Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2015 | Aug. 14, 2015 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Brookfield DTLA Fund Office Trust Investor Inc. | |
Entity Central Index Key | 1,575,311 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 0 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2015 | Dec. 31, 2014 |
Investments in real estate: | ||
Land | $ 229,555 | $ 229,555 |
Buildings and improvements | 2,157,523 | 2,155,040 |
Tenant improvements | 253,003 | 234,827 |
Investments in real estate, gross | 2,640,081 | 2,619,422 |
Less: accumulated depreciation | 222,109 | 189,108 |
Investments in real estate, net | 2,417,972 | 2,430,314 |
Cash and cash equivalents | 113,792 | 125,004 |
Restricted cash | 58,195 | 47,118 |
Rents, deferred rents and other receivables, net | 78,139 | 74,332 |
Intangible assets, net | 112,484 | 125,827 |
Deferred charges, net | 69,982 | 63,825 |
Prepaid and other assets, net | 5,851 | 11,516 |
Total assets | 2,856,415 | 2,877,936 |
Liabilities: | ||
Mortgage loans, net | 2,113,066 | 2,111,135 |
Accounts payable and other liabilities | 82,219 | 85,125 |
Due to affiliates, net | 1,962 | 2,749 |
Intangible liabilities, net | 33,883 | 37,725 |
Total liabilities | $ 2,231,130 | $ 2,236,734 |
Commitments and Contingencies | ||
Mezzanine Equity: | ||
Mezzanine equity | $ 760,964 | $ 739,600 |
Total mezzanine equity | 760,964 | 739,600 |
Stockholders’ Deficit: | ||
Common stock, $0.01 par value, 1,000 shares issued and outstanding as of June 30, 2015 and December 31, 2014 | 0 | 0 |
Additional paid-in capital | 191,710 | 191,710 |
Accumulated deficit | (155,046) | (137,339) |
Accumulated other comprehensive loss | (2,127) | (2,066) |
Noncontrolling interest – Series B common interest | (170,216) | (150,703) |
Total stockholders’ deficit | (135,679) | (98,398) |
Total liabilities and deficit | 2,856,415 | 2,877,936 |
7.625% Series A Cumulative Redeemable Preferred Stock, $0.01 par value, 9,730,370 shares issued and outstanding as of June 30, 2015 and December 31, 2014 | ||
Mezzanine Equity: | ||
Mezzanine equity | 366,923 | 357,649 |
Series A-1 preferred interest | ||
Mezzanine Equity: | ||
Mezzanine equity | 340,477 | 331,871 |
Senior participating preferred interest | ||
Mezzanine Equity: | ||
Mezzanine equity | $ 53,564 | $ 50,080 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | 6 Months Ended | 12 Months Ended |
Jun. 30, 2015 | Dec. 31, 2014 | |
Common stock, par value (in USD per share) | $ 0.01 | $ 0.01 |
Common stock, shares issued (in shares) | 1,000 | 1,000 |
Common stock, shares outstanding (in shares) | 1,000 | 1,000 |
Series A Preferred Stock | ||
Preferred Stock Features | 7.625% Series A Cumulative Redeemable Preferred Stock | 7.625% Series A Cumulative Redeemable Preferred Stock |
Series A Preferred stock dividend rate | 7.625% | 7.625% |
Series A Preferred stock, par value (in USD per share) | $ 0.01 | $ 0.01 |
Series A preferred stock, shares issued (in shares) | 9,730,370 | 9,730,370 |
Series A preferred stock, shares outstanding (in shares) | 9,730,370 | 9,730,370 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Revenue: | ||||
Rental income | $ 39,186 | $ 38,074 | $ 77,989 | $ 75,751 |
Tenant reimbursements | 23,570 | 25,261 | 45,211 | 45,609 |
Parking | 8,819 | 8,329 | 17,492 | 16,662 |
Interest and other | 5,863 | 2,694 | 10,254 | 5,013 |
Total revenue | 77,438 | 74,358 | 150,946 | 143,035 |
Expenses: | ||||
Rental property operating and maintenance | 24,008 | 23,224 | 46,213 | 47,609 |
Real estate taxes | 9,490 | 9,809 | 19,478 | 18,856 |
Parking | 1,913 | 1,652 | 3,829 | 3,449 |
Other expense | 1,142 | 701 | 1,368 | 944 |
Depreciation and amortization | 23,984 | 28,100 | 48,573 | 54,110 |
Interest | 23,629 | 22,271 | 47,274 | 44,791 |
Total expenses | 84,166 | 85,757 | 166,735 | 169,759 |
Net loss | (6,728) | (11,399) | (15,789) | (26,724) |
Series B common interest – allocation of net loss | (9,319) | (12,756) | (19,446) | (27,723) |
Net loss attributable to Brookfield DTLA | (3,849) | (6,978) | (8,433) | (15,970) |
Net loss available to common interest holders of Brookfield DTLA | (8,486) | (11,615) | (17,707) | (25,244) |
Series A-1 Preferred Interest | ||||
Expenses: | ||||
Current dividends | 4,303 | 4,303 | 8,606 | 8,606 |
Senior Participating Preferred Interest | ||||
Expenses: | ||||
Current dividends | 597 | 3,102 | 1,184 | 7,235 |
Redemption measurement adjustment | 1,540 | 930 | 2,300 | 1,128 |
Series A Preferred Stock | ||||
Expenses: | ||||
Current dividends | $ 4,637 | $ 4,637 | $ 9,274 | $ 9,274 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (6,728) | $ (11,399) | $ (15,789) | $ (26,724) |
Derivative transactions: | ||||
Derivative holding gains (losses) | 2,406 | (2,009) | (128) | (3,875) |
Comprehensive loss | (4,322) | (13,408) | (15,917) | (30,599) |
Comprehensive loss attributable to noncontrolling interests | 1,620 | 5,473 | 7,423 | 12,783 |
Comprehensive loss available to common interest holders of Brookfield DTLA | $ (2,702) | $ (7,935) | $ (8,494) | $ (17,816) |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Stockholders' Deficit - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Non- controlling Interest |
Balance, beginning of period at Dec. 31, 2013 | $ 7,999 | $ 0 | $ 191,710 | $ (89,177) | $ 480 | $ (95,014) |
Balance, beginning of period (in shares) at Dec. 31, 2013 | 1,000 | |||||
Increase (Decrease) in Stockholder's Equity [Roll Forward] | ||||||
Net loss | (26,724) | (15,970) | (10,754) | |||
Other comprehensive loss | (3,875) | (1,846) | (2,029) | |||
Dividends on Series A preferred stock, Series A-1 preferred interest and senior participating preferred interest | (26,243) | (9,274) | (16,969) | |||
Balance, end of period at Jun. 30, 2014 | (48,843) | $ 0 | 191,710 | (114,421) | (1,366) | (124,766) |
Balance, end of period (in shares) at Jun. 30, 2014 | 1,000 | |||||
Balance, beginning of period at Dec. 31, 2014 | $ (98,398) | $ 0 | 191,710 | (137,339) | (2,066) | (150,703) |
Balance, beginning of period (in shares) at Dec. 31, 2014 | 1,000 | 1,000 | ||||
Increase (Decrease) in Stockholder's Equity [Roll Forward] | ||||||
Net loss | $ (15,789) | (8,433) | (7,356) | |||
Other comprehensive loss | (128) | (61) | (67) | |||
Dividends on Series A preferred stock, Series A-1 preferred interest and senior participating preferred interest | (21,364) | (9,274) | (12,090) | |||
Balance, end of period at Jun. 30, 2015 | $ (135,679) | $ 0 | $ 191,710 | $ (155,046) | $ (2,127) | $ (170,216) |
Balance, end of period (in shares) at Jun. 30, 2015 | 1,000 | 1,000 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Cash flows from operating activities: | ||
Net loss | $ (15,789) | $ (26,724) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 48,573 | 54,110 |
(Recovery of) provision for doubtful accounts | (110) | 0 |
Amortization of below-market leases/ above-market leases | (1,271) | (1,248) |
Straight-line rent amortization | (6,812) | (10,023) |
Amortization of tenant inducements | 1,142 | 1,208 |
Amortization of debt discounts | 1,931 | 2,353 |
Amortization of deferred financing costs | 601 | 627 |
Changes in assets and liabilities: | ||
Rents, deferred rents and other receivables | 1,973 | (9,303) |
Due to affiliates, net | (787) | 664 |
Deferred charges | (11,525) | (4,859) |
Prepaid and other assets | 5,664 | 8,524 |
Accounts payable and other liabilities | 4,071 | 3,442 |
Net cash provided by operating activities | 27,661 | 18,771 |
Cash flows from investing activities: | ||
Expenditures for improvements to real estate | (27,764) | (17,232) |
Increase in restricted cash | (11,077) | (2,183) |
Net cash used in investing activities | (38,841) | (19,415) |
Cash flows from financing activities: | ||
Principal payments on mortgage loans | 0 | (2,340) |
Distributions to Brookfield DTLA Holdings | 0 | 70,000 |
Financing fees paid | (32) | 0 |
Net cash used in financing activities | (32) | (72,340) |
Net change in cash and cash equivalents | (11,212) | (72,984) |
Cash and cash equivalents at beginning of period | 125,004 | 196,071 |
Cash and cash equivalents at end of period | 113,792 | 123,087 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 44,757 | 41,757 |
Supplemental disclosure of non-cash activities: | ||
Accrual for real estate improvements | 11,432 | 11,488 |
Accrual for deferred leasing costs | 5,841 | 2,628 |
Decrease in fair value of interest rate swap | $ (128) | $ (3,875) |
Organization and Description of
Organization and Description of Business | 6 Months Ended |
Jun. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Description of Business | Organization and Description of Business Brookfield DTLA Fund Office Trust Investor Inc. (“Brookfield DTLA” or the “Company”) is a Maryland corporation and was incorporated on April 19, 2013. Brookfield DTLA was formed for the purpose of consummating the transactions contemplated in the Agreement and Plan of Merger dated as of April 24, 2013, as amended (the “Merger Agreement”), and the issuance of shares of 7.625% Series A Cumulative Redeemable Preferred Stock (the “Series A preferred stock”) in connection with the acquisition of MPG Office Trust, Inc. and MPG Office, L.P. (together, “MPG”). Brookfield DTLA is a direct subsidiary of Brookfield DTLA Holdings LLC (“Brookfield DTLA Holdings”), a Delaware limited liability company, and an indirect subsidiary of Brookfield Office Properties Inc. (“BPO”). Brookfield DTLA owns BOA Plaza, EY Plaza, Wells Fargo Center–North Tower, Wells Fargo Center–South Tower, Gas Company Tower and 777 Tower, each of which are Class A office properties located in the Los Angeles Central Business District (the “LACBD”). Brookfield DTLA receives its income primarily from rental income (including tenant reimbursements) generated from the operations of its office and retail properties, and to a lesser extent, from its parking garages. |
Basis of Presentation
Basis of Presentation | 6 Months Ended |
