Douglas Emmett Inc.
08/07/2026 | Press release | Distributed by Public on 08/07/2026 14:13
Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our Forward Looking Statements disclaimer, and our consolidated financial statements and related notes in Part I, Item 1 of this Report. During the six months ended June 30, 2026, our results of operations were impacted by various transactions - see "Acquisitions, Debt and Equity Transactions, and Development and Repositioning Projects" further below.
Business Description
Douglas Emmett, Inc. is a fully integrated, self-administered and self-managed REIT. Through our interest in our Operating Partnership and its subsidiaries, and our consolidated JVs, we are one of the largest owners and operators of high-quality office and multifamily properties in Los Angeles County, California and in Honolulu, Hawaii. We focus on owning, acquiring, developing and managing a substantial market share of top-tier office properties and premier multifamily communities in neighborhoods that possess significant supply constraints, high-end executive housing and key lifestyle amenities.
For the purpose of reporting key operating metrics we are focused on the properties in our In-Service Portfolio. The In-Service Portfolio as of June 30, 2026 reflects the inclusion of our Burbank office property which had been under redevelopment into a multi-tenant office building following the move-out of a long-term single tenant, as well as the office properties in Beverly Hills which we acquired this quarter. Our In-Service Portfolio consists of our Total Portfolio excluding our Development Portfolio. The Development Portfolio consists of two multifamily properties whose operations are significantly limited by the development activity and are excluded from our In-Service Portfolio statistics and operating metrics. Our portfolio statistics and operating metrics as of June 30, 2026 were as follows:
| In-Service Portfolio | Development Portfolio | Total Portfolio | |||||||||||||||||||||
| Office Portfolio | |||||||||||||||||||||||
| Number of Properties | 75 | - | 75 | ||||||||||||||||||||
| Rentable square feet | 18,228,716 | - | 18,228,716 | ||||||||||||||||||||
| Multifamily Portfolio | |||||||||||||||||||||||
| Number of Properties | 13 | 2 | 15 | ||||||||||||||||||||
| Number of Units | 4,410 | 1,035 | 5,445 | ||||||||||||||||||||
| In-Service Portfolio Leasing Statistics | |||||||||||
| Office Portfolio | |||||||||||
| Leased Rate | 80.3 | % | |||||||||
| Occupancy Rate | 75.6 | % | |||||||||
| Multifamily Portfolio Leased Rate | 99.4 | % | |||||||||
Revenues by Segment and Location
During the six months ended June 30, 2026, revenues from our Total Portfolio were derived as follows:
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Acquisitions, Debt and Equity Transactions, and Development and Repositioning Projects
Acquisitions, Debt and Equity Transactions
During the first quarter of 2026:
•We entered into accreting swaps starting January 2, 2026 that mature January 1, 2030 to effectively fix the interest rate on a portion of the increasing estimated balance outstanding under the construction loan at 5.80%.
•In March 2026, we entered into a new consolidated JV for the purpose of acquiring medical office properties in Beverly Hills, CA. See below for more information regarding this acquisition.
During the second quarter of 2026:
•In April 2026, a new JV managed by us acquired The Bedford Collection, a five-building medical office portfolio, totaling 246,000 square feet in the Beverly Hills Golden Triangle for $260.0 million. We hold a 13.3% stake in the joint venture's $150.0 million of equity. The joint venture also borrowed $130.0 million secured by a non-recourse, interest-only first trust deed loan that matures April 13, 2031. The loan bears interest at SOFR plus 1.70%, which we fixed at 5.26% with interest rate swaps through May 1, 2030.
•In May 2026, we refinanced a $400.0 million office term loan that was scheduled to mature in November 2026. The new, non-recourse, interest-only loan has a floating interest rate of SOFR + 2.25%, which we swap-fixed to a rate of 6.15% through June 2029. The loan matures in May 2030.
•In June 2026, we refinanced a $415.0 million office term loan that was scheduled to mature in August 2026. The new, non-recourse, interest-only loan has a floating interest rate of SOFR + 2.25%, which we swap-fixed to a rate of 6.18% through July 2029. The loan matures in June 2030.
See Notes 3, 7, 9, and 10 to our consolidated financial statements in Item 1 of this Report for more information regarding our acquisitions, debt, derivative contracts and equity, respectively.
