What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-02-18 compared with 2021-02-22 · 216 added, 254 removed, 1268 unchanged (27% of the section changed)

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Other Information

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

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 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2020.

The 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 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2021.

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 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2020.

The 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 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2021.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

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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 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2020.

The 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 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2021.

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 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2020.

Our Independent Registered Public Accounting Firm is Ernst & Young LLP , Los Angeles California , PCAOB Firm ID:

The 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 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2021.

Exhibits and Financial Statement Schedule

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Acquired Lease Intangibles

Investment in Unconsolidated Funds

Investments in Unconsolidated Funds

Secured Notes Payable & Revolving Credit Facility, Net

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Number Description Footnote

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.

3.1 Articles of Amendment and Restatement of Douglas Emmett, Inc.

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+ 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)

(1) Filed with Amendment No.

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(File number 001-33106)

Douglas Emmett, Inc.

Exhibits (continued)

(3) Filed with Form 8-K on October 30, 2006 and incorporated herein by this reference.

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(File number 001-33106)

Douglas Emmett, Inc.

Exhibits (continued)

(5) Filed with Amendment No.

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/s/ JORDAN L.

President, CEO and Director

Kaplan President, CEO and Director

(Principal Executive Officer)

(Principal Financial and Accounting Officer)

Chairman of the Board

Emmett Chairman of the Board

/s/ KENNETH M.

COO and Director

/s/ CHRISTOPHER H.

Christopher H.

Panzer COO and Director

/s/ LESLIE E.

Bider Director

/s/ DORENE C.

Dominguez Director

Feinberg Director

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/s/ THOMAS E.

O’Hern Director

/s/ WILLIAM E.

/s/ JOHNESE SPISSO

Johnese Spisso Director

/s/ JOHNESE M.

Spisso Director

Report of Management on Internal Control over Financial Reporting

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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:

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was 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.

Collectability of lease payments due from office tenants

Description of the Matter During 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.

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 office rental revenues and tenant recoveries, including controls over management’s assessment of the collectability of future lease payments.

For example, we tested controls over management’s consideration of the factors mentioned above used in assessing collectability and controls over the completeness and accuracy of the data used in management’s analyses.

To test the office rental revenues and tenant recoveries recognized, we performed audit procedures that included, among others, evaluating the data and assumptions used in determining whether collection of substantially all of the lease payments was probable based on the factors mentioned above.

In addition, we tested the completeness and accuracy of the data that was used in management’s collectability analyses.

The communication of the critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

Impairment of investment in real estate

Description of the Matter The Company’s net investment in real estate totaled $8.9 billion as of December 31, 2020.

Description of the Matter

The Company’s net investment in real estate totaled $8.8 billion as of December 31, 2021.

As discussed in Note 2 to the consolidated financial statements, the Company 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 property may not be recoverable.

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Our evaluation of management’s identification of indicators of impairment included our related assessment of the severity of such indicators, either individually or in combination, in determining whether a triggering event has occurred that requires the Company to evaluate the recoverability of the real estate asset.

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 real estate asset impairment assessment process.

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 real estate asset impairment assessment process.

For example, we tested controls over management’s process for identifying and evaluating potential impairment indicators.

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For example, we searched for any tenants or groups of tenants with significant write offs or upcoming lease expirations that occupy a substantial portion of a real estate asset.

We also searched for any significant declines in operating results of a real estate asset due to occupancy changes, tenant bankruptcies, environmental issues, physical damage, change in intended use or adverse changes in legal factors.

We also searched for any significant declines in operating results of a real estate asset due to occupancy changes, environmental issues, physical damage, change in intended use or adverse changes in legal factors.

