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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 2, 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))

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

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

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





Item 2.02 Results of Operations and Financial Condition

On May 2, 2019, Douglas Emmett, Inc. released its financial results for the quarter ended March 31, 2019 by posting to its website its First Quarter 2019 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 2019 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:
May 2, 2019
By:
/s/ PETER D. SEYMOUR
 
 
 
Peter D. Seymour
 
 
 
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 3,642 apartment units (excluding our residential development pipeline) in the premier coastal submarkets of Los Angeles and Honolulu.
Financial Results: Three months ended March 31, 2019 compared to three months ended March 31, 2018:
Revenues increased by 5.6% to $224.2 million.
Net income attributable to common stockholders increased by 1.8% to $28.7 million.
FFO increased by 7.4% to $103.1 million, or $0.52 per fully diluted share.
AFFO increased by 19.9% to $85.1 million.
Same property Cash NOI increased by 7.6% to $133.7 million.
Office: Our office portfolio was 91.8% leased at quarter end, up 0.1% from the fourth quarter of 2018, and our occupancy rate remained consistent at 90.3%. We signed over 770,000 square feet of leases during the first quarter. Comparing leases we signed during the first quarter to the expiring leases covering the same space, straight-line rents increased by 20.5% and starting cash rents increased by 9.1% compared to expiring cash rents, reflecting a high concentration of leases in the Valley.
Multifamily: Our multifamily portfolio remains fully leased at 99.6%.
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 $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. We are wrapping up our first group of office repositioning projects, and pursuing additional opportunities that we believe will provide a high return on our invested capital.
Debt:
In March, we renewed our $400 million non-recourse, revolving credit facility, secured by 6 properties. In addition to extending the maturity date, we lowered the interest rate and reduced the unused facility fees. The extended credit line bears interest at LIBOR plus 1.15% and matures in August 2023. See page 13.
With the exception of a loan on our completed 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: On April 16, 2019, we paid a quarterly cash dividend of $0.26 per common share, or $1.04 on an annualized basis.
Guidance: We are decreasing our 2019 full year guidance for Net Income Per Common Share - Diluted to $0.68 to $0.74 and increasing our full year guidance for FFO to $2.09 to $2.15 per fully diluted share. The decrease in Net Income Per Common Share reflects depreciation charges from repositioning and development activities. 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 First Quarter 2019 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, 2019

 
Office Portfolio
 
 
 
 
 
 
 
 
 
Consolidated
 
Total
 
 
Properties
63

 
71

 
 
Rentable square feet (in thousands)
16,527

 
18,367

 
 
Leased rate
91.9
%
 
91.8
%
 
 
Occupancy rate
90.4
%
 
90.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Multifamily Portfolio
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
Properties
 
 
10

 
 
Units
 
 
3,642

 
 
Leased rate
 
 
99.6
%
 
 
 
 
 
 
 

 
Market Capitalization (in thousands, except price per share)
 
 
 
 
 
 
 
Fully diluted shares outstanding as of March 31, 2019
 
198,941

 
 
Common stock closing price per share (NYSE:DEI)
 
$
40.42

 
 
Equity capitalization
 
$
8,041,179

 
 
 
 
 
 

 
Net Debt (in thousands)(1)
 
 
 
 
 
 
 
 
 
Consolidated
 
Our Share
 
 
 
 
 
 
 
 
$
4,158,806

 
$
3,745,054

 
 
Less: cash and cash equivalents
(149,722
)
 
(78,487
)
 
 
Net debt
$
4,009,084

 
$
3,666,567

 
 
 
 
 
 
 

 
Leverage Ratio (in thousands, except percentage)
 
 
 
 
 
 
 
Pro forma enterprise value
 
$
11,707,745

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

 
AFFO Payout Ratio
 
 
 
 
 
 
 
Three Months ended March 31, 2019
 
60.9
%
 
 
 
 
 
 
_______________________________________
(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 March 31, 2019
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Company Overview


Board of Directors and Executive Officers
as of March 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
Peter D. Seymour
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)

 
March 31, 2019
 
December 31, 2018
 
 
 
 
 
Unaudited
 
 
Assets
 

 
 

Investment in real estate:
 

 
 

Land
$
1,067,639

 
$
1,065,099

Buildings and improvements
8,088,899

 
7,995,203

Tenant improvements and lease intangibles
847,471

 
840,653

Property under development
57,527

 
129,753

Investment in real estate, gross
10,061,536

 
10,030,708

Less: accumulated depreciation and amortization
(2,309,901
)
 
