EX-99.1 2 dei2013q2ex99-1.htm 2013 Q2 EARNINGS PACKAGE DEI 2013 Q2 ex99-1



Douglas Emmett, Inc.
 
EXECUTIVE SUMMARY
 

We are one of the largest owners and operators of high-quality office and multifamily properties located in the premier coastal submarkets of Southern California and Hawaii. Our properties are concentrated in ten submarkets - Beverly Hills, Brentwood, Burbank, Century City, Honolulu, Olympic Corridor, Santa Monica, Sherman Oaks/Encino, Warner Center/Woodland Hills and Westwood. We focus on owning and acquiring a substantial share of top-tier office properties and premier multifamily communities in neighborhoods with significant supply constraints, high-end executive housing and key lifestyle amenities. We operate as a REIT and are listed on the New York Stock Exchange under the symbol DEI.

SECOND QUARTER 2013 EXECUTIVE SUMMARY

Fundamentals: During the quarter, even after the impact of our recent acquisition, our leased rate in our total office portfolio increased by 10 basis points, while our occupied percentage increased by 40 basis points. We continue to show higher net effective office rents in all of our other submarkets except Warner Center, resulting in average positive straight line rent roll-up of 3.4% on office leases executed during the quarter compared to the expiring leases for the same space. In our multifamily portfolio, which remains fully leased, our average asking rents are 5.2% higher than in the second quarter of 2012.
   
Funds From Operations: Our Funds From Operations (FFO) (adjusted for terminated swaps) increased by 9.9% to $67.7 million for the quarter ended June 30, 2013 compared to $61.6 million for the prior year quarter, and Adjusted Funds from Operations increased by 8.6% to $55.3 million from $50.9 million. GAAP net income attributable to common stockholders increased by 108.9% to $13.6 million for the quarter ended June 30, 2013 compared to $6.5 million for the prior year quarter.

Same Property Cash NOI: Our same property cash NOI increased by 2.4% in the second quarter of 2013 compared to the second quarter of 2012, due to increases in both our office and multifamily revenues, as well as good expense control.

Recent Developments:

On May 15, 2013, we used a portion of our cash on hand to purchase a 225,000 square foot Class A office building located at 8484 Wilshire Blvd. in Beverly Hills for a contract price of $89.0 million, or approximately $395 per square foot.

On April 30, 2013, we closed a $325.0 million loan to refinance an existing loan to one of our unconsolidated Funds, reducing its outstanding debt by $40.0 million. The new loan matures on May 1, 2018, and we have effectively fixed its interest rate at 2.35% per annum until May 1, 2017.

Leverage: At June 30, 2013, we had $184.4 million in cash and cash equivalents on our balance sheet, and our net consolidated debt to enterprise value was 42%.

Dividends: On July 15, 2013, we paid a quarterly cash dividend of $0.18 per share, or $0.72 on an annualized basis per share, to our shareholders of record on June 28, 2013.

Guidance: As set forth on page 22, we have adjusted our 2013 FFO guidance to $1.45-$1.49 per diluted share.


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


Douglas Emmett, Inc.
 
TABLE OF CONTENTS
 


______________________________________________

This Second Quarter 2013 Earnings Results and Operating Information 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.  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, such as the recent global financial crisis; decreased rental rates or increased tenant incentives and vacancy rates; defaults on, early terminations of, or 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 identifying properties to acquire and completing acquisitions; failure to successfully operate acquired properties and operations; 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 amount of 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; the consequences of any 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, investors should use caution in relying on previously reported forward-looking statements, which were based on results and trends at the time they were made, 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 to reflect events or circumstances after the date of this Earnings Package.


Douglas Emmett, Inc.
CORPORATE DATA
 
as of June 30, 2013




Office Portfolio
Consolidated
Total Portfolio
 
Number of office properties
51

59

 
Square feet (in thousands)
13,078

14,902

 
Leased rate
91.8
%
91.5
%
 
Occupied rate
90.2
%
89.7
%
 
 
 
 
 
Multifamily Portfolio
 
 
 
Number of multifamily properties
 
9

 
Number of multifamily units
 
2,868

 
Multifamily leased rate
 
100.0
%
 

Market Capitalization (in thousands, except price per share)
 
Closing price per share of common stock (NYSE:DEI)
 
$
24.95

 
Shares of common stock outstanding
 
142,594

 
Fully diluted shares outstanding
 
174,996

 
Equity capitalization(1)
 
$
4,366,145

 
Net debt(2)
 
$
3,166,727

 
Total enterprise value
 
$
7,532,872

 
Net debt/total enterprise value
 
42
%
 
__________________________________________

(1)
Common equity capitalization represents our fully diluted shares multiplied by the closing price of our stock.
(2)
Net debt represents our consolidated debt, net of our cash and cash equivalents.  It excludes the debt of our unconsolidated real estate funds.

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



3

Douglas Emmett, Inc.
 