/s/ Ernst & Young LLP

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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, 2020 and 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, 2020 and related notes and financial statement schedule listed in the Index at Item 15(a), and our report dated February 19, 2021 expressed an unqualified opinion thereon.

as of December 31, 2021 and 2020, 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, 2021 and related notes and financial statement schedule listed in the Index at Item 15(a), and our report dated February 18, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

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Net income $ 56,131 $ 38,553 $ 418,698

Other comprehensive (loss) income:

Other comprehensive income (loss):

cash flow hedges 158,923 ( 183,521 ) ( 107,292 )

Comprehensive (loss) income ( 144,968 ) 311,406 143,682

Comprehensive loss (income) attributable to noncontrolling interests 64,816 ( 19,099 ) ( 16,751 )

Comprehensive (loss) income attributable to common stockholders $ ( 80,152 ) $ 292,307 $ 126,931

Comprehensive income (loss) 215,054 ( 144,968 ) 311,406

Comprehensive (income) loss attributable to noncontrolling interests ( 40,526 ) 64,816 ( 19,099 )

Comprehensive income (loss) attributable to common stockholders $ 174,528 $ ( 80,152 ) $ 292,307

See accompanying notes to the consolidated financial statements.

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Issuance of common stock — — 4,933

Exercise of stock options — — 21

Ending balance 175,529 175,464 175,370

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Issuance of common stock, net — — 200,933

Taxes paid on exercise of stock options — — ( 450 )

Ending balance $ 3,488,886 $ 3,487,887 $ 3,486,356

AOCI Beginning balance $ ( 148,035 ) $ ( 17,462 ) $ 53,944

ASU 2017-12 adoption — — 211

Cash flow hedge adjustments 109,261 ( 130,573 ) ( 71,406 )

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ASU 2016-02 adoption — — ( 2,144 )

ASU 2017-12 adoption — — ( 211 )

Net income attributable to common stockholders 65,267 50,421 363,713

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Repurchase of OP Units with cash ( 122 ) ( 7 ) ( 734 )

Taxes paid on exercise of stock options — — ( 450 )

Contributions — — 176,000

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Dividends paid to common stockholders ( 196,529 ) ( 196,333 ) ( 179,667 )

Taxes paid on exercise of stock options — — ( 450 )

Repurchase of OP Units ( 122 ) ( 7 ) ( 734 )

Proceeds from issuance of common stock, net — — 200,983

Net cash (used in) provided by financing activities ( 136,330 ) 187,538 ( 213,849 )

Increase (decrease) in cash and cash equivalents and restricted cash 18,713 7,456 ( 30,418 )

Net cash provided by (used in) financing activities 5,246 ( 136,330 ) 187,538

Increase in cash and cash equivalents and restricted cash 163,489 18,713 7,456

Cash and cash equivalents and restricted cash - beginning balance 172,517 153,804 146,348

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Capitalized stock-based compensation for improvements to real estate and developments $ 6,183 $ 5,448 $ 4,698

Removal of fully depreciated and amortized tenant improvements and lease intangibles $ 73,045 $ 88,205 $ 75,729

Removal of fully depreciated and amortized buildings, building improvements, tenant improvements and lease intangibles $ 157,325 $ 73,045 $ 88,205

Removal of fully amortized acquired lease intangible assets $ 442 $ 372 $ 2,132

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Non-cash Financing Transactions

Gain recorded in AOCI - Adoption of ASU 2017-12 - consolidated derivatives $ — $ — $ 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

Gain (loss) recorded in AOCI - consolidated derivatives $ 82,876 $ ( 232,652 ) $ ( 76,273 )

Gain (loss) recorded in AOCI - unconsolidated Funds' derivatives (our share) $ 569 $ ( 410 ) $ ( 5,023 )

Accrual for deferred loan costs $ 150 $ 50 $ 1,416

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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.

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.

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At December 31, 2021, our Consolidated Portfolio consisted of (i) a 17.8 million square foot office portfolio, (ii) 4,388 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 an unconsolidated Fund which, at December 31, 2020, owned an additional 0.4 million square feet of office space.

We also manage and own an equity interest an unconsolidated Fund which, at December 31, 2021, 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.

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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 $ 3.19 billion of consolidated debt.

We also consolidate three JVs ( four 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, 2020, these consolidated entities had aggregate total consolidated assets of $ 9.25 billion (of which $ 8.86 billion related to investment in real estate), aggregate total consolidated liabilities of $ 5.25 billion (of which $ 4.74 billion related to debt), and aggregate total consolidated equity of $ 4.00 billion (of which $ 1.56 billion related to noncontrolling interests).

The consolidated debt, excluding our consolidated JVs, was $ 3.41 billion and $ 3.19 billion, as of December 31, 2021 and December 31, 2020, respectively.

We also consolidate three JVs through our Operating Partnership ( four 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).

