(Mark One) | ||||
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 | |||
or | ||||
o | 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 | 10281 | |
(Address of principal executive offices) | (Zip Code) |
Securities registered pursuant to Section 12(b) of the Act: | ||
Title of each class | Name of each exchange on which registered | |
7.625% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share | New York Stock Exchange |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer x | |
Smaller reporting company o | Emerging growth company o |
Page | |||
Item 16. | |||
Item 1. | Business. |
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 1B. | Unresolved Staff Comments. |
Item 2. | Properties. |
Percentage Leased | Annualized Rent (1) | Annualized Rent $/RSF (2) | ||||||||
December 31, 2018 | 86.3 | % | $ | 167,124,493 | $ | 25.74 | ||||
December 31, 2017 | 86.8 | % | 163,123,792 | 24.98 | ||||||
December 31, 2016 | 87.9 | % | 160,894,418 | 24.31 |
(1) | Annualized rent represents the annualized monthly contractual rent under executed leases as of the date indicated. This amount reflects total base rent before any rent abatements as of the date indicated 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 executed leases as of December 31, 2018 for the twelve months ending December 31, 2019 are approximately $12.3 million, or $1.89 per leased square foot. Total abatements for executed leases as of December 31, 2017 for the twelve months ended December 31, 2018 were approximately $13.2 million, or $2.03 per leased square foot. Total abatements for executed leases as of December 31, 2016 for the twelve months ended December 31, 2017 were approximately $11.5 million, or $1.73 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. |
Leasing Activity | Percentage Leased | ||||
Leased square feet as of December 31, 2017 | 6,530,729 | 86.8 | % | ||
Expirations | (670,907 | ) | (8.9 | )% | |
New leases | 334,293 | 4.4 | % | ||
Renewals | 299,365 | 4.0 | % | ||
Leased square feet as of December 31, 2018 | 6,493,480 | 86.3 | % |
Square Feet | |||||||||||||||||||||||||
Property | Number of Buildings | Number of Tenants | Year Acquired | Net Building Rentable | % of Net Rentable | % Leased | Total Annualized Rent (1) | Annualized Rent $/RSF (2) | |||||||||||||||||
BOA Plaza | 1 | 29 | 2006 | 1,405,428 | 18.7 | % | 91.5 | % | $ | 33,172,530 | $ | 25.79 | |||||||||||||
Wells Fargo Center–North Tower | 2 | 35 | 2013 | 1,400,639 | 18.6 | % | 87.2 | % | 32,251,343 | 26.41 | |||||||||||||||
Gas Company Tower | 1 | 30 | 2013 | 1,345,163 | 17.9 | % | 91.8 | % | 31,123,507 | 25.21 | |||||||||||||||
EY Plaza | 1 | 83 | 2006 | 1,224,967 | 16.3 | % | 90.9 | % | 27,917,936 | 25.08 | |||||||||||||||
Wells Fargo Center–South Tower | 1 | 20 | 2013 | 1,124,960 | 14.9 | % | 76.9 | % | 22,454,848 | 25.97 | |||||||||||||||
777 Tower | 1 | 47 | 2013 | 1,024,835 | 13.6 | % | 75.5 | % | 20,204,329 | 26.12 | |||||||||||||||
7 | 244 | 7,525,992 | 100.0 | % | 86.3 | % | $ | 167,124,493 | $ | 25.74 |
(1) | Annualized rent represents the annualized monthly contractual rent under executed leases as of December 31, 2018. This amount reflects total base rent before any rent abatements as of December 31, 2018 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 executed leases as of December 31, 2018 for the twelve months ending December 31, 2019 are approximately $12.3 million, or $1.89 per leased square foot. |
(2) | Annualized rent per rentable square foot represents annualized rent as computed above, divided by leased square feet as of December 31, 2018. |
Tenant | Annualized Rent (1) | % of Total Annualized Rent | Leased RSF | % of Total Leased RSF | Year of Expiry | ||||||||||||
1 | Latham & Watkins LLP | $ | 12,444,278 | 7.5 | % | 399,820 | 6.2 | % | Various | ||||||||
2 | Southern California Gas Company | 9,830,675 | 5.9 | % | 461,862 | 7.1 | % | Various | |||||||||
3 | The Capital Group Companies | 9,520,735 | 5.7 | % | 429,955 | 6.6 | % | Various | |||||||||
4 | Wells Fargo Bank National Association | 7,402,208 | 4.4 | % | 314,447 | 4.8 | % | 2023 | |||||||||
5 | Gibson, Dunn & Crutcher LLP | 7,400,662 | 4.4 | % | 269,173 | 4.2 | % | 2022 | |||||||||
6 | Bank of America N.A. | 6,911,368 | 4.1 | % | 209,544 | 3.2 | % | Various | |||||||||
7 | Oaktree Capital Management, L.P. | 5,444,694 | 3.3 | % | 207,259 | 3.2 | % | 2030 | |||||||||
8 | Shepard, Mullin, Richter | 4,447,467 | 2.7 | % | 173,959 | 2.7 | % | 2025 | |||||||||
9 | Ernst & Young U.S. LLP | 3,541,414 | 2.1 | % | 129,737 | 2.0 | % | Various | |||||||||
10 | Sidley Austin (CA) LLP | 3,366,525 | 2.0 | % | 135,798 | 2.1 | % | 2024 | |||||||||
$ | 70,310,026 | 42.1 | % | 2,731,554 | 42.1 | % |
(1) | Annualized rent is calculated as contractual base rent under executed leases as of December 31, 2018. For those leases where rent has not yet commenced, the first month in which rent is to be received is used to determine annualized rent. |
Rentable Leased Square Feet as of December 31, 2018 | |||||||||||||||||||||||||
Tenant | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | Beyond | Year of Final Expiry | |||||||||||||||||
1 | Latham & Watkins LLP | 26 | — | 64 | — | — | — | 310 | 2031 | ||||||||||||||||
2 | Southern California Gas Company | 56 | — | — | — | — | — | 406 | 2026 | ||||||||||||||||
3 | The Capital Group Companies | 52 | — | — | 54 | — | — | 324 | 2033 | ||||||||||||||||
4 | Wells Fargo Bank National Association | — | — | — | — | 315 | — | — | 2023 | ||||||||||||||||
5 | Gibson, Dunn & Crutcher LLP | — | — | — | 269 | — | — | — | 2022 | ||||||||||||||||
6 | Bank of America N.A. | — | — | — | — | — | — | 209 | 2029 | ||||||||||||||||
7 | Oaktree Capital Management, L.P. | — | — | — | — | — | — | 207 | 2030 | ||||||||||||||||
8 | Shepard, Mullin, Richter | — | — | — | — | — | — | 174 | 2025 | ||||||||||||||||
9 | Ernst & Young U.S. LLP | 9 | — | — | — | — | — | 121 | 2032 | ||||||||||||||||
10 | Sidley Austin (CA) LLP | — | — | — | — | — | 136 | — | 2024 | ||||||||||||||||
Leased square feet expiring by year | 143 | — | 64 | 323 | 315 | 136 | 1,751 | ||||||||||||||||||
Percentage of leased square feet expiring by year | 2.2 | % | — | % | 1.0 | % | 5.0 | % | 4.8 | % | 2.1 | % | 27.0 | % |
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) | |||||||||||||||
2019 | 416,648 | 6.4 | % | $ | 9,362,016 | 5.6 | % | $ | 22.47 | $ | 22.73 | ||||||||||
2020 | 351,363 | 5.4 | % | 9,261,743 | 5.5 | % | 26.36 | 27.49 | |||||||||||||
2021 | 351,438 | 5.4 | % | 9,394,433 | 5.6 | % | 26.73 | 29.17 | |||||||||||||
2022 | 653,793 | 10.1 | % | 17,845,964 | 10.7 | % | 27.30 | 30.03 | |||||||||||||
2023 | 912,138 | 14.1 | % | 22,462,179 | 13.4 | % | 24.63 | 28.24 | |||||||||||||
2024 | 528,022 | 8.1 | % | 14,218,042 | 8.5 | % | 26.93 | 31.84 | |||||||||||||
2025 | 713,794 | 11.0 | % | 19,905,208 | 11.9 | % | 27.89 | 32.94 | |||||||||||||
2026 | 580,002 | 8.9 | % | 13,639,682 | 8.2 | % | 23.52 | 28.79 | |||||||||||||
2027 | 179,966 | 2.8 | % | 4,827,011 | 2.9 | % | 26.82 | 35.74 | |||||||||||||
2028 | 20,434 | 0.3 | % | 576,433 | 0.4 | % | 28.21 | 39.85 | |||||||||||||
Thereafter | 1,785,882 | 27.5 | % | 45,631,782 | 27.3 | % | 25.55 | 38.69 | |||||||||||||
Total expiring leases | 6,493,480 | 100.0 | % | $ | 167,124,493 | 100.0 | % | $ | 25.74 | $ | 32.05 | ||||||||||
Currently available | 1,032,512 | ||||||||||||||||||||
Total rentable square feet | 7,525,992 |
(1) | Annualized rent represents the annualized monthly contractual rent under executed leases as of December 31, 2018. This amount reflects total base rent before any rent abatements as of December 31, 2018 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 executed leases as of December 31, 2018 for the twelve months ending December 31, 2019 are approximately $12.3 million, or $1.89 per leased square foot. |
(2) | Current rent per leased square foot represents base rent for executed leases, divided by total leased square feet as of December 31, 2018. |
(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. |
Principal Amount | Percent of Total Debt | Effective Interest Rate | Weighted Average Term to Maturity | ||||||||
Fixed-rate | $ | 908.5 | 42 | % | 4.19 | % | 4 years | ||||
Variable-rate swapped to fixed-rate | 230.0 | 11 | % | 3.90 | % | 2 years | |||||
Variable-rate (1) | 1,013.2 | 47 | % | 4.57 | % | 2 years | |||||
$ | 2,151.7 | 100 | % | 4.34 | % | 3 years |
(1) | As of December 31, 2018 and the date of this report, a future advance amount of $31.8 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 and inducements, leasing commissions, and common area improvements. |
Item 3. | Legal Proceedings. |
Item 4. | Mine Safety Disclosures. |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters | |||
and Issuer Purchases of Equity Securities. |
Item 6. | Selected Financial Data. |
For the Year Ended December 31, | |||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Operating Results | |||||||||||||||||||
Total revenue | $ | 315,680 | $ | 306,322 | $ | 310,692 | $ | 299,090 | $ | 294,161 | |||||||||
Total expenses | 360,337 | 343,959 | 348,859 | 339,444 | 347,153 | ||||||||||||||
Net loss | (44,657 | ) | (37,637 | ) | (38,167 | ) | (40,354 | ) | (52,992 | ) | |||||||||
Net income (loss) attributable to noncontrolling interests: | |||||||||||||||||||
Series A-1 preferred interest – current dividends | 17,306 | 17,213 | 17,213 | 17,213 | 17,213 | ||||||||||||||
Senior participating preferred interest – current dividends | — | — | — | 2,321 | 10,044 | ||||||||||||||
Senior participating preferred interest – redemption measurement adjustment | 1,482 | 479 | 2,428 | 6,625 | 2,256 | ||||||||||||||
Series B preferred interest – current preferred return | 17,961 | 13,435 | 2,084 | — | — | ||||||||||||||
Series B common interest – allocation of net income (loss) | 28,343 | (45,699 | ) | (41,055 | ) | (44,521 | ) | (52,891 | ) | ||||||||||
Net loss attributable to Brookfield DTLA | (109,749 | ) | (23,065 | ) | (18,837 | ) | (21,992 | ) | (29,614 | ) | |||||||||
Series A preferred stock – current dividends | 18,532 | 18,548 | 18,548 | 18,548 | 18,548 | ||||||||||||||
Net loss available to common interest holders of Brookfield DTLA | $ | (128,281 | ) | $ | (41,613 | ) | $ | (37,385 | ) | $ | (40,540 | ) | $ | (48,162 | ) | ||||
Other Information | |||||||||||||||||||
Cash flows provided by operating activities | $ | 17,389 | $ | 31,786 | $ | 35,828 | $ | 29,991 | $ | 22,962 | |||||||||
Cash flows used in investing activities (1) | (90,065 | ) | (74,696 | ) | (57,350 | ) | (58,061 | ) | (43,729 | ) | |||||||||
Cash flows provided by (used in) financing activities | 110,941 | 20,030 | 4,341 | (36,486 | ) | (25,979 | ) |
(1) | In January 2018, Brookfield DTLA adopted the guidance in Accounting Standards Update (“ASU”) 2016-18, Restricted Cash, which requires entities to include restricted cash with cash and cash equivalents when reconciling the beginning and end of period total amounts shown in the statement of cash flows. Therefore, the change in restricted cash is no longer presented as a separate line item within cash flows from investing activities in the Company’s consolidated statement of cash flows since such balances are now combined with cash and cash equivalents at both the beginning and end of the reporting period. We have retroactively restated the 2017, 2016, 2015 and 2014 consolidated statements of cash flows by reclassifying the decrease or (increase) in restricted cash of $24.5 million, $(6.3) million, $(6.7) million and $(24.3) million, respectively, from cash flows used in investing activities to net change in cash, cash equivalents and restricted cash. |
As of December 31, | |||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 (1) | |||||||||||||||
Financial Position | |||||||||||||||||||
Investments in real estate, net | $ | 2,416,245 | $ | 2,413,857 | $ | 2,411,624 | $ | 2,419,119 | $ | 2,430,314 | |||||||||
Total assets | 2,795,658 | 2,747,815 | 2,769,959 | 2,798,010 | 2,873,808 | ||||||||||||||
Mortgage loans, net | 2,140,724 | 1,991,692 | 2,076,804 | 2,111,405 | 2,107,007 | ||||||||||||||
Total liabilities | 2,220,690 | 2,100,014 | 2,198,862 | 2,255,952 | 2,232,606 | ||||||||||||||
Mezzanine equity | 1,015,889 | 990,749 | 829,532 | 726,595 | 739,600 | ||||||||||||||
Stockholders’ deficit | (440,921 | ) | (342,948 | ) | (258,435 | ) | (184,537 | ) | (98,398 | ) |
(1) | In December 2015, Brookfield DTLA adopted the guidance in ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. We have retroactively restated the 2014 consolidated balance sheet by reclassifying unamortized debt issuance costs of $4.1 million from total assets to mortgage loans, net in accordance with this guidance. We have also reduced total liabilities by $4.1 million in the 2014 consolidated balance sheet. |
Item 7. | Management’s Discussion and Analysis of Financial Condition |
Sources | Uses | ||||
• | Cash on hand; | • | Property operations; | ||
• | Cash generated from operations; | • | Capital expenditures; | ||
• | Contributions from DTLA Holdings; and | • | Payments in connection with loans; and | ||
• | Proceeds from additional secured or unsecured debt financings. | • | Distributions to DTLA Holdings. |
Square Feet | |||||||||||||||||
Property | Net Building Rentable | % of Net Rentable | % Leased | Total Annualized Rents (1) | Annualized Rent $/RSF (2) | ||||||||||||
BOA Plaza | 1,405,428 | 18.7 | % | 91.5 | % | $ | 33,172,530 | $ | 25.79 | ||||||||
Wells Fargo Center–North Tower | 1,400,639 | 18.6 | % | 87.2 | % | 32,251,343 | 26.41 | ||||||||||
Gas Company Tower | 1,345,163 | 17.9 | % | 91.8 | % | 31,123,507 | 25.21 | ||||||||||
EY Plaza | 1,224,967 | 16.3 | % | 90.9 | % | 27,917,936 | 25.08 | ||||||||||
Wells Fargo Center–South Tower | 1,124,960 | 14.9 | % | 76.9 | % | 22,454,848 | 25.97 | ||||||||||
777 Tower | 1,024,835 | 13.6 | % | 75.5 | % | 20,204,329 | 26.12 | ||||||||||
7,525,992 | 100.0 | % | 86.3 | % | $ | 167,124,493 | $ | 25.74 |
(1) | Annualized rent represents the annualized monthly contractual rent under executed leases as of December 31, 2018. This amount reflects total base rent before any rent abatements as of December 31, 2018 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 executed leases as of December 31, 2018 for the twelve months ending December 31, 2019 are approximately $12.3 million, or $1.89 per leased square foot. |
(2) | Annualized rent per rentable square foot represents annualized rent as computed above, divided by leased square feet as of December 31, 2018. |
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) | |||||||||||||||
2019 | 416,648 | 6.4 | % | $ | 9,362,016 | 5.6 | % | $ | 22.47 | $ | 22.73 | ||||||||||
2020 | 351,363 | 5.4 | % | 9,261,743 | 5.5 | % | 26.36 | 27.49 | |||||||||||||
2021 | 351,438 | 5.4 | % | 9,394,433 | 5.6 | % | 26.73 | 29.17 | |||||||||||||
2022 | 653,793 | 10.1 | % | 17,845,964 | 10.7 | % | 27.30 | 30.03 | |||||||||||||
2023 | 912,138 | 14.1 | % | 22,462,179 | 13.4 | % | 24.63 | 28.24 | |||||||||||||
2024 | 528,022 | 8.1 | % | 14,218,042 | 8.5 | % | 26.93 | 31.84 | |||||||||||||
2025 | 713,794 | 11.0 | % | 19,905,208 | 11.9 | % | 27.89 | 32.94 | |||||||||||||
2026 | 580,002 | 8.9 | % | 13,639,682 | 8.2 | % | 23.52 | 28.79 | |||||||||||||
2027 | 179,966 | 2.8 | % | 4,827,011 | 2.9 | % | 26.82 | 35.74 | |||||||||||||
2028 | 20,434 | 0.3 | % | 576,433 | 0.4 | % | 28.21 | 39.85 | |||||||||||||
Thereafter | 1,785,882 | 27.5 | % | 45,631,782 | 27.3 | % | 25.55 | 38.69 | |||||||||||||
Total expiring leases | 6,493,480 | 100.0 | % | $ | 167,124,493 | 100.0 | % | $ | 25.74 | $ | 32.05 | ||||||||||
Currently available | 1,032,512 | ||||||||||||||||||||
Total rentable square feet | 7,525,992 |
(1) | Annualized rent represents the annualized monthly contractual rent under executed leases as of December 31, 2018. This amount reflects total base rent before any rent abatements as of December 31, 2018 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 executed leases as of December 31, 2018 for the twelve months ending December 31, 2019 are approximately $12.3 million, or $1.89 per leased square foot. |
(2) | Current rent per leased square foot represents base rent for executed leases, divided by total leased square feet as of December 31, 2018. |
(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, 2017 | 6,530,729 | 86.8 | % | ||
Expirations | (670,907 | ) | (8.9 | )% | |
New leases | 334,293 | 4.4 | % | ||
Renewals | 299,365 | 4.0 | % | ||
Leased square feet as of December 31, 2018 | 6,493,480 | 86.3 | % |
Principal Amount | Percent of Total Debt | Effective Interest Rate | Weighted Average Term to Maturity | ||||||||
Fixed-rate | $ | 908.5 | 42 | % | 4.19 | % | 4 years | ||||
Variable-rate swapped to fixed-rate | 230.0 | 11 | % | 3.90 | % | 2 years | |||||
Variable-rate (1) | 1,013.2 | 47 | % | 4.57 | % | 2 years | |||||
$ | 2,151.7 | 100 | % | 4.34 | % | 3 years |
(1) | As of December 31, 2018 and the date of this report, a future advance amount of $31.8 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 and inducements, leasing commissions, and common area improvements. |
Interest Rate | Contractual Maturity Date | Principal Amount | Annual Debt Service (1) | |||||||||
Floating-Rate Debt | ||||||||||||
Variable-Rate Loans: | ||||||||||||
Wells Fargo Center–North Tower (2) | 4.11 | % | 10/9/2020 | $ | 400,000 | $ | 16,652 | |||||
Wells Fargo Center–North Tower (3) | 6.46 | % | 10/9/2020 | 65,000 | 4,255 | |||||||
Wells Fargo Center–North Tower (4) | 7.46 | % | 10/9/2020 | 35,000 | 2,646 | |||||||
Wells Fargo Center–South Tower (5) | 4.15 | % | 11/4/2021 | 258,186 | 10,862 | |||||||
777 Tower (6) | 4.53 | % | 11/1/2019 | 220,000 | 10,104 | |||||||
EY Plaza (7) | 6.90 | % | 11/27/2020 | 35,000 | 2,448 | |||||||
Total variable-rate loans | 1,013,186 | 46,967 | ||||||||||
Variable-Rate Swapped to Fixed-Rate Loan: | ||||||||||||
EY Plaza (8) | 3.90 | % | 11/27/2020 | 230,000 | 9,091 | |||||||
Total floating-rate debt | 1,243,186 | 56,058 | ||||||||||
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 | |||||||
Figueroa at 7th | 3.88 | % | 3/1/2023 | 58,500 | 2,301 | |||||||
Total fixed-rate rate debt | 908,500 | 38,591 | ||||||||||
Total debt | 2,151,686 | $ | 94,649 | |||||||||
Less: unamortized debt issuance costs | 10,962 | |||||||||||
Total debt, net | $ | 2,140,724 |
(1) | Annual debt service for variable-rate loans is calculated using the one-month LIBOR rate in place on the debt as of December 31, 2018 plus the contractual spreads per the loan agreements. Annual debt service for fixed-rate loans is calculated based on contractual interest rates per the loan agreements. |
(2) | This loan bears interest at LIBOR plus 1.65%. As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 4.25%. Brookfield DTLA has three options to extend the maturity date of this loan, each for a period of one year, as long as the maturity dates of both of the mezzanine loans are extended when the maturity date of the mortgage loan is extended. |
(3) | This loan bears interest at LIBOR plus 4.00%. As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 4.25%. Brookfield DTLA has three options to extend the maturity date of this loan, each for a period of one year, as long as the maturity date of the other mezzanine loan is extended when the maturity date of the mortgage loan is extended. |
(4) | This loan bears interest at LIBOR plus 5.00%. As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 4.25%. Brookfield DTLA has three options to extend the maturity date of this loan, each for a period of one year, as long as the maturity date of the other mezzanine loan is extended when the maturity date of the mortgage loan is extended. |
(5) | This loan bears interest at LIBOR plus 1.80%. As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 4.50%. Brookfield DTLA has two options to extend the maturity date of this loan, each for a period of one year. As of December 31, 2018, a future advance amount of $31.8 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 and inducements, leasing commissions, and common area improvements. |
(6) | This loan bears interest at LIBOR plus 2.18%. As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 5.75%. Brookfield DTLA has one option to extend the maturity date of this loan 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 December 31, 2018, we do not meet the criteria specified in the loan agreement to extend this loan. See “—Debt Maturities—777 Tower” below. |
(7) | This loan bears interest at LIBOR plus 4.55%. As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 3.50%. |
(8) | This loan bears interest at LIBOR plus 1.65%. As required by the loan agreement, we have entered into interest rate swap contracts to hedge this loan, which effectively fix the LIBOR portion of the interest rate at 2.27%. The effective interest rate of 3.90% includes interest on the swaps. |
• | The special purpose property-owning subsidiary of DTLA Holdings or DTLA Holdings filing a voluntary petition for bankruptcy; |
• | The special purpose property-owning subsidiary of DTLA Holdings’ failure to maintain its status as a special purpose entity; |
• | Subject to certain conditions, the special purpose property-owning subsidiary of DTLA Holdings’ failure to obtain the lender’s written consent prior to any subordinate financing or other voluntary lien encumbering the associated property; and |
• | Subject to certain conditions, the special purpose property-owning subsidiary of DTLA Holdings’ failure to obtain the lender’s written consent prior to a transfer or conveyance of the associated property, including, in some cases, indirect transfers in connection with a change in control of DTLA Holdings or Brookfield DTLA. |
For the Year Ended December 31, | (Decrease)/ Increase | % Change | ||||||||||||
2018 | 2017 | |||||||||||||
Revenue: | ||||||||||||||
Rental income | $ | 162.2 | $ | 165.7 | $ | (3.5 | ) | (2 | )% | |||||
Tenant reimbursements | 105.9 | 96.5 | 9.4 | 10 | % | |||||||||
Parking | 37.3 | 37.1 | 0.2 | — | % | |||||||||
Interest and other | 10.3 | 7.0 | 3.3 | 47 | % | |||||||||
Total revenue | 315.7 | 306.3 | 9.4 | 3 | % | |||||||||
Expenses: | ||||||||||||||
Rental property operating and maintenance | 99.0 | 94.0 | 5.0 | 5 | % | |||||||||
Real estate taxes | 40.0 | 37.7 | 2.3 | 6 | % | |||||||||
Parking | 10.2 | 9.4 | 0.8 | 8 | % | |||||||||
Other expense | 9.9 | 11.5 | (1.6 | ) | (14 | )% | ||||||||
Depreciation and amortization | 96.2 | 97.8 | (1.6 | ) | (2 | )% | ||||||||
Interest | 105.0 | 93.5 | 11.5 | 12 | % | |||||||||
Total expenses | 360.3 | 343.9 | 16.4 | 5 | % | |||||||||
Net loss | $ | (44.6 | ) | $ | (37.6 | ) | $ | (7.0 | ) |
For the Year Ended December 31, | (Decrease)/ Increase | % Change | ||||||||||||
2017 | 2016 | |||||||||||||
Revenue: | ||||||||||||||
Rental income | $ | 165.7 | $ | 169.2 | $ | (3.5 | ) | (2 | )% | |||||
Tenant reimbursements | 96.5 | 95.6 | 0.9 | 1 | % | |||||||||
Parking | 37.1 | 36.6 | 0.5 | 1 | % | |||||||||
Interest and other | 7.0 | 9.3 | (2.3 | ) | (25 | )% | ||||||||
Total revenue | 306.3 | 310.7 | (4.4 | ) | (1 | )% | ||||||||
Expenses: | ||||||||||||||
Rental property operating and maintenance | 94.0 | 92.8 | 1.2 | 1 | % | |||||||||
Real estate taxes | 37.7 | 37.4 | 0.3 | 1 | % | |||||||||
Parking | 9.4 | 8.4 | 1.0 | 12 | % | |||||||||
Other expense | 11.5 | 11.2 | 0.3 | 2 | % | |||||||||
Depreciation and amortization | 97.8 | 104.0 | (6.2 | ) | (6 | )% | ||||||||
Interest | 93.5 | 95.1 | (1.6 | ) | (2 | )% | ||||||||
Total expenses | 343.9 | 348.9 | (5.0 | ) | (1 | )% | ||||||||
Net loss | $ | (37.6 | ) | $ | (38.2 | ) | $ | 0.6 |
For the Year Ended December 31, | Dollar Change | ||||||||||
2018 | 2017 | ||||||||||
Net cash provided by operating activities | $ | 17,389 | $ | 31,786 | $ | (14,397 | ) | ||||
Net cash used in investing activities | (90,065 | ) | (74,696 | ) | (15,369 | ) | |||||
Net cash provided by financing activities | 110,941 | 20,030 | 90,911 |
2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | Total | |||||||||||||||||||||
Principal payments on mortgage loans | $ | 220,000 | $ | 765,000 | $ | 708,186 | $ | — | $ | 58,500 | $ | 400,000 | $ | 2,151,686 | |||||||||||||
Interest payments – | |||||||||||||||||||||||||||
Fixed-rate debt (1) | 38,591 | 38,697 | 30,590 | 18,726 | 16,803 | 11,025 | 154,432 | ||||||||||||||||||||
Variable-rate swapped to fixed-rate debt | 9,069 | 9,017 | — | — | — | — | 18,086 | ||||||||||||||||||||
Variable-rate debt (2) | 45,306 | 31,381 | 9,166 | — | — | — | 85,853 | ||||||||||||||||||||
Tenant-related commitments (3) | 85,606 | 11,281 | 9,650 | 2,410 | 1,143 | 2,582 | 112,672 | ||||||||||||||||||||
$ | 398,572 | $ | 855,376 | $ | 757,592 | $ | 21,136 | $ | 76,446 | $ | 413,607 | $ | 2,522,729 |
(1) | Interest payments on fixed-rate debt are calculated based on contractual interest rates and scheduled maturity dates. |
(2) | 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 December 31, 2018 plus the contractual spread per the loan agreements. |
(3) | Tenant-related commitments include tenant improvements and leasing commissions and are based on executed leases as of December 31, 2018. |
For the Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Property management fee expense | $ | 8,111 | $ | 8,136 | $ | 7,964 | |||||
Asset management fee expense | 6,330 | 6,330 | 6,330 | ||||||||
Leasing and construction management fee expenses | 3,209 | 5,198 | 3,049 | ||||||||
General, administrative and reimbursable expenses | 3,007 | 2,613 | 2,466 |
For the Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Insurance expense | $ | 8,026 | $ | 7,795 | $ | 7,948 |
For the Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Rental income and tenant reimbursements revenue | $ | 1,928 | $ | — | $ | — | |||||
Rental property and maintenance expense | 862 | 579 | — |
Notional Value | Strike Rate | Effective Date | Expiration Date | Fair Value | |||||||||||
Interest rate swap | $ | 172,600 | 2.18 | % | 11/27/2013 | 11/2/2020 | $ | 951 | |||||||
Interest rate swap | 54,206 | 2.47 | % | 3/29/2018 | 11/2/2020 | 23 | |||||||||
Interest rate cap | 400,000 | 4.25 | % | 9/21/2018 | 10/15/2020 | 6 | |||||||||
Interest rate cap | 65,000 | 4.25 | % | 9/21/2018 | 10/15/2020 | 1 | |||||||||
Interest rate cap | 35,000 | 4.25 | % | 9/21/2018 | 10/15/2020 | 1 | |||||||||
Interest rate cap | 290,000 | 4.50 | % | 11/5/2018 | 11/4/2020 | 3 | |||||||||
Interest rate cap | 220,000 | 5.75 | % | 10/15/2018 | 11/1/2019 | — | |||||||||
Interest rate cap | 35,000 | 3.50 | % | 3/29/2018 | 10/1/2019 | — | |||||||||
$ | 985 |
Fair Value of | |||||||||||
Interest Expense | Mortgage Loans | Interest Rate Swaps | |||||||||
50 basis point increase | $ | 5,152 | $ | (6,818 | ) | $ | 1,876 | ||||
50 basis point decrease | (5,152 | ) | 6,797 | (1,898 | ) |
Item 8. | Financial Statements and Supplementary Data. |
Page | |
As of December 31, | |||||||
2018 | 2017 | ||||||
ASSETS | |||||||
Investments in Real Estate: | |||||||
Land | $ | 227,555 | $ | 227,555 | |||
Buildings and improvements | 2,245,818 | 2,208,498 | |||||
Tenant improvements | 361,077 | 320,269 | |||||
Investments in real estate, gross | 2,834,450 | 2,756,322 | |||||
Less: accumulated depreciation | 418,205 | 342,465 | |||||
Investments in real estate, net | 2,416,245 | 2,413,857 | |||||
Cash and cash equivalents | 80,421 | 31,958 | |||||
Restricted cash | 25,349 | 35,547 | |||||
Rents, deferred rents and other receivables, net | 151,509 | 129,482 | |||||
Intangible assets, net | 44,640 | 58,289 | |||||
Deferred charges, net | 67,731 | 69,635 | |||||
Prepaid and other assets, net | 9,763 | 9,047 | |||||
Total assets | $ | 2,795,658 | $ | 2,747,815 | |||
LIABILITIES AND DEFICIT | |||||||
Liabilities: | |||||||
Mortgage loans, net | $ | 2,140,724 | $ | 1,991,692 | |||
Accounts payable and other liabilities | 63,678 | 80,810 | |||||
Due to affiliates, net | 3,834 | 11,273 | |||||
