Douglas Emmett, Inc.
(NYSE: DEI)
Supplemental Operating and
Financial Data
For the Quarter and Year Ended
December 31, 2007
TABLE OF CONTENTS
| PAGE |
| CORPORATE DATA | |
| | |
| Company Background | 2 |
| Corporate Data | 3 |
| Investor Information | 4 |
| | |
| CONSOLIDATED FINANCIAL RESULTS | |
| | |
| Balance Sheets | 6 |
| Quarterly and Annual Operating Results | 7 |
| Funds from Operations and Adjusted Funds from Operations | 8 |
| Debt Balances | 9 |
| | |
| PORTFOLIO DATA | |
| | |
| Office Portfolio Summary | 11 |
| Office Portfolio Occupancy and In-Place Rents | 12 |
| Multifamily Portfolio Summary | 13 |
| Tenant Diversification | 14 |
| Industry Diversification | 15 |
| Lease Distribution | 16 |
| Lease Expirations | 17 |
| Quarterly Lease Expirations – Next Four Quarters | 18 |
| Office Portfolio Leasing Activity | 19 |
This Supplemental Operating and Financial Data 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. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. You should not rely on forward-looking statements as predictions of future events. Forward-looking statements involve numerous risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ materially from those expressed in any forward-looking statement made by us. These risks and uncertainties include, but are not limited to: adverse economic and real estate developments in Southern California and Honolulu; decreased rental rates or increased tenant incentives and vacancy rates; defaults on, early terminations of, or non-renewal of leases by tenants; increased interest rates and operating costs; failure to generate sufficient cash flows to service our outstanding indebtedness; difficulties in identifying properties to acquire and completing acquisitions; failure to successfully operate acquired properties and operations; failure to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended; possible adverse changes in rent control laws and regulations; environmental uncertainties; risks related to natural disasters; lack or insufficient amount of insurance; inability to successfully expand into new markets or submarkets; risks associated with property development; conflicts of interest with our officers; changes in real estate and zoning laws and increases in real property tax rates; the consequences of any future terrorist attacks; and other risks and uncertainties detailed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission.
CORPORATE DATA
COMPANY BACKGROUND
We are one of the largest owners and operators of high-quality office and multifamily properties in Los Angeles County, California and have a growing presence in Honolulu, Hawaii. Our presence in Los Angeles and Honolulu is the result of a consistent and focused strategy of identifying submarkets that are supply constrained, have high barriers to entry and exhibit strong economic characteristics such as population and job growth and a diverse economic base. In our office portfolio, we focus primarily on owning and acquiring a substantial share of top-tier office properties within submarkets located near high-end executive housing and key lifestyle amenities. In our multifamily portfolio, we focus primarily on owning and acquiring select properties at premier locations within these same submarkets.
Our office portfolio consists of 48 properties with approximately 11.8 million rentable square feet and our multifamily portfolio consists of 9 properties with a total of 2,868 units. As of December 31, 2007, our office portfolio was 95.7% leased, and our multifamily properties were 98.7% leased. Our office portfolio contributed approximately 85.3% of our annualized rent as of December 31, 2007, while our multifamily portfolio contributed the remaining 14.7%. As of December 31, 2007, our Los Angeles County office and multifamily portfolio contributed approximately 91.2% of our annualized rent, and our Honolulu, Hawaii office and multifamily portfolio contributed the remaining 8.8%.
Our properties are concentrated in nine premier Los Angeles County submarkets—Brentwood, Olympic Corridor, Century City, Santa Monica, Beverly Hills, Westwood, Sherman Oaks/Encino, Warner Center/Woodland Hills and Burbank—as well as in Honolulu, Hawaii.
This Supplemental Operating and Financial Data supplements the information provided in our reports filed with the Securities and Exchange Commission. Additional information about us and our properties is also available at our website www.douglasemmett.com.