PROPERTY MAP
 
as of June 30, 2013

 

4

Douglas Emmett, Inc.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
 
as of June 30, 2013

CORPORATE OFFICES

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

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 Anderson
 
Retired Real Estate Executive and Investor
Leslie E. Bider
 
Chief Executive Officer – PinnacleCare
Dr. David T. Feinberg
 
Chief Executive Officer – University of California, Los Angeles (UCLA) Hospital System, Associate Vice Chancellor – UCLA Health Sciences
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

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

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


5

Douglas Emmett, Inc.
 
BALANCE SHEETS
 
(in thousands)

 
June 30, 2013
 
December 31, 2012
 
(unaudited)
 
 

Assets
 

 
 

Investment in real estate:
 

 
 

Land
$
860,526

 
$
851,679

Buildings and improvements
5,326,100

 
5,244,738

Tenant improvements and lease intangibles
726,350

 
690,120

Investment in real estate, gross
6,912,976

 
6,786,537

Less: accumulated depreciation
(1,398,595
)
 
(1,304,468
)
Investment in real estate, net
5,514,381

 
5,482,069

 
 
 
 
Cash and cash equivalents
184,413

 
373,203

Tenant receivables, net
1,552

 
1,331

Deferred rent receivables, net
65,591

 
63,192

Acquired lease intangible assets, net
4,117

 
4,707

Investment in unconsolidated real estate funds
189,700

 
149,478

Other assets
25,756

 
29,827

Total assets
$
5,985,510

 
$
6,103,807

 
 
 
 
Liabilities
 
 
 

Secured notes payable
$
3,351,140

 
$
3,441,140

Interest payable, accounts payable and accrued expenses
46,377

 
45,171

Security deposits
35,485

 
34,284

Acquired lease intangible liabilities, net
61,912

 
67,035

Interest rate contracts
71,317

 
100,294

Dividends payable
25,667

 
25,424

Total liabilities
3,591,898

 
3,713,348

 
 
 
 
Equity
 
 
 

Douglas Emmett, Inc. stockholders' equity:
 
 
 

Common stock
1,426

 
1,412

Additional paid-in capital
2,653,750

 
2,635,408

Accumulated other comprehensive income (loss)
(56,738
)
 
(82,991
)
Accumulated deficit
(599,785
)
 
(574,173
)
Total Douglas Emmett, Inc. stockholders' equity
1,998,653

 
1,979,656

Noncontrolling interests
394,959

 
410,803

Total equity
2,393,612

 
2,390,459

Total liabilities and equity
$
5,985,510

 
$
6,103,807



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


6

Douglas Emmett, Inc.
 OPERATING RESULTS
(unaudited and in thousands, except per share data)


 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Revenues:
 

 
 

 
 

 
 

Office rental:
 

 
 

 
 

 
 

Rental revenues
$
99,110

 
$
98,651

 
$
196,480

 
$
196,753

Tenant recoveries
11,718

 
11,787

 
22,303

 
21,762

Parking and other income
18,834

 
17,757

 
37,302

 
34,950

Total office revenues
129,662

 
128,195

 
256,085

 
253,465

 
 
 
 
 
 
 
 
Multifamily rental:
 
 
 
 
 
 
 
Rental revenues
17,655

 
16,945

 
35,217

 
33,700

Parking and other income
1,399

 
1,328

 
2,872

 
2,691

Total multifamily revenues
19,054

 
18,273

 
38,089

 
36,391

 
 
 
 
 
 
 
 
Total revenues
148,716

 
146,468

 
294,174

 
289,856

 
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
 
Office expenses
42,722

 
42,444

 
84,031

 
83,391

Multifamily expenses
4,942

 
4,931

 
9,951

 
9,861

General and administrative
7,082

 
6,741

 
14,178

 
13,441

Depreciation and amortization
48,091

 
46,728

 
94,115

 
92,525

Total operating expenses
102,837

 
100,844

 
202,275

 
199,218

 
 
 
 
 
 
 
 
Operating income
45,879

 
45,624

 
91,899

 
90,638

 
 
 
 
 
 
 
 
Other income
1,250

 
593

 
2,027

 
1,401

Other expense
(1,019
)
 
(434
)
 
(1,386
)
 
(1,009
)
Income (loss), including depreciation, from unconsolidated real estate funds
1,335

 
(1,117
)
 
2,524

 
(2,101
)
Interest expense
(32,399
)
 
(36,591
)
 
(65,231
)
 
(74,152
)
Acquisition-related expenses
(68
)
 

 
(243
)
 

Net income
14,978

 
8,075

 
29,590

 
14,777

Less:  Net income attributable to noncontrolling interests
(1,343
)
 
(1,548
)
 
(3,873
)
 
(2,864
)
Net income attributable to common stockholders
$
13,635

 
$
6,527

 
$
25,717

 
$
11,913

 
 
 
 
 
 
 
 
Net income per common share – basic
$
0.10

 
$
0.05

 
$
0.18

 
$
0.09

Net income per common share – diluted
$
0.09

 
$
0.05

 
$
0.18

 
$
0.08

 
 
 
 
 
 
 
 
