Attached files
| file | filename |
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| 8-K - FORM 8K - Douglas Emmett Inc | form8k.htm |
| EX-99.2 - SUPPLEMENTAL Q3-2011 - Douglas Emmett Inc | ex99-2.htm |
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808 Wilshire Boulevard, 2nd Floor T: 310.255.7700
Santa Monica, California 90401 F: 310.255.7702
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FOR IMMEDIATE RELEASE
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Mary Jensen, Vice President – Investor Relations
310.255.7751 or mjensen@douglasemmett.com
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Douglas Emmett Reports
2011 Third Quarter Earnings Results
Reports FFO of $0.34 Per Diluted Share
Increases Annual FFO Guidance
SANTA MONICA, CALIFORNIA – November 1, 2011 – Douglas Emmett, Inc. (NYSE:DEI), a real estate investment trust (REIT), today announced its financial results for the quarter ended September 30, 2011.
Financial Results
Funds From Operations (FFO) for the three months ended September 30, 2011 totaled $54.6 million, or $0.34 per diluted share, compared to $55.9 million, or $0.36 per diluted share, for the three months ended September 30, 2010. FFO for the nine months ended September 30, 2011 totaled $177.3 million, or $1.11 per diluted share, compared to $150.8 million, or $0.96 per diluted share, for the nine months ended September 30, 2010.
For the three months ended September 30, 2011, Douglas Emmett had GAAP net income of $3.4 million attributable to common stockholders, or $0.03 per diluted share. This compares to a GAAP net loss of $3.9 million, or $(0.03) per diluted share, attributable to common stockholders for the three months ended September 30, 2010. For the nine months ended September 30, 2011, Douglas Emmett reported a GAAP net loss of $2.0 million attributable to common stockholders, or $(0.02) per diluted share. This compares to a GAAP net loss of $21.2 million, or $(0.17) per diluted share, attributable to common stockholders for the nine months September 30, 2010.
Company Operations
Office: During the third quarter, Douglas Emmett had its third consecutive quarter of net positive absorption, totaling 58,343 square feet, or an increase of 40 basis points. Douglas Emmett signed leases covering 640,721 square feet in the third quarter of 2011, compared to leases covering 665,945 square feet in the second quarter of 2011.
Excluding the eight properties owned by its unconsolidated funds, Douglas Emmett’s office portfolio was 90.3% leased and 88.2% occupied at September 30, 2011. Douglas Emmett’s total office portfolio, including its fund-owned properties, was 89.2% leased and 87.1% occupied at September 30, 2011. The occupied percentage represents the portion of Douglas Emmett’s office portfolio that is leased where the rent commencement date has occurred.
On a cash basis, same property office revenues decreased to $120.6 million in the third quarter of 2011 from $123.4 million in the third quarter of 2010. Same property office expenses, on a cash basis, increased to $44.3 million in the third quarter of 2011 from $43.5 million in the third quarter of 2010. On a GAAP basis, same property office revenues decreased to $126.4 million in the third quarter of 2011 from $131.1 million in the third quarter of 2010, and same property office expenses increased to $44.3 million in the third quarter of 2011 from $43.4 million in the third quarter of 2010.
Douglas Emmett, Inc. Announces 2011 Third Quarter Earnings Results
Company Operations (cont’d)
Multifamily: At September 30, 2011, Douglas Emmett’s multifamily portfolio was 99.6% leased. On a cash basis, same property multifamily revenues increased to $16.8 million for the quarter ended September 30, 2011, from $16.1 million for the quarter ended September 30, 2010. On a GAAP basis, same property multifamily revenues increased to $17.6 million for the quarter ended September 30, 2011 from $17.0 million for the quarter ended September 30, 2010.
Cash Position
As of September 30, 2011, Douglas Emmett had $349.6 million in cash and cash equivalents on hand, compared to $272.4 million at December 31, 2010.
