EX-99.1 2 a2015q3ex991ep.htm EXHIBIT 99.1 Exhibit


 
 


Executive Summary


We are one of the largest owners and operators of high-quality office and multifamily properties located in the premier coastal markets of Southern California and Hawaii, with a total portfolio that includes 15.5 million square feet of Class A office properties and 3,336 apartment units.
Office Fundamentals: In our core Los Angeles submarkets, the Westside and Sherman Oaks Encino, average rents are rising over 10% per year. As a result, starting cash rents in leases signed during the third quarter were 10.2% higher than the expiring rent in the prior leases covering the same space, while straight line rents were up 26.1%. We leased 640,507 square feet during the third quarter, keeping the leased rate for our total office portfolio flat at 92.8% and our occupancy flat at 90.9%.
Multifamily Fundamentals: Our multifamily portfolio was fully leased, with average asking rents 4.6% higher than in the third quarter of 2014.
Financial Results: Compared to the prior year quarter, (i) our Funds From Operations (FFO) increased by 12.3% to $70.4 million; (ii) our Adjusted Funds From Operations (AFFO) increased by 27.5% to $58.7 million; (iii) our GAAP net income attributable to common stockholders increased by 63.4% to $12.1 million; and (iv) our same property cash NOI increased by 5.6% to $93.1 million.
Debt: Our net consolidated debt to enterprise value was 40% at September 30, 2015, well within our target range. We have no material debt maturities in 2015 and limited maturities in 2016 and 2017. Our recent debt activity included:
On July 1, 2015, we paid off the remaining $260 million of a $400 million term loan due in 2017 using cash on hand and funds from our credit line.
On July 27, 2015, we closed a secured, non-recourse $180 million interest only loan. The loan bears interest at LIBOR + 1.45%, which has been effectively fixed at 3.06% per annum until July 2020 through an interest rate swap. The new loan is secured by one of our office properties and, including a two year extension option, effectively matures in July 2022.
On August 21, 2015, we increased the availability under our credit line to $400 million from $300 million and extended the maturity date to August 2020 from December 2017.
On October 13, 2015, we closed a secured, non-recourse $400 million, interest only loan. The loan bears interest at LIBOR + 1.35%, which has been effectively fixed at 2.64% per annum until November 2020 through an interest rate swap. The new loan is secured by a pool of seven office properties and matures in November 2022. We used a portion of the proceeds from this loan to pay down $254 million of our $510 million loan due in April 2018.
Dividends: On October 15, 2015, we paid a quarterly cash dividend of $0.21 per common share, or $0.84 per common share on an annualized basis, to our shareholders of record on September 30, 2015.  Our strong 62.2% AFFO payout ratio leaves us with ample liquidity as well as room for additional dividend growth.
Guidance: We are narrowing our guidance for 2015 FFO to between $1.62 to $1.64 per share. We now expect our 2015 AFFO to be between $1.26 to $1.28 per share, raising the midpoint of our guidance by a penny. For details, please see page 23.







NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definitions.

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Table of Contents
 
PAGE
 
 
COMPANY OVERVIEW
 
 
 
 
FINANCIAL RESULTS
 
 
 
 
PORTFOLIO DATA
 
 
 
 
 
 
Forward Looking Statements
This Third Quarter 2015 Earnings Results and Operating Information, which we refer to as our Earnings Package, supplements the information provided in our reports filed with the Securities and Exchange Commission.  It contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and we claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995.  Forward-looking statements presented in this Earnings Package, and those that we may make orally or in writing from time to time, are based on our beliefs and assumptions.  Our actual results will be affected by known and unknown risks, trends, uncertainties and factors, some of which are beyond our control or ability to predict, including, but not limited to: adverse economic and real estate developments in Southern California and Honolulu; a general downturn in the economy; decreased rental rates or increased tenant incentives and vacancy rates; defaults on, and early terminations and non-renewal of, leases by tenants; increased interest rates and operating costs; failure to generate sufficient cash flows to service our outstanding indebtedness; difficulties in acquiring properties; failure to successfully operate properties; failure to maintain our status as a REIT; possible adverse changes in rent control laws and regulations; environmental uncertainties; risks related to natural disasters; lack or insufficient insurance; inability to successfully expand into new markets or submarkets; risks associated with property development; conflicts of interest with our officers; changes in real estate and zoning laws and increases in real property tax rates; possible future terrorist attacks; and other risks and uncertainties detailed in our Annual Report on Form 10-K and other documents filed with the Securities and Exchange Commission. Although we believe that our assumptions are reasonable, they are not guarantees of future performance and some will inevitably prove to be incorrect.  As a result, our actual future results can be expected to differ from our expectations, and those differences may be material.  Accordingly, please use caution in relying on previously reported forward-looking statements to anticipate future results or trends. This Earnings Package and all subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements.

2

 
Company Overview


Corporate Data
as of September 30, 2015

 
Office Portfolio
 
 
 
 
 
 
 
 
 
Consolidated
 
Total Portfolio(1)
 
 
Properties
54

 
62

 
 
Rentable square feet (in thousands)
13,692

 
15,516

 
 
Leased rate
92.6
%
 
92.8
%
 
 
Occupancy rate
90.7
%
 
90.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Multifamily Portfolio
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
 
Properties
 
 
10

 
 
Units
 
 
3,336

 
 
Leased rate
 
 
99.6
%
 
 
 
 
 
 
 

 
Market Capitalization (in thousands, except price per share)
 
 
 
 
 
 
 
Closing price per share of common stock (NYSE:DEI)
 
$
28.72

 
 
Shares of common stock outstanding
 
146,359

 
 
Fully diluted shares outstanding
 
177,671

 
 
Equity capitalization(2)
 
$
5,102,714

 
 
Net debt(3)
 
$
3,464,181

 
 
Total enterprise value
 
$
8,566,895

 
 
Net debt/total enterprise value
 
40
%
 
 
 
 
 
 
_______________________________________________
(1)
Our total portfolio includes eight office properties in two unconsolidated institutional real estate funds which we manage and of which we own a weighted average of approximately 60% at September 30, 2015 based on square footage.
(2)
Equity capitalization represents our fully diluted shares multiplied by the closing price of our common stock on September 30, 2015.
(3)
Net debt represents our consolidated debt, net of our cash and cash equivalents.  Net debt excludes the debt of our unconsolidated real estate funds.



NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definition

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Company Overview


Property Map
as of September 30, 2015


4                     Go to Table of Contents

 
Company Overview


Board of Directors and Executive Officers
as of September 30, 2015

OUR BOARD OF DIRECTORS
___________________________________________________________________________________________
Dan A. Emmett
 
Chairman of the Board – Douglas Emmett, Inc.
Jordan L. Kaplan
 
Chief Executive Officer and President – Douglas Emmett, Inc.
Kenneth M. Panzer
 
Chief Operating Officer – Douglas Emmett, Inc.
Christopher H. Anderson
 
Retired Real Estate Executive and Investor
Leslie E. Bider
 
Chief Executive Officer – PinnacleCare
Thomas E. O’Hern
 
Senior Executive Vice President, Chief Financial Officer & Treasurer – Macerich Company
William E. Simon, Jr.
 
