Douglas Emmett Inc.

11/04/2024 | Press release | Distributed by Public on 11/04/2024 15:11

Business/Financial Results Form 8 K




Executive Summary

We own and operate 18.0 million square feet of Class A office properties and 4,476 apartment units (excluding our residential development pipeline and the vacated Barrington Plaza units) in the premier coastal submarkets of Los Angeles and Honolulu.
Quarterly Results: For the quarter ended September 30, 2024 compared to the quarter ended September 30, 2023:
•Our revenues decreased by 1.8% to $250.8 million, primarily due to lower office occupancy.
•Our net income (loss) attributable to common stockholders increased by 134.6% to net income of $4.6 million, or net income of $0.03 per diluted share.
•Our FFO decreased by 3.8% to $86.0 million, or $0.43 per fully diluted share, primarily due to lower office NOI.
•Our AFFO increased by 0.2% to $68.8 million.
•Our same property Cash NOI decreased by 5.7% to $139.4 million, due to lower office NOI partially offset by multifamily growth.

Leasing: During the third quarter, we had approximately 90,000 square feet of positive absorption which drove a 50 basis point increase in our portfolio leased rate to 82%. We signed 236 office leases covering 1,003,000 square feet, driven by 353,000 square feet of new leases and 650,000 square feet of renewal leases. This was also our best quarter for new leasing to tenants over 10,000 square feet since late 2022 when recessionary fears surfaced. Our median lease size remains at 2,400 square feet and across our almost 2,700 office leases we have less than 30 leases that are over 40,000 square feet.
Leasing can vary from quarter to quarter, and we expect a drop in occupancy next quarter when Studio Plaza vacates, but we are encouraged by our lower than average lease expirations in each of the next five years. Comparing the office leases we signed during the third quarter to the expiring leases for the same space, straight-line rents increased by 0.4% and cash rents decreased by 11.2%. Our multifamily portfolio remains essentially fully leased at 99.1%.
Balance Sheet & Dividends: At quarter end, we had cash and cash equivalents of $544.2 million. On October 16, 2024, we paid a quarterly cash dividend of $0.19 per common share, or $0.76 per common share on an annualized basis.
Guidance: Based on our third quarter results and our higher expectations for fourth quarter operations we have increased our guidance for Net Income Per Common Share - Diluted to be between $0.10 and $0.14, and our FFO per fully diluted share to be between $1.69 and $1.73 per share. Our guidance does not include the impact of future property acquisitions or dispositions, stock sales or repurchases, financings, property damage insurance recoveries, impairment charges or other possible capital markets activities. See page 21.

NOTE: See the non-GAAP reconciliations for FFO & AFFO on page 8 and same property NOI on page 10.
See the "Definitions" section for definitions of certain terms used in this Earnings Package.

Table of Contents
Forward Looking Statements (FLS)
This Third Quarter 2024 Earnings Results and Operating Information, which we refer to as our Earnings Package (EP), supplements the information provided in our reports filed with the Securities and Exchange Commission (SEC). It contains FLS within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and we claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements related to the expectations regarding the performance of our business, financial results, liquidity and capital resources and other non-historical statements. In some cases, these FLS can be identified by the use of words such as "expect," "potential," "continue," "may," "will," "should," "could," "seek," "project," "intend," "plan," "estimate," "anticipate," or the negative version of these words or other similar words which are predictions of or indicate future events or trends and which do not relate solely to historical matters. FLS presented in this EP, and those that we may make orally or in writing from time to time, are based on our beliefs and assumptions. Our actual results will be affected by known and unknown risks, trends, uncertainties and factors, some of which are beyond our control or ability to predict, including, but not limited to: adverse economic, political or real estate developments affecting Southern California or Honolulu, Hawaii; competition from other real estate investors in our markets; decreased rental rates or increased tenant incentives and vacancy rates; reduced demand for office space, including as a result of remote work and flexible working arrangements that allow work from remote locations other than the employer's office premises; defaults on, early terminations of, or non-renewal of leases by tenants; increases in interest rates and operating costs, including due to inflation; insufficient cash flows to service our debt or pay rent on ground leases; difficulties in raising capital; inability to liquidate real estate or other investments quickly; difficulties in acquiring properties; failure to successfully operate properties; failure to maintain our REIT status; adverse changes in rent control laws and regulations; environmental uncertainties; natural disasters; fire and other property damage; insufficient insurance or increases in insurance costs; inability to successfully expand into new markets or submarkets; risks associated with property development; conflicts of interest with our officers; reliance on key personnel; changes in zoning and other land use laws; adverse changes to tax laws, including those related to property taxes; possible terrorist attacks or wars; and other risks and uncertainties detailed in our Annual Report on Form 10-K for 2023, and other documents filed with the SEC. Although we believe that our assumptions underlying our FLS are reasonable, they are not guarantees of future performance and some will inevitably prove to be incorrect. As a result, our actual future results can be expected to differ from our expectations, and those differences could be material. Accordingly, please use caution in relying on any FLS in this EP to anticipate future results or trends. This EP and all subsequent written and oral FLS attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our FLS.
2
Company Overview

Corporate Data
as of September 30, 2024

Office Portfolio
Consolidated Total
Properties 68 70
Rentable square feet (in thousands) 17,595 17,981
Leased rate 82.0 % 82.0 %
Occupancy rate 79.4 % 79.4 %
Multifamily Portfolio(1)
Total
Properties 14
Units 4,476
Leased rate 99.1 %
Market Capitalization (in thousands, except price per share)
Fully Diluted Shares outstanding as of September 30, 2024 202,435
Common stock closing price per share (NYSE:DEI) $ 17.57
Equity Capitalization $ 3,556,790
Net Debt (in thousands)
Consolidated Our Share
Debt principal(2)
$ 5,535,368 $ 4,606,698
Less: cash and cash equivalents and loan collateral deposits(3)
(558,148) (421,080)
Net Debt $ 4,977,220 $ 4,185,618
Leverage Ratio (in thousands, except percentage)
Pro Forma Enterprise Value $ 7,742,408
Our Share of Net Debt to Pro Forma Enterprise Value 54 %
AFFO Payout Ratio(4)
Three months ended September 30, 2024 56.0 %
_______________________________________________
(1) Unit totals exclude units vacated as part of removing Barrington Plaza from the rental market. Leased rate excludes Barrington Plaza.
(2) See page 12 for a reconciliation of consolidated debt principal and our share of debt principal to consolidated debt on the balance sheet.
(3) The consolidated balance of $558.1 million includes our consolidated cash and cash equivalents of $544.2 million and a loan collateral deposit of $13.9 million in an interest bearing account with a lender. Our share is calculated by starting with the consolidated balance of $558.1 million, then deducting the other owners' share of our JVs' cash and cash equivalents of $155.2 million and then adding our share of our unconsolidated Fund's cash and cash equivalents of $18.2 million. See note 5 to the debt table on page 12 regarding the loan collateral deposit.
(4) Payout ratio based on $0.19 dividend payable to shareholders of record as of September 30, 2024.
NOTE: See the "Definitions" section for definitions of certain terms used in this Earnings Package.
Company Overview

Property Map
as of September 30, 2024

Company Overview

Board of Directors and Executive Officers
as of September 30, 2024

BOARD OF DIRECTORS
__________________________________________________________________________________________________________________________________
Dan A. Emmett Our Chairman of the Board
Jordan L. Kaplan Our Chief Executive Officer and President
Kenneth M. Panzer Our Chief Operating Officer
Leslie E. Bider Retired Executive and Investor
Dorene C. Dominguez Chairwoman and CEO of Vanir Group of Companies
Ray C. Leonard President, Sugar Ray Leonard Foundation
Virginia A. McFerran Technology and Data Science Advisor
Thomas E. O'Hern Former CEO of The Macerich Company
William E. Simon, Jr. Partner Emeritus, Simon Quick Advisors
Shirley Wang Founder and CEO, Plastpro Inc.

