Maryland | 1-33106 | 20-3073047 |
(State or other jurisdiction of incorporation) | Commission file number | (I.R.S. Employer identification No.) |
DOUGLAS EMMETT, INC. | |||
Dated: | November 1, 2016 | By: | /s/ MONA M. GISLER |
Mona M. Gisler | |||
Chief Financial Officer |
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• | Financial Results: Compared to the prior year quarter, our (i) net income attributable to common stockholders increased by 163.9% to $31.8 million, (ii) Funds From Operations (FFO) increased by 19.2% to $83.9 million, (iii) Adjusted Funds From Operations (AFFO) increased by 17.1% to $68.7 million, and (iv) same property cash NOI increased by 7.4% to $100.7 million. |
• | Office Fundamentals: During the third quarter, we leased 571,252 square feet of office space and, compared to the second quarter, the leased rate for our total office portfolio decreased to 91.9% from 92.1%, primarily due to higher vacancy acquisitions during the third quarter of 2016. With our office rents increasing, straight-line rents for office leases signed during the third quarter were up 31.3% and starting cash rents were up 15.0% over the expiring cash rents from leases covering the same space. |
• | Multifamily Fundamentals: Our multifamily portfolio remained fully leased and the same property cash revenues increased by 3.1% compared to the prior year quarter. |
• | Acquisitions: During the third quarter, a consolidated joint venture that we manage and in which we owned a 20% interest as of September 30, 2016, acquired two multi-tenant Class A office properties in Los Angeles: |
◦ | On July 21, 2016, the joint venture acquired a 365,000 square foot office property located at 12100 Wilshire Boulevard in the Brentwood submarket of Los Angeles for $225.0 million. |
◦ | On September 27, 2016, the joint venture acquired a 129,000 square foot office property located at 233 Wilshire Boulevard in the Santa Monica submarket of Los Angeles for $139.5 million. |
• | Disposition: During the third quarter, we closed on the sale of a 168,000 square foot office property in Sherman Oaks, Los Angeles for a contract price of $56.7 million in cash. |
• | Debt: At September 30, 2016, our pro forma net debt to enterprise value was 38%. We have no material debt maturities until August 2018. |
• | Dividends: On October 14, 2016, we paid a quarterly cash dividend of $0.22 per common share, or $0.88 per common share on an annualized basis, to our shareholders of record on September 30, 2016. |
• | Guidance: We are adding guidance for 2016 Net Income Per Common Share - Diluted of $0.53 to $0.57 per share. In addition, we are increasing the midpoint of our FFO guidance by 2 cents to $1.79 to $1.81 per share, and we are increasing the midpoint of our AFFO guidance by 3 cents to $1.44 to $1.46 per share. See page 23. |
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COMPANY OVERVIEW | |
FINANCIAL RESULTS | |
PORTFOLIO DATA | |
![]() | Company Overview |
Office Portfolio | |||||||
Consolidated(1) | Total Portfolio(2) | ||||||
Properties | 59 | 67 | |||||
Rentable Square Feet (in thousands) | 15,807 | 17,631 | |||||
Leased rate | 91.9 | % | 91.9 | % | |||
Occupancy rate | 90.0 | % | 90.2 | % | |||
Multifamily Portfolio | |||||||
Consolidated | |||||||
Properties | 10 | ||||||
Units | 3,336 | ||||||
Leased rate | 99.6 | % | |||||
Market Capitalization (in thousands, except price per share) | ||||||
Fully Diluted Shares outstanding | 179,883 | |||||
Closing price per share of common stock (NYSE:DEI) | $ | 36.63 | ||||
Equity capitalization(3) | $ | 6,589,121 | ||||
Leverage Ratio (dollars in thousands) | ||||||
Consolidated net debt(4) | $ | 4,279,092 | ||||
Pro forma net debt(4) | $ | 4,043,904 | ||||
Pro forma enterprise value | $ | 10,633,026 | ||||
Pro forma net debt to enterprise value | 38 | % | ||||
AFFO Payout Ratio(5) | |||||
Three months ended September 30, 2016 | 56.4 | % | |||
(1) | Includes our wholly owned office properties and seven office properties in three consolidated joint ventures which we manage and hold a weighted average capital interest of approximately 29% based on square footage. |
(2) | Includes our consolidated portfolio and eight office properties in two unconsolidated institutional real estate funds (our Funds)which we manage and a weighted average capital interest of approximately 60% based on square footage. |
(3) | Represents our Fully Diluted Shares multiplied by the closing price of our common stock on September 30, 2016. |
(4) | Consolidated net debt represents consolidated debt, net of cash and cash equivalents of $158.4 million, before deducting unamortized deferred loan costs of $35.7 million. Pro forma net debt includes our share of consolidated net debt plus our share of our unconsolidated real estate funds calculated on the same basis. See page 12 for the calculation of our consolidated and pro forma debt. |
(5) | Represents dividends paid within each period divided by our AFFO for that period. |
![]() | Company Overview |
![]() | Company Overview |
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 | Chief Executive Officer, PinnacleCare |
Dr. David T. Feinberg | President and Chief Executive Officer, Geisinger Health System |
Virginia A. McFerran | President and Chief Executive Officer, Optum Analytics |
