Toggle SGML Header (+)


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)
July 31, 2018

394447159_deiblacklogoaa02.jpg

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 July 31, 2018, Douglas Emmett, Inc. released its financial results for the quarter ended June 30, 2018 by posting to its website its Second 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    Second Quarter 2018 Earnings Results and Operating 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:
July 31, 2018
By:
/s/ MONA M. GISLER
 
 
 
Mona M. Gisler
 
 
 
Chief Financial Officer



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
394447159_a2018investorrelationscover2.jpg


394447159_bluelogo_headeraa02.jpg
 
 



Executive Summary


We own and operate 18.4 million square feet of Class A office properties and 3,522 apartment units (excluding our residential development pipeline) in the premier coastal submarkets of Los Angeles and Honolulu.
Financial Results: For the three months ended June 30, 2018 compared to three months ended June 30, 2017:
Revenues increased by 9.9% to $219.5 million.
Net income attributable to common stockholders increased by 56.5% to $31.7 million.
FFO increased by 18.7% to $100.8 million, or $0.51 per fully diluted share.
AFFO increased by 12.0% to $76.0 million.
Same property Cash NOI increased by 5.3% to $98.0 million, which brings the average growth for the first half of the year in line with our full year guidance range.
Office: We signed 929,000 square feet of office leases during the second quarter, including a record 410,000 square feet of new office leases. Our total office portfolio leased rate increased by 120 basis points to 91.7%, and the occupancy rate increased by 30 basis points to 88.9%. Comparing office leases we signed during the second quarter to the expiring leases covering the same space, straight-line rents increased by 28.1% and starting cash rents increased by 11.6%.
Multifamily: The leased rate for our multifamily portfolio increased by 80 basis points to 99.7%, helped by a 150 basis point increase in the leased rate for our Honolulu multifamily properties to 99.5%. Residential expenses rose 10.7% compared to last year, reflecting higher payroll and utility costs as well as some timing issues. We made a significant payroll adjustment toward the end of last year in response to upcoming minimum wage increases mandated by Los Angeles. Although that significant adjustment will continue to impact comparisons to last year, future payroll increases should track general wage inflation.
Development: Our two multifamily development projects remain on schedule and on budget. We are continuing with construction at our 376 unit apartment tower in Brentwood. At our Moanalua apartment development in Honolulu, we ended the quarter with a total of 194 new units leased, and we expect to complete that project, including 475 net new units, a new fitness center and the upgrade of our existing units, around the end of this year. See page 22 for more information.
Debt: With the exception of a loan on our development project at Moanalua, our next term loan maturity is approximately four years away in 2022. We also have a large number of unencumbered properties that provide flexibility for future financings.
Dividends: On July 13, 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 June 29, 2018.
Guidance: We are narrowing our 2018 full year guidance for Net Income Per Common Share - Diluted to $0.67 to $0.71 and for FFO to $1.99 to $2.03 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.

1                     Go to Table of Contents

394447159_bluelogo_headeraa02.jpg
 
 


Table of Contents
COMPANY OVERVIEW
 
 
 
 
FINANCIAL RESULTS
 
 
 
 
PORTFOLIO DATA
 
 
 
 
               GUIDANCE
 
 
 
 
               DEFINITIONS

Forward Looking Statements
This Second 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.

2

394447159_bluelogo_headeraa02.jpg
 
Company Overview


Corporate Data
as of June 30, 2018

 
Office Portfolio
 
 
 
 
 
 
 
 
 
Consolidated
 
Total
 
 
Properties
63

 
71

 
 
Rentable square feet (in thousands)
16,583

 
18,418

 
 
Leased rate
91.6
%
 
91.7
%
 
 
Occupancy rate
88.9
%
 
88.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Multifamily Portfolio
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
 
Properties
 
 
10

 
 
Units
 
 
3,522

 
 
Leased rate
 
 
99.7
%
 
 
 
 
 
 
 

 
Market Capitalization (in thousands, except price per share)
 
 
 
 
 