EXECUTIVE OFFICERS
__________________________________________________________________________________________________________________________________
Jordan L. Kaplan Chief Executive Officer and President
Kenneth M. Panzer Chief Operating Officer
Peter D. Seymour Chief Financial Officer
Kevin A. Crummy Chief Investment Officer
Michele L. Aronson Executive Vice President, General Counsel and Secretary

CORPORATE OFFICE
1299 Ocean Avenue, Suite 1000, Santa Monica, California 90401
Phone: (310) 255-7700

For more information, please visit our website at www.douglasemmett.com or contact:
Stuart McElhinney, Vice President, Investor Relations
(310) 255-7751
Financial Results

Consolidated Balance Sheets
(Unaudited; In thousands)

September 30, 2024 December 31, 2023
Assets
Investment in real estate, gross $ 12,470,638 $ 12,405,814
Less: accumulated depreciation and amortization (3,851,872) (3,652,630)
Investment in real estate, net 8,618,766 8,753,184
Ground lease right-of-use asset 7,441 7,447
Cash and cash equivalents 544,227 523,082
Tenant receivables 4,371 6,096
Deferred rent receivables 116,862 115,321
Acquired lease intangible assets, net 2,607 2,971
Interest rate contract assets 76,910 170,880
Investment in unconsolidated Fund 23,077 15,977
Other assets 57,503 49,260
Total assets $ 9,451,764 $ 9,644,218
Liabilities
Secured notes payable, net $ 5,513,086 $ 5,543,171
Ground lease liability 10,827 10,836
Interest payable, accounts payable and deferred revenue 162,536 131,237
Security deposits 62,767 61,958
Acquired lease intangible liabilities, net 13,212 19,838
Dividends payable 31,822 31,781
Total liabilities 5,794,250 5,798,821
Equity
Douglas Emmett, Inc. stockholders' equity:
Common stock 1,674 1,672
Additional paid-in capital 3,396,212 3,392,955
Accumulated other comprehensive income 53,651 115,917
Accumulated deficit (1,361,693) (1,290,682)
Total Douglas Emmett, Inc. stockholders' equity 2,089,844 2,219,862
Noncontrolling interests 1,567,670 1,625,535
Total equity 3,657,514 3,845,397
Total liabilities and equity $ 9,451,764 $ 9,644,218

NOTE: See the "Definitions" section for definitions of certain terms used in this Earnings Package.
Financial Results

Consolidated Operating Results
(Unaudited; In thousands, except per share data)

Three Months Ended September 30, Nine Months Ended September 30,
2024 2023 2024 2023
Revenues
Office rental
Rental revenues and tenant recoveries(1)
$ 174,457 $ 181,106 $ 515,252 $ 535,243
Parking and other income 28,204 27,717 84,586 82,371
Total office revenues 202,661 208,823 599,838 617,614
Multifamily rental
Rental revenues 44,091 42,864 129,964 131,126
Parking and other income 4,001 3,722 11,697 12,469
Total multifamily revenues 48,092 46,586 141,661 143,595
Total revenues 250,753 255,409 741,499 761,209
Operating Expenses
Office expenses 78,026 74,631 212,387 220,261
Multifamily expenses 16,740 17,256 48,557 50,470
General and administrative expenses 10,109 12,826 33,168 34,698
Depreciation and amortization 97,180 122,022 288,441 336,771
Total operating expenses 202,055 226,735 582,553 642,200
Other income 7,298 6,229 21,772 12,561
Other expenses (96) (175) (290) (820)
Income from unconsolidated Fund 664 290 1,785 1,177
Interest expense (56,824) (56,043) (167,111) (151,859)
Net (loss) income (260) (21,025) 15,102 (19,932)
Net loss attributable to noncontrolling interests 4,878 7,663 9,303 17,681
Net income (loss) attributable to common stockholders $ 4,618 $ (13,362) $ 24,405 $ (2,251)
Net income (loss) per common share - basic and diluted $ 0.03 $ (0.08) $ 0.14 $ (0.02)
Dividends declared per common share $ 0.19 $ 0.19 $ 0.57 $ 0.57
Weighted average shares of common stock outstanding - basic and diluted 167,411 166,738 167,374 170,553
_______________________________________________________________________
(1)Rental revenues and tenant recoveries include tenant recoveries for the following periods:
•$16.8 million and $18.0 million for the three months ended September 30, 2024 and 2023, and
•$37.3 million and $43.7 million for the nine months ended September 30, 2024 and 2023, respectively.

NOTE: See the "Definitions" section for definitions of certain terms used in this Earnings Package.
Financial Results

Funds From Operations & Adjusted Funds From Operations(1)
(Unaudited; in thousands, except per share data)

The table below presents a reconciliation of Net income (loss) attributable to common stockholders to Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO):

Three Months Ended September 30, Nine Months Ended September 30,
2024 2023 2024 2023
Funds From Operations (FFO)
Net income (loss) attributable to common stockholders $ 4,618 $ (13,362) $ 24,405 $ (2,251)
Depreciation and amortization of real estate assets 97,180 122,022 288,441 336,771
Net loss attributable to noncontrolling interests (4,878) (7,663) (9,303) (17,681)
Adjustments attributable to unconsolidated Fund(2)
1,208 742 3,397 2,232
Adjustments attributable to consolidated JVs(2)
(12,113) (12,358) (38,795) (34,646)
FFO $ 86,015 $ 89,381 $ 268,145 $ 284,425
Adjusted Funds From Operations (AFFO)
FFO $ 86,015 $ 89,381 $ 268,145 $ 284,425
Straight-line rent (598) (1,200) (1,541) (2,007)
Net accretion of acquired above- and below-market leases (1,936) (2,461) (6,262) (8,156)
Loan costs, loan premium amortization and swap amortization 2,479 2,291 6,997 6,459
Recurring capital expenditures, tenant improvements and capitalized leasing expenses(3)
(22,683) (28,855) (70,779) (85,076)
Non-cash compensation expense 4,840 5,003 15,260 15,588
Adjustments attributable to unconsolidated Fund(2)
(488) (98) (606) (399)
Adjustments attributable to consolidated JVs(2)
1,214 4,645 6,580 14,129
AFFO $ 68,843 $ 68,706 $ 217,794 $ 224,963
Weighted average shares of common stock outstanding - diluted 167,411 166,738 167,374 170,553
Weighted average units in our operating partnership outstanding 34,878 33,277 34,681 33,083
Weighted average fully diluted shares outstanding 202,289 200,015 202,055 203,636
Net income (loss) per common share - basic and diluted $ 0.03 $ (0.08) $ 0.14 $ (0.02)
FFO per share - fully diluted $ 0.43 $ 0.45 $ 1.33 $ 1.40
Dividends paid per share(4)
$ 0.19 $ 0.19 $ 0.57 $ 0.57
__________________________________________________________
(1)Presents the FFO and AFFO attributable to our common stockholders and noncontrolling interests in our Operating Partnership, including our share of our consolidated JVs and our unconsolidated Fund.
(2)Adjusts for the portion of each other listed adjustment item on our share of the results of our unconsolidated Fund and for each other listed adjustment item that is attributed to the noncontrolling interests in our consolidated JVs.
(3)Under the GAAP lease accounting rules, we expense non-incremental leasing expenses (leasing expenses not directly related to the signing of a lease) and capitalize incremental leasing expenses. Since non-incremental leasing expenses are included in the calculation of net income (loss) attributable to common stockholders and FFO, the capitalized leasing expenses adjustment to AFFO only includes incremental leasing expenses.
(4)Reflects dividends paid within the respective periods.

