What changed in this filing

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Item 9A. Controls and Procedures

2024-02-16 compared with 2023-02-17 · 251 added, 237 removed, 1216 unchanged (29% of the section changed)

Controls and Procedures

As of December 31, 2022, the end of the period covered by this Report, we carried out an evaluation, under the supervision and with the participation of management, including our CEO and CFO, regarding the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) at the end of the period covered by this Report.

As of December 31, 2023, the end of the period covered by this Report, we carried out an evaluation, under the supervision and with the participation of management, including our CEO and CFO, regarding the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).

Based on the foregoing, our CEO and CFO concluded, as of that time, that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in reports filed or submitted under the Exchange Act (i) is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our CEO and our CFO, as appropriate, to allow for timely decisions regarding required disclosure.

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Other Information

(b) During the three months ended December 31, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each such term is defined in Item 408(a) of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

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Investments in Unconsolidated Fund

Secured Notes Payable & Revolving Credit Facility, Net

Secured Notes Payable, Net

Interest Payable, Accounts Payable and Deferred Revenue

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All other schedules have been omitted because the required information is not present, or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements or notes thereto.

Douglas Emmett, Inc.

(a)(3) exhibits

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2016 Omnibus Stock Incentive Plan LTIP Unit Award Agreement.

10.7 Employment agreement dated January 1, 2019 between Douglas Emmett, Inc., Douglas Emmett Properties, LP and Jordan L.

10.7 Employment agreement dated January 1, 2024 between Douglas Emmett, Inc., Douglas Emmett Properties, LP and Jordan Kaplan.

10.8 Employment agreement dated January 1, 20 24 between Douglas Emmett, Inc., Douglas Emmett Properties, LP and Kenneth Panzer.

10.9 Employment agreement dated January 1, 2019 between Douglas Emmett, Inc., Douglas Emmett Properties, LP and Kevin A.

21.1 List of Subsidiaries of the Registrant.

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32.2 Certificate of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

97.1 Douglas Emmett, Inc.

Policy for Recovery of Erroneously Awarded Compensation.

101.INS Inline XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.*

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(File number 001-33106)

Douglas Emmett, Inc.

Exhibits (continued)

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(File number 333-135082)

(9) Filed with Definitive Proxy Statement on April 17, 2020 and incorporated herein by this reference.

(9) Filed with Definitive Proxy Statement on April 14, 2023 and incorporated herein by this

(File number 001-33106)

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(File number 001-33106)

(11) Filed with Form 10-K on February 18, 2022 and incorporated herein by this reference.

(File number 001-33106)

(12) Filed with Form 8-K on December 24, 2018 and incorporated herein by this reference.

(11) Filed with Form 8-K on January 3, 2024 and incorporated herein by this reference.

(File number 001-33106)

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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:

(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 separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Purchase price accounting

Description of the Matter

During the year ended December 31, 2022, the Company acquired 1221 Ocean Avenue, a multifamily apartment building in Santa Monica, through a new joint venture that the Company manages and owns a controlling 55% interest.

As explained in Note 3 to the consolidated financial statements, the transaction was accounted for as an asset acquisition, and as such, is recorded at the price to acquire the real estate property, including acquisition costs.

The purchase price is allocated to land, buildings and improvements, and identifiable intangible assets such as in-place at-market leases and acquired below-market tenant leases liabilities, based upon the relative fair value of the acquired assets and liabilities.

The fair values of the acquired assets and liabilities were determined by the Company utilizing the sales comparison approach as it relates to land and the income approach which utilized discounted cash flows as it relates the other acquired assets and liabilities.

Both approaches used market information available to the Company as inputs.

Auditing the Company’s accounting for its acquisition was complex due to the significant estimation required by management in determining the fair value assigned to the acquired land, buildings and improvements, and intangible lease assets and liabilities.

The significant estimation was primarily due to the judgmental nature of the inputs to the valuation models used to measure the fair value of the assets and liabilities as well as the sensitivity of the respective fair values to changes in the significant underlying assumptions.

The more significant assumptions utilized included comparable land sales, rental rates, revenue growth rates, discount rates, and capitalization rates.

These significant assumptions are forward-looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over management’s accounting for the property acquisition, including controls over the Company’s review of the assumptions underlying the purchase price allocation, the cash flow projections and the accuracy of the underlying data used.

For example, we tested controls over the review of the valuation models and the underlying assumptions used to develop such estimates.

For the Company’s property acquisition, we read the transaction agreement, and evaluated whether the Company had appropriately determined whether the transaction was accounted for as a business combination or asset acquisition.

We also evaluated the significant assumptions and methods used in developing the fair value estimates of the tangible assets and intangible lease assets and liabilities.

To test the estimated fair value of the land, building and intangible lease assets and liabilities, we performed audit procedures that included, among other procedures, evaluating the Company’s use of the sales comparison and income approaches and testing the significant assumptions used in the discounted cash flow model, and testing the completeness and accuracy of the underlying data supporting the significant assumptions and estimates.

For example, we agreed the contractual rents used in the cash flow projections to in-place tenant leases on a sample basis and evaluated the property operating expenses for reasonableness.

We involved our valuation specialists to assist in evaluating the methodologies utilized by the Company as compared to standard valuation practices, performing procedures to corroborate the reasonableness of the significant assumptions utilized in developing the fair value estimates of the acquired land, building, and intangible lease assets and liabilities.

For example, our valuation specialists (i) used independently identified data sources to evaluate the appropriateness of management’s selected comparable land sales, and (ii) obtained market specific information (i.e., revenue growth rates, discount rates, market rental rates and capitalization rates) and compared it to the market information utilized by the Company.

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) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

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 account or disclosure to which it relates.

Impairment of investment in real estate

Description of the Matter The Company’s net investment in real estate totaled $9.0 billion as of December 31, 2022.

As discussed in Note 2 to the consolidated financial statements, the Company assesses on a periodic basis 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.

Description of the Matter

The Company’s net investment in real estate totaled $8.7 billion as of December 31, 2023.

As discussed in Note 2 to the consolidated financial statements, on a periodic basis and whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable, the Company assesses whether there has been an impairment in the carrying value of its properties.

When indicators of impairment are present for a property, management calculates the future undiscounted cash flows expected to be generated by the property and compares it to the property’s carrying value to determine whether an impairment occurred.

Auditing the Company’s evaluation of whether its real estate assets are recoverable was complex and involved a high degree of subjectivity in evaluating management’s assumptions in estimating the future cash flows as they are based on assumptions about future market and economic conditions.

The estimation required in the undiscounted future cash flow assumptions includes management’s assumptions regarding future occupancy, rental revenues and operating costs.

Based on its assessment, management concluded that no impairments occurred for the year ended December 31, 2023.

The Company’s evaluation of impairment indicators was based on qualitative and quantitative factors including consideration of significant decreases in the market prices of long-lived assets and the impact of current economic trends.

