Douglas Emmett, Inc. (DEI) Q2 2026 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to Douglas Emmett 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 McElhinney, Vice President of Investor Relations for Douglas Emmett.

Thank you. Joining us today on the call are Jordan L. Kaplan, our Chairman and CEO Kevin Andrew Crummy, our CIO and Peter D. 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 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 1 question and 1 follow-up. Thank you. Will now turn the call over to Jordan.

Good morning and thank you for joining us. We had a very active quarter and made real progress on all 4 of our strategic priorities. Our leasing up our office portfolio, acquiring properties at attractive pricing, redeveloping properties to maximize value and refinancing upcoming debt maturities. We signed 960 thousand square feet of office leases. With a good mix of new and renewal deals. And achieved positive absorption of approximately 60 thousand square feet. Healthy office rents and low concessions helped us sign new leases that were 3% more valuable than the expiring leases they replaced. Of course, most of the positive impact of this leasing will occur over the next 12 months. Our apartment portfolio remains fully leased increasing rents. On the acquisition front, we and a few of our joint venture partners acquired an extremely well leased block of prime Beverly Hills medical office properties. Our redevelopment efforts are exceeding expectations Studio Plaza in Burbank, is now leased well over 50% So we have moved it from development to in service. Our apartment redevelopment projects are on track to add over 1 thousand new units. Finally, we refinanced over $800 million of debt this quarter. So with that, I will turn the call over to Kevin.

Thanks, Jordan, and good morning. As Jordan mentioned, in April, we and our joint venture partners acquired the Bedford Collection a 5-building 246 thousand square foot medical office portfolio in the Beverly Hills Golden Triangle, for $260 million We managed the joint venture and hold a 13.3% equity stake. The entity was capitalized with $150 million of equity and $130 million of debt. In addition, during the quarter, we refinanced 2 office loans scheduled to mature later this year. In May, we refinanced a $400 million loan for 4 years and effectively fixed the interest at 6.15% until June 2029. And in June, we refinanced a $415 million loan for 4 years, and effectively fixed the interest at 6.18% until July 2029. With that, I will turn the call over to Stuart.

Thanks, Kevin. Good morning, everyone. During the second quarter, we signed 34 office leases totaling just under 960 thousand square feet. Including 90-3 new leases totaling over 375 thousand square feet and 1 hundred 40-1 renewal leases totaling over 584 thousand square feet. A healthy leasing volume for us and it builds on the momentum we have been seeing over the past few quarters. On rental rates, the straight line value of leases we executed in the quarter increased by 3.2% compared to the prior leases for the same space. With our typical 3% to 5% annual fixed rent bumps continuing to more than offset the impact of lower beginning cash rents. As Jordan mentioned, we have now moved Studio Plaza to our in service portfolio. Since the first generation leases at Studio Plaza take longer to build out, this will have the effect of widening our lease to occupied spread for the next few quarters. In addition, while the lease rate at Studio Plaza is now well over 50%, its inclusion will mean lower reported leased and occupied percentages for our office portfolio until occupancy at Studio Plaza equals or exceeds our average office occupancy. Our lease transaction costs averaged $5.35 per square foot per year. Well below the benchmark for other office REITs. Our residential portfolio continues to perform well, with cash same property NOI up 2% compared to the second quarter of last year. Demand remains very strong across our markets with our portfolio still over 99% leased. With that, I will turn the call over to Peter to discuss our financial results.

Thanks, Stuart. Good morning, everyone. Compared to the second quarter of 25, revenue increased from $252 million to $257 million FFO increased but still rounded to $0.37 per share and AFFO increased from $54 million to $56 million Same property cash NOI decreased 1.2% for the quarter. At approximately 4.9% of revenue, our G&A remains the lowest among our benchmark group. We are now including Studio Plaza in our occupancy assumption for the full year. Despite being leased well over 50%, its occupancy has not yet reached the average for our portfolio. Solely as the result of including Studio Plaza for the full year, we are lowering our office occupancy guidance range to between 75% to 77%. Our operating income expectations have improved from our prior projections, but we anticipate that this improvement will be more than offset by the impact of higher market interest rates. Therefore, we now expect our 2026 diluted net income per common share to be between -$0.20 and -$0.16 and our fully diluted FFO per share to be between $1.39 and $1.43 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. You are using a speakerphone, please pick up your handset before pressing the keys. Again, in consideration of other participants, please limit your queries to 1 question and 1 follow-up. At this time, we will pause momentarily to assemble our roster. Our first question comes from Steve Sakwa with Evercore. Please go ahead.

