UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☑ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20192020
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____

Commission file number: 1-33106
nysedei-20201231_g1.jpg
Douglas Emmett, Inc.
(Exact name of registrant as specified in its charter)
Maryland20-3073047
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1299 Ocean Avenue, Suite 1000,, Santa Monica,, California90401
(Address of principal executive offices, including zip code)
(310) (310) 255-7700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.01 par value per shareDEINew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes☑No☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes☐No☑
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes☑No☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).Yes☑No☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☑Accelerated filer☐Non-accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes☐No☑
The aggregate market value of the common stock $0.01 par value, held by non-affiliates of the registrant, as of June 28, 2019,30, 2020, was $6.61$5.09 billion. (This computation excludes the market value of all shares of Common Stock reported as beneficially owned by executive officers and directors of the registrant. Such exclusion shall not be deemed to constitute an admission that any such person is an affiliate of the Registrant.)
The registrant had 175,373,806175,464,148 shares of its common stock $0.01 par value, outstanding as of February 7, 2020.12, 2021.
DOCUMENTS INCORPORATED BY REFERENCE
REFERENCE: Portions of the registrant’s definitive proxy statement to be issuedfiled in conjunction with the registrant’s annual meeting of shareholders to be held in 20202021 are incorporated by reference in Part III of this Report on Form 10-K. Such proxy statement will be filed by the registrant with the Securities and Exchange Commission not later than 120 days after the end of the registrant’s fiscal year ended December 31, 2019.2020.

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DOUGLAS EMMETT, INC.

FORM 10-K

Table of Contents
Page
3
6
PART I
Table of Contents
Page
Forward Looking Statements
57
PART I
Item 1
Business Overview
6
1012
2427
2528
3033
3033
PART II
3134
3335
3436
4952
4952
4952
4953
4953
PART III
5054
5054
5054
5054
5054
PART IV
5155
5357
5458



Explanatory Note


We early adopted the SEC's amendments to Items 301, 302 and 303 of the Regulation S-K rules which became effective on February 10, 2021. Our early adoption resulted in, among other things, the following updates to this Report:
•We ceased disclosing selected financial data previously disclosed in Part II, Item 6,
•We ceased disclosing the contractual obligation table in Part II, Item 7, and replaced it with qualitative disclosure, and
•We ceased disclosing the quarterly financial data in the footnotes to our consolidated financial statements in Part IV, Item 15 (we are required to disclose the quarterly financial data if we make updates to our quarterly data at year end).
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Glossary


Abbreviations used in this Report:

ADAAmericans with Disabilities Act of 1990
AOCIAccumulated Other Comprehensive Income (Loss)
ASCAccounting Standards Codification
ASUAccounting Standards Update
ATMAt-the-Market
BOMABuilding Owners and Managers Association
CEOChief Executive Officer
CFOChief Financial Officer
CodeInternal Revenue Code of 1986, as amended
COOCOVID-19Coronavirus Disease 2019
COOChief Operating Officer
DEIDouglas Emmett, Inc.
EPAUnited States Environmental Protection Agency
EPSEarnings Per Share
Exchange ActSecurities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
FFOFunds From Operations
Fund XDouglas Emmett Fund X, LLC
FIRPTAForeign Investment in Real Property Tax Act of 1980, as amended
FundsUnconsolidated institutional real estate fundsInstitutional Real Estate Funds
GAAPGenerally Accepted Accounting Principles (United States)
IRSInternal Revenue Service
ITInformation Technology
JVJoint Venture
LIBORLondon Interbank Offered Rate
LTIP UnitsLong-Term Incentive Plan Units
MGCLMaryland General Corporation Law
NAREITNational Association of Real Estate Investment Trusts
NYSENew York Stock Exchange
OCIOther Comprehensive Income (Loss)
OP UnitsOperating Partnership Units
Operating PartnershipDouglas Emmett Properties, LP
Opportunity FundFund X Opportunity Fund, LLC
OFACOffice of Foreign Assets Control
Partnership XDouglas Emmett Partnership X, LP
PCAOBPublic Company Accounting Oversight Board (United States)
QRSQualified REIT subsidiary(ies)
REITReal Estate Investment Trust
ReportAnnual Report on Form 10-K
SECSecurities and Exchange Commission
Securities ActSecurities Act of 1933, as amended
S&P 500Standard & Poor's 500 Index
TRSTaxable REIT subsidiary(ies)Subsidiary(ies)
USUnited States
USDUnited States Dollar
VIEVariable Interest Entity(ies)

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Glossary

Defined terms used in this Report:

Annualized RentAnnualized cash base rent (excludes tenant reimbursements, parking and other revenue) before abatements under leases commenced as of the reporting date and expiring after the reporting date. Annualized Rent for our triple net office properties (in Honolulu and twoone single tenant buildingsbuilding in Los Angeles) is calculated 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 does includeincludes rent for a health club that we own and operate in Honolulu and 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.
Consolidated PortfolioIncludes all of the properties included in our consolidated results, including our consolidated JVs.
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), and impairment write-downs of real estate from our net income (including adjusting for the effect of such items attributable to consolidated JVs and unconsolidated Funds, but not for noncontrolling interests included in our Operating Partnership). FFO is a non-GAAP supplemental financial measure that we report because we believe it is useful to our investors. See Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Report for a discussion of FFO.
Leased RateThe percentage leased as of the reporting date. 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 percentage leased. We report Leased 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 Leased Rate to manage and monitor the performance of our office and multifamily portfolios.
Net Operating Income (NOI)We calculate NOI as revenue less operating expenses attributable to the properties that we own and operate. NOI is calculated by excluding the following from our net income: general and administrative expense, depreciation and amortization expense, other income, other expenses, income from unconsolidated Funds, interest expense, gain from consolidation of JVs, gains (or losses) on sales of investments in real estate and net income attributable to noncontrolling interests. NOI is a non-GAAP supplemental financial measure that we report because we believe it is useful to our investors. See Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Report for a discussion of our Same Property NOI.
Occupancy RateThe percentage leased,We calculate the Occupancy Rate by excluding signed leases not yet commenced as offrom the reporting date.Leased Rate. Management space is considered leased and occupied, while spaceoccupied. 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 percentage leasedOccupancy Rate. We report Occupancy Rate because it is a widely reported measure of the performance of equity REITs, and occupied.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.
Recurring Capital ExpendituresBuilding 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.
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Glossary
Rentable Square Feet

Based on the BOMA remeasurement and consists of leased square feet (including square feet with respect to signed leases not commenced as of the reporting date), available square feet, building management use square feet and square feet of the 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.
Rental RateWe present two forms of Rental Rates - Cash Rental Rates and Straight-Line 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.
Same PropertiesOur consolidated properties that have been owned and operated by us in a consistent manner, and reported in our consolidated results during the entire span of both periods being compared. We exclude from our same property subset any properties (i) acquired during the comparative periods; (ii) sold, held for sale, contributed or otherwise removed from our consolidated financial statements during the comparative periods; or (iii) that underwent a major repositioning project or were impacted by development activity that we believed significantly affected the properties' results during the comparative periods.
Short-Term LeasesRepresents 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 PortfolioIncludes our Consolidated Portfolio plus the properties owned by our Fund.









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Forward Looking Statements

This Report contains forward-looking statements within the meaning of the Section 27A of the Securities Act and Section 21E of the Exchange Act. You can find many (but not all) of these statements by looking for words such as “believe”, “expect”, “anticipate”, “estimate”, “approximate”, “intend”, “plan”, “would”, “could”, “may”, “future” or other similar expressions in this Report. We claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995. We caution investors that any forward-looking statements used in this Report, or those that we make orally or in writing from time to time, are based on our beliefs and assumptions, as well as information currently available to us. Actual outcomes will be affected by known and unknown risks, trends, uncertainties and factors 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 future results can be expected to differ from our expectations, and those differences may be material. Accordingly, investors should use caution when relying on previously reported forward-looking statements, which were based on results and trends at the time they were made, to anticipate future results or trends. Some of the risks and uncertainties that could cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include the following:

•adverse developments related to the COVID-19 pandemic;
•adverse economic or real estate developments affecting Southern California or Honolulu, Hawaii;
•competition from other real estate investors in our markets;
•decreasing rental rates or increasing tenant incentive and vacancy rates;
•defaults on, early terminations of, or non-renewal of leases by tenants;
•increases in interest rates or operating costs;
•insufficient cash flows to service our outstanding debt or pay rent on ground leases;
•difficulties in raising capital;
•inability to liquidate real estate or other investments quickly;
•adverse changes to 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 and submarkets;
•difficulties in identifying properties to acquire and failure to complete acquisitions successfully;
•failure to successfully operate acquired properties;
•risks associated with property development;
•risks associated with JVs;
•conflicts of interest with our officers and reliance on key personnel;    
•changes in zoning and other land use laws;
•adverse results of litigation or governmental proceedings;
•failure to comply with laws, regulations and covenants that are applicable to our business;
•possible terrorist attacks or wars;
•possible cyber attacks or intrusions;
•adverse changes to accounting rules;
•weaknesses in our internal controls over financial reporting;
•failure to maintain our REIT status under federal tax laws; and
•adverse changes to tax laws, including those related to property taxes.

For further discussion of these and other risk factors see Item 1A. "Risk Factors” in this Report. This Report and all subsequent written and oral forward-looking statements 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 forward-looking statements to reflect events or circumstances after the date of this Report.

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PART I

Item 1. Business

Overview

Business description

Douglas Emmett, Inc. is a fully integrated, self-administered and self-managed REIT. We are one of the largest owners and operators of high-quality office and multifamily properties located in premier coastal submarkets in Los Angeles and Honolulu. Through our interest in our Operating Partnership and its subsidiaries, our consolidated JVs, and our unconsolidated Fund, we focus on owning, acquiring, developing and managing a significant market share of top-tier office properties and premier multifamily communities in neighborhoods with significant supply constraints, high-end executive housing and key lifestyle amenities. Our properties are located in the Beverly Hills, Brentwood, Burbank, Century City, Olympic Corridor, Santa Monica, Sherman Oaks/Encino, Warner Center/Woodland Hills and Westwood submarkets of Los Angeles County, California, and in Honolulu, Hawaii. We intend to increase our market share in our existing submarkets and may enter into other submarkets with similar characteristics where we believe we can gain significant market share. The terms "us," "we" and "our" as used in this Report refer to Douglas Emmett, Inc. and its subsidiaries on a consolidated basis.

At December 31, 2019,2020, we owned a Consolidated Portfolio consisting of (i) an 18.0a 17.8 million square foot office portfolio, (ii) 4,1614,287 multifamily apartment units and (iii) fee interests in two parcels of land from which we receive rent under ground leases. We also manage and own equity interests in our unconsolidated Fund which, at December 31, 2019,2020, owned an additional 0.4 million square feet of office space. We manage our unconsolidated Fund alongside our Consolidated Portfolio, and we therefore present the statistics for our office portfolio on a Total Portfolio basis. For more information, see Item 2 “Properties” of this Report. As of December 31, 2019,2020, our portfolio consisted of the following (including ancillary retail space and excluding the two parcels of land from which we receive rent under ground leases):


 Consolidated PortfolioTotal
Portfolio
Office
Wholly-owned properties5353
Consolidated JV properties1616
Unconsolidated Fund properties—2
Total6971
Multifamily
Wholly-owned properties1111
Consolidated JV properties11
Total1212
Total8183
 Consolidated Portfolio 
Total
Portfolio
Office   
Wholly-owned properties53 53
Consolidated JV properties17 17
Unconsolidated Fund properties— 2
Total70 72
    
Rentable square feet (in thousands)17,960 18,346
    
Multifamily   
Wholly-owned properties10 10
Consolidated JV properties1 1
Total11 11
    
Units4,161 4,161


Business Strategy
 
We employ a focused business strategy that we have developed and implemented over the past four decades:
•
•Concentration of High Quality Office and Multifamily Properties in Premier Submarkets.
First we select submarkets that are supply constrained, with high barriers to entry, key lifestyle amenities, proximity to high-end executive housing and a strong, diverse economic base. Virtually no entitled Class A office space is currently under construction in our targeted submarkets. Our submarkets are dominated by small, affluent tenants, whose rents are very small relative to their revenues and often not the paramount factor in their leasing decisions. At December 31, 2019,2020, our office portfolio median size tenant was approximately 2,7002,600 square feet. Our office tenants operate in diverse industries, including among others legal, financial services, entertainment, real estate, accounting and consulting, health services, retail, technology and insurance, reducing our dependence on any one industry. In 2017, 2018, 2019 and 2019,2020, no tenant accounted for more than 10% of our total revenues.

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•Disciplined Strategy of Acquiring Substantial Market Share In Each Submarket.
Disciplined Strategy of Acquiring Substantial Market Share.
Once we select a submarket, we follow a disciplined strategy of gaining substantial market share to provide us with extensive local transactional market information, pricing power in lease and vendor negotiations and an enhanced ability to identify and negotiate investment opportunities. As a result, we average approximately a 39%38% share of the Class A office space in our submarkets based on the square feet of exposure in our total portfolio to each submarket. See "Office Portfolio Summary" in Item 2 “Properties” of this Report.
•
Proactive Asset and Property Management.
Our fully integrated and focused operating platform provides the unsurpassed tenant service demanded in our submarkets, with in-house leasing, proactive asset and property management and internal design and construction services, which we believe provides us with a competitive advantage in managing our property portfolio. Our in-house leasing agents and legal specialists allow us to lease a large property portfolio with a diverse group of smaller tenants, closing an average of approximately three office leases each business day, and our in-house construction company allows us to compress the time required for building out many smaller spaces, resulting in reduced vacancy periods. Our property management group oversees day-to-day property management of both our office and multifamily portfolios, allowing us to benefit from the operational efficiencies permitted by our submarket concentration.

Corporate Structure

Douglas Emmett, Inc. was formed as a Maryland corporation on June 28, 2005 to continue and expand the operations of Douglas Emmett Realty Advisors and its 9 institutional funds. All of our assets are directly or indirectly held by our Operating Partnership, which was formed as a Delaware limited partnership on July 25, 2005. As the sole stockholder of the general partner of our Operating Partnership, we generally have the exclusive power under the partnership agreement to manage and conduct the business of our Operating Partnership, subject to certain limited approval and voting rights of the other limited partners. Our interest in our Operating Partnership entitles us to share in the profits and losses and cash distributions in proportion to our percentage ownership.

JVs and Fund

InAt December 31, 2020, in addition to fifty-three office properties and teneleven residential properties wholly-owned by our Operating Partnership, we manage and own equity interests in:
•three consolidated JVs, through which we and institutional investors own sixteen office properties in our core markets totaling 4.2 million square feet and one residential property with 350 apartments, and in which we own a weighted average of 46% at December 31, 2020 based on square footage. We are entitled to (i) distributions based on invested capital as well as additional distributions based on cash net operating income, (ii) fees for property management and other services and (iii) reimbursement of certain acquisition-related expenses and certain other costs.
•
four consolidated JVs, through which we and institutional investors own seventeen office properties in our core markets totaling 4.3 million square feet and one residential property with 350 apartments, and in which we own a weighted average of 46% at December 31, 2019 based on square footage. We are entitled to (i) distributions based on invested capital as well as (in the case of three of the JVs) additional distributions based on cash net operating income, (ii) fees for property management and other services and (iii) reimbursement of certain acquisition-related expenses and certain other costs.
one unconsolidated Fund through which we and institutional investors own two office properties in our core markets totaling 0.4 million square feet and in which we own 30%34% at December 31, 2019.2020.  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.

The financial data in this Report presents our JVs on a consolidated basis and our Funds on an unconsolidated basis in accordance with GAAP. See "Basis of Presentation" in Note 1 to our consolidated financial statement in Item 15 of this Report for more information regarding the consolidation of our JVs.

On November 21, 2019, we restructured one of our previously unconsolidated Funds, after which it is treated as a consolidated JV in our financial statements. The results of the consolidated JV are included in our operating results from November 21, 2019 (before November 21, 2019, our share of the Fund's net income was included in our statements of operations in Income from unconsolidated Funds).

In December 2020, we sold an 80 thousand square foot office property in Honolulu, which was held by one of our consolidated JVs in which we owned a two-thirds capital interest. The JV was subsequently dissolved before December 31, 2020 (and is therefore not included in the JV statistics disclosed above). The results of the consolidated JV are included in our operating results until it was dissolved in December 2020. See Note 3 and Note 6 to our consolidated financial statement in Item 15 of this Report for more information regarding the consolidation of the JV and our unconsolidated Funds, respectively.these transactions.
Most of the property data in this Report is presented for our Total Portfolio, which includes the properties owned by our JVs and our Funds, as we believe this presentation assists in understanding our business.


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Taxation

We believe that we qualify, and we intend to continue to qualify, for taxation as a REIT under the Code, although we cannot provide assurance that this has happened or will happen. See Item 1A "Risk Factors" of this Report for the risks we face regarding taxation as a REIT. The following summary is qualified in its entirety by the applicable Code provisions and related rules, and administrative and judicial interpretations. If we qualify for taxation as a REIT, we will generally not be required to pay federal corporate income taxes on the portion of our net income that is currently distributed to stockholders. This treatment substantially eliminates the “double taxation” (i.e., at the corporate and stockholder levels) that generally results from investment in a corporation. However, we will be required to pay federal income tax under certain circumstances.

The Code defines a REIT as a corporation, trust or association (i) which is managed by one or more trustees or directors; (ii) the beneficial ownership of which is evidenced by transferable shares or certificates of beneficial interest; (iii) which would be taxable but for Sections 856 through 860 of the Code as a domestic corporation; (iv) which is neither a financial institution nor an insurance company subject to certain provisions of the Code; (v) the beneficial ownership of which is held by 100 or more persons; (vi) of which, during the last half of each taxable year, not more than 50% in value of the outstanding stock is owned, actually or constructively, by five or fewer individuals; and (vii) which meets certain other tests, described below, regarding the amount of its distributions and the nature of its income and assets. The Code requires that conditions (i) to (iv) be met during the entire taxable year and that condition (v) be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months.

There are two gross income requirements we must satisfy:
i.at least 75% of our gross income (excluding gross income from “prohibited transactions” as defined below and qualifying hedges) for each taxable year must be derived directly or indirectly from investments relating to real property or mortgages on real property or from certain types of temporary investment income, and
ii.at least 95% of our gross income (excluding gross income from “prohibited transactions” and qualifying hedges) for each taxable year must be derived from income that qualifies under the 75% test or from other dividends, interest or gain from the sale or other disposition of stock or securities. In general, a “prohibited transaction” is a sale or other disposition of property (other than foreclosure property) held primarily for sale to customers in the ordinary course of business.
i.at least 75% of our gross income (excluding gross income from “prohibited transactions” as defined below and qualifying hedges) for each taxable year must be derived directly or indirectly from investments relating to real property or mortgages on real property or from certain types of temporary investment income, and
ii.at least 95% of our gross income (excluding gross income from “prohibited transactions” and qualifying hedges) for each taxable year must be derived from income that qualifies under the 75% test or from other dividends, interest or gain from the sale or other disposition of stock or securities. In general, a “prohibited transaction” is a sale or other disposition of property (other than foreclosure property) held primarily for sale to customers in the ordinary course of business.

We must satisfy five asset tests at the close of each quarter of our taxable year:
i.at least 75% of the value of our total assets must be represented by real estate assets including shares of stock of other REITs, debt instruments of publicly offered REITs, certain other stock or debt instruments purchased with the proceeds of a stock offering or long-term public debt offering by us (but only for the one-year period after such offering), cash, cash items and government securities,
ii.not more than 25% of our total assets may be represented by securities other than those in the 75% asset class,
iii.of the assets included in the 25% asset class, the value of any one issuer’s securities owned by us may not exceed 5% of the value of our total assets and we may not own more than 10% of the vote or value of the securities of any one issuer, in each case other than securities included under the 75% asset test above and interests in TRS or QRS, each as defined below, and in the case of the 10% value test, subject to certain other exceptions,
iv.not more than 20% of the value of our total assets may be represented by securities of one or more TRS, and
v.not more than 25% of the value of our total assets may be represented by nonqualified publicly offered REIT debt instruments.
i.at least 75% of the value of our total assets must be represented by real estate assets including shares of stock of other REITs, debt instruments of publicly offered REITs, certain other stock or debt instruments purchased with the proceeds of a stock offering or long-term public debt offering by us (but only for the one-year period after such offering), cash, cash items and government securities,
ii.not more than 25% of our total assets may be represented by securities other than those in the 75% asset class,
iii.of the assets included in the 25% asset class, the value of any one issuer’s securities owned by us may not exceed 5% of the value of our total assets and we may not own more than 10% of the vote or value of the securities of any one issuer, in each case other than securities included under the 75% asset test above and interests in TRS or QRS, each as defined below, and in the case of the 10% value test, subject to certain other exceptions,
iv.not more than 20% of the value of our total assets may be represented by securities of one or more TRS, and
v.not more than 25% of the value of our total assets may be represented by nonqualified publicly offered REIT debt instruments.

In order to qualify as a REIT, we are required to distribute dividends (other than capital gains dividends) to our stockholders equal to at least (A) the sum of (i) 90% of our “REIT taxable income” (computed without regard to the dividends paid deduction and our net capital gain) and (ii) 90% of the net income, if any (after tax), from foreclosure property, less (B) the sum of certain items of non-cash income. The distributions must be paid in the taxable year to which they relate, or in the following taxable year if declared before we timely file our tax return for such year, if paid on or before the first regular dividend payment date after such declaration and if we so elect and specify the dollar amount in our tax return. To the extent that we do not distribute all of our net long-term capital gains or distribute at least 90%, but less than 100%, of our REIT taxable income, we will be required to pay tax thereon at the regular corporate tax rates.rate. Furthermore, if we fail to distribute during each calendar year the sum of at least (i) 85% of our ordinary income for such year, (ii) 95% of our capital gains income for such year, and (iii) any undistributed taxable income from prior periods, we would be required to pay a 4% excise tax on the excess of such required distributions over the amounts actually distributed.

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We own interests in various partnerships and limited liability companies. In the case of a REIT that is a partner in a partnership or a member of a limited liability company that is treated as a partnership under the Code, Treasury Regulations provide that for purposes of the REIT income and asset tests, the REIT will be deemed to own its proportionate share of the assets of the partnership or limited liability company (determined in accordance with its capital interest in the entity), subject to special rules related to the 10% asset test, and will be deemed to be entitled to the income of the partnership or limited liability company attributable to such share.

We own an interest in a subsidiary that is intended to be treated as a QRS. The Code provides that a QRS will be ignored for federal income tax purposes and all assets, liabilities and items of income, deduction and credit of the QRS will be treated as our assets, liabilities and items of income. We hold certain of our properties through subsidiaries that have elected to be taxed as REITs. We also wholly own interestsan interest in certain corporationsa corporation which havehas elected to be treated as TRSs.a TRS. A REIT may own more than 10% of the voting stock and value of the securities of a corporation that jointly elects with the REIT to be a TRS, provided certain requirements are met. A TRS generally may engage in any business, including the provision of customary or non-customary services to tenants of its parent REIT and of others, except a TRS may not manage or operate a hotel or healthcare facility. A TRS is treated as a regular corporation and is subject to federal income tax and applicable state income and franchise taxes at regular corporate rates. In addition, a 100% tax may be imposed on a REIT if its rental, service or other agreements with its TRS, or the TRS agreements with the REIT’s tenants, are not on arm’s-length terms.

We may be required to pay state or local tax in various state or local jurisdictions, including those in which we own properties or otherwise transact business or reside. The state and local tax treatment of us and our stockholders may not conform to the federal income tax consequences discussed above. We may also be subject to certain taxes applicable to REITs, including taxes in lieu of disqualification as a REIT, on undistributed income, and on income from prohibited transactions.

In addition, if we acquire any asset from a corporation that is or has been a C corporation in a transaction in which our tax basis in the asset is less than the fair market value of the asset, in each case determined as of the date on which we acquired the asset, and we subsequently recognize gain on the disposition of the asset during the five-year period beginning on the date on which we acquired the asset, then we generally will be required to pay tax at the highest regular corporate tax rate on this gain to the extent of the excess of (i) the fair market value of the asset over (ii) our adjusted tax basis in the asset, in each case determined as of the date on which we acquired the asset.

Insurance

We carry comprehensive liability, fire, extended coverage, business interruption and rental loss insurance covering all of the properties in our portfolio under blanket insurance policies. We believe the policy specifications and insured limits are appropriate and adequate given the relative risk of loss and the cost of the coverage and industry practice. See Item 1A “Risk Factors” of this Report for the risks we face regarding insurance.

Competition

We compete with a number of developers, owners and operators of office and multifamily real estate, many of which own properties similar to ours in the same markets in which our properties are located. See Item 2 of this Report for more information about our properties. See Item 1A “Risk Factors” of this Report for the risks we face regarding competition.

Regulation

Our properties are subject to various covenants, laws, ordinances and regulations, including regulations relating to common areas, fire and safety requirements, various environmental laws, the ADA and rent control laws.

The governmental authorities in the jurisdictions in which we primarily operate, Los Angeles, Beverly Hills and Santa Monica, have passed COVID-19 pandemic relief ordinances prohibiting evictions and allowing rent deferral for residential, retail, and office tenants, regardless of financial distress. The ordinances cover our residential, retail and office tenants (with some carve outs for large tenants) and generally prohibit landlords from evicting tenants and imposing late fees or interest, and allow tenants to pay back the deferred rent over a certain period.

See Item 1A “Risk Factors” of this Report for the risks we face regarding laws and regulations.

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Sustainability

In operating our buildings and running our business, we actively work to promote our operations in a sustainable and responsible manner.  Our sustainability initiatives include items such as lighting, retrofitting, energy management systems, variable frequency drives in our motors, electricity co-generation, energy efficiency, recycling and water conservation.  As a result of our efforts, 78% of our eligible office space isin 2019 was ENERGY STAR certified by the EPA as having energy efficiency in the top 25% of buildings nationwide.nationwide (our 2020 Energy Star scores are being reviewed to properly account for any impact from the COVID-19 pandemic).


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Segments

We operate two business segments: the acquisition, development, ownership and management of office real estate, and the acquisition, development, ownership and management of multifamily real estate. The services for our office segment include primarily rental of office space and other tenant services, including parking and storage space rental. The services for our multifamily segment include primarily rental of apartments and other tenant services, including parking and storage space rental. See Note 15 to our consolidated financial statements in Item 15 of this Report for more information regarding our segments.

Employees

Human Capital

Central to our long-term strategy is attracting, developing and retaining the best talent with the right skills to drive our success. Our ability to maintain our competitive position is largely dependent upon the skill and effort of our executive officers and key personnel, who have significant real estate industry experience, strong industry reputations and networks, and assist us in identifying acquisition, disposition, development and borrowing opportunities, negotiating with tenants and sellers of properties, and managing our development projects and the operations of our properties. As of December 31, 2019,2020, we employed approximately 700 people.
713 people.
We promote an atmosphere of openness, respect and trust and bring a sense of teamwork and inclusion to all we do. We recognize that having a range of experiences, backgrounds and perspectives allows us to find new ways of doing things. We make sure to walk the talk in fostering a workplace culture that encourages and empowers all our employees to have a voice and fulfill their potential.

We value and advance the diversity and inclusion of the people with whom we work. We are committed to equal opportunity in workplaces that are free from discrimination or harassment on the basis of race, sex, color, ancestry, citizenship, marital status, family status, national or social origin, ethnicity, religion, age, disability, sexual orientation, gender identification or expression, political opinion or any other status protected by applicable law. Recruitment, hiring, placement, development, training, compensation and advancement may not be based on any of these factors, but should instead be based on factors such as qualifications, performance, skills and experience.

We know that the first step in hiring and retaining the best talent is to create safe and inspiring workplaces where people feel valued. We offer competitive compensation and benefits to all regular full-time employees, including but not limited to paid holiday, vacation, and sick time, retirement savings plans and medical, dental, and vision coverage. We also offer a very generous equity compensation program that empowers our employees to act and feel like owners, not just employees. In 2020, we provided equity compensation to approximately two-thirds, of our approximately 700 employees.

The health and safety of our employees, tenants, and vendors is of the utmost importance to us. We adhere to leading health and safety standards across our portfolio, and each year, we require all our employees to complete safety training and also provide them seminars on various health topics free of charge. The COVID-19 pandemic had a significant impact on our human capital management during 2020. We are deemed an essential business and we moved quickly to institute safety protocols and procedures to keep our properties open and to protect our tenants and employees who continued to work on site and at our headquarters.

Principal Executive Offices

Our principal executive offices are located in the building we own at 1299 Ocean Avenue, Suite 1000, Santa Monica, California 90401 (telephone 310-255-7700).
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Available Information

We make available on our website at www.douglasemmett.com our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments thereto, free of charge, as soon as reasonably practicable after we file such reports with, or furnish them to, the SEC. None of the information on or hyperlinked from our website is incorporated into this Report.

For more information, please contact:

Stuart McElhinney
Vice President, Investor Relations
310-255-7751
smcelhinney@douglasemmett.com


Item 1A. Risk Factors

The following risk factors are what we believe to be the most significant risk factors that could adversely affect our business and operations, including, without limitation, our financial condition, REIT status, results of operations and cash flows, our ability to service our debt and pay dividends to our stockholders, our ability to capitalize on business opportunities as they arise, our ability to raise capital, and the market price of our common stock.

This is not an exhaustive list, and additional risk factors could adversely affect our business and financial performance. We operate in a very competitive and rapidly changing environment and new risk factors emerge from time to time. It is therefore not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

This discussion of risk factors includes many forward-looking statements. For cautions about relying on forward-looking statements see “Forward Looking Statements” at the beginning of this Report.

Our risk factors are grouped into the following categories:
•Risks Related to Our Properties and Our Business;
•Risks Related to Our Organization and Structure;
•Risks Related to Taxes and Our Status as a REIT;
•General Risks.

Risks Related to Our Properties and Our Business

The COVID-19 global pandemic could adversely affect our business, financial position, results of operations, cash flows, our ability to service our debt, our ability to pay dividends to our stockholders, our REIT status, our ability to capitalize on business opportunities as they arise, our ability to raise capital, and/or the market price of our common stock.

The COVID-19 global pandemic has led to severe disruption to general economic activities as governments and businesses take actions to mitigate the public health crisis. The extent to which the COVID-19 global pandemic ultimately impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions taken to contain the virus, and how quickly and to what extent normal economic and operating conditions resume. Even if the COVID-19 global pandemic subsides, we may continue to experience significant impacts to our business as a result of its global economic impact, including any resulting economic recession.

Although the impacts of the pandemic cannot be predicted at this time, some potential impacts from the pandemic could include:
•Government actions that reduce or otherwise hinder our ability to collect rent promptly or at all, adversely affect tenant demand, increase our costs or otherwise reduce our collections;
•Supply chain, governmental or other disruptions that adversely affect construction or our operations and/or those of our tenants;
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•Economic pressure on our tenants, which could lead to lower collections or defaults;
•Reduced or different tenant demand, leading to lower occupancy and/or rental rates in our buildings;
•Increases in expenses and/or capital investments or decreases in tenant demand as a result of safety concerns;
•Increased risks of IT disruptions and/or cyber attacks as a result of our employees or tenants working remotely;
•Disruption of our operations as a result of the illness or social distancing of our employees or tenants;
•Changes in the financial markets, the value of our properties and/or our cash flows which adversely affect our stock price and/or our tenants' access to needed debt or equity capital on reasonable or any terms; and/or
•Increases in the cost or availability, or changes to the terms, of insurance.

All of our properties are located in Los Angeles County, California and Honolulu, Hawaii, and we are therefore exposed to greater risk than if we owned a more geographically diverse portfolio. Our properties in Los Angeles County are concentrated in certain submarkets, exposing us to risks associated with those specific areas.

Because of the geographic concentration of our properties, we are susceptible to adverse economic and regulatory developments, as well as natural disasters, in the markets and submarkets where we operate, including, for example, economic slowdowns, industry slowdowns, business downsizing, business relocations, increases in real estate and other taxes, changes in regulation, earthquakes, floods, droughts and wildfires. California is also regarded as being more litigious, regulated and taxed than many other states.


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Our operating performance is subject to risks associated with the real estate industry.

Real estate investments are subject to various risks, fluctuations and cycles in value and demand, many of which are beyond our control. These events include, but are not limited to:
•adverse changes in international, national or local economic conditions;
•inability to rent space on favorable terms, including possible market pressures to offer tenants rent abatements, tenant improvements, early termination rights or below-market renewal options;
•adverse changes in financial conditions of actual or potential investors, buyers, sellers or tenants;
•inability to collect rent from tenants;
•competition from other real estate investors, including other real estate operating companies, publicly-traded REITs and institutional investment funds;
•reduced tenant demand for office space and residential units from matters such as (i) changestrends in space utilization, (ii) changes in the relative popularity of our properties, (iii) the type of space we provide or (iv) purchasing versus leasing;
•reduced demand for parking space due to the impact of technology such as self driving cars, and the increasing popularity of car ride sharing services;
•increases in the supply of office space and residential units;
•fluctuations in interest rates and the availability of credit, which could adversely affect our ability to obtain financing on favorable terms or at all;
•increases in expenses (or our reduced ability to recover expenses from our tenants), including insurance costs, labor costs (such as the unionization of our employees or the employees of any parties with whom we contract for services to our buildings), energy prices, real estate assessments and other taxes, as well as costs of compliance with laws, regulations and governmental policies;
•utility disruptions;
•the effects of rent controls, stabilization laws and other laws or covenants regulating rental rates;
•changes in, and changes in enforcement of, laws, regulations and governmental policies, including, without limitation, health, safety, environmental, zoning and tax laws, governmental fiscal policies and the ADA;
•legislative uncertainty related to federal and state spending and tax policy;
•difficulty in operating properties effectively;
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•acquiring undesirable properties; and
•inability to dispose of properties at appropriate times or at favorable prices.

We have a substantial amount of debt, which exposes us to interest rate fluctuation risk and the risk of not being able to refinance our debt, which in turn could expose us to the risk of default under our debt obligations.

We have a substantial amount of debt and we may incur significant additional debt for various purposes, including, without limitation, to fund future property acquisitions and development activities, reposition properties and to fund our operations. See Note 8 to our consolidated financial statements in Item 15 of this Report for more detail regarding our consolidated debt. See "Off-Balance Sheet Arrangements" in Item 7 of this Report for more detail regarding our unconsolidated debt.

Our substantial indebtedness, and the limitations and other constraints imposed on us by our debt agreements, especially during economic downturns when credit is harder to obtain, could adversely affect us, including the following:
•our cash flows may be insufficient to meet our required principal and interest payments;
•servicing our borrowings may leave us with insufficient cash to operate our properties or to pay the distributions necessary to maintain our REIT qualification;
•we may be unable to borrow additional funds as needed or on favorable terms, which could, among other things, adversely affect our ability to capitalize upon acquisition opportunities;
•we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our existing indebtedness;

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we may be forced to dispose of one or more of our properties, possibly on disadvantageous terms;
•we may violate any restrictive covenants in our loan documents, which could entitle the lenders to accelerate our debt obligations;
•we may be unable to hedge floating rate debt, counterparties may fail to honor their obligations under our hedge agreements, the hedge agreements may not effectively hedge the interest rate fluctuation risk, and, upon the expiration of any hedge agreements we do have, we will be exposed to the then-existing market rates of interest and future interest rate volatility with respect to debt that is currently hedged; we could also be declared in default on our hedge agreements if we default on the underlying debt that we are hedging;
•we may default on our obligations and the lenders or mortgagees may foreclose on our properties that secure their loans and receive an assignment of rents and leases;
•our default under any of our indebtedness with cross default provisions could result in a default on other indebtedness;
•any foreclosure on our properties could also create taxable income without accompanying cash proceeds, which could adversely affect our ability to meet the REIT distribution requirements imposed by the Code.
•our floating rate debt and related hedges are indexed to USD-LIBOR, any regulatory changes which impact the USD-LIBOR benchmark, such as the potential transition to the Secured Overnight Financing Rate (see Item 7A - "Quantitative and Qualitative Disclosures about Market Risk" below), could impact our borrowing costs or the effectiveness of our hedges.

The rents we receive from new leases may be less than our asking rents, and we may experience rent roll-down from time to time.

As a result of various factors, such as competitive pricing pressure in our submarkets, adverse conditions in the Los Angeles County or Honolulu real estate market, general economic downturns, or the desirability of our properties compared to other properties in our submarkets, the rents we receive on new leases could be less than our in-place rents.

In order to successfully compete against other properties, we must spend money to maintain, repair, and renovate our properties, which reduces our cash flows.

If our properties are not as attractive to current and prospective tenants in terms of rent, services, condition, or location as properties owned by our competitors, we could lose tenants or suffer lower rental rates. As a result, we may from time to time be required to incur significant capital expenditures to maintain the competitiveness of our properties. There can be no assurances that any such expenditures would result in higher occupancy or rental rates, or deter existing tenants from relocating to properties owned by our competitors.

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We face intense competition, which could adversely impact the occupancy and rental rates of our properties.

We compete with a number of developers, owners and operators of office and multifamily real estate, many of which own properties similar to ours in the same markets in which our properties are located. If our competitors offer space at rental rates below current market rates, or below the rental rates that we currently charge our tenants, or if they offer tenants significant rent or other concessions, we may lose existing or potential tenants and may not be able to replace them, and we may be pressured to reduce our rental rates below those we currently charge or offer more substantial rent abatements, tenant improvements, early termination rights or below-market renewal options in order to retain tenants when our tenants’ leases expire.

Potential losses, including from adverse weather conditions, natural disasters and title claims, may not be covered by insurance.

Our business operations in Los Angeles County, California and Honolulu, Hawaii are susceptible to, and could be significantly affected by, adverse weather conditions and natural disasters such as earthquakes, tsunamis, hurricanes, volcanoes, drought, wind, floods, landslides and fires. The likelihood of such disasters may be increased as a result of climate changes. Adverse weather conditions and natural disasters could cause significant damage to our properties or to the economies of the regions in which they are located, the risk of which is enhanced by the concentration of our properties’ locations. Our insurance coverage may not be adequate to cover business interruption or losses resulting from adverse weather or natural disasters. In addition, our insurance policies include substantial self-insurance portions and significant deductibles and co-payments for such events, and we are subject to the availability of insurance in the US and the pricing thereof. As a result, we may incur significant costs in the event of adverse weather conditions and natural disasters.


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Most of our properties are located in Southern California, an area subject to an increased risk of earthquakes. While we presently carry earthquake insurance on our properties, the amount of our earthquake insurance coverage may not be sufficient to fully cover losses from earthquakes. We may reduce or discontinue earthquake or any other insurance coverage on some or all of our properties in the future if the cost of premiums for any of these policies in our judgment exceeds the value of the coverage discounted for the risk of loss.

We do not carry insurance for certain losses, such as losses caused by certain environmental conditions, asbestos, riots or war. In addition, our title insurance policies generally only insure the value of a property at the time of purchase, and we have not and do not intend to increase our title insurance coverage as the market value of our portfolio increases. As a result, we may not have sufficient coverage against all losses that we may experience, including from adverse title claims.

If we experience a loss that is uninsured or which exceeds policy limits, we could incur significant costs and lose the capital invested in the damaged properties as well as the anticipated future cash flows from those properties. If the damaged properties are encumbered, we may continue to be liable for the indebtedness, even if these properties were irreparably damaged.

If any of our properties were destroyed or damaged, then we might not be permitted to rebuild many of those properties to their existing height or size at their existing location under current zoning and land use regulations. In the event that we experience a substantial or comprehensive loss of one of our properties, we may not be able to rebuild such property to its existing specifications and otherwise may have to upgrade such property to meet current code requirements.

New regulations in the submarkets in which we operate could require us to make safety improvements to our buildings, for example requiring us to retrofit our buildings to better withstand earthquakes, and we could incur significant costs complying with those regulations.

Terrorism and war could harm our business and operating results.

The possibility of future terrorist attacks or war could have a negative impact on our operations, even if they are not directed at our properties and even if they never actually occur. Terrorist attacks can also substantially affect the availability and price of insurance coverage for certain types of damages or occurrences, and our insurance policies for terrorism include large deductibles and co-payments. The lack of sufficient insurance for these types of acts could expose us to significant losses.

Security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our IT networks and related systems could harm our business.

We face risks associated with security breaches, whether through cyber attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization and other significant disruptions of our IT networks and related systems. The risk of a security breach or disruption, particularly through cyber attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations (including managing our building systems) and, in some cases, may be critical to the operations of certain of our tenants. Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our efforts will be effective in preventing attempted security breaches or disruptions. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk. A security breach or other significant disruption involving our IT networks and related systems could have an adverse effect on our business, for example:
Disruption to our networks and systems and thus our operations and/or those of our tenants or vendors;
Misstated financial reports, violations of loan covenants, missed reporting deadlines and missed permitting deadlines;
Inability to comply with laws and regulations;
Unauthorized access to, destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could be used to compete against us or for disruptive, destructive or otherwise harmful purposes;
Rendering us unable to maintain the building systems relied upon by our tenants;

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The requirement of significant management attention and resources to remedy any damages that result;
Claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; and
Damage to our reputation among our tenants, investors, or others.

We may be unable to renew leases or lease vacant space.

We may be unable to renew our tenants' leases, in which case we must find new tenants. To attract new tenants or retain existing tenants, particularly in periods of recession, we may have to accept rental rates below our existing rental rates or offer substantial rent abatements, tenant improvements, early termination rights or below-market renewal options. Accordingly, portions of our office and multifamily properties may remain vacant for extended periods of time. In addition, some existing leases currently provide tenants with options to renew the terms of their leases at rates that are below the current market rates or to terminate their leases prior to the expiration date thereof. We actively pursue opportunities for what we believe to be well-located and high quality buildings that may be in a transitional phase due to current or impending vacancies. We cannot assure that any such vacancies will be filled following a property acquisition, or that new tenant leases will be executed at or above market rates. As of December 31, 2019, 6.7%2020, 11.4% of the square footage in our total office portfolio was available for lease and 12.4%13.3% was scheduled to expire in 2020.2021. As of December 31, 2019, 1.9%2020, 1.8% of the units in our multifamily portfolio were available for lease, and substantially all of the leases in our multifamily portfolio must be renewed within the next year. For more information see Item 2 “Properties” of this Report.

Our business strategy for our office portfolio focuses on leasing to smaller-sized tenants which may present greater credit risks.

Our business strategy for our office portfolio focuses on leasing to smaller-sized tenants, which may present greater credit risks because they are more susceptible to economic downturns than larger tenants, and may be more likely to cancel or not renew their leases.

Real estate investments are generally illiquid.

Our real estate investments are relatively difficult to sell quickly. Return of capital and realization of gains, if any, from an investment will generally occur upon disposition or refinancing of the underlying property. We may not be able to realize our investment objectives by sale or be able to refinance at attractive prices within any given period of time. We may also not be able to complete any exit strategy. Any number of factors could increase these risks, such as (i) weak market conditions, (ii) the lack of an established market for a property, (iii) changes in the financial condition or prospects of prospective buyers, (iv) changes in local, national or international economic conditions, and (v) changes in laws, regulations or fiscal policies. Furthermore, certain properties may be adversely affected by contractual rights, such as rights of first offer or ground leases.

We may incur significant costs complying with laws, regulations and covenants that are applicable to our properties.

The properties in our portfolio are subject to various covenants, federal, state and local laws, ordinances, regulatory requirements, including permitting and licensing requirements, various environmental laws, the ADA and rent control laws. Such laws and regulations, including municipal or local ordinances, zoning restrictions and restrictive covenants imposed by community developers may restrict our use of our properties and may require us to obtain approval from local officials or community standards organizations at any time with respect to our properties, including prior to acquiring a property or when undertaking renovations of any of our existing properties. Among other things, these restrictions may relate to fire and safety, seismic, asbestos-cleanup or hazardous material abatement requirements. There can be no assurance that existing laws and regulations will not adversely affect us or the timing or cost of any future acquisitions, developments or renovations, or that additional regulations that increase such delays or result in additional costs will not be adopted. Under the ADA, our properties must meet federal requirements related to access and use by disabled persons to the extent that such properties are “public accommodations”. The costs of our on-going efforts to comply with these laws and regulations are substantial. Moreover, as we have not conducted a comprehensive audit or investigation of all of our properties to determine our compliance with applicable laws and regulations, we may be liable for investigation and remediation costs, penalties, and/or damages, which could be substantial and could adversely affect our ability to sell or rent our property or to borrow using such property as collateral.