Auditing the Company's impairment assessment for real estate assets was challenging because of the high degree of auditor judgment necessary to evaluate management’s identification of indicators of potential impairment.

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 estimating and evaluating the assumptions used in the future undiscounted cash flow projections for the properties where impairment indicators existed.

For properties with identified indicators of impairment, we performed audit procedures over the Company’s estimation of the properties’ undiscounted future cash flows.

For example, we compared the significant assumptions used to estimate future cash flows to the Company’s historical accounting records or to available market data.

We also tested the mathematical accuracy of management’s forecasted cash flows.

Additionally, for certain assumptions, we performed sensitivity analyses to evaluate the changes in the undiscounted cash flows of the properties that would result from changes in the assumptions.

Our testing of the Company’s impairment assessment included, among other procedures, evaluating significant judgments applied in determining whether indicators of impairment existed for the Company’s real estate assets.

Our procedures included obtaining evidence to corroborate such judgments and consideration of contrary evidence.

For example, we compared significant assumptions to historical operating results and market data, and considered the potential impact of debt maturities and lease expirations on management’s ability to hold the properties over the expected term.

/s/ Ernst & Young LLP

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Total Assets $ 9,644,218 $ 9,747,446

Secured notes payable and revolving credit facility, net $ 5,191,893 $ 5,012,076

Secured notes payable, net $ 5,543,171 $ 5,191,893

Ground lease liability 10,836 10,848

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Additional paid-in capital 3,392,955 3,493,307

Accumulated other comprehensive income (loss) 187,063 ( 38,774 )

Accumulated other comprehensive income 115,917 187,063

Accumulated deficit ( 1,290,682 ) ( 1,119,714 )

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Other expenses ( 1,032 ) ( 714 ) ( 937 )

Income from unconsolidated Fund 1,224 946 430

(Loss) income from unconsolidated Fund ( 34,643 ) 1,224 946

Interest expense ( 209,468 ) ( 150,185 ) ( 147,496 )

Gain on sale of investment in real estate — — 6,393

Net income 96,540 56,131 38,553

Net (loss) income ( 75,840 ) 96,540 56,131

Net loss attributable to noncontrolling interests 33,134 605 9,136

Net income attributable to common stockholders $ 97,145 $ 65,267 $ 50,421

Net income per common share – basic and diluted $ 0.55 $ 0.37 $ 0.28

Net (loss) income attributable to common stockholders $ ( 42,706 ) $ 97,145 $ 65,267

Net (loss) income per common share – basic and diluted $ ( 0.26 ) $ 0.55 $ 0.37

See accompanying notes to the consolidated financial statements.

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2023 2022 2021

Net income $ 96,540 $ 56,131 $ 38,553

Other comprehensive income (loss):

Net (loss) income $ ( 75,840 ) $ 96,540 $ 56,131

Other comprehensive (loss) income:

cash flow hedges ( 100,031 ) 325,548 158,923

Comprehensive income (loss) 422,088 215,054 ( 144,968 )

Comprehensive (income) loss attributable to noncontrolling interests ( 99,106 ) ( 40,526 ) 64,816

Comprehensive income (loss) attributable to common stockholders $ 322,982 $ 174,528 $ ( 80,152 )

Comprehensive (loss) income ( 175,871 ) 422,088 215,054

Comprehensive loss (income) attributable to noncontrolling interests 62,019 ( 99,106 ) ( 40,526 )

Comprehensive (loss) income attributable to common stockholders $ ( 113,852 ) $ 322,982 $ 174,528

See accompanying notes to the consolidated financial statements.

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Exchange of OP Units for common stock 468 281 65

Repurchases of common stock ( 9,072 ) — —

Ending balance 167,206 175,810 175,529

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Exchange of OP Units for common stock 5 3 —

Repurchases of common stock ( 91 ) — —

Ending balance $ 1,672 $ 1,758 $ 1,755

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Exchange of OP Units for common stock 7,736 4,597 1,056

Repurchase of OP Units with cash ( 176 ) ( 57 ) ( 4 )

Repurchases of OP Units with cash 1,054 ( 176 ) ( 57 )

Repurchases of common stock ( 109,142 ) — —

Ending balance $ 3,392,955 $ 3,493,307 $ 3,488,886

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Accumulated Deficit Beginning balance $ ( 1,119,714 ) $ ( 1,035,798 ) $ ( 904,516 )

Net income attributable to common stockholders 97,145 65,267 50,421

Net (loss) income attributable to common stockholders ( 42,706 ) 97,145 65,267

Dividends ( 128,262 ) ( 181,061 ) ( 196,549 )

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Noncontrolling Interests Beginning balance $ 1,713,369 $ 1,570,484 $ 1,558,928

Net loss attributable to noncontrolling interests ( 605 ) ( 9,136 ) ( 11,868 )

Net loss ( 33,134 ) ( 605 ) ( 9,136 )

Cash flow hedge adjustments ( 28,885 ) 99,711 49,662

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Exchange of OP Units for common stock ( 7,741 ) ( 4,600 ) ( 1,056 )

Repurchase of OP Units with cash ( 161 ) ( 65 ) ( 3 )

Repurchases of OP Units with cash ( 3,460 ) ( 161 ) ( 65 )

Stock-based compensation 25,850 26,509 27,070

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Total Equity Beginning balance $ 4,275,783 $ 3,986,553 $ 3,996,019

Net income 96,540 56,131 38,553

Net (loss) income ( 75,840 ) 96,540 56,131

Cash flow hedge adjustments ( 100,031 ) 325,548 158,923

Repurchase of OP Units with cash ( 337 ) ( 122 ) ( 7 )

Repurchases of OP Units with cash ( 2,406 ) ( 337 ) ( 122 )

Repurchases of common stock ( 109,233 ) — —

Contributions 125 81,000 —

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Operating Activities

Net income $ 96,540 $ 56,131 $ 38,553

Adjustments to reconcile net income to net cash provided by operating activities:

Income from unconsolidated Fund ( 1,224 ) ( 946 ) ( 430 )

Gain from insurance recoveries for damage to real estate — — ( 13,105 )

Gain on sale of investment in real estate — — ( 6,393 )

Net (loss) income $ ( 75,840 ) $ 96,540 $ 56,131

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Loss (income) from unconsolidated Fund 34,643 ( 1,224 ) ( 946 )

Depreciation and amortization 459,949 372,798 371,289

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Operating distributions from unconsolidated Fund 1,288 1,224 943

Purchase of interest rate caps ( 1,622 ) — —

Change in working capital components:

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Property acquisition — ( 330,470 ) —

Proceeds from sale of investment in real estate, net — — 20,658

Acquisition of additional interests in unconsolidated Fund — — ( 6,591 )

Acquisition of additional interest in unconsolidated Fund ( 5,214 ) — —

Capital distributions from unconsolidated Fund 80 1,919 1,342

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Dividends paid to common stockholders ( 129,895 ) ( 196,805 ) ( 196,529 )

