Document
false0001364250 0001364250 2020-05-07 2020-05-07


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (date of earliest event reported): May 7, 2020

Douglas Emmett, Inc.
(Exact name of registrant as specified in its charter)

Maryland
001-33106
20-3073047
(State or other jurisdiction of incorporation)
Commission file number
(I.R.S. Employer identification No.)

1299 Ocean Avenue, Suite 1000
,
Santa Monica
,
California
90401
(Address of principal executive offices)
(Zip Code)

Registrant’s telephone number, including area code:    (310) 255-7700


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading Symbol
 
Name of Each Exchange on Which Registered
Common Stock, $0.01 par value per share
 
DEI
 
New York Stock Exchange


Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company  


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐






Item 2.02 Results of Operations and Financial Condition

On May 7, 2020, Douglas Emmett, Inc. released its financial results for the quarter ended March 31, 2020 by posting to its website its First Quarter 2020 Earnings Results and Operating Information package (attached as Exhibit 99.1).  The information contained in this report on Form 8-K, including the attached Exhibits, shall not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by Douglas Emmett, Inc. under the Securities Act of 1933, as amended.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits: The following exhibits are furnished with this Current Report on Form 8-K:

Exhibit Number
 
Description
 
 
 
99.1
 
104
 
Cover Page Interactive Data File (embedded within the Inline XBRL document)



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
DOUGLAS EMMETT, INC.
 
 
 
 
Dated:
May 7, 2020
By:
/s/ PETER D. SEYMOUR
 
 
 
Peter D. Seymour
 
 
 
Chief Financial Officer



Exhibit


 
 


Executive Summary

We own and operate 18.3 million square feet of Class A office properties and 4,161 apartment units in the premier coastal submarkets of Los Angeles and Honolulu.
  
Financial Results: For the three months ended March 31, 2020 compared to the three months ended March 31, 2019:
We grew our revenues by 12.1% to $251.4 million.
Our net income attributable to common stockholders decreased by 6.2% to $26.9 million.
We grew our FFO by 8.5% to $111.9 million, or $0.55 per fully diluted share.
We grew our AFFO by 16.4% to $99.1 million.
We grew our same property Cash NOI by 7.7% to $145.6 million.

Leasing: During the first quarter, we signed approximately 700,000 square feet of office leases. Comparing the office leases we signed during the first quarter to the expiring leases for the same space, we grew straight-line rents by 22.6% and cash rents by 9.3%. Our multifamily portfolio remains essentially fully leased at 98%. Since the last weeks of the first quarter, leasing activity has slowed, particularly in office leasing.

Liquidity: We entered the second quarter with strong cash flows and a healthy balance sheet. At the end of the first quarter we had:
$175 million of cash on hand,
An undrawn $400 million line of credit,
No debt maturities before 2023,
No financial covenants that could force us to issue equity at the wrong time, and
41% of our office portfolio was unencumbered.

Development: On the capital front, construction is continuing on our two large multifamily development projects, although it may take a little longer under current conditions. In Honolulu, where we are developing 500 apartment units at our office conversion project, we have already pre-leased a number of units and expect to deliver them over the next few months. For our Brentwood apartment tower, we currently expect delivery of the first units to be pushed into 2022. For the moment, we have suspended work on new office repositioning projects, and acquisitions in our markets seem to be on hold because buyers and sellers need to evaluate the new conditions.

Dividends: On April 15, 2020, we paid a quarterly cash dividend of $0.28 per common share, or $1.12 on an annualized basis.

Guidance: As is true everywhere, our tenants are now struggling with the impacts of the pandemic on their business. In addition, the cities in which we operate have passed unusually punitive ordinances prohibiting evictions and allowing rent deferral for residential, retail, and office tenants, regardless of financial distress. By eliminating any fees or interest and providing long payback periods, tenants essentially have the option of a free loan. Given the current uncertainties about the duration and extent of the impact from these ordinances and other pandemic related issues, we are withdrawing our 2020 full year guidance. Our April rent collections to date represent 87% of aggregate rent billed, with residential at 95%, office at 90% and our small retail component at 22%. We don’t know whether these numbers will prove to be a good predictor of the next few months or the remainder of the year.





NOTE:  See the non-GAAP reconciliations for FFO & AFFO on page 8 and same property NOI on page 10.

NOTE:  See the "Definitions" section for definitions of certain terms used in this Earnings Package.

1                     Go to Table of Contents

 
 


Table of Contents
COMPANY OVERVIEW
 
 
 
 
FINANCIAL RESULTS
 
 
 
 
PORTFOLIO DATA
 
 
 