Jun. 30, 2015 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation As used in these consolidated and combined financial statements and related notes, unless the context requires otherwise, the terms “Brookfield DTLA,” the “Company,” “us,” “we” and “our” refer to Brookfield DTLA Fund Office Trust Investor Inc. Principles of Consolidation and Combination and Basis of Presentation The unaudited condensed consolidated financial statements and related disclosures have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) applicable to interim financial information and with the instructions to Form 10‑Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments, consisting of only those of a normal and recurring nature, considered necessary for a fair presentation of the financial position and interim results of Brookfield DTLA as of and for the periods presented have been included. The results of operations for interim periods are not necessarily indicative of those that may be expected for a full fiscal year. The condensed consolidated balance sheet data as of December 31, 2014 has been derived from Brookfield DTLA’s audited financial statements; however, the accompanying notes to the condensed consolidated financial statements do not include all disclosures required by GAAP. The financial information included herein should be read in conjunction with the consolidated financial statements and related notes included in Brookfield DTLA’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 31, 2015 . Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. For example, estimates and assumptions have been made with respect to fair values of assets and liabilities for applying the acquisition method of accounting, the useful lives of assets, recoverable amounts of receivables, impairment of long-lived assets and fair value of debt. Actual results could ultimately differ from such estimates. Recent Accounting Pronouncements In April 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014‑08, Presentation of Financial Statements and Property, Plant, and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which requires entities to disclose only disposals representing a strategic shift in operations as discontinued operations. The new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The guidance in ASU 2014-08 became effective for Brookfield DTLA beginning January 1, 2015. The implementation of this pronouncement did not have a material impact on Brookfield DTLA’s consolidated financial statements. In May 2014, the FASB issued ASU 2014-09 establishing Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. ASU 2014-09 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. ASU 2014-09 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration that the entity expects to be entitled to receive in exchange for those goods or services and also requires certain additional disclosures. ASU 2014-09 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017. We are currently evaluating the impact of the adoption of ASU 2014-09 on Brookfield DTLA’s consolidated financial statements. In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This topic provides guidance on management’s responsibility to evaluate whether there is substantial doubt about a company’s ability to continue as a going concern and requires related footnote disclosures. The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. We are currently evaluating the impact of the adoption of ASU 2014-15 on Brookfield DTLA’s consolidated financial statements. In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis to ASC Topic 810 , Consolidation . ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the amendments: (i) modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities, (ii) eliminate the presumption that a general partner should consolidate a limited partnership, (iii) affect the consolidated analysis of reporting entities that are involved with VIEs, and (iv) provide a scope exception for certain entities. ASU 2015-02 is effective for interim and annual reporting periods beginning after December 15, 2015. We are currently evaluating the impact of the adoption of ASU 2015-02 on Brookfield DTLA’s consolidated financial statements. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs , which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. For public business entities, this ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Entities should apply the new guidance on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. We are currently evaluating the impact of the adoption of ASU 2015-03 on Brookfield DTLA’s consolidated financial statements. Income Taxes Brookfield DTLA has elected to be taxed as a real estate investment trust (“REIT”) pursuant to Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its tax period ended December 31, 2013. Brookfield DTLA intends to conduct its operations so as to continue to qualify as a REIT. Accordingly, Brookfield DTLA is not subject to U.S. federal income tax, provided that it continues to qualify as a REIT and distributions to its stockholders, if any, generally equal or exceed its taxable income. Qualification and taxation as a REIT depends upon Brookfield DTLA’s ability to meet the various qualification tests imposed under the Code related to annual operating results, asset diversification, distribution levels and diversity of stock ownership. Accordingly, no assurance can be given that Brookfield DTLA will be organized or be able to operate in a manner so as to continue to qualify as a REIT. If Brookfield DTLA fails to qualify as a REIT in any taxable year, it will be subject to federal and state income tax on its taxable income at regular corporate tax rates, and it may be ineligible to qualify as a REIT for four subsequent tax years. Brookfield DTLA may also be subject to certain state or local income taxes, or franchise taxes on its REIT activities. Brookfield DTLA made no provision for income taxes in its condensed consolidated financial statements for the three and six months ended June 30, 2015 and 2014, respectively. Brookfield DTLA’s taxable income or loss is different than its financial statement income or loss. Brookfield DTLA recognizes tax benefits from uncertain tax positions when it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more likely than not recognition threshold. Brookfield DTLA had no unrecognized tax benefits as of June 30, 2015 and December 31, 2014 , and Brookfield DTLA does not expect its unrecognized tax benefits balance to change during the next 12 months. Brookfield DTLA’s 2013 tax period and 2014 tax year remain open due to the statute of limitations and may be subject to examination by federal, state and local authorities. The 2011 and 2012 tax years as well as the short tax period ended October 15, 2013 for Brookfield DTLA and its subsidiaries remain open due to the statute of limitations and may be subject to examination by federal, state and local tax authorities. |
Rents, Deferred Rents and Other
Rents, Deferred Rents and Other Receivables, Net | 6 Months Ended |
Jun. 30, 2015 | |
Receivables [Abstract] | |
Rents, Deferred Rents and Other Receivables, Net | Rents, Deferred Rents and Other Receivables, Net Brookfield DTLA’s rents, deferred rents and other receivables are presented net of the following amounts in the condensed consolidated balance sheets (in thousands): June 30, 2015 December 31, 2014 Allowance for doubtful accounts $ 272 $ 382 Accumulated amortization of tenant inducements 5,020 3,878 Brookfield DTLA recorded a provision for (recovery of) doubtful accounts of $0.1 million and $(0.1) million during the three and six months ended June 30, 2015 , respectively. Brookfield DTLA recorded a provision for doubtful accounts of $0.1 million during the three and six months ended June 30, 2014 . |
Intangible Assets and Liabiliti
Intangible Assets and Liabilities | 6 Months Ended |
Jun. 30, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets and Liabilities | Intangible Assets and Liabilities Brookfield DTLA’s intangible assets and liabilities are summarized as follows (in thousands): June 30, 2015 December 31, 2014 Intangible Assets In-place leases $ 110,519 $ 110,519 Tenant relationships 46,248 46,248 Above-market leases 39,936 39,936 196,703 196,703 Less: accumulated amortization 84,219 70,876 Intangible assets, net $ 112,484 $ 125,827 Intangible Liabilities Below-market leases $ 76,344 $ 76,344 Less: accumulated amortization 42,461 38,619 Intangible liabilities, net $ 33,883 $ 37,725 The impact of the amortization of acquired below-market leases, net of acquired above-market leases, on rental income and of acquired in-place leases and tenant relationships on depreciation and amortization expense is as follows (in thousands): For the Three Months Ended For the Six Months Ended June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 Rental income $ 648 $ 595 $ 1,271 $ 1,248 Depreciation and amortization expense 5,126 8,159 10,772 16,483 As of June 30, 2015 , the estimate of the amortization/accretion of intangible assets and liabilities during the remainder of 2015 , the next four years and thereafter is as follows (in thousands): In-Place Leases Other Intangible Assets Intangible Liabilities 2015 $ 7,713 $ 4,071 $ 3,615 2016 13,879 7,635 6,597 2017 10,776 6,296 5,944 2018 7,787 5,198 4,176 2019 6,526 4,363 3,515 Thereafter 20,839 17,401 10,036 $ 67,520 $ 44,964 $ 33,883 |
Deferred Charges, Net
Deferred Charges, Net | 6 Months Ended |
Jun. 30, 2015 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Deferred Charges, Net | Deferred Charges, Net Brookfield DTLA’s deferred charges are presented net of the following amounts in the condensed consolidated balance sheets (in thousands): June 30, 2015 December 31, 2014 Accumulated amortization of leasing costs $ 33,070 $ 28,270 Accumulated amortization of deferred financing costs 1,709 1,108 |
Mortgage Loans
Mortgage Loans | 6 Months Ended |
Jun. 30, 2015 | |
Debt Disclosure [Abstract] | |
Mortgage Loans | Mortgage Loans Brookfield DTLA’s debt is as follows (in thousands, except percentage amounts): Contractual Maturity Date Principal Amount as of Interest Rate June 30, 2015 Dec. 31, 2014 Floating-Rate Debt Variable-Rate Loans: Wells Fargo Center–South Tower (1) 12/1/2016 1.99 % $ 290,000 $ 290,000 777 Tower (2) 11/1/2018 1.89 % 200,000 200,000 Figueroa at 7th (3) 9/10/2017 2.44 % 35,000 35,000 Total variable-rate loans 525,000 525,000 Variable-Rate Swapped to Fixed-Rate Loan: EY Plaza (4) 11/27/2020 3.93 % 185,000 185,000 Total floating-rate debt 710,000 710,000 Fixed-Rate Debt: Wells Fargo Center–North Tower 4/6/2017 5.70 % 550,000 550,000 Gas Company Tower 8/11/2016 5.10 % 458,000 458,000 BOA Plaza 9/1/2024 4.05 % 400,000 400,000 Total fixed-rate debt 1,408,000 1,408,000 Total debt 2,118,000 2,118,000 Less: debt discounts 4,934 6,865 Total debt, net $ 2,113,066 $ 2,111,135 __________ (1) This loan bears interest at LIBOR plus 1.80% . As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 4.75% . Brookfield DTLA has two options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). (2) This loan bears interest at LIBOR plus 1.70% . As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 5.75% . Brookfield DTLA has two options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). (3) This loan bears interest at LIBOR plus 2.25% . Brookfield DTLA has two options to extend the maturity date of this loan, each for a period of 12 months, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). (4) This loan bears interest at LIBOR plus 1.75% . As required by the loan agreement, we have entered into an interest rate swap agreement to hedge this loan, which effectively fixes the LIBOR portion of the interest rate at 2.178% . The