– Over 380,000 Square Feet of Leasing Activity –

– Positive Rent Spreads of 8.7% GAAP and 3.4% Cash –

– Updates 2022 Outlook –

Hudson Pacific Properties, Inc. (NYSE: HPP), a unique provider of end-to-end real estate solutions for dynamic tech and media tenants in global epicenters for these synergistic, converging and secular growth industries, today announced financial results for the third quarter 2022.

"We are pleased that our ongoing efforts in serving the tech and media industries across our world-class portfolio produced a year-over-year increase in leasing activity with over 380,000 square feet completed during the quarter," stated Victor Coleman, Chairman and CEO. "There is no question that tenants are being more methodical in their decision process given a slower than anticipated return-to-office and the rapidly changing economic climate, marked by high inflation and rising interest rates. Driven by our sharp focus on leasing our highly amenitized collaborative and sustainable office and studio space, we continue to see strong traffic and elevated interest in many of our properties. With nearly $1 billion of liquidity and 93% of our debt fixed or hedged, our balance sheet is well-positioned to support our ongoing leasing and development efforts as we continue to forge ahead and build long-term shareholder value."

Financial Results Compared to Third Quarter 2021

  • Total revenue increased 14.4% to $260.4 million
  • Net loss attributable to common stockholders of $17.3 million, or $0.12 per diluted share, compared to net loss of $9.3 million, or $0.06 per diluted share
  • FFO, excluding specified items, of $74.1 million, or $0.52 per diluted share, compared to $77.3 million, or $0.50 per diluted share. Specified items consist of transaction-related expenses of $9.3 million, or $0.07 per diluted share, and a one-time property tax expense of $0.4 million, or $0.00 per diluted share, compared to transaction-related expenses of $6.3 million, or $0.04 per diluted share and a one-time debt extinguishment cost of $3.2 million, or $0.02 per diluted share, offset by a one-time, prior-period property tax reimbursement of $1.3 million, or $0.01 per diluted share
  • FFO of $64.4 million, or $0.45 per diluted share, compared to $69.1 million, or $0.45 per diluted share
  • AFFO of $55.8 million, or $0.39 per diluted share, compared to $68.5 million, or $0.44 per diluted share
  • Same-store property cash NOI of $122.7 million compared to $125.2 million

Leasing

  • Executed 65 new and renewal leases totaling 381,364 square feet
  • GAAP and cash rents increased 8.7% and 3.4%, respectively, from prior levels
  • In-service office portfolio ended the quarter at 87.8% occupied and 89.3% leased
  • Same-store studio portfolio was 84.4% occupied and leased over the trailing 12-months

Development

  • Tenant improvements ongoing at fully leased 590,000-square-foot One Westside and 130,000-square-foot Harlow office (re)development projects with GAAP rents commenced and stabilization anticipated in the second quarter 2023 and fourth quarter 2022, respectively
  • Under-construction projects include Sunset Glenoaks, a 7-stage, 241,000-square-foot studio in Los Angeles delivering in second half of 2023, and Washington 1000, a 546,000-square-foot office development in Seattle delivering in 2024

Acquisitions/Dispositions

  • Acquired Quixote, a leading provider of sound stages and production services, for $360 million before closing adjustments
  • Sold office properties Northview Center in Lynnwood, Washington and Del Amo in Torrance, California, generating a total of $48.8 million of proceeds before closing adjustments
  • Subsequent to the quarter, sold 6922 Hollywood office property in Hollywood, California for $96.0 million before closing adjustments

Capital Markets

  • Completed public offering of $350.0 million of senior unsecured green bonds at 5.950% due February 2028

