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United States
Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

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: 001-33106
deiblacklogoaa09.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, California
90401
(Address of principal executive offices)(Zip Code)

(310) 255-7700
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

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
 
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 filerAccelerated filer
Non-accelerated filerSmaller 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 
Class Outstanding atMay 3, 2024
Common Stock, $0.01 par value per share 167,378,737shares
1



DOUGLAS EMMETT, INC.
FORM 10-Q
Table of Contents
Page
 
 
 
 
 
     Overview
     Other Assets
     Equity
     EPS
 

2

Abbreviations used in this Report:

AOCIAccumulated Other Comprehensive Income (Loss)
ASCAccounting Standards Codification
ASUAccounting Standards Update
BOMABuilding Owners and Managers Association
CEOChief Executive Officer
CFOChief Financial Officer
CodeInternal Revenue Code of 1986, as amended
COVID-19Coronavirus Disease 2019
DEIDouglas Emmett, Inc.
EPSEarnings Per Share
Exchange ActSecurities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
FCAFinancial Conduct Authority
FDICFederal Deposit Insurance Corporation
FFOFunds From Operations
FundUnconsolidated Institutional Real Estate Fund
GAAPGenerally Accepted Accounting Principles (United States)
JVJoint Venture
LIBORLondon Interbank Offered Rate
LTIP UnitsLong-Term Incentive Plan Units
NAREITNational Association of Real Estate Investment Trusts
OCIOther Comprehensive Income (Loss)
OP UnitsOperating Partnership Units
Operating PartnershipDouglas Emmett Properties, LP
Partnership XDouglas Emmett Partnership X, LP
PCAOBPublic Company Accounting Oversight Board (United States)
REITReal Estate Investment Trust
ReportQuarterly Report on Form 10-Q
SECSecurities and Exchange Commission
Securities ActSecurities Act of 1933, as amended
SOFRSecured Overnight Financing Rate
TRSTaxable REIT Subsidiary(ies)
USUnited States
USDUnited States Dollar
VIEVariable Interest Entity(ies)

3

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 one single tenant building 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 includes rent for our corporate headquarters in Santa Monica. We report Annualized Rent because it is a widely reported measure of the performance of equity REITs, and is used by some investors as a means to determine tenant demand and to compare our performance and value with other REITs. We use Annualized Rent to manage and monitor the performance of our office and multifamily portfolios.
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), impairment write-downs of real estate and impairment write-downs of our investment in our unconsolidated Fund from our net income (loss) (including adjusting for the effect of such items attributable to our consolidated JVs and our unconsolidated Fund, but not for noncontrolling interests included in our 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 2 of this Report for a discussion of FFO.
Leased Rate
The 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 the Leased Rate. For newly developed buildings going through initial lease up, units are included in both the numerator and denominator as they are leased. We report Leased 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 (loss): general and administrative expenses, depreciation and amortization expense, other income, other expenses, income (loss) from unconsolidated Fund, interest expense, gains (or losses) on sales of investments in real estate and net income (loss) 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 2 of this Report for a discussion of our Same Property NOI.
Occupancy Rate
We calculate Occupancy Rate by excluding signed leases not yet commenced from the Leased Rate. Management space is considered occupied. Space taken out of service during a repositioning or which is vacant as a result of a fire or other damage is excluded from both the numerator and denominator for calculating the Occupancy Rate. For newly developed buildings going through initial lease up, units are included in both the numerator and denominator as they are occupied. We report Occupancy Rate because it is a widely reported measure of the performance of equity REITs, and is also used by some investors as a means to determine tenant demand and to compare our performance with other REITs. We use Occupancy Rate to manage and monitor the performance of our office and multifamily portfolios.
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.
4

Defined terms used in this Report (continued):
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 Properties
Our 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 that during the comparable periods were: (i) acquired, (ii) sold, held for sale, contributed or otherwise removed from our consolidated financial statements, (iii) that underwent a major repositioning project or were impacted by development activity, or suffered significant casualty loss that we believed significantly affected the properties' operating results. We also exclude rent received from ground leases.
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.
5

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 economic, political 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;
reduced demand for office space, including as a result of remote work and flexible working arrangements that allow work from remote locations other than the employer’s office premises;
defaults on, early terminations of, or non-renewal of leases by tenants;
increases in interest rates;
increases in operating costs, including due to inflation;
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 our 2023 Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and 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.
6

