| 808 Wilshire Boulevard, 2nd FloorT: 310.255.7700 Santa Monica, California 90401F: 310.255.7702 |
FOR IMMEDIATE RELEASE
Mary Jensen, Vice President – Investor Relations 310.255.7751 or mjensen@douglasemmett.com | |
Douglas Emmett, Inc. Announces
2008 Third Quarter Earnings Results
Reports FFO of $0.33 Per Diluted Share
SANTA MONICA, CALIFORNIA – November 4, 2008 – Douglas Emmett, Inc. (NYSE:DEI), a real estate investment trust (REIT), announced the release of its financial results for the quarter ended September 30, 2008.
Financial Results
Funds From Operations (FFO) for the three months ended September 30, 2008 totaled $51.1 million, or $0.33 per diluted share, compared to $46.6 million, or $0.29 per diluted share, for the three months ended September 30, 2007. FFO for the nine months ended September 30, 2008 totaled $156.1 million, or $1.00 per diluted share, compared to $141.7 million, or $0.86 per diluted share, for the nine months ended September 30, 2007. The Company reported a GAAP net loss of $9.7 million, or ($0.08) per diluted share, for the three months ended September 30, 2008, compared to a GAAP net loss of $2.8 million, or ($0.03) per diluted share, for the three months ended September 30, 2007. The Company reported a GAAP net loss of $21.6 million, or ($0.18) per diluted share, for the nine months ended September 30, 2008, compared to a GAAP net loss of $7.3 million, or ($0.06) per diluted share, in the first nine months of 2007.
Property Transactions
Subsequent to the end of the quarter, the Company contributed six Class ‘A’ office properties to Douglas Emmett Fund X, LLC (the “Fund”). The properties, totaling 1.4 million square feet, were originally acquired by the Company on March 26, 2008.
The Fund was formed on October 7, 2008 with initial equity commitments of $300 million. The Fund’s investment strategy will be to take advantage of real estate opportunities within the Company’s core submarkets using the same disciplined underwriting and leverage principles that have governed acquisitions at Douglas Emmett for more than 20 years. Upon its final closing, the Fund is expected to range from $500 million to $1 billion in equity commitments including a $150 million commitment from the Company. The Fund will be the Company’s exclusive investment vehicle, with limited exceptions, and contemplates an investment period of up to 4 years followed by a value creation period of up to 10 years.
Financings and Debt Structure
In connection with the aforementioned property contribution, the Company transferred to the Fund a non-recourse 5-year secured term loan in the amount of $365 million, which was obtained in August 2008. The term loan bears interest at a floating rate equal to LIBOR plus 165 basis points; interest rate swap contracts effectively fix the rate at 5.515% for the first 4 years.
None of the Company’s current term loan debt matures until 2012, and the interest rate on that debt is fixed by interest rate swap contracts at a weighted average rate of approximately 5.14% per annum. The Company’s only other loan obligations are (i) its $370 million senior secured revolving credit facility, whose maturity can be extended by the Company until October 30, 2011, and (ii) an $18 million secured acquisition loan whose maturity can be extended by the Company until March 1, 2011.
Company Operations
Total revenues for the three months ended September 30, 2008 increased 15.7% to $153.2 million from $132.5 million for the three months ended September 30, 2007. Operating income increased 7.9% to $40.2 million for the three months ended September 30, 2008 compared to the three months ended September 30, 2007. Net operating income from the properties owned by the Company in both the third quarter of 2008 and the third quarter of 2007 rose 4.0% on a GAAP basis and 9.2% on a cash basis year over year.
Office: Total revenues from the Company’s office portfolio increased to $135.8 million for the three months ended September 30, 2008, an increase of 18.4% from the three months ended September 30, 2007. Total office revenues from the same properties owned by the Company in both the third quarter of 2008 and the third quarter of 2007 rose 3.1% on a GAAP basis and 5.6% on a cash basis year-over-year.
As of September 30, 2008, the Company’s office portfolio was 94.0% leased and 93.3% occupied, compared to 94.8% leased and 93.8% occupied at June 30, 2008. The occupied percentage represents the leased portion of the Company’s office portfolio less those leases where the rent commencement date has yet to occur. During the quarter, the Company signed 115 new and renewal leases, totaling approximately 514,838 square feet.
