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8-K - Hudson Pacific Properties, Inc.hppq420118-k.htm
EX-99.1 - Hudson Pacific Properties, Inc.q42011ex991.htm
HUDSON PACIFIC PROPERTIES, INC.
FOURTH QUARTER 2011
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 April 27, 2011. 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 April 27, 2011. In light of these risks and uncertainties, any forward-looking events described herein or in Hudson Pacific Properties, Inc.'s March 2012 conference call may not occur.


Hudson Pacific Properties, Inc.
Fourth Quarter 2011 Supplemental Operating and Financial Data


TABLE OF CONTENTS


 
PAGE
COMPANY BACKGROUND AND CORPORATE DATA
3 - 4
 
 
CONSOLIDATED FINANCIAL RESULTS
 
 
 
Consolidated Balance Sheets
Consolidated Statements of Operations
Funds from Operations and Adjusted Funds from Operations
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 2011 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
Theodore R. Antenucci
Jonathan M. Glaser
Chairman of the Board and Chief Executive Officer, Hudson Pacific Properties, Inc.
President and Chief Executive Officer, Catellus Development Corporation
Managing Member, JMG Capital Management LLC
 
 
 
Richard B. Fried
Mark D. Linehan
Robert M. Moran, Jr.
Managing Member, Farallon Capital Management, L.L.C.
President and Chief Executive Officer, Wynmark Company
Co-founder and Co-owner, FJM Investments LLC
 
 
 
Barry A. Porter
Patrick Whitesell
Howard S. Stern
Managing General Partner, Clarity Partners L.P.
Co-Chief Executive, WME Entertainment
President, Hudson Pacific Properties, Inc.
 
 
 
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
SVP, Acquisitions
 
 
 
 
 
Harout Diramerian
Kay Tidwell
Elva Hernandez
Chief Accounting Officer
EVP, General Counsel
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 2011 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
15

Office properties square feet (in thousands)
3,575
Office properties leased rate as of December 31, 2011(1)
91.0
%
Office properties occupied rate as of December 31, 2011(1) (2)
88.6
%
 
 
Number of media & entertainment properties owned
2

Media & entertainment square feet (in thousands)
878

Media & entertainment occupied rate as of December 31, 2011(3)
70.1
%
 
 
Number of land assets owned
4

Land assets square feet (in thousands)(4)
1,447

 
 
Market capitalization (in thousands):
 
Total debt(5)
$
397,906

Series A Preferred Units
12,475

Series B Preferred Stock
87,500

Common equity capitalization(6)
516,157

Total market capitalization
$
1,014,038

Debt/total market capitalization
39.2
%
Series A preferred units & debt/total market capitalization
40.5
%
Common stock data (NYSE:HPP):
 
Range of closing prices(7)
 $ 10.85 - 14.16
Closing price at quarter end
$
14.16

Weighted average fully diluted shares\units outstanding (in thousands)(8)
36,195

Shares of common stock\units outstanding on December 31, 2011 (in thousands)(9)
36,452

__________________________
(1)
Office properties leased rate and occupied rate includes properties acquired in third quarter 2011, including the approximately 50,000 square-foot vacant 275 Brannan property, which the Company is in the process of renovating in anticipation of re-tenanting. Excluding 275 Brannan, the office properties leased rate and occupied rate was 92.3% and 89.9%, respectively.
(2)
Represents percent leased less signed leases not yet commenced.
(3)
Percent occupied for media and entertainment properties is the average percent occupied for the 12 months ended December 31, 2011.
(4)
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.
(5)
Total debt excludes non-cash loan premium/discount.
(6)
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.
(7)
For the quarter ended December 31, 2011.
(8)
For the quarter ended December 31, 2011. Diluted shares represent ownership in our company through shares of common stock, OP Units and other convertible instruments. Diluted shares do not include shares issuable upon exchange of our series A preferred units, which do not become exchangeable until June 29, 2013.
(9)
This amount represents fully diluted common shares and OP units (including unvested restricted shares) at December 31, 2011, and does not include shares issuable upon exchange of our series A preferred units, which do not become exchangeable until June 29, 2013.


