Hudson Pacific Properties Inc

Previous wording

As of March 31, 2024, our in-service office portfolio was 80.5% leased (including leases not yet commenced). Our same-store studio properties were 76.9% leased for the average percent leased for the 12 months ended March 31, 2024.

Current wording

As of June 30, 2024, our in-service office portfolio was 80.0% leased (including leases not yet commenced). Our same-store studio properties were 76.1% leased for the average percent leased for the 12 months ended June 30, 2024.

Previous wording

We had no business acquisitions during the three months ended March 31, 2024.

Current wording

We had no business acquisitions during the six months ended June 30, 2024.

Previous wording

We had no property acquisitions during the three months ended March 31, 2024.

Current wording

We had no property acquisitions during the six months ended June 30, 2024.

Previous wording

We had no property dispositions during the three months ended March 31, 2024.

Current wording

We had no property dispositions during the six months ended June 30, 2024.

Previous wording

Under Construction and Future Development Projects

Current wording

In Process and Future Development Projects

Previous wording

We own 50% of the ownership interests in the unconsolidated joint venture that owns Sunset Glenoaks Studios.

Current wording

We own 50% of the ownership interests in the consolidated joint venture that owns Sunset Glenoaks Studios.

Previous wording

Does not include 25 month-to-month leases.

Current wording

Does not include 24 month-to-month leases.

Previous wording

During the three months ended March 31, 2024, there were $88.0 million of borrowings on the unsecured revolving credit facility, net of repayments. The Company generally uses the unsecured revolving credit facility to finance the acquisition of properties and businesses, to provide funds for tenant improvements and capital expenditures and to provide for working capital and other corporate purposes.

Current wording

During the six months ended June 30, 2024, there were $80.0 million of borrowings on the unsecured revolving credit facility, net of repayments. The Company generally uses the unsecured revolving credit facility to finance the acquisition of properties and businesses, to provide funds for tenant improvements and capital expenditures and to provide for working capital and other corporate purposes.

Previous wording

For the three months ended March 31, 2024, the Company recorded net loss of $53.4 million compared to net loss of $14.8 million for the three months ended March 31, 2023. The reasons for the change are discussed below with respect to the decrease in net operating income for the same period.

Current wording

For the three months ended June 30, 2024, the Company recorded net loss of $47.6 million compared to $31.5 million for the three months ended June 30, 2023. The reasons for the change are discussed below with respect to the decrease in net operating income for the same period.

Previous wording

NOI decreased $37.0 million, or 26.2%, for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily resulting from:

Current wording

NOI decreased $29.0 million, or 21.7%, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily resulting from:

Previous wording

•a decrease in office NOI of $13.5 million primarily resulting from the sales of our One Westside property in December 2023 and 604 Arizona and 3401 Exposition in August 2023; and

Current wording

•a decrease in office NOI of $14.4 million primarily resulting from the sales of our One Westside and Westside Two properties in December 2023 and 604 Arizona and 3401 Exposition in August 2023, partially offset by an increase due to new leases commencing at our Metro Center property during the first half of 2024; partially offset by

Previous wording

•a $1.3 million increase in operating expenses, predominantly due to higher property and casualty insurance renewal premiums and higher tax expenses at several properties.

Current wording

•a $1.2 million increase in operating expenses predominantly due to higher tax and utility expenses at several properties in 2024.

Previous wording

Loss from unconsolidated real estate entities remained flat at $0.7 million for the three months ended March 31, 2024 compared to $0.7 million for the three months ended March 31, 2023.

Current wording

We recorded a $2.5 million loss from unconsolidated real estate entities for the three months ended June 30, 2024 compared to $0.7 million for the three months ended June 30, 2023. The change was primarily driven by higher interest expense at the unconsolidated entities due to an increase in the average reference rates for variable rate debt.

Previous wording

We recognized fee income of $1.1 million for the three months ended March 31, 2024 compared to $2.4 million for the three months ended March 31, 2023. Fee income represents the management fee income earned from our unconsolidated real estate entities.

