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Form 8-K Hudson Pacific Propertie For: Feb 25 Filed by: Hudson Pacific Properties, L.P.

February 25, 2016 4:01 PM EST




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): February 25, 2016
 _________________________________
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., Ninth 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 February 25, 2016, 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 and year ended December 31, 2015. A copy of the press release is furnished herewith as Exhibit 99.1, which is incorporated herein by reference.
Also on February 25, 2016, we made available on our Web site (www.hudsonpacificproperties.com) certain supplemental information concerning our financial results and operations for the fourth 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 and year ended December 31, 2015 and made available on our Web site certain supplemental information relating to our financial results for the quarter ended December 31, 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 February 25, 2016 regarding the Company’s financial results for the quarter and full-year ended December 31, 2015.
99.2**
 
Supplemental Operating and Financial Data for the quarter ended December 31, 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:
February 25, 2016
By:
/s/ Mark T. Lammas
 
 
 
Mark T. Lammas
 
 
 
Chief Operating Officer, Chief Financial Officer and Treasurer
EXHBIT INDEX
Exhibit
No.
 
Description
99.1**
 
Press release dated February 25, 2016 regarding the Company’s financial results for the quarter and full-year ended December 31, 2015.
99.2**
 
Supplemental Operating and Financial Data for the quarter ended December 31, 2015.


 
**
Furnished herewith.


 





Hudson Pacific Properties Announces Strong
Fourth Quarter and Full Year 2015 Financial Results


Los Angeles, CA, February 25, 2016—Hudson Pacific Properties, Inc. (the “Company” or “Hudson Pacific”) (NYSE: HPP) today announced financial results for the fourth quarter ended December 31, 2015.

Fourth Quarter Highlights

FFO (excluding specified items) of $64.8 million, or $0.44 per diluted share, compared to $22.2 million, or $0.32 per share, a year ago;
Completed new and renewal leases totaling 400,441 square feet at cash and GAAP rent spreads of 22.7% and 42.0%, respectively;
Improved in-service office portfolio leased rate to 90.1% at December 31, 2015, up from 89.5% as of September 30, 2015;
Completed a private placement for $425.0 million of senior guaranteed notes, fully repaying the Company’s two-year floating rate facility with long-term, fixed rate financing;
Closed on a new $300.0 million term loan credit facility;
Declared and paid a quarterly dividend of $0.20 per common share, a 60.0% increase from the previous annualized dividend level; and
Redeemed all issued and outstanding shares of its 8.375% Series B Cumulative Redeemable Preferred Stock.

“We had a strong fourth quarter, with solid execution on all fronts, particularly in terms of leasing, where activity across our portfolio has only accelerated during the first few months of 2016,” said Victor Coleman, Hudson Pacific Properties’ Chairman and CEO. “In the fourth quarter, we executed over 400,000 square feet of new and renewal leases at cash rent spreads in excess of 22.0%, which in turn, addressed our largest 2016 expiration, and effectively stabilized Pinnacle I.”

Coleman added, “Year-to-date, we’ve over 860,000 square feet executed and in leases, and another 745,000 square feet in LOIs, including more than 365,000 square feet relating to 2017 expirations. We’re making significant progress with regard to leasing at our development and redevelopment projects, and ICON is now 100.0% pre-leased as we recently signed another lease with Netflix for the tower’s remaining 123,000 square feet. We’ve seen no drop-off in leasing activity, and fundamentals across our core markets remain strong. As we continue to evaluate potential dispositions, our recent sale of Bayhill Office Center to YouTube at a premium to our purchase price allocation underscores there’s still robust demand from sophisticated tech companies for high-quality office space in A+ locations.”

Financial Results

Funds From Operations (FFO) (excluding specified items) for the three months ended December 31, 2015 totaled $64.8 million, or $0.44 per diluted share, compared to $22.2 million, or $0.32 per share, a year ago. The specified items for the fourth quarter of 2015 consisted of acquisition-related expense savings of $0.1 million, or $0.00 per diluted share. The specified items for the fourth quarter of 2014 consisted of expenses associated with the acquisition of the Equity Office Properties’ San Francisco Peninsula and Silicon Valley portfolio (the “EOP Northern California Portfolio”) of $4.3 million, or $0.06 per diluted share, and costs associated with a one-year consulting arrangement with a former executive of $1.3 million, or $0.02 per diluted share. FFO, including the specified items, totaled $64.9 million, or $0.44 per diluted share, for the three months ended December 31, 2015, compared to $16.6 million, or $0.24 per share, a year ago.

The Company reported a net loss attributable to common stockholders of $6.5 million, or $(0.07) per diluted share, for the three months ended December 31, 2015, compared to a net loss attributable to common stockholders of $2.3 million, or $(0.03) per diluted share, for the three months ended December 31, 2014.






Combined Operating Results For The Three Months Ended December 31, 2015

Total revenue from continuing operations during the quarter increased 124.8% to $154.7 million from $68.8 million for the same quarter a year ago. Total operating expenses from continuing operations increased 146.5% to $140.8 million from $57.1 million for the same quarter a year ago. As a result, income from operations increased 18.6% to $13.8 million for the fourth quarter of 2015, compared to income from operations of $11.6 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 fourth quarter of 2015 increased 158.8% to $16.6 million, compared to interest expense of $6.4 million for the same quarter a year ago. At December 31, 2015, the Company had $2.3 billion of notes payable (excluding unamortized premium and deferred financing costs), compared to $957.5 million (including held for sale mortgage loans and excluding unamortized premium and deferred financing costs) at December 31, 2014.

Segment Operating Results For The Three Months Ended December 31, 2015

Office Properties

Total revenue from continuing operations at the Company’s office properties increased 145.5% to $143.9 million from $58.6 million for the same quarter a year ago. The increase was primarily due to a $76.3 million increase in rental revenue to $118.2 million and an $11.5 million increase in tenant recoveries to $22.3 million, largely resulting from the EOP Northern California Portfolio acquisition, though revenue associated with leases at Element LA and 3401 Exposition Boulevard also contributed.

Office property operating expenses from continuing operations increased 148.5% to $50.8 million from $20.4 million for the same quarter a year ago. The increase was primarily the result of operating expenses associated with the EOP Northern California Portfolio acquisition.

As a result, office property net operating income in the fourth quarter increased by 143.9% on a GAAP basis and by 146.2% on a cash basis.

At December 31, 2015, the Company’s stabilized and in-service office portfolio was 95.3% and 90.1% leased, respectively. During the quarter, the Company executed 60 new and renewal leases totaling 400,441 square feet.

Media and Entertainment Properties

Total revenue at the Company’s media and entertainment properties increased 5.8% to $10.8 million from $10.2 million for the same quarter a year ago, primarily due to a $0.9 million increase in rental revenue to $6.1 million, partially offset by a decrease in other property-related revenue by $0.4 million to $4.3 million. The increase in rental revenue stemmed from improved stage and production office occupancy at both properties, while the decrease in other property-related revenue primarily resulted from lower lighting and grip revenue at Sunset Bronson due to a fourth quarter production hiatus of certain stage users.
 
Total media and entertainment operating expenses decreased 13.6% to $6.4 million from $7.4 million for the same quarter a year ago, largely due to administrative expense savings associated with development overhead allocations, and lower equipment rental costs stemming from the production hiatus of certain stage users at Sunset Bronson.

As a result, media and entertainment net operating income in the fourth quarter increased by 57.2% on a GAAP basis and by 42.0% on a cash basis.

The Company historically based occupancy trends for Sunset Gower and Sunset Bronson on estimated gross square footage as determined at the time of their respective acquisitions in 2007 and 2008. The Company has since reconfigured or adapted certain spaces for improved utilization and, during the fourth quarter, completed a full examination of space





utilization at both media and entertainment properties. As a result, the Company adjusted current and historic occupancy trends for Sunset Gower and Sunset Bronson to include space utilization for production support and building management, which aligns more closely with customary office property methodologies. The Company also eliminated from certain structural vacancy (i.e. electrical plant, utility areas and covered pathways) historically included within the gross square footage, but not available for tenancy. The revised methodology more accurately reflects space utilization at Sunset Gower and Sunset Bronson, and commencing in the current quarter, the Company will report occupancy trends for its media and entertainment properties accordingly. The Company has likewise recalculated and will report historic occupancies based on this methodology to facilitate comparisons to prior periods.

As of December 31, 2015, the trailing 12-month occupancy for the Company’s media and entertainment properties increased to 78.5% from 76.4% for the trailing 12-month period ended December 31, 2014. By way of comparison, under the prior methodology, reported trailing 12-month occupancy as of the fourth quarter ending December 31, 2014 was 71.6%.

Combined Operating Results For The Twelve Months Ended December 31, 2015

For the year ended December 31, 2015, total revenue from continuing operations was $520.9 million, a 105.5% increase from $253.4 million for the same period a year ago. Total operating expenses from continuing operations were $473.5 million, compared to $204.7 million for the same period a year ago. As a result, income from operations decreased 2.6% to $47.4 million for the year ended December 31, 2015, compared to $48.7 million for the same period a year ago. Revenues for the year ended December 31, 2014 include an early lease termination payment from Fox Interactive Media, Inc. of $1.6 million (after the write-off of non-cash items) relating to 625 Second Street with no comparable activity for the year ended December 31, 2015. Operating expenses for the year ended December 31, 2014 include a one-time supplemental net property tax expense of $0.8 million largely resulting from reassessment of the Company’s San Francisco portfolio with no comparable activity for the year ended December 31, 2015. Operating expenses for the year ended December 31, 2014 also include costs of $4.1 million associated with a one-year consulting arrangement with a former executive with no comparable activity for the year ended December 31, 2015.

Interest expense for the year ended December 31, 2015 increased 95.4% to $50.7 million, compared to $25.9 million for the same period a year ago. At December 31, 2015, the Company had $2.3 billion of notes payable, compared to $957.5 million at December 31, 2014. The Company had $43.3 million of acquisition-related expense for the year ended December 31, 2015, compared to $4.6 million for the same period a year ago. The Company had $30.5 million of gain on sale associated with the disposition of First Financial and Bay Park Plaza, compared to $5.5 million of gain on sale associated with disposition of Tierrasanta for the year ended December 31, 2014.

Balance Sheet

At December 31, 2015, the Company had total assets of $6.3 billion, including unrestricted cash and cash equivalents of $53.6 million. At December 31, 2015, the Company had $400.0 million of total capacity under its unsecured revolving credit facility, of which $230.0 million had been drawn. Subsequent to the quarter, the Company repaid $210.0 million of unsecured revolving credit facility from proceeds generated by the sale of Bayhill Office Center.

Major Leasing

Executed Significant Leases at Pinnacle I, 1455 Market Street & 12655 Jefferson Boulevard

The Company executed 106,802 square feet of new and renewal leases at Pinnacle I in Burbank, California, resulting in the property being 92.9% leased at the end of the fourth quarter. Consequently, the Company addressed the largest 2016 lease expiration within its portfolio, Clear Channel’s lease for 109,323 square feet, by executing a 75,214-square-foot renewal lease with iHeart Radio and backfilling the remaining 31,588 square feet with Fox Twentieth Television, Inc.

At 1455 Market Street in San Francisco, California, the Company executed a seven-year, 24,438-square-foot lease





with leading music and video entertainment platform Vevo to backfill 50.0% of Rocketfuel’s recently vacated space.

Finally, the Company pre-leased 17,867 square feet to multinational media and digital marketing communications company Dentsu Aegis Network at its 12655 Jefferson Boulevard redevelopment in Playa Vista, California.

Financings

Completed $425 Million Private Placement

On December 16, 2015, the Company’s operating partnership completed a private placement for $425.0 million of guaranteed senior notes, consisting of $110.0 million of 4.34% Series A guaranteed senior notes due January 2, 2023, $259.0 million of 4.69% Series B guaranteed senior notes due December 16, 2025, and $56.0 million of 4.79% Series C guaranteed senior notes due December 16, 2027. Collectively, the notes pay interest semiannually until maturity, and are fully and unconditionally guaranteed by the Company and, in certain limited circumstances, subsidiaries of the Company. The operating partnership used proceeds from the private placement to repay the remaining $375.0 million balance under its two-year term facility, with the balance of proceeds going to repay indebtedness under its unsecured revolving credit facility and to fund general corporate purposes.

Completed $300 Million New Term Loan

On November 17, 2015, the Company’s operating partnership entered into a new term loan credit agreement, which provides for a $175.0 million unsecured five-year term loan credit facility and a $125.0 million unsecured seven-year term loan credit facility. These facilities remain fully undrawn as of the date of this press release, and proceeds remain available to fund investment activities, repay indebtedness, or for general corporate purposes. The Company has not determined the ultimate use of these funds, but has provided guidance regarding potential use as part of its full-year 2016 FFO estimate below.

Dividend

Common Dividend Paid & Increased by 60%

The Company’s Board of Directors declared a dividend on its common stock of $0.20 per share for the fourth quarter of 2015, equivalent to an annual rate of $0.80 per share and a 60.0% increase from the previous annualized dividend level of $0.50 per share. The dividend was paid on December 30, 2015 to stockholders of record on December 20, 2015.

Preferred Stock Redemption

Redeemed All Issued & Outstanding Preferred Stock

On December 10, 2015, the Company redeemed all 5,800,000 issued and outstanding shares of its 8.375% Series B Cumulative Redeemable Preferred Stock. The redemption price was $25.00 per share, plus all accrued and unpaid dividends to, but not including, the redemption date in an amount equal to $0.40712 per share, for a total payment of $25.40712 per share, paid in cash, without interest on the redemption date.

Activities Subsequent to December 31, 2015

Sold Bayhill Office Center To YouTube

On January 15, 2015, the Company sold Bayhill Office Center in San Bruno, California to online video distribution company YouTube for $215.0 million before certain credits, prorations and closing costs. The Company acquired the 554,328-square-foot Class A office campus as part of the EOP Northern California Portfolio purchased in April 2015 from Blackstone, but viewed the property as non-core to its portfolio primarily due to location. The sale was an all-





cash, off-market transaction, and YouTube purchased the property at a premium to the Company’s original purchase price allocation.