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 |
Mona M. Gisler | Chief Financial Officer |
Kevin A. Crummy | Chief Investment Officer |
![]() | Financial Results |
September 30, 2016 | December 31, 2015 | ||||||
Assets | |||||||
Investment in real estate: | |||||||
Land | $ | 1,025,704 | $ | 897,916 | |||
Buildings and improvements | 7,215,310 | 5,644,546 | |||||
Tenant improvements and lease intangibles | 795,600 | 696,647 | |||||
Property under development | 45,535 | 26,900 | |||||
Investment in real estate, gross | 9,082,149 | 7,266,009 | |||||
Less: accumulated depreciation and amortization | (1,855,427 | ) | (1,687,998 | ) | |||
Investment in real estate, net | 7,226,722 | 5,578,011 | |||||
Real estate held for sale, net | — | 42,943 | |||||
Cash and cash equivalents | 158,415 | 101,798 | |||||
Tenant receivables, net | 2,168 | 1,907 | |||||
Deferred rent receivables, net | 90,480 | 79,837 | |||||
Acquired lease intangible assets, net | 4,990 | 4,484 | |||||
Interest rate contract assets | — | 4,830 | |||||
Investment in unconsolidated real estate funds | 144,930 | 164,631 | |||||
Other assets | 17,568 | 87,720 | |||||
Total assets | $ | 7,645,273 | $ | 6,066,161 | |||
Liabilities | |||||||
Secured notes payable and revolving credit facility, net(1) | $ | 4,401,851 | $ | 3,611,276 | |||
Interest payable, accounts payable and deferred revenue | 94,792 | 57,417 | |||||
Security deposits | 46,144 | 38,683 | |||||
Acquired lease intangible liabilities, net | 74,151 | 28,605 | |||||
Interest rate contract liabilities | 28,046 | 16,310 | |||||
Dividends payable | 33,248 | 32,322 | |||||
Total liabilities | 4,678,232 | 3,784,613 | |||||
Equity | |||||||
Douglas Emmett, Inc. stockholders' equity: | |||||||
Common stock | 1,511 | 1,469 | |||||
Additional paid-in capital | 2,719,856 | 2,706,753 | |||||
Accumulated other comprehensive loss | (23,661 | ) | (9,285 | ) | |||
Accumulated deficit | (805,529 | ) | (772,726 | ) | |||
Total Douglas Emmett, Inc. stockholders' equity | 1,892,177 | 1,926,211 | |||||
Noncontrolling interests | 1,074,864 | 355,337 | |||||
Total equity | 2,967,041 | 2,281,548 | |||||
Total liabilities and equity | $ | 7,645,273 | $ | 6,066,161 |
(1) | See page 12 for more information regarding our debt balances. |
![]() | Financial Results |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues | |||||||||||||||
Office rental | |||||||||||||||
Rental revenues | $ | 128,744 | $ | 103,436 | $ | 366,400 | $ | 307,895 | |||||||
Tenant recoveries | 12,914 | 11,074 | 34,111 | 32,687 | |||||||||||
Parking and other income | 25,950 | 21,715 | 74,572 | 63,890 | |||||||||||
Total office revenues | 167,608 | 136,225 | 475,083 | 404,472 | |||||||||||
Multifamily rental | |||||||||||||||
Rental revenues | 22,801 | 22,133 | 67,634 | 65,752 | |||||||||||
Parking and other income | 1,712 | 1,719 | 5,191 | 5,119 | |||||||||||
Total multifamily revenues | 24,513 | 23,852 | 72,825 | 70,871 | |||||||||||
Total revenues | 192,121 | 160,077 | 547,908 | 475,343 | |||||||||||
Operating Expenses | |||||||||||||||
Office expenses | 56,926 | 49,195 | 158,190 | 139,936 | |||||||||||
Multifamily expenses | 5,950 | 6,191 | 17,322 | 17,941 | |||||||||||
General and administrative | 8,099 | 6,867 | 25,573 | 21,701 | |||||||||||
Depreciation and amortization | 63,827 | 52,229 | 181,947 | 153,309 | |||||||||||
Total operating expenses | 134,802 | 114,482 | 383,032 | 332,887 | |||||||||||
Operating income | 57,319 | 45,595 | 164,876 | 142,456 | |||||||||||
Other income | 2,295 | 2,129 | 6,527 | 13,103 | |||||||||||
Other expenses | (1,728 | ) | (1,605 | ) | (4,963 | ) | (4,796 | ) | |||||||
Income, including depreciation, from unconsolidated funds | 2,334 | 898 | 5,564 | 3,548 | |||||||||||
Interest expense | (36,479 | ) | (32,705 | ) | (109,842 | ) | (101,521 | ) | |||||||
Acquisition-related expenses | (1,188 | ) | (153 | ) | (2,865 | ) | (641 | ) | |||||||
Income before gains | 22,553 | 14,159 | 59,297 | 52,149 | |||||||||||
Gains on sales of investments in real estate | 13,245 | — | 14,327 | — | |||||||||||
Net income | 35,798 | 14,159 | 73,624 | 52,149 | |||||||||||
Less: Net income attributable to noncontrolling interests | (3,950 | ) | (2,089 | ) | (7,928 | ) | (7,932 | ) | |||||||
Net income attributable to common stockholders | $ | 31,848 | $ | 12,070 | $ | 65,696 | $ | 44,217 | |||||||
Net income per common share - basic | $ | 0.210 | $ | 0.082 | $ | 0.440 | $ | 0.302 | |||||||
Net income per common share - diluted | $ | 0.206 | $ | 0.080 | $ | 0.428 | $ | 0.293 | |||||||
Weighted average shares of common stock outstanding - basic | 150,753 | 146,331 | 148,578 | 145,856 | |||||||||||
Weighted average shares of common stock outstanding - diluted | 153,419 | 150,740 | 152,819 | 150,285 |
![]() | Financial Results |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Funds From Operations (FFO) | |||||||||||||||
Net income attributable to common stockholders | $ | 31,848 | $ | 12,070 | $ | 65,696 | $ | 44,217 | |||||||
Depreciation and amortization of real estate assets | 63,827 | 52,229 | 181,947 | 153,309 | |||||||||||
Net income attributable to noncontrolling interests | 3,950 | 2,089 | 7,928 | 7,932 | |||||||||||
Adjustments attributable to unconsolidated funds(2) | 4,037 | 4,008 | 11,935 | 12,001 | |||||||||||
