing our Barrington Plaza apartment community to install modern fire life safety systems and otherwise bring the asset up to date. Tenants have been notified that they are required to vacate the property and approximately half have already done so. This is having a current impact on our earnings, but we have waited three years to begin this process, and I am very happy that it has started. Second, July, we closed a new 10 year $350 million nonrecourse interest only loan secured by two recently completed residential projects. The loan is floating at 137 over SOFR, which we feel is a very good rate. Both properties were built using our free cash flow, so they were completely unencumbered. In a difficult loan environment, we are pleased to have this additional source of cash to take advantage of future opportunities. While new leasing from larger tenants has been slow, tenants over 10,000 square feet did account for nearly half our renewals in the second quarter. Overall, we signed 210 offices covering nearly 1 million square feet. We are seeing tenants renew further ahead of their expirations and for longer lease terms. This returns us to a more typical lease expiration pattern, reversing the short term mentality we saw during the pandemic.