Maryland | 1-33106 | 20-3073047 |
(State or other jurisdiction of incorporation) | Commission file number | (I.R.S. Employer identification No.) |
DOUGLAS EMMETT, INC. | |||
Dated: | February 11, 2014 | By: | /s/ THEODORE E. GUTH |
Theodore E. Guth | |||
Chief Financial Officer |
Douglas Emmett, Inc. | EXECUTIVE SUMMARY | |
• | Office Fundamentals: During the fourth quarter, we increased the leased rate of our total office portfolio by over 50 basis points to 92.2% and our occupied percentage by over 80 basis points to 90.4%. Excluding the impact of acquisitions, we increased our leased rate during the full year of 2013 by about 120 basis points and our occupied rate by about 100 basis points. We continue to achieve higher net effective rents year over year in all of our submarkets except for Warner Center, with an increasing number of our leases including annual rent bumps in excess of 3%. On a mark to market basis, the asking rents for our total office portfolio were on average 1.6% higher than our in-place rents. |
• | Multifamily Fundamentals: In our multifamily portfolio, which remains fully leased, our average asking rents were 5.3% higher than in the fourth quarter of 2012. |
• | Financial Results: For the fourth quarter, we increased our Funds From Operations (FFO) by 13.6% to $64.2 million, our Adjusted Funds From Operations (AFFO) by 14.3% to $51.5 million and our GAAP net income attributable to common stockholders by 48.0% to $8.8 million compared to the fourth quarter of 2012. We increased our 2013 FF0 per share to a record $1.49, up 9.6% from 2012 and 27.4% from 2007, our first full year as a public company (2012 FFO includes an adjustment for interest rate swaps terminated in 2011). In 2013, our AFFO per share increased to a record $1.18, up 12.4% from 2012 and 66.2% from 2007, while our GAAP net income per common share increased by 100.0% to $0.32 compared to 2012. |
• | Same Property Cash NOI: Our 2013 same property cash NOI increased by 1.7% compared to 2012. |
• | Debt: In December 2013, we closed a four year, $300 million secured revolving credit facility with interest at LIBOR+1.40%. We used $40 million from this facility, along with $110 million of our cash on hand, to pay off a loan scheduled to mature in April 2015. At year end, our net consolidated debt to enterprise value was 44%. |
• | Developments: We expect to break ground on an additional 452 apartments at our Moanalua Hillside Apartments in Honolulu by the middle of this year. Construction should take approximately 18 months and cost approximately $100 million, which includes the cost of upgrading the existing 696 apartments and building a brand new community center. In Brentwood, our high-rise apartment project is making good progress through the protracted development process. |
• | Dividends: We have increased our projected 2014 annualized dividend to $0.80 per share. With our continued strong AFFO growth, our 2014 projected AFFO payout ratio of 64% (based on the mid point of our current guidance), is among the best of comparable office REITs, giving us strong liquidity, as well as room for additional dividend growth. |
• | Guidance: We are establishing our 2014 full year FFO guidance range of $1.57 - $1.63 per diluted share, and our AFFO guidance range of $1.18 - $1.24 per diluted share. Please see our 2014 guidance detail on page 22. |
Douglas Emmett, Inc. | TABLE OF CONTENTS | |
PAGE | |
COMPANY OVERVIEW | |
CONSOLIDATED FINANCIAL RESULTS | |
PORTFOLIO DATA | |
Douglas Emmett, Inc. | CORPORATE DATA | |
as of December 31, 2013 |
Office Portfolio | Consolidated | Total Portfolio | |||||
Number of office properties | 52 | 60 | |||||
Square feet (in thousands) | 13,271 | 15,094 | |||||
Leased rate, including properties acquired during the year(1) | 92.2 | % | 92.2 | % | |||
Occupied rate, including properties acquired during the year(1) | 90.6 | % | 90.4 | % | |||
Multifamily Portfolio | |||||||
Number of multifamily properties | 9 | ||||||
Number of multifamily units | 2,868 | ||||||
Multifamily leased rate | 99.5 | % | |||||
Market Capitalization (in thousands, except price per share) | ||||||
Closing price per share of common stock (NYSE:DEI) | $ | 23.29 | ||||
Shares of common stock outstanding | 142,605 | |||||
Fully diluted shares outstanding | 174,957 | |||||
Equity capitalization(2) | $ | 4,074,751 | ||||
Net debt(3) | $ | 3,196,934 | ||||
Total enterprise value | $ | 7,271,686 | ||||
Net debt/total enterprise value | 44 | % | ||||
(1) | These statistics include the impact of property acquisitions during 2013, and so may not be directly comparable to statistics from prior quarters. We often seek to use our operating platform to create value by acquiring buildings with greater vacancy than our portfolio. Excluding the impact of acquisitions during 2013, the leased rate for our total office portfolio was 92.3% and the occupied rate was 90.6%. |
