The following excerpt is from the company's SEC filing.
Executed Over 970,000 Square Feet Of Leases
Achieved GAAP And Cash Rent Spreads Of 58% And 49%
Los Angeles, CA,
August 4, 2016
—Hudson Pacific Properties, Inc. (the “Company,” or “Hudson Pacific”) (NYSE: HPP) today announced financial results for the
June 30, 2016
Net income attributable to common stockholders of
per diluted share, compared to net loss of
per diluted share, a year ago;
FFO, excluding specified item s, of
per diluted share, a year ago;
Executed new and renewal leases totaling
square feet, consisting of
square feet of new leases and
square feet of renewal leases;
Achieved GAAP and cash rent growth on new and renewal leases of
Increased in-service office portfolio leased rate to
, up from 90.7% as of March 31, 2016 and 88.8% a year ago;
Sold One Bay Plaza in Burlingame, California and Patrick Henry Drive in Santa Clara, California for a combined total of $72.4 million before credits, prorations and closing costs; and
Declared and paid a quarterly dividend of
per share on common stock.
“Our second quarter results include over 970,000 square feet of deals at cash rent spreads close to 50%, underscoring the strength of our leasing pipeline and our team’s ability to execute,” said Victor Coleman, Hudson Pacific Properties’ Chairman and CEO. “Year-to-date we have leased an impressive 1.8 million square feet, with the preponderance of that activity, nearly 75%, in our Bay Area assets.”
Coleman added, “We continue to take advantage of demand from well-qualified buyers for Bay Area assets. In the second quarter, we sold two additional former-Blackstone portfolio properties, One Bay Plaza and Patrick Henry Drive, both at premiums to our original purchase prices. We are focused on execution of lease-up and value creation within our existing portfolio, but will evaluate very select, strategic acquisition opportunities, primarily in the Los Angeles and Seattle markets. Our recent purchase of 11601 Wilshire Boulevard exemplifies this approach.”
The Company reported net income attributable to common stockholders of
per diluted share, for the three months ended
, compared to net loss attributable to common stockholders of
June 30, 2015
Funds From Operations (FFO), excluding specified items, for the three months ended
per diluted share, compared to FFO, excluding specified items, of
per share, a year ago. Specified items for the
consisted of acquisition-related expense of
per diluted share. Specified items for the second quarter of 2015 consisted of acquisition-related expense of
FFO, including specified items, for the three months ended
per diluted share, a year ago.
Combined Operating Results For The Three Months Ended
Total revenue during the
for the same quarter a year ago. Total operating expenses decreased
ago. As a result, income from operations increased
for the same quarter a year ago. The primary reasons for the changes in total revenue and operating expenses are discussed below in connection with the Company’s segment operating results.
Interest expense during the
for the same quarter a year ago. The Company had
and $2.1 billion of notes payable, excluding net deferred financing costs and net loan premium, at
of unrealized loss on the ineffective portion of derivatives, with nothing comparable for the same quarter a year ago. The Company also had
of acquisition-related expense associated with the acquisition of 11601 Wilshire Boulevard completed during the third quarter of
of acquisition-related expense associated with the acquisition of the EOP Northern California portfolio in the
quarter of 2015.
Segment Operating Results For The Three Months Ended
Total revenue at the Company’s office properties increased
for the same quarter a year ago. The increase was primarily the result of a
increase in tenant recoveries to
, partially offset by a decrease in rental revenue of
and in parking and other revenue of
. The increase in tenant recoveries largely resulted from a corresponding increase in operating expenses discussed below, partially offset by a loss of tenant recoveries stemming from the sales of Bay Park Plaza in third quarter of 2015, Bayhill Office Center in the first quarter of 2016 and One Bay Plaza in the
. The decrease in rental, parking and other revenue was also primarily due to these asset sales, though higher rental revenue on improved rents and occupancy throughout the Company’s in-service portfolio partially offset this decrease.
Office property operating expenses increased
for the same quarter a year ago. The expense increase primarily resulted from higher occupancy in our in-service office portfolio, partially offset by the sales of Bay Park Plaza, Bayhill Office Center and One Bay Plaza.
Net operating income with respect to the Company’s
same-store office properties for the
on a GAAP basis and
on a cash basis.
, the Company’s stabilized and in-service office portfolio was
leased, respectively. During the quarter, the Company executed
Media and Entertainment Properties
Total revenue at the Company’s media and entertainment properties increased
for the same quarter a year ago largely due to a
increase in rental revenue to
. The increase in rental revenue stemmed from higher occupancy at Sunset Gower and Sunset Bronson. In addition, stage and office space at Sunset Bronson were taken off-line for improvements during the three months ended June 30, 2015, and were fully occupied over the three months ended
. Total media and entertainment operating expenses increased
for the same quarter a year ago, also largely due to higher occupancy at Sunset Gower and Sunset Bronson.