Co-chairman, William E. Simon & Sons, LLC
Virginia McFerran
 
Founder and owner of M Consulting; former Chief Information Officer of the UCLA Health system

OUR EXECUTIVE OFFICERS
____________________________________________________________________________________________
Dan A. Emmett
 
Chairman of the Board
Jordan L. Kaplan
 
Chief Executive Officer and President
Kenneth M. Panzer
 
Chief Operating Officer
Theodore E. Guth
 
Chief Financial Officer
Kevin A. Crummy
 
Chief Investment Officer

CORPORATE OFFICES
808 Wilshire Boulevard, Suite 200, Santa Monica, California 90401
Phone: (310) 255-7700

For more information, please visit our website at www.douglasemmett.com or contact:
Stuart McElhinney, Vice President, Investor Relations
(310) 255-7751
smcelhinney@douglasemmett.com



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Financial Results


Consolidated Balance Sheets
(In thousands)

 
September 30, 2015
 
December 31, 2014
 
(unaudited)
 
(audited)
Assets
 

 
 

Investment in real estate:
 

 
 

Land
$
924,965

 
$
900,813

Buildings and improvements
5,688,794

 
5,590,118

Tenant improvements and lease intangibles
708,461

 
666,672

Investment in real estate, gross
7,322,220

 
7,157,603

Less: accumulated depreciation and amortization
(1,673,716
)
 
(1,531,157
)
Investment in real estate, net
5,648,504

 
5,626,446

 
 
 
 
Cash and cash equivalents
9,930

 
18,823

Tenant receivables, net
2,036

 
2,143

Deferred rent receivables, net
79,464

 
74,997

Acquired lease intangible assets, net
4,729

 
3,527

Investment in unconsolidated real estate funds
165,156

 
171,390

Other assets
34,037

 
57,270

Total assets
$
5,943,856

 
$
5,954,596

 
 
 
 
Liabilities
 
 
 

Secured notes payable and revolving credit facility
$
3,474,111

 
$
3,435,290

Interest payable, accounts payable and deferred revenue
67,526

 
54,364

Security deposits
38,063

 
37,450

Acquired lease intangible liabilities, net
32,145

 
45,959

Interest rate contract liabilities
31,465

 
37,386

Dividends payable
30,735

 
30,423

Total liabilities
3,674,045

 
3,640,872

 
 
 
 
Equity
 
 
 

Douglas Emmett, Inc. stockholders' equity:
 
 
 

Common stock
1,464

 
1,449

Additional paid-in capital
2,698,708

 
2,678,798

Accumulated other comprehensive loss
(26,850
)
 
(30,089
)
Accumulated deficit
(754,571
)
 
(706,700
)
Total Douglas Emmett, Inc. stockholders' equity
1,918,751

 
1,943,458

Noncontrolling interests
351,060

 
370,266

Total equity
2,269,811

 
2,313,724

Total liabilities and equity
$
5,943,856

 
$
5,954,596


NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definitions.

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Financial Results


Consolidated Operating Results
(Unaudited; in thousands, except share and per share data)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
Revenues:
 

 
 

 
 

 
 

Office rental:
 

 
 

 
 

 
 

Rental revenues
$
103,436

 
$
97,465

 
$
307,895

 
$
296,342

Tenant recoveries
11,074

 
11,093

 
32,687

 
33,720

Parking and other income
21,715

 
19,399

 
63,890

 
58,534

Total office revenues
136,225

 
127,957

 
404,472

 
388,596

 
 
 
 
 
 
 
 
Multifamily rental:
 
 
 
 
 
 
 
Rental revenues
22,133

 
18,767

 
65,752

 
55,447

Parking and other income
1,719

 
1,417

 
5,119

 
4,392

Total multifamily revenues
23,852

 
20,184

 
70,871

 
59,839

 
 
 
 
 
 
 
 
Total revenues
160,077

 
148,141

 
475,343

 
448,435

 
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
 
Office expenses
49,195

 
47,631

 
139,936

 
135,644

Multifamily expenses
6,191

 
5,261

 
17,941

 
15,490

General and administrative
6,867

 
6,658

 
21,701

 
20,181

Depreciation and amortization
52,229

 
50,111

 
153,309

 
151,249

Total operating expenses
114,482

 
109,661

 
332,887

 
322,564

 
 
 
 
 
 
 
 
Operating income
45,595

 
38,480

 
142,456

 
125,871

 
 
 
 
 
 
 
 
Other income
2,129

 
3,769

 
13,103

 
12,642

Other expenses
(1,605
)
 
(1,983
)
 
(4,796
)
 
(5,114
)
Income, including depreciation, from unconsolidated funds
898

 
665

 
3,548

 
2,725

Interest expense
(32,705
)
 
(32,098
)
 
(101,521
)
 
(95,888
)
Acquisition-related expenses
(153
)
 
(152
)
 
(641
)
 
(180
)
Net income
14,159

 
8,681

 
52,149

 
40,056

Less:  Net income attributable to noncontrolling interests
(2,089
)
 
(1,292
)
 
(7,932
)
 
(6,328
)
Net income attributable to common stockholders
$
12,070

 
$
7,389

 
$
44,217

 
$
33,728

 
 
 
 
 
 
 
 
Net income per common share – basic
$
0.082

 
$
0.051

 
$
0.302

 
$
0.234

Net income per common share – diluted
$
0.080

 
$
0.050

 
$
0.293

 
$
0.227

 
 
 
 
 
 
 
 
Weighted average shares of common stock outstanding - basic
146,331

 
144,361

 
145,856

 
143,741

Weighted average shares of common stock outstanding - diluted
150,740

 
148,641

 
150,285

 
147,844


NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definitions.

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Financial Results


Consolidated
Funds From Operations & Adjusted Funds From Operations(1) 
(Unaudited; in thousands, except share and per share data)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Funds From Operations (FFO)
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
12,070

 
$
7,389

 
$
44,217

 
$
33,728

Depreciation and amortization of real estate assets
52,229

 
50,111

 
153,309

 
151,249

Net income attributable to noncontrolling interests
2,089

 
1,292

 
7,932

 
6,328

Adjustments attributable to consolidated joint venture and unconsolidated funds(2)
3,990

 
3,898

 
11,925

 
11,662

FFO
$
70,378

 
$
62,690

 
$
217,383

 
$
202,967

 
 
 
 
 
 
 
 
Adjusted Funds From Operations (AFFO)
 
 
 
 
 
 
 
FFO
$
70,378

 
$
62,690

 
$
217,383

 
$
202,967

Straight-line rent
(1,101
)
 
(951
)
 
(4,467
)
 
(3,377
)
Net accretion of acquired above and below market leases(3)
(2,866
)
 
(3,412
)
 
(15,806
)
 
(10,506
)
Loan costs
1,558

 
1,029

 
5,532

 
3,077

Recurring capital expenditures, tenant improvements and leasing commissions
(11,573
)
 
(15,340
)
 
(38,579
)
 
(38,788
)
Non-cash compensation expense
2,978

 
2,267

 
10,292

 
6,942

Adjustments attributable to consolidated joint venture and unconsolidated funds(2)
(714
)
 
(275
)
 
(2,611
)
 
(405
)
AFFO
$
58,660

 
$
46,008

 
$
171,744

 
$
159,910

 
 
 
 
 
 
 
 
Weighted average share equivalents outstanding- fully diluted
177,702

 
176,413

 
177,616

 
176,182

FFO per share- fully diluted
$
0.40

 
$
0.36

 
$
1.22

 
$
1.15

AFFO per share- fully diluted
$
0.33

 
$
0.26

 
$
0.97

 
$
0.91

Dividends per share
$
0.21

 
$
0.20

 
$
0.63

 
$
0.60

AFFO payout ratio
62.2
%
 
74.9
%
 
63.7
%
 
64.6
%
____________________________________________________

(1)
Reflects our consolidated FFO and AFFO attributable to the common stockholders and noncontrolling interests.
(2)
Adjusts for (i) the portion of each other listed adjustment item that is attributed to the noncontrolling interest in our consolidated joint venture and (ii) the effect of each other listed adjustment item on our share of the results of our unconsolidated Funds.
(3)
Other Income during the first quarter of 2015 included $6.6 million of accretion of an above-market ground lease related to the acquisition of the land under one of our office buildings. We do not expect comparable amounts in future quarters.


NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definitions.

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Financial Results


Consolidated Same Property Statistical & Financial Data
(Unaudited; in thousands, except statistics)

 
 
 
 
 
 
 
 
As of September 30,
 
 
 
2015
 
2014
 
 
Same Property Office Statistics
 
 
 
 
 
Number of properties
50

 
50

 
 
Rentable square feet (in thousands)
12,791

 
12,781

 
 
Ending % leased
92.3
%
 
91.8
%
 
 
Ending % occupied
90.3
%
 
89.4
%
 
 
Quarterly average % occupied
90.3
%
 
89.3
%
 
 
 
 
 
 
 
 
Same Property Multifamily Statistics
 
 
 
 
 
Number of properties
9

 
9

 
 
Number of units
2,868

 
2,868

 
 
Ending % leased(1)
99.6
%
 
99.7
%
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
% Favorable
 
 
 
2015
 
2014
 
(Unfavorable)
 
 
Same Property Net Operating Income - GAAP Basis
 

 
 

 
 

 
 
Total office revenues
$
126,999

 
$
123,431

 
2.9
 %
 
 
Total office expenses
(45,753
)
 
(45,870
)
 
0.3
 %
 
 
Office NOI
81,246

 
77,561

 
4.8
 %
 
 
 
 
 
 
 
 
 
 
Total multifamily revenues
20,920

 
20,184

 
3.6
 %
 
 
Total multifamily expenses
(5,371
)
 
(5,261
)
 
(2.1
)%
 
 
Multifamily NOI
15,549

 
14,923

 
4.2
 %
 
 
 
 
 
 
 
 
 
 
Same Property NOI - GAAP basis
$
96,795

 
$
92,484

 
4.7
 %
 
 
 
 
 
 
 
 
 
 
Same Property Net Operating Income - Cash Basis
 
 
 
 
 
 
 
Total office revenues
$
124,202

 
$
120,004

 
3.5
 %
 
 
Total office expenses
(45,766
)
 
(45,920
)
 
0.3
 %
 
 
Office NOI
78,436

 
74,084

 
5.9
 %
 
 
 
 
 
 
 
 
 
 
Total multifamily revenues
20,083

 
19,345

 
3.8
 %
 
 
Total multifamily expenses
(5,371
)
 
(5,261
)
 
(2.1
)%
 
 
Multifamily NOI
14,712

 
14,084

 
4.5
 %
 
 
 
 
 
 
 
 
 
 
Same Property NOI - cash basis
$
93,148

 
$
88,168

 
5.6
 %
 
 
 
 
 
 
 
 
 
____________________________________________________
(1)
In calculating the percentage of unit leased, units temporarily unoccupied as a result of fire or similar damage (8 units in 2014) were removed from the numerator and denominator. The loss in rent from those units was recovered from insurance.

NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definitions.

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Financial Results


Reconciliation of Same Property NOI to GAAP Net Income
(Unaudited and in thousands)
 
Three Months Ended September 30,
 
2015
 
2014
 
 
 
 
Same property office revenues - cash basis
$
124,202

 
$
120,004

GAAP adjustments per definition of NOI - cash basis
2,797

 
3,427

Same property office revenues - GAAP basis
126,999

 
123,431

 
 
 
 
Same property office expenses - cash basis
(45,766
)
 
(45,920
)
GAAP adjustments per definition of NOI - cash basis
13

 
50

Same property office expenses - GAAP basis
(45,753
)
 
(45,870
)
 
 
 
 
Office NOI - GAAP basis
81,246

 
77,561

 
 
 
 
Same property multifamily revenues - cash basis
20,083

 
19,345

GAAP adjustments per definition of NOI - cash basis
837

 
839

Same property multifamily revenues - GAAP basis
20,920

 
20,184

 
 
 
 
Same property multifamily expenses - cash basis
(5,371
)
 
(5,261
)
GAAP adjustments per definition of NOI - cash basis

 

Same property multifamily expenses - GAAP basis
(5,371
)
 
(5,261
)
 
 
 
 
Multifamily NOI - GAAP basis
15,549

 
14,923

 
 
 
 
Total same property NOI - GAAP basis
96,795

 
92,484

Non-comparable office revenues
9,226

 
4,526

Non-comparable office expenses
(3,442
)
 
(1,761
)
Non-comparable multifamily revenues
2,932

 

Non-comparable multifamily expenses
(820
)
 

Total NOI - GAAP basis
104,691

 
95,249

General and administrative
(6,867
)
 
(6,658
)
Depreciation and amortization
(52,229
)
 
(50,111
)
Operating income
45,595

 
38,480

Other income
2,129

 
3,769

Other expenses
(1,605
)
 
(1,983
)
Income, including depreciation, from unconsolidated real estate funds
898

 
665

Interest expense
(32,705
)
 
(32,098
)
Acquisition-related expenses
(153
)
 
(152
)
Net income
14,159

 
8,681

Less: Net income attributable to noncontrolling interests
(2,089
)
 
(1,292
)
Net income attributable to common stockholders
$
12,070

 
$
7,389


NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definitions.


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Financial Results


Unconsolidated Real Estate Funds Operating Results(1) 
(Unaudited and in thousands)

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Unconsolidated Real Estate Funds Summary Income Statement(2)
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Office revenues
 
$
17,459

 
$
16,647

 
$
52,500

 
$
49,276

Office expenses
 
(7,623
)
 
(7,277
)
 
(21,662
)
 
(20,319
)
NOI
 
9,836

 
9,370

 
30,838

 
28,957

General and administrative
 
(60
)
 
(58
)
 
(232
)
 
(161
)
Depreciation and amortization
 
(6,884
)
 
(6,774
)
 
(20,534
)
 
(20,169
)
Operating income
 
2,892

 
2,538

 
10,072

 
8,627

Other income
 

 

 

 
114

Interest expense
 
(2,903
)
 
(2,920
)
 
(8,641
)
 
(8,681
)
Net income (loss)
 
$
(11
)
 
$
(382
)
 
$
1,431

 
$
60

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated Real Estate Funds FFO(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
(11
)
 
$
(382
)
 
$
1,431

 
$
60

Add back: depreciation and amortization
 
6,884

 
6,774

 
20,534

 
20,169

FFO
 
$
6,873

 
$
6,392

 
$
21,965

 
$
20,229

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Our Share of the Unconsolidated Real Estate Funds FFO
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Our share of the Funds net income (loss)
 
