Form 8-K Douglas Emmett Inc For: May 05
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (date of earliest event reported)
May 5, 2015
Douglas Emmett, Inc.
(Exact name of registrant as specified in its charter)
Maryland | 1-33106 | 20-3073047 |
(State or other jurisdiction of incorporation) | Commission file number | (I.R.S. Employer identification No.) |
808 Wilshire Boulevard, Suite 200, Santa Monica, California 90401
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (310) 255-7700
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
On May 5, 2015, Douglas Emmett, Inc. released its financial results for the quarter ended March 31, 2015 by posting to its website its First Quarter 2015 Earnings Results and Operating Information package (attached hereto as Exhibit 99). The information contained in this report on Form 8-K, including the Exhibit, shall not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by Douglas Emmett, Inc. under the Securities Act of 1933, as amended.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99 First Quarter 2015 Earnings Results and Operating Information
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DOUGLAS EMMETT, INC. | |||
Dated: | May 5, 2015 | By: | /s/ THEODORE E. GUTH |
Theodore E. Guth | |||
Chief Financial Officer | |||
 | ||
Executive Summary
We are one of the largest owners and operators of high-quality office and multifamily properties located in the premier coastal markets of Southern California and Hawaii, with a total portfolio that includes 15.5 million square feet of Class A office properties and 3,336 apartment units.
• | Office Fundamentals: With our average office rental growth rates in almost all of our markets near or above double digits, the starting cash rents on office leases that we signed during the first quarter were 5.2% higher than the expiring leases for the same space, while the straight line rents were 22% higher than the same space under the prior lease. Even with our current focus on rental rates, we also achieved solid leasing of 715,139 square feet, increasing the leased rate for our total office portfolio to 92.6% and our occupancy to 91.1%. |
• | Multifamily Fundamentals: Our multifamily portfolio was fully leased, with average asking rents 5.9% higher than in the first quarter of 2014. |
• | Financial Results: Compared to the prior year quarter, (i) our Funds From Operations (FFO) increased by 9.3% to $76.0 million; (ii) our Adjusted Funds From Operations (AFFO) decreased by 6.2% to $53.5 million; (iii) our GAAP net income attributable to common stockholders increased by 44.1% to $18.7 million; and (iv) our same property cash NOI increased by 0.1% to $93.2 million. The decrease in our AFFO results from an increase in tenant improvements and leasing commissions reflecting the substantial growth in our office occupancy over the last two quarters. |
• | Debt: Our net consolidated debt to enterprise value was 40% at March 31, 2015, and we have no material debt maturities in 2015. We recently closed two loans: |
• | On March 5, 2015, we closed a non-recourse $102 million term loan, which matures in April 2025 with interest effectively fixed at 2.84% for the first five years. The loan is secured by a recently acquired multifamily community located in Honolulu, Hawaii. |
• | On April 15, 2015, we closed a non-recourse $340 million interest only term loan, which matures in April 2022 with interest effectively fixed at 2.77% per annum until April 2020. The loan is secured by several recent acquisitions as well as two properties released from an existing loan. We used the proceeds from this loan to pay down (i) $140 million of a $400 million loan due in 2017 and (ii) the entire outstanding balance on our $300 million credit line. |
During the remainder of 2015, we plan additional refinancings to extend our maturities and take advantage of the current interest rate environment.
• | Acquisitions: We closed two acquisitions during the quarter: |
• | On March 5, 2015, we purchased a 227,000 square foot Class “A” multi-tenant office property in Encino, California, for $92.4 million, or approximately $407 per square foot. |
• | In February 2015, we acquired the land under one of our office buildings in Honolulu, Hawaii, in exchange for 34,412 units of our operating partnership valued at $1.0 million and the cancellation of $26.5 million of debt. |
• | Dividends: On April 15, 2015, we paid a quarterly cash dividend of $0.21 per common share, or $0.84 per common share on an annualized basis, to our shareholders of record on March 31, 2015. Our strong 68.2% AFFO payout ratio leaves us with ample liquidity as well as room for additional dividend growth. |
• | Guidance: We are increasing the mid-point of our 2015 guidance, and expect FFO to be between $1.59 to $1.63 per share and AFFO to be between $1.22 to $1.26 per share. For details, please see page 23. |
NOTE: Please see the "Definitions" section at the end of this Earnings Package for certain definitions.
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Table of Contents
PAGE | |
COMPANY OVERVIEW | |
FINANCIAL RESULTS | |
PORTFOLIO DATA | |
Forward Looking Statements
This First Quarter 2015 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. Our actual results will be affected by known and unknown risks, trends, uncertainties and factors, some of which are beyond our control or ability to predict, including, but not limited to: adverse economic and real estate developments in Southern California and Honolulu; a general downturn in the economy; decreased rental rates or increased tenant incentives and vacancy rates; defaults on, and early terminations and non-renewal of, leases by tenants; increased interest rates and operating costs; failure to generate sufficient cash flows to service our outstanding indebtedness; difficulties in acquiring properties; failure to successfully operate properties; failure to maintain our status as a REIT; possible adverse changes in rent control laws and regulations; environmental uncertainties; risks related to natural disasters; lack or insufficient insurance; inability to successfully expand into new markets or submarkets; risks associated with property development; conflicts of interest with our officers; changes in real estate and zoning laws and increases in real property tax rates; possible future terrorist attacks; and other risks and uncertainties detailed in our Annual Report on Form 10-K and other documents filed with the Securities and Exchange Commission. Although we believe that our assumptions are reasonable, they are not guarantees of future performance and some will inevitably prove to be incorrect. As a result, our actual future results can be expected to differ from our expectations, and those differences may be material. Accordingly, please use caution in relying on previously reported forward-looking statements to anticipate future results or trends. This Earnings Package and all subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements.
