EX-99.1 2 a2016q3ex991ep.htm EXHIBIT 99.1 Exhibit


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Executive Summary

We are a large owner and operator of high-quality office and multifamily properties in Los Angeles and Honolulu. Our portfolio includes 17.6 million square feet of Class A office properties and 3,336 apartment units.
 
Financial Results: Compared to the prior year quarter, our (i) net income attributable to common stockholders increased by 163.9% to $31.8 million, (ii) Funds From Operations (FFO) increased by 19.2% to $83.9 million, (iii) Adjusted Funds From Operations (AFFO) increased by 17.1% to $68.7 million, and (iv) same property cash NOI increased by 7.4% to $100.7 million.

Office Fundamentals: During the third quarter, we leased 571,252 square feet of office space and, compared to the second quarter, the leased rate for our total office portfolio decreased to 91.9% from 92.1%, primarily due to higher vacancy acquisitions during the third quarter of 2016. With our office rents increasing, straight-line rents for office leases signed during the third quarter were up 31.3% and starting cash rents were up 15.0% over the expiring cash rents from leases covering the same space.
 
Multifamily Fundamentals: Our multifamily portfolio remained fully leased and the same property cash revenues increased by 3.1% compared to the prior year quarter.

Acquisitions: During the third quarter, a consolidated joint venture that we manage and in which we owned a 20% interest as of September 30, 2016, acquired two multi-tenant Class A office properties in Los Angeles:

On July 21, 2016, the joint venture acquired a 365,000 square foot office property located at 12100 Wilshire Boulevard in the Brentwood submarket of Los Angeles for $225.0 million.
On September 27, 2016, the joint venture acquired a 129,000 square foot office property located at 233 Wilshire Boulevard in the Santa Monica submarket of Los Angeles for $139.5 million.

The joint venture financed 40% of the acquisition cost using a $146.0 million secured, non–recourse interest only loan that matures in July 2019 and bears interest at LIBOR + 1.55%.

Disposition: During the third quarter, we closed on the sale of a 168,000 square foot office property in Sherman Oaks, Los Angeles for a contract price of $56.7 million in cash.

Debt: At September 30, 2016, our pro forma net debt to enterprise value was 38%. We have no material debt maturities until August 2018.

Dividends: On October 14, 2016, we paid a quarterly cash dividend of $0.22 per common share, or $0.88 per common share on an annualized basis, to our shareholders of record on September 30, 2016.

Guidance: We are adding guidance for 2016 Net Income Per Common Share - Diluted of $0.53 to $0.57 per share. In addition, we are increasing the midpoint of our FFO guidance by 2 cents to $1.79 to $1.81 per share, and we are increasing the midpoint of our AFFO guidance by 3 cents to $1.44 to $1.46 per share. 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
COMPANY OVERVIEW
 
 
 
 
FINANCIAL RESULTS
 
 
 
 
PORTFOLIO DATA
 
 
 
 
               GUIDANCE
 
 
               DEFINITIONS
Forward Looking Statements
This Third Quarter 2016 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 of 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.

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Company Overview


Corporate Data
as of September 30, 2016

 
Office Portfolio
 
 
 
 
 
 
 
 
 
Consolidated(1)
 
Total Portfolio(2)
 
 
Properties
59

 
67

 
 
Rentable Square Feet (in thousands)
15,807

 
17,631

 
 
Leased rate
91.9
%
 
91.9
%
 
 
Occupancy rate
90.0
%
 
90.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Multifamily Portfolio
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
 
Properties
 
 
10

 
 
Units
 
 
3,336

 
 
Leased rate
 
 
99.6
%
 
 
 
 
 
 
 
 
Market Capitalization (in thousands, except price per share)
 
 
 
 
 
 
 
Fully Diluted Shares outstanding
 
179,883

 
 
Closing price per share of common stock (NYSE:DEI)
 
$
36.63

 
 
Equity capitalization(3)
 
$
6,589,121

 
 
 
 
 
 
 
Leverage Ratio (dollars in thousands)
 
 
 
 
 
 
 
Consolidated net debt(4)
 
$
4,279,092

 
 
Pro forma net debt(4)
 
$
4,043,904

 
 
Pro forma enterprise value
 
$
10,633,026

 
 
Pro forma net debt to enterprise value
 
38
%
 
 
 
 
 
 
 
AFFO Payout Ratio(5)
 
 
 
 
 
 
 
