UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2019 
or
oTRANSITION 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.)

Hudson Pacific Properties, Inc.
Hudson Pacific Properties, L.P.
(Exact name of registrant as specified in its charter)


Hudson Pacific Properties, Inc.


Maryland
(State or other jurisdiction of incorporation or organization)
27-1430478
(I.R.S. Employer Identification Number)
Hudson Pacific Properties, L.P.


Maryland
(State or other jurisdiction of incorporation or organization)
80-0579682
(I.R.S. Employer Identification Number)

11601 Wilshire Blvd., Ninth Floor
Los Angeles, California 90025
(Address of principal executive offices) (Zip Code)
(310) 445-5700
(Registrant’s telephone number, including area code)


N/A
(Former name, former address and
former fiscal year, if changed since last report)

______________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    
Hudson Pacific Properties, Inc. Yes  x   No  o
Hudson Pacific Properties, L.P. Yes  x   No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    
Hudson Pacific Properties, Inc. Yes  x   No  o
Hudson Pacific Properties, L.P. Yes  x   No  o


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Hudson Pacific Properties, Inc.
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company) 
Smaller reporting company o
Emerging growth company o


Hudson Pacific Properties, L.P
L.P.
Large accelerated filer  o
Accelerated filer  o
Non-accelerated filer x
Non-accelerated filer  x
(Do not check if a smaller reporting company) 
Smaller reporting company  o
Emerging growth company  o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Hudson Pacific Properties, Inc. o
Hudson Pacific Properties, L.P. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   
Hudson Pacific Properties, Inc.  Yes  o    No  x
Hudson Pacific Properties, L.P. Yes  o    No  x

Securities registered pursuant to Section 12(b) of the Act:
RegistrantTitle of each classTrading Symbol(s)Name of each exchange on which registered
Hudson Pacific Properties, Inc.Common Stock, $0.01 par valueHPPNew York Stock Exchange

The number of shares of common stock of Hudson Pacific Properties, Inc. outstanding at NovemberMay 1, 20172019 was 156,060,854.154,375,000.



Table of Contents

EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the period ended September 30, 2017March 31, 2019 of Hudson Pacific Properties, Inc., a Maryland corporation, and Hudson Pacific Properties, L.P., a Maryland limited partnership. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “we,” “us,” “our,” or “our Company” refer to Hudson Pacific Properties, Inc. together with its consolidated subsidiaries, including Hudson Pacific Properties, L.P. Unless otherwise indicated or unless the context requires otherwise, all references to “our operating partnership” or “the operating partnership” refer to Hudson Pacific Properties, L.P. together with its consolidated subsidiaries.
Hudson Pacific Properties, Inc. is a real estate investment trust, or REIT, and the sole general partner of our operating partnership. As of September 30, 2017,March 31, 2019, Hudson Pacific Properties, Inc. owned approximately 99.6%99.2% of the outstanding common units ofownership interest in our operating partnership interest (including unvested restricted units) in our operating partnership, or common units.. The remaining approximately 0.4% of outstanding common units at September 30, 2017 were0.8% interest was owned by certain of our executive officers, directors and directors, certain of their affiliates and other outside investors. As of December 31, 2016, certain affiliates of Blackstone Group L.P. (“Blackstone”) and Farallon Capital Management, LLC (“the Farallon Funds”) held an ownership interest in the Company and theinvestors, including unvested operating partnership. Following a common stock offering and a common unit repurchase on January 10, 2017, Blackstone and the Farallon Funds informed us that they no longer owned common stock or common units in the Company or the operating partnership.partnership performance units. As the sole general partner of our operating partnership, Hudson Pacific Properties, Inc. has the full, exclusive and complete responsibility for our operating partnership’s day-to-day management and control.
We believe combining the quarterly reports on Form 10-Q of Hudson Pacific Properties, Inc. and the operating partnership into this single report results in the following benefits:
•enhancing investors’ understanding of our Company and our operating partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;


•eliminating duplicative disclosure and providing a more streamlined and readable presentation because a substantial portion of the disclosure appliesdisclosures apply to both our Company and our operating partnership; and


•creating time and cost efficiencies through the preparation of one combined report instead of two separate reports.


There are a few differences between our Company and our operating partnership, which are reflected in the disclosures in this report. We believe it is important to understand the differences between our Company and our operating partnership in the context of how we operate as an interrelated, consolidated company. Hudson Pacific Properties, Inc. is a REIT, the only material assets of which are the units of partnership interest in our operating partnership. As a result, Hudson Pacific Properties, Inc. does not conduct business itself, other than acting as the sole general partner of our operating partnership, issuing equity from time to time and guaranteeing certain debt of our operating partnership. Hudson Pacific Properties, Inc. itself does not issue any indebtedness but guarantees some of the debt of our operating partnership. Our operating partnership, which is structured as a partnership with no publicly traded equity, holds substantially all of the assets of our Company and conducts substantially all of our business. Except for net proceeds from equity issuances by Hudson Pacific Properties, Inc., which are generally contributed to our operating partnership in exchange for units of partnership interest in our operating partnership, our operating partnership generates the capital required by our Company’s business through its operations, its incurrence of indebtedness or through the issuance of units of partnership interest in our operating partnership.
Non-controlling interest, stockholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of our Company and those of our operating partnership. The common units in our operating partnership are accounted for as partners’ capital in our operating partnership’s consolidated financial statements and, to the extent not held by our Company, as a non-controlling interest in our Company’s consolidated financial statements. The differences between stockholders’ equity, partners’ capital and non-controlling interest result from the differences in the equity issued by our Company and our operating partnership.
To help investors understand the significant differences between our Company and our operating partnership, this report presents the consolidated financial statements and Note 14—Earnings Per Share separately for our Company and our operating partnership. All other sections of this report, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures About Market Risk,” are presented together for our Company and our operating partnership.


2



In order to establish that the Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that our Company and our operating partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, or the Exchange Act and 18 U.S.C. §1350, this report also includes separate Part I, Item 4 “Controls and Procedures” sections and separate Exhibit 31 and 32 certifications for each of Hudson Pacific Properties, Inc. and our operating partnership.


3






HUDSON PACIFIC PROPERTIES, INC. AND HUDSON PACIFIC PROPERTIES, L.P.
QUARTERLY REPORT FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017
TABLE OF CONTENTS


Page
PART I—FINANCIAL INFORMATION
ITEM 1.Financial Statements of Hudson Pacific Properties, Inc.
Consolidated Balance Sheets as of September 30, 2017March 31, 2019 (unaudited) and December 31, 20162018
5
Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2017March 31, 2019 and 20162018
6
Consolidated Statements of Comprehensive (Loss) Income (Loss) (unaudited) for the three and nine months ended September 30, 2017March 31, 2019 and 20162018
7
Consolidated Statements of Equity (unaudited) for the ninethree months ended September 30, 2017 (unaudited) and year ended DecemberMarch 31, 20162019 and 2018
8
Consolidated Statements of Cash Flows (unaudited) for the ninethree months ended September 30, 2017March 31, 2019 and 20162018
9
ITEM 1.Financial Statements of Hudson Pacific Properties, L.P.
Consolidated Balance Sheets as of September 30, 2017March 31, 2019 (unaudited) and December 31, 20162018
10
Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2017March 31, 2019 and 20162018
11
Consolidated Statements of Comprehensive (Loss) Income (Loss) (unaudited) for the three and nine months ended September 30, 2017March 31, 2019 and 20162018
12
Consolidated Statements of Capital (unaudited) for the ninethree months ended September 30, 2017 (unaudited)March 31, 2019 and year ended December 31, 20162018
13
Consolidated Statements of Cash Flows (unaudited) for the ninethree months ended September 30, 2017March 31, 2019 and 20162018
14
15
ITEM 2.
3940
ITEM 3.
6056
ITEM 4.
6056
PART II—OTHER INFORMATION
ITEM 1.
58
ITEM 1.1A.
6258
ITEM 1A.2.
62
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
6258
ITEM 3.
6259
ITEM 4.
6259
ITEM 5.
6259
ITEM 6.
6360
6461




4


PART I—FINANCIAL INFORMATION
ITEM 1.
ITEM 1.   FINANCIAL STATEMENTS OF HUDSON PACIFIC PROPERTIES, INC.

HUDSON PACIFIC PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS
(in thousands, except unitshare data)



September 30, 2017 December 31, 2016
March 31, 2019
(unaudited)
December 31, 2018
ASSETS(unaudited)  ASSETS
Investment in real estate, at cost$6,558,898
 $6,099,293
Investment in real estate, at cost$6,990,420 $7,059,537 
Accumulated depreciation and amortization(504,141) (387,181)Accumulated depreciation and amortization(739,334)(695,631)
Investment in real estate, net6,054,757
 5,712,112
Investment in real estate, net6,251,086 6,363,906 
Cash and cash equivalents87,723
 83,015
Cash and cash equivalents52,445 53,740 
Restricted cash25,784
 25,177
Restricted cash13,626 14,451 
Accounts receivable, net5,014
 6,833
Accounts receivable, net17,969 14,004 
Straight-line rent receivables, net97,184
 82,109
Straight-line rent receivables, net159,004 142,369 
Deferred leasing costs and lease intangible assets, net257,831
 294,209
Deferred leasing costs and lease intangible assets, net280,193 279,896 
U.S. Government securitiesU.S. Government securities144,992 146,880 
Operating lease right-of-use assetOperating lease right-of-use asset272,051 — 
Prepaid expenses and other assets, net57,360
 79,058
Prepaid expenses and other assets, net82,441 55,633 
Assets associated with real estate held for sale321,437
 396,485
Assets associated with real estate held for sale99,821 — 
TOTAL ASSETS$6,907,090
 $6,678,998
TOTAL ASSETS$7,373,628 $7,070,879 
   
LIABILITIES AND EQUITY   LIABILITIES AND EQUITY
Notes payable, net$2,424,358
 $2,473,323
Accounts payable and accrued liabilities162,938
 116,973
LiabilitiesLiabilities
Unsecured and secured debt, netUnsecured and secured debt, net$2,711,632 $2,623,835 
In-substance defeased debtIn-substance defeased debt137,417 138,223 
Joint venture partner debtJoint venture partner debt66,136 66,136 
Accounts payable, accrued liabilities and otherAccounts payable, accrued liabilities and other208,047 175,300 
Operating lease liabilityOperating lease liability274,626 — 
Lease intangible liabilities, net55,335
 73,569
Lease intangible liabilities, net41,112 45,612 
Security deposits and prepaid rent66,499
 70,468
Security deposits and prepaid rent69,251 68,687 
Derivative liabilities819
 1,303
Liabilities associated with real estate held for sale224,032
 230,435
Liabilities associated with real estate held for sale732 — 
TOTAL LIABILITIES2,933,981
 2,966,071
6.25% Series A cumulative redeemable preferred units of the operating partnership10,177
 10,177
EQUITY   
Hudson Pacific Properties, Inc. stockholders’ equity:   
Common stock, $0.01 par value, 490,000,000 authorized, 155,302,800 shares and 136,492,235 shares outstanding at September 30, 2017 and December 31, 2016, respectively1,553
 1,364
Total liabilitiesTotal liabilities3,508,953 3,117,793 
Redeemable preferred units of the operating partnershipRedeemable preferred units of the operating partnership9,815 9,815 
Redeemable non-controlling interest in consolidated real estate entitiesRedeemable non-controlling interest in consolidated real estate entities114,616 113,141 
EquityEquity
Hudson Pacific Properties, Inc. stockholders’ equityHudson Pacific Properties, Inc. stockholders’ equity
Common stock, $0.01 par value, 490,000,000 authorized, 154,373,581 shares and 154,371,538 shares outstanding at March 31, 2019 and December 31, 2018, respectivelyCommon stock, $0.01 par value, 490,000,000 authorized, 154,373,581 shares and 154,371,538 shares outstanding at March 31, 2019 and December 31, 2018, respectively1,543 1,543 
Additional paid-in capital3,619,940
 3,109,394
Additional paid-in capital3,485,307 3,524,502 
Accumulated other comprehensive income6,465
 9,496
Accumulated other comprehensive income9,674 17,501 
Accumulated income (deficit)18,911
 (16,971)
Accumulated deficitAccumulated deficit(41,189)— 
Total Hudson Pacific Properties, Inc. stockholders’ equity3,646,869
 3,103,283
Total Hudson Pacific Properties, Inc. stockholders’ equity3,455,335 3,543,546 
Non-controlling interest—members in consolidated entities302,111
 304,608
Non-controlling interest—members in consolidated entities267,039 268,246 
Non-controlling interest—units in the operating partnership13,952
 294,859
Non-controlling interest—units in the operating partnership17,870 18,338 
TOTAL EQUITY3,962,932
 3,702,750
Total equityTotal equity3,740,244 3,830,130 
TOTAL LIABILITIES AND EQUITY$6,907,090
 $6,678,998
TOTAL LIABILITIES AND EQUITY$7,373,628 $7,070,879 







The accompanying notes are an integral part of these consolidated financial statements.

5






HUDSON PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except share data)

Three Months Ended March 31,
20192018
REVENUES
Office
Rental (Note 2)$170,197 $130,082 
Tenant recoveries (Note 2)— 20,904 
Service revenues (Note 2)5,661 5,546 
Total office revenues175,858 156,532 
Studio
Rental (Note 2)12,394 10,383 
Tenant recoveries (Note 2)— 354 
Service revenues and other (Note 2)9,137 6,849 
Total studio revenues21,531 17,586 
Total revenues197,389 174,118 
OPERATING EXPENSES
Office operating expenses60,815 53,240 
Studio operating expenses11,109 9,664 
General and administrative18,094 15,564 
Depreciation and amortization68,505 60,553 
Total operating expenses158,523 139,021 
OTHER EXPENSE (INCOME)
Interest expense24,350 20,503 
Interest income(1,024)(9)
Transaction-related expenses128 118 
Other expense (income)106 (404)
Gains on sale of real estate— (37,674)
Impairment loss52,201 — 
Total other expense (income)75,761 (17,466)
Net (loss) income(36,895)52,563 
Net income attributable to preferred units(153)(159)
Net income attributable to participating securities(308)(327)
Net income attributable to non-controlling interest in consolidated real estate entities(2,821)(3,323)
Net loss attributable to redeemable non-controlling interest in consolidated real estate entities600 — 
Net loss (income) attributable to non-controlling interest in the operating partnership185 (177)
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS$(39,392)$48,577 
BASIC AND DILUTED PER SHARE AMOUNTS
Net (loss) income attributable to common stockholders—basic$(0.26)$0.31 
Net (loss) income attributable to common stockholders—diluted$(0.26)$0.31 
Weighted average shares of common stock outstanding—basic154,396,159 155,626,055 
Weighted average shares of common stock outstanding—diluted154,396,159 156,714,822 

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
REVENUES       
Office       
Rental$139,157
 $123,919
 $406,275
 $358,193
Tenant recoveries24,982
 22,657
 67,421
 64,493
Parking and other8,035
 5,521
 22,146
 16,103
Total Office revenues172,174
 152,097
 495,842
 438,789
Media & Entertainment       
Rental11,012
 7,102
 26,802
 19,987
Tenant recoveries133
 243
 927
 655
Other property-related revenue6,561
 5,005
 14,964
 12,784
Other141
 136
 271
 226
Total Media & Entertainment revenues17,847
 12,486
 42,964
 33,652
TOTAL REVENUES190,021
 164,583
 538,806
 472,441
OPERATING EXPENSES       
Office operating expenses59,102
 53,975
 162,524
 150,769
Media & Entertainment operating expenses10,588
 6,499
 24,842
 18,746
General and administrative13,013
 12,955
 41,329
 38,474
Depreciation and amortization71,158
 67,414
 217,340
 201,890
TOTAL OPERATING EXPENSES153,861
 140,843
 446,035
 409,879
INCOME FROM OPERATIONS36,160
 23,740
 92,771
 62,562
OTHER EXPENSE (INCOME)       
Interest expense22,461
 19,910
 66,086
 54,775
Interest income(44) (130) (90) (216)
Unrealized loss (gain) on ineffective portion of derivative instruments37
 (879) 82
 1,630
Transaction-related expenses598
 315
 598
 376
Other income(1,402) (693) (2,656) (716)
TOTAL OTHER EXPENSES21,650
 18,523
 64,020
 55,849
 INCOME BEFORE GAINS ON SALE OF REAL ESTATE14,510
 5,217
 28,751
 6,713
Gains on sale of real estate—
 —
 16,866
 8,515
NET INCOME14,510
 5,217
 45,617
 15,228
Net income attributable to preferred units(159) (159) (477) (477)
Net income attributable to participating securities(255) (196) (750) (589)
Net income attributable to non-controlling interest in consolidated entities(2,991) (2,525) (9,002) (6,866)
Net income attributable to non-controlling interest in units in the operating partnership(41) (490) (256) (2,357)
Net income attributable to Hudson Pacific Properties, Inc. common stockholders$11,064
 $1,847
 $35,132
 $4,939
Basic and diluted per share amounts:       
Net income attributable to common stockholders—basic$0.07
 $0.02
 $0.23
 $0.05
Net income attributable to common stockholders—diluted$0.07
 $0.02
 $0.23
 $0.05
Weighted average shares of common stock outstanding—basic155,302,800
 115,083,622
 152,874,952
 99,862,583
Weighted average shares of common stock outstanding—diluted156,093,736
 116,262,622
 153,648,888
 100,979,583
Dividends declared per share$0.25
 $0.20
 $0.75
 $0.60










The accompanying notes are an integral part of these consolidated financial statements.

6






HUDSON PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (LOSS)
(unaudited, in thousands)


Three Months Ended March 31,
20192018
Net (loss) income$(36,895)$52,563 
Other comprehensive (loss) income: change in fair value of derivatives(7,864)9,513 
Comprehensive (loss) income(44,759)62,076 
Comprehensive income attributable to preferred units(153)(159)
Comprehensive income attributable to participating securities(308)(391)
Comprehensive income attributable to non-controlling interest in consolidated entities(2,821)(3,323)
Comprehensive loss attributable to redeemable non-controlling interest in consolidated real estate entities600 — 
Comprehensive loss (income) attributable to non-controlling interest in the operating partnership222 (211)
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS$(47,219)$57,992 

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Net income$14,510
 $5,217
 $45,617
 $15,228
Other comprehensive income (loss): change in fair value of derivative instruments507
 3,087
 611
 (20,818)
Comprehensive income (loss)15,017
 8,304
 46,228
 (5,590)
Comprehensive income attributable to preferred units(159) (159) (477) (477)
Comprehensive income attributable to participating securities(255) (196) (750) (589)
Comprehensive income attributable to non-controlling interest in consolidated entities(2,991) (2,525) (9,002) (6,866)
Comprehensive (income) loss attributable to units in the operating partnership(43) (1,137) (276) 5,903
Comprehensive income (loss) attributable to Hudson Pacific Properties, Inc. stockholders$11,569
 $4,287
 $35,723
 $(7,619)








































The accompanying notes are an integral part of these consolidated financial statements.

7





HUDSON PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(unaudited, in thousands, except share data)


Hudson Pacific Properties, Inc. Stockholders’ EquityNon-controlling interest
Shares of Common StockStock AmountAdditional Paid-in CapitalRetained Earnings (Accumulated Deficit)Accumulated Other Comprehensive IncomeUnits in the operating partnershipMembers in Consolidated EntitiesTotal Equity
Balance, December 31, 2017155,602,508 $1,556 $3,622,988 $— $13,227 $14,591 $258,602 $3,910,964 
Cumulative adjustment related to adoption of ASU 2017-12— — — (231)230 1 — — 
Contributions— — — — — — 2,691 2,691 
Distributions— — — — — — (1,060)(1,060)
Proceeds from sale of common stock, net of underwriters discount and transaction costs— — (173)— — — — (173)
Issuance of unrestricted stock43,900 — — — — — — — 
Shares withheld to satisfy tax withholding(20,353)— (693)— — — — (693)
Declared dividend— — — (39,173)— (178)— (39,351)
Amortization of stock-based compensation— — 3,551 — 1,019 — 4,570 
Net income— — — 48,904 — 177 3,323 52,404 
Change in fair value of derivatives— — — — 9,479 34 — 9,513 
Balance, March 31, 2018155,626,055 $1,556 $3,625,673 $9,500 $22,936 $15,644 $263,556 $3,938,865 
Balance at December 31, 2018154,371,538 $1,543 $3,524,502 $— $17,501 $18,338 $268,246 $3,830,130 
Cumulative adjustment related to adoption of ASC 842— — — (2,105)— — — (2,105)
Distributions— — — — — — (4,028)(4,028)
Issuance of unrestricted stock128,923 1 (1)— — — — — 
Shares withheld to satisfy tax withholding(126,880)(1)(3,667)— — — — (3,668)
Declared dividend— — (39,241)— — (1,186)— (40,427)
Amortization of stock-based compensation— — 3,714 — — 1,465 — 5,179 
Net (loss) income— — — (39,084)— (185)2,821 (36,448)
Change in fair value of derivatives— — — — (7,827)(37)— (7,864)
Redemption of common units in the operating partnership— — — — — (525)— (525)
Balance at March 31, 2019154,373,581 $1,543 $3,485,307 $(41,189)$9,674 $17,870 $267,039 $3,740,244 

 Hudson Pacific Properties, Inc. Stockholders’ Equity   
 Shares of Common Stock
Stock
Amount
Additional
Paid-in
Capital
Accumulated
(Deficit) Income
Accumulated
Other
Comprehensive
(Loss) Income
Non-
controlling
Interest—Units in the
Operating
Partnership
Non-controlling Interest—Members in Consolidated EntitiesTotal Equity
Balance at January 1, 201689,153,780
$891
$1,710,979
$(44,955)$(1,081)$1,800,578
$262,625
$3,729,037
Contributions—
—
—
—
—
—
33,996
33,996
Distributions—
—
—
—
—
—
(1,303)(1,303)
Proceeds from sale of common stock, net of underwriters’ discount and transaction costs47,010,695
470
1,449,111
—
—
—
—
1,449,581
Issuance of unrestricted stock590,520
6
—
—
—
—
—
6
Shares withheld to satisfy tax withholding(262,760)(3)(8,424)—
—
—
—
(8,427)
Declared dividend—
—
(90,005)—
—
(27,814)—
(117,819)
Amortization of stock-based compensation—
—
13,609
—
—
1,045
—
14,654
Net income—
—
—
27,984
—
5,848
9,290
43,122
Change in fair value of derivatives—
—
—
—
10,577
(4,635)—
5,942
Redemption of common units in the operating partnership—
—
34,124
—
—
(1,480,163)—
(1,446,039)
Balance at December 31, 2016136,492,235
1,364
3,109,394
(16,971)9,496
294,859
304,608
3,702,750
Contributions—
—
—
—
—
—
3,870
3,870
Distributions—
—
—
—
—
—
(15,369)(15,369)
Proceeds from sale of common stock, net of underwriters’ discount and transaction costs18,656,575
187
647,337
—
—
—
—
647,524
Issuance of unrestricted stock274,251
3
(3)—
—
—
—
—
Shares withheld to satisfy tax withholding(120,261)(1)(4,202)—
—
—
—
(4,203)
Declared dividend—
—
(117,916)—
—
(492)—
(118,408)
Amortization of stock-based compensation—
—
9,865
—
—
2,007
—
11,872
Net income—
—
—
35,882
—
256
9,002
45,140
Change in fair value of derivatives—
—
—
—
591
20
—
611
Redemption of common units in the operating partnership—
—
(24,535)—
(3,622)(282,698)—
(310,855)
Balance at September 30, 2017155,302,800
$1,553
$3,619,940
$18,911
$6,465
$13,952
$302,111
$3,962,932















The accompanying notes are an integral part of these consolidated financial statements.

8





HUDSON PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)

Three Months Ended March 31,
20192018
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income$(36,895)$52,563 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization68,505 60,553 
Non-cash portion of interest expense1,591 1,658 
Amortization of stock-based compensation5,150 4,338 
Straight-line rents(16,635)(9,942)
Straight-line rent expenses366 136 
Amortization of above- and below-market leases, net(4,179)(3,811)
Amortization of above- and below-market ground lease, net615 624 
Amortization of lease incentive costs326 303 
Other non-cash adjustments— 256 
Impairment loss52,201 — 
Gains on sale of real estate— (37,674)
Change in operating assets and liabilities:
Accounts receivable(4,263)(1,782)
Deferred leasing costs and lease intangibles(13,675)(6,614)
Prepaid expenses and other assets2,771 3,313 
Accounts payable, accrued liabilities and other33,004 (33)
Security deposits and prepaid rent564 559 
Net cash provided by operating activities89,446 64,447 
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to investment in real estate(94,615)(103,512)
Maturities of U.S. Government securities1,932 — 
Proceeds from sale of real estate— 237,004 
Deposits for property acquisitions(35,584)— 
Net cash (used in) provided by investing activities(128,267)133,492 
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from unsecured and secured debt430,001 130,000 
Payments of unsecured and secured debt(335,145)(308,529)
Payments of in-substance defeased debt(806)— 
Proceeds from issuance of common stock, net— (173)
Repurchase of common units in the operating partnership(525)— 
Dividends paid to common stock and unit-holders(40,427)(39,351)
Dividends paid to preferred unit-holders(153)(159)
Contribution of redeemable non-controlling member in consolidated real estate entities2,075 — 
Contribution of non-controlling member in consolidated real estate entities— 2,691 
Distribution to non-controlling member in consolidated real estate entities(4,028)(1,060)
Payments to satisfy tax withholding(3,668)(693)
Payment of loan costs(10,623)(6,965)
Net cash provided by (used in) financing activities36,701 (224,239)
Net decrease in cash and cash equivalents and restricted cash(2,120)(26,300)
Cash and cash equivalents and restricted cash—beginning of period68,191 101,280 
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH—END OF PERIOD$66,071 $74,980 

 Nine Months Ended September 30,
 2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$45,617
 $15,228
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization217,340
 201,890
Amortization of deferred financing costs and loan premium, net3,558
 3,278
Amortization of stock-based compensation11,237
 9,931
Straight-line rents(15,174) (19,398)
Straight-line rent expenses296
 886
Amortization of above- and below-market leases, net(14,326) (13,804)
Amortization of above- and below-market ground lease, net2,088
 1,604
Amortization of lease incentive costs1,140
 1,017
Other non-cash adjustments(1)
598
 682
Gains on sale of real estate(16,866) (8,515)
Change in operating assets and liabilities:   
Accounts receivable1,649
 12,521
Deferred leasing costs and lease intangibles(23,270) (34,610)
Prepaid expenses and other assets(3,000) (5,008)
Accounts payable and accrued liabilities34,660
 32,786
Security deposits and prepaid rent(5,943) 2,364
Net cash provided by operating activities239,604
 200,852
CASH FLOWS FROM INVESTING ACTIVITIES   
Additions to investment property(224,797) (183,286)
Property acquisitions(257,734) (307,919)
Proceeds from sales of real estate81,707
 283,855
Contributions to unconsolidated entities(1,071) (28,393)
Distributions from unconsolidated entities17,416
 —
Deposit for property acquisitions—
 (13,130)
Proceed from repayment of notes receivable—
 28,892
Net cash used in investing activities(384,479) (219,981)
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from notes payable270,000
 957,000
Payments of notes payable(321,892) (808,006)
Proceeds from issuance of common stock, net647,524
 880,514
Payment for redemption of common units in the operating partnership(310,855) (876,213)
Distributions paid to common stockholders and unitholders(118,408) (88,469)
Distributions paid to preferred unitholders(477) (477)
Contributions from non-controlling member in consolidated entities3,870
 103
Distributions to non-controlling member in consolidated entities(15,369) (990)
Payments to satisfy tax withholding(4,203) (1,776)
Payments of loan costs—
 (2,661)
Net cash provided by financing activities150,190
 59,025
Net increase in cash and cash equivalents and restricted cash5,315
 39,896
Cash and cash equivalents and restricted cash—beginning of period108,192
 71,561
Cash and cash equivalents and restricted cash—end of period$113,507
 $111,457
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:   
Cash paid for interest including amounts capitalized$47,852
 $53,474
NON-CASH INVESTING ACTIVITIES:   
Accounts payable and accrued liabilities for real estate investments$(6,740) $(10,227)
Reclassification of investment in unconsolidated entities for real estate investments$7,835
 $—

_____________ 
(1)Represents bad debt expense/recovery, amortization of discount and net origination fees on purchased and originated loans and unrealized loss/gain on ineffective portion of derivative instruments.








The accompanying notes are an integral part of these consolidated financial statements.

9

ITEM 1.  FINANCIAL STATEMENTS OF HUDSON PACIFIC PROPERTIES, L.P.

ITEM 1.FINANCIAL STATEMENTS OF HUDSON PACIFIC PROPERTIES, L.P.


