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8-K - Hudson Pacific Properties, Inc.hppq220128-k.htm
EX-99.1 - Hudson Pacific Properties, Inc.q22012ex991.htm
HUDSON PACIFIC PROPERTIES, INC.
SECOND QUARTER 2012
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 August 2012 conference call may not occur.


Hudson Pacific Properties, Inc.
Second Quarter 2012 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.
Second Quarter 2012 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
Kay Tidwell
EVP, Operations and Development
EVP, Finance
EVP, General Counsel
 
 
 
 
 
Alexander Vouvalides
Drew Gordon
Harout Diramerian
SVP, Acquisitions

SVP, Northern California
Chief Accounting Officer
 
 
 
Arthur X. Suazo
 
Elva Hernandez
Director of Leasing

 
Operational Controller
INVESTOR RELATIONS
 

Addo Communications
(310) 829-5400
Email Contact: lasseg@addocommunications.com
Please visit our corporate Web site at: www.hudsonpacificproperties.com
 


3

Hudson Pacific Properties, Inc.
Second Quarter 2012 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
17

Office properties square feet (in thousands)
3,805

Office properties leased rate as of June 30, 2012(1)
90.8
%
Office properties occupied rate as of June 30, 2012(1) (2)
87.3
%
 
 
Number of media & entertainment properties owned
2

Media & entertainment square feet (in thousands)
878

Media & entertainment occupied rate as of June 30, 2012(3)
69.6
%
 
 
Number of land assets owned
4

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

 
 
Market capitalization (in thousands):
 
Total debt(5)
$
348,749

Series A Preferred Units
12,475

Series B Preferred Stock
145,000

Common equity capitalization(6)
864,811

Total market capitalization
$
1,371,035

Debt/total market capitalization
25.4
%
Series A preferred units & debt/total market capitalization
26.3
%
Common stock data (NYSE:HPP):
 
Range of closing prices(7)
$ 14.96-17.41

Closing price at quarter end
$
17.41

Weighted average fully diluted shares\units outstanding (in thousands)(8)
42,855

Shares of common stock\units outstanding on June 30, 2012 (in thousands)(9)
49,673

__________________________
(1)
Office properties leased rate and occupied rate includes the approximately 50,000 square-foot vacant 275 Brannan and approximately 212,319 square-foot recently acquired 901 Market Street properties, which the Company is in the process of renovating in anticipation of new tenancy. Excluding 275 Brannan and 901 Market Street, the office properties leased rate and occupied rate was 93.6% 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 June 30, 2012.
(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 June 30, 2012.
(8)
For the quarter ended June 30, 2012. 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 June 30, 2012, 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.
Second Quarter 2012 Supplemental Operating and Financial Data

Consolidated Balance Sheets
(Unaudited, in thousands, except share data)
 
June 30, 2012
 
December 31, 2011
ASSETS
 
 
 
Total investment in real estate, net
$
1,098,022

 
$
1,007,175

Cash and cash equivalents
102,525

 
13,705

Restricted cash
10,241

 
9,521

Accounts receivable, net
10,371

 
8,963

Straight-line rent receivables
13,274

 
10,801

Deferred leasing costs and lease intangibles, net
77,784

 
84,131

Deferred finance costs, net
4,800

 
5,079

Interest rate contracts
172

 
164

Goodwill
8,754

 
8,754

Prepaid expenses and other assets
14,234

 
4,498

TOTAL ASSETS
$
1,340,177

 
$
1,152,791

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Notes payable
$
350,332

 
$
399,871

Accounts payable and accrued liabilities
13,924

 
12,469

Below-market leases
30,100

 
22,861

Security deposits
6,215

 
5,651

Prepaid rent
9,982

 
10,795

TOTAL LIABILITIES
410,553

 
451,647

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

 
12,475

 
 
 
 
EQUITY
 
 
 
Hudson Pacific Properties, Inc. stockholders’ equity:
 
 
 
Preferred stock, $0.01 par value, 10,000,000 authorized; 8.375% series B cumulative redeemable preferred stock, $25.00 liquidation preference, 5,800,000 shares and 3,500,000 shares outstanding at June 30, 2012 and December 31, 2011, respectively
145,000

 
87,500

Common Stock, $0.01 par value 490,000,000 authorized, 47,218,151 shares and 33,840,854 shares outstanding at June 30, 2012 and December 31, 2011, respectively
472

