Hudson Pacific Properties, Inc. (NYSE:HPP) Q2 2022 Results Conference Call July 27, 2022 2:00 PM ET Company Participants Laura Campbell - EVP, IR & Marketing Victor Coleman - Chairman, CEO Mark Lammas - President Harout Diramerian - CFO Art Suazo - EVP of Leasing Conference Call Participants Alexander Goldfarb - Piper Sandler Daniel Ismail - Green Street David Rodgers - Baird Jamie Feldman - Bank of America Michael Griffin - Citi Tayo Okusanya - Credit Suisse Ronald Kamdem - Morgan Stanley Vikram Malhotr ...

Financial Performance - Total revenues for the three months ended March 31, 2022, were $244.5 million, an increase of 14.7% compared to $213.1 million for the same period in 2021[23] - Net loss attributable to common stockholders for Q1 2022 was $19.8 million, compared to a net income of $5.0 million in Q1 2021, reflecting a significant decline[23] - The company reported a comprehensive loss of $6.5 million for Q1 2022, compared to a comprehensive income of $14.3 million in Q1 2021[25] - Net income for Q1 2022 was a loss of $7.615 million, compared to a profit of $11.411 million in Q1 2021, indicating a significant decline in profitability[32] - The company reported a net loss of $7.6 million for Q1 2022, compared to a net income of $11.4 million in Q1 2021[184] Revenue Breakdown - Office rental revenues for Q1 2022 were $206.2 million, up 8.5% from $189.9 million in Q1 2021[23] - Studio rental revenues increased to $13.4 million in Q1 2022, compared to $12.2 million in Q1 2021, marking a growth of 10.1%[23] - Total studio revenues for Q1 2022 were $33.1 million, a significant increase of 58.2% compared to $21.0 million in Q1 2021[37] - Office segment revenues increased to $211.4 million in Q1 2022, up from $192.1 million in Q1 2021, representing a growth of 10.7%[184] - Studio segment revenues rose to $33.1 million in Q1 2022, compared to $21.0 million in Q1 2021, marking a significant increase of 57.1%[184] Assets and Liabilities - Total assets as of March 31, 2022, amounted to $9.0 billion, a slight increase from $8.99 billion as of December 31, 2021[21] - Total liabilities increased to $4.9 billion as of March 31, 2022, compared to $4.7 billion at the end of 2021, indicating a rise in financial obligations[21] - Total assets as of March 31, 2022, were $9.004 billion, a slight increase from $8.990 billion at the end of 2021[35] - The total liabilities increased to $4.923 billion as of March 31, 2022, compared to $4.654 billion at the end of 2021, marking an increase of approximately 5.8%[35] Cash and Liquidity - Cash and cash equivalents rose to $137.6 million as of March 31, 2022, up from $96.6 million at the end of 2021, showing improved liquidity[21] - Cash provided by operating activities in Q1 2022 was $95.454 million, down from $114.695 million in Q1 2021, reflecting a decrease of approximately 16.7%[32] - Cash and cash equivalents increased to $137.598 million as of March 31, 2022, compared to $96.555 million at the end of 2021, showing a growth of approximately 42.5%[35] - Cash and cash equivalents at the end of Q1 2022 were $137.6 million, slightly up from $134.3 million at the end of Q1 2021[193] Operating Expenses - Operating expenses for the three months ended March 31, 2022, totaled $205.3 million, an increase of 14.6% from $179.2 million in the same period last year[23] - Total operating expenses increased to $205.3 million in Q1 2022, up from $179.2 million in Q1 2021, reflecting a rise of 14.6%[37] Debt and Financing - Unsecured and secured debt rose to $3.973 billion as of March 31, 2022, up from $3.734 billion at the end of 2021, representing an increase of approximately 6.4%[35] - The Company’s unsecured debt as of March 31, 2022, has a carrying value of $2,260.000 million and a fair value of $2,246.311 million[149] - The Company’s secured debt as of March 31, 2022, has a carrying value of $1,740.720 million and a fair value of $1,734.332 million[149] Impairment and Valuation - The company reported an impairment loss of $20.503 million in Q1 2022, indicating challenges in asset valuation[32] - The company recognized an impairment loss of $8.5 million related to the Zio trade name during the three months ended March 31, 2022, due to rebranding efforts[103] - The Company recorded $12.0 million of impairment charges related to its Del Amo office property during the three months ended March 31, 2022, due to a reduction in estimated fair value[89] Shareholder Information - The weighted average shares of common stock outstanding decreased to 149.2 million in Q1 2022 from 150.8 million in Q1 2021[23] - The number of common units outstanding decreased to 146.405 million as of March 31, 2022, from 152.967 million at the end of 2021[35] - The Company has a share repurchase program authorized for up to $250 million, with cumulative repurchases totaling $176.2 million since inception, but no repurchases were made in Q1 2022[176] - The Company entered into an uncollared accelerated share repurchase agreement for $100 million, with an initial payment made and approximately 3.3 million shares received during Q1 2022[177] Market Conditions and Risks - The debt market remains sensitive to macroeconomic factors, which may impact refinancing options and terms[205] - Future declines in rental rates and potential concessions may decrease cash flows from properties, affecting overall revenue[203] - The company faces uncertainties related to the economic environment, which could negatively impact commercial real estate fundamentals[204] - The overall market conditions are highly competitive, with potential impacts from the COVID-19 pandemic still being assessed[202]

Financial Data and Key Metrics Changes - Revenue for Q1 2022 increased by 14.7% to $244.5 million compared to Q1 2021 [31] - FFO excluding specified items rose by 3.3% to $75.2 million, or $0.50 per diluted share [31] - AFFO grew by 11.8% to $58.6 million, while same-store property cash NOI increased by 1.4% to $120.3 million [33] Business Line Data and Key Metrics Changes - Over 500,000 square feet of leases were signed in the quarter, with a 12% GAAP and 5.8% cash increase in rents from prior levels [19] - The in-service office portfolio ended the quarter at 91.1% occupied and 92.3% leased [21] - The leasing pipeline includes 2.2 million square feet of activity, up about 35% from the long-term average [21] Market Data and Key Metrics Changes - The Vancouver market fundamentals remain strong with sub 6% vacancy [28] - The South Lake Union submarket in Seattle has a vacancy rate below 10% [26] - Demand for large tenants in Silicon Valley and the Peninsula has notably increased, with significant leasing activity reported [50] Company Strategy and Development Direction - The company aims to create shareholder value by selectively growing its real estate portfolio, focusing on tech and media industries [6][7] - The strategy includes pursuing capital recycling opportunities and enhancing ESG leadership [5][12] - The company plans to capitalize on embedded development opportunities and pursue attractive acquisitions in a disciplined manner [9][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the leasing market, noting a positive momentum in demand and active deals [48] - The company anticipates continued growth in same-store property cash NOI, despite some short-term fluctuations [37] - Management highlighted the importance of ESG initiatives and their integration into the company's strategy [13][15] Other Important Information - The company has repurchased $380 million of common stock over the last four years, with plans to reach $580 million by the end of the third quarter [12] - The anticipated proceeds from asset sales are expected to be between $325 million and $350 million, which will be used to pay down credit facilities and fund development [29] Q&A Session Summary Question: Can you talk about the change in leasing or same-store NOI presentation? - Management explained that the change was made to simplify financials and align with peers, with a minor sequential decline attributed to both office and media [40][42] Question: What drove the decline in occupancy? - The decline was primarily due to a significant tenant, Dell, vacating space, but overall there was positive net absorption without that impact [52][54] Question: Can you elaborate on the Washington 1000 project? - Management expressed confidence in the project due to attractive all-in costs and strong tenant demand in the South Lake Union submarket [56][58] Question: How does the company view the studio and office split in guidance? - Management clarified that combining guidance is consistent with industry practices and does not indicate unpredictability in studio demand [62][64] Question: What is the outlook for interest expense? - The increase in interest expense is attributed to the updated LIBOR curve, and the company plans to use asset sales to pay down debt [110][112]

FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_____to_____ Commission file number 001-34789 (Hudson Pacific Properties, Inc.) Commission file number 333-202799-01 (Hudson Pacific Properties, L.P.) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Hudson Pacifi ...