| Number of office properties owned | 48 |
| Square feet owned (in thousands) | 11,809 |
| Office leased rate as of December 31, 2007 | 95.7% |
Office occupied rate as of December 31, 2007(1) | 95.0% |
| Number of multifamily properties owned | 9 |
| Number of multifamily units owned | 2,868 |
| Multifamily leased rate as of December 31, 2007 | 98.7 |
| Market capitalization (in thousands): | |
Total debt(2) | $3,080,450 |
Common equity capitalization(3) | $3,549,394 |
Total market capitalization | $6,629,844 |
| Debt/total market capitalization | 46.5% |
| Common stock data (NYSE:DEI): | |
Range of closing prices(4) | $22.61 - $27.44 |
Closing price at quarter end | $22.61 |
Weighted average fully diluted shares outstanding(in thousands) (4) (5) | 159,111 |
Shares of common stock outstanding on February 8, 2008(6) | 120,181 |
| (1) | Represents percent leased less signed leases not yet commenced. |
| (2) | Excludes non-cash loan premium. |
| (3) | Common equity capitalization represents the total number of common shares and operating partnership units outstanding multiplied by the closing price of our stock at the end of the period. |
| (4) | For the quarter ended December 31, 2007. |
| (5) | Fully diluted shares shown here represent ownership in our company through common stock and OP units. |
| (6) | This amount represents undiluted shares, and does not include OP units. |
INVESTOR INFORMATION
| 808 Wilshire Boulevard, Suite 200, Santa Monica, California 90401 |
Dan A. Emmett Chairman of the Board, Douglas Emmett, Inc | Leslie E. Bider Former Chairman and Chief Executive Officer, Warner Chapel Music, Inc. and Private Investor | Thomas E. O’Hern Executive Vice President, Chief Financial Officer and Treasurer, Macerich Company |
Jordan L. Kaplan President and Chief Executive Officer | Victor J. Coleman Former President and Chief Operating Officer, Arden Realty, Inc. and Managing Director, Hudson Capital, LLC | Dr. Andrea L. Rich Former President and Chief Executive Officer, Los Angeles Museum of Art, and Former Executive Vice Chancellor and Chief Operating Officer, University of California Los Angeles |
Kenneth M. Panzer Chief Operating Officer, Douglas Emmett, Inc. | Ghebre Selassie Mehreteab Chief Executive Officer, NHP Foundation | William Wilson III Former Chairman, Cornerstone Properties, Inc., Managing Partner, Wilson Meany Sullivan, LLC |
| EXECUTIVE AND SENIOR MANAGEMENT |
Jordan L. Kaplan President and Chief Executive Officer | Kenneth M. Panzer Chief Operating Officer, Douglas Emmett, Inc. | William Kamer Chief Financial Officer |
Allan B. Golad SVP, Property Management | Andres Gavinet Executive Vice President of Finance | Michael J. Means SVP, Commercial Leasing |
| | Gregory R. Hambly Chief Operating Accounting Officer | |
| Vice President - Investor Relations |
| Email Contact: mjensen@douglasemmett.com |
| Please visit our corporate website at: www.douglasemmett.com |
CONSOLIDATED FINANCIAL RESULTS
BALANCE SHEETS
(unaudited and in thousands)
| | | December 31, | | |
| | | 2007 | | | 2006 |
| Assets | | | | | |
| Investment in real estate: | | | | | |
| Land | | $ | 825,560 | | | $ | 813,599 | |
| Buildingsand improvements | | | 4,978,124 | | | | 4,863,955 | |
| Tenant improvements and leasing costs | | | 460,486 | | | | 411,063 | |
| | | | 6,264,170 | | | | 6,088,617 | |
| Less: accumulated depreciation | | | (242,114 | ) | | | (32,521 | ) |
| Net investment in real estate | | | 6,022,056 | | | | 6,056,096 | |
| | | | | | | | | | |
| Cash and cash equivalents | | | 5,843 | | | | 4,536 | |
| Tenant receivables, net | | | 955 | | | | 4,160 | |
| Deferred rent receivables, net | | | 20,805 | | | | 3,587 | |
| Interest rate contracts | | | 84,600 | | | | 76,915 | |
| Acquired lease intangibleassets, net | | | 24,313 | | | | 34,137 | |
| Other assets | | | 31,396 | | | | 20,687 | |
| Total assets | | $ | 6, 189 , 968 | | | $ | 6, 200,118 | |
| | | | | | | | | | |
| Liabilities | | | | | | | | | |
| Secured notes payable | | $ | 3,080,450 | | | $ | 2,760,000 | |
| Unamortizednon-cashdebt premium | | | 25,227 | | | | 29,702 | |
| Interest rate contracts | | | 129,083 | | | | 6,278 | |
| Accrued interest payable | | | 13,963 | | | | 12,701 | |
| Accounts payable and accrued expenses | | | 48,741 | | | | 39,035 | |
| Acquired lease intangibleliabilities, net | | | 218,371 | | | | 263,649 | |
| Security deposits | | | 31,309 | | | | 28,670 | |
| Dividends payable | | | 19,221 | | | | 13,801 | |
| Total liabilities | | | 3,566,365 | | | | 3,153,836 | |
| | | | | | | | | | |
| Minority interests | | | 793,764 | | | | 934,509 | |
| | | | | | | | | | |
| Stockholders’ Equity | | | | | | | | | |
| Common stock | | | 1,098 | | | | 1,150 | |