Completed Additional Major Leasing

Netflix, the world’s leading Internet television network, executed its ROFR to lease the remaining five floors, or another 123,221 square feet, at the Company’s ICON development in Hollywood, California. As a result, the 323,000-square-foot ICON office tower is now 100.0% pre-leased to Netflix with tenant build-out expected to commence in third quarter 2016.

In addition, the Company executed a 48,876-square-foot lease with multinational mobile ride hail company Uber Technologies, Inc. to backfill the remaining 24,438 square feet of Rocketfuel’s recently vacated space, as well as another 25,420 square feet formerly occupied by Bank of America.

Obtained Board Approval For Share Repurchase Program

Effective January 20, 2016, the Company’s Board of Directors authorized a share repurchase program to buy up to $100.0 million of the Company’s outstanding common stock. The program may be implemented at the Company’s discretion at any time for up to one year from the date of approval. Repurchases, if and when made, would be compliant with the SEC’s Rule 10b-18, and subject to market conditions, applicable legal requirements and other factors. The repurchase program serves as another capital allocation tool for the Company, a means to return capital to shareholders from asset dispositions, which will be weighed against other potential investment opportunities.

2016 Outlook

The Company is providing full-year 2016 FFO guidance in the range of $1.65 to $1.75 per diluted share (excluding specified items). This guidance reflects the acquisitions, dispositions, financings and leasing activity referenced in this press release. As is always the case, the Company’s guidance does not reflect or attempt to anticipate any impact to FFO from speculative acquisitions or dispositions. This guidance assumes full-year 2016 weighted average fully diluted common stock/units of 146,296,300. This guidance also assumes that the $175.0 million five-year and $125.0 million seven-year unsecured term loans described in this press release are fully drawn as of April, with the proceeds used toward the repayment of floating rate indebtedness, including the $30.0 million loan secured by 901 Market Street, the $20.0 million outstanding balance under the revolving credit facility, and the remaining $250.0 million applied to repay a corresponding amount of the unhedged portion of the existing five-year term loan. This guidance further assumes that the interest rate for the undrawn $125.0 million seven-year unsecured term loan is fixed through an interest rate swap upon funding at a rate consistent with the existing seven-year term financing (i.e. 2.66% to 3.56% per annum, before amortization of deferred financing costs). The full-year 2016 FFO estimate reflects management’s view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels and the earnings impact of events referenced in this press release, but otherwise excludes any impact from future unannounced or speculative acquisitions, dispositions, debt financings or repayments, recapitalizations, capital market activity or similar matters.
 
Supplemental Information

Supplemental financial information regarding the Company’s fourth quarter and full year 2015 results may be found in the Financial Reports 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 fourth quarter 2015 financial results at 1:30 p.m. PT / 4:30 p.m. ET on February 25, 2016. 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 February 25, 2016, at 4:30 p.m. PT / 7:30 p.m. ET, through March 3, 2016, at 8:59 p.m. PT / 11:59 p.m. ET by dialing (877) 870-5176 and entering the passcode 13629054. 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 16.8 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 Contact:

Hudson Pacific Properties
Laura Campbell
Vice President, Head of Investor Relations
(310) 622-1702

or

Blue Marlin Partners
Greg Berardi
(415) 239-7826



(FINANCIAL TABLES FOLLOW)





Hudson Pacific Properties, Inc.
Consolidated Balance Sheet
(In thousands, except share data)
 
December 31, 2015
 
December 31, 2014
ASSETS
(Unaudited)
 
Audited
REAL ESTATE ASSETS
 
 
 
Land
$
1,283,751

 
$
620,805

Building and improvements
3,964,630

 
1,284,602

Tenant improvements
293,131

 
116,317

Furniture and fixtures
9,586

 
13,721

Property under development
218,438

 
135,850

Total real estate held for investment
5,769,536

 
2,171,295

Accumulated depreciation and amortization
(269,074
)
 
(134,657
)
Investment in real estate, net
5,500,462

 
2,036,638

Cash and cash equivalents
53,551

 
17,753

Restricted cash
18,010

 
14,244

Accounts receivable, net
21,159

 
16,247

Notes receivable
28,684

 
28,268

Straight-line rent receivables
59,636

 
33,006

Deferred leasing costs and lease intangible assets, net
318,031

 
102,023

Deferred finance costs, net

 

Interest rate contracts
2,061

 
3

Goodwill
8,754

 
8,754

Prepaid expenses and other assets
27,292

 
10,039

Assets associated with real estate held for sale
216,395

 
68,165

TOTAL ASSETS
$
6,254,035

 
$
2,335,140

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Notes payable, net
$
2,260,716

 
$
912,683

Accounts payable and accrued liabilities
84,048

 
36,844

Lease intangible liabilities, net
95,208

 
40,969

Security deposits
21,302

 
6,257

Prepaid rent
38,245

 
8,600

Interest rate contracts
2,010

 
1,750

Liabilities associated with real estate held for sale
13,292

 
42,845

TOTAL LIABILITIES
2,514,821

 
1,049,948

 
 
 
 
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 per unit liquidation preference, no outstanding shares at December 31, 2015, 5,800,000 shares outstanding at December 31, 2014.

 
145,000

Common stock, $0.01 par value, 490,000,000 authorized, 89,153,780 shares and 66,797,816 shares outstanding at December 31, 2015 and 2014, respectively.
891

 
668

Additional paid-in capital
1,710,979

 
1,070,833

Accumulated other comprehensive loss
(1,081
)
 
(2,443
)
Accumulated deficit
(44,955
)
 
(34,884
)
Total Hudson Pacific Properties, Inc. stockholders’ equity
1,665,834

 
1,179,174

Non-controlling interest—members in Consolidated Entities
262,625

 
42,990

Non-controlling common units in the Operating Partnership
1,800,578

 
52,851

TOTAL EQUITY
3,729,037

 
1,275,015

TOTAL LIABILITIES AND EQUITY
$
6,254,035

 
$
2,335,140

 
 
 
 






Hudson Pacific Properties, Inc.
Combined Statements of Operations
(Unaudited, in thousands, except share and per share data)
 
Three Months Ended 
 December 31,
 
Year Ended 
 December 31,
 
 
2015
 
2014
 
2015
 
2014
Revenues
 
 
 
 
 
 
 
Office
 
 
 
 
 
 
 
Rental
$
118,222

 
$
41,917

 
$
394,543

 
$
156,806

Tenant recoveries
22,345

 
10,866

 
66,235

 
34,509

Parking and other
3,328

 
5,839

 
20,940

 
22,471

Total office revenues
143,895

 
58,622

 
481,718

 
213,786

 
 
 
 
 
 
 
 
Media & Entertainment
 
 
 
 
 
 
 
Rental
6,125

 
5,215

 
23,027

 
22,138

Tenant recoveries
238

 
157

 
943

 
1,128

Other property-related revenue
4,324

 
4,723

 
14,849

 
15,751

Other
69

 
70

 
313

 
612

Total Media & Entertainment revenues
10,756

 
10,165

 
39,132

 
39,629

 
 
 
 
 
 
 
 
Total revenues
154,651

 
68,787

 
520,850

 
253,415

 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
Office operating expenses
50,767

 
20,432

 
166,131

 
78,372

Media & Entertainment operating expenses
6,372

 
7,376

 
23,726

 
25,897

General and administrative
9,583

 
9,096

 
38,534

 
28,253

Depreciation and amortization
74,126

 
20,243

 
245,071

 
72,216

Total operating expenses
140,848

 
57,147

 
473,462

 
204,738

 
 
 
 
 
 
 
 
Income from operations
13,803

 
11,640

 
47,388

 
48,677

 
 
 
 
 
 
 
 
Other expense (income)
 
 
 
 
 
 
 
Interest expense
16,600

 
6,413

 
50,667

 
25,932

Interest income
(6
)
 
(9
)
 
(124
)
 
(30
)
Acquisition-related expenses
(106
)
 
4,322

 
43,336

 
4,641

Other expense (income)
60

 
29

 
62

 
(14
)
Total other expense (income)
16,548

 
10,755

 
93,941

 
30,529

(Loss) income from continuing operations before gain on sale of real estate
(2,745
)
 
885

 
(46,553
)
 
18,148

Gain on sale of real estate

 

 
30,471

 
5,538

(Loss) income from continuing operations
(2,745
)
 
885

 
(16,082
)
 
23,686

(Loss) income from discontinued operations

 

 

 
(164
)
Impairment loss from discontinued operations

 

 

 

Net (loss) income from discontinued operations

 

 

 
(164
)
Net (loss) income
$
(2,745
)
 
$
885

 
$
(16,082
)
 
$
23,522

 
 
 
 
 
 
 
 
Net income attributable to preferred stock and units
(2,520
)
 
(3,195
)
 
(12,105
)
 
(12,785
)
Net income attributable to restricted shares
(127
)
 
(68
)
 
(356
)
 
(274
)
Original issuance costs of redeemed Series B preferred stock
(5,970
)
 

 
(5,970
)
 

Net loss (income) attributable to non-controlling interest in consolidated entities
815

 
6

 
(3,853
)
 
(149
)
Net loss (income) attributable to common units in the Operating Partnership
4,087

 
82

 
21,969

 
(359
)
Net (loss) income attributable to Hudson Pacific Properties, Inc. common stockholders
$
(6,460
)
 
$
(2,290
)
 
$
(16,397
)
 
$
9,955

Basic and diluted per share amounts:
 
 
 
 
 
 
 
Net (loss) income from continuing operations attributable to common stockholders
$
(0.07
)
 
$
(0.03
)
 
$
(0.19
)
 
$
0.15

Net income (loss) income from discontinued operations

 

 

 

Net (loss) income attributable to common stockholders’ per share—basic
$
(0.07
)
 
$
(0.03
)
 
$
(0.19
)
 
$
0.15

Weighted average shares of common stock outstanding—basic
88,990,612

 
66,512,651

 
85,927,216

 
65,792,447

Dividends declared per share of common stock
$
0.200

 
$
0.125

 
$
0.575

 
$
0.500







Hudson Pacific Properties, Inc.
Funds From Operations
(Unaudited, in thousands, except per share data)

 
Three Months Ended 
 December 31,
 
Year Ended 
 December 31,
 
2015
 
2014
 
2015
 
2014
Reconciliation of net loss to Funds From Operations (FFO):
 
 
 
 
 
 
 
Net income (loss)
$
(2,745
)
 
$
885

 
$
(16,082
)
 
$
23,522

Adjustments:
 
 
 
 
 
 
 
Depreciation and amortization of real estate assets
73,876

 
20,158

 
244,182

 
72,003

Depreciation and amortization—discontinued operations

 

 

 

Gain on sale of real estate

 

 
(30,471
)
 
(5,538
)
Impairment loss

 

 

 

FFO attributable to non-controlling interest in Consolidated Entities
(3,696
)
 
(1,254
)
 
(14,216
)
 
(5,260
)
Net income attributable to preferred stock and units
(2,520
)
 
(3,195
)
 
(12,105
)
 
(12,785
)
FFO to common stockholders and unit holders
$
64,915

 
$
16,594

 
$
171,308

 
$
71,942

Specified items impacting FFO:
 
 
 
 
 
 
 
Acquisition-related expenses
(106
)
 
4,322

 
43,336

 
4,641

Consulting fee to former executive

 
1,273

 

 
4,109

Supplemental property tax expenses/(savings)

 

 

 
809

Lease termination revenue

 

 

 
(1,687
)
Lease termination non-cash write-off

 

 

 
77

FFO (excluding specified items) to common stockholders and unit holders
$
64,809

 
$
22,189

 
$
214,644

 
$
79,891

 
 
 
 
 
 
 
 
Weighted average common stock/units outstanding—diluted
145,946

 
69,685

 
129,590

 
68,892

FFO per common stock/unit—diluted
$
0.44

 
$
0.24

 
$
1.32

 
$
1.04

FFO (excluding specified items) per common stock/unit—diluted
$
0.44

 
$
0.32

 
$
1.66

 
$
1.16






HUDSON PACIFIC PROPERTIES, INC.
FOURTH QUARTER 2015
Supplemental Operating and Financial Information

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 Northern and Southern 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 Current Report on Form 8-K filed with the Securities and Exchange Commission 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, and our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 12, 2015.


Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information


TABLE OF CONTENTS


 
PAGE
COMPANY BACKGROUND, RESEARCH COVERAGE AND CORPORATE DATA
3 
 
 
CONSOLIDATED FINANCIAL RESULTS
 
 
Consolidated Balance Sheets
Consolidated Statements of Operations
Funds from Operations
Adjusted Funds From Operations
Debt Summary
 
 
PORTFOLIO DATA
13
 
 
In-Service Office Portfolio by Property
14
In-Service Office Portfolio Summary
16
Redevelopment, Development and Held-For-Sale Office Summary
17
Land Properties Summary
18
Media & Entertainment Portfolio Summary
19
Current Value Creation Development Projects
20
Same-Store Analysis
22
Reconciliation of Same-Store Property Net Operating Income to GAAP Net Income (Loss)
24
Net Operating Income Detail
25
Office Portfolio Leasing Activity
26
Office Portfolio Lease Distribution
27
Office Portfolio Commenced Leases with Non-Recurring, Up-Front Abatements
28
Quarterly Uncommenced / Backfill — Next Eight Quarters
29
Quarterly Office Lease Expirations — Next Eight Quarters
30
Office Lease Expirations — Annual
31
Fifteen Largest Office Tenants
32
Office Portfolio Diversification
33
 
 
DEFINITIONS
34

2



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

COMPANY BACKGROUND
CORPORATE
11601 Wilshire Boulevard, Ninth 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.
 