 
            DEFINITIONS

Forward Looking Statements (FLS)
This First Quarter 2020 Earnings Results and Operating Information, which we refer to as our Earnings Package (EP), supplements the information provided in our reports filed with the Securities and Exchange Commission (SEC).  It contains FLS within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and we claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements related to the expectations regarding the performance of our business, financial results, liquidity and capital resources and other non-historical statements, including the statements in the “Guidance” sections of this EP. In some cases, these FLS can be identified by the use of words such as “expect,” "potential,” “continue,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “intends,” “plans,” “estimates,” "anticipates,” or the negative version of these words or other comparable words. FLS presented in this EP, and those that we may make orally or in writing from time to time, are based on our beliefs and assumptions.  Our actual results will be affected by known and unknown risks, trends, uncertainties and factors, some of which are beyond our control or ability to predict, including, but not limited to: adverse developments related to the Coronavirus (COVID-19) global pandemic; adverse economic and real estate developments in Southern California and Honolulu; a general downturn in the economy; decreased rental rates or increased tenant incentives and vacancy rates; defaults on, and early terminations and non-renewal of, leases by tenants; increased interest rates and operating costs; failure to generate sufficient cash flows to service our debt; difficulties in acquiring properties; failure to successfully operate properties; failure to maintain our status as a REIT; possible adverse changes in rent control laws and regulations; environmental uncertainties; risks related to natural disasters; lack of or insufficient insurance; inability to successfully expand into new markets or submarkets; risks associated with property development; conflicts of interest with our officers; changes in real estate and zoning laws and increases in real property tax rates; possible future terrorist attacks; and other risks and uncertainties detailed in our Annual Report on Form 10-K and other documents filed with the SEC. Although we believe that our assumptions underlying our forward looking statements are reasonable, they are not guarantees of future performance and some will inevitably prove to be incorrect.  As a result, our actual future results can be expected to differ from our expectations, and those differences may be material.  Accordingly, please use caution in relying on any FLS in this EP or any previously reported FLS to anticipate future results or trends. This EP and all subsequent written and oral FLS attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our FLS.

2

 
Company Overview


Corporate Data
as of March 31, 2020

 
Office Portfolio
 
 
 
 
 
 
 
 
 
Consolidated
 
Total
 
 
Properties
70

 
72

 
 
Rentable square feet (in thousands)
17,939

 
18,324

 
 
Leased rate
92.3
%
 
92.2
%
 
 
Occupancy rate
90.9
%
 
90.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Multifamily Portfolio
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
Properties
 
 
11

 
 
Units
 
 
4,161

 
 
Leased rate(1)
 
 
98.0
%
 
 
 
 
 
 
 

 
Market Capitalization (in thousands, except price per share)
 
 
 
 
 
 
 
Fully Diluted Shares outstanding as of March 31, 2020
 
204,794

 
 
Common stock closing price per share (NYSE:DEI)
 
$
30.51

 
 
Equity Capitalization
 
$
6,248,272

 
 
 
 
 
 

 
Net Debt (in thousands)
 
 
 
 
 
 
 
 
 
Consolidated
 
Our Share
 
 
 
 
 
 
 
 
Debt principal(2) 
$
4,653,079

 
$
3,791,970

 
 
Less: cash and cash equivalents(3)
(174,696
)
 
(95,594
)
 
 
Net Debt
$
4,478,383

 
$
3,696,376

 
 
 
 
 
 
 

 
Leverage Ratio (in thousands, except percentage)
 
 
 
 
 
 
 
Pro Forma Enterprise Value
 
$
9,944,648

 
 
Our Share of Net Debt to Pro Forma Enterprise Value
 
37
%
 
 
 
 
 
 

 
AFFO Payout Ratio
 
 
 
 
 
 
 
Three months ended March 31, 2020
 
58.0
%
 
 
 
 
 
 
_______________________________________________
(1)
Both the numerator and denominator used in calculating the percentage of units leased do not include 138 units at one property which are temporarily unoccupied as a result of a fire.
(2)
See page 12 for a reconciliation of consolidated debt principal and our share of debt principal to consolidated debt on the balance sheet.
(3)
Our share of cash and cash equivalents is calculated starting with our consolidated cash and cash equivalents of $174.7 million, then deducting the other owners' share of our JVs' cash and cash equivalents of $81.6 million and then adding our share of our unconsolidated Fund's cash and cash equivalents of $2.4 million.
NOTE:  See the "Definitions" section for definitions of certain terms used in this Earnings Package.

3                     Go to Table of Contents

 
Company Overview


Property Map
as of March 31, 2020



4                     Go to Table of Contents

 
Company Overview


Board of Directors and Executive Officers
as of March 31, 2020


BOARD OF DIRECTORS
______________________________________________________________________________________________________________
Dan A. Emmett
Our Executive Chairman of the Board
Jordan L. Kaplan
Our Chief Executive Officer and President
Kenneth M. Panzer
Our Chief Operating Officer
Christopher H. Anderson
Retired Real Estate Executive and Investor
Leslie E. Bider
Vice Chairman, PinnacleCare
Dr. David T. Feinberg
Vice President, Google Health
Virginia A. McFerran
Technology and Data Science Advisor
Thomas E. O’Hern
Chief Executive Officer, Macerich
William E. Simon, Jr.
Partner, Simon Quick Advisors
Johnese M. Spisso
President, UCLA Health; Chief Executive Officer, UCLA Hospital System; Associate Vice Chancellor, UCLA Health Sciences

EXECUTIVE OFFICERS
______________________________________________________________________________________________________________
Dan A. Emmett
Chairman of the Board
Jordan L. Kaplan
Chief Executive Officer and President
Kenneth M. Panzer
Chief Operating Officer
Peter D. Seymour
Chief Financial Officer
Kevin A. Crummy
Chief Investment Officer


CORPORATE OFFICE
1299 Ocean Avenue, Suite 1000, Santa Monica, California 90401
Phone: (310) 255-7700

For more information, please visit our website at www.douglasemmett.com or contact:
Stuart McElhinney, Vice President, Investor Relations
(310) 255-7751
smcelhinney@douglasemmett.com

