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spk04: 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 listen-only mode. After the 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 McKinney, Vice President of Investor Relations for Douglas Emmett.
spk12: 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. Thank you. I will now turn the call over to Jordan.
spk02: Good morning, everyone. Thank you for joining us. I'm pleased to report that 2022 is off to a good start. Compared to a year ago, FFO is up over 15% and AFFO is up over 20%. We continue to see strong demand from our affluent small tenant base and increasing interest from larger tenants. We leased almost 900,000 square feet last quarter, including more than 325,000 square feet of new leasing. I was very pleased to see positive absorption for the third consecutive quarter. especially considering our typically high role during the first quarter each year. In addition, our leasing spreads meaningfully improved. After quarter end, we acquired 1221 Ocean Avenue in Santa Monica, one of the most prestigious and best located multifamily assets on the West Coast with panoramic ocean views from every unit. Looking forward, rising interest rates and inflation will present us with both challenges and opportunities. We are prepared for the challenges and remain ready to take advantage of the opportunities. With that, I will turn the call over to Kevin.
spk13: Thanks, Jordan, and good morning, everyone. As Jordan said, on April 26th, we acquired 1221 Ocean Avenue, an iconic apartment property overlooking the beach in Santa Monica. The property is currently 98% leased and includes 120 units, with an average unit size of 1,500 square feet. The purchase price is $330 million, which works out to $2.75 million per unit or $1,800 per square foot. The purchase is made by a new joint venture that we manage and in which we own a 55% interest. The joint venture obtained $175 million secured non-recourse interest-only term loan that matures in April 2029. The loan bears interest at SOFR plus 1.25%, which we fixed at 3.9% through April 2026 with an interest rate swap. Turning to development, we continue to see strong tenant interest in rents above our pro formas at both 1132 Bishop in downtown Honolulu and the landmark Los Angeles in Brentwood. When completed, These projects along with 1221 Ocean add almost 1,000 units to our portfolio. As I mentioned last quarter, we are also working on repositioning a number of properties that should substantially boost rents. At our recently acquired 1221 Ocean Avenue, we will be continuing a major renovation project, which includes significant upgrades to every unit, as well as the common areas. We have plenty of dry powder and strong JV relationships. I remain hopeful that 2022 will bring more transactions to the market. Stuart?
spk12: Thanks, Kevin. Good morning, everyone. Leasing demand was strong during the first quarter. In Q1, we signed 246 office leases, covering almost 900,000 square feet, including 571,000 square feet of renewal leases and 326,000 square feet of new leases. As Jordan mentioned, we achieved our third consecutive quarter of positive absorption, with our office lease rate increasing to 87.7%. Our leased to occupied spread increased to 3.1%, an all-time high. I'm happy to report that our leasing spreads this quarter improved to positive 9.4% for straight line and negative 3.7% for cash. We remain focused on recovering occupancy at this point in the cycle and expect rent spreads to remain choppy. Our multifamily portfolio remains full at 99.7% lease and rents continue to rise at a strong clip. With that, I'll turn the call over to Peter to discuss our results.
spk13: Thanks, Stuart. Good morning, everyone. Turning to our results, compared to the first quarter of 2021, revenues increased by 10.4%. Same property cash NOI increased by 10.7%. FFO increased by 15.4% to 50 cents per share. mostly driven by both office and residential revenue increases, partly offset by higher expenses, and AFFO increased 20.2% to $94.1 million. Our GNA, at only 4.7% of revenues, remains very low relative to our benchmark group. Turning to guidance, we are raising our FFO guidance for 2022 by one cent to be between $2.02 and $2.08 per share.
spk02: which reflects an increase from our recent acquisition, partially offset by higher interest rate assumptions. For information on assumptions underlying our guidance, please refer to the schedule in the earnings package.
spk13: As usual, our guidance does not assume the impact of future acquisitions, dispositions, or financings. I will now turn the call over to the operator so we can take your questions.
spk04: Thank you. For our Q&A, if you would like to ask a question, please press star followed by 1 on your telephone keypad now. If you change your mind, please press star followed by 2. When preparing to ask a question, please ensure your phone is unmuted locally. And again, in consideration of other participants, please limit your queries to one question and one follow-up. Thank you. Our first question today comes from Jamie Feldman from Bank of America. Your line is open.
