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Section 1: 8-K (8-K)

Document


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 8, 2018

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


Maryland
1-33106
20-3073047
(State or other jurisdiction of incorporation)
Commission file number
(I.R.S. Employer identification No.)

808 Wilshire Boulevard, Suite 200, 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):
 
o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))











Item 2.02 Results of Operations and Financial Condition

On May 8, 2018, Douglas Emmett, Inc. released its financial results for the quarter ended March 31, 2018 by posting to its website its First Quarter 2018 Earnings Results and Operating Information package (attached as Exhibit 99.1).  The information contained in this report on Form 8-K, including the attached Exhibit, 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 exhibit is furnished with this Current Report on Form 8-K:

Exhibit No.    Description

99.1    First Quarter 2018 Earnings Results and Operation Information



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 8, 2018
By:
/s/ MONA M. GISLER
 
 
 
Mona M. Gisler
 
 
 
Chief Financial Officer



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
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Executive Summary


We own and operate 18.4 million square feet of Class A office properties and 3,448 apartment units (excluding our residential development pipeline) in the premier coastal submarkets of Los Angeles and Honolulu.
Financial Results: For the three months ended March 31, 2018 compared to three months ended March 31, 2017:
Revenues increased by 9.1% to $212.2 million.
Net income attributable to common stockholders increased by 48.1% to $28.2 million.
FFO increased by 14.7% to $96.0 million, or $0.49 per fully diluted share.
AFFO increased by 1.8% to $71.0 million. Our renewal leasing volume during the quarter contributed to exceptionally high leasing commissions of $13.2 million. Had leasing commissions been in-line with the trend for the prior two years of $4.2 million per quarter then AFFO would have increased by 14.7% to $80.0 million.
Same property Cash NOI increased by 1.4% to $93.3 million, reflecting the expected impacts from the timing of tenant recovery revenues, tenant reimbursements and lease settlements. We remain confident in our guidance for same property cash NOI this year.
Office: We signed a record 1.3 million square feet of office leases during the first quarter including a 456,000 square foot renewal for our single tenant property in Burbank. The occupancy decline this quarter resulted from higher than usual expirations impacting January, including an 89,000 square foot downsize in Warner Center. Since quarter end, we have made good progress in leasing, including backfilling approximately two thirds of the Warner Center downsize. We are well positioned to increase occupancy across our entire portfolio as lease expirations through the end of 2019 are the lowest since we went public in 2006. Comparing office leases we signed during the first quarter to the expiring leases covering the same space, straight-line rents increased 40.4% and starting cash rents increased 16.9%.
Multifamily: The leased rate for our multifamily portfolio increased to 98.9% as we made significant progress backfilling a temporary vacancy in one of our Hawaii multifamily communities. We expect continued headwinds at our Moanalua community from ongoing construction and the recapture of our previously income restricted units.
Development: We commenced construction at our 376 unit apartment tower in Brentwood. At our Moanalua apartment development in Honolulu, we ended the quarter with a total of 104 new units leased, and we expect to complete that project, including a new fitness center and the upgrade of our existing units, around the end of this year. See page 22 for more information.
Debt:
In February 2018, we borrowed $335 million under a secured, non-recourse interest-only loan maturing in March 2025. The loan bears interest at LIBOR + 1.30%, which was effectively fixed at 3.84% for five years through interest rate swaps. The loan is secured by a wholly-owned office property. We used the proceeds from the loan and our credit line to pay off two loans totaling $426 million scheduled to mature in 2019.
With the exception of a loan on our development project at Moanalua, our next term loan maturity is four years away in 2022. We also have a large number of unencumbered properties that provide flexibility for future financings.
Dividends: On April 17, 2018, we paid a quarterly cash dividend of $0.25 per common share, or $1.00 per common share on an annualized basis, to our shareholders of record on March 29, 2018.
Guidance: We are increasing our 2018 full year guidance for Net Income Per Common Share - diluted to $0.66 to $0.72 and for FFO to $1.98 to $2.04 per fully diluted share. See page 23 for more information.

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.

