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 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 McKinney, Vice President of Investor Relations for Douglas Emmett.

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, and thank you for joining us. Office leasing during the third quarter was obviously not what we had hoped. While July was strong with over 300,000 square feet leased, our typical August slowdown in new leasing was deeper than usual and lasted into September. Fortunately, renewals did better with tenant retention above our 70% long-term average. Fourth quarter, office leasing is off to a good start, but we're now hesitant to be encouraging until we complete the quarter. We've seen that multifamily growth rates have slowed in other parts of the country and other markets in LA County, but we're not seeing that in our portfolio. Our multifamily same-store cash NOI increased almost 7% compared to the prior year. Same-property cash NOI for the whole portfolio is up 3.5%. with office benefiting from higher property tax refunds. We expect property tax refunds to be impactful for the foreseeable future, though the timing remains unpredictable. Our two multifamily development projects in Brentwood and Westwood will add over 1,000 premium units to our portfolio. In addition, recent changes to state and municipal law allow us to build more multifamily units at a number of our existing locations. For example, we can now build a new 500-unit residential tower at the corner of Wilshire and Barrington in Brentwood. During the third quarter, we refinanced almost $1.2 billion of debt at very competitive rates. We are also actively working on a number of off-market office opportunities with full engagement from our joint venture partners. I will now turn the call over to Kevin.

Thanks, Jordan, and good morning. At 10900 Wilshire and Westwood, we are finalizing plans for converting the existing office tower to apartments and building a new ground-up apartment building. Construction should begin in 2026. At the landmark residences in Brentwood, construction is in full swing. When we finish the project, it will meaningfully add to our in-service residential portfolio. Finally, we continue to make good progress leasing at Studio Plaza in Burbank. During the quarter, we completed three financing transactions that extend our debt maturities at very competitive fixed interest rates. As we mentioned in our last call, in July, we refinanced a $200 million office term loan that was scheduled to mature in September 2026. The new non-recourse interest-only term loan matures in July 2032, with interest effectively fixed at 5.6% through July 2030. In August, we closed a package of new residential term loans. The new secured non-recourse interest-only loans total approximately $941.5 million. Their interest at a fixed rate of 4.8% and mature in September 2030. They replaced loans aggregating $930 million that were scheduled to mature in 2027 and 2029. We also repaid the debt that encumbered the landmark residences and added that property to our pool of unencumbered assets. We continue to work on refinancing our next loan maturities, now scheduled for late 2026, and to look for attractive acquisitions. With that, I will turn the call over to Stuart.

Thanks, Kevin. Good morning, everyone. During the third quarter, we signed 215 office leases, covering 840,000 square feet in our in-service portfolio. This included roughly 200,000 square feet of new leases, which reflects the slowdown in the latter half of the quarter that Jordan mentioned. Office rental rates and concessions are steady. Looking ahead, our remaining office expirations in 2026 and 2027 are below our historical averages. The overall straight-line value of new leases we sign in a quarter increased by 1.8%. with cash spreads down 11.4%. At an average of only $5.63 per square foot per year, our office leasing costs during the third quarter remained well below the average for other office REITs in our benchmark group. Our residential portfolio continues to enjoy strong demand and remained essentially fully leased. With that, I'll turn the call over to Peter to discuss our results.

Thanks, Stuart. Good morning, everyone. Compared to the third quarter, of 2024, revenue was flat at $251 million. FFO decreased to 34 cents per share and AFFO decreased to $52 million with increased interest expense outpacing higher contribution from operations. Same property cash NOI increased 3.5%, reflecting a strong 6.8% increase from multifamily and a healthy 2.6% increase from office. As Jordan mentioned, we continue to receive significant property tax refunds whose timing varies unpredictably from quarter to quarter. Excluding property tax refunds, our office same property cash NOI growth would have been essentially flat. At approximately 4.3% of revenue, our G&A remains low. Turning to guidance, we still expect our 2025 net income per common share diluted to be between 7 and 11 cents. and our FFO for fully diluted share to be between the $1.43 and the $1.47. For information on assumptions underlying our guidance, please refer to the schedule in the earnings package. As usual, our guidance does not assume the impact of future property acquisitions or dispositions, common stock sales or repurchases, financings, property damage insurance recoveries, impairment charges, or other possible capital markets activities. I will now turn the call over to the operator so we can take your questions.