Weighted average shares of common stock outstanding - basic
142,581

 
139,651

 
142,511

 
139,025

Weighted average shares of common stock outstanding - diluted
175,252

 
173,193

 
174,937

 
172,481


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



7

Douglas Emmett, Inc.
FUNDS FROM OPERATIONS AND
ADJUSTED FUNDS FROM OPERATIONS
 
(unaudited and in thousands, except per share data)


 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Funds From Operations (FFO)
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
13,635

 
$
6,527

 
$
25,717

 
$
11,913

Depreciation and amortization of real estate assets
48,091

 
46,728

 
94,115

 
92,525

Net income attributable to noncontrolling interests
1,343

 
1,548

 
3,873

 
2,864

Adjustments attributable to consolidated joint venture and unconsolidated investment in real estate funds
4,634

 
3,449

 
8,142

 
6,523

FFO (before adjustments for terminated swaps)
67,703

 
58,252

 
131,847

 
113,825

Amortization of accumulated other comprehensive income as a result of terminated swaps (1)

 
3,360

 

 
7,707

FFO (after adjustments for terminated swaps)
$
67,703

 
$
61,612

 
$
131,847

 
$
121,532

 
 
 
 
 
 
 
 
Adjusted Funds From Operations (AFFO)
 
 
 
 
 
 
 
FFO (after adjustments for terminated swaps)
$
67,703

 
$
61,612

 
$
131,847

 
$
121,532

Straight-line rent adjustment
(439
)
 
(788
)
 
(2,399
)
 
(2,846
)
Amortization of acquired above and below market leases
(3,968
)
 
(4,459
)
 
(8,022
)
 
(9,336
)
Amortization of interest rate contracts and loan premium

 

 

 
(996
)
Amortization of prepaid financing
933

 
890

 
2,103

 
2,045

Recurring capital expenditures, tenant improvements and leasing commissions
(10,273
)
 
(8,370
)
 
(21,518
)
 
(22,197
)
Non-cash compensation expense
2,448

 
2,323

 
4,989

 
4,504

Adjustments attributable to consolidated joint venture and unconsolidated investment in real estate funds
(1,133
)
 
(334
)
 
(1,607
)
 
(683
)
AFFO
$
55,271

 
$
50,874

 
$
105,393

 
$
92,023

 
 
 
 
 
 
 
 
Weighted average share equivalents outstanding - diluted
175,252

 
173,193

 
174,937

 
172,481

FFO per share- diluted
$0.39
 
$0.36
 
$0.75
 
$0.70
AFFO per share- diluted
$0.32
 
$0.29
 
$0.60
 
$0.53
AFFO payout ratio
55.66
%
 
50.18
%
 
58.38
%
 
55.49
%
Dividends per share declared
$0.18
 
$0.15
 
$0.36
 
$0.30
__________________________________________________

(1)
We terminated certain interest rate swaps in December 2011 in connection with the refinancing of related loans. In calculating FFO, we make an adjustment to treat debt interest rate swaps as terminated for all purposes in the quarter of termination. In contrast, under GAAP, terminated swaps can continue to impact net income over their original lives as if they were still outstanding. In calculating FFO, we recognize the full expense in the period the swaps are terminated and offset the subsequent amortization expense contained in GAAP net income by an equivalent amount in this table. In the three and six months ended June 30, 2012, GAAP net income was reduced by amortization expense as a result of certain swaps terminated in December 2011, and we offset that expense by an equivalent amount in calculating our FFO. We had no swap terminations in 2012 and 2013.

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



8

Douglas Emmett, Inc.
SAME PROPERTY STATISTICAL AND FINANCIAL DATA
(unaudited and in thousands, except statistics)

 
As of June 30,
 
 
2013
 
2012
 
Same Property Office Statistics(1)
 
 
 
 
Number of properties
49

 
49

 
Rentable square feet (in thousands)
12,774

 
12,772

 
Ending % leased
91.9
%
 
90.8
%
 
Ending % occupied
90.2
%
 
89.1
%
 
Quarterly average % occupied
90.1
%
 
88.9
%
 
 
 
 
 
 
Same Property Multifamily Statistics
 
 
 
 
Number of properties
9

 
9

 
Number of units
2,868

 
2,868

 
Ending % leased
100.0
%
 
99.8
%
 


 
Three Months Ended June 30,
 
% Favorable
 
 
2013
 
2012
 
(Unfavorable)
 
Same Property Net Operating Income - GAAP Basis
 

 
 

 
 

 
Total office revenues
$
127,495

 
$
127,222

 
0.2
 %
 
Total multifamily revenues
19,054

 
18,273

 
4.3
 %
 
Total revenues
146,549

 
145,495

 
0.7
 %
 
 
 
 
 
 
 
 
Total office expenses
(41,817
)
 
(42,041
)
 
0.5
 %
 
Total multifamily expenses
(4,942
)
 
(4,931
)
 
(0.2
)%
 
Total property expenses
(46,759
)
 
(46,972
)
 
0.5
 %
 
 
 
 
 
 
 
 
Same Property NOI - GAAP basis
$
99,790

 
$
98,523

 
1.3
 %
 
 
 
 
 
 
 
 
Same Property Net Operating Income - Cash Basis
 
 
 
