Form 8-K Hudson Pacific Propertie For: Nov 05
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________
FORM 8-K
_________________________________
CURRENT REPORT
Pursuant to Section 13 OR 15 (d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 5, 2015
_________________________________
Hudson Pacific Properties, Inc.
(Exact name of registrant as specified in its charter)
Maryland | 001-34789 | 27-1430478 | ||
(State or other | (Commission File Number) | (IRS Employer | ||
jurisdiction of | Identification No.) | |||
incorporation) |
11601 Wilshire Blvd., Sixth Floor Los Angeles, California | 90025 | ||
(Address of Principal Executive Offices) | (Zip Code) |
(310) 445-5700
Registrant's Telephone Number, Including Area Code
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
_________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Section 2 — Financial Information
Item 2.02 | Results of Operations and Financial Condition. |
On November 5, 2015, Hudson Pacific Properties, Inc. (also referred to herein as the “Company,” “we,” “us,” or “our”) issued a press release regarding our financial results for our quarter ended September 30, 2015. A copy of the press release is furnished herewith as Exhibit 99.1, which is incorporated herein by reference.
Also on November 5, 2015, we made available on our Web site (www.hudsonpacificproperties.com) certain supplemental information concerning our financial results and operations for the third quarter. A copy of the supplemental information is furnished herewith as Exhibit 99.2, which is incorporated herein by reference.
Exhibits 99.1 and 99.2 are being furnished pursuant to Item 2.02 and shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. The information in this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act regardless of any general incorporation language in such filing.
Section 7 — Regulation FD
Item 7.01 | Regulation FD Disclosure. |
As discussed in Item 2.02 above, we issued a press release regarding our financial results for our quarter ended September 30, 2015 and made available on our Web site certain supplemental information relating to our financial results for the quarter ended September 30, 2015.
The information being furnished pursuant to Item 7.01 shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section. The information in this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act regardless of any general incorporation language in such filing.
Section 9 — Financial Statements and Exhibits
Item 9.01 | Financial Statements and Exhibits. |
(d) | Exhibits. |
Exhibit No. | Description | |
99.1** | Press release dated November 5, 2015 regarding the Company’s financial results for the quarter ended September 30, 2015. | |
99.2** | Supplemental Operating and Financial Data for the quarter ended September 30, 2015. |
** | Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
HUDSON PACIFIC PROPERTIES, INC. | |||||
Date: | November 5, 2015 | By: | /s/ Mark T. Lammas | ||
Mark T. Lammas | |||||
Chief Financial Officer |
EXHBIT INDEX
Exhibit No. | Description | |
99.1** | Press release dated November 5, 2015 regarding the Company’s financial results for the quarter ended September 30, 2015. | |
99.2** | Supplemental Operating and Financial Data for the quarter ended September 30, 2015. |
** | Furnished herewith. |
Hudson Pacific Properties Reports Strong Third Quarter 2015 Financial Results
Nearly 680,000 Square Feet Of Leases Executed; Cash Rent Spreads Exceed 40.0%
Los Angeles, CA, November 5, 2015—Hudson Pacific Properties, Inc. (the “Company,” or “Hudson Pacific”) (NYSE: HPP) today announced financial results for the third quarter ended September 30, 2015.
Third Quarter Highlights
• | FFO (excluding specified items) of $63.0 million, or $0.43 per diluted share, compared to $20.8 million, or $0.30 per share, a year ago; |
• | Completed new and renewal leases totaling 679,443 square feet, including a new 200,052-square-foot lease at the Company’s under-construction ICON office tower in Hollywood, California; |
• | Improved in-service office portfolio leased rate to 89.5% as of September 30, 2015, up from 88.8% as of June 30, 2015; |
• | Acquired 405 Mateo, a three-building, 83,285-square-foot redevelopment project in Downtown Los Angeles’ Arts District for $40.0 million (before credits, prorations and closing costs); |
• | Sold the 260,183-square-foot Bay Park Plaza office property in Burlingame, California for $90.0 million (before credits, prorations, and closing costs); |
• | Declared and paid quarterly dividend of $0.125 per share on common stock; and |
• | Declared and paid dividend of $0.52344 per share on 8.375% Series B Cumulative Preferred Stock. |
“We had a strong third quarter, which included significant leasing activity throughout our portfolio, and the sale of a non-strategic asset, net proceeds from which were used to repay a portion of our floating rate debt,” said Victor J. Coleman, Hudson Pacific Properties’ Chairman and CEO. “We executed nearly 680,000 square feet of new and renewal leases at cash rent spreads north of 43.0%, including a long-term lease with Netflix for over 60.0% of our ICON office development more than a year before the project is scheduled to be delivered.”
Coleman continued, “Conditions in the real estate and capital markets remain favorable, and we’re moving quickly on all fronts, evaluating acquisitions, dispositions, refinancings and other opportunities to capture additional value for our stockholders.”
Financial Results
Funds From Operations (FFO) (excluding specified items) for the three months ended September 30, 2015 totaled $63.0 million, or $0.43 per diluted share, compared to FFO (excluding specified items) of $20.8 million, or $0.30 per share, a year ago. The specified items for the third quarter of 2015 consisted of an acquisition-related expense reimbursement of $0.1 million, or $0.00 per diluted share. Specified items for the third quarter of 2014 consisted of acquisition-related expenses of $0.2 million, or $0.00 per diluted share, costs associated with a one-year consulting arrangement with a former executive of $0.9 million, or $0.01 per diluted share, and a one-time supplemental net property tax expense for periods prior to the third quarter of 2014 of $1.1 million, or $0.02 per diluted share. FFO, including the specified items, totaled $63.1 million, or $0.43 per diluted share, for the three months ended September 30, 2015, compared to $18.6 million, or $0.27 per share, a year ago.
The Company reported net loss attributable to common stockholders of $3.9 million, or $(0.04) per diluted share, for the three months ended September 30, 2015, compared to net income attributable to common stockholders of $7.6 million, or $0.11 per diluted share, for the three months ended September 30, 2014.
Combined Operating Results For The Three Months Ended September 30, 2015
Total revenue from continuing operations during the third quarter increased 122.4% to $151.6 million from $68.2 million for the same quarter a year ago. Total operating expenses from continuing operations increased 165.4% to $147.4 million from $55.5 million for the same quarter a year ago. As a result, income from operations decreased 67.0% to $4.2 million from $12.6 million for the same quarter a year ago. The primary reasons for the increases in total revenue and total operating expenses are discussed below in connection with the Company’s segment operating results.
Interest expense during the third quarter increased 120.8% to $14.5 million from $6.6 million for the same quarter a year ago. At September 30, 2015, the Company had $2.1 billion of notes payable, compared to $920.9 million at September 30, 2014.
The Company had $8.4 million of gain on sale associated with the disposition of its Bay Park Plaza office property during the third quarter of 2015 compared to $5.5 million of gain on sale associated with the disposition of its Tierrasanta property during the third quarter of 2014.
Segment Operating Results For The Three Months Ended September 30, 2015
Office Properties
Total revenue from continuing operations at the Company’s office properties increased 149.1% to $141.3 million from $56.7 million for the same quarter a year ago. The increase was the result of a $75.2 million increase in rental revenue to $114.7 million, an $8.0 million increase in tenant recoveries to $20.0 million, and a $1.5 million increase in parking and other revenue to $6.6 million. The increase in rental revenue and tenant recoveries was largely the result of the EOP Northern California Portfolio acquisition on April 1, 2015, though revenue associated with leases at the Company’s Element LA and 3401 Exposition Boulevard properties also contributed to this increase. The increase in parking and other revenue was largely the result of higher parking revenues at several of the Company’s same-store office properties.
Office property operating expenses from continuing operations increased 115.0% to $51.5 million from $24.0 million for the same quarter a year ago. The increase was primarily the result of operating expenses associated with the EOP Northern California Portfolio acquired on April 1, 2015.
Net operating income with respect to our 19 same-store office properties for the third quarter increased 9.8% on a cash basis and decreased by 0.3% on a GAAP basis, as free rent associated with non-recurring upfront abatements on several leases expired.
At September 30, 2015, the Company’s stabilized and in-service office portfolio was 94.5% and 89.5% leased, respectively. During the quarter, the Company executed 83 new and renewal leases totaling 679,443 square feet, with 65 of these leases, totaling 411,563 square feet, executed at properties within the EOP Northern California Portfolio.
Media and Entertainment Properties
Total revenue at the Company’s media and entertainment properties decreased 10.5% to $10.2 million from $11.4 million for the same quarter a year ago largely due to a $0.2 million decrease in rental revenue to $6.0 million, a $0.2 million decrease in other revenue to $0.1 million, and a $0.7 million decrease in other property-related revenue to $3.9 million. The decrease in rental revenue stemmed from the Company’s decision to take a stage off-line to facilitate the extension of its lease with KTLA at its Sunset Bronson property, while the decrease in other revenue and other property-related revenue largely resulted from the production hiatus of two television shows, one at the Company’s Sunset Bronson property and the other at its Sunset Gower property. Total media and entertainment operating expenses decreased 15.1% to $6.3 million from $7.4 million for the same quarter a year ago due to the aforementioned decrease in television show production activity.
Same-store media and entertainment net operating income in the third quarter (excluding specified items) decreased by 2.0% on a GAAP basis and by 13.6% on a cash basis.
As of September 30, 2015, the trailing 12-month occupancy for the Company’s media and entertainment portfolio increased to 71.9% from 71.6% for the trailing 12-month period ended September 30, 2014.
Combined Operating Results For The Nine Months Ended September 30, 2015
For the first nine months of 2015, total revenue from continuing operations was $366.2 million, an increase of 97.0% from $185.9 million in the same period the prior year. Total operating expenses from continuing operations were $332.6 million, an increase of 123.5% from $148.8 million in the same period a year ago. As a result, income from operations decreased 9.3% to $33.6 million for the first nine months of 2015, compared to income from operations of $37.0 million for the same period a year ago. Revenues for the first nine months of 2014 included an early lease termination from Fox Interactive Media, Inc. relating to the Company’s 625 Second Street property of $1.6 million (after the write-off of non-cash items), with no comparable activity in the first nine months of 2015. Operating expenses for the nine months of 2014 included a one-time supplemental net property tax expense of $0.8 million resulting from the reassessment of the Company’s San Francisco portfolio, with no comparable activity in the first nine months of 2015. Operating expenses for the nine months of 2014 also included costs of $2.8 million associated with a one-year consulting arrangement with a former executive with no comparable activity for the nine months of 2015. The Company had $43.4 million of acquisition-related expense during the first nine months of 2015, compared to $0.3 million of acquisition-related expense during the first nine months of 2014. Interest expense during the first nine months of 2015 increased 74.5% to $34.1 million from $19.5 million in the same period of 2014. At September 30, 2015, the Company had $2.1 billion of notes payable, compared to $920.9 million at September 30, 2014. The Company had $30.5 million of gain on sale associated with the dispositions of its First Financial and Bay Park Plaza office properties, compared to $5.5 million of gain on sale associated with the disposition of its Tierrasanta property during the first nine months of 2014.
Balance Sheet
At September 30, 2015, the Company had total assets of $6.3 billion, including unrestricted cash and cash equivalents of $46.7 million. At September 30, 2015, the Company had $400.0 million of total capacity under its unsecured revolving credit facility, of which $105.0 million had been drawn. The Company’s $550.0 million five-year term loan and $350.0 million seven-year term loan were each fully drawn. During the quarter, the Company repaid $90.0 million of its two-year term loan, resulting in a $460.0 million balance under that facility as of September 30, 2015. Subsequent to the end of the quarter, the Company repaid an additional $85.0 million of its two-year term loan, resulting in a current $375.0 million balance under that facility.
Acquisitions
Second Los Angeles Arts District Building Purchased
On August 17, 2015, the Company acquired a three-building, 83,285-square-foot redevelopment property in Downtown Los Angeles’ Arts District for $40.0 million (before credits, prorations and closing costs). This off-market transaction was funded with borrowings under the Company’s unsecured revolving credit facility. The property, known as “405 Mateo,” is currently vacant and undergoing design review to determine the optimal program, which will likely consist of creative office, retail and parking. 405 Mateo is located approximately one block from the Company’s recently acquired 4th & Traction property, affording a significant foothold at the center of this in-demand, supply-constrained “micro-market.” The Arts District has become a sought-after alternative to other creative office markets, such as Hollywood and West Los Angeles, in part due to a growing number of higher-end residential projects and retail and nightlife destinations.
Dispositions
EOP Northern California Portfolio Asset Sold
On September 30, 2015, the Company sold its two building, 260,183-square-foot Bay Park Plaza office property in Burlingame, California to Asian private equity firm H&Q Asia Pacific for $90.0 million (before certain credits, prorations and closing costs). The Company acquired the property as part the EOP Northern California Portfolio purchased earlier this year from Blackstone. The sale was the result of an unsolicited offer on a non-strategic asset at a premium to the Company’s purchase price allocation. The Company used transaction proceeds to pay-down a portion of its two-year term facility.
Major Leasing
Netflix Headquarters Lease Signed At ICON
On August 20, 2015, the Company entered into a long-term lease with Netflix, a leading digital content provider, for 200,052 square feet, or 61.2% of its ICON office tower in Hollywood, California. The property is currently under construction and scheduled for completion in late 2016 with Netflix’s lease commencement expected in early 2017. The deal was the largest office lease signed to date in Hollywood in terms of square feet, and affords Netflix the opportunity to leverage the unique combination of office, stage and production space at the Company’s Sunset Bronson property.
Activities Subsequent to September 30, 2015
Element LA Loan Refinanced
On October 9, 2015, the Company refinanced an existing $83.2 million construction loan secured by its Element LA property in West Los Angeles, California, which bore an annual interest rate of LIBOR plus 1.95% and was scheduled to mature on November 1, 2017. The new $168.0 million mortgage loan bears a fixed rate of 4.5930% and is scheduled to mature on November 6, 2025. The Company used $85.0 million of net proceeds from this refinancing to repay a portion of its two-year, floating-rate term loan.
Dividend
Common and Preferred Dividends Paid
The Company’s Board of Directors declared a dividend on its common stock of $0.125 per share and on its 8.375% Series B Cumulative Preferred Stock of $0.52344 per share for the third quarter of 2015. Both dividends were paid on September 30, 2015 to stockholders of record on September 20, 2015.
2015 Outlook
Guidance Increase
The Company is increasing its full-year 2015 FFO guidance from its previously announced range of $1.56 to $1.62 per diluted share (excluding specified items) to a revised range of $1.60 to $1.64 per diluted share (excluding specified items). The guidance reflects the Company’s FFO for the third quarter ended September 30, 2015 of $0.43 per diluted share (excluding specified items), as well as all acquisitions, dispositions, offerings, financings and leasing activity referenced in this press release. As is always the case, the full-year 2015 FFO estimate reflects management’s view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels and earnings from events referenced in this release, but otherwise excludes any impact from future unannounced or speculative acquisitions, dispositions, debt financings or repayments, recapitalizations, capital market activity or similar matters. This guidance assumes full-year 2015 weighted average fully diluted common stock/units of 129,575,000. This
guidance also assumes that the remaining $375.0 million balance under the Company’s two-year term facility is fully repaid on or around December 15, 2015 with fixed rate financing bearing 4.613% per annum. The Company’s other unhedged, floating rate indebtedness, including the $250.0 million of five-year term financing which remains unhedged, is assumed to remain at its current floating rate of interest through the remainder of this calendar year.
Supplemental Information
Supplemental financial information regarding the Company’s third quarter 2015 results may be found in the Investor Relations section of the Company’s Website at investors.hudsonpacificproperties.com. This supplemental information provides additional detail on items such as property occupancy, financial performance by property and debt maturity schedules.
Conference Call
The Company will hold a conference call to discuss third quarter 2015 financial results at 1:30 p.m. PT / 4:30 p.m. ET on November 5, 2015. To participate in the call by telephone, please dial (877) 407-0784 five to 10 minutes prior to the start time to allow time for registration. International callers should dial (201) 689-8560. The call will also be broadcast live over the Internet and can be accessed via the Investor Relations section of Hudson Pacific’s Website at investors.hudsonpacificproperties.com, where a replay of the call will be available for 90 days. A replay will also be available beginning November 5, at 4:30 p.m. PT / 7:30 p.m. ET, through November 12, at 8:59 p.m. PT / 11:59 p.m. ET, by dialing (877) 870-5176 and entering the passcode 13621374. International callers should dial (858) 384-5517 and enter the same passcode.