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Douglas Emmett, Inc.
Consolidated Balance Sheets
(Unaudited; In thousands, except share data)
 March 31, 2024December 31, 2023
Assets  
Investment in real estate, gross$12,432,301 $12,405,814 
Less: accumulated depreciation and amortization(3,721,673)(3,652,630)
Investment in real estate, net8,710,628 8,753,184 
Ground lease right-of-use asset7,445 7,447 
Cash and cash equivalents556,677 523,082 
Tenant receivables5,783 6,096 
Deferred rent receivables115,120 115,321 
Acquired lease intangible assets, net2,848 2,971 
Interest rate contract assets170,607 170,880 
Investment in unconsolidated Fund24,996 15,977 
Other assets42,963 49,260 
Total Assets$9,637,067 $9,644,218 
Liabilities  
Secured notes payable, net$5,544,517 $5,543,171 
Ground lease liability10,832 10,836 
Interest payable, accounts payable and deferred revenue153,235 131,237 
Security deposits62,428 61,958 
Acquired lease intangible liabilities, net17,373 19,838 
Dividends payable31,812 31,781 
Total Liabilities5,820,197 5,798,821 
Equity  
Douglas Emmett, Inc. stockholders' equity:  
Common Stock, $0.01 par value, 750,000,000 authorized, 167,371,920 and 167,206,267 outstanding at March 31, 2024 and December 31, 2023, respectively
1,674 1,672 
Additional paid-in capital3,395,499 3,392,955 
Accumulated other comprehensive income118,999 115,917 
Accumulated deficit(1,313,573)(1,290,682)
Total Douglas Emmett, Inc. stockholders' equity2,202,599 2,219,862 
Noncontrolling interests1,614,271 1,625,535 
Total Equity3,816,870 3,845,397 
Total Liabilities and Equity$9,637,067 $9,644,218 

See accompanying notes to the consolidated financial statements.
7

Douglas Emmett, Inc.
Consolidated Statements of Operations
(Unaudited; in thousands, except per share data)




 Three Months Ended March 31,
 20242023
Revenues 
Office rental  
Rental revenues and tenant recoveries$169,726 $176,345 
Parking and other income28,211 27,013 
Total office revenues197,937 203,358 
Multifamily rental  
Rental revenues43,220 43,973 
Parking and other income3,812 5,062 
Total multifamily revenues47,032 49,035 
Total revenues244,969 252,393 
Operating Expenses  
Office expenses67,220 72,768 
Multifamily expenses15,850 16,888 
General and administrative expenses11,571 10,940 
Depreciation and amortization95,769 93,176 
Total operating expenses190,410 193,772 
Other income7,044 3,283 
Other expenses(114)(520)
(Loss) income from unconsolidated Fund(26)289 
Interest expense(55,332)(45,511)
Net income6,131 16,162 
Net loss attributable to noncontrolling interests2,778 2,211 
Net income attributable to common stockholders$8,909 $18,373 
Net income per common share – basic and diluted$0.05 $0.10 
 
See accompanying notes to the consolidated financial statements.
8

Douglas Emmett, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited and in thousands)



 Three Months Ended March 31,
 20242023
Net income$6,131 $16,162 
Other comprehensive income (loss): cash flow hedges4,100 (51,897)
Comprehensive income (loss)10,231 (35,735)
Comprehensive loss attributable to noncontrolling interests1,760 18,121 
Comprehensive income (loss) attributable to common stockholders$11,991 $(17,614)
 
See accompanying notes to the consolidated financial statements.

9

Douglas Emmett, Inc.
Consolidated Statements of Equity
(Unaudited; in thousands, except dividend per share data)

 Three Months Ended March 31,
 20242023
Shares of Common StockBeginning balance167,206 175,810 
Exchange of OP Units for common stock166 — 
Repurchases of common stock— (1,435)
Ending balance167,372 174,375 
Common StockBeginning balance$1,672 $1,758 
Exchange of OP units for common stock2 — 
Repurchases of common stock— (14)
Ending balance$1,674 $1,744 
Additional Paid-in CapitalBeginning balance$3,392,955 $3,493,307 
Exchange of OP Units for common stock2,543 — 
Repurchases of OP Units with cash1 4 
Repurchases of common stock— (16,500)
Ending balance$3,395,499 $3,476,811 
Accumulated Other Comprehensive IncomeBeginning balance$115,917 $187,063 
Cash flow hedge adjustments3,082 (35,987)
Ending balance$118,999 $151,076 
Accumulated DeficitBeginning balance$(1,290,682)$(1,119,714)
Net income attributable to common stockholders8,909 18,373 
Dividends(31,800)(33,131)
Ending balance$(1,313,573)$(1,134,472)
Noncontrolling InterestsBeginning balance$1,625,535 $1,713,369 
Net loss attributable to noncontrolling interests(2,778)(2,211)
Cash flow hedge adjustments1,018 (15,910)
Contributions— 125 
Distributions(10,457)(10,140)
Exchange of OP Units for common stock(2,545)— 
Repurchases of OP Units with cash(7)(93)
Stock-based compensation3,505 3,507 
Ending balance$1,614,271 $1,688,647 
 
Statement continues on the next page.
10

Douglas Emmett, Inc.
Consolidated Statements of Equity
(Unaudited; in thousands, except dividend per share data)
Three Months Ended March 31,
20242023
Total EquityBeginning balance$3,845,397 $4,275,783 
Net income6,131 16,162 
Cash flow hedge adjustments4,100 (51,897)
Repurchases of OP Units with cash(6)(89)
Repurchases of common stock (16,514)
Contributions 125 
Dividends(31,800)(33,131)
Distributions(10,457)(10,140)
Stock-based compensation3,505 3,507 
Ending balance$3,816,870 $4,183,806 
Dividends declared per common share$0.19 $0.19 