Three months ended September 30, 2016
 
56.4
%
 
 
 
 
 
 
_______________________________________________
(1)
Includes our wholly owned office properties and seven office properties in three consolidated joint ventures which we manage and hold a weighted average capital interest of approximately 29% based on square footage.
(2)
Includes our consolidated portfolio and eight office properties in two unconsolidated institutional real estate funds (our Funds)which we manage and a weighted average capital interest of approximately 60% based on square footage.
(3)
Represents our Fully Diluted Shares multiplied by the closing price of our common stock on September 30, 2016.
(4)
Consolidated net debt represents consolidated debt, net of cash and cash equivalents of $158.4 million, before deducting unamortized deferred loan costs of $35.7 million. Pro forma net debt includes our share of consolidated net debt plus our share of our unconsolidated real estate funds calculated on the same basis. See page 12 for the calculation of our consolidated and pro forma debt.
(5)
Represents dividends paid within each period divided by our AFFO for that period.

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

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Company Overview


Property Map
as of September 30, 2016

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Company Overview


Board of Directors and Executive Officers
as of September 30, 2016


BOARD OF DIRECTORS
____________________________________________________________________________________________
Dan A. Emmett
Our Executive Chairman of the Board
Jordan L. Kaplan
Our Chief Executive Officer and President
Kenneth M. Panzer
Our Chief Operating Officer
Christopher H. Anderson
Retired Real Estate Executive and Investor
Leslie E. Bider
Chief Executive Officer, PinnacleCare
Dr. David T. Feinberg
President and Chief Executive Officer, Geisinger Health System
Virginia A. McFerran
President and Chief Executive Officer, Optum Analytics
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

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


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
(Unaudited, in thousands)

 
September 30, 2016
 
December 31, 2015
Assets
 

 
 

Investment in real estate:
 

 
 

Land
$
1,025,704

 
$
897,916

Buildings and improvements
7,215,310

 
5,644,546

Tenant improvements and lease intangibles
795,600

 
696,647

Property under development
45,535

 
26,900

Investment in real estate, gross
9,082,149

 
7,266,009

Less: accumulated depreciation and amortization
(1,855,427
)
 
(1,687,998
)
Investment in real estate, net
7,226,722

 
5,578,011

Real estate held for sale, net

 
42,943

Cash and cash equivalents
158,415

 
101,798

Tenant receivables, net
2,168

 
1,907

Deferred rent receivables, net
90,480

 
79,837

Acquired lease intangible assets, net
4,990

 
4,484

Interest rate contract assets

 
4,830

Investment in unconsolidated real estate funds
144,930

 
164,631

Other assets
17,568

 
87,720

Total assets
$
7,645,273

 
$
6,066,161

 
 
 
 
Liabilities
 
 
 

Secured notes payable and revolving credit facility, net(1)
$
4,401,851

 
$
3,611,276

Interest payable, accounts payable and deferred revenue
94,792

 
57,417

Security deposits
46,144

 
38,683

Acquired lease intangible liabilities, net
74,151

 
28,605

Interest rate contract liabilities
28,046

 
16,310

Dividends payable
33,248

 
32,322

Total liabilities
4,678,232

 
3,784,613

 
 
 
 
Equity
 
 
 

Douglas Emmett, Inc. stockholders' equity:
 
 
 

Common stock
1,511

 
1,469

Additional paid-in capital
2,719,856

 
2,706,753

Accumulated other comprehensive loss
(23,661
)
 
(9,285
)
Accumulated deficit
(805,529
)
 
(772,726
)
Total Douglas Emmett, Inc. stockholders' equity
1,892,177

 
1,926,211

Noncontrolling interests
1,074,864

 
355,337

Total equity
2,967,041

 
2,281,548

Total liabilities and equity
$
7,645,273

 
$
6,066,161

____________________________________________________
(1)
See page 12 for more information regarding our debt balances.

 
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,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Revenues
 

 
 

 
 

 
 

Office rental
 

 
 

 
 

 
 

Rental revenues
$
128,744

 
$
103,436

 
$
366,400

 
$
307,895

Tenant recoveries
12,914

 
11,074

 
34,111

 
32,687

Parking and other income
25,950

 
21,715

 
74,572

 
63,890

Total office revenues
167,608

 
136,225

 
475,083

 
404,472

 
 
 
 
 
 
 
 
Multifamily rental
 
 
 
 
 
 
 
