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, 2018 | By: | /s/ MONA M. GISLER |
Mona M. Gisler | |||
Chief Financial Officer |
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• | Financial Results: For the three months ended September 30, 2018 compared to three months ended September 30, 2017: |
◦ | Revenues increased by 7.0% to $223.3 million. Our non-cash revenue declined by about $2 million compared to the second quarter of 2018 and will continue to decline at an accelerated pace (excluding the impact from any future acquisitions). |
◦ | Net income attributable to common stockholders increased by 19.3% to $30.6 million. |
◦ | FFO increased by 10.3% to $100.1 million, or $0.51 per fully diluted share. |
◦ | AFFO increased by 10.3% to $82.5 million. |
◦ | Same property Cash NOI increased by 4.2% to $98.4 million. |
• | Office: We signed 740,000 square feet of office leases during the third quarter. Our total office portfolio leased rate remained relatively flat at 91.4% and our occupancy rate increased by 60 basis points to 89.5%, reflecting our leasing success in the first half of the year. Comparing office leases we signed during the third quarter to the expiring leases covering the same space, straight-line rents increased by 23.6% and starting cash rents increased by 11.1%. |
• | Multifamily: Our multifamily portfolio remains fully leased at 98.8%. With the second building at our Moanalua development fully on-line in Q3, we now have almost 1,800 units in service in Honolulu. Multifamily same property Cash NOI increased by 3.0% to $16.0 million. Residential expenses rose 6.9% compared to last year, reflecting higher payroll and utility costs as well as some timing issues. We expect comparative payroll increases to be much lower in future quarters when the comparison quarter includes the significant payroll adjustment we made late last year in response to minimum wage increases mandated by Los Angeles. |
• | Development and Repositioning Projects: Our two multifamily development projects remain on schedule and on budget. At our Moanalua apartment development in Honolulu, we are more than half way through the delivery of 475 net new residential units and we ended the quarter with a total of 221 new units leased. We expect to complete that project, along with a new fitness center and the upgrade of our existing units, around the end of this year. We are continuing with construction at our 376 unit apartment tower in Brentwood. See page 22 for more information on development. On the repositioning front, we are making investments in a number of our existing properties where we believe that targeted capital will yield significant future returns. We expect to complete several of these repositioning projects in the next few months. |
• | Debt: With the exception of a loan on our development project at Moanalua, our next term loan maturity is approximately three and a half years away in 2022. We also have a large number of unencumbered properties that provide flexibility for future financings. |
• | Dividends: On October 16, 2018, we paid a quarterly cash dividend of $0.25 per common share, or $1.00 per common share on an annualized basis, to our shareholders of record on September 28, 2018. |
• | Guidance: We are increasing and narrowing our 2018 full year guidance for Net Income Per Common Share - Diluted to $0.69 to $0.71 and for FFO to $2.01 to $2.03 per fully diluted share. See page 23 for more information. |
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COMPANY OVERVIEW | |
FINANCIAL RESULTS | |
PORTFOLIO DATA | |
![]() | Company Overview |
Office Portfolio | |||||||
Consolidated | Total | ||||||
Properties | 63 | 71 | |||||
Rentable square feet (in thousands) | 16,599 | 18,434 | |||||
Leased rate | 91.5 | % | 91.4 | % | |||
Occupancy rate | 89.6 | % | 89.5 | % | |||
Multifamily Portfolio | |||||||
Consolidated | |||||||
Properties | 10 | ||||||
Units | 3,563 | ||||||
Leased rate | 98.8 | % | |||||
Market Capitalization (in thousands, except price per share) | ||||||
Fully diluted shares outstanding as of September 30, 2018 | 198,110 | |||||
Common stock closing price per share (NYSE:DEI) | $ | 37.72 | ||||
Equity capitalization | $ | 7,472,724 | ||||
Net Debt (in thousands)(1) | |||||||||
Consolidated | Our Share | ||||||||
$ | 4,154,157 | $ | 3,740,405 | ||||||
Less: cash and cash equivalents | (172,362 | ) | (84,964 | ) | |||||