Thanks. Good morning. Maybe Jordan or Stuart, could you maybe just comment a little bit more on the leasing activity? You have obviously now had 2 pretty solid quarters on the new lease side. And I am just curious if there is any sort of larger deals that may be influencing that trend? And what is your expectation for new leasing volume moving into the back half of the year?

I mean, we can both answer that. Yes. Look, I will jump in. I would say we have had 3 really good quarters actually, if you go 3 pretty good quarters in a row. We are building on the momentum here, so we are excited about what is going on in leasing. Now they are another great quarter with 960 thousand feet. I think the Q1, if you look at Q1 with the record new leasing we did last quarter, that was chunkier as we talked a little bit about that last quarter with some larger deals. This quarter was less so, just we had pretty typical activity from, you know, that larger group that we call over 10 thousand feet this quarter, so not super chunky. And I think we are very optimistic that we are going to have good momentum continue through the second half of the And I agree with all that.

I am very happy with what our leasing group is doing. And, you know, I hope that we are getting a little wind in our back and we are going to continue. And it feels that way. But like I keep saying, I do not know if the proof is in 1 quarter, 2 quarters, 3 quarters, 4 quarters, but I look at what we have done, I feel very good. Okay. And then maybe just on the debt, I know you have got a couple of swap maturities coming up over the next kind of 12 months or so. Just kind of remind us your plans for those swaps and is there anything you can do to sort of help mitigate or offset some of that higher interest expense or kind of it is what it is? I do not want to say it is what it is. that is for sure. When-- look, we do not choose to live in a world where we have a lot floating. Rich? So when you see something go to floating, it is probably during the last bit of the term of that loan, which means we are going to refinance that loan. We have started working on refining that loan and it can get refinanced at the beginning of that time or later in time, we have a window to do it. I do not think we are going to stay floating. I am not thrilled with where interest rates are. But, you know, we were just talking about that, and you know, I needed I am really trying to think of a good way to deal with those interest rates because the rest of the company the rest of what is going on is so good that I feel that the changes in that the increased cost of interest we were low leverage. None of our buildings are jeopardized. None of the ownership is jeopardized. But it is really kind of clouding our performance, and it bothers me as much as it bothers you guys. And we are really thinking about solutions to that. Okay, thanks. that is it for me. Thanks.

Our next question comes from Jamie Feldman with Wells Fargo. Please go ahead.

Great. Thanks for taking the question. I am sitting in for Blaine today. So, you know, interesting portfolio transaction in Beverly Hills. Can you just talk more about any other interesting opportunities you are working on or that might be out there you know, whether unique asset types or larger portfolio transactions? And then, you know, with the transaction market improving and investor expectations, you know, and investors may be getting more aggressive, how have return requirements changed? Both in terms of what you are willing to get and what your investors are looking for?

Well, I got to tell you because it is funny we are looking at you know, to me, we had a great quarter. I was surprised the stock was off because we were talking about, I am like, it is the best time to be in real estate. We are we are working on a bunch of acquisitions. I will tell you that. Will we make them? I do not know that, but there are definitely some large ones, and it is getting a ton of our focus. And, you know, we have gone through very long periods where we have been accused of some early on after 2009, we only buy, we do not develop. Then as we got later in the term, we were only developing. We never buy anything. Now we are back to buying, which know, we are developing residential, but I love buying deals at good pricing. And I think opportunities extremely good right now. This is like a great time to be other than interest rates are probably playing a part in the opportunity that is created. This is a great time to be in real estate because I believe in the markets I believe in the real estate. And pricing has conspired in the way it since the early nineties to create opportunities to buy fantastic buildings. So we have been after forever. And we are super focused. it is what is driving most of my travel. Okay.

So I guess, second part of the question was just return expectations how are yours changing? Given maybe markets are improving? And then how are your investors changing or what they are looking for changing?

Well, everybody is looking for better returns. Driven by where interest rates are and the lack of equity and debt that is generally available in the market, which is probably what is creating the opportunity and at the same time you know, it means we are not always in agreement with the seller. But we are obviously making deals. You are watching us do it. And we are making these deals with in a good part, a very good part with our JV partners who seem pretty happy with what is going on because they are continuing to ask what is next. So we have to get the what is next and get it organized and get it in front of them correctly. Because there is definitely an appetite now, we are seeing even for office in our markets.