Repurchase of OP Units ( 337 ) ( 122 ) ( 7 )

Net cash (used in) provided by financing activities ( 3,003 ) 5,246 ( 136,330 )

(Decrease) increase in cash and cash equivalents and restricted cash ( 67,068 ) 163,489 18,713

Repurchases of OP Units ( 2,406 ) ( 337 ) ( 122 )

Repurchases of common stock ( 109,233 ) — —

Net cash provided by (used in) financing activities 60,871 ( 3,003 ) 5,246

Increase (decrease) in cash and cash equivalents and restricted cash 254,245 ( 67,068 ) 163,489

Cash and cash equivalents and restricted cash - beginning balance 268,938 336,006 172,517

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Cash and cash equivalents $ 523,082 $ 268,837 $ 335,905

Restricted cash 101 101 132

Restricted cash (included in Other assets on our consolidated balance sheets) 101 101 101

Cash and cash equivalents and restricted cash $ 523,183 $ 268,938 $ 336,006

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Non-cash Financing Transactions

Gain (loss) recorded in AOCI - consolidated derivatives $ 326,396 $ 82,876 $ ( 232,652 )

Gain (loss) recorded in AOCI - unconsolidated Fund's derivatives (our share) $ 3,780 $ 569 $ ( 410 )

Gain recorded in AOCI - consolidated derivatives $ 45,364 $ 326,396 $ 82,876

Gain recorded in AOCI - unconsolidated Fund's derivatives (our share) $ 585 $ 3,780 $ 569

Dividends declared $ 128,262 $ 181,061 $ 196,549

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We consolidate our Operating Partnership through which we conduct substantially all of our business, and own, directly and through subsidiaries, substantially all of our assets, and are obligated to repay substantially all of our liabilities.

The consolidated debt, excluding our consolidated JVs, was $ 3.41 billion, as of December 31, 2022 and December 31, 2021, respectively.

The consolidated debt, excluding our consolidated JVs, was $ 3.76 billion and $ 3.41 billion, as of December 31, 2023 and December 31, 2022, respectively.

We also consolidate four JVs through our Operating Partnership.

See Note 3 for more information regarding our JV transactions.

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

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See Note 3 for our property acquisition disclosures.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Depreciation and Amortization

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

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

• 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.

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The gain or loss recorded is measured as the difference between the sales price, less costs to sell, and the carrying value of the real estate when we sell it.

See Note 3 for our property disposition disclosures.

We did not sell any properties during 2023, 2022 and 2021.

Cost Capitalization

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During 2023, 2022 and 2021, we capitalized $ 38.0 million, $ 59.7 million and $ 185.4 million of costs related to our developments, respectively, which included $ 1.5 million, $ 9.1 million and $ 8.8 million of capitalized interest, respectively.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

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

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See Note 14 for the fair value disclosures related to the ground lease liability.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Investment in Unconsolidated Fund

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As of December 31, 2023 and 2022, the total investment basis difference included in our investment balance in our unconsolidated Fund was $ 4.1 million and $ 27.8 million, respectively.

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

Our share of the net income or losses from our Fund is included in Income (Loss) from unconsolidated Fund in our consolidated statements of operations.

We periodically assess whether there has been any impairment that is other than temporary in our investment in our unconsolidated Fund.

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 2022, 2021 or 2020.

Based upon such periodic assessments, we recorded an impairment charge of $ 36.2 million during 2023, and no impairment charges occurred during 2022 or 2021.

The impairment charge we recorded during 2023 is included in Income (loss) from unconsolidated Fund on our consolidated statement of operations.

Impairment of Long-Lived Assets

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Rental Revenues and Tenant Recoveries

We account for our rental revenues and tenant recoveries in accordance with Topic 842.

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 our consolidated statements of operations.

We account for our rental revenues, and variable lease payments such as tenant recoveries and parking revenues, in accordance with Topic 842.

We adopted a practical expedient which allows us to account for our rental revenues, tenant recoveries and parking revenues on a combined basis.

Rental revenues and tenant recoveries from tenant leases are included in Rental revenues and tenant recoveries on our consolidated statements of operations.

Parking revenues are included in office Parking and other income on our consolidated statements of operations.

See "Office parking revenues" disclosure further below.

All of our tenant leases are classified as operating leases.

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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.

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 our consolidated statements of operations, are recognized as revenue on a gross basis in the period that the recoverable expenses are incurred.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Estimated tenant recoveries for real estate taxes, common area maintenance and other recoverable operating expenses, which are included in Rental revenues and tenant recoveries on our 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, 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.

Tenant recoveries were $ 61.6 million, $ 58.2 million and $ 56.5 million in 2023, 2022 and 2021, respectively.

Tenant receivables consist primarily of amounts due for contractual lease payments and reimbursements of common area maintenance expenses, property taxes, and other costs recoverable from tenants.

Deferred rent receivables represent the amount by which the cumulative straight-line rental revenue recorded to date exceeds the cumulative cash rents billed to date under the lease agreement.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Lease Terminations

Lease termination fees, which are included in Rental revenues and tenant recoveries in our consolidated statements of operations, are recognized on a straight line basis over the new remaining lease term when the related lease is canceled.

Lease termination fees, which are included in Rental revenues and tenant recoveries on our 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 $ 5.2 million, $ 1.3 million and $ 1.2 million during 2023, 2022 and 2021, respectively.

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 our consolidated statements of operations, is recognized over the related lease term.

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 on our consolidated statements of operations, is recognized over the related lease term.

We recognized revenue for reimbursement of tenant improvements of $ 5.8 million, $ 4.8 million and $ 5.8 million during 2023, 2022 and 2021, respectively.

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For leases where we have concluded that it is not probable that we will collect substantially all the lease payments due under those leases, we limit the lease income to the lesser of the income recognized on a straight-line basis or cash basis.

If our conclusion of collectibility changes, we will record the difference between the lease income that would have been recognized on a straight-line basis and cash basis as a current-period adjustment to rental revenues and tenant recoveries.

We write-off tenant receivables and deferred rent receivables as a charge against rental revenues and tenant recoveries in the period we conclude that substantially all of the lease payments are not probable of collection.

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 $ 0.6 million, $ 3.0 million, and $ 41.0 million in 2022, 2021, and 2020 respectively.

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.

We restored accrual basis accounting for certain office tenants that were previously determined to be uncollectible and accounted for on a cash basis of accounting, which increased our office revenues by $ 3.6 million in 2022.

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.

Charges for uncollectible tenant receivables and deferred rent receivables reduced our office revenues by $ 0.8 million, $ 0.6 million, and $ 3.0 million in 2023, 2022, and 2021 respectively.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Parking and Other Income

Office Parking Revenues

Office parking revenues, which are included in office Parking and other income in our consolidated statements of operations, are within the scope of Topic 606 "Revenue from Contracts with Customers".