 
 
 
Total office revenues
$
124,100

 
$
122,867

 
1.0
 %
 
Total multifamily revenues
18,214

 
17,430

 
4.5
 %
 
Total revenues
142,314

 
140,297

 
1.4
 %
 
 
 
 
 
 
 
 
Total office expenses
(41,862
)
 
(42,087
)
 
0.5
 %
 
Total multifamily expenses
(4,942
)
 
(4,931
)
 
(0.2
)%
 
Total property expenses
(46,804
)
 
(47,018
)
 
0.5
 %
 
 
 
 
 
 
 
 
Same Property NOI - cash basis
$
95,510

 
$
93,279

 
2.4
 %
 
 
 
 
 
 
 
 
_____________________________________________

(1)
Our same property NOI excludes a 225,000 square foot office property in Beverly Hills that we acquired in May 2013, and a 79,000 square foot office property in Honolulu (in which we own a two thirds interest) which is currently undergoing a repositioning.

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

9

Douglas Emmett, Inc.
RECONCILIATION OF SAME PROPERTY NOI
TO GAAP NET INCOME
 
(unaudited and in thousands)


 
Three Months Ended June 30,
 
2013
 
2012
Same property office revenues - cash basis
$
124,100

 
$
122,867

GAAP adjustments per definition of NOI - cash basis
3,395

 
4,355

Same property office revenues - GAAP basis
127,495

 
127,222

 
 
 
 
Same property multifamily revenues - cash basis
18,214

 
17,430

GAAP adjustments per definition of NOI - cash basis
840

 
843

Same property multifamily revenues - GAAP basis
19,054

 
18,273

 
 
 
 
Same property revenues - GAAP basis
146,549

 
145,495

 
 
 
 
Same property office expenses - cash basis
(41,862
)
 
(42,087
)
GAAP adjustments per definition of NOI - cash basis
45

 
46

Same property office expenses - GAAP basis
(41,817
)
 
(42,041
)
 
 
 
 
Same property multifamily expenses - cash basis
(4,942
)
 
(4,931
)
GAAP adjustments per definition of NOI - cash basis

 

Same property multifamily expenses - GAAP basis
(4,942
)
 
(4,931
)
 
 
 
 
Same property expenses - GAAP basis
(46,759
)
 
(46,972
)
 


 


Same property Net Operating Income (NOI) - GAAP basis
99,790

 
98,523

Non-comparable office revenues
2,167

 
972

Non-comparable office expenses
(905
)
 
(402
)
Total property NOI - GAAP basis
101,052

 
99,093

General and administrative expenses
(7,082
)
 
(6,741
)
Depreciation and amortization
(48,091
)
 
(46,728
)
Operating income
45,879

 
45,624

Other income
1,250

 
593

Other expense
(1,019
)
 
(434
)
Income (loss), including depreciation, from unconsolidated real estate funds
1,335

 
(1,117
)
Interest expense
(32,399
)
 
(36,591
)
Acquisition-related expenses
(68
)
 

Net income
14,978

 
8,075

Less: Net income attributable to noncontrolling interests
(1,343
)
 
(1,548
)
Net income attributable to common stockholders
$
13,635

 
$
6,527



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


10

Douglas Emmett, Inc.
 
OPERATING RESULTS OF
 
UNCONSOLIDATED REAL ESTATE FUNDS(1)
 
 
(unaudited and in thousands)


 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Summary Income Statement of Unconsolidated Real Estate Funds
 
2013
 
2012
 
2013
 
2012
Office revenues
 
$
16,026

 
$
15,320

 
$
31,408

 
$
30,436

Office expenses
 
(6,190
)
 
(5,904
)
 
(12,162
)
 
(11,703
)
NOI
 
9,836

 
9,416

 
19,246

 
18,733

General and administrative
 
(96
)
 
(67
)
 
(163
)
 
(131
)
Depreciation and amortization
 
(6,521
)
 
(6,519
)
 
(13,014
)
 
(13,331
)
Operating income
 
3,219

 
2,830

 
6,069

 
5,271

Other income
 

 

 

 
3

Interest expense
 
(2,619
)
 
(5,923
)
 
(5,127
)
 
(11,849
)
Net income (loss)
 
$
600

 
$
(3,093
)
 
$
942

 
$
(6,575
)
 
 
 
 
 
 
 
 
 
FFO of Unconsolidated Real Estate Funds
 
 
 
 
 
 
 
 
Net income (loss)
 
$
600

 
$
(3,093
)
 
$
942

 
$
(6,575
)
Add back: depreciation and amortization
 
6,521

 
6,519

 
13,014

 
13,331

FFO
 
$
7,121

 
$
3,426

 
$
13,956

 
$
6,756

 
 
 
 
 
 
 
 
 
Douglas Emmett's Share of the Unconsolidated Real Estate Funds FFO
 
 
 
 
 
 
 
 
Our share of the unconsolidated real estate funds' net income (loss)
 
$
547

 
$
(1,889
)
 
$
946

 
$
(3,745
)
Add back: our share of the funds' depreciation and amortization
 
3,812

 
3,635

 
7,504

 
6,881

Equity allocation and basis difference
 
788

 
772

 
1,578

 
1,644

Our share of the unconsolidated real estate funds' FFO
 
$
5,147

 
$
2,518

 
$
10,028

 
$
4,780


__________________________________________________

(1)
We manage and own significant equity interests in two unconsolidated institutional real estate Funds which own 8 properties. Our ownership interest entitles us to a pro rata share of any distributions based on our ownership (a weighted average of 60% at June 30, 2013 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.  The investment period for these Funds ended on October 7, 2012, and no further properties will be purchased by them. As of June 30, 2013 we have no further capital commitments to our Funds.


