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8-K - Hudson Pacific Properties, Inc.hppq120128-k.htm
EX-99.1 - Hudson Pacific Properties, Inc.q12012ex991.htm
HUDSON PACIFIC PROPERTIES, INC.
FIRST 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 May 2012 conference call may not occur.


Hudson Pacific Properties, Inc.
First 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.
First 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
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
(310) 829-5400
Email Contact: lasseg@addocommunications.com
Please visit our corporate Web site at: www.hudsonpacificproperties.com
 


3

Hudson Pacific Properties, Inc.
First 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
15

Office properties square feet (in thousands)
3,583
Office properties leased rate as of March 31, 2012(1)
91.2
%
Office properties occupied rate as of March 31, 2012(1) (2)
89.2
%
 
 
Number of media & entertainment properties owned
2

Media & entertainment square feet (in thousands)
878

Media & entertainment occupied rate as of March 31, 2012(3)
69.2
%
 
 
Number of land assets owned
4

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

 
 
Market capitalization (in thousands):
 
Total debt(5)
$
359,277

Series A Preferred Units
12,475

Series B Preferred Stock
145,000

Common equity capitalization(6)
551,542

Total market capitalization
$
1,068,294

Debt/total market capitalization
33.6
%
Series A preferred units & debt/total market capitalization
34.8
%
Common stock data (NYSE:HPP):
 
Range of closing prices(7)
$ 13.62-16.01

Closing price at quarter end
$
15.13

Weighted average fully diluted shares\units outstanding (in thousands)(8)
36,454

Shares of common stock\units outstanding on March 31, 2012 (in thousands)(9)
36,454

__________________________
(1)
Office properties leased rate and occupied rate includes 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 92.5% and 90.5%, 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 March 31, 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 March 31, 2012.
(8)
For the quarter ended March 31, 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 March 31, 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.
First Quarter 2012 Supplemental Operating and Financial Data

Consolidated Balance Sheets
(Unaudited, in thousands, except share data)
 
March 31, 2012
 
December 31, 2010
ASSETS
 
 
 
Total investment in real estate, net
$
1,001,034

 
$
1,007,175

Cash and cash equivalents
21,858

 
13,705

Restricted cash
10,175

 
9,521

Accounts receivable, net
8,069

 
8,963

Straight-line rent receivables
12,364

 
10,801

Deferred leasing costs and lease intangibles, net
78,940

 
84,131

Deferred finance costs, net
5,293

 
5,079

Interest rate contracts
437

 
164

Goodwill
8,754

 
8,754

Prepaid expenses and other assets
13,576

 
4,498

TOTAL ASSETS
$
1,160,500

 
$
1,152,791

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Notes payable
$
361,051

 
$
399,871

Accounts payable and accrued liabilities
14,448

 
12,469

Below-market leases
21,503

 
22,861

Security deposits
6,136

 
5,651

Prepaid rent
6,829

 
10,795

TOTAL LIABILITIES
409,967

 
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 March 31, 2012 and December 31, 2011, respectively
145,000

 
87,500

Common Stock, $0.01 par value 490,000,000 authorized, 33,998,498 shares and 33,840,854 shares outstanding at March 31, 2012 and December 31, 2011, respectively
340

 
338

Additional paid-in capital
550,873

 
552,043

Accumulated other comprehensive (deficit) income
(968
)
 
(883
)
Accumulated deficit
(16,245
)
 
(13,685
)
Total Hudson Pacific Properties, Inc. stockholders’ equity
679,000

 
625,313

Non-controlling common units in the Operating Partnership
59,058

 
63,356

TOTAL EQUITY
738,058

 
688,669

TOTAL LIABILITIES AND EQUITY
$
1,160,500

 
$
1,152,791

 
 
 
 


6

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

Consolidated Statements of Operations
(Unaudited, in thousands, except share and per share data)
 
Three Months Ended March 31,
 
 
2012
 
2011
Revenues
 
 
 
Office
 
 
 
Rental
$
22,380

 
$
17,514

Tenant recoveries
5,374

 
4,963

Parking and other
2,114

 
3,155

Total office revenues
29,868

 
25,632

Media & entertainment
 
 
 
Rental
5,451

 
5,480

Tenant recoveries
248

 
343

Other property-related revenue
2,624

 
3,271

Other
40

 
78

     Total media & entertainment revenues
8,363

 
9,172

Total revenues
38,231

 
34,804

 
 
 
 
Operating expenses
 
 
 