 
 
Fully diluted shares outstanding as of June 30, 2018
 
198,047

 
 
Common stock closing price per share (NYSE:DEI)
 
$
40.18

 
 
Equity capitalization
 
$
7,957,533

 
 
 
 
 
 

 
Net Debt (in thousands)(1)
 
 
 
 
 
 
 
 
 
Consolidated
 
Our Share
 
 
 
 
 
 
 
 
$
4,140,329

 
$
3,718,783

 
 
Less: cash and cash equivalents
(170,391
)
 
(75,478
)
 
 
Net debt
$
3,969,938

 
$
3,643,305

 
 
 
 
 
 
 

 
Leverage Ratio (in thousands, except percentage)
 
 
 
 
 
 
 
Pro forma enterprise value
 
$
11,600,838

 
 
Our share of net debt to pro forma enterprise value
 
31
%
 
 
 
 
 
 

 
AFFO Payout Ratio
 
 
 
 
 
 
 
Three Months Ended June 30, 2018
 
65.3
%
 
 
 
 
 
 
_______________________________________
(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.

3                     Go to Table of Contents

394447159_bluelogo_headeraa02.jpg
 
Company Overview


Property Map
as of June 30, 2018
394447159_adeipropertymap2017q4a02.jpg

4                     Go to Table of Contents

394447159_bluelogo_headeraa02.jpg
 
Company Overview


Board of Directors and Executive Officers
as of June 30, 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
[email protected]

5                     Go to Table of Contents

394447159_bluelogo_headeraa02.jpg
 
Financial Results


Consolidated Balance Sheets
(In thousands)

 
June 30, 2018
 
December 31, 2017
 
 
 
 
 
Unaudited
 
 
Assets
 

 
 

Investment in real estate:
 

 
 

Land
$
1,064,189

 
$
1,062,345

Buildings and improvements
7,945,119

 
7,886,201

Tenant improvements and lease intangibles
802,868

 
756,190

Property under development
111,760

 
124,472

Investment in real estate, gross
9,923,936

 
9,829,208

Less: accumulated depreciation and amortization
(2,136,480
)
 
(2,012,752
)
Investment in real estate, net
7,787,456

 
7,816,456

Cash and cash equivalents
170,391

 
176,645

Tenant receivables, net
3,261

 
2,980

Deferred rent receivables, net
115,211

 
106,021

Acquired lease intangible assets, net
3,741

 
4,293

Interest rate contract assets
116,090

 
60,069

Investment in unconsolidated real estate funds
109,835

 
107,735

Other assets
11,999

 
18,442

Total assets
$
8,317,984

 
$
8,292,641

 
 
 
 
Liabilities
 
 
 

Secured notes payable and revolving credit facility, net
$
4,106,495

 
$
4,117,390

Interest payable, accounts payable and deferred revenue
125,419

 
103,947

Security deposits
50,509

 
50,414

Acquired lease intangible liabilities, net
62,789

 
75,635

Interest rate contract liabilities

 
807

Dividends payable
42,486

 
42,399

Total liabilities
4,387,698

 
4,390,592

 
 
 
 
Equity
 
 
 

Douglas Emmett, Inc. stockholders' equity:
 
 
 

Common stock
1,699

 
1,696

Additional paid-in capital
3,277,643

 
3,272,539

Accumulated other comprehensive income
87,486

 
43,099

Accumulated deficit
(905,085
)
 
(879,810
)
Total Douglas Emmett, Inc. stockholders' equity
2,461,743

 
2,437,524

Noncontrolling interests
1,468,543

 
1,464,525

Total equity
3,930,286

 
3,902,049

Total liabilities and equity
$
8,317,984

 
$
8,292,641






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

6                     Go to Table of Contents

394447159_bluelogo_headeraa02.jpg
 
Financial Results


Consolidated Operating Results
(Unaudited; in thousands, except per share data)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
Revenues
 

 
 

 
 

 
 

Office rental
 

 
 

 
 

 
 