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| Company Overview | |
Corporate Data
as of March 31, 2015
Office Portfolio | Consolidated | Total Portfolio(1) | |||||
Number of office properties | 54 | 62 | |||||
Square feet (in thousands) | 13,681 | 15,505 | |||||
Leased rate | 92.2 | % | 92.6 | % | |||
Occupancy rate | 90.6 | % | 91.1 | % | |||
Multifamily Portfolio | Consolidated | ||||||
Number of multifamily properties | 10 | ||||||
Number of multifamily units | 3,336 | ||||||
Multifamily leased rate | 99.6 | % | |||||
Market Capitalization (in thousands, except price per share) | ||||||
Closing price per share of common stock (NYSE: DEI) | $ | 29.81 | ||||
Shares of common stock outstanding | 145,859 | |||||
Fully diluted shares outstanding | 177,801 | |||||
Equity capitalization(2) | $ | 5,300,238 | ||||
Net debt(3) | $ | 3,486,827 | ||||
Total enterprise value | $ | 8,787,065 | ||||
Net debt/total enterprise value | 40 | % | ||||
_______________________________________________
(1) | Our total portfolio includes two unconsolidated institutional real estate funds in which we own significant equity interests. |
(2) | Equity capitalization represents our fully diluted shares multiplied by the closing price of our common stock on March 31, 2015. |
(3) | Net debt represents our consolidated debt, net of our cash and cash equivalents. Net debt excludes the debt of our unconsolidated real estate funds. |
NOTE: Please see the "Definitions" section at the end of this Earnings Package for certain definition
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| Company Overview | |
Property Map
as of March 31, 2015
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| Company Overview | |
Board of Directors and Executive Officers
as of March 31, 2015
OUR BOARD OF DIRECTORS
___________________________________________________________________________________________
Dan A. Emmett | Chairman of the Board – Douglas Emmett, Inc. | |
Jordan L. Kaplan | Chief Executive Officer and President – Douglas Emmett, Inc. | |
Kenneth M. Panzer | Chief Operating Officer – Douglas Emmett, Inc. | |
Christopher H. Anderson | Retired Real Estate Executive and Investor | |
Leslie E. Bider | Chief Executive Officer – PinnacleCare | |
Dr. David T. Feinberg | President and Chief Executive Officer – Geisinger Health System | |
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 | |
Theodore E. Guth | Chief Financial Officer | |
Kevin A. Crummy | Chief Investment Officer | |
CORPORATE OFFICES
808 Wilshire Boulevard, Suite 200, Santa Monica, California 90401
Phone: (310) 255-7700
For more information, please visit our website at www.douglasemmett.com or contact:
Stuart McElhinney, Vice President, Investor Relations
(310) 255-7751
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| Financial Results | |
Consolidated Balance Sheets
(in thousands)
March 31, 2015 | December 31, 2014 | ||||||
(unaudited) | (audited) | ||||||
Assets | |||||||
Investment in real estate: | |||||||
Land | $ | 924,965 | $ | 900,813 | |||
Buildings and improvements | 5,682,768 | 5,590,118 | |||||
Tenant improvements and lease intangibles | 691,025 | 666,672 | |||||
Investment in real estate, gross | 7,298,758 | 7,157,603 | |||||
Less: accumulated depreciation and amortization | (1,580,991 | ) | (1,531,157 | ) | |||
Investment in real estate, net | 5,717,767 | 5,626,446 | |||||
Cash and cash equivalents | 16,639 | 18,823 | |||||
Tenant receivables, net | 1,820 | 2,143 | |||||
Deferred rent receivables, net | 77,222 | 74,997 | |||||
Acquired lease intangible assets, net | 5,238 | 3,527 | |||||
Investment in unconsolidated real estate funds | 168,870 | 171,390 | |||||
Other assets | 25,249 | 57,270 | |||||
Total assets | $ | 6,012,805 | $ | 5,954,596 | |||
Liabilities | |||||||
Secured notes payable and revolving credit facility | $ | 3,503,466 | $ | 3,435,290 | |||
Interest payable, accounts payable and deferred revenue | 63,140 | 54,364 | |||||
Security deposits | 36,441 | 37,450 | |||||
Acquired lease intangible liabilities, net | 38,661 | 45,959 | |||||
Interest rate contracts | 35,275 | 37,386 | |||||
Dividends payable | 30,631 | 30,423 | |||||
Total liabilities | 3,707,614 | 3,640,872 | |||||
Equity | |||||||
Douglas Emmett, Inc. stockholders' equity: | |||||||
Common stock | 1,459 | 1,449 | |||||
Additional paid-in capital | 2,692,020 | 2,678,798 | |||||
Accumulated other comprehensive income (loss) | (29,404 | ) | (30,089 | ) | |||
Accumulated deficit | (718,632 | ) | (706,700 | ) | |||
Total Douglas Emmett, Inc. stockholders' equity | 1,945,443 | 1,943,458 | |||||
Noncontrolling interests | 359,748 | 370,266 | |||||
Total equity | 2,305,191 | 2,313,724 | |||||
Total liabilities and equity | $ | 6,012,805 | $ | 5,954,596 | |||
NOTE: Please see the "Definitions" section at the end of this Earnings Package for certain definitions.
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| Financial Results | |
Consolidated Operating Results
(unaudited and in thousands, except per share data)
Three Months Ended March 31, | |||||||
2015 | 2014 | ||||||
Revenues: | |||||||
Office rental: | |||||||
Rental revenues | $ | 100,651 | $ | 98,613 | |||
Tenant recoveries | 10,150 | 10,907 | |||||
Parking and other income | 20,655 | 19,567 | |||||
Total office revenues | 131,456 | 129,087 | |||||
Multifamily rental: | |||||||
Rental revenues | 21,644 | 18,310 | |||||
Parking and other income | 1,709 | 1,479 | |||||
Total multifamily revenues | 23,353 | 19,789 | |||||
Total revenues | 154,809 | 148,876 | |||||
Operating Expenses: | |||||||
Office expenses | 44,199 | 43,356 | |||||
Multifamily expenses | 5,820 | 5,133 | |||||
General and administrative | 7,361 | 6,811 | |||||
Depreciation and amortization | 49,834 | 50,199 | |||||
Total operating expenses | 107,214 | 105,499 | |||||
Operating income | 47,595 | 43,377 | |||||
Other income | 8,559 | 4,287 | |||||
Other expenses | (1,572 | ) | (1,453 | ) | |||
Income, including depreciation, from unconsolidated real estate funds | 1,443 | 1,113 | |||||
Interest expense | (33,639 | ) | (31,838 | ) | |||
Acquisition-related expenses | (290 | ) | (28 | ) | |||
Net income | 22,096 | 15,458 | |||||
Less: Net income attributable to noncontrolling interests | (3,397 | ) | (2,482 | ) | |||
Net income attributable to common stockholders | $ | 18,699 | $ | 12,976 | |||
Net income per common share – basic | 0.128 | 0.090 | |||||
Net income per common share – diluted | 0.124 | 0.088 | |||||
Weighted average shares of common stock outstanding - basic | 145,327 | 143,140 | |||||
Weighted average shares of common stock outstanding - diluted | 149,802 | 146,861 | |||||
NOTE: Please see the "Definitions" section at the end of this Earnings Package for certain definitions.
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| Financial Results | |
Consolidated
Funds From Operations & Adjusted Funds From Operations
(unaudited and in thousands, except per share data)
Three Months Ended March 31, | |||||||
2015 | 2014 | ||||||
Funds From Operations (FFO) | |||||||
Net income attributable to common stockholders | $ | 18,699 | $ | 12,976 | |||
Depreciation and amortization of real estate assets | 49,834 | 50,199 | |||||
Net income attributable to noncontrolling interests | 3,397 | 2,482 | |||||
Adjustments attributable to consolidated joint venture and investment in unconsolidated real estate funds(1) | 4,081 | 3,866 | |||||
FFO | $ | 76,011 | $ | 69,523 | |||
Adjusted Funds From Operations (AFFO) | |||||||
FFO | $ | 76,011 | $ | 69,523 | |||
Straight-line rent | (2,225 | ) | (1,286 | ) | |||
Net accretion of acquired above and below market leases(2) | (9,799 | ) | (3,552 | ) | |||
Amortization of interest rate contracts and deferred loan costs | 1,773 | 1,021 | |||||
Recurring capital expenditures, tenant improvements and leasing commissions | (15,293 | ) | (10,884 | ) | |||
Non-cash compensation expense | 3,638 | 2,350 | |||||
Adjustments attributable to consolidated joint venture and investment in unconsolidated real estate funds(1) | (653 | ) | (191 | ) | |||
AFFO | $ | 53,452 | $ | 56,981 | |||
Weighted average share equivalents outstanding - diluted(3) | 177,520 | 175,751 | |||||
FFO per share- diluted | $ | 0.43 | $ | 0.40 | |||
AFFO per share- diluted | $ | 0.30 | $ | 0.32 | |||
Dividends per share | $ | 0.21 | $ | 0.20 | |||
AFFO payout ratio | 68.15 | % | 60.36 | % | |||
____________________________________________________
(1) | Adjusts for (i) the portion of each listed adjustment item that is attributed to the noncontrolling interest in our consolidated joint venture and (ii) the effect of each listed adjustment item on our share of the results of our unconsolidated Funds. |
(2) | Other Income during the first quarter of 2015 included $6.6 million of accretion of an above-market ground lease related to the acquisition of the land under one of our office buildings. We do not expect comparable amounts in future quarters. |
(3) | Calculated based on the weighted average shares outstanding, including unvested LTIP units, the dilutive impact of stock options, and assuming the exchange of all Operating Partnership units and vested LTIP units. |
NOTE: Please see the "Definitions" section at the end of this Earnings Package for certain definitions.
