Emmett Fund Targets Up to $1B in Equity

SANTA MONICA, CA-Douglas Emmett Inc. has contributed six class A office properties totaling 1.4 million sf to a new investment entity called Douglas Emmett Fund X LLC that upon final closing is expected to range from $500 million to $1 billion in equity commitments including a $150 million commitment from the Santa Monica, CA-based REIT. The six buildings that Emmett has contributed to the fund are in West Los Angeles and the San Fernando Valley. Emmett bought the properties from West Los Angeles-based Arden Realty Inc. on March 26 this year for $610 million and said at the time that it planned to invest significantly in capital improvements in a number of the buildings.

Emmett’s new fund, which it formed on Oct. 7, is slated for a four-year investment period. Company officials have discussed the formation of the fund in a number of the REIT’s earnings conference calls, during which the REIT’s president and CEO, Jordan Kaplan, has said that the new fund will become the primary acquisition vehicle for Emmett. In its prepared statement announcing the contribution of the six office buildings to the fund, Emmett said that the new undertaking “will be the company’s exclusive investment vehicle, with limited exceptions.” After the investment period of up to four years, it foresees “a value creation period of up to 10 years.”

The new fund was formed with initial equity commitments of $300 million. Its investment strategy will be to look for acquisitions in Emmett’s core submarkets “using the same disciplined underwriting and leverage principles that have governed acquisitions at Douglas Emmett for more than 20 years,” the REIT said in its prepared statement.