Net debt | $ | 3,981,795 | $ | 3,655,441 | |||||
Leverage Ratio (in thousands, except percentage) | ||||||
Pro forma enterprise value | $ | 11,128,164 | ||||
Our share of net debt to pro forma enterprise value | 33 | % | ||||
AFFO Payout Ratio | |||||
Three Months Ended September 30, 2018 | 60.1 | % | |||
(1) | See page 12 for details and a reconciliation to the consolidated debt on our balance sheet. |
![]() | 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 | Vice Chairman, PinnacleCare |
Dr. David T. Feinberg | President and Chief Executive Officer, Geisinger Health System |
Virginia A. McFerran | Partner, Optum Ventures |
Thomas E. O’Hern | Senior Executive Vice President, CFO & Treasurer, Macerich Company |
William E. Simon, Jr. | Partner, Massey Quick Simon & Co., LLC |
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, 2018 | December 31, 2017 | ||||||
Unaudited | |||||||
Assets | |||||||
Investment in real estate: | |||||||
Land | $ | 1,065,099 | $ | 1,062,345 | |||
Buildings and improvements | 7,995,377 | 7,886,201 | |||||
Tenant improvements and lease intangibles | 821,483 | 756,190 | |||||
Property under development | 105,567 | 124,472 | |||||
Investment in real estate, gross | 9,987,526 | 9,829,208 | |||||
Less: accumulated depreciation and amortization | (2,200,403 | ) | (2,012,752 | ) | |||
Investment in real estate, net | 7,787,123 | 7,816,456 | |||||
Cash and cash equivalents | 172,362 | 176,645 | |||||
Tenant receivables, net | 5,040 | 2,980 | |||||
Deferred rent receivables, net | 118,736 | 106,021 | |||||
Acquired lease intangible assets, net | 3,492 | 4,293 | |||||
Interest rate contract assets | 124,751 | 60,069 | |||||
Investment in unconsolidated real estate funds | 118,252 | 107,735 | |||||
Other assets | 18,023 | 18,442 | |||||
Total assets | $ | 8,347,779 | $ | 8,292,641 | |||
Liabilities | |||||||
Secured notes payable and revolving credit facility, net | $ | 4,122,277 | $ | 4,117,390 | |||
Interest payable, accounts payable and deferred revenue | 151,106 | 103,947 | |||||
Security deposits | 50,773 | 50,414 | |||||
Acquired lease intangible liabilities, net | 57,591 | 75,635 | |||||
Interest rate contract liabilities | — | 807 | |||||
Dividends payable | 42,491 | 42,399 | |||||
Total liabilities | 4,424,238 | 4,390,592 | |||||
Equity | |||||||
Douglas Emmett, Inc. stockholders' equity: | |||||||
Common stock | 1,699 | 1,696 | |||||
Additional paid-in capital | 3,277,746 | 3,272,539 | |||||
Accumulated other comprehensive income | 94,643 | 43,099 | |||||
Accumulated deficit | (917,009 | ) | (879,810 | ) | |||
Total Douglas Emmett, Inc. stockholders' equity | 2,457,079 | 2,437,524 | |||||
Noncontrolling interests | 1,466,462 | 1,464,525 | |||||
Total equity | 3,923,541 | 3,902,049 | |||||
Total liabilities and equity | $ | 8,347,779 | $ | 8,292,641 |
![]() | Financial Results |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues | |||||||||||||||
Office rental | |||||||||||||||
Rental revenues | $ | 150,316 | $ | 140,993 | $ | 448,248 | $ | 409,674 | |||||||
Tenant recoveries | 16,364 | 15,854 | 42,071 | 39,705 | |||||||||||
Parking and other income | 30,374 | 27,771 | 87,829 | 81,129 | |||||||||||
Total office revenues | 197,054 | 184,618 | 578,148 | 530,508 | |||||||||||
Multifamily rental | |||||||||||||||
Rental revenues | 24,241 | 22,282 | 70,957 | 66,760 | |||||||||||
Parking and other income | 2,013 | 1,849 | 5,919 | 5,594 | |||||||||||
Total multifamily revenues | 26,254 | 24,131 | 76,876 | 72,354 | |||||||||||
Total revenues | 223,308 | 208,749 | 655,024 | 602,862 | |||||||||||
Operating Expenses | |||||||||||||||
Office expenses | 66,288 | 62,468 | 188,462 | 175,240 | |||||||||||
Multifamily expenses | 7,114 | 6,041 | 20,720 | 17,866 | |||||||||||
General and administrative | 9,440 | 8,441 | 28,444 | 27,189 | |||||||||||
Depreciation and amortization | 74,067 | 69,974 | 219,944 | 206,141 | |||||||||||
Total operating expenses | 156,909 | 146,924 | 457,570 | 426,436 | |||||||||||
Operating income | 66,399 | 61,825 | 197,454 | 176,426 | |||||||||||
Other income | 2,951 | 2,659 | 8,373 | 7,152 | |||||||||||
Other expenses | (1,561 | ) | (1,659 | ) | (5,380 | ) | (5,156 | ) | |||||||
Income, including depreciation, from unconsolidated funds | 1,348 | 1,137 | 4,522 | 4,427 | |||||||||||
Interest expense | (33,721 | ) | (35,454 | ) | (99,889 | ) | (110,408 | ) | |||||||
Net income | 35,416 | 28,508 | 105,080 | 72,441 | |||||||||||
