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Douglas Emmett, Inc. Announces 2010 Fourth Quarter and Year-End Earnings Results

^{Published on 2011-02-08 16:45:22 - Market Wire}
 

SANTA MONICA, Calif.--([ BUSINESS WIRE ])--Douglas Emmett, Inc. (NYSE:DEI), a real estate investment trust (REIT), today announced its 2010 fourth quarter and year-end financial results for the period ended December 31, 2010.

Financial Results

Funds From Operations (FFO) for the three months ended December 31, 2010 totaled $43.6 million, or $0.28 per diluted share, compared to $46.3 million, or $0.30 per diluted share, for the three months ended December 31, 2009. For the year ended December 31, 2010, FFO totaled $194.4 million, or $1.24 per diluted share, compared to $198.1 million, or $1.27 per diluted share, for the year ended December 31, 2009. These results include a charge to FFO from cash and non-cash swap termination costs totaling approximately $13.9 million, or $0.09 per diluted share, in the fourth quarter of 2010.

The Company reported a GAAP net loss attributable to common stockholders of ($5.2) million, or ($0.04) per diluted share, for the three months ended December 31, 2010, compared to a GAAP net loss attributable to common stockholders of ($8.9) million, or ($0.07) per diluted share, for the three months ended December 31, 2009. For the year ended December 31, 2010, the Company reported a GAAP net loss attributable to common stockholders of ($26.4) million, or ($0.22) per diluted share, compared to ($27.1) million, or ($0.22) per diluted share, for the year ended December 31, 2009.

Same Property Net Operating Income (NOI) on a cash basis decreased 1.2% for the three months ended December 31, 2010 compared to the three months ended December 31, 2009. Same Property NOI on a GAAP basis for the three months ended December 31, 2010 decreased 2.6% compared to the three months ended December 31, 2009.

Company Operations

Office: Total leasing activity during the fourth quarter of 2010 totaled 781,375 square feet under 169 leases signed by the Company, which marks the Companya™s seventh consecutive quarter of strong leasing velocity. Fourth quarter leasing volume compared favorably to the third quarter of 2010, which totaled 680,794 square feet under 190 leases. Total leasing activity during the fourth quarter included 63 new leases signed by the Company covering 260,364 square feet, compared to 70 new leases covering 203,959 square feet in the third quarter of 2010.

Excluding the seven properties owned by the Companya™s unconsolidated funds, the Companya™s office portfolio was 89.6% leased and 88.1% occupied at December 31, 2010, compared to 89.9% leased and 88.7% occupied at September 30, 2010. The Companya™s total office portfolio, including its fund-owned properties, was 88.6% leased and 86.9% occupied at December 31, 2010, compared to 88.9% leased and 87.4% occupied at September 30, 2010. Excluding the properties that the Company acquired during the year, occupancy declined by 200 basis points in 2010, in line with 2010 guidance. The occupied percentage represents the portion of the Companya™s office portfolio that is leased except where the rent commencement date has yet to occur.

Same property office revenues, on a cash basis, decreased to $113.2 million in the fourth quarter of 2010 from $114.1 million in the fourth quarter of 2009. Same property office expenses, on a cash basis, increased to $38.8 million in the fourth quarter of 2010 from $38.6 million in the fourth quarter of 2009. Same property office revenues, on a GAAP basis, decreased to $120.1 million in the fourth quarter of 2010 from $122.4 million in the fourth quarter of 2009. Same property office expenses, on a GAAP basis, increased to $38.8 million in the fourth quarter of 2010 from $38.6 million in the fourth quarter of 2009.

Multifamily: Same property multifamily revenues, on a cash basis, increased to $16.3 million for the quarter ended December 31, 2010, from $16.1 million for the quarter ended December 31, 2009. Same property multifamily revenues, on a GAAP basis, increased to $17.2 million for the quarter ended December 31, 2010, from $17.0 million for the quarter ended December 31, 2009.

As of December 31, 2010, the Companya™s multifamily portfolio was 99.2% leased, compared to 99.3% leased at September 30, 2010.

Cash Position

As of December 31, 2010, the Company had $272.4 million in cash and cash equivalents on hand compared to $72.7 million at December 31, 2009.

Financings

On November 1, 2010, the Company announced that it had obtained ten-year, cross-collateralized term loans aggregating $388.08 million. The loans bear interest at a floating rate equal to one-month LIBOR plus 165 basis points. However, the Company has entered into interest rate swap contracts that effectively fix the interest rate at approximately 3.65% for seven years expiring on November 1, 2017. The loans mature on November 2, 2020. The term loans are secured by four of the Companya™s multifamily properties in Brentwood and Santa Monica. The loan proceeds fully repaid four loans totaling $388.08 million that were scheduled to mature on June 1, 2012. The Company has also terminated the existing interest rate swap contracts that were scheduled to mature on August 1, 2011 and were related to the repaid loans.

