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8-K - Hudson Pacific Properties, Inc.hpp-q3x8k.htm
EX-99.1 - Hudson Pacific Properties, Inc.q32011ex991.htm
HUDSON PACIFIC PROPERTIES, INC.
THIRD 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 November 2011 conference call may not occur.

Hudson Pacific Properties, Inc.
Third 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.
Third 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
VP, Asset Management
 
 
 
 
 
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.
Third 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
14

Office properties square feet (in thousands)
3,367
Office properties leased rate as of September 30, 2011(1)
90.4
%
Office properties occupied rate as of September 30, 2011(1) (2)
89.0
%
 
 
Number of media & entertainment properties owned
2

Media & entertainment square feet (in thousands)
857

Media & entertainment occupied rate as of September 30, 2011(3)
73.1
%
 
 
Number of land assets owned
4

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

 
 
Market capitalization (in thousands):
 
Total debt(5)
$
298,097

Series A Preferred Units
12,475

Series B Preferred Stock
87,500

Common equity capitalization(6)
420,813

Total market capitalization
$
818,885

Debt/total market capitalization
36.4
%
Series A preferred units & debt/total market capitalization
37.9
%
Common stock data (NYSE:HPP):
 
Range of closing prices(7)
$ 11.46-16.00
Closing price at quarter end
$
11.63

Weighted average fully diluted shares\units outstanding (in thousands)(8)
36,183

Shares of common stock\units outstanding on September 30, 2011 (in thousands)(9)
36,183

__________________________
(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 91.8% and 90.4%, 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 September 30, 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 September 30, 2011.
(8)
For the quarter ended September 30, 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 September 30, 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.
Third Quarter 2011 Supplemental Operating and Financial Data

Consolidated Balance Sheets
(Unaudited, in thousands, except share data)
 
September 30, 2011
 
December 31, 2010
ASSETS
 
 
 
Total investment in real estate, net
$
912,273

 
$
837,622

Cash and cash equivalents
20,715

 
48,875

Restricted cash
9,624

 
4,121

Accounts receivable, net
10,758

 
4,478

Straight-line rent receivables
8,950

 
6,703

Deferred leasing costs and lease intangibles, net
78,943

 
86,385

Deferred finance costs, net
4,892

 
3,211

Interest rate contracts
202

 

Goodwill
8,754

 
8,754

Prepaid expenses and other assets
9,239

 
4,416

TOTAL ASSETS
$
1,064,350

 
$
1,004,565

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Notes payable
$
298,672

 
$
342,060

Accounts payable and accrued liabilities
18,753

 
11,507

Below-market leases
19,293

 
20,983

Security deposits
5,703

 
5,052

Prepaid rent
12,470

 
10,559

Interest rate contracts

 
71

TOTAL LIABILITIES
354,891

 
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 September 30, 2011 and December 31, 2010, respectively
87,500

 
87,500

Common Stock, $0.01 par value 490,000,000 authorized, 33,572,454 outstanding at September 30, 2011 and 22,436,950 outstanding at December 31, 2010, respectively
336

 
224

Additional paid-in capital
556,650

 
411,598

Accumulated other comprehensive (deficit) income
(847
)
 
6

Accumulated deficit
(10,588
)
 
(3,482
)
Total Hudson Pacific Properties, Inc. stockholders’ equity
633,051

 
495,846

Non-controlling common units in the Operating Partnership
63,933

 
65,684

TOTAL EQUITY
696,984

 
561,530

TOTAL LIABILITIES AND EQUITY
$
1,064,350

 
$
1,004,565

 
 
 
 


6

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

Consolidated Statements of Operations
(Unaudited, in thousands, except share and per share data)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2011
 
2010
 
2011
 
2010
Revenues
 
 
 
 
 
 
 
Office
 
 
 
 
 
 
 
Rental
$
18,950

 
$
6,521

 
$
54,285

 
$
12,786

Tenant recoveries
7,437

 
1,001

 
19,584

 
1,915

Other
349

 
97

 
2,535

 
125

Total office revenues
26,736

 
7,619

 
76,404

 
14,826

Media & entertainment
 
 
 
 
 
 
 
Rental
5,188

 
5,246

 
16,260

 
15,453

Tenant recoveries
402

 
363

 
1,261

 
1,179

Other property-related revenue
4,579

 
4,194

 
11,092

 
7,996

Other
12

 
83

 
111

 
96

     Total media & entertainment revenues
10,181

 
9,886

 
28,724

 
24,724

Total revenues
36,917

 
17,505

 
105,128

 
22,068

 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
Office operating expenses
12,785

