Douglas Emmett Inc
For the period ended Dec 31, 2024. Filed Feb 14, 2025.
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FY2024 · Filed Feb 14, 2025
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Derivative Contracts
- Derivative Contracts
Derivative Summary
The table below summarizes our derivative contracts as of December 31, 2024:
| Number of Interest Rate Swaps | Notional(In thousands) | |
|---|---|---|
| Derivatives Designated as Cash Flow Hedges: | ||
| Consolidated derivatives - swaps(1)(2)(3) | 22 | $3,130,000 |
| Consolidated derivatives - caps(2)(3) | 5 | $822,000 |
| Unconsolidated Fund's derivatives - swaps(2)(3)(4) | 2 | $115,000 |
(1)The notional amount reflects 100%, not our pro-rata share, of our consolidated JVs' derivatives. See Note 8 for more information about our hedged consolidated debt.
(2)Our derivative contracts do not provide for right of offset between derivative contracts.
(3)See Note 14 for our derivative fair value disclosures.
(4)The notional amount reflects 100%, not our pro-rata share, of our unconsolidated Fund's derivatives. See Note 6 for more information about our Fund, including our equity interest percentage. See "Guarantees" in Note 17 for more information about our Fund's hedged debt.
Counterparty Credit Risk
We are subject to credit risk from the counterparties on our interest rate swap and cap contract assets because we do not receive collateral. We seek to minimize that risk by entering into agreements with a variety of counterparties with investment grade ratings. The fair value of our interest rate swap and cap contract assets, including accrued interest and excluding credit risk adjustments, was as follows:
| (In thousands) | December 31, 2024 | December 31, 2023 |
|---|---|---|
| Consolidated derivatives(1) | $85,420 | $184,700 |
| Unconsolidated Fund's derivatives(2) | $6,839 | $9,643 |
(1)The amounts reflect 100%, not our pro-rata share, of our consolidated JVs' derivatives.
(2)The amounts reflect 100%, not our pro-rata share, of our unconsolidated Fund's derivatives. For more information about our Fund, including our equity interest percentage, see Note 6.
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Impact of Hedges on AOCI and the Consolidated Statements of Operations
The table below presents the effect of our derivatives on our AOCI and the consolidated statements of operations:
| (In thousands) | Year Ended December 31, | ||
|---|---|---|---|
| 2024 | 2023 | 2022 | |
| Derivatives Designated as Cash Flow Hedges: | |||
| Consolidated derivatives: | |||
| Gains recorded in AOCI before reclassifications(1) | $47,896 | $45,364 | $326,396 |
| Gains reclassified from AOCI to Interest expense(1) | $(140,615) | $(144,318) | $(4,287) |
| Interest expense presented on the consolidated statements of operations | $(229,442) | $(209,468) | $(150,185) |
| Unconsolidated Fund's derivatives (our share)(2): | |||
| Gains recorded in AOCI before reclassifications(1) | $5,417 | $585 | $3,780 |
| Gains reclassified from AOCI to Income (loss) from unconsolidated Fund(1) | $(3,663) | $(1,662) | $(341) |
| Income (loss) from unconsolidated Fund presented on the consolidated statements of operations | $2,593 | $(34,643) | $1,224 |
| Derivatives Not Designated as Cash Flow Hedges: | |||
| Consolidated derivatives: | |||
| Loss recorded as interest expense(3) | $— | $— | $38 |
(1)See Note 11 for our AOCI reconciliation.
(2)We calculate our share by multiplying the total amount for the Fund by our equity interest in the Fund. For more information about our Fund, including our equity interest percentage, see Note 6.
(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.
Future Reclassifications from AOCI
At December 31, 2024, 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) | |
|---|---|
| Consolidated derivatives: | |
| Gains to be reclassified from AOCI to Interest Expense | $51,246 |
| Unconsolidated Fund's derivatives (our share)(1): | |
| Gains to be reclassified from AOCI to Income (loss) from unconsolidated Fund | $2,845 |
(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.
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The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.