On Wednesday, Douglas Emmett (NYSE:DEI) discussed first-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

Douglas Emmett reported positive absorption of approximately 100,000 square feet for the second consecutive quarter and executed a record 450,000 square feet of new leases.

The company acquired a portfolio of medical office properties in Beverly Hills for $260 million, aiming to expand its portfolio at a significant discount to long-term value.

Strategic redevelopment projects in Brentwood, Westwood, and Burbank are progressing, with Studio Plaza leasing underway.

Q1 office leasing costs averaged $6.30 per square foot, below the benchmark for other Office REITs, and the residential portfolio reported a 4.2% increase in cash same-property NOI.

Douglas Emmett's guidance for 2026 expects diluted net income per share between negative $0.20 and negative $0.14, with FFO per share between $1.39 and $1.45.

Full Transcript

OPERATOR

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 McElhenney, vice president of Investor Relations for Douglas Emmett. Please go ahead.

Stuart McElhenney (Vice President of Investor Relations)

Thank you. Joining us today on the call are Jordan Kaplan, our Chairman 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 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.

Jordan Kaplan (Chairman and CEO)

Good morning and thank you for joining us. Our operating results were once again exceptional. First, we recorded approximately 100,000 square feet of positive absorption for the second consecutive quarter. In the last six months we delivered our best results since 2019, growing our lease rate by over 1%. Second, we executed over 450,000 square feet of new leases, our best quarter ever for new leasing. Third, we posted record leasing to tenants over 10,000 square feet and fourth, we did all this while realizing meaningful straight line rent roll up. We understand that everyone is watching our leasing for signs of a sustained recovery. While two quarters is not sufficient to call a bottom, we are becoming increasingly hopeful. We believe that this part of the cycle presents a rare opportunity to expand our portfolio at a significant discount to long term value. Thus far we have made two acquisitions, including an April acquisition in which we and our joint venture partners paid $260 million for a portfolio of premium medical office properties located in the Beverly Hills Golden Triangle encompassing Almost the entire 400 block block of Bedford Drive. I am proud of the outstanding job done by our operations team and our capital markets group. These results reflect their sustained hard work. As we have discussed, we remain hyper focused on growing earnings through leasing acquisitions and the redevelopment of Studio Plaza, the landmark Residences and 10900 Wilshire. We have also been successful extending our debt at lower rates than are available to the broader market. Before I finish, I can't help but mention recent referrals and in the media to Jevons Paradox, which compares the impact of AI adoption on job growth and office demand to past transformative technologies such as personal computers, the Internet and cloud computing. With that, I will turn the call over to Kevin Thanks Jordan and good morning. This April a new joint venture managed by us acquired the Bedford Collection, a five building 246,000 square foot medical office portfolio located in the Beverly Hills Golden Triangle. We hold a 13% stake in the joint venture's $150 million of equity. The joint venture also borrowed $130 million secured by a non recourse interest only first trustee loan maturing in April 2031. The loan bears interest of SOFR plus one hundred and seventy basis points which we have effectively fixed at 5.26% per annum through April 2030. The three development projects that Jordan mentioned are progressing nicely in Brentwood. Our multi year redevelopment of the 712 unit Landmark Residences continues in full swing at 10900 Wilshire in Westwood. We expect to commence construction this year to convert the property into a 323 unit apartment community at Studio Plaza in Burbank. The redevelopment is completed and leasing is well underway with some tenants already taking occupancy. With that I will turn the call over to Stuart.

Kevin Crummey (Chief Investment Officer)