HUDSON PACIFIC PROPERTIES, L.PL.P.
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)


March 31, 2019
(unaudited)
December 31, 2018
ASSETS
Investment in real estate, at cost$6,990,420 $7,059,537 
Accumulated depreciation and amortization(739,334)(695,631)
Investment in real estate, net6,251,086 6,363,906 
Cash and cash equivalents52,445 53,740 
Restricted cash13,626 14,451 
Accounts receivable, net17,969 14,004 
Straight-line rent receivables, net159,004 142,369 
Deferred leasing costs and lease intangible assets, net280,193 279,896 
U.S. Government securities144,992 146,880 
Operating lease right-of-use asset272,051 — 
Prepaid expenses and other assets, net82,441 55,633 
Assets associated with real estate held for sale99,821 — 
TOTAL ASSETS$7,373,628 $7,070,879 
LIABILITIES AND CAPITAL
Liabilities
Unsecured and secured debt, net$2,711,632 $2,623,835 
In-substance defeased debt137,417 138,223 
Joint venture partner debt66,136 66,136 
Accounts payable, accrued liabilities and other208,047 175,300 
Operating lease liability274,626 — 
Lease intangible liabilities, net41,112 45,612 
Security deposits and prepaid rent69,251 68,687 
Liabilities associated with real estate held for sale732 — 
Total liabilities3,508,953 3,117,793 
Redeemable preferred units of the operating partnership9,815 9,815 
Redeemable non-controlling interest in consolidated real estate entities114,616 113,141 
Capital
Hudson Pacific Properties, L.P. partners’ capital
Common units, 155,094,354 and 154,940,583 issued and outstanding at March 31, 2019 and December 31, 2018, respectively.3,463,504 3,544,319 
Accumulated other comprehensive income9,701 17,565 
Total Hudson Pacific Properties, L.P. partners’ capital3,473,205 3,561,884 
Non-controlling interest—members in consolidated entities267,039 268,246 
Total capital3,740,244 3,830,130 
TOTAL LIABILITIES AND CAPITAL$7,373,628 $7,070,879 

 September 30, 2017 December 31, 2016
ASSETS(unaudited)  
Investment in real estate, at cost$6,558,898
 $6,099,293
Accumulated depreciation and amortization(504,141) (387,181)
Investment in real estate, net6,054,757
 5,712,112
Cash and cash equivalents87,723
 83,015
Restricted cash25,784
 25,177
Accounts receivable, net5,014
 6,833
Straight-line rent receivables, net97,184
 82,109
Deferred leasing costs and lease intangible assets, net257,831
 294,209
Prepaid expenses and other assets, net57,360
 79,058
Assets associated with real estate held for sale321,437
 396,485
TOTAL ASSETS$6,907,090
 $6,678,998
    
LIABILITIES   
Notes payable, net$2,424,358
 $2,473,323
Accounts payable and accrued liabilities162,938
 116,973
Lease intangible liabilities, net55,335
 73,569
Security deposits and prepaid rent66,499
 70,468
Derivative liabilities819
 1,303
Liabilities associated with real estate held for sale224,032
 230,435
TOTAL LIABILITIES2,933,981
 2,966,071
6.25% Series A cumulative redeemable preferred units of the operating partnership10,177
 10,177
CAPITAL   
Hudson Pacific Properties, L.P. partners’ capital:   
Common units, 155,871,845 and 145,942,855 issued and outstanding at September 30, 2017 and December 31, 2016, respectively.3,654,332
 3,392,264
Accumulated other comprehensive income6,489
 5,878
Total Hudson Pacific Properties, L.P. partners’ capital3,660,821
 3,398,142
Non-controlling interest—members in consolidated entities302,111
 304,608
TOTAL CAPITAL3,962,932
 3,702,750
TOTAL LIABILITIES AND CAPITAL$6,907,090
 $6,678,998












The accompanying notes are an integral part of these consolidated financial statements.

10






HUDSON PACIFIC PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except unit data)

Three Months Ended March 31,
20192018
REVENUES
Office
Rental (Note 2)$170,197 $130,082 
Tenant recoveries (Note 2)— 20,904 
Service revenues (Note 2)5,661 5,546 
Total office revenues175,858 156,532 
Studio
Rental (Note 2)12,394 10,383 
Tenant recoveries (Note 2)— 354 
Service revenues and other (Note 2)9,137 6,849 
Total studio revenues21,531 17,586 
Total revenues197,389 174,118 
OPERATING EXPENSES
Office operating expenses60,815 53,240 
Studio operating expenses11,109 9,664 
General and administrative18,094 15,564 
Depreciation and amortization68,505 60,553 
Total operating expenses158,523 139,021 
OTHER EXPENSE (INCOME)
Interest expense24,350 20,503 
Interest income(1,024)(9)
Transaction-related expenses128 118 
Other expense (income)106 (404)
Gains on sale of real estate— (37,674)
Impairment loss52,201 — 
Total other expense (income)75,761 (17,466)
Net (loss) income(36,895)52,563 
Net income attributable to non-controlling interest in consolidated real estate entities(2,821)(3,323)
Net loss attributable to redeemable non-controlling interest in consolidated real estate entities600 — 
Net (loss) income attributable to Hudson Pacific Properties, L.P.(39,116)49,240 
Net income attributable to preferred units(153)(159)
Net income attributable to participating securities(308)(327)
NET (LOSS) INCOME AVAILABLE TO COMMON UNITHOLDERS$(39,577)$48,754 
BASIC AND DILUTED PER UNIT AMOUNTS
Net (loss) income attributable to common unitholders—basic$(0.26)$0.31 
Net (loss) income attributable to common unitholders—diluted$(0.26)$0.31 
Weighted average shares of common units outstanding—basic155,120,144 156,195,100 
Weighted average shares of common units outstanding—diluted155,120,144 157,283,867 

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
REVENUES       
Office       
Rental$139,157
 $123,919
 $406,275
 $358,193
Tenant recoveries24,982
 22,657
 67,421
 64,493
Parking and other8,035
 5,521
 22,146
 16,103
Total Office revenues172,174
 152,097
 495,842
 438,789
Media & Entertainment       
Rental11,012
 7,102
 26,802
 19,987
Tenant recoveries133
 243
 927
 655
Other property-related revenue6,561
 5,005
 14,964
 12,784
Other141
 136
 271
 226
Total Media & Entertainment revenues17,847
 12,486
 42,964
 33,652
TOTAL REVENUES190,021
 164,583
 538,806
 472,441
OPERATING EXPENSES       
Office operating expenses59,102
 53,975
 162,524
 150,769
Media & Entertainment operating expenses10,588
 6,499
 24,842
 18,746
General and administrative13,013
 12,955
 41,329
 38,474
Depreciation and amortization71,158
 67,414
 217,340
 201,890
TOTAL OPERATING EXPENSES153,861
 140,843
 446,035
 409,879
INCOME FROM OPERATIONS36,160
 23,740
 92,771
 62,562
OTHER EXPENSE (INCOME)       
Interest expense22,461
 19,910
 66,086
 54,775
Interest income(44) (130) (90) (216)
Unrealized loss (gain) on ineffective portion of derivative instruments37
 (879) 82
 1,630
Transaction-related expenses598
 315
 598
 376
Other income(1,402) (693) (2,656) (716)
TOTAL OTHER EXPENSES21,650
 18,523
 64,020
 55,849
 INCOME BEFORE GAINS ON SALE OF REAL ESTATE14,510
 5,217
 28,751
 6,713
Gains on sale of real estate—
 —
 16,866
 8,515
NET INCOME14,510
 5,217
 45,617
 15,228
Net income attributable to non-controlling interest in consolidated entities(2,991) (2,525) (9,002) (6,866)
Net income attributable to Hudson Pacific Properties, L.P.11,519
 2,692
 36,615
 8,362
Net income attributable to preferred units(159) (159) (477) (477)
Net income attributable to participating securities(255) (196) (750) (589)
Net income available to Hudson Pacific Properties, L.P. common unitholders$11,105
 $2,337
 $35,388
 $7,296
Basic and diluted per unit amounts:       
Net income attributable to common unitholders—basic$0.07
 $0.02
 $0.23
 $0.05
Net income attributable to common unitholders—diluted$0.07
 $0.02
 $0.23
 $0.05
Weighted average shares of common units outstanding—basic155,871,845
 145,614,312
 153,736,796
 145,550,685
Weighted average shares of common units outstanding—diluted156,662,781
 146,793,312
 154,510,732
 146,667,685
Dividends declared per unit$0.25
 $0.20
 $0.75
 $0.60











The accompanying notes are an integral part of these consolidated financial statements.

11






HUDSON PACIFIC PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (LOSS)
(unaudited, in thousands)


Three Months Ended March 31,
20192018
Net (loss) income$(36,895)$52,563 
Other comprehensive (loss) income: change in fair value of derivatives(7,864)9,513 
Comprehensive (loss) income(44,759)62,076 
Comprehensive income attributable to preferred units(153)(159)
Comprehensive income attributable to participating securities(308)(391)
Comprehensive income attributable to non-controlling interest in consolidated entities(2,821)(3,323)
Comprehensive loss attributable to redeemable non-controlling interest in consolidated real estate entities600 — 
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO PARTNERS’ CAPITAL$(47,441)$58,203 

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Net income$14,510
 $5,217
 $45,617
 $15,228
Other comprehensive income (loss): change in fair value of derivative instruments507
 3,087
 611
 (20,818)
Comprehensive income (loss)15,017
 8,304
 46,228
 (5,590)
Comprehensive income attributable to preferred units(159) (159) (477) (477)
Comprehensive income attributable to participating securities(255) (196) (750) (589)
Comprehensive income attributable to non-controlling interest in consolidated entities(2,991) (2,525) (9,002) (6,866)
Comprehensive income (loss) attributable to Hudson Pacific Properties, L.P. partners’ capital$11,612
 $5,424
 $35,999
 $(13,522)










































The accompanying notes are an integral part of these consolidated financial statements.

12






HUDSON PACIFIC PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF CAPITAL
(unaudited, in thousands, except unit data)

Hudson Pacific Properties, L.P. Partners’ Capital
Number of Common UnitsCommon UnitsAccumulated Other Comprehensive IncomeTotal Partners’ CapitalNon-controlling Interest—Members in Consolidated EntitiesTotal Capital
Balance at December 31, 2017156,171,553 $3,639,086 $13,276 $3,652,362 $258,602 $3,910,964 
Cumulative adjustment related to adoption of ASU 2017-12— (231)231 — — — 
Contributions— — — — 2,691 2,691 
Distributions— — — — (1,060)(1,060)
Proceeds from sale of common units, net of underwriters’ discount and transaction costs— (173)— (173)— (173)
Issuance of unrestricted units43,900 — — — — — 
Units withheld to satisfy tax withholding(20,353)(693)— (693)— (693)
Declared distributions— (39,351)— (39,351)— (39,351)
Amortization of unit-based compensation— 4,570 — 4,570 — 4,570 
Net income— 49,081 — 49,081 3,323 52,404 
Change in fair value of derivatives— — 9,513 9,513 — 9,513 
Balance at March 31, 2018156,195,100 $3,652,289 $23,020 $3,675,309 $263,556 $3,938,865 
Balance at December 31, 2018154,940,583 3,544,319 17,565 3,561,884 268,246 3,830,130 
Cumulative adjustment related to adoption of ASC 842— (2,105)— (2,105)— (2,105)
Distributions— — — — (4,028)(4,028)
Issuance of unrestricted units298,727 — — — — — 
Units withheld to satisfy tax withholding(126,880)(3,668)— (3,668)— (3,668)
Declared distributions— (40,427)— (40,427)— (40,427)
Amortization of unit-based compensation— 5,179 — 5,179 — 5,179 
Net (loss) income— (39,269)— (39,269)2,821 (36,448)
Change in fair value of derivatives— — (7,864)(7,864)— (7,864)
Redemption of common units(18,076)(525)— (525)— (525)
Balance at March 31, 2019155,094,354 $3,463,504 $9,701 $3,473,205 $267,039 $3,740,244 

 Hudson Pacific Properties, L.P. Partners’ Capital  
 Number of Common UnitsCommon UnitsAccumulated Other Comprehensive (Loss) IncomeNon-controlling Interest—Members in Consolidated EntitiesTotal Capital
Balance at January 1, 2016145,450,095
$3,466,476
$(64)$262,625
$3,729,037
Contributions—
—
—
33,996
33,996
Distributions—
—
—
(1,303)(1,303)
Proceeds from sale of common units, net of underwriters’ discount and transaction costs47,010,695
1,449,581
—
—
1,449,581
Issuance of unrestricted units590,520
6
—
—
6
Units withheld to satisfy tax withholding(262,760)(8,427)—
—
(8,427)
Declared distributions—
(117,819)—
—
(117,819)
Amortization of unit-based compensation—
14,654
—
—
14,654
Net income—
33,832
—
9,290
43,122
Change in fair value of derivative instruments—
—
5,942
—
5,942
Redemption of common units(46,845,695)(1,446,039)—
—
(1,446,039)
Balance at December 31, 2016145,942,855
3,392,264
5,878
304,608
3,702,750
Contributions—
—
—
3,870
3,870
Distributions—
—
—
(15,369)(15,369)
Proceeds from sale of common units, net of underwriters’ discount and transaction costs18,656,575
647,524
—
—
647,524
Issuance of unrestricted units274,251
—
—
—
—
Units withheld to satisfy tax withholding(120,261)(4,203)—
—
(4,203)
Declared distributions—
(118,408)—
—
(118,408)
Amortization of unit-based compensation—
11,872
—
—
11,872
Net income—
36,138
—
9,002
45,140
Change in fair value of derivative instruments—
—
611
—
611
Redemption of common units(8,881,575)(310,855)—
—
(310,855)
Balance at September 30, 2017155,871,845
$3,654,332
$6,489
$302,111
$3,962,932


















The accompanying notes are an integral part of these consolidated financial statements.

13






HUDSON PACIFIC PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)


Three Months Ended March 31,
20192018
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income$(36,895)$52,563 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization68,505 60,553 
Non-cash portion of interest expense1,591 1,658 
Amortization of unit-based compensation5,150 4,338 
Straight-line rents(16,635)(9,942)
Straight-line rent expenses366 136 
Amortization of above- and below-market leases, net(4,179)(3,811)
Amortization of above- and below-market ground lease, net615 624 
Amortization of lease incentive costs326 303 
Other non-cash adjustments— 256 
Impairment loss52,201 — 
Gains on sale of real estate— (37,674)
Change in operating assets and liabilities:
Accounts receivable(4,263)(1,782)
Deferred leasing costs and lease intangibles(13,675)(6,614)
Prepaid expenses and other assets2,771 3,313 
Accounts payable and accrued liabilities and other33,004 (33)
Security deposits and prepaid rent564 559 
Net cash provided by operating activities89,446 64,447 
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to investment in real estate(94,615)(103,512)
Maturities of U.S. Government securities1,932 — 
Proceeds from sale of real estate— 237,004 
Deposits for property acquisitions(35,584)— 
Net cash (used in) provided by investing activities(128,267)133,492 
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from unsecured and secured debt430,001 130,000 
Payments of unsecured and secured debt(335,145)(308,529)
Payments of in-substance defeased debt(806)— 
Proceeds from issuance of common units, net— (173)
Repurchase of common units in the operating partnership(525)— 
Dividends paid to common stock and unit-holders(40,427)(39,351)
Dividends paid to preferred unit-holders(153)(159)
Contribution of redeemable non-controlling member in consolidated real estate entities2,075 — 
Contribution of non-controlling member in consolidated real estate entities— 2,691 
Distribution to non-controlling member in consolidated real estate entities(4,028)(1,060)
Payments to satisfy tax withholding(3,668)(693)
Payment of loan costs(10,623)(6,965)
Net cash provided by (used in) financing activities36,701 (224,239)
Net decrease in cash and cash equivalents and restricted cash(2,120)(26,300)
Cash and cash equivalents and restricted cash—beginning of period68,191 101,280 
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH—END OF PERIOD$66,071 $74,980 

 Nine Months Ended September 30,
 2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$45,617
 $15,228
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization217,340
 201,890
Amortization of deferred financing costs and loan premium, net3,558
 3,278
Amortization of unit-based compensation11,237
 9,931
Straight-line rents(15,174) (19,398)
Straight-line rent expenses296
 886
Amortization of above- and below-market leases, net(14,326) (13,804)
Amortization of above- and below-market ground lease, net2,088
 1,604
Amortization of lease incentive costs1,140
 1,017
Other non-cash adjustments(1)
598
 682
Gains on sale of real estate(16,866) (8,515)
Change in operating assets and liabilities:   
Accounts receivable1,649
 12,521
Deferred leasing costs and lease intangibles(23,270) (34,610)
Prepaid expenses and other assets(3,000) (5,008)
Accounts payable and accrued liabilities34,660
 32,786
Security deposits and prepaid rent(5,943) 2,364
Net cash provided by operating activities239,604
 200,852
CASH FLOWS FROM INVESTING ACTIVITIES   
Additions to investment property(224,797) (183,286)
Property acquisitions(257,734) (307,919)
Proceeds from sales of real estate81,707
 283,855
Contributions to unconsolidated entities(1,071) (28,393)
Distributions from unconsolidated entities17,416
 —
Deposit for property acquisitions—
 (13,130)
Proceed from repayment of notes receivable—
 28,892
Net cash used in investing activities(384,479) (219,981)
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from notes payable270,000
 957,000
Payments of notes payable(321,892) (808,006)
Proceeds from issuance of common units, net647,524
 880,514
Payment for redemption of common units(310,855) (876,213)
Distributions paid to common unitholders(118,408) (88,469)
Distributions paid to preferred unitholders(477) (477)
Contributions from non-controlling member in consolidated entities3,870
 103
Distributions to non-controlling member in consolidated entities(15,369) (990)
Payments to satisfy tax withholding(4,203) (1,776)
Payments of loan costs—
 (2,661)
Net cash provided by financing activities150,190
 59,025
Net increase in cash and cash equivalents and restricted cash5,315
 39,896
Cash and cash equivalents and restricted cash—beginning of period108,192
 71,561
Cash and cash equivalents and restricted cash—end of period$113,507
 $111,457
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:   
Cash paid for interest including amounts capitalized$47,852
 $53,474
NON-CASH INVESTING ACTIVITIES:   
Accounts payable and accrued liabilities for real estate investments$(6,740) $(10,227)
Reclassification of investment in unconsolidated entities for real estate investments$7,835
 $—

_____________ 
(1)Represents bad debt expense/recovery, amortization of discount and net origination fees on purchased and originated loans and unrealized loss/gain on ineffective portion of derivative instruments.







The accompanying notes are an integral part of these consolidated financial statements.

14

Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)


1. Organization


Hudson Pacific Properties, Inc. is a Maryland corporation formed on November 9, 2009 as a fully integrated, self-administered and self-managed real estate investment trust (“REIT”). Through its controlling interest in the operating partnership and its subsidiaries, Hudson Pacific Properties, Inc. owns, manages, leases, acquires and develops real estate, consisting primarily of office and media and entertainmentstudio properties. Unless otherwise indicated or unless the context requires otherwise, all references in these financial statements to “the Company” refer to Hudson Pacific Properties, Inc. together with its consolidated subsidiaries, including Hudson Pacific Properties, L.P. Unless otherwise indicated or unless the context requires otherwise, all references to “our operating partnership” or “the operating partnership” refer to Hudson Pacific Properties, L.P. together with its consolidated subsidiaries.

On April 1, 2015, the Company completed the acquisition of the EOP Northern California Portfolio (“EOP Acquisition”) from Blackstone Real Estate Partners V and VI (“Blackstone”). The EOP Acquisition consisted of 26 high-quality office assets totaling approximately 8.2 million square feet and two development parcels located throughout the Northern California region. The total consideration paid for the EOP Acquisition before certain credits, prorations and closing costs included a cash payment of $1.75 billion and an aggregate of 63,474,791 shares of common stock of Hudson Pacific Properties, Inc. and common units in the operating partnership.
The Company’s portfolio consists of properties located throughout Northern and Southern California and the Pacific Northwest. The following table summarizes the Company’s portfolio as of September 30, 2017:
March 31, 2019:
 Number of Properties Square Feet (unaudited)
Office properties:   
Northern California(1)
29
 9,600,289
Southern California(2)
16
 2,817,509
Pacific Northwest(3)
8
 1,496,620
Total Office properties53
 13,914,418
Media & Entertainment properties:   
Southern California(2)
3
 1,249,927
Total Media & Entertainment properties3
 1,249,927
Total(4)
56
 15,164,345
SegmentsNumber of Properties
Square Feet
(unaudited)
Office52 13,866,793 
Studio3 1,224,403 
TOTAL(1)
55 15,091,196 
_________________
(1)Includes the Foster City, Milpitas, North San Jose, Palo Alto, Redwood Shores, San Francisco, San Mateo and Santa Clara submarkets.
(2)Includes the Burbank, Downtown Los Angeles, Hollywood, Torrance and West Los Angeles submarkets.
(3)Includes the Lynnwood, Pioneer Square and South Lake Union submarkets.
(4)Includes redevelopment, development and held for sale office properties.

1.Includes redevelopment, development and held for sale properties.

2. Summary of Significant Accounting Policies


Basis of Presentation


The accompanying consolidated financial statements of the Company and the operating partnership are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) applicable to interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to the Securities and Exchange Commission (“SEC”) rules and regulations. Accordingly, the interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying interim financial statements reflect all adjustments of a normal and recurring nature that are considered necessary for a fair presentation of the results for the interim periods presented. References to number of properties and square-feet are not covered by the auditor’s review procedures.


The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year ended December 31, 2017.2019. The interim consolidated financial statements should be read in conjunction with the

15


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)
(Unaudited, tabular amounts in thousands, except square footage and share/unit data)


consolidated financial statements in the 20162018 Annual Report on Form 10-K of Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P. and the notes thereto.

Certain amounts in the consolidated financial statements for the prior period have been reclassified to conform to the current period presentation. Included in the reclassified amounts are properties held for sale. These amounts relate to 3402 Pico Boulevard, which was sold on March 21, 2017, and Pinnacle I and Pinnacle II, which are expected to be sold during the fourth quarter of 2017.


Principles of Consolidation


The unaudited interim consolidated financial statements of the Company include the accounts of the Company, the operating partnership and all wholly owned subsidiaries and variable interest entities (“VIEs”), of which the Company is the primary beneficiary.controlled subsidiaries. The unaudited interim consolidated financial statements of the operating partnership include the accounts of the operating partnership and all wholly owned subsidiaries and VIEs, of which the operating partnership is the primary beneficiary.controlled subsidiaries. All intercompany balances and transactions have been eliminated in the consolidated financial statements.

Under the consolidation guidance, the Company first evaluates an entity using the variable interest model, then the voting model. The Company ultimately consolidates all VIEsentities that the Company controls through either majority ownership or voting rights, including all variable interest entities (“VIEs”) of which the Company is considered the primary beneficiary. The Company accounts for all other unconsolidated joint ventures using the equity method of accounting. In addition, the Company continually evaluates each legal entity that is not wholly owned for reconsideration based on changing circumstances.

VIEs are defined as entities in which equity investors (i) do not have have:

15
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
•the characteristics of a controlling financial interest and/or (ii) do not have interest;

•sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. parties; and/or

•the entity is structured with non-substantive voting rights.

The entity that consolidates a VIE is known as its primary beneficiary and is generally the entity with (i)both the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE. As of September 30, 2017,March 31, 2019, the Company has determined that fourits operating partnership and five joint ventures and our operating partnership met the definition of a VIE. ThreeFour of the joint ventures are consolidated entities and one joint venture is a non-consolidatedan unconsolidated entity.


Consolidated Entities


As of September 30, 2017,March 31, 2019, the operating partnership has determined that threefour of its joint ventures met the definition of a VIE and are consolidated:
PropertyEntityPropertyOwnership interest
Interest
Pinnacle I(1)
Hudson 1455 Market, L.P.		65.01455 Market55.0 %
Pinnacle II(1)
Hudson 1099 Stewart, L.P.		65.0Hill755.0 %
1455 Market StreetHPP-MAC WSP, LLC55.0One Westside and 10850 Pico75.0 %
Hill7Hudson One Ferry REIT, L.P.55.0Ferry Building55.0 %
_____________
(1)A single joint venture owns both Pinnacle I and Pinnacle II. The Company entered into an agreement on September 14, 2017 to sell its ownership interest in Pinnacle I and Pinnacle II. The sale is expected to close in the fourth quarter of 2017.


As of September 30, 2017,March 31, 2019 and December 31, 2018, the Company has determined that ourits operating partnership met the definition of a VIE and is consolidated.

Substantially all of the assets and liabilities of the Company are related to these VIEs.


Non-consolidated EntitiesUnconsolidated Entity

On June 15, 2017, the Company purchased the remaining interest in land at its 11601 Wilshire property. Refer to Note 3 for details. As a result of the purchase, the Company is no longer accounting for the interest in land as a non-consolidated entity.


As of September 30, 2017,March 31, 2019, the Company has determined it is not the primary beneficiary of one joint venture that meets the definition of a VIE.venture. Due to its significant influence over the non-consolidatedunconsolidated entity, the Company accounts for it using the equity method of accounting. Under the equity method, the Company initially records the investment at cost and subsequently adjusts for equity in earnings or losses and cash contributions and distributions. The Company’s net equity investment is reflected within prepaid expenses and other assets on the Consolidated Balance Sheets which represents the

16


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)
(Unaudited, tabular amounts in thousands, except square footage and share/unit data)


Company’s maximum exposure for loss. The Company’s share of net income or loss from the entity is included within other income on the Consolidated Statements of Operations. The Company owns 21%Company’s net equity investment of the non-consolidated entity.unconsolidated entity of $86 thousand and $86 thousand as of March 31, 2019 and December 31, 2018, respectively, is reflected within prepaid expenses and other assets on the Consolidated Balance Sheets, which represents the Company’s maximum exposure for loss.


Use of Estimates


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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to acquiring, developing and assessing the carrying values of its real estate properties, determining the incremental borrowing rate used in the present value calculations of its new or modified operating lessee agreements, its accrued liabilities and its performance-based equity compensation awards. The Company bases its 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.


Recently IssuedLease Accounting Pronouncements


Changes to GAAP are established by the Financial Accounting Standards Board (“the FASB”) in the form of Accounting Standards Update (“ASU”). The following ASUs were adopted by the Company in 2017:
StandardDescriptionEffect on the Financial Statements or Other Significant Matters
ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill ImpairmentThis guidance removes step two from the goodwill impairment test. As a result, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.The Company early adopted this guidance during the second quarter of 2017 and applied it prospectively. The adoption did not have an impact on the Company’s consolidated financial statements.
ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22,In February 2016, and November 17, 2016 EITF Meetings (SEC Update)The guidance in this ASU is based on two SEC staff announcements made at the September 2016 and November 2016 EITF meetings. In the September meeting, the SEC announced that a registrant should disclose the potential material effects of the ASUs related to revenues, leases and credit losses on financial instruments. As a result of the November meeting, the ASU conforms Accounting Standards Codification (“ASC”) 323 to the guidance issued in ASU 2014-01 related to investments in qualified affordable housing projects.The Company adopted this guidance during the first quarter of 2017 and applied it prospectively. With the adoption, the Company provided updates on its implementation of the ASUs related to revenue, leases and credit losses on financial instruments. Please refer to sections below for updates on the implementation of revenue and lease ASUs. The ASU related to credit losses on financial instruments could have a material impact on trade receivables and the Company is currently assessing the impact of this ASU on its consolidated financial statements and notes to the consolidated financial statements.
ASU 2016-19, Technical Corrections and ImprovementsThe technical corrections make minor change to certain aspects of the FASB ASC, including changes to resolve differences between current and pre-Codification guidance, updates to wording, references to avoid misapplication and textual simplifications to increase the Codification’s utility and understandability and minor amendments to guidance that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities.The Company adopted this guidance during the first quarter of 2017 and applied it prospectively. The adoption did not have a material impact on the Company’s consolidated financial statements.
ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force)This guidance requires entities to include restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. The Company early adopted this guidance during the second quarter of 2017 and applied it retrospectively. Pursuant to the adoption, the Company revised the Consolidated Statement of Cash Flows and disclosed the reconciliation to the related captions in the Consolidated Balance Sheets in Note 19.

17


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)
(Unaudited, tabular amounts in thousands, except square footage and share/unit data)


StandardDescriptionEffect on the Financial Statements or Other Significant Matters
ASU 2016-17, Consolidation (Topic 810): Interests Held through Related Parties That Are under Common ControlThis guidance outlines how a single decisionmaker of a VIE should treat indirect interests held through other related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE.The Company adopted this guidance during the first quarter of 2017 and applied it retrospectively. The adoption did not have a material impact on the Company’s consolidated financial statements and did not change the consolidation conclusion.
ASU 2016-15, Classification of Certain Cash Receipts and Cash PaymentsThis ASU clarifies how certain transactions should be classified in the statement of cash flows, including debt prepayment costs, contingent consideration payments made after a business combination and distributions received from equity method investments. The ASU provides two approaches to determine the classification of cash distributions received from equity method investments: (i) the “cumulative earnings” approach, under which distributions up to the amount of cumulative equity in earnings recognized will be classified as cash inflows from operating activities, and those in excess of that amount will be classified as cash inflows from investing activities and (ii) the “nature of the distribution” approach, under which distributions will be classified based on the nature of the underlying activity that generated cash distributions. The guidance requires a Company to elect either the “cumulative earnings” approach or the “nature of the distribution” approach at the time of adoption.The Company early adopted this guidance during the second quarter of 2017 and applied it retrospectively. Pursuant to the adoption, the Company elected the “nature of the distribution” approach related to the distributions received from its equity method investments. The adoption did not have an impact on the Company’s Consolidated Statements of Cash Flows.
ASU 2016-07, Investments—Equity Method and Joint Ventures (Topic 323), Simplifying the Transition to the Equity Method of AccountingThe guidance eliminates the requirement that an investor retrospectively apply equity method accounting when an investment that it had accounted for by another method initially qualifies for use of the equity method. The guidance also requires an investor that has an available-for-sale security that subsequently qualifies for the equity method to recognize in net income the unrealized holding gains or losses in accumulated other comprehensive income related to that security when it begins applying the equity method. It is required to apply this guidance prospectively.The Company adopted this guidance during the first quarter of 2017 and applied it prospectively. The adoption did not have a material impact on the Company’s consolidated financial statements.
ASU 2016-05, Derivatives and Hedging (Topic 815), Effect of Derivative Contract Novations on Existing Hedge Accounting RelationshipsThe guidance states that the novation of a derivative contract (e.g., a change in the counterparty) in a hedge accounting relationship does not, in and of itself, require de-designation of that hedge accounting relationship. The hedge accounting relationship could continue uninterrupted if all of the other hedge accounting criteria are met, including the expectation that the hedge will be highly effective when the creditworthiness of the new counterparty to the derivative contract is considered. Either a prospective or a modified retrospective approach can be applied.The Company adopted this guidance during the first quarter of 2017 and applied it prospectively. The adoption did not have a material impact on the Company’s consolidated financial statements.
Update on ASC 606, Revenue from Contracts with Customers (“ASC 606”), implementation

On May 28, 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This guidance outlines a single comprehensive model for entities to usecodified in accounting for revenues arising from contracts with customers and specifically notes that lease contracts with customers are a scope exception. The FASB has subsequently issued other ASUs to amend and provide further guidance related to ASC 606. These ASUs are effective for annual reporting periods (including interim periods) beginning after December 15, 2017. Either the full retrospective basis (to the beginning of its contracts) or modified retrospective method (from the beginning of the latest fiscal year of adoption) is permitted.

