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Douglas Emmett (DEI) Q3 2021 Earnings Call Transcript

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DEI earnings call for the period ending September 30, 2021.

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Douglas Emmett (DEI 3.19%)
Q3 2021 Earnings Call
Nov 03, 2021, 2:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

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 -- Vice President, Investor Relations

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.

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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 -- President and Chief Executive Officer

Good morning, everyone. Thank you for joining us. In the third quarter, we increased FFO per share by $0.08 compared to the prior year. Compared to last quarter, despite new loan costs and higher utilities, FFO per share was up $0.01 due to stronger rent collections, greater tenant recoveries, increased parking revenues, higher office occupancy, and better multifamily occupancy and rents.

It is worth noting that only 1.5% of our FFO is noncash. These results reflect our recovering submarkets where average vaccination rates now exceed 85% for people 12 and over and COVID rates are among the lowest in the nation. Increased tenant confidence has raised our office utilization to approximately 70% in Los Angeles and to over 80% in Honolulu. We had another strong office leasing quarter, driving 30 basis points of positive absorption.

Our residential portfolio is fully leased, with rents rising in all of our submarkets. Despite the recent California eviction moratorium extensions, past due rent collection continues to accelerate without any meaningful rent forgiveness. Office and residential rent collection for the quarters affected by the pandemic improved to 97%, while retail rose to almost 70%. We continue to deliver highly accretive development projects, while extending and lowering our cost of debt.

And we have the capital to pursue new acquisitions and develop opportunities as they emerge. With that, I will now turn the call over to Kevin.

Kevin Crummy -- Chief Investment Officer

Thanks, Jordan, and good morning, everyone. I'm really pleased with the progress of our two multifamily development projects, where we continue to lease units as quickly as they are built at rents above our pro formas. We are already pre-leasing units to our 376-unit Brentwood residential tower, where we expect to begin delivering units before year-end. At 1132 Bishop, our downtown Honolulu office to residential conversion, we have completed and leased approximately 40% of our planned 493 units and continue to convert floors as office tenants vacate.

On the debt front, we are lowering our average interest rate and extending our maturities, having closed two new loans, totaling $740 million in the third quarter, with an average effective interest rate of 2.13% per annum. This new, nonrecourse, interest-only debt consisted of a $625 million loan, due in August 2028, with interest effectively fixed at 2.12% until June 2025, which is secured by four properties owned by one of our consolidated joint ventures. And the $115 million loan due in September 2028, with interest effectively fixed at 2.19% until October 2026, which is secured by two properties owned by our unconsolidated fund. After paying off the prior loans, we generated an additional $55 million in working capital.

Our overall portfolio weighted average interest rate is fixed at only 2.94%, and we have no term debt maturities before 2024. We also have significant financing capacity as 46% of our office properties are currently unencumbered. Office property sales in our markets remained slow, but we are starting to see some multifamily opportunities, and we have ample liquidity for acquisitions as they become available. I will now turn the call over to Stuart.

Stuart McElhinney -- Vice President, Investor Relations

Thanks, Kevin. Good morning, everyone. We continue to see good leasing demand for both our smaller and larger tenant spaces. In Q3, we signed 242 office leases, covering 819,000 square feet, consisting of 262,000 square feet of new leases and 557,000 square feet of renewal leases, including approximately 50,000 square feet of expansions.

As Jordan mentioned, our lease rate improved 30 basis points to 87.6%. Our occupancy increased 20 basis points to 85%. Due to our robust leasing activity during the last two quarters, the spread between our leased and occupied rate increased to 260 basis points. Our leasing spreads during the third quarter were positive 3.9% for straight-line and negative 6.1% for cash.

As a result of significant tenant improvement allowances for one large tenant, our leasing costs this quarter increased to $6.08 per square foot per year. Excluding that tenant, our leasing costs remain below our pre-pandemic average at only $5.52 per annum. Our multifamily portfolio remains essentially fully leased at 99.3% leased, with rents now back to pre-pandemic levels. With that, I'll turn the call over to Peter to discuss our results.

Peter Seymour -- Chief Financial Officer

Thanks, Stuart. Good morning, everyone. Turning to our results. Compared to the third quarter of 2020, FFO increased 19% to $0.48 per share, AFFO increased 26.6% to $87.6 million and same-property cash NOI increased by 13.5%.

Compared to the second quarter of 2021, FFO per share increased by $0.01 due to higher rent collections, more tenant recoveries, increased parking revenues, and better multifamily occupancy and rents. Our expenses also increased as a result of fees and interest associated with our new loans and increased seasonal utilities. As Jordan mentioned, only 1.5% of our FFO is noncash as we had minimal noncash rent from straight-line and above and below market lease adjustments. Our G&A also remains very low relative to our benchmark group at only 4.8% of revenues.

Turning to guidance. We expect fourth quarter FFO per share to be between $0.47 and $0.49. As usual, this guidance does not assume the impact of future acquisitions, dispositions, financings or property damage recoveries. I will now turn the call over to the operator so we can take your questions.

Questions & Answers:


Operator

[Operator instructions]. Our first question is from Steve Sakwa with Evercore ISI. Please go ahead.

Steve Sakwa -- Evercore ISI -- Analyst

Thanks. A couple of questions. Jordan, on past calls, you sort of talked about, I'll call it, the missing bucket of revenue that were due to tenants that were in place, but not paying. And I think that number was somewhere in the $12 million range of money that was owed you.

Do you have an update on that figure just based on some of the comments you made about better collections and things improving on that front?