Development Portfolio
The Landmark Residences (Formerly Barrington Plaza)
During the second quarter of 2023, we removed The Landmark Residences residential property in Los Angeles from the rental market. A reconstruction of this property is expected to take a number of years at a cost of several hundred million dollars. As of June 30, 2026, a significant majority of the tenants have vacated. See "Legal Proceedings" in Note 15 to our consolidated financial statements in Item 1 of this Report.
10900 Wilshire Boulevard
During the first quarter of 2025, a consolidated JV that we manage acquired an office property located at 10900 Wilshire. We are developing a mixed-used community featuring up to 323 apartment units. We plan to convert the existing office tower to apartments in phases over a number of years as they become available. There is no predetermined residential to office ratio.
Repositionings
We often strategically purchase properties with large vacancies or expected near-term lease roll-over and use our knowledge of the property and submarket to reposition the property for the optimal use and tenant mix. In addition, we may reposition properties already in our portfolio. The work we undertake to reposition a building typically takes months or even years, and could involve a range of improvements from a complete structural renovation to a targeted remodeling of selected spaces. During the repositioning, the affected property may display depressed rental revenues and occupancy levels that impact our operating results and, therefore, comparisons of our performance from period to period.
Office Rental Rates
The table below presents the average annual rental rate per leased square foot and the annualized lease transaction costs per leased square foot for leases executed in our total office portfolio during the respective periods. Commencing with the fourth quarter of 2024, the table below presents only our In-Service Portfolio.
| Six Months Ended | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||
| June 30, 2026 | 2025 | 2024 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||
|
Average straight-line rental rate(1)(2)(4)
|
$46.36 | $44.14 | $50.50 | $42.97 | $46.78 | |||||||||||||||||||||||||||||||||
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Annualized lease transaction costs(3)(4)
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$5.94 | $5.91 | $5.95 | $5.53 | $5.85 | |||||||||||||||||||||||||||||||||
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(1)These average rental rates are not directly comparable from year to year because the averages are significantly affected from period to period by factors such as the buildings, submarkets, and types of space and terms involved in the leases executed during the respective reporting period. Because straight-line rent takes into account the full economic value during the full term of each lease, including rent concessions and escalations, we believe that it may provide a better comparison than ending cash rents, which include the impact of the annual escalations over the entire term of the lease.
(2)Reflects the weighted average straight-line Annualized Rent. Excludes leases with a term of twelve months or less, leases where the prior lease was terminated more than a year before signing of the new lease, leases for tenants relocated at the landlord's request, leases in acquired buildings where we believe the information about the prior agreement is incomplete or where we believe the base rent reflects other off-market inducements to the tenant, and other non-comparable leases, such as retail leases.
(3)Reflects the weighted average leasing commissions and tenant improvement allowances divided by the weighted average number of years for the leases. Excludes leases substantially negotiated by the seller in the case of acquired properties, leases for tenants relocated from space at the landlord's request, and non-comparable leases, such as retail leases.
(4)Our office rental rates and lease transaction costs were impacted by a large tenant lease renewal during 2024. Our lease transaction costs in the first quarter of 2026 were impacted by a number of new leases to large tenants.
Office Rent Roll
The table below presents the rent roll for new and renewed leases per leased square foot executed in our total office portfolio. The table below presents only our In-Service Portfolio.
| Six Months Ended June 30, 2026 | ||||||||||||||||||||||||||
|
Rent Roll(1)(2)
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Expiring
Rate(2)
|
New/Renewal Rate(2)
|
Percentage Change | |||||||||||||||||||||||
| Cash Rent | $49.86 | $45.51 | (8.7)% | |||||||||||||||||||||||
| Straight-line Rent | $44.54 | $46.36 | 4.1% | |||||||||||||||||||||||
___________________________________________________
(1)Represents the average annual initial stabilized cash and straight-line rents per square foot on new and renewed leases signed during the period compared to the prior leases for the same space. Excludes leases with a term of twelve months or less, leases where the prior lease was terminated more than a year before signing of the new lease, leases for tenants relocated at the landlord's request, leases in acquired buildings where we believe the information about the prior agreement is incomplete or where we believe the base rent reflects other off-market inducements to the tenant, and other non-comparable leases, such as retail leases.
(2)Our office rent roll can fluctuate from period to period as a result of changes in our submarkets, buildings and term of the expiring leases, making these metrics difficult to predict.