Less: Net income attributable to noncontrolling interests | (4,855 | ) | (2,894 | ) | (14,629 | ) | (7,534 | ) | |||||||
Net income attributable to common stockholders | $ | 30,561 | $ | 25,614 | $ | 90,451 | $ | 64,907 | |||||||
Net income per common share - basic | $ | 0.18 | $ | 0.15 | $ | 0.53 | $ | 0.41 | |||||||
Net income per common share - diluted | $ | 0.18 | $ | 0.15 | $ | 0.53 | $ | 0.41 | |||||||
Weighted average shares of common stock outstanding - basic | 169,926 | 165,471 | 169,815 | 158,000 | |||||||||||
Weighted average shares of common stock outstanding - diluted | 169,931 | 165,520 | 169,828 | 158,419 |
![]() | Financial Results |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Funds From Operations (FFO) | |||||||||||||||
Net income attributable to common stockholders | $ | 30,561 | $ | 25,614 | $ | 90,451 | $ | 64,907 | |||||||
Depreciation and amortization of real estate assets | 74,067 | 69,974 | 219,944 | 206,141 | |||||||||||
Net income attributable to noncontrolling interests | 4,855 | 2,894 | 14,629 | 7,534 | |||||||||||
Adjustments attributable to unconsolidated funds(2) | 4,233 | 4,084 | 12,382 | 12,140 | |||||||||||
Adjustments attributable to consolidated joint ventures(2) | (13,572 | ) | (11,798 | ) | (40,484 | ) | (31,363 | ) | |||||||
FFO | $ | 100,144 | $ | 90,768 | $ | 296,922 | $ | 259,359 | |||||||
Adjusted Funds From Operations (AFFO) | |||||||||||||||
FFO | $ | 100,144 | $ | 90,768 | $ | 296,922 | $ | 259,359 | |||||||
Straight-line rent | (3,524 | ) | (2,982 | ) | (12,715 | ) | (9,012 | ) | |||||||
Net accretion of acquired above- and below-market leases | (4,948 | ) | (4,814 | ) | (17,243 | ) | (13,290 | ) | |||||||
Loan costs | 1,954 | 2,520 | 6,131 | 7,443 | |||||||||||
Recurring capital expenditures, tenant improvements and leasing expenses | (18,128 | ) | (18,023 | ) | (65,543 | ) | (52,219 | ) | |||||||
Non-cash compensation expense | 4,924 | 4,450 | 14,906 | 13,463 | |||||||||||
Adjustments attributable to unconsolidated funds(2) | (1,454 | ) | (1,033 | ) | (5,721 | ) | (3,545 | ) | |||||||
Adjustments attributable to consolidated joint ventures(2) | 3,530 | 3,906 | 12,706 | 10,138 | |||||||||||
AFFO | $ | 82,498 | $ | 74,792 | $ | 229,443 | $ | 212,337 | |||||||
Weighted average shares of common stock outstanding - diluted | 169,931 | 165,520 | 169,828 | 158,419 | |||||||||||
Weighted average units in our operating partnership outstanding | 28,145 | 25,534 | 28,157 | 25,780 | |||||||||||
Weighted average fully diluted shares outstanding | 198,076 | 191,054 | 197,985 | 184,199 | |||||||||||
Net income per common share - diluted | $ | 0.18 | $ | 0.15 | $ | 0.53 | $ | 0.41 | |||||||
FFO per share - fully diluted | $ | 0.51 | $ | 0.48 | $ | 1.50 | $ | 1.41 | |||||||
Dividends declared per share | $ | 0.25 | $ | 0.23 | $ | 0.75 | $ | 0.69 |
(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. |
![]() | Financial Results |
As of September 30, | |||||||
2018 | 2017 | ||||||
Office Statistics | |||||||
Number of properties | 47 | 47 | |||||
Rentable square feet (in thousands) | 11,797 | 11,738 | |||||
Ending % leased | 91.0 | % | 91.6 | % | |||
Ending % occupied | 89.6 | % | 89.7 | % | |||
Quarterly average % occupied | 89.4 | % | 89.9 | % | |||
Multifamily Statistics | |||||||
Number of properties | 9 | 9 | |||||
Number of units | 2,640 | 2,640 | |||||
Ending % leased | 99.7 | % | 98.5 | % | |||
Three Months Ended September 30, | % Favorable | |||||||||||
2018 | 2017 | (Unfavorable) | ||||||||||
Net Operating Income (NOI)(1) | ||||||||||||
Office revenues | $ | 127,809 | $ | 122,401 | 4.4 | % | ||||||
Office expenses | (43,681 | ) | (41,775 | ) | (4.6 | )% | ||||||
Office NOI | 84,128 | 80,626 | 4.3 | % | ||||||||
Multifamily revenues | 21,274 | 20,463 | 4.0 | % | ||||||||
Multifamily expenses | (5,316 | ) | (4,972 | ) | (6.9 | )% | ||||||
Multifamily NOI | 15,958 | 15,491 | 3.0 | % | ||||||||
Total NOI | $ | 100,086 | $ | 96,117 | 4.1 | % | ||||||
Cash Net Operating Income (NOI)(1) | ||||||||||||
Office cash revenues | $ | 126,170 | $ | 120,723 | 4.5 | % | ||||||
Office cash expenses | (43,694 | ) | (41,788 | ) | (4.6 | )% | ||||||
Office cash NOI | 82,476 | 78,935 | 4.5 | % | ||||||||
Multifamily cash revenues | 21,269 | 20,455 | 4.0 | % | ||||||||
Multifamily cash expenses | (5,316 | ) | (4,972 | ) | (6.9 | )% | ||||||
Multifamily cash NOI | 15,953 | 15,483 | 3.0 | % | ||||||||