Jordan Kaplan -- President and Chief Executive Officer

Well, I wish you were right that it was 12 million. It was -- it got as high as 70 million, that never came up, came down. I said we were sort of down at 60 for a few quarters. And now -- and then it came down to 50, high 40s, 50, may a little over 50.

And that's kind of the zone we're at, although it's declining a little bit every quarter. I mean it's -- I would say, in the last few quarters, it's been on a very similar trajectory. We gained a little bit of ground because more and more people kind of roll into paying. But I don't think we're going to gain big ground on that front until the moratoriums are off.

Last time I looked at it, it was like 47 million.

Steve Sakwa -- Evercore ISI -- Analyst

Right. OK. Just to be clear, that's an annual number. So quarterly, you're kind of in that --

Jordan Kaplan -- President and Chief Executive Officer

No. No, no that's not an annual number. That's everything from the beginning of the pandemic. So take -- anybody -- like, we have basically no defaults in normal times.

I mean, it's less than 20 basis points. So go from the time of the moratorium, all money that's owed to us from that time, that's what I'm telling you. It's not a quarterly number, it's not an annual number. I guess at this point, it's six quarters number what's owed to us.

Steve Sakwa -- Evercore ISI -- Analyst

OK. Understood. Maybe just switching gears on the sort of maybe potential debt refinancing. I know you sort of talked about this a little bit.

You've got some loans coming due, but not until '24, but some swap rates that burn off, maybe at the beginning part of next year. I'm just curious how should we be thinking about that? Some of those look like they're above market today. And so I'm just curious if your ability to get it like that $300 million that comes due 01/01/24 with a swap maturity of 01/01/22.

Jordan Kaplan -- President and Chief Executive Officer

So of course, as I've said, I'm not trying to announce new loans or anything that we haven't already -- we did announce, like, 700 million to loans. And don't worry, we didn't just like do those loans and stop working. Hey, I'm on a tear to refi and bring our cost of debt down, and we've been quoting it to you. So you should be very reasonable to assume that we're able to read our debt chart the same way as you are and working on everything.

Yes.

Steve Sakwa -- Evercore ISI -- Analyst

Right. OK. But I guess it's fair to assume that the benefits will accrue to you sort of when the swap dates mature as opposed to the debt maturity dates.

Jordan Kaplan -- President and Chief Executive Officer

You can even take swaps and extend and blend. You should just assume I'm doing the best economic thing for us I can do for anything, that's at rates that I think we can improve on and extend out and lock in for longer periods of time. And I mean, like -- I mean, we have very little -- aside from swaps, we really don't have debt to have costs associated with redoing it or whatever. I mean, usually, we have 18 months or something where you can't pay it off.

But -- So that means that everything is there. You look at swaps, you look at when that expires, I mean you look at spreads on loans and you go, what's out there that we can work on to keep improving and lengthening our debt ladder at lower cost. And we -- and we're definitely doing that. I mean it's with -- Michelle's, like, super focused on it.

Steve Sakwa -- Evercore ISI -- Analyst

OK.Thanks.

Operator

The next question is from Alexander Goldfarb with Piper Sandler. Please go ahead.

Alexander Goldfarb -- Piper Sandler -- Analyst

Congrats on, I guess, two things. One, people come back to your offices. So hopefully, they're paying a lot in parking, and two, the positive absorption. So digging into these, is it -- Jordan, what do you think is driving the office utilization, and don't say that you guys offer free coffee and concierge service when they come up to park.

Is it really just a small tenant profile that a lot of those tenants are now coming back? Or is there something specific to the Westside L.A. market and the Honolulu market that people in those markets are coming back to work in the office much quicker than we're seeing in the other CBDs.

Jordan Kaplan -- President and Chief Executive Officer

I think there's probably three things that all kind of lead strongly our way. So the first one is our markets, whether it be downtown in Honolulu or obviously, West L.A. or along Ventura in the Valley, have really sort of embraced vaccination. We're up in the 85% range on vaccination.

And we're seeing super-minimal COVID, like, when you do your hospital checks and you see, say, emergency rooms or just how many COVID patients are in the hospital, we're talking about small, small numbers, a single-digit numbers in humongous hospitals, right? So that's number one. Number two is for better or worse, we haven't embraced mass transit. So it's really easy to get in your car and drive into work. And we don't have all the checking and everything when you come into the lot.

I mean, you just drive in, park in your space, come up the elevator and go in your office. So because that's so easy and user-friendly, I think that's bringing a lot of people in. Now the third one, which you brought up, which is right, which is, whether it be our smaller tenants, the nature of our markets, the nature of our buildings and our building floor plates, most of our tenants are built out around 225 feet, something in that range. And so what happens is, we don't have the dense packing here.

And without dense packing, you don't have -- people are more comfortable coming in. And I guess there's a fourth and the fourth is probably the biggest, I should have mentioned it first, which is small tenants, local tenants are not driven by national policies. And so if you have a tenant that has to set a national standard for all over the country, if different things are going on, whether in Northern California or in Ohio, or wherever they may be, they're running a lot more conservative than a local tenant says, "Hey, everything is good, everybody get back in." And so the -- our tenants are much more nimble. So even we are seeing and our largest of tenants, which are driven by national policies, mostly coming out of New York, and then they lean to an extremely conservative side of things, then we see them being slower to come in or many times told they can't come in.

Whereas with smaller tenants, very fast to come in and say everybody get back.

Alexander Goldfarb -- Piper Sandler -- Analyst

OK. And then the second is on the absorption. Clearly, great to see it in the quarter. You guys mentioned previously that you're focused on occupancy build before you deal with rent.