5                     Go to Table of Contents

 
Financial Results


Consolidated Balance Sheets
(In thousands)

 
March 31, 2020
 
December 31, 2019
 
 
 
 
 
Unaudited
 
 
Assets
 

 
 

Investment in real estate:
 

 
 

Land
$
1,152,684

 
$
1,152,684

Buildings and improvements
9,307,283

 
9,308,481

Tenant improvements and lease intangibles
907,767

 
905,753

Property under development
143,019

 
111,715

Investment in real estate, gross
11,510,753

 
11,478,633

Less: accumulated depreciation and amortization
(2,592,996
)
 
(2,518,415
)
Investment in real estate, net
8,917,757

 
8,960,218

Ground lease right-of-use asset
7,477

 
7,479

Cash and cash equivalents
174,696

 
153,683

Tenant receivables
5,801

 
5,302

Deferred rent receivables
133,563

 
134,968

Acquired lease intangible assets, net
6,064

 
6,407

Interest rate contract assets

 
22,381

Investment in unconsolidated Fund
48,346

 
42,442

Other assets
19,350

 
16,421

Total assets
$
9,313,054

 
$
9,349,301

 
 
 
 
Liabilities
 
 
 

Secured notes payable and revolving credit facility, net
$
4,620,215

 
$
4,619,058

Ground lease liability
10,878

 
10,882

Interest payable, accounts payable and deferred revenue
156,195

 
131,410

Security deposits
60,356

 
60,923

Acquired lease intangible liabilities, net
47,769

 
52,367

Interest rate contract liabilities
238,821

 
54,616

Dividends payable
49,113

 
49,111

Total liabilities
5,183,347

 
4,978,367

 
 
 
 
Equity
 
 
 

Douglas Emmett, Inc. stockholders' equity:
 
 
 

Common stock
1,754

 
1,754

Additional paid-in capital
3,486,442

 
3,486,356

Accumulated other comprehensive loss
(165,872
)
 
(17,462
)
Accumulated deficit
(780,562
)
 
(758,576
)
Total Douglas Emmett, Inc. stockholders' equity
2,541,762

 
2,712,072

Noncontrolling interests
1,587,945

 
1,658,862

Total equity
4,129,707

 
4,370,934

Total liabilities and equity
$
9,313,054

 
$
9,349,301


NOTE:  See the "Definitions" section for definitions of certain terms used in this Earnings Package.

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Financial Results


Consolidated Operating Results(1) 
(Unaudited; in thousands, except per share data)

 
Three Months Ended March 31,
 
2020
 
2019
 
 
 
 
Revenues
 

 
 

Office rental
 

 
 

Rental revenues and tenant recoveries(2)
$
185,827

 
$
167,235

Parking and other income
34,062

 
30,055

Total office revenues
219,889

 
197,290

 
 
 
 
Multifamily rental
 
 
 
Rental revenues
29,086

 
24,893

Parking and other income
2,375

 
2,003

Total multifamily revenues
31,461

 
26,896

 
 
 
 
Total revenues
251,350

 
224,186

 
 
 
 
Operating Expenses
 
 
 
Office expenses
69,664

 
63,449

Multifamily expenses
9,356

 
7,555

General and administrative expenses
10,335

 
9,832

Depreciation and amortization
97,777

 
79,873

Total operating expenses
187,132

 
160,709

 
 
 
 
Operating income
64,218

 
63,477

 
 
 
 
Other income
1,989

 
2,898

Other expenses
(1,396
)
 
(1,845
)
Income from unconsolidated Funds
323

 
1,551

Interest expense
(35,420
)
 
(33,293
)
Net income
29,714

 
32,788

Less: Net income attributable to noncontrolling interests
(2,791
)
 
(4,087
)
Net income attributable to common stockholders
$
26,923

 
$
28,701

 
 
 
 
Net income per common share - basic and diluted
$
0.15

 
$
0.17

 
 
 
 
Dividends declared per common share
$
0.28

 
$
0.26

 
 
 
 
Weighted average shares of common stock outstanding - basic and diluted
175,373

 
170,221


_______________________________________________________________________
(1)
On November 21, 2019, we restructured one of our previously unconsolidated funds, after which it is treated as a consolidated JV. The results of the consolidated JV are included in our operating results from November 21, 2019 (before November 21, 2019, our share of the Fund's net income was included in the line item Income from unconsolidated Funds).
(2)
Rental revenues and tenant recoveries include tenant recoveries of $14.6 million and $13.7 million for the three months ended March 31, 2020 and 2019, respectively.




NOTE:  See the "Definitions" section for definitions of certain terms used in this Earnings Package.

