Douglas Emmett, Inc.

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. Please go ahead.

Thank you. Joining us today on the call are Jordan Kaplan, our President and CEO, Kevin Crummey, 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 website. 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 may be 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 website. 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. Good morning, everyone.

I hope you're staying healthy. Our rent collections continue to be negatively impacted by the pandemic. and our market's very tenant-oriented lease enforcement moratoriums, which are considerably out of sync with the other Gateway markets. However, our second quarter collections were somewhat better than the numbers we previously disclosed for April. As of today, we have collected 91% of our second quarter billings, including 96% from residential, 93% from office, and 35% from retail. These numbers are based on our current tenants' pre-pandemic rent obligations. At the end of the second quarter, pursuant to GAAP, we wrote off certain tenant receivables. That reduced our second quarter FFO by about 4 cents per share, most of which related to the retail and hospitality tenants in our portfolio. We also wrote off all non-cash straight-line balances related to those tenants. which further reduced FFO by six cents per share. Of course, any collections from those receivables will be included in future quarters FFO. The pandemic also reduced second quarter FFO by about five cents per share from lower parking income. Overall, the cash and non-cash write-offs and the lower parking income related to this crisis reduced our FFO for the second quarter by about 15 cents to 41 cents per share. As the commercial moratoriums are amended and expire, we should see improved collections. During past downturns, free from government intervention, our actual tenant defaults have been just under 2%. Despite the current uncertainties driven by the pandemic, During the quarter, we executed 125 office leases for over 650,000 square feet, only a notch behind Q1 and with longer average lease terms. This is a remarkable accomplishment and a testament to our investment in virtual tours and remote leasing technology. We don't know exactly how the present challenges will impact our local economy, but having managed through three prior recessions, Our strategy and platform are built to withstand downturns. We own a dominant share of the best buildings in the best markets in Los Angeles. Unlike some other markets, we do not face significant potential supply overhang from new buildings. We believe that our small tenant focus diversifies our risk, and prior downturns, the impact of personal guarantees, and the small business owner's commitment to their business have kept our defaults very low. We have a robust, vertically integrated operating platform, and we have no debt maturities before 2023. Our buildings have remained open and available to our tenants throughout the pandemic. Fortunately, we do not have the significant mass transit, parking, or vertical transportation concerns faced in other markets. We are proud of the customer service our team has provided and the safety protocols we have implemented in response to this crisis. With that, I will turn the call over to Kevin. Thanks, Jordan, and good morning, everyone. On the development front, construction is continuing on our two large multifamily development projects. Demand for the new apartments at our conversion project in Honolulu has exceeded expectations. By quarter end, we had completed the first 98 units, and to date, We have leased 61 units at our pro forma rental rates. We have begun construction for our next phase, which involves four floors and is comprised of 76 units and building amenities. Delivery of those units is expected to begin later this year. Construction is progressing steadily at our 34-story, 376-unit apartment tower in Brentwood. This project will be the first residential high-rise west of the 405 in more than 40 years. The development includes a one-acre park fronting Wilshire Boulevard. We still expect to deliver our first units in 2022. On May 15, 2020, we refinanced the loan for one of our consolidated joint ventures. The new, secured, non-recourse $450 million interest-only loan will mature in May 2027 and bears interest at LIBOR plus 1.35%. We entered into interest rate swaps that effectively fixed the rate at 2.26% following the expiration of the current swaps for an average fixed interest rate of 2.6% per annum through April 2025. We used part of the proceeds to pay off a $400 million loan secured by the same properties that was scheduled to mature in July 2024. Deal volume is significantly below normal. But going forward, we hope to see more offerings as deferred transactions come to market. We and our joint venture partners have ample liquidity to capitalize on opportunities that match our investment criteria. I will now turn the call over to Stuart.