$
76

 
$
(160
)
 
$
1,081

 
$
299

Add back: our share of the Funds depreciation and amortization
 
4,010

 
3,914

 
12,003

 
11,710

Equity allocation and basis difference
 
822

 
825

 
2,467

 
2,426

Our share of the Unconsolidated Real Estate Funds FFO
 
$
4,908

 
$
4,579

 
$
15,551

 
$
14,435

__________________________________________________
(1)
We own and manage significant equity interests in two unconsolidated institutional real estate Funds, which own a combined eight Class A office properties, totaling 1.8 million square feet, in our submarkets.  Our ownership interest entitles us to a pro rata share of any distributions based on our ownership (a weighted average of approximately 60% at September 30, 2015 based on square footage), additional distributions based on the total invested capital and a carried interest if the investors’ distributions exceed a hurdle rate.  We also receive fees and reimbursement of expenses for managing our unconsolidated Funds’ properties. 
(2)
These amounts represent 100% (not our pro-rata share) of the amounts related to the Funds on a combined basis.







NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definitions.

11                     Go to Table of Contents

 
Financial Results

 
 
 
 
 
 
 
 
 
 
 
Consolidated Debt
(As of September 30, 2015, unaudited and in thousands)
 
 
 
 
 
 
 
 
 
 
 
Description
Maturity Date
 
Principal Balance
Effective Rate (2)
 
Swap Maturity Date
 
 
 
 
 
 
 
 
 
 
 
 
Term Debt(1)
12/24/2015
 
$
20,000

 
LIBOR + 1.45%
(11) 
 --
 
 
 
3/1/2016
(3) 
16,140

 
LIBOR + 1.60%
 
 --
 
 
 
3/1/2016
 
82,000

 
LIBOR + 0.62%
(12) 
 --
 
 
 
6/1/2017
 
18,000

 
LIBOR + 0.62%
(12) 
 --
 
 
 
4/2/2018
(4) 
510,000

 
4.12%
 
4/1/2016
 
 
 
8/1/2018
 
530,000

 
3.74%
 
8/1/2016
 
 
 
8/5/2018
(5) 
355,000

 
4.14%
 
 --
 
 
 
2/1/2019
(6) 
153,421

 
4.00%
 
 --
 
 
 
6/5/2019
(7) 
285,000

 
3.85%
 
 --
 
 
 
10/1/2019
 
145,000

 
LIBOR + 1.25%
(12) 
 --
 
 
 
3/1/2020
(8) 
349,070

 
4.46%
 
 --
 
 
 
11/2/2020
 
388,080

 
3.65%
 
11/1/2017
 
 
 
4/15/2022
 
340,000

 
2.77%
 
4/1/2020
 
 
 
7/27/2022
(9) 
180,000

 
3.06%
 
7/1/2020
 
 
 
4/1/2025
 
102,400

 
2.84%
 
3/1/2020
 
 
Total Term Debt
 
 
$
3,474,111

 
 
 
 
 
 
Credit facility(10)
8/21/2020
 

 
LIBOR + 1.40%
 
 --
 
 
Total Debt
 
 
$
3,474,111

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
_________________________________________________________________________
(1)
As of September 30, 2015, the weighted average remaining life (including extension options) of our outstanding term debt (excluding our revolving credit facility) was 4.0 years. For the $3.19 billion of term debt on which the interest rate was fixed under the terms of the loan or a swap, (i) the weighted average remaining life was 4.2 years, (ii) the weighted average remaining period during which interest was fixed was 2.4 years, (iii) the weighted average annual interest rate was 3.80% and (iv) including the non-cash amortization of deferred loan costs, the weighted average effective interest rate was 3.92%. Except as otherwise noted below, each loan (including our revolving credit facility) is secured by one or more separate collateral pools consisting of one or more properties, requiring monthly payments of interest only, with the outstanding principal due upon maturity.
(2)
Includes the effect of interest rate swaps and excludes the effect of prepaid loan fees.
(3)
Borrower is a consolidated entity in which our Operating Partnership owns a two-thirds interest.
(4)
We paid down $254 million of this loan on October 13, 2015 using a portion of the proceeds of a new secured, non-recourse $400 million, interest only loan with interest effectively fixed at 2.64% per annum until November 2020.
(5)
Interest-only until February 2016, with principal amortization thereafter based upon a 30-year amortization schedule.
(6)
Requires monthly payments of principal and interest. Principal amortization is based upon a 30-year amortization schedule.
(7)
Interest only until February 2017, with principal amortization thereafter based upon a 30-year amortization schedule.
(8)
Interest rate is fixed until March 1, 2018, and is floating thereafter, with principal amortization after May 2016 based upon a 30-year amortization schedule. The maturity date includes the effect of our exercise of two one-year extension options which we expect to be able to exercise.
(9)
Maturity date includes the effect of our exercise of a two-year extension option which we expect to be able to exercise.
(10)
$400.0 million revolving credit facility. Unused commitment fees range from 0.15% to 0.20%.
(11)
Effective October 13, 2015 through maturity, the rate on $9 million of this loan was effectively fixed at the spread plus 2.1%.
(12)
Effective October 13, 2015 through the earlier of maturity or April 1, 2016, the rate on these loans is effectively fixed at the spread plus 2.1%.
 
 
 
 
 
 
 
 
 
 
Unconsolidated Debt of our Funds
(As of September 30, 2015, unaudited and in thousands)
 
 
 
 
 
 
 
 
 
 
 
Maturity Date
Principal Balance
Our Share of Principal
Effective Rate(1)
Swap Maturity Date
 
 
 
 
 
 
 
 
 
 
 
4/1/2016
$
51,143

 
$
12,404

(2) 
5.67%
 
 
5/1/2018
325,000

 
222,980

(3) 
2.35%
5/1/2017
 
 
 
$
376,143

 
$
235,384

 
 
 
 
 
 
 
 
 
 
 
 
 
________________________________________________________________________
(1)
Includes the effect of interest rate swaps and excludes the effect of prepaid loan fees.
(2)
Loan to one of our Funds, which is secured by one property and requires monthly payments of principal and interest.
(3)
Loan to one of our Funds, which is secured by six properties and requires monthly payments of interest only.
NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definitions.

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Portfolio Data


Office Portfolio Summary
Total Office Portfolio as of September 30, 2015

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Submarket
 
Number of Properties
 
Rentable Square
Feet
 
Percent of Square Feet of Our Total Portfolio
 
Submarket Rentable Square Feet
 
Our Market Share in Submarket
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beverly Hills
 
9

 
1,860,657

 
12.0
%
 
7,741,422
 
21.2
%
 
 
Brentwood
 
14

 
1,672,849

(1) 
10.8

 
3,356,126
 
49.8

 
 
Burbank
 
1

 
420,949

 
2.7

 
6,733,458
 
6.3

 
 
Century City
 
3

 
916,952

 
5.9

 
10,064,599
 
9.1

 
 
Honolulu
 
4

 
1,716,712

 
11.1

 
5,088,599
 
33.7

 
 
Olympic Corridor
 
5

 
1,098,075

 
7.1

 
3,294,672
 
33.3

 
 
Santa Monica
 
8

 
973,169

 
6.3

 
8,709,282
 
11.2

 
 
Sherman Oaks/Encino
 
13

 
3,602,988

 
23.2

 
6,179,755
 
58.3

 
 
Warner Center/Woodland Hills
 
3

 
2,856,444

 
18.4

 
7,203,647
 
39.7

 
 
Westwood
 
2

 
396,808

 
2.5

 
4,443,398
 
8.9

 
 
Total
 
62

 
15,515,603

 
100.0
%
 
62,814,958
 
24.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
_____________________________________________________
(1)
Excludes an approximately 35,000 square foot building on one property which was removed from service in connection with a planned multi-family development project at the site. See our multifamily development projects on page 22.







































NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definitions.