7                     Go to Table of Contents

 
Financial Results


Funds From Operations & Adjusted Funds From Operations(1) 
(Unaudited; in thousands, except per share data)


The table below presents a reconciliation of Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) to Net income attributable to common stockholders:

 
Three Months Ended March 31,
 
2020
 
2019
Funds From Operations (FFO)
 
 
 
Net income attributable to common stockholders
$
26,923

 
$
28,701

Depreciation and amortization of real estate assets
97,777

 
79,873

Net income attributable to noncontrolling interests
2,791

 
4,087

Adjustments attributable to unconsolidated Funds(2)
654

 
4,514

Adjustments attributable to consolidated JVs(2)
(16,263
)
 
(14,077
)
FFO
$
111,882

 
$
103,098

 
 
 
 
Adjusted Funds From Operations (AFFO)
 
 
 
FFO
$
111,882

 
$
103,098

Straight-line rent
1,406

 
(4,369
)
Net accretion of acquired above- and below-market leases
(4,256
)
 
(4,120
)
Loan costs, loan premium amortization and swap amortization
1,223

 
1,867

Recurring capital expenditures, tenant improvements and capitalized leasing expenses(3)
(18,216
)
 
(17,783
)
Non-cash compensation expense
5,200

 
4,507

Adjustments attributable to unconsolidated Funds(2)
(64
)
 
(1,994
)
Adjustments attributable to consolidated JVs(2)
1,940

 
3,921

AFFO
$
99,115

 
$
85,127

 
 
 
 
Weighted average shares of common stock outstanding - diluted
175,373

 
170,221

Weighted average units in our operating partnership outstanding
29,501

 
28,652

Weighted average fully diluted shares outstanding
204,874

 
198,873

 
 
 
 
Net income per common share - basic and diluted
$
0.15

 
$
0.17

FFO per share - fully diluted
$
0.55

 
$
0.52

Dividends paid per share(4)
$
0.28

 
$
0.26

__________________________________________________________
(1)
Presents the FFO and AFFO attributable to our common stockholders and noncontrolling interests in our Operating Partnership, including our share of our consolidated JVs and our unconsolidated Funds.
(2)
Adjusts for the portion of each other listed adjustment item on our share of the results of our unconsolidated Funds and for each other listed adjustment item that is attributed to the noncontrolling interests in our consolidated JVs. We restructured one of our unconsolidated Funds in November 2019 after which it was consolidated as a JV. The adjustments for the unconsolidated Funds and consolidated JVs are therefore not directly comparable to the prior period.
(3)
Under the lease accounting rules, we expense non-incremental leasing expenses (leasing expenses not directly related to the signing of a lease) and capitalize incremental leasing expenses. Since non-incremental leasing expenses are included in the calculation of net income attributable to common stockholders and FFO, the capitalized leasing expenses adjustment to AFFO only includes incremental leasing expenses.
(4)
Reflects dividends paid within the respective periods.

NOTE:  See the "Definitions" section for definitions of certain terms used in this Earnings Package.

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Financial Results


Same Property Statistics & Net Operating Income (NOI)(1) 
(Unaudited; in thousands, except statistics)

 
 
 
 
 
 
 
 
As of March 31,
 
 
 
2020
 
2019
 
 
Office Statistics
 
 
 
 
 
Number of properties
60

 
60

 
 
Rentable square feet (in thousands)
16,050

 
16,042

 
 
Ending % leased
92.3
%
 
91.6
%
 
 
Ending % occupied
90.9
%
 
90.1
%
 
 
Quarterly average % occupied
91.1
%
 
90.4
%
 
 
 
 
 
 
 
 
Multifamily Statistics
 
 
 
 
 
Number of properties
8

 
8

 
 
Number of units
1,928

 
1,928

 
 
Ending % leased
97.5
%
 
99.8
%
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
% Favorable
 
 
 
2020
 
2019
 
(Unfavorable)
 
 
Net Operating Income (NOI)
 
 
 
 
 
 
 
Office revenues
$
197,060

 
$
192,785

 
2.2
 %
 
 
Office expenses
(61,948
)
 
(60,876
)
 
(1.8
)%
 
 
Office NOI
135,112

 
131,909

 
2.4
 %
 
 
 
 
 
 
 
 
 
 
Multifamily revenues
15,657

 
15,833

 
(1.1
)%
 
 
Multifamily expenses
(4,158
)
 
(4,021
)
 
(3.4
)%
 
 
Multifamily NOI
11,499

 
11,812

 
(2.6
)%
 
 
 
 
 
 
 
 
 
 
Total NOI
$
146,611

 
$
143,721

 
2.0
 %
 
 
 
 
 
 
 
 
 
 
Cash Net Operating Income (NOI)
 
 
 
 
 
 
 
Office cash revenues
$
196,055

 
$
184,284

 
6.4
 %
 
 
Office cash expenses
(61,948
)
 
(60,876
)
 
(1.8
)%
 
 
Office cash NOI
134,107

 
123,408

 
8.7
 %
 
 
 
 
 
 
 
 
 
 
Multifamily cash revenues
15,655

 
15,824

 
(1.1
)%
 
 
Multifamily cash expenses
(4,158
)
 
(4,021
)
 
(3.4
)%
 
 
Multifamily cash NOI
11,497

 
11,803

 
(2.6
)%
 
 
 
 
 
 
 
 
 
 
Total Cash NOI
$
145,604

 
$
135,211

 
7.7
 %
 
 
 
 
 
 
 
 
 
_________________________________________________
(1) The amounts presented include 100% (not our pro-rata share). See page 10 for a reconciliation of these non-GAAP measures to net income attributable to common stockholders.



NOTE:  See the "Definitions" section for definitions of certain terms used in this Earnings Package.

