Hudson Pacific Properties Inc

Previous wording

The following discussion relates to our consolidated financial statements and should be read in conjunction with the consolidated financial statements and the related notes, see Part IV, Item 15(a) “Exhibits, Financial Statement Schedules.” Statements in this Item 7 contain forward-looking statements. Such statements are subject to risks, uncertainties and assumptions and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. In particular, information concerning projected future occupancy rates, rental rate increases, property development timing and investment amounts contain forward-looking statements. Furthermore, all of the statements regarding future financial performance (including anticipated funds from operations (“FFO”) market conditions and demographics) are forward-looking statements. Numerous factors will affect our actual results, some of which are beyond our control. These include the strength of commercial and industrial real estate markets, market conditions affecting tenants, competitive market conditions, interest rate levels, volatility in our stock price and capital market conditions. Accordingly, investors should use caution and not place undue reliance on this information, which speaks only as of the date of this report. We expressly disclaim any responsibility to update any forward-looking information, whether as a result of new information, future events, or otherwise, except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws to disclose material information.

Current wording

The following discussion relates to our consolidated financial statements and should be read in conjunction with the consolidated financial statements and the related notes, refer to Part IV, Item 15(a) “Exhibits, Financial Statement Schedules.” Statements in this Item 7 contain forward-looking statements. Such statements are subject to risks, uncertainties and assumptions and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. In particular, information concerning projected future occupancy rates, rental rate increases, property development timing and investment amounts contain forward-looking statements. Furthermore, all of the statements regarding future financial performance (including anticipated funds from operations (“FFO”) market conditions and demographics) are forward-looking statements. Numerous factors will affect our actual results, some of which are beyond our control. These include the strength of commercial and industrial real estate markets, market conditions affecting tenants, competitive market conditions, interest rate levels, volatility in our stock price and capital market conditions. Accordingly, investors should use caution and not place undue reliance on this information, which speaks only as of the date of this report. We expressly disclaim any responsibility to update any forward-looking information, whether as a result of new information, future events, or otherwise, except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws to disclose material information.

Previous wording

For a discussion of important risks related to our business, and related to investing in our securities, including risks that could cause actual results and events to differ materially from results and events referred to in the forward-looking statements see Part I, Item 1A “Risk Factors.” In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur.

Current wording

For a discussion of important risks related to our business, and related to investing in our securities, including risks that could cause actual results and events to differ materially from results and events referred to in the forward-looking statements refer to Part I, Item 1A “Risk Factors.” In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur.

Previous wording

Through our interest in Hudson Pacific Properties, L.P. (our operating partnership) and its subsidiaries, at December 31, 2023, our portfolio of owned real estate included office properties comprising approximately 14.7 million square feet, studio properties comprising approximately 48 sound stages and 1.7 million square feet and land properties comprising approximately 3.2 million square feet of undeveloped density rights. Our production services assets include vehicles, lighting and grip, production supplies and other equipment and the lease rights to 27 sound stages.

Current wording

Through our interest in Hudson Pacific Properties, L.P. (our operating partnership) and its subsidiaries, at December 31, 2024, our portfolio of owned real estate included office properties comprising approximately 14.6 million square feet, studio properties comprising approximately 45 sound stages and 1.7 million square feet and land properties comprising approximately 3.2 million square feet of undeveloped density rights. Our production services assets include vehicles, lighting and grip, production supplies and other equipment and the lease rights to 24 sound stages.

Previous wording

As of December 31, 2023, our in-service office portfolio was 81.9% leased (including leases not yet commenced). Our same-store studio properties average percent leased for the twelve months ended December 31, 2023 was 80.4%.

Current wording

As of December 31, 2024, our in-service office portfolio was 78.9% leased (including leases not yet commenced). Our same-store studio properties average percent leased for the twelve months ended December 31, 2024 was 73.8%.