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Because we own real property, we are subject to extensive environmental regulations, which create uncertainty regarding future environmental expenditures and liabilities.  

Environmental laws regulate, and impose liability for, releases of hazardous or toxic substances into the environment. Under various provisions of these laws, an owner or operator of real estate may be liable for costs related to soil or groundwater contamination on, in, or migrating to or from its property. Persons who arrange for the disposal or treatment of hazardous or toxic substances may be liable for the costs of cleaning up contamination at the disposal site. Such laws often impose liability regardless of whether the person knew of, or was responsible for, the presence of the hazardous or toxic substances that caused the contamination. The presence of, or contamination resulting from, any of these substances, or the failure to properly remediate them, may adversely affect our ability to sell or rent our property or to borrow using the property as collateral. Persons exposed to hazardous or toxic substances may sue for personal injury damages, for example, some laws impose liability for release of or exposure to asbestos-containing materials, a substance known to be present in a number of our buildings. In other cases, some of our properties have been (or may have been) impacted by contamination from past operations or from off-site sources. As a result, in connection with our current or former ownership, operation, management and development of real properties, we may be potentially liable for investigation and cleanup costs, penalties, and damages under environmental laws.
Although most of our properties have been subjected to preliminary environmental assessments, known as Phase I assessments, by independent environmental consultants that identify certain liabilities, Phase I assessments are limited in scope, and may not include or identify all potential environmental liabilities or risks associated with the property. Unless required by applicable laws or regulations, we may not further investigate, remedy or ameliorate the liabilities disclosed in the Phase I assessments. We cannot assure that these or other environmental studies identified all potential environmental liabilities, or that we will not incur material environmental liabilities in the future. If we do incur material environmental liabilities in the future, we may face significant remediation costs and may find it difficult to sell any affected properties. See Note 17 to our consolidated financial statements in Item 15 of this Report for more detail regarding our buildings that contain asbestos.

Rent control or rent stabilization legislation and other regulatory restrictions may limit our ability to increase rents and pass through new or increased operating costs to our tenants.

We presently expect to continue operating and acquiring properties in areas that have adopted laws and regulations imposing restrictions on the timing or amount of rent increases or have imposed regulations relating to low- and moderate-income housing.

California and various municipalities within Southern California, including the cities of Los Angeles and Santa Monica where our properties are located, have enacted rent control legislation. All of our multifamily properties in Los Angeles County are affected by these laws and regulations. Under current California law we are able to increase rents to market rates once a tenant vacates a rent-controlled unit,unit; however, increases in rental rates for renewing tenants are limited by California, Los Angeles and Santa Monica rent control regulations.

Hawaii does not have state mandated rent control, however portions of the Honolulu multifamily market are subject to low- and moderate-income housing regulations. We have agreed to rent specified percentages of the units at some of our Honolulu multifamily properties to persons with income below specified levels in exchange for certain tax benefits.

These laws and regulations can (i) limit our ability to charge market rents, increase rents, evict tenants or recover increases in our operating expenses, (ii) negatively impact our ability to attract higher-paying tenants, (iii) require us to incur costs for reporting and compliance, and (iv) make it more difficult for us to dispose of properties in certain circumstances. Any failure to comply with these regulations could result in fines, penalties and/or the loss of certain tax benefits and the forfeiture of rents.

We may be unable to complete acquisitions that would grow our business, or successfully integrate and operate acquired properties.  

Our planned growth strategy includes the disciplined acquisition of properties as opportunities arise. Our ability to acquire properties on favorable terms and to successfully integrate and operate them is subject to significant risks, including the following:
•we may be unable to acquire desired properties because of competition from other real estate investors, including other real estate operating companies, publicly-traded REITs and investment funds;
•competition from other potential acquirers may significantly increase the purchase price of a desired property;
•we may acquire properties that are not accretive to our results upon acquisition or we may not successfully manage and
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lease them up to meet our expectations;

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we may be unable to generate sufficient cash from operations, or obtain the necessary debt or equity financing to consummate an acquisition or, if obtained, the financing may not be on favorable terms;
•cash flows from the acquired properties may be insufficient to service the related debt financing;
•we may need to spend more than we budgeted to make necessary improvements or renovations to acquired properties;
•we may spend significant time and money on potential acquisitions that we do not close;
•the process of acquiring or pursuing the acquisition of a property may divert the attention of our senior management team from our existing business operations;
•we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations;
•occupancy and rental rates of acquired properties may be less than expected; and
•we may acquire properties without recourse, or with limited recourse, for liabilities, whether known or unknown, such as clean-up of environmental contamination, claims by tenants, vendors or other persons against the former owners of the properties and claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties.

We may be unable to successfully expand our operations into new markets and submarkets.

If the opportunity arises, we may explore acquisitions of properties in new markets. The risks applicable to our ability to acquire, integrate and operate properties in our current markets are also applicable to our ability to acquire, integrate and operate properties in new markets. In addition to these risks, we will not possess the same level of familiarity with the dynamics and market conditions of any new markets that we may enter, which could adversely affect our ability to expand into those markets. We may be unable to build a significant market share or achieve a desired return on our investments in new markets.

We are exposed to risks associated with property development.

We engage in development and redevelopment activities with respect to certain of our properties. To the extent that we do so, we are subject to certain risks, including the following:
•We may not complete a development or redevelopment project on schedule or within budgeted amounts (as a result of risks beyond our control, such as weather, labor conditions, material shortages and price increases);
•We may be unable to lease the developed or redeveloped properties at budgeted rental rates or lease up the property within budgeted time frames;
•We may devote time and expend funds on development or redevelopment of properties that we may not complete;
•We may encounter delays or refusals in obtaining all necessary zoning, land use, and other required entitlements, and building, occupancy and other required governmental permits and authorizations;
•We may encounter delays, refusals and unforeseen cost increases resulting from third-party litigation or objections;
•We may fail to obtain the financial results expected from properties we develop or redevelop; and
•We have developed and redeveloped properties in the past, however only in a limited manner in recent years, which could adversely affect our ability to develop or redevelop properties or to achieve our expected returns.

We are exposed to certain risks when we enter into JVs or issue securities of our subsidiaries, including our Operating Partnership.

We have and may in the future develop or acquire properties with, or raise capital from, third parties through partnerships, JVs or other entities, or through acquiring or disposing of non-controlling interests in, or sharing responsibility for managing the affairs of, a property, partnership, JV or other entity. This may subject us to risks that may not be present with other methods of ownership, including for example the following:
•We may not be able to exercise sole decision-making authority regarding the properties, partnership, JV or other entity, which would allow for impasses on decisions that could restrict our ability to sell or transfer our interests in such entity or such entity’s ability to transfer or sell its assets;

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•Partners or co-venturers may default on their obligations including those related to capital contributions, debt financing or interest rate swaps, which could delay acquisition, construction or development of a property or increase our financial commitment to the partnership or JV;
•Conflicts of interests with our partners or co-venturers as result of matters such as different needs for liquidity, assessments of the market or tax objectives; ownership of competing interests in other properties; and other business interests, policies or objectives that are competitive or inconsistent with ours;
•If any such jointly owned or managed entity takes or expects to take actions that could jeopardize our status as a REIT or require us to pay tax, we may suffer significantly, including having to dispose of our interest in such entity (if that is possible) or even losing our status as a REIT;
•Our assumptions regarding the tax impact of any structure or transaction could prove to be incorrect, and we could be exposed to significant taxable income, property tax reassessments or other liabilities, including any liability to third parties that we may assume as part of such transaction or otherwise;
•Disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses, affect our ability to develop or operate a property and/or prevent our officers and/or directors from focusing their time and effort on our business;
•We may, in certain circumstances, be liable for the actions of our third-party partners or co-venturers; and
•We may not be able to raise capital as needed from institutional investors or sovereign wealth funds, or on terms that are favorable.

If we default on the ground lease to which one of our properties is subject, our business could be adversely affected.

Some of our properties may be subject to a ground lease. If we default under the terms of such a lease, we may be liable for damages and could lose our ownership interest in the property.

We may not have sufficient cash available for distribution to stockholders at expected levels in the future.

Our distributions could exceed our cash generated from operations. If necessary, we may fund the difference from our existing cash balances or additional borrowings. If our available cash were to decline significantly below our taxable income, we could lose our REIT status unless we could borrow to make such distributions or make any required distributions in common stock.

Our property taxes could increase due to property tax rate changes, reassessments or changes in property tax laws, which would adversely impact our cash flows.

We are required to pay property taxes for our properties, which could increase as property tax rates increase or as our properties are assessed or reassessed by taxing authorities. In California, under current law, reassessment occurs primarily as a result of a “change in ownership”. A potential reassessment may take a considerable amount of time, during which the property taxing authorities make a determination of the occurrence of a “change of ownership”, as well as the actual reassessed value. In addition, from time to time, there have been proposals to base property taxes on commercial properties on their current market value, without any limit based on purchase price. If any similar proposal were adopted, the property taxes we pay could increase substantially. In California, pursuant to an existing state law commonly referred to as Proposition 13, properties are reassessed to market value only at the time of change in ownership or completion of construction, and thereafter, annual property reassessments are limited to 2% increases over the previously assessed values. As a result, Proposition 13 generally results in significant below-market assessed values over time. From time to time, including recently, lawmakers and political coalitions have initiated efforts to repeal or amend Proposition 13 to eliminate its application to commercial and industrial properties. If successful, a repeal of Proposition 13 could substantially increase the assessed values and property taxes for our properties in California.


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If a transaction intended to qualify as a Section 1031 Exchange is later determined to be taxable or if we are unable to identify and complete the acquisition of a suitable replacement property to effect a Section 1031 Exchange, we may face adverse consequences, and if the laws applicable to such transactions are amended or repealed, we may not be able to dispose of properties on a tax deferred basis.

From time to time we may dispose of properties in transactions that are intended to qualify as tax deferred exchanges under Section 1031 of the Code (Section 1031 Exchanges). It is possible that the qualification of a transaction as a Section 1031 Exchange could be successfully challenged and determined to be currently taxable. In such cases, our taxable income would increase as would the amount of distributions we are required to make to satisfy our REIT distribution requirements. This could increase the dividend income to our stockholders by reducing any return of capital they receive. In some circumstances, we may be required to pay additional dividends or, in lieu of that, corporate income tax, possibly including interest and penalties. As a result, we may be required to borrow in order to pay additional dividends or taxes, and the payment of such taxes could cause us to have less cash available to distribute to our stockholders. If a Section 1031 Exchange were later to be determined to be taxable, we may be required to amend our tax returns for the applicable year in question, including any reports we distributed to our stockholders. It is possible that legislation could be enacted that could modify or repeal the laws with respect to Section 1031 Exchanges, which could make it more difficult or not possible for us to dispose of properties on a tax deferred basis.

We face risks associated with contractual counterparties being designated “Prohibited Persons” by the Office of Foreign Assets Control.

The OFAC of the US Department of the Treasury maintains a list of persons designated as terrorists or who are otherwise blocked or banned (“Prohibited Persons”). The OFAC regulations and other laws prohibit conducting business or engaging in transactions with Prohibited Persons. Some of our agreements require us and the other party to comply with the OFAC requirements. If a party with whom we contract is placed on the OFAC list we may be required by the OFAC regulations to terminate the agreement, which could result in a losses or a damage claim by the other party that the termination was wrongful.

Terrorism and war could harm our business and operating results.

The possibility of future terrorist attacks or war could have a negative impact on our operations, even if they are not directed at our properties and even if they never actually occur. Terrorist attacks can also substantially affect the availability and price of insurance coverage for certain types of damages or occurrences, and our insurance policies for terrorism include large deductibles and co-payments. The lack of sufficient insurance for these types of acts could expose us to significant losses.

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Risks Related to Our Organization and Structure

Tax consequences to holders of OP Units upon a sale or refinancing of our properties may cause the interests of our executive officers to differ from the interests of our stockholders.  

Some of our properties were contributed to us in exchange for units of our Operating Partnership. As a result of the unrealized built-in gain attributable to such properties at the time of their contribution, some holders of OP Units, including our executive officers, may suffer different and more adverse tax consequences than holders of our common stock upon the sale or refinancing of the properties owned by our Operating Partnership, including disproportionately greater allocations of items of taxable income and gain upon a realization event. As a result, those holders may have different objectives regarding the appropriate pricing, timing and other material terms of any sale or refinancing of certain properties, or whether to sell or refinance such properties at all.

Our executive officers have significant influence over our affairs.  

At December 31, 2019,2020, our executive officers owned 4% of our outstanding common stock, but they would own 14%15% if they converted all of their OP Units into common stock. As a result, our executive officers, to the extent that they vote their shares in a similar manner, will have significant influence over our affairs and could exercise such influence in a manner that is not in the best interests of our other stockholders, including by attempting to delay, defer or prevent a change of control transaction that might otherwise be in the best interests of our stockholders.

Under their employment agreements, certain of our executive officers will receive severance if they are terminated without cause or resign for good reason.

We have employment agreements with Jordan L. Kaplan, Kenneth M. Panzer and Kevin A. Crummy, which provide each executive with severance if they are terminated without cause or resign for good reason (including following a change of control), based on two or three times (depending on the officer) his annual total of salary, bonus and incentive compensation such as LTIP Units, options or outperformance grants. In addition, these executive officers would not be restricted from competing with us after their departure.

The loss of any of our executive officers or key senior personnel could significantly harm our business.

Our ability to maintain our competitive position is largely dependent upon the skill and effort of our executive officers and key personnel, who have significant real estate industry experience, strong industry reputations and networks, and assist us in identifying acquisition, disposition, development and borrowing opportunities, negotiating with tenants and sellers of properties, and managing our development projects and the operations of our properties. If we lose the services of any of our executive officers or key senior personnel our business could be adversely affected.

Compensation awards to our management may not be tied to or correspond with improved financial results or the market price of our common stock.

The compensation committee of our board of directors is responsible for overseeing our compensation and incentive compensation plans. Our compensation committee has significant discretion in structuring compensation packages and may make compensation decisions based on any number of factors. Compensation awards may not be tied to or correspond with improved financial results or the market price of our common stock. See Note 13 to our consolidated financial statements in Item 15 of this Report for more information regarding our stock-based compensation.

Our board of directors may change significant corporate policies without stockholder approval.

Our investment, financing, borrowing, dividend, operating and other policies are determined by our board of directors. These policies may be amended or revised at any time and from time to time at the discretion of our board of directors without a vote of our stockholders. Our board of directors may change our policies with respect to conflicts of interest provided that such changes are consistent with applicable legal requirements.

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Our growth depends on external sources of capital which are outside of our control.

In order to qualify as a REIT, we are required under the Code to distribute annually at least 90% of our “REIT taxable income", determined without regard to the dividends paid deduction and by excluding any net capital gain. To the extent that we do not distribute all of our net long-term capital gains or at least 90% of our REIT taxable income, we will be required to pay tax thereon at the regular corporate tax rates.rate. Because of these distribution requirements, we may not be able to fund future capital needs from our operating cash flows, including acquisitions, development and debt refinancing. Consequently, we expect to rely on third-party sources to fund some of our capital needs and we may not be able to obtain financing on favorable terms or at all. Any additional borrowings will increase our leverage, and any additional equity that we issue will dilute our common stock. Our access to third-party sources of capital depends on many factors, some of which include:
•general market conditions;
•the market’s perception of our growth potential;

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our current debt levels;
•our current and expected future earnings;
•our cash flows and cash dividends; and
•the market price per share of our common stock.

We face risks associated with short-term liquid investments. 

From time to time, we have significant cash balances that we invest in a variety of short-term money market fund investments that are intended to preserve principal value and maintain a high degree of liquidity while providing current income. These investments are not insured against loss of principal and there is no guarantee that our investments in these funds will be redeemable at par value. If we cannot liquidate our investments or redeem them at par we could incur losses and experience liquidity issues.

Our charter, the partnership agreement of our Operating Partnership, and Maryland law contain provisions that may delay or prevent a change of control transaction.

(i) Our charter contains a five percent ownership limit.

Our charter, subject to certain exceptions, contains restrictions on ownership that limit, and authorizes our directors to take such actions as are necessary and desirable to limit, any person to actual or constructive ownership of not more than five percent of the value or number, whichever is more restrictive, of the outstanding shares of our common stock. Our board of directors, in its sole discretion, may exempt a proposed transferee from the ownership limit. The ownership limit contained in our charter may delay or prevent a transaction or a change of control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders.

(ii) Our board of directors may create and issue a class or series of preferred stock without stockholder approval.

Our board of directors is empowered under our charter to amend our charter to increase or decrease the aggregate number of shares of our common stock or the number of shares of stock of any class or series that we have authority to issue, to designate and issue from time to time one or more classes or series of preferred stock and to classify or reclassify any unissued shares of our common stock or preferred stock without stockholder approval. Our board of directors may determine the relative rights, preferences and privileges of any class or series of preferred stock issued. As a result, we may issue series or classes of preferred stock with preferences, dividends, powers and rights, voting or otherwise, senior to the rights of our common stock holders. The issuance of preferred stock could also have the effect of delaying or preventing a change of control transaction that might otherwise be in the best interests of our stockholders.

(iii) Certain provisions in the partnership agreement of our Operating Partnership may delay or prevent an unsolicited acquisition of us.

Provisions in our Operating Partnership agreement may delay or make more difficult unsolicited acquisitions of us or changes in our control. These provisions could discourage third parties from making proposals involving an unsolicited acquisition of us or change of our control, although some stockholders might consider such proposals, if made, desirable. These provisions include, among others:
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•redemption rights of qualifying parties;
•transfer restrictions on our OP Units;
•the ability of the general partner in some cases to amend the partnership agreement without the consent of the limited partners; and
•the right of the limited partners to consent to transfers of the general partnership interest and mergers under specified circumstances.

Any potential change of control transaction may be further limited as a result of provisions of the partnership unit designation for certain LTIP Units, which require us to preserve the rights of LTIP unit holders and may restrict us from amending the partnership agreement for our Operating Partnership in a manner that would have an adverse effect on the rights of LTIP unit holders.

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(iv) Certain provisions of Maryland law could inhibit changes in control.

Certain provisions of the MGCL may have the effect of inhibiting a third party from making a proposal to acquire us or impeding a change of control under circumstances that otherwise could provide our stockholders with the opportunity to realize a premium over the market price of our common stock, including:
•“business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter impose special appraisal rights and special stockholder voting requirements on these combinations; and
•“control share” provisions that provide that “control shares” of our company (defined as shares which, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

We have elected to opt out of these provisions of the MGCL, in the case of the business combination provisions of the MGCL, by resolution of our board of directors, and in the case of the control share provisions of the MGCL, pursuant to a provision in our bylaws. However, our board of directors may by resolution elect to repeal the foregoing opt-outs from the business combination provisions of the MGCL and we may, by amendment to our bylaws, opt in to the control share provisions of the MGCL in the future.

Our charter, bylaws, our Operating Partnership agreement and Maryland law also contain other provisions that may delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders.

Under their employment agreements, certain of our executive officers will receive severance if they are terminated without cause or resign for good reason.

We have employment agreements with Jordan L. Kaplan, Kenneth M. Panzer and Kevin A. Crummy, which provide each executive with severance if they are terminated without cause or resign for good reason (including following a change of control), based on two or three times (depending on the officer) his annual total of salary, bonus and incentive compensation such as LTIP Units, options or outperformance grants. In addition, these executive officers would not be restricted from competing with us after their departure.

Our fiduciary duties as the sole stockholder of the general partner of our Operating Partnership could create conflicts of interest.

As the sole stockholder of the general partner of our Operating Partnership, we have fiduciary duties to the other limited partners in our Operating Partnership, the discharge of which may conflict with the interests of our stockholders. The limited partners of our Operating Partnership have agreed that, in the event of a conflict in the fiduciary duties owed by us to our stockholders and, in our capacity as general partner of our Operating Partnership, to such limited partners, we are under no obligation to give priority to the interests of such limited partners. The limited partners have the right to vote on certain amendments to the Operating Partnership agreement (which require approval by a majority in interest of the limited partners, including us) and individually to approve certain amendments that would adversely affect their rights. These voting rights may be exercised in a manner that conflicts with the interests of our stockholders. For example, we are unable to modify the rights of limited partners to receive distributions as set forth in the Operating Partnership agreement in a manner that adversely affects their rights without their consent, even though such modification might be in the best interest of our stockholders.

The loss of any of our executive officers or key senior personnel could significantly harm our business.

Our ability to maintain our competitive position is largely dependent on the skill and effort of our executive officers and key senior personnel, who have strong industry reputations, assist us in identifying acquisition and borrowing opportunities, having such opportunities brought to us, and negotiating with tenants and sellers of properties. If we lose the services of any of our executive officers or key senior personnel our business could be adversely affected.


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Our board of directors may change significant corporate policies without stockholder approval.

Our investment, financing, borrowing, dividend, operating and other policies are determined by our board of directors. These policies may be amended or revised at any time and from time to time at the discretion of our board of directors without a vote of our stockholders. Our board of directors may change our policies with respect to conflicts of interest provided that such changes are consistent with applicable legal requirements.

Compensation awards to our management may not be tied to or correspond with improved financial results or the market price of our common stock.

The compensation committee of our board of directors is responsible for overseeing our compensation and incentive compensation plans. Our compensation committee has significant discretion in structuring compensation packages and may make compensation decisions based on any number of factors. Compensation awards may not be tied to or correspond with improved financial results or the market price of our common stock. See Note 13 to our consolidated financial statements in Item 15 of this Report for more information regarding our stock-based compensation.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results.

An effective system of internal control over financial reporting is necessary for us to provide reliable financial reports, prevent fraud and operate successfully as a public company. There can be no guarantee that our internal controls over financial reporting will be effective in accomplishing all control objectives all of the time. Deficiencies, including material weaknesses, in our internal control over financial reporting that may occur in the future could result in material misstatements in our financial reporting, which could result in restatements of our financial statements. Failure to maintain effective internal controls could cause us to not meet our reporting obligations, which could affect our ability to remain listed with the NYSE or result in SEC enforcement actions, and could cause investors to lose confidence in our reported financial information.

Litigation could have an adverse effect on our business.

From time to time, we are party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. An unfavorable resolution of litigation could adversely affect us. Even when there is a favorable outcome, litigation may result in substantial expenses and significantly divert the attention of our management with a similar adverse effect on us.

New accounting pronouncements could adversely affect our operating results or the reported financial performance of our tenants.

Accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Uncertainties posed by various initiatives of accounting standard-setting by the FASB and the SEC, which create and interpret applicable accounting standards for U.S. companies, may change the financial accounting and reporting standards or their interpretation and application of these standards that govern the preparation of our financial statements. Similarly, these changes could have a material impact on our tenants’ reported financial condition or results of operations, credit ratings and preferences regarding leasing real estate. See "New Accounting Pronouncements" in Note 2 to our consolidated financial statements in Item 15 of this Report.


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Risks Related to Taxes and Our Status as a REIT

Prospective investors should consult with their tax advisors regarding the effects of recently enacted tax legislation and other legislative, regulatory and administrative developments.
On December 22, 2017,Our property taxes could increase due to property tax rate changes, reassessments or changes in property tax laws, which would adversely impact our cash flows.

We are required to pay property taxes for our properties, which could increase as property tax rates increase or as our properties are assessed or reassessed by taxing authorities. In California, under current law, reassessment occurs primarily as a result of a “change in ownership”. A potential reassessment may take a considerable amount of time, during which the Tax Cuts and Jobs Act (the “TCJA”) was signed into law. The TCJA makes major changes to the Code, includingproperty taxing authorities make a number of provisionsdetermination of the Code that affectoccurrence of a “change of ownership”, as well as the taxation of REITs and their stockholders. Among the changes made by the TCJA are:
(i)permanently reducing the generally applicable corporate tax rate,
(ii)generally reducing the tax rate applicable to individuals and other non-corporate taxpayers for tax years beginning after December 31, 2017 and before January 1, 2026,
(iii) eliminating or modifying certain previously allowed deductions (including substantially limiting interest deductibility, compensation deductions in excess of $1.0 million per year for certain executives of publicly held corporations and, for individuals, the deduction for non-business state and local taxes),
(iv) for taxable years beginning after December 31, 2017 and before January 1, 2026, providing for preferential rates of taxation through a deduction of upactual reassessed value. In addition, from time to 20% (subjecttime, there have been proposals to certain limitations)base property taxes on most ordinary REIT dividends and certain trade or business income of non-corporate taxpayers, and
(v)imposes new limitations on the deduction of net operating losses, which may result in us having to make additional taxable distributions to our stockholders in order to comply with REIT distribution requirements or avoid taxes on retained income and gains.

The effect of the significant changes made by the TCJA are uncertain, and the IRS has issued only limited guidance to date, additional administrative guidance will be required in order to fully evaluate the effect of many provisions. The effect of any technical corrections with respect to the TCJA could have an adverse effect on us or our stockholders. Investors should consult their tax advisors regarding the implications of the TCJAcommercial properties on their investmentcurrent market value, without any limit based on purchase price. If any similar proposal were adopted, the property taxes we pay could increase substantially. In California, pursuant to an existing state law commonly referred to as Proposition 13, properties are reassessed to market value only at the time of change in ownership or completion of construction, and thereafter, annual property reassessments are limited to 2% increases over the previously assessed values. As a result, Proposition 13 generally results in significant below-market assessed values over time. From time to time, including recently, lawmakers and political coalitions have initiated efforts to repeal or amend Proposition 13 to eliminate its application to commercial and industrial properties. If successful, a repeal of Proposition 13 could substantially increase the assessed values and property taxes for our common stock.properties in California.

Failure to qualify as a REIT would result in higher taxes and reduced cash available for distributions.

We have elected to be taxed as a REIT under the Code, commencing with our initial taxable year ended December 31, 2006. To qualify as a REIT, we must satisfy on a continuing basis certain technical and complex income, asset, organizational, distribution, stockholder ownership and other requirements. See Item 1 "Business Overview" of this Report for more information regarding these tests. Our ability to satisfy these tests depends upon our analysis of and compliance with numerous factors, many of which are not subject to a precise determination and have only limited judicial and administrative interpretations, and which are not entirely within our control. Holding most of our assets through our Operating Partnership further complicates the application of the REIT requirements and a technical or inadvertent mistake could jeopardize our REIT status.  Legislation, new regulations, administrative interpretations or court decisions could significantly change the tax laws with respect to the requirements for qualification as a REIT or the federal income tax consequences of qualification as a REIT. Although we believe that we will continue to qualify as a REIT, we can give no assurance that we have qualified or will continue to qualify as a REIT.

If we were to fail to qualify as a REIT in any taxable year, and certain relief provisions did not apply, we would be subject to federal income tax on our taxable income at the regular corporate rate, and distributions to stockholders would not be deductible by us in computing our taxable income. Any such corporate tax liability could be substantial and would reduce the amount of cash available for distribution to our stockholders. Unless entitled to relief under certain Code provisions, we would also be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a REIT. In addition, if we fail to qualify as a REIT, we would not be required to make distributions to stockholders, and all distributions to stockholders will be subject to tax as dividend income to the extent of our current and accumulated earnings and profits. If we fail to qualify as a REIT for federal income tax purposes and are able to avail ourselves of one or more of the relief provisions under the Code in order to maintain our REIT status, we would nevertheless be required to pay penalty taxes of $50,000 or more for each such failure.


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As a result of the above factors, our failure to qualify as a REIT could impair our ability to raise capital and expand our business, substantially reduce distributions to stockholders, result in us incurring substantial indebtedness (to the extent borrowings are feasible) or liquidating substantial investments in order to pay the resulting taxes, and adversely affect the market price of our common stock.

Our Fund, and two of our consolidated JVs, also own properties through one or more entities which are intended to qualify as REITs, and we may in the future use other structures that include REITs. The failure of any such entities to qualify as a REIT could have similar consequences to the REIT subsidiary and could also cause us to fail to qualify as a REIT.

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If the Operating Partnership, or any of its subsidiaries, were treated as a regular corporation for federal income tax purposes, we could cease to qualify as a REIT.

Although we believe that the Operating Partnership and other subsidiary partnerships, limited liability companies, REIT subsidiaries, QRS and other subsidiaries (other than the TRS) in which we own a direct or indirect interest will be treated for tax purposes as a partnership, disregarded entity (e.g., in the case of a 100% owned limited liability company), REIT or QRS, as applicable, no assurance can be given that the IRS will not successfully challenge the tax classification of any such entity, or that a court would not sustain such a challenge. If the IRS were successful in treating the Operating Partnership or other subsidiaries as entities taxable as a corporation (including a “publicly traded partnership” taxed as a corporation) for federal income tax purposes, we would likely fail to qualify as a REIT and it would significantly reduce the amount of cash available for distribution by such subsidiaries to us.

Even if we qualify as a REIT, we will be required to pay some taxes which would reduce cash available for distributions.

Even if we qualify as a REIT for federal income tax purposes, we will be required to pay certain federal, state and local taxes on our income and property. For example, we will be subject to income tax to the extent that we distribute less than 100% of our REIT taxable income (including capital gains). In addition, any net taxable income earned directly by our TRS, or through entities that are disregarded for federal income tax purposes as entities separate from our TRS, will be subject to federal and possibly state corporate income tax. We have elected to treat severalone of our subsidiaries as TRSs,a TRS, and we may elect to treat other subsidiaries as TRSs in the future. In this regard, several provisions of the laws applicable to REITs and their subsidiaries ensure that a TRS will be subject to an appropriate level of federal income taxation. For example, for taxable years prior to 2018, a TRS is limited in its ability to deduct interest payments made to an affiliated REIT.REIT and, for taxable years after 2017, a TRS is subject to more general limitations on its ability to deduct interest payments to any lender. In addition, the REIT has to pay a 100% tax on some payments that it receives or on some deductions taken by its TRS if the economic arrangements between the REIT, the REIT’s tenants, and the TRS are not comparable to similar arrangements between unrelated parties. In addition, some state and local jurisdictions may tax some of our income even though as a REIT we are not subject to federal income tax on that income because not all states and localities treat REITs the same as they are treated for federal income tax purposes. Moreover, if we have net income from “prohibited transactions,” that income will be subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business. Although we do not intend to hold any properties that would be characterized as held primarily for sale to customers in the ordinary course of our business, such characterization is a factual determination and we cannot guarantee that the IRS would agree with our characterization of our properties. To the extent that we are required to pay federal, state and local taxes, we will have less cash available for distributions to our stockholders.

REIT distribution requirements could adversely affect our liquidity and cause us to forego otherwise attractive opportunities.

To qualify as a REIT, we generally must distribute annually at least 90% of our REIT taxable income, excluding any net capital gains. To the extent that we do not distribute all of our net long-term capital gains or at least 90% of our REIT taxable income, we will be required to pay tax thereon at the regular corporate tax rates.rate. We intend to make distributions to our stockholders to comply with the Code requirements for REITs and to minimize or eliminate our corporate income tax obligation. Certain types of assets and activities generate substantial mismatches between taxable income and available cash.cash, either because of differences in timing between the recognition of income and the actual receipt of cash or because of differences between the deduction of expenses and the actual payment of those expenses. Such assets include rental real estate that has been financed through financing structures which require some or all of available cash flows to be used to service borrowings. As a result, the requirement to distribute a substantial portion of our taxable income could cause us to sell assets in adverse market conditions, borrow on unfavorable terms, make a taxable distribution of our stock as part of a distribution in which stockholders may elect to receive our stock or (subject to a limit measured as a percentage of the total distribution) cash, distribute amounts that could otherwise be used to fund our operations, capital expenditures, acquisitions or repayment of debt, or cause us to forego otherwise attractive opportunities.


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Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.

The maximum federal tax rate (not including the Medicare Contribution Tax on unearned income) applicable to income from “qualified dividends” payable to U.S. stockholders that are individuals, trusts and estates is 20%. Dividends payable by REITs, however, generally are not eligible for the 20% rate. However, under the TCJA, for taxable years beginning after December 31, 2017 and before January 1, 2026, individuals, trusts, and estates generally may deduct up to 20% of ordinary REIT dividends. Although these rules do not adversely affect the taxation of REITs or dividends payable by REITs, investors who are individuals, trusts and estates may perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends.

REIT stockholders can receive taxable income without cash distributions.

Under certain circumstances, REITs are permitted to pay required dividends in shares of their stock rather than in cash. If we were to avail ourselves of that option, our stockholders could be required to pay taxes on such stock distributions without the benefit of cash distributions to pay the resulting taxes.
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If a transaction intended to qualify as a Section 1031 Exchange is later determined to be taxable or if we are unable to identify and complete the acquisition of a suitable replacement property to effect a Section 1031 Exchange, we may face adverse consequences, and if the laws applicable to such transactions are amended or repealed, we may not be able to dispose of properties on a tax deferred basis.

From time to time we may dispose of real properties in transactions that are intended to qualify as tax deferred exchanges under Section 1031 of the Code (Section 1031 Exchanges). It is possible that the qualification of a transaction as a Section 1031 Exchange could be successfully challenged and determined to be currently taxable. In such cases, our taxable income would increase as would the amount of distributions we are required to make to satisfy our REIT distribution requirements. This could increase the dividend income to our stockholders by reducing any return of capital they receive. In some circumstances, we may be required to pay additional dividends or, in lieu of that, corporate income tax, possibly including interest and penalties. As a result, we may be required to borrow in order to pay additional dividends or taxes, and the payment of such taxes could cause us to have less cash available to distribute to our stockholders. If a Section 1031 Exchange were later to be determined to be taxable, we may be required to amend our tax returns for the applicable year in question, including any reports we distributed to our stockholders. It is possible that legislation could be enacted that could modify or repeal the laws with respect to Section 1031 Exchanges, which could make it more difficult or not possible for us to dispose of properties on a tax deferred basis.

Legislative or other actions affecting REITs could have a negative effect on our investors or us, including our ability to maintain our qualification as a REIT or the federal income tax consequences of such qualification.

Federal income tax laws are constantly under review by persons involved in the legislative process, the IRS and the U.S. Department of the Treasury. Changes to the laws could adversely affect us and our investors. New legislation, Treasury Regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to qualify as a REIT, the federal income tax consequences of such qualification, or the federal income tax consequences of an investment in us. Changes to laws relating to the tax treatment of other entities, or an investment in other entities, could make an investment in such other entities more attractive relative to an investment in a REIT.

Non-U.S. investors may be subject to FIRPTA, which would impose tax on certain distributions and on the sale of common stock if we are unable to qualify as a “domestically controlled” REIT or if our stock is not considered to be regularly traded on an established securities market.

A non-U.S. investor disposing of a U.S. real property interest, including shares of a U.S. corporation whose assets consist principally of U.S. real property interests or USRPIs is generally subject to a tax, known as FIRPTA tax, on the gain recognized on the disposition. Such FIRPTA tax does not apply, however, to the disposition of stock in a REIT if the REIT is a “domestically controlled qualified investment entity.” A domestically controlled qualified investment entity includes a REIT in which, at all times during a specified testing period, less than 50% of the value of its shares is held directly or indirectly by non-U.S. holders. In the event that we do not constitute a domestically controlled qualified investment entity, a non-U.S. investor’s sale of our common stock nonetheless will generally not be subject to tax under FIRPTA as a sale of a USRPI, provided that (1) the stock owned is of a class that is “regularly traded” as defined by applicable Treasury regulations, on an established securities market, and (2) the selling non-U.S. investor held 10% or less of our outstanding common stock at all times during a specified testing period. If we were to fail to so qualify as a domestically controlled qualified investment entity and our common stock were to fail to be “regularly traded”, a gain realized by a non-U.S. investor on a sale of our common stock would be subject to FIRPTA tax and applicable withholding. No assurance can be given that we will be a domestically controlled qualified investment entity. Additionally, any distributions we make to our non-U.S. stockholders that are attributable to gain from the sale of any USRPI will also generally be subject to FIRPTA tax and applicable withholdings, unless the recipient non-U.S. stockholder has not owned more than 10% of our common stock at any time during the year preceding the distribution and our common stock is treated as being “regularly traded”.


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General Risks

Security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our IT networks and related systems could harm our business.

We face risks associated with security breaches, whether through cyber attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization and other significant disruptions of our IT networks and related systems. The risk of a security breach or disruption, particularly through cyber attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations (including managing our building systems) and, in some cases, may be critical to the operations of certain of our tenants. Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our efforts will be effective in preventing attempted security breaches or disruptions. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk. A security breach or other significant disruption involving our IT networks and related systems could have an adverse effect on our business, for example:
•Disruption to our networks and systems and thus our operations and/or those of our tenants or vendors;
•Misstated financial reports, violations of loan covenants, missed reporting deadlines and missed permitting deadlines;
•Inability to comply with laws and regulations;
•Unauthorized access to, destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could be used to compete against us or for disruptive, destructive or otherwise harmful purposes;
•Rendering us unable to maintain the building systems relied upon by our tenants;
•The requirement of significant management attention and resources to remedy any damages that result;
•Claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; and
•Damage to our reputation among our tenants, investors, or others.

Litigation could have an adverse effect on our business.

From time to time, we are party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. An unfavorable resolution of litigation could adversely affect us. Even when there is a favorable outcome, litigation may result in substantial expenses and significantly divert the attention of our management with a similar adverse effect on us.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results.

An effective system of internal control over financial reporting is necessary for us to provide reliable financial reports, prevent fraud and operate successfully as a public company. There can be no guarantee that our internal controls over financial reporting will be effective in accomplishing all control objectives all of the time. Deficiencies, including material weaknesses, in our internal control over financial reporting that may occur in the future could result in material misstatements in our financial reporting, which could result in restatements of our financial statements. Failure to maintain effective internal controls could cause us to not meet our reporting obligations, which could affect our ability to remain listed with the NYSE or result in SEC enforcement actions, and could cause investors to lose confidence in our reported financial information.

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New accounting pronouncements could adversely affect our operating results or the reported financial performance of our tenants.

Accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Uncertainties posed by various initiatives of accounting standard-setting by the FASB and the SEC, which create and interpret applicable accounting standards for U.S. companies, may change the financial accounting and reporting standards or their interpretation and application of these standards that govern the preparation of our financial statements. Similarly, these changes could have a material impact on our tenants’ reported financial condition or results of operations, credit ratings and preferences regarding leasing real estate. See "New Accounting Pronouncements" in Note 2 to our consolidated financial statements in Item 15 of this Report.

Item 1B. Unresolved Staff Comments

None.

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Item 2. Properties

We present property level data for our Total Portfolio, except that we present historical capital expenditures for our Consolidated Portfolio.

Office Portfolio Summary as of December 31, 20192020

RegionNumber of PropertiesOur Rentable Square Feet
Region Rentable Square Feet(1)
Our Average Market Share(2)
Los Angeles
   Westside(3)
52 9,995,347 39,258,39935.4 %
   Valley16 6,790,777 21,115,24543.9 
Honolulu(3)
3 1,406,141 4,985,85028.2 
Total / Average71 18,192,265 65,359,49438.0 %

(1)    The rentable square feet in each region is based on the Rentable Square Feet as reported in the 2020 fourth 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 in our total portfolio to each submarket as follows:
RegionSubmarketNumber of PropertiesOur Rentable Square Feet
Our Market Share(2)
WestsideBrentwood15 2,085,745 60.0 %
Westwood7 2,188,007 44.5 
Olympic Corridor5 1,142,885 34.6 
Beverly Hills(3)
11 2,196,067 27.9 
Santa Monica11 1,425,374 14.2 
Century City3 957,269 9.1 
ValleySherman Oaks/Encino12 3,488,995 53.8 
Warner Center/Woodland Hills3 2,845,577 37.6 
Burbank1 456,205 6.5 
Honolulu
Honolulu(3)
3 1,406,141 28.2 
Total / Weighted Average71 18,192,265 38.0 %

(3)    In calculating market share, we adjusted the rentable square footage by (i) removing approximately 277,000 rentable square feet of vacant space at an office building in Honolulu, which we are converting to residential apartments, from both our rentable square footage and that of the submarket and (ii) removing a 218,000 square foot property located just outside the Beverly Hills city limits from both the numerator and the denominator.








28
Region Number of Properties Our Rentable Square Feet 
Region Rentable Square Feet(1)
 
Our Average Market Share(2)
         
Los Angeles        
   Westside(3)
 52
 9,992,932
 37,358,326 37.6%
   Valley 16
 6,790,777
 21,257,083 43.4
Honolulu(3)
 4
 1,562,235
 4,872,939 32.1
Total / Average 72
 18,345,944
 63,488,348 39.3%

(1)The rentable square feet in each region is based on the Rentable Square Feet as reported in the 2019 fourth quarter CBRE Marketview report for our submarkets in that region.
(2)Our market share is calculated by dividing Rentable Square Feet by the applicable Rentable Square Feet, weighted in the case of averages based on the square feet of exposure in our total portfolio to each submarket as follows:

Region Submarket Number of Properties Our Rentable Square Feet 
Our Market Share(2)
         
Westside Brentwood 15
 2,085,745
 62.5%
 Westwood 7
 2,185,592
 51.3
 Olympic Corridor 5
 1,142,885
 33.1
 
Beverly Hills(3)
 11
 2,196,067
 28.6
 Santa Monica 11
 1,425,374
 15.4
 Century City 3
 957,269
 9.4
Valley Sherman Oaks/Encino 12
 3,488,995
 53.4
 Warner Center/Woodland Hills 3
 2,845,577
 37.1
 Burbank 1
 456,205
 6.5
Honolulu 
Honolulu(3)
 4
 1,562,235
 32.1
  Total / Weighted Average 72
 18,345,944
 39.3%

(3)In calculating market share, we adjusted the rentable square footage by (i) removing approximately 202,000 rentable square feet of vacant space at an office building in Honolulu, which we are converting to residential apartments, from both our rentable square footage and that of the submarket and (ii) removing a 218,000 square foot property located just outside the Beverly Hills city limits from both the numerator and the denominator.









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Office Portfolio Percentage Leased and In-place Rents as of December 31, 20192020

Region(1)
 
Percent
Leased
 
Annualized Rent(2)
 
Annualized Rent Per Leased Square Foot(2)
 
Monthly Rent Per Leased Square Foot(2)
Region(1)
Percent
Leased
Annualized Rent(2)
Annualized Rent Per Leased Square Foot(2)
Monthly Rent Per Leased Square Foot(2)
        
Los Angeles        Los Angeles
Westside 93.7% $470,576,030
 $52.58
 $4.38
 Westside89.7 %$470,509,237 $54.37 $4.53 
Valley 92.6
 214,855,878
 35.55
 2.96
 Valley86.5 208,429,511 36.41 3.03 
Honolulu 94.3
 48,661,931
 34.96
 2.91
Honolulu90.8 41,597,947 34.57 2.88 
Total / Weighted Average 93.3% $734,093,839
 $44.80
 $3.73
Total / Weighted Average88.6 %$720,536,695 $46.24 $3.85 

(1)Regional data reflects the following underlying submarket data:

(1)Regional data reflects the following underlying submarket data:
Region Submarket 
Percent
Leased
 
Monthly Rent Per Leased Square Foot(2)
RegionSubmarketPercent
Leased
Monthly Rent Per Leased Square Foot(2)
    
Westside Beverly Hills 96.4% $4.38
WestsideBeverly Hills93.5 %$4.54 
Brentwood 91.0
 3.83
Brentwood87.5 3.96 
Century City 93.7
 4.24
Century City91.1 4.24 
Olympic Corridor 93.6
 3.37
Olympic Corridor89.9 3.40 
Santa Monica 95.2
 6.23
Santa Monica89.7 6.59 
Westwood 92.5
 4.25
Westwood87.1 4.42 
Valley Burbank 100.0
 4.28
ValleyBurbank100.0 4.51 
Sherman Oaks/Encino 94.3
 3.13
Sherman Oaks/Encino86.5 3.18 
Warner Center/Woodland Hills 89.4
 2.49
Warner Center/Woodland Hills84.4 2.56 
Honolulu Honolulu 94.3
 2.91
HonoluluHonolulu90.8 2.88 
 Weighted Average 93.3% $3.73
Weighted Average88.6 %$3.85 

(2)Does not include signed leases not yet commenced, which are included in percent leased but excluded from annualized rent.
(2) Does not include signed leases not yet commenced, which are included in percent leased but excluded from annualized rent.