The Company has compiled an inventory of sources of revenues and have preliminarily identified three revenue streams. Two of these revenue streams will be accounted for under ASC 606 when it becomes effective on January 1, 2018. The remaining revenue stream, which is integral to the Company’s leasing revenues, will be accounted for under ASC 606, effective with the adoption of ASC 842, Leases (“ASC 842”), on January 1, 2019.which amends the guidance in former ASC 840, Leases (“ASC 840”). The Company is in the process of evaluating the impact on its consolidated financial statements but expects that the recognition of revenues will not be impacted by this standard. The Company plans to adopt ASC 606 on January 1, 2018 using the modified retrospective approach.

18


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)
(Unaudited, tabular amounts in thousands, except square footage and share/unit data)


Update on ASC 842 implementation

On February 25, 2016, the FASB issued ASU 2016-02 to amend the accounting guidance for leases andstandard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a lease agreement (i.e., lessees and lessors). The new standard increases transparency and

16
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
comparability most significantly by requiring the recognition by lessees of right-of-use (“ROU”) assets and lease liabilities on the balance sheet for those leases classified as operating leases. The Company adopted ASC 842 provides practical expedience that allow entities to not (i) reassess whether any expired or existing contracts are or contain leases; (ii) reassesson January 1, 2019 using the lease classification for any expired or existing leases; (iii) reassess initial direct costs for any existing leases. This ASU is effective for annual reporting periods (including interim periods) beginning after December 15, 2018. A modified retrospective transition approach that must be applied for leases that exist or are entered into after the beginning of the earliest comparative period presented in the consolidated financial statements.

The Company plans to adopt the standard on January 1, 2019 and expects to adopt using the practical expedience elections.2019.


Lessor Accounting
The Company recognized rental revenues and tenant recoveries of $175.3 million and $501.4 million for the three and nine months ended September 30, 2017. This ASUASC 842 requires companies to identify lease and non-lease components of a lease agreement. Lease components relate to the right to use the leased asset andwhereas non-lease components relate to payments for goods or services that are transferred separately from the right to use the underlying asset. Total

ASC 842 provides transition practical expedients that must be elected together that allow entities to not (i) reassess whether any expired or existing contracts are considered or contain leases; (ii) reassess the lease classification for any expired or existing leases; and (iii) reassess initial direct costs for any existing leases that are in effect as of the date of adoption. Additionally, the guidance allows an entity to elect a practical expedient to not assess whether an existing or expired land easement that was not previously accounted for as a lease under ASC 840 is considered in a lease under ASC 842. For lessors, the guidance provides for a practical expedient, by class of underlying asset, to elect a combined single lease component presentation if (i) the timing and pattern of the transfer of the combined single lease component is the same, and (ii) the related lease component, if accounted for separately, would be classified as an operating lease.

The Company elected the practical expedients above. The lessor practical expedient to combine lease and non-lease components was elected only for the Company’s leases related to the office properties. For the Company’s studio properties, the timing and pattern of the transfer of the lease components and non-lease components for studio properties are not the same and therefore the Company could not elect this practical expedient for the Company’s studio properties. The standalone selling price related to the studio non-lease components is readily available and does not require estimates.

Lessee Accounting

The Company determines if an arrangement is a lease at inception. The Company’s operating lease agreements relate to ground lease assets and are reflected in operating lease ROU assets and operating lease liabilities on the Consolidated Balance Sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date, or the date of the ASC 842 adoption, in determining the present value of lease payments. The weighted average incremental borrowing rate used to calculate the ROU assets and liabilities was 5.7%. ROU assets also include any lease payments made and exclude lease incentives. Many of the Company’s lessee agreements include options to extend the lease, which we do not include in its minimum lease terms unless they are reasonably certain to be exercised. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. The weighted average remaining lease term, as of March 31, 2019, was 33 years.

Lessor Accounting

As a lessor, the Company’s recognition of revenue remained consistent with previous guidance, apart from the narrower definition of initial direct costs that can be capitalized. With the election of the lessor practical expedient, the presentation of revenues on the Consolidated Statement of Operations has changed to reflect a single lease component which combines rental, tenant recoveries, and other tenant-related revenues for the office portfolio. For the Company’s rentals at the studio properties, total lease consideration is allocated to lease and non-lease components on a relative standalone basis. The recognition of revenues related to lease components will beis governed by ASC 842, while revenue related to non-lease components willis be subject to ASC 606.


Under current accounting standards,The new standard defines initial direct costs as only the incremental costs of signing a lease. Internal direct compensation costs and external legal fees related to the execution of successful lease agreements that no longer meet the definition of initial direct costs under ASC 842 will be accounted for as office operating expense or studio operating expense in the Company’s Consolidated Statements of Operations. Additionally, the Company recognizesmay elect the practical expedients only for leases that have commenced before the effective date of the adoption of ASC 842. As a result of the adoption, the Company recognized $1.8
17
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
million as a cumulative adjustment to accumulated deficit for costs associated with leases that have not commenced as of January 1, 2019, that were previously capitalized and no longer meet the definition of initial direct costs in accordance with ASC 842. The Company recognized $0.3 million as cumulative adjustments to accumulated deficit related to other transition adjustments.

Revenue Recognition

The Company has compiled an inventory of its sources of revenues and has identified the following material revenue streams: (i) rental revenues (ii) tenant recoveries and other tenant-related revenues (iii) ancillary revenues (iv) guest parking revenues and (v) sale of real estate.
Revenue StreamComponents
Financial Statement Location(1)
Rental revenuesOffice rentals, stage rentals and storage rentalsOffice and studio segments: rental
Tenant recoveries and other tenant-related revenuesReimbursement of real estate taxes, insurance, repairs and maintenance, other operating expenses and must take parking revenuesOffice segment: rental
Studio segment: rental and service revenue and other
Ancillary revenuesRevenues derived from tenants’ use of lighting, equipment rental, power, HVAC and telecommunications (i.e., telephone and internet)Studio segment: service revenue and other
Guest parking revenuesParking revenue that is not associated with lease agreementsOffice segment: service revenue
Studio segment: service revenue and other
Sale of real estateGains on sales derived from cash consideration less cost basisGains on sale of real estate
_________________
1.The financial statement locations stated above are as of March 31, 2019 after the adoption of ASC 842 and do not reflect the locations as of December 31, 2018.

The Company’s 2018 rental revenues are accounted for under ASC 840. The Company continues to recognize rental revenue from tenants on a straight-line basis over the lease term when collectability is reasonably assuredprobable and the tenant has taken possession of or controls the physical use of the leased asset. Tenant

The Company recognizes tenant recoveries related to reimbursement of real estate taxes, insurance, repairs and maintenance, and other operating expenses are recognized as revenue in the period during which the applicable expenses are incurred. The reimbursements are recognized and presented gross, as we arethe Company is generally the primary obligor with respect to purchasing goods and services from third-party suppliers, havehas discretion in selecting the supplier and bearbears the associated credit risk.


Other tenant-related revenues includes parking stipulated in lease agreements as must-take parking rentals. These revenues are recognized over the term of the lease.

Ancillary revenues and guest parking revenues have been accounted for under ASC 606 since the Company adopted this standard on January 1, 2018. These revenues have single performance obligations and are recognized at the point in time when services are rendered.

The Company has not completed its analysis of this ASU but expectsfollowing table summarizes the Company’s revenue streams that lessors will continue to recognize the lease revenue component using an approach that is substantially equivalent to existing guidance. The Company expects thatare accounted for under ASC 606:
March 31, 2019March 31, 2018
Ancillary revenues$8,086 $5,320 
Guest parking revenues$6,447 $5,413 
Studio related tenant recoveries(1)
$275 N/A 
_________________
1.Studio related tenant recoveries will be separated into lease and non-lease components.are accounted for under ASC 606 effective January 1, 2019.


The ASU also requires lessors to capitalize only those costs that are defined as initial direct costs. Under the current accounting standards, the Company capitalizes initial direct and indirect leasing costs. During the three and nine months ended September 30, 2017, the Company capitalized $1.8 million and $5.0 million of indirect leasing costs, respectively. Under this new ASU, these costs will be expensed as incurred.

Lessee Accounting

As of September 30, 2017, the future undiscounted minimum lease payments under the Company’s ground leases totaled $456.3 million. This guidance requires lessees to record a lease liability at lease inception, with a corresponding right-of-use asset, except for short-term leases. The Company continues to evaluate the amount of right-of-use asset and lease liability that will need to be recorded with respect to its ground leases where it is the lessee.





19
18


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)Statements
(Unaudited, tabular amounts in thousands, except square footage, share and share/unit data)

The following table summarizes the Company’s receivables that are accounted for under ASC 606:
March 31, 2019December 31, 2018
Ancillary revenues$5,836 $3,752 
Guest parking revenues$1,393 $959 
Studio related tenant recoveries$— N/A 
_________________
1.Studio related tenant recoveries are accounted for under ASC 606 effective January 1, 2019.

Sale of real estate has been accounted for under ASC 610, Other Income, since the Company adopted this standard on January 1, 2018. As a result of the adoption, there was no change in respect to the timing and pattern of revenue recognition. This standard requires the Company to apply certain recognition and measurement principles in accordance with ASC 606 when it recognizes nonfinancial assets and in-substance nonfinancial assets, and the counterparty is not a customer. This is the case for the Company’s sales of real estate, and as a result the Company is required to evaluate the sales of real estate based on transfer of control. If a real estate sale contract includes ongoing involvement by the seller with the sold property, the seller must evaluate each promised good or service under the contract to determine whether it represents a performance obligation, constitutes a guarantee or prevents the transfer of control. The timing and pattern of revenue recognition might change as it relates to gains of sale of real estate if the sale includes continued involvement that represents a separate performance obligation.

Recently Issued Accounting Pronouncements

Changes to GAAP are established by the Financial Accounting Standards Board (the “FASB”) in the form of Accounting Standards Update (“ASU”). The following ASUs were adopted by the Company in 2019:
StandardDescriptionEffect on the Financial Statements or Other Significant Matters
ASU 2016-02, Leases (Topic 842)

ASU 2019-01, Leases (Topic 842): Codification Improvements

ASU 2018-11, Leases (Topic 842): Targeted Improvements

ASU 2018-10, Codification Improvements to Topic 842, Leases

ASU 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842
Issued on February 5, 2016, ASU 2016-02 amends the accounting guidance for leases and sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a lease agreement (i.e., lessees and lessors).The Company adopted ASC 842 during the first quarter of 2019 using the modified retrospective transition method with a cumulative adjustment to accumulated deficit. Refer to Lease Accounting section above for details.
ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting PurposesThe amendments in this update permit use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to the UST, the LIBOR swap rate, the OIS rate based on the Fed Funds Effective Rate, and the SIFMA Municipal Swap Rate.The Company adopted this guidance during the first quarter of 2019 using the prospective approach. The adoption did not have an impact on the Consolidated Financial Statements since LIBOR is still in use, however, this is expected to have an impact in later periods once SOFR is adopted.
ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive IncomeThe amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this Update also require certain disclosures about stranded tax effects.The Company adopted this guidance during the first quarter of 2019 on a prospective basis. The adoption did not have an impact on the Consolidated Financial Statements.

19
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)

Other Recently Issued ASUs
Other recently issued ASUs

The Company considers the applicability and impact of all ASUs. The following table lists the recently issued ASUs that have not been disclosed in the Company’s 2016Company’s 2018 Annual Report on Form 10-K and have not been adopted by the Company. The list excludes those ASUs that are not expected to have a material impact on the Company’s consolidated financial statements.

StandardDescriptionEffective DateEffect on the Financial Statements or Other Significant Matters
ASU 2017-12,2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, (Topic 815): Targeted Improvementsand Topic 825, Financial InstrumentsThe FASB amended its standards on credit losses, hedging, and recognizing and
measuring financial instruments to Accounting for Hedging Activitiesclarify them and address implementation issues.		The guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. Therefore, a cumulative effect adjustment related to elimination of ineffectiveness measurement is required to be recorded to the opening balance of retained earnings as of the beginning of the fiscal year of adoption for cash flow hedge. The guidance also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. This guidance must be applied using a modified retrospective approach.Effective for annual reporting periods (including interim periods)fiscal years beginning after December 15, 20182020, and interim periods within those fiscal years.The Company is currently evaluating the impact of this standard on its consolidated financial statements and notes to the consolidated financial statements. The Company expects that the adoption would impact derivative instruments that have portions of ineffectiveness. The Company plans to early adopt this guidance during the first quarter in 2018 and apply it using the modified retrospective approach.
ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification AccountingThe guidance clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. This guidance must be applied prospectively.Effective for annual reporting periods (including interim periods) beginning after December 15, 2017The Company does not currently expect a material impact of this ASU on its consolidated financial statements and notes to the consolidated financial statements. The Company plans to adopt this guidance during the first quarter in 2018.
ASU 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial AssetsThe guidance updates the definition of an in substance nonfinancial asset and clarifies the scope of ASC 610-20 on the sale or transfer of nonfinancial assets to noncustomers, including partial sales. It also clarifies the derecognition guidance for nonfinancial assets to conform with the new revenue recognition standard. Either a full or modified retrospective approach can be applied.Effective for annual reporting periods (including interim periods) beginning after December 15, 2017The Company currently expects that the adoption of this ASU could have a material impact on its consolidated financial statements; however, such impact will not be known until the Company disposes of any of its investments in real estate properties, which would all be sales of nonfinancial assets. The Company plans to adopt this guidance during the first quarter in 2018 and apply it using the modified retrospective approach.update.



20


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)
(Unaudited, tabular amounts in thousands, except square footage and share/unit data)


3. Investment in Real Estate

Real estate held for investment


The following table summarizes the Company’s investment in real estate, at cost as of:
March 31, 2019December 31, 2018
Land$1,313,411 $1,372,872 
Building and improvements4,941,701 4,991,770 
Tenant improvements547,427 510,217 
Furniture and fixtures9,451 9,320 
Property under development178,430 175,358 
INVESTMENT IN REAL ESTATE, AT COST(1)
$6,990,420 $7,059,537 
 September 30, 2017 December 31, 2016
Land$1,369,320
 $1,221,450
Building and improvements4,526,416
 4,217,232
Tenant improvements389,284
 361,108
Furniture and fixtures8,217
 4,264
Property under development265,661
 295,239
Investment in real estate, at cost(1)
$6,558,898
 $6,099,293
_____________
_____________1.Excludes balances related to properties that have been classified as held for sale.
(1)Excludes balances related to properties that have been classified as held for sale.


Acquisitions

The Company’s acquisitions are accounted for using the acquisition method. The results of operations for each of these acquisitions are included in the Company’s Consolidated Statements of Operations from the date of acquisition.

The Company evaluates each acquisition to determine if the integrated set of assets and activities acquired meet the definition of a business and need to be accounted for as a business combination in accordance with ASC 805, Business Combinations. An integrated set of assets and activities would fail to qualify as a business if either (i) substantially all of the fair value of the gross assets acquired is concentrated in either a single identifiable asset or a group of similar identifiable assets or (ii) the integrated set of assets and activities is lacking, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs (i.e., revenue generated before and after the transaction). An acquired process is considered substantive if (i) the process includes an organized workforce (or includes an acquired contract that provides access to an organized workforce) that is skilled, knowledgeable and experienced in performing the process, (ii) the process cannot be replaced without significant cost, effort, or delay or (iii) the process is considered unique or scarce.


The Company assesses fair value based on Level 2 and Level 3 inputs withinhad no acquisitions during the fair value framework, which includes estimated cash flow projections that utilize appropriate discount, capitalization rates, renewal probability and available market information, which includes market rental rate and market rent growth rates. Estimates of future cash flows are based on a number of factors, including historical operating results, known and anticipated trends and market and economic conditions.

The fair value of tangible assets of an acquired property considers the value of the property as if it were vacant. The fair value of acquired “above- and below-” market leases are based on the estimated cash flow projections utilizing discount rates that reflect the risks associated with the leases acquired. The amount recorded is based on the present value of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the extended below-market term for any leases with below-market renewal options. Other intangible assets acquired include amounts for in-place lease values that are based on the Company’s evaluation of the specific characteristics of each tenant’s lease. Factors considered include estimates of carrying costs during hypothetical expected lease-up periods, market conditions and costs to execute similar leases. In estimating carrying costs,three months ended March 31, 2019. On March 26, 2019, the Company includes estimates of lost rents at market ratesentered into an agreement to purchase, through a joint venture with Blackstone Property Partners (“Blackstone”), the 1.45 million-square-foot Bentall Centre property located in Vancouver, Canada. The acquisition is expected to close during the hypothetical expected lease-up periods, which are dependent on local market conditions. In estimating costs to execute similar leases, the Company considers leasing commissions and legal and other related costs.second quarter of 2019.


21


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)
(Unaudited, tabular amounts in thousands, except square footage and share/unit data)


The following table summarizes the information on the acquisitions completed during the nine months ended September 30, 2017:
Property Submarket Segment Date of Acquisition Square Feet (unaudited) 
Purchase Price(1) (in millions)
Sunset Las Palmas Studios(2)
 Hollywood Media and Entertainment 5/1/2017 369,000
 $200.0
11601 Wilshire land(3)
 West Los Angeles Office 6/15/2017 N/A
 50.0
6666 Santa Monica(4)
 Hollywood Media and Entertainment 6/29/2017 4,150
 3.2
Total acquisitions       373,150
 $253.2
_____________
(1)Represents purchase price before certain credits, prorations and closing costs.
(2)The property consists of stages, production office and support space on 15 acres near Sunset Gower Studios and Sunset Bronson Studios. The purchase price above does not include equipment purchased by the Company for $2.8 million, which was transacted separately from the studio acquisition. In April 2017, the Company drew $150.0 million under the unsecured revolving credit facility to fund the acquisition.
(3)On July 1, 2016 the Company purchased a partial interest in land held as a tenancy in common in conjunction with its acquisition of the 11601 Wilshire property. The land interest held as a tenancy in common was accounted for as an equity method investment. On June 15, 2017, the Company purchased the remaining interest, which was fair valued and allocated to land and building.
(4)This parcel is adjacent to the Sunset Las Palmas Studios property.

The Company’s acquisitions did not meet the definition of a business and were therefore accounted for as asset acquisitions. In accordance with asset acquisitions, the purchase price includes capitalized acquisition costs. The following table represents the Company’s final aggregate purchase price accounting, as of the respective acquisition dates, for each of the Company’s acquisitions completed in the nine months ended September 30, 2017:
 
Sunset Las Palmas Studios(1)
 11601 Wilshire land 6666 Santa Monica Total
Investment in real estate$202,723
 $50,034
 $3,091
 $255,848
Deferred leasing costs and in-place lease intangibles(2)
1,741
 —
 145
 1,886
Total assets assumed$204,464
 $50,034
 $3,236
 $257,734
_____________
(1)The purchase price allocation includes equipment purchased by the Company of $2.8 million.
(2)Represents weighted-average amortization period of 1.21 years.


Dispositions


The following table summarizes the properties sold during the nine months ended September 30, 2017. These properties were non-strategic assets to the Company’s portfolio:
Property Date of Disposition Square Feet (unaudited) 
Sales Price(1) 
(in millions)
222 Kearny Street 2/14/2017 148,797
 $51.8
3402 Pico Boulevard 3/21/2017 50,687
 35.0
Total dispositions   199,484
 $86.8
_________________ 
(1)Represents gross sales price before certain credits, prorations and closing costs.

The dispositions of these properties resulted in a $16.9 million gain for the nine months ended September 30, 2017. This amount is included in gains on sale of real estate in the Consolidated Statements of Operations. There wereCompany had no dispositions during the three months ended September 30, 2017.March 31, 2019.

Held for Sale


The Company had fourone property, Campus Center, classified as held for sale as of March 31, 2019. The Campus Center property, which includes the office property and developable land, is being sold to two separate, unrelated buyers for a combined amount of approximately $150 million (before certain credits, prorations and closing costs). Both sales are expected to close during the second quarter of 2019. The Company did not have any properties classified as held for sale as of December 31, 2016. Two properties were disposed of during the first quarter of 2017. The Company entered into an agreement on September 14, 2017 to sell its ownership interest in the consolidated joint venture that owns Pinnacle I and Pinnacle II to certain affiliates of Blackstone for $350.0 million, before credits, prorations and closing costs, including the assumption of $216.0 million of secured notes payable. The sale of Pinnacle I and Pinnacle II is expected to close in the fourth quarter of 2017.2018.


22


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)
(Unaudited, tabular amounts in thousands, except square footage and share/unit data)



The following table summarizes the components of assets and liabilities associated with real estate held for sale as of:
  September 30, 2017 December 31, 2016
ASSETS    
Investment in real estate, net $302,992
 $371,422
Accounts receivable, net 11
 357
Straight-line rent receivables, net 5,220
 5,949
Deferred leasing costs and lease intangible assets, net 13,204
 17,798
Prepaid expenses and other assets, net 10
 959
Assets associated with real estate held for sale $321,437
 $396,485
     
LIABILITIES    
Notes payable, net $214,818
 $214,687
Accounts payable and accrued liabilities 3,229
 6,517
Lease intangible liabilities, net 5,316
 6,588
Security deposits and prepaid rent 669
 2,643
Liabilities associated with real estate held for sale $224,032
 $230,435

Impairment of Long-Lived Assets

No impairment indicators have been noted and the Company recorded no impairment charges for the nine months ended September 30, 2017.


23
20


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)Statements
(Unaudited, tabular amounts in thousands, except square footage, share and share/unit data)


March 31, 2019
ASSETS
Investment in real estate, net$99,703 
Deferred leasing costs and lease intangible assets, net14 
Prepaid expenses and other assets, net104 
ASSETS ASSOCIATED WITH REAL ESTATE HELD FOR SALE$99,821 
LIABILITIES
Accounts payable, accrued liabilities and other$732 
LIABILITIES ASSOCIATED WITH REAL ESTATE HELD FOR SALE$732 

Impairment of Long-Lived Assets

The Company assesses the carrying value of real estate assets and related intangibles whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable in accordance with GAAP. Impairment losses are recorded on real estate assets held for investment when indicators of impairment are present and the future undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. The Company recognizes impairment losses to the extent the carrying amount exceeds the fair value, based on Level 1 or Level 2 inputs, less estimated costs to sell. The Company recorded $52.2 million of impairment charges related to the Campus Center office property that was held for sale as March 31, 2019. The Company’s estimated fair value was based on the sale price. The Company did not recognize impairment losses during the three months ended March 31, 2018. 

4. Deferred Leasing Costs and Lease Intangibles, net


The following summarizes the Company’s deferred leasing costs and lease intangibles as of:
March 31, 2019December 31, 2018
Deferred leasing costs and in-place lease intangibles$340,634 $336,535 
Accumulated amortization(126,298)(123,432)
Deferred leasing costs and in-place lease intangibles, net214,336 213,103 
Below-market ground leases72,916 72,916 
Accumulated amortization(9,558)(8,932)
Below-market ground leases, net63,358 63,984 
Above-market leases8,370 8,425 
Accumulated amortization(5,871)(5,616)
Above-market leases, net2,499 2,809 
DEFERRED LEASING COSTS AND LEASE INTANGIBLE ASSETS, NET(1)
$280,193 $279,896 
Below-market leases$92,623 $101,736 
Accumulated amortization(52,419)(57,043)
Below-market leases, net40,204 44,693 
Above-market ground leases1,095 1,095 
Accumulated amortization(187)(176)
Above-market ground leases, net908 919 
LEASE INTANGIBLE LIABILITIES, NET(1)
$41,112 $45,612 
_____________ 
1.Excludes balances related to properties that have been classified as held for sale.

21
 September 30, 2017 December 31, 2016
Above-market leases$19,622
 $23,430
Accumulated amortization(14,299) (12,989)
Above-market leases, net5,323
 10,441
Deferred leasing costs and in-place lease intangibles316,695
 350,747
Accumulated amortization(128,598) (133,511)
Deferred leasing costs and in-place lease intangibles, net188,097
 217,236
Below-market ground leases71,210
 71,423
Accumulated amortization(6,799) (4,891)
Below-market ground leases, net64,411
 66,532
Deferred leasing costs and lease intangible assets, net(1)
$257,831
 $294,209
    
Below-market leases$111,443
 $128,817
Accumulated amortization(57,081) (56,254)
Below-market leases, net54,362
 72,563
Above-market ground leases1,095
 1,095
Accumulated amortization(122) (89)
Above-market ground leases, net973
 1,006
Lease intangible liabilities, net(1)
$55,335
 $73,569
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
_____________Notes to Unaudited Consolidated Financial Statements
(1)Excludes balances related to properties that have been classified as held for sale.
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
The Company recognized the following amortization related to deferred leasing costs and lease intangibles:
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Above-market leases(1)
$1,855
 $2,809
 $5,122
 $10,223
Below-market leases(1)
5,776
 7,311
 19,448
 24,027
Deferred leasing costs and in-place lease intangibles(2)
17,376
 20,742
 57,813
 65,408
Above-market ground leases(3)
11
 11
 33

33
Below-market ground leases(3)
629
 545
 2,121

1,637
Three Months Ended March 31,
20192018
Deferred leasing costs and in-place lease intangibles(1)
$(11,882)$(11,696)
Below-market ground leases(2) 
$(626)$(635)
Above-market leases(3) 
$(310)$(474)
Below-market leases(3)
$4,489 $4,285 
Above-market ground leases(2)
$11 $11 
__________________ 
(1)Amortization is recorded in revenues in the Consolidated Statements of Operations.
(2)Amortization is recorded in depreciation and amortization expenses and office rental revenues in the Consolidated Statements of Operations.
(3)Amortization is recorded in office operating expenses in the Consolidated Statements of Operations.

1.Amortization is recorded in depreciation and amortization expenses and office rental revenues in the Consolidated Statements of Operations.

2.Amortization is recorded in office operating expenses in the Consolidated Statements of Operations.
243.Amortization is recorded in rental revenues in the Consolidated Statements of Operations.



Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)
(Unaudited, tabular amounts in thousands, except square footage and share/unit data)


5. Accounts Receivable, netReceivables


The Company’s accounting policy and methodology used to estimate the allowance for doubtful accounts isrelated to service revenues are discussed in the Company’s 20162018 Annual Report on Form 10-K. The following table summarizes the Company’s accounts receivable, net of allowance for doubtful accounts as of:
 September 30, 2017 December 31, 2016
Accounts receivable$6,643
 $8,660
Allowance for doubtful accounts(1,629) (1,827)
Accounts receivable, net(1)
$5,014
 $6,833
_____________
(1)Excludes balances related to properties that have been classified as held for sale.

6. Straight-line Rent Receivables, net

The Company’sCompany's accounting policy and methodology used to estimateassess collectibility related to rental revenues changed on January 1, 2019 when the Company adopted ASC 842. The guidance requires the Company to assess, at lease commencement and subsequently, collectibility from its tenants of future lease payments. If the Company determines collectibility is not probable, it recognizes an adjustment to lower income from rentals, whereas previously the Company recognized bad debt expense.



Accounts Receivable

As of March 31, 2019, accounts receivable was $18.3 million and there was an allowance for doubtful accounts is discussed in the Company’s 2016 Annual Report on Form 10-K. The following table represents the Company’s straight-line rent receivables, net of $362 thousand. As of December 31, 2018, accounts receivable was $16.5 million and there was an allowance for doubtful accounts as of:of $2.5 million.

Straight-Line Rent Receivable

As of March 31, 2019, straight-line rent receivable was $159.0 million and there was no allowance for doubtful accounts. As of December 31, 2018, straight-line rent receivables was $142.4 million and there was no allowance for doubtful accounts.

 September 30, 2017 December 31, 2016
Straight-line rent receivables$97,191
 $82,245
Allowance for doubtful accounts(7) (136)
Straight-line rent receivables, net(1)
$97,184
 $82,109
_____________
(1)Excludes balances related to properties that have been classified as held for sale.

7.6. Prepaid Expenses and Other Assets, net 


The following table summarizes the Company’s prepaid expenses and other assets, net as of:
March 31, 2019December 31, 2018
Derivative assets$10,463 $16,687 
Goodwill8,754 8,754 
Non-real estate investments3,138 2,713 
Investment in unconsolidated joint venture86 86 
Other(1)
60,000 27,393 
PREPAID EXPENSES AND OTHER ASSETS, NET(2)
$82,441 $55,633 
 September 30, 2017 December 31, 2016
Investment in unconsolidated entities$14,093
 $37,228
Goodwill8,754
 8,754
Derivative assets6,250
 5,935
Other28,263
 27,141
Prepaid expenses and other assets, net$57,360
 $79,058
_____________
_____________1.Includes deposits of $35.6 million for future acquisitions as of March 31, 2019 and no deposits for future acquisitions at December 31, 2018.
(1)
2.Excludes balances related to properties that have been classified as held for sale.