Previous wording

During the year ended December 31, 2023, the Company sold its Skyway Landing, 604 Arizona, 3401 Exposition, Cloud10 and One Westside and Westside Two properties for $102.0 million, $32.5 million, $40.0 million, $43.5 million and $700 million, respectively. Please refer to Part IV, Item 15 (a) “Exhibits, Financial Statement Schedules—Note 4 to the Consolidated Financial Statements—Investment in Real Estate” for details.

Current wording

During the year ended December 31, 2024, the Company sold its 3176 Porter Drive property for $24.8 million. Please refer to Part IV, Item 15 (a) “Exhibits, Financial Statement Schedules—Note 4 to the Consolidated Financial Statements—Investment in Real Estate” for details.

Previous wording

During the year ended December 31, 2023, there were $193.0 million of repayments on the unsecured revolving credit facility, net of borrowings. 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 year ended December 31, 2024, there were $128.0 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

The amount of net rental revenue generated by the properties in our portfolio depends principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space that becomes available from lease terminations. As of December 31, 2023, the percent leased for our in-service office properties was approximately 81.9% (or 80.8%, excluding leases signed but not commenced as of that date). As of December 31, 2023, the percent leased, based on a 12-month trailing average, was approximately 80.4% for same-store studio properties. The amount of rental revenue generated by us also depends on our ability to maintain or increase rental rates at our properties. We believe that the average rental rates for our office properties are generally below the current average quoted market rate. We believe the average rental rates for our studio properties are generally equal to current average quoted market rates. Negative trends in one or more of these factors could adversely affect our rental revenue in future periods. Future economic downturns or regional downturns affecting our submarkets or downturns in our tenants’ industries that impair our ability to renew or re-let space and the ability of our tenants to fulfill their lease commitments, as in the case of tenant bankruptcies, could adversely affect our ability to maintain or increase rental rates at our properties. In addition, growth in rental revenue will also partially depend on our ability to acquire additional properties that meet our investment criteria.

Current wording

The amount of net rental revenue generated by the properties in our portfolio depends principally on our ability to maintain the occupancy rates of leased space and to lease available space. As of December 31, 2024, the percent leased for our in-service office properties was approximately 78.9% (or 78.3%, excluding leases signed but not commenced as of that date). As of December 31, 2024, the percent leased, based on a 12-month trailing average, was approximately 73.8% for in-service studio properties (excludes Sunset Glenoaks, for which 12-month trailing occupancy data is not yet available). The amount of rental revenue generated by us also depends on our ability to maintain or increase rental rates at our properties. We believe that the average rental rates for our office properties are generally below the current average quoted market rate. We believe the average rental rates for our studio properties are generally equal to current average quoted market rates. Negative trends in one or more of these factors could adversely affect our rental revenue in future periods. Future economic downturns or regional downturns affecting our submarkets or downturns in our tenants’ industries that impair our ability to renew or re-let space and the ability of our tenants to fulfill their lease commitments, as in the case of tenant bankruptcies, could adversely affect our ability to maintain or increase rental rates at our properties. In addition, growth in rental revenue will also partially depend on our ability to acquire additional properties that meet our investment criteria.

Previous wording

We own real estate primarily in California, the Pacific Northwest, Western Canada and Greater London, United Kingdom. We operate our production services business in key US media markets in California, New Mexico, Louisiana, Atlanta and New York. Positive or negative changes in economic or other conditions in any of the markets in which we own real estate and/or operate, including state budgetary shortfalls, employment rates, natural hazards and other factors, may impact our overall performance.

Current wording

We own real estate primarily in California, the Pacific Northwest and Western Canada. We operate our production services business in key US media markets in California, New Mexico, Atlanta and New York. Positive or negative changes in economic or other conditions in any of the markets in which we own real estate and/or operate, including state budgetary shortfalls, employment rates, natural hazards and other factors, may impact our overall performance.