9                     Go to Table of Contents

 
Financial Results

 
Reconciliation of Same Property NOI to Net Income
(Unaudited and in thousands)


 
Three Months Ended March 31,
 
2020
 
2019
 
 
 
 
Same property office cash revenues
$
196,055

 
$
184,284

Non-cash adjustments per definition of NOI
1,005

 
8,501

Same property office revenues
197,060

 
192,785

 
 
 
 
Same property office expenses
(61,948
)
 
(60,876
)
 
 
 
 
Office NOI
135,112

 
131,909

 
 
 
 
Same property multifamily cash revenues
15,655

 
15,824

Non-cash adjustments per definition of NOI
2

 
9

Same property multifamily revenues
15,657

 
15,833

 
 
 
 
Same property multifamily expenses
(4,158
)
 
(4,021
)
 
 
 
 
Multifamily NOI
11,499

 
11,812

 
 
 
 
Same Property NOI
146,611

 
143,721

Non-comparable office revenues
22,829

 
4,505

Non-comparable office expenses
(7,716
)
 
(2,573
)
Non-comparable multifamily revenues
15,804

 
11,063

Non-comparable multifamily expenses
(5,198
)
 
(3,534
)
NOI
172,330

 
153,182

General and administrative expenses
(10,335
)
 
(9,832
)
Depreciation and amortization
(97,777
)
 
(79,873
)
Operating income
64,218

 
63,477

Other income
1,989

 
2,898

Other expenses
(1,396
)
 
(1,845
)
Income from unconsolidated Funds
323

 
1,551

Interest expense
(35,420
)
 
(33,293
)
Net income
29,714

 
32,788

Less: Net income attributable to noncontrolling interests
(2,791
)
 
(4,087
)
Net income attributable to common stockholders
$
26,923

 
$
28,701










NOTE:  See the "Definitions" section for definitions of certain terms used in this Earnings Package.

10                     Go to Table of Contents

 
Financial Results


Financial Data for JVs & Fund
(Unaudited, in thousands)

 
Three Months Ended March 31, 2020
 
 
 
 
 
 
 
Wholly-Owned Properties
 
Consolidated JVs(1)
 
Unconsolidated Fund(2)
 
 
 
 
 
 
Revenues
$
185,003

 
$
66,347

 
$
4,602

Office and multifamily operating expenses
$
57,855

 
$
21,165

 
$
1,512

Straight-line rent
$
(1,825
)
 
$
419

 
$
(72
)
Above/below-market lease revenue
$
858

 
$
3,398

 
$
(3
)
Cash NOI attributable to outside interests(3)
$

 
$
21,481

 
$
1,951

Our share of cash NOI(4)
$
128,115

 
$
19,884

 
$
1,214

______________________________________________________
(1)
Represents stand-alone financial data (with property management fees excluded from operating expenses as a consolidating entry) for four consolidated JVs. We manage our JVs and own a weighted average interest of approximately 46% in them based on square footage. The JVs own a combined seventeen Class A office properties totaling 4.3 million square feet and one residential property with 350 apartments in our submarkets. We are entitled to (i) distributions based on invested capital, (ii) fees for property management and other services, (iii) reimbursement of certain acquisition-related expenses and certain other costs and (iv) in most cases, additional distributions based on Cash NOI.
(2)
Represents stand-alone financial data (with property management fees excluded from operating expenses as a consolidating entry) for one unconsolidated Fund. We manage our Fund in which we own an interest of approximately 34%. The Fund owns two Class A office properties totaling 0.4 million square feet in our submarkets. We are entitled to (i) priority distributions, (ii) distributions based on invested capital, (iii) a carried interest if the investors’ distributions exceed a hurdle rate, (iv) fees for property management and other services and (v) reimbursement of certain costs.  
(3)
Represents the share of Cash NOI allocable under the applicable agreements to interests other than our Fully Diluted Shares.
(4)
Represents the share of Cash NOI allocable to our Fully Diluted Shares.


























NOTE:  See the "Definitions" section for definitions of certain terms used in this Earnings Package.

11                     Go to Table of Contents

 
Financial Results

 
Loans
(As of March 31, 2020, unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maturity Date(1)
 
Principal Balance
(In Thousands)
 
Our Share(2)
(In Thousands)
 
Effective
Rate(3)
 
Swap Maturity Date
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Wholly-Owned Subsidiaries
 
 
 
 
 
 
 
 
 
 
 
 
 
1/1/2024
 
$
300,000

 
$
300,000

 
3.46%
 
1/1/2022
 
 
3/3/2025
 
335,000

 
335,000

 
3.84%
 
3/1/2023
 
 
4/1/2025
 
102,400

 
102,400

 
2.76%
 
3/1/2023
 
 
8/15/2026
(4)
415,000

 
415,000

 
2.58%
 
8/1/2025
 
 
9/19/2026
 
400,000

 
400,000

 
2.44%
 
9/1/2024
 
 
9/26/2026
(5)
200,000

 
200,000

 
2.77%
 
10/1/2024
 
 
11/1/2026
(6)
400,000

 
400,000

 
2.18%
 
10/1/2024
 
 
6/1/2027
 
550,000

 
550,000

 
3.16%
 
6/1/2022
 
 
6/1/2029
 
255,000

 
255,000

 
3.26%
 
6/1/2027
 
 
6/1/2029
(7)
125,000

 
125,000

 
2.55%
 
6/1/2027
 
 
6/1/2038
(8)
30,679

 
30,679

 
4.55%
 
N/A
 
 
8/21/2023
(9)

 

 
LIBOR + 1.15%
 
N/A
 
 
Subtotal
 
3,113,079

 
3,113,079

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated JVs
 
 
 
 
 