See accompanying notes to the consolidated financial statements.
11

Douglas Emmett, Inc.
Consolidated Statements of Cash Flows
(Unaudited and in thousands)

    
 Three Months Ended March 31,
20242023
Operating Activities  
Net income$6,131 $16,162 
Adjustments to reconcile net income to net cash provided by operating activities:  
Loss (income) from unconsolidated Fund26 (289)
Depreciation and amortization95,769 93,176 
Net accretion of acquired lease intangibles(2,343)(3,037)
Straight-line rent202 126 
Loan premium amortized and written off(115)(113)
Deferred loan costs amortized and written off2,209 2,134 
Amortization of stock-based compensation2,863 2,794 
Operating distributions from unconsolidated Fund248 289 
Change in working capital components:  
Tenant receivables313 2,061 
Interest payable, accounts payable and deferred revenue26,945 28,176 
Security deposits470 298 
Other assets6,306 3,697 
Net cash provided by operating activities139,024 145,474 
Investing Activities  
Capital expenditures for improvements to real estate(48,127)(40,031)
Capital expenditures for developments(9,678)(11,953)
Insurance recoveries for damage to real estate475 529 
Acquisition of additional interest in unconsolidated Fund(5,214) 
Capital distributions from unconsolidated Fund96 52 
Net cash used in investing activities(62,448)(51,403)
Financing Activities  
Proceeds from borrowings 10,000 
Repayment of borrowings(222)(10,212)
Loan cost payments(526)(696)
Contributions from noncontrolling interests in consolidated JVs 125 
Distributions paid to noncontrolling interests(10,457)(10,140)
Dividends paid to common stockholders(31,770)(33,403)
Repurchases of OP Units(6)(89)
Repurchases of common stock (16,514)
Net cash used in financing activities(42,981)(60,929)
Increase in cash and cash equivalents and restricted cash33,595 33,142 
Cash and cash equivalents and restricted cash - beginning balance523,183 268,938 
Cash and cash equivalents and restricted cash - ending balance$556,778 $302,080 
12

Douglas Emmett, Inc.
Consolidated Statements of Cash Flows
(Unaudited and in thousands)

Reconciliation of Ending Cash Balance
March 31, 2024March 31, 2023
Cash and cash equivalents$556,677 $301,979 
Restricted cash (included in Other assets on our consolidated balance sheets)101 101 
Cash and cash equivalents and restricted cash$556,778 $302,080 


Supplemental Cash Flows Information

 Three Months Ended March 31,
 20242023
Cash paid for interest, net of capitalized interest$53,247 $41,371 
Capitalized interest paid$1,824 $513 
Non-cash Investing Transactions
Accrual for real estate and development capital expenditures$11,716 $29,904 
Capitalized stock-based compensation for improvements to real estate and developments$642 $713 
Removal of fully depreciated and amortized buildings, building improvements, tenant improvements and lease intangibles$24,878 $22,812 
Removal of fully amortized acquired lease intangible assets$81 $75 
Removal of fully accreted acquired lease intangible liabilities$1,863 $3,721 
Non-cash Financing Transactions
Gain (loss) recorded in AOCI - consolidated derivatives$38,842 $(19,817)
Gain (loss) recorded in AOCI - unconsolidated Fund's derivatives (our share)$5,047 $(272)
Dividends declared$31,812 $33,142 
Exchange of OP Units for common stock$2,545 $ 

See accompanying notes to the consolidated financial statements.
13

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



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 substantial 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 March 31, 2024, our Consolidated Portfolio consisted of (i) a 17.6 million square foot office portfolio, (ii) 4,528 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 an equity interest in an unconsolidated Fund which, at March 31, 2024, 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 March 31, 2024, our portfolio consisted of the following (including ancillary retail space and excluding two parcels of land from which we receive rent under ground leases):
 Consolidated PortfolioTotal
Portfolio
Office
Wholly-owned properties5252
Consolidated JV properties1616
Unconsolidated Fund properties2
6870
Multifamily
Wholly-owned properties1212
Consolidated JV properties22
1414
Total8284

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. The consolidated debt, excluding our consolidated JVs, was $3.76 billion as of March 31, 2024 and December 31, 2023. See Note 8. We also consolidate four JVs through our Operating Partnership. We consolidate our Operating Partnership and our four JVs because they are VIEs and we or our Operating Partnership are the primary beneficiary for each.


14

Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (unaudited) (continued)
As of March 31, 2024, our consolidated VIE entities, excluding our Operating Partnership, had:
aggregate consolidated assets of $3.82 billion (of which $3.45 billion related to investment in real estate), and
aggregate consolidated liabilities of $1.89 billion (of which $1.81 billion related to debt).

As of December 31, 2023, our consolidated VIE entities, excluding our Operating Partnership, had:
aggregate consolidated assets of $3.83 billion (of which $3.47 billion related to investment in real estate), and
aggregate consolidated liabilities of $1.88 billion (of which $1.81 billion related to debt).

