Hudson Pacific Properties, Inc. - FORM 8-K - EX-99.2 - March 15, 2011

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HUDSON PACIFIC PROPERTIES, INC.
FOURTH QUARTER 2010
Supplemental Operating and Financial Data
 
This Supplemental Operating and Financial Data contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. You should not rely on forward-looking statements as predictions of future events. Forward-looking statements involve numerous risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ materially from those expressed in any forward-looking statement made by us. These risks and uncertainties include, but are not limited to: adverse economic and real estate developments in Southern and Northern California; 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 Prospectus filed with the Securities and Exchange Commission on June 23, 2010. 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 Prospectus dated June 23, 2010. In light of these risks and uncertainties, any forward-looking events described herein or in Hudson Pacific Properties, Inc.'s March 2011 conference call may not occur.
 
 
 
 
 
 
Hudson Pacific Properties, Inc.
Fourth Quarter 2010 Supplemental Operating and Financial Data

 
TABLE OF CONTENTS
 
 
 
PAGE
COMPANY BACKGROUND AND CORPORATE DATA
3 - 4
 
 
CONSOLIDATED FINANCIAL RESULTS
 
 
 
Balance Sheets
Quarterly Operating Results
Funds from Operations and Adjusted Funds from Operations
Same Property Statistical and Financial Data
 
Debt Summary
 
 
PORTFOLIO DATA
 
 
 
Office Portfolio Summary, Occupancy, and In-place Rents
Media & Entertainment Portfolio Summary, Occupancy, and In-place Rents
Ten Largest Office Tenants
Office Portfolio Leasing Activity
Office Lease Expirations - Annual
Quarterly Office Lease Expirations - Next Four Quarters
Office Portfolio Diversification
 
 
DEFINITIONS
 
 
 

2
Hudson Pacific Properties, Inc.
Fourth Quarter 2010 Supplemental Operating and Financial Data

COMPANY BACKGROUND
 
CORPORATE
11601 Wilshire Boulevard, Suite 1600, Los Angeles, California 90025
(310) 445-5700
 
BOARD OF DIRECTORS
 
 
 
Victor J. Coleman
Mark Burnett
Mark D. Linehan
Chairman of the Board and Chief Executive Officer, Hudson Pacific Properties, Inc
Independent Television Series Producer
President and Chief Executive Officer, Wynmark Company
 
 
 
Howard S. Stern
Richard B. Fried
Robert M. Moran, Jr.
President, Hudson Pacific Properties, Inc.
Managing Member, Farallon Capital Management, L.L.C.
Co-founder and Co-owner, FJM Investments LLC
 
 
 
Theodore R. Antenucci
Jonathan M. Glaser
Barry A. Porter
President and Chief Investment Officer, Prologis and President and Chief Executive Officer, Catellus Development Corporation
Managing Member, JMG Capital Management LLC
Managing General Partner, Clarity Partners L.P.
 
 
 
EXECUTIVE AND SENIOR MANAGEMENT
 
 
 
Victor J. Coleman
Howard S. Stern
Mark T. Lammas
Chief Executive Officer
President
Chief Financial Officer
 
 
 
 
 
Christopher Barton
Dale Shimoda
Alexander Vouvalides
EVP, Operations and Development
EVP, Finance
VP, Asset Management
 
 
 
 
 
Harout Diramerian
Kay Tidwell
Elva Hernandez
Chief Accounting Officer
EVP, Legal Affairs
Operational Controller
INVESTOR RELATIONS
 
 
Addo Communications
Andrew Blazier
(310) 829-5400
Email Contact: andrewb@addocommunications.com
Please visit our corporate Web site at: www.hudsonpacificproperties.com
 
 

3
Hudson Pacific Properties, Inc.
Fourth Quarter 2010 Supplemental Operating and Financial Data

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 full-service, vertically integrated real estate company focused on owning, operating and acquiring high-quality office properties in select growth markets primarily in Northern and Southern California. Our investment strategy is focused on high barrier-to-entry, in-fill locations with favorable, long-term supply demand characteristics. These markets include Los Angeles, Orange County, San Diego, San Francisco, Silicon Valley and the East Bay, which we refer to as our target markets.
 