Multifamily Rental Rates
The table below presents the average annual rental rate per leased unit for new tenants. Commencing with the fourth quarter of 2024, the table below presents only our In-Service Portfolio.
| Six Months Ended | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||
| June 30, 2026 | 2025 | 2024 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||
|
Average annual rental rate - new tenants(1)
|
$39,283 | $40,917 | $39,580 | $36,070 | $31,763 | |||||||||||||||||||||||||||||||||
_____________________________________________________________________
(1) These average rental rates are not directly comparable from year to year because of changes in the properties and units included. For example:
(i) During 2023, the average was impacted by leasing of units at our newly developed West Los Angeles property, The Landmark Los Angeles, where the rental rates were higher than the average in our portfolio. The Landmark Residences (formerly Barrington Plaza) was removed from this metric beginning with the third quarter of 2023.
(ii) During 2024, the average was impacted by leasing of units at our newly developed West Los Angeles property, The Landmark Los Angeles, where the rental rates were higher than the average in our portfolio.
Multifamily Rent Roll
The rent on leases subject to rent change during the six months ended June 30, 2026 (new tenants and existing tenants undergoing annual rent review) was 3.3% higher on average than the prior rent for the same unit after adjusting for rent concessions. The rent change includes only our In-Service Portfolio.
Office and Multifamily Occupancy Rates
The tables below present the occupancy rates for our office portfolio and multifamily portfolio. Our Occupancy Rates may not be directly comparable from year to year, as they can be impacted by acquisitions, dispositions, and development and redevelopment projects. Commencing with the fourth quarter of 2024, the table below presents only our In-Service Portfolio.
| December 31, | ||||||||||||||||||||||||||||||||||||||
| Occupancy Rates as of: | June 30, 2026 | 2025 | 2024 | 2023 | 2022 | |||||||||||||||||||||||||||||||||
|
Office portfolio(1)
|
75.6% | 78.0% | 79.2% | 81.0% | 83.7% | |||||||||||||||||||||||||||||||||
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Multifamily portfolio(2)
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96.9% | 98.0% | 97.4% | 96.7% | 98.1% | |||||||||||||||||||||||||||||||||
| Six Months Ended | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||
|
Average Occupancy Rates(3):
|
June 30, 2026 | 2025 | 2024 | 2023 | 2022 | |||||||||||||||||||||||||||||||||
| Office portfolio | 77.0% | 78.2% | 80.1% | 82.6% | 84.2% | |||||||||||||||||||||||||||||||||
|
Multifamily portfolio(2)
|
97.7% | 97.4% | 97.0% | 96.9% | 97.9% | |||||||||||||||||||||||||||||||||
__________________________________________________________________
(1)The occupancy rate as of June 30, 2026 reflects the inclusion of a redeveloped office property in Burbank, Studio Plaza, which is currently in its lease-up phase, and the office acquisition we made in the second quarter of 2026.
(2)Excludes units vacated as part of removing The Landmark Residences (formerly Barrington Plaza) from the rental market until June of 2023 and excludes the impact of The Landmark Residences entirely starting in July 2023.
(3)Average occupancy rates are calculated by averaging the occupancy rates at the end of each of the quarters in the period and at the end of the quarter immediately prior to the start of the period.
Office Portfolio Lease Expirations
As of June 30, 2026, assuming non-exercise of renewal options and early termination rights, we expect to see expiring square footage for our In-Service office portfolio as follows:
____________________________________________________
(1) Average of the percentage of leases at June 30, 2023, 2024, and 2025 with the same remaining duration as the leases for the labeled year had at June 30, 2026.