4

















CONSOLIDATED FINANCIAL RESULTS

























5

Hudson Pacific Properties, Inc.
Fourth Quarter 2011 Supplemental Operating and Financial Data

Consolidated Balance Sheets
(Unaudited, in thousands, except share data)
 
December 31, 2011
 
December 31, 2010
ASSETS
 
 
 
Total investment in real estate, net
$
1,007,175

 
$
837,622

Cash and cash equivalents
13,705

 
48,875

Restricted cash
9,521

 
4,121

Accounts receivable, net
8,963

 
4,478

Straight-line rent receivables
10,801

 
6,703

Deferred leasing costs and lease intangibles, net
84,131

 
86,385

Deferred finance costs, net
5,079

 
3,211

Interest rate contracts
164

 

Goodwill
8,754

 
8,754

Prepaid expenses and other assets
4,498

 
4,416

TOTAL ASSETS
$
1,152,791

 
$
1,004,565

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Notes payable
$
399,871

 
$
342,060

Accounts payable and accrued liabilities
12,469

 
11,507

Below-market leases
22,861

 
20,983

Security deposits
5,651

 
5,052

Prepaid rent
10,795

 
10,559

Interest rate contracts

 
71

TOTAL LIABILITIES
451,647

 
390,232

 
 
 
 
6.25% series A cumulative redeemable preferred units of the Operating Partnership
12,475

 
12,475

Redeemable non-controlling interest in consolidated real estate entity

 
40,328

 
 
 
 
EQUITY
 
 
 
Hudson Pacific Properties, Inc. stockholders’ equity:
 
 
 
Preferred stock, $0.01 par value, 10,000,000 authorized; 8.375% series B cumulative redeemable preferred stock, $25.00 liquidation preference, 3,500,000 shares outstanding at December 31, 2011 and December 31, 2010, respectively
87,500

 
87,500

Common Stock, $0.01 par value 490,000,000 authorized, 33,840,854 outstanding at December 31, 2011 and 22,436,950 outstanding at December 31, 2010, respectively
338

 
224

Additional paid-in capital
552,043

 
411,598

Accumulated other comprehensive (deficit) income
(883
)
 
6

Accumulated deficit
(13,685
)
 
(3,482
)
Total Hudson Pacific Properties, Inc. stockholders’ equity
625,313

 
495,846

Non-controlling common units in the Operating Partnership
63,356

 
65,684

TOTAL EQUITY
688,669

 
561,530

TOTAL LIABILITIES AND EQUITY
$
1,152,791

 
$
1,004,565

 
 
 
 



6

Hudson Pacific Properties, Inc.
Fourth Quarter 2011 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,
 
 
2011
 
2010
 
2011
 
2010
Revenues
 
 
 
 
 
 
 
Office
 
 
 
 
 
 
 
Rental
$
21,058

 
$
9,461

 
$
75,343

 
$
22,247

Tenant recoveries
5,979

 
1,538

 
22,102

 
3,115

Parking and other
1,766

 
678

 
7,763

 
1,141

Total office revenues
28,803

 
11,677

 
105,208

 
26,503

Media & entertainment
 
 
 
 
 
 
 
Rental
5,357

 
5,478

 
21,617

 
20,931

Tenant recoveries
278

 
392

 
1,539

 
1,571

Other property-related revenue
2,546

 
3,401

 
13,638

 
11,397

Other
76

 
142

 
187

 
238

     Total media & entertainment revenues
8,257

 
9,413

 
36,981

 
34,137

Total revenues
37,060

 
21,090

 
142,189

 
60,640

 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
Office operating expenses
12,147