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.
Number of office properties owned
11
 
Office properties square feet (in thousands)
3,134
 
Office properties leased rate as of December 31, 2010
88.0
%
Office properties occupied rate as of December 31, 2010(1)
87.7
%
 
 
Number of media & entertainment properties owned
2
 
Media & entertainment square feet (in thousands)
857
 
Media & entertainment occupied rate as of December 31, 2010(2)
72.6
%
 
 
Number of land assets owned
4
 
Land assets square feet (in thousands)(3)
1,447
 
 
 
Market capitalization (in thousands):
 
Total debt(4)
$
341,417
 
Series A Preferred Units
12,475
 
Redeemable non-controlling interest in consolidated real estate entity
40,328
 
Series B Preferred Stock
87,500
 
Common equity capitalization(5)
373,737
 
Total market capitalization
$
855,457
 
Debt/total market capitalization
39.9
%
Series A preferred units & debt/total market capitalization
41.4
%
Common stock data (NYSE:HPP):
 
Range of closing prices(6)
$ 14.69-16.52
Closing price at quarter end
$
15.05
 
Weighted average fully diluted shares outstanding (in thousands)(7)
24,833
 
Shares of common stock outstanding on December 31, 2010 (in thousands)(8)
22,437
 
______________________________
(1)    
Represents percent leased less signed leases not yet commenced.
(2)    
Percent occupied for media and entertainment properties is the average percent occupied for the 12 months ended December 31, 2010.
(3)    
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.
(4)    
Total debt excludes non-cash loan premium/discount. Total debt includes entire $106.0 million project level indebtedness relating to the Rincon Center project. We currently own a 51% interest in this project.
(5)    
Common equity capitalization represents the weighted average shares of common stock and OP units outstanding multiplied by the closing price of our stock at the end of the period.
(6)    
For the quarter ended December 31, 2010.
(7)    
For the quarter ended December 31, 2010. Diluted shares represent ownership in our company through shares of common stock, OP Units and other convertible instruments.
(8)    
This amount represents undiluted shares (including unvested restricted shares), and does not include OP units and other convertible equity instruments.

4
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CONSOLIDATED FINANCIAL RESULTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

5
Hudson Pacific Properties, Inc.
Fourth Quarter 2010 Supplemental Operating and Financial Data

Consolidated Balance Sheets
(Unaudited, in thousands, except share data)
 
December 31, 2010
 
December 31,
2009
ASSET
 
 
 
Total investment in real estate, net
$
839,032
 
 
$
412,478
 
Cash and cash equivalents
48,875
 
 
3,694
 
Restricted cash
4,121
 
 
4,231
 
Accounts receivable, net
4,478
 
 
1,273
 
Straight-line rent receivables
6,688
 
 
2,935
 
Deferred leasing costs and lease intangibles, net
85,286
 
 
19,219
 
Deferred financing costs, net
3,211
 
 
668
 
Goodwill
8,754
 
 
—
 
Prepaid expenses and other assets
4,130
 
 
3,736
 
TOTAL ASSETS
$
1,004,575
 
 
$
448,234
 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Notes payable
$
342,060
 
 
$
189,518
 
Accounts payable and accrued liabilities
11,506
 
 
6,026
 
Below-market leases
20,994
 
 
11,636
 
Security deposits
5,052
 
 
2,939
 
Prepaid rent
10,559
 
 
11,102
 
Interest rate contracts
71
 
 
425
 
TOTAL LIABILITIES
390,242
 
 
221,646
 
 
 
 
 
6.25% Series A cumulative redeemable preferred units of the Operating Partnership
12,475
 
 
—
 
Redeemable non-controlling interest in consolidated real estate entity
40,328
 
 
—
 
 
 
 
 
EQUITY
 
 
 
Members' equity
—
 
 
223,240
 
Hudson Pacific Properties, Inc. stockholder's equity:
 
 
 
Series B cumulative redeemable preferred stock
87,500
 
 
—
 
Common Stock, $0.01 par value 490,000,000 authorized, 22,436,950 outstanding at December 31, 2010
224
 