Total Cash NOI | $ | 98,429 | $ | 94,418 | 4.2 | % | ||||||
(1) | See page 10 for a reconciliation to net income attributable to common stockholders. |
![]() | Financial Results |
Three Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Same property office cash revenues | $ | 126,170 | $ | 120,723 | |||
Non cash adjustments per definition of NOI | 1,639 | 1,678 | |||||
Same property office revenues | 127,809 | 122,401 | |||||
Same property office cash expenses | (43,694 | ) | (41,788 | ) | |||
Non cash adjustments per definition of NOI | 13 | 13 | |||||
Same property office expenses | (43,681 | ) | (41,775 | ) | |||
Office NOI | 84,128 | 80,626 | |||||
Same property multifamily cash revenues | 21,269 | 20,455 | |||||
Non cash adjustments per definition of NOI | 5 | 8 | |||||
Same property multifamily revenues | 21,274 | 20,463 | |||||
Same property multifamily expenses | (5,316 | ) | (4,972 | ) | |||
Multifamily NOI | 15,958 | 15,491 | |||||
Same Property NOI | 100,086 | 96,117 | |||||
Non-comparable office revenues | 69,245 | 62,217 | |||||
Non-comparable office expenses | (22,607 | ) | (20,693 | ) | |||
Non-comparable multifamily revenues | 4,980 | 3,668 | |||||
Non-comparable multifamily expenses | (1,798 | ) | (1,069 | ) | |||
NOI | 149,906 | 140,240 | |||||
General and administrative | (9,440 | ) | (8,441 | ) | |||
Depreciation and amortization | (74,067 | ) | (69,974 | ) | |||
Operating income | 66,399 | 61,825 | |||||
Other income | 2,951 | 2,659 | |||||
Other expenses | (1,561 | ) | (1,659 | ) | |||
Income, including depreciation, from unconsolidated real estate funds | 1,348 | 1,137 | |||||
Interest expense | (33,721 | ) | (35,454 | ) | |||
Net income | 35,416 | 28,508 | |||||
Less: Net income attributable to noncontrolling interests | (4,855 | ) | (2,894 | ) | |||
Net income attributable to common stockholders | $ | 30,561 | $ | 25,614 |
![]() | Financial Results |
Three Months Ended September 30, 2018 | |||||||||||
Wholly-Owned Properties | Consolidated Joint Ventures(1) | Unconsolidated Funds(2) | |||||||||
Revenues | $ | 181,050 | $ | 42,258 | $ | 19,970 | |||||
Office and multifamily operating expenses | $ | 59,361 | $ | 14,041 | $ | 7,181 | |||||
Straight-line rent | $ | 1,812 | $ | 1,712 | $ | 208 | |||||
Above/below-market lease revenue | $ | 1,375 | $ | 3,573 | $ | (3 | ) | ||||
Cash NOI attributable to outside interests(3) | $ | — | $ | 15,289 | $ | 4,451 | |||||
Our share of cash NOI(4) | $ | 118,502 | $ | 7,643 | $ | 8,133 | |||||
Nine Months Ended September 30, 2018 | |||||||||||
Wholly-Owned Properties | Consolidated Joint Ventures(1) | Unconsolidated Funds(2) | |||||||||
Revenues | $ | 529,902 | $ | 125,122 | $ | 58,933 | |||||
Office and multifamily operating expenses | $ | 169,310 | $ | 39,872 | $ | 20,068 | |||||
Straight-line rent | $ | 6,951 | $ | 5,764 | $ | 1,066 | |||||
Above/below-market lease revenue | $ | 4,714 | $ | 12,529 | $ | (3 | ) | ||||
Cash NOI attributable to outside interests(3) | $ | — | $ | 44,622 | $ | 13,667 | |||||
Our share of cash NOI(4) | $ | 348,927 | $ | 22,335 | $ | 24,135 |
(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. |
![]() | Financial Results |
Loans (As of September 30, 2018, unaudited) | ||||||||||||||
Maturity Date(1) | Principal Balance (In Thousands) | Our Share(2) (In Thousands) | Effective Rate(3) | Swap Maturity Date | ||||||||||
Consolidated Wholly-Owned Subsidiaries | ||||||||||||||
10/1/2019 | $ | 145,000 | $ | 145,000 | LIBOR + 1.25% | N/A | ||||||||
4/15/2022 | 340,000 | 340,000 | 2.77% | 4/1/2020 | ||||||||||
7/27/2022 | 180,000 | 180,000 | 3.06% | 7/1/2020 | ||||||||||
11/1/2022 | 400,000 | 400,000 | 2.64% | 11/1/2020 | ||||||||||
6/23/2023 | 360,000 | 360,000 | 2.57% | 7/1/2021 | ||||||||||
12/23/2023 | 220,000 | 220,000 | 3.62% | 12/23/2021 | ||||||||||
1/1/2024 | 300,000 | 300,000 | 3.46% | 1/1/2022 | ||||||||||
3/3/2025 | 335,000 | 335,000 | 3.84% | 3/1/2023 | ||||||||||
4/1/2025 | 102,400 | 102,400 | 2.84% | 3/1/2020 | ||||||||||
12/1/2025 | 115,000 | 115,000 | 2.76% | 12/1/2020 | ||||||||||
6/1/2027 | 550,000 | 550,000 | 3.16% | 6/1/2022 | ||||||||||
6/1/2038 | (4) | 31,757 | 31,757 | 4.55% | N/A | |||||||||
8/21/2020 | (5) | 95,000 | 95,000 | LIBOR + 1.40% | N/A | |||||||||
Subtotal | 3,174,157 | 3,174,157 | ||||||||||||
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) | $ | 4,154,157 | $ | 3,428,157 | |||||||||
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 | $ | 3,740,405 | ||||||||||||