 
 
Barry A. Porter
Jonathan M. Glaser
Robert L. Harris II
Managing General Partner, Clarity Partners L.P.
Managing Member, JMG Capital Management LLC
Executive Chairman, 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
 
Richard B. Fried
 
 
Managing Member, Farallon Capital Management, L.L.C.
 
EXECUTIVE AND SENIOR MANAGEMENT
 
 
 
Victor J. Coleman
Mark T. Lammas
Christopher Barton
Chief Executive Officer and President
Chief Operating Officer, Chief Financial Officer and Treasurer
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
VP, Head of Investor Relations
[email protected]
 

3



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information


RESEARCH COVERAGE
 
EQUITY RESEARCH COVERAGE
 
 
 
James Feldman
Barry Oxford
Alexander Goldfarb
Bank of America Merrill Lynch
D.A. Davidson 
Sandler O'Neill + Partners
(646) 855-5808
(212) 240-9871
(212) 466-7937
 
 
 
Ross Smotrich
Craig Mailman
Nick Yulico
Barclay Capital
KeyBanc Capital Markets
UBS Investment Bank
(212) 526-2306
(917) 368-2316
(212) 713-3402
 
 
 
Ian Weissman
Richard Anderson
Brendan Maiorana
Credit Suisse
Mizuho Securities
Wells Fargo Securities
(212) 538-6889
(212) 205-8445
(443) 263-6516
 
 
 
 
Sumit Sharma
 
 
Morgan Stanley
 
 
(212) 761-7567
 
 
 
 
RATING AGENCIES
 
 
 
Stephen Boyd
Ranjini Venkatesan
Anita Ogbara
Fitch Ratings
Moody’s Investors Service
Standard & Poor’s
 (212) 908-9153
 (212) 553-3828
(212) 438-5077
 
 
 
 
 


4



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

CORPORATE DATA
(unaudited, $ in thousands, except 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.

 
December 31, 2015
 
September 30, 2015
 
June 30, 2015
 
March 31, 2015
 
December 31, 2014
Number of office properties owned
54

 
53

 
53

 
25

 
26

Office properties square feet(1)
14,034,944

 
13,872,326

 
14,042,298

 
5,700,148

 
5,923,827

Stabilized office properties leased rate as of end of period(2)
95.3
%
 
94.5
%
 
94.7
%
 
93.7
%
 
94.6
%
In-Service office properties leased rate as of end of period(3)
90.1
%
 
89.5
%
 
88.8
%
 
N/A

 
N/A

Number of media & entertainment properties owned
2

 
2

 
2

 
2

 
2

Media & entertainment square feet(1)
879,652

 
879,652

 
879,652

 
879,652

 
879,652

Media & entertainment occupied rate as of end of period(4)
78.5
%
 
76.8
%
 
76.5
%
 
76.5
%
 
76.4
%
Number of land assets owned
8

 
7

 
7

 
5

 
5

Land assets square feet(5)
2,638,875

 
2,590,099

 
2,590,099

 
1,448,173

 
1,448,173

Market capitalization (in thousands):
 
 
 
 
 
 
 
 
 
Total debt(6)
$
2,278,445

 
$
2,086,589

 
$
2,116,974

 
$
784,571

 
$
957,452

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

Common equity capitalization(7)
4,116,264

 
4,197,190

 
4,135,927

 
2,731,256

 
2,091,479

Total market capitalization
$
6,404,886

 
$
6,438,956

 
$
6,408,078

 
$
3,671,004

 
$
3,204,108

Debt/total market capitalization
35.6
%
 
32.4
%
 
33.0
%
 
21.4
%
 
29.9
%
Series A preferred units & debt/total market capitalization
35.7
%
 
32.6
%
 
33.2
%
 
21.6
%
 
30.2
%
Common stock data (NYSE: HPP):
 
 
 
 
 
 
 
 
 
Range of closing prices(8)
$ 27.40-30.97

 
$ 27.70 - 31.68

 
$ 28.22 - 33.95

 
$ 30.25 - 33.65

 
$ 24.64 - 30.34

Closing price at quarter end
$
28.14

 
$
28.79

 
$
28.37

 
$
33.19

 
$
30.06

Weighted average fully diluted common stock\units outstanding (in thousands)(9)
145,946

 
145,902

 
145,849

 
79,713

 
69,685

Shares of common stock\units outstanding at end of period (in thousands)(10)
146,278

 
145,786

 
145,785

 
82,292

 
69,577

__________________________
(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. Please refer to footnote on page 19 regarding the re-measurement of the media properties.
(2)
Stabilized office properties leased rate excludes the development, redevelopment, lease-up properties, properties held-for-sale and land properties described on pages 15, 17, and 18.
(3)
In-service office properties leased rate includes the stabilized office properties and lease-up properties described on pages 14 and 15. 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 and deferred financing fees.
(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 December 31, 2015, September 30, 2015, June 31,2015, March 31, 2015 and December 31, 2014 includes an estimate for projected executive stock grants under our 2013, 2014 and 2015 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 2013/2014/2015 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 2013/2014/2015 OPP stock grants.

5



















CONSOLIDATED FINANCIAL RESULTS
























6



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

Consolidated Balance Sheets
(Unaudited, $ in thousands, except share data)
 
December 31, 2015
 
December 31, 2014
ASSETS
 
 
 
Total investment in real estate, net
$
5,500,462

 
$
2,036,638

Cash and cash equivalents
53,551

 
17,753

Restricted cash
18,010

 
14,244

Accounts receivable, net
21,159

 
16,247

Notes receivable
28,684

 
28,268

Straight-line rent receivables
59,636

 
33,006

Deferred leasing costs and lease intangible assets, net
318,031

 
102,023

Interest rate contracts
2,061

 
3

Goodwill
8,754

 
8,754

Prepaid expenses and other assets
27,292

 
10,039

Assets associated with real estate held for sale
216,395

 
68,165

TOTAL ASSETS
$
6,254,035

 
$
2,335,140

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Notes payable, net
$
2,260,716

 
$
912,683

Accounts payable and accrued liabilities
84,048

 
36,844

Lease intangible liabilities, net
95,208

 
40,969

Security deposits
21,302

 
6,257

Prepaid rent
38,245

 
8,600

Interest rate contracts
2,010

 
1,750

Liabilities associated with real estate held for sale
13,292

 
42,845

TOTAL LIABILITIES
$
2,514,821

 
$
1,049,948

 
 
 
 
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 per unit liquidation preference, no outstanding shares at December 31, 2015, 5,800,000 shares outstanding at December 31, 2014.
$

 
$
145,000

Common stock, $0.01 par value, 490,000,000 authorized, 89,153,780 shares and 66,797,816 shares outstanding at December 31, 2015 and 2014, respectively.
891

 
668

Additional paid-in capital
1,710,979

 
1,070,833

Accumulated other comprehensive loss
(1,081
)
 
(2,443
)
Accumulated deficit
(44,955
)
 
(34,884
)
Total Hudson Pacific Properties, Inc. stockholders’ equity
$
1,665,834

 
$
1,179,174

Non-controlling interest—members in Consolidated Entities
262,625

 
42,990

Non-controlling common units in the Operating Partnership
1,800,578

 
52,851

TOTAL EQUITY
$
3,729,037

 
$
1,275,015

TOTAL LIABILITIES AND EQUITY
$
6,254,035

 
$
2,335,140


7



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

Consolidated Statements of Operations
(Unaudited, in thousands, except share and per share data)
 
Three Months Ended December 31,
 
Year Ended 
 December 31,
 
 
2015
 
2014
 
2015
 
2014
Revenues
 
 
 
 
 
 
 
Office
 
 
 
 
 
 
 
Rental
$
118,222

 
$
41,917

 
$
394,543

 
$
156,806

Tenant recoveries
22,345

 
10,866

 
66,235

 
34,509

Parking and other
3,328

 
5,839

 
20,940

 
22,471

Total office revenues
$
143,895

 
$
58,622

 
$
481,718

 
$
213,786

Media & Entertainment
 
 
 
 
 
 
 
Rental
$
6,125

 
$
5,215

 
$
23,027

 
$
22,138

Tenant recoveries
238

 
157

 
943

 
1,128

Other property-related revenue
4,324

 
4,723

 
14,849

 
15,751

Other
69

 
70

 
313

 
612

Total Media & Entertainment revenues
$
10,756

 
$
10,165

 
$
39,132

 
$
39,629

Total revenues
$
154,651

 
$
68,787

 
$
520,850

 
$
253,415

Operating expenses
 
 
 
 
 
 
 
Office operating expenses
$
50,767

 
$
20,432

 
$
166,131

 
$
78,372

Media & Entertainment operating expenses
6,372

 
7,376

 
23,726

 
25,897

General and administrative
9,583

 
9,096

 
38,534

 
28,253

Depreciation and amortization
74,126

 
20,243

 
245,071

 
72,216

Total operating expenses
$
140,848

 
57,147

 
$
473,462

 
$
204,738

Income from operations
$
13,803

 
$
11,640

 
$
47,388

 
$
48,677

Other expense (income)
 
 
 
 
 
 
 
Interest expense
$
16,600

 
$
6,413

 
$
50,667

 
$
25,932

Interest income
(6
)
 
(9
)
 
(124
)
 
(30
)
Acquisition-related expenses
(106
)
 
4,322

 
43,336

 
4,641

Other expense (income)
60

 
29

 
62

 
(14
)
Total other expense (income)
$
16,548

 
$
10,755

 
$
93,941

 
$
30,529

(Loss) income from continuing operations before gain on sale of real estate
$
(2,745
)
 
$
885

 
$
(46,553
)
 
$
18,148

Gain on sale of real estate

 

 
30,471

 
5,538

(Loss) income from continuing operations
(2,745
)
 
885

 
(16,082
)
 
23,686

(Loss) income from discontinued operations

 

 

 
(164
)
Net (loss) income from discontinued operations

 

 
$

 
$
(164
)
Net (loss) income
$
(2,745
)
 
$
885

 
$
(16,082
)
 
$
23,522

Net income attributable to preferred stock and units
$
(2,520
)
 
$
(3,195
)
 
$
(12,105
)
 
$
(12,785
)
Original issuance costs of redeemed Series B preferred units (note 9)
(5,970
)
 

 
(5,970
)
 

Net income attributable to restricted shares
(127
)
 
(68
)
 
(356
)
 
(274
)
Net loss (income) attributable to non-controlling interest in consolidated entities
815

 
6

 
(3,853
)
 
(149
)
Net loss (income) attributable to common units in the Operating Partnership
4,087

 
82

 
21,969

 
(359
)
Net (loss) income attributable to Hudson Pacific Properties, Inc. common stockholders
$
(6,460
)
 
$
(2,290
)
 
$
(16,397
)
 
$
9,955

Basic and diluted per share amounts:
 
 
 
 
 
 
 
Net (loss) income from continuing operations attributable to common stockholders
$
(0.07
)
 
$
(0.03
)
 
$
(0.19
)
 
$
0.15

Net income (loss) income from discontinued operations

 

 

 

Net (loss) income attributable to common stockholders’ per share—basic
$
(0.07
)
 
$
(0.03
)
 
$
(0.19
)
 
$
0.15

Weighted average shares of common stock outstanding—basic
88,990,612

 
66,512,651

 
85,927,216

 
65,792,447

Dividends declared per share of common stock
$
0.200

 
$
0.125

 
$
0.575

 
$
0.500


8



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

FUNDS FROM OPERATIONS
(Unaudited, $ in thousands, except per share data)
 
 
Three Months Ended
Quarter To Date
 
December 31, 2015
 
September 30, 2015
 
June 30,
2015
 
March 31,
 2015
 
December 31, 2014
Funds From Operations (FFO)(1)
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
(2,745
)
 
$
(1,828
)
 
$
(36,083
)
 
$
24,574

 
$
885

Adjustments:
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization of real estate assets
 
73,876

 
79,940

 
73,293

 
17,073

 
20,158

(Gain) / Loss from Sale of Real Estate
 

 
(8,371
)
 
591

 
(22,691
)
 

FFO attributable to non-controlling interest
 
(3,696
)
 
(3,494
)
 
(3,696
)
 
(3,312
)
 
(1,254
)
Net income attributable to preferred stock and units
 
(2,520
)
 
(3,195
)
 
(3,195
)
 
(3,195
)
 
(3,195
)
FFO to common stockholders and unitholders
 
$
64,915

 
$
63,052

 
$
30,910

 
$
12,449

 
$
16,594

Specified items impacting FFO:
 
 
 
 
 
 
 
 
 
 
Acquisition-related expenses
 
$
(106
)
 
$
(83
)
 
$
37,481

 
$
6,044

 
$
4,322

Consulting fee to former executive
 

 

 

 

 
1,273

FFO (excluding specified items) to common stockholders and unitholders
 
$
64,809

 
$
62,969

 
$
68,391

 
$
18,493

 
$
22,189

 
 
 
 
 
 
 
 
 
 
 
Weighted average common stock/units outstanding—diluted
 
145,946

 
145,902

 
145,849

 
79,713

 
69,685

FFO per common stock/unit—diluted
 
$
0.44

 
$
0.43

 
$
0.21

 
$
0.16

 
$
0.24

FFO (excluding specified items) per common stock/unit—diluted
 
$
0.44

 
$
0.43

 
$
0.47

 
$
0.23

 
$
0.32

 
 
 
 
 
 
 
 
 
 
 
Year To Date
 
Twelve Months Ended
 
Nine Months Ended
 
Six Months Ended
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31, 2015
 
September 30, 2015
 
June 30,
2015
 
March 31, 2015
 
December 31, 2014
Funds From Operations (FFO)(1)
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
(16,082
)
 
$
(13,337
)
 
$
(11,509
)
 
$
24,574

 
23,522

Adjustments:
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization of real estate assets
 
244,182

 
170,306

 
90,366

 
17,073

 
72,003

Depreciation and amortization—discontinued operations
 

 

 

 

 

(Gain) / Loss from Sale of Real Estate
 
(30,471
)
 
(30,471
)
 
(22,100
)
 
(22,691
)
 
(5,538
)
FFO attributable to non-controlling interest
 
(14,216
)
 
(10,520
)
 
(7,008
)
 
(3,312
)
 
(5,260
)
Net income attributable to preferred stock and units
 
(12,105
)
 
(9,585
)
 
(6,390
)
 
(3,195
)
 
(12,785
)
FFO to common stockholders and unit holders
 
$
171,308

 
$
106,393

 
$
43,359

 
$
12,449

 
$
71,942

Specified items impacting FFO:
 
 
 
 
 
 
 
 
 
 
Acquisition-related expenses
 
$
43,336

 
$
43,442

 
$
43,525

 
$
6,044

 
$
4,641

Consulting fee to former executive
 

 

 

 

 
4,109

Supplemental net property tax expenses (savings)
 

 

 

 

 
809

Lease termination revenue
 

 

 

 

 
(1,687
)
Lease termination non-cash write-off
 

 

 

 

 
77

FFO (excluding specified items) to common stockholders and unit holders
 
$
214,644

 
$
149,835

 
$
86,884

 
$
18,493

 
$
79,891

 
 
 
 
 
 
 
 
 
 
 
Weighted average common stock/units outstanding—diluted
 
129,590

 
124,052

 
113,162

 
79,713

 
68,892

FFO per common stock/unit—diluted
 
$
1.32

 
$
0.86

 
$
0.38

 
$
0.16

 
$
1.04

FFO (excluding specified items) per common stock/unit—diluted
 
$
1.66

 
$
1.21

 
$
0.77

 
$
0.23

 
$
1.16

______________________________
(1)
See page 34 for Managements Statements on Funds From Operations (FFO) and Adjusted Funds From Operations (AFFO).

