(State or other jurisdiction of incorporation) | Commission file number | (I.R.S. Employer identification No.) |
, | , | ||||
(Address of principal executive offices) | (Zip Code) |
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||
Exhibit Number | Description | |
99.1 | ||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
DOUGLAS EMMETT, INC. | |||
Dated: | February 11, 2020 | By: | /s/ PETER D. SEYMOUR |
Peter D. Seymour | |||
Chief Financial Officer |
◦ | We grew our revenues by 7.8% to $243.9 million. |
◦ | Our net income attributable to common stockholders, which included a gain of $307.9 million from the consolidation of a previously unconsolidated fund, increased by 986.6% to $278.6 million. |
◦ | We grew our FFO by 7.0% to $110.0 million, or $0.54 per fully diluted share. |
◦ | We grew our AFFO by 12.8% to $90.5 million. |
◦ | We grew our same property Cash NOI by 7.3% to $143.5 million. |
◦ | We grew our revenues by 6.3% to $936.7 million. |
◦ | Our net income attributable to common stockholders, which included a gain of $307.9 million from the consolidation mentioned above, increased by 213.3% to $363.7 million. |
◦ | We grew our FFO by 6.3% to $424.8 million, or $2.10 per fully diluted share. |
◦ | We grew our AFFO by 18.0% to $365.4 million. |
◦ | We grew our same property Cash NOI by 7.5% to $560.4 million. |
COMPANY OVERVIEW | |
FINANCIAL RESULTS | |
PORTFOLIO DATA | |
2020 GUIDANCE | |
Reconciliation of 2020 Non-GAAP Guidance | |
Company Overview |
Office Portfolio | |||||||
Consolidated | Total | ||||||
Properties | 70 | 72 | |||||
Rentable square feet (in thousands) | 17,960 | 18,346 | |||||
Leased rate | 93.3 | % | 93.3 | % | |||
Occupancy rate | 91.5 | % | 91.4 | % | |||
Multifamily Portfolio | |||||||
Total | |||||||
Properties | 11 | ||||||
Units | 4,161 | ||||||
Leased rate | 98.1 | % | |||||
Market Capitalization (in thousands, except price per share) | ||||||
Fully Diluted Shares outstanding as of December 31, 2019 | 204,889 | |||||
Common stock closing price per share (NYSE:DEI) | $ | 43.90 | ||||
Equity Capitalization | $ | 8,994,644 | ||||
Net Debt (in thousands) | |||||||||
Consolidated | Our Share | ||||||||
Debt principal(1) | $ | 4,653,264 | $ | 3,788,151 | |||||
Less: cash and cash equivalents(2) | (153,683 | ) | (79,798 | ) | |||||
Net Debt | $ | 4,499,581 | $ | 3,708,353 | |||||
Leverage Ratio (in thousands, except percentage) | ||||||
Pro Forma Enterprise Value | $ | 12,702,997 | ||||
Our Share of Net Debt to Pro Forma Enterprise Value | 29 | % | ||||
AFFO Payout Ratio | |||||
Three months ended December 31, 2019 | 58.7 | % | |||
(1) | See page 12 for a reconciliation of consolidated debt principal and our share of debt principal to consolidated debt on the balance sheet. |
(2) | Our share of cash and cash equivalents is calculated starting with our consolidated cash and cash equivalents of $153.7 million, then deducting the other owners' share of our JVs' cash and cash equivalents of $75.7 million and then adding our share of our unconsolidated Fund's cash and cash equivalents of $1.9 million. |
Company Overview |
Company Overview |
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 | Vice Chairman, PinnacleCare |
Dr. David T. Feinberg | Vice President, Google Health |
Virginia A. McFerran | Vice President, Business Development, Google Health |
Thomas E. O’Hern | Chief Executive Officer, Macerich |
William E. Simon, Jr. | Partner, Simon Quick Advisors |
Johnese Spisso | President, UCLA Health; Chief Executive Officer, UCLA Hospital System; Associate Vice Chancellor, UCLA Health Sciences |
Dan A. Emmett | Chairman of the Board |
Jordan L. Kaplan | Chief Executive Officer and President |
Kenneth M. Panzer | Chief Operating Officer |
Peter D. Seymour | Chief Financial Officer |
Kevin A. Crummy | Chief Investment Officer |
Financial Results |
December 31, 2019 | December 31, 2018 | ||||||
Unaudited | |||||||
Assets | |||||||
Investment in real estate: | |||||||
Land | $ | 1,152,684 | $ | 1,065,099 | |||
Buildings and improvements | 9,308,481 | 7,995,203 | |||||
Tenant improvements and lease intangibles | 905,753 | 840,653 | |||||
Property under development | 111,715 | 129,753 | |||||
Investment in real estate, gross | 11,478,633 | 10,030,708 | |||||
Less: accumulated depreciation and amortization | (2,518,415 | ) | (2,246,887 | ) | |||
Investment in real estate, net | 8,960,218 | 7,783,821 | |||||
Ground lease right-of-use asset | 7,479 | — | |||||
Cash and cash equivalents | 153,683 | 146,227 | |||||
Tenant receivables | 5,302 | 4,371 | |||||
Deferred rent receivables | 134,968 | 124,834 | |||||
Acquired lease intangible assets, net | 6,407 | 3,251 | |||||
Interest rate contract assets | 22,381 | 73,414 | |||||
Investment in unconsolidated Funds | 42,442 | 111,032 | |||||
Other assets | 16,421 | 14,759 | |||||
Total assets | $ | 9,349,301 | $ | 8,261,709 | |||
Liabilities | |||||||
Secured notes payable and revolving credit facility, net | $ | 4,619,058 | $ | 4,134,030 | |||
Ground lease liability | 10,882 | — | |||||
Interest payable, accounts payable and deferred revenue | 131,410 | 130,154 | |||||