(2,246,887
)
Investment in real estate, net
7,751,635

 
7,783,821

Ground lease right-of-use asset
7,483

 

Cash and cash equivalents
149,722

 
146,227

Tenant receivables, net
5,281

 
4,371

Deferred rent receivables, net
129,203

 
124,834

Acquired lease intangible assets, net
3,092

 
3,251

Interest rate contract assets
46,880

 
73,414

Investment in unconsolidated real estate funds
105,526

 
111,032

Other assets
17,087

 
14,759

Total assets
$
8,215,909

 
$
8,261,709

 
 
 
 
Liabilities
 
 
 

Secured notes payable and revolving credit facility, net
$
4,129,271

 
$
4,134,030

Ground lease liability
10,887

 

Interest payable, accounts payable and deferred revenue
142,339

 
130,154

Security deposits
50,802

 
50,733

Acquired lease intangible liabilities, net
44,883

 
52,569

Interest rate contract liabilities
5,283

 
1,530

Dividends payable
44,262

 
44,263

Total liabilities
4,427,727

 
4,413,279

 
 
 
 
Equity
 
 
 

Douglas Emmett, Inc. stockholders' equity:
 
 
 

Common stock
1,702

 
1,702

Additional paid-in capital
3,282,388

 
3,282,316

Accumulated other comprehensive income
30,943

 
53,944

Accumulated deficit
(953,335
)
 
(935,630
)
Total Douglas Emmett, Inc. stockholders' equity
2,361,698

 
2,402,332

Noncontrolling interests
1,426,484

 
1,446,098

Total equity
3,788,182

 
3,848,430

Total liabilities and equity
$
8,215,909

 
$
8,261,709


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,
 
2019
 
2018
 
 
 
 
Revenues
 

 
 

Office rental
 

 
 

Rental revenues and tenant recoveries
$
167,235

 
$
158,824

Parking and other income
30,055

 
28,509

Total office revenues
197,290

 
187,333

 
 
 
 
Multifamily rental
 
 
 
Rental revenues
24,893

 
23,061

Parking and other income
2,003

 
1,853

Total multifamily revenues
26,896

 
24,914

 
 
 
 
Total revenues
224,186

 
212,247

 
 
 
 
Operating Expenses
 
 
 
Office expenses
63,449

 
60,356

Multifamily expenses
7,555

 
6,698

General and administrative expenses
9,832

 
9,567

Depreciation and amortization
79,873

 
72,498

Total operating expenses
160,709

 
149,119

 
 
 
 
Operating income
63,477

 
63,128

 
 
 
 
Other income
2,898

 
2,630

Other expenses
(1,845
)
 
(1,733
)
Income, including depreciation, from unconsolidated funds
1,551

 
1,506

Interest expense
(33,293
)
 
(32,900
)
Net income
32,788

 
32,631

Less:  Net income attributable to noncontrolling interests
(4,087
)
 
(4,425
)
Net income attributable to common stockholders
$
28,701

 
$
28,206

 
 
 
 
Net income per common share - basic
$
0.17

 
$
0.17

Net income per common share - diluted
$
0.17

 
$
0.17

 
 
 
 
Dividends declared per common share
$
0.26

 
$
0.25

 
 
 
 
Weighted average shares of common stock outstanding - basic
170,221

 
169,601

Weighted average shares of common stock outstanding - diluted
170,221

 
169,625








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,
 
2019
 
2018
Funds From Operations (FFO)
 
 
 
Net income attributable to common stockholders
$
28,701

 
$
28,206

Depreciation and amortization of real estate assets
79,873

 
72,498

Net income attributable to noncontrolling interests
4,087

 
4,425

Adjustments attributable to unconsolidated funds(2)
4,514

 
4,097

 Adjustments attributable to consolidated joint ventures(2)
(14,077
)
 
(13,242
)
FFO
$
103,098

 
$
95,984

 
 
 
 
Adjusted Funds From Operations (AFFO)
 
 
 
FFO
$
103,098

 
$
95,984

Straight-line rent
(4,369
)
 
(5,172
)
Net accretion of acquired above- and below-market leases
(4,120
)
 
(6,152
)
Loan costs
1,867

 
2,309

Recurring capital expenditures, tenant improvements and capitalized leasing expenses(3)
(17,783
)
 
