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DE

Douglas Emmett Inc (DEI)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 results were mixed: revenue was flat year over year at $250.58M (slight miss vs S&P Global consensus $251.69M*), GAAP EPS was $(0.07) (slightly below $(0.063)), and FFO/share was $0.34 (in line with $0.341); AFFO fell to $51.96M as higher interest expense offset operational gains .
  • Same-property cash NOI rose 3.5% YoY, driven by multifamily (+6.8%) and modest office growth (+2.6%); management noted office benefited from property tax refunds that are expected to continue but are unpredictable in timing .
  • Office leasing volume underperformed expectations (840K sf signed in-service; 199K sf new) as a deeper-than-usual August slowdown extended into September; cash re-leasing spreads were -11.4% while straight-line spreads remained positive at +1.8% .
  • 2025 guidance was maintained/narrowed: NI/share diluted $0.07–$0.11 and FFO/share $1.43–$1.47; assumptions revised to slightly lower average office occupancy (78–79%) and better same-property cash NOI trajectory (-1.0% to 0.0%) .

What Went Well and What Went Wrong

  • What Went Well
    • Multifamily remained essentially full (98.8%) with strong demand; multifamily same-property cash NOI grew ~7% YoY .
    • Office same-property cash NOI increased 2.6% YoY, assisted by property tax refunds; total same-property cash NOI rose 3.5% .
    • Balance sheet progress: ~$1.14B of term financing executed since July at fixed or swapped rates (4.8% resi loans to 2030; $200M office loan swapped to 5.6% to 2030), pushing maturities out to 2032 and eliminating encumbrance on The Landmark Residences .
  • What Went Wrong
    • New office leasing materially missed internal expectations (199K sf new leases vs robust July pipeline), as decision-making slowed in late August/September; renewals were stronger with tenant retention above the long-term ~70% average .
    • Cash leasing spreads remained negative (-11.4% in Q3), reflecting healthy contractual rent bumps in expiring leases and a market not yet seeing broad rent inflation; straight-line spreads stayed positive (+1.8%) .
    • GAAP EPS missed consensus slightly on flat revenue and higher interest expense; AFFO declined to $51.96M (vs $68.84M in Q3’24) due to interest costs and elevated recurring capex/tenant improvements/leasing expenses .

Financial Results

Core metrics versus S&P Global consensus (estimates marked with “*”)

MetricQ1 2025Q2 2025Q3 2025
Revenue Actual ($M)$251.54 $252.43 $250.58
Revenue Consensus ($M)$246.49*$251.18*$251.69*
GAAP EPS Actual ($)$0.24 $(0.04) $(0.07)
GAAP EPS Consensus ($)$(0.055)*$(0.0588)*$(0.0634)*
FFO/share Actual ($)$0.40 $0.37 $0.34
FFO/share Consensus ($)$0.388*$0.369*$0.341*

Values with “*” retrieved from S&P Global.

Segment revenues

Segment Revenue ($M)Q1 2025Q2 2025Q3 2025
Office Total Revenues$202.10 $202.81 $201.06
Multifamily Total Revenues$49.44 $49.62 $49.52

Profitability and cash flow

MetricQ1 2025Q2 2025Q3 2025
AFFO ($M)$62.35 $54.47 $51.96
NOI ($M)$161.93 $159.65 $159.40
NOI Margin (%)64.4%63.3%63.6%
Same-Property Cash NOI YoY (%)(0.2%) (1.1%) 3.5%

Note: NOI margin is calculated from NOI and total revenues shown above.

KPIs and leasing

KPIQ1 2025Q2 2025Q3 2025
Office Leased Rate (In-Service)80.9% 80.7% 79.8%
Office Occupancy (In-Service)78.6% 78.0% 77.5%
Multifamily Leased Rate99.1% 99.3% 98.8%
Office Leases Signed (sf)753,371 944,312 839,630
New Office Leases (sf)275,977 275,197 199,141
Renewals (sf)477,394 669,115 640,489
Cash Rent Spread (%)(12.6%) (13.3%) (11.4%)
Straight-line Rent Spread (%)+0.9% +2.4% +1.8%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
NI/share (diluted)FY 2025$0.07–$0.13 (Q1) $0.07–$0.11 (Q2/Q3) Narrowed lower end; maintained mid-upper
FFO/share (fully diluted)FY 2025$1.42–$1.48 (Q1) $1.43–$1.47 (Q2/Q3) Narrowed toward mid-range
Avg Office Occupancy (assumption)FY 202578%–80% (Q1/Q2) 78%–79% (Q3) Revised slightly lower
Same-Property Cash NOI (assumption)FY 2025(2.5%)–(0.5%) (Q1/Q2) (1.0%)–0.0% (Q3) Revised higher (less negative)
Residential Leased RateFY 2025Essentially fully leased (Q1/Q2) Essentially fully leased (Q3) Maintained
Interest ExpenseFY 2025$260–$270M (Q1/Q2) $260–$270M (Q3) Maintained
Dividend2025$0.19/sh quarterly (paid Apr 15, Jul 15) $0.19/sh (paid Oct 15) Maintained