No goodwill impairment indicators have been noted during the nine months ended September 30, 2017.classified as held for sale.



25
22


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)Statements
(Unaudited, tabular amounts in thousands, except square footage, share and share/unit data)


Goodwill
8. Notes Payable, net
No goodwill impairment indicators have been identified during the three months ended March 31, 2019.

Non-Real Estate Investments

The following table sets forth information with respectCompany holds investments in privately traded companies. The investments require accounting under the equity method unless the interest in the entity is deemed to be so insubstantial such that the amountsCompany has virtually no influence over the entity’s operating and financial policies.

The Company holds investments in entities that do not report NAV. The Company marks the these investments to fair value based on Level 2 inputs, whenever fair value is readily available or observable. Changes in fair value are included in the unrealized gain on non-real estate investment line item on the Consolidated Statements of Operations. In the first quarter of 2019 and 2018, there was no gain or loss recognized due to observable changes in fair value. For one of the investments, the Company is committed to funding up to $20.0 million in a real estate technology venture capital fund. During the first quarter of 2019, the Company has contributed $425 thousand to this fund with $19.6 million remaining to be contributed. 

Investment in Unconsolidated Joint Venture

As of March 31, 2019, the Company has determined it is not the primary beneficiary of one joint venture. Due to its significant influence over the unconsolidated entity, the Company accounts for it using the equity method of accounting.

On June 16, 2016, the Company entered into a joint venture to co-originate a loan secured by land in Santa Clara, California. The Company owns 21% of the unconsolidated entity. On July 10, 2018, the Company received a return of capital related to its share of the repayment of the notes payable, net as of:receivable.

 September 30, 2017 December 31, 2016 
Interest Rate(1)
 Contractual Maturity Date 
UNSECURED NOTES PAYABLE        
Unsecured Revolving Credit Facility(2)
$250,000
 $300,000
 LIBOR + 1.15% to 1.85% 4/1/2019
(3) 
5-Year Term Loan due April 2020(2)(4)
450,000
 450,000
 LIBOR + 1.30% to 2.20% 4/1/2020 
5-Year Term Loan due November 2020(2)
175,000
 175,000
 LIBOR + 1.30% to 2.20% 11/17/2020 
7-Year Term Loan due April 2022(2)(5)
350,000
 350,000
 LIBOR + 1.60% to 2.55% 4/1/2022 
7-Year Term Loan due November 2022(2)(6)
125,000
 125,000
 LIBOR + 1.60% to 2.55% 11/17/2022 
Series A Notes110,000
 110,000
 4.34% 1/2/2023 
Series E Notes50,000
 50,000
 3.66% 9/15/2023 
Series B Notes259,000
 259,000
 4.69% 12/16/2025 
Series D Notes150,000
 150,000
 3.98% 7/6/2026 
Series C Notes56,000
 56,000
 4.79% 12/16/2027 
TOTAL UNSECURED NOTES PAYABLE1,975,000

2,025,000
     
         
SECURED NOTES PAYABLE        
Rincon Center(7)
98,896
 100,409
 5.13% 5/1/2018 
Sunset Gower Studios/Sunset Bronson Studios5,001
 5,001
 LIBOR + 2.25% 3/4/2019
(3) 
Met Park North(8)
64,500
 64,500
 LIBOR + 1.55% 8/1/2020 
10950 Washington(7)
27,549
 27,929
 5.32% 3/11/2022 
Pinnacle I(9)(10)
129,000
 129,000
 3.95% 11/7/2022 
Element LA168,000
 168,000
 4.59% 11/6/2025 
Pinnacle II(10)
87,000
 87,000
 4.30% 6/11/2026 
Hill7(11)
101,000
 101,000
 3.38% 11/6/2026 
TOTAL SECURED NOTES PAYABLE680,946
 682,839
     
TOTAL NOTES PAYABLE2,655,946
 2,707,839
     
Held for sale balances(10)
(216,000) (216,000)     
Deferred financing costs, net(12)
(15,588) (18,516)     
TOTAL NOTES PAYABLE, NET(13)
$2,424,358
 $2,473,323
     
_________________
(1)Interest rate with respect to indebtedness is calculated on the basis of a 360-day year for the actual days elapsed. Interest rates are as of September 30, 2017, which may be different than the interest rates as of December 31, 2016 for corresponding indebtedness.
(2)The Company has the option to make an irrevocable election to change the interest rate depending on the Company’s credit rating. As of September 30, 2017, no such election had been made.
(3)The maturity date may be extended once for an additional one-year term.
(4)Effective July 2016, $300.0 million of the term loan was effectively fixed at 2.75% to 3.65% per annum through the use of two interest rate swaps. See Note 10 for details.
(5)Effective July 2016, the outstanding balance of the term loan was effectively fixed at 3.36% to 4.31% per annum through the use of two interest rate swaps. See Note 10 for details.
(6)Effective June 1, 2016, the outstanding balance of the term loan was effectively fixed at 3.03% to 3.98% per annum through the use of an interest rate swap. See Note 10 for details.
(7)Monthly debt service includes annual debt amortization payments based on a 30-year amortization schedule with a balloon payment at maturity.
(8)This loan bears interest only. Interest on the full loan amount was effectively fixed at 3.71% per annum through the use of an interest rate swap. See Note 10 for details.
(9)This loan bears interest only for the first five years. Beginning with the payment due December 6, 2017, monthly debt service will include annual debt amortization payments based on a 30-year amortization schedule with a balloon payment at maturity.
(10)The Company owns 65% of the ownership interests in the consolidated joint venture that owns the Pinnacle I and II properties. The full amount of the loan is shown. The Company entered into an agreement on September 14, 2017 to sell its ownership interest in the consolidated joint venture that owns Pinnacle I and Pinnacle II. The sale is expected to close in the fourth quarter of 2017. These properties meet the definition of properties held for sale.
(11)The Company owns 55% of the ownership interest in the consolidated joint venture that owns the Hill7 property. The full amount of the loan is shown. The maturity date of this loan can be extended for an additional two years at a higher interest rate and with principal amortization.
(12)Excludes deferred financing costs related to properties held for sale and amounts related to establishing the Company’s unsecured revolving credit facility.
(13)Excludes amounts related to a public offering of senior notes that closed October 2, 2017.

26
23


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)Statements
(Unaudited, tabular amounts in thousands, except square footage, share and share/unit data)


7. Debt


CurrentThe following table sets forth information with respect to the Company’s outstanding indebtedness:
March 31, 2019December 31, 2018
Interest Rate(1)
Contractual Maturity Date
UNSECURED AND SECURED DEBT
Unsecured debt
Unsecured revolving credit facility(2)(3)
$220,000 $400,000 LIBOR + 1.05% to 1.50%3/13/2022
(4)
Term loan A(2)(5)
300,000 300,000 LIBOR + 1.20% to 1.70%4/1/2020
(6)
Term loan B(2)(7)
350,000 350,000 LIBOR + 1.20% to 1.70%4/1/2022
Term loan D(2)(8)
125,000 125,000 LIBOR + 1.20% to 1.70%11/17/2022
Series A notes110,000 110,000 4.34%  1/2/2023
Series E notes50,000 50,000 3.66%  9/15/2023
Series B notes259,000 259,000 4.69%  12/16/2025
Series D notes150,000 150,000 3.98%  7/6/2026
3.95% Registered senior notes400,000 400,000 3.95%  11/1/2027
Series C notes56,000 56,000 4.79%  12/16/2027
4.65% Registered senior notes(9)
350,000 — 4.65%  4/1/2029
Term loan C— 75,000 LIBOR + 1.30% to 2.20%N/A
Total unsecured debt2,370,000 2,275,000 
Secured debt
Met Park North(10)
64,500 64,500 LIBOR + 1.55%8/1/2020
10950 Washington(11)
26,736 26,880 5.32%  3/11/2022
Sunset Bronson Studios/ICON/CUE(12)
5,001 — LIBOR + 1.35%  3/1/2024
Element LA168,000 168,000 4.59%  11/6/2025
Hill7(13)
101,000 101,000 3.38%  11/6/2028
Sunset Gower Studios/Sunset Bronson Studios— 5,001 LIBOR + 2.25%N/A
Total secured debt365,237 365,381 
Total unsecured and secured debt2,735,237 2,640,381 
Unamortized deferred financing costs and loan discounts(14)
(23,605)(16,546)
TOTAL UNSECURED AND SECURED DEBT, NET$2,711,632 $2,623,835 
IN-SUBSTANCE DEFEASED DEBT(15)
$137,417 $138,223 4.47%10/1/2022
JOINT VENTURE PARTNER DEBT(16)
$66,136 $66,136 4.50%  10/9/2028
_________________
1.Interest rate with respect to indebtedness is calculated on the basis of a 360-day year activityfor the actual days elapsed. Interest rates are as of March 31, 2019, which may be different than the interest rates as of December 31, 2018 for corresponding indebtedness.

2.The Company has an option to make an irrevocable election to change the interest rate depending on the Company’s credit rating or a specified base rate plus an applicable margin. As of March 31, 2019, no such election had been made.
3.The Company has a total capacity of $600.0 million under its unsecured revolving credit facility.
4.The maturity date may be extended once for an additional one-year term.
5.The interest rate on the outstanding balance of the term loan was effectively fixed at 2.65% to 3.06% per annum through the use of two interest rate swaps. See Note 8 for details.
6.The maturity date may be extended twice, each time for an additional one-year term.
7.The interest rate on the outstanding balance of the term loan was effectively fixed at 2.96% to 3.46% per annum through the use of two interest rate swaps. See Note 8 for details.
8.The interest rate on the outstanding balance of the term loan was effectively fixed at 2.63% to 3.13% per annum through the use of an interest rate swap. See Note 8 for details.
9.On September 14, 2017,February 27, 2019, the Company entered into an agreement to sell its ownership interests in the consolidated joint venture that owns the Pinnacle I and Pinnacle II properties to certain affiliates of Blackstone for $350.0 million, before credits, prorations and closing costs, including the assumption of $216.0 million of secured notes payable. The loan balance related to these properties as of September 30, 2017 and December 31, 2016 is reflected in liabilities associated with real estate held for sale in the Consolidated Balance Sheets.

On October 2, 2017, our operating partnership completed an underwritten public offering of $400.0$350.0 million inof senior notes, due November 1, 2027. The noteswhich were issued at 99.815%98.663% of par,par.
10.Interest on the full loan amount has been effectively fixed at 3.71% per annum through the use of an interest rate swap. See Note 8 for details.
11.Monthly debt service includes annual debt amortization payments based on a 30-year amortization schedule with a couponballoon payment at maturity.
12.The Company has a total capacity of 3.950%. The notes are fully and unconditionally guaranteed$235.0 million under the Sunset Bronson Studios/ICON/CUE revolving credit facility. This loan is secured by the Company. The net proceeds from the offering, after deducting the underwriting discount and offering expenses, were approximately $396.7 million, which was used to repay $150.0 million of the Company’s 5-year term loan due April 2020 with the remainder of the net proceeds, together with cash on hand, used to fully repay the $250.0 million balance outstanding under the Company’s unsecured revolving credit facility.

Indebtedness

The Company presents its financial statements on a consolidated basis. Notwithstanding such presentation, except to the extent expressly indicated, such as in the case of the project financing for Sunset Gower Studios and Sunset Bronson Studios, the Company’s separate property-owning subsidiaries are not obligors of the debt of their respective affiliatesICON and each property-owning subsidiary’s separate liabilities do not constitute obligations of its respective affiliates.

Loan agreements include events of default that the Company believes are usual for loan and transactions of this type. As of the date of this filing, there have been no events of default associated with the Company’s loans.
The following table summarizes the minimum future principal payments due (before the impact of extension options, if applicable) on the operating partnership’s secured and unsecured notes payable as of September 30, 2017:
Year Annual Principal Payments
Remaining 2017 $821
2018 101,157
2019 257,886
2020 692,493
2021 3,142
Thereafter 1,600,447
Total(1)
 $2,655,946
_________________
(1)Includes balances related to properties that have been classified as held for sale.

CUE properties. 
27
24


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)Statements
(Unaudited, tabular amounts in thousands, except square footage, share and share/unit data)


13.The Company owns 55% of the ownership interest in the consolidated joint venture that owns the Hill7 property. The full amount of the loan is shown. This loan bears interest only at 3.38% until November 6, 2026, at which time the interest rate will increase and monthly debt service will include principal payments with a balloon payment at maturity.
Unsecured Revolving Credit Facility

The operating partnership’s14.Excludes deferred financing costs related to establishing the Company’s unsecured revolving credit facility is amended from time to time. and Sunset Bronson Studios/ICON/CUE revolving credit facility, which are reflected in prepaid and other assets, net line item in the Consolidated Balance Sheets. See Note 6 for details.
15.The termsCompany owns 75% of the arrangement are more fully describedownership interest in the joint venture that owns the One Westside and 10850 Pico properties. The full amount of the loan is shown. Monthly debt service includes annual debt amortization payments based on a 10-year amortization schedule with a balloon payment at maturity.
16.This amount relates to debt attributable to Allianz U.S. Private REIT LP (“Allianz”), the Company’s 2016 Annual Reportpartner in the joint venture that owns the Ferry Building property. The maturity date may be extended twice for an additional two-year term each.

Current Year Activity

During the three months ended March 31, 2019, the outstanding borrowings on Form 10-K.the unsecured revolving credit facility decreased by $180.0 million, net of draws. The Company uses the unsecured revolving credit facility to finance the acquisition of other properties, to provide funds for tenant improvements and capital expenditures and to provide for working capital and other corporate purposes.  

On February 27, 2019, the operating partnership completed an underwritten public offering of $350.0 million in senior notes due April 1, 2029. The notes are fully and unconditionally guaranteed by the Company. The net proceeds from the offering, after deducting the underwriting discount, were approximately $343.0 million and were used to repay outstanding borrowings under its unsecured revolving credit facility and $75.0 million of its five-year term loan due November 17, 2020.  

On March 1, 2019, the Company entered into a loan agreement to borrow up to $235.0 million on a revolving basis, maturing on March 1, 2024. The Company drew $5.0 million to pay down the Sunset Gower Studios/Sunset Bronson Studios construction loan that matured on March 4, 2019. The unused fee rate related to Sunset Bronson Studios/ICON/CUE is 0.20%.  

Indebtedness

The Company presents its financial statements on a consolidated basis. Notwithstanding such presentation, except to the extent expressly indicated, the Company’s separate property-owning subsidiaries are not obligors of or under the debt of their respective affiliates and each property-owning subsidiary’s separate liabilities do not constitute obligations of its respective affiliates. 

Loan agreements include events of default that the Company believes are usual for loans and transactions of this type. As of the date of this filing, there have been no events of default associated with the Company’s loans.
The following table provides information regarding the Company’s minimum future principal payments due on the Company’s debt (before the impact of extension options, if applicable) as of March 31, 2019:
YearUnsecured and Secured DebtIn-substance Defeased DebtJoint Venture Partner Debt
Remaining 2019$424 $2,387 $— 
2020 365,095 3,323 — 
2021 632 3,494 — 
2022 720,085 128,213 — 
2023 160,000 — — 
Thereafter1,489,001 — 66,136 
TOTAL$2,735,237 $137,417 $66,136 

25
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
Unsecured Debt

Registered Senior Notes

On February 27, 2019, the operating partnership completed an underwritten public offering of $350.0 million in senior notes due April 1, 2029. The notes were issued at 98.663% of par, with a coupon of 4.65% and an effective interest rate of 4.82%. The notes are fully and unconditionally guaranteed by the Company.

On October 2, 2017, the operating partnership completed an underwritten public offering of $400.0 million in senior notes due November 1, 2027. The notes were issued at 99.815% of par, with a coupon of 3.95% and an effective interest rate of 3.97%. The notes are fully and unconditionally guaranteed by the Company.

Term Loan and Credit Facility

On March 13, 2018, the operating partnership entered into a third amended and restated credit agreement (the “Amended and Restated Credit Agreement”) with various financial institutions. The Amended and Restated Credit Agreement amends and restates and replaces (i) the operating partnership’s existing second amended and restated credit agreement, entered into on March 31, 2015, which governed its $400.0 million unsecured revolving credit facility, $300.0 million unsecured 5-year term loan facility and $350.0 million unsecured 7-year term loan facility, and (ii) the operating partnership’s Term Loan Credit Agreement, entered into on November 17, 2015, which governed its $75.0 million unsecured 5-year term loan facility and $125.0 million unsecured 7-year term loan facility.

The Amended and Restated Credit Agreement provides for (i) the increase of the operating partnership’s unsecured revolving credit facility to $600.0 million and the extension of the term to March 13, 2022 and (ii) term loans in amount and tenor equal to the term loans outstanding under the previous agreements ($300.0 million term loan A maturing April 1, 2020, $350.0 million term loan B maturing April 1, 2022, $75.0 million term loan C maturing November 17, 2020 and $125.0 million term loan D maturing November 17, 2022). The $75.0 million term loan was repaid with proceeds from the Company’s 4.65% registered senior notes.

The following table summarizes the balance and key terms of the unsecured revolving credit facility as of:
 September 30, 2017 December 31, 2016
Outstanding borrowings$250,000
 $300,000
Remaining borrowing capacity150,000
 100,000
Total borrowing capacity$400,000
 $400,000
Interest rate(1)
LIBOR + 1.15% to 1.85%
Facility fee-annual rate(1)
0.20% or 0.35%
Contractual maturity date(2)
4/1/2019
March 31, 2019December 31, 2018
Outstanding borrowings$220,000 $400,000 
Remaining borrowing capacity380,000 200,000 
TOTAL BORROWING CAPACITY$600,000 $600,000 
Interest rate(1)(2)
LIBOR + 1.05% to 1.50%
Annual facility fee rate(1)
0.15% or 0.30%
Contractual maturity date(3)
3/13/2022
_________________
(1)The rate is based on the operating partnership’s leverage ratio.
(2)The maturity date may be extended once for an additional one-year term.

1.The rate is based on the operating partnership’s leverage ratio. The Company has the option to make an irrevocable election to change the interest rate depending on the Company’s credit rating. As of March 31, 2019, no such election had been made.
2.The Company has the option to make an irrevocable election to change the interest rate depending on the Company’s specified base rate plus an applicable margin. As of March 31, 2019, no such election had been made.
3.The maturity date may be extended once for an additional one-year term.

Debt Covenants


The operating partnership’s ability to borrow under its unsecured loan arrangements remains subject to ongoing compliance with financial and other covenants as defined in the respective agreements. Certain financial covenant ratios are subject to change in the occurrence of material acquisitions as defined in the respective agreements. Other covenants include certain limitations on dividend payouts and distributions, limits on certain types of investments outside of the operating partnership’s primary business and other customary affirmative and negative covenants.
 
The following table summarizes existing covenants and their covenant levels related to the unsecured revolving credit facility, term loans, and note purchase agreements, when considering the most restrictive terms:
Covenant RatioCovenant Level
Leverage ratiomaximum of 0.60:1.00
Unencumbered leverage ratiomaximum of 0.60:1.00
Fixed charge coverage ratiominimum of 1.50:1.00
Secured indebtedness leverage ratiomaximum of 0.45:1.00
Unsecured interest coverage ratiominimum of 2.00:1.00

The operating partnership was in compliance with its financial covenants as of September 30, 2017.

Repayment Guarantees

Sunset Gower Studios and Sunset Bronson Studios Loan

In connection with the loan secured by the Sunset Gower Studios and Sunset Bronson Studios properties, the Company has guaranteed in favor of and promised to pay to the lender 19.5% of the principal payable under the loan in the event the borrower, a wholly-owned entity of the operating partnership, does not do so. As of September 30, 2017, the outstanding balance was $5.0 million, which results in a maximum guarantee amount for the principal under this loan of $1.0 million. Furthermore, the Company agreed to guarantee the completion of the construction improvements, including tenant improvements, as defined in the agreement, in the event of any default of the borrower. If the borrower fails to complete the remaining required work, the guarantor agrees to perform timely all of the completion obligations, as defined in the agreement. As of the date of this filing, there has been no event of default associated with this loan.


28
26


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)Statements
(Unaudited, tabular amounts in thousands, except square footage, share and share/unit data)


Covenant RatioCovenant Level
Total liabilities to total asset value≤ 60%
Unsecured indebtedness to unencumbered asset value≤ 60%
Adjusted EBITDA to fixed charges≥ 1.5x
Secured indebtedness to total asset value≤ 45%
Unencumbered NOI to unsecured interest expense≥ 2.0x

The following table summarizes existing covenants and their covenant levels related to the registered senior notes:
Covenant RatioCovenant Level
Debt to total assets≤ 60%
Total unencumbered assets to unsecured debt≥ 150%
Consolidated income available for debt service to annual debt service charge≥ 1.5x
Secured debt to total assets≤ 45%

The operating partnership was in compliance with its financial covenants as of March 31, 2019.

Repayment Guarantees

Registered Senior Notes

The Company has fully and unconditionally guaranteed the operating partnership’s 3.95% registered senior notes and 4.65% registered senior notes. 

Other Loans


Although the rest of the operating partnership’s loans are secured and non-recourse, the operating partnership provides limited customary secured debt guarantees for items such as voluntary bankruptcy, fraud, misapplication of payments and environmental liabilities.


Interest Expense


The following table represents a reconciliation from the gross interest expense to the amount on the interest expense line item in the Consolidated Statements of Operations:
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
2017 2016 2017 201620192018
Gross interest expense(1)
$24,107
 $21,726
 $70,345
 $59,911
Gross interest expense(1)
$27,465 $22,431 
Capitalized interest(2,831) (2,960) (7,817) (8,414)Capitalized interest(4,706)(3,586)
Amortization of deferred financing costs and loan premium, net1,185
 1,144
 3,558
 3,278
Interest expense$22,461
 $19,910
 $66,086
 $54,775
Amortization of deferred financing costs and loan discountsAmortization of deferred financing costs and loan discounts1,591 1,658 
INTEREST EXPENSEINTEREST EXPENSE$24,350 $20,503 
_________________
(1)
1.Includes interest on the Company’s notes payable and hedging activities.
9. Security Deposits and Prepaid Rent

The following table summarizes the Company’s security depositsdebt and prepaid rent as of:hedging activities and extinguishment costs related to paydowns in the term loans.

8. Derivatives
 September 30, 2017 December 31, 2016
Security deposits$36,881
 $31,064
Prepaid rent29,618
 39,404
Security deposits and prepaid rent(1)
$66,499
 $70,468
_____________
(1)Excludes balances related to properties that have been classified as held for sale.

10. Derivative Instruments


The Company enters into derivative instrumentsderivatives in order to hedge interest rate risk. The Company had six interest rate swaps with aggregate notional amounts of $839.5 million as of September 30, 2017March 31, 2019 and December 31, 2016.2018. These derivative instrumentsderivatives were designated as effective cash flow hedges for accounting purposes. There

27
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
The Company has agreements with its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is no impactaccelerated by the lender due to the Company’s default on the Company’s Consolidated Statements of Cash Flows.indebtedness.


The Company’s derivative instrumentsderivatives are classified as Level 2 and their fair values are derived from estimated values obtained from observable market data for similar instruments.

5-Year Term Loan due April 2020 and 7-Year Term Loan due April 2022

On April 1, 2015, the Company effectively hedged $300.0 million of the 5-Year Term Loan due April 2020 through two interest rate swaps, each with a notional amount of $150.0 million, which, effective as of May 1, 2015, swapped one-month LIBOR to a fixed rate of 1.36% through the loan’s maturity. Therefore, the interest rate is effectively fixed at 2.66% to 3.56%, depending on the operating partnership’s leverage ratio. The unhedged portion bears interest at a rate equal to one-month LIBOR plus 1.30% to 2.20%, depending on the operating partnership’s leverage ratio.

The Company also effectively hedged its $350.0 million 7-Year Term Loan due April 2022 through two interest rate swaps, which, effective as of May 1, 2015, swapped one-month LIBOR to a fixed rate of 1.61% through the loan’s maturity. Therefore, the interest rate is effectively fixed at 3.21% to 4.16% depending on the operating partnership’s leverage ratio.


29


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)
(Unaudited, tabular amounts in thousands, except square footage and share/unit data)


In July 2016, the derivative instruments described above were amended to include a 0.00% floor to one-month LIBOR and then de-designated the original swap and designated the amended swap as a hedge in order to minimize the ineffective portion of the original derivative instruments. Therefore, the effective interest rate increased to a range of 2.75% to 3.65% with respect to $300.0 million of the 5-Year Term Loan due April 2020 and 3.36% to 4.31% with respect to the 7-year Term Loan due April 2022, in each case, per annum. The interest rate within the range is based on the operating partnership’s leverage ratio. The amount included in accumulated other comprehensive income (loss) prior to the de-designation is amortized into interest expense over the remaining original terms of the derivative instruments.

For the three and nine months ended September 30, 2017, the Company recognized an unrealized loss of $37 thousand and $82 thousand, respectively, reflected in the unrealized loss (gain) on ineffective portion of derivative instruments line item on the Consolidated Statements of Operations. For the three and nine months ended September 30, 2016, the Company recognized an unrealized gain of $0.9 million and an unrealized loss of $1.6 million, respectively.

7-Year Term Loan due November 2022

On May 3, 2016, the Company entered into a derivative instrument with respect to $125.0 million of the 7-Year Term Loan due November 2022. This derivative instrument became effective on June 1, 2016 and swapped one-month LIBOR, which includes a 0.00% floor, to a fixed rate of 1.43% through the loan’s maturity.

Met Park North

OnJuly 31, 2013, the Company closed a seven-year loan totaling $64.5 million with Union Bank, N.A., secured by the Met Park North property. The loan bears interest at a rate equal to one-month LIBOR plus 1.55%. The full loan is subject to an interest rate contract that swaps one-month LIBOR to a fixed rate of 2.16% through the loan’s maturity on August 1, 2020.

Overall


The fair market value of derivative instrumentsderivatives is presented on a gross basis in prepaid and other expenses, net and derivative liabilities line items on the Consolidated Balance Sheets. The following table summarizes the Company’s derivative assetsinstruments as of September 30, 2017March 31, 2019 and December 31, 2016 were $6.3 million2018:
Interest Rate Range(1)
Fair Value Asset
Underlying Debt InstrumentNumber of HedgesNotional AmountEffective DateMaturity DateLowHighMarch 31, 2019December 31, 2018
Met Park North1 $64,500 August 2013August 20203.71%  3.71%  $141 $350 
Term loan A(2)
2 300,000 July 2016April 20202.65%  3.06%  2,813 4,038 
Term loan B(2)
2 350,000April 2015April 20222.96%  3.46%  4,264 7,543 
Term loan D(2)
1 125,000June 2016 November 20222.63%  3.13%  3,245 4,756 
TOTAL6 $839,500 $10,463 $16,687 
_____________
1.The rate is based on the fixed rate from the swap and $5.9 million, respectively. The derivative liabilitiesthe spread based on the operating partnership’s leverage ratio. 
2.Interest rate with respect to indebtedness is calculated on the basis of a 360-day year for the actual days elapsed. Interest rates are as of September 30, 2017March 31, 2019, which may be different than the interest rates in prior periods for corresponding indebtedness.

In January 2019, the Company entered into a forward interest rate swap designated hedge. In February 2019, it was terminated, which resulted in a cash payment of approximately $1.6 million that was recorded in accumulated other comprehensive (loss) income on the Consolidated Balance Sheets and December 31, 2016 were $0.8 millionwill be recognized over the life of the 4.65% registered senior notes entered into in February 2019 as an adjustment to interest expense. The cash payment is included in the payment of loan costs paid line item of the Consolidated Statements of Cash Flows.

On January 1, 2018, the Company early adopted ASU 2017-12, Derivatives and $1.3 million, respectively.Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). As a result of the adoption, the Company is no longer recognizing unrealized gains or losses related to ineffective portions of its derivatives. In 2018, the Company recognized a $231 thousand cumulative-effect adjustment to other comprehensive income, with a corresponding adjustment to the opening balance of retained earnings (accumulated deficit).


The Company reclassifies into earnings in the same period during which the hedged forecasted transaction affects earnings. As of September 30, 2017,March 31, 2019, the Company expects $1.1$6.5 million of unrealized lossgain included in accumulated other comprehensive lossincome will be reclassified as a reduction to interest expense in the next 12 months.


11.9. U.S. Government Securities

The Company has U.S. Government securities of $145.0 million and $146.9 million as of March 31, 2019 and December 31, 2018. The One Westside and 10850 Pico properties acquisition in 2018 included the assumption of debt which was, in-substance, defeased through the purchase of U.S. Government-backed securities. The securities are investments held to maturity and are carried at amortized cost on the Consolidated Balance Sheets. As of March 31, 2019, the Company had $2.9 million of gross unrealized gains and no gross unrealized losses.

The following table summarizes the carrying value and fair value of the Company’s securities by the contractual maturity date March 31, 2019:
Carrying ValueFair Value
Due in 1 year$4,274 $4,281 
Due in 1 year through 5 years140,718 143,632 
TOTAL$144,992 $147,913 

28
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
10. Income Taxes

Hudson Pacific Properties, Inc. has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (“the Code”(the “Code”), commencing with its taxable year ended December 31, 2010. Provided it continues to qualify for taxation as a REIT, Hudson Pacific Properties, Inc. is generally not subject to corporate level income tax on the earnings distributed currently to its stockholders. The Company has elected, together with one of its subsidiaries, to treat such subsidiary as a taxable REIT subsidiary (“TRS”) for federal income tax purposes.


