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Douglas Emmett Inc (DEI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $245.0M, down 5.5% year over year; GAAP diluted EPS was $(0.01), FFO per fully diluted share was $0.38, and AFFO was $58.7M .
  • Same‑property cash NOI declined 4.5% on lower office revenues, partly offset by 6% multifamily growth; residential assets remained essentially fully leased at 99.1% .
  • 2025 guidance introduced: FFO/share $1.42–$1.48 and diluted GAAP EPS $(0.17)–$(0.11), with average office occupancy guided to 78%–80% and interest expense $260–$270M .
  • Strategic catalysts: signed 204 office leases in Q4 (796k sf) with improved large‑tenant demand; formed JV to acquire 10900 Wilshire and an adjoining resi site; closed $325M JV refinancing and a new $61.8M JV loan, both fixed in the 6%s .
  • Estimate comparison unavailable: S&P Global consensus data could not be retrieved at time of analysis, so beats/misses vs Street are not assessed (see Estimates Context) .

What Went Well and What Went Wrong

What Went Well

  • Residential portfolio remained essentially fully leased at 99.1%, providing stable cash flows despite office headwinds .
  • Large‑tenant demand rebounded to pre‑pandemic averages; Q4 signed 204 office leases (796k sf) including 242k sf new and 554k sf renewals, with straight‑line rent up 4% and leasing costs at only $5.46/sf/year .
  • Executed growth initiatives: JV acquired 10900 Wilshire with an estimated combined project cap rate above 10% post‑work; management emphasized operating synergies and robust development pipeline (Studio Plaza, Barrington Plaza) .

What Went Wrong

  • Topline and profitability pressured by lower office occupancy and higher interest expense: revenue fell 5.5% YoY, FFO/share fell to $0.38 (vs $0.46), same‑property cash NOI down 4.5% .
  • Warner Bros. move‑out at Studio Plaza created occupancy drag; management noted leasing/occupancy lag of 100–350 bps, delaying conversion of signed leases into occupied space .
  • 2025 outlook cautious: guided GAAP EPS negative and interest expense up to $260–$270M; average office occupancy guide (78–80%) implies muted occupancy recovery despite positive absorption ambitions .

Financial Results

Summary vs Prior Periods and Estimates

MetricQ4 2023Q3 2024Q4 2024Consensus (S&P Global)
Revenue ($USD Millions)$259.3 $250.8 $245.0 Unavailable
Net Income (Loss) Attributable to Common ($USD Millions)$(40.5) $4.6 $(0.9) Unavailable
Diluted EPS ($)$(0.24) $0.03 $(0.01) Unavailable
FFO per Fully Diluted Share ($)$0.46 $0.43 $0.38 Unavailable
AFFO ($USD Millions)$74.6 $68.8 $58.7 Unavailable
Same‑Property Cash NOI ($USD Millions)$149.1 $139.4 $142.4 Unavailable

Notes: Estimate comparison unavailable due to S&P Global access limitation at time of request .

Segment Breakdown

MetricQ4 2023Q3 2024Q4 2024
Total Office Revenues ($USD Millions)$212.3 $202.7 $196.6
Total Multifamily Revenues ($USD Millions)$46.9 $48.1 $48.4