 
—
 
Additional paid-in capital
411,598
 
 
—
 
Accumulated other comprehensive income
6
 
 
—
 
Accumulated deficit
(3,482
)
 
—
 
Total Hudson Pacific Properties, Inc. stockholders’ equity
495,846
 
 
223,240
 
Non-controlling interests:
 
 
 
Members in consolidated real estate entities
—
 
 
3,348
 
Unitholders in the Operating Partnership
65,684
 
 
—
 
 
65,684
 
 
3,348
 
TOTAL EQUITY
561,530
 
 
226,588
 
TOTAL LIABILITIES AND EQUITY
$
1,004,575
 
 
$
448,234
 
 

6
Hudson Pacific Properties, Inc.
Fourth Quarter 2010 Supplemental Operating and Financial Data

Consolidated Statements of Operations
(Unaudited, in thousands, except share and per share data)
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
 
 
2010
 
2009
 
2010
 
2009
Revenues
 
 
 
 
 
 
 
Office
 
 
 
 
 
 
 
Rental
$
9,461
 
 
$
2,697
 
 
$
22,247
 
 
$
11,046
 
Tenant recoveries
2,108
 
 
589
 
 
4,023
 
 
2,024
 
Other
108
 
 
100
 
 
233
 
 
252
 
Total office revenues
11,677
 
 
3,386
 
 
26,503
 
 
13,322
 
Media & entertainment
 
 
 
 
 
 
 
Rental
5,478
 
 
4,617
 
 
20,931
 
 
19,916
 
Tenant recoveries
392
 
 
567
 
 
1,571
 
 
1,792
 
Other property-related revenue
3,401
 
 
2,025
 
 
11,397
 
 
9,427
 
Other
142
 
 
7
 
 
238
 
 
64
 
     Total media & entertainment revenues
9,413
 
 
7,216
 
 
34,137
 
 
31,199
 
Total revenues
21,090
 
 
10,602
 
 
60,640
 
 
44,521
 
 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
Office operating expenses
4,562
 
 
1,914
 
 
10,212
 
 
6,242
 
Media & entertainment operating expenses
4,621
 
 
5,094
 
 
19,815
 
 
19,545
 
General and administrative
2,114
 
 
—
 
 
4,493
 
 
—
 
Depreciation and amortization
5,927
 
 
2,574
 
 
15,912
 
 
10,908
 
Total operating expenses
17,224
 
 
9,582
 
 
50,432
 
 
36,695
 
 
 
 
 
 
 
 
 
Income from operations
$
3,866
 
 
$
1,020
 
 
$
10,208
 
 
$
7,826
 
 
 
 
 
 
 
 
 
Other expense (income)
 
 
 
 
 
 
 
Interest expense
2,635
 
 
2,090
 
 
8,831
 
 
8,792
 
Interest income
(22
)
 
(10
)
 
(59
)
 
(19
)
Unrealized (gain) on interest rate contracts
—
 
 
(192
)
 
(347
)
 
(400
)
Acquisition-related expenses
1,584
 
 
—
 
 
4,273
 
 
—
 
Other expenses
200
 
 
—
 
 
192
 
 
97
 
 
$
4,397
 
 
$
1,888
 
 
$
12,890
 
 
$
8,470
 
 
 
 
 
 
 
 
 
Net loss
$
(531
)
 
$
(868
)
 
$
(2,682
)
 
$
(644
)
 
 
 
 
 
 
 
 
Less: Net income attributable to preferred non-controlling partnership interest
(622
)
 
—
 
 
(817
)
 
—
 
Less: Net income attributable to restricted shares
(25
)
 
—
 
 
(50
)
 
—
 
Less: Net income attributable to non-controlling members in consolidated real estate entities
(148
)
 
33
 
 
(119
)
 
29
 
Add: Net loss attributable to unitholders in the Operating Partnership
141
 
 
—
 
 
418
 
 
—
 
Net loss attributable to Hudson Pacific Properties, Inc. shareholders' / controlling member's equity
$
(1,185
)
 
$
(835
)
 
