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Douglas Emmett (DEI) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Real Estate· Aug 5, 2026

Source: earnings call transcript

Executive summary

Douglas Emmett Q2 FY26 — Strong Leasing, Strategic Acquisitions, and Debt Refinancing

Douglas Emmett delivered a robust quarter marked by significant office leasing activity and strategic acquisitions, including a prime Beverly Hills medical office portfolio. While operational improvements are noted, the company faces headwinds from higher interest rates impacting its full-year earnings guidance. Management is actively pursuing further acquisition opportunities, leveraging current market conditions.

Highlights

5

  • Signed 960,000 square feet of office leases, achieving 60,000 square feet of positive absorption.

  • New office leases were 3.2% more valuable than expiring leases.

  • Acquired the Bedford Collection, a 246,000 sq ft medical office portfolio, for $260 million with JV partners.

  • Refinanced over $800 million of debt, fixing interest rates until June/July 2029.

  • Residential portfolio remains over 99% leased with cash same-property NOI up 2% YoY.

Concerns

3

  • Lowered full-year office occupancy guidance to 75%-77% due to Studio Plaza inclusion.

  • Higher market interest rates are expected to offset operating income improvements, leading to negative diluted net income guidance of -$0.20 to -$0.16 per share.

  • Fully diluted FFO per share guidance for FY26 is $1.39-$1.43, impacted by higher interest rates.

Guidance & targets

CategoryTargetConfidence
Office occupancy
75% to 77%
medium materiality
Medium
Diluted net income per common share
negative $0.20 and negative $0.16
high materiality
Medium
Fully diluted FFO per share
$1.39 and $1.43
high materiality
Medium

Segment performance

SegmentRevenueYoYQoQMargin
Office Portfolio
Strong leasing momentum with 234 office leases signed. New leases were 3.2% more valuable than prior leases for the same space. Lease transaction costs are well below benchmark. The leased-to-occupied spread widened to 470 basis points.
Leases signed: 960,000 sq ftNew leases signed: 375,000 sq ftRenewal leases signed: 584,000 sq ftPositive absorption: 60,000 sq ftNew lease value increase vs expiring: 3.2%Lease transaction costs: $5.35 per sq ft per year
————
Residential Portfolio
Continues to perform well with strong demand and high occupancy. Rent growth is expected to normalize towards long-term trends after a period of exceptionally high growth.
Cash same-property NOI growth: 2% YoYLeased percentage: >99%
————

Deals & partnerships

Joint Venture partners Acquisition of 5-building, 246,000 sq ft medical office portfolio (Bedford Collection) $260 million

Acquired in April in the Beverly Hills Golden Triangle. Douglas Emmett manages the joint venture.

Various lenders Refinancing of a $400 million office loan $400 million 4 years

Refinanced in May, extending maturity and fixing interest rate.

Various lenders Refinancing of a $415 million office loan $415 million 4 years

Refinanced in June, extending maturity and fixing interest rate.

Capital programs

Studio Plaza Redevelopment in-service

Benefit:now leased well over 50%

Studio Plaza in Burbank has been moved from development to the in-service portfolio, now leased well over 50%. Its inclusion will temporarily widen the lease-to-occupied spread and lower reported leased/occupied percentages until its occupancy equals or exceeds the portfolio average.

Apartment Redevelopment Projects on track

Benefit:over 1,000 new units

Apartment redevelopment projects are on track to add over 1,000 new units to the residential portfolio.

10900 Wilshire Redevelopment slowed down to explore office opportunities
Start: possible to start this year

Benefit:mixed-use project (residential and office)

The 10900 Wilshire redevelopment project has been purposely slowed down to explore potential for large office tenants, aiming for a mixed-use project. All money for the project is funded and ready to go.

Risks & headwinds

Impact of higher market interest rates Full-year 2026

Expected to offset operating income improvements; leading to negative diluted net income guidance of -$0.20 to -$0.16 per share and lower FFO per share guidance of $1.39-$1.43.

Mitigation:Management is actively thinking about solutions; low leverage position means buildings are not jeopardized; current high rates are also creating acquisition opportunities at attractive pricing.

Studio Plaza inclusion temporarily lowers reported leased and occupied percentages Next few quarters

Office occupancy guidance lowered to 75%-77%.

Mitigation:Studio Plaza is already over 50% leased and leasing up rapidly; expected to reach average occupancy over time, which will resolve the temporary drag on portfolio metrics.

What to watch in Q3 FY26

Office leasing volume and absorption

Second half of the year
Current 960,000 sq ft signed, 60,000 sq ft positive absorption in Q2
Target Continued strong momentum and positive absorption

Why it matters

Sustained leasing activity is crucial for office portfolio recovery and NOI growth.

I think we're very optimistic that we're going to have good momentum continue through the second half of the year.

Find out whether DEI delivers this. Inve re-checks your case every morning.

Q&A highlights

Can you elaborate on the strong leasing activity, particularly new leases, and your expectations for the second half of the year?

Management confirmed strong momentum over three quarters, noting Q2 was less chunky than Q1 but still robust, and expressed optimism for continued momentum in H2, driven by a healthy mix of large and small tenants.

“I think we're very optimistic that we're going to have good momentum continue through the second half of the year.”

asked by Steve Sakwa · answered by Stuart McElhinney

2 min read 6 chapters

Detailed narrative

Office Leasing Momentum

The company reported strong office leasing activity for the third consecutive quarter, signing 960,000 square feet of leases, including 93 new leases totaling over 375,000 square feet. This led to positive absorption of 60,000 square feet and new leases being 3.2% more valuable than prior ones. Management expressed optimism for continued momentum through the second half of the year, noting a healthy mix of large and small tenants.

Strategic Acquisitions

Douglas Emmett, with joint venture partners, acquired the Bedford Collection, a 5-building, 246,000 square foot medical office portfolio in Beverly Hills for $260 million. The company holds a 13.3% equity stake and manages the JV. Management highlighted the current market as an opportune time for acquisitions due to favorable pricing, with all-cash IRRs on a 10-year look potentially reaching 10% or better.

Debt Refinancing Activities

The company refinanced over $800 million of debt during the quarter, including a $400 million office loan and a $415 million office loan. Both were refinanced for 4-year terms at effectively fixed interest rates of 6.15% and 6.18% respectively, extending their maturities to June and July 2029. Management is actively seeking solutions to mitigate the impact of higher interest rates on overall performance.

Residential Portfolio Performance

The apartment portfolio maintained strong performance, remaining over 99% leased with cash same-property NOI up 2% year-over-year. Redevelopment projects are on track to add over 1,000 new units. While rent growth has been exceptionally high in recent years, management expects it to normalize towards long-term trends.

Studio Plaza Redevelopment Update

Studio Plaza in Burbank, now over 50% leased, has been moved to the in-service portfolio. Its inclusion is expected to widen the lease-to-occupied spread for a few quarters and temporarily lower reported leased and occupied percentages for the overall office portfolio until its occupancy equals or exceeds the portfolio average. The project is leasing up rapidly.

10900 Wilshire Redevelopment Strategy

The 10900 Wilshire redevelopment project, which is fully funded, has been purposely slowed down. Management is exploring potential opportunities for large office tenants to create a mixed-use project, rather than proceeding solely with residential development. This strategic pause aims to maximize value by accommodating potential office demand.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.