Thanks Kevin. Good morning everyone. During the first quarter we signed 218 office leases totaling 909,000 square feet, including a single quarter record of 461,000 square feet of new leases. We signed 448,000 square feet of renewal leases and as Jordan mentioned, leasing was particularly strong from new tenants over 10,000 square feet. Tenant retention remains strong consistent with our historical average. Our first quarter office demand was diversified across many industries with legal, financial services, entertainment, real estate and accounting representing the top 5. Our leasing spreads also improved in the first quarter as we continue to sign new leases that are more valuable than the expiring lease for the same space. The overall straight line value of new leases we signed in the quarter increased by 5.3%. Cash spreads are lower by 7.7% as a result of our very healthy fixed 3 to 5% annual rent increases over the life of the expiring lease, first quarter office leasing costs averaged $6.30 per square foot per year, significantly below the benchmark average for other Office REITs, though slightly elevated for us due to exceptional new and larger leasing, which typically require more tenant improvement costs. Our residential portfolio continues to perform well with cash. Same property NOI up 4.2% compared to the first quarter of last year. Demand remains very strong across our markets and our portfolio remains over 99% leased. With that, I'll turn the call over to Peter to discuss our financial results. Thanks, Stuart. Good morning everyone. Compared to the first quarter of 2025, revenue remained essentially flat at $251 million. FFO decreased to $0.37 per share and AFFO decreased to $49 million, reflecting higher interest expense and lower partly offset by strong multifamily performance. Same property cash NOI decreased 1.4% for the quarter at approximately 5.4% of revenue. Our G&A remains the lowest among our benchmark group in terms of guidance. We still expect our 2026 diluted net income per common share to be between negative 20 and negative $0.14 and our fully diluted FFO per share to be between $1.39 and $1.45. We expect the FFO gains from the Bedford acquisition to be largely offset by higher assumed interest expense, reflecting the flattening interest rate curve. 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.

OPERATOR

We will now begin the question and answer session in consideration of other participants. Please limit your queries to one question and one follow up. To ask a question, you may press Star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, please press Star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Steve Sacwa with Evercore isi. Please go ahead.

Steve Sacwa (Equity Analyst)

Yeah, thanks. Good morning out there. I don't know, Jordan or maybe Stuart. Could you guys maybe just expound a little bit on the leasing volume? Obviously, the new leasing was quite strong and we're just trying to get our arms around whether there were any larger leases that might have kind of skewed the quarterly volume here. If you could provide any maybe insight on how many over 10,000 got done this quarter versus historically done, just to kind of gauge the breadth of the leasing activity.

Stuart McElhenney (Vice President of Investor Relations)

Yeah, Steve, it's Stuart. Yeah, as we said, it was record amount of leasing in that over 10,000 category, the most we've ever had. So really strong. There were a number of deals between 10 and 20,000 square feet, and there were a few deals over 20,000 square feet that were in so very strong a bunch of industries, entertainment, legal. So it was a wide variety of industries in that larger category, but it's the strongest leasing we've had of that size ever.

Steve Sacwa (Equity Analyst)

Okay, thanks. And then maybe a follow up. Jordan, can you provide any just additional, I guess, valuation metrics, kind of yield, return on equity, stabilize yield on the Bedford transaction? Obviously we can back into a price per foot, but any kind of going in cap rates or return on equity that you could share for Douglas Emmett would be helpful.

Jordan Kaplan (Chairman and CEO)

Thanks. Well, we agreed with the seller not to give out that information, although you don't even have to back on the price per foot. I think we gave it to you. Isn't it around $1,000 a foot? Nine, very high nines. It's a portfolio that, as odd as it sound, I've been trying to buy since the 90s, and I'm beyond pleased with the deal. I think that we're particularly lucky that it came up at a time when it was a good time to buy almost anything. So I'm very, very pleased with the deal. Steve, next time you're out here, we'll walk you around it and you will, I think, be surprised by the amount of control we have. Anything else? Those were my two questions. Thanks. All right, thanks, Dan.

OPERATOR

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

Alexander Goldfarb (Equity Analyst)

Sure. And good morning out there, Jordan. You mentioned Jevons Paradox, so I had to Google that to look what that is. But are you seeing that? Were you just making that comment on its own, or do you have real anecdotes that you're seeing in the marketplace of people saying, hey, because of AI and all the innovation that's going on, we actually need to hire more. I'm just sort of curious if it was just a comment that you threw out or you're actually seeing it in leasing discussions.