Multifamily: Total revenues from the Company’s multifamily portfolio decreased to $17.4 million for the three months ended September 30, 2008, a decrease of 1.8% from the three months ended September 30, 2007. On a cash basis, total multifamily revenues from the Company’s multifamily portfolio increased by 4.4% to $16.6 million from $15.9 million over the comparable period. As of September 30, 2008, the Company’s multifamily portfolio was 99.6% leased compared to 99.2% leased at June 30, 2008.
Douglas Emmett Announces
Third Quarter 2008 Company Earnings Results
During the quarter, the Company’s Board of Directors declared a quarterly cash dividend of $0.1875 per share. The dividend was paid on October 15, 2008 to shareholders of record as of September 30, 2008. On an annualized basis, this represents a dividend of $0.75 per common share.
Guidance
FFO guidance for the fourth quarter of 2008 is expected to range between $0.32 - $0.34 per diluted share. Therefore, the Company is raising its FFO guidance for the full year of 2008, which is anticipated to range between $1.32 and $1.34 per diluted share. Additionally, The Company’s guidance excludes any impact from future acquisitions, dispositions, additional equity purchases, debt financings, recapitalizations or similar matters.
Conference Call and Web Cast Information
A conference call to discuss the Company’s 2008 third quarter financial results is scheduled for Wednesday, November 5, 2008 at 2:00 pm Eastern Time or 11:00 am Pacific Time. Interested parties can access the call via the Internet by going to the Investor Relations section of the Company’s Web site at www.douglasemmett.com or by dialing into the call at 800-240-2430 (domestic) or 303-262-2142 (international). A replay of the live call will be available via the web site for 90 days. A digital replay will be available through Wednesday, November 12, 2008 at 800-405-2236 (domestic) or 303-590-3000 (international) and using the passcode 11120766.
Supplemental Information
Supplemental financial information for the Company’s 2008 third quarter financial results can be accessed on the Company’s Web site under the Investor Relations section at www.douglasemmett.com.
About Douglas Emmett, Inc.
Douglas Emmett, Inc. (NYSE: DEI) is a fully integrated, self-administered and self-managed real estate investment trust (REIT), and one of the largest owners and operators of high-quality office and multifamily properties located in premier submarkets in California and Hawaii. The Company’s properties are concentrated in ten submarkets – Brentwood, Olympic Corridor, Century City, Santa Monica, Beverly Hills, Westwood, Sherman Oaks/Encino, Warner Center/Woodland Hills, Burbank and Honolulu. The Company focuses on owning and acquiring a substantial share of top-tier office properties and premier multifamily communities in neighborhoods that possess significant supply constraints, high-end executive housing and key lifestyle amenities. For more information on Douglas Emmett, please visit the Company’s Web site at www.douglasemmett.com.
Safe Harbor Statement
Except for the historical facts, the statements in this press release regarding Douglas Emmett’s business activities are forward-looking statements based on the beliefs of, assumptions made by, and information currently available to us about known and unknown risks, trends, uncertainties and factors that 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. Accordingly, investors should use caution in relying on forward-looking statements to anticipate future results or trends. For a discussion of some of the risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Any securities offered in the Fund are not registered under the Securities Act of 1933 and can not be offered or sold in the United States absent registration under that act or an applicable exemption from those registration requirements. Nothing in the foregoing disclosure constitutes an offer to sell any securities in the Fund, nor a solicitation of an offer to purchase any such securities.
--tables follow--
Douglas Emmett Announces
Third Quarter 2008 Company Earnings Results
Douglas Emmett, Inc.