(23,267
)
Non-cash compensation expense
4,507

 
5,059

Adjustments attributable to unconsolidated funds(2)
(1,994
)
 
(2,386
)
Adjustments attributable to consolidated joint ventures(2)
3,921

 
4,618

AFFO
$
85,127

 
$
70,993

 
 
 
 
Weighted average shares of common stock outstanding - diluted
170,221

 
169,625

Weighted average units in our operating partnership outstanding
28,652

 
28,263

Weighted average fully diluted shares outstanding
198,873

 
197,888

 
 
 
 
Net income per common share - diluted
$
0.17

 
$
0.17

FFO per share - fully diluted
$
0.52

 
$
0.49

Dividends paid per share(4)
$
0.26

 
$
0.25

______________________________________________
(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)
We adopted the new lease accounting rules in the first quarter of 2019. Under the new rules, we expense non-incremental leasing expenses (leasing expenses not directly related to the signing of a lease) and capitalize incremental leasing expenses. Since non-incremental leasing expenses are included in the calculation of net income attributable to common stockholders and FFO, the 2019 adjustment to AFFO only includes incremental leasing expenses.
(4)
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)(1) 
(Unaudited; in thousands, except statistics)

 
 
 
 
 
 
 
 
As of March 31,
 
 
 
2019
 
2018
 
 
Office Statistics
 
 
 
 
 
Number of properties
59

 
59

 
 
Rentable square feet (in thousands)
15,286

 
15,223

 
 
Ending % leased
91.8
%
 
90.9
%
 
 
Ending % occupied
90.3
%
 
89.2
%
 
 
Quarterly average % occupied
90.5
%
 
89.8
%
 
 
 
 
 
 
 
 
Multifamily Statistics
 
 
 
 
 
Number of properties
9

 
9

 
 
Number of units
2,640

 
2,640

 
 
Ending % leased
99.8
%
 
99.5
%
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
% Favorable
 
 
 
2019
 
2018
 
(Unfavorable)
 
 
Net Operating Income (NOI)
 
 
 
 
 
 
 
Office revenues
$
181,989

 
$
170,977

 
6.4
 %
 
 
Office expenses
(56,952
)
 
(54,280
)
 
(4.9
)%
 
 
Office NOI
125,037

 
116,697

 
7.1
 %
 
 
 
 
 
 
 
 
 
 
Multifamily revenues 
21,526

 
20,845

 
3.3
 %
 
 
Multifamily expenses
(5,602
)
 
(5,330
)
 
(5.1
)%
 
 
Multifamily NOI
15,924

 
15,515

 
2.6
 %
 
 
 
 
 
 
 
 
 
 
Total NOI
$
140,961

 
$
132,212

 
6.6
 %
 
 
 
 
 
 
 
 
 
 
Cash Net Operating Income (NOI)
 
 
 
 
 
 
 
Office cash revenues
$
174,733

 
$
163,018

 
7.2
 %
 
 
Office cash expenses
(56,952
)
 
(54,280
)
 
(4.9
)%
 
 
Office cash NOI
117,781

 
108,738

 
8.3
 %
 
 
 
 
 
 
 
 
 
 
Multifamily cash revenues
21,517

 
20,839

 
3.3
 %
 
 
Multifamily cash expenses
(5,602
)
 
(5,330
)
 
(5.1
)%
 
 
Multifamily cash NOI
15,915

 
15,509

 
2.6
 %
 
 
 
 
 
 
 
 
 
 
Total Cash NOI
$
133,696

 
$
124,247

 
7.6
 %
 
 
 
 
 
 
 
 
 
_________________________________________________
(1) The amounts presented include 100% (not our pro-rata share). See page 10 for a reconciliation of these non-GAAP measures to net income attributable to common stockholders.