| Additional paid-in capital | | | 2,144,849 | | | | 2,144,600 | |
| Accumulated other comprehensive(loss) income | | | (101,163 | ) | | | 415 | |
| Accumulated deficit | | | (214,945 | ) | | | (34,392 | ) |
| Total stockholders’ equity | | | 1,829,839 | | | | 2,111,773 | |
Total liabilities and stockholders’ equity | | $ | 6, 189 , 968 | | | $ | 6 ,200,118 | |
QUARTERLY AND ANNUAL OPERATING RESULTS
(unaudited and in thousands, except per share data)
| | | Three Months Ended | | | Year Ended | |
| | | Mar. 31, 2007 | | | Jun. 30, 2007 | | | Sep. 30, 2007 | | | Dec. 31, 2007 | | | Dec. 31, 2007 | |
| | | | | | | | | | | | | | | | |
| Revenues: | | | | | | | | | | | | | | | |
| Office rental: | | | | | | | | | | | | | | | |
Rental revenues | | $ | 91,612 | | | $ | 92,884 | | | $ | 94,592 | | | $ | 97, 833 | | | $ | 376, 921 | |
Tenant recoveries | | | 7,858 | | | | 5,362 | | | | 6,704 | | | | 5,253 | | | | 25,177 | |
Parking and other income | | | 11,100 | | | | 11,098 | | | | 12,137 | | | | 12,313 | | | | 46,648 | |
Total office revenues | | | 110,570 | | | | 109,344 | | | | 113,433 | | | | 115,399 | | | | 448,746 | |
| Multifamily rental: | | | | | | | | | | | | | | | | | | | | |
Rental revenues | | | 16,514 | | | | 16,879 | | | | 16,994 | | | | 17,040 | | | | 67,427 | |
Parking and other income | | | 491 | | | | 526 | | | | 505 | | | | 525 | | | | 2,047 | |
Total multifamily revenues | | | 17,005 | | | | 17,405 | | | | 17,499 | | | | 17,565 | | | | 69,474 | |
| Total revenues | | | 127,575 | | | | 126,749 | | | | 130,932 | | | | 132,964 | | | | 518,220 | |
Operating Expenses: | | | | | | | | | | | | | | | | | | | | |
Office expenses | | | 32,966 | | | | 31,124 | | | | 32,817 | | | | 31,852 | | | | 128,759 | |
Multifamily expenses | | | 4,923 | | | | 3,872 | | | | 4,332 | | | | 4,023 | | | | 17,150 | |
General and administrative | | | 5,042 | | | | 5,120 | | | | 5,862 | | | | 5,462 | | | | 21,486 | |
Depreciation and amortization | | | 51,121 | | | | 50,494 | | | | 50,629 | | | | 57,349 | | | | 209,593 | |
| Total operating expenses | | | 94,052 | | | | 90,610 | | | | 93,640 | | | | 98,686 | | | | 376,988 | |
Operating income | | | 33,523 | | | | 36,139 | | | | 37,292 | | | | 34,278 | | | | 141,232 | |
Interest and other income | | | 82 | | | | 372 | | | | 205 | | | | 36 | | | | 695 | |
Interest expense | | | (38,302 | ) | | | (38,313 | ) | | | (41,504 | ) | | | (42,497 | ) | | | (160,616 | ) |
Loss before minority interests | | | (4,697 | ) | | | (1,802 | ) | | | (4,007 | ) | | | (8,183 | ) | | | (18,689 | ) |
Minority interests | | | 1,424 | | | | 542 | | | | 1,222 | | | | 2,493 | | | | 5,681 | |
Net loss | | $ | (3,273 | ) | | $ | (1,260 | ) | | $ | (2,785 | ) | | $ | ( 5 , 690 | ) | | $ | ( 13 , 008 | ) |
Net loss per common share –basic and diluted(1) | | $ | (0.03 | ) | | $ | (0.01 | ) | | $ | (0.03 | ) | | $ | (0.0 5 | ) | | $ | (0. 12 | ) |
Weighted average shares of common stock outstanding –basic and diluted(1) | | | 115,006 | | | | 114,862 | | | | 110,956 | | | | 109,834 | | | | 112,646 | |
| (1)Diluted shares are calculated in accordance with GAAP accounting literature, and include common stock plus dilutive equity instruments, as appropriate. This amount excludes OP units, which are included in the non-GAAP calculation of fully diluted shares on page 3. |
FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS
(unaudited and in thousands, except per share data)
| | | Three Months Ended | | | Year Ended | |
| | | Mar. 31, 2007 | | | Jun. 30, 2007 | | | Sep. 30, 2007 | | | Dec. 31, 2007 | | | Dec. 31, 2007 | |
Funds From Operations (FFO)(1) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Net Loss | | $ | (3 , 273 | ) | | $ | (1 , 260 | ) | | $ | (2 , 785 | ) | | $ | ( 5 , 690 | ) | | $ | ( 13 , 008 | ) |
Depreciation and amortization of real estate assets | | | 51,118 | | | | 50,494 | | | | 50,629 | | | | 57,349 | | | | 209,590 | |
Minority Interests | | | (1,424 | ) | | | (542 | ) | | | (1,222 | ) | | | (2,493 | ) | | | (5,681 | ) |
FFO | | $ | 46,421 | | | $ | 48,692 | | | $ | 46,622 | | | $ | 49, 166 | | | $ | 190, 901 | |
Adjusted Funds From Operations (AFFO)(2) | | | | | | | | | | | | | | | | | | | | |
FFO | | $ | 46,421 | | | $ | 48,692 | | | $ | 46,622 | | | $ | 49,166 | | | $ | 190, 901 | |
Straight-line rent adjustment | | | (4,505 | ) | | | (4,502 | ) | | | (4,075 | ) | | | (4,136 | ) | | | (17,218 | ) |
| Amortization of acquired above and below market leases | | | (9,863 | ) | | | (10,074 | ) | | | (9,996 | ) | | | (10,628 | ) | | | (40,561 | ) |
| Amortization of interest rate contracts and loan premium | | | 2,474 | | | | 1,850 | | | | 2,232 | | | | 2,511 | | | | 9,067 | |