Office operating expenses
11,356

 
10,274

Media & entertainment operating expenses
4,770

 
5,179

General and administrative
4,514

 
3,146

Depreciation and amortization
12,132

 
11,361

Total operating expenses
32,772

 
29,960

 
 
 
 
Income from operations
5,459

 
4,844

Other expense (income)
 
 
 
Interest expense
4,891

 
4,642

Interest income
(5
)
 
(8
)
Acquisition-related expenses
61

 

Other expenses (income)
44

 
117

 
4,991

 
4,751

 
 
 
 
Net income
$
468

 
$
93

 
 
 
 
Less: Net income attributable to preferred stock and units
(3,231
)
 
(2,027
)
Less: Net income attributable to restricted shares
(78
)
 
(62
)
Less: Net income attributable to non-controlling interest in consolidated real estate entities

 
(813
)
Add: Net loss attributable to common units in the Operating Partnership
203

 
299

Net loss attributable to Hudson Pacific Properties, Inc. shareholders
$
(2,638
)
 
$
(2,510
)
Net loss attributable to shareholders’ per share - basic and diluted
$
(0.08
)
 
$
(0.11
)
Weighted average shares of common stock outstanding - basic and diluted
33,320,450

 
21,949,118

Dividends declared per common share
$
0.125

 
$
0.125


7

Hudson Pacific Properties, Inc.
First 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 March 31,
 
 
2012
 
2011
Funds From Operations (FFO) (1)
 
 
 
 
Net (loss) income
 
468

 
93

Adjustments:
 
 
 
 
Depreciation and amortization of real estate assets
 
12,132

 
11,361

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

 
(813
)
Less: Net income attributable to preferred stock and units
 
(3,231
)
 
(2,027
)
FFO to common shareholders and unit holders
 
9,369

 
8,614

Specified items impacting FFO:
 
 
 
 
Acquisition-related expenses
 
61

 

Master Halco termination revenue
 

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

 
716

FFO (after specified items) to common shareholders and unit holders
 
9,430

 
6,586

 
 
 
 
 
Weighted average common shares/units outstanding - diluted
 
36,454

 
25,060

FFO per common share/unit - diluted
 
0.26

 
0.34

FFO (after specified items) per common share/unit - diluted
 
0.26

 
0.26

 
 
 
 
 
Adjusted Funds From Operations (AFFO) (1)
 
 
 
 
FFO
 
9,369

 
8,614

Adjustments:
 
 
 
 
Straight-line rent
 
(1,563
)
 
(876
)
Amortization of prepaid rent (2)
 
314

 
275

Amortization of above market and below market leases, net
 
(370
)
 
(93
)
Amortization of below market ground lease
 
62

 
80

Amortization of lease buy-out costs
 
23

 
339

Amortization of deferred financing costs and loan premium/discount, net
 
304

 
86

Recurring capital expenditures, tenant improvements and lease commissions
 
(2,004
)
 
(1,228
)
Non-cash compensation expense
 
1,229

 
720

AFFO
 
7,364

 
7,917

 
 
 
 
 
Dividends paid to common stock and unit holders
 
4,559

 
2,381

AFFO payout ratio
 
61.9
%
 
30.1
%


______________________________
(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.
First 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 March 31, 2012.

 
 
 
 
 
Annual
 
 
 
Balance at
Debt
Outstanding
 
Interest Rate (1)
 
Debt Service (1)
 
Maturity Date
 
Maturity
Secured Revolving Credit Facility
$
10,000

 
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)
41,960

 
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
108,647

 
5.136%
 
7,195

 
5/1/2018
 
97,673

Mortgage loan secured by First Financial
43,000

 
4.58%
 
2,002

 
2/1/2022
 
36,799

Mortgage loan secured by 10950 Washington (5)
29,970

 
5.316%
 
2,003

 
3/11/2022
99,719

24,632

Subtotal
$
359,277

 
 
 
 
 
 
 
 
Unamortized loan premium, net (6)
1,774

 
 
 
 
 
 
 
 
Total
$
361,051

 
 
 
 
 
 
 
 







______________________________
(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.
(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.
First Quarter 2012 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

 
61.9
%
 
89.6
%
 
$
47,826,703

 
$
24.08

 
 
 
 
 
 
 
 
 
 
 
 
 
Los Angeles
 
7

 
920,261

 
25.7
%
 
93.5
%
 
29,733,070

 
34.57

 
 
 
 
 
 
 
 
 
 
 
 
 
Orange County
 
1

 
333,922

 
9.3
%
 
77.9
%
 
6,391,023

 
24.56

 
 
 
 
 
 
 
 
 
 
 
 
 
San Diego
 
1

 
112,300

 
3.1
%
 
80.0
%
 
1,446,991

 
16.11

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15

 
3,583,028

 
100
%
 
89.2
%
 
$
85,397,787

 
$
26.72





















______________________________
(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 March 31, 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 March 31, 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 March 31, 2012.

