Hudson Pacific Properties Reports Third Quarter 2021 Financial Results

Net Loss of $0.06 per Diluted Share

FFO of $0.50 per Diluted Share (Excluding Specified Items)

Same-store office and studio cash NOI increased 10.8% and 45.5%, respectively

Over 318,000 Square Feet of Office Leases Executed

GAAP and cash rent growth of 8.3% and 5.1%, respectively

Stabilized and in-service office portfolios 92.1% and 91.2% leased, respectively

Remaining 2021 office lease expirations just 1.9% of Company's Share of ABR

Completed Multiple Transactions to Grow Studio Platform

Purchased 91-acre London-area studio development site with Blackstone

Unveiled plans for 241,000-square-foot Los Angeles-area studio development with Blackstone

Acquired studio transportation and logistics businesses Star Waggons and Zio Studio Services

Narrowed Full-Year and Provided Q4 2021 FFO Guidance

$1.95 to $1.99 per diluted share (excluding specified items) for full-year

$0.48 to $0.50 per diluted share (excluding specified items) for Q4

Hudson Pacific Properties, Inc. (the "Company" or "Hudson Pacific") (NYSE: HPP) today announced financial results for the third quarter 2021.

Management Comments & Industry Outlook

Victor Coleman, Hudson Pacific Properties' Chairman and CEO, said:

"Hudson Pacific remains very well positioned as we continue to navigate the pandemic and look to a return to office for most of our tenants by year-end or early 2022. Our studio and office tenants continue to pay rent and any deferrals. After completing nearly 320,000 square feet of office leasing this quarter with positive rent spreads, our stabilized office portfolio leased percentage remains north of 92%, and our remaining 2021 expirations equate to less than 2% of our annualized base rent. A further sign of our portfolio's resiliency, we achieved robust double digit same-store office and studio cash NOI growth—nearly 11% and 46%, respectively.

"In addition to office leasing, we have been very focused on the continued expansion of our studio portfolio, and successfully executed on multiple transactions in the third quarter. We announced two new Sunset Studios locations—our Sunset Glenoaks Studios development in the Los Angeles area and our Sunset Waltham Cross Studios development in the UK. We also purchased Star Waggons and Zio Studio Services in two separate transactions, enabling us to provide enhanced services to our studio clients and capture additional on- and off-lot production-related revenue."

Consolidated Financial & Operating Results

For third quarter 2021 compared to third quarter 2020:

• Net loss attributable to common stockholders of $9.3 million, or $0.06 per diluted share, compared to net loss of $5.4 million, or $0.04 per diluted share;
• FFO, excluding specified items, of $77.3 million, or $0.50 per diluted share, compared to $66.0 million, or $0.43 per diluted share;
  • Specified items consisting of transaction-related expenses of $6.3 million, or $0.04 per diluted share, one-time debt extinguishment costs of $3.2 million, or $0.02 per diluted share and a one-time, prior-period supplemental property tax reimbursement related to Sunset Las Palmas of $1.3 million, or $0.01 per diluted share, compared to transaction-related expenses of $0.2 million, or $0.00 per diluted share and one-time debt extinguishment costs of $2.7 million, or $0.02 per diluted share;
• FFO, including specified items, of $69.1 million, or $0.45 per diluted share, compared to $63.2 million, or $0.41 per diluted share;
• Total revenue increased 16.0% to $227.6 million;
• Total operating expenses increased 13.8% to $190.8 million; and
• Interest expense increased 3.3% to $30.8 million.

Office Segment Results

Financial & operating

For third quarter 2021 compared to third quarter 2020:

• Total revenue increased 11.7% to $201.9 million.
• Operating expenses increased 8.8% to $71.9 million.
• Net operating income and cash net operating income for the 45 consolidated same-store office properties increased 5.1% and 10.8%, respectively.

Leasing

• Stabilized and in-service office portfolios were 92.1% and 91.2% leased, respectively; and
• Executed 53 new and renewal leases totaling 318,428 square feet with GAAP and cash rent growth of 8.3% and 5.1%, respectively.

Studio Segment Results

Financial & operating

For third quarter 2021 compared to third quarter 2020:

• Total revenue increased 65.5% to $25.8 million.
• Total operating expenses increased 33.3% to $12.0 million.
• Net operating income and cash net operating income for the three same-store studio properties increased 49.8% and 45.5%, respectively.

Leasing

• Trailing 12-month occupancy for the three same-store studio properties was 87.6%.

Leasing Activity

Executed significant leases across the portfolio

• BrightEdge Technologies, Inc. renewed its 36,542-square-foot lease through August 2024 at Metro Center in Foster City.
• Globallogic renewed its 28,930-square-foot lease through March 2023 at Concourse in San Jose.
• Kramer Levin signed a 27,447-square-foot lease commencing September 2021 through October 2033 at 333 Twin Dolphin in Redwood City.
• Thorsteinssons renewed its 20,904-square-foot lease through February 2025 at Bentall Centre in Downtown Vancouver.