$
(3,250
)
 
$
(615
)
Net loss attributable to shareholders' per share - basic and diluted
$
(0.05
)
 
$
—
 
 
$
—
 
 
$
—
 
Weighted average shares of common stock outstanding - basic and diluted
21,946,508
 
 
—
 
 
—
 
 
—
 
Dividends declared per common share
$
0.095
 
 
$
—
 
 
$
—
 
 
$
—
 

7
Hudson Pacific Properties, Inc.
Fourth Quarter 2010 Supplemental Operating and Financial Data

FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS
(unaudited, in thousands, except per share data)
 
 
Three Months Ended
 
 
December 31, 2010
Funds From Operation (FFO) (1)
 
 
Net loss
 
$
(531
)
Adjustments:
 
 
Depreciation and amortization of real estate assets
 
5,927
 
Less: Net income attributable to non-controlling members in consolidated real estate entities
 
(148
)
Less: Net income attributable to preferred non-controlling partnership interest
 
(622
)
FFO
 
$
4,626
 
Specified items impacting FFO:
 
 
Acquisition-related expenses
 
1,584
 
One-time property tax expense reduction
 
(1,089
)
FFO (after specified items)
 
5,121
 
 
 
 
Weighted average common shares/units outstanding - diluted
 
24,833
 
FFO (after specified items) per common share/unit - diluted
 
0.21
 
 
 
 
Adjusted Funds From Operations (AFFO) (1)
 
 
FFO
 
4,626
 
Adjustments:
 
 
Straight-line rent
 
(964
)
Amortization of prepaid rent (2)
 
251
 
Amortization of above market and below market leases, net
 
123
 
Amortization of below market ground lease
 
47
 
Amortization of lease buy-out costs
 
31
 
Amortization of deferred financing costs and loan premium/discount, net
 
314
 
Re-occurring capital expenditures, tenant improvements and lease commissions
 
(167
)
Non-cash compensation expense
 
389
 
AFFO
 
$
4,650
 
 
 
 
AFFO per common share/unit - diluted
 
0.19
 
Dividends per share declared
 
0.095
 
AFFO payout ratio
 
50.7
%
 
 
 
 
______________________________
(1)    
See page 18 for Management Statements on Funds From Operations (FFO) and Adjusted Funds From Operations (AFFO)
(2)    
Represents 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.

8
Hudson Pacific Properties, Inc.
Fourth Quarter 2010 Supplemental Operating and Financial Data

DEBT SUMMARY
(In thousands)
 
The following table sets forth information with respect to our outstanding indebtedness as of December 31, 2010.
 
 
 
 
 
 
Annual
 
 
 
Balance at
Debt
Outstanding
 
Interest Rate (1)
 
Debt Service
 
Maturity Date
 
Maturity
Mortgage loan secured by Sunset Bronson (2)
$
37,000
 
 
LIBOR+3.65%
 
 
$
1,651
 
 
4/30/2011
 
$
37,000
 
Mortgage loan secured by Rincon Center (3)
106,000
 
 
6.08
%
 
6,529
 
 
7/1/2011
 
106,000
 
Mortgage loan secured by First Financial
43,000
 
 
5.34
%
 
2,328
 
 
12/1/2011
 
43,000
 
Mortgage loan secured by Tierrasanta
14,300
 
 
5.62
%
 
815
 
 
12/1/2011
 
14,300
 
Mortgage loan secured by 10950 Washington
30,000
 
 
5.94
%
 
1,807
 
 
2/1/2012
 
30,000
 
Secured Revolving Credit Facility (4)
111,117
 
 
LIBOR+3.25% to 4.00%
 
 
5,351
 
 
6/29/2013
 
111,117
 
Subtotal
$
341,417
 
 
 
 
 
 
 
 
 
Unamortized loan discount, net (5)
643
 
 
 
 
 
 
 
 
 
