Santa Monica-Based Douglas Emmett Closes Fund with Half-Billion Dollars to Invest

July 6, 2010
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user tim (the enchanter)

Leverage notwithstanding, Douglas Emmett Inc. has closed the subscription period to its Fund X with equity commitments totaling approximately $549.3 million. The Santa Monica, Calif.-based REIT has invested $191 million of its own into the institutional fund.

It was in 2008 when Douglas Emmett formed Fund X, which had $300 million of inequity commitments upon its October 2008 initial closing. The REIT kicked off the fund’s portfolio by contributing a group of six premier office properties located in the Los Angeles area. Douglas Emmett had acquired the portfolio, which features 1.4 million square feet of office space, from Arden Realty in March 2008 for a contract price of about $610 million, and funded part of the purchase with a $365 million five-year, non-recourse interest-only loan from a group of lenders led by Eurohypo. Fund X took on that loan upon Douglas Emmett’s contribution of the properties, the majority of which–including the 432,000-square-foot building at 8393 Wilshire Blvd. and the 339,000-square-foot building at 9100 Wilshire–are in the Beverly Hills submarket of Los Angeles.

With part of Fund X’s equity having been used for the acquisition of Douglas Emmett’s six-property office portfolio, the investment vehicle is now left with $267 million of equity commitments to spend on acquisitions. Terms of Fund X call for investment activities to take place for up to four years after the initial 2008 closing, followed by a 10-year value creation period.

Fund X’s hunting grounds will be limited to Douglas Emmett’s core Los Angeles-area submarkets including Beverly Hills, Century City Santa Monica, as well as the valley submarkets of Sherman Oaks/Encino and Woodland Hills. Honolulu is also very much on the radar.