Okay. Thank you for that. And then I guess for my follow-up, it looks like there were some adjustments in the UCLA tenancy this quarter. have 2 more leases with them and 1 additional property and some expirations were shifted. Can you give us a general idea of how your conversations with them are going? How committed to their space in your portfolio they seem to be? And then can you also comment on the 77 thousand square foot Stanley expiration in 2027? Thank you.

Sure. Yeah. Sure, Jamie. So I think we are in good conversations with UCLA about the remaining expirations this year. We feel good about that. They do not act like a single large tenant. They have a bunch of leases with us. And, literally, we have had it in 1 quarter where they have given back space and leased space the in the same quarter because they have a bunch of different apartments departments that are kind of acting independently. But we feel good about the space that is coming up. Same with Jordan Stanley next year, I think there is productive conversations happening. We are feeling good about the expirations, that are next year for Jordan Stanley.

Okay. Do you have a sense of when you might have an answer on Jordan Stanley? Like how early they tend to lock things in?

Well, we generally, we are not in the business of giving you guys details on individual tenants. I know they are on our big tenant list. I understand why you are asking. I will also mention that is more than 1 lease with Jordan Stanley. Not 1 large lease. They also have multiple leases with us, which is multiple leases in that 77 thousand feet.

Okay. Alright. Great. Thank you.

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

Hey, morning out there. Jordan, on your debt comment and where interest rates are, As you think about the company, clearly, you guys run it on a pretty lowly levered overall perspective. But if you think about the individual asset financing that you do and the JV structures, are you thinking that you and your partners would run the buildings with lower leverage So meaning as loans are maturing, you guys would either pay them off entirely or refinance them at lower LTVs. In that way, you cannot do anything about interest rates, but you can do something about where the loan balances are. I am just trying to think if you are thinking along those lines.

it is a little more complicated than that. But you are right. There might be ways especially with the fact that we are buying at same time and bringing in partners to reduce our exposure to the, you know, fluctuations in interest rate or into to this higher level interest. We do not really have high level debt. I mean, know, I think unlike many, many, many of my peers, especially ones that have nonrecourse debt, we have not been in a position of giving anything back. We have equity across the board. We are in good shape there. But, obviously, interest has moved against us, and it is a cost that is hitting us now. I mean, it is funny because the great news is interest rates will go up and they will go down when they are dropping. it is going to be great because if you really look at our NOI, the way we maintained our NOI and cash flow coming off the properties before interest, it is been outstanding. I mean, beyond outstanding. And so as the properties lease up, you are looking at a lot of NOI and a lot of income. But interest obviously has been taken the cream off of that. And then the question is, we want to do, like, some more permanent things and try and really just reduce our exposure to it, Or do we go, hey. it is a time it is a moment in time. We are making acquisitions. it is helping us get those done at great pricing, and it will not always sit this way. So we will, like, take something. it is better than buying a building at a super high price, which you live with for the rest of your life. Rich? And so just thinking through all of that, I think it is really getting in the way of people realizing how well our markets and how well the company is doing operationally.

Okay. And then the second question is, you know, if you look at what is going on with Paramount and the state attorney general, on that debate and whether, you know, maybe they do relocate or not. Is there any concern in LA that, you know, maybe the environment there is not even as amenable to corporate Hollywood staying and maybe that industry will start to morph to other markets? Or is the view that, no, this is just headline noise, nothing is going to change And therefore, all the Hollywood, you know, all the office users, you know, there is no disruption to that market. I am just trying to think about how this plays out and obviously the saber rattling that is going on.

Well, I think the deal is going to close. I will admit I am at a little bit of a loss why our state government is against 2 California companies being here and merging. But putting that to the side, I think, overall, it is healthy for the people here. I think you have seen stuff from whether it be David or his father. They are pretty committed to California. I you know, the talent is here. The directors are here. You know, they are frankly, they are they have giant capital commitments to facilities here. So I think it is been running at a low-- I you know, now you are starting to see big movies come out. You know, the I am not sure what is going on there. Unfortunately or fortunately, ever really impact us a lot because the tenants we have are definitely living here, like, literally in our neighborhood, and they are renting from us. Because they are living here. Now when you talk about the studios, we do not own any of that. And so I want California to do well and I want you know, all the industries to be able to be here, but I am not sure it impacts us that much. Though I do hope that the state gets out of the way and lets them merge I think that the new company is going to be-- you know, produce even more and I think they are going to lean into those big movies. Thank you, Jordan.