We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Again, in consideration of other participants, please limit your queries to one question and one follow-up. Thank you. At this time, we will pause momentarily to assemble our roster. The first question comes from Nick Ulico with Scotiabank. Please go ahead.

Thanks. I guess starting off with leasing, if we go back to last quarter and the call, you guys had some optimism on the leasing pipeline. You still had your occupancy guidance intact, and then this quarter didn't play out as expected. I'm just hoping to get a little bit more detail on sort of what

exactly did not materialize um you know in the new leasing plant there were certain markets buildings anything you could just sort of quantify a little bit more on that um good morning nick i would i don't do not have a great answer i can't point to an industry i can't point to a market i can't point to a building there was a slowdown we actually you know still did a number of deals over 10,000 feet, all of that worked, it just slowed down. And you know, if you ask the question, where we now thing, you know, it seems like the slowdown is temporary. And it looks like, you know, we're off on this quarter, a good start, but I don't want to make any predictions because we were so surprised by July. You know, from July to August, we were like, oh, this is going to be a great quarter. Then you had August and September just kind of fell off, or actually like later part of August. And, I mean, maybe it'll be timing. I'm not sure.

Okay. And I guess second question, you know, Jordan is, you know, you're a larger shareholder in the stock. I'm sure you're not happy with – how the stock's done, and some of that has to do with leasing and performance there. But are you starting to think about other alternatives? You mentioned some acquisitions, but I guess I'm wondering, do you think about trying to prune the portfolio? Do you think about stock buybacks? Are there other opportunities to do something, sort of pivot here a little bit, terms of a strategy to sort of improve the stock performance outside of just the leasing focus that needs to be addressed? Thanks.

I would say that, well, first of all, I still feel very good about both our office and residential portfolios. We're growing our residential portfolio, and we're working on growing our office portfolio. I think the markets will be good. I actually think both of them will come back at a good clip when I look at kind of more macro things. So there's obviously some stuff that's been in the way. I'd say locally the only real thing that's been in the way has been politics. I think politics are kind of starting to move back into the right direction. And then there's been some national stuff, but I know some other markets are recovering. I'll still say we have very good tenants. We have high renewal rates. I like our prospects in office. I'm working on buying more office, as Kevin said. And we gave you a sense of how much more aggressive we're becoming on developing residential. And our residential is performing extremely well. So I'm more on the development side. We are moving on a number of things. There's a ton that we can do here in L.A. as a result of these changes in laws. And I'm going to tell you, I still feel good about our office portfolio. I get it that last quarter was more upsetting to me than anybody. But, you know, we're trying to continue. We're continuing to do our best.

All right. Thanks.

Thanks.

The next question comes from Steve Sacqua with Evercore ISI. Please go ahead.

Thanks. Stuart, you provided a little bit of comment on kind of the tax refunds, and Peter did as well, but I'm just trying to make sure when we look at kind of the third quarter office expenses, is that $74 million kind of a good run rate, or are there some kind of one-time true-op payments that sort of hit in the quarter that benefited Q3 but won't carry forward in the Q4 and beyond?

It's David. It's Peter. Yeah, I mean... Whenever we have tax refunds, you're going to see it in the expense line. And as we said, we expect to continue to get property tax refunds, and we expect those to be impactful. It's just hard for us to predict quarter to quarter, year to year, what the numbers are going to be.

No, I understand that. But is the 74 kind of like the new base with which you grow from, or were there past refunds that were kind of one time in nature that the run rate is higher than that?

It's kind of hard to pull it all apart, but there's a little bit of both. There's some of it that's one time, and there's some of it that you reset for a period of time.

I mean, I don't think we have guidance for you on expenses for the next few years, but I can tell you this, Steve. We have been receiving rolling tax refunds for quite a while, and I think they're going to keep rolling forward. Because, you know, they're just very slow. The money comes in very slow. We don't recognize the money until we receive it. I mean, but it's been coming in, and I think it's going to keep coming in when I look at the amount we have in front of them.

Okay, thanks. And then maybe, Jordan, just going back to kind of leasing broadly, I mean, I did see that UCLA downsized kind of their footprint with you in the third quarter, but just any comments kind of around the industries that did lease in kind of the third quarter? Maybe where were you positively surprised at activity, and were there any industries that just, you know, are still kind of stuck and maybe underperforming your expectations?