Current wording

We recognized fee income of $1.4 million for the three months ended June 30, 2024 compared to $2.3 million for the three months ended June 30, 2023. Fee income represents the management fee income earned from our unconsolidated real estate entities. The primary reason for the decrease in fee income is due to less construction activity at Sunset Waltham Cross during the three months ended June 30, 2024.

Previous wording

Gross interest expense decreased by $2.6 million, or 5.0%, to $50.7 million for the three months ended March 31, 2024 compared to $53.3 million for the three months ended March 31, 2023. The decrease was primarily driven by a repayment of the One Westside & Westside Two construction loan in December 2023, decreases in the average outstanding borrowings on the Company’s unsecured revolving credit facility and a repayment of the Quixote seller note in April 2023 and Series E notes in September 2023.

Current wording

Gross interest expense decreased by $1.3 million, or 2.5%, to $53.1 million for the three months ended June 30, 2024 compared to $54.4 million for the three months ended June 30, 2023. The decrease was primarily driven by a repayment of the One Westside & Westside Two construction loan in December 2023, a decrease in the average outstanding borrowings on the Company’s unsecured revolving credit facility and repayments of the Quixote seller note in April 2023 and Series E notes in September 2023.

Previous wording

Capitalized interest increased by $1.6 million, or 23.6%, to $8.5 million for the three months ended March 31, 2024 compared to $6.9 million for the three months ended March 31, 2023. The increase was primarily driven by development activity at Washington 1000 and interest capitalized on our unconsolidated investment in the Sunset Glenoaks Studios development. An increase in the average reference rates for the Company’s variable rate debt also contributed to the increase. The increase was partially offset by a reduction in capitalized interest due to the sale of the Westside Two property in December 2023.

Current wording

Capitalized interest increased by $3.6 million, or 49.3%, to $10.9 million for the three months ended June 30, 2024 compared to $7.3 million for the three months ended June 30, 2023. The increase was primarily driven by development activity at Washington 1000 and Sunset Glenoaks and Sunset Pier 94 Studios. An increase in the average reference rates for the Company’s variable rate debt also contributed to the increase. The increase was partially offset by a reduction in capitalized interest due to the sale of the Westside Two property in December 2023.

Previous wording

Non-cash interest expense decreased by $5.5 million, or 74.0%, to $1.9 million of expense for the three months ended March 31, 2024 compared to $7.4 million of income for the three months ended March 31, 2023. The decrease was primarily driven by the amortization of mark-to-market gains related to the interest rate cap on our Hollywood Media Portfolio loan during the three months ended March 31, 2023. The cap expired in August 2023 and was accounted for under the mark-to-market approach until it was designated as a cash flow hedge in December 2022. Additionally, there was a decrease in deferred financing cost amortization due to the deferred financing costs related to the Hollywood Media Portfolio debt being fully amortized as of August 2023 and the write-off of the deferred financing costs related to the One Westside & Westside Two construction loan in December 2023.

Current wording

Non-cash interest expense decreased by $5.5 million, or 73.5%, to $2.0 million for the three months ended June 30, 2024 compared to $7.5 million for the three months ended June 30, 2023. The decrease was primarily driven by the amortization of mark-to-market gains related to the interest rate cap on our Hollywood Media Portfolio loan during the three months ended June 30, 2023. The cap expired in August 2023 and was accounted for under the mark-to-market approach until it was designated as a cash flow hedge in December 2022. Additionally, there was a decrease in deferred financing cost amortization due to the deferred financing costs related to the Hollywood Media Portfolio debt being fully amortized as of August 2023 and the write-off of the deferred financing costs related to the One Westside & Westside Two construction loan in December 2023.

Previous wording

Interest income increased by $0.5 million, or 130.2%, to $0.9 million for the three months ended March 31, 2024 compared to $0.4 million for the three months ended March 31, 2023. The increase was primarily driven by an increase in interest earned on cash deposits in interest-bearing accounts.

Current wording

Interest income increased by $0.3 million, or 145.3%, to $0.6 million for the three months ended June 30, 2024 compared to $0.2 million for the three months ended June 30, 2023. The increase was primarily driven by an increase in interest earned on cash deposits in interest-bearing accounts.