 
 
 
 
 
 
 
 
2/28/2023
 
580,000

 
174,000

 
2.37%
 
3/1/2021
 
 
7/1/2024
 
400,000

 
356,000

 
3.44%
 
7/1/2022
 
 
12/19/2024
 
400,000

 
80,000

 
3.47%
 
1/1/2023
 
 
6/1/2029
 
160,000

 
32,000

 
3.25%
 
7/1/2027
 
 
Total Consolidated Loans
(10)
$
4,653,079

 
$
3,755,079

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated Fund
 
 
 
 
 
 
 
 
 
 
 
 
 
3/1/2023
 
$
110,000

 
$
36,891

 
2.30%
 
3/1/2021
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Loans
 
 
 
$
3,791,970

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Except as noted below, our loans and revolving credit facility: (i) are non-recourse, (ii) are secured by separate collateral pools consisting of one or more properties, (iii) require interest-only monthly payments with the outstanding principal due upon maturity, and (iv) contain certain financial covenants which could require us to deposit excess cash flow with the lender under certain circumstances unless we (at our option) either provide a guarantee or additional collateral or pay down the loan within certain parameters set forth in the loan documents.  Certain loans with maturity date extensions require us to meet minimum financial thresholds in order to exercise those extensions.
(1)
Maturity dates include the effect of extension options.
(2)
"Our Share" is calculated by multiplying the principal balance by our share of the borrowing entity's equity, and is used to calculate the non-GAAP measure "Our Share of Net Debt" - see Corporate Data on page 3.
(3)
Effective rate as of March 31, 2020. Includes the effect of interest rate swaps and excludes the effect of prepaid loan costs.
(4)
Effective rate will increase to 3.07% on April 1, 2020.
(5)
Effective rate will decrease to 2.36% on July 1, 2020.
(6)
Effective rate will increase to 2.31% on July 1, 2021.
(7)
Effective rate will increase to 3.25% on December 1, 2020.
(8)
Requires monthly payments of principal and interest. Principal amortization is based upon a 30-year amortization schedule.
(9)
$400 million revolving credit facility. Unused commitment fees range from 0.10% to 0.15%.
(10)
Our consolidated debt on the balance sheet of $4.62 billion is calculated by adding $6.5 million of unamortized loan premium and deducting $39.4 million of unamortized deferred loan costs from our total consolidated loans of $4.65 billion.
 
 
 
 
 
Statistics for consolidated loans with interest fixed under the terms of the loan or a swap
 
 
 
 
 
 
Principal balance (in billions)
$4.65
 
 
Weighted average remaining life (including extension options)
5.9 years
 
 
Weighted average remaining fixed interest period
3.6 years
 
 
Weighted average annual interest rate
3.00%
 
 
 
 
 
NOTE:  See the "Definitions" section for definitions of certain terms used in this Earnings Package.

12                     Go to Table of Contents

 
Portfolio Data


Office Portfolio Summary
Total Office Portfolio as of March 31, 2020


 
 
 
 
 
 
 
 
 
 
 
 
Region
 
Number of Properties
 
Our Rentable Square Feet
 
Region Rentable Square Feet(1)
 
Our Average Market Share(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
Los Angeles
 
 
 
 
 
 
 
 
 
 
   Westside(3)
 
52

 
9,992,932

 
38,139,316
 
37.2
%
 
 
   Valley
 
16

 
6,790,777

 
21,161,280
 
43.7

 
 
Honolulu(3)
 
4

 
1,540,639

 
4,852,143
 
31.8

 
 
Total / Average
 
72

 
18,324,348

 
64,152,739
 
39.1
%
 
 
 
 
 
 
 
 
 
 
 
 
_________________________________________________
(1)
The rentable square feet in each region is based on the Rentable Square Feet as reported in the 2020 first quarter CBRE Marketview report for our submarkets in that region.
(2)
Our market share is calculated by dividing Rentable Square Feet by the applicable Rentable Square Feet, weighted in the case of averages based on the square feet of exposure in our total portfolio to each submarket as follows:
 
 
 
 
 
 
 
 
 
 
 
 
Region
 
Submarket
 
Number of Properties
 
Our Rentable Square Feet
 
Our Market Share(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
Westside
 
Brentwood
 
15

 
2,085,745

 
60.5
%
 
 
 
Westwood
 
7

 
2,185,592

 
50.4

 
 
 
Olympic Corridor
 
5

 
1,142,885

 
36.9

 
 
 
Beverly Hills(3)
 
11

 
2,196,067

 
27.7

 
 
 
Santa Monica
 
11

 
1,425,374

 
14.7

 
 
 
Century City
 
3

 
957,269

 
9.2

 
 
Valley
 
Sherman Oaks/Encino
 
12

 
3,488,995

 
53.4

 
 
 
Warner Center/Woodland Hills
 
3

 
2,845,577

 
37.6

 
 
 
Burbank
 
1

 
456,205

 
6.5

 
 
Honolulu
 
Honolulu(3)
 
4

 
1,540,639

 
31.8

 
 
 
 
Total / Weighted Average
 
72

 
18,324,348

 
39.1
%
 
 
 
 
 
 
 
 
 
 
 
 
_______________________________________________
(3)
In calculating market share, we adjusted the rentable square footage by (i) removing approximately 223,000 rentable square feet of vacant space at an office building in Honolulu, which we are converting to residential apartments, from both our rentable square footage and that of the submarket (see page 22) and (ii) removing a 218,000 square foot property located just outside the Beverly Hills city limits from both the numerator and the denominator.