So is third quarter -- is this an anomaly and fourth quarter is going to be negative again? Or is fourth quarter shaping up to be like third quarter? And if that's the case, how many quarters of positive absorption do you need before you push more on rate?

Jordan Kaplan -- President and Chief Executive Officer

So I think the market is improving, straight out, that's for sure, the case and people coming back and the pace of activity. But I don't want that to take away from our leasing because they are running on one of those rat treadmill wheels at a hyper pace. And they are scrambling to get us back into the 90% range. So there's sort of two things going on: superfast and aggressive leasing that just keeps getting better and better against a market that's also getting better and better.

And you can't let up on either one. So there's really no coasting, there's not going to be any kind of free ride. But certainly, all that hard work and all the lead generation and all the direct connect, it's all coming through and it's all starting to pay. And so I'm super happy to get that positive number, and I'm hopeful going forward about it.

If you ask me the kind of question of pushing rents, I hope that we get -- tenants during their pandemic get shortened up their leases. So that means we have a little more to lease each quarter. But of course, there's more people wanting to lease and wanting to extend. So I hope we soon get into a position where we're getting more and better positive absorption.

And then -- but with that, first of all, direction matters, right? If the direction is positive absorption that matters. But as equally important is, you got to be up around 90% before you're going to push rents. So however time it takes to get -- to pick up the next 300-or-so basis points that will give you the idea of when to push rents. And that is dependent on our hard work, but also equally dependent on the markets continue to improve.

It's a big improvement to be at that 70-plus percent utilization rate. That makes a big difference.

Alexander Goldfarb -- Piper Sandler -- Analyst

OK. Thank you.

Operator

The next question is from Craig Mailman with KeyBanc Capital Markets. Please go ahead.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

Jordan, maybe a follow-up on the utilization, how that kind of relates to the rebound in parking revenue. I know you guys had some improvement this quarter, but you're still probably 30-ish percent off of where you were third quarter of '19, kind of pre-pandemic. Is there -- are you guys seeing any different patterns with hybrid work where people are buying monthly, isn't they're buying daily passes and that's impacting it? Or could you just kind of walk us through how much more utilization you need to kind of get back to par of pre-COVID?

Jordan Kaplan -- President and Chief Executive Officer

Yes. So I saw you did that calculation. That -- so when we look back parking as a calculation on its own. If you really -- we have access to more data than you do.

But that number would have given you numbers of closer to 75%, OK? But we have a lot of other ways that we can look at, whether it be card count, whether it be tenant survey and also just our managers at the building is going through and see who's in and occupancy. So what we do to try and figure out utilization is we take all those numbers and try and triangulate. But frankly, that triangulation, we've leaned to the lowest end of that. So some of the numbers, as I just didn't -- told you about parking, some of those numbers actually indicated an even higher number and even to the lowest number of triangulating and Hawaii hit 80.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

But I guess what I was getting at is you guys -- in the buildings, utilization is increasing, but the revenues from parking are still off, right? So how much more utilization do you need to get in the buildings to get kind of back to where you were pre COVID? And is there anything in terms of the schedules of people coming in that's altering it if you're getting monthly versus daily or anything on that front?

Jordan Kaplan -- President and Chief Executive Officer

Well, I would say that the parking utilization, the parking revenue is extremely well tied to utilization. Early on, which you might be indicating to, it was not because there were expense savings over the fact that not as many people are using the garages. But now it's pretty closely tied. So I think we need to get the utilization to get back to 100%.

And now remember, I'm not sure anyone's ever utilizing their space 100%. But we need to get back to the point where people are buying. They're expecting the user space enough that the economic calculation around daily and monthly passes shifts back to monthly passes. Now we're obviously getting there at a pretty good clip because this is being driven by monthly, not daily, but you need to get the rest of the way.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

That's helpful. Then just separately, on same-store, Peter, I don't know if you could kind of walk through the components of what drove the 30%. I know it's revenue, and so part of it is just occupancy, part of it's rate. I'm just kind of, I guess, most curious about how much of that upside is driven by just better collections or the recovery, some of that 60 that's now at 47 million.

Peter Seymour -- Chief Financial Officer

Yes. So it's a combination of all the things that Jordan laid out in the opening remarks that are driving the overall improvement. So yes, there's some collections. Improvement in parking, tenant recoveries, all those play into the office numbers, offset by -- partly by slightly lower occupancy.

And then on the multifamily side, you've got improvement in occupancy versus last year as well as rent improvements and some collection improvement.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

But it's not one thing. It's kind of -- there's no standout that drove the upside.

Peter Seymour -- Chief Financial Officer

Not one thing. It's a combination of all those factors.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

Great. Thank you.

Operator

The next question is from John Kim with BMO Capital Markets. Pleas go ahead.

John Kim -- BMO Capital Markets -- Analyst

Thank you. So it looks like William Morris Endeavor has the option to terminate their lease next year. Do you get a sense that they will exercise that option? And when will you know when they make a decision?

Jordan Kaplan -- President and Chief Executive Officer

Well, we don't really discuss individual leases. But even if I would love to discuss that lease, I might be a -- I don't know.

Kevin Crummy -- Chief Investment Officer

Yes, they're not going to going to tip their hand before they need to -- it's going to be a negotiation. They're in one of our best properties, in the heart of the triangle in Beverly Hills. They have an extremely below market lease. So it'd be hard to imagine they want to give that out, but we'll have to wait and see what they decide.