Rental revenues
22,801

 
22,133

 
67,634

 
65,752

Parking and other income
1,712

 
1,719

 
5,191

 
5,119

Total multifamily revenues
24,513

 
23,852

 
72,825

 
70,871

 
 
 
 
 
 
 
 
Total revenues
192,121

 
160,077

 
547,908

 
475,343

 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
Office expenses
56,926

 
49,195

 
158,190

 
139,936

Multifamily expenses
5,950

 
6,191

 
17,322

 
17,941

General and administrative
8,099

 
6,867

 
25,573

 
21,701

Depreciation and amortization
63,827

 
52,229

 
181,947

 
153,309

Total operating expenses
134,802

 
114,482

 
383,032

 
332,887

 
 
 
 
 
 
 
 
Operating income
57,319

 
45,595

 
164,876

 
142,456

 
 
 
 
 
 
 
 
Other income
2,295

 
2,129

 
6,527

 
13,103

Other expenses
(1,728
)
 
(1,605
)
 
(4,963
)
 
(4,796
)
Income, including depreciation, from unconsolidated funds
2,334

 
898

 
5,564

 
3,548

Interest expense
(36,479
)
 
(32,705
)
 
(109,842
)
 
(101,521
)
Acquisition-related expenses
(1,188
)
 
(153
)
 
(2,865
)
 
(641
)
Income before gains
22,553

 
14,159

 
59,297

 
52,149

Gains on sales of investments in real estate
13,245

 

 
14,327

 

Net income
35,798

 
14,159

 
73,624

 
52,149

Less:  Net income attributable to noncontrolling interests
(3,950
)
 
(2,089
)
 
(7,928
)
 
(7,932
)
Net income attributable to common stockholders
$
31,848

 
$
12,070

 
$
65,696

 
$
44,217

 
 
 
 
 
 
 
 
Net income per common share - basic
$
0.210

 
$
0.082

 
$
0.440

 
$
0.302

Net income per common share - diluted
$
0.206

 
$
0.080

 
$
0.428

 
$
0.293

 
 
 
 
 
 
 
 
Weighted average shares of common stock outstanding - basic
150,753

 
146,331

 
148,578

 
145,856

Weighted average shares of common stock outstanding - diluted
153,419

 
150,740

 
152,819

 
150,285

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

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Financial Results


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,
 
2016
 
2015
 
2016
 
2015
Funds From Operations (FFO)
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
31,848

 
$
12,070

 
$
65,696

 
$
44,217

Depreciation and amortization of real estate assets
63,827

 
52,229

 
181,947

 
153,309

Net income attributable to noncontrolling interests
3,950

 
2,089

 
7,928

 
7,932

Adjustments attributable to unconsolidated funds(2)
4,037

 
4,008

 
11,935

 
12,001

 Adjustments attributable to consolidated joint ventures(2)
(6,510
)
 
(18
)
 
(11,326
)
 
(76
)
Gains on sales of investments in real estate
(13,245
)
 

 
(14,327
)
 

FFO
$
83,907

 
$
70,378

 
$
241,853

 
$
217,383

 
 
 
 
 
 
 
 
Adjusted Funds From Operations (AFFO)
 
 
 
 
 
 
 
FFO
$
83,907

 
$
70,378

 
$
241,853

 
$
217,383

Straight-line rent
(3,279
)
 
(1,101
)
 
(10,915
)
 
(4,467
)
Net accretion of acquired above and below market leases(3)
(5,101
)
 
(2,866
)
 
(13,415
)
 
(15,806
)
Loan costs
2,227

 
1,558

 
6,288

 
5,532

Recurring capital expenditures, tenant improvements and leasing commissions
(14,170
)
 
(11,573
)
 
(40,371
)
 
(38,579
)
Non-cash compensation expense
4,056

 
2,978

 
12,231

 
10,292

Adjustments attributable to unconsolidated funds(2)
(2,241
)
 
(716
)
 
(4,920
)
 
(2,615
)
Adjustments attributable to consolidated joint ventures(2)
3,299

 
2

 
6,871

 
4

AFFO
$
68,698

 
$
58,660

 
$
197,622

 
$
171,744

 
 
 
 
 
 
 
 
Weighted average shares of common stock outstanding - diluted
153,419

 
150,740

 
152,819

 
150,285

Weighted average Operating Partnership Units and LTIP Units outstanding(4)
26,246

 
26,962

 
26,593

 
27,331

Weighted average fully diluted shares outstanding
179,665

 
177,702

 
179,412

 
177,616

 
 