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 $ 84.9 million, $ 69.0 million and $ 76.1 million in 2022, 2021 and 2020, respectively.

Office parking revenues were $ 92.2 million, $ 84.9 million and $ 69.0 million in 2023, 2022 and 2021, respectively, and are included in office Parking and other income on our consolidated statements of operations.

Office parking receivables were $ 0.8 million and $ 0.9 million as of December 31, 2023 and 2022, respectively, and are included in Tenant receivables on our consolidated balance sheets.

Ground Lease Revenues

We own two parcels of land from which we receive rent under ground leases.

We account for our ground lease revenues as operating leases in accordance with Topic 842.

Ground lease revenues were $ 7.9 million, $ 2.1 million and $ 0.3 million in 2023, 2022 and 2021, respectively, and are included in office Parking and other income on our consolidated statements of operations.

Insurance Recoveries

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

The amount by which insurance recoveries related to property damage exceed any losses recognized from that damage are recorded as Other income on our consolidated statements of operations when payment has been received or confirmation of the amount of proceeds has been received.

In January 2020, there was a fire in one of our residential property buildings.

We carry comprehensive liability and property insurance covering all of the properties in our portfolio under blanket insurance policies to cover these kinds of losses.

We recorded $ 3.9 million, $ 4.8 million, and $ 3.9 million of business interruption revenues during 2022, 2021 and 2020, respectively, which is included in Multifamily rental - Parking and other income in our 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 our consolidated statements of operations.

We recorded $ 1.3 million, $ 3.9 million, and $ 4.8 million of business interruption revenues during 2023, 2022 and 2021, respectively, which is included in Multifamily rental - Parking and other income on our consolidated statements of operations.

Interest Income

Interest income from our short-term money market fund investments is recognized on an accrual basis.

Interest income is included in other income in our consolidated statements of operations.

Interest income is included in Other income on our consolidated statements of operations.

Leasing Costs

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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.

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.

Loan costs incurred directly with the issuance of secured notes payable 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 consolidated balance sheets.

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Notes to Consolidated Financial Statements (continued)

In circumstances where we modify or exchange our revolving credit facility with the same lender, we account for the loan costs based upon whether the borrowing capacity of the new arrangement is (a) equal to or greater than the borrowing capacity of the old arrangement, or (b) less than the borrowing capacity of the old arrangement (borrowing capacity is defined as the product of the remaining term and the maximum available credit).

If the borrowing capacity of the new arrangement is greater than or equal to the borrowing capacity of the old arrangement, then we (i) continue to defer and amortize the unamortized deferred loan costs from the old arrangement over the term of the new arrangement and (ii) defer all lender and other costs incurred directly in connection with the new arrangement over the term of the new arrangement.

If the borrowing capacity of the new arrangement is less than the borrowing capacity of the old arrangement, then we (i) write off any unamortized deferred loan costs at the time of the transaction related to the old arrangement in proportion to the decrease in the borrowing capacity of the old arrangement and (ii) defer all lender and other costs incurred directly in connection with the new arrangement over the term of the new arrangement.

Deferred loan costs are presented on the consolidated balance sheets as a deduction from the carrying amount of our secured notes payable and revolving credit facility.

Deferred loan costs are presented on the consolidated balance sheets as a deduction from the carrying amount of our secured notes payable.

All loan costs expensed and deferred loan costs amortized are included in interest expense in our consolidated statements of operations.

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When we enter into a floating-rate term loan, we generally enter into an interest rate swap agreement for the equivalent principal amount, for a period covering the majority of the loan term, which effectively converts our floating-rate debt to a fixed-rate basis during that time.

We also enter into interest rate cap agreements from time to time to cap the interest rates on our floating rate loans.

We may enter into derivative contracts that are intended to hedge certain economics risks, even though hedge accounting does not apply or we elect to not apply hedge accounting.

4 unchanged sentences

Amounts recorded in AOCI related to our designated hedges are reclassified to Interest expense as interest payments are made on the hedged floating rate debt.

Amounts reported in AOCI related to our Fund's hedges are reclassified to Income from unconsolidated Fund, as interest payments are made by our Fund on its hedged floating rate debt.

Our derivatives are presented on our consolidated balance sheets at fair value, on a gross basis, excluding accrued interest.

Amounts reported in AOCI related to our Fund's hedges are reclassified to Income (loss) from unconsolidated Fund, as interest payments are made by our Fund on its hedged floating rate debt.

Our derivatives are included in Interest rate contract assets and Interest rate contract liabilities on our consolidated balance sheets at fair value, on a gross basis, excluding accrued interest.

The accrued interest is included in Interest Payable, accounts payable and deferred revenue on our consolidated balance sheets.

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See Note 13 for our stock-based compensation disclosures.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

We calculate basic EPS by dividing the net income attributable to common stockholders for the period by the weighted average number of common shares outstanding during the respective period.

We calculate diluted EPS by dividing the net income attributable to common stockholders for the period by the weighted average number of common shares and dilutive instruments outstanding during the respective period using the treasury stock method.

We calculate basic EPS by dividing the net income (loss) attributable to common stockholders for the period by the weighted average number of common shares outstanding during the respective period.

We calculate diluted EPS by dividing the net income (loss) attributable to common stockholders for the period by the weighted average number of common shares and dilutive instruments outstanding during the respective period using the treasury stock method.

Unvested LTIP Units contain non-forfeitable rights to dividends and we account for them as participating securities and include them in the computation of basic and diluted EPS using the two-class method.

See Note 12 for our EPS disclosures.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Segment Information

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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.

Our TRSs did not have significant tax provisions or deferred income tax items for 2022, 2021 or 2020.

Our TRS did not have significant tax provision or deferred income tax items for 2023, 2022 or 2021.

Our subsidiaries (other than our TRS), including our Operating Partnership, are partnerships, disregarded entities, QRSs or REITs, as applicable, for federal income tax purposes.

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We consider the applicability and impact of all ASUs.

Other than the ASU 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.

Adoption of ASU 2022-06 (Topic 848 - "Reference Rate Reform")

In December 2022, the FASB issued ASU No.

2022-06 to defer the sunset date for ASU No.

2020-04, Topic 848 - "Reference Rate Reform" to December 31, 2024 from December 31, 2022.

ASU 2020-04 included practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

In the first quarter of 2020 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 adopted ASU 2022-06 in December 2022 and it did not impact our financial statements.

Other than the ASU 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.

ASUs Not Yet Adopted

Adoption of ASU 2023-0 7 (Topic 280 - "Segment Reporting")

In November 2023, the FASB issued ASU No.

2023-07, which provides guidance on improvements to reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses.

The ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

The requirements in the ASU should be applied on a retrospective basis.

We expect to adopt the ASU for our fiscal year ending December 31, 2024, and we expect to provide additional segment disclosures in our reporting to meet the requirements of the ASU.