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| Financial Results | |
Consolidated Same Property Statistical & Financial Data
(unaudited and in thousands, except statistics)
As of March 31, | |||||||
2015 | 2014 | ||||||
Same Property Office Statistics | |||||||
Number of properties | 50 | 50 | |||||
Rentable square feet (in thousands) | 12,781 | 12,780 | |||||
Ending % leased | 92.0 | % | 91.4 | % | |||
Ending % occupied | 90.4 | % | 89.8 | % | |||
Quarterly average % occupied | 90.3 | % | 90.2 | % | |||
Same Property Multifamily Statistics | |||||||
Number of properties | 9 | 9 | |||||
Number of units | 2,868 | 2,868 | |||||
Ending % leased(1) | 99.7 | % | 99.5 | % | |||
Three Months Ended March 31, | % Favorable | |||||||||||
2015 | 2014 | (Unfavorable) | ||||||||||
Same Property Net Operating Income - GAAP Basis | ||||||||||||
Total office revenues | $ | 124,349 | $ | 124,799 | (0.4 | )% | ||||||
Total office expenses | (41,566 | ) | (41,706 | ) | 0.3 | % | ||||||
Office NOI | 82,783 | 83,093 | (0.4 | )% | ||||||||
Total multifamily revenues | 20,561 | 19,789 | 3.9 | % | ||||||||
Total multifamily expenses | (5,128 | ) | (5,133 | ) | 0.1 | % | ||||||
Multifamily NOI | 15,433 | 14,656 | 5.3 | % | ||||||||
Same Property NOI - GAAP basis | $ | 98,216 | $ | 97,749 | 0.5 | % | ||||||
Same Property Net Operating Income - Cash Basis | ||||||||||||
Total office revenues | $ | 120,220 | $ | 121,084 | (0.7 | )% | ||||||
Total office expenses | (41,579 | ) | (41,751 | ) | 0.4 | % | ||||||
Office NOI | 78,641 | 79,333 | (0.9 | )% | ||||||||
Total multifamily revenues | 19,723 | 18,944 | 4.1 | % | ||||||||
Total multifamily expenses | (5,128 | ) | (5,133 | ) | 0.1 | % | ||||||
Multifamily NOI | 14,595 | 13,811 | 5.7 | % | ||||||||
Same Property NOI - cash basis | $ | 93,236 | $ | 93,144 | 0.1 | % | ||||||
____________________________________________________
(1) | In calculating the percentage of units leased, units temporarily unoccupied as a result of fire or similar damage (4 units in 2015 and 21 units in 2014) were removed from the numerator and denominator. In both cases, the lost rent from those units is being recovered from insurance. |
NOTE: Please see the "Definitions" section at the end of this Earnings Package for certain definitions.
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| Financial Results | |
Reconciliation of Same Property NOI to GAAP Net Income
(unaudited and in thousands)
Three Months Ended March 31, | |||||||
2015 | 2014 | ||||||
Same property office revenues - cash basis | $ | 120,220 | $ | 121,084 | |||
GAAP adjustments per definition of NOI - cash basis | 4,129 | 3,715 | |||||
Same property office revenues - GAAP basis | 124,349 | 124,799 | |||||
Same property office expenses - cash basis | (41,579 | ) | (41,751 | ) | |||
GAAP adjustments per definition of NOI - cash basis | 13 | 45 | |||||
Same property office expenses - GAAP basis | (41,566 | ) | (41,706 | ) | |||
Office NOI - GAAP basis | 82,783 | 83,093 | |||||
Same property multifamily revenues - cash basis | 19,723 | 18,944 | |||||
GAAP adjustments per definition of NOI - cash basis | 838 | 845 | |||||
Same property multifamily revenues - GAAP basis | 20,561 | 19,789 | |||||
Same property multifamily expenses - cash basis | (5,128 | ) | (5,133 | ) | |||
GAAP adjustments per definition of NOI - cash basis | — | — | |||||
Same property multifamily expenses - GAAP basis | (5,128 | ) | (5,133 | ) | |||
Multifamily NOI - GAAP basis | 15,433 | 14,656 | |||||
Total same property NOI - GAAP basis | 98,216 | 97,749 | |||||
Non-comparable office revenues | 7,107 | 4,288 | |||||
Non-comparable office expenses | (2,633 | ) | (1,650 | ) | |||
Non-comparable multifamily revenues | 2,792 | — | |||||
Non-comparable multifamily expenses | (692 | ) | — | ||||
Total NOI - GAAP basis | 104,790 | 100,387 | |||||
General and administrative | (7,361 | ) | (6,811 | ) | |||
Depreciation and amortization | (49,834 | ) | (50,199 | ) | |||
Operating income | 47,595 | 43,377 | |||||
Other income | 8,559 | 4,287 | |||||
Other expense | (1,572 | ) | (1,453 | ) | |||
Income, including depreciation, from unconsolidated real estate funds | 1,443 | 1,113 | |||||
Interest expense | (33,639 | ) | (31,838 | ) | |||
Acquisition-related expenses | (290 | ) | (28 | ) | |||
Net income | 22,096 | 15,458 | |||||
Less: Net income attributable to noncontrolling interests | (3,397 | ) | (2,482 | ) | |||
Net income attributable to common stockholders | $ | 18,699 | $ | 12,976 | |||
NOTE: Please see the "Definitions" section at the end of this Earnings Package for certain definitions.