Total
$
342,060
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
______________________________
(1)    
Interest rate with respect to indebtedness is calculated on the basis of a 360-day year for the actual days elapsed.
(2)    
The indebtedness encumbering the Sunset Bronson property is floating rate indebtedness. We entered into a secured interest rate contract with respect to $37.0 notional principal amount of indebtedness that went effective upon the closing of the IPO and related formation transaction on June 29, 2010 and swapped one-month LIBOR to a fixed rate of 0.75%. On February 11, 2011, we closed a five-year term loan totaling $92.0 million secured by the Company's Sunset Gower and Sunset Bronson media and entertainment campuses. The loan bears interest at a rate equal to one-month LIBOR plus 350 basis points. $37.0 million of the loan is currently subject to the interest rate swap described in footnote (1) above. We are required to hedge at least half of the $92.0 million term loan no later than March 28, 2011.
(3)    
Outstanding balance reflects full project level indebtedness on Rincon Center, without pro rata adjustment for our 51% share of the Rincon Center joint venture.
(4)    
We entered into a $200.0 million secured revolving credit facility with a group of lenders for which an affiliate of Barclays Capital Inc. acts as administrative agent and joint lead arranger and affiliates of Merrill Lynch, Pierce, Fenner & Smith Incorporated act as syndication agent and joint lead arranger. The facility bears interest at a rate per annum equal to LIBOR plus 325 basis points to 400 basis points, depending on our leverage ratio, provided that LIBOR is subject to a floor of 1.50%. The secured revolving credit facility contains an accordion feature that allows us to increase the availability by $50.0 million, to $250.0 million, under specified circumstances.
(5)    
Represents non-cash mark-to-market adjustment on debt associated with the First Financial, Tierrasanta, Rincon and 10950 Washington loans.

9
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PORTFOLIO DATA
 
 
 
 
 
 
 
 
 
 
 
 

10
Hudson Pacific Properties, Inc.
Fourth Quarter 2010 Supplemental Operating and Financial Data

OFFICE PORTFOLIO SUMMARY, OCCUPANCY, AND IN-PLACE RENTS
 
 
County
 
Number of Properties
 
Square Feet (1)
 
Percent of Total
 
Percent
Occupied (2)
 
Annualized Base Rent (3)
 
Annualized Base Rent Per Leased Square Foot (4)
 
 
 
 
 
 
 
 
 
 
 
 
 
San Francisco (5)
 
4
 
 
2,027,929
 
 
64.7
%
 
84.1
%
 
$
37,715,931
 
 
$
22.11
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Los Angeles
 
5
 
 
667,738
 
 
21.3
%
 
94.0
%
 
20,007,800
 
 
31.89
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Orange County
 
1
 
 
333,922
 
 
10.7
%
 
93.7
%
 
7,794,151
 
 
24.90
 
 
 
 
 
 
 
 
 
 
 
 
 
 
San Diego
 
1
 
 
104,234
 
 
3.3
%
 
96.8
%
 
1,580,915
 
 
15.67
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11
 
 
3,133,823
 
 
100.0
%
 
87.7
%
 
$
67,098,797
 
 
$
24.43
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
______________________________
(1)    
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 remeasurement or releasing.
(2)    
Percent occupied for office properties is calculated as (i) square footage under commenced leases as of December 31, 2010, divided by (ii) total square feet, expressed as a percentage.
(3)    
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)) for the month ended December 31, 2010, by (ii) 12.
(4)    
Annualized base rent per leased square foot for the office properties is calculated as (i) annualized base rent divided by (ii) square footage under lease as of December 31, 2010.
(5)    
San Francisco amounts include full Rincon Center project without pro rata adjustment for our 51% share of the Rincon Center joint venture.

11
Hudson Pacific Properties, Inc.
Fourth Quarter 2010 Supplemental Operating and Financial Data

MEDIA & ENTERTAINMENT PORTFOLIO SUMMARY, OCCUPANCY, AND IN-PLACE RENTS
 
 
Property
 
Square Feet (1)
 
Percent of Total
 
Percent Occupied (2)
 
Annual Base Rent (3)
 
Annual Base Rent Per Leased Square Foot (4)
 
 
 
 
 
 
 
 
 
 
 
Sunset Gower
 
543,709
 
 
63.4
%
 
70.9
%
 
$
11,670,642
 
 
$
30.27
 
 
 