Douglas Emmett, Inc.

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__________________________________________________________________________________

(1) During 2022, Property under development balances transferred to Land and Building and improvements for real estate placed into service were $ 13.1 million and $ 360.4 million, respectively.

(1) During 2023, Property under development balances transferred to Building and improvements for real estate placed into service were $ 51.6 million.

During 2022, Property under development balances transferred to Land and Building and improvements for real estate placed into service were $ 13.1 million and $ 360.4 million, respectively.

2022 Property Acquisition

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Net assets and liabilities acquired $ 330,470

2020 Property Disposition

In December 2020, we closed on the sale of an 80,000 square foot office property in Honolulu for a contract price of $ 21.0 million in cash, resulting in a gain of $ 6.4 million after transaction costs.

The property sold was held by one of our consolidated JVs in which we owned a two-thirds capital interest.

The JV was subsequently dissolved prior to December 31, 2020.

Property to be Removed from Service

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

In connection with the remova l of the property from the rental market, we accelerated and recorded additional depreciation expense of $ 82.1 million during 2023, which is included in Depreciation and amortization on our consolidated statements of operations.

Douglas Emmett, Inc.

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As of December 31, 2023, the ground lease right-of-use asset carrying value was $ 7.4 million, and the ground lease liability was $ 10.8 million.

Ground rent expense, which is included in Office expenses in our consolidated statements of operations, was $ 733 thousand during 2022, 2021 and 2020.

Ground rent expense, which is included in Office expenses on our consolidated statements of operations, was $ 733 thousand during 2023, 2022 and 2021.

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, 2023:

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(In thousands)

2023 $ 10,564

Thereafter ( 1,072 )

4 unchanged sentences

Description of our Fund

As of December 31, 2022 and 2021, 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.

Partnership X pays us fees and reimburses us for certain expenses related to property management and other services we provide, which are included in Other income in our consolidated statements of operations.

As of December 31, 2023, we managed and owned an equity interest of 53.8 % in an unconsolidated Fund, Partnership X, through which we and other investors in the Fund owned two office properties totaling 0.4 million square feet.

During 2021, 2022 and 2023, we owned an interest of approximately 33.5 % in Partnership X.

On December 31, 2023, we purchased an additional 20.2 % equity interest in the Fund.

Partnership X pays us fees and reimburses us for certain expenses related to property management and other services we provide, which are included in Other income on our consolidated statements of operations.

We also receive distributions based on invested capital and on any profits that exceed certain specified cash returns to the investors.

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The tables below present selected financial information for Partnership X.

The amounts presented reflect 100 % (not our pro-rata share) of amounts related to the Fund, and are based upon historical book value:

The amounts presented reflect 100 % (not our pro-rata share) of the amounts related to the Fund, and are based upon historical book value:

(In thousands) December 31, 2023 December 31, 2022

7 unchanged sentences

Net income $ 4,190 $ 3,158 $ 2,333

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

(In thousands) December 31, 2023 December 31, 2022

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Indefinite-lived intangibles 1,988 1,988

Deposit with lender (1)

Furniture, fixtures and equipment, net 7,014 7,144

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Total other assets $ 49,260 $ 33,941

_______________________________________________________________________

(1) In connection with the Barrington Plaza loan, Barrington Plaza Apartments have been removed from the rental market.

See Note 3, "Property to be removed from service".

The lender required a $ 13.3 million cash deposit, which we placed in an interest-bearing collateral account during the third quarter of 2023.

The lender will return the deposit at the earlier of August 2026 or when the loan is paid in full.

See Note 8 for our debt disclosures.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Secured Notes Payable and Revolving Credit Facility, Net

Principal Balance as of December 31, 2022 Principal Balance as of December 31, 2021 Variable Interest Rate Fixed Interest

Secured Notes Payable, Net

Principal Balance as of December 31, 2023 Principal Balance as of December 31, 2022 Variable Interest Rate (2)

Fixed Interest

Swap Maturity Date

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Term loan (4)(5)

3/3/2025 $ 335,000 $ 335,000 LIBOR + 1.30 %

3.84 % 3/1/2023

3/3/2025 $ 335,000 $ 335,000 SOFR + 1.41 %

Fannie Mae loan (4)(5)

4/1/2025 102,400 102,400 LIBOR + 1.25 %

2.76 % 3/1/2023

4/1/2025 102,400 102,400 SOFR + 1.36 %

Term loan (4)

8/15/2026 415,000 415,000 LIBOR + 1.10 %

8/15/2026 415,000 415,000 SOFR + 1.20 %

3.07 % 8/1/2025

Term loan (4)

9/19/2026 400,000 400,000 LIBOR + 1.15 %

9/19/2026 400,000 400,000 SOFR + 1.25 %

2.44 % 9/1/2024

Term loan (4)

9/26/2026 200,000 200,000 LIBOR + 1.20 %

9/26/2026 200,000 200,000 SOFR + 1.30 %

2.36 % 10/1/2024

Term loan (4)

11/1/2026 400,000 400,000 LIBOR + 1.15 %

11/1/2026 400,000 400,000 SOFR + 1.25 %

2.31 % 10/1/2024

Fannie Mae loan (4)(6)

6/1/2027 550,000 550,000 LIBOR + 1.37 %

6/1/2027 550,000 550,000 SOFR + 1.48 %

Term loan (4)

5/18/2028 300,000 300,000 LIBOR + 1.40 %

5/18/2028 300,000 300,000 SOFR + 1.51 %

2.21 % 6/1/2026

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Fannie Mae loan (4)

6/1/2029 255,000 255,000 LIBOR + 0.98 %

6/1/2029 255,000 255,000 SOFR + 1.09 %

3.26 % 6/1/2027

Fannie Mae loan (4)

6/1/2029 125,000 125,000 LIBOR + 0.98 %

6/1/2029 125,000 125,000 SOFR + 1.09 %

3.25 % 6/1/2027

Fannie Mae loan (4)(7)

8/1/2033 350,000 — SOFR + 1.37 %

Term loan (8)

6/1/2038 27,640 28,502 N/A 4.55 % N/A

Revolving credit facility (7)

8/21/2023 — — LIBOR + 1.15 %

Total Wholly-Owned Subsidiary Debt 3,760,040 3,410,902

1 unchanged sentence

Term loan (4)(9)

12/19/2024 400,000 400,000 LIBOR + 1.30 %

3.47 % 1/1/2023

12/19/2024 400,000 400,000 SOFR + 1.40 %

Term loan (4)

5/15/2027 450,000 450,000 LIBOR + 1.35 %

5/15/2027 450,000 450,000 SOFR + 1.45 %

2.26 % 4/1/2025

Term loan (4)

8/19/2028 625,000 625,000 LIBOR + 1.35 %

8/19/2028 625,000 625,000 SOFR + 1.45 %

2.12 % 6/1/2025

3 unchanged sentences

Fannie Mae loan (4)

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

6/1/2029 160,000 160,000 SOFR + 1.09 %

3.25 % 7/1/2027

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_____________________________________________________

Except as noted below, our loans and revolving credit facility:

Except as noted below, our loans:

(i) are non-recourse, (ii) are secured by separate collateral pools consisting of one or more properties, (iii) require interest-only monthly payments with the outstanding principal due upon maturity, and (iv) contain certain financial covenants which could require us to deposit excess cash flow with the lender under certain circumstances unless we (at our option) either provide a guarantee or additional collateral or pay down the loan within certain parameters set forth in the loan documents.