 
338

Additional paid-in capital
735,872

 
552,043

Accumulated other comprehensive (deficit) income
(1,215
)
 
(883
)
Accumulated deficit
(21,383
)
 
(13,685
)
Total Hudson Pacific Properties, Inc. stockholders’ equity
858,746

 
625,313

Non-controlling common units in the Operating Partnership
58,403

 
63,356

TOTAL EQUITY
917,149

 
688,669

TOTAL LIABILITIES AND EQUITY
$
1,340,177

 
$
1,152,791

 
 
 
 


6

Hudson Pacific Properties, Inc.
Second Quarter 2012 Supplemental Operating and Financial Data

Consolidated Statements of Operations
(Unaudited, in thousands, except share and per share data)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2012
 
2011
 
2012
 
2011
Revenues
 
 
 
 
 
 
 
Office
 
 
 
 
 
 
 
Rental
$
22,591

 
$
17,821

 
$
44,971

 
$
35,335

Tenant recoveries
5,593

 
4,962

 
10,973

 
9,925

Parking and other
2,450

 
1,253

 
4,558

 
4,408

Total office revenues
30,634

 
24,036

 
60,502

 
49,668

 
 
 
 
 
 
 
 
Media & entertainment
 
 
 
 
 
 
 
Rental
5,805

 
5,592

 
11,256

 
11,072

Tenant recoveries
417

 
516

 
665

 
859

Other property-related revenue
3,697

 
3,242

 
6,321

 
6,513

Other
62

 
21

 
102

 
99

     Total media & entertainment revenues
9,981

 
9,371

 
18,344

 
18,543

 
 
 
 
 
 
 
 
Total revenues
40,615

 
33,407

 
78,846

 
68,211

 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
Office operating expenses
13,778

 
9,533

 
25,134

 
19,807

Media & entertainment operating expenses
6,289

 
5,771

 
11,059

 
10,950

General and administrative
4,151

 
3,062

 
8,665

 
6,208

Depreciation and amortization
13,708

 
10,626

 
25,840

 
21,987

Total operating expenses
37,926

 
28,992

 
70,698

 
58,952

 
 
 
 
 
 
 
 
Income from operations
2,689

 
4,415

 
8,148

 
9,259

 
 
 
 
 
 
 
 
Other expense (income)
 
 
 
 
 
 
 
Interest expense
4,575

 
4,530

 
9,466

 
9,172

Interest income
(2
)
 
(23
)
 
(7
)
 
(31
)
Acquisition-related expenses
299

 

 
360

 

Other expenses (income)
46

 
118

 
90

 
235

 
4,918

 
4,625

 
9,909

 
9,376

 
 
 
 
 
 
 
 
Net loss
$
(2,229
)
 
$
(210
)
 
$
(1,761
)
 
$
(117
)
 
 
 
 
 
 
 
 
Less: Net income attributable to preferred stock and units
(3,231
)
 
(2,027
)
 
(6,462
)
 
(4,054
)
Less: Net income attributable to restricted shares
(79
)
 
(62
)
 
(157
)
 
(124
)
Less: Net income attributable to non-controlling interest in consolidated real estate entities

 
10

 

 
(803
)
Add: Net loss attributable to common units in the Operating Partnership
322

 
188

 
525

 
487

Net loss attributable to Hudson Pacific Properties, Inc. shareholders
$
(5,217
)
 
$
(2,101
)
 
$
(7,855
)
 
$
(4,611
)
Net loss attributable to shareholders’ per share - basic and diluted
$
(0.13
)
 
$
(0.07
)
 
$
(0.21
)
 
$
(0.18
)
Weighted average shares of common stock outstanding - basic and diluted
39,772,030

 
29,161,139

 
36,546,240

 
25,575,051

Dividends declared per common share
$
0.125

 
$
0.125

 
$
0.500

 
$
0.500


7

Hudson Pacific Properties, Inc.
Second Quarter 2012 Supplemental Operating and Financial Data

FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS
(unaudited, in thousands, except per share data)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2012
 
2011
 
2012
 
2011
Funds From Operations (FFO) (1)
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(2,229
)
 
$
(210
)
 
$
(1,761
)
 
$
(117
)
Adjustments:
 
 
 
 
 
 
 
 
Depreciation and amortization of real estate assets
 
13,708

 
10,626

 
25,840

 
21,987

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

 
10

 