John Kim -- BMO Capital Markets -- Analyst

Can you tell us which quarter the tenant option is in?

Jordan Kaplan -- President and Chief Executive Officer

Yes. It's in --

Kevin Crummy -- Chief Investment Officer

Yes. Well, they have to give us notice by the end of this year.

John Kim -- BMO Capital Markets -- Analyst

OK. Kevin, can you elaborate on your prepared remarks, you mentioned the acquisition opportunities in multifamily? I'm just wondering, has pricing gotten better on a cap rate basis or versus replacement cost? Or -- are you just seeing more sellers in the market today?

Kevin Crummy -- Chief Investment Officer

We're -- so the multifamily market nationally is pretty hot. And when you have a hot market, it draws out product. And so we're seeing a lot more product in the L.A. area of people that are offering properties for sale on the multifamily side than we are on the office side, which is still fairly slow.

John Kim -- BMO Capital Markets -- Analyst

Can you give an indication on cap rates, year-one cap rates of opportunities you're looking at?

Kevin Crummy -- Chief Investment Officer

Well, it's fairly low.

Peter Seymour -- Chief Financial Officer

Well, let me put this out, to me, I think 4% would be a good day. I don't think it's at that. It's really low.

John Kim -- BMO Capital Markets -- Analyst

OK. Thank you very much.

Operator

The next question is from Blaine Heck with Wells Fargo. Please go ahead.

Blaine Heck -- Wells Fargo Securities -- Analyst

Maybe to ask about occupancy a little differently. You guys have a 2.6% spread between your lease rate and actual occupancy within your portfolio. Based on your historical numbers, I think that's typically closer to about 1% on average. Do you guys see any major impediments to occupancy following that lease rate up in the next few quarters? And do you think that 1% spread between leased and occupied is a fair target for us to think about longer term?

Peter Seymour -- Chief Financial Officer

Yes. Blaine, I think if you look at the long-term average, it's more like 1.6, 1.7%, knocked down at 1.1% would be pretty tight for us. I think that as we're coming out of this and gaining occupancy, we're going to see choppiness quarter to quarter. So I don't know that it will be a smooth line up.

But yes, this 260 is historically pretty high for us as we've been doing -- we had a huge leasing quarter Q2 and then another really solid leasing quarter of Q3. So we got to move folks in over the next few quarters. And as folks get moved in, that gap should tighten, although we hope to continue doing a lot of leasing in the future quarters because demand has stayed really good. So it's not a gap that's concerning in any way, but I think we -- long-term average more like 170, 160 basis points.

Jordan Kaplan -- President and Chief Executive Officer

I think it's good. But I'm happy when that's a very wide gap because that means we're doing a lot of leasing and those tons are going to move in and our overall occupancy number move up. And that gap stays -- when we get up to 93%, I think we were maybe even a little higher than that, going into this thing, then it was very small because there's not a lot of room, not a lot of frictional activity happening. But when you have a lot of leasing you need to do, you want that gap to get big because it means they're doing a ton of leasing and those people move in, all your numbers will move out.

Blaine Heck -- Wells Fargo Securities -- Analyst

Right. No, that's helpful. And then maybe sticking with you guys, Jordan or Stuart, can you talk about tenant concessions you're seeing at this point. We noticed leasing costs were up a bit this quarter, and I know that stack can bounce around a lot from quarter to quarter.

But I think in the past couple of quarters, you guys highlighted the tenants were willing to trade TIs for competitive rents. Was there anything in the quarter that would suggest their mindset might have changed? Or was there something else in there that may be skewed the numbers.

Stuart McElhinney -- Vice President, Investor Relations

Yes. I mentioned it briefly in my opening remarks that we did have one large tenant for us, a pretty large tenant that skewed those numbers up this quarter. So taking that one tenant out, our leasing costs were actually below our pre-pandemic average, so they went down like $5.50 from the $6.08 that we posted. So that definitely skewed numbers.

We are -- we have kept concessions low, free rent, all that kind of stuff has never been high for us, has remained low throughout the pandemic. So that's been good to see. So nothing else that really changed, no trends to point to in the quarter other than that one very large lease.

Blaine Heck -- Wells Fargo Securities -- Analyst

Great. Thanks for the color.

Operator

The next question is from Manny Korchman with Citi. Please go ahead.

Manny Korchman -- Citi -- Analyst

Jordan, going back to the utilization for a second. Do you have any idea of how that compares to sort of neighboring buildings or your submarkets? Is everyone seeing that? And then if people are looking at Castle or some other national stats, are those stats just wrong? Or is there something unique about your buildings, your tenants or assets that's bringing that higher -- that number higher than people expected?

Jordan Kaplan -- President and Chief Executive Officer

I don't -- I mean, obviously, we don't have a number. We don't have that kind of information on our neighboring buildings. All I have on those is kind of observation. I mean I live here.

And I will tell you, if you said traffic, community, people walk on the streets, restaurants being full, shops being full, sports events filling up. It's all -- all of that I see visually is consistent with what we just told you about people coming back into the office. But I don't -- we don't have any data on them.

Peter Seymour -- Chief Financial Officer

And, Manny, when you're looking at Castle, they're including, obviously, like Downtown Los Angeles in that for L.A., which is a totally different product type than what we have and has all of the national challenges that Jordan mentioned earlier. They've got corporate policy. They've got huge tenants that we're not dealing with.

Jordan Kaplan -- President and Chief Executive Officer

Yes. And by the way, government, which is branched mostly downtowns, not in. They're not in. They're still home.