Media and entertainment net operating income in the
quarter increased by
, the trailing 12-month occupancy for the Company’s media and entertainment portfolio increased to
from 76.5% for the period ended
, the Company had total assets of
, including unrestricted cash and cash equivalents of
, the Company had $400.0 million of total capacity under its unsecured revolving credit facility, of which
had been drawn.
Executed Significant Leases Throughout Portfolio
Qualcomm, a leading 3G and next-generation wireless technology company, renewed its lease through July 2022 at Skyport Plaza office campus in North San Jose, California. Qualcomm
has maintained offices at the property for nearly four years, and
will continue to occupy a total of 365,502 square feet in two buildings.
The General Services Administration renewed its lease on behalf of the U.S. Army Corps of Engineers (USACE) at 1455 Market Street in San Francisco, California. USACE, a provider of public and military engineering services, will continue to occupy 71,729 square feet through February 2019.
RGN-National (Regus) Business Centers, which owns/operates flex office space worldwide, renewed their lease for 44,957 square feet through March 2022 at Gateway office campus in North San Jose, California.
BrightEdge Technologies, a leading SEO company and platform, executed a lease for 36,542 square feet through June 2024 at 989 Hillsdale Avenue, part of Metro Center office complex in Foster City, California.
NFL Enterprises, on behalf of NFL Media, executed a lease for another 30,300 square feet, backfilling the former SDI media space at 10950 Washington Boulevard in Culver City, California. NFL Media will now occupy through June 2019 the entirety of 10950 Washington Boulevard, as well as the adjacent 10900 Washington Boulevard, for a total of 167,605 square feet.
Cloud computing company Salesforce.com executed a lease for an additional 23,683 square feet at Rincon Center in San Francisco, California. The deal backfilled the entire space formerly occupied by Intrax, and brings Salesforce.com’s total occupancy at Rincon Center to 261,250 square feet.
Sold Additional EOP Northern California Assets
On April 7, 2016, the Company sold Patrick Henry Drive, a 70,520-square-foot R&D office building located at 3055 Patrick Henry Drive in Santa Clara, California for $19.0 million before certain credits, prorations and closing costs. KT Properties Urban, Inc. acquired the property, which was entirely vacant at time of sale, in an all-cash, off-market transaction.
On June 1, 2016, the Company sold One Bay Plaza, a 195,739-square-foot office tower located at 1350 Bayshore Highway in Burlingame, California to a joint venture between Harvest Properties and New York Life Real Estate Investors for $53.4 million before credits, prorations and closing costs.
The Company sold both assets at premiums to their original purchase prices when acquired as part of the EOP Northern California portfolio acquisition on April 1, 2015.
Financings & Refinancings
On May 3, 2016, the Company drew all $175.0 million of its five-year and $125.0 million of its seven-year unsecured term loan credit facilities entered into in November of last year. The Company used loan proceeds to repay floating rate indebtedness, including the $30.0 million loan secured by 901 Market Street, $60.0 million outstanding balance under its revolving credit facility, $110.0 million of the outstanding balance under its loan secured by Sunset Gower/Sunset Bronson, and $100.0 million of its unhedged existing five-year term loan.
On June 6, 2016, the Company fully refinanced project-level financing associated with Pinnacle II in Burbank, with a 10-year, $87.0 million loan bearing interest of 4.30% per annum. The refinancing successfully replaced the loan previously secured by Pinnacle II, which was bearing interest of 6.31% per annum.
Repayment & Funding Of Select Debt Investments
On June 14, 2016, the Company was fully repaid on its $28.5 million participation in a $120.0 million bridge loan originated by Canyon Capital Realty Advisors for the acquisition and redevelopment of the historic Broadway Trade Center in Los Angeles, California.
On June 16, 2016, the Company funded $28.4 million of a $140.0 million first mortgage loan, originated by a limited liability company managed by Mesa West Capital, to finance China-based technology company LeEco’s acquisition of a 48.6-acre land site in Santa Clara, California. LeEco plans to develop a three-million-square-foot global headquarters campus at this location.
Completed Common Stock Public Offering
On May 16, 2016, the Company completed a public offering of 10,600,000 shares of its common stock, consisting of 10,117,223 shares offered by the Company and 482,777 shares offered by funds affiliated with Farallon Capital Management, L.L.C. (collectively, the “Farallon Funds”). The Company used the $294.2 million of net proceeds to acquire 10,000,000 common units of limited partnership interest in its operating partnership, Hudson Pacific Properties, L.P. (the “Operating Partnership”), from certain entities affiliated with The Blackstone Group L.P., and 117,223 common units of limited partnership interest in the Operating Partnership from the Farallon Funds. The Company did not receive any proceeds from the sale of the shares of common stock in this offering by the Farallon Funds.