Balance Sheet as of September 30, 2022

  • $866.7 million of total liquidity comprised of $161.7 million of unrestricted cash and cash equivalents and $705.0 million of undrawn capacity under the unsecured revolving credit facility
  • Another $141.5 million and $69.8 million of undrawn capacity under construction loans secured by One Westside/10850 Pico and Sunset Glenoaks, respectively
  • $3.7 billion of Company's share of unsecured and secured debt and preferred units (net of cash and cash equivalents)
  • 91.1% fixed or hedged debt with weighted average maturity of 4.4 years including extensions
  • Subsequent to the quarter, the Company used $85.0 million of 6922 Hollywood sale proceeds to repay amounts outstanding on its unsecured resolving credit facility, resulting in $790.0 million of undrawn capacity, or an increase in total liquidity to $951.7 million with 93.2% fixed or hedged debt

Dividend

  • The Company's Board of Directors declared and paid dividends on its common stock of $0.25 per share, equivalent to an annual rate of $1.00 per share, and on its 4.750% Series C cumulative preferred stock of $0.296875 per share, equivalent to an annual rate of $1.18750 per share

ESG Leadership

  • Subsequent to the quarter, ranked #1 out of 96 companies in Office, Americas peer group for GRESB's 2022 Real Estate Assessment, achieving a Green Star designation and the highest 5-star rating for a fourth consecutive year

2022 Outlook

The Company is narrowing its 2022 full-year FFO guidance to a range of $2.01 to $2.05 per diluted share, excluding specified items, from the prior range of $2.00 to $2.06. Specified items consist of an $8.5 million trade name non-cash impairment, $10.7 million of transaction-related expenses, and a $0.8 million one-time property tax expense identified as excluded items in the Company's year-to-date 2022 FFO.

The FFO outlook 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 and in earlier announcements. It otherwise excludes any impact from new acquisitions, dispositions, debt financings or repayments, recapitalizations, capital markets activity or similar matters. There can be no assurance that actual results will not differ materially from this estimate.

Below are some of the assumptions the Company used in providing this guidance (dollars and share data in thousands):

 

Current Guidance

 

Full Year 2022

Metric

Low

High

FFO per share

$

2.01

 

$

2.05

 

Growth in same-store property cash NOI(1)(2)

 

2.50

%

 

3.50

%

GAAP non-cash revenue (straight-line rent and above/below-market rents)(3)

$

40,000

 

$

50,000

 

GAAP non-cash expense (straight-line rent expense and above/below-market ground rent)

$

(4,500

)

$

(4,500

)

General and administrative expenses(4)

$

(79,000

)

$

(83,000

)

Interest expense(5)

$

(151,500

)

$

(154,500

)

Interest income

$

1,950

 

$

2,050

 

Corporate-related depreciation and amortization

$

(19,900

)

$

(20,100

)

FFO from unconsolidated joint ventures

$

7,000

 

$

8,000

 

FFO attributable to non-controlling interests

$

(69,500

)

$

(73,500

)

FFO attributable to preferred units/shares

$

(21,000

)

$

(21,000

)

Weighted average common stock/units outstanding—diluted(6)

 

146,000

 

 

147,000

 

(1)

Same-store for the full year 2022 is defined as the 42 stabilized office properties and three studio properties owned and included in the portfolio as of January 1, 2021, and anticipated to still be owned and included in the portfolio through December 31, 2022. Same-store property cash NOI growth assumes the expiration (without renewal or backfill in 2022) of all 376,817 square feet leased to Qualcomm at Skyport Plaza as of July 31, 2022. Adjusted for this expiration, full year 2022 same-store property cash NOI growth would be 4.25% - 5.25%.

(2)

Please see non-GAAP information below for definition of cash NOI.

(3)

Includes non-cash straight-line rent associated with the studio and office properties.

(4)

Includes non-cash compensation expense, which the Company estimates at $25,000 in 2022.

(5)

Includes amortization of deferred financing costs and loan discounts/premiums, which the Company estimates at $14,000 in 2022.

(6)

Diluted shares represent ownership in the Company through shares of common stock, OP Units and other convertible or exchangeable instruments. The weighted average fully diluted common stock/units outstanding for 2022 includes an estimate for the dilution impact of stock grants to the Company's executives under its 2020, 2021 and 2022 long-term incentive programs. This estimate is based on the projected award potential of such programs as of the end of the most recently completed quarter, as calculated in accordance with the ASC 260, Earnings Per Share.