9



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

ADJUSTED FUNDS FROM OPERATIONS
(Unaudited, $ in thousands, except per share data)
 
 
Three Months Ended
Quarter To Date
 
December 31, 2015
 
September 30, 2015
 
June 30,
2015
 
March 31,
2015
 
December 31, 2014
Adjusted Funds From Operations (AFFO)(1)
 
 
 
 
 
 
 
 
 
 
FFO
 
$
64,915

 
$
63,052

 
$
30,910

 
$
12,449

 
$
16,594

Adjustments:
 
 
 
 
 
 
 
 
 
 
Straight-line rent
 
(5,053
)
 
(8,903
)
 
(10,931
)
 
(3,038
)
 
(3,105
)
Amortization of above-market and below-market leases, net
 
(6,158
)
 
(3,750
)
 
(10,258
)
 
(1,291
)
 
(1,215
)
Amortization of below-market ground lease
 
958

 
515

 
515

 
62

 
62

Amortization of lease buy-out costs
 
94

 
89

 
89

 
86

 
144

Amortization of deferred financing costs and loan premium/discount, net
 
2,546

 
1,154

 
1,551

 
652

 
460

Recurring capital expenditures, tenant improvements and lease commissions
 
(5,727
)
 
(8,598
)
 
(13,301
)
 
(6,191
)
 
(11,702
)
Non-cash compensation expense
 
2,235

 
2,034

 
2,003

 
2,149

 
2,512

AFFO
 
$
53,810

 
$
45,593

 
$
578

 
$
4,878

 
$
3,750

 
 
 
 
 
 
 
 
 
 
 
Weighted average common stock/units outstanding—diluted
 
145,946

 
145,902

 
145,849

 
79,713

 
69,685

AFFO per common stock/unit—diluted
 
$
0.37

 
$
0.31

 
$

 
$
0.06

 
$
0.05

Dividends paid to common stock and unitholders
 
$
29,138

 
$
18,226

 
$
18,224

 
$
10,287

 
$
8,932

AFFO payout ratio
 
54.1
%
 
40.0
%
 
3,152.9
%
 
210.9
%
 
238.2
%
 
 
 
 
 
 
 
 
 
 
 
Year To Date
 
Twelve Months Ended
 
Nine Months Ended
 
Six Months Ended
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31, 2015
 
September 30, 2015
 
June 30, 2015
 
March 31, 2015
 
December 31, 2014
Adjusted Funds From Operations (AFFO)(1)
 
 
 
 
 
 
 
 
 
 
FFO
 
$
171,308

 
$
106,393

 
$
43,359

 
$
12,449

 
$
71,942

Adjustments:
 
 
 
 
 
 
 
 
 
 
Straight-line rent
 
(27,925
)
 
(22,872
)
 
(13,969
)
 
(3,038
)
 
(12,753
)
Amortization of above-market and below-market leases, net
 
(21,457
)
 
(15,299
)
 
(11,549
)
 
(1,291
)
 
(5,081
)
Amortization of below-market ground lease
 
2,050

 
1,092

 
577

 
62

 
248

Amortization of lease buy-out costs
 
358

 
264

 
175

 
86

 
379

Amortization of deferred financing costs and loan premium/discount, net
 
5,903

 
3,357

 
2,203

 
652

 
1,525

Recurring capital expenditures, tenant improvements and lease commissions
 
(33,817
)
 
(28,090
)
 
(19,492
)
 
(6,191
)
 
(40,984
)
Non-cash compensation expense
 
8,421

 
6,186

 
4,152

 
2,149

 
7,559

AFFO
 
$
104,841

 
$
51,031

 
$
5,456

 
$
4,878

 
$
22,835

 
 
 
 
 
 
 
 
 
 
 
Weighted average common stock/units outstanding—diluted
 
129,590

 
124,052

 
113,162

 
79,713

 
68,892

AFFO per common stock/unit—diluted
 
$
0.81

 
$
0.41

 
$
0.05

 
$
0.06

 
$
0.33

Dividends paid to common stock and unitholders
 
$
75,875

 
$
46,737

 
$
28,511

 
$
10,287

 
$
34,966

AFFO payout ratio
 
72.4
%
 
91.6
%
 
522.6
%
 
210.9
%
 
153.1
%
______________________________
(1)
See page 34 for Managements Statements on Funds From Operations (FFO) and Adjusted Funds From Operations (AFFO).

10



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

DEBT SUMMARY
(Tabular amounts in thousands)


The following table summarizes the balance of the Company’s indebtedness as of December 31, 2015 and December 31, 2014.
 
December 31, 2015
 
December 31, 2014
Notes Payable
$
2,278,445

 
$
915,003

Less: unamortized loan premium and deferred financing costs, net(1)
(17,729
)
 
(2,320
)
Notes Payable, net
$
2,260,716

 
$
912,683

________________
(1)
Unamortized loan premium and deferred financing costs exclude debt issuance costs related to establishing the Company’s unsecured revolving credit facility and undrawn term loans. These costs are presented within prepaid expenses and other assets in the consolidated balance sheets. 
 

11



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

The following table sets forth information as of December 31, 2015 and December 31, 2014 with respect to the Company’s outstanding indebtedness:    
 
December 31, 2015
December 31, 2014
 
 
 
 
 
 
Principal Amount
 
Unamortized Loan Premium and Deferred Financing Costs, net
 
Principal Amount
 
Unamortized Loan Premium and Deferred Financing Costs, net
 
Interest Rate(1)
 
Contractual Maturity Date
Annual Debt Service (13)
Balance at
Maturity
Unsecured Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
Unsecured Revolving Credit Facility(2)
$
230,000

 
$

 
$
130,000

 
$

 
LIBOR+1.15% to 1.85%
 
4/1/2019(10)
$

$
230,000

5-Year Term Loan due April 2020(2)(3)
550,000

 
(5,571
)
 
150,000

 
(870
)
 
LIBOR+1.30% to 2.20%
 
4/1/2020

550,000

5-Year Term Loan due November 2020(2)

 

 

 

 
LIBOR +1.30% to 2.20%
 
11/17/2020


7-Year Term Loan due April 2022(2)(4)
350,000

 
(2,656
)
 

 

 
LIBOR +1.60% to 2.55%
 
4/1/2022
11,235

350,000

7-Year Term Loan due November 2022(2)

 

 

 

 
LIBOR + 1.60% to 2.55%
 
11/17/2022


4.34% Series A Notes
110,000

 
(1,011
)
 

 

 
4.34%
 
1/2/2023

110,000

4.69% Series B Notes
259,000

 
(2,378
)
 

 

 
4.69%
 
12/16/2025

259,000

4.79% Series C Notes
56,000

 
(509
)
 

 

 
4.79%
 
12/16/2027

56,000

    Total Unsecured Loans
$
1,555,000

 
$
(12,125
)
 
$
280,000

 
$
(870
)
 
 
 
 
$
11,235

$
1,555,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage loan secured by Pinnacle II(5)
86,228

 
1,310

(6) 
87,421

 
3,056

(6) 
6.31%
 
9/6/2016
6,754

85,301

Mortgage loan secured by 901 Market
30,000

 
(119
)
 
49,600

 
(434
)
 
LIBOR+2.25%
 
10/31/2016

30,000

Mortgage loan secured by Rincon Center(7)
102,309

 
(355
)
 
104,126

 
(518
)
 
5.13%
 
5/1/2018
7,195

97,673

Mortgage loan secured by Sunset Gower/Sunset Bronson(8)(9)
115,001

 
(2,232
)
 
97,000

 
(678
)
 
LIBOR+2.25%
 
3/4/2019

97,000

Mortgage loan secured by Met Park North(10)
64,500

 
(509
)
 
64,500

 
(521
)
 
LIBOR+1.55%
 
8/1/2020
2,393

64,500

Mortgage loan secured by 10950 Washington(7)
28,407

 
(421
)
 
28,866

 
(493
)
 
5.32%
 
3/11/2022
2,003

24,632

Mortgage loan secured by Pinnacle I(11)
129,000

 
(694
)
 
129,000

 
(796
)
 
3.95%
 
11/7/2022
5,172

117,190

Mortgage loan secured by Element L.A.
168,000

 
(2,584
)
 
59,490

 
(1,066
)
 
4.59%
 
11/6/2025
7,716

168,000

Mortgage loan secured by 275 Brannan

 

 
15,000

 

 
LIBOR+2.00%
 
N/A

N/A

   Total mortgage loans before mortgage loan on real estate held for sale
$
723,445

 
$
(5,604
)
 
$
635,003

 
$
(1,450
)
 
 
 
 
$
31,233

$
684,296

Total
$
2,278,445

 
$
(17,729
)
 
$
915,003

 
$
(2,320
)
 
 
 
 
$
42,468

2,239,296

Mortgage loan on real estate held for sale
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage loan secured by First Financial(12)
$

 
$

 
$
42,449

 
$
(369
)
 
4.58%
 
N/A
$
2,639

N/A

_________________
(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. Interest rates are as of December 31, 2015, which may be different than the interest rates as of December 31, 2014 for corresponding indebtedness.
(2)
The Company has the option to make an irrevocable election to change the interest rate depending on the Company’s credit rating. As of December 31, 2015, no such election has been made.
(3)
Effective May 1, 2015, $300.0 million of the $550.0 million term loan has been effectively fixed at 2.66% to 3.56% through the use of an interest rate swap.
(4)
Effective May 1, 2015, the outstanding balance of the term loan has been effectively fixed at 3.21% to 4.16% through the use of an interest rate swap.
(5)
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 with a balloon payment at maturity.
(6)
Represents unamortized amount of the non-cash mark-to-market adjustment.
(7)
Monthly debt service includes annual debt amortization payments based on a 30-year amortization schedule with a balloon payment at maturity.
(8)
Interest on $92.0 million of the outstanding loan balance has been effectively capped at 5.97% and 4.25% on $50.0 million and $42.0 million, respectively, of the loan through the use of two interest rate caps through February 11, 2016.
(9)
The maturity date may be extended once for an additional one-year term.
(10)
This loan bears interest only. Interest on the full loan amount has been effectively fixed at 3.71% through use of an interest rate swap. See Part IV, Note 6 of the consolidated financial statements included elsewhere in this report for details.
(11)
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 with a balloon payment at maturity.
(12)
This loan has been recorded as part of the liabilities associated with real estate held for sale as of December 31, 2014. The property was sold in 2015.
(13)
Annual debt service includes principal payments based on amortization schedule and annual interest payments of fixed rate loans and variable rate loans with effective fixed rate as a result of interest rate contracts. In instances where interest is paid based on a LIBOR margin, we used the average December LIBOR and current margin based on the leverage ratio as of December 31, 2015. Amount doesn't include interest payment of variable rate loan with effectively fixed rate on partial loan balance through interest rate contracts.