The Company’s property-owning subsidiaries are limited liability companies and are treated as pass-through entities or disregarded entities (or, in the case of the entities that own the 1455 Market, StreetHill7 and Hill7Ferry Building properties, REITs) for federal income tax purposes. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements for the activities of these entities.


The Company periodically evaluates its tax positions to determine whether it is more likely than not that such positions would be sustained upon examination by a tax authority for all open tax years, as defined by the statute of limitations, based on their technical merits. As of September 30, 2017,March 31, 2019, the Company has not established a liability for uncertain tax positions.


30




The Company and its TRS file income tax returns with the U.S. federal government and various state and local jurisdictions. The Company and its TRS are no longer subject to tax examinations by tax authorities for years prior to 2012.2014. The Company has assessed its tax positions for all open years, which include 20122014 to 2016,2017, and concluded that there are no material uncertainties to be recognized.


12.11. Future Minimum Rents and Lease Payments

The following table summarizes the future minimum base rents (excluding tenant reimbursements for operating expenses and termination fees related to tenants exercising early termination options) for properties as of March 31, 2019:
Year EndedNon-CancellableSubject to Early Termination Options
Total (1)
Remaining 2019 $410,310 $2,728 $413,038 
2020 530,493 14,245 544,738 
2021 496,431 34,147 530,578 
2022 453,315 39,098 492,413 
2023 421,940 37,598 459,538 
Thereafter2,052,986 86,069 2,139,055 
TOTAL$4,365,475 $213,885 $4,579,360 
_____________
3.Excludes rents under leases at the Company’s studio properties with terms of one year or less.

29
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
The following table summarizes the Company’s ground lease terms related to properties that are held subject to long-term non-cancellable ground lease obligations as of March 31, 2019:
PropertyExpiration DateNotes
3400 Hillview10/31/2040The ground rent is the greater of the minimum annual rent or percentage annual rent. The minimum annual rent until October 31, 2017 is the lesser of 10% of Fair Market Value (“FMV”) of the land or $1.0 million grown at 75% of the cumulative increases in consumer price index (“CPI”) from October 1989. Thereafter, minimum annual rent, which resets annually, is the lesser of 10% of FMV of the land or the minimum annual rent as calculated as of November 1, 2017 plus 75% of subsequent cumulative CPI changes. The minimum annual rent cannot be less than a set amount. Percentage annual rent is gross income multiplied by 24.125%.
Clocktower Square9/26/2056The ground rent is minimum annual rent (adjusted every 10 years) plus 25% of adjusted gross income (“AGI”). Minimum rent adjustments adds 60% of the average annual participation rent payable over five years. Annual participation is the excess of 25% of AGI over the minimum annual rent for a given lease year.
Del Amo6/30/2049Rent under the ground sublease is $1.00 per year, with the sublessee being responsible for all impositions, insurance premiums, operating charges, maintenance charges, construction costs and other charges, costs and expenses that arise or may be contemplated under any provisions of the ground sublease.
Ferry BuildingVariousThe land on which the building is situated is subject to a ground lease agreement that expires on April 1, 2067. The minimum annual rent (adjusted every 5 years) is the prior year’s minimum annual rent plus cumulative increase in CPI with a floor of 10% and a cap of 20%.

Additionally, the parking lot is subject to a separate ground lease agreement that expires on April 1, 2023. The minimum annual rent adjusts each year for changes in CPI with a floor of 2% and a cap of 4%. The parking lot is subject to automatic renewals for 10-year periods at market.
Foothill Research Center6/30/2039The ground rent is the greater of the minimum annual rent or percentage annual rent. The minimum annual rent, which resets annually, is the lesser of 10% of FMV of the land or the previous year’s minimum annual rent plus 75% of CPI increase. The minimum annual rent cannot be less than a set amount. Percentage annual rent is gross income multiplied by 24.125%.
3176 Porter7/31/2040The ground rent is the greater of the minimum annual rent or percentage annual rent. The minimum annual rent, which resets annually, is the lesser of 10% of FMV of the land or the previous year’s minimum annual rent plus 75% of CPI increase. Percentage annual rent is Lockheed’s base rent multiplied by 24.125%. The minimum annual rent cannot be less than a set amount.
Metro Center4/29/2054Every 10 years rent adjusts to 7.233% of FMV of the land (since 2008) and adjusts to reflect the change in CPI from the preceding FMV adjustment date (since 2013). The CPI adjustment has a floor of the previous minimum rent. The Company has an option to extend the ground lease for four additional periods of 11 years each.
Page Mill Center11/30/2041The ground rent is minimum annual rent (adjusted on January 1, 2019 and January 1, 2029) plus 25% of AGI, less minimum annual rent. Minimum rent adjustments adds 60% of the average annual participation rent payable over five years. Annual participation is the excess of 25% of AGI over the minimum annual rent for a given lease year.
Page Mill Hill11/17/2049The ground rent is minimum annual rent (adjusted every 10 years) plus 60% of the average of the percentage annual rent for the previous 7 lease years. Minimum rent adjustments add 60% of the average annual percentage rent for the previous 7 years.
Palo Alto Square11/30/2045The ground rent is minimum annual rent (adjusted every 10 years starting January 1, 2022) plus 25% of AGI less minimum annual rent. The minimum annual rent adjustments add 50% of the average annual percentage rent from the previous 5 years.
Sunset Gower Studios3/31/2060Every 7 years rent adjusts to 7.5% of FMV of the land.
Techmart5/31/2053Rent subject to a 10% increase every 5 years. The Company has an option to extend the ground lease for two additional periods of 10 years each. This extension option was not included in the calculation of the right of use asset and lease liability.

Contingent rental expense is recorded in the period in which the contingent event becomes probable. The Company recognized rentfollowing table summarizes rental expense for ground leases and a corporate office lease as follows:
Three Months Ended March 31,
20192018
Contingent rental expense$2,514 $3,095 
Minimum rental expense$4,603 $3,337 

30
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Contingent rental expense$2,191
 $1,970
 $6,025
 $6,417
Minimum rental expense2,952
 3,070
 9,203
 10,064

The following table provides information regarding the Company’s future minimum lease payments for its ground leases (before the impact of extension options, if applicable) as of September 30, 2017:
March 31, 2019:
Year 
Ground Leases (1)
Year
Lease Payments(1)
Remaining 2017 $3,359
2018 14,115
2019 14,165
Remaining 2019Remaining 2019$13,808 
2020 14,165
2020 18,411 
2021 14,165
2021 18,411 
2022 2022 18,411 
2023 2023 18,489 
Thereafter 396,307
Thereafter501,924 
Total $456,276
TOTALTOTAL$589,454 
_________________
(1)In situations where ground lease obligation adjustments are based on third-party appraisals of fair market land value, CPI adjustments and/or percentage of gross income that exceeds the minimum annual rent, the future minimum lease amounts above include the lease rental obligations in effect as of September 30, 2017.

1.In situations where ground lease obligation adjustments are based on third-party appraisals of fair market land value, CPI adjustments and/or percentage of gross income that exceeds the minimum annual rent, the future minimum lease amounts above include the lease rental obligations in effect as of March 31, 2019.

13.On March 26, 2019, the Company entered into a joint venture with Blackstone to purchase the Bentall Centre property located in Vancouver, Canada. The land on which the Bentall Centre is located is subject to long-term non-cancellable ground lease agreements. The future minimum lease payments are excluded from the table above. See Note 3 for details.


12. Fair Value of Financial Instruments

The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:


•Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;


•Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and


•Level 3: prices or valuation techniques where little or no market data is available that require inputs that are both significant to the fair value measurement and unobservable.


31


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)Statements
(Unaudited, tabular amounts in thousands, except square footage, share and share/unit data)



The Company measures fair value of financial instruments using Level 2 inputs categorized within the fair value framework. The Company’s financial assets and liabilities measured and reported at fair value on a recurring basis include the following as of:
  September 30, 2017 December 31, 2016
  Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Derivative assets $—
 $6,250
 $—
 $6,250
 $—
 $5,935
 $—
 $5,935
Derivative liabilities —
 819
 —
 819
 —
 1,303
 —
 1,303
March 31, 2019December 31, 2018
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Derivative assets(1)
$— $10,463 $— $10,463 $— $16,687 $— $16,687 
Non-real estate investments(1)
$— $3,138 $— $3,138 $— $2,713 $— $2,713 

___________
1.Included in the prepaid expenses and other assets, net line item on the Consolidated Balance Sheets.

Other Financial Instruments


The carrying values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities are reasonable estimates of fair value, using Level 1 inputs, because of the short-term nature of these instruments. Fair value for investment in U.S. Government securities are estimates based on Level 1 inputs. Fair values for notes payabledebt are estimatesestimated based on rates currently prevailing for similar instruments of similar maturities using Level 2 inputs.

The table below represents the carrying value and fair value of the Company’s notes payableinvestment in securities and debt as of:
 September 30, 2017 December 31, 2016
 Carrying Value Fair Value Carrying Value Fair Value
Unsecured notes payable(1)
$1,975,000
 $1,962,238
 2,025,000
 $2,011,210
Secured notes payable(1)(2)
680,946
 669,181
 682,839
 669,924
March 31, 2019December 31, 2018
Carrying ValueFair ValueCarrying ValueFair Value
Assets
U.S. Government securities$144,992 $147,913 $146,880 $147,686 
Liabilities
Unsecured debt(1)(2)
$2,364,728 $2,354,445 $2,274,352 $2,227,265 
Secured debt(1)
$365,237 $357,572 $365,381 $354,109 
In-substance defeased debt$137,417 $136,287 $138,223 $135,894 
Joint venture partner debt$66,136 $68,259 $66,136 $66,136 
_________________
(1)Amounts represent notes payable excluding net deferred financing costs.
(2)Includes balances related to properties that have been classified as held for sale.

1.Amounts represent debt excluding net deferred financing costs.
2.The 3.95% registered senior notes and the 4.65% registered senior notes were issued at a discount. The discount, net of amortization, was $5.3 million and $0.6 million at March 31, 2019 and December 31, 2018, respectively, and is included within unsecured debt.
14.
13. Stock-Based Compensation


The Company has various stock compensation arrangements, which are more fully described in the 20162018 Annual Report on Form 10-K. Under the 2010 Incentive Plan, as amended (“the 2010(the “2010 Plan”), the Company’s board of directors (“the Board”(the “Board”) has the ability to grant, among other things, restricted stock, restricted stock units, operating partnership performance units and performance-based awards.


The Board awards restricted shares to non-employee Board members on an annual basis as part of such Board members’ annual compensation and to newly elected non-employee Board members in accordance with the Non-Employee Director Compensation Program. The time-based awards are generally issued in the second quarter, in conjunction with the director’s election to the Board, and the individual share awards vest in equal annual installments over the applicable service vesting period, which is three years.


The Board awards time-based restricted shares or time-based operating partnership performance units to certain employees on an annual basis as part of the employees’ annual compensation. TheThese time-based awards are generally issued in the fourth quarter and the individual share awards vest in equal annual installments over the applicable service vesting period, which is generally three years. Additionally, certain restricted share awards are subject to a mandatory holding period upon vesting if the grantee is a named executive officer.


In December 2015, the Compensation Committeecompensation committee of the Board (the “Compensation Committee”) awarded a one-time special retention award to certain executives. The grants consist of time-based awards and performance-based awards. The time-based awards vest in equal 25% installments over a four-year period, subject to the participant’s continued employment. The performance-based awards vest over a four-year period, subject to the achievement of applicable performance goals and the participant’s continued employment.


32
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
The Compensation Committee of the Board annually adopts a Hudson Pacific Properties, Inc. Outperformance Program (“OPP Plan”) under the 2010 Plan. An award under the OPP Plan is ultimately earned to the extent the Company outperforms a predetermined total shareholder return (“TSR”) goal and/or achieves goals with respect to the outperformance of its peers in a particular REIT index. The ultimate aggregate award cannot exceed the predetermined maximum bonus pool. With respect to OPP Plan awards granted prior to 2017,through 2016, to the extent an award is earned following the completion of a three-year performance period, 50% of the earned award will vest in full at the end of the three-year performance period and 25%50% of the earned award will vest in equal annual installments over the two years thereafter, subject to the participant’s continued

32


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)
(Unaudited, tabular amounts in thousands, except square footage and share/unit data)


employment. OPP Plan awards granted are settled in common stock or,and, in the case of certain executives, in operating partnership performance units in the operating partnership. In February 2017, the Compensation Committee adoptedunits. Commencing with the 2017 OPP Plan. The 2017 OPP Plan, is substantially similar to the previous OPP Plans except for (i) the performance period is January 1, 2017 to December 31, 2019 (ii) the maximum bonus pool is $20.0 million and (iii) the two-year post-performance vesting period was replaced with a two-year mandatory holding period upon vesting. In February 2019, the Compensation Committee adopted the 2019 OPP Plan. The 2019 OPP Plan is substantially similar to the 2018 OPP Plan except for (i) the performance period beginning on January 1, 2019 and ending on December 31, 2021 and (ii) the maximum bonus pool is $28.0 million.


The per unit fair value of the 2017grants from the 2019 OPP award grantedPlan was estimated on the date of grant using the following assumptions in the Monte Carlo valuation:
Assumption
Assumption
Expected price volatility for the Company24.00%22.00% 
Expected price volatility for the particular REIT index17.00%18.00% 
Risk-free rate1.47%2.57% 
Dividend yield2.30%3.00% 


The following table presents the classification and amount recognized for stock-based compensation related to the Company’s awards:
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
2017 2016 2017 201620192018
Expensed stock compensation(1)
$3,449
 $3,288
 $11,237
 $9,931
Expensed stock compensation(1)
$5,150 $4,338 
Capitalized stock compensation(2)
217
 112
 635
 300
Capitalized stock compensation(2)
29 232 
Total stock compensation(3)
$3,666
 $3,400
 $11,872
 $10,231
TOTAL STOCK COMPENSATION(3)
TOTAL STOCK COMPENSATION(3)
$5,179 $4,570 
_________________
(1)Amounts are recorded in general and administrative expenses in the Consolidated Statements of Operations.
(2)Amounts are recorded in deferred leasing costs and lease intangible assets, net and investment in real estate, at cost in the Consolidated Balance Sheets.
(3)Amounts are recorded in additional paid-in capital and non-controlling interest—units in the operating partnership in the Consolidated Balance Sheets.
1.Amounts are recorded in general and administrative expenses in the Consolidated Statements of Operations.
2.Amounts are recorded in deferred leasing costs and lease intangible assets, net and investment in real estate, at cost in the Consolidated Balance Sheets.
15.3.Amounts are recorded in additional paid-in capital and non-controlling interest—units in the operating partnership in the Consolidated Balance Sheets.

14. Earnings Per Share

Hudson Pacific Properties, Inc.


Hudson Pacific Properties, Inc.

The Company calculates basic earnings per share by dividing the net income (loss) available to common stockholders for the period by the weighted average number of common shares outstanding during the period. Hudson Pacific Properties, Inc.The Company calculates diluted earnings per share by dividing the diluted net income (loss) available to common stockholders for the period by the weighted average number of common shares and dilutive instruments outstanding during the period using the treasury stock method or the if-converted method, whichever is more dilutive. Unvested time-based RSUsrestricted stock awards, unvested time-based performance unit awards and unvested OPP awardsrestricted stock units (“RSUs”) that contain nonforfeitable rights to dividends are participating securities and are included in the computation of earnings per share pursuant to the two-class method.



33


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)Statements
(Unaudited, tabular amounts in thousands, except square footage, share and share/unit data)


The following table reconciles the numerator and denominator in computing Hudson Pacific Properties, Inc.’sthe Company’s basic and diluted earnings per share for net (loss) income available to common stockholders:
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
2017 2016 2017 201620192018
Numerator:       Numerator:
Basic and diluted net income available to Hudson Pacific Properties, Inc. common stockholders
$11,064

$1,847

$35,132

$4,939
Basic and diluted net (loss) income available to common stockholdersBasic and diluted net (loss) income available to common stockholders$(39,392)$48,577 
Denominator:       Denominator:
Basic weighted average common shares outstanding155,302,800
 115,083,622
 152,874,952
 99,862,583
Basic weighted average common shares outstanding154,396,159 155,626,055 
Effect of dilutive instruments(1)
790,936
 1,179,000
 773,936
 1,117,000
Effect of dilutive instruments(1)
— 1,088,767 
Diluted weighted average common shares outstanding156,093,736
 116,262,622
 153,648,888
 100,979,583
Basic earnings per common share$0.07
 $0.02
 $0.23
 $0.05
Diluted earnings per common share$0.07
 $0.02
 $0.23
 $0.05
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDINGDILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING154,396,159 156,714,822 
Basic (loss) earnings per common shareBasic (loss) earnings per common share$(0.26)$0.31 
Diluted (loss) earnings per common shareDiluted (loss) earnings per common share$(0.26)$0.31 
________________
(1)The Company includes unvested awards and convertible common units as contingently issuable shares in the computation of diluted earnings per share once the market criteria are met, assuming that the end of the reporting period is the end of the contingency period. Any anti-dilutive securities are excluded from the diluted earnings per share calculation.

1.The Company includes unvested awards and convertible common and participating units as contingently issuable shares in the computation of diluted earnings per share once the market criteria are met, assuming that the end of the reporting period is the end of the contingency period. Any anti-dilutive securities are excluded from the diluted earnings per share calculation.

Hudson Pacific Properties, L.P.


Hudson Pacific Properties, L.P.The Company calculates basic earnings per share by dividing the net income (loss) available to common unitholders for the period by the weighted average number of common units outstanding during the period. Hudson Pacific Properties, L.P.The Company calculates diluted earnings per share by dividing the diluted net income (loss) available to common unitholders for the period by the weighted average number of common units and dilutive instruments outstanding during the period using the treasury stock method or the if-converted method, whichever is more dilutive. Unvested time-based RSUsrestricted stock awards, unvested time-based performance unit awards and unvested OPP awardsRSUs that contain nonforfeitable rights to dividends are participating securities and are included in the computation of earnings per unit pursuant to the two-class method.


The following table reconciles the numerator and denominator in computing Hudson Pacific Properties, L.P.’sthe Company’s basic and diluted earnings per unit for net (loss) income available to common unitholders:
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
2017 2016 2017 201620192018
Numerator:       Numerator:
Basic and diluted net income available to Hudson Pacific Properties, L.P. common unitholders$11,105
 $2,337
 $35,388
 $7,296
Basic and diluted net (loss) income available to common unitholdersBasic and diluted net (loss) income available to common unitholders$(39,577)$48,754 
Denominator:       Denominator:
Basic weighted average common units outstanding155,871,845
 145,614,312
 153,736,796
 145,550,685
Basic weighted average common units outstanding155,120,144 156,195,100 
Effect of dilutive instruments(1)
790,936
 1,179,000
 773,936
 1,117,000
Effect of dilutive instruments(1)
— 1,088,767 
Diluted weighted average common units outstanding156,662,781
 146,793,312
 154,510,732
 146,667,685
Basic earnings per common unit$0.07
 $0.02
 $0.23
 $0.05
Diluted earnings per common unit$0.07
 $0.02
 $0.23
 $0.05
DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDINGDILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING155,120,144 157,283,867 
Basic (loss) earnings per common unitBasic (loss) earnings per common unit$(0.26)$0.31 
Diluted (loss) earnings per common unitDiluted (loss) earnings per common unit$(0.26)$0.31 
________________
(1)The operating partnership includes unvested awards as contingently issuable units in the computation of diluted earnings per unit once the market criteria are met, assuming that the end of the reporting period is the end of the contingency period. Any anti-dilutive securities are excluded from the diluted earnings per unit calculation.
1.The operating partnership includes unvested awards as contingently issuable units in the computation of diluted earnings per unit once the market criteria are met, assuming that the end of the reporting period is the end of the contingency period. Any anti-dilutive securities are excluded from the diluted earnings per unit calculation.


34


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)Statements
(Unaudited, tabular amounts in thousands, except square footage, share and share/unit data)

15. Redeemable Non-Controlling Interest

Redeemable Preferred Units of the Operating Partnership

As of March 31, 2019 and December 31, 2018, there were 392,598 series A preferred units of partnership interest in the operating partnership, or series A preferred units, issued and outstanding, which are not owned by the Company. On April 16, 2018, 14,468 series A preferred units of partnership interest were redeemed for cash at a redemption price of $25.00 per share, plus accrued and unpaid dividends to, but not including, the date of redemption.

These series A preferred units are entitled to preferential distributions at a rate of 6.25% per annum on the liquidation preference of $25.00 per unit and became convertible at the option of the holder into common units or redeemable into cash or, at the Company’s election, exchangeable for registered shares of common stock.

Redeemable Non-Controlling Interest in Consolidated Real Estate Entities

On March 1, 2018, the Company entered into a joint venture agreement with Macerich WSP, LLC (“Macerich”) to form HPP-MAC WSP, LLC (“HPP-MAC JV”). On August 31, 2018, Macerich contributed Westside Pavilion to the HPP-MAC JV. The Company has a 75% interest in the joint venture that owns the One Westside and 10850 Pico properties. The Company has a put right, after a specified time, to sell its interest at fair market value. Macerich has a put right, after a specified time, to sell its interest at fair market value, which is a redemption right that is not solely within the control of the Company. The put right is not currently redeemable. Therefore, the non-controlling interest related to this joint venture is included as temporary equity. Once the redemption is probable, the carrying amount will be marked to market with the change in value reflected in additional paid-in capital.

On October 9, 2018, the Company entered into a joint venture with Allianz to purchase the Ferry Building property. The Company has a 55% interest in the joint venture that owns the Ferry Building property. The Company has a put right, if certain events occur, to sell its interest at fair market value. Allianz has a put right, if certain events occur, to sell its interest at fair market value, which is a redemption right that is not solely within the control of the Company. The put right is not currently redeemable. Therefore, the non-controlling interest related to this joint venture is included as temporary equity. Once the redemption is probable, the carrying amount will be marked to market with the change in value reflected in additional paid-in capital.

The following table reconciles the beginning and ending balances of redeemable non-controlling interests:

Series A Redeemable Preferred UnitsConsolidated Entities
Balance at December 31, 2018$9,815 $113,141 
Contributions— 2,075 
Declared dividend(153)— 
Net income (loss)153 (600)
BALANCE AT MARCH 31, 2019$9,815 $114,616 

35

Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
16. Equity


The table below presents the effect of the Company’s derivative instrumentsderivatives on accumulated other comprehensive income (“OCI”):
  
Hudson Pacific Properties, Inc. Stockholders’ Equity
 
Non-controlling
Interest—Units in the Operating
Partnership
 Total Equity
Balance at January 1, 2017 $9,496
 $(3,618) $5,878
Unrealized loss recognized in OCI due to change in fair value (3,095) (4) (3,099)
Loss reclassified from OCI into income (as interest expense) 3,686
 24
 3,710
Net change in OCI related to derivative instruments 591
 20
 611
Reclassification related to redemption of common units in the operating partnership (3,622) 3,622
 —
Balance at September 30, 2017 $6,465
 $24
 $6,489
Hudson Pacific Properties, Inc. Stockholders’ Equity
Non-controlling
interests
Total Equity
Balance at December 31, 2018$17,501 $64 $17,565 
Unrealized loss recognized in OCI due to change in fair value(5,926)(28)(5,954)
Gain reclassified from OCI into income (as interest expense)(1)
(1,901)(9)(1,910)
Net change in OCI(7,827)(37)(7,864)
BALANCE AT MARCH 31, 2019$9,674 $27 $9,701 
_____________
Non-controlling Interests—Common units1.The gains and losses on the Company’s derivatives are reported in the operating partnershipinterest expense line item on the Consolidated Statements of Operations. Interest expense was $24.4 million for the three months ended March 31, 2019.


Non-Controlling Interests

Common Units in the Operating Partnership

Common units of the operating partnership and shares of common stock of the Company have essentially the same economic characteristics, as they share equally in the total net income or loss distributions of the operating partnership. Investors who own common units have the right to cause the operating partnership to repurchase any or all of their common units for cash equal to the then-current market value of one share of common stock or, at the Company’s election, issue shares of the Company’s common stock in exchange for common units on a one-for-one basis.


The following table summarizesPerformance Units in the ownership of common units, excluding unvested restricted units as of:
Operating Partnership
 September 30, 2017 December 31, 2016
Company-owned common units in the operating partnership155,302,800
 136,492,235
Company’s ownership interest percentage99.6% 93.5%
Non-controlling common units in the operating partnership(1)
569,045
 9,450,620
Non-controlling ownership interest percentage(1)
0.4% 6.5%
_________________ 
(1)Represents common units held by certain of the Company’s executive officers and directors, certain of their affiliates and other outside investors.

On January 10, 2017, common unitholders required the operating partnership to repurchase 8,881,575 common units and the Company elected, in accordance with the limited partnership agreement of the operating partnership, to settle in cash to satisfy the repurchase. The Company funded the repurchase using the proceeds from a registered underwritten public offering of common stock.


Performance units are partnership interests in the operating partnership. Each performance unit awarded will be deemed equivalent to an award of one share of common stock under the 2010 Plan, reducing the availability for other equity awards on a one-for-one basis. Under the terms of the performance units, the operating partnership will revalue its assets for tax purposes upon the occurrence of certain specified events and any increase in valuation from the time of grant until such event will be allocated first to the holders of performance units to equalize the capital accounts of such holders with the capital accounts of common unitholders. Subject to any agreed upon exceptions, once vested and having achieved parity with common unitholders, performance units are convertible into common units in the operating partnership on a one-for-one basis.



Current Year Activity

The following table summarizes the ownership interest in the operating partnership, excluding unvested restricted units and unvested restricted performance units as of:
March 31, 2019December 31, 2018
Company-owned common units in the operating partnership154,373,581 154,371,538 
Company’s ownership interest percentage99.5 %99.6 %
Non-controlling units in the operating partnership(1)
720,773 569,045 
Non-controlling ownership interest percentage(1)
0.5 %0.4 %
_________________ 
1.Represents units held by certain of the Company’s executive officers, directors and outside investors. As of March 31, 2019, this amount represents both common units and performance units of 550,969 and 169,804, respectively.

On January 17, 2019, a common unitholder requested the operating partnership repurchase 18,076 common units and the Company elected, in accordance with the limited partnership agreement of the operating partnership, to settle in cash to satisfy the redemption. On March 11, 2019, 169,804 performance units were granted and vested related to the completion of the 2016 OPP performance period.

35
36


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)Statements
(Unaudited, tabular amounts in thousands, except square footage, share and share/unit data)


6.25% Series A cumulative redeemable preferred units of the operating partnership

There are 407,066 Series A preferred units of partnership interest in the operating partnership, or Series A preferred units, which are not owned by the Company. These Series A preferred units are entitled to preferential distributions at a rate of 6.25% per annum on the liquidation preference of $25.00 per unit and became convertible at the option of the holder into common units or redeemable into cash or, at the Company’s election, exchangeable for registered shares of common stock after June 29, 2013. For a description of the conversion and redemption rights of the Series A preferred units, please see “Description of the Partnership Agreement of Hudson Pacific Properties, L.P.—Material Terms of Our Series A Preferred Units” in the Company’s June 23, 2010 Prospectus.

Common Stock Activity


On January 10, 2017, theThe Company has not completed a public offering of 8,881,575 shares ofany common stock of Hudson Pacific Properties, Inc. Proceeds from the offering were used to repurchase common unitsofferings in the operating partnership.2019.

On March 3, 2017, the Company completed another public offering of 9,775,000 shares of common stock. Proceeds from the offering were used to fully repay a $255.0 million balance outstanding under its unsecured revolving credit facility, with the remaining proceeds used for general corporate purposes.


The Company’s at-the-market, or ATM, program permits sales of up to $125.0 million of common stock. The Company did not utilize the ATM program during the ninethree months ended September 30, 2017.March 31, 2019. A cumulative total of $20.1 million has been sold as of September 30, 2017.March 31, 2019.


Share repurchase programRepurchase Program


There have been no repurchases in 2019. On January 20, 2016,March 8, 2018, the Board increased the amountauthorized a under its share repurchase program to buy up to $100.0a total of $250.0 million. A cumulative total of the outstanding common stock of Hudson Pacific Properties, Inc. No share repurchases have$50.0 million has been maderepurchased as of September 30, 2017.March 31, 2019. The Company may make repurchases under the program at any time in its discretion, subject to market conditions, applicable legal requirements and other factors.


Dividends


During the third quarter of 2017, the CompanyThe Board declared dividends on its common stocka quarterly basis and non-controlling interestthe Company paid the dividends during the quarters in common units inwhich the operating partnershipdividends were declared. The following table summarizes dividends declared and paid for the periods presented:
Three Months Ended March 31,
20192018
Common stock(1)
$0.25 $0.25 
Common units(1)
$0.25 $0.25 
Series A preferred units(1)
$0.3906 $0.3906 
Performance units$0.25 $0.25 
_________________ 
1.The first quarter of $0.25 per share and unit. The Company also declared dividends on its Series A preferred units of $0.3906 per unit. The third quarter2019 dividends were paid on September 29, 2017March 28, 2019 to stockholdersshareholders and unitholders of record on September 19, 2017.March 18, 2019.


Taxability of Dividends


Earnings and profits, which determine the taxability of distributions to stockholders, may differ from income reported for financial reporting purposes due to the differences for federal income tax purposes in the treatment of loss on extinguishment of debt, revenue recognition, compensation expense and the basis of depreciable assets and estimated useful lives used to compute depreciation.