Use of Non-GAAP Information
The Company calculates funds from operations before non-controlling interest (FFO) in accordance with the standards established by the National Association of Real Estate Investment Trusts (NAREIT). FFO represents net income (loss), computed in accordance with accounting principles generally accepted in the United States of America (GAAP), excluding gains (or losses) from sales of depreciable operating property, real estate depreciation and amortization (excluding amortization of above/below market lease intangible assets and liabilities and amortization of deferred financing costs and debt discounts/premium) and after adjustments for unconsolidated partnerships and joint ventures. The Company uses FFO as a supplemental performance measure because, in excluding real estate depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. The Company also believes that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare its operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of the Company’s properties that results from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of its properties, all of which have real economic effect and could materially impact the Company’s results from operations, the utility of FFO as a measure of the Company’s performance is limited. Other equity REITs may not calculate FFO in accordance with the NAREIT definition and, accordingly, the Company’s FFO may not be comparable to such other REITs’ FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of the Company’s performance. FFO should not be used as a measure of the Company’s liquidity, nor is it indicative of funds available to fund the Company’s cash needs, including the Company’s ability to pay dividends. FFO should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP.
About Hudson Pacific Properties
Hudson Pacific Properties is a vertically integrated real estate company focused on acquiring, repositioning, developing and operating high-quality office and state-of-the-art media and entertainment properties in select West Coast markets. Hudson Pacific invests across the risk-return spectrum, favoring opportunities where it can employ leasing, capital investment and management expertise to create additional value. Founded in 2006 as Hudson Capital, the Company went public in 2010, electing to be taxed as a real estate investment trust. Through the years, Hudson Pacific has
strategically assembled a portfolio totaling approximately 17.3 million square feet, including land for development, in high-growth, high-barrier-to-entry submarkets throughout Northern and Southern California and the Pacific Northwest. The Company is a leading provider of design-forward, next-generation workspaces for a variety of tenants, with a focus on Fortune 500 and industry-leading growth companies, many in the technology, media and entertainment sectors. As a long-term owner, Hudson Pacific prioritizes tenant satisfaction and retention, providing highly-customized build-outs and working proactively to accommodate tenants’ growth. Hudson Pacific trades as a component of the Russell 2000® and the Russell 3000® indices. For more information visit hudsonpacificproperties.com.
Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond the Company’s control that may cause actual results to differ significantly from those expressed in any forward-looking statement. All forward-looking statements reflect the Company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause the Company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission, or SEC, on March 2, 2015, as amended, and other risks described in documents subsequently filed by the Company from time to time with the SEC.
Investor/Media Contacts:
Hudson Pacific Properties, Inc.
Laura Campbell
Director, Investor Relations
(310) 445-5700
or
Greg Berardi
Blue Marlin Partners
(415) 239-7826
(FINANCIAL TABLES FOLLOW)
Hudson Pacific Properties, Inc. Consolidated Balance Sheets (In thousands, except share data) | |||||||
September 30, 2015 | December 31, 2014 | ||||||
ASSETS | (Unaudited) | (Audited) | |||||
REAL ESTATE ASSETS | |||||||
Land | $ | 1,373,794 | $ | 620,805 | |||
Building and improvements | 4,071,345 | 1,284,602 | |||||
Tenant improvements | 280,079 | 116,317 | |||||
Furniture and fixtures | 9,653 | 13,721 | |||||
Property under development | 174,928 | 135,850 | |||||
Total real estate held for investment | 5,909,799 | 2,171,295 | |||||
Accumulated depreciation and amortization | (228,828 | ) | (134,657 | ) | |||
Investment in real estate, net | 5,680,971 | 2,036,638 | |||||
Cash and cash equivalents | 46,668 | 17,753 | |||||
Restricted cash | 18,606 | 14,244 | |||||
Accounts receivable, net | 17,309 | 16,247 | |||||
Notes receivable | 28,580 | 28,268 | |||||
Straight-line rent receivables | 56,069 | 33,006 | |||||
Deferred leasing costs and lease intangibles, net | 353,080 | 102,023 | |||||
Deferred finance costs, net | 22,861 | 8,723 | |||||
Interest rate contracts | — | 3 | |||||
Goodwill | 8,754 | 8,754 | |||||
Prepaid expenses and other assets | 21,611 | 6,692 | |||||
Assets associated with real estate held for sale | — | 68,534 | |||||
TOTAL ASSETS | $ | 6,254,509 | $ | 2,340,885 | |||
LIABILITIES AND EQUITY | |||||||
Notes payable | $ | 2,088,335 | $ | 918,059 | |||
Accounts payable and accrued liabilities | 90,096 | 36,844 | |||||
Lease intangible liabilities, net | 114,485 | 40,969 | |||||
Security deposits | 21,839 | 6,257 | |||||
Prepaid rent | 19,650 | 8,600 | |||||
Interest rate contracts | 8,614 | 1,750 | |||||
Liabilities associated with real estate held for sale | 357 | 43,214 | |||||
TOTAL LIABILITIES | 2,343,376 | 1,055,693 | |||||
6.25% series A cumulative redeemable preferred units of the Operating Partnership | 10,177 | 10,177 | |||||
EQUITY | |||||||
Hudson Pacific Properties, Inc. stockholders’ equity: | |||||||
Preferred stock, $0.01 par value, 10,000,000 authorized; 8.375% series B cumulative redeemable preferred stock, $25.00 liquidation preference, 5,800,000 shares outstanding at September 30, 2015 and December 31, 2014, respectively | 145,000 | 145,000 | |||||
Common stock, $0.01 par value, 490,000,000 authorized, 89,079,569 shares and 66,797,816 shares outstanding at September 30, 2015 and December 31, 2014, respectively | 891 | 668 | |||||
Additional paid-in capital | 1,730,004 | 1,070,833 | |||||
Accumulated other comprehensive loss | (6,531 | ) | (2,443 | ) | |||
Accumulated deficit | (44,592 | ) | (34,884 | ) | |||
Total Hudson Pacific Properties, Inc. stockholders’ equity | 1,824,772 | 1,179,174 | |||||
Non-controlling interest—members in consolidated entities | 263,707 | 42,990 | |||||
Non-controlling common units in the Operating Partnership | 1,812,477 | 52,851 | |||||
TOTAL EQUITY | 3,900,956 | 1,275,015 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 6,254,509 | $ | 2,340,885 | |||
Hudson Pacific Properties, Inc.
Combined Statements of Operations
(Unaudited, in thousands, except share and per share data)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Revenues | |||||||||||||||
Office | |||||||||||||||
Rental | $ | 114,693 | $ | 39,503 | $ | 276,321 | $ | 115,418 | |||||||
Tenant recoveries | 20,036 | 12,084 | 43,890 | 23,643 | |||||||||||
Parking and other | 6,601 | 5,140 | 17,612 | 16,632 | |||||||||||
Total office revenues | 141,330 | 56,727 | 337,823 | 155,693 | |||||||||||
Media & entertainment | |||||||||||||||
Rental | 6,041 | 6,239 | 16,902 | 17,646 | |||||||||||
Tenant recoveries | 212 | 267 | 705 | 971 | |||||||||||
Other property-related revenue | 3,860 | 4,583 | 10,525 | 11,028 | |||||||||||
Other | 113 | 339 | 244 | 542 | |||||||||||
Total media & entertainment revenues | 10,226 | 11,428 | 28,376 | 30,187 | |||||||||||
Total revenues | 151,556 | 68,155 | 366,199 | 185,880 | |||||||||||
Operating expenses | |||||||||||||||
Office operating expenses | 51,538 | 23,969 | 115,364 | 58,469 | |||||||||||
Media & entertainment operating expenses | 6,280 | 7,401 | 17,354 | 19,244 | |||||||||||
General and administrative | 9,378 | 6,802 | 28,951 | 19,157 | |||||||||||
Depreciation and amortization | 80,195 | 17,361 | 170,945 | 51,973 | |||||||||||
Total operating expenses | 147,391 | 55,533 | 332,614 | 148,843 | |||||||||||
Income from operations | 4,165 | 12,622 | 33,585 | 37,037 | |||||||||||
Other (income) expense | |||||||||||||||
Interest expense | 14,461 | 6,550 | 34,067 | 19,519 | |||||||||||
Interest income | (17 | ) | (1 | ) | (118 | ) | (21 | ) | |||||||
Acquisition-related (expense reimbursements) expenses | (83 | ) | 214 | 43,442 | 319 | ||||||||||
Other expense (income) | 3 | (56 | ) | 2 | (43 | ) | |||||||||
14,364 | 6,707 | 77,393 | 19,774 | ||||||||||||
(Loss) income from continuing operations before gain on sale of real estate | (10,199 | ) | 5,915 | (43,808 | ) | 17,263 | |||||||||
Gain on sale of real estate | 8,371 | 5,538 | 30,471 | 5,538 | |||||||||||
(Loss) income from continuing operations | (1,828 | ) | 11,453 | (13,337 | ) | 22,801 | |||||||||
Loss from discontinued operations | — | (38 | ) | — | (164 | ) | |||||||||
Net loss from discontinued operations | — | (38 | ) | — | (164 | ) | |||||||||
Net (loss) income | $ | (1,828 | ) | $ | 11,415 | $ | (13,337 | ) | $ | 22,637 | |||||
Net income attributable to preferred stock and units | (3,195 | ) | (3,195 | ) | (9,585 | ) | (9,590 | ) | |||||||
Net income attributable to restricted shares | (79 | ) | (68 | ) | (229 | ) | (206 | ) | |||||||
Net income attributable to non-controlling interest in consolidated entities | (1,273 | ) | (259 | ) | (4,668 | ) | (155 | ) | |||||||
Net loss (income) attributable to common units in the Operating Partnership | 2,470 | (273 | ) | 17,872 | (441 | ) | |||||||||
Net (loss) income attributable to Hudson Pacific Properties, Inc. common stockholders | $ | (3,905 | ) | $ | 7,620 | $ | (9,947 | ) | $ | 12,245 | |||||
Basic and diluted per share amounts: | |||||||||||||||
Net (loss) income from continuing operations attributable to common stockholders | $ | (0.04 | ) | $ | 0.11 | $ | (0.12 | ) | $ | 0.19 | |||||
Net (loss) income attributable to common stockholders’ per share—basic and diluted | $ | (0.04 | ) | $ | 0.11 | $ | (0.12 | ) | $ | 0.19 | |||||
Weighted average shares of common stock outstanding—basic and diluted | 88,984,236 | 66,506,179 | 84,894,863 | 65,549,741 | |||||||||||
Dividends declared per share of common stock | $ | 0.125 | $ | 0.125 | $ | 0.375 | $ | 0.375 |
Hudson Pacific Properties, Inc.
Funds From Operations
(Unaudited, in thousands, except per share data)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Reconciliation of net loss to Funds From Operations (FFO): | |||||||||||||||
Net (loss) income | $ | (1,828 | ) | $ | 11,415 | $ | (13,337 | ) | $ | 22,637 | |||||
Adjustments: | |||||||||||||||
Depreciation and amortization of real estate assets | 79,940 | 17,342 | 170,306 | 51,845 | |||||||||||
Gain on sale of real estate | (8,371 | ) | (5,538 | ) | (30,471 | ) | (5,538 | ) | |||||||
FFO attributable to non-controlling interests | (3,494 | ) | (1,396 | ) | (10,520 | ) | (4,009 | ) | |||||||
Net income attributable to preferred stock and units | (3,195 | ) | (3,195 | ) | (9,585 | ) | (9,590 | ) | |||||||
FFO to common stockholders and unit holders | $ | 63,052 | $ | 18,628 | $ | 106,393 | $ | 55,345 | |||||||
Specified items impacting FFO: | |||||||||||||||
Acquisition-related (expense reimbursements) expenses | $ | (83 | ) | $ | 214 | $ | 43,442 | $ | 319 | ||||||
Consulting fee to former executive | — | 890 | — | 2,836 | |||||||||||
Supplemental net property tax expense | — | 1,072 | — | 809 | |||||||||||
Lease termination revenue | — | — | — | (1,687 | ) | ||||||||||
Lease termination non-cash write-off | — | — | — | 77 | |||||||||||
FFO (excluding specified items) to common stockholders and unit holders | $ | 62,969 | $ | 20,804 | $ | 149,835 | $ | 57,699 | |||||||
Weighted average common stock/units outstanding— diluted | 145,902 | 69,126 | 124,052 | 67,933 | |||||||||||
FFO per common stock/unit—diluted | $ | 0.43 | $ | 0.27 | $ | 0.86 | $ | 0.81 | |||||||
FFO (excluding specified items) per common stock/unit—diluted | $ | 0.43 | $ | 0.30 | $ | 1.21 | $ | 0.85 |
HUDSON PACIFIC PROPERTIES, INC.
THIRD QUARTER 2015
Supplemental Operating and Financial Data
This Supplemental Operating and Financial Data contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. You should not rely on forward-looking statements as predictions of future events. Forward-looking statements involve numerous risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ materially from those expressed in any forward-looking statement made by us. These risks and uncertainties include, but are not limited to: adverse economic and real estate developments in Southern and Northern California and the Pacific Northwest; decreased rental rates or increased tenant incentives and vacancy rates; defaults on, early terminations of, or non-renewal of leases by tenants; increased interest rates and operating costs; failure to generate sufficient cash flows to service our outstanding indebtedness; difficulties in identifying properties to acquire and completing acquisitions; failure to successfully integrate pending and recent acquisitions; failure to successfully operate acquired properties and operations; failure to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended; possible adverse changes in laws and regulations; environmental uncertainties; risks related to natural disasters; lack or insufficient amount of insurance; inability to successfully expand into new markets or submarkets; risks associated with property development; conflicts of interest with our officers; changes in real estate and zoning laws and increases in real property tax rates; the consequences of any possible future terrorist attacks; and other risks and uncertainties detailed in our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission on March 2, 2015, as amended, and our Form 8-K filed on January 12, 2015. You are cautioned that the information contained herein speaks only as of the date hereof and Hudson Pacific Properties, Inc. assumes no obligation to update any forward-looking information, whether as a result of new information, future events or otherwise. For a discussion of important risks related to Hudson Pacific Properties, Inc.’s business, and an investment in its securities, including risks that could cause actual results and events to differ materially from results and events referred to in the forward-looking information, see the discussion under the caption “Risk Factors” in Hudson Pacific Properties, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission on March 2, 2015, as amended.
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
TABLE OF CONTENTS
Page | |
COMPANY BACKGROUND AND CORPORATE DATA | |
CONSOLIDATED FINANCIAL RESULTS | |
Consolidated Balance Sheets | |
Consolidated Statements of Operations | |
Funds from Operations | |
Adjusted Funds from Operations | |
Debt Summary | |
PORTFOLIO DATA | |
In-Service Office Portfolio by Property | |
In-Service Office Portfolio Summary | |
Redevelopment, Development and Held-For-Sale Office Summary | |
Land Properties Summary | |
Media & Entertainment Portfolio Summary | |
Current Value Creation Development Projects | |
Same-Store Analysis | |
Reconciliation of Same-Store Property Net Operating Income to GAAP Net Income (Loss) | |
Net Operating Income Detail | |
Office Portfolio Leasing Activity | |
Office Portfolio Commenced Leases with Non-Recurring, Up-Front Abatements | |
Quarterly Uncommenced / Backfill — Next Eight Quarters | |
Quarterly Office Lease Expirations — Next Eight Quarters | |
Office Lease Expirations — Annual | |
Fifteen Largest Office Tenants | |
Office Portfolio Diversification | |
DEFINITIONS |
2
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
COMPANY BACKGROUND
CORPORATE 11601 Wilshire Boulevard, Sixth Floor, Los Angeles, California 90025 (310) 445-5700 www.hudsonpacificproperties.com | |||||
BOARD OF DIRECTORS | |||||
Victor J. Coleman | Theodore R. Antenucci | Frank Cohen | |||
Chairman of the Board, Chief Executive Officer and President, Hudson Pacific Properties, Inc. | President and Chief Executive Officer, Catellus Development Corporation | Senior Managing Director, Blackstone Group, L.P. | |||
Richard B. Fried | Jonathan M. Glaser | Robert L. Harris II | |||
Managing Member, Farallon Capital Management, L.L.C. | Managing Member, JMG Capital Management LLC | Executive Chairman of the Board, Acacia Research Corporation | |||
Mark D. Linehan | Robert M. Moran, Jr. | Michael Nash | |||
President and Chief Executive Officer, Wynmark Company | Co-founder and Co-owner, FJM Investments LLC | Senior Managing Director, Blackstone Group, L.P., Chief Investment Officer, Blackstone Real Estate Debt Strategies | |||
Barry A. Porter | John Schreiber | ||||
Managing General Partner, Clarity Partners L.P. | President, Centaur Capital Partners, Inc., Partner and Co-Founder, Blackstone Real Estate Advisors | ||||
EXECUTIVE AND SENIOR MANAGEMENT | |||||
Victor J. Coleman | Mark T. Lammas | Christopher Barton | |||
Chief Executive Officer and President | Chief Operating Officer and Chief Financial Officer | EVP, Development and Capital Investments | |||
Alexander Vouvalides | Dale Shimoda | Kay L. Tidwell | |||
Chief Investment Officer | EVP, Finance | EVP, General Counsel and Secretary | |||
Arthur X. Suazo | Harout Diramerian | Steve Jaffe | |||
EVP, Leasing | Chief Accounting Officer | Chief Risk Officer | |||
Josh Hatfield | Drew Gordon | Gary Hansel | |||
EVP, Operations | SVP, Northern California | SVP, Southern California | |||
David Tye | Elva Hernandez | ||||
SVP, Pacific Northwest | VP, Controller | ||||
INVESTOR RELATIONS | |||||
Laura Campbell Director, Investor Relations |
3
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
CORPORATE DATA
(unaudited, $ in thousands, except number of properties, square feet and per share data)
Hudson Pacific Properties, Inc. (NYSE: HPP) (also referred to herein as the “Company,” “we,” “us,” or “our”) is a vertically integrated real estate company focused on acquiring, repositioning, developing and operating high-quality office and state-of-the-art media and entertainment properties in high-growth, high-barrier-to-entry submarkets throughout Northern and Southern California and the Pacific Northwest. The Company invests across the risk-return spectrum, favoring opportunities where it can employ leasing, capital investment and management expertise to create additional value. This Supplemental Operating and Financial Data supplements the information provided in our reports filed with the Securities and Exchange Commission. We maintain a Web site at www.hudsonpacificproperties.com.