Rental revenues
$
150,161

 
$
135,665

 
$
297,932

 
$
268,681

Tenant recoveries
14,654

 
12,801

 
25,707

 
23,851

Parking and other income
28,946

 
27,076

 
57,455

 
53,358

Total office revenues
193,761

 
175,542

 
381,094

 
345,890

 
 
 
 
 
 
 
 
Multifamily rental
 
 
 
 
 
 
 
Rental revenues
23,655

 
22,237

 
46,716

 
44,478

Parking and other income
2,053

 
1,853

 
3,906

 
3,745

Total multifamily revenues
25,708

 
24,090

 
50,622

 
48,223

 
 
 
 
 
 
 
 
Total revenues
219,469

 
199,632

 
431,716

 
394,113

 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
Office expenses
61,818

 
57,887

 
122,174

 
112,772

Multifamily expenses
6,908

 
5,878

 
13,606

 
11,825

General and administrative
9,437

 
8,592

 
19,004

 
18,748

Depreciation and amortization
73,379

 
68,793

 
145,877

 
136,167

Total operating expenses
151,542

 
141,150

 
300,661

 
279,512

 
 
 
 
 
 
 
 
Operating income
67,927

 
58,482

 
131,055

 
114,601

 
 
 
 
 
 
 
 
Other income
2,792

 
2,331

 
5,422

 
4,493

Other expenses
(2,086
)
 
(1,773
)
 
(3,819
)
 
(3,497
)
Income, including depreciation, from unconsolidated funds
1,668

 
1,113

 
3,174

 
3,290

Interest expense
(33,268
)
 
(38,000
)
 
(66,168
)
 
(74,954
)
Net income
37,033

 
22,153

 
69,664

 
43,933

Less:  Net income attributable to noncontrolling interests
(5,349
)
 
(1,909
)
 
(9,774
)
 
(4,640
)
Net income attributable to common stockholders
$
31,684

 
$
20,244

 
$
59,890

 
$
39,293

 
 
 
 
 
 
 
 
Net income per common share - basic
$
0.19

 
$
0.13

 
$
0.35

 
$
0.25

Net income per common share - diluted
$
0.19

 
$
0.13

 
$
0.35

 
$
0.25

 
 
 
 
 
 
 
 
Weighted average shares of common stock outstanding - basic
169,916

 
155,898

 
169,759

 
154,203

Weighted average shares of common stock outstanding - diluted
169,926

 
155,952

 
169,776

 
154,810





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

7                     Go to Table of Contents

394447159_bluelogo_headeraa02.jpg
 
Financial Results


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

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Funds From Operations (FFO)
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
31,684

 
$
20,244

 
$
59,890

 
$
39,293

Depreciation and amortization of real estate assets
73,379

 
68,793

 
145,877

 
136,167

Net income attributable to noncontrolling interests
5,349

 
1,909

 
9,774

 
4,640

Adjustments attributable to unconsolidated funds(2)
4,052

 
4,020

 
8,149

 
8,056

 Adjustments attributable to consolidated joint ventures(2)
(13,670
)
 
(10,044
)
 
(26,912
)
 
(19,565
)
FFO
$
100,794

 
$
84,922

 
$
196,778

 
$
168,591

 
 
 
 
 
 
 
 
Adjusted Funds From Operations (AFFO)
 
 
 
 
 
 
 
FFO
$
100,794

 
$
84,922

 
$
196,778

 
$
168,591

Straight-line rent
(4,019
)
 
(2,442
)
 
(9,191
)
 
(6,030
)
Net accretion of acquired above- and below-market leases
(6,143
)
 
(4,284
)
 
(12,295
)
 
(8,476
)
Loan costs
1,868

 
2,812

 
4,177

 
4,923

Recurring capital expenditures, tenant improvements and leasing expenses
(24,148
)
 
(19,732
)
 
(47,415
)
 
(34,196
)
Non-cash compensation expense
4,923

 
4,454

 
9,982

 
9,013

Adjustments attributable to unconsolidated funds(2)
(1,881
)
 