We consolidate our Operating Partnership and our three JVs because they are VIEs and we or our Operating Partnership are the primary beneficiary for each.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2021, our consolidated VIE entities, excluding our Operating Partnership, had aggregate consolidated assets of $ 3.56 billion (of which $ 3.28 billion related to investment in real estate) and aggregate consolidated liabilities of $ 1.72 billion (of which $ 1.64 billion related to debt).

As of December 31, 2020, our consolidated VIE entities, excluding our Operating Partnership, had aggregate consolidated assets of $ 3.58 billion (of which $ 3.37 billion related to investment in real estate) and aggregate consolidated liabilities of $ 1.73 billion (of which $ 1.59 billion related to debt).

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.

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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.

Commencing with the third quarter of 2020, we moved the disclosure of our investment 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 investment in real estate footnote for all periods presented.

Summary of Significant Accounting Policies

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See Note 3 for our property acquisition disclosures.

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.

Depreciation and Amortization

The assets and liabilities listed below are carried on our consolidated balance sheet net of the related accumulated depreciation or amortization/accretion, and any impairment charges.

We accelerate depreciation for affected assets when we renovate our buildings or our buildings are impacted by new developments.

When assets are sold or retired, their cost and related accumulated depreciation or amortization are removed from our consolidated balance sheet with the resulting gains or losses, if any, reflected in our results of operations for the respective period.

• Buildings and improvements are depreciated on a straight-line basis using an estimated life of twenty-five to forty years for buildings and fifteen years for improvements.

• 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 in-place leases are amortized on a straight-line basis over the weighted average remaining term of the acquired in-place leases.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

• Acquired 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.

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• 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.

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

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During 2021, 2020 and 2019, we capitalized $ 185.4 million, $ 186.4 million and $ 75.3 million of costs related to our developments, respectively, which included $ 8.8 million, $ 4.8 million and $ 3.8 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.

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.

We account for our ground lease, for which we are the lessee, in accordance with Topic 842 "Leases".

We classify the ground lease as an operating lease, and we recognize a right-of-use asset for the land and a lease liability for the future lease payments.

We 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 sheets 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 sheets.

As of December 31, 2020 and 2019, the total investment basis difference included in our investment balance in unconsolidated Funds was $ 29.6 million and $ 27.8 million, respectively.

Investment in Unconsolidated Fund

As of December 31, 2021 and 2020, we managed and owned an equity interest in one unconsolidated Fund.

Before November 21, 2019 we managed and owned equity interests in three unconsolidated Funds.

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.

We account for our investment in our unconsolidated Fund using the equity method because we have significant influence but not control over the Fund.

Under the equity method, we initially recorded our investment in our Fund 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 Fund's net income or losses, (ii) our share of the Fund's other comprehensive income or losses, (iii) our cash contributions to the Fund and (iv) our distributions received from the Fund.

We will remove our investment in our unconsolidated Fund from our consolidated balance sheet when we sell our interest in the Fund or if the Fund qualifies for consolidation.

Our investment in our unconsolidated Fund is included in Investment in unconsolidated Fund in the consolidated balance sheets.

Our share of our Fund's accumulated other comprehensive income or losses is included in Accumulated other comprehensive income (loss) in our consolidated balance sheets.

As of December 31, 2021 and 2020, the total investment basis difference included in our investment balance in our unconsolidated Fund was $ 28.7 million and $ 29.6 million, respectively.

Our share of the net income or losses from our Funds is included in Income from unconsolidated Funds in the consolidated statements of operations.

We periodically assess whether there has been any impairment that is other than temporary in our investment in our 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, no impairments occurred during 2021, 2020 or 2019.

See Note 6 for our Fund disclosures.

Impairment of Long-Lived Assets

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Based upon such periodic assessments, no impairments occurred during 2021, 2020 or 2019.

In downtown Honolulu, we are converting a 25 story, 490,000 square foot office tower into approximately 500 apartments 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 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 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

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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.

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.

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.

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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 Terminations

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 $ 1.2 million, $ 1.0 million and $ 0.5 million during 2021, 2020 and 2019, respectively.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Tenant Improvements

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 $ 5.8 million, $ 5.9 million and $ 5.8 million during 2021, 2020 and 2019, respectively.