 
 
 
 
 
 
Net income per common share - diluted
$
0.21

 
$
0.08

 
$
0.43

 
$
0.29

FFO per share- fully diluted
$
0.47

 
$
0.40

 
$
1.35

 
$
1.22

Dividends declared per share
$
0.22

 
$
0.21

 
$
0.66

 
$
0.63

____________________________________________________
(1)
Reflects the FFO and AFFO attributable to the common stockholders and noncontrolling interests in our Operating Partnership, which includes our share of the FFO and AFFO from our unconsolidated Funds and excludes the FFO and AFFO attributable to the noncontrolling interests in our consolidated joint ventures.
(2)
Adjusts for the portion of each other listed adjustment item that is attributed to the noncontrolling interests in our consolidated joint ventures and the effect of each other listed adjustment item on our share of the results of our unconsolidated Funds.
(3)
The nine months ended September 30, 2015 includes $6.6 million of accretion for an above-market ground lease related to the acquisition of land under one of our office buildings during the first quarter of 2015.
(4)
Long-Term Incentive Plan Units (LTIP Units) are granted as part of our equity compensation plan.
NOTE:  Please see the "Definitions" section at the end of this Earnings Package for certain definitions.

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Financial Results


Same Property Statistics & Net Operating Income
(Unaudited; in thousands, except statistics)

 
 
 
 
 
 
 
 
As of September 30,
 
 
 
2016
 
2015
 
 
Office Statistics
 
 
 
 
 
Number of properties
50

 
50

 
 
Rentable Square Feet (in thousands)
12,654

 
12,556

 
 
Ending % leased
92.5
%
 
93.0
%
 
 
Ending % occupied
90.4
%
 
91.0
%
 
 
Quarterly average % occupied
90.7
%
 
91.0
%
 
 
 
 
 
 
 
 
Multifamily Statistics
 
 
 
 
 
Number of properties
9

 
9

 
 
Number of units
2,640

 
2,640

 
 
Ending % leased
99.6
%
 
99.7
%
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
% Favorable
 
 
 
2016
 
2015
 
(Unfavorable)
 
 
Net Operating Income (NOI)(1)
 

 
 

 
 

 
 
Office revenues
$
131,937

 
$
127,615

 
3.4
%
 
 
Office expenses
(44,145
)
 
(45,271
)
 
2.5
%
 
 
Office NOI
87,792

 
82,344

 
6.6
%
 
 
 
 
 
 
 
 
 
 
Multifamily revenues
20,823

 
20,221

 
3.0
%
 
 
Multifamily expenses
(4,847
)
 
(5,121
)
 
5.4
%
 
 
Multifamily NOI
15,976

 
15,100

 
5.8
%
 
 
 
 
 
 
 
 
 
 
 
$
103,768

 
$
97,444

 
6.5
%
 
 
 
 
 
 
 
 
 
 
Cash Net Operating Income (NOI)(1)
 
 
 
 
 
 
 
Office revenues
$
129,708

 
$
124,803

 
3.9
%
 
 
Office expenses
(44,158
)
 
(45,284
)
 
2.5
%
 
 
Office Cash NOI
85,550

 
79,519

 
7.6
%
 
 
 
 
 
 
 
 
 
 
Multifamily revenues
19,978

 
19,384

 
3.1
%
 
 
Multifamily expenses
(4,847
)
 
(5,121
)
 
5.4
%
 
 
Multifamily Cash NOI
15,131

 
14,263

 
6.1
%
 
 
 
 
 
 
 
 
 
 
 
$
100,681

 
$
93,782

 
7.4
%
 
 
 
 
 
 
 
 
 
____________________________________________
(1)
For a reconciliation of these items to Net Income, please see page 10.

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 Net Income
(Unaudited and in thousands)

 
Three Months Ended September 30,
 
2016
 
2015
 
 
 
 
Same property office cash revenues
$
129,708

 
$
124,803

Non cash adjustments per definition of NOI
2,229

 
2,812

Same property office revenues
131,937

 
127,615

 
 
 
 
Same property office cash expenses
(44,158
)
 
(45,284
)
Non cash adjustments per definition of NOI
13

 
13

Same property office expenses
(44,145
)
 
(45,271
)
 
 
 
 
Office NOI
87,792

 
82,344

 
 
 
 