(1,181
)
 
(4,267
)
 
(2,512
)
Adjustments attributable to consolidated joint ventures(2)
4,558

 
3,249

 
9,176

 
6,232

AFFO
$
75,952

 
$
67,798

 
$
146,945

 
$
137,545

 
 
 
 
 
 
 
 
Weighted average shares of common stock outstanding - diluted
169,926

 
155,952

 
169,776

 
154,810

Weighted average units in our operating partnership outstanding
28,053

 
25,782

 
28,158

 
25,904

Weighted average fully diluted shares outstanding
197,979

 
181,734

 
197,934

 
180,714

 
 
 
 
 
 
 
 
Net income per common share - diluted
$
0.19

 
$
0.13

 
$
0.35

 
$
0.25

FFO per share - fully diluted
$
0.51

 
$
0.47

 
$
0.99

 
$
0.93

Dividends declared per share
$
0.25

 
$
0.23

 
$
0.50

 
$
0.46

______________________________________________
(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.

8                     Go to Table of Contents

394447159_bluelogo_headeraa02.jpg
 
Financial Results


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

 
 
 
 
 
 
 
 
As of June 30,
 
 
 
2018
 
2017
 
 
Office Statistics
 
 
 
 
 
Number of properties
47

 
47

 
 
Rentable square feet (in thousands)
11,782

 
11,738

 
 
Ending % leased
91.3
%
 
91.8
%
 
 
Ending % occupied
89.2
%
 
90.0
%
 
 
Quarterly average % occupied
89.0
%
 
89.9
%
 
 
 
 
 
 
 
 
Multifamily Statistics
 
 
 
 
 
Number of properties
9

 
9

 
 
Number of units
2,640

 
2,640

 
 
Ending % leased
99.8
%
 
99.4
%
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
% Favorable
 
 
 
2018
 
2017
 
(Unfavorable)
 
 
Net Operating Income (NOI)(1)
 
 
 
 
 
 
 
Office revenues
$
124,082

 
$
119,014

 
4.3
 %
 
 
Office expenses
(40,667
)
 
(39,531
)
 
(2.9
)%
 
 
Office NOI
83,415

 
79,483

 
4.9
 %
 
 
 
 
 
 
 
 
 
 
Multifamily revenues 
21,170

 
20,451

 
3.5
 %
 
 
Multifamily expenses
(5,341
)
 
(4,823
)
 
(10.7
)%
 
 
Multifamily NOI
15,829

 
15,628

 
1.3
 %
 
 
 
 
 
 
 
 
 
 
Total NOI
$
99,244

 
$
95,111

 
4.3
 %
 
 
 
 
 
 
 
 
 
 
Cash Net Operating Income (NOI)(1)
 
 
 
 
 
 
 
Office cash revenues
$
122,865

 
$
116,991

 
5.0
 %
 
 
Office cash expenses
(40,680
)
 
(39,544
)
 
(2.9
)%
 
 
Office cash NOI
82,185

 
77,447

 
6.1
 %
 
 
 
 
 
 
 
 
 
 
Multifamily cash revenues
21,164

 
20,442

 
3.5
 %
 
 
Multifamily cash expenses
(5,341
)
 
(4,823
)
 
(10.7
)%
 
 
Multifamily cash NOI
15,823

 
15,619

 
1.3
 %
 
 
 
 
 
 
 
 
 
 
Total Cash NOI
$
98,008

 
$
93,066

 
5.3
 %
 
 
 
 
 
 
 
 
 
_________________________________________________
(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.

9                     Go to Table of Contents

394447159_bluelogo_headeraa02.jpg
 
Financial Results

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


 
Three Months Ended June 30,
 
2018
 
2017
 
 
 
 
Same property office cash revenues
$
122,865

 
$
116,991

Non cash adjustments per definition of NOI
1,217

 
2,023

Same property office revenues
124,082

 
119,014

 
 
 
 
Same property office cash expenses
(40,680
)
 