Security deposits | 60,923 | 50,733 | |||||
Acquired lease intangible liabilities, net | 52,367 | 52,569 | |||||
Interest rate contract liabilities | 54,616 | 1,530 | |||||
Dividends payable | 49,111 | 44,263 | |||||
Total liabilities | 4,978,367 | 4,413,279 | |||||
Equity | |||||||
Douglas Emmett, Inc. stockholders' equity: | |||||||
Common stock | 1,754 | 1,702 | |||||
Additional paid-in capital | 3,486,356 | 3,282,316 | |||||
Accumulated other comprehensive (loss) income | (17,462 | ) | 53,944 | ||||
Accumulated deficit | (758,576 | ) | (935,630 | ) | |||
Total Douglas Emmett, Inc. stockholders' equity | 2,712,072 | 2,402,332 | |||||
Noncontrolling interests | 1,658,862 | 1,446,098 | |||||
Total equity | 4,370,934 | 3,848,430 | |||||
Total liabilities and equity | $ | 9,349,301 | $ | 8,261,709 |
Financial Results |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues | |||||||||||||||
Office rental | |||||||||||||||
Rental revenues and tenant recoveries(2) | $ | 180,389 | $ | 170,828 | $ | 694,315 | $ | 661,147 | |||||||
Parking and other income | 30,987 | 28,955 | 122,440 | 116,784 | |||||||||||
Total office revenues | 211,376 | 199,783 | 816,755 | 777,931 | |||||||||||
Multifamily rental | |||||||||||||||
Rental revenues | 29,642 | 24,466 | 110,697 | 95,423 | |||||||||||
Parking and other income | 2,875 | 2,015 | 9,230 | 7,962 | |||||||||||
Total multifamily revenues | 32,517 | 26,481 | 119,927 | 103,385 | |||||||||||
Total revenues | 243,893 | 226,264 | 936,682 | 881,316 | |||||||||||
Operating Expenses | |||||||||||||||
Office expenses | 67,971 | 64,289 | 264,482 | 252,751 | |||||||||||
Multifamily expenses | 9,287 | 7,368 | 33,681 | 28,116 | |||||||||||
General and administrative expenses | 9,859 | 10,197 | 38,068 | 38,641 | |||||||||||
Depreciation and amortization | 108,867 | 89,920 | 357,743 | 309,864 | |||||||||||
Total operating expenses | 195,984 | 171,774 | 693,974 | 629,372 | |||||||||||
Operating income | 47,909 | 54,490 | 242,708 | 251,944 | |||||||||||
Other income | 2,911 | 3,041 | 11,653 | 11,414 | |||||||||||
Other expenses | (1,908 | ) | (2,364 | ) | (7,216 | ) | (7,744 | ) | |||||||
Income from unconsolidated Funds | 1,334 | 1,878 | 6,923 | 6,400 | |||||||||||
Interest expense | (35,555 | ) | (33,513 | ) | (143,308 | ) | (133,402 | ) | |||||||
Gain from consolidation of JV | 307,938 | — | 307,938 | — | |||||||||||
Net income | 322,629 | 23,532 | 418,698 | 128,612 | |||||||||||
Less: Net income attributable to noncontrolling interests | (44,071 | ) | 2,103 | (54,985 | ) | (12,526 | ) | ||||||||
Net income attributable to common stockholders | $ | 278,558 | $ | 25,635 | $ | 363,713 | $ | 116,086 | |||||||
Net income per common share - basic | $ | 1.58 | $ | 0.15 | $ | 2.09 | $ | 0.68 | |||||||
Net income per common share - diluted | $ | 1.58 | $ | 0.15 | $ | 2.09 | $ | 0.68 | |||||||
Dividends declared per common share | $ | 0.28 | $ | 0.26 | $ | 1.06 | $ | 1.01 | |||||||
Weighted average shares of common stock outstanding - basic | 175,356 | 170,121 | 173,358 | 169,893 | |||||||||||
Weighted average shares of common stock outstanding - diluted | 175,356 | 170,121 | 173,358 | 169,902 |
(1) | On November 21, 2019, we restructured one of our previously unconsolidated funds, after which it is treated as a consolidated JV. The results of the consolidated JV are included in our operating results from November 21, 2019 (before November 21, 2019, our share of the Fund's net income was included in the line item Income from unconsolidated Funds). See the executive summary for a description of the transaction. |
(2) | Rental revenues and tenant recoveries include tenant recoveries of $15.8 million and $15.6 million for the three months ended December 31, 2019 and 2018, and $62.0 million and $57.7 million for the years ended December 31, 2019 and 2018, respectively. |
Financial Results |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Funds From Operations (FFO) | |||||||||||||||
Net income attributable to common stockholders | $ | 278,558 | $ | 25,635 | $ | 363,713 | $ | 116,086 | |||||||
Depreciation and amortization of real estate assets | 108,867 | 89,920 | 357,743 | 309,864 | |||||||||||
Net income attributable to noncontrolling interests | 44,071 | (2,103 | ) | 54,985 | 12,526 | ||||||||||
Adjustments attributable to unconsolidated Funds(2) | 2,630 | 4,320 | 15,815 | 16,702 | |||||||||||
Adjustments attributable to consolidated JVs(2) | (16,162 | ) | (14,964 | ) | (59,505 | ) | (55,448 | ) | |||||||
Gain from consolidation of JV | (307,938 | ) | — | (307,938 | ) | — | |||||||||
FFO | $ | 110,026 | $ | 102,808 | $ | 424,813 | $ | 399,730 | |||||||
Adjusted Funds From Operations (AFFO) | |||||||||||||||
FFO | $ | 110,026 | $ | 102,808 | $ | 424,813 | $ | 399,730 | |||||||
Straight-line rent | (836 | ) | (6,098 | ) | (10,134 | ) | (18,813 | ) | |||||||
Net accretion of acquired above- and below-market leases | (3,745 | ) | (4,782 | ) | (16,264 | ) | (22,025 | ) | |||||||
Loan costs | 2,955 | 1,956 | 16,213 | 8,087 | |||||||||||
Recurring capital expenditures, tenant improvements and capitalized leasing expenses(3) | (25,355 | ) | (22,918 | ) | (77,321 | ) | (88,461 | ) | |||||||