The accompanying unaudited interim 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. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in conformity with US GAAP may have been condensed or omitted pursuant to SEC rules and regulations, although we believe that the disclosures are adequate to make their presentation not misleading. The accompanying unaudited interim consolidated financial statements include, in our opinion, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial information set forth therein. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements in our 2023 Annual Report on Form 10-K and the notes thereto. Any references to the number or class of properties, square footage, per square footage amounts, apartment units and geography, are outside the scope of our independent registered public accounting firm’s review of our consolidated financial statements in accordance with the standards of the PCAOB.


2. Summary of Significant Accounting Policies

We have not made any changes to our significant accounting policies disclosed in our 2023 Annual Report on Form 10-K.

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.

Revenue Recognition

Rental revenues and tenant recoveries

We account for our rental revenues, and variable lease payments such as tenant recoveries and parking revenues, in accordance with Topic 842. We adopted a practical expedient which allows us to account for our rental revenues, tenant recoveries and parking revenues on a combined basis. Rental revenues and tenant recoveries from tenant leases are included in Rental revenues and tenant recoveries on our consolidated statements of operations. Tenant recoveries were $9.1 million and $13.1 million for the three months ended March 31, 2024 and 2023, respectively. Parking revenues are included in Parking and other income on our consolidated statements of operations.

Collectibility

In accordance with Topic 842, we 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.
15

Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (unaudited) (continued)
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 that we will collect substantially all the lease 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. We write-off tenant receivables and deferred rent receivables as a charge against rental revenues and tenant recoveries in the period we conclude 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. If our conclusion of collectibility changes, 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 rental revenues and tenant recoveries.

Income Taxes

We have elected to be taxed as a REIT under the Code. 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. We are subject to corporate-level tax on the earnings that we derive through our TRS.

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. As of the date of this Report, the FASB has not issued any ASUs that we expect to be applicable and have a material impact on our consolidated financial statements.


3. Investment in Real Estate

The table below summarizes our investment in real estate:

(In thousands)March 31, 2024December 31, 2023
Land$1,185,977$1,185,977
Buildings and improvements(1)
10,156,06210,142,410
Tenant improvements and lease intangibles1,029,4961,020,988
Property under development(1)
60,76656,439
Investment in real estate, gross$12,432,301$12,405,814
________________________________________________
(1)    During the three months ended March 31, 2024, Property under development balances transferred to Building and improvements for real estate placed into service was $3.2 million.

Property to be Removed from Service

During the second quarter of 2023, we removed our Barrington Plaza Apartments property in Los Angeles from the rental market.







16

Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (unaudited) (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 the market rent at the time.

As of March 31, 2024, the ground lease right-of-use asset carrying value was $7.4 million and the ground lease liability was $10.8 million.

Ground rent expense, which is included in Office expenses on our consolidated statements of operations, was $183 thousand for each of the three month periods ended March 31, 2024 and 2023.

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 March 31, 2024:
Twelve months ending March 31:(In thousands)
2025$733 
2026733 
2027733 
2028733 
2029733 
Thereafter42,330 
Total future minimum lease payments$45,995 

17

Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (unaudited) (continued)
5. Acquired Lease Intangibles

Summary of our Acquired Lease Intangibles

 (In thousands)March 31, 2024December 31, 2023
Above-market tenant leases$4,460 $4,541 
Above-market tenant leases - accumulated amortization(2,468)(2,430)
Above-market ground lease where we are the lessor1,152 1,152 
Above-market ground lease - accumulated amortization(296)(292)
Acquired lease intangible assets, net$2,848 $2,971 
Below-market tenant leases$46,145 $48,008 
Below-market tenant leases - accumulated accretion(28,772)(28,170)
Acquired lease intangible liabilities, net$17,373 $19,838 


Impact on the Consolidated Statements of Operations

The table below summarizes the net amortization/accretion related to our above- and below-market leases:

 Three Months Ended March 31,
 (In thousands)20242023
Net accretion of above- and below-market tenant lease assets and liabilities(1)
$2,347 $3,041 
Amortization of an above-market ground lease asset(2)
(4)(4)
Total$2,343 $3,037 
______________________________________________
(1)    Recorded as a net increase to office and multifamily rental revenues.
(2)    Recorded as a decrease to office parking and other income.


18

Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (unaudited) (continued)
6. Investment in Unconsolidated Fund

Description of our Fund

As of March 31, 2024, we managed and owned an equity interest of 74.0% in an unconsolidated Fund, Partnership X, through which we and other investors in the Fund owned two office properties totaling 0.4 million square feet. During 2023 we owned an equity interest of 33.5% in the Fund. On December 31, 2023, we purchased an additional 20.2% equity interest in the Fund which increased our equity interest in the Fund to 53.8%. On February 29, 2024, we purchased an additional 20.2% equity interest in the Fund which increased our equity interest in the Fund to 74.0%.
Partnership X pays us fees and reimburses us for certain expenses related to property management and other services we provide, which are included in Other income on 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 the cash distributions we received from Partnership X:
Three Months Ended March 31,
 (In thousands)20242023
Operating distributions received$248 $289 
Capital distributions received96 52 
Total distributions received$344 $341 