Jordan Kaplan (Chairman and CEO)

You know, our leasing is really picking up, as you saw. I cannot say I've seen that. exact thing happening. But the reason I was just so thrilled to read about that is that I feel like I've been saying it now for a year or two years about AI. I mean, as AI empowers people to be more efficient and effective, I just think the result will be people will want to hire more people that can do that. Now there's some people, if they don't embrace it, they're going to feel left behind. And I'm sure that will happen. But if you said to me the number of people employed or the more direct statement is that your office buildings are going to be empty because no one needs to hire anybody, I don't believe that one bit. And if you look back at all the technologies in the past that have made that same prediction that people were going to whether stay home or whatever the case may be, and the exact opposite has happened. So. And I just felt like I was so surprised to see it show up from a guy from the 1800s who was talking about coal. And as things became more efficient, he thought less coal be used, but in fact more got used. But there's many examples since then.

Alexander Goldfarb (Equity Analyst)

Okay, and the second question is, and I know I've asked you before about the South Bay like El Segundo and those markets out to lax, but you know, just hearing recently about more demand for aerospace and defense and you know that's sort of that community's long history. Do you guys, as you think about acquisitions especially, you've shown you still have a lot of JV capital that wants into the market. Would you reassess and possibly consider entering some of those markets if you feel like the aerospace defense has renewed legs over this cycle or your view, or maybe Kevin's view is there's enough acquisition demand in your traditional markets and maybe you're not so sure how long the aerospace demand is that you're going to stick where you are versus possibly entering some new sub markets.

Jordan Kaplan (Chairman and CEO)

I think the problem with those other markets that you're mentioning is that people can still build and if aerospace really picks up down there, they're going to just build more facilities for them. And that always worries me in a market because you don't have to just be good about getting in. You got to be really careful to get out at the right time. I'm much more comfortable here where even at a period like COVID-19, real estate, recession, et cetera, we have throughout it all, and I know we, you know, we've lost lease rate over the last, whatever it is, six years for the most part due to Covid. There's such a durable demand here and such an extreme limit on supply that I'm just very comfortable buying here. I look at all the other factors that. The wealth here, the homes, the people that are working here, the other drivers like the universities, the places, industries that have focused their research here, especially on, like, medical and research and medical research and tech research. I just have a lot more comfort here than making a kind of moving farther out. And as you said, I do feel there are more deals. And we're saying that to our JV partners and so on. You know, everyone's. Everyone's focused on it.

Alexander Goldfarb (Equity Analyst)

Thank you.

OPERATOR

The next question will come from Anthony Paulone with JP Morgan. Please go ahead.

Anthony Paulone (Equity Analyst)

Thank you. Jordan, you talked about just finding bottom here, but can you maybe step back just to give us your thoughts on LA in general and how that's playing into tenant behavior or desire to sign leases just a little bit more on the ground in terms of what the feedback has been from prospective tenants.

Jordan Kaplan (Chairman and CEO)

So when you say LA in general, I don't know if you're saying as opposed to another one of the gateway markets, but LA in general, in many aspects, just generally feels like it's coming back. I mean, you see it in the leasing. We see it in the differences of policing and attitudes in the cities that we're operating in the way things are kind of. People are done with the kind of permissiveness that was incubated by Covid. And so we see a lot of ways where things are coming back. And of course, we're just seeing a lot more tenant demand. I hope it holds up.

Anthony Paulone (Equity Analyst)

Okay. And then at Studio Plaza, you said it sounds like tenants are starting to take some space there. When should we think about that just being put to bed in terms of stabilized and up and running?

Jordan Kaplan (Chairman and CEO)

Well, we'll call it stabilized when we get up into the 90s, and we're working our way towards that. The tenants are moving in. And separately, I'm very pleased with the mix of tenants. I felt like while it was definitely great to have a single tenant there that stayed for 30 years, it was always sort of a risk hanging out in our future. And when Warner Brothers moved out, I will admit, I was frightened. I was talking to Ken about it, and I'm so happy now to see, like, a real good mix of tenants, good demand for the building, leasing it up, and a good mix of some tenants provide amenity. The whole thing is working extremely well. And the way we redid the building so it's One of my greatest happinesses and relief to see how it's moving now.

Stuart McElhenney (Vice President of Investor Relations)

I mean do you think it's another year to get to 90 plus or two years out? Tony, we're not going to give. We're pleased with the pace so far. Like when it's stabilized we'll move it back into the in service portfolio. But we don't like to give individual building data and we don't want to put a timeline on ourselves. Okay, thanks.