I would say this, and I'm glad you reminded me of that. I was going to say the one area where I'm seeing weak, it's not a lot of it in our portfolio with the exception of UCLA, but where we see weakness is government. Government is definitely having everything. They're having trouble bringing people back in. They're having budgetary problems. They're shrinking. They got it all going on. Most of our other sectors seem to be okay. and every time we get bonked, I'm always like, oh, great, UCLA again, but I will also tell you, I think UCLA is going to bring people back, so it's hard to know where they're going to end up. They could end up being our growth engine going forward in terms of new leasing because they have been shrinking for a while, and they really need to bring people back in a more robust way, so I don't want to beat on them too much. They really are only, you know, they rely on the government, both the federal government and the state government. They're obviously part of the state government. I know the government has beaten the daylights out of downtown. So anyways, that's the only industry I can give you some feel for.

Okay, thank you.

The next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.

Hey, morning out there. And thank you for keeping your conference call old school, not going the high-tech route. So I appreciate that. Jordan, your stock is trading at a nine implied. I understand the enthusiasm for apartment development. It's been something long in the making over the past few decades, and it's great to see you guys be able to take advantage. You also mentioned potential more acquisitions. But from a funding perspective... You know, you can't really issue equity. That makes no sense. You're always hesitant to sell assets to gin up additional cash. So with everything that's on your plate and where the stock is, how would you think about funding new acquisitions if you have, you know, demands on your capital for the development projects?

Well, as I mentioned, we have extremely good engagement from our joint venture platforms. Uh, you're right. We're not issuing stock, but you know, historically we have not issued stock to make acquisitions regardless of where the stock price was. We do have positive cashflow coming out of the company. We, we, so we're, you know, we're generating cashflow. We're using it to do a number of things. Uh, we have a lot of ability to do financing. I mean, I, I know we don't mention it that often, but huge, we're all non-recourse first trustee debt. And a huge portion of our portfolio doesn't have any loans on it. And so we can actually use that to use financing. We can use our free cash flow to invest alongside our joint venture partners. To date, most of what we've done is use some of our free cash flow and invest it alongside our joint venture partners. And we've used some of our free cash flow to power the two development projects we have, although one of them has a lot of joint venture partners in it, so it's not taking much.

Okay, but your point is that between the demands to fund the current development pipeline, there's still excess cash that you're generating to fund JV acquisitions?

That's 100% true. Okay.

Second question is just playing off of that, again, Given where the stock is trading and you guys haven't been huge issuers over time, why would the joint venture partners not be interested with you guys in just maybe taking the company private? I mean, the public markets haven't rewarded what you guys have achieved. You certainly have a lot of growth ahead of you, but it would seem like an opportune moment to arbitrage the difference.

Well, I mean, yeah, they ask that a lot. I don't think it's a very good time to go private because you're my shareholders, which I'm one and a lot of us are, because I think the stock's super undervalued and I want to do a good job for the shareholders. But yeah, I mean, you're right. They're, they're all, they all lead with that.

No, I'm just saying you guys, I mean, there's a lot of good stuff that you guys are doing, but it's not reflected in the stock.

Yeah, I know it's not. And it's a point in time and the stock, Kind of moves around vis-a-vis what's going on, and most of the time I'm wrong. It should be up. It's down. It's just, you know, things slow down. It's up. But I think over the long haul, we're going to have a great opportunity to do a good job for our shareholders. I don't want to, like, you know, crawl out with my tail between my legs. I want to do a good job for them.

Okay. Thank you. Thanks.

The next question comes from Blaine Heck with Wells Fargo. Please go ahead.

Great. Jordan, appreciate the commentary. Can you just talk a little bit more about the size of the opportunity set within your portfolio to potentially do more office to residential conversions or ground up residential development and maybe where in the timeline of getting the required permitting or zoning you are. Is the opportunity you mentioned in prepared remarks something that you think could be shovel ready in 2026? And are there any others that you think could be started in the next couple of years?