 
(803
)
Less: Net income attributable to preferred stock and units
 
(3,231
)
 
(2,027
)
 
(6,462
)
 
(4,054
)
FFO to common shareholders and unit holders
 
$
8,248

 
$
8,399

 
$
17,617

 
$
17,013

Specified items impacting FFO:
 
 
 
 
 
 
 
 
Acquisition-related expenses
 
299

 

 
360

 

One-time property tax expenses
 
918

 

 
918

 

Master Halco termination revenue
 

 

 

 
(2,744
)
Master Halco non-cash write-off
 

 

 

 
716

FFO (after specified items) to common shareholders and unit holders
 
$
9,465

 
$
8,399

 
$
18,895

 
$
14,985

 
 
 
 
 
 
 
 
 
Weighted average common shares/units outstanding - diluted
 
42,855

 
32,270

 
39,200

 
28,682

FFO per common share/unit - diluted
 
$
0.19

 
$
0.26

 
$
0.45

 
$
0.59

FFO (after specified items) per common share/unit - diluted
 
$
0.22

 
$
0.26

 
$
0.48

 
$
0.52

 
 
 
 
 
 
 
 
 
Adjusted Funds From Operations (AFFO) (1)
 
 
 
 
 
 
 
 
FFO
 
$
8,248

 
$
8,399

 
$
17,617

 
$
17,013

Adjustments:
 
 
 
 
 
 
 
 
Straight-line rent
 
(910
)
 
(1,153
)
 
(2,473
)
 
(2,029
)
Amortization of prepaid rent (2)
 
327

 
279

 
640

 
554

Amortization of above market and below market leases, net
 
(720
)
 
(120
)
 
(1,089
)
 
(214
)
Amortization of below market ground lease
 
62

 
62

 
124

 
142

Amortization of lease buy-out costs
 
23

 
23

 
45

 
361

Amortization of deferred financing costs and loan premium/discount, net
 
340

 
282

 
644

 
368

Recurring capital expenditures, tenant improvements and lease commissions
 
(3,395
)
 
(1,277
)
 
(5,399
)
 
(2,505
)
Non-cash compensation expense
 
774

 
593

 
2,002

 
1,313

AFFO
 
$
4,749

 
$
7,088

 
$
12,111

 
$
15,003

 
 
 
 
 
 
 
 
 
Dividends paid to common stock and unit holders
 
$
6,224

 
$
4,524

 
$
10,783

 
$
7,656

AFFO payout ratio
 
131.1
%
 
63.8
%
 
89.0
%
 
51.0
%


______________________________
(1)
See page 18 for Management's 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.
Second Quarter 2012 Supplemental Operating and Financial Data

DEBT SUMMARY
(In thousands)

The following table sets forth information with respect to our outstanding indebtedness as of June 30, 2012.

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

 
LIBOR+2.50% to 3.25%
 
$ --

 
6/29/2013
 
$ --

Mortgage loan secured by 625 Second Street (2)
33,700

 
5.85%
 
1,999

 
2/1/2014
 
33,700

Mortgage loan secured by 6922 Hollywood Boulevard (3)
41,750

 
5.58%
 
3,230

 
1/1/2015
 
39,422

Mortgage loan secured by Sunset Gower/Sunset Bronson (4)
92,000

 
LIBOR+3.50%
 
--

 
2/11/2016
 
89,681

Mortgage loan secured by Rincon Center
108,393

 
5.134%
 
7,195

 
5/1/2018
 
97,673

Mortgage loan secured by First Financial (5)
43,000

 
4.58%
 
2,002

 
2/1/2022
 
36,799

Mortgage loan secured by 10950 Washington
29,906

 
5.316%
 
2,639

 
3/11/2022
99,719

24,632

Subtotal
$
348,749

 
 
 
 
 
 
 
 
Unamortized loan premium, net (6)
1,583

 
 
 
 
 
 
 
 
Total
$
350,332

 
 
 
 
 
 
 
 







______________________________
(1)
Interest rate with respect to indebtedness is calculated on the basis of a 360-day year for the actual days elapsed, excluding the amortization of loan fees and costs.
(2)
This loan was assumed on September 1, 2011 in connection with the closing of our acquisition of 625 Second Street property.
(3)
This loan was assumed on November 22, 2011 in connection with the closing of our acquisition of the 6922 Hollywood Boulevard property.
(4)
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. Beginning with the payment due February 1, 2014, monthly debt service will include principal payments based on a 30-year amortization schedule, for total annual debt amortization of $1,113.
(5)
The loan bears interest only for the first two years. Beginning with the payment due March 1, 2014, monthly debt service will include principal payments based on a 30-year amortization schedule, for total annual debt service of $2,639.
(6)
Represents unamortized amount of the non-cash mark-to-market adjustment on debt associated with 625 Second Street and 6922 Hollywood Boulevard.

