(Mark One) | ||||
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2017 | |||
or | ||||
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________________ to __________________ |
Maryland | 46-2616226 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
250 Vesey Street, 15th Floor New York, NY (Address of principal executive offices) | 10281 (Zip Code) |
Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer x | |
Smaller reporting company ¨ | Emerging growth company ¨ |
Page | |||
PART I—FINANCIAL INFORMATION | |||
Item 1. | Financial Statements. | ||
Item 2. | |||
Item 3. | |||
Item 4. | |||
PART II—OTHER INFORMATION | |||
Item 1. | |||
Item 1A. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
Item 5. | |||
Item 6. | |||
Item 1. | Financial Statements. |
September 30, 2017 | December 31, 2016 | ||||||
ASSETS | |||||||
Investments in Real Estate: | |||||||
Land | $ | 227,555 | $ | 227,555 | |||
Buildings and improvements | 2,199,966 | 2,191,676 | |||||
Tenant improvements | 309,840 | 321,542 | |||||
2,737,361 | 2,740,773 | ||||||
Less: accumulated depreciation | 331,480 | 329,149 | |||||
Investments in real estate, net | 2,405,881 | 2,411,624 | |||||
Cash and cash equivalents | 48,122 | 30,301 | |||||
Restricted cash | 48,393 | 60,084 | |||||
Rents, deferred rents and other receivables, net | 122,474 | 118,211 | |||||
Intangible assets, net | 61,811 | 75,586 | |||||
Deferred charges, net | 62,467 | 64,967 | |||||
Prepaid and other assets, net | 3,557 | 9,186 | |||||
Total assets | $ | 2,752,705 | $ | 2,769,959 | |||
LIABILITIES AND DEFICIT | |||||||
Liabilities: | |||||||
Mortgage loans, net | $ | 1,990,984 | $ | 2,076,804 | |||
Accounts payable and other liabilities | 84,442 | 85,504 | |||||
Due to affiliates, net | 3,330 | 14,327 | |||||
Intangible liabilities, net | 17,622 | 22,227 | |||||
Total liabilities | $ | 2,096,378 | $ | 2,198,862 | |||
Commitments and Contingencies (See Note 13) |
September 30, 2017 | December 31, 2016 | ||||||
LIABILITIES AND DEFICIT (continued) | |||||||
Mezzanine Equity: | |||||||
7.625% Series A Cumulative Redeemable Preferred Stock, $0.01 par value, 9,730,370 shares issued and outstanding as of September 30, 2017 and December 31, 2016 | $ | 386,763 | $ | 372,852 | |||
Noncontrolling Interests: | |||||||
Series A-1 preferred interest | 379,206 | 366,297 | |||||
Senior participating preferred interest | 25,519 | 25,019 | |||||
Series B preferred interest | 186,326 | 65,364 | |||||
Total mezzanine equity | 977,814 | 829,532 | |||||
Stockholders’ Deficit: | |||||||
Common stock, $0.01 par value, 1,000 shares issued and outstanding as of September 30, 2017 and December 31, 2016 | — | — | |||||
Additional paid-in capital | 194,210 | 194,210 | |||||
Accumulated deficit | (245,902 | ) | (215,264 | ) | |||
Accumulated other comprehensive loss | (1,020 | ) | (1,607 | ) | |||
Noncontrolling interest – Series B common interest | (268,775 | ) | (235,774 | ) | |||
Total stockholders’ deficit | (321,487 | ) | (258,435 | ) | |||
Total liabilities and deficit | $ | 2,752,705 | $ | 2,769,959 |
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||
Sept. 30, 2017 | Sept. 30, 2016 | Sept. 30, 2017 | Sept. 30, 2016 | ||||||||||||
Revenue: | |||||||||||||||
Rental income | $ | 40,628 | $ | 40,334 | $ | 120,843 | $ | 124,071 | |||||||
Tenant reimbursements | 24,368 | 23,481 | 72,138 | 69,318 | |||||||||||
Parking | 9,216 | 9,251 | 27,785 | 27,772 | |||||||||||
Interest and other | 2,855 | 4,342 | 8,286 | 10,028 | |||||||||||
Total revenue | 77,067 | 77,408 | 229,052 | 231,189 | |||||||||||
Expenses: | |||||||||||||||
Rental property operating and maintenance | 25,422 | 24,435 | 73,332 | 71,509 | |||||||||||
Real estate taxes | 9,886 | 9,573 | 28,806 | 28,413 | |||||||||||
Parking | 2,196 | 2,213 | 6,926 | 6,259 | |||||||||||
Other expense | 1,122 | 1,428 | 3,489 | 3,125 | |||||||||||
Depreciation and amortization | 24,335 | 25,695 | 74,020 | 78,032 | |||||||||||
Interest | 23,243 | 23,458 | 70,223 | 71,479 | |||||||||||
Total expenses | 86,204 | 86,802 | 256,796 | 258,817 | |||||||||||
Net loss | (9,137 | ) | (9,394 | ) | (27,744 | ) | (27,628 | ) | |||||||
Net loss attributable to noncontrolling interests: | |||||||||||||||
Series A-1 preferred interest – current dividends | 4,303 | 4,303 | 12,909 | 12,909 | |||||||||||
Senior participating preferred interest – redemption measurement adjustment | 385 | 908 | 250 | 1,964 | |||||||||||
Series B preferred interest – current dividends | 3,965 | 881 | 9,470 | 949 | |||||||||||
Series B common interest – allocation of net loss | (11,738 | ) | (10,532 | ) | (33,646 | ) | (30,023 | ) | |||||||
Net loss attributable to Brookfield DTLA | (6,052 | ) | (4,954 | ) | (16,727 | ) | (13,427 | ) | |||||||
Series A preferred stock – current dividends | 4,637 | 4,637 | 13,911 | 13,911 | |||||||||||
Net loss available to common interest holders of Brookfield DTLA | $ | (10,689 | ) | $ | (9,591 | ) | $ | (30,638 | ) | $ | (27,338 | ) |
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||
Sept. 30, 2017 | Sept. 30, 2016 | Sept. 30, 2017 | Sept. 30, 2016 | ||||||||||||
Net loss | $ | (9,137 | ) | $ | (9,394 | ) | $ | (27,744 | ) | $ | (27,628 | ) | |||
Other comprehensive loss: | |||||||||||||||
Derivative transactions: | |||||||||||||||
Derivative holding gains (losses) | 469 | 1,832 | 1,232 | (3,290 | ) | ||||||||||
Comprehensive loss | (8,668 | ) | (7,562 | ) | (26,512 | ) | (30,918 | ) | |||||||
Less: comprehensive loss attributable to noncontrolling interests | (2,840 | ) | (3,481 | ) | (10,372 | ) | (15,922 | ) | |||||||
Comprehensive loss available to common interest holders of Brookfield DTLA | $ | (5,828 | ) | $ | (4,081 | ) | $ | (16,140 | ) | $ | (14,996 | ) |
Number of Shares | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Non- controlling Interest | Total Stockholders’ Deficit | |||||||||||||||||||||
Common Stock | |||||||||||||||||||||||||||
Balance, December 31, 2016 | 1,000 | $ | — | $ | 194,210 | $ | (215,264 | ) | $ | (1,607 | ) | $ | (235,774 | ) | $ | (258,435 | ) | ||||||||||
Net loss | (16,727 | ) | (11,017 | ) | (27,744 | ) | |||||||||||||||||||||
Other comprehensive income | 587 | 645 | 1,232 | ||||||||||||||||||||||||
Dividends on Series A preferred stock, Series A-1 preferred interest, senior participating preferred interest and Series B preferred interest | (13,911 | ) | (22,629 | ) | (36,540 | ) | |||||||||||||||||||||
Balance, September 30, 2017 | 1,000 | $ | — | $ | 194,210 | $ | (245,902 | ) | $ | (1,020 | ) | $ | (268,775 | ) | $ | (321,487 | ) |
Number of Shares | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Non- controlling Interest | Total Stockholders’ Deficit | |||||||||||||||||||||
Common Stock | |||||||||||||||||||||||||||
Balance, December 31, 2015 | 1,000 | $ | — | $ | 191,710 | $ | (177,879 | ) | $ | (2,580 | ) | $ | (195,788 | ) | $ | (184,537 | ) | ||||||||||
Net loss | (13,427 | ) | (14,201 | ) | (27,628 | ) | |||||||||||||||||||||
Other comprehensive loss | (1,568 | ) | (1,722 | ) | (3,290 | ) | |||||||||||||||||||||
Contribution from Brookfield DTLA Holdings | 2,500 | 2,500 | |||||||||||||||||||||||||
Dividends on Series A preferred stock, Series A-1 preferred interest, senior participating preferred interest and Series B preferred interest | (13,911 | ) | (15,822 | ) | (29,733 | ) | |||||||||||||||||||||
Balance, September 30, 2016 | 1,000 | $ | — | $ | 194,210 | $ | (205,217 | ) | $ | (4,148 | ) | $ | (227,533 | ) | $ | (242,688 | ) |
For the Nine Months Ended | |||||||
September 30, 2017 | September 30, 2016 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (27,744 | ) | $ | (27,628 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 74,020 | 78,032 | |||||
Recovery of doubtful accounts | (7 | ) | (239 | ) | |||
Amortization of below-market leases/ above-market leases | (1,639 | ) | (2,733 | ) | |||
Straight-line rent amortization | (6,989 | ) | (14,574 | ) | |||
Amortization of tenant inducements | 2,808 | 2,502 | |||||
Amortization of discounts and deferred financing costs | 4,659 | 3,499 | |||||
Changes in assets and liabilities: | |||||||
Rents, deferred rents and other receivables | (83 | ) | (2,508 | ) | |||
Deferred charges | (5,600 | ) | (3,912 | ) | |||
Prepaid and other assets | 5,630 | 5,585 | |||||
Accounts payable and other liabilities | 5,117 | (2,761 | ) | ||||
Due to affiliates, net | (10,997 | ) | (6,064 | ) | |||
Net cash provided by operating activities | 39,175 | 29,199 | |||||
Cash flows from investing activities: | |||||||
Expenditures for improvements to real estate | (54,308 | ) | (41,189 | ) | |||
Decrease (increase) in restricted cash | 11,691 | (5,832 | ) | ||||
Net cash used in investing activities | (42,617 | ) | (47,021 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from mortgage loans | 470,000 | 470,000 | |||||
Principal payments on mortgage loans | (553,001 | ) | (460,543 | ) | |||
Dividends paid on Series A preferred stock | — | (21,893 | ) | ||||
Contribution from (distributions to) senior participating preferred interest, net | 250 | (336 | ) | ||||
Contribution from Brookfield DTLA Holdings | — | 2,500 | |||||
Contributions from Series B preferred interest | 111,492 | 43,000 | |||||
Financing fees paid | (7,478 | ) | (3,138 | ) | |||
Net cash provided by financing activities | 21,263 | 29,590 | |||||
Net change in cash and cash equivalents | 17,821 | 11,768 | |||||
Cash and cash equivalents at beginning of period | 30,301 | 53,736 | |||||
Cash and cash equivalents at end of period | $ | 48,122 | $ | 65,504 |
For the Nine Months Ended | |||||||
September 30, 2017 | September 30, 2016 | ||||||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for interest | $ | 66,809 | $ | 67,901 | |||
Supplemental disclosure of non-cash activities: | |||||||
Accrual for real estate improvements | $ | 19,526 | $ | 6,758 | |||
Accrual for deferred leasing costs | 3,204 | 2,169 | |||||
Writeoff of fully depreciated buildings and improvements | 3,992 | — | |||||
Writeoff of fully depreciated tenant improvements | 48,790 | — | |||||
Writeoff of fully amortized intangible assets | 57,088 | — | |||||
Writeoff of fully amortized intangible liabilities | 16,320 | — | |||||
Increase (decrease) in fair value of interest rate swap, net | 1,232 | (3,290 | ) | ||||
September 30, 2017 | December 31, 2016 | ||||||
Allowance for doubtful accounts | $ | 206 | $ | 213 | |||
Accumulated amortization of tenant inducements | 12,029 | 9,924 |
September 30, 2017 | December 31, 2016 | ||||||
Intangible Assets | |||||||
In-place leases | $ | 71,439 | $ | 110,519 | |||
Tenant relationships | 33,524 | 46,248 | |||||
Above-market leases | 34,652 | 39,936 | |||||
139,615 | 196,703 | ||||||
Less: accumulated amortization | 77,804 | 121,117 | |||||
Intangible assets, net | $ | 61,811 | $ | 75,586 | |||
Intangible Liabilities | |||||||
Below-market leases | $ | 60,023 | $ | 76,344 | |||
Less: accumulated amortization | 42,401 | 54,117 | |||||
Intangible liabilities, net | $ | 17,622 | $ | 22,227 |
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||
Sept. 30, 2017 | Sept. 30, 2016 | Sept. 30, 2017 | Sept. 30, 2016 | ||||||||||||
Rental income | $ | 747 | $ | (158 | ) | $ | 1,639 | $ | 2,733 | ||||||
Depreciation and amortization expense | 3,239 | 4,994 | 10,809 | 14,796 |
In-Place Leases | Other Intangible Assets | Intangible Liabilities | |||||||||
2017 | $ | 2,001 | $ | 1,416 | $ | 1,326 | |||||
2018 | 6,747 | 5,116 | 3,799 | ||||||||
2019 | 5,698 | 4,310 | 3,225 | ||||||||
2020 | 5,052 | 3,417 | 3,017 | ||||||||