So, and There are a number of extremely great locations that we now feel we can build meaningful additional resi. And Ken and I have been talking a lot about it. And I've said to you guys historically, really the gating issue for us is kind of growing our ability to do more projects. And we're talking about that. the early stages of that we are we are already doing so we're working on like planning and looking at some of these sites talking to architects about what can we do here working on on a lot of that I mean if you ask me do we have a lot of sites that could be ready to go at the end of 26 we probably do but we we ourselves have to finish building the stuff we're building to do a good job. And so we're kind of, I would say we're tightening up that line of projects and getting them more than theoretically ready. But how fast will we roll them out? That's a little harder to answer.

Okay, great. And, John, just to follow up, similarly on the acquisition side, you know, do you think you're close to closing on any other interesting opportunities and maybe how have your return requirements evolved along with the changes in your cost of capital?

I believe we'll make some meaningful acquisitions in, you know, reasonable timeline. I'm extremely confident of that. What was the second part of your question? You want to know how my return metrics are kind of best in class, but consistent with the world of returns that we live in right now. But we don't want to lose best in class deals. And that's the stuff that seems to work the best for us in terms of where we like to operate, which I've said before is in the top quartile of our portfolio. I think that's more achievable now than ever. I'm telling you right now, I'm really confident that that will happen. I think that as a result of that, we're not going to miss any of those. It's going to be, you know, the return metrics are better than they were in 2019, but I don't know if they'll be all the way to where you guys want them. For us, I think we'll feel very good about them.

Got it. Thanks for the call.

The next question comes from Seth Berge with Citi. Please go ahead.

Thanks. It's Nick Jessup here with Seth. Maybe just following up on the transaction market. Are you feeling that there's more competition as you're bidding for assets? How are you seeing kind of the competition landscape changing?

I think that, you know, we're a little bit like, As the odds are going to sound, there's so many markers that remind me of when Ken and I got into this business. So when we, in the early 90s, we did a lot of buying. All through the 90s, we did a lot of buying. And I remember looking at that time at where, like, how much was broker transactions, how much was off-market, getting people to come to us. And I'm seeing that shift again, a lot more off-market now. I mean, like an amazingly higher percentage of off market. We know you'll do it in close, which is great. It's great. You know, it's kind of a payback for decades of building that reputation. So that has given me confidence. We're seeing like real deals and we're running at them and stuff that I've wanted for a long time.

Thanks. And then just on, you know, a couple of questions have been on kind of the discount and ways to close it. And I understand where, you know, obviously you're not happy with the stock prices and see a path to closing that discount. But is that, you know, you'd mentioned kind of the LPs maybe having some interest. Has that been a broader board discussion or is that more just kind of your opinion on where the opportunity is to close that gap right now?

I didn't give that as an opportunity to close the gap. I said, I wouldn't want to do that now. The stock price is too low. That's not doing a good job. I'm saying, a lot of saying is, of course, they ask me about it all the time. But why would I go with an incredibly low point in the stock and say, oh, now I'm going to go, I mean, you guys are looking at me like I'm an idiot. I believe that Office and Resi has huge upside. Why wouldn't we deliver to our existing shareholders?

Thank you.

The next question comes from John Kim with BMO Capital Markets. Please go ahead.

Good morning. I wanted to ask a two-part question on leasing. Jordan, you mentioned October seems like it picked up. I'm wondering what you attribute that to. And secondly, is there anything that you can do to stimulate demand? You know, we're seeing here in New York, a lot of landlords really step it up on amenities. And I know your portfolio doesn't really have the same footprint to do that, but I was wondering if any amenities would resonate in your market.

Where some amenities make a difference, we have done that kind of thing. We've been pretty successful in projects where we have a lot of leasing and making deal with a gym or something like that, a commercial gym to be there, high-end gyms. And that becomes an amenity of the project, and obviously we make money on those deals. But, you know, our portfolio is in very amenity-rich areas. And I'm not just talking about, like, access to high-end housing. I'm talking about restaurants, the whole nine yards. So we don't have, like, a ton of additional demand like that on that front. In terms of stepping up demand, we are, nobody's better than us at getting out there and getting access to every deal that's out there and pushing and trying to get them done. I mean, if you looked at the various tiers of our portfolio and the outreach and the aggression of showings and trying to turn those into, you know, every step of the way you go, We have an incredibly aggressive platform. So I have a lot of confidence in that. That's why you hear me saying I got it that the pace of real estate and the recovery of the office portfolio is not consistent with a quarter-to-quarter analysis, and certainly we had a quarter that didn't look great. But when I look at what's happening in general and our platform and its outreach and what's out there and what we're going after, I go, no, I still feel good about this. I'm confident we'll get there. We just have to stay focused and keep playing hard. And we will. And I think we're going to do a great job for everybody.