Adjustments attributable to consolidated joint ventures(2) | (6,510 | ) | (18 | ) | (11,326 | ) | (76 | ) | |||||||
Gains on sales of investments in real estate | (13,245 | ) | — | (14,327 | ) | — | |||||||||
FFO | $ | 83,907 | $ | 70,378 | $ | 241,853 | $ | 217,383 | |||||||
Adjusted Funds From Operations (AFFO) | |||||||||||||||
FFO | $ | 83,907 | $ | 70,378 | $ | 241,853 | $ | 217,383 | |||||||
Straight-line rent | (3,279 | ) | (1,101 | ) | (10,915 | ) | (4,467 | ) | |||||||
Net accretion of acquired above and below market leases(3) | (5,101 | ) | (2,866 | ) | (13,415 | ) | (15,806 | ) | |||||||
Loan costs | 2,227 | 1,558 | 6,288 | 5,532 | |||||||||||
Recurring capital expenditures, tenant improvements and leasing commissions | (14,170 | ) | (11,573 | ) | (40,371 | ) | (38,579 | ) | |||||||
Non-cash compensation expense | 4,056 | 2,978 | 12,231 | 10,292 | |||||||||||
Adjustments attributable to unconsolidated funds(2) | (2,241 | ) | (716 | ) | (4,920 | ) | (2,615 | ) | |||||||
Adjustments attributable to consolidated joint ventures(2) | 3,299 | 2 | 6,871 | 4 | |||||||||||
AFFO | $ | 68,698 | $ | 58,660 | $ | 197,622 | $ | 171,744 | |||||||
Weighted average shares of common stock outstanding - diluted | 153,419 | 150,740 | 152,819 | 150,285 | |||||||||||
Weighted average Operating Partnership Units and LTIP Units outstanding(4) | 26,246 | 26,962 | 26,593 | 27,331 | |||||||||||
Weighted average fully diluted shares outstanding | 179,665 | 177,702 | 179,412 | 177,616 | |||||||||||
Net income per common share - diluted | $ | 0.21 | $ | 0.08 | $ | 0.43 | $ | 0.29 | |||||||
FFO per share- fully diluted | $ | 0.47 | $ | 0.40 | $ | 1.35 | $ | 1.22 | |||||||
Dividends declared per share | $ | 0.22 | $ | 0.21 | $ | 0.66 | $ | 0.63 |
(1) | Reflects the FFO and AFFO attributable to the common stockholders and noncontrolling interests in our Operating Partnership, which includes our share of the FFO and AFFO from our unconsolidated Funds and excludes the FFO and AFFO attributable to the noncontrolling interests in our consolidated joint ventures. |
(2) | Adjusts for the portion of each other listed adjustment item that is attributed to the noncontrolling interests in our consolidated joint ventures and the effect of each other listed adjustment item on our share of the results of our unconsolidated Funds. |
(3) | The nine months ended September 30, 2015 includes $6.6 million of accretion for an above-market ground lease related to the acquisition of land under one of our office buildings during the first quarter of 2015. |
(4) | Long-Term Incentive Plan Units (LTIP Units) are granted as part of our equity compensation plan. |
![]() | Financial Results |
As of September 30, | |||||||
2016 | 2015 | ||||||
Office Statistics | |||||||
Number of properties | 50 | 50 | |||||
Rentable Square Feet (in thousands) | 12,654 | 12,556 | |||||
Ending % leased | 92.5 | % | 93.0 | % | |||
Ending % occupied | 90.4 | % | 91.0 | % | |||
Quarterly average % occupied | 90.7 | % | 91.0 | % | |||
Multifamily Statistics | |||||||
Number of properties | 9 | 9 | |||||
Number of units | 2,640 | 2,640 | |||||
Ending % leased | 99.6 | % | 99.7 | % | |||
Three Months Ended September 30, | % Favorable | |||||||||||
2016 | 2015 | (Unfavorable) | ||||||||||
Net Operating Income (NOI)(1) | ||||||||||||
Office revenues | $ | 131,937 | $ | 127,615 | 3.4 | % | ||||||
Office expenses | (44,145 | ) | (45,271 | ) | 2.5 | % | ||||||
Office NOI | 87,792 | 82,344 | 6.6 | % | ||||||||
Multifamily revenues | 20,823 | 20,221 | 3.0 | % | ||||||||
Multifamily expenses | (4,847 | ) | (5,121 | ) | 5.4 | % | ||||||
Multifamily NOI | 15,976 | 15,100 | 5.8 | % | ||||||||
$ | 103,768 | $ | 97,444 | 6.5 | % | |||||||
Cash Net Operating Income (NOI)(1) | ||||||||||||
Office revenues | $ | 129,708 | $ | 124,803 | 3.9 | % | ||||||
Office expenses | (44,158 | ) | (45,284 | ) | 2.5 | % | ||||||
Office Cash NOI | 85,550 | 79,519 | 7.6 | % | ||||||||
Multifamily revenues | 19,978 | 19,384 | 3.1 | % | ||||||||
Multifamily expenses | (4,847 | ) | (5,121 | ) | 5.4 | % | ||||||
Multifamily Cash NOI | 15,131 | 14,263 | 6.1 | % | ||||||||
$ | 100,681 | $ | 93,782 | 7.4 | % | |||||||
(1) | For a reconciliation of these items to Net Income, please see page 10. |
![]() | Financial Results |
Three Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Same property office cash revenues | $ | 129,708 | $ | 124,803 | |||
Non cash adjustments per definition of NOI | 2,229 | 2,812 | |||||
Same property office revenues | 131,937 | 127,615 | |||||
Same property office cash expenses | (44,158 | ) | (45,284 | ) | |||
Non cash adjustments per definition of NOI | 13 | 13 | |||||
Same property office expenses | (44,145 | ) | (45,271 | ) | |||
Office NOI | 87,792 | 82,344 | |||||
Same property multifamily cash revenues | 19,978 | 19,384 | |||||
Non cash adjustments per definition of NOI | 845 | 837 | |||||
Same property multifamily revenues | 20,823 | 20,221 | |||||
Same property multifamily cash expenses | (4,847 | ) | (5,121 | ) | |||
Non cash adjustments per definition of NOI | — | — | |||||
Same property multifamily expenses | (4,847 | ) | (5,121 | ) | |||
Multifamily NOI | 15,976 | 15,100 | |||||
Same Property NOI | 103,768 | 97,444 | |||||
Non-comparable office revenues | 35,671 | 8,610 | |||||