Results of Operations
Comparison of three months ended June 30, 2026 to three months ended June 30, 2025
| Three Months Ended June 30, | Favorable (Unfavorable) | |||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Change | % | Commentary | ||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||||||||||||||
| Office rental revenue and tenant recoveries | $ | 174,008 | $ | 172,924 | $ | 1,084 | 0.6 | % | The increase was primarily due to: (i) an increase in rental revenues from a collection of office properties we acquired in April 2026 and (ii) higher tenant recoveries, party offset by (iii) lower rental revenues due to lower occupancy. | |||||||||||||||||||||||||||||
| Office parking and other income | $ | 32,026 | $ | 29,886 | $ | 2,140 | 7.2 | % | The increase was primarily due to higher parking income driven by higher parking rates. | |||||||||||||||||||||||||||||
| Multifamily revenue | $ | 50,514 | $ | 49,624 | $ | 890 | 1.8 | % | The increase was primarily due to higher rental revenues driven by higher occupancy and higher rental rates, partly offset by lower below-market lease accretion. | |||||||||||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||||||||||||||||
| Office rental expenses | $ | 77,597 | $ | 76,559 | $ | (1,038) | (1.4) | % | The increase was primarily due to higher rental expenses from a collection of office properties we acquired in April 2026, partly offset by lower insurance and property taxes. | |||||||||||||||||||||||||||||
| Multifamily rental expenses | $ | 16,827 | $ | 16,230 | $ | (597) | (3.7) | % | The increase was primarily due to higher property taxes and personnel expenses. | |||||||||||||||||||||||||||||
| General and administrative expenses | $ | 12,482 | $ | 12,281 | $ | (201) | (1.6) | % | General and administrative expenses did not change significantly compared to the prior period. | |||||||||||||||||||||||||||||
| Depreciation and amortization | $ | 99,297 | $ | 101,719 | $ | 2,422 | 2.4 | % | The decrease was primarily due to assets that were fully depreciated in the second quarter of 2025, partly offset by an increase in depreciation and amortization from a collection of office properties we acquired in April 2026. | |||||||||||||||||||||||||||||
| Non-Operating Income and Expenses | ||||||||||||||||||||||||||||||||||||||
| Other income | $ | 3,049 | $ | 4,788 | $ | (1,739) | (36.3) | % | The decrease was primarily due to a decrease in interest income due to lower cash and cash equivalent balances and lower interest rates. | |||||||||||||||||||||||||||||
| Other expenses | $ | (80) | $ | (161) | $ | 81 | 50.3 | % | Other expenses did not change significantly compared to the prior period. | |||||||||||||||||||||||||||||
| Interest expense | $ | (68,255) | $ | (65,335) | $ | (2,920) | (4.5) | % | The increase was primarily due to higher borrowing rates related to our refinancing activities that occurred in the third quarter of 2025 and second quarter of 2026 and interest expense on a loan related to a collection of office properties we acquired in April 2026. | |||||||||||||||||||||||||||||
Comparison of six months ended June 30, 2026 to six months ended June 30, 2025
| Six Months Ended June 30, | Favorable (Unfavorable) | |||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Change | % | Commentary | ||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||||||||||||||
| Office rental revenue and tenant recoveries | $ | 343,060 | $ | 345,438 | $ | (2,378) | (0.7) | % | The decrease was primarily due to: (i) lower rental revenues due to lower occupancy, partly offset by (ii) an increase in rental revenues from a collection of office properties we acquired in April 2026 and (iii) higher tenant recoveries. | |||||||||||||||||||||||||||||
| Office parking and other income | $ | 63,494 | $ | 59,469 | $ | 4,025 | 6.8 | % | The increase was primarily due to higher parking income driven by higher parking rates. | |||||||||||||||||||||||||||||
| Multifamily revenue | $ | 100,953 | $ | 99,062 | $ | 1,891 | 1.9 | % | The increase was primarily due to higher rental revenues driven by higher occupancy and higher rental rates, partly offset by lower below-market lease accretion. | |||||||||||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||||||||||||||||
| Office expenses | $ | 152,073 | $ | 149,612 | $ | (2,461) | (1.6) | % | The increase was primarily due to: (i) higher rental expenses from a collection of office properties we acquired in April 2026, (ii) higher scheduled services expenses, and (iii) higher utilities expenses. | |||||||||||||||||||||||||||||
| Multifamily expenses | $ | 33,386 | $ | 32,785 | $ | (601) | (1.8) | % | The increase was primarily due to higher personnel expenses and higher property taxes. | |||||||||||||||||||||||||||||
| General and administrative expenses | $ | 26,058 | $ | 23,741 | $ | (2,317) | (9.8) | % | The increase was primarily due to higher advocacy expenses. | |||||||||||||||||||||||||||||
| Depreciation and amortization | $ | 196,704 | $ | 199,559 | $ | 2,855 | 1.4 | % | The decrease was primarily due to assets that were fully depreciated in the second quarter of 2025, partly offset by an increase in depreciation and amortization from a collection of office properties we acquired in April 2026. | |||||||||||||||||||||||||||||
| Non-Operating Income and Expenses | ||||||||||||||||||||||||||||||||||||||
| Other income | $ | 6,040 | $ | 9,711 | $ | (3,671) | (37.8) | % | The decrease was primarily due to a decrease in interest income due to lower cash and cash equivalent balances and lower interest rates. | |||||||||||||||||||||||||||||
| Other expenses | $ | (80) | $ | (266) | $ | 186 | 69.9 | % | Other expenses did not change significantly compared to the prior period. | |||||||||||||||||||||||||||||