 
4,562

 
44,740

 
10,212

Media & entertainment operating expenses
5,373

 
4,621

 
22,446

 
19,815

General and administrative
3,986

 
2,114

 
13,038

 
4,493

Depreciation and amortization
11,637

 
5,927

 
44,660

 
15,912

Total operating expenses
33,143

 
17,224

 
124,884

 
50,432

 
 
 
 
 
 
 
 
Income from operations
3,917

 
3,866

 
17,305

 
10,208

Other expense (income)
 
 
 
 
 
 
 
Interest expense
4,235

 
2,635

 
17,480

 
8,831

Interest income
(6
)
 
(22
)
 
(73
)
 
(59
)
Unrealized (gain) on interest rate contracts

 

 

 
(347
)
Acquisition-related expenses
932

 
1,584

 
1,693

 
4,273

Other expenses (income)
74

 
200

 
443

 
192

 
5,235

 
4,397

 
19,543

 
12,890

 
 
 
 
 
 
 
 
Net (loss) income
$
(1,318
)
 
$
(531
)
 
$
(2,238
)
 
$
(2,682
)
 
 
 
 
 
 
 
 
Less: Net income attributable to preferred stock and units
(2,027
)
 
(622
)
 
(8,108
)
 
(817
)
Less: Net income attributable to restricted shares
(54
)
 
(25
)
 
(231
)
 
(50
)
Less: Net loss (income) attributable to non-controlling interest in consolidated real estate entities

 
(148
)
 
(803
)
 
(119
)
Add: Net loss attributable to common units in the Operating Partnership
248

 
141

 
946

 
418

Net loss attributable to Hudson Pacific Properties, Inc. shareholders’ / controlling members’ equity
$
(3,151
)
 
$
(1,185
)
 
$
(10,434
)
 
$
(3,250
)
Net loss attributable to shareholders’ per share - basic and diluted
$
(0.10
)
 
$
(0.05
)
 
$
(0.35
)
 
$

Weighted average shares of common stock outstanding - basic and diluted
33,150,491

 
21,946,508

 
29,392,920

 

Dividends declared per common share
$
0.125

 
$
0.095

 
$
0.500

 
0.1921



7

Hudson Pacific Properties, Inc.
Fourth Quarter 2011 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,
 
Twelve Months Ended
 
 
2011
 
2010
 
December 31, 2011
Funds From Operations (FFO) (1)
 
 
 
 
 
 
Net (loss) income
 
$
(1,318
)
 
$
(531
)
 
$
(2,238
)
Adjustments:
 
 
 
 
 
 
Depreciation and amortization of real estate assets
 
11,637

 
5,927

 
44,660

Less: Income attributable to restricted stock
 
(110
)
 

 
(494
)
Less: Net loss (income) attributable to non-controlling interest in consolidated real estate entities
 

 
(148
)
 
(803
)
Less: Net income attributable to preferred stock and units
 
(2,027
)
 
(622
)
 
(8,108
)
FFO to common shareholders and unit holders
 
$
8,182

 
$
4,626

 
$
33,017

Specified items impacting FFO:
 
 
 
 
 
 
Acquisition-related expenses
 
$
932

 
$
1,584

 
$
1,693

Property tax savings
 

 
(1,089
)
 

FFO (after specified items) to common shareholders and unit holders
 
$
9,114

 
$
5,121

 
$
34,710

 
 
 
 
 
 
 
Weighted average common shares/units outstanding - diluted
 
$
35,762

 
$
24,823

 
$
32,004

FFO per common share/unit - diluted
 
$
0.23

 
$
0.19

 
$
1.03

FFO (after specified items) per common share/unit - diluted
 
$
0.25

 
$
0.21

 
$
1.08

 
 
 
 
 
 
 
Adjusted Funds From Operations (AFFO) (1)
 
 
 
 
 
 
FFO
 
$
8,182

 
$
4,626

 
$
33,017

Adjustments:
 
 
 
 
 
 
Straight-line rent
 
(1,851
)
 
(964
)
 
(4,098
)
Amortization of prepaid rent (2)
 