Tenant Recoveries

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.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Subsequent to year-end, in accordance with our policy, 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.

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.

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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 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.

Before the adoption of Topic 842, we presented our tenant receivables and deferred rent receivables net of allowances on our consolidated balance sheets.

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.

Tenant 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 tenant recoveries by $ 0.6 million for the year ended December 31, 2018.

Charges for uncollectible tenant receivables and deferred rent receivables, which were primarily due to the impact of the COVID-19 pandemic, reduced our office revenues by $ 3.0 million and $ 41.0 million in 2021 and 2020, respectively.

Lease Modifications

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.

Office Parking Revenues

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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 and $ 102.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Office parking revenues were $ 69.0 million, $ 76.1 million and $ 108.7 million in 2021, 2020 and 2019, respectively.

Office parking receivables were $ 0.8 million and $ 0.6 million as of December 31, 2021 and 2020, respectively, and are included in Tenant receivables in our consolidated balance sheets.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Insurance Recoveries

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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 included in Multifamily rental - Parking and other income in the consolidated statements of operations, and a gain related to property damage of $ 13.1 million, which is included in Other income in the consolidated statements of operations.

We recorded $ 4.8 million and $ 3.9 million of business interruption revenues during 2021 and 2020, respectively, which is included in Multifamily rental - Parking and other income in the consolidated statements of operations.

In addition, we recorded a gain related to property damage of $ 13.1 million during 2020, which is included in Other income in the consolidated statements of operations.

Interest Income

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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 as incurred.

Prior to January 1, 2019, we capitalized most of our leasing costs.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

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 sheets.

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 consolidated balance 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.

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See Note 8 for our loan cost disclosures.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Debt Discounts and Premiums

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See Note 10 for our derivative disclosures.

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.

We account for stock-based compensation, which includes grants of LTIP Units, using the fair value method of accounting.

The estimated fair value of LTIP Units granted, net of estimated forfeitures, is amortized over the vesting period, which is based upon service.

See Note 13 for our stock-based compensation disclosures.

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See Note 15 for our segment disclosures.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

We have elected to be taxed as a REIT under the Code, commencing with our initial taxable year ended December 31, 2006.

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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.

We had two TRSs in 2020 and 2019.

Our TRSs did not have significant tax provisions or deferred income tax items for 2021, 2020 or 2019.

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We consider the applicability and impact of all ASUs.

Other than the ASUs discussed below, the FASB has not issued any other ASUs that we expect to be applicable and have a material impact on our consolidated financial statements.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

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 was the first quarter of 2020.

The amendments in the ASU should be applied on a modified-retrospective basis.

The ASU impacts our measurement of credit losses for our Office parking receivables, which were $ 0.6 million and $ 1.3 million as of December 31, 2020 and December 31, 2019, respectively, and are included in Tenant receivables in our consolidated balance sheets.

We adopted the ASU in the first quarter of 2020 and it did not 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

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.

We did not adopt any ASUs during 2021, and 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 future consolidated financial statements.

Douglas Emmett, Inc.

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Buildings and improvements (1)

9,344,087 9,344,653

Tenant improvements and lease intangibles 935,639 928,867

Property under development (1)

388,530 254,297

Investment in real estate, gross $ 11,819,077 $ 11,678,638

__________________________________________________________________________________

(1) During 2021, Property under development balances transferred to Building and improvements for real estate placed into service was $ 51.2 million.

2021 Property Acquisitions and Dispositions

During 2021, we did not purchase or sell any properties.

2020 Property Disposition

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Net assets and liabilities acquired $ 366,584

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Consolidation of JV

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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).

Douglas Emmett, Inc.

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.

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Net assets acquired and liabilities assumed $ 558,256

2018 Property Acquisitions and Dispositions

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

Douglas Emmett, Inc.

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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.

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 that time.

As of December 31, 2021, 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 and 2018, which is included in Office expenses in our consolidated statements of operations.

Ground rent expense, which is included in Office expenses in our consolidated statements of operations, was $ 733 thousand during 2021, 2020 and 2019.

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, 2021:

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( 17 ) ( 17 ) ( 18 )

Accretion of an above-market ground lease liability (3)

Total $ 9,541 $ 15,878 $ 16,264

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(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, 2021.