OPERATOR

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

Jana Gallen (Equity Analyst)

Thank you. , congrats on the strong start to the year.

Stuart McElhenney (Vice President of Investor Relations)

The spread between the leased and commenced occupancy continues to widen. When you think about the expected commencements, the forward pipeline and then the expiration schedule, does it seem like this quarter has been kind of the trough in the occupancy number as Jordan said in his remarks, you know, we're not ready to call a bottom. We're certainly pleased with the pace of leasing the last few quarters and hope that continues. We're really pleased to see that lease to occupied spread widen out three and a half. Now that means we've been doing a lot of leasing. Of course those folks will need to move in which will happen over the next few quarters. With the larger leases that we're signing that takes a little longer than our typical tenant. So the commencement dates are out a little further than the typical 2,500 foot guy that we can get in very quickly. But hopefully that spread stays wide. We need to do a lot of leasing and when that spread is wide that means that we've done a lot of leasing and and those folks need to move in. Thank you. And can you give us maybe like just rough estimates for the under 10,000? You know that would be maybe like a two quarter lag and then maybe the larger or any kind of rules of thumb for us to think about in modeling. Yeah, for the typical, the 2,500 foot guy, we can get them in very quickly. I mean we build a lot of move in ready spec suites. That's a program that we're very aggressive about. We try to have all of our buildings have a couple of those suites ready to go. Those can be in extremely fast. But a more typical average for that smaller tenant is a few months so they can be moved in within a quarter or two of when we sign the lease. And then for the larger guys, it really depends on the level of build out. Studio Plaza has some significant build outs going on. So some of those folks will be moving in next year. So that is really deal specific. Thank you.

OPERATOR

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

Seth Bergey

Hi. Thanks for taking my question. I guess just to follow up on some of those comments on the signed not commenced spread, how much of that 350 basis points is smaller tenants that you can kind of get in quickly versus skewed by some of the larger leases that will take longer to get those tenants moved in? I don't have the breakdown between small and large in that sign not commenced. I know a lot of it is still our under 10,000ft guys, so I suspect we'll have steady move ins throughout the rest of 2026 and then some of the larger guys are going to take a little longer, like I said.

Stuart McElhenney (Vice President of Investor Relations)

Great. And then just as a follow up, I know you're not ready to kind of call bottom here, but what are you seeing in terms of tour activity or kind of the forward pipeline that gives you confidence that things will kind of improve over the coming quarters? It's the good activity that we've been seeing these last six months that's continued the pipeline is good, healthy activity. Tours calls, all the metrics we look at all seem very healthy. Great.

OPERATOR

Our next question comes from Upurana with KeyBank Capital Markets. Please go ahead.

Upurana (Equity Analyst)

Great, thank you. On the Bedford acquisition, is there any kind of mark to market opportunity? We couldn't hear you. Yeah, you're cutting out. Can you hear me now? Yes. Yeah. On the Bedford collection, is there a mark to market opportunity there or any kind of expected rent growth that you can achieve there?

Jordan Kaplan (Chairman and CEO)

I think there's always a small mark to market opportunity in everything we've been doing, but not a stunning one like with a. Sometimes you buy a building with a bank or something in it where the rent's like less than half and it's an old lease that's not there. Google, we own a lot of medical office. This is kind of our first foray into that product type. We own probably about a million feet of medical office. It's fantastic product. We love the tenants. They're very sticky. They invest a lot of their own money in the space. So we're very pleased to add to that.

Upurana (Equity Analyst)

Okay, great. That was helpful. And then could you maybe talk a little bit on the potential to do additional external growth opportunities that you're seeing in the market? I know you've talked about developing resi and trying to buy stabilized office, which you've been doing, but just curious what kinds of opportunities you're seeing and the depth that you're seeing out in your markets,

Kevin Crummey (Chief Investment Officer)

it's Kevin. We're seeing a lot of activity, and more than half of it is off market where somebody reaches out. And so, you know, we're feeling pretty good about the engagement that we're having with people. We just need to close the gap and come up with pricing that makes sense. And as we've said, we're focused on office.