17. Segment Reporting

The Company’s reporting segments are based on the Company’s method of internal reporting, which classifies its operations into two reporting segments: (i) office properties and (ii) studio properties. The Company evaluates performance based upon net operating income of the combined properties in each segment. General and administrative expenses and interest expense are not included in segment profit as its internal reporting addresses these items on a corporate level. Asset information by segment is not reported because the Company does not use this measure to assess performance or make decisions to allocate resources, therefore, depreciation and amortization expense is not allocated among segments.

36
37


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)Statements
(Unaudited, tabular amounts in thousands, except square footage, share and share/unit data)


The table below presents the operating activity of the Company’s reportable segments:
17.
Three Months Ended March 31,
20192018
Office segment
Office revenues$175,858 $156,532 
Office expenses(60,815)(53,240)
Office segment profit115,043 103,292 
Studio segment
Studio revenues21,531 17,586 
Studio expenses(11,109)(9,664)
Studio segment profit10,422 7,922 
TOTAL SEGMENT PROFIT$125,465 $111,214 
Segment revenues$197,389 $174,118 
Segment expenses(71,924)(62,904)
TOTAL SEGMENT PROFIT$125,465 $111,214 

The table below is a reconciliation of the total profit from all segments to net (loss) income:
Three Months Ended March 31,
20192018
Total profit from all segments$125,465 $111,214 
General and administrative(18,094)(15,564)
Depreciation and amortization(68,505)(60,553)
Interest expense(24,350)(20,503)
Interest income1,024 9 
Transaction-related expenses(128)(118)
Other (loss) income(106)404 
Gains on sale of real estate— 37,674 
Impairment loss(52,201)— 
NET (LOSS) INCOME$(36,895)$52,563 

18. Related Party Transactions


Employment Agreements


The Company has entered into employment agreements with certain executive officers, effective January 1, 2016, that provide for various severance and change in control benefits and other terms and conditions of employment.


Lease and Subsequent PurchaseFerry Building Acquisition from an Affiliate of Corporate Headquarters from Blackstone


On July 26, 2006, the Company’s predecessor, Hudson Capital, LLC, entered into a lease agreement and subsequent amendments with landlord Trizec Holdings Cal, LLC (an affiliate of Blackstone) for the Company’s corporate headquarters at 11601 Wilshire. The Company amended the lease to increase its occupancy to 40,120 square feet commencing on September 1, 2015. On December 16, 2015,October 9, 2018, the Company entered into an amendment of that lease to expand the space to approximately 42,371 square feet and to extend the term by an additional three years, to a total of ten years, through August 31, 2025. On July 1, 2016, the Company purchased the 11601 Wilshire property from affiliates of Blackstone for $311.0 million (before credits, prorations and closing costs).

Sale of Pinnacle I and Pinnacle II to certain affiliates of Blackstone

On September 14, 2017, the Company entered into an agreement to sell its ownership interests in the consolidated joint venture that ownswith Allianz to purchase the Pinnacle I and Pinnacle II properties toFerry Building from certain affiliates of Blackstone for $350.0$291.0 million before prorations, credits prorations and closing costs, includingcosts. At the assumption of $216.0 million of secured notes payable. The sale of Pinnacle I and Pinnacle II is expected to close in the fourth quarter of 2017.

JMG Capital Lease at 11601 Wilshire

JMG Capital Management LLC leases approximately 6,638 square feet at the Company’s 11601 Wilshire property pursuant to an eight-year lease at an aggregate rate of approximately $279 thousand annualized rent per year. Jonathan M. Glaser, a director on the Board, is the founder and managing member of JMG Capital Management LLC. JMG Capital Management LLC was a tenanttime of the property at the time it was purchased by the Company.

222 Kearny Street Disposition

On February 14, 2017, the Company sold its 222 Kearny Street property totransaction, Michael Nash, a joint venture, a partnersenior managing director of which is an affiliate of the Farallon Funds. Richard B. Fried,Blackstone, was a director onof the Board. Mr. Nash resigned from the Board is a managing member of the Farallon Funds.on March 14, 2019.


Agreements Related to EOP Acquisition

On April 1, 2015, the Company completed the EOP Acquisition from certain affiliates of Blackstone, which consisted of 26 high-quality office assets totaling approximately 8.2 million square feet and two development parcels located throughout the Northern California region. The total consideration paid for the EOP Acquisition before certain credits, prorations and closing costs, included a cash payment of $1.75 billion and an aggregate of 63,474,791 shares of common stock of Hudson Pacific Properties, Inc. and common units in the operating partnership. In connection with the EOP Acquisition, the Company, the operating partnership and Blackstone entered into a stockholders agreement, which conferred Blackstone certain rights, including the right to nominate up to three of the Company’s directors. Additionally, the Company entered into a registration rights agreement with Blackstone providing for customary registration rights with respect to the equity consideration paid in the EOP Acquisition. Following a common stock offering and common unit repurchase on January 10, 2017, the stockholders agreement and the registration rights agreement automatically terminated on that date.

Common Stock Offerings and Common Unit Redemptions
On January 10, 2017, the Company, Blackstone and the Farallon Funds completed a public offering of 18,673,808 shares of common stock, consisting of 8,881,575 shares offered by the Company and 9,792,233 shares offered by the selling stockholders. The offering generated net proceeds for the Company and the selling stockholders of approximately $310.9

37
38


Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements—(Continued)Statements
(Unaudited, tabular amounts in thousands, except square footage, share and share/unit data)


million and $342.7 million, respectively, before expenses. The Company used the net proceeds that it received from the offering to redeem 8,881,575 common units held by Blackstone and the Farallon Funds.
The Company did not receive any proceeds from the sale of the common stock by the selling stockholders in the offerings described above but it paid approximately half of the expenses of the offerings with respect to the shares of common stock sold by the Farallon Funds and all of the expenses with respect to the shares of common stock sold by Blackstone, in each case, other than underwriting discounts, which were borne by the selling stockholders.
18.19. Commitments and Contingencies


Legal


From time to time, the Company is party to various lawsuits, claims and other legal proceedings arising out of, or incident to, the ordinary course of business. Management believes, based in part upon consultation with legal counsel, 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. As of September 30, 2017,March 31, 2019, the risk of material loss from such legal actions impacting the Company’s financial condition or results from operations has been assessed as remote.


Letters of Credit


As of September 30, 2017,March 31, 2019, the Company has an outstanding letterletters of credit totaling approximately $2.0$2.6 million under the unsecured revolving credit facility. The letterletters of credit isare primarily related to utility company security deposit requirements.


19.20. Supplemental Cash Flow ReconciliationInformation


Supplemental cash flow information is included as follows:
Three Months Ended March 31,
20192018
Cash paid for interest, net of capitalized interest$13,543 $12,915 
Non-cash investing and financing activities
Accounts payable and accrued liabilities for real estate investments(813)20,462 

Restricted cash primarily consists of amounts held by lenders to fund reserves such as capital improvements, taxes, insurance, debt service and operating expenditures. Pursuant to the adoption of ASU 2016-18, the Company included restricted cash with cash and cash equivalents in the Consolidated Statements of Cash Flows, which resulted in an increase of $4.1 million in the net cash provided by operating activities line item in the Consolidated Statements of Cash Flows for the nine months ended September 30, 2016. The following table provides a reconciliation of cash and cash equivalents and restricted cash at the beginning and end of the periods presented:
Three Months Ended March 31,
20192018
Beginning of period:
Cash and cash equivalents$53,740 $78,922 
Restricted cash14,451 22,358 
TOTAL$68,191 $101,280 
End of period:
Cash and cash equivalents$52,445 $64,080 
Restricted cash13,626 10,900 
TOTAL$66,071 $74,980 

 Nine Months Ended September 30,
 2017 2016
Beginning of period:   
Cash and cash equivalents$83,015
 $53,551
Restricted cash25,177
 18,010
Total$108,192
 $71,561
    
End of period:   
Cash and cash equivalents$87,723
 $89,354
Restricted cash25,784
 22,103
Total$113,507
 $111,457
20. Subsequent Events

On October 2, 2017, our operating partnership completed an underwritten public offering of $400.0 million in senior notes due November 1, 2027. The notes were issued at 99.815% of par, with a coupon of 3.950%. The notes are fully and unconditionally guaranteed by the Company. The net proceeds from the offering, after deducting the underwriting discount and offering expenses, were approximately $396.7 million, which was used to repay $150.0 million of the Company’s 5-year term loan due April 2020 with the remainder of the net proceeds, together with cash on hand, used to fully repay the $250.0 million balance outstanding under the Company’s unsecured revolving credit facility.



38
39



ITEM 2.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Forward-LookingThe 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 I, Item 1 “Financial Statements of Hudson Pacific Properties, Inc.”, “Financial Statements of Hudson Pacific Properties, L.P.” and “Notes to Unaudited Consolidated Financial Statements.” Statements in this Item 2 contain forward-looking statements. For a discussion of forward-looking statements, 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 refer to the forward-looking statements section in this Item 2.

Forward-looking Statements


Certain written and oral statements made or incorporated by reference from time to time by us or our representatives in this Quarterly Report on Form 10-Q, other filings or reports filed with the SEC, press releases, conferences, or otherwise, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, as amended, and Section 21E of the Exchange Act). In particular, statements relating to our liquidity and capital resources, portfolio performance and results of operations contain forward-looking statements. Furthermore, all of the statements regarding future financial performance (including anticipated funds from operations, or FFO, market conditions and demographics) are forward-looking statements. We are including this cautionary statement to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any such forward-looking statements. We caution investors that any forward-looking statements presented in this Quarterly Report on Form 10-Q, or that management may make orally or in writing from time to time, are based on management’s beliefs and assumptions made by, and information currently available to, management. When used, the words “anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” “result” and similar expressions that do not relate solely to historical matters are intended to identify 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. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on past forward-looking statements, which were based on results and trends at the time they were made, to anticipate future results or trends. Additional information concerning these and other risks and uncertainties is contained in our other periodic filings with the SEC.


Some of the risks and uncertainties that may cause our actual results, performance, liquidity or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:


•adverse economic or real estate developments in our target markets;


•general economic conditions;


•defaults on, early terminations of or non-renewal of leases by tenants;


•fluctuations in interest rates and increased operating costs;


•our failure to obtain necessary outside financing or maintain an investment grade rating;


•our failure to generate sufficient cash flows to service our outstanding indebtedness and maintain dividend payments;


•lack or insufficient amounts of insurance;


•decreased rental rates or increased vacancy rates;


•difficulties in identifying properties to acquire and completing acquisitions;


•our failure to successfully operate acquired properties and operations;


40
•our failure to maintain our status as a REIT;


•environmental uncertainties and risks related to adverse weather conditions and natural disasters;


•financial market fluctuations;



39



•risks related to acquisitions generally, including the diversion of management’s attention from ongoing business operations and the impact on customers, tenants, lenders, operating results and business;


•the inability to successfully integrate acquired properties, realize the anticipated benefits of acquisitions or capitalize on value creation opportunities;


•the impact of changes in the tax laws as a result of recent federal tax reform legislation and uncertainty as to how some of those changes may be applied;

•changes in real estate and zoning laws and increases in real property tax rates; and


•other factors affecting the real estate industry generally.


Additionally, we operate in a highly competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.


Executive Summary

Through our interest in Hudson Pacific Properties, L.P. (our operating partnership) and its subsidiaries, at March 31, 2019, our consolidated office portfolio consisted of approximately 13.9 million square feet of in-service, redevelopment, development and held for sale properties. Additionally, as of March 31, 2019, our studio and land portfolio consisted of 1.2 million and 2.6 million, respectively, square feet of in-service. Our portfolio consists of 55 properties located in Northern and Southern California and the Pacific Northwest.

As of March 31, 2019, our consolidated in-service office portfolio was 92.9% leased (including leases not yet commenced). Our same-store studio properties were 92.4% leased for the average percent leased for the 12 months ended March 31, 2019.


41
The following table summarizes our portfolio as of March 31, 2019:

In-Service PortfolioNumber of Buildings
Rentable Square Feet(1)
Percent Occupied(2)
Percent Leased(3)
Annualized Base Rent per Square Foot(4)
Office
Same-store(5)
31 7,842,466 94.1 %94.9 %$48.61 
Stabilized non-same store(6)
9 2,590,210 95.4 %96.2 %$51.94 
Total stabilized40 10,432,676 94.4 %95.2 %$49.45 
Lease-up(6)(7)
71,871,220 69.9 %80.4 %$49.78 
Total in-service47 12,303,896 90.7 %92.9 %$49.49 
Redevelopment(6)
2683,090 
Development(6)
2408,227 
Held for sale(6)
1 471,580 
Total office52 13,866,793 
Studio
Same-store(8)
31,171,707 92.4 %$38.89 
Non-same-store(6)
— 52,696 
(9)
100.0 %$40.70 
Total studio3 1,224,403 
Land— 2,639,562 
(10)
TOTAL55 17,730,758 
____________
1.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.
2.Calculated as (i) square footage under commenced leases as of March 31, 2019, divided by (ii) total square feet, expressed as a percentage.
3.Calculated as (i) square footage under commenced and uncommenced leases as of March 31, 2019, divided by (ii) total square feet, expressed as a percentage.
4.Calculated as (i) annualized base rent divided by (ii) square footage under commenced leases as of March 31, 2019. Annualized base rent does not reflect tenant reimbursements.
5.Includes office properties owned and included in our stabilized portfolio as of January 1, 2018 and still owned and included in the stabilized portfolio as of March 31, 2019.
6.Included in our non-same-store property group.
7.Includes office properties that have not yet reached 92.0% occupancy since the date they were acquired or placed under redevelopment or development as of March 31, 2019.
8.Includes studio properties owned and included in our portfolio as of January 1, 2018 and still owned and included in our portfolio as of March 31, 2019.
9.This includes 41,496 square feet located at our 6605 Eleanor Avenue and 1034 Seward Street properties and 11,200 square feet located at our 6660 Santa Monica Boulevard property, included as part of Sunset Las Palmas Studios, that have not met the same-store studio threshold.
10.This includes 946,350 square feet of developable land adjacent to our Campus Center office property that was classified as held for sale as of March 31, 2019. The sale is expected to close during the second quarter of 2019.

Current Quarter Highlights

Acquisitions

We had no acquisitions during the three months ended March 31, 2019. On March 26, 2019, we entered into an agreement to purchase, through a joint venture with Blackstone Property Partners, the 1.45 million-square-foot Bentall Centre property located in Vancouver, Canada. The acquisition is expected to close during the second quarter of 2019.

Dispositions

We had no dispositions during the three months ended March 31, 2019.

Redevelopment/Development

42
The following table summarizes the properties currently under redevelopment and development as well as future developments as of March 31, 2019:
LocationSubmarket
Estimated Square Feet(1)
Estimated Completion DateEstimated Stabilization Date
Redevelopment:
MaxwellDowntown Los Angeles99,090 Q1-2019Q4-2019
One WestsideWest Los Angeles584,000 TBD TBD 
Total redevelopment683,090 
Development:
EPICHollywood302,102 Q4-2019Q3-2021
HarlowHollywood106,125 Q1-2020Q3-2021
Total development408,227 
TOTAL REDEVELOPMENT AND DEVELOPMENT1,091,317 
Future Development:
Element LA—DevelopmentWest Los Angeles500,000 TBD TBD 
Sunset Bronson Studios Lot D—DevelopmentHollywood19,816 TBD TBD 
Sunset Gower Studios—DevelopmentHollywood423,396 TBD TBD 
Sunset Las Palmas Studios—DevelopmentHollywood400,000 TBD TBD 
Cloud10North San Jose350,000 TBD TBD 
TOTAL FUTURE DEVELOPMENT1,693,212 
_____________
1.Determined by management based upon estimated leasable square feet, which may be less or more than the BOMA rentable area. Square footage may change over time due to re-measurement or re-leasing.

Held for Sale

As of March 31, 2019, we had one property that met the criteria to be classified as held for sale. The property was identified as a non-strategic asset to our portfolio. We entered into an agreement on March 28, 2019 to sell our Campus Center property, which includes the office property and developable land, to two separate, unrelated buyers for a combined amount of approximately $150 million (before certain credits, prorations and closing costs). We recorded $52.2 million of impairment charges related to the Campus Center office property that was held for sale as of March 31, 2019. Both sales are expected to close during the second quarter of 2019.

Lease Expirations

The following table summarizes the lease expirations for leases in place as of March 31, 2019 plus available space, for each of the nine full calendar years beginning January 1, 2019 at the properties in our office portfolio. Unless otherwise stated in the footnotes, the information set forth in the table assumes that tenants exercise no renewal options.
43
Year of Lease ExpirationExpiring LeasesSquare Footage of Expiring LeasesPercentage of Office Portfolio Square Feet
Annualized Base Rent(1)
Percentage of Office Portfolio Annualized Base Rent
Annualized Base Rent Per Leased Square Foot(2)
VacantN/A1,446,701 10.5 %N/AN/AN/A
2019(3)
128 894,971 6.5  $43,808,363 7.1 %$48.95 
2020 145 938,298 6.8  47,353,172 7.6  50.47 
2021 130 1,244,058 9.0  56,442,039 9.0  45.37 
2022 117 1,183,158 8.6  55,768,863 8.9  47.14 
2023 82 1,526,551 11.0  67,981,672 10.9  44.53 
2024 88 1,455,604 10.5  72,366,297 11.6  49.72 
2025 30 1,081,971 7.8  56,296,162 9.0  52.03 
2026 17 326,691 2.4  17,688,631 2.8  54.14 
2027 15 405,078 2.9  21,596,067 3.5  53.31 
2028 17 555,792 4.0  34,527,781 5.5  62.12 
Thereafter��26 1,408,629 10.2  78,675,514 12.6  55.85 
Building management use21 146,361 1.1  — —  — 
Signed leases not commenced(4)
23 1,205,757 8.7  71,611,797 11.5  59.39 
TOTAL/WEIGHTED AVERAGE(5)
839 13,819,620 100.0 %$624,116,358 100.0 %$50.44 
_____________
1.Rent data for our office properties is presented on an annualized basis without regard to cancellation options. Annualized base rent for office properties is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements)) as of March 31, 2019, by (ii) 12. Annualized base rent does not reflect tenant reimbursements.
2.Annualized base rent per square foot for all lease expiration years is calculated as (i) base rental payments (defined as cash base rents (before abatements)) under commenced leases, divided by (ii) square footage under commenced leases as of March 31, 2019.
3.Excludes 22,553-square-foot management office occupied by Hudson Pacific Properties, Inc. The management office is being reflected under building management use in the table above.
4.Annualized base rent per leased square foot and annualized base rent per square foot at expiration for signed leases not commenced reflects uncommenced leases for space not occupied as of March 31, 2019 and is calculated as (i) base rental payments (defined as cash base rents (before abatements)) under uncommenced leases for vacant space as of March 31, 2019, divided by (ii) square footage under uncommenced leases as of March 31, 2019.
5.Total expiring square footage does not include 47,173 square feet of month-to-month leases.

44
Historical Tenant Improvements and Leasing Commissions

The following table summarizes historical information regarding tenant improvement and leasing commission costs for tenants at our office properties:
Three Months Ended March 31,
20192018
Renewals(1)
Number of leases16 19 
Square feet97,123 302,401 
Tenant improvement costs per square foot(2)(3)
$8.26 $44.31 
Leasing commission costs per square foot(2)
7.92 14.12 
Total tenant improvement and leasing commission costs(2)
$16.18 $58.43 
New leases(4)
Number of leases29 36 
Square feet947,013 253,855 
Tenant improvement costs per square foot(2)(3)
$92.57 $46.95 
Leasing commission costs per square foot(2)
33.58 14.53 
Total tenant improvement and leasing commission costs(2)
$126.15 $61.48 
TOTAL
Number of leases45 55 
Square feet1,044,136 556,256 
Tenant improvement costs per square foot(2)(3)
$84.73 $45.52 
Leasing commission costs per square foot(2)
31.19 14.30 
TOTAL TENANT IMPROVEMENT AND LEASING COMMISSION COSTS(2)
$115.92 $59.82 
_____________
1.Excludes retained tenants that have relocated or expanded into new space within our portfolio.
2.Assumes all tenant improvement and leasing commissions are paid in the calendar year in which the lease is executed, which may be different than the year in which they were actually paid.
3.Tenant improvement costs are based on negotiated tenant improvement allowances set forth in leases, or, for any lease in which a tenant improvement allowance was not specified, the aggregate cost originally budgeted at the time the lease commenced.
4.Includes retained tenants that have relocated or expanded into new space within our portfolio.

Financings

During the three months ended March 31, 2019, the outstanding borrowings on the unsecured revolving credit facility decreased by $180.0 million, net of draws. We use the unsecured revolving credit facility to finance the acquisition of other properties, to provide funds for tenant improvements and capital expenditures and to provide for working capital and other corporate purposes.

On February 27, 2019, our operating partnership completed an underwritten public offering of $350.0 million in senior notes due April 1, 2029 that are fully and unconditionally guaranteed by Hudson Pacific Properties, Inc. The net proceeds from the offering, after deducting the underwriting discount, were approximately $343.0 million and were used to repay outstanding borrowings under our unsecured revolving credit facility and $75.0 million of its five-year term loan due November 17, 2020.

On March 1, 2019, we entered into a loan agreement to borrow up to $235.0 million on a revolving basis, maturing on March 1, 2024. We drew $5.0 million to pay down the Sunset Gower Studios/Sunset Bronson Studios construction loan that matured on March 4, 2019. The unused fee rate related to Sunset Bronson Studios/ICON/CUE is 0.20%.

45
Historical Results of Operations


This Quarterly Report on Form 10-Q of Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P. represents an update to the more detailed and comprehensive disclosures included in the 20162018 Annual Report on Form 10-K of Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P. Accordingly, you should read the following discussion in conjunction with the information included in our 20162018 Annual Report on Form 10-K, as well as the unaudited financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.


In addition, some of the statements and assumptions in this Quarterly Report on Form 10-Q are forward-looking statements within the meaning of Section 27A of the Securities Act or Section 21E of the Exchange Act, including, in particular, statements about our plans, strategies and prospects as well as estimates of industry growth for the quarter and beyond. See “Forward-Looking“Forward-looking Statements.”

40



Overview

The following table identifies the properties in our portfolio as of September 30, 2017:
Properties Acquisition Date Acquisition/Estimated Rentable Square Feet Consideration Paid (in thousands)
Predecessor properties:      
875 Howard Street 2/15/2007 286,270
 $—
Sunset Gower Studios 8/17/2007 545,673
 —
Sunset Bronson Studios 1/30/2008 308,026
 —
Technicolor Building(1)
 6/1/2008 114,958
 —
Properties acquired after IPO:      
Del Amo Office 8/13/2010 113,000
 27,327
9300 Wilshire 8/24/2010 61,224
 14,684
1455 Market Street(2)
 12/16/2010 1,025,833
 92,365
Rincon Center 12/16/2010 580,850
 184,571
10950 Washington 12/22/2010 159,024
 46,409
604 Arizona 7/26/2011 44,260
 21,373
275 Brannan Street 8/19/2011 54,673
 12,370
625 Second Street 9/1/2011 138,080
 57,119
6922 Hollywood 11/22/2011 205,523
 92,802
6050 Sunset Blvd. & 1445 N. Beachwood Drive 12/16/2011 20,032
 6,502
10900 Washington 4/5/2012 9,919
 2,605
901 Market Street 6/1/2012 206,199
 90,871
Element LA (includes 1861 Bundy) 9/5/2012 & 9/26/2013 284,037
 99,936
1455 Gordon Street 9/21/2012 5,921
 2,385
Pinnacle I(3)
 11/8/2012 393,777
 209,504
3401 Exposition 5/22/2013 63,376
 25,722
Pinnacle II(3)
 6/14/2013 230,000
 136,275
Seattle Portfolio (83 King Street, 505 First Avenue, Met Park North and Northview Center) 7/31/2013 844,980
 368,389
Merrill Place 2/12/2014 193,153
 57,034
EOP Northern California Portfolio (see table on next page for property list) 4/1/2015 7,120,686
 3,489,541
4th & Traction(4)
 5/22/2015 120,937
 49,250
MaxWell (formerly known as 405 Mateo)(5)
 8/17/2015 83,285
 40,000
11601 Wilshire(6)
 7/1/2016 & 6/15/2017 500,475
 361,000
Hill7(7)
 10/7/2016 285,680
 179,800
Page Mill Hill 12/12/2016 182,676
 150,000
Sunset Las Palmas Studios (includes 6666 Santa Monica) 5/1/2017 & 6/29/2017 373,150
 203,200
Development properties(8):
      
ICON(9)
 N/A 325,757
 N/A
CUE(10)
 N/A 91,953
 N/A
450 Alaskan Way(11)
 N/A 170,974
 N/A
95 Jackson(12)
 N/A 31,659
 N/A
EPIC(13)
 N/A 300,000
 N/A
Total   15,476,020
 $6,021,034
_________________
(1)We acquired this property in August 2007 and completed the development in June 2008.
(2)We own a 55% joint venture interest in the 1455 Market Street property as of January 2015.

41



(3)We own a 65% joint venture interest in the Pinnacle I and Pinnacle II properties as of June 2013. We entered into an agreement on September 14, 2017 to sell our ownership interest in the consolidated joint venture that owns Pinnacle I and Pinnacle II. The sale is expected to close in the fourth quarter of 2017.
(4)This development was completed in the second quarter of 2017 and is estimated to be stabilized in the fourth quarter of 2018.
(5)We estimate this development will be completed in the fourth quarter of 2018 and stabilized in the second quarter of 2019.
(6)We acquired the building and partial interest in the land on July 1, 2016 and acquired the remaining interest in the land on June 15, 2017.
(7)We own a 55% joint venture interest in the Hill7 property as of October 2016.
(8)The development properties were included within acquisitions above.
(9)This development was completed in the fourth quarter of 2016 and stabilized in the second quarter of 2017.
(10)This development was completed in the third quarter of 2017 and is estimated to be stabilized in the second quarter of 2019.
(11)This development was completed in the third quarter of 2017 and is estimated to be stabilized in the second quarter of 2018.
(12)We estimate this development will be completed in the second quarter of 2018 and stabilized in the fourth quarter of 2018.
(13)We estimate this development will be completed in the first quarter of 2020 and stabilized in the third quarter of 2021.

The following table identifies the properties we own as of September 30, 2017 that were acquired as part of the EOP Acquisition:
PropertiesAcquisition Square Feet
1740 Technology206,876
2180 Sand Hill Road45,613
333 Twin Dolphin Plaza182,789
3400 Hillview207,857
555 Twin Dolphin Plaza198,936
Campus Center471,580
Clocktower Square100,344
Concourse944,386
Embarcadero Place197,402
Foothill Research Center195,376
Gateway609,093
Lockheed42,899
Metro Center730,215
Metro Plaza456,921
Page Mill Center176,245
Palo Alto Square328,251
Peninsula Office Park510,789
Shorebreeze230,932
Cloud10 (formerly known as Skyport Plaza)418,086
Skyway Landing247,173
Techmart Commerce Center284,440
Towers at Shore Center334,483
Total7,120,686




42



The following table identifies the properties that were disposed through September 30, 2017:
Properties Disposition Date Square Feet 
Sales Price(1) (in millions)
City Plaza 7/12/2013 333,922
 $56.0
Tierrasanta 7/16/2014 112,300
 19.5
First Financial 3/6/2015 223,679
 89.0
Bay Park Plaza 9/29/2015 260,183
 90.0
Bayhill Office Center 1/14/2016 554,328
 215.0
Patrick Henry Drive 4/7/2016 70,520
 19.0
One Bay Plaza 6/1/2016 195,739
 53.4
12655 Jefferson 11/4/2016 100,756
 80.0
222 Kearny Street 2/14/2017 148,797
 51.8
3402 Pico Boulevard 3/21/2017 50,687
 35.0
Total(2)(3)
   2,050,911
 $708.7
_________________ 
(1)Represents gross sales price before certain credits, prorations and closing costs.
(2)Excludes the disposition of 45% interest in 1455 Market Street office property on January 7, 2015.
(3)Excludes our sale of an option to acquire land at 9300 Culver on December 6, 2016.

All amounts and percentages used in this discussion of our results of operations are calculated using the numbers presented in the financial statements contained in Part I, Item 1 of this Quarterly Report rather than the rounded numbers appearing in this discussion. The dollar amounts included in the tables in this discussion of our results of operations are presented in thousands.

43





Comparison of the three months ended September 30, 2017Three Months Ended March 31, 2019 to the three months ended September 30, 2016Three Months Ended March 31, 2018

Net Operating Income


We evaluate performance based upon property net operating income (“NOI”) from continuing operations.. 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, from continuing operations, 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 income from continuing operations.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 on a GAAP basis, 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.