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Description of our Funds

As of December 31, 2020, we managed and owned an equity interest of 33.5 % in an unconsolidated Fund, Partnership X, through which we and other investors in the Fund own two 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.

As of December 31, 2021 and 2020, we managed and owned an equity interest of 33.5 % 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.

We purchased an additional interest of 3.6 % in Partnership X for $ 6.6 million during 2020.

Before November 21, 2019, we managed and owned equity interests in three 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 eight office properties totaling 1.8 million square feet.

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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.

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_________________________________________________

(1) The results of operations are not directly comparable to the prior periods;

(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, 2021.

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Term loan (3)

1/1/2024 $ 300,000 $ 300,000 LIBOR + 1.55 %

$ — $ 300,000

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3.16 % 6/1/2022

Term loan (4)(6)

5/18/2028 300,000 — LIBOR + 1.40 %

2.21 % 6/1/2026

Term loan (4)(7)

1/1/2029 300,000 — SOFR + 1.56 %

3.42 % 1/1/2027

Fannie Mae loan (4)

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Term loan (3)

— — 400,000 — — —

Term loan (4)

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2.12 % 6/1/2025

Term loan (3)

Fannie Mae loan (4)

6/1/2029 160,000 160,000 LIBOR + 0.98 %

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(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 extensions require us to meet minimum financial thresholds in order to exercise those extensions.

(1) Maturity dates include the effect of extension options.

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 December 31, 2021.

Includes the effect of interest rate swaps and excludes the effect of prepaid loan fees.

Includes the effect of interest rate swaps, and excludes the effect of prepaid loan fees and loan premiums.

See Note 10 for details of our interest rate swaps.

See below for details of our loan costs.

See further below for details of our loan costs and loan premiums.

(3) We paid off these loans during 2021.

(4) The loan agreement includes a zero -percent LIBOR floor.

The corresponding swaps do not include such a floor.

(4) Effective rate will increase to 2.31 % on July 1, 2021.

(5) The effective rate increased from 2.18 % to 2.31 % on July 1, 2021 due to the expiration of the prior swaps.

(6) We closed this loan during the second quarter of 2021.

(7) We closed this loan during the fourth quarter of 2021, and used the proceeds to pay off a loan secured by the same property.

The interest rate decreased to 2.66 % on January 1, 2022.

(8) Requires monthly payments of principal and interest.

Principal amortization is based upon a 30 -year amortization schedule.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

(9) $ 400.0 million revolving credit facility.

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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.

(10) 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.

(11) We closed this loan during the third quarter of 2021.

(12) The table does not include our unconsolidated Fund's loan - see "Guarantees" in Note 17 for information about our Fund's loan.

(13) See Note 14 for our debt and derivative fair value disclosures.

(14) Balances are net of accumulated amortization of $ 3.2 million and $ 2.7 million at December 31, 2021 and December 31, 2020, respectively.

(15) Balances are net of accumulated amortization of $ 46.3 million and $ 38.3 million at December 31, 2021 and December 31, 2020, respectively.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Debt Statistics

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(In thousands)

2026 1,415,987

Thereafter 2,789,808

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

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Loan Premium and Loan Costs

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Total $ 10,850 $ 6,566 $ 15,371

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Interest Payable, Accounts Payable and Deferred Revenue

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Total interest payable, accounts payable and deferred revenue $ 145,460 $ 144,344

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Derivative Contracts

Derivative Summary

As of December 31, 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)

As of December 31, 2021, all of our interest rate swaps, including our consolidated JVs' and our unconsolidated Fund's interest rate swaps, as summarized below, were designated as cash flow hedges:

Number of Interest Rate Swaps Notional

(In thousands)

Consolidated derivatives (1)(2)(4)(5)

37 $ 5,317,400

Unconsolidated Fund's derivative (3)(4)(5)

Unconsolidated Fund's derivatives (3)(4)(5)

___________________________________________________

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(2) The notional amount includes:

Five 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

Two 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.

Two swaps with a combined initial notional amount of $ 50.0 million, which will increase to $ 450.0 million on July 1, 2022 to replace existing swaps when they expire, and

One swap with a notional amount of $ 300.0 million that will replace existing swaps when they expire on January 1, 2022.

(3) The notional amount reflects 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 .