2021 | 4,815 | 3,381 | 2,893 | ||||||||
Thereafter | 9,319 | 10,539 | 3,362 | ||||||||
$ | 33,632 | $ | 28,179 | $ | 17,622 |
September 30, 2017 | December 31, 2016 | ||||||
Accumulated amortization of deferred leasing costs | $ | 39,808 | $ | 49,575 |
Contractual Maturity Date | Principal Amount as of | |||||||||||
Interest Rate | September 30, 2017 | December 31, 2016 | ||||||||||
Floating-Rate Debt | ||||||||||||
Variable-Rate Loans: | ||||||||||||
Wells Fargo Center–North Tower (1) | 4/9/2019 | 3.49 | % | $ | 370,000 | $ | — | |||||
Wells Fargo Center–North Tower (2) | 4/9/2019 | 6.49 | % | 55,000 | — | |||||||
Wells Fargo Center–North Tower (3) | 4/9/2019 | 8.24 | % | 45,000 | — | |||||||
Wells Fargo Center–South Tower (4) | 12/6/2018 | 4.93 | % | 250,000 | 250,000 | |||||||
777 Tower (5) | 11/1/2018 | 3.42 | % | 220,000 | 220,000 | |||||||
Figueroa at 7th (6) | 12/10/2017 | 3.41 | % | 35,000 | 35,000 | |||||||
Total variable-rate loans | 975,000 | 505,000 | ||||||||||
Variable-Rate Swapped to Fixed-Rate Loan: | ||||||||||||
EY Plaza (7) | 11/27/2020 | 3.93 | % | 177,858 | 180,859 | |||||||
Total floating-rate debt | 1,152,858 | 685,859 | ||||||||||
Fixed-Rate Debt: | ||||||||||||
BOA Plaza | 9/1/2024 | 4.05 | % | 400,000 | 400,000 | |||||||
Gas Company Tower | 8/6/2021 | 3.47 | % | 319,000 | 319,000 | |||||||
Gas Company Tower | 8/6/2021 | 6.50 | % | 131,000 | 131,000 | |||||||
Total fixed-rate debt | 850,000 | 850,000 | ||||||||||
Debt Refinanced: | ||||||||||||
Wells Fargo Center–North Tower | — | 550,000 | ||||||||||
Total debt | 2,002,858 | 2,085,859 | ||||||||||
Less: unamortized discounts and debt issuance costs | 11,874 | 9,055 | ||||||||||
Total debt, net | $ | 1,990,984 | $ | 2,076,804 |
(1) | This loan bears interest at LIBOR plus 2.25%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 2.75%. Brookfield DTLA has three options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). |
(2) | This loan bears interest at LIBOR plus 5.25%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 2.75%. Brookfield DTLA has three options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). |
(3) | This loan bears interest at LIBOR plus 7.00%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 2.75%. Brookfield DTLA has three options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). |
(4) | This loan bears interest at LIBOR plus 3.69%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 3.00%. Brookfield DTLA has three options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). As of September 30, 2017, a maximum future advance amount of $20.0 million is available under this loan that can be drawn by the Company to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements, leasing commissions and capital expenditures. |
(5) | This loan bears interest at LIBOR plus 2.18%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 5.75%. Brookfield DTLA has two options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). |
(6) | This loan bears interest at LIBOR plus 2.25%. On November 2, 2017, Brookfield DTLA extended the maturity date of this loan until January 8, 2018. After this extension, the Company has two options to extend the maturity date of this loan, the first for a period of eight months and the second for a period of 12 months, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). See Note 14 “Subsequent Event.” |
(7) | This loan bears interest at LIBOR plus 1.75%. As required by the loan agreement, we have entered into an interest rate swap agreement to hedge this loan, which effectively fixes the LIBOR portion of the interest rate at 2.178%. The effective interest rate of 3.93% includes interest on the swap. |
2017 (1) | $ | 36,025 | |
2018 | 474,233 | ||
2019 | 474,449 | ||
2020 | 168,151 | ||
2021 | 450,000 | ||
Thereafter | 400,000 | ||
$ | 2,002,858 |
(1) | On November 2, 2017, Brookfield DTLA extended the maturity date of the $35.0 million mortgage loan secured by Figueroa at 7th from December 10, 2017 until January 8, 2018. See Note 14 “Subsequent Event.” |
Number of Shares of Series A Preferred Stock | Series A Preferred Stock | Noncontrolling Interests | Total Mezzanine Equity | ||||||||||||||||||||
Series A-1 Preferred Interest | Senior Participating Preferred Interest | Series B Preferred Interest | |||||||||||||||||||||
Balance, December 31, 2016 | 9,730,370 | $ | 372,852 | $ | 366,297 | $ | 25,019 | $ | 65,364 | $ | 829,532 | ||||||||||||
Issuance of Series B preferred interest | 111,492 | 111,492 | |||||||||||||||||||||
Current dividends | 13,911 | 12,909 | — | 9,470 | 36,290 | ||||||||||||||||||
Contribution from senior participating preferred interest, net | 250 | 250 | |||||||||||||||||||||
Redemption measurement adjustment | 250 | 250 | |||||||||||||||||||||
Balance, September 30, 2017 | 9,730,370 | $ | 386,763 | $ | 379,206 | $ | 25,519 | $ | 186,326 | $ | 977,814 |
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||
Sept. 30, 2017 | Sept. 30, 2016 | Sept. 30, 2017 | Sept. 30, 2016 | ||||||||||||
Balance at beginning of period | $ | (2,610 | ) | $ | (10,537 | ) | $ | (3,373 | ) | $ | (5,415 | ) | |||
Other comprehensive income (loss) before reclassifications | 469 | 1,832 | 1,232 | (3,290 | ) | ||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | — | — | — | |||||||||||
Net current-period other comprehensive income (loss) | 469 | 1,832 | 1,232 | (3,290 | ) | ||||||||||
Balance at end of period | $ | (2,141 | ) | $ | (8,705 | ) | $ | (2,141 | ) | $ | (8,705 | ) |
Fair Value Measurements Using | ||||||||||||||||
Total Fair Value | Quoted Prices in Active Markets for Identical (Liabilities) Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Interest rate swap at: | ||||||||||||||||
September 30, 2017 | $ | (2,141 | ) | $ | — | $ | (2,141 | ) | $ | — | ||||||
December 31, 2016 | (3,373 | ) | — | (3,373 | ) | — | ||||||||||
Interest rate caps at: | ||||||||||||||||
September 30, 2017 | $ | 17 | $ | — | $ | 17 | $ | — | ||||||||
December 31, 2016 | 53 | — | 53 | — |
Fair Value | |||||||||
September 30, 2017 | December 31, 2016 | ||||||||
Derivatives designated as cash flow hedging instruments: | |||||||||
Interest rate swap | $ | (2,141 | ) | $ | (3,373 | ) |
Amount of Gain (Loss) Recognized in AOCL | Amount of Gain (Loss) Reclassified from AOCL to Statement of Operations | ||||||
Derivatives designated as cash flow hedging instruments: | |||||||
Interest rate swap for the nine months ended: | |||||||
September 30, 2017 | $ | 1,232 | $ | — | |||
September 30, 2016 | (3,290 | ) | — |
September 30, 2017 | December 31, 2016 | ||||||
Wells Fargo Center–North Tower | $ | 370,000 | $ | — | |||
Wells Fargo Center–North Tower | 55,000 | — | |||||
Wells Fargo Center–North Tower | 45,000 | — | |||||
Wells Fargo Center–South Tower | 270,000 | 270,000 | |||||
777 Tower | 220,000 | 220,000 | |||||
$ | 960,000 | $ | 490,000 |
September 30, 2017 | December 31, 2016 | ||||||
Estimated fair value | $ | 2,003,116 | $ | 2,059,449 | |||
Carrying amount | 2,002,858 | 2,085,859 |
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||
Sept. 30, 2017 | Sept. 30, 2016 | Sept. 30, 2017 | Sept. 30, 2016 | ||||||||||||
Property management fee expense | $ | 2,021 | $ | 1,955 | $ | 6,112 | $ | 5,864 | |||||||
Asset management fee expense | 1,583 | 1,583 | 4,748 | 4,748 | |||||||||||
General, administrative and reimbursable expenses | 623 | 615 | 1,860 | 1,857 | |||||||||||
Leasing and construction management fees | 634 | 410 | 1,481 | 1,321 |
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||
Sept. 30, 2017 | Sept. 30, 2016 | Sept. 30, 2017 | Sept. 30, 2016 | ||||||||||||
Insurance expense | $ | 1,948 | $ | 1,950 | $ | 5,828 | $ | 5,873 |
Item 2. | Management’s Discussion and Analysis of Financial Condition |
Sources | Uses | ||||
• | Cash on hand; | • | Property operations; | ||
• | Cash generated from operations; | • | Capital expenditures; | ||
• | Contributions from Brookfield DTLA Holdings; and | • | Payments in connection with loans; | ||
• | Proceeds from additional secured or unsecured debt financings. | • | Distributions to Brookfield DTLA Holdings; and | ||
• | Dividend payment in connection with legal settlement. |
Square Feet | Leased % and In-Place Rents | ||||||||||||||||
Property | Net Building Rentable | % of Net Rentable | % Leased | Total Annualized Rents (1) | Annualized Rent $/RSF (2) | ||||||||||||
BOA Plaza | 1,405,428 | 18.67 | % | 93.0 | % | $ | 32,739,465 | $ | 25.06 | ||||||||
Wells Fargo Center–North Tower | 1,400,639 | 18.61 | % | 86.0 | % | 30,700,712 | 25.48 | ||||||||||
Gas Company Tower | 1,345,163 | 17.87 | % | 89.9 | % | 30,029,055 | 24.82 | ||||||||||
EY Plaza | 1,224,967 | 16.28 | % | 89.0 | % | 26,549,323 | 24.36 | ||||||||||
Wells Fargo Center–South Tower | 1,124,960 | 14.95 | % | 66.6 | % | 19,272,575 | 25.73 | ||||||||||
777 Tower | 1,024,835 | 13.62 | % | 81.8 | % | 20,224,383 | 24.12 | ||||||||||
7,525,992 | 100.00 | % | 85.0 | % | $ | 159,515,513 | $ | 24.93 |
(1) | Annualized rent represents the annualized monthly contractual rent under existing leases as of September 30, 2017. This amount reflects total base rent before any rent abatements as of September 30, 2017 and is shown on a net basis; thus, for any tenant under a partial gross lease, the expense stop, or under a fully gross lease, the current year operating expenses (which may be estimates as of such date), are subtracted from gross rent. Total abatements for leases in effect as of September 30, 2017 for the twelve months ending September 30, 2018 are approximately $15.0 million, or $2.34 per leased square foot. |
(2) | Annualized rent per rentable square foot represents annualized rent as computed above, divided by leased square feet as of the same date. |
Year | Total Area in Square Feet Covered by Expiring Leases | Percentage of Leased Square Feet | Annualized Rent (1) | Percentage of Annualized Rent | Current Rent per Leased Square Foot (2) | Rent per Leased Square Foot at Expiration (3) | |||||||||||||||
2017 | 27,982 | 0.4 | % | $ | 753,032 | 0.5 | % | $ | 26.91 | $ | 27.17 | ||||||||||
2018 | 576,186 | 9.0 | % | 11,217,172 | 7.0 | % | 19.47 | 19.65 | |||||||||||||
2019 | 442,433 | 6.9 | % | 12,363,644 | 7.8 | % | 27.94 | 29.89 | |||||||||||||
2020 | 306,858 | 4.8 | % | 7,829,062 | 4.9 | % | 25.51 | 28.19 | |||||||||||||
2021 | 422,157 | 6.6 | % | 11,058,885 | 6.9 | % | 26.20 | 29.44 | |||||||||||||
2022 | 804,787 | 12.6 | % | 21,418,942 | 13.4 | % | 26.61 | 30.67 | |||||||||||||
2023 | 805,033 | 12.6 | % | 19,493,503 | 12.2 | % | 24.21 | 28.66 | |||||||||||||
2024 | 417,960 | 6.6 | % | 10,637,926 | 6.7 | % | 25.45 | 30.93 | |||||||||||||
2025 | 718,971 | 11.2 | % | 19,752,991 | 12.4 | % | 27.47 | 33.10 | |||||||||||||
2026 | 517,636 | 8.1 | % | 11,463,487 | 7.2 | % | 22.15 | 28.74 | |||||||||||||
Thereafter | 1,358,811 | 21.2 | % | 33,526,869 | 21.0 | % | 24.67 | 37.78 | |||||||||||||
Total expiring leases | 6,398,814 | 100.0 | % | $ | 159,515,513 | 100.0 | % | $ | 24.93 | $ | 30.80 | ||||||||||
Currently available | 1,127,178 | ||||||||||||||||||||
Total rentable square feet | 7,525,992 |
(1) | Annualized rent represents the annualized monthly contractual rent under existing leases as of September 30, 2017. This amount reflects total base rent before any rent abatements as of September 30, 2017 and is shown on a net basis; thus, for any tenant under a partial gross lease, the expense stop, or under a fully gross lease, the current year operating expenses (which may be estimates as of such date), are subtracted from gross rent. Total abatements for leases in effect as of September 30, 2017 for the twelve months ending September 30, 2018 are approximately $15.0 million, or $2.34 per leased square foot. |