So all the city, state, all those guys downtown, federal courts, they're not in. So downtown is still lonely. But if you can go Westside, you wouldn't know there was anything, you would just go at full tilt, traffic and road jams.

Manny Korchman -- Citi -- Analyst

Great. And maybe this is one for Stuart. Just going back to lease occupied spread, is there anything in the commencement timing of the new leases you're signing that would actually have that number expand near term, where people are -- they're signing leases, but they're not moving in as quickly as you had in the past. And so could we see a number expand without occupancy, expanding the leasing continue to be good?

Stuart McElhinney -- Vice President, Investor Relations

No. No, I don't think we've seen anything change in our typical kind of move-in schedule. Typically, our tenants move in pretty quickly. It does take a few quarters to get everybody moved in from when we're signing the leases.

But we haven't seen any trends where that's gapped out on us from what we're typically seeing.

Michael Bilerman -- Citi -- Analyst

It's Michael Bilerman, here with Manny. Maybe one of you just -- can you just explain what is the actual utilization calculation to come up with that 70%? I don't know if that's unique visitors over the course of the quarter. I just -- you don't have the same sort of card swipes and things like that. So I'm just trying to understand what that 70% actually is based on?

Jordan Kaplan -- President and Chief Executive Officer

Sure. So it's what I said on that earlier one. There's four ways where we get information. One is parking revenue and parking parts coming in.

And then there are some buildings with card swipes going up. That's the second way that data. A third way is our managers and our day porters, that whole crew through observation, questioning them, saying, where is it out? How full are the floors? How many tenants are actually coming in and using our space? And the fourth way is we actually sent out tenant questionnaires and ask them about their utilization of their space.

Michael Bilerman -- Citi -- Analyst

But are you like putting all these into a model and triangulating? And is it -- is 70% what you believe was daily average occupancy over the quarter using these four techniques in some way, shape, or form? And the only reason I'm asking is 70% seems, even for friends I speak to on the West Coast, like, they don't say their buildings are 70% full every day. And I wouldn't imagine it's Monday through Friday. And so I just want to really peel down what this actual number represents in terms of human bodies rather than a tenant.

Jordan Kaplan -- President and Chief Executive Officer

OK. So they're each unique in what they give you. We actually -- when you say triangulate, as I said, we gave you kind of the lowest possible number. I know that contradicts what you're expecting, but we did.

So when we do tenant surveys and say we're back in our office, I don't know what -- I mean, I guess from when they answer that survey, that's what they're talking about.

Michael Bilerman -- Citi -- Analyst

But you're counting that a 100%, like, if the tenant writes back again we're back, you're assuming that it's 100% --

Jordan Kaplan -- President and Chief Executive Officer

Yes. I would say, like, if a building has 100 tenants and 70 of them saying we're back in and working, then we go that 70.

Michael Bilerman -- Citi -- Analyst

So it's not -- it's not counting actual people that are coming through each day. So like here at city, right? I mean we're -- city would say we're back in the -- but our density is only 35, 40% on average over the course of the week. Even though there --

Jordan Kaplan -- President and Chief Executive Officer

Yes, I got it. So there's four things, right? So the second is parking. So people are buying their parking passes, and we see that they're coming into the building. OK? So when you say, all right, we look at the revenue we're getting out of people that have come back because we know the revenue tracked very closely to your utilization, you remember how low it troughed.

And we go, "Wow, that revenue," as I said, the revenue and people starting to pay again for parking is actually above the 70%. And then the third thing is in buildings, where we do have tracking of people doing the cars in the elevator, like ours, you come and visited me, you've got to do your card in the elevator to get up to your space. There's a third method, right? And so -- and which ones didn't I mention --

Peter Seymour -- Chief Financial Officer

I think you covered them all.

Jordan Kaplan -- President and Chief Executive Officer

Yes. And the fourth is the manager is going in and opening doors, and saying, are people in here working? Now they're not going in the guys sweet and counting them, but if they're opening doors and now they're saying, "Yes, we're at least at 70%." We open it. There's receptionists, Yes, we're operating. We're back in the office.

We go, "OK, that counts." Right? So I don't know that I can give you a formula where all of those statistics go together, but I'm pretty confident in our numbers.

Michael Bilerman -- Citi -- Analyst

Does the parking affect sort of people that are not necessarily working at building, but going to restaurants or other things? And if people are not carpooling, so you have more people just driving to work on their own, maybe they're not using any form of public transportation. I mean could that be driving it relative to the past as well. And certainly is a lot more traffic here in New York, right, because less people are taking public transport.

Jordan Kaplan -- President and Chief Executive Officer

Yes. I mean, all of those things that you're saying could be. The parking indicated actually a higher utilization rate than 70%. But I don't think they're having the impact that you're indicating, they're pretty minor.

I doubt those things really are highly impacting things.

Michael Bilerman -- Citi -- Analyst

OK. And then just thinking about '22 and '23, right? You got about, I think, like 30, 35% of the rent rolling. How far ahead of you of those can you get? And can you just comment on sort of mark-to-market because those rents were a little bit higher than where you've been signing rents recently. And I know there may be a mix issue or a location issue.

Jordan Kaplan -- President and Chief Executive Officer

Well, our mark-to-market historically has been like 10, 11% and now it's dropped almost flat, maybe it's that flat. And so my comment on mark-to-market is until we get back to lease rates up closer to the 90%, I don't think we're going to be able to do meaningful improvements to that mark-to-market number, OK? So that's number one. And then number two is, you're asking sort of this timing question that for the entire pandemic, I've been saying is the $100,000 question, which is how long is it going to take for us to recover our occupancy and lease rate using occupancy separate from utilization. I think utilization is coming back superfast, probably going to help drive higher occupancy.