(4) Our derivative contracts do not provide for right of offset between derivative contracts.

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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, 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.

As of December 31, 2021, there have been no events of default with respect to our interest rate swaps, our consolidated JVs' interest rate swaps, or our Fund's interest rate swaps.

We do not post collateral for our interest rate swap contract liabilities.

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$ 77,760 $ 225,166

Unconsolidated Fund's derivative $ 208 $ —

Unconsolidated Fund's derivatives (2)

___________________________________________________

(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 derivatives.

For more information about our Fund, including our equity interest percentage, see Note 6.

Douglas Emmett, Inc.

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Consolidated derivatives (1)(3)

Unconsolidated Fund's derivative (2)(3)

Unconsolidated Fund's derivatives (2)(3)

___________________________________________________

(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.

(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.

(3) We did not have any interest rate swap contract asset balances as of December 31, 2020.

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Consolidated derivatives:

Gain recorded in AOCI - adoption of ASU 2017-12 (1)

$ — $ — $ 211

(Losses) gains recorded in AOCI before reclassifications (1)

Gains (losses) recorded in AOCI before reclassifications (1)

$ 82,876 $ ( 232,652 ) $ ( 76,273 )

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Unconsolidated Funds' derivatives (our share) (2) :

(Losses) gains recorded in AOCI before reclassifications (1)

Gains (losses) recorded in AOCI before reclassifications (1)

$ 569 $ ( 410 ) $ ( 5,023 )

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

For more information about our Funds, including our equity interest percentages, see Note 6.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Future Reclassifications from AOCI

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Losses to be reclassified from AOCI to Interest Expense $ ( 50,746 )

Unconsolidated Fund's derivative (our share) (1) :

Losses to be reclassified from AOCI to Income from unconsolidated Funds $ ( 46 )

Unconsolidated Fund's derivatives (our share) (1) :

Losses to be reclassified from AOCI to Income from unconsolidated Fund $ ( 148 )

______________________________________________

(1) 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.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

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 acquired 65 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 4,051 OP Units for $ 122 thousand in cash.

• 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.

• We acquired 150 OP Units for $ 7 thousand in cash.

• 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.

• We acquired 19 thousand OP Units and fully-vested LTIP Units for $ 734 thousand in cash.

• 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.

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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).

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 30.1 million OP Units and fully-vested LTIP Units, and represented approximately 14.6 % of our Operating Partnership's total outstanding interests as of December 31, 2020 when we owned 175.5 million OP Units (to match our 175.5 million shares of outstanding common stock).

As of December 31, 2021, noncontrolling interests in our Operating Partnership owned 31.1 million OP Units and fully-vested LTIP Units, which represented approximately 15.0 % of our Operating Partnership's total outstanding interests, and we owned 175.5 million OP Units (to match our 175.5 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.

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Beginning balance $ ( 148,035 ) $ ( 17,462 ) $ 53,944

Adoption of ASU 2017-12 - cumulative opening balance adjustment — — 211

Consolidated derivatives:

Other comprehensive (loss) gain before reclassifications ( 232,652 ) ( 76,273 ) 22,723

Reclassification of loss (gain) from AOCI to Interest Expense 49,435 ( 24,298 ) ( 10,103 )

Other comprehensive income (loss) before reclassifications 82,876 ( 232,652 ) ( 76,273 )

Reclassification of loss (income) from AOCI to Interest Expense 75,358 49,435 ( 24,298 )

Unconsolidated Funds' derivatives (our share) (2) :

Other comprehensive (loss) gain before reclassifications ( 410 ) ( 5,023 ) 3,052

Reclassification of loss (gain) from AOCI to Income from unconsolidated Funds 106 ( 1,698 ) ( 813 )

Other comprehensive income (loss) before reclassifications 569 ( 410 ) ( 5,023 )

Reclassification of loss (income) from AOCI to Income from unconsolidated Funds 120 106 ( 1,698 )

Net current period OCI 158,923 ( 183,521 ) ( 107,292 )

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Denominator (In thousands):

Weighted average shares of common stock outstanding - basic 175,380 173,358 169,893

Effect of dilutive securities:

Stock options (1)

Weighted average shares of common stock and common stock equivalents outstanding - diluted 175,380 173,358 169,902

Net income per common share - basic $ 0.28 $ 2.09 $ 0.68

Net income per common share - diluted $ 0.28 $ 2.09 $ 0.68

Weighted average shares of common stock outstanding - basic and diluted (1)

175,478 175,380 173,358

Net income per common share - basic and diluted $ 0.37 $ 0.28 $ 2.09

____________________________________________________

(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 (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.