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





11

Douglas Emmett, Inc.
 
DEBT BALANCES
 
(unaudited and in thousands)


Consolidated Debt
Maturity Date
 
at June 30, 2013 (1)
 
Principal Balance
Effective Annual Rate (2)
 
3/3/2014
 
$
16,140

(3) 
LIBOR + 1.85%
 
 
2/1/2015
 
111,920

 
DMBS + 0.707%
(4) 
(Fannie Mae)
4/1/2015
 
150,000

 
LIBOR +1.50%
 
 
3/1/2016
 
82,000

 
LIBOR + 0.62%
 
(Fannie Mae)
6/1/2017
 
18,000

 
LIBOR + 0.62%
 
(Fannie Mae)
10/2/2017
 
400,000

 
4.45%
(5) 
 
4/2/2018
 
510,000

 
4.12%
(5) 
 
8/1/2018
 
530,000

 
3.74%
(5) 
 
8/5/2018
 
355,000

(6) 
4.14%
 
 
2/1/2019
 
155,000

(7) 
4.00%
 
 
6/5/2019
 
285,000

(8) 
3.85%
 
 
3/1/2020
(9) 
350,000

(10) 
4.46%
 
 
11/2/2020
 
388,080

 
3.65%
(5) 
 
 
 
$
3,351,140

 
 
 
 

____________________________________________________

(1)
As of June 30, 2013, (i) the weighted average remaining life of our outstanding debt was 5.1 years; (ii) of the $2.97 billion of debt on which the interest rate was fixed under the terms of the loan or a swap, the weighted average remaining life was 5.5 years, the weighted average remaining period during which interest was fixed was 4.1 years and the weighted average annual interest rate was 4.05%; and (iii) including the non-cash amortization of interest rate contracts and prepaid financing, the effective weighted average interest rate was 4.17%. Except as otherwise noted, each loan is secured by a separate collateral pool consisting of one or more properties, requiring monthly payments of interest only with outstanding principal due upon maturity.
(2)
Includes the effect of interest rate contracts and excludes amortization of prepaid financing, all shown on an actual/360-day basis.
(3)
The borrower is a consolidated entity in which our Operating Partnership owns a two-thirds interest.
(4)
The loan has a $75.0 million tranche bearing interest at DMBS + 0.76% and a $36.9 million tranche bearing interest at DMBS + 0.60%
(5)
Interest rates fixed or effectively fixed through interest rate swaps until the following dates: $400.0 million loan, July 2015; $510.0 million loan, April 2016; $530.0 million loan, August 2016; and $388.1 million loan, November 2017.
(6)
Interest-only until February 2016, with principal amortization thereafter based upon a 30-year amortization table.
(7)
Interest-only until February 2015, with principal amortization thereafter based upon a 30-year amortization table.
(8)
Interest only until February 2017, with principal amortization thereafter based upon a 30-year amortization table.
(9)
We have 2 one-year extension options, which would extend the maturity to March 1, 2020 from March 1, 2018, subject to meeting certain conditions.
(10)
Interest-only until March 2014 with principal amortization thereafter based upon a 30-year amortization table.


Unconsolidated Debt
 
 
at June 30, 2013
Maturity Date
 
Outstanding Principal
 
Our Share of Principal
 
Effective Annual Rate
4/1/2016
 
53,722

 
13,030

(1) 
5.67%
5/1/2018
 
$
325,000

 
$
222,980

(2) 
2.35%
 
 
$
378,722

 
$
236,010

 
 

_____________________________________________________

(1)
Loan to one of our unconsolidated Funds which is secured by one property.  Requires monthly payments of principal and interest.
(2)
Loan to one of our unconsolidated Funds which is secured by a pool of six properties. Requires monthly payments of interest only, with outstanding principal due upon maturity. The swap fixing the rate on this loan expires on May 1, 2017.