Upurana (Equity Analyst)

Okay, great. Thank you.

OPERATOR

Up next, we have John Kim with BMO Capital Markets. Please go ahead.

John Kim

Good morning. With the Bedford Collection, you announced that you have a third of the Class A office space in Beverly Hills.

Jordan Kaplan (Chairman and CEO)

And I'm wondering if you could talk about what kind of scale advantages or pricing power that provides you. There are several advantages we get from the market control we have across our portfolio. On the operating side, there's tremendous synergies. We've looked at, like, the last 10 or 11 acquisitions we've made. We're able to lower operating expenses, on average, about 20%. So it's meaningful savings. We do that because we're so localized. We have such concentrations of buildings close to each other that we can have expensive people shared across properties. We don't have to have a manager at every single building or a very expensive engineer at every single building. We also negotiate very large contracts across our portfolio. So that gets us better pricing. Even more important than the operating side is on the leasing side gives us the ability to offer space to any tenant to fit them into our portfolio. If we've already got them in the portfolio and they're growing or they're shrinking, we can move them maybe across the street in one of our other buildings that has space that will work for them. And generally, with the small tenants that we have, our goal is not to rip out the space every time and spend 200 bucks a foot rebuilding it. The spaces are built out pretty standardized, and we want to move tenants into a space that already works for them. The configuration with the conference room and the offices the way they like it, and spend, you know, a little bit of TI's new paint, new carpet, whatever that is, get them in quickly and not spend a lot of capital. That's why, you see, our leasing costs, on average, are so much lower than the other office REITs you'll look at. And having the concentration of those markets allows us to do that, because if we own 30% of the space in Beverly Hills, we're going to have an opportunity to take any requirement in that market and show them several options that should work for the amount of Space they need. So is your intention to keep this portfolio medical office, or are you indifferent and kind of lease it to any tenant that wants space? If you're speaking about the Bedford Collection, it will stay medical office. Is that your question? Yeah, yeah. Bedford will State Medical. We own several medical office properties in Beverly Hills. Like I said, it's fantastic product, but my comments about the synergies work across medical and just regular office. Got it. Okay. And then when you mentioned that you're not ready to call the bottom, is that on occupancy or leasing? I'm just wondering if the midpoint of

John Kim

your occupancy guidance is achievable, if there's

Jordan Kaplan (Chairman and CEO)

the floor to come down even further. Well, we definitely feel like it's achievable. That's why we left the range where it is. So we're comfortable with the range on occupancy. Q1 is typically a tough occupancy quarter for us because more than their fair share of leases expire on 1231 for whatever reason. So then anybody that moves out that occupancy dip hits Q1. So it's not unusual for us to see a small decline in occupancy in Q1 and then ramp up throughout the rest of the year, which is what we expected in our own guide when we gave the range. Got it. Okay, thank you.

OPERATOR

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

Dylan Brzezinski (Equity Analyst)

Hi, guys. Thanks for taking the question. Just maybe touching on the various submarkets, we noticed that net absorption, at least a percentage increase in the west side and Honolulu, decline in the Valley. Any sort of discernible trends from that? I mean, should we expect the Valley to maybe lag in its recovery versus the west side? No, I wouldn't expect that. I think we did some good leasing in the Valley. It's just pockets here and there, and it depends on the, you know, whatever leases got signed that quarter. But we would expect the Valley to increase along with the west side. We're getting good activity there. Sherman Oak, Encino has had a lot of activity. Warner center, which has typically been our laggard market out there, also good tours, good activity. So, no, I wouldn't expect the Valley to continue to lag. We're working hard to increase the lease rate in all our sub markets, and we definitely think that's achievable. And then just touching back on sort of the capital markets and transaction environment. Given that what appears to be just a recovery leasing backdrop, are you seeing any increased competition from other buyers that are getting in bidding tents as you