(1) | Maturity dates include the effect of extension options. |
(2) | "Our Share" is a non GAAP measure calculated by multiplying the principal balance by our share of the borrowing entity's equity. |
(3) | Includes the effect of interest rate swaps and excludes the effect of prepaid loan costs. |
(4) | Requires monthly payments of principal and interest. Principal amortization is based upon a 30-year amortization schedule. |
(5) | $400 million revolving credit facility. Unused commitment fees range from 0.15% to 0.20%. |
(6) | Our consolidated debt on the balance sheet of $4.12 billion is calculated by adding $4.0 million of unamortized loan premium and deducting $35.9 million of unamortized deferred loan costs from our total consolidated loans of $4.15 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) | 5.6 years | ||
Weighted average remaining fixed interest period | 2.9 years | ||
Weighted average annual interest rate | 3.07% | ||
![]() | Portfolio Data |
Submarket | Number of Properties | Rentable Square Feet | Percent of Square Feet of Our Total Portfolio | Submarket Rentable Square Feet(1) | Our Market Share in Submarket(2) | |||||||||||
Beverly Hills(3) | 11 | 2,193,326 | 11.9 | % | 7,089,250 | 27.9 | % | |||||||||
Brentwood | 15 | 2,063,913 | 11.2 | 3,328,103 | 62.0 | |||||||||||
Burbank | 1 | 456,205 | 2.5 | 7,060,975 | 6.5 | |||||||||||
Century City | 3 | 951,534 | 5.2 | 10,195,143 | 9.3 | |||||||||||
Honolulu | 4 | 1,763,845 | 9.5 | 5,088,599 | 34.7 | |||||||||||
Olympic Corridor | 5 | 1,141,560 | 6.2 | 3,458,794 | 33.0 | |||||||||||
Santa Monica | 11 | 1,426,080 | 7.7 | 9,861,775 | 14.5 | |||||||||||
Sherman Oaks/Encino | 12 | 3,479,316 | 18.9 | 6,528,253 | 53.3 | |||||||||||
Warner Center/Woodland Hills | 3 | 2,830,996 | 15.4 | 7,667,855 | 36.9 | |||||||||||
Westwood | 6 | 2,126,962 | 11.5 | 4,211,981 | 50.5 | |||||||||||
Total / Weighted Average | 71 | 18,433,737 | 100.0 | % | 64,490,728 | 28.2 | % | |||||||||
(1) | Source is the 2018 third quarter CBRE Marketview report. Changes from last quarter are due to adjustments made by CBRE with respect to existing buildings, not new construction, with the exception of a small addition in Santa Monica. |
(2) | Calculated by dividing Rentable Square Feet by the applicable Submarket Rentable Square Feet. |
(3) | Includes a 216,000 square foot property located just outside the Beverly Hills city limits. To calculate our percentage of the submarket, the property is not included in the numerator or the denominator for consistency with third party data. |
![]() | Portfolio Data |
Submarket | Percent Leased(1) | Annualized Rent(2) | Annualized Rent Per Leased Square Foot(2) | Monthly Rent Per Leased Square Foot(2) | ||||||||||||
Beverly Hills | 96.3 | % | $ | 100,129,708 | $ | 50.30 | $ | 4.19 | ||||||||
Brentwood | 90.6 | 79,362,156 | 43.87 | 3.66 | ||||||||||||
Burbank | 100.0 | 21,819,057 | 47.83 | 3.99 | ||||||||||||
Century City | 92.8 | 39,389,255 | 47.33 | 3.94 | ||||||||||||
Honolulu | 86.4 | 49,523,873 | 33.97 | 2.83 | ||||||||||||
Olympic Corridor | 93.0 | 37,980,360 | 38.13 | 3.18 | ||||||||||||
Santa Monica | 93.9 | 91,240,541 | 70.75 | 5.90 | ||||||||||||
Sherman Oaks/Encino | 91.4 | 110,905,899 | 36.30 | 3.03 | ||||||||||||
Warner Center/Woodland Hills | 86.3 | 68,553,751 | 29.17 | 2.43 | ||||||||||||
Westwood | 93.0 | 90,494,001 | 48.57 | 4.05 | ||||||||||||
Total / Weighted Average | 91.4 | % | $ | 689,398,602 | 42.82 | 3.57 | ||||||||||
Recurring Office Capital Expenditures per Rentable Square Foot | ||||||||||||||||
Three months ended September 30, 2018 | $ | 0.04 | ||||||||||||||
Nine months ended September 30, 2018 | $ | 0.14 | ||||||||||||||
(1) | Includes 346,766 square feet with respect to signed leases not yet commenced at September 30, 2018. |
(2) | Excludes signed leases not yet commenced at September 30, 2018. |
![]() | Portfolio Data |
Portfolio Tenant Size | |||||
Median | Average | ||||
Square feet | 2,500 | 5,500 | |||
Office Leases | Rentable Square Feet | Annualized Rent | |||||||||||||||||||
Square Feet Under Lease | Number | Percent | Amount | Percent | Amount | Percent | |||||||||||||||
2,500 or less | 1,445 | 49.5 | % | 1,984,038 | 12.3 | % | $ | 83,208,056 | 12.1 | % | |||||||||||
2,501-10,000 | 1,104 | 37.8 | 5,439,687 | 33.8 | 229,917,029 | 33.4 | |||||||||||||||
10,001-20,000 | 235 | 8.0 | 3,247,091 | 20.2 | 135,938,363 | 19.7 | |||||||||||||||