effective interest rate of 3.93% includes interest on the swap. As of June 30, 2015 , our debt to be repaid during the remainder of 2015 , the next four years and thereafter is as follows (in thousands): 2015 $ 311 2016 751,831 2017 589,026 2018 204,232 2019 4,449 Thereafter 568,151 $ 2,118,000 As of June 30, 2015 , $220.0 million of our debt may be prepaid without penalty, $458.0 million may be defeased (as defined in the underlying loan agreements), $550.0 million may be prepaid with prepayment penalties or defeased (as defined in the underlying loan agreement) at our option, $290.0 million may be prepaid with prepayment penalties, $200.0 million is locked out from prepayment until November 1, 2015 , and $400.0 million locked out from defeasance until September 30, 2016 . Funding of Wells Fargo Center–North Tower Collateral Reserve In connection with the MPG acquisition, Brookfield DTLA Holdings assumed the mortgage loan secured by the Wells Fargo Center–North Tower office property. In connection with loan assumption, Brookfield DTLA Holdings agreed to deposit a total of $10.0 million into a collateral reserve account held by the lender, of which $5.0 million was deposited when the loan was assumed during 2013 and $1.25 million was funded by Brookfield DTLA in April 2014, October 2014 and April 2015, respectively. The remaining $1.25 million will be paid in October 2015. Non-Recourse Carve Out Guarantees All of Brookfield DTLA’s $2.1 billion of mortgage debt is subject to “non-recourse carve out” guarantees that expire upon elimination of the underlying loan obligations. Under these guarantees, these otherwise non‑recourse loans can become partially or fully recourse against Brookfield DTLA Holdings if certain triggering events occur as defined in the loan agreements. Debt Reporting Pursuant to the terms of certain of our mortgage loan agreements, Brookfield DTLA is required to report a debt service coverage ratio (“DSCR”) calculated using the formulas specified in the underlying loan agreements. We have submitted the required reports to the lenders for the measurement periods ended June 30, 2015 and were in compliance with the amounts required by the loan agreements, with the exception of Gas Company Tower. Under the Gas Company Tower mortgage loan, we reported a DSCR of 0.71 to 1.00 , calculated using actual debt service under the loan, and a DSCR of 0.56 to 1.00 , calculated using actual debt service plus a hypothetical principal payment using a 30 -year amortization schedule. Because the reported DSCR using the actual debt service plus a hypothetical principal payment was less than 1.00 to 1.00, the lender could seek to remove Brookfield Properties Management (CA) Inc. as property manager of Gas Company Tower, which is the only recourse available to the lender as a result of such breach. Pursuant to the terms of the Gas Company Tower, Wells Fargo Center–South Tower, Wells Fargo Center–North Tower, EY Plaza, and Figueroa at 7th mortgage loan agreements, we are required to provide annual audited financial statements of Brookfield DTLA Holdings to the lenders or agents. The receipt of any opinion other than an “unqualified” audit opinion on our annual audited financial statements is an event of default under the loan agreements for the properties listed above. If an event of default occurs, the lenders have the right to pursue the remedies contained in the loan documents, including acceleration of all or a portion of the debt and foreclosure. |
Mezzanine Equity
Mezzanine Equity | 6 Months Ended |
Jun. 30, 2015 | |
Temporary Equity Disclosure [Abstract] | |
Mezzanine Equity | Mezzanine Equity Mezzanine equity in the condensed consolidated balance sheets as of June 30, 2015 and December 31, 2014 is comprised of the Series A preferred stock, a Series A-1 preferred interest and a senior participating preferred interest (the “Preferred Interests”). The Series A-1 preferred interest and senior participating preferred interest are held by a noncontrolling interest holder. The Preferred Interests are classified in mezzanine equity because they are callable and the holder of the Series A-1 preferred interest and senior participating preferred interest (which also owns some of the Series A preferred stock) indirectly controls the ability to elect to redeem such instruments, through its controlling interest in the Company and its subsidiaries. There is no commitment or obligation on the part of Brookfield DTLA or Brookfield DTLA Holdings to redeem the Preferred Interests. The Preferred Interests included within mezzanine equity were recorded at fair value on the date of issuance and have been adjusted to the greater of their carrying amount or redemption value as of June 30, 2015 and December 31, 2014 . Adjustments to increase the carrying amount to redemption value are recorded in the consolidated statement of operations as a redemption measurement adjustment. During the year ended December 31, 2014 , the Company made cash distributions to Brookfield DTLA Holdings totaling $220.0 million , in respect of the senior participating preferred interest held by Brookfield DTLA Holdings, using proceeds from the refinancing of EY Plaza and BOA Plaza. Other than these distributions, Brookfield DTLA has not paid any cash dividends in the past. Any future dividends declared would be at the discretion of Brookfield DTLA’s board of directors and would depend on its financial condition, results of operations, contractual obligations and the terms of its financing agreements at the time a dividend is considered, and other relevant factors. Series A Preferred Stock As of June 30, 2015 and December 31, 2014 , 9,730,370 shares of Series A preferred stock were outstanding, of which 9,357,469 shares were issued to third parties and 372,901 shares were issued to DTLA Fund Holding Co., a subsidiary of Brookfield DTLA Holdings. No dividends were declared on the Series A preferred stock during the six months ended June 30, 2015 and 2014 . Dividends on the Series A preferred stock are cumulative, and therefore, will continue to accrue at an annual rate of $1.90625 per share. As of June 30, 2015 , the cumulative amount of unpaid dividends totals $123.6 million and has been reflected in the carrying amount of the Series A preferred stock. The Series A preferred stock does not have a stated maturity and is not subject to any sinking fund or mandatory redemption provisions. Upon liquidation, dissolution or winding up, the Series A preferred stock will rank senior to our common stock with respect to the payment of distributions. We may, at our option, redeem the Series A preferred stock, in whole or in part, for cash at a redemption price of $25.00 per share, plus all accumulated and unpaid dividends on such Series A preferred stock up to and including the redemption date. The Series A preferred stock is not convertible into or exchangeable for any other property or securities of Brookfield DTLA. As of June 30, 2015 , the Series A preferred stock is reported at its redemption value of $366.9 million calculated using the redemption price of $25.00 per share plus all accumulated and unpaid dividends on such Series A preferred stock through June 30, 2015 . Series A-1 Preferred Interest On October 15, 2013 , Brookfield DTLA Fund Properties II LLC (“New OP”) issued a Series A-1 preferred interest to Brookfield DTLA Holdings or wholly owned subsidiaries of Brookfield DTLA Holdings with a stated value of $225.7 million in connection with the formation of Brookfield DTLA and the MPG acquisition. The Series A-1 preferred interest has mirror rights to the Series A preferred interests issued by New OP, which are held by a wholly owned subsidiary of Brookfield DTLA, but only with respect to their respective preferred liquidation preferences, and share pro rata with 48.13% to the Series A-1 preferred interest and 51.87% to the Series A preferred interest based on their current liquidation preferences in accordance with their respective preferred liquidation preferences in distributions from New OP, until their preferred liquidation preferences have been reduced to zero. Thereafter, distributions will be made 47.66% to the Series A preferred interest and 52.34% to the Series B preferred interest, which is held by Brookfield DTLA Holdings. The economic terms of the Series A preferred stock mirror those of the New OP Series A preferred interests, including distributions in respect of the preferred liquidation preference. As of June 30, 2015 , the Series A-1 preferred interest is reported at its redemption value of $340.5 million calculated using its liquidation value of $225.7 million plus $114.8 million of accumulated and unpaid dividends on such Series A-1 preferred interest through June 30, 2015 . Senior Participating Preferred Interest On October 15, 2013 , Brookfield DTLA Fund Properties III LLC (“DTLA OP”) issued a senior participating preferred interest to Brookfield DTLA Holdings in connection with the formation of Brookfield DTLA and the MPG acquisition. The senior participating preferred interest was comprised of $240.0 million in preferred interests with a 7.0% coupon and a 4.0% participating interest in the residual value of DTLA OP, which owns 333 South Hope Co. LLC and EYP Realty LLC. BOA Plaza and EY Plaza were contributed to DTLA OP, directly and indirectly, by Brookfield DTLA in connection with the merger. As of the merger date, these properties had a leverage ratio that was lower than the leverage ratio of the MPG properties acquired, as well as the target leverage ratio that the Company’s management sought to achieve for its properties, as they were refinanced, of approximately 60% to 65% . The size of the preferred interest component of the senior participating preferred interest issued to Brookfield DTLA was based, in part, on the expected net proceeds from the refinancing of the properties owned by 333 South Hope LLC (which holds BOA Plaza) and EYP Realty LLC (which holds EY Plaza) at a leverage ratio in this range and represented a portion of the approximately $595 million fair market value as of the merger date of BOA Plaza and EY Plaza, reduced by the outstanding principal balances of the mortgage loans secured by BOA Plaza and EY Plaza and the $25.0 million promissory note due to BOP Management Inc. As of June 30, 2015 , the senior participating preferred interest is reported at its redemption value of $53.6 million calculated using the value of the preferred and participating interests totaling $51.6 million plus $2.0 million of accumulated and unpaid dividends on the preferred interest through June 30, 2015 . Change in Mezzanine Equity A summary of the change in mezzanine equity for the six months ended June 30, 2015 is as follows (in thousands, except share amounts): Number of Shares of Series A Preferred Stock Series A Preferred Stock Noncontrolling Interests Total Mezzanine Equity Series A-1 Preferred Interest Senior Participating Preferred Interest Balance, December 31, 2014 9,730,370 $ 357,649 $ 331,871 $ 50,080 $ 739,600 Current dividends 9,274 8,606 1,184 19,064 Redemption measurement adjustment 2,300 2,300 Balance, June 30, 2015 9,730,370 $ 366,923 $ 340,477 $ 53,564 $ 760,964 |