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

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Financial Results

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


 
Three Months Ended March 31,
 
2019
 
2018
 
 
 
 
Same property office cash revenues
$
174,733

 
$
163,018

Non cash adjustments per definition of NOI
7,256

 
7,959

Same property office revenues
181,989

 
170,977

 
 
 
 
Same property office expenses
(56,952
)
 
(54,280
)
 
 
 
 
Office NOI
125,037

 
116,697

 
 
 
 
Same property multifamily cash revenues
21,517

 
20,839

Non cash adjustments per definition of NOI
9

 
6

Same property multifamily revenues
21,526

 
20,845

 
 
 
 
Same property multifamily expenses
(5,602
)
 
(5,330
)
 
 
 
 
Multifamily NOI
15,924

 
15,515

 
 
 
 
Same Property NOI
140,961

 
132,212

Non-comparable office revenues
15,301

 
16,356

Non-comparable office expenses
(6,497
)
 
(6,076
)
Non-comparable multifamily revenues
5,370

 
4,069

Non-comparable multifamily expenses
(1,953
)
 
(1,368
)
NOI
153,182

 
145,193

General and administrative expenses
(9,832
)
 
(9,567
)
Depreciation and amortization
(79,873
)
 
(72,498
)
Operating income
63,477

 
63,128

Other income
2,898

 
2,630

Other expenses
(1,845
)
 
(1,733
)
Income, including depreciation, from unconsolidated real estate funds
1,551

 
1,506

Interest expense
(33,293
)
 
(32,900
)
Net income
32,788

 
32,631

Less: Net income attributable to noncontrolling interests
(4,087
)
 
(4,425
)
Net income attributable to common stockholders
$
28,701

 
$
28,206









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, 2019
 
 
 
 
 
 
 
Wholly-Owned Properties
 
Consolidated Joint Ventures(1)
 
Unconsolidated Funds(2)
 
 
 
 
 
 
Revenues
$
182,707

 
$
41,479

 
$
20,158

Office and multifamily operating expenses
$
57,252

 
$
13,752

 
$
6,827

Straight-line rent
$
2,428

 
$
1,941

 
$
206

Above/below-market lease revenue
$
1,378

 
$
2,742

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

 
$
15,302

 
$
4,658

Our share of cash NOI(4)
$
121,649

 
$
7,742

 
$
8,470

______________________________________________________
(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.

11                     Go to Table of Contents

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Financial Results

 
Loans
(As of March 31, 2019, 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) 
31,406

 
31,406

 
4.55%
 
N/A
 
 
8/21/2023
(5) 
100,000

 
100,000

 
LIBOR + 1.15%
 
N/A
 
 
Subtotal
 
3,178,806

 
3,178,806

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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) 
$
4,158,806

 
$
3,432,806

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
 
 
$
3,745,054

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
________________________________________________________________________
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 0.10% to 0.15%.
(6)
Our consolidated debt on the balance sheet of $4.13 billion is calculated by adding $3.9 million of unamortized loan premium and deducting $33.5 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)
5.2 years
 
 
Weighted average remaining fixed interest period
2.5 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

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Portfolio Data


Office Portfolio Summary
Total Office Portfolio as of March 31, 2019


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

 
2,084,627

 
3,336,801
 
62.5
%
 
 
Sherman Oaks/Encino
 
12

 
3,486,941

 
6,528,253
 
53.4

 
 
Westwood
 
6

 
2,133,881

 
4,259,142
 
50.1

 
 
Warner Center/Woodland Hills
 
3

 
2,845,577

 
7,667,855
 
37.1

 
 
Honolulu(3)
 
4

 
1,641,517

 
4,952,221
 
33.1

 
 
Olympic Corridor
 
5

 
1,142,885

 
3,451,688
 
33.1

 
 
Beverly Hills(4)
 
11

 
2,195,912

 
6,911,291
 
28.6

 
 
Santa Monica
 
11

 
1,427,671

 
9,250,950
 
15.4

 
 
Century City
 
3

 
951,534

 
10,148,454
 
9.4

 
 
Burbank
 
1

 
456,205

 
7,060,975
 
6.5

 
 
Total / Weighted Average(5)
 
71

 
18,366,750

 
63,567,630
 
39.2
%
 
 
 
 
 
 
 
 
 
 
 
 
_______________________________________________________
(1)
Source is the 2019 first quarter CBRE Marketview report.
(2)
Calculated by dividing Rentable Square Feet by the applicable Submarket Rentable Square Feet.
(3)
We removed approximately 122,000 rentable square feet of vacant space at an office building we are converting to residential apartments. Third party submarket data was updated for consistency. See page 22.
(4)
Includes a 218,000 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.
(5)
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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397778632_bluelogo_headeraa07.jpg
 
Portfolio Data

 
Office Percentage Leased and In-Place Rents
Total Office Portfolio as of March 31, 2019
Annualized Rent by Submarket
 
397778632_chart-d1e62ca60317579e975.jpg
 
 
 
 
 
 
 