(2) | Current rent per leased square foot represents current base rent, divided by total leased square feet as of the same date. |
(3) | Rent per leased square foot at expiration represents base rent, including any future rent steps, and thus represents the base rent that will be in place at lease expiration. |
Leasing Activity | Percentage Leased | ||||
Leased square feet as of December 31, 2016 | 6,619,016 | 87.9 | % | ||
Expirations | (715,245 | ) | (9.5 | )% | |
New leases | 185,873 | 2.5 | % | ||
Renewals | 309,170 | 4.1 | % | ||
Leased square feet as of September 30, 2017 | 6,398,814 | 85.0 | % |
Principal Amount | Percent of Total Debt | Effective Interest Rate | Weighted Average Term to Maturity | ||||||||
Fixed-rate | $ | 850.0 | 42.44 | % | 4.21 | % | 5 years | ||||
Variable-rate swapped to fixed-rate | 177.9 | 8.88 | % | 3.93 | % | 3 years | |||||
Variable-rate (1) (2) | 975.0 | 48.68 | % | 4.23 | % | 1 year | |||||
$ | 2,002.9 | 100.00 | % | 4.19 | % | 3 years |
(1) | As of September 30, 2017, a maximum future advance amount of $20.0 million is available under the Wells Fargo Center–South Tower mortgage loan that can be drawn by the Company to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements, leasing commissions and capital expenditures. As of November 13, 2017, no funds have been drawn against the future advance amount. |
(2) | On November 2, 2017, Brookfield DTLA extended the maturity date of the $35.0 million mortgage loan secured by Figueroa at 7th from December 10, 2017 until January 8, 2018. See “Subsequent Event. |
Interest Rate | Contractual Maturity Date | Principal Amount (1) | Annual Debt Service | |||||||||
Floating-Rate Debt | ||||||||||||
Variable-Rate Loans: | ||||||||||||
Wells Fargo Center–North Tower (2) | 3.49 | % | 4/9/2019 | $ | 370,000 | $ | 13,074 | |||||
Wells Fargo Center–North Tower (3) | 6.49 | % | 4/9/2019 | 55,000 | 3,616 | |||||||
Wells Fargo Center–North Tower (4) | 8.24 | % | 4/9/2019 | 45,000 | 3,757 | |||||||
Wells Fargo Center–South Tower (5) | 4.93 | % | 12/6/2018 | 250,000 | 12,496 | |||||||
777 Tower (6) | 3.42 | % | 11/1/2018 | 220,000 | 7,629 | |||||||
Figueroa at 7th (7) | 3.41 | % | 12/10/2017 | 35,000 | 1,208 | |||||||
Total variable-rate loans | 975,000 | 41,780 | ||||||||||
Variable-Rate Swapped to Fixed-Rate Loan: | ||||||||||||
EY Plaza (8) | 3.93 | % | 11/27/2020 | 177,858 | 7,083 | |||||||
Total floating-rate debt | 1,152,858 | 48,863 | ||||||||||
Fixed-Rate Debt | ||||||||||||
BOA Plaza | 4.05 | % | 9/1/2024 | 400,000 | 16,425 | |||||||
Gas Company Tower | 3.47 | % | 8/6/2021 | 319,000 | 11,232 | |||||||
Gas Company Tower | 6.50 | % | 8/6/2021 | 131,000 | 8,633 | |||||||
Total fixed-rate rate debt | 850,000 | 36,290 | ||||||||||
Total debt | 2,002,858 | $ | 85,153 | |||||||||
Less: unamortized debt issuance costs | 11,874 | |||||||||||
Total debt, net | $ | 1,990,984 |
(1) | Assuming no payment has been made in advance of its due date. |
(2) | This loan bears interest at LIBOR plus 2.25%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 2.75%. Brookfield DTLA has three options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). |
(3) | This loan bears interest at LIBOR plus 5.25%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 2.75%. Brookfield DTLA has three options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). |
(4) | This loan bears interest at LIBOR plus 7.00%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 2.75%. Brookfield DTLA has three options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). |
(5) | This loan bears interest at LIBOR plus 3.69%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 3.00%. Brookfield DTLA has three options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). As of September 30, 2017, a maximum future advance amount of $20.0 million is available under this loan that can be drawn by the Company to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements, leasing commissions and capital expenditures. As of November 13, 2017, no funds have been drawn against the future advance amount. |
(6) | This loan bears interest at LIBOR plus 2.18%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 5.75%. Brookfield DTLA has two options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). |
(7) | This loan bears interest at LIBOR plus 2.25%. On November 2, 2017, Brookfield DTLA extended the maturity date of this loan until January 8, 2018. After this extension, the Company has two options to extend the maturity date of this loan, the first for a period of eight months and the second for a period of 12 months, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). See “Subsequent Event.” |
(8) | This loan bears interest at LIBOR plus 1.75%. As required by the loan agreement, we have entered into an interest rate swap agreement to hedge this loan, which effectively fixes the LIBOR portion of the interest rate at 2.178%. The effective interest rate of 3.93% includes interest on the swap. |
For the Three Months Ended | Increase/ (Decrease) | % Change | ||||||||||||
Sept. 30, 2017 | Sept. 30, 2016 | |||||||||||||
Revenue: | ||||||||||||||
Rental income | $ | 40.6 | $ | 40.4 | $ | 0.2 | — | % | ||||||
Tenant reimbursements | 24.3 | 23.4 | 0.9 | 4 | % | |||||||||
Parking | 9.2 | 9.3 | (0.1 | ) | (1 | )% | ||||||||
Interest and other | 2.9 | 4.3 | (1.4 | ) | (33 | )% | ||||||||
Total revenue | 77.0 | 77.4 | (0.4 | ) | (1 | )% | ||||||||
Expenses: | ||||||||||||||
Rental property operating and maintenance | 25.4 | 24.4 | 1.0 | 4 | % | |||||||||
Real estate taxes | 9.9 | 9.6 | 0.3 | 3 | % | |||||||||
Parking | 2.2 | 2.2 | — | — | % | |||||||||
Other expense | 1.1 | 1.4 | (0.3 | ) | (21 | )% | ||||||||
Depreciation and amortization | 24.3 | 25.7 | (1.4 | ) | (5 | )% | ||||||||
Interest | 23.2 | 23.5 | (0.3 | ) | (1 | )% | ||||||||
Total expenses | 86.1 | 86.8 | (0.7 | ) | (1 | )% | ||||||||
Net loss | $ | (9.1 | ) | $ | (9.4 | ) | $ | 0.3 |
For the Nine Months Ended | Increase/ (Decrease) | % Change | ||||||||||||
Sept. 30, 2017 | Sept. 30, 2016 | |||||||||||||
Revenue: | ||||||||||||||
Rental income | $ | 120.8 | $ | 124.1 | $ | (3.3 | ) | (3 | )% | |||||
Tenant reimbursements | 72.1 | 69.3 | 2.8 | 4 | % | |||||||||
Parking | 27.8 | 27.8 | — | — | % | |||||||||
Interest and other | 8.3 | 10.0 | (1.7 | ) | (17 | )% | ||||||||
Total revenue | 229.0 | 231.2 | (2.2 | ) | (1 | )% | ||||||||
Expenses: | ||||||||||||||
Rental property operating and maintenance | 73.3 | 71.5 | 1.8 | 3 | % | |||||||||
Real estate taxes | 28.8 | 28.4 | 0.4 | 1 | % | |||||||||
Parking | 6.9 | 6.3 | 0.6 | 10 | % | |||||||||
Other expense | 3.5 | 3.1 | 0.4 | 13 | % | |||||||||
Depreciation and amortization | 74.0 | 78.0 | (4.0 | ) | (5 | )% | ||||||||
Interest | 70.2 | 71.5 | (1.3 | ) | (2 | )% | ||||||||
Total expenses | 256.7 | 258.8 | (2.1 | ) | (1 | )% | ||||||||
Net loss | $ | (27.7 | ) | $ | (27.6 | ) | $ | (0.1 | ) |
For the Nine Months Ended | Increase/ (Decrease) | ||||||||||
Sept. 30, 2017 | Sept. 30, 2016 | ||||||||||
(In thousands) | |||||||||||
Net cash provided by operating activities | $ | 39,175 | $ | 29,199 | $ | 9,976 | |||||
Net cash used in investing activities | (42,617 | ) | (47,021 | ) | (4,404 | ) | |||||
Net cash provided by financing activities | 21,263 | 29,590 | (8,327 | ) |
2017 | 2018 | 2019 | 2020 | 2021 | Thereafter | Total | |||||||||||||||||||||
Principal payments on mortgage loans (1) | $ | 36,025 | $ | 474,233 | $ | 474,449 | $ | 168,151 | $ | 450,000 | $ | 400,000 | $ | 2,002,858 | |||||||||||||
Interest payments – | |||||||||||||||||||||||||||
Fixed-rate debt (2) | 9,147 | 36,290 | 36,290 | 36,390 | 28,289 | 43,875 | 190,281 | ||||||||||||||||||||
Variable-rate swapped to fixed-rate debt | 1,777 | 6,975 | 6,789 | 6,434 | — | — | 21,975 | ||||||||||||||||||||
Variable-rate debt (3) | 10,461 | 38,428 | 5,490 | — | — | — | 54,379 | ||||||||||||||||||||
Tenant-related commitments (4) | 53,042 | 13,237 | 12,890 | 2,135 | 1,504 | 4,376 | 87,184 | ||||||||||||||||||||
$ | 110,452 | $ | 569,163 | $ | 535,908 | $ | 213,110 | $ | 479,793 | $ | 448,251 | $ | 2,356,677 |
(1) | On November 2, 2017, Brookfield DTLA extended the maturity date of the $35.0 million mortgage loan secured by Figueroa at 7th from December 10, 2017 until January 8, 2018. See “Subsequent Event.” |
(2) | Interest payments on fixed-rate debt are calculated based on contractual interest rates and scheduled maturity dates. |
(3) | Interest payments on variable-rate debt are calculated based on scheduled maturity dates and the one-month LIBOR rate in place on the debt as of September 30, 2017 plus the contractual spread per the loan agreements. |
(4) | Tenant-related commitments include tenant improvements and leasing commissions and are based on executed leases as of September 30, 2017. |
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||
Sept. 30, 2017 | Sept. 30, 2016 | Sept. 30, 2017 | Sept. 30, 2016 | ||||||||||||
Property management fee expense | $ | 2,021 | $ | 1,955 | $ | 6,112 | $ | 5,864 | |||||||
Asset management fee expense | 1,583 | 1,583 | 4,748 | 4,748 | |||||||||||
General, administrative and reimbursable expenses | 623 | 615 | 1,860 | 1,857 | |||||||||||
Leasing and construction management fees | 634 | 410 | 1,481 | 1,321 |
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||
Sept. 30, 2017 | Sept. 30, 2016 | Sept. 30, 2017 | Sept. 30, 2016 | ||||||||||||
Insurance expense | $ | 1,948 | $ | 1,950 | $ | 5,828 | $ | 5,873 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
Item 4. | Controls and Procedures. |
Item 1. | Legal Proceedings. |
Item 1A. | Risk Factors. |
• | Risks generally incident to the ownership of real property, including the ability to retain tenants and rent space upon lease expirations, the financial condition and solvency of our tenants, the relative illiquidity of real estate and changes in real estate taxes, regulatory compliance costs and other operating expenses; |
• | Risks associated with the Downtown Los Angeles market, which is characterized by challenging leasing conditions, including limited numbers of new tenants coming into the market and the downsizing of large tenants in the market such as accounting firms, banks and law firms; |
• | Risks related to increased competition for tenants in the Downtown Los Angeles market, including aggressive attempts by competing landlords to fill large vacancies by providing tenants with lower rental rates, increasing amounts of free rent and providing larger allowances for tenant improvements; |
• | The impact or unanticipated impact of general economic, political and market factors in the regions in which Brookfield DTLA or any of its subsidiaries does business; |
• | The use of debt to finance Brookfield DTLA’s business or that of its subsidiaries; |
• | The behavior of financial markets, including fluctuations in interest rates; |
• | Uncertainties of real estate development or redevelopment; |
• | Global equity and capital markets and the availability of equity and debt financing and refinancing within these markets; |
• | Risks relating to Brookfield DTLA’s insurance coverage; |
• | The possible impact of international conflicts and other developments, including terrorist acts; |
• | Potential environmental liabilities; |
• | Dependence on management personnel; |