Hudson Pacific Properties, Inc. (NYSE:HPP) Q4 2021 Earnings Conference Call February 17, 2022 2:00 PM ET Company Participants Laura Campbell - Executive Vice President, Investor Relations and Marketing Victor Coleman - Chief Executive Officer and Chairman Mark Lammas - President Harout Diramerian - Chief Financial Officer Art Suazo - Executive Vice President, Leasing Conference Call Participants Craig Mailman - KeyBanc Capital Markets John Kim - BMO Capital Markets Manny Korchman - Citi Jamie Feldman - Bank ...

| --- | --- | --- | --- | |----------------------------------------------|-------|-----------------------------------------|-------| | | | | | | | | | | | | | | | | | | | | | UDSON | | | | | P A C I F I C PROPERTIES | | | | | SUPPLEMENTAL INFORMATION FOURTH QUARTER 2021 | | | | | | | REIMAGINING NOW. TO CREATE WHAT'S NEXT. | | Hudson Pacific Properties, Inc. Supplemental Information | Fourth Quarter 2021 | --- | --- | |-------|-------------------------------------------------------------- ...

| --- | --- | --- | --- | |---------------------------------------------|-------|-----------------------------------------|-------| | | | | | | | | | | | | | | | | UDSON | | | | | P A C I F I C PROPERTIES | | | | | SUPPLEMENTAL INFORMATION THIRD QUARTER 2021 | | | | | | | REIMAGINING NOW. TO CREATE WHAT'S NEXT. | | Hudson Pacific Properties, Inc. Supplemental Information | Third Quarter 2021 | --- | --- | |-------|---------------------------------------------------------------------------------------------- ...

[EXPLANATORY NOTE](index=3&type=section&id=EXPLANATORY%20NOTE) This note clarifies the consolidated reporting of Hudson Pacific Properties, Inc. and its operating partnership, outlining their structure and financial distinctions - This report combines the quarterly reports on Form 10-Q for Hudson Pacific Properties, Inc. (REIT) and Hudson Pacific Properties, L.P. (operating partnership)[12](index=12&type=chunk) - Hudson Pacific Properties, Inc. owns approximately **98.7%** of the ownership interest in the operating partnership[13](index=13&type=chunk) - The operating partnership holds substantially all of the Company's assets and conducts most of its business[14](index=14&type=chunk) - Main differences in consolidated financial statements between the Company and the operating partnership are non-controlling interest, stockholders' equity, and partners' capital[15](index=15&type=chunk) [PART I—FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [ITEM 1. Financial Statements of Hudson Pacific Properties, Inc.](index=5&type=section&id=ITEM%201.%20Financial%20Statements%20of%20Hudson%20Pacific%20Properties%2C%20Inc.) This section presents Hudson Pacific Properties, Inc.'s unaudited consolidated financial statements, detailing its financial position, operations, and cash flows Consolidated Balance Sheets (September 30, 2021 vs. December 31, 2020) | Metric | Sep 30, 2021 (in millions) | Dec 31, 2020 (in millions) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Total Assets | $8.804 | $8.350 | | Total Liabilities | $4.812 | $4.245 | | Total Equity | $3.852 | $3.968 | | Investment in real estate, net | $7.161 | $7.112 | | Unsecured and secured debt, net | $3.910 | $3.399 | Consolidated Statements of Operations (Three Months Ended Sep 30, 2021 vs. 2020) | Metric | 2021 (in millions) | 2020 (in millions) | Change (in millions) | % Change | | :--------------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Total Revenues | $227.6 | $196.3 | +$31.3 | +16.0% | | Total Operating Expenses | $190.8 | $167.6 | +$23.2 | +13.8% | | Net (Loss) Income | $(6.2) | $(1.4) | $(4.8) | +353.9% | | Net (Loss) Income Attributable to Common Stockholders | $(9.3) | $(5.4) | $(3.9) | +70.9% | | Basic EPS | $(0.06) | $(0.04) | $(0.02) | +50.0% | Consolidated Statements of Operations (Nine Months Ended Sep 30, 2021 vs. 2020) | Metric | 2021 (in millions) | 2020 (in millions) | Change (in millions) | % Change | | :--------------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Total Revenues | $656.4 | $601.1 | +$55.2 | +9.2% | | Total Operating Expenses | $552.9 | $498.5 | +$54.4 | +10.9% | | Net Income | $12.3 | $19.6 | $(7.3) | -37.4% | | Net (Loss) Income Attributable to Common Stockholders | $(2.0) | $8.9 | $(10.9) | -122.5% | | Basic EPS | $(0.01) | $0.06 | $(0.07) | -116.7% | Consolidated Statements of Cash Flows (Nine Months Ended Sep 30, 2021 vs. 2020) | Metric | 2021 (in millions) | 2020 (in millions) | Change (in millions) | % Change | | :--------------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Net cash provided by operating activities | $285.5 | $247.9 | +$37.6 | +15.2% | | Net cash used in investing activities | $(560.6) | $(305.2) | $(255.4) | +83.7% | | Net cash provided by financing activities | $345.8 | $403.3 | $(57.5) | -14.3% | | Cash and cash equivalents and restricted cash—End of Period | $220.2 | $404.3 | $(184.0) | -45.5% | [ITEM 1. Financial Statements of Hudson Pacific Properties, L.P.](index=11&type=section&id=ITEM%201.%20Financial%20Statements%20of%20Hudson%20Pacific%20Properties%2C%20L.P.) This section presents Hudson Pacific Properties, L.P.'s unaudited consolidated financial statements, detailing its financial position, operations, and cash flows, largely mirroring the Inc. entity Consolidated Balance Sheets (September 30, 2021 vs. December 31, 2020) | Metric | Sep 30, 2021 (in millions) | Dec 31, 2020 (in millions) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Total Assets | $8.804 | $8.350 | | Total Liabilities | $4.812 | $4.245 | | Total Capital | $3.852 | $3.968 | | Investment in real estate, net | $7.161 | $7.112 | | Unsecured and secured debt, net | $3.910 | $3.399 | Consolidated Statements of Operations (Three Months Ended Sep 30, 2021 vs. 2020) | Metric | 2021 (in millions) | 2020 (in millions) | Change (in millions) | % Change | | :--------------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Total Revenues | $227.6 | $196.3 | +$31.3 | +16.0% | | Total Operating Expenses | $190.8 | $167.6 | +$23.2 | +13.8% | | Net (Loss) Income | $(6.2) | $(1.4) | $(4.8) | +353.9% | | Net (Loss) Income Available to Common Unitholders | $(9.4) | $(5.6) | $(3.7) | +66.2% | | Basic EPS | $(0.06) | $(0.04) | $(0.02) | +50.0% | Consolidated Statements of Operations (Nine Months Ended Sep 30, 2021 vs. 2020) | Metric | 2021 (in millions) | 2020 (in millions) | Change (in millions) | % Change | | :--------------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Total Revenues | $656.4 | $601.1 | +$55.2 | +9.2% | | Total Operating Expenses | $552.9 | $498.5 | +$54.4 | +10.9% | | Net Income | $12.3 | $19.6 | $(7.3) | -37.4% | | Net (Loss) Income Available to Common Unitholders | $(2.0) | $8.5 | $(10.5) | -123.7% | | Basic EPS | $(0.01) | $0.05 | $(0.06) | -120.0% | Consolidated Statements of Cash Flows (Nine Months Ended Sep 30, 2021 vs. 2020) | Metric | 2021 (in millions) | 2020 (in millions) | Change (in millions) | % Change | | :--------------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Net cash provided by operating activities | $285.5 | $247.9 | +$37.6 | +15.2% | | Net cash used in investing activities | $(560.6) | $(305.2) | $(255.4) | +83.7% | | Net cash provided by financing activities | $345.8 | $403.3 | $(57.5) | -14.3% | | Cash and cash equivalents and restricted cash—End of Period | $220.2 | $404.3 | $(184.0) | -45.5% | [Notes to Unaudited Consolidated Financial Statements](index=19&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed notes to the unaudited consolidated financial statements, offering crucial context and breakdowns for the primary financial figures [1. Organization](index=19&type=section&id=1.