Noncontrolling Interests
Noncontrolling Interests | 6 Months Ended |
Jun. 30, 2015 | |
Noncontrolling Interest [Abstract] | |
Noncontrolling Interests | Noncontrolling Interests Mezzanine Equity Component The Series A-1 preferred interest and senior participating preferred interest consist of equity interests of New OP and DTLA OP, respectively, which are owned directly by Brookfield DTLA Holdings. These noncontrolling interests are presented as mezzanine equity in the condensed consolidated balance sheet. See Note 7 “Mezzanine Equity.” Stockholders’ Deficit Component The Series B common interest ranks junior to the Series A preferred stock as to dividends and upon liquidation and is presented in the condensed consolidated balance sheet as noncontrolling interest. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 6 Months Ended |
Jun. 30, 2015 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss A summary of the change in accumulated other comprehensive loss related to Brookfield DTLA’s cash flow hedges is as follows (in thousands): For the Three Months Ended For the Six Months Ended June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 Balance at beginning of period $ (6,871 ) $ (859 ) $ (4,337 ) $ 1,007 Other comprehensive gain (loss) before reclassifications 2,406 (2,009 ) (128 ) (3,875 ) Amounts reclassified from accumulated other comprehensive gain (loss) — — — — Net current-period other comprehensive gain (loss) 2,406 (2,009 ) (128 ) (3,875 ) Balance at end of period $ (4,465 ) $ (2,868 ) $ (4,465 ) $ (2,868 ) |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements The valuation of Brookfield DTLA’s interest rate swap is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flow of the derivative. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. We have incorporated credit valuation adjustments to appropriately reflect both our own and the respective counterparty’s non-performance risk in the fair value measurements. Brookfield DTLA’s (liabilities) assets measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fall, are as follows (in thousands): Fair Value Measurements Using Total Fair Value Quoted Prices in Active Markets for Identical (Liabilities) Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Interest rate swap at: June 30, 2015 $ (4,465 ) $ — $ (4,465 ) $ — December 31, 2014 (4,337 ) — (4,337 ) — Interest rate caps at: June 30, 2015 $ 37 $ — $ 37 $ — December 31, 2014 190 — 190 — |
Financial Instruments
Financial Instruments | 6 Months Ended |
Jun. 30, 2015 | |
Investments, All Other Investments [Abstract] | |
Financial Instruments | Financial Instruments Derivative Financial Instruments A summary of the fair value of Brookfield DTLA’s derivative financial instruments is as follows (in thousands): Fair Value June 30, 2015 December 31, 2014 Derivatives designated as cash flow hedging instruments: Interest rate swap liability $ (4,465 ) $ (4,337 ) The interest rate swap liability is included in accounts payable and other liabilities in the condensed consolidated balance sheet. A summary of the effect of derivative financial instruments reported in the condensed consolidated financial statements is as follows (in thousands): Amount of Loss Recognized in AOCL Amount of Loss Reclassified from AOCL to Statement of Operations Derivatives designated as cash flow hedging instruments: Interest rate swap for the six months ended: June 30, 2015 $ (128 ) $ — June 30, 2014 (3,875 ) — Interest Rate Swap— As of June 30, 2015 and December 31, 2014 , Brookfield DTLA held an interest rate swap with a notional amount of $185.0 million , which was assigned to the EY Plaza mortgage loan. The swap requires net settlement each month and expires on November 2, 2020 . Interest Rate Caps— Brookfield DTLA holds interest rate caps pursuant to the terms of certain of its mortgage loan agreements with the following notional amounts (in thousands): June 30, 2015 December 31, 2014 Wells Fargo Center–South Tower $ 290,000 $ 290,000 777 Tower 200,000 200,000 $ 490,000 $ 490,000 Other Financial Instruments The estimated fair value and carrying amount of Brookfield DTLA’s mortgage loans are as follows (in thousands): June 30, 2015 December 31, 2014 Estimated fair value $ 2,125,967 $ 2,133,158 Carrying amount 2,118,000 2,118,000 We calculated the estimated fair value of our mortgage loans by discounting the future contractual cash flows of the loans using current risk adjusted rates available to borrowers with similar credit ratings. The estimated fair value of mortgage loans is classified as Level 3. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2015 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions Management Agreements Brookfield DTLA has entered into arrangements with Brookfield Properties Management LLC, an affiliate of BPO, which is affiliated with the Company through common ownership through BPO, under which the affiliate provides property management and various other services. Property management fees under these agreements are calculated based on 2.75% of rents collected (as defined in the management agreements). In addition, the Company pays BOP Asset Manager LLC an asset management fee, which is calculated based on 0.75% of the capital contributed to Brookfield DTLA Holdings. A summary of costs incurred by Brookfield DTLA under these arrangements is as follows (in thousands): For the Three Months Ended For the Six Months Ended June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 Property management fee expense $ 1,933 $ 2,138 $ 3,836 $ 4,017 Asset management fee expense 1,544 1,523 3,067 3,029 General, administrative and reimbursable expenses 737 609 1,286 1,310 Leasing and construction management fees 749 1,013 3,528 1,685 Insurance Agreements Brookfield DTLA’s properties are covered under an insurance policy entered into by BPO that provides all risk property and business interruption for BPO’s commercial portfolio with an aggregate limit of $2.5 billion per occurrence as well as an aggregate limit of $300.0 million of earthquake insurance. In addition, Brookfield DTLA’s properties are covered by a terrorism insurance policy that provides aggregate coverage of $4.0 billion for all of BPO’s U.S. properties. Brookfield DTLA is in compliance with the contractual obligations regarding terrorism insurance contained in such policies. Insurance premiums for Brookfield DTLA are paid by an affiliate company under common control through BPO. Brookfield DTLA reimburses the affiliate company for the actual cost of such premiums. A summary of costs incurred by Brookfield DTLA under this arrangement is as follows (in thousands): For the Three Months Ended For the Six Months Ended June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 Insurance expense $ 2,198 $ 2,463 $ 4,345 $ 3,767 |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Litigation General— Brookfield DTLA and its subsidiaries may be subject to pending legal proceedings and litigation incidental to its business. After consultation with legal counsel, management believes that any liability that may potentially result upon resolution of such matters is not expected to have a material adverse effect on the Company’s business, financial condition or consolidated financial statements as a whole. Merger-Related Litigation— Following the announcement of the execution of the Agreement and Plan of Merger dated as of April 24, 2013, as amended (the “Merger Agreement”), seven putative class actions were filed against Brookfield Office Properties Inc. (“BPO”), Brookfield DTLA, Brookfield DTLA Holdings LLC, Brookfield DTLA Fund Office Trust Inc., Brookfield DTLA Fund Properties (collectively, the “Brookfield Parties”), MPG Office Trust, Inc., MPG Office, L.P., and the members of MPG Office Trust, Inc.’s board of directors. Five of these lawsuits were filed on behalf of MPG Office Trust, Inc.’s common stockholders: (i) two lawsuits, captioned Coyne v. MPG Office Trust, Inc., et al ., No. BC507342 (the “Coyne Action”), and Masih v. MPG Office Trust, Inc., et al. , No. BC507962 (the “Masih Action”), were filed in the Superior Court of the State of California in Los Angeles County (the “California State Court”) on April 29, 2013 and May 3, 2013, respectively; and (ii) three lawsuits, captioned Kim v. MPG Office Trust, Inc. et al ., No. 24‑C-13-002600 (the “Kim Action”), Perkins v. MPG Office Trust, Inc., et al. , No. 24-C-13-002778 (the “Perkins Action”) and Dell’Osso v. MPG Office Trust, Inc., et al., No. 24‑C-13-003283 (the “Dell’Osso Action”) were filed in the Circuit Court for Baltimore City, Maryland on May 1, 2013, May 8, 2013 and May 22, 2013, respectively (collectively, the “Common Stock Actions”). Two lawsuits, captioned Cohen v. MPG Office Trust, Inc. et al. , No. 24-C-13-004097 (the “Cohen Action”) and Donlan v. Weinstein, et al ., No. 24‑C-13-004293 (the “Donlan Action”), were filed on behalf of MPG Office Trust, Inc.’s preferred stockholders in the Circuit Court for Baltimore City, Maryland on June 20, 2013 and July 2, 2013, respectively (collectively, the “Preferred Stock Actions”). In each of the Common Stock Actions, the plaintiffs allege, among other things, that MPG Office Trust, Inc.’s board of directors breached their fiduciary duties in connection with the merger by failing to maximize the value of MPG Office Trust, Inc. and ignoring or failing to protect against conflicts of interest, and that the relevant Brookfield Parties named as defendants aided and abetted those breaches of fiduciary duty. The Kim Action further alleges that MPG Office, L.P. also aided and abetted the breaches of fiduciary duty by MPG Office Trust, Inc.’s board of directors, and the Dell’Osso Action further alleges that MPG Office Trust, Inc. and MPG Office, L.P. aided and abetted the breaches of fiduciary duty by MPG Office Trust, Inc.’s board of directors. On June 4, 2013, the Kim and Perkins plaintiffs filed identical, amended complaints in the Circuit Court for Baltimore City, Maryland. On June 5, 2013, the Masih plaintiffs also filed an amended complaint in the Superior Court of the State of California in Los Angeles County. The three amended complaints, as well as the Dell’Osso Action complaint, allege that the preliminary proxy statement filed by MPG Office Trust, Inc. with the SEC on May 21, 2013 is false and/or misleading because it fails to include certain details of the process leading up to the merger and fails to provide adequate information concerning MPG Office Trust, Inc.’s financial