• | The ability to complete and effectively integrate acquisitions into existing operations and the ability to attain expected benefits therefrom; |
• | Operational and reputational risks; |
• | Catastrophic events, such as earthquakes and hurricanes; and |
• | The impact of legislative, regulatory and competitive changes and other risk factors relating to the real estate industry, as detailed from time to time in the reports of Brookfield DTLA filed with the SEC. |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
Item 3. | Defaults Upon Senior Securities. |
Item 4. | Mine Safety Disclosures. |
Item 5. | Other Information. |
Item 6. | Exhibits. |
Exhibit No. | Exhibit Description | |
Certification of Principal Executive Officer dated November 13, 2017 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
Certification of Principal Financial Officer dated November 13, 2017 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
Certification of Principal Executive Officer and Principal Financial Officer dated November 13, 2017 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1) | ||
101.INS** | XBRL Instance Document | |
101.SCH** | XBRL Taxonomy Extension Schema Document | |
101.CAL** | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF** | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB** | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE** | XBRL Taxonomy Extension Presentation Linkbase Document |
* | Filed herewith. |
** | Furnished herewith. |
(1) | This exhibit should not be deemed to be “filed” for purposes of Section 18 of the Exchange Act. |
Date: | As of November 13, 2017 |
BROOKFIELD DTLA FUND OFFICE TRUST INVESTOR INC. | |||
Registrant | |||
By: | /s/ G. MARK BROWN | ||
G. Mark Brown | |||
Chairman of the Board | |||
(Principal executive officer) | |||
By: | /s/ EDWARD F. BEISNER | ||
Edward F. Beisner | |||
Chief Financial Officer | |||
(Principal financial officer) | |||
Date: As of November 13, 2017 | By: | /s/ G. MARK BROWN |
G. Mark Brown | ||
Chairman of the Board | ||
(Principal executive officer) |
Date: As of November 13, 2017 | By: | /s/ EDWARD F. BEISNER |
Edward F. Beisner | ||
Chief Financial Officer | ||
(Principal financial officer) |
(i) | The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2017 (the “Periodic Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
(ii) | Information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: As of November 13, 2017 | By: | /s/ G. MARK BROWN |
G. Mark Brown | ||
Chairman of the Board | ||
(Principal executive officer) |
By: | /s/ EDWARD F. BEISNER | |
Edward F. Beisner | ||
Chief Financial Officer | ||
(Principal financial officer) |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Nov. 10, 2017 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Brookfield DTLA Fund Office Trust Investor Inc. | |
Entity Central Index Key | 0001575311 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Well-known Seasoned Issuer | No | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q3 | |
Entity Current Reporting Status | Yes | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 0 |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2017 |
Dec. 31, 2016 |
|
Common stock, par value (in USD per share) | $ 0.01 | $ 0.01 |
Common stock, shares issued (in shares) | 1,000 | 1,000 |
Common stock, shares outstanding (in shares) | 1,000 | 1,000 |
Series A preferred stock | ||
Preferred stock features | 7.625% Series A Cumulative Redeemable Preferred Stock | 7.625% Series A Cumulative Redeemable Preferred Stock |
Series A preferred stock dividend rate | 7.625% | 7.625% |
Series A preferred stock, par value (in USD per share) | $ 0.01 | $ 0.01 |
Series A preferred stock, shares issued (in shares) | 9,730,370 | 9,730,370 |
Series A preferred stock, shares outstanding (in shares) | 9,730,370 | 9,730,370 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Revenue: | ||||
Rental income | $ 40,628 | $ 40,334 | $ 120,843 | $ 124,071 |
Tenant reimbursements | 24,368 | 23,481 | 72,138 | 69,318 |
Parking | 9,216 | 9,251 | 27,785 | 27,772 |
Interest and other | 2,855 | 4,342 | 8,286 | 10,028 |
Total revenue | 77,067 | 77,408 | 229,052 | 231,189 |
Expenses: | ||||
Rental property operating and maintenance | 25,422 | 24,435 | 73,332 | 71,509 |
Real estate taxes | 9,886 | 9,573 | 28,806 | 28,413 |
Parking | 2,196 | 2,213 | 6,926 | 6,259 |
Other expense | 1,122 | 1,428 | 3,489 | 3,125 |
Depreciation and amortization | 24,335 | 25,695 | 74,020 | 78,032 |
Interest | 23,243 | 23,458 | 70,223 | 71,479 |
Total expenses | 86,204 | 86,802 | 256,796 | 258,817 |
Net loss | (9,137) | (9,394) | (27,744) | (27,628) |
Series B common interest – allocation of net loss | (11,738) | (10,532) | (33,646) | (30,023) |
Net loss attributable to Brookfield DTLA | (6,052) | (4,954) | (16,727) | (13,427) |
Net loss available to common interest holders of Brookfield DTLA | (10,689) | (9,591) | (30,638) | (27,338) |
Series A-1 preferred interest | ||||
Expenses: | ||||
Current dividends | 4,303 | 4,303 | 12,909 | 12,909 |
Senior participating preferred interest | ||||
Expenses: | ||||
Redemption measurement adjustment | 385 | 908 | 250 | 1,964 |
Series B preferred interest | ||||
Expenses: | ||||
Current dividends | 3,965 | 881 | 9,470 | 949 |
Series A preferred stock | ||||
Expenses: | ||||
Current dividends | $ 4,637 | $ 4,637 | $ 13,911 | $ 13,911 |
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (9,137) | $ (9,394) | $ (27,744) | $ (27,628) |
Derivative transactions: | ||||
Derivative holding gains (losses) | 469 | 1,832 | 1,232 | (3,290) |
Comprehensive loss | (8,668) | (7,562) | (26,512) | (30,918) |
Less: comprehensive loss attributable to noncontrolling interests | (2,840) | (3,481) | (10,372) | (15,922) |
Comprehensive loss available to common interest holders of Brookfield DTLA | $ (5,828) | $ (4,081) | $ (16,140) | $ (14,996) |
Organization and Description of Business |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Description of Business | Organization and Description of Business Brookfield DTLA Fund Office Trust Investor Inc. (“Brookfield DTLA” or the “Company”) is a Maryland corporation and was incorporated on April 19, 2013. Brookfield DTLA was formed for the purpose of consummating the transactions contemplated in the Agreement and Plan of Merger dated as of April 24, 2013, as amended (the “Merger Agreement”), and the issuance of shares of 7.625% Series A Cumulative Redeemable Preferred Stock (the “Series A preferred stock”) in connection with the acquisition of MPG Office Trust, Inc. and MPG Office, L.P. (together, “MPG”). Brookfield DTLA is a direct subsidiary of Brookfield DTLA Holdings LLC (“Brookfield DTLA Holdings”), a Delaware limited liability company, and an indirect partially-owned subsidiary of Brookfield Office Properties Inc., a corporation under the Laws of Canada (“BPO”, and together with its affiliates excluding the Company and its subsidiaries, the “Manager”). Brookfield DTLA owns BOA Plaza, EY Plaza, Wells Fargo Center–North Tower, Wells Fargo Center–South Tower, Gas Company Tower and 777 Tower, each of which is a Class A office property located in the Los Angeles Central Business District (the “LACBD”). Brookfield DTLA receives its income primarily from rental income (including tenant reimbursements) generated from the operations of its office and retail properties, and to a lesser extent, from its parking garages. |
Basis of Presentation |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation As used in these condensed consolidated financial statements and related notes, unless the context requires otherwise, the terms “Brookfield DTLA,” the “Company,” “us,” “we” and “our” refer to Brookfield DTLA Fund Office Trust Investor Inc. Principles of Consolidation and Basis of Presentation The accompanying unaudited condensed consolidated financial statements and related disclosures have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) applicable to interim financial information and with the instructions to Form 10‑Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments, consisting of only those of a normal and recurring nature, considered necessary for a fair presentation of the financial position and interim results of Brookfield DTLA as of and for the periods presented have been included. The results of operations for interim periods are not necessarily indicative of those that may be expected for a full fiscal year. The condensed consolidated balance sheet data as of December 31, 2016 has been derived from Brookfield DTLA’s audited financial statements; however, the accompanying notes to the condensed consolidated financial statements do not include all disclosures required by GAAP. The financial information included herein should be read in conjunction with the consolidated financial statements and related notes included in Brookfield DTLA’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 20, 2017. Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. For example, estimates and assumptions have been made with respect to fair values of assets and liabilities for purposes of applying the acquisition method of accounting, the useful lives of assets, recoverable amounts of receivables, impairment of long-lived assets and fair value of debt. Actual results could ultimately differ from such estimates. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09 establishing Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. ASU 2014-09 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. ASU 2014-09 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration that the entity expects to be entitled to receive in exchange for those goods or services and also requires certain additional disclosures. ASU 2014-09 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017. We are currently evaluating the impact of the adoption of ASU 2014-09 on Brookfield DTLA’s consolidated financial statements. In February 2016, the FASB issued ASU 2016-02 establishing ASC Topic 842, Leases. The guidance in this update supersedes the guidance in ASC Topic 840, Leases. ASU 2016-02 revises GAAP related to accounting for leases by lessees. Under this new guidance, lessees will be required to recognize a lease liability and a right-of-use asset in the balance sheet for all leases with terms greater than 12 months. Leases will be classified as either finance or operating, with classification determining the pattern of expense recognition in the statement of operations. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and should be applied using a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. We are currently evaluating the impact of the adoption of ASU 2016-02 on Brookfield DTLA’s consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments to ASC Topic 230, Statement of Cash Flows. ASU 2016-15 clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows to reduce diversity in practice with respect to (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingent consideration payments made after a business combination, (iv) proceeds from the settlement of insurance claims, (v) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, (vi) distributions received from equity method investees, (vii) beneficial interests in securitization transactions, and (viii) separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017, with early adoption permitted. We do not expect the adoption of this update to have a material impact on Brookfield DTLA’s consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, Restricted Cash to ASC Topic 230, Statement of Cash Flows. ASU 2016-18 requires entities to show the changes in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. Upon adoption, we will retrospectively reconcile the activity in our cash, cash equivalents, restricted cash and restricted cash equivalents during reporting periods. In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business to ASC Topic 805, Business Combinations. ASU 2017-01 introduced amendments that are intended to make the guidance on the definition of a business more consistent and cost-efficient. The objective of the update is to add further guidance that assists entities in evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business by providing a screen to determine when a set of assets and activities acquired is not a business. ASU 2017-01 is effective for annual periods beginning after December 15, 2017 including interim periods within those periods. ASU 2017-01 must be applied prospectively on or after the effective date. We are currently evaluating the impact of the adoption of ASU 2017-01 on Brookfield DTLA’s consolidated financial statements. In February 2017, the FASB issued ASU 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets to ASC Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets. ASU 2017-05 clarifies the scope of recently established guidance on nonfinancial asset derecognition as well as the accounting for partial sales of nonfinancial assets. This update conforms the derecognition guidance on nonfinancial assets with the model for transactions in ASC 606. ASU 2017-05 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. We do not expect the adoption of this update to have a material impact on Brookfield DTLA’s consolidated financial statements. In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities to ASC Topic 815, Derivatives and Hedging. ASU 2017-12 introduced amendments intended to make targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. The objective of the update is to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. All transition requirements and elections should be applied to hedging relationships existing as of the date of adoption and the effect of the adoption should be reflected as of the beginning of the fiscal year of adoption. We are currently evaluating the impact of the adoption of ASU 2017-01 on Brookfield DTLA’s consolidated financial statements. Income Taxes Brookfield DTLA has elected to be taxed as a real estate investment trust (“REIT”) pursuant to Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its tax period ended December 31, 2013. Brookfield DTLA conducts and intends to conduct its operations so as to continue to qualify as a REIT. Accordingly, Brookfield DTLA is not subject to U.S. federal income tax, provided that it continues to qualify as a REIT and distributions to its stockholders, if any, generally equal or exceed its taxable income. Brookfield DTLA has elected to treat certain of its subsidiaries as taxable REIT subsidiaries (“TRS”). Certain activities that we undertake must be conducted by a TRS, such as non-customary services for our tenants, and holding assets that we cannot hold directly. A TRS is subject to both federal and state income taxes. Qualification and taxation as a REIT depends upon Brookfield DTLA’s ability to meet the various qualification tests imposed under the Code related to annual operating results, asset diversification, distribution levels and diversity of stock ownership. Accordingly, no assurance can be given that Brookfield DTLA will be organized or be able to operate in a manner so as to continue to qualify as a REIT. If Brookfield DTLA fails to qualify as a REIT in any taxable year, it will be subject to federal and state income tax on its taxable income at regular corporate tax rates, and it may be ineligible to qualify as a REIT for four subsequent tax years. Brookfield DTLA may also be subject to certain state or local income taxes, or franchise taxes on its REIT activities. Brookfield DTLA made provisions for income taxes of $291 thousand and $482 thousand during the three and nine months ended September 30, 2017, respectively. Brookfield DTLA made no provision and a $419 thousand provision for income taxes during the three and nine months ended September 30, 2016, respectively. Brookfield DTLA’s taxable income or loss is different than its financial statement income or loss. Brookfield DTLA recognizes tax benefits from uncertain tax positions when it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more likely than not recognition threshold. Brookfield DTLA had no unrecognized tax benefits as of September 30, 2017 and December 31, 2016, and Brookfield DTLA does not expect its unrecognized tax benefits balance to change during the next 12 months. As of September 30, 2017, Brookfield DTLA’s 2013 tax period and 2014, 2015 and 2016 tax years remain open due to the statute of limitations and may be subject to examination by federal, state and local authorities. The short tax period ended October 15, 2013 for Brookfield DTLA and its subsidiaries remains open due to the statute of limitations and may be subject to examination by federal, state and local tax authorities. |
Rents, Deferred Rents and Other Receivables, Net |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Rents, Deferred Rents and Other Receivables, Net | Rents, Deferred Rents and Other Receivables, Net Brookfield DTLA’s rents, deferred rents and other receivables are presented net of the following amounts in the condensed consolidated balance sheets (in thousands):
Brookfield DTLA recorded recoveries of doubtful accounts of $2 thousand and $7 thousand during the three and nine months ended September 30, 2017, respectively. Brookfield DTLA recorded recoveries of doubtful accounts of $311 thousand and $239 thousand during the three and nine months ended September 30, 2016, respectively. |
Intangible Assets and Liabilities |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets and Liabilities | Intangible Assets and Liabilities Brookfield DTLA’s intangible assets and liabilities are summarized as follows (in thousands):
The impact of the amortization of acquired below-market leases, net of acquired above-market leases, on rental income and of acquired in-place leases and tenant relationships on depreciation and amortization expense is as follows (in thousands):
As of September 30, 2017, the estimate of the amortization/accretion of intangible assets and liabilities during the remainder of 2017, the next four years and thereafter is as follows (in thousands):
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Deferred Charges, Net |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Deferred Charges, Net | Deferred Charges, Net Brookfield DTLA’s deferred charges are presented net of the following amounts in the condensed consolidated balance sheets (in thousands):
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Mortgage Loans |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage Loans | Mortgage Loans Brookfield DTLA’s debt is as follows (in thousands, except percentage amounts):
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Debt Refinanced On April 5, 2017, Brookfield DTLA refinanced the $550.0 million mortgage loan secured by Wells Fargo Center–North Tower. In connection with the refinancing, the Company repaid $80.0 million of principal and incurred transaction costs totaling $7.4 million. During April 2017, the Company received an $82.0 million cash contribution from Brookfield DTLA Holdings that was used to pay for costs associated with the refinancing of Wells Fargo Center–North Tower. The new $470.0 million loan is comprised of a $370.0 million mortgage loan, a $55.0 million mezzanine loan and a $45.0 million mezzanine loan, each of which bears interest at variable rates equal to LIBOR plus 2.25%, 5.25% and 7.00%, respectively, and require the payment of interest-only until maturity. As required by the mortgage and mezzanine loan agreements, on April 5, 2017 the Company entered into interest rate cap agreements with a total notional amount of $470.0 million that limit the LIBOR portion of the interest rates to 2.75%. The mortgage and mezzanine loans mature on April 9, 2019. Brookfield DTLA has three options to extend the maturity date of the loans, each for a period of one year, subject to meeting certain debt yield ratios (as specified in the mortgage and mezzanine loan agreements). The mortgage and mezzanine loans can be prepaid, in whole or in part, with prepayment penalties (as defined in the underlying loan agreements) until July 9, 2018 after which the loans can be repaid without penalty. A voluntary prepayment of the mortgage or mezzanine loans requires a simultaneous pro-rata prepayment of all loans encumbering this property. Debt Maturities As Brookfield DTLA’s debt matures, principal payment obligations present significant future cash requirements. As of September 30, 2017, our debt to be repaid during the remainder of 2017, the next four years and thereafter is as follows (in thousands):
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As of September 30, 2017, $343.9 million of our debt may be prepaid without penalty, $400.0 million may be defeased (as defined in the underlying loan agreement), and $1,259.0 million may be prepaid with prepayment penalties. Debt Extension— On August 14, 2017, Brookfield DTLA extended the maturity date of the $35.0 million mortgage loan secured by Figueroa at 7th until December 10, 2017. Then on November 2, 2017, Brookfield DTLA extended the maturity date of this loan until January 8, 2018. After the second extension, the Company has two options to extend the maturity date of this loan, the first for a period of eight months and the second for a period of 12 months, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). The Company plans to refinance this loan on or prior to January 8, 2018 and does not expect to make a principal paydown when the loan is refinanced. See Note 14 “Subsequent Event.” Non-Recourse Carve Out Guarantees All of Brookfield DTLA’s $2.0 billion of mortgage debt is subject to “non-recourse carve out” guarantees that expire upon elimination of the underlying loan obligations. In connection with all of these loans, Brookfield DTLA entered into “non-recourse carve out” guarantees, which provide for these otherwise non-recourse loans to become partially or fully recourse against Brookfield DTLA Holdings or one of its subsidiaries, if certain triggering events (as defined in the loan agreements) occur. Debt Reporting Pursuant to the terms of certain of our mortgage loan agreements, Brookfield DTLA is required to report a debt service coverage ratio (“DSCR”) calculated using the formulas specified in the underlying loan agreements. We have submitted the required reports to the lenders for the measurement periods ended September 30, 2017 and were in compliance with the amounts required by the loan agreements. Pursuant to the terms of the EY Plaza and Figueroa at 7th mortgage loan agreements, we are required to provide annual audited financial statements of Brookfield DTLA Holdings to the lenders or agents. The receipt of any opinion other than an “unqualified” audit opinion on our annual audited financial statements is an event of default under the loan agreements for the properties listed above. If an event of default occurs, the lenders have the right to pursue the remedies contained in the loan documents, including acceleration of all or a portion of the debt and foreclosure. |