Financings
During the third quarter, Douglas Emmett closed two term loans totaling $885 million. Since September 2010, Douglas Emmett has closed six term loan transactions totaling over $2.5 billion at a weighted average fixed interest rate of 4.07%. During the fourth quarter of 2011, Douglas Emmett expects to terminate its $322.5 million interest rate swap that is scheduled to expire on August 1, 2012.
Dividends
During the quarter, Douglas Emmett’s Board of Directors declared a quarterly cash dividend of $0.13 per common share, or $0.52 per common share on an annualized basis. The dividend was paid on October 13, 2011 to shareholders of record as of September 30, 2011.
Guidance
Douglas Emmett has raised its 2011 FFO guidance range to $1.35 - $1.37 per diluted share from $1.32 - $1.36 per diluted share. This guidance includes the estimated $10 million cost of terminating the $322.5 million interest rate swap that is expected to occur during the fourth quarter of 2011(although the cost and timing of any such termination will depend on future events). Other estimates and assumptions will be discussed during the conference call.
Conference Call and Webcast Information
A conference call to discuss Douglas Emmett’s 2011 third quarter financial results is scheduled for Wednesday, November 2, 2011 at 2:00 pm Eastern Time or 11:00 am Pacific Time. Interested parties can access the live call or the replay as follows:
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Internet: Go to www.douglasemmett.com at least fifteen minutes prior to the start time of the call in order to register, download and install any necessary audio software.
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Phone: 877-298-7945 (U.S./Canada) or 706-758-2996 (International) – conference ID #15966469
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Replay: A rebroadcast of the live call will be available for 90 days on Douglas Emmett’s website at www.douglasemmett.com.A replay will also available telephonically from approximately 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time, on Wednesday, November 2, 2011 to Thursday, November 10, 2011 using 855-859-8367 (U.S./Canada), or 404-537-3406 (International) and conference ID #15966469.
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Supplemental Information
Supplemental financial information for Douglas Emmett ’s 2011 third quarter results can be accessed on Douglas Emmett ’s website under the Investor Relations section at www.douglasemmett.com.
page 2 of 8
Douglas Emmett, Inc. Announces 2011 Third Quarter Earnings Results
About Douglas Emmett, Inc.
Douglas Emmett, Inc. (NYSE: DEI) is a fully integrated, self-administered and self-managed real estate investment trust (REIT), and one of the largest owners and operators of high-quality office and multifamily properties located in premier submarkets in Southern California and Hawaii. Douglas Emmett’s properties are concentrated in ten submarkets – Brentwood, Olympic Corridor, Century City, Santa Monica, Beverly Hills, Westwood, Sherman Oaks/Encino, Warner Center/Woodland Hills, Burbank and Honolulu. Douglas Emmett focuses on owning and acquiring a substantial share of top-tier office properties and premier multifamily communities in neighborhoods that possess significant supply constraints, high-end executive housing and key lifestyle amenities. Douglas Emmett maintains a website at www.douglasemmett.com.
Safe Harbor Statement
Except for the historical facts, the statements in this press release are forward-looking statements based on our beliefs about, and assumptions made by, and information currently available to us about known and unknown risks, trends, uncertainties and factors that may be beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they are not guarantees of future performance and some will inevitably prove to be incorrect. As a result, our actual future results can be expected to differ from our expectations, and those differences may be material. Accordingly, investors should use caution in relying on forward-looking statements to anticipate future results or trends. For a discussion of some of the risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission.
--tables follow—
page 3 of 8
Douglas Emmett, Inc. Announces 2011 Third Quarter Earnings Results
Douglas Emmett, Inc.