| Interest expense | $ | (132,796) | $ | (125,413) | $ | (7,383) | (5.9) | % | The increase was primarily due to higher borrowing rates related to our refinancing activities that occurred in the third quarter of 2025 and second quarter of 2026 and interest expense on a loan related to a collection of office properties we acquired in April 2026. | |||||||||||||||||||||||||||||
Non-GAAP Supplemental Financial Measure: FFO
Usefulness to Investors
We report FFO because it is a widely reported measure of the performance of equity REITs, and is also used by some investors to identify the impact of trends in occupancy rates, rental rates and operating costs from year to year, excluding impacts from changes in the value of our real estate, and to compare our performance with other REITs. FFO is a non-GAAP financial measure for which we believe that net (loss) income is the most directly comparable GAAP financial measure. FFO has limitations as a measure of our performance because it excludes depreciation and amortization of real estate, and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures, tenant improvements and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations. FFO should be considered only as a supplement to net (loss) income as a measure of our performance and should not be used as a measure of our liquidity or cash flow, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends. Other REITs may not calculate FFO in accordance with the NAREIT definition and, accordingly, our FFO may not be comparable to the FFO of other REITs. See "Results of Operations" above for a discussion of the items that impacted our net (loss) income.
FFO Reconciliation to GAAP
The table below reconciles our FFO (the FFO attributable to our common stockholders and noncontrolling interests in our Operating Partnership - which includes our share of our consolidated JVs FFO) to net (loss) income attributable to common stockholders (the most directly comparable GAAP measure).
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||
| Net (loss) income attributable to common stockholders | $ | (2,681) | $ | (5,835) | $ | (5,179) | $ | 33,965 | |||||||||||||||||||||
| Depreciation and amortization of real estate assets | 99,297 | 101,719 | 196,704 | 199,559 | |||||||||||||||||||||||||
| Net loss attributable to noncontrolling interests | (12,260) | (9,228) | (22,371) | (4,449) | |||||||||||||||||||||||||
|
Adjustments attributable to consolidated JVs(1)
|
(8,009) | (12,081) | (16,903) | (26,328) | |||||||||||||||||||||||||
| Gain from consolidation of JV | - | - | - | (47,212) | |||||||||||||||||||||||||
| FFO | $ | 76,347 | $ | 74,575 | $ | 152,251 | $ | 155,535 | |||||||||||||||||||||
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(1)Adjusts for the net (loss) income and depreciation and amortization of real estate assets that is attributable to the noncontrolling interests in our consolidated JVs.
Comparison of three months ended June 30, 2026 to three months ended June 30, 2025
For the three months ended June 30, 2026, FFO increased by $1.8 million, or 2.4%, to $76.3 million, compared to $74.6 million for the three months ended June 30, 2025. The increase was primarily due to: (i) higher tenant recoveries, (ii) higher office parking and other income, and (iii) higher multifamily rental revenues due to higher occupancy and higher rental rates, which was partly offset by (iv) higher interest expense, (v) lower interest income, (vi) lower office occupancy, and (vii) higher office expenses from a collection of office properties we acquired in April 2026.
Comparison of six months ended June 30, 2026 to six months ended June 30, 2025
For the six months ended June 30, 2026, FFO decreased by $3.3 million, or 2.1%, to $152.3 million, compared to $155.5 million for the six months ended June 30, 2025. The decrease was primarily due to: (i) higher interest expense, (ii) lower office occupancy, (iii) lower interest income, and (iv) higher office expenses from a collection of office properties we acquired in April 2026, which was partly offset by (v) higher tenant recoveries and (vi) higher office parking and other income.
Non-GAAP Supplemental Financial Measure: Same Property NOI
Usefulness to Investors
We report Same Property NOI to facilitate a comparison of our operations between reported periods. Many investors use Same Property NOI to evaluate our operating performance and to compare our operating performance with other REITs, because it can reduce the impact of investing transactions on operating trends. Same Property NOI is a non-GAAP financial measure for which we believe that net (loss) income is the most directly comparable GAAP financial measure. We report Same Property NOI because it is a widely recognized measure of the performance of equity REITs, and is used by some investors to identify trends in occupancy rates, rental rates and operating costs and to compare our operating performance with that of other REITs. Same Property NOI has limitations as a measure of our performance because it excludes depreciation and amortization expense, and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures, tenant improvements and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations. Other REITs may not calculate Same Property NOI in the same manner. As a result, our Same Property NOI may not be comparable to the Same Property NOI of other REITs. Same Property NOI should be considered only as a supplement to net (loss) income as a measure of our performance and should not be used as a measure of our liquidity or cash flow, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends.