Non-cash compensation expense | 5,124 | 7,392 | 18,288 | 22,298 | |||||||||||
Adjustments attributable to unconsolidated Funds(2) | (1,287 | ) | (1,701 | ) | (6,577 | ) | (7,422 | ) | |||||||
Adjustments attributable to consolidated JVs(2) | 3,652 | 3,622 | 16,412 | 16,328 | |||||||||||
AFFO | $ | 90,534 | $ | 80,279 | $ | 365,430 | $ | 309,722 | |||||||
Weighted average shares of common stock outstanding - diluted | 175,356 | 170,121 | 173,358 | 169,902 | |||||||||||
Weighted average units in our operating partnership outstanding | 28,852 | 28,142 | 28,724 | 28,154 | |||||||||||
Weighted average fully diluted shares outstanding | 204,208 | 198,263 | 202,082 | 198,056 | |||||||||||
Net income per common share - diluted | $ | 1.58 | $ | 0.15 | $ | 2.09 | $ | 0.68 | |||||||
FFO per share - fully diluted | $ | 0.54 | $ | 0.52 | $ | 2.10 | $ | 2.02 | |||||||
Dividends paid per share(4) | $ | 0.26 | $ | 0.25 | $ | 1.04 | $ | 1.00 |
(1) | Presents the FFO and AFFO attributable to our common stockholders and noncontrolling interests in our Operating Partnership, including our share of our consolidated JVs and our unconsolidated Funds. |
(2) | Adjusts for the portion of each other listed adjustment item on our share of the results of our unconsolidated Funds and for each other listed adjustment item that is attributed to the noncontrolling interests in our consolidated JVs. |
(3) | We adopted the new lease accounting rules in the first quarter of 2019. Under the new rules, we expense non-incremental leasing expenses (leasing expenses not directly related to the signing of a lease) and capitalize incremental leasing expenses. Since non-incremental leasing expenses are included in the calculation of net income attributable to common stockholders and FFO, the 2019 capitalized leasing expenses adjustment to AFFO only includes incremental leasing expenses. |
(4) | Reflects dividends paid within the respective periods. |
Financial Results |
As of December 31, | |||||||
2019 | 2018 | ||||||
Office Statistics | |||||||
Number of properties | 60 | 60 | |||||
Rentable square feet (in thousands) | 15,501 | 15,461 | |||||
Ending % leased | 93.5 | % | 92.2 | % | |||
Ending % occupied | 91.6 | % | 90.7 | % | |||
Quarterly average % occupied | 91.3 | % | 90.3 | % | |||
Multifamily Statistics | |||||||
Number of properties | 9 | 9 | |||||
Number of units | 2,640 | 2,640 | |||||
Ending % leased | 98.1 | % | 99.5 | % | |||
Three Months Ended December 31, | % Favorable | |||||||||||
2019 | 2018 | (Unfavorable) | ||||||||||
Net Operating Income (NOI) | ||||||||||||
Office revenues | $ | 191,624 | $ | 186,345 | 2.8 | % | ||||||
Office expenses | (60,576 | ) | (58,983 | ) | (2.7 | )% | ||||||
Office NOI | 131,048 | 127,362 | 2.9 | % | ||||||||
Multifamily revenues | 21,274 | 21,298 | (0.1 | )% | ||||||||
Multifamily expenses | (5,660 | ) | (5,521 | ) | (2.5 | )% | ||||||
Multifamily NOI | 15,614 | 15,777 | (1.0 | )% | ||||||||
Total NOI | $ | 146,662 | $ | 143,139 | 2.5 | % | ||||||
Cash Net Operating Income (NOI) | ||||||||||||
Office cash revenues | $ | 188,418 | $ | 176,954 | 6.5 | % | ||||||
Office cash expenses | (60,576 | ) | (58,983 | ) | (2.7 | )% | ||||||
Office cash NOI | 127,842 | 117,971 | 8.4 | % | ||||||||
Multifamily cash revenues | 21,271 | 21,294 | (0.1 | )% | ||||||||
Multifamily cash expenses | (5,660 | ) | (5,521 | ) | (2.5 | )% | ||||||
Multifamily cash NOI | 15,611 | 15,773 | (1.0 | )% | ||||||||
Total Cash NOI | $ | 143,453 | $ | 133,744 | 7.3 | % | ||||||
Financial Results |
Three Months Ended December 31, | |||||||
2019 | 2018 | ||||||
Same property office cash revenues | $ | 188,418 | $ | 176,954 | |||
Non-cash adjustments per definition of NOI | 3,206 | 9,391 | |||||
Same property office revenues | 191,624 | 186,345 | |||||
Same property office expenses | (60,576 | ) | (58,983 | ) | |||
Office NOI | 131,048 | 127,362 | |||||
Same property multifamily cash revenues | 21,271 | 21,294 | |||||
Non-cash adjustments per definition of NOI | 3 | 4 | |||||
Same property multifamily revenues | 21,274 | 21,298 | |||||
Same property multifamily expenses | (5,660 | ) | (5,521 | ) | |||
Multifamily NOI | 15,614 | 15,777 | |||||
Same Property NOI | 146,662 | 143,139 | |||||
Non-comparable office revenues | 19,752 | 13,438 | |||||
Non-comparable office expenses | (7,395 | ) | (5,306 | ) | |||
Non-comparable multifamily revenues | 11,243 | 5,183 | |||||
Non-comparable multifamily expenses | (3,627 | ) | (1,847 | ) | |||
NOI | 166,635 | 154,607 | |||||
General and administrative expenses | (9,859 | ) | (10,197 | ) | |||
Depreciation and amortization | (108,867 | ) | (89,920 | ) | |||
Operating income | 47,909 | 54,490 | |||||
Other income | 2,911 | 3,041 | |||||
Other expenses | (1,908 | ) | (2,364 | ) | |||
Income from unconsolidated Funds | 1,334 | 1,878 | |||||
Interest expense | (35,555 | ) | (33,513 | ) | |||
Gain from consolidation of JV | 307,938 | — | |||||
Net income | 322,629 | 23,532 | |||||
Less: Net income attributable to noncontrolling interests | (44,071 | ) | 2,103 | ||||