Previous wording

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of commitments and contingencies as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to acquiring, developing and assessing the carrying values of our real estate properties, the fair value measurement of contingent consideration, assets acquired and liabilities assumed in business combination transactions, determining the incremental borrowing rate used in the present value calculations of our new or modified operating lessee agreements, our accrued liabilities, and our performance-based equity compensation awards. We base our estimates on historical experience, current market conditions, and various other assumptions that are believed to be reasonable under the circumstances. Actual results could materially differ from these estimates. The following critical accounting policies discussion reflects what we believe are the most significant estimates, assumptions and judgments used in the preparation of our consolidated financial statements. See Part IV, Item 15(a) “Exhibits, Financial Statement Schedules—Note 2 to the Consolidated Financial Statements—Summary of Significant Accounting Policies” for details on our significant accounting policies.

Current wording

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of commitments and contingencies as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to acquiring, developing and assessing the carrying values of our real estate properties, assets acquired and liabilities assumed in business combination transactions, the fair values of our goodwill and intangible assets, determining the incremental borrowing rate used in the present value calculations of our new or modified operating lessee agreements, our accrued liabilities, and our performance-based equity compensation awards. We base our estimates on historical experience, current market conditions, and various other assumptions that are believed to be reasonable under the circumstances. Actual results could materially differ from these estimates. The following critical accounting policies discussion reflects what we believe are the most significant estimates, assumptions and judgments used in the preparation of our consolidated financial statements. Refer to Part IV, Item 15(a) “Exhibits, Financial Statement Schedules—Note 2 to the Consolidated Financial Statements—Summary of Significant Accounting Policies” for details on our significant accounting policies.

Previous wording

We test our goodwill and indefinite-lived intangible assets for impairment at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. Goodwill is tested for impairment at the reporting unit to which it is assigned, which can be an operating segment or one level below an operating segment. We have three operating segments: the management entity, Office and Studio, each of which is a reporting unit. The Studio reporting unit consists of Zio and Star Waggons businesses acquired during the year ended December 31, 2021 and Quixote business acquired during the year ended December 31, 2022. The assessment of goodwill for impairment may initially be performed based on qualitative factors to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying value, including goodwill. If so, a quantitative assessment is performed, and to the extent the carrying value of the reporting unit exceeds its fair value, impairment is recognized for the excess up to the amount of goodwill assigned to the reporting unit. Alternatively, the Company may bypass a qualitative assessment and proceed directly to a quantitative assessment.

Current wording

We test our goodwill and indefinite-lived intangible assets for impairment at least annually on December 31st, or more frequently if events or changes in circumstances indicate that the asset may be impaired. Goodwill is tested for impairment at the reporting unit to which it is assigned, which can be an operating segment or one level below an operating segment. We have three operating segments: the management entity, Office and Studio. The Studio operating segment consists of two reporting units: Sunset Studios and Quixote. The Quixote reporting unit consists of the Zio and Star Waggons businesses acquired during 2021 and the Quixote business acquired during 2022, which have since been integrated as a single business. The assessment of goodwill for impairment may initially be performed based on qualitative factors to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying value, including goodwill. If so, a quantitative assessment is performed, and to the extent the carrying value of the reporting unit exceeds its fair value, impairment is recognized for the excess up to the amount of goodwill assigned to the reporting unit. Alternatively, the Company may bypass a qualitative assessment and proceed directly to a quantitative assessment.

Previous wording

The recognition of revenues related to lease components is governed by ASC 842. The revenue related to non-lease components is subject to ASC 606, Revenue from Contracts with Customers (“ASC 606”).

Current wording

The recognition of revenues related to lease components is governed by ASC 842, Leases (“ASC 842”). The revenue related to non-lease components is subject to ASC 606, Revenue from Contracts with Customers (“ASC 606”).

Previous wording

Determined by management based upon estimated leasable square feet, which may be less or more than the Building Owners and Managers Association

Current wording

Determined by management based upon estimated leasable square feet, which may be less or more than the Building Owners and Managers Association (“BOMA”) rentable area. Square footage may change over time due to re-measurement or re-leasing. Represents 100% share of consolidated and unconsolidated joint ventures.

Previous wording

See Repositioning table in this document for the office and studio projects under repositioning as of December 31, 2023.

Current wording

Refer to Repositioning table in this document for the office and studio projects under repositioning as of December 31, 2024.