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Portfolio Data


Office Percentage Leased and In-Place Rents
Total Office Portfolio as of September 30, 2015

Annualized Rent by Submarket
 
 
 
 
 
 
 
 
 
 
 
 
 
Submarket
 
Percentage Leased(1)
 
Annualized Rent
 
Annualized Rent Per Leased Square Foot(2)
 
Monthly Rent Per Leased Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
Beverly Hills
 
96.8
%
 
$
71,942,815

 
$
41.57

 
$
3.46

 
 
Brentwood
 
97.3

 
60,444,722

 
38.24

 
3.19

 
 
Burbank
 
100.0

 
16,048,013

 
38.12

 
3.18

 
 
Century City
 
96.0

 
33,617,200

 
39.24

 
3.27

 
 
Honolulu(3)
 
87.7

 
48,707,326

 
33.54

 
2.80

 
 
Olympic Corridor
 
97.3

 
31,702,003

 
31.18

 
2.60

 
 
Santa Monica(4)
 
98.9

 
53,432,778

 
56.15

 
4.68

 
 
Sherman Oaks/Encino
 
93.5

 
105,781,982

 
32.31

 
2.69

 
 
Warner Center/Woodland Hills
 
83.3

 
63,369,344

 
27.80

 
2.32

 
 
Westwood
 
95.5

 
13,596,872

 
36.79

 
3.07

 
 
Total / Weighted Average
 
92.8

 
$
498,643,055

 
35.79

 
2.98

 
 
 
 
 
 
 
 
 
 
 
 
 
Recurring Office Capital Expenditures per Rentable Square Foot
 
 
 
 
 
 
For the three months ended September 30, 2015
 
 
 
 
 
$
0.03

 
 
For the nine months ended September 30, 2015
 
 
 
 
 
$
0.10

 
 
 
 
 
 
 
 
 
 
 
 
_______________________________________________________________
(1)
Includes 294,263 square feet with respect to signed leases not yet commenced.
(2)
Represents annualized rent divided by leased square feet (excluding signed leases not commenced).
(3)
Includes $2,830,631 of annualized rent attributable to a health club that we operate.
(4)
Includes $2,142,943 of annualized rent attributable to our corporate headquarters.
NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definitions.

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Portfolio Data


Office Tenant Diversification
Total Office Portfolio as of September 30, 2015

Percentage of Annualized Rent by Lease Size
 
Individual tenants paying 1% or more of aggregate Annualized Rent(1):
 
 
 
 
 
Tenant
 
Number of Leases
 
Number of Properties
 
Lease Expiration(2)
 
Total Leased Square Feet
 
Percent of Rentable Square Feet
 
Annualized Rent
 
Percent of Annualized Rent
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Time Warner(3)
 
3

 
3

 
2016-2019
 
580,812

 
3.7
%
 
$
21,668,290

 
4.3
%
 
 
William Morris Endeavor(4)
 
1

 
1

 
2027
 
181,215

 
1.2

 
9,341,159

 
1.9

 
 
Equinox Fitness(5)
 
4

 
4

 
2018-2033
 
137,648

 
0.9

 
5,051,120

 
1.0

 
 
Total
 
8

 
8

 
 
 
899,675

 
5.8
%
 
$
36,060,569

 
7.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Based on minimum base rent in leases expiring after September 30, 2015.
 
 
(2) Expiration dates are per leases.  For tenants with multiple leases, the range shown reflects leases other than storage and similar leases.
 
 
(3) Includes a 150,000 square foot lease expiring in April 2016 (an existing subtenant has leased 101,000 square feet of this space commencing on expiration of the current lease and continuing until July 2023), a 10,000 square foot lease expiring in December 2017 and a 421,000 square foot lease expiring in September 2019.
 
 
(4) Tenant has an option to terminate this lease in December 2022.
 
 
(5) Includes a 44,000 square foot lease expiring in April 2018, a 33,000 square foot lease expiring in August 2019, a 31,000 square foot lease expiring in September 2027 and a 30,000 square foot lease expiring in April 2033.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definitions.

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Portfolio Data


Office Lease Distribution
Total Office Portfolio as of September 30, 2015

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Square Feet Under Lease
 
Number of Leases
 
Leases as a Percent of Total
 
Rentable Square Feet
 
Square Feet as a Percent of Total
 
Annualized Rent
 
Annualized Rent as a Percent of Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,500 or less
 
1,357

 
51.1
%
 
1,860,791

 
12.0
%
 
$
66,711,124

 
13.4
%
 
 
2,501-10,000
 
973

 
36.7

 
4,657,550

 
30.0

 
161,964,178

 
32.5

 
 
10,001-20,000
 
212

 
8.0

 
2,876,588

 
18.5

 
102,120,451

 
20.5

 
 
20,001-40,000
 
82

 
3.1

 
2,143,139

 
13.8

 
77,883,887

 
15.6

 
 
40,001-100,000
 
24

 
0.9

 
1,388,067

 
9.0

 
52,664,488

 
10.5

 
 
Greater than 100,000
 
5

 
0.2

 
1,005,941

 
6.5

 
37,298,927

 
7.5

 
 
Subtotal
 
2,653

 
100.0
%
 
13,932,076

(1) 
89.8
%
 
498,643,055

 
100.0
%
 
 
Signed leases not commenced
 
 
 
 
 
294,263

 
1.9

 
 
 
 
 
 
Available
 
 
 
 
 
1,121,400

 
7.2

 
 
 
 
 
 
Building Management Use
 
 
 
 
 
111,868

 
0.7

 
 
 
 
 
 
BOMA Adjustment(2)
 
 
 
 
 
55,996

 
0.4

 
 
 
 
 
 
Total
 
2,653

 
100.0
%
 
15,515,603

 
100.0
%
 
$
498,643,055

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Average tenant size is approximately 5,300 square feet.  Median tenant size is approximately 2,500 square feet.
 
 
(2) Represents square footage adjustments for leases that do not reflect BOMA remeasurement.
 
 
 
 
























NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definitions.


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Portfolio Data


Office Industry Diversification
Total Office Portfolio as of September 30, 2015

Percentage of Annualized Rent by Tenant Industry
 
 
 
 
 
 
 
 
Industry
 
Number of Leases
 
Annualized Rent as a Percent of Total
 
 
 
 
 
 
 
 
 
Legal
 
530
 
18.4
%
 
 
Financial Services
 
338
 
14.0

 
 
Entertainment
 
188
 
13.6

 
 
Real Estate
 
213
 
9.8

 
 
Health Services
 
357
 
8.8

 
 
Accounting & Consulting
 
312
 
8.5

 
 
Retail
 
186
 
6.6

 
 
Insurance
 
111
 
5.5

 
 
Technology
 
124
 
5.1

 
 
Advertising
 
74
 
2.5

 
 
Public Administration
 
81
 
2.4

 
 
Educational Services
 
33
 
2.1

 
 
Other
 
106
 
2.7

 
 
Total
 
2,653
 
100.0
%
 
 
 
 
 
 
 
 
NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definitions.