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Table of Contents
COMPANY OVERVIEW
 
 
 
 
FINANCIAL RESULTS
 
 
 
 
PORTFOLIO DATA
 
 
 
 
               GUIDANCE
 
 
 
 
               DEFINITIONS

Forward Looking Statements
This First Quarter 2018 Earnings Results and Operating Information, which we refer to as our Earnings Package, supplements the information provided in our reports filed with the Securities and Exchange Commission.  It contains forward-looking statements 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.  Forward-looking statements presented in this Earnings Package, 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 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 outstanding indebtedness; 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 Securities and Exchange Commission. Although we believe that our assumptions 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 previously reported forward-looking statements to anticipate future results or trends. This Earnings Package and all subsequent written and oral forward-looking statements 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 forward-looking statements.

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Company Overview


Corporate Data
as of March 31, 2018

 
Office Portfolio
 
 
 
 
 
 
 
 
 
Consolidated
 
Total
 
 
Properties
63

 
71

 
 
Rentable square feet (in thousands)
16,578

 
18,409

 
 
Leased rate
90.7
%
 
90.5
%
 
 
Occupancy rate
88.7
%
 
88.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Multifamily Portfolio
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
 
Properties
 
 
10

 
 
Units
 
 
3,448

 
 
Leased rate
 
 
98.9
%
 
 
 
 
 
 
 

 
Market Capitalization (in thousands, except price per share)
 
 
 
 
 
 
 
Fully diluted shares outstanding as of March 31, 2018
 
197,923

 
 
Common stock closing price per share (NYSE:DEI)
 
$
36.76

 
 
Equity capitalization
 
$
7,275,646

 
 
 
 
 
 

 
Net Debt (in thousands)(1)
 
 
 
 
 
 
 
 
 
Consolidated
 
Our Share
 
 
 
 
 
 
 
 
$
4,134,500

 
$
3,712,954

 
 
Less: cash and cash equivalents
(183,556
)
 
(82,381
)
 
 
Net debt
$
3,950,944

 
$
3,630,573

 
 
 
 
 
 
 

 
Leverage Ratio (in thousands, except percentages)
 
 
 
 
 
 
 
Pro forma enterprise value
 
$
10,906,219

 
 
Our share of net debt to pro forma enterprise value
 
33
%
 
 
 
 
 
 

 
AFFO Payout Ratio
 
 
 
 
 
 
 
Three Months ended March 31, 2018
 
69.9
%
 
 
 
 
 
 
_______________________________________
(1)
See page 12 for details and a reconciliation to the consolidated debt on our balance sheet.


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

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Company Overview


Property Map
as of March 31, 2018
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Company Overview


Board of Directors and Executive Officers
as of March 31, 2018


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
President and Chief Executive Officer, Geisinger Health System
Virginia A. McFerran
Partner, Optum Ventures
Thomas E. O’Hern
Senior Executive Vice President, CFO & Treasurer, Macerich Company
William E. Simon, Jr.
Partner, Massey Quick Simon & Co., LLC

EXECUTIVE OFFICERS
___________________________________________________________________________________________________________________________________
Dan A. Emmett
Chairman of the Board
Jordan L. Kaplan
Chief Executive Officer and President
Kenneth M. Panzer
Chief Operating Officer
Mona M. Gisler
Chief Financial Officer
Kevin A. Crummy
Chief Investment Officer


CORPORATE OFFICES
808 Wilshire Boulevard, Suite 200, 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

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Financial Results


Consolidated Balance Sheets
(In thousands)

 
March 31, 2018
 
December 31, 2017
 
 
 
 
 
Unaudited
 
 
Assets
 

 
 

Investment in real estate:
 

 
 

Land
$
1,062,326

 
$
1,062,345

Buildings and improvements
7,914,592

 
7,886,201

Tenant improvements and lease intangibles
773,065

 
756,190

Property under development
96,920

 
124,472

Investment in real estate, gross
9,846,903

 
9,829,208

Less: accumulated depreciation and amortization
(2,067,299
)
 
(2,012,752
)
Investment in real estate, net
7,779,604

 
7,816,456

Property held for sale, net
17,576

 

Cash and cash equivalents
183,556

 
176,645

Tenant receivables, net
2,871

 
2,980

Deferred rent receivables, net
111,005

 
106,021

Acquired lease intangible assets, net
3,998

 
4,293

Interest rate contract assets
98,909

 
60,069

Investment in unconsolidated real estate funds
110,117

 
107,735

Other assets
16,264

 
18,442

Total assets
$
8,323,900

 
$
8,292,641

 
 
 
 
Liabilities
 
 
 