Consolidated Balance Sheets
(in thousands)
| | | September 30, 2008 | | | December 31, 2007 | |
| Assets | | (unaudited) | | | | |
| Investments in real estate: | | | | | | |
Land | | $ | 892,239 | | | $ | 825,560 | |
Buildings and improvements | | | 5,519,479 | | | | 4,978,124 | |
Tenant improvements and lease intangibles | | | 538,477 | | | | 460,486 | |
| | | | 6,950,195 | | | | 6,264,170 | |
Less: accumulated depreciation | | | (426,332 | ) | | | (242,114 | ) |
Net investment in real estate | | | 6,523,863 | | | | 6,022,056 | |
Cash and cash equivalents | | | 2,155 | | | | 5,843 | |
Tenant receivables, net | | | 688 | | | | 955 | |
Deferred rent receivables, net | | | 31,691 | | | | 20,805 | |
Interest rate contracts | | | 92,223 | | | | 84,600 | |
Acquired lease intangible assets, net | | | 19,735 | | | | 24,313 | |
Other assets | | | 33,978 | | | | 31,396 | |
Total assets | | $ | 6,704,333 | | | $ | 6,189,968 | |
| Liabilities | | | | | | | | |
Secured notes payable | | $ | 3,712,175 | | | $ | 3,080,450 | |
Unamortized non-cash debt premium | | | 21,697 | | | | 25,227 | |
Interest rate contracts | | | 144,496 | | | | 129,083 | |
Accrued interest payable | | | 21,933 | | | | 13,963 | |
Accounts payable and accrued expenses | | | 43,911 | | | | 48,741 | |
Acquired lease intangible liabilities, net | | | 207,184 | | | | 218,371 | |
Security deposits | | | 35,891 | | | | 31,309 | |
Dividends payable | | | 22,814 | | | | 19,221 | |
Total liabilities | | | 4,210,101 | | | | 3,566,365 | |
| | | | | | | | | |
Minority interests | | | 554,048 | | | | 793,764 | |
| Stockholders’ equity | | | | | | | | |
Common stock | | | 1,217 | | | | 1,098 | |
Additional paid-in capital | | | 2,280,396 | | | | 2,019,716 | |
Accumulated other comprehensive income | | | (96,045 | ) | | | (101,163 | ) |
Accumulated deficit | | | (245,384 | ) | | | (89,812 | ) |
Total stockholders’ equity | | | 1,940,184 | | | | 1,829,839 | |
Total liabilities and stockholders’ equity | | $ | 6,704,333 | | | $ | 6,189,968 | |
Douglas Emmett Announces
Third Quarter 2008 Company Earnings Results
Douglas Emmett, Inc.
Consolidated Statements of Operations
(unaudited and in thousands, except per share data)
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| Revenues: | | | | | | | | | | | | |
| Office rental: | | | | | | | | | | | | |
| Rental revenues | | $ | 112,787 | | | $ | 94,592 | | | $ | 323,016 | | | $ | 279,088 | |
| Tenant recoveries | | | 8,335 | | | | 7,973 | | | | 22,523 | | | | 23,138 | |
| Parking and other income | | | 14,681 | | | | 12,137 | | | | 41,252 | | | | 34,335 | |
| Total office revenues | | | 135,803 | | | | 114,702 | | | | 386,791 | | | | 336,561 | |
| | | | | | | | | | | | | | | | | |
| Multifamily rental: | | | | | | | | | | | | | | | | |
| Rental revenues | | | 16,483 | | | | 16,994 | | | | 50,130 | | | | 50,387 | |
| Parking and other income | | | 950 | | | | 765 | | | | 2,698 | | | | 2,338 | |
| Total multifamily revenues | | | 17,433 | | | | 17,759 | | | | 52,828 | | | | 52,725 | |
| | | | | | | | | | | | | | | | | |
| Total revenues | | | 153,236 | | | | 132,461 | | | | 439,619 | | | | 389,286 | |
| | | | | | | | | | | | | | | | | |
| Operating Expenses: | | | | | | | | | | | | | | | | |
| Office expenses | | | 39,915 | | | | 34,086 | | | | 109,404 | | | | 100,121 | |
| Multifamily expenses | | | 4,238 | | | | 4,592 | | | | 12,503 | | | | 13,943 | |
| General and administrative | | | 5,243 | | | | 5,862 | | | | 16,257 | | | | 16,024 | |
| Depreciation and amortization | | | 63,611 | | | | 50,629 | | | | 184,218 | | | | 152,244 | |
| Total operating expenses | | | 113,007 | | | | 95,169 | | | | 322,382 | | | | 282,332 | |
| | | | | | | | | | | | | | | | | |
| Operating income | | | 40,229 | | | | 37,292 | | | | 117,237 | | | | 106,954 | |
| | | | | | | | | | | | | | | | | |
| Other (expense) income | | | (43 | ) | | | 205 | | | | 489 | | | | 659 | |
| Interest expense | | | (52,586 | ) | | | (41,504 | ) | | | (145,580 | ) | | | (118,119 | ) |
| | | | | | | | | | | | | | | | | |
| Loss before minority interests | | | (12,400 | ) | | | (4,007 | ) | | | (27,854 | ) | | | (10,506 | ) |
| | | | | | | | | | | | | | | | | |
| Minority interests | | | 2,704 | | | | 1,222 | | | | 6,230 | | | | 3,188 | |
| Net loss | | $ | (9,696 | ) | | $ | (2,785 | ) | | $ | (21,624 | ) | | $ | (7,318 | ) |
Net loss per common share – basic and diluted(1) | | $ | (0.08 | ) | | $ | (0.03 | ) | | $ | (0.18 | ) | | $ | (0.06 | ) |
Weighted average shares of common stock outstanding – basic and diluted(1) | | | 121,509 | | | | 110,956 | | | | 120,373 | | | | 113,593 | |
| (1) | Diluted shares are calculated in accordance with accounting principles generally accepted in the United States (GAAP), and include common stock plus dilutive equity instruments, as appropriate. This amount excludes OP units, which are included in the non-GAAP calculation of diluted shares on page 6. |
Douglas Emmett Announces
Third Quarter 2008 Company Earnings Results
Douglas Emmett, Inc.