advisors. In each of the Preferred Stock Actions, which were brought on behalf of MPG Office Trust, Inc.’s preferred stockholders, the plaintiffs allege, among other things, that, by entering into the Merger Agreement and tender offer, MPG Office Trust, Inc. breached the Articles Supplementary, which governs the issuance of the MPG preferred shares, that MPG Office Trust, Inc.’s board of directors breached their fiduciary duties by agreeing to a merger agreement that violated the preferred stockholders’ contractual rights and that the relevant Brookfield Parties named as defendants aided and abetted those breaches of contract and fiduciary duty. On July 15, 2013, the plaintiffs in the Preferred Stock Actions filed a joint amended complaint in the Circuit Court for Baltimore City, Maryland that further alleged that MPG Office Trust, Inc.’s board of directors failed to disclose material information regarding BPO’s extension of the tender offer. The plaintiffs in the seven lawsuits sought an injunction against the merger, rescission or rescissory damages in the event the merger has been consummated, an award of fees and costs, including attorneys’ and experts’ fees, and other relief. On July 10, 2013, solely to avoid the costs, risks and uncertainties inherent in litigation, the Brookfield Parties and the other named defendants in the Common Stock Actions signed a memorandum of understanding (the “MOU”), regarding a proposed settlement of all claims asserted therein. The parties subsequently entered into a stipulation of settlement dated November 21, 2013 providing for the release of all asserted claims, additional disclosures by MPG concerning the merger made prior to the merger’s approval, and the payment, by defendants, of an award of attorneys’ fees and expenses in an amount not to exceed $475,000 . After a hearing on June 4, 2014, the California State Court granted plaintiffs’ motion for final approval of the settlement, and entered a Final Order and Judgment, awarding plaintiffs’ counsel’s attorneys’ fees and expenses in the amount of $475,000 , which was paid by MPG Office LLC on June 18, 2014. BPO is seeking reimbursement for the settlement payment from MPG’s insurers. In the Preferred Stock Actions, at a hearing on July 24, 2013, the Maryland State Court denied plaintiffs’ motion for preliminary injunction seeking to enjoin the tender offer. The plaintiffs filed a second amended complaint on November 22, 2013 that added additional arguments in support of their allegations that the new preferred shares do not have the same rights as the MPG preferred shares. The defendants moved to dismiss the second amended complaint on December 20, 2013, and briefing on the motion concluded on February 28, 2014. At a hearing on June 18, 2014, the Maryland State Court heard oral arguments on the defendants’ motion to dismiss and reserved judgment on the decision. On October 21, 2014, the parties sent a joint letter to the Maryland State Court stating that since the June 18 meeting, the parties have commenced discussions towards a possible resolution of the lawsuit, requesting that the court temporarily refrain from deciding the pending motion to dismiss to facilitate the discussions, and stating that the parties will report to the court within 45 days of the October 21 letter regarding the status of their discussions. Counsel for the parties have reached an agreement to settle the Preferred Stock Actions on a class-wide basis and dismiss the case with prejudice in exchange for the payment of $2.25 per share of Series A preferred stock of accumulated and unpaid dividends to holders of record on a record date to be set after final approval of the settlement by the Maryland State Court, plus any attorneys’ fees awarded by the Maryland State Court to the plaintiffs’ counsel. The dividend will reduce the amount of accumulated and unpaid dividends on the Series A preferred stock, and the terms of the Series A preferred stock will otherwise remain unchanged. The agreement is subject to a number of conditions precedent, further documentation, and approval of the Maryland State Court, after notice to the class. The parties entered into a Memorandum of Understanding (the “MOU”) on March 30, 2015 memorializing the agreement to settle the Preferred Stock Actions, which has been filed with the Maryland State Court. A copy of the MOU was filed with Brookfield DTLA’s Annual Report on Form 10-K as Exhibit 99.1. On June 1, 2015, the parties filed, with the Maryland State Court, a joint motion for preliminary approval of the settlement ( “ Joint Motion ” ) and a Stipulation and Agreement of Compromise and Settlement entered into by the parties on May 29, 2015 (the “Stipulation”), together with ancillary documents. In the Stipulation, plaintiff’s counsel stated, among other things, that it intends to petition the Maryland State Court for an award of attorneys’ fees and expenses of up to $5,250,000 . On July 31, 2015, the parties filed a supplemental brief in support of their Joint Motion and amended form of notice to the class. While the final outcome with respect to the Preferred Stock Actions cannot be predicted with certainty, in the opinion of management after consultation with external legal counsel, any liability that may arise from such contingencies would not have a material adverse effect on the financial position, results of operations or liquidity of Brookfield DTLA. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 6 Months Ended |
Jun. 30, 2015 | |
Accounting Policies [Abstract] | |
Principles of Consolidation and Combination and Basis of Presentation | Principles of Consolidation and Combination and Basis of Presentation The unaudited condensed consolidated financial statements and related disclosures have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) applicable to interim financial information and with the instructions to Form 10‑Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments, consisting of only those of a normal and recurring nature, considered necessary for a fair presentation of the financial position and interim results of Brookfield DTLA as of and for the periods presented have been included. The results of operations for interim periods are not necessarily indicative of those that may be expected for a full fiscal year. The condensed consolidated balance sheet data as of December 31, 2014 has been derived from Brookfield DTLA’s audited financial statements; however, the accompanying notes to the condensed consolidated financial statements do not include all disclosures required by GAAP. The financial information included herein should be read in conjunction with the consolidated financial statements and related notes included in Brookfield DTLA’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 31, 2015 . |
Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. For example, estimates and assumptions have been made with respect to fair values of assets and liabilities for applying the acquisition method of accounting, the useful lives of assets, recoverable amounts of receivables, impairment of long-lived assets and fair value of debt. Actual results could ultimately differ from such estimates. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In April 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014‑08, Presentation of Financial Statements and Property, Plant, and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which requires entities to disclose only disposals representing a strategic shift in operations as discontinued operations. The new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The guidance in ASU 2014-08 became effective for Brookfield DTLA beginning January 1, 2015. The implementation of this pronouncement did not have a material impact on Brookfield DTLA’s consolidated financial statements. In May 2014, the FASB issued ASU 2014-09 establishing Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. ASU 2014-09 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. ASU 2014-09 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration that the entity expects to be entitled to receive in exchange for those goods or services and also requires certain additional disclosures. ASU 2014-09 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017. We are currently evaluating the impact of the adoption of ASU 2014-09 on Brookfield DTLA’s consolidated financial statements. In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This topic provides guidance on management’s responsibility to evaluate whether there is substantial doubt about a company’s ability to continue as a going concern and requires related footnote disclosures. The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. We are currently evaluating the impact of the adoption of ASU 2014-15 on Brookfield DTLA’s consolidated financial statements. In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis to ASC Topic 810 , Consolidation . ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the amendments: (i) modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities, (ii) eliminate the presumption that a general partner should consolidate a limited partnership, (iii) affect the consolidated analysis of reporting entities that are involved with VIEs, and (iv) provide a scope exception for certain entities. ASU 2015-02 is effective for interim and annual reporting periods beginning after December 15, 2015. We are currently evaluating the impact of the adoption of ASU 2015-02 on Brookfield DTLA’s consolidated financial statements. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs , which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. For public business entities, this ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Entities should apply the new guidance on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. We are currently evaluating the impact of the adoption of ASU 2015-03 on Brookfield DTLA’s consolidated financial statements. |