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| Financial Results | |
Operating Results of Unconsolidated Real Estate Funds(1)
(unaudited and in thousands)
Three Months Ended March 31, | ||||||||
Summary Income Statement of Unconsolidated Real Estate Funds(2) | 2015 | 2014 | ||||||
Office revenues | $ | 17,480 | $ | 16,355 | ||||
Office expenses | (6,691 | ) | (6,442 | ) | ||||
NOI | 10,789 | 9,913 | ||||||
General and administrative | (60 | ) | (31 | ) | ||||
Depreciation and amortization | (6,915 | ) | (6,631 | ) | ||||
Operating income | 3,814 | 3,251 | ||||||
Interest expense | (2,854 | ) | (2,867 | ) | ||||
Net income | $ | 960 | $ | 384 | ||||
FFO of Unconsolidated Real Estate Funds(2) | ||||||||
Net income | $ | 960 | $ | 384 | ||||
Add back: depreciation and amortization | 6,915 | 6,631 | ||||||
FFO | $ | 7,875 | $ | 7,015 | ||||
Our Share of the Unconsolidated Real Estate Funds FFO | ||||||||
Our share of the unconsolidated real estate funds' net income | $ | 626 | $ | 325 | ||||
Add back: our share of the funds' depreciation and amortization | 4,062 | 3,862 | ||||||
Equity allocation and basis difference | 817 | 788 | ||||||
Our share of the unconsolidated real estate funds' FFO | $ | 5,505 | $ | 4,975 | ||||
__________________________________________________
(1) | We own and manage significant equity interests in two unconsolidated institutional real estate Funds, which own a combined eight Class A office properties, totaling 1.8 million square feet, in our submarkets. Our ownership interest entitles us to a pro rata share of any distributions based on our ownership (a weighted average of approximately 60% at March 31, 2015 based on square footage), additional distributions based on the total invested capital and a carried interest if the investors’ distributions exceed a hurdle rate. We also receive fees and reimbursement of expenses for managing our unconsolidated Funds’ properties. |
(2) | These amounts represent 100% (not our pro-rata share) of the amounts related to the Funds on a combined basis. |
NOTE: Please see the "Definitions" section at the end of this Earnings Package for certain definitions.
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| Financial Results | |
Consolidated Debt Balances (as of March 31, 2015, unaudited and in thousands) | |||||||||||
Description | Maturity Date | Principal Balance | Effective Annual Rate (2) | Swap Maturity Date | |||||||
Term Debt(1) | 12/24/2015 | $ | 20,000 | LIBOR + 1.45% | -- | ||||||
3/1/2016 | (3) | 16,140 | LIBOR + 1.60% | -- | |||||||
3/1/2016 | 82,000 | LIBOR + 0.62% | -- | ||||||||
6/1/2017 | 18,000 | LIBOR + 0.62% | -- | ||||||||
10/2/2017 | (4) | 400,000 | 4.45% | 7/1/2015 | |||||||
4/2/2018 | 510,000 | 4.12% | 4/1/2016 | ||||||||
8/1/2018 | 530,000 | 3.74% | 8/1/2016 | ||||||||
8/5/2018 | (5) | 355,000 | 4.14% | -- | |||||||
2/1/2019 | (6) | 154,776 | 4.00% | -- | |||||||
6/5/2019 | (7) | 285,000 | 3.85% | -- | |||||||
10/1/2019 | (8) | 145,000 | LIBOR + 1.25% | -- | |||||||
3/1/2020 | (9) | 349,070 | 4.46% | -- | |||||||
11/2/2020 | 388,080 | 3.65% | 11/1/2017 | ||||||||
4/1/2025 | 102,400 | 2.84% | 3/1/2020 | ||||||||
Total Term Debt | $ | 3,355,466 | |||||||||
Credit facility(10) | 12/11/2017 | 148,000 | LIBOR + 1.40% | -- | |||||||
Total Debt | $ | 3,503,466 | |||||||||
_________________________________________________________________________
(1) | As of March 31, 2015, (i) the weighted average remaining life (including extension options) of our outstanding term debt (excluding our revolving credit line) was 3.9 years; (ii) of the $3.07 billion of term debt on which the interest rate was fixed under the terms of the loan or a swap, the weighted average remaining life was 4.0 years, the weighted average remaining period during which interest was fixed was 2.2 years, and the weighted average annual interest rate was 4.11%; and (iii) including the non-cash amortization of prepaid financing, the weighted average effective interest rate was 4.23%. 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 the amortization of prepaid financing. |
(3) | The borrower is a consolidated entity in which our Operating Partnership owns a two-thirds interest. |
(4) | Subsequent to quarter end, we prepaid $140 million of this loan with a portion of the proceeds of a new $340 million term loan, which matures in April 2022, with interest at LIBOR + 1.40% per annum, effectively fixed by a swap at 2.77% per annum until April 2020. |
(5) | Interest-only until February 2016, with principal amortization thereafter based upon a 30-year amortization schedule. |
(6) | Principal amortization based upon a 30-year amortization schedule. |
(7) | Interest only until February 2017, with principal amortization thereafter based upon a 30-year amortization schedule. |
(8) | During the period from April 16, 2015 to June 30, 2015, the interest on $140 million of this loan will be effectively fixed at 3.7% per annum. |
(9) | Interest rate is fixed until March 1, 2018, and is floating thereafter, with principal amortization after May 2016 based upon a 30-year amortization schedule. We have two one-year extension options to extend the maturity as late as March 1, 2020, subject to certain conditions. |
(10) | $300.0 million revolving credit facility secured by 3 separate collateral pools consisting of a total of 6 properties. Unused commitment fees range from 0.15% to 0.20%. We used the proceeds of the new term loan described in note 4 above to pay down the entire balance in April. |
Unconsolidated Debt Balances (as of March 31, 2015, unaudited and in thousands) | |||||||||||||
Maturity Date | Principal Balance | Our Share of Principal | Effective Annual Rate(1) | Swap Maturity Date | |||||||||
4/1/2016 | $ | 51,735 | $ | 12,548 | (2) | 5.67% | — | ||||||
5/1/2018 | 325,000 | 222,980 | (3) | 2.35% | 5/1/2017 | ||||||||
$ | 376,735 | $ | 235,528 | ||||||||||
_________________________________________________________________________
(1) | Includes the effect of interest rate contracts and excludes the amortization of prepaid financing. |
(2) | Loan to one of our unconsolidated Funds secured by one property. The loan requires monthly payments of principal and interest. |
(3) | Loan to one of our unconsolidated Funds secured by six properties. The loan requires monthly payments of interest only. |
NOTE: Please see the "Definitions" section at the end of this Earnings Package for certain definitions.
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| Portfolio Data | |
Office Portfolio Summary
Total Office Portfolio as of March 31, 2015
Submarket | Number of Properties | Rentable Square Feet | Percent of Square Feet of Our Total Portfolio | Submarket Rentable Square Feet | Our Market Share in Submarket | |||||||||||
Beverly Hills | 9 | 1,860,656 | 12.0 | % | 7,741,422 | 21.2 | % | |||||||||
Brentwood | 14 | 1,665,977 | (1) | 10.7 | 3,356,126 | 49.6 | ||||||||||
Burbank | 1 | 420,949 | 2.7 | 6,733,458 | 6.3 | |||||||||||
Century City | 3 | 916,952 | 5.9 | 10,064,599 | 9.1 | |||||||||||
Honolulu | 4 | 1,716,710 | 11.1 | 5,088,599 | 33.7 | |||||||||||
Olympic Corridor | 5 | 1,098,075 | 7.1 | 3,014,329 | 36.4 | |||||||||||
Santa Monica | 8 | 972,959 | 6.3 | 8,709,282 | 11.2 | |||||||||||
Sherman Oaks/Encino | 13 | 3,599,573 | 23.2 | 6,171,530 | 58.3 | |||||||||||
Warner Center/Woodland Hills | 3 | 2,856,441 | 18.4 | 7,203,647 | 39.7 | |||||||||||
Westwood | 2 | 396,808 | 2.6 | 4,443,398 | 8.9 | |||||||||||
Total | 62 | 15,505,100 | 100.0 | % | 62,526,390 | 24.5 | % | |||||||||
_____________________________________________________
1. | Excludes a building with approximately 35,000 square foot which was removed from service in connection with a planned multi-family development project at the site. See our multifamily development projects on page 22. |
NOTE: Please see the "Definitions" section at the end of this Earnings Package for certain definitions.