(39,544
)
Non cash adjustments per definition of NOI
13

 
13

Same property office expenses
(40,667
)
 
(39,531
)
 
 
 
 
Office NOI
83,415

 
79,483

 
 
 
 
Same property multifamily cash revenues
21,164

 
20,442

Non cash adjustments per definition of NOI
6

 
9

Same property multifamily revenues
21,170

 
20,451

 
 
 
 
Same property multifamily expenses
(5,341
)
 
(4,823
)
 
 
 
 
Multifamily NOI
15,829

 
15,628

 
 
 
 
Same Property NOI
99,244

 
95,111

Non-comparable office revenues
69,679

 
56,528

Non-comparable office expenses
(21,151
)
 
(18,356
)
Non-comparable multifamily revenues
4,538

 
3,639

Non-comparable multifamily expenses
(1,567
)
 
(1,055
)
NOI
150,743

 
135,867

General and administrative
(9,437
)
 
(8,592
)
Depreciation and amortization
(73,379
)
 
(68,793
)
Operating income
67,927

 
58,482

Other income
2,792

 
2,331

Other expenses
(2,086
)
 
(1,773
)
Income, including depreciation, from unconsolidated real estate funds
1,668

 
1,113

Interest expense
(33,268
)
 
(38,000
)
Net income
37,033

 
22,153

Less: Net income attributable to noncontrolling interests
(5,349
)
 
(1,909
)
Net income attributable to common stockholders
$
31,684

 
$
20,244









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

10                     Go to Table of Contents

394447159_bluelogo_headeraa02.jpg
 
Financial Results


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

 
Three Months Ended June 30, 2018
 
 
 
 
 
 
 
Wholly-Owned Properties
 
Consolidated Joint Ventures(1)
 
Unconsolidated Funds(2)
 
 
 
 
 
 
Revenues
$
177,037

 
$
42,432

 
$
19,817

Office and multifamily operating expenses
$
55,442

 
$
13,284

 
$
6,614

Straight-line rent
$
2,331

 
$
1,688

 
$
457

Above/below-market lease revenue
$
1,549

 
$
4,594

 
$
(2
)
Cash NOI attributable to outside interests(3)
$

 
$
15,204

 
$
5,208

Our share of cash NOI(4)
$
117,715

 
$
7,662

 
$
7,540

 
 
 
 
 
 
 
Six Months Ended June 30, 2018
 
 
 
 
 
 
 
Wholly-Owned Properties
 
Consolidated Joint Ventures(1)
 
Unconsolidated Funds(2)
 
 
 
 
 
 
Revenues
$
348,852

 
$
82,864

 
$
38,963

Office and multifamily operating expenses
$
109,949

 
$
25,831

 
$
12,887

Straight-line rent
$
5,139

 
$
4,052

 
$
858

Above/below-market lease revenue
$
3,339

 
$
8,956

 
$

Cash NOI attributable to outside interests(3)
$

 
$
29,334

 
$
10,268

Our share of cash NOI(4)
$
230,425

 
$
14,691

 
$
14,950

______________________________________________________
(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.

11                     Go to Table of Contents

394447159_bluelogo_headeraa02.jpg
 
Financial Results

 
Outstanding Loans
(As of June 30, 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) 
31,929

 
31,929

 
4.55%
 
N/A
 
 
8/21/2020
(5) 
81,000

 
81,000

 
LIBOR + 1.40%
 
N/A
 
 
Subtotal
 
3,160,329

 
3,160,329

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Joint Ventures
 
 
 
 
 
 
 
 
 
 
 
 
 
2/28/2023
 
580,000

 
174,000

 
2.37%
 
3/1/2021
 
 
12/19/2024
 
400,000

 
80,000

 
3.47%
 
1/1/2023
 
 
Total Consolidated Loans
(6) 
$
4,140,329

 
$
3,414,329

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
 
 
$
3,718,783

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
________________________________________________________________________
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 $4.11 billion is calculated by adding $4.1 million of unamortized loan premium and deducting $37.9 million of unamortized deferred loan costs from our total consolidated loans of $4.14 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)
5.9 years
 
 
Weighted average remaining fixed interest period
3.2 years
 
 
Weighted average annual interest rate
3.07%
 
 
 
 
 
NOTE:  See the "Definitions" section for definitions of certain terms used in this Earnings Package.