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

12

Douglas Emmett, Inc.
OFFICE PORTFOLIO SUMMARY
as of June 30, 2013



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
 
8

 
1,643,901

 
11.0
%
 
7,709,880
 
21.3
%
Brentwood
 
14

 
1,700,887

 
11.4

 
3,356,126
 
50.7

Burbank
 
1

 
420,949

 
2.8

 
6,707,410
 
6.3

Century City
 
3

 
916,060

 
6.1

 
10,064,599
 
9.1

Honolulu
 
4

 
1,716,705

 
11.5

 
5,088,599
 
33.7

Olympic Corridor
 
5

 
1,098,070

 
7.4

 
3,022,969
 
36.3

Santa Monica
 
8

 
970,962

 
6.5

 
8,700,348
 
11.2

Sherman Oaks/Encino
 
11

 
3,181,254

 
21.4

 
6,171,530
 
51.5

Warner Center/Woodland Hills
 
3

 
2,855,909

 
19.2

 
7,203,647
 
39.6

Westwood
 
2

 
396,808

 
2.7

 
4,443,398
 
8.9

Total
 
59

 
14,901,505

 
100.0
%
 
62,468,506
 
23.9



_____________________________________________________



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

13

Douglas Emmett, Inc.
OFFICE PORTFOLIO PERCENT LEASED AND IN-PLACE RENTS
 
as of June 30, 2013

Submarket
 
Percent Leased(1)
 
Annualized Rent
 
Annualized Rent Per Leased Square Foot (2)
 
Monthly Rent Per Leased Square Foot
Beverly Hills
 
94.2
%
 
$
61,445,255

 
$
41.36

 
$
3.45

Brentwood
 
88.1

 
54,166,597

 
37.57

 
3.13

Burbank
 
100.0

 
15,145,670

 
35.98

 
3.00

Century City
 
96.0

 
32,722,545

 
37.65

 
3.14

Honolulu(3)
 
89.8

 
47,335,118

 
32.16

 
2.68

Olympic Corridor
 
92.8

 
30,912,252

 
31.17

 
2.60

Santa Monica(4)
 
99.1

 
52,339,379

 
54.91

 
4.58

Sherman Oaks/Encino
 
94.1

 
92,311,078

 
32.07

 
2.67

Warner Center/Woodland Hills
 
83.8

 
67,338,077

 
29.20

 
2.43

Westwood
 
94.7

 
12,997,665

 
35.36

 
2.95

Total / Weighted Average
 
91.5

 
$
466,713,636

 
35.40

 
2.95

 
 
 
 
 
 
 
 
 
Recurring Office Capital Expenditures per Rentable Square Foot
For the three months ended June 30, 2013
 
 
 
$
0.07

For the six months ended June 30, 2013
 
 
 
$
0.10

_______________________________________________________________

(1)
Includes 270,973 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 $3,004,407 of annualized rent attributable to a health club that we operate.
(4)
Includes $1,332,386 of annualized rent attributable to our corporate headquarters.

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

14

Douglas Emmett, Inc.
MULTIFAMILY PORTFOLIO SUMMARY
as of June 30, 2013

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

 
33
%
 
 
Honolulu
 
2
 
1,098

 
38

 
 
Santa Monica
 
2
 
820

 
29

 
 
Total
 
9
 
2,868

 
100
%
 
 
 
 
 
 
 
 
 
 
 
Submarket
 
Percent Leased
 
Annualized Rent
 
Monthly Rent Per Leased Unit
 
 
Brentwood
 
100.0
%
 
$
24,952,528

 
$
2,189

 
 
Honolulu
 
100.0

 
20,240,940

 
1,536

 
 
Santa Monica(1)
 
100.0

 
23,695,092

 
2,408

 
 
Total / Weighted Average
 
100.0
%
 
$
68,888,560

 
2,002

 
 
Recurring Multifamily Capital Expenditures per Unit
 
 
 
For the three months ended June 30, 2013
$
70

 
 
For the six months ended June 30, 2013
$
136

 

________________________________________________________________

(1)
Excludes 8,013 square feet of ancillary retail space generating annualized rent of $171,081.


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

15

Douglas Emmett, Inc.
OFFICE TENANT DIVERSIFICATION
(1% or Greater of Annualized Rent)
as of June 30, 2013

Individual tenants paying more than 1% of aggregate Annualized Rent:
Tenant
 
Number of Leases
 
Number of Properties
 
Lease Expiration(1)
 
Total Leased Square Feet
 
Percent of Rentable Square Feet
 
Annualized Rent
 
Percent of Annualized Rent
Time Warner (2)
 
4
 
4
 
2015-2020
 
625,750
 
4.2
%
 
$
22,402,484

 
4.8
%
William Morris Endeavor (3)
 
1
 
1
 
2027
 
175,163
 
1.2

 
8,745,625

 
1.9

Bank of America (4)
 
10
 
8
 
2013-2018
 
111,815
 
0.7

 
5,016,410

 
1.1

The Macerich Partnership, L.P.
 
1
 
1
 
2018
 
90,832
 
0.6

 
4,803,881

 
1.0

Total
 
16
 
14
 
 
 
1,003,560
 
6.7
%
 
$
40,968,400

 
8.8
%

_______________________________________________________________

(1)
Expiration dates are per leases and do not assume exercise of renewal, extension or termination options.  For tenants with multiple leases, the range shown reflects all leases other than storage, ATM and similar leases.
(2)
Includes a 10,000 square foot lease expiring in April 2015, a 150,000 square foot lease expiring in April 2016, a 421,000 square foot lease expiring in September 2019 and a 45,000 square foot lease expiring in December 2020.
(3)
Includes 172,000 square foot office and 3,000 square foot storage expiring June 2027.  Does not include an additional 5,000 square feet under lease that commences in 2013 and expire in 2027.
(4)
Includes a 21,000 square foot lease expiring in September 2013, a 7,000 square foot lease expiring in March 2014, a 9,000 square foot lease expiring in September 2014, an 11,000 square foot lease expiring in October 2014, an 11,000 square foot lease expiring in November 2014, a 4,000 square foot lease expiring in February 2015, a 6,000 square foot lease expiring in May 2015, a 23,000 square foot lease expiring in December 2015, a 12,000 square foot lease expiring in March 2018 and an 8,000 square foot lease expiring in March 2018.