Mezzanine Equity |
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Temporary Equity Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mezzanine Equity | Mezzanine Equity Mezzanine equity in the condensed consolidated balance sheets is comprised of the Series A preferred stock, a Series A-1 preferred interest, a senior participating preferred interest, and a Series B preferred interest (collectively, the “Preferred Interests”). The Series A-1 preferred interest, senior participating preferred interest and Series B preferred interest are held by a noncontrolling interest holder. The Preferred Interests are classified in mezzanine equity because they are callable, and the holder of the Series A-1 preferred interest, senior participating preferred interest, Series B preferred interest, and some of the Series A preferred stock indirectly controls the ability to elect to redeem such instruments, through its controlling interest in the Company and its subsidiaries. There is no commitment or obligation on the part of Brookfield DTLA or Brookfield DTLA Holdings to redeem the Preferred Interests. The Preferred Interests included within mezzanine equity were recorded at fair value on the date of issuance and have been adjusted to the greater of their carrying amount or redemption value as of September 30, 2017 and December 31, 2016. Adjustments to increase the carrying amount to redemption value are recorded in the condensed consolidated statement of operations as a redemption measurement adjustment. Series A Preferred Stock As of September 30, 2017 and December 31, 2016, 9,730,370 shares of Series A preferred stock were outstanding, of which 9,357,469 shares were issued to third parties and 372,901 shares were issued to DTLA Fund Holding Co., a subsidiary of Brookfield DTLA Holdings. No dividends were declared on the Series A preferred stock during the nine months ended September 30, 2017 and 2016. Dividends on the Series A preferred stock are cumulative, and therefore, will continue to accrue at an annual rate of $1.90625 per share. As of September 30, 2017, the cumulative amount of unpaid dividends totals $143.5 million and has been reflected in the carrying amount of the Series A preferred stock. The Series A preferred stock does not have a stated maturity and is not subject to any sinking fund or mandatory redemption provisions. Upon liquidation, dissolution or winding up, the Series A preferred stock will rank senior to our common stock with respect to the payment of distributions. We may, at our option, redeem the Series A preferred stock, in whole or in part, for cash at a redemption price of $25.00 per share, plus all accumulated and unpaid dividends on such Series A preferred stock up to and including the redemption date. The Series A preferred stock is not convertible into or exchangeable for any other property or securities of Brookfield DTLA. As of September 30, 2017, the Series A preferred stock is reported at its redemption value of $386.8 million calculated using the redemption price of $25.00 per share plus all accumulated and unpaid dividends on such Series A preferred stock through September 30, 2017. Series A-1 Preferred Interest The Series A-1 preferred interest is held by Brookfield DTLA Holdings or wholly owned subsidiaries of Brookfield DTLA Holdings. The Series A-1 preferred interest has mirror rights to the Series A preferred interests issued by Brookfield DTLA Fund Properties II LLC (“New OP”), which are held by a wholly owned subsidiary of Brookfield DTLA, but only with respect to their respective preferred liquidation preferences, and share pro rata with 48.13% to the Series A-1 preferred interest and 51.87% to the Series A preferred interest based on their current liquidation preferences in accordance with their respective preferred liquidation preferences in distributions from New OP, until their preferred liquidation preferences have been reduced to zero. Thereafter, distributions will be made 47.66% to the common component of the Series A interest and 52.34% to the common component of the Series B interest, which is held by Brookfield DTLA Holdings. The economic terms of the Series A preferred stock mirror those of the New OP Series A preferred interests, including distributions in respect of the preferred liquidation preference. As of September 30, 2017, the Series A-1 preferred interest is reported at its redemption value of $379.2 million calculated using its liquidation value of $225.7 million plus $153.5 million of accumulated and unpaid dividends on such Series A-1 preferred interest through September 30, 2017. Senior Participating Preferred Interest Brookfield DTLA Fund Properties III LLC (“DTLA OP”) issued a senior participating preferred interest to Brookfield DTLA Holdings in connection with the formation of Brookfield DTLA and the MPG acquisition. The senior participating preferred interest was comprised of $240.0 million in preferred interests with a 7.0% coupon and a 4.0% participating interest in the residual value of DTLA OP. During the nine months ended September 30, 2017, the Company received a net cash contribution totaling $250 thousand from Brookfield DTLA Holdings, which was used for general corporate purposes. As of September 30, 2017, the senior participating preferred interest is reported at its redemption value of $25.5 million using the value of the participating interest. Series B Preferred Interest At the time of the merger with MPG, Brookfield DTLA Holdings made a commitment to make capital contributions in cash or property to New OP, which directly or indirectly owns the Brookfield DTLA properties, to fund up to $260.0 million of its future cash needs, for which it will be entitled to receive a preferred return, if and when called by New OP. The Series B preferred interest in New OP held by Brookfield DTLA Holdings is effectively senior to the interest in New OP held by Brookfield DTLA and has a priority on distributions senior to the equity securities of such subsidiaries held indirectly by Brookfield DTLA and, as a result, effectively rank senior to the Series A preferred stock. The Series B preferred interest in New OP may limit the amount of funds available to Brookfield DTLA for any purpose, including for dividends or other distributions to holders of its capital stock, including the Series A preferred stock. On February 27, 2017, the Company received a $29.5 million cash contribution from Brookfield DTLA Holdings, which is entitled to a preferred return of 9.0% as part of the Series B preferred interest. The Company used these funds for general corporate purposes. On April 4, 2017, the Company received an $82.0 million cash contribution from Brookfield DTLA Holdings, which is entitled to a preferred return of 9.0% as part of the Series B preferred interest. The Company used these funds to pay for costs associated with the refinancing of the Wells Fargo Center–North Tower mortgage loan. As of September 30, 2017, the Series B preferred interest is reported at its redemption value of $186.3 million calculated using its liquidation value of $174.8 million plus $11.5 million of accumulated and unpaid dividends on such Series B preferred interest through September 30, 2017. Change in Mezzanine Equity A summary of the change in mezzanine equity for the nine months ended September 30, 2017 is as follows (in thousands, except share amounts):
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Noncontrolling Interests |
9 Months Ended |
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Sep. 30, 2017 | |
Noncontrolling Interest [Abstract] | |
Noncontrolling Interests | Noncontrolling Interests Mezzanine Equity Component The Series A-1 preferred interest, senior participating preferred interest and Series B preferred interest consist of equity interests of New OP, DTLA OP and New OP, respectively, which are owned directly by Brookfield DTLA Holdings. These noncontrolling interests are presented as mezzanine equity in the condensed consolidated balance sheet. See Note 7 “Mezzanine Equity.” Stockholders’ Deficit Component The Series B common interest ranks junior to the Series A preferred stock as to dividends and upon liquidation and is presented in the condensed consolidated balance sheet as noncontrolling interest. |
Accumulated Other Comprehensive Loss |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss A summary of the change in accumulated other comprehensive loss related to Brookfield DTLA’s cash flow hedges is as follows (in thousands):
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements The valuation of Brookfield DTLA’s interest rate swap is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flow of the derivative. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. We have incorporated credit valuation adjustments to appropriately reflect both our own and the respective counterparty’s non-performance risk in the fair value measurements. Brookfield DTLA’s (liabilities) assets measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fall, are as follows (in thousands):
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Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments | Financial Instruments Derivative Financial Instruments A summary of the fair value of Brookfield DTLA’s derivative financial instruments is as follows (in thousands):
A summary of the effect of derivative financial instruments reported in the condensed consolidated financial statements is as follows (in thousands):
Interest Rate Swap— As of September 30, 2017 and December 31, 2016, Brookfield DTLA held an interest rate swap assigned to the EY Plaza mortgage loan with notional amounts of $177.9 million and $180.9 million, respectively. The swap requires net settlement each month and expires on November 2, 2020. Interest Rate Caps— Brookfield DTLA holds interest rate caps pursuant to the terms of certain of its mortgage loan agreements with the following notional amounts (in thousands):
As required by the Wells Fargo Center–North Tower mortgage and mezzanine loan agreements, on April 5, 2017 the Company entered into interest rate cap agreements with a total notional amount of $470.0 million that limit the LIBOR portion of the interest rate to 2.75%. Other Financial Instruments The estimated fair value and carrying amount of Brookfield DTLA’s mortgage loans are as follows (in thousands):
We calculated the estimated fair value of our mortgage loans by discounting the future contractual cash flows of the loans using current risk adjusted rates available to borrowers with similar credit ratings. The estimated fair value of mortgage loans is classified as Level 3. |
Related Party Transactions |
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Related Party Transactions | Related Party Transactions Management Agreements Certain subsidiaries of Brookfield DTLA have entered into arrangements with the Manager, pursuant to which the Manager provides property management and various other services. Property management fees under the management agreements are calculated based on 2.75% of rents collected (as defined in the management agreements). In addition, the Company pays the Manager an asset management fee, which is calculated based on 0.75% of the capital contributed by Brookfield DTLA Holdings. A summary of costs incurred by the applicable subsidiaries of Brookfield DTLA under these arrangements is as follows (in thousands):