Consolidated Balance Sheets
(in thousands)
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September 30, 2011
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December 31, 2010
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(unaudited)
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||||||||
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Assets
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||||||||
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Investment in real estate:
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Land
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$ | 851,679 | $ | 851,679 | ||||
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Buildings and improvements
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5,230,898 | 5,226,269 | ||||||
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Tenant improvements and lease intangibles
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625,705 | 592,735 | ||||||
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Investment in real estate, gross
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6,708,282 | 6,670,683 | ||||||
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Less: accumulated depreciation
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(1,074,062 | ) | (913,923 | ) | ||||
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Investment in real estate, net
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5,634,220 | 5,756,760 | ||||||
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Cash and cash equivalents
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349,607 | 272,419 | ||||||
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Tenant receivables, net
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1,558 | 1,591 | ||||||
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Deferred rent receivables, net
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55,889 | 48,933 | ||||||
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Interest rate contracts
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14,270 | 52,528 | ||||||
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Acquired lease intangible assets, net
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6,958 | 9,356 | ||||||
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Investment in unconsolidated real estate funds
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117,625 | 110,920 | ||||||
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Other assets
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36,553 | 26,782 | ||||||
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Total assets
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$ | 6,216,680 | $ | 6,279,289 | ||||
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Liabilities
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||||||||
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Secured notes payable
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$ | 3,623,096 | $ | 3,658,000 | ||||
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Unamortized non-cash debt premium
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1,401 | 10,133 | ||||||
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Interest rate contracts
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123,096 | 99,687 | ||||||
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Accrued interest payable
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12,860 | 12,789 | ||||||
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Accounts payable and accrued expenses
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47,468 | 45,004 | ||||||
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Acquired lease intangible liabilities, net
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92,109 | 110,244 | ||||||
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Security deposits
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33,664 | 31,850 | ||||||
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Dividends payable
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16,616 | 12,413 | ||||||
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Total liabilities
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3,950,310 | 3,980,120 | ||||||
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Equity
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Douglas Emmett, Inc. stockholders’ equity:
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Common stock
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1,278 | 1,241 | ||||||
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Additional paid-in capital
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2,403,054 | 2,332,307 | ||||||
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Accumulated other comprehensive income (loss)
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(93,907 | ) | (58,765 | ) | ||||
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Accumulated deficit
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(495,054 | ) | (447,722 | ) | ||||
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Total Douglas Emmett, Inc. stockholders’ equity
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1,815,371 | 1,827,061 | ||||||
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Noncontrolling interests
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450,999 | 472,108 | ||||||
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Total equity
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2,266,370 | 2,299,169 | ||||||
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Total liabilities and equity
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$ | 6,216,680 | $ | 6,279,289 | ||||
page 4 of 8
Douglas Emmett, Inc. Announces 2011 Third Quarter Earnings Results
Douglas Emmett, Inc.
Consolidated Statements of Operations
(unaudited and in thousands, except per share data)
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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||||||||||||||
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2011
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2010
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2011
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2010
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Revenues:
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Office rental:
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Rental revenues
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$ | 97,740 | $ | 101,509 | $ | 295,059 | $ | 298,951 | |||||||
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Tenant recoveries
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11,601 | 12,087 | 33,670 | 26,275 | |||||||||||
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Parking and other income
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17,100 | 17,485 | 51,006 | 48,874 | |||||||||||
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Total office revenues
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126,441 | 131,081 | 379,735 | 374,100 | |||||||||||
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Multifamily rental:
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Rental revenues
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16,372 | 15,824 | 48,647 | 47,602 | |||||||||||
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Parking and other income
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1,246 | 1,165 | 3,676 | 3,364 | |||||||||||
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Total multifamily revenues
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17,618 | 16,989 | 52,323 | 50,966 | |||||||||||