NOTE:  See the "Definitions" section for definitions of certain terms used in this Earnings Package.

13                     Go to Table of Contents

 
Portfolio Data


Office Percentage Leased and In-Place Rents
Total Office Portfolio as of March 31, 2020
Annualized Rent by Region
 
 
 
 
 
 
 
 
 
 
 
 
 
Region(1)
 
Percent
Leased
 
Annualized Rent(2)
 
Annualized Rent Per Leased Square Foot(2)
 
Monthly Rent Per Leased Square Foot(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
Los Angeles
 
 
 
 
 
 
 
 
 
 
   Westside
 
92.7
%
 
$
472,210,117

 
$
52.93

 
$
4.41

 
 
   Valley
 
91.5

 
216,488,355

 
36.10

 
3.01

 
 
Honolulu
 
92.5

 
48,206,066

 
35.72

 
2.98

 
 
Total / Weighted Average
 
92.2
%
 
$
736,904,538

 
$
45.30

 
$
3.77

 
 
 
 
 
 
 
 
 
 
 
 
_______________________________________________________________
(1)
Regional data reflects the following underlying submarket data:
 
 
 
 
 
 
 
 
 
 
Region
 
Submarket
 
Percent
Leased
 
Monthly Rent Per Leased Square Foot(2)
 
 
 
 
 
 
 
 
 
 
 
Westside
 
Beverly Hills
 
94.8
%
 
$
4.39

 
 
 
Brentwood
 
90.3

 
3.87

 
 
 
Century City
 
93.5

 
4.16

 
 
 
Olympic Corridor
 
92.6

 
3.42

 
 
 
Santa Monica
 
93.3

 
6.35

 
 
 
Westwood
 
92.2

 
4.28

 
 
Valley
 
Burbank
 
100.0

 
4.37

 
 
 
Sherman Oaks/Encino
 
92.1

 
3.19

 
 
 
Warner Center/Woodland Hills
 
89.3

 
2.52

 
 
Honolulu
 
Honolulu
 
92.5

 
2.98

 
 
 
 
Weighted Average
 
92.2
%
 
$
3.77

 
 
 
 
 
 
 
 
 
 

(2)
Does not include signed leases not yet commenced, which are included in percent leased but excluded from annualized rent.
 
 
 
 
 
Recurring Office Capital Expenditures per Rentable Square Foot
 
 
 
Three months ended March 31, 2020
$
0.03

 
 
 
 
 
NOTE:  See the "Definitions" section for definitions of certain terms used in this Earnings Package.

14                     Go to Table of Contents

 
Portfolio Data


Office Lease Diversification
Total Office Portfolio as of March 31, 2020




 
 
 
 
 
 
 
Portfolio Tenant Size
 
 
 
Median
 
Average
 
 
 
 
 
 
 
 
Square feet
2,700
 
5,600
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Leases
 
Rentable Square Feet
 
Annualized Rent
 
 
Square Feet Under Lease
 
Number
 
Percent
 
Amount
 
Percent
 
Amount
 
Percent
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,500 or less
 
1,399

 
48.0
%
 
1,954,148

 
12.0
%
 
$
87,287,876

 
11.8
%
 
 
2,501-10,000
 
1,143

 
39.2

 
5,596,068

 
34.4

 
249,578,335

 
33.9

 
 
10,001-20,000
 
240

 
8.2

 
3,316,546

 
20.4

 
141,631,172

 
19.2

 
 
20,001-40,000
 
98

 
3.4

 
2,701,190

 
16.6

 
122,549,187

 
16.6

 
 
40,001-100,000
 
32

 
1.1

 
1,791,312

 
11.0

 
91,893,518

 
12.5

 
 
Greater than 100,000
 
4

 
0.1

 
908,539

 
5.6

 
43,964,450

 
6.0

 
 
Total for all leases
 
2,916

 
100.0
%
 
16,267,803

 
100.0
%
 
$
736,904,538

 
100.0
%
 
 
 
 
 
 
 






NOTE:  See the "Definitions" section for definitions of certain terms used in this Earnings Package.

15                     Go to Table of Contents

 
Portfolio Data


Largest Office Tenants
Total Office Portfolio as of March 31, 2020

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tenants paying 1% or more of our aggregate Annualized Rent:
 
 
 
 
 
Tenant
 
Number of Leases
 
Number of Properties
 
Lease Expiration(1)
 
Total Leased Square Feet
 
Percent of Rentable Square Feet
 
Annualized Rent
 
Percent of Annualized Rent
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Time Warner(2)
 
3

 
3

 
 2023-2024
 
468,819

 
2.5
%
 
$
24,399,553

 
3.3
%
 
 
UCLA(3)
 
26

 
10

 
 2020-2027
 
336,695

 
1.8

 
17,290,077

 
2.3

 
 
William Morris Endeavor(4)
 
2

 
1

 
2022-2027
 
213,539

 
1.2

 
12,416,368

 
1.7

 
 
Morgan Stanley(5)
 
5

 
5

 
2022-2027
 
145,488

 
0.8

 
9,562,282

 
1.3

 
 
Equinox Fitness(6)
 
5

 
5

 
2024-2033
 
181,177

 
1.0

 
8,744,891

 
1.2

 
 