 
 
 
 
 
 
 
 
 
Sunset Bronson
 
313,723
 
 
36.6
%
 
75.5
%
 
9,520,517
 
 
40.18
 
 
 
 
 
 
 
 
 
 
 
 
 
 
857,432
 
 
100.0
%
 
72.6
%
 
$
21,191,159
 
 
$
34.04
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
______________________________
(1)    
Square footage for media and entertainment 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 remeasurement or releasing.
(2)    
Percent occupied for media and entertainment properties is the average percent occupied for the 12 months ended December 31, 2010.
(3)    
Annual base rent for media and entertainment properties reflects actual base rent for the 12 months ended December 31, 2010, 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, 2010.

12
Hudson Pacific Properties, Inc.
Fourth Quarter 2010 Supplemental Operating and Financial Data

TEN LARGEST OFFICE TENANTS (1) 
 
 
Tenant
 
Number of Leases
 
Number of Properties
 
Lease Expiration
 
Total Leased Square Feet
 
Percent of Rentable Square Feet
 
Annualized Base Rent (2)
 
Percent of Annualized Base Rent
Bank of America
 
1
 
 
1
 
 
Various (3)
 
835,649
 
 
26.7
%
 
$
9,950,860
 
 
14.8
%
AIG
 
1
 
 
1
 
 
Various (4)
 
170,089
 
 
5.4
%
 
6,809,675
 
 
10.1
%
AT&T
 
1
 
 
1
 
 
8/31/2013
 
155,964
 
 
5.0
%
 
5,850,333
 
 
8.7
%
Technicolor Creative Services USA, Inc.
 
1
 
 
1
 
 
5/31/2020
 
114,958
 
 
3.7
%
 
4,103,173
 
 
6.1
%
GSA - U.S. Corps of Engineers
 
1
 
 
1
 
 
2/19/2017
 
89,995
 
 
2.9
%
 
3,150,982
 
 
4.7
%
Saatchi & Saatchi North America, Inc.
 
1
 
 
1
 
 
12/31/2019
 
113,000
 
 
3.6
%
 
3,069,070
 
 
4.6
%
Kondaur Capital Corp.
 
1
 
 
1
 
 
3/31/2013
 
125,208
 
 
4.0
%
 
3,004,992
 
 
4.5
%
NFL Enterprises
 
1
 
 
1
 
 
3/31/2015
 
95,570
 
 
3.0
%
 
2,808,595
 
 
4.2
%
State of California
 
1
 
 
1
 
 
7/31/2012
 
35,452
 
 
1.1
%
 
1,659,606
 
 
2.5
%
Pepperdine University
 
1
 
 
1
 
 
1/31/2019
 
35,351
 
 
1.1
%
 
1,367,659
 
 
2.0
%
Total
 
10
 
 
10
 
 
 
 
1,771,236
 
 
56.5
%
 
$
41,774,945
 
 
62.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
______________________________
(1)    
Top Ten Largest Office Tenants is determined by Annualized Base Rental Income as of December 31, 2010.
(2)    
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)) for the month ended December 31, 2010, by (ii) 12.
(3)    
Bank of America lease expiration by square footage: (1) 28,574 sf at 12/31/2011; (2) 25,474 sf at 12/31/2012; (3) 236,522 sf at 12/31/2013; (4) 331,197 sf at 12/31/2015; and (5) 213,882 sf at 12/31/2017.
(4)    
AIG lease expiration by square footage: (1) 3,332 sf at 5/31/2011; (2) 166,757 sf at 7/31/2017.
 