Insurance Agreements Properties held by certain Brookfield DTLA subsidiaries are covered under insurance policies entered into by the Manager. Insurance premiums for Brookfield DTLA’s properties are paid by the Manager and Brookfield DTLA reimburses the Manager for the actual cost of such premiums. A summary of costs incurred by the applicable Brookfield DTLA subsidiaries under this arrangement is as follows (in thousands):
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Brookfield DTLA and its subsidiaries may be subject to pending legal proceedings and litigation incidental to its business. After consultation with legal counsel, management believes that any liability that may potentially result upon resolution of such matters is not expected to have a material adverse effect on the Company’s business, financial condition or consolidated financial statements as a whole. |
Subsequent Event |
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Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Event On November 2, 2017, Brookfield DTLA extended the maturity date of the $35.0 million mortgage loan secured by Figueroa at 7th until January 8, 2018. After this extension, the Company has two options to extend the maturity date of this loan, the first for a period of eight months and the second for a period of 12 months, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). The Company plans to refinance this loan on or prior to January 8, 2018 and does not expect to make a principal paydown when the loan is refinanced. |
Basis of Presentation (Policies) |
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Accounting Policies [Abstract] | |
Principles of Consolidation and Basis of Presentation | Principles of Consolidation and Basis of Presentation The accompanying unaudited condensed consolidated financial statements and related disclosures have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) applicable to interim financial information and with the instructions to Form 10‑Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments, consisting of only those of a normal and recurring nature, considered necessary for a fair presentation of the financial position and interim results of Brookfield DTLA as of and for the periods presented have been included. The results of operations for interim periods are not necessarily indicative of those that may be expected for a full fiscal year. The condensed consolidated balance sheet data as of December 31, 2016 has been derived from Brookfield DTLA’s audited financial statements; however, the accompanying notes to the condensed consolidated financial statements do not include all disclosures required by GAAP. The financial information included herein should be read in conjunction with the consolidated financial statements and related notes included in Brookfield DTLA’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 20, 2017. |
Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. For example, estimates and assumptions have been made with respect to fair values of assets and liabilities for purposes of applying the acquisition method of accounting, the useful lives of assets, recoverable amounts of receivables, impairment of long-lived assets and fair value of debt. Actual results could ultimately differ from such estimates. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09 establishing Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. ASU 2014-09 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. ASU 2014-09 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration that the entity expects to be entitled to receive in exchange for those goods or services and also requires certain additional disclosures. ASU 2014-09 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017. We are currently evaluating the impact of the adoption of ASU 2014-09 on Brookfield DTLA’s consolidated financial statements. In February 2016, the FASB issued ASU 2016-02 establishing ASC Topic 842, Leases. The guidance in this update supersedes the guidance in ASC Topic 840, Leases. ASU 2016-02 revises GAAP related to accounting for leases by lessees. Under this new guidance, lessees will be required to recognize a lease liability and a right-of-use asset in the balance sheet for all leases with terms greater than 12 months. Leases will be classified as either finance or operating, with classification determining the pattern of expense recognition in the statement of operations. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and should be applied using a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. We are currently evaluating the impact of the adoption of ASU 2016-02 on Brookfield DTLA’s consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments to ASC Topic 230, Statement of Cash Flows. ASU 2016-15 clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows to reduce diversity in practice with respect to (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingent consideration payments made after a business combination, (iv) proceeds from the settlement of insurance claims, (v) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, (vi) distributions received from equity method investees, (vii) beneficial interests in securitization transactions, and (viii) separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017, with early adoption permitted. We do not expect the adoption of this update to have a material impact on Brookfield DTLA’s consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, Restricted Cash to ASC Topic 230, Statement of Cash Flows. ASU 2016-18 requires entities to show the changes in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. Upon adoption, we will retrospectively reconcile the activity in our cash, cash equivalents, restricted cash and restricted cash equivalents during reporting periods. In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business to ASC Topic 805, Business Combinations. ASU 2017-01 introduced amendments that are intended to make the guidance on the definition of a business more consistent and cost-efficient. The objective of the update is to add further guidance that assists entities in evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business by providing a screen to determine when a set of assets and activities acquired is not a business. ASU 2017-01 is effective for annual periods beginning after December 15, 2017 including interim periods within those periods. ASU 2017-01 must be applied prospectively on or after the effective date. We are currently evaluating the impact of the adoption of ASU 2017-01 on Brookfield DTLA’s consolidated financial statements. In February 2017, the FASB issued ASU 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets to ASC Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets. ASU 2017-05 clarifies the scope of recently established guidance on nonfinancial asset derecognition as well as the accounting for partial sales of nonfinancial assets. This update conforms the derecognition guidance on nonfinancial assets with the model for transactions in ASC 606. ASU 2017-05 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. We do not expect the adoption of this update to have a material impact on Brookfield DTLA’s consolidated financial statements. In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities to ASC Topic 815, Derivatives and Hedging. ASU 2017-12 introduced amendments intended to make targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. The objective of the update is to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. All transition requirements and elections should be applied to hedging relationships existing as of the date of adoption and the effect of the adoption should be reflected as of the beginning of the fiscal year of adoption. We are currently evaluating the impact of the adoption of ASU 2017-01 on Brookfield DTLA’s consolidated financial statements. |
Income Taxes | Income Taxes Brookfield DTLA has elected to be taxed as a real estate investment trust (“REIT”) pursuant to Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its tax period ended December 31, 2013. Brookfield DTLA conducts and intends to conduct its operations so as to continue to qualify as a REIT. Accordingly, Brookfield DTLA is not subject to U.S. federal income tax, provided that it continues to qualify as a REIT and distributions to its stockholders, if any, generally equal or exceed its taxable income. Brookfield DTLA has elected to treat certain of its subsidiaries as taxable REIT subsidiaries (“TRS”). Certain activities that we undertake must be conducted by a TRS, such as non-customary services for our tenants, and holding assets that we cannot hold directly. A TRS is subject to both federal and state income taxes. Qualification and taxation as a REIT depends upon Brookfield DTLA’s ability to meet the various qualification tests imposed under the Code related to annual operating results, asset diversification, distribution levels and diversity of stock ownership. Accordingly, no assurance can be given that Brookfield DTLA will be organized or be able to operate in a manner so as to continue to qualify as a REIT. If Brookfield DTLA fails to qualify as a REIT in any taxable year, it will be subject to federal and state income tax on its taxable income at regular corporate tax rates, and it may be ineligible to qualify as a REIT for four subsequent tax years. Brookfield DTLA may also be subject to certain state or local income taxes, or franchise taxes on its REIT activities. Brookfield DTLA made provisions for income taxes of $291 thousand and $482 thousand during the three and nine months ended September 30, 2017, respectively. Brookfield DTLA made no provision and a $419 thousand provision for income taxes during the three and nine months ended September 30, 2016, respectively. Brookfield DTLA’s taxable income or loss is different than its financial statement income or loss. Brookfield DTLA recognizes tax benefits from uncertain tax positions when it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more likely than not recognition threshold. Brookfield DTLA had no unrecognized tax benefits as of September 30, 2017 and December 31, 2016, and Brookfield DTLA does not expect its unrecognized tax benefits balance to change during the next 12 months. As of September 30, 2017, Brookfield DTLA’s 2013 tax period and 2014, 2015 and 2016 tax years remain open due to the statute of limitations and may be subject to examination by federal, state and local authorities. The short tax period ended October 15, 2013 for Brookfield DTLA and its subsidiaries remains open due to the statute of limitations and may be subject to examination by federal, state and local tax authorities. |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Rents, Deferred Rents and Other Receivables | Brookfield DTLA’s rents, deferred rents and other receivables are presented net of the following amounts in the condensed consolidated balance sheets (in thousands):
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Intangible Assets and Liabilities (Tables) |
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Summary of Intangible Assets and Liabilities | Brookfield DTLA’s intangible assets and liabilities are summarized as follows (in thousands):