(3) | Net debt represents our consolidated debt, net of our cash and cash equivalents. It excludes the debt of our unconsolidated real estate funds. |
Douglas Emmett, Inc. | PROPERTY MAP | |
as of December 31, 2013 |
Douglas Emmett, Inc. | BOARD OF DIRECTORS AND EXECUTIVE OFFICERS | |
as of December 31, 2013 |
Dan A. Emmett | Chairman of the Board – Douglas Emmett, Inc. | |
Jordan L. Kaplan | Chief Executive Officer and President – Douglas Emmett, Inc. | |
Kenneth M. Panzer | Chief Operating Officer – Douglas Emmett, Inc. | |
Christopher Anderson | Retired Real Estate Executive and Investor | |
Leslie E. Bider | Chief Executive Officer – PinnacleCare | |
Dr. David T. Feinberg | Chief Executive Officer – University of California, Los Angeles (UCLA) Hospital System, Associate Vice Chancellor – UCLA Health Sciences | |
Thomas E. O’Hern | Senior Executive Vice President, Chief Financial Officer & Treasurer – Macerich Company | |
William E. Simon, Jr. | Co-chairman, William E. Simon & Sons, LLC |
Dan A. Emmett | Chairman of the Board | |
Jordan L. Kaplan | Chief Executive Officer and President | |
Kenneth M. Panzer | Chief Operating Officer | |
Theodore E. Guth | Chief Financial Officer |
Douglas Emmett, Inc. | BALANCE SHEETS | |
(unaudited and in thousands) |
December 31, 2013 | December 31, 2012 | ||||||
Assets | |||||||
Investment in real estate: | |||||||
Land | $ | 867,284 | $ | 851,679 | |||
Buildings and improvements | 5,386,446 | 5,244,738 | |||||
Tenant improvements and lease intangibles | 759,003 | 690,120 | |||||
Investment in real estate, gross | 7,012,733 | 6,786,537 | |||||
Less: accumulated depreciation | (1,495,819 | ) | (1,304,468 | ) | |||
Investment in real estate, net | 5,516,914 | 5,482,069 | |||||
Cash and cash equivalents | 44,206 | 373,203 | |||||
Tenant receivables, net | 1,760 | 1,331 | |||||
Deferred rent receivables, net | 69,662 | 63,192 | |||||
Acquired lease intangible assets, net | 3,744 | 4,707 | |||||
Investment in unconsolidated real estate funds | 182,896 | 149,478 | |||||
Other assets | 28,607 | 29,827 | |||||
Total assets | $ | 5,847,789 | $ | 6,103,807 | |||
Liabilities | |||||||
Secured notes payable | $ | 3,241,140 | $ | 3,441,140 | |||
Interest payable, accounts payable and deferred revenue | 52,763 | 45,171 | |||||
Security deposits | 35,470 | 34,284 | |||||
Acquired lease intangible liabilities, net | 59,543 | 67,035 | |||||
Interest rate contracts | 63,144 | 100,294 | |||||
Dividends payable | 28,521 | 25,424 | |||||
Total liabilities | 3,480,581 | 3,713,348 | |||||
Equity | |||||||
Douglas Emmett, Inc. stockholders' equity: | |||||||
Common stock | 1,426 | 1,412 | |||||
Additional paid-in capital | 2,653,905 | 2,635,408 | |||||
Accumulated other comprehensive income (loss) | (50,554 | ) | (82,991 | ) | |||
Accumulated deficit | (634,380 | ) | (574,173 | ) | |||
Total Douglas Emmett, Inc. stockholders' equity | 1,970,397 | 1,979,656 | |||||
Noncontrolling interests | 396,811 | 410,803 | |||||
Total equity | 2,367,208 | 2,390,459 | |||||
Total liabilities and equity | $ | 5,847,789 | $ | 6,103,807 |
Douglas Emmett, Inc. | OPERATING RESULTS | |
(unaudited and in thousands, except per share data) |
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Revenues: | |||||||||||||||
Office rental: | |||||||||||||||
Rental revenues | $ | 98,464 | $ | 96,085 | $ | 394,739 | $ | 391,447 | |||||||
Tenant recoveries | 10,974 | 10,994 | 45,144 | 44,093 | |||||||||||
Parking and other income | 18,738 | 17,309 | 74,717 | 69,736 | |||||||||||
Total office revenues | 128,176 | 124,388 | 514,600 | 505,276 | |||||||||||
Multifamily rental: | |||||||||||||||
Rental revenues | 18,063 | 17,397 | 71,209 | 68,262 | |||||||||||
Parking and other income | 1,437 | 1,365 | 5,727 | 5,461 | |||||||||||
Total multifamily revenues | 19,500 | 18,762 | 76,936 | 73,723 | |||||||||||
Total revenues | 147,676 | 143,150 | 591,536 | 578,999 | |||||||||||
Operating Expenses: | |||||||||||||||
Office expenses | 44,427 | 43,041 | 174,952 | 170,725 | |||||||||||
Multifamily expenses | 4,820 | 4,812 | 19,928 | 19,672 | |||||||||||
General and administrative | 5,890 | 7,892 | 26,614 | 27,943 | |||||||||||
Depreciation and amortization | 49,823 | 45,778 | 191,351 | 184,849 | |||||||||||
Total operating expenses | 104,960 | 101,523 | 412,845 | 403,189 | |||||||||||
Operating income | 42,716 | 41,627 | 178,691 | 175,810 | |||||||||||
Other income | 2,237 | 794 | 6,402 | 2,821 | |||||||||||
Other expenses | (1,422 | ) | (438 | ) | (4,199 | ) | (1,883 | ) | |||||||
Income (loss), including depreciation, from unconsolidated real estate funds | (237 | ) | 1,054 | 3,098 | (1,710 | ) | |||||||||
Interest expense | (32,716 | ) | (35,697 | ) | (130,548 | ) | (146,693 | ) | |||||||
Acquisition-related expenses | (74 | ) | — | (607 | ) | — | |||||||||
Net income | 10,504 | 7,340 | 52,837 | 28,345 | |||||||||||
Less: Net income attributable to noncontrolling interests | (1,661 | ) | (1,366 | ) | (7,526 | ) | (5,403 | ) | |||||||