13
Hudson Pacific Properties, Inc.
Fourth Quarter 2010 Supplemental Operating and Financial Data

OFFICE PORTFOLIO LEASING ACTIVITY
 
 
Total Gross Leasing Activity
 
Rentable square feet
23,344
 
Number of leases
7
 
 
 
Gross New Leasing Activity
 
Rentable square feet
15,135
 
New cash rate
$
28.90
 
Number of leases
3
 
 
 
Gross Renewal Leasing Activity
 
Rentable square feet
8,209
 
Renewal cash rate
$
25.74
 
Number of leases
4
 
 
 
Net Absorption
 
Leased rentable square feet
15,135
 
 
 
Cash Rent Growth (1)
 
Expiring Rate
$
30.61
 
New/Renewal Rate
$
25.74
 
Change
(15.9
)%
 
 
Straight-Line Rent Growth (2)
 
Expiring Rate
$
28.46
 
New/Renewal Rate
$
24.85
 
Change
(12.7
)%
 
 
Weighted Average Lease Terms
 
New (in months)
60
 
Renewal (in months)
13
 
Tenant Improvements and Leasing Commissions (3)
Total Lease Transaction Costs Per Square Foot
Annual Lease Transaction Costs Per Square Foot
New leases
$32.80
$6.51
Renewal leases
$0.77
$0.69
Blended
$21.54
$5.89
______________________________
(1)    
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.
(2)    
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.
(3)    
Represents per square foot weighted average lease transaction costs based on the lease executed in the current quarter in our properties.

14
Hudson Pacific Properties, Inc.
Fourth Quarter 2010 Supplemental Operating and Financial Data

OFFICE LEASE EXPIRATIONS - ANNUAL
 
 
Year of Lease Expiration
 
Square Footage of Expiring Leases
 
Percent of Office Portfolio Square Feet
 
Annualized Base Rent (1)
 
Percentage of Office Portfolio Annualized Base Rent
 
Annualized Base Rent Per Leased Square Foot (2)
 
Annualized Base Rent Per Lease Square Foot at Expiration (3)
Available
 
377,437
 
 
12.0
%
 
$
—
 
 
 
 
$
—
 
 
$
—
 
2010 (4)
 
3,509
 
 
0.1
%
 
94,743
 
 
0.1
%
 
27.00
 
 
27.00
 
2011
 
196,157
 
 
6.3
%
 
4,947,674
 
 
7.3
%
 
25.22
 
 
25.28
 
2012
 
149,323
 
 
4.8
%
 
4,757,639
 
 
7.1
%
 
31.86
 
 
33.05
 
2013
 
710,262
 
 
22.7
%
 
17,068,998
 
 
25.3
%
 
24.03
 
 
25.12
 
2014
 
107,403
 
 
3.4
%
 
2,872,665
 
 
4.3
%
 
26.75
 
 
29.98
 
2015
 
470,100
 
 
15.0
%
 
7,535,645
 
 
11.2
%
 
16.03
 
 
18.37
 
2016
 
105,870
 
 
3.4
%
 
2,960,556
 
 
4.4
%
 
27.96
 
 
31.94
 
2017
 
578,546
 
 
18.5
%
 
14,821,434
 
 
22.0
%
 
25.62
 
 
28.45
 
2018
 
27,613
 
 
0.9
%
 
562,686
 
 
0.8
%
 
20.38
 
 
26.58
 
2019
 
215,745
 
 
6.9
%
 
6,257,044
 
 
9.3
%
 
29.00
 
 
33.83
 
Thereafter
 
170,785
 
 
5.4
%
 
5,219,711
 
 
7.7
%
 
30.56
 
 
45.82
 
Building management use
 
11,785
 
 
0.4
%
 
—
 
 
—
%
 
—
 
 
—
 
Signed leases not commenced
 
9,288
 
 
0.3
%
 
259,995
 
 
0.4
%
 
27.99
 
 
33.45
 
Total/Weighted Average
 
3,133,823
 
 
100.0
%
 
$
67,358,790
 
 
100.0 %
 
 
$
24.44
 
 
$
24.16
 
 
 
 
 
 
 
 
 
 
 
 
 
______________________________
(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)) for the month ended December 31, 2010, by (ii) 12.
(2)    
Annualized base rent per leased square foot for the office properties is calculated as (i) annualized base rent divided by (ii) square footage under lease as of December 31, 2010.
(3)    
Annualized base rent per leased square foot at expiration for the office properties is calculated as (i) annualized base rent at expiration divided by (ii) square footage under lease as of December 31, 2010.
(4)    
2010 expiration reflects expirations at December 31, 2010.