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


Same-Store•Same-store properties, which includes all of the properties owned and included in our stabilized portfolio as of JulyJanuary 1, 20162018 and still owned and included in the stabilized portfolio as of September 30, 2017;March 31, 2019; and


Non-Same-Store•Non-same-store properties heldinclude:
•Stabilized non-same-store properties
•Lease-up properties
•Development properties
•Redevelopment properties
•Held for sale properties development projects, redevelopment properties and lease-up properties as

46

The following table reconciles net (loss) income to NOI:
Three Months Ended
March 31,		Dollar ChangePercent Change
20192018
Net (loss) income$(36,895)$52,563 $(89,458)(170.2)%
Adjustments:
Interest expense24,350 20,503 3,847 18.8  
Interest income(1,024)(9)(1,015)11,277.8  
Transaction-related expenses128 118 10 8.5  
Other expense (income)106 (404)510 (126.2) 
Gains on sale of real estate— (37,674)37,674 (100.0) 
Impairment loss52,201 — 52,201 100.0  
General and administrative18,094 15,564 2,530 16.3  
Depreciation and amortization68,505 60,553 7,952 13.1  
NOI$125,465 $111,214 $14,251 12.8 %
Same-store NOI$89,061 $81,707 $7,354 9.0 %
Non-same-store NOI36,404 29,507 6,897 23.4  
NOI$125,465 $111,214 $14,251 12.8 %
 Three Months Ended September 30,    
 2017 2016 Dollar Change Percent Change
Net income$14,510
 $5,217
 $9,293
 178.1 %
Adjustments:       
Interest expense22,461
 19,910
 2,551
 12.8
Interest income(44) (130) 86
 (66.2)
Unrealized loss (gain) on ineffective portion of derivative instruments37
 (879) 916
 (104.2)
Transaction-related expenses598
 315
 283
 89.8
Other income(1,402) (693) (709) 102.3
Income from operations36,160
 23,740
 12,420
 52.3
Adjustments:       
General and administrative13,013
 12,955
 58
 0.4
Depreciation and amortization71,158
 67,414
 3,744
 5.6
NOI$120,331
 $104,109
 $16,222
 15.6 %
        
Same-Store NOI$77,257
 $72,964
 $4,293
 5.9 %
Non-Same-Store NOI43,074
 31,145
 11,929
 38.3
NOI$120,331
 $104,109
 $16,222
 15.6 %


Rental Components


We adopted ASC 842 using the modified retrospective approach as of January 1, 2019 and elected to apply the transition method of the standard at the beginning of the period of adoption. As such, the prior period amounts presented under ASC 840 were not restated to conform with the 2019 presentation. As we elected the practical expedient in ASC 842, which allows us to avoid separating lease and non-lease rental income, all office rental income earned pursuant to tenant leases in 2019 is reflected as one line, “Rental,” in the 2019 Consolidated Statement of Operations and as a result we do not disclose tenant recoveries as a separate GAAP revenue measure. However, we believe that tenant recoveries are useful to investors as a supplemental measure of our ability to recover operating expenses, property taxes, insurance and other expenses. For our studio leases, we did not elect the lessor practical expedient to combine lease and non-lease components. Therefore, studio rentals includes property tax and insurance recoveries and all other recoveries are included in service revenues and other. The following table presents our revenues in accordance with GAAP:
Three Months Ended March 31,
2019 2018 
Revenues
Office
Rental$170,197 $130,082 
Tenant recoveries— 20,904 
Service revenues5,661 5,546 
Total office revenues175,858 156,532 
Studio
Rental12,394 10,383 
Tenant recoveries— 354 
Service revenues and other9,137 6,849 
Total studio revenues21,531 17,586 
TOTAL REVENUES$197,389 $174,118 

44
47



We evaluate rental and tenant recoveries separately. Tenant recoveries are not a measure of revenues as allowed by GAAP and should not be considered an alternative to our GAAP measures included in our Consolidated Statement of Operations. The following table reports the breakdown of the 2019 rental income based on the 2018 presentation:

Three Months Ended March 31,
2019 2018 
Revenues
Office
Rental$145,460 $130,082 
Tenant recoveries24,737 20,904 
Service revenues5,661 5,546 
Total office revenues175,858 156,532 
Studio
Rental11,930 10,383 
Tenant recoveries464 354 
Service revenues and other9,137 6,849 
Total studio revenues21,531 17,586 
TOTAL REVENUES$197,389 $174,118 

The following table summarizes certain statistics of our Same-Store Officesame-store office and Media and Entertainmentstudio properties:
Three Months Ended March 31,
2019 2018 
Same-store office
Number of properties31 31 
Rentable square feet7,842,466 7,842,466 
Ending % leased94.9 %94.3 %
Ending % occupied94.1 %93.2 %
Average % occupied for the period93.0 %92.8 %
Average annual rental rate per square foot$48.61 $45.77 
Same-store studio
Number of properties3 3 
Rentable square feet1,171,707 1,171,707 
Average % occupied for the period(1)
92.4 %N/A 
_____________
1.Percent occupied for same-store studio is the average percent occupied for the 12-months ended March 31, 2019. Trailing 12-month occupancy for March 31, 2018 is not applicable as the Sunset Las Palmas Studio property was acquired in May 2017.

48
 Three Months Ended September 30,
 2017 2016
Same-Store Office statistics:   
Number of properties32
 32
Rentable square feet7,901,375
 7,901,375
Ending % leased95.9% 95.6%
Ending % occupied92.8% 94.6%
Average % occupied for the period93.3% 92.7%
Average annual rental rate per square foot$42.13
 $39.50
    
Same-Store Media and Entertainment statistics:   
Number of properties2
 2
Rentable square feet873,002
 873,002
Average % occupied for the period90.6% 87.4%

The following table gives further detail on our NOI:
Three Months Ended March 31,
20192018
Same-StoreNon-Same-StoreTotalSame-StoreNon-Same-StoreTotal
Revenues
Office
Rental$93,020 $52,440 $145,460 $86,675 $43,407 $130,082 
Tenant recoveries17,344 7,393 24,737 16,445 4,459 20,904 
Service revenues4,166 1,495 5,661 4,104 1,442 5,546 
Total office revenues114,530 61,328 175,858 107,224 49,308 156,532 
Studio
Rental11,417 513 11,930 10,383 — 10,383 
Tenant recoveries146 318 464 354 — 354 
Service revenues and other9,348 (211)9,137 6,849 — 6,849 
Total studio revenues20,911 620 21,531 17,586 — 17,586 
Total revenues135,441 61,948 197,389 124,810 49,308 174,118 
Operating expenses
Office operating expenses35,397 25,418 60,815 33,439 19,801 53,240 
Studio operating expenses10,983 126 11,109 9,664 — 9,664 
Total operating expenses46,380 25,544 71,924 43,103 19,801 62,904 
Office NOI79,133 35,910 115,043 73,785 29,507 103,292 
Studio NOI9,928 494 10,422 7,922 — 7,922 
NOI$89,061 $36,404 $125,465 $81,707 $29,507 $111,214 
 Three Months Ended September 30,
 2017 2016
 Same-StoreNon-Same-StoreTotal Same-StoreNon-Same-StoreTotal
Revenues       
Office       
Rental$81,705
$57,452
$139,157
 $78,137
$45,782
$123,919
Tenant recoveries17,809
7,173
24,982
 17,412
5,245
22,657
Parking and other5,120
2,915
8,035
 3,241
2,280
5,521
Total Office revenues104,634
67,540
172,174
 98,790
53,307
152,097
        
Media & Entertainment       
Rental8,220
2,792
11,012
 7,102
—
7,102
Tenant recoveries65
68
133
 243
—
243
Other property-related revenue5,048
1,513
6,561
 5,005
—
5,005
Other137
4
141
 136
—
136
Total Media & Entertainment revenues13,470
4,377
17,847
 12,486
—
12,486
        
Total revenues118,104
71,917
190,021
 111,276
53,307
164,583
        
Operating Expenses       
Office operating expenses33,513
25,589
59,102
 31,813
22,162
53,975
Media & Entertainment operating expenses7,334
3,254
10,588
 6,499
—
6,499
Total operating expenses40,847
28,843
69,690
 38,312
22,162
60,474
        
Office NOI71,121
41,951
113,072
 66,977
31,145
98,122
Media & Entertainment NOI6,136
1,123
7,259
 5,987
—
5,987
NOI$77,257
$43,074
$120,331
 $72,964
$31,145
$104,109











45
49



The following table gives further detail on our change toin NOI:
Three Months Ended March 31, 2019 as compared to
Three Months Ended March 31, 2018
Same-StoreNon-Same-StoreTotal
Dollar ChangePercent ChangeDollar ChangePercent ChangeDollar ChangePercent Change
Revenues
Office
Rental$6,345 7.3 %$9,033 20.8 %$15,378 11.8 %
Tenant recoveries899 5.5  2,934 65.8  3,833 18.3  
Service revenues62 1.5  53 3.7  115 2.1  
Total office revenues7,306 6.8  12,020 24.4  19,326 12.3  
Studio
Rental1,034 10.0  513 100.0  1,547 14.9  
Tenant recoveries(208)(58.8) 318 100.0  110 31.1  
Service revenues and other2,499 36.5  (211)(100.0) 2,288 33.4  
Total studio revenues3,325 18.9  620 100.0  3,945 22.4  
Total revenues10,631 8.5  12,640 25.6  23,271 13.4  
Operating expenses
Office operating expenses1,958 5.9  5,617 28.4  7,575 14.2  
Studio operating expenses1,319 13.6  126 100.0  1,445 15.0  
Total operating expenses3,277 7.6  5,743 29.0  9,020 14.3  
Office NOI5,348 7.2  6,403 21.7  11,751 11.4  
Studio NOI2,006 25.3  494 100.0  2,500 31.6  
NOI$7,354 9.0 %$6,897 23.4 %$14,251 12.8 %
 Three Months Ended September 30, 2017 as compared to Three Months Ended September 30, 2016
 Same-Store Non-Same-Store Total
 Dollar ChangePercent Change Dollar ChangePercent Change Dollar ChangePercent Change
Revenues        
Office        
Rental$3,568
4.6 % $11,670
25.5% $15,238
12.3 %
Tenant recoveries397
2.3
 1,928
36.8
 2,325
10.3
Parking and other1,879
58.0
 635
27.9
 2,514
45.5
Total Office revenues5,844
5.9
 14,233
26.7
 20,077
13.2
         
Media & Entertainment        
Rental1,118
15.7
 2,792
100.0
 3,910
55.1
Tenant recoveries(178)(73.3) 68
100.0
 (110)(45.3)
Other property-related revenue43
0.9
 1,513
100.0
 1,556
31.1
Other1
0.7
 4
100.0
 5
3.7
Total Media & Entertainment revenues984
7.9
 4,377
100.0
 5,361
42.9
         
Total revenues6,828
6.1
 18,610
34.9
 25,438
15.5
         
Operating expenses        
Office operating expenses1,700
5.3
 3,427
15.5
 5,127
9.5
Media & Entertainment operating expenses835
12.8
 3,254
100.0
 4,089
62.9
Total operating expenses2,535
6.6
 6,681
30.1
 9,216
15.2
         
Office NOI4,144
6.2
 10,806
34.7
 14,950
15.2
Media & Entertainment NOI149
2.5
 1,123
100.0
 1,272
21.2
NOI$4,293
5.9 % $11,929
38.3% $16,222
15.6 %


NOI increased $16.2$14.3 million, or 15.6%12.8%, for the three months ended September 30, 2017March 31, 2019 as compared to the three months ended September 30, 2016,March 31, 2018, primarily resulting from:


A $4.1•$7.4 million or 6.2%, increase in NOI from our Same-Store Officesame-store properties resultingdriven by:
•An increase in office NOI of $5.3 million primarily from increaseddue to:
•$6.3 million increase in rental revenues primarily relating to Salesforce.com subleasing to Twilio Inc. at our Rincon Center property and leases signed at our 1455 Market Street (Bank of America) and 875 Howard Street (Glu Mobile,(Square, Inc. and Snap,WeWork Companies Inc.), Clocktower (Baker McKenzie) and Concourse (Nutanix, Inc. and Vital Connect, Inc.) properties at a higher rate than expiring leases;
•$0.9 million increase in tenant recoveries primarily relating to the commercial rents tax in San Francisco effective in 2019;
•$0.1 million increase in service revenues primarily relating to parking at our ICON property; partially offset by
•$2.0 million increase in operating expenses primarily relating to the commercial rents tax in San Francisco effective in 2019 and overall increased occupancy.
•An increase in studio NOI of $2.0 million primarily due to:
•$2.5 million increase in service revenues and other primarily relating to lighting and grip revenues; partially offset by
•$1.3 million increase in operating expenses relating to increase in production activity at our Studios.
•Rental revenues and tenant recoveries of $11.4 million and $0.1 million, respectively, for the three months ended March 31, 2019 remained relatively flat as compared to $10.4 million and $0.4 million, respectively, for the three months ended March 31, 2018.
•$6.9 million increase in NOI from our non-same-store properties driven by:
•Overall increase in office NOI of $6.4 million primarily due to:
50
•Our acquisition of 10850 Pico (August 2018) and Ferry Building (October 2018) properties, partially offset by the sale of our Embarcadero Place (January 2018), 2180 Sand Hill (March 2018), 9300 Wilshire (April 2018) and Peninsula Office Park (July 2018) properties; in addition to
•$9.0 million increase in rental revenues primarily relating to our acquisition of 10850 Pico (August 2018) and Ferry Building (October 2018) properties, leases signed at our Gateway (Lumenis, Inc. and Santa Clara Valley Transportation Authority), Palo Alto Square (Orbital Insight, Inc) and Metro Plaza (Nutanix, Inc.) properties at a higher rate than expiring leases, and reduction in above-market lease amortization at our Towers at Shore Center property, partially offset by lowerhigher occupancy at our Rincon Center property. Tenant recoveries increased due to higher overall recoverable operating expenses. Parkinglease-up of our 450 Alaskan (Nestle USA, Inc. and other revenues increased due to lease termination fees related to our Campus CenterRegus) property and 901 Market Street properties.CUE (Netflix, Inc.);

A $10.8•$2.9 million or 34.7%, increase in NOI from our Non-Same-Store Office properties resultingtenant recoveries primarily from increased rental revenues relating to the commencement of Netflix, Inc.’s lease at our ICON property, leases signed at our Metro Center (Qualys, Inc.) and Shorebreeze (Y Media Labs) properties at a higher rate than expiring leases and acquisitions in 2016, which include 11601 Wilshire (acquired in July 2016), Hill7 (acquired in October 2016) and Page Mill Hill (acquired in December 2016), collectively referred to as “the 2016 Acquisitions.” The increase was partially offset by the sale of our 12655 Jefferson (sold in November 2016) and 222 Kearny Street (sold in February 2017) properties. The increase was also partially offset by lower revenues from our 604 Arizona property, which was taken off-line for a redevelopment project.

A $0.1 million, or 2.5%, increase in NOI from our Same-Store Media and Entertainment properties resulting primarily from higher rental revenues. The change was driven by increase in occupancy and production at Sunset Bronson Studios.


46



A $1.1 million, or 100.0%, increase in NOI from our Non-Same-Store Media and Entertainment property resulting from our acquisition of Sunset Las Palmas Studios in May 2017.Ferry Building (October 2018); and

Office NOI
Same-Store

Same-Store Office rental•Service revenues increased $3.6 million, or 4.6%, to $81.7of $1.5 million for the three months ended September 30, 2017March 31, 2019 remained relatively flat as compared to $78.1$1.4 million for the three months ended September 30, 2016.March 31, 2018; partially offset by
•$5.6 million increase in operating expenses primarily relating to our acquisition of Ferry Building (October 2018); and
•the sale of our Embarcadero Place (January 2018), 2180 Sand Hill (March 2018), 9300 Wilshire (April 2018) and Peninsula Office Park (July 2018) properties.
•An increase in studio NOI of $0.5 million resulting from our acquisition of 6605 Eleanor Avenue (June 2018), 1034 Seward Street (June 2018) and 6660 Santa Monica (October 2018) properties.

Other Expenses (Income)

Interest Expense

The following table represents a reconciliation from the gross interest expense to the amount on the interest expense line item in the Consolidated Statements of Operations:
Three Months Ended March 31,
20192018Dollar ChangePercent Change
Gross interest expense$27,465 $22,431 $5,034 22.4 %
Capitalized interest(4,706)(3,586)(1,120)31.2  
Amortization of deferred financing costs/loan discounts1,591 1,658 (67)(4.0) 
TOTAL$24,350 $20,503 $3,847 18.8 %

Gross interest expense increased by $5.0 million, or 22.4%, to $27.5 million for the quarter ended March 31, 2019 compared to $22.4 million for the quarter ended March 31, 2018. The increase is primarily driven by assumed debt associated with One Westside and 10850 Pico (August 2018) properties and joint venture partner debt related to our Ferry Building (October 2018) property and our 4.65% registered senior notes (February 2019) at higher interest rate than debt repaid with the proceeds.

Capitalized interest increased $1.1 million, or 31.2%, to $4.7 million for the quarter ended March 31, 2019 compared to $3.6 million for the quarter ended March 31, 2018. The increase was primarily due to leases signed atdriven by our 1455 Market Street (Bank of America)One Westside redevelopment property and 875 Howard Street (Glu Mobile, Inc.our EPIC and Snap, Inc.)Harlow development properties, at a higher rate than expiring leases. The increase was also due to a reduction in above-market lease amortization at our Towers at Shore Center property, partially offset by lower occupancy at our Rincon Center property.recently completed redevelopment and development properties.


Same-Store Office tenant recoveries increased $0.4 million, or 2.3%, to $17.8 millionGains on Sale of Real Estate

We generated no gains on sale of real estate for three months ended September 30, 2017March 31, 2019 compared to $17.4 million for the three months ended September 30, 2016. The increase was due to higher overall recoverable operating expenses.

Same-Store Office parking and other revenues increased $1.9 million, or 58.0%, to $5.1 million for the three months ended September 30, 2017 compared to $3.2 million for the three months ended September 30, 2016. The increase was primarily due to lease termination fees related to our Campus Center and 901 Market Street properties.

Same-Store Office operating expenses increased $1.7 million, or 5.3%, to $33.5 million for the three months ended September 30, 2017 compared to $31.8 million for the three months ended September 30, 2016. The change was primarily due to an increase in repairs and maintenance expense and ground rent expense, partially offset by a decrease in operating expense due to property tax reassessments relating to the prior year for our Rincon Center property.

Non-Same-Store

Non-Same-Store Office rental revenues increased by $11.7 million, or 25.5%, to $57.5 million for the three months ended September 30, 2017 compared to $45.8 million for the three months ended September 30, 2016. The increase was primarily due to 2016 Acquisitions, rental revenues relating to the commencement of Netflix, Inc.’s lease at our ICON property, and leases signed at our Metro Center (Qualys, Inc.) and Shorebreeze (Y Media Labs) properties at a higher rate than expiring leases. The increase was also partially offset by lower revenues from our 604 Arizona property, which was taken off-line for a redevelopment project, and by the sale of our 12655 Jefferson and 222 Kearny Street properties.

Non-Same-Store Office tenant recoveries increased $1.9 million, or 36.8%, to $7.2 million for the three months ended September 30, 2017 compared to $5.2 million for the three months ended September 30, 2016. The increase was primarily due the commencement of Netflix, Inc.’s lease at our ICON property and the 2016 Acquisitions, partially offset by the sale of our 222 Kearny Street property.

Non-Same-Store Office parking and other revenues increased $0.6 million, or 27.9%, to $2.9 million for the three months ended September 30, 2017 compared to $2.3 million for the three months ended September 30, 2016. The increase was primarily due to the commencement of Netflix, Inc.’s lease at our ICON property and the 2016 Acquisitions, partially offset by the sale of our 222 Kearny Street property.

Non-Same-Store Office operating expenses increased by $3.4 million, or 15.5%, to $25.6 million for the three months ended September 30, 2017 compared to $22.2 million for the three months ended September 30, 2016. The increase was primarily due to the 2016 Acquisitions and the commencement of Netflix, Inc.’s lease at our ICON property, partially offset by the sale of our 222 Kearny Street property. In addition, the increase was partially offset by lower expenses from our 604 Arizona property, which was taken off-line for a redevelopment project.


47



Media & Entertainment NOI

Same-Store
Same-Store Media and Entertainment revenues increased by $1.0 million, or 7.9%, to $13.5 million for the three months ended September 30, 2017 compared to $12.5 million for the three months ended September 30, 2016. The activity was primarily related to an increase in rental revenues by $1.1 million to $8.2 million for the three months ended September 30, 2017 primarily due to an increase in occupancy and production at Sunset Bronson Studios. Tenant recoveries of $0.1 million for the three months ended September 30, 2017 remained relatively flat as compared to $0.2 million for the three months ended September 30, 2016. Other property-related revenues of $5.0 million for the three months ended September 30, 2017 remained relatively flat as compared to $5.0 million for the three months ended September 30, 2016.
Same-Store Media and Entertainment operating expenses increased $0.8 million, or 12.8%, to $7.3 million for the three months ended September 30, 2017 compared to $6.5 million for the three months ended September 30, 2016. The increase was due to overall increase in occupancy and production.

Non-Same-Store

Non-Same-Store Media and Entertainment revenues were $4.4 million for the three months ended September 30, 2017. Non-Same-Store Media and Entertainment operating expenses were $3.3 million for the three months ended September 30, 2017. We acquired Sunset Las Palmas Studios in May 2017, which caused the increase in revenues and expenses.

Other Expenses (Income)

Interest expense increased $2.6 million, or 12.8%, to $22.5 million for the three months ended September 30, 2017 compared to $19.9 million for the three months ended September 30, 2016. We had notes payable, excluding net deferred financing costs, of $2.66 billion at September 30, 2017 compared to $2.43 billion at September 30, 2016. The increase was primarily attributable to an increase in our unsecured revolving credit facility usage, $101.0 million of borrowings related to our Hill7 property and $50.0 million of borrowings related to a private placement drawn on September 15, 2016.

We recognized unrealized loss on our derivative instruments of $37 thousand during the three months ended September 30, 2017 as compared to $0.9 million unrealized gain during the three months ended September 30, 2016. The unrealized loss was related to a portion of our derivative instruments that was evaluated to be ineffective in 2016. In July 2016, we amended the interest rate swaps to add a 0.00% floor to one-month LIBOR and then de-designated the original swaps and designated the amended swaps as a hedge in order to minimize the ineffective portion of the original derivatives.

Other income increased $0.7 million, or 102.3%, to $1.4$37.7 million during the three months ended September 30, 2017 as compared to $0.7 million duringMarch 31, 2018, which resulted from the three months ended September 30, 2016. The change was primarily due to increased income related to a joint venture we entered into on June 16, 2016 to co-originate a loan secured by land in Santa Clara, California.sale of our Embarcadero Place (January 2018), 2600 Campus Drive (January 2018) and 2180 Sand Hill (March 2018) properties.


51
General and Administrative Expenses

General and administrative expenses include wages and salaries for corporate-level employees, accounting, legal and other professional services, office supplies, entertainment, travel and automobile expenses, telecommunications and computer-related expenses and other miscellaneous items. General and administrative expenses increased $0.1$2.5 million, or 0.4%16.3%, to $13.0$18.1 million for the three months ended September 30, 2017March 31, 2019 compared to $13.0$15.6 million for the three months ended September 30, 2016.March 31, 2018. The change was primarily attributable to the adoption of the 20172019 Hudson Pacific Properties, Inc. Outperformance Program (“2017 OPP Plan”) and increasedan increase in staffing to meet operational needs, partially offset by decreasesneeds. Additionally, we adopted ASC 842 on January 1, 2019, which resulted in information technology expensesmore payroll being expensed rather than capitalized to deferred leasing costs.

Depreciation and investor relations costs.Amortization Expense

Depreciation and amortization expense increased $3.7$8.0 million, or 5.6%13.1%, to $71.2$68.5 million for the three months ended September 30, 2017March 31, 2019 compared to $67.4$60.6 million for the three months ended September 30, 2016.March 31, 2018. The increase was primarily related to depreciation expenses associated with the 2016 Acquisitions, our ICON property and the acquisition of Sunset Las Palmas Studios, partially offset by the reduction of depreciation expense as a result of the sale of our 222 Kearny Street property.

48




Comparison of the nine months endedSeptember 30, 2017 to the nine months endedSeptember 30, 2016
NOI

Management evaluates NOI by evaluating the performance of the following property groups as evidenced by the comparison of the nine months ended September 30, 2017 to the nine months ended September 30, 2016 results of operations:

Same-Store properties, which includes all of the properties ownedFerry Building (October 2018) and included in our stabilized portfolio as of January 1, 2016 and still owned and included in the stabilized portfolio as of September 30, 2017;

Non-Same-Store properties, held for sale properties, development projects,recently completed redevelopment properties and lease-up properties as of September 30, 2017 and other properties not owned or not in operation from January 1, 2016 through September 30, 2017.

The following table reconciles net income to NOI:
 Nine Months Ended September 30,    
 2017 2016 Dollar Change Percent Change
Net income$45,617
 $15,228
 $30,389
 199.6 %
Adjustments:       
Interest expense66,086
 54,775
 11,311
 20.6
Interest income(90) (216) 126
 (58.3)
Unrealized loss on ineffective portion of derivative instruments82
 1,630
 (1,548) (95.0)
Transaction-related expenses598
 376
 222
 59.0
Other income(2,656) (716) (1,940) 270.9
Gains on sale of real estate(16,866) (8,515) (8,351) 98.1
Income from operations92,771
 62,562
 30,209
 48.3
Adjustments:       
General and administrative41,329
 38,474
 2,855
 7.4
Depreciation and amortization217,340
 201,890
 15,450
 7.7
NOI$351,440
 $302,926
 $48,514
 16.0 %
 

      
Same-Store NOI$220,895
 $204,520
 $16,375
 8.0 %
Non-Same-Store NOI130,545
 98,406
 32,139
 32.7
NOI$351,440
 $302,926
 $48,514
 16.0 %


49



The following table summarizes certain statistics of our Same-Store Office and Media and Entertainment properties:
 Nine Months Ended September 30,
 2017 2016
Same-Store Office statistics:   
Number of properties31
 31
Rentable square feet7,725,130
 7,725,130
Ending % leased95.9% 95.5%
Ending % occupied92.5% 94.5%
Average % occupied for the period94.1% 94.4%
Average annual rental rate per square foot$41.48
 $38.85
    
Same-Store Media and Entertainment statistics:   
Number of properties2
 2
Rentable square feet873,002
 873,002
Average % occupied for the period90.6% 87.4%

The following table gives further detail on our NOI:
 Nine Months Ended September 30,
 2017 2016
 Same-StoreNon-Same-StoreTotal Same-StoreNon-Same-StoreTotal
Revenues       
Office       
Rental$231,645
$174,630
$406,275
 $219,762
$138,431
$358,193
Tenant recoveries47,433
19,988
67,421
 49,279
15,214
64,493
Parking and other13,430
8,716
22,146
 9,760
6,343
16,103
Total Office revenues292,508
203,334
495,842
 278,801
159,988
438,789
        
Media & Entertainment       
Rental22,014
4,788
26,802
 19,987
—
19,987
Tenant recoveries795
132
927
 655
—
655
Other property-related revenue12,143
2,821
14,964
 12,784
—
12,784
Other261
10
271
 226
—
226
Total Media & Entertainment revenues35,213
7,751
42,964
 33,652
—
33,652
        
Total revenues327,721
211,085
538,806
 312,453
159,988
472,441
        
Operating Expenses       
Office operating expenses87,306
75,218
162,524
 89,187
61,582
150,769
Media & Entertainment operating expenses19,520
5,322
24,842
 18,746
—
18,746
Total operating expenses106,826
80,540
187,366
 107,933
61,582
169,515
        
Office NOI205,202
128,116
333,318
 189,614
98,406
288,020
Media & Entertainment NOI15,693
2,429
18,122
 14,906
—
14,906
NOI$220,895
$130,545
$351,440
 $204,520
$98,406
$302,926






50



The following table gives further detail on our change to NOI:
 Nine Months Ended September 30, 2017 as compared to Nine Months Ended September 30, 2016
 Same-Store Non-Same-Store Total
 Dollar ChangePercent Change Dollar ChangePercent Change Dollar ChangePercent Change
Revenues        
Office        
Rental$11,883
5.4 % $36,199
26.1% $48,082
13.4%
Tenant recoveries(1,846)(3.7) 4,774
31.4
 2,928
4.5
Parking and other3,670
37.6
 2,373
37.4
 6,043
37.5
Total Office revenues13,707
4.9
 43,346
27.1
 57,053
13.0
         
Media & Entertainment        
Rental2,027
10.1
 4,788
100.0
 6,815
34.1
Tenant recoveries140
21.4
 132
100.0
 272
41.5
Other property-related revenue(641)(5.0) 2,821
100.0
 2,180
17.1
Other35
15.5
 10
100.0
 45
19.9
Total Media & Entertainment revenues1,561
4.6
 7,751
100.0
 9,312
27.7
         
Total revenues15,268
4.9
 51,097
31.9
 66,365
14.0
         
Operating expenses        
Office operating expenses(1,881)(2.1) 13,636
22.1
 11,755
7.8
Media & Entertainment operating expenses774
4.1
 5,322
100.0
 6,096
32.5
Total operating expenses(1,107)(1.0) 18,958
30.8
 17,851
10.5
         
Office NOI15,588
8.2
 29,710
30.2
 45,298
15.7
Media & Entertainment NOI787
5.3
 2,429
100.0
 3,216
21.6
NOI$16,375
8.0 % $32,139
32.7% $48,514
16.0%

NOI increased $48.5 million, or 16.0%, for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, primarily resulting from:

A $15.6 million, or 8.2%, increase in NOI from our Same-Store Office properties resulting primarily from increased rental revenues relating to leases signed at our 1455 Market Street (Uber Technologies, Inc. and Bank of America), 875 Howard Street (Glu Mobile, Inc. and Snap, Inc.) and 625 Second Street (Github, Inc. and Ziff Davis, LLC) properties at a higher rate than expiring leases.properties. The increase was also due to a reduction in above-market lease amortization at our Towers at Shore Center property, partially offset by a one-time GAAP straight-line rent write-off at our 901 Market Street (NerdWallet) property. In addition, parking and other revenues increased due to lease termination fees related to our Campus Center and 901 Market Street properties. In addition, tenant recoveries decreased due to property tax adjustments relating to the prior year for our Rincon Center property and lower recoveries for our Towers at Shore Center property, partially offset by higher recoveries for our 1455 Market Street property.