Office Lease Diversification as of December 31, 20192020

Portfolio Tenant Size
MedianAverage
Square feet2,6005,600

Office LeasesRentable Square FeetAnnualized Rent
Square Feet Under LeaseNumberPercentAmountPercentAmountPercent
2,500 or less1,342 48.2 %1,898,57512.2 %$85,216,915 11.8 %
2,501-10,0001,087 39.0 5,313,734 34.1 241,978,877 33.6 
10,001-20,000232 8.3 3,231,737 20.8 142,440,890 19.8 
20,001-40,00091 3.3 2,513,815 16.1 116,359,825 16.1 
40,001-100,00030 1.1 1,714,355 11.0 89,122,704 12.4 
Greater than 100,0004 0.1 910,353 5.8 45,417,484 6.3 
Total for all leases2,786 100.0 %15,582,569100.0 %$720,536,695 100.0 %
29
Portfolio Tenant Size
 Median Average
    
Square feet2,700 5,600

  Office Leases Rentable Square Feet Annualized Rent
Square Feet Under Lease Number Percent Amount Percent Amount Percent
             
2,500 or less 1,406
 47.9% 1,961,349
 12.0% $86,387,301
 11.8%
2,501-10,000 1,150
 39.2
 5,647,365
 34.5
 248,326,228
 33.8
10,001-20,000 243
 8.3
 3,357,323
 20.5
 144,200,267
 19.7
20,001-40,000 99
 3.4
 2,722,556
 16.6
 121,979,833
 16.6
40,001-100,000 32
 1.1
 1,789,354
 10.9
 89,728,037
 12.2
Greater than 100,000 4
 0.1
 908,539
 5.5
 43,472,173
 5.9
Total for all leases 2,934
 100.0% 16,386,486
 100.0% $734,093,839
 100.0%

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Largest Office Tenants as of December 31, 20192020

The table below presents 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 RentTenantNumber of LeasesNumber of Properties
Lease Expiration(1)
Total Leased Square FeetPercent of Rentable Square FeetAnnualized RentPercent of Annualized Rent
            
Time Warner(2)
 3
 3
  2020-2024 468,775
 2.5% $23,892,512
 3.2%
Time Warner(2)
33 2023 - 2024468,8192.6 %$25,152,727 3.5 %
UCLA(3)
 26
 10
  2020-2027 335,996
 1.8
 16,964,929
 2.3
UCLA(3)
2610 2021 - 2027340,0001.8 17,745,785 2.5 
William Morris Endeavor(4)
 2
 1
 2022-2027 213,539
 1.2
 12,415,744
 1.7
William Morris Endeavor(4)
3 1 2022 - 2027215,353 1.2 12,906,988 1.8 
Morgan Stanley(5)
 5
 5
 2022-2027 145,488
 0.8
 9,340,152
 1.3
Morgan Stanley(5)
5 5 2022 - 2027145,488 0.8 9,684,650 1.3 
Equinox Fitness(6)
 5
 5
 2024-2033 181,177
 1.0
 8,744,891
 1.2
Equinox Fitness(6)
5 5 2024 - 2033185,236 1.0 9,373,770 1.3 
Total 41
 24
 1,344,975
 7.3% $71,358,228
 9.7%Total42241,354,8967.4 %$74,863,920 10.4 %

(1)Expiration dates are per lease (expiration dates do not reflect storage and similar leases).
(2)Square footage expires as follows: 2,000 square feet in 2020, 10,000 square feet in 2023, and 456,000 square feet in 2024.
(3)Square footage expires as follows: 36,000 square feet in 2020, 72,000 square feet in 2021, 55,000 square feet in 2022, 46,000 square feet in 2023, 10,000 square feet in 2024, 49,000 square feet in 2025, and 67,000 square feet in 2027. Tenant has options to terminate 31,000 square feet in 2020, 16,000 square feet in 2023, and 51,000 square feet in 2025.
(4)Square footage expires as follows: 1,000 square feet in 2022 and 213,000 square feet in 2027. Tenant has an option to terminate 2,000 square feet in 2020 and 212,000 square feet in 2022.
(5)Square footage expires as follows: 16,000 square feet in 2022, 30,000 square feet in 2023, 26,000 square feet in 2025, and 74,000 square feet in 2027. Tenant has options to terminate 30,000 square feet in 2021, 26,000 square feet in 2022, and 32,000 square feet in 2024.
(6)Square footage expires as follows: 34,000 square feet in 2024, 31,000 square feet in 2027, 44,000 square feet in 2028, 42,000 square feet in 2030, and 30,000 square feet in 2033.
(1)    Expiration dates are per lease (expiration dates do not reflect storage and similar leases).
(2)    Square footage (rounded) expires as follows: 13,000 square feet in 2023; and 456,000 square feet in 2024.
(3)    Square footage (rounded) expires as follows: 67,000 square feet in 2021; 55,000 square feet in 2022; 47,000 square feet in 2023; 11,000 square feet in 2024; 89,000 square feet in 2025; 5,000 square feet in 2026; and 67,000 square feet in 2027. Tenant has options to terminate 16,000 square feet in 2023; and 51,000 square feet in 2025.
(4)    Square footage (rounded) expires as follows: 1,000 square feet in 2022; and 209,000 square feet in 2027. Tenant has an option to terminate 214,000 square feet in 2022.
(5)    Square footage (rounded) expires as follows: 16,000 square feet in 2022; 30,000 square feet in 2023; 26,000 square feet in 2025; and 74,000 square feet in 2027. Tenant has options to terminate 26,000 square feet in 2022; and 32,000 square feet in 2024.
(6)    Square footage (rounded) expires as follows: 34,000 square feet in 2024; 31,000 square feet in 2027; 44,000 square feet in 2028; 46,000 square feet in 2030; and 30,000 square feet in 2033.

Office Industry Diversification as of December 31, 20192020

IndustryNumber of LeasesAnnualized Rent as a Percent of Total
Legal57618.3 %
Financial Services38514.9 
Entertainment19213.5 
Real Estate30012.0 
Accounting & Consulting3199.9 
Health Services3517.6 
Retail1785.6 
Technology974.7 
Insurance1003.7 
Educational Services543.6 
Public Administration912.6 
Advertising441.2 
Manufacturing & Distribution491.1 
Other501.3 
Total2,786100.0 %


30
Industry Number of Leases Annualized Rent as a Percent of Total
     
Legal 578 18.0%
Financial Services 392 15.0
Entertainment 235 13.7
Real Estate 297 11.5
Accounting & Consulting 346 10.0
Health Services 371 7.4
Retail 183 5.8
Technology 123 4.9
Insurance 102 3.9
Educational Services 58 3.6
Public Administration 91 2.4
Advertising 58 1.4
Manufacturing & Distribution 55 1.2
Other 45 1.2
Total 2,934 100.0%


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Office Lease Expirations as of December 31, 20192020 (assuming non-exercise of renewal options and early termination rights)

Year of Lease ExpirationNumber of
Leases		Rentable
Square Feet		Expiring
Square Feet
as a Percent of Total		Annualized Rent at December 31, 2020Annualized
Rent as a
Percent of Total
Annualized
Rent Per
Leased Square Foot(1)
Annualized
Rent Per
Leased
Square
Foot at Expiration(2)
Short Term Leases86 300,680 1.6 %$10,769,281 1.5 %$35.82 $35.45 
2021633 2,419,731 13.3 107,378,723 14.9 44.38 44.28 
2022583 2,469,833 13.6 109,318,544 15.2 44.26 46.44 
2023494 2,623,371 14.4 122,533,662 17.0 46.71 50.23 
2024331 2,365,979 13.0 111,748,524 15.5 47.23 52.51 
2025275 1,671,450 9.2 78,199,196 10.8 46.79 54.25 
2026171 1,249,005 6.9 57,738,131 8.0 46.23 56.33 
202794 1,256,409 6.9 60,992,313 8.5 48.54 59.36 
202845 399,403 2.2 21,685,413 3.0 54.29 71.21 
202923 152,691 0.8 6,755,741 0.9 44.24 56.30 
203029 422,916 2.3 20,660,248 2.9 48.85 66.91 
Thereafter22 251,101 1.4 12,756,919 1.8 50.80 72.09 
Subtotal/weighted average2,786 15,582,569 85.7 720,536,695 100.0 46.24 51.82 
Signed leases not commenced216,833 1.2 
Available2,076,598 11.4 
Building management use119,712 0.6 
BOMA adjustment (3)
196,553 1.1 
Total/Weighted Average2,786 18,192,265 100.0 %$720,536,695 100.0 %$46.24 $51.82 

(1)Represents annualized rent at December 31, 2020 divided by leased square feet.
(2)Represents annualized rent at expiration divided by leased square feet.
(3)Represents the square footage adjustments for leases that do not reflect BOMA remeasurement.
31
Year of Lease ExpirationNumber of
Leases		 Rentable
Square Feet		 Expiring
Square Feet
as a Percent of Total		 Annualized Rent at December 31, 2019 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 Leases90
 388,857
 2.1% $15,542,730
 2.1% $39.97
 $40.07
2020603
 2,280,149
 12.4
 94,274,941
 12.8
 41.35
 41.93
2021608
 2,671,166
 14.5
 114,622,103
 15.6
 42.91
 44.77
2022520
 2,368,191
 12.9
 101,568,616
 13.8
 42.89
 46.67
2023379
 2,350,706
 12.8
 109,054,580
 14.9
 46.39
 51.74
2024291
 2,213,656
 12.1
 102,218,624
 13.9
 46.18
 53.30
2025193
 1,389,093
 7.6
 63,364,148
 8.6
 45.62
 55.62
202688
 770,888
 4.2
 37,218,326
 5.1
 48.28
 60.98
202775
 1,074,520
 5.9
 51,969,743
 7.1
 48.37
 61.86
202839
 363,667
 2.0
 20,345,515
 2.8
 55.95
 72.38
202926
 164,083
 0.9
 7,169,890
 1.0
 43.70
 57.83
Thereafter22
 351,510
 1.9
 16,744,623
 2.3
 47.64
 74.12
Subtotal/weighted average2,934
 16,386,486
 89.3
 734,093,839
 100.0
 44.80
 50.87
Signed leases not commenced 360,085
 1.9
        
Available  1,223,319
 6.7
        
Building management use 121,450
 0.7
        
BOMA adjustment (3)
  254,604
 1.4
        
Total/Weighted Average2,934
 18,345,944
 100.0% $734,093,839
 100.0% $44.80
 $50.87

(1)Represents annualized rent at December 31, 2019 divided by leased square feet.
(2)Represents annualized rent at expiration divided by leased square feet.
(3)Represents the square footage adjustments for leases that do not reflect BOMA remeasurement.

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Historical Office Tenant Improvements and Leasing Commissions

Year Ended December 31,
Year Ended December 31, 202020192018
2019 2018 2017
Renewals     
Renewal leasesRenewal leases   
Number of leases450
 467
 482
Number of leases438 450 467 
Square feet2,068,345
 2,420,185
 2,213,716
Square feet1,990,974 2,068,345 2,420,185 
Tenant improvement costs per square foot (1)
$12.47
 $9.22
 $11.47
Tenant improvement costs per square foot (1)
$8.98 $12.47 $9.22 
Leasing commission costs per square foot (1)
7.61
 10.15
 7.77
Leasing commission costs per square foot (1)
6.99 7.61 10.15 
Total costs per square foot (1)
$20.08
 $19.37
 $19.24
Total costs per square foot (1)
$15.97 $20.08 $19.37 
     
New leases 
  
  
New leases   
Number of leases354
 332
 337
Number of leases228 354 332 
Square feet1,362,489
 1,195,118
 1,189,808
Square feet700,509 1,362,489 1,195,118 
Tenant improvement costs per square foot (1)
$26.41
 $24.63
 $28.22
Tenant improvement costs per square foot (1)
$25.46 $26.41 $24.63 
Leasing commission costs per square foot (1)
10.73
 9.30
 12.26
Leasing commission costs per square foot (1)
9.41 10.73 9.30 
Total costs per square foot (1)
$37.14
 $33.93
 $40.48
Total costs per square foot (1)
$34.87 $37.14 $33.93 
     
Total 
  
  
Total leasesTotal leases   
Number of leases804
 799
 819
Number of leases666 804 799 
Square feet3,430,834
 3,615,303
 3,403,524
Square feet2,691,483 3,430,834 3,615,303 
Tenant improvement costs per square foot (1)
$17.93
 $14.31
 $17.32
Tenant improvement costs per square foot (1)
$13.27 $17.93 $14.31 
Leasing commission costs per square foot (1)
8.84
 9.87
 9.34
Leasing commission costs per square foot (1)
7.62 8.84 9.87 
Total costs per square foot (1)
$26.77
 $24.18
 $26.66
Total costs per square foot (1)
$20.89 $26.77 $24.18 

(1)Tenant improvements and leasing commissions are reported in the period in which the lease is signed. Tenant improvements are based on signed leases, or, for leases in which a tenant improvement allowance was not specified, the amount budgeted at the time the lease commenced.

(1)Tenant improvements and leasing commissions are reported in the period in which the lease is signed. Tenant improvements are based on signed leases, or, for leases in which a tenant improvement allowance was not specified, the amount budgeted at the time the lease commenced.


Historical Office Recurring Capital Expenditures (consolidated office portfolio)
 Year Ended December 31,
202020192018
Recurring capital expenditures(1)
$3,887,091 $4,043,540 $3,684,483 
Total square feet(1)
14,851,378 14,785,961 13,784,509 
Recurring capital expenditures per square foot(1)
$0.26 $0.27 $0.27 

(1)We excluded the following properties:
a.For 2020, we excluded eleven properties with an aggregate 3.0 million square feet.
b.For 2019, we excluded twelve properties with an aggregate 3.2 million square feet.
c.For 2018, we excluded ten properties with an aggregate 2.8 million square feet.
32
 Year Ended December 31,
 2019 2018 2017
      
Recurring capital expenditures(1)
$4,043,540
 $3,684,483
 $3,537,175
Total square feet(1)
14,785,961
 13,784,509
 13,700,370
Recurring capital expenditures per square foot(1)
$0.27
 $0.27
 $0.26

(1)For 2019, we excluded eleven properties with an aggregate 3.2 million square feet. For 2018 and 2017, we excluded ten properties with an aggregate 2.8 million square feet.

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Multifamily Portfolio as of December 31, 20192020

Submarket Number of Properties Number of Units Units as a Percent of TotalSubmarketNumber of PropertiesNumber of UnitsUnits as a Percent of Total
      
Los Angeles      Los Angeles
Santa Monica 2 820
 20% Santa Monica2820 19 %
West Los Angeles 6 1,300
 31
 West Los Angeles61,300 30 
Honolulu(1)
 3 2,041
 49
Honolulu(1)
42,167 51 
Total 11 4,161
 100%Total124,287 100 %
      
Submarket Percent Leased 
Annualized Rent(2)
 Monthly Rent Per Leased UnitSubmarketPercent Leased
Annualized Rent(2)
Monthly Rent Per Leased Unit
      
Los Angeles      Los Angeles
Santa Monica 99.1% $29,961,408
 $3,075
 Santa Monica98.2 %$29,485,080 $3,056 
West Los Angeles 98.1
 48,843,348
 3,197
 West Los Angeles98.2 42,053,964 2,967 
Honolulu(1)
 97.8
 44,281,644
 1,852
Honolulu(1)
98.2 47,838,660 1,879 
Total / Weighted Average 98.1% $123,086,400
 $2,516
Total / Weighted Average98.2 %$119,377,704 $2,422 

(1)
(1)    Includes newly developed units just made available for rent.
(2)The multifamily portfolio also includes 10,495 square feet of ancillary retail space generating annualized rent of $408,077, which is not included in multifamily annualized rent.

(2)     The multifamily portfolio also includes 10,495 square feet of ancillary retail space generating annualized rent of $423,145, which is not included in multifamily annualized rent.


Historical Multifamily Recurring Capital Expenditures

Year Ended December 31, Year Ended December 31,
2019 2018 2017202020192018
     
Recurring capital expenditures(1)(2)
$3,191,162
 $2,564,003
 $1,693,466
Recurring capital expenditures(1)(2)
$2,666,273 $3,191,162 $2,564,003 
Total units(1)(2)
3,324
 3,324
 3,380
Total units(1)(2)
3,230 3,324 3,324 
Recurring capital expenditures per unit(1)
$960
 $772
 $507
Recurring capital expenditures per unit(1)
$832 $960 $772 

(1)Recurring capital expenditures are costs associated with the turnover of units. Our multifamily portfolio includes a large number of units that, due to Santa Monica rent control laws, have had only modest rent increases since 1979. During 2019, when a tenant vacated one of these units, we incurred on average $55 thousand per unit to bring the unit up to our standards. We classify these capital expenditures as non-recurring.
(2)For 2019, we excluded two properties, one that we acquired in 2019 and another with newly developed units, with an aggregate 837 apartments.

(1)Recurring capital expenditures are costs associated with the turnover of units. Our multifamily portfolio includes a large number of units that, due to Santa Monica rent control laws, have had only modest rent increases since 1979. During 2020, when a tenant vacated one of these units, we incurred on average $25 thousand per unit to bring the unit up to our standards. We classify these capital expenditures as non-recurring.
(2)We excluded the following properties:
a.For 2020, we excluded four properties, with an aggregate 1057 units.
b.For 2019, we excluded two properties with an aggregate 837 units.


Item 3. Legal Proceedings

From time to time, we are party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. Excluding ordinary, routine litigation incidental to our business, we are not currently a party to any legal proceedings that we believe would reasonably be expected to have a materially adverse effect on our business, financial condition or results of operations.

Item 4. Mine Safety Disclosures
    
None.


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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market for Common Stock; Dividends
Our common stock is traded on the NYSE under the symbol “DEI”. On December 31, 2019,2020, the closing price of our common stock was $29.18.

$43.90.
The table below presents the dividends declared for our common stock as reported by the NYSE:


 First QuarterSecond QuarterThird QuarterFourth Quarter
2020    
Dividend declared$0.28 $0.28 $0.28 $0.28 
2019    
Dividend declared$0.26 $0.26 $0.26 $0.28 

  First Quarter Second Quarter Third Quarter Fourth Quarter
2019        
         
Dividend declared $0.26
 $0.26
 $0.26
 $0.28
         
2018  
  
  
  
         
Dividend declared $0.25
 $0.25
 $0.25
 $0.26


Holders of Record

We had 1315 holders of record of our common stock on February 7, 2020.12, 2021. Many of the shares of our common stock are held in “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number.

Sales of Unregistered Securities

On November 21, 2019, we issued 332 thousand OP Units valued at $14.4 million to existing investors in one of our previously unconsolidated Funds in connection with the purchase of equity in that Fund. Each OP Unit can be exchanged into one share of our common stock (or its cash equivalent at our option). This issuance did not involve underwriters or any public offering. We believe that the issuance of OP Units is exempt from the registration requirements of the Securities Act under Rule 506 of Regulation D promulgated under the Securities Act and Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving any public offering. There was no advertising, general promotion or other marketing undertaken in connection with the issuance. The investors represented and warranted that (i) they acquired the OP Units for investment purposes only and not for the purpose of further distribution, (ii) they had sufficient knowledge and experience in financial and business matters and the ability to bear the economic risk of its investment, and (iii) that the OP Units were taken for investment purposes and not with a view to resale in violation of applicable securities laws.None.

Repurchases of Equity Securities

None.

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Performance Graph

The information below shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, other than as provided in Item 201 of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, except to the extent we specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.


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The graph below compares the cumulative total return on our common stock from December 31, 20142015 to December 31, 20192020 to the cumulative total return of the S&P 500, NAREIT Equity and an appropriate “peer group” index (assuming a $100 investment in our common stock and in each of the indexes on December 31, 2014,2015, and that all dividends were reinvested into additional shares of common stock at the frequency with which dividends are paid on the common stock during the applicable fiscal year). The total return performance presented in this graph is not necessarily indicative of, and is not intended to suggest, the total future return performance.


nysedei-20201231_g2.jpg
chart-953f3db59df45f0290f.jpg

               
   Period Ending 
 Index 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 
               
 DEI 100.00
 113.05
 136.10
 156.57
 133.80
 176.56
 
 S&P 500 100.00
 101.38
 113.51
 138.29
 132.23
 173.86
 
 
NAREIT Equity(1)
 100.00
 103.20
 111.99
 117.84
 112.39
 141.61
 
 
Peer group(2)
 100.00
 97.97
 103.38
 103.81
 88.76
 110.00
 
               
 Period Ending
Index12/31/1512/31/1612/31/1712/31/1812/31/1912/31/20
DEI100.00 120.39 138.50 118.36 156.18 107.99 
S&P 500100.00 111.96 136.40 130.42 171.49 203.04 
NAREIT Equity(1)
100.00 108.52 114.19 108.91 137.23 126.25 
Peer group(2)
100.00 105.53 105.97 90.60 112.96 77.00 

(1)FTSE NAREIT Equity REITs index.
(2)Consists of Boston Properties, Inc. (BXP), Kilroy Realty Corporation (KRC), SL Green Realty Corp. (SLG), Vornado Trust (VNO) and Hudson Pacific Properties, Inc (HPP).

(1)FTSE NAREIT Equity REITs index.
32
(2)Consists of Boston Properties, Inc. (BXP), Kilroy Realty Corporation (KRC), SL Green Realty Corp. (SLG), Vornado Trust (VNO) and Hudson Pacific Properties, Inc (HPP).
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Item 6. Selected Financial Data

The table below presents selected consolidated financial and operating data and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements included in Items 7 and 15 in this Report, respectively.

None.
35
 Year Ended December 31,
 2019 2018 2017 2016 2015
Consolidated Statements of Operations Data
(In thousands):
         
Total office revenues$816,755
 $777,931
 $715,546
 $645,633
 $540,975
Total multifamily revenues$119,927
 $103,385
 $96,506
 $96,918
 $94,799
Total revenues$936,682
 $881,316
 $812,052
 $742,551
 $635,774
Operating income$242,708
 $251,944
 $241,023
 $220,817
 $189,527
Net income attributable to common stockholders$363,713
 $116,086
 $94,443
 $85,397
 $58,384
Per Share Data: 
  
  
  
  
Net income attributable to common stockholders per share - basic$2.09
 $0.68
 $0.58
 $0.57
 $0.40
Net income attributable to common stockholders per share - diluted$2.09
 $0.68
 $0.58
 $0.55
 $0.39
Weighted average common shares outstanding (in thousands): 
  
  
  
  
Basic173,358
 169,893
 160,905
 149,299
 146,089
Diluted173,358
 169,902
 161,230
 153,190
 150,604
Dividends declared per common share$1.06
 $1.01
 $0.94
 $0.89
 $0.85
 
 
 As of December 31,
 2019 2018 2017 2016 2015
Consolidated Balance Sheet Data (In thousands): 
  
  
  
  
Total assets$9,349,301
 $8,261,709
 $8,292,641
 $7,613,705
 $6,066,161
Secured notes payable and revolving credit facility, net$4,619,058
 $4,134,030
 $4,117,390
 $4,369,537
 $3,611,276
Property Data: 
  
  
  
  
Number of consolidated properties(1)
81
 73
 73
 69
 64

(1)Excludes properties owned by our unconsolidated Fund(s).


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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our consolidated financial statements and related notes in Part IV, Item 15 of this Report.  Our results of operations for the yearsyear ended December 31, 2019 and 20182020 were affected by a property acquisition, consolidation ofdisposition, a JV,loan refinancing, hedging, and development activity repositionings and loan refinancings - see Acquisitions,Dispositions, Financings and Hedging, Developments and Repositionings further below.

Business DescriptionOverview

Douglas Emmett, Inc. is a fully integrated, self-administered and self-managed REIT. Through our interest in our Operating Partnership and its subsidiaries, our consolidated JVs and our unconsolidated Fund, we are one of the largest owners and operators of high-quality office and multifamily properties in Los Angeles County, California and in Honolulu, Hawaii. We focus on owning, acquiring, developing and managing 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. As of December 31, 2019,2020, our portfolio consisted of the following (including ancillary retail space):

      
  
Consolidated Portfolio(1)
 
Total Portfolio(2)
 
 Office    
 Class A Properties70 72 
 Rentable Square Feet (in thousands)17,960 18,346 
 Leased rate93.3% 93.3% 
 Occupied rate91.5% 91.4% 
      
 Multifamily    
 Properties11 11 
 Units4,161 4,161 
 Leased rate98.1% 98.1% 
 Occupied rate95.2% 95.2% 
      
 
Consolidated Portfolio(1)
Total Portfolio(2)
Office
Class A Properties6971
Rentable Square Feet (in thousands)17,80718,192
Leased rate88.6%88.6%
Occupancy rate87.4%87.4%
Multifamily
Properties1212
Units4,2874,287
Leased rate98.2%98.2%
Occupancy rate94.2%94.2%

(1)
Our Consolidated Portfolio includes the properties in our consolidated results. Through our subsidiaries, we own 100% of these properties, except for seventeen office properties totaling 4.3
(1)     Our Consolidated Portfolio includes the properties in our consolidated results. Through our subsidiaries, we own 100% of these properties, except for sixteen office properties totaling 4.2 million square feet and one residential property with 350 apartments, which we own through three consolidated JVs. Our Consolidated Portfolio also includes two land parcels from which we receive ground rent from ground leases to the owners of a Class A office building and a hotel.
(2)     and one residential property with 350 apartments, which we own through four consolidated JVs. Our Consolidated Portfolio also includes two land parcels from which we receive ground rent from ground leases to the owners of a Class A office building and a hotel.
(2)Our Total Portfolio includes our Consolidated Portfolio as well as two properties totaling 0.4 million square feet owned by our unconsolidated Fund. See Note 6 to our consolidated financial statements in Item 15 of this Report for more information about our unconsolidated Fund.

Revenues by Segment and Location

During the year ended December 31, 2019, revenues from our Consolidated Portfolio was derived as follows:

chart-e7cecfff2fa857919d5.jpg______chart-d41bba435d3b5137836.jpg

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Acquisitions, Financings, Developments and Repositionings

Acquisitions

On June 7, 2019, we acquired The Glendon, a residential community in Westwood with 350 apartments and approximately 50,000 square feet of retail, for $365.1 million. On June 28, 2019, we completed the contribution of the property to a consolidated JV that we manage and in which we own a twenty percent capital interest. The acquisition and related working capital was funded with a $160.0 million interest-only loan, a $44.0 million capital contribution by us and a $176.0 million capital contribution by other investors. See second quarter financing transactions below for more information regarding the funding for this acquisition. See Note 3 to our consolidated financial statements in Item 15 of this Report for more information regardingabout our unconsolidated Fund.

Revenues by Segment and Location

During the year ended December 31, 2020, revenues from our Consolidated Portfolio was derived as follows:

nysedei-20201231_g3.jpg______nysedei-20201231_g4.jpg
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Impact of the COVID-19 Pandemic on our Business

Our buildings have remained open and available to our tenants throughout the pandemic. Our rent collections continue to be negatively impacted by the pandemic and our markets' very tenant-oriented lease enforcement moratoriums, which are considerably out of sync with other gateway markets. However, during the third and fourth quarters we did see some incremental improvements in rent collections and leasing activity.

The governmental authorities in the jurisdictions in which we primarily operate, Los Angeles, Beverly Hills and Santa Monica, have passed unusually punitive COVID-19 pandemic ordinances prohibiting evictions and allowing rent deferral for residential, retail, and office tenants, regardless of financial distress. The ordinances cover our residential, retail and office tenants (with some carve outs for large tenants) and generally prohibit landlords not only from evicting tenants but also from imposing any late fees or interest and allow tenants to pay back the deferred rent over a certain period.

At the end of the second, third and fourth quarters, we wrote off certain tenant receivables and deferred rent receivables, and we had a significant decrease in our parking revenues due to lower utilization. For the year ended December 31, 2020, charges for uncollectible amounts related to tenant receivables and deferred rent receivables, which were primarily due to the COVID-19 pandemic, reduced our office revenues by $41.0 million. If we subsequently collect amounts that were previously written off, then the amounts collected will be recorded as an increase to our rental revenues and tenant recoveries in the period they are collected. See "Rental Revenues and Tenant Recoveries" in Note 2 to our consolidated financial statements in Item 15 of this acquisition.Report. We cannot predict how the COVID-19 pandemic will impact our future collections. During the second, third and fourth quarters, we had savings from variable expenses which partly offset the write-offs of tenant receivables and deferred rent receivables and the decrease in our parking revenues.

While our tenant retention was in-line with long-term averages, our total office portfolio leased percentage declined by 4.7% during 2020 to 88.6% as of December 31, 2020, as new leasing volume remained below pre-COVID-19 levels. As of December 31, 2020, our multifamily portfolio remained essentially fully leased at 98%.

Other considerations that could impact our future leasing, rent collections, and revenue include:

•How long the pandemic continues.
•Whether the local governments that have authorized rent deferrals in our markets modify or extend the deferral terms, or alternatively allow them to expire as written.
•Whether more tenants stop paying rent if the impact to their business grows.
•How attendance in our buildings changes and drives parking revenue or rent collection.
•How leasing activity and occupancy will evolve.

On November 21, 2019,the capital front, construction is continuing on our two large multifamily development projects, although the projects may take a little longer under current conditions.

Overall, we acquired an additional 16.3%expect the COVID-19 pandemic to continue to adversely impact many parts of our business, and those impacts have been, and will continue, to be material. For more information of the equityrisks to our business, please see Item 1A "Risk Factors" in onethis Report.

37
Table of our previously unconsolidated Funds, Fund X,Contents


Dispositions, Financings and Hedging, Developments and Repositionings

Dispositions

In December 2020, we closed on the sale of an 80,000 square foot office property in exchangeHonolulu, which was held by a consolidated JV in which we owned a two-thirds capital interest, for $76.9a contract price of $21.0 million in cash, resulting in a gain of $6.4 million after transaction costs. We closed a health club that we owned and 332 thousand OP Units valuedoperated at $14.4 million, which increased our ownership in the Fund to 89.0%. In connection with this transaction,respective property shortly before we restructuredsold the Fund with the one remaining institutional investor. The new JV is a VIE, and as a result of the amended operating agreement, we became the primary beneficiary of the VIE and commenced consolidating the JV on November 21, 2019. The JV owns six Class A office properties totaling 1.5 million square feet in the prime Los Angeles submarkets of Beverly Hills, Santa Monica, Sherman Oaks/Encino and Warner Center. The JV also owns an interest of 9.4% in our remaining unconsolidated Fund, Partnership X, which owns two additional Class A office properties totaling 386,000 square feet in Beverly Hills and Brentwood. The results of the consolidated JV are included in our operating results from November 21, 2019.property.

Financings and Hedging

•During the first quarter of 2019:2020, we entered into forward interest rate swaps to hedge future term-loan refinancings. The forward swaps have an initial notional amount of $495.0 million, with effective dates ranging from June 2020 to March 2021, and maturity dates ranging from April 2025 to June 2025, fixing the one-month LIBOR interest rate in a range of 0.74% to 0.91%.
◦In March 2019, we renewed our $400.0 million revolving credit facility, releasing two previously encumbered properties, lowering the borrowing rate and unused facility fees, and extending the maturity date. The renewed facility bears interest at LIBOR + 1.15% and matures on August 21, 2023.

•During the second quarter of 2019:
◦We closed a secured, non-recourse $255.0 million interest-only loan scheduled to mature in June 2029. The loan bears interest at LIBOR + 0.98%, which we have effectively fixed through an interest rate swap at 3.26% until June 2027. We used the proceeds to pay off a $145.0 million loan that was scheduled to mature in October 2019.
◦We closed a secured, non-recourse $125.0 million interest-only loan scheduled to mature in June 2029. The loan bears interest at LIBOR + 0.98%, which we have effectively fixed through interest rate swaps at 2.55% until December 2020, which then increases to 3.25% until June 2027. We used the proceeds to pay off a $115.0 million loan that was scheduled to mature in December 2025.
◦We closed a secured, non-recourse $160.0 million interest-only loan scheduled to mature in June 2029. The loan bears interest at LIBOR + 0.98%, which we have effectively fixed through an interest rate swap at 3.25% until July 2027. We used the proceeds to partially fund the acquisition of The Glendon property. This loan has been assumed by the consolidated JV to which we contributed The Glendon property.
◦We entered into a forward interest rate swap to extend the fixed-rate period for a term loan with a principal balance of $102.4 million, scheduled to mature in April 2025, for three years. We also entered into forward interest rate swaps with an initial notional amount of $75.0 million, effective as of September 2019 and scheduled to mature in August 2025, fixing one-month LIBOR at 1.97%, to hedge the $415.0 million term-loan we closed in the third quarter - see third quarter financing transactions below.
◦We issued 4.9 million shares of our common stock under our ATM program for net proceeds of $201.0 million. We used a portion of the funds to partially fund the acquisition of The Glendon property, and a portion of the funds to pay off a $220.0 million loan in the third quarter - see third quarter financing transactions below.
◦Other investors in the consolidated JV to which we contributed The Glendon property contributed $176.0 million to the JV to fund the acquisition of the property, and we contributed $44.0 million to the JV.
During the third quarter2020, we refinanced a loan for one of 2019:
◦We paid off a $220.0 million loan scheduled to mature in December 2023 and terminated the related interest rate swaps.
◦We closed a secured, non-recourse $415.0our consolidated JVs. We closed a secured, non-recourse $450.0 million interest-only loan, scheduled to mature in August 2026. The loan bears interest at LIBOR + 1.10%, which we have effectively fixed through interest rate swaps at 2.58% until

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April 2020, which then increases to 3.07% until August 2025. Part of the proceeds were used to pay-off a $340.0 million loanis scheduled to mature in May 2027. The loan bears interest at LIBOR + 1.35%, which was effectively fixed at 2.26% following the expiration of the current swaps, for an average fixed interest rate of 2.6% per annum through April 2022.
◦We closed a secured, non-recourse $400.0 million interest-only loan scheduled to mature in September 2026. The loan bears interest at LIBOR + 1.15%, which we have effectively fixed through interest rate swaps at 2.44% until September 2024. The proceeds were used to pay-off a $400.0 million loan scheduled to mature in November 2022.
◦We closed a secured, non-recourse $200.0 million interest-only loan scheduled to mature in September 2026. The loan bears interest at LIBOR + 1.20%, which we have effectively fixed through interest rate swaps at 2.77% until July 2020, which then decreases to 2.36% until October 2024. Part2025. We used part of the proceeds were used to pay off a $180.0 million loan scheduled to mature in July 2022.
During the fourth quarter of 2019proceeds to pay off a $400.0 million loan, secured by the same properties, that was scheduled to mature in July 2024.
◦We closed a secured, non-recourse $400.0 million interest-only loan scheduled to mature in November 2026. The loan bears interest at LIBOR + 1.15%, which we have effectively fixed through interest rate swaps at 2.18% until July 2021, which increases to 2.31% until October 2024. Part of the proceeds were used to pay off a $360.0 million loan scheduled to mature in June 2023.

See Notes 8 and 10 to our consolidated financial statements in Item 15 of this Report for more information regarding our debt and derivatives, respectively.

Developments

•Residential High-Rise Tower, Brentwood, California
In West Los Angeles, we are building a 34 story high-rise apartment building with 376 apartments. The tower is being built on a site that is directly adjacent to an existing office building and a 712 unit residential property, both of which we own. We expect the cost of the development to be approximately $180 million to $200 million, which does not include the cost of the land which we have owned since 1997. As part of the project, we are investing additional capital to build a one-acreone acre park on Wilshire Boulevard that will be available to the public and provide a valuable amenity to our surrounding properties and community. Construction continues on the project, although we may face some delays as a result of the impact of the COVID-19 pandemic on permitting and other logistics. We currently expect constructionthe first units to take about three years.be delivered in 2022.
At our Moanalua Hillside Apartments in
•1132 Bishop Street, Honolulu, we completed the construction of an additional 491 new apartments on 28 acres which now join our existing 680 apartments. We also invested additional capital to upgrade the existing buildings, improve the parking and landscaping, build a new leasing and management office, and construct a new fitness center and two pools.Hawaii
In downtown Honolulu, we are converting a 25 story, 490 thousand square foot office tower into approximately 500 apartments. We expectThis project will help address the severe shortage of rental housing in Honolulu and revitalize the central business district. The conversion to occuris occurring in phases over a number of years as the office space is vacated. We currently estimate the construction costs to be approximately $80 million to $100.0$100 million, although the inherent uncertainties of development are compounded by the multi-year and phased nature of the conversion. Assuming timely city approvals, we expectconversion and potential impacts from the firstCOVID-19 pandemic. We began leasing the new units to be delivered induring the second quarter of 2020. This project will help address the severe shortage of rental housing in Honolulu, and revitalize the central business district.

Repositionings

We often strategically purchase properties with large vacancies or expected near-term lease roll-over and use our knowledge of the property and submarket to reposition the property for the optimal use and tenant mix. In addition, we may reposition properties already in our portfolio. The work we undertake to reposition a building typically takes months or even years, and could involve a range of improvements from a complete structural renovation to a targeted remodeling of selected spaces. During the repositioning, the affected property may display depressed rental revenue and occupancy levels that impact our results and, therefore, comparisons of our performance from period to period. We have temporarily suspended work on new office repositioning projects due to the COVID-19 pandemic.


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Table of Contents



Rental Rate Trends - Total Portfolio

Office Rental Rates

Our office rental rates for 2020 were primarily impacted by the COVID-19 pandemic.

The table below presents the average annual rental rate per leased square foot and the annualized lease transaction costs per leased square foot for leases executed in our total office portfolio:portfolio during the respective periods:

             
   Year Ended December 31, 
   2019 2018 2017 2016 2015 
             
 
Average straight-line rental rate(1)(2)
 $49.65 $48.77 $44.48 $43.21 $42.65 
 
Annualized lease transaction costs(3)
 $6.02 $5.80 $5.68 $5.74 $4.77 
             
 Year Ended December 31,
20202019201820172016
Average straight-line rental rate(1)(2)
$45.26$49.65$48.77$44.48$43.21
Annualized lease transaction costs(3)
$5.11$6.02$5.80$5.68$5.74

(1)These average rental rates are not directly comparable from year to year because the averages are significantly affected from period to period by factors such as the buildings, submarkets, and types of space and terms involved in the leases executed during the respective reporting period. Because straight-line rent takes into account the full economic value of each lease, including rent concessions and escalations, we believe that it may provide a better comparison than ending cash rents, which include the impact of the annual escalations over the entire term of the lease.
(2)Reflects the weighted average straight-line Annualized Rent.
(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 and leases for tenants relocated from space being taken out of service.
(1)These average rental rates are not directly comparable from year to year because the averages are significantly affected from period to period by factors such as the buildings, submarkets, and types of space and terms involved in the leases executed during the respective reporting period. Because straight-line rent takes into account the full economic value of each lease, including rent concessions and escalations, we believe that it may provide a better comparison than ending cash rents, which include the impact of the annual escalations over the entire term of the lease.
(2)Reflects the weighted average straight-line Annualized Rent.
(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 and leases for tenants relocated from space at the landlords request.

Office Rent Roll

The table below presents the rent roll for new and renewed leases per leased square foot executed in our total office portfolio:

Year Ended December 31, 2020
Rent Roll(1)(2)
Expiring
Rate(2)
New/Renewal Rate(2)
Percentage Change
Cash Rent$43.02$44.162.6%
Straight-line Rent$38.71$45.2616.9%

(1)Represents the average annual initial stabilized cash and straight-line rents per square foot on new and renewed leases signed during the year 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 from space at landlord's request, leases modified by workout agreements, retail leases, and leases in acquired buildings where we believe the information about the prior agreement is incomplete or where we believe base rent reflects other off-market inducements to the tenant.
(2)Our office rent roll can fluctuate from period to period as a result of changes in our submarkets, buildings and term of the expiring leases, making these metrics difficult to predict.
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  Year Ended December 31, 2019 
        
 
Rent Roll(1)(2)
Expiring
Rate(2)
 
New/Renewal Rate(2)
 Percentage Change 
        
 Cash Rent$42.91 $47.25 10.1% 
 Straight-line Rent$38.92 $49.65 27.6% 
        

(1)Represents the average annual initial stabilized cash and straight-line rents per square foot on new and renewed leases signed during the year compared to the prior leases for the same space. Excludes Short Term Leases, leases where the prior lease was terminated more than a year before signing of the new lease, leases for tenants relocated from space being taken out of service, and leases in acquired buildings where we believe the information about the prior agreement is incomplete or where we believe base rent reflects other off-market inducements to the tenant that are not reflected in the prior lease document.
(2)Our office rent roll can fluctuate from period to period as a result of changes in our submarkets, buildings and term of the expiring leases, making these metrics difficult to predict.

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Multifamily Rental Rates

Our multifamily rental rates for 2020 were primarily impacted by the COVID-19 pandemic.

The table below presents the average annual rental rate per leased unit for new tenants:
             
   Year Ended December 31, 
   2019 2018 2017 2016 2015 
             
 
Average annual rental rate - new tenants(1)
 $28,350
 $27,542
 $28,501
 $28,435
 $27,936
 
             
 Year Ended December 31,
20202019201820172016
Average annual rental rate - new tenants(1)
$28,416 $28,350 $27,542 $28,501 $28,435 

(1)These average rental rates are not directly comparable from year to year because of changes in the properties and units included. For example: (i) the average for 2018 decreased from 2017 because we added a significant number of units at our Moanalua Hillside Apartments development in Honolulu, where the rental rates are lower than the average in our portfolio, and (ii) the average for 2019 increased from 2018 because we acquired The Glendon where higher rental rates offset the effect of adding additional units at our Moanalua Hillside Apartments development.
(1)    These average rental rates are not directly comparable from year to year because of changes in the properties and units included. For example: (i) the average for 2018 decreased from 2017 because we added a significant number of units at our Moanalua Hillside Apartments development in Honolulu, where the rental rates are lower than the average in our portfolio, and (ii) the average for 2019 increased from 2018 because we acquired The Glendon where higher rental rates offset the effect of adding additional units at our Moanalua Hillside Apartments development.

Multifamily Rent Roll

The rent on leases subject to rent change during the year ended December 31, 20192020 (new tenants and existing tenants undergoing annual rent review) was 0.9% higher3.4% lower than the prior rent on the same unit.


Occupancy Rates - Total Portfolio

Our occupancy rates for 2020 were primarily impacted by the COVID-19 pandemic.

The tables below present the occupancy rates for our total office portfolio and multifamily portfolio:

 December 31,
Occupancy Rates(1) as of:
20202019201820172016
Office portfolio87.4 %91.4 %90.3 %89.8 %90.4 %
Multifamily portfolio(2)
94.2 %95.2 %97.0 %96.4 %97.9 %

 Year Ended December 31,
Average Occupancy Rates(1)(3):
20202019201820172016
Office portfolio89.5 %90.7 %89.4 %89.5 %90.6 %
Multifamily portfolio(2)
94.2 %96.5 %96.6 %97.2 %97.6 %

(1)Occupancy rates include the impact of property acquisitions, most of whose occupancy rates at the time of acquisition were below that of our existing portfolio.
(2)The Occupancy Rate for our multifamily portfolio was impacted by our acquisition of The Glendon property in 2019 and by new units at our Moanalua Hillside Apartments development in Honolulu in 2019 and 2018.
(3)Average occupancy rates are calculated by averaging the occupancy rates at the end of each of the quarters in the period and at the end of the quarter immediately prior to the start of the period.
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   December 31, 
 
Occupancy Rates(1) as of:
 2019 2018 2017 2016 2015 
             
 Office portfolio 91.4% 90.3% 89.8% 90.4% 91.2% 
 
Multifamily portfolio(2)
 95.2% 97.0% 96.4% 97.9% 98.0% 
             

             
   Year Ended December 31, 
 
Average Occupancy Rates(1)(3):
 2019 2018 2017 2016 2015 
             
 Office portfolio 90.7% 89.4% 89.5% 90.6% 90.9% 
 
Multifamily portfolio(2)
 96.5% 96.6% 97.2% 97.6% 98.2% 
             

(1)Occupancy rates include the impact of property acquisitions, most of whose occupancy rates at the time of acquisition were below that of our existing portfolio.
(2)The Occupancy Rate for our multifamily portfolio was impacted by an acquisition in 2019 and by new units at our Moanalua Hillside Apartments development in Honolulu in 2019 and 2018 - see "Acquisitions, Financings, Developments and Repositionings" above.
(3)Average occupancy rates are calculated by averaging the occupancy rates at the end of each of the quarters in the period and at the end of the quarter immediately prior to the start of the period.