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

16

Douglas Emmett, Inc.
OFFICE LEASE DISTRIBUTION
 
as of June 30, 2013



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
 
1,269

 
51.8%
 
1,739,585

 
11.7%
 
$
60,333,176

 
12.9%
2,501-10,000
 
873

 
35.7
 
4,166,049

 
28.0
 
143,715,514

 
30.8
10,001-20,000
 
202

 
8.3
 
2,799,168

 
18.8
 
100,877,893

 
21.6
20,001-40,000
 
76

 
3.1
 
2,062,802

 
13.8
 
71,818,949

 
15.4
40,001-100,000
 
23

 
0.9
 
1,411,641

 
9.5
 
53,133,934

 
11.4
Greater than 100,000
 
5

 
0.2
 
1,006,586

 
6.7
 
36,834,170

 
7.9
Subtotal
 
2,448

 
100.0%
 
13,185,831

(1) 
88.5%
 
466,713,636

 
100.0%
Signed leases not commenced
 
 
 
 
 
270,973

 
1.8
 
 
 
 
Available
 
 
 
 
 
1,270,050

 
8.5
 
 
 
 
Building Management Use
 
 
 
 
 
102,586

 
0.7
 
 
 
 
BOMA Adjustment(2)
 
 
 
 
 
72,065

 
0.5
 
 
 
 
Total
 
2,448

 
100.0%
 
14,901,505

 
100.0%
 
$
466,713,636

 
100.0%

_________________________________________________________________

(1)
Average tenant size is approximately 5,400 square feet.  Median tenant size is approximately 2,400 square feet.
(2)
Represents square footage adjustments for leases that do not reflect BOMA 1996 remeasurement.

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



17

Douglas Emmett, Inc.
INDUSTRY DIVERSIFICATION
 
as of June 30, 2013

Industry
 
Number of Leases
 
Annualized Rent as a Percent of Total
Legal
 
489
 
18.7
%
Financial Services
 
312
 
13.9

Entertainment
 
168
 
13.7

Real Estate
 
181
 
9.0

Accounting & Consulting
 
301
 
8.9

Health Services
 
316
 
7.9

Insurance
 
115
 
7.7

Retail
 
193
 
7.0

Technology
 
105
 
4.4

Advertising
 
66
 
2.4

Public Administration
 
68
 
2.3

Educational Services
 
26
 
1.6

Other
 
108
 
2.5

Total
 
2,448
 
100.0
%

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

18

Douglas Emmett, Inc.
OFFICE LEASE EXPIRATIONS
 
as of June 30, 2013



Year of Lease Expiration
 
Number of Leases
 
Rentable Square Feet
 
Expiring Square Feet as a Percent of Total
 
Annualized Rent at June 30, 2013
 
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
 
50

 
105,218

 
0.7
%
 
$
3,154,813

 
0.7
%
 
$
29.98

 
$
29.98

2013
 
185

 
552,511

 
3.7

 
19,804,383

 
4.2

 
35.84

 
36.45

2014
 
485

 
1,996,182

 
13.4

 
72,199,812

 
15.5

 
36.17

 
36.77

2015
 
474

 
2,049,312

 
13.8

 
69,943,228

 
15.0

 
34.13

 
35.83

2016
 
395

 
1,997,955

 
13.4

 
67,760,594

 
14.5

 
33.91

 
36.26

2017
 
326

 
1,773,880

 
11.9

 
58,486,207

 
12.5

 
32.97

 
36.68

2018
 
250

 
1,339,146

 
9.0

 
51,824,157

 
11.1

 
38.70

 
42.58

2019
 
87

 
1,130,901

 
7.6

 
40,183,274

 
8.6

 
35.53

 
40.38

2020
 
78

 
739,488

 
5.0

 
25,846,770

 
5.6

 
34.95

 
41.44

2021
 
42

 
449,076

 
3.0

 
16,346,178

 
3.5

 
36.40

 
42.48

2022
 
25

 
246,862

 
1.6

 
8,367,773

 
1.8

 
33.90

 
42.80

Thereafter
 
51

 
805,300

 
5.4

 
32,796,447

 
7.0

 
40.73

 
51.61

Subtotal/Weighted Average
 
2,448

 
13,185,831

 
88.5

 
466,713,636

 
100.0

 
35.40

 
38.84

Signed leases not commenced
 
270,973

 
1.8

 
 
 
 
 
 
 
 
Available
 
1,270,050

 
8.5

 
 
 
 
 
 
 
 
Building Management Use
 
102,586

 
0.7

 
 
 
 
 
 
 
 
BOMA Adjustment(3)
 
 
 
72,065

 
0.5

 
 
 
 
 
 
 
 
Total/Weighted Average
 
2,448

 
14,901,505

 
100.0
%
 
$
466,713,636

 
100.0
%
 
35.40

 
38.84


_________________________________________________________________

(1)
Represents annualized rent at June 30, 2013 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 1996 remeasurement.