But -- and I don't have a good prediction around that. We lost 600 basis points in essentially five quarters, right? And now we've turned it, and I'm not foolish to think five quarters to recover 600, but I don't know how many quarters.

Michael Bilerman -- Citi -- Analyst

Right. Because the '22 and '23 rents are going to be comping some elevated as you came out of the GSE and we're pushing rent pretty hard with higher escalators. You're expiring or you're coming up to the higher rent years just given the lease term that you've had in your markets and how well your markets have performed.

Jordan Kaplan -- President and Chief Executive Officer

Yes. I don't think -- that one step that you're pointing out has not worked as you might instinctively think. I mean, actually, in the higher rent markets, we tend to get like roll up and the lower rent markets tend to stay flat longer because that's why they were lower rent markets. So if you're looking at kind of higher rents rolling, usually, that means that we're going to get better role numbers than when you have lower rents rolling.

But I don't even -- I would caution against using that to predict something. I mean because I think markets like those higher rent markets, whether it be Santa Monica or West L.A. at that point, they did held up pretty well on rent, very strongly on rent.

Michael Bilerman -- Citi -- Analyst

Yes. All right. Thanks for the color, Jordan. Appreciate it.

Jordan Kaplan -- President and Chief Executive Officer

All right.

Operator

The next question is from James Feldman with Bank of America. Please go ahead.

James Feldman -- Bank of America Merrill Lynch -- Analyst

Not to beat a dead horse, but just to confirm, the 70%, is that a percentage of pre-pandemic levels? Or no, that's just of all your tenants, 70% are in the office?

Jordan Kaplan -- President and Chief Executive Officer

That's of all our tenants of how many -- who's coming into the office.

James Feldman -- Bank of America Merrill Lynch -- Analyst

OK. Cool. I guess just -- you've obviously -- you had a big spike in leasing in the second quarter. It's held up pretty well.

Can you just talk more about who is actually signing leases? How many of these are tenants that took some time off and are now coming back? How much is actually kind of incremental growth. Clearly, there's a lot of sectors that are expanding right now. Maybe just some more color on the current leasing pipeline and what we've seen in the last couple of quarters?

Stuart McElhinney -- Vice President, Investor Relations

Yes, Jamie, I mentioned in my remarks, we did have a good expansion quarter. We did 50,000 feet of expansion. So great to see that our current tenants are growing, and that's net expansion. Our expansions have been outpacing contractions among our tenants for several quarters.

So that's great to see. And we're seeing the typical diverse set of tenants that we always see. We've got that great pie chart in the supplemental for you guys that shows all the different industries that we lease to. It's not dominated by any one industry or kind of tenant.

We're seeing great demand from our smaller tenants. That's been true throughout the pandemic. They've really held us in 2020 when the larger guys seem to be sitting on the sidelines, and that's remained true. But we've -- last quarter, we talked about and again, through this quarter, larger -- medium and larger tenants for us have started transacting again in a meaningful way.

So positive kind of across the board. I think we're seeing -- I haven't heard that we've seen a huge trend of tenants that were sitting on the sidelines that are coming back. I haven't heard that, but I've just been hearing that it's our kind of typical demand. We always have tenants moving from other buildings, new businesses being created.

It's that same mix that we're used to seeing.

James Feldman -- Bank of America Merrill Lynch -- Analyst

I was going to ask about taking from other buildings after all the -- after the money you put into years. I mean is there a consistent trend there, certain assets that are losing tenants or types of assets --

Kevin Crummy -- Chief Investment Officer

We've always outperformed the markets that we're in, even being 40% on average of these submarkets, our occupancy has typically outperformed the buildings in our markets. Sometimes it can be several hundred basis points of occupancy outperformance. So we -- I think we run a great Class A portfolio. We have been investing in some of our buildings with these repositionings.

I think those have been great returns, and we have had tenants move from other buildings into our buildings. So we're going to continue that program. We think it's been successful. But yes, it's not atypical for us to outperform the buildings around us in a meaningful way.

Jordan Kaplan -- President and Chief Executive Officer

I agree with everything which you just said, but I'll also say those repositionings, even in this pandemic, even in everything is paying off grade. So if you said to me, I mean, I think we underestimated the rent differentiation that we would be able to get from the money we're spending. I mean, I wish we had $1 billion of repositioning. But that's why you saw us even during the middle of pandemic, we restarted them.

James Feldman -- Bank of America Merrill Lynch -- Analyst

OK. And then are tenants looking for any more flexibility in their leases? I know you have relatively short-term leases or smaller tenant leases. But is there anyone asking for stuff that might look a little bit closer to what they can get from a co-working space or a flex office provider or maybe certain days of the week or anything different coming out of the downturn?

Kevin Crummy -- Chief Investment Officer

I haven't heard that. I think tenants are always looking for flexibility. We're in the long-term leasing business. We're not in the flex workspace business.

It's typical in a recession that tenants tend to go shorter on the leases, and we've seen that. We've seen that in every cycle. When the economy is doing great, tenants feel more comfortable signing longer term and vice versa. So that's been true, but we're not -- we're not offering anything that resembles select workspace.

So --

Jordan Kaplan -- President and Chief Executive Officer

Yes, it is like early, can't say none of that, none of them.

James Feldman -- Bank of America Merrill Lynch -- Analyst

OK. And then you said a lot of the parking has come back, at least from the -- from your utilization count. I mean where do you think you are versus pre-pandemic parking levels in terms of revenue?