9
















PORTFOLIO DATA













10

Hudson Pacific Properties, Inc.
Second Quarter 2012 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

 
15.3
%
 
82.4
%
 
$
17,882,608

 
$
37.24

 
$
3.10

1455 Market Street
 
1,012,012

 
26.6
%
 
92.1
%
 
12,908,049

 
13.85

 
1.15

875 Howard Street
 
286,270

 
7.5
%
 
96.9
%
 
5,770,697

 
20.79

 
1.73

222 Kearny Street
 
148,797

 
3.9
%
 
98.2
%
 
5,216,104

 
35.69

 
2.97

625 Second Street
 
136,906

 
3.6
%
 
100.0
%
 
5,337,903

 
38.99

 
3.25

275 Brannan Street
 
51,710

 
1.3
%
 
%
 

 

 

901 Market Street
 
212,319

 
5.6
%
 
64.9
%
 
3,509,620

 
25.46

 
2.12

Subtotal
 
2,428,864

 
63.8
%
 
86.8
%
 
$
50,624,981

 
$
23.99

 
$
2.00

 
 
 
 
 
 
 
 
 
 
 
 
 
Los Angeles
 
 
 
 
 
 
 
 
 
 
 
 
First Financial
 
222,423

 
5.8
%
 
83.3
%
 
$
6,191,685

 
$
33.43

 
$
2.79

Technicolor Building
 
114,958

 
3.0
%
 
100.0
%
 
4,395,488

 
38.24

 
3.19

Del Amo Office Building
 
113,000

 
3.0
%
 
100.0
%
 
3,069,070

 
27.16

 
2.26

9300 Wilshire
 
61,224

 
1.6
%
 
77.1
%
 
1,962,809

 
41.56

 
3.46

10950 Washington
 
158,873

 
4.2
%
 
100.0
%
 
4,626,953

 
29.12

 
2.43

604 Arizona
 
44,260

 
1.2
%
 
100.0
%
 
1,617,172

 
36.54

 
3.04

6922 Hollywood
 
205,523

 
5.4
%
 
92.1
%
 
7,672,561

 
40.51

 
3.38

10900 Washington
 
9,919

 
0.2
%
 
%
 

 

 

Subtotal
 
930,180

 
24.4
%
 
91.7
%
 
$
29,535,738

 
$
34.63

 
$
2.89

 
 
 
 
 
 
 
 
 
 
 
 
 
Orange
 
 
 
 
 
 
 
 
 
 
 
 
City Plaza
 
333,922

 
8.8
%
 
80.4
%
 
$
6,619,967

 
$
24.66

 
$
2.05

Subtotal
 
333,922

 
8.8
%
 
80.4
%
 
$
6,619,967

 
$
24.66

 
$
2.05

 
 
 
 
 
 
 
 
 
 
 
 
 
San Diego
 
 
 
 
 
 
 
 
 
 
 
 
Tierrasanta
 
112,300

 
3.0
%
 
80.5
%
 
$
1,431,779

 
$
15.84

 
$
1.32

Subtotal
 
112,300

 
3.0
%
 
80.5
%
 
$
1,431,779

 
$
15.84

 
$
1.32

 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL
 
3,805,266

 
100.0
%
 
87.3
%
 
$
88,212,465

 
$
26.55

 
$
2.21

______________________________
(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 June 30, 2012, 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 June 30, 2012, 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 June 30, 2012.