11

Hudson Pacific Properties, Inc.
First 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
 
549,792

 
63.7
%
 
64.8
%
 
$
10,994,885

 
$
30.85

 
 
 
 
 
 
 
 
 
 
 
Sunset Bronson
 
313,723

 
36.3
%
 
76.9
%
 
9,725,908

 
40.32

 
 
 
 
 
 
 
 
 
 
 
 
 
863,515

 
100.0
%
 
69.2
%
 
$
20,720,793

 
$
34.67
























______________________________
(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 December 31, 2011, 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 March 31, 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 March 31, 2012.
(3)
Annual base rent for media and entertainment properties reflects actual base rent for the 12 months ended March 31, 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 March 31, 2012.

12

Hudson Pacific Properties, Inc.
First Quarter 2012 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

 
23.2
%
 
$
9,409,853

 
11.0
%
AIG  (4)
 
1

 
1

 
Various
 
166,757

 
4.7
%
 
6,894,564

 
8.1
%
AT&T
 
1

 
1

 
8/31/2013
 
155,964

 
4.4
%
 
5,850,333

 
6.8
%
Fox Interactive Media, Inc.
 
1

 
1

 
3/31/2017
 
104,897

 
2.9
%
 
4,384,484

 
5.1
%
Technicolor Creative Services USA, Inc.
 
1

 
1

 
5/31/2020
 
114,958

 
3.2
%
 
4,246,778

 
5.0
%
GSA - U.S. Corps of Engineers
 
1

 
1

 
2/19/2017
 
89,995

 
2.5
%
 
3,260,240

 
3.8
%
NFL Enterprises
 
1

 
1

 
3/31/2015
 
104,589

 
2.9
%
 
3,250,922

 
3.8
%
Kondaur Capital Corp.
 
1

 
1

 
3/31/2013
 
125,208

 
3.5
%
 
3,185,292

 
3.7
%
Saatchi & Saatchi North America, Inc.
 
1

 
1

 
12/31/2019
 
113,000

 
3.2
%
 
3,069,070

 
3.6
%
Trailer Park, Inc.
 
1

 
1

 
9/30/2018
 
72,101

 
2.0
%
 
2,788,967

 
3.3
%
Total
 
10

 
10

 
 
 
1,880,018

 
52.5
%
 
$
46,340,503

 
54.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 












______________________________
(1)
Top Ten Largest Office Tenants is determined by Annualized Base Rental Income as of March 31, 2012.
(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 March 31, 2012, 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 (right of early termination); (3) 331,197 sf at 12/31/2015 (right of early termination); and (4) 213,882 sf at 12/31/2017.
(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.

13

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

OFFICE PORTFOLIO LEASING ACTIVITY


Total Gross Leasing Activity
 
Rentable square feet
88,332

Number of leases
14

 
 
Gross New Leasing Activity
 
Rentable square feet
73,356

New cash rate
$
35.02

Number of leases
8

 
 
Gross Renewal Leasing Activity
 
Rentable square feet
14,976

Renewal cash rate
$
29.64

Number of leases
6

 
 
Net Absorption
 
Leased rentable square feet
67,223

 
 
Cash Rent Growth (1)
 
Expiring Rate
$
30.52

New/Renewal Rate
$
34.33

Change
12.5
%
 
 
Straight-Line Rent Growth (2)
 
Expiring Rate
$
29.53

New/Renewal Rate
$
36.59

Change
23.9
%
 
 
Weighted Average Lease Terms
 
New (in months)
97

Renewal (in months)
35

Tenant Improvements and Leasing Commissions (3)
Total Lease Transaction Costs Per Square Foot
Annual Lease Transaction Costs Per Square Foot
New leases
$33.81
$4.19
Renewal leases
$10.89
$3.78
Blended
$29.92
$4.16
______________________________
(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.
First Quarter 2012 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
 
315,051

 
8.8
%
 
$

 