Income Taxes | Income Taxes Brookfield DTLA has elected to be taxed as a real estate investment trust (“REIT”) pursuant to Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its tax period ended December 31, 2013. Brookfield DTLA intends to conduct its operations so as to continue to qualify as a REIT. Accordingly, Brookfield DTLA is not subject to U.S. federal income tax, provided that it continues to qualify as a REIT and distributions to its stockholders, if any, generally equal or exceed its taxable income. Qualification and taxation as a REIT depends upon Brookfield DTLA’s ability to meet the various qualification tests imposed under the Code related to annual operating results, asset diversification, distribution levels and diversity of stock ownership. Accordingly, no assurance can be given that Brookfield DTLA will be organized or be able to operate in a manner so as to continue to qualify as a REIT. If Brookfield DTLA fails to qualify as a REIT in any taxable year, it will be subject to federal and state income tax on its taxable income at regular corporate tax rates, and it may be ineligible to qualify as a REIT for four subsequent tax years. Brookfield DTLA may also be subject to certain state or local income taxes, or franchise taxes on its REIT activities. Brookfield DTLA made no provision for income taxes in its condensed consolidated financial statements for the three and six months ended June 30, 2015 and 2014, respectively. Brookfield DTLA’s taxable income or loss is different than its financial statement income or loss. Brookfield DTLA recognizes tax benefits from uncertain tax positions when it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more likely than not recognition threshold. Brookfield DTLA had no unrecognized tax benefits as of June 30, 2015 and December 31, 2014 , and Brookfield DTLA does not expect its unrecognized tax benefits balance to change during the next 12 months. Brookfield DTLA’s 2013 tax period and 2014 tax year remain open due to the statute of limitations and may be subject to examination by federal, state and local authorities. The 2011 and 2012 tax years as well as the short tax period ended October 15, 2013 for Brookfield DTLA and its subsidiaries remain open due to the statute of limitations and may be subject to examination by federal, state and local tax authorities. |
Rents, Deferred Rents and Oth22
Rents, Deferred Rents and Other Receivables, Net (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Receivables [Abstract] | |
Schedule of Rents, Deferred Rents and Other Receivables | Brookfield DTLA’s rents, deferred rents and other receivables are presented net of the following amounts in the condensed consolidated balance sheets (in thousands): June 30, 2015 December 31, 2014 Allowance for doubtful accounts $ 272 $ 382 Accumulated amortization of tenant inducements 5,020 3,878 |
Intangible Assets and Liabili23
Intangible Assets and Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Summary of Intangible Assets and Liabilities | Brookfield DTLA’s intangible assets and liabilities are summarized as follows (in thousands): June 30, 2015 December 31, 2014 Intangible Assets In-place leases $ 110,519 $ 110,519 Tenant relationships 46,248 46,248 Above-market leases 39,936 39,936 196,703 196,703 Less: accumulated amortization 84,219 70,876 Intangible assets, net $ 112,484 $ 125,827 Intangible Liabilities Below-market leases $ 76,344 $ 76,344 Less: accumulated amortization 42,461 38,619 Intangible liabilities, net $ 33,883 $ 37,725 |
Schedule of Impact of Intangible Amortization Expense | The impact of the amortization of acquired below-market leases, net of acquired above-market leases, on rental income and of acquired in-place leases and tenant relationships on depreciation and amortization expense is as follows (in thousands): For the Three Months Ended For the Six Months Ended June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 Rental income $ 648 $ 595 $ 1,271 $ 1,248 Depreciation and amortization expense 5,126 8,159 10,772 16,483 |
Schedule of Estimated Future Amortization/Accretion of Intangible Assets and Liabilities | As of June 30, 2015 , the estimate of the amortization/accretion of intangible assets and liabilities during the remainder of 2015 , the next four years and thereafter is as follows (in thousands): In-Place Leases Other Intangible Assets Intangible Liabilities 2015 $ 7,713 $ 4,071 $ 3,615 2016 13,879 7,635 6,597 2017 10,776 6,296 5,944 2018 7,787 5,198 4,176 2019 6,526 4,363 3,515 Thereafter 20,839 17,401 10,036 $ 67,520 $ 44,964 $ 33,883 |
Deferred Charges, Net (Tables)
Deferred Charges, Net (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of Deferred Charges | Brookfield DTLA’s deferred charges are presented net of the following amounts in the condensed consolidated balance sheets (in thousands): June 30, 2015 December 31, 2014 Accumulated amortization of leasing costs $ 33,070 $ 28,270 Accumulated amortization of deferred financing costs 1,709 1,108 |
Mortgage Loans (Tables)
Mortgage Loans (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Debt Disclosure [Abstract] | |
Schedule of Debt | Brookfield DTLA’s debt is as follows (in thousands, except percentage amounts): Contractual Maturity Date Principal Amount as of Interest Rate June 30, 2015 Dec. 31, 2014 Floating-Rate Debt Variable-Rate Loans: Wells Fargo Center–South Tower (1) 12/1/2016 1.99 % $ 290,000 $ 290,000 777 Tower (2) 11/1/2018 1.89 % 200,000 200,000 Figueroa at 7th (3) 9/10/2017 2.44 % 35,000 35,000 Total variable-rate loans 525,000 525,000 Variable-Rate Swapped to Fixed-Rate Loan: EY Plaza (4) 11/27/2020 3.93 % 185,000 185,000 Total floating-rate debt 710,000 710,000 Fixed-Rate Debt: Wells Fargo Center–North Tower 4/6/2017 5.70 % 550,000 550,000 Gas Company Tower 8/11/2016 5.10 % 458,000 458,000 BOA Plaza 9/1/2024 4.05 % 400,000 400,000 Total fixed-rate debt 1,408,000 1,408,000 Total debt 2,118,000 2,118,000 Less: debt discounts 4,934 6,865 Total debt, net $ 2,113,066 $ 2,111,135 __________ (1) This loan bears interest at LIBOR plus 1.80% . As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 4.75% . Brookfield DTLA has two options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). (2) This loan bears interest at LIBOR plus 1.70% . As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 5.75% . Brookfield DTLA has two options to extend the maturity date of the loan, each for a period of one year, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). (3) This loan bears interest at LIBOR plus 2.25% . Brookfield DTLA has two options to extend the maturity date of this loan, each for a period of 12 months, subject to meeting certain debt yield and loan to value ratios (as specified in the loan agreement). (4) This loan bears interest at LIBOR plus 1.75% . As required by the loan agreement, we have entered into an interest rate swap agreement to hedge this loan, which effectively fixes the LIBOR portion of the interest rate at 2.178% . The effective interest rate of 3.93% includes interest on the swap. |
Schedule of Maturities of Debt | As of June 30, 2015 , our debt to be repaid during the remainder of 2015 , the next four years and thereafter is as follows (in thousands): 2015 $ 311 2016 751,831 2017 589,026 2018 204,232 2019 4,449 Thereafter 568,151 $ 2,118,000 |
Mezzanine Equity (Tables)
Mezzanine Equity (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Temporary Equity Disclosure [Abstract] | |
Summary of Change in Mezzanine Equity | A summary of the change in mezzanine equity for the six months ended June 30, 2015 is as follows (in thousands, except share amounts): Number of Shares of Series A Preferred Stock Series A Preferred Stock Noncontrolling Interests Total Mezzanine Equity Series A-1 Preferred Interest Senior Participating Preferred Interest Balance, December 31, 2014 9,730,370 $ 357,649 $ 331,871 $ 50,080 $ 739,600 Current dividends 9,274 8,606 1,184 19,064 Redemption measurement adjustment 2,300 2,300 Balance, June 30, 2015 9,730,370 $ 366,923 $ 340,477 $ 53,564 $ 760,964 |
Accumulated Other Comprehensi27
Accumulated Other Comprehensive Loss (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Equity [Abstract] | |
Summary of Change in Accumulated Other Comprehensive Loss Related to Cash Flow Hedges | A summary of the change in accumulated other comprehensive loss related to Brookfield DTLA’s cash flow hedges is as follows (in thousands): For the Three Months Ended For the Six Months Ended June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 Balance at beginning of period $ (6,871 ) $ (859 ) $ (4,337 ) $ 1,007 Other comprehensive gain (loss) before reclassifications 2,406 (2,009 ) (128 ) (3,875 ) Amounts reclassified from accumulated other comprehensive gain (loss) — — — — Net current-period other comprehensive gain (loss) 2,406 (2,009 ) (128 ) (3,875 ) Balance at end of period $ (4,465 ) $ (2,868 ) $ (4,465 ) $ (2,868 ) |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Summary of (Liabilities) Assets Measured at Fair Value on a Recurring Basis | Brookfield DTLA’s (liabilities) assets measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fall, are as follows (in thousands): Fair Value Measurements Using Total Fair Value Quoted Prices in Active Markets for Identical (Liabilities) Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Interest rate swap at: June 30, 2015 $ (4,465 ) $ — $ (4,465 ) $ — December 31, 2014 (4,337 ) — (4,337 ) — Interest rate caps at: June 30, 2015 $ 37 $ — $ 37 $ — December 31, 2014 190 — 190 — |
Financial Instruments (Tables)
Financial Instruments (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Investments, All Other Investments [Abstract] | |
Summary of Fair Value of Derivative Financial Instruments | A summary of the fair value of Brookfield DTLA’s derivative financial instruments is as follows (in thousands): Fair Value June 30, 2015 December 31, 2014 Derivatives designated as cash flow hedging instruments: Interest rate swap liability $ (4,465 ) $ (4,337 ) |
Summary of Effect of Derivative Financial Instruments Reported In Consolidated Financial Statements | A summary of the effect of derivative financial instruments reported in the condensed consolidated financial statements is as follows (in thousands): Amount of Loss Recognized in AOCL Amount of Loss Reclassified from AOCL to Statement of Operations Derivatives designated as cash flow hedging instruments: Interest rate swap for the six months ended: June 30, 2015 $ (128 ) $ — June 30, 2014 (3,875 ) — |
Schedule of Notional Amounts of Interest Rate Caps | Brookfield DTLA holds interest rate caps pursuant to the terms of certain of its mortgage loan agreements with the following notional amounts (in thousands): June 30, 2015 December 31, 2014 Wells Fargo Center–South Tower $ 290,000 $ 290,000 777 Tower 200,000 200,000 $ 490,000 $ 490,000 |
Summary of Estimated Fair Value and Carrying Amounts of Mortgage Loans | The estimated fair value and carrying amount of Brookfield DTLA’s mortgage loans are as follows (in thousands): June 30, 2015 December 31, 2014 Estimated fair value $ 2,125,967 $ 2,133,158 Carrying amount 2,118,000 2,118,000 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Related Party Transactions [Abstract] | |
Summary of Costs Incurred Under Arrangements with Related Parties | A summary of costs incurred by Brookfield DTLA under these arrangements is as follows (in thousands): For the Three Months Ended For the Six Months Ended June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 Property management fee expense $ 1,933 $ 2,138 $ 3,836 $ 4,017 Asset management fee expense 1,544 1,523 3,067 3,029 General, administrative and reimbursable expenses 737 609 1,286 1,310 Leasing and construction management fees 749 1,013 3,528 1,685 A summary of costs incurred by Brookfield DTLA under this arrangement is as follows (in thousands): For the Three Months Ended For the Six Months Ended June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 Insurance expense $ 2,198 $ 2,463 $ 4,345 $ 3,767 |