Net income attributable to common stockholders | $ | 8,843 | $ | 5,974 | $ | 45,311 | $ | 22,942 | |||||||
Net income per common share – basic | $ | 0.06 | $ | 0.04 | $ | 0.32 | $ | 0.16 | |||||||
Net income per common share – diluted | $ | 0.06 | $ | 0.04 | $ | 0.31 | $ | 0.16 | |||||||
Weighted average shares of common stock outstanding - basic | 142,603 | 140,795 | 142,556 | 139,791 | |||||||||||
Weighted average shares of common stock outstanding - diluted | 174,600 | 173,660 | 174,802 | 173,120 |
Douglas Emmett, Inc. | FUNDS FROM OPERATIONS AND | |
ADJUSTED FUNDS FROM OPERATIONS | ||
(unaudited and in thousands, except per share data) |
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Funds From Operations (FFO) | |||||||||||||||
Net income attributable to common stockholders | $ | 8,843 | $ | 5,974 | $ | 45,311 | $ | 22,942 | |||||||
Depreciation and amortization of real estate assets | 49,823 | 45,778 | 191,351 | 184,849 | |||||||||||
Net income attributable to noncontrolling interests | 1,661 | 1,366 | 7,526 | 5,403 | |||||||||||
Adjustments attributable to consolidated joint venture and investment in unconsolidated real estate funds | 3,873 | 3,401 | 15,894 | 13,311 | |||||||||||
FFO (before adjustments for terminated swaps) | 64,200 | 56,519 | 260,082 | 226,505 | |||||||||||
Amortization of accumulated other comprehensive income as a result of terminated swaps (1) | — | — | — | 8,855 | |||||||||||
FFO (after adjustments for terminated swaps) | $ | 64,200 | $ | 56,519 | $ | 260,082 | $ | 235,360 | |||||||
Adjusted Funds From Operations (AFFO) | |||||||||||||||
FFO (after adjustments for terminated swaps) | $ | 64,200 | $ | 56,519 | $ | 260,082 | $ | 235,360 | |||||||
Straight-line rent | (1,753 | ) | (227 | ) | (6,470 | ) | (4,511 | ) | |||||||
Amortization of acquired above and below market leases | (3,723 | ) | (4,132 | ) | (15,693 | ) | (18,094 | ) | |||||||
Amortization of loan premium | — | — | — | (996 | ) | ||||||||||
Amortization of interest rate contracts and deferred loan costs | 1,263 | 948 | 4,302 | 4,248 | |||||||||||
Recurring capital expenditures, tenant improvements and leasing commissions | (10,693 | ) | (11,541 | ) | (43,862 | ) | (43,503 | ) | |||||||
Non-cash compensation expense | 2,509 | 3,788 | 10,005 | 10,583 | |||||||||||
Adjustments attributable to consolidated joint venture and investment in unconsolidated real estate funds | (293 | ) | (299 | ) | (2,218 | ) | (1,281 | ) | |||||||
AFFO | $ | 51,510 | $ | 45,056 | $ | 206,146 | $ | 181,806 | |||||||
Weighted average share equivalents outstanding - diluted | 174,600 | 173,660 | 174,802 | 173,120 | |||||||||||
FFO per share- diluted | $0.37 | $0.33 | $1.49 | $1.36 | |||||||||||
AFFO per share- diluted | $0.30 | $0.26 | $1.18 | $1.05 | |||||||||||
AFFO payout ratio | 60.03 | % | 56.97 | % | 60.00 | % | 54.06 | % | |||||||
Dividends per share declared | $0.20 | $0.18 | $0.74 | $0.63 |
(1) | In calculating FFO, we treated certain interest rate swaps as terminated for all purposes in 2011 when they were in fact terminated in connection with refinancing the underlying loans. In contrast, under GAAP, terminated swaps continue to impact net income over their original lives as if they were still outstanding. We had no swap terminations in 2012 or 2013, so this policy did not affect FFO in the last quarter of 2012 or in any quarter of 2013. |
Douglas Emmett, Inc. | SAME PROPERTY STATISTICAL AND FINANCIAL DATA | |
(unaudited and in thousands, except statistics) |
As of December 31, | |||||||
2013 | 2012 | ||||||
Same Property Office Statistics(1) | |||||||
Number of properties | 49 | 49 | |||||
Rentable square feet (in thousands) | 12,775 | 12,774 | |||||
Ending % leased | 92.3 | % | 91.4 | % | |||
Ending % occupied | 90.7 | % | 89.8 | % | |||
Quarterly average % occupied | 90.5 | % | 89.4 | % | |||
Same Property Multifamily Statistics | |||||||
Number of properties | 9 | 9 | |||||
Number of units | 2,868 | 2,868 | |||||
Ending % leased | 99.5 | % | 99.7 | % | |||
Three Months Ended December 31, | % Favorable | |||||||||||
2013 | 2012 | (Unfavorable) | ||||||||||
Same Property Net Operating Income - GAAP Basis (1) | ||||||||||||
Total office revenues | $ | 124,263 | $ | 123,634 | 0.5 | % | ||||||
Total office expenses | (42,550 | ) | (42,633 | ) | 0.2 | % | ||||||
Office NOI | 81,713 | 81,001 | 0.9 | % | ||||||||
Total multifamily revenues | 19,500 | 18,762 | 3.9 | % | ||||||||
Total multifamily expenses | (4,820 | ) | (4,812 | ) | (0.2 | )% | ||||||
Multifamily NOI | 14,680 | 13,950 | 5.2 | % | ||||||||
Same Property NOI - GAAP basis | $ | 96,393 | $ | 94,951 | 1.5 | % | ||||||
Same Property Net Operating Income - Cash Basis (1) | ||||||||||||
Total office revenues | $ | 120,293 | $ | 120,178 | 0.1 | % | ||||||
Total office expenses | (42,596 | ) | (42,679 | ) | 0.2 | % | ||||||
Office NOI | 77,697 | 77,499 | 0.3 | % | ||||||||