20,001-40,000 | 102 | 3.5 | 2,777,620 | 17.3 | 115,350,841 | 16.7 | |||||||||||||||
40,001-100,000 | 32 | 1.1 | 1,759,465 | 10.9 | 84,707,546 | 12.3 | |||||||||||||||
Greater than 100,000 | 4 | 0.1 | 892,091 | 5.5 | 40,276,767 | 5.8 | |||||||||||||||
Total for all leases | 2,922 | 100.0 | % | 16,099,992 | 100.0 | % | $ | 689,398,602 | 100.0 | % | |||||||||||
![]() | 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) | 3 | 3 | 2020-2024 | 468,775 | 2.5 | % | $ | 22,257,305 | 3.2 | % | |||||||||||||
UCLA(3) | 26 | 11 | 2018-2027 | 287,327 | 1.6 | 14,010,598 | 2.0 | ||||||||||||||||
William Morris Endeavor(4) | 1 | 1 | 2027 | 196,204 | 1.1 | 10,997,983 | 1.6 | ||||||||||||||||
Morgan Stanley(5) | 5 | 5 | 2022-2027 | 145,488 | 0.8 | 8,960,139 | 1.3 | ||||||||||||||||
Equinox Fitness(6) | 5 | 5 | 2019-2033 | 180,087 | 1.0 | 7,426,266 | 1.1 | ||||||||||||||||
Total | 40 | 25 | 1,277,881 | 7.0 | % | $ | 63,652,291 | 9.2 | % | ||||||||||||||
(1) | Expiration dates are per lease (expiration dates do not reflect storage and similar leases). |
(2) | Square footage expires as follows: 2,000 square feet in 2020, 11,000 square feet in 2021, and 456,000 square feet in 2024. |
(3) | Square footage expires as follows: 13,000 square feet in 2018, 13,000 square feet in 2019, 43,000 square feet in 2020, 56,000 square feet in 2021, 55,000 square feet in 2022, 40,000 square feet in 2023, and 67,000 square feet in 2027. Tenant has options to terminate 31,000 square feet in 2020, 15,000 square feet in 2023, and 51,000 square feet in 2025. |
(4) | Tenant has an option to terminate 2,000 square feet in 2020 and 193,000 square feet in 2022. |
(5) | Square footage expires as follows: 15,000 square feet in 2022, 30,000 square feet in 2023, 26,000 square feet in 2025, and 74,000 square feet in 2027. Tenant has options to terminate 30,000 square feet in 2021, 26,000 square feet in 2022, and 16,000 square feet in 2024. |
(6) | Square footage expires as follows: 33,000 square feet in 2019, 42,000 square feet in 2020, 31,000 square feet in 2027, 44,000 square feet in 2028, and 30,000 square feet in 2033. |
![]() | Portfolio Data |
Industry | Number of Leases | Annualized Rent as a Percent of Total | ||||||
Legal | 569 | 18.2 | % | |||||
Financial Services | 387 | 14.9 | ||||||
Entertainment | 205 | 12.9 | ||||||
Real Estate | 289 | 11.2 | ||||||
Accounting & Consulting | 361 | 10.1 | ||||||
Health Services | 377 | 7.6 | ||||||
Retail | 192 | 5.9 | ||||||
Technology | 133 | 5.4 | ||||||
Insurance | 104 | 4.1 | ||||||
Educational Services | 55 | 3.4 | ||||||
Public Administration | 92 | 2.4 | ||||||
Advertising | 59 | 1.7 | ||||||
Manufacturing & Distribution | 54 | 1.2 | ||||||
Other | 45 | 1.0 | ||||||
Total | 2,922 | 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, 2018 | Annualized Rent as a Percent of Total | Annualized Rent Per Leased Square Foot(1) | Annualized Rent Per Leased Square Foot at Expiration(2) | |||||||||||||||||||
Short Term Leases | 54 | 145,699 | 0.8 | % | $ | 5,200,025 | 0.8 | % | $ | 35.69 | $ | 35.74 | ||||||||||||||
2018 | 129 | 438,875 | 2.4 | 17,969,201 | 2.6 | 40.94 | 41.08 | |||||||||||||||||||
2019 | 551 | 1,920,221 | 10.4 | 76,338,527 | 11.1 | 39.76 | 40.62 | |||||||||||||||||||
2020 | 617 | 2,706,387 | 14.7 | 110,946,903 | 16.1 | 40.99 | 43.02 | |||||||||||||||||||
2021 | 523 | 2,580,615 | 14.0 | 108,059,154 | 15.7 | 41.87 | 45.28 | |||||||||||||||||||
2022 | 365 | 1,936,986 | 10.4 | 79,877,187 | 11.6 | 41.24 | 46.39 | |||||||||||||||||||
2023 | 294 | 2,060,597 | 11.2 | 92,862,628 | 13.5 | 45.07 | 52.35 | |||||||||||||||||||
2024 | 154 | 1,672,016 | 9.1 | 72,732,550 | 10.5 | 43.50 | 52.54 | |||||||||||||||||||
2025 | 94 | 803,346 | 4.3 | 36,497,311 | 5.3 | 45.43 | 56.51 | |||||||||||||||||||
2026 | 42 | 492,162 | 2.7 | 23,335,448 | 3.4 | 47.41 | 60.26 | |||||||||||||||||||
2027 | 56 | 872,134 | 4.7 | 41,521,076 | 6.0 | 47.61 | 61.50 | |||||||||||||||||||
Thereafter | 43 | 470,954 | 2.6 | 24,058,592 | 3.4 | 51.08 | 70.36 | |||||||||||||||||||
Subtotal/weighted average | 2,922 | 16,099,992 | 87.3 | % | $ | 689,398,602 | 100.0 | % | 42.82 | 48.57 | ||||||||||||||||
Signed leases not commenced | 346,766 | 1.9 | ||||||||||||||||||||||||
Available | 1,584,752 | 8.6 | ||||||||||||||||||||||||
Building management use | 131,299 | 0.7 | ||||||||||||||||||||||||
BOMA adjustment(3) | 270,928 | 1.5 | ||||||||||||||||||||||||