Summarized Financial Information for Partnership X

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

 (In thousands)March 31, 2024December 31, 2023
Total assets$147,959 $146,945 
Total liabilities$119,561 $118,822 
Total equity$28,398 $28,123 

 Three Months Ended March 31,
 (In thousands)20242023
Total revenues$3,823 $4,642 
Operating income$360 $1,305 
Net (loss) income$(73)$749 

7. Other Assets
 (In thousands)March 31, 2024December 31, 2023
Restricted cash$101 $101 
Prepaid expenses16,417 20,594 
Indefinite-lived intangibles1,988 1,988 
Deposit with lender(1)
13,540 13,440 
Furniture, fixtures and equipment, net6,946 7,014 
Other3,971 6,123 
Total other assets$42,963 $49,260 
_______________________________________________________________________
(1) In connection with the Barrington Plaza loan, we deposited cash into an interest-bearing collateral account with the lender. See our debt disclosures in Note 8 (note 4 to the table) for more detail regarding this loan and the related deposit.
19

Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (unaudited) (continued)
8. Secured Notes Payable, Net

Description
Maturity
Date(1)
Principal Balance as of March 31, 2024Principal Balance as of December 31, 2023Variable Interest Rate
Fixed Interest
Rate(2)
Swap Maturity Date
(In thousands)
Consolidated Wholly Owned Subsidiaries
Term loan(3)(5)
3/3/2025$335,000 $335,000 
SOFR + 1.41%
N/AN/A
Fannie Mae loan(3)(5)
4/1/2025102,400 102,400 
SOFR + 1.36%
N/AN/A
Term loan(3)
8/15/2026415,000 415,000 
SOFR + 1.20%
3.07%8/1/2025
Term loan(3)
9/19/2026400,000 400,000 
SOFR + 1.25%
2.44%9/1/2024
Term loan(3)
9/26/2026200,000 200,000 
SOFR + 1.30%
2.36%10/1/2024
Term loan(3)
11/1/2026400,000 400,000 
SOFR + 1.25%
2.31%10/1/2024
Fannie Mae loan(3)(4)
6/1/2027550,000 550,000 
SOFR + 1.48%
N/AN/A
Term loan(3)
5/18/2028300,000 300,000 
SOFR + 1.51%
2.21%6/1/2026
Term loan(3)
1/1/2029300,000 300,000 
SOFR + 1.56%
2.66%1/1/2027
Fannie Mae loan(3)
6/1/2029255,000 255,000 
SOFR + 1.09%
3.26%6/1/2027
Fannie Mae loan(3)
6/1/2029125,000 125,000 
SOFR + 1.09%
3.25%6/1/2027
Fannie Mae loan(3)(5)
8/1/2033350,000 350,000 
SOFR + 1.37%
N/AN/A
Term loan(6)
6/1/203827,419 27,640 N/A4.55%N/A
Total Wholly-Owned Subsidiary Debt3,759,819 3,760,040 
Consolidated JVs
Term loan(3)(9)
12/19/2024400,000 400,000 
SOFR + 1.40%
N/AN/A
Term loan(3)
5/15/2027450,000 450,000 
SOFR + 1.45%
2.26%4/1/2025
Term loan(3)
8/19/2028625,000 625,000 
SOFR + 1.45%
2.12%6/1/2025
Term loan(3)(7)
4/26/2029175,000 175,000 
SOFR + 1.25%
3.90%5/1/2026
Fannie Mae loan(3)
6/1/2029160,000 160,000 
SOFR + 1.09%
3.25%7/1/2027
Total Consolidated Debt(8)
5,569,819 5,570,040 
Unamortized loan premium, net(9)
2,973 3,087 
Unamortized deferred loan costs, net(10)
(28,275)(29,956)
Total Consolidated Debt, net$5,544,517 $5,543,171 
_______________________________________________________________________
Except as noted below, our loans: (i) are non-recourse, (ii) are secured by separate collateral pools consisting of one or more properties, (iii) require interest-only monthly payments with the outstanding principal due upon maturity, and (iv) contain certain financial covenants which could require us to deposit excess cash flow with the lender under certain circumstances unless we (at our option) either provide a guarantee or additional collateral or pay down the loan within certain parameters set forth in the loan documents.  Certain loans with maturity date extension options require us to meet minimum financial thresholds in order to extend the loan maturity date.
(1)Maturity dates include extension options.
(2)Effective rate as of March 31, 2024. Includes the effect of interest rate swaps (if applicable) and excludes the effect of prepaid loan fees and loan premiums. See Note 10 for details of our interest rate swaps. See further below for details of our loan costs and loan premiums.
(3)The loan agreement includes a zero-percent SOFR floor. If the loan is swap-fixed then the related swaps do not include such a floor.
(4)The loan is secured by four residential properties. A portion of the loan totaling $472 million has a lender-required out-of-the-money interest rate cap at a weighted average of 8.99% until July 2026. For the portion of the loan relating to Barrington Plaza, in connection with the removal of that property from the rental market during 2023, the lender is treating the debt as a construction loan and we signed a construction completion guarantee in January 2024. The lender also required a $13.3 million cash deposit, which we placed into an interest bearing collateral account during 2023. The lender will return the deposit at the earlier of August 2026 or when the loan is paid in full. The deposit is included in Other assets in our consolidated balance sheets. See Note 7.
(5)The loan has a lender-required out-of-the-money interest rate cap at an interest rate of 7.84% until August 2026.
(6)The loan requires monthly payments of principal and interest. The principal amortization is based upon a 30-year amortization schedule.
(7)We guaranteed the portion of the loan principal that would need to be paid down in order to meet the minimum debt yield in the loan agreement. See Note 16.
(8)The table does not include our unconsolidated Fund's loan - see Note 16. See Note 13 for our debt fair value disclosures.
(9)Balances are net of accumulated amortization of $4.2 million and $4.1 million at March 31, 2024 and December 31, 2023, respectively.
(10)Balances are net of accumulated amortization of $57.7 million and $56.0 million at March 31, 2024 and December 31, 2023, respectively.
20