 
$

 
$

2012
 
240,708

 
6.7
%
 
6,244,603

 
7.1
%
 
25.94

 
25.98

2013
 
732,147

 
20.4
%
 
18,218,862

 
20.8
%
 
24.88

 
25.36

2014
 
150,934

 
4.2
%
 
4,957,345

 
5.7
%
 
32.84

 
34.27

2015
 
502,145

 
14.0
%
 
8,833,654

 
10.1
%
 
17.59

 
19.39

2016
 
235,298

 
6.6
%
 
6,971,898

 
8.0
%
 
29.63

 
32.98

2017
 
709,191

 
19.8
%
 
20,886,067

 
23.9
%
 
29.45

 
31.4

2018
 
134,471

 
3.8
%
 
4,584,501

 
5.2
%
 
34.09

 
39.62

2019
 
229,127

 
6.4
%
 
6,884,266

 
7.9
%
 
30.05

 
34.76

2020
 
211,000

 
5.9
%
 
6,929,269

 
7.9
%
 
32.84

 
46.13

2021
 

 
%
 

 
%
 

 

Thereafter
 
31,261

 
0.9
%
 
887,324

 
1.0
%
 
28.38

 
40.73

Building management use
 
20,241

 
0.5
%
 

 
%
 

 

Signed leases not commenced
 
71,454

 
2.0
%
 
2,064,630

 
2.4
%
 
28.89

 
44.22

Total/Weighted Average
 
3,583,028

 
100.0
%
 
$
87,462,419

 
100.0
%
 
$
26.76

 
$
27.13













______________________________
(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 March 31, 2012, 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 March 31, 2012.
(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 March 31, 2012.


15

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

QUARTERLY OFFICE LEASE EXPIRATIONS - NEXT FOUR QUARTERS

 
 
Q2 2012
 
Q3 2012
 
Q4 2012
 
Q1 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
 
2,369

$
24.30

 
53,816

$
45.43

 
989

$
66.95

 
1,377

$
38.00

1455 Market Street
 


 
41,321

1.09

 
50,948

12.36

 
100

69.93

875 Howard Street
 


 


 


 


222 Kearny Street
 
2,092

29.50

 
4,330

53.45

 
1,827

47.27

 
8,831

42.58

625 Second Street
 


 


 


 


275 Brannan Street
 


 


 


 


Subtotal
 
4,461

$
26.74

 
99,467

$
27.36

 
53,764

$
14.55

 
10,308

$
42.23

 
 
 
 
 
 
 
 
 
 
 
 
 
Los Angeles
 
 
 
 
 
 
 
 
 
 
 
 
First Financial
 
772

$
29.66

 

$

 
1,348

$
31.83

 
4,438

$
38.21

Technicolor Building
 


 


 


 


Del Amo Office Building
 


 


 


 


9300 Wilshire
 
150

37.12

 


 
1,087

37.08

 
432

36.11

10950 Washington
 
425

31.06

 


 


 


604 Arizona
 


 
44,260

36.54

 


 


6922 Hollywood
 


 
2,222

38.56

 


 


Subtotal
 
1,347

$
30.93

 
46,482

$
36.63

 
2,435

$
34.17

 
4,870

$
38.02

 
 
 
 
 
 
 
 
 
 
 
 
 
Orange
 
 
 
 
 
 
 
 
 
 
 
 
City Plaza
 
8,618

$
23.85

 
9,202

$
27.40

 

$

 
127,337

$
25.42

Subtotal
 
8,618

$
23.85

 
9,202

$
27.40

 

$

 
127,337

$
25.42

 
 
 
 
 
 
 
 
 
 
 
 
 
San Diego
 
 
 
 
 
 
 
 
 
 
 
 
Tierrasanta
 

$

 
14,932

$
22.52

 

$

 

$

Subtotal
 

$

 
14,932

$
22.52

 

$

 

$

 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
14,426

$
25.41

 
170,083

$
29.47

 
56,199

$
15.40

 
142,515

$
27.07




______________________________
(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 March 31, 2012, by (ii) 12.

16

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

OFFICE PORTFOLIO DIVERSIFICATION


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

 
2.7
%
Educational
 
120,396

 
4.1
%
Financial Services
 
1,089,524

 
19.5
%
Insurance
 
180,964

 
8.4
%
Legal
 
144,738

 
5.0
%
Media & Entertainment
 
453,339

 
18.0
%
Other
 
63,875

 
1.0
%
Real Estate
 
63,320

 
2.5
%
Retail
 
201,945

 
6.2
%
Technology
 
501,393

 
21.1
%
Advertising
 
115,735

 
3.7
%
Government
 
125,447

 
5.8
%
Healthcare
 
56,738

 
2.0
%
Total
 
3,196,523

 
100.0
%

















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

17

Hudson Pacific Properties, Inc.
First 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