Comparison of three months ended June 30, 2026 to three months ended June 30, 2025
Our Same Properties for 2026 included 69 office properties, aggregating 17.5 million Rentable Square Feet, and 13 multifamily properties with an aggregate 4,410 units. The amounts presented below reflect 100% (not our pro-rata share).
| Three Months Ended June 30, | Favorable (Unfavorable) | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Change | % | Commentary | |||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Office revenues | $ | 196,447 | $ | 197,902 | $ | (1,455) | (0.7) | % |
The decrease was primarily due to: (i) lower rental revenues due to lower occupancy, partly offset by (ii) higher tenant recoveries and (iii) higher parking income due to higher parking rates.
|
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| Office expenses | (74,973) | (75,304) | 331 | 0.4 | % | The decrease was primarily due to: (i) lower insurance and property taxes expenses and (ii) lower personnel costs, partly offset by (iii) higher scheduled services expenses and (iv) higher utilities expenses. | |||||||||||||||||||||||||||||
| Office NOI | 121,474 | 122,598 | (1,124) | (0.9) | % | ||||||||||||||||||||||||||||||
| Multifamily revenues | 50,054 | 49,125 | 929 | 1.9 | % | The increase was primarily due to higher rental revenues driven by higher occupancy and higher rental rates, partly offset by lower below-market lease accretion. | |||||||||||||||||||||||||||||
| Multifamily expenses | (16,723) | (15,986) | (737) | (4.6) | % | The increase was primarily due to: (i) higher utilities expenses, (ii) higher insurance and taxes, and (iii) higher personnel expenses. | |||||||||||||||||||||||||||||
| Multifamily NOI | 33,331 | 33,139 | 192 | 0.6 | % | ||||||||||||||||||||||||||||||
| Total NOI | $ | 154,805 | $ | 155,737 | $ | (932) | (0.6) | % | |||||||||||||||||||||||||||
Reconciliation to GAAP
The table below presents a reconciliation of Net loss attributable to common stockholders (the most directly comparable GAAP measure) to NOI and Same Property NOI:
| Three Months Ended June 30, | |||||||||||||||||
| (In thousands) | 2026 | 2025 | |||||||||||||||
| Net loss attributable to common stockholders | $ | (2,681) | $ | (5,835) | |||||||||||||
| Net loss attributable to noncontrolling interests | (12,260) | (9,228) | |||||||||||||||
| Net loss | (14,941) | (15,063) | |||||||||||||||
| General and administrative expenses | 12,482 | 12,281 | |||||||||||||||
| Depreciation and amortization | 99,297 | 101,719 | |||||||||||||||
| Other income | (3,049) | (4,788) | |||||||||||||||
| Other expenses | 80 | 161 | |||||||||||||||
| Interest expense | 68,255 | 65,335 | |||||||||||||||
| NOI | $ | 162,124 | $ | 159,645 | |||||||||||||
| Same Property NOI by Segment | |||||||||||||||||
| Same property office revenues | $ | 196,447 | $ | 197,902 | |||||||||||||
| Same property office expenses | (74,973) | (75,304) | |||||||||||||||
| Same Property Office NOI | 121,474 | 122,598 | |||||||||||||||
| Same property multifamily revenues | 50,054 | 49,125 | |||||||||||||||
| Same property multifamily expenses | (16,723) | (15,986) | |||||||||||||||
| Same Property Multifamily NOI | 33,331 | 33,139 | |||||||||||||||
| Same Property NOI | 154,805 | 155,737 | |||||||||||||||
| Non-comparable office revenues | 9,587 | 4,908 | |||||||||||||||
| Non-comparable office expenses | (2,624) | (1,255) | |||||||||||||||
| Non-comparable multifamily revenues | 460 | 499 | |||||||||||||||
| Non-comparable multifamily expenses | (104) | (244) | |||||||||||||||
| NOI | $ | 162,124 | $ | 159,645 | |||||||||||||
Comparison of six months ended June 30, 2026 to six months ended June 30, 2025
Our Same Properties for 2026 included 69 office properties, aggregating 17.5 million Rentable Square Feet, and 13 multifamily properties with an aggregate 4,410 units. The amounts presented below reflect 100% (not our pro-rata share).