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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.

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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 LTIP Units to employees during 2020, 2019 and 2018, respectively.

In aggregate, we granted 1.1 million, 1.1 million, and 802 thousand LTIP Units to employees during 2021, 2020 and 2019, 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, and 37 thousand LTIP Units to our non-employee directors during 2020, 2019 and 2018, respectively.

In aggregate, we granted 52 thousand, 55 thousand, and 38 thousand LTIP Units to our non-employee directors during 2021, 2020 and 2019, respectively.

Douglas Emmett, Inc.

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Compensation Expense

At December 31, 2020, the total unrecognized stock-based compensation expense for unvested LTIP Unit awards was $ 19.3 million, which will be recognized over a weighted-average term of two years .

At December 31, 2021, the total unrecognized stock-based compensation expense for unvested LTIP Unit awards was $ 19.5 million, which will be recognized over a weighted-average term of 2 years.

The table below presents our stock-based compensation expense:

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Capitalized stock-based compensation $ 6,183 $ 5,448 $ 4,698

Intrinsic value of options exercised $ — $ — $ 1,196

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, 2017 49 $ 12.66 16 $ 1,375

Exercised ( 49 ) $ 12.66 $ 1,196

Outstanding at December 31, 2018 — $ — 0 $ —

_________________________________________________

(1) There were no options outstanding during the years ended December 31, 2020 and 2019.

The table below presents our unvested LTIP Units activity:

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Fair value - c onsolidated derivatives (1)

Fair value - unconsolidated Fund's derivative (2)

Fair value - unconsolidated Fund's derivatives (2)

Derivative Liabilities:

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$ 69,930 $ 214,016

Fair value - unconsolidated Fund's derivative (2)

Fair value - unconsolidated Fund's derivatives (2)

___________________________________________________________________________________

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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.

(2) The amounts 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 in our consolidated balance sheets.

See Note 6 for more information about our Fund, including our equity interest percentage, and see "Guarantees" in Note 17 regarding our Fund's derivatives.

Douglas Emmett, Inc.

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(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 are not exercised.

The amounts assume that early termination options held by tenants will not be exercised.

Commitments, Contingencies and Guarantees

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We seek to minimize our credit risk from our tenant leases by:

(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.

During the years ended December 31, 2020, 2019 and 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.

(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.

During 2021, 2020 and 2019, no tenant accounted for more than 10% of our total revenues.

See our "Rental Revenues and Tenant Recoveries" accounting 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 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.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Swap Counterparty Credit Risk

3 unchanged sentences

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.

We seek to minimize our credit risk by entering into agreements with a variety of counterparties with investment grade ratings.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Cash Balances

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As of December 31, 2021, 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

Contractual Commitments

Development Projects

In West Los Angeles, we are building a high-rise apartment building with 376 apartments.

1 unchanged sentence

As of December 31, 2021, we had an aggregate remaining contractual commitment for these and other development projects of approximately $ 69.7 million.

Other Contractual Commitments

As of December 31, 2021, we had an aggregate remaining contractual commitment for repositionings, capital expenditure projects and tenant improvements of approximately $ 22.0 million.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

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, 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, 2020.

The amounts represent 100 % (not our pro-rata share) of the amounts related to our Fund:

Loan Maturity Date Principal Balance

(In thousands) Variable Interest Rate Swap Fixed Interest Rate Swap 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 two properties and requires monthly payments of interest only, with the outstanding principal due upon maturity.

As of December 31, 2020, assuming a zero -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 zero -percent LIBOR floor.

The corresponding swap does not include such a floor.

Partnership X Guarantees

Our unconsolidated Fund, Partnership X, has a $ 115.0 million floating-rate term loan that matures on September 14, 2028 .

Starting on October 1, 2021, the loan carried interest at LIBOR + 1.35 % (with a zero-percent LIBOR floor), which has been effectively fixed at 2.19 % until October 1, 2026 with interest rate swaps (which do not have zero-percent LIBOR floors).