Total
 
41

 
24

 
 
 
1,345,718

 
7.3
%
 
$
72,413,171

 
9.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
______________________________________________________
(1)
Expiration dates are per lease (expiration dates do not reflect storage and similar leases).
(2)
Square footage expires as follows: 13,000 square feet in 2023; and 456,000 square feet in 2024.
(3)
Square footage expires as follows: 23,000 square feet in 2020; 72,000 square feet in 2021; 55,000 square feet in 2022; 46,000 square feet in 2023; 11,000 square feet in 2024; 63,000 square feet in 2025; and 67,000 square feet in 2027. Tenant has options to terminate 31,000 square feet in 2020; 16,000 square feet in 2023; and 51,000 square feet in 2025.
(4)
Square footage expires as follows: 1,000 square feet in 2022 and 213,000 square feet in 2027. Tenant has an option to terminate 2,000 square feet in 2020 and 212,000 square feet in 2022.
(5)
Square footage expires as follows: 16,000 square feet in 2022; 30,000 square feet in 2023; 26,000 square feet in 2025; and 74,000 square feet in 2027. Tenant has options to terminate 30,000 square feet in 2021; 26,000 square feet in 2022; and 32,000 square feet in 2024.
(6)
Square footage expires as follows: 34,000 square feet in 2024; 31,000 square feet in 2027; 44,000 square feet in 2028; 42,000 square feet in 2030; and 30,000 square feet in 2033.
















NOTE:  See the "Definitions" section for definitions of certain terms used in this Earnings Package.

16                     Go to Table of Contents

 
Portfolio Data

 
Office Industry Diversification
Total Office Portfolio as of March 31, 2020

Percentage of Annualized Rent by Tenant Industry
 
 
 
 
 
 
 
 
Industry
 
Number of Leases
 
Annualized Rent as a Percent of Total
 
 
 
 
 
 
 
 
 
Legal
 
578

 
17.8
%
 
 
Financial Services
 
394

 
14.9

 
 
Entertainment
 
229

 
13.6

 
 
Real Estate
 
306

 
11.7

 
 
Accounting & Consulting
 
337

 
10.0

 
 
Health Services
 
372

 
7.5

 
 
Retail
 
183

 
5.8

 
 
Technology
 
113

 
4.8

 
 
Insurance
 
102

 
4.1

 
 
Educational Services
 
57

 
3.6

 
 
Public Administration
 
92

 
2.5

 
 
Advertising
 
54

 
1.3

 
 
Manufacturing & Distribution
 
53

 
1.2

 
 
Other
 
46

 
1.2

 
 
Total
 
2,916

 
100.0
%
 
 
 
 
 
 
 
 
NOTE:  See the "Definitions" section for definitions of certain terms used in this Earnings Package.

17                     Go to Table of Contents

 
Portfolio Data

Office Lease Expirations
Total Office Portfolio as of March 31, 2020
(1)
Average of the percentage of leases expiring at March 31, 2017, 2018, and 2019 with the same remaining duration as the leases for the labeled year had at March 31, 2020. Acquisitions are included in the comparable average commencing in the quarter after the acquisition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year of Lease Expiration
 
Number of Leases
 
Rentable Square Feet
 
Expiring Square Feet as a Percent of Total
 
Annualized Rent at March 31, 2020
 
Annualized Rent as a Percent of Total
 
Annualized Rent Per Leased Square Foot(1)
 
Annualized Rent Per Leased Square Foot at Expiration(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short Term Leases
 
86

 
372,157

 
2.0
%
 
$
14,434,860

 
1.9
%
 
$
38.79

 
$
38.79

 
 
2020
 
425

 
1,556,581

 
8.5

 
66,068,523

 
9.0

 
42.44

 
42.96

 
 
2021
 
641

 
2,778,185

 
15.2

 
119,446,614

 
16.2

 
42.99

 
44.65

 
 
2022
 
534

 
2,388,738

 
13.0

 
103,951,627

 
14.1

 
43.52

 
46.94

 
 
2023
 
432

 
2,467,063

 
13.5

 
114,787,302

 
15.6

 
46.53

 
51.55

 
 
2024
 
294

 
2,200,630

 
12.0

 
102,401,664

 
13.9

 
46.53

 
53.18

 
 
2025
 
233

 
1,545,522

 
8.4

 
70,609,947

 
9.6

 
45.69

 
55.09

 
 
2026
 
101

 
951,595

 
5.2

 
44,129,245

 
6.0

 
46.37

 
59.00

 
 
2027
 
82

 
1,113,966

 
6.1

 
54,027,535

 
7.3

 
48.50

 
61.29

 
 
2028
 
39

 
373,864

 
2.0

 
21,210,588

 
2.9

 
56.73

 
73.30

 
 
2029
 
24

 
159,313

 
0.9

 
6,904,340

 
0.9

 
43.34

 
57.21

 
 
Thereafter
 
25

 
360,189

 
2.0

 
18,932,293

 
2.6

 
52.56

 
73.64

 
 
Subtotal/weighted average
 
2,916

 
16,267,803

 
88.8
%
 
$
736,904,538

 
100.0
%
 
$
45.30

 
$
51.29

 
 
Signed leases not commenced
 
264,256

 
1.4

 
 
 
 
 
 
 
 
 
 
Available
 
1,421,440

 
7.7