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Office Lease Expirations

As of December 31, 2019,2020, assuming non-exercise of renewal options and early termination rights, we expect to see expiring square footage in our total office portfolio is as follows:

chart-03ec8b90d3ef5ffe891.jpgnysedei-20201231_g5.jpg

(1) Average of the percentage of leases at December 31, 2016, 2017, 2018, and 20182019 with the same remaining duration as the leases for the labeled year had at December 31, 2019.2020. Acquisitions are included in the prior year average commencing in the quarter after the acquisition.





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Results of Operations

Comparison of 2020 to 2019
Year Ended December 31,Favorable
20202019(Unfavorable)%Commentary
(In thousands)
Revenues
Office rental revenue and tenant recoveries$680,359 $694,315 $(13,956)(2.0)%The decrease was primarily due to: (i) a decrease of $58.4 million in rental revenue and tenant recoveries from properties that we owned throughout both periods and (ii) a decrease of $3.5 million in rental revenues and tenant recoveries from a building we are converting from an office building to residential building in Hawaii, partly offset by (a) an increase of $46.4 million of rental revenues and tenant recoveries from a JV we consolidated in November 2019 and (b) an increase of $1.5 million in rental revenues and tenant recoveries from a property that we purchased in June 2019. The decrease in properties that we owned throughout both periods was primarily due to write-offs of uncollectible receivables and deferred rent receivables and lower collections, both as a result of the COVID-19 pandemic.
Office parking and other income$90,810 $122,440 $(31,630)(25.8)%The decrease was due to a decrease of $37.5 million in parking and other income from properties we owned throughout both periods, primarily due to a decrease in parking activity as a result of the COVID-19 pandemic, partly offset by an increase of $6.0 million in parking and other income from a JV we consolidated in November 2019.
Multifamily revenue$120,354 $119,927 $427 0.4 %The increase was due to an increase of: (i) $5.0 million in revenue from a property that we purchased in June 2019, (ii) an increase of $1.9 million in revenue from the new apartments at our Moanalua Hillside Apartments development, and (iii) an increase of $1.0 million in revenues from an office building we are converting to a residential building in Hawaii, partly offset by (a) a decrease of $4.7 million in revenues at a property where units are temporarily unoccupied as a result of a fire, and (b) a decrease of $2.8 million in revenues from our other properties, which was primarily due to lower occupancy and collections, both as a result of the COVID-19 pandemic. Multifamily revenues for 2020 included $3.9 million of insurance proceeds related to the fire at one of our properties in January 2020.
Operating expenses
Office rental expenses$268,259 $264,482 $(3,777)(1.4)%The increase was due to: (i) $17.4 million in rental expenses from a JV we consolidated in November 2019, and (ii) an increase of $0.7 million in rental expenses from a property we purchased in June 2019, partly offset by (a) a decrease of $1.6 million in rental expenses from an office building we are converting to a residential building in Hawaii, and (b) a decrease of $12.7 million in rental expenses from our other properties, which was primarily due to a decrease in scheduled services expenses, utility expenses, and repairs and maintenance expenses, as a result of lower utilization caused by the COVID-19 pandemic.
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Year Ended December 31,Favorable
20202019(Unfavorable)%Commentary
(In thousands)
Multifamily rental expenses$37,154 $33,681 $(3,473)(10.3)%The increase was primarily due to an increase of $2.8 million in rental expenses from the property we purchased in June 2019, and an increase of $0.2 million in rental expenses from the new apartments at our Moanalua Hillside Apartments development.
General and administrative expenses$39,601 $38,068 $(1,533)(4.0)%The increase was primarily due to an increase in personnel expenses.
Depreciation and amortization$385,248 $357,743 $(27,505)(7.7)%The increase was due to: (i) depreciation and amortization of $31.4 million from a JV we consolidated in November 2019, (ii) an increase of $3.2 million in depreciation and amortization from the property we purchased in June 2019, partly offset by (a) a decrease of $2.8 million in depreciation and amortization from an office building we are converting to a residential building in Hawaii, due to less accelerated depreciation of the building in 2020, and (b) a decrease of $4.4 million for our other properties, which was primarily due to property repositioning activity in 2019.
Non-Operating Income and Expenses
Other income$16,288 $11,653 $4,635 39.8 %The increase was due to a $13.1 million gain from insurance recoveries related to property damage to a building impacted by a fire, partly offset by (i) a decrease of $4.8 million in revenue from a health club in Honolulu that we owned and operated and closed permanently in the fourth quarter of 2020, (ii) a decrease of $1.6 million in income related to our Fund that was consolidated as a JV in November 2019, and (iii) a decrease of $2.1 million in interest income due to lower money market balances and interest rates.
Other expenses$(2,947)$(7,216)$4,269 59.2 %The decrease was primarily due to a decrease of $3.2 million in expenses for the health club in Honolulu that we closed permanently in the fourth quarter of 2020 and a decrease in expenses of $0.9 million related to our Fund that was consolidated as a JV in November 2019.
Income from unconsolidated Funds$430 $6,923 $(6,493)(93.8)%The decrease was primarily due to the consolidation of one of our Funds as a JV in November 2019 and a decrease in income from our remaining Fund in 2020. The decrease in income from our remaining Fund was primarily due to the Fund's lower net income in 2020 as a result of write-offs of uncollectible receivables and deferred rent receivables, lower collections, and a decrease in parking income, which were all as a result of the COVID-19 pandemic.
Interest expense$(142,872)$(143,308)$436 0.3 %The decrease was primarily due to loan costs expensed in connection with our debt refinancing activities in 2019, partly offset by interest expense from the debt of a JV that was consolidated in November 2019 and interest expense from the debt to finance the property we purchased in June 2019.
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Year Ended December 31,Favorable
20202019(Unfavorable)%Commentary
(In thousands)
Gain on sale of investment in real estate$6,393 $— $6,393 100.0 %The increase is due to the sale of an 80,000 square foot office property in Honolulu, which was held by a consolidated JV in which we owned a two-thirds capital interest. We closed on the sale in December 2020 for a contract price of $21.0 million in cash.
Gain from consolidation of JV$— $307,938 $(307,938)(100.0)%The decrease is due to the gain in 2019 from the consolidation of a JV in November 2019 that was previously accounted for as an unconsolidated Fund using the equity method.

Comparison of 2019 to 2018

             
   Year Ended December 31, Favorable     
   2019 2018 (Unfavorable) % Commentary 
             
   (In thousands)     
 Revenues 
             
 Office rental revenue and tenant recoveries $694,315
 $661,147
 $33,168
 5.0 % The increase was due to (i) an increase of $25.4 million of rental revenue and tenant recoveries from properties that we owned throughout both periods, due to higher rental and occupancy rates, (ii) $6.6 million of rental revenue and tenant recoveries from a JV we consolidated in November 2019, and (iii) $2.5 million of rental revenue and tenant recoveries from retail space at the residential community we acquired in June 2019, partly offset by (iv) a decrease of $1.3 million of rental revenue and tenant recoveries at an office building we are converting to a residential building in Hawaii. 
 Office parking and other income $122,440
 $116,784
 $5,656
 4.8 % The increase was due to (i) an increase in parking and other income of $3.9 million from properties we owned throughout both periods, due to higher occupancy and rates, (ii) $1.2 million of parking and other income from a JV we consolidated in November 2019, and (iii) $0.8 million of parking and other income from retail space at the residential community we acquired in June 2019, partly offset by (iv) a decrease of $0.3 million in parking and other income at an office building we are converting to a residential building in Hawaii. 
 Multifamily revenue $119,927
 $103,385
 $16,542
 16.0 % The increase was due to (i) revenues of $9.7 million from the residential community we acquired in June 2019, (ii) an increase in revenues of $4.8 million from the new apartments at our Moanalua Hillside Apartments development, and (iii) an increase in revenues of $2.0 million at our other residential properties, which was primarily due to an increase in rental revenues due to higher rental rates. 
             
 Operating expenses 
             
 Office rental expenses $264,482
 $252,751
 $(11,731) (4.6)% The increase was due to (i) an increase of $9.0 million of rental expenses from properties that we owned throughout both periods, (ii) $2.4 million of rental expenses from a JV we consolidated in November 2019, and (iii) $0.8 million of rental expenses from retail space at the residential community we acquired in June 2019, partly offset by (iv) a decrease of $0.5 million in rental expenses at an office building we are converting to a residential building in Hawaii. The increase in rental expenses from properties that we owned throughout both periods was due to an increase in utility expenses, property taxes, personnel expenses, repairs and maintenance expenses, scheduled services expenses and insurance expense. 
             

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   Year Ended December 31, Favorable     
   2019 2018 (Unfavorable) % Commentary 
             
   (In thousands)     
             
 Multifamily rental expenses $33,681
 $28,116
 $(5,565) (19.8)% The increase was due to (i) $3.2 million of rental expenses from the residential community we acquired in June 2019, (ii) an increase in rental expenses of $1.3 million at our residential properties that we owned throughout both periods, and (iii) an increase in rental expenses of $1.1 million from the new apartments at our Moanalua Hillside Apartments development. The increase in rental expenses from properties that we owned throughout both periods was due to an increase in property taxes, scheduled services expenses, personnel expenses and repairs and maintenance expenses. 
 General and administrative expenses $38,068
 $38,641
 $573
 1.5 % The decrease was primarily due to a decrease in personnel expenses. 
 Depreciation and amortization $357,743
 $309,864
 $(47,879) (15.5)% The increase was due to (i) an increase in depreciation and amortization of $28.0 million from an office building we are converting to a residential building in Hawaii, due to accelerated depreciation of the building, (ii) $6.0 million of depreciation and amortization from the residential community that we acquired in June 2019, (iii) $3.0 million from a JV we consolidated in November 2019, (iv) an increase in depreciation and amortization of $2.3 million from the new apartments at our Moanalua Hillside Apartments development, and (v) an increase of $8.7 million at our other properties, which reflects activity at our repositioning properties and an increase in investment in real estate balances. 
             
 Non-Operating Income and Expenses 
             
 Other income $11,653
 $11,414
 $239
 2.1 % The increase was primarily due to an increase in interest income and an increase in revenue from the health club that we own and operate. 
 Other expenses $(7,216) $(7,744) $528
 6.8 % The decrease was primarily due to a decrease in expenses related to our property management and other services we provide to our Funds and a decrease in acquisition expenses. 
 Income from unconsolidated Funds $6,923
 $6,400
 $523
 8.2 % The increase was primarily due to an increase in net income from our unconsolidated Funds, which was primarily due to an increase in revenues due to an increase in occupancy and rental rates. 
 Interest expense $(143,308) $(133,402) $(9,906) (7.4)% The increase was primarily due to loan costs incurred in connection with our debt refinancing activities during the current year. 
 Gain from consolidation of JV $307,938
 $—
 $307,938
 100.0 % The gain is due to the consolidation of a JV in November 2019 that was previously accounted for as an unconsolidated Fund using the equity method. 
       

Comparison of 2018 to 2017

See Item 7 of Part II in our Annual Report on Form 10-K for the year ended December 31, 20182019 filed with the SEC on February 15, 201914, 2020 for a discussion of our results of operations for the year ended December 31, 2018.

2019.
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Non-GAAP Supplemental Financial Measure: FFO

Usefulness to Investors

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 the 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 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 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. FFO should be considered only as a supplement to net income 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. See "Results of Operations" above for a discussion of the items that impacted our net income.

Comparison of 20192020 to 20182019

Our FFO increasedresults for 2020 were primarily impacted by $25.1the COVID-19 pandemic. Our FFO decreased by $52.3 million, or 6.3%12.3%, to $372.5 million for 2020 compared to $424.8 million for 2019, compared to $399.7 million for 2018, which was primarily due toto: (i) an increasea decrease in the operating income from our office portfolio (office revenues less office rental expenses), which was primarily due to lower collections, write-offs of uncollectible receivables and deferred rent receivables, and a decrease in parking income, and (ii) a decrease in the operating income from our multifamily portfolio (multifamily revenues less multifamily rental expenses), which was primarily due to an increase in occupancyproperty taxes, insurance premiums and rental rates, and operating income from retail space at The Glendon residential community we acquired in June 2019, and (ii) an increase in operating income from our residential portfolio due to operating income from apartments at The Glendon residential community and leasing of new units at our Moanalua Hillside Apartments development, which was partially offset by (iii) loan costs incurred in connection with the new loans we closed.

personnel expenses.

Comparison of 20182019 to 20172018

See Item 7 of Part II in our Annual Report on Form 10-K for the year ended December 31, 20182019 filed with the SEC on February 15, 201914, 2020 for a discussion of our FFO for the year ended December 31, 2018.2019.

Reconciliation to GAAP

The table below reconciles our FFO (the FFO attributable to our common stockholders and noncontrolling interests in our Operating Partnership - which includes our share of our consolidated JVs and our unconsolidated Funds FFO) to net income attributable to common stockholders computed in accordance with GAAP:
 Year Ended December 31,
(In thousands)20202019
  
Net income attributable to common stockholders$50,421 $363,713 
Depreciation and amortization of real estate assets(1)
385,248 357,743 
Net (loss) income attributable to noncontrolling interests(1)
(11,868)54,985 
Adjustments attributable to unconsolidated Funds (1)(2)
2,739 15,815 
Adjustments attributable to consolidated JVs (1)(3)
(47,606)(59,505)
Gain on sale of investment in real estate(6,393)— 
Gain from consolidation of JV(1)
— (307,938)
FFO$372,541 $424,813 

(1)We restructured one of our unconsolidated Funds in November 2019 after which it was consolidated as a JV. The various adjustments in the reconciliation of FFO are therefore not directly comparable to the prior period. See Note 6 to our consolidated financial statements in item 15 of this Report for more information.
(2)Adjusts for our share of our unconsolidated Funds depreciation and amortization of real estate assets.
(3)Adjusts for the net income (loss) and depreciation and amortization of real estate assets that is attributable to the noncontrolling interests in our consolidated JVs.
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   Year Ended December 31, 
 (In thousands) 2019 2018 
       
 Net income attributable to common stockholders $363,713
 $116,086
 
 Depreciation and amortization of real estate assets 357,743
 309,864
 
 Net income attributable to noncontrolling interests 54,985
 12,526
 
 
Adjustments attributable to unconsolidated Funds (1)
 15,815
 16,702
 
 
Adjustments attributable to consolidated JVs (2)
 (59,505) (55,448) 
 Gain from consolidation of JV (307,938) —
 
 FFO $424,813
 $399,730
 
       

(1)Adjusts for our share of our unconsolidated Funds depreciation and amortization of real estate assets.
(2)Adjusts for the net income and depreciation and amortization of real estate assets that is attributable to the noncontrolling interests in our consolidated JVs.

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Non-GAAP Supplemental Financial Measure: Same Property NOI

Usefulness to Investors

We report Same Property NOI to facilitate a comparison of our operations between reported periods. Many investors use Same Property NOI to evaluate our operating performance and to compare our operating performance with other REITs, because it can reduce the impact of investing transactions on operating trends. Same Property NOI is a non-GAAP financial measure for which we believe that net income is the most directly comparable GAAP financial measure.  We report Same Property 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.  Same Property 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 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 REITs may not calculate Same Property NOI in the same manner. As a result, our Same Property NOI may not be comparable to the Same Property NOI of other REITs. Same Property NOI should be considered only as a supplement to net income 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. 

Comparison of 20192020 to 2018:2019:

Our 2019 same properties for 2020 included 60 office properties, aggregating 15.516.1 million Rentable Square Feet, and 98 multifamily properties with an aggregate 2,6401,928 units. The amounts presented includereflect 100% (not our pro-rata share). Our Same Property results for 2020 were primarily impacted by the COVID-19 pandemic.

Year Ended December 31,Favorable
20202019(Unfavorable)%Commentary
(In thousands)
Office revenues$694,653 $789,223 $(94,570)(12.0)%The decrease was primarily due to: (i) a decrease in rental revenues due to lower collections and write-offs of uncollectible receivables and deferred rent receivables, (ii) a decrease in parking income due to lower activity, and (iii) a decrease in tenant recoveries due to a decrease in
recoverable operating costs and lower collections and write-offs of uncollectible receivables.
Office expenses(239,032)(251,384)12,352 4.9 %The decrease was primarily due to a decrease in parking expenses, utility expenses, and janitorial expenses.
Office NOI455,621 537,839 (82,218)(15.3)%
Multifamily revenues59,286 62,969 (3,683)(5.8)%The decrease was primarily due to a decrease in rental revenues due to lower collections, rental rates and occupancy.
Multifamily expenses(16,319)(16,075)(244)(1.5)%The increase was primarily due to an increase in insurance expenses and personnel expenses.
Multifamily NOI42,967 46,894 (3,927)(8.4)%
Total NOI$498,588 $584,733 $(86,145)(14.7)%
46
            
  Year Ended December 31, Favorable     
  2019 2018 (Unfavorable) % Commentary 
  (In thousands)     
            
 Office revenues$760,616
 $726,096
 $34,520
 4.8 % The increase was primarily due to (i) an increase in rental revenues due to an increase in rental and occupancy rates, (ii) an increase in tenant recoveries due to an increase in recoverable operating costs and (iii) an increase in parking and other income. 
 Office expenses(241,130) (232,377) (8,753) (3.8)% The increase was primarily due to an increase in property taxes, insurance, utility expenses, personnel expenses and repairs and maintenance expenses. 
 Office NOI519,486
 493,719
 25,767
 5.2 %   
            
 Multifamily revenues85,716
 84,601
 1,115
 1.3 % The increase was primarily due to (i) an increase in rental revenues due to an increase in rental rates and (ii) parking and other income. 
 Multifamily expenses(21,997) (21,522) (475) (2.2)% The increase was primarily due to an increase in personnel expenses, repairs and maintenance expenses and utility expenses. 
 Multifamily NOI63,719
 63,079
 640
 1.0 %   
            
 Total NOI$583,205
 $556,798
 $26,407
 4.7 %   
            

43



Reconciliation to GAAP

The table below presents a reconciliation of our Same Property NOI to net income attributable to common stockholders:

      
  Year Ended December 31, 
 (In thousands)2019 2018 
      
 Same Property NOI$583,205
 $556,798
 
 Non-comparable office revenues56,139
 51,835
 
 Non-comparable office expenses(23,352) (20,374) 
 Non-comparable multifamily revenues34,211
 18,784
 
 Non-comparable multifamily expenses(11,684) (6,594) 
 NOI638,519
 600,449
 
 General and administrative expenses(38,068) (38,641) 
 Depreciation and amortization(357,743) (309,864) 
 Operating income242,708
 251,944
 
 Other income11,653
 11,414
 
 Other expenses(7,216) (7,744) 
 Income from unconsolidated Funds6,923
 6,400
 
 Interest expense(143,308) (133,402) 
 Gain from consolidation of JV307,938
 —
 
 Net income418,698
 128,612
 
 Less: Net income attributable to noncontrolling interests(54,985) (12,526) 
 Net income attributable to common stockholders$363,713
 $116,086
 
      


Year Ended December 31,
(In thousands)20202019
Same Property NOI$498,588 $584,733 
Non-comparable office revenues76,516 27,532 
Non-comparable office expenses(29,227)(13,098)
Non-comparable multifamily revenues61,068 56,958 
Non-comparable multifamily expenses(20,835)(17,606)
NOI586,110 638,519 
General and administrative expenses(39,601)(38,068)
Depreciation and amortization(385,248)(357,743)
Other income16,288 11,653 
Other expenses(2,947)(7,216)
Income from unconsolidated Funds430 6,923 
Interest expense(142,872)(143,308)
Gain on sale of investment in real estate6,393 — 
Gain from consolidation of JV— 307,938 
Net income38,553 418,698 
Less: Net loss (income) attributable to noncontrolling interests11,868 (54,985)
Net income attributable to common stockholders$50,421 $363,713 


Comparison of 20182019 to 20172018

See Item 7 of Part II in our Annual Report on Form 10-K for the year ended December 31, 20182019 filed with the SEC on February 15, 201914, 2020 for a discussion of our same property NOI for the year ended December 31, 2018.2019.



44
47

Liquidity and Capital Resources

Short-term liquidity

During the year ended December 31, 2020, we generated cash from operations of $420.2 million. As of December 31, 2020, we had $172.4 million of cash and cash equivalents, and we had a $75.0 million balance on our $400.0 million revolving credit facility. Our earliest debt maturity is February 28, 2023. Excluding acquisitions, development projects and debt refinancings, we expect to meet our short-term liquidity requirements through cash on hand, cash generated by operations and our revolving credit facility. See Note 8 to our consolidated financial statements in Item 15 of this Report for more information regarding our revolving credit facility.debt.

Long-term liquidity

Our long-term liquidity needs consist primarily of funds necessary to pay for acquisitions, development projects and debt refinancings. We do not expect to have sufficient funds on hand to cover these long-term cash requirements due to the requirement to distribute a substantial majority of our income on an annual basis imposed by REIT federal tax rules. We plan to meet our long-term liquidity needs through long-term secured non-recourse indebtedness, the issuance of equity securities, including common stock and OP Units, as well as property dispositions and JV transactions. We have an ATM program which would allow us, subject to market conditions, to sell up to an additional $198$400.0 million of shares of common stock as of the date of this Report.

We only use property level, non-recourse debt. As of December 31, 2020, approximately 41% of our total office portfolio is unencumbered. To mitigate the impact of changing interest rates on our cash flows from operations, we generally enter into interest rate swap agreements with respect to our loans with floating interest rates.  These swap agreements generally expire between one to two years before the maturity date of the related loan, during which time we can refinance the loan without any interest penalty. See Notes 8 and 10 to our consolidated financial statements in Item 15 of this Report for more information regarding our debt and derivative contracts, respectively. 
Certain Contractual obligations asObligations

See the following notes to our consolidated financial statements in Item 15 of December 31, 2019this Report for information regarding our contractual commitments:

•Note 4 - minimum future ground lease payments;
•Note 8 - minimum future principal payments for our secured notes payable and revolving credit facility, and the interest rates that determine our future periodic interest payments; and
•Note 17 - developments, capital expenditure projects and repositionings.

             
   Payment due by period 
 (In thousands) Total 
Less than
1 year
 
2-3
years
 
4-5
years
 Thereafter 
             
 
Term loan principal payments(1)
 $4,653,264
 $752
 $301,610
 $1,716,764
 $2,634,138
 
 
Term loan interest payments(2)
 828,601
 140,779
 281,923
 205,247
 200,652
 
 
Ground lease payments(3)
 49,110
 733
 1,466
 1,466
 45,445
 
 
Development commitments(4)
 233,374
 122,623
 110,750
 —
 —
 
 
Capital expenditures and tenant improvements commitments(5)
 24,600
 24,600
 —
 —
 —
 
 Total $5,788,949
 $289,487
 $695,749
 $1,923,477
 $2,880,235
 
             

(1)Reflects the future principal payments due on our consolidated secured notes payable and revolving credit facility, excluding any maturity extension options. See Note 8 to our consolidated financial statements in Item 15 of this Report.
(2)Reflects the future interest payments due on our consolidated secured notes payable and revolving credit facility, excluding any maturity extension options. The interest payments include the effect of interest rate swaps when relevant, and are based on the USD one-month LIBOR rate as of December 31, 2019 when floating. Future interest payments on our revolving credit facility are based on the balance as of December 31, 2019. See Note 8 to our consolidated financial statements in Item 15 of this Report.
(3)Reflects the future minimum ground lease payments. See Note 4 to our consolidated financial statements in Item 15 of this Report.
(4)See "Acquisitions, Financings, Developments and Repositionings" for a discussion of our developments.
(5)Reflects the aggregate remaining contractual commitment for capital expenditure projects and repositionings, as well as tenant improvements. See "Acquisitions, Financings, Developments and Repositionings" for a discussion of our repositionings.


45

Off-Balance Sheet Arrangements

Unconsolidated Fund's Debt

Our unconsolidated Fund has its own secured non-recourse debt, and we have made certain environmental and other limited indemnities and guarantees covering customary non-recourse carve-outs related to that loan. We have also guaranteed the related swap. Our Fund has agreed to indemnify us for any amounts that we would be required to pay under that agreement. As of December 31, 2019,2020, all of the obligations under the respective loan and swap agreements have been performed in accordance with the terms of those agreements. For information regarding our Fund and our Fund's debt, see Notes 6 and 17, respectively, to our consolidated financial statements in Item 15 of this Report.


48


Cash Flows

Comparison of 20192020 to 2019
2018

           
   2019 2018 Increase (Decrease) % 
   (In thousands)   
           
 
Net cash provided by operating activities(1)
 $469,586
 $432,982
 $36,604
 8.5% 
 
Net cash used in investing activities(2)
 $(649,668) $(249,551) $400,117
 160.3% 
 
Cash provided by (used in) financing activities(3)
 $187,538
 $(213,849) $401,387
 187.7% 
           
20202019Increase (Decrease)%
(In thousands)
Net cash provided by operating activities(1)
$420,218 $469,586 $(49,368)(10.5)%
Net cash used in investing activities(2)
$(265,175)$(649,668)$(384,493)(59.2)%
Cash (used in) provided by financing activities(3)
$(136,330)$187,538 $(323,868)(172.7)%

(1)Our cash flows provided by operating activities are primarily dependent upon the occupancy and rental rates of our portfolio, the collectability of rent and recoveries from our tenants, and the level of our operating expenses and general and administrative expenses, and interest expense.  The increase was primarily due to: (i) an increase in operating income from our office portfolio due to an increase in occupancy and rental rates, and operating income from retail space at The Glendon residential community we acquired in June 2019, and (ii) an increase in operating income from our residential portfolio due to operating income from apartments at The Glendon residential community and leasing of new units at our Moanalua Hillside Apartments development.
(2)Our cash flows used in investing activities are generally used to fund property acquisitions, developments and redevelopment projects, and Recurring and non-Recurring Capital Expenditures. The increase is primarily due to $365.9 million paid for The Glendon residential community in 2019 and an increase of $81.4 million paid for additional interests in unconsolidated Funds in 2019, partially offset by $39.2 million of cash assumed from the consolidation of a JV.
(3)Our cash flows provided by financing activities are generally impacted by our borrowings and capital activities, as well as dividends and distributions paid to common stockholders and noncontrolling interests, respectively.  The increase is primarily due to (i) $201.0 million of net proceeds from the issuance of common stock, (ii) $163.6 million of contributions from noncontrolling interests in consolidated JVs, and (iii) an increase of $77.6 million in net borrowings, partially offset by (a) an increase in loan cost payments of $18.4 million, (b) an increase in distributions to noncontrolling interests of $12.4 million, and (c) an increase in dividends paid to common stockholders of $9.8 million.

(1)    Our cash flows provided by operating activities are primarily dependent upon the occupancy and rental rates of our portfolio, the collectability of rent and recoveries from our tenants, and the level of our operating expenses and general and administrative expenses, and interest expense.  The decrease in cash provided by operating activities was primarily due to: (i) a decrease in cash generated by our office portfolio, which was primarily due to a decrease in collections and parking income as a result of the COVID-19 pandemic, (ii) an increase of $8.6 million in cash paid for interest primarily due to the consolidation of one of our Funds as a JV in November 2019, (iii) a decrease of $6.4 million in operating distributions from our unconsolidated real estate funds primarily due to the consolidation of one of our Funds as a JV in November 2019, and (iv) a decrease in cash generated by our multifamily portfolio, which was primarily due to an increase in property taxes, insurance premiums and personnel expenses.
(2)    Our cash flows used in investing activities are generally used to fund property acquisitions, developments and redevelopment projects, and Recurring and non-Recurring Capital Expenditures. The decrease in cash used in investing activities was primarily due to: (i) $365.9 million paid for a property that we purchased in June 2019, (ii) a decrease of $84.2 million paid for additional interests in unconsolidated Funds, (iii) a decrease of $33.0 million in capital expenditures for improvements to real estate, and (iv) $20.7 million in net proceeds from the sale of an office property in Honolulu in December 2020, partly offset by (a) an increase of $92.5 million in capital expenditures for developments and (b) $39.2 million of cash assumed from the consolidation of a JV in 2019.
(3)    Our cash flows used in financing activities are generally impacted by our borrowings and capital activities, as well as dividends and distributions paid to common stockholders and noncontrolling interests, respectively.  The decrease is primarily due to (i) $201.0 million of net proceeds from the issuance of common stock in 2019, (ii) $163.6 million of contributions from noncontrolling interests in consolidated JVs in 2019, and (iii) an increase of $16.7 million in dividends paid to common stockholders, partly offset by (a) an increase of $35.0 million in net borrowings and (b) a decrease of $17.5 million in loan cost payments.

Comparison of 20182019 to 20172018

See Item 7 of Part II in our Annual Report on Form 10-K for the year ended December 31, 20182019 filed with the SEC on February 15, 201914, 2020 for a discussion of our cash flows for the year ended December 31, 2018.2019.


46
49

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP, which requires us to make estimates of certain items which affect the reported amounts of our assets, liabilities, revenues and expenses. While we believe that our estimates are based upon reasonable assumptions and judgments at the time that they are made, some of our estimates could prove to be incorrect, and those differences could be material. Below is a discussion of our critical accounting policies, which are the policies we believe require the most estimate and judgment. See Note 2 to our consolidated financial statements included in Item 15 of this Report for the summary of our significant accounting policies.

Investment in Real Estate

Acquisitions and Initial Consolidation of VIEs

We account for property acquisitions as asset acquisitions. We allocate the purchase price for asset acquisitions, which includes the capitalized transaction costs, and for the properties upon the initial consolidation of VIEs not determined to be a business, on a relative fair value basis to: (i) land, (ii) buildings and improvements, (iii) tenant improvements and identifiable intangible assets such as in-place at-market leases, (iv) acquired above- and below-market ground and tenant leases, and if applicable (v) assumed debt, based upon comparable sales for land, and the income approach using our estimates of expected future cash flows and other valuation techniques, which include but are not limited to, our estimates of rental rates, revenue growth rates, capitalization rates and discount rates, for other assets and liabilities. We estimate the relative fair values of the tangible assets on an ‘‘as-if-vacant’’ basis. The estimated relative fair value of acquired in-place at-market leases are the estimated costs to lease the property to the occupancy level at the date of acquisition, including the fair value of leasing commissions and legal costs. We evaluate the time period over which we expect such occupancy level to be achieved and include an estimate of the net operating costs (primarily real estate taxes, insurance and utilities) incurred during the lease-up period. Above and below-market ground and tenant leases are recorded as an asset or liability based upon the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid or received pursuant to the in-place ground or tenant leases, respectively, and our estimate of fair market rental rates for the corresponding in-place leases, over the remaining non-cancelable term of the leases. Assumed debt is recorded at fair value based upon the present value of the expected future payments and current interest rates.

These estimates require judgment, involve complex calculations, and the allocations have a direct and material impact on our results of operations because, for example, (i) there would be less depreciation if we allocate more value to land (which is not depreciated), or (ii) if we allocate more value to buildings than to tenant improvements, the depreciation would be recognized over a much longer time period, because buildings are depreciated over a longer time period than tenant improvements.

Cost capitalization

We capitalize development costs, including predevelopment costs, interest, property taxes, insurance and other costs directly related to the development of real estate. Indirect development costs, including salaries and benefits, office rent, and associated costs for those individuals directly responsible for and who spend their time on development activities are also capitalized and allocated to the projects to which they relate. Development costs are capitalized while substantial activities are ongoing to prepare an asset for its intended use. We consider a development project to be substantially complete when the residential units or office space is available for occupancy but no later than one year after cessation of major construction activity. Costs incurred after a project is substantially complete and ready for its intended use, or after development activities have ceased, are expensed as incurred. Costs previously capitalized related to abandoned developments are charged to earnings. Expenditures for repairs and maintenance are expensed as incurred.

The capitalization of development costs requires judgment, and can directly and materially impact our results of operations because, for example, (i) if we don't capitalize costs that should be capitalized, then our operating expenses would be overstated during the development period, and the subsequent depreciation of the developed real estate would be understated, or (ii) if we capitalize costs that should not be capitalized, then our operating expenses would be understated during the development period, and the subsequent depreciation of the real estate would be overstated. We capitalized development costs of $186.4 million, $75.3 million and $78.7 million during 2020, 2019 and $66.0 million during 2019, 2018, or 2017, respectively.


47
50



Impairment of Long-Lived Assets

We assess our investment in real estate and our investment in our Funds for impairment on a periodic basis, and whenever events or changes in circumstances indicate that the carrying value of our investments in real estate may not be recoverable. If the undiscounted future cash flows expected to be generated by the asset are less than the carrying value of the asset, and our evaluation indicates that we may be unable to recover the carrying value, then we would record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the asset. Our estimates of future cash flows are based in part upon assumptions regarding future occupancy, rental rates and operating costs, and could differ materially from actual results. We record real estate held for sale at the lower of carrying value or estimated fair value, less costs to sell, and similarly recognize impairment losses if we believe that we cannot recover the carrying value. Our evaluation of market conditions for assets held for sale requires judgment, and our expectations could differ materially from actual results. Impairment losses would reduce our net income and could be material. Based upon such periodic assessments we did not record any impairment losses for our long-lived assets and Funds during 2020, 2019 2018 or 2017. 2018.

In downtown Honolulu, 1132 Bishop Street, we are converting a 25 story, 490,000 square foot office tower into approximately 500 apartments. We expect the conversion to occurapartments in phases over a number of years as the office space is vacated. Due to the significant change in planned use of the property, we performed an annual impairment assessment in 2019 by comparing the property's expected undiscounted cash flows to the property's carrying value plus the expected development costs and concluded that there was no impairment as of December 31, 2019.loss. We determined the undiscounted cash flows using our estimates of the expected future cash flows which included, but were not limited to, our estimates of property's net operating income, and capitalization rates.
Revenue Recognition - Collectibility of lease payments from office tenants

In accordance with Topic 842, if collectibility of lease payments is not probable at the commencement date, then we limit the lease income to the lesser of the income recognized on a straight-line basis or cash basis. If our assessment of collectibility changes after the commencement date, we record the difference between the lease income that would have been recognized on a straight-line basis and cash basis as a current-period adjustment to lease income. We adopted the complete impairment model guidance within Topic 842. Under this model, commencing on January 1, 2019, we no longer maintain a general reserve related to our receivables, and instead analyze, on a lease-by-lease basis, whether amounts due under the operating lease are deemed probable for collection. We write off tenant and deferred rent receivables as a charge against rental revenue in the period we determine the lease payments are not probable for collection.
Our assessment of the collectibility of lease payments requires judgment and could have a material impact on our results of operations. This assessment involves using a methodology that requires judgment and estimates about matters that are uncertain at the time the estimates are made, including tenant specific factors, specific industry conditions, and general economic trends and conditions. During the year ended December 31, 2020, our results of operations were materially impacted by the COVID-19 pandemic. See "Impacts of the COVID-19 Pandemic on our Business". For the year ended December 31, 2020, charges for uncollectible amounts related to tenant receivables and deferred rent receivables, which were primarily due to the COVID-19 pandemic, reduced our office revenues by $41.0 million.
Revenue Recognition for Tenant Recoveries

Our tenant recovery revenues for recoverable operating expenses are recognized as revenue in the period that the recoverable expenses are incurred. Subsequent to year-end, we perform reconciliations on a lease-by-lease basis and bill or credit each tenant for any differences between the estimated expenses we billed to the tenant and the actual expenses incurred. Estimating tenant recovery revenues requires an in-depth analysis of the complex terms of each underlying lease. Examples of estimates and judgments made when determining the amounts recoverable include:
•estimating the recoverable expenses;
•estimating the impact of changes to expense and occupancy during the year;
•estimating the fixed and variable components of operating expenses for each building;
•conforming recoverable expense pools to those used in the base year for the underlying lease; and
•judging whether an expense or capital expenditure is recoverable pursuant to the terms of the underlying lease.

51


These estimates require judgment and involve complex calculations.calculations for each of our office properties. If our estimates prove to be incorrect, then our tenant recovery revenues and net income could be materially and adversely affected in future periods when we perform our reconciliations. The impact of changing our current year tenant recovery billings by 5% would result in a change to our tenant recovery revenues and net income of $2.6 million, $2.6 million and $2.4 million during 2020, 2019 and $2.1 million during 2019, 2018, and 2017, respectively.

Stock-Based Compensation

We award stock-based compensation to certain employees and non-employee directors in the form of LTIP Units. We recognize the fair value of the awards over the requisite vesting period, which is based upon service. The fair value of the awards is based upon the market value of our common stock on the grant date and a discount for post-vesting restrictions.

Our estimate of the discount for post-vesting restrictions requires judgment. If our estimate of the discount is too high or too low it would result in the fair value of the awards that we make being too low or too high, respectively, which would result in an under- or over-expense of stock-based compensation, respectively, and this under- or over-expensing of stock-based compensation could be material towould result in our net income.income being overstated or understated, respectively. Stock-based compensation expense was $21.4 million, $18.4 million and $22.3 million for 2020, 2019 and $18.5 million for 2019, 2018, and 2017, respectively. The impact of changing the discount rate by 5% would result in a change to our stock-based compensation expense and net income of $1.1 million, $0.9 million and $1.1 million during 2020, 2019 and $0.9 million during 2019, 2018, and 2017, respectively.


48

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We use derivative instrumentsinterest rate swaps to hedge interest rate risk related to our floating rate borrowings. However, our use of these instruments exposes us to credit risk from the potential inability of our counterparties to perform under the terms of those agreements. We attempt to minimize this credit risk by contracting with a variety of high-quality financial counterparties. See Notes 8 and 10 to our consolidated financial statements in Item 15 of this Report for more information regarding our debt and derivatives.interest rate swaps. As of December 31, 2019,2020, we havehad no outstanding floating rate debt that iswas unhedged.

Market Transition to SOFR from USD-LIBOR

In July 2017, the Financial Conduct Authority (the("FCA" - the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after December 31, 2021. As a result, the Federal Reserve Board ("FRB")and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee ("ARRC"), which identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on industry-wide and company-specific transition plans as it relates to derivatives and cash markets exposed to USD-LIBOR.

The administrator of LIBOR has proposed stopping publication of the one-week and two-month USD-LIBOR settings after 31 December 2021, and the remaining USD LIBOR settings (i.e., the overnight and the one- , three-, six- and 12- month settings) after June 30, 2023. After the announcement, the FCA, FRB and other regulators issued statements encouraging banks to cease entering into new contracts referencing USD-LIBOR as soon as practicable, but no later than 31 December 2021, to facilitate an orderly transition from USD-LIBOR.

Our floating rate borrowings and derivative instrumentsinterest rate swaps are indexed to USD-LIBOR and we are monitoring this activity and evaluating the related risks - which include interest on loans and amounts received and paid on derivative instruments. These risks arise in connection with transitioning contracts to a new alternative rate. Therate - which include: (i) loan interest payments, (ii) amounts received and paid on interest rate swaps, and (iii) the value of loans or derivative instruments tied to LIBOR could also be impacted if LIBOR is limited or discontinued.instruments. While we currently expect LIBORUSD-LIBOR to be available in substantially its current form until the end ofat least December 31, 2021, and possibly until June 30, 2023, it is possible that LIBORUSD-LIBOR will become unavailable prior to that point.time. This could result, for example, if sufficient banks decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transition to an alternative reference rate will be accelerated and potentially magnified.

Item 8. Financial Statements and Supplementary Data

See the Index to our Financial Statements in Part IV, Item 15.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

52



Item 9A. Controls and Procedures

As of December 31, 2019,2020, the end of the period covered by this Report, we carried out an evaluation, under the supervision and with the participation of management, including our CEO and CFO, regarding the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) at the end of the period covered by this Report. Based on the foregoing, our CEO and CFO concluded, as of that time, that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in reports filed or submitted under the Exchange Act (i) is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our CEO and our CFO, as appropriate, to allow for timely decisions regarding required disclosure.

There have not been any changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2019,2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting and the Report of Independent Registered Public Accounting Firm thereon appear at pages F-1 and F-3F-6, respectively, and are incorporated herein by reference.

Item 9B. Other Information

None.

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49

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information required by this item is incorporated by reference to the information set forth under the captions “Election of Directors (Proposal 1) – Information Concerning Current Directors and Nominees”, “Information About Our Executive Officers”, “Corporate Governance”, “Board Meetings and Committees” and “Delinquent Section 16(a) Reports” (to the extent required), in our Proxy Statement for the 20202021 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2019.2020.

Item 11. Executive Compensation

Information required by this item is incorporated by reference to the information set forth under the captions “Executive Compensation”, “Compensation Committee Report”, “Director Compensation”, and “Compensation Committee Interlocks and Insider Participation”, in our Proxy Statement for the 20202021 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2019.2020.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Securities Authorized for Issuance Under Stock-Based Compensation Plan

The following table presents information with respect to shares of our common stock that may be issued under our existing stock incentive plan as of December 31, 2019:2020:

Plan Category 
Number of shares of common stock to be issued upon exercise of outstanding options, warrants and rights
(In thousands)
 Weighted-average exercise price of outstanding options, warrants and rights 
Number of shares of common stock remaining available for future issuance under stock-based compensation plans (excluding shares reflected in column (a))
(In thousands)
Plan CategoryNumber of shares of common stock to be issued upon exercise of outstanding options, warrants and rights
(In thousands)		Weighted-average exercise price of outstanding options, warrants and rightsNumber of shares of common stock remaining available for future issuance under stock-based compensation plans (excluding shares reflected in column (a))
(In thousands)
 (a) (b) (c) (a)(b)(c)
Stock-based compensation plans approved by stockholders(1)1,723(2)$—(3)105Stock-based compensation plans approved by stockholders(1)2,855(2)$—(3)9,062

(1)For a description of our 2016 Omnibus Stock Incentive Plan, see Note 13 to our consolidated financial statements in Item 15 of this Report. We did not have any other stock-based compensation plans as of December 31, 2019.
(2)Consists of 0.8 million vested and 0.9 million unvested LTIP Units.
(3)We have no outstanding options. There are no exercise prices for LTIP Units.
(1)    For a description of our 2016 Omnibus Stock Incentive Plan, see Note 13 to our consolidated financial statements in Item 15 of this Report. We did not have any other stock-based compensation plans as of December 31, 2020.
(2)    Consists of 1.9 million vested and 1.0 million unvested LTIP Units.
(3)    We have no outstanding options. There are no exercise prices for LTIP Units.

The remaining information required by this item is incorporated by reference to the information set forth under the caption “Voting Securities and Principal Stockholders—Security Ownership of Certain Beneficial Owners and Management”, in our Proxy Statement for the 20202021 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2019.2020.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information required by this item is incorporated by reference to the information set forth under the captions “Election of Directors (Proposal 1) – Information Concerning Current Directors and Nominees”, “Corporate Governance” and “Transactions With Related Persons”, in our Proxy Statement for the 20202021 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2019.2020.

Item 14. Principal Accounting Fees and Services

Information required by this item is incorporated by reference to the information set forth under the caption “Independent Registered Public Accounting Firm” in our Proxy Statement for the 20202021 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2019.


2020.
50
54

PART IV

Item 15. Exhibits and Financial Statement Schedule

 (a)(1) and (2) Financial Statements and Schedules

Index
Page
Exhibits
5256
Signatures
5458
Report of Management on Internal Control Over Financial Reporting
F- 1
Report of Independent Registered Public Accounting Firm
F- 2
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
F- 65
Consolidated Balance Sheets
F- 76
Consolidated Statements of Operations
F- 87
Consolidated Statements of Comprehensive Income (Loss)
F- 98
Consolidated Statements of Equity
F- 109
Consolidated Statements of Cash Flows
F- 1211
Notes to Consolidated Financial Statements
F- 1312
Overview
F- 1312
Summary of Significant Accounting Policies
F- 1413
Investment in Real Estate
F- 2220
Ground Lease
F- 2422
Acquired Lease Intangibles
F- 2523
Investment in Unconsolidated FundsFunds
F- 2624
Other Assets
F- 2725
Secured Notes Payable & Revolving Credit Facility, Net
F- 2826
Interest Payable, Accounts Payable and Deferred Revenue
F- 3027
Derivative Contracts
F- 3128
Equity
F- 3330
EPS
F- 3532
Stock-Based Compensation
F- 3633
Fair Value of Financial Instruments
F- 3835
Segment Reporting
F- 4037
Future Minimum Lease Receipts
F- 4138
Commitments, Contingencies and Guarantees
F- 4138
Quarterly Financial Information (unaudited)
F- 43
Subsequent Events
F- 43
Schedule III - Consolidated Real Estate and Accumulated Depreciation
F- 4441
Note: All other schedules have been omitted because the required information is not present, or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements or notes thereto.