Okay. And then my second question was on Barrington Landmark. Any update on the litigation process? progress, if you think we'll get some news on that in the next year or so. And you added a new development site there this quarter. Do you expect that to get off the ground before landmark residences?

We wouldn't build that before we have landmark residences built, at least, because that would just compete directly with it. We already have 700 units there. So we would do all the work to get it ready, which is a good thing to do, and we're already doing that to marry it to the project. But as I said, we have to play through what we're building right now, but it's probably also smart for us to do some of the other work on many other sites. That's one site. But on a number of the other sites to go like, This is kind of getting more and more ready to go with all that we need to know that when we do want to get to it, we can get right to it. And that's the early stuff that Ken and I have talked about doing and are doing, and we are doing it.

And then litigation?

The litigation, they're like trading mountains of documents. I mean, obviously, we feel very good about it, but nothing like that's ever very fast, and it's certainly not going – I mean, the metabolism of the courts is extremely slow, like as slow as a sloth. So just assume that's what we're dealing with.

Okay. Thank you.

The next question comes from Jana Gallen with Bank of America. Please go ahead.

Hi. Thank you for taking my question. When you talk about the slowdown experienced in August and September, was that more that touring and top of funnel activity slowed or the activity was there and then the decision making just kind of got paused? And when you think about the improvement in October, Is it more just a normal month, or is it seeing that kind of delayed activity from the summer coming now into the fourth quarter?

I think it was probably a slowdown in decision-making to close. And in terms of this quarter, I'm so nervous to make projections. I would like to have the proof be in the pudding. Let us just deliver the answers. And I told you, things... I mean, if you're looking at it, you go, what's the problem? I mean, so let's just see closing and all the rest of it. Let's see how we do this quarter.

Great. And then I'm just curious if you could kind of talk about the decision or the strategy to refinance the multifamily properties early and to unencumber the landmark residences.

Well, you know, I would say Fannie Mae was a great partner there. They allowed us, they left their loan intact and allowed us to basically empty the buildings. They're pro-housing. When they knew that we were going to build back and do the housing, they're a pro-housing bunch. So they're like, we don't want to get in the way of housing. I said, it'd be Hard on me, we could probably handle it, but it'd be hard on me if you told me I had to repay your loan at this exact moment, right? Once we had made it into the construction, they were saying, okay, we'll let you roll forward on that. That's great. I can't say how much I appreciate that because that makes a huge difference to adding this housing. But I also said, when I see a good opportunity to get you back out of that, because I know it's like a, you know, it's whatever. it's an item on your list, we'll take it. And as those other resi deals have just matured and the cash flow just keeps increasing, we saw an opportunity to extend everything out at very good pricing, very good spread. And we certainly had the room to, at that point, de-lever Barrington, take all the leverage off so it didn't have to be on their watch list. It's great points with your lender when they You can do something for them, and we did it.

Great. Thank you.

Next question comes from Rich Anderson with Cantor Fitzgerald. Please go ahead.

Hey, thanks. Good morning out there. Perhaps a tough question to answer, but is there anything about the coming Olympics economic activity, you as a landlord of office and multifamily in the area that you see as an opportunity, short-term, long-term, given what typically happens in front of and after an Olympic event? Anything you're thinking about at all, or is it just a non-event from the standpoint of Douglas Emmett?

There is one big primary thing, which is that the council member for that first for CD5 has a strong interest in making a lot of really positive changes. So UCLA is the Olympic athletic village. So all of the athletes stay in the dorms at UCLA and then their area is going to be that Westwood village area. And she's really leaning into like every type of funding, everything they can put together to get that area like really nice and showing well to the world. Uh, and she's come to a couple of large owners of which obviously were one of them and said, I want you to kind of lean into all this with us. And we said we would, and we joined her, um, in a very similar way that Santa Monica came to us and they're doing something similar, uh, not necessarily for the Olympics, but here in this downtown area. And we've joined them too. Uh, and so I think if you're asking specifically about the Olympics, I think. It's going to leave that area much better off. And we see that the city and county and even state and all the rest want to show well there in that village. And those improvements to the village where we're a large owner in terms of like making more of like walking areas of streets, you know, making the retail work, pushing the transportation outside. She's focused on all those things. And I think they're going to get a bunch of them done. She wants to get it done.