September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | September 30, 2014 | ||||||||||||||
Number of office properties owned | 53 | 53 | 25 | 26 | 25 | |||||||||||||
Office properties square feet(1) | 13,872,326 | 14,042,298 | 5,700,148 | 5,923,827 | 5,422,612 | |||||||||||||
Stabilized office properties leased rate as of end of period(2) | 94.5 | % | 94.7 | % | 93.7 | % | 94.6 | % | 94.1 | % | ||||||||
In-Service office properties leased rate as of end of period(3) | 89.5 | % | 88.8 | % | N/A | N/A | N/A | |||||||||||
Number of media & entertainment properties owned | 2 | 2 | 2 | 2 | 2 | |||||||||||||
Media & entertainment square feet(1) | 869,568 | 869,568 | 869,568 | 869,568 | 884,193 | |||||||||||||
Media & entertainment leased rate as of end of period(4) | 71.9 | % | 71.6 | % | 71.6 | % | 71.6 | % | 71.6 | % | ||||||||
Number of land assets owned | 7 | 7 | 5 | 5 | 6 | |||||||||||||
Land assets estimated square feet(5) | 2,590,099 | 2,590,099 | 1,448,173 | 1,448,173 | 1,861,173 | |||||||||||||
Market capitalization (in thousands): | ||||||||||||||||||
Total debt(6) | $ | 2,086,589 | $ | 2,116,974 | $ | 784,571 | $ | 957,452 | $ | 917,238 | ||||||||
Series A Preferred Units | 10,177 | 10,177 | 10,177 | 10,177 | 10,177 | |||||||||||||
Series B Preferred Stock | 145,000 | 145,000 | 145,000 | 145,000 | 145,000 | |||||||||||||
Common equity capitalization(7) | 4,197,190 | 4,135,927 | 2,731,256 | 2,091,479 | 1,712,132 | |||||||||||||
Total market capitalization | $ | 6,438,956 | $ | 6,408,078 | $ | 3,671,004 | $ | 3,204,108 | $ | 2,784,547 | ||||||||
Debt/total market capitalization | 32.4 | % | 33.0 | % | 21.4 | % | 29.9 | % | 32.9 | % | ||||||||
Series A preferred units & debt/total market capitalization | 32.6 | % | 33.2 | % | 21.6 | % | 30.2 | % | 33.3 | % | ||||||||
Common stock data (NYSE: HPP) | ||||||||||||||||||
Range of closing prices(8) | $ 27.70 - 31.68 | $ 28.22 - 33.95 | $ 30.25 - 33.65 | $ 24.64 - 30.34 | $ 24.45 - 27.01 | |||||||||||||
Closing price at quarter end | $ | 28.79 | $ | 28.37 | $ | 33.19 | $ | 30.06 | $ | 24.66 | ||||||||
Weighted average fully diluted common stock\units outstanding (in thousands)(9) | 145,902 | 145,849 | 79,713 | 69,685 | 69,126 | |||||||||||||
Shares of common stock\units outstanding at end of period (in thousands)(10) | 145,786 | 145,785 | 82,292 | 69,577 | 69,430 |
__________________________
(1) | Square footage for properties has been determined by management based upon estimated leasable square feet, which may be less or more than the Building Owners and Managers Association, or BOMA, rentable area. Square footage may change over time due to re-measurement or re-leasing. |
(2) | Stabilized office properties leased rate excludes the development, redevelopment, lease-up properties, properties held-for-sale, and land properties described on pages 13, 15, and 16. |
(3) | In-service office properties leased rate includes the stabilized office properties and lease-up properties described on pages 12 and 13. The Company has adopted an “in-service” office properties classification as of the three-month period ending June 30, 2015 in light of the April 1, 2015 acquisition of a significant number of lease-up properties. |
(4) | Percent occupied for media and entertainment properties is the average percent leased for the 12 months ended as of the quarter indicated. |
(5) | Square footage for land assets represents management’s estimate of developable square feet, the majority of which remains subject to receipt of entitlement approvals that have not yet been obtained. |
(6) | Total debt excludes non-cash loan premium/discount. |
(7) | Common equity capitalization represents the shares of common stock (including unvested restricted shares) and OP units outstanding multiplied by the closing price of our stock at the end of the period. |
(8) | For the quarter indicated. |
(9) | For the quarter indicated, diluted shares represent ownership in our Company through shares of common stock, OP Units and other convertible or exchangeable instruments. The weighted average fully diluted common stock/units outstanding for the three-month periods ending September 30, 2015, March 31, 2015 and December 31, 2014 includes an estimate for projected executive stock grants under our 2013 and 2014 outperformance programs based on the projected award potential of such programs as of end of such periods, as calculated in accordance with the Accounting Standards Codification 260 Earnings Per Share (the “Projected 2013/2014 OPP stock grants”). |
(10) | This amount represents fully diluted common stock and OP units (including unvested restricted stocks) as of the end of the quarter indicated. The shares of common stock\units outstanding does not include any Projected 2013/2014 OPP stock grants. |
4
CONSOLIDATED FINANCIAL RESULTS
5
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
Consolidated Balance Sheets (Unaudited, $ in thousands, except share data) | |||||||
September 30, 2015 | December 31, 2014 | ||||||
ASSETS | |||||||
Total investment in real estate, net | $ | 5,680,971 | $ | 2,036,638 | |||
Cash and cash equivalents | 46,668 | 17,753 | |||||
Restricted cash | 18,606 | 14,244 | |||||
Accounts receivable, net | 17,309 | 16,247 | |||||
Notes receivable | 28,580 | 28,268 | |||||
Straight-line rent receivables | 56,069 | 33,006 | |||||
Deferred leasing costs and lease intangibles, net | 353,080 | 102,023 | |||||
Deferred finance costs, net | 22,861 | 8,723 | |||||
Interest rate contracts | — | 3 | |||||
Goodwill | 8,754 | 8,754 | |||||
Prepaid expenses and other assets | 21,611 | 6,692 | |||||
Assets associated with real estate held for sale | — | 68,534 | |||||
TOTAL ASSETS | $ | 6,254,509 | $ | 2,340,885 | |||
LIABILITIES AND EQUITY | |||||||
Notes payable | $ | 2,088,335 | $ | 918,059 | |||
Accounts payable and accrued liabilities | 90,096 | 36,844 | |||||
Lease intangible liabilities, net | 114,485 | 40,969 | |||||
Security deposits | 21,839 | 6,257 | |||||
Prepaid rent | 19,650 | 8,600 | |||||
Interest rate contracts | 8,614 | 1,750 | |||||
Liabilities associated with real estate held for sale | 357 | 43,214 | |||||
TOTAL LIABILITIES | $ | 2,343,376 | $ | 1,055,693 | |||
6.25% series A cumulative redeemable preferred units of the Operating Partnership | 10,177 | 10,177 | |||||
EQUITY | |||||||
Hudson Pacific Properties, Inc. stockholders’ equity: | |||||||
Preferred stock, $0.01 par value, 10,000,000 authorized; 8.375% series B cumulative redeemable preferred stock, $25.00 liquidation preference, 5,800,000 shares outstanding at September 30, 2015 and December 31, 2014, respectively | $ | 145,000 | $ | 145,000 | |||
Common stock, $0.01 par value, 490,000,000 authorized, 89,079,569 shares and 66,797,816 shares outstanding at September 30, 2015 and December 31, 2014, respectively | 891 | 668 | |||||
Additional paid-in capital | 1,730,004 | 1,070,833 | |||||
Accumulated other comprehensive loss | (6,531 | ) | (2,443 | ) | |||
Accumulated deficit | (44,592 | ) | (34,884 | ) | |||
Total Hudson Pacific Properties, Inc. stockholders’ equity | $ | 1,824,772 | $ | 1,179,174 | |||
Non-controlling interest—members in consolidated entities | 263,707 | 42,990 | |||||
Non-controlling common units in the Operating Partnership | 1,812,477 | 52,851 | |||||
TOTAL EQUITY | $ | 3,900,956 | $ | 1,275,015 | |||
TOTAL LIABILITIES AND EQUITY | $ | 6,254,509 | $ | 2,340,885 |
6
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
Consolidated Statements of Operations (Unaudited, $ in thousands, except share and per share data) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Revenues | |||||||||||||||
Office | |||||||||||||||
Rental | $ | 114,693 | $ | 39,503 | $ | 276,321 | $ | 115,418 | |||||||
Tenant recoveries | 20,036 | 12,084 | 43,890 | 23,643 | |||||||||||
Parking and other | 6,601 | 5,140 | 17,612 | 16,632 | |||||||||||
Total office revenues | $ | 141,330 | $ | 56,727 | $ | 337,823 | $ | 155,693 | |||||||
Media & entertainment | |||||||||||||||
Rental | $ | 6,041 | $ | 6,239 | $ | 16,902 | $ | 17,646 | |||||||
Tenant recoveries | 212 | 267 | 705 | 971 | |||||||||||
Other property-related revenue | 3,860 | 4,583 | 10,525 | 11,028 | |||||||||||
Other | 113 | 339 | 244 | 542 | |||||||||||
Total media & entertainment revenues | $ | 10,226 | $ | 11,428 | $ | 28,376 | $ | 30,187 | |||||||
Total revenues | $ | 151,556 | $ | 68,155 | $ | 366,199 | $ | 185,880 | |||||||
Operating expenses | |||||||||||||||
Office operating expenses | $ | 51,538 | $ | 23,969 | $ | 115,364 | $ | 58,469 | |||||||
Media & entertainment operating expenses | 6,280 | 7,401 | 17,354 | 19,244 | |||||||||||
General and administrative | 9,378 | 6,802 | 28,951 | 19,157 | |||||||||||
Depreciation and amortization | 80,195 | 17,361 | 170,945 | 51,973 | |||||||||||
Total operating expenses | $ | 147,391 | $ | 55,533 | $ | 332,614 | $ | 148,843 | |||||||
Income from operations | $ | 4,165 | $ | 12,622 | $ | 33,585 | $ | 37,037 | |||||||
Other (income) expense | |||||||||||||||
Interest expense | $ | 14,461 | $ | 6,550 | $ | 34,067 | $ | 19,519 | |||||||
Interest income | (17 | ) | (1 | ) | (118 | ) | (21 | ) | |||||||
Acquisition-related (expense reimbursements) expenses | (83 | ) | 214 | 43,442 | 319 | ||||||||||
Other expense (income) | 3 | (56 | ) | 2 | (43 | ) | |||||||||
$ | 14,364 | $ | 6,707 | $ | 77,393 | $ | 19,774 | ||||||||
(Loss) income from continuing operations before gain on sale of real estate | (10,199 | ) | 5,915 | (43,808 | ) | 17,263 | |||||||||
Gain on sale of real estate | 8,371 | 5,538 | 30,471 | 5,538 | |||||||||||
(Loss) Income from continuing operations | (1,828 | ) | 11,453 | (13,337 | ) | 22,801 | |||||||||
Loss from discontinued operations | — | (38 | ) | — | (164 | ) | |||||||||
Net loss from discontinued operations | — | (38 | ) | — | (164 | ) | |||||||||
Net (loss) income | $ | (1,828 | ) | $ | 11,415 | $ | (13,337 | ) | $ | 22,637 | |||||
Net income attributable to preferred stock and units | (3,195 | ) | (3,195 | ) | (9,585 | ) | (9,590 | ) | |||||||
Net income attributable to restricted shares | (79 | ) | (68 | ) | (229 | ) | (206 | ) | |||||||
Net income attributable to non-controlling interest in consolidated entities | (1,273 | ) | (259 | ) | (4,668 | ) | (155 | ) | |||||||
Net loss (income) attributable to common units in the Operating Partnership | 2,470 | (273 | ) | 17,872 | (441 | ) | |||||||||
Net (loss) income attributable to Hudson Pacific Properties, Inc. common stockholders | $ | (3,905 | ) | $ | 7,620 | $ | (9,947 | ) | $ | 12,245 | |||||
Basic and diluted per share amounts: | |||||||||||||||
Net (loss) income from continuing operations attributable to common stockholders | $ | (0.04 | ) | $ | 0.11 | $ | (0.12 | ) | $ | 0.19 | |||||
Net (loss) income attributable to common stockholders’ per share—basic and diluted | $ | (0.04 | ) | $ | 0.11 | $ | (0.12 | ) | $ | 0.19 | |||||
Weighted average shares of common stock outstanding—basic and diluted | 88,984,236 | 66,506,179 | 84,894,863 | 65,549,741 | |||||||||||
Dividends declared per share of common stock | $ | 0.125 | $ | 0.125 | $ | 0.375 | $ | 0.375 |
7
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
FUNDS FROM OPERATIONS (Unaudited, $ in thousands, except per share data) | ||||||||||||||||||||
Quarter To Date | Three Months Ended | |||||||||||||||||||
Funds From Operations (FFO)(1) | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | September 30, 2014 | |||||||||||||||
Net (loss) income | $ | (1,828 | ) | $ | (36,083 | ) | $ | 24,574 | $ | 885 | $ | 11,415 | ||||||||
Adjustments: | ||||||||||||||||||||
Depreciation and amortization of real estate assets | 79,940 | 73,293 | 17,073 | 20,158 | 17,342 | |||||||||||||||
(Gain) / Loss from sale of real estate | (8,371 | ) | 591 | (22,691 | ) | — | (5,538 | ) | ||||||||||||
FFO attributable to non-controlling interests | (3,494 | ) | (3,696 | ) | (3,312 | ) | (1,254 | ) | (1,396 | ) | ||||||||||