51
55
Table of Contents
Douglas Emmett, Inc.
Exhibits


(a)(3) exhibits

NumberDescriptionFootnote
1.1
Equity Distribution Agreement, dated October 9, 2020, by and among Douglas Emmett, Inc., Douglas Emmett Management, Inc., Douglas Emmett Properties, LP, Wells Fargo Securities, LLC, J.P. Morgan Securities LLC, and Jefferies LLC.
(1)
3.1
Articles of Amendment and Restatement of Douglas Emmett, Inc.
(2)
3.2
Bylaws of Douglas Emmett, Inc.
(3)
3.3
Certificate of Correction to Articles of Amendment and Restatement of Douglas Emmett, Inc.
(4)
3.4
Bylaws Amendment
(5)
4.1
Form of Certificate of Common Stock of Douglas Emmett, Inc.
(6)
4.2
Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934*
10.1
Form of Agreement of Limited Partnership of Douglas Emmett Properties, LP.
(6)
10.2
Registration Rights Agreement among Douglas Emmett, Inc. and the Initial Holders named therein. +
(7)
10.3
Form of Indemnification Agreement between Douglas Emmett, Inc. and its directors and officers. +
(8)
10.4
Douglas Emmett, Inc. 2016 Omnibus Stock Incentive Plan. +
(9)
10.5
Form of Douglas Emmett Properties, LP Partnership Unit Designation – 2016 LTIP Units. +
(10)
10.6
Form of Douglas Emmett, Inc. 2016 Omnibus Stock Incentive Plan 2016 LTIP Unit Award Agreement. +*
10.7
Employment agreement dated January 1, 2019 between Douglas Emmett, Inc., Douglas Emmett Properties, LP and Jordan L. Kaplan. +
(11)
10.8
Employment agreement dated January 1, 2019 between Douglas Emmett, Inc., Douglas Emmett Properties, LP and Kenneth Panzer. +
(11)
10.9
Employment agreement dated January 1, 2019 between Douglas Emmett, Inc., Douglas Emmett Properties, LP and Kevin A. Crummy. +
(11)
21.1
23.1
31.1
31.2
32.1(12)
32.2(12)
101.INSInline XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.*
101.SCHInline XBRL Taxonomy Extension Schema Document.*
101.CAL
101.DEF
101.LAB
101.PRE
104Cover Page Interactive Data File (embedded within the Inline XBRL document)*
*Filed with this Annual Report on Form 10-K .
+Denotes management contract or compensatory plan, contract or arrangement.
(1)Filed with Form 8-K on October 13, 2020 and incorporated herein by this reference. (File number 001-33106)
(2)Filed with Amendment No. 6 to Form S-11 on October 19, 2006 and incorporated herein by this reference. (File number 333-135082)
(3)Filed with Form 8-K on September 6, 2013 and incorporated herein by this reference. (File number 001-33106)
56
NumberDescriptionFootnote
  
1.1
Equity Distribution Agreement, dated August 4, 2017, by and among Douglas Emmett, Inc., Douglas Emmett Management, Inc., Douglas Emmett Properties, LP, Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC. 
(1)
1.2
Supplement No. 1 to Equity Distribution Agreement, dated November 20, 2017, by and among Douglas Emmett, Inc., Douglas Emmett Management, Inc., Douglas Emmett Properties, LP, Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner, & Smith Incorporated and J.P. Morgan Securities LLC.
(2)
3.1
Articles of Amendment and Restatement of Douglas Emmett, Inc.
(3)
3.2
Bylaws of Douglas Emmett, Inc.
(4)
3.3
Certificate of Correction to Articles of Amendment and Restatement of Douglas Emmett, Inc.
(5)
3.4
Bylaws Amendment
(6)
4.1
Form of Certificate of Common Stock of Douglas Emmett, Inc.
(7)
4.2
Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934*
 
10.1
Form of Agreement of Limited Partnership of Douglas Emmett Properties, LP.
(7)
10.2
Registration Rights Agreement among Douglas Emmett, Inc. and the Initial Holders named therein. +
(8)
10.3
Form of Indemnification Agreement between Douglas Emmett, Inc. and its directors and officers. +
(9)
10.4
Douglas Emmett, Inc. 2016 Omnibus Stock Incentive Plan. +
(10)
10.5
Form of Douglas Emmett Properties, LP Partnership Unit Designation – 2016 LTIP Units. +
(11)
10.6
Form of Douglas Emmett, Inc. 2016 Omnibus Stock Incentive Plan 2016 LTIP Unit Award Agreement. +
(11)
10.7
Employment agreement dated January 1, 2019 between Douglas Emmett, Inc., Douglas Emmett Properties, LP and Jordan L. Kaplan. +
(12)
10.8
Employment agreement dated January 1, 2019 between Douglas Emmett, Inc., Douglas Emmett Properties, LP and Kenneth Panzer. +
(12)
10.9
Employment agreement dated January 1, 2019 between Douglas Emmett, Inc., Douglas Emmett Properties, LP and Kevin A. Crummy. +
(12)
21.1
List of Subsidiaries of the Registrant. *

23.1
Consent of Independent Registered Public Accounting Firm. *

31.1
Certificate of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *

31.2
Certificate of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *

32.1
Certificate of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
(13)
32.2
Certificate of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
(13)
101.INSInline XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.* 
101.SCHInline XBRL Taxonomy Extension Schema Document.* 
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.*
 
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.*
 
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.*
 
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.*
 
104Cover Page Interactive Data File (embedded within the Inline XBRL document)* 
  
*Filed with this Annual Report on Form 10-K . 
+Denotes management contract or compensatory plan, contract or arrangement. 
(1)Filed with Form 8-K on August 7, 2017 and incorporated herein by this reference. (File number 001-33106) 

52
Table of Contents
Douglas Emmett, Inc.
Exhibits (continued)


(2)(4)Filed with Form 8-K on November 22, 2017 and incorporated herein by this reference. (File number 001-33106)
(3)Filed with Amendment No. 6 to Form S-11 on October 19, 2006 and incorporated herein by this reference. (File number 333-135082)
(4)Filed with Form 8-K on September 6, 2013 and incorporated herein by this reference. (File number 001-33106)
(5)Filed with Form 8-K on October 30, 2006 and incorporated herein by this reference. (File number 001-33106)
(6)(5)Filed with Form 8-K on April 9, 2018 and incorporated herein by this reference. (File number 001-33106)
(7)(6)Filed with Amendment No. 3 to Form S-11 on October 3, 2006 and incorporated herein by this reference. (File number 333-135082)
(8)(7)Filed with Form S-11 on June 16, 2006 and incorporated herein by this reference. (File number 333-135082)
(9)(8)Filed with Amendment No. 2 to Form S-11 on September 20, 2006 and incorporated herein by this reference. (File number 333-135082)
(10)(9)Filed with Form 8-KDefinitive Proxy Statement on June 3, 2016April 17, 2020 and incorporated herein by this reference. (File number 001-33106)
(11)(10)Filed with Form 8-K on December 12, 2016 and incorporated herein by this reference. (File number 001-33106)
(12)(11)Filed with Form 8-K on December 21, 2018 and incorporated herein by this reference. (File number 001-33106)
(13)(12)In accordance with SEC Release No. 33-8212, these exhibits are being furnished, and are not being filed as part of this Report on Form 10-K or as a separate disclosure document, and are not being incorporated by reference into any Securities Act registration statement.


Item 16. Form 10-K Summary

None.

57
53

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

DOUGLAS EMMETT, INC.
Dated:By:/s/ JORDAN L. KAPLAN
February 14, 202019, 2021Jordan L. Kaplan
President and CEO

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the persons below, in their respective capacities, on behalf of the registrant as of February 14, 2020.19, 2021.

SignatureTitle
/s/ JORDAN L. KAPLAN
Jordan L. Kaplan
 		President, CEO and Director
(Principal Executive Officer)
/s/ PETER D. SEYMOUR
Peter D. SeymourCFO
(Principal Financial and Accounting Officer)
/s/ DAN A. EMMETT
Dan A. Emmett
 		Chairman of the Board
 
/s/ KENNETH M. PANZER
Kenneth M. Panzer
 		COO and Director
 
/s/ CHRISTOPHER H. ANDERSON
Christopher H. Anderson
 		Director
 
SignatureTitle
/s/ JORDAN L. KAPLAN
Jordan L. Kaplan
President, CEO and Director
(Principal Executive Officer)
/s/ PETER D. SEYMOUR
Peter D. Seymour
CFO
(Principal Financial and Accounting Officer)
/s/ DAN A. EMMETT
Dan A. Emmett
Chairman of the Board
/s/ KENNETH M. PANZER
Kenneth M. Panzer
COO and Director
/s/ CHRISTOPHER H. ANDERSON
Christopher H. Anderson
Director
/s/ LESLIE E. BIDER
Leslie E. Bider

 
Director

 
/s/ DR. DAVID T. FEINBERG
Dr. David T. FeinbergDirector
/s/ VIRGINIA A. MCFERRAN
Virginia A. McFerranDirector
/s/ THOMAS E. O’HERN
Thomas E. O’Hern

 
Director

 
/s/ WILLIAM E. SIMON, JR.
William E. Simon, Jr.

 
Director

 
/s/ JOHNESE SPISSO
Johnese SpissoDirector
 

58
54


Report of Management on Internal Control over Financial Reporting

The management of Douglas Emmett, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934.

Our system of internal control is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of our financial statements for external reporting purposes in accordance with US GAAP. Our management, including the undersigned CEO and CFO, assessed the effectiveness of our internal control over financial reporting as of December 31, 2019.2020. In conducting its assessment, management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission on Internal Control—Integrated Framework (2013 Framework). Based on this assessment, management concluded that, as of December 31, 2019,2020, our internal control over financial reporting was effective based on those criteria.

Management, including our CEO and CFO, does not expect that our disclosure controls and procedures, or our internal controls will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

The effectiveness of our internal control over financial reporting as of December 31, 2019,2020, has been audited by Ernst & Young LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this annual report, as stated in their report appearing on page F-3F-6, which expresses an unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, 20192020..

/s/ JORDAN L. KAPLAN
Jordan L. Kaplan
President and CEO
/s/ JORDAN L. KAPLAN
Jordan L. Kaplan
President and CEO
 /s/ PETER D. SEYMOUR
Peter D. Seymour
CFO

February 19, 2021
February 14, 2020



F- 1


Report of Independent Registered Public Accounting Firm


To the Shareholders and the Board of Directors of Douglas Emmett, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Douglas Emmett, Inc. (the “Company”) as of December 31, 20192020 and 2018,2019, and the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 20192020 and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20192020 and 2018,2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019,2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019,2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 14, 202019, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.


F- 2



Collectability of lease payments due from office tenants
Description of the MatterDuring 2020, the Company recognized office rental revenues and tenant recoveries of $680.4 million and recorded tenant receivables of $18.2 million and deferred rent receivables of $116.2 million at December 31, 2020. As described in Note 2 to the consolidated financial statements, under ASC 842 the Company performs an assessment as to whether or not substantially all of the amounts due under the tenant’s lease agreement is deemed probable of collection. Subsequently, for leases where the Company has concluded that it is not probable that it will collect substantially all the lease payments due under those leases, the Company limits the lease income to the lesser of the income recognized on a straight-line basis or cash basis.

Auditing the Company's collectability assessment is complex due to the judgment involved in the Company’s determination of the collectability of remaining lease payments due from its tenants. The determination involves consideration of tenant specific factors, specific industry conditions, and general economic trends and conditions.
Consolidation of Douglas Emmett Fund X, LLC
Description of the Matter
As explained in Note 3 to the consolidated financial statements, the Company and the remaining non-controlling interest holder purchased additional interests in Douglas Emmett Fund X, LLC ("Fund X"). Upon completing the transaction including amending the operating agreement, Fund X was determined to be a variable interest entity (“VIE”) and the Company was determined to be its primary beneficiary. Accordingly, the Company began consolidating the VIE and recorded a $307.9 million gain on revaluing Fund X's assets and liabilities upon consolidation.

Auditing management’s application of the variable interest entity consolidation model to this transaction, and the resulting gain upon consolidation, was complex and required significant judgment. In particular, significant judgment was required in determining the fair value of each of Fund X’s six properties which utilized a combination of market and income valuation approaches. The significant assumptions for the market approach included assumptions of transactions of comparable size and location. The significant assumptions for the income approach related to the assumptions underlying the cash flow projections and included market rental rates, market growth rates and market discount rates. Changes in these assumptions may have materially affected the Company’s determination of the fair value of Fund X’s net assets which, in turn, would have impacted the gain on consolidation.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's controls over management’s accounting for the consolidation of Fund X,office rental revenues and tenant recoveries, including controls over management’s reviewassessment of the significant assumptions mentioned above that were used to estimate fair value. This includedcollectability of future lease payments. For example, we tested controls over management’s consideration of corroborativethe factors mentioned above used in assessing collectability and contrary evidence from current industrycontrols over the completeness and economic trends, prevailing market conditions, internally available information and other relevant factors.

To evaluate the Company’s consolidation analysisaccuracy of the transaction,data used in management’s analyses.

To test the office rental revenues and tenant recoveries recognized, we performed audit procedures that included, among others, reviewing the amended and restated Fund X operating agreement and testing the fair value of Fund X’s assets and liabilities. Our audit procedures in testing the fair value of Fund X’s assets and liabilities included, among others, (i) evaluating the methodsdata and significant assumptions used in the valuationdetermining whether collection of Fund X’s assets, (ii) assessing the reasonablenesssubstantially all of the resulting fair values utilizing comparable market transactions, (iii) testinglease payments was probable based on the factors mentioned above. In addition, we tested the completeness and accuracy of the valuation model and underlying data supporting the significant assumptions and estimates, and (iv) comparing the fair value of Fund X’s resulting net assets to the price paid by the Company and the unrelated non-managing member to acquire the other Fund X non-managing member interests. We also involved a valuation specialist to assistthat was used in the assessment of the methodology utilized by the Company, and to test the significant assumptions mentioned above in the cash flow projections.

F- 3

Purchase price accountingImpairment of investment in real estate
Description of the Matter
During the year endedThe Company’s net investment in real estate totaled $8.9 billion as of December 31, 2019, the Company acquired The Glendon, a residential property in Westwood consisting of apartments and retail space, for $365.9 million and consolidated a previously owned equity method accounted for investment in Douglas Emmett Fund X, LLC (“Fund X”) on a relative fair value basis.2020. As explained in Note 3 to the consolidated financial statements, the Glendon transaction was accounted for as an asset acquisition, and as such, is recorded at the price to acquire the real estate property, including acquisition costs. In addition, as discussed in Note 3 to the consolidated financial statements, the Company consolidated Fund X’s six office properties and related identifiable assets and liabilities on a relative fair value basis.
For both of these transactions, the purchase price/consideration are allocated to land, building and intangible lease assets and liabilities based upon the relative fair value of the acquired assets and liabilities. The fair value of the acquired assets and liabilities were determined by the Company utilizing the sales comparison approach as it relates to land and the income approach which utilized discounted cash flows as it relates the other acquired assets and liabilities. Both approaches used market information available to the Company as inputs.
Auditing the Company’s accounting for its Glendon acquisition and Fund X consolidation was complex due to the significant estimation required by management in determining the fair value assigned to the acquired land, building and intangible lease assets and liabilities. The significant estimation was primarily due to the judgmental nature of the inputs to the valuation models used to measure the fair value of the assets and liabilities as well as the sensitivity of the respective fair values to the significant underlying assumptions. The Company utilized the sales comparison approach to measure the fair value of the acquired land and the discounted cash flow method to measure the fair value of the remaining acquired assets and liabilities. The more significant assumptions utilized included comparable land sales, revenue growth rates, discount rates, market rental rates and capitalization rates. These significant assumptions are forward-looking and could be affected by future economic and market conditions.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over management’s accounting for the Glendon property acquisition and Fund X consolidation, including controls over the Company’s review of the assumptions underlying the purchase price allocation, the cash flow projections and the accuracy of the underlying data used. For example, we tested controls over the determination of the fair value of the land, building and intangible lease assets and liabilities, including the controls over the review of the valuation models and the underlying assumptions used to develop such estimates.
For the Company’s Glendon property acquisition and Fund X consolidation, we read the respective transaction agreements, and evaluated whether the Company had appropriately determined whether the transactions were accounted for as business combinations or asset acquisitions. For both transactions, we also evaluated the significant assumptions and methods used in developing the fair value estimates of the tangible assets and intangible lease assets and liabilities. To test the estimated fair value of the land, building and intangible lease assets and liabilities, we performed audit procedures that included, among other procedures, evaluating the Company’s use of the sales comparison and income approaches and testing the significant assumptions used in the discounted cash flow model, and testing the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. For example, we agreed the contractual rents used in the cash flow projections to in-place tenant leases and compared certain property operating expenses, such as real estate property taxes, to historical operating results adjusted for the transaction. We involved our valuation specialists to assist in evaluating the methodologies utilized by the Company as compared to standard valuation practices, performing procedures to corroborate the reasonableness of the significant assumptions utilized in developing the fair value estimates of the acquired land, building, and intangible lease assets and liabilities, and performing corroborative calculations to assess the reasonableness of the acquired building asset. For example, our valuation specialists (i) used independently identified data sources to evaluate the appropriateness of management’s selected comparable land sales, (ii) obtained market specific information (i.e. revenue growth rates, discount rates, market rental rates and capitalization rates) and compared it to the market information utilized by the Company, and (iii) for a sample of properties, performed comparative calculations using the cost approach to validate the amount allocated to the building asset.

F- 4

Real Estate Investments - Impairment Assessment of 1132 Bishop Street
Description of the Matter
As explained in Note 2 to the consolidated financial statements, the Company finalized plans to convert 1132 Bishop Street,periodically assesses whether there has been any impairment in the carrying value of its properties and whenever events or changes in circumstances indicate that the carrying value of a commercial office property located in Honolulu, Hawaii into a residential property. Due tomay not be recoverable. Impairment is recognized on real estate assets held for investment when indicators of impairment are present and the change in planned use of the property, the Company assessed whether the property was potentially impaired by comparing 1132 Bishop Street’s expectedfuture undiscounted cash flows on an undiscounted basisfor a real estate asset are less than its carrying amount, at which time the real estate asset is written down to the property’s net book value plus expected development costs.
its estimated fair value.

Auditing the Company's accountingimpairment assessment for potential impairment and its tests for recoverability involved areal estate assets was challenging because of the high degree of subjectivity as estimates underlying the determinationsubjective auditor judgment necessary in evaluating management’s identification of indicators of potential impairment. Our evaluation of management’s identification of indicators of impairment included our related assessment of the undiscounted cash flows were based on assumptions about future market rental rates, operating expenses and capitalization rates. These assumptions are forward-looking and could be affected by future economic and market conditions, and are dependent,severity of such indicators, either individually or in part, oncombination, in determining whether a triggering event has occurred that requires the completionCompany to evaluate the recoverability of the planned redevelopment.
real estate asset.
F- 3


How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company's processes to determine indicators ofCompany’s real estate asset impairment and to conduct tests for recoverability if indicators of impairment are present. This includedassessment process. For example, we tested controls over management's review of the significant assumptions underlying the undiscounted cash flows. 
management’s process for identifying and evaluating potential impairment indicators.

Our testing of the Company'sCompany’s impairment assessment included, among other procedures, evaluating significant judgments applied in determining whether indicators of impairment existed for the significant assumptionsCompany’s real estate assets. Our procedures included obtaining evidence to corroborate such judgments and operating data usedsearching for evidence contrary to estimate the property’s undiscounted cash flows.such judgments. For example, we compared thesearched for any tenants or groups of tenants with significant assumptions, namely market rental rates, operating expenses and capitalization rates, used to estimate future cash flows to current market rental rates and capitalization rates for similar properties published in multiple third-party market studies.write offs or upcoming lease expirations that occupy a substantial portion of a real estate asset. We also performedsearched for any significant declines in operating results of a sensitivity analysis on the Company’s inputs, namely expected net operating income, capitalization rates and expected construction costsreal estate asset due to assess whetheroccupancy changes, to certain assumptions would resulttenant bankruptcies, environmental issues, physical damage, change in a materially different outcome. We also recalculated management's undiscounted cash flows.
intended use or adverse changes in legal factors.


/s/ Ernst & Young LLP

We have served as the Company's auditor since 1995.

Los Angeles, California

February 14, 202019, 2021




F- 54


Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Douglas Emmett, Inc.
 
Opinion on Internal Control over Financial Reporting

We have audited Douglas Emmett, Inc.’s internal control over financial reporting as of December 31, 2019,2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Douglas Emmett, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Douglas Emmett, Inc. as of December 31, 20192020 and 2018,2019, the related consolidated statements of operations, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 20192020 and related notes and financial statement schedule listed in the Index at Item 15(a), and our report dated February 14, 202019, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Los Angeles, California
February 14, 202019, 2021



F- 65
Table of Contents
Douglas Emmett, Inc.
Consolidated Balance Sheets
(In thousands, except share data)




 December 31, 2020December 31, 2019
Assets  
Investment in real estate, gross$11,678,638 $11,478,633 
Less: accumulated depreciation and amortization(2,816,193)(2,518,415)
Investment in real estate, net8,862,445 8,960,218 
Ground lease right-of-use asset7,472 7,479 
Cash and cash equivalents172,385 153,683 
Tenant receivables18,226 5,302 
Deferred rent receivables116,199 134,968 
Acquired lease intangible assets, net5,141 6,407 
Interest rate contract assets0 22,381 
Investment in unconsolidated Fund47,374 42,442 
Other assets21,583 16,421 
Total Assets$9,250,825 $9,349,301 
Liabilities
Secured notes payable and revolving credit facility, net$4,744,967 $4,619,058 
Ground lease liability10,871 10,882 
Interest payable, accounts payable and deferred revenue144,344 131,410 
Security deposits56,247 60,923 
Acquired lease intangible liabilities, net35,223 52,367 
Interest rate contract liabilities214,016 54,616 
Dividends payable49,138 49,111 
Total liabilities5,254,806 4,978,367 
Equity
Douglas Emmett, Inc. stockholders' equity:
Common Stock, $0.01 par value, 750,000,000 authorized, 175,463,887 and 175,369,746 outstanding at December 31, 2020 and December 31, 2019, respectively1,755 1,754 
Additional paid-in capital3,487,887 3,486,356 
Accumulated other comprehensive loss(148,035)(17,462)
Accumulated deficit(904,516)(758,576)
Total Douglas Emmett, Inc. stockholders' equity2,437,091 2,712,072 
Noncontrolling interests1,558,928 1,658,862 
Total equity3,996,019 4,370,934 
Total Liabilities and Equity$9,250,825 $9,349,301 
 December 31, 2019 December 31, 2018
Assets 
  
Investment in real estate: 
  
Land$1,152,684
 $1,065,099
Buildings and improvements9,308,481
 7,995,203
Tenant improvements and lease intangibles905,753
 840,653
Property under development111,715
 129,753
Investment in real estate, gross11,478,633
 10,030,708
Less: accumulated depreciation and amortization(2,518,415) (2,246,887)
Investment in real estate, net8,960,218
 7,783,821
Ground lease right-of-use asset7,479
 —
Cash and cash equivalents153,683
 146,227
Tenant receivables5,302
 4,371
Deferred rent receivables134,968
 124,834
Acquired lease intangible assets, net6,407
 3,251
Interest rate contract assets22,381
 73,414
Investment in unconsolidated Funds42,442
 111,032
Other assets16,421
 14,759
Total Assets$9,349,301
 $8,261,709
    
Liabilities   
Secured notes payable and revolving credit facility, net$4,619,058
 $4,134,030
Ground lease liability10,882
 —
Interest payable, accounts payable and deferred revenue131,410
 130,154
Security deposits60,923
 50,733
Acquired lease intangible liabilities, net52,367
 52,569
Interest rate contract liabilities54,616
 1,530
Dividends payable49,111
 44,263
Total liabilities4,978,367
 4,413,279
    
Equity   
Douglas Emmett, Inc. stockholders' equity:   
Common Stock, $0.01 par value, 750,000,000 authorized, 175,369,746 and 170,214,809 outstanding at December 31, 2019 and December 31, 2018, respectively1,754
 1,702
Additional paid-in capital3,486,356
 3,282,316
Accumulated other comprehensive (loss) income(17,462) 53,944
Accumulated deficit(758,576) (935,630)
Total Douglas Emmett, Inc. stockholders' equity2,712,072
 2,402,332
Noncontrolling interests1,658,862
 1,446,098
Total equity4,370,934
 3,848,430
Total Liabilities and Equity$9,349,301
 $8,261,709


See accompanying notes to the consolidated financial statements.



F- 76
Table of Contents
Douglas Emmett, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)





Year Ended December 31, Year Ended December 31,
2019 2018 2017 202020192018
Revenues   
  Revenues 
Office rental   
  Office rental 
Rental revenues and tenant recoveries$694,315
 $661,147
 $606,852
Rental revenues and tenant recoveries$680,359 $694,315 $661,147 
Parking and other income122,440
 116,784
 108,694
Parking and other income90,810 122,440 116,784 
Total office revenues816,755
 777,931
 715,546
Total office revenues771,169 816,755 777,931 
   
  
  
Multifamily rental     Multifamily rental
Rental revenues110,697
 95,423
 89,039
Rental revenues107,011 110,697 95,423 
Parking and other income9,230
 7,962
 7,467
Parking and other income13,343 9,230 7,962 
Total multifamily revenues119,927
 103,385
 96,506
Total multifamily revenues120,354 119,927 103,385 
     
Total revenues936,682
 881,316
 812,052
Total revenues891,523 936,682 881,316 
   
  
  
Operating Expenses     Operating Expenses
Office expenses264,482
 252,751
 233,633
Office expenses268,259 264,482 252,751 
Multifamily expenses33,681
 28,116
 24,401
Multifamily expenses37,154 33,681 28,116 
General and administrative expenses38,068
 38,641
 36,234
General and administrative expenses39,601 38,068 38,641 
Depreciation and amortization357,743
 309,864
 276,761
Depreciation and amortization385,248 357,743 309,864 
Total operating expenses693,974
 629,372
 571,029
Total operating expenses730,262 693,974 629,372 
     
Operating income242,708
 251,944
 241,023
     
Other income11,653
 11,414
 9,712
Other income16,288 11,653 11,414 
Other expenses(7,216) (7,744) (7,037)Other expenses(2,947)(7,216)(7,744)
Income from unconsolidated Funds6,923
 6,400
 5,905
Income from unconsolidated Funds430 6,923 6,400 
Interest expense(143,308) (133,402) (145,176)Interest expense(142,872)(143,308)(133,402)
Gain on sale of investment in real estateGain on sale of investment in real estate6,393 0 0 
Gain from consolidation of JV307,938
 —
 —
Gain from consolidation of JV0 307,938 0 
Net income418,698
 128,612
 104,427
Net income38,553 418,698 128,612 
Less: Net income attributable to noncontrolling interests(54,985) (12,526) (9,984)
Less: Net loss (income) attributable to noncontrolling interestsLess: Net loss (income) attributable to noncontrolling interests11,868 (54,985)(12,526)
Net income attributable to common stockholders$363,713
 $116,086
 $94,443
Net income attributable to common stockholders$50,421 $363,713 $116,086 
     
Net income per common share – basic$2.09
 $0.68
 $0.58
Net income per common share – diluted$2.09
 $0.68
 $0.58
Net income per common share – basic and dilutedNet income per common share – basic and diluted$0.28 $2.09 $0.68 


See accompanying notes to the consolidated financial statements.



F- 87
Table of Contents
Douglas Emmett, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)


 Year Ended December 31,
 202020192018
Net income$38,553 $418,698 $128,612 
Other comprehensive (loss) income: cash flow hedges(183,521)(107,292)15,070 
Comprehensive (loss) income(144,968)311,406 143,682 
Less: Comprehensive loss (income) attributable to noncontrolling interests64,816 (19,099)(16,751)
Comprehensive (loss) income attributable to common stockholders$(80,152)$292,307 $126,931 
 Year Ended December 31,
 2019 2018 2017
      
Net income$418,698
 $128,612
 $104,427
Other comprehensive (loss) income: cash flow hedges(107,292) 15,070
 34,290
Comprehensive income311,406
 143,682
 138,717
Less: Comprehensive income attributable to noncontrolling interests(19,099) (16,751) (16,331)
Comprehensive income attributable to common stockholders$292,307
 $126,931
 $122,386


See accompanying notes to the consolidated financial statements.




F- 98
Table of Contents
Douglas Emmett, Inc.
Consolidated Statements of Equity
(In thousands, except per share data)



 Year Ended December 31,
 202020192018
   
Shares of Common StockBeginning balance175,370 170,215 169,565 
Exchange of OP Units for common stock94 222 629 
Issuance of common stock— 4,933 — 
Exercise of stock options— — 21 
Ending balance175,464 175,370 170,215 
  
Common StockBeginning balance$1,754 $1,702 $1,696 
Exchange of OP Units for common stock1 2 6 
Issuance of common stock— 50 — 
Ending balance$1,755 $1,754 $1,702 
  
Additional Paid-in CapitalBeginning balance$3,486,356 $3,282,316 $3,272,539 
Exchange of OP Units for common stock1,535 3,538 10,286 
Repurchase of OP Units with cash(4)(431)(59)
Issuance of common stock, net— 200,933 — 
Taxes paid on exercise of stock options— — (450)
Ending balance$3,487,887 $3,486,356 $3,282,316 
  
AOCIBeginning balance$(17,462)$53,944 $43,099 
ASU 2017-12 adoption— — 211 
Cash flow hedge adjustments(130,573)(71,406)10,634 
Ending balance$(148,035)$(17,462)$53,944 
  
Accumulated DeficitBeginning balance$(758,576)$(935,630)$(879,810)
ASU 2016-02 adoption— (2,144)— 
ASU 2017-12 adoption— — (211)
Net income attributable to common stockholders50,421 363,713 116,086 
Dividends(196,361)(184,515)(171,695)
Ending balance$(904,516)$(758,576)$(935,630)
Noncontrolling InterestsBeginning balance$1,658,862 $1,446,098 $1,464,525 
ASU 2016-02 adoption— (355)— 
Net (loss) income attributable to noncontrolling interests(11,868)54,985 12,526 
Cash flow hedge adjustments(52,948)(35,886)4,225 
Contributions— 176,000 — 
Consolidation of JV— 61,394 — 
Distributions(60,392)(76,978)(52,142)
Issuance of OP Units for acquisition of additional interest in unconsolidated Fund— 14,390 — 
Exchange of OP Units for common stock(1,536)(3,540)(10,292)
Repurchase of OP Units with cash(3)(303)(49)
Stock-based compensation26,813 23,057 27,305 
Ending balance$1,558,928 $1,658,862 $1,446,098 
  Year Ended December 31,
  2019 2018 2017
       
Shares of Common StockBeginning balance170,215
 169,565
 151,530
Exchange of OP units for common stock222
 629
 1,059
Issuance of common stock4,933
 —
 15,687
Exercise of stock options—
 21
 1,289
Ending balance175,370
 170,215
 169,565
     
  
Common StockBeginning balance$1,702
 $1,696
 $1,515
Exchange of OP units for common stock2
 6
 11
Issuance of common stock50
 —
 157
Exercise of stock options—
 —
 13
Ending balance$1,754
 $1,702
 $1,696
     
  
Additional Paid-in CapitalBeginning balance$3,282,316
 $3,272,539
 $2,725,157
Exchange of OP units for common stock3,538
 10,286
 14,231
Repurchase of OP Units with cash(431) (59) (6,763)
Issuance of common stock, net200,933
 —
 593,011
Taxes paid on exercise of stock options—
 (450) (53,097)
Ending balance$3,486,356
 $3,282,316
 $3,272,539
     
  
AOCIBeginning balance$53,944
 $43,099
 $15,156
ASU 2017-12 adoption—
 211
 —
Cash flow hedge adjustments(71,406) 10,634
 27,943
Ending balance$(17,462) $53,944
 $43,099
     
  
Accumulated DeficitBeginning balance$(935,630) $(879,810) $(820,685)
ASU 2016-02 adoption(2,144) —
 —
ASU 2017-12 adoption—
 (211) —
Net income attributable to common stockholders363,713
 116,086
 94,443
Dividends(184,515) (171,695) (153,568)
Ending balance$(758,576) $(935,630) $(879,810)
       
Noncontrolling InterestsBeginning balance$1,446,098
 $1,464,525
 $1,092,928
ASU 2016-02 adoption(355) —
 —
Net income attributable to noncontrolling interests54,985
 12,526
 9,984
Cash flow hedge adjustments(35,886) 4,225
 6,347
Contributions176,000
 —
 284,248
Consolidation of JV61,394
 —
 —
Distributions(76,978) (52,142) (38,101)
Issuance of OP Units for acquisition of additional interest in unconsolidated Fund14,390
 —
 —
Issuance of OP Units for acquisition of real estate—
 —
 105,687
Exchange of OP units for common stock(3,540) (10,292) (14,242)
Repurchase of OP Units with cash(303) (49) (3,341)
Stock-based compensation23,057
 27,305
 21,015
Ending balance$1,658,862
 $1,446,098
 $1,464,525
       

F- 109
Douglas Emmett, Inc.
Consolidated Statements of Equity
(In thousands, except per share data)


Year Ended December 31,
202020192018
  
Total EquityBeginning balance$4,370,934 $3,848,430 $3,902,049 
ASU 2016-02 adoption— (2,499)— 
Net income38,553 418,698 128,612 
Cash flow hedge adjustments(183,521)(107,292)14,859 
Consolidation of JV— 61,394 — 
Issuance of common stock, net— 200,983 — 
Issuance of OP Units for acquisition of additional interest in unconsolidated Fund— 14,390 — 
Repurchase of OP Units with cash(7)(734)(108)
Taxes paid on exercise of stock options— — (450)
Contributions— 176,000 — 
Dividends(196,361)(184,515)(171,695)
Distributions(60,392)(76,978)(52,142)
Stock-based compensation26,813 23,057 27,305 
Ending balance$3,996,019 $4,370,934 $3,848,430 
Dividends declared per common share$1.12 $1.06 $1.01 

       
       
  Year Ended December 31,
  2019 2018 2017
     
  
Total EquityBeginning balance$3,848,430
 $3,902,049
 $3,014,071
ASU 2016-02 adoption(2,499) —
 —
Net income418,698
 128,612
 104,427
Cash flow hedge adjustments(107,292) 14,859
 34,290
Consolidation of JV61,394
 —
 —
Issuance of common stock, net200,983
 —
 593,168
Issuance of OP Units for acquisition of additional interest in unconsolidated Fund14,390
 —
 —
Issuance of OP Units for acquisition of real estate—
 —
 105,687
Repurchase of OP Units with cash(734) (108) (10,104)
Taxes paid on exercise of stock options—
 (450) (53,084)
Contributions176,000
 —
 284,248
Dividends(184,515) (171,695) (153,568)
Distributions(76,978) (52,142) (38,101)
Stock-based compensation23,057
 27,305
 21,015
Ending balance$4,370,934
 $3,848,430
 $3,902,049
       
 Dividends declared per common share$1.06
 $1.01
 $0.94

See accompanying notes to the consolidated financial statements.

F- 1110
Table of Contents
Douglas Emmett, Inc.
Consolidated Statements of Cash Flows
(In thousands)


 Year Ended December 31,
 202020192018
Operating Activities  
Net income$38,553 $418,698 $128,612 
Adjustments to reconcile net income to net cash provided by operating activities:
Income from unconsolidated Funds(430)(6,923)(6,400)
Gain from insurance recoveries for damage to real estate(13,105)0 0 
Gain on sale of investment in real estate(6,393)0 0 
Gain from consolidation of JV0 (307,938)0 
Depreciation and amortization385,248 357,743 309,864 
Net accretion of acquired lease intangibles(15,878)(16,264)(22,025)
Straight-line rent18,733 (10,134)(18,813)
Loan premium amortized and written off(2,274)(261)(205)
Deferred loan costs amortized and written off7,832 14,314 8,292 
Amortization of stock-based compensation21,365 18,359 22,299 
Operating distributions from unconsolidated Funds394 6,820 6,400 
Change in working capital components:
Tenant receivables(11,645)(609)(1,391)
Interest payable, accounts payable and deferred revenue5,557 (6,844)1,376 
Security deposits(4,676)1,919 319 
Other assets(3,063)706 4,654 
Net cash provided by operating activities420,218 469,586 432,982 
Investing Activities
Capital expenditures for improvements to real estate(143,445)(176,448)(179,062)
Capital expenditures for developments(154,153)(61,660)(68,459)
Insurance recoveries for damage to real estate17,120 0 0 
Property acquisition0 (365,885)0 
Cash assumed from consolidation of JV0 39,226 0 
Proceeds from sale of investment in real estate, net20,658 0 0 
Acquisition of additional interests in unconsolidated Funds(6,591)(90,754)(9,379)
Capital distributions from unconsolidated Funds1,236 5,853 7,349 
Net cash used in investing activities(265,175)(649,668)(249,551)
Financing Activities
Proceeds from borrowings674,000 2,185,000 667,000 
Repayment of borrowings(549,752)(2,095,718)(655,326)
Loan cost payments(3,846)(21,348)(2,992)
Contributions from noncontrolling interests in consolidated JVs0 163,556 0 
Distributions paid to noncontrolling interests(60,392)(64,534)(52,142)
Dividends paid to common stockholders(196,333)(179,667)(169,831)
Taxes paid on exercise of stock options0 0 (450)
Repurchase of OP Units(7)(734)(108)
Proceeds from issuance of common stock, net0 200,983 0 
Net cash (used in) provided by financing activities(136,330)187,538 (213,849)
Increase (decrease) in cash and cash equivalents and restricted cash18,713 7,456 (30,418)
Cash and cash equivalents and restricted cash - beginning balance153,804 146,348 176,766 
Cash and cash equivalents and restricted cash - ending balance$172,517 $153,804 $146,348 
Reconciliation of Ending Cash Balance
Year Ended December 31,
202020192018
Cash and cash equivalents - ending balance$172,385 $153,683 $146,227 
Restricted cash - ending balance132 121 121 
Cash and cash equivalents and restricted cash - ending balance$172,517 $153,804 $146,348 

 Year Ended December 31,
 2019
2018
2017
Operating Activities 
  
  
Net income$418,698
 $128,612
 $104,427
Adjustments to reconcile net income to net cash provided by operating activities:     
Income from unconsolidated Funds(6,923) (6,400) (5,905)
Gain from consolidation of JV(307,938) —
 —
Depreciation and amortization357,743
 309,864
 276,761
Net accretion of acquired lease intangibles(16,264) (22,025) (18,006)
Straight-line rent(10,134) (18,813) (12,855)
Write-off of uncollectible amounts4,103
 2,154
 406
Deferred loan costs amortized and written off14,314
 8,292
 10,834
Amortization of loan premium(261) (205) —
Derivative non-cash adjustments—
 —
 51
Amortization of stock-based compensation18,359
 22,299
 18,478
Operating distributions from unconsolidated Funds6,820
 6,400
 5,905
Change in working capital components:     
Tenant receivables(4,712) (3,545) (1,221)
Interest payable, accounts payable and deferred revenue(6,844) 1,376
 24,942
Security deposits1,919
 319
 4,424
Other assets706
 4,654
 (5,544)
Net cash provided by operating activities469,586
 432,982
 402,697
      
Investing Activities     
Capital expenditures for improvements to real estate(176,448) (179,062) (108,326)
Capital expenditures for developments(61,660) (68,459) (63,018)
Property acquisitions(365,885) —
 (537,669)
Cash assumed from consolidation of JV39,226
 —
 —
Acquisition of additional interests in unconsolidated Funds(90,754) (9,379) (4,142)
Capital distributions from unconsolidated Funds5,853
 7,349
 43,560
Net cash used in investing activities(649,668) (249,551) (669,595)
      
Financing Activities     
Proceeds from borrowings2,185,000
 667,000
 1,410,500
Repayment of borrowings(2,095,718) (655,326) (1,698,544)
Loan cost payments(21,348) (2,992) (11,442)
Contributions from noncontrolling interests in consolidated JVs163,556
 —
 284,248
Distributions paid to noncontrolling interests(64,534) (52,142) (38,101)
Dividends paid to common stockholders(179,667) (169,831) (146,026)
Taxes paid on exercise of stock options—
 (450) (53,084)
Repurchase of OP Units(734) (108) (10,104)
Proceeds from issuance of common stock, net200,983
 —
 593,169
Net cash provided by (used in) financing activities187,538
 (213,849) 330,616
      
Increase (decrease) in cash and cash equivalents and restricted cash7,456
 (30,418) 63,718
Cash and cash equivalents and restricted cash - beginning balance146,348
 176,766
 113,048
Cash and cash equivalents and restricted cash - ending balance$153,804
 $146,348
 $176,766

Supplemental Cash Flows Information

 Year Ended December 31,
 202020192018
Operating Activities
Cash paid for interest, net of capitalized interest$136,823 $128,205 $124,487 
Capitalized interest paid$4,810 $3,782 $3,520 
Non-cash Investing Transactions
Accrual for real estate and development capital expenditures$37,185 $35,398 $24,702 
Capitalized stock-based compensation for improvements to real estate and developments$5,448 $4,698 $5,006 
Removal of fully depreciated and amortized tenant improvements and lease intangibles$73,045 $88,205 $75,729 
Removal of fully amortized acquired lease intangible assets$372 $2,132 $1,582 
Removal of fully accreted acquired lease intangible liabilities$20,649 $29,660 $15,431 
Recognition of ground lease right-of-use asset - Adoption of ASU 2016-02$0 $10,885 $0 
Above-market ground lease intangible liability offset against right-of-use asset - Adoption of ASU 2016-02$0 $3,408 $0 
Recognition of ground lease liability - Adoption of ASU 2016-02$0 $10,885 $0 
Non-cash Financing Transactions
Gain recorded in AOCI - Adoption of ASU 2017-12 - consolidated derivatives$0 $0 $211 
(Loss) gain recorded in AOCI - consolidated derivatives$(232,652)$(76,273)$22,723 
(Loss) gain recorded in AOCI - unconsolidated Funds' derivatives (our share)$(410)$(5,023)$3,052 
Accrual for deferred loan costs$50 $1,416 $0 
Non-cash contributions from noncontrolling interests in consolidated JVs$0 $12,444 $0 
Non-cash distributions to noncontrolling interests$0 $12,444 $0 
Dividends declared$196,361 $184,515 $171,695 
Exchange of OP Units for common stock$1,536 $3,540 $10,292 
OP Units issued for acquisition of additional interest in unconsolidated Fund$0 $14,390 $0 
 Year Ended December 31,
 2019 2018 2017
Operating Activities     
Cash paid for interest, net of capitalized interest$128,205
 $124,487
 $135,824
Capitalized interest paid$3,782
 $3,520
 $2,745
      
Non-cash Investing Transactions     
Accrual for real estate and development capital expenditures$35,398
 $24,702
 $3,776
Capitalized stock-based compensation for improvements to real estate and developments$4,698
 $5,006
 $2,537
Removal of fully depreciated and amortized tenant improvements and lease intangibles$88,205
 $75,729
 $53,687
Removal of fully amortized acquired lease intangible assets$2,132
 $1,582
 $414
Removal of fully accreted acquired lease intangible liabilities$29,660
 $15,431
 $5,057
Recognition of ground lease right-of-use asset - Adoption of ASU 2016-02$10,885
 $—
 $—
Above-market ground lease intangible liability offset against right-of-use asset - Adoption of ASU 2016-02$3,408
 $—
 $—
Recognition of ground lease liability - Adoption of ASU 2016-02$10,885
 $—
 $—
      
Non-cash Financing Transactions     
Gain recorded in AOCI - Adoption of ASU 2017-12 - consolidated derivatives$—
 $211
 $—
(Loss) gain recorded in AOCI - consolidated derivatives$(76,273) $22,723
 $16,512
(Loss) gain recorded in AOCI - unconsolidated Funds' derivatives (our share)$(5,023) $3,052
 $3,275
Accrual for deferred loan costs$1,416
 $—
 $—
Assumption of term loan for acquisition of real estate$—
 $—
 $36,460
Non-cash contributions from noncontrolling interests in consolidated JVs$12,444
 $—
 $—
Non-cash distributions to noncontrolling interests$12,444
 $—
 $—
Dividends declared$184,515
 $171,695
 $153,568
Exchange of OP units for common stock$3,540
 $10,292
 $14,242
Issuance of OP Units for acquisition of real estate$—
 $—
 $105,687
OP Units issued for acquisition of additional interest in unconsolidated Fund$14,390
 $—
 $—

See accompanying notes to the consolidated financial statements.