288

 
251

 
1,130

Amortization of above market and below market leases, net
 
(284
)
 
123

 
(649
)
Amortization of below market ground lease
 
62

 
47

 
266

Amortization of lease buy-out costs
 
23

 
31

 
407

Amortization of deferred financing costs and loan premium/discount, net
 
275

 
314

 
1,022

Recurring capital expenditures, tenant improvements and lease commissions
 
(2,683
)
 
(167
)
 
(6,958
)
Non-cash compensation expense
 
656

 
389

 
2,660

AFFO
 
$
4,668

 
$
4,650

 
$
26,797

 
 
 
 
 
 
 
Dividends paid to common stock and unit holders
 
$
4,523

 
$
2,358

 
$
12,179

AFFO payout ratio
 
96.9
%
 
50.7
%
 
45.4
%


______________________________
(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 2011 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, 2011.

 
 
 
 
 
Annual
 
 
 
Balance at
Debt
Outstanding
 
Interest Rate (1)
 
Debt Service (1)
 
Maturity Date
 
Maturity
Secured Revolving Credit Facility (2)
$
121,000

 
LIBOR+2.50% to 3.25%
 
$

 
6/29/2013
 
$

Mortgage loan secured by 625 Second Street (3)
33,700

 
5.85%
 
1,999

 
2/1/2014
 
33,700

Mortgage loan secured by 6922 Hollywood Boulevard (4)
42,174

 
5.58%
 
3,230

 
1/1/2015
 
39,422

Mortgage loan secured by Sunset Gower/Sunset Bronson (5)
92,000

 
LIBOR+3.50%
 

 
2/11/2016
 
89,681

Mortgage loan secured by Rincon Center (6)
109,032

 
5.13%
 
7,195

 
5/1/2018
99,719

97,673

Subtotal
$
397,906

 
 
 
 
 
 
 
 
Unamortized loan premium, net (7)
1,965

 
 
 
 
 
 
 
 
Total
$
399,871

 
 
 
 
 
 
 
 


______________________________
(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. Annual debt service excludes debt that remains at variable rates.
(2)
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. Until it was amended on April 4, 2011, the facility bore 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 was 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. On April 4, 2011, we amended our $200.0 million secured revolving credit facility. As a result of the amendment, the secured revolving credit facility now bears interest at a rate per annum equal to LIBOR plus 250 basis points to 325 basis points (down from 325 basis points to 400 basis points), depending on our leverage ratio, and is no longer subject to a LIBOR floor of 1.50%. The secured revolving credit facility continues to include an accordion feature that allows us to increase the availability by $50.0 million, to $250.0 million, under specified circumstances. The annual fee charged against the unused portion of the facility has also been reduced to 40 basis points (down from 50 basis points).
(3)
This loan was assumed on September 1, 2011 in connection with the closing of our acquisition of 625 Second Street property.
(4)
This loan was assumed on November 22, 2011 in connection with the closing of our acquisition of the 6922 Hollywood Boulevard property.
(5)
On February 11, 2011, we closed a five-year term loan totaling $92.0 million with Wells Fargo Bank, N.A., secured by our Sunset Gower and Sunset Bronson media and entertainment properties. The loan bears interest at a rate equal to one-month LIBOR plus 3.50%. $37.0 million of the loan was subject to an interest rate contract, which swaps one-month LIBOR to a fixed rate of 0.75% through April 30, 2011. On March 16, 2011, we purchased an interest rate cap in order to cap one-month LIBOR at 3.715% with respect to $50.0 million of the loan through its maturity on February 11, 2016. On January 11, 2012 we purchased an interest rate cap in order to cap one-month LIBOR at 2.00% with respect to $42.0 million of the loan through its maturity on February 11, 2016. Proceeds from the loan were used to fully refinance a $37.0 million mortgage loan secured by our Sunset Bronson property that was scheduled to mature on April 30, 2011. Until its repayment on February 11, 2011, the $37.0 million mortgage loan secured by our Sunset Bronson property incurred interest at a rate of one-month LIBOR plus 3.65% and was subject to the same interest rate contract swapping one-month LIBOR to a fixed rate of 0.75% described earlier.
(6)
On April 29, 2011, we closed a seven-year term loan totaling $110.0 million with JPMorgan Chase Bank, National Association, secured by our Rincon Center property. The loan bears interest at a fixed annual rate of 5.134%. The loan fully refinanced the prior $106.0 million project loan on the property that was scheduled to mature on July 1, 2011.
(7)
Represents unamortized amount of the non-cash mark-to-market adjustment on debt associated with the 625 Second Street and 6922 Hollywood Boulevard properties.