Intangible liabilities, net | 12,454 | 16,239 | |||||
Total liabilities | 2,220,690 | 2,100,014 | |||||
Commitments and Contingencies (See Note 14) | |||||||
Mezzanine Equity: | |||||||
7.625% Series A Cumulative Redeemable Preferred Stock, $0.01 par value, 9,730,370 shares issued and outstanding as of December 31, 2018 and 2017 | 409,932 | 391,400 | |||||
Noncontrolling Interests: | |||||||
Series A-1 preferred interest | 400,816 | 383,510 | |||||
Senior participating preferred interest | 23,443 | 25,548 | |||||
Series B preferred interest | 181,698 | 190,291 | |||||
Total mezzanine equity | 1,015,889 | 990,749 | |||||
Stockholders’ Deficit: | |||||||
Common stock, $0.01 par value, 1,000 shares issued and outstanding as of December 31, 2018 and 2017 | — | — | |||||
Additional paid-in capital | 195,825 | 194,210 | |||||
Accumulated deficit | (385,158 | ) | (256,877 | ) | |||
Accumulated other comprehensive loss | (107 | ) | (273 | ) | |||
Noncontrolling interest – Series B common interest | (251,481 | ) | (280,008 | ) | |||
Total stockholders’ deficit | (440,921 | ) | (342,948 | ) | |||
Total liabilities and deficit | $ | 2,795,658 | $ | 2,747,815 |
For the Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Revenue: | |||||||||||
Rental income | $ | 162,203 | $ | 165,689 | $ | 169,168 | |||||
Tenant reimbursements | 105,930 | 96,518 | 95,578 | ||||||||
Parking | 37,252 | 37,093 | 36,614 | ||||||||
Interest and other | 10,295 | 7,022 | 9,332 | ||||||||
Total revenue | 315,680 | 306,322 | 310,692 | ||||||||
Expenses: | |||||||||||
Rental property operating and maintenance | 98,940 | 93,945 | 92,744 | ||||||||
Real estate taxes | 40,013 | 37,758 | 37,401 | ||||||||
Parking | 10,165 | 9,374 | 8,430 | ||||||||
Other expense | 9,920 | 11,508 | 11,239 | ||||||||
Depreciation and amortization | 96,264 | 97,808 | 103,970 | ||||||||
Interest | 105,035 | 93,566 | 95,075 | ||||||||
Total expenses | 360,337 | 343,959 | 348,859 | ||||||||
Net loss | (44,657 | ) | (37,637 | ) | (38,167 | ) | |||||
Net income (loss) attributable to noncontrolling interests: | |||||||||||
Series A-1 preferred interest – current dividends | 17,306 | 17,213 | 17,213 | ||||||||
Senior participating preferred interest – redemption measurement adjustment | 1,482 | 479 | 2,428 | ||||||||
Series B preferred interest – current preferred return | 17,961 | 13,435 | 2,084 | ||||||||
Series B common interest – allocation of net income (loss) | 28,343 | (45,699 | ) | (41,055 | ) | ||||||
Net loss attributable to Brookfield DTLA | (109,749 | ) | (23,065 | ) | (18,837 | ) | |||||
Series A preferred stock – current dividends | 18,532 | 18,548 | 18,548 | ||||||||
Net loss available to common interest holders of Brookfield DTLA | $ | (128,281 | ) | $ | (41,613 | ) | $ | (37,385 | ) |
For the Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Net loss | $ | (44,657 | ) | $ | (37,637 | ) | $ | (38,167 | ) | ||
Other comprehensive income: | |||||||||||
Derivative transactions: | |||||||||||
Unrealized derivative holding gains | 1,548 | 2,799 | 2,042 | ||||||||
Reclassification adjustment for realized gains included in net loss | (1,198 | ) | — | — | |||||||
Total other comprehensive income | 350 | 2,799 | 2,042 | ||||||||
Comprehensive loss | (44,307 | ) | (34,838 | ) | (36,125 | ) | |||||
Less: comprehensive income (loss) attributable to noncontrolling interests | 65,276 | (13,107 | ) | (18,261 | ) | ||||||
Comprehensive loss available to common interest holders of Brookfield DTLA | $ | (109,583 | ) | $ | (21,731 | ) | $ | (17,864 | ) |
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 | (18,837 | ) | (19,330 | ) | (38,167 | ) | |||||||||||||||||||||
Other comprehensive income | 973 | 1,069 | 2,042 | ||||||||||||||||||||||||
Contributions from 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 | (18,548 | ) | (21,725 | ) | (40,273 | ) | |||||||||||||||||||||
Balance, December 31, 2016 | 1,000 | — | 194,210 | (215,264 | ) | (1,607 | ) | (235,774 | ) | (258,435 | ) | ||||||||||||||||
Net loss | (23,065 | ) | (14,572 | ) | (37,637 | ) | |||||||||||||||||||||
Other comprehensive income | 1,334 | 1,465 | 2,799 | ||||||||||||||||||||||||
Dividends on Series A Preferred Stock, Series A-1 preferred interest, senior participating preferred interest and Series B preferred interest | (18,548 | ) | (31,127 | ) | (49,675 | ) | |||||||||||||||||||||
Balance, December 31, 2017 | 1,000 | — | 194,210 | (256,877 | ) | (273 | ) | (280,008 | ) | (342,948 | ) | ||||||||||||||||
Net (loss) income | (109,749 | ) | 65,092 | (44,657 | ) | ||||||||||||||||||||||
Other comprehensive income | 166 | 184 | 350 | ||||||||||||||||||||||||
Contributions from DTLA Holdings | 1,615 | 1,615 | |||||||||||||||||||||||||
Dividends on Series A Preferred Stock, Series A-1 preferred interest, senior participating preferred interest and Series B preferred interest | (18,532 | ) | (36,749 | ) | (55,281 | ) | |||||||||||||||||||||
Balance, December 31, 2018 | 1,000 | $ | — | $ | 195,825 | $ | (385,158 | ) | $ | (107 | ) | $ | (251,481 | ) | $ | (440,921 | ) |
For the Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Cash flows from operating activities: | |||||||||||
Net loss | $ | (44,657 | ) | $ | (37,637 | ) | $ | (38,167 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 96,264 | 97,808 | 103,970 | ||||||||
Provision for doubtful (recovery of) accounts | 190 | (7 | ) | (271 | ) | ||||||
Amortization of below-market leases/ above-market leases | 222 | (2,219 | ) | (3,465 | ) | ||||||
Straight-line rent amortization | (11,399 | ) | (11,237 | ) | (16,798 | ) | |||||
Amortization of tenant inducements | 4,228 | 3,816 | 3,399 | ||||||||
Amortization of debt issuance costs and discounts | 9,565 | 6,400 | 4,329 | ||||||||
Realized gain on derivative financial instruments | (1,198 | ) | — | — | |||||||
Changes in assets and liabilities: | |||||||||||
Rents, deferred rents and other receivables, net | (12,179 | ) | (3,850 | ) | (9,122 | ) | |||||
Deferred charges, net | (22,209 | ) | (15,336 | ) | (9,516 | ) | |||||
Prepaid and other assets, net | (82 | ) | 139 | (53 | ) | ||||||
Accounts payable and other liabilities | 6,083 | (3,037 | ) | (3,469 | ) | ||||||
Due to affiliates, net | (7,439 | ) | (3,054 | ) | 4,991 | ||||||
Net cash provided by operating activities | 17,389 | 31,786 | 35,828 | ||||||||
Cash flows from investing activities: | |||||||||||
Expenditures for real estate improvements | (90,065 | ) | (74,696 | ) | (57,350 | ) | |||||
Net cash used in investing activities | (90,065 | ) | (74,696 | ) | (57,350 | ) |
For the Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Cash flows from financing activities: | |||||||||||
Proceeds from mortgage loans | $ | 1,081,686 | $ | 470,000 | $ | 720,000 | |||||
Principal payments on mortgage loans | (931,831 | ) | (554,028 | ) | (751,518 | ) | |||||
Dividend paid on Series A preferred stock | — | — | (21,893 | ) | |||||||
Contributions from noncontrolling interests | — | 112,012 | 63,280 | ||||||||
Distributions to noncontrolling interests | (30,141 | ) | (470 | ) | (616 | ) | |||||
Contributions from DTLA Holdings | 1,615 | — | 2,500 | ||||||||
Financing fees paid | (10,388 | ) | (7,484 | ) | (7,412 | ) | |||||
Net cash provided by financing activities | 110,941 | 20,030 | 4,341 | ||||||||
Net change in cash, cash equivalents and restricted cash | 38,265 | (22,880 | ) | (17,181 | ) | ||||||
Cash, cash equivalents and restricted cash at beginning of year | 67,505 | 90,385 | 107,566 | ||||||||
Cash, cash equivalents and restricted cash at end of year | $ | 105,770 | $ | 67,505 | $ | 90,385 | |||||
Supplemental disclosure of cash flow information: | |||||||||||
Cash paid for interest | $ | 96,074 | $ | 88,160 | $ | 89,630 | |||||
Cash paid for income taxes, net | 1,127 | 214 | 584 | ||||||||
Supplemental disclosure of non-cash activities: | |||||||||||
Accrual for real estate improvements | $ | 17,179 | $ | 25,616 | $ | 24,465 | |||||
Accrual for deferred leasing costs | 2,997 | 3,277 | 2,349 | ||||||||
Increase in fair value of interest rate swaps | 1,548 | 2,799 | 2,042 | ||||||||
Writeoff of fully depreciated buildings and improvements | — | 4,007 | — | ||||||||
Writeoff of fully depreciated tenant improvements | — | 56,291 | — | ||||||||
Writeoff of fully amortized deferred charges | — | 20,481 | — | ||||||||
Writeoff of fully amortized intangible assets | — | 68,990 | — | ||||||||
Writeoff of fully amortized intangible liabilities | — | 16,783 | — |
For the Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Cash and cash equivalents at beginning of year | $ | 31,958 | $ | 30,301 | $ | 53,736 | |||||
Restricted cash at beginning of year | 35,547 | 60,084 | 53,830 | ||||||||
Cash, cash equivalents and restricted cash at beginning of year | $ | 67,505 | $ | 90,385 | $ | 107,566 | |||||
Cash and cash equivalents at end of year | $ | 80,421 | $ | 31,958 | $ | 30,301 | |||||
Restricted cash at end of year | 25,349 | 35,547 | 60,084 | ||||||||
Cash, cash equivalents and restricted cash at end of year | $ | 105,770 | $ | 67,505 | $ | 90,385 |
As of December 31, | |||||||
2018 | 2017 | ||||||
Intangible Assets | |||||||
In-place leases | $ | 66,365 | $ | 66,365 | |||
Tenant relationships | 30,078 | 30,078 | |||||
Above-market leases | 31,270 | 31,270 | |||||
Intangible assets, gross | 127,713 | 127,713 | |||||
Less: accumulated amortization | 83,073 | 69,424 | |||||
Intangible assets, net | $ | 44,640 | $ | 58,289 | |||
Intangible Liabilities | |||||||
Below-market leases | $ | 59,561 | $ | 59,561 | |||
Less: accumulated amortization | 47,107 | 43,322 | |||||
Intangible liabilities, net | $ | 12,454 | $ | 16,239 |
For the Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Rental income | $ | (222 | ) | $ | 2,218 | $ | 3,465 | ||||
Depreciation and amortization expense | 9,642 | 13,527 | 19,609 |
In-Place Leases | Other Intangible Assets | Intangible Liabilities | |||||||||
2019 | $ | 5,742 | $ | 4,043 | $ | 3,223 | |||||
2020 | 4,786 | 3,228 | 2,975 | ||||||||
2021 | 4,533 | 3,171 | 2,797 | ||||||||
2022 | 3,847 | 2,944 | 2,460 | ||||||||
2023 | 2,221 | 2,569 | 674 | ||||||||
Thereafter | 2,975 | 4,581 | 325 | ||||||||
$ | 24,104 | $ | 20,536 | $ | 12,454 |
Contractual Maturity Date | Principal Amount as of December 31, | |||||||||||
Interest Rate | 2018 | 2017 | ||||||||||
Floating-Rate Debt | ||||||||||||
Variable-Rate Loans: | ||||||||||||
Wells Fargo Center–North Tower (1) | 10/9/2020 | 4.11 | % | $ | 400,000 | $ | — | |||||
Wells Fargo Center–North Tower (2) | 10/9/2020 | 6.46 | % | 65,000 | — | |||||||
Wells Fargo Center–North Tower (3) | 10/9/2020 | 7.46 | % | 35,000 | — | |||||||
Wells Fargo Center–South Tower (4) | 11/4/2021 | 4.15 | % | 258,186 | — | |||||||
777 Tower (5) | 11/1/2019 | 4.53 | % | 220,000 | 220,000 | |||||||
EY Plaza (6) | 11/27/2020 | 6.90 | % | 35,000 | — | |||||||
Total variable-rate loans | 1,013,186 | 220,000 | ||||||||||
Variable-Rate Swapped to Fixed-Rate Loan: | ||||||||||||
EY Plaza (7) | 11/27/2020 | 3.90 | % | 230,000 | — | |||||||
Total floating-rate debt | 1,243,186 | 220,000 | ||||||||||
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 | |||||||
Figueroa at 7th | 3/1/2023 | 3.88 | % | 58,500 | — | |||||||
Total fixed-rate debt | 908,500 | 850,000 | ||||||||||
Debt Refinanced: | ||||||||||||
Wells Fargo Center–North Tower | — | 470,000 | ||||||||||
Wells Fargo Center–South Tower | — | 250,000 | ||||||||||
EY Plaza | — | 176,831 | ||||||||||
Figueroa at 7th | — | 35,000 | ||||||||||
Total debt refinanced | — | 931,831 | ||||||||||
Total debt | 2,151,686 | 2,001,831 | ||||||||||
Less: unamortized debt issuance costs | 10,962 | 10,139 | ||||||||||
Total debt, net | $ | 2,140,724 | $ | 1,991,692 |
(1) | This loan bears interest at LIBOR plus 1.65%. As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 4.25%. Brookfield DTLA has three options to extend the maturity date of this loan, each for a period of one year, as long as the maturity dates of both of the mezzanine loans are extended when the maturity date of the mortgage loan is extended. |
(2) | This loan bears interest at LIBOR plus 4.00%. As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 4.25%. Brookfield DTLA has three options to extend the maturity date of this loan, each for a period of one year, as long as the maturity date of the other mezzanine loan is extended when the maturity date of the mortgage loan is extended. |
(3) | This loan bears interest at LIBOR plus 5.00%. As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 4.25%. Brookfield DTLA has three options to extend the maturity date of this loan, each for a period of one year, as long as the maturity date of the other mezzanine loan is extended when the maturity date of the mortgage loan is extended. |
(4) | This loan bears interest at LIBOR plus 1.80%. As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 4.50%. Brookfield DTLA has two options to extend the maturity date of this loan, each for a period of one year. As of December 31, 2018, a future advance amount of $31.8 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 and inducements, leasing commissions, and common area improvements. |
(5) | This loan bears interest at LIBOR plus 2.18%. As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 5.75%. Brookfield DTLA has one option to extend the maturity date of this loan 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 December 31, 2018, we do not meet the criteria specified in the loan agreement to extend this loan. See “—Debt Maturities—777 Tower” below. |
(6) | This loan bears interest at LIBOR plus 4.55%. As required by the loan agreement, we have entered into an interest rate cap contract that limits the LIBOR portion of the interest rate to 3.50%. |
(7) | This loan bears interest at LIBOR plus 1.65%. As required by the loan agreement, we have entered into interest rate swap contracts to hedge this loan, which effectively fix the LIBOR portion of the interest rate at 2.27%. The effective interest rate of 3.90% includes interest on the swaps. |
2019 | $ | 220,000 | |
2020 | 765,000 | ||
2021 | 708,186 | ||
2022 | — | ||
2023 | 58,500 | ||
Thereafter | 400,000 | ||
$ | 2,151,686 |
• | The special purpose property-owning subsidiary of DTLA Holdings or DTLA Holdings filing a voluntary petition for bankruptcy; |
• | The special purpose property-owning subsidiary of DTLA Holdings’ failure to maintain its status as a special purpose entity; |
• | Subject to certain conditions, the special purpose property-owning subsidiary of DTLA Holdings’ failure to obtain the lender’s written consent prior to any subordinate financing or other voluntary lien encumbering the associated property; and |
• | Subject to certain conditions, the special purpose property-owning subsidiary of DTLA Holdings’ failure to obtain the lender’s written consent prior to a transfer or conveyance of the associated property, including, in some cases, indirect transfers in connection with a change in control of DTLA Holdings or Brookfield DTLA. |
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, 2015 | 9,730,370 | $ | 354,304 | $ | 349,084 | $ | 23,207 | $ | — | $ | 726,595 | ||||||||||||
Issuance of Series B preferred interest | 63,280 | 63,280 | |||||||||||||||||||||
Current dividends | 18,548 | 17,213 | — | — | 35,761 | ||||||||||||||||||
Current preferred return | 2,084 | 2,084 | |||||||||||||||||||||
Redemption measurement adjustment | 2,428 | 2,428 | |||||||||||||||||||||
Distributions to holders | (616 | ) | — | (616 | ) | ||||||||||||||||||
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 | 18,548 | 17,213 | — | — | 35,761 | ||||||||||||||||||
Current preferred return | 13,435 | 13,435 | |||||||||||||||||||||
Redemption measurement adjustment | 479 | 479 | |||||||||||||||||||||
Contribution from holders | 520 | 520 | |||||||||||||||||||||
Distributions to holders | (470 | ) | — | (470 | ) | ||||||||||||||||||
Balance, December 31, 2017 | 9,730,370 | 391,400 | 383,510 | 25,548 | 190,291 | 990,749 | |||||||||||||||||
Issuance of Series B preferred interest | — | — | |||||||||||||||||||||
Current dividends | 18,532 | 17,306 | — | — | 35,838 | ||||||||||||||||||
Current preferred return | 17,961 | 17,961 | |||||||||||||||||||||
Redemption measurement adjustment | 1,482 | 1,482 | |||||||||||||||||||||
Distributions to holders | (3,587 | ) | (26,554 | ) | (30,141 | ) | |||||||||||||||||
Balance, December 31, 2018 | 9,730,370 | $ | 409,932 | $ | 400,816 | $ | 23,443 | $ | 181,698 | $ | 1,015,889 |
For the Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Balance at beginning of year | $ | (574 | ) | $ | (3,373 | ) | $ | (5,415 | ) | ||
Other comprehensive income before reclassifications | 1,548 | 2,799 | 2,042 | ||||||||
Amounts reclassified from accumulated other comprehensive loss | (1,198 | ) | — | — | |||||||
Net current-year other comprehensive income | 350 | 2,799 | 2,042 | ||||||||
Balance at end of year | $ | (224 | ) | $ | (574 | ) | $ | (3,373 | ) |
Fair Value Measurements Using | ||||||||||||||||
Total Fair Value | Quoted Prices in Active Markets for Identical Assets (Liabilities) (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Interest rate swaps at: | ||||||||||||||||
December 31, 2018 | $ | 974 | $ | — | $ | 974 | $ | — | ||||||||
December 31, 2017 | (574 | ) | — | (574 | ) | — | ||||||||||
December 31, 2016 | (3,373 | ) | — | (3,373 | ) | — | ||||||||||
Interest rate caps at: | ||||||||||||||||
December 31, 2018 | $ | 11 | $ | — | $ | 11 | $ | — | ||||||||
December 31, 2017 | 15 | — | 15 | — | ||||||||||||
December 31, 2016 | 53 | — | 53 | — |
Fair Value as of December 31, | |||||||
2018 | 2017 | ||||||
Derivatives designated as hedging instruments: | |||||||
Interest rate swaps | $ | 974 | $ | (574 | ) | ||
Derivatives not designated as hedging instruments: | |||||||
Interest rate caps | 11 | 15 |
Amount of Gain Recognized in AOCL | Amount of Gain Reclassified from AOCL to Statement of Operations | ||||||
Derivatives designated as hedging instruments: | |||||||
Interest rate swaps for the year ended: | |||||||
December 31, 2018 | $ | 1,548 | $ | 1,198 | |||
December 31, 2017 | 2,799 | — | |||||
December 31, 2016 | 2,042 | — |
Notional Amount | Swap Rate | LIBOR Spread | Effective Interest Rate | Expiration Date | |||||||||||
Interest rate swap | $ | 172,600 | 2.18 | % | 1.65 | % | 3.83 | % | 11/2/2020 | ||||||
Interest rate swap | 54,206 | 2.47 | % | 1.65 | % | 4.12 | % | 11/2/2020 | |||||||
$ | 226,806 | 2.27 | % | 1.65 | % | 3.90 | % |
As of December 31, | |||||||
2018 | 2017 | ||||||
Wells Fargo Center–North Tower | $ | 400,000 | $ | 370,000 | |||
Wells Fargo Center–North Tower | 65,000 | 55,000 | |||||
Wells Fargo Center–North Tower | 35,000 | 45,000 | |||||
Wells Fargo Center–South Tower | 290,000 | 270,000 | |||||
777 Tower | 220,000 | 220,000 | |||||
EY Plaza | 35,000 | — | |||||
$ | 1,045,000 | $ | 960,000 |
As of December 31, | |||||||
2018 | 2017 | ||||||
Estimated fair value | $ | 2,142,813 | $ | 2,003,600 | |||
Carrying amount | 2,151,686 | 2,001,831 |
For the Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Property management fee expense | $ | 8,111 | $ | 8,136 | $ | 7,964 | |||||
Asset management fee expense | 6,330 | 6,330 | 6,330 | ||||||||
Leasing and construction management fee expenses | 3,209 | 5,198 | 3,049 | ||||||||
General, administrative and reimbursable expenses | 3,007 | 2,613 | 2,466 |
For the Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Insurance expense | $ | 8,026 | $ | 7,795 | $ | 7,948 |
For the Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Rental income and tenant reimbursements revenue | $ | 1,928 | $ | — | $ | — | |||||
Rental property and maintenance expense | 862 | 579 | — |
2019 | $ | 160,732 | |
2020 | 162,373 | ||
2021 | 162,175 | ||
2022 | 147,958 | ||
2023 | 130,674 | ||
Thereafter | 587,950 | ||
$ | 1,351,862 |
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | ||||||||||||
(In thousands) | |||||||||||||||
Year Ended December 31, 2018 | |||||||||||||||
Revenue | $ | 75,211 | $ | 84,194 | $ | 77,151 | $ | 79,124 | |||||||
Expenses | 84,990 | 89,458 | 91,789 | 94,100 | |||||||||||
Net loss | (9,779 | ) | (5,264 | ) | (14,638 | ) | (14,976 | ) | |||||||
Net (loss) income attributable to noncontrolling interests: | |||||||||||||||
Series A-1 preferred interest – current dividends | 4,303 | 4,303 | 4,303 | 4,397 | |||||||||||
Senior participating preferred interest – redemption measurement adjustment | 1,657 | 768 | 220 | (1,163 | ) | ||||||||||
Series B preferred interest – current preferred return | 3,879 | 3,921 | 3,965 | 6,196 | |||||||||||
Series B common interest – allocation of net (loss) income | (12,695 | ) | (9,889 | ) | (14,531 | ) | 65,458 | ||||||||
Net loss attributable to Brookfield DTLA | (6,923 | ) | (4,367 | ) | (8,595 | ) | (89,864 | ) | |||||||
Series A preferred stock – current dividends | 4,637 | 4,637 | 4,637 | 4,621 | |||||||||||
Net loss available to common interest holders of Brookfield DTLA | $ | (11,560 | ) | $ | (9,004 | ) | $ | (13,232 | ) | $ | (94,485 | ) | |||
Year Ended December 31, 2017 | |||||||||||||||
Revenue | $ | 75,915 | $ | 76,070 | $ | 77,067 | $ | 77,270 | |||||||
Expenses | 86,021 | 84,571 | 86,204 | 87,163 | |||||||||||
Net loss | (10,106 | ) | (8,501 | ) | (9,137 | ) | (9,893 | ) | |||||||
Net loss attributable to noncontrolling interests: | |||||||||||||||
Series A-1 preferred interest – current dividends | 4,303 | 4,303 | 4,303 | 4,304 | |||||||||||
Senior participating preferred interest – redemption measurement adjustment | 56 | (191 | ) | 385 | 229 | ||||||||||
Series B preferred interest – current preferred return | 1,644 | 3,861 | 3,965 | 3,965 | |||||||||||
Series B common interest – allocation of net loss | (10,858 | ) | (11,050 | ) | (11,738 | ) | (12,053 | ) | |||||||
Net loss attributable to Brookfield DTLA | (5,251 | ) | (5,424 | ) | (6,052 | ) | (6,338 | ) | |||||||
Series A preferred stock – current dividends | 4,637 | 4,637 | 4,637 | 4,637 | |||||||||||
Net loss available to common interest holders of Brookfield DTLA | $ | (9,888 | ) | $ | (10,061 | ) | $ | (10,689 | ) | $ | (10,975 | ) |
Encum- brances | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition | Gross Amount at Which Carried at Close of Period | Accum- ulated Depre- ciation (3) | Year Acquired | |||||||||||||||||||||||||||||||||
Land | Buildings and Improve- ments | Improve- ments | Carrying Costs | Land | Buildings and Improve- ments (1) | Total (2) | ||||||||||||||||||||||||||||||||
Los Angeles, CA | ||||||||||||||||||||||||||||||||||||||
Wells Fargo Center– North Tower 333 S. Grand Avenue | $ | 500,000 | $ | 41,024 | $ | 456,363 | $ | 94,924 | $ | — | $ | 41,024 | $ | 551,287 | $ | 592,311 | $ | 70,932 | 2013 | |||||||||||||||||||
BOA Plaza 333 S. Hope Street | 400,000 | 54,163 | 354,422 | 48,130 | — | 54,163 | 402,552 | 456,715 | 106,833 | 2006 | ||||||||||||||||||||||||||||
Wells Fargo Center– South Tower 355 S. Grand Avenue | 258,186 | 21,231 | 401,149 | 44,677 | — | 21,231 | 445,826 | 467,057 | 50,528 | 2013 | ||||||||||||||||||||||||||||
Gas Company Tower 525-555 W. Fifth Street | 450,000 | 20,742 | 396,159 | 65,881 | — | 20,742 | 462,040 | 482,782 | 51,813 | 2013 | ||||||||||||||||||||||||||||
EY Plaza (4) 725 S. Figueroa Street | 323,500 | 47,385 | 286,982 | 118,822 | — | 47,385 | 405,804 | 453,189 | 95,304 | 2006 | ||||||||||||||||||||||||||||
777 Tower 777 S. Figueroa Street | 220,000 | 38,010 | 303,697 | 24,759 | — | 38,010 | 328,456 | 366,466 | 42,795 | 2013 | ||||||||||||||||||||||||||||
Development site at 755 S. Figueroa Street | — | 5,000 | — | 10,930 | — | 5,000 | 10,930 | 15,930 | — | |||||||||||||||||||||||||||||
$ | 2,151,686 | $ | 227,555 | $ | 2,198,772 | $ | 408,123 | $ | — | $ | 227,555 | $ | 2,606,895 | $ | 2,834,450 | $ | 418,205 |
(1) | Land improvements are combined with building improvements for financial reporting purposes and are carried at cost. |
(2) | The aggregate gross cost of Brookfield DTLA’s investments in real estate for federal income tax purposes approximated $2.6 billion as of December 31, 2018. |
(3) | Depreciation in the consolidated statement of operations is computed on a straight-line basis over the following estimated useful lives: buildings (60 years, with an estimated salvage value of 5%), building improvements (ranging from 7 years to 25 years), and tenant improvements (the shorter of the useful life or the applicable lease term). |
(4) | Includes the mortgage loan encumbering the Figueroa at 7th retail property. |
For the Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Investments in Real Estate | |||||||||||
Balance at beginning of year | $ | 2,756,322 | $ | 2,740,773 | $ | 2,675,249 | |||||
Additions during the year: | |||||||||||
Improvements | 78,128 | 75,847 | 65,524 | ||||||||
Deductions during the year: | |||||||||||
Other (1) | — | 60,298 | — | ||||||||
Balance at end of year | $ | 2,834,450 | $ | 2,756,322 | $ | 2,740,773 |
(1) | During the year ended December 31, 2017, the amount reported represents the cost of fully depreciated buildings and improvements and tenant improvements written off during the period. |
For the Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Accumulated Depreciation | |||||||||||
Balance at beginning of year | $ | 342,465 | $ | 329,149 | $ | 256,130 | |||||
Additions during the year: | |||||||||||
Depreciation expense | 75,740 | 73,614 | 73,019 | ||||||||
Deductions during the year: | |||||||||||
Other (1) | — | 60,298 | — | ||||||||
Balance at end of year | $ | 418,205 | $ | 342,465 | $ | 329,149 |
(1) | During the year ended December 31, 2017, the amount reported represents the accumulated depreciation of fully depreciated buildings and improvements and tenant improvements written off during the period. |
Item 9. | Changes in and Disagreements With Accountants on Accounting | |||
and Financial Disclosure. |
Item 10. | Directors, Executive Officers and Corporate Governance. |
Name | Age | Position | Executive Officer Since | |||
G. Mark Brown | 54 | Chairman of the Board and Principal Executive Officer of Brookfield DTLA (also a Managing Partner in Brookfield Asset Management’s real estate group) | 2017 | |||
Bryan D. Smith | 48 | Chief Financial Officer of Brookfield DTLA (also a Senior Vice President in Brookfield Asset Management’s real estate group) | 2018 |
Name | Age | Position | Director Since | |||
G. Mark Brown | 54 | Director (also Chairman of the Board and Principal Executive Officer of Brookfield DTLA, and a Managing Partner in Brookfield Asset Management’s real estate group) | 2013 | |||
Michelle L. Campbell | 48 | Director (also Senior Vice President and Secretary of Brookfield DTLA and a Senior Vice President in Brookfield Asset Management’s real estate group) | 2014 | |||
Andrew Dakos | 53 | Director | 2017 | |||
Murray Goldfarb | 44 | Director (also a Managing Partner in Brookfield Asset Management’s real estate group) | 2018 | |||
Phillip Goldstein | 74 | Director | 2017 | |||
Ian Parker | 54 | Director (also Chief Operating Officer of Brookfield DTLA and Chief Operating Officer for Brookfield Properties in the Western US and Canada) | 2017 | |||
Robert L. Stelzl | 73 | Director | 2014 |
Name (1) | Fees Earned or Paid in Cash ($) (2) | Total ($) | ||||
(a) | (b) | (g) | ||||
Andrew Dakos | 65,000 | 65,000 | ||||
Phillip Goldstein | 55,000 | 55,000 | ||||
Robert L. Stelzl | 65,000 | 65,000 |
(1) | Each non-independent member of the board of directors does not receive any additional compensation from the Company for his or her services as a director. |
(2) | Amounts shown in Column (b) are those earned during the fiscal year ended December 31, 2018 for annual retainer fees and, in the case of Messrs. Dakos and Stelzl, Audit Committee fees. |
Item 12. | Security Ownership of Certain Beneficial Owners and Management | |||
and Related Stockholder Matters. |
Name of Beneficial Owner (1) | Amount and Nature of Beneficial Ownership (2) | Percent of Class (2) | ||||