F- 1211
Table of Contents
Douglas Emmett, Inc.
Notes to Consolidated Financial Statements



1. Overview

Organization and Business Description

Douglas Emmett, Inc. is a fully integrated, self-administered and self-managed REIT. We are one of the largest owners and operators of high-quality office and multifamily properties in Los Angeles County, California and Honolulu, Hawaii. Through our interest in our Operating Partnership and its subsidiaries, consolidated JVs and unconsolidated Fund, we focus on owning, acquiring, developing and managing a significant market 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 terms "us," "we" and "our" as used in the consolidated financial statements refer to Douglas Emmett, Inc. and its subsidiaries on a consolidated basis.

At December 31, 2019,2020, our Consolidated Portfolio consisted of (i) an 18.0a 17.8 million square foot office portfolio, (ii) 4,1614,287 multifamily apartment units and (iii) fee interests in 2 parcels of land from which we receive rent under ground leases. We also manage and own an equity interest an unconsolidated Fund which, at December 31, 2019,2020, owned an additional 0.4 million square feet of office space. We manage our unconsolidated Fund alongside our Consolidated Portfolio, and we therefore present the statistics for our office portfolio on a Total Portfolio basis. As of December 31, 2019,2020, our portfolio (not including 2 parcels of land from which we receive rent under ground leases), consisted of the following properties (including ancillary retail space):

 Consolidated PortfolioTotal Portfolio
Office
Wholly-owned properties5353
Consolidated JV properties1616
Unconsolidated Fund properties02
6971
Multifamily
Wholly-owned properties1111
Consolidated JV properties11
1212
Total8183
 Consolidated Portfolio Total Portfolio
Office   
Wholly-owned properties53 53
Consolidated JV properties17 17
Unconsolidated Fund properties— 2
 70 72
    
Multifamily   
Wholly-owned properties10 10
Consolidated JV properties1 1
 11 11
    
Total81 83


Basis of Presentation

The accompanying consolidated financial statements are the consolidated financial statements of Douglas Emmett, Inc. and its subsidiaries, including our Operating Partnership and our consolidated JVs. All significant intercompany balances and transactions have been eliminated in our consolidated financial statements.

We consolidate entities in which we are considered to be the primary beneficiary of a VIE or have a majority of the voting interest of the entity. We are deemed to be the primary beneficiary of a VIE when we have (i) the power to direct the activities of that VIE that most significantly impact its economic performance, and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. We do not consolidate entities in which the other parties have substantive kick-out rights to remove our power to direct the activities, most significantly impacting the economic performance, of that VIE. In determining whether we are the primary beneficiary, we consider factors such as ownership interest, management representation, authority to control decisions, and contractual and substantive participating rights of each party. We consolidate our Operating Partnership through which we conduct substantially all of our business, and own, directly and through subsidiaries, substantially all of our assets, and are obligated to repay substantially all of our liabilities, including $3.11$3.19 billion of consolidated debt. See Note 8. We also consolidate 4 JVs.three JVs (4 JVs before December 31, 2020 - see "2020 Property Disposition" in Note 3 for more information regarding the dissolution of one of our JVs before December 31, 2020). As of December 31, 2019,2020, these consolidated entities had aggregate total consolidated assets of $9.35$9.25 billion (of which $8.96$8.86 billion related to investment in real estate), aggregate total consolidated liabilities of $4.98$5.25 billion (of which $4.62$4.74 billion related to debt), and aggregate total consolidated equity of $4.37$4.00 billion (of which $1.66$1.56 billion related to noncontrolling interests).


F- 1312
Douglas Emmett, Inc.
Notes to Consolidated Financial Statements


The accompanying consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC in conformity with US GAAP as established by the FASB in the ASC. The accompanying consolidated financial statements include, in our opinion, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial information set forth therein. Any references to the number or class of properties, square footage, per square footage amounts, apartment units and geography, are unaudited and outside the scope of our independent registered public accounting firm’s audit of our consolidated financial statements in accordance with the standards of the PCAOB.

DuringCommencing with the current reporting period,third quarter of 2020, we reportedmoved the disclosure of our demolition expenses as part of Other expensesinvestment in real estate cost categories (land, buildings and improvements, tenant improvements and lease intangibles, and property under development) from the consolidated balance sheets to our consolidated statements of operations and we reclassified the comparableinvestment in real estate footnote for all periods to conform to the current period presentation.presented. See Note 3.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make certain estimates that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

Investment in Real Estate

Acquisitions and Initial Consolidation of VIEs

We account for property acquisitions as asset acquisitions, and include the acquired propertiesproperties' results of operations in our results of operations from the respective acquisition date. We allocate the purchase price for asset acquisitions, which includes the capitalized transaction costs, and for the properties upon the initial consolidation of VIEs not determined to be a business, on a relative fair value basis to: (i) land, (ii) buildings and improvements, (iii) tenant improvements and identifiable intangible assets such as in-place at-market leases, (iv) acquired above- and below-market ground and tenant leases (including for renewal options), and if applicable (v) assumed debt and (vi) assumed interest rate swaps, based upon comparable sales for land, and the income approach using our estimates of expected future cash flows and other valuation techniques, which include but are not limited to, our estimates of rental rates, revenue growth rates, capitalization rates and discount rates, for other assets and liabilities. We estimate the relative fair values of the tangible assets on an ‘‘as-if-vacant’’ basis. The estimated relative fair value of acquired in-place at-market leases are the estimated costs to lease the property to the occupancy level at the date of acquisition, including the fair value of leasing commissions and legal costs. We evaluate the time period over which we expect such occupancy level to be achieved and include an estimate of the net operating costs (primarily real estate taxes, insurance and utilities) incurred during the lease-up period. Above- and below-market ground and tenant leases are recorded as an asset or liability based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid or received pursuant to the in-place ground or tenant leases, respectively, and our estimate of the fair market rental rates for the corresponding in-place leases, over the remaining non-cancelable term of the lease. Assumed debt is recorded at fair value based upon the present value of the expected future payments and current interest rates. See Note 3 for our property acquisition disclosures.

Depreciation

Buildings and improvements are depreciated on a straight-line basis using an estimated life of forty years for buildings and fifteen years for improvements, and are carried on our balance sheet, offset by the related accumulated depreciation and any impairment charges, until they are sold. Tenant improvements are depreciated on a straight-line basis over the life of the related lease, with any remaining balance depreciated in the period of any early lease termination. Acquired in-place leases are amortized on a straight line basis over the weighted average remaining term of the acquired in-place leases, and are carried on our balance sheet, offset by the related accumulated amortization, until the related building is either sold or impaired. Lease intangibles are amortized on a straight-line basis over the related lease term, with any remaining balance amortized in the period of any early lease termination. Acquired above- and below-market tenant leases are amortized/accreted on a straight line basis over the life of the related lease and recorded as either an increase (for below-market leases) or a decrease (for above-market leases) to rental revenue. Acquired above- and below-market ground leases, from which we earn ground rent income, are amortized/accreted on a straight line basis over the life of the related lease and recorded either as an increase (for below-market leases) or a decrease (for above-market leases) to rental revenue. Acquired above- and below-market ground leases, for which we incur ground rent expense, are accreted/ amortized over the life of the related lease and recorded either as an increase (for below-market leases) or a decrease (for above-market leases) to expense.


F- 1413
Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (continued)





We accelerate depreciation for affected assets when we renovate our buildings or existing buildings are impacted by new developments. When assets are sold or retired, their cost and related accumulated depreciation or amortization are removed from our balance sheet with the resulting gains or losses, if any, reflected in our results of operations for the respective period.

Real Estate Held for Sale

Properties are classified as held for sale in our consolidated balance sheets when they meet certain requirements, including the approval of the sale of the property, the marketing of the property for sale, and our expectation that the sale will likely occur within the next 12 months. Properties classified as held for sale are carried at the lower of their carrying value or fair value less costs to sell, and we also cease to depreciate the property. As of December 31, 20192020 and 2018,2019, we did not have any properties held for sale.

Dispositions

Recognition of gains or losses from sales of investments in real estate requires that we meet certain revenue recognition criteria and transfer control of the real estate to the buyer. The gain or loss recorded is measured as the difference between the sales price, less costs to sell, and the carrying value of the real estate when we sell it. See Note 3 for our property disposition disclosures.

Cost capitalization

Costs incurred during the period of construction of real estate are capitalized. Cost capitalization of development and redevelopment activities begins during the predevelopment period, which we define as the activities that are necessary to begin the development of the property.  We cease capitalization upon substantial completion of the project, but no later than one year from cessation of major construction activity.  We also cease capitalization when activities necessary to prepare the property for its intended use have been suspended. Capitalized costs are included in Property under developmentInvestment in real estate, gross, in our consolidated balance sheets. Once major construction activity has ceased and the development or redevelopment property is in the lease-up phase, the capitalized costs are transferred to (i) Land, (ii) Building and improvements and (iii) Tenant improvements and lease intangibles on our consolidated balance sheets as the historical cost of the property. Demolition expenses and repairs and maintenance are recorded as expense when incurred. During 2020, 2019 2018 and 2017,2018, we capitalized $186.4 million, $75.3 million $78.7 million and $66.0$78.7 million of costs related to our developments, respectively, which included $4.8 million, $3.8 million $3.5 million and $2.7$3.5 million of capitalized interest, respectively.

Ground Leases

We account for our ground lease, for which we are the lessee, in accordance with Topic 842 "Leases", which we adopted on January 1, 2019 on a prospective basis, see New Accounting Pronouncements further below.basis. Upon adoption of the ASU, we continued to classify the lease as an operating lease, and we recognized a right-of-use asset for the land and a lease liability for the future lease payments of $10.9 million. We calculated the carrying value of the right-of-use asset and lease liability by discounting the future lease payments using our incremental borrowing rate. We adjusted the right-of-use asset carrying value for a related above-market ground lease liability of $3.4 million, which reduced the carrying value of the asset to $7.5 million. We continued to recognize the lease payments as expense, which is included in Office expenses in our consolidated statements of operations. See Note 4 for more information regarding this ground lease. See Note 14 for the fair value disclosures related to the ground lease liability.

Investment in Unconsolidated Funds

We account for our investments in unconsolidated Funds using the equity method because we have significant influence but not control over the Funds. Under the equity method, we initially record our investment in our Funds at cost, which includes acquisition basis difference and additional basis for capital raising costs, and subsequently adjust the investment balance for: (i) our share of the Funds net income or losses, (ii) our share of the Funds other comprehensive income or losses, (iii) our cash contributions to the Fund and (iv) our distributions received from the Fund. We remove our investment in unconsolidated Funds from our consolidated balance sheet when we sell our interest in the Funds or the Funds qualify for consolidation.

Our investment in unconsolidated Funds is included in Investment in unconsolidated Funds in the consolidated balance sheetsheets and our share of net income or losses from the Funds is included in Income from unconsolidated Funds in the consolidated statements of operations. Our share of the Funds accumulated other comprehensive income or losses is included in Accumulated other comprehensive income (loss) in our consolidated balance sheet.sheets. As of December 31, 20192020 and 2018,2019, the total investment basis difference included in our investment balance in unconsolidated Funds was $29.6 million and $27.8 million, and $2.2 million, respectively. See Note 6 for our Fund disclosures.


F- 1514
Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (continued)




We periodically assess whether there has been any impairment that is other than temporary in our investment in unconsolidated funds. An impairment charge would be recorded if events or changes in circumstances indicate that a decline in the fair value below the carrying value has occurred and the decline is other-than-temporary. Based upon such periodic assessments, 0 impairments occurred during 2020, 2019 or 2018. See Note 6 for our Fund disclosures.

Impairment of Long-Lived Assets

We periodically assess whether there has been any impairment in the carrying value of our properties and whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. An impairment charge would be recorded if events or changes in circumstances indicate that a decline in the fair value below the carrying value has occurred and the decline is other-than-temporary. Recoverability of the carrying value of our properties is measured by a comparison of the carrying value to the undiscounted future cash flows expected to be generated by the property. If the carrying value exceeds the estimated undiscounted future cash flows, an impairment loss is recorded equal to the difference between the property's carrying value and its fair value based on the estimated discounted future cash flows. We also perform a similar periodic assessment for our investments in our Funds. Based upon such periodic assessments, 0 impairments occurred during 2020, 2019 2018or 2018.

2017.
In downtown Honolulu, at 1132 Bishop Street, we are converting a 25 story, 490,000 square foot office tower into approximately 500 apartments. We expect the conversion to occurapartments in phases over a number of years as the office space is vacated. Due to the significant change in planned use of the property, we performed anannual impairment assessment in 2019 by comparing the property's expected undiscounted cash flows to the property's carrying value plus the expected development costs and concluded that there was no impairment as of December 31, 2019.loss. We determined the undiscounted cash flows using our estimates of the expected future cash flows which included, but were not limited to, our estimates of property's net operating income, and capitalization rates.

Cash and Cash Equivalents

We consider short-term investments with maturities of three months or less when purchased to be cash equivalents.

Rental Revenues and Tenant Recoveries

We account for our rental revenues and tenant recoveries in accordance with Topic 842 "Leases", which we adopted on January 1, 2019 on a modified retrospective basis, see New Accounting Pronouncements further below.basis. Topic 842 did not significantly change our accounting policy for recognizing rental revenues and tenant recoveries, and we adopted a practical expedient which allows us to account for our rental revenues and tenant recoveries on a combined basis. Rental revenues and tenant recoveries from tenant leases are included in Rental revenues and tenant recoveries in the consolidated statements of operations. All of our tenant leases are classified as operating leases. For lease terms exceeding one year, rental income is recognized on a straight-line basis over the lease term. Tenant receivables consist primarily of amounts due for contractual lease payments and reimbursements of common area maintenance expenses, property taxes, and other costs recoverable from tenants. Deferred rent receivables represent the amount by which the cumulative straight-line rental revenue recognized on a straight-line basis in excess ofrecorded to date exceeds the cumulative cash rents billed rents. If ato date under the lease is canceled then the deferred rent is recognized over the new remaining lease term. We recognized straight line rent of $10.1 million, $18.8 million and $12.9 million during 2019, 2018 and 2017, respectively.agreement. Rental revenue from month-to-month leases or leases with no scheduled rent increases or other adjustments is recognized on a monthly basis when earned.

Lease termination fees, which are included in Rental revenues and tenant recoveries in the consolidated statements of operations, are recognized on a straight line basis over the new remaining lease term when the related lease is canceled. We recognized lease termination revenue of $0.5$1.0 million,, $1.6 $0.5 million and $2.1$1.6 million during 2020, 2019 and 2018, and 2017, respectively.
Tenant improvements constructed, and owned by us, and reimbursed by tenants are recorded as our assets, and the related revenue, which are included in Rental revenues and tenant recoveries in the consolidated statements of operations, is recognized over the related lease term. We recognized revenue for reimbursement of tenant improvements of $5.9 million, $5.8 million and $3.5 million during 2020, 2019 and $2.6 million during 2019, 2018, and 2017, respectively.

Estimated tenant recoveries for real estate taxes, common area maintenance and other recoverable operating expenses, which are included in Rental revenues and tenant recoveries in the consolidated statements of operations, are recognized as revenue on a gross basis in the period that the recoverable expenses are incurred. Subsequent to year-end, we perform reconciliations on a lease-by-lease basis and bill or credit each tenant for any differences between the estimated expenses we billed to the tenant and the actual expenses incurred.

F- 15
Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (continued)




In accordance with Topic 842, if collectibilitywe perform an assessment as to whether or not substantially all of the amounts due under a tenant’s lease agreement is deemed probable of collection. This assessment involves using a methodology that requires judgment and estimates about matters that are uncertain at the time the estimates are made, including tenant specific factors, specific industry conditions, and general economic trends and conditions.

For leases where we have concluded it is probable that we will collect substantially all the lease payments due under those leases, we continue to record lease income on a straight-line basis over the lease term. For leases where we have concluded that it is not probable atthat we will collect substantially all the commencement date, thenlease payments due under those leases, we limit the lease income to the lesser of the income recognized on a straight-line basis or cash basis. If our assessmentconclusion of collectibility changes, after the commencement date, we will record the difference between the lease income that would have been recognized on a straight-line basis and cash basis as a current-period adjustment to lease income.rental revenues and tenant recoveries. We elected to adopt the complete impairment model guidance within Topic 842. Under this model, commencing on January 1, 2019, we no longer maintain a general reserve related to ourwrite-off tenant receivables and instead analyze, on a lease-by-lease basis, whether amounts due under the operating lease are deemed probable for collection. We write off tenant and deferred rent receivables as a charge against rental revenuerevenues and tenant recoveries in the period we determineconclude that substantially all of the lease payments are not probable of collection. If we subsequently collect amounts that were previously written off then the amounts collected are recorded as an increase to our rental revenues and tenant recoveries in the period they are collected. Charges for collection.uncollectible amounts, related to tenant receivables and deferred rent receivables, which for the year ended December 31, 2020 were primarily due to the impact of the COVID-19 pandemic, reduced our office revenues by $41.0 million and $2.6 million for the years ended December 31, 2020 and 2019, respectively.


F- 16
Table of Contents
Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (continued)





Before the adoption of Topic 842, we presented our tenant receivables and deferred rent receivables net of allowances on our consolidated balance sheets. Tenant receivables consist primarily of amounts due for contractual lease payments and reimbursements of common area maintenance expenses, property taxes, and other costs recoverable from tenants. Deferred rent receivables represent the amount by which the cumulative straight-line rental revenue recorded to date exceeds the cumulative cash rents billed to date under the lease agreement. We considered many factors when evaluating the level of allowances necessary, including evaluations of individual tenant receivables, historical loss activity, current economic conditions and other relevant factors. We generally obtain letters of credit or security deposits from our tenants. The table below presentsTenant receivable allowances reduced our rental revenues and tenant recoveries by $2.2 million for the year ended December 31, 2018, and deferred rent receivable allowances increased our rental revenues and security obtained from our tenants before we adopted Topic 842:tenant recoveries by $0.6 million for the year ended December 31, 2018.

(In thousands)December 31, 2018
  
Allowance for tenant receivables$5,215
Allowance for deferred rent receivables$2,849
Letters of credit from our tenants$27,749
Cash security deposits from our tenants$50,733

The table below presents the impact of the changes in our allowances on our results of operations:
 Year Ended December 31,
(In thousands)2018 2017
    
Tenant receivables allowance - decrease in net income$(2,154) $(406)
Deferred rent receivables allowance - increase in net income$556
 $1,739


Office Parking Revenues

Office parking revenues, which are included in office Parking and other income in our consolidated statements of operations, are within the scope of Topic 606 "Revenue from Contracts with Customers", which we adopted on January 1, 2018 on a modified retrospective basis. Topic 606 did not significantly change our accounting policy for parking revenues.. Our lease contracts generally make a specified number of parking spaces available to the tenant, and we bill and recognize parking revenues on a monthly basis in accordance with the lease agreements, generally using the monthly parking rates in effect at the time of billing. Office parking revenues were $76.1 million, $108.7 million $102.5 million and $96.2$102.5 million for the years ended December 31, 2020, 2019 2018 and 2017,2018, respectively. Office parking receivables were $1.3$0.6 million and $1.1$1.3 million as of December 31, 20192020 and 2018,2019, respectively, and are included in Tenant receivables in our consolidated balance sheets.

Insurance Recoveries

InsuranceThe amount by which insurance recoveries related to property damage exceeds any losses recognized from that damage are recorded as other income when payment is eitherhas been received or receiptconfirmation of the amount of proceeds has been received.

In January 2020, there was a fire in one of our residential property buildings. We carry comprehensive liability and property insurance covering all of the properties in our portfolio under blanket insurance policies to cover these kinds of losses. During the year ended December 31, 2020 we recorded $3.9 million of business interruption revenues, which is determinedincluded in Multifamily rental - Parking and other income in the consolidated statements of operations, and a gain related to be probable.property damage of $13.1 million, which is included in Other income in the consolidated statements of operations.

Interest Income

Interest income from our short-term money market fund investments is recognized on an accrual basis. Interest income is included in other income in the consolidated statements of operations.

Leasing Costs

We account for our leasing costs in accordance with Topic 842 "Leases", which we adopted on January 1, 2019 on a modified retrospective basis, see New Accounting Pronouncements further below.basis. In accordance with Topic 842, we capitalize initial direct costs of a lease, which are costs that would not have been incurred had the lease not been executed. Costs to negotiate a lease that would have been incurred regardless of whether the lease was executed, such as employee salaries, are not considered to be initial direct costs, and are expensed.expensed as incurred. Prior to January 1, 2019, we capitalized most of our leasing costs.

F- 1716
Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (continued)





Loan Costs

Loan costs incurred directly with the issuance of secured notes payable and revolving credit facilities are deferred and amortized to interest expense over the respective loan or credit facility term. Any unamortized amounts are written off upon early repayment of the secured notes payable, and the related cost and accumulated amortization are removed from our consolidate balance sheet.sheets.

To the extent that a refinancing is considered an exchange of debt with the same lender, we account for loan costs based upon whether the old debt is determined to be modified or extinguished for accounting purposes. If the old debt is determined to be modified then we (i) continue to defer and amortize any unamortized deferred loan costs associated with the old debt at the time of the modification over the new term of the modified debt, (ii) defer and amortize the lender costs incurred in connection with the modification over the new term of the modified debt, and (iii) expense all other costs associated with the modification. If the old debt is determined to be extinguished then we (i) write off any unamortized deferred loan costs associated with the extinguished debt at the time of the extinguishment and remove the related cost and accumulated amortization from our balance sheet, (ii) expense all lender costs associated with the extinguishment, and (iii) defer and amortize all other costs incurred directly in connection with the extinguishment over the term of the new debt.

In circumstances where we modify or exchange our revolving credit facility with the same lender, we account for the loan costs based upon whether the borrowing capacity of the new arrangement is (a) equal to or greater than the borrowing capacity of the old arrangement, or (b) less than the borrowing capacity of the old arrangement (borrowing capacity is defined as the product of the remaining term and the maximum available credit). If the borrowing capacity of the new arrangement is greater than or equal to the borrowing capacity of the old arrangement, then we (i) continue to defer and amortize the unamortized deferred loan costs from the old arrangement over the term of the new arrangement and (ii) defer all lender and other costs incurred directly in connection with the new arrangement over the term of the new arrangement. If the borrowing capacity of the new arrangement is less than the borrowing capacity of the old arrangement, then we (i) write off any unamortized deferred loan costs at the time of the transaction related to the old arrangement in proportion to the decrease in the borrowing capacity of the old arrangement and (ii) defer all lender and other costs incurred directly in connection with the new arrangement over the term of the new arrangement.

Deferred loan costs are presented on the balance sheet as a deduction from the carrying amount of our secured notes payable and revolving credit facility. All loan costs expensed and deferred loan costs amortized are included in interest expense in our consolidated statements of operations. See Note 8 for our loan cost disclosures.

Debt Discounts and Premiums

Debt discounts and premiums related to recording debt assumed in connection with property acquisitions at fair value are generally amortized and accreted, respectively, over the remaining term of the related loan, which approximates the effective interest method. The amortization/accretion is included in interest expense in our consolidated statements of operations.

Derivative Contracts

We make use of interest rate swap contracts to manage the risk associated with changes in interest rates on our floating-rate debt. When we enter into a floating-rate term loan, we generally enter into an interest rate swap agreement for the equivalent principal amount, for a period covering the majority of the loan term, which effectively converts our floating-rate debt to a fixed-rate basis during that time. We do not speculate in derivatives and we do not make use of any other derivative instruments.

When entering into derivative agreements, we generally elect to designate them as cash flow hedges for accounting purposes. Changes in fair value of hedging instruments designated as cash flow hedges are recorded in accumulated other comprehensive income (loss) (AOCI), which is a component of equity outside of earnings. For our Funds' hedging instruments designated as cash flow hedges, we record our share of the changes in fair value of the hedging instrument in AOCI. Amounts recorded in AOCI related to our designated hedges are reclassified to Interest expense as interest payments are made on the hedged floating rate debt. Amounts reported in AOCI related to our Funds' hedges are reclassified to Income from unconsolidated Funds, as interest payments are made by our Funds on their hedged floating rate debt.
We present our derivatives on the balance sheet at fair value on a gross basis. Our share of the fair value of our Funds' derivatives is included in our investment in unconsolidated Funds on our consolidated balance sheet. See Note 10 for our derivative disclosures.


F- 1817
Table of Contents
Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (continued)





Stock-Based Compensation

We account for stock-based compensation, including stock options and LTIP Units, using the fair value method of accounting. The estimated fair value of stock options and LTIP Units, net of estimated forfeitures, is amortized over the vesting period, which is based upon service. See Note 13 for our stock-based compensation disclosures.

EPS


We calculate basic EPS by dividing the net income attributable to common stockholders for the period by the weighted average number of common shares outstanding during the respective period. We calculate diluted EPS by dividing the net income attributable to common stockholders for the period by the weighted average number of common shares and dilutive instruments outstanding during the respective period using the treasury stock method. Unvested LTIP Units contain non-forfeitable rights to dividends and we account for them as participating securities and include them in the computation of basic and diluted EPS using the two-class method. See Note 12 for our EPS disclosures.

Segment Information

Segment information is prepared on the same basis that our management reviews information for operational decision-making purposes. We operate 2 business segments: the acquisition, development, ownership and management of office real estate, and the acquisition, development, ownership and management of multifamily real estate. The services for our office segment include primarily rental of office space and other tenant services, including parking and storage space rental. The services for our multifamily segment include primarily rental of apartments and other tenant services, including parking and storage space rental. See Note 15 for our segment disclosures.

Income Taxes

We have elected to be taxed as a REIT under the Code, commencing with our initial taxable year ended December 31, 2006. To qualify as a REIT, we are required (among other things) to distribute at least 90% of our REIT taxable income to our stockholders and meet various other requirements imposed by the Code relating to matters such as operating results, asset holdings, distribution levels and diversity of stock ownership. Provided that we qualify for taxation as a REIT, we are generally not subject to corporate-level income tax on the earnings distributed currently to our stockholders that we derive from our REIT qualifying activities. If we fail to qualify as a REIT in any taxable year, and are unable to avail ourselves of certain savings provisions set forth in the Code, all of our taxable income would be subject to federal income tax at the regular corporate rate, including any applicable alternative minimum tax for taxable years prior to 2018.

We have elected to treat severalone of our subsidiaries as TRSs,a TRS, which generally may engage in any business, including the provision of customary or non-customary services to our tenants. A TRS is treated as a regular corporation and is subject to federal income tax and applicable state income and franchise taxes at regular corporate rates.  Our TRSs did not have significant tax provisions or deferred income tax items for 2020, 2019 2018 or 2017.2018. Our subsidiaries (other than our TRS), including our Operating Partnership, are partnerships, disregarded entities, QRSs or REITs, as applicable, for federal income tax purposes. Under applicable federal and state income tax rules, the allocated share of net income or loss from disregarded entities or flow-through entities is reportable in the income tax returns of the respective owners. Accordingly, no income tax provision is included in our consolidated financial statements for these entities.

New Accounting Pronouncements

Changes to US GAAP are implemented by the FASB in the form of ASUs.  We consider the applicability and impact of all ASUs. Other than the ASUs discussed below, the FASB has not issued any other ASUs duringthat we expect to be applicable and have a material impact on our consolidated financial statements.


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Notes to Consolidated Financial Statements (continued)





ASUs Adopted

During 2019 we adopted the ASU listed below:

ASU 2016-02 (Topic 842 - "Leases")

In February 2016, the FASB issued ASU No. 2016-02, (Topic 842 - "Leases"). The primary impact of the ASU is the recognition of lease assets and liabilities on the balance sheet by lessees for leases classified as operating leases. The accounting applied by lessors is largely unchanged. For example, the vast majority of operating leases remain classified as operating leases, and lessors continue to recognize lease payments for those leases on a straight-line basis over the lease term.

We adopted the ASU on January 1, 2019 using the modified retrospective transition method. We recorded cumulative adjustments of $2.1 million and $0.4 million to the opening balances of accumulated deficit and noncontrolling interests, respectively, for leasing expenses related to leases that were entered into before the adoption date but commenced after the adoption date. The ASU provides a practical expedient package, which we elected to use, that allows entities (a) not to reassess whether any expired or existing contracts as of the adoption date are considered or contain leases; (b) not to reassess the lease classification for any expired or existing leases as of the adoption date; and (c) not to reassess initial direct costs for any existing leases as of the adoption date. All leases entered into on or after the adoption date were accounted for under the ASU.
We lease space to tenants at our office and multifamily properties. Under the ASU, all of our tenant leases continue to be classified as operating leases. The ASU continues to require that lease payments for operating leases be recognized over the lease term on a straight-line basis unless another systematic and rational basis is more representative of the pattern in which benefit is expected to be derived from the use of the underlying asset. If collectibility of the lease payments is not probable at the commencement date, then the lease income should be limited to the lesser of the income recognized on a straight-line basis or cash basis. If the assessment of collectibility changes after the commencement date, any difference between the lease income that would have been recognized on a straight-line basis and cash basis must be recognized as a current-period adjustment to lease income. We elected to adopt the complete impairment model guidance within ASC 842. Under this model we no longer maintain a general reserve related to our receivables, and instead analyze, on a lease-by-lease basis, whether amounts due under the operating lease are deemed probable for collection. We write off tenant and deferred rent receivables as a charge against rental revenue in the period we determine the lease payments are not probable for collection.

The ASU requires separation of the lease from the non-lease components (for example, maintenance services or other activities that transfer a good or service to the customer) in a contract. Only the lease components are accounted for in accordance with the ASU. The consideration in the contract is allocated to the lease and non-lease components on a relative standalone selling price basis and the non-lease component would be accounted for in accordance with ASC 606 ("Revenue from Contracts with Customers"). In July 2018, the FASB issued ASU No. 2018-11 which includes an optional practical expedient for lessors to elect, by class of underlying asset, to not separate the lease from the non-lease components if certain criteria are met. Our office tenant leases include a lease component for the rental income and a non-lease component for the related tenant recoveries. We determined that our office tenant leases qualify for the single component presentation and we adopted the practical expedient. We account for the combined components under the ASU.

Rental revenues and tenant recoveries from our office tenant leases is included in Rental revenues and tenant recoveries under Office rental in our consolidated statements of operations. Rental revenues from our multifamily tenant leases is included in multifamily Rental revenues in our consolidated statements of operations. Rental revenue recognized on a straight-line basis in excess of billed rents is included in Deferred rent receivables in our consolidated balance sheets. See Note 16 for more information regarding the future lease rental receipts from our operating leases.

The ASU defines initial direct costs of a lease, which may be capitalized, as costs that would not have been incurred had the lease not been executed. Costs to negotiate a lease that would have been incurred regardless of whether the lease was executed, such as employee salaries, are not considered to be initial direct costs, and may not be capitalized. We historically capitalized most of our leasing costs. We expensed $4.2 million during the year ended December 31, 2019, of leasing costs related to our tenant leases that did not qualify as initial direct costs of a lease, which are included in General and administrative expenses in our consolidated statements of operations.


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Notes to Consolidated Financial Statements (continued)





We pay rent under a ground lease which expires on December 31, 2086. Upon adoption of the ASU, we continued to classify the lease as an operating lease, and we recognized a right-of-use asset for the land and a lease liability for the future lease payments of $10.9 million. We calculated the carrying value of the right-of-use asset and lease liability by discounting the future lease payments using our incremental borrowing rate. We adjusted the right-of-use asset carrying value for a related above-market ground lease liability of $3.4 million, which reduced the carrying value of the asset to $7.5 million. We continued to recognize the lease payments as expense, which is included in Office expenses in our consolidated statements of operations. See Note 4 for more information regarding this ground lease. See Note 14 for the fair value disclosures related to the ground lease liability.

In December 2018, the FASB issued ASU 2018-20, an update to ASU 2016-02, which provides guidance on accounting for sales and other similar taxes collected from lessees, certain lessor costs, and recognition of variable payments for contracts with lease and nonlease components. We adopted the ASU and it did not have a material impact on our consolidated financial statements.

In March 2019, the FASB issued ASU 2019-01, an update to ASU 2016-02, which provides guidance on transition disclosures related to Topic 250 "Accounting Changes and Error Corrections" and other technical updates. We adopted the ASU and it did not have a material impact on our consolidated financial statements.

ASUs Not Yet Adopted

ASU 2016-13 (Topic 326 - "Financial Instruments-Credit Losses")

In June 2016, the FASB issued ASU No. 2016-13, "Measurement of Credit Losses on Financial Instruments", which amends "Financial Instruments-Credit Losses" (Topic 326). The ASU provides guidance for measuring credit losses on financial instruments. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those years, which for us would bewas the first quarter of 2020, and early adoption is permitted.2020. The amendments in thisthe ASU should be applied retrospectively.on a modified-retrospective basis. The ASU would impactimpacts our measurement of credit losses for our Office parking receivables, which were $1.3$0.6 million and $1.1$1.3 million as of December 31, 20192020 and 2018,December 31, 2019, respectively, and are included in Tenant receivables in our consolidated balance sheets. We expect to adoptadopted the ASU in the first quarter of 2020 and we doit did not expect the ASU to have a material impact on our consolidated financial statements.

ASU 2020-04 (Topic 848 - "Reference Rate Reform")

In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform", which contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The practical expedients are optional and may be elected over time as reference rate reform activities occur. We elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients maintains the presentation of derivatives consistent with past presentation. We will continue to evaluate the impact of the ASU and may apply other elections, as applicable, as additional changes in the market occur. Our election to apply the hedge accounting expedients in the first quarter of 2020 did not have a material impact on our consolidated financial statements.

Other Pronouncements

FASB COVID-19 Lease Modification Accounting Relief

In April 2020, the FASB staff issued a question and answer document (the “Lease Modification Q&A”) on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. Under the existing lease accounting guidance, we would be required to determine on a lease-by-lease basis if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A allows us, if certain criteria are met, to bypass the lease-by-lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. We have availed ourselves of the election to avoid performing a lease-by-lease analysis and we have elected to apply the lease modification accounting framework for the lease concessions that meet the criteria.

FASB COVID-19 Cash Flow Hedge Accounting Relief

In April 2020, the FASB staff issued a question and answer document (the “Cash Flow Hedge Accounting Q&A”) on the application of cash flow hedge accounting guidance to cash flow hedges impacted by the COVID-19 pandemic. The Cash Flow Hedge Accounting Q&A clarifies that: (i) when cash flow hedge accounting has been discontinued, the delays in the timing of the forecasted transactions related to the impact of the COVID-19 pandemic may be considered rare cases caused by extenuating circumstances outside the control or influence of an entity, thereby allowing amounts deferred in AOCI to remain in AOCI until the forecasted transaction affects earnings, and (ii) missed forecasts, related to the effects of the COVID-19 pandemic, do not need to be considered when determining whether the entity has exhibited a pattern of missing forecasts that would call into question the entity’s ability to accurately predict forecasted transactions and the propriety of using cash flow hedge accounting in the future for similar transactions. The Cash Flow Hedge Accounting Q&A did not have a material impact on our consolidated financial statements.

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Notes to Consolidated Financial Statements (continued)





3. Investment in Real Estate

We accountThe table below summarizes our investment in real estate:

(In thousands)December 31, 2020December 31, 2019
Land$1,150,821$1,152,684
Buildings and improvements9,344,6539,308,481
Tenant improvements and lease intangibles928,867905,753
Property under development254,297111,715
Investment in real estate, gross$11,678,638$11,478,633


2020 Property Disposition

In December 2020, we closed on the sale of an 80,000 square foot office property in Honolulu for a contract price of $21.0 million in cash, resulting in a gain of $6.4 million after transaction costs. The property sold was held by one of our property acquisitions as asset acquisitions.consolidated JVs in which we owned a two-thirds capital interest. The acquired property's results of operations are included in our results of operations from the respective acquisition dates.JV was subsequently dissolved prior to December 31, 2020.

2019 Property Acquisition and JV consolidation

Acquisition of The Glendon

On June 7, 2019, we acquired The Glendon, a residential community in Westwood, and on June 28, 2019, we contributed the property to a consolidated JV that we manage and in which we own a 20% capital interest. The table below summarizes the purchase price allocation for the acquisition. See Note 14 for our fair value disclosures. The contract and purchase prices differ due to prorations and similar adjustments:

(In thousands, except number of units)The Glendon
SubmarketWest Los Angeles
Acquisition dateJune 7, 2019
Contract price$365,100 
Number of multifamily units350
Retail square footage50 
Land$32,773 
Buildings and improvements333,624 
Tenant improvements and lease intangibles2,301 
Acquired above- and below-market leases, net(2,114)
Net assets and liabilities acquired$366,584 
(In thousands, except number of units)The Glendon
  
SubmarketWest Los Angeles
Acquisition dateJune 7, 2019
Contract price$365,100
Number of multifamily units350
Retail square footage50
  
Land$32,773
Buildings and improvements333,624
Tenant improvements and lease intangibles2,301
Acquired above- and below-market leases, net(2,114)
Net assets and liabilities acquired$366,584



Consolidation of JV

On November 21, 2019, we acquired an additional 16.3% of the equity in one of our previously unconsolidated Funds, Fund X, in exchange for $76.9 million in cash and 332 thousand OP Units valued at $14.4 million, which increased our ownership in the Fund to 89.0%. In connection with this transaction, we restructured the Fund with 1 remaining institutional investor. The new JV is a VIE, and as a result of the amended operating agreement, we became the primary beneficiary of the VIE and commenced consolidating the JV on November 21, 2019. The results of the consolidated JV are included in our operating results from November 21, 2019 (before November 21, 2019, our share of the Fund's net income was included in our statements of operations in Income from unconsolidated Funds).
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Notes to Consolidated Financial Statements (continued)




The consolidation of the JV required us to recognize the JVs identifiable assets and liabilities at fair value in our consolidated financial statements, along with the fair value of the non-controlling interest of $61.4 million. We recognized a gain of $307.9 million to adjust the carrying value of our existing investment in the JV to its estimated fair value upon consolidation. See Note 14 for our fair value disclosures.

The gain was determined by taking the difference between: (a) the fair value of Fund X’s assets less its liabilities and (b) the sum of the fair value of the noncontrolling interest, carrying value of our existing investment in Fund X, and the amounts paid to acquire other Fund investors’ interests. We determined the fair value of Fund X’s assets and liabilities upon initial consolidation using our estimates of expected future cash flows and other valuation techniques.  We estimated the fair values of Fund X’s properties by using the income and sales comparison valuation approaches which included, but are not limited to, our estimates of rental rates, comparable sales, revenue growth rates, capitalization rates and discount rates.  Assumed debt was recorded at fair value based upon the present value of the expected future payments and current interest rates.  Other acquired assets, including cash and assumed liabilities were recorded at cost due to the short-term nature of the balances.


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Notes to Consolidated Financial Statements (continued)





The JV owns 6 Class A office properties totaling 1.5 million square feet in the Los Angeles submarkets of Beverly Hills, Santa Monica, Sherman Oaks/Encino and Warner Center. The JV also owns an interest of 9.4% in our remaining unconsolidated Fund, Partnership X, which owns 2 additional Class A office properties totaling 386,000 square feet in Beverly Hills and Brentwood. The table below summarizes the purchase price allocation for the initial consolidation of the JV.JV:

(In thousands)JV Consolidation
  
Consolidation dateNovember 21, 2019
Square footage1,454
  
Land$52,272
Buildings and improvements831,416
Tenant improvements and lease intangibles40,890
Acquired above- and below-market leases, net(14,198)
JV interest in unconsolidated Fund28,783
Assumed debt(403,016)
Assumed interest rate swaps(4,147)
Other assets and liabilities, net26,256
Net assets acquired and liabilities assumed$558,256

(In thousands)JV Consolidation
Consolidation dateNovember 21, 2019
Square footage1,454 
Land$52,272 
Buildings and improvements831,416 
Tenant improvements and lease intangibles40,890 
Acquired above- and below-market leases, net(14,198)
JV interest in unconsolidated Fund28,783 
Assumed debt(403,016)
Assumed interest rate swaps(4,147)
Other assets and liabilities, net26,256 
Net assets acquired and liabilities assumed$558,256 


2018 Property Acquisitions and Dispositions

During 2018, we did not purchase or sell any properties.

2017 Acquisitions

During 2017, (i) a consolidated JV that we manage and in which we own an equity interest acquired 3 Class A office properties (1299 Ocean Avenue, 429 Santa Monica Boulevard and 9665 Wilshire Boulevard), for which investors contributed $284.0 million directly to the JV, and (ii) we acquired 1 wholly-owned Class A office property (9401 Wilshire Boulevard). The table below summarizes the purchase price allocations for the acquisitions. The contract and purchase prices differ due to prorations and similar matters.

(In thousands)1299 Ocean  429 Santa Monica 9665 Wilshire 
9401 Wilshire(1)
        
SubmarketSanta Monica Santa Monica Beverly Hills Beverly Hills
Acquisition dateApril 25 April 25 July 20 December 20
Contract price$275,800
 $77,000
 $177,000
 $143,647
Building square footage206 87 171 146
        
Investment in real estate:       
Land$22,748
 $4,949
 $5,568
 $6,740
Buildings and improvements260,188
 69,286
 175,960
 144,467
Tenant improvements and lease intangibles5,010
 3,248
 1,112
 7,843
Acquired above- and below-market leases, net(10,683) (722) (4,339) (11,559)
Assumed debt(2)
—
 —
 —
 (36,460)
Net assets and liabilities acquired$277,263
 $76,761
 $178,301
 $111,031

(1)We issued OP Units to the seller in connection with the acquisition of 9401 Wilshire. See Note 11 for more information.
(2)We assumed a loan from the seller in connection with the acquisition of 9401 Wilshire. At the date of acquisition, the loan had a fair value of $36.5 million and a principal balance of $32.3 million. See Note 8 for more information.

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Notes to Consolidated Financial Statements (continued)





4. Ground Lease

We pay rent under a ground lease located in Honolulu, Hawaii, which expires on December 31, 2086. The rent is fixed at $733 thousand per year until February 28, 2029, after which it will reset to the greater of the existing ground rent or market.

As of December 31, 2019,2020, the ground lease right-of-use asset carrying value of this ground lease was $7.5 million and the ground lease liability was $10.9 million. We incurred ground rent expense of $733 thousand during 2020, 2019 2018 and 2017,2018, which is included in Office expenses in our consolidated statements of operations.