Thanks.

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

Thanks. Good morning out there. So on Plaza moving into the operating portfolio, What besides it making the marquee of your occupancy guidance now going forward, what was the impact from that on guidance, if anything? Is there a cap interest burn off as a result? Like, what besides higher interest expense that you point out, what role did Studio Plaza play in the guidance? If any?

So it is Studio Plaza had debt, it would have been included already, but it does not have any debt. So start with that. And most of the steps for Studio Plaza have been included forever. it is only the leasing or maybe some type of same store stats. That you know so I mean, you know, we have we have really said it.

I mean, the impact is on leasing. I mean, we-- you know, it had it had a slightly negative impact on leasing simply because it is obviously not leased as well as the rest of the portfolio. But it is it is been extremely well leased and what I think has been a pretty good we redid the building and have leased it up to this point. In what I think has been a pretty rapid fashion. it is moving along the clip. We were asked to include it. People did not like it being on the outside, so we included it. Yeah.

And I think that, you know, part of the operational improvement we mentioned is offsetting some of the interest is including Studio Plaza. it is going well there. And that is part of that.

Okay. Outside of Studio Plaza, redev being among your 4 priorities, know, you were once upon a time making 30% on your money on sort of repositioning activities around the portfolio. Can you talk about and provide some color about that business again, outside of Studio Plaza, where it is happening, if you can provide that and what types of returns you are seeing today?

Sure. I think we I do not know 30 percent or whatever percent but we have done a very good job over time. You know, there is a market where they do not really let you build new office buildings, and it is extremely difficult to build off apartment buildings. Now, we are talking about repositioning, not new. We are doing a lot putting a lot of capital into building new apartments. But in terms of repositioning, there is repositioning being done on our resi portfolio. And there is also always repositioning or worked on if we are always doing a certain number of lobbies. We are always doing a certain number of elevators. Because we want all our buildings to stay at the top of the market. In terms of perception, like a top 10, 20% of the market. And there is a huge ranking process for that. So we are constantly doing work. I mean, if you follow the portfolio for a while, things that people do not even expect, like, 4 you know, it is got a whole new skin now. Rich? We redid the lobby at 100 Wilshire, which was I mean, all these buildings were getting great rents before too, by the way. But it keeps the building at the top of the market. And you get even more out of it because it, you know, it takes what is at our bottom and moves it back up. And so we have been spending that capital for probably mine and Kenneth's whole career. Although, I will admit, we amped it up Over the last 5, 6, 7 years, something in that range, and it has paid very good dividends for us to push up into that you know, top, like I keep saying, 20% range.

Okay. Great. Thanks very much. Thanks.

Our next question comes from Upal Rana with KeyBanc Capital Markets. Please go ahead.

Great. Thank you. Jordan, you talked about, you know, lease activity over the past 3 quarters. Could you comment on where some of that tenant demand has changed the most over the past few quarters? Any industries that may have surprised you or either positively or negatively?

Surprise would not be the word. Now, I am happy. That the larger tenants have come back and they came back probably even a little more than a quarter ago, but you have really seen it reflected in our in our numbers. The small tenants were always kind of rolling along at a good clip, but it was still back. Like, when a large guy does not renew, it takes many small tenants to fill in the space. And so now that we are getting like a good dose of large guys and small guys, we are not being left with such visible holes that we have to plug. But I-- I am-- I will not say I am surprised because I have as I have said many times, I believed in the market, but I am really happy that it is moving along much better now than it certainly did during COVID, and then it kind of had another little drag and started recovering, then had a little drag down when the Fed came out and said, okay, inflation is real, and we are going to start raising rates. And now, you know, it feels like we saw a 2020 late 24, early 25, bottom, and it feels like we are on a good clip right now.

You want to say something? Go ahead. Yes. Just on the industries, Upal, if you look at our pie chart of our industries, those top 6 categories that are probably largest have all had very good demand. it is remained very diverse across those industries. Legal, financial services, real estate, still all good and active and entertainment has been very strong despite, you know, the headlines. We have been doing good entertainment leasing as well.

Yes. I have got to say we keep getting asked about entertainment, I guess, vis a vis studios. We are actually doing a lot of leasing to entertainment. I mean, you know, that is that is that was the solid tailwind between where studio Plaza is today. But, no, I mean, I realized that probably they are not using as much studio space. Great.