Total/weighted average | 2,922 | 18,433,737 | 100.0 | % | $ | 689,398,602 | 100.0 | % | $ | 42.82 | $ | 48.57 | ||||||||||||||
(1) | Represents annualized rent at September 30, 2018 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 2018 | Q1 2019 | Q2 2019 | Q3 2019 | |||||||||||
Expiring Square Feet(1) | 351,897 | 326,507 | 547,983 | 512,453 | ||||||||||
Percentage of Portfolio | 1.9 | % | 1.8 | % | 3.0 | % | 2.8 | % | ||||||
Expiring Rent per Square Foot(2) | $40.03 | $38.98 | $39.00 | $42.23 | ||||||||||
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 2018 | Q1 2019 | Q2 2019 | Q3 2019 | ||||||||||||
Beverly Hills | Expiring SF(1) | 40,891 | 42,696 | 74,185 | 104,243 | ||||||||||
Expiring rent per SF(2) | $46.96 | $43.90 | $45.28 | $49.57 | |||||||||||
Brentwood | Expiring SF(1) | 56,764 | 36,880 | 57,237 | 68,915 | ||||||||||
Expiring rent per SF(2) | $44.02 | $41.77 | $44.56 | $45.87 | |||||||||||
Century City | Expiring SF(1) | 9,295 | 13,725 | 22,258 | 16,230 | ||||||||||
Expiring rent per SF(2) | $45.80 | $46.53 | $33.20 | $50.44 | |||||||||||
Honolulu | Expiring SF(1) | 34,279 | 49,063 | 70,841 | 34,423 | ||||||||||
Expiring rent per SF(2) | $38.80 | $33.54 | $34.05 | $34.12 | |||||||||||
Olympic Corridor | Expiring SF(1) | 18,360 | 19,041 | 47,348 | 43,303 | ||||||||||
Expiring rent per SF(2) | $35.50 | $35.37 | $38.16 | $43.54 | |||||||||||
Santa Monica | Expiring SF(1) | 1,215 | 12,195 | 14,471 | 48,771 | ||||||||||
Expiring rent per SF(2) | $49.32 | $70.27 | $67.59 | $46.56 | |||||||||||
Sherman Oaks/Encino | Expiring SF(1) | 62,647 | 70,631 | 130,765 | 61,773 | ||||||||||
Expiring rent per SF(2) | $37.12 | $35.70 | $36.85 | $33.90 | |||||||||||
Warner Center/Woodland Hills | Expiring SF(1) | 50,897 | 50,513 | 90,861 | 82,606 | ||||||||||
Expiring rent per SF(2) | $29.98 | $29.78 | $30.23 | $30.82 | |||||||||||
Westwood | Expiring SF(1) | 77,549 | 31,763 | 40,017 | 52,189 | ||||||||||
Expiring rent per SF(2) | $43.19 | $46.40 | $49.04 | $48.35 | |||||||||||
(1) | Includes leases with an expiration date in the applicable quarter where the space had not been re-leased as of September 30, 2018, other than 145,699 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, as well as the varying terms and square footage of the individual leases expiring. |
![]() | Portfolio Data |
Net Absorption During Quarter(1) | (0.30)% | ||
Office Leases Signed During Quarter | Number of leases | Rentable Square Feet | Weighted Average Lease Term (months) | ||||
New leases | 83 | 294,000 | 50 | ||||
Renewal leases | 113 | 445,946 | 43 | ||||
All leases | 196 | 739,946 | 46 | ||||
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 | $42.28 | $43.70 | N/A | ||||
Prior leases for the same space | $33.89 | $35.36 | $38.04 | ||||
Percentage change | 24.8% | 23.6% | 11.1% | (3) | |||
Average Office Lease Transaction Costs (Per Square Foot) | |||||
Lease Transaction Costs | Lease Transaction Costs per Annum | ||||
New leases signed during the quarter | $30.92 | $7.41 | |||
Renewal leases signed during the quarter | $17.16 | $4.75 | |||
All leases signed during the quarter | $22.63 | $5.90 | |||
(1) | Net absorption represents the change in percentage leased between the last day of the current and prior quarter, excluding properties acquired or sold during the current quarter. |
(2) | Represents the average initial stabilized cash and straight-line rents on new and renewed leases signed during the quarter compared to the prior leases for the same space, excluding Short Term Leases, leases where the prior lease was terminated more than a year before signing of the new lease, and leases in acquired buildings where we believe the information about the prior agreement is incomplete or where we believe base rent reflects other off-market inducements to the tenant that are not reflected in the prior lease document. |
(3) | The percentage change for expiring cash rent represents the comparison between the starting cash rent on leases signed during the quarter and the expiring cash rent for the prior leases for the same space. |
![]() | Portfolio Data |
Submarket | Number of Properties | Number of Units | Units as a Percent of Total | ||||||||||
Brentwood | 5 | 950 | 27 | % | |||||||||
Honolulu(1) | 3 | 1,793 | 50 | ||||||||||
Santa Monica | 2 | 820 | 23 | ||||||||||
Total | 10 | 3,563 | 100 | % | |||||||||
Submarket | Percent Leased | Annualized Rent(2) | Monthly Rent Per Leased Unit | ||||||||||