Non-comparable office expenses | (12,781 | ) | (3,924 | ) | |||
Non-comparable multifamily revenues | 3,690 | 3,631 | |||||
Non-comparable multifamily expenses | (1,103 | ) | (1,070 | ) | |||
NOI | 129,245 | 104,691 | |||||
General and administrative | (8,099 | ) | (6,867 | ) | |||
Depreciation and amortization | (63,827 | ) | (52,229 | ) | |||
Operating income | 57,319 | 45,595 | |||||
Other income | 2,295 | 2,129 | |||||
Other expenses | (1,728 | ) | (1,605 | ) | |||
Income, including depreciation, from unconsolidated real estate funds | 2,334 | 898 | |||||
Interest expense | (36,479 | ) | (32,705 | ) | |||
Acquisition-related expenses | (1,188 | ) | (153 | ) | |||
Income before gains | 22,553 | 14,159 | |||||
Gains on sales of investments in real estate | 13,245 | — | |||||
Net income | 35,798 | 14,159 | |||||
Less: Net income attributable to noncontrolling interests | (3,950 | ) | (2,089 | ) | |||
Net income attributable to common stockholders | $ | 31,848 | $ | 12,070 |
![]() | Financial Results |
Three months ended September 30, 2016 | |||||||||||
Wholly Owned Properties | Consolidated Joint Ventures(1) | Unconsolidated Funds(2) | |||||||||
Revenues | $ | 164,885 | $ | 27,236 | $ | 18,867 | |||||
Operating expenses | $ | 53,487 | $ | 9,389 | $ | 6,085 | |||||
Straight-line rent | $ | 1,001 | $ | 2,278 | $ | 139 | |||||
Above/below-market lease revenue | $ | 2,109 | $ | 2,992 | $ | 25 | |||||
Cash NOI attributable to outside interests(3) | $ | — | $ | 8,097 | $ | 4,763 | |||||
Our share of Cash NOI(4) | $ | 108,288 | $ | 4,480 | $ | 7,855 | |||||
Nine months ended September 30, 2016 | |||||||||||
Wholly Owned Properties | Consolidated Joint Ventures(1) | Unconsolidated Funds(2) | |||||||||
Revenues | $ | 487,867 | $ | 60,041 | $ | 54,104 | |||||
Operating expenses | $ | 155,117 | $ | 20,395 | $ | 18,269 | |||||
Straight-line rent | $ | 4,469 | $ | 6,446 | $ | 694 | |||||
Above/below-market lease revenue | $ | 6,597 | $ | 6,818 | $ | 91 | |||||
Cash NOI attributable to outside interests(3) | $ | — | $ | 14,033 | $ | 13,241 | |||||
Our share of Cash NOI(4) | $ | 321,684 | $ | 12,349 | $ | 21,809 |
(1) | Represents stand-alone financial data (with property management fees excluded from operating expenses as a consolidating entry) for three consolidated joint ventures which we manage and partially own and which own a combined seven Class A office properties totaling 2.3 million square feet in our submarkets. We are entitled to (i) distributions based on invested capital as well as additional distributions based on Cash NOI, (ii) fees for property management and other services and (iii) reimbursement of certain acquisition expenses and certain other costs. |
(2) | Represents stand-alone financial data (with property management fees excluded from operating expenses as a consolidating entry) for two unconsolidated Funds which we manage and partially own and which own a combined eight Class A office properties totaling 1.8 million square feet in our submarkets. We are entitled to (i) priority distributions in addition to distributions based on invested capital, (ii) a carried interest if the investors’ distributions exceed a hurdle rate and (iii) fees for property management and other services and (iv) reimbursement of certain costs. |
(3) | Represents the share of Cash NOI attributable to interests other than our fully diluted shares under the applicable agreements. |
(4) | Represents the share of Cash NOI attributable to our fully diluted shares. |
![]() | Financial Results |
Outstanding Loans (As of September 30, 2016, unaudited and in thousands) | ||||||||||||||
Maturity Date(1) | Principal Balance | Our Share(2) | Effective Rate(3) | Swap Maturity Date | ||||||||||
Consolidated Loans - Wholly Owned Subsidiaries | ||||||||||||||
2/28/2018 | $ | 1,000 | $ | 1,000 | 3.00% | -- | ||||||||
8/1/2018 | 530,000 | 530,000 | LIBOR + 1.70% | -- | ||||||||||
8/5/2018 | (4) | 351,472 | 351,472 | 4.14% | -- | |||||||||
2/1/2019 | (4) | 150,627 | 150,627 | 4.00% | -- | |||||||||
6/5/2019 | (5) | 285,000 | 285,000 | 3.85% | -- | |||||||||
10/1/2019 | 145,000 | 145,000 | LIBOR + 1.25% | -- | ||||||||||
3/1/2020 | (6) | 347,188 | 347,188 | 4.46% | -- | |||||||||
11/2/2020 | 388,080 | 388,080 | 3.65% | 11/1/2017 | ||||||||||
4/15/2022 | 340,000 | 340,000 | 2.77% | 4/1/2020 | ||||||||||
7/27/2022 | 180,000 | 180,000 | 3.06% | 7/1/2020 | ||||||||||
11/2/2022 | 400,000 | 400,000 | 2.64% | 11/1/2020 | ||||||||||
6/23/2023 | 360,000 | 360,000 | 2.57% | 7/1/2021 | ||||||||||
4/1/2025 | 102,400 | 102,400 | 2.84% | 3/1/2020 | ||||||||||
12/1/2025 | 115,000 | 115,000 | 2.76% | 12/1/2020 | ||||||||||
8/21/2020 | (7) | — | — | LIBOR + 1.40% | -- | |||||||||
Subtotal | $ | 3,695,767 | $ | 3,695,767 | ||||||||||
Consolidated Loans - Joint Ventures | ||||||||||||||
3/1/2017 | $ | 15,740 | $ | 10,493 | LIBOR + 1.60% | -- | ||||||||
7/21/2019 | 146,000 | 29,200 | LIBOR + 1.55% | -- | ||||||||||
2/28/2023 | 580,000 | 174,000 | 2.37% | 3/1/2021 | ||||||||||
Total Consolidated Loans | (8) | $ | 4,437,507 | $ | 3,909,460 | |||||||||
Unconsolidated Loans of our Funds | ||||||||||||||
5/1/2018 | $ | 325,000 | $ | 222,980 | 2.35% | 5/1/2017 | ||||||||
3/1/2023 | 110,000 | 26,680 | 2.30% | 3/1/2021 | ||||||||||