Net income attributable to preferred stock and units | (3,195 | ) | (3,195 | ) | (3,195 | ) | (3,195 | ) | (3,195 | ) | ||||||||||
FFO to common stockholders and unit holders | $ | 63,052 | $ | 30,910 | $ | 12,449 | $ | 16,594 | $ | 18,628 | ||||||||||
Specified items impacting FFO: | ||||||||||||||||||||
Acquisition-related (expense reimbursements) expenses | $ | (83 | ) | $ | 37,481 | $ | 6,044 | $ | 4,322 | $ | 214 | |||||||||
Consulting fee to former executive | — | — | — | 1,273 | 890 | |||||||||||||||
Supplemental net property tax expense | — | — | — | — | 1,072 | |||||||||||||||
FFO (excluding specified items) to common stockholders and unit holders | $ | 62,969 | $ | 68,391 | $ | 18,493 | $ | 22,189 | $ | 20,804 | ||||||||||
Weighted average common stock/units outstanding—diluted | 145,902 | 145,849 | 79,713 | 69,685 | 69,126 | |||||||||||||||
FFO per common stock/unit—diluted | $ | 0.43 | $ | 0.21 | $ | 0.16 | $ | 0.24 | $ | 0.27 | ||||||||||
FFO (excluding specified items) per common stock/unit—diluted | $ | 0.43 | $ | 0.47 | $ | 0.23 | $ | 0.32 | $ | 0.30 | ||||||||||
Year To Date | Nine Months Ended | Six Months Ended | Three Months Ended | Twelve Months Ended | Nine Months Ended | |||||||||||||||
Funds From Operations (FFO)(1) | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | September 30, 2014 | |||||||||||||||
Net (loss) income | $ | (13,337 | ) | $ | (11,509 | ) | $ | 24,574 | $ | 23,522 | $ | 22,637 | ||||||||
Adjustments: | ||||||||||||||||||||
Depreciation and amortization of real estate assets | 170,306 | 90,366 | 17,073 | 72,003 | 51,845 | |||||||||||||||
Gain from sale of real estate | (30,471 | ) | (22,100 | ) | (22,691 | ) | (5,538 | ) | (5,538 | ) | ||||||||||
FFO attributable to non-controlling interest | (10,520 | ) | (7,008 | ) | (3,312 | ) | (5,260 | ) | (4,009 | ) | ||||||||||
Net income attributable to preferred stock and units | (9,585 | ) | (6,390 | ) | (3,195 | ) | (12,785 | ) | (9,590 | ) | ||||||||||
FFO to common stockholders and unit holders | $ | 106,393 | $ | 43,359 | $ | 12,449 | $ | 71,942 | $ | 55,345 | ||||||||||
Specified items impacting FFO: | ||||||||||||||||||||
Acquisition-related expenses | $ | 43,442 | $ | 43,525 | $ | 6,044 | $ | 4,641 | $ | 319 | ||||||||||
Consulting fee to former executive | — | — | — | 4,109 | 2,836 | |||||||||||||||
Supplemental net property tax expense | — | — | — | 809 | 809 | |||||||||||||||
Lease termination revenue | — | — | — | (1,687 | ) | (1,687 | ) | |||||||||||||
Lease termination non-cash write-off | — | — | — | 77 | 77 | |||||||||||||||
FFO (excluding specified items) to common stockholders and unit holders | $ | 149,835 | $ | 86,884 | $ | 18,493 | $ | 79,891 | $ | 57,699 | ||||||||||
Weighted average common stock/units outstanding—diluted | 124,052 | 113,162 | 79,713 | 68,892 | 67,933 | |||||||||||||||
FFO per common stock/unit—diluted | $ | 0.86 | $ | 0.38 | $ | 0.16 | $ | 1.04 | $ | 0.81 | ||||||||||
FFO (excluding specified items) per common stock/unit—diluted | $ | 1.21 | $ | 0.77 | $ | 0.23 | $ | 1.16 | $ | 0.85 |
______________________________
(1) | See page 30 for Management’s Statements on Funds From Operations (FFO) and Adjusted Funds From Operations (AFFO). |
8
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
ADJUSTED FUNDS FROM OPERATIONS (Unaudited, $ in thousands, except per share data) | ||||||||||||||||||||
Quarter To Date | Three Months Ended | |||||||||||||||||||
Adjusted Funds From Operations (AFFO)(1) | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | September 30, 2014 | |||||||||||||||
FFO | $ | 63,052 | $ | 30,910 | $ | 12,449 | $ | 16,594 | $ | 18,628 | ||||||||||
Adjustments: | ||||||||||||||||||||
Straight-line rent | (8,903 | ) | (10,931 | ) | (3,038 | ) | (3,105 | ) | (2,737 | ) | ||||||||||
Amortization of above-market and below-market leases, net | (3,750 | ) | (10,258 | ) | (1,291 | ) | (1,215 | ) | (1,291 | ) | ||||||||||
Amortization of above-market and below-market ground leases, net | 515 | 515 | 62 | 62 | 62 | |||||||||||||||
Amortization of lease incentive costs | 89 | 89 | 86 | 144 | 102 | |||||||||||||||
Amortization of deferred financing costs and loan premium/discount, net | 1,154 | 1,551 | 652 | 460 | 598 | |||||||||||||||
Recurring capital expenditures, tenant improvements and lease commissions | (8,598 | ) | (13,301 | ) | (6,191 | ) | (11,702 | ) | (8,378 | ) | ||||||||||
Non-cash compensation expense | 2,034 | 2,003 | 2,149 | 2,512 | 1,792 | |||||||||||||||
AFFO | $ | 45,593 | $ | 578 | $ | 4,878 | $ | 3,750 | $ | 8,776 | ||||||||||
Weighted average common stock/units outstanding—diluted | 145,902 | 145,849 | 79,713 | 69,685 | 69,126 | |||||||||||||||
AFFO per common stock/unit—diluted | $ | 0.31 | $ | — | $ | 0.06 | $ | 0.05 | $ | 0.13 | ||||||||||
Dividends paid to common stock and unit holders | $ | 18,226 | $ | 18,224 | $ | 10,287 | $ | 8,932 | $ | 8,679 | ||||||||||
AFFO payout ratio | 40.0 | % | 3,152.9 | % | 210.9 | % | 238.2 | % | 98.9 | % | ||||||||||
Year To Date | Nine Months Ended | Six Months Ended | Three Months Ended | Twelve Months Ended | Nine Months Ended | |||||||||||||||
Adjusted Funds From Operations (AFFO)(1) | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | September 30, 2014 | |||||||||||||||
FFO | $ | 106,393 | $ | 43,359 | $ | 12,449 | $ | 71,942 | $ | 55,345 | ||||||||||
Adjustments: | ||||||||||||||||||||
Straight-line rent | (22,872 | ) | (13,969 | ) | (3,038 | ) | (12,753 | ) | (9,435 | ) | ||||||||||
Amortization of above-market and below-market leases, net | (15,299 | ) | (11,549 | ) | (1,291 | ) | (5,081 | ) | (3,830 | ) | ||||||||||
Amortization of above-market and below-market ground leases, net | 1,092 | 577 | 62 | 248 | 186 | |||||||||||||||
Amortization of lease incentive costs | 264 | 175 | 86 | 379 | 235 | |||||||||||||||
Amortization of deferred financing costs and loan premium/discount, net | 3,357 | 2,203 | 652 | 1,525 | 1,065 | |||||||||||||||
Recurring capital expenditures, tenant improvements and lease commissions | (28,090 | ) | (19,492 | ) | (6,191 | ) | (40,984 | ) | (29,282 | ) | ||||||||||
Non-cash compensation expense | 6,186 | 4,152 | 2,149 | 7,559 | 5,047 | |||||||||||||||
AFFO | $ | 51,031 | $ | 5,456 | $ | 4,878 | $ | 22,835 | $ | 19,331 | ||||||||||
Weighted average common stock/units outstanding—diluted | 124,052 | 113,162 | 79,713 | 68,892 | 67,933 | |||||||||||||||
AFFO per common stock/unit—diluted | $ | 0.41 | $ | 0.05 | $ | 0.06 | $ | 0.33 | $ | 0.28 | ||||||||||
Dividends paid to common stock and unit holders | $ | 46,737 | $ | 28,511 | $ | 10,287 | $ | 34,966 | $ | 26,034 | ||||||||||
AFFO payout ratio | 91.6 | % | 522.6 | % | 210.9 | % | 153.1 | % | 134.7 | % |
9
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
DEBT SUMMARY
(Tabular amounts in thousands)
The following table sets forth information with respect to our outstanding indebtedness as of September 30, 2015.
Debt | Outstanding | Interest Rate(1) | Annual Debt Service(1) | Maturity Date | Balance at Maturity | |||||||||||
Unsecured loans | ||||||||||||||||
Unsecured revolving credit facility(2) | $ | 105,000 | LIBOR+ 1.15% to 1.85% | $ | — | 4/1/2020 | $ | 105,000 | ||||||||
Unsecured term loan—2-year term(3) | 460,000 | LIBOR+ 1.30% to 2.20% | — | 4/1/2018 | 460,000 | |||||||||||
Unsecured term loan—5-year term(4) | 550,000 | LIBOR+ 1.30% to 2.20% | — | 4/1/2020 | 550,000 | |||||||||||
Unsecured term loan—7-year term(5) | 350,000 | LIBOR+ 1.60% to 2.55% | — | 4/1/2022 | 350,000 | |||||||||||
Total unsecured loans | $ | 1,465,000 | ||||||||||||||
Mortgage Loans | ||||||||||||||||
Mortgage loan secured by Pinnacle II(6) | $ | 86,537 | 6.31% | 6,754 | 9/6/2016 | 85,301 | ||||||||||
Mortgage loan secured by 901 Market(7) | 30,000 | LIBOR+2.25% | — | 10/31/2016 | 30,000 | |||||||||||
Mortgage loan secured by Element LA(8) | 83,107 | LIBOR+1.95% | — | 11/1/2017 | 83,107 | |||||||||||
Mortgage loan secured by Rincon Center(9) | 102,920 | 5.13% | 7,195 | 5/1/2018 | 97,673 | |||||||||||
Mortgage loan secured by Sunset Gower/Sunset Bronson(10) | 97,000 | LIBOR+2.25% | — | 3/4/2019 | 97,000 | |||||||||||
Mortgage loan secured by Met Park North(11) | 64,500 | LIBOR+1.55% | — | 8/1/2020 | 64,500 | |||||||||||
Mortgage loan secured by 10950 Washington(12) | 28,525 | 5.32% | 2,003 | 3/11/2022 | 24,632 | |||||||||||
Mortgage loan secured by Pinnacle I(13) | 129,000 | 3.95% | 5,172 | 11/7/2022 | 117,190 | |||||||||||
Subtotal mortgage loans | $ | 621,589 | ||||||||||||||
Unamortized loan premium, net(14) | 1,746 | |||||||||||||||
Total mortgage loans | $ | 623,335 | ||||||||||||||
Total | $ | 2,088,335 |
______________________________
(1) | Interest rate with respect to indebtedness is calculated on the basis of a 360-day year for the actual days elapsed, excluding the amortization of loan fees and costs. |
(2) | Subsequent to September 30, 2015, we paid down the principal balance by $20.0 million. |
(3) | Subsequent to September 30, 2015, we paid down the principal balance by $85.0 million. |
(4) | Effective as of May 1, 2015, the Company entered into an interest rate contract with respect to $300.0 million of the $550.0 million five-year term loan facility that swapped one-month LIBOR to a fixed rate of 1.36% through the loan’s maturity on April 1, 2020. As a result, $300.0 million of this facility currently bears interest at a rate equal to 2.66% to 3.56% per annum depending on our leverage ratio. |
(5) | Effective as of May 1, 2015, the Company entered into an interest rate contract with respect to the entire $350.0 million seven-year term loan facility that swapped one-month LIBOR to a fixed rate of 1.61% through the loan’s maturity on April 1, 2022. As a result, this facility currently bears interest at a rate equal to 3.21% to 4.16% per annum depending on our leverage ratio. |
(6) | This loan was assumed on June 14, 2013 in connection with the contribution of the Pinnacle II property to the Company’s joint venture with M. David Paul & Associates/Worthe Real Estate Group. This loan bore interest only for the first five years. Beginning with the payment due October 6, 2011, monthly debt service includes annual debt amortization payments based on a 30-year amortization schedule. |
(7) | On October 29, 2012, we obtained a loan for our 901 Market property pursuant to which we borrowed $49.6 million upon closing. On April 10, 2015 we repaid $19.6 million of this loan. |
(8) | On November 24, 2014 we amended our construction loan for Element LA to, among other things, increase availability from $65.5 million to $102.4 million for budgeted site-work, construction of a parking garage, base building, tenant improvements, and leasing commission costs associated with the renovation and lease-up of the property. |
(9) | This loan is amortizing based on a 30-year amortization schedule. |
(10) | On March 16, 2011, we purchased an interest rate cap in order to cap one-month LIBOR at 3.715% with respect to $50.0 million of the loan through February 11, 2016. On January 11, 2012 we purchased an interest rate cap in order to cap one-month LIBOR at 2.00% with respect to $42.0 million of the loan through February 11, 2016. Effective March 4, 2015, the terms of this loan were amended and restated to introduce the ability to draw up to an additional $160.0 million for budgeted construction costs associated with our ICON development and to extend the maturity date from February 11, 2018 to March 4, 2019. |
(11) | This loan bears interest only at a rate equal to one-month LIBOR plus 1.55%. The full loan amount is subject to an interest rate contract that swapped one-month LIBOR to a fixed rate of 2.1644% through the loan’s maturity on August 1, 2020. As a result, this loan bears interest at a rate equal to 3.7144% per annum. |
(12) | This loan is amortizing based on a 30-year amortization schedule. |