Secured notes payable and revolving credit facility, net
$
4,098,900

 
$
4,117,390

Interest payable, accounts payable and deferred revenue
136,874

 
103,947

Security deposits
49,943

 
50,414

Acquired lease intangible liabilities, net
69,187

 
75,635

Interest rate contract liabilities
46

 
807

Dividends payable
42,483

 
42,399

Total liabilities
4,397,433

 
4,390,592

 
 
 
 
Equity
 
 
 

Douglas Emmett, Inc. stockholders' equity:
 
 
 

Common stock
1,699

 
1,696

Additional paid-in capital
3,277,421

 
3,272,539

Accumulated other comprehensive income
74,021

 
43,099

Accumulated deficit
(894,289
)
 
(879,810
)
Total Douglas Emmett, Inc. stockholders' equity
2,458,852

 
2,437,524

Noncontrolling interests
1,467,615

 
1,464,525

Total equity
3,926,467

 
3,902,049

Total liabilities and equity
$
8,323,900

 
$
8,292,641






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

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Financial Results


Consolidated Operating Results
(Unaudited; in thousands, except per share data)
 
Three Months Ended March 31,
 
2018
 
2017
 
 
 
 
Revenues
 

 
 

Office rental
 

 
 

Rental revenues
$
147,771

 
$
133,016

Tenant recoveries
11,053

 
11,050

Parking and other income
28,509

 
26,282

Total office revenues
187,333

 
170,348

 
 
 
 
Multifamily rental
 
 
 
Rental revenues
23,061

 
22,241

Parking and other income
1,853

 
1,892

Total multifamily revenues
24,914

 
24,133

 
 
 
 
Total revenues
212,247

 
194,481

 
 
 
 
Operating Expenses
 
 
 
Office expenses
60,356

 
54,885

Multifamily expenses
6,698

 
5,947

General and administrative
9,567

 
10,156

Depreciation and amortization
72,498

 
67,374

Total operating expenses
149,119

 
138,362

 
 
 
 
Operating income
63,128

 
56,119

 
 
 
 
Other income
2,630

 
2,162

Other expenses
(1,733
)
 
(1,724
)
Income, including depreciation, from unconsolidated funds
1,506

 
2,177

Interest expense
(32,900
)
 
(36,954
)
Net income
32,631

 
21,780

Less:  Net income attributable to noncontrolling interests
(4,425
)
 
(2,731
)
Net income attributable to common stockholders
$
28,206

 
$
19,049

 
 
 
 
Net income per common share - basic
$
0.17

 
$
0.12

Net income per common share - diluted
$
0.17

 
$
0.12

 
 
 
 
Weighted average shares of common stock outstanding - basic
169,601

 
152,490

Weighted average shares of common stock outstanding - diluted
169,625

 
153,655











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

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Financial Results


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

 
Three Months Ended March 31,
 
2018
 
2017
Funds From Operations (FFO)
 
 
 
Net income attributable to common stockholders
$
28,206

 
$
19,049

Depreciation and amortization of real estate assets
72,498

 
67,374

Net income attributable to noncontrolling interests
4,425

 
2,731

Adjustments attributable to unconsolidated funds(2)
4,097

 
4,036

 Adjustments attributable to consolidated joint ventures(2)
(13,242
)
 
(9,521
)
FFO
$
95,984

 
$
83,669

 
 
 
 
Adjusted Funds From Operations (AFFO)
 
 
 
FFO
$
95,984

 
$
83,669

Straight-line rent
(5,172
)
 
(3,588
)
Net accretion of acquired above- and below-market leases
(6,152
)
 
(4,192
)
Loan costs
2,309

 
2,111

Recurring capital expenditures, tenant improvements and leasing commissions
(23,267
)
 
(14,464
)
Non-cash compensation expense
5,059

 
4,559

Adjustments attributable to unconsolidated funds(2)
(2,386
)
 
(1,331
)
Adjustments attributable to consolidated joint ventures(2)
4,618

 
2,983

AFFO
$
70,993

 
$
69,747

 
 
 
 
Weighted average shares of common stock outstanding - diluted
169,625

 
153,655

Weighted average units in our operating partnership outstanding
28,263

 
26,025

Weighted average fully diluted shares outstanding
197,888

 
179,680

 
 
 
 
Net income per common share - diluted
$
0.17

 
$
0.12

FFO per share - fully diluted
$
0.49

 
$
0.47

Dividends declared per share
$
0.25

 
$
0.23

______________________________________________
(1)
Presents the FFO and AFFO attributable to our common stockholders and noncontrolling interests in our Operating Partnership, including our share of our consolidated joint ventures 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 joint ventures.