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(1) Maturity dates include extension options.

(2) LIBOR loans converted to SOFR during 2023 include a small SOFR adjustment to calculate the interest payable to the lender, which are included in the spreads.

The SOFR conversion did not change the swap-fixed interest rates for our swap-fixed loans.

(3) Effective rate as of December 31, 2023.

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

Includes the effect of interest rate swaps (if applicable) and excludes the effect of prepaid loan fees and loan premiums.

See Note 10 for details of our interest rate swaps.

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

(3) The loan agreement includes a zero -percent LIBOR or SOFR floor.

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

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

If the loan is swap-fixed then the related swaps do not include such a floor.

(4) The swaps expired on June 1, 2022.

(5) The effective rate decreased from 3.42 % to 2.66 % on January 1, 2022 when a new swap replaced old swaps that expired.

(5) The swaps expired on March 1, 2023.

(6) The loan is secured by four residential properties.

A portion of the loan totaling $ 472.0 million has a lender-required out-of-the-money interest rate cap at a weighted average of 8.99 % until July 2026 .

Barrington Plaza Apartments have been removed from the rental market.

S ee Note 3, "Property to be removed from service." For the portion of the loan relating to Barrington Plaza, t he lender is treating the debt as a construction loan.

They required a $ 13.3 million cash deposit, which we placed in an interest-bearing collateral account during the third quarter of 2023, and we signed a construction completion guarantee in January 2024.

The lender will return the deposit at the earlier of August 2026 or when the loan is paid in full.

The deposit is included in Other assets in our balance sheet.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

(7) We closed the loan during the third quarter of 2023.

The loan has a lender-required out-of-the-money interest rate cap at an interest rate of 7.84 % until August 2026.

We used part of the proceeds from the loan to pay off the balance on our revolving credit facility, which expired in August 2023.

There was no balance outstanding on the credit facility as of December 31, 2022.

(8) The loan requires monthly payments of principal and interest.

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

(7) $ 400.0 million revolving credit facility.

Unused commitment fees range from 0.10 % to 0.15 %.

The facility has a zero -percent LIBOR floor.

(8) The effective rate decreased from 3.04 % to 2.26 % on July 1, 2022 when existing swaps were upsized to replace swaps that expired.

(9) We closed this loan during the second quarter of 2022 in connection with the acquisition of a residential property, see Note 3.

The principal amortization is based upon a 30 -year amortization schedule.

(9) The swaps expired on January 1, 2023.

(10) During the fourth quarter of 2023, we entered into a guarantee for this loan which guarantees the portion of the loan principal that would need to be paid down in order to meet the minimum debt yield in the loan agreement.

(11) The table does not include our unconsolidated Fund's loan - see Note 17.

See Note 14 for our debt fair value disclosures.

See Note 14 for our fair value disclosures.

(12) Balances are net of accumulated amortization of $ 4.1 million and $ 3.7 million at December 31, 2023 and December 31, 2022, respectively.

(13) Balances are net of accumulated amortization of $ 56.0 million and $ 54.1 million at December 31, 2023 and December 31, 2022, respectively.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Debt Statistics

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Aggregate fixed rate loans 27,640 28,502

Aggregate capped rate loans 822,000 —

Aggregate floating rate loans 915,400 550,000

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Future Principal Payments

At December 31, 2022, the minimum future principal payments due on our consolidated secured notes payable and revolving credit facility were as follows:

At December 31, 2023, the minimum future principal payments due on our consolidated secured notes payable were as follows:

Year ending December 31:

3 unchanged sentences

2026 1,415,987

2027 1,001,033

Thereafter 1,387,694

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Loan Premium and Loan Costs

The table below presents loan premium and loan costs, which are included in Interest expense in our consolidated statements of operations:

The table below presents loan premium and loan costs, which are included in Interest expense on our consolidated statements of operations:

Year Ended December 31,

18 unchanged sentences

24 $ 3,805,000

Consolidated derivatives - caps (2)(3)(4)

Unconsolidated Fund's derivatives - swaps (2)(3)(5)

2 unchanged sentences

___________________________________________________

(1) The notional amount includes 100 %, not our pro-rata share, of our consolidated JVs' derivatives.

(2) 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 .

See Note 8 for more information about our hedged consolidated debt.

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

(4) Includes four interest rate caps purchased with a notional amount of $ 550.0 million and one interest rate cap sold with a notional amount of $ 550.0 million.

(3) See Note 14 for our derivative fair value disclosures.

(4) We purchased five interest rate caps with a notional amount of $ 822.0 million during the third quarter of 2023.

See Note 8 for more information about our hedged consolidated debt.

(5) The notional amount reflects 100 %, not our pro-rata share, of our unconsolidated Fund's derivatives.

See Note 6 for more information about our Fund, including our equity interest percentage.

(6) Five interest rate caps with a total aggregate notional amount of $ 1.10 billion expired on July 1, 2023.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Credit-risk-related Contingent Features

Certain of our swaps include credit-risk related contingent features.

For example, we have agreements with certain of our interest rate swap counterparties that contain a provision under which we could be declared in default on our derivative obligations if repayment of the underlying indebtedness that we are hedging is accelerated by the lender due to our default on the indebtedness.

As of December 31, 2022, 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.

The fair value of our interest rate swap contract liabilities, including accrued interest and excluding credit risk adjustments, was as follows:

(In thousands) December 31, 2022 December 31, 2021

Consolidated derivatives (1)(2)

Unconsolidated Fund's derivatives (3)

___________________________________________________

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

(2) We did not have any consolidated swaps in a liability position as of December 31, 2022.

(3) Our unconsolidated Fund did not have any swaps in a liability position for the periods presented.