Same property multifamily cash revenues
19,978

 
19,384

Non cash adjustments per definition of NOI
845

 
837

Same property multifamily revenues
20,823

 
20,221

 
 
 
 
Same property multifamily cash expenses
(4,847
)
 
(5,121
)
Non cash adjustments per definition of NOI

 

Same property multifamily expenses
(4,847
)
 
(5,121
)
 
 
 
 
Multifamily NOI
15,976

 
15,100

 
 
 
 
Same Property NOI
103,768

 
97,444

Non-comparable office revenues
35,671

 
8,610

Non-comparable office expenses
(12,781
)
 
(3,924
)
Non-comparable multifamily revenues
3,690

 
3,631

Non-comparable multifamily expenses
(1,103
)
 
(1,070
)
NOI
129,245

 
104,691

General and administrative
(8,099
)
 
(6,867
)
Depreciation and amortization
(63,827
)
 
(52,229
)
Operating income
57,319

 
45,595

Other income
2,295

 
2,129

Other expenses
(1,728
)
 
(1,605
)
Income, including depreciation, from unconsolidated real estate funds
2,334

 
898

Interest expense
(36,479
)
 
(32,705
)
Acquisition-related expenses
(1,188
)
 
(153
)
Income before gains
22,553

 
14,159

Gains on sales of investments in real estate
13,245

 

Net income
35,798

 
14,159

Less: Net income attributable to noncontrolling interests
(3,950
)
 
(2,089
)
Net income attributable to common stockholders
$
31,848

 
$
12,070



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

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Financial Results


Supplemental Financial Data for Joint Ventures and Funds
(Unaudited, in thousands)

The tables below present certain financial data for our wholly owned properties, consolidated joint ventures and unconsolidated funds:
 
Three months ended September 30, 2016
 
 
 
 
 
 
 
Wholly Owned Properties
 
Consolidated Joint Ventures(1)
 
Unconsolidated Funds(2)
 
 
 
 
 
 
Revenues
$
164,885

 
$
27,236

 
$
18,867

Operating expenses
$
53,487

 
$
9,389

 
$
6,085

Straight-line rent
$
1,001

 
$
2,278

 
$
139

Above/below-market lease revenue
$
2,109

 
$
2,992

 
$
25

Cash NOI attributable to outside interests(3)
$

 
$
8,097

 
$
4,763

Our share of Cash NOI(4)
$
108,288

 
$
4,480

 
$
7,855

 
 
 
 
 
 
 
Nine months ended September 30, 2016
 
 
 
 
 
 
 
Wholly Owned Properties
 
Consolidated Joint Ventures(1)
 
Unconsolidated Funds(2)
 
 
 
 
 
 
Revenues
$
487,867

 
$
60,041

 
$
54,104

Operating expenses
$
155,117

 
$
20,395

 
$
18,269

Straight-line rent
$
4,469

 
$
6,446

 
$
694

Above/below-market lease revenue
$
6,597

 
$
6,818

 
$
91

Cash NOI attributable to outside interests(3)
$

 
$
14,033

 
$
13,241

Our share of Cash NOI(4)
$
321,684

 
$
12,349

 
$
21,809


______________________________________________________
(1)
Represents stand-alone financial data (with property management fees excluded from operating expenses as a consolidating entry) for three consolidated joint ventures which we manage and partially own and which own a combined seven Class A office properties totaling 2.3 million square feet in our submarkets. We are entitled to (i) distributions based on invested capital as well as additional distributions based on Cash NOI, (ii) fees for property management and other services and (iii) reimbursement of certain acquisition expenses and certain other costs. 
(2)
Represents stand-alone financial data (with property management fees excluded from operating expenses as a consolidating entry) for two unconsolidated Funds which we manage and partially own and which own a combined eight Class A office properties totaling 1.8 million square feet in our submarkets. We are entitled to (i) priority distributions in addition to distributions based on invested capital, (ii) a carried interest if the investors’ distributions exceed a hurdle rate and (iii) fees for property management and other services and (iv) reimbursement of certain costs.  
(3)
Represents the share of Cash NOI attributable to interests other than our fully diluted shares under the applicable agreements.
(4)
Represents the share of Cash NOI attributable to our fully diluted shares.