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)
(Unaudited; in thousands, except statistics)
 
 
 
 
 
 
 
 
As of March 31,
 
 
 
2018
 
2017
 
 
Office Statistics
 
 
 
 
 
Number of properties
47

 
47

 
 
Rentable square feet (in thousands)
11,777

 
11,696

 
 
Ending % leased
90.5
%
 
91.9
%
 
 
Ending % occupied
88.9
%
 
89.8
%
 
 
Quarterly average % occupied
89.7
%
 
90.1
%
 
 
 
 
 
 
 
 
Multifamily Statistics
 
 
 
 
 
Number of properties
9

 
9

 
 
Number of units
2,640

 
2,640

 
 
Ending % leased
99.5
%
 
99.6
%
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
% Favorable
 
 
 
2018
 
2017
 
(Unfavorable)
 
 
Net Operating Income (NOI)(1)
 
 
 
 
 
 
 
Office revenues
$
121,031

 
$
117,293

 
3.2
 %
 
 
Office expenses
(40,000
)
 
(38,239
)
 
(4.6
)%
 
 
Office NOI
81,031

 
79,054

 
2.5
 %
 
 
 
 
 
 
 
 
 
 
Multifamily revenues 
20,845

 
20,499

 
1.7
 %
 
 
Multifamily expenses
(5,330
)
 
(4,903
)
 
(8.7
)%
 
 
Multifamily NOI
15,515

 
15,596

 
(0.5
)%
 
 
 
 
 
 
 
 
 
 
Total NOI
$
96,546

 
$
94,650

 
2.0
 %
 
 
 
 
 
 
 
 
 
 
Cash Net Operating Income (NOI)(1)
 
 
 
 
 
 
 
Office cash revenues
$
117,788

 
$
114,656

 
2.7
 %
 
 
Office cash expenses
(40,013
)
 
(38,252
)
 
(4.6
)%
 
 
Office cash NOI
77,775

 
76,404

 
1.8
 %
 
 
 
 
 
 
 
 
 
 
Multifamily cash revenues
20,839

 
20,489

 
1.7
 %
 
 
Multifamily cash expenses
(5,330
)
 
(4,903
)
 
(8.7
)%
 
 
Multifamily cash NOI
15,509

 
15,586

 
(0.5
)%
 
 
 
 
 
 
 
 
 
 
Total Cash NOI
$
93,284

 
$
91,990

 
1.4
 %
 
 
 
 
 
 
 
 
 
_________________________________________________
(1)
See page 10 for a reconciliation to net income attributable to common stockholders.




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

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Financial Results

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

 
Three Months Ended March 31,
 
2018
 
2017
 
 
 
 
Same property office cash revenues
$
117,788

 
$
114,656

Non cash adjustments per definition of NOI
3,243

 
2,637

Same property office revenues
121,031

 
117,293

 
 
 
 
Same property office cash expenses
(40,013
)
 
(38,252
)
Non cash adjustments per definition of NOI
13

 
13

Same property office expenses
(40,000
)
 
(38,239
)
 
 
 
 
Office NOI
81,031

 
79,054

 
 
 
 
Same property multifamily cash revenues
20,839

 
20,489

Non cash adjustments per definition of NOI
6

 
10

Same property multifamily revenues
20,845

 
20,499

 
 
 
 
Same property multifamily expenses
(5,330
)
 
(4,903
)
 
 
 
 
Multifamily NOI
15,515

 
15,596

 
 
 
 
Same Property NOI
96,546

 
94,650

Non-comparable office revenues
66,302

 
53,055

Non-comparable office expenses
(20,356
)
 
(16,646
)
Non-comparable multifamily revenues
4,069

 
3,634

Non-comparable multifamily expenses
(1,368
)
 
(1,044
)
NOI
145,193

 
133,649

General and administrative
(9,567
)
 
(10,156
)
Depreciation and amortization
(72,498
)
 
(67,374
)
Operating income
63,128

 
56,119

Other income
2,630

 
2,162

Other expenses
(1,733
)
 