9
















PORTFOLIO DATA














10

Hudson Pacific Properties, Inc.
Fourth Quarter 2011 Supplemental Operating and Financial Data

OFFICE PORTFOLIO SUMMARY, OCCUPANCY, AND IN-PLACE RENTS

 
 
 
 
 
 
 
 
 
 
Annualized Base Rent Per Leased Square Foot (4)
 
Monthly Rent Per Leased Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percent of Total
 
Percent Occupied (2)
 
Annualized Base Rent (3)
 
 
County
 
Square Feet (1)
 
 
 
 
 
San Francisco
 
 
 
 
 
 
 
 
 
 
 
 
Rincon Center
 
580,850

 
16.2
%
 
84.9
%
 
$
18,745,119

 
$
38.00

 
$
3.17

1455 Market Street
 
1,012,012

 
28.3
%
 
92.1
%
 
12,597,438

 
13.52

 
1.13

875 Howard Street
 
286,270

 
8.0
%
 
87.4
%
 
4,823,115

 
19.28

 
1.61

222 Kearny Street
 
148,797

 
4.2
%
 
89.0
%
 
4,721,108

 
35.66

 
2.97

625 Second Street
 
136,906

 
3.8
%
 
100.0
%
 
5,205,838

 
38.02

 
3.17

275 Brannan Street
 
51,710

 
1.4
%
 
%
 

 

 

Subtotal
 
2,216,545

 
62.0
%
 
87.7
%
 
$
46,092,619

 
$
23.70

 
$
1.98

 
 
 
 
 
 
 
 
 
 
 
 
 
Los Angeles
 
 
 
 
 
 
 
 
 
 
 
 
First Financial
 
222,423

 
6.2
%
 
84.2
%
 
$
6,299,258

 
$
33.62

 
$
2.80

Technicolor Building
 
114,958

 
3.2
%
 
100.0
%
 
4,246,778

 
36.94

 
3.08

Del Amo Office Building
 
113,000

 
3.2
%
 
100.0
%
 
3,069,070

 
27.16

 
2.26

9300 Wilshire
 
61,224

 
1.7
%
 
93.5
%
 
2,383,360

 
41.63

 
3.47

10950 Washington
 
158,873

 
4.4
%
 
100.0
%
 
4,514,061

 
28.41

 
2.37

604 Arizona
 
44,260

 
1.2
%
 
100.0
%
 
1,617,172

 
36.54

 
3.04

6922 Hollywood
 
205,523

 
5.7
%
 
92.1
%
 
7,467,130

 
39.43

 
3.29

Subtotal
 
920,261

 
25.7
%
 
94.0
%
 
$
29,596,829

 
$
34.21

 
$
2.85

 
 
 
 
 
 
 
 
 
 
 
 
 
Orange
 
 
 
 
 
 
 
 
 
 
 
 
City Plaza
 
333,922

 
9.3
%
 
77.9
%
 
$
6,326,014

 
$
24.31

 
$
2.03

Subtotal
 
333,922

 
9.3
%
 
77.9
%
 
$
6,326,014

 
$
24.31

 
$
2.03

 
 
 
 
 
 
 
 
 
 
 
 
 
San Diego
 
 
 
 
 
 
 
 
 
 
 
 
Tierrasanta
 
104,234

 
2.9
%
 
92.0
%
 
$
1,515,713

 
$
15.80

 
$
1.32

Subtotal
 
104,234

 
2.9
%
 
92.0
%
 
$
1,515,713

 
$
15.80

 
$
1.32

 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL
 
3,574,962

 
100.0
%
 
88.6
%
 
$
83,531,175

 
$
26.38

 
$
2.20

______________________________
(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, 2011, 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, 2011, 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, 2011.