(13) | This loan bears interest only for the first five years. Beginning with the payment due December 6, 2017, monthly debt service will include annual debt amortization payments based on a 30-year amortization schedule, for total annual debt service of $7.3 million. |
(14) | Represents unamortized amount of the non-cash mark-to-market adjustment on debt associated with Pinnacle II. |
10
PORTFOLIO DATA
11
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
IN-SERVICE OFFICE PORTFOLIO BY PROPERTY(1) | |||||||||||||||||||
Percent Occupied(3) | Percent Leased(3) | Annualized Base Rent(4) | Annualized Base Rent Per Square Foot(4) | ||||||||||||||||
Location | Submarket | Square Feet(2) | |||||||||||||||||
SAME-STORE | |||||||||||||||||||
Greater Seattle, Washington | |||||||||||||||||||
Met Park North | Lake Union | 190,748 | 95.7 | % | 95.7 | % | $ | 4,884,878 | $ | 26.75 | |||||||||
Northview | Lynnwood | 182,009 | 81.8 | 81.8 | 3,160,604 | 21.23 | |||||||||||||
505 First Avenue | Pioneer Square | 288,140 | 96.5 | 96.9 | 5,778,605 | 20.79 | |||||||||||||
83 King Street | Pioneer Square | 184,083 | 97.0 | 97.0 | 4,779,245 | 26.76 | |||||||||||||
Subtotal | 844,980 | 93.3 | % | 93.4 | % | $ | 18,603,332 | $ | 23.61 | ||||||||||
San Francisco Bay Area, California | |||||||||||||||||||
1455 Market Street | San Francisco | 1,025,833 | 97.4 | % | 97.5 | % | $ | 29,408,371 | $ | 29.45 | |||||||||
222 Kearny Street | San Francisco | 148,797 | 84.8 | 84.8 | 5,421,536 | 42.98 | |||||||||||||
275 Brannan Street | San Francisco | 54,673 | 100.0 | 100.0 | 3,074,137 | 56.23 | |||||||||||||
625 Second Street | San Francisco | 138,080 | 56.1 | 73.8 | 3,717,624 | 48.03 | |||||||||||||
875 Howard Street | San Francisco | 286,270 | 80.0 | 80.0 | 5,557,415 | 24.26 | |||||||||||||
Rincon Center | San Francisco | 580,850 | 91.3 | 91.5 | 22,404,317 | 42.27 | |||||||||||||
Subtotal | 2,234,503 | 90.2 | % | 91.5 | % | 69,583,399 | $ | 34.52 | |||||||||||
Los Angeles, California | |||||||||||||||||||
Pinnacle I | Burbank | 393,777 | 89.1 | % | 91.8 | % | $ | 14,273,972 | $ | 40.70 | |||||||||
Pinnacle II | Burbank | 231,864 | 99.2 | 99.2 | 8,942,900 | 38.88 | |||||||||||||
6922 Hollywood | Hollywood | 205,523 | 85.7 | 85.7 | 7,622,748 | 43.27 | |||||||||||||
Technicolor Building | Hollywood | 114,958 | 100.0 | 100.0 | 4,549,302 | 39.57 | |||||||||||||
Del Amo Office Building | Torrance | 113,000 | 100.0 | 100.0 | 3,327,208 | 29.44 | |||||||||||||
10900 Washington | West Los Angeles | 9,919 | 100.0 | 100.0 | 391,602 | 39.48 | |||||||||||||
10950 Washington | West Los Angeles | 159,024 | 100.0 | 100.0 | 5,904,374 | 37.13 | |||||||||||||
604 Arizona | West Los Angeles | 44,260 | 100.0 | 100.0 | 1,922,857 | 43.44 | |||||||||||||
9300 Wilshire | West Los Angeles | 61,224 | 91.5 | 91.5 | 2,373,107 | 42.36 | |||||||||||||
Subtotal | 1,333,549 | 94.0 | % | 94.9 | % | $ | 49,308,070 | $ | 39.32 | ||||||||||
Total Same-Store | 4,413,032 | 92.0 | % | 92.9 | % | $ | 137,494,801 | $ | 33.88 | ||||||||||
NON-SAME-STORE | |||||||||||||||||||
Greater Seattle, Washington | |||||||||||||||||||
Merrill Place | Pioneer Square | 193,153 | 73.2 | % | 73.2 | % | $ | 3,532,163 | $ | 25.00 | |||||||||
Subtotal | 193,153 | 73.2 | % | 73.2 | % | $ | 3,532,163 | $ | 25.00 | ||||||||||
San Francisco Bay Area, California | |||||||||||||||||||
3400 Hillview | Palo Alto | 207,857 | 100.0 | % | 100.0 | % | $ | 12,569,445 | $ | 60.47 | |||||||||
Clocktower Square | Palo Alto | 100,344 | 96.9 | 96.9 | 5,981,510 | 61.54 | |||||||||||||
Foothill Research | Palo Alto | 195,376 | 100.0 | 100.0 | 12,132,115 | 62.10 | |||||||||||||
Towers at Shore Center | Redwood Shores | 334,483 | 94.8 | 94.8 | 26,594,367 | 83.84 | |||||||||||||
901 Market Street | San Franciso | 206,199 | 100.0 | 100.0 | 9,576,329 | 46.44 | |||||||||||||
1740 Technology | San Jose Airport | 206,876 | 99.1 | 99.1 | 6,477,658 | 31.59 | |||||||||||||
Concourse | San Jose Airport | 944,386 | 93.6 | 94.5 | 24,966,195 | 28.26 | |||||||||||||
Skyport Plaza | San Jose Airport | 418,086 | 99.1 | 99.1 | 9,647,615 | 23.29 | |||||||||||||
Campus Center | Silicon Valley | 471,580 | 100.0 | 100.0 | 14,713,296 | 31.20 | |||||||||||||
Subtotal | 3,085,187 | 97.2 | % | 97.5 | % | $ | 122,658,530 | $ | 40.91 | ||||||||||
Los Angeles, California | |||||||||||||||||||
3401 Exposition | West Los Angeles | 63,376 | 100.0 | % | 100.0 | % | $ | 2,624,147 | $ | 41.41 | |||||||||
Element LA | West Los Angeles | 284,037 | 100.0 | 100.0 | 14,960,821 | 52.67 | |||||||||||||
Subtotal | 347,413 | 100.0 | % | 100.0 | % | $ | 17,584,968 | $ | 50.62 | ||||||||||
Total Non-Same-Store | 3,625,753 | 96.2 | % | 96.4 | % | 143,775,661 | $ | 41.23 | |||||||||||
Total Stabilized | 8,038,785 | 93.9 | % | 94.5 | % | $ | 281,270,462 | $ | 37.28 |
12
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
IN-SERVICE OFFICE PORTFOLIO BY PROPERTY(1)—CONTINUED | |||||||||||||||||||
Percent Occupied(3) | Percent Leased(3) | Annualized Base Rent(4) | Annualized Base Rent Per Square Foot(4) | ||||||||||||||||
Location | Submarket | Square Feet(2) | |||||||||||||||||
LEASE-UP | |||||||||||||||||||
San Francisco Bay Area, California | |||||||||||||||||||
One Bay Plaza | Burlingame | 195,739 | 75.0 | % | 79.0 | % | $ | 4,929,223 | $ | 33.59 | |||||||||
Metro Center | Foster City | 730,215 | 57.5 | 60.0 | 17,475,901 | 41.60 | |||||||||||||
2180 Sand Hill Road | Palo Alto | 45,613 | 56.0 | 56.0 | 2,162,943 | 84.67 | |||||||||||||
Embarcadero Place | Palo Alto | 197,402 | 74.3 | 92.9 | 4,349,397 | 29.67 | |||||||||||||
Lockheed | Palo Alto | 46,759 | 91.7 | 91.7 | 1,651,286 | 38.49 | |||||||||||||
Page Mill Center | Palo Alto | 176,245 | 62.7 | 87.2 | 6,874,504 | 62.20 | |||||||||||||
Palo Alto Square | Palo Alto | 328,251 | 83.6 | 86.6 | 18,802,428 | 68.50 | |||||||||||||
333 Twin Dolphin Plaza | Redwood Shores | 182,789 | 73.5 | 88.5 | 5,662,593 | 42.18 | |||||||||||||
555 Twin Dolphin Plaza | Redwood Shores | 198,936 | 88.9 | 88.9 | 7,777,258 | 43.99 | |||||||||||||
Shorebreeze | Redwood Shores | 230,932 | 66.5 | 66.5 | 6,621,089 | 43.14 | |||||||||||||
Skyway Landing | Redwood Shores | 247,173 | 84.5 | 92.7 | 7,282,249 | 34.87 | |||||||||||||
Bayhill Office Center | San Bruno | 554,328 | 89.0 | 94.4 | 14,792,151 | 30.00 | |||||||||||||
Gateway | San Jose Airport | 609,093 | 80.6 | 82.6 | 13,647,922 | 27.79 | |||||||||||||
Metro Plaza | San Jose Airport | 456,921 | 78.7 | 88.0 | 10,297,278 | 28.65 | |||||||||||||
Peninsula Office Park | San Mateo | 510,789 | 80.2 | 80.2 | 16,740,853 | 40.87 | |||||||||||||
Techmart Commerce | Silicon Valley | 284,440 | 79.6 | 79.6 | 7,951,396 | 35.11 | |||||||||||||
Total Lease-up | 4,995,625 | 76.5 | % | 81.4 | % | $ | 147,018,471 | $ | 38.49 | ||||||||||
TOTAL IN-SERVICE | 13,034,410 | 87.2 | % | 89.5 | % | $ | 428,288,932 | $ | 37.68 |
___________________________
(1) | Our in-service portfolio excludes the development, redevelopment, properties held-for-sale, and land properties described on pages 15 and 16. As of September 30, 2015, we had one office development property under construction, five office redevelopment properties under construction, and seven land properties (see pages 15 and 16). We define “lease-up” properties as properties we recently purchased, developed, or redeveloped that have not yet reached 92.0% occupancy and are within one year following purchase and cessation of major construction activities, as applicable. |
(2) | Square footage for office properties has been determined by management based upon estimated leasable square feet, which may be less or more than the Building Owners and Managers Association, or BOMA, rentable area. Square footage may change over time due to re-measurement or re-leasing. |
(3) | Percent occupied for office properties is calculated as (i) square footage under commenced leases as of September 30, 2015, divided by (ii) total square feet, expressed as a percentage. Percent leased for office properties includes uncommenced leases. |
(4) | Rent data for our office properties is presented on an annualized basis. Annualized base rent for office properties is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements)) under commenced leases as of September 30, 2015, by (ii) 12. Annualized base rent per square foot for the office properties is calculated as (i) annualized base rent divided by (ii) square footage under commenced leases as of September 30, 2015. Annualized base rent does not reflect tenant reimbursements. |
13
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
IN-SERVICE OFFICE PORTFOLIO SUMMARY(1) | ||||||||||||||||||||||||||
Occupied Square Feet | Percent Occupied(3) | Leased Square Feet | Percent Leased(3) | Annualized Base Rent(4) | Annualized Base Rent Per Square Foot(4) | |||||||||||||||||||||
Location | Properties | Square Feet(2) | ||||||||||||||||||||||||
STABILIZED | ||||||||||||||||||||||||||
Greater Seattle, Washington | ||||||||||||||||||||||||||
Lake Union | 1 | 190,748 | 182,590 | 95.7 | % | 182,590 | 95.7 | % | $ | 4,884,878 | $ | 26.75 | ||||||||||||||
Lynnwood | 1 | 182,009 | 148,863 | 81.8 | 148,863 | 81.8 | 3,160,604 | 21.23 | ||||||||||||||||||
Pioneer Square | 3 | 665,376 | 597,830 | 89.8 | 599,188 | 90.1 | 14,090,013 | 23.57 | ||||||||||||||||||
Subtotal | 5 | 1,038,133 | 929,283 | 89.5 | % | 930,641 | 89.6 | % | $ | 22,135,495 | $ | 23.82 | ||||||||||||||
San Francisco Bay Area, California | ||||||||||||||||||||||||||
Palo Alto | 3 | 503,577 | 500,426 | 99.4 | % | 500,426 | 99.4 | % | $ | 30,683,070 | $ | 61.31 | ||||||||||||||
Redwood Shores | 1 | 334,483 | 317,210 | 94.8 | 317,210 | 94.8 | 26,594,367 | 83.84 | ||||||||||||||||||
San Francisco | 7 | 2,440,702 | 2,222,216 | 91.0 | 2,249,925 | 92.2 | 79,159,729 | 35.62 | ||||||||||||||||||
San Jose Airport | 3 | 1,569,348 | 1,502,954 | 95.8 | 1,512,111 | 96.4 | 41,091,467 | 27.34 | ||||||||||||||||||
Silicon Valley | 1 | 471,580 | 471,580 | 100.0 | 471,580 | 100.0 | 14,713,296 | 31.20 | ||||||||||||||||||
Subtotal | 15 | 5,319,690 | 5,014,386 | 94.3 | % | 5,051,252 | 95.0 | % | $ | 192,241,929 | $ | 38.34 | ||||||||||||||
Los Angeles, California | ||||||||||||||||||||||||||
Burbank | 2 | 625,641 | 580,704 | 92.8 | % | 591,592 | 94.6 | % | $ | 23,216,872 | $ | 39.98 | ||||||||||||||
Hollywood | 2 | 320,481 | 291,142 | 90.8 | 291,142 | 90.8 | 12,172,050 | 41.81 | ||||||||||||||||||
Torrance | 1 | 113,000 | 113,000 | 100.0 | 113,000 | 100.0 | 3,327,208 | 29.44 | ||||||||||||||||||
West Los Angeles | 6 | 621,840 | 616,636 | 99.2 | 616,636 | 99.2 | 28,176,908 | 45.69 | ||||||||||||||||||
Subtotal | 11 | 1,680,962 | 1,601,482 | 95.3 | % | 1,612,370 | 95.9 | % | $ | 66,893,038 | $ | 41.77 | ||||||||||||||
Total Stabilized | 31 | 8,038,785 | 7,545,151 | 93.9 | % | 7,594,263 | 94.5 | % | $ | 281,270,462 | $ | 37.28 | ||||||||||||||
LEASE-UP | ||||||||||||||||||||||||||
San Francisco Bay Area, California | ||||||||||||||||||||||||||
Burlingame | 1 | 195,739 | 146,748 | 75.0 | % | 154,568 | 78.97 | % | $ | 4,929,223 | $ | 33.59 | ||||||||||||||
Foster City | 1 | 730,215 | 420,067 | 57.5 | 438,239 | 60.02 | 17,475,901 | 41.60 | ||||||||||||||||||
Palo Alto | 5 | 794,270 | 600,073 | 75.6 | 689,849 | 86.85 | 33,840,558 | 56.39 | ||||||||||||||||||
Redwood Shores | 4 | 859,830 | 673,351 | 78.3 | 721,129 | 83.87 | 27,343,188 | 40.61 | ||||||||||||||||||
San Bruno | 1 | 554,328 | 493,096 | 89.0 | 523,512 | 94.44 | 14,792,151 | 30.00 | ||||||||||||||||||
San Jose Airport | 2 | 1,066,014 | 850,560 | 79.8 | 905,317 | 84.93 | 23,945,200 | 28.15 | ||||||||||||||||||
San Mateo | 1 | 510,789 | 409,634 | 80.2 | 409,634 | 80.20 | 16,740,853 | 40.87 | ||||||||||||||||||
Silicon Valley | 1 | 284,440 | 226,491 | 79.6 | 226,491 | 79.63 | 7,951,396 | 35.11 | ||||||||||||||||||
Total Lease-up | 16 | 4,995,625 | 3,820,020 | 76.5 | % | 4,068,739 | 81.4 | % | $ | 147,018,470 | $ | 38.49 | ||||||||||||||
TOTAL IN-SERVICE | 47 | 13,034,410 | 11,365,171 | 87.2 | % | 11,663,002 | 89.5 | % | $ | 428,288,932 | $ | 37.68 |
___________________________
Refer to footnotes on page 13.