15
Hudson Pacific Properties, Inc.
Fourth Quarter 2010 Supplemental Operating and Financial Data

QUARTERLY OFFICE LEASE EXPIRATIONS - NEXT FOUR QUARTERS
 
 
 
County
 
 
 
Q1 2011
 
Q2 2011
 
Q3 2011
 
Q4 2011
 
 
 
 
 
 
 
 
 
 
 
San Francisco
 
Expiring SF
 
2,103
 
 
44,925
 
 
13,653
 
 
28,574
 
 
 
Rent per SF (1) 
 
 
$
25.90
 
 
$
30.55
 
 
$
34.10
 
 
$
12.00
 
Los Angeles
 
Expiring SF
 
7,242
 
 
7,656
 
 
10,921
 
 
6,474
 
 
 
Rent per SF (1)
 
$
36.25
 
 
$
34.46
 
 
$
32.83
 
 
$
28.61
 
Orange
 
Expiring SF
 
4,285
 
 
5,651
 
 
33,482
 
 
5,173
 
 
 
Rent per SF (1)
 
$
22.65
 
 
$
26.77
 
 
$
27.64
 
 
$
24.81
 
San Diego
 
Expiring SF
 
11,580
 
 
8,305
 
 
—
 
 
6,133
 
 
 
Rent per SF (1)
 
$
12.64
 
 
$
15.28
 
 
$
—
 
 
$
10.88
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
______________________________
(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)) for the month ended December 31, 2010, by (ii) 12.

16
Hudson Pacific Properties, Inc.
Fourth Quarter 2010 Supplemental Operating and Financial Data

OFFICE PORTFOLIO DIVERSIFICATION
 
 
 
 
Total
 
Annualized Rent as
Industry
 
Square Feet (1)
 
of Percent of Total
Business Services
 
65,004
 
 
2.8
%
Educational
 
96,713
 
 
4.0
%
Financial Services
 
1,085,432
 
 
25.1
%
Insurance
 
214,810
 
 
11.8
%
Legal
 
145,566
 
 
5.8
%
Media & Entertainment
 
331,631
 
 
15.6
%
Other
 
72,882
 
 
2.2
%
Real Estate
 
68,232
 
 
3.2
%
Retail
 
176,829
 
 
5.5
%
Technology
 
219,029
 
 
10.7
%
Advertising
 
115,735
 
 
4.7
%
Government
 
125,447
 
 
7.2
%
Healthcare
 
29,788
 
 
1.4
%
Total
 
2,747,098
 
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
______________________________
(1)    
Does not include signed leases not commenced.

17
Hudson Pacific Properties, Inc.
Fourth Quarter 2010 Supplemental Operating and Financial Data

 
DEFINITIONS
 
Funds From Operations (FFO): We calculate funds from operations before non-controlling interest (FFO) in accordance with the standards established by the National Association of Real Estate Investment Trusts (NAREIT). FFO represents net income(loss), computed in accordance with accounting principles generally accepted in the United States of America (GAAP), excluding gains (or losses) from sales of depreciable operating property, real estate depreciation and amortization (excluding amortization of above (below) market rents for acquisition properties and amortization of deferred financing costs and debt discounts) and after adjustments for unconsolidated partnerships and joint ventures. We use FFO as a supplemental performance measure because, in excluding real estate depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs.
 
We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that results from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. Other equity REITs may not calculate FFO in accordance with the NAREIT definition and, accordingly, our FFO may not be comparable to such other REITs' FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of our performance. FFO should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends. FFO should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP.
 
Adjusted Funds From Operations (AFFO): Adjusted Funds From Operations (AFFO) is a non-GAAP financial measure we believe is a useful supplemental measure of our performance. We compute AFFO by adding to FFO the non-cash compensation expense, and amortization of deferred financing costs and loan premium/discount, 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 deferred financing costs and debt 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, and it only provides an additional perspective on our ability to fund cash needs and make distributions to shareholders by adjusting the effect of the non-cash items included in FFO, as well as recurring capital expenditures and leasing costs. 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.
 

18

Hudson Pacific Properties, Inc. Reports