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

11                     Go to Table of Contents

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Financial Results

 
 
 
 
 
 
 
 
 
 
 
 
Outstanding Loans
(As of September 30, 2016, unaudited and in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maturity Date(1)
 
Principal Balance
 
Our Share(2)
 
Effective Rate(3)
 
Swap Maturity Date
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Loans - Wholly Owned Subsidiaries
 
 
 
 
 
 
 
 
 
 
 
 
 
2/28/2018
 
$
1,000

 
$
1,000

 
3.00%
 
 --
 
 
8/1/2018
 
530,000

 
530,000

 
LIBOR + 1.70%
 
 --
 
 
8/5/2018
(4) 
351,472

 
351,472

 
4.14%
 
 --
 
 
2/1/2019
(4) 
150,627

 
150,627

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

 
285,000

 
3.85%
 
 --
 
 
10/1/2019
 
145,000

 
145,000

 
LIBOR + 1.25%
 
 --
 
 
3/1/2020
(6) 
347,188

 
347,188

 
4.46%
 
 --
 
 
11/2/2020
 
388,080

 
388,080

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

 
340,000

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

 
180,000

 
3.06%
 
7/1/2020
 
 
11/2/2022
 
400,000

 
400,000

 
2.64%
 
11/1/2020
 
 
6/23/2023
 
360,000

 
360,000

 
2.57%
 
7/1/2021
 
 
4/1/2025
 
102,400

 
102,400

 
2.84%
 
3/1/2020
 
 
12/1/2025
 
115,000

 
115,000

 
2.76%
 
12/1/2020
 
 
8/21/2020
(7) 

 

 
LIBOR + 1.40%
 
 --
 
 
Subtotal
 
$
3,695,767

 
$
3,695,767

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Loans - Joint Ventures
 
 
 
 
 
 
 
 
 
 
 
 
 
3/1/2017
 
$
15,740

 
$
10,493

 
LIBOR + 1.60%
 
 --
 
 
7/21/2019
 
146,000

 
29,200

 
LIBOR + 1.55%
 
 --
 
 
2/28/2023
 
580,000

 
174,000

 
2.37%
 
3/1/2021
 
 
Total Consolidated Loans
(8) 
$
4,437,507

 
$
3,909,460

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated Loans of our Funds
 
 
 
 
 
 
 
 
 
 
 
 
 
5/1/2018
 
$
325,000

 
$
222,980

 
2.35%
 
5/1/2017
 
 
3/1/2023
 
110,000

 
26,680

 
2.30%
 
3/1/2021
 
 
Total Unconsolidated Loans
 
$
435,000

 
$
249,660

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Loans
 


 
$
4,159,120

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Except as otherwise noted below, each loan (including our revolving credit facility) is non-recourse and secured by one or more separate collateral pools consisting of one or more properties, and requires monthly payments of interest only with the outstanding principal due upon maturity.
(1)
Maturity dates include the effect of extension options.
(2)
Eliminates the share held by noncontrolling interests in our consolidated joint ventures and investors in our unconsolidated Funds by multiplying the principal balance by our share of the borrowing entity.
(3)
Includes the effect of interest rate swaps and excludes the effect of prepaid loan costs.
(4)
Requires monthly payments of principal and interest. Principal amortization is based upon a 30-year amortization schedule.
(5)
Interest only until February 2017, 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. Interest rate is fixed until March 1, 2018.
(7)
$400 million revolving credit facility. Unused commitment fees range from 0.15% to 0.20%
(8)
At September 30, 2016, the weighted average remaining life, including extension options, of our total consolidated term loans (excluding our revolving credit facility) was 4.5 years. For the $3.60 billion of term loans on which the interest rate was fixed under the terms of the loan or a swap, the weighted average (i) remaining life was 5.0 years, (ii) remaining period during which the interest rate was fixed was 3.1 years, (iii) annual interest rate was 3.24% and (iv) effective interest rate was 3.39% (including the non-cash amortization of deferred loan costs).

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, 2016

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Submarket
 
Number of Properties
 
Rentable Square
Feet
 
Percent of Square Feet of Our Total Portfolio
 
Submarket Rentable Square Feet
 
Our Market Share in Submarket(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beverly Hills(2)
 
9

 
1,861,339

 
10.6
%
 
7,408,659
 
22.2
%
 
 
Brentwood
 
15

 
2,046,646

 
11.6

 
3,356,126
 
61.0

 
 
Burbank
 
1

 
420,949

 
2.4

 
6,733,458
 
6.3

 
 
Century City
 
3

 
940,913

 
5.3

 
10,064,599
 
9.3

 
 
Honolulu
 
4

 
1,716,716

 
9.7

 
5,088,599
 
33.7

 
 