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

Counterparty Credit Risk

11 unchanged sentences

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

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Impact of Hedges on AOCI and the Consolidated Statements of Operations

4 unchanged sentences

Consolidated derivatives:

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

Gains recorded in AOCI before reclassifications (1)

$ 45,364 $ 326,396 $ 82,876

1 unchanged sentence

$ ( 144,318 ) $ ( 4,287 ) $ 75,358

Interest Expense presented in the consolidated statements of operations $ ( 150,185 ) $ ( 147,496 ) $ ( 142,872 )

Interest expense presented on the consolidated statements of operations $ ( 209,468 ) $ ( 150,185 ) $ ( 147,496 )

Unconsolidated Fund's derivatives (our share) (2) :

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

Gains recorded in AOCI before reclassifications (1)

$ 585 $ 3,780 $ 569

(Gains) losses reclassified from AOCI to Income from unconsolidated Fund (1)

(Gains) losses reclassified from AOCI to Income (loss) from unconsolidated Fund (1)

$ ( 1,662 ) $ ( 341 ) $ 120

Income from unconsolidated Fund presented in the consolidated statements of operations $ 1,224 $ 946 $ 430

(Loss) income from unconsolidated Fund presented on the consolidated statements of operations $ ( 34,643 ) $ 1,224 $ 946

Derivatives Not Designated as Cash Flow Hedges:

5 unchanged sentences

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

(3) Gains and losses from non-designated interest rate caps offset each other during the periods presented.

The respective caps expired on July 1, 2023.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Future Reclassifications from AOCI

At December 31, 2022, our estimate of the AOCI related to derivatives designated as cash flow hedges that will be reclassified to earnings during the next year as interest rate swap payments are made, is as follows:

At December 31, 2023, our estimate of the AOCI related to derivatives designated as cash flow hedges that will be reclassified to earnings during the next year is as follows:

(In thousands)

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

Gains to be reclassified from AOCI to Income from unconsolidated Fund $ 1,535

Gains to be reclassified from AOCI to Income (loss) from unconsolidated Fund $ 1,505

______________________________________________

1 unchanged sentence

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

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

• We repurchased 9.1 million shares of our common stock for $ 109.1 million in cash, excluding transaction costs, in open market transactions.

The average purchase price was $ 12.03 per share.

• We acquired 468 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 209 thousand OP Units for $ 2.4 million in cash.

• We acquired 281 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 10 thousand OP Units for $ 337 thousand in cash.

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• We acquired 4 thousand 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.

Noncontrolling Interests

Our noncontrolling interests consist of interests in our Operating Partnership and consolidated JVs which are not owned by us.

As of December 31, 2022, noncontrolling interests in our Operating Partnership owned 32.5 million OP Units and fully-vested LTIP Units, which represented approximately 15.6 % of our Operating Partnership's total outstanding interests, and we owned 175.8 million OP Units (to match our 175.8 million shares of outstanding common stock).

As of December 31, 2023, noncontrolling interests in our Operating Partnership owned 33.8 million OP Units and fully-vested LTIP Units, which represented approximately 16.8 % of our Operating Partnership's total outstanding interests, and we owned 167.2 million OP Units (to match our 167.2 million shares of outstanding common stock), which represented approximately 83.2 % of our Operating Partnership's total outstanding interests.

A share of our common stock, an OP Unit and an LTIP Unit (once vested and booked up) have essentially the same economic characteristics, sharing equally in the distributions from our Operating Partnership.

5 unchanged sentences

Changes in our Ownership Interest in our Operating Partnership

The table below presents the effect on our equity from net income attributable to common stockholders and changes in our ownership interest in our Operating Partnership:

The table below presents the effect on our equity from net (loss) income attributable to common stockholders and changes in our ownership interest in our Operating Partnership:

Year Ended December 31,

(In thousands) 2023 2022 2021

Net income attributable to common stockholders $ 97,145 $ 65,267 $ 50,421

Net (loss) income attributable to common stockholders $ ( 42,706 ) $ 97,145 $ 65,267

Transfers from noncontrolling interests:

Exchange of OP Units with noncontrolling interests 7,741 4,600 1,056

Repurchase of OP Units from noncontrolling interests ( 176 ) ( 57 ) ( 4 )

Repurchases of OP Units from noncontrolling interests 1,054 ( 176 ) ( 57 )

Net transfers from noncontrolling interests 8,795 4,424 999

Change from net income attributable to common stockholders and transfers from noncontrolling interests $ 101,569 $ 66,266 $ 51,952

Change from net (loss) income attributable to common stockholders and transfers from noncontrolling interests $ ( 33,911 ) $ 101,569 $ 66,266

AOCI Reconciliation (1)

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(In thousands) 2023 2022 2021

Accumulated Other Comprehensive Loss - Beginning balance $ ( 38,774 ) $ ( 148,035 ) $ ( 17,462 )

Accumulated Other Comprehensive Income (Loss) - Beginning balance $ 187,063 $ ( 38,774 ) $ ( 148,035 )

Consolidated derivatives:

Other comprehensive income (loss) before reclassifications 326,396 82,876 ( 232,652 )

Other comprehensive income before reclassifications 45,364 326,396 82,876

Reclassification of (gains) losses from AOCI to Interest Expense ( 144,318 ) ( 4,287 ) 75,358

Unconsolidated Fund's derivatives (our share) (2) :

Other comprehensive income (loss) before reclassifications 3,780 569 ( 410 )

Reclassification of (gains) losses from AOCI to Income from unconsolidated Fund ( 341 ) 120 106

Other comprehensive income before reclassifications 585 3,780 569

Reclassification of (gains) losses from AOCI to Income (loss) from unconsolidated Fund ( 1,662 ) ( 341 ) 120

Net current period OCI ( 100,031 ) 325,548 158,923

20 unchanged sentences

Numerator (In thousands):

Net income attributable to common stockholders $ 97,145 $ 65,267 $ 50,421

Net (loss) income attributable to common stockholders $ ( 42,706 ) $ 97,145 $ 65,267

Allocation to participating securities:

Unvested LTIP Units ( 1,191 ) ( 912 ) ( 876 )

Net income attributable to common stockholders - basic and diluted $ 96,233 $ 64,391 $ 49,591

Net (loss) income attributable to common stockholders - basic and diluted $ ( 43,897 ) $ 96,233 $ 64,391

Denominator (In thousands):

1 unchanged sentence

169,597 175,756 175,478

Net income per common share - basic and diluted $ 0.55 $ 0.37 $ 0.28

Net (loss) income per common share - basic and diluted $ ( 0.26 ) $ 0.55 $ 0.37

____________________________________________________

(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.

(1) Outstanding OP Units and vested LTIP Units are not included in the denominator in calculating diluted EPS, even though they may be exchanged under certain conditions for common stock on a one -for-one basis, because their associated net income or loss (equal on a per unit basis to the Net income or loss per common share - diluted) was already deducted in calculating Net income (loss) attributable to common stockholders.

Accordingly, any exchange would not have any effect on diluted EPS.

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Short term financial instruments

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

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

Secured notes payable

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The calculation incorporates observable market interest rates which we consider to be Level 2 inputs, assumes that the loans will be outstanding through maturity, and includes any maturity extension options.