%20Organization) - Hudson Pacific Properties, Inc. operates as a REIT, primarily owning, managing, leasing, acquiring, and developing office and studio properties through its operating partnership[52](index=52&type=chunk) Portfolio Summary (as of September 30, 2021) | Segment | Number of Properties | Square Feet | | :---------------------- | :------------------- | :---------- | | Consolidated Office | 52 | 14,076,114 | | Consolidated Studios | 3 | 1,224,403 | | Consolidated Land | 6 | 2,504,406 | | Total Consolidated | 61 | 17,804,923 | | Unconsolidated Office | 1 | 1,495,738 | | Unconsolidated Land | 3 | 691,000 | | Total Unconsolidated | 4 | 2,186,738 | | **TOTAL** | **65** | **19,991,661** | [2. Summary of Significant Accounting Policies](index=19&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) - The consolidated financial statements are prepared in accordance with GAAP applicable to interim financial information[55](index=55&type=chunk) - The Company consolidates entities it controls through majority ownership or voting rights, including Variable Interest Entities (VIEs) where it is the primary beneficiary[60](index=60&type=chunk) - As of September 30, 2021, **12** joint ventures are consolidated as VIEs, and **5** unconsolidated joint ventures are accounted for using the equity method[61](index=61&type=chunk)[63](index=63&type=chunk)[68](index=68&type=chunk) - Revenue recognition policies cover rental revenues, tenant recoveries, ancillary revenues, other revenues, sale of real estate, management fee income, and management services reimbursement income[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk) - Acquisitions are accounted for using the acquisition method for business combinations or a cost accumulation and allocation model for asset acquisitions[83](index=83&type=chunk)[84](index=84&type=chunk) [3. Business Combinations](index=25&type=section&id=3.%20Business%20Combinations) - The Company acquired **100%** of the equity interests in Zio Entertainment Network, LLC (August 16, 2021) and Star Waggons, LLC (August 31, 2021)[87](index=87&type=chunk) - These acquisitions expand the Company's service offerings for its studio platform by adding transportation and logistics services[87](index=87&type=chunk) Acquisition Date Fair Value of Consideration Transferred (in millions) | Acquired Entity | Cash | Contingent Consideration | Total Consideration | | :-------------- | :--- | :----------------------- | :------------------ | | Zio | $117.2 | $22.8 | $140.0 | | Star Waggons | $92.7 | — | $92.7 | | **Total** | **$209.9** | **$22.8** | **$232.7** | - Goodwill of **$70.5 million** for Zio and **$25.9 million** for Star Waggons was recognized, totaling **$96.4 million**, attributable to expected synergies and assembled workforce[91](index=91&type=chunk) Revenue and Net Income from Acquisitions (Acquisition Date to Sep 30, 2021, in millions) | Entity | Revenue | Net Income | | :----- | :------ | :--------- | | Zio | $4.2 | $1.3 | | Star Waggons | $2.8 | $1.0 | [4. Investment in Real Estate](index=27&type=section&id=4.%20Investment%20in%20Real%20Estate) Investment in Real Estate, at cost (in millions) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :-------------------------- | :----------- | :----------- | | Land | $1,351.9 | $1,351.9 | | Building and improvements | $6,008.1 | $5,840.8 | | Tenant improvements | $751.7 | $728.1 | | Property under development | $320.8 | $281.9 | | **Total Investment in Real Estate, at cost** | **$8,446.5** | **$8,215.0** | - No acquisitions or dispositions of real estate related to consolidated entities occurred during the nine months ended September 30, 2021[95](index=95&type=chunk)[96](index=96&type=chunk) - An impairment loss of **$2.8 million** was recorded for the Del Amo office property due to a reduction in management's intended hold period[99](index=99&type=chunk) [5. Non-Real Estate Property, Plant and Equipment, net](index=28&type=section&id=5.%20Non-Real-Estate%20Property%2C%20Plant%20and%20Equipment%2C%20net) Non-Real Estate Property, Plant and Equipment, net (in millions) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :--------------------------------------- | :----------- | :----------- | | Trailers | $37.2 | — | | Trucks and other vehicles | $11.4 | — | | Non-real estate property, plant and equipment, at cost | $71.6 | $17.4 | | **NON-REAL ESTATE PROPERTY, PLANT AND EQUIPMENT, NET** | **$60.3** | **$8.4** | - The significant increase in non-real estate property, plant and equipment is primarily due to the acquisition of trailers, trucks, and other equipment from the Zio and Star Waggons business combinations[100](index=100&type=chunk) [6. Investment in Unconsolidated Real Estate Entities](index=28&type=section&id=6.%20Investment%20in%20Unconsolidated%20Real%20Estate%20Entities) - The Company owns **35%** of the Sunset Waltham Cross Studios development joint venture and **50%** of the Sunset Glenoaks Studios development joint venture[101](index=101&type=chunk)[102](index=102&type=chunk) - The Company owns **20%** of the Bentall Centre office property joint venture and has guaranteed **$102.7 million** of its debt[103](index=103&type=chunk) Combined and Condensed Balance Sheets for Unconsolidated Joint Ventures (in millions) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :-------------------------- | :----------- | :----------- | | Total Assets | $1,101.1 | $906.8 | | Total Liabilities | $551.8 | $548.6 | | Company's Capital | $148.7 | $80.8 | Combined and Condensed Statements of Operations for Unconsolidated Joint Ventures (Nine Months Ended Sep 30, 2021 vs. 2020, in millions) | Metric | 2021 | 2020 | | :------------- | :----- | :----- | | Total Revenues | $60.1 | $77.2 | | Net Income (Loss) | $8.3 | $0.3 | [7. Deferred Leasing Costs and Intangible Assets, net and Intangible Liabilities, net](index=30&type=section&id=7.%20Deferred%20Leasing%20Costs%20and%20Intangible%20Assets%2C%20net%20and%20Intangible%20Liabilities%2C%20net) Deferred Leasing Costs and Intangible Assets, net (in millions) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :--------------------------------------- | :----------- | :----------- | | Deferred leasing costs and in-place lease intangibles, net | $204.2 | $225.7 | | Below-market ground leases, net | $56.8 | $59.1 | | Customer relationships, net | $51.7 | — | | Non-competition agreements, net | $5.2 | — | | Trade name | $17.1 | — | | **TOTAL DEFERRED LEASING COSTS AND INTANGIBLE ASSETS, NET** | **$335.6** | **$285.8** | Intangible Liabilities, net (in millions) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :-------------------------- | :----------- | :----------- | | Below-market leases, net | $39.5 | $48.3 | | Above-market ground leases, net | $0.8 | $0.8 | | **TOTAL INTANGIBLE LIABILITIES, NET** | **$40.3** | **$49.1** | - The increase in intangible assets is primarily due to newly acquired customer relationships (**$52.5 million**) and trade names (**$17.1 million**) from the Zio and Star Waggons acquisitions[89](index=89&type=chunk)[90](index=90&type=chunk)[108](index=108&type=chunk) - Amortization related to deferred leasing costs and intangibles was **$11.5 million** for the three months and **$34.8 million** for the nine months ended September 30, 2021[109](index=109&type=chunk) [8. Receivables](index=31&type=section&id=8.%20Receivables) - Accounts receivable increased to **$24.9 million** as of September 30, 2021, from **$22.1 million** at December 31, 2020, with a **$0.2 million** allowance for doubtful accounts[112](index=112&type=chunk) - Straight-line rent receivables increased to **$241.3 million** as of September 30, 2021, from **$226.0 million** at December 31, 2020, with a **$31.0 thousand** allowance for doubtful accounts[113](index=113&type=chunk) [9. Prepaid Expenses and Other Assets, net](index=31&type=section&id=9.