| Six Months Ended June 30, | Favorable (Unfavorable) | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Change | % | Commentary | |||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Office revenues | $ | 392,674 | $ | 395,093 | $ | (2,419) | (0.6)% |
The decrease was primarily due to: (i) lower rental revenues due to lower occupancy, partly offset by (ii) higher tenant recoveries, and (iii) higher parking income due to higher parking rates.
|
|||||||||||||||||||||||||||
| Office expenses | (148,564) | (147,226) | (1,338) | (0.9)% | The increase was primarily due to: (i) higher scheduled services expenses and (ii) higher utilities expenses, partly offset by (iii) lower insurance expenses. | ||||||||||||||||||||||||||||||
| Office NOI | 244,110 | 247,867 | (3,757) | (1.5)% | |||||||||||||||||||||||||||||||
| Multifamily revenues | 100,038 | 98,074 | 1,964 | 2.0% | The increase was primarily due to higher rental revenues driven by higher occupancy and higher rental rates, partly offset by lower below-market lease accretion. | ||||||||||||||||||||||||||||||
| Multifamily expenses | (33,150) | (32,260) | (890) | (2.8)% | The increase was primarily due to higher personnel costs and higher utilities expenses. | ||||||||||||||||||||||||||||||
| Multifamily NOI | 66,888 | 65,814 | 1,074 | 1.6% | |||||||||||||||||||||||||||||||
| Total NOI | $ | 310,998 | $ | 313,681 | $ | (2,683) | (0.9)% | ||||||||||||||||||||||||||||
Reconciliation to GAAP
The table below presents a reconciliation of Net (loss) income attributable to common stockholders (the most directly comparable GAAP measure) to Same Property NOI:
| Six Months Ended June 30, | |||||||||||||||||
| (In thousands) | 2026 | 2025 | |||||||||||||||
| Net (loss) income attributable to common stockholders | $ | (5,179) | $ | 33,965 | |||||||||||||
| Net loss attributable to noncontrolling interests | (22,371) | (4,449) | |||||||||||||||
| Net (loss) income | (27,550) | 29,516 | |||||||||||||||
| General and administrative expenses | 26,058 | 23,741 | |||||||||||||||
| Depreciation and amortization | 196,704 | 199,559 | |||||||||||||||
| Other income | (6,040) | (9,711) | |||||||||||||||
| Other expenses | 80 | 266 | |||||||||||||||
| Interest expense | 132,796 | 125,413 | |||||||||||||||
| Gain from consolidation of JV | - | (47,212) | |||||||||||||||
| NOI | $ | 322,048 | $ | 321,572 | |||||||||||||
| Same Property NOI by Segment | |||||||||||||||||
| Same property office revenues | $ | 392,674 | $ | 395,093 | |||||||||||||
| Same property office expenses | (148,564) | (147,226) | |||||||||||||||
| Same Property Office NOI | 244,110 | 247,867 | |||||||||||||||
| Same property multifamily revenues | 100,038 | 98,074 | |||||||||||||||
| Same property multifamily expenses | (33,150) | (32,260) | |||||||||||||||
| Same Property Multifamily NOI | 66,888 | 65,814 | |||||||||||||||
| Same Property NOI | 310,998 | 313,681 | |||||||||||||||
| Non-comparable office revenues | 13,880 | 9,814 | |||||||||||||||
| Non-comparable office expenses | (3,509) | (2,386) | |||||||||||||||
| Non-comparable multifamily revenues | 915 | 988 | |||||||||||||||
| Non-comparable multifamily expenses | (236) | (525) | |||||||||||||||
| NOI | $ | 322,048 | $ | 321,572 | |||||||||||||
Liquidity and Capital Resources
Short-term liquidity
Our short-term liquidity needs consist primarily of funds necessary for our operating activities, development, repositioning projects, debt refinancings, dividends, distributions and discretionary share repurchases. During the six months ended June 30, 2026, we generated cash from operations of $213.1 million. As of June 30, 2026, we had $355.0 million of cash and cash equivalents. See Note 7 to our consolidated financial statements in Item 1 of this Report for more information regarding our debt maturities and interest rate swap expirations. Excluding acquisitions and debt refinancings, we expect to meet our short-term liquidity requirements through cash on hand and cash generated by operations. With respect to our short-term debt maturities, we expect to refinance them prior to maturity.