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

The table below summarizes our consolidated fixed and floating rate debt:
(In thousands)Principal Balance as of March 31, 2024Principal Balance as of December 31, 2023
Aggregate swapped to fixed rate loans$3,805,000 $3,805,000 
Aggregate fixed rate loans27,419 27,640 
Aggregate capped rate loans822,000 822,000 
Aggregate floating rate loans915,400 915,400 
Total Debt$5,569,819 $5,570,040 
The table below summarizes certain consolidated debt statistics as of March 31, 2024:
Statistics for consolidated loans with interest fixed under the terms of the loan or a swap
Principal balance (in billions)$3.83
Weighted average remaining life (including extension options)3.8 years
Weighted average remaining fixed interest period1.6 years
Weighted average annual interest rate2.66%

Future Principal Payments

At March 31, 2024, the minimum future principal payments due on our consolidated secured notes payable were as follows:
Twelve months ending March 31:
Including Maturity Extension Options(1)
(In thousands)
2025$735,912 
2026103,354 
20271,415,999 
20281,001,045 
20291,226,094 
Thereafter1,087,415 
Total future principal payments$5,569,819 
________________________________________________
(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 on our consolidated statements of operations:
 Three Months Ended March 31,
(In thousands)20242023
Loan premium amortized and written off$(115)$(113)
Deferred loan costs amortized and written off2,209 2,134 
Loan costs expensed52 3 
Total$2,146 $2,024 
21

Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (unaudited) (continued)
9. Interest Payable, Accounts Payable and Deferred Revenue

(In thousands)March 31, 2024December 31, 2023
Interest payable$18,638 $18,647 
Accounts payable and accrued liabilities88,493 61,767 
Deferred revenue46,104 50,823 
Total interest payable, accounts payable and deferred revenue$153,235 $131,237 


10. Derivative Contracts

We make use of interest rate swap and cap contracts to manage the risk associated with changes in interest rates on our floating-rate debt and to satisfy certain lender requirements. 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 also enter into interest rate cap agreements from time to time to cap the interest rates on our floating rate loans. We may enter into derivative contracts that are intended to hedge certain economic risks, even though hedge accounting does not apply or we elect to not apply hedge accounting. We do not speculate in derivatives and we do not make use of any other derivative instruments. See Note 8 regarding our debt and our consolidated JVs' debt that is hedged.

Derivative Summary

The table below summarizes our derivative contracts as of March 31, 2024:
Number of Interest Rate ContractsNotional
(In thousands)
Derivatives Designated as Cash Flow Hedges:
Consolidated derivatives - swaps(1)(2)(3)
24$3,805,000 
Consolidated derivatives - caps(2)(3)
5$822,000 
Unconsolidated Fund's derivatives - swaps(2)(3)(4)
2$115,000 
___________________________________________________
(1)The notional amount reflects 100%, not our pro-rata share, of our consolidated JVs' derivatives. See Note 8 for more information about our hedged consolidated debt.
(2)Our derivative contracts do not provide for right of offset between derivative contracts.
(3)See Note 13 for our derivative fair value disclosures.
(4)The notional amount reflects 100%, not our pro-rata share, of our unconsolidated Fund's derivatives. See Note 6 for more information about our Fund, including our equity interest percentage. See "Guarantees" in Note 16 for more information about our Fund's hedged debt.

22

Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (unaudited) (continued)
Counterparty Credit Risk

We are subject to credit risk from the counterparties on our interest rate swap and cap contract assets because we do not receive collateral. We seek to minimize that risk by entering into agreements with a variety of counterparties with investment grade ratings. The fair value of our interest rate swap and cap contract assets, including accrued interest and excluding credit risk adjustments, was as follows:
(In thousands)March 31, 2024December 31, 2023
Consolidated derivatives(1)
$184,328 $184,700 
Unconsolidated Fund's derivatives(2)
$10,309 $9,643 
________________________________________________________
(1)The amounts reflect 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 derivatives. For more information about our Fund, including our equity interest percentage, see Note 6.