spk09: Great. Thanks for taking my question. I guess I just want to go back to your first comment. You know, you said strong demand from affluent, small tenant base and increasing interest from larger tenants. Can you talk more about the leases you did sign in the quarter and how the pipeline looks today? Do you think you can maintain this 800 plus thousand leasing volume, especially given your expiration start to moderate going into the back half of the year? Hey, Jamie.
spk12: Yeah. I mean, it was, like I said, strong quarter for leasing. We signed 246 office leases, which is, you know, a real good number for us. We're seeing good demand from small tenants, medium-sized tenants, larger tenants for us, which I think are small for most people, but larger for us. Really good quarter, and pipeline still remains healthy.
spk09: We're happy about that. Is there anything you can tell us about who's actually signing leases now? Are there different sectors? Are there tenants that have been on the sidelines for a while? especially on the larger side? And then also, what does the pipeline look like today than maybe this time last quarter?
spk12: Yeah, I think one of the strengths of our portfolio is how diverse our tenant base is and the demand drivers we have here. And that continues to be true. We put that nice pie chart in the supplemental for you guys that shows kind of all the industries that we have. And we haven't seen any real material changes to those groups. We're still getting demand kind of across the board from all those industries that we've typically had. So no notable shift there that I would point to. We're in kind of a flow business here. We don't call out individual leases. We're doing a lot of transactions, several a day, really. You know, every business day we're signing three or four office leases. So that continues to be the case, and we're seeing good broad-based demand.
spk09: And you say the pipeline is filled. You know, the pipeline today is as good as it was three months ago. Like, you could easily put up similar numbers next quarter.
spk12: Yeah, I mean, I'm not going to make a prediction for Q2. We're early in the quarter, but the pipeline remains healthy, yes.
spk09: Okay. All right. Thank you.
spk04: Our next question comes from John Kim from BMO Capital Markets. Please go ahead.
spk03: Thanks. Good morning. I was wondering if you could share any characteristics on your new joint venture on multifamily. Any characteristics about the partner that you're with? How big can this fund be? Is it a one-off acquisition or are you pursuing other apartment acquisitions?
spk13: Hey, John. It's Kevin. The partner is an existing sovereign partner that we have in some of our other joint ventures. You know, we haven't set up anything formal where we've got a plan to go out and buy a certain amount of multifamily, but it's certainly an asset class that, you know, when we can get larger properties that have the right size of units, we're all over it and very aggressive for it.
spk02: I don't think, you know, your question, Ms. Jordan... It's not a problem of having the money available. If we set up a fund to do additional deals, then we'd have an obligation to feed it with deals. It's more a problem of finding the deals. I don't think there's any problem having access to the equity to do the deals. So when they come up, it's easy to make calls and then we have a partner.
spk03: I was just wondering, this is a more luxury higher price point. Asset than typical in your portfolio.
spk02: So I was just wondering if you were targeting the higher end rental market We definitely are We definitely are So all the way across our portfolio both in office and residential We're trying we're targeting the high end and this was a fantastic fit for us we just built something that's at the top and we own other stuff here along the coast and that we're doing work on that is at the top end. All the moves we've made have been to have the highest end, the most premium residential and office portfolio.
spk03: You mentioned doing renovations on the assets. Can you describe the timeline of that? Will that be as the units vacate? Because I would imagine the turnover on that asset is pretty low.
spk13: The turnover is a little lower in this asset, but we're just continuing a program that the previous owners started where when we get back a unit that's unrenovated that we spend the money to upgrade it and then release it.
spk05: Okay.
spk03: Great. Thank you.
spk04: Our next question comes from Manny Korchman from Citi. Your line is open.