(a) | (b) | (c) | ||||
G. Mark Brown | — | * | ||||
Michelle L. Campbell | — | * | ||||
Andrew Dakos (3) | 208,069 | 2.14 | % | |||
Murray Goldfarb | — | * | ||||
Phillip Goldstein (4) | 208,069 | 2.14 | % | |||
Ian Parker | — | * | ||||
Bryan D. Smith | — | * | ||||
Robert L. Stelzl | — | * | ||||
Directors and Executive Officers as a group | 208,069 | 2.14 | % |
* | Less than 1%. |
(1) | The address for each listed beneficial owner is c/o Brookfield DTLA Fund Office Trust Investor Inc., 250 Vesey Street, 15th Floor, New York, New York, 10281. |
(2) | Under Rule 13d-3 of the Exchange Act, certain shares may be deemed to be beneficially owned by more than one person (if, for example, a person shares the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of Series A preferred stock actually outstanding as of March 29, 2019. |
(3) | All shares reported by Mr. Dakos are held by clients of Bulldog Investors. Mr. Dakos disclaims any beneficial interest in such shares. |
(4) | All shares reported by Mr. Goldstein are held by clients of Bulldog Investors. Mr. Goldstein disclaims any beneficial interest in such shares. |
Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
For the Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Property management fee expense | $ | 8,111 | $ | 8,136 | $ | 7,964 | |||||
Asset management fee expense | 6,330 | 6,330 | 6,330 | ||||||||
Leasing and construction management fee expenses | 3,209 | 5,198 | 3,049 | ||||||||
General, administrative and reimbursable expenses | 3,007 | 2,613 | 2,466 |
For the Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Insurance expense | $ | 8,026 | $ | 7,795 | $ | 7,948 |
For the Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Rental income and tenant reimbursements revenue | $ | 1,928 | $ | — | $ | — | |||||
Rental property and maintenance expense | 862 | 579 | — |
Fees (1) | For the Year Ended December 31, | |||||||
2018 | 2017 | |||||||
Audit fees (2) | $ | 754,100 | $ | 731,000 | ||||
Audit-related fees | — | — | ||||||
Tax fees | — | — | ||||||
All other fees | — | — | ||||||
$ | 754,100 | $ | 731,000 |
(1) | All services rendered for these fees were pre-approved in accordance with the Audit Committee’s policy regarding the approval of audit and non-audit services provided by the external auditor. |
(2) | Audit fees consist of fees for professional services provided in connection with the audits of the Company’s annual consolidated financial statements, audits of the Company’s subsidiaries required for statute or otherwise and the performance of interim reviews of the Company’s quarterly unaudited condensed consolidated financial statements. |
(a) | The following documents are filed as part of this Annual Report on Form 10-K: | |||||
1. | Financial Statements | |||||
2. | Financial Statement Schedules for the Years Ended December 31, 2018, 2017 and 2016 | |||||
All financial statement schedules are omitted because they are not applicable, or the | ||||||
required information is included in the consolidated financial statements or | ||||||
notes thereto. See Part II, Item 8 “Financial Statements and Supplementary Data.” | ||||||
3. | Exhibits (listed by number corresponding to Item 601 of Regulation S-K) |
Incorporated by Reference | ||||||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | |||||
Articles of Incorporation of Brookfield DTLA Fund Office Trust Investor Inc. | S-4 | 333-189273 | 3.1 | June 12, 2013 | ||||||
Second Amended and Restated Bylaws of Brookfield DTLA Fund Office Trust Investor Inc. | 8-K | 001-36135 | 3.2 | August 14, 2014 | ||||||
Articles of Incorporation of Brookfield DTLA Fund Office Trust Inc. | S-4 | 333-189273 | 3.3 | June 12, 2013 | ||||||
Bylaws of Brookfield DTLA Fund Office Trust Inc. | S-4 | 333-189273 | 3.4 | June 12, 2013 | ||||||
Articles of Amendment of Brookfield DTLA Fund Office Trust Inc. | S-4/A | 333-189273 | 3.5 | October 9, 2013 | ||||||
Articles Supplementary of Brookfield DTLA Fund Office Trust Investor Inc. 7.625% Series A Cumulative Redeemable Preferred Stock | S-4/A | 333-189273 | 4.1 | August 27, 2013 | ||||||
Incorporated by Reference | ||||||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | |||||
Articles Supplementary of Brookfield DTLA Fund Office Trust Investor Inc. 15% Series B Cumulative Nonvoting Preferred Stock | S-4/A | 333-189273 | 4.2 | August 27, 2013 | ||||||
Articles Supplementary of Brookfield DTLA Fund Office Trust Inc. 7.625% Series A Cumulative Redeemable Preferred Stock | S-4/A | 333-189273 | 4.3 | August 27, 2013 | ||||||
Articles Supplementary of Brookfield DTLA Fund Office Trust Inc. 15% Series B Cumulative Nonvoting Preferred Stock | S-4/A | 333-189273 | 4.4 | August 27, 2013 | ||||||
Form of Certificate of Series A Preferred Stock of Brookfield DTLA Fund Office Trust Investor Inc. | 10-K | 001-36135 | 4.1 | April 8, 2014 | ||||||
Form of Indemnity Agreement | 8-K | 001-36135 | 10.1 | November 4, 2013 | ||||||
Limited Liability Company Agreement of Brookfield DTLA Fund Properties II LLC | 8-K | 001-36135 | 10.1 | April 1, 2019 | ||||||
Limited Liability Company Agreement of Brookfield DTLA Fund Properties III LLC | 8-K | 001-36135 | 10.2 | April 1, 2019 | ||||||
Loan Agreement dated as of February 6, 2018 by and between BOP FIGat7th LLC, as Borrower, and Metropolitan Life Insurance Company, as Lender | 8-K | 001-36135 | 10.3 | April 1, 2019 | ||||||
Incorporated by Reference | ||||||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | |||||
Guaranty as of February 6, 2018 by Brookfield DTLA Holdings LLC (“Guarantor”) in favor of Metropolitan Life Insurance Company (“Lender”) | ||||||||||
Amended and Restated Loan Agreement dated as of March 29, 2018, by and among EYP Realty, LLC, as Borrower, Wells Fargo Bank, National Association, as Administrative Agent, Wells Fargo Securities, LLC, as Sole Lead Arranger and Sole Bookrunner, Landesbank Baden-Württemberg, New York Branch, as Documentation Agent and the Financial Institutions now or hereafter signatories hereto and their assignees pursuant to Section 13.12, as Lenders | 8-K | 001-36135 | 10.4 | April 1, 2019 | ||||||
Mezzanine Loan Agreement dated as of March 29, 2018 by and among EYP Mezzanine LLC, as Borrower, and RVP Mezz Debt 1 LLC, as Lender | 8-K | 001-36135 | 10.5 | April 1, 2019 | ||||||
Mezzanine Limited Guaranty made as of March 29, 2018 by Brookfield DTLA Holdings LLC (“Guarantor”) in favor of RVP Mezz Debt 1 LLC (“Lender”) | ||||||||||
Incorporated by Reference | ||||||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | |||||
Loan Agreement dated as of September 21, 2018 among North Tower, LLC, as Borrower, the Financial Institutions party hereto and their Assignees under Section 18.15, as Lenders, Citibank, N.A., as Administrative Agent, and Citigroup Global Markets Inc. and Natixis, New York Branch, as Joint Lead Arranger | 8-K | 001-36135 | 10.6 | April 1, 2019 | ||||||
Completion Guaranty dated September 21, 2018 by Brookfield DTLA Holdings LLC (the “Guarantor”) in favor of Citibank, N.A. (the “Administrative Agent”) and each of the Lenders | ||||||||||
Limited Recourse Guaranty dated September 21, 2018 by Brookfield DTLA Holdings LLC (the “Guarantor”) in favor of Citibank, N.A. (the “Administrative Agent”) and each of the Lenders | ||||||||||
Unfunded Obligations Guaranty dated September 21, 2018 by Brookfield DTLA Holdings LLC (the “Guarantor”) in favor of Citibank, N.A. (the “Administrative Agent”) and each of the Lenders | ||||||||||
Mezzanine A Loan Agreement dated as of September 21, 2018 between North Tower Mezzanine, LLC, as Borrower, and Mirae Asset Daewoo Co., Ltd., as Lender | 8-K | 001-36135 | 10.7 | April 1, 2019 | ||||||
Incorporated by Reference | ||||||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | |||||
Mezzanine B Loan Agreement dated as of September 21, 2018 between North Tower Mezzanine II, LLC, as Borrower, and Citi Global Markets Realty Corp., as Lender | 8-K | 001-36135 | 10.8 | April 1, 2019 | ||||||
Loan Agreement dated as of July 11, 2016 between Maguire Properties – 555 W. Fifth, LLC and Maguire Properties – 350 S. Figueroa, LLC, collectively, as Borrower, and Deutsche Bank AG, New York Branch and Barclays Bank PLC, collectively, as Lender | 10-K | 001-36135 | 10.7 | March 20, 2017 | ||||||
Mezzanine Loan Agreement dated as of July 11, 2016 between Maguire Properties – 555 W. Fifth Mezz I, LLC, as Borrower, and Deutsche Bank AG, New York Branch and Barclays Bank PLC, collectively, as Lender | 10-K | 001-36135 | 10.8 | March 20, 2017 | ||||||
Guaranty of Recourse Obligations executed as of July 11, 2016 by Brookfield DTLA Holdings LLC, as Guarantor, for the benefit of Deutsche Bank AG, New York Branch and of Barclays Bank PLC, collectively as Lender | 10-K | 001-36135 | 10.9 | March 20, 2017 | ||||||
Incorporated by Reference | ||||||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | |||||
Mezzanine Guaranty of Recourse Obligations executed as of July 11, 2016 by Brookfield DTLA Holdings LLC, as Guarantor, for the benefit of Deutsche Bank AG, New York Branch and of Barclays Bank PLC, collectively as Lender | 10-K | 001-36135 | 10.10 | March 20, 2017 | ||||||
Deed of Trust, Security Agreement and Fixture Filing by Maguire Properties – 777 Tower, LLC, as Trustor to Fidelity National Title Insurance Company, as Trustee for the benefit of Metropolitan Life Insurance Company, as Beneficiary, dated October 15, 2013 | 8-K | 001-36135 | 10.2 | April 7, 2014 | ||||||
Promissory Note, dated as of October 15, 2013, between Maguire Properties – 777 Tower, LLC and Metropolitan Life Insurance Company | 8-K | 001-36135 | 10.3 | April 7, 2014 | ||||||
Amended and Restated Promissory Note dated September 1, 2016 by Maguire Properties – 777 Tower, LLC and Metropolitan Life Insurance Company | 10-K | 001-36135 | 10.13 | March 20, 2017 | ||||||
Loan extension letter dated October 25, 2018 among Metropolitan Life Insurance Company (“Lender”), Maguire Properties – 777 Tower, LLC (“Borrower”) and Brookfield DTLA Holdings LLC (“Guarantor”) | ||||||||||
Incorporated by Reference | ||||||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | |||||
Loan Agreement dated as of November 5, 2018 by and among Maguire Properties–355 S. Grand, LLC, as Borrower, Landesbank Hessen- Thürigen Girozentrale, New York Branch, as Administrative Agent, Barclays Bank PLC, as Syndication Agent, Landesbank Hessen- Thürigen Girozentrale, Barclays Bank PLC and Natixis, New York Branch, as Joint Lead Arrangers. Landesbank Hessen-Thürigen Girozentrale as Hedge Coordinator, and the Financial Institutions now or hereafter signatories hereto and their assignees, as Lenders | 8-K | 001-36135 | 10.9 | April 1, 2019 | ||||||
Limited Guaranty made as of November 5, 2018 by Brookfield DTLA Holdings LLC (“Guarantor”) in favor of Landesbank Hessen- Thüringen Girozentrale, New York Branch, as Administrative Agent on behalf of the Lenders (together with its successors and assigns, “Administrative Agent”) and each of the Lenders party to the Loan Agreement | 8-K | 001-36135 | 10.10 | April 1, 2019 | ||||||
Incorporated by Reference | ||||||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | |||||
Loan Agreement, dated as of August 7, 2014, among 333 South Hope Co. LLC and 333 South Hope Plant LLC, collectively, as Borrower, Wells Fargo Bank, National Association, as Lender, and Citigroup Global Markets Realty Corp., as Lender | 10-K | 001-36135 | 10.24 | March 31, 2015 | ||||||
Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of August 7, 2014, by 333 South Hope Co. LLC and 333 South Hope Plant LLC, collectively, as grantor, to Fidelity National Title Company, as trustee, for the benefit of Wells Fargo Bank, National Association and Citigroup Global Markets Realty Corp., collectively, as beneficiary | 10-K | 001-36135 | 10.25 | March 31, 2015 | ||||||
Guaranty of Recourse Obligations dated as of August 7, 2014 | 10-K | 001-36135 | 10.26 | March 31, 2015 | ||||||
Reserve Guaranty dated as of August 7, 2014 | 10-K | 001-36135 | 10.27 | March 31, 2015 | ||||||
Side Letter regarding Reserve Guaranty dated as of August 7, 2014 | 10-K | 001-36135 | 10.28 | March 31, 2015 | ||||||
List of Subsidiaries of the Registrant as of December 31, 2018 | ||||||||||
Certification of Principal Executive Officer dated April 1, 2019 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||||||
Incorporated by Reference | ||||||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | |||||
Certification of Principal Financial Officer dated April 1, 2019 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||||||
Certification of Principal Executive Officer and Principal Financial Officer dated April 1, 2019 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1) | ||||||||||
(b) | Exhibits Required by Item 601 of Regulation S-K | ||||||
See Item 3 above. | |||||||
(c) | Financial Statement Schedules | ||||||
See Item 2 above. | |||||||
_________ | |||||||
* | Filed herewith. | ||||||
** | Furnished herewith. | ||||||
(1 | ) | This exhibit should not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934. |
Date: | April 1, 2019 |
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/ BRYAN D. SMITH | ||
Bryan D. Smith | |||
Chief Financial Officer | |||
(Principal financial officer) | |||
Date: | April 1, 2019 | By: | /s/ G. MARK BROWN |
G. Mark Brown Chairman of the Board (Principal executive officer) | |||
April 1, 2019 | By: | /s/ BRYAN D. SMITH | |
Bryan D. Smith Chief Financial Officer (Principal financial and accounting officer) | |||
April 1, 2019 | By: | /s/ MICHELLE L. CAMPBELL | |
Michelle L. Campbell Senior Vice President, Secretary and Director | |||
April 1, 2019 | By: | /s/ ANDREW DAKOS | |
Andrew Dakos Director | |||
April 1, 2019 | By: | /s/ MURRAY GOLDFARB | |
Murray Goldfarb Director | |||
April 1, 2019 | By: | /s/ PHILLIP GOLDSTEIN | |
Phillip Goldstein Director | |||
April 1, 2019 | By: | /s/ IAN PARKER | |
Ian Parker Chief Operating Officer and Director | |||
April 1, 2019 | By: | /s/ ROBERT L. STELZL | |
Robert L. Stelzl Director |
A. | Pursuant to the terms of that certain Mezzanine Loan Agreement dated of even date herewith by and between EYP Mezzanine, LLC, a Delaware limited liability company (“Borrower”) and Lender (as amended, restated or otherwise modified from time to time, the “Loan Agreement”), Lender has agreed to make a loan to Borrower in the maximum principal amount of Thirty-Five Million and 00/100 Dollars ($35,000,000.00) (the “Loan”) for the purposes specified in the Loan Agreement, said purposes relating to 725 South Figueroa Street, Los Angeles, California, as more particularly described therein (the “Property”). The Loan Agreement provides that the Loan shall be evidenced by a promissory note (as amended, restated or otherwise modified from time to time, the “Note”) executed by Borrower and payable to the order of Lender, in the principal amount of the Loan and shall be secured by the Pledge Agreement and other security instruments, if any, specified in the Loan Agreement. |
B. | Guarantor owns a direct interest in Borrower, has an indirect financial interest in the Property as a result thereof and will benefit from Lender making the Loan to Borrower. |
C. | Initially capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to such terms in the Loan Agreement. |
1. | PAYMENT GUARANTY. Guarantor hereby guarantees and agrees that it shall be liable to Lender without any limitation for the following (together with Guarantor’s obligations under Sections 2 and 4 of this Guaranty, the “Guaranteed Obligations”): |
1.1 | the entire principal sum outstanding under the Note, together with accrued interest and other amounts payable thereunder and under all of the Loan Documents, as such amount shall be outstanding from time to time, if (1) a voluntary bankruptcy or insolvency proceeding is commenced by Borrower or Mortgage Borrower, (2) an involuntary bankruptcy or insolvency proceeding of Borrower or Mortgage Borrower which is commenced by any party Controlling, Controlled by or under common Control with Borrower, Mortgage Borrower or Guarantor or any creditor or claimant acting in collusion with Borrower or Mortgage Borrower or any of the foregoing parties, or (3) any breach of the covenants set forth in Section 9.7 of the Loan Agreement, titled “Assignment”, but solely to the extent relating to (x) Mortgage Borrower’s transfer of the fee interest in the Property or any material portion thereof or Borrower’s transfer of any interest in the Collateral, or (y) direct |
1.2 | Intentionally Omitted. |
2. | NON-RECOURSE CARVE-OUT GUARANTY. Subject to Section 4 of this Guaranty, in addition to the guarantee set forth in Section 1 hereof, Guarantor further guarantees and promises to pay to Lender, or order, on demand, in lawful money of the United States, in immediately available funds, and to defend, indemnify and hold harmless Lender, its directors, officers, employees, successors and assigns from and against all losses, damages, liabilities, claims, actions, judgments, court costs and legal and other expenses (including, without limitation, reasonable attorneys’ fees and expenses), other than any special or punitive damages, which Lender actually incurs as a direct consequence of (a) the misapplication, in violation of the Loan Documents, by Borrower, Mortgage Borrower or any of its members or managers or any constituent member, manager, partner, officer, shareholder or director of any such member or manager or any agent, employee or Affiliate of any of them, of any rents, income, issues or proceeds, if any, derived from the Property, including, without limitation, security deposits (or letters of credit delivered by tenants in lieu of security deposits and the proceeds thereof) which Borrower has received; (b) the misapplication or misappropriation by Borrower or Mortgage Borrower, in violation of the Loan Documents, of (i) proceeds paid to it under any insurance policy by reason of damage, loss or destruction affecting any portion of the Property or (ii) any proceeds or awards resulting from condemnation of all or any part of the Property or any deed given in lieu thereof; (c) the fraud or willful misconduct of Borrower, Mortgage Borrower or any of its members (or any of the members of such members) or Guarantor in connection with the Property and/or the Loan; (d) the intentional misrepresentation by Borrower, Mortgage Borrower any of its members (or any of the members of such members) or Guarantor in connection with the Loan; (e) any intentional waste by Borrower, Mortgage Borrower of the Property and/or Improvements, to the extent funds from the Property are available to Borrower or Mortgage Borrower for such purpose after the payment of all Operating Expenses and sums due and owing to Lender under the Loan Documents and the Fee Letter; (f) Borrower’s breach of the covenants set forth in Section 9.10 of the Loan Agreement, entitled “Special Covenants; Single Purpose Entity”, which breach results in a consolidation of the assets of Borrower or Mortgage Borrower with the assets of another person or entity and causes Lender material damage, cost, liability or expense; (g) Borrower’s breach of the covenants set forth in Section 9.7 of the Loan Agreement, entitled “Assignment” that does not result in full recourse under Section 1.1(3) of this Guaranty; (h) a Lien that is superior to the lien of the Pledge Agreement, excluding real estate taxes (except to the extent funds generated by the Property are sufficient therefor) and excluding Permitted Liens; (i) Borrower’s or Mortgage Borrower’s failure to pay all taxes, assessments, levies and charges imposed by any public or quasi-public authority, or utility company which are or which may become a lien on the Property, in each case, to the extent funds generated by the Property are sufficient therefor (to the full extent of |
3. | GUARANTY OF TENANT IMPROVEMENT AND LEASING OBLIGATIONS. Guarantor hereby guarantees and agrees that it shall cause Borrower, or otherwise be liable to Lender for Borrower’s failure, to satisfy and complete tenant improvements, tenant allowances and leasing commissions under New Leases in an amount not to exceed $7,198,100, provided that such amount shall be reduced by (a) each TI/LC Burnoff Amount and (b) any amount actually paid to Mortgage Lender under Section 1.3 of the Limited Guaranty dated November 27, 2013, as amended by the Omnibus Amendment to Loan Agreement and Loan Documents dated as of March 29, 2018, by Guarantor in favor of Wells Fargo Bank, National Association, as Administrative Agent under the Mortgage Loan Agreement in each case on the date such amount is actually paid. |
4. | RECOURSE CARVEOUTS INAPPLICABLE. Notwithstanding anything contained herein to the contrary, (a) a Foreclosure Control Transfer shall not be deemed a breach of the covenants set forth in Section 9.7 of the Loan Agreement, (b) Guarantor shall have no liability for any actions, conditions or events first occurring after the Control Transfer Date except for actions, conditions or events caused by any action or inaction of |
5. | REMEDIES. If Guarantor fails to promptly perform its obligations under this Guaranty, Lender may from time to time, and without first requiring performance by Borrower or exhausting any or all security for the Loan, bring any action at law or in equity or both to compel Guarantor to perform its obligations hereunder, and to collect in any such action compensation for all out-of-pocket costs and expenses (including reasonable fees of outside counsel) actually incurred by Lender in the enforcement hereof or the preservation of Lender’s rights hereunder. |
6. | RIGHTS OF LENDER. Lender, without giving notice to Guarantor or obtaining Guarantor’s consent and without affecting the liability of Guarantor, from time to time, may: (a) renew or extend all or any portion of Borrower’s obligations under the Note or any of the other Loan Documents; (b) declare all sums owing to Lender under the Note and the other Loan Documents due and payable upon the occurrence and during the continuance of a Default; (c) make changes in the dates specified for payments of any sums payable in periodic installments under the Note or any of the other Loan Documents; (d) otherwise enter into modifications of the terms of any of the other Loan Documents (other than Loan Documents to which Guarantor is a party to); (e) take and hold security for the performance of Borrower’s obligations under the Notes or the other Loan Documents and exchange, enforce, waive and release any such security, or impair or fail to perfect any lien on or security interest in any such security; (f) apply such security and direct the order or manner of sale thereof as Lender in its discretion may determine; (g) release, substitute or add any one or more endorsers of the Note or guarantors of Borrower’s obligations under the Note or the other Loan Documents; (h) apply payments received by Lender from Borrower to any obligations of Borrower to Lender, in such order as Lender shall determine in its sole discretion, whether or not any such obligations are covered by this Guaranty; (i) assign this Guaranty in whole or in part, to the holder of the Note; and (j) assign, transfer or negotiate all or any part of the indebtedness guaranteed by this Guaranty. |
7. | GUARANTOR’S WAIVERS. Guarantor waives: (a) any defense based upon any legal disability or other defense of Borrower, any other guarantor or any other person, or by reason of the cessation or limitation of the liability of Borrower from any cause other than full payment of all sums payable under the Note or any of the other Loan Documents; (b) any defense based upon any lack of authority of the officers, directors, partners, members, managers or agents acting or purporting to act on behalf of Borrower or any principal of Borrower or any defect in the formation of Borrower or any principal |
8. | GUARANTOR’S WARRANTIES. Guarantor warrants and acknowledges that: (a) Lender would not make the Loan but for this Guaranty; (b) Guarantor has reviewed all of the terms and provisions of the Loan Agreement and the other Loan Documents; (c) there are no conditions precedent to the effectiveness of this Guaranty; (d) Guarantor has established adequate means of obtaining from sources other than Lender, on a continuing basis, financial and other information pertaining to Borrower’s and Mortgage Borrower’s financial condition, the Property and Mortgage Borrower’s and Borrower’s activities relating thereto and the status of Borrower’s performance of its obligations under the Loan Documents, and Guarantor agrees to keep adequately informed from such means of any facts, events or circumstances which might in any way affect Guarantor’s risks hereunder and Lender has not made any representation to Guarantor as to any such matters; (e) Guarantor has all requisite power and authority to own or lease its property and to carry on its own business as now conducted; (f) Guarantor has the full limited liability company power and authority to execute and deliver this Guaranty and to perform its obligations hereunder; the execution, delivery and performance of this Guaranty by Guarantor has been duly and validly authorized; and all requisite limited liability company action has been taken by Guarantor to make this Guaranty valid and binding upon Guarantor, enforceable in accordance with its terms; (g) neither any Loan Party nor any of its subsidiaries is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any charter or corporate restriction that would be reasonably likely to have a Material Adverse Effect; (h) Guarantor’s execution of, and compliance with, this Guaranty will not result in the breach of any term or provision of the operating agreement or other governing instrument of Guarantor, or result in the breach of any term or provision of, or conflict with or constitute a default under, or, to Guarantor’s knowledge result in the acceleration of any obligation under any material agreement, indenture or loan or credit agreement or other instrument to which the Guarantor is subject, or result in the violation of any law, rule, regulation, order, judgment or decree to which the Guarantor is subject; (i) intentionally deleted; (j) to Guarantor’s knowledge, there is no action, suit, proceeding or investigation pending or threatened against it which, if decided adversely against Guarantor, is reasonably likely to, either in any one instance or in the aggregate, result in any material adverse change in the business, operations, financial condition, properties or assets of Guarantor, or in any material impairment of the right or ability of Guarantor to carry on its business substantially as now conducted, or in any material liability on the part of Guarantor, or which would draw into question the validity of this Guaranty or of any action taken or to be taken in connection with the obligations of Guarantor contemplated herein, or which would be likely to impair materially the ability of Guarantor to perform |
9. | SUBORDINATION. Guarantor subordinates all present and future indebtedness owing by Borrower to Guarantor to the obligations at any time owing by Borrower to Lender under the Note and the other Loan Documents. Guarantor assigns all such indebtedness to Lender as security for this Guaranty, the Note and the other Loan Documents. Guarantor agrees to make no claim for such indebtedness until all obligations of Borrower under the Note and the other Loan Documents have been fully discharged. Guarantor agrees that it will not take any action or initiate any proceedings, judicial or otherwise, to enforce Guarantor’s rights or remedies with respect to any such indebtedness, including without limitation any action to enforce remedies with respect to any defaults under such indebtedness or to any collateral securing such indebtedness or to obtain any judgment or prejudgment remedy against Borrower or any such collateral. Guarantor also agrees that it will not commence or join with any other creditor or creditors of Borrower in commencing any bankruptcy, reorganization or insolvency proceedings against Borrower. Guarantor further agrees not to assign all or any part of such indebtedness unless Lender is given prior notice and such assignment is expressly made subject to the terms of this Guaranty (including, but not limited to, the assignment to Lender set forth herein). If Lender so requests, (a) all instruments evidencing such indebtedness shall be duly endorsed and delivered to Lender, (b) all security for such |