 
 
 
 
Submarket
Percent
Leased(1)
 
Annualized Rent(2)
 
Annualized Rent Per Leased Square Foot(2)
 
Monthly Rent Per Leased Square Foot(2)
 
 
 
 
 
 
 
 
 
 
 
 
Beverly Hills
95.9
%
 
$
104,912,777

 
$
51.47

 
$
4.29

 
 
Brentwood
89.5

 
79,814,302

 
44.76

 
3.73

 
 
Burbank
100.0

 
22,714,720

 
49.79

 
4.15

 
 
Century City
93.4

 
40,777,950

 
48.85

 
4.07

 
 
Honolulu
94.8

 
50,632,448

 
34.68

 
2.89

 
 
Olympic Corridor
91.6

 
39,342,726

 
39.21

 
3.27

 
 
Santa Monica
93.3

 
92,316,791

 
72.13

 
6.01

 
 
Sherman Oaks/Encino
91.7

 
112,332,520

 
36.65

 
3.05

 
 
Warner Center/Woodland Hills
87.1

 
70,116,302

 
29.43

 
2.45

 
 
Westwood
90.2

 
91,862,950

 
49.52

 
4.13

 
 
Total / Weighted Average
91.8
%
 
$
704,823,486

 
$
43.62

 
$
3.63

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recurring Office Capital Expenditures per Rentable Square Foot
 
 
 
 
Three months ended March 31, 2019
 
$
0.08

 
 
 
 
 
 
 
 
 
 
 
_______________________________________________________________
(1)
Includes 272,170 square feet with respect to signed leases not yet commenced at March 31, 2019.
(2)
Excludes signed leases not yet commenced at March 31, 2019.


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

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397778632_bluelogo_headeraa07.jpg
 
Portfolio Data


Office Lease Diversification
Total Office Portfolio as of March 31, 2019

397778632_q12019officeleasedivers.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
 
1,444

 
49.2
%
 
1,983,475

 
12.3
%
 
$
84,762,752

 
12.0
%
 
 
2,501-10,000
 
1,120

 
38.1

 
5,491,429

 
34.0

 
236,166,780

 
33.5

 
 
10,001-20,000
 
235

 
8.0

 
3,247,198

 
20.1

 
136,754,290

 
19.4

 
 
20,001-40,000
 
102

 
3.5

 
2,781,944

 
17.2

 
119,478,884

 
17.0

 
 
40,001-100,000
 
31

 
1.1

 
1,751,724

 
10.8

 
85,819,435

 
12.2

 
 
Greater than 100,000
 
4

 
0.1

 
902,669

 
5.6

 
41,841,346

 
5.9

 
 
Total for all leases
 
2,936

 
100.0
%
 
16,158,439

 
100.0
%
 
$
704,823,486

 
100.0
%
 
 
 
 
 
 
 






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

15                     Go to Table of Contents

397778632_bluelogo_headeraa07.jpg
 
Portfolio Data


Largest Office Tenants
Total Office Portfolio as of March 31, 2019

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

 
2.6
%
 
$
23,164,538

 
3.3
%
 
 
UCLA(3)
 
25

 
10

 
 2019-2027
 
321,106

 
1.7

 
15,914,380

 
2.2

 
 
William Morris Endeavor(4)
 
1

 
1

 
2027
 
206,782

 
1.1

 
11,666,900

 
1.7

 
 
Morgan Stanley(5)
 
5

 
5

 
2022-2027
 
145,488

 
0.8

 
9,221,887

 
1.3

 
 
Equinox Fitness(6)
 
5

 
5

 
2020 - 2033
 
180,087

 
1.0

 
7,533,301

 
1.1

 
 
Total
 
39

 
24

 
 
 
1,322,238

 
7.2
%
 
$
67,501,006

 
9.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
______________________________________________________
(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: 6,000 square feet in 2019, 41,000 square feet in 2020, 69,000 square feet in 2021, 55,000 square feet in 2022, 40,000 square feet in 2023, 37,000 square feet in 2024, 6,000 square feet in 2025, 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 205,000 square feet in 2022.
(5)
Square footage expires as follows: 16,000 square feet in 2022, 30,000 square feet in 2023, 26,000 square feet in 2025, and 74,000 square feet in 2027. Tenant has options to terminate 30,000 square feet in 2021, 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.