Total Unconsolidated Loans | $ | 435,000 | $ | 249,660 | ||||||||||
Total Loans | $ | 4,159,120 | ||||||||||||
(1) | Maturity dates include the effect of extension options. |
(2) | Eliminates the share held by noncontrolling interests in our consolidated joint ventures and investors in our unconsolidated Funds by multiplying the principal balance by our share of the borrowing entity. |
(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) | Interest only until February 2017, with principal amortization thereafter based upon a 30-year amortization schedule. |
(6) | Requires monthly payments of principal and interest. Principal amortization is based upon a 30-year amortization schedule. Interest rate is fixed until March 1, 2018. |
(7) | $400 million revolving credit facility. Unused commitment fees range from 0.15% to 0.20% |
(8) | At September 30, 2016, the weighted average remaining life, including extension options, of our total consolidated term loans (excluding our revolving credit facility) was 4.5 years. For the $3.60 billion of term loans on which the interest rate was fixed under the terms of the loan or a swap, the weighted average (i) remaining life was 5.0 years, (ii) remaining period during which the interest rate was fixed was 3.1 years, (iii) annual interest rate was 3.24% and (iv) effective interest rate was 3.39% (including the non-cash amortization of deferred loan costs). |
![]() | Portfolio Data |
Submarket | Number of Properties | Rentable Square Feet | Percent of Square Feet of Our Total Portfolio | Submarket Rentable Square Feet | Our Market Share in Submarket(1) | |||||||||||
Beverly Hills(2) | 9 | 1,861,339 | 10.6 | % | 7,408,659 | 22.2 | % | |||||||||
Brentwood | 15 | 2,046,646 | 11.6 | 3,356,126 | 61.0 | |||||||||||
Burbank | 1 | 420,949 | 2.4 | 6,733,458 | 6.3 | |||||||||||
Century City | 3 | 940,913 | 5.3 | 10,064,599 | 9.3 | |||||||||||
Honolulu | 4 | 1,716,716 | 9.7 | 5,088,599 | 33.7 | |||||||||||
Olympic Corridor | 5 | 1,126,097 | 6.4 | 3,524,632 | 31.9 | |||||||||||
Santa Monica | 9 | 1,121,226 | 6.4 | 9,526,221 | 11.8 | |||||||||||
Sherman Oaks/Encino | 12 | 3,451,005 | 19.6 | 6,171,530 | 55.9 | |||||||||||
Warner Center/Woodland Hills | 3 | 2,822,805 | 16.0 | 7,203,647 | 39.2 | |||||||||||
Westwood | 6 | 2,123,035 | 12.0 | 4,443,398 | 47.8 | |||||||||||
Total | 67 | 17,630,731 | 100.0 | % | 63,520,869 | 27.4 | % | |||||||||
(1) | Our market share in the submarket is calculated by dividing Rentable Square Feet by the submarket Rentable Square Feet. The submarket Rentable Square Feet is sourced from the 2016 second quarter CBRE Marketview report. |
(2) | In our Beverly Hills submarket data we include one property consisting of approximately 216,000 square feet located just outside the Beverly Hills city limits. In calculating our percentage of the submarket, we have eliminated this property from both the numerator and the denominator for consistency with third party data. |
![]() | Portfolio Data |
Submarket | Percentage Leased(1) | Annualized Rent | Annualized Rent Per Leased Square Foot(2) | Monthly Rent Per Leased Square Foot | |||||||||||||
Beverly Hills | 97.2 | % | $ | 77,121,503 | $ | 43.67 | $ | 3.64 | |||||||||
Brentwood | 94.6 | 73,977,616 | 39.50 | 3.29 | |||||||||||||
Burbank | 100.0 | 16,022,904 | 38.06 | 3.17 | |||||||||||||
Century City | 94.4 | 35,492,142 | 42.09 | 3.51 | |||||||||||||
Honolulu(3) | 87.0 | 47,628,714 | 33.10 | 2.76 | |||||||||||||
Olympic Corridor | 98.3 | 35,144,971 | 33.06 | 2.76 | |||||||||||||
Santa Monica(4) | 97.8 | 62,402,955 | 60.03 | 5.00 | |||||||||||||
Sherman Oaks/Encino | 90.7 | 101,880,946 | 33.82 | 2.82 | |||||||||||||
Warner Center/Woodland Hills | 86.4 | 66,103,443 | 28.34 | 2.36 | |||||||||||||
Westwood | 89.0 | 81,156,545 | 44.35 | 3.70 | |||||||||||||
Total / Weighted Average | 91.9 | % | $ | 596,931,739 | 38.22 | 3.18 | |||||||||||
Recurring Office Capital Expenditures per Rentable Square Foot | |||||||||||||||||
For the three months ended September 30, 2016 | $ | 0.03 | |||||||||||||||
For the nine months ended September 30, 2016 | $ | 0.17 | |||||||||||||||
(1) | Includes 302,291 square feet with respect to signed leases not yet commenced at September 30, 2016. |
(2) | Represents annualized rent divided by leased square feet (excluding signed leases not commenced at September 30, 2016). |
(3) | Includes $2,855,236 of annualized rent attributable to a health club that we operate. |
(4) | Includes $2,228,661 of annualized rent attributable to our corporate headquarters. |
![]() | Portfolio Data |
Office Leases | Rentable Square Feet | Annualized Rent | |||||||||||||||||||
Square Feet Under Lease | Number | Percent | Amount | Percent | Amount | Percent | |||||||||||||||
2,500 or less | 1,408 | 49.5 | % | 1,945,883 | 12.4 | % | $ | 73,919,448 | 12.4 | % | |||||||||||
2,501-10,000 | 1,072 | 37.7 | 5,260,689 | 33.7 | 197,221,429 | 33.0 | |||||||||||||||
10,001-20,000 | 234 | 8.2 | 3,211,098 | 20.6 | 121,939,538 | 20.4 | |||||||||||||||
20,001-40,000 | 98 | 3.4 | 2,637,633 | 16.9 | 102,532,670 | 17.2 | |||||||||||||||
40,001-100,000 | 29 | 1.0 | 1,602,561 | 10.3 | 65,206,547 | 10.9 | |||||||||||||||
Greater than 100,000 | 5 | 0.2 | 961,114 | 6.1 | 36,112,107 | 6.1 | |||||||||||||||
Total | 2,846 | 100.0 | % | 15,618,978 | 100.0 | % | $ | 596,931,739 | 100.0 | % | |||||||||||