12

















PORTFOLIO DATA






13



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

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
%
 
$
4,987,899

 
$
27.32

Northview
 
Lynnwood
 
182,009

 
81.8

 
87.7

 
3,161,940

 
21.24

505 First Avenue
 
Pioneer Square
 
288,140

 
96.5

 
96.9

 
5,929,129

 
21.33

83 King Street
 
Pioneer Square
 
184,083

 
97.0

 
97.0

 
4,803,891

 
26.90

Subtotal
 
 
 
844,980

 
93.3
%
 
94.7
%
 
$
18,882,859

 
$
23.96

San Francisco Bay Area, California
 
 
 
 
 
 
 
 
 
 
 
 
1455 Market Street
 
San Francisco
 
1,025,833

 
94.1
%
 
97.2
%
 
$
29,142,482

 
$
30.18

222 Kearny Street
 
San Francisco
 
148,797

 
84.8

 
84.8

 
5,439,868

 
43.10

275 Brannan Street
 
San Francisco
 
54,673

 
100.0

 
100.0

 
3,074,137

 
56.23

625 Second Street
 
San Francisco
 
138,080

 
73.8

 
73.8

 
5,129,702

 
50.31

875 Howard Street(5)
 
San Francisco
 
230,443

 
99.4

 
99.4

 
5,663,393

 
24.72

Rincon Center
 
San Francisco
 
580,850

 
87.0

 
87.4

 
21,700,736

 
42.93

Subtotal
 
 
 
2,178,676

 
91.0
%
 
92.6
%
 
70,150,318

 
$
35.37

Los Angeles, California
 
 
 
 
 
 
 
 
 
 
 
 
Pinnacle I
 
Burbank
 
393,777

 
89.1
%
 
92.9
%
 
$
14,289,943

 
$
40.75

Pinnacle II
 
Burbank
 
230,000

 
100.0

 
100.0

 
8,942,900

 
38.88

6922 Hollywood
 
Hollywood
 
205,523

 
85.7

 
85.7

 
7,701,674

 
43.71

Technicolor Building
 
Hollywood
 
114,958

 
100.0

 
100.0

 
4,873,345

 
42.39

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

 
88.7

 
88.7

 
2,342,076

 
43.14

Subtotal
 
 
 
1,331,685

 
94.0
%
 
95.2
%
 
$
49,695,979

 
$
39.68

Total Same-Store
 
 
 
4,355,341

 
92.4
%
 
93.8
%
 
$
138,729,156

 
$
34.48

NON-SAME-STORE
 
 
 
 
 
 
 
 
 
 
 
 
Greater Seattle, Washington
 
 
 
 
 
 
 
 
 
 
 
 
Merrill Place(6)
 
Pioneer Square
 
163,768

 
83.1
%
 
89.4
%
 
$
3,406,278

 
$
25.03

Subtotal
 
 
 
163,768

 
83.1
%
 
89.4
%
 
$
3,406,278

 
$
25.03

San Francisco Bay Area, California
 
 
 
 
 
 
 
 
 
 
 
 
3400 Hillview
 
Palo Alto
 
207,857

 
100.0
%
 
100.0
%
 
$
12,946,581

 
$
62.29

Clocktower Square
 
Palo Alto
 
100,344

 
96.9

 
96.9

 
6,450,500

 
66.36

Foothill Research
 
Palo Alto
 
195,376

 
100.0

 
100.0

 
12,179,059

 
62.34

Lockheed
 
Palo Alto
 
42,899

 
100.0

 
100.0

 
1,651,286

 
38.49

Towers at Shore Center
 
Redwood Shores
 
334,483

 
89.1

 
90.3

 
25,482,851

 
85.47

2180 Sand Hill Road
 
Palo Alto
 
45,613

 
97.2

 
97.2

 
3,982,066

 
89.85

Skyway Landing
 
Redwood Shores
 
247,173

 
92.7

 
92.7

 
8,786,675

 
38.36

901 Market Street
 
San Francisco
 
206,199

 
100.0

 
100.0

 
9,644,049

 
46.77

1740 Technology
 
North San Jose
 
206,876

 
99.1

 
99.1

 
6,477,658

 
31.59

Concourse
 
North San Jose
 
944,386

 
94.8

 
96.2

 
25,846,584

 
28.87

Skyport Plaza
 
North San Jose
 
418,086

 
99.1

 
99.1

 
9,650,011

 
23.29

Campus Center
 
Silicon Valley
 
471,580

 
100.0

 
100.0

 
14,713,296

 
31.20

Subtotal
 
 
 
3,420,872

 
96.7
%
 
97.2
%
 
$
137,810,616

 
$
41.67


14



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

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)
 
 
 
 
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
 
 
 
3,932,053

 
96.4
%
 
97.1
%
 
158,801,862

 
$
41.89

Total Stabilized
 
 
 
8,287,394

 
94.3
%
 
95.3
%
 
$
297,531,018

 
$
38.08

 
 
 
 
 
 
 
 
 
 
 
 
 
LEASE-UP
 
 
 
 
 
 
 
 
 
 
 
 
San Francisco Bay Area, California
 
 
 
 
 
 
 
 
 
 
 
 
One Bay Plaza
 
Burlingame
 
195,739

 
77.9
%
 
78.8
%
 
$
5,212,684

 
$
34.17

Metro Center
 
Foster City
 
730,215

 
59.0

 
59.0

 
18,416,823

 
42.78

Embarcadero Place
 
Palo Alto
 
197,402

 
85.1

 
92.8

 
5,444,435

 
32.43

Page Mill Center
 
Palo Alto
 
176,245

 
87.2

 
87.2

 
9,843,216

 
64.02

Palo Alto Square
 
Palo Alto
 
328,251

 
84.6

 
89.2

 
18,917,195

 
68.16

333 Twin Dolphin Plaza
 
Redwood Shores
 
182,789

 
88.5

 
88.5

 
7,559,812

 
46.72

555 Twin Dolphin Plaza
 
Redwood Shores
 
198,936

 
89.6

 
89.6

 
7,851,234

 
44.03

Shorebreeze
 
Redwood Shores
 
230,932

 
66.5

 
67.9

 
6,822,947

 
44.45

Gateway
 
North San Jose
 
609,093

 
82.8

 
83.8

 
14,059,579

 
27.88

Metro Plaza
 
North San Jose
 
456,921

 
79.4

 
84.2

 
10,593,142

 
29.21

Peninsula Office Park
 
San Mateo
 
510,789

 
84.0

 
85.1

 
17,068,516

 
39.79

Techmart Commerce
 
Silicon Valley
 
284,440

 
75.8

 
76.7

 
7,809,873

 
36.21

Total Lease-up
 
 
 
4,101,752

 
77.7
%
 
79.5
%
 
$
129,599,456

 
$
40.66

 
 
 
 
 
 
 
 
 
 
 
 
 
Total In-Service
 
 
 
12,389,146

 
88.8
%
 
90.1
%
 
$
427,130,474

 
$
38.82

_____________________________
(1)
Our in-service portfolio excludes the development, redevelopment, properties held-for-sale and land properties described on pages 17 and 18. As of December 31, 2015, we had two office development properties under construction, seven office redevelopment properties under construction, one property held-for-sale, and eight land properties (see pages 17 and 18). 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 December 31, 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 December 31, 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 December 31, 2015. Annualized base rent does not reflect tenant reimbursements.
(5) Upon Heald College’s lease termination, the entirety of the first floor measuring 55,827 square feet has been designated for redevelopment amid permitting and conversion of the space from educational to office usage (see page 17).
(6) In conjunction with the development of 450 Alaskan Way, 29,385 square feet of newly vacated space has been repositioned as redevelopment (see page 17).

15



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

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
%
 
$
4,987,899

 
$
27.32

Lynnwood
 
1
 
182,009

 
148,863

 
81.8

 
159,670

 
87.7

 
3,161,940

 
21.24

Pioneer Square
 
3
 
635,991

 
592,627

 
93.2

 
604,291

 
95.0

 
14,139,298

 
23.86

Subtotal
 
5
 
1,008,748

 
924,080

 
91.6
%
 
946,551

 
93.8
%
 
$
22,289,137

 
$
24.12

San Francisco Bay Area, California
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Palo Alto
 
5
 
592,089

 
587,644

 
99.2
%
 
587,644

 
99.2
%
 
$
37,209,491

 
$
63.32

Redwood Shores
 
2
 
581,656

 
527,216

 
90.6

 
531,026

 
91.3

 
34,269,527

 
65.00

San Francisco
 
7
 
2,384,875

 
2,189,267

 
91.8

 
2,222,774

 
93.2

 
79,794,368

 
36.45

North San Jose
 
3
 
1,569,348

 
1,514,707

 
96.5

 
1,527,723

 
97.3

 
41,974,252

 
27.71

Silicon Valley
 
1
 
471,580

 
471,580

 
100.0

 
471,580

 
100.0

 
14,713,296

 
31.20

Subtotal
 
18
 
5,599,548

 
5,290,414

 
94.5
%
 
5,340,747

 
95.4
%
 
$
207,960,934

 
$
39.31

Los Angeles, California
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Burbank
 
2
 
623,777

 
580,704

 
93.1
%
 
595,632

 
95.5
%
 
$
23,232,843

 
$
40.01

Hollywood
 
2
 
320,481

 
291,142

 
90.8

 
291,142

 
90.8

 
12,575,020

 
43.19

Torrance
 
1
 
113,000

 
113,000

 
100.0

 
113,000

 
100.0

 
3,327,208

 
29.44

West Los Angeles
 
6
 
621,840

 
614,902

 
98.9

 
614,902

 
98.9

 
28,145,876

 
45.77

Subtotal
 
11
 
1,679,098

 
1,599,748

 
95.3
%
 
1,614,676

 
96.2
%
 
$
67,280,947

 
$
42.06

Total Stabilized
 
34
 
8,287,394

 
7,814,242

 
94.3
%
 
7,901,974

 
95.3
%
 
$
297,531,018

 
$
38.08

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LEASE-UP
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
San Francisco Bay Area, California
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Burlingame
 
1
 
195,739

 
152,542

 
77.9
%
 
154,245

 
78.80
%
 
$
5,212,684

 
$
34.17

Foster City
 
1
 
730,215

 
430,515

 
59.0

 
430,515

 
58.96

 
18,416,823

 
42.78

Palo Alto
 
3
 
701,898

 
599,191

 
85.4

 
629,900

 
89.74

 
34,204,845

 
57.09

Redwood Shores
 
3
 
612,657

 
493,616

 
80.6

 
496,847

 
81.10

 
22,233,993

 
45.04

North San Jose
 
2
 
1,066,014

 
866,944

 
81.3

 
895,292

 
83.99

 
24,652,721

 
28.44

San Mateo
 
1
 
510,789

 
428,936

 
84.0

 
434,762

 
85.12

 
17,068,516

 
39.79

Silicon Valley
 
1
 
284,440

 
215,695

 
75.8

 
218,054

 
76.66

 
7,809,874

 
36.21

Total Lease-up
 
12
 
4,101,752

 
3,187,439

 
77.7
%
 
3,259,615

 
79.5
%
 
$
129,599,456

 
$
40.66

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL IN-SERVICE
 
46
 
12,389,146

 
11,001,681

 
88.8
%
 
11,161,589

 
90.1
%
 
$
427,130,474

 
$
38.82


Refer to footnotes on page 15.


16



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

REDEVELOPMENT, DEVELOPMENT AND HELD-FOR-SALE SUMMARY(1) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annualized Base Rent(4)
 
Annualized Base Rent Per Square Foot(4)
 
 
 
 
Estimated Square Feet(2)
 
Occupied Square Feet
 
Percent Occupied(3)
 
Leased Square Feet
 
Percent Leased(3)
 
 
Location
 
Submarket
 
 
 
 
 
 
 
REDEVELOPMENT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Greater Seattle, Washington
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Merrill Place Theater Building (5)
 
Pioneer Square
 
29,385

 

 
%
 

 
$

 
$

 
$

Subtotal
 
 
 
29,385

 

 
%
 

 
%
 
$

 
$

San Francisco Bay Area, California
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Patrick Henry Drive
 
Silicon Valley
 
70,520

 

 
%
 

 
%
 
$

 
$

875 Howard (1st Floor) (6)
 
San Francisco
 
55,827

 

 

 

 

 

 

Subtotal
 
 
 
126,347

 

 
%
 

 
%
 
$

 
$

Los Angeles, California
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12655 Jefferson
 
West Los Angeles
 
100,756

 

 
%
 
17,867

 
17.7
%
 
$

 
$

3402 Pico (Existing)
 
West Los Angeles
 
50,687

 

 

 

 

 

 

4th & Traction
 
Downtown Los Angeles
 
120,937

 

 

 

 

 

 

405 Mateo
 
Downtown Los Angeles
 
83,285

 

 

 

 

 

 

Subtotal
 
 
 
355,665

 

 
%
 
17,867

 
5.0
%
 
$

 
$

Total Redevelopment
 
 
 
511,397

 

 
%
 
17,867

 
3.5
%
 

 
$

DEVELOPMENT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Greater Seattle, Washington
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Merrill Place—450 Alaskan Way
 
Pioneer Square
 
166,800

 

 

 

 

 

 

Subtotal
 
 
 
166,800

 

 
%
 

 
%
 
$

 
$

Los Angeles, California
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Icon—Building I Tower(7)
 
Hollywood
 
323,273

 

 
%
 
200,052

 
61.9
%
 
$

 
$

Icon—Building II
 
Hollywood
 
90,000

 

 

 

 

 

 

Total Icon
 
 
 
413,273

 

 
%
 
200,052

 
48.4
%
 
$

 
$

Total Development
 
 
 
580,073

 

 
%
 
200,052

 
34.5
%
 

 
$

HELD-FOR-SALE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
San Francisco Bay Area, California
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bayhill Office Center
 
San Bruno
 
554,328

 
496,497

 
89.6
%
 
516,817

 
93.2
%
 
$
15,116,301

 
$
30.45

Total Held-for-Sale
 
 
 
554,328

 
496,497

 
89.6
%
 
516,817

 
93.2
%
 
$
15,116,301

 
$
30.45

TOTAL
 
 
 
1,645,798

 
496,497

 
30.2
%
 
734,736

 
44.6
%
 
15,116,301

 
$
30.45

_____________________________
(1)
Excludes in-service properties and land assets (see pages 14, 15 and 18).
(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 December 31, 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 December 31, 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 December 31, 2015. Annualized base rent does not reflect tenant reimbursements.
(5)
In conjunction with the development of 450 Alaskan Way, 29,385 square feet of newly vacated space has been repositioned as redevelopment.
(6)
Upon Heald College’s lease termination, the entirety of the first floor measuring 55,827 square feet has been designated for redevelopment amid permitting and conversion of the space from educational to office usage.
(7)
Subsequent to December 31, 2015, Netflix entered into an amendment to take possession of an additional 73,697 square feet at a base rental rate of $54.00 psf during the first quarter of 2017 and 49,524 square feet of Must-Take Space during the third quarter of 2018 at a base rental rate of $58.20 psf. As a result of this expansion, Icon Building I Tower is 100% leased at 323,273 square feet as of February 2016.