16                     Go to Table of Contents

397778632_bluelogo_headeraa07.jpg
 
Portfolio Data

 
Office Industry Diversification
Total Office Portfolio as of March 31, 2019

Percentage of Annualized Rent by Tenant Industry
397778632_chart-dfd5674b9ba05b2ab84.jpg
 
 
 
 
 
 
 
 
Industry
 
Number of Leases
 
Annualized Rent as a Percent of Total
 
 
 
 
 
 
 
 
 
Legal
 
581

 
18.2
%
 
 
Financial Services
 
391

 
15.0

 
 
Entertainment
 
209

 
12.8

 
 
Real Estate
 
294

 
11.3

 
 
Accounting & Consulting
 
358

 
10.2

 
 
Health Services
 
372

 
7.4

 
 
Retail
 
187

 
5.8

 
 
Technology
 
128

 
5.2

 
 
Insurance
 
106

 
4.1

 
 
Educational Services
 
58

 
3.6

 
 
Public Administration
 
94

 
2.4

 
 
Advertising
 
58

 
1.6

 
 
Manufacturing & Distribution
 
52

 
1.3

 
 
Other
 
48

 
1.1

 
 
Total
 
2,936

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

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397778632_bluelogo_headeraa07.jpg
 
Portfolio Data

Office Lease Expirations
Total Office Portfolio as of March 31, 2019
397778632_chart-abe976baf90b50acaf2.jpg
(1) Average of the percentage of leases expiring at March 31, 2016, 2017, and 2018 with the same remaining duration as the leases for the labeled year had at March 31, 2019. 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, 2019
 
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
 
59

 
167,251

 
0.9
%
 
$
6,728,829

 
1.0
%
 
$
40.23

 
$
40.36

 
 
2019
 
381

 
1,332,743

 
7.2

 
52,949,203

 
7.5

 
39.73

 
40.16

 
 
2020
 
665

 
2,732,526

 
14.9

 
113,319,006

 
16.1

 
41.47

 
42.89

 
 
2021
 
574

 
2,675,893

 
14.6

 
113,111,656

 
16.0

 
42.27

 
45.09

 
 
2022
 
423

 
2,133,722

 
11.6

 
90,185,286

 
12.8

 
42.27

 
46.91

 
 
2023
 
331

 
2,158,987

 
11.8

 
98,156,108

 
13.9

 
45.46

 
52.12

 
 
2024
 
213

 
1,974,391

 
10.8

 
88,076,253

 
12.5

 
44.61

 
53.77

 
 
2025
 
120

 
941,219

 
5.1

 
43,375,368

 
6.2

 
46.08

 
56.68

 
 
2026
 
51

 
537,069

 
2.9

 
25,390,889

 
3.6

 
47.28

 
59.43

 
 
2027
 
63

 
953,405

 
5.2

 
45,845,848

 
6.5

 
48.09

 
62.38

 
 
2028
 
37

 
352,301

 
1.9

 
19,217,089

 
2.7

 
54.55

 
72.45

 
 
Thereafter
 
19

 
198,932

 
1.1

 
8,467,951

 
1.2

 
42.57

 
61.79

 
 
Subtotal/weighted average
 
2,936

 
16,158,439

 
88.0
%
 
704,823,486

 
100.0
%
 
43.62

 
49.48

 
 
Signed leases not commenced
 
272,170

 
1.5

 
 
 
 
 
 
 
 
 
 
Available
 
1,512,260

 
8.2

 
 
 
 
 
 
 
 
 
 
Building management use
 
130,116

 
0.7

 
 
 
 
 
 
 
 
 
 
BOMA adjustment(3)
 
 
 
293,765

 
1.6

 
 
 
 
 
 
 
 
 
 
Total/weighted average
 
2,936

 
18,366,750

 
100.0
%
 
$
704,823,486

 
100.0
%
 
$
43.62

 
$
49.48

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
___________________________________________________
(1)
Represents annualized rent at March 31, 2019 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.

18                     Go to Table of Contents

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Portfolio Data


Office Lease Expirations - Next Four Quarters
Total Office Portfolio as of March 31, 2019

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
Q1 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Expiring Square Feet(1)
 
335,237
 
386,029
 
611,477
 
628,092
 
 
Percentage of Portfolio
 
2.1
%
 
2.4
%
 
3.8
%
 
3.9
%
 
 
Expiring Rent per Square Foot(2)
 
$36.37
 
$41.58
 
$41.34
 
$42.56