%20Prepaid%20Expenses%20and%20Other%20Assets%2C%20net) Prepaid Expenses and Other Assets, net (in millions) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :--------------------------------------- | :----------- | :----------- | | Deposits and pre-development costs for future acquisitions | $37.9 | $28.5 | | Non-real estate investments | $24.7 | $4.1 | | Stock purchase warrant | $1.7 | — | | **TOTAL PREPAID EXPENSES AND OTHER ASSETS, NET** | **$98.7** | **$55.5** | - The Company recognized an unrealized gain of **$9.9 million** on its non-real estate investments for the nine months ended September 30, 2021[115](index=115&type=chunk) - An unrealized gain of **$1.7 million** was recognized on the stock purchase warrant for the nine months ended September 30, 2021[116](index=116&type=chunk) [10. Goodwill](index=32&type=section&id=10.%20Goodwill) Goodwill (in millions) | Metric | Amount | | :-------------------------- | :------- | | Balance as of December 31, 2020 | $8.8 | | Acquisitions | $96.4 | | **Balance as of September 30, 2021** | **$105.1** | - The increase in goodwill is primarily due to the Zio and Star Waggons acquisitions in August 2021[117](index=117&type=chunk) - No goodwill impairment indicators were identified during the three and nine months ended September 30, 2021[118](index=118&type=chunk) [11. Debt](index=32&type=section&id=11.%20Debt) Outstanding Indebtedness (in millions) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :-------------------------- | :----------- | :----------- | | Unsecured debt | $2,225.0 | $1,925.0 | | Secured debt | $1,719.0 | $1,507.3 | | In-substance defeased debt | $129.1 | $131.7 | | Joint venture partner debt | $66.1 | $66.1 | | **TOTAL UNSECURED AND SECURED DEBT, NET** | **$3,910.4** | **$3,399.5** | - The Company had **$300.0 million** in borrowings on its unsecured revolving credit facility during the nine months ended September 30, 2021[122](index=122&type=chunk) - The Hollywood Media Portfolio loan was refinanced to **$1.1 billion** at LIBOR + **1.17%** (from **$900.0 million** at LIBOR + **2.15%**), resulting in a **$6.2 million** loss on extinguishment of debt[123](index=123&type=chunk) - The operating partnership was in compliance with its financial covenants as of September 30, 2021[130](index=130&type=chunk) Interest Expense (Nine Months Ended Sep 30, 2021 vs. 2020, in millions) | Metric | 2021 | 2020 | Change | | :------------------------------------------------- | :----- | :----- | :----- | | Gross interest expense | $101.3 | $93.8 | +$7.5 | | Capitalized interest | $(17.0) | $(14.3) | $(2.8) | | Amortization of deferred financing costs and loan discounts/premiums | $7.5 | $4.6 | +$2.9 | | **TOTAL INTEREST EXPENSE** | **$91.8** | **$84.2** | **+$7.6** | [12. Derivatives](index=35&type=section&id=12.%20Derivatives) - The Company uses interest rate swaps and caps to hedge interest rate risk[134](index=134&type=chunk) - As of September 30, 2021, the Company had three interest rate swaps with aggregate notional amounts of **$475.0 million** (designated as cash flow hedges) and one interest rate cap with a notional amount of **$1.1 billion** (accounted for under mark-to-market)[134](index=134&type=chunk)[135](index=135&type=chunk) Fair Value of Derivative Instruments (in millions) | Instrument | Sep 30, 2021 | Dec 31, 2020 | | :-------------------------- | :----------- | :----------- | | Interest rate cap derivative asset | $0.1 | $0.0 | | Interest rate swap derivative liabilities | $(4.7) | $(10.1) | | **TOTAL** | **$(4.6)** | **$(10.1)** | - The Company expects **$4.6 million** of unrealized loss from cash flow hedges to be reclassified as an increase to interest expense in the next **12** months[139](index=139&type=chunk) [13. U.S. Government Securities](index=36&type=section&id=13.%20U.S.%20Government%20Securities) - The Company held **$130.1 million** in U.S. Government securities as of September 30, 2021, down from **$135.1 million** at December 31, 2020[140](index=140&type=chunk) - These securities are investments held to maturity and are related to in-substance defeased debt[140](index=140&type=chunk) - The Company incurred **$5.1 million** of gross unrealized gains on these securities as of September 30, 2021[140](index=140&type=chunk) [14. Income Taxes](index=36&type=section&id=14.%20Income%20Taxes) - Hudson Pacific Properties, Inc. has elected to be taxed as a REIT, generally not subject to corporate-level income tax on distributed earnings[142](index=142&type=chunk) - Certain subsidiaries are treated as taxable REIT subsidiaries (TRSs) for federal income tax purposes[142](index=142&type=chunk) - As of September 30, 2021, the Company has not established a liability for uncertain tax positions[144](index=144&type=chunk) [15. Future Minimum Rents and Lease Payments](index=37&type=section&id=15.%20Future%20Minimum%20Rents%20and%20Lease%20Payments) Future Minimum Base Rents for Properties (as of Sep 30, 2021, in millions) | Year Ended | Total | | :---------------- | :---------- | | Remaining 2021 | $159.1 | | 2022 | $627.5 | | 2023 | $580.1 | | 2024 | $522.9 | | 2025 | $418.6 | | Thereafter | $1,779.9 | | **TOTAL** | **$4,088.2** | - The present value of the Company's operating lease liabilities (as lessee) was **$280.2 million** as of September 30, 2021[148](index=148&type=chunk) Future Minimum Lease Payments for Operating Leases (as of Sep 30, 2021, in millions) | Year | Lease Payments | | :---------------- | :------------- | | Remaining 2021 | $5.2 | | 2022 | $20.7 | | 2023 | $20.4 | | 2024 | $20.4 | | 2025 | $20.4 | | Thereafter | $521.2 | | **Total operating lease payments** | **$608.4** | [16. Fair Value of Financial Instruments](index=38&type=section&id=16.%20Fair%20Value%20of%20Financial%20Instruments) Fair Value Measurements (in millions, as of Sep 30, 2021) | Instrument | Level 1 | Level 2 | Level 3 | Total | | :--------------------------------------- | :------ | :------ | :------ | :------ | | Interest rate cap derivative asset | $— | $0.1 | $— | $0.1 | | Interest rate swap derivative liabilities | $— | $(4.7) | $— | $(4.7) | | Non-real estate investments measured at fair value | $1.9 | $1.6 | $— | $3.5 | | Stock purchase warrant | $— | $1.7 | $— | $1.7 | | Earnout liability | $— | $— | $22.8 | $22.8 | | Non-real estate investments measured at NAV | $— | $— | $— | $21.2 | - The earnout liability of **$22.8 million**, related to the Zio acquisition, is classified as Level **3** and valued using a probability-weighted discounted cash flow model[153](index=153&type=chunk) - The fair values of debt are estimates based on Level **2** inputs[155](index=155&type=chunk) [17. Stock-based Compensation](index=39&type=section&id=17.%20Stock-based%20Compensation) - The Company grants various stock compensation awards, including restricted stock, restricted stock units, and operating partnership performance units, under its **2010** Incentive Plan and PSU Plan[157](index=157&type=chunk)[161](index=161&type=chunk) Stock Compensation (in millions) | Metric | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2021 | | :-------------------------- | :-------------------------- | :-------------------------- | | Expensed stock compensation | $5.8 | $15.7 | | Capitalized stock compensation | $0.8 | $2.7 | | **TOTAL STOCK COMPENSATION** | **$6.6** | **$18.4** | [18. Earnings Per Share](index=40&type=section&id=18.