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



19

Douglas Emmett, Inc.
QUARTERLY OFFICE LEASE EXPIRATIONS - NEXT FOUR QUARTERS
 
as of June 30, 2013



 
 
Q3 2013
 
Q4 2013
 
Q1 2014
 
Q2 2014
 
Expiring SF(1)
 
283,391
 
269,120
 
440,207
 
534,982
 
Percentage of Portfolio
 
2.1
%
 
2.0
%
 
3.3
%
 
4.1
%
 
Expiring Rent per SF(2)
 
$
37.43

 
$
35.41

 
$
39.80

 
$
34.24

 


Detailed Submarket Data(3)
 
 
Q3 2013
 
Q4 2013
 
Q1 2014
 
Q2 2014
 
Beverly Hills
Expiring SF(1)
 
26,719

 
30,032

 
50,025

 
36,927

 
 
Expiring Rent per SF
 
$
34.65

 
$
36.92

 
$
42.40

 
$
45.99

 
 
 
 
 
 
 
 
 
 
 
 
Brentwood
Expiring SF(1)
 
20,300

 
19,437

 
91,569

 
62,916

 
 
Expiring Rent per SF
 
$
50.05

 
$
51.12

 
$
42.54

 
$
36.28

 
 
 
 
 
 
 
 
 
 
 
 
Century City
Expiring SF(1)
 

 
4,877

 
6,013

 
39,193

 
 
Expiring Rent per SF
 
$

 
$
43.59

 
$
34.74

 
$
36.44

 
 
 
 
 
 
 
 
 
 
 
 
Honolulu
Expiring SF(1)
 
47,296

 
48,956

 
28,259

 
26,815

 
 
Expiring Rent per SF
 
$
34.04

 
$
31.70

 
$
36.32

 
$
29.74

 
 
 
 
 
 
 
 
 
 
 
 
Olympic Corridor
Expiring SF(1)
 
21,580

 
41,756

 
37,914

 
73,011

 
 
Expiring Rent per SF
 
$
33.40

 
$
31.87

 
$
32.11

 
$
34.44

 
 
 
 
 
 
 
 
 
 
 
 
Santa Monica
Expiring SF(1)
 
18,615

 
5,606

 
43,070

 
15,050

 
 
Expiring Rent per SF
 
$
62.18

 
$
53.93

 
$
66.43

 
$
77.13

 
 
 
 
 
 
 
 
 
 
 
 
Sherman Oaks/Encino
Expiring SF(1)
 
25,583

 
84,668

 
69,998

 
86,943

 
 
Expiring Rent per SF
 
$
36.43

 
$
35.07

 
$
35.19

 
$
32.02

 
 
 
 
 
 
 
 
 
 
 
 
Warner Center/Woodland Hills
Expiring SF(1)
 
113,872

 
24,239

 
104,946

 
192,245

 
 
Expiring Rent per SF
 
$
34.22

 
$
27.80

 
$
31.51

 
$
29.09

 
 
 
 
 
 
 
 
 
 
 
 
Westwood
Expiring SF(1)
 
9,426

 
9,549

 
8,413

 
1,882

 
 
Expiring Rent per SF
 
$
37.04

 
$
40.46

 
$
49.93

 
$
32.51

 
_________________________________________________________________

(1)
Includes leases with an expiration date in the applicable quarter where the space had not been re-leased as of June 30, 2013, other than 105,218 square feet of short term leases. The variations in this number from quarter to quarter primarily reflects the mix of buildings/submarkets involved, although it is also impacted by the varying terms and square footage of the individual leases involved.
(2)
Includes the impact of rent escalations over the entire term of the expiring lease, and thus is not directly comparable to asking rents.
(3)
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, these numbers should be extrapolated with caution.

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

20

Douglas Emmett, Inc.
OFFICE PORTFOLIO LEASING ACTIVITY
for the three months ended June 30, 2013





 
 
 
 
 
Rentable Square feet
 
Percentage
 
 
Net Absorption During Quarter(1)
 
28,261
 
0.19%
 
 
 
 
 
 
 
 
 
 
 
Office Leases Signed During Quarter
 
Number of leases
 
Rentable square feet
 
Weighted Average Lease Term (months)
 
 
New leases
 
71
 
225,825
 
64
 
 
Renewal leases
 
126
 
465,939
 
50
 
 
All leases
 
197
 
691,764
 
55
 

 
Change in Rental Rate for Office Leases Executed during the Quarter(2)
 
 
 
 
 
 
 
 
 
 
 
Starting Cash Rent
 
Straight-line Rent
 
Expiring Cash Rent(3)