17



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information


LAND PROPERTIES SUMMARY
Location
 
Submarket
 
Square Feet(1)
 
Percent of Total
San Francisco Bay Area, California
 
 
 
 
 
 
Skyport Plaza
 
North San Jose
 
350,000

 
13.3
%
Campus Center
 
Silicon Valley
 
946,350

 
35.9
%
Subtotal
 
 
 
1,296,350

 
49.1
%
 
 
 
 
 
 
 
Los Angeles
 
 
 
 
 
 
Sunset Bronson—Lot A
 
Hollywood
 
300,000

 
11.4
%
Sunset Bronson—Lot D(2)
 
Hollywood
 
19,816

 
0.8
%
Sunset Gower—Redevelopment
 
Hollywood
 
423,396

 
16.0

Element LA
 
West Los Angeles
 
500,000

 
18.9

3402 Pico (Future)
 
West Los Angeles
 
99,313

 
3.8

3402 Pico (Residential)(3)
 
West Los Angeles
 
TBD

 

Subtotal
 
 
 
1,342,525

 
50.9
%
 
 
 
 
 
 
 
TOTAL
 
 
 
2,638,875

 
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.
(2)
Square footage for Sunset Bronson Lot D represents management’s estimate of developable square feet for 33 residential units.
(3)
Management estimates that 3402 Pico (Residential) could be improved with up to 12 residential units.


18



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

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 Studios
 
571,626

 
65.0
%
 
80.4
%
 
$
14,304,870

 
$
31.11

Sunset Bronson Studios
 
308,026

 
35.0

 
75.0

 
6,784,503

 
29.39

TOTAL
 
879,652

 
100.0
%
 
78.5
%
 
$
21,089,373

 
$
30.53

______________________________
(1)
Occupancy trends for the media and entertainment properties have historically been determined based on their estimated gross square feet as determined in connection with the acquisitions of the Sunset Gower Studios and Sunset Bronson Studios properties in 2007 and 2008, respectively. Since that time, certain space has been either reconfigured or adapted for improved utilization. During the quarter, the Company completed a full examination of historic space utilization at both of its media and entertainment properties. As a result of that undertaking, the Company has adjusted the current and historic occupancy trends for the media and entertainment properties to reflect the utilization of certain production support space and building management use as occupancy, to more closely align with customary office property occupancy methodologies. The Company has also eliminated from the rentable square footage certain structural vacancy (i.e. electrical plant, utility areas and covered pathways) historically included within the gross square footage, but not available for tenancy. Commencing with the most recently completed quarter, the Company intends to report occupancy trends for the media and entertainment properties in accordance with this methodology. Similarly, for purposes of enhancing and ensuring consistency with comparisons to prior periods, historic occupancies have likewise been calculated to reflect this methodology. Going forward, management expects these enhancements to more accurately reflect higher lease percentages than under the prior methodology. As of December 31, 2015, the fourth quarter average occupancy for the media and entertainment properties increased to 78.5% from 76.4% for the same period a year ago. By way of comparison, under the prior methodology, reported occupancy as of the fourth quarter ending December 31, 2014 was 71.6%.
(2)
Percent leased for media and entertainment properties is the average percent leased for the 12 months ended December 31, 2015.
(3)
Annual base rent for media and entertainment properties reflects actual base rent for the 12 months ended December 31, 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) square footage under lease as of December 31, 2015.


19



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

CURRENT VALUE CREATION REDEVELOPMENT AND DEVELOPMENT PROJECTS
(Unaudited, $ in thousands, except square feet)
 
 
 
 
Estimated Construction Period
 
 
 
 
 
 
 
Project Costs(1)
 
 
Property
 
City
 
Start Date
 
Estimated Completion Date
 
Estimated
Stabilization Date
(2)
 
Estimated Rentable Square Feet(3)
 
Total %Leased
 
Project Costs
as of 12/31/15
 
Total Estimated Project Costs
 
Estimated Initial Stabilized Yield on Project Costs(4)
UNDER CONSTRUCTION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Greater Seattle, Washington












 



 

Merrill Place (450 Alaskan Way)

Seattle

Q1-2016

Q4-2017

Q1-2018

166,800


%
 
$
9,565

(5) 
$
92,696

(5) 
6.7%
Los Angeles, California
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Icon—Building I Tower
 
Hollywood
 
Q4-2014
 
Q4-2016
 
Q3-2018
 
323,273

 
61.9
%
(6) 
N/A

 
N/A

 
N/A
Icon—Building II
 
Hollywood
 
Q1-2016
 
Q3-2017
 
Q3-2018
 
90,000

 
%
 
N/A

 
N/A

 
N/A
Total Icon(7)
 
 
 
 
 
 
 
 
 
413,273

 
48.4
%
 
$
70,598

 
$
200,813

 
8.8%
12655 Jefferson
 
Playa Del Rey
 
Q2-2015
 
Q2-2016
 
Q3-2016
 
100,756

 
17.7
%
 
42,603

 
60,891

 
7.2%
3402 Pico (Existing)
 
Santa Monica
 
Q3-2015

Q2-2016

TBD
 
50,687

 
N/A

 
14,434

(8) 
23,831

(8) 
9.6%
4th & Traction

Los Angeles

Q4-2015

Q2-2017

Q2-2018

120,937


N/A

 
52,243

(9) 
93,025

(9) 
6.5%
Total Under Construction
 
 
 
 
 
 
 
 
 
852,453

 


 
$
189,443

 
$
471,256

 

FUTURE DEVELOPMENT PIPELINE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Greater Seattle, Washington
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Merrill Place Theater Building
 
Seattle
 
TBD
 
TBD
 
TBD
 
29,385

 
N/A

 
N/A

 
TBD

 
TBD
San Francisco Bay Area, California
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Skyport Plaza
 
North San Jose
 
TBD
 
TBD
 
TBD
 
350,000

 
N/A

 
$
10,500

(10) 
TBD

 
TBD
Campus Center
 
Milpitas
 
TBD
 
TBD
 
TBD
 
946,350

 
N/A

 
$
7,000

(11) 
TBD

 
TBD
Los Angeles, California
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sunset Bronson—Lot D
 
Hollywood
 
TBD
 
TBD
 
TBD
 
19,816

 
N/A

 
N/A

 
TBD

 
TBD
Sunset Bronson—Lot A
 
Hollywood
 
TBD
 
TBD
 
TBD
 
300,000

 
N/A

 
$
2,154

(12) 
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 (Future)(13)
 
Santa Monica
 
TBD
 
TBD
 
TBD
 
99,313

 
N/A

 
$
4,966

(14) 
TBD

 
TBD
405 Mateo
 
Los Angeles
 
TBD
 
TBD
 
TBD
 
83,285

 
N/A

 
$
40,209

(15) 
TBD

 
TBD
Total Future Development Pipeline
 
 
 
 
 
 
 
 
 
2,751,545

 
 
 
 
 
 
 
 

(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.

20



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

(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)
Project Costs as of December 31, 2015 and Total Estimated Project Costs for Merrill Place (450 Alaskan Way) include $7.0 million for management’s estimate of allocated land and acquisition costs.
(6)
Subsequent to December 31, 2015, Netflix entered into an amendment to take possession of an additional 73,697 square feet at a base rental rate of $54.00 psf during the first quarter of 2017 and 49,524 square feet of Must-Take Space during the third quarter of 2018 at a base rental rate of $58.20 psf. As a result of this expansion, Icon Building I Tower is 100% leased at 323,273 square feet as of February 2016.
(7)
The Icon development consists of a 14-story office tower (Icon—Building 1 Tower), a five-story mid-rise office building (Icon—Building II), and 1,635-stall parking structure. The parking structure was completed within the fourth quarter of 2015. The estimated completion and stabilization dates for each of the buildings is reflected in the table above. 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 exclude land.
(8)
Project Costs as of December 31, 2015 and Total Estimated Project Costs for 3402 Pico (Existing) include approximately $12.634 million for management’s estimate of allocated land (including existing 50,687-square-foot building) and acquisition costs. Not included in the cost for 3402 Pico (Existing) are (i) $4.966 million for management’s estimate of allocated land value for 3402 Pico (Future); and (ii) $1.0 million for management's estimate of allocated land value for 3402 Pico (Residential).
(9)
Project Costs as of December 31, 2015 and Total Estimated Project Costs for 4th & Traction include approximately $49.402 million of initial acquisition cost for existing 120,937-square-foot building.
(10)
Project Costs as of December 31, 2015 for Skyport Plaza include approximately $10.5 million for management’s estimate of allocated land and acquisition costs.
(11)
Project Costs as of December 31, 2015 for Campus Center include approximately $7.0 million for management’s estimate of allocated land and acquisition costs.
(12)
Project Costs as of December 31, 2015 for Sunset Bronson—Lot A excludes land.
(13)
Estimated rentable square feet for 3402 Pico (Future) does not include a 50,687-square-foot existing vacant building.
(14)
Project Costs as of December 31, 2015 for 3402 Pico (Future) include approximately $4.966 million for management’s estimate of allocated land value.
(15)
Projects Costs as of December 31, 2015 for 405 Mateo include approximately $40.0 million of initial acquisition costs for the existing 83,285-square-foot building.




21



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information


SAME-STORE ANALYSIS(1) 
(Unaudited, $ in thousands)
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2015
 
2014
 
% change
 
2015
 
2014
 
% change
Same-store office statistics (2)
 
 
 
 
 
 
 
 
 
 
 
Number of properties
19

 
19

 
 
 
19

 
19

 
 
Rentable square feet
4,355,341

 
4,355,341

 
 
 
4,355,341

 
4,355,341

 
 
Ending % leased
93.8
%
 
95.6
%
 
(1.9
)%
 
93.8
%
 
95.6
%
 
(1.9
)%
Ending % occupied
92.4
%
 
93.4
%
 
(1.1
)%
 
92.4
%
 
93.4
%
 
(1.1
)%
Average % occupied for the period
92.9
%
 
93.1
%
 
(0.2
)%
 
92.6
%
 
90.6
%
 
2.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
Same-store media statistics (3)
 
 
 
 
 
 
 
 
 
 
 
Number of properties
2

 
2

 
 
 
2

 
2

 
 
Rentable square feet
879,652

 
879,652

 
 
 
879,652

 
879,652

 
 
Average % occupied for the period
81.8
%
 
75.2
%
 
6.6
 %
 
78.5
%
 
76.4
%
 
2.1
 %
 
 
 
 
 
 
 
 
 
 
 
 
SAME-STORE ANALYSIS GAAP BASIS
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2015
 
2014
 
% change
 
2015
 
2014
 
% change
Same-store net operating income — GAAP basis
 
 
 
 
 
 
 
 
 
 
 
Total office revenues
$
46,694

 
$
50,653

 
(7.8
)%
 
$
185,755

 
$
183,973

(4)(5) 
1.0
 %
Total media revenues
10,756

 
10,165

 
5.8

 
39,132

 
39,629

 
(1.3
)
Total revenues
$
57,450

 
$
60,818

 
(5.5
)%
 
$
224,887

 
$
223,602

 
0.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
Total office expense
$
17,105

 
$
17,843

 
(4.1
)%
 
$
67,141

 
$
65,268

(6) 
2.9
 %
Total media expense
6,372

 
7,376

 
(13.6
)
 
23,726

 
25,897

 
(8.4
)
Total property expense
$
23,477

 
$
25,219

 
(6.9
)%
 
$
90,867

 
$
91,165

 
(0.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
Same-store office net operating income — GAAP basis
$
29,589

 
$
32,810

 
(9.8
)%
 
$
118,614

 
$
118,705

 
(0.1
)%
NOI Margin
63.4
%
 
64.8
%
 
(1.4
)%
 
63.9
%
 
64.5
%
 
(0.6
)%
Same-store media net operating income — GAAP basis
$
4,384

 
$
2,789

 
57.2
 %
 
$
15,406

 
$
13,732

 
12.2
 %
NOI Margin
40.8
%
 
27.4
%
 
13.4
 %
 
39.4
%
 
34.7
%
 
4.7
 %
Same-store total property net operating income — GAAP basis
$
33,973

 
$
35,599

 
(4.6
)%
 
$
134,020

 
$
132,437

 
1.2
 %
NOI Margin
59.1
%
 
58.5
%
 
0.6
 %
 
59.6
%
 
59.2
%
 
0.4
 %




22



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

SAME-STORE ANALYSIS(1) CONTINUED
(Unaudited, $ in thousands)

SAME-STORE ANALYSIS CASH BASIS
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2015
 
2014
 
% change
 
2015
 
2014
 
% change
Same-store net operating income — Cash basis
 
 
 
 
 
 
 
 
 
 
 
Total office revenues
$
45,029

 
$
47,020

 
(4.2
)%
 
$
177,952


$
167,689

(4)(5) 
6.1
 %
Total media revenues
10,308

 
10,147

 
1.6

 
37,407

 
39,666

 
(5.7
)
Total revenues
$
55,337

 
$
57,167

 
(3.2
)%
 
$
215,359

 
$
207,355

 
3.9
 %
 
 
 
 
 
 
 
 
 
 
 
 
Total office expense
$
17,043

 
$
17,781

 
(4.2
)%
 
$
66,894

 
$
65,021

(6) 
2.9
 %
Total media expense
6,372

 
7,376

 
(13.6
)
 
23,726

 
25,897

 
(8.4
)
Total property expense
$
23,415

 
$
25,157

 
(6.9
)%
 
$
90,620

 
$
90,918

 
(0.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
Same-store office net operating income — Cash basis
$
27,986

 
$
29,239

 
(4.3
)%
 
$
111,058

 
$
102,668

 
8.2
 %
NOI Margin
62.2
%
 
62.2
%
 
 %
 
62.4
%
 
61.2
%
 
1.2
 %
Same-store media net operating income — Cash basis
$
3,936

 
$
2,771

 
42.0
 %
 
$
13,681

 
$
13,769

 
(0.6
)%
NOI Margin
38.2
%
 
27.3
%
 
10.9
 %
 
36.6
%
 
34.7
%
 
1.9
 %
Same-store total property net operating income — Cash basis
$
31,922

 
$
32,010

 
(0.3
)%
 
$
124,739

 
$
116,437

 
7.1
 %
NOI Margin
57.7
%
 
56.0
%
 
1.7
 %
 
57.9
%
 
56.2
%
 
1.7
 %
___________________________
(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 December 31, 2015.
(2)See page 14 for same-store office properties.
(3)See page 19 for same-store media properties.
(4)Amount excludes one-time $3,340 tenant recoveries relating to prior year property tax expenses disclosed in the Q3-2014 earnings release.
(5)Amount excludes a one-time $1.6 million early lease termination fee income disclosed in the Q2-2014 earnings release.
(6)Amount excludes one-time $4,201 property tax expenses disclosed in the Q3-2014 earnings release.