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Total revenues
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144,059 | 148,070 | 432,058 | 425,066 | |||||||||||
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Operating Expenses:
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Office expenses
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44,294 | 43,441 | 127,081 | 116,753 | |||||||||||
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Multifamily expenses
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4,832 | 4,596 | 14,317 | 13,598 | |||||||||||
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General and administrative
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6,954 | 7,101 | 21,260 | 18,895 | |||||||||||
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Depreciation and amortization
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45,872 | 57,621 | 160,139 | 167,874 | |||||||||||
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Total operating expenses
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101,952 | 112,759 | 322,797 | 317,120 | |||||||||||
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Operating income
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42,107 | 35,311 | 109,261 | 107,946 | |||||||||||
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Other income
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299 | 257 | 898 | 654 | |||||||||||
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Loss, including depreciation, from unconsolidated
real estate funds
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(285 | ) | (1,810 | ) | (2,064 | ) | (5,514 | ) | |||||||
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Interest expense
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(37,717 | ) | (38,498 | ) | (110,245 | ) | (129,308 | ) | |||||||
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Acquisition-related expenses
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— | (3 | ) | — | (295 | ) | |||||||||
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Net income (loss)
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4,404 | (4,743 | ) | (2,150 | ) | (26,517 | ) | ||||||||
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Less: Net (income) loss attributable to
noncontrolling interests
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(1,007 | ) | 847 | 182 | 5,343 | ||||||||||
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Net income (loss) attributable to common stockholders
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$ | 3,397 | $ | (3,896 | ) | $ | (1,968 | ) | $ | (21,174 | ) | ||||
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Net income (loss) per common share – basic and diluted(1)
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$ | 0.03 | $ | (0.03 | ) | $ | (0.02 | ) | $ | (0.17 | ) | ||||
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Weighted average shares of common stock outstanding – basic(1)
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127,462 | 123,077 | 125,439 | 122,356 | |||||||||||
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Weighted average shares of common stock outstanding – diluted (1)
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161,186 | 123,077 | 125,439 | 122,356 | |||||||||||
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(1)
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Basic and diluted shares are calculated in accordance with United States generally accepted accounting principles (GAAP) and include common stock plus dilutive equity instruments during the three months ended September 30, 2011. During the three months ended September 30, 2010 and the nine months ended September 30, 2011 and 2010, all potentially dilutive instruments, including stock options, OP units and LTIP units (Long-Term Incentive Plan units that are limited partnership units in our OP), were anti-dilutive and have been excluded from our computation of weighted average dilutive shares outstanding during those periods.
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page 5 of 8
Douglas Emmett, Inc. Announces 2011 Third Quarter Earnings Results
Douglas Emmett, Inc.
FFO Reconciliation
(unaudited and in thousands, except per share data)
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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2011
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2010
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2011
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2010
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Funds From Operations (FFO) (1)
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Net income (loss) attributable to common stockholders
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$ | 3,397 | $ | (3,896 | ) | $ | (1,968 | ) | $ | (21,174 | ) | ||||
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Depreciation and amortization of real estate assets
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45,872 | 57,621 | 160,139 | 167,874 | |||||||||||
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Net income (loss) attributable to noncontrolling interests
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1,007 | (847 | ) | (182 | ) | (5,343 | ) | ||||||||
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Amortization of swap termination fee (2)
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1,526 | ― | 10,436 | ― | |||||||||||
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Less: adjustments attributable to consolidated joint venture and unconsolidated investment in real estate funds
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2,837 | 3,068 | 8,841 | 9,445 | |||||||||||
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FFO
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$ | 54,639 | $ | 55,946 | $ | 177,266 | $ | 150,802 | |||||||
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Weighted average share equivalents outstanding - fully diluted
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161,186 | 156,564 | 159,315 | 156,340 | |||||||||||
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FFO per share - fully diluted
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$ | 0.34 | $ | 0.36 | $ | 1.11 | $ | 0.96 | |||||||
| (1) |
We calculate funds from operations before non-controlling interest (FFO) in accordance with the standards established by the National Association of Real Estate Investment Trusts (NAREIT). FFO represents net income (loss), computed in accordance with GAAP, excluding gains (or losses) from sales of depreciable operating property, real estate depreciation and amortization (other than amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. We provide FFO as a supplemental performance measure because, by excluding real estate depreciation and amortization and gains and losses from property dispositions, it can illustrate trends in occupancy rates, rental rates and operating costs from year to year. We also believe that, as a widely recognized measure of the performance of REITs, FFO can be used by investors as a basis to compare our operating performance with that of other REITs. However, FFO has limitations as a measure of our performance because it excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations. Other equity REITs may not calculate FFO in accordance with the NAREIT definition and, accordingly, our FFO may not be comparable to those other REITs’ FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of our performance. FFO should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends. FFO should not be used as a supplement to or substitute measure for cash flow from operating activities computed in accordance with GAAP.