NOTE: See the "Definitions" section for definitions of certain terms used in this Earnings Package.
Financial Results

Same Property Statistics & Net Operating Income (NOI)(1)
(Unaudited; in thousands, except statistics)

As of September 30,
2024 2023
Office Statistics
Number of properties 66 66
Rentable square feet (in thousands) 17,105 17,105
Ending % leased 81.5 % 83.3 %
Ending % occupied 78.8 % 81.3 %
Quarterly average % occupied 79.1 % 81.8 %
Multifamily Statistics
Number of properties 11 11
Number of units 3,569 3,569
Ending % leased 99.2 % 98.8 %

Three Months Ended September 30, % Favorable
2024 2023 (Unfavorable)
Net Operating Income (NOI)
Office revenues $ 195,348 $ 201,739 (3.2) %
Office expenses (77,238) (73,835) (4.6) %
Office NOI 118,110 127,904 (7.7) %
Multifamily revenues 36,154 34,967 3.4 %
Multifamily expenses (11,647) (10,954) (6.3) %
Multifamily NOI 24,507 24,013 2.1 %
Total NOI $ 142,617 $ 151,917 (6.1) %
Cash Net Operating Income (NOI)
Office cash revenues $ 193,030 $ 199,037 (3.0) %
Office cash expenses (77,238) (73,835) (4.6) %
Office cash NOI 115,792 125,202 (7.5) %
Multifamily cash revenues 35,208 33,571 4.9 %
Multifamily cash expenses (11,647) (10,954) (6.3) %
Multifamily cash NOI 23,561 22,617 4.2 %
Total Cash NOI $ 139,353 $ 147,819 (5.7) %
_________________________________________________
(1) The amounts presented include 100% (not our pro-rata share). See page 10 for a reconciliation of net income (loss) attributable to common stockholders to these non-GAAP measures.

NOTE: See the "Definitions" section for definitions of certain terms used in this Earnings Package.
Financial Results

Same Property NOI Reconciliation
(Unaudited and in thousands)

The tables below present a reconciliation of Net income (loss) attributable to common stockholders to Same Property NOI:

Three Months Ended September 30,
2024 2023
Net income (loss) attributable to common stockholders $ 4,618 $ (13,362)
Net loss attributable to noncontrolling interests (4,878) (7,663)
Net loss (260) (21,025)
General and administrative expenses 10,109 12,826
Depreciation and amortization 97,180 122,022
Other income (7,298) (6,229)
Other expenses 96 175
Income from unconsolidated Fund (664) (290)
Interest expense 56,824 56,043
NOI $ 155,987 $ 163,522
Same Property NOI by Segment
Same property office cash revenues $ 193,030 $ 199,037
Non-cash adjustments per definition of NOI 2,318 2,702
Same property office revenues 195,348 201,739
Same property office cash expenses (77,238) (73,835)
Same Property Office NOI 118,110 127,904
Same property multifamily cash revenues 35,208 33,571
Non-cash adjustments per definition of NOI 946 1,396
Same property multifamily revenues 36,154 34,967
Same property multifamily cash expenses (11,647) (10,954)
Same Property Multifamily NOI 24,507 24,013
Same Property NOI 142,617 151,917
Non-comparable office revenues 7,313 7,084
Non-comparable office expenses (788) (796)
Non-comparable multifamily revenues 11,938 11,619
Non-comparable multifamily expenses (5,093) (6,302)
NOI $ 155,987 $ 163,522

NOTE: See the "Definitions" section for definitions of certain terms used in this Earnings Package.
Financial Results

Financial Data for JVs & Fund
(Unaudited, in thousands)

Three Months Ended September 30, 2024
Wholly-Owned Properties
Consolidated JVs(1)
Unconsolidated Fund(2)
Revenues $ 185,866 $ 64,887 $ 4,604
Office and multifamily operating expenses $ 69,483 $ 25,283 $ 1,732
Straight-line rent $ 1,550 $ (952) $ (110)
Above/below-market lease revenue $ 198 $ 1,738 $ -
Cash NOI attributable to outside interests(3)
$ - $ 20,219 $ 621
Our share of cash NOI(4)
$ 114,635 $ 18,599 $ 2,361
Nine Months Ended September 30, 2024
Wholly-Owned Properties
Consolidated JVs(1)
Unconsolidated Fund(2)
Revenues $ 556,395 $ 185,104 $ 13,289
Office and multifamily operating expenses $ 199,573 $ 61,371 $ 4,748
Straight-line rent $ 2,746 $ (1,205) $ (853)
Above/below-market lease revenue $ 602 $ 5,660 $ -
Cash NOI attributable to outside interests(3)
$ - $ 61,709 $ 2,395
Our share of cash NOI(4)
$ 353,474 $ 57,569 $ 6,999
______________________________________________________
(1) Represents stand-alone financial data (with property management fees excluded from operating expenses as a consolidating entry) for four consolidated JVs that we manage. We own a weighted average interest of approximately 46% (based on square footage) in the four JVs, which owned a combined sixteen Class A office properties totaling 4.2 million square feet and two residential properties with 470 apartments in our regions. We are entitled to (i) distributions based on invested capital, (ii) fees for property management and other services, (iii) reimbursement of certain acquisition-related expenses and certain other costs and (iv) additional distributions based on Cash NOI.
(2) Represents stand-alone financial data (with property management fees excluded from operating expenses as a consolidating entry) for one unconsolidated Fund that we manage. We owned an interest of approximately 54% during January and February of 2024. We purchased an additional 20% interest on February 29, 2024 which increased our ownership interest in the Fund to 74%. The Fund owns two Class A office properties totaling 0.4 million square feet in our regions. We are entitled to (i) priority distributions, (ii) distributions based on invested capital, (iii) a carried interest if the investors' distributions exceed a hurdle rate, (iv) fees for property management and other services and (v) reimbursement of certain costs.
(3) Represents the share of Cash NOI allocable under the applicable agreements to interests other than our Fully Diluted Shares.
(4) Represents the share of Cash NOI allocable to our Fully Diluted Shares.