| Amortization of prepaid financing | | | 249 | | | | 251 | | | | 282 | | | | 353 | | | | 1,135 | |
| Recurring capital expenditures, tenant improvements and leasing commissions | | | (5,929 | ) | | | (6,576 | ) | | | (7,377 | ) | | | (10,260 | ) | | | (30,142 | ) |
| Non-cash compensation expense | | | 626 | | | | 736 | | | | 468 | | | | 491 | | | | 2,321 | |
| AFFO | | $ | 29,473 | | | $ | 30,377 | | | $ | 28,156 | | | $ | 27,497 | | | $ | 115, 503 | |
| Weighted average share equivalents outstanding (in thousands)- diluted | | | 166,391 | | | | 165,709 | | | | 160,625 | | | | 159,111 | | | | 162,935 | |
| FFO per share- diluted | | $ | 0.28 | | | $ | 0.29 | | | $ | 0.29 | | | $ | 0.31 | | | $ | 1.17 | |
| Dividends per share declared | | $ | 0.175 | | | $ | 0.175 | | | $ | 0.175 | | | $ | 0.175 | | | $ | 0.70 | |
| AFFO payout ratio | | | 97.99 | % | | | 93.90 | % | | | 98.62 | % | | | 99.91 | % | | | 97.53 | % |
| (1) | We calculate funds from operations before minority interest (FFO) in accordance with the standards established by the National Association of Real Estate Investment Trusts (NAREIT). FFO represents net income (loss), computed in accordance with accounting principles generally accepted in the United States of America (GAAP), excluding gains (or losses) from sales of depreciable operating property, real estate depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. Management uses FFO as a supplemental performance measure because, in excluding real estate depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that results from use or market conditions nor the level of capital expenditures 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, the utility of FFO as a measure of our performance is limited. Other equity REITs may not calculate FFO in accordance with the NAREIT definition and, accordingly, our FFO may not be comparable to such other REITs’ FFO. Accordingly, 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, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends. FFO should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP. |
| (2) | Adjusted Funds From Operations (AFFO) is a non-GAAP financial measure we believe is a useful supplemental measure of our performance. We compute AFFO by adding to FFO the non-cash compensation expense, amortization of prepaid financing costs and straight-line rents, and then subtracting recurring capital expenditures, tenant improvements and leasing commissions. AFFO is not intended to represent cash flow for the period, and it only provides an additional perspective on our ability to fund cash needs and make distributions to shareholders by adjusting the effect of the non-cash items included in FFO, as well as recurring capital expenditures and leasing costs. We believe that net income is the most directly comparable GAAP financial measure to AFFO. We also believe that AFFO provides useful information to the investment community about the Company’s financial position as compared to other REITs since AFFO is a widely reported measure used by other REITs. However, other REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not be comparable to other REITs. |
DEBT BALANCES
(unaudited and in thousands)
| | | Principal Balance | | Fixed/Floating Rate | | Hedged Annual Interest Rate | | Maturity Date | | Swap Maturity Date | |
| | | | | | | | | | | | |
| Variable Rate Swapped to Fixed Rate: | | | | | | | | | | | |
Modified Term Loan(2)(3) | | $ | 2,300,000 | | LIBOR + 0.85% | | 5.20% | | 08/31/12 | | 08/01/10-08/01/12 | |
| | | | | | | | | | | | | |
Fannie Mae Loan I(4) | | | 293,000 | | DMBS + 0.60% | | 4.76 | | 06/01/12 | | 08/01/11 | |
Fannie Mae Loan II(4) | | | 75,000 | | DMBS + 0.76% | | 4.93 | | 02/01/15 | | 08/01/11 | |
Fannie Mae Loan III(4) | | | 82,000 | | LIBOR + 0.62% | | 5.70 | | 02/01/16 | | 03/01/12 | |
Fannie Mae Loan IV(4) | | | 95,080 | | DMBS + 0.60% | | 5.86 | | 06/01/12 | | 08/01/11 | |
Fannie Mae Loan V(4) | | | 36,920 | | DMBS + 0.60% | | 5.86 | | 02/01/15 | | 08/01/11 | |
Fannie Mae Loan VI(4) | | | 18,000 | | LIBOR + 0.62% | | 5.90 | | 06/01/17 | | 06/01/12 | |
Subtotal | | $ | 2,900,000 | (5) | | | 5.20% | | | | | |
| Variable Rate: | | | | | | | | | | | | |
| $370 Million Senior Secured Revolving Credit Facility | | | 180,450 | | LIBOR / Fed Funds +(8) | | -- | | 10/30/09 | | -- | |
Subtotal | | | 3,080,450 | | | | | | | | | |
| | | | | | | | | | | | | |
Add: Unamortized Non-Cash Loan Premium(7) | | | 25,227 | | | | | | | | | |
| Total | | $ | 3,105,677 | | | | | | | | | |
| (1) | Includes the effect of interest rate contracts. Based on actual/365-day basis and excludes amortization of loan fees and unused fees on credit line. |