Total multifamily revenues | 18,660 | 17,920 | 4.1 | % | ||||||||
Total multifamily expenses | (4,820 | ) | (4,812 | ) | (0.2 | )% | ||||||
Multifamily NOI | 13,840 | 13,108 | 5.6 | % | ||||||||
Same Property NOI - cash basis | $ | 91,537 | $ | 90,607 | 1.0 | % | ||||||
(1) | Our same property statistics and NOI exclude a 225 thousand square foot office property in Beverly Hills that we acquired in May 2013, a 191 thousand square foot office property in Encino that we acquired in August 2013, a 79 thousand square foot office property in Honolulu (in which we own a two thirds interest) which is currently undergoing a repositioning, and our unconsolidated real estate funds. |
Douglas Emmett, Inc. | RECONCILIATION OF SAME PROPERTY NOI | |
TO GAAP NET INCOME | ||
(unaudited and in thousands) |
Three Months Ended December 31, | |||||||
2013 | 2012 | ||||||
Same property office revenues - cash basis | $ | 120,293 | $ | 120,178 | |||
GAAP adjustments per definition of NOI - cash basis | 3,970 | 3,456 | |||||
Same property office revenues - GAAP basis | 124,263 | 123,634 | |||||
Same property office expenses - cash basis | (42,596 | ) | (42,679 | ) | |||
GAAP adjustments per definition of NOI - cash basis | 46 | 46 | |||||
Same property office expenses - GAAP basis | (42,550 | ) | (42,633 | ) | |||
Office NOI - GAAP basis | 81,713 | 81,001 | |||||
Same property multifamily revenues - cash basis | 18,660 | 17,920 | |||||
GAAP adjustments per definition of NOI - cash basis | 840 | 842 | |||||
Same property multifamily revenues - GAAP basis | 19,500 | 18,762 | |||||
Same property multifamily expenses - cash basis | (4,820 | ) | (4,812 | ) | |||
GAAP adjustments per definition of NOI - cash basis | — | — | |||||
Same property multifamily expenses - GAAP basis | (4,820 | ) | (4,812 | ) | |||
Multifamily NOI - GAAP basis | 14,680 | 13,950 | |||||
Total same property Net Operating Income (NOI) - GAAP basis | 96,393 | 94,951 | |||||
Non-comparable office revenues | 3,913 | 754 | |||||
Non-comparable office expenses | (1,877 | ) | (408 | ) | |||
Total property NOI - GAAP basis | 98,429 | 95,297 | |||||
General and administrative expenses | (5,890 | ) | (7,892 | ) | |||
Depreciation and amortization | (49,823 | ) | (45,778 | ) | |||
Operating income | 42,716 | 41,627 | |||||
Other income | 2,237 | 794 | |||||
Other expense | (1,422 | ) | (438 | ) | |||
(Loss) income, including depreciation, from unconsolidated real estate funds | (237 | ) | 1,054 | ||||
Interest expense | (32,716 | ) | (35,697 | ) | |||
Acquisition-related expenses | (74 | ) | — | ||||
Net income | 10,504 | 7,340 | |||||
Less: Net income attributable to noncontrolling interests | (1,661 | ) | (1,366 | ) | |||
Net income attributable to common stockholders | $ | 8,843 | $ | 5,974 |
Douglas Emmett, Inc. | OPERATING RESULTS OF | |
UNCONSOLIDATED REAL ESTATE FUNDS(1) | ||
(unaudited and in thousands) |
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
Summary Income Statement of Unconsolidated Real Estate Funds(2) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Office revenues | $ | 16,349 | $ | 15,547 | $ | 63,976 | $ | 61,475 | ||||||||
Office expenses | (8,282 | ) | (6,218 | ) | (27,321 | ) | (24,460 | ) | ||||||||
NOI | 8,067 | 9,329 | 36,655 | 37,015 | ||||||||||||
General and administrative | (107 | ) | (102 | ) | (331 | ) | (280 | ) | ||||||||
Depreciation and amortization | (6,606 | ) | (6,457 | ) | (26,173 | ) | (26,178 | ) | ||||||||
Operating income | 1,354 | 2,770 | 10,151 | 10,557 | ||||||||||||
Other income (expense) | 28 | (39 | ) | 28 | (37 | ) | ||||||||||
Interest expense | (2,931 | ) | (2,575 | ) | (10,980 | ) | (19,412 | ) | ||||||||
Net income (loss) | $ | (1,549 | ) | $ | 156 | $ | (801 | ) | $ | (8,892 | ) | |||||
FFO of Unconsolidated Real Estate Funds (2) | ||||||||||||||||
Net income (loss) | $ | (1,549 | ) | $ | 156 | $ | (801 | ) | $ | (8,892 | ) | |||||
Add back: depreciation and amortization | 6,606 | 6,457 | 26,173 | 26,178 | ||||||||||||
FFO | $ | 5,057 | $ | 6,613 | $ | 25,372 | $ | 17,286 | ||||||||
Douglas Emmett's Share of the Unconsolidated Real Estate Funds FFO | ||||||||||||||||
Our share of the unconsolidated real estate funds' net income (loss) | $ | (982 | ) | $ | 283 | $ | (19 | ) | $ | (4,892 | ) | |||||
Add back: our share of the funds' depreciation and amortization | 3,856 | 3,583 | 15,189 | 14,021 | ||||||||||||
Equity allocation and basis difference | 745 | 771 | 3,117 | 3,182 | ||||||||||||
Our share of the unconsolidated real estate funds' FFO | $ | 3,619 | $ | 4,637 | $ | 18,287 | $ | 12,311 |
(1) | We manage and own significant equity interests in two unconsolidated institutional real estate Funds which own eight Class A office properties, totaling 1.8 million square feet, in our submarkets. Our ownership interest entitles us to a pro rata share of any distributions based on our ownership (a weighted average of approximately 60% at December 31, 2013 based on square footage), additional distributions based on the total invested capital, and a carried interest if the investors’ distributions exceed a hurdle rate. We also receive fees and reimbursement of expenses for managing our unconsolidated Funds’ properties. |