Organization and Description 31
Organization and Description of Business - Narrative (Details) | Oct. 15, 2013 | Jun. 30, 2015 | Dec. 31, 2014 |
Series A Preferred Stock | |||
Organization and Description of Business [Line Items] | |||
Preferred stock dividend rate | 7.625% | 7.625% | 7.625% |
Basis of Presentation - Narrati
Basis of Presentation - Narrative (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2014 | |
Accounting Policies [Abstract] | |||||
Provision for income taxes | $ 0 | $ 0 | $ 0 | $ 0 | |
Unrecognized tax benefits | $ 0 | $ 0 | $ 0 |
Rents, Deferred Rents and Oth33
Rents, Deferred Rents and Other Receivables, Net - Schedule of Rents, Deferred Rents and Other Receivables (Details) - USD ($) $ in Thousands | Jun. 30, 2015 | Dec. 31, 2014 |
Receivables [Abstract] | ||
Allowance for doubtful accounts | $ 272 | $ 382 |
Accumulated amortization of tenant inducements | $ 5,020 | $ 3,878 |
Rents, Deferred Rents and Oth34
Rents, Deferred Rents and Other Receivables, Net - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Receivables [Abstract] | ||||
Provision for (recovery of) doubtful cccounts | $ 0.1 | $ 0.1 | $ (0.1) | $ 0.1 |
Intangible Assets and Liabili35
Intangible Assets and Liabilities - Summary of Intangible Assets and Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2015 | Dec. 31, 2014 |
Acquired Finite-Lived Intangible Assets and Liabilities [Line Items] | ||
Intangible assets, gross | $ 196,703 | $ 196,703 |
Less: accumulated amortization | 84,219 | 70,876 |
Intangible assets, net | 112,484 | 125,827 |
Below-market leases | 76,344 | 76,344 |
Less: accumulated amortization | 42,461 | 38,619 |
Intangible liabilities, net | 33,883 | 37,725 |
In-place leases | ||
Acquired Finite-Lived Intangible Assets and Liabilities [Line Items] | ||
In-place leases | 110,519 | 110,519 |
Intangible assets, net | 67,520 | |
Tenant relationships | ||
Acquired Finite-Lived Intangible Assets and Liabilities [Line Items] | ||
Tenant relationships | 46,248 | 46,248 |
Above-market leases | ||
Acquired Finite-Lived Intangible Assets and Liabilities [Line Items] | ||
Above-market leases | $ 39,936 | $ 39,936 |
Intangible Assets and Liabili36
Intangible Assets and Liabilities - Schedule of Impact of Intangible Amortization Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Rental income | ||||
Acquired Indefinite-lived Intangible Assets and Liabilities [Line Items] | ||||
Amortization of intangible assets | $ 648 | $ 595 | $ 1,271 | $ 1,248 |
Depreciation and amortization expense | ||||
Acquired Indefinite-lived Intangible Assets and Liabilities [Line Items] | ||||
Amortization of intangible assets | $ 5,126 | $ 8,159 | $ 10,772 | $ 16,483 |
Intangible Assets and Liabili37
Intangible Assets and Liabilities - Schedule of Estimated Future Amortization/Accretion of Intangible Assets and Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2015 | Dec. 31, 2014 |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
Intangible assets, net | $ 112,484 | $ 125,827 |
Below Market Lease, Net, Amortization Income, Fiscal Year Maturity [Abstract] | ||
2,015 | 3,615 | |
2,016 | 6,597 | |
2,017 | 5,944 | |
2,018 | 4,176 | |
2,019 | 3,515 | |
Thereafter | 10,036 | |
Intangible liabilities, net | 33,883 | $ 37,725 |
In-Place Leases | ||
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
2,015 | 7,713 | |
2,016 | 13,879 | |
2,017 | 10,776 | |
2,018 | 7,787 | |
2,019 | 6,526 | |
Thereafter | 20,839 | |
Intangible assets, net | 67,520 | |
Other Intangible Assets | ||
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
2,015 | 4,071 | |
2,016 | 7,635 | |
2,017 | 6,296 | |
2,018 | 5,198 | |
2,019 | 4,363 | |
Thereafter | 17,401 | |
Intangible assets, net | $ 44,964 |
Deferred Charges, Net - Schedul
Deferred Charges, Net - Schedule of Deferred Charges (Details) - USD ($) $ in Thousands | Jun. 30, 2015 | Dec. 31, 2014 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Accumulated amortization of leasing costs | $ 33,070 | $ 28,270 |
Accumulated amortization of deferred financing costs | $ 1,709 | $ 1,108 |
Mortgage Loans - Schedule of De
Mortgage Loans - Schedule of Debt (Details) - USD ($) $ in Thousands | Jun. 30, 2015 | Dec. 31, 2014 |
Debt Instrument [Line Items] | ||
Carrying amount | $ 2,118,000 | $ 2,118,000 |
Less: debt discounts | 4,934 | 6,865 |
Total debt, net | 2,113,066 | 2,111,135 |
Variable Rate Debt | ||
Debt Instrument [Line Items] | ||
Carrying amount | 525,000 | 525,000 |
Floating Rate Debt | ||
Debt Instrument [Line Items] | ||
Carrying amount | 710,000 | 710,000 |
Fixed Rate Debt | ||
Debt Instrument [Line Items] | ||
Carrying amount | $ 1,408,000 | 1,408,000 |
Wells Fargo Center - South Tower | Variable Rate Debt | ||
Debt Instrument [Line Items] | ||
Variable interest rate | 1.99% | |
Carrying amount | $ 290,000 | 290,000 |
777 Tower | Variable Rate Debt | ||
Debt Instrument [Line Items] | ||
Variable interest rate | 1.89% | |
Carrying amount | $ 200,000 | 200,000 |
Figueroa at 7th | Variable Rate Debt | ||
Debt Instrument [Line Items] | ||
Variable interest rate | 2.44% | |
Carrying amount | $ 35,000 | 35,000 |
EY Plaza | Floating Rate Debt | ||
Debt Instrument [Line Items] | ||
Carrying amount | $ 185,000 | 185,000 |
EY Plaza | Floating Rate Debt | LIBOR | ||
Debt Instrument [Line Items] | ||
Variable interest rate | 3.93% | |
Wells Fargo Center - North Tower | Fixed Rate Debt | ||
Debt Instrument [Line Items] | ||
Fixed interest rate | 5.70% | |
Carrying amount | $ 550,000 | 550,000 |
Gas Company Tower | Fixed Rate Debt | ||
Debt Instrument [Line Items] | ||
Fixed interest rate | 5.10% | |
Carrying amount | $ 458,000 | 458,000 |
BOA Plaza | Fixed Rate Debt | ||
Debt Instrument [Line Items] | ||
Fixed interest rate | 4.05% | |
Carrying amount | $ 400,000 | $ 400,000 |
Mortgage Loans - Schedule of 40
Mortgage Loans - Schedule of Debt (Footnote) (Details) - Jun. 30, 2015 - extension_option | Total |
Floating Rate Debt | EY Plaza | LIBOR | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 1.75% |
Swap rate | 2.178% |
Effective interest rate | 3.93% |
Variable Rate Debt | Wells Fargo Center - South Tower | |
Debt Instrument [Line Items] | |
Number of options to extend | 2 |
Option extension period | 1 year |
Effective interest rate | 1.99% |
Variable Rate Debt | Wells Fargo Center - South Tower | LIBOR | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 1.80% |
Cap interest rate | 4.75% |
Variable Rate Debt | 777 Tower | |
Debt Instrument [Line Items] | |
Number of options to extend | 2 |
Option extension period | 1 year |
Effective interest rate | 1.89% |
Variable Rate Debt | 777 Tower | LIBOR | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 1.70% |
Cap interest rate | 5.75% |
Variable Rate Debt | Figueroa at 7th | |
Debt Instrument [Line Items] | |
Number of options to extend | 2 |
Option extension period | 12 months |
Effective interest rate | 2.44% |
Variable Rate Debt | Figueroa at 7th | LIBOR | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 2.25% |
Mortgage Loans - Schedule of Ma
Mortgage Loans - Schedule of Maturities of Debt (Details) - USD ($) $ in Thousands | Jun. 30, 2015 | Dec. 31, 2014 |
Debt Disclosure [Abstract] | ||
2,015 | $ 311 | |
2,016 | 751,831 | |
2,017 | 589,026 | |
2,018 | 204,232 | |
2,019 | 4,449 | |
Thereafter | 568,151 | |
Total | $ 2,118,000 | $ 2,118,000 |
Mortgage Loans - Narrative (Det
Mortgage Loans - Narrative (Details) $ in Thousands | 6 Months Ended | ||||||
Jun. 30, 2015USD ($) | Oct. 31, 2015USD ($) | Apr. 01, 2015USD ($) | Dec. 31, 2014USD ($) | Oct. 02, 2014USD ($) | Apr. 08, 2014USD ($) | Oct. 15, 2013USD ($) | |
Debt Instrument [Line Items] | |||||||
Prepayment amount without penalty | $ 220,000 | ||||||
Amount available to be defeased | 458,000 | ||||||
Prepayment amount with penalty or available to be defeased | 550,000 | ||||||
Prepaid with penalties | 290,000 | ||||||
Amount unavailable for prepayment | 200,000 | ||||||
Amount unavailable for defeasance | 400,000 | ||||||
Carrying amount | $ 2,118,000 | $ 2,118,000 | |||||
Covenant compliance | Pursuant to the terms of certain of our mortgage loan agreements, Brookfield DTLA is required to report a debt service coverage ratio (“DSCR”) calculated using the formulas specified in the underlying loan agreements. We have submitted the required reports to the lenders for the measurement periods ended June 30, 2015 and were in compliance with the amounts required by the loan agreements, with the exception of Gas Company Tower. | ||||||
Covenant description | Under the Gas Company Tower mortgage loan, we reported a DSCR of 0.71 to 1.00, calculated using actual debt service under the loan, and a DSCR of 0.56 to 1.00, calculated using actual debt service plus a hypothetical principal payment using a 30-year amortization schedule. Because the reported DSCR using the actual debt service plus a hypothetical principal payment was less than 1.00 to 1.00, the lender could seek to remove Brookfield Properties Management (CA) Inc. as property manager of Gas Company Tower, which is the only recourse available to the lender as a result of such breach. | ||||||
Carrying Amount | |||||||
Debt Instrument [Line Items] | |||||||
Carrying amount | $ 2,118,000 | 2,118,000 | |||||
Fixed Rate Debt | |||||||
Debt Instrument [Line Items] | |||||||
Carrying amount | 1,408,000 | 1,408,000 | |||||
Fixed Rate Debt | Wells Fargo Center - North Tower | |||||||
Debt Instrument [Line Items] | |||||||
Collateral reserve required by lender | $ 10,000 | ||||||
Carrying amount | 550,000 | 550,000 | |||||
Fixed Rate Debt | Wells Fargo Center - North Tower | Restricted Cash | |||||||
Debt Instrument [Line Items] | |||||||
Collateral reserve paid to lender | $ 1,250 | $ 1,250 | $ 1,250 | $ 5,000 | |||
Fixed Rate Debt | Gas Company Tower | |||||||
Debt Instrument [Line Items] | |||||||
Carrying amount | $ 458,000 | $ 458,000 | |||||
Debt service coverage ratio | 0.71 | ||||||
Debt service coverage ratio with 30 year amortization schedule | 0.56 | ||||||
Amortization period | 30 years | ||||||
Debt service coverage ratio, minimum | 1 | ||||||
Forecast | Fixed Rate Debt | Wells Fargo Center - North Tower | |||||||
Debt Instrument [Line Items] | |||||||
Remaining collateral reserve payments | $ 1,250 |
Mezzanine Equity - Narrative (D
Mezzanine Equity - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands | Oct. 15, 2013 | Oct. 15, 2013 | Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2014 | Jun. 30, 2015 |
Class of Stock [Line Items] | ||||||
Redemption value | $ 760,964 | $ 739,600 | $ 760,964 | |||