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Portfolio Data

Office Lease Expirations
Total Office Portfolio as of September 30, 2015
(1) Average of the percentage of leases at September 30, 2012, 2013, 2014 with the same remaining duration as the leases at September 30,2015 had from the labeled year.    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year of Lease Expiration
 
Number of Leases
 
Rentable Square Feet
 
Expiring Square Feet as a Percent of Total
 
Annualized Rent at September 30, 2015
 
Annualized Rent as a Percent of Total
 
Annualized Rent Per Leased Square Foot(1)
 
Annualized Rent Per Leased Square Foot at Expiration(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short Term Leases
 
53

 
202,471

 
1.3
%
 
$
6,152,995

 
1.2
%
 
$
30.39

 
$
30.39

 
 
2015
 
71

 
228,273

 
1.5

 
7,628,391

 
1.5

 
33.42

 
33.58

 
 
2016
 
527

 
1,846,112

 
11.9

 
64,026,131

 
12.8

 
34.68

 
35.59

 
 
2017
 
579

 
2,376,955

 
15.3

 
80,546,157

 
16.2

 
33.89

 
35.62

 
 
2018
 
457

 
1,963,577

 
12.7

 
74,728,696

 
15.0

 
38.06

 
41.12

 
 
2019
 
299

 
1,817,980

 
11.7

 
64,620,021

 
13.0

 
35.54

 
39.13

 
 
2020
 
297

 
1,752,474

 
11.3

 
61,964,882

 
12.4

 
35.36

 
40.19

 
 
2021
 
141

 
1,088,381

 
7.0

 
39,011,996

 
7.8

 
35.84

 
41.84

 
 
2022
 
69

 
621,895

 
4.0

 
22,413,491

 
4.5

 
36.04

 
43.21

 
 
2023
 
60

 
806,056

 
5.2

 
26,546,929

 
5.3

 
32.93

 
41.52

 
 
2024
 
46

 
334,024

 
2.1

 
12,170,759

 
2.5

 
36.44

 
46.22

 
 
Thereafter
 
54

 
893,878

 
5.8

 
38,832,607

 
7.8

 
43.44

 
61.10

 
 
Subtotal/Weighted Average
 
2,653

 
13,932,076

 
89.8

 
498,643,055

 
100.0

 
35.79

 
40.37

 
 
Signed leases not commenced
 
294,263

 
1.9

 
 
 
 
 
 
 
 
 
 
Available
 
1,121,400

 
7.2

 
 
 
 
 
 
 
 
 
 
Building Management Use
 
111,868

 
0.7

 
 
 
 
 
 
 
 
 
 
BOMA Adjustment(3)
 
 
 
55,996

 
0.4

 
 
 
 
 
 
 
 
 
 
Total/Weighted Average
 
2,653

 
15,515,603

 
100.0
%
 
$
498,643,055

 
100.0
%
 
35.79

 
40.37

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
___________________________________________________
(1)
Represents annualized rent at September 30, 2015 divided by leased square feet.
(2)
Represents annualized rent at expiration divided by leased square feet.
(3)
Represents the square footage adjustments for leases that do not reflect BOMA remeasurement.
NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definitions.

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Portfolio Data


Office Quarterly Lease Expirations - Next Four Quarters
Total Office Portfolio as of September 30, 2015

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q4 2015
 
Q1 2016
 
Q2 2016
 
Q3 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Expiring SF(1)
 
228,273
 
334,133
 
468,607
 
403,570
 
 
Percentage of Portfolio
 
1.5
%
 
2.2
%
 
3.0
%
 
2.6
%
 
 
Expiring Rent per SF(2)
 
$
33.58

 
$
33.31

 
$
37.34

 
$
34.08

 
 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
Detailed Submarket Data
 
 
 
 
 
Due to the small square footage of leases in each quarter in each submarket, and the varying terms and square footage of the individual leases and the individual buildings involved, the data in this table should only be extrapolated with caution.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q4 2015
 
Q1 2016
 
Q2 2016
 
Q3 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beverly Hills
Expiring SF(1)
 
23,717

 
29,557

 
46,681

 
26,546

 
 
Expiring Rent per SF(2)
 
$
41.32

 
$
35.04

 
$
41.69

 
$
42.95

 
 
Brentwood
Expiring SF(1)
 
12,462

 
37,566

 
68,342

 
74,921

 
 
Expiring Rent per SF(2)
 
$
32.47

 
$
34.20

 
$
37.00

 
$
34.98

 
 
Century City
Expiring SF(1)
 
15,582

 
33,829

 
19,261

 
49,720

 
 
Expiring Rent per SF(2)
 
$
33.83

 
$
40.55

 
$
37.94

 
$
36.72

 
 
Honolulu
Expiring SF(1)
 
31,176

 
37,149

 
35,292

 
36,189

 
 
Expiring Rent per SF(2)
 
$
32.15

 
$
31.63

 
$
35.50

 
$
31.75

 
 
Olympic Corridor
Expiring SF(1)
 
17,310

 
24,855

 
21,633

 
37,809

 
 
Expiring Rent per SF(2)
 
$
30.26

 
$
32.67

 
$
31.62

 
$
31.16

 
 
Santa Monica
Expiring SF(1)
 
10,118

 
4,581

 
33,834

 
15,249

 
 
Expiring Rent per SF(2)
 
$
34.78

 
$
64.29

 
$
57.70

 
$
43.91

 
 
Sherman Oaks/Encino
Expiring SF(1)
 
54,373

 
67,521

 
187,665

 
115,010

 
 
Expiring Rent per SF(2)
 
$
31.79

 
$
32.22

 
$
35.61

 
$
32.62

 
 
Warner Center/Woodland Hills
Expiring SF(1)
 
36,208

 
93,499

 
40,079

 
40,794

 
 
Expiring Rent per SF(2)
 
$
24.93

 
$
29.57

 
$
28.04

 
$
28.07

 
 
Westwood
Expiring SF(1)
 
27,327

 
5,576

 
15,820

 
7,332

 
 
Expiring Rent per SF(2)
 
$
45.56

 
$
38.84

 
$
37.66

 
$
37.46

 
 
 
 
 
 
 
 
 
 
 
 
 
_________________________________________________________________
(1)
Includes leases with an expiration date in the applicable quarter where the space had not been re-leased as of September 30, 2015, other than 202,471 square feet of short-term leases.
(2)
Includes the impact of rent escalations over the entire term of the expiring lease, and is therefore not directly comparable to starting rents. Fluctuations in this number from quarter to quarter primarily reflects the mix of buildings/submarkets involved, and is also impacted by the varying terms and square footage of the individual leases expiring.



NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definitions.

