In order to reduce its existing high level of debt, California-based real estate investment trust (REIT), Douglas Emmett, Inc. (DEI - Snapshot Report) , obtained a non-recourse secured term loan worth $285.0 million. The term loan, which is scheduled to mature on June 5, 2019, bears a fixed annual interest rate of 3.85%.
Of the total loan amount, the company intends to utilize $100 million to pay off an outstanding loan, maturing on April 1, 2015. Douglas Emmett intends to use the remainder of the proceeds for general corporate purposes.
The strategic move is aimed at lowering financing costs and improving the liquidity of the company. Douglas Emmett further expects to strengthen its balance sheet and create long-term value for its shareholders. As of March 31, 2012, the company had cash and cash equivalents of $155.5 million. The company also paid a quarterly dividend of 15 cents per share in the first quarter of 2012, which increased 15.4% from the year-ago quarter.
With a geographically diverse portfolio concentrated mostly in high-income, high-growth areas, Douglas Emmett is one of the largest owners and operators of high-quality office and multi-family properties in premier coastal submarkets of Southern California and Hawaii. The company generally signs long-term leases with high credit tenants, which limits the downside risk and provides a steady source of income. Some of the renowned tenants of Douglas Emmett include Time Warner Inc. (TWX - Analyst Report) , The Macerich Partnership L.P., an operating arm of The Macerich Company (MAC - Analyst Report) and Bank of America Corp. (BAC - Analyst Report) .
The company has properties in ten vibrant submarkets – Olympic Corridor, Santa Monica, Sherman Oaks/Encino, Warner Center/Woodland Hills, Beverly Hills, Brentwood, Burbank, Century City, Honolulu and Westwood. Presently, the company has over 55 properties spanning approximately 14.7 million square feet.
Douglas Emmett is scheduled to release its second quarter 2012 earnings on July 31, 2012. The Zacks Consensus Estimate for second quarter 2012 FFO (fund from operations) is pegged at 35 cents per share. Funds from operations, a widely accepted and reported measure of REIT’s performance, is derived by adding depreciation, amortization and other non-cash expenses to net income. We presently have a long-term 'Neutral' recommendation and a Zacks #3 Rank (a short-term Hold rating) on the stock.