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| Portfolio Data | |
Office Percentage Leased and In-Place Rents
Total Office Portfolio as of March 31, 2015
Annualized Rent by Submarket
Submarket | Percentage Leased (1) | Annualized Rent | Annualized Rent Per Leased Square Foot(2) | Monthly Rent Per Leased Square Foot | |||||||||||||
Beverly Hills | 97.6 | % | $ | 72,124,113 | $ | 41.24 | $ | 3.44 | |||||||||
Brentwood | 94.5 | 58,372,977 | 37.90 | 3.16 | |||||||||||||
Burbank | 100.0 | 16,048,013 | 38.12 | 3.18 | |||||||||||||
Century City | 98.9 | 34,246,794 | 38.66 | 3.22 | |||||||||||||
Honolulu(3) | 87.7 | 48,757,409 | 33.36 | 2.78 | |||||||||||||
Olympic Corridor | 95.0 | 31,583,752 | 30.69 | 2.56 | |||||||||||||
Santa Monica(4) | 99.6 | 52,525,443 | 54.80 | 4.57 | |||||||||||||
Sherman Oaks/Encino | 93.3 | 103,493,076 | 31.83 | 2.65 | |||||||||||||
Warner Center/Woodland Hills | 83.5 | 63,084,098 | 27.62 | 2.30 | |||||||||||||
Westwood | 96.4 | 13,484,755 | 36.11 | 3.01 | |||||||||||||
Total / Weighted Average | 92.6 | $ | 493,720,430 | 35.38 | 2.95 | ||||||||||||
Recurring Office Capital Expenditures per Rentable Square Foot | |||||||||||||||||
For the three months ended March 31, 2015 | $ | 0.02 | |||||||||||||||
_______________________________________________________________
(1) | Includes 238,794 square feet with respect to signed leases not yet commenced. |
(2) | Represents annualized rent divided by leased square feet (excluding signed leases not commenced). |
(3) | Includes $2,774,082 of annualized rent attributable to a health club that we operate. |
(4) | Includes $1,432,927 of annualized rent attributable to our corporate headquarters. |
NOTE: Please see the "Definitions" section at the end of this Earnings Package for certain definitions.
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| Portfolio Data | |
Office Tenant Diversification
Total Office Portfolio as of March 31, 2015
Percentage of Annualized Rent by Lease Size
Individual tenants paying 1% or more of aggregate Annualized Rent(1): | |||||||||||||||||||||||
Tenant | Number of Leases | Number of Properties | Lease Expiration(2) | Total Leased Square Feet | Percent of Rentable Square Feet | Annualized Rent | Percent of Annualized Rent | ||||||||||||||||
Time Warner(3) | 3 | 3 | 2016-2019 | 580,812 | 3.7 | % | $ | 21,683,437 | 4.4 | % | |||||||||||||
William Morris Endeavor(4) | 1 | 1 | 2027 | 181,215 | 1.2 | 9,067,759 | 1.8 | ||||||||||||||||
Equinox Fitness(5) | 4 | 4 | 2018-2033 | 137,648 | 0.9 | 4,996,166 | 1.0 | ||||||||||||||||
The Macerich Partnership, L.P. | 1 | 1 | 2018 | 90,832 | 0.6 | 4,940,295 | 1.0 | ||||||||||||||||
Total | 9 | 9 | 990,507 | 6.4 | % | $ | 40,687,657 | 8.2 | % | ||||||||||||||
(1) Based on minimum base rent in leases expiring after March 31, 2015. | |||||||||||||||||||||||
(2) Expiration dates are per leases. For tenants with multiple leases, the range shown reflects all leases other than storage and similar leases. | |||||||||||||||||||||||
(3) Includes a 150,000 square foot lease expiring in April 2016 (an existing subtenant has leased 101,000 square feet of this space commencing on expiration of the current lease and continuing until July 2023), a 10,000 square foot lease expiring in December 2017 and a 421,000 square foot lease expiring in September 2019. | |||||||||||||||||||||||
(4) Tenant has an option to terminate this lease in December 2022. | |||||||||||||||||||||||
(5) Includes a 44,000 square foot lease expiring in April 2018, a 33,000 square foot lease expiring in August 2019, a 31,000 square foot lease expiring in September 2027 and a 30,000 square foot lease expiring in April 2033. | |||||||||||||||||||||||
NOTE: Please see the "Definitions" section at the end of this Earnings Package for certain definitions.
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| Portfolio Data | |
Office Lease Distribution
Total Office Portfolio as of March 31, 2015
Square Feet Under Lease | Number of Leases | Leases as a Percent of Total | Rentable Square Feet | Square Feet as a Percent of Total | Annualized Rent | Annualized Rent as a Percent of Total | |||||||||||||||
2,500 or less | 1,366 | 51.4 | % | 1,880,429 | 12.1 | % | $ | 66,258,768 | 13.4 | % | |||||||||||
2,501-10,000 | 968 | 36.5 | 4,647,444 | 30.0 | 159,526,223 | 32.3 | |||||||||||||||
10,001-20,000 | 210 | 7.9 | 2,865,003 | 18.5 | 102,070,619 | 20.7 | |||||||||||||||
20,001-40,000 | 83 | 3.1 | 2,175,322 | 14.0 | 76,849,946 | 15.6 | |||||||||||||||
40,001-100,000 | 23 | 0.9 | 1,379,942 | 8.9 | 52,074,394 | 10.5 | |||||||||||||||
Greater than 100,000 | 5 | 0.2 | 1,005,941 | 6.5 | 36,940,480 | 7.5 | |||||||||||||||
Subtotal | 2,655 | 100.0 | % | 13,954,081 | (1) | 90.0 | % | 493,720,430 | 100.0 | % | |||||||||||
Signed leases not commenced | 238,794 | 1.5 | |||||||||||||||||||
Available | 1,144,754 | 7.4 | |||||||||||||||||||
Building Management Use | 115,533 | 0.8 | |||||||||||||||||||
BOMA Adjustment(2) | 51,938 | 0.3 | |||||||||||||||||||
Total | 2,655 | 100.0 | % | 15,505,100 | 100.0 | % | $ | 493,720,430 | 100.0 | % | |||||||||||
(1) Average tenant size is approximately 5,300 square feet. Median tenant size is approximately 2,400 square feet. | |||||||||||||||||||||
(2) Represents square footage adjustments for leases that do not reflect BOMA remeasurement. | |||||||||||||||||||||
NOTE: Please see the "Definitions" section at the end of this Earnings Package for certain definitions.