 
2,822

 
32,592

 
5,650

Media & entertainment operating expenses
6,123

 
5,959

 
17,073

 
15,194

General and administrative
2,844

 
2,379

 
9,052

 
2,379

Depreciation and amortization
11,036

 
4,317

 
33,023

 
9,985

Total operating expenses
32,788

 
15,477

 
91,740

 
33,208

 
 
 
 
 
 
 
 
Income from operations
4,129

 
2,028

 
13,388

 
6,342

Other expense (income)
 
 
 
 
 
 
 
Interest expense
4,073

 
1,784

 
13,245

 
6,196

Interest income
(36
)
 
(31
)
 
(67
)
 
(37
)
Unrealized (gain) on interest rate contracts

 

 

 
(347
)
Acquisition-related expenses
762

 
256

 
762

 
2,689

Other expenses (income)
133

 
(8
)
 
368

 
(8
)
 
4,932

 
2,001

 
14,308

 
8,493

 
 
 
 
 
 
 
 
Net (loss) income
$
(803
)
 
$
27

 
$
(920
)
 
$
(2,151
)
 
 
 
 
 
 
 
 
Less: Net income attributable to preferred stock and units
(2,027
)
 
(195
)
 
(6,081
)
 
(199
)
Less: Net income attributable to restricted shares
(53
)
 
(25
)
 
(177
)
 
(25
)
Less: Net loss (income) attributable to non-controlling interest in consolidated real estate entities

 

 
(803
)
 
32

Add: Net loss attributable to common units in the Operating Partnership
211

 
21

 
698

 
277

Net loss attributable to Hudson Pacific Properties, Inc. shareholders’ / controlling members’ equity
$
(2,672
)
 
$
(172
)
 
$
(7,283
)
 
$
(2,066
)
Net loss attributable to shareholders’ per share - basic and diluted
$
(0.08
)
 
$
(0.01
)
 
$
(0.26
)
 
$

Weighted average shares of common stock outstanding - basic and diluted
33,146,334

 
21,946,508

 
28,126,546

 

Dividends declared per common share
$
0.125

 
$
0.0971

 
$
0.375

 


7

Hudson Pacific Properties, Inc.
Third 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 September 30,
 
Nine Months Ended
 
 
2011
 
2010
 
September 30, 2011
Funds From Operations (FFO) (1)
 
 
 
 
 
 
Net (loss) income
 
(803
)
 
27

 
(920
)
Adjustments:
 
 
 
 
 
 
Depreciation and amortization of real estate assets
 
11,036

 
4,317

 
33,023

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

 

 
(803
)
Less: Net income attributable to preferred stock and units
 
(2,027
)
 
(195
)
 
(6,081
)
FFO to common shareholders and unit holders
 
8,206

 
4,149

 
25,219

Specified items impacting FFO:
 
 
 
 
 
 
Acquisition-related expenses
 
762

 
256

 
762

FFO (after specified items) to common shareholders and unit holders
 
8,968

 
4,405

 
25,981

 
 
 
 
 
 
 
Weighted average common shares/units outstanding - diluted
 
36,183

 
24,823

 
31,210

FFO per common share/unit - diluted
 
0.23

 
0.17

 
0.81

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

 
0.18

 
0.83

 
 
 
 
 
 
 
Adjusted Funds From Operations (AFFO) (1)
 
 
 
 
 
 
FFO
 
8,206

 
4,149

 
25,219

Adjustments:
 
 
 
 
 
 
Straight-line rent
 
(218
)
 
(1,472
)
 
(2,247
)
Amortization of prepaid rent (2)
 
288

 
251

 
842

Amortization of above market and below market leases, net
 
(151
)
 
(130
)
 
(365
)
Amortization of below market ground lease
 
62

 
15

 
204

Amortization of lease buy-out costs
 
23

 
133

 
384

Amortization of deferred financing costs and loan premium/discount, net
 
379

 
369

 
747

Recurring capital expenditures, tenant improvements and lease commissions
 
(1,770
)
 
(812
)
 
(4,275
)
Non-cash compensation expense
 
691

 
376

 
2,004

AFFO
 
7,510

 
2,879

 
22,513

 
 
 
 
 
 
 
Dividends paid to common stock and unit holders
 
4,523

 
2,358

 
12,179

AFFO payout ratio
 
60.2
%
 
81.9
%
 
54.1
%


______________________________
(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.
Third 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 September 30, 2011.