10. | BANKRUPTCY OF BORROWER. The validity of this Guaranty and the obligations of Guarantor hereunder shall in no way be terminated, affected or impaired by reason of the commencement of a case under the Bankruptcy Code by or against any person obligated under the Loan Documents. If Borrower shall have taken advantage of, or be subject to the protection of, any provision in the Bankruptcy Code, the effect of which is to prevent or delay Lender from taking any remedial action against the Borrower, including the exercise of any option Lender has to declare the obligations guaranteed hereunder to be due and payable on the happening of any default or event by which, under the terms of the Loan Documents, such obligations shall become due and payable, Lender may, as against Guarantor, nevertheless, declare such obligations due and payable and enforce any or all of its rights and remedies against Guarantor provided for herein. In any bankruptcy or other proceeding in which the filing of claims is required by law, Guarantor shall file all claims which Guarantor is so required to file against Borrower relating to any indebtedness of Borrower to Guarantor and shall assign to Lender all rights of Guarantor thereunder. If Guarantor does not file any such claim, Lender, as attorney-in-fact for Guarantor, is hereby authorized to do so in the name of Guarantor or, in Lender’s discretion, to assign the claim to a nominee and to cause proof of claim to be filed in the name of Lender’s nominee. The foregoing power of attorney is coupled with an interest and cannot be revoked. Lender or its nominee shall have the right, in its reasonable discretion, to accept or reject any plan proposed in such proceeding and to take any other action which a party filing a claim is entitled to do. In all such cases, whether in administration, bankruptcy or otherwise, the person or persons authorized to pay such claim shall pay to Lender, to be credited first against all obligations other than the Guaranteed Obligations, and then to the Guaranteed Obligations, the amount payable on such claim and, to the full extent necessary for that purpose, Guarantor hereby assigns to Lender, all of Guarantor’s rights to any such payments or distributions; provided, however, Guarantor’s obligations hereunder shall not be satisfied or credited except to the extent that Lender receives cash by reason of any such payment or distribution. If Lender receives anything hereunder other than cash, the same shall be held as collateral for the Guaranteed Obligations. The liability of Guarantor hereunder shall be reinstated and revised, and the rights of Lender shall continue, with respect to any amount at any time paid by Borrower on account of the Guaranteed Obligations which Lender shall be legally required to restore or return upon the bankruptcy, insolvency or reorganization of Borrower or for any other reasons, all as though such amount had not been paid. If all or any portion of the obligations guaranteed hereunder are paid or performed, the |
11. | LOAN SALES AND PARTICIPATIONS; DISCLOSURE OF INFORMATION. Guarantor agrees that Lender may elect, at any time, in accordance with the Loan Documents, to sell, assign, or grant participations in all or any portion of its rights and obligations under the Loan Documents and this Guaranty, and that any such sale, assignment or participation may be to one or more financial institutions, private investors, and/or other entities, at such Lender’s sole discretion. Guarantor further agrees that Lender may disseminate to any such actual or potential purchaser(s), assignee(s) or participant(s) all documents and information (including, without limitation, all financial information) which has been or is hereafter provided to or known to Lender with respect to: (a) the Property and its operations; (b) any party connected with the Loan (including, without limitation, the Guarantor, Mortgage Borrower, Borrower, any partner, joint venturer or member of Borrower, any constituent partner, joint venturer or member of Borrower, any other guarantor and any non-borrower trustor); and/or (c) any lending relationship other than the Loan which Lender may have with any party connected with the Loan. In connection with any such sale, assignment or participation, Guarantor further agrees that this Guaranty shall be sufficient evidence of the obligations of Guarantor to each purchaser or assignee and upon written request by Lender, Guarantor shall, within thirty (30) days after request by Lender (but not more frequently than twice in any calendar year), (x) deliver to Lender an estoppel certificate, in form and substance reasonably acceptable to Lender, verifying for the benefit of Lender and any such other party the status, terms and provisions of this Guaranty to the knowledge of the officer delivering such certificate, and (y) at the sole cost and expense of the requesting party, enter into such amendments or modifications to this Guaranty or the Loan Documents as may be reasonably required in order to evidence any such sale or assignment, provided such amendment or modification shall have no adverse impact on Guarantor. |
12. | ADDITIONAL, INDEPENDENT AND UNSECURED OBLIGATIONS. This Guaranty is a continuing guaranty of payment and not of collection and cannot be revoked by Guarantor and shall continue to be effective with respect to any indebtedness referenced in Sections 1, 2 and 3 hereof arising or created after any attempted revocation hereof. The obligations of Guarantor hereunder shall be in addition to and shall not limit |
13. | REPORTING REQUIREMENTS. At all times during which any indebtedness remains outstanding pursuant to the Loan Documents, Guarantor shall comply with the reporting requirements relating to Guarantor set forth in Section 10.1(b) and 10.1(c) of the Loan Agreement. |
14. | INTEREST. Any amounts that become due and payable by Guarantor under this Guaranty, if not paid within five (5) Business Days after demand therefor, shall bear interest at a rate per annum equal to the Alternate Rate from the date of demand to the date that such sums are paid to Lender. The foregoing shall be without any double-counting with interest paid on the Guaranteed Obligations which interest is itself part of the Guaranteed Obligations. |
15. | ATTORNEYS’ FEES; ENFORCEMENT. If any attorney is engaged by Lender to enforce or defend any provision of this Guaranty or to collect any sums owed by Guarantor under this Guaranty, with or without the filing of any legal action or proceeding, Guarantor shall pay to Lender, immediately upon demand all attorneys’ fees and costs incurred by Lender in connection therewith, together with interest thereon from the date of such demand until paid at the rate of interest applicable to the principal balance of the Note as specified therein. |
16. | RULES OF CONSTRUCTION. The term “person” as used herein shall include any individual, company, trust or other legal entity of any kind whatsoever. If this Guaranty is executed by more than one person, the term “Guarantor” shall include all such persons. When the context and construction so require, all words used in the singular herein shall be deemed to have been used in the plural and vice versa. All headings appearing in this Guaranty are for convenience only and shall be disregarded in construing this Guaranty. |
17. | CONSTRUCTION OF DOCUMENTS. The parties hereto acknowledge that they were represented by competent counsel in connection with the negotiation, drafting and execution of this Guaranty and that this Guaranty shall not be subject to the principle of construing their meaning against the party which drafted same. |
18. | GOVERNING LAW. |
19. | MISCELLANEOUS. Time is of the essence with respect to every provision hereof. The provisions of this Guaranty will bind and benefit the heirs, executors, administrators, legal representatives, nominees, successors and assigns of Guarantor and Lender; provided that Guarantor may not assign any of its rights or obligations hereunder or under any other Loan Document without the prior written consent of the Lender (and any attempted such assignment without such consent shall be null and void). The liability of all persons and entities who are in any manner obligated hereunder shall be joint and several. If any provision of this Guaranty shall be determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, that portion shall be deemed severed from this Guaranty and the remaining parts shall remain in full force as though the invalid, illegal or unenforceable portion had never been part of this Guaranty. This Guaranty may be executed in one or more counterparts by some or all of the parties hereto, each of which counterparts shall be an original and all of which together shall constitute a single agreement of Guaranty. The failure of any party hereto to execute this Guaranty, or any counterpart hereof, shall not relieve the other signatories from their obligations hereunder. This Guaranty shall be deemed to be continuing in nature and shall remain in full force and effect and shall survive the exercise of any remedy by Lender under the Pledge Agreement or any of the other Loan Documents, including without limitation any foreclosure or deed in lieu thereof. |
20. | JOINT AND SEVERAL LIABILITY. The liability of the Guarantor hereunder shall be joint and several with any other guarantors of the Borrower’s obligations under the Note and the other Loan Documents. |
21. | ENFORCEABILITY. Guarantor hereby acknowledges that: (a) the obligations undertaken by Guarantor in this Guaranty are complex in nature, and (b) numerous possible defenses to the enforceability of these obligations may presently exist and/or may arise hereafter, and (c) as part of Lender’s consideration for entering into this transaction, Lender has specifically bargained for the waiver and relinquishment by Guarantor of all such defenses, and (d) Guarantor has had the opportunity to seek and receive legal advice from skilled legal counsel in the area of financial transactions of the type contemplated herein. Given all of the above, Guarantor does hereby represent and confirm to Lender that Guarantor is fully informed regarding, and that Guarantor does thoroughly understand: (i) the nature of all such possible defenses, and (ii) the circumstances under which such defenses may arise, and (iii) the benefits which such defenses might confer upon Guarantor, and (iv) the legal consequences to Guarantor of |
22. | WAIVER OF RIGHT TO TRIAL BY JURY. GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR THERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND GUARANTOR HEREBY AGREES AND CONSENTS THAT LENDER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT BY GUARANTOR TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY. |
23. | NOTICES. Notices to be given hereunder shall be given (and deemed received) in accordance with the terms of Section 13.4 of the Loan Agreement, addressed, if to Lender, as set forth in the Loan Agreement, and, if to Guarantor, as follows: |
Guarantor: | Brookfield DTLA Holdings LLC c/o Brookfield Properties, Inc. Brookfield Place 250 Vesey Street, 15th Floor New York, New York 10281 Attention: Jason Kirschner |
With a copy to: | Brookfield DTLA Holdings LLC c/o Brookfield Properties, Inc. Brookfield Place 250 Vesey Street, 15th Floor New York, New York 10281 Attention: General Counsel |
With a copy to: | Clearly Gottlieb Steen & Hamilton LLP One Liberty Plaza New York, New York 10006 Attention: Steven Wilner, Esq. |
24. | INTEGRATION. This Guaranty represents the final agreement between the parties with respect to the subject matter hereof and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties with respect to such subject matter. There are no oral agreements between the parties. This instrument may be amended only in an instrument in writing executed by the parties. |
25. | LIMITED RECOURSE. The members and other direct or indirect owners of Guarantor and its officers, directors, partners, members, shareholders, principals, managers, trustees, agents and affiliates shall have no personal liability for and none of their assets shall be subject to a claim arising out of the obligations of Guarantor hereunder or under any of the other Loan Documents. |
26. | FINANCIAL COVENANTS. Guarantor shall, at all times, comply with the Guarantor Financial Covenants set forth in Section 9.17 of the Loan Agreement. |
27. | OUTSIDE SOURCES. Notwithstanding anything contained herein to the contrary, no amounts paid on account of the Loan shall constitute a payment under this Guaranty unless (a) payment is made after the occurrence of a Default and Lender’s exercise of any remedies in connection therewith and (b) Guarantor makes payment directly to Lender with funds from Outside Sources (hereinafter defined). “Outside Sources” shall mean funds belonging to Guarantor which are not derived directly or indirectly from the ownership, operation, sale or liquidation of the Property (including, but not limited to, insurance proceeds, condemnation awards, rents and any other proceeds paid or payable with respect to the Property). |
28. | DEFINED TERMS; USAGES. Unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, words used in this Guaranty may be used interchangeably in singular or plural form, and the word “Property” shall mean “the Property, including any individual parcel of real property and improvements constituting a part thereof”. The terms “include(s)” and “including” shall mean “include(s), without limitation” and “including, without limitation”, respectively. |
29. | TAXES. Taxes in respect of this Guaranty shall be paid by Guarantor as required by Section 2.11 of the Loan Agreement (with the understanding and agreement of Guarantor that, for purposes hereof, Guarantor shall have the same payment and reimbursement obligations as the Borrower under such Section 2.11 even though Guarantor is not specifically referenced in such Section 2.11, and by accepting the benefits hereof, Lender agrees that it will comply with such Section 2.11). |
“GUARANTOR” | |
BROOKFIELD DTLA HOLDINGS LLC, a Delaware limited liability company By: Brookfield DTLA GP, LLC a Delaware limited liability company, its managing member By: /s/ MICHELLE L. CAMPBELL Name: Michelle L. Campbell Title: Senior Vice President & Secretary |
Completion Guaranty | 333 South Grand Refinance |
Guaranty | 333 South Grand Refinance |
Unfunded Obligations Guaranty | 333 South Grand Refinance |
RE: | Loan from Metropolitan Life Insurance Company (“Lender”) to Maguire Properties – 777 Tower, LLC, a Delaware limited liability company (“Borrower”)(the “Loan”), evidenced by that certain Amended and Restated Promissory Note dated September 1, 2016, in the original principal amount of $220,000,000 by Borrower in favor of Lender (the “Note”) and all other documents evidencing and securing the Note (collectively, the “Loan Documents”) and that certain Guaranty dated October 15, 2013 by Brookfield DTLA Holdings LLC, a Delaware limited liability company (“Guarantor”) in favor of Lender (the “Guaranty”) |
1. | Exercise of Extension Option. On or before October 31, 2018, Borrower shall wire to Lender, in accordance with the wiring instructions attached on Exhibit “A”, an extension fee in the amount of $770,000, which fee shall be due and payable and earned upon execution of this Agreement by Borrower (the “Extension Fee”). Upon Lender’s receipt of the Extension Fee and subject to the satisfaction of the other conditions contained in this Agreement, the Maturity Date shall be extended through and including the Extended Maturity Date. The period from the Maturity Date, through the Extended Maturity Date, shall be hereinafter referred to as the “Extension Period”. |
2. | Conditions to Extension Period. The extension of the Maturity Date by the Extension Period shall be conditioned upon satisfaction of all of the following: (a) Lender’s receipt of the Extension Fee; (b) there being, as of the beginning of the Extension Period, no Event of Default; (c) Borrower shall pay all of Lender’s out of pocket costs and expenses in connection with the matters contemplated by this Agreement, including without limitation, reasonable attorneys’ fees and costs and, if applicable, premiums for title endorsements (not to exceed $2,500); (d) Borrower shall have (i) entered into a new Interest Rate Cap Agreement on the terms set forth in Exhibit “B” attached hereto and otherwise satisfactory to Lender in its sole discretion and (ii) collaterally assigned such new Interest Rate Cap Agreement to Lender pursuant to an assignment agreement in the form attached hereto as Exhibit “C”; and (e) Borrower shall deliver to Lender endorsements issued by CTIC and FATCO (as each are hereinafter defined) to each of the applicable Existing Title Insurance Policies (as hereinafter defined) insuring Lender’s continued first lien priority notwithstanding the execution of this Agreement, and further insuring that there are no liens, encumbrances, or exceptions to title which are not reflected in the Existing Title Insurance Policies other than as set out in the New Endorsements (as hereinafter defined). Lender shall incur no cost or expense in connection with the matters contemplated by this Agreement. |
3. | Representations and Warranties of Borrower. Borrower represents and warrants to Lender as follows: |
(a) | Borrower hereby reaffirms, as of the date hereof, the representations and warranties of Borrower contained in Sections 8.01, 8.02, 8.03(c), (e), (f) and (g), 8.04, 8.05 and 10.01(c) of the Deed of Trust; provided, however, such reaffirmation of the representations set forth in Section 8.02 of the Deed of Trust is made to Borrower’s knowledge without inquiry. Borrower hereby further reaffirms (except as previously disclosed to Lender in writing), as of the date hereof, each of the other representations and warranties of Borrower contained in the Loan Documents and the Indemnity Agreement, except that (i) Borrower makes no reaffirmation of the representations set forth in Section 8.03(b) of the |
i. | With respect to the Second Amended and Restated Bylaws of Brookfield DTLA Fund Office Trust Investor Inc., Articles of Revival were filed on February 22, 2018; |
ii. | With respect to Brookfield DTLA Fund Properties Holding, Inc., there has been an Amendment No. 1 to By-Law No. 1 dated March 7, 2016; and |
iii. | With respect to Brookfield DTLA Fund Office Trust Inc., Articles of Revival were filed February 22, 2018. |
(b) | There currently exists no Event of Default, or, to Borrower’s knowledge, any circumstance which with the giving of notice or the lapse of time would constitute an Event of Default; |
(c) | The execution and delivery of this Agreement by Borrower does not contravene, result in a breach of or constitute a default under any mortgage, loan agreement, indenture or other contract or agreement to which it is a party or by which it or any of its properties may be bound (nor would such execution and delivery constitute such a default with the passage of time or the giving of notice or both) and does not violate or contravene any law, order, decree, rule or regulation to which it is subject; |
(d) | The execution and delivery of, and performance under this Agreement by Borrower is within its power and authority without the joinder or consent of any other party and has been duly authorized by all requisite action; and |
(e) | This Agreement constitutes the legal, valid and binding obligation of Borrower enforceable by Lender in accordance with its terms except to the extent that the enforcement thereof or the availability of equitable remedies may be limited by applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent transfer or similar laws now or hereafter in effect relating to or affecting creditors’ rights generally or by principles of equity, or by the discretion of any court of competent jurisdiction in awarding equitable remedies, regardless of whether such enforcement is considered in a proceeding in equity or in law. |
4. | Representations and Warranties of Guarantor: Guarantor represents and warrants to Lender as follows: |
(a) | All of the representations and warranties of Guarantor contained in the Guaranty remain true and correct as of the date of this Agreement; |
(b) | The execution and delivery of this Agreement by Guarantor does not contravene, result in a breach of or constitute a default under any mortgage, loan agreement, indenture or other contract or agreement to which it is a party or by which it or any of its properties may be bound (nor would such execution and delivery constitute such a default with the passage of time or the giving of notice or both) and does not violate or contravene any law, order, decree, rule or regulation to which it is subject; |
(c) | The execution and delivery of, and performance under this Agreement by Guarantor is within its power and authority without the joinder or consent of any other party and has been duly authorized by all requisite action; and |
(d) | This Agreement constitutes the legal, valid and binding obligation of Guarantor enforceable by Lender in accordance with its terms except to the extent that the enforcement thereof or the availability of equitable remedies may be limited by applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent transfer or similar laws now or hereafter in effect relating to or affecting creditors’ rights generally or by principles of equity, or by the discretion of any court of competent jurisdiction in awarding equitable remedies, regardless of whether such enforcement is considered in a proceeding in equity or in law. |
5. | Ratification by Borrower. Borrower hereby (i) ratifies and confirms the terms of each of the Loan Documents and the Indemnity Agreement, as modified by this Agreement, (ii) agrees that each of the Loan Documents and the Indemnity Agreement, as modified by this Agreement, is in full force and effect and enforceable against Borrower in accordance with its terms subject to the limitations set out in Section 3(e) of this Agreement, and (iii) acknowledges that the outstanding principal balance of the Loan as of the date of this Agreement is $220,000,000, which amount is due and payable by Borrower to Lender subject to and in accordance with the terms of this Agreement and the other Loan Documents without any existing and asserted defense or right of offset, nor basis for any unasserted defense or right of offset, whatsoever. This Agreement shall be deemed to be a “Loan Document.” |
6. | Reaffirmation of Guaranty. As material consideration for Lender agreeing to the terms and conditions set forth in this Agreement, Guarantor reaffirms its, his or her respective obligations under that certain Guaranty dated October 15, 2013 by Guarantor in favor of Lender (the “Guaranty”), consents to the execution and delivery of this Agreement, and agrees and acknowledges that its, his or her guaranty liability shall not be diminished in any way by the execution and delivery of this Agreement or by the consummation of any of the transactions contemplated herein and that the provisions and covenants of the Guaranty shall extend to and include the provisions of this Agreement as if the same had been originally incorporated into the Loan Documents. Guarantor has no existing and asserted, and no basis for any unasserted, defenses, setoffs, claims, counterclaims or causes of action of any kind or nature whatsoever with respect to the Loan Documents, the Guaranty or the Indemnity Agreement and this Agreement or the indebtedness under the Loan evidenced and secured thereby, or with respect to any other documents or |
7. | Conforming Modifications. The Loan Documents, the Guaranty and the Indemnity Agreement are hereby modified to provide that all references therein to the Loan Documents, the Guaranty or the Indemnity Agreement shall be deemed to refer to the Loan Documents, the Guaranty and the Indemnity Agreement as amended hereby. |
8. | Release |
a. | Release of All Claims. Borrower, on behalf of itself, its members, managers, general and limited partners and all constituents thereof, and its affiliates and its and their successors and assigns (collectively, the “Releasing Parties”), hereby releases and forever discharges Lender and all of its subsidiaries, affiliates, divisions, officers, directors, employees, agents, attorneys, advisors, successors and assigns (collectively, the “Released Parties”) from any and all claims, demands, debts, liabilities, damages, contracts, obligations, accounts, torts, causes of action or claims for relief of whatever kind or nature, whether known or unknown, whether suspected or unsuspected, which the Releasing Parties or any of them may have or which may hereafter be asserted or accrue against Released Parties or any of them, resulting from or in any way relating to any act or omission done or committed by Released Parties, or any of them, prior to the date hereof. |
b. | Release Includes Unknown Claims. The release contained in Section 8(a) above and in this Section 8(b) apply to all claims which the Releasing Parties or any of them have or which may hereafter arise against the Released Parties or any of them, as a result of acts or omissions occurring before the date hereof, whether or not known or suspected by the parties hereto. Borrower expressly acknowledges that although ordinarily a general release does not extend to claims which the releasing party does not know or suspect to exist in its favor, which if known by it would have materially affected its settlement with the party released, it has carefully considered and taken into account in determining to enter into this Agreement the possible existence of such unknown losses or claims. |
c. | Complete Defense. This release by Releasing Parties shall constitute a complete defense to any claim, cause of action, defense, contract, liability, indebtedness or obligation arising or occurring prior to the date hereof and release pursuant to this release. Nothing in this release shall be construed as (or shall be admissible in any legal action or proceeding as) an admission by Lender or any other Released Party that any defense, indebtedness, obligation, liability, claim or cause of action exists which is within the scope of those hereby released. |
d. | Survival. This Section 8 shall survive the repayment and performance of all obligations secured by the Deed of Trust, and the reconveyance, foreclosure, or other extinguishment of the Deed of Trust. |
9. | Successors and Assigns. Subject to the foregoing, this Agreement is binding upon Borrower and Guarantor and their successors and permitted assigns, and inure to the benefit of and are enforceable by Lender and its successors and assigns. |
10. | Time of the Essence. Time shall be of the essence with respect to this Agreement. |
11. | Captions. The captions are inserted only as a matter of convenience and for reference, and in no way define, limit, or describe the scope or intent of any provisions of this Agreement. |