12                     Go to Table of Contents

394447159_bluelogo_headeraa02.jpg
 
Portfolio Data


Office Portfolio Summary
Total Office Portfolio as of June 30, 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

 
2,193,157

 
11.9
%
 
7,089,250
 
27.9
%
 
 
Brentwood
 
15

 
2,063,758

 
11.2

 
3,328,103
 
62.0

 
 
Burbank
 
1

 
456,205

 
2.5

 
7,060,975
 
6.5

 
 
Century City
 
3

 
948,362

 
5.2

 
10,195,143
 
9.3

 
 
Honolulu
 
4

 
1,755,993

 
9.5

 
5,088,599
 
34.5

 
 
Olympic Corridor
 
5

 
1,139,058

 
6.2

 
3,458,794
 
32.9

 
 
Santa Monica
 
11

 
1,426,080

 
7.7

 
9,721,728
 
14.7

 
 
Sherman Oaks/Encino
 
12

 
3,478,899

 
18.9

 
6,528,253
 
53.3

 
 
Warner Center/Woodland Hills
 
3

 
2,829,802

 
15.4

 
7,665,927
 
36.9

 
 
Westwood
 
6

 
2,126,962

 
11.5

 
4,044,507
 
52.6

 
 
Total / Weighted Average
 
71

 
18,418,276

 
100.0
%
 
64,181,279
 
28.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
_______________________________________________________
(1)
Source is the 2018 second quarter CBRE Marketview report.
(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, the property is not included in the numerator or the denominator for consistency with third party data.
































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

13                     Go to Table of Contents

394447159_bluelogo_headeraa02.jpg
 
Portfolio Data

 
Office Percentage Leased and In-Place Rents
Total Office Portfolio as of June 30, 2018
Annualized Rent by Submarket
 
394447159_chart-cf0abb3286505e849ff.jpg
 
 
 
 
 
 
 
 
 
 
 
Submarket
Percent
Leased(1)
 
Annualized Rent(2)
 
Annualized Rent Per Leased Square Foot(2)
 
Monthly Rent Per Leased Square Foot(2)
 
 
 
 
 
 
 
 
 
 
 
 
Beverly Hills
96.2
%
 
$
97,306,151

 
$
49.38

 
$
4.12

 
 
Brentwood
90.4

 
78,286,871

 
43.27

 
3.61

 
 
Burbank
100.0

 
21,819,057

 
47.83

 
3.99

 
 
Century City
96.1

 
40,054,398

 
46.50

 
3.87

 
 
Honolulu
87.7

 
49,576,762

 
34.02

 
2.84

 
 
Olympic Corridor
93.3

 
37,489,256

 
37.33

 
3.11

 
 
Santa Monica
97.7

 
89,101,374

 
69.25

 
5.77

 
 
Sherman Oaks/Encino
90.6

 
108,410,494

 
36.05

 
3.00

 
 
Warner Center/Woodland Hills
86.3

 
66,711,206

 
28.95

 
2.41

 
 
Westwood
91.8

 
87,596,845

 
48.10

 
4.01

 
 
Total / Weighted Average
91.7
%
 
$
676,352,414

 
42.33

 
3.53

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recurring Office Capital Expenditures per Rentable Square Foot
 
 
 
 
Three Months ended June 30, 2018
 
$
0.06

 
 
Six Months Ended June 30, 2018
 
$
0.09

 
 
 
 
 
 
 
 
 
 
 
_______________________________________________________________
(1)
Includes 511,736 square feet with respect to signed leases not yet commenced at June 30, 2018.
(2)
Excludes signed leases not yet commenced at June 30, 2018.