The Company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis, including the information under "FFO Guidance" 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, which is the most directly comparable forward-looking GAAP financial measure. This includes, 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 Information

Supplemental financial information regarding Hudson Pacific's third quarter 2022 results may be found on the Investors section of the Company's website at HudsonPacificProperties.com. This supplemental information provides additional detail on items such as property occupancy, financial performance by property and debt maturity schedules.

Conference Call

The Company will hold a conference call to discuss third quarter 2022 financial results at 11:00 a.m. PT / 2:00 p.m. ET on November 3, 2022. Please dial (833) 470-1428 and enter passcode 131380 to access the call. International callers should dial (404) 975-4839 and enter the same passcode. A live, listen-only webcast and replay can be accessed via the Investors section of the Company's website at HudsonPacificProperties.com.

About Hudson Pacific Properties

Hudson Pacific Properties (NYSE: HPP) is a real estate investment trust serving dynamic tech and media tenants in global epicenters for these synergistic, converging and secular growth industries. Hudson Pacific’s unique and high-barrier tech and media focus leverages a full-service, end-to-end value creation platform forged through deep strategic relationships and niche expertise across identifying, acquiring, transforming and developing properties into world-class amenitized, collaborative and sustainable office and studio space. For more information visit HudsonPacificProperties.com.

Forward-Looking Statements

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, which 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, of 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 filed with the Securities and Exchange Commission, or SEC, and other risks described in documents subsequently filed by the Company from time to time with the SEC.

Consolidated Balance Sheets

Unaudited, in thousands, except share data

 

 

September 30, 2022

 

December 31, 2021

 

(Unaudited)

 

 

ASSETS

 

 

 

Investment in real estate, at cost

$

8,656,934

 

 

$

8,361,477

 

Accumulated depreciation and amortization

 

(1,478,250

)

 

 

(1,283,774

)

Investment in real estate, net

 

7,178,684

 

 

 

7,077,703

 

Non-real estate property, plant and equipment, net

 

128,504

 

 

 

58,469

 

Cash and cash equivalents

 

161,667

 

 

 

96,555

 

Restricted cash

 

42,401

 

 

 

100,321

 

Accounts receivable, net

 

19,692

 

 

 

25,339

 

Straight-line rent receivables, net

 

275,518

 

 

 

240,306

 

Deferred leasing costs and intangible assets, net

 

405,434

 

 

 

341,444

 

U.S. Government securities

 

 

 

 

129,321

 

Operating lease right-of-use assets

 

399,570

 

 

 

287,041

 

Prepaid expenses and other assets, net

 

106,640

 

 

 

119,000

 

Investment in unconsolidated real estate entities

 

154,144

 

 

 

154,731

 

Goodwill

 

261,139

 

 

 

109,439

 

Assets associated with real estate held for sale

 

187,026

 

 

 

250,520

 

TOTAL ASSETS

$

9,320,419

 

 

$

8,990,189

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Liabilities

 

 

 

Unsecured and secured debt, net

$

4,449,316

 

 

$

3,733,903

 

In-substance defeased debt

 

 

 

 

128,212

 

Joint venture partner debt

 

66,136

 

 

 

66,136

 

Accounts payable, accrued liabilities and other

 

355,545

 

 

 

300,959

 

Operating lease liabilities

 

396,412

 

 

 

293,596

 

Intangible liabilities, net

 

35,758

 

 

 

42,290

 

Security deposits, prepaid rent and other

 

87,049

 

 

 

84,939

 

Liabilities associated with real estate held for sale

 

2,475

 

 

 

3,898

 

Total liabilities

 

5,392,691

 

 

 

4,653,933

 

 

 

 

 

Redeemable preferred units of the operating partnership

 

9,815

 

 

 

9,815

 

Redeemable non-controlling interest in consolidated real estate entities

 

125,583

 

 

 

129,449

 

 

 

 

 

Equity

 

 

 