NOTE: See the "Definitions" section for definitions of certain terms used in this Earnings Package.
Financial Results
Loans
(As of September 30 2024, unaudited)
Maturity Date(1)
Principal Balance
(In Thousands)
Our Share(2)
(In Thousands)
Effective
Rate(3)
Swap Maturity Date
Consolidated Wholly-Owned Subsidiary Loans 3/3/2025 $ 335,000 $ 335,000
SOFR + 1.41%
N/A
4/1/2025 102,400 102,400
SOFR + 1.36%
N/A
8/15/2026 415,000 415,000 3.07% 8/1/2025
9/19/2026 (4) 366,000 366,000
SOFR + 1.25%
N/A
9/26/2026 200,000 200,000 2.36% 10/1/2024
11/1/2026 400,000 400,000 2.31% 10/1/2024
6/1/2027 (5) 550,000 550,000
SOFR + 1.48%
N/A
5/18/2028 300,000 300,000 2.21% 6/1/2026
1/1/2029 300,000 300,000 2.66% 1/1/2027
6/1/2029 255,000 255,000 3.26% 6/1/2027
6/1/2029 125,000 125,000 3.25% 6/1/2027
8/1/2033 350,000 350,000 SOFR + 1.37% N/A
6/1/2038 (6) 26,968 26,968 4.55% N/A
Subtotal 3,725,368 3,725,368
Consolidated JV Loans 12/19/2024 400,000 80,000
SOFR + 1.40%
N/A
5/15/2027 450,000 400,500 2.26% 4/1/2025
8/19/2028 625,000 187,500 2.12% 6/1/2025
4/26/2029 (7) 175,000 96,250 3.90% 5/1/2026
6/1/2029 160,000 32,000 3.25% 7/1/2027
Total Consolidated Loans (8) $ 5,535,368 $ 4,521,618
Unconsolidated Fund Loan
9/14/2028 $ 115,000 $ 85,080 2.19% 10/1/2026
Total Loans $ 4,606,698
Except as noted below, our loans: (i) are non-recourse, (ii) are secured by separate collateral pools consisting of one or more properties, (iii) require interest-only monthly payments with the outstanding principal due at maturity, and (iv) contain certain financial covenants which could require us to deposit excess cash flow with the lender under certain circumstances unless we (at our option) either provide a guarantee or additional collateral or pay down the loan within certain parameters set forth in the loan documents. Certain loans with maturity date extension options require us to meet minimum financial thresholds in order to exercise those extension options.
(1)Maturity dates include the effect of extension options.
(2)"Our Share" is calculated by multiplying the principal balance by our share of the borrowing entity's equity, and is used to calculate the non-GAAP measure "Our Share of Net Debt" - see Corporate Data on page 3.
(3)Effective rate as of September 30, 2024. Includes the effect of interest rate swaps & excludes the effect of prepaid loan costs.
(4)During September 2024, we paid the loan principal down by $34.0 million in order to meet a minimum financial threshold to exercise an extension option. The related swaps expired on September 1, 2024.
(5)The loan is secured by four residential properties. For the portion secured by Barrington Plaza, in connection with the removal of that property from the rental market during 2023, we deposited $13.3 million of cash into an interest bearing collateral account with the lender. The lender will return the deposit at the earlier of August 2026 or when the loan is paid in full. The lender is treating the loan as a construction loan and we signed a construction completion guarantee.
(6)The loan requires monthly payments of principal and interest based upon a 30-year principal amortization schedule.
(7)A portion of this loan is guaranteed.
(8)Our consolidated debt on the balance sheet (see page 6) of $5.51 billion is calculated by adding $2.8 million of unamortized loan premium & deducting $25.1 million of unamortized deferred loan costs from our total consolidated loans of $5.54 billion.
Statistics for consolidated loans with interest fixed under the terms of the loan or a swap
Principal balance (in billions) $3.43
Weighted average remaining life (including extension options) 3.4 years
Weighted average remaining fixed interest period 1.2 years
Weighted average annual interest rate 2.68%
NOTE: See the "Definitions" section for definitions of certain terms used in this Earnings Package.
Portfolio Data

Office Portfolio Summary
Total Office Portfolio as of September 30, 2024
We divide our office portfolio into three regions: the Westside and San Fernando Valley regions of Los Angeles, California and Honolulu, Hawaii.
Region Westside Valley Honolulu Total / Weighted Average
Number of Office Properties 52 16 2 70
Our Rentable Square Feet 9,999,051 6,790,777 1,190,835 17,980,663
Region Rentable Square Feet (1)
40,336,982 22,640,511 5,333,102 68,310,595
Our Market Share(2)
35.1 % 44.3 % 22.3 % 37.7 %
Our Percent Leased 81.4 % 81.2 % 92.0 % 82.0 %
Our Annualized Rent $ 443,470,745 $ 194,125,342 $ 37,155,117 $ 674,751,204
Annualized Rent Per Leased Square Foot (3)
$ 57.37 $ 36.26 $ 36.11 $ 47.81
Monthly Rent Per Leased Square Foot (3)
$ 4.78 $ 3.02 $ 3.01 $ 3.98
____________________________________________________________
(1) The rentable square feet in each region is based on the Rentable Square Feet as reported in the 2024 third quarter CBRE Marketview report for our submarkets in that region.
(2) Our market share is calculated by dividing our Rentable Square Feet by the applicable Region's Rentable Square Feet, weighted in the case of averages based on the square feet of exposure to our submarkets in each region. In calculating market share, we adjusted the rentable square footage by: (i) removing 67,000 rentable square feet for an office building in Honolulu that we are converting to residential apartments from both our rentable square footage and that of the region, and (ii) to add a 218,000 square foot property located just outside the Beverly Hills city limits to both the numerator and the denominator.
(3) Does not include signed leases not yet commenced, which are included in percent leased but excluded from annualized rent.
Recurring Office Capital Expenditures per Rentable Square Foot
Three months ended September 30, 2024 $ 0.07
Nine months ended September 30, 2024 $ 0.16

NOTE: See the "Definitions" section for definitions of certain terms used in this Earnings Package.
Portfolio Data

Office Lease Diversification
Total Office Portfolio as of September 30, 2024

Portfolio Tenant Size
Median Average
Square feet 2,400 5,300

Office Leases Rentable Square Feet Annualized Rent
Square Feet Under Lease Number Percent Amount Percent Amount Percent
2,500 or less 1,354 50.9 % 1,953,576 13.8 % $ 87,017,833 12.9 %
2,501-10,000 994 37.4 4,849,175 34.5 223,599,782 33.2
10,001-20,000 202 7.5 2,782,313 19.6 132,332,305 19.5
20,001-40,000 82 3.1 2,249,608 15.9 106,740,289 15.8
40,001-100,000 27 1.0 1,573,091 11.2 80,588,169 12.0
Greater than 100,000 2 0.1 703,973 5.0 44,472,826 6.6
Total for all leases 2,661 100.0 % 14,111,736 100.0 % $ 674,751,204 100.0 %