(2) | These amounts represent 100% (not our pro-rata share) of amounts related to the Funds. |
Douglas Emmett, Inc. | DEBT BALANCES | |
(unaudited and in thousands) |
Maturity Date | at December 31, 2013 (1) | |||||||
Principal Balance | Effective Annual Rate (2) | |||||||
3/3/2014 | $ | 16,140 | (3) | LIBOR + 1.85% | ||||
2/1/2015 | 111,920 | DMBS + 0.707% | (4) | (Fannie Mae) | ||||
3/1/2016 | 82,000 | LIBOR + 0.62% | (Fannie Mae) | |||||
6/1/2017 | 18,000 | LIBOR + 0.62% | (Fannie Mae) | |||||
10/2/2017 | 400,000 | 4.45% | (5) | |||||
4/2/2018 | 510,000 | 4.12% | (5) | |||||
8/1/2018 | 530,000 | 3.74% | (5) | |||||
8/5/2018 | 355,000 | (6) | 4.14% | |||||
2/1/2019 | 155,000 | (7) | 4.00% | |||||
6/5/2019 | 285,000 | (8) | 3.85% | |||||
3/1/2020 | (9) | 350,000 | (10) | 4.46% | ||||
11/2/2020 | 388,080 | 3.65% | (5) | |||||
Total Term Debt | $ | 3,201,140 | ||||||
12/11/2017 | 40,000 | LIBOR + 1.40% | (11) | (Revolving credit facility) | ||||
$ | 3,241,140 |
(1) | As of December 31, 2013, (i) the weighted average remaining life of our outstanding debt was 4.8 years; (ii) of the $2.97 billion of debt on which the interest rate was fixed under the terms of the loan or a swap, the weighted average remaining life was 5.0 years, the weighted average remaining period during which interest was fixed was 3.4 years and the weighted average annual interest rate was 4.05%; and (iii) including the non-cash amortization of interest rate contracts and prepaid financing, the effective weighted average interest rate was 4.18%. Except as otherwise noted, each loan is secured by a separate collateral pool consisting of one or more properties, requiring monthly payments of interest only with outstanding principal due upon maturity. |
(2) | Includes the effect of interest rate contracts and excludes amortization of prepaid financing, all shown on an actual/360-day basis. |
(3) | The borrower is a consolidated entity in which our Operating Partnership owns a two-thirds interest. |
(4) | The loan has a $75.0 million tranche bearing interest at DMBS + 0.76% and a $36.9 million tranche bearing interest at DMBS + 0.60%. |
(5) | Interest rates effectively fixed through interest rate swaps until the following dates: $400.0 million loan, July 2015; $510.0 million loan, April 2016; $530.0 million loan, August 2016; and $388.1 million loan, November 2017. |
(6) | Interest-only until February 2016, with principal amortization thereafter based upon a 30-year amortization table. |
(7) | Interest-only until February 2015, with principal amortization thereafter based upon a 30-year amortization table. |
(8) | Interest only until February 2017, with principal amortization thereafter based upon a 30-year amortization table. |
(9) | We have 2 one-year extension options, which would extend the maturity to March 1, 2020 from March 1, 2018, subject to meeting certain conditions. |
(10) | Interest-only until March 2014, with principal amortization thereafter based upon a 30-year amortization table. |
(11) | Secured revolving credit facility under which we can borrow up to $300.0 million. |
at December 31, 2013 | ||||||||||
Maturity Date | Outstanding Principal | Our Share of Principal | Effective Annual Rate | |||||||
4/1/2016 | $ | 53,180 | $ | 12,898 | (1) | 5.67% | ||||
5/1/2018 | 325,000 | 222,980 | (2) | 2.35% | ||||||
$ | 378,180 | $ | 235,878 |
(1) | Loan to one of our unconsolidated Funds secured by one property. Requires monthly payments of principal and interest. |
(2) | Loan to one of our unconsolidated Funds secured by six properties. Requires monthly payments of interest only, with outstanding principal due upon maturity. The swap fixing the rate on this loan expires on May 1, 2017. |
Douglas Emmett, Inc. | OFFICE PORTFOLIO SUMMARY | |
as of December 31, 2013 |
Submarket | Number of Properties | Rentable Square Feet | Percent of Square Feet of Our Total Portfolio | Submarket Rentable Square Feet | Our Market Share in Submarket | |||||||||||
Beverly Hills | 8 | 1,643,911 | 10.9 | % | 7,741,422 | 21.2 | % | |||||||||
Brentwood | 14 | 1,700,889 | 11.3 | 3,356,126 | 50.7 | |||||||||||
Burbank | 1 | 420,949 | 2.8 | 6,733,458 | 6.3 | |||||||||||
Century City | 3 | 916,060 | 6.1 | 10,064,599 | 9.1 | |||||||||||
Honolulu | 4 | 1,716,708 | 11.4 | 5,088,599 | 33.7 | |||||||||||
Olympic Corridor | 5 | 1,098,073 | 7.3 | 3,022,969 | 36.3 | |||||||||||
Santa Monica | 8 | 972,795 | 6.4 | 8,700,348 | 11.2 | |||||||||||
Sherman Oaks/Encino | 12 | 3,372,129 | 22.3 | 6,171,530 | 54.6 | |||||||||||
Warner Center/Woodland Hills | 3 | 2,855,911 | 18.9 | 7,203,647 | 39.6 | |||||||||||
Westwood | 2 | 396,808 | 2.6 | 4,443,398 | 8.9 | |||||||||||