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| Portfolio Data | |
Office Industry Diversification
Total Office Portfolio as of March 31, 2015
Percentage of Annualized Rent by Tenant Industry
Industry | Number of Leases | Annualized Rent as a Percent of Total | |||||
Legal | 524 | 18.5 | % | ||||
Entertainment | 187 | 13.8 | |||||
Financial Services | 336 | 13.8 | |||||
Real Estate | 211 | 9.6 | |||||
Health Services | 353 | 8.7 | |||||
Accounting & Consulting | 326 | 8.6 | |||||
Retail | 186 | 6.6 | |||||
Insurance | 117 | 5.6 | |||||
Technology | 127 | 5.1 | |||||
Advertising | 77 | 2.5 | |||||
Public Administration | 79 | 2.4 | |||||
Educational Services | 33 | 2.2 | |||||
Other | 99 | 2.6 | |||||
Total | 2,655 | 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 March 31, 2015
Year of Lease Expiration | Number of Leases | Rentable Square Feet | Expiring Square Feet as a Percent of Total | Annualized Rent at March 31, 2015 | Annualized Rent as a Percent of Total | Annualized Rent Per Leased Square Foot(1) | Annualized Rent Per Leased Square Foot at Expiration(2) | |||||||||||||||||||
Short Term Leases | 47 | 163,753 | 1.1 | % | $ | 4,201,985 | 0.9 | % | $ | 25.66 | $ | 25.66 | ||||||||||||||
2015 | 319 | 1,011,727 | 6.5 | 34,536,473 | 7.0 | 34.14 | 34.73 | |||||||||||||||||||
2016 | 561 | 2,066,596 | 13.3 | 71,318,647 | 14.5 | 34.51 | 35.56 | |||||||||||||||||||
2017 | 540 | 2,317,963 | 14.9 | 77,894,666 | 15.8 | 33.60 | 35.65 | |||||||||||||||||||
2018 | 390 | 1,809,438 | 11.7 | 67,779,393 | 13.7 | 37.46 | 40.75 | |||||||||||||||||||
2019 | 276 | 1,766,796 | 11.4 | 62,352,565 | 12.6 | 35.29 | 39.15 | |||||||||||||||||||
2020 | 225 | 1,538,969 | 9.9 | 54,149,527 | 11.0 | 35.19 | 39.59 | |||||||||||||||||||
2021 | 109 | 929,770 | 6.0 | 33,291,820 | 6.7 | 35.81 | 42.15 | |||||||||||||||||||
2022 | 55 | 509,886 | 3.3 | 17,941,202 | 3.6 | 35.19 | 41.66 | |||||||||||||||||||
2023 | 49 | 710,974 | 4.6 | 22,897,531 | 4.6 | 32.21 | 40.62 | |||||||||||||||||||
2024 | 44 | 309,061 | 2.0 | 11,274,835 | 2.3 | 36.48 | 47.01 | |||||||||||||||||||
Thereafter | 40 | 819,148 | 5.3 | 36,081,786 | 7.3 | 44.05 | 61.98 | |||||||||||||||||||
Subtotal/Weighted Average | 2,655 | 13,954,081 | 90.0 | 493,720,430 | 100.0 | 35.38 | 39.69 | |||||||||||||||||||
Signed leases not commenced | 238,794 | 1.5 | ||||||||||||||||||||||||
Available | 1,144,754 | 7.4 | ||||||||||||||||||||||||
Building Management Use | 115,533 | 0.8 | ||||||||||||||||||||||||
BOMA Adjustment(3) | 51,938 | 0.3 | ||||||||||||||||||||||||
Total/Weighted Average | 2,655 | 15,505,100 | 100.0 | % | $ | 493,720,430 | 100.0 | % | 35.38 | 39.69 | ||||||||||||||||
___________________________________________________
(1) | Represents annualized rent at March 31, 2015 divided by leased square feet. |
(2) | Represents annualized rent at expiration divided by leased square feet. |
(3) | Represents the square footage adjustments for leases that do not reflect BOMA remeasurement. |
NOTE: Please see the "Definitions" section at the end of this Earnings Package for certain definitions.
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| Portfolio Data | |
Quarterly Office Lease Expirations - Next Four Quarters
Total Office Portfolio as of March 31, 2015
Q2 2015 | Q3 2015 | Q4 2015 | Q1 2016 | |||||||||||||||
Expiring SF(1) | 310,126 | 222,524 | 479,077 | 504,600 | ||||||||||||||
Percentage of Portfolio | 2.2 | % | 1.6 | % | 3.4 | % | 3.6 | % | ||||||||||
Expiring Rent per SF(2) | $ | 34.96 | $ | 34.81 | $ | 34.54 | $ | 34.12 | ||||||||||
Detailed Submarket Data | |||||||||||||||||||
Due to the small square footage of leases in each quarter in each submarket, and the varying terms and square footage of the individual leases and the individual buildings involved, the data in this table should only be extrapolated with caution. | |||||||||||||||||||
Q2 2015 | Q3 2015 | Q4 2015 | Q1 2016 | ||||||||||||||||
Beverly Hills | Expiring SF(1) | 26,115 | 12,231 | 72,813 | 42,183 | ||||||||||||||
Expiring Rent per SF(2) | $ | 46.43 | $ | 39.78 | $ | 39.33 | $ | 39.36 | |||||||||||
Brentwood | Expiring SF(1) | 21,850 | 16,665 | 50,009 | 61,553 | ||||||||||||||
Expiring Rent per SF(2) | $ | 36.39 | $ | 33.82 | $ | 36.04 | $ | 36.02 | |||||||||||
Century City | Expiring SF(1) | 22,314 | 35,897 | 26,591 | 42,122 | ||||||||||||||
Expiring Rent per SF(2) | $ | 35.31 | $ | 39.63 | $ | 35.01 | $ | 39.74 | |||||||||||
Honolulu | Expiring SF(1) | 45,591 | 13,978 | 46,595 | 43,055 | ||||||||||||||
Expiring Rent per SF(2) | $ | 32.68 | $ | 33.94 | $ | 31.23 | $ | 31.68 | |||||||||||
Olympic Corridor | Expiring SF(1) | 15,821 | 25,895 | 59,250 | 39,417 | ||||||||||||||
Expiring Rent per SF(2) | $ | 36.95 | $ | 32.74 | $ | 34.10 | $ | 31.19 | |||||||||||
Santa Monica | Expiring SF(1) | 44,034 | 12,510 | 20,877 | 7,950 | ||||||||||||||
Expiring Rent per SF(2) | $ | 39.42 | $ | 54.02 | $ | 43.68 | $ | 57.94 | |||||||||||
Sherman Oaks/Encino | Expiring SF(1) | 51,108 | 73,108 | 92,442 | 174,897 | ||||||||||||||
Expiring Rent per SF(2) | $ | 31.33 | $ | 30.91 | $ | 31.93 | $ | 33.86 | |||||||||||
Warner Center/Woodland Hills | Expiring SF(1) | 70,998 | 23,219 | 71,630 | 83,206 | ||||||||||||||
Expiring Rent per SF(2) | $ | 30.99 | $ | 28.23 | $ | 27.27 | $ | 27.95 | |||||||||||
Westwood | Expiring SF(1) | 12,295 | 9,021 | 38,870 | 10,217 | ||||||||||||||
Expiring Rent per SF(2) | $ | 35.23 | $ | 40.05 | $ | 42.60 | $ | 35.93 | |||||||||||
_________________________________________________________________
(1) | Includes leases with an expiration date in the applicable quarter where the space had not been re-leased as of March 31, 2015, other than 163,753 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. |
NOTE: Please see the "Definitions" section at the end of this Earnings Package for certain definitions.