Fair market value as of merger date | $ 595,000 | $ 595,000 | ||||
Series A Preferred Stock | ||||||
Class of Stock [Line Items] | ||||||
Series A preferred stock, shares outstanding (in shares) | 9,730,370 | 9,730,370 | 9,730,370 | |||
Preferred stock dividends declared (in USD per share) | $ 0 | $ 0 | ||||
Preferred stock, dividend rate (in USD per share) | 1.90625 | |||||
Preferred stock, amount of preferred dividends in arrears | $ 123,600 | |||||
Preferred stock, liquidation preference (in USD per share) | $ 25 | $ 25 | ||||
Redemption value | $ 366,923 | $ 357,649 | $ 366,923 | |||
Series A Preferred Stock | Third party issuance | ||||||
Class of Stock [Line Items] | ||||||
Series A preferred stock, shares outstanding (in shares) | 9,357,469 | 9,357,469 | 9,357,469 | |||
Series A Preferred Stock | Brookfield DTLA Holdings LLC | ||||||
Class of Stock [Line Items] | ||||||
Series A preferred stock, shares outstanding (in shares) | 372,901 | 372,901 | 372,901 | |||
Series A-1 Preferred Interest | ||||||
Class of Stock [Line Items] | ||||||
Preferred stock, amount of preferred dividends in arrears | $ 114,800 | |||||
Redemption value | $ 340,477 | $ 331,871 | 340,477 | |||
Stated value of preferred interest issued | 225,700 | 225,700 | ||||
Liquidation value | 225,700 | 225,700 | ||||
Senior Participating Preferred Interest | ||||||
Class of Stock [Line Items] | ||||||
Distributions to noncontrolling interests | 220,000 | |||||
Redemption value | 53,564 | $ 50,080 | 53,564 | |||
Stated value of preferred interest issued | $ 240,000 | 240,000 | ||||
Coupon rate, preferred interest | 7.00% | |||||
Preferred and participating interests value | 51,600 | |||||
Accumulated and unpaid dividends | $ 2,000 | $ 2,000 | ||||
Series A Preferred Interest | ||||||
Class of Stock [Line Items] | ||||||
Current preferred liquidation percentage | 51.87% | |||||
Preferred liquidation percentage after current liquidation preference has been reduced to zero | 47.66% | |||||
Series A-1 Preferred Interest | ||||||
Class of Stock [Line Items] | ||||||
Current preferred liquidation percentage | 48.13% | |||||
Series B Preferred Interest | ||||||
Class of Stock [Line Items] | ||||||
Preferred liquidation percentage after current liquidation preference has been reduced to zero | 52.34% | |||||
333 South Hope and EYP Realty | Senior Participating Preferred Interest | Brookfield DTLA Holdings LLC | ||||||
Class of Stock [Line Items] | ||||||
Residual interest | 4.00% | |||||
BOP Management Inc. | Notes Payable | ||||||
Class of Stock [Line Items] | ||||||
Promissory note due | $ 25,000 | $ 25,000 | ||||
Lower Range | ||||||
Class of Stock [Line Items] | ||||||
Target leverage ratio | 60.00% | |||||
Upper Range | ||||||
Class of Stock [Line Items] | ||||||
Target leverage ratio | 65.00% |
Mezzanine Equity - Summary of C
Mezzanine Equity - Summary of Change in Mezzanine Equity (Details) - 6 months ended Jun. 30, 2015 - USD ($) $ in Thousands | Total |
Increase (Decrease) in Temporary Equity [Roll Forward] | |
Balance, December 31, 2014 | $ 739,600 |
Current dividends | 19,064 |
Redemption measurement adjustment | 2,300 |
Balance, June 30, 2015 | $ 760,964 |
Series A Preferred Stock | |
Increase (Decrease) in Temporary Equity [Roll Forward] | |
Balance, December 31, 2014 (in shares) | 9,730,370 |
Balance, December 31, 2014 | $ 357,649 |
Current dividends | $ 9,274 |
Balance, June 30, 2015 (in shares) | 9,730,370 |
Balance, June 30, 2015 | $ 366,923 |
Series A-1 Preferred Interest | |
Increase (Decrease) in Temporary Equity [Roll Forward] | |
Balance, December 31, 2014 | 331,871 |
Current dividends | 8,606 |
Balance, June 30, 2015 | 340,477 |
Senior Participating Preferred Interest | |
Increase (Decrease) in Temporary Equity [Roll Forward] | |
Balance, December 31, 2014 | 50,080 |
Current dividends | 1,184 |
Redemption measurement adjustment | 2,300 |
Balance, June 30, 2015 | $ 53,564 |
Accumulated Other Comprehensi45
Accumulated Other Comprehensive Loss - Summary of Change in Accumulated Other Comprehensive Loss Related to Cash Flow Hedges (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Accumulated Other Comprehensive Loss [Line Items] | ||||
Balance at beginning of period | $ (2,066) | |||
Balance at end of period | $ (2,127) | (2,127) | ||
Accumulated Other Comprehensive Loss | ||||
Accumulated Other Comprehensive Loss [Line Items] | ||||
Balance at beginning of period | (6,871) | $ (859) | (4,337) | $ 1,007 |
Other comprehensive gain (loss) before reclassifications | 2,406 | (2,009) | (128) | (3,875) |
Amounts reclassified from accumulated other comprehensive gain (loss) | 0 | 0 | 0 | 0 |
Net current-period other comprehensive gain (loss) | 2,406 | (2,009) | (128) | (3,875) |
Balance at end of period | $ (4,465) | $ (2,868) | $ (4,465) | $ (2,868) |
Fair Value Measurements - Summa
Fair Value Measurements - Summary of (Liabilities) Assets Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands | Jun. 30, 2015 | Dec. 31, 2014 |
Interest Rate Swap | ||
Fair Value, Assets Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest Rate Cash Flow Hedge Derivative at Fair Value, Net | $ (4,465) | $ (4,337) |
Interest Rate Swap | Quoted Prices in Active Markets for Identical (Liabilities) Assets (Level 1) | ||
Fair Value, Assets Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest Rate Cash Flow Hedge Derivative at Fair Value, Net | 0 | 0 |
Interest Rate Swap | Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest Rate Cash Flow Hedge Derivative at Fair Value, Net | (4,465) | (4,337) |
Interest Rate Swap | Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest Rate Cash Flow Hedge Derivative at Fair Value, Net | 0 | 0 |
Interest Rate Cap | ||
Fair Value, Assets Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest Rate Derivative Instruments Not Designated as Hedging Instruments, Asset at Fair Value | 37 | 190 |
Interest Rate Cap | Quoted Prices in Active Markets for Identical (Liabilities) Assets (Level 1) | ||
Fair Value, Assets Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest Rate Derivative Instruments Not Designated as Hedging Instruments, Asset at Fair Value | 0 | 0 |
Interest Rate Cap | Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest Rate Derivative Instruments Not Designated as Hedging Instruments, Asset at Fair Value | 37 | 190 |
Interest Rate Cap | Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest Rate Derivative Instruments Not Designated as Hedging Instruments, Asset at Fair Value | $ 0 | $ 0 |
Financial Instruments - Summary
Financial Instruments - Summary of Fair Value of Derivative Instruments (Details) - Interest Rate Swap - USD ($) $ in Thousands | Jun. 30, 2015 | Dec. 31, 2014 |
Derivatives, Fair Value [Line Items] | ||
Interest Rate Cash Flow Hedge Derivative at Fair Value, Net | $ (4,465) | $ (4,337) |
Accounts Payable and Other Liabilities [Member] | Fair Value, Measurements, Recurring | Designated as Hedging Instrument | ||
Derivatives, Fair Value [Line Items] | ||
Interest Rate Cash Flow Hedge Derivative at Fair Value, Net | $ (4,465) | $ (4,337) |
Financial Instruments - Summa48
Financial Instruments - Summary of Effect of Derivative Instruments (Details) - Cash Flow Hedging - Interest Rate Swap - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Derivative [Line Items] | ||
Amount of Loss Recognized in AOCL | $ (128) | $ (3,875) |
Amount of Loss Reclassified from AOCL to Statement of Operations | $ 0 | $ 0 |
Financial Instruments - Narrati
Financial Instruments - Narrative (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Interest Rate Swap | EY Plaza | ||
Derivative [Line Items] | ||
Notional amount | $ 185,000,000 | $ 185,000,000 |
Financial Instruments - Schedul
Financial Instruments - Schedule of Interest Rate Derivatives (Details) - Interest Rate Cap - USD ($) $ in Thousands | Jun. 30, 2015 | Dec. 31, 2014 |
Derivative Instruments, Interest Rate Caps [Line Items] | ||
Notional amount | $ 490,000 | $ 490,000 |
Wells Fargo Center - South Tower | ||
Derivative Instruments, Interest Rate Caps [Line Items] | ||
Notional amount | 290,000 | 290,000 |
777 Tower | ||
Derivative Instruments, Interest Rate Caps [Line Items] | ||
Notional amount | $ 200,000 | $ 200,000 |
Financial Instruments - Summa51
Financial Instruments - Summary of Fair Value and Carrying Amounts of Mortgage Loans (Details) - USD ($) $ in Thousands | Jun. 30, 2015 | Dec. 31, 2014 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage loans | $ 2,118,000 | $ 2,118,000 |
Carrying amount | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage loans | 2,118,000 | 2,118,000 |
Significant Unobservable Inputs (Level 3) | Estimated fair value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage loans | $ 2,125,967 | $ 2,133,158 |
Related Party Transactions - Na
Related Party Transactions - Narrative (Details) - 6 months ended Jun. 30, 2015 - USD ($) | Total |
Related Party Transactions [Abstract] | |
Property management fee, percent | 2.75% |
Asset management fee, percent | 0.75% |
Real estate insurance, business interruption coverage per occurrence | $ 2,500,000,000 |
Real estate insurance, earthquake insurance aggregate limit | 300,000,000 |
Real estate insurance, terrorism insurance aggregate coverage | $ 4,000,000,000 |
Related Party Transactions - Su
Related Party Transactions - Summary of Costs Incurred Under Arrangements with Related Parties (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Property management fee expense | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction expenses | $ 1,933 | $ 2,138 | $ 3,836 | $ 4,017 |
Asset management fee expense | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction expenses | 1,544 | 1,523 | 3,067 | 3,029 |
General, administrative and reimbursable expenses | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction expenses | 737 | 609 | 1,286 | 1,310 |
Leasing and construction management fees | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction expenses | 749 | 1,013 | 3,528 | 1,685 |
Insurance expense | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction expenses | $ 2,198 | $ 2,463 | $ 4,345 | $ 3,767 |
Commitments and Contingencies -
Commitments and Contingencies - Narrative (Details) | Jun. 18, 2014USD ($) | Apr. 24, 2013lawsuit | May. 29, 2015USD ($) | Mar. 30, 2015$ / shares | Nov. 21, 2013USD ($) |
Amount of stipulated settlement | |||||
Loss Contingencies [Line Items] | |||||
Number of claims filed | lawsuit | 7 | ||||
Maximum stipulation of settlement | $ 475,000 | ||||
Series A Preferred Stock | |||||
Loss Contingencies [Line Items] | |||||
Proposed litigation payment per preferred share of accumulated and unpaid dividends (in USD per share) | $ / shares | $ 2.25 | ||||
Proposed litigation settlement, attorneys' fees | $ 5,250,000 | ||||
MPG Office LLC | MPG Office LLC | |||||
Loss Contingencies [Line Items] | |||||
Payment for legal settlement | $ 475,000 |