Previous wording

Includes 546,000 square feet related to the office development Washington 1000, 241,000 square feet related to Sunset Glenoaks Studios and 232,000 square feet related to Sunset Pier 94 Studios.

Current wording

Includes 546,000 square feet related to the office development Washington 1000 and 232,000 square feet related to Sunset Pier 94 Studios.

Previous wording

We evaluate performance based upon property net operating income (“NOI”). 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 net income, as an indication of our performance, or as an alternative to cash flows as a measure of liquidity, or our ability to make distributions. All companies may not calculate NOI in the same manner. We consider 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 our properties and the impact to operations from trends in occupancy rates, rental rates and operating costs, providing a perspective not immediately apparent from net income. We calculate 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. We define 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. We believe that 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.

Current wording

We evaluate performance based upon net operating income (“NOI”). 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 net income, as an indication of our performance, or as an alternative to cash flows as a measure of liquidity, or our ability to make distributions. All companies may not calculate NOI in the same manner. We consider 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 our properties and the impact to operations from trends in occupancy rates, rental rates and operating costs, providing a perspective not immediately apparent from net income. We calculate 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. We define 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. We believe that 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.

Previous wording

Management further analyzes NOI by evaluating the performance from the following property groups:

Current wording

Management further analyzes NOI by evaluating the performance from the following groups:

Previous wording

NOI decreased $110.6 million, or 18.1%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily resulting from:

Current wording

NOI decreased $113.8 million, or 22.7%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily resulting from:

Previous wording

•a $36.8 million decrease in same-store NOI driven by:

Current wording

•a $61.3 million decrease in same-store NOI driven by:

Previous wording

•a decrease in office NOI of $13.2 million primarily due to:

Current wording

•a decrease in office NOI of $56.8 million primarily due to:

Previous wording

•an $11.0 million increase in operating expenses, predominantly engineering, cleaning and utilities resulting from a colder winter in 2023, higher insurance premiums and higher repair and maintenance expense, which was partially offset by a prior-period property tax reimbursement at our ICON property.

Current wording

•a $3.8 million increase in operating expenses predominantly driven by a prior-period property tax reimbursement at our ICON property in 2023 and higher engineering, utility, insurance and tax expenses at several properties in 2024.

Previous wording

•a decrease in studio NOI of $6.4 million primarily due to:

Current wording

•a decrease in studio NOI of $4.5 million primarily due to:

Previous wording

•a $73.7 million decrease in non-same-store NOI driven by:

Current wording

•a $52.6 million decrease in non-same-store NOI driven by:

Previous wording

(Loss) income from unconsolidated real estate entities

Current wording

Loss from unconsolidated real estate entities

Previous wording

We recognized a loss from our unconsolidated real estate entities of $3.9 million for the year ended December 31, 2023 compared to $0.9 million of income for the year ended December 31, 2022. 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 and one-time lease termination fees received in 2022.

Current wording

Loss from our unconsolidated real estate entities increased by $3.4 million, or 87.3%, to $7.3 million for the year ended December 31, 2024 compared to $3.9 million for the year ended December 31, 2023. The change was primarily driven by higher interest expense at the unconsolidated entities in 2024 due to an increase in the average reference rates for variable rate debt and a mark-to-market adjustment for an interest rate swap that does not qualify for hedge accounting.

Previous wording

Fee income decreased by $1.8 million, or 22.5%, to $6.2 million for the year ended December 31, 2023 compared to $8.0 million for the year ended December 31, 2022. Fee income represents the management fee income earned from the unconsolidated real estate entities. The decrease is primarily due to a slowdown in construction activity at our unconsolidated Sunset Waltham Cross development in 2023.

Current wording

Fee income decreased by $0.9 million, or 14.8%, to $5.3 million for the year ended December 31, 2024 compared to $6.2 million for the year ended December 31, 2023. Fee income represents the management fee income earned from the unconsolidated real estate entities. The decrease is primarily due to a decrease in construction activity at our unconsolidated Sunset Waltham Cross development, partially offset by an increase in construction activity at our unconsolidated Pier 94 development.