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Schedule of Impact of Intangible Amortization Expense | The impact of the amortization of acquired below-market leases, net of acquired above-market leases, on rental income and of acquired in-place leases and tenant relationships on depreciation and amortization expense is as follows (in thousands):
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Schedule of Estimated Future Amortization/Accretion of Intangible Assets and Liabilities | As of September 30, 2017, the estimate of the amortization/accretion of intangible assets and liabilities during the remainder of 2017, the next four years and thereafter is as follows (in thousands):
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Schedule of Deferred Charges | Brookfield DTLA’s deferred charges are presented net of the following amounts in the condensed consolidated balance sheets (in thousands):
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Mortgage Loans (Tables) |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Debt | Brookfield DTLA’s debt is as follows (in thousands, except percentage amounts):
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Schedule of Maturities of Debt | As of September 30, 2017, our debt to be repaid during the remainder of 2017, the next four years and thereafter is as follows (in thousands):
__________
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Mezzanine Equity (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Temporary Equity Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Change in Mezzanine Equity | A summary of the change in mezzanine equity for the nine months ended September 30, 2017 is as follows (in thousands, except share amounts):
|
Accumulated Other Comprehensive Loss (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the Change in Accumulated Other Comprehensive Loss Related to Cash Flow Hedges | A summary of the change in accumulated other comprehensive loss related to Brookfield DTLA’s cash flow hedges is as follows (in thousands):
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Fair Value Measurements (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of (Liabilities) Assets Measured at Fair Value on a Recurring Basis | Brookfield DTLA’s (liabilities) assets measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fall, are as follows (in thousands):
|
Financial Instruments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Fair Value of Derivative Financial Instruments | A summary of the fair value of Brookfield DTLA’s derivative financial instruments is as follows (in thousands):
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Summary of Effect of Derivative Financial Instruments | A summary of the effect of derivative financial instruments reported in the condensed consolidated financial statements is as follows (in thousands):
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Schedule of Notional Amounts of Interest Rate Caps | Brookfield DTLA holds interest rate caps pursuant to the terms of certain of its mortgage loan agreements with the following notional amounts (in thousands):
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Summary of Estimated Fair Value and Carrying Amount of Mortgage Loans | The estimated fair value and carrying amount of Brookfield DTLA’s mortgage loans are as follows (in thousands):
|
Related Party Transactions (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Costs Incurred Under Arrangements with Related Parties | A summary of costs incurred by the applicable Brookfield DTLA subsidiaries under this arrangement is as follows (in thousands):
A summary of costs incurred by the applicable subsidiaries of Brookfield DTLA under these arrangements is as follows (in thousands):
|
Organization and Description of Business - Narrative (Details) |
9 Months Ended | 12 Months Ended | |
---|---|---|---|
Oct. 15, 2013 |
Sep. 30, 2017 |
Dec. 31, 2016 |
|
Series A preferred stock | |||
Organization and Description of Business [Line Items] | |||
Preferred stock, dividend rate, percentage | 7.625% | 7.625% | 7.625% |
Basis of Presentation - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Accounting Policies [Abstract] | |||||
Provision for income taxes | $ 291 | $ 0 | $ 482 | $ 419 | |
Unrecognized tax benefits | $ 0 | $ 0 | $ 0 |
Rents, Deferred Rents and Other Receivables, Net - Schedule of Rents, Deferred Rents and Other Receivables (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Receivables [Abstract] | ||
Allowance for doubtful accounts | $ 206 | $ 213 |
Accumulated amortization of tenant inducements | $ 12,029 | $ 9,924 |
Rents, Deferred Rents and Other Receivables, Net - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Receivables [Abstract] | ||||
Recovery of doubtful accounts | $ (2) | $ (311) | $ (7) | $ (239) |
Intangible Assets and Liabilities - Summary of Intangible Assets and Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Intangible Assets | ||
In-place leases | $ 71,439 | $ 110,519 |
Tenant relationships | 33,524 | 46,248 |
Above-market leases | 34,652 | 39,936 |
Intangible assets, gross | 139,615 | 196,703 |
Less: accumulated amortization | 77,804 | 121,117 |
Intangible assets, net | 61,811 | 75,586 |
Intangible Liabilities | ||
Below-market leases | 60,023 | 76,344 |
Less: accumulated amortization | 42,401 | 54,117 |
Intangible liabilities, net | $ 17,622 | $ 22,227 |
Intangible Assets and Liabilities - Schedule of Impact of Intangible Amortization Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Rental income | ||||
Acquired Indefinite-lived Intangible Assets and Liabilities [Line Items] | ||||
Amortization of intangible assets | $ 747 | $ (158) | $ 1,639 | $ 2,733 |
Depreciation and amortization expense | ||||
Acquired Indefinite-lived Intangible Assets and Liabilities [Line Items] | ||||
Amortization of intangible assets | $ 3,239 | $ 4,994 | $ 10,809 | $ 14,796 |
Intangible Assets and Liabilities - Schedule of Estimated Future Amortization/Accretion of Intangible Assets and Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity | ||
Intangible assets, net | $ 61,811 | $ 75,586 |
Below Market Lease, Net, Amortization Income, Fiscal Year Maturity | ||
2017 | 1,326 | |
2018 | 3,799 | |
2019 | 3,225 | |
2020 | 3,017 | |
2021 | 2,893 | |
Thereafter | 3,362 | |
Intangible liabilities, net | 17,622 | $ 22,227 |
In-Place Leases | ||
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity | ||
2017 | 2,001 | |
2018 | 6,747 | |
2019 | 5,698 | |
2020 | 5,052 | |
2021 | 4,815 | |
Thereafter | 9,319 | |
Intangible assets, net | 33,632 | |
Other Intangible Assets | ||
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity | ||
2017 | 1,416 | |
2018 | 5,116 | |
2019 | 4,310 | |
2020 | 3,417 | |
2021 | 3,381 | |
Thereafter | 10,539 | |
Intangible assets, net | $ 28,179 |
Deferred Charges, Net - Schedule of Deferred Charges (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Accumulated amortization of deferred leasing costs | $ 39,808 | $ 49,575 |
Mortgage Loans - Schedule of Maturities of Debt (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Debt Disclosure [Abstract] | ||
2017 (1) | $ 36,025 | |
2018 | 474,233 | |
2019 | 474,449 | |
2020 | 168,151 | |
2021 | 450,000 | |
Thereafter | 400,000 | |
Total | $ 2,002,858 | $ 2,085,859 |
Accumulated Other Comprehensive Loss - Summary of Change in Accumulated Other Comprehensive Loss Related to Cash Flow Hedges (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||||
Balance at beginning of period | $ (1,607) | |||
Balance at end of period | $ (1,020) | (1,020) | ||
Accumulated Other Comprehensive Loss | ||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||||
Balance at beginning of period | (2,610) | $ (10,537) | (3,373) | $ (5,415) |
Other comprehensive income (loss) before reclassifications | 469 | 1,832 | 1,232 | (3,290) |
Amounts reclassified from accumulated other comprehensive loss | 0 | 0 | 0 | 0 |
Net current-period other comprehensive income (loss) | 469 | 1,832 | 1,232 | (3,290) |
Balance at end of period | $ (2,141) | $ (8,705) | $ (2,141) | $ (8,705) |
Financial Instruments - Summary of Fair Value of Derivative Instruments (Details) - Interest Rate Swap - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Derivatives, Fair Value [Line Items] | ||
Interest rate cash flow hedge derivative at fair value, net | $ (2,141) | $ (3,373) |
Accounts Payable and Other Liabilities | Cash Flow Hedging | Designated as Hedging Instrument | ||
Derivatives, Fair Value [Line Items] | ||
Interest rate cash flow hedge derivative at fair value, net | $ (2,141) | $ (3,373) |
Financial Instruments - Summary of Effect of Derivative Instruments (Details) - Cash Flow Hedging - Interest Rate Swap - Designated as Hedging Instrument - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Derivative [Line Items] | ||
Amount of Gain (Loss) Recognized in AOCL | $ 1,232 | $ (3,290) |
Amount of Gain (Loss) Reclassified from AOCL to Statement of Operations | $ 0 | $ 0 |
Financial Instruments - Narrative (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Apr. 05, 2017 |
Dec. 31, 2016 |
---|---|---|---|
Interest Rate Caps | Not Designated as Hedging Instrument | |||
Derivative [Line Items] | |||
Notional amount | $ 960,000 | $ 490,000 | |
EY Plaza | Interest Rate Swap | Designated as Hedging Instrument | |||
Derivative [Line Items] | |||
Notional amount | $ 177,900 | $ 180,900 | |
Wells Fargo Center - North Tower | Interest Rate Caps | Not Designated as Hedging Instrument | |||
Derivative [Line Items] | |||
Notional amount | $ 470,000 | ||
LIBOR | Wells Fargo Center - North Tower | |||
Derivative [Line Items] | |||
Cap interest rate | 2.75% |
Financial Instruments - Summary of Fair Value and Carrying Amounts of Mortgage Loans (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Carrying amount | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Mortgage loans | $ 2,002,858 | $ 2,085,859 |
Significant Unobservable Inputs (Level 3) | Estimated fair value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Mortgage loans | $ 2,003,116 | $ 2,059,449 |
Related Party Transactions - Narrative (Details) |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Related Party Transactions [Abstract] | |
Property management fee, percent | 2.75% |
Asset management fee, percent | 0.75% |
Related Party Transactions - Summary of Costs Incurred Under Arrangements with Related Parties (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Property management fee expense | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction expenses | $ 2,021 | $ 1,955 | $ 6,112 | $ 5,864 |
Asset management fee expense | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction expenses | 1,583 | 1,583 | 4,748 | 4,748 |
General, administrative and reimbursable expenses | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction expenses | 623 | 615 | 1,860 | 1,857 |
Leasing and construction management fees | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction expenses | 634 | 410 | 1,481 | 1,321 |
Insurance expense | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction expenses | $ 1,948 | $ 1,950 | $ 5,828 | $ 5,873 |
Subsequent Event - Narrative (Details) - Variable Rate Loans - Mortgage Loan - Figueroa at 7th $ in Millions |
Nov. 02, 2017
extension_option
|
Sep. 30, 2017
USD ($)
|
---|---|---|
Subsequent Event [Line Items] | ||
Debt refinanced or to be refinanced | $ | $ 35.0 | |
LIBOR | Subsequent Event | ||
Subsequent Event [Line Items] | ||
Number of options to extend | extension_option | 2 | |
Option extension period | 8 months | |
Second option extension period | 12 months |
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