Okay, great. That's a bad question after all. And then the second question, you mentioned progress at Studio Plaza. Can you put a finer point on that in terms of anything around leasing activity, where you're at? I know you're hesitant typically to not get too specific, but I'm wondering if you could share anything about progress there.

Thanks. I think the big comments around Studio Plus is, number one, I had a lot of fear there, you know, of reading the entertainment industry and what's going on. But we're doing tons of entertainment deals there, and it's leasing. And we're getting all sizes of tenants and, you know, some little larger multi-floor. We're getting single floor. We're getting all of it. We've got to close them, of course. A number have closed already. I think some are already paying. Well, we finished a project. The project shows incredibly well. And so, like, I would just say my blood pressure went down on it now that I'm seeing it perform. So that's the main thing. And I have a lot of confidence it'll be, we'll finally, well, it was great. It was great doing it. It was at least for 30 years, you know, to a mix of tenants. But, you know, ever since Warner Brothers took it over, it was just always a subject. And now it's going to be like a good, you know, robustly multi-office project that will take kind of the risk profile of those large single tenants off our plate, and it's just not something we enjoy, and it's getting done. So I'm pretty happy about it, actually. And the redo of the building is a stunner. That's one also that has, like, a lot of amenities that our earlier question asked me about, got it set up with, like, Great outdoor amenities, indoor amenities, the whole thing.

Yeah, so when do you think you're kind of sort of done getting that back leased? Do you have a timeline in mind?

Yeah, but if I give a timeline, I'll blow it. So I don't want to do that.

All right. Thanks very much. All right, thanks.

The next question comes from Upal Rana with KeyBank Capital Markets. Please go ahead.

Great, thank you. Jordan, you mentioned doing more acquisitions, and I want to get your thoughts on the Beverly Hills office market. Some assets have traded there recently, including one of your peers buying Maple Plaza. So I just want to get your thoughts there, and maybe if you could tell us if you were part of the bidding there as well. Thanks.

Well, I saw the stuff they sold, and I saw what they bought, and what I have for them is applause. I mean, that was a great trade to move out of that other stuff and into that. I'm like, well done. And I love the Beverly Hills market. I think it's a great market.

Okay, great. Thanks. And then could you talk about any of the larger tenants coming back to the market? You mentioned in the past that You were seeing an increase there, but just curious what your thoughts are today.

You were in it. Go ahead.

Yeah, I mean, we saw, again, very typical, good, healthy leasing over 10,000 feet in Q3, so that was good to see. You know, it was a year, I think more than a year ago now, that we were really seeing that category underperform, and it's been pretty healthy the last couple quarters.

Okay, great. Thank you.

Again, if you have a question, please press star then one. The next question comes from Dylan Brzezinski with Green Street. Please go ahead.

Hi, guys. Good morning. Just a quick one from me. You know, you mentioned the amount of acquisition opportunities that you guys are looking at on the office side. I guess presumably these are mostly sort of value-add type deals where Douglas and me can bring them into the operating platform and execute lease up. But I guess how do you guys weigh that? with the existing portfolio level vacancy that you guys have in the office portfolio today?

So you saw us do a value-add deal, and maybe that's why you're saying that, because we took that one, we bought that 220,000-foot building with the development site, and we're converting it. But my main guiding principle is buy now. the best stuff in the market and keep control over the best stuff in the market because I still believe in the markets. So the best stuff could have some vacancy, it could not have vacancy. But if you go what's my the number one criteria, it's not value add, not value add, whatever it's, we want to buy the best buildings in the markets that we think are long term, great investments that have great supply constraints and a great kind of natural tenant base and amenities and good access to high-end housing, all the stuff that seems like pablum that we put in the front of our original S11, but really has what's guided us.

That's helpful. Thanks, Jordan. Thanks.

This concludes our question and answer session. I would like to turn the conference back to Jordan Kaplan for any closing remarks.

Well, thank you for joining us and we look forward to meeting with a number of you individually soon. Bye-bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.