spk02: Hey, Jordan, just following on that line of question about the renovation program, how much money do you intend to put into the asset by the time that program is done, and how should we think about sort of a yield on that incremental capital? Most of, as I said in the past, most of these deals are yielding over 20% on putting the capital in to reduce the buildings, and this one isn't any different I suspect we'll put something less than $20 million into the project. It'll be within that range. There's also work we're doing, if you're talking about a new deal we just bought to the lobby and to the arrival experience that I think will be, you know, small dollars to make a big difference. And then I appreciate the point on moving to sort of the higher end of the market on the resi stuff. If that's the goal, why not take this one on wholly owned and JV some of your sort of more run rate properties you've owned for a while and have the public investors exposure to the high end be higher and the JV exposure to sort of more the commodity markets? We don't have a lot that is commodity, but I will tell you that, you know, you're right, lined up with our investors. You'd also like to have us put those projects in and JV those along with the new stuff we're buying. So you're in agreement with them. It's much harder to put a joint venture together where I'm selling something. It's much easier when we're buying something, we're all going in at the same price. That's a really easy phone call. We have documents done to say to people, that okay, here's what we're going to do. I'm going to buy this, which obviously we want part of that, but I'm also going to put these other things in, which then they have to value those, and they're not trusting me to do the valuing, because they have to have outside value, since I'm actually a seller. It's just a harder deal to put together. And I might have missed this, but have you spoken about the cap rate valuation on this purchase? I mean, you know from the past I'm not in love with cap rates, but I think that this thing will stabilize somewhere in the mid-4s, but we're going in in the low 3s. Okay, and then one quick question for, excuse me, for Stillwater. Stuart, just the spread between occupied space and leased space has widened a little bit. I know in the past you talked about that being attributed to sort of lighter traffic just on the tour side. Is there anything to note on that, or when does the inflection point come where that flips?
spk12: Are you talking about the leased to occupied spread, Manny? Right, yeah. Yeah, so yeah, we have seen that gap out. It's kind of all the time high, which I mentioned. Honestly, I hope that we continue doing a ton of leasing over these future quarters and that stays elevated. But we're probably likely to see it moderate. Really what we've seen is that during the pandemic slowdown, it's stretched out our bill times a little bit. So it's taken us a little longer to get folks moved in. So that's caused that gap to stay a little wider than we're used to.
spk03: Thanks very much.
spk04: Our next question comes from Steve Sackler from Evercore at ISI. Please go ahead.
spk00: Thanks. Good morning. Jordan, I guess I just wanted to understand a little bit more kind of the absorption trend. And I guess I was a little surprised that given the strength in the leasing, you know, you had over 300,000 square feet of new deals and you had very good renewal activity. And if I look back to your fourth quarter supplement, you know, it only showed about 475,000 square feet expiring in the first quarter. So, you know, you did, you know, almost double the amount of activity and yet absorption and, you know, the lease trade only went up 10 basis points. So I'm just trying to figure out what am I missing in the math here? And, you know, if you continue at this pace or what pace do you need to actually see more absorption than kind of 10 basis points a quarter?
spk02: Well, what I'll tell you is this. We know that the first half of the year is very tough. I don't know exactly where. I don't want to get too much into numbers because I don't know what number you're pulling. But we knew we had a huge roll first quarter, and we have a pretty good roll second quarter. And then we have a more mild second half of the year. So if you would have told me that we were going to get it all positive during the first quarter with leasing, I was definitely happier than you are about it. I mean, I was thinking we're going to need to do a lot of leasing to get this to be a positive quarter. And, you know, as Stuart said to you, we're still seeing a pipeline that looks that way, which is fantastic news. So I consider the leasing that was done during the quarter and the fact that we actually had that amount of roll. Look, we did 900,000 feet of a positive 10 basis points. I mean, that tells you there was a lot that was going on there. If it was a matter of pulling leases from other places, then you would have been a lot more positive. We had a tough quarter ahead of us. That was not only a fantastic quarter, great job done by the crew that did it, but also a good sign that it's a very lively market right now. That's the main thing I've been looking for. Are the people out there going to backfill and fill this thing up? You know, we saw that, and we've now seen that for three quarters in a row, really probably four quarters in a row. But for sure three, because now take this quarter. So I think as long as the rest of the economy and everything holds and the recovery keeps going, I'm feeling very good about directionally where we're headed in terms of doing, you know, job one, which is, you know, refilling up the portfolio from the losses that we took during the pandemic.
spk00: Okay, well, we can certainly follow up offline and go through page 19 of the supplemental in more detail. I guess as it relates to the landmark, you know, when we toured the asset, I guess in late March, you were having some very early success on the rents you were achieving against your pro formas. Is there anything you can just sort of share with us on the volume and kind of the pricing since that time?
spk02: Yeah, well, yeah, we're still having that success. I mean, people are moving in, and we're really pleased with the leasing that's going on. I mean, I'm not changing it from saying it's going to take two years to lease up the project, but all signs are that we'll make it in two years, and maybe we'll do a little better. I'm sure we'll make it within two years for sure now, and we're getting rates that are just substantially above when we start construction to what we expected.
spk00: Okay, thanks. That's it for me.
spk04: Our next question comes from Connor Mitchell from Piper Sandler. Your line is open.