Hudson Pacific Properties, Inc. stockholders' equity:

 

 

 

Preferred stock, $0.01 par value, 18,400,000 authorized at September 30, 2022 and December 31, 2021; 4.750% Series C cumulative redeemable preferred stock; $25.00 per share liquidation preference, 17,000,000 outstanding at September 30, 2022 and December 31, 2021

 

425,000

 

 

 

425,000

 

Common stock, $0.01 par value, 481,600,000 authorized, 140,923,320 shares and 151,124,543 shares outstanding at September 30, 2022 and December 31, 2021, respectively

 

1,408

 

 

 

1,511

 

Additional paid-in capital

 

2,935,448

 

 

 

3,317,072

 

Accumulated other comprehensive loss

 

(17,066

)

 

 

(1,761

)

Total Hudson Pacific Properties, Inc. stockholders' equity

 

3,344,790

 

 

 

3,741,822

 

Non-controlling interest—members in consolidated real estate entities

 

384,724

 

 

 

402,971

 

Non-controlling interest—units in the operating partnership

 

62,816

 

 

 

52,199

 

Total equity

 

3,792,330

 

 

 

4,196,992

 

TOTAL LIABILITIES AND EQUITY

$

9,320,419

 

 

$

8,990,189

 

Consolidated Statements of Operations

Unaudited, in thousands, except share data

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

REVENUES

 

 

 

 

 

 

 

Office

 

 

 

 

 

 

 

Rental

$

208,779

 

 

$

197,941

 

 

$

626,807

 

 

$

580,354

 

Service and other revenues

 

4,712

 

 

 

3,925

 

 

 

14,328

 

 

 

9,358

 

Total office revenues

 

213,491

 

 

 

201,866

 

 

 

641,135

 

 

 

589,712

 

Studio

 

 

 

 

 

 

 

Rental

 

15,305

 

 

 

12,768

 

 

 

42,137

 

 

 

36,472

 

Service and other revenues

 

31,558

 

 

 

12,998

 

 

 

73,025

 

 

 

30,169

 

Total studio revenues

 

46,863

 

 

 

25,766

 

 

 

115,162

 

 

 

66,641

 

Total revenues

 

260,354

 

 

 

227,632

 

 

 

756,297

 

 

 

656,353

 

OPERATING EXPENSES

 

 

 

 

 

 

 

Office operating expenses

 

78,340

 

 

 

71,865

 

 

 

230,529

 

 

 

207,538

 

Studio operating expenses

 

26,688

 

 

 

12,044

 

 

 

66,357

 

 

 

35,963

 

General and administrative

 

19,795

 

 

 

18,288

 

 

 

62,178

 

 

 

53,846

 

Depreciation and amortization

 

93,070

 

 

 

88,568

 

 

 

276,701

 

 

 

255,507

 

Total operating expenses

 

217,893

 

 

 

190,765

 

 

 

635,765

 

 

 

552,854

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

(Loss) income from unconsolidated real estate entities

 

(352

)

 

 

566

 

 

 

1,731

 

 

 

1,671

 

Fee income

 

911

 

 

 

678

 

 

 

3,122

 

 

 

2,323

 

Interest expense

 

(37,261

)

 

 

(30,825

)

 

 

(101,816

)

 

 

(91,800

)

Interest income

 

196

 

 

 

934

 

 

 

2,026

 

 

 

2,868

 

Management services reimbursement income—unconsolidated real estate entities

 

983

 

 

 

253

 

 

 

3,159

 

 

 

879

 

Management services expense—unconsolidated real estate entities

 

(983

)

 

 

(253

)

 

 

(3,159

)

 

 

(879

)

Transaction-related expenses

 

(9,331

)

 

 

(6,300

)

 

 

(10,713

)

 

 

(7,364

)

Unrealized (loss) gain on non-real estate investments

 

(894

)

 

 

827

 

 

 

(1,062

)

 

 

11,620

 

Loss on sale of real estate

 

(180

)

 

 

 

 

 

(180

)

 

 

 

Impairment loss

 