Acquisitions

Purchased London-area studio development site

On July 29, Hudson Pacific and Blackstone acquired a 91-acre site, 17 miles north of central London in Broxbourne, Hertfordshire, through a 35/65 (Hudson Pacific/Blackstone) joint venture for £120 million. The proposed development, which will be known as Sunset Waltham Cross Studios and is subject to planning permission, will transform the site into a world-class film and television studio campus with an expected total investment of approximately £700 million.

Expanded studio production services platform

In separate transactions, on August 16 and 31 respectively, the Company acquired Zio Studio Services and Star Waggons, two industry-leading companies that provide transportation and logistics services to studio productions, for a combined $222 million (before closing adjustments and including an estimated first year earnout payment). Star Waggons and Zio Studio Services collectively comprise a fleet of more than 1,100 luxury location trailers, specialized vehicles and other transportation assets and related equipment.

Development

Announced plans to build Los Angeles-area studio facility

On July 29, Hudson Pacific and Blackstone announced plans to develop through a 50/50 joint venture a fully entitled, state-of-the-art, purpose-built studio facility in Sun Valley, California. The approximately 241,000-square-foot, seven-stage facility, which will be known as Sunset Glenoaks Studios, is expected to start construction in fourth quarter 2021 with delivery in third quarter 2023, and will represent a total $170-190 million investment.

Unveiled plans for hybrid mass timber office development

On September 23, Hudson Pacific submitted plans for approval of a 16-story hybrid mass timber office and retail development at Bentall Centre called Burrard Exchange. Under the proposed plans, approximately 450,000 square feet of office and retail space would be added within the Bentall Centre campus, creating one of the tallest exposed mass timber office buildings in North America on one of the last large development sites in Downtown Vancouver.

Financings

Refinanced Hollywood Media Portfolio

On August 9, the Company refinanced its mortgage loan secured by the Hollywood Media Portfolio. The new loan replaces the prior $900 million loan bearing LIBOR plus 2.15% per annum with a $1.1 billion loan bearing LIBOR plus 1.17%. The new loan has a two-year term from the first payment date, with three one-year extension options, subject to certain requirements, and is non-recourse, except as to customary non-recourse carve-outs. The Company purchased approximately $209.8 million of new loan, which bears interest at a weighted average rate of LIBOR plus 1.55% per annum.

Balance Sheet

As of the end of the third quarter 2021:

• $3.2 billion of the Company's share of unsecured and secured debt and preferred units (net of cash and cash equivalents) resulting in a leverage ratio of 43.2%.
• Approximately $0.6 billion of total liquidity comprised of:
  • $110.5 million of unrestricted cash and cash equivalents;
  • $300.0 million of undrawn capacity under the unsecured revolving credit facility; and
  • $194.4 million of undrawn capacity under the construction loan secured by One Westside and 10850 Pico.
• Investment grade credit rated with 68.1% unsecured and 77.3% fixed-rate debt and a weighted average maturity of 4.6 years.

Dividend

Paid common dividend

• The Company's Board of Directors declared a dividend on its common stock of $0.25 per share, equivalent to an annual rate of $1.00 per share.

Activities Subsequent to Third Quarter 2021

Earned top recognition in 2021 GRESB Assessment

On October 1, Hudson Pacific received top honors in the 2021 Global Real Estate Sustainability Benchmark (GRESB^®) Real Estate Assessment for its ESG accomplishments. In addition to achieving Green Star and highest 5-Star ratings for a third consecutive year, Hudson Pacific was recognized as an Office Sector Leader for the Americas, and ranked first among the 22 companies in this category for the Development Benchmark. The Company also received an "A" Public Disclosure score, ranking first among U.S. office companies.

2021 Outlook

The Company is narrowing 2021 full-year and providing fourth-quarter guidance in the range of $1.95 to $1.99 per diluted share, excluding specified items, and $0.48 to $0.50 per diluted share, excluding specified items, respectively. Specified items for the full year, including those referenced in the Company's second quarter SEC filings and this earnings release, include $7.4 million of transaction-related expenses and $3.2 million of the Company's share of costs associated with the early extinguishment of debt. There are no specified items in connection with fourth quarter guidance.

Note the Company incurred $1.4 million of prior-period supplemental property tax expenses as noted in its first and second quarter SEC filings, nearly all of which was offset by the prior-period supplemental property tax reimbursement of $1.3 million received during the third quarter. As a result, the Company is not identifying a specified item related to prior-period property taxes for purposes of 2021 full-year guidance.

The FFO estimates reflect 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 future unannounced or speculative 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):

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 2021 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 2021 financial results at 11:00 a.m. PT / 2:00 p.m. ET on October 27, 2021. Please dial (844) 200-6205 and enter passcode 811347 to access the call. International callers should dial (929) 526-1599. 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 is a real estate investment trust with a portfolio of office and studio properties totaling over 20 million square feet, including land for development. Focused on global epicenters of innovation, media and technology, its anchor tenants include Fortune 500 and leading growth companies such as Google, Netflix, Riot Games, Square, Uber and more. Hudson Pacific is publicly traded on the NYSE under the symbol HPP and listed as a component of the S&P MidCap 400 Index. 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211026006186/en/