23



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

RECONCILIATION OF SAME-STORE PROPERTY NET OPERATING INCOME TO GAAP NET INCOME (LOSS)
(Unaudited, $ in thousands)
 
Three Months Ended 
 December 31,
 
Year Ended 
 December 31,
 
2015
 
2014
 
2015
 
2014
Reconciliation to net income
 
 
 
 
 
 
 
Same-store office revenues — Cash basis
$
45,029

 
$
47,020

 
$
177,952

 
$
167,689

GAAP adjustments to office revenues — Cash basis
1,665

 
3,633

 
7,803

 
16,284

One time revenue adjustments per definition

 

 

 
4,950

Same-store office revenues — GAAP basis
$
46,694

 
$
50,653

 
$
185,755

 
$
188,923

 
 
 
 
 
 
 
 
Same-store media revenues — Cash basis
$
10,308

 
$
10,147

 
$
37,407

 
$
39,666

GAAP adjustments to media revenues — Cash basis
448

 
18

 
1,725

 
(37
)
Same-store media revenues — GAAP basis
$
10,756

 
$
10,165

 
$
39,132

 
$
39,629

 
 
 
 
 
 
 
 
Same-store property revenues — GAAP basis
$
57,450

 
$
60,818

 
$
224,887

 
$
228,552

 
 
 
 
 
 
 
 
Same-store office expenses — Cash basis
$
17,043

 
$
17,781

 
$
66,894

 
$
65,021

GAAP adjustments to office expenses — Cash basis
62

 
62

 
247

 
247

Property tax expense adjustments

 

 

 
4,201

Same-store office expenses — GAAP basis
$
17,105

 
$
17,843

 
$
67,141

 
$
69,469

 
 
 
 
 
 
 
 
Same-store media expenses — Cash basis
$
6,372

 
$
7,376

 
$
23,726

 
$
25,897

Same-store media expenses — GAAP basis
$
6,372

 
$
7,376

 
$
23,726

 
$
25,897

 
 
 
 
 
 
 
 
Same-store property expenses — GAAP basis
$
23,477

 
$
25,219

 
$
90,867

 
$
95,366

 
 
 
 
 
 
 
 
Same-store net operating income — GAAP basis
$
33,973

 
$
35,599

 
$
134,020

 
$
133,186

Non-same-store GAAP net operating income
63,539

 
5,380

 
196,973

 
15,960

General and administrative
(9,583
)
 
(9,096
)
 
(38,534
)
 
(28,253
)
Depreciation and amortization
(74,126
)
 
(20,243
)
 
(245,071
)
 
(72,216
)
Income from operations
$
13,803

 
$
11,640

 
$
47,388

 
$
48,677

Interest expense
(16,600
)
 
(6,413
)
 
(50,667
)
 
(25,932
)
Interest income
6

 
9

 
124

 
30

Acquisition-related expenses
106

 
(4,322
)
 
(43,336
)
 
(4,641
)
Other expense
(60
)
 
(29
)
 
(62
)
 
14

Gain on sale of real estate

 

 
30,471

 
5,538

Net loss from discontinued operations

 

 

 
(164
)
Net income (loss)
$
(2,745
)
 
$
885

 
$
(16,082
)
 
$
23,522


24



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

NET OPERATING INCOME DETAIL
Three Months Ended December 31, 2015
(Unaudited, $ in thousands)
 
 
Same Store Office Properties(1)
 
Non-Same Store Office Properties(2)
 
Development/
Redevelopment
(3)
 
Lease-Up Properties(4)
 
Held-for-Sale(3)
 
Media & Entertainment(5)
 
Total Properties
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash
 
$
34,342

 
$
40,322

 
$

 
$
28,807

 
$
3,530

 
$
5,677

 
$
112,678

GAAP Revenue
 
1,665

 
1,323

 

 
7,026

 
1,204

 
448

 
11,666

Total Rents
 
$
36,007

 
$
41,645

 
$

 
$
35,833

 
$
4,734

 
$
6,125

 
$
124,344

 
 
 
 
 
 
 
 
 
 

 
 
 
 
Tenant Reimbursements
 
$
8,662

 
$
8,641

 
$

 
$
4,175

 
$
707

 
$
238

 
$
22,423

Parking and Other
 
2,025

 
244

 
(6
)
 
64

 
20

 
4,393

 
6,740

Total Revenue
 
$
46,694

 
$
50,530

 
$
(6
)
 
$
40,072

 
$
5,461

 
$
10,756

 
$
153,507

 
 
 
 
 
 
 
 
 
 

 
 
 
 
Property operating expenses
 
17,105

 
16,286

 
18

 
15,494

 
1,741

 
6,372

 
57,016

Property GAAP Net Operating Income
 
$
29,589

 
$
34,244

 
$
(24
)
 
$
24,578

 
$
3,720

 
$
4,384

 
$
96,491

 
 
 
 
 
 
 
 
 
 

 
 
 
 
Square Feet
 
4,355,341

 
3,932,053

 
1,091,470

 
4,101,752

 
554,328

 
879,652

 
14,914,596

Ending % Leased
 
93.8
%
 
97.1
%
 
20.0
%
 
79.5
%
 
93.2
%
 
81.8
%
 
84.6
%
Ending % Occupied
 
92.4
%
 
96.4
%
 
%
 
77.7
%
 
89.6
%
 
81.8
%
 
81.9
%

 


 


 


 


 


 


 


Property GAAP Net Operating Income
 
$
29,589

 
$
34,244

 
$
(24
)
 
$
24,578

 
$
3,720

 
$
4,384

 
$
96,491

Less : GAAP Revenue
 
(1,665
)
 
(1,323
)
 

 
(7,026
)
 
(1,204
)
 
(448
)
 
(11,666
)
Add : GAAP Expense
 
62

 
419

 

 
69

 

 

 
550

Property Cash Net Operating Income
 
$
27,986

 
$
33,340

 
$
(24
)
 
$
17,621

 
$
2,516

 
$
3,936

 
$
85,375

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income Reconciliation
 
Q4 - 2015
 
 
Property GAAP Net Operating Income
 
$
96,491

 
 
Broadway Note
 
906

 
 
Disposed Asset
 
(127
)
 
 
Other Income/Inter-Company Eliminations
 
242

 
 
Total GAAP Net Operating Income
 
$
97,512

 
 
General and administrative
 
(9,583
)
 
 
Depreciation and amortization
 
(74,126
)
 
(1) See page 14 for same-store office properties.
Income from operations
 
$
13,803

 
(2) See page 15 for non-same-store properties.
Interest expense
 
(16,600
)
 
(3) See page 17 for redevelopment, development and held-for-sale properties.
Interest income
 
6

 
(4) See page 15 for lease-up properties.
Acquisition-related expenses
 
106

 
(5) See page 19 for same-store media properties.
Other expenses (income)
 
(60
)
 
 
Gain on sale of real estate
 

 
 
Discontinued ops
 

 
 
Net Income
 
$
(2,745
)
 
 

25



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

OFFICE PORTFOLIO LEASING ACTIVITY
 
Three Months Ended 
 December 31, 2015
 
Year Ended 
 December 31, 2015
Total Gross Leasing Activity(1)
 
 
 
Rentable Square Feet
400,441

 
1,586,556

Gross New Leasing Activity
 
 
 
Rentable square feet
193,211

 
924,832

New cash rate
$
52.56

 
$
50.98

Gross Renewal Leasing Activity
 
 
 
Rentable square feet
207,230

 
661,724

Renewal cash rate
$
46.53

 
$
48.11

Total Leases Expired and Terminated
 
 
 
Contractual (scheduled) expiration (square feet)
138,556

 
511,109

Early termination (square feet)
31,106

 
227,323

Total
169,662

 
738,432

Net Absorption
 
 
 
Leased rentable square feet
23,549

 
186,400

Cash Rent Growth(2)
 
 
 
Expiring Rate
$
38.50

 
$
37.22

New/Renewal Rate
$
47.25

 
$
48.96

Change
22.7
%
 
31.5
%
Straight-Line Rent Growth(3)
 
 
 
Expiring Rate
$
33.88

 
$
33.97

New/Renewal Rate
$
48.10

 
$
50.17

Change
42.0
%
 
47.7
%
Weighted Average Lease Terms
 
 
 
New (in months)
56.6

 
73.6

Renewal (in months)
63.8

 
48.9

Tenant Improvements and Leasing Commissions(4)
Lease Transaction Costs Per Square Foot
 
Three Months Ended 
 December 31, 2015
 
Year Ended 
 December 31, 2015
 
Total
 
Annual
 
Total
 
Annual
New leases
$
34.63

 
$
7.34

 
$
48.24

 
$
7.87

Renewal leases
$
27.08

 
$
5.10

 
$
18.71

 
$
4.59

Blended
$
30.72

 
$
6.11

 
$
35.93

 
$
6.81

______________________________
(1)
The 1,586,556 square feet executed in the twelve-month period ended December 31, 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 consisting 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.

26



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information


OFFICE PORTFOLIO LEASE DISTRIBUTION


Square Feet Under Lease
 
Number of Leases
 
Percentage of All Leases
 
Total Leased Square Feet
 
Percentage of Office Portfolio Leased Square Feet
 
Annualized Base Rent(1)
 
Percentage of Office Portfolio Annualized Base Rent
2,500 or Less
 
273

 
29.5
%
 
396,869

 
3.3
%
 
$
14,709,016

 
3.2
%
2,501-10,000
 
376

 
40.6

 
1,917,649

 
16.1

 
72,908,001

 
15.8

10,001-20,000
 
94

 
10.2

 
1,327,213

 
11.2

 
54,651,001

 
11.8

20,001-40,000
 
63

 
6.8

 
1,778,749

 
15.0

 
75,758,850

 
16.4

40,001-100,000
 
38

 
4.1

 
2,163,214

 
18.2

 
94,922,729

 
20.6

Greater than 100,000
 
21

 
2.3

 
3,767,951

 
31.7

 
129,297,179

 
28.0

Building Management Use
 
34

 
3.7

 
146,533

 
1.2

 

 

Signed Leases Not Commenced
 
26

 
2.8

 
398,147

 
3.3

 
19,092,973

 
4.1

Total
 
925

 
100.0
%
 
11,896,325

 
100.0
%
 
$
461,339,749

 
100.0
%

_____________________________
(1)
Annualized base rent is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements)), including uncommenced leases, as of December 31, 2015 (ii) by 12. Annualized base rent does not reflect tenant reimbursements.


27



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information


OFFICE PORTFOLIO COMMENCED LEASES WITH NON-RECURRING, UP-FRONT ABATEMENTS(1)
 
 
Submarket
 
Square Feet
 
Lease Start Date
 
Rent Start Date
 
Starting Base Rents(2)
 
Lease Expiration Date
San Francisco Bay Area, California
 
 
 
 
 
 
 
 
 
 
 
 
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



______________________________
(1)
Consists of leases greater than 10,000 square feet which commenced on or prior to December 31, 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 December 31, 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 December 31, 2015, and (ii) 12, by (iii) the leased square footage. Base rents do not include tenant reimbursements.



28



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information


QUARTERLY UNCOMMENCED/BACKFILL — NEXT EIGHT QUARTERS(1) 
 
 
Q1 2016
 
Q2 2016
 
Q3 2016
 
Q4 2016
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 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
Starting Rent/sf(2)
Greater Seattle, Washington
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lake Union
 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

Lynnwood
 
10,807

18.75

 


 


 


 


 


 


 


Pioneer Square
 
11,664

25.57

 


 


 


 


 


 


 


Subtotal
 
22,471

$
22.29

 

$

 

$

 

$

 

$

 

$

 

$

 

$

San Francisco Bay Area, California
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Burlingame
 
1,703

$
40.80

 

$

 

$

 

$

 

$

 

$

 

$

 

$

Foster City
 
4,855

70.80

 


 


 


 


 


 


 


Palo Alto
 
25,111

51.69

 
5,598

78.00

 


 


 


 


 


 


Redwood Shores
 
7,041

58.65

 


 


 


 


 


 


 


San Bruno
 
20,320

36.44

 


 


 


 


 


 


 


San Francisco
 
26,266

69.23

 
1,940

46.00

 
817

72.00

 
28,922

36.00

 


 
38,739

70.84

 


 


North San Jose
 
122,771

36.76

 
18,405

37.08

 
1,969

35.40

 


 


 


 


 


San Mateo
 
5,826

49.20

 


 


 


 


 


 


 


Silicon Valley
 
2,359

46.80

 


 


 


 


 


 


 


Subtotal
 
216,252

$
44.36

 
25,943

$
46.58

 
2,786

$
46.13

 
28,922

$
36.00

 

$

 
38,739

$
70.84

 

$

 

$

Los Angeles, California
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Burbank
 
10,888

$
40.80

 

$

 
31,588

$
40.80

 

$

 

$

 

$

 

$

 

$

Downtown Los Angeles
 


 


 


 


 


 


 


 


Hollywood
 


 


 


 


 
200,052

54.00

(3) 


 


 


Torrance
 


 


 


 


 


 


 


 


West Los Angeles
 


 
17,867

52.80

 


 


 


 


 


 


Subtotal
 
10,888

$
40.80

 
17,867

$
52.80

 
31,588

$
40.80

 

$

 
200,052

$
54.00

 

$

 

$

 

$

 
 





 





 


 


 


 


Total
 
249,611

$
42.22

 
43,810

$
49.11

 
34,374

$
41.23

 
28,922

$
36.00

 
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 December 31, 2015 but with commencement dates after December 31, 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 January 1, 2017. The lease will commence six months after the anticipated delivery date, which is estimated to be July 1, 2016. Subsequent to December 31, 2015, Netflix entered into an amendment to take possession of an additional 73,697 square feet at a base rental rate of $54.00 psf during the first quarter of 2017 and 49,524 square feet of Must-Take Space during the third quarter of 2018 at a base rental rate of $58.20 psf. As a result of this expansion, Icon Building I Tower is 100% leased at 323,273 square feet as of February 2016.