Our median tenant size is approximately 2,600 square feet and our average tenant size is approximately 5,500 square feet. | |||||||||||||||||||||
![]() | Portfolio Data |
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) | 2 | 2 | 2017-2019 | 430,810 | 2.4 | % | $ | 16,333,703 | 2.7 | % | |||||||||||||
William Morris Endeavor(3) | 1 | 1 | 2027 | 184,995 | 1.1 | 9,825,633 | 1.6 | ||||||||||||||||
UCLA(4) | 20 | 9 | 2016-2022 | 186,865 | 1.1 | 8,276,137 | 1.4 | ||||||||||||||||
Equinox Fitness(5) | 5 | 5 | 2018-2033 | 180,087 | 1.0 | 6,968,612 | 1.2 | ||||||||||||||||
Total | 28 | 17 | 982,757 | 5.6 | % | $ | 41,404,085 | 6.9 | % | ||||||||||||||
(1) Expiration dates are per lease. Ranges reflects leases other than storage and similar leases. | |||||||||||||||||||||||
(2) The square footage under these leases expire as follows: 10,000 square feet in 2017 and 421,000 square feet in 2019. | |||||||||||||||||||||||
(3) Tenant has an option to terminate this lease in 2022. | |||||||||||||||||||||||
(4) The square footage under these leases expire as follows: 6,000 square feet in 2016, 38,000 square feet in 2017, 13,000 square feet in 2018, 13,000 square feet in 2019, 39,000 square feet in 2020, 41,000 square feet in 2021 (tenant has options to terminate 7,000 square feet in either 2017 or 2020), and 36,000 square feet in 2022 (tenant has options to terminate 12,000 square feet in 2017 and 24,000 square feet in 2020). Does not include a 15,000 square foot lease commencing December 2016. | |||||||||||||||||||||||
(5) The square footage under these leases expire as follows: 44,000 square feet in 2018, 33,000 square feet in 2019, 42,000 square feet in 2020, 31,000 square feet in 2027 and 30,000 square feet in 2033. |
![]() | Portfolio Data |
Industry | Number of Leases | Annualized Rent as a Percent of Total | |||||
Legal | 554 | 18.1 | % | ||||
Financial Services | 376 | 14.2 | |||||
Entertainment | 201 | 12.8 | |||||
Real Estate | 259 | 10.3 | |||||
Accounting & Consulting | 355 | 9.7 | |||||
Health Services | 367 | 8.9 | |||||
Retail | 204 | 6.2 | |||||
Technology | 128 | 5.7 | |||||
Insurance | 108 | 4.7 | |||||
Educational Services | 45 | 2.8 | |||||
Public Administration | 94 | 2.5 | |||||
Advertising | 72 | 2.2 | |||||
Other | 83 | 1.9 | |||||
Total | 2,846 | 100.0 | % | ||||
![]() | Portfolio Data |
Year of Lease Expiration | Number of Leases | Rentable Square Feet | Expiring Square Feet as a Percent of Total | Annualized Rent at September 30, 2016 | 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 | 60 | 211,527 | 1.2 | % | $ | 6,065,359 | 1.0 | % | $ | 28.67 | $ | 31.21 | ||||||||||||||
2016 | 111 | 400,844 | 2.3 | 14,406,795 | 2.4 | 35.94 | 36.10 | |||||||||||||||||||
2017 | 603 | 2,487,008 | 14.1 | 88,876,504 | 14.9 | 35.74 | 36.51 | |||||||||||||||||||
2018 | 566 | 2,311,003 | 13.1 | 91,439,654 | 15.3 | 39.57 | 41.49 | |||||||||||||||||||
2019 | 431 | 2,168,896 | 12.3 | 81,497,477 | 13.6 | 37.58 | 40.46 | |||||||||||||||||||
2020 | 391 | 2,222,070 | 12.6 | 84,602,527 | 14.2 | 38.07 | 42.52 | |||||||||||||||||||
2021 | 312 | 1,908,074 | 10.8 | 73,875,848 | 12.4 | 38.72 | 44.37 | |||||||||||||||||||
2022 | 131 | 969,417 | 5.5 | 36,202,228 | 6.1 | 37.34 | 45.26 | |||||||||||||||||||
2023 | 88 | 990,072 | 5.6 | 35,568,697 | 6.0 | 35.93 | 43.38 | |||||||||||||||||||
2024 | 56 | 478,000 | 2.7 | 18,116,922 | 3.0 | 37.90 | 47.63 | |||||||||||||||||||
2025 | 38 | 494,710 | 2.8 | 22,803,367 | 3.8 | 46.09 | 60.25 | |||||||||||||||||||
Thereafter | 59 | 977,357 | 5.6 | 43,476,361 | 7.3 | 44.48 | 60.37 | |||||||||||||||||||
Subtotal/Weighted Average | 2,846 | 15,618,978 | 88.6 | % | 596,931,739 | 100.0 | % | 38.22 | 43.09 | |||||||||||||||||
Signed leases not commenced | 302,291 | 1.7 | ||||||||||||||||||||||||
Available | 1,419,765 | 8.0 | ||||||||||||||||||||||||
Building Management Use | 118,360 | 0.7 | ||||||||||||||||||||||||
BOMA Adjustment(3) | 171,337 | 1.0 | ||||||||||||||||||||||||
Total/Weighted Average | 2,846 | 17,630,731 | 100.0 | % | $ | 596,931,739 | 100.0 | % | 38.22 | 43.09 | ||||||||||||||||
(1) | Represents annualized rent at September 30, 2016 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. |
![]() | Portfolio Data |
Q4 2016 | Q1 2017 | Q2 2017 | Q3 2017 | |||||||||||
Expiring Square Feet(1) | 400,844 | 499,846 | 510,191 | 626,157 | ||||||||||
Percentage of Portfolio | 2.3 | % | 2.8 | % | 2.9 | % | 3.6 | % | ||||||
Expiring Rent per Square Foot(2) | $36.10 | $36.48 | $38.45 | $35.08 | ||||||||||
Submarket Data | |||||||||||||||
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, the data in this table should only be extrapolated with caution. | |||||||||||||||
Q4 2016 | Q1 2017 | Q2 2017 | Q3 2017 | ||||||||||||
Beverly Hills | Expiring SF(1) | 18,137 | 94,462 | 50,579 | 51,746 | ||||||||||
Expiring Rent per SF(2) | $37.94 | $40.23 | $40.75 | $43.77 | |||||||||||
Brentwood | Expiring SF(1) | 44,243 | 42,786 | 82,300 | 74,387 | ||||||||||
Expiring Rent per SF(2) | $38.65 | $35.96 | $37.68 | $36.13 | |||||||||||
Century City | Expiring SF(1) | 20,072 | 7,849 | 60,521 | 11,863 | ||||||||||
Expiring Rent per SF(2) | $42.17 | $35.96 | $46.89 | $40.75 | |||||||||||
Honolulu | Expiring SF(1) | 32,652 | 25,367 | 49,468 | 79,269 | ||||||||||