spk01: Hi. Thanks for taking my question. So given the success and outperformance of Brentwood and Bishop, does it make you want to accelerate the next round of projects?
spk02: I probably always wanted to accelerate the next round of projects. Unfortunately, for the last periods of COVID and all the rest of it, the city's been in a deceleration phase. We're just seeing, I'm not even sure municipalities are totally back in the office yet, even to respond to things. We just started meaningfully having meetings again in their offices with council members and various people at both in, Honolulu and here in LA. So we're not an island. We can't do it on our own. All of these things take, you know, agreements with cities and it's just, they're just bad now. But of course, I mean, we have, even though I think with inflation and construction costs, prices have gone up, we have a tremendously good pipeline of very holistic, low-hanging fruit for particularly residential construction on property that we already own. But getting it through the system and getting permits and getting all that done just takes some time, as we've been saying all along. But you're right. Of course, this has been super successful, and we'd love to do more quicker.
spk11: Okay. Great. Thank you.
spk04: Our next question comes from Blaine Heck from Wells Fargo. Please go ahead.
spk11: Great. Thanks. Good morning. Jordan, just to be clear, on the initial cap rate you quoted on 1221 and the low threes, does that cap rate include management fees that you guys will be paid by your partner, or is that just on the NOI?
spk02: Well, it's a cap rate. Of course, it includes property management fees, if that's your question. I mean, cap rate is the NOI divided by the purchase price. So you take the going in NOI of whatever expenses are allocated to the building and divide it. That's what it is. Maybe I don't understand your question. Yeah, I'm just asking whether it's... Oh, you mean like a promoter or an asset management fee or something like that? No, it doesn't include that.
spk11: Okay. Okay, that's helpful. And then second question, can you just talk about any interesting trends you're seeing in your valley markets? Are you seeing any incremental demand from companies that may want to have a location in less of an urban environment or less density? Is utilization any different in the valley? And I guess, you know, how do you just, how do you see those markets faring during the return to office relative to the west side?
spk02: Well, sort of that Encino trend, Sherman Oak Strip is doing well, and it's always kind of a follow-up pattern to the west side. It's dense. It's hard to build there. It's got really high-end housing nearby. It's got a lot of amenities along Ventura Boulevard. Finally, and I've said that, I don't know if I've said it on calls. You guys know that I spent like 15 years making excuses for Warner Center and why. And then a few years ago, we stopped having to make excuses for why because it came back strong and basically why it was probably one of our strongest markets all the way through the pandemic. And now finally, finally, there's great stuff happening at Warner Center. We kept getting hit with new supply of office and that's over. And now we're seeing new, more than one deal like multiple deals of shifts of companies out there whether it be for studio space or um taking big plots you i mean i don't think it's a secret that the ramps are put to in a practice field right literally right next to warner center we will be looking down at the practice field that they're building Um, and so that takes all of that and cleans that up. There's another project that was office that I think is probably going to convert to residential. So that will clean that up. So there's a lot of, and then there's, as I said, there's Amazon and some others that are moving in that big commitments to that area for very robust stuff. Like studios hire a lot of people and use a lot of people right around them. So it's just been one good piece of news after another in that area. So I'm very optimistic. And by the way, we've been saying for a while that the residential development in that area has been stunning. And it's still going. If you go there, you will see residential being built everywhere. But now you're seeing all the other amenities, like a lot of retail, additional retail, little retail centers being built. And then you're seeing the fact that some larger users like I just described, going out there saying, this is where our players are, this is where our coaches are, this is where the studio people are, now building their facilities out there to be next to their people. So that's all going to make a huge difference for us.
spk11: That's a great color. Thank you.
spk04: Our next question comes from Rich Anderson from SMBC. Please go ahead.
spk07: Thanks. Good morning. So can you give some color on the latest sort of cadence of tenant behaviors in L.A. area, you know, as it relates to rent relief applications and all that noise and, you know, whether or not this may be closing in on the last time we have to have this conversation, but just curious what the latest, you know, observations are.