(4,795

)

 

 

(2,762

)

 

 

(28,548

)

 

 

(2,762

)

Loss on extinguishment of debt

 

 

 

 

(6,249

)

 

 

 

 

 

(6,249

)

Other income (expense)

 

2,453

 

 

 

82

 

 

 

4,047

 

 

 

(1,547

)

Total other expenses

 

(49,253

)

 

 

(43,049

)

 

 

(131,393

)

 

 

(91,240

)

Net (loss) income

 

(6,792

)

 

 

(6,182

)

 

(10,861

)

 

 

12,259

 

Net income attributable to Series A preferred units

 

(153

)

 

 

(153

)

 

 

(459

)

 

 

(459

)

Net income attributable to Series C preferred shares

 

(5,047

)

 

 

 

 

 

(15,384

)

 

 

 

Net income attributable to participating securities

 

(300

)

 

 

(276

)

 

 

(894

)

 

 

(830

)

Net income attributable to non-controlling interest in consolidated real estate entities

 

(6,256

)

 

 

(3,585

)

 

 

(21,898

)

 

 

(15,764

)

Net loss attributable to redeemable non-controlling interest in consolidated real estate entities

 

1,037

 

 

 

816

 

 

 

4,433

 

 

 

2,780

 

Net loss attributable to common units in the operating partnership

 

225

 

 

 

85

 

 

 

548

 

 

 

16

 

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS

$

(17,286

)

 

$

(9,295

)

 

$

(44,515

)

 

$

(1,998

)

 

 

 

 

 

 

 

 

BASIC AND DILUTED PER SHARE AMOUNTS

 

 

 

 

 

 

 

Net loss attributable to common stockholders—basic

$

(0.12

)

 

$

(0.06

)

 

$

(0.31

)

 

$

(0.01

)

Net loss attributable to common stockholders—diluted

$

(0.12

)

 

$

(0.06

)

 

$

(0.31

)

 

$

(0.01

)

Weighted average shares of common stock outstanding—basic

 

141,117,194

 

 

 

152,320,252

 

 

 

144,677,652

 

 

 

151,443,305

 

Weighted average shares of common stock outstanding—diluted

 

141,117,194

 

 

 

152,320,252

 

 

 

144,677,652

 

 

 

151,443,305

 

Funds From Operations

Unaudited, in thousands, except per share data

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

RECONCILIATION OF NET (LOSS) INCOME TO FUNDS FROM OPERATIONS (FFO)(1):

 

 

 

 

 

 

 

Net (loss) income

$

(6,792

)

 

$

(6,182

)

 

$

(10,861

)

 

$

12,259

 

Adjustments:

 

 

 

 

 

 

 

Depreciation and amortization—Consolidated

 

93,070

 

 

 

88,568

 

 

 

276,701

 

 

 

255,507

 

Depreciation and amortization—Non-real estate assets

 

(5,541

)

 

 

(2,221

)

 

 

(14,458

)

 

 

(3,388

)

Depreciation and amortization—Company's share from unconsolidated real estate entities

 

1,278

 

 

 

1,462

 

 

 

3,967

 

 

 

4,523

 

Loss on sale of real estate

 

180

 

 

 

 

 

 

180

 

 

 

 

Impairment loss—Real estate assets

 

4,795

 

 

 

2,762

 

 

 

20,048

 

 

 

2,762

 

Unrealized loss (gain) on non-real estate investments

 

894

 

 

 

(827

)

 

 

1,062

 

 

 

(11,620

)

Tax impact of unrealized gain on non-real estate investment

 

 

 

 

 

 

 

 

 

 

1,876

 

FFO attributable to non-controlling interests

 

(18,261

)

 

 

(14,288

)

 

 

(56,934

)

 

 

(46,731

)

FFO attributable to preferred shares and units

 

(5,200

)

 

 

(153

)

 

 

(15,843

)

 

 

(459

)

FFO to common stockholders and unitholders

 

64,423

 

 

 

69,121

 

 

 

203,862

 

 