| (2) | Secured by seven separate cross collateralized pools. Requires monthly payments of interest only, with outstanding principal due upon maturity. |
| (3) | Includes $1.11 billion swapped to 4.89% until August 1, 2010; $545.0 million swapped to 5.75% until December 1, 2010; $322.5 million swapped to 4.98% until August 1, 2011; and $322.5 million swapped to 5.02% until August 1, 2012. |
| (4) | Secured by four separate collateralized pools. Fannie Mae Discount Mortgage-Backed Security (DMBS) generally tracks 90-day LIBOR. |
| (5) | The weighted average remaining life of our outstanding debt is 4.9 years. The weighted average remaining life of the interest rate swaps associated with this balance is 3.2 years. |
| (6) | Credit Facility is secured by nine properties and has two-one year extension options available. |
| (7) | Represents non-cash mark-to-market adjustment on variable rate debt associated with office properties. |
| (8) | The revolving credit facility bears interest at either LIBOR + 0.70% or Fed Funds + 0.95% at our election. If the amount outstanding exceeds $262.5 million, the credit facility bears interest at either LIBOR + 0.80% or Fed Funds + 1.05% at our election. |
PORTFOLIO DATA
OFFICE PORTFOLIO SUMMARY
| Submarket | | Number of Properties | | Rentable Square Feet (1) | | Percent of Total |
| | | | | | | | |
| West Los Angeles | | | | | | | |
Brentwood | | 13 | | 1,390,630 | | 11.8 | % |
Olympic Corridor | | 5 | | 1,096,014 | | 9.3 | |
Century City | | 3 | | 915,979 | | 7.7 | |
Santa Monica | | 7 | | 860,200 | | 7.3 | |
Beverly Hills | | 4 | | 572,446 | | 4.8 | |
Westwood | | 2 | | 396,807 | | 3.4 | |
| San Fernando Valley | | | | | | | |
ShermanOaks/Encino | | 9 | | 2,879,170 | | 24.4 | |
Warner Center/Woodland Hills | | 2 | | 2,597,843 | | 22.0 | |
| Tri-Cities | | | | | | | |
Burbank | | 1 | | 420,949 | | 3.6 | |
| Honolulu | | 2 | | 679,337 | | 5.7 | |
| Total | | 48 | | 11,809,375 | | 100.0 | % |
| (1) | Based on BOMA 1996 remeasurement. Total consists of 11,169,174 leased square feet, 508,118 available square feet, 66,199 building management use square feet, and 65,884 square feet of BOMA 1996 adjustment on leased space. |
OFFICE PORTFOLIO OCCUPANCY AND IN-PLACE RENTS
| Submarket | | Percent Leased | | | Annualized Rent(2) | | | Annualized Rent Per Leased Square Foot(3) | | | Monthly Rent Per Leased Square Foot | |
| | | | | | | | | | | | | |
| West Los Angeles | | | | | | | | | | | | |
Brentwood | | | 97.8 | % | | $ | 48,073,101 | | | $ | 35.65 | | | $ | 2.97 | |
Olympic Corridor | | | 94.8 | | | | 29,910,408 | | | | 29.50 | | | | 2.46 | |
Century City | | | 99.0 | | | | 30,464,094 | | | | 34.34 | | | | 2.86 | |
Santa Monica(4) | | | 99.0 | | | | 39,942,421 | | | | 47.14 | | | | 3.93 | |
Beverly Hills | | | 95.9 | | | | 22,134,788 | | | | 39.99 | | | | 3.33 | |
Westwood | | | | | | | 13,022,028 | | | | 34.64 | | | | 2.89 | |
| San Fernando Valley | | | | | | | | | | | | | | | | |
ShermanOaks/Encino | | | 95.8 | | | | 79,597,132 | | | | 29.36 | | | | 2.45 | |
Warner Center/Woodland Hills | | | 92.5 | | | | 64,597,132 | | | | 27.54 | | | | 2.30 | |
| Tri-Cities | | | | | | | | | | | | | | | | |
Burbank | | | 100.0 | | | | 14,118,629 | | | | 33.54 | | | | 2.79 | |
| Honolulu | | | 90.4 | | | | 18,581,686 | | | | 31.33 | | | | 2.61 | |
| Total | | | 95.7 | % | | $ | 360,105,160 | | | $ | 32.49 | | | $ | 2.71 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Recurring Capital Expenditures | | | | | | | | | | | | | | | | |
- Office (per rentable square foot) for the three months ended December 31, 2007 | | | | | | | | | | $ | 0.19 | | | | | |
- Office (per rentable square foot) for the twelve months ended December 31, 2007 | | | | | | | | | | $ | 0.46 | | | | | |
| (1) | Includes 84,684 square feet with respect to signed leases not yet commenced. |
| (2) | Represents annualized monthly cash rent under leases commenced as of December 31, 2007 (excluding 84,684 square feet with respect to signed leases not yet commenced). The amount reflects total cash rent before abatements. For our Burbank and Honolulu office properties, annualized rent is converted from triple net to gross by adding expense reimbursements to base rent. |
| (3) | Represents annualized rent divided by leased square feet (excluding 84,684 square feet with respect to signed leases not commenced) as set forth in note (1) above for the total. |
| (4) | Includes $1,108,103 of annualized rent attributable to our corporate headquarters at our Lincoln/Wilshire property. |
MULTIFAMILY PORTFOLIO SUMMARY
| Submarket | | Number of Properties | | | Number of Units | | | Percent of Total | |
| West Los Angeles | | | | | | | | | |