KPIs

KPIQ3 2024Q4 2024
In‑Service Office Leased Rate (%)82.0% 81.1%
In‑Service Office Occupancy Rate (%)79.4% 79.2%
Residential Leased Rate (%)99.1% 99.1%
Net Absorption (Office, quarterly)+0.50% −0.50%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Income (Loss) per Common Share – Diluted ($)FY 2025N/A$(0.17) to $(0.11) New
FFO per Share – Fully Diluted ($)FY 2025N/A$1.42 to $1.48 New
Average Office Occupancy (%)FY 2025N/A78% to 80% New
Same‑Property Cash NOI Growth (%)FY 2025N/A−2.5% to −0.5% New
G&A Expenses ($USD Millions)FY 2025N/A$46 to $50 New
Interest Expense ($USD Millions)FY 2025N/A$260 to $270 New
Weighted Avg Fully Diluted Shares (Millions)FY 2025N/A204.0 New
Dividend (Quarterly per share)Q1 2025$0.19 (Dec 13 declaration) $0.19 (paid Jan 15, 2025) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Large‑tenant demand and absorptionShortfall in >10k sf leases; confidence long‑term; positive straight‑line rent roll‑up Best quarter for >10k sf new leases since late 2022; positive absorption ~90k sf Demand from >10k sf back to pre‑pandemic averages; optimism for positive absorption in 2025 Improving
Studio Plaza (Warner Bros. move‑out, redevelopment)Preparing for vacancy; repositioning to multi‑tenant; timing drag on FFO Occupancy drop expected in Q4; reiterated multi‑tenant strategy Redevelopment capex $75–$100M; active leasing underway Executing
Debt profile and refinancingPlans include collateral adds, selective paydowns; confident on maturities Swaps/maturities management; more tax refunds incorporated in guidance Closed $325M JV loan (fixed 6.36%); new $61.8M JV loan (6%→6.25%); addressing 2026 ~$1.3B maturities in 2025 Active risk management
Multifamily performanceEssentially fully leased at 99%; healthy rent roll‑ups 99.1% leased; continued strength 99.1% leased; 6% multifamily NOI growth YoY in Q4 Stable/Strong
Regulatory/macro (rent freezes, wildfires)——Discussed potential rent freezes/eviction moratorium; Governor actions on Coastal Commission; wildfire impact and rebuilding dynamics External overhangs

Management Commentary

  • CEO on 2025 outlook: “Our 2025 lease expirations are 25% lower than 2024’s record high… we’re seeing a rebound in demand from larger office tenants… optimistic that we will achieve positive absorption during 2025.” .
  • CIO on 10900 Wilshire JV: “We estimate the JV’s total investment… approximately $150–$200 million over a 3–4 year period… secured nonrecourse interest‑only loan… fixed rate of 6% until July 2027 and 6.25% thereafter.” .
  • CFO on Q4 performance: “Revenue decreased by 5.5%… lowered FFO to $0.38 per share and AFFO to $58.7 million… same‑property cash NOI decreased by 4.5% due to lower office revenues, partly offset by 6% multifamily growth.” .

Q&A Highlights

  • Leasing/occupancy lag: Typical lag between leasing and occupancy can range 100–350 bps; retention expected ~69–70% historically .
  • Development yields/cap rates: Management indicated going in “a little over a 10% cap rate,” expecting >10% combined post‑work on the 10900 Wilshire project .
  • 2026 debt maturities (~$1.3B): Actively working to address in 2025; deals not assumed in guidance until closed .
  • Regulatory watch: Discussion of potential rent freezes/eviction moratoriums; confidence in Governor’s orders limiting Coastal Commission involvement post‑fires .
  • Studio Plaza leasing: Already signing leases; focus on completing common areas and build‑outs to move tenants in .

Estimates Context

  • Street consensus (S&P Global) for Q4 2024 EPS, revenue, EBITDA and related metrics was unavailable at time of analysis due to access limits; as a result, we cannot assess DEI’s Q4 beat/miss vs consensus or magnitude of surprise .
  • Given the actuals (revenue down 5.5% YoY, FFO/share $0.38, AFFO $58.7M), sell‑side models may need to reflect sustained office headwinds, higher interest expense, and the occupancy lag tied to Studio Plaza, offset by residential stability and improving large‑tenant pipelines .

Key Takeaways for Investors

  • Residential strength (99.1% leased) and low G&A (~5% of revenue) provide ballast while office demand normalizes; underwriting should continue to assign premium to multifamily stability .
  • Positive leasing momentum with larger tenants and lower 2025 roll sets up for absorption improvement, but expect timing lag before it translates to occupancy and FFO uplift—position sizing should reflect that lag .
  • 2025 guidance (FFO $1.42–$1.48; EPS negative) embeds construction impacts and higher interest expense; risk management focus on 2026 maturities remains a key stock driver near term .
  • Strategic capital allocation advancing: value‑add redevelopment at Studio Plaza ($75–$100M) and Westwood office+resi JV (10900 Wilshire) targeting >10% cap outcomes—monitor execution milestones and leasing progress for catalyst potential .
  • Dividend maintained at $0.19/quarter with 66.3% AFFO payout ratio in Q4; income investors should watch AFFO trajectory vs payout sustainability amid office NOI recovery timelines .
  • Trading implication: near‑term narrative likely driven by leasing updates (especially Studio Plaza), debt extensions/refis, and macro rate path; medium‑term thesis hinges on absorption recovery and successful development/redevelopment execution .