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Portfolio Data


Office Leasing Activity
Total Office Portfolio during the three months ended September 30, 2015

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rentable Square feet
 
Percentage
 
 
 
 
 
 
 
 
 
 
 
Net Absorption During Quarter
 
1,304
 
0.01%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Leases Signed During Quarter
 
Number of leases
 
Rentable square feet
 
Weighted Average Lease Term (months)
 
 
 
 
 
 
 
 
 
 
 
New leases
 
78
 
264,637
 
62
 
 
Renewal leases
 
96
 
375,870
 
49
 
 
All leases
 
174
 
640,507
 
55
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
Change in Annual Rental Rates (Per Square Foot) for Office Leases Executed during the Quarter(1)
 
 
 
 
 
 
 
 
 
 
 
Starting Cash Rent
 
Straight-line Rent
 
Expiring Cash Rent
 
 
 
 
 
 
 
 
 
 
Leases executed during the quarter
$41.00
 
$43.14
 
N/A
 
 
Prior leases for the same space
$33.45
 
$34.20
 
$37.20
 
 
Percentage change
22.6%
 
26.1%
 
10.2%
(2) 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
Average Office Lease Transaction Costs (Per Square Foot)(3)
 
 
 
 
 
 
 
 
 
Lease Transaction Costs
 
Lease Transaction Costs per Annum
 
 
 
 
 
 
 
 
New leases signed during the quarter
$31.85
 
$6.15
 
 
Renewal leases signed during the quarter
$15.81
 
$3.84
 
 
All leases signed during the quarter
$22.43
 
$4.92
 
 
 
 
 
 
 
________________________________________________________________
(1)
Represents the average initial stabilized cash and straight-line rents on new and renewal leases executed during the quarter compared to the prior lease on the same space, excluding short term leases and leases on space where the prior lease was terminated more than a year before execution of the new lease.
(2)
The percentage change for expiring cash rent represents the difference in the starting cash rent on leases executed during the quarter compared to the expiring cash rent on the prior leases for the same space.
(3)
Represents the weighted average of tenant improvements and leasing commissions.


NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definitions.

20                     Go to Table of Contents

 
Portfolio Data


Multifamily Portfolio Summary
as of September 30, 2015

Annualized Rent by Submarket
 
 
 
 
 
 
 
 
 
 
Submarket
 
Number of Properties
 
Number of Units
 
Units as a Percent of Total
 
 
 
 
 
 
 
 
 
 
 
Brentwood
 
5
 
950

 
28
%
 
 
Honolulu
 
3
 
1,566

 
47

 
 
Santa Monica
 
2
 
820

 
25

 
 
Total
 
10
 
3,336

 
100
%
 
 
 
 
 
 
 
 
 
 
 
Submarket
 
Percent Leased
 
Annualized Rent
 
Monthly Rent Per Leased Unit
 
 
 
 
 
 
 
 
 
 
 
Brentwood
 
99.9
%
 
$
27,578,184

 
$
2,422

 
 
Honolulu
 
99.4

 
32,893,836

 
1,761

 
 
Santa Monica(1)
 
99.6

 
26,151,012

 
2,667

 
 
Total / Weighted Average
 
99.6
%
 
$
86,623,032

 
2,172

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recurring Multifamily Capital Expenditures per Unit
 
 
 
 
 
 
 
For the three months ended September 30, 2015
$
119

 
 
 
 
 
 
For the nine months ended September 30, 2015
$
324

 
 
 
 
 
________________________________________________________________
(1)
Excludes 10,013 square feet of ancillary retail space generating annualized rent of $249,748.

NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definitions.

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Portfolio Data


Multifamily Development Projects
Rendering of our Moanalua Hillside Apartments, Honolulu Hawaii development, including the new entry and common area facilities, the new 8 story buildings and re-skinned existing 4 and 6 story buildings.

We are currently working on two multi-family development projects located on sites that we already own:
Moanalua Hillside Apartments, Honolulu, Hawaii
Projected Units
Estimated Cost (1)
Anticipated Completion of Construction
500
$120 million
Late 2017
Our Moanalua Hillside apartment community currently includes 696 apartment units located on 28 acres near downtown Honolulu and key military bases. The development project would add 500 new units. In addition, we plan to improve the parking and landscaping, build a new leasing and management office, and construct a new recreation and fitness facility with a new pool.

The Landmark, Brentwood, California
Projected Units
Estimated Cost(1)
Anticipated Start of Construction
Anticipated Construction Period
376
$120 - $140 million
2017
18-24 months
The Landmark would be the first new residential high-rise development west of the 405 freeway in almost 40 years, offering stunning oceans views and luxury amenities. Present plans call for a 34 story, 376 unit tower located on a site currently housing a supermarket. However, the process in Los Angeles often results in significant changes in development plans and/or unanticipated delays.
_____________________________________________________________________________
(1)
Estimated cost does not include the cost of the land, which in each case was previously purchased in connection with the current use. In the case of The Landmark, the cost of the existing underground parking garage is also not included.
NOTES: 
(1)
All figures are only estimates, as development in our markets is long and complex and subject to inherent uncertainties.
(2)
Please see the "Definitions" section at the end of this Earnings Package for certain definitions.

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Guidance


2015 OUTLOOK
Metric
2015 Guidance
Funds From Operations (FFO)
$1.62 to $1.64 per share
Adjusted Funds From Operations (AFFO)
$1.26 to $1.28 per share

Metric
Commentary
Assumption Range
Compared to Prior Guidance
Average Office Occupancy
Calculated by averaging the occupancy rates for each quarter in the year, which is determined by averaging the last day of the quarter with the last day of the prior quarter.
90.5% to 91.5%
unchanged
Residential Leased Rate
We manage our apartment portfolio to be fully leased as a result of supply constraints and rent control in our markets.
Essentially Fully Leased
unchanged
Same Property Cash NOI
Includes fees from early lease terminations and prior year CAM reconciliations.
Year over Year Increase 2.5% to 3.5%
unchanged
Core Same Property Cash NOI
Excludes fees from early lease terminations and prior year CAM reconciliations.
Year over Year Increase 3.0% to 4.0%
unchanged
Revenue from Above/Below Market Leases
Does not include $6.6 million of Other Income (net) in the first quarter related to a ground lease in Honolulu, which is also deducted in calculating AFFO.
$11 to $13 Million
unchanged
Straight-Line Revenue
Assumes that non-cash Straight-Line Revenues will be essentially the same as in 2014.
$4 to $6 Million
unchanged
G&A
We expect to maintain G&A at approximately 5% of revenue.
$27 to $30 Million
unchanged
Interest Expense
 
$136 to $138 Million
revised
Weighted Average Diluted Shares
Range based on variations in average stock price; does not assume any new stock offerings.
177 to 178 Million
unchanged
Other Income (net)
Excluding the impact of any special items in any quarter, we assume that Other Income (net of Other Expense) will be in the neighborhood of $500,000 per quarter for the remainder of the year.
Acquisitions/ Dispositions
Does not include any impact (including related costs) from acquisitions or dispositions that have not been announced.

Except as disclosed, our guidance does not include the impact from possible future property acquisitions or dispositions, including acquisition and disposition costs, financings, other possible capital markets activities or impairment charges. The guidance and representative assumptions on this page are forward looking statements and reflect our views of current and future market conditions. Only a few of our assumptions underlying our guidance are noted above, and our actual results will be affected by known and unknown risks, trends, uncertainties and factors, some of which are beyond our control or ability to predict. Although we believe that the assumptions underlying our guidance are reasonable, they are not guarantees of future performance and some of them will inevitably prove to be incorrect.  As a result, our actual future results can be expected to differ from our expectations, and those differences may be material.






NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definitions.

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Definitions

Adjusted Funds From Operations (AFFO):  We calculate AFFO from FFO by (i) eliminating the impact on FFO of straight-line rent; amortization/accretion of acquired above/below market leases; amortization/accretion of loan premiums/discounts; amortization of interest rate contracts; amortization/expense of loan costs; non-cash compensation expense; and adjustments attributable to consolidated joint ventures and investments in unconsolidated real estate funds, and (ii) subtracting recurring capital expenditures, tenant improvements and leasing commissions. AFFO is a non-GAAP financial measure for which we believe that net income is the most directly comparable GAAP financial measure. AFFO is not intended to represent cash flow, but may provide an additional perspective on our operating results and our ability to fund cash needs and pay dividends.  As a widely reported measure of the performance of REITs, AFFO is also used by some investors to compare our performance with other REITs.  However, other REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not be comparable to that of other REITs. AFFO should be considered only as a supplement to net income as a measure of our performance.

Annualized Rent:  Represents annualized monthly cash base rent (i.e., excludes tenant reimbursements, parking and other revenue) before abatements under leases commenced as of the measurement date (does not include 294,263 square feet with respect to signed leases not yet commenced at September 30, 2015).  For our triple net Burbank and Honolulu office properties, annualized rent is calculated by adding expense reimbursements to base rent. Annualized rent does not include lost rent recovered from insurance.
  
Average Occupancy Rates: Calculated by averaging the occupancy rates on the last day of the current and prior quarter and, for reporting periods longer than a quarter, by averaging the occupancy rates for all the quarters in the respective reported period.

Beverly Hills: We include in our Beverly Hills submarket data one property consisting of approximately 216,000 square feet located just outside the Beverly Hills city limits. In calculating our percentage of the submarket, we have eliminated this property from both the numerator and the denominator for consistency with third party data.

Diluted Shares:  We include common stock and other convertible equity instruments, but not units in our Operating Partnership, in calculating diluted shares.

Fully Diluted Shares:  We include common stock and other convertible equity instruments, as well as units in our Operating Partnership, in calculating fully diluted shares 

Funds From Operations (FFO):  We calculate FFO before noncontrolling interests in accordance with the standards established by the National Association of Real Estate Investment Trusts (NAREIT). FFO is a non-GAAP financial measure which represents net income calculated in accordance with GAAP, excluding gains (or losses) from sales of depreciable operating property, real estate depreciation and amortization (other than amortization of deferred loan costs), and after adjustments attributable to consolidated joint ventures and investments in unconsolidated real estate funds.  We provide FFO as a supplemental performance measure because some investors use it to identify trends in occupancy rates, rental rates and operating costs from year to year.  We also believe that, as a widely recognized measure of the performance of REITs, FFO is used by some investors as a basis to compare our operating performance with that of other REITs.  However, FFO has limitations as a measure of our performance because it excludes depreciation and amortization, and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures, tenant improvements and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations.  Other equity REITs may not calculate FFO in accordance with the NAREIT definition and, accordingly, our FFO may not be comparable to other REITs.  FFO should be considered only as a supplement to net income as a measure of our performance.  FFO should not be used as a measure of our liquidity or cash flow, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends. 

GAAP: GAAP refers to accounting principles generally accepted in the United States.

Net Operating Income (NOI):  NOI is a non-GAAP measure consisting of the revenue and expense attributable to the real estate properties that we own and operate. We present two forms of NOI:

“NOI - GAAP basis” is calculated by excluding the following from our net income : general and administrative expense, depreciation and amortization expense, other income, other expense, income (or loss) including depreciation from unconsolidated real estate funds, interest expense, acquisition related expenses, and net income attributable to noncontrolling interests.


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Definitions

“NOI - Cash basis” is calculated by excluding from the GAAP basis NOI our straight-line rent and the amortization/accretion of acquired above/below market leases.

 We provide NOI as a supplemental performance measure because, by excluding the adjustments listed above, some investors use it to identify trends in occupancy rates, rental rates and operating costs from year to year.  We also believe that, as a widely recognized measure of the performance of REITs, NOI is used by some investors as a basis to compare our operating performance with that of other REITs.  However, NOI has limitations as a measure of our performance because it excludes depreciation and amortization expense, and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures, tenant improvements and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations.  Other equity REITs may not calculate NOI in a similar manner and, accordingly, our NOI may not be comparable to those other REITs' NOI. NOI should be considered only as a supplement to net income as a measure of our performance and should not be used as a measure of our liquidity or cash flow, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends. 

Occupancy Rate:  Represents the percentage leased, not including signed leases not yet commenced, as of September 30, 2015.
 
Properties Owned:  Our "Consolidated Portfolio" includes all of the properties included in our consolidated results. We own 100% of these properties, except for a 79,000 square foot property owned by a joint venture in which we own a 66.67% interest. Our "Total Portfolio" includes our Consolidated Portfolio plus eight properties totaling 1.8 million square feet owned by our unconsolidated real estate Funds, in which we own a weighted average of approximately 60% based on square footage.

Recurring Capital Expenditures: Building improvements and leasing costs required to maintain current revenues once a property has been stabilized, generally excluding capital expenditures and leasing costs for items such as acquired buildings being stabilized, newly developed space and upgrades to improve revenues or operating expenses, as well as those resulting from casualty damage or bringing the property into compliance with governmental requirements.

Rentable Square Feet:  Based on the BOMA remeasurement.  At September 30, 2015, total consists of 14,226,339 leased square feet (including 294,263 square feet with respect to signed leases not commenced), 1,121,400 available square feet, 111,868 building management use square feet and 55,996 square feet of BOMA adjustment on leased space.

Same Property NOI:  To facilitate a comparison of NOI between reported periods, we calculate comparable amounts for a subset of our owned properties referred to as our “same properties.”  Same property amounts are calculated as the amounts attributable to properties which have been owned and operated by us in a consistent manner, and reported in our consolidated results, during the entire span of both periods being compared.  Therefore, we excluded from our same property set for this quarter any properties (i) acquired on or after January 1, 2014; (ii) sold, contributed or otherwise removed from our consolidated financial statements on or after January 1, 2014; or (iii) that underwent a major repositioning project that we believed significantly affected its results at any point during the period commencing on January 1, 2014 and ending on September 30, 2015. Our same properties for 2015 include all of our consolidated properties other than (i) a 216,000 square foot office property we acquired in October 2014, (ii) a 468 unit multifamily property in Honolulu we acquired in December 2014, (iii) a 227,000 square foot office property we acquired in March 2015, (iv) a 413,000 square foot office property which included a 35,000 square foot store on which we expect to develop a residential tower and (v) a 79,000 square foot office property in Honolulu (a joint venture in which we own a 66.67% interest) which is undergoing a repositioning.

Shares of Common Stock Outstanding:  Represents undiluted common shares outstanding as of September 30, 2015, and therefore excludes units in our Operating Partnership and other convertible equity instruments.

Short Term Leases:  Represents leases that expired on or before the measurement date or had a term of less than one year, including hold over tenancies, month to month leases and other short term occupancies.

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