12. | FURTHER EXTENSIONS; PRESERVATION OF REMEDIES. LENDER IS AGREEING TO ONLY AN EXTENSION OF THE LOAN AS SET FORTH HEREIN AND IN NO EVENT SHALL LENDER HAVE ANY OBLIGATION TO CONSENT TO A FURTHER EXTENSION OF THE MATURITY DATE EXCEPT IN ACCORDANCE WITH SECTION 1(E) OF THE NOTE. BORROWER ACKNOWLEDGES AND AGREES THAT THE EXTENSION OF THE MATURITY DATE TO THE EXTENDED MATURITY DATE CONSTITUTES THE EXERCISE OF ONE OF THE TWO EXTENSION OPTIONS PROVIDED TO BORROWER PURSUANT TO SECTION 1(E) OF THE NOTE. LENDER EXPRESSLY RESERVES ALL OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS, INCLUDING THE RIGHT TO ENFORCE ITS RIGHTS AND REMEDIES SHOULD A DEFAULT OCCUR DUE TO NON-PAYMENT OF THE LOAN IN FULL ON OR BEFORE THE MATURITY DATE AS EXTENDED HEREIN. |
13. | Further Assurances. Borrower and Guarantor agree to execute such other documents and perform such other acts as may be reasonably required by Lender to carry out the purposes of this Agreement. |
14. | Entire Agreement. This Agreement contains the entire agreement among Borrower, Guarantor and Lender with respect to matters contained herein, and there are no other agreements, either oral or written, and no other representations or statements, either oral or written, on which Borrower or Guarantor has relied. This Agreement shall not be modified except by a writing executed by Borrower, Guarantor and Lender. |
15. | Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original. |
16. | Fees and Costs. Borrower agrees to pay, within 5 days of Lender’s request, Lender’s actual out-of-pocket costs and expenses (including actual out-of-pocket attorneys’ fees) incurred by Lender in connection with the preparation of this Agreement and the matters contemplated by this Agreement regardless of whether all of the conditions to the extension of the Maturity Date to the Extended Maturity Date are satisfied. |
17. | No Waivers or Modifications. Except as expressly set forth in this Agreement, nothing in this Agreement shall operate as an amendment, alteration, modification or waiver of any of the provisions of the Note, the other Loan Documents, the Indemnity Agreement or the Guaranty. |
Execution Date: [_____________], 2018 | ||||
Loan: A first mortgage loan in the principal amount of $220,000,000 from Lender to Borrower. | ||||
Borrower : | ||||
Maguire Properties – 777 Tower, LLC, a Delaware limited liability company | ||||
Borrower’s Address: | ||||
Maguire Properties – 777 Tower, LLC | ||||
c/o Brookfield Office Properties, Inc. | ||||
250 Vesey Street, 15th Floor | ||||
New York, New York 10281 | ||||
Attention: Jason Kirschner | ||||
Facsimile: (646) 430-8556 | ||||
with copies to: | ||||
Maguire Properties – 777 Tower, LLC | ||||
c/o Brookfield Office Properties, Inc. | ||||
250 Vesey Street, 15th Floor | ||||
New York, New York 10281 | ||||
Attention: General Counsel | ||||
Facsimile: (212) 417-7195 | ||||
and: | ||||
Goodwin Procter LLP | ||||
100 Northern Avenue | ||||
Boston, MA 02210 | ||||
Attention: Sam Richardson, Esq. | ||||
Telephone: (617) 570-1878 | ||||
Facsimile: (617) 801-8789 |
Lender & Address: | |||||
Metropolitan Life Insurance Company, a New York corporation | |||||
One MetLife Way | |||||
Whippany, NJ 07981-1449 | |||||
Attention: Senior Vice President, Real Estate Investments | |||||
Re: 777 South Figueroa | |||||
and | |||||
Metropolitan Life Insurance Company | |||||
333 South Hope Street, Suite 3650 | |||||
Los Angeles, California 90071 | |||||
Attention: Director/Officer in Charge | |||||
Re: 777 South Figueroa | |||||
and | |||||
Metropolitan Life Insurance Company | |||||
425 Market Street, Suite 1050 | |||||
San Francisco, California 94105 | |||||
Attention: Associate General Counsel | |||||
Re: 777 South Figueroa | |||||
Note: Amended and Restated Promissory Note dated as of September 1, 2016 in the original principal amount of the Loan executed by Borrower in favor of Lender, as the same may be amended, consolidated, split, severed, restated, replaced, supplemented, renewed, extended or otherwise modified from time to time. | |||||
Deed of Trust: A Deed of Trust, Security Agreement and Fixture Filing dated as of October 15, 2013 executed by Borrower, as trustor, to Fidelity National Title Insurance Company, as trustee for the benefit of Lender, as beneficiary, securing repayment of the Note recorded in the records of the County in which the Property is located, as the same may be amended concurrently herewith and further amended, consolidated, split, severed, restated, replaced, supplemented, renewed, extended or otherwise modified from time to time. | |||||
Loan Documents: The Note, the Deed of Trust, and any other documents related to the Note and/or the Deed of Trust, and all renewals, amendments, modifications, restatements and extensions of these documents, including any of the foregoing entered into concurrently herewith. Notwithstanding the foregoing, neither the Indemnity Agreement nor the Guaranty are Loan Documents, and in accordance with their terms, each shall survive repayment of the Loan or other termination of the Loan Documents. | |||||
Indemnity Agreement: Unsecured Indemnity Agreement dated as of October 15, 2013 and executed by Borrower in favor of Lender, as the same may be amended concurrently herewith | |||||
and further amended, restated, replaced, supplemented or otherwise modified from time to time. | |||||
Guaranty: Guaranty dated as of October 15, 2013 and executed by the Liable Party (as defined in the Deed of Trust) in favor of Lender, as the same may be amended concurrently herewith and further amended, restated, replaced, supplemented or otherwise modified from time. | |||||
Subsidiaries | Jurisdiction In Which Organized | Percentage of Voting Securities Owned Directly or Indirectly by Brookfield DTLA Fund Office Trust Investor Inc. | |||
Brookfield DTLA Fund Office Trust Inc. | Maryland | 100 | % | ||
MPG Office LLC | Maryland | 100 | % | ||
Brookfield DTLA Fund Properties II LLC | Delaware | 100 | % | ||
Brookfield DTLA 333 South Grand REIT LLC | Delaware | 100 | % | ||
North Tower Mezzanine II, LLC | Delaware | 100 | % | ||
North Tower Mezzanine, LLC | Delaware | 100 | % | ||
North Tower, LLC | Delaware | 100 | % | ||
Brookfield DTLA 555 West 5th REIT LLC | Delaware | 100 | % | ||
Maguire Properties – 350 S. Figueroa Mezzanine, LLC | Delaware | 100 | % | ||
Maguire Properties – 350 S. Figueroa, LLC | Delaware | 100 | % | ||
Maguire Properties – 555 W. Fifth Mezzanine, LLC | Delaware | 100 | % | ||
Maguire Properties – 555 W. Fifth Mezz I, LLC | Delaware | 100 | % | ||
Maguire Properties – 555 W. Fifth Mezz II, LLC | Delaware | 100 | % | ||
Maguire Properties – 555 W. Fifth Mezz III, LLC | Delaware | 100 | % | ||
Maguire Properties – 555 W. Fifth, LLC | Delaware | 100 | % | ||
Brookfield DTLA 355 South Grand REIT LLC | Delaware | 100 | % | ||
Maguire Properties – 355 S. Grand, LLC | Delaware | 100 | % | ||
Brookfield DTLA 777 South Figueroa REIT LLC | Delaware | 100 | % | ||
Maguire Properties – 777 Tower, LLC | Delaware | 100 | % | ||
Brookfield DTLA 4050/755 Inc. | Delaware | 100 | % | ||
Maguire Properties Holdings I, LLC | Delaware | 100 | % | ||
Maguire Properties – 755 S. Figueroa, LLC | Delaware | 100 | % | ||
Maguire Properties Holdings III, LLC | Delaware | 100 | % | ||
Maguire Properties – 4050 W. Metropolitan LLC | Delaware | 100 | % | ||
Brookfield DTLA Fund Properties III LLC | Delaware | 100 | % | ||
Brookfield DTLA 725 South Figueroa REIT LLC | Delaware | 100 | % | ||
EYP Realty Holdings, LLC | Delaware | 100 | % | ||
EYP Realty, LLC | Delaware | 100 | % |
Subsidiaries | Jurisdiction In Which Organized | Percentage of Voting Securities Owned Directly or Indirectly by Brookfield DTLA Fund Office Trust Investor Inc. | |||
Brookfield DTLA Figat7th REIT LLC | Delaware | 100 | % | ||
BOP FIGat7th LLC | Delaware | 100 | % | ||
BOP Figat7th Parking LLC | Delaware | 100 | % | ||
Brookfield DTLA 333 South Hope REIT LLC | Delaware | 100 | % | ||
333 South Hope Mezz LLC | Delaware | 100 | % | ||
333 South Hope Co. LLC | Delaware | 100 | % | ||
333 South Hope Plant LLC | Delaware | 100 | % | ||
Brookfield DTLA TRS Inc. | Delaware | 100 | % |
__________ | |
Note: | All of the subsidiaries listed above are included in the Company’s consolidated financial statements. Inactive subsidiaries have not been included in the above list. |
Date: April 1, 2019 | By: | /s/ G. MARK BROWN |
G. Mark Brown | ||
Chairman of the Board | ||
(Principal executive officer) |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
Date: April 1, 2019 | By: | /s/ BRYAN D. SMITH |
Bryan D. Smith | ||
Chief Financial Officer | ||
(Principal financial officer) |
(i) | The Company’s Annual Report on Form 10-K for the period ended December 31, 2018 (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: April 1, 2019 | By: | /s/ G. MARK BROWN |
G. Mark Brown | ||
Chairman of the Board | ||
(Principal executive officer) |
By: | /s/ BRYAN D. SMITH | |
Bryan D. Smith | ||
Chief Financial Officer | ||
(Principal financial officer) |
Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Mar. 29, 2019 |
Jun. 30, 2018 |
|
Document Information [Line Items] | |||
Entity Registrant Name | Brookfield DTLA Fund Office Trust Investor Inc. | ||
Entity Central Index Key | 0001575311 | ||
Entity Accounting Standard | US GAAP | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Non-accelerated Filer | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Common Stock, Shares Outstanding | 0 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Shell Company | false | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
Entity Public Float | $ 0 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Common stock, par value (in USD per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
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 feature | 7.625% Series A Cumulative Redeemable Preferred Stock | 7.625% Series A Cumulative Redeemable Preferred Stock |
Preferred stock, dividend rate, percentage | 7.625% | 7.625% |
Preferred stock, par value (in USD per share) | $ 0.01 | $ 0.01 |
Preferred stock, liquidation preference (in USD per share) | $ 25.00 | $ 25.00 |
Preferred stock, shares issued (in shares) | 9,730,370 | 9,730,370 |
Preferred stock, shares outstanding (in shares) | 9,730,370 | 9,730,370 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Statement of Comprehensive Income [Abstract] | |||
Net loss | $ (44,657) | $ (37,637) | $ (38,167) |
Derivative transactions: | |||
Unrealized derivative holding gains | 1,548 | 2,799 | 2,042 |
Reclassification adjustment for realized gains included in net loss | (1,198) | 0 | 0 |
Total other comprehensive income | 350 | 2,799 | 2,042 |
Comprehensive loss | (44,307) | (34,838) | (36,125) |
Less: comprehensive income (loss) attributable to noncontrolling interests | 65,276 | (13,107) | (18,261) |
Comprehensive loss available to common interest holders of Brookfield DTLA | $ (109,583) | $ (21,731) | $ (17,864) |
Organization and Description of Business |
12 Months Ended |
---|---|
Dec. 31, 2018 | |
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, a Delaware limited liability company (“DTLA Holdings”, and together with its affiliates excluding the Company and its subsidiaries, the “Manager”). DTLA Holdings is an indirect partially-owned subsidiary of Brookfield Property Partners L.P., a limited partnership under the Laws of Bermuda (“BPY”), which in turn is the flagship listed real estate company of Brookfield Asset Management Inc., a corporation under the Laws of Canada (“BAM”). 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”) and other investments. 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 and Summary of Significant Accounting Policies |
12 Months Ended |
---|---|
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Summary of Significant Accounting Policies | Basis of Presentation and Summary of Significant Accounting Policies As used in these 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 consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated balance sheets as of December 31, 2018 and 2017 include the accounts of Brookfield DTLA and subsidiaries in which it has a controlling financial interest. All intercompany transactions have been eliminated in consolidation as of and for the years ended December 31, 2018, 2017 and 2016. In determining whether Brookfield DTLA has a controlling financial interest in an entity and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members as well as whether the entity is a variable interest entity (“VIE”) and Brookfield DTLA is the primary beneficiary. A VIE is broadly defined as an entity where either (i) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. A variable interest holder is considered to be the primary beneficiary of a VIE if it has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. Brookfield DTLA qualitatively assesses whether it is (or is not) the primary beneficiary of a VIE. Consideration of various factors includes, but is not limited to, Brookfield DTLA’s ability to direct the activities that most significantly impact the VIE’s economic performance, its form of ownership interest, its representation on the VIE’s governing body, the size and seniority of its investment, its ability and the rights of other investors to participate in policy making decisions and its ability to replace the manager of and/or liquidate the entity. The Company earns a return through an indirect investment in Brookfield DTLA Fund Properties II LLC (“New OP”). DTLA Holdings, the parent of Brookfield DTLA, owns all of the common interest in New OP. Brookfield DTLA has an indirect preferred stock interest in New OP and its wholly owned subsidiary is the managing member of New OP. The Company determined that New OP is a VIE and as a result of having the power to direct the significant activities of New OP and exposure to the economic performance of New OP, Brookfield DTLA meets the two conditions for being the primary beneficiary. Brookfield DTLA is required to continually evaluate its VIE relationships and consolidation conclusion. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the 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 the fair value of debt. Actual results could ultimately differ from such estimates. Reclassifications During the year ended December 31, 2018, the Company reclassified asset management fees earned by the Manager from rental property operating and maintenance expense to other expense in the consolidated statement of operations. Management does not include asset management fees as an input when evaluating the operating performance of Brookfield DTLA’s properties and created a new category within other expense during 2018 to capture such fees. For the years ended December 31, 2017 and 2016, the Company reported rental property operating and maintenance expense totaling $100.3 million and $99.1 million and other expense totaling $5.2 million and $4.9 million in the consolidated statements of operations, respectively. After the reclassification, rental property operating and maintenance expense now totals $94.0 million and $92.8 million and other expense now totals $11.5 million and $11.2 million in the consolidated statements of operations for the years ended December 31, 2017 and 2016, respectively. These reclassifications had no effect on the Company’s financial position, results of operations or cash flows in any year. During the year ended December 31, 2018, the Company also reclassified lease termination fees from interest and other income to rental income in the consolidated statement of operations in anticipation of adopting Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). For the years ended December 31, 2017 and 2016, the Company reported interest and other income totaling $10.3 million and $13.7 million and rental income totaling $162.4 million and $164.8 million in the consolidated statements of operations, respectively. After the reclassification, interest and other income now totals $7.0 million and $9.3 million and rental income now totals $165.7 million and $169.2 million in the consolidated statements of operations for the years ended December 31, 2017 and 2016, respectively. These reclassifications had no effect on the Company’s financial position, results of operations or cash flows in any year. Accounting Pronouncements Adopted in 2018 Effective January 1, 2018, Brookfield DTLA adopted, on a modified retrospective basis, the guidance in Financial Accounting Standards Board (“FASB”) ASU 2014-09, Revenue from Contracts with Customers Accounting Standards Codification (“ASC”) Topic 606. ASU 2014-09, as amended by subsequent ASUs on the topic, established a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and superseded 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 requires certain additional disclosures. The adoption of this pronouncement did not have an impact on Brookfield DTLA’s consolidated financial statements. Effective January 1, 2018, Brookfield DTLA adopted, on a retrospective basis, the guidance in ASU 2016-18, Restricted Cash to Topic 230, Statement of Cash Flows. ASU 2016-18 requires entities to include restricted cash with cash and cash equivalents when reconciling the beginning and end of period total amounts shown in the statement of cash flows. Therefore, the change in restricted cash is no longer presented as a separate line item within cash flows from investing activities in the Company’s consolidated statement of cash flows since such balances are now combined with cash and cash equivalents at both the beginning and end of the reporting period. For the year ended December 31, 2017, the Company used net cash in investing activities of $74.7 million instead of the $50.2 million previously reported, while for the year ended December 31, 2016, the net cash used in investing activities was $57.4 million instead of the $63.6 million previously reported. Effective January 1, 2018, Brookfield DTLA adopted, on a retrospective basis, the guidance in ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments to 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 of how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The adoption of this guidance did not have an impact on Brookfield DTLA’s consolidated financial statements. Accounting Pronouncements Effective January 1, 2019 Leases In February 2016, the FASB issued an update (“ASU 2016-02”), Leases (Topic 842). The primary difference between Topic 842 and current GAAP is the recognition of lease assets and liabilities on the balance sheet by lessees for leases classified as operating leases under current GAAP. The accounting applied by lessors is largely unchanged from current GAAP, for example, the vast majority of operating leases will remain classified as operating leases, and lessors will continue to recognize lease income for those leases on a straight-line basis over the lease term. In July 2018, the FASB issued ASU 2018-11, which includes an optional practical expedient for lessors to elect, by class of underlying asset, to not separate the lease from the non-lease components as required by Topic 842 if certain criteria are met. For leases where we are the lessor, the Company qualifies for the single component presentation and as a result, leases will be accounted for in a similar method to existing standards. Topic 842 defines initial direct costs of a lease (which the Company has historically capitalized) as incremental costs that would not have been incurred had the lease not been executed. Costs to negotiate or arrange a lease regardless of its outcome, such as fixed employee compensation, tax or legal advice to negotiate lease terms, and lessor costs related to advertising or soliciting potential tenants, will be expensed as incurred under the new guidance. During the year ended December 31, 2018, the Company capitalized $137 thousand of leasing costs that would not qualify as initial direct costs and would have been expensed under Topic 842. ASU 2016-02 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2018. We currently expect to adopt this standard effective January 1, 2019 using the practical expedients provided in the standard and the changes approved by the FASB. Other In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, to 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 interim and annual reporting periods in fiscal years beginning after December 15, 2018. We do not expect the adoption of this guidance to have material impact on Brookfield DTLA’s consolidated financial statements. Accounting Pronouncements Effective January 1, 2020 In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), and made changes to its conceptual framework, Conceptual Framework for Financial Reporting-Chapter 8: Notes to Financial Statements, that are intended to improve the effectiveness of disclosures in notes to financial statements. ASU 2018-13 removes, modifies and adds certain disclosure requirements related to fair value measurements required by Topic 820. The guidance is effective for interim and annual periods in fiscal years beginning after December 15, 2019. Early adoption is permitted for any eliminated or modified disclosures. We are currently evaluating the impact of the adoption of this guidance on Brookfield DTLA’s consolidated financial statements. In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810), Targeted Improvements to Related Party Guidance for Variable Interest Entities, which amends two aspects of the related-party guidance in Topic 810. Specifically, ASU 2018-17 (1) adds an elective private company scope exception to the variable interest entity guidance for entities under common control and (2) removes a sentence in ASC 810-10-55-37D regarding the evaluation of fees paid to decision makers to conform with the amendments in ASU 2016-17, Consolidation (Topic 810), Interests Held through Related Parties That Are under Common Control (issued in October 2016). ASU 2018-17 is effective for interim and annual periods in fiscal years beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact of the adoption of this guidance on Brookfield DTLA’s consolidated financial statements. Significant Accounting Policies Business Combinations— Effective January 1, 2018, Brookfield DTLA adopted, on a prospective basis, the guidance in ASU 2017-01, Clarifying the Definition of a Business to ASC Topic 805, Business Combinations. Prior to the adoption of this guidance, the Company applied purchase accounting to the assets and liabilities related to real estate investments acquired from third parties. Prior to adopting this guidance, Brookfield DTLA allocated the purchase price of real estate acquired to tangible assets, consisting primarily of land, building and tenant improvements, and identifiable intangible assets and liabilities, consisting of the value of above- and below-market leases, in-place leases, and tenant relationships, based in each case on their fair value in accordance with GAAP in effect at the time of the acquisitions. The principal valuation technique employed by Brookfield DTLA in determining the fair value of identified assets acquired and liabilities assumed is the income approach, which is then compared to the cost approach. Tangible values for investments in real estate are calculated based on replacement costs for like type quality assets. Above- and below-market lease values are determined by comparing in-place rents with current market rents. In‑place lease amounts are determined by calculating the potential lost revenue during the replacement of the current leases in place. Leasing commissions and legal/marketing fees are determined based upon market allowances pro-rated over the remaining lease terms. Mortgage loans assumed in an acquisition are analyzed using current market terms for similar debt. The value of the acquired above-market and below-market leases are amortized and recorded as either a decrease (in the case of above-market leases) or an increase (in the case of below-market leases) to rental income in the consolidated statement of operations over the remaining term of the associated lease. The value of tenant relationships is amortized over the expected term of the relationship, which includes an estimated probability of lease renewal. The value of in-place leases is amortized as an expense over the remaining life of the leases. Amortization of tenant relationships and in‑place leases is included in depreciation and amortization in the consolidated statement of operations. Investments in Real Estate— Land is carried at cost. Buildings are recorded at historical cost and are depreciated on a straight‑line basis over the estimated useful life of the building, which is 60 years with an estimated salvage value of 5%. Building improvements are recorded at historical cost and are depreciated on a straight-line basis over their estimated useful lives, which range from 7 years to 25 years. Land improvements are combined with building improvements for financial reporting purposes and are carried at cost. Tenant improvements that are determined to be assets of Brookfield DTLA are recorded at cost; amortization is included in depreciation and amortization expense in the consolidated statement of operations on a straight‑line basis over the shorter of the useful life or the applicable lease term. Depreciation expense related to investments in real estate during the years ended December 31, 2018, 2017 and 2016 was $75.7 million, $73.6 million and $73.0 million, respectively. Real estate is reviewed for impairment if events or changes in circumstances indicate that the carrying amount of the real estate may not be recoverable. In such an event, a comparison is made of the current and projected operating cash flows of the property into the foreseeable future on an undiscounted basis to the carrying amount of the real estate. If the undiscounted cash flows expected to be generated by an asset are less than its carrying amount, an impairment provision would be recorded to write down the carrying amount of such asset to its fair value. Brookfield DTLA assesses fair value based on estimated cash flow projections utilizing appropriate discount and capitalization rates and available market information. Projections of future cash flow take into account the specific business plan for the property and management’s best estimate of the most probable set of economic conditions expected to prevail in the market. Management believes no impairment of Brookfield DTLA’s real estate assets existed at December 31, 2018 and 2017. Cash and Cash Equivalents— Cash and cash equivalents include all cash and short-term investments with an original maturity of three months or less. Restricted Cash— Restricted cash consists primarily of deposits for tenant improvements and leasing commissions, real estate taxes, debt service reserves and other items as required by certain of our mortgage loan agreements. Rents, Deferred Rents and Other Receivables, Net— Differences between rental income and the contractual amounts due are recorded as deferred rents receivable in the consolidated balance sheet. Brookfield DTLA evaluates its deferred rents receivable to consider if an allowance is necessary. Rents, deferred rents and other receivables, net also includes amounts paid to a tenant for improvements owned or costs incurred by the tenant. Such amounts are treated as tenant inducements and are presented in the consolidated balance sheet net of accumulated amortization totaling $16.7 million and $12.5 million as of December 31, 2018 and 2017, respectively. Amortization of tenant inducements is recorded on a straight-line basis over the term of the related lease as a reduction of rental income in the consolidated statement of operations. Brookfield DTLA periodically evaluates