Total | 60 | 15,094,233 | 100.0 | % | 62,526,096 | 24.1 | ||||||||||
Douglas Emmett, Inc. | OFFICE PORTFOLIO PERCENT LEASED AND IN-PLACE RENTS | |
as of December 31, 2013 |
Submarket | Percent Leased(1) | Annualized Rent | Annualized Rent Per Leased Square Foot(2) | Monthly Rent Per Leased Square Foot | |||||||||||||
Beverly Hills | 95.7 | % | $ | 62,970,420 | $ | 41.88 | $ | 3.49 | |||||||||
Brentwood | 92.0 | 54,913,679 | 36.65 | 3.05 | |||||||||||||
Burbank | 100.0 | 15,145,670 | 35.98 | 3.00 | |||||||||||||
Century City | 98.9 | 33,553,933 | 37.61 | 3.13 | |||||||||||||
Honolulu(3) | 88.9 | 46,125,696 | 31.75 | 2.65 | |||||||||||||
Olympic Corridor | 92.8 | 30,813,205 | 30.79 | 2.57 | |||||||||||||
Santa Monica(4) | 97.2 | 50,571,389 | 54.01 | 4.50 | |||||||||||||
Sherman Oaks/Encino | 94.0 | 98,238,825 | 31.64 | 2.64 | |||||||||||||
Warner Center/Woodland Hills | 85.1 | 65,198,413 | 28.26 | 2.35 | |||||||||||||
Westwood | 92.6 | 12,689,173 | 35.19 | 2.93 | |||||||||||||
Total / Weighted Average | 92.2 | $ | 470,220,403 | 34.89 | 2.91 | ||||||||||||
Recurring Office Capital Expenditures per Rentable Square Foot | |||||||||||||||||
For the three months ended December 31, 2013 | $ | 0.08 | |||||||||||||||
For the twelve months ended December 31, 2013 | $ | 0.24 | |||||||||||||||
(1) | Includes 267,944 square feet with respect to signed leases not yet commenced. |
(2) | Represents annualized rent divided by leased square feet (excluding signed leases not commenced). |
(3) | Includes $3,003,143 of annualized rent attributable to a health club that we operate. |
(4) | Includes $1,332,386 of annualized rent attributable to our corporate headquarters. |
Douglas Emmett, Inc. | MULTIFAMILY PORTFOLIO SUMMARY | |
as of December 31, 2013 |
Submarket | Number of Properties | Number of Units | Units as a Percent of Total | ||||||||||
Brentwood | 5 | 950 | 33 | % | |||||||||
Honolulu | 2 | 1,098 | 38 | ||||||||||
Santa Monica | 2 | 820 | 29 | ||||||||||
Total | 9 | 2,868 | 100 | % | |||||||||
Submarket | Percent Leased | Annualized Rent | Monthly Rent Per Leased Unit | ||||||||||
Brentwood(1) | 99.4 | % | $ | 24,753,032 | $ | 2,235 | |||||||
Honolulu | 99.5 | 20,437,104 | 1,560 | ||||||||||
Santa Monica(2) | 99.9 | 24,334,284 | 2,476 | ||||||||||
Total / Weighted Average | 99.5 | % | $ | 69,524,420 | 2,044 | ||||||||
Recurring Multifamily Capital Expenditures per Unit | |||||
For the three months ended December 31, 2013 | $ | 133 | |||
For the twelve months ended December 31, 2013 | $ | 354 | |||
(1) | In calculating the percentage of units leased, we removed from the numerator and denominator 21 units at one property which are temporarily unoccupied as a result of damage related to a fire, even though the lost rent from those units is being covered by insurance. |
(2) | Excludes 8,013 square feet of ancillary retail space generating annualized rent of $176,532. |
Douglas Emmett, Inc. | OFFICE TENANT DIVERSIFICATION | |
as of December 31, 2013 |
Individual tenants paying more than 1% of aggregate Annualized Rent(1): | |||||||||||||||||||||||
Tenant | Number of Leases | Number of Properties | Lease Expiration(2) | Total Leased Square Feet | Percent of Rentable Square Feet | Annualized Rent | Percent of Annualized Rent | ||||||||||||||||
Time Warner(3) | 4 | 4 | 2015-2023 | 625,750 | 4.1 | % | $ | 22,316,440 | 4.7 | % | |||||||||||||
William Morris Endeavor | 1 | 1 | 2027 | 180,967 | 1.2 | 9,308,348 | 2.0 | ||||||||||||||||
The Macerich Partnership, L.P. | 1 | 1 | 2018 | 90,832 | 0.6 | 4,803,882 | 1.0 | ||||||||||||||||
Total | 6 | 6 | 897,549 | 5.9 | % | $ | 36,428,670 | 7.7 | % | ||||||||||||||
(1) Based on minimum base rent in leases expiring after December 31, 2013. | |||||||||||||||||||||||
(2) Expiration dates are per leases and do not assume exercise of renewal, extension or termination options. For tenants with multiple leases, the range shown reflects all leases other than storage and similar leases. | |||||||||||||||||||||||
(3) Includes a 10,000 square foot lease expiring in April 2015, a 150,000 square foot lease expiring in April 2016 (the existing subtenant has leased 101,000 square feet of this space commencing on expiration of the current lease and continuing until July 2023), a 421,000 square foot lease expiring in September 2019 and a 45,000 square foot lease expiring in December 2020. | |||||||||||||||||||||||
Douglas Emmett, Inc. | OFFICE LEASE DISTRIBUTION | |
as of December 31, 2013 |
Square Feet Under Lease | Number of Leases | Leases as a Percent of Total | Rentable Square Feet | Square Feet as a Percent of Total | Annualized Rent | Annualized Rent as a Percent of Total | ||||||||||||
2,500 or less | 1,294 | 51.1% | 1,778,018 | 11.8% | $ | 61,381,110 | 13.1% | |||||||||||
2,501-10,000 | 918 | 36.3 | 4,323,116 | 28.6 | 146,060,018 | 31.1 | ||||||||||||
10,001-20,000 | 211 | 8.3 | 2,864,062 | 19.0 | 101,330,628 | 21.5 | ||||||||||||