FFO Reconciliation
(unaudited and in thousands, except per share data)
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
Funds From Operations (FFO) (1): | | | | | | | | | | | | |
| Net loss | | $ | (9,696 | ) | | $ | (2,785 | ) | | $ | (21,624 | ) | | $ | (7,318 | ) |
Depreciation and amortization of real estate assets | | | 63,611 | | | | 50,629 | | | | 184,218 | | | | 152,241 | |
Minority interests | | | (2,704 | ) | | | (1,222 | ) | | | (6,230 | ) | | | (3,188 | ) |
Loss on asset disposition | | | 33 | | | | - | | | | 65 | | | | - | |
Less: adjustments attributable to minority interest in consolidated joint venture | | | (151 | ) | | | - | | | | (313 | ) | | | - | |
| FFO | | $ | 51,093 | | | $ | 46,622 | | | $ | 156,116 | | | $ | 141,735 | |
| Weighted average share equivalents outstanding –diluted | | | 156,519 | | | | 160,625 | | | | 156,555 | | | | 164,230 | |
| | | | | | | | | | | | | | | | | |
| FFO per share – diluted | | $ | 0.33 | | | $ | 0.29 | | | $ | 1.00 | | | $ | 0.86 | |
| (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. |
Douglas Emmett Announces
Third Quarter 2008 Company Earnings Results
Douglas Emmett, Inc.
Same Property Statistical and Financial Data
(unaudited and in thousands, except statistics)
| | | Three Months Ended September 30, | | | | |
| | | 2008 | | | 2007 | | | % Change | |
| Same Property Office Statistics | | | | | | | | | |
| Number of properties | | | 47 | | | | 47 | | | | |
| Rentable square feet | | | 11,636,924 | | | | 11,635,116 | | | | |
| Average % leased | | | 95.2 | % | | | 95.7 | % | | | |
| Average % occupied | | | 94.3 | % | | | 93.4 | % | | | |
| | | | | | | | | | | | |
| Same Property Multifamily Statistics | | | | | | | | | | | |
| Number of properties | | | 9 | | | | 9 | | | | |
| Number of Units | | | 2,868 | | | | 2,868 | | | | |
| Average % leased | | | 99.4 | % | | | 99.4 | % | | | |
| | | | | | | | | | | | |
Same Property Net Operating Income - GAAP Basis(1)(3) | | | | | | | | | | | |
| Total office revenues | | $ | 118,273 | | | $ | 114,702 | | | | 3.1 | % |
| Total multifamily revenues | | | 17,433 | | | | 17,759 | | | | (1.8 | ) |
| Total revenues | | | 135,706 | | | | 132,461 | | | | 2.4 | |
| | | | | | | | | | | | | |
| Total office expense | | | 33,937 | | | | 34,086 | | | | (0.4 | ) |
| Total multifamily expense | | | 4,238 | | | | 4,592 | | | | (7.7 | ) |
| Total property expense | | | 38,175 | | | | 38,678 | | | | (1.3 | ) |
| | | | | | | | | | | | | |
| Same Property NOI - GAAP basis | | $ | 97,531 | | | $ | 93,783 | | | | 4.0 | % |
| | | | | | | | | | | | | |
Same Property Net Operating Income - Cash Basis(1)(2)(3) | | | | | | | | | | | | |
| Total office revenues | | $ | 108,742 | | | $ | 102,934 | | | | 5.6 | % |
| Total multifamily revenues | | | 16,550 | | | | 15,855 | | | | 4.4 | |
| Total revenues | | | 125,292 | | | | 118,789 | | | | 5.5 | |
| | | | | | | | | | | | | |
| Total office expense | | | 33,982 | | | | 34,488 | | | | (1.5 | ) |
| Total multifamily expense | | | 4,238 | | | | 4,592 | | | | (7.7 | ) |
| Total property expense | | | 38,220 | | | | 39,080 | | | | (2.2 | ) |
| | | | | | | | | | | | | |
| Same Property NOI - cash basis | | $ | 87,072 | | | $ | 79,709 | | | | 9.2 | % |
| | | | | | | | | | | | | |
NOTE: See page 8 for a description of same property, cash basis and NOI.