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| (2) |
For the three and nine months ended September 30, 2011, GAAP interest expense was increased by $1.5 million and $10.4 million, respectively, of non-cash amortization from interest rate swaps we terminated in November 2010 that were fully amortized in August 2011. In calculating FFO for each period, we added back the respective amount of this amortization, leaving a net zero impact on FFO, since we recorded the full impact of the swap termination payment in FFO in the fourth quarter of 2010.
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page 6 of 8
Douglas Emmett, Inc. Announces 2011 Third Quarter Earnings Results
Douglas Emmett, Inc.
Same Property Statistical and Financial Data
(unaudited and in thousands, except statistics)
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As of September 30,
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2011
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2010
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Same Property Office Statistics
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Number of properties
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50 | 50 | |||||
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Rentable square feet
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12,850,859 | 12,849,758 | |||||
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% leased
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90.3 | % | 89.9 | % | |||
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% occupied
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88.2 | % | 88.7 | % | |||
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Same Property Multifamily Statistics
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Number of properties
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9 | 9 | |||||
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Number of units
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2,868 | 2,868 | |||||
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% leased
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99.6 | % | 99.3 | % | |||
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Three Months Ended
September 30,
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% Favorable
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2011
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2010
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(Unfavorable)
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Same Property Net Operating Income – GAAP Basis (1)(2)
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Total office revenues
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$ | 126,441 | $ | 131,081 | (3.5 | )% | ||||
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Total multifamily revenues
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17,618 | 16,989 | 3.7 | |||||||
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Total revenues
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144,059 | 148,070 | (2.7 | ) | ||||||
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Total office expense
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(44,294 | ) | (43,441 | ) | (2.0 | ) | ||||
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Total multifamily expense
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(4,832 | ) | (4,596 | ) | (5.1 | ) | ||||
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Total property expense
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(49,126 | ) | (48,037 | ) | (2.3 | ) | ||||
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Same Property NOI - GAAP basis
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$ | 94,933 | $ | 100,033 | (5.1 | )% | ||||
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Same Property Net Operating Income - Cash Basis(1)(2)
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Total office revenues
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$ | 120,617 | $ | 123,358 | (2.2 | )% | ||||
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Total multifamily revenues
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16,771 | 16,121 | 4.0 | |||||||
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Total revenues
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137,388 | 139,479 | (1.5 | ) | ||||||
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Total office expense
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(44,339 | ) | (43,486 | ) | (2.0 | ) | ||||
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Total multifamily expense
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(4,832 | ) | (4,596 | ) | (5.1 | ) | ||||
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Total property expense
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(49,171 | ) | (48,082 | ) | (2.3 | ) | ||||
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Same Property NOI - cash basis
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$ | 88,217 | $ | 91,397 | (3.5 | )% | ||||
NOTE: See below for a description of same property, cash basis and NOI.
page 7 of 8
Douglas Emmett, Inc. Announces 2011 Third Quarter Earnings Results
Douglas Emmett, Inc.
