This article first appeared on GuruFocus .
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Revenue:Increased from $252 million to $257 million in Q2 2026 compared to Q2 2025.
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FFO per Share:Increased but rounded to $0.37 per share.
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AFFO:Increased from $54 million to $56 million.
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Same-Property Cash NOI:Decreased 1.2% for the quarter.
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Office Leasing Volume:Signed 234 office leases totaling just under 960,000 square feet, including 93 new leases (over 375,000 sq ft) and 141 renewal leases (over 584,000 sq ft).
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Office Rental Rates:Straight-line value of executed leases increased by 3.2% compared to prior leases for the same space.
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Office Absorption:Achieved positive absorption of approximately 60,000 square feet.
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Lease Transaction Costs:Averaged $5.35 per square foot per year.
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Residential Same-Property NOI:Cash same-property NOI up 2% compared to Q2 2025; portfolio over 99% leased.
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G&A Expense:Approximately 4.9% of revenue.
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2026 Guidance:Diluted net income per common share expected between negative $0.20 and negative $0.16; fully diluted FFO per share expected between $1.39 and $1.43.
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Office Occupancy Guidance:Lowered to between 75% and 77% for the full year due to Studio Plaza inclusion.
Release Date: August 05, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Signed 960,000 square feet of office leases with positive absorption of 60,000 square feet, marking three consecutive strong quarters.
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New leases were 3% more valuable than expiring leases, with low concessions and healthy rent bumps.
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Acquired the Bedford Collection, a well-leased medical office portfolio in Beverly Hills, at attractive pricing.
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Refinanced over $800 million of debt, fixing interest rates at 6.15% and 6.18% for four years.
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Residential portfolio remains over 99% leased with cash same-property NOI up 2% year-over-year.
Negative Points
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Same-property cash NOI decreased 1.2% for the quarter.
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Higher market interest rates are expected to offset operational improvements, lowering 2026 FFO guidance to $1.39-$1.43 per share.
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Including Studio Plaza in the operating portfolio reduces reported office occupancy guidance to 75%-77%.
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Net income guidance remains negative, projected between -$0.20 and -$0.16 per share.
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Lease-to-occupied spread widened to 470 basis points, indicating significant space leased but not yet occupied, delaying revenue recognition.
Q & A Highlights
Q: Can you quantify the annualized NOI embedded in the current leased-but-occupied spread, which is now nearly 500 basis points? A: CFO Peter Seymour noted that with the average lease rate and the amount of space involved, the potential NOI is very meaningful as it moves in over the next 12 months. CEO Jordan Kaplan emphasized that a wide spread of 470 basis points is an extremely good sign, as fast and aggressive leasing creates this gap, indicating strong future revenue growth.
Q: What is your strategy regarding upcoming debt maturities and the impact of higher interest rates on the company's performance? A: CEO Jordan Kaplan stated that the company does not choose to live in a world with a lot of floating-rate debt and plans to refinance loans before they float. He acknowledged that higher interest costs are "clouding our performance" and that the team is actively thinking about solutions to mitigate this, given the company's low leverage and strong operational performance.
Q: Can you provide more color on the acquisition opportunities you are seeing, and what are your return requirements? A: CEO Jordan Kaplan described the current market as a "great time to be in real estate," with pricing creating opportunities not seen since the early '90s. He noted that all-cash IRRs on a 10-year look are coming in at 10% or better, a level not seen for a long time. The company is focused on large, high-quality office acquisitions and is working with JV partners who are eager for more deals.
Q: How are conversations going with UCLA and Morgan Stanley regarding their upcoming lease expirations? A: Stuart McElhinney, IRO, stated that conversations with UCLA about remaining expirations this year are going well, noting they act as multiple independent departments rather than a single large tenant. Regarding the 77,000 square feet of Morgan Stanley expirations in 2027, he confirmed productive conversations are happening and that the space comprises multiple leases, not one large one.
Q: Given the acquisition opportunities, are you considering reestablishing a credit facility for additional flexibility? A: CEO Jordan Kaplan explained that the calculation currently does not favor a credit line due to high unused fees. He noted that borrowing money directly and arbitraging it into an interest-bearing account is a lower-cost alternative, so the company would likely pursue that route if it needed more capital.
Q: What is the status of the 10900 Wilshire redevelopment project, and are you prioritizing acquisitions over residential development? A: CEO Jordan Kaplan stated that the project could still start this year, but they have purposely slowed it down to explore potential large office leases that could make a mixed-use project more profitable. He emphasized that residential is still part of the plan, but they want to accommodate any large office tenants first. He also noted that office acquisitions are a better opportunity than apartments, which are still trading at low cap rates.
Q: What are your expectations for rent growth in the multifamily portfolio for the second half of the year? A: CEO Jordan Kaplan stated that while the portfolio remains over 99% leased, he expects rent growth to revert to its long-term trend, which is significantly lower than the unsustainable growth seen in the last couple of years. He indicated that the recent high growth rates were an anomaly and that normalization is expected.
Q: Can you comment on the strength of leasing activity and whether larger deals are influencing the trend? A: Stuart McElhinney, IRO, noted that the company has had three good quarters in a row, with Q2 being less reliant on "chunky" larger deals than Q1. He expressed optimism that momentum will continue through the second half of the year. CEO Jordan Kaplan added that he is "very happy" with the leasing group's performance and feels the company is getting a "wind in our back."
Q: How are you thinking about the impact of the Paramount merger and potential industry shifts on your Hollywood-adjacent portfolio? A: CEO Jordan Kaplan stated that the merger is likely to close and is healthy for California. He noted that the company's tenants are local and committed to the area, and that the studio space itself is not a significant part of their portfolio. He expressed hope that the state will allow the merger, as the new company could produce even more content.
Q: What is the impact of moving Studio Plaza into the in-service portfolio on guidance and financials? A: CEO Jordan Kaplan clarified that Studio Plaza has no debt, so there is no cap interest burn-off. The main impact is on reported occupancy and leasing statistics, as the building is leased well over 50% but not yet at the portfolio average. CFO Peter Seymour added that the operational improvement from Studio Plaza is part of what is offsetting some of the higher interest expense.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