Net income attributable to common stockholders | $ | 278,558 | $ | 25,635 |
Financial Results |
Three Months Ended December 31, 2019 | |||||||||||
Wholly-Owned Properties | Consolidated JVs(1)(2) | Unconsolidated Funds(1)(3) | |||||||||
Revenues | $ | 187,711 | $ | 56,182 | $ | 13,712 | |||||
Office and multifamily operating expenses | $ | 58,952 | $ | 18,306 | $ | 4,530 | |||||
Straight-line rent | $ | 146 | $ | 690 | $ | 5 | |||||
Above/below-market lease revenue | $ | 893 | $ | 2,852 | $ | (3 | ) | ||||
Cash NOI attributable to outside interests(4) | $ | — | $ | 20,344 | $ | 3,557 | |||||
Our share of cash NOI(5) | $ | 127,720 | $ | 13,990 | $ | 5,623 | |||||
Year Ended December 31, 2019 | |||||||||||
Wholly-Owned Properties | Consolidated JVs(1)(2) | Unconsolidated Funds(1)(3) | |||||||||
Revenues | $ | 747,448 | $ | 189,234 | $ | 75,952 | |||||
Office and multifamily operating expenses | $ | 235,827 | $ | 62,336 | $ | 25,656 | |||||
Straight-line rent | $ | 4,664 | $ | 5,470 | $ | 798 | |||||
Above/below-market lease revenue | $ | 5,060 | $ | 11,204 | $ | (12 | ) | ||||
Cash NOI attributable to outside interests(4) | $ | — | $ | 70,978 | $ | 17,806 | |||||
Our share of cash NOI(5) | $ | 501,897 | $ | 39,246 | $ | 31,704 |
(1) | On November 21, 2019, we restructured one of our previously unconsolidated funds, after which it is treated as a consolidated JV. The results of the consolidated JV are included in the Consolidated JVs column from November 21, 2019 (before November 21, 2019, the unconsolidated Fund's results were included in the Unconsolidated Funds column). See the executive summary for a description of the transaction. |
(2) | Represents stand-alone financial data (with property management fees excluded from operating expenses as a consolidating entry) for four consolidated JVs (three consolidated JVs during the period before November 21, 2019). We manage our JVs and own a weighted average interest of approximately 46% in them based on square footage (27% during the period before November 21, 2019). The JVs own a combined seventeen Class A office properties totaling 4.3 million square feet and one residential property with 350 apartments in our submarkets (eleven Class A properties totaling 2.8 million square feet and one residential property with 350 apartments during the period before November 21, 2019). We are entitled to (i) distributions based on invested capital, (ii) fees for property management and other services, (iii) reimbursement of certain acquisition-related expenses and certain other costs and (iv) in most cases, additional distributions based on Cash NOI. |
(3) | Represents stand-alone financial data (with property management fees excluded from operating expenses as a consolidating entry) for one unconsolidated Fund (three unconsolidated Funds during the period before November 21, 2019). We manage our remaining Fund in which we own an interest of approximately 30% (three Funds with a weighted average ownership interest of 63% based on square footage during the period before November 21, 2019). The Fund owns two Class A office properties totaling 0.4 million square feet in our submarkets (the Funds owned a combined eight Class A office properties totaling 1.8 million square feet during the period before November 21, 2019). We are entitled to (i) priority distributions, (ii) distributions based on invested capital, (iii) a carried interest if the investors’ distributions exceed a hurdle rate, (iv) fees for property management and other services and (v) reimbursement of certain costs. |
(4) | Represents the share of Cash NOI allocable under the applicable agreements to interests other than our Fully Diluted Shares. |
(5) | Represents the share of Cash NOI allocable to our Fully Diluted Shares. |
Financial Results |
Loans (As of December 31, 2019, unaudited) | ||||||||||||||
Maturity Date(1) | Principal Balance (In Thousands) | Our Share(2) (In Thousands) | Effective Rate(3) | Swap Maturity Date | ||||||||||
Consolidated Wholly-Owned Subsidiaries | ||||||||||||||
1/1/2024 | $ | 300,000 | $ | 300,000 | 3.46% | 1/1/2022 | ||||||||
3/3/2025 | 335,000 | 335,000 | 3.84% | 3/1/2023 | ||||||||||
4/1/2025 | (4) | 102,400 | 102,400 | 2.84% | 3/1/2023 | |||||||||
8/15/2026 | (5) | 415,000 | 415,000 | 2.58% | 8/1/2025 | |||||||||
9/19/2026 | 400,000 | 400,000 | 2.44% | 9/1/2024 | ||||||||||
9/26/2026 | (6) | 200,000 | 200,000 | 2.77% | 10/1/2024 | |||||||||
11/1/2026 | (7) | 400,000 | 400,000 | 2.18% | 10/1/2024 | |||||||||
6/1/2027 | 550,000 | 550,000 | 3.16% | 6/1/2022 | ||||||||||
6/1/2029 | 255,000 | 255,000 | 3.26% | 6/1/2027 | ||||||||||
6/1/2029 | (8) | 125,000 | 125,000 | 2.55% | 6/1/2027 | |||||||||
6/1/2038 | (9) | 30,864 | 30,864 | 4.55% | N/A | |||||||||
8/21/2023 | (10) | — | — | LIBOR + 1.15% | N/A | |||||||||
Subtotal | 3,113,264 | 3,113,264 | ||||||||||||
Consolidated JVs | ||||||||||||||
2/28/2023 | 580,000 | 174,000 | 2.37% | 3/1/2021 | ||||||||||
7/1/2024 | 400,000 | 356,000 | 3.44% | 7/1/2022 | ||||||||||
12/19/2024 | 400,000 | 80,000 | 3.47% | 1/1/2023 | ||||||||||
6/1/2029 | 160,000 | 32,000 | 3.25% | 7/1/2027 | ||||||||||