NOTE: See the "Definitions" section for definitions of certain terms used in this Earnings Package.
Portfolio Data

Largest Office Tenants
Total Office Portfolio as of September 30, 2024

Tenants paying 1% or more of our aggregate Annualized Rent:
Tenant Number of Leases Number of Properties
Lease Expiration(1)
Total Leased Square Feet Percent of Rentable Square Feet Annualized Rent Percent of Annualized Rent
Warner Bros. Discovery(2)
1 1 2024 456,205 2.5 % $ 27,787,941 4.1 %
William Morris Endeavor(3)
1 1 2037 247,768 1.4 16,684,885 2.5
UCLA(4)
14 8 2025-2033 200,854 1.1 11,814,159 1.7
Morgan Stanley(5)
5 5 2025-2028 144,688 0.8 10,999,565 1.6
Equinox Fitness(6)
6 5 2029-2038 185,236 1.0 10,589,285 1.6
NKSFB 2 2 2030 135,066 0.8 6,756,412 1.0
Total 29 22 1,369,817 7.6 % $ 84,632,247 12.5 %
______________________________________________________
(1) Expiration dates are per lease (expiration dates do not reflect storage and similar leases).
(2) Tenant's lease expired on September 30, 2024.
(3) Tenant has the option to terminate its lease in 2033.
(4) Square footage (rounded) expires as follows: 4 leases totaling 119,000 square feet in 2025; 5 leases totaling 32,000 square feet in 2026; 1 lease totaling 8,000 square feet in 2028; 2 leases totaling 28,000 square feet in 2029; and 2 leases totaling 14,000 square feet in 2033.
(5) Square footage (rounded) expires as follows: 89,000 square feet in 2027, 30,000 square feet in 2028, and 26,000 square feet in 2030.
(6) Square footage (rounded) expires as follows: 34,000 square feet in 2029; 46,000 square feet in 2035; 31,000 square feet in 2037 and 74,000 square feet in 2038.

NOTE: See the "Definitions" section for definitions of certain terms used in this Earnings Package.
Portfolio Data
Office Industry Diversification
Total Office Portfolio as of September 30, 2024

Percentage of Annualized Rent by Tenant Industry
Industry Number of Leases Annualized Rent as a Percent of Total
Legal 570 18.7 %
Financial Services 359 15.2
Entertainment 138 13.8
Real Estate 312 12.6
Health Services 395 9.5
Accounting & Consulting 293 8.7
Retail 156 5.1
Technology 92 4.8
Insurance 88 3.0
Educational Services 42 2.7
Public Administration 71 2.4
Manufacturing & Distribution 58 1.4
Advertising 34 1.0
Other 53 1.1
Total 2,661 100.0 %

NOTE: See the "Definitions" section for definitions of certain terms used in this Earnings Package.
Portfolio Data
Office Lease Expirations
Total Office Portfolio as of September 30, 2024
(1) Average of the percentage of leases expiring at September 30, 2021, 2022, and 2023 with the same remaining duration as the leases for the labeled year had at September 30, 2024. Acquisitions are included in the comparable average commencing in the quarter after the acquisition.
Year of Lease Expiration Number of Leases Rentable Square Feet Expiring Square Feet as a Percent of Total Annualized Rent at September 30, 2024 Annualized Rent as a Percent of Total
Annualized Rent Per Leased Square Foot(1)
Annualized Rent Per Leased Square Foot at Expiration(2)
Short Term Leases(3)
76 751,650 4.2 % $ 39,329,402 5.8 % $ 52.32 $ 52.33
2024 120 413,842 2.3 17,321,911 2.6 41.86 42.03
2025 623 2,387,341 13.3 113,211,791 16.8 47.42 48.28
2026 524 2,284,594 12.7 105,403,039 15.6 46.14 48.72
2027 430 2,038,230 11.3 96,689,285 14.3 47.44 51.87
2028 308 1,545,485 8.6 73,066,555 10.8 47.28 52.83
2029 225 1,249,465 6.9 56,198,500 8.3 44.98 51.66
2030 114 1,041,493 5.8 53,645,918 8.0 51.51 58.76
2031 84 578,343 3.2 28,068,169 4.2 48.53 58.11
2032 47 467,830 2.6 21,704,740 3.2 46.39 58.35
2033 50 354,678 2.0 18,016,788 2.7 50.80 68.06
Thereafter 60 998,785 5.6 52,095,106 7.7 52.16 74.98
Subtotal/weighted average 2,661 14,111,736 78.5 % $ 674,751,204 100.0 % $ 47.81 $ 53.60
Signed leases not commenced 471,982 2.6
Available 3,229,716 18.0
Building management use 106,974 0.6
BOMA adjustment(4)
60,255 0.3
Total/weighted average 2,661 17,980,663 100.0 % $ 674,751,204 100.0 % $ 47.81 $ 53.60
___________________________________________________
(1)Represents annualized rent at September 30, 2024 divided by leased square feet.
(2)Represents annualized rent at expiration divided by leased square feet.
(3)Includes the Warner Bros. Discovery lease for 456k square feet.
(4)Represents the square footage adjustments for leases that do not reflect BOMA remeasurement.
NOTE: See the "Definitions" section for definitions of certain terms used in this Earnings Package.
Portfolio Data

Office Lease Expirations - Next Four Quarters
Total Office Portfolio as of September 30, 2024

Q4 2024 Q1 2025 Q2 2025 Q3 2025 Next Twelve Months
Los Angeles
Westside 230,399 181,953 321,541 387,725 1,121,618
Valley 146,788 157,177 149,095 223,379 676,439
Honolulu 36,655 25,323 37,249 44,036 143,263
Expiring Square Feet(1)
413,842 364,453 507,885 655,140 1,941,320
Percentage of Portfolio 2.3 % 2.0 % 2.8 % 3.6 % 10.7 %
Los Angeles
Westside $51.44 $54.48 $54.25 $62.90 $56.70
Valley $29.93 $32.87 $35.09 $35.85 $33.70
Honolulu $31.37 $35.60 $39.21 $37.86 $36.15
Expiring Rent per Square Foot(2)
$42.03 $43.85 $47.52 $52.00 $47.17
________________________________________________________
(1)Includes leases with an expiration date in the applicable period where the space had not been re-leased as of September 30, 2024, other than 751,650 square feet of Short-Term Leases.
(2)Fluctuations in this number primarily reflect the mix of buildings/regions involved, as well as the varying terms and square footage of the individual leases expiring. As a result, the data in this table should only be extrapolated with caution.