14
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
REDEVELOPMENT, DEVELOPMENT AND HELD-FOR-SALE OFFICE SUMMARY(1)
Estimated Square Feet(2) | Occupied Square Feet | Percent Occupied(3) | Leased Square Feet | Percent Leased(3) | Annualized Base Rent(4) | Annualized Base Rent Per Square Foot(4) | |||||||||||||||||||
Location | Submarket | ||||||||||||||||||||||||
REDEVELOPMENT | |||||||||||||||||||||||||
Los Angeles, California | |||||||||||||||||||||||||
12655 Jefferson | West Los Angeles | 100,077 | — | — | % | — | — | % | $ | — | $ | — | |||||||||||||
3402 Pico | West Los Angeles | 50,097 | — | — | — | — | — | — | |||||||||||||||||
4th & Traction | Downtown Los Angeles | 120,937 | — | — | — | — | — | — | |||||||||||||||||
405 Mateo | Downtown Los Angeles | 83,285 | — | — | % | — | — | % | $ | — | $ | — | |||||||||||||
Subtotal | 354,396 | — | — | % | — | — | % | $ | — | $ | — | ||||||||||||||
San Francisco Bay Area, California | |||||||||||||||||||||||||
Patrick Henry Drive | Silicon Valley | 70,520 | — | — | % | — | — | % | $ | — | $ | — | |||||||||||||
Subtotal | 70,520 | — | — | % | — | — | % | $ | — | $ | — | ||||||||||||||
Total Redevelopment | 424,916 | — | — | % | — | — | % | $ | — | $ | — | ||||||||||||||
DEVELOPMENT | |||||||||||||||||||||||||
Los Angeles, California | |||||||||||||||||||||||||
Icon—Building I Tower | Hollywood | 323,000 | — | — | % | 200,052 | 61.9 | % | $ | — | $ | — | |||||||||||||
Icon—Building II | Hollywood | 90,000 | — | — | — | — | — | — | |||||||||||||||||
Total Icon | 413,000 | — | — | % | 200,052 | 48.4 | % | $ | — | $ | — | ||||||||||||||
Total Development | 413,000 | — | — | % | 200,052 | 48.4 | % | $ | — | $ | — | ||||||||||||||
TOTAL | 837,916 | — | — | % | 200,052 | 23.9 | % | $ | — | $ | — |
______________________________
(1) | Excludes in-service properties and land assets (see pages 12, 13, and 16). |
(2) | Square footages have been determined by management based upon estimated leasable square feet, which may be less or more than the Building Owners and Managers Association, or BOMA, rentable area. Square footage may change over time due to re-measurement or re-leasing. |
(3) | Percent occupied for office properties is calculated as (i) square footage under commenced leases as of September 30, 2015, divided by (ii) total square feet, expressed as a percentage. Percent leased for office properties includes uncommenced leases. |
(4) | Rent data for our office properties is presented on an annualized basis. Annualized base rent for office properties is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements)) under commenced leases as of September 30, 2015, by (ii) 12. Annualized base rent per square foot for the office properties is calculated as (i) annualized base rent divided by (ii) square footage under commenced lease as of September 30, 2015. Annualized base rent does not reflect tenant reimbursements. |
15
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
LAND PROPERTIES SUMMARY
Location | Submarket | Square Feet(1) | Percent of Total | |||||
Greater Seattle, Washington | ||||||||
Merrill Place | Pioneer Square | 166,800 | 6.4 | % | ||||
Subtotal | 166,800 | 6.4 | % | |||||
San Francisco Bay Area, California | ||||||||
Skyport Plaza | San Jose | 350,000 | 13.5 | % | ||||
Campus Center | Silicon Valley | 750,000 | 29.0 | |||||
Subtotal | 1,100,000 | 42.5 | % | |||||
Los Angeles, California | ||||||||
Sunset Bronson—Lot A | Hollywood | 300,000 | 11.6 | % | ||||
Sunset Gower— Redevelopment | Hollywood | 423,396 | 16.3 | |||||
Element LA | West Los Angeles | 500,000 | 19.3 | |||||
3402 Pico | West Los Angeles | 99,903 | 3.9 | |||||
Subtotal | 1,323,299 | 51.1 | % | |||||
TOTAL | 2,590,099 | 100.0 | % |
______________________________
(1) | Square footage for land assets represents management’s estimate of developable square feet, the majority of which remains subject to entitlement approvals that have not yet been obtained. |
16
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
MEDIA & ENTERTAINMENT PORTFOLIO SUMMARY
Property | Square Feet(1) | Percent of Total | Percent Leased(2) | Annual Base Rent(3) | Annual Base Rent Per Leased Square Foot(4) | ||||||||||||
Sunset Gower | 570,470 | 65.6 | % | 72.5 | % | $ | 14,157,644 | $ | 34.22 | ||||||||
Sunset Bronson | 299,098 | 34.4 | 70.7 | 6,797,999 | 32.01 | ||||||||||||
TOTAL | 869,568 | 100.0 | % | 71.9 | % | $ | 20,955,643 | $ | 33.47 |
______________________________
(1) | Square footage for media and entertainment properties has been determined by management based upon estimated gross square feet, which may be less or more than BOMA rentable area. Square footage may change over time due to re-measurement or re-leasing. During the fourth quarter ended December 31, 2014, the Company razed approximately 14,625 square feet at its Sunset Bronson property in connection with its ICON development. |
(2) | Percent leased for media and entertainment properties is the average percent leased for the 12 months ended September 30, 2015. |
(3) | Annual base rent for media and entertainment properties reflects actual base rent for the 12 months ended September 30, 2015, excluding tenant reimbursements. |
(4) | Annual base rent per leased square foot for the media and entertainment properties is calculated as (i) annual base rent divided by (ii) the average square footage under lease during the 12 months ended September 30, 2015 |
17
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
CURRENT VALUE CREATION DEVELOPMENT PROJECTS
(Unaudited, $ in thousands, except square feet)
Estimated Construction Period | Project Costs(1) | |||||||||||||||||||||||
City | Start Date | Estimated Completion Date | Estimated Stabilization Date(2) | Estimated Rentable Square Feet(3) | Total %Leased | Project Costs as of 9/30/15 | Total Estimated Project Costs | Estimated Initial Stabilized Yield on Project Costs(4) | ||||||||||||||||
UNDER CONSTRUCTION | ||||||||||||||||||||||||
Los Angeles, California | ||||||||||||||||||||||||
Icon—Building I Tower | Hollywood | Q4-2014 | Q4-2016 | Q2-2017 | 323,000 | — | % | N/A | N/A | N/A | ||||||||||||||
Icon—Building II | Hollywood | Q4-2014 | Q3-2017 | Q2-2018 | 90,000 | — | % | N/A | N/A | N/A | ||||||||||||||
Total Icon(5) | 413,000 | — | % | $ | 50,455 | $ | 200,287 | 8.5% | ||||||||||||||||
12655 Jefferson | Playa Del Rey | Q2-2015 | Q4-2015 | Q2-2016 | 100,077 | — | % | 40,053 | 60,658 | 7.2% | ||||||||||||||
Total Under Construction | 513,077 | $ | 90,508 | $ | 260,945 | |||||||||||||||||||
FUTURE DEVELOPMENT PIPELINE | ||||||||||||||||||||||||
Los Angeles, California | ||||||||||||||||||||||||
Sunset Bronson—Lot A | Hollywood | TBD | TBD | TBD | 300,000 | N/A | N/A | TBD | TBD | |||||||||||||||
Sunset Gower—Redevelopment | Hollywood | TBD | TBD | TBD | 423,396 | N/A | N/A | TBD | TBD | |||||||||||||||
Element LA | Los Angeles | TBD | TBD | TBD | 500,000 | N/A | N/A | TBD | TBD | |||||||||||||||
3402 Pico(6) | Santa Monica | TBD | TBD | TBD | 99,903 | N/A | N/A | TBD | TBD | |||||||||||||||
4th & Traction | Los Angeles | TBD | TBD | TBD | 120,937 | N/A | N/A | TBD | TBD | |||||||||||||||
405 Mateo | Los Angeles | TBD | TBD | TBD | 83,285 | N/A | N/A | TBD | TBD | |||||||||||||||
San Francisco Bay Area, California | ||||||||||||||||||||||||
Skyport Plaza | San Jose | TBD | TBD | TBD | 350,000 | N/A | N/A | TBD | TBD | |||||||||||||||
Campus Center | Milpitas | TBD | TBD | TBD | 750,000 | N/A | N/A | TBD | TBD | |||||||||||||||
Greater Seattle, Washington | ||||||||||||||||||||||||
Merrill Place | Seattle | TBD | TBD | TBD | 166,800 | N/A | N/A | TBD | TBD | |||||||||||||||
Total Future Development Pipeline | 2,794,321 |
__________________________
(1) | Project costs exclude interest costs capitalized in accordance with Accounting Standards Codification (“ASC”) 835-20-50-1, personnel costs capitalized in accordance with ASC 970-360-25 and operating expenses capitalized in accordance with ASC 970-340. |
(2) | Based on management’s estimate of stabilized occupancy (92.0%). |
(3) | Square footage for office properties has been determined by management based upon estimated leasable square feet, which may be less or more than the Building Owners and Managers Association, or BOMA, rentable area. Square footage may change over time due to re-measurement or re-leasing. |
(4) | Estimated initial stabilized yield on project costs is calculated as the quotient of the estimated amounts of NOI and our investment in the property once the project has reached stabilized occupancy (92%) and initial rental concessions, if any, have elapsed. Our estimated initial stabilized yield excludes the impact of leverage. Our cash rents related to our value-creation projects are expected to increase over time and our average cash yields are expected, in general, to be greater than our estimated initial stabilized yields on a cash basis. Our estimates for initial cash yields, and total costs at completion, represent our initial estimates at the commencement of the project. We expect to update this information upon completion of the project, or sooner if there are significant changes to the expected project yields or costs. We caution you not to place undue reliance on the estimated initial stabilized yields because they are based solely on our estimates, using data available to us throughout the development process. The amount of total investment required to reach stabilized occupancy may differ substantially from our estimates due to various factors. We can provide no assurance that the actual initial stabilized yields will be consistent with the estimated initial stabilized yields set forth herein. |
(5) | The Icon development is comprised of a 14-story office tower (Icon—Building 1 Tower), a 5-story mid-rise office building (Icon—Building II), and 1,635-stall parking structure. The parking structure is scheduled to be completed within the fourth quarter of 2015. The estimated completion and stabilization dates for each of the buildings is reflected in the above table. Since the costs of the parking structure and certain other development costs are attributable to both buildings, estimated project costs and stabilized yield on project costs are shown on a combined basis for the entire Icon development. Total estimated project costs for Icon excludes land. |
(6) | Estimated rentable square feet for 3402 Pico does not include a 50,097 square foot existing vacant building. |
18
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
SAME-STORE ANALYSIS(1)
(Unaudited, tabular amounts in thousands, except number of properties and square feet)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2015 | 2014 | % change | 2015 | 2014 | % change | ||||||||||||||||
Same-store office statistics(2) | |||||||||||||||||||||
Number of properties | 19 | 19 | 19 | 19 | |||||||||||||||||
Rentable square feet | 4,413,032 | 4,413,032 | 4,413,032 | 4,413,032 | |||||||||||||||||
Ending % leased | 92.9 | % | 94.8 | % | (2.0 | )% | 92.9 | % | 94.8 | % | (2.0 | )% | |||||||||
Ending % occupied | 92.0 | % | 94.1 | % | (2.2 | )% | 92.0 | % | 94.1 | % | (2.2 | )% | |||||||||
Average % occupied for the period | 92.9 | % | 92.0 | % | 1.0 | % | 92.5 | % | 89.8 | % | 3.0 | % | |||||||||
Same-store media statistics(3) | |||||||||||||||||||||
Number of properties | 2 | 2 | 2 | 2 | |||||||||||||||||
Rentable square feet | 869,568 | 869,568 | 869,568 | 869,568 | |||||||||||||||||
Average % occupied for the period | 77.3 | % | 76.7 | % | 0.8 | % | 72.5 | % | 72.8 | % | (0.4 | )% | |||||||||
SAME-STORE ANALYSIS—GAAP BASIS | |||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2015 | 2014 | % change | 2015 | 2014 | % change | ||||||||||||||||
Same-store net operating income—GAAP basis | |||||||||||||||||||||
Total office revenues | $ | 47,484 | $ | 47,059 | (4) | 0.9 | % | $ | 139,060 | $ | 133,776 | (5)(6) | 3.9 | % | |||||||
Total media revenues | 10,226 | 11,428 | (10.5 | ) | 28,376 | 30,187 | (6.0 | ) | |||||||||||||
Total revenues | $ | 57,710 | $ | 58,487 | (1.3 | )% | $ | 167,436 | $ | 163,963 | 2.1 | % | |||||||||
Total office expense | $ | 17,654 | $ | 17,150 | (7) | 2.9 | % | $ | 50,037 | $ | 47,881 | (8) | 4.5 | % | |||||||
Total media expense | 6,280 | 7,401 | (15.1 | ) | 17,354 | 19,244 | (9.8 | ) | |||||||||||||
Total property expense | $ | 23,934 | $ | 24,551 | (2.5 | )% | $ | 67,391 | $ | 67,125 | 0.4 | % | |||||||||
Same-store office net operating income—GAAP basis | $ | 29,830 | $ | 29,909 | (0.3 | )% | $ | 89,023 | $ | 85,895 | 3.6 | % | |||||||||
NOI Margin | 62.8 | % | 63.6 | % | (1.3 | )% | 64.0 | % | 64.2 | % | (0.3 | )% | |||||||||
Same-store media net operating income—GAAP basis | $ | 3,946 | $ | 4,027 | (2.0 | )% | $ | 11,022 | $ | 10,943 | 0.7 | % | |||||||||
NOI Margin | 38.6 | % | 35.2 | % | 9.7 | % | 38.8 | % | 36.3 | % | 6.9 | % | |||||||||
Same-store total property net operating income—GAAP basis | $ | 33,776 | $ | 33,936 | (0.5 | )% | $ | 100,045 | $ | 96,838 | 3.3 | % | |||||||||
NOI Margin | 58.5 | % | 58.0 | % | 0.9 | % | 59.8 | % | 59.1 | % | 1.2 | % |
19
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
SAME-STORE ANALYSIS(1) —CONTINUED
(Unaudited, tabular amounts in thousands)
SAME-STORE ANALYSIS—CASH BASIS | |||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2015 | 2014 | % change | 2015 | 2014 | % change | ||||||||||||||||
Same-store net operating income—Cash basis | |||||||||||||||||||||
Total office revenues | $ | 46,236 | $ | 43,186 | (4) | 7.1 | % | $ | 132,922 | $ | 121,125 | (5)(6) | 9.7 | % | |||||||
Total media revenues | 9,808 | 11,482 | (14.6 | ) | 27,099 | 30,241 | (10.4 | ) | |||||||||||||
Total revenues | $ | 56,044 | $ | 54,668 | 2.5 | % | $ | 160,021 | $ | 151,366 | 5.7 | % | |||||||||
Total office expense | $ | 17,592 | $ | 17,088 | (7) | 2.9 | % | $ | 49,852 | $ | 47,696 | (8) | 4.5 | % | |||||||
Total media expense | 6,280 | 7,401 | (15.1 | ) | 17,354 | 19,244 | (9.8 | ) | |||||||||||||
Total property expense | $ | 23,872 | $ | 24,489 | (2.5 | )% | $ | 67,206 | $ | 66,940 | 0.4 | % | |||||||||
Same-store office net operating income—Cash basis | $ | 28,644 | $ | 26,098 | 9.8 | % | $ | 83,070 | $ | 73,429 | 13.1 | % | |||||||||
NOI Margin | 62.0 | % | 60.4 | % | 2.6 | % | 62.5 | % | 60.6 | % | 3.1 | % | |||||||||
Same-store media net operating income—Cash basis | $ | 3,528 | $ | 4,081 | (13.6 | )% | $ | 9,745 | $ | 10,997 | (11.4 | )% | |||||||||
NOI Margin | 36.0 | % | 35.5 | % | 1.4 | % | 36.0 | % | 36.4 | % | (1.1 | )% | |||||||||
Same-store total property net operating income—Cash basis | $ | 32,172 | $ | 30,179 | 6.6 | % | $ | 92,815 | $ | 84,426 | 9.9 | % | |||||||||
NOI Margin | 57.4 | % | 55.2 | % | 4.0 | % | 58.0 | % | 55.8 | % | 3.9 | % |
______________________________
(1) | “Same store” defined as all of the properties owned and included in our stabilized portfolio as of January 1, 2014 and still owned and included in the stabilized portfolio as of September 30, 2015. |
(2) | See page 12 for same-store office properties. |
(3) | See page 17 for same-store media properties. |
(4) | Amount excludes one-time $3,644 tenant recoveries relating to prior year property tax expenses disclosed in the Q3-2014 earnings release. |
(5) | Amount excludes one-time $3,340 tenant recoveries relating to prior year property tax expenses disclosed in the Q3-2014 earnings release. |
(6) | Amount excludes a one-time $1.6 million early lease termination fee income disclosed in the Q2-2014 earnings release. |
(7) | Amount excludes one-time $4,742 property tax expenses disclosed in the Q3-2014 earnings release. |
(8) | Amount excludes one-time $4,201 property tax expenses disclosed in the Q3-2014 earnings release. |
20
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
RECONCILIATION OF SAME-STORE PROPERTY NET OPERATING INCOME TO GAAP NET INCOME (LOSS)
(Unaudited, $ in thousands)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Reconciliation to net income | |||||||||||||||
Same-store office revenues—Cash basis | $ | 46,236 | $ | 43,186 | $ | 132,922 | $ | 121,125 | |||||||