Total Consolidated Loans | (11) | $ | 4,653,264 | $ | 3,755,264 | |||||||||
Unconsolidated Fund | ||||||||||||||
3/1/2023 | $ | 110,000 | $ | 32,887 | 2.30% | 3/1/2021 | ||||||||
Total Loans | $ | 3,788,151 | ||||||||||||
(1) | Maturity dates include the effect of extension options. |
(2) | "Our Share" is a non-GAAP measure calculated by multiplying the principal balance by our share of the borrowing entity's equity. |
(3) | Effective rate as of December 31, 2019. Includes the effect of interest rate swaps and excludes the effect of prepaid loan costs. |
(4) | Effective rate will decrease to 2.76% on March 2, 2020. |
(5) | Effective rate will increase to 3.07% on April 1, 2020. |
(6) | Effective rate will decrease to 2.36% on July 1, 2020. |
(7) | Effective rate will increase to 2.31% on July 1, 2021. |
(8) | Effective rate will increase to 3.25% on December 1, 2020. |
(9) | Requires monthly payments of principal and interest. Principal amortization is based upon a 30-year amortization schedule. |
(10) | $400 million revolving credit facility. Unused commitment fees range from 0.10% to 0.15%. |
(11) | Our consolidated debt on the balance sheet of $4.62 billion is calculated by adding $6.7 million of unamortized loan premium and deducting $40.9 million of unamortized deferred loan costs from our total consolidated loans of $4.65 billion. |
Statistics for consolidated loans with interest fixed under the terms of the loan or a swap | |||
Principal balance (in billions) | $4.65 | ||
Weighted average remaining life (including extension options) | 6.1 years | ||
Weighted average remaining fixed interest period | 3.9 years | ||
Weighted average annual interest rate | 3.00% | ||
Portfolio Data |
Region | Number of Properties | Our Rentable Square Feet | Region Rentable Square Feet(1) | Our Average Market Share(2) | |||||||||
Los Angeles | |||||||||||||
Westside(3) | 52 | 9,992,932 | 37,358,326 | 37.6 | % | ||||||||
Valley | 16 | 6,790,777 | 21,257,083 | 43.4 | |||||||||
Honolulu(3) | 4 | 1,562,235 | 4,872,939 | 32.1 | |||||||||
Total / Average | 72 | 18,345,944 | 63,488,348 | 39.3 | % | ||||||||
(1) | The rentable square feet in each region is based on the Rentable Square Feet as reported in the 2019 fourth quarter CBRE Marketview report for our submarkets in that region. |
(2) | Our market share is calculated by dividing Rentable Square Feet by the applicable Rentable Square Feet, weighted in the case of averages based on the square feet of exposure in our total portfolio to each submarket as follows: |
Region | Submarket | Number of Properties | Our Rentable Square Feet | Our Market Share(2) | |||||||||
Westside | Brentwood | 15 | 2,085,745 | 62.5 | % | ||||||||
Westwood | 7 | 2,185,592 | 51.3 | ||||||||||
Olympic Corridor | 5 | 1,142,885 | 33.1 | ||||||||||
Beverly Hills(3) | 11 | 2,196,067 | 28.6 | ||||||||||
Santa Monica | 11 | 1,425,374 | 15.4 | ||||||||||
Century City | 3 | 957,269 | 9.4 | ||||||||||
Valley | Sherman Oaks/Encino | 12 | 3,488,995 | 53.4 | |||||||||
Warner Center/Woodland Hills | 3 | 2,845,577 | 37.1 | ||||||||||
Burbank | 1 | 456,205 | 6.5 | ||||||||||
Honolulu | Honolulu(3) | 4 | 1,562,235 | 32.1 | |||||||||
Total / Weighted Average | 72 | 18,345,944 | 39.3 | % | |||||||||
(3) | In calculating market share, we adjusted the rentable square footage by (i) removing approximately 202,000 rentable square feet of vacant space at an office building in Honolulu, which we are converting to residential apartments, from both our rentable square footage and that of the submarket (see page 22) and (ii) removing a 218,000 square foot property located just outside the Beverly Hills city limits from both the numerator and the denominator. |
Portfolio Data |
Region(1) | Percent Leased | Annualized Rent(2) | Annualized Rent Per Leased Square Foot(2) | Monthly Rent Per Leased Square Foot(2) | |||||||||||||
Los Angeles | |||||||||||||||||
Westside | 93.7 | % | $ | 470,576,030 | $ | 52.58 | $ | 4.38 | |||||||||
Valley | 92.6 | 214,855,878 | 35.55 | 2.96 | |||||||||||||
Honolulu | 94.3 | 48,661,931 | 34.96 | 2.91 | |||||||||||||
Total / Weighted Average | 93.3 | % | $ | 734,093,839 | $ | 44.80 | $ | 3.73 | |||||||||
(1) | Regional data reflects the following underlying submarket data: |
Region | Submarket | Percent Leased | Monthly Rent Per Leased Square Foot(2) | ||||||||
Westside | Beverly Hills | 96.4 | % | $ | 4.38 | ||||||
Brentwood | 91.0 | 3.83 | |||||||||
Century City | 93.7 | 4.24 | |||||||||
Olympic Corridor | 93.6 | 3.37 | |||||||||
Santa Monica | 95.2 | 6.23 | |||||||||
Westwood | 92.5 | 4.25 | |||||||||
Valley | Burbank | 100.0 | 4.28 | ||||||||
Sherman Oaks/Encino | 94.3 | 3.13 | |||||||||
Warner Center/Woodland Hills | 89.4 | 2.49 | |||||||||
Honolulu | Honolulu | 94.3 | 2.91 | ||||||||
Weighted Average | 93.3 | % | $ | 3.73 | |||||||
(2) | Does not include signed leases not yet commenced, which are included in percent leased but excluded from annualized rent. |
Recurring Office Capital Expenditures per Rentable Square Foot | |||||
Three months ended December 31, 2019 | $ | 0.09 | |||
Year ended December 31, 2019 | $ | 0.27 | |||