The table below presents the estimated fair value and carrying value of our secured notes payable (excluding our revolving credit facility), the carrying value includes unamortized loan premium and excludes unamortized deferred loan fees:

The table below presents the estimated fair value and carrying value of our secured notes payable, the carrying value includes unamortized loan premium and excludes unamortized deferred loan fees:

(In thousands) December 31, 2023 December 31, 2022

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Notes to Consolidated Financial Statements (continued)

Financial instruments measured at fair value

Financial instruments measured at fair value on a recurring basis

Derivative instruments

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Fair value - c onsolidated derivatives (1)

$ 1,790 $ 69,930

Fair value - unconsolidated Fund's derivatives (2)

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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.

Items measured at fair value on a non-recurring basis

Equity method investment

As of December 31, 2023 and 2022, we managed and owned an equity interest in one unconsolidated Fund.

We account for our investment in our unconsolidated Fund using the equity method.

Our investment in our unconsolidated Fund is presented on the consolidated balance sheet at carrying value.

On December 31, 2023, we recorded an impairment charge of $ 36.2 million, which reduced the carrying value of our investment in our unconsolidated Fund to it's fair value of $ 10.8 million.

No impairment charges occurred during 2022 or 2021.

The estimated fair value of our investment in the unconsolidated Fund, used to calculate the impairment charge, was calculated using level 3 inputs for the Fund's investment in real estate.

The fair value of the Fund's investment in real estate was based upon the negotiated purchase price for our purchase of an additional 20.2 % equity interest in the Fund on December 31, 2023.

As of December 31, 2023, the carrying value presented on our consolidated balance sheet of $ 16.0 million includes the acquisition of our additional interest.

Douglas Emmett, Inc.

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Total profit from all segments $ 658,855 $ 659,831 $ 614,996

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

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

(In thousands) Year Ended December 31,

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Other expenses ( 1,032 ) ( 714 ) ( 937 )

Income from unconsolidated Fund 1,224 946 430

(Loss) Income from unconsolidated Fund ( 34,643 ) 1,224 946

Interest expense ( 209,468 ) ( 150,185 ) ( 147,496 )

Gain on sale of investment in real estate — — 6,393

Net income 96,540 56,131 38,553

Net (loss) income ( 75,840 ) 96,540 56,131

Net loss attributable to noncontrolling interests 33,134 605 9,136

Net income attributable to common stockholders $ 97,145 $ 65,267 $ 50,421

Net (loss) income attributable to common stockholders $ ( 42,706 ) $ 97,145 $ 65,267

Douglas Emmett, Inc.

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From time to time, we are party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business.

We are currently in litigation with the insurance providers in 2020 for Barrington Plaza to recover certain costs associated with reconstruction.

Excluding ordinary, routine litigation incidental to our business, we are not currently a party to any legal proceedings that we believe would reasonably be expected to have a materially adverse effect on our business, financial condition or results of operations.

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

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Derivative Counterparty Credit Risk

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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, 2023, we had an aggregate remaining contractual commitment for repositionings, capital expenditure projects and tenant improvements of approximately $ 12.7 million.

Loan Guarantees

We signed a guarantee for the $ 175.0 million consolidated JV loan which guarantees the portion of the loan principal that would need to be paid down to meet the minimum debt yield in the loan agreement.

The loan matures in April 2029.

The guarantee will remain in effect until either the guarantee obligation or the loan is paid in full.

As of December 31, 2023, we estimate the risk of loss for this guarantee to be low.

See Note 8 for more information regarding our debt.

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

See Note 3, "Property to be removed from service." The reconstruction of this property is expected to take a number of years at a cost of several hundred million dollars.

The lender is treating the $ 210.0 million Barrington Plaza loan, which matures in June 2027, as a construction loan, and we signed a construction completion guarantee in January 2024.

The guarantee will remain in effect until either the construction is completed or the loan is paid in full.

See Note 8 for more information regarding our debt.

Douglas Emmett, Inc.

Notes to Consolidated Financial Statements (continued)

Unconsolidated Fund 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 carries 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 carries interest at SOFR + 1.46 % (with a zero -percent SOFR floor), which has been effectively fixed at 2.19 % until October 1, 2026 with interest rate swaps (which do not have zero -percent SOFR floors).

The loan and related swaps were converted to SOFR from LIBOR during the third quarter of 2023, resulting in a small SOFR adjustment to calculate the interest payable to the lender (which is included in the loan spread above).

The conversion to SOFR did not change the swap-fixed interest rate.

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

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

As of December 31, 2022, assuming that LIBOR does not decrease below zero-percent, the maximum future interest payments for the swaps were $ 3.7 million.

As of December 31, 2023, assuming that SOFR does not decrease below zero -percent, the maximum future interest payments for the swaps were $ 2.7 million.

As of December 31, 2023, all of the obligations under the related loan and swap agreements have been performed in accordance with the terms of those agreements.

As of December 31, 2023, we estimate the risk of loss for the various indemnities and guarantees to be low.

See Note 6 for more information regarding Partnership X.

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Property Name Encumb-rances Land Building & Improve-ments (1)

Improve-ments (1)(2)

Land Building & Improve-ments (1)(2)

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The Trillium (5)

— 20,688 143,263 85,673 21,989 227,635 249,624 101,297 1988/2021 2005

Valley Executive Tower 104,000 8,446 67,672 110,841 11,737 175,222 186,959 77,859 1984 1998

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Barrington Plaza (6)

210,000 28,568 81,485 146,318 58,208 198,163 256,371 172,603 1963/1998 1998

Barrington/Kiowa 13,940 5,720 10,052 1,374 5,720 11,426 17,146 5,242 1974 2006

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Property Name Encumb-rances Land Building & Improve-ments (1)

Improve-ments (1)(2)

Land Building & Improve-ments (1)(2)

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Year Built / Renovated Year Acquired

Owensmouth/Warner(6) — 23,848 — — 23,848 — 23,848 — N/A 2006

Owensmouth/Warner (5)

— 23,848 — 1,725 23,848 1,725 25,573 35 N/A 2006

Total Operating Properties $ 5,570,040 $ 898,700 $ 6,922,385 $ 4,528,290 $ 1,185,977 $ 11,163,398 $ 12,349,375 $ 3,652,630

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_____________________________________________________

(1) These properties are encumbered by our revolving credit facility, which had no balance as of December 31, 2022.

(1) Includes tenant improvements and lease intangibles.

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(5) The property includes a parcel of land from which we receive rent under a ground lease.

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

See Note 3, "Property to be removed from service", for more detail.

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

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Improvements and developments 214,955 223,315 297,764

Properties sold — — ( 24,508 )

Removal of fully depreciated and amortized buildings, building improvements, tenant improvements and lease intangibles ( 102,114 ) ( 100,050 ) ( 157,325 )

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Depreciation and amortization ( 459,949 ) ( 372,798 ) ( 371,289 )

Properties sold — — 10,002

Other accumulated depreciation and amortization 4,570 2,028 1,512

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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 9A. Controls and Procedures