Previous wording

Gross interest expense increased $62.0 million, or 38.1%, to $224.8 million for the year ended December 31, 2023 compared to $162.8 million for the year ended December 31, 2022. The increase was primarily driven by an increase in the average reference rates for the Company’s variable rate debt, increases in the average outstanding borrowings on the Company’s unsecured revolving credit facility and One Westside construction loan and interest incurred on the 5.95% registered senior notes, which were issued in September 2022. The overall increase was partially offset by a decrease in interest expense due to the repayment of the Series A notes in January 2023, Quixote note in April 2023 and Series E notes in September 2023.

Current wording

Gross interest expense decreased by $14.8 million, or 6.6%, to $210.0 million for the year ended December 31, 2024 compared to $224.8 million for the year ended December 31, 2023. The decrease was primarily driven by a repayment of the One Westside and Westside Two construction loan in December 2023, the Quixote seller note in April 2023 and the Series E notes in September 2023, as well as a decrease in the average outstanding borrowings on the Company’s unsecured revolving credit facility. The decrease was partially offset by interest on the loan secured by Sunset Glenoaks Studios, which became a consolidated property as of April 1, 2024.

Previous wording

Non-cash interest expense increased $16.7 million, or 324.3% to $21.9 million for the year ended December 31, 2023 compared to $5.2 million for the year ended December 31, 2022. The increase in non-cash interest expense was due to mark-to- market gains on the Hollywood Media Portfolio interest rate cap in the third quarter of 2022 that did not recur in 2023 as we began applying hedge accounting prospectively from the fourth quarter of 2022. The increase was partially offset by a decrease in deferred financing cost amortization primarily due to the deferred financing costs related to the Hollywood Media Portfolio debt being fully amortized as of August 2023.

Current wording

Non-cash interest expense decreased by $14.1 million, or 64.6% to $7.7 million for the year ended December 31, 2024 compared to $21.9 million for the year ended December 31, 2023. The decrease in non-cash interest expense was primarily due to the amortization of mark-to-market gains related to the interest rate cap on our Hollywood Media Portfolio loan during the year ended December 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 loan and the One Westside and Westside Two construction loan being fully amortized as of August 2023 and December 2023, respectively.

Previous wording

We recorded $1.2 million of income predominantly related to the remeasurement of the Zio earnout liability to fair value during the year ended December 31, 2023. During the year ended December 31, 2022, we recorded $14.4 million of expenses primarily related to the Quixote acquisition in August 2022.

Current wording

During the year ended December 31, 2024, we recorded $2.5 million of expense predominantly related to dead deal costs. During the year ended December 31, 2023, we recorded $1.2 million of income primarily related to the remeasurement of the Zio earnout liability to fair value.

Previous wording

We recognized an unrealized loss on non-real estate investments of $3.1 million for the year ended December 31, 2023 compared to an unrealized loss on non-real estate investments of $1.4 million for the year ended December 31, 2022. 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 $4.0 million for the year ended December 31, 2024 compared to an unrealized loss on non-real estate investments of $3.1 million for the year ended December 31, 2023. The activity in both periods is due to the observable changes in the fair value of the investments.

Previous wording

During the year ended December 31, 2023, we recognized a $10.0 million gain on extinguishment of debt due to the settlement of the Quixote note at a discount. No gain or loss on extinguishment of debt was recognized during the year ended December 31, 2022.

Current wording

During the year ended December 31, 2023, we recognized a $10.0 million gain on extinguishment of debt due to the settlement of the Quixote note payable at a discount. No gain or loss on extinguishment of debt was recognized during the year ended December 31, 2024.

Previous wording

During the year ended December 31, 2023, we recognized a $103.2 million gain on sale of real estate attributable to the sales of our Skyway Landing, 604 Arizona, 3401 Exposition, Cloud10, One Westside and Westside Two properties. During the year ended December 31, 2022, we recognized a $2.2 million loss on sale of real estate in connection with the dispositions of our Northview Center and 6922 Hollywood properties.