%20Earnings%20Per%20Share) - Basic and diluted earnings per share for both Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P. are calculated using the two-class method[165](index=165&type=chunk)[167](index=167&type=chunk) Hudson Pacific Properties, Inc. - Basic and Diluted EPS (Nine Months Ended Sep 30, 2021 vs. 2020) | Metric | 2021 | 2020 | | :------------------------------------------------- | :----- | :----- | | Net (loss) income available to common stockholders | $(2.0) | $8.9 | | Basic EPS | $(0.01) | $0.06 | | Diluted EPS | $(0.01) | $0.06 | Hudson Pacific Properties, L.P. - Basic and Diluted EPS (Nine Months Ended Sep 30, 2021 vs. 2020) | Metric | 2021 | 2020 | | :------------------------------------------------- | :----- | :----- | | Net (loss) income available to common unitholders | $(2.0) | $8.5 | | Basic EPS | $(0.01) | $0.05 | | Diluted EPS | $(0.01) | $0.05 | [19. Redeemable Non-controlling Interest](index=41&type=section&id=19.%20Redeemable%20Non-controlling%20Interest) - Redeemable non-controlling interests include Series A preferred units of the operating partnership (**392,598** units) with **6.25%** preferential distributions[169](index=169&type=chunk)[170](index=170&type=chunk) - Non-controlling interests in consolidated real estate entities (HPP-MAC WSP, LLC and Hudson One Ferry REIT, L.P.) are classified as temporary equity due to partner put rights[171](index=171&type=chunk)[172](index=172&type=chunk) Redeemable Non-controlling Interests (in millions) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :------------------------------------------------- | :----------- | :----------- | | Redeemable preferred units of the operating partnership | $9.8 | $9.8 | | Redeemable non-controlling interest in consolidated real estate entities | $129.3 | $127.9 | [20. Equity](index=42&type=section&id=20.%20Equity) Hudson Pacific Properties, Inc. - Accumulated Other Comprehensive Loss (in millions) | Metric | Dec 31, 2020 | Sep 30, 2021 | | :--------------------------------------- | :----------- | :----------- | | Balance | $(8.1) | $(4.4) | | Net change in OCI | N/A | $3.7 | Hudson Pacific Properties, L.P. - Accumulated Other Comprehensive Loss (in millions) | Metric | Dec 31, 2020 | Sep 30, 2021 | | :--------------------------------------- | :----------- | :----------- | | Balance | $(8.2) | $(4.5) | | Net change in OCI | N/A | $3.7 | - The Company's ownership interest in the operating partnership was **99.1%** as of September 30, 2021[180](index=180&type=chunk) - During the nine months ended September 30, 2021, the Company sold **1,526,163** shares of common stock for **$45.7 million** under its ATM program[182](index=182&type=chunk) - The Company repurchased **$14.7 million** of its common stock under its share repurchase program during the nine months ended September 30, 2021[183](index=183&type=chunk) [21. Segment Reporting](index=44&type=section&id=21.%20Segment%20Reporting) - The Company operates in two reportable segments: office properties and studio properties, with performance evaluated based on Net Operating Income (NOI)[187](index=187&type=chunk) Segment Profit (in millions) | Segment | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Office segment profit | $130.0 | $114.6 | $382.2 | $356.9 | | Studio segment profit | $13.7 | $6.5 | $30.7 | $22.0 | | **TOTAL SEGMENT PROFIT** | **$143.7** | **$121.2** | **$412.9** | **$378.9** | [22. Related Party Transactions](index=45&type=section&id=22.%20Related%20Party%20Transactions) - The Company has employment agreements with certain executive officers[190](index=190&type=chunk) - The Company is party to long-term operating lease agreements with an unconsolidated joint venture for office space and facilities[191](index=191&type=chunk) - During the nine months ended September 30, 2021, the Company recognized **$0.8 million** of related rental expense from these leases[191](index=191&type=chunk) [23. Commitments and Contingencies](index=45&type=section&id=23.%20Commitments%20and%20Contingencies) - The Company has aggregate commitments of **$28.0 million** to non-real estate funds, with **$13.3 million** remaining to be contributed[192](index=192&type=chunk) - Outstanding obligations under construction agreements totaled **$179.9 million** as of September 30, 2021[196](index=196&type=chunk) - The Company had outstanding letters of credit totaling approximately **$2.8 million**[195](index=195&type=chunk) - Management believes the ultimate resolution of all legal claims will not have a material adverse effect on the Company's results of operations, financial position, or cash flows[193](index=193&type=chunk)[194](index=194&type=chunk) [24. Supplemental Cash Flow Information](index=46&type=section&id=24.%20Supplemental%20Cash%20Flow%20Information) Supplemental Cash Flow Information (Nine Months Ended Sep 30, 2021 vs. 2020, in millions) | Metric | 2021 | 2020 | | :------------------------------------------------- | :----- | :----- | | Cash paid for interest, net of capitalized interest | $74.4 | $65.9 | | Accounts payable and accrued liabilities for real estate investments | $136.7 | $132.8 | | Lease liabilities recorded in connection with right-of-use assets | $13.9 | $— | | Earnout liability recognized as contingent consideration for business combination | $22.8 | $— | - Restricted cash primarily consists of amounts held by lenders to fund reserves such as capital improvements, taxes, insurance, debt service, and operating expenditures[197](index=197&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=48&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's discussion and analysis of the Company's financial condition, results of operations, and liquidity for the reported periods [Forward-looking Statements](index=48&type=section&id=Forward-looking%20Statements) This section provides a cautionary statement regarding forward-looking statements, highlighting inherent risks and uncertainties that may cause actual results to vary - Statements relating to liquidity, capital resources, portfolio performance, and future financial performance are considered forward-looking statements[200](index=200&type=chunk) - Forward-looking statements are subject to risks, uncertainties, and assumptions that may cause actual results to vary materially from those anticipated[200](index=200&type=chunk) - The Company expressly disclaims any responsibility to update forward-looking statements[200](index=200&type=chunk) [Impact of COVID-19](index=50&type=section&id=Impact%20of%20COVID-19) The COVID-19 pandemic continues to impact global and local economies, with ongoing uncertainty regarding its future effects on operations and financial condition - The COVID-19 pandemic is ongoing, and the Company continues to closely monitor its impact on all aspects of its business and geographies[204](index=204&type=chunk) - With increased vaccine availability, the Company has begun to see increases in physical occupancy at its properties[204](index=204&type=chunk) - Significant uncertainty remains regarding the timing and duration of economic recovery, disruptions in financial markets, and the pandemic's impact on rent collection, occupancy rates, and demand for office space[204](index=204&type=chunk)[207](index=207&type=chunk) - The Board of Directors will continue to evaluate the dividend policy to preserve liquidity[206](index=206&type=chunk) [Executive Summary](index=51&type=section&id=Executive%20Summary) As of September 30, 2021, the Company's portfolio comprised approximately **15.6 million** square feet of office and **1.2 million** square feet of studio properties - As of September 30, 2021, the Company's portfolio included approximately **15.6 million** square feet of office properties, **1.2 million** square feet of studio properties, and **3.2 million** developable square feet of land, totaling **65** properties[208](index=208&type=chunk) - The in-service office portfolio was **91.2%** leased (including leases not