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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)
February 12, 2019

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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.)

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):
 
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 February 12, 2019, Douglas Emmett, Inc. released its financial results for the quarter ended December 31, 2018 by posting to its website its Fourth 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    Fourth 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:
February 12, 2019
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 18.5 million square feet of Class A office properties and 3,595 apartment units (excluding our residential development pipeline) in the premier coastal submarkets of Los Angeles and Honolulu.
Quarterly Results: Three months ended December 31, 2018 compared to three months ended December 31, 2017:
Revenues increased by 8.2% to $226.3 million.
Net income attributable to common stockholders decreased by 13.2% to $25.6 million.
FFO increased by 7.8% to $102.8 million, or $0.52 per fully diluted share.
AFFO increased by 5.5% to $80.3 million.
Same property Cash NOI increased by 3.1% to $99.1 million.
Annual Results: 2018 compared to 2017:
Revenues increased by 8.5% to $881.3 million.
Net income attributable to common stockholders increased by 22.9% to $116.1 million.
FFO increased by 12.7% to $399.7 million, or $2.02 per fully diluted share.
AFFO increased by 7.4% to $309.7 million.
Same property Cash NOI increased by 3.5% to $388.8 million.
Office: Our office portfolio ended 2018 at 91.7% leased, up 0.3% from the third quarter, and our occupancy rate increased to 90.3%, up 0.8% from the prior quarter. We signed over 680,000 square feet of leases during the fourth quarter. Comparing leases we signed during the fourth quarter to the expiring leases covering the same space, straight-line rents increased by 26.3% and starting cash rents increased by 12.7% compared to expiring cash rents.
Multifamily: Our multifamily portfolio remains fully leased at 99.0%.
Office to Residential Conversion Project: In downtown Honolulu, we are converting a 25 story, 490,000 square foot office tower into approximately 500 rental apartments, which will help address a severe shortage of rental housing and revitalize the central business district. We expect the conversion to occur in phases over a number of years as the office space is vacated, with construction costs currently estimated to be around $80 million to $100 million, although the inherent uncertainties of development in our markets is compounded by the multi-year and phased nature of the conversion. See page 22.
Development and Repositioning Projects: We’ve completed construction at our Moanalua apartment community, which now has almost 1,200 units. With the upgrades to our existing buildings and new amenities, this is now one of the most modern and desirable workforce housing communities in Hawaii. In Brentwood we are continuing with construction at our 376 unit apartment tower. See page 22. On the office repositioning front, in the next few months we will complete several of the projects we began in 2018, and we are moving forward with additional repositioning projects for 2019 where we believe that targeted capital will yield significant future returns.
Debt: With the exception of a loan on our development project at Moanalua, our next term loan maturity is approximately three years away in 2022. We also have a large number of unencumbered properties that provide flexibility for future financings.
Dividends: Commencing with our dividend paid on January 15, 2019, we increased our quarterly cash dividend by 4% to $0.26 per common share, or $1.04 on an annualized basis.
Guidance: We are initiating 2019 full year guidance for Net Income Per Common Share - Diluted of $0.73 to $0.79 and for FFO of $2.07 to $2.13 per fully diluted share. See page 23.

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 Fourth 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 December 31, 2018

 
Office Portfolio
 
 
 
 
 
 
 
 
 
Consolidated
 
Total
 
 
Properties
63

 
71

 
 
Rentable square feet (in thousands)
16,617

 
18,455

 
 
Leased rate
91.9
%
 
91.7
%
 
 
Occupancy rate
90.4
%
 
90.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Multifamily Portfolio
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
Properties
 
 
10

 
 
Units
 
 
3,595

 
 
Leased rate
 
 
99.0
%
 
 
 
 
 
 
 

 
Market Capitalization (in thousands, except price per share)
 
 
 
 
 
 
 
Fully diluted shares outstanding as of December 31, 2018
 
198,772

 
 
Common stock closing price per share (NYSE:DEI)
 
$
34.13

 
 
Equity capitalization
 
$
6,784,089

 
 
 
 
 
 

 
Net Debt (in thousands)(1)
 
 
 
 
 
 
 
 
 
Consolidated
 
Our Share
 
 
 
 
 
 
 
 
$
4,163,982

 
$
3,750,230

 
 
Less: cash and cash equivalents
(146,227
)
 
(69,364
)
 
 
Net debt
$
4,017,755

 
$
3,680,866

 
 
 
 
 
 
 