That was helpful. And then, you know, you mentioned the benefit from this quarter's leasing will not be realized until the next 12 months. Your leased not occupied spread is now almost sitting at 500 basis points. So maybe you can quantify how much of the annualized NOI is embedded in these leases? And have those already been signed, but you know, are you just, like, just kind of curious how are we should we be thinking about this as we roll into 2027?

I do not I will let maybe Peter has some kind of idea. Look, you have got a sense of our average lease rate and you know how much space it is. And if it moves in over the course of 12 months, you can kind of do that math. it is a very meaningful number. And we are we are very pleased with that trajectory. And we expect to continue to add that as we continue to maintain high leasing volume over the next few quarters.

I have to say I saw that 470 basis point spread-- over 470, yes. And I mean, you cannot get better news than that. I would tell you, when that spreads wide, we are leasing a lot. And when that spread narrows to below 200, you go, well, there is not a lot of leasing going on because more and faster aggressive leasing creates the spread. And so almost more than the fact that we are we are reporting a very meaningful positive absorption is that spread capping out that wide, which might be 1 of the widest I have ever seen, is an extremely good sign.

Okay. Great. Thank you.

Our next question comes from Dylan Przybylinski with Green Street. Please go ahead.

Hi, guys. Good afternoon. Thanks for taking the question. Maybe Jordan, just going back to your comments around the team being sort of active on working on a number of acquisitions. Have you sort of seen pricing change at all in the last, call it, 6 to 9 months? And I guess as you guys are sort of underwriting opportunities, are you able to share sort of the yield on cost you guys are sort of targeting So we are able to get deals done now.

I mean, Pricing is down from, we will call, whatever, 2017, 2018, 2019, okay? And probably even 2020, 2021, 2022. So pricing is down from that. What and it is it is 1 I will I will say, I mean, in my life of this is my 40th year. I have only seen a guy selling a building for less than they bought it for twice, and 1 was in their early nineties, and this is the second time. So that by itself, if you stand back, you go, this incredible opportunity. Now separately, what is creating more of an opportunity is the fact that it is kind of wherever the beating's been long enough, rates have been high for long enough, whatever you wanna call it, they are starting to be a meeting, you know, we are we are getting some people to trade. At numbers that work for us, our investor and then, and they are like, fine. I am out. Okay? And that is the biggest thing. Rich? Because we lived through that 2008-2010. Was hard to buy stuff because rates were very low. And people were just were not willing to meet, let's say, the pricing that a bunch of you know, grave dancers were sitting around and expecting in terms of equity yields. So not a lot of buildings traded. Now, You know, what traded was debt pieces. Okay? Now I actually think some really high quality real estate's gonna trade. You are seeing it happen because we are doing it. We have already done 2 deals. And so I am thinking this is a very good opportunity because separate from, like, getting someone to do something, kinda out of whack with what the market is doing, there is a real meeting at a good price point, a good cost per foot, and with a good yield, And so I go, okay. that is everything good, so do not waste this. And we are out working to make sure we do not.

And when you say good yield, are you able to sort of share what you guys are sort of underwriting to? At all?

Well, I think our all cash IRRs on a 10-year look. Are probably coming in 10% or better. that is that is we have not seen that for a long time.

On sort of being some of the insurance stuff going on when at, at Barrington Plaza.

Well, I do not have a update you guys would care about. there is an off lot of paper movement, could tell you that. I mean, everyone's asking for more and more and We are gonna have it. it is getting a lot of attention. Now. Great.

Thank you. Thanks.

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

Thank you. Just given the opportunities you are seeing in the office on the acquisition side, are you putting some of the residential developments, say, the 10 thousand units, sort of on the back burner for now? And in particular, I wanted to ask about 10.9 thousand Wilshire, which is 1 of the redevelopment projects. I think you said last quarter that was gonna start this year. And then I am not sure that is still in the works. Wanted to get an update on that. Redevelopment as well.