The table below, which assumes that the ground rent payments will continue to be $733 thousand per year after February 28, 2029, presents the future minimum ground lease payments as of December 31, 2019:2020:

Year ending December 31:(In thousands)
  
2020$733
2021733
2022733
2023733
2024733
Thereafter45,445
Total future minimum lease payments$49,110


Year ending December 31:(In thousands)
2021$733 
2022733 
2023733 
2024733 
2025733 
Thereafter44,712 
Total future minimum lease payments$48,377 

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Notes to Consolidated Financial Statements (continued)





5. Acquired Lease Intangibles

Summary of our Acquired Lease Intangibles

(In thousands) December 31, 2019 December 31, 2018
     
Above-market tenant leases $7,220
 $5,595
Above-market tenant leases - accumulated amortization (1,741) (3,289)
Above-market ground lease where we are the lessor 1,152
 1,152
Above-market ground lease - accumulated amortization (224) (207)
Acquired lease intangible assets, net $6,407
 $3,251
     
Below-market tenant leases $102,583
 $112,175
Below-market tenant leases - accumulated accretion (50,216) (63,013)
Above-market ground lease where we are the tenant(1)
 —
 4,017
Above-market ground lease - accumulated accretion(1)
 —
 (610)
Acquired lease intangible liabilities, net $52,367
 $52,569

(In thousands)December 31, 2020December 31, 2019
Above-market tenant leases$6,848 $7,220 
Above-market tenant leases - accumulated amortization(2,618)(1,741)
Above-market ground lease where we are the lessor1,152 1,152 
Above-market ground lease - accumulated amortization(241)(224)
Acquired lease intangible assets, net$5,141 $6,407 
Below-market tenant leases$81,934 $102,583 
Below-market tenant leases - accumulated accretion(46,711)(50,216)
Acquired lease intangible liabilities, net$35,223 $52,367 

Impact on the Consolidated Statements of Operations

The table below summarizes the net amortization/accretion related to our above- and below-market leases:
 Year Ended December 31,
(In thousands)202020192018
Net accretion of above- and below-market tenant lease assets and liabilities(1)
$15,895 $16,282 $21,992 
Amortization of an above-market ground lease asset(2)
(17)(18)(17)
Accretion of an above-market ground lease liability(3)
0 0 50 
Total$15,878 $16,264 $22,025 

(1)    Recorded as a net increase to office and multifamily rental revenues.
(2)    Recorded as a decrease to office parking and other income.
(3)    Recorded as a decrease to office expense. Upon adoption of ASU 2016-02 on January 1, 2019 we adjusted the ground lease right-of-use asset carrying value with the carrying value of the above-market ground lease - see Notes 2 and 4.

Impact on the Consolidated Statements of Operations

The table below summarizes the net amortization/accretion related to our above- and below-market leases:
 Year Ended December 31,
(In thousands)2019 2018 2017
      
Net accretion of above- and below-market tenant lease assets and liabilities(1)
$16,282
 $21,992
 $17,973
Amortization of an above-market ground lease asset(2)
(18) (17) (17)
Accretion of an above-market ground lease liability(3)
—
 50
 50
Total$16,264
 $22,025
 $18,006

(1)Recorded as a net increase to office and multifamily rental revenues.
(2)Recorded as a decrease to office parking and other income.
(3)Recorded as a decrease to office expense. Upon adoption of ASU 2016-02 on January 1, 2019 we adjusted the ground lease right-of-use asset carrying value with the carrying value of the above-market ground lease - see Notes 2 and 4.
The table below presents the future net accretion related to our above- and below-market leases at December 31, 2019.2020.
Year ending December 31: Net increase to revenues
   
  (In thousands)
2020 $15,339
2021 9,371
2022 6,674
2023 4,576
2024 3,702
Thereafter 6,298
Total $45,960

Year ending December 31:Net increase to revenues
(In thousands)
2021$9,125 
20226,482 
20234,512 
20243,665 
20252,975 
Thereafter3,323 
Total$30,082 

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Notes to Consolidated Financial Statements (continued)





6. Investments in Unconsolidated Funds

Description of our Funds

As of December 31, 2019,2020, we managemanaged and ownowned an equity interest of 29.9%33.5% in an unconsolidated Fund, Partnership X, through which we and other investors in the Fund own 2 office properties totaling 0.4 million square feet. During the year ended December 31, 2020 we purchased additional interests of 3.6% in Partnership X for $6.6 million.

As of December 31, 2019, we owned a 29.9% equity interest in Partnership X. Before November 21, 2019, we managed and owned equity interests in 3 unconsolidated Funds, consisting of 6.2% of the Opportunity Fund, 72.7% of Fund X and 28.4% of Partnership X, through which we and other investors in the Funds owned 8 office properties totaling 1.8 million square feet. On November 21, 2019, we acquired additional interests of 16.3% in Fund X and 1.5% in Partnership X, and restructured Fund X which resulted in Fund X being treated as a consolidated JV from November 21, 2019. See Note 3 for more information regarding the consolidation of the JV. We also acquired all of the investors’ ownership interests in the Opportunity Fund (The Opportunity Fund’s only investment was an ownership interest in Fund X) and closed the Opportunity Fund. During the period January 1, 2019 to November 20, 2019 we purchased additional interests of 1.4% in Fund X and 3.9% in Partnership X.

As of December 31, 2018, we owned equity interests of 24.5% in Partnership X, 6.2% in the Opportunity Fund, and 71.3% in Fund X. During the year ended December 31, 2018 we purchased an additional 1.9% interest in Fund X.

Our Funds pay us fees and reimburse us for certain expenses related to property management and other services we provide, which are included in Other income in our consolidated statements of operations. We also receive distributions based on invested capital and on any profits that exceed certain specified cash returns to the investors. The table below presents cash distributions we received from our Funds:
 Year Ended December 31,
(In thousands)202020192018
Operating distributions received(1)
$394 $6,820 $6,400 
Capital distributions received(1)
1,236 5,853 7,349 
Total distributions received(1)
$1,630 $12,673 $13,749 

(1)    The balances reflect the combined balances for Partnership X, Fund X and the Opportunity Fund through November 20, 2019 and the balances for Partnership X from November 21, 2019 through December 31, 2020.
 Year Ended December 31,
(In thousands)2019 2018 2017
      
Operating distributions received(1)
$6,820
 $6,400
 $5,905
Capital distributions received(1)
5,853
 7,349
 43,560
Total distributions received(1)
$12,673
 $13,749
 $49,465

(1)The balances reflect the combined balances for Partnership X, Fund X and the Opportunity Fund through November 20, 2019 and the balances for Partnership X from November 21, 2019 through December 31, 2019.

Summarized Financial Information for our Funds

The tables below present selected financial information for the Funds. The amounts presented reflect 100% (not our pro-rata share) of amounts related to the Funds, and are based upon historical acquired book value:


(In thousands)December 31, 2019 December 31, 2018(In thousands)December 31, 2020December 31, 2019
   
Total assets(1)
$136,479
 $694,713
Total assets(1)
$133,617 $136,479 
Total liabilities(1)
$113,330
 $525,483
Total liabilities(1)
$112,706 $113,330 
Total equity(1)
$23,149
 $169,230
Total equity(1)
$20,911 $23,149 

(1) The balances as of December 31, 2019for both periods reflect the balances for Partnership X.
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Notes to Consolidated Financial Statements (continued)




 Year Ended December 31,
(In thousands)202020192018
Total revenues(1)
$15,744 $75,952 $79,590 
Operating income(1)
$3,614 $22,269 $22,959 
Net income(1)
$887 $7,350 $6,260 

(1) The balances asresults of December 31, 2018operations are not directly comparable to the prior periods; the balances reflect the combined balances for Partnership X, Fund X and the Opportunity Fund.Fund through November 20, 2019 and the balances for Partnership X from November 21, 2019 through December 31, 2020.

 Year Ended December 31,
(In thousands)2019 2018 2017
      
Total revenues(1)
$75,952
 $79,590
 $75,896
Operating income(1)
$22,269
 $22,959
 $20,640
Net income(1)
$7,350
 $6,260
 $5,085

(1)The balances reflect the combined balances for Partnership X, Fund X and the Opportunity Fund through November 20, 2019 and the balances for Partnership X from November 21, 2019 through December 31, 2019.


7. Other Assets

(In thousands)December 31, 2020December 31, 2019
Restricted cash$132 $121 
Prepaid expenses13,774 8,711 
Other indefinite-lived intangibles1,988 1,988 
Furniture, fixtures and equipment, net2,358 2,368 
Other3,331 3,233 
Total other assets$21,583 $16,421 
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Notes to Consolidated Financial Statements (continued)





7. Other Assets

(In thousands)December 31, 2019 December 31, 2018
    
Restricted cash$121
 $121
Prepaid expenses8,711
 7,830
Other indefinite-lived intangibles1,988
 1,988
Furniture, fixtures and equipment, net2,368
 1,101
Other3,233
 3,719
Total other assets$16,421
 $14,759


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Notes to Consolidated Financial Statements (continued)





8. Secured Notes Payable and Revolving Credit Facility, Net
Description 
 
Maturity
Date (1)
 Principal Balance as of December 31, 2019 Principal Balance as of December 31, 2018 Variable Interest Rate 
Fixed Interest
Rate (2)
 Swap Maturity Date
             
    (In thousands)      
             
Wholly-Owned Subsidiaries
Fannie Mae loan(3)
 — $—
 $145,000
 — — —
Fannie Mae loan(3)
 — —
 115,000
 —
—
—
Term loan(3)
 — —
 220,000
 — — —
Term loan(3)
 — —
 340,000
 — — —
Term loan(3)
 — —
 400,000
 — — —
Term loan(3)
 — —
 180,000
 — — —
Term loan(3)
 — —
 360,000
 — — —
Term loan(4)
 1/1/2024 300,000
 300,000
 LIBOR + 1.55% 3.46% 1/1/2022
Term loan(4)
 3/3/2025 335,000
 335,000
 LIBOR + 1.30% 3.84% 3/1/2023
Fannie Mae loan(4)(5)
 4/1/2025 102,400
 102,400
 LIBOR + 1.25%
2.84%
3/1/2023
Term loan(4)(6)(7)
 8/15/2026 415,000
 —
 LIBOR + 1.10%
2.58%
8/1/2025
Term loan(4)(6)
 9/19/2026 400,000
 —
 LIBOR + 1.15%
2.44%
9/1/2024
Term loan(4)(6)(8)
 9/26/2026 200,000
 —
 LIBOR + 1.20%
2.77%
10/1/2024
Term loan(4)(6)(9)
 11/1/2026 400,000
 —
 LIBOR + 1.15% 2.18% 10/1/2024
Fannie Mae loan(4)
 6/1/2027 550,000
 550,000
 LIBOR + 1.37% 3.16% 6/1/2022
Fannie Mae loan(4)(6)
 6/1/2029 255,000
 —
 LIBOR + 0.98% 3.26% 6/1/2027
Fannie Mae loan(4)(6)(10)
 6/1/2029 125,000
 —
 LIBOR + 0.98% 2.55% 6/1/2027
Term loan(11)
 6/1/2038 30,864
 31,582
 N/A 4.55% N/A
Revolving credit facility(12)
 8/21/2023 —
 105,000
 LIBOR + 1.15% N/A N/A
Total Wholly-Owned Subsidiary Debt 3,113,264
 3,183,982
 




             
Consolidated JVs
Term loan(4)
 2/28/2023 580,000
 580,000
 LIBOR + 1.40% 2.37% 3/1/2021
Term loan(4)(13)
 7/1/2024 400,000
 —
 LIBOR + 1.65% 3.44% 7/1/2022
Term loan(4)
 12/19/2024 400,000
 400,000
 LIBOR + 1.30% 3.47% 1/1/2023
Term loan(4)(6)
 6/1/2029 160,000
 —
 LIBOR + 0.98% 3.25% 7/1/2027
Total Consolidated Debt(14)
 4,653,264
 4,163,982
      
Unamortized loan premium, net 6,741
 3,986
      
Unamortized deferred loan costs, net (40,947) (33,938) 




Total Consolidated Debt, net $4,619,058
 $4,134,030
 





Description
Maturity
Date (1)
Principal Balance as of December 31, 2020Principal Balance as of December 31, 2019Variable Interest Rate
Fixed Interest
Rate (2)
Swap Maturity Date
(In thousands)
Consolidated Wholly-Owned Subsidiaries
Term loan(3)
1/1/2024$300,000 $300,000 LIBOR + 1.55%3.46%1/1/2022
Term loan(3)
3/3/2025335,000 335,000 LIBOR + 1.30%3.84%3/1/2023
Fannie Mae loan(3)
4/1/2025102,400 102,400 LIBOR + 1.25%2.76%3/1/2023
Term loan(3)
8/15/2026415,000 415,000 LIBOR + 1.10%3.07%8/1/2025
Term loan(3)
9/19/2026400,000 400,000 LIBOR + 1.15%2.44%9/1/2024
Term loan(3)
9/26/2026200,000 200,000 LIBOR + 1.20%2.36%10/1/2024
Term loan(3)(4)
11/1/2026400,000 400,000 LIBOR + 1.15%2.18%10/1/2024
Fannie Mae loan(3)
6/1/2027550,000 550,000 LIBOR + 1.37%3.16%6/1/2022
Fannie Mae loan(3)
6/1/2029255,000 255,000 LIBOR + 0.98%3.26%6/1/2027
Fannie Mae loan(3)
6/1/2029125,000 125,000 LIBOR + 0.98%3.25%6/1/2027
Term loan(5)
6/1/203830,112 30,864 N/A4.55%N/A
Revolving credit facility(6)
8/21/202375,000 0 LIBOR + 1.15%N/AN/A
Total Wholly-Owned Subsidiary Debt3,187,512 3,113,264 
Consolidated JVs
Term loan(7)
— — 400,000 — — — 
Term loan(3)
2/28/2023580,000 580,000 LIBOR + 1.40%2.37%3/1/2021
Term loan(3)
12/19/2024400,000 400,000 LIBOR + 1.30%3.47%1/1/2023
Term loan(3)(8)
5/15/2027450,000 0 LIBOR + 1.35%3.04%4/1/2025
Term loan(3)
6/1/2029160,000 160,000 LIBOR + 0.98%3.25%7/1/2027
Total Consolidated Debt(9)
4,777,512 4,653,264 
Unamortized loan premium, net(10)
4,467 6,741 
Unamortized deferred loan costs, net(11)
(37,012)(40,947)
Total Consolidated Debt, net$4,744,967 $4,619,058 

Except as noted below, each loan (including our loans and revolving credit facility) isfacility: (i) are non-recourse, and(ii) are secured by 1 or more separate collateral pools consisting of 1 or more properties, and requires(iii) require interest-only monthly payments of interest only with the outstanding principal due upon maturity. Certain of our loansmaturity, 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 if necessary forwithin certain parameters set forth in the properties involvedloan documents.  Certain loans with maturity date extensions require us to meet minimum financial thresholds although we have never hadin order to makeexercise those extensions.
(1)Maturity dates include the effect of extension options.
(2)Effective rate as of December 31, 2020. Includes the effect of interest rate swaps and excludes the effect of prepaid loan fees. See Note 10 for details of our interest rate swaps. See below for details of our loan costs.
(3)The loan agreement includes a 0-percent LIBOR floor. The corresponding swaps do not include such a payment.floor.
(1)Maturity dates include the effect of extension options.
(2)Includes the effect of interest rate swaps and excludes the effect of prepaid loan fees. See Note 10 for details of our interest rate swaps. See below for details of our loan costs.
(3)At December 31, 2019, these loans have been paid off.
(4)Loan agreement includes a 0-percent LIBOR floor. The corresponding swaps do not include such a floor.
(5)The effective rate will decrease to 2.76% on March 2, 2020.

(4)Effective rate will increase to 2.31% on July 1, 2021.
(5)Requires monthly payments of principal and interest. Principal amortization is based upon a 30-year amortization schedule.
(6)$400.0 million revolving credit facility. Unused commitment fees range from 0.10% to 0.15%. The facility has a zero-percent LIBOR floor.
(7)We paid this loan off during the second quarter of 2020.
(8)We closed this loan during the second quarter of 2020. The effective rate will decrease to 2.26% on July 1, 2022.
(9)The table does not include our unconsolidated Funds' loan - see Note 17. See Note 14 for our fair value disclosures.
(10)Balances are net of accumulated amortization of $2.7 million and $0.5 million at December 31, 2020 and December 31, 2019, respectively.
(11)Balances are net of accumulated amortization of $38.3 million and $30.7 million at December 31, 2020 and December 31, 2019, respectively.
F- 2826
Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (continued)





(6)These loans were closed during the twelve months ended December 31, 2019.
(7)Effective rate will increase to 3.07% on April 1, 2020.
(8)Effective rate will decrease to 2.36% on July 1, 2020.
(9)Effective rate will increase to 2.31% on July 1, 2021.
(10)Effective rate will increase to 3.25% on December 1, 2020.
(11)Requires monthly payments of principal and interest. Principal amortization is based upon a 30-year amortization schedule.
(12)In March 2019, we renewed our $400.0 million revolving credit facility, releasing two previously encumbered properties, lowering the borrowing rate and unused facility fees, and extending the maturity date. Unused commitment fees range from 0.10% to 0.15% . The loan agreement includes a zero-percent LIBOR floor.
(13)A previously unconsolidated Fund is now treated as a consolidated JV. See Note 3.
(14)The table does not include our unconsolidated Funds' loans - see Note 17. See Note 14 for our fair value disclosures.

Debt Statistics

The following table below summarizes our consolidated fixed and floating rate debt:

(In thousands)Principal Balance as of December 31, 2020Principal Balance as of December 31, 2019
Aggregate swapped to fixed rate loans$4,672,400 $4,622,400 
Aggregate fixed rate loans30,112 30,864 
Aggregate floating rate loans75,000 0 
Total Debt$4,777,512 $4,653,264 
(In thousands) Principal Balance as of December 31, 2019 Principal Balance as of December 31, 2018
     
Aggregate swapped to fixed rate loans $4,622,400
 $3,882,400
Aggregate fixed rate loans 30,864
 31,582
Aggregate floating rate loans —
 250,000
Total Debt $4,653,264
 $4,163,982


The following table below summarizes certain consolidated debt statistics as of December 31, 2019:2020:

Statistics for consolidated loans with interest fixed under the terms of the loan or a swap
Principal balance (in billions)$4.654.70
Weighted average remaining life (including extension options)6.15.3 years
Weighted average remaining fixed interest period3.93.1 years
Weighted average annual interest rate3.00%3.02%


Future Principal Payments

At December 31, 2019,2020, the minimum future principal payments due on our consolidated secured notes payable and revolving credit facility were as follows:
Year ending December 31:
Including Maturity Extension Options(1)
(In thousands)
2021$787 
2022823 
2023655,862 
2024700,902 
2025438,343 
Thereafter2,980,795 
Total future principal payments$4,777,512 

Year ending December 31: Excluding Maturity Extension Options 
Including Maturity Extension Options(1)
     
  (In thousands)
     
2020 $752
 $752
2021 787
 787
2022 300,823
 823
2023 915,862
 580,862
2024 800,902
 1,100,902
Thereafter 2,634,138
 2,969,138
Total future principal payments $4,653,264
 $4,653,264
(1) Some of our loan agreements require that we meet certain minimum financial thresholds to be able to extend the loan maturity.

(1)Some of our loan agreements require that we meet certain minimum financial thresholds to be able to extend the loan maturity.
Loan Premium and Loan Costs

The table below presents loan premium and loan costs, which are included in Interest expense in our consolidated statements of operations:
 Year Ended December 31,
(In thousands)202020192018
Loan premium amortized and written off$(2,274)$(261)$(205)
Deferred loan costs amortized and written off7,832 14,314 8,234 
Loan costs expensed1,008 1,318 58 
Total$6,566 $15,371 $8,087 


F- 2927
Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (continued)





Loan Costs

Deferred loan costs are net of accumulated amortization of $30.7 million and $24.2 million at December 31, 2019 and December 31, 2018, respectively. The table below presents loan costs, which are included in interest expense in our consolidated statements of operations:
 Year Ended December 31,
(In thousands)2019 2018 2017
      
Loan costs expensed$1,318
 $58
 $557
Deferred loan costs written off6,865
 360
 1,802
Deferred loan cost amortization7,449
 7,874
 9,033
Total$15,632
 $8,292
 $11,392




9. Interest Payable, Accounts Payable and Deferred Revenue

(In thousands) December 31, 2019 December 31, 2018
     
Interest payable $11,707
 $10,657
Accounts payable and accrued liabilities 66,437
 75,111
Deferred revenue 53,266
 44,386
Total interest payable, accounts payable and deferred revenue $131,410
 $130,154


(In thousands)December 31, 2020December 31, 2019
Interest payable$12,199 $11,707 
Accounts payable and accrued liabilities81,595 66,437 
Deferred revenue50,550 53,266 
Total interest payable, accounts payable and deferred revenue$144,344 $131,410 


F- 30
Table of Contents
Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (continued)





10. Derivative Contracts


Derivative Summary

As of December 31, 2019,2020, all of our interest rate swaps, which include the interest rate swaps of our consolidated JVs and our unconsolidated Fund, were designated as cash flow hedges:

 Number of Interest Rate Swaps Notional (In thousands)Number of Interest Rate SwapsNotional (In thousands)
  
Consolidated derivatives(1)(2)(4)(5)
 43 $5,124,800
Consolidated derivatives(1)(2)(4)(5)
39$5,117,400 
Unconsolidated Fund's derivative(3)(4)(5)
 1 $110,000
Unconsolidated Fund's derivative(3)(4)(5)
1$110,000 

(1)The notional amount reflects 100%, not our pro-rata share, of our consolidated JVs' derivatives.
(2)Includes forward swaps with a total notional of $502.4 million.
(3)The notional amount reflects 100%, not our pro-rata share, of our unconsolidated Fund's derivatives.
(4)Our derivative contracts do not provide for right of offset between derivative contracts.
(5)See Note 14 for our derivative fair value disclosures.

(1)The notional amount reflects 100%, not our pro-rata share, of our consolidated JVs' derivatives.
(2)The notional amount includes:
a.NaN swaps with a combined initial notional amount of $135.0 million, which will increase to $1.08 billion in the future to replace existing swaps as they expire, and
b.NaN forward swaps (swaps effective after December 31, 2020) with a combined notional of $400.0 million, which will replace existing swaps as they expire.
(3)The notional amount reflects 100%, not our pro-rata share, of our unconsolidated Fund's derivative.
(4)Our derivative contracts do not provide for right of offset between derivative contracts.
(5)See Note 14 for our derivative fair value disclosures.


Credit-risk-related Contingent Features

Our swaps include credit-risk related contingent features. For example, we have agreements with certain of our interest rate swap counterparties that contain a provision under which we could be declared in default on our derivative obligations if repayment of the underlying indebtedness that we are hedging is accelerated by the lender due to our default on the indebtedness. As of December 31, 2019,2020, there have been no events of default with respect to our interest rate swaps, our consolidated JVs' swaps or our unconsolidated Fund's interest rate swap. We do not post collateral for our interest rate swap contract liabilities. The fair value of our interest rate swap contract liabilities, including accrued interest and excluding credit risk adjustments, was as follows:
(In thousands) December 31, 2019 December 31, 2018(In thousands)December 31, 2020December 31, 2019
    
Consolidated derivatives(1)
 $56,896
 $1,681
Consolidated derivatives(1)
$225,166 $56,896 
Unconsolidated Fund's derivatives(2)
 $—
 $—
Unconsolidated Fund's derivativeUnconsolidated Fund's derivative$208 $0 

(1)Includes 100%, not our pro-rata share, of our consolidated JVs' derivatives.
(2)
Our unconsolidated Fund did not have any derivatives in a liability position.
(1)Includes 100%, not our pro-rata share, of our consolidated JVs' derivatives.


F- 28
Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (continued)






Counterparty Credit Risk

We are subject to credit risk from the counterparties on our interest rate swap contract assets because we do not receive collateral. We seek to minimize that risk by entering into agreements with a variety of high quality counterparties with investment grade ratings. The fair value of our interest rate swap contract assets, including accrued interest and excluding credit risk adjustments, was as follows:

(In thousands) December 31, 2019 December 31, 2018
     
Consolidated derivatives(1)
 $23,275
 $76,021
Unconsolidated Fund's derivative(2)
 $963
 $12,576
(In thousands)December 31, 2020December 31, 2019
Consolidated derivatives(1)(3)
$0 $23,275 
Unconsolidated Fund's derivative(2)(3)
$0 $963 

(1)Includes 100%, not our pro-rata share, of our consolidated JVs' derivatives.
(2)The amounts reflect 100%, not our pro-rata share, of our unconsolidated Fund's derivative.

(1)Includes 100%, not our pro-rata share, of our consolidated JVs' derivatives.

(2)The amounts reflect 100%, not our pro-rata share, of our unconsolidated Fund's derivative.
F- 31
Table(3)We did not have any interest rate swap contract asset balances as of ContentsDecember 31, 2020.
Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (continued)





Impact of Hedges on AOCI and the Consolidated Statements of Operations

The table below presents the effect of our derivatives on our AOCI and the consolidated statements of operations:

(In thousands)Year Ended December 31,
 2019 2018 2017
Derivatives Designated as Cash Flow Hedges:     
      
Consolidated derivatives:     
Gain recorded in AOCI - adoption of ASU 2017-12(1)
$—
 $211
 $—
(Loss) gain recorded in AOCI before reclassifications(1)
$(76,273) $22,723
 $16,512
(Gain) loss reclassified from AOCI to Interest Expense(1)
$(24,298) $(10,103) $13,976
Interest Expense presented in the consolidated statements of operations$(143,308) $(133,402) $(145,176)
Loss (gain) related to ineffectiveness recorded in Interest Expense$—
 $—
 $51
Unconsolidated Funds' derivatives (our share)(2):
 
  
  
(Loss) gain recorded in AOCI before reclassifications(1)
$(5,023) $3,052
 $3,275
(Gain) loss reclassified from AOCI to Income from unconsolidated Funds(1)
$(1,698) $(813) $527
Income from unconsolidated Funds presented in the consolidated statements of operations$6,923
 $6,400
 $5,905

(In thousands)Year Ended December 31,
 202020192018
Derivatives Designated as Cash Flow Hedges:  
Consolidated derivatives:
Gain recorded in AOCI - adoption of ASU 2017-12(1)
$0 $0 $211 
(Losses) gains recorded in AOCI before reclassifications(1)
$(232,652)$(76,273)$22,723 
Losses (gains) reclassified from AOCI to Interest Expense(1)
$49,435 $(24,298)$(10,103)
Interest Expense presented in the consolidated statements of operations$(142,872)$(143,308)$(133,402)
Unconsolidated Funds' derivatives (our share)(2):
  
(Losses) gains recorded in AOCI before reclassifications(1)
$(410)$(5,023)$3,052 
Losses (gains) reclassified from AOCI to Income from unconsolidated Funds(1)
$106 $(1,698)$(813)
Income from unconsolidated Funds presented in the consolidated statements of operations$430 $6,923 $6,400 

(1)See Note 11 for our AOCI reconciliation.
(2)We calculate our share by multiplying the total amount for each Fund by our equity interest in the respective Fund.

(1)See Note 11 for our AOCI reconciliation.
(2)We calculate our share by multiplying the total amount for each Fund by our equity interest in the respective Fund.

Future Reclassifications from AOCI

At December 31, 2019,2020, our estimate of the AOCI related to derivatives designated as cash flow hedges that will be reclassified to earnings during the next year as interest rate swap payments are made, is as follows:

 (In thousands)
  
Consolidated derivatives: 
Losses to be reclassified from AOCI to Interest Expense$(2,461)
Unconsolidated Fund's derivatives (our share): 
Gains to be reclassified from AOCI to Income from unconsolidated Funds$235


(In thousands)
Consolidated derivatives:
Losses to be reclassified from AOCI to Interest Expense$(72,495)
Unconsolidated Fund's derivative (our share)(1):
Losses to be reclassified from AOCI to Income from unconsolidated Funds$(46)

(1) We calculate our share by multiplying the total amount for our Fund by our equity interest in the Fund.


F- 3229
Table of Contents
Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (continued)





11. Equity

Transactions
    
2020 Transactions

During the year ended December 31, 2020, (i) we acquired 94 thousand OP Units in exchange for issuing an equal number of shares of our common stock to the holders of the OP Units, and (ii) we acquired 150 OP Units for $7 thousand in cash.

2019 Transactions

During the year ended December 31, 2019, (i) we acquired 222 thousand OP Units in exchange for issuing an equal number of shares of our common stock to the holders of the OP Units, (ii) we acquired 19 thousand OP Units and fully-vested LTIP Units for $734 thousand in cash, and (iii) we issued 4.9 million shares of our common stock under our ATM program for net proceeds of $201.0 million.

We purchased a property on June 7, 2019 for a contract price of $365.1 million, which we subsequently contributed to one of our consolidated JVs on June 28, 2019. We manage and own a 20 percent capital interest in the JV. The acquisition and related working capital was funded with (i) a secured, non-recourse $160.0 million interest-only loan scheduled to mature in June 2029, which was assumed by the consolidated JV to which we contributed the property, (ii) a $44.0 million capital contribution by us to the JV, and (iii) a $176.0 million capital contribution by Noncontrolling interests in the JV. See Note 3 for more information regarding the property acquisition and Note 8 for more information regarding the loan.

On November 21, 2019, we acquired an additional 16.3% of the equity in one of our previously unconsolidated Funds, Fund X, in exchange for $76.9 million in cash and 332 thousand OP Units valued at $14.4 million, which increased our ownership in the Fund to 89.0%. See Note 3 for more information regarding the consolidation of the JV and note 6 for more information regarding our Funds.

2018 Transactions

During the year ended December 31, 2018, we (i) acquired 629 thousand OP Units in exchange for issuing an equal number of shares of our common stock to the holders of the OP Units, (ii) acquired 3 thousand OP Units for $108 thousand in cash and (iii) issued 21 thousand shares of our common stock for the exercise of 49 thousand stock options on a net settlement basis (net of the exercise price and related taxes).

2017 Transactions

During 2017, we or our Operating Partnership, (i) acquired 1.1 million OP Units in exchange for issuing an equal number of shares of our common stock to the holders of the OP Units, (ii) issued 1.3 million shares of our common stock for the exercise of 3.9 million stock options on a net settlement basis (net of the exercise price and related taxes), (iii) issued 15.7 million shares of our common stock under our ATM program for net proceeds of $593.3 million, and (iv) issued 2.6 million OP Units valued at $105.7 million in connection with the acquisition of the 9401 Wilshire office property, of which we subsequently acquired 248 thousand OP Units for $10.1 million in cash. One of our JVs acquired 3 office properties, 1299 Ocean Avenue, 429 Santa Monica and 9665 Wilshire, for which investors contributed $284.0 million directly to the JV.
 
Noncontrolling Interests

Our noncontrolling interests consist of interests in our Operating Partnership and consolidated JVs which are not owned by us. Noncontrolling interests in our Operating Partnership owned 29.130.1 million OP Units and fully-vested LTIP Units, and represented approximately 14%14.6% of our Operating Partnership's total outstanding interests as of December 31, 20192020 when we owned 175.4175.5 million OP Units (to match our 175.4175.5 million shares of outstanding common stock).

A share of our common stock, an OP Unit and an LTIP Unit (once vested and booked up) have essentially the same economic characteristics, sharing equally in the distributions from our Operating Partnership.  Investors who own OP Units have the right to cause our Operating Partnership to acquire their OP Units for an amount of cash per unit equal to the market value of 1 share of our common stock at the date of acquisition, or, at our election, exchange their OP Units for shares of our common stock on aone-for-one 1-for-one basis. LTIP Units have been granted to our employees and non-employee directors as part of their compensation. These awards generally vest over a service period and once vested can generally be converted to OP Units provided our stock price increases by more than a specified hurdle.


F- 3330
Table of Contents
Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (continued)





Changes in our Ownership Interest in our Operating Partnership

The table below presents the effect on our equity from net income attributable to common stockholders and changes in our ownership interest in our Operating Partnership:
Year Ended December 31,
(In thousands)202020192018
Net income attributable to common stockholders$50,421 $363,713 $116,086 
Transfers from noncontrolling interests:
Exchange of OP Units with noncontrolling interests1,535 3,540 10,292 
Repurchase of OP Units from noncontrolling interests(4)(431)(59)
Net transfers from noncontrolling interests1,531 3,109 10,233 
Change from net income attributable to common stockholders and transfers from noncontrolling interests$51,952 $366,822 $126,319 
 Year Ended December 31,
(In thousands)2019 2018 2017
      
Net income attributable to common stockholders$363,713
 $116,086
 $94,443
      
Transfers from noncontrolling interests:     
Exchange of OP Units with noncontrolling interests3,540
 10,292
 14,242
Repurchase of OP Units from noncontrolling interests(431) (59) (6,764)
Net transfers from noncontrolling interests3,109
 10,233
 7,478
      
Change from net income attributable to common stockholders and transfers from noncontrolling interests$366,822
 $126,319
 $101,921



AOCI Reconciliation(1)

The table below presents a reconciliation of our AOCI, which consists solely of adjustments related to derivatives designated as cash flow hedges:
Year Ended December 31,Year Ended December 31,
(In thousands)2019 2018 2017(In thousands)202020192018
     
Beginning balance$53,944
 $43,099
 $15,156
Beginning balance$(17,462)$53,944 $43,099 
Adoption of ASU 2017-12 - cumulative opening balance adjustment—
 211
 —
Adoption of ASU 2017-12 - cumulative opening balance adjustment0 0 211 
Consolidated derivatives:     Consolidated derivatives:
Other comprehensive (loss) gain before reclassifications(76,273) 22,723
 16,512
Other comprehensive (loss) gain before reclassifications(232,652)(76,273)22,723 
Reclassification of (gain) loss from AOCI to Interest Expense(24,298) (10,103) 13,976
Reclassification of loss (gain) from AOCI to Interest ExpenseReclassification of loss (gain) from AOCI to Interest Expense49,435 (24,298)(10,103)
Unconsolidated Funds' derivatives (our share)(2):
     
Unconsolidated Funds' derivatives (our share)(2):
Other comprehensive (loss) gain before reclassifications(5,023) 3,052
 3,275
Other comprehensive (loss) gain before reclassifications(410)(5,023)3,052 
Reclassification of (gain) loss from AOCI to Income from unconsolidated Funds(1,698) (813) 527
Reclassification of loss (gain) from AOCI to Income from unconsolidated FundsReclassification of loss (gain) from AOCI to Income from unconsolidated Funds106 (1,698)(813)
Net current period OCI(107,292) 15,070
 34,290
Net current period OCI(183,521)(107,292)15,070 
OCI attributable to noncontrolling interests35,886
 (4,225) (6,347)OCI attributable to noncontrolling interests52,948 35,886 (4,225)
OCI attributable to common stockholders(71,406) 10,845
 27,943
OCI attributable to common stockholders(130,573)(71,406)10,845 
     
Ending balance$(17,462) $53,944
 $43,099
Ending balance$(148,035)$(17,462)$53,944 

(1)
(1)See Note 10 for the details of our derivatives and Note 14 for our derivative fair value disclosures.
(2)We calculate our share by multiplying the total amount for each Fund by our equity interest in the respective Fund.

(2)We calculate our share by multiplying the total amount for each Fund by our equity interest in the respective Fund.

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Notes to Consolidated Financial Statements (continued)





Dividends (unaudited)

Our common stock dividends paid during 20192020 are classified for federal income tax purposes as follows:

Record Date Paid Date Dividend Per Share Ordinary Income % Capital Gain % Return of Capital % Section 199A Dividend %
             
12/31/2018 1/15/2019 $0.26
 51.8% —% 48.2% 51.8%
3/29/2019 4/16/2019 0.26
 51.8% —% 48.2% 51.8%
6/28/2019 7/12/2019 0.26
 51.8% —% 48.2% 51.8%
9/30/2019 10/16/2019 0.26
 51.8% —% 48.2% 51.8%
Total / Weighted Average $1.04
 51.8% —% 48.2% 51.8%


Record DatePaid DateDividend Per ShareOrdinary Income %Capital Gain %Return of Capital %Section 199A Dividend %
12/31/20191/15/2020$0.28 49.8 %0 %50.2 %49.8 %
3/31/20204/15/20200.28 49.8 %0 %50.2 %49.8 %
6/30/20207/15/20200.28 49.8 %0 %50.2 %49.8 %
9/30/202010/15/20200.28 49.8 %0 %50.2 %49.8 %
Total / Weighted Average$1.12 49.8 %0 %50.2 %49.8 %


12. EPS

The table below presents the calculation of basic and diluted EPS:

 Year Ended December 31,
 2019 2018 2017
Numerator (In thousands):     
Net income attributable to common stockholders$363,713
 $116,086
 $94,443
Allocation to participating securities: Unvested LTIP Units(1,594) (546) (626)
Net income attributable to common stockholders - basic and diluted$362,119
 $115,540
 $93,817
      
Denominator (In thousands):     
Weighted average shares of common stock outstanding - basic173,358
 169,893
 160,905
Effect of dilutive securities: Stock options(1)
—
 9
 325
Weighted average shares of common stock and common stock equivalents outstanding - diluted173,358
 169,902
 161,230
      
Net income per common share - basic$2.09
 $0.68
 $0.58
      
Net income per common share - diluted$2.09
 $0.68
 $0.58

Year Ended December 31,
202020192018
Numerator (In thousands):
Net income attributable to common stockholders$50,421 $363,713 $116,086 
Allocation to participating securities: Unvested LTIP Units(830)(1,594)(546)
Net income attributable to common stockholders - basic and diluted$49,591 $362,119 $115,540 
Denominator (In thousands):
Weighted average shares of common stock outstanding - basic175,380 173,358 169,893 
Effect of dilutive securities: Stock options(1)
0 0 9 
Weighted average shares of common stock and common stock equivalents outstanding - diluted175,380 173,358 169,902 
Net income per common share - basic$0.28 $2.09 $0.68 
Net income per common share - diluted$0.28 $2.09 $0.68 

(1)There were no outstanding options during the year ended December 31, 2019. Outstanding OP Units and vested LTIP Units are not included in the denominator in calculating diluted EPS, even though they may be exchanged under certain conditions for common stock on a one-for-one
(1)     Outstanding OP Units and vested LTIP Units are not included in the denominator in calculating diluted EPS, even though they may be exchanged under certain conditions for common stock on a 1-for-one basis, because their associated net income (equal on a per unit basis to the Net income per common share - diluted) was already deducted in calculating Net income attributable to common stockholders. Accordingly, any exchange would not have any effect on diluted EPS. The following table below presents the weighted average OP Units and vested LTIP Units outstanding for the respective periods:

 Year Ended December 31,
(In thousands)202020192018
OP Units28,288 26,465 26,661 
Vested LTIP Units815 1,652 813 
 Year Ended December 31,
(In thousands)2019 2018 2017
      
OP Units26,465
 26,661
 24,810
Vested LTIP Units1,652
 813
 274




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Notes to Consolidated Financial Statements (continued)





13. Stock-Based Compensation

2016 Omnibus Stock Incentive Plan

Plans

The Douglas Emmett, Inc. 2016 Omnibus Stock Incentive Plan, as amended, our stock incentive plan (our "2016 Plan"), permits us to make grants of incentive stock options, non-qualified stock options, stock appreciation rights, deferred stock awards, restricted stock awards, dividend equivalent rights and other stock-based awards. On May 28, 2020, our stockholders approved an amendment to the 2016 Plan to, among other things, increase the number of common shares for future awards by 9.5 million. We had an aggregate of 1.89.1 million shares available for grant as of December 31, 2019.2020. Awards such as LTIP Units, deferred stock and restricted stock, which deliver the full value of the underlying shares, are counted against the Plan limits as 2 shares. Awards such as stock options and stock appreciation rights are counted as 1 share. The number of shares reserved under our 2016 Plan is also subject to adjustment in the event of a stock split, stock dividend or other change in our capitalization. Shares of stock underlying any awards that are forfeited, canceled or otherwise terminated (other than by exercise) are added back to the shares of stock available for future issuance under the 2016 Plan. For options exercised, our policy is to issue common stock on a net settlement basis - net of the exercise price and related taxes.

Until it expired in 2016, we made grants under our 2006 Omnibus Stock Incentive Plan (our "2006 Plan"), which was substantially similar to our 2016 Plan. No further awards may be granted under our 2006 Plan, although awards granted under the 2006 Plan in the past and which are still outstanding will continue to be governed by the terms of our 2006 Plan.
Our 2016 and 2006 Plans (the "Plans") are administered by the compensation committee of our board of directors. The compensation committee may interpret our Plans and make all determinations necessary or desirable for the administration of our Plans. The committee has full power and authority to select the participants to whom awards will be granted, to make any combination of awards to participants, to accelerate the exercisability or vesting of any award and to determine the specific terms and conditions of each award, subject to the provisions of our 2016 Plan. All officers, employees, directors and other key personnel (including consultants and prospective employees) are eligible to participate in our 2016 Plan.

We have made certain awards in the form of a separate series of units of limited partnership interests in our Operating Partnership called LTIP Units, which can be granted either as free-standing awards or in tandem with other awards under our 2016 Plan. Our LTIP Units are valued by reference to the value of our common stock at the time of grant, and are subject to such conditions and restrictions as the compensation committee may determine, including continued employment or service, and/or achievement of pre-established performance goals, financial metrics and other objectives. Once vested, LTIP Units can generally be converted to OP Units on a one1 for one basis, provided our stock price increases by more than a specified hurdle.

Employee Awards

We grant stock-based compensation in the form of LTIP Units as a part of our annual incentive compensation to various employees each year, a portion which vests at the date of grant, and the remainder which vests in 3 equal annual installments over the 3 calendar years following the grant date. Compensation expense for LTIP Units which are not vested at the grant date is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. We have also made long-term grants in the form of LTIP Units to certain employees, which generally vest in equal annual installments over four to five calendar years following the grant date, and some of these grants include a portion which vests at the date of grant. In aggregate, we granted 1.1 million, 802 thousand, and 898 thousand and 800 thousand LTIP Units to employees during 2020, 2019 2018 and 2017,2018, respectively.

Non-Employee Director Awards

As annual fees for their services, each of our non-employee directors receives a grant of LTIP Units that vests on a quarterly basis during the year the services are rendered, which is the calendar year following the grant date. We granted 55 thousand, 38 thousand, 37 thousand and 2837 thousand LTIP Units to our non-employee directors during 2020, 2019 2018 and 2017,2018, respectively.










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Notes to Consolidated Financial Statements (continued)





Compensation Expense

At December 31, 2019,2020, the total unrecognized stock-based compensation expense for unvested LTIP Unit awards was $22.0$19.3 million, which will be recognized over a weighted-average term of two years. The table below presents our stock-based compensation expense:
Year Ended December 31,
(In thousands)202020192018
Stock-based compensation expense, net$21,365 $18,359 $22,299 
Capitalized stock-based compensation$5,448 $4,698 $5,006 
Intrinsic value of options exercised$0 $0 $1,196 
 Year Ended December 31,
(In thousands)2019 2018 2017
      
Stock-based compensation expense, net$18,359
 $22,299
 $18,478
Capitalized stock-based compensation$4,698
 $5,006
 $2,537
Intrinsic value of options exercised$—
 $1,196
 $102,963


Stock-Based Award Activity

The table below presents our outstanding stock options activity(1):

Fully Vested Stock Options: Number of Stock Options (Thousands) Weighted Average Exercise Price 
Weighted Average
Remaining Contract Life (Months)
 
Total
Intrinsic Value (Thousands)
 Intrinsic Value of Options Exercised (Thousands)
           
Outstanding at December 31, 2016 3,969
 $12.43
 27 $95,770
  
Exercised (3,920) $12.43
     $102,963
Outstanding at December 31, 2017 49
 $12.66
 16 $1,375
  
Exercised (49) $12.66
     $1,196
Outstanding at December 31, 2018 —
 $—
 0 $—
  
           

Fully Vested Stock Options:Number of Stock Options (Thousands)Weighted Average Exercise PriceWeighted Average
Remaining Contract Life (Months)		Total
Intrinsic Value (Thousands)		Intrinsic Value of Options Exercised (Thousands)
Outstanding at December 31, 201749 $12.66 16$1,375 
Exercised(49)$12.66 $1,196 
Outstanding at December 31, 20180 $0 0$0 

(1)     There were 0no options outstanding options during the yearyears ended December 31, 20192020 and 2019.