20,001-40,000 | 80 | 3.2 | 2,131,545 | 14.1 | 73,445,368 | 15.6 | ||||||||||||
40,001-100,000 | 22 | 0.9 | 1,364,748 | 9.1 | 51,827,429 | 11.0 | ||||||||||||
Greater than 100,000 | 5 | 0.2 | 1,015,560 | 6.7 | 36,175,850 | 7.7 | ||||||||||||
Subtotal | 2,530 | 100.0% | 13,477,049 | (1) | 89.3% | 470,220,403 | 100.0% | |||||||||||
Signed leases not commenced | 267,944 | 1.8 | ||||||||||||||||
Available | 1,173,719 | 7.8 | ||||||||||||||||
Building Management Use | 109,383 | 0.7 | ||||||||||||||||
BOMA Adjustment(2) | 66,138 | 0.4 | ||||||||||||||||
Total | 2,530 | 100.0% | 15,094,233 | 100.0% | $ | 470,220,403 | 100.0% | |||||||||||
(1) Average tenant size is approximately 5,300 square feet. Median tenant size is approximately 2,400 square feet. | ||||||||||||||||||
(2) Represents square footage adjustments for leases that do not reflect BOMA 1996 remeasurement. | ||||||||||||||||||
Douglas Emmett, Inc. | INDUSTRY DIVERSIFICATION | |
as of December 31, 2013 |
Industry | Number of Leases | Annualized Rent as a Percent of Total | |||||
Legal | 508 | 18.9 | % | ||||
Financial Services | 328 | 13.9 | |||||
Entertainment | 177 | 13.7 | |||||
Real Estate | 193 | 8.9 | |||||
Accounting & Consulting | 307 | 8.6 | |||||
Health Services | 322 | 8.1 | |||||
Insurance | 122 | 7.2 | |||||
Retail | 191 | 6.8 | |||||
Technology | 110 | 4.3 | |||||
Advertising | 69 | 2.6 | |||||
Public Administration | 68 | 2.3 | |||||
Educational Services | 27 | 1.7 | |||||
Other | 108 | 3.0 | |||||
Total | 2,530 | 100.0 | % | ||||
Douglas Emmett, Inc. | OFFICE LEASE EXPIRATIONS | |
as of December 31, 2013 |
Year of Lease Expiration | Number of Leases | Rentable Square Feet | Expiring Square Feet as a Percent of Total | Annualized Rent at December 31, 2013 | 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 | 52 | 173,107 | 1.1 | % | $ | 4,769,138 | 1.0 | % | $ | 27.55 | $ | 27.56 | ||||||||||||||
2014 | 428 | 1,803,879 | 12.0 | 64,135,175 | 13.6 | 35.55 | 35.84 | |||||||||||||||||||
2015 | 524 | 2,082,865 | 13.8 | 71,433,311 | 15.2 | 34.30 | 35.61 | |||||||||||||||||||
2016 | 474 | 2,027,372 | 13.4 | 68,788,818 | 14.6 | 33.93 | 36.05 | |||||||||||||||||||
2017 | 363 | 1,855,611 | 12.3 | 61,793,054 | 13.1 | 33.30 | 36.40 | |||||||||||||||||||
2018 | 297 | 1,500,769 | 10.0 | 55,734,008 | 11.8 | 37.14 | 41.49 | |||||||||||||||||||
2019 | 142 | 1,309,462 | 8.7 | 45,536,634 | 9.7 | 34.78 | 39.07 | |||||||||||||||||||
2020 | 97 | 831,153 | 5.5 | 28,512,523 | 6.1 | 34.30 | 40.71 | |||||||||||||||||||
2021 | 54 | 542,391 | 3.6 | 20,081,388 | 4.3 | 37.02 | 43.00 | |||||||||||||||||||
2022 | 30 | 260,547 | 1.7 | 8,812,190 | 1.9 | 33.82 | 42.92 | |||||||||||||||||||
2023 | 38 | 601,060 | 4.0 | 19,171,875 | 4.1 | 31.90 | 40.16 | |||||||||||||||||||
Thereafter | 31 | 488,833 | 3.2 | 21,452,289 | 4.6 | 43.88 | 59.61 | |||||||||||||||||||
Subtotal/Weighted Average | 2,530 | 13,477,049 | 89.3 | 470,220,403 | 100.0 | 34.89 | 38.53 | |||||||||||||||||||
Signed leases not commenced | 267,944 | 1.8 | ||||||||||||||||||||||||
Available | 1,173,719 | 7.8 | ||||||||||||||||||||||||
Building Management Use | 109,383 | 0.7 | ||||||||||||||||||||||||
BOMA Adjustment(3) | 66,138 | 0.4 | ||||||||||||||||||||||||
Total/Weighted Average | 2,530 | 15,094,233 | 100.0 | % | $ | 470,220,403 | 100.0 | % | 34.89 | 38.53 | ||||||||||||||||
(1) | Represents annualized rent at December 31, 2013 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 1996 remeasurement. |
Douglas Emmett, Inc. | QUARTERLY OFFICE LEASE EXPIRATIONS - NEXT FOUR QUARTERS | |
as of December 31, 2013 |
Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | |||||||||||||||
Expiring SF(1) | 285,078 | 538,318 | 371,045 | 609,438 | ||||||||||||||
Percentage of Portfolio | 2.1 | % | 4.0 | % | 2.8 | % | 4.5 | % | ||||||||||
Expiring Rent per SF(2) | $ | 39.75 | $ | 34.35 | $ | 36.68 | $ | 34.83 | ||||||||||
Detailed Submarket Data(3) | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | |||||||||||||||
Beverly Hills | Expiring SF(1) | 21,475 | 36,225 | 32,086 | 41,044 | ||||||||||||||
Expiring Rent per SF(2) | $ | 32.88 | $ | 44.63 | $ | 47.85 | $ | 38.11 | |||||||||||
Brentwood | Expiring SF(1) | 32,660 | 59,126 | 38,965 | 73,926 | ||||||||||||||
Expiring Rent per SF(2) | $ | 38.53 | $ | 35.44 | $ | 42.85 | $ | 33.07 | |||||||||||
Century City | Expiring SF(1) | — | 39,193 | 15,510 | 73,801 | ||||||||||||||
Expiring Rent per SF(2) | $ | — | $ | 36.44 | $ | 39.80 | $ | 44.34 | |||||||||||
Honolulu | Expiring SF(1) | 5,566 | 22,226 | 42,145 | 37,262 | ||||||||||||||
Expiring Rent per SF(2) | $ | 31.78 | $ | 29.91 | $ | 32.07 | $ | 32.29 | |||||||||||
Olympic Corridor | Expiring SF(1) | 7,898 | 67,677 | 40,558 | 26,786 | ||||||||||||||
Expiring Rent per SF(2) | $ | 27.40 | $ | 34.28 | $ | 31.76 | $ | 33.75 | |||||||||||
Santa Monica | Expiring SF(1) | 43,070 | 15,050 | 29,789 | 37,295 | ||||||||||||||