the collectability of amounts due from tenants and maintains an allowance for doubtful accounts in the consolidated balance sheet for estimated losses resulting from the inability of tenants to make required payments under the lease agreements. Management exercises judgment in establishing these allowances and considers payment history and current credit status in developing these estimates. The allowance for doubtful accounts for Brookfield DTLA totaled $314 thousand and $206 thousand as of December 31, 2018 and 2017, respectively. During the years ended December 31, 2018, 2017 and 2016, Brookfield DTLA recorded a provision for doubtful accounts of $190 thousand, and recoveries of accounts of $7 thousand and $271 thousand, respectively. Due to/from Affiliates, Net— Amounts due to/from affiliates, net consist of related party receivables and payables from affiliates of BAM primarily for fees for property and asset management and other services. These amounts are due on demand and are non‑interest bearing. See Note 12 “Related Party Transactions.” Deferred Charges, Net— Leasing costs are deferred and are presented as deferred charges in the consolidated balance sheet net of accumulated amortization totaling $50.3 million and $39.8 million as of December 31, 2018 and 2017, respectively. Deferred leasing costs are amortized on a straight‑line basis over the terms of the related leases as part of depreciation and amortization expense in the consolidated statement of operations. Prepaid and Other Assets, Net— Prepaid and other assets, net include prepaid insurance, real estate taxes and interest, fair value of derivative financial instruments, other operating costs and non-operating furniture and equipment, net of accumulated depreciation totaling $4.6 million and $4.3 million, as of December 31, 2018 and 2017, respectively. Mortgage Loans, Net— Mortgage loans are presented in the consolidated balance sheet net of unamortized debt issuance costs totaling $11.0 million and $10.1 million as of December 31, 2018 and 2017, respectively. Debt issuance costs and discounts totaling $9.6 million, $6.4 million and $4.3 million were amortized during the years ended December 31, 2018, 2017 and 2016, respectively, over the terms of the related mortgage loans on a basis that approximates the effective interest method and are included as part of interest expense in the consolidated statement of operations. Revenue Recognition— Rental income from leases providing for periodic increases in base rent is recognized on a straight-line basis over the noncancelable term of the respective leases. Certain leases with retail tenants also provide for the payment by the lessee of additional rent based on a percentage of the tenant’s sales. Percentage rents are recognized only after the tenant sales thresholds have been achieved. Recoveries of operating expenses and real estate taxes are recorded as tenant reimbursements in the consolidated statement of operations in the period during which the expenses are incurred. Derivative Financial Instruments— Brookfield DTLA uses interest rate swap and cap derivative financial instruments to manage risk from fluctuations in interest rates. Interest rate swaps involve the receipt of variable-rate amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying principal amount. Interest rate caps involve the receipt of variable-rate amounts beyond a specified strike price over the life of the contracts without exchange of the underlying principal amount. The Company believes these contracts are with counterparties who are creditworthy financial institutions. At the inception of the contracts, Brookfield DTLA designates its interest rate swap contracts as cash flow hedges and documents the relationship of the hedge to the underlying transaction. Hedge effectiveness is assessed at inception and throughout the life of the hedge to ensure the hedge qualifies for hedge accounting. Changes in fair value associated with hedge ineffectiveness, if any, are recorded in the consolidated statement of operations. Changes in fair value of cash flow hedge derivative financial instruments are deferred and recorded as part of accumulated other comprehensive loss in the consolidated statement of stockholders’ deficit until the underlying transaction affects earnings. In the event that an anticipated transaction is no longer likely to occur, the Company recognizes the change in fair value of the derivative financial instrument in its consolidated statement of operations in the period the determination is made. Additionally, Brookfield DTLA uses interest rate cap contracts to limit impact of changes in the LIBOR rate on certain of its mortgage and mezzanine loans. Due to the short-term nature of the contracts involved, the Company does not use hedge accounting for these contracts, and as such, changes in fair value are recorded in the period of change in the consolidated statement of operations. Segment Reporting Brookfield DTLA currently operates in a single reportable segment referred to as its office segment, which includes the operation and management of commercial office properties. Each of Brookfield DTLA’s operating properties is considered a separate operating segment, as each property earns revenues and incurs expenses, individual operating results are reviewed and discrete financial information is available. Management does not distinguish or group Brookfield DTLA’s consolidated operations based on geography, size or type. Brookfield DTLA’s operating properties have similar economic characteristics and provide similar products and services to tenants. As a result, Brookfield DTLA’s operating properties are aggregated into a single reportable segment. Accounting for Conditional Asset Retirement Obligations Brookfield DTLA has evaluated whether it has any conditional asset retirement obligations, which are a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional upon future events that may or may not be within an entity’s control. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. Accordingly, Brookfield DTLA recognized a liability for a conditional asset retirement obligation in the consolidated balance sheet as of December 31, 2018 and 2017. |
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 December 31, 2018, the estimate of the amortization/accretion of intangible assets and liabilities during the next five years and thereafter is as follows (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 dates and percentage amounts):
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The weighted average interest rate of our debt was 4.34% and 4.29% as of December 31, 2018 and 2017, respectively. Debt Refinanced Figueroa at 7th— On February 6, 2018, Brookfield DTLA refinanced the mortgage loan secured by the Figueroa at 7th retail property and received net proceeds totaling $58.0 million, of which $35.0 million was used to repay the mortgage loan that previously encumbered the property, with the remainder used for general corporate purposes. The new $58.5 million loan bears interest at a fixed rate equal to 3.88%, requires the payment of interest-only until maturity, and matures on March 1, 2023. The loan is locked out from prepayment until March 1, 2020, after which it can be prepaid, in whole or in part, with prepayment fees (as defined in the underlying loan agreement) until November 1, 2022, after which the loan may be repaid without penalty. EY Plaza— On March 29, 2018, Brookfield DTLA refinanced the mortgage loan secured by the EY Plaza office property and received net proceeds totaling $263.4 million, of which $175.8 million was used to repay the mortgage loan that previously encumbered the property, with the remainder used for general corporate purposes. The new $265.0 million loan is comprised of a $230.0 million mortgage loan and a $35.0 million mezzanine loan, each of which bears interest at variable rates equal to LIBOR plus 1.65% and 4.55%, respectively, requires the payment of interest-only until maturity, and matures on November 27, 2020. The mortgage loan can be prepaid, in whole or in part, with prepayment fees (as defined in the underlying loan agreement) and payment of early termination fees to the counterparties to the interest rate swap contracts, as long as the mezzanine loan has been repaid in full prior to any prepayment of the mortgage loan. As required by the mortgage and mezzanine loan agreements, on March 29, 2018 the Company entered into derivative financial instruments to manage the risk of fluctuations in interest rates on its consolidated statement of operations. See Note 11 “Financial Instruments.” Wells Fargo Center–North Tower— On September 21, 2018, Brookfield DTLA refinanced the mortgage and mezzanine loans secured by the Wells Fargo Center–North Tower office property and received net proceeds totaling $496.0 million, of which $470.0 million was used to repay the loans that previously encumbered the property, with the remainder used for general corporate purposes. The new $500.0 million loan is comprised of a $400.0 million mortgage loan, a $65.0 million mezzanine loan, and a $35.0 million mezzanine loan, each of which bears interest at variable rates equal to LIBOR plus 1.65%, 4.00%, and 5.00%, respectively, requires the payment of interest-only until maturity, and matures on October 9, 2020. The mortgage loan can be prepaid, in whole or in part, with prepayment fees (as defined in the underlying loan agreement), as long as the mezzanine loans are repaid on a pro rata basis with the mortgage loan, until October 9, 2019, after which the loan may be repaid without penalty. Brookfield DTLA has three options to extend the maturity dates of the mortgage and mezzanine loans, each for a period of one year, as long as the maturity dates of both of the mezzanine loans are extended when the maturity date of the mortgage loan is extended. As required by the mortgage and mezzanine loan agreements, on September 21, 2018 the Company entered into derivative financial instruments to manage the risk of fluctuations in interest rates on its consolidated statement of operations. See Note 11 “Financial Instruments.” Wells Fargo Center–South Tower— On November 5, 2018, Brookfield DTLA refinanced the mortgage loan secured by the Wells Fargo Center–South Tower office property and received net proceeds totaling $250.0 million that were used to repay the loan that previously encumbered the property. The Company incurred costs totaling $3.5 million in connection with this transaction, of which $3.0 million were paid using proceeds from the refinancing and $0.5 million using cash on hand. The new $290.0 million mortgage loan is comprised of an initial advance amount of $253.0 million and a maximum future advance amount of $37.0 million that can be drawn by the Company to fund approved leasing costs (as defined in the underlying loan agreement), including tenant improvements and inducements, leasing commissions, and common area improvements. The loan bears interest at a variable rate of LIBOR plus 1.80%, matures on November 4, 2021, and requires the payment of interest-only until maturity. The loan can be prepaid, in whole or in part, with prepayment fees (as defined in the underlying loan agreement) until November 5, 2019, after which the loan can be repaid without penalty. Brookfield DTLA has two options to extend the maturity date of the loan, each for a period of one year. During the year ended December 31, 2018, the Company received $5.2 million from the lender for approved leasing costs under the future advance portion of the mortgage loan. As of December 31, 2018, an advance amount of $31.8 million remains available under this loan that can be drawn to fund future approved leasing costs. As required by the mortgage loan agreement, on November 5, 2018 the Company entered into a derivative financial instrument to manage the risk of fluctuations in interest rates on its consolidated statement of operations. See Note 11 “Financial Instruments.” Debt Extension 777 Tower— On October 31, 2018, Brookfield DTLA extended the maturity date of the mortgage loan secured by the 777 Tower office property for a period of one year to November 1, 2019. The Company incurred costs totaling approximately $0.8 million in connection with this transaction that were paid using cash on hand. As required by the extension agreement, on October 15, 2018 the Company entered into a derivative financial instrument to manage the risk of fluctuations in interest rates on its consolidated statement of operations. See Note 11 “Financial Instruments.” Debt Maturities As Brookfield DTLA’s debt matures, principal payment obligations present significant future cash requirements. As of December 31, 2018, our debt to be repaid during the next five years and thereafter is as follows (in thousands):
As of December 31, 2018, $220.0 million of our debt may be prepaid without penalty, $400.0 million may be defeased (as defined in the underlying loan agreement), $1,473.2 million may be prepaid with prepayment penalties, and $58.5 million is locked out from prepayment until March 1, 2020. 777 Tower— Brookfield DTLA currently intends to refinance the mortgage loan secured by the 777 Tower office property on or about November 1, 2019, its scheduled maturity date. As of December 31, 2018, we do not meet the criteria specified in the loan agreement to extend the maturity date of this loan. As of December 31, 2018, the Company does not expect to make a principal paydown when the loan is refinanced (based on current market conditions). There can be no assurance that this refinancing can be accomplished or what terms will be available in the market for this type of financing at the time of any refinancing. Non-Recourse Carve Out Guarantees All of Brookfield DTLA’s $2.2 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 DTLA Holdings or one of its subsidiaries, if certain triggering events (as defined in the loan agreements) occur. Although these events differ from loan to loan, some of the common events include:
In addition, other items that are customarily recourse to a non-recourse carve out guarantor include, but are not limited to, the payment of real property taxes, the breach of representations related to environmental issues or hazardous substances, physical waste of the property, liens which are senior to the mortgage loan and outstanding security deposits. The maximum amount DTLA Holdings would be required to pay under a “non‑recourse carve out” guarantee is the principal amount of the loan (or a total of $2.2 billion as of December 31, 2018 for all loans). This maximum amount does not include liabilities related to environmental issues or hazardous substances. Losses resulting from the breach of our loan agreement representations related to environmental issues or hazardous substances are generally recourse to DTLA Holdings pursuant to the “non-recourse carve out” guarantees and any such losses would be in addition to the total principal amounts of the loans. The potential losses are not quantifiable and can be material in certain circumstances, depending on the severity of the environmental or hazardous substance issues. Since each of our non-recourse loans is secured by the office building owned by the special purpose property-owning subsidiary of DTLA Holdings, the amount due to the lender from DTLA Holdings in the event a “non-recourse carve out” guarantee is triggered could subsequently be partially or fully mitigated by the net proceeds received from any disposition of the office building; however, such proceeds may not be sufficient to cover the maximum potential amount due, depending on the particular asset. Debt Reporting Compliance 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 December 31, 2018 and were in compliance with the amounts required by the loan agreements. |
Mezzanine Equity |
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Temporary Equity Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mezzanine Equity | Mezzanine Equity Mezzanine equity in the consolidated balance sheet 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 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 December 31, 2018 and 2017. Adjustments to increase the carrying amount to redemption value are recorded in the consolidated statement of operations as a redemption measurement adjustment. Distributions During the years ended December 31, 2018, 2017 and 2016, the Company made distributions using cash on hand totaling $30.1 million, $0.5 million and $0.6 million, respectively, to DTLA Holdings related to the Series B preferred and senior participating preferred interests during 2018 and the senior participating preferred interest during 2017 and 2016, respectively. Series A Preferred Stock Brookfield DTLA is authorized to issue up to 10,000,000 shares of Series A preferred stock, $0.01 par value per share, with a liquidation preference of $25.00 per share. As of December 31, 2018 and 2017, 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 DTLA Holdings. No dividends were declared on the Series A preferred stock during the years ended December 31, 2018, 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 December 31, 2018, the cumulative amount of unpaid dividends totals $166.7 million and has been reflected in the carrying amount of the Series A preferred stock. During the year ended December 31, 2016, Brookfield DTLA paid a cash dividend of $2.25 per share to holders of record of its Series A preferred stock at the close of business on December 15, 2015 using cash on hand. This dividend payment reduced the accumulated and unpaid dividends owed on the Series A preferred stock by $21.9 million. The dividend was declared on December 4, 2015 by the board of directors in connection with the settlement on a class-wide basis of the litigation brought in Maryland State Court and styled as In re MPG Office Trust Inc. Preferred Shareholder Litigation, Case No. 24‑C-13-004097. 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 December 31, 2018, the Series A preferred stock is reported at its redemption value of $409.9 million calculated using the redemption price of $25.00 per share plus all accumulated and unpaid dividends on such Series A preferred stock through December 31, 2018. Series A-1 Preferred Interest The Series A-1 preferred interest is held by DTLA Holdings or wholly owned subsidiaries of DTLA Holdings. The Series A-1 preferred interest has mirror rights to the Series A preferred interests issued by New OP, which are held by a wholly owned subsidiary of Brookfield DTLA. The Series A-1 preferred interest shares pro rata with the Series A preferred interest in distributions from New OP at the rate of 48.13% to the Series A-1 preferred interest and 51.87% to the Series A preferred interest until their accumulated and unpaid dividends and 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 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 December 31, 2018, the Series A-1 preferred interest is reported at its redemption value of $400.8 million calculated using its liquidation value of $225.7 million plus $175.1 million of accumulated and unpaid dividends on such Series A-1 preferred interest through December 31, 2018. Senior Participating Preferred Interest Brookfield DTLA Fund Properties III LLC (“DTLA OP”) issued a senior participating preferred interest to DTLA Holdings in connection with the formation of Brookfield DTLA and the MPG acquisition. The senior participating preferred interest represents a 4.0% participating interest in the residual value of DTLA OP. During the years ended December 31, 2018, 2017 and 2016, Brookfield DTLA made distributions totaling $3.6 million, $0.5 million and $0.6 million, respectively, to DTLA Holdings as returns of investment related to the senior participating preferred interest held using cash on hand. Additionally, the Company received a cash contribution of $0.5 million during the year ended December 31, 2017 from DTLA Holdings, which was used for general corporate purposes. As of December 31, 2018, the senior participating preferred interest is reported at its redemption value of $23.4 million using the value of the participating interest. Series B Preferred Interest At the time of the merger with MPG, 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 market rate of return determined at the time of contribution (“preferred return”). As of December 31, 2018, $85.2 million is available to the Company under this commitment for future funding. The Series B preferred interest in New OP held by 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. During the year ended December 31, 2017, the Company received cash contributions totaling $111.5 million from DTLA Holdings, which are entitled to a 9.0% preferred return as part of the Series B preferred interest. The Company used the funds received to pay for costs associated with the refinancing of the Wells Fargo Center–North Tower mortgage loan, including a principal paydown and transaction costs, and for general corporate purposes. During the year ended December 31, 2016, the Company received cash contributions totaling $63.3 million from DTLA Holdings under this commitment, which are entitled to a 9.0% preferred return as part of the Series B preferred interest. The Company used the funds received to pay for costs associated with the refinancing of the Wells Fargo Center–South Tower and Gas Company Tower mortgage loans, including principal paydowns and funding of loan reserves, and for general corporate purposes. During the year ended December 31, 2018, Brookfield DTLA made distributions totaling $26.6 million to DTLA Holdings as preferred returns on the Series B preferred interest using cash on hand. As of December 31, 2018, the Series B preferred interest is reported at its redemption value of $181.7 million calculated using its liquidation value of $174.8 million plus $6.9 million of unpaid preferred returns on such Series B preferred interest through December 31, 2018. Change in Mezzanine Equity A summary of the change in mezzanine equity is as follows (in thousands, except share amounts):
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Stockholders' Deficit |
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Dec. 31, 2018 | |
Equity [Abstract] | |
Stockholders' Deficit | Stockholders’ Deficit Brookfield DTLA is authorized to issue up to 1,000,000 shares of common stock, $0.01 par value per share. As of December 31, 2018 and 2017, 1,000 shares of common stock were issued and outstanding. No dividends were declared on the common stock during the years ended December 31, 2018, 2017 and 2016. Brookfield DTLA has not paid any cash dividends on its common stock in the past. Any future dividends declared would be at the discretion of Brookfield DTLA’s board of directors and would depend on its financial condition, results of operations, contractual obligations and the terms of its financing agreements at the time a dividend is considered, and other relevant factors. During the years ended December 31, 2018 and 2016, Brookfield DTLA received capital contributions totaling $1.6 million and $2.5 million, respectively, from DTLA Holdings, which were used for general corporate purposes. |
Noncontrolling Interests |
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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 DTLA Holdings. These noncontrolling interests are presented as mezzanine equity in the consolidated balance sheet. See Note 5 “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 consolidated balance sheet as noncontrolling interest. |
Accumulated Other Comprehensive Loss |
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Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss A summary of the change in accumulated other comprehensive loss related to Brookfield DTLA’s derivative financial instruments designated as cash flow hedges is as follows (in thousands):
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Income Taxes |
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Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 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. Our TRS did not have significant tax provisions or deferred income tax items for the years ended December 31, 2018, 2017 and 2016. 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 or remain qualified as a REIT. If Brookfield DTLA fails to qualify as a REIT in any taxable year, we will be subject to federal and state income tax on our taxable income at regular corporate tax rates, and we may be ineligible to qualify as a REIT for four subsequent tax years. Brookfield DTLA may be subject to certain state or local income taxes, or franchise taxes on its REIT activities. Brookfield DTLA’s taxable income or loss is different than its financial statement income or loss. As of December 31, 2018 and 2017, Brookfield DTLA had net operating loss carryforwards totaling $288 million and $240 million, respectively, which expire between 2033 and 2038. On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act amended the Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. Effective January 1, 2018, the Act reduced the corporate tax rate from a maximum rate of 35% to a flat rate of 21% for businesses. Since Brookfield DTLA has elected to qualify as a REIT with the intent of distributing 100% of its taxable income, there was no material impact to the Company’s consolidated financial statements. Uncertain Tax Positions 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 has no unrecognized tax benefits as of December 31, 2018 and 2017, and does not expect its unrecognized tax benefits balance to change during the next 12 months. As of December 31, 2018, Brookfield DTLA’s 2013 tax period and 2014, 2015, 2016 and 2017 tax years remain open due to the statute of limitations and may be subject to examination by federal, state and local authorities. |
Fair Value Measurements |
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Fair Value Measurements | Fair Value Measurements The valuation of Brookfield DTLA’s derivative financial instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of the derivatives. These analyses reflect the contractual terms of the derivatives, including the period to maturity, and use 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 assets (liabilities) 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):
Interest rate swap assets and caps are included in prepaid and other assets, net and interest rate swap liabilities are included in accounts payable and other liabilities in the consolidated balance sheet. A summary of the effect of derivative financial instruments reported in the consolidated financial statements is as follows (in thousands):
The gain reclassified from accumulated other comprehensive loss during the year ended December 31, 2018 is included as part of interest and other revenue in the consolidated statement of operations. Changes in the fair value of interest rate caps during the years ended December 31, 2018, 2017 and 2016 had an immaterial impact on the Company’s consolidated statements of operations. Interest Rate Swaps— As of December 31, 2018, Brookfield DTLA held the following interest rate swap contracts pursuant to the terms of the EY Plaza mortgage loan agreement (in thousands, except percentages and dates):
As required by the EY Plaza mortgage loan agreement, on March 29, 2018 the Company entered into an interest rate swap contract with a notional amount of $54.2 million and a swap rate of 2.47%, which effectively fixes the LIBOR portion of the interest rate at 4.12%. The swap requires net settlement each month. Interest Rate Caps— Brookfield DTLA holds interest rate cap contracts pursuant to the terms of certain of its mortgage and mezzanine loan agreements with the following notional amounts (in thousands):