spk02: Well, we said to you, quite a while ago that our defaults would be less than 2%. I think at this point we probably are already less than 2% and still we'll collect even more. So I'm feeling pretty good. We're going to collect a super majority of the money that's owed to us and the money that's owed to us is down to a much smaller number than it used to be. As I said, as I have said, and as I'll say right now, I don't think the rest of the collections are going to show up in any meaningful way in the numbers that we're showing you guys. I mean, it's coming in or it's been put into new deals or whatever the case has been, but it's been vanishing fast. So I don't think, I think two big things. Number one, There are three things. When we went into this recession and into this pandemic recession, there were three big impacts on Douglas Town. One was obviously the loss of occupancy, the loss of lease rate, which we've been talking a lot about on this call, which we, I mean, we for sure turned that corner and we're doing a lot of leasing and we need to just regain those tenants. The second was the hit we took in parking, which has been coming back. We had a very strong comeback for a while. Now a lot of people are back, but they had a lot of must-take on their parking spaces. They're using them now. We're seeing our parking lots full. And I think we'll capture the rest of that money as long as the economy keeps going the way it's going in a reasonable, a good, reasonable timeframe. And... The last thing was the fact that, you know, you would have never imagined this, but the government told people not to pay their rent. That was kind of craziness. But then some most did, some didn't. And even the ones that didn't are now paying and paying back rent on some kind of programs or making deals. And we're not down to big numbers left of where we have to make deals with people or do something about what they owe us. So all three of those metrics, which were the hits we took, are all back heading in the right direction.
spk07: I recall the owed rent was, I don't, I might have this completely wrong, 50 or 60 million. What's that number now?
spk02: Oh, we're like closer to half that. Okay. Like 30 or something. Yeah, it's in the 30s.
spk07: Okay. Second question is, You mentioned we're prepared for the opportunities that inflation brings. I wonder what that means in terms of the opportunities, and specifically, is 1221 one such opportunity, meaning perhaps the pool of people interested in buying it got smaller, you could do it, you had the money to do it. Is that what you mean by opportunities, that you stand out relative to the competition to buy stuff? Maybe you could just kind of clarify what types of opportunities come from an inflationary environment for you.
spk02: Two things come from inflation for real estate. The classic one is that it's like a perfect hedge against inflation, right? So real estate tends, because it's a leveraged asset, real estate tends to early get hit with higher interest rates. But then as things calm down again, you end up with substantial growth in value, which comes from the fact that rents are up and all the rest of it is up. So that's one opportunity that just happens. Inflationary environments tend to, on the mid to longer term, be very good for real estate. The second opportunity is properties coming available. People there have kind of scooted along with very low leverage debt. Maybe they haven't been running the buildings to get the maximum cash out of it. And now, all of a sudden, the cost of their leverage, not putting them in jeopardy of losing their building, but the cost of their leverage is going up, and they're saying to themselves, wow, you know, ain't You know, I need to run my building better to deal with the fact that my debt's costing me a little more. Maybe I'm just tired of this. And it just highlights once again that maybe there's an opportunity to get out of the building. Still, there's a lot of value there and might bring some more stuff for sale. That's what we're hoping for.
spk07: So was 1221, you know, tethered to the environment or is that why it came free or maybe not?
spk02: I think 1221 was basically...no, that wasn't the cause for 1221. I think 1221, you know, wasn't the fit. The seller didn't feel it was the right fit. It was a very good fit for us, and we were able to negotiate a deal that made everybody happy. Okay.
spk07: Good enough. Thanks very much.
spk04: Our next question comes from Dave Rogers from Baird. Your line is open.
spk10: Yeah, good morning out there. I think last quarter you said something to the effect of expect most of the deferrals to come back in the way of blend and extend transactions, or at least kind of model it out that way as you go forward. Can you talk about maybe the impact of those transactions on the leasing economics that you quoted? And I guess the second part of that question is just trying to kind of reconcile same-store cash revenues between last year and this year. There seems like a bigger delta maybe of where you're collecting a little bit more on the cash side. So those two questions, please.
spk02: Well, I think the main reason we're collecting more on the cash side is even if people owe us money, almost everybody's come current. So let's like, so people that weren't paying us are paying us now. And what we're dealing with is the part that they own us. So that's, that's going to make a big difference. Is that, is that what you're asking? Meaning that they're paying this month's rent and continuing to pay, you know, on a regular basis. And then they have some amount that they owe us from the past. This is Peter. Um, and, uh, you know, so we're working through with them, the, you know, the past amounts when you were talking blend and extend, I mean, you know, with, typically what we do is we recognize the outstanding balance and, you know, come up with a payment program. And then, you know, the new lease is a new lease that stands on its own at market rates.