GAAP adjustments to office revenues—Cash basis | 1,248 | 3,873 | 6,138 | 12,651 | |||||||||||
One time revenue adjustments per definition | — | 3,644 | — | 4,950 | |||||||||||
Same-store office revenues—GAAP basis | $ | 47,484 | $ | 50,703 | $ | 139,060 | $ | 138,726 | |||||||
Same-store media revenues—Cash basis | $ | 9,808 | $ | 11,482 | $ | 27,099 | $ | 30,241 | |||||||
GAAP adjustments to media revenues—Cash basis | 418 | (54 | ) | 1,277 | (54 | ) | |||||||||
Same-store media revenues—GAAP basis | $ | 10,226 | $ | 11,428 | $ | 28,376 | $ | 30,187 | |||||||
Same-store property revenues—GAAP basis | $ | 57,710 | $ | 62,131 | $ | 167,436 | $ | 168,913 | |||||||
Same-store office expenses—Cash basis | $ | 17,592 | $ | 17,088 | $ | 49,852 | $ | 47,696 | |||||||
GAAP adjustments to office expenses—Cash basis | 62 | 62 | 185 | 185 | |||||||||||
Property tax expense adjustments | — | 4,742 | — | 4,201 | |||||||||||
Same-store office expenses—GAAP basis | $ | 17,654 | $ | 21,892 | $ | 50,037 | $ | 52,082 | |||||||
Same-store media expenses—Cash basis | $ | 6,280 | $ | 7,401 | $ | 17,354 | $ | 19,244 | |||||||
Same-store media expenses—GAAP basis | $ | 6,280 | $ | 7,401 | $ | 17,354 | $ | 19,244 | |||||||
Same-store property expenses—GAAP basis | $ | 23,934 | $ | 29,293 | $ | 67,391 | $ | 71,326 | |||||||
Same-store net operating income—GAAP basis | $ | 33,776 | $ | 32,838 | $ | 100,045 | $ | 97,587 | |||||||
Non-Same Store GAAP net operating income | 59,962 | 3,947 | 133,436 | 10,580 | |||||||||||
General and administrative | (9,378 | ) | (6,802 | ) | (28,951 | ) | (19,157 | ) | |||||||
Depreciation and amortization | (80,195 | ) | (17,361 | ) | (170,945 | ) | (51,973 | ) | |||||||
Income from operations | $ | 4,165 | $ | 12,622 | $ | 33,585 | $ | 37,037 | |||||||
Interest expense | (14,461 | ) | (6,550 | ) | (34,067 | ) | (19,519 | ) | |||||||
Interest income | 17 | 1 | 118 | 21 | |||||||||||
Acquisition-related expense reimbursements (expenses) | 83 | (214 | ) | (43,442 | ) | (319 | ) | ||||||||
Other (expense) income | (3 | ) | 56 | (2 | ) | 43 | |||||||||
Gain on sale of real estate | 8,371 | 5,538 | 30,471 | 5,538 | |||||||||||
Net loss from discontinued operations | — | (38 | ) | — | (164 | ) | |||||||||
Net (loss) income | $ | (1,828 | ) | $ | 11,415 | $ | (13,337 | ) | $ | 22,637 |
21
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
NET OPERATING INCOME DETAIL Three Months Ended September 30, 2015 (Unaudited, $ in thousands) | ||||||||||||||||||||||||
Same Store Office Properties(1) | Non-Same Store Office Properties(2) | Development/ Redevelopment(3) | Lease-Up Properties(4) | Media & Entertainment(5) | Total Properties | |||||||||||||||||||
Revenue | ||||||||||||||||||||||||
Rents | ||||||||||||||||||||||||
Cash | $ | 34,441 | $ | 31,193 | $ | — | $ | 34,751 | $ | 5,623 | $ | 106,008 | ||||||||||||
GAAP Revenue | 1,248 | 5,143 | — | 6,055 | 418 | 12,864 | ||||||||||||||||||
Total Rents | $ | 35,689 | $ | 36,336 | $ | — | $ | 40,806 | $ | 6,041 | $ | 118,872 | ||||||||||||
Tenant Reimbursements | $ | 6,852 | $ | 7,310 | $ | — | $ | 5,580 | $ | 212 | $ | 19,954 | ||||||||||||
Parking and Other | 4,943 | 295 | (3 | ) | 195 | 3,973 | 9,403 | |||||||||||||||||
Total Revenue | $ | 47,484 | $ | 43,941 | $ | (3 | ) | $ | 46,581 | $ | 10,226 | $ | 148,229 | |||||||||||
Property Operating Expenses | 17,654 | 13,647 | (9 | ) | 19,510 | 6,280 | 57,082 | |||||||||||||||||
Property GAAP Net Operating Income | $ | 29,830 | $ | 30,294 | $ | 6 | $ | 27,071 | $ | 3,946 | $ | 91,147 | ||||||||||||
Square Feet | 4,413,032 | 3,625,753 | 837,916 | 4,995,625 | 869,568 | 14,741,894 | ||||||||||||||||||
Ending % Leased | 92.9 | % | 96.4 | % | 23.9 | % | 81.4 | % | 71.9 | % | 84.7 | % | ||||||||||||
Ending % Occupied | 92.0 | % | 96.2 | % | — | % | 76.5 | % | 71.9 | % | 81.3 | % | ||||||||||||
NOI Margin | 62.8 | % | 68.9 | % | N/A | 58.1 | % | 38.6 | % | 61.5 | % | |||||||||||||
Property GAAP Net Operating Income | $ | 29,830 | $ | 30,294 | $ | 6 | $ | 27,071 | $ | 3,946 | $ | 91,147 | ||||||||||||
Less : GAAP Revenue | (1,248 | ) | (5,143 | ) | — | (6,055 | ) | (418 | ) | (12,864 | ) | |||||||||||||
Add : GAAP Expense | 62 | 426 | — | 28 | — | 515 | ||||||||||||||||||
Property Cash Net Operating Income | $ | 28,644 | $ | 25,577 | $ | 6 | $ | 21,044 | $ | 3,528 | $ | 78,798 | ||||||||||||
Net Income Reconciliation | Q3-2015 | |||||||||||||||||||||||
Property GAAP Net Operating Income | $ | 91,147 | ||||||||||||||||||||||
Broadway Note | 1,163 | |||||||||||||||||||||||
Disposed Properties | 1,217 | |||||||||||||||||||||||
Other income/inter-company eliminations | 211 | |||||||||||||||||||||||
Total GAAP Net Operating Income | $ | 93,738 | ||||||||||||||||||||||
General and administrative | (9,378 | ) | ||||||||||||||||||||||
Depreciation and amortization | (80,195 | ) | (1) See page 12 for same-store office properties. | |||||||||||||||||||||
Income from Operations | $ | 4,165 | (2) See page 12 for non-same-store properties. | |||||||||||||||||||||
Interest expense | (14,461 | ) | (3) See page 15 for development/redevelopment properties. | |||||||||||||||||||||
Interest income | 17 | (4) See page 13 for lease-up properties. | ||||||||||||||||||||||
Acquisition-related expense reimbursements | 83 | (5) See page 17 for same-store media properties. | ||||||||||||||||||||||
Other expenses | (3 | ) | ||||||||||||||||||||||
Gain on sale of real estate | 8,371 | |||||||||||||||||||||||
Net Loss | $ | (1,828 | ) |
22
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
OFFICE PORTFOLIO LEASING ACTIVITY
Three Months Ended September 30, 2015 | Nine Months Ended September 30, 2015 | ||||||
Total Gross Leasing Activity(1) | |||||||
Rentable square feet | 679,443 | 1,186,115 | |||||
Gross New Leasing Activity | |||||||
Rentable square feet | 511,178 | 731,621 | |||||
New cash rate | $ | 50.55 | $ | 50.56 | |||
Gross Renewal Leasing Activity | |||||||
Rentable square feet | 168,265 | 454,494 | |||||
Renewal cash rate | $ | 48.21 | $ | 48.82 | |||
Total Leases Expired and Terminated | |||||||
Contractual (scheduled) expiration (square feet) | 174,305 | 372,553 | |||||
Early termination (square feet) | 53,210 | 196,217 | |||||
Total | 227,515 | 568,770 | |||||
Net Absorption | |||||||
Leased rentable square feet | 283,663 | 162,851 | |||||
Cash Rent Growth(2) | |||||||
Expiring rate | $ | 33.56 | $ | 36.05 | |||
New/renewal rate | $ | 48.17 | $ | 49.7 | |||
Change | 43.5 | % | 37.9 | % | |||
Straight-Line Rent Growth(3) | |||||||
Expiring Rate | $ | 30.96 | $ | 33.45 | |||
New/renewal rate | $ | 50.41 | $ | 51.06 | |||
Change | 62.8 | % | 52.6 | % | |||
Weighted Average Lease Terms | |||||||
New (in months) | 84.9 | 78.1 | |||||
Renewal (in months) | 49.2 | 42.1 |
Tenant Improvements and Leasing Commissions(4) | Lease Transaction Costs Per Square Foot | ||||||||||||||
Three Months Ended September 30, 2015 | Nine Months Ended September 30, 2015 | ||||||||||||||
Total | Annual | Total | Annual | ||||||||||||
New leases | $ | 61.23 | $ | 8.65 | $ | 51.84 | $ | 7.97 | |||||||
Renewal leases | $ | 19.46 | $ | 4.74 | $ | 14.89 | $ | 4.24 | |||||||
Blended | $ | 50.88 | $ | 8.02 | $ | 37.68 | $ | 7.03 |
______________________________
(1) | The 1,186,115 square feet executed in the nine-month period ended September 30, 2015 excludes: (a) a 5-year management agreement with Sodexo America to operate food services in 7,612 square feet (Suite 190) at Pinnacle I (this is a building amenity with no base rent); and (b) a 15-year lease extension with KTLA-TV for 94,205 square feet (Buildings 15, 16, 20 and 21, and Stage 6) at Sunset Bronson Studios, a part of our Media & Entertainment portfolio, scheduled to commence February 1, 2016. The current KTLA-TV lease comprised of 90,506 square feet will expire with a net effective rent of $1.50 (NNN) on January 31, 2016 while the lease extension consisting of 94,205 square feet will commence with a net effective rent of $2.39 (NNN) on February 1, 2016. |
(2) | Represents a comparison between initial stabilized cash rents on new and renewal leases as compared to the expiring cash rents in the same space. New leases are only included if the same space was leased within the previous 12 months. |
(3) | Represents a comparison between initial straight-line rents on new and renewal leases as compared to the straight-line rents on expiring leases in the same space. New leases are only included if the same space was leased within the previous 12 months. |
(4) | Represents per square foot weighted average lease transaction costs based on the lease executed in the current quarter in our properties. |
23
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
OFFICE PORTFOLIO COMMENCED LEASES WITH NON-RECURRING, UP-FRONT ABATEMENTS(1) | |||||||||||||||
Location | Submarket | Square Feet | Lease Start Date | Rent Start Date | Starting Base Rents(2) | Lease Expiration Date | |||||||||
San Francisco Bay Area, California | |||||||||||||||
Bayhill Office Center | San Bruno | 106,099 | 2/1/2015 | 10/1/2015 | $ | 22.80 | 1/31/2025 | ||||||||
Palo Alto Square | Palo Alto | 13,040 | 2/1/2015 | 8/1/2015 | 79.20 | 12/31/2019 | |||||||||
Page Mill Center | Palo Alto | 22,846 | 3/1/2015 | 8/1/2015 | 74.04 | 6/30/2020 | |||||||||
Foothill Research Center | Palo Alto | 85,910 | 3/1/2015 | 10/1/2015 | 61.80 | 2/28/2025 | |||||||||
Palo Alto Square | Palo Alto | 13,291 | 3/1/2015 | 9/1/2015 | 78.00 | 2/28/2025 | |||||||||
Metro Center | Foster City | 18,803 | 3/1/2015 | 10/1/2015 | 39.00 | 2/28/2022 | |||||||||
Peninsula Office Park | San Mateo | 27,737 | 5/1/2015 | 9/1/2015 | 46.20 | 4/30/2020 | |||||||||
Skyway Landing | Redwood Shores | 17,555 | 6/1/2015 | 10/1/2015 | 45.00 | 5/31/2018 | |||||||||
Peninsula Office Park | San Mateo | 34,730 | 8/17/2015 | 11/17/2015 | 49.20 | 5/31/2022 | |||||||||
Palo Alto Square | Palo Alto | 26,490 | 9/1/2015 | 1/1/2016 | 84.00 | 8/31/2020 | |||||||||
Los Angeles, California | |||||||||||||||
Element LA | West Los Angeles | 284,037 | 4/1/2015 | 10/1/2015 | $ | 52.67 | 3/31/2030 |
______________________________
(1) | Consists of leases greater than 10,000 square feet which commenced on or prior to September 30, 2015, with three or more months of up-front free rent resulting in a rent start date after the commencement of the three month period ending September 30, 2015. |
(2) | Stated per leased square foot. Calculated by dividing the product of (i) monthly base rental payments (defined as cash base rents (before abatements)) as of the lease commencement date, and (ii) 12, by (iii) the leased square footage. For commenced leases, calculated by dividing the product of (i) monthly base rental payments (defined as cash base rents (before abatements)) for the month ended September 30, 2015, and (ii) 12, by (iii) the leased square footage. Base rents do not include tenant reimbursements. |
24
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
QUARTERLY UNCOMMENCED/BACKFILL — NEXT EIGHT QUARTERS(1) | ||||||||||||||||||||||||||||||||||||||||||||||||
Q4 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | Q1 2017 | Q2 2017 | Q3 2017 | |||||||||||||||||||||||||||||||||||||||||
Location | SF | Starting Rent/sf(2) | SF | Starting Rent/sf(2) | SF | Starting Rent/sf(2) | SF | Starting Rent/sf(2) | SF | Starting Rent/sf(2) | SF | Starting Rent/sf(2) | SF | Starting Rent/sf(2) | SF(2) | Starting Rent/sf(2) | ||||||||||||||||||||||||||||||||
Greater Seattle, Washington | ||||||||||||||||||||||||||||||||||||||||||||||||
Lake Union | — | $ | — | — | $ | — | — | $ | — | — | $ | — | — | $ | — | — | $ | — | — | $ | — | — | $ | — | ||||||||||||||||||||||||
Lynnwood | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Pioneer Square | — | — | 1,358 | 24.50 | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Subtotal | — | $ | — | 1,358 | $ | 24.50 | — | $ | — | — | $ | — | — | $ | — | — | $ | — | — | $ | — | — | $ | — | ||||||||||||||||||||||||
San Francisco Bay Area, California | ||||||||||||||||||||||||||||||||||||||||||||||||
Burlingame | 7,820 | $ | 39.75 | — | $ | — | — | $ | — | — | $ | — | — | $ | — | — | $ | — | — | $ | — | — | $ | — | ||||||||||||||||||||||||
Foster City | 18,172 | 65.29 | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Palo Alto | 80,037 | 58.96 | 9,739 | 63.00 | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Redwood Shores | 47,778 | 54.71 | 3,810 | 63.00 | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
San Bruno | 13,186 | 45.62 | 17,230 | 34.80 | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
San Francisco | 25,881 | 57.05 | 1,828 | 58.88 | — | — | — | — | — | — | — | — | 38,739 | 70.84 | — | — | ||||||||||||||||||||||||||||||||
San Jose Airport | 47,541 | 36.72 | 76,774 | 36.00 | 18,405 | 37.08 | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
San Mateo | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Silicon Valley | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Subtotal | 240,415 | $ | 52.63 | 109,381 | $ | 39.54 | 18,405 | $ | 37.08 | — | $ | — | — | $ | — | — | $ | — | 38,739 | $ | 70.84 | — | $ | — | ||||||||||||||||||||||||
Los Angeles, California | ||||||||||||||||||||||||||||||||||||||||||||||||
Burbank | — | $ | — | 10,888 | $ | 40.80 | — | $ | — | — | $ | — | — | $ | — | — | $ | — | — | $ | — | — | $ | — | ||||||||||||||||||||||||
Downtown Los Angeles | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Hollywood | — | — | — | — | — | — | — | — | — | — | 200,052 | 54.00 | (3) | — | — | — | — | |||||||||||||||||||||||||||||||
Torrance | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
West Los Angeles | 194 | 49.48 | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Subtotal | 194 | $ | 49.48 | 10,888 | $ | 40.80 | — | $ | — | — | $ | — | — | $ | — | 200,052 | $ | 54.00 | — | $ | — | — | $ | — | ||||||||||||||||||||||||
TOTAL | 240,609 | $ | 52.63 | 121,627 | $ | 39.48 | 18,405 | $ | 37.08 | — | $ | — | — | $ | — | 200,052 | $ | 54.00 | 38,739 | $ | 70.84 | — | $ | — |
______________________
(1) | Consists of (i) uncommenced leases, defined as new leases with respect to vacant space, and (ii) backfill leases, defined as new leases with respect to occupied space, in either case executed on or prior to September 30, 2015 but with commencement dates after September 30, 2015 and within the next eight quarters. |
(2) | Calculated by dividing the product of (i) monthly base rental payments (defined as cash base rents (before abatements)) as of the lease commencement date, and (ii) 12, by (iii) the leased square footage. Base rents do not include tenant reimbursements. Rent commencement dates do not reflect up-front free rents, if any. |
(3) | Netflix, Inc. is anticipated to commence on 1/1/2017. The lease will commence 6 months after the anticipated delivery date, which is estimated to be 7/1/2016. |
25
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
QUARTERLY OFFICE LEASE EXPIRATIONS — NEXT EIGHT QUARTERS(1) | ||||||||||||||||||||||||||||||||||||||||||||||||
Q4 2015(2) | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | Q1 2017 | Q2 2017 | Q3 2017 | |||||||||||||||||||||||||||||||||||||||||
Location | Expiring SF(3) | Rent/sf(4) | Expiring SF(3) | Rent/sf(4) | Expiring SF(3) | Rent/sf(4) | Expiring SF(3) | Rent/sf(4) | Expiring SF(3) | Rent/sf(4) | Expiring SF(3) | Rent/sf(4) | Expiring SF(3) | Rent/sf(4) | Expiring SF(3) | Rent/sf(4) | ||||||||||||||||||||||||||||||||
Greater Seattle, Washington | ||||||||||||||||||||||||||||||||||||||||||||||||
Lake Union | — | $ | — | — | $ | — | — | $ | — | — | $ | — | 600 | $ | 43.70 | — | $ | — | — | $ | — | — | $ | — | ||||||||||||||||||||||||
Lynnwood | — | — | — | — | 44,908 | 18.50 | — | $ | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Pioneer Square | 29,881 | 24.86 | 19,445 | 26.51 | — | — | 11,995 | 26.96 | 8,349 | 25.67 | 6,000 | 28.50 | — | — | — | — | ||||||||||||||||||||||||||||||||
Subtotal | 29,881 | 24.86 | 19,445 | 26.51 | 44,908 | $ | 18.50 | 11,995 | $ | 26.96 | 8,949 | $ | 26.88 | 6,000 | $ | 28.50 | — | $ | — | — | $ | — | ||||||||||||||||||||||||||