NOTE: See the "Definitions" section for definitions of certain terms used in this Earnings Package.
Portfolio Data

Office Leasing Activity
Total Office Portfolio during the Three Months ended September 30, 2024

Net Absorption During Quarter 0.50%

Office Leases Signed During Quarter Number of Leases Rentable Square Feet
Weighted Average Lease Term (months)1
New leases 92 353,235 55
Renewal leases 144 649,856 59
All leases 236 1,003,091 57

Change in Rental Rates for Office Leases Executed during the Quarter(2)
Expiring
Rate 		New/Renewal Rate Percentage Change
Cash Rent $48.99 $43.50 (11.2)%
Straight-line Rent $44.53 $44.69 0.4%

Average Office Lease Transaction Costs(3)
Lease Transaction Costs per SF Lease Transaction Costs per Annum
New leases signed during the quarter $29.14 $6.57
Renewal leases signed during the quarter $24.14 $6.09
All leases signed during the quarter $25.86 $6.27
________________________________________________________________
(1)Average renewal lease term exclude leases with a term of twelve months or less.
(2)Represents the average annual initial stabilized cash and straight-line rents per square foot on new and renewed leases signed during the quarter compared to the prior leases for the same space. Excludes leases with a term of twelve months or less, leases where the prior lease was terminated more than a year before signing of the new lease, leases for tenants relocated at the landlord's request, leases in acquired buildings where we believe the information about the prior agreement is incomplete or where we believe the base rent reflects other off-market inducements to the tenant, and other non-comparable leases, such as retail leases.
(3)Reflects the weighted average leasing commissions and tenant improvement allowances divided by the weighted average number of years for the leases. Excludes leases substantially negotiated by the seller in the case of acquired properties, leases for tenants relocated at the landlord's request, and non-comparable leases, such as retail leases.

NOTE: See the "Definitions" section for definitions of certain terms used in this Earnings Package.
Portfolio Data

Multifamily Portfolio Summary
as of September 30, 2024

We divide our multifamily portfolio into three regions: Santa Monica, West Los Angeles and Honolulu, Hawaii.

Annualized Rent by Region
Region Number of Properties Number of Units Units as a Percent of Total
Santa Monica 3 940 21 %
West Los Angeles(1)
7 1,049 23 %
Honolulu 4 2,487 56 %
Total 14 4,476 100 %
Region Percent Leased
Annualized Rent(2)
Monthly Rent Per Leased Unit
Santa Monica 99.1 % $ 50,419,296 $ 4,518
West Los Angeles(3)
98.1 % 54,350,928 4,808
Honolulu 99.4 % 69,137,436 2,336
Total / Weighted Average 99.1 % $ 173,907,660 $ 3,341

Recurring Multifamily Capital Expenditures per Unit (2)
Three months ended September 30, 2024 $ 198
Nine months ended September 30, 2024 $ 573
________________________________________________________________
(1) Excludes units vacated as part of removing Barrington Plaza from the rental market.
(2) The multifamily portfolio also includes 77,157 square feet and annualized rent of $2,957,850 consisting of ancillary retail space at three properties and the remaining office space at a building undergoing conversion from office to residential, which are not included in this table.
(3) Excludes Barrington Plaza.
NOTE: See the "Definitions" section for definitions of certain terms used in this Earnings Package.
Guidance

2024 Guidance(1)
Metric Per Share
Net income per common share - diluted
$0.10 to $0.14
FFO per share - fully diluted
$1.69 to $1.73

Assumptions
Metric Assumption Range Compared to Prior Assumption
Average Office Occupancy
79% to 80%
Narrowed
Residential Leased Rate
Essentially fully leased Unchanged
Same Property Cash NOI Growth
-3.0% to -1.5% Revised
Above/Below Market Net Revenue
$6 to $10 million
Unchanged
Straight-line Revenue
$2 to $5 million Unchanged
G & A Expenses
$46 to $50 million
Revised
Interest Expense
$225 to $235 million
Unchanged
Weighted average fully diluted shares outstanding 202.0 million Unchanged
________________________________________________________________
(1) All of our assumptions include 100% of our consolidated JVs share, not our pro rata share. Except as disclosed, our guidance does not include the impact of future property acquisitions or dispositions, common stock sales or repurchases, financings, property damage insurance recoveries, impairment charges or other possible capital markets activities.
The guidance and representative assumptions on this page are forward looking statements, subject to the safe harbor contained at the beginning of this Earnings Package, and reflect our views of current and future market conditions. Ranges represent a set of likely assumptions, but actual results could fall outside the ranges presented. Only a few of our assumptions underlying our guidance are disclosed above, and our actual results will be affected by known and unknown risks, trends, uncertainties and other factors, some of which are beyond our control or ability to predict. Although we believe that the assumptions underlying our guidance are reasonable, they are not guarantees of future performance and some of them will inevitably prove to be incorrect. As a result, our actual future results can be expected to differ from our expectations, and those differences could be material. See page 22 for a reconciliation of our Non-GAAP guidance.

NOTE: See the "Definitions" section for definitions of certain terms used in this Earnings Package.
Guidance

Reconciliation of 2024 Non-GAAP Guidance(1)
(Unaudited; in millions, except per share amounts)

Reconciliation of our guided Net income per common share - diluted to FFO per share - fully diluted:

Reconciliation of net income attributable to common stockholders to FFO Low High
Net income attributable to common stockholders $ 17.4 $ 24.1
Adjustments for depreciation and amortization of real estate assets 395.0 385.0
Adjustments for noncontrolling interests, consolidated JVs and unconsolidated Fund (71.0) (59.6)
FFO $ 341.4 $ 349.5
Weighted average fully diluted shares outstanding High Low
Weighted average shares of common stock outstanding - diluted 167.4 167.4
Weighted average units in our operating partnership outstanding 34.6 34.6
Weighted average fully diluted shares outstanding 202.0 202.0
Per share Low High
Net income per common share - diluted $ 0.10 $ 0.14
FFO per share - fully diluted $ 1.69 $ 1.73
_____________________________________________
(1) Our guidance does not include the impact of future property acquisitions or dispositions, common stock sales or repurchases, financings, property damage insurance recoveries, if any, or other possible capital markets activities or impairment charges. The reconciliation should be used as an example only, with the numbers presented only as representative assumptions. Ranges represent a set of likely assumptions, but actual results could fall outside the ranges presented.

All assumptions are forward looking statements, subject to the safe harbor contained at the beginning of this Earnings Package, and reflect our views of current and future market conditions. Our actual results will be affected by known and unknown risks, trends, uncertainties and other factors, some of which are beyond our control or ability to predict. Although we believe that the assumptions underlying the guidance are reasonable, they are not guarantees of future performance and some of them will inevitably prove to be incorrect. As a result, our actual future results can be expected to differ from our expectations, and those differences could be material.