Olympic Corridor
 
5

 
1,126,097

 
6.4

 
3,524,632
 
31.9

 
 
Santa Monica
 
9

 
1,121,226

 
6.4

 
9,526,221
 
11.8

 
 
Sherman Oaks/Encino
 
12

 
3,451,005

 
19.6

 
6,171,530
 
55.9

 
 
Warner Center/Woodland Hills
 
3

 
2,822,805

 
16.0

 
7,203,647
 
39.2

 
 
Westwood
 
6

 
2,123,035

 
12.0

 
4,443,398
 
47.8

 
 
Total
 
67

 
17,630,731

 
100.0
%
 
63,520,869
 
27.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Our market share in the submarket is calculated by dividing Rentable Square Feet by the submarket Rentable Square Feet. The submarket Rentable Square Feet is sourced from the 2016 second quarter CBRE Marketview report.
(2)
In our Beverly Hills submarket data we include 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.

































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, 2016
Annualized Rent by Submarket
 
a2016q3ex99_chart-37621a04.jpg
 
 
 
 
 
 
 
 
 
 
 
 
Submarket
 
Percentage Leased(1)
 
Annualized Rent
 
Annualized Rent Per Leased Square Foot(2)
 
Monthly Rent Per Leased Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
Beverly Hills
 
97.2
%
 
$
77,121,503

 
$
43.67

 
$
3.64

 
 
Brentwood
 
94.6

 
73,977,616

 
39.50

 
3.29

 
 
Burbank
 
100.0

 
16,022,904

 
38.06

 
3.17

 
 
Century City
 
94.4

 
35,492,142

 
42.09

 
3.51

 
 
Honolulu(3)
 
87.0

 
47,628,714

 
33.10

 
2.76

 
 
Olympic Corridor
 
98.3

 
35,144,971

 
33.06

 
2.76

 
 
Santa Monica(4)
 
97.8

 
62,402,955

 
60.03

 
5.00

 
 
Sherman Oaks/Encino
 
90.7

 
101,880,946

 
33.82

 
2.82

 
 
Warner Center/Woodland Hills
 
86.4

 
66,103,443

 
28.34

 
2.36

 
 
Westwood
 
89.0

 
81,156,545

 
44.35

 
3.70

 
 
Total / Weighted Average
 
91.9
%
 
$
596,931,739

 
38.22

 
3.18

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recurring Office Capital Expenditures per Rentable Square Foot
 
 
 
 
 
 
For the three months ended September 30, 2016
 
$
0.03

 
 
For the nine months ended September 30, 2016
 
$
0.17

 
 
 
 
 
 
 
 
 
 
 
 
_______________________________________________________________
(1)
Includes 302,291 square feet with respect to signed leases not yet commenced at September 30, 2016.
(2)
Represents annualized rent divided by leased square feet (excluding signed leases not commenced at September 30, 2016).
(3)
Includes $2,855,236 of annualized rent attributable to a health club that we operate.
(4)
Includes $2,228,661 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 Lease Diversification
Total Office Portfolio as of September 30, 2016

q3leasediversificationa01.jpg

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Leases
 
Rentable Square Feet
 
Annualized Rent
 
 
Square Feet Under Lease
 
Number
 
Percent
 
Amount
 
Percent
 
Amount
 
Percent
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,500 or less
 
1,408

 
49.5
%
 
1,945,883

 
12.4
%
 
$
73,919,448

 
12.4
%
 
 
2,501-10,000
 
1,072

 
37.7

 
5,260,689

 
33.7

 
197,221,429

 
33.0

 
 
10,001-20,000
 
234

 
8.2

 
3,211,098

 
20.6

 
121,939,538

 
20.4

 
 
20,001-40,000
 
98

 
3.4

 
2,637,633

 
16.9

 
102,532,670

 
17.2

 
 
40,001-100,000
 
29

 
1.0

 
1,602,561

 
10.3

 
65,206,547

 
10.9

 
 
Greater than 100,000
 
5

 
0.2

 
961,114

 
6.1

 
36,112,107

 
6.1

 
 
Total
 
2,846

 
100.0
%
 
15,618,978

 
100.0
%
 
$
596,931,739

 
100.0
%
 
 
 
 
 
Our median tenant size is approximately 2,600 square feet and our average tenant size is approximately 5,500 square feet.
 