On December 30, 2010, the Company announced that it had established an at-the-market aATMa stock offering program through which, at its discretion, it may sell up to $250 million of its common stock from time to time over the next three years. Douglas Emmett established this program as a prudent step to expand the Companya™s future funding options. Citi, Goldman Sachs & Co. and Morgan Stanley will act as the Companya™s sales agents in the event the Company chooses to sell stock under this program.

Acquisitions

During the quarter, Wilshire Bundy Plaza, a class aAa office building totaling more than 310,000 square feet, was acquired through one of the Companya™s funds for a contract price of $111 million, or approximately $358 per square foot. The asset is located in the Companya™s Brentwood submarket along the Wilshire Corridor. In conjunction with this transaction, the Companya™s fund assumed an amortizing term loan with a principal balance as of December 31, 2010 of approximately $56.2 million and a 5.67% interest rate. The loan matures on April 1, 2016.

Dividends

During the quarter, the Companya™s Board of Directors declared a quarterly cash dividend of $0.10 per common share. The dividend was paid on January 14, 2011 to shareholders of record as of December 31, 2010. On an annualized basis, this represents a dividend of $0.40 per common share.

On January 12, 2011, the Company announced that none of the Companya™s 2010 dividends will be classified as ordinary income or capital gains for United States federal income tax purposes. 100% of the Companya™s 2010 dividends will be classified as a return of capital. Additional information on the taxability of Douglas Emmetta™s Common Stock dividends can be found on the Investor Relations section of the Company website at [ www.douglasemmett.com ].

Guidance

The Company will establish a full year 2011 FFO guidance range of $1.23 - $1.31 per diluted share in its February 9, 2011 conference call. This guidance is based upon assumptions concerning the Companya™s 2011 debt refinancing program and other matters that will be discussed on the conference call.

Conference Call and Webcast Information

A conference call to discuss the Companya™s 2010 fourth quarter and full year financial results is scheduled for Wednesday, February 9, 2011 at 2:00 pm Eastern Time or 11:00 am Pacific Time. Interested parties can access the live call or the replay via the:

• 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.
• Phone: 877-298-7945 (U.S./Canada) or 706-758-2996 (International) a" conference ID #5424610.
• Replay: A rebroadcast of the live call will be available for 90 days on the Companya™s website, at [ www.douglasemmett.com ]. Alternatively, a digital replay will be available at approximately 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time, on Wednesday, February 9, 2011 through Wednesday, February 16, 2011 using 800-642-1687 (U.S./Canada), or 706-645-9291 (International) and conference ID #5424610.

Supplemental Information

Supplemental financial information for the Companya™s 2010 fourth quarter and year-end financial results can be accessed on the Companya™s website under the Investor Relations section at [ www.douglasemmett.com ].

About Douglas Emmett, Inc.

Douglas Emmett, Inc. (NYSE: DEI) is a fully integrated, self-administered and self-managed real estate investment trust (REIT), and one of the largest owners and operators of high-quality office and multifamily properties located in premier submarkets in Southern California and Hawaii. The Companya™s properties are concentrated in ten submarkets a" Brentwood, Olympic Corridor, Century City, Santa Monica, Beverly Hills, Westwood, Sherman Oaks/Encino, Warner Center/Woodland Hills, Burbank and Honolulu. The Company focuses on owning and acquiring a substantial share of top-tier office properties and premier multifamily communities in neighborhoods that possess significant supply constraints, high-end executive housing and key lifestyle amenities. The Company 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 are beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they are not guarantees of future performance and some will inevitably prove to be incorrect. As a result, our actual future results can be expected to differ from our expectations, and those differences may be material. Accordingly, investors should use caution in relying on forward-looking statements to anticipate future results or trends. For a discussion of some of the risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see aRisk Factorsa in our Annual Report on Form 10-K filed with the Securities and Exchange Commission.

(1) Douglas Emmett Fund X, LLC (Fund X) was deconsolidated from our financial statements as of the end of February 2009 and is presented on an unconsolidated basis beginning March 2009. As a result, the consolidated operating results of Douglas Emmett, Inc. for 2009 presented above reflect the impact of the properties owned by Fund X only for the months of January and February 2009 on a consolidated basis.

(2) Basic and diluted shares are calculated in accordance with accounting principles generally accepted in the United States (GAAP) and include common stock plus dilutive equity instruments, as appropriate. This amount excludes OP units and vested LTIP units (Long-Term Incentive Plan units that are limited partnership units in our OP), which are included in the non-GAAP calculation of diluted shares on the following page of this release.

(1) We calculate funds from operations before noncontrolling interest (FFO) in accordance with the standards established by the National Association of Real Estate Investment Trusts (NAREIT). FFO represents net income (loss), computed in accordance with accounting principles generally accepted in the United States of America (GAAP), excluding gains (or losses) from sales of depreciable operating property, real estate depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. Management uses FFO as a supplemental performance measure because, in excluding real estate depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that results from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. Other equity REITs may not calculate FFO in accordance with the NAREIT definition and, accordingly, our FFO may not be comparable to such other REITsa™ FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of our performance. FFO should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends. FFO should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP.

NOTE: See below for a description of same property, cash basis and NOI.