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Douglas Emmett : Q2-21 Earnings Package

08/03/2021 | 06:06pm EDT

Executive Summary

We own and operate 18.2 million square feet of Class A office properties and 4,335 apartment units (excluding our residential development pipeline) in the premier coastal submarkets of Los Angeles and Honolulu.

COVID-19 Update: We still face headwinds from the pandemic and our local governments' response. Los Angeles has extended its lease enforcement moratorium until September 30th and has returned to a mask mandate, despite our submarkets' vaccination rate of approximately 80% for people over 16 and over 65% for teens.

Quarterly Results: For the three months ended June 30, 2021 compared to the three months ended June 30, 2020:

  • Our revenues increased by 8.3% to $225.0 million.
  • Our net income attributable to common stockholders increased by 697.9% to $16.2 million.
  • Our FFO increased by 14.3% to $96.5 million, or $0.47 per fully diluted share.
  • Our AFFO decreased by 3.3% to $77.9 million.
  • Our same property Cash NOI increased by 0.7% to $144.1 million.

Compared to the first quarter of 2021 our FFO per share increased by 3 cents, primarily due to better collections and roughly 1 cent per share from higher business interruption insurance recoveries. Only 1.2% of our revenue

came from non-cashstraight-line rent and above- and below-market lease adjustments.

Leasing: During the second quarter, we signed 253 office leases for an all-time high of approximately 1,297,000 square feet. As expected, even record leasing was not enough to completely offset our abnormally high lease expirations during the quarter, so our leased rate declined by 0.4% to 87.3%. Because it will take time for new tenants to move in, our occupancy declined by 1.5%. Comparing the office leases we signed during the second quarter to the expiring leases for the same space, straight-line rents increased by 9.5% and cash rents decreased by 6.6%. At the same time, we lowered our lease transaction costs by another 15% compared to the first quarter of 2021. Our multifamily portfolio remains essentially fully leased at 99.4%.

Balance Sheet: We closed a secured, non-recourse $300.0 million interest-only term loan scheduled to mature in May 2028. The loan bears interest at LIBOR + 1.40%, which was effectively fixed through interest rate swaps at 2.21% until June 2026. The loan is secured by three office properties that were previously unencumbered. We used $175.0 million of the proceeds to pay off our revolving credit facility balance. We have no debt maturities before 2023, no financial covenants that could force us to issue equity, and 46% of our office portfolio is unencumbered.

Development: We remain very pleased with the progress of our two multifamily development projects. At 1132 Bishop, our 493 unit downtown Honolulu office to residential conversion, we have leased 100% of the 174 delivered units. We expect to deliver the first units at our 376 unit Brentwood high-rise apartment tower during the fourth quarter of 2021.

Dividends: On July 15, 2021, we paid a quarterly cash dividend of $0.28 per common share, or $1.12 on an annualized basis.

Guidance: We expect third quarter net income per common share diluted to be between $0.06 and $0.08 and FFO per share to be between $0.44 and $0.46. This reflects the usual higher seasonal utilities expenses, as well as additional interest expense from our new loan, lower beginning office occupancy, and lower business interruption insurance recoveries. We are not comfortable giving guidance for the fourth quarter, as our results will depend on the course of the pandemic and the timing and immediate impact of the expiration of the moratoriums. Our guidance does not include the impact of future property acquisitions or dispositions, financings, property damage recoveries, if any, or other possible capital markets activities or impairment charges.

NOTE: See the non-GAAP reconciliations for FFO & AFFO on page 8and same property NOI on page 10.

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


Go to Table of Contents

Table of Contents


Corporate Data


Property Map


Board of Directors and Executive Officers



Consolidated Balance Sheets


Consolidated Operating Results


Funds from Operations & Adjusted Funds From Operations


Same Property Statistics & Net Operating Income


Reconciliation of Same Property NOI to Net Income


Financial Data for JVs & Fund





Office Portfolio Summary


Office Percentage Leased and In-Place Rents


Office Lease Diversification


Largest Office Tenants


Office Industry Diversification


Office Lease Expirations


Office Lease Expirations - Next Four Quarters


Office Leasing Activity


Multifamily Portfolio Summary


Multifamily Development Projects


Reconciliation of Third Quarter 2021 Non-GAAP Guidance




Forward Looking Statements (FLS)

This Second Quarter 2021 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," "seeks," "projects," "intends," "plans," "estimates," "anticipates," or the negative version of these words or other comparable words. 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 developments related to the Coronavirus (COVID-19) global pandemic; adverse economic and real estate developments in Southern California and Honolulu; a general downturn in the economy; decreased rental rates or increased tenant incentives and vacancy rates; defaults on, and early terminations and non-renewal of, leases by tenants; increased interest rates and operating costs; failure to generate sufficient cash flows to service our debt; difficulties in acquiring properties; failure to successfully operate properties; failure to maintain our status as a REIT; possible adverse changes in rent control laws and regulations; environmental uncertainties; risks related to natural disasters; fire and other property damage, lack of or insufficient insurance; inability to successfully expand into new markets or submarkets; risks associated with property development; conflicts of interest with our officers; changes in real estate and zoning laws and increases in real property tax rates; possible future terrorist attacks; and other risks and uncertainties detailed in our Annual Report on Form 10-K for 2020, and other documents filed with the SEC. Although we believe that our assumptions underlying our forward looking statements 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, 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.


Company Overview

Corporate Data

as of June 30, 2021

Office Portfolio






Rentable square feet (in thousands)



Leased rate

87.3 %

87.3 %

Occupancy rate

84.9 %

84.8 %

Multifamily Portfolio






Leased rate(1)

99.4 %

Market Capitalization (in thousands, except price per share)

Fully Diluted Shares outstanding as of June 30, 2021


Common stock closing price per share (NYSE:DEI)



Equity Capitalization



Net Debt (in thousands)


Our Share

Debt principal(2)





Less: cash and cash equivalents(3)



Net Debt





Leverage Ratio (in thousands, except percentage)

Pro Forma Enterprise Value

$ 10,809,769

Our Share of Net Debt to Pro Forma Enterprise Value

36 %

AFFO Payout Ratio

Three months ended June 30, 2021

74.2 %


  1. Both the numerator and denominator used in calculating the percentage of units leased do not include 82 units at one property which are temporarily unoccupied as a result of a fire.
  2. See page 12for a reconciliation of consolidated debt principal and our share of debt principal to consolidated debt on the balance sheet.
  3. Our share of cash and cash equivalents is calculated starting with our consolidated cash and cash equivalents of $330.9 million, then deducting the other owners' share of our JVs' cash and cash equivalents of $78.2 million and then adding our share of our unconsolidated Fund's cash and cash equivalents of $1.5 million.

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


Go to Table of Contents

Company Overview

Property Map

as of June 30, 2021


Go to Table of Contents

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Douglas Emmett Inc. published this content on 03 August 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 August 2021 22:04:02 UTC.

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P/E ratio 2021 117x
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Last Close Price 33,76 $
Average target price 36,00 $
Spread / Average Target 6,64%
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Jordan L. Kaplan President, Chief Executive Officer & Director
Peter D. Seymour Chief Financial Officer
Dan A. Emmett Chairman
Kenneth M. Panzer Chief Operating Officer & Director
Kevin A. Crummy Chief Investment Officer
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