Portfolio Data |
Portfolio Tenant Size | |||||
Median | Average | ||||
Square feet | 2,700 | 5,600 | |||
Office Leases | Rentable Square Feet | Annualized Rent | |||||||||||||||||||
Square Feet Under Lease | Number | Percent | Amount | Percent | Amount | Percent | |||||||||||||||
2,500 or less | 1,406 | 47.9 | % | 1,961,349 | 12.0 | % | $ | 86,387,301 | 11.8 | % | |||||||||||
2,501-10,000 | 1,150 | 39.2 | 5,647,365 | 34.5 | 248,326,228 | 33.8 | |||||||||||||||
10,001-20,000 | 243 | 8.3 | 3,357,323 | 20.5 | 144,200,267 | 19.7 | |||||||||||||||
20,001-40,000 | 99 | 3.4 | 2,722,556 | 16.6 | 121,979,833 | 16.6 | |||||||||||||||
40,001-100,000 | 32 | 1.1 | 1,789,354 | 10.9 | 89,728,037 | 12.2 | |||||||||||||||
Greater than 100,000 | 4 | 0.1 | 908,539 | 5.5 | 43,472,173 | 5.9 | |||||||||||||||
Total for all leases | 2,934 | 100.0 | % | 16,386,486 | 100.0 | % | $ | 734,093,839 | 100.0 | % | |||||||||||
Portfolio Data |
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) | 3 | 3 | 2020-2024 | 468,775 | 2.5 | % | $ | 23,892,512 | 3.2 | % | |||||||||||||
UCLA(3) | 26 | 10 | 2020-2027 | 335,996 | 1.8 | 16,964,929 | 2.3 | ||||||||||||||||
William Morris Endeavor(4) | 2 | 1 | 2022-2027 | 213,539 | 1.2 | 12,415,744 | 1.7 | ||||||||||||||||
Morgan Stanley(5) | 5 | 5 | 2022-2027 | 145,488 | 0.8 | 9,340,152 | 1.3 | ||||||||||||||||
Equinox Fitness(6) | 5 | 5 | 2024-2033 | 181,177 | 1.0 | 8,744,891 | 1.2 | ||||||||||||||||
Total | 41 | 24 | 1,344,975 | 7.3 | % | $ | 71,358,228 | 9.7 | % | ||||||||||||||
(1) | Expiration dates are per lease (expiration dates do not reflect storage and similar leases). |
(2) | Square footage expires as follows: 2,000 square feet in 2020; 10,000 square feet in 2023; and 456,000 square feet in 2024. |
(3) | Square footage expires as follows: 36,000 square feet in 2020; 72,000 square feet in 2021; 55,000 square feet in 2022; 46,000 square feet in 2023; 10,000 square feet in 2024; 49,000 square feet in 2025; and 67,000 square feet in 2027. Tenant has options to terminate 31,000 square feet in 2020; 16,000 square feet in 2023; and 51,000 square feet in 2025. |
(4) | Square footage expires as follows: 1,000 square feet in 2022 and 213,000 square feet in 2027. Tenant has an option to terminate 2,000 square feet in 2020 and 212,000 square feet in 2022. |
(5) | Square footage expires as follows: 16,000 square feet in 2022; 30,000 square feet in 2023; 26,000 square feet in 2025; and 74,000 square feet in 2027. Tenant has options to terminate 30,000 square feet in 2021; 26,000 square feet in 2022; and 32,000 square feet in 2024. |
(6) | Square footage expires as follows: 34,000 square feet in 2024; 31,000 square feet in 2027; 44,000 square feet in 2028; 42,000 square feet in 2030; and 30,000 square feet in 2033. |
Portfolio Data |
Industry | Number of Leases | Annualized Rent as a Percent of Total | ||||||
Legal | 578 | 18.0 | % | |||||
Financial Services | 392 | 15.0 | ||||||
Entertainment | 235 | 13.7 | ||||||
Real Estate | 297 | 11.5 | ||||||
Accounting & Consulting | 346 | 10.0 | ||||||
Health Services | 371 | 7.4 | ||||||
Retail | 183 | 5.8 | ||||||
Technology | 123 | 4.9 | ||||||
Insurance | 102 | 3.9 | ||||||
Educational Services | 58 | 3.6 | ||||||
Public Administration | 91 | 2.4 | ||||||
Advertising | 58 | 1.4 | ||||||
Manufacturing & Distribution | 55 | 1.2 | ||||||
Other | 45 | 1.2 | ||||||
Total | 2,934 | 100.0 | % | |||||
Portfolio Data |
(1) | Average of the percentage of leases expiring at December 31, 2016, 2017, and 2018 with the same remaining duration as the leases for the labeled year had at December 31, 2019. Acquisitions are included in the comparable 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 December 31, 2019 | 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 | 90 | 388,857 | 2.1 | % | $ | 15,542,730 | 2.1 | % | $ | 39.97 | $ | 40.07 | ||||||||||||||
2020 | 603 | 2,280,149 | 12.4 | 94,274,941 | 12.8 | 41.35 | 41.93 | |||||||||||||||||||
2021 | 608 | 2,671,166 | 14.5 | 114,622,103 | 15.6 | 42.91 | 44.77 | |||||||||||||||||||
2022 | 520 | 2,368,191 | 12.9 | 101,568,616 | 13.8 | 42.89 | 46.67 | |||||||||||||||||||
2023 | 379 | 2,350,706 | 12.8 | 109,054,580 | 14.9 | 46.39 | 51.74 | |||||||||||||||||||
2024 | 291 | 2,213,656 | 12.1 | 102,218,624 | 13.9 | 46.18 | 53.30 | |||||||||||||||||||
2025 | 193 | 1,389,093 | 7.6 | 63,364,148 | 8.6 | 45.62 | 55.62 | |||||||||||||||||||
2026 | 88 | 770,888 | 4.2 | 37,218,326 | 5.1 | 48.28 | 60.98 | |||||||||||||||||||
2027 | 75 | 1,074,520 | 5.9 | 51,969,743 | 7.1 | 48.37 | 61.86 | |||||||||||||||||||
2028 | 39 | 363,667 | 2.0 | 20,345,515 | 2.8 | 55.95 | 72.38 | |||||||||||||||||||
2029 | 26 | 164,083 | 0.9 | 7,169,890 | 1.0 | 43.70 | 57.83 | |||||||||||||||||||
Thereafter | 22 | 351,510 | 1.9 | 16,744,623 | 2.3 | 47.64 | 74.12 | |||||||||||||||||||
Subtotal/weighted average | 2,934 | 16,386,486 | 89.3 | % | $ | 734,093,839 | 100.0 | % | $ | 44.80 | $ | 50.87 | ||||||||||||||
Signed leases not commenced | 360,085 | 1.9 | ||||||||||||||||||||||||
Available | 1,223,319 | 6.7 | ||||||||||||||||||||||||
Building management use | 121,450 | 0.7 | ||||||||||||||||||||||||