Brentwood | | | 5 | | | | 950 | | | | 33 | % |
Santa Monica | | | 2 | | | | 820 | | | | 29 | |
| Honolulu | | | 2 | | | | 1,098 | | | | 38 | |
| Total | | | 9 | | | | 2,868 | | | | 100 | % |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Submarket | | Percent Leased | | | Annualized Rent (1) | | | Monthly Rent Per Leased Unit | |
| | | | | | | | | | | | | |
| West Los Angeles | | | | | | | | | | | | |
| Brentwood | | | 98.9 | % | | $ | 23,440,056 | | | $ | 2,078 | |
| Santa Monica | | | 99.8 | | | | 19,948,278 | | | | 2,032 | |
| Honolulu | | | 97.7 | | | | 18,481,044 | | | | 1,435 | |
| Total | | | 98.7 | % | | $ | 61,869,378 | | | $ | 1,821 | |
| | | | | | | | | | | | | |
| Recurring Capital Expenditures | | | | | | | | | | | | |
- Multifamily (per unit) for the three months ended December 31, 2007 | | | | | | | | | | $ | 114 | |
- Multifamily (per unit) for the twelve months ended December 31, 2007 | | | | | | | | | | $ | 470 | |
| (1) | Represents December 31, 2007 multifamily rental income annualized. |
| (2) | Excludes 10,013 square feet of ancillary retail space, which generated $285,766 of annualized rent as of December 31, 2007. |
TENANT DIVERSIFICATION
(Greater than 1% of Annualized Rent)
| | Number of Leases | Number of Properties | Lease Expiration(1) | Total Leased Square Feet | Percent of Rentable Square Feet | Annualized Rent(2) | Percent of Annualized Rent |
| | | | | | | | |
Time Warner(3) | 4 | 4 | 2008-2019 | 642,845 | 5.4 | $21,734,656 | 6.0% |
| AIG SunAmerica | 1 | 1 | 2013 | 182,010 | 1.5 | 5,211,950 | 1.4 |
| The Endeavor Agency, LLC | 2 | 1 | 2019 | 103,421 | 0.9 | 4,202,029 | 1.2 |
| Blue Shield of California | 1 | 1 | 2009 | 135,106 | 1.1 | 3,939,691 | 1.1 |
| Metrocities Mortgage, LLC | 2 | 2 | 2010-2015 | 138,040 | 1.2 | 3,895,165 | 1.1 |
Pacific Theatres Exhibition Corp(4) | 1 | 1 | 2016 | 88,300 | 0.8 | 3,567,320 | 1.0 |
| Total | 11 | 10 | | 1,289,722 | 10.9 | $42,550,811 | 11.8% |
| (1) | Expiration dates are per leases and do not assume exercise of renewal, extension or termination options. For tenants with multiple leases, expirations are shown as a range. |
| (2) | Represents annualized monthly cash rent under leases commenced as of December 31, 2007. The amount reflects total cash rent before abatements. For our Burbank and Honolulu office properties, annualized rent is converted from triple net to gross by adding expense reimbursements to base rent. |
| (3) | Includes a 10,000 square foot lease expiring in October 2008, a 62,000 square foot lease expiring in June 2010, a 150,000 square foot lease expiring in April 2016, and a 420,000 square foot lease expiring in September 2019. |
| (4) | Annualized rent excludes rent determined as a percentage of sales. |
| Industry | Number of Leases | Annualized Rent as a Percent of Total |
| | | |
| Legal | 306 | 15.9% |
| Financial Services | 263 | 15.8 |
| Entertainment | 118 | 12.1 |
| Real Estate | 154 | 9.0 |
| Accounting and Consulting | 169 | 8.6 |
| Health Services | 269 | 8.1 |
| Insurance | 81 | 7.9 |
| Retail | 155 | 6.7 |
| Technology | 68 | 3.9 |
| Advertising | 49 | 3.0 |
| Public Administration | 31 | 2.2 |
| Educational Services | 9 | 0.7 |
| Other | 227 | 6.1 |
| Total | 1,899 | 100.0% |
| Square Feet Under Lease | | Number of Leases | | Leases as a Percent of Total | | Rentable Square Feet (1) | | Square Feet as a Percent of Total | | Annualized Rent (2) | | Annualized Rent as a Percent of Total |
| | | | | | | | | | | | | |
| 2,500 or less | | 934 | | 49.2% | | 1,250,331 | | 10.6% | | 42,573,897 | | 11.8% |
| 2,501-10,000 | | 714 | | 37.6 | | 3,456,248 | | 29.3 | | 111,156,003 | | 30.9 |
| 10,001-20,000 | | 164 | | 8.6 | | 2,298,648 | | 19.4 | | 74,025,194 | | 20.5 |
| 20,001-40,000 | | 59 | | 3.1 | | 1,641,739 | | 13.9 | | 54,605,892 | | 15.2 |
| 40,001-100,000 | | 21 | | 1.1 | | 1,190,566 | | 10.1 | | 39,186,253 | | 10.9 |
| Greater than 100,000 | | 7 | | 0.4 | | 1,246,958 | | 10.5 | | 38,557,921 | | 10.7 |
| Subtotal | | 1,899 | | 100.0% | | 11,084,490 | | 93.8% | | 360,105,160 | | 100.0% |
| Available | | - | | - | | 508,118 | | 4.3 | | - | | - |
BOMA Adjustment(3) | | - | | - | | 65,884 | | 0.6 | | - | | - |
| Building Management Use | | - | | - | | 66,199 | | 0.6 | | - | | - |
| Signed leases not commenced | | - | | - | | 84,684 | | 0.7 | | - | | - |
| Total | | 1,899 | | 100.0% | | 11,809,375 | | 100.0% | | 360,105,160 | | 100.0% |
(1) Based on BOMA 1996 remeasurement. Total consists of 11,169,174 leased square feet (includes 84,684 square feet with respect to signed leases not commenced),
508,118 available square feet, 66,199 building management use square feet, and 65,884 square feet of BOMA 1996 adjustment on leased space.
