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    DEI
    Earnings call· Jun 2026(Q2 FY26)

    Douglas Emmett Q2 FY26 earnings call DEI

    Aug 5, 2026 Source

    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

    3
    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

    2
    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%
    		————

    Operational metrics

    6
    Total Revenue
    $257 millionup from $252 million in Q2 2025
    Q2 FY26

    Compared to the second quarter of 2025, revenue increased from $252 million to $257 million.

    AFFO
    $56 millionup from $54 million in Q2 2025
    Q2 FY26

    AFFO increased from $54 million to $56 million.

    G&A as % of revenue
    4.9%
    Q2 FY26

    At approximately 4.9% of revenue, our G&A remains the lowest among our benchmark group.

    Cash on balance sheet
    $355 million
    Q2 FY26

    The company has $355 million of cash on the balance sheet.

    All-cash IRRs on 10-year look
    10% or better
    Long-term

    All-cash IRRs on a 10-year look for acquisitions are estimated to be 10% or better, a level not seen for a long time.

    Office leased-to-occupied spread
    470
    Q2 FY26

    The leased-to-occupied spread for the office portfolio widened to 470 basis points, indicating strong leasing activity that will translate to future occupancy.

    Industry KPIs

    6
    MetricValueDetails
    Occupancy rate>99%%
    Same store noi growth-1.2%%
    Investment volume closed$260 millionUSD
    Leasing bookings volume signed960,000sq ft
    Ffo core ffo normalized ffo per share$0.37per share
    Lease renewal spread re leasing recapture3.2%%

    Deals & partnerships

    3
    Joint Venture partnersAcquisition 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 lendersRefinancing of a $400 million office loan$400 million4 years

    Refinanced in May, extending maturity and fixing interest rate.

    Various lendersRefinancing of a $415 million office loan$415 million4 years

    Refinanced in June, extending maturity and fixing interest rate.

    Capital programs

    3
    Studio Plaza Redevelopmentin-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 Projectson 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 Redevelopmentslowed 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

    2
    Impact of higher market interest ratesFull-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 percentagesNext 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

    5

    Office leasing volume and absorption

    Second half of the year
    Current960,000 sq ft signed, 60,000 sq ft positive absorption in Q2
    TargetContinued 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.

    Q&A highlights

    6

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.