 
Leverage Ratio (in thousands, except percentage)
 
 
 
 
 
 
 
Pro forma enterprise value
 
$
10,464,956

 
 
Our share of net debt to pro forma enterprise value
 
35
%
 
 
 
 
 
 

 
AFFO Payout Ratio
 
 
 
 
 
 
 
Three Months Ended December 31, 2018
 
61.8
%
 
 
 
 
 
 
_______________________________________
(1)
See page 12 for details and a reconciliation of this non-GAAP measure 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 December 31, 2018
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Company Overview


Board of Directors and Executive Officers
as of January 31, 2019


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
Partner, Optum Ventures
Thomas E. O’Hern
Chief Executive Officer, Macerich
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
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
[email protected]

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Financial Results


Consolidated Balance Sheets
(In thousands)

 
December 31, 2018
 
December 31, 2017
 
 
 
 
 
Unaudited
 
 
Assets
 

 
 

Investment in real estate:
 

 
 

Land
$
1,065,099

 
$
1,062,345

Buildings and improvements
7,995,203

 
7,886,201

Tenant improvements and lease intangibles
840,653

 
756,190

Property under development
129,753

 
124,472

Investment in real estate, gross
10,030,708

 
9,829,208

Less: accumulated depreciation and amortization
(2,246,887
)
 
(2,012,752
)
Investment in real estate, net
7,783,821

 
7,816,456

Cash and cash equivalents
146,227

 
176,645

Tenant receivables, net
4,371

 
2,980

Deferred rent receivables, net
124,834

 
106,021

Acquired lease intangible assets, net
3,251

 
4,293

Interest rate contract assets
73,414

 
60,069

Investment in unconsolidated real estate funds
111,032

 
107,735

Other assets
14,759

 
18,442

Total assets
$
8,261,709

 
$
8,292,641

 
 
 
 
Liabilities
 
 
 

Secured notes payable and revolving credit facility, net
$
4,134,030

 
$
4,117,390

Interest payable, accounts payable and deferred revenue
130,154

 
103,947

Security deposits
50,733

 
50,414

Acquired lease intangible liabilities, net
52,569

 
75,635

Interest rate contract liabilities
1,530

 
807

Dividends payable
44,263

 
42,399

Total liabilities
4,413,279

 
4,390,592

 
 
 
 
Equity
 
 
 

Douglas Emmett, Inc. stockholders' equity:
 
 
 

Common stock
1,702

 
1,696

Additional paid-in capital
3,282,316

 
3,272,539

Accumulated other comprehensive income
53,944

 
43,099

Accumulated deficit
(935,630
)
 
(879,810
)
Total Douglas Emmett, Inc. stockholders' equity
2,402,332

 
2,437,524

Noncontrolling interests
1,446,098

 
1,464,525

Total equity
3,848,430

 
3,902,049

Total liabilities and equity
$
8,261,709

 
$
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 December 31,
 
Year Ended
December 31,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
Revenues
 

 
 

 
 

 
 

Office rental
 

 
 

 
 

 
 

Rental revenues and tenant recoveries
$
170,828

 
$
157,473

 
$
661,147

 
$
606,852

Parking and other income
28,955

 
27,565

 
116,784

 
108,694

Total office revenues
199,783

 
185,038

 
777,931

 
715,546

 
 
 
 
 
 
 
 
Multifamily rental
 
 
 
 
 
 
 
Rental revenues
24,466

 
22,279

 
95,423

 
89,039

Parking and other income
2,043

 
1,873

 
7,962

 
7,467

Total multifamily revenues
26,509

 
24,152

 
103,385

 
96,506

 
 
 
 
 
 
 
 
Total revenues
226,292

 
209,190

 
881,316

 
812,052

 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
Office expenses
64,289

 
58,393

 
252,751

 
233,633

Multifamily expenses
7,396

 
6,535

 
28,116

 
24,401

General and administrative
10,197

 
9,045

 
38,641

 
36,234

Depreciation and amortization
89,920

 
70,620

 
309,864

 
276,761

Total operating expenses
171,802

 
144,593

 
629,372

 
571,029

 
 
 
 
 
 
 
 
Operating income
54,490

 
64,597

 
251,944

 
241,023

 
 
 
 
 
 
 
 
Other income
3,041

 
2,560

 
11,414

 
9,712

Other expenses
(2,092
)
 
(1,881
)
 
(7,472
)
 
(7,037
)
Income, including depreciation, from unconsolidated funds
1,878

 
1,478

 
6,400

 
5,905

Interest expense
(33,513
)
 