(1,724
)
Income, including depreciation, from unconsolidated real estate funds
1,506

 
2,177

Interest expense
(32,900
)
 
(36,954
)
Net income
32,631

 
21,780

Less: Net income attributable to noncontrolling interests
(4,425
)
 
(2,731
)
Net income attributable to common stockholders
$
28,206

 
$
19,049










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

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Financial Results


Financial Data for Joint Ventures & Funds
(Unaudited, in thousands)

 
Three Months ended March 31, 2018
 
 
 
 
 
 
 
Wholly-Owned Properties
 
Consolidated Joint Ventures(1)
 
Unconsolidated Funds(2)
 
 
 
 
 
 
Revenues
$
171,815

 
$
40,432

 
$
19,146

Office and multifamily operating expenses
$
54,507

 
$
12,547

 
$
6,273

Straight-line rent
$
2,808

 
$
2,364

 
$
401

Above/below-market lease revenue
$
1,790

 
$
4,362

 
$
2

Cash NOI attributable to outside interests(3)
$

 
$
14,129

 
$
5,060

Our share of cash NOI(4)
$
112,710

 
$
7,030

 
$
7,410

______________________________________________________
(1)
Represents stand-alone financial data (with property management fees excluded from operating expenses as a consolidating entry) for three consolidated joint ventures ("JVs") which we manage and in which we own a weighted average interest of approximately 28% based on square footage. The JVs own a combined ten Class A office properties totaling 2.8 million square feet 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 three unconsolidated Funds which we manage and in which we own a weighted average interest of approximately 60.0% based on square footage. The Funds own a combined eight Class A office properties totaling 1.8 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.

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Financial Results

 
Outstanding Loans
(As of March 31, 2018, unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maturity Date(1)
 
Principal Balance
(In Thousands)
 
Our Share(2)
(In Thousands)
 
Effective Rate(3)
 
Swap Maturity Date
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Wholly-Owned Subsidiaries
 
 
 
 
 
 
 
 
 
 
 
 
 
10/1/2019
 
$
145,000

 
$
145,000

 
LIBOR + 1.25%
 
N/A
 
 
4/15/2022
 
340,000

 
340,000

 
2.77%
 
4/1/2020
 
 
7/27/2022
 
180,000

 
180,000

 
3.06%
 
7/1/2020
 
 
11/1/2022
 
400,000

 
400,000

 
2.64%
 
11/1/2020
 
 
6/23/2023
 
360,000

 
360,000

 
2.57%
 
7/1/2021
 
 
12/23/2023
 
220,000

 
220,000

 
3.62%
 
12/23/2021
 
 
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

 
2.84%
 
3/1/2020
 
 
12/1/2025
 
115,000

 
115,000

 
2.76%
 
12/1/2020
 
 
6/1/2027
 
550,000

 
550,000

 
3.16%
 
6/1/2022
 
 
6/1/2038
(4) 
32,100

 
32,100

 
4.55%
 
N/A
 
 
8/21/2020
(5) 
75,000

 
75,000

 
LIBOR + 1.40%
 
N/A
 
 
Subtotal
 
3,154,500

 
3,154,500

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Joint Ventures
 
 
 
 
 
 
 
 
 
 
 
 
 
2/28/2023
 
580,000

 
174,000

 
2.37%
 
3/1/2021
 
 
12/20/2024
 
400,000

 
80,000

 
3.47%
 
1/1/2023
 
 
Total Consolidated Loans
(6) 
$
4,134,500

 
$
3,408,500

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated Funds
 
 
 
 
 
 
 
 
 
 
 
 
 
3/1/2023
 
$
110,000

 
$
26,762

 
2.30%
 
3/1/2021
 
 
7/1/2024
 
400,000

 
277,692

 
3.44%
 
7/1/2022
 
 
Total Unconsolidated Loans
 
$
510,000

 
$
304,454

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Loans
 
 
 
$
3,712,954

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
________________________________________________________________________
Except as noted below, each loan (including our revolving credit facility) is non-recourse and secured by one or more separate collateral pools consisting of one or more properties, and requires interest-only monthly payments with the outstanding principal due upon maturity.
(1)
Maturity dates include the effect of extension options.
(2)
"Our Share" is a non GAAP measure calculated by multiplying the principal balance by our share of the borrowing entity's equity.
(3)
Includes the effect of interest rate swaps and excludes the effect of prepaid loan costs.
(4)
Requires monthly payments of principal and interest. Principal amortization is based upon a 30-year amortization schedule.
(5)
$400 million revolving credit facility. Unused commitment fees range from 0.15% to 0.20%.
(6)
Our consolidated debt on the balance sheet of $4.10 billion is calculated by adding $4.1 million of unamortized loan premium and deducting $39.7 million of unamortized deferred loan costs from our total consolidated loans of $4.13 billion.