 

214,729

 

Specified items impacting FFO:

 

 

 

 

 

 

 

Transaction-related expenses

 

9,331

 

 

 

6,300

 

 

 

10,713

 

 

 

7,364

 

One-time prior period net property tax adjustment—Company’s share

 

366

 

 

 

(1,346

)

 

 

786

 

 

 

26

 

Impairment loss—Trade name

 

 

 

 

 

 

 

8,500

 

 

 

 

One-time debt extinguishment cost—Company's share

 

 

 

 

3,187

 

 

 

 

 

 

3,187

 

FFO (excluding specified items) to common stockholders and unitholders

$

74,120

 

 

$

77,262

 

 

$

223,861

 

 

$

225,306

 

 

 

 

 

 

 

 

 

Weighted average common stock/units outstanding—diluted

 

143,158

 

 

 

154,027

 

 

 

147,068

 

 

 

153,379

 

FFO per common stock/unit—diluted

$

0.45

 

 

$

0.45

 

 

$

1.39

 

 

$

1.40

 

FFO (excluding specified items) per common stock/unit—diluted

$

0.52

 

 

$

0.50

 

 

$

1.52

 

 

$

1.47

 

  1. Hudson Pacific calculates FFO in accordance with the White Paper on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). The White Paper defines FFO as net income or loss calculated in accordance with generally accepted accounting principles in the United States (“GAAP”), excluding gains and losses from sales of depreciable real estate and impairment write-downs associated with depreciable real estate, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), adjusting for consolidated and unconsolidated joint ventures. The calculation of FFO includes amortization of deferred revenue related to tenant-funded tenant improvements and excludes the depreciation of the related tenant improvement assets. Hudson Pacific believes that FFO is a useful supplemental measure of its operating performance. The exclusion from FFO of gains and losses from the sale of operating real estate assets allows investors and analysts to readily identify the operating results of the assets that form the core of the Company's activity and assists in comparing those operating results between periods. Also, because FFO is generally recognized as the industry standard for reporting the operations of REITs, it facilitates comparisons of operating performance to other REITs. However, other REITs may use different methodologies to calculate FFO, and accordingly, the Company's FFO may not be comparable to all other REITs. Implicit in historical cost accounting for real estate assets in accordance with GAAP is the assumption that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies using historical cost accounting alone to be insufficient. Because FFO excludes depreciation and amortization of real estate assets, Hudson Pacific believes that FFO along with the required GAAP presentations provides a more complete measurement of the Company's performance relative to its competitors and a more appropriate basis on which to make decisions involving operating, financing and investing activities than the required GAAP presentations alone would provide. Hudson Pacific uses FFO per share to calculate annual cash bonuses for certain employees. However, FFO should not be viewed as an alternative measure of Hudson Pacific's operating performance because it does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company's properties, which are significant economic costs and could materially impact the Company's results from operations.

Net Operating Income

Unaudited, in thousands

 

 

Three Months Ended September 30,

 

 

2022

 

 

 

2021

 

RECONCILIATION OF NET LOSS TO NET OPERATING INCOME (NOI)(1):

 

 

 

Net loss

$

(6,792

)

 

$

(6,182

)

Adjustments:

 

 

 

Loss (income) from unconsolidated real estate entities

 

352

 

 

 

(566

)

Fee income

 

(911

)

 

 

(678

)

Interest expense

 

37,261

 

 

 

30,825

 

Interest income

 

(196

)

 

 

(934

)

Management services reimbursement income—unconsolidated real estate entities

 

(983

)

 

 

(253

)

Management services expense—unconsolidated real estate entities

 

983

 

 

 

253

 

Transaction-related expenses

 

9,331

 

 

 

6,300

 

Unrealized loss (gain) on non-real estate investments

 

894

 

 

 

(827

)

Loss on sale of real estate

 

180

 

 

 

 

Impairment loss

 

4,795

 

 

 

2,762

 

Loss on extinguishment of debt

 

 

 

 

6,249

 

Other income

 

(2,453

)