NOTE: See the "Definitions" section for definitions of certain terms used in this Earnings Package.
Definitions
Adjusted Funds From Operations (AFFO): We calculate AFFO from FFO by (i) eliminating the impact on FFO of straight-line rent; amortization/accretion of acquired above/below market leases; loan costs such as amortization/accretion of loan premiums/discounts; amortization and hedge ineffectiveness of interest rate contracts; amortization/expense of loan costs; non-cash compensation expense, and (ii) subtracting recurring capital expenditures, tenant improvements and capitalized leasing expenses (including adjusting for the effect of such items attributable to our consolidated JVs and our unconsolidated Fund, but not for noncontrolling interests included in our calculation of fully diluted equity). Recurring capital expenditures, tenant improvements and leasing expenses are those required to maintain current revenues once a property has been stabilized, generally excluding those for acquired buildings being stabilized, newly developed space and upgrades to improve revenues or operating expenses or significantly change the use of the space, as well as those resulting from casualty damage or bringing the property into compliance with governmental requirements. We report AFFO because it is a widely reported measure of the performance of equity Real Estate Investments Trusts (REITs), and is also used by some investors to compare our performance with other REITs. However, the National Association of Real Estate Investment Trusts (NAREIT) has not defined AFFO, and other REITs may use different methodologies for calculating AFFO, and accordingly, our AFFO may not be comparable to the AFFO of other REITs. AFFO is a non-GAAP financial measure for which we believe that net income (loss) is the most directly comparable GAAP financial measure. AFFO should be considered only as a supplement to net income (loss) as a measure of our performance and should not be used as a measure of our liquidity or cash flow, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends.
AFFO Payout Ratio: Represents dividends announced divided by the AFFO for that period. We report AFFO Payout Ratio because it is a widely reported measure of the performance of equity REITs, and is also used by some investors to compare our performance with other REITs.
Annualized Rent: Represents annualized cash base rent (i.e. excludes tenant reimbursements, parking and other revenue) before abatement under leases commenced as of the reporting date and expiring after the reporting date (does not include 471,982 square feet with respect to signed leases not yet commenced at September 30, 2024). For our triple net office properties (in Honolulu and one single tenant building in Los Angeles), annualized rent is calculated for triple net leases by adding expense reimbursements and estimates of normal building expenses paid by tenants to base rent. Annualized Rent does not include lost rent recovered from insurance and rent for building management use. Annualized Rent includes rent for our corporate headquarters in Santa Monica. We report Annualized Rent because it is a widely reported measure of the performance of equity REITs, and is used by some investors as a means to determine tenant demand and to compare our performance and value with other REITs. We use Annualized Rent to manage and monitor the performance of our office and multifamily portfolios.
Average Office Occupancy: Calculated by averaging the Occupancy Rates on the last day of the current and prior quarter and, for reporting periods longer than a quarter, by averaging the Occupancy Rates for all the quarters in the respective reported period.
Consolidated Portfolio: Includes all of the properties included in our consolidated results, including our consolidated JVs. At September 30, 2024, we own 100% of our consolidated portfolio, except for sixteen office properties totaling 4.2 million square feet and two residential properties with 470 apartments, which we own through four consolidated JVs and in which we own a weighted average interest of approximately 46% based on square footage.
Consolidated Net Debt: Represents our consolidated debt, net of cash and cash equivalents and loan collateral deposited with lenders, and before adding unamortized loan premium and deducting unamortized deferred loan costs. Cash and cash equivalents and loan collateral deposited with lenders are subtracted because they could be used to reduce the debt obligations, and unamortized loan premium and deferred loan costs are not adjusted for because they do not require cash settlement. Consolidated Net Debt is a non-GAAP financial measure for which we believe that consolidated debt is the most directly comparable GAAP financial measure. We report Consolidated Net Debt because some investors use it to evaluate and compare our leverage and financial position with that of other REITs. A limitation associated with using Consolidated Net Debt is that it subtracts cash and cash equivalents and loan collateral deposited with lenders and may therefore imply that there is less debt than the most comparable GAAP financial measure indicates.
Equity Capitalization: Represents our Fully Diluted Shares multiplied by the closing price of our common stock on the New York Stock Exchange as of September 30, 2024.
Definitions
Fully Diluted Shares: Calculated according to the treasury stock method, based on our diluted outstanding stock and units in our Operating Partnership.
Fund: At September 30, 2024, we owned an interest of approximately 74% in Douglas Emmett Partnership X, LP (Partnership X). During 2023, we owned an interest of approximately 34% in Partnership X, and we purchased an additional 20% interest on December 31, 2023, which increased our ownership to 54%. We also purchased an additional 20% interest on February 29, 2024, which increased our ownership to 74%. The Fund owns two office properties totaling 0.4 million square feet.
Funds From Operations (FFO): We calculate FFO in accordance with the standards established by NAREIT by excluding gains (or losses) on sales of investments in real estate, gains (or losses) from changes in control of investments in real estate, real estate depreciation and amortization (other than amortization of right-of-use assets for which we are the lessee and amortization of deferred loan costs), impairment write-downs of real estate and impairment write-downs of our investment in our unconsolidated Fund from our net income (loss) (including adjusting for the effect of such items attributable to our consolidated JVs and our unconsolidated Fund, but not for noncontrolling interests included in our calculation of fully diluted equity). We report FFO because it is a widely reported measure of the performance of equity REITs, and is also used by some investors to identify the impact of trends in occupancy rates, rental rates and operating costs from year to year, excluding impacts from changes in the value of our real estate, and to compare our performance with other REITs. FFO is a non-GAAP financial measure for which we believe that net income (loss) is the most directly comparable GAAP financial measure. FFO has limitations as a measure of our performance because it excludes depreciation and amortization of real estate, and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures, tenant improvements and leasing expenses necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations. FFO should be considered only as a supplement to net income (loss) as a measure of our performance and should not be used as a measure of our liquidity or cash flow, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends. Other REITs may not calculate FFO in accordance with the NAREIT definition and, accordingly, our FFO may not be comparable to the FFO of other REITs.
GAAP: Refers to accounting principles generally accepted in the United States.
Joint Ventures (JVs): At September 30, 2024, we owned a weighted average interest of approximately 46% based on square footage in four consolidated JVs. The JVs owned sixteen office properties totaling 4.2 million square feet and two residential properties with 470 apartments.
Lease Transaction Costs: Represents the weighted average of tenant improvements and leasing commissions for leases signed by us during the quarter, excluding leases substantially negotiated by the seller in the case of acquired properties and leases for tenants relocated from space being taken out of service. We report Lease Transaction Costs because it is a widely reported measure of the performance of equity REITs, and is used by some investors to determine our cash needs and to compare our performance with other REITs. We use Lease Transaction Costs to manage and monitor the performance of our office and multifamily portfolios.
Leased Rate: The percentage leased as of September 30, 2024. Management space is considered leased. Space taken out of service during a repositioning or which is vacant as a result of a fire or other damage is excluded from both the numerator and denominator for calculating the Leased Rate. For newly developed buildings going through initial lease up, units are included in both the numerator and denominator as they are leased. We report Leased Rates because it is a widely reported measure of the performance of equity REITs, and is also used by some investors as a means to determine tenant demand and to compare our performance with other REITs. We use Leased Rate to manage and monitor the performance of our office and multifamily portfolios.