Previous wording

We recognized an unrealized loss on non-real estate investments of $0.9 million for the three months ended March 31, 2024 compared to an unrealized gain of $0.8 million for the three months ended March 31, 2023. The activity in both periods is due to the observable changes in the fair value of the investments.

Current wording

We recognized an unrealized loss on non-real estate investments of $1.0 million for the three months ended June 30, 2024 compared to an unrealized loss of $0.8 million for the three months ended June 30, 2023, which were due to the observable changes in the fair value of the investments.

Previous wording

During the three months ended March 31, 2024, we recognized other income of $0.1 million. During the three months ended March 31, 2023, we recognized other income of $5.2 million predominantly related to an income tax benefit recorded in the first quarter of 2023 related to the studio service-related businesses.

Current wording

During the three months ended June 30, 2024, we recognized other income of $1.3 million. During the three months ended June 30, 2023, we recognized other income of $0.1 million. This increase was primarily driven by the sale of a non-real estate investment during the three months ended June 30, 2024.

Previous wording

General and administrative expenses increased by $1.0 million, or 5.3%, to $19.7 million for the three months ended March 31, 2024 compared to $18.7 million for the three months ended March 31, 2023. The increase was primarily driven by an increase in non-cash executive compensation expense and information technology-related expenses, partially offset by a decrease in the payroll and bonus expenses during the three months ended March 31, 2024.

Current wording

General and administrative expenses increased by $1.8 million, or 9.3%, to $20.7 million for the three months ended June 30, 2024 compared to $18.9 million for the three months ended June 30, 2023. The increase was primarily driven by an increase in non-cash compensation, salaries and wages, bonuses and information technology-related expenses, as well as lower capitalization of expenses during the three months ended June 30, 2024 as compared to the prior period. The increase was partially offset by lower professional fees expense during the three months ended June 30, 2024.

Previous wording

Depreciation and amortization expense decreased by $5.3 million, or 5.4%, to $91.9 million for the three months ended March 31, 2024 compared to $97.1 million for the three months ended March 31, 2023. The decrease was primarily related to the sales of our One Westside and Westside Two properties in December 2023 and 604 Arizona and 3401 Exposition in August 2023.

Current wording

Depreciation and amortization expense decreased by $12.1 million, or 12.3%, to $86.8 million for the three months ended June 30, 2024 compared to $98.9 million for the three months ended June 30, 2023. The decrease was primarily related to the sales of our One Westside and Westside Two properties in December 2023 and 604 Arizona and 3401 Exposition in August 2023.

Previous wording

•a decrease in studio NOI of $3.9 million driven by a residual impact of the Writers Guild of America strike and the Screen Actors Guild - American Federation of Television and Radio Artists strike.

Current wording

•a decrease in studio NOI of $2.8 million driven by residual impact from the Writers Guild of America strike and the Screen Actors Guild - American Federation of Television and Radio Artists strike.

Previous wording

•a $19.6 million decrease in same-store NOI driven by:

Current wording

•a $35.4 million decrease in same-store NOI driven by:

Previous wording

•a decrease in studio NOI of $2.6 million primarily due to a lease expiration at Sunset Las Palmas Studios and the strikes mentioned above.

Current wording

•a decrease in studio NOI of $3.0 million primarily due to a lease expiration at our Sunset Las Palmas Studios partially offset by increased production activity at our Sunset Gower Studios during the six months ended June 30, 2024.

Previous wording

Transaction-related expenses increased by $1.0 million, or 81.3%, to $2.2 million for the three months ended March 31, 2024 compared to $1.2 million for the three months ended March 31, 2023. The increase was primarily related to dead deal costs incurred during the three months ended March 31, 2024.

Current wording

Transaction-related expenses increased $3.4 million, or 251.6%, to $2.0 million of expense for the six months ended June 30, 2024 compared to $1.3 million of income for the six months ended June 30, 2023. The increase was primarily related to dead deal costs incurred during the six months ended June 30, 2024 and the remeasurement of the Zio earnout liability to fair value during the six months ended June 30, 2023.