spk10: And I guess to that last point, Peter, that's what you're really kind of quoting from a cash spread. It's not really reflecting kind of the higher rent and past due collections in those numbers.
spk02: That's correct. We're quoting just the lease. not the payment program in our spreads.
spk10: Yeah, I think that answered both questions, so thank you.
spk04: We have a follow-up from Jamie Feldman from Bank of America. Please go ahead.
spk09: Thanks. You may have just answered, but maybe I didn't hear it right or misunderstood the answer. So your leasing spread spiked up to kind of minus 3%. this quarter on a cash basis they were as low as minus nine percent last quarter and they've been kind of on this sequential quarterly decline i mean how would you explain that move uh leasing spreads are on the sequential quarterly increase they're not on the decline no i'm saying last quarter i think it was minus nine percent cash this quarter was minus three percent cash yeah you're you know i think in the past so they're they're improving
spk02: Yeah, they're improving. That number tells you something, but I wouldn't grab it too tight because depending on what rolls in any particular quarter, that number can really jump around. But generally, as things recover, that number hopefully turns positive again. I think more what's reflected even in the minus nine on cash and the fact that the straight line is now up is during the pandemic, I know you'll remember, Jamie, people kept asking what's happening with rents, what's happening with rents. And we said, rents aren't as far off as you might think. And in fact, I'm not sure rents fell off such a huge amount. They fell off, and we gave you the best of what we could get to those numbers, and that's what this is a proxy for when you do roll up, roll down, and all the rest of it. They haven't fallen. So all of these numbers, because you're doing, remember, our leases have very big bumps in them. So when you say ending cash to starting cash, 3% difference, that's one year of growth. Beyond that, you're saying you still got your four years of growth that you got from when that lease was signed. So that's a good thing to tell you, hey, people are coming back and rents are not, I mean, rents are not going that meaningfully different. And we're seeing that. You're seeing it. And I think the straight line comparison gives you the total value of the lease compared to the prior lease, and you see those positive spreads. We don't have a lot of free rent anyway, so it's really giving you a pretty good measure of the change in value of the lease.
spk09: Okay. Yeah, I'm thinking about your messaging over the last year or so, and you kept talking about, well, if we can get to X occupancy in the portfolio, we can really start pushing rent. Has that changed?
spk02: No. No. I think that it's one thing to push rents. It's another thing to not lose ground on rents. And I just don't think we've lost as much ground as you might have thought through that tough period of the last two years. And now we just need to lease a portfolio. But I will also say, well, I'm happy that we aren't losing as much in rental rates. The thing that we want to do is lease out the portfolio. That's the job. Okay.
spk09: So it sounds like the takeaway is it was definitely a better quarter. Maybe it's not the trend to think is written stone for going forward, but things do feel better.
spk12: Don't use this one quarter as the curve, Jamie. Like I said in my opening, you know, they're going to be choppy quarter to quarter. This number moves around. A lot depends on, you know, we have such a mix of leases that get signed in the quarter. So don't use this as the curve going forward. We're happy to improve, but, you know, it's not going to be smooth sailing. This is a very good leasing quarter.
spk02: Now, I hope every quarter of the next quarters is this good. But just... Every recovery, no recovery to have a straight line.
spk09: Okay. And then do you have any updates on some of your larger expirations this year or next year, just in terms of known move-outs that we didn't know about three months ago?
spk12: No, nothing noteworthy. I mean, we have a pretty steady roll. We always have some of our larger guys rolling out. So, you know, nothing that's noteworthy.
spk09: Okay, great. Thank you.
spk04: Our next question comes from Bill Crow from Raymond James. Your line is open.
spk06: Yeah, good morning out there, guys. Thanks for the time. That last discussion actually led me into my two questions that I had. And the first one is, Jordan, you talk about rents not really going down, but do you see more tenants leaving because of asking rents or lack of TIs or I guess, is there any reason why, any commonality of the reason why tenants don't renew?
spk02: Our renewal rate has been pretty steady, and it's been pretty good. Matter of fact, oddly, last year it was higher than normal. The reason for the loss of lease rate has totally to do with the fact that the new tenants weren't moving around as much. So they were moving less. Now they're moving more. Now we're getting more new tenants. That's why we've You guys have gotten focused on that number. I mean, the reason I said it was such a spectacular quarter is 330,000 feet anew. That's like a fantastic quarter. 330,000 feet anew. So that new number is the key number to grow us back up. We've held steady very good on our renewal. And the new number is also a good sign if you say what's going on with the economy, what's going on with people going back to work. Okay, you're going to see all that in the new number, the new leasing.