 
 
 







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

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Portfolio Data


Largest Office Tenants
Total Office Portfolio as of September 30, 2016

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tenants paying 1% or more of our aggregate Annualized Rent:
 
 
 
 
 
Tenant
 
Number of Leases
 
Number of Properties
 
Lease Expiration(1)
 
Total Leased Square Feet
 
Percent of Rentable Square Feet
 
Annualized Rent
 
Percent of Annualized Rent
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Time Warner(2)
 
2

 
2

 
2017-2019
 
430,810

 
2.4
%
 
$
16,333,703

 
2.7
%
 
 
William Morris Endeavor(3)
 
1

 
1

 
2027
 
184,995

 
1.1

 
9,825,633

 
1.6

 
 
UCLA(4)
 
20

 
9

 
2016-2022
 
186,865

 
1.1

 
8,276,137

 
1.4

 
 
Equinox Fitness(5)
 
5

 
5

 
2018-2033
 
180,087

 
1.0

 
6,968,612

 
1.2

 
 
Total
 
28

 
17

 
 
 
982,757

 
5.6
%
 
$
41,404,085

 
6.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Expiration dates are per lease.  Ranges reflects leases other than storage and similar leases.
 
 
(2) The square footage under these leases expire as follows: 10,000 square feet in 2017 and 421,000 square feet in 2019.
 
 
(3) Tenant has an option to terminate this lease in 2022.
 
 
(4) The square footage under these leases expire as follows: 6,000 square feet in 2016, 38,000 square feet in 2017, 13,000 square feet in 2018, 13,000 square feet in 2019, 39,000 square feet in 2020, 41,000 square feet in 2021 (tenant has options to terminate 7,000 square feet in either 2017 or 2020), and 36,000 square feet in 2022 (tenant has options to terminate 12,000 square feet in 2017 and 24,000 square feet in 2020). Does not include a 15,000 square foot lease commencing December 2016.
 
 
(5) The square footage under these leases expire as follows: 44,000 square feet in 2018, 33,000 square feet in 2019, 42,000 square feet in 2020, 31,000 square feet in 2027 and 30,000 square feet in 2033.
 


















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, 2016

Percentage of Annualized Rent by Tenant Industry
a2016q3ex99_chart-37881a04.jpg
 
 
 
 
 
 
 
 
Industry
 
Number of Leases
 
Annualized Rent as a Percent of Total
 
 
 
 
 
 
 
 
 
Legal
 
554
 
18.1
%
 
 
Financial Services
 
376
 
14.2

 
 
Entertainment
 
201
 
12.8

 
 
Real Estate
 
259
 
10.3

 
 
Accounting & Consulting
 
355
 
9.7

 
 
Health Services
 
367
 
8.9

 
 
Retail
 
204
 
6.2

 
 
Technology
 
128
 
5.7

 
 
Insurance
 
108
 
4.7

 
 
Educational Services
 
45
 
2.8

 
 
Public Administration
 
94
 
2.5

 
 
Advertising
 
72
 
2.2

 
 
Other
 
83
 
1.9

 
 
Total
 
2,846
 
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, 2016
a2016q3ex99_chart-37968a04.jpg
(1) Average of the percentage of leases at September 30, 2013, 2014, 2015 with the same remaining duration as the leases for the labeled year had at September 30, 2016. Acquisitions are included in the prior year average commencing in the quarter after the acquisition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year of Lease Expiration
 
Number of Leases
 
Rentable Square Feet
 
Expiring Square Feet as a Percent of Total
 
Annualized Rent at September 30, 2016
 
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
 
60

 
211,527

 
1.2
%
 
$
6,065,359

 
1.0
%
 
$
28.67

 
$
31.21

 
 
2016
 
111

 
400,844

 
2.3

 
14,406,795

 
2.4

 
35.94

 
36.10

 
 
2017
 
603

 
2,487,008

 
14.1

 
88,876,504

 
14.9

 
35.74

 
36.51

 
 
2018
 
566

 
2,311,003

 
13.1

 
91,439,654

 
15.3

 
39.57

 
41.49

 
 
2019
 
431

 
2,168,896

 
12.3

 
81,497,477

 
13.6

 
37.58

 
40.46

 
 
2020
 
391

 
2,222,070

 
12.6

 
84,602,527

 
14.2

 
38.07

 
42.52

 
 
2021
 
312

 
1,908,074

 
10.8

 
73,875,848

 
12.4

 
38.72

 
44.37

 
 
2022
 
131