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

14                     Go to Table of Contents

394447159_bluelogo_headeraa02.jpg
 
Portfolio Data


Office Lease Diversification
Total Office Portfolio as of June 30, 2018
394447159_capturea11.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
 
1,450

 
49.4
%
 
1,995,738

 
12.5
%
 
$
82,763,773

 
12.2
%
 
 
2,501-10,000
 
1,114

 
38.0

 
5,474,243

 
34.2

 
228,554,844

 
33.8

 
 
10,001-20,000
 
236

 
8.1

 
3,240,893

 
20.3

 
135,125,291

 
20.0

 
 
20,001-40,000
 
101

 
3.4

 
2,766,303

 
17.3

 
114,222,063

 
16.9

 
 
40,001-100,000
 
29

 
1.0

 
1,608,554

 
10.1

 
75,820,825

 
11.2

 
 
Greater than 100,000
 
4

 
0.1

 
892,091

 
5.6

 
39,865,618

 
5.9

 
 
Total for all leases
 
2,934

 
100.0
%
 
15,977,822

 
100.0
%
 
$
676,352,414

 
100.0
%
 
 
 
 
 
 
 





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

15                     Go to Table of Contents

394447159_bluelogo_headeraa02.jpg
 
Portfolio Data


Largest Office Tenants
Total Office Portfolio as of June 30, 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
 
287,327

 
1.5

 
14,036,693

 
2.1

 
 
William Morris Endeavor(4)
 
1

 
1

 
2027
 
196,204

 
1.1

 
10,678,421

 
1.6

 
 
Morgan Stanley(5)
 
5

 
5

 
2022-2027
 
144,848

 
0.8

 
8,406,763

 
1.2

 
 
Equinox Fitness(6)
 
5

 
5

 
2019-2033
 
180,087

 
1.0

 
7,390,981

 
1.1

 
 
Total
 
40

 
25

 
 
 
1,277,241

 
6.9
%
 
$
62,766,522

 
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: 13,000 square feet in 2018, 13,000 square feet in 2019, 43,000 square feet in 2020, 56,000 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

394447159_bluelogo_headeraa02.jpg
 
Portfolio Data

 
Office Industry Diversification
Total Office Portfolio as of June 30, 2018

Percentage of Annualized Rent by Tenant Industry
394447159_chart-33571e2234a651e995d.jpg
 
 
 
 
 
 
 
 
Industry
 
Number of Leases
 
Annualized Rent as a Percent of Total
 
 
 
 
 
 
 
 
 
Legal
 
572

 
18.1
%
 
 
Financial Services
 
385

 
14.7

 
 
Entertainment
 
203

 
12.8

 
 
Real Estate
 
290

 
11.2

 
 
Accounting & Consulting
 
371

 
10.4

 
 
Health Services
 
375

 
7.6

 
 
Retail
 
194

 
5.9

 
 
Technology
 
131

 
5.1

 
 
Insurance
 
108

 
4.2

 
 
Educational Services
 
53

 
3.5

 
 
Public Administration
 
93

 
2.5

 
 
Advertising
 
63

 
1.8

 
 
Manufacturing & Distribution
 
54

 
1.2

 
 
Other
 
42

 
1.0

 
 
Total
 
2,934

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

17                     Go to Table of Contents

394447159_bluelogo_headeraa02.jpg
 
Portfolio Data

Office Lease Expirations
Total Office Portfolio as of June 30, 2018
394447159_chart-68976575eb025a3f815.jpg
(1) Average of the percentage of leases expiring at June 30, 2015, 2016, and 2017 with the same remaining duration as the leases for the labeled year had at June 30, 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 June 30, 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
 
97

 
301,973

 
1.6
%
 
$
10,382,960

 
1.5
%
 
$
34.38

 
$
34.43

 
 
2018
 
238

 
780,267

 
4.2

 
32,171,621

 
4.8

 
41.23

 
41.56

 
 
2019
 
563

 
2,033,095

 
11.0

 
80,530,251

 
11.9