11

Hudson Pacific Properties, Inc.
Fourth Quarter 2011 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
 
544,602

 
63.4
%
 
66.6
%
 
$
11,203,641

 
$
30.88

 
 
 
 
 
 
 
 
 
 
 
Sunset Bronson
 
313,723

 
36.6
%
 
76.3
%
 
9,755,321

 
40.77

 
 
 
 
 
 
 
 
 
 
 
 
 
858,325

 
100.0
%
 
70.1
%
 
$
20,958,962

 
$
34.81
























______________________________
(1)
Square footage for media and entertainment properties has been determined by management based upon estimated average leasable square feet, which may be less or more than the BOMA rentable area. Square footage, which reflects the weighted average over the preceding 12 months, may change over time due to remeasurement, releasing, development, or acquisition. On December 16, 2011 we acquired 20,261 square feet of office property located at 6050 Sunset and 1445 Beechwood, ancillary to our Sunset Gower property. Those acquisitions are reflected in the square footage for Sunset Gower as of December 16, 2011 on a weighted average basis. As of December 31, 2011, the square footage for Sunset Gower and Sunset Bronson totaled 878,196 square feet, including those acquisitions.
(2)
Percent occupied for media and entertainment properties is the average percent occupied for the 12 months ended December 31, 2011.
(3)
Annual base rent for media and entertainment properties reflects actual base rent for the 12 months ended December 31, 2011, excluding tenant reimbursements.
(4)
Annual base rent per leased square foot for the media and entertainment properties is calculated as (i) annual base rent divided by (ii) the average square footage under lease for the 12 months ended December 31, 2011.


12

Hudson Pacific Properties, Inc.
Fourth Quarter 2011 Supplemental Operating and Financial Data

TEN LARGEST OFFICE TENANTS


Tenant
 
Number of Leases
 
Number of Properties
 
Lease Expiration (1)
 
Total Leased Square Feet
 
Percent of Rentable Square Feet
 
Annualized Base Rent (2)
 
Percent of Annualized Base Rent
Bank of America (3)
 
1

 
1

 
Various
 
832,549

 
23.3
%
 
$
9,135,780

 
10.9
%
AIG
 
1

 
1

 
7/31/2017
 
166,757

 
4.7
%
 
6,894,564

 
8.3
%
AT&T
 
1

 
1

 
8/31/2013
 
155,964

 
4.4
%
 
5,850,333

 
7.0
%
Fox Interactive Media, Inc.
 
1

 
1

 
3/31/2017
 
104,897

 
2.9
%
 
4,384,484

 
5.2
%
Technicolor Creative Services USA, Inc.
 
1

 
1

 
5/31/2020
 
114,958

 
3.2
%
 
4,246,778

 
5.1
%
GSA - U.S. Corps of Engineers
 
1

 
1

 
2/19/2017
 
89,995

 
2.5
%
 
3,260,240

 
3.9
%
NFL Enterprises
 
1

 
1

 
3/31/2015
 
104,589

 
2.9
%
 
3,193,160

 
3.8
%
Kondaur Capital Corp.
 
1

 
1

 
3/31/2013
 
125,208

 
3.5
%
 
3,095,142

 
3.7
%
Saatchi & Saatchi North America, Inc.
 
1

 
1

 
12/31/2019
 
113,000

 
3.2
%
 
3,069,070

 
3.7
%
Trailer Park, Inc.
 