 
 
 
 
 
Annual
 
 
 
Balance at
Debt
Outstanding
 
Interest Rate (1)
 
Debt Service (1)
 
Maturity Date
 
Maturity
Mortgage loan secured by 10950 Washington
$
30,000

 
5.94%
 
$
1,807

 
2/1/2012
 
$
30,000

Secured Revolving Credit Facility (2)
33,000

 
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 Sunset Gower/Sunset Bronson (4)
92,000

 
LIBOR+3.50%
 
--
 
2/11/2016
 
89,681

Mortgage loan secured by Rincon Center (5)
109,397

 
5.134%
 
7,195

 
5/1/2018
99,719

97,673

Subtotal
$
298,097

 
 
 
 
 
 
 
 
Unamortized loan premium, net (6)
575

 
 
 
 
 
 
 
 
Total
$
298,672

 
 
 
 
 
 
 
 


______________________________
(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)
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. 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. The remaining proceeds were used to partially pay down our secured revolving credit facility. 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.
(5)
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.
(6)
Represents unamortized amount of the non-cash mark-to-market adjustment on debt associated with the First Financial and 10950 Washington loans.

9















PORTFOLIO DATA













10

Hudson Pacific Properties, Inc.
Third Quarter 2011 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
 
6

 
2,216,545

 
65.8
%
 
87.3
%
 
$
46,521,011

 
$
24.04

 
 
 
 
 
 
 
 
 
 
 
 
 
Los Angeles
 
6

 
711,998

 
21.1
%
 
94.8
%
 
22,101,263

 
32.76

 
 
 
 
 
 
 
 
 
 
 
 
 
Orange County
 
1

 
333,922

 
9.9
%
 
86.9
%
 
7,155,816

 
24.66

 
 
 
 
 
 
 
 
 
 
 
 
 
San Diego
 
1

 
104,234

 
3.1
%
 
92.0
%
 
1,510,622

 
15.75

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14

 
3,366,699

 
100
%
 
89.0
%
 
$
77,288,711

 
$
25.80





















______________________________
(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 September 30, 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 September 30, 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 September 30, 2011.

11

Hudson Pacific Properties, Inc.
Third 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
 
543,709

 
63.4
%
 
70.8
%
 
$
11,717,588

 
$
30.45

 
 
 
 
 
 
 
 
 
 
 
Sunset Bronson
 
313,723

 
36.6
%
 
77.1
%
 
9,743,958

 
40.27

 
 
 
 
 
 
 
 
 
 
 
 
 
857,432

 
100.0
%
 
73.1
%
 
$
21,461,546

 
$
34.24



























______________________________
(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.
(2)
Percent occupied for media and entertainment properties is the average percent occupied for the 12 months ended September 30, 2011.
(3)
Annual base rent for media and entertainment properties reflects actual base rent for the 12 months ended September 30, 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) square footage under lease as of September 30, 2011.

12

Hudson Pacific Properties, Inc.
Third Quarter 2011 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 (3)
 
1

 
1

 
Various
 
832,549

 
24.7
%
 
$
9,913,660

 
12.8
%
AIG
 
1

 
1

 
7/31/2017
 
166,757

 
5.0
%
 
6,894,564

 
8.9
%
AT&T
 
1

 
1

 
8/31/2013
 
155,964

 
4.6
%
 
5,850,333

 
7.6
%
Fox Interactive Media, Inc.
 
1

 
1

 
3/31/2017
 
104,897

 
3.1
%
 
4,349,889

 
5.6
%
Technicolor Creative Services USA, Inc.
 
1

 
1

 
5/31/2020
 
114,958

 
3.4
%
 
4,246,778

 
5.5
%
GSA - U.S. Corps of Engineers
 
1

 
1

 
2/19/2017
 
89,995

 
2.7
%
 
3,260,240

 
4.2
%
Kondaur Capital Corp.
 
1

 
1

 
3/31/2013
 
125,208

 
3.7
%
 
3,095,142

 
4.0
%
Saatchi & Saatchi North America, Inc.
 
1

 
1

 
12/31/2019
 
113,000

 
3.4
%
 
3,069,070

 
4.0
%
NFL Enterprises
 
1

 
1

 
3/31/2015
 
95,570

 
2.8
%
 
2,895,300

 
3.7
%
State of California
 
1

 
1

 
12/31/2017
 
35,452

 
1.1
%
 
1,659,606

 
2.1
%
Total
 
10

 
10

 
 
 
1,834,350

 
54.5
%
1,788,380

$
45,234,582

0.571

58.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 














______________________________
(1)
Top Ten Largest Office Tenants is determined by Annualized Base Rental Income as of September 30, 2011.
(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 September 30, 2011, by (ii) 12.
(3)
Bank of America lease expiration by square footage: (1) 50,948 sf at 12/31/2012; (2) 236,522 sf at 12/31/2013; (3) 331,197 sf at 12/31/2015; and (4) 213,882 sf at 12/31/2017.