 
 
 
 
 
Statistics for Consolidated Loans with interest fixed under the terms of the loan or a swap
 
 
 
 
 
 
Principal balance (in billions)
$3.91
 
 
Weighted average remaining life (including extension options)
6.1 years
 
 
Weighted average remaining fixed interest period
3.4 years
 
 
Weighted average annual interest rate
3.07%
 
 
 
 
 
NOTE:  See the "Definitions" section for definitions of certain terms used in this Earnings Package.

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Portfolio Data


Office Portfolio Summary
Total Office Portfolio as of March 31, 2018

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Submarket
 
Number of Properties
 
Rentable Square
Feet
 
Percent of Square Feet of Our Total Portfolio
 
Submarket Rentable Square Feet(1)
 
Our Market Share in Submarket(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beverly Hills(3)
 
11

 
2,190,910

 
11.9
%
 
6,994,166
 
28.2
%
 
 
Brentwood
 
15

 
2,061,469

 
11.2

 
3,318,103
 
62.1

 
 
Burbank
 
1

 
456,205

 
2.5

 
7,060,975
 
6.5

 
 
Century City
 
3

 
948,362

 
5.1

 
10,039,688
 
9.4

 
 
Honolulu
 
4

 
1,752,753

 
9.5

 
5,088,599
 
34.4

 
 
Olympic Corridor
 
5

 
1,139,058

 
6.2

 
3,443,438
 
33.1

 
 
Santa Monica
 
11

 
1,426,080

 
7.7

 
9,692,458
 
14.7

 
 
Sherman Oaks/Encino
 
12

 
3,477,302

 
18.9

 
6,357,769
 
54.7

 
 
Warner Center/Woodland Hills
 
3

 
2,829,802

 
15.4

 
7,781,317
 
36.4

 
 
Westwood
 
6

 
2,126,962

 
11.6

 
4,044,774
 
52.6

 
 
Total / Weighted Average
 
71

 
18,408,903

 
100.0
%
 
63,821,287
 
28.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
_______________________________________________________
(1)
Source is the 2018 first quarter CBRE Marketview report. Changes from last quarter are due to adjustments made by CBRE with respect to existing buildings, not new construction.
(2)
Calculated by dividing Rentable Square Feet by the applicable Submarket Rentable Square Feet.
(3)
Includes a 216,000 square foot property located just outside the Beverly Hills city limits. To calculate our percentage of the submarket, we have eliminated the property from the numerator and the denominator for consistency with third party data.




































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

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Portfolio Data

 
Office Percentage Leased and In-Place Rents
Total Office Portfolio as of March 31, 2018
Annualized Rent by Submarket
 
393396381_chart-9cd4a5f0079459b389ca01.jpg
 
 
 
 
 
 
 
 
 
 
 
Submarket
Percent
Leased(1)
 
Annualized Rent(2)
 
Annualized Rent Per Leased Square Foot(2)
 
Monthly Rent Per Leased Square Foot(2)
 
 
 
 
 
 
 
 
 
 
 
 
Beverly Hills
94.6
%
 
$
97,015,743

 
$
49.02

 
$
4.08

 
 
Brentwood
90.1

 
77,443,238

 
42.83

 
3.57

 
 
Burbank
100.0

 
21,819,057

 
47.83

 
3.99

 
 
Century City
94.7

 
39,235,775

 
46.05

 
3.84

 
 
Honolulu
87.6

 
49,121,915

 
33.34

 
2.78

 
 
Olympic Corridor
93.1

 
36,878,637

 
36.85

 
3.07

 
 
Santa Monica
97.9

 
87,036,868

 
67.52

 
5.63

 
 
Sherman Oaks/Encino
88.9

 
105,418,367

 
35.92

 
2.99

 
 
Warner Center/Woodland Hills
84.3

 
66,172,797

 
28.86

 
2.40

 
 
Westwood
90.0

 
87,010,201

 
47.72

 
3.98

 
 
Total / Weighted Average
90.5
%
 
$
667,152,598

 
41.93

 
3.49

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recurring Office Capital Expenditures per Rentable Square Foot
 
 
 
 
Three Months Ended March 31, 2018
 
$
0.04

 
 
 
 
 
 
 
 
 
 
 
_______________________________________________________________
(1)
Includes 356,614 square feet with respect to signed leases not yet commenced at March 31, 2018.
(2)
Excludes signed leases not yet commenced at March 31, 2018.