Jordan Kaplan -- President and Chief Executive Officer

Well, I actually said that parking on its own would have total 75% by itself. Yes, for those tenants that are in, yes.

James Feldman -- Bank of America Merrill Lynch -- Analyst

OK. All right. Thank you.

Operator

Next question is from Rich Anderson with SMBC. Please go ahead.

Rich Anderson -- SMBC Nikko Securities -- Analyst

So this four-pronged approach to calculating that 70%, is this the first quarter you've done that?

Peter Seymour -- Chief Financial Officer

It's not the first quarter, but it's the first quarter I spent a lot of time really nailing down those four things, knowing that it was indicating a much larger number. And I know that people are going to ask a lot about -- I don't think they're going to ask this much about it, but I knew they were going to ask a lot about it.

Rich Anderson -- SMBC Nikko Securities -- Analyst

I would just -- whether 70% is the right or wrong number, I think the most important number is the trend. And so you don't have a reading from the second quarter to throw out there?

Peter Seymour -- Chief Financial Officer

Yes, yes, we did yes. Yes, we did have a reading from the second quarter, and we gave it to you.

Rich Anderson -- SMBC Nikko Securities -- Analyst

What was it?

Peter Seymour -- Chief Financial Officer

You just didn't ask so many questions about it, and therefore, maybe like came and went without a lot of discussion.

Rich Anderson -- SMBC Nikko Securities -- Analyst

OK. Remind me, because I don't remember.

Peter Seymour -- Chief Financial Officer

What we can say.

Rich Anderson -- SMBC Nikko Securities -- Analyst

I think we thought we were in the 40 to 50% --

Peter Seymour -- Chief Financial Officer

Yes. We gave you. Yes, I think we said 40 to 50% for second quarter utilization, yes.

Rich Anderson -- SMBC Nikko Securities -- Analyst

OK. So what do you think -- obviously, tenant confidence and all that good stuff. But is this like foreshadowing to better leasing activity just because the people just feel better and you might even expect this to play a role in how well you lease space going forward just because people feel better about things.

Jordan Kaplan -- President and Chief Executive Officer

Well, the leasing activity is foreshadowing the leasing activity. I mean the fact that we've turned a thing to positive absorption, which is no small fee. But that's the biggest foreshadowing thing. I don't know that -- obviously, quarter to quarter, you're going to have some ups and downs.

But I mean, assuming pandemic and government and everybody stays out of the way and we get to keep going, yes, I feel very good. And then I would say one of the symptoms of that is utilization, like, everything is recovering and as is utilization.

Rich Anderson -- SMBC Nikko Securities -- Analyst

OK. Anything about wage pressure or supply chain disruptions that worries you for any reason? I mean I assume it does, to some degree, but perhaps less so in your neck of the woods, smaller tenants, less kind of capex bites and all that kind of stuff.

Jordan Kaplan -- President and Chief Executive Officer

Well, I don't think this supply chain takes horrible. And you can kind of take the narrow view of our tenants, but it's the wrong way to look at our markets. I mean we have the largest port in the United States, the most containers passing through it. These thing needs to get cleaned up.

I mean I look out my window, I see containerships. I don't -- I mean we never had containerships in Santa Monica Bay. So yes, I mean it needs to get fixed and people need to get back to work.

Rich Anderson -- SMBC Nikko Securities -- Analyst

OK. And then last, Peter, any reason why we shouldn't expect double-digit type same-store growth in the fourth quarter, you provided guidance. I'm wondering what the underpinnings are from a same-store perspective.

Peter Seymour -- Chief Financial Officer

Well, I mean, we're not giving guidance on same-store, but yes, we did get guidance overall. And we -- you saw the range. We think it's consistent with what we performed this quarter. And you got to go back and look at last year fourth quarter for the comparison.

But I think all the same factors we've talked about, collections, parking, tenant recoveries, those probably all still hold, we'll see where expenses come in and so on. But we gave you the overall guidance.

Rich Anderson -- SMBC Nikko Securities -- Analyst

All right. Good enough. Thanks.

Operator

The next question is from Dave Rodgers with Baird. Please go ahead.

Dave Rodgers -- Baird -- Analyst

Maybe for Jordan or Stuart can help out with some of the numbers, but I wanted to ask about the new leasing volume. It was down 45% this quarter sequentially, and I realize there have already been some catch-up. But can you guys give us some more color on kind of how the quarter trended, because it looks like the quarter came out weaker than you left the second quarter, but that's not what you're saying. So I'm wondering if there's an August impact in there.

And then also, can you give us some color on October leasing, with October in the book, how that might have compared to a five-year average or something comparable to that?

Stuart McElhinney -- Vice President, Investor Relations

Yes. I'll just say, second quarter was an all-time high for leasing for us. It was a record quarter, like record new record renewal. I mean, we did more leasing than we've ever done.

So I wouldn't take an all-time record and expect to trend forward like that. Q3 was a very good leasing quarter for us regardless of the pandemic, anything like that. And I'll just say we had the whole delta surge that happened to us in the middle of the summer. Summer -- August is typically a slow month for leasing anyway.

So all things considered very strong leasing quarter, new and renewal. I wouldn't compare it to Q2 and say it was a big deceleration because I think Q2 was just an anomaly on the high side. We did some very large leases in Q2. that's not typical for us.

So we knew that wasn't going to be a repeat.