| (2) | Represents annualized monthly cash base rent (i.e., excludes tenant reimbursements, parking and other revenue) under leases commenced as of December 31, 2007 (excluding 84,684 square feet with respect to signed leases not yet commenced). The amount reflects total cash rent before abatements. For our Burbank and Honolulu office properties, annualized rent is converted from triple net to gross by adding expense reimbursements to base rent. |
| (3) | Represents square footage adjustments for leases that do not reflect BOMA 1996 remeasurement. |
| Year of Lease Expiration | | Number of Leases Expiring | | | Rentable Square Feet(1) | | | Expiring Square Feet as a Percent of Total | | | Annualized Rent(2) | | | Annualized Rent as a Percent of Total | | | Annualized Rent Per Leased Square Foot(3) | | | Annualized Rent Per Leased Square Foot at Expiration(4) | |
| | | | | | | | | | | | | | | | | | | | | | |
| Available | | | - | | | | 508,118 | | | | 4.3 | % | | $ | - | | | | - | % | | $ | - | | | $ | - | |
| 2008 | | | 368 | | | | 1,351,575 | | | | 11.4 | | | | 41,550,926 | | | | 11.5 | | | | 30.74 | | | | 30.96 | |
| 2009 | | | 374 | | | | 1,524,053 | | | | 12.9 | | | | 48,256,616 | | | | 13.4 | | | | 31.66 | | | | 32.83 | |
| 2010 | | | 348 | | | | 1,571,128 | | | | 13.3 | | | | 52,772,732 | | | | 14.6 | | | | 33.59 | | | | 36.04 | |
| 2011 | | | 283 | | | | 1,440,723 | | | | 12.2 | | | | 46,723,697 | | | | 13.0 | | | | 32.43 | | | | 36.18 | |
| 2012 | | | 242 | | | | 1,334,973 | | | | 11.3 | | | | 43,944,325 | | | | 12.2 | | | | 32.92 | | | | 38.02 | |
| 2013 | | | 115 | | | | 1,047,698 | | | | 8.9 | | | | 34,848,233 | | | | 9.7 | | | | 33.26 | | | | 40.94 | |
| 2014 | | | 67 | | | | 672,627 | | | | 5.7 | | | | 21,140,179 | | | | 5.9 | | | | 31.43 | | | | 39.39 | |
| 2015 | | | 33 | | | | 428,269 | | | | 3.6 | | | | 13,311,846 | | | | 3.7 | | | | 31.08 | | | | 39.45 | |
| 2016 | | | 28 | | | | 602,246 | | | | 5.1 | | | | 19,299,796 | | | | 5.4 | | | | 32.05 | | | | 39.55 | |
| 2017 | | | 22 | | | | 233,831 | | | | 2.0 | | | | 7,481,197 | | | | 2.1 | | | | 31.99 | | | | 42.55 | |
| Thereafter | | | 19 | | | | 877,367 | | | | 7.4 | | | | 30,775,613 | | | | 8.5 | | | | 35.08 | | | | 46.67 | |
BOMA Adjustment(5) | | | - | | | | 65,884 | | | | 0.6 | | | | - | | | | - | | | | - | | | | - | |
| Building Management Use | | | - | | | | 66,199 | | | | 0.6 | | | | - | | | | - | | | | - | | | | - | |
| Signed leases not commenced | | | - | | | | 84,684 | | | | 0.7 | | | | - | | | | - | | | | - | | | | - | |
| Total/Weighted Average | | | 1,899 | | | | 11,809,375 | | | | 100.0 | % | | $ | 360,105,160 | | | | 100.0 | % | | $ | 32.49 | | | $ | 39.92 | |
| (1) | Based on BOMA 1996 remeasurement. Total consists of 11,169,174 leased square feet (includes 84,684 square feet with respect to signed leases not commenced), |
508,118 available square feet, 66,199 building management use square feet, and 65,884 square feet of BOMA 1996 adjustment on leased space.