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

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Portfolio Data


Office Lease Diversification
Total Office Portfolio as of March 31, 2018
393396381_capturea07.jpg
 
 
 
 
 
 
 
Portfolio Tenant Size
 
 
 
Median
 
Average
 
 
 
 
 
 
 
 
Square feet
2,500
 
5,400
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Leases
 
Rentable Square Feet
 
Annualized Rent
 
 
Square Feet Under Lease
 
Number
 
Percent
 
Amount
 
Percent
 
Amount
 
Percent
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,500 or less
 
1,457

 
49.7
%
 
2,002,979

 
12.6
%
 
$
82,570,824

 
12.4
%
 
 
2,501-10,000
 
1,111

 
37.9

 
5,450,766

 
34.3

 
224,976,735

 
33.7

 
 
10,001-20,000
 
233

 
7.9

 
3,196,147

 
20.1

 
132,666,046

 
19.9

 
 
20,001-40,000
 
101

 
3.4

 
2,788,156

 
17.5

 
114,695,595

 
17.2

 
 
40,001-100,000
 
29

 
1.0

 
1,579,837

 
9.9

 
72,426,123

 
10.8

 
 
Greater than 100,000
 
4

 
0.1

 
892,091

 
5.6

 
39,817,275

 
6.0

 
 
Total for all leases
 
2,935

 
100.0
%
 
15,909,976

 
100.0
%
 
$
667,152,598

 
100.0
%
 
 
 
 
 
 
 








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

15                     Go to Table of Contents

393396381_bluelogo_headeraa01.jpg
 
Portfolio Data

Largest Office Tenants
Total Office Portfolio as of March 31, 2018

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

 
2020-2024
 
468,775

 
2.5
%
 
$
22,253,664

 
3.3
%
 
 
UCLA(3)
 
26

 
11

 
2018-2027
 
272,677

 
1.5

 
13,233,802

 
2.0

 
 
William Morris Endeavor(4)
 
1

 
1

 
2027
 
196,204

 
1.1

 
10,737,982

 
1.6

 
 
Morgan Stanley(5)
 
5

 
5

 
2022-2027
 
144,848

 
0.8

 
8,366,695

 
1.3

 
 
Equinox Fitness(6)
 
5

 
5

 
2019-2033
 
180,087

 
1.0

 
7,330,864

 
1.1

 
 
Total
 
40

 
25

 
 
 
1,262,591

 
6.9
%
 
$
61,923,007

 
9.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
______________________________________________________
(1)
Expiration dates are per lease (expiration dates do not reflect storage and similar leases).
(2)
Square footage expires as follows: 2,000 square feet in 2020, 11,000 square feet in 2021, and 456,000 square feet in 2024.
(3)
Square footage expires as follows: 14,000 square feet in 2018, 13,000 square feet in 2019, 43,000 square feet in 2020, 41,000 square feet in 2021, 55,000 square feet in 2022, 40,000 square feet in 2023, and 67,000 square feet in 2027. Tenant has options to terminate 31,000 square feet in 2020, 15,000 square feet in 2023, and 51,000 square feet in 2025.
(4)
Tenant has an option to terminate 2,000 square feet in 2020 and 193,000 square feet in 2022.
(5)
Square footage expires as follows: 15,000 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 16,000 square feet in 2024.
(6)
Square footage expires as follows: 33,000 square feet in 2019, 42,000 square feet in 2020, 31,000 square feet in 2027, 44,000 square feet in 2028, 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

393396381_bluelogo_headeraa01.jpg
 
Portfolio Data

 
Office Industry Diversification
Total Office Portfolio as of March 31, 2018

Percentage of Annualized Rent by Tenant Industry
393396381_chart-35bd6a47e05152b7be6a01.jpg
 