I still think it is possible for it to start this year. I will tell you, honestly, we purposely slowed it down. Because we have got some indications that the office, there is some real interest from some large tenants. Look, 1 way or another, that thing will have residential. Okay? But I do not want to walk away from opportunity to have a mixed use project and the office can be more profitable, especially if some big tenants say, I am gonna take this for a while. So I do not want to-- so, you know, it we need to give a little time, let it mature. So I said, slow it down. Let's just make sure we are not, like, doing something that we lose our ability to accommodate some larger leases that could be in there, and then we would have res and large leases. You know, people a lot of time we saw this in Hawaii that as people start seeing what we are gonna do and the amenities, they are like, well, I do not mind having my office building in that because look at these crazy amenities, whether it be gym and a club on the top and a pool and whatnot. So we have to we have to let that play out a little bit. it is not that we are not ready. All the money funded. Everything's good to go on it. We just wanna watch a little bit. For a while. that is why we kind of slowed down our language on it.

Okay. And given the opportunities you are seeing for investments, and banks no longer redlining office as an asset class, have you thought about reestablishing credit facility? I realize you have $3.155 billion of cash. The balance sheet, but just to give you some additional flexibility.

I do think about that I am gonna tell you something. Every time I think about doing that and you know, we have a lot of buildings that do not even have loans on them, right? So I always have to compare borrowing cash on a credit line to just borrowing the money and then, like, arbitraging it into an interest bearing account till I need it and looking at that cost. And for better or probably it is worse, but for whatever, that calculation does not tell you to have a credit line. That calculation just says borrow the money, and arbitrage it into an interest bearing account because it is it is a lower cost. Banks and people that are lending are still charging a lot for unused fees and a lot of fees around that because they really want their you know, they wanna have outstandings And just click it off, Kenneth.

Sorry about that. Alright. Sorry.

Well, that was actually my phone. That and I forgot to turn it off for this call. So, Stuart, took it from Kenneth and shut it off. Okay. So, I just it is just a calculation. And if we wanted more capital, we would be better off just borrowing it. At the moment because of where the credit line market is. Got it.

Okay. Thank you. Thanks.

Our next question comes from Seth Bergey with Citi. Please go ahead.

Hey, thanks for taking my question and good morning out there. Guess just going back to some of the acquisitions commentary, you mentioned it is a good time to be in real estate. And your last acquisition was kind of an outpatient medical. Are we thinking about that all as office? Are there is there anything interesting in residential or other asset classes that you are focused on? And then just on the office piece, how many high quality buildings are kind of out there that cater to those smaller tenants similar to how your office portfolio is currently constructed?

I think there is going to be sizable real opportunities coming up or they are coming up right now. And I want to have the so first of all, okay, we have been we have been looking for office. I always loved medical office, and that medical office came up, and we did it. Okay? We also did a large office building. Which had an opportunity to be both resi and office. Actually, Plan A was office, and then we said we will flip to resi because we had them both built into our analysis. There are some To buy apartments-- apartments are still trading relative to the rest of the real estate in the world. At very low cap rates at pretty good pricing. Now there is a lot of new stuff trading because they might have financed it with construction loans that were relying on very low cap rates, that now they cannot get out of their construction debt, so it is selling. In terms of, like, making their hurdles in terms of, like, rental rate oh, you see it in our portfolio. I mean, the resi has gone kind of where and better where people thought they would go. And the in general, things are extremely well leased up. So those are-- those are debt. You just look at the deal like we would buy because we do not use a lot of debt. You would go, well, the pricing is not necessarily that denuded compared to what it was in 2018-2020, whatever. So I just do not feel acquisition is as good an opportunity. Office like I said, I think a guy that bought an office building in 17, 18, 19, is selling it today. If he does, for less, he is gotten used to the fact of where rates are, where yields are. And therefore, I go, great deal. But we are not seeing that in apartments.

And then just a quick follow-up on some of your return comments. Does that include kind of the economics of doing that in the JV structure?

No. That was a simple question and simple answer. Do you have anything else? All right, move on.

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

Thank you. Thanks for taking the question. Maybe following up on the apartments and your multifamily portfolio specifically, can you talk to rent growth expectations for the second half of the year? Given your high occupancies?

So I do not know if you remember, but if you go back and rents and our revenue was moving at a clip that I said every quarter, this is unsustainable. We have never seen anything like this. it is unsustainable. The long term trend has been significantly less than what you saw the last couple of years. I would expect to go to the long term trend. I and that trend is a trend that you can calculate 100 different ways going all the way back to like the 1.99 thousands in terms of growth of apartment rents. And I do not know why we will be so dramatically off track of well, I do know why, but we have been very off track in terms of growth. The last couple of years, which has been much higher than normal. And I would always expect it to go to normal.

Thank you.

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

Well, thank you, everybody, for joining us. And we look forward to speaking with you again soon. Goodbye.

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