Long-term liquidity
Our long-term liquidity needs consist primarily of funds necessary to pay for acquisitions, development and debt refinancings. We do not expect to have sufficient funds on hand to cover these long-term cash requirements due to REIT federal tax rules which require that we distribute at least 90% of our income on an annual basis. We plan to meet our long-term liquidity needs through long-term secured non-recourse debt, the issuance of equity securities, including common stock and OP Units, as well as property dispositions and JV transactions.
We generally only use non-recourse debt secured by our properties. As of the date of this report, approximately 32% of our total office portfolio was unencumbered. To mitigate the impact of changing interest rates on our cash flows from operations, we generally enter into interest rate swap agreements with respect to our loans with floating interest rates. These swap agreements generally expire two years before the maturity date of the related loan, during which time we can refinance the loan without any interest penalty. We also enter into interest rate cap agreements from time to time to cap the interest rates on our floating rate loans. See Notes 7 and 9 to our consolidated financial statements in Item 1 of this Report for more information regarding our debt and derivative contracts, respectively. See Item 3 "Quantitative and Qualitative Disclosures about Market Risk" of this Report regarding the impact of interest rate increases on our future operating results and cash flows.
Certain Contractual Obligations
See the following notes to our consolidated financial statements in Item 1 of this Report for information regarding our contractual commitments:
•Note 4 - minimum future ground lease payments;
•Note 7 - minimum future principal payments for our secured notes payable, and the interest rates that determine our future periodic interest payments; and
•Note 15 - contractual commitments and guarantees.
Off-Balance Sheet Arrangements
None.
Cash Flows
Comparison of six months ended June 30, 2026 to six months ended June 30, 2025
| Six Months Ended June 30, | Increase (Decrease) In Cash Balance | ||||||||||||||||||||||||||||
| 2026 | 2025 | % | |||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
|
Net cash provided by operating activities(1)
|
$ | 213,084 | $ | 213,927 | $ | (843) | (0.4) | % | |||||||||||||||||||||
|
Net cash used in investing activities(2)
|
$ | (413,272) | $ | (105,175) | $ | (308,097) | (292.9) | % | |||||||||||||||||||||
|
Net cash provided by (used in) financing activities(3)
|
$ | 214,361 | $ | (126,486) | $ | 340,847 | 269.5 | % | |||||||||||||||||||||
________________________________________________________________________
(1) Our cash flows from operating activities are primarily dependent upon the occupancy and rental rates of our portfolio, the collectibility of tenant receivables, the level of our operating and general and administrative expenses, and interest expense. The decrease in cash provided from operating activities of $0.8 million was primarily due to: (i) higher interest expense, (ii) lower office occupancy, (iii) lower interest income, (iv) higher office expenses and (v) higher general and administrative expense, which was partly offset by (vi) higher tenant recoveries, (vii) higher office parking and other income and (viii) higher multifamily rental revenues due to higher occupancy and higher rental rates.
(2) Our cash flows from investing activities is generally used to fund property acquisitions, developments and redevelopment projects, and Recurring and non-Recurring Capital Expenditures. The increase in cash used in investing activities of $308.1 million was primarily due to (i) The Bedford Collection acquisition of $254.4 million, (ii) $25.6 million of cash and cash equivalents assumed from the consolidation of Partnership X on January 1, 2025, (iii) an increase in capital expenditures for improvements to real estate of $14.5 million, and (iv) an increase in capital expenditures for developments of $12.2 million.
(3) Our cash flows from financing activities are generally impacted by our borrowings and capital activities, as well as dividends and distributions paid to common stockholders and noncontrolling interests, respectively. The increase in cash provided by financing activities of $340.8 million was primarily due to higher net borrowings and an increase in contributions from noncontrolling interests in consolidated JVs of $124.6 million.
Critical Accounting Policies and Estimates
We have not made any changes to our critical accounting policies disclosed in our 2025 Annual Report on Form 10-K. Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with US GAAP, and which requires us to make estimates of certain items, which affect the reported amounts of our assets, liabilities, revenues and expenses. While we believe that our estimates are based upon reasonable assumptions and judgments at the time that they are made, some of our estimates could prove to be incorrect, and those differences could be material. Some of our estimates are subject to adjustment as we believe appropriate, based on revised estimates, and reconciliation to actual results when available.
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