yet commenced)[209](index=209&type=chunk) - Same-store studio properties were **87.6%** leased for the average percent leased for the **12** months ended September 30, 2021[209](index=209&type=chunk) [Overview](index=52&type=section&id=Overview) This section provides an overview of the Company's recent business and property activities, including acquisitions, dispositions, and development projects [Business Acquisitions](index=52&type=section&id=Business%20Acquisitions) - The Company acquired Zio Entertainment Network, LLC and Star Waggons, LLC in August 2021 to expand transportation and logistics services for studio productions[217](index=217&type=chunk) [Property Acquisitions](index=53&type=section&id=Property%20Acquisitions) - On July 29, 2021, the Company purchased the land site for the Sunset Waltham Cross Studios development through an unconsolidated joint venture (**35%** ownership)[218](index=218&type=chunk) - No property acquisitions related to consolidated entities occurred during the nine months ended September 30, 2021[219](index=219&type=chunk) [Property Dispositions](index=53&type=section&id=Property%20Dispositions) - No property dispositions occurred during the nine months ended September 30, 2021[220](index=220&type=chunk) [Held for Sale](index=53&type=section&id=Held%20for%20Sale) - No properties were classified as held for sale as of September 30, 2021[221](index=221&type=chunk) [Under Construction and Future Development Projects](index=53&type=section&id=Under%20Construction%20and%20Future%20Development%20Projects) Under Construction and Future Development Projects (as of Sep 30, 2021) | Project Type | Location | Estimated Square Feet | Estimated Completion/Stabilization | | :--------------------------------- | :------------------- | :-------------------- | :------------------------------- | | Under Construction | One Westside | 584,000 | Q1-2022 (Completion), Q2-2023 (Stabilization) | | Future Development Pipeline | Washington 1000 | 538,164 | TBD | | Future Development Pipeline | Burrard Exchange at Bentall Centre | 450,000 | TBD | | Future Development Pipeline | Sunset Glenoaks Studios | 241,000 | Q3-2023 (Completion), Q2-2024 (Stabilization) | | **Total** | | **3,779,406** | | [Lease Expirations](index=54&type=section&id=Lease%20Expirations) This section details the Company's office portfolio lease expirations as of September 30, 2021, including square footage and annualized base rent Office Lease Expirations (as of Sep 30, 2021) | Year of Lease Expiration | Square Footage of Expiring Leases | Percent of Office Portfolio Square Feet | Annualized Base Rent Per Leased Square Foot | | :----------------------- | :-------------------------------- | :-------------------------------------- | :------------------------------------------ | | Vacant | 1,578,093 | 12.4% | N/A | | 2021 | 300,074 | 2.4% | $38.43 | | 2022 | 1,769,126 | 14.0% | $49.19 | | 2023 | 1,256,924 | 9.9% | $50.62 | | 2024 | 1,752,692 | 13.8% | $52.67 | | 2025 | 1,327,198 | 10.4% | $59.34 | | Thereafter | 817,931 | 6.4% | $54.91 | | **Portfolio Total/Weighted Average** | **12,702,504** | **100.0%** | **$53.52** | [Historical Tenant Improvements and Leasing Commissions](index=55&type=section&id=Historical%20Tenant%20Improvements%20and%20Leasing%20Commissions) This section details tenant improvement and leasing commission costs for office properties, distinguishing between new leases and renewals Tenant Improvement and Leasing Commission Costs (9 Months Ended Sep 30, 2021 vs. 2020) | Metric | 2021 | 2020 | | :------------------------------------------------- | :----- | :----- | | **Renewals:** | | | | Number of leases | 92 | 64 | | Square feet | 909,757 | 251,025 | | Tenant improvement costs per square foot | $8.23 | $4.19 | | Leasing commission costs per square foot | $7.56 | $5.41 | | **Total costs per square foot** | **$15.79** | **$9.60** | | **New leases:** | | | | Number of leases | 76 | 59 | | Square feet | 443,221 | 269,919 | | Tenant improvement costs per square foot | $67.50 | $56.26 | | Leasing commission costs per square foot | $15.85 | $10.63 | | **Total costs per square foot** | **$83.35** | **$66.89** | | **TOTAL (All leases):** | | | | Number of leases | 168 | 123 | | Square feet | 1,352,978 | 520,944 | | **Total costs per square foot** | **$36.56** | **$37.72** | [Financings](index=55&type=section&id=Financings) This section outlines the Company's financing activities, including borrowings on its revolving credit facility and the refinancing of a significant mortgage loan - The Company borrowed **$300.0 million** on its unsecured revolving credit facility during the nine months ended September 30, 2021[236](index=236&type=chunk) - The Hollywood Media Portfolio loan was refinanced to a **$1.1 billion** mortgage loan with an initial interest rate of LIBOR + **1.17%** (from **$900.0 million** at LIBOR + **2.15%**)[237](index=237&type=chunk) [Historical Results of Operations](index=56&type=section&id=Historical%20Results%20of%20Operations) This section provides a detailed comparison of the Company's historical results of operations, focusing on Net Operating Income (NOI) and other income/expense items [Comparison of the Three Months Ended September 30, 2021 to the Three Months Ended September 30, 2020](index=56&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20September%2030%2C%202021%20to%20the%20Three%20Months%20Ended%20September%2030%2C%202020) Net Operating Income (NOI) Reconciliation (3 Months Ended Sep 30, 2021 vs. 2020, in millions) | Metric | 2021 | 2020 | Dollar Change | Percent Change | | :--------------------------------- | :----- | :----- | :------------ | :------------- | | Net loss | $(6.2) | $(1.4) | $(4.8) | 353.9% | | **NOI** | **$143.7** | **$121.2** | **$22.5** | **18.6%** | | Same-store NOI | $123.8 | $115.0 | $8.8 | 7.7% | | Non-same-store NOI | $19.9 | $6.2 | $13.7 | 222.3% | Same-store Office Statistics (3 Months Ended Sep 30, 2021 vs. 2020) | Metric | 2021 | 2020 | | :--------------------------------- | :----- | :----- | | Ending % leased | 91.0% | 94.2% | | Average annual rental rate per square foot | $54.77 | $52.53 | Same-store Studio Statistics (3 Months Ended Sep 30, 2021 vs. 2020) | Metric | 2021 | 2020 | | :--------------------------------- | :----- | :----- | | Average % occupied for the period | 87.6% | 91.1% | - Non-same-store NOI increased by **$13.7 million**, primarily due to the acquisition of the **1918** Eighth property and the Zio and Star Waggons acquisitions[247](index=247&type=chunk) - Same-store NOI increased by **$8.8 million**, driven by new office leases (Clocktower Square, Rincon Center, Maxwell) and increased studio services[247](index=247&type=chunk) Interest Expense (3 Months Ended Sep 30, 2021 vs. 2020, in millions) | Metric | 2021 | 2020 | Dollar Change | Percent Change | | :------------------------------------------------- | :----- | :----- | :------------ | :------------- | | Gross interest expense | $33.9 | $32.2 | $1.7 | 5.2% | | Capitalized interest | $(5.8) | $(4.5) | $(1.2) | 27.5% | | Amortization of deferred financing costs and loan discounts/premiums | $2.7 | $2.1 | $0.6 | 26.4% | | **TOTAL** | **$30.8** | **$29.8** | **$1.0** | **3.3%** | - Transaction-related expenses increased by **3,380.7%** to **$6.3 million**, attributable to the Zio and Star Waggons acquisitions[254](index=254&type=chunk) - Depreciation and amortization expense increased by **18.0%** to **$88.6 million**, mainly due to the **1918** Eighth acquisition, accelerated depreciation, and new assets from Zio and Star Waggons[252](index=252&type=chunk) [Comparison of the Nine Months Ended September 30, 2021 to the Nine Months Ended September 30, 