Previous wording

During the three months ended March 31, 2023, we recognized a $7.0 million gain on the sale of our Skyway Landing property. No gain or loss on sale was recognized during the three months ended March 31, 2024.

Current wording

During the six months ended June 30, 2023, we recognized a $7.0 million gain on the sale of our Skyway Landing property. No gain or loss on sale was recognized during the six months ended June 30, 2024.

Previous wording

We had approximately $114.3 million of cash and cash equivalents at March 31, 2024. Our principal source of operating cash flow is related to leasing and operating the properties in our portfolio. Our properties provide a relatively consistent stream of cash flow that provides us with resources to pay operating expenses, debt service and fund quarterly dividend and distribution requirements.

Current wording

We had approximately $78.5 million of cash and cash equivalents at June 30, 2024. Our principal source of operating cash flow is related to leasing and operating the properties in our portfolio. Our properties provide a relatively consistent stream of cash flow that provides us with resources to pay operating expenses, debt service and fund quarterly dividend and distribution requirements.

Previous wording

This loan is held by an unconsolidated joint venture. Amounts are presented at HPP’s share.

Current wording

This loan is held by an unconsolidated joint venture.

Previous wording

Our ability to incur additional debt will be dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. If we incur additional debt, the risks associated with our leverage, including our ability to service our debt, would increase. In addition, our ability to incur additional debt may be affected by our senior unsecured debt ratings as provided by the major credit rating agencies in the United States. Certain of the major U.S. credit rating agencies have previously downgraded our senior unsecured debt rating to non-investment grade. These and any further ratings downgrades could adversely impact our ability to access debt markets in the future and increase the cost of future debt. As of March 31, 2024, the credit ratings for our senior unsecured debt were Ba1, BB and BBB- from Moody’s, Standard and Poor’s and Fitch, respectively.

Current wording

Our ability to incur additional debt will be dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. If we incur additional debt, the risks associated with our leverage, including our ability to service our debt, would increase. In addition, our ability to incur additional debt may be affected by our senior unsecured debt ratings as provided by the major credit rating agencies in the United States. Certain of the major U.S. credit rating agencies have previously downgraded our senior unsecured debt rating to non-investment grade. These and any further ratings downgrades could adversely impact our ability to access debt markets in the future and increase the cost of future debt. As of June 30, 2024, the credit ratings for our senior unsecured debt were Ba3, BB and BB- from Moody’s, Standard and Poor’s and Fitch, respectively.

Previous wording

Equity capitalization represents the shares of common stock outstanding (including unvested restricted shares), OP and LTIP units outstanding, restricted performance units and dilutive shares multiplied by the closing price of $6.45, as reported by the NYSE, on March 28, 2024 as well as the aggregate value of the Series C preferred stock liquidation preference as of March 31, 2024.

Current wording

Equity capitalization represents the shares of common stock outstanding (including unvested restricted shares), OP and LTIP units outstanding, restricted performance units and dilutive shares multiplied by the closing price of $4.81, as reported by the NYSE, on June 28, 2024 as well as the aggregate value of the Series C preferred stock liquidation preference as of June 30, 2024.

Previous wording

During the three months ended March 31, 2024, there were no material changes outside the ordinary course of business in the information regarding specified contractual obligations contained in our 2023 Annual Report on Form 10-K. See Part I, Item 1 “Note 9 to the Consolidated Financial Statements—Debt” for information regarding our future minimum principal payments due on our outstanding debt. See Part I, Item 1 “Note 12 to the Consolidated Financial Statements—Future Minimum Rents and Lease Payments” for information regarding our future minimum operating lease payments. See Part I, Item 1 “Note 20 to the Consolidated Financial Statements—Commitments and Contingencies” for more detail.