Reconciliation of Same Property NOI to GAAP Net Income (Loss) (1)(2)
(unaudited and in thousands)
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Three Months Ended September 30,
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2011
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2010
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|||||||
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Same property office revenues - cash basis
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$ | 120,617 | $ | 123,358 | ||||
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GAAP adjustments
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5,824 | 7,723 | ||||||
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Same property office revenues - GAAP basis
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126,441 | 131,081 | ||||||
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Same property multifamily revenues - cash basis
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16,771 | 16,121 | ||||||
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GAAP adjustments
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847 | 868 | ||||||
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Same property multifamily revenues - GAAP basis
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17,618
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16,989
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Same property revenues - GAAP basis
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144,059 | 148,070 | ||||||
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Same property office expenses - cash basis
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(44,339 | ) | (43,486 | ) | ||||
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GAAP adjustments
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45 | 45 | ||||||
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Same property office expenses - GAAP basis
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(44,294 | ) | (43,441 | ) | ||||
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Same property multifamily expenses - cash basis
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(4,832 | ) | (4,596 | ) | ||||
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GAAP adjustments
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― | ― | ||||||
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Same property multifamily expenses - GAAP basis
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(4,832
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)
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(4,596
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)
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||||
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Same property expenses - GAAP basis
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(49,126 | ) | (48,037 | ) | ||||
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Same property Net Operating Income (NOI)- GAAP basis
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94,933 | 100,033 | ||||||
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Total property NOI - GAAP basis
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94,933 | 100,033 | ||||||
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General and administrative expenses
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(6,954 | ) | (7,101 | ) | ||||
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Depreciation and amortization
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(45,872 | ) | (57,621 | ) | ||||
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Operating income
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42,107 | 35,311 | ||||||
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Other income
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299 | 257 | ||||||
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Loss, including depreciation, from unconsolidated real estate funds
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(285 | ) | (1,810 | ) | ||||
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Interest expense
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(37,717 | ) | (38,498 | ) | ||||
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Acquisition-related expenses
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― | (3 | ) | |||||
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Net income (loss)
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4,404 | (4,743 | ) | |||||
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Less: Net (income) loss attributable to noncontrolling interests
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(1,007 | ) | 847 | |||||
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Net income (loss) attributable to common stockholders
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$ | 3,397 | $ | (3,896 | ) | |||
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(1)
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To facilitate a comparison of NOI between periods, we calculate comparable amounts for a subset of our owned properties referred to as our “same properties.” Same property amounts are calculated as the amounts attributable to properties which have been owned and operated by us, and reported in our consolidated results, during the entire span of both periods compared. Therefore, any properties either acquired after the first day of the earlier comparison period or sold, contributed or otherwise removed from our consolidated financial statements before the last day of the later comparison period are excluded from same properties. We may also exclude from the same property set any property that is undergoing a major repositioning project that would impact the comparability of its results between two periods.
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(2)
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Net operating income (NOI) is a non-GAAP measure consisting of the revenue and expense attributable to the real estate properties that we own and operate. Although NOI is considered a non-GAAP measure, we present NOI on a “GAAP basis” by using property revenues and expenses calculated in accordance with GAAP. The most directly comparable GAAP measure to NOI is net income (or loss), adjusted to exclude general and administrative expense, depreciation and amortization expense, interest income, interest expense, income from unconsolidated partnerships, income (or loss) attributable to noncontrolling interests, gains (or losses) from sales of depreciable operating properties, net income from discontinued operations and extraordinary items.
We also provide NOI calculated on a “cash basis”. Cash basis NOI is also a non-GAAP measure that we calculate by excluding from GAAP basis NOI our straight-line rent adjustments and the amortization of above/below market lease intangible assets and liabilities.
We provide NOI (on both a “GAAP “and “cash” basis) as a supplemental performance measure because, by excluding real estate depreciation and amortization expense and gains (or losses) from property dispositions, some investors use it to illustrate trends in occupancy rates, rental rates and operating costs from year to year. We also believe that some investors find NOI useful as a basis to compare our operating performance with that of other REITs. However, NOI has limitations as a measure of our performance because it excludes depreciation and amortization expense and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties (all of which have real economic effect and could materially impact our results from operations). Other equity REITs may not calculate NOI in a similar manner and, accordingly, our NOI may not be comparable to those other REITs’ NOI. Accordingly, NOI should be considered only as a supplement to net income as a measure of our performance. NOI should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends. NOI should not be used as a substitute measure for cash flow from operating activities computed in accordance with GAAP.
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page 8 of 8