What changed in this filing

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Item 1. Business

2022-02-18 compared with 2021-02-22 · 55 added, 16 removed, 128 unchanged (36% of the section changed)

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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.

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 substantial 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.

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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.

See "Basis of Presentation" in Note 1 to our consolidated financial statements 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.

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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 these transactions.

See Note 3 and Note 6 to our consolidated financial statements in Item 15 of this Report for more information regarding 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.

We operate two business segments, our office segment and our multifamily segment.

Our segments include the acquisition, development, ownership and management of office and multifamily real estate.

The services for our office segment include primarily the rental of office space and other tenant services, including parking and storage space rental.

The services for our multifamily segment include primarily the 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.

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.

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

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.

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, energy efficiency, recycling and water conservation.

As a result of our efforts, 78% of our eligible office space in 2019 was ENERGY STAR certified by the EPA as having energy efficiency in the top 25% of buildings nationwide (our 2020 Energy Star scores are being reviewed to properly account for any impact from the COVID-19 pandemic).

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.

Environmental Sustainability

We actively manage our operations in an environmentally sustainable manner.

On an annual basis, our Board of Directors assesses material climate-related risks by assigning numeric values based on both the likelihood of occurrence and the potential impact, with mitigation approaches considered and evaluated.

Throughout the year, our Corporate Sustainability Committee, led by the Chairman of our Board of Directors and our COO, oversees our policies and operational controls for environmental, health, safety and social risks, and monitors our progress and results.

Every month, our Director of Engineering Services and our six Regional Engineers meet to monitor and implement the policies set by our Corporate Sustainability Committee.

Our Regional Engineers hold monthly meetings with each Building Engineer in their respective regions to review specific building operating issues and opportunities for improvement.

We also use external resources to provide critical expertise, tools and resources for our sustainability program.

We engage with our stakeholders to align sustainability efforts and improve the efficiency and health of our business and communities.

We share our sustainability goals and standards with our tenants, vendors and suppliers and work closely with them to gather information, develop solutions, and implement technologies and programs to achieve our goals.

In our communities, we seek input from other stakeholders and participate in local Business Improvement Districts.

We have integrated sustainability into our property management practices, tenant improvement build-outs and meetings with existing and prospective tenants.

Our sustainability program covers five key areas:

• Energy Usage

Our actual energy consumption from year to year is impacted by many factors, such as weather, occupancy in our buildings and activities of our tenants.

Many of these factors are beyond our control.

However, we can and do seek to make our buildings more energy efficient.

Some of our initiatives to reduce our consumption include items such as real time energy monitoring software, LED lighting retrofitting, and new energy management systems.

As a result of our efforts, 88% of our eligible office space in 2020 qualified for "ENERGY STAR Certification" by the EPA as having energy efficiency in the top 25% of buildings nationwide (our 2021 ENERGY STAR scores were not yet available as of the date of this Report).

Our energy and electricity are provided by utility providers through the grid (LA Department of Water and Power, Southern California Edison, and Hawaii Electric Company).

We estimate the percentage of renewable energy provided by our utility providers was approximately one-third in 2019 (the most recent available data).

• Water Usage

We have undertaken a number of initiatives to conserve water across our portfolio.

Our buildings use low flow faucets and toilets, and we have also saved water by using waterless urinals.

Where permitted, we try to recycle used water (by law, we cannot recycle most of the water used in our buildings since it must be fit for human consumption).

In a few of our buildings where groundwater naturally seeps into our subterranean parking garages, we treat the water before pumping it back into the ground.

In partnership with our vendors and tenants, we have implemented business waste and e-waste recycling programs (we do not generate any production waste or packaging waste) at our properties.

Non-Hazardous Waste:

Our routine operations only generate modest amounts of ancillary waste, primarily from typical operations in an office setting.

A major source of our waste is the debris generated by refurbishment of our buildings, particularly in recurring tenant improvements that can be generated when a new tenant moves into a building.

To minimize that waste, we attempt to construct tenant improvements that will be usable by future tenants, and to fit tenants into existing spaces without substantial refurbishment.

Hazardous Waste:

Our operations only generate modest ancillary amounts of hazardous waste (mostly office supplies), which we dispose of in accordance with all applicable waste regulations.

Similarly, our tenants are almost entirely limited by their leases to general office uses that prohibit the use of additional hazardous wastes and are required by their leases to comply with all applicable waste regulations.

• Air Emissions

Although our operations do not create significant air emissions such as nitrogen oxides (NOx), sulfur oxides (Sox), volatile organic compounds (VOCs) or particulate matter (PM), our Los Angeles properties produce a small amount of emissions from stationary sources such as natural gas boilers.

We have been working to reduce those emissions by upgrading to lower emission models.

We expect to reduce the indirect air emissions from our utility suppliers by reducing our per square foot electricity usage.

We also encourage sustainable transportation choices by our tenants:

We have installed over 200 Electric Vehicle charging stations at our properties and have plans to add additional stations.

All of our buildings provide ample bicycle parking.

• Development

Ground up development is a small but growing part of our business.

So far, all our development projects have been adding additional density in existing office or apartment community sites we already owned.

We are committed to selecting development sites that are not in environmentally protected areas or areas of high biodiversity, and strive to use brownfield sites instead of greenfield sites.

At one of our current residential development projects in Brentwood we are investing significant additional capital to building a one acre park on Wilshire Boulevard that will be available to the public, providing urban green space as well as a valuable amenity to the surrounding properties and community.

Human Capital

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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.

The COVID-19 pandemic had a significant impact on our human capital management during 2020 and 2021.

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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business