| (2) | Represents annualized monthly base rent under leases commenced as of December 31, 2007. The amount reflects total base rent before abatements. |
| (3) | Represents annualized rent divided by leased square feet. |
| (4) | Represents annualized rent at expiration divided by leased square feet. |
| (5) | Represents the square footage adjustments for leases that do not reflect BOMA 1996 remeasurement. |
QUARTERLY LEASE EXPIRATIONS - NEXT FOUR QUARTERS
| Submarket | | | | Q1-2008 | | | | | Q2 2008 | | | | | Q3 2008 | | | | | Q4-2008 | | |
| | | | | | | | | | | | | | | | | | | | | | |
| West Los Angeles | | | | | | | | | | | | | | | | | | | | | |
Brentwood | Expiring SF | | $ | 33,737 | | | | $ | 38,898 | | | | $ | 41,150 | | | | $ | 41,387 | | |
| | Rent per SF(1) | | | 33.91 | | | | | 33.59 | | | | | 32.96 | | | | | 36.15 | | |
Olympic Corridor | Expiring SF | | | 61,106 | | | | | 36,362 | | | | | 34,215 | | | | | 18,356 | | |
| | Rent per SF(1) | | | 30.78 | | | | | 30.00 | | | | | 28.05 | | | | | 28.32 | | |
Century City | Expiring SF | | | 5,277 | | | | | 15,149 | | | | | 5,473 | | | | | 16,868 | | |
| | Rent per SF(1) | | | 34.18 | | | | | 41.94 | | | | | 33.31 | | | | | 34.08 | | |
Santa Monica | Expiring SF | | | 25,048 | | | | | 1,447 | | | | | 75,943 | | | | | 18,014 | | |
| | Rent per SF(1) | | | 51.46 | | | | | 49.71 | | | | | 38.29 | | | | | 43.87 | | |
Beverly Hills | Expiring SF | | | 1,911 | | | | | 11,428 | | | | | 19,063 | | | | | 14.286 | | |
| | Rent per SF(1) | | | 22.28 | | | | | 35.99 | | | | | 36.46 | | | | | 44.29 | | |
Westwood | Expiring SF | | | 9,235 | | | | | - | | | | | 10,542 | | | | | 11,010 | | |
| | Rent per SF(1) | | | 38.06 | | | | | - | | | | | 36.13 | | | | | 35.77 | | |
| San Fernando Valley | | | | | | | | | | | | | | | | | | | | | |
Sherman Oaks/Encino | Expiring SF | | | 56,887 | | | | | 107,390 | | | | | 121,371 | | | | | 143,536 | | |
| | Rent per SF(1) | | | 32.93 | | | | | 27.63 | | | | | 30.15 | | | | | 26.96 | | |
Warner Center/Woodland Hills | Expiring SF | | | 98,267 | | | | | 45,185 | | | | | 66,478 | | | | | 92,428 | | |
| | Rent per SF(1) | | | 23.83 | | | | | 29.03 | | | | | 25.87 | | | | | 27.95 | | |
| Tri-Cities | | | | | | | | | | | | | | | | | | | | | |
Burbank | Expiring SF | | | - | | | | | - | | | | | - | | | | | - | | |
| | Rent per SF(1) | | | - | | | | | - | | | | | - | | | | | - | | |
| Honolulu | Expiring SF | | | 7,734 | | | | | 26,835 | | | | | 10,183 | | | | | 29,376 | | |
| | Rent per SF(1) | | | 31.98 | | | | | 30.07 | | | | | 30.86 | | | | | 28.92 | | |
| Total | Expiring SF | | | 299,202 | | (2) | | | 282,694 | | (3) | | | 384,418 | | (4) | | | 385,261 | | (5) |
| | Rent per SF(1) | | | 31.25 | | | | | 30.43 | | | | | 31.67 | | | | | 30.40 | | |
| (1) | Represents annualized base rent (i.e., excludes tenant reimbursements, parking and other revenue) per leased square foot at expiration. The amount reflects total cash rent before abatements. For our Burbank and Honolulu office properties, annualized rent is converted from triple net to gross by adding expense reimbursements to base rent. |
| (2) | As of December 31, 2007, 121,754 rentable square feet had been renewed for leases that were previously scheduled to expire in the quarter. |
| (3) | As of December 31, 2007, 126,560 rentable square feet had been renewed for leases that were previously scheduled to expire in the quarter. |
| (4) | As of December 31, 2007, 142,819 rentable square feet had been renewed for leases that were previously scheduled to expire in the quarter. |
| (5) | As of December 31, 2007, 22,002 rentable square feet had been renewed for leases that were previously scheduled to expire in the quarter. |
OFFICE PORTFOLIO LEASING ACTIVITY
(For the three months ended December 31, 2007)
| Gross New Leasing Activity | | | |
Rentable square feet | | | 222,128 |
Number of leases | | | 52 |
| Gross Renewal Leasing Activity | | | |
Rentable square feet | | | 239,340 |
Number of leases | | | 39 |
| Net Absorption | | | |
Leased rentable square feet | | | 13,313 |
Cash Rent Growth(1) | | | |
Expiring Rate | | | $34.89 |
New/Renewal Rate | | | $46.72 |
Increase | | | 33.9% |
Straight-Line Rent Growth(2) | | | |
Expiring Rate | | | $32.92 |
New/Renewal Rate | | | $51.01 |
Increase | | | 55.0% |
| Weighted Average Lease Terms | | | |
New (in months) | | | 54 |
Renewal (in months) | | | 57 |
| | | | |
Tenant Improvement and Leasing Commissions(3) (per rentable square foot) | Total Lease Transaction Costs | | Annual Lease Transaction Costs |
New leases | $15.99 | | $3.59 |
Renewal leases | $13.95 | | $2.95 |
Blended | $14.93 | | $3.25 |
| (1) | Represents the difference between initial stabilized cash rents on new and renewal leases as compared to the expiring cash rents on the same space. |
| (2) | Represents a comparison between straight-line rent on expiring leases and the straight-line rent for new leases on the same space. |
| (3) | Represents weighted average lease transaction costs based on the leases executed in the current quarter in our properties, including repositioned properties. |