San Francisco Bay Area, California | ||||||||||||||||||||||||||||||||||||||||||||||||
Burlingame | 10,413 | 27.25 | — | $ | — | 13,538 | $ | 26.85 | 6,692 | $ | 30.96 | 6,590 | $ | 31.17 | — | $ | — | 10,162 | 38.26 | 2,707 | 36.23 | |||||||||||||||||||||||||||
Foster City | 21,844 | 45.49 | 4,485 | 83.52 | 694 | 58.71 | 12,865 | 41.93 | 13,068 | 44.18 | 39,294 | 39.48 | 7,868 | 53.94 | 5,577 | 56.96 | ||||||||||||||||||||||||||||||||
Palo Alto | 2,162 | 32.40 | 18,535 | 57.14 | 96,838 | 31.81 | 39,199 | $ | 44.45 | 36,150 | 37.02 | 80,944 | 76.30 | 25,952 | 65.30 | 2,199 | 90.00 | |||||||||||||||||||||||||||||||
Redwood Shores | 32,575 | 53.30 | 31,039 | 28.65 | 84,070 | 37.10 | 43,718 | 116.13 | 38,696 | 40.41 | 12,894 | 30.11 | 28,393 | 49.75 | 57,436 | 41.73 | ||||||||||||||||||||||||||||||||
San Bruno | 16,976 | 36.37 | 2,470 | 11.59 | 39,269 | 36.16 | 5,360 | 38.70 | 54,649 | 29.81 | 3,129 | 28.68 | 10,770 | 38.97 | 47,697 | 31.94 | ||||||||||||||||||||||||||||||||
San Francisco | 75,212 | 31.47 | 3,332 | 35.00 | 47,617 | 32.27 | 22,283 | 37.79 | 3,515 | 37.73 | 162,180 | 35.47 | 32,050 | 33.63 | 139,197 | 47.09 | ||||||||||||||||||||||||||||||||
San Jose Airport | 129,450 | 29.72 | 93,375 | 28.63 | 60,847 | 28.78 | 82,971 | 30.33 | 122,303 | 28.50 | 161,400 | 30.67 | 91,865 | 29.85 | 481,002 | 26.05 | ||||||||||||||||||||||||||||||||
San Mateo | 8,362 | 44.22 | 4,563 | 43.28 | 43,779 | 36.97 | 14,355 | 43.46 | 9,583 | 41.46 | 4,930 | 45.76 | 39,045 | 43.21 | 7,576 | 43.92 | ||||||||||||||||||||||||||||||||
Silicon Valley | 6,004 | 38.30 | 13,763 | 34.53 | 12,760 | 29.36 | 15,471 | 33.72 | 14,172 | 35.90 | — | — | 4,750 | 38.28 | 31,596 | 32.11 | ||||||||||||||||||||||||||||||||
Subtotal | 302,998 | $ | 34.71 | 171,562 | $ | 33.89 | 399,412 | $ | 33.31 | 242,914 | $ | 50.54 | 298,726 | $ | 32.93 | 464,771 | $ | 41.17 | 250,855 | $ | 39.98 | 774,987 | $ | 32.22 | ||||||||||||||||||||||||
Los Angeles, California | ||||||||||||||||||||||||||||||||||||||||||||||||
Burbank | — | $ | — | — | $ | — | — | $ | — | 109,323 | $ | 43.51 | 9,005 | $ | 44.50 | — | $ | — | — | $ | — | — | $ | — | ||||||||||||||||||||||||
Downtown Los Angeles | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Hollywood | — | — | — | — | — | — | — | — | — | — | — | — | 2,664 | — | — | — | ||||||||||||||||||||||||||||||||
Torrance | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
West Los Angeles | 1,068 | 41.40 | 4,364 | 45.21 | 33,031 | 31.31 | — | — | 2,853 | 39.96 | — | — | 8,527 | 46.35 | 5,253 | 65.42 | ||||||||||||||||||||||||||||||||
Subtotal | 1,068 | $ | 41.40 | 4,364 | $ | 45.21 | 33,031 | $ | 31.31 | 109,323 | $ | 43.51 | 11,858 | $ | 43.41 | — | $ | — | 11,191 | $ | 35.32 | 5,253 | $ | 65.42 | ||||||||||||||||||||||||
TOTAL | 333,947 | $ | 33.85 | 195,371 | $ | 33.41 | 477,351 | $ | 31.78 | 364,232 | $ | 47.66 | 319,533 | $ | 33.15 | 470,771 | $ | 41.01 | 262,046 | $ | 39.78 | 780,240 | $ | 32.44 |
______________________
(1) | The following schedule does not reflect 35,407 square feet that expired on September 30, 2015. |
(2) | Q4 2015 expiring square footage does not include 53,662 square feet of Month-to-Month leases. |
(3) | Includes leases that expire on the last day of the quarter. |
(4) | Calculated by dividing the product of (i) monthly base rental payments (defined as cash base rents (before abatements)) as of the lease expiration date, and (ii) 12, by (iii) the leased square footage. Base rents do not include tenant reimbursements. |
26
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
OFFICE LEASE EXPIRATIONS—ANNUAL
Year of Lease Expiration | Square Footage of Expiring Leases | Percent of Office Portfolio Square Feet | Annualized Base Rent(1) | Percentage of Office Portfolio Annualized Base Rent | Annualized Base Rent Per Square Foot(2) | Annualized Base Rent Per Square Foot at Expiration(3) | |||||||||||||||
Vacant | 2,009,272 | 14.5 | % | ||||||||||||||||||
2015 | 369,354 | 2.7 | 12,308,617 | 2.7 | 33.32 | 33.41 | |||||||||||||||
2016 | 1,356,487 | 9.8 | 48,829,294 | 10.8 | 36.00 | 36.60 | |||||||||||||||
2017 | 2,076,400 | 15.0 | 69,562,057 | 15.3 | 33.50 | 35.19 | |||||||||||||||
2018 | 1,302,731 | 9.4 | 47,177,996 | 10.4 | 36.21 | 40.00 | |||||||||||||||
2019 | 2,051,808 | 14.8 | 75,154,463 | 16.6 | 36.63 | 41.68 | |||||||||||||||
2020 | 900,950 | 6.5 | 37,911,657 | 8.4 | 42.08 | 49.95 | |||||||||||||||
2021 | 980,033 | 7.1 | 36,495,433 | 8.1 | 37.24 | 44.06 | |||||||||||||||
2022 | 224,016 | 1.6 | 9,980,075 | 2.2 | 44.55 | 57.83 | |||||||||||||||
2023 | 641,149 | 4.6 | 20,370,942 | 4.5 | 31.77 | 38.86 | |||||||||||||||
2024 | 123,907 | 0.9 | 6,539,308 | 1.4 | 52.78 | 61.56 | |||||||||||||||
Thereafter | 1,185,402 | 8.6 | 63,145,029 | 13.9 | 53.27 | 63.31 | |||||||||||||||
Building management use | 99,272 | 0.7 | — | — | — | — | |||||||||||||||
Signed leases not commenced(4) | 497,883 | 3.6 | 25,860,345 | 5.7 | 51.94 | 63.05 | |||||||||||||||
Total/Weighted Average | 13,818,664 | 100.0 | % | $ | 453,335,216 | 100.0 | % | $ | 38.39 | $ | 43.42 |
______________________________
(1) | Rent data for our office properties is presented on an annualized basis without regard to cancellation options. Annualized base rent for office properties is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements)) as of September 30, 2015, by (ii) 12. Annualized base rent does not reflect tenant reimbursements. |
(2) | Annualized base rent per square foot for all lease expiration years is calculated as (i) base rental payments (defined as cash base rents (before abatements)) under commenced leases, divided by (ii) square footage under commenced leases as of September 30, 2015. |
(3) | Annualized base rent per square foot at expiration for all lease expiration years use is calculated as (i) base rental payments (defined as cash base rents (before abatements)) under commenced leases, divided by (ii) square footage under commenced lease as of September 30, 2015. |
(4) | Annualized base rent per leased square foot and annualized best rent per square foot at expiration for signed leases not commenced, reflects uncommenced leases on space not occupied as of September 30, 2015 and is calculated as (i) base rental payments (defined as cash base rents (before abatements)) under uncommenced leases for vacant space as of September 30, 2015, divided by (ii) square footage under uncommenced leases as of September 30, 2015. |
27
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
FIFTEEN LARGEST OFFICE TENANTS
Tenant | Property | Number of Leases | Number of Properties | Lease Expiration | Total Leased Square Feet | Percent of Rentable Square Feet | Annualized Base Rent(1) | Percent of Annualized Base Rent | |||||||||||
Google, Inc.(2) | Various | 2 | 2 | Various | 305,729 | 2.2% | $ | 18,617,934 | 4.3% | ||||||||||
Weil, Gotshal & Manges LLP(3) | Towers at Shore Center | 1 | 1 | Various | 101,000 | 0.8 | 16,265,637 | 3.8 | |||||||||||
Riot Games, Inc.(4) | Various | 2 | 2 | Various | 286,629 | 2.1 | 15,102,344 | 3.5 | |||||||||||
Cisco Systems, Inc.(5) | Various | 2 | 2 | Various | 474,560 | 3.4 | 14,808,569 | 3.5 | |||||||||||
Square | 1455 Market Street | 1 | 1 | 9/27/2023 | 334,284 | 2.4 | 10,938,442 | 2.6 | |||||||||||
Salesforce.com(6) | Rincon Center | 1 | 1 | Various | 237,567 | 1.7 | 10,762,085 | 2.5 | |||||||||||
Uber Technologies, Inc. | 1455 Market Street | 1 | 1 | 2/28/2025 | 232,290 | 1.7 | 9,903,340 | 2.3 | |||||||||||
Warner Bros. Entertainment | Pinnacle II | 1 | 1 | 12/31/2021 | 230,000 | 1.7 | 8,942,900 | 2.1 | |||||||||||
Qualcomm Incorporated | Skyport Plaza | 2 | 1 | 7/31/2017 | 365,502 | 2.6 | 8,675,247 | 2.0 | |||||||||||
Warner Music Group | Pinnacle I | 1 | 1 | 12/31/2019 | 195,166 | 1.4 | 8,005,578 | 1.9 | |||||||||||
NetSuite, Inc.(7) | Peninsula Office Park | 2 | 1 | Various | 166,667 | 1.2 | 7,567,085 | 1.8 | |||||||||||
EMC Corporation(8) | Various | 3 | 2 | Various | 294,756 | 2.1 | 7,370,001 | 1.7 | |||||||||||
AIG | Rincon Center | 1 | 1 | 7/31/2017 | 132,600 | 1.0 | 6,099,600 | 1.4 | |||||||||||
Stanford(9) | Various | 2 | 2 | Various | 89,281 | 0.6 | 5,971,358 | 1.4 | |||||||||||
GSA(10) | Various | 5 | 4 | Various | 183,709 | 1.3 | 5,601,912 | 1.3 | |||||||||||
TOTAL | 27 | 23 | 3,629,740 | 26.2% | $ | 154,632,032 | 36.1% |
______________________________
(1) | Annualized base rent is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements)) under commenced leases as of September 30, 2015, by (ii) 12. Annualized base rent does not reflect tenant reimbursements. |
(2) | Google, Inc. expirations by property and square footage: (1) 207,857 square feet at 3400 Hillview expiring on November 30, 2021 and (2) 97,872 square feet at Foothill Research Center expiring on February 28, 2025. |
(3) | Weil, Gotshal & Manges LLP expiration by square footage: (1) 25,320 square feet expiring on August 31, 2016 and (2) 75,680 square feet expiring on August 31, 2026. |
(4) | Riot Games, Inc. expirations by property and square footage: (1) 2,592 square feet at Shorebreeze Center expiring on November 30, 2015 and (2) 284,037 square feet at Element LA expiring on March 31, 2030. |
(5) | Cisco Systems, Inc. expirations by property and square footage: (1) 2,980 square feet at Concourse expiring March 31, 2018 and (2) 471,580 square feet at Campus Center expiring on December 31, 2019. |
(6) | Salesforce.com is expected to take possession of an additional 4,144 square feet during the second quarter of 2017. Expirations by square footage: (1) 78,872 square feet expiring on July 31, 2025; (2) 59,689 square feet expiring on April 30, 2027; (3) 93,028 square feet expiring on October, 31, 2028; and (4) 5,978 square feet of MTM storage space. |
(7) | NetSuite, Inc. expirations by square footage: (1) 38,194 square feet expiring on August 31, 2019 and (2) 128,473 square feet expiring May 31, 2022. |
(8) | EMC expirations by property and square footage: (1) 66,510 square feet at 875 Howard Street expiring on June 30, 2019; (2) 185,292 square feet at 505 First expiring on October 18, 2021; and (3) 42,954 square feet at 505 First expiring on December 31, 2023. |
(9) | Stanford is expected to take possession of an additional 43,215 square feet at Page Mill Center during the fourth quarter of 2015. Expirations by property and square footage: (1) Stanford Healthcare 63,201 square feet at Page Mill Center expiring June 30, 2019 and (2) Stanford University 26,080 square feet at Palo Alto Square expiring on December 31, 2019. |
(10) | GSA expirations by property and square footage: (1) 71,729 square feet at 1455 Market Street expiring on February 19, 2017; (2) 5,906 square feet at 901 Market Street expiring on April 30, 2017; (3) 28,993 square feet at Northview expiring on April 4, 2020; 33,582 square feet at Rincon Center expiring May 31, 2020; and (4) 43,499 square feet at 901 Market Street expiring on July 31, 2021. |
28
Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
OFFICE PORTFOLIO DIVERSIFICATION
Industry | Total Square Feet(1) | Annualized Rent as of Percent of Total | ||||
Business Services | 967,672 | 7.7 | % | |||
Educational | 90,421 | 0.6 | ||||
Financial Services | 434,499 | 1.8 | ||||
Insurance | 381,052 | 3.4 | ||||
Legal | 740,991 | 11.5 | ||||
Media & Entertainment | 1,491,047 | 14.6 | ||||
Other | 1,071,267 | 9.0 | ||||
Real Estate | 89,112 | 0.9 | ||||
Retail | 768,270 | 5.2 | ||||
Technology | 4,662,429 | 39.7 | ||||
Advertising | 119,993 | 0.9 | ||||
Government | 302,488 | 2.2 | ||||
Healthcare | 245,930 | 2.5 | ||||
TOTAL | 11,365,171 | 100.0 | % |
______________________________
(1) | Does not include signed leases not commenced. |
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Hudson Pacific Properties, Inc.
Third Quarter 2015 Supplemental Operating and Financial Data
DEFINITIONS
Funds From Operations (FFO): We calculate funds from operations before non-controlling interest (FFO) in accordance with the standards established by the National Association of Real Estate Investment Trusts (NAREIT). FFO represents net income (loss), computed in accordance with accounting principles generally accepted in the United States of America (GAAP), excluding gains (or losses) from sales of depreciable operating property, real estate depreciation and amortization (excluding amortization of above (below) market rents for acquisition properties and amortization of deferred financing costs and debt discounts) and after adjustments for unconsolidated partnerships and joint ventures. We use FFO as a supplemental performance measure because, in excluding real estate depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs.
We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that results from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. Other equity REITs may not calculate FFO in accordance with the NAREIT definition and, accordingly, our FFO may not be comparable to such other REITs’ FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of our performance. FFO should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends. FFO should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP.
Adjusted Funds From Operations (AFFO): Adjusted Funds From Operations (AFFO) is a non-GAAP financial measure we believe is a useful supplemental measure of our performance. We compute AFFO by adding to FFO the non-cash compensation expense and amortization of deferred financing costs, and subtracting recurring capital expenditures, tenant improvements and leasing commissions (excluding pre-existing obligations on contributed or acquired properties funded with amounts received in settlement of prorations), and eliminating the net effect of straight-line rents, amortization of lease buy-out costs, and amortization of above/below market lease intangible assets and liabilities and amortization of loan discounts/premium. AFFO is not intended to represent cash flow for the period. We believe that AFFO provides useful information to the investment community about our financial position as compared to other REITs since AFFO is a widely reported measure used by other REITs. However, other REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not be comparable to other REITs.
Net Operating Income (NOI): We evaluate performance based upon property net operating income (“NOI”) from continuing operations. NOI is not a measure of operating results or cash flows from operating activities as measured by GAAP and should not be considered an alternative to income from continuing operations, as an indication of our performance, or as an alternative to cash flows as a measure of liquidity, or our ability to make distributions. All companies may not calculate NOI in the same manner. We consider NOI to be a useful performance measure to investors and management, because when compared across periods, NOI reflects the revenues and expenses directly associated with owning and operating the Company’s properties and the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing a perspective not immediately apparent from income from continuing operations. We define NOI as operating revenues (including rental revenues, other property-related revenue, tenant recoveries and other operating revenues), less property-level operating expenses (which includes external management fees, if any, and property-level general and administrative expenses). NOI excludes corporate general and administrative expenses, depreciation and amortization, impairments, gain/loss on sale of real estate, interest expense, acquisition-related expenses and other non-operating items. NOI on a cash basis is NOI on a GAAP basis, adjusted to exclude the effect of straight-line rent and adjustments required by GAAP. We believe that NOI on a cash basis is helpful to investors as an additional measure of operating performance because it eliminates straight-line rent and other non-cash adjustments to revenue and expenses.
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