Brentwood | 99.8 | % | $ | 31,432,068 | $ | 2,763 | |||||||
Honolulu(1) | 98.0 | 38,857,020 | 1,850 | ||||||||||
Santa Monica | 99.5 | 29,457,144 | 3,012 | ||||||||||
Total / Weighted Average | 98.8 | % | $ | 99,746,232 | $ | 2,366 | |||||||
Recurring Multifamily Capital Expenditures per Unit(3) | |||||
Three months ended September 30, 2018 | $ | 172 | |||
Nine months ended September 30, 2018 | $ | 562 | |||
(1) | Includes newly developed units just made available for rent. |
(2) | The multifamily portfolio also includes 10,495 square feet of ancillary retail space generating annualized rent of $391,400, which is not included in multifamily annualized rent. |
(3) | Excludes new development units. |
![]() | Developments |
Honolulu, Hawaii | |||
![]() | Photo of new apartment buildings at our Moanalua Hillside Apartments community | ||
We are adding 475 units (net of existing units removed) to our 696 unit Moanalua Hillside apartment community located on 28 acres near downtown Honolulu and key military bases. The new units are expected to cost about $120 million, not including the cost of the land which we have owned since 2005. We are also investing 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. Construction continues and as of September 30, 2018 we had leased 221 of our new units. |
Brentwood, California | |||
Rendering of our planned new residential tower in Brentwood (center), with a new park in the foreground, and our existing residential and office buildings (left and right, respectively). | ![]() | ||
Our new Brentwood development is the first new residential high-rise development west of the 405 freeway in more than 40 years, offering stunning ocean views and luxury amenities. The 34 story, 376 unit tower is being built on a site that is directly adjacent to our existing office building and a 712 unit residential property that we own. The estimated budget is between $180 million and $200 million, not including the cost of the land which we have owned since 1997. As part of the project, we are investing additional capital to build a one acre park on Wilshire Boulevard that will be available to the public and provide a valuable amenity to our surrounding properties and community. Site work is underway, and we expect construction to take about 3 years. |
(1) | All figures are estimates, as development in our markets is long and complex and subject to inherent uncertainties. |
![]() | Guidance |
Metric | Per Share |
Net income per common share - diluted | $0.69 to $0.71 |
FFO per share - fully diluted | $2.01 to $2.03 |
Metric | Commentary | Assumption Range | Compared to Prior Guidance |
Average Office Occupancy | 89% to 91% | Unchanged | |
Residential Leased Rate | We manage our apartment portfolio to be fully leased (due to rent control in our markets). Our assumption excludes the impact of leasing up newly developed units placed in service during the year. | Essentially fully leased | Unchanged |
Same Property Cash NOI | Annual increase of 3% to 4% | Increased | |
Net Revenue from Above/Below Market Leases | $20 to $22 million | Unchanged | |
Straight-line Revenue | $17 to $19 million | Unchanged | |
G&A | $37 to $40 million | Unchanged | |
Interest Expense | Includes 100% of our consolidated JVs interest expense (not our pro rata share). | $132.5 to $135.5 million | Unchanged |
![]() | Guidance |
Reconciliation of net income attributable to common stockholders to FFO | Low | High | |||||
Net income attributable to common stockholders | $ | 117.3 | $ | 120.7 | |||
Adjustments for depreciation and amortization of real estate assets | 300.0 | 295.0 | |||||
Adjustments for noncontrolling interests, consolidated JVs and unconsolidated funds | (19.3 | ) | (13.8 | ) | |||
FFO | $ | 398.0 | $ | 401.9 | |||
Reconciliation of shares outstanding | High | Low | |||||
Weighted average shares of common stock outstanding - diluted | 170.0 | 170.0 | |||||
Weighted average units in our operating partnership outstanding | 28.0 | 28.0 | |||||
Weighted average fully diluted shares outstanding | 198.0 | 198.0 | |||||
Per share | Low | High | |||||
Net income per common share - diluted | $ | 0.69 | $ | 0.71 | |||
FFO per share - fully diluted | $ | 2.01 | $ | 2.03 |
![]() | Definitions |
![]() | Definitions |
• | 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, 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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