As required by the EY Plaza mezzanine loan agreement, on March 29, 2018 the Company entered into an interest rate cap contract with a notional amount of $35.0 million that limits the LIBOR portion of the interest rate to 3.50%. The cap contract expires on October 1, 2019. As required by the Wells Fargo Center–North Tower mortgage and mezzanine loan agreements, on September 21, 2018 the Company entered interest rate cap contracts with notional amounts totaling $500.0 million that limit the LIBOR portion of the interest rates to 4.25%. The cap contracts expire on October 15, 2020. As required by the 777 Tower extension agreement, on October 15, 2018 the Company entered into an interest rate cap contract with a notional amount of $220.0 million that limits the LIBOR portion of the interest rate to 5.75%. The cap contract expires on November 1, 2019. As required by the Wells Fargo Center–South Tower mortgage loan agreement, on November 5, 2018 the Company entered into an interest rate cap contract with a notional amount of $290.0 million that limits the LIBOR portion of the interest rate to 4.50%. The cap contract expires on November 4, 2020. Other Financial Instruments Brookfield DTLA’s other financial instruments that are exposed to concentrations of credit risk consist primarily of cash and accounts receivable. Management routinely assesses the financial strength of its tenants and, as a consequence, believes that its accounts receivable credit risk exposure is limited. Brookfield DTLA places its temporary cash investments with federally insured institutions. Cash balances with any one institution may at times be in excess of the federally insured limits. The estimated fair value and carrying amount of Brookfield DTLA’s mortgage and mezzanine loans are as follows (in thousands):
We calculated the estimated fair value of our mortgage loans using methods and techniques appropriate for each loan after an observation of market participants and current lending markets. The primary techniques used are applications of the Income Approach which converts future amounts (for example, cash flows) to a single current (that is, discounted) amount using a risk adjusted discount rate. The estimated fair value of mortgage loans is classified as Level 3. |
Related Party Transactions |
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 entered into in connection with these arrangements 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 DTLA Holdings. Leasing management fees paid to the Manager range from 1.00% to 4.00% of expected rents, depending on the terms of the lease and whether a third-party broker was paid a commission for the transaction. Construction management fees are paid to the Manager based on 3.00% of hard and soft construction costs. A summary of costs incurred by the applicable subsidiaries Brookfield DTLA under these arrangements is as follows (in thousands):
Costs incurred under these arrangements are included in rental property operating and maintenance expense in the consolidated statement of operations, with the exception of asset management fee expense which is included in other expense. Insurance Agreements Properties held by certain Brookfield DTLA subsidiaries and affiliates are covered under insurance policies entered into by the Manager that provide, among other things, all risk property and business interruption coverage for BPY’s commercial portfolio with an aggregate limit of $2.5 billion per occurrence as well as an aggregate limit of $437.5 million of earthquake insurance, and $372.5 million of flood and weather catastrophe insurance. In addition, Brookfield DTLA’s properties are covered by a terrorism insurance policy that provides a maximum of $4.0 billion per occurrence for all of BPY’s U.S. properties. Brookfield DTLA is in compliance with the contractual obligations regarding terrorism insurance contained in such policies. 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 and affiliates under this arrangement, which are included in rental property operating and maintenance expense in the consolidated statement of operations, is as follows (in thousands):
Other Related Party Transactions with BAM Affiliates Brookfield DTLA leases office space to a tenant in which an affiliate of BAM is an investor. Additionally, the Company purchases chilled water for air conditioning at one of its properties from an affiliate of BAM. A summary of the impact of related party transactions with BAM affiliates on the Company’s consolidated statement of operations is as follows (in thousands):
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Rental Income |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||
Rental Income | Rental Income Brookfield DTLA’s properties are leased to tenants under net operating leases with initial expiration dates ranging from 2019 to 2035. The future minimum base rental income (on a non‑straight‑line basis) to be received under executed noncancelable tenant operating leases as of December 31, 2018 is as follows (in thousands):
Certain leases with retail tenants also provide for the payment by the lessee of additional rent based on a percentage of the tenant’s sales. The amounts shown in the table above do not include percentage rents. The Company recorded percentage rents totaling $2.0 million, $3.1 million and $2.8 million during the years ended December 31, 2018, 2017 and 2016, respectively. |
Commitments and Contingencies |
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Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Concentration of Tenant Credit Risk Brookfield DTLA generally does not require collateral or other security from its tenants, other than security deposits or letters of credit. Our credit risk is mitigated by the high quality of our existing tenant base, review of prospective tenants’ risk profiles prior to lease execution, and frequent monitoring of our tenant portfolio to identify problem tenants. However, since we have a significant concentration of rental revenue from certain tenants, the inability of those tenants to make their lease payments could have a material adverse effect on our results of operations, cash flow or financial condition. A significant portion of Brookfield DTLA’s rental income and tenant reimbursements revenue is generated by a small number of tenants. No tenant accounted for more than 10% of our consolidated rental income and tenant reimbursements revenue during the years ended December 31, 2018, 2017 and 2016. Concentration of Property Revenue Risk During the years ended December 31, 2018, 2017 and 2016, EY Plaza, BOA Plaza, Wells Fargo Center–North Tower, Wells Fargo Center–South Tower, Gas Company Tower and 777 Tower each contributed more than 10% of Brookfield DTLA’s consolidated revenue. The revenue generated by these six properties totaled 98%, 100% and 100% of Brookfield DTLA’s consolidated revenue during the years ended December 31, 2018, 2017 and 2016, respectively. Litigation 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. |
Quarterly Financial Information (Unaudited) |
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Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Information (Unaudited) | Quarterly Financial Information (Unaudited)
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Investments in Real Estate |
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SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in Real Estate | Investments in Real Estate A summary of information related to Brookfield DTLA’s investments in real estate as of December 31, 2018 is as follows (in thousands):
The following is a reconciliation of Brookfield DTLA’s investments in real estate (in thousands):
__________
The following is a reconciliation of Brookfield DTLA’s accumulated depreciation on its investments in real estate (in thousands):
__________
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Basis of Presentation and Summary of Significant Accounting Policies (Policies) |
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Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Principles of Consolidation and Basis of Presentation | Principles of Consolidation and Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated balance sheets as of December 31, 2018 and 2017 include the accounts of Brookfield DTLA and subsidiaries in which it has a controlling financial interest. All intercompany transactions have been eliminated in consolidation as of and for the years ended December 31, 2018, 2017 and 2016. |
Consolidation of Variable Interest Entities | In determining whether Brookfield DTLA has a controlling financial interest in an entity and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members as well as whether the entity is a variable interest entity (“VIE”) and Brookfield DTLA is the primary beneficiary. A VIE is broadly defined as an entity where either (i) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. A variable interest holder is considered to be the primary beneficiary of a VIE if it has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. Brookfield DTLA qualitatively assesses whether it is (or is not) the primary beneficiary of a VIE. Consideration of various factors includes, but is not limited to, Brookfield DTLA’s ability to direct the activities that most significantly impact the VIE’s economic performance, its form of ownership interest, its representation on the VIE’s governing body, the size and seniority of its investment, its ability and the rights of other investors to participate in policy making decisions and its ability to replace the manager of and/or liquidate the entity. The Company earns a return through an indirect investment in Brookfield DTLA Fund Properties II LLC (“New OP”). DTLA Holdings, the parent of Brookfield DTLA, owns all of the common interest in New OP. Brookfield DTLA has an indirect preferred stock interest in New OP and its wholly owned subsidiary is the managing member of New OP. The Company determined that New OP is a VIE and as a result of having the power to direct the significant activities of New OP and exposure to the economic performance of New OP, Brookfield DTLA meets the two conditions for being the primary beneficiary. Brookfield DTLA is required to continually evaluate its VIE relationships and consolidation conclusion. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the 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 the fair value of debt. Actual results could ultimately differ from such estimates. |
Reclassifications | Reclassifications During the year ended December 31, 2018, the Company reclassified asset management fees earned by the Manager from rental property operating and maintenance expense to other expense in the consolidated statement of operations. Management does not include asset management fees as an input when evaluating the operating performance of Brookfield DTLA’s properties and created a new category within other expense during 2018 to capture such fees. For the years ended December 31, 2017 and 2016, the Company reported rental property operating and maintenance expense totaling $100.3 million and $99.1 million and other expense totaling $5.2 million and $4.9 million in the consolidated statements of operations, respectively. After the reclassification, rental property operating and maintenance expense now totals $94.0 million and $92.8 million and other expense now totals $11.5 million and $11.2 million in the consolidated statements of operations for the years ended December 31, 2017 and 2016, respectively. These reclassifications had no effect on the Company’s financial position, results of operations or cash flows in any year. During the year ended December 31, 2018, the Company also reclassified lease termination fees from interest and other income to rental income in the consolidated statement of operations in anticipation of adopting Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). For the years ended December 31, 2017 and 2016, the Company reported interest and other income totaling $10.3 million and $13.7 million and rental income totaling $162.4 million and $164.8 million in the consolidated statements of operations, respectively. After the reclassification, interest and other income now totals $7.0 million and $9.3 million and rental income now totals $165.7 million and $169.2 million in the consolidated statements of operations for the years ended December 31, 2017 and 2016, respectively. These reclassifications had no effect on the Company’s financial position, results of operations or cash flows in any year. |
Recent Accounting Pronouncements | Accounting Pronouncements Adopted in 2018 Effective January 1, 2018, Brookfield DTLA adopted, on a modified retrospective basis, the guidance in Financial Accounting Standards Board (“FASB”) ASU 2014-09, Revenue from Contracts with Customers Accounting Standards Codification (“ASC”) Topic 606. ASU 2014-09, as amended by subsequent ASUs on the topic, established a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and superseded 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 requires certain additional disclosures. The adoption of this pronouncement did not have an impact on Brookfield DTLA’s consolidated financial statements. Effective January 1, 2018, Brookfield DTLA adopted, on a retrospective basis, the guidance in ASU 2016-18, Restricted Cash to Topic 230, Statement of Cash Flows. ASU 2016-18 requires entities to include restricted cash with cash and cash equivalents when reconciling the beginning and end of period total amounts shown in the statement of cash flows. Therefore, the change in restricted cash is no longer presented as a separate line item within cash flows from investing activities in the Company’s consolidated statement of cash flows since such balances are now combined with cash and cash equivalents at both the beginning and end of the reporting period. For the year ended December 31, 2017, the Company used net cash in investing activities of $74.7 million instead of the $50.2 million previously reported, while for the year ended December 31, 2016, the net cash used in investing activities was $57.4 million instead of the $63.6 million previously reported. Effective January 1, 2018, Brookfield DTLA adopted, on a retrospective basis, the guidance in ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments to 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 of how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The adoption of this guidance did not have an impact on Brookfield DTLA’s consolidated financial statements. Accounting Pronouncements Effective January 1, 2019 Leases In February 2016, the FASB issued an update (“ASU 2016-02”), Leases (Topic 842). The primary difference between Topic 842 and current GAAP is the recognition of lease assets and liabilities on the balance sheet by lessees for leases classified as operating leases under current GAAP. The accounting applied by lessors is largely unchanged from current GAAP, for example, the vast majority of operating leases will remain classified as operating leases, and lessors will continue to recognize lease income for those leases on a straight-line basis over the lease term. In July 2018, the FASB issued ASU 2018-11, which includes an optional practical expedient for lessors to elect, by class of underlying asset, to not separate the lease from the non-lease components as required by Topic 842 if certain criteria are met. For leases where we are the lessor, the Company qualifies for the single component presentation and as a result, leases will be accounted for in a similar method to existing standards. Topic 842 defines initial direct costs of a lease (which the Company has historically capitalized) as incremental costs that would not have been incurred had the lease not been executed. Costs to negotiate or arrange a lease regardless of its outcome, such as fixed employee compensation, tax or legal advice to negotiate lease terms, and lessor costs related to advertising or soliciting potential tenants, will be expensed as incurred under the new guidance. During the year ended December 31, 2018, the Company capitalized $137 thousand of leasing costs that would not qualify as initial direct costs and would have been expensed under Topic 842. ASU 2016-02 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2018. We currently expect to adopt this standard effective January 1, 2019 using the practical expedients provided in the standard and the changes approved by the FASB. Other In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, to 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 interim and annual reporting periods in fiscal years beginning after December 15, 2018. We do not expect the adoption of this guidance to have material impact on Brookfield DTLA’s consolidated financial statements. Accounting Pronouncements Effective January 1, 2020 In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), and made changes to its conceptual framework, Conceptual Framework for Financial Reporting-Chapter 8: Notes to Financial Statements, that are intended to improve the effectiveness of disclosures in notes to financial statements. ASU 2018-13 removes, modifies and adds certain disclosure requirements related to fair value measurements required by Topic 820. The guidance is effective for interim and annual periods in fiscal years beginning after December 15, 2019. Early adoption is permitted for any eliminated or modified disclosures. We are currently evaluating the impact of the adoption of this guidance on Brookfield DTLA’s consolidated financial statements. In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810), Targeted Improvements to Related Party Guidance for Variable Interest Entities, which amends two aspects of the related-party guidance in Topic 810. Specifically, ASU 2018-17 (1) adds an elective private company scope exception to the variable interest entity guidance for entities under common control and (2) removes a sentence in ASC 810-10-55-37D regarding the evaluation of fees paid to decision makers to conform with the amendments in ASU 2016-17, Consolidation (Topic 810), Interests Held through Related Parties That Are under Common Control (issued in October 2016). ASU 2018-17 is effective for interim and annual periods in fiscal years beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact of the adoption of this guidance on Brookfield DTLA’s consolidated financial statements. |
Business Combinations | Business Combinations— Effective January 1, 2018, Brookfield DTLA adopted, on a prospective basis, the guidance in ASU 2017-01, Clarifying the Definition of a Business to ASC Topic 805, Business Combinations. Prior to the adoption of this guidance, the Company applied purchase accounting to the assets and liabilities related to real estate investments acquired from third parties. Prior to adopting this guidance, Brookfield DTLA allocated the purchase price of real estate acquired to tangible assets, consisting primarily of land, building and tenant improvements, and identifiable intangible assets and liabilities, consisting of the value of above- and below-market leases, in-place leases, and tenant relationships, based in each case on their fair value in accordance with GAAP in effect at the time of the acquisitions. The principal valuation technique employed by Brookfield DTLA in determining the fair value of identified assets acquired and liabilities assumed is the income approach, which is then compared to the cost approach. Tangible values for investments in real estate are calculated based on replacement costs for like type quality assets. Above- and below-market lease values are determined by comparing in-place rents with current market rents. In‑place lease amounts are determined by calculating the potential lost revenue during the replacement of the current leases in place. Leasing commissions and legal/marketing fees are determined based upon market allowances pro-rated over the remaining lease terms. Mortgage loans assumed in an acquisition are analyzed using current market terms for similar debt. The value of the acquired above-market and below-market leases are amortized and recorded as either a decrease (in the case of above-market leases) or an increase (in the case of below-market leases) to rental income in the consolidated statement of operations over the remaining term of the associated lease. The value of tenant relationships is amortized over the expected term of the relationship, which includes an estimated probability of lease renewal. The value of in-place leases is amortized as an expense over the remaining life of the leases. Amortization of tenant relationships and in‑place leases is included in depreciation and amortization in the consolidated statement of operations. |
Investments in Real Estate | Investments in Real Estate— Land is carried at cost. Buildings are recorded at historical cost and are depreciated on a straight‑line basis over the estimated useful life of the building, which is 60 years with an estimated salvage value of 5%. Building improvements are recorded at historical cost and are depreciated on a straight-line basis over their estimated useful lives, which range from 7 years to 25 years. Land improvements are combined with building improvements for financial reporting purposes and are carried at cost. Tenant improvements that are determined to be assets of Brookfield DTLA are recorded at cost; amortization is included in depreciation and amortization expense in the consolidated statement of operations on a straight‑line basis over the shorter of the useful life or the applicable lease term. Depreciation expense related to investments in real estate during the years ended December 31, 2018, 2017 and 2016 was $75.7 million, $73.6 million and $73.0 million, respectively. Real estate is reviewed for impairment if events or changes in circumstances indicate that the carrying amount of the real estate may not be recoverable. In such an event, a comparison is made of the current and projected operating cash flows of the property into the foreseeable future on an undiscounted basis to the carrying amount of the real estate. If the undiscounted cash flows expected to be generated by an asset are less than its carrying amount, an impairment provision would be recorded to write down the carrying amount of such asset to its fair value. Brookfield DTLA assesses fair value based on estimated cash flow projections utilizing appropriate discount and capitalization rates and available market information. Projections of future cash flow take into account the specific business plan for the property and management’s best estimate of the most probable set of economic conditions expected to prevail in the market. Management believes no impairment of Brookfield DTLA’s real estate assets existed at December 31, 2018 and 2017. |
Cash and Cash Equivalents | Cash and Cash Equivalents— Cash and cash equivalents include all cash and short-term investments with an original maturity of three months or less. |
Restricted Cash | Restricted Cash— Restricted cash consists primarily of deposits for tenant improvements and leasing commissions, real estate taxes, debt service reserves and other items as required by certain of our mortgage loan agreements. |
Rents, Deferred Rents and Other Receivables, Net | Rents, Deferred Rents and Other Receivables, Net— Differences between rental income and the contractual amounts due are recorded as deferred rents receivable in the consolidated balance sheet. Brookfield DTLA evaluates its deferred rents receivable to consider if an allowance is necessary. Rents, deferred rents and other receivables, net also includes amounts paid to a tenant for improvements owned or costs incurred by the tenant. Such amounts are treated as tenant inducements and are presented in the consolidated balance sheet net of accumulated amortization totaling $16.7 million and $12.5 million as of December 31, 2018 and 2017, respectively. Amortization of tenant inducements is recorded on a straight-line basis over the term of the related lease as a reduction of rental income in the consolidated statement of operations. Brookfield DTLA periodically evaluates the collectability of amounts due from tenants and maintains an allowance for doubtful accounts in the consolidated balance sheet for estimated losses resulting from the inability of tenants to make required payments under the lease agreements. Management exercises judgment in establishing these allowances and considers payment history and current credit status in developing these estimates. The allowance for doubtful accounts for Brookfield DTLA totaled $314 thousand and $206 thousand as of December 31, 2018 and 2017, respectively. During the years ended December 31, 2018, 2017 and 2016, Brookfield DTLA recorded a provision for doubtful accounts of $190 thousand, and recoveries of accounts of $7 thousand and $271 thousand, respectively. |
Deferred Charges, Net | Deferred Charges, Net— Leasing costs are deferred and are presented as deferred charges in the consolidated balance sheet net of accumulated amortization totaling $50.3 million and $39.8 million as of December 31, 2018 and 2017, respectively. Deferred leasing costs are amortized on a straight‑line basis over the terms of the related leases as part of depreciation and amortization expense in the consolidated statement of operations. |
Mortgage Loans, Net | Mortgage Loans, Net— Mortgage loans are presented in the consolidated balance sheet net of unamortized debt issuance costs totaling $11.0 million and $10.1 million as of December 31, 2018 and 2017, respectively. Debt issuance costs and discounts totaling $9.6 million, $6.4 million and $4.3 million were amortized during the years ended December 31, 2018, 2017 and 2016, respectively, over the terms of the related mortgage loans on a basis that approximates the effective interest method and are included as part of interest expense in the consolidated statement of operations. |
Revenue Recognition | Revenue Recognition— Rental income from leases providing for periodic increases in base rent is recognized on a straight-line basis over the noncancelable term of the respective leases. Certain leases with retail tenants also provide for the payment by the lessee of additional rent based on a percentage of the tenant’s sales. Percentage rents are recognized only after the tenant sales thresholds have been achieved. Recoveries of operating expenses and real estate taxes are recorded as tenant reimbursements in the consolidated statement of operations in the period during which the expenses are incurred. |
Derivative Financial Instruments | Derivative Financial Instruments— Brookfield DTLA uses interest rate swap and cap derivative financial instruments to manage risk from fluctuations in interest rates. Interest rate swaps involve the receipt of variable-rate amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying principal amount. Interest rate caps involve the receipt of variable-rate amounts beyond a specified strike price over the life of the contracts without exchange of the underlying principal amount. The Company believes these contracts are with counterparties who are creditworthy financial institutions. At the inception of the contracts, Brookfield DTLA designates its interest rate swap contracts as cash flow hedges and documents the relationship of the hedge to the underlying transaction. Hedge effectiveness is assessed at inception and throughout the life of the hedge to ensure the hedge qualifies for hedge accounting. Changes in fair value associated with hedge ineffectiveness, if any, are recorded in the consolidated statement of operations. Changes in fair value of cash flow hedge derivative financial instruments are deferred and recorded as part of accumulated other comprehensive loss in the consolidated statement of stockholders’ deficit until the underlying transaction affects earnings. In the event that an anticipated transaction is no longer likely to occur, the Company recognizes the change in fair value of the derivative financial instrument in its consolidated statement of operations in the period the determination is made. Additionally, Brookfield DTLA uses interest rate cap contracts to limit impact of changes in the LIBOR rate on certain of its mortgage and mezzanine loans. Due to the short-term nature of the contracts involved, the Company does not use hedge accounting for these contracts, and as such, changes in fair value are recorded in the period of change in the consolidated statement of operations. |