Earnings Call Themes & Trends

TopicQ1 2025 (prior)Q2 2025 (prior)Q3 2025 (current)Trend
Office leasing momentumPositive absorption; strong >10K sf demand Robust volume; leased vs occupied gap widening seen as healthy pipeline New leasing underperformed; decision-making slowed; renewals strong Mixed: pipeline intact but conversion to signings slowed in Aug/Sep
Property tax refundsNot emphasizedPrior-year refunds created tough comps; excluding, SP cash NOI slightly positive Refunds continue, impactful but unpredictable; office SP cash NOI flat ex-refunds Ongoing tailwind with timing risk
Multifamily strengthEssentially full; strong demand Full occupancy; same-store cash NOI >10% 98.8% leased; ~7% SP cash NOI growth Solid and durable
Office-to-resi conversions10900 Wilshire plan initiated Detailed plan; 320+ units; 10% yield on cost discussed qualitatively Expanded entitlements; 323 units; first units in ~18 months Increasingly central to strategy
Studio Plaza (Burbank)Re-tenanting above expectations Progressing; first tenant in; NOI impact later “Tons of entertainment deals”; confidence improved Positive momentum
Capital structureRefinanced $462M in Mar; extended to 2032/30 $200M office loan swapped to 5.6% to 2030 ~$941.5M resi loans at 4.8% to 2030; $200M office to 2032; unencumbered Landmark Extended maturities at competitive fixed rates
Demand by sector/regionBroad sector demand; legal/fitness noted LA multifamily strong vs broader LA commentary Government-related tenants (e.g., UCLA) lag; others healthy Selective pockets of weakness (public sector)

Management Commentary

  • CEO on leasing miss and pipeline: “While July was strong with over 300,000 sq ft leased, our typical August slowdown in new leasing was deeper than usual and lasted into September… Fourth quarter office leasing is off to a good start, but we're now hesitant to be encouraging until we complete the quarter.”
  • CFO on property tax refunds: “We continue to receive significant property tax refunds, whose timing varies unpredictably… Excluding property tax refunds, our office same-property cash NOI growth would have been essentially flat.”
  • CIO on financing: “In July, we refinanced a $200 million office term loan… swapped to a fixed rate of 5.6% through July 2030… In August, we closed eight new residential term loans… $941.5 million… fixed-rate of 4.80%… mature in September 2030.”
  • Strategy on acquisitions/JVs: “We have extremely good engagement from our joint venture platform… We can use our free cash flow to invest alongside our joint venture partners.”
  • Conversion pipeline: “We are finalizing plans for converting the existing office tower [10900 Wilshire] to apartments… first apartments… could be delivered in the next 18 months.”

Q&A Highlights

  • Leasing cadence and sectors: Management attributed the Q3 new leasing shortfall to a late-quarter decision-making slowdown rather than a specific submarket/industry; government-affiliated tenants (e.g., UCLA) remain slower, while other sectors are broadly healthy .
  • Expense/tax refunds: Q3 office expense run-rate benefited from refunds; some elements are one-time, others reset levels; further refunds expected but unpredictable .
  • Capital allocation and privatization: With stock undervalued, the company favors JVs and balance sheet financing over issuing equity; a go-private is not attractive at current valuation, and focus remains on shareholder value in public markets .
  • Studio Plaza: Strong demand led by entertainment tenants across sizes; several deals signed with occupancy commencing as buildouts complete; confidence increased materially .
  • 10900 Wilshire conversion economics: Management indicated confidence in risk-adjusted returns and referenced prior commentary around double-digit yield on cost as feasible over time (discussion context) .

Estimates Context

  • Q3 2025 vs consensus: Revenue $250.58M vs $251.69M* (slight miss); GAAP EPS $(0.07) vs $(0.0634)* (slight miss); FFO/share $0.34 vs $0.341* (in line) .
  • Prior quarters: Q2 beat on revenue and EPS (rev $252.43M vs $251.18M*; EPS $(0.04) vs $(0.059)); Q1 beat significantly on GAAP EPS due to JV consolidation gain ($0.24 vs $(0.055)) .
  • Implications: With guidance maintained/narrowed and tax refund timing volatile, Street models may trim near-term leasing assumptions (new leasing volume) but maintain multifamily strength and fixed-rate interest expense trajectories. Values with “*” retrieved from S&P Global.

Key Takeaways for Investors

  • Multifamily resilience continues to offset softer-than-expected Q3 office new leasing; same-property cash NOI growth improved to +3.5% YoY in Q3 from negative in 1H .
  • Office fundamentals show stability (positive straight-line spreads), but new leasing conversion is pacing-sensitive; watch Q4 execution given a better start to the quarter per management .
  • Balance sheet derisking advanced: ~$1.14B of fixed-rate/hedged financings at 4.8%–5.6% extended maturities; focus turns to remaining 2026 maturities .
  • Conversion optionality is a differentiator: 10900 Wilshire and broader entitlements (8,000–10,000 potential units across sites) can reduce office exposure and compound multifamily value over time .
  • Guidance suggests steady FFO/share with slightly lower average office occupancy and improved SP cash NOI trajectory; dividend remains covered (AFFO payout ~75% in Q3) .
  • Trading setup: Narrative likely hinges on 1) Q4 leasing follow-through, 2) visibility into ongoing tax refunds, and 3) execution milestones on Studio Plaza and Wilshire conversion (leasing/permits/phase timing) .

Additional References (Q3 2025 documents)

  • 8-K/Exhibit 99.1 earnings package with results, guidance, and portfolio detail .
  • Earnings call transcript with prepared remarks and Q&A – (alt version –).
  • Press releases: earnings posting (Nov 4), earnings date (Oct 1), dividend (Sep 6) .