Douglas Emmett Inc (NYSE:DEI) Q2 2020 Earnings Conference Call - Final Transcript

Aug 07, 2020 • 02:00 pm ET


Douglas Emmett Inc (NYSE:DEI) Q2 2020 Earnings Conference Call - Final Transcript


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Ladies and gentlemen, thank you for standing by. Welcome to Douglas Emmett's quarterly earnings call. Today's call is being recorded. [Operator Instructions] I will now turn the conference over to Stuart McElhinney, Vice President of Investor Relations for Douglas Emmett.

Please go ahead.

Stuart McElhinney

Thank you. Joining us today on the call are Jordan Kaplan, our president and CEO; Kevin Crummy, our CIO; and Peter Seymour, our CFO. This call is being webcast live from our website and will be available for replay during the next 90 days. You can also find our earnings package at the Investor Relations section of our website.

You can find reconciliations of non-GAAP financial measures discussed during today's call in the earnings package. During the course of this call, we will make forward-looking statements. These forward-looking statements are based on the beliefs of, assumptions made by and information currently available to us. Our actual results will be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control or ability to predict.

Although we believe that our assumptions are reasonable, they are not guarantees of future performance, and some will prove to be incorrect. Therefore, our actual future results can be expected to differ from our expectations, and those differences may be material. For a more detailed description of some potential risks, please refer to our SEC filings, which can be found in the Investor Relations section of our website. When we reach the question-and-answer portion, in consideration of others, please limit yourself to one question and one follow-up.

I will now turn the call over to Jordan.

Jordan Kaplan

Good morning, everyone. I hope you're staying healthy. Our rent collections continued to be negatively impacted by the pandemic and our market's very tenant-oriented lease enforcement moratoriums, which are considerably out of sync with the other gateway markets. However, our second-quarter collections were somewhat better than the numbers we previously disclosed for April.

As of today, we have collected 91% of our second-quarter billings, including 96% from residential, 93% from office, and 35% from retail. These numbers are based on our current tenants' pre-pandemic rent obligations. At the end of the second quarter, pursuant to GAAP, we wrote off certain tenant receivables. That reduced our second-quarter FFO by about $0.04 per share, most of which related to the retail and hospitality tenants in our portfolio.

We also wrote off all noncash straight-line balances related to those tenants, which further reduced FFO by $0.06 per share. Of course, any collections from those receivables will be included in future quarters' FFO. The pandemic also reduced second-quarter FFO by about $0.05 per share from lower parking income. Overall, the cash and non-cash write-offs and the lower parking income related to this crisis reduced our FFO for the second quarter by about $0.15 to $0.41 per share.

As the commercial moratoriums are amended and expired, we should see improved collections. During the past downturns, free from government intervention, our actual tenant defaults have been just under 2%. Despite