 
 
 
 
 
 
 
Industry
 
Number of Leases
 
Annualized Rent as a Percent of Total
 
 
 
 
 
 
 
 
 
Legal
 
579

 
18.4
%
 
 
Financial Services
 
387

 
14.7

 
 
Entertainment
 
204

 
12.8

 
 
Real Estate
 
286

 
10.9

 
 
Accounting & Consulting
 
372

 
10.7

 
 
Health Services
 
375

 
7.5

 
 
Retail
 
198

 
6.0

 
 
Technology
 
123

 
4.9

 
 
Insurance
 
107

 
4.3

 
 
Educational Services
 
52

 
3.3

 
 
Public Administration
 
91

 
2.5

 
 
Advertising
 
65

 
1.8

 
 
Manufacturing & Distribution
 
47

 
1.1

 
 
Other
 
49

 
1.1

 
 
Total
 
2,935

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

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Portfolio Data

Office Lease Expirations
Total Office Portfolio as of March 31, 2018
393396381_chart-f5e24e8e94b458be97ca01.jpg
(1) Average of the percentage of leases expiring at March 31, 2015, 2016, and 2017 with the same remaining duration as the leases for the labeled year had at March 31, 2018. 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, 2018
 
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
 
78

 
229,392

 
1.2
%
 
$
8,282,547

 
1.2
%
 
$
36.11

 
$
36.16

 
 
2018
 
405

 
1,332,705

 
7.2

 
55,297,385

 
8.3

 
41.49

 
41.92

 
 
2019
 
549

 
2,059,812

 
11.2

 
81,197,795

 
12.2

 
39.42

 
40.87

 
 
2020
 
589

 
2,598,053

 
14.1

 
104,881,833

 
15.7

 
40.37

 
42.97

 
 
2021
 
441

 
2,340,947

 
12.7

 
96,608,977

 
14.5

 
41.27

 
45.26

 
 
2022
 
342

 
1,817,471

 
9.9

 
73,867,941

 
11.1

 
40.64

 
46.38

 
 
2023
 
227

 
1,777,352

 
9.6

 
76,249,450

 
11.4

 
42.90

 
51.94

 
 
2024
 
116

 
1,448,691

 
7.9

 
63,115,140

 
9.5

 
43.57

 
52.82

 
 
2025
 
70

 
674,671

 
3.7

 
30,728,982

 
4.6

 
45.55

 
58.31

 
 
2026
 
37

 
452,361

 
2.5

 
20,996,270

 
3.1

 
46.41

 
59.91

 
 
2027
 
54

 
852,248

 
4.6

 
39,456,589

 
5.9

 
46.30

 
61.46

 
 
Thereafter
 
27

 
326,273

 
1.8

 
16,469,689

 
2.5

 
50.48

 
69.84

 
 
Subtotal/weighted average
 
2,935

 
15,909,976

 
86.4
%
 
$
667,152,598

 
100.0
%
 
41.93

 
47.81

 
 
Signed leases not commenced
 
356,614

 
1.9

 
 
 
 
 
 
 
 
 
 
Available
 
1,740,847

 
9.5

 
 
 
 
 
 
 
 
 
 
Building management use
 
123,271

 
0.7

 
 
 
 
 
 
 
 
 
 
BOMA adjustment(3)
 
 
 
278,195

 
1.5

 
 
 
 
 
 
 
 
 
 
Total/weighted average
 
2,935

 
18,408,903

 
100.0
%
 
$
667,152,598

 
100.0
%
 
$
41.93

 
$
47.81

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
___________________________________________________
(1)
Represents annualized rent at March 31, 2018 divided by leased square feet.
(2)
Represents annualized rent at expiration divided by leased square feet.
(3)
Represents the square footage adjustments for leases that do not reflect BOMA remeasurement.
NOTE:  See the "Definitions" section for definitions of certain terms used in this Earnings Package.

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Portfolio Data


Office Lease Expirations - Next Four Quarters
Total Office Portfolio as of March 31, 2018

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q2 2018
 
Q3 2018
 
Q4 2018
 
Q1 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Expiring Square Feet(1)
 
320,908
 
411,398
 
600,399
 
518,795
 
 
Percentage of Portfolio
 
1.7
%
 
2.2
%
 
3.3
%
 
2.8
%