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| Portfolio Data | |
Office Leasing Activity
Total Office Portfolio during the three months ended March 31, 2015
Rentable Square feet | Percentage | |||||||
Net Absorption During Quarter | 16,600 | 0.11% | ||||||
Office Leases Signed During Quarter | Number of leases | Rentable square feet | Weighted Average Lease Term (months) | |||||
New leases | 68 | 215,937 | 75 | |||||
Renewal leases | 114 | 499,202 | 59 | |||||
All leases | 182 | 715,139 | 64 | |||||
Change in Rental Rates for Office Leases Executed during the Quarter(1) | |||||||
Starting Cash Rent | Straight-line Rent | Expiring Cash Rent | |||||
Leases executed during the quarter | $40.00 | $42.61 | N/A | ||||
Prior leases for same space | $33.68 | $34.94 | $38.04 | ||||
Percentage change | 18.8% | 21.9% | 5.2% | (2) | |||
Average Office Lease Transaction Costs (Per Square Foot)(3) | |||||
Lease Transaction Costs | Lease Transaction Costs per Annum | ||||
New leases signed during quarter | $37.81 | $6.09 | |||
Renewal leases signed during quarter | $23.89 | $4.84 | |||
All leases signed during quarter | $28.09 | $5.28 | |||
________________________________________________________________
(1) | Represents the average initial stabilized cash rents and straight-line on new and renewal leases executed during the quarter compared to the prior lease on the same space, excluding short term leases and leases on space where the prior lease was terminated more than a year before. |
(2) | The percentage change for expiring cash rent represents the difference in the starting cash rent on leases executed during the quarter compared to the expiring cash rent on the prior leases for the same space. |
(3) | Represents weighted average tenant improvements and leasing commissions. |
NOTE: Please see the "Definitions" section at the end of this Earnings Package for certain definitions.
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| Portfolio Data | |
Multifamily Portfolio Summary
as of March 31, 2015
Annualized Rent by Submarket
Submarket | Number of Properties | Number of Units | Units as a Percent of Total | ||||||||||
Brentwood | 5 | 950 | 28 | % | |||||||||
Honolulu | 3 | 1,566 | 47 | ||||||||||
Santa Monica | 2 | 820 | 25 | ||||||||||
Total | 10 | 3,336 | 100 | % | |||||||||
Submarket | Percent Leased | Annualized Rent | Monthly Rent Per Leased Unit | ||||||||||
Brentwood | 99.3 | % | $ | 26,664,684 | $ | 2,356 | |||||||
Honolulu(1) | 99.9 | 32,256,000 | 1,723 | ||||||||||
Santa Monica(2) | 99.6 | 25,679,244 | 2,619 | ||||||||||
Total / Weighted Average | 99.6 | % | $ | 84,599,928 | 2,123 | ||||||||
Recurring Multifamily Capital Expenditures per Unit | |||||
For the three months ended March 31, 2015 | $ | 70 | |||
________________________________________________________________
(1) | In calculating the percentage of units leased, 4 units temporarily unoccupied as a result of fire damage were removed from the numerator and denominator. The lost rent from those units is being recovered from insurance. |
(2) | Excludes 10,013 square feet of ancillary retail space generating annualized rent of $247,921. |
NOTE: Please see the "Definitions" section at the end of this Earnings Package for certain definitions.
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| Portfolio Data | |
Multifamily Development Projects
Rendering of our Moanalua Hillside Apartments, Honolulu Hawaii development, including the new entry and common area facilities, the new 8 story buildings and re-skinned existing 4 and 6 story buildings.
We are currently working on two multi-family development projects located on sites that we already own:
Moanalua Hillside Apartments, Honolulu, Hawaii | |||
Projected Units | Estimated Cost (1) | Anticipated Completion of Construction | |
500 | $120 million | 2016/2017 | |
Our Moanalua Hillside apartments currently include 696 apartment units located on 28 acres near downtown Honolulu and key military bases. The development project would add 500 new units, upgrade the existing apartment buildings, improve the parking and landscaping, and build a new leasing and management office, a new recreation building with a fitness facility and a new pool and deck area. | |||
The Landmark, Brentwood, California | |||
Projected Units | Estimated Cost(1) | Anticipated Start of Construction | Anticipated Construction Period |
376 | $100 - $120 million | 2016 | 18-24 months |
The Landmark would be the first new residential high-rise development west of the 405 freeway in almost 40 years, offering stunning oceans views and luxury amenities. Present plans call for a 34 story, 376 unit tower located on a site currently housing a supermarket. However, the process in Los Angeles often results in significant changes in development plans and/or significant unanticipated delays. | |||
_____________________________________________________________________________
(1) | Estimated cost does not include the cost of the land, which in each case was previously purchased in connection with the current use. In the case of The Landmark, the cost of the existing underground parking garage is also not included. |
NOTES:
(1) | All figures are only estimates, as development in our markets is long and complex and subject to inherent uncertainties. |
(2) | NOTE: Please see the "Definitions" section at the end of this Earnings Package for certain definitions. |
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| Guidance | |
2015 OUTLOOK
Metric | 2015 Guidance |
Funds From Operations (FFO) | $1.59 to $1.63 per share |
Adjusted Funds From Operations (AFFO) | $1.22 to $1.26 per share |
Metric | Commentary | Assumption Range | Compared to Prior Guidance |
Average Office Occupancy | Calculated by averaging the occupancy rates for each quarter in the year, which is determined by averaging the last day of the quarter with the last day of the prior quarter. | 90.5% to 91.5% | increased |
Residential Leased Rate | We manage our apartment portfolio to be fully leased as a result of supply constraints and rent control in our markets. | Essentially Fully Leased | unchanged |
Same Property Cash NOI | Includes fees from early lease terminations and prior year CAM reconciliations. | Year over Year Increase 1.5% to 2.5% | increased |
Core Same Property Cash NOI | Excludes fees from early lease terminations and prior year CAM reconciliations. | Year over Year Increase 2.5% to 3.5% | increased |
Revenue from Above/Below Market Leases | Does not include $6.6 million of Other Income (net) in the first quarter related to a ground lease in Honolulu, which is also deducted in calculating AFFO. | $11 to $13 Million | narrowed |
Straight-Line Revenue | Assumes that non-cash Straight-Line Revenues will be essentially the same as in 2014. | $4 to $6 Million | unchanged |
G&A | We expect to maintain G&A at approximately 5% of revenue. | $27 to $30 Million | unchanged |
Interest Expense | During the remainder of 2015, we expect to continue to extend our maturities and take advantage of the current interest rate environment by accelerating the refinancing of one or two additional property pools due in 2016 and 2017. | $137 to $141 Million | unchanged |
Weighted Average Diluted Shares | Range based on variations in average stock price; does not assume any new stock offerings. | 177 to 178 Million | unchanged |
Other Income (net) | Other Income in the first quarter included $6.6 million of FAS 141 as a result of the acquisition of the fee interest under one of our Honolulu office buildings. Excluding this amount, and absent any unusual events, we assume that Other Income (net of Other Expense) will be in the neighborhood of $500,000 per quarter for the remainder of the year. | ||
Acquisitions/ Dispositions | Does not include any impact (including related costs) from acquisitions or dispositions that have not been announced. | ||
Except as disclosed, our guidance does not include the impact from possible future property acquisitions or dispositions, including acquisition and disposition costs, financings, other possible capital markets activities or impairment charges. The guidance and representative assumptions on this page are forward looking statements and reflect our views of current and future market conditions. Our actual results will be affected by known and unknown risks, trends, uncertainties and factors, some of which are beyond our control or ability to predict. Although we believe that 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.