Douglas Emmett Announces
Third Quarter 2008 Company Earnings Results
Douglas Emmett, Inc.
Reconciliation of Same Property NOI to GAAP Net Income (Loss)
(unaudited and in thousands)
| | | Three Months Ended September 30, | |
| | | 2008 | | | 2007 | |
Same property office revenues - cash basis (1)(2) | | $ | 108,742 | | | $ | 102,934 | |
| GAAP adjustments | | | 9,531 | | | | 11,768 | |
| Same property office revenues - GAAP basis | | | 118,273 | | | | 114,702 | |
| Same property multifamily revenues - cash basis | | | 16,550 | | | | 15,855 | |
| GAAP adjustments | | | 883 | | | | 1,904 | |
| Same property multifamily revenues - GAAP basis | | | 17,433 | | | | 17,759 | |
| Same property revenues - GAAP basis | | | 135,706 | | | | 132,461 | |
| Same property office expenses - GAAP basis | | | (33,937 | ) | | | (34,086 | ) |
| Same property multifamily expenses - GAAP basis | | | (4,238 | ) | | | (4,592 | ) |
Same property Net Operating Income (NOI)(3) - GAAP basis | | | 97,531 | | | | 93,783 | |
| Non-same property NOI - GAAP Basis | | | 11,552 | | | | - | |
| Total property NOI - GAAP basis | | | 109,083 | | | | 93,783 | |
| General and administrative expenses | | | (5,243 | ) | | | (5,862 | ) |
| Depreciation and amortization | | | (63,611 | ) | | | (50,629 | ) |
| Operating income | | | 40,229 | | | | 37,292 | |
| Other (expense) income | | | (43 | ) | | | 205 | |
| Interest expense | | | (52,586 | ) | | | (41,504 | ) |
| Loss before minority interests | | | (12,400 | ) | | | (4,007 | ) |
| Minority interests | | | 2,704 | | | | 1,222 | |
| Net loss | | $ | (9,696 | ) | | $ | (2,785 | ) |
| (1) | To facilitate a more meaningful comparison of Net Operating Income (“NOI”) – as defined below – between periods, we calculate comparable amounts for a subset of our owned properties referred to as same properties. Same property amounts are calculated as the amounts attributable to properties which have been owned and operated by us during the entire span of both periods compared. Therefore, any properties either acquired after the first day of the earlier comparison period or sold before the last day of the later comparison period are excluded from same properties. We may also exclude from the same property set any property that is undergoing a major repositioning project that would impact the comparability of its results between two periods. |
| (2) | NOI as defined below includes the revenue and expense directly attributable to our real estate properties calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and is specifically labeled as GAAP basis. We also believe that NOI calculated on a cash basis is useful for investors to understand our operations. Cash basis NOI is also a non-GAAP measure, which we calculate by excluding from GAAP basis NOI our straight-line rent adjustments and the amortization of above/below market lease intangible assets and liabilities. Accordingly, cash basis NOI should be considered only as a supplement to net income as a measure of our performance. Cash basis NOI 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. Cash basis NOI should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP. |
| (3) | Reported net income (or loss) is computed in accordance with GAAP. In contrast, NOI is a non-GAAP measure consisting of the revenue and expense attributable to the real estate properties that we own and operate. The most directly comparable GAAP measure to NOI is net income (or loss), adjusted to exclude general and administrative expense, depreciation and amortization expense, interest income, interest expense, income from unconsolidated partnerships, minority interests in consolidated partnerships, gains (or losses) from sales of depreciable operating properties, net income from discontinued operations and extraordinary items. Management uses NOI as a supplemental performance measure because, in excluding real estate depreciation and amortization expense and gains (or 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 NOI will be useful to investors as a basis to compare our operating performance with that of other REITs. However, because NOI 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 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 NOI as a measure of our performance is limited. Other equity REITs may not calculate NOI in a similar manner and, accordingly, our NOI may not be comparable to such other REITs’ NOI. Accordingly, NOI should be considered only as a supplement to net income as a measure of our performance. NOI 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. NOI should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP. |
###