BOMA adjustment(3) | 254,604 | 1.4 | ||||||||||||||||||||||||
Total/weighted average | 2,934 | 18,345,944 | 100.0 | % | $ | 734,093,839 | 100.0 | % | $ | 44.80 | $ | 50.87 | ||||||||||||||
(1) | Represents annualized rent at December 31, 2019 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. |
Portfolio Data |
Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | |||||||||||
Los Angeles | ||||||||||||||
Westside | 212,886 | 190,554 | 220,991 | 531,747 | ||||||||||
Valley | 135,013 | 197,618 | 215,729 | 291,412 | ||||||||||
Honolulu | 78,488 | 29,698 | 40,125 | 135,888 | ||||||||||
Expiring Square Feet(1) | 426,387 | 417,870 | 476,845 | 959,047 | ||||||||||
Percentage of Portfolio | 2.3 | % | 2.3 | % | 2.6 | % | 5.2 | % | ||||||
Los Angeles | ||||||||||||||
Westside | $50.63 | $48.42 | $49.38 | $49.59 | ||||||||||
Valley | $33.88 | $33.07 | $34.30 | $34.39 | ||||||||||
Honolulu | $35.08 | $35.89 | $33.68 | $34.06 | ||||||||||
Expiring Rent per Square Foot(2) | $42.46 | $40.27 | $41.24 | $42.77 | ||||||||||
(1) | Includes leases with an expiration date in the applicable period where the space had not been re-leased as of December 31, 2019, other than 388,857 square feet of Short-Term Leases. |
(2) | Fluctuations in this number primarily reflect the mix of buildings/submarkets involved, as well as the varying terms and square footage of the individual leases expiring. As a result, the data in this table should only be extrapolated with caution. While the following table sets forth data for our underlying submarkets, that data is even more influenced by such issues: |
Next Four Quarters | |||||||||
Region | Submarket | Expiring SF | Expiring Rent per SF | ||||||
Westside | Beverly Hills | 143,242 | $48.60 | ||||||
Brentwood | 293,109 | $47.42 | |||||||
Century City | 114,652 | $51.68 | |||||||
Olympic Corridor | 184,009 | $39.82 | |||||||
Santa Monica | 140,265 | $67.72 | |||||||
Westwood | 280,901 | $48.67 | |||||||
Valley | Sherman Oaks/Encino | 456,872 | $36.87 | ||||||
Warner Center/Woodland Hills | 382,900 | $30.52 | |||||||
Honolulu | Honolulu | 284,199 | $34.48 | ||||||
Portfolio Data |
Net Absorption During Quarter(1) | 0.18% | ||
Office Leases Signed During Quarter | Number of Leases | Rentable Square Feet | Weighted Average Lease Term (months) | |||||
New leases | 73 | 326,197 | 73 | |||||
Renewal leases | 105 | 464,718 | 47 | |||||
All leases | 178 | 790,915 | 58 | |||||
Change in Rental Rates for Office Leases Executed during the Quarter(2) | |||||||
Expiring Rate(2) | New/Renewal Rate(2) | Percentage Change | |||||
Cash Rent | $45.14 | $49.01 | 8.6% | ||||
Straight-line Rent | $40.36 | $51.89 | 28.6% | ||||
Average Office Lease Transaction Costs | |||||
Lease Transaction Costs per SF | Lease Transaction Costs per Annum | ||||
New leases signed during the quarter | $29.66 | $4.85 | |||
Renewal leases signed during the quarter | $24.45 | $6.30 | |||
All leases signed during the quarter | $26.50 | $5.52 | |||
(1) | Net absorption represents the change in percentage leased between the last day of the current and prior quarter, excluding properties acquired or sold during the current quarter. |
(2) | Represents the average annual initial stabilized cash and straight-line rents per square foot on new and renewed leases signed during the quarter compared to the prior leases for the same space. Excludes Short Term Leases, leases where the prior lease was terminated more than a year before signing of the new lease, leases for tenants relocated from space being taken out of service, and leases in acquired buildings where we believe the information about the prior agreement is incomplete or where we believe base rent reflects other off-market inducements to the tenant that are not reflected in the prior lease document. |
Portfolio Data |
Submarket | Number of Properties | Number of Units | Units as a Percent of Total | ||||||||||
Los Angeles | |||||||||||||
Santa Monica | 2 | 820 | 20 | % | |||||||||
West Los Angeles | 6 | 1,300 | 31 | ||||||||||
Honolulu(1) | 3 | 2,041 | 49 | ||||||||||
Total | 11 | 4,161 | 100 | % | |||||||||
Submarket | Percent Leased | Annualized Rent(2) | Monthly Rent Per Leased Unit | ||||||||||
Los Angeles | |||||||||||||
Santa Monica | 99.1 | % | $ | 29,961,408 | $ | 3,075 | |||||||
West Los Angeles | 98.1 | 48,843,348 | 3,197 | ||||||||||
Honolulu(1) | 97.8 | 44,281,644 | 1,852 | ||||||||||
Total / Weighted Average | 98.1 | % | $ | 123,086,400 | $ | 2,516 | |||||||
Recurring Multifamily Capital Expenditures per Unit | |||||
Three months ended December 31, 2019 | $ | 382 | |||
Year ended December 31, 2019 | $ | 960 | |||
(1) | Includes newly developed units just made available for rent. |
(2) | The multifamily portfolio also includes 10,495 square feet of ancillary retail space generating annualized rent of $408,077, which is not included in multifamily annualized rent. |
Developments |
1132 Bishop Street, Honolulu, Hawaii | |