NOTE: Please see the "Definitions" section at the end of this Earnings Package for certain definitions.
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| Definitions | |
Adjusted Funds From Operations (AFFO): We calculate AFFO from FFO by (i) eliminating the impact on FFO of straight-line rent; amortization/accretion of acquired above/below market leases; amortization/accretion of loan premiums/discounts; amortization of interest rate contracts and deferred loan costs; non-cash compensation expense; and adjustments attributable to consolidated joint ventures and investments in unconsolidated real estate funds, and (ii) subtracting recurring capital expenditures, tenant improvements and leasing commissions. AFFO is a non-GAAP financial measure for which we believe that net income is the most directly comparable GAAP financial measure. AFFO is not intended to represent cash flow, but may provide an additional perspective on our operating results and our ability to fund cash needs and pay dividends. As a widely reported measure of the performance of REITs, AFFO is also used by some investors to compare our performance with other REITs. However, other REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not be comparable to that of other REITs. AFFO should be considered only as a supplement to net income as a measure of our performance.
Annualized Rent: Represents annualized monthly cash base rent (i.e., excludes tenant reimbursements, parking and other revenue) before abatements under leases commenced as of the measurement date (does not include 238,794 square feet with respect to signed leases not yet commenced at March 31, 2015). For our triple net Burbank and Honolulu office properties, annualized rent is calculated by adding expense reimbursements to base rent. Annualized rent does not include lost rent covered by insurance.
Average Occupancy Rates: Calculated by averaging the occupancy rates on the last day of the quarter and of the prior quarter and, for periods longer than a quarter, by averaging the occupancy rates for all the quarters in the period.
Beverly Hills: We include in our Beverly Hills submarket data one property consisting of approximately 216,000 square feet located just outside the Beverly Hills city limits. In calculating our percentage of the submarket, we have eliminated this property from both the numerator and the denominator for consistency with third party data.
Diluted Shares: Diluted shares are calculated in accordance with GAAP and represent ownership in our company through shares of common stock, units in our Operating Partnership and other convertible equity instruments.
Funds From Operations (FFO): We calculate FFO before noncontrolling interests in accordance with the standards established by the National Association of Real Estate Investment Trusts (NAREIT). FFO is a non-GAAP financial measure which represents net income calculated in accordance with GAAP, excluding gains (or losses) from sales of depreciable operating property, real estate depreciation and amortization (other than amortization of deferred loan costs), and after adjustments attributable to consolidated joint ventures and investments in unconsolidated real estate funds. We provide FFO as a supplemental performance measure because, by excluding gains and losses from property dispositions, and real estate depreciation and amortization, some investors use it to illustrate trends in occupancy rates, rental rates and operating costs from year to year. We also believe that, as a widely recognized measure of the performance of REITs, FFO is used by some investors as a basis to compare our operating performance with that of other REITs. However, FFO has limitations as a measure of our performance because it excludes depreciation and amortization, and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures, tenant improvements and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations. Other equity REITs may not calculate FFO in accordance with the NAREIT definition and, accordingly, our FFO may not be comparable to other REITs. FFO should be considered only as a supplement to net income as a measure of our performance. FFO should not be used as a measure of our liquidity or cash flow, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends.
GAAP: GAAP refers to accounting principles generally accepted in the United States.
Net Operating Income (NOI): NOI is a non-GAAP measure consisting of the revenue and expense attributable to the real estate properties that we own and operate. We present two forms of NOI:
• | “NOI - GAAP basis” is calculated by excluding the following from our net income : general and administrative expense, depreciation and amortization expense, other income, other expense, income (or loss) including depreciation from unconsolidated real estate funds, interest expense, acquisition related expenses, and net income attributable to noncontrolling interests. |
• | “NOI - Cash basis” is calculated by excluding from the GAAP basis NOI our straight-line rent and the amortization/accretion of acquired above/below market leases. |
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| Definitions | |
We provide NOI as a supplemental performance measure because, by excluding the adjustments listed above, some investors use it to illustrate trends in occupancy rates, rental rates and operating costs from year to year. We also believe that, as a widely recognized measure of the performance of REITs, NOI is used by some investors as a basis to compare our operating performance with that of other REITs. However, NOI has limitations as a measure of our performance because it excludes depreciation and amortization expense, and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures, tenant improvements and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations. Other equity REITs may not calculate NOI in a similar manner and, accordingly, our NOI may not be comparable to those other REITs' NOI. NOI should be considered only as a supplement to net income as a measure of our performance and should not be used as a measure of our liquidity or cash flow, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends.
Occupancy Rate: Represents percent leased, not including signed leases not yet commenced, as of March 31, 2015.
Properties Owned: Our "Consolidated Portfolio" includes all of the properties included in our consolidated results. We own 100% of these properties, except for a 79,000 square foot property owned by a joint venture in which we own a 66.67% interest. Our "Total Portfolio" includes our Consolidated Portfolio plus eight properties totaling 1.8 million square feet owned by our unconsolidated real estate Funds, in which we own a weighted average of approximately 60% based on square footage.
Recurring Capital Expenditures: Building improvements and leasing costs required to maintain current revenues once a property has been stabilized, generally excluding capital expenditures and leasing costs for items such as acquired buildings being stabilized, newly developed space and upgrades to improve revenues or operating expenses, as well as those resulting from casualty damage or bringing the property into compliance with governmental requirements.
Rentable Square Feet: Based on BOMA remeasurement. At March 31, 2015, total consists of 14,192,875 leased square feet (including 238,794 square feet with respect to signed leases not commenced), 1,144,754 available square feet, 115,533 building management use square feet and 51,938 square feet of BOMA adjustment on leased space.
Same Property NOI: To facilitate a comparison of NOI between reported periods, we calculate comparable amounts for a subset of our owned properties referred to as our “same properties.” Same property amounts are calculated as the amounts attributable to properties which have been owned and operated by us in a consistent manner, and reported in our consolidated results, during the entire span of both periods being compared. Therefore, we excluded from our same property set for this quarter any properties (i) acquired on or after January 1, 2014; (ii) sold, contributed or otherwise removed from our consolidated financial statements before March 31, 2015; or (iii) that underwent a major repositioning project that we believed significantly affected its results at any point during the period commencing on January 1, 2014 and ending on March 31, 2015. Our same properties for 2015 include all of our consolidated properties other than (i) a 216,000 square foot office property we acquired in October 2014, (ii) a 468 unit multifamily property in Honolulu we acquired in December 2014, (iii) a 227,000 square foot office property we acquired in March 2015, (iv) a 413,000 square foot office property which included a 35,000 square foot store on which we expect to develop a residential tower and (v) a 79,000 square foot office property in Honolulu (a joint venture in which we own a two thirds interest) which is undergoing a repositioning.
Shares of Common Stock Outstanding: Represents undiluted common shares outstanding as of March 31, 2015, and therefore excludes units in our Operating Partnership and other convertible equity instruments.
Short Term Leases: Represents leases that expired on or before the measurement date or had a term of less than one year, including hold over tenancies, month to month leases and other short term occupancies.
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