11

Hudson Pacific Properties, Inc.
Second Quarter 2012 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
 
554,982

 
63.9
%
 
65.5
%
 
$
11,145,616.33

 
$
30.66

 
 
 
 
 
 
 
 
 
 
 
Sunset Bronson
 
313,723

 
36.1
%
 
77.0
%
 
9,834,837.15

 
40.72

 
 
 
 
 
 
 
 
 
 
 
 
 
868,705

 
100.0
%
 
69.6
%
 
$
20,980,453.48

 
$
34.68
























______________________________
(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 BOMA rentable area. Square footage may change over time due to remeasurement or releasing. 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 June 30, 2012, the square footage for Sunset Gower and Sunset Bronson totaled 878,196 square feet, including those acquisitions. Since the percent occupied is determined on a weighted average basis for the 12 months ended June 30, 2012, the square footage for 6050 Sunset and 1445 Beechwood is also included in the square footage for the media and entertainment properties on a weighted average basis.
(2)
Percent occupied for media and entertainment properties is the average percent occupied for the 12 months ended June 30, 2012.
(3)
Annual base rent for media and entertainment properties reflects actual base rent for the 12 months ended June 30, 2012, 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 June 30, 2012.

12

Hudson Pacific Properties, Inc.
Second Quarter 2012 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

 
21.9
%
 
$
9,409,853

 
10.7
%
AIG  (4)
 
1

 
1

 
Various
 
166,757

 
4.4
%
 
6,894,564

 
7.8
%
AT&T
 
1

 
1

 
8/31/2013
 
155,964

 
4.1
%
 
5,850,333

 
6.6
%
Fox Interactive Media, Inc.
 
1

 
1

 
3/31/2017
 
104,897

 
2.8
%
 
4,454,787

 
5.1
%
GSA (5)
 
3

 
2

 
Various
 
138,712

 
3.6
%
 
4,421,116

 
5.0
%
Technicolor Creative Services USA, Inc.
 
1

 
1

 
5/31/2020
 
114,958

 
3.0
%
 
4,395,488

 
5.0
%
NFL Enterprises
 
1

 
1

 
3/31/2015
 
104,589

 
2.7
%
 
3,282,726

 
3.7
%
Kondaur Capital Corp. (6)
 
1

 
1

 
3/31/2013
 
125,208

 
3.3
%
 
3,185,292

 
3.6
%
Saatchi & Saatchi North America, Inc.
 
1

 
1

 
12/31/2019
 
113,000

 
3.0
%
 
3,069,070

 
3.5
%
Trailer Park, Inc.
 
1

 
1

 
9/30/2018
 
72,101

 
1.9
%
 
2,789,503

 
3.2
%
Total
 
12

 
11

 
 
 
1,928,735

 
50.7
%
 
$
47,752,732

 
54.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 









______________________________
(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 June 30, 2012, 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 December 31, 2012, subject to satisfaction of certain conditions associated with the lease to MTA; (2) 50,948 square feet at December 31, 2012; (3) 220,072 square feet at December 31, 2013; (4) 331,197 square feet at December 31, 2015; and (5) 191,438 square feet at December 31, 2017.
(4)
AIG has exercised an early termination right with respect to 18,364 square feet at Rincon Center, which expiration will become effective on July 31, 2012. The remaining 148,393 square feet under their lease is scheduled to expired on July 31, 2017.
(5)
GSA expirations by property and square footage: (1) 89,995 square feet at 1455 Market Street expiring on February 19, 2017; (2) 5,906 square feet at 901 Market Street expiring on April 30, 2017; and (3) 42,811 square feet at 901 Market Street expiring on July 31, 2021.
(6)
Effective June 29, 2012, the Company entered into a 125,208 square foot lease with CashCall, Inc. at our City Plaza property that backfills nearly 87,000 square feet of the lease with Kondaur Capital Corp. that was scheduled to expire in March 2013. Staged occupancy under the lease with CashCall, Inc. begins in September 2012.

13

Hudson Pacific Properties, Inc.
Second Quarter 2012 Supplemental Operating and Financial Data

OFFICE PORTFOLIO LEASING ACTIVITY


Total Gross Leasing Activity
 
Rentable square feet
214,154

Number of leases
17

 
 
Gross New Leasing Activity
 
Rentable square feet
171,519

New cash rate
$
25.76

Number of leases
9

 
 
Gross Renewal Leasing Activity
 
Rentable square feet
42,635

Renewal cash rate
$
43.01

Number of leases
8

 
 
Net Absorption
 
Leased rentable square feet
139,018

 
 
Cash Rent Growth (1)
 
Expiring Rate
$
30.40

New/Renewal Rate
$
28.48

Change
(6.3
)%
 
 
Straight-Line Rent Growth (2)
 
