Douglas Emmett Narrows Loss as Office Leasing Slows
Quarterly revenue rose about 2% to $257 million from a year earlier.
Douglas Emmett (DEI), an office and multifamily real-estate investment trust, narrowed its quarterly loss while funds from operations held steady and office leasing activity slowed.
The results extended a gradual revenue recovery, though weaker office property income and higher borrowing costs continued to weigh on the company. Positive office absorption moderated for a second consecutive quarter, and growth in rents on replacement leases eased from the start of the year.
Revenue increased from $251 million in the first quarter and $249 million in the fourth quarter of 2024, while rising about 2% year over year. The net loss attributable to common stockholders narrowed to $3 million from $6 million a year earlier, compared with a roughly $2 million loss in the preceding quarter. FFO remained $0.37 a diluted share both sequentially and year over year, while AFFO rose to $56 million from $49 million in the first quarter and $54 million a year earlier.
Office properties remained the principal drag. Same-property office cash net operating income fell 2.1% to $118.6 million as a 1.4% decline in cash revenue outweighed a 0.4% reduction in expenses. Net absorption slowed to about 60,000 square feet from roughly 100,000 square feet in the first quarter, though it remained positive. Executed office leases were valued 3.2% above the expiring leases they replaced, down from a 5.3% increase in the preceding quarter.
Multifamily properties partly offset that pressure, with same-property cash NOI rising 2% to $33.2 million. The pace slowed from 4.2% in the first quarter as a 4.6% increase in expenses absorbed part of the quarter’s 2.9% revenue growth. Across the portfolio, same-property cash NOI was roughly unchanged sequentially at $152 million and below $154 million a year earlier.
Douglas Emmett narrowed its 2025 FFO forecast to $1.39 to $1.43 a diluted share from $1.39 to $1.45, cutting the top of the range as higher market interest rates more than offset improved operating expectations. The company also lowered its office-occupancy forecast to 75% to 77%, reflecting the inclusion of the redeveloped Studio Plaza property, whose occupancy was below the portfolio average.
Interest expense rose 4.5% to $68.3 million. During the quarter, Douglas Emmett refinanced $815 million of office loans with four-year nonrecourse debt carrying a fixed rate of just over 6% for three years, leaving higher financing costs as a constraint even as operating expectations improved.