Segment Reporting | Segment Reporting Brookfield DTLA currently operates in a single reportable segment referred to as its office segment, which includes the operation and management of commercial office properties. Each of Brookfield DTLA’s operating properties is considered a separate operating segment, as each property earns revenues and incurs expenses, individual operating results are reviewed and discrete financial information is available. Management does not distinguish or group Brookfield DTLA’s consolidated operations based on geography, size or type. Brookfield DTLA’s operating properties have similar economic characteristics and provide similar products and services to tenants. As a result, Brookfield DTLA’s operating properties are aggregated into a single reportable segment. |
Accounting for Conditional Asset Retirement Obligations | Accounting for Conditional Asset Retirement Obligations Brookfield DTLA has evaluated whether it has any conditional asset retirement obligations, which are a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional upon future events that may or may not be within an entity’s control. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. Accordingly, Brookfield DTLA recognized a liability for a conditional asset retirement obligation in the consolidated balance sheet as of December 31, 2018 and 2017. |
Intangible Assets and Liabilities (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 December 31, 2018, the estimate of the amortization/accretion of intangible assets and liabilities during the next five years and thereafter is as follows (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 dates and percentage amounts):
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Schedule of Debt Maturities | As of December 31, 2018, our debt to be repaid during the next five years and thereafter is as follows (in thousands):
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Mezzanine Equity (Tables) |
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Temporary Equity Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Change in Mezzanine Equity | A summary of the change in mezzanine equity is as follows (in thousands, except share amounts):
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Accumulated Other Comprehensive Loss (Tables) |
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Change in Accumulated Other Comprehensive Loss | A summary of the change in accumulated other comprehensive loss related to Brookfield DTLA’s derivative financial instruments designated as cash flow hedges is as follows (in thousands):
|
Fair Value Measurements (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Assets (Liabilities) Measured at Fair Value on a Recurring Basis | Brookfield DTLA’s assets (liabilities) 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) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 consolidated financial statements is as follows (in thousands):
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Schedules of Derivative Instruments | As of December 31, 2018, Brookfield DTLA held the following interest rate swap contracts pursuant to the terms of the EY Plaza mortgage loan agreement (in thousands, except percentages and dates):
Brookfield DTLA holds interest rate cap contracts pursuant to the terms of certain of its mortgage and mezzanine loan agreements with the following notional amounts (in thousands):
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Summary of Estimated Fair Value and Carrying Amount of Mortgage and Mezzanine Loans | The estimated fair value and carrying amount of Brookfield DTLA’s mortgage and mezzanine loans are as follows (in thousands):
|
Related Party Transactions (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Costs Incurred Under Agreements with Related Parties | A summary of costs incurred by the applicable subsidiaries Brookfield DTLA under these arrangements is as follows (in thousands):
A summary of costs incurred by the applicable Brookfield DTLA subsidiaries and affiliates under this arrangement, which are included in rental property operating and maintenance expense in the consolidated statement of operations, is as follows (in thousands):
A summary of the impact of related party transactions with BAM affiliates on the Company’s consolidated statement of operations is as follows (in thousands):
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Rental Income (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Base Rental Income Under Executed Noncancelable Tenant Operating Leases | The future minimum base rental income (on a non‑straight‑line basis) to be received under executed noncancelable tenant operating leases as of December 31, 2018 is as follows (in thousands):
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Quarterly Financial Information (Unaudited) (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Quarterly Financial Information (Unaudited) |
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Investments in Real Estate (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Real Estate Properties | A summary of information related to Brookfield DTLA’s investments in real estate as of December 31, 2018 is as follows (in thousands):
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Investments in Real Estate | The following is a reconciliation of Brookfield DTLA’s investments in real estate (in thousands):
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Accumulated Depreciation | The following is a reconciliation of Brookfield DTLA’s accumulated depreciation on its investments in real estate (in thousands):
__________
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Organization and Description of Business - Narrative (Details) |
12 Months Ended | ||
---|---|---|---|
Oct. 15, 2013 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
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 and Summary of Significant Accounting Policies - Reclassifications - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Rental property operating and maintenance | $ 98,940 | $ 93,945 | $ 92,744 | ||||||||
Other expense | 9,920 | 11,508 | 11,239 | ||||||||
Revenues | $ 79,124 | $ 77,151 | $ 84,194 | $ 75,211 | $ 77,270 | $ 77,067 | $ 76,070 | $ 75,915 | 315,680 | 306,322 | 310,692 |
Rental income | 162,203 | 165,689 | 169,168 | ||||||||
Interest and Other | |||||||||||
Revenues | $ 10,295 | 7,022 | 9,332 | ||||||||
Previously Reported | |||||||||||
Rental property operating and maintenance | 100,300 | 99,100 | |||||||||
Other expense | 5,200 | 4,900 | |||||||||
Rental income | 162,400 | 164,800 | |||||||||
Previously Reported | Interest and Other | |||||||||||
Revenues | $ 10,300 | $ 13,700 |
Basis of Presentation and Summary of Significant Accounting Policies - Accounting Pronouncements Adopted In 2018 and Effective Jan 1, 2019 - Narrative (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Net cash used in investing activities | $ (90,065) | $ (74,696) | $ (57,350) |
Accounting Standards Update 2016-18 | |||
Net cash used in investing activities | (74,700) | (57,400) | |
Accounting Standards Update 2016-18 | Previously Reported | |||
Net cash used in investing activities | $ (50,200) | $ (63,600) | |
Accounting Standards Update 2016-02 | Leasing Costs Not Qualifying To Be Expensed Under New Principle | |||
Effect of change in accounting principle | $ 137 |
Basis of Presentation and Summary of Significant Accounting Policies - Investments in Real Estate - Narrative (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Property, Plant and Equipment [Line Items] | |||
Depreciation expense related to investments in real estate | $ 75,700 | $ 73,600 | $ 73,000 |
Impairment of real estate assets | $ 0 | $ 0 | |
Building | |||
Property, Plant and Equipment [Line Items] | |||
Useful life | 60 years | ||
Estimated salvage value | 5.00% | ||
Building Improvements | Minimum | |||
Property, Plant and Equipment [Line Items] | |||
Useful life | 7 years | ||
Building Improvements | Maximum | |||
Property, Plant and Equipment [Line Items] | |||
Useful life | 25 years |
Basis of Presentation and Summary of Significant Accounting Policies - Rents, Deferred Rents and Other Receivables, Net - Narrative (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Receivables [Abstract] | |||
Tenant inducments, accumulated amortization | $ 16,700 | $ 12,500 | |
Allowance for doubtful accounts | 314 | 206 | |
Provision for doubtful (recovery of) accounts | $ 190 | $ (7) | $ (271) |
Basis of Presentation and Summary of Significant Accounting Policies - Deferred Charges, Net - Narrative (Details) - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Deferred leasing costs, accumulated amortization | $ 50.3 | $ 39.8 |
Basis of Presentation and Summary of Significant Accounting Policies - Prepaid and Other Assets, Net - Narrative (Details) - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Prepaid Expense and Other Assets [Abstract] | ||
Accumulated depreciation of non-operating furniture and equipment | $ 4.6 | $ 4.3 |
Basis of Presentation and Summary of Significant Accounting Policies - Mortgage Loans, Net - Narrative (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Debt Disclosure [Abstract] | |||
Unamortized debt issuance costs | $ 10,962 | $ 10,139 | |
Amortization of debt issuance costs and discounts | $ 9,565 | $ 6,400 | $ 4,329 |
Intangible Assets and Liabilities - Summary of Intangible Assets and Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Intangible Assets | ||
In-place leases | $ 66,365 | $ 66,365 |
Tenant relationships | 30,078 | 30,078 |
Above-market leases | 31,270 | 31,270 |
Intangible assets, gross | 127,713 | 127,713 |
Less: accumulated amortization | 83,073 | 69,424 |
Intangible assets, net | 44,640 | 58,289 |
Intangible Liabilities | ||
Below-market leases | 59,561 | 59,561 |
Less: accumulated amortization | 47,107 | 43,322 |
Intangible liabilities, net | $ 12,454 | $ 16,239 |
Intangible Assets and Liabilities - Schedule of Impact of Intangible Amortization Expense (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Rental income | |||
Acquired Indefinite-lived Intangible Assets and Liabilities [Line Items] | |||
Amortization of intangible assets and liabilities | $ (222) | $ 2,218 | $ 3,465 |
Depreciation and amortization expense | |||
Acquired Indefinite-lived Intangible Assets and Liabilities [Line Items] | |||
Amortization of intangible assets and liabilities | $ 9,642 | $ 13,527 | $ 19,609 |
Intangible Assets and Liabilities - Schedule of Estimated Future Amortization/Accretion of Intangible Assets and Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity | ||
Intangible assets, net | $ 44,640 | $ 58,289 |
Intangible Liabilities, Net, Amortization Income, Fiscal Year Maturity | ||
2019 | 3,223 | |
2020 | 2,975 | |
2021 | 2,797 | |
2022 | 2,460 | |
2023 | 674 | |
Thereafter | 325 | |
Intangible liabilities, net | 12,454 | $ 16,239 |
In-Place Leases | ||
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity | ||
2019 | 5,742 | |
2020 | 4,786 | |
2021 | 4,533 | |
2022 | 3,847 | |
2023 | 2,221 | |
Thereafter | 2,975 | |
Intangible assets, net | 24,104 | |
Other Intangible Assets | ||
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity | ||
2019 | 4,043 | |
2020 | 3,228 | |
2021 | 3,171 | |
2022 | 2,944 | |
2023 | 2,569 | |
Thereafter | 4,581 | |
Intangible assets, net | $ 20,536 |
Mortgage Loans - Narrative (Details) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt Instrument [Line Items] | ||
Weighted average interest rate of total debt outstanding | 4.34% | 4.29% |
Mortgage Loans - Debt Extension - Narrative (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Oct. 31, 2018 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Debt Instrument [Line Items] | ||||
Payment of financing costs | $ 10,388 | $ 7,484 | $ 7,412 | |
777 Tower | ||||
Debt Instrument [Line Items] | ||||
Payment of financing costs | $ 800 | |||
777 Tower | Variable Rate Debt - Mortgage Loan | ||||
Debt Instrument [Line Items] | ||||
Extension term of maturity date on loan | 1 year |
Mortgage Loans - Schedule of Debt Maturities (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt Disclosure [Abstract] | ||
2019 | $ 220,000 | |
2020 | 765,000 | |
2021 | 708,186 | |
2022 | 0 | |
2023 | 58,500 | |
Thereafter | 400,000 | |
Total | $ 2,151,686 | $ 2,001,831 |
Mortgage Loans - Debt Maturities - Narrative (Details) $ in Millions |
Dec. 31, 2018
USD ($)
|
---|---|
Debt Instrument [Line Items] | |
Prepaid without penalty | $ 220.0 |
Available to be defeased | 400.0 |
Prepaid with prepayment penalties | 1,473.2 |
Locked out from prepayment until March 1, 2020 | $ 58.5 |
Mortgage Loans - Non-Recourse Carve Out Guarantees - Narrative (Details) $ in Billions |
Dec. 31, 2018
USD ($)
|
---|---|
Debt Instrument [Line Items] | |
Mortgage debt subject to non-recourse carve out guarantees | $ 2.2 |
Mortgage Loans - Debt Reporting Compliance - Narrative (Details) |
12 Months Ended |
---|---|
Dec. 31, 2018 | |
Debt Instrument [Line Items] | |
Covenant compliance | 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 December 31, 2018 and were in compliance with the amounts required by the loan agreements. |
Mezzanine Equity - Distributions - Narrative (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Class of Stock [Line Items] | |||
Distributions to noncontrolling interests | $ 30,141 | $ 470 | $ 616 |
Series B Preferred Interest and Senior Participating Preferred Interest | |||
Class of Stock [Line Items] | |||
Distributions to noncontrolling interests | 30,100 | ||
Senior Participating Preferred Interest | |||
Class of Stock [Line Items] | |||
Distributions to noncontrolling interests | $ 3,587 | $ 470 | $ 616 |
Mezzanine Equity - Senior Participating Preferred Interest - Narrative (Details) - USD ($) $ in Thousands |
12 Months Ended | ||||
---|---|---|---|---|---|
Oct. 15, 2013 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Class of Stock [Line Items] | |||||
Distributions to noncontrolling interests | $ (30,141) | $ (470) | $ (616) | ||
Contribution from noncontrolling interests | 0 | 112,012 | 63,280 | ||
Redemption value | 1,015,889 | 990,749 | 829,532 | $ 726,595 | |
Senior Participating Preferred Interest | |||||
Class of Stock [Line Items] | |||||
Distributions to noncontrolling interests | (3,600) | (500) | (600) | ||
Contribution from noncontrolling interests | 500 | ||||
Redemption value | $ 23,443 | $ 25,548 | $ 25,019 | $ 23,207 | |
DTLA Holdings | Senior Participating Preferred Interest | 333 South Hope and EYP Realty | |||||
Class of Stock [Line Items] | |||||
Participating interest in residual value | 4.00% |
Mezzanine Equity - Series B Preferred Interest - Narrative (Details) - USD ($) $ in Thousands |
12 Months Ended | ||||
---|---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Oct. 15, 2013 |
|
Class of Stock [Line Items] | |||||
Issuance of Series B preferred interest | $ 0 | $ 111,492 | $ 63,280 | ||
Distributions to noncontrolling interests | (30,141) | (470) | (616) | ||
Redemption value | 1,015,889 | 990,749 | 829,532 | $ 726,595 | |
Series B preferred interest | |||||
Class of Stock [Line Items] | |||||
Maximum funding commitment | $ 260,000 | ||||
Future funding commitment available | 85,200 | ||||
Issuance of Series B preferred interest | 0 | $ 111,492 | $ 63,280 | ||
Preferred return rate | 9.00% | 9.00% | |||
Distributions to noncontrolling interests | (26,600) | ||||
Redemption value | 181,698 | $ 190,291 | $ 65,364 | $ 0 | |
Liquidation value | 174,800 | ||||
Unpaid preferred returns | $ 6,900 |
Stockholders' Deficit - Common Stock - Narrative (Details) - $ / shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Equity [Abstract] | |||
Common stock, shares authorized (in shares) | 1,000,000 | 1,000,000 | |
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 | |
Dividends declared on common stock (in USD per share) | $ 0 | $ 0 | $ 0 |
Stockholders' Deficit - Capital Contributions - Narrative (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Equity [Abstract] | |||
Contributions from DTLA Holdings | $ 1,615 | $ 0 | $ 2,500 |
Accumulated Other Comprehensive Loss - Summary of Change in Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Accumulated Other Comprehensive Loss [Roll Forward] | |||
Other comprehensive income before reclassifications | $ 1,548 | $ 2,799 | $ 2,042 |
Amounts reclassified from accumulated other comprehensive loss | (1,198) | 0 | 0 |
Accumulated Other Comprehensive Loss | |||
Accumulated Other Comprehensive Loss [Roll Forward] | |||
Balance at beginning of year | (574) | (3,373) | (5,415) |
Other comprehensive income before reclassifications | 1,548 | 2,799 | 2,042 |
Amounts reclassified from accumulated other comprehensive loss | (1,198) | 0 | 0 |
Net current-year other comprehensive income | 350 | 2,799 | 2,042 |
Balance at end of year | $ (224) | $ (574) | $ (3,373) |
Income Taxes Narrative (Details) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforwards | $ 288,000,000 | $ 240,000,000 |
Unrecognized tax benefits | $ 0 | $ 0 |
Financial Instruments - Summary of Fair Value of Derivative Instruments (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|---|
Interest Rate Swap | |||
Derivatives, Fair Value | |||
Interest rate cash flow hedge derivatives at fair value | $ 974 | $ (574) | $ (3,373) |
Prepaid and Other Assets, Net | Interest Rate Swap | Cash Flow Hedging | Designated as Hedging Instrument | |||
Derivatives, Fair Value | |||
Interest rate cash flow hedge derivatives at fair value | 974 | ||
Prepaid and Other Assets, Net | Interest Rate Cap | Cash Flow Hedging | Not Designated as Hedging Instrument | |||
Derivatives, Fair Value | |||
Interest rate cash flow hedge derivatives at fair value | $ 11 | 15 | |
Accounts Payable and Other Liabilities | Interest Rate Swap | Cash Flow Hedging | Designated as Hedging Instrument | |||
Derivatives, Fair Value | |||
Interest rate cash flow hedge derivatives at fair value | $ (574) |
Financial Instruments - Summary of Effect of Derivative Instruments (Details) - Interest Rate Swap - Cash Flow Hedging - Designated as Hedging Instrument - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Derivative | |||
Amount of Gain Recognized in AOCL | $ 1,548 | $ 2,799 | $ 2,042 |
Amount of Gain Reclassified from AOCL to Statement of Operations | $ 1,198 | $ 0 | $ 0 |
Financial Instruments - Schedule of Interest Rate Swaps (Details) - Designated as Hedging Instrument - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Mar. 29, 2018 |
|
Interest Rate Swap Agreement One | EY Plaza | ||
Derivative | ||
Notional amount | $ 172,600 | |
Swap rate | 2.18% | |
LIBOR spread | 1.65% | |
Effective interest rate | 3.83% | |
Interest Rate Swap Agreement Two | EY Plaza | ||
Derivative | ||
Notional amount | $ 54,206 | $ 54,200 |
Swap rate | 2.47% | 2.47% |
LIBOR spread | 1.65% | |
Effective interest rate | 4.12% | 4.12% |
Interest Rate Swap | ||
Derivative | ||
Notional amount | $ 226,806 | |
Swap rate | 2.27% | |
LIBOR spread | 1.65% | |
Effective interest rate | 3.90% |
Financial Instruments - Interest Rate Swaps - Narrative (Details) - EY Plaza - Interest Rate Swap Agreement Two - Designated as Hedging Instrument - USD ($) $ in Thousands |
Dec. 31, 2018 |
Mar. 29, 2018 |
---|---|---|
Derivative | ||
Notional amount | $ 54,206 | $ 54,200 |
Swap rate | 2.47% | 2.47% |
Effective interest rate | 4.12% | 4.12% |
Financial Instruments - Summary of Estimated Fair Value and Carrying Amount of Mortgage and Mezzanine Loans (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Estimated fair value | Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Mortgage and mezzanine loans | $ 2,142,813 | $ 2,003,600 |
Carrying amount | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Mortgage and mezzanine loans | $ 2,151,686 | $ 2,001,831 |
Related Party Transactions - Management Agreements - Narrative (Details) |
12 Months Ended |
---|---|
Dec. 31, 2018 | |
Property Management Fee | |
Related Party Transaction | |
Related party transaction rate | 2.75% |
Asset Management Fee | |
Related Party Transaction | |
Related party transaction rate | 0.75% |
Leasing Management Fee | Minimum | |
Related Party Transaction | |
Related party transaction rate | 1.00% |
Leasing Management Fee | Maximum | |
Related Party Transaction | |
Related party transaction rate | 4.00% |
Construction Management Fee | |
Related Party Transaction | |
Related party transaction rate | 3.00% |
Related Party Transactions - Summary of Costs Incurred Under Agreements with Related Parties (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Property management fee expense | |||
Related Party Transaction | |||
Related party transaction expense | $ 8,111 | $ 8,136 | $ 7,964 |
Asset management fee expense | |||
Related Party Transaction | |||
Related party transaction expense | 6,330 | 6,330 | 6,330 |
Leasing and construction management fee expense | |||
Related Party Transaction | |||
Related party transaction expense | 3,209 | 5,198 | 3,049 |
General, administrative and reimbursable expenses | |||
Related Party Transaction | |||
Related party transaction expense | 3,007 | 2,613 | 2,466 |
Insurance expense | |||
Related Party Transaction | |||
Related party transaction expense | $ 8,026 | $ 7,795 | $ 7,948 |
Related Party Transactions - Insurance Agreements - Narrative (Details) $ in Millions |
12 Months Ended |
---|---|
Dec. 31, 2018
USD ($)
| |
Related Party Transactions [Abstract] | |
Real Estate Insurance, All Risk Property and Business Interruption, Aggregate Limit per Occurrence | $ 2,500.0 |
Real Estate Insurance, Earthquake, Aggregate Limit | 437.5 |
Real Estate Insurance, Flood and Weather Catastrophe, Aggregate Limit | 372.5 |
Real Estate Insurance, Terrorism Insurance per Occurrence Maximum | $ 4,000.0 |
Related Party Transactions - Other Related Party Transactions with BAM Affiliates - Narrative (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Rental income and tenant reimbursements revenue | |||
Related Party Transaction | |||
Related party transaction revenue | $ 1,928 | $ 0 | $ 0 |
Rental property operating and maintenance expense | |||
Related Party Transaction | |||
Related party transaction expense | $ 862 | $ 579 | $ 0 |
Rental Income - Schedule of Future Minimum Base Rental Income Under Executed Noncancelable Tenant Operating Leases (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Leases [Abstract] | |
2019 | $ 160,732 |
2020 | 162,373 |
2021 | 162,175 |
2022 | 147,958 |
2023 | 130,674 |
Thereafter | 587,950 |
Total | $ 1,351,862 |
Rental Income - Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Leases [Abstract] | |||
Percentage rental income earned | $ 2.0 | $ 3.1 | $ 2.8 |
Commitments and Contingencies - Concentration of Tenant Credit Risk - Narrative (Details) - customer |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|---|
Customer concentration risk | Revenue | |||
Concentration Risk [Line Items] | |||
Number of tenants | 0 | 0 | 0 |
Commitments and Contingencies - Concentration of Property Revenue Risk - Narrative (Details) - EY Plaza, BOA Plaza, Wells Fargo Center North Tower, Wells Fargo Center South Tower, Gas Company Tower And 777 Tower - Revenue - Properties |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Concentration Risk [Line Items] | |||
Number of real estate properties | 6 | 6 | 6 |
Product Concentration Risk | |||
Concentration Risk [Line Items] | |||
Percentage of consolidated revenue generated by six properties | 98.00% | 100.00% | 100.00% |
Quarterly Financial Information (Unaudited) - Schedule of Quarterly Financial Information (Unaudited) (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Quarterly Financial Information [Line Items] | |||||||||||
Revenues | $ 79,124 | $ 77,151 | $ 84,194 | $ 75,211 | $ 77,270 | $ 77,067 | $ 76,070 | $ 75,915 | $ 315,680 | $ 306,322 | $ 310,692 |
Expenses | 94,100 | 91,789 | 89,458 | 84,990 | 87,163 | 86,204 | 84,571 | 86,021 | 360,337 | 343,959 | 348,859 |
Net loss | (14,976) | (14,638) | (5,264) | (9,779) | (9,893) | (9,137) | (8,501) | (10,106) | (44,657) | (37,637) | (38,167) |
Series B common interest – allocation of net income (loss) | 65,458 | (14,531) | (9,889) | (12,695) | (12,053) | (11,738) | (11,050) | (10,858) | 28,343 | (45,699) | (41,055) |
Net loss attributable to Brookfield DTLA | (89,864) | (8,595) | (4,367) | (6,923) | (6,338) | (6,052) | (5,424) | (5,251) | (109,749) | (23,065) | (18,837) |
Net loss available to common interest holders of Brookfield DTLA | (94,485) | (13,232) | (9,004) | (11,560) | (10,975) | (10,689) | (10,061) | (9,888) | (128,281) | (41,613) | (37,385) |
Series A-1 preferred interest | |||||||||||
Quarterly Financial Information [Line Items] | |||||||||||
Current dividends | 4,397 | 4,303 | 4,303 | 4,303 | 4,304 | 4,303 | 4,303 | 4,303 | 17,306 | 17,213 | 17,213 |
Senior participating preferred interest | |||||||||||
Quarterly Financial Information [Line Items] | |||||||||||
Redemption measurement adjustment | (1,163) | 220 | 768 | 1,657 | 229 | 385 | (191) | 56 | 1,482 | 479 | 2,428 |
Series B preferred interest | |||||||||||
Quarterly Financial Information [Line Items] | |||||||||||
Current preferred return | 6,196 | 3,965 | 3,921 | 3,879 | 3,965 | 3,965 | 3,861 | 1,644 | 17,961 | 13,435 | 2,084 |
Series A preferred stock | |||||||||||
Quarterly Financial Information [Line Items] | |||||||||||
Current dividends | $ 4,621 | $ 4,637 | $ 4,637 | $ 4,637 | $ 4,637 | $ 4,637 | $ 4,637 | $ 4,637 | $ 18,532 | $ 18,548 | $ 18,548 |
Investments in Real Estate - Summary of Information Related to Investments in Real Estate (Footnote) (Details) $ in Billions |
12 Months Ended |
---|---|
Dec. 31, 2018
USD ($)
| |
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation [Line Items] | |
Investment in real estate for federal income tax purposes | $ 2.6 |
Buildings | |
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation [Line Items] | |
Useful life | 60 years |
Estimated salvage value | 5.00% |
Building Improvements | Minimum | |
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation [Line Items] | |
Useful life | 7 years |
Building Improvements | Maximum | |
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation [Line Items] | |
Useful life | 25 years |
Investments in Real Estate - Schedule of Reconciliation of Investments in Real Estate and Accumulated Depreciation (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Investments in Real Estate | |||
Balance at beginning of year | $ 2,756,322 | $ 2,740,773 | $ 2,675,249 |
Improvements | 78,128 | 75,847 | 65,524 |
Other deductions | 0 | 60,298 | 0 |
Balance at end of year | 2,834,450 | 2,756,322 | 2,740,773 |
Accumulated Depreciation | |||
Balance at beginning of year | 342,465 | 329,149 | 256,130 |
Depreciation expense | 75,740 | 73,614 | 73,019 |
Other deductions | 0 | 60,298 | 0 |
Balance at end of year | $ 418,205 | $ 342,465 | $ 329,149 |
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