Expiring Rent per SF(2) | $ | 66.43 | $ | 77.13 | $ | 42.92 | $ | 59.67 | |||||||||||
Sherman Oaks/Encino | Expiring SF(1) | 70,517 | 92,901 | 81,958 | 95,062 | ||||||||||||||
Expiring Rent per SF(2) | $ | 36.66 | $ | 33.00 | $ | 36.88 | $ | 34.43 | |||||||||||
Warner Center/Woodland Hills | Expiring SF(1) | 97,940 | 204,038 | 83,740 | 217,118 | ||||||||||||||
Expiring Rent per SF(2) | $ | 32.54 | $ | 29.78 | $ | 31.21 | $ | 28.00 | |||||||||||
Westwood | Expiring SF(1) | 5,952 | 1,882 | 6,294 | 7,144 | ||||||||||||||
Expiring Rent per SF(2) | $ | 57.29 | $ | 32.51 | $ | 36.86 | $ | 36.33 | |||||||||||
(1) | Includes leases with an expiration date in the applicable quarter where the space had not been re-leased as of December 31, 2013, other than 173,107 square feet of short term leases. The variations in this number from quarter to quarter primarily reflects the mix of buildings/submarkets involved, although it is also impacted by the varying terms and square footage of the individual leases involved. |
(2) | Includes the impact of rent escalations over the entire term of the expiring lease, and thus is not directly comparable to asking rents. |
(3) | Due to the small square footage of leases in each quarter in each submarket, and the varying terms and square footage of the individual leases and the individual buildings involved, these numbers should be extrapolated with caution. |
Douglas Emmett, Inc. | OFFICE PORTFOLIO LEASING ACTIVITY | |
for the three months ended December 31, 2013 |
Rentable Square feet | Percentage | |||||||
Net Absorption During Quarter(1) | 79,551 | 0.53% | ||||||
Office Leases Signed During Quarter | Number of leases | Rentable square feet | Weighted Average Lease Term (months) | |||||
New leases | 70 | 267,797 | 57 | |||||
Renewal leases | 99 | 320,570 | 50 | |||||
All leases | 169 | 588,367 | 53 | |||||
Change in Rental Rates for Office Leases Executed during the Quarter(2) | |||||||
Starting Cash Rent | Straight-line Rent | Expiring Cash Rent(3) | |||||
Leases executed during the quarter | $33.55 | $34.46 | N/A | ||||
Prior leases for same space | $33.58 | $34.62 | $36.88 | ||||
Percentage change | (0.1)% | (0.5)% | (9.0)% | ||||
Average Office Lease Transaction Costs (Per Square Foot)(4) | |||||
Lease Transaction Costs | Lease Transaction Costs per Annum | ||||
New leases signed during quarter | $32.70 | $6.91 | |||
Renewal leases signed during quarter | $14.45 | $3.46 | |||
All leases signed during quarter | $22.76 | $5.14 | |||
(1) | Excludes any properties acquired during the quarter. |
(2) | Represents the average initial stabilized cash rents and straight-line on new and renewal leases executed during the quarter compared to the prior lease on the same space, excluding short term leases and new leases on space which had not been leased for at least a year. |
(3) | The percentage change represents the difference in the starting cash rent on leases executed during the quarter compared to the expiring cash rent on the prior leases for the same space, which reflects the impact of rent escalations over the entire term of the expiring lease. The impact on cash revenues in the quarter was offset by the increase in cash revenues due to the annual rent escalations on the continuing in-place leases. |
(4) | Represents weighted average tenant improvements and leasing commissions. |
Douglas Emmett, Inc. | 2014 GUIDANCE | |
Metric | 2014 Guidance |
Funds From Operations (FFO) | $1.57 to $1.63 per share |
Adjusted Funds From Operations (AFFO) | $1.18 to $1.24 per share |
Office occupancy rate as of 12/31/2014 | 1.5% to 2.5% greater than at 12/31/13 |
Residential leased rate as of 12/31/2014 | Essentially fully leased |
Same property cash NOI growth rate | Up 2% to 3% from 2013 |
G&A | $27 million to $28.5 million |
Interest expense | $128 million to $129 million |
FAS 141 revenue (from above/below market leases) | $22 million to $23 million(1) |
Straight-line revenue | $4 million to $5.5 million |
Recurring capex (Office) | $0.25 per square foot |
Recurring capex (Multifamily) | $450 per unit |
Weighted average diluted shares | 175 million to 176 million(2) |
(1) | Assumes that we exercise our option to purchase the land under one of our office buildings in Honolulu, which accelerates the remaining FAS 141 balance on our ground lease for that building. |
Douglas Emmett, Inc. | DEFINITIONS | |
• | “NOI - GAAP basis” is calculated by excluding the following from our net income : general and administrative expense, depreciation and amortization expense, other income, other expense, income (or loss) including depreciation from unconsolidated real estate funds, interest expense, acquisition related expenses, and net income attributable to noncontrolling interests. |
• | “NOI - Cash basis” is calculated by excluding from GAAP basis NOI our straight-line rent and the amortization of acquired above and below market leases. |
Douglas Emmett, Inc. | DEFINITIONS | |