Douglas Emmett Tenants
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Douglas Emmett Exec Compensation Hinges On Raising Tenant Rents

Posted: February 14th, 2018

In April 2017, Douglas Emmett submitted its “Proxy” (14A) filing to the U.S. Securities and Exchange Commission (SEC), announcing its annual shareholders meeting.

For publicly traded companies such as Douglas Emmett (NYSE: DEI), Proxy statements address issues that will be brought up for vote during the shareholders meeting, including the election of company directors. The statement must also disclose “executives’ and directors’ compensation, including salaries, bonuses, equity awards and any deferred compensation.”

Executive Compensation Tied to “Increase Rents”

Regarding executive compensation, Douglas Emmett has an Executive Compensation Committee that purports to base salaries, stock awards, benefits and bonuses on various performance goals achieved during the year.

The first cited “Announced Goal” in Douglas Emmett’s Proxy was to increase tenant rent:

Area Announced Goal Results
Leasing Increase rents in our office portfolio During 2016, we increased net effective office rents throughout our office portfolio, and we maintained high levels of occupancy in our office portfolio despite acquiring several properties with significant vacancy, ending the year at 92.2% leased and 90.4% occupied. Based on external estimates, the leased rate of our office portfolio at December 31, 2016 exceeded the average Class A office leased rate in our submarkets by over 160 basis points, a strong achievement because we represent more than a quarter of those markets. The average straight-line rental rate for new and renewed leases that we signed during 2016 was 27.4% greater than the average straight-line rental rate on the expiring leases for the same space.
Increase rents in our multi-family portfolio During 2016, our multifamily portfolio remained fully leased while we raised asking rents by an average of 5%.

Achieving Company Goals of Increased Rents

  • Douglas Emmett boasted increasing rents in 2016 in its office portfolio for “new and renewed leases” for the same space by 27.4%.
  • At its residential properties, Douglas Emmett raised asking rents by an average of 5%. This was a major jump from the previous year when Douglas Emmett raised residential rents by just 3.5%.

Douglas Emmett Execs Rewarded

Rewarded in part for raising tenant rates, Douglas Emmett’s top executives Jordan Kaplan and Kenneth Panzer each earned $7.9 million in total compensation last year.

Kaplan and Panzer both, according to the Proxy statement, have $30-plus million golden parachutes if they are terminated from employment at Douglas Emmett without cause. They will…

receive severance equal to (a) compensation equal to three times the average of his total compensation over the last three full calendar years ending prior to the termination date (two times for Mr. Crummy), including (i) his salary, (ii) his annual bonus and (iii) the value of any other awards under our plans (the value of LTIP Units will be the face value of the award on the date of grant) (except that in the case of long term grants, where it will be based on the amount that vested in the year - this provision does not apply to Messrs. Kaplan or Panzer, who did not receive any long term grants), and (b) continued coverage under our medical and dental plans for the officer and his eligible dependents for a three-year period (two-year period for Mr. Crummy) following his termination.

For Kaplan and Panzer, that works out to “severance payments” of about $22 million, plus the immediate vesting of stock options that “would result in additional value of $9,783,712.”