1

 
1

 
9/30/2018
 
72,101

 
2.0
%
 
2,712,987

 
3.2
%
Total
 
10

 
10

 
 
 
1,880,018

 
52.6
%
1,788,380

$
45,842,538

0.571

54.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 














______________________________
(1)
The Bank of America, GSA - U.S. Corps of Engineers, and Saatchi & Saatchi North America, Inc. leases are subject to early termination prior to expiration at the option of the tenant.
(2)
Annualized base rent is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements)) for the month ended December 31, 2011, by (ii) 12. Annualized base rent does not reflect tenant reimbursements.
(3)
Bank of America lease early termination rights by square footage: (1) 38,894 square feet at or around September 30, 2012, subject to satisfaction of certain conditions associated with the lease to MTA; (2) 50,948 square feet at December 31, 2012; (3) 197,628 square feet at December 31, 2013; (4) 331,197 square feet at December 31, 2015; and (5) 213,882 square feet at December 31, 2017.



13

Hudson Pacific Properties, Inc.
Fourth Quarter 2011 Supplemental Operating and Financial Data

OFFICE PORTFOLIO LEASING ACTIVITY


Total Gross Leasing Activity
 
Rentable square feet
104,849

Number of leases
17

 
 
Gross New Leasing Activity
 
Rentable square feet
74,678

New cash rate
$
29.72

Number of leases
8

 
 
Gross Renewal Leasing Activity
 
Rentable square feet
30,171

Renewal cash rate
$
29.88

Number of leases
9

 
 
Net Absorption
 
Leased rentable square feet
60,775

 
 
Cash Rent Growth (1)
 
Expiring Rate
$
26.56

New/Renewal Rate
$
30.30

Change
14.1
%
 
 
Straight-Line Rent Growth (2)
 
Expiring Rate
$
25.76

New/Renewal Rate
$
32.43

Change
25.9
%
 
 
Weighted Average Lease Terms
 
New (in months)
116

Renewal (in months)
65

Tenant Improvements and Leasing Commissions (3)
Total Lease Transaction Costs Per Square Foot
Annual Lease Transaction Costs Per Square Foot
New leases
$58.68
$6.09
Renewal leases
$20.32
$3.75
Blended
$47.64
$5.66
______________________________
(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 2011 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
 
321,387

 
9.0
%
 
$

 

 
$

 
$

2011
 
5,781

 
0.2
%
 
223,797

 
0.3
%
 
38.71

 
38.71

2012
 
244,625

 
6.8
%
 
6,043,271

 
7.0
%
 
24.70

 
24.83

2013
 
727,942

 
20.3
%
 
17,882,598

 
20.7
%
 
24.57

 
25.76

2014
 
157,608

 
4.4
%
 
5,134,741

 
5.9
%
 
32.58

 
34.48

2015
 
477,556

 
13.4
%
 
7,884,147

 
9.1
%
 
16.51

 
18.64

2016
 
235,298

 
6.6
%
 
6,899,184

 
8.0
%
 
29.32

 
32.98

2017
 
724,510

 
20.2
%
 
21,499,047

 
24.9
%
 
29.67

 
31.73

2018
 
133,938

 
3.7
%
 
4,518,623

 
5.2
%
 
33.74

 
39.73

2019
 
195,869

 
5.5
%
 
5,679,715

 
6.6
%
 
29.00

 
33.87

2020
 
211,000

 
5.9
%
 
6,882,126

 
8.0
%
 
32.62

 
46.13

Thereafter
 
31,577

 
0.9
%
 
883,925

 
1.0
%
 
27.99

 
39.36

Building management use
 
20,241

 
0.6
%
 

 
%
 

 

Signed leases not commenced
 
87,630

 
2.5
%
 
2,787,729

 
3.2
%
 
31.81

 
46.00

Total/Weighted Average
 
3,574,962

 
100.0
%
 
$
86,318,903

 
100.0
%
 
$
26.53

 
$
27.16













______________________________
(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, 2011, 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, 2011.
(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, 2011.