spk12: Bill, when we survey our tenants moving out, there's obviously, if you guess, there's a million reasons why tenants move out. They're shrinking or they're growing or they're going out of business or they're moving markets, something like that. And we're getting the same list of reasons why guys are moving out. There's no major shift in that. It's still a big spread of different reasons.
spk06: All right. No, that's helpful. Jordan, you just mentioned, look at the new leasing and the sign of the local economy. So where are we relative to 2019, whether it's based on new leasing or backed office rates or parking revenue? Are we 50% back, 75% back of what we've lost? Where are you in the momentum scale?
spk02: Well, in income, because a lot of the stuff we've done We're almost catching up to 2019, but we've done a lot of new business. So when the whole company's up to full tilt, we're going to be looking at some pretty spectacular numbers. But we're lucky. You can't ignore the fact that we're still down almost 600 basis points, and that's a lot of money. And as that recovers, you know, it's going to make a giant difference. I mean, part... The rest of these, all other numbers will pale next to that number. I mean, and what I keep pointing out, but this is all around the fringes, is the good news is huge new tenant activity. Rents are still there and going strong. And, you know, every sign is that, and I keep saying, as long as the economy holds. But every sign is that with this economy, we're on a really good trajectory.
spk06: And you're not getting the political pushback or you feel better about the overall environment, I guess, today?
spk02: Well, you know, certainly the environment's improved politically in terms of removing rent moratoriums and stuff like that. I mean, I'm not in love with the politics, but that's not my number one problem at the moment.
spk06: All right.
spk08: all right listen thanks for the time appreciate it thanks our final question comes from daniel ismail from green street your line is open great thank you maybe just going back to the acquisition in santa monica i'm just curious is that a rent controlled building and if so how many units are uh you know currently well below market if you're able to share that figure a good number of um but
spk02: It is a rent-controlled building, but I'm not sure that rent control plays as big a role in that building as it has in other buildings. I mean, some of what's happened in that building is that rents have just moved up very quickly. So even maybe deals that were done during the pandemic or earlier are pretty far off the market of where current rents are. So as those roll, we'll pick that up. That's why there's such a meaningful spread between the going in cap and what I would call the stabilized cap.
spk08: Got it. And then, Jordan, I appreciate the comments on inflation and interest rates. I'm just curious, have you guys noticed any tangible price movements either on the office or residential side in terms of, you know, cap rate movements due to the rise in rates?
spk02: I don't think there's been enough in the way of transaction. I mean, this is a phenomenon that at best is two months old. So I'm not sure there's enough transactions to show that. The place where there's a lot of transactions where I think you're seeing the world already slow down is in detached homes, single-family homes. I think that move in interest rates has very quickly slowed down the trajectory of pricing and transactions around the single-family home market.
spk08: Got it.
spk05: Thanks for the cover. All right.
spk04: We have a follow-up question from Steve Sackler from Evercore ISI. Please go ahead.
spk00: Yeah, thanks. Just a quick one. Jordan, I guess there was a story or an article about a potential mansion tax in in la that would really go to fund homeless issues and i mean the article reads as if it's just on housing that's over like 10 10 million dollars i just wanted to be certain that that was truly on housing and nothing on commercial yeah i think that's a transfer tax so calling it a mansion tax is a little bit of a strange name for it i think it's
spk02: Just like in many of the cities, it's a transfer tax that was proposed and you know, it'll have to make it through the people are kind of negative on taxes right now. And that might be one more thing. And we got to look at all this stuff and see, you know, how to fight these various things. It's just a transfer tax.
spk00: Okay. But, but just on single family, not on either your type of residential and certainly not on commercial. Is that correct?
spk02: To my knowledge, and I saw what you sent me, which I suspect is just extremely misleading, that article. To my knowledge, it's just a transfer tax. It doesn't matter if the house is industrial or anything else. It's just a transfer tax. The way they described it in the article you sent me was so odd that... I haven't heard of there being something just on mansions, even though that's the way that newspaper happened to describe that.
spk00: Okay. Great. Thanks.
spk04: We have no further questions. I'll now hand back to Jordan Kaplan for closing remarks.
spk02: Okay. Well, thank you all for joining us, and we will speak to you again in a quarter.
spk04: Today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.
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