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)Three Months Ended March 31,
 20242023
Derivatives Designated as Cash Flow Hedges:  
Consolidated derivatives:
Gains (losses) recorded in AOCI before reclassifications(1)
$38,842 $(19,817)
Gains reclassified from AOCI to Interest Expense(1)
$(38,978)$(31,452)
Interest expense presented on the consolidated statements of operations$(55,332)$(45,511)
Unconsolidated Fund's derivatives (our share)(2):
Gains (losses) recorded in AOCI before reclassifications(1)
$5,047 $(272)
Gains reclassified from AOCI to (Loss) income from unconsolidated Fund(1)
$(811)$(356)
(Loss) income from unconsolidated Fund presented on the consolidated statements of operations$(26)$289 
________________________________________________________________
(1)See Note 11 for our AOCI reconciliation.
(2)We calculate our share by multiplying the total amount for the Fund by our equity interest in the Fund. For more information about our Fund, including our equity interest percentage, see Note 6.


Future Reclassifications from AOCI

At March 31, 2024, our estimate of the AOCI related to derivatives designated as cash flow hedges that will be reclassified to earnings during the next twelve months is as follows:
(In thousands)
Consolidated derivatives:
Gains to be reclassified from AOCI to Interest Expense$118,828 
Unconsolidated Fund's derivatives (our share)(1):
Gains to be reclassified from AOCI to (Loss) income from unconsolidated Fund$3,526 
________________________________________________________
(1)    We calculate our share by multiplying the total amount for the Fund by our equity interest in the Fund. For more information about our Fund, including our equity interest percentage, see Note 6.

23

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

Transactions
    
During the Three Months Ended March 31, 2024
We acquired 166 thousand OP Units in exchange for issuing an equal number of shares of our common stock to the holders of the OP Units.
We acquired 461 OP Units for $6 thousand in cash.

During the Three Months Ended March 31, 2023
We repurchased 1.4 million shares of our common stock for $16.5 million in cash, excluding transaction costs, in open market transactions. The average purchase price was $11.50 per share.
We acquired 5 thousand OP Units for $89 thousand in cash.

Noncontrolling Interests

Our noncontrolling interests consist of interests in our Operating Partnership and consolidated JVs which are not owned by us. As of March 31, 2024, noncontrolling interests in our Operating Partnership owned 33.7 million OP Units and fully-vested LTIP Units, which represented approximately 16.7% of our Operating Partnership's total outstanding interests, and we owned 167.4 million OP Units (to match our 167.4 million shares of outstanding common stock), which represented approximately 83.3% of our Operating Partnership's total outstanding interests.

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 one 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 a one-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.

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:
 Three Months Ended March 31,
(In thousands)20242023
Net income attributable to common stockholders$8,909 $18,373 
Transfers from noncontrolling interests:
Exchange of OP Units with noncontrolling interests2,545  
Repurchases of OP Units from noncontrolling interests1 4 
Net transfers from noncontrolling interests2,546 4 
Change from net income attributable to common stockholders and transfers from noncontrolling interests$11,455 $18,377 



24

Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (unaudited) (continued)
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:
Three Months Ended March 31,
(In thousands)20242023
Accumulated Other Comprehensive Income - Beginning balance$115,917 $187,063 
Consolidated derivatives:
Other comprehensive income (loss) before reclassifications38,842 (19,817)
Reclassification of gains from AOCI to Interest Expense(38,978)(31,452)
Unconsolidated Fund's derivatives (our share)(2):
Other comprehensive income (loss) before reclassifications5,047 (272)
Reclassification of gains from AOCI to (Loss) income from unconsolidated Fund(811)(356)
Net current period OCI4,100 (51,897)
OCI attributable to noncontrolling interests(1,018)15,910 
OCI attributable to common stockholders3,082 (35,987)
Accumulated Other Comprehensive Income - Ending balance$118,999 $151,076 
___________________________________________________
(1)See Note 10 for the details of our derivatives and Note 13 for our derivative fair value disclosures.
(2)We calculate our share by multiplying the total amount for our Fund by our equity interest in the Fund. For more information about our Fund, including our equity interest percentage, see Note 6.


Stock-Based Compensation

The Douglas Emmett, Inc. 2016 Omnibus Stock Incentive Plan, as amended (the "2016 Plan"), permits us to make grants of stock-based compensation awards to our directors, officers, employees and consultants. The plan is administered by the compensation committee of our board of directors. As of March 31, 2024, we had an aggregate of 16.6 million shares of common stock available for future awards. The table below presents our stock-based compensation expense:

Three Months Ended March 31,
(In thousands)20242023
Stock-based compensation expense, net$2,863 $2,794 
Capitalized stock-based compensation$642 $713 

















25

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

We calculate basic EPS by dividing the net income (loss) attributable to common stockholders for the period by the weighted average number of common shares outstanding during the period. We calculate diluted EPS by dividing the net income (loss) attributable to common stockholders for the period by the weighted average number of common shares and dilutive instruments outstanding during the period using the treasury stock method. We account for unvested LTIP awards that contain non-forfeitable rights to dividends as participating securities and include these securities in the computation of basic and diluted EPS using the two-class method. The table below presents the calculation of basic and diluted EPS:

 Three Months Ended March 31,
 20242023
Numerator (In thousands):  
Net income attributable to common stockholders$8,909 $18,373 
Allocation to participating securities: Unvested LTIP Units(350)(239)
Net income attributable to common stockholders - basic and diluted$8,559 $18,134 
Denominator (In thousands):
Weighted average shares of common stock outstanding - basic and diluted(1)
167,326 175,765 
Net income per common share - basic and diluted$0.05 $0.10 
____________________________________________________
(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 one-for-one basis, because their associated net income or loss (equal on a per unit basis to the Net income or loss per common share - diluted) was already deducted in calculating Net income (loss) attributable to common stockholders. Accordingly, any exchange would not have any effect on diluted EPS. The table below presents the weighted average OP Units and vested LTIP Units outstanding for the respective periods:

 Three Months Ended March 31,
 (In thousands)20242023
OP Units30,930 30,129 
Vested LTIP Units2,771 2,390 
















26

Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (unaudited) (continued)
13. 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 March 31, 2024, 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, 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 includes any maturity extension options. The table below presents the estimated fair value and carrying value of our secured notes payable, the carrying value includes unamortized loan premium and excludes unamortized deferred loan fees:

(In thousands)March 31, 2024December 31, 2023
Fair value$5,489,463 $5,484,032 
Carrying value$5,572,792 $5,573,127 


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)March 31, 2024December 31, 2023
Fair value$4,390 $4,496 
Carrying value$10,832 $10,836 


27

Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (unaudited) (continued)
Financial instruments measured at fair value on a recurring basis

Derivative instruments

See Note 10 for the details of our derivatives. We present our derivatives on our consolidated balance sheets 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 non-performance risk. Our derivatives are not subject to master netting arrangements.  

The table below presents the estimated fair value of our derivatives. We did not have any consolidated or unconsolidated derivatives in a liability position for the periods presented.

(In thousands)March 31, 2024December 31, 2023
Derivative Assets:
Fair value - consolidated derivatives(1)
$170,607 $170,880 
Fair value - unconsolidated Fund's derivatives(2)
$9,824 $9,150 
____________________________________________________
(1)    Consolidated derivatives, which reflect 100%, not our pro-rata share, of our consolidated JVs' derivatives, are included in interest rate contracts on our consolidated balance sheets. The fair values exclude accrued interest which is included in interest payable on our consolidated balance sheets.
(2)    Unconsolidated Fund's derivatives, which reflect 100%, not our pro-rata share, of our unconsolidated Fund's derivatives. Our pro-rata share of the amounts related to the unconsolidated Fund's derivatives is included in our Investment in unconsolidated Fund on our consolidated balance sheets. See Note 6 for more information about our Fund, including our equity interest percentage, and see "Guarantees" in Note 16 regarding our Fund's derivatives.
28

Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (unaudited) (continued)
14. Segment Reporting

Segment information is prepared on the same basis that our management reviews information for operational decision-making purposes.  We operate in two 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)Three Months Ended March 31,
20242023
Office Segment
Total office revenues$197,937 $203,358 
Office expenses(67,220)(72,768)
Office segment profit130,717 130,590 
Multifamily Segment
Total multifamily revenues47,032 49,035 
Multifamily expenses(15,850)(16,888)
Multifamily segment profit31,182 32,147 
Total profit from all segments$161,899 $162,737 


The table below presents a reconciliation of the total profit from all segments to net income attributable to common stockholders:

(In thousands)Three Months Ended March 31,
 20242023
Total profit from all segments$161,899 $162,737 
General and administrative expenses(11,571)(10,940)
Depreciation and amortization(95,769)(93,176)
Other income7,044 3,283 
Other expenses(114)(520)
(Loss) income from unconsolidated Fund(26)289 
Interest expense(55,332)(45,511)
Net income6,131 16,162 
Net loss attributable to noncontrolling interests2,778 2,211 
Net income attributable to common stockholders$8,909 $18,373 
29

Douglas Emmett, Inc.
Notes to Consolidated Financial Statements (unaudited) (continued)
15. 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 two 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 March 31, 2024:
Twelve months ending March 31: (In thousands)
2025$595,336 
2026501,098 
2027403,764 
2028326,721 
2029252,824 
Thereafter927,938 
Total future minimum base rentals(1)
$3,007,681 
___________________________________
(1)    Does not include (i) residential leases, which typically have a term of one year or less, (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 will not be exercised.


16. 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.  We are currently in litigation with the insurance providers in 2020 for Barrington Plaza to recover certain costs associated with reconstruction. 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 by (i) targeting smaller, more affluent office 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.  For the three months ended March 31, 2024 and 2023, no tenant accounted for more than 10% of our total revenues.  See our revenue recognition policy in Note 2 for the charges to revenue for uncollectible amounts for tenant receivables and deferred rent receivables.

Geographic Risk

All of our properties, including our consolidated JVs and our unconsolidated Fund's properties, 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.