Expiring Rent per SF(2) | $33.98 | $30.74 | $30.52 | $33.75 | |||||||||||
Olympic Corridor | Expiring SF(1) | 37,634 | 23,251 | 34,208 | 70,699 | ||||||||||
Expiring Rent per SF(2) | $28.74 | $32.98 | $31.27 | $33.97 | |||||||||||
Santa Monica | Expiring SF(1) | 26,044 | 15,405 | 19,036 | 2,223 | ||||||||||
Expiring Rent per SF(2) | $45.77 | $49.57 | $63.18 | $46.41 | |||||||||||
Sherman Oaks/Encino | Expiring SF(1) | 148,683 | 115,329 | 88,231 | 211,723 | ||||||||||
Expiring Rent per SF(2) | $34.11 | $32.85 | $34.29 | $33.76 | |||||||||||
Warner Center/Woodland Hills | Expiring SF(1) | 27,324 | 63,277 | 45,807 | 100,830 | ||||||||||
Expiring Rent per SF(2) | $29.67 | $28.89 | $28.47 | $30.57 | |||||||||||
Westwood | Expiring SF(1) | 46,055 | 112,120 | 80,041 | 23,417 | ||||||||||
Expiring Rent per SF(2) | $42.54 | $41.80 | $43.81 | $47.74 | |||||||||||
(1) | Includes leases with an expiration date in the applicable quarter where the space had not been re-leased as of September 30, 2016, other than 211,527 square feet of short-term leases. |
(2) | Includes the impact of rent escalations over the entire term of the expiring lease, and is therefore not directly comparable to starting rents. Fluctuations in this number from quarter to quarter primarily reflects the mix of buildings/submarkets involved, and is also impacted by the varying terms and square footage of the individual leases expiring. |
![]() | Portfolio Data |
Rentable Square Feet | Percentage | |||||||
Net Absorption During Quarter(1) | 125 | 0% | ||||||
Office Leases Signed During Quarter | Number of leases | Rentable Square Feet | Weighted Average Lease Term (months) | |||||
New leases | 67 | 236,641 | 65 | |||||
Renewal leases | 96 | 334,611 | 48 | |||||
All leases | 163 | 571,252 | 55 | |||||
Change in Annual Rental Rates (Per Square Foot) for Office Leases Executed during the Quarter(2) | |||||||
Starting Cash Rent | Straight-line Rent | Expiring Cash Rent | |||||
Leases signed during the quarter | $42.62 | $44.68 | N/A | ||||
Prior leases for the same space | $33.32 | $34.04 | $37.05 | ||||
Percentage change | 27.9% | 31.3% | 15.0% | (3) | |||
Average Office Lease Transaction Costs (Per Square Foot)(4) | |||||
Lease Transaction Costs | Lease Transaction Costs per Annum | ||||
New leases signed during the quarter | $38.19 | $7.01 | |||
Renewal leases signed during the quarter | $19.50 | $4.86 | |||
All leases signed during the quarter | $27.24 | $5.91 | |||
(1) | Net absorption excludes the impact of acquisitions, dispositions and building remeasurements during the quarter. |
(2) | Represents the average initial stabilized cash and straight-line rents on new and renewal leases signed during the quarter compared to the prior lease on the same space, excluding Short Term Leases and leases on space where the prior lease was terminated more than a year before signing of the new lease. |
(3) | The percentage change for expiring cash rent represents the comparison between the starting cash rent on leases executed during the quarter and the expiring cash rent on the prior leases for the same space. |
(4) | Represents the weighted average of tenant improvements and leasing commissions. |
![]() | Portfolio Data |
Submarket | Number of Properties | Number of Units | Units as a Percent of Total | ||||||||||
Brentwood | 5 | 950 | 28 | % | |||||||||
Honolulu | 3 | 1,566 | 47 | ||||||||||
Santa Monica | 2 | 820 | 25 | ||||||||||
Total | 10 | 3,336 | 100 | % | |||||||||
Submarket | Percent Leased | Annualized Rent | Monthly Rent Per Leased Unit | ||||||||||
Brentwood | 100.0 | % | $ | 28,943,160 | $ | 2,539 | |||||||
Honolulu (1) | 99.2 | 33,431,352 | 1,801 | ||||||||||
Santa Monica(2) | 100.0 | 27,499,944 | 2,795 | ||||||||||
Total / Weighted Average | 99.6 | % | $ | 89,874,456 | 2,258 | ||||||||
Recurring Multifamily Capital Expenditures per Unit | |||||
For the three months ended September 30, 2016 | $ | 145 | |||
For the nine months ended September 30, 2016 | $ | 358 | |||
(2) | Excludes 10,013 square feet of ancillary retail space generating annualized rent of $360,532. |
![]() | Developments |
Moanalua Hillside Apartments, Honolulu, Hawaii | |||
Projected Units (net) | Estimated Cost | Anticipated Delivery | |
475 | $120 million | Phase 1 (238 Units) - Late 2017 Phase 2 (237 Units) - Late 2018 | |
We are adding 475 units (net of existing units removed) to our Moanalua Hillside apartment community located on 28 acres near downtown Honolulu and key military bases. The $120 million estimated cost of the new units does not include the cost of the land which we owned before beginning the project. We also plan to invest additional capital to upgrade the existing units, improve the parking and landscaping, build a new leasing and management office, and construct a new recreation and fitness facility with a new pool. |
The Landmark, Brentwood, California | |||
Projected Units | Estimated Cost | Anticipated Start of Construction | Anticipated Construction Period |
376 | $120 - $140 million | 2017 | 18-24 months |