2020](index=61&type=section&id=Comparison%20of%20the%20Nine%20Months%20Ended%20September%2030%2C%202021%20to%20the%20Nine%20Months%20Ended%20September%2030%2C%202020) Net Operating Income (NOI) Reconciliation (9 Months Ended Sep 30, 2021 vs. 2020, in millions) | Metric | 2021 | 2020 | Dollar Change | Percent Change | | :--------------------------------- | :----- | :----- | :------------ | :------------- | | Net income | $12.3 | $19.6 | $(7.3) | (37.4)% | | **NOI** | **$412.9** | **$378.9** | **$33.9** | **8.9%** | | Same-store NOI | $355.0 | $352.9 | $2.0 | 0.6% | | Non-same-store NOI | $57.9 | $26.0 | $31.9 | 122.6% | Same-store Office Statistics (9 Months Ended Sep 30, 2021 vs. 2020) | Metric | 2021 | 2020 | | :--------------------------------- | :----- | :----- | | Ending % leased | 91.1% | 94.1% | | Average annual rental rate per square foot | $54.59 | $52.39 | Same-store Studio Statistics (9 Months Ended Sep 30, 2021 vs. 2020) | Metric | 2021 | 2020 | | :--------------------------------- | :----- | :----- | | Average % occupied for the period | 87.6% | 91.1% | - Non-same-store NOI increased by **$31.9 million**, primarily from the **1918** Eighth acquisition and the Zio and Star Waggons acquisitions[266](index=266&type=chunk) - Same-store NOI increased by **$2.0 million**, driven by a **$4.7 million** increase in studio NOI (due to increased lighting and grip services) partially offset by a **$2.7 million** decrease in office NOI[266](index=266&type=chunk) Interest Expense (9 Months Ended Sep 30, 2021 vs. 2020, in millions) | Metric | 2021 | 2020 | Dollar Change | Percent Change | | :------------------------------------------------- | :----- | :----- | :------------ | :------------- | | Gross interest expense | $101.3 | $93.8 | $7.5 | 8.0% | | Capitalized interest | $(17.0) | $(14.3) | $(2.8) | 19.5% | | Amortization of deferred financing costs and loan discounts/premiums | $7.5 | $4.6 | $2.9 | 63.1% | | **TOTAL** | **$91.8** | **$84.2** | **+$7.6** | **9.0%** | - Transaction-related expenses increased by **1,573.6%** to **$7.4 million**, primarily due to the Zio and Star Waggons acquisitions[273](index=273&type=chunk) - Depreciation and amortization expense increased by **14.9%** to **$255.5 million**, mainly due to the **1918** Eighth acquisition, accelerated depreciation, and new assets from Zio and Star Waggons[272](index=272&type=chunk) [Liquidity and Capital Resources](index=66&type=section&id=Liquidity%20and%20Capital%20Resources) This section details the Company's liquidity sources and uses, including cash, credit facilities, and debt, along with its capital structure [Liquidity Sources](index=67&type=section&id=Liquidity%20Sources) - Cash and cash equivalents were approximately **$110.5 million** at September 30, 2021[281](index=281&type=chunk) - The Company sold **$65.8 million** of common stock through its ATM program (total capacity **$125.0 million**) through September 30, 2021[283](index=283&type=chunk) - As of September 30, 2021, **$300.0 million** had been drawn on the **$600.0 million** unsecured revolving credit facility[284](index=284&type=chunk) - As of September 30, 2021, **$220.2 million** had been drawn on the **$414.6 million** construction loan secured by One Westside and **10850** Pico properties[284](index=284&type=chunk) Ratio of Debt to Total Market Capitalization (as of Sep 30, 2021, in millions) | Metric | Amount | | :--------------------------------------- | :----------- | | Total consolidated debt | $3,953.8 | | Common equity capitalization | $4,091.4 | | **Total consolidated debt/total consolidated market capitalization** | **49.1%** | [Outstanding Indebtedness](index=68&type=section&id=Outstanding%20Indebtedness) Outstanding Indebtedness (in millions) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :-------------------------- | :----------- | :----------- | | Unsecured debt | $2,225.0 | $1,925.0 | | Secured debt | $1,719.0 | $1,507.3 | | In-substance defeased debt | $129.1 | $131.7 | | Joint venture partner debt | $66.1 | $66.1 | - The operating partnership was in compliance with its financial covenants as of September 30, 2021[288](index=288&type=chunk) [Liquidity Uses](index=68&type=section&id=Liquidity%20Uses) - The Company is required to pay up to **$35.0 million** in additional contingent consideration for the Zio acquisition (**$15.0 million** in **2022** and **$20.0 million** in **2024**)[289](index=289&type=chunk) - Outstanding obligations under construction agreements totaled **$179.9 million** as of September 30, 2021[196](index=196&type=chunk) [Cash Flows](index=68&type=section&id=Cash%20Flows) Cash Flow Activity (9 Months Ended Sep 30, 2021 vs. 2020, in millions) | Metric | 2021 | 2020 | Dollar Change | Percent Change | | :--------------------------------- | :----- | :----- | :------------ | :------------- | | Net cash provided by operating activities | $285.5 | $247.9 | $37.6 | 15.2% | | Net cash used in investing activities | $(560.6) | $(305.2) | $(255.4) | 83.7% | | Net cash provided by financing activities | $345.8 | $403.3 | $(57.5) | (14.3)% | - Net cash used in investing activities increased by **$255.4 million**, primarily due to the Zio and Star Waggons acquisitions (**$209.9 million** cash consideration) and a **$72.1 million** increase in contributions to unconsolidated real estate entities[293](index=293&type=chunk)[294](index=294&type=chunk) - Net cash provided by financing activities decreased by **$57.5 million**, mainly due to a **$347.7 million** decrease in contributions from non-controlling members and an **$87.3 million** decrease in proceeds from unsecured and secured debt[295](index=295&type=chunk) [Off-Balance Sheet Arrangements](index=70&type=section&id=Off-Balance%20Sheet%20Arrangements) The Company's off-balance sheet arrangements primarily relate to its investment in an unconsolidated joint venture with significant mortgage indebtedness - The unconsolidated Bentall Centre joint venture has mortgage indebtedness of approximately **$513.6 million**[296](index=296&type=chunk) - The Company's proportionate share of this debt is approximately **$102.7 million**[296](index=296&type=chunk) [Critical Accounting Policies](index=70&type=section&id=Critical%20Accounting%20Policies) This section highlights critical accounting policies requiring significant management estimates and judgments, which could materially affect reported financial results - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues, and expenses[297](index=297&type=chunk) - Key estimates include acquiring, developing, and assessing carrying values of real estate properties, fair value measurement of contingent consideration, and incremental borrowing rates for leases[297](index=297&type=chunk) - Actual results could materially differ from these estimates[297](index=297&type=chunk) [Non-GAAP Supplemental Financial Measure: Funds From Operations](index=70&type=section&id=Non-GAAP%20Supplemental%20Financial%20Measure%3A%20Funds%20From%20Operations) This section presents Funds From Operations (FFO) as a key supplemental non-GAAP measure for REIT operating performance, calculated per NAREIT guidelines - FFO is calculated in accordance with the White Paper issued by NAREIT, excluding gains/losses from sales of depreciable real estate and impairment write-downs, plus real estate-related depreciation and amortization[299](index=299&type=chunk) - FFO is considered a useful supplemental measure of operating performance for investors and analysts to compare operating results between periods and to other REITs[300](index=300&type=chunk) FFO to Common Stockholders and Unitholders (in millions) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net (loss) income | $(6.2) | $(1.4) | $12.3 | $19.6 | | **FFO