Paid Common Dividend
The Company’s Board of Directors declared a dividend on its common stock of
per share for the
. The dividends were paid on June 30, 2016 to stockholders of record on June 20, 2016.
Activities Subsequent to June 30, 2016
Acquired 11601 Wilshire Boulevard
On July 1, 2016, the Company acquired 11601 Wilshire Boulevard, a 500,475-square-foot Class A office tower in West Los Angeles, from real estate funds managed by Blackstone for $311.0 million before credits, prorations and closing costs. The Company intends to lease-up, renovate and improve operating efficiencies at the currently 82.7% occupied property, which has served as its headquarters for the last six years.
Completed $200.0 Million Private Placement
On July 6, 2016, the Company completed a private placement of debt yielding $200.0 million of gross proceeds. The Company applied net proceeds from $150.0 million of 3.98% senior guaranteed notes due July 6, 2026 to fund the 11601 Wilshire Boulevard acquisition. The Company expects to access the remaining $50.0 million, consisting of 3.66% senior guaranteed notes due September 15, 2023, on or before September 15, 2016 to repay amounts outstanding under its unsecured revolving credit facility or for general corporate purposes.
On July 21, 2016, the Company completed a public offering of 20,000,000 shares of its common stock, consisting of 19,195,373 shares offered by the Company and 804,627 shares offered by funds affiliated with the Farallon Funds. The Company used the $582.0 million of net proceeds to acquire 19,000,000 common units of limited partnership interest in the Operating Partnership, from certain entities affiliated with The Blackstone Group L.P., and 195,373 common units of limited partnership interest in the Operating Partnership from the Farallon Funds. The Company did not receive any proceeds from the sale of the shares of common stock in this offering by the Farallon Funds.
The Company is increasing its full-year 2016 FFO guidance from its previously announced range of $1.68 to $1.76 per diluted share, excluding specified items, to a revised range of $1.71 to $1.77 per diluted share, excluding specified items. The guidance reflects the Company’s FFO for the
per diluted share, excluding specified items, as well as the transactional activity referenced in this press release and in earlier announcements, including the sale of 12655 Jefferson Boulevard in the fourth quarter, and the anticipated funding of $50.0 million of 3.66% senior guaranteed notes on or before September 15, 2016 to repay amounts outstanding under its unsecured revolving credit facility or for general corporate purposes. This guidance also reflects the elimination of the ineffective portion of the interest rate swaps relating to $650.0 million of its five- and seven-year term loans due April of 2020 and 2022, respectively, through an increase in the underlying fixed rate by a weighted average of 12 basis points per annum. This guidance assumes full-year 2016 weighted average fully diluted common stock/units of
. The full-year 2016 FFO estimate reflects management’s view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels and the earnings impact of events referenced in this press release, but otherwise excludes any impact from future unannounced or speculative acquisitions, dispositions, debt financings or repayments, recapitalizations, capital market activity or similar matters.
The Company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis, including the information under “2016 Outlook” above, where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and/or amount of various items that would impact net income attributable to common stockholders per diluted share, the most directly comparable forward-looking GAAP financial measure, including, for example, acquisition costs and other non-core items that have not yet occurred, are out of the Company’s control and/or cannot be reasonably predicted. For the same reasons, the Company is unable to address the probable significance of the unavailable information. Forward-looking non-GAAP financial measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.
Supplemental financial information regarding the Company’s
results may be found in the Investor Relations section of the Company’s Website at
. This supplemental information provides additional detail on items such as property occupancy, financial performance by property, and debt maturity schedules.
The Company will hold a conference call to discuss
financial results at 11:00 a.m. PT / 2:00 p.m. ET on
. To participate in the call by telephone, please dial (877) 407-0784 five to 10 minutes prior to the start time to allow time for registration. International callers should dial (201) 689-8560. The call will also be broadcast live over the Internet and can be accessed via the Investor Relations section of the Company’s Website at
, where a replay of the call will be available for 90 days. A replay will also be available beginning August 4, at 2:00 p.m. PT / 5:00 p.m. ET, through August 11, at 8:59 p.m. PT / 11:59 p.m. ET, by dialing (877) 870-5176 and entering the passcode 13640344. International callers should dial (858) 384-5517 and enter the same passcode.
