There’s nothing about our market that’s bad. Actually, most of our market is good. People are in the office, in terms of utilization, it’s basically like full. I mean maybe Friday is a little a little light, but that’s it. So I can’t see anything else. So I think it all gets down to all of ours prediction about the national economy kind of encouraging large new investment again, which is the opposite of what the Fed is trying to encourage.
Anthony Paolone: Okay. And then just my other question is, can you comment on just any sort of capital markets activity you’re seeing or investment sales in your market, and maybe where values may be, and also just your own desire to put any capital out right now?
Kevin Crummy: Anthony, it’s Kevin. Look, downtown is absorbing all the headlines right now. And so there is activity, as I mentioned in my remarks, in the surrounding markets. We haven’t really seen that much activity in our markets with properties that fit our investment objectives, but we definitely are interested in putting out some capital in this market because we think that there are going to be some really incredible buying opportunities as most people are shunning office. And we’re very, very confident that the office market here, based on the fundamental supply and demand, that we’re very confident in the long term that we’re going to do well, and we want to buy as many office buildings as we can at good pricing.
Operator: The next question comes from Alexander Goldfarb with Piper Sandler.
Alexander Goldfarb: Jordan, just going back to Steve Sakwa’s question on the tenants and the larger tenants. Given that you’ve described L.A. and certainly, the West side is not oversupplied, or work from home issues, is this a matter of where the larger tenants are choosing to grow elsewhere, meaning that, as these companies are restaffing and contending, whatever, they’re emphasizing other office markets versus their L.A. outpost? Just trying to understand. Because, to your point, it’s not like your tenants are huge 500,000 square footers that where you’re talking $10 million, $20 million, $30 million of dollars of investment. The investment is still small. So just trying to get better color into the mindset of these larger tenants of yours, because certainly, they’re smaller compared to your bigger CBD brethren.
Jordan Kaplan: That’s a good question, actually. I’ve been asked that. I do not think our problem is one of tenants choosing to relocate not only out of West L.A. or out of L.A., but out of state, which I guess is kind of the gist of what you’re saying. And I’ll admit, I’m not happy about some of the population statistics for California and movement that’s happened. But I don’t think that’s actually happening in our markets. And we are not seeing tenants say, great knowing you, now we’re leaving. We’re just seeing them say, we’re doing layoffs and we don’t need this space now. And I don’t think they’re going to never hire people again or never need the space again. I just don’t think they need it right now. And a lot of that, you see that coming from tech companies, which you’re hearing.
I mean the people that drive a lot of that large tenant space, even larger than what we use, are tech companies, entertainment companies, like the research guys are still taking large amounts of space. And I don’t think they’re saying we’re abandoning California or we’re abandoning L.A. I think they’re just literally laying people off and saying we’re taking less space and cutting our costs.
Alexander Goldfarb: Okay. So — and second question is, as you look at your peers, your landlord peers, are you seeing tangible signs where you — I mean, I have to believe that given your balance sheet capital position, that there are some financially stressed landlords or maybe institutional landlord to want out of the business where you guys would be able to win because you’re willing to invest in the asset, fund the commission, the TI, what have you. Are you seeing tangible signs that that’s the case, or not really? I would just think that that would play to your advantage, but maybe it is and maybe that’s why 70 bps down is the negative absorption, not more. I’m just trying to get a sense for how your capital position…
Jordan Kaplan: Yes. I will tell you, part of what you’re saying, I definitely think. I think that there are landlords that have vacancy that — where the decision about whether they retain the building is not just a decision around, I have a loan coming up or maybe I’m overleveraged, or maybe they’re not even overleveraged, but it’s also a decision about the work and maybe even suffering and capital expense that they’re going to have to go through to lease up a building. And they might be saying, “Boy, we don’t even have the people there to do this anymore.” And that’s a battle we just don’t want to own right now, in terms of like dedication of expertise and all the rest. That probably will create most of the opportunities that we’ll see.
I don’t — I think there might be a tiny amount of overleveraged opportunities. I think most of the rest of them will revolve around people just being burned out and not wanting to carry the load, the operating load of leasing up a building where they’ve let the occupancy slide a lot through inattention or distraction.
Operator: And the next question comes from Michael Griffin with Citi.
Michael Griffin: I wanted to go back to the commentary on the large space takers and being hesitant to kind of commit to leases. Should we interpret that as meaning there is going to be continued negative net absorption later this year? And is it possible that you would look to cut up that space for some of your smaller guys? Or would you rather wait for large tenants to come back, so maybe you could charge higher rents?
Jordan Kaplan: Well, the absorption or whatever it is, is in our guidance of what we think this year. But in terms of cutting up space, we’re superfast to cut up space because we lease to small tenants very fast. Now being fast to cut up space is like talking a guy that wants to run a 10K and go, I’m going to run a marathon fast. I mean it’s just a much longer process. So when we — but we don’t hang out. If you get a floor back, if you don’t think there’s a good tenant for that floor, we cut it off and we lease it out. And it’s probably because we have such a — and that takes a very large and focused and just takes a great amount of expertise to be able to do that. And so that’s been one of our kind of superpowers, is that we can quickly cut off space, and we have the — we both have the construction company and the expertise to break up space, put in spaces that are very appealing to the market to take that as it is.