Current wording

During the year ended December 31, 2024, we recognized a $2.5 million loss on sale of real estate attributable to the sale of our 3176 Porter property. During the year ended December 31, 2023, we recognized a $103.2 million gain on sale of real estate attributable to the sales of our Skyway Landing, 604 Arizona, 3401 Exposition, Cloud10, One Westside and Westside Two properties.

Previous wording

During the year ended December 31, 2023, we recorded an income tax provision of $6.8 million primarily related to a valuation allowance recorded against certain deferred tax assets.

Current wording

During the year ended December 31, 2024, we recorded an income tax provision of $1.6 million primarily related to a valuation allowance recorded against certain deferred tax assets and a change in Canadian tax legislation resulting in an increase in current tax expense. During the year ended December 31, 2023, we recorded an income tax provision of $6.8 million primarily related to a valuation allowance recorded against certain deferred tax assets.

Previous wording

General and administrative expenses decreased $4.5 million, or 5.7%, to $75.0 million for the year ended December 31, 2023 compared to $79.5 million for the year ended December 31, 2022. The decrease was primarily driven by a decrease in payroll, non-cash compensation, office and travel and entertainment expenses.

Current wording

General and administrative expenses increased by $4.5 million, or 6.0%, to $79.5 million for the year ended December 31, 2024 compared to $75.0 million for the year ended December 31, 2023. The increase was primarily driven by an increase in non-cash compensation expense and lower capitalization of expenses during the year ended December 31, 2024 due to less development activity as compared to the prior year. The increase was partially offset by lower travel and entertainment and payroll expenses during the year ended December 31, 2024.

Previous wording

•proceeds from the Sunset Glenoaks construction loan (unconsolidated joint venture), Sunset Pier 94 Studios construction loan (unconsolidated joint venture) and Bentall Centre loan (unconsolidated joint venture); and

Current wording

•proceeds from the Sunset Glenoaks construction loan, Sunset Pier 94 Studios construction loan (unconsolidated joint venture) and Bentall Centre loan (unconsolidated joint venture); and

Previous wording

We had approximately $100.4 million of cash and cash equivalents at December 31, 2023. 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 $63.3 million of cash and cash equivalents at December 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.

Previous wording

During the year ended December 31, 2023 we completed the strategic disposition of five office properties for gross proceeds totaling $918.0 million, before certain credits, prorations and closing costs, and a total gain on sale of $103.2 million.

Current wording

During the year ended December 31, 2024 we completed the strategic disposition of 3176 Porter for gross proceeds of $24.8 million, before certain credits, prorations and closing costs.

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

In November 2023, the unconsolidated joint venture that owns Bentall Centre amended the loan secured by the property. The amendment extended the contractual maturity date to July 1, 2027, modified the interest rate to CORRA + 2.30% and modified the loan capacity to $501.1 million. As of December 31, 2023, there was $482.2 million outstanding. The loan was transacted in Canadian dollars. Amounts are shown in U.S. dollars using the foreign currency exchange rate as of December 31, 2023.

Current wording

The loan was transacted in Canadian dollars. Amounts are shown in U.S. dollars using the foreign currency exchange rate as of December 31, 2024.

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 $9.31, as reported by the NYSE, on December 29, 2023 as well as the aggregate value of the Series C preferred stock liquidation preference as of December 31, 2023.

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 $3.03, as reported by the NYSE, on December 31, 2024 as well as the aggregate value of the Series C preferred stock liquidation preference as of December 31, 2024.

Previous wording

Reflects our projected interest obligations for fixed rate debts, including those that are effectively fixed as a result of derivatives. Also includes $14.2 million of projected interest related to our joint venture partner debt and debt that is effectively fixed through the use of interest rate swaps.

Current wording

Reflects our projected interest obligations for fixed rate debts, including those that are effectively fixed as a result of derivatives. Also includes $11.2 million of projected interest related to our joint venture partner debt and debt that is effectively fixed through the use of interest rate swaps.