The Landmark would be the first new residential high-rise development west of the 405 freeway in almost 40 years, offering stunning ocean views and luxury amenities. Present plans call for a 34 story, 376 unit tower located on a site currently housing a supermarket. However, the process in Los Angeles often results in significant changes in development plans and/or unanticipated delays. The $120 - $140 million estimated cost does not include the cost of the land or the existing underground parking garage, both of which we owned before beginning the project. |
(1) | All figures are only estimates, as development in our markets is long and complex and subject to inherent uncertainties. |
![]() | Guidance |
Metric | 2016 Guidance |
Net Income Per Common Share - Diluted | $0.53 to $0.57 per share |
Funds From Operations (FFO) | $1.79 to $1.81 per share |
Adjusted Funds From Operations (AFFO) | $1.44 to $1.46 per share |
Metric | Commentary | Assumption Range | Compared to Prior Guidance |
Average Office Occupancy | Based on our total office portfolio and reflects the impact of higher vacancy acquisitions. | 90% to 91% | Revised |
Residential Leased Rate | We manage our apartment portfolio to be fully leased due to rent control in our markets. | Essentially Fully Leased | Unchanged |
Same Property Cash NOI | Includes revenue from early lease terminations and prior year CAM reconciliations. | Annual Increase of 5% to 6% | Revised |
Core Same Property Cash NOI | Excludes revenue from early lease terminations and prior year CAM reconciliations. | Annual Increase of 5% to 6% | Revised |
Net Revenue from Above/Below Market Leases | Since our IPO, our non-cash revenue from below market leases has benefited from amortizing intangibles related to our pre-1999 residential units. These intangibles will be fully amortized in October 2016. As a result, our non-cash revenue will be reduced by approximately $0.6 million in the fourth quarter and by $3.0 million in 2017. | $16.5 to $18.5 million | Unchanged |
Straight-Line Revenue | $13.5 to $15.5 million | Unchanged | |
G&A | $32 to $35 million | Unchanged | |
Interest Expense | $146.5 to $148.5 million | Revised | |
Weighted Average Fully Diluted Shares Outstanding | 179 to 180 million | Unchanged | |
Other Income (net) | $1.5 to 2.5 million | Unchanged |
(1) | Except as disclosed, our guidance does not include the impact of possible future property acquisitions or dispositions, including acquisition and disposition costs, financings, other possible capital markets activities or impairment charges. The guidance and representative assumptions on this page are forward looking statements, subject to the safe harbor contained at the beginning of this Earnings Package, and reflect our views of current and future market conditions. Only a few of our assumptions underlying our guidance are disclosed above, and our actual results will be affected by known and unknown risks, trends, uncertainties and other factors, some of which are beyond our control or ability to predict. Although we believe that the assumptions underlying our guidance are reasonable, they are not guarantees of future performance and some of them will inevitably prove to be incorrect. As a result, our actual future results can be expected to differ from our expectations, and those differences could be material. |
![]() | Definitions |
![]() | Definitions |
Reconciliation of net income attributable to common stockholders to FFO | Low | High | |||||
Net income attributable to common stockholders | $ | 80.6 | $ | 86.8 | |||
Depreciation and amortization of real estate assets | 250.0 | 244.7 | |||||
Net income attributable to noncontrolling interests | 10.6 | 11.7 | |||||
Adjustments attributable to unconsolidated funds | 16.1 | 16.1 | |||||
Adjustments attributable to consolidated joint ventures | (20.9 | ) | (20.9 | ) | |||
Gains on sales of investments in real estate | (14.3 | ) | (14.3 | ) | |||
FFO | $ | 322.1 | $ | 324.1 | |||
Reconciliation of shares outstanding(3) | High | Low | |||||
Weighted average shares of common stock outstanding- diluted | 153.5 | 152.5 | |||||
Weighted average Operating Partnership Units & LTIP Units outstanding(4) | 26.5 | 26.5 | |||||
Weighted average fully diluted shares outstanding | 180.0 | 179.0 | |||||
Per share | Low | High | |||||
Net income per common share - diluted(1) | $ | 0.53 | $ | 0.57 | |||
FFO per share- fully diluted(2) | $ | 1.79 | $ | 1.81 |
(1) | Calculated by dividing net income attributable to common stockholders by the weighted average shares of common stock outstanding - diluted. |
(2) | Calculated by dividing FFO by the weighted average fully diluted shares outstanding. |
(3) | Use the low end of the range to calculate the high end of the range for per share amounts and vice versa. |
(4) | Long-Term Incentive Plan Units (LTIP Units) are granted as part of our equity compensation plan. |
• | NOI: is calculated by excluding the following from our net income: general and administrative expense, depreciation and amortization expense, other income, other expense, income, including depreciation, from unconsolidated real estate funds, interest expense, acquisition related expenses, gains (or losses) on sales of investments in real estate and net income attributable to noncontrolling interests. |
• | Cash NOI: is calculated by excluding from NOI our straight-line rent and the amortization/accretion of acquired above/below market leases. |
![]() | Definitions |
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