Hudson Pacific Properties Reports Second Quarter 2023 Financial Results

Hudson Pacific Properties, Inc. (NYSE: HPP) (the "Company," "Hudson Pacific," or "HPP"), a unique provider of end-to-end real estate solutions for dynamic tech and media tenants in global epicenters for these synergistic, converging and secular growth industries,today announced financial results for the second quarter 2023.

"We continued to focus on the controllable aspects of our business during the quarter, which included leasing and expense management, given the industry challenges we are working to navigate," said Victor Coleman, Chairman & CEO. "Last month, the national entertainment strike expanded, with the actors joining the writers on strike for the first time since 1960. A strike of this magnitude, while rare and historically short-term, can be extremely impactful and far-reaching. We’re working diligently to mitigate its impact and to ensure our studio business is well positioned to capture the potential surge in production upon resolution. Regarding our office portfolio, a greater percentage of our tenants are starting to enforce back-to-office requirements, which we believe could ultimately result in the need for more office space as workforces have grown on a net basis over the past five years in many industries central to our leasing efforts. The timeline for tenant decision making remains extended, but increased interest is signaling that office fundamentals could begin to evolve in a more positive manner in our west coast markets. With our attention to capital preservation and addressing our debt maturities, we expect to overcome today’s challenges and capitalize on longer-term tenant activity within our attractive portfolio."

Financial Results Compared to Second Quarter 2022

• Total revenue of $245.2 million compared to $251.4 million, primarily due to previously communicated vacancies at Skyport Plaza and 10900-10950 Washington and the sales of 6922 Hollywood and Skyway Landing
• Net loss attributable to common stockholders of $36.2 million, or $0.26 per diluted share, compared to net loss of $7.4 million, or $0.05 per diluted share, driven by the aforementioned tenant move-outs and asset sales, higher operating expenses associated with the Quixote acquisition and increased interest expense
• FFO, excluding specified items, of $34.5 million, or $0.24 per diluted share, compared to $74.6 million, or $0.51 per diluted share. Specified items consist of transaction-related income (rather than expense) of $2.5 million, or $0.02 per diluted share (includes lowering accruals for future earn-outs related to the Zio Studio Services acquisition); prior-period property tax reimbursement of $1.5 million, or $0.01 per diluted share; deferred tax asset write-off expense of $3.5 million, or $0.02 per diluted share; and, gain on debt extinguishment of $7.2 million (net of taxes), or $0.05 per diluted share. Prior year specified items consisted of transaction-related expenses of $1.1 million, or $0.01 per diluted share; and prior-period property tax expense of $0.5 million, or $0.00 per diluted share
• FFO of $42.2 million, or $0.29 per diluted share, compared to $73.0 million, or $0.50 per diluted share
• AFFO of $31.1 million, or $0.22 per diluted share, compared to $60.3 million, or $0.41 per diluted share
• Same-store cash NOI of $127.6 million up 4.7% compared to $121.9 million, mostly attributable to significant office lease commencements at One Westside and Harlow

Leasing

• Executed 61 new and renewal leases totaling 403,231 square feet, including a 56,000-square-foot renewal and extension with Rivian Automotive at Clocktower Square through 2028
• GAAP and cash rents decreased 3.8% and 8.1%, respectively, from prior levels
• In-service office portfolio ended the quarter at 85.2% occupied and 87.0% leased, with the change primarily attributable to small- to mid-sized expirations in the Peninsula and Silicon Valley, and to a lesser extent, Vancouver
• On average over the trailing 12 months, the in-service studio portfolio was 86.5% leased, and the related 35 stages were 95.7% leased

Balance Sheet as of June 30, 2023

• $581.2 million of total liquidity comprised of $109.2 million of unrestricted cash and cash equivalents and $472.0 million of undrawn capacity under the unsecured revolving credit facility
• $90.0 million and $32.4 million of undrawn capacity under construction loans secured by One Westside/Westside Two and Sunset Glenoaks Studios, respectively
• HPP's share of net debt to HPP's share of undepreciated book value was 38.7% with 85.3% of debt fixed or capped and no material maturities until the loan secured by One Westside, which is 100% leased to Google through 2036, matures in December 2024
• Repaid the Quixote loan for $150.0 million, a $10.0 million discount on the principal balance, with funds from the unsecured revolving credit facility

Dividend

• The Company's Board of Directors declared and paid dividends on its common stock of $0.125 per share, and on its 4.750% Series C cumulative preferred stock of $0.296875 per share

ESG Leadership

• Issued 2022 Corporate Responsibility Report outlining achievements, including ranking #1 amongst office companies in the Americas in the GRESB Real Estate Assessment, winning Nareit’s Office Leader in the Light Award, inclusion in the Bloomberg Gender-Equality Index, and launch of HPPx2030 with ambitious targets to reduce climate impact and diversify management

2023 Outlook

Due to continued uncertainty around the duration of the studio-related union strikes, the Company will continue to provide certain assumptions relevant to its full-year 2023 office outlook, but has not reinstated its outlook for 2023 full-year FFO or studio-related assumptions. Current assumptions reflect management’s view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels and the earnings impact of events referenced in this press release and in earlier announcements. It otherwise excludes any impact from new acquisitions, dispositions, debt financings or repayments, recapitalizations, capital markets activity or similar matters. There can be no assurance that actual results will not differ materially from these estimates.

The Company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis, where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and/or amount of various items that would impact net income attributable to common stockholders per diluted share, which is the most directly comparable forward-looking GAAP financial measure. This includes, for example, acquisition costs and other non-core items that have not yet occurred, are out of the Company's control and/or cannot be reasonably predicted. For the same reasons, the Company is unable to address the probable significance of the unavailable information. Forward-looking non-GAAP financial measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.

Supplemental Information

Supplemental financial information regarding Hudson Pacific's second quarter 2023 results may be found on the Investors section of the Company's website at HudsonPacificProperties.com. This supplemental information provides additional detail on items such as property occupancy, financial performance by property and debt maturity schedules.

Conference Call

The Company will hold a conference call to discuss second quarter 2023 financial results at 9:00 a.m. PT / 12:00 p.m. ET on August 2, 2023. Please dial (833) 470-1428 and enter passcode 861397 to access the call. International callers should dial (404) 975-4839 and enter the same passcode. A live, listen-only webcast and replay can be accessed via the Investors section of the Company's website at HudsonPacificProperties.com.

About Hudson Pacific Properties

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

Forward-Looking Statements

This press release may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events, or trends and that do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond the Company's control, which may cause actual results to differ significantly from those expressed in any forward-looking statement. All forward-looking statements reflect the Company's good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause the Company's future results to differ materially from any forward-looking statements, see the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, and other risks described in documents subsequently filed by the Company from time to time with the SEC.

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