(34,768
)
 
(133,402
)
 
(145,176
)
Demolition expenses
(272
)
 

 
(272
)
 

Net income
23,532

 
31,986

 
128,612

 
104,427

Less:  Net loss (income) attributable to noncontrolling interests
2,103

 
(2,450
)
 
(12,526
)
 
(9,984
)
Net income attributable to common stockholders
$
25,635

 
$
29,536

 
$
116,086

 
$
94,443

 
 
 
 
 
 
 
 
Net income per common share - basic
$
0.15

 
$
0.17

 
$
0.68

 
$
0.58

Net income per common share - diluted
$
0.15

 
$
0.17

 
$
0.68

 
$
0.58

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.26

 
$
0.25

 
$
1.01

 
$
0.94

 
 
 
 
 
 
 
 
Weighted average shares of common stock outstanding - basic
170,121

 
169,521

 
169,893

 
160,905

Weighted average shares of common stock outstanding - diluted
170,121

 
169,562

 
169,902

 
161,230


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 December 31,
 
Year Ended
December 31,
 
2018
 
2017
 
2018
 
2017
Funds From Operations (FFO)
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
25,635

 
$
29,536

 
$
116,086

 
$
94,443

Depreciation and amortization of real estate assets
89,920

 
70,620

 
309,864

 
276,761

Net (loss) income attributable to noncontrolling interests
(2,103
)
 
2,450

 
12,526

 
9,984

Adjustments attributable to unconsolidated funds(2)
4,320

 
4,080

 
16,702

 
16,220

 Adjustments attributable to consolidated joint ventures(2)
(14,964
)
 
(11,311
)
 
(55,448
)
 
(42,674
)
FFO
$
102,808

 
$
95,375

 
$
399,730

 
$
354,734

 
 
 
 
 
 
 
 
Adjusted Funds From Operations (AFFO)
 
 
 
 
 
 
 
FFO
$
102,808

 
$
95,375

 
$
399,730

 
$
354,734

Straight-line rent
(6,098
)
 
(3,843
)
 
(18,813
)
 
(12,855
)
Net accretion of acquired above- and below-market leases
(4,782
)
 
(4,716
)
 
(22,025
)
 
(18,006
)
Loan costs
1,956

 
4,000

 
8,087

 
11,443

Recurring capital expenditures, tenant improvements and leasing expenses
(22,918
)
 
(20,806
)
 
(88,461
)
 
(73,025
)
Non-cash compensation expense
7,392

 
4,998

 
22,298

 
18,461

Adjustments attributable to unconsolidated funds(2)
(1,701
)
 
(1,568
)
 
(7,422
)
 
(5,113
)
Adjustments attributable to consolidated joint ventures(2)
3,622

 
2,650

 
16,328

 
12,788

AFFO
$
80,279

 
$
76,090

 
$
309,722

 
$
288,427

 
 
 
 
 
 
 
 
Weighted average shares of common stock outstanding - diluted
170,121

 
169,562

 
169,902

 
161,230

Weighted average units in our operating partnership outstanding
28,142

 
25,836

 
28,154

 
25,796

Weighted average fully diluted shares outstanding
198,263

 
195,398

 
198,056

 
187,026

 
 
 
 
 
 
 
 
Net income per common share - diluted
$
0.15

 
$
0.17

 
$
0.68

 
$
0.58

FFO per share - fully diluted
$
0.52

 
$
0.49

 
$
2.02

 
$
1.90

Dividends paid per share(3)
$
0.25

 
$
0.23

 
$
1.00

 
$
0.92

______________________________________________
(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.
(3)
Reflects dividends paid within the respective quarters.



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 December 31,
 
 
 
2018
 
2017
 
 
Office Statistics
 
 
 
 
 
Number of properties
47

 
47

 
 
Rentable square feet (in thousands)
11,810

 
11,738

 
 
Ending % leased
91.5
%
 
91.8
%
 
 
Ending % occupied
90.4
%
 
90.5
%
 
 
Quarterly average % occupied
90.0
%
 
90.1
%
 
 
 
 
 
 
 
 
Multifamily Statistics
 
 
 
 
 
Number of properties
9

 
9

 
 
Number of units
2,640

 
2,640

 
 
Ending % leased
99.5
%
 
99.3
%
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
% Favorable
 
 
 
2018
 
2017
 
(Unfavorable)
 
 
Net Operating Income (NOI)(1)
 