15

Hudson Pacific Properties, Inc.
Fourth Quarter 2011 Supplemental Operating and Financial Data

QUARTERLY OFFICE LEASE EXPIRATIONS - NEXT FOUR QUARTERS (1) 

 
 
Q1 2012
 
Q2 2012
 
Q3 2012
 
Q4 2012
County
 
Expiring SF
Rent per SF
 
Expiring SF
Rent per SF
 
Expiring SF
Rent per SF
 
Expiring SF
Rent per SF
San Francisco
 
 
 
 
 
 
 
 
 
 
 
 
Rincon Center
 
2,353

$
34.22

 
571

$
89.74

 
35,452

$
47.21

 
989

$
66.95

1455 Market Street
 


 


 
41,421

1.09

(2 
) 
50,948

12.00

875 Howard Street
 


 


 


 


222 Kearny Street
 


 
2,092

29.50

 
4,330

53.45

 
1,827

47.27

625 Second Street
 
2,817

23.00

 


 


 


275 Brannan Street
 


 


 


 


Subtotal
 
5,170

$
28.11

 
2,663

$
42.42

 
132,051

$
19.40

 
2,816

$
54.18

 
 
 
 
 
 
 
 
 
 
 
 
 
Los Angeles
 
 
 
 
 
 
 
 
 
 
 
 
First Financial
 
7,918

$
29.95

 
2,210

$
29.88

 

$

 
1,348

$
31.83

Technicolor Building
 


 


 


 


Del Amo Office Building
 


 


 


 


9300 Wilshire
 
1,922

41.84

 


 


 


10950 Washington
 
425

31.06

 


 


 


604 Arizona
 


 


 
44,260

36.54

 


6922 Hollywood
 


 


 
2,222

38.56

 


Subtotal
 
10,265

$
32.22

 
2,210

$
29.88

 
46,482

$
36.63

 
1,348

$
31.83

 
 
 
 
 
 
 
 
 
 
 
 
 
Orange
 
 
 
 
 
 
 
 
 
 
 
 
City Plaza
 

$

 
8,618

$
23.48

 
11,937

$
26.90

 

$

Subtotal
 

$

 
8,618

$
23.48

 
11,937

$
26.90

 

$

 
 
 
 
 
 
 
 
 
 
 
 
 
San Diego
 
 
 
 
 
 
 
 
 
 
 
 
Tierrasanta
 
6,133

$
11.21

 

$

 
14,932

$
22.52

 

$

Subtotal
 
6,133

$
11.21

 

$

 
14,932

$
22.52

 

$

 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL
 
21,568

$
25.26

 
13,491

$
28.27

 
205,402

$
22.40

 
4,164

$
46.94

______________________________
(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, 2011, by (ii) 12.
(2)
Reflects abated rent on 38,894 square feet with Bank of America during decommissioning process pending lease commencement with the MTA.


16

Hudson Pacific Properties, Inc.
Fourth Quarter 2011 Supplemental Operating and Financial Data

OFFICE PORTFOLIO DIVERSIFICATION


 
 
Total
 
Annualized Rent as
Industry
 
Square Feet (1)
 
of Percent of Total
Business Services
 
79,109

 
2.8
%
Educational
 
120,396

 
4.1
%
Financial Services
 
1,089,807

 
19.5
%
Insurance
 
180,964

 
8.6
%
Legal
 
144,186

 
5.1
%
Media & Entertainment
 
460,891

 
18.5
%
Other
 
91,247

 
1.9
%
Real Estate
 
63,320

 
2.6
%
Retail
 
201,464

 
6.4
%
Technology
 
463,697

 
19.8
%
Advertising
 
115,735

 
3.8
%
Government
 
125,447

 
5.9
%
Healthcare
 
29,682

 
1.2
%
Total
 
3,165,945

 
100.0
%

















______________________________
(1)
Does not include signed leases not commenced.


17

Hudson Pacific Properties, Inc.
Fourth Quarter 2011 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/premiums) 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/premiums. 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.



18