Net Absorption: Represents the change in percentage leased between the last day of the current and prior quarter, excluding a property undergoing conversion from office to residential use, as well as properties acquired or sold during the current quarter. The calculation also excludes the impact of building remeasurement. We report Net Absorption because it is a widely reported measure of the performance of equity REITs, and is used by some investors as a means to determine tenant demand and to compare our performance with other REITs. We use Net Absorption to manage and monitor the performance of our office portfolio.
Definitions
Net Income (Loss) Per Common Share - Diluted: We calculate Net Income (Loss) Per Common Share - Diluted in accordance with GAAP by dividing the net income (loss) attributable to common stockholders for the period by the weighted average number of common shares and dilutive instruments outstanding during the period using the treasury stock method. We account for unvested Long Term Incentive Plan Unit awards that contain non-forfeitable rights to dividends as participating securities and include these securities in the computation using the two-class method.
Net Operating Income (NOI): We calculate NOI as revenue less operating expenses attributable to the properties that we own and operate. We present two forms of NOI:
•NOI: is calculated by excluding the following from our net income (loss): general and administrative expenses, depreciation and amortization expense, other income, other expenses, income (loss) from unconsolidated Fund, interest expense, gains (losses) on sales of investments in real estate and net income (loss) attributable to noncontrolling interests.
•Cash NOI: is calculated by excluding from NOI our straight-line rent and the amortization/accretion of acquired above/below market leases.
We report NOI because it is a widely recognized measure of the performance of equity REITs, and is used by some investors to identify trends in occupancy rates, rental rates and operating costs and to compare our operating performance with that of other REITs. NOI is a non-GAAP financial measure for which we believe that net income (loss) is the most directly comparable GAAP financial measure. NOI has limitations as a measure of our performance because it excludes depreciation and amortization expense, and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures, tenant improvements and leasing expenses necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations. NOI should be considered only as a supplement to net income (loss) as a measure of our performance and should not be used as a measure of our liquidity or cash flow, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends. Other REITs may not calculate NOI in a similar manner and, accordingly, our NOI may not be comparable to the NOI of other REITs.
Occupancy Rate: We calculate Occupancy Rate by excluding signed leases not yet commenced from the Leased Rate. Management space is considered occupied. Space taken out of service during a repositioning or which is vacant as a result of a fire or other damage is excluded from both the numerator and denominator for calculating the Occupancy Rate. For newly developed buildings going through initial lease up, units are included in both the numerator and denominator as they are occupied. We report Occupancy Rate because it is a widely reported measure of the performance of equity REITs, and is also used by some investors as a means to determine tenant demand and to compare our performance with other REITs. We use Occupancy Rate to manage and monitor the performance of our office and multifamily portfolios.
Operating Partnership: Douglas Emmett Properties, LP
Our Share of Net Debt: We calculate Our Share of Net Debt by: (i) multiplying the principal balance of our consolidated loans and our unconsolidated Fund's loan by our equity interest in the relevant borrower, (ii) subtracting the product of cash and cash equivalents multiplied by our equity interest in the entity that owns the cash or cash equivalents, and (iii) subtracting the product of loan collateral deposited with lenders multiplied by our equity interest in the entity that deposited the collateral with the lender. We subtract cash and cash equivalents and loan collateral deposited with lenders because they could be used to reduce the debt obligations, and do not add unamortized loan premium or subtract unamortized deferred loan costs because they do not require cash settlement. Our Share of Net Debt is a non-GAAP financial measure for which we believe that consolidated debt is the most directly comparable GAAP financial measure. We report Our Share of Net Debt because some investors use it to evaluate and compare our leverage and financial position with that of other REITs.
Pro Forma Enterprise Value: We calculate Pro Forma Enterprise Value by adding Equity Capitalization to Our Share of Net Debt. Pro Forma Enterprise Value is a non-GAAP financial measure for which we believe that consolidated total equity and liabilities is the most directly comparable GAAP financial measure. We report Pro Forma Enterprise Value because some investors use it to evaluate and compare our financial position with that of other REITs.
Definitions
Recurring Capital Expenditures: Building improvements required to maintain revenues once a property has been stabilized, and excludes capital expenditures for (i) acquired buildings being stabilized, (ii) newly developed space, (iii) upgrades to improve revenues or operating expenses or significantly change the use of the space, (iv) casualty damage and (v) bringing the property into compliance with governmental or lender requirements. We report Recurring Capital Expenditures because it is a widely reported measure of the performance of equity REITs, and is used by some investors as a means to determine our cash flow requirements and to compare our performance with other REITs. We use Recurring Capital Expenditures to manage and monitor the performance of our office and multifamily portfolios.
Rental Rate: We report Rental Rate because it is a widely reported measure of the performance of equity REITs, and is used by some investors to compare our performance with other REITs. We use Rental Rate to manage and monitor the performance of our office and multifamily portfolios. We present two forms of Rental Rates:
•Cash Rental Rate: is calculated by dividing the rent paid by the Rentable Square Feet.
•Straight-Line Rental Rate: is calculated by dividing the average rent over the lease term by the Rentable Square Feet.
Rentable Square Feet: Based on the Building Owners and Managers Association (BOMA) measurement. At September 30, 2024, total consists of 14,583,718 leased square feet (including 471,982 square feet with respect to signed leases not commenced), 3,229,716 available square feet, 106,974 building management use square feet and 60,255 square feet of BOMA adjustment on leased space. We report Rentable Square Feet because it is a widely reported measure of the performance and value of equity REITs, and is also used by some investors to compare our performance and value with other REITs. We use Rentable Square Feet to manage and monitor the performance of our office portfolio.
Same Property NOI: To facilitate a comparison of NOI between reported periods, we report NOI for a subset of our properties referred to as our "same properties," which are properties that have been owned and operated by us during both periods being compared. We exclude from our same property subset properties that during the comparable periods were: (i) acquired, (ii) sold, held for sale, contributed or otherwise removed from our consolidated financial statements, or (iii) that underwent a major repositioning project, were impacted by development activity, or suffered significant casualty loss that we believed significantly affected the properties' operating results. We also exclude rent received from ground leases. Our Same Property NOI is not adjusted for noncontrolling interests in properties which are not wholly owned.
Our same properties for 2024 include all of our Consolidated Portfolio properties, other than: (1) a 493,000 square foot office property in Honolulu affected by development activity, (2) a residential property with 712 apartments and approximately 34,000 square feet of retail space in Los Angeles which we are removing from the residential rental market following a fire in January 2020, (3) a new residential property with 376 apartments in West Los Angeles that we placed into service in 2022, and (4) a 456,000 square foot single tenant office property in Los Angeles that we plan to reposition when the tenant's lease expires in 2024.
We report Same Property NOI because it is a widely reported measure of the performance and value of equity REITs, and it is used by some investors to: (i) analyze our operating results excluding the impact of properties not being operated on a consistent basis, and (ii) to compare our performance and value with other REITs. We use Same Property NOI to manage and monitor the performance of our office portfolio.
Short Term Leases: Represents leases that expired on or before the reporting date or had a term of less than one year, including hold over tenancies, month to month leases and other short term occupancies.
Total Portfolio: At September 30, 2024, our Total Portfolio included our Consolidated Portfolio and two office properties totaling 0.4 million square feet owned by one unconsolidated Fund in which we owned approximately 74%.
"We" and "our" refers to Douglas Emmett, Inc., our Operating Partnership and its subsidiaries, as well as our consolidated JVs and our unconsolidated Fund.