 
 
 
 
 
 
Office revenues
$
129,990

 
$
121,393

 
7.1
 %
 
 
Office expenses
(42,193
)
 
(38,717
)
 
(9.0
)%
 
 
Office NOI
87,797

 
82,676

 
6.2
 %
 
 
 
 
 
 
 
 
 
 
Multifamily revenues 
21,298

 
20,514

 
3.8
 %
 
 
Multifamily expenses
(5,521
)
 
(5,271
)
 
(4.7
)%
 
 
Multifamily NOI
15,777

 
15,243

 
3.5
 %
 
 
 
 
 
 
 
 
 
 
Total NOI
$
103,574

 
$
97,919

 
5.8
 %
 
 
 
 
 
 
 
 
 
 
Cash Net Operating Income (NOI)(1)
 
 
 
 
 
 
 
Office cash revenues
$
125,507

 
$
119,603

 
4.9
 %
 
 
Office cash expenses
(42,206
)
 
(38,730
)
 
(9.0
)%
 
 
Office cash NOI
83,301

 
80,873

 
3.0
 %
 
 
 
 
 
 
 
 
 
 
Multifamily cash revenues
21,294

 
20,507

 
3.8
 %
 
 
Multifamily cash expenses
(5,521
)
 
(5,271
)
 
(4.7
)%
 
 
Multifamily cash NOI
15,773

 
15,236

 
3.5
 %
 
 
 
 
 
 
 
 
 
 
Total Cash NOI
$
99,074

 
$
96,109

 
3.1
 %
 
 
 
 
 
 
 
 
 
_________________________________________________
(1)
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.

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Financial Results

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


 
Three Months Ended December 31,
 
2018
 
2017
 
 
 
 
Same property office cash revenues
$
125,507

 
$
119,603

Non cash adjustments per definition of NOI
4,483

 
1,790

Same property office revenues
129,990

 
121,393

 
 
 
 
Same property office cash expenses
(42,206
)
 
(38,730
)
Non cash adjustments per definition of NOI
13

 
13

Same property office expenses
(42,193
)
 
(38,717
)
 
 
 
 
Office NOI
87,797

 
82,676

 
 
 
 
Same property multifamily cash revenues
21,294

 
20,507

Non cash adjustments per definition of NOI
4

 
7

Same property multifamily revenues
21,298

 
20,514

 
 
 
 
Same property multifamily expenses
(5,521
)
 
(5,271
)
 
 
 
 
Multifamily NOI
15,777

 
15,243

 
 
 
 
Same Property NOI
103,574

 
97,919

Non-comparable office revenues
69,793

 
63,645

Non-comparable office expenses
(22,096
)
 
(19,676
)
Non-comparable multifamily revenues
5,183

 
3,638

Non-comparable multifamily expenses
(1,847
)
 
(1,264
)
NOI
154,607

 
144,262

General and administrative
(10,197
)
 
(9,045
)
Depreciation and amortization
(89,920
)
 
(70,620
)
Operating income
54,490

 
64,597

Other income
3,041

 
2,560

Other expenses
(2,092
)
 
(1,881
)
Income, including depreciation, from unconsolidated real estate funds
1,878

 
1,478

Interest expense
(33,513
)
 
(34,768
)
    Demolition expenses
(272
)
 

Net income
23,532

 
31,986

Less: Net loss (income) attributable to noncontrolling interests
2,103

 
(2,450
)
Net income attributable to common stockholders
$
25,635

 
$
29,536






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 December 31, 2018
 
 
 
 
 
 
 
Wholly-Owned Properties
 
Consolidated Joint Ventures(1)
 
Unconsolidated Funds(2)
 
 
 
 
 
 
Revenues
$
182,907

 
$
43,385

 
$
20,656

Office and multifamily operating expenses
$
57,846

 
$
13,839

 
$
6,942

Straight-line rent
$
4,345

 
$
1,753

 
$
69

Above/below-market lease revenue
$
1,312

 
$
3,470

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

 
$
16,155

 
$
4,833

Our share of cash NOI(4)
$
119,404

 
$
8,168

 
$
8,815

 
 
 
 
 
 
 
Year Ended December 31, 2018
 
 
 
 
 
 
 
Wholly-Owned Properties
 
Consolidated Joint Ventures(1)
 
Unconsolidated Funds(2)
 
 
 
 
 