Expiring Rate
$
26.40

New/Renewal Rate
$
26.63

Change
0.9
 %
 
 
Weighted Average Lease Terms
 
New (in months)
80

Renewal (in months)
74

Tenant Improvements and Leasing Commissions (3)
Total Lease Transaction Costs Per Square Foot
Annual Lease Transaction Costs Per Square Foot
New leases
$45.80
$6.90
Renewal leases
$18.48
$2.99
Blended
$40.36
$6.17
______________________________
(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.
Second Quarter 2012 Supplemental Operating and Financial Data

OFFICE LEASE EXPIRATIONS - ANNUAL


Year of Lease Expiration
 
Square Footage of Expiring Leases (1)
 
Percent of Office Portfolio Square Feet
 
Annualized Base Rent (2)
 
Percentage of Office Portfolio Annualized Base Rent
 
Annualized Base Rent Per Leased Square Foot (3)
 
Annualized Base Rent Per Lease Square Foot at Expiration (4)
Available
 
351,459

 
9.2
%
 
$

 

 
$

 
$

2012
 
205,003

 
5.4
%
 
4,513,332

 
4.9
%
 
22.02

 
22.08

2013
 
808,817

 
21.3
%
 
20,264,088

 
22.1
%
 
25.05

 
25.45

2014
 
145,067

 
3.8
%
 
4,617,812

 
5.0
%
 
31.83

 
32.98

2015
 
508,820

 
13.4
%
 
8,967,805

 
9.8
%
 
17.62

 
19.38

2016
 
237,391

 
6.2
%
 
7,112,613

 
7.7
%
 
29.96

 
33.03

2017
 
710,861

 
18.7
%
 
21,049,468

 
22.9
%
 
29.61

 
31.32

2018
 
142,849

 
3.8
%
 
4,793,175

 
5.2
%
 
33.55

 
38.90

2019
 
229,127

 
6.0
%
 
6,884,266

 
7.5
%
 
30.05

 
34.76

2020
 
239,675

 
6.3
%
 
8,131,854

 
8.9
%
 
33.93

 
45.97

2021
 
42,811

 
1.1
%
 
958,642

 
1.0
%
 
22.39

 
28.45

Thereafter
 
31,577

 
0.8
%
 
919,411

 
1.0
%
 
29.12

 
40.32

Building management use
 
20,241

 
0.5
%
 

 
%
 

 

Signed leases not commenced
 
131,568

 
3.5
%
 
3,690,924

 
4.0
%
 
28.05

 
38.52

Total/Weighted Average
 
3,805,266

 
100.0
%
 
$
91,903,390

 
100.0
%
 
$
26.61

 
$
29.52












______________________________
(1)
Effective June 29, 2012, the Company entered into a 125,208 square foot lease with CashCall, Inc. at our City Plaza property that backfills nearly 87,000 square feet of the lease with Kondaur Capital Corp. that was scheduled to expire in March 2013. Staged occupancy under the lease with CashCall, Inc. begins in September 2012.
(2)
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 June 30, 2012, by (ii) 12.
(3)
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 June 30, 2012.
(4)
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 June 30, 2012.

15

Hudson Pacific Properties, Inc.
Second Quarter 2012 Supplemental Operating and Financial Data

QUARTERLY OFFICE LEASE EXPIRATIONS - NEXT FOUR QUARTERS
 
 
Q3 2012
 
Q4 2012
 
Q1 2013
 
Q2 2013
County
 
Expiring SF
Rent per SF (1)
 
Expiring SF
Rent per SF (1)
 
Expiring SF
Rent per SF (1)
 
Expiring SF
Rent per SF (1)
San Francisco
 
 
 
 
 
 
 
 
 
 
 
 
Rincon Center
 
20,733

$
39.98

 

$

 
1,377

$
38.00

 
895

$
29.00

1455 Market Street
 
2,427

18.54

 
89,842

7.01

 
100

69.93

 


875 Howard Street
 


 


 


 


222 Kearny Street
 
2,092

29.50

 
1,827

47.27

 
8,831

43.01

 
5,171

45.00

625 Second Street
 


 


 


 


275 Brannan Street
 


 


 


 


901 Market Street
 
1,897

37.53

 


 
32,928

23.00

 


Subtotal
 
27,149

$
37.08

 
91,669

$
7.81

 
43,236

$
27.67

 
6,066

$
42.64

 
 
 
 
 
 
 
 
 
 
 
 
 
Los Angeles
 
 
 
 
 
 
 
 
 
 
 