In downtown Honolulu, we are converting a 25 story, 490,000 square foot office tower into approximately 500 rental apartments. This project will help address the severe shortage of rental housing in Honolulu, and revitalize the central business district, where we own a significant portion of the Class A office space. We expect the conversion to occur in phases over a number of years as the office space is vacated. In select cases, we will relocate tenants to our other office buildings in Honolulu, although we do not have enough vacancy to accommodate all of them. We currently estimate that construction costs will be $80 million to $100 million, although the inherent uncertainties of development are compounded by the multi-year and phased nature of the conversion. Assuming timely approvals, we expect the first units to be delivered in 2020. | |
Residential High Rise Tower, Brentwood, California | |
In Brentwood, we are building the first new residential high-rise development west of the 405 freeway in more than 40 years, offering stunning ocean views and luxury amenities. The 34 story, 376 unit tower is being built on a site that is directly adjacent to an office building and a 712 unit residential property that we own. The estimated budget is between $180 million and $200 million, not including the cost of the land which we have owned since 1997. As part of the project, we are investing additional capital to build a one acre park on Wilshire Boulevard that will be available to the public and provide a valuable amenity to our surrounding properties and community. We expect construction to take about three years. | Rendering of our new residential tower in Brentwood (center), with a new park in the foreground, and our existing residential and office buildings (left and right, respectively). |
Guidance |
Metric | Per Share |
Net income per common share - diluted | $0.68 to $0.74 |
FFO per share - fully diluted | $2.23 to $2.29 |
Metric | Assumption Range |
Average Office Occupancy | 90% to 91% |
Residential Leased Rate | Essentially fully leased |
Same Property Cash NOI Growth | 4.5% to 5.5% |
Above/Below Market Net Revenue | $14 to $16 million |
Straight-line Revenue | $4 to $6 million |
G&A | $40 to $44 million |
Interest Expense | $142 to $145 million |
Guidance |
Reconciliation of net income attributable to common stockholders to FFO | Low | High | |||||
Net income attributable to common stockholders | $ | 119.3 | $ | 129.9 | |||
Adjustments for depreciation and amortization of real estate assets | 390.0 | 380.0 | |||||
Adjustments for noncontrolling interests, consolidated JVs and unconsolidated Funds | (52.1 | ) | (40.4 | ) | |||
FFO | $ | 457.2 | $ | 469.5 | |||
Reconciliation of shares outstanding | High | Low | |||||
Weighted average shares of common stock outstanding - diluted | 175.5 | 175.5 | |||||
Weighted average units in our operating partnership outstanding | 29.5 | 29.5 | |||||
Weighted average fully diluted shares outstanding | 205.0 | 205.0 | |||||
Per share | Low | High | |||||
Net income per common share - diluted | $ | 0.68 | $ | 0.74 | |||
FFO per share - fully diluted | $ | 2.23 | $ | 2.29 |
Definitions |
Definitions |
• | NOI: is calculated by excluding the following from our net income: general and administrative expenses, depreciation and amortization expense, other income, other expenses, income from unconsolidated Funds, interest expense, gain from consolidation of JVs, gains (or losses) on sales of investments in real estate and net income attributable to noncontrolling interests. |
• | Cash NOI: is calculated by excluding from NOI our straight-line rent and the amortization/accretion of acquired above/below market leases. |
Definitions |
Definitions |
• | Our same properties for the three months ended December 31, 2019: include all of our Consolidated Portfolio properties, other than (1) a 80,500 square foot property in Honolulu, where the largest tenant is a health club that we own and operate, (2) a 492,600 square foot office property in Honolulu and a multifamily property in Honolulu which are affected by development activities, (3) a 583,000 square foot office property in Los Angeles which we expect to be affected by repositioning activity, (4) a residential community in Los Angeles that we acquired in June 2019 with 350 apartments and approximately 50,000 square feet of retail space, and (5) six office properties totaling 1.5 million square feet owned by a consolidated JV that was an unconsolidated Fund before November 21, 2019. |
• | Our same properties for 2020: include all of our Consolidated Portfolio properties, other than (1) a 80,500 square foot property in Honolulu, where the largest tenant is a health club that we own and operate, (2) a 492,600 square foot office property in Honolulu and a multifamily property in Honolulu which are affected by development activities, (3) a residential community in Los Angeles that we acquired in June 2019 with 350 apartments and approximately 50,000 square feet of retail space, (4) a residential community with 712 apartments and approximately 34,000 square feet of retail space in Los Angeles partially affected by fire damage, and (5) a consolidated JV that was an unconsolidated Fund before November 21, 2019. |
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