 
Revenues
$
712,809

 
$
168,507

 
$
79,589

Office and multifamily operating expenses
$
227,156

 
$
53,711

 
$
27,010

Straight-line rent
$
11,296

 
$
7,517

 
$
1,135

Above/below-market lease revenue
$
6,026

 
$
15,999

 
$
(6
)
Cash NOI attributable to outside interests(3)
$

 
$
60,777

 
$
18,500

Our share of cash NOI(4)
$
468,331

 
$
30,503

 
$
32,950

______________________________________________________
(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 62% 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

 
Loans
(As of December 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) 
31,582

 
31,582

 
4.55%
 
N/A
 
 
8/21/2020
(5) 
105,000

 
105,000

 
LIBOR + 1.40%
 
N/A
 
 
Subtotal
 
3,183,982

 
3,183,982

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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) 
$
4,163,982

 
$
3,437,982

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated Funds
 
 
 
 
 
 
 
 
 
 
 
 
 
3/1/2023
 
$
110,000

 
$
26,954

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

 
285,294

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

 
$
312,248

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Loans
 
 
 
$
3,750,230

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
________________________________________________________________________
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 $4.13 billion is calculated by adding $4.0 million of unamortized loan premium and deducting $33.9 million of unamortized deferred loan costs from our total consolidated loans of $4.16 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)
5.4 years
 
 
Weighted average remaining fixed interest period
2.6 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 December 31, 2018


 
 
 
 
 
 
 
 
 
 
 
 
Submarket
 
Number of Properties
 
Rentable Square
Feet
 
Submarket Rentable Square Feet(1)
 
Our Market Share in Submarket(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
Brentwood
 
15

 
2,068,190

 
3,328,102
 
62.1
%
 
 
Sherman Oaks/Encino
 
12

 
3,486,941

 
6,528,253
 
53.4

 
 
Westwood
 
6

 
2,133,881

 
4,211,981
 
50.7

 
 
Warner Center/Woodland Hills
 
3

 
2,830,996

 
7,667,855
 
36.9

 
 
Honolulu
 
4

 
1,763,845

 
5,088,599
 
34.7

 
 
Olympic Corridor
 
5

 
1,141,560

 
3,458,794
 
33.0

 
 
Beverly Hills(3)
 
11

 
2,194,631

 
7,089,250
 
27.9

 
 
Santa Monica
 
11

 
1,427,671

 
9,861,775
 
14.5

 
 
Century City
 
3

 
951,534

 
10,148,454
 
9.4

 
 
Burbank
 
1

 
456,205

 
7,060,975
 
6.5

 
 
Total / Weighted Average(4)
 
71

 
18,455,454

 
64,444,038
 
39.1
%
 
 
 
 
 
 
 
 
 
 
 
 
_______________________________________________________
(1)
Source is the 2018 fourth 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.
(4)
The average of our market share in all submarkets is weighted based on the square feet of exposure in our total portfolio to each submarket.
































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 December 31, 2018
Annualized Rent by Submarket
 
396714244_chart-3f971e1d08255f21ab6.jpg
 
 
 
 
 
 
 
 
 
 
 
Submarket
Percent
Leased(1)
 
Annualized Rent(2)
 
Annualized Rent Per Leased Square Foot(2)
 
Monthly Rent Per Leased Square Foot(2)
 
 
 
 
 
 
 
 
 
 
 
 
Beverly Hills
96.0
%
 
$
103,654,116

 
$
51.00

 
$
4.25

 
 
Brentwood
91.0

 
79,619,517

 
44.20

 
3.68

 
 
Burbank
100.0

 
22,515,408

 
49.35

 
4.11

 
 
Century City
93.3

 
39,841,715

 
47.88

 
3.99

 
 
Honolulu
87.9

 
49,535,063

 
33.70

 
2.81

 
 
Olympic Corridor
91.5

 
38,478,427

 
38.62

 
3.22

 
 
Santa Monica
93.4

 
90,462,372

 
71.22

 
5.93

 
 
Sherman Oaks/Encino
92.4

 
114,073,086

 
36.70

 
3.06

 
 
Warner Center/Woodland Hills
87.2

 
69,732,752

 
29.22

 
2.44

 
 
Westwood
92.5

 
92,882,126

 
49.02

 
4.08

 
 
Total / Weighted Average
91.7
%
 
$
700,794,582

 
$
43.13

 
$
3.59

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recurring Office Capital Expenditures per Rentable Square Foot
 
 
 
 
Three months ended December 31, 2018
 
$
0.13

 
 