 
First Financial
 
1,098

$
39.91

 
1,348

$
31.83

 
4,438

$
38.44

 
5,033

$
39.06

Technicolor Building
 


 


 


 


Del Amo Office Building
 


 


 


 


9300 Wilshire
 
150

37.12

 
1,087

37.08

 
432

36.11

 
2,712

54.00

10950 Washington
 
425

31.06

 


 


 
20,047

23.57

604 Arizona
 
44,260

36.54

 


 


 


6922 Hollywood
 
2,222

38.56

 


 


 


10900 Washington
 


 


 


 


Subtotal
 
48,155

$
36.66

 
2,435

$
34.17

 
4,870

$
38.23

 
27,792

$
29.34

 
 
 
 
 
 
 
 
 
 
 
 
 
Orange
 
 
 
 
 
 
 
 
 
 
 
 
City Plaza
 
17,820

$
27.32

 

$

 
127,337 (2)

$
25.42

 
1,997

$
22.20

Subtotal
 
17,820

$
27.32

 

$

 
127,337

$
25.42

 
1,997

$
22.20

 
 
 
 
 
 
 
 
 
 
 
 
 
San Diego
 
 
 
 
 
 
 
 
 
 
 
 
Tierrasanta
 
9,629

$
24.41

 

$

 

$

 

$

Subtotal
 
9,629

$
24.41

 

$

 

$

 

$

 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
102,753

$
34.00

 
94,104

$
8.49

 
175,443

$
26.33

 
35,855

$
31.20

______________________________
(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 June 30, 2012, by (ii) 12.
(2)
Effective June 29, 2012, the Company entered into a 125,208 square foot lease with CashCall, Inc. at our City Plaza property that backfills nearly 87,000 square feet of the lease with Kondaur Capital Corp. that was scheduled to expire in March 2013. Staged occupancy under the lease with CashCall, Inc. begins in September 2012.

16

Hudson Pacific Properties, Inc.
Second Quarter 2012 Supplemental Operating and Financial Data

OFFICE PORTFOLIO DIVERSIFICATION


 
 
Total
 
Annualized Rent as
Industry
 
Square Feet (1)
 
of Percent of Total
Business Services
 
82,487

 
2.7
%
Educational
 
120,396

 
4.0
%
Financial Services
 
1,089,543

 
18.9
%
Insurance
 
180,964

 
8.2
%
Legal
 
144,701

 
4.7
%
Media & Entertainment
 
448,018

 
17.4
%
Other
 
152,170

 
3.8
%
Real Estate
 
63,497

 
2.5
%
Retail
 
230,104

 
6.6
%
Technology
 
497,555

 
20.4
%
Advertising
 
115,735

 
3.5
%
Government
 
167,387

 
6.2
%
Healthcare
 
29,682

 
1.1
%
Total
 
3,322,239

 
100.0
%

















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

17

Hudson Pacific Properties, Inc.
Second Quarter 2012 Supplemental Operating and Financial Data


DEFINITIONS

Funds From Operations (FFO): We calculate funds from operations before non-controlling interest (FFO) in accordance with the standards established by the National Association of Real Estate Investment Trusts (NAREIT). FFO represents net income (loss), computed in accordance with accounting principles generally accepted in the United States of America (GAAP), excluding gains (or losses) from sales of depreciable operating property, real estate depreciation and amortization (excluding amortization of above (below) market rents for acquisition properties and amortization of deferred financing costs and debt discounts) and after adjustments for unconsolidated partnerships and joint ventures. We use FFO as a supplemental performance measure because, in excluding real estate depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs.

We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that results from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. Other equity REITs may not calculate FFO in accordance with the NAREIT definition and, accordingly, our FFO may not be comparable to such other REITs' FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of our performance. FFO should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends. FFO should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP.
 
Adjusted Funds From Operations (AFFO): Adjusted Funds From Operations (AFFO) is a non-GAAP financial measure we believe is a useful supplemental measure of our performance. We compute AFFO by adding to FFO the non-cash compensation expense and amortization of deferred financing costs, and subtracting recurring capital expenditures, tenant improvements and leasing commissions (excluding pre-existing obligations on contributed or acquired properties funded with amounts received in settlement of prorations), and eliminating the net effect of straight-line rents, amortization of lease buy-out costs, and amortization of above/below market lease intangible assets and liabilities and amortization of loan discounts/premium. 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