Current wording

During the six months ended June 30, 2024, there were no material changes outside the ordinary course of business in the information regarding specified contractual obligations contained in our 2023 Annual Report on Form 10-K. See Part I, Item 1 “Note 9 to the Consolidated Financial Statements—Debt” for information regarding our future minimum principal payments due on our outstanding debt. See Part I, Item 1 “Note 12 to the Consolidated Financial Statements—Future Minimum Rents and Lease Payments” for information regarding our future minimum operating lease payments. See Part I, Item 1 “Note 20 to the Consolidated Financial Statements—Commitments and Contingencies” for more detail.

Previous wording

Comparison of the cash flow activity for the three months ended March 31, 2023 is as follows (in thousands, except percentage change):

Current wording

Comparison of the cash flow activity for the six months ended June 30, 2023 is as follows (in thousands, except percentage change):

Previous wording

Cash and cash equivalents and restricted cash were $133.6 million and $119.2 million at March 31, 2024 and December 31, 2023, respectively.

Current wording

Cash and cash equivalents and restricted cash were $99.9 million and $119.2 million at June 30, 2024 and December 31, 2023, respectively.

Previous wording

Net cash provided by operating activities decreased by $27.4 million, or 29.6%, to $65.1 million for the three months ended March 31, 2024 compared to $92.5 million for the three months ended March 31, 2023. The decrease primarily resulted from the property dispositions during the year ended December 31, 2023 and a large known move-out at our 1455 Market property.

Current wording

Net cash provided by operating activities decreased by $50.9 million, or 33.6%, to $100.8 million for the six months ended June 30, 2024 compared to $151.7 million for the six months ended June 30, 2023. The decrease primarily resulted from the property dispositions during the year ended December 31, 2023 and a large known move-out at our 1455 Market property.

Previous wording

Net cash used in investing activities increased by $81.9 million, or 779.7%, to $71.4 million used in investing activities for the three months ended March 31, 2024 compared to $10.5 million provided by investing activities for the three months ended March 31, 2023. The change primarily resulted from $100.4 million of proceeds from sales of real estate during the three months ended March 31, 2023. There were no sales of real estate during the three months ended March 31, 2024. The change was partially offset by a $31.6 million lower additions to investment in real estate during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

Current wording

Net cash used in investing activities increased by $27.6 million, or 29.6%, to $121.0 million for the six months ended June 30, 2024 compared to $93.4 million for the six months ended June 30, 2023. The change primarily resulted from $100.4 million of proceeds from sales of real estate during the six months ended June 30, 2023. There were no sales of real estate during the six months ended June 30, 2024. The change was partially offset by $67.9 million lower additions to investment in real estate during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Previous wording

Net cash provided by financing activities increased $226.5 million, or 110.0%, to $20.6 million provided by financing activities for the three months ended March 31, 2024 compared to $205.8 million used in financing activities for the three months ended March 31, 2023. The change primarily resulted from $202.0 million lower payments of unsecured and secured debt, $42.2 million higher proceeds from unsecured and secured debt and $28.8 million lower dividends paid to common stock and unitholders during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The change was partially offset by $40.9 million spent to purchase our partner’s interest in the 1455 Market property during the three months ended March 31, 2024.

Current wording

Net cash provided by financing activities increased $217.3 million, or 100.5%, to $1.1 million provided by financing activities for the six months ended June 30, 2024 compared to $216.2 million used in financing activities for the six months ended June 30, 2023. The change primarily resulted from $354.0 million lower payments of unsecured and secured debt, $39.6 million lower dividends paid to common stock and unitholders and $19.7 million lower distributions to non-controlling members in consolidated real estate entities during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The change was partially offset by $151.0 million lower proceeds from unsecured and secured debt and $40.9 million spent to purchase our partner’s interest in the 1455 Market property during the six months ended June 30, 2024.

Previous wording

(3)This loan has an initial interest rate of SOFR + 4.75% per annum until stabilization of the project, at which time the effective interest rate will decrease to SOFR + 4.00%. This loan is interest-only through its term. The maturity date includes the effect of extension options.

Current wording

(2)This loan has an initial interest rate of SOFR + 4.75% per annum until stabilization of the project, at which time the effective interest rate will decrease to SOFR + 4.00%. This loan is interest-only through its term. The maturity date includes the effect of extension options.