Jordan Kaplan -- President and Chief Executive Officer

Yes, and I got to say, if you skip the second quarter, it's the largest quarter we've had since, like, all of 2020, all of 2021. I mean only the second quarter was larger. It's our largest quarter in the last seven or eight quarters.

Dave Rodgers -- Baird -- Analyst

Fair point, I guess, as you guys look at October and how you maybe left August, how you left September and how you left October, were those all sequential improvements in terms of what you're underwriting in terms of new lease deals?

Stuart McElhinney -- Vice President, Investor Relations

I'd say that the pipeline still is very healthy on the leasing front. I think we're feeling good about leasing. So the pipeline is looking good. I don't know about sequential.

Monthly, we're not getting into that. But we feel good about the leasing. As Jordan said, tenants seem to be feeling more confident. We're coming back.

We're doing a lot of transactions. We did 242 leases, that's a lot of leases to sign in a quarter, and the demand is still there, still looking good.

Dave Rodgers -- Baird -- Analyst

Maybe just one follow-up for Peter and on a specific dollar amount. What was the rent and/or reimbursement that you collected in the quarter that you didn't bill in the dollar amount?

Peter Seymour -- Chief Financial Officer

Yes. We're not breaking that out, but we gave you the overall trend in collections that it's been gradually getting better each quarter. I think Jordan said earlier in the call that we're probably not going to see a meaningful impact on the big past due balances until the moratoriums expire. We have a number of tenants who still have past due balances.

A lot of the improvement is existing tenants paying their current rent and having in the end that number go up.

Jordan Kaplan -- President and Chief Executive Officer

So that's an important point because we've been asked this question a few times now on this call. So one thing is collecting past due amounts just to be clear, that number of 60 down to 50, 47, whatever. Another is tenants just going, I'm just going to start paying now. And so like more and more people are just saying, I'm just going to start paying now.

And then, of course, they also might be also catching up on old rent. So that's one of the drivers of the numbers getting better.

Dave Rodgers -- Baird -- Analyst

All right. Thank you very much.

Operator

The next question is from Daniel Ismail with Green Street Advisors. Please go ahead.

Daniel Ismail -- Green Street Advisors -- Analyst

Great. Jordan, you mentioned in the past that apartment development pipeline on building on existing land. And I'm just curious about the status of that plan. And why not accelerate it given how healthy multifamily pricing is?

Jordan Kaplan -- President and Chief Executive Officer

Yes, I'd love to accelerate it, but you need a city to cooperate in both cities, and they don't necessarily even if they have been in the office. So we can't -- accelerating those projects means that council members and staff and all that has to be around and say we're going to work on it. I mean, geez, getting their attention, it's like brutal. So frankly, we push to where we can, but there's a lot of agendas in the city right now and us developing apartments isn't very high up on their agendas.

Daniel Ismail -- Green Street Advisors -- Analyst

I mean, I guess, is it your sense that regardless of the state of city's budget -- regardless any of cities budgets, that the entitlement process has not gotten necessarily easier since the pandemic.

Stuart McElhinney -- Vice President, Investor Relations

Daniel, we're having a lot of trouble hearing you. There's a lot of static on your line. I couldn't make out --

Jordan Kaplan -- President and Chief Executive Officer

Yes. I couldn't understand the question.

Daniel Ismail -- Green Street Advisors -- Analyst

Apologies. Is this better?

Stuart McElhinney -- Vice President, Investor Relations

No.

Daniel Ismail -- Green Street Advisors -- Analyst

Can you guys hear me?

Jordan Kaplan -- President and Chief Executive Officer

Yes.

Daniel Ismail -- Green Street Advisors -- Analyst

OK. Great. My question is related to the process of entitlement given the state of city's budget. So I assume it's not gone any easier since the start of the pandemic and the overall deterioration of city budget.

Kevin Crummy -- Chief Investment Officer

It's not really a budget. This is Kevin speaking. It's not really a budget issue in these cities because the federal government bailed them out, but it's a workforce issue. In that, you have a lot of people that are Zooming from home and they're not as efficient, and then you've also got some vaccination mandates that are hitting where some of the people don't want to vaccinate and so they're out of the office.

And the cities are definitely less efficient than the private sector and adapt into the way that we work right now. And so that's kind of slowed down everything. And then on the political front, too, it's just tougher to arrange meetings with homeowners groups and meetings with the various constituents and stakeholders in the marketplace. So it's slowed down overall.

But we're still focused on areas that we think we can move it forward. We're definitely spending time.

Daniel Ismail -- Green Street Advisors -- Analyst

Great. Thank you.

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 -- President and Chief Executive Officer

OK. Well, just thank you all for joining us, and we look forward to speaking with you again next quarter.

Operator

[Operator signoff]

Duration: 63 minutes

Call participants:

Stuart McElhinney -- Vice President, Investor Relations

Jordan Kaplan -- President and Chief Executive Officer

Kevin Crummy -- Chief Investment Officer

Peter Seymour -- Chief Financial Officer

Steve Sakwa -- Evercore ISI -- Analyst

Alexander Goldfarb -- Piper Sandler -- Analyst

Craig Mailman -- KeyBanc Capital Markets -- Analyst

John Kim -- BMO Capital Markets -- Analyst

Blaine Heck -- Wells Fargo Securities -- Analyst

Manny Korchman -- Citi -- Analyst

Michael Bilerman -- Citi -- Analyst

James Feldman -- Bank of America Merrill Lynch -- Analyst

Rich Anderson -- SMBC Nikko Securities -- Analyst

Dave Rodgers -- Baird -- Analyst

Daniel Ismail -- Green Street Advisors -- Analyst

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