The loan is secured by two properties held by Partnership X and is non-recourse.

We have made certain environmental and other limited indemnities and guarantees covering customary non-recourse carve-outs for Partnership X's loan, and we have also guaranteed the related swaps.

Partnership X has agreed to indemnify us for any amounts that we would be required to pay under these agreements.

As of December 31, 2021, assuming that LIBOR does not decrease below zero-percent, the maximum future interest payments for the swap were $ 4.7 million.

As of December 31, 2021, all of the obligations under the related loan and swap agreements have been performed in accordance with the terms of those agreements.

See Note 6 for more information about Partnership X.

Douglas Emmett, Inc.

6 unchanged sentences

Land Building & Improve-ments (2)(3)

Accumulated Depreciation & Amortization Year Built / Renovated Year Acquired

Accumulated Depreciation & Amortization (3) (5)

Year Built / Renovated Year Acquired

Office Properties

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Land Building & Improve-ments (2)(3)

Accumulated Depreciation & Amortization Year Built / Renovated Year Acquired

Accumulated Depreciation & Amortization (3) (5)

Year Built / Renovated Year Acquired

Office Properties (continued)

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Moanalua Hillside Apartments 255,000 24,791 157,353 122,383 35,365 269,162 304,527 62,113 1968/2004/2019 2005

Residences at Bishop Place — — — 35,025 — 35,025 35,025 449 2020 N/A

The Residences at Bishop Place — — — 86,256 — 86,256 86,256 3,031 2020-2021 N/A

Pacific Plaza 78,000 10,091 16,159 75,106 27,816 73,540 101,356 29,471 1963/1998 1999

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Land Building & Improve-ments (2)(3)

Accumulated Depreciation & Amortization Year Built / Renovated Year Acquired

Accumulated Depreciation & Amortization (3) (5)

Year Built / Renovated Year Acquired

Owensmouth/Warner — 23,848 — — 23,848 — 23,848 — N/A 2006

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Property Under Development

1132 Bishop Place Conversion $ — $ — $ — $ 50,704 $ — $ 50,704 $ 50,704 N/A N/A

Landmark II Development — 13,070 — 173,409 13,070 173,409 186,479 N/A N/A

The Residences at Bishop Place $ — $ — $ — $ 48,815 $ — $ 48,815 $ 48,815 N/A N/A

The Landmark Los Angeles — 13,070 — 305,041 13,070 305,041 318,111 N/A N/A

Other Developments 21,604 21,604 21,604 N/A N/A

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_____________________________________________________

(1) These properties are encumbered by our revolving credit facility, which had a $ 75.0 million balance as of December 31, 2020.

(1) These properties are encumbered by our revolving credit facility, which had no balance as of December 31, 2021.

(2) Includes tenant improvements and lease intangibles.

(3) Net of fully depreciated and amortized tenant improvements and lease intangibles removed from our books.

(3) Net of fully depreciated and amortized buildings, building improvements, tenant improvements and lease intangibles removed from our books.

(4) At December 31, 2021, the aggregate federal income tax cost basis for consolidated real estate was $ 8.06 billion (unaudited).

(5) See our depreciation and amortization policy in Note 2 to our consolidated financial statements.

The table below presents a reconciliation of our investment in real estate:

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Properties sold — ( 24,508 ) —

Removal of fully depreciated and amortized tenant improvements and lease intangibles ( 73,045 ) ( 88,205 ) ( 75,729 )

Removal of fully depreciated and amortized buildings, building improvements, tenant improvements and lease intangibles ( 157,325 ) ( 73,045 ) ( 88,205 )

Ending balance $ 11,819,077 $ 11,678,638 $ 11,478,633

4 unchanged sentences

Other accumulated depreciation and amortization 1,512 4,423 ( 1,990 )

Removal of fully depreciated and amortized tenant improvements and lease intangibles 73,045 88,205 75,729

Removal of fully depreciated and amortized buildings, building improvements, tenant improvements and lease intangibles 157,325 73,045 88,205

Ending balance $ ( 3,028,645 ) $ ( 2,816,193 ) $ ( 2,518,415 )

1 unchanged sentence

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 9A. Controls and Procedures