Twelve months ended December 31, 2018
 
$
0.27

 
 
 
 
 
 
 
 
 
 
 
_______________________________________________________________
(1)
Includes 258,614 square feet with respect to signed leases not yet commenced at December 31, 2018.
(2)
Excludes signed leases not yet commenced at December 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 December 31, 2018

396714244_q4officeleasediversitya02.jpg
 
 
 
 
 
 
 
Portfolio Tenant Size
 
 
 
Median
 
Average
 
 
 
 
 
 
 
 
Square feet
2,600
 
5,500
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Leases
 
Rentable Square Feet
 
Annualized Rent
 
 
Square Feet Under Lease
 
Number
 
Percent
 
Amount
 
Percent
 
Amount
 
Percent
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,500 or less
 
1,451

 
49.2
%
 
1,996,030

 
12.3
%
 
$
84,709,765

 
12.1
%
 
 
2,501-10,000
 
1,123

 
38.1

 
5,492,073

 
33.8

 
232,835,025

 
33.2

 
 
10,001-20,000
 
237

 
8.0

 
3,267,485

 
20.1

 
137,477,094

 
19.6

 
 
20,001-40,000
 
103

 
3.5

 
2,820,838

 
17.4

 
118,613,578

 
16.9

 
 
40,001-100,000
 
32

 
1.1

 
1,770,591

 
10.9

 
85,517,687

 
12.2

 
 
Greater than 100,000
 
4

 
0.1

 
901,051

 
5.5

 
41,641,433

 
6.0

 
 
Total for all leases
 
2,950

 
100.0
%
 
16,248,068

 
100.0
%
 
$
700,794,582

 
100.0
%
 
 
 
 
 
 
 







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

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Portfolio Data


Largest Office Tenants
Total Office Portfolio as of December 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
%
 
$
22,953,657

 
3.2
%
 
 
UCLA(3)
 
25

 
10

 
2019-2027
 
319,161

 
1.7

 
15,691,388

 
2.2

 
 
William Morris Endeavor(4)
 
2

 
1

 
2027
 
205,313

 
1.1

 
11,671,698

 
1.7

 
 
Morgan Stanley(5)
 
5

 
5

 
2022-2027
 
145,488

 
0.8

 
9,007,837

 
1.3

 
 
Equinox Fitness(6)
 
5

 
5

 
2020-2033
 
180,087

 
1.0

 
7,426,266

 
1.1

 
 
Total
 
40

 
24

 
 
 
1,318,824

 
7.1
%
 
$
66,750,846

 
9.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
______________________________________________________
(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: 6,400 square feet in 2019, 46,000 square feet in 2020, 68,000 square feet in 2021, 55,000 square feet in 2022, 40,000 square feet in 2023, 36,000 square feet in and 2024, 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 202,000 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, and 26,000 square feet in 2022.
(6)
Square footage expires as follows: 42,000 square feet in 2020, 33,000 square feet in 2024, 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.

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Portfolio Data

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

Percentage of Annualized Rent by Tenant Industry
396714244_chart-f07bb18c86105401aab.jpg
 
 
 
 
 
 
 
 
Industry
 
Number of Leases
 
Annualized Rent as a Percent of Total
 
 
 
 
 
 
 
 
 
Legal
 
577

 
18.0
%
 
 
Financial Services
 
393

 
14.9

 
 
Entertainment
 
212

 
13.1

 
 
Real Estate
 
293

 
11.2

 
 
Accounting & Consulting
 
363

 
10.2

 
 
Health Services
 
374

 
7.6

 
 
Retail
 
194

 
5.9

 
 
Technology
 
130

 
5.1

 
 
Insurance
 
103

 
4.1

 
 
Educational Services
 
57

 
3.7

 
 
Public Administration
 
93

 
2.3

 
 
Advertising
 
59

 
1.6

 
 
Manufacturing & Distribution
 
55

 
1.2

 
 
Other
 
47

 
1.1

 
 
Total
 
2,950

 
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 December 31, 2018
396714244_chart-2233cc762b7152c3b26.jpg
(1) Average of the percentage of leases expiring at December 31, 2015, 2016, and 2017 with the same remaining duration as the leases for the labeled year had at December 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 December 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
 
79

 
366,917

 
2.0
%
 
$
13,869,946

 
2.0
%
 
$
37.80

 
$
37.91

 
 
2019
 
520

 
1,708,218

 
9.3

 
67,811,719

 
9.7

 
39.70

 
40.28