Douglas Emmett, Inc. (NYSE:DEI) Q4 2022 Results Conference Call February 8, 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

Blaine Heck - Wells Fargo

Michael Griffin - Citi

Alexander Goldfarb - Piper Sandler

Steve Sakwa - Evercore ISI

Nick Yulico - Scotiabank

John Kim - BMO

Dylan Burzinski - Green Street

Tayo Okusanya - Credit Suisse

Dave Rogers - Baird

Rich Anderson - SMBC Nikko

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Douglas Emmett's quarterly earnings 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 Investor Relations for Douglas Emmett.

Stuart McElhinney

Thank you. Joining us today on the call are Jordan Kaplan, our President and CEO; and 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 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 to be incorrect. 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 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, everyone. Thank you for joining us. For Douglas Emmett, 2022 was a year of real accomplishments in the face of notable challenges. In our markets, during the first three quarters, the impacts of COVID dissipated, we leased 3 million square feet and office utilization rates rebounded to over 80%. During the fourth quarter, as economic concerns grew, we saw a slowdown in new and renewal demand from large tenants. Fortunately, we continue to see good activity from the small tenants who dominate our markets and leased 770,000 square feet during the quarter. Overall, our absorption was slightly negative for the year. Given the macroeconomic climate, we believe it is prudent for our guidance to assume no meaningful recovery in office occupancy during this year. During 2022, the value of both our residential and commercial leases increased. Our straight line office rates were up 5.8% and our residential rents increased an average of 7.8%. In addition, our two multifamily development projects added 505 units to our portfolio. The current state of the national economy is challenging for all of us, but remote work, oversupply, the reliance on large tenants and concerns about reduced urban appeal seem to pose additional obstacles for some office CBDs. Fortunately, our markets, supply constraints, smaller tenants, short commutes and low reliance on public transit have supported relatively high leasing volume and utilization during the pandemic. This recent experience, combined with our industry diversification and strong operating platform, gives us confidence in the long term prospects for our markets.