 

13

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

OFFICE PORTFOLIO LEASING ACTIVITY


Total Gross Leasing Activity
 
Rentable square feet
112,673

Number of leases
13

 
 
Gross New Leasing Activity
 
Rentable square feet
57,635

New cash rate
$
32.47

Number of leases
4

 
 
Gross Renewal Leasing Activity
 
Rentable square feet
55,038

Renewal cash rate
$
22.76

Number of leases
9

 
 
Net Absorption
 
Leased rentable square feet
42,234

 
 
Cash Rent Growth (1)
 
Expiring Rate
$
22.95

New/Renewal Rate
$
22.76

Change
(0.8
)%
 
 
Straight-Line Rent Growth (2)
 
Expiring Rate
$
21.93

New/Renewal Rate
$
22.96

Change
4.7
 %
 
 
Weighted Average Lease Terms
 
New (in months)
149

Renewal (in months)
37

Tenant Improvements and Leasing Commissions (3)
Total Lease Transaction Costs Per Square Foot
Annual Lease Transaction Costs Per Square Foot
New leases
$62.79
$5.04
Renewal leases
$7.85
$2.52
Blended
$35.95
$4.56
______________________________
(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.
Third 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
 
323,030

 
9.6
%
 
$

 

 
$

 
$

2011
 
65,442

 
1.9
%
 
1,774,290

 
2.2
%
 
27.11

 
27.11

2012
 
232,609

 
6.9
%
 
7,138,553

 
9.0
%
 
30.69

 
31.42

2013
 
745,709

 
22.2
%
 
18,211,773

 
23.1
%
 
24.42

 
25.23

2014
 
132,208

 
3.9
%
 
3,845,481

 
4.9
%
 
29.09

 
31.11

2015
 
468,537

 
13.9
%
 
7,557,334

 
9.6
%
 
16.13

 
18.27

2016
 
193,451

 
5.8
%
 
5,360,814

 
6.8
%
 
27.71

 
31.26

2017
 
725,004

 
21.6
%
 
21,066,930

 
26.7
%
 
29.06

 
32.17

2018
 
27,613

 
0.8
%
 
580,013

 
0.7
%
 
21.01

 
25.40

2019
 
195,869

 
5.8
%
 
5,679,715

 
7.2
%
 
29.00

 
33.87

2020
 
170,785

 
5.1
%
 
5,363,317

 
6.8
%
 
31.40

 
45.82

Thereafter
 
23,683

 
0.7
%
 
710,490

 
0.9
%
 
30.00

 
41.00

Building management use
 
15,038

 
0.4
%
 

 
%
 

 

Signed leases not commenced
 
47,721

 
1.4
%
 
1,593,999

 
2.0
%
 
33.40

 
38.71

Total/Weighted Average
 
3,366,699

 
100.0
%
 
$
78,882,709

 
100.0
%
 
$
25.92

 
$
26.11













______________________________
(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 September 30, 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 September 30, 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 September 30, 2011.


15

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

QUARTERLY OFFICE LEASE EXPIRATIONS - NEXT FOUR QUARTERS



County
 
 
 
Q4 2011
 
Q1 2012
 
Q2 2012
 
Q3 2012
 
 
 
 
 
 
 
 
 
 
 
San Francisco
 
Expiring SF
 
874

 
11,943

 
50,265

 
4,173

 
 
Rent per SF (1) 

 
$
17.32

 
$
37.15

 
$
42.64

 
$
58.28

Los Angeles
 
Expiring SF
 
1,621

 
12,418

 
47,772

 
22,293

 
 
Rent per SF (1)
 
$
35.72

 
$
33.37

 
$
36.05

 
$
33.90

Orange
 
Expiring SF
 
5,173

 
3,371

 
4,507

 
9,987

 
 
Rent per SF (1)
 
$
24.81

 
$
27.84

 
$
22.54

 
$
27.81

San Diego
 
Expiring SF
 
6,133

 

 

 
14,932

 
 
Rent per SF (1)
 
$
11.21

 
$

 
$

 
$
22.18

 
 
 
 
 
 
 
 
 
 
 





















______________________________
(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 September 30, 2011, by (ii) 12.

16

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

OFFICE PORTFOLIO DIVERSIFICATION


 
 
Total
 
Annualized Rent as
Industry
 
Square Feet (1)
 
of Percent of Total
Business Services
 
76,489

 
2.8
%
Educational
 
120,396

 
4.5
%
Financial Services
 
1,086,169

 
22.0
%
Insurance
 
211,478

 
10.4
%
Legal
 
144,360

 
5.5
%
Media & Entertainment
 
363,873

 
15.3
%
Other
 
86,044

 
2.0
%
Real Estate
 
42,683

 
1.8
%
Retail
 
178,945

 
5.0
%
Technology
 
420,368

 
19.1
%
Advertising
 
115,735

 
4.1
%
Government
 
125,447

 
6.4
%
Healthcare
 
27,061

 
1.1
%
Total
 
2,999,048

 
100.0
%

















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

17

Hudson Pacific Properties, Inc.
Third 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) 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