TO COMMON STOCKHOLDERS AND UNITHOLDERS** | **$69.1** | **$63.2** | **$214.7** | **$221.6** | [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=72&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the Company's exposure to market risks, including foreign currency exchange rate risk and the impact of LIBOR discontinuance - The Company has exposure to foreign currency exchange rate risk related to its unconsolidated real estate entities operating in Canada and the United Kingdom[306](index=306&type=chunk) - Gains or losses resulting from the translation of foreign currencies are classified in accumulated other comprehensive loss and are excluded from net income[306](index=306&type=chunk) - There have been no material changes for the nine months ended September 30, 2021, to the market risk information provided in the **2020** Annual Report on Form **10-K**[305](index=305&type=chunk) [ITEM 4. Controls and Procedures](index=72&type=section&id=ITEM%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting [Disclosure Controls and Procedures (Hudson Pacific Properties, Inc.)](index=72&type=section&id=Disclosure%20Controls%20and%20Procedures%20%28Hudson%20Pacific%20Properties%2C%20Inc.%29) - The Chief Executive Officer and Chief Financial Officer concluded that Hudson Pacific Properties, Inc.'s disclosure controls and procedures were effective as of September 30, 2021[309](index=309&type=chunk) [Disclosure Controls and Procedures (Hudson Pacific Properties, L.P.)](index=72&type=section&id=Disclosure%20Controls%20and%20Procedures%20%28Hudson%20Pacific%20Properties%2C%20L.P.%29) - The Chief Executive Officer and Chief Financial Officer of Hudson Pacific Properties, Inc. concluded that Hudson Pacific Properties, L.P.'s disclosure controls and procedures were effective as of September 30, 2021[312](index=312&type=chunk) [Changes in Internal Control Over Financial Reporting (Hudson Pacific Properties, Inc.)](index=74&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting%20%28Hudson%20Pacific%20Properties%2C%20Inc.%29) - No changes occurred during the third quarter of **2021** that materially affected, or are reasonably likely to materially affect, Hudson Pacific Properties, Inc.'s internal control over financial reporting[313](index=313&type=chunk) [Changes in Internal Control Over Financial Reporting (Hudson Pacific Properties, L.P.)](index=74&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting%20%28Hudson%20Pacific%20Properties%2C%20L.P.%29) - No changes occurred during the third quarter of **2021** that materially affected, or are reasonably likely to materially affect, Hudson Pacific Properties, L.P.'s internal control over financial reporting[314](index=314&type=chunk) [PART II—OTHER INFORMATION](index=75&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=75&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The Company is involved in various lawsuits and legal proceedings, none of which are expected to have a material adverse effect on its financial position or operations - The Company is a party to various lawsuits, claims, and other legal proceedings arising out of the ordinary course of business[317](index=317&type=chunk) - Management believes that the ultimate resolution of all such claims will not have a material adverse effect on the Company's results of operations, financial position, or cash flows[317](index=317&type=chunk) [ITEM 1A. RISK FACTORS](index=75&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section highlights the risk related to the discontinuing of LIBOR, which could impact the Company's interest payments and financial condition - The discontinuing of USD LIBOR after June **30**, **2023**, poses a risk to the Company[318](index=318&type=chunk) - Uncertainty about future changes to LIBOR or its unavailability could impact interest payments, the value of LIBOR-tied instruments, and interest rates on current or future indebtedness[318](index=318&type=chunk)[319](index=319&type=chunk) - Any adverse effects could impact the Company's financial condition, results of operations, cash flows, or the market price of its common stock[320](index=320&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=75&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details unregistered sales of equity securities, including partnership units and common stock issued for restricted stock awards - During the third quarter of **2021**, the operating partnership issued partnership units in private placements[322](index=322&type=chunk) - The Company issued an aggregate of **1,168** shares of common stock in connection with the vesting of restricted stock awards during the third quarter of **2021**[322](index=322&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=76&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported for the period - No defaults upon senior securities were reported[325](index=325&type=chunk) [ITEM 4. Mine Safety Disclosures](index=76&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) No mine safety disclosures were reported for the period - No mine safety disclosures were reported[326](index=326&type=chunk) [ITEM 5. Other Information](index=76&type=section&id=ITEM%205.%20Other%20Information) No other information was reported for the period - No other information was reported[327](index=327&type=chunk) [ITEM 6. Exhibits](index=77&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form **10-Q**, including organizational documents, certifications, and XBRL financial information - The exhibits include Articles of Amendment and Restatement, Bylaws, Agreement of Limited Partnership, and Certificate of Limited Partnership[329](index=329&type=chunk) - Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Sections **302** and **906** of the Sarbanes-Oxley Act of **2002** are filed for both Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.[329](index=329&type=chunk) - Financial information formatted in iXBRL (Inline eXtensible Business Reporting Language) is included as Exhibit **101**[329](index=329&type=chunk) [SIGNATURES](index=78&type=section&id=SIGNATURES) The report is signed by the Chief Executive Officer and Chief Financial Officer for both Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P. - The report is signed by Victor J. Coleman, Chief Executive Officer, and Harout K. Diramerian, Chief Financial Officer, for Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.[335](index=335&type=chunk)[336](index=336&type=chunk)[340](index=340&type=chunk)[341](index=341&type=chunk) - The signing date for both entities is October **29**, **2021**[335](index=335&type=chunk)[336](index=336&type=chunk)[340](index=340&type=chunk)[341](index=341&type=chunk)

Hudson Pacific Properties, Inc. (NYSE:HPP) Q3 2021 Earnings Conference Call October 27, 2021 2:00 PM ET Company Participants Laura Campbell - EVP, IR & Marketing Victor Coleman - Chairman and CEO Mark Lammas - President Harout Diramerian - CFO Conference Call Participants Craig Mailman - KeyBanc Capital Markets Alexander Goldfarb - Piper Sandler Jamie Feldman - Bank of America Merrill Lynch Manny Korchman - Citi John Kim - BMO Capital Markets Blaine Heck - Wells Fargo Securities Ronald Kamdem - Morgan ...

Hudson Pacific Properties, Inc. (NYSE:HPP) Q2 2021 Results Conference Call August 4, 2021 2:00 PM ET Company Participants Laura Campbell - EVP, IR and Marketing Victor Coleman - Chairman and CEO Mark Lammas - President Harout Diramerian - CFO Art Suazo - EVP, Leasing Conference Call Participants Craig Mailman - KeyBanc Capital Markets Manny Korchman - Citigroup Nick Yulico - Scotiabank Alexander Goldfarb - Piper Sandler John Kim - BMO Capital Markets Blaine Heck - Wells Fargo Jamie Feldman - Bank of America ...