Jordan Kaplan (Chairman and CEO)

guys take a look at all these transactions that you guys have referenced. So I think the term people are using is office curious. And so, you know, people are kicking the tires. There haven't been a lot of the type of assets in our markets that we get super excited about like we did with Bedford. So, you know, as I believe, and you're seeing this up in San Francisco and you're seeing this in New York. You know, as these markets recover, more and more people start to pay attention to it. But you know, right now we're trying to buy as much as we can because the prices relative to the long term values are at a significant discount. You know, I think that, you know, I remember this kind of thing happening in the 90s. I think that one of the things with office buildings, when people have been sort of exiting it for a while, the operating platforms get denuded. And so as they want to come back in, they're even more nervous because it's operation and the income that people are focusing on more than ever now. And I think it's going to give us an edge for a little while because I've seen many operating platforms sort of dissolve and shift to third party, which means you don't really have the people and the information you need to understand and try and do deals. Now the capital, there's capital, but it doesn't mean they're super comfortable in terms of being aggressive on dealers deals.

Dylan Brzezinski (Equity Analyst)

That's helpful. Color guys, thanks so much.

OPERATOR

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

Rich Anderson (Equity Analyst)

Thanks. Good morning. So, Jordan, you said when Warner Brothers left Studio Plaza, you described yourself as frightened. Don't remember you saying that at the time, but nonetheless, I get it. But I'm curious when you think about the totality of your business today. Obviously things are looking great in terms of a possible bottoming, but where is work still left to be done? Where are the shortcomings of the Douglas Emmett portfolio in your mind that still need your attention?

Jordan Kaplan (Chairman and CEO)

Well, first of all, I actually was frightened, but I wasn't frightened because I thought the building wouldn't lease up or be able to lease up. I was frightened for how long it would take to get tenants because it was right dead center at a time when leasing was at an incredible low and the press around entertainment was very bad. It turned out that neither of those was true with respect to this building. And the redo that was done by our operations group has been very well received and appealing. So if you Have a chance to come out here and see it. It's extremely nice building. So it's attracting tenants are kind of voting to be there. Regardless of what's going on around today, I would say, I mean, you know, I have a partner that runs operations, Kent Panzer. So my area that I'm super focused on all the time is capital markets. Today I'm focused on kind of finishing off our debt program. There's not a lot left to do to extend that out and kind of right size and get all that correct and then finding acquisitions and getting as much capital placed as we can. While what I consider to be, and you've heard everybody here say it, an opportunity that I know Ken and I haven't seen it for, for 30 years and we talk about it all the time. So that's kind of. If you. I want the debt finish, I think our guys are. I think that's pretty much getting done. But I want to make sure done, done and done, that's nice and clean. And then I need to get out there and make sure we make some good acquisitions and keep talking to our partners and try and kind of shake some stuff loose. Because as Kevin said, a lot, a lot of this stuff's kind of become relationship oriented. And some of the last things we've been. Are doing and close on have been people just phoning me that I've known for a long time. So that's been an important part.

Rich Anderson (Equity Analyst)

Okay, second question. Stu, you said, you know, the larger tenant leasing is a mix of all different types of industries. So then what would you say the common thread is to this happening for you guys? Because this is the second time we're. At least the second time we're hearing, you know, some optimism around larger leases. What is the communication from those entities sort of saying about why they're willing to do it? Is there any sort of theme around why you're seeing more in the way of larger lease activity?

Jordan Kaplan (Chairman and CEO)

I think that, as I said on the last call, a lot of what we're seeing is sort of sideline fatigue. I mean, they've been holding off, holding off, holding off, trying to wait to see where things are headed. You're able to make a lot of money in this market. And they finally sort of started breaking and saying, well, we're just going to do deals and start expanding because going to get left behind. And I mean, the last time I looked at the stats, our expansions were way above our contractions and our new tenants coming into the market are, you know, rushing to set up shop and have some type of new business that makes them think they need more people. So maybe they're just tired of waiting. Maybe they're. I mean, there was an article recently that said that people just become sort of indifferent towards the wild fluctuations and they're going to just do business as usual and move forward. I don't know what mix of things that is, because I think a lot of this is driven by the broader economy. But there definitely has been a change in attitude.

Rich Anderson (Equity Analyst)

Okay. Sounds good. Thanks very much.

OPERATOR

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

Jordan Kaplan (Chairman and CEO)

Well, look forward to speaking with you again next quarter.

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