29



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

QUARTERLY OFFICE LEASE EXPIRATIONS — NEXT EIGHT QUARTERS(1) 
 
 
Q1 2016(2)
 
Q2 2016
 
Q3 2016
 
Q4 2016
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 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

 


 

$

 


 


 

 

 
6,049

 
20.50

Pioneer Square
 
20,834

26.91

 


 
11,995

26.96

 
8,349

25.67

 
6,000

28.50

 


 

 

 
3,260

 
33.00

Subtotal
 
20,834

$
26.91

 
44,908

$
18.50

 
11,995

$
26.96

 
8,949

$
26.88

 
6,000

$
28.50

 

$

 

 
$

 
9,309

 
$
24.88

San Francisco Bay Area, California
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Burlingame
 
1,278

$
27.00

 
13,538

$
26.85

 
6,692

$
30.96

 
6,590

$
31.17

 

$

 
10,162

$
38.26

 
2,707

 
$
36.23

 
10,536

 
$
37.36

Foster City
 
4,485

83.52

 
694

58.71

 
9,422

39.49

 
17,199

45.34

 
39,294

39.48

 
7,868

53.94

 
5,577

 
56.96

 
25,668

 
52.13

Palo Alto
 
12,428

46.89

 
102,945

34.55

 
39,199

44.45

 
36,150

37.02

 
80,944

76.30

 
25,952

65.30

 
2,199

 
90.00

 
121,754

 
72.55

Redwood Shores
 
31,039

28.65

 
52,324

37.90

 
43,718

116.13

 
43,998

42.41

 
33,140

44.19

 
28,393

49.75

 
57,436

 
41.73

 
50,045

 
55.81

San Bruno
 


 
12,189

45.06

 
32,440

33.11

 
54,649

29.81

 
3,129

28.68

 
10,770

38.97

 
47,697

 
31.94

 
17,147

 
34.60

San Francisco
 
3,332

35.00

 
39,908

29.77

 
16,252

38.45

 
3,515

37.73

 
157,873

35.14

 
32,050

33.63

 
139,197

 
47.09

 
187,529

(6) 
11.43

North San Jose
 
93,375

28.63

 
60,847

28.78

 
82,971

30.33

 
124,920

28.78

 
161,400

30.67

 
94,106

29.98

 
481,002

(5) 
26.05

 
118,591

 
28.63

San Mateo
 
4,563

43.28

 
48,718

38.09

 
14,355

43.46

 
9,583

41.46

 
4,930

45.76

 
39,045

43.21

 
7,576

 
43.92

 
15,661

 
36.70

Silicon Valley
 
9,710

33.80

 
12,760

29.36

 
15,471

33.72

 
16,409

37.63

 


 
4,750

38.28

 
31,596

 
32.11

 
14,916

 
40.29

Subtotal
 
160,210

$
32.44

 
343,923

$
33.91

 
260,520

$
48.98

 
313,013

$
33.74

 
480,710

$
41.62

 
253,096

$
39.94

 
774,987

 
$
32.22

 
561,847

 
$
36.78

Los Angeles, California
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Burbank
 

$

 

$

 
4,953

$
44.18

 
9,005

$
44.50

 

$

 

$

 

 
$

 
8,257

 
$
39.00

Downtown Los Angeles
 


 


 


 


 


 


 

 

 

 

Hollywood
 


 


 


 


 


 
2,664


 

 

 

 

Torrance
 


 


 


 


 


 


 

 

 

 

West Los Angeles
 
4,364

45.21

 
30,300

29.75

 


 
3,047

40.66

 


 
8,527

44.35

 
5,253

 
65.42

 
1,068

 
50.18

Subtotal
 
4,364

$
45.21

 
30,300

$
29.75

 
4,953

$
44.18

 
12,052

$
43.53

 

$

 
11,191

$
33.79

 
5,253

 
$
65.42

 
9,325

 
$
40.28

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
185,408

$
32.12

 
419,131

$
31.96

 
277,468

$
47.94

 
334,014

$
33.91

 
486,710

$
41.45

 
264,287

$
39.68

 
780,240

 
$
32.44

 
580,481

 
$
36.65

Expirations as % of
In-Service Portfolio
 
1.5%
 
 
3.4%
 
 
2.2%
 
 
2.7%
 
 
3.9%
 
 
2.1%
 
 
6.3%
 
 
 
4.7%
 
 
______________________
(1)
The following schedule does not reflect 259,853 square feet that expired on December 31, 2015.
(2)
Q1 2016 expiring square footage does not include 50,960 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.
(5)
Qualcomm at Skyport Plaza comprises 365,502 square feet of the total expiring square footage at Q3 2017.
(6)
Bank of America comprises 185,021 square feet of the total expiring square footage at Q4 2017. Bank of America expirations by square footage and annual base rate: (i) 116,824 square feet expiring at $5.97; (ii) 4,492 square feet expiring at $11.94; (iii) 38,239 square feet expiring at $23.88, and (iv) 25,466 square feet expiring at $14.33.

30



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

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
 
2,137,756

 
15.3
%
 


 


 


 


2015
 
259,853

 
1.9

 
$
7,950,952

 
1.7
%
 
$
30.60

 
$
30.78

2016
 
1,216,021

 
8.7

 
43,669,835

 
9.5

 
35.91

 
36.17

2017
 
2,111,718

 
15.1

 
74,061,179

 
16.1

 
35.07

 
36.58

2018
 
1,351,166

 
9.7

 
50,132,214

 
10.9

 
37.10

 
40.32

2019
 
2,097,069

 
15.0

 
77,863,269

 
16.9

 
37.13

 
42.13

2020
 
949,150

 
6.8

 
40,647,220

 
8.8

 
42.82

 
49.66

2021
 
1,005,119

 
7.2

 
38,184,161

 
8.3

 
37.99

 
44.44

2022
 
301,147

 
2.2

 
15,087,819

 
3.3

 
50.10

 
63.13

2023
 
641,149

 
4.6

 
20,476,998

 
4.5

 
31.94

 
38.86

2024
 
123,907

 
0.9

 
6,559,123

 
1.4

 
52.94

 
61.56

Thereafter
 
1,244,386

 
8.9

 
66,290,781

 
14.4

 
53.27

 
63.79

Building management use
 
146,533

 
1.0

 

 

 

 

Signed leases not commenced(4)
 
398,147

 
2.8

 
19,092,973

 
4.2

 
47.95

 
60.71

Total/Weighted Average
 
13,983,121

 
100.0
%
 
$
460,016,524

 
100.0
%
 
$
38.84

 
$
43.81

______________________________
(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)) December 31, 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 December 31, 2015.
(3)
Annualized base rent per square foot at expiration 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 lease as of December 31, 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 and is calculated as (i) base rental payments (defined as cash base rents (before abatements)) under uncommenced leases for vacant space as of December 31, 2015, divided by (ii) square footage under uncommenced leases as of December 31, 2015.


31



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

FIFTEEN LARGEST OFFICE TENANTS

Tenant
 
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)
 
2
 
2
 
Various
 
305,729

 
2.2
%
 
$
18,995,070

 
4.3
%
Weil, Gotshal & Manges LLP(3)
 
1
 
1
 
Various
 
101,000

 
0.7
%
 
16,265,637

 
3.7

Riot Games, Inc.(4)
 
2
 
2
 
Various
 
286,629

 
2.0
%
 
15,108,565

 
3.4

Cisco Systems, Inc.(5)
 
2
 
2
 
Various
 
474,560

 
3.4
%
 
14,808,569

 
3.3

Uber Technologies, Inc.(6)
 
2
 
2
 
Various
 
252,536

 
1.8
%
 
10,948,034

 
2.5

Square, Inc.
 
1
 
1
 
9/27/2023
 
334,284

 
2.4
%
 
10,938,442

 
2.5

Salesforce.com(7)
 
1
 
1
 
Various
 
237,567

 
1.7
%
 
10,855,113

 
2.5

Stanford(8)
 
3
 
2
 
Various
 
132,496

 
0.9
%
 
9,087,944

 
2.1

Warner Bros. Entertainment
 
1
 
1
 
12/31/21
 
230,000

 
1.6
%
 
8,942,900

 
2.0

Qualcomm Incorporated
 
2
 
1
 
7/31/17
 
365,502

 
2.6
%
 
8,675,247

 
2.0

Warner Music Group
 
1
 
1
 
12/31/2019
 
195,166

 
1.4
%
 
8,005,578

 
1.8

NetSuite, Inc.(9)
 
2
 
1
 
Various
 
166,667

 
1.2
%
 
7,567,085

 
1.7

EMC Corporation(10)
 
3
 
2
 
Various
 
294,756

 
2.1
%
 
7,520,525

 
1.7

AIG, Inc.
 
1
 
1
 
7/31/2017
 
132,600

 
0.9
%
 
6,099,600

 
1.4

GSA(11)
 
5
 
4
 
Various
 
183,709

 
1.3
%
 
5,584,077

 
1.3

TOTAL
 
29
 
24
 
 
 
3,693,201

 
26.3
%
 
$
159,402,386

 
36.0
%
______________________________
(1)
Annualized base rent is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements)) under commenced leases as of December 31, 2015, by (ii) 12. Annualized base rent does not reflect tenant reimbursements.
(2)
Google, Inc. expirations by property and square footage: (i) 207,857 square feet at 3400 Hillview expiring on November 30, 2021 and (ii) 97,872 square feet at Foothill Research Center expiring on February 28, 2025.
(3)
Weil, Gotshal & Manges LLP expiration by square footage: (i) 25,320 square feet expiring on August 31, 2016 and (ii) 75,680 square feet expiring on August 31, 2026.
(4)
Riot Games, Inc. expirations by property and square footage: (i) 2,592 square feet at Shorebreeze Center expiring on November 30, 2016 and (ii) 284,037 square feet at Element LA expiring on March 31, 2030.
(5)
Cisco Systems, Inc. expirations by property and square footage: (i) 2,980 square feet at Concourse expiring March 31, 2018 and (ii) 471,580 square feet at Campus Center expiring on December 31, 2019.
(6)
Uber Technologies, Inc. expirations by property and square footage: (i) 232,290 square feet at 1455 Market expiring on 2/28/2025 and (ii) 20,246 square feet at Skyway Landing expiring 3/31/2017.
(7)
Salesforce.com is expected to take possession of an additional 4,144 square feet during the second quarter of 2017. Expirations by square footage: (i) 78,872 square feet expiring on July 31, 2025; (ii) 59,689 square feet expiring on April 30, 2027; (iii) 93,028 square feet expiring on October, 31, 2028; and (iv) 5,978 square feet of MTM storage space.
(8)
Stanford Expirations by property and square footage: (i) Stanford Healthcare 63,201 square feet at Page Mill Center expiring June 30, 2019; (ii) Board of Trustees Stanford 43,215 square feet at Page Mill Center expiring 12/31/2022 and (iii) Stanford University 26,080 square feet at Palo Alto Square expiring on December 31, 2019.
(9)
NetSuite, Inc. expirations by square footage: (i) 38,194 square feet expiring on August 31, 2019 and (ii) 128,473 square feet expiring May 31, 2022.
(10)
EMC expirations by property and square footage: (i) 66,510 square feet at 875 Howard Street expiring on June 30, 2019; (ii) 185,292 square feet at 505 First expiring on October 18, 2021; and (iii) 42,954 square feet at 505 First expiring on December 31, 2023.
(11)
GSA expirations by property and square footage: (i) 71,729 square feet at 1455 Market Street expiring on February 19, 2017; (ii) 5,906 square feet at 901 Market Street expiring on April 30, 2017; (iii) 28,993 square feet at Northview expiring on April 4, 2020; (iv) 33,582 square feet at Rincon Center expiring May 31, 2020; and (v) 43,499 square feet at 901 Market Street expiring on July 31, 2021.


32



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information

OFFICE PORTFOLIO DIVERSIFICATION


 
 
Total Square Feet(1)
 
Annualized Rent as Percentage of Total
Industry
 
 
Business Services
 
946,703

 
7.5
%
Educational
 
109,953

 
1.1

Financial Services
 
403,941

 
1.7

Insurance
 
388,040

 
3.3

Legal
 
737,028

 
11.3

Media & Entertainment
 
1,489,236

 
14.2

Other
 
1,135,249

 
9.1

Real Estate
 
86,217

 
0.8

Retail
 
749,947

 
5.1

Technology
 
4,770,202

 
40.4

Advertising
 
124,300

 
0.9

Government
 
302,488

 
2.1

Healthcare
 
254,874

 
2.5

TOTAL
 
11,498,178

 
100.0
%
_____________________________
(1)
Does not include signed leases not commenced.

33



Hudson Pacific Properties, Inc.
Fourth Quarter 2015 Supplemental Operating and Financial Information


DEFINITIONS

Funds From Operations (FFO): Funds From Operations before non-controlling interest (FFO) is a non-GAAP financial measure we believe is a useful supplemental measure of our performance. We calculate 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. We also add to FFO the difference between rental revenue recognize in accordance with accounting principles generally accepted in the United States (GAAP) based on the amortization of the prepaid rent liability relating to the KTLA lease at our Sunset Bronson property compared to scheduled cash rents received in connection with such prepayment. 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.


34




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