 

 

(82

)

General and administrative

 

19,795

 

 

 

18,288

 

Depreciation and amortization

 

93,070

 

 

 

88,568

 

NOI

$

155,326

 

 

$

143,723

 

 

 

 

 

NET OPERATING INCOME BREAKDOWN

 

 

 

Same-store office cash revenues

 

179,876

 

 

 

177,820

 

Straight-line rent

 

(3,176

)

 

 

1,787

 

Amortization of above-market and below-market leases, net

 

1,503

 

 

 

2,931

 

Amortization of lease incentive costs

 

(327

)

 

 

(423

)

Same-store office revenues

 

177,876

 

 

 

182,115

 

 

 

 

 

Same-store studios cash revenues

 

21,834

 

 

 

18,070

 

Straight-line rent

 

440

 

 

 

690

 

Amortization of lease incentive costs

 

(9

)

 

 

(9

)

Same-store studio revenues

 

22,265

 

 

 

18,751

 

 

 

 

 

Same-store revenues

 

200,141

 

 

 

200,866

 

 

 

 

 

Same-store office cash expenses

 

65,906

 

 

 

61,765

 

Straight-line rent

 

325

 

 

 

325

 

Non-cash portion of interest expense

 

21

 

 

 

11

 

Amortization of above-market and below-market ground leases, net

 

586

 

 

 

586

 

Same-store office expenses

 

66,838

 

 

 

62,687

 

 

 

 

 

Same-store studio cash expenses

 

13,080

 

 

 

8,878

 

Non-cash portion of interest expense

 

70

 

 

 

80

 

Same-store studio expenses

 

13,150

 

 

 

8,958

 

 

 

 

 

Same-store expenses

 

79,988

 

 

 

71,645

 

 

 

 

 

Same-store net operating income

 

120,153

 

 

 

129,221

 

Non-same-store net operating income

 

35,173

 

 

 

14,502

 

NET OPERATING INCOME

$

155,326

 

 

$

143,723

 

 

 

 

 

SAME-STORE OFFICE NOI DECREASE

 

(7.0

) %

 

 

SAME-STORE OFFICE CASH NOI DECREASE

 

(1.8

) %

 

 

SAME-STORE STUDIO NOI DECREASE

 

(6.9

) %

 

 

SAME-STORE STUDIO CASH NOI DECREASE

 

(4.8

) %

 

 

  1. Hudson Pacific evaluates performance based upon property NOI from continuing operations. NOI is not a measure of operating results or cash flows from operating activities or cash flows as measured by GAAP and should not be considered an alternative to income from continuing operations, as an indication of the Company's performance, or as an alternative to cash flows as a measure of liquidity, or the Company's ability to make distributions. All companies may not calculate NOI in the same manner. Hudson Pacific considers NOI to be a useful performance measure to investors and management because when compared across periods, NOI reflects the revenues and expenses directly associated with owning and operating the Company's properties and the impact to operations from trends in occupancy rates, rental rates and operating costs, providing a perspective not immediately apparent from income from continuing operations. Hudson Pacific calculates NOI as net income (loss) excluding corporate general and administrative expenses, depreciation and amortization, impairments, gains/losses on sales of real estate, interest expense, transaction-related expenses and other non-operating items. Hudson Pacific defines NOI as operating revenues (including rental revenues, other property-related revenue, tenant recoveries and other operating revenues), less property-level operating expenses (which includes external management fees, if any, and property-level general and administrative expenses). NOI on a cash basis is NOI adjusted to exclude the effect of straight-line rent and other non-cash adjustments required by GAAP. Hudson Pacific believes NOI on a cash basis is helpful to investors as an additional measure of operating performance because it eliminates straight-line rent and other non-cash adjustments to revenue and expenses.

 

Investor Contact Laura Campbell Executive Vice President, Investor Relations & Marketing (310) 622-1702 lcampbell@hudsonppi.com

Media Contact Laura Murray Senior Director, Communications (310) 622-1781 lmurray@hudsonppi.com

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