The table below presents our unvested LTIP Units activity:

Unvested LTIP Units:Number of Units (Thousands)Weighted Average Grant Date Fair ValueGrant Date Fair Value (Thousands)
Outstanding at December 31, 20171,056 $26.98 
Granted935 $27.01 $25,247 
Vested(1,036)$25.82 $26,740 
Forfeited(10)$34.18 $333 
Outstanding at December 31, 2018945 $28.20 
Granted840 $31.92 $26,821 
Vested(826)$29.13 $24,061 
Forfeited(35)$35.41 $1,234 
Outstanding at December 31, 2019924 $30.48 
Granted1,190 $21.12 $25,175 
Vested(1,073)$24.58 $26,369 
Forfeited(57)$28.20 $1,623 
Outstanding at December 31, 2020984 $25.71 
Unvested LTIP Units: Number of Units (Thousands) Weighted Average Grant Date Fair Value Grant Date Fair Value (Thousands)
       
Outstanding at December 31, 2016 1,040
 $23.46
  
Granted 828
 $29.89
 $24,745
Vested (807) $25.40
 $20,497
Forfeited (5) $31.36
 $172
Outstanding at December 31, 2017 1,056
 $26.98
  
Granted 935
 $27.01
 $25,247
Vested (1,036) $25.82
 $26,740
Forfeited (10) $34.18
 $333
Outstanding at December 31, 2018 945
 $28.20
  
Granted 840
 $31.92
 $26,821
Vested (826) $29.13
 $24,061
Forfeited (35) $35.41
 $1,234
Outstanding at December 31, 2019 924
 $30.48
  

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Notes to Consolidated Financial Statements (continued)





14. Fair Value of Financial Instruments

Our estimates of the fair value of financial instruments were determined using available market information and widely used valuation methods.  Considerable judgment is necessary to interpret market data and determine an estimated fair value.  The use of different market assumptions or valuation methods may have a material effect on the estimated fair values. The FASB fair value framework hierarchy distinguishes between assumptions based on market data obtained from sources independent of the reporting entity, and the reporting entity’s own assumptions about market-based inputs.  The hierarchy is as follows:
Level 1 - inputs utilize unadjusted quoted prices in active markets for identical assets or liabilities.  
Level 2 - inputs are observable either directly or indirectly for similar assets and liabilities in active markets.  
Level 3 - inputs are unobservable assumptions generated by the reporting entity

As of December 31, 2019,2020, we did not have any fair value estimates of financial instruments using Level 3 inputs.

Financial instruments disclosed at fair value

Short term financial instruments: The carrying amounts for cash and cash equivalents, tenant receivables, revolving credit line, interest payable, accounts payable, security deposits and dividends payable approximate fair value because of the short-term nature of these instruments.

Secured notes payable: See Note 8 for the details of our secured notes payable. We estimate the fair value of our consolidated secured notes payable by calculating the credit-adjusted present value of the principal and interest payments for each secured note payable. The calculation incorporates observable market interest rates which we consider to be Level 2 inputs, assumes that the loans will be outstanding through maturity, and excludesincludes any maturity extension options. The table below presents the estimated fair value and carrying value of our secured notes payable (excluding our revolving credit facility), the carrying value includes unamortized loan premium and excludes unamortized deferred loan fees:
(In thousands) December 31, 2019 December 31, 2018
     
Fair value $4,678,623
 $4,087,979
Carrying value $4,653,264
 $4,062,968


(In thousands)December 31, 2020December 31, 2019
Fair value$4,719,462 $4,682,305 
Carrying value$4,706,979 $4,660,005 


Ground lease liability: See Note 4 for the details of our ground lease. We estimate the fair value of our ground lease liability by calculating the present value of the future lease payments disclosed in Note 4 using our incremental borrowing rate. The calculation incorporates observable market interest rates which we consider to be Level 2 inputs. The table below presents the estimated fair value and carrying value of our ground lease liability:
(In thousands)December 31, 2019
  
Fair value$12,218
Carrying value$10,882


(In thousands)December 31, 2020December 31, 2019
Fair value$11,865 $12,218 
Carrying value$10,871 $10,882 





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Notes to Consolidated Financial Statements (continued)





Financial instruments measured at fair value

Derivative instruments: See Note 10 for the details of our derivatives. We present our derivatives onin the consolidated balance sheetsheets at fair value, on a gross basis, excluding accrued interest.  We estimate the fair value of our derivative instruments by calculating the credit-adjusted present value of the expected future cash flows of each derivative.  The calculation incorporates the contractual terms of the derivatives, observable market interest rates which we consider to be Level 2 inputs, and credit risk adjustments to reflect the counterparty's as well as our own nonperformance risk. Our derivatives are not subject to master netting arrangements.  The table below presents the estimated fair value of our derivatives:

(In thousands)December 31, 2019 December 31, 2018(In thousands)December 31, 2020December 31, 2019
Derivative Assets:   Derivative Assets:
Fair value - consolidated derivatives(1)
$22,381
 $73,414
Fair value - consolidated derivatives(1)
$0 $22,381 
Fair value - unconsolidated Funds' derivatives(2)
$889
 $12,228
Fair value - unconsolidated Fund's derivative(2)
Fair value - unconsolidated Fund's derivative(2)
$0 $889 
   
Derivative Liabilities:   Derivative Liabilities:
Fair value - consolidated derivatives(1)
$54,616
 $1,530
Fair value - consolidated derivatives(1)
$214,016 $54,616 
Fair value - unconsolidated Funds' derivatives(2)
$—
 $—
Fair value - unconsolidated Fund's derivative(2)
Fair value - unconsolidated Fund's derivative(2)
$137 $0 

(1)Consolidated derivatives, which include 100%, not our pro-rata share, of our consolidated JVs' derivatives, are included in interest rate contracts in our consolidated balance sheets. The fair values exclude accrued interest which is included in interest payable in the consolidated balance sheets.
(2)
(1)    Consolidated derivatives, which include 100%, not our pro-rata share, of our consolidated JVs' derivatives, are included in interest rate contracts in our consolidated balance sheets. The fair values exclude accrued interest which is included in interest payable in the consolidated balance sheets.
(2)    The amounts reflect 100%, not our pro-rata share, of our unconsolidated Fund's derivative. Our pro-rata share of the amounts related to the unconsolidated Fund's derivative is included in our Investment in unconsolidated Funds in our consolidated balance sheets. See "Guarantees" in Note 17 regarding our unconsolidated Fund's debt and derivative.
Reflects 100%, not our pro-rata share, of our unconsolidated Funds' derivatives. Our pro-rata share of the amounts related to the unconsolidated Funds' derivatives is included in our Investment in unconsolidated Funds in our consolidated balance sheets. See Note 17 regarding our unconsolidated Funds debt and derivatives. Our unconsolidated Funds' did not have any derivatives in a liability position for the periods presented.

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Notes to Consolidated Financial Statements (continued)





15. Segment Reporting

Segment information is prepared on the same basis that our management reviews information for operational decision-making purposes.  We operate in 2 business segments: (i) the acquisition, development, ownership and management of office real estate and (ii) the acquisition, development, ownership and management of multifamily real estate.  The services for our office segment primarily include rental of office space and other tenant services, including parking and storage space rental.  The services for our multifamily segment include rental of apartments and other tenant services, including parking and storage space rental. Asset information by segment is not reported because we do not use this measure to assess performance or make decisions to allocate resources. Therefore, depreciation and amortization expense is not allocated among segments.  General and administrative expenses and interest expense are not included in segment profit as our internal reporting addresses these items on a corporate level. The table below presents the operating activity of our reportable segments:

(In thousands)Year Ended December 31,
 2019 2018 2017
Office Segment     
Total office revenues$816,755
 $777,931
 $715,546
Office expenses(264,482) (252,751) (233,633)
Office segment profit552,273
 525,180
 481,913
      
Multifamily Segment     
Total multifamily revenues119,927
 103,385
 96,506
Multifamily expenses(33,681) (28,116) (24,401)
Multifamily segment profit86,246
 75,269
 72,105
      
Total profit from all segments$638,519
 $600,449
 $554,018


(In thousands)Year Ended December 31,
202020192018
Office Segment
Total office revenues$771,169 $816,755 $777,931 
Office expenses(268,259)(264,482)(252,751)
Office segment profit502,910 552,273 525,180 
Multifamily Segment
Total multifamily revenues120,354 119,927 103,385 
Multifamily expenses(37,154)(33,681)(28,116)
Multifamily segment profit83,200 86,246 75,269 
Total profit from all segments$586,110 $638,519 $600,449 


The table below presents a reconciliation of the total profit from all segments to net income attributable to common stockholders:
(In thousands)Year Ended December 31,
 2019 2018 2017
      
Total profit from all segments$638,519
 $600,449
 $554,018
General and administrative expenses(38,068) (38,641) (36,234)
Depreciation and amortization(357,743) (309,864) (276,761)
Other income11,653
 11,414
 9,712
Other expenses(7,216) (7,744) (7,037)
Income from unconsolidated Funds6,923
 6,400
 5,905
Interest expense(143,308) (133,402) (145,176)
Gain from consolidation of JV307,938
 —
 —
Net income418,698
 128,612
 104,427
   Less: Net income attributable to noncontrolling interests(54,985) (12,526) (9,984)
Net income attributable to common stockholders$363,713
 $116,086
 $94,443

(In thousands)Year Ended December 31,
202020192018
Total profit from all segments$586,110 $638,519 $600,449 
General and administrative expenses(39,601)(38,068)(38,641)
Depreciation and amortization(385,248)(357,743)(309,864)
Other income16,288 11,653 11,414 
Other expenses(2,947)(7,216)(7,744)
Income from unconsolidated Funds430 6,923 6,400 
Interest expense(142,872)(143,308)(133,402)
Gain on sale of investment in real estate6,393 0 0 
Gain from consolidation of JV0 307,938 0 
Net income38,553 418,698 128,612 
   Less: Net loss (income) attributable to noncontrolling interests11,868 (54,985)(12,526)
Net income attributable to common stockholders$50,421 $363,713 $116,086 

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Notes to Consolidated Financial Statements (continued)





16. Future Minimum Lease Rental Receipts

We lease space to tenants primarily under non-cancelable operating leases that generally contain provisions for a base rent plus reimbursement of certain operating expenses, and we own fee interests in 2 parcels of land from which we receive rent under ground leases. The table below presents the future minimum base rentals on our non-cancelable office tenant and ground leases for our consolidated properties at December 31, 2019:2020:

Year Ending December 31,(In thousands)
  
2020$658,016
2021572,372
2022484,611
2023384,866
2024294,137
Thereafter691,145
Total future minimum base rentals(1)
$3,085,147

Year Ending December 31,(In thousands)
2021$635,956 
2022553,974 
2023452,930 
2024355,428 
2025266,182 
Thereafter629,410 
Total future minimum base rentals(1)
$2,893,880 

(1)
(1)    Does not include (i) residential leases, which typically have a term of one year or less, (ii) holdover rent, (ii) holdover rent, (iii) other types of rent such as storage and antenna rent, (iv) tenant reimbursements, (v) straight line rent, (vi) amortization/accretion of acquired above/below-market lease intangibles, and (vii) percentage rents.  The amounts assume that early termination options held by tenants are not exercised.


17. Commitments, Contingencies and Guarantees

Legal Proceedings

From time to time, we are party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business.  Excluding ordinary, routine litigation incidental to our business, we are not currently a party to any legal proceedings that we believe would reasonably be expected to have a materially adverse effect on our business, financial condition or results of operations.

Concentration of Risk

Tenant Receivables

We are subject to credit risk with respect to our tenant receivables and deferred rent receivables related to our tenant leases. Our tenants' ability to honor the terms of their respective leases remains dependent upon economic, regulatory and social factors. We seek to minimize our credit risk from our tenant leases byby: (i) targeting smaller, more affluent tenants, from a diverse mix of industries, (ii) performing credit evaluations of prospective tenants, and (iii) obtaining security deposits or letters of credit from our tenants. InDuring the years ended December 31, 2020, 2019 2018 and 2017,2018, no tenant accounted for more than 10% of our total revenues. See Note 2 for the details of our charges to revenue for uncollectible amounts and allowances for tenant receivables and deferred rent receivables.

Geographic Risk

All of our properties, including the properties of our consolidated JVs and our unconsolidated Fund, are located in Los Angeles County, California and Honolulu, Hawaii, and we are therefore susceptible to adverse economic and regulatory developments, as well as natural disasters, in those markets.

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Notes to Consolidated Financial Statements (continued)




Swap Counterparty Credit Risk

We are subject to credit risk with respect to our interest rate swap counterparties that we use to manage the risk associated with our floating rate debt. We do not post or receive collateral with respect to our swap transactions. Our swap contracts do not provide for right of offset between derivative contracts. See Note 10 for the details of our interest rate contracts. We seek to minimize our credit risk by entering into agreements with a variety of high quality counterparties with investment grade ratings.

Cash Balances

We have significant cash balances invested in a variety of short-term money market funds that are intended to preserve principal value and maintain a high degree of liquidity while providing current income. These investments are not insured against loss of principal and there is no guarantee that our investments in these funds will be redeemable at par value. We also have significant cash balances in bank accounts with high quality financial institutions with investment grade ratings.  Interest bearing bank accounts at each U.S. banking institution are insured by the FDIC up to $250 thousand.

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Notes to Consolidated Financial Statements (continued)





Asset Retirement Obligations

Conditional asset retirement obligations represent a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement is conditional on a future event that may or may not be within our control.  A liability for a conditional asset retirement obligation must be recorded if the fair value of the obligation can be reasonably estimated.  Environmental site assessments have identified NaN buildings in our Consolidated Portfolio which contain asbestos, and would have to be removed in compliance with applicable environmental regulations if these properties are demolished or undergo major renovations.

As of December 31, 2019,2020, the obligations to remove the asbestos from properties which are currently undergoing major renovations, or that we plan to renovate in the future, are not material to our consolidated financial statements. As of December 31, 2019,2020, the obligations to remove the asbestos from our other properties have indeterminable settlement dates, and we are unable to reasonably estimate the fair value of the associated conditional asset retirement obligations.

Development and Other Contracts

In West Los Angeles, we are building a high-rise apartment building with 376 apartments. We expect construction to take about three years. In downtown Honolulu, at 1132 Bishop Street, we are converting a 25 story, 490,000 square foot office tower into approximately 500 apartments. We expect the conversion to occurapartments in phases over a number of years as the office space is vacated.

As of December 31, 2019,2020, we had an aggregate remaining contractual commitment for these and other development projects of approximately $233.3$148.2 million. As of December 31, 2019,2020, we had an aggregate remaining contractual commitment for repositionings, capital expenditure projects and tenant improvements of approximately $24.6$23.2 million.

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Notes to Consolidated Financial Statements (continued)




Guarantees

We have made certain environmental and other limited indemnities and guarantees covering customary non-recourse carve- outs for our unconsolidated Fund's debt. We have also guaranteed the related swap. Our Fund has agreed to indemnify us for any amounts that we would be required to pay under these agreements. As of December 31, 2019,2020, all of the obligations under the related debt and swap agreements have been performed in accordance with the terms of those agreements. The table below summarizes our Fund's debt as of December 31, 2019.2020. The amounts represent 100% (not our pro-rata share) of the amounts related to our Funds:
Fund:
Fund(1)
Loan Maturity DatePrincipal Balance
(In thousands)		Variable Interest RateSwap Fixed Interest RateSwap Maturity Date
Partnership X(2)(3)
3/1/2023$110,000 LIBOR + 1.40%2.30%3/1/2021

(1)See Note 6 for more information regarding our unconsolidated Fund.
(2)Floating rate term loan, swapped to fixed, which is secured by 2 properties and requires monthly payments of interest only, with the outstanding principal due upon maturity. As of December 31, 2019, assuming a 0-percent LIBOR interest rate during the remaining life of the swap, the maximum future payments under the swap agreement were $1.2 million.
(3)Loan agreement includes a 0-percent LIBOR floor. The corresponding swap does not include such a floor.

(1)See Note 6 for more information regarding our unconsolidated Fund.

(2)Floating rate term loan, swapped to fixed, which is secured by 2 properties and requires monthly payments of interest only, with the outstanding principal due upon maturity. As of December 31, 2020, assuming a 0-percent LIBOR interest rate during the remaining life of the swap, the maximum future payments under the swap agreement were $0.2 million.
(3)Loan agreement includes a 0-percent LIBOR floor. The corresponding swap does not include such a floor.

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Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (continued)





18. Quarterly Financial Information (unaudited)

The tables below present selected quarterly information for 2019 and 2018:
 Three Months Ended
(In thousands, except per share amounts)March 31,
2019		 June 30, 2019 September 30, 2019 December 31, 2019
        
Total revenue$224,186
 $230,534
 $238,069
 $243,893
Net income before noncontrolling interests$32,788
 $39,860
 $23,421
 $322,629
Net income attributable to common stockholders$28,701
 $33,966
 $22,488
 $278,558
Net income per common share - basic$0.17
 $0.20
 $0.13
 $1.58
Net income per common share - diluted$0.17
 $0.20
 $0.13
 $1.58
Weighted average shares of common stock outstanding - basic170,221
 172,498
 175,278
 175,356
Weighted average shares of common stock and common stock equivalents outstanding - diluted170,221
 172,498
 175,278
 175,356
        
 Three Months Ended
(In thousands, except per share amounts)March 31,
2018		 June 30, 2018 September 30, 2018 December 31, 2018
        
Total revenue$212,247
 $219,469
 $223,308
 $226,292
Net income before noncontrolling interests$32,631
 $37,033
 $35,416
 $23,532
Net income attributable to common stockholders$28,206
 $31,684
 $30,561
 $25,635
Net income per common share - basic$0.17
 $0.19
 $0.18
 $0.15
Net income per common share - diluted$0.17
 $0.19
 $0.18
 $0.15
Weighted average shares of common stock outstanding - basic169,601
 169,916
 169,926
 170,121
Weighted average shares of common stock and common stock equivalents outstanding - diluted169,625
 169,926
 169,931
 170,121



19. Subsequent Events

In January 2020, there was a fire in one of our buildings at our Barrington Plaza apartment property. We carry comprehensive liability and property insurance covering all of the properties in our portfolio under blanket insurance policies and we do not currently expect the event to have a material impact on our financial position and results of operations.









F- 43
Table of Contents
Douglas Emmett, Inc.
Schedule III - Consolidated Real Estate and Accumulated Depreciation and Amortization
As of December 31, 20192020
(In thousands)



  Initial CostCost Capitalized Subsequent to AcquisitionGross Carrying Amount   
Property NameEncumb-rancesLand
Building & Improve-ments(2)
Improve-ments(2)(3)
Land
Building & Improve-ments(2)
Total(4)
Accumulated Depreciation & AmortizationYear Built / RenovatedYear Acquired
Office Properties
100 Wilshire$252,033 $12,769 $78,447 $152,439 $27,108 $216,547 $243,655 $78,996 1968/2002/20191999
233 Wilshire62,961 9,263 130,426 3,572 9,263 133,998 143,261 18,080 1975/2008-20092016
401 Wilshire0 9,989 29,187 133,958 21,787 151,347 173,134 52,475 1981/2000/20201996
429 Santa Monica33,691 4,949 72,534 2,994 4,949 75,528 80,477 9,421 1982/20162017
1132 Bishop Place0 8,317 105,651 51,794 8,833 156,929 165,762 114,736 19922004
1299 Ocean124,699 22,748 265,198 15,765 22,748 280,963 303,711 30,555 1980/2006/20202017
1901 Avenue of the Stars0 18,514 131,752 112,572 26,163 236,675 262,838 91,455 1968/20012001
2001 Wilshire37,411 5,711 81,622 1,307 5,711 82,929 88,640 3,007 1980/20132008
8383 Wilshire175,314 18,004 328,118 2,532 18,005 330,649 348,654 12,928 1971/20092008
8484 Wilshire(1)15,898 8,846 77,780 16,307 8,846 94,087 102,933 24,354 1972/20132013
9100 Wilshire142,264 13,455 258,329 2,860 13,455 261,189 274,644 9,554 1971/20162008
9401 Wilshire30,112 6,740 152,310 12,643 6,740 164,953 171,693 16,086 1971/20202017
9601 Wilshire0 16,597 54,774 106,660 17,658 160,373 178,031 62,249 1962/20042001
9665 Wilshire77,445 5,568 177,072 21,048 5,568 198,120 203,688 19,014 1971/20202017
10880 Wilshire198,794 29,995 437,514 33,635 29,988 471,156 501,144 68,095 1970/2009/20202016
10960 Wilshire201,893 45,844 429,769 30,124 45,852 459,885 505,737 68,382 1971/20062016
11777 San Vicente44,412 5,032 15,768 29,715 6,714 43,801 50,515 17,397 1974/19981999
12100 Wilshire101,203 20,164 208,755 9,268 20,164 218,023 238,187 32,833 19852016
12400 Wilshire0 5,013 34,283 76,833 8,828 107,301 116,129 41,710 19851996
15250 Ventura22,369 2,130 48,908 696 2,130 49,604 51,734 2,155 1970/20122008
16000 Ventura37,971 1,936 89,531 505 1,936 90,036 91,972 3,546 1980/20112008
16501 Ventura42,944 6,759 53,112 12,937 6,759 66,049 72,808 17,250 1986/20122013
Beverly Hills Medical Center0 4,955 27,766 29,526 6,435 55,812 62,247 21,685 1964/20042004
Bishop Square200,000 16,273 213,793 38,762 16,273 252,555 268,828 75,511 1972/19832010
Brentwood Court0 2,564 8,872 906 2,563 9,779 12,342 3,869 19842006
Brentwood Executive Plaza0 3,255 9,654 32,951 5,921 39,939 45,860 15,640 1983/19961995
Brentwood Medical Plaza0 5,934 27,836 1,766 5,933 29,603 35,536 11,658 19752006
Brentwood San Vicente Medical0 5,557 16,457 1,841 5,557 18,298 23,855 6,791 1957/19852006
Brentwood/Saltair0 4,468 11,615 11,621 4,775 22,929 27,704 9,556 19862000
Bundy/Olympic0 4,201 11,860 28,709 6,030 38,740 44,770 15,014 1991/19981994
Camden Medical Arts42,276 3,102 12,221 28,587 5,298 38,612 43,910 14,777 1972/19921995
Carthay Campus0 6,595 70,454 5,469 6,594 75,924 82,518 16,901 1965/20082014
Century Park Plaza173,000 10,275 70,761 135,178 16,153 200,061 216,214 67,506 1972/1987/20201999
Century Park West(1)4,072 3,717 29,099 244 3,667 29,393 33,060 10,964 19712007
Columbus Center0 2,096 10,396 9,426 2,333 19,585 21,918 7,915 19872001
Coral Plaza0 4,028 15,019 18,832 5,366 32,513 37,879 12,864 19811998
Cornerstone Plaza(1)9,928 8,245 80,633 6,016 8,263 86,631 94,894 31,950 19862007
Encino Gateway0 8,475 48,525 55,830 15,653 97,177 112,830 38,892 1974/19982000
Encino Plaza0 5,293 23,125 47,159 6,165 69,412 75,577 27,886 1971/19922000
Encino Terrace105,565 12,535 59,554 102,884 15,533 159,440 174,973 58,012 19861999
Executive Tower(1)14,503 6,660 32,045 57,605 9,471 86,839 96,310 34,313 19891995
    Initial Cost Cost Capitalized Subsequent to Acquisition Gross Carrying Amount      
Property Name Encumb-rances Land 
Building & Improve-ments(2)
 
Improve-ments(2)(3)
 Land 
Building & Improve-ments(2)
 
Total(5)
 Accumulated Depreciation & Amortization Year Built / Renovated Year Acquired
Office Properties
100 Wilshire $252,034
 $12,769
 $78,447
 $151,175
 $27,108
 $215,283
 $242,391
 $73,429
 1968/2002/2019 1999
233 Wilshire 62,962
 9,263
 130,426
 3,549
 9,263
 133,975
 143,238
 14,268
 1975/2008-2009 2016
401 Wilshire —
 9,989
 29,187
 129,932
 21,787
 147,321
 169,108
 47,259
 1981/2000/2019 1996
429 Santa Monica 33,691
 4,949
 72,534
 3,086
 4,949
 75,620
 80,569
 6,978
 1982/2016 2017
1132 Bishop Street —
 8,317
 105,651
 55,172
 8,833
 160,307
 169,140
 87,669
 1992 2004
1299 Ocean 124,699
 22,748
 265,198
 15,300
 22,748
 280,498
 303,246
 22,015
 1980/2006/2019 2017
1901 Avenue of the Stars —
 18,514
 131,752
 114,260
 26,163
 238,363
 264,526
 86,611
 1968/2001 2001
2001 Wilshire(4)
 36,000
 5,711
 81,622
 151
 5,711
 81,773
 87,484
 273
 1980/2013 2008
8383 Wilshire(4)
 138,000
 18,005
 328,118
 695
 18,005
 328,813
 346,818
 1,076
 1971/2009 2008
8484 Wilshire(1)
 —
 8,846
 77,780
 16,101
 8,846
 93,881
 102,727
 21,021
 1972/2013 2013
9100 Wilshire(4)
 115,000
 13,455
 258,329
 518
 13,455
 258,847
 272,302
 807
 1971/2016 2008
9401 Wilshire 30,864
 6,740
 152,310
 12,743
 6,740
 165,053
 171,793
 10,617
 1971/2019 2017
9601 Wilshire —
 16,597
 54,774
 105,395
 17,658
 159,108
 176,766
 57,708
 1962/2004 2001
9665 Wilshire 77,445
 5,568
 177,072
 18,550
 5,568
 195,622
 201,190
 12,887
 1971/2019 2017
10880 Wilshire 198,794
 29,995
 437,514
 31,763
 29,988
 469,284
 499,272
 53,543
 1970/2009/2019 2016
10960 Wilshire 201,893
 45,844
 429,769
 27,072
 45,852
 456,833
 502,685
 54,210
 1971/2006 2016
11777 San Vicente 44,412
 5,032
 15,768
 29,600
 6,714
 43,686
 50,400
 16,119
 1974/1998 1999
12100 Wilshire 101,203
 20,164
 208,755
 8,255
 20,164
 217,010
 237,174
 26,206
 1985 2016
12400 Wilshire —
 5,013
 34,283
 76,442
 8,828
 106,910
 115,738
 38,680
 1985 1996
15250 Ventura(4)
 26,000
 2,130
 48,907
 139
 2,130
 49,046
 51,176
 211
 1970/2012 2008
16000 Ventura(4)
 42,000
 1,936
 89,531
 301
 1,936
 89,832
 91,768
 325
 1980/2011 2008
16501 Ventura 42,944
 6,759
 53,112
 11,387
 6,759
 64,499
 71,258
 15,359
 1986/2012 2013
Beverly Hills Medical Center —
 4,955
 27,766
 28,814
 6,435
 55,100
 61,535
 20,186
 1964/2004 2004
Bishop Square 200,000
 16,273
 213,793
 31,072
 16,273
 244,865
 261,138
 70,903
 1972/1983 2010
Brentwood Court —
 2,564
 8,872
 524
 2,563
 9,397
 11,960
 3,653
 1984 2006
Brentwood Executive Plaza —
 3,255
 9,654
 32,710
 5,921
 39,698
 45,619
 14,519
 1983/1996 1995
Brentwood Medical Plaza —
 5,934
 27,836
 1,285
 5,933
 29,122
 35,055
 11,088
 1975 2006
Brentwood San Vicente Medical —
 5,557
 16,457
 1,180
 5,557
 17,637
 23,194
 6,782
 1957/1985 2006
Brentwood/Saltair —
 4,468
 11,615
 11,766
 4,775
 23,074
 27,849
 8,845
 1986 2000
Bundy/Olympic —
 4,201
 11,860
 29,078
 6,030
 39,109
 45,139
 14,450
 1991/1998 1994
Camden Medical Arts 42,276
 3,102
 12,221
 27,853
 5,298
 37,878
 43,176
 13,704
 1972/1992 1995
Carthay Campus —
 6,595
 70,454
 6,241
 6,594
 76,696
 83,290
 15,396
 1965/2008 2014
Century Park Plaza 173,000
 10,275
 70,761
 132,532
 16,153
 197,415
 213,568
 60,946
 1972/1987/2019 1999
Century Park West(1)   
 —
 3,717
 29,099
 (1,050) 3,667
 28,099
 31,766
 10,038
 1971 2007
Columbus Center —
 2,096
 10,396
 9,569
 2,333
 19,728
 22,061
 7,439
 1987 2001
Coral Plaza —
 4,028
 15,019
 18,918
 5,366
 32,599
 37,965
 12,051
 1981 1998
Cornerstone Plaza(1)
 —
 8,245
 80,633
 7,135
 8,263
 87,750
 96,013
 30,052
 1986 2007
Encino Gateway —
 8,475
 48,525
 55,246
 15,653
 96,593
 112,246
 35,614
 1974/1998 2000
Encino Plaza —
 5,293
 23,125
 47,991
 6,165
 70,244
 76,409
 26,809
 1971/1992 2000
Encino Terrace 105,565
 12,535
 59,554
 94,108
 15,533
 150,664
 166,197
 53,418
 1986 1999
Executive Tower(1)
 —
 6,660
 32,045
 59,549
 9,471
 88,783
 98,254
 34,753
 1989 1995
                     

F- 4441
Table of Contents
Douglas Emmett, Inc.
Schedule III - Consolidated Real Estate and Accumulated Depreciation and Amortization
As of December 31, 20192020
(In thousands)



  Initial CostCost Capitalized Subsequent to AcquisitionGross Carrying Amount  
Property NameEncumb-rancesLand
Building & Improve-ments(2)
Improve-
ments(2)(3)
Land
Building & Improve-ments(2)
Total(4)
Accumulated Depreciation & AmortizationYear Built / RenovatedYear Acquired
Office Properties (continued)
First Financial Plaza54,077 12,092 81,104 3,625 12,092 84,729 96,821 16,105 19862015
Gateway Los Angeles0 2,376 15,302 48,928 5,119 61,487 66,606 24,206 19871994
Harbor Court0 51 41,001 49,704 12,060 78,696 90,756 26,323 19942004
Landmark II0 6,086 109,259 67,603 13,070 169,878 182,948 66,413 19891997
Lincoln/Wilshire0 3,833 12,484 25,947 7,475 34,789 42,264 11,725 19962000
MB Plaza0 4,533 22,024 33,640 7,503 52,694 60,197 20,441 1971/19961998
Olympic Center52,000 5,473 22,850 35,110 8,247 55,186 63,433 21,262 1985/19961997
One Westwood(1)12,300 10,350 29,784 62,108 9,194 93,048 102,242 35,741 1987/20041999
Palisades Promenade0 5,253 15,547 54,414 9,664 65,550 75,214 25,394 19901995
Saltair/San Vicente21,533 5,075 6,946 17,365 7,557 21,829 29,386 8,606 1964/19921997
San Vicente Plaza0 7,055 12,035 (19)7,055 12,016 19,071 5,078 19852006
Santa Monica Square48,500 5,366 18,025 22,093 6,863 38,621 45,484 15,029 1983/20042001
Second Street Plaza0 4,377 15,277 36,693 7,421 48,926 56,347 19,532 19911997
Sherman Oaks Galleria300,000 33,213 17,820 415,540 48,328 418,245 466,573 161,123 1981/20021997
Studio Plaza0 9,347 73,358 122,033 15,015 189,723 204,738 74,404 1988/20041995
The Tower65,969 9,643 160,602 4,628 9,643 165,230 174,873 25,697 1988/19982016
The Trillium(1)18,300 20,688 143,263 81,855 21,989 223,817 245,806 85,272 19882005
Valley Executive Tower104,000 8,446 67,672 105,315 11,737 169,696 181,433 65,685 19841998
Valley Office Plaza0 5,731 24,329 47,285 8,957 68,388 77,345 26,985 1966/20021998
Verona0 2,574 7,111 15,396 5,111 19,970 25,081 7,788 19911997
Village on Canon61,745 5,933 11,389 50,309 13,303 54,328 67,631 20,858 1989/19951994
Warner Center Towers335,000 43,110 292,147 425,283 59,418 701,122 760,540 274,820 1982-1993/20042002
Warner Corporate Center34,671 11,035 65,799 1,011 11,035 66,810 77,845 3,332 1988/20152008
Westside Towers141,915 8,506 79,532 81,997 14,568 155,467 170,035 60,811 19851998
Westwood Center113,344 9,512 259,341 10,984 9,513 270,324 279,837 42,236 1965/20002016
Westwood Place71,000 8,542 44,419 52,519 11,448 94,032 105,480 36,139 19871999
Multifamily Properties
555 Barrington50,000 6,461 27,639 40,890 14,903 60,087 74,990 23,363 19891999
Barrington Plaza210,000 28,568 81,485 148,028 58,208 199,873 258,081 78,529 1963/19981998
Barrington/Kiowa13,940 5,720 10,052 731 5,720 10,783 16,503 4,226 19742006
Barry11,370 6,426 8,179 550 6,426 8,729 15,155 3,526 19732006
Kiowa5,470 2,605 3,263 469 2,605 3,732 6,337 1,485 19722006
Moanalua Hillside Apartments255,000 24,791 157,353 121,051 35,365 267,830 303,195 54,824 1968/2004/20192005
Residences at Bishop Place0 0 0 35,025 0 35,025 35,025 449 2020N/A
Pacific Plaza78,000 10,091 16,159 74,232 27,816 72,666 100,482 27,494 1963/19981999
The Glendon160,000 32,773 335,925 1,257 32,775 337,180 369,955 15,307 20082019
The Shores212,000 20,809 74,191 199,738 60,555 234,183 294,738 88,257 1965-67/20021999
Villas at Royal Kunia94,220 42,887 71,376 15,231 35,163 94,331 129,494 41,691 1990/19952006
Waena Apartments102,400 26,864 119,273 1,843 26,864 121,116 147,980 20,055 1970/2009-20142014
    Initial Cost Cost Capitalized Subsequent to Acquisition Gross Carrying Amount      
Property Name Encumb-rances Land 
Building & Improve-ments(2)
 
Improve-
ments(2)(3)
 Land 
Building & Improve-ments(2)
 
Total(5)
 Accumulated Depreciation & Amortization Year Built / Renovated Year Acquired
Office Properties (continued)
First Financial Plaza 54,077
 12,092
 81,104
 3,635
 12,092
 84,739
 96,831
 13,474
 1986 2015
Gateway Los Angeles —
 2,376
 15,302
 49,327
 5,119
 61,886
 67,005
 23,283
 1987 1994
Harbor Court —
 51
 41,001
 48,087
 12,060
 77,079
 89,139
 24,518
 1994 2004
Honolulu Club —
 1,863
 16,766
 5,896
 1,863
 22,662
 24,525
 9,089
 1980 2008
Landmark II —
 6,086
 109,259
 67,669
 13,070
 169,944
 183,014
 61,622
 1989 1997
Lincoln/Wilshire —
 3,833
 12,484
 23,598
 7,475
 32,440
 39,915
 10,883
 1996 2000
MB Plaza —
 4,533
 22,024
 33,600
 7,503
 52,654
 60,157
 18,784
 1971/1996 1998
Olympic Center 52,000
 5,473
 22,850
 34,804
 8,247
 54,880
 63,127
 19,807
 1985/1996 1997
One Westwood(1)
 —
 10,350
 29,784
 63,393
 9,194
 94,333
 103,527
 34,093
 1987/2004 1999
Palisades Promenade —
 5,253
 15,547
 54,541
 9,664
 65,677
 75,341
 23,435
 1990 1995
Saltair/San Vicente 21,533
 5,075
 6,946
 16,739
 7,557
 21,203
 28,760
 8,044
 1964/1992 1997
San Vicente Plaza —
 7,055
 12,035
 (61) 7,055
 11,974
 19,029
 4,798
 1985 2006
Santa Monica Square 48,500
 5,366
 18,025
 21,723
 6,863
 38,251
 45,114
 13,974
 1983/2004 2001
Second Street Plaza —
 4,377
 15,277
 36,308
 7,421
 48,541
 55,962
 17,963
 1991 1997
Sherman Oaks Galleria 300,000
 33,213
 17,820
 410,836
 48,328
 413,541
 461,869
 150,971
 1981/2002 1997
Studio Plaza —
 9,347
 73,358
 122,044
 15,015
 189,734
 204,749
 68,366
 1988/2004 1995
The Tower 65,969
 9,643
 160,602
 4,196
 9,643
 164,798
 174,441
 20,889
 1988/1998 2016
The Trillium(1)
 —
 20,688
 143,263
 85,509
 21,989
 227,471
 249,460
 80,180
 1988 2005
Valley Executive Tower 104,000
 8,446
 67,672
 104,500
 11,737
 168,881
 180,618
 60,805
 1984 1998
Valley Office Plaza —
 5,731
 24,329
 46,172
 8,957
 67,275
 76,232
 24,902
 1966/2002 1998
Verona —
 2,574
 7,111
 15,131
 5,111
 19,705
 24,816
 7,106
 1991 1997
Village on Canon 61,745
 5,933
 11,389
 50,012
 13,303
 54,031
 67,334
 19,444
 1989/1995 1994
Warner Center Towers 335,000
 43,110
 292,147
 421,607
 59,418
 697,446
 756,864
 256,107
 1982-1993/2004 2002
Warner Corporate Center(4)
 43,000
 11,035
 65,799
 335
 11,035
 66,134
 77,169
 298
 1988/2015 2008
Westside Towers 141,915
 8,506
 79,532
 82,034
 14,568
 155,504
 170,072
 56,383
 1985 1998
Westwood Center 113,343
 9,512
 259,341
 12,344
 9,513
 271,684
 281,197
 33,966
 1965/2000 2016
Westwood Place 71,000
 8,542
 44,419
 52,040
 11,448
 93,553
 105,001
 33,866
 1987 1999
                     
Multifamily Properties
555 Barrington 50,000
 6,461
 27,639
 40,435
 14,903
 59,632
 74,535
 21,850
 1989 1999
Barrington Plaza 210,000
 28,568
 81,485
 153,858
 58,208
 205,703
 263,911
 75,202
 1963/1998 1998
Barrington/Kiowa 13,940
 5,720
 10,052
 656
 5,720
 10,708
 16,428
 3,979
 1974 2006
Barry 11,370
 6,426
 8,179
 549
 6,426
 8,728
 15,154
 3,340
 1973 2006
Kiowa 5,470
 2,605
 3,263
 421
 2,605
 3,684
 6,289
 1,378
 1972 2006
Moanalua Hillside Apartments 255,000
 24,791
 157,353
 119,348
 35,365
 266,127
 301,492
 47,725
 1968/2004/2019 2005
Pacific Plaza 78,000
 10,091
 16,159
 74,021
 27,816
 72,455
 100,271
 25,820
 1963/1998 1999
The Glendon 160,000
 32,773
 335,925
 467
 32,775
 336,390
 369,165
 6,028
 2008 2019
The Shores 212,000
 20,809
 74,191
 199,491
 60,555
 233,936
 294,491
 82,309
 1965-67/2002 1999
Villas at Royal Kunia 94,220
 42,887
 71,376
 14,961
 35,163
 94,061
 129,224
 38,965
 1990/1995 2006
Waena Apartments 102,400
 26,864
 119,273
 1,502
 26,864
 120,775
 147,639
 16,852
 1970/2009-2014 2014
                     

F- 4542
Table of Contents
Douglas Emmett, Inc.
Schedule III - Consolidated Real Estate and Accumulated Depreciation and Amortization
As of December 31, 20192020
(In thousands)



   Initial Cost Cost Capitalized Subsequent to Acquisition Gross Carrying Amount        Initial CostCost Capitalized Subsequent to AcquisitionGross Carrying Amount   
Property Name Encumb-rances Land 
Building & Improve-ments(2)
 
Improve-
ments(2)(3)
 Land 
Building & Improve-ments(2)
 
Total(5)
 Accumulated Depreciation & Amortization Year Built / Renovated Year AcquiredProperty NameEncumb-rancesLand
Building & Improve-ments(2)
Improve-
ments(2)(3)
Land
Building & Improve-ments(2)
Total(4)
Accumulated Depreciation & AmortizationYear Built / RenovatedYear Acquired
Ground LeaseGround LeaseGround Lease
Owensmouth/Warner (1)
 —
 23,848
 —
 —
 23,848
 —
 23,848
 —
 N/A 2006
Owensmouth/WarnerOwensmouth/Warner0 23,848 0 0 23,848 0 23,848 0 N/A2006
Total Operating Properties $4,653,264
 $878,478
 $6,610,605
 $3,877,835
 $1,152,684
 $10,214,234
 $11,366,918
 $2,518,415
 Total Operating Properties$4,777,512 $876,614 $6,593,840 $3,953,887 $1,150,821 $10,273,520 $11,424,341 $2,816,193 
                 
Property Under DevelopmentProperty Under DevelopmentProperty Under Development
1132 Bishop Street Conversion $—
 $—
 $—
 $16,818
 $—
 $16,818
 $16,818
 $—
 N/A N/A
1132 Bishop Place Conversion1132 Bishop Place Conversion$0 $0 $0 $50,704 $0 $50,704 $50,704 0N/AN/A
Landmark II Development —
 13,070
 —
 79,703
 13,070
 79,703
 92,773
 —
 N/A N/ALandmark II Development0 13,070 0 173,409 13,070 173,409 186,479 0N/AN/A
Other Developments —
 —
 —
 2,124
 —
 2,124
 2,124
 —
 N/A N/AOther Developments00017,114 017,114 17,114 0N/AN/A
Total Property Under Development $—
 $13,070
 $—
 $98,645
 $13,070
 $98,645
 $111,715
 $—
    Total Property Under Development$0 $13,070 $0 $241,227 $13,070 $241,227 $254,297 $0   
                 
Total $4,653,264
 $891,548
 $6,610,605
 $3,976,480
 $1,165,754
 $10,312,879
 $11,478,633
 $2,518,415
    Total$4,777,512 $889,684 $6,593,840 $4,195,114 $1,163,891 $10,514,747 $11,678,638 $2,816,193   

(1)These properties are encumbered by our revolving credit facility, which had a 0 balance as of December 31, 2019. 
(2)Includes tenant improvements and lease intangibles.
(3)Net of fully depreciated and amortized tenant improvements and lease intangibles removed from our books.
(4)A previously unconsolidated Fund is now treated as a consolidated JV.
(5)At December 31, 2019, the aggregate federal income tax cost basis for consolidated real estate was $7.91 billion (unaudited).

(1)These properties are encumbered by our revolving credit facility, which had a $75.0 million balance as of December 31, 2020. 
(2)Includes tenant improvements and lease intangibles.
(3)Net of fully depreciated and amortized tenant improvements and lease intangibles removed from our books.
(4)At December 31, 2020, the aggregate federal income tax cost basis for consolidated real estate was $7.96 billion (unaudited).


The table below presents a reconciliation of our investment in real estate:
 Year Ended December 31,
 2019 2018 2017
Investment in real estate, gross     
Beginning balance$10,030,708
 $9,829,208
 $8,998,120
Property acquisitions368,698
 —
 707,120
Consolidation of JV924,578
 —
 —
Improvements and developments242,854
 277,229
 177,655
Removal of fully depreciated and amortized tenant improvements and lease intangibles(88,205) (75,729) (53,687)
Ending balance$11,478,633
 $10,030,708
 $9,829,208
      
Accumulated depreciation and amortization     
Beginning balance$(2,246,887) $(2,012,752) $(1,789,678)
Depreciation and amortization(357,743) (309,864) (276,761)
Other accumulated depreciation and amortization(1,990) —
 —
Removal of fully depreciated and amortized tenant improvements and lease intangibles88,205
 75,729
 53,687
Ending balance$(2,518,415) $(2,246,887) $(2,012,752)
      
Investment in real estate, net$8,960,218
 $7,783,821
 $7,816,456


Year Ended December 31,
 202020192018
Investment in real estate, gross   
Beginning balance$11,478,633 $10,030,708 $9,829,208 
Property acquisitions0 368,698 0 
Consolidation of JV0 924,578 0 
Improvements and developments297,558 242,854 277,229 
Properties sold(24,508)0 0 
Removal of fully depreciated and amortized tenant improvements and lease intangibles(73,045)(88,205)(75,729)
Ending balance$11,678,638 $11,478,633 $10,030,708 
Accumulated depreciation and amortization
Beginning balance$(2,518,415)$(2,246,887)$(2,012,752)
Depreciation and amortization(385,248)(357,743)(309,864)
Properties sold10,002 0 0 
Other accumulated depreciation and amortization4,423 (1,990)0 
Removal of fully depreciated and amortized tenant improvements and lease intangibles73,045 88,205 75,729 
Ending balance$(2,816,193)$(2,518,415)$(2,246,887)
Investment in real estate, net$8,862,445 $8,960,218 $7,783,821 

F- 4643