Use of Non-GAAP Information
The Company calculates 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, plus real estate depreciation and amortization (excluding amortization of above/below market lease intangible assets and liabilities and amortization of deferred financing costs and debt discounts/premium) and after adjustments for unconsolidated partnerships and joint ventures. The Company uses 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. The Company also believes that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare its operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of the Company’s properties that results from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of its properties, all of which have real economic effect and could materially impact the Company’s results from operations, the utility of FFO as a measure of the Company’s performance is limited. Other equity REITs may not calculate FFO in accordance with the NAREIT definition and, accordingly, the Company’s 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 the Company’s performance. FFO should not be used as a measure of the Company’s liquidity, nor is it indicative of funds available to fund the Company’s cash needs, including the Company’s 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.
About Hudson Pacific Properties
Hudson Pacific Properties is a vertically integrated real estate company focused on acquiring, repositioning, developing and operating high-quality office and state-of-the-art media and entertainment properties in select West Coast markets. Hudson Pacific
invests across the risk-return spectrum, favoring opportunities where it can employ leasing, capital investment and management expertise to create additional value. Founded in 2006 as Hudson Capital, the Company went public in 2010, electing to be taxed as a real estate investment trust. Through the years, Hudson Pacific has strategically assembled a portfolio totaling over 17 million square feet, including land for development, in high-growth, high-barrier-to-entry submarkets throughout Northern and Southern California and the Pacific Northwest. The Company is a leading provider of design-forward, next-generation workspaces for a variety of tenants, with a focus on Fortune 500 and industry-leading growth companies, many in the technology, media and entertainment sectors. As a long-term owner, Hudson Pacific prioritizes tenant satisfaction and retention, providing highly customized build-outs and working proactively to accommodate tenants’ growth. Hudson Pacific trades as a component of the Russell 2000® and the Russell 3000® indices. For more information visit
This press release may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events, or trends and that do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond the Company’s control that may cause actual results to differ significantly from those expressed in any forward-looking statement. All forward-looking statements reflect the Company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause the Company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2015
filed with the Securities and Exchange Commission, or SEC, on February 26, 2016, and other risks described in documents subsequently filed by the Company from time to time with the SEC.
Vice President, Head of Investor Relations
Blue Marlin Partners
(FINANCIAL TABLES FOLLOW)
Consolidated Balance Sheets
(In thousands, except share data)
REAL ESTATE ASSETS
Building and improvements
Furniture and fixtures
Property under development
Total real estate held for investment
Accumulated depreciation and amortization
Investment in real estate, net
Cash and cash equivalents
Accounts receivable, net
Notes receivable, net
Straight-line rent receivables, net
Deferred leasing costs and lease intangible assets, net
Prepaid expenses and other assets, net
Investment in unconsolidated entity
Assets associated with real estate held for sale
LIABILITIES AND EQUITY
Notes payable, net
Accounts payable and accrued liabilities
Lease intangible liabilities, net
Liabilities associated with real estate held for sale
6.25% series A cumulative redeemable preferred units of the operating partnership
Hudson Pacific Properties, Inc. stockholders’ equity:
Common stock, $0.01 par value, 490,000,000 authorized, 99,385,084 shares and 89,153,780 shares outstanding at June 30, 2016 and December 31, 2015, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Total Hudson Pacific Properties, Inc. stockholders’ equity
Non-controlling interest—members in consolidated entities
Non-controlling interest—units in the operating partnership
TOTAL LIABILITIES AND EQUITY
Combined Statements of Operations
(Unaudited, in thousands, except share data)
Three Months Ended
Six Months Ended
Parking and other
Total office revenues
Media & Entertainment
Other property-related revenue
Total Media & Entertainment revenues
Office operating expenses
Media & Entertainment operating expenses
General and administrative
Depreciation and amortization
Income from operations
Other expense (income)
Unrealized loss on ineffective portion of derivative instruments
Other (income) expense
Total other expenses
Income (loss) before gains (loss) on sale of real estate
Gains (loss) on sale of real estate
Net income (loss)
Net income attributable to preferred stock and units
Net income attributable to participating securities
Net income attributable to non-controlling interest in consolidated real estate entities
Net (income) loss attributable to common units in the operating partnership
Net income (loss) attributable to Hudson Pacific Properties, Inc. common stockholders
Basic and diluted per share amounts:
Net income attributable to common stockholders’ per share—basic
Net income attributable to common stockholders’ per share—diluted
Weighted average shares of common stock outstanding—basic
Weighted average shares of common stock outstanding—diluted
Dividends declared per share of common stock
(Unaudited, in thousands, except per share data)
Reconciliation of net income to Funds From Operations (
Depreciation and amortization of real estate assets
(Gains) loss on sale of real estate
FFO attributable to non-controlling interests
FFO to common stockholders and unitholders
Specified items impacting FFO:
FFO (excluding specified items) to common stockholders and unitholders
Weighted average common stock/units outstanding—diluted
FFO per common stock/unit—diluted
FFO (excluding specified items) per common stock/unit—diluted
The above information was disclosed in a filing to the SEC. To see the filing, click here.
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