A $29.7 million, or 30.2%, increase in NOI from our Non-Same-Store Office store properties resulting primarily from increased rental revenues relating to the commencement of Netflix, Inc.’s lease at our ICON property in the first quarter of 2017, leases signed at our Metro Center (Qualys, Inc. and BrightEdge Technologies, Inc.) property at a higher rate than expiring leases and the 2016 Acquisitions, partially offset by the sale of our One Bay Plaza (sold in June 2016)Embarcadero Place (January 2018), 2180 Sand Hill (March 2018), 9300 Wilshire (April 2018) and 222 Kearny Street (sold in February 2017)Peninsula Office Park (July 2018) properties. In addition, the increase was partially offset by lower revenues from our 604 Arizona property, which was taken off-line for a redevelopment project, and lower occupancy at our Palo Alto Square property.



Impairment Loss



51



A $0.8We recorded $52.2 million or 5.3%, increase in NOI from our Same-Store Media and Entertainment properties resulted primarily from higher rental revenues. The increase was primarily from an increase in occupancy and production at Sunset Bronson Studios, partially offset by increase in property taxes due to adjustments made in the prior year.

A $2.4 million, or 100.0%, increase in NOI from our Non-Same-Store Media and Entertainment properties resulting from the acquisition of Sunset Las Palmas Studios in May 2017.

Office NOI
Same-Store

Same-Store Office rental revenues increased $11.9 million, or 5.4%, to $231.6 million for the nine months ended September 30, 2017 compared to $219.8 million for the nine months ended September 30, 2016. The increase was primarily due to leases signed at our 1455 Market Street (Uber Technologies, Inc. and Bank of America), 875 Howard Street (Glu Mobile, Inc. and Snap, Inc.) and 625 Second Street (Github, Inc. and Ziff Davis, LLC) properties at a higher rate than expiring leases. The increase was also due to a reduction in above-market lease amortization at our Towers at Shore Center property, partially offset by a one-time GAAP straight-line rent write-off at our 901 Market Street (NerdWallet) property.

Same-Store Office tenant recoveries decreased $1.8 million, or 3.7%, to $47.4 million for nine months ended September 30, 2017 compared to $49.3 million for the nine months ended September 30, 2016. The decrease was primarily related to lower property tax recovery resulting from a property tax reassessment of our Rincon Center property and lower recoveries for our Towers at Shore Center property, partially offset by higher recoveries for our 1455 Market Street property.

Same-Store Office parking and other revenues increased $3.7 million, or 37.6%, to $13.4 million for the nine months ended September 30, 2017 compared to $9.8 million for the nine months ended September 30, 2016. The increase was primarily due to lease termination feesimpairment charges related to our Campus Center and 901 Market Street properties.

Same-Store Office operating expenses decreased $1.9 million, or 2.1%, to $87.3 millionoffice property that was held for sale as March 31, 2019. Our estimated fair value was based on the ninesale price. We did not recognize impairment losses during the three months ended September 30, 2017 compared to $89.2 million for the nine months ended September 30, 2016. The decrease was primarily due to property tax reassessments relating to the prior year for our Rincon Center.March 31, 2018.


Non-Same-Store

Non-Same-Store Office rental revenues increased by $36.2 million, or 26.1%, to $174.6 million for the nine months ended September 30, 2017 compared to $138.4 million for the nine months ended September 30, 2016. The increase was primarily due to rental revenues relating to the commencement of Netflix, Inc.’s lease at our ICON property in the first quarter of 2017, leases signed at our Metro Center (Qualys, Inc. and BrightEdge Technologies, Inc.) property at a higher rate than expiring leases and the 2016 Acquisitions, partially offset by the sale of our One Bay Plaza and 222 Kearny Street properties. In addition, the increase was partially offset by lower revenues from our 604 Arizona property, which was taken off-line for a redevelopment project, and lower occupancy at our Palo Alto Square property.

Non-Same-Store Office tenant recoveries increased $4.8 million, or 31.4%, to $20.0 million for nine months ended September 30, 2017 compared to $15.2 million for the nine months ended September 30, 2016. The increase was primarily due the commencement of Netflix, Inc.’s lease at our ICON property and the 2016 Acquisitions, partially offset by the sale of our One Bay Plaza and 222 Kearny Street properties.

Non-Same-Store Office parking and other revenues increased $2.4 million, or 37.4%, to $8.7 million for the nine months ended September 30, 2017 compared to $6.3 million for the nine months ended September 30, 2016. The increase was primarily due the commencement of Netflix, Inc.’s lease at our ICON property and the 2016 Acquisitions, partially offset by the sale of our 222 Kearny Street property.

Non-Same-Store Office operating expenses increased by $13.6 million, or 22.1%, to $75.2 million for the nine months ended September 30, 2017 compared to $61.6 million for the nine months ended September 30, 2016. The increase was primarily due the commencement of Netflix, Inc.’s lease at our ICON property, higher expense at Metro Center and the 2016 Acquisitions, partially offset by the sale of our One Bay Plaza and 222 Kearny Street properties.

52




Media & Entertainment NOI

Same-Store

Same-Store Media and Entertainment revenues increased by $1.6 million, or 4.6%, to $35.2 million for the nine months ended September 30, 2017 as compared to $33.7 million for the nine months ended September 30, 2016. The activity was primarily related to a $2.0 million increase in rental revenue to $22.0 million for the nine months ended September 30, 2017 as compared to $20.0 million for the nine months ended September 30, 2016 as a result of an increase in occupancy and production at Sunset Bronson Studios. Tenant recoveries of $0.8 million for the nine months ended September 30, 2017 remained relatively flat as compared to $0.7 million for the nine months ended September 30, 2016. Other property-related revenues of $12.1 million for the nine months ended September 30, 2017 remained relatively flat as compared to $12.8 million for the nine months ended September 30, 2016.
Same-Store Media and Entertainment operating expenses increased by $0.8 million, 4.1%, to $19.5 million for the nine months ended September 30, 2017 compared to $18.7 million for the nine months ended September 30, 2016. The increase was due to overall increase in occupancy and production.

Non-Same-Store

Non-Same-Store Media and Entertainment revenues were $7.8 million for the nine months ended September 30, 2017. Non-Same-Store Media and Entertainment operating expenses were $5.3 million for the nine months ended September 30, 2017. We acquired Sunset Las Palmas Studios in May 2017, which caused the increase in revenues and expenses.

Other Expenses (Income)

Interest expense increased $11.3 million, or 20.6%, to $66.1 million for the nine months ended September 30, 2017 compared to $54.8 million for the nine months ended September 30, 2016. At September 30, 2017, we had $2.66 billion of notes payable, compared to $2.43 billion at September 30, 2016, excluding net deferred financing costs. The increase was primarily attributable to a $400.0 million net increase in term loan debt and private placement borrowings and $101.0 million borrowings related to our Hill7 property, partially offset by interest savings related to the paydown on our indebtedness associated with our Sunset Gower Studios, Sunset Bronson Studios and 901 Market Street properties.

We recognized unrealized loss on our derivative instruments of $0.1 million during the nine months ended September 30, 2016 as compared to $1.6 million during the nine months ended September 30, 2016. The unrealized loss was related to a portion of our derivative instruments that was evaluated to be ineffective in 2016. In July 2016, we amended the interest rate swaps to add a 0.00% floor to one-month LIBOR and then de-designated the original swaps and designated the amended swaps as a hedge in order to minimize the ineffective portion of the original derivatives.

Other income increased $1.9 million, or 270.9%, to $2.7 million for the nine months ended September 30, 2017 compared to $0.7 million for the nine months ended September 30, 2016. The change was primarily due to increased income related to a joint venture we entered into on June 16, 2016 to co-originate a loan secured by land in Santa Clara, California.

We recognized $16.9 million gains on sale of real estate for the nine months ended September 30, 2017 compared to a $8.5 million for the nine months ended September 30, 2016. We completed the sale of our 222 Kearny Street and 3402 Pico Boulevard properties in 2017 and completed the sale of our Bayhill Office Center, Patrick Henry Drive and One Bay Plaza properties in 2016.


53



General and administrative expenses include wages and salaries for corporate-level employees, accounting, legal and other professional services, office supplies, entertainment, travel and automobile expenses, telecommunications and computer-related expenses and other miscellaneous items. General and administrative expenses increased $2.9 million, or 7.4%, to $41.3 million for the nine months ended September 30, 2017 compared to $38.5 million for the nine months ended September 30, 2016. The increase in general and administrative expenses was primarily attributable to the adoption of the 2017 OPP, increased staffing to meet operational needs and investor relations costs.

Depreciation and amortization expense increased $15.5 million, or 7.7%, to $217.3 million for the nine months ended September 30, 2017 compared to $201.9 million for the nine months ended September 30, 2016. The increase was primarily related to depreciation expenses associated with 2016 Acquisitions, our ICON property and the acquisition of Sunset Las Palmas Studios, partially offset by the reduction of depreciation expense as a result of the sale of our One Bay Plaza and 222 Kearny Street properties.

Liquidity and Capital Resources


We have remained capitalized since our initial public offering through public offerings, private placements and continuous offerings under our ATM program. We currently expect that our principal sources of funds to meet our short-term and long-term liquidity requirements for working capital, strategic acquisitions, capital expenditures, tenant improvements, leasing costs, dividends and distributions, share repurchases and repayments of outstanding debt financing will include:

•Cash on hand, cash reserves and net cash provided by operations;

•Proceeds from additional equity securities;

•Our ATM program;

•Borrowings under the operating partnership’s unsecured revolving credit facility and Sunset Bronson Studios/ICON/CUE revolving credit facility; and

•Proceeds from additional secured, unsecured debt financings or offerings.

Liquidity Sources

We had $87.7$52.4 million of cash and cash equivalents at September 30, 2017.March 31, 2019. 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.


AsOur ability to access the equity capital markets will be dependent on a number of September 30, 2017, we had $150.0 million of total undrawn capacity under our unsecured revolving credit facility.factors as well, including general market conditions for REITs and market perceptions about us.


We have an at-the-market equity offering program, or ATM program whichthat allows us to sell up to $125.0 million of common stock, $20.1 million of which has been sold through September 30, 2017.

On January 20, 2016, our Board authorized a share repurchase programMarch 31, 2019. Any future sales will depend on several factors, including, but not limited to, buy up to $100.0 million of our outstanding common stock. No share repurchases were made through September 30, 2017.

Based onmarket conditions, the closingtrading price of our common stock and our capital needs. We have no obligation to sell the remaining shares available for sale under this program. 

52
As of debt toMarch 31, 2019, we had total market capitalization was approximately 33.5% (counting Series A preferred units as debt). Our total market capitalization is defined as the sumborrowing capacity of the market value of our outstanding common stock (which may decrease, thereby increasing our debt to total capitalization ratio), including restricted stock that we may issue to certain of our directors and executive officers, plus the aggregate value of common units not owned by us, plus the liquidation preference of outstanding Series A preferred units, plus the book value of our total consolidated indebtedness.

On October 2, 2017, our operating partnership completed an underwritten public offering of $400.0$600.0 million in senior notes due November 1, 2027. The notes were issued at 99.815% of par, with a coupon of 3.950%. The notes are fully and unconditionally guaranteed by us. The net proceeds from the offering, after deducting the underwriting discount and offering expenses, were approximately $396.7 million, which was used to repay $150.0 million of our 5-year term loan due April 2020 with the remainder of the net proceeds, together with cash on hand, used to fully repay the $250.0 million balance outstanding under our unsecured revolving credit facility.facility, $220.0 million of which had been drawn. As of March 31, 2019, we had total borrowing capacity of $235.0 million secured by our Sunset Bronson Studios/ICON/CUE properties, $5.0 million of which had been drawn.

We intend to use the unsecured revolving credit facility and ATM program, among other things, to finance the acquisition of other properties, to provide funds for tenant improvements and capital expenditures and to provide for working capital and other corporate purposes.


Our short-term liquidity requirements primarily consist of operating expenses and other expenditures associated with our properties, distributions to our limited partners and dividend payments to our stockholders required to maintain our REIT status, capital expenditures and potential acquisitions. We expect to meet our short-term liquidity requirements through cash on hand, net cash provided by operations, certain amounts included in restricted cash and, if necessary, by drawing upon our unsecured revolving credit facility.

Our long-term liquidity needs consist primarily of funds necessary for the repayment of debt at maturity, property acquisitions and non-recurring capital improvements. We expect to meet our long-term liquidity requirements with net cash from operations, long-term secured and unsecured indebtedness and the issuance of equity and debt securities. We also may fund property acquisitions and non-recurring capital improvements using our unsecured revolving credit facility pending permanent financing.

54




We believe we have access to multiple sources of capital to fund our long-term liquidity requirements, including the incurrence of additional debt and the issuance of additional equity. However, our ability to incur additional debt will be dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. Our ability to access the equity capital markets will be dependent on a number of factors as well, including general market conditions for REITs and market perceptions about us.

Outstanding Indebtedness

Our indebtedness creates the possibility that we may be unable to generate cash sufficient to pay the principal of, interest on or other amounts in respect of our indebtedness and other obligations. In addition, we may incur additional debt from time to time to finance strategic acquisitions, investments, joint ventures or for other purposes, subject to the restrictions contained in the documents governing our indebtedness. If we incur additional debt, the risks associated with our leverage, including our ability to service our debt, would increase.


AsThe following table sets forth our ratio of September 30, 2017, we had outstanding notes payabledebt to total market capitalization (counting series A preferred units as debt) as of $2.66 billion (before $16.8 million of netMarch 31, 2019.

March 31, 2019
Debt(1)
$2,735,237 
Series A preferred units9,815 
Common equity capitalization(2)
5,406,531 
TOTAL MARKET CAPITALIZATION8,151,583 
Series A preferred units & debt/total market capitalization33.7 %
_____________
1.Excludes in-substance defeased debt, joint venture partner debt and unamortized deferred financing costs and including notes payable associated with real estate held for sale)loan discounts. 
2.Common equity capitalization represents the shares of common stock (including unvested restricted shares), OP units outstanding, restricted performance units and dilutive shares multiplied by the closing price of which $1.42 billion, or 53.4%, was variable rate debt. $839.5 millionour stock, as reported by the NYSE, as of the variable rate debt is subject to derivative instruments described in Part I, Item 1 “Note 10 to the Consolidated Financial Statements—Derivative Instruments.”March 31, 2019.



Outstanding Indebtedness



55



The following table sets forth information as of March 31, 2019 and December 31, 2018 with respect to the amounts included in notes payable, net as of:
our outstanding indebtedness (excluding unamortized deferred financing costs and loan discounts):
 September 30, 2017 December 31, 2016 
Interest Rate(1)
 Contractual Maturity Date 
UNSECURED NOTES PAYABLE        
Unsecured Revolving Credit Facility(2)
$250,000
 $300,000
 LIBOR + 1.15% to 1.85% 4/1/2019
(3) 
5-Year Term Loan due April 2020(2)(4)
450,000
 450,000
 LIBOR + 1.30% to 2.20% 4/1/2020 
5-Year Term Loan due November 2020(2)
175,000
 175,000
 LIBOR + 1.30% to 2.20% 11/17/2020 
7-Year Term Loan due April 2022(2)(5)
350,000
 350,000
 LIBOR + 1.60% to 2.55% 4/1/2022 
7-Year Term Loan due November 2022(2)(6)
125,000
 125,000
 LIBOR + 1.60% to 2.55% 11/17/2022 
Series A Notes110,000
 110,000
 4.34% 1/2/2023 
Series E Notes50,000
 50,000
 3.66% 9/15/2023 
Series B Notes259,000
 259,000
 4.69% 12/16/2025 
Series D Notes150,000
 150,000
 3.98% 7/6/2026 
Series C Notes56,000
 56,000
 4.79% 12/16/2027 
TOTAL UNSECURED NOTES PAYABLE1,975,000
 2,025,000
     
         
SECURED NOTES PAYABLE        
Rincon Center(7)
98,896
 100,409
 5.13% 5/1/2018 
Sunset Gower Studios/Sunset Bronson Studios5,001
 5,001
 LIBOR + 2.25% 3/4/2019
(3) 
Met Park North(8)
64,500
 64,500
 LIBOR + 1.55% 8/1/2020 
10950 Washington(7)
27,549
 27,929
 5.32% 3/11/2022 
Pinnacle I(9)(10)
129,000
 129,000
 3.95% 11/7/2022 
Element LA168,000
 168,000
 4.59% 11/6/2025 
Pinnacle II(10)
87,000
 87,000
 4.30% 6/11/2026 
Hill7(11)
101,000
 101,000
 3.38% 11/6/2026 
TOTAL SECURED NOTES PAYABLE680,946
 682,839
     
TOTAL NOTES PAYABLE2,655,946
 2,707,839
     
Held for sale balances(10)
(216,000) (216,000)     
Deferred financing costs, net(12)
(15,588) (18,516)     
TOTAL NOTES PAYABLE, NET(13)
$2,424,358
 $2,473,323
     
March 31, 2019December 31, 2018
Unsecured debt$2,370,000 $2,275,000 
Secured debt$365,237 $365,381 
In-substance defeased debt$137,417 $138,223 
Joint venture partner debt$66,136 $66,136 
_________________
(1)Interest rate with respect to indebtedness is calculated on the basis of a 360-day year for the actual days elapsed. Interest rates are as of September 30, 2017, which may be different than the interest rates as of December 31, 2016 for corresponding indebtedness.
(2)We have the option to make an irrevocable election to change the interest rate depending on our credit rating. As of September 30, 2017, no such election had been made.
(3)The maturity date may be extended once for an additional one-year term.
(4)Effective July 2016, $300.0 million of the term loan was effectively fixed at 2.75% to 3.65% per annum through the use of two interest rate swaps. See Part I, Item 1 “Note 10 to our Consolidated Financial Statements—Derivative Instruments” for details.
(5)Effective July 2016, the outstanding balance of the term loan was effectively fixed at 3.36% to 4.31% per annum through the use of two interest rate swaps. See Part I, Item 1 “Note 10 to our Consolidated Financial Statements—Derivative Instruments” for details.
(6)Effective June 1, 2016, the outstanding balance of the term loan was effectively fixed at 3.03% to 3.98% per annum through the use of an interest rate swap. See Part I, Item 1 “Note 10 to our Consolidated Financial Statements—Derivative Instruments” for details.
(7)Monthly debt service includes annual debt amortization payments based on a 30-year amortization schedule with a balloon payment at maturity.
(8)This loan bears interest only. Interest on the full loan amount was effectively fixed at 3.71% per annum through the use of an interest rate swap. See Part I, Item 1 “Note 10 to our Consolidated Financial Statements—Derivative Instruments” for details.
(9)This loan bears interest only for the first five years. Beginning with the payment due December 6, 2017, monthly debt service will include annual debt amortization payments based on a 30-year amortization schedule with a balloon payment at maturity.
(10)We own 65% of the ownership interests in the consolidated joint venture that owns the Pinnacle I and II properties. The full amount of the loan is shown. We entered into an agreement on September 14, 2017 to sell our ownership interest in the consolidated joint venture that owns Pinnacle I and Pinnacle II. The sale is expected to close in the fourth quarter of 2017. These properties meet the definition of properties held for sale.
(11)We own 55% of the ownership interest in the consolidated joint venture that owns the Hill7 property. The full amount of the loan is shown. The maturity date of this loan can be extended for an additional two years at a higher interest rate and with principal amortization.
(12)Excludes deferred financing costs related to properties held for sale and amounts related to establishing our unsecured revolving credit facility.
(13)Excludes amounts related to a public offering of $400 million aggregate principal amount of 3.950% senior notes due 2027 that closed October 2, 2017.    


The operating partnership was in compliance with its financial covenants as of September 30, 2017.March 31, 2019.


56Liquidity Uses



Cash Flows
A comparison of our cash flow activity is as follows:
 Nine Months Ended September 30,    
 2017 2016 Dollar Change Percent Change
Net cash provided by operating activities$239,604
 $200,852
 $38,752
 19.3%
Net cash used in investing activities(384,479) (219,981) (164,498) 74.8
Net cash provided by financing activities150,190
 59,025
 91,165
 154.5

Cash and cash equivalents and restricted cash were $113.5 million and $108.2 million at September 30, 2017 and December 31, 2016, respectively.

Operating Activities

Net cash provided by operating activities increased by $38.8 million to $239.6 million for the nine months ended September 30, 2017 compared to $200.9 million for the nine months ended September 30, 2016. The change resulted primarily from an increase in cash NOI, as defined, from our office and media and entertainment properties, driven by our Sunset Las Palmas Studios acquisition, 2016 Acquisitions and higher rental revenue across our portfolio, partially offset by lower cash NOI related to One Bay Plaza (sold in June 2016) and 222 Kearny Street (sold in February 2017) properties.

Investing Activities

Net cash used in investing activities increased by $164.5 million to $384.5 million for the nine months ended September 30, 2017 compared to $220.0 million for the nine months ended September 30, 2016. The increase resulted primarily from a reduction in proceeds from sales of real estate properties and an increase in cash used for additions to investment in real estate, partially offset by a reduction in cash used to acquire real estate.

Financing Activities

Net cash provided by financing activities increased by $91.2 million to $150.2 million for the nine months ended September 30, 2017 compared to $59.0 million for the nine months ended September 30, 2016. The change resulted primarily from a reduction in repurchases of common units in our operating partnership and reduction in payments of notes payable, partially offset by a reduction in proceeds from notes payable and reduction in proceeds from sale of stock.


Contractual Obligations and Commitments

During the ninethree months ended September 30, 2017,March 31, 2019, there were no material changes outside the ordinary course of business in the information regarding specified contractual obligations contained in our 20162018 Annual Report on Form 10-K. See Part I, Item 1 “Note 87 to our Consolidated Financial Statements—Notes Payable, net”Debt,” for information regarding our minimum future principal payments due on our note payables.outstanding debt. See Part I, Item 1 “Note 1211 to our Consolidated Financial Statements—Future Minimum Rents and Lease Payments” for information regarding our future minimum ground lease payments.


53
Cash Flows

A comparison of our cash flow activity is as follows:
Three Months Ended March 31,
20192018Dollar ChangePercent Change
Net cash provided by operating activities$89,446 $64,447 $24,999 38.8 %
Net cash (used in) provided by investing activities$(128,267)$133,492 $(261,759)(196.1)%
Net cash provided by (used in) financing activities$36,701 $(224,239)$260,940 (116.4)%

Cash and cash equivalents and restricted cash were $66.1 million and $68.2 million at March 31, 2019 and December 31, 2018, respectively.

Operating Activities

Net cash provided by operating activities increased by $25.0 million, or 38.8%, to $89.4 million for the three months ended March 31, 2019 compared to $64.4 million for the three months ended March 31, 2018. The change resulted primarily from an increase in cash rents from our office and studio properties related to our 10850 Pico and Ferry Building acquisitions in 2019 and lease-up related to our CUE (Netflix, Inc.) and 450 Alaskan (Nestle USA, Inc. and Regus) properties, partially offset by higher general and administrative expenses, interest expense and lower cash rents due to the sale of our Embarcadero Place (January 2018), 2180 Sand Hill (March 2018), 9300 Wilshire (April 2018) and Peninsula Office Park (July 2018) properties.

Investing Activities

Net cash used in investing activities increased by $261.8 million, or 196.1%, to $128.3 million for the three months ended March 31, 2019 compared to net cash provided by investing activities of $133.5 million for the three months ended March 31, 2018. The increase resulted primarily from no sales of real estate properties in 2019 compared to $237.0 million of proceeds from sales in 2018. In addition, cash used for deposits for future real estate acquisitions increased in 2019. The increase was offset by lower cash used for additions to investment in real estate.

Financing Activities

Net cash provided by financing activities increased by $260.9 million, or 116.4%, to $36.7 million for the three months ended March 31, 2019 compared to net cash used in financing activities of $224.2 million for the three months ended March 31, 2018. The change resulted primarily from an increase in proceeds from debt, partially offset by increase in paydowns of debt.

Off-Balance Sheet Arrangements


We currently do not have any off-balance sheet arrangements.


Critical Accounting Policies


Our discussion and analysis of our historical financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our financial statements in conformity with GAAP requires us to make estimates of certain items and judgments as to certain future events, for example with respect to the assignment of the purchase price of an acquired property among land, buildings, improvements,

57



equipment and any related intangible assets and liabilities, or the effect of a property tax reassessment of our properties. These determinations, even though inherently subjective and prone to change, affect the reported amounts of our assets, liabilities, revenues and expenses. While we believe that our estimates are based on reasonable assumptions and judgments at the time they are made, some of our assumptions, estimates and judgments will inevitably prove to be incorrect. As a result, actual outcomes will likely differ from our accruals and those differences—positive or negative—could be material. Some of our accruals are subject to adjustment, as we believe appropriate based on revised estimates and reconciliation to the actual results when available.


In addition,
54
Effective January 1, 2019, we identified certainadopted ASC 842 which resulted in changes to our critical accounting policy relating to lease accounting. Refer to Part I, Item 1 “Note 2 to our Consolidated Financial Statements—Summary of Significant Accounting Policies,” for information regarding our updated policies that affect certainas a result of our more significant estimates and assumptions used in preparing our consolidated financial statements in our 2016 Annual Report on Form 10-K. We have not made any material changes to these policies during the periods covered by this Report.adoption of ASC 842.



58



Non-GAAP Supplemental Financial Measure: Funds From Operations


We calculate FFO in accordance with the White Paper issued in December 2018 on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts.Trusts (“NAREIT”). The White Paper defines FFO as net income or loss calculated in accordance with GAAP, excluding extraordinary items, as defined by GAAP, gains and losses from sales of depreciable real estate, gains and losses from sale of certain real estate assets and impairment write-downs associated with depreciable real estate, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets) and after adjustment for unconsolidated partnerships and joint ventures. The calculation of FFO includes the amortization of deferred revenue related to tenant-funded tenant improvements and excludes the depreciation of the related tenant improvement assets. In the December 2018 White Paper, NAREIT, provided an option to include value changes in mark-to-market equity securities in the calculation of FFO. We elected this option, retroactively during the fourth quarter of 2018. We believe that FFO is a useful supplemental measure of our operating performance. The exclusion from FFO of gains and losses from the sale of operating real estate assets allows investors and analysts to readily identify the operating results of the assets that form the core of our activity and assists in comparing those operating results between periods. Also, because FFO is generally recognized as the industry standard for reporting the operations of REITs, it facilitates comparisons of operating performance to other REITs. However, other REITs may use different methodologies to calculate FFO, and accordingly, our FFO may not be comparable to all other REITs.

Implicit in historical cost accounting for real estate assets in accordance with GAAP is the assumption that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies using historical cost accounting alone to be insufficient. Because FFO excludes depreciation and amortization of real estate assets, we believe that FFO along with the required GAAP presentations provides a more complete measurement of our performance relative to our competitors and a more appropriate basis on which to make decisions involving operating, financing and investing activities than the required GAAP presentations alone would provide. We use FFO per share to calculate annual cash bonuses for certain employees.

However, FFO should not be viewed as an alternative measure of our operating performance because it does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, which are significant economic costs and could materially impact our results from
operations.


The following table presents a reconciliation of net (loss) income to FFO:
Three Months Ended March 31,
20192018
Net (loss) income$(36,895)$52,563 
Adjustments:
Depreciation and amortization68,505 60,553 
Corporate-related depreciation and amortization(523)(484)
Gains on sale of real estate— (37,674)
Impairment loss52,201 — 
FFO attributable to non-controlling interests(6,738)(5,331)
FFO attributable to preferred units(153)(159)
FFO TO COMMON STOCKHOLDERS AND UNITHOLDERS$76,397 $69,468 

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Net income$14,510
 $5,217
 $45,617
 $15,228
Adjustments:       
Depreciation and amortization of real estate assets70,555
 66,965
 215,788
 200,525
Gains on sale of real estate—
 —
 (16,866) (8,515)
FFO attributable to non-controlling interests(6,609) (4,902) (18,561) (13,574)
Net income attributable to preferred units(159) (159) (477) (477)
FFO to common stockholders and unitholders$78,297
 $67,121
 $225,501
 $193,187

59
55



ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information about our market risk is disclosed in Part II, Item 7A, of our 20162018 Annual Report on Form 10-K and is incorporated herein by reference. There have been no material changes for the ninethree months ended September 30, 2017March 31, 2019 to the information provided in Part II, Item 7A, of our 20162018 Annual Report on Form 10-K.


ITEM 4.CONTROLS AND PROCEDURES

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures (Hudson Pacific Properties, Inc.)


Hudson Pacific Properties, Inc. maintains disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in Hudson Pacific Properties, Inc.’s reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.


As required by Rule 13a-15(b) under the Exchange Act, Hudson Pacific Properties, Inc. carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures as of the end of the period covered by this report.


Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded, as of that time, that Hudson Pacific Properties, Inc.’s disclosure controls and procedures were effective in providing a reasonable level of assurance that information Hudson Pacific Properties, Inc. is required to disclose in reports that Hudson Pacific Properties, Inc. files under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.


Disclosure Controls and Procedures (Hudson Pacific Properties, L.P.)


Hudson Pacific Properties, L.P. maintains disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in Hudson Pacific Properties, L.P.’s reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer of Hudson Pacific Properties, Inc. (the sole general partner of Hudson Pacific Properties, L.P.), as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.


As required by Rule 13a-15(b) under the Exchange Act, Hudson Pacific Properties, L.P. carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer of Hudson Pacific Properties, Inc. (the sole general partner of Hudson Pacific Properties, L.P.), of the effectiveness of the design and operation of the disclosure controls and procedures as of the end of the period covered by this report.


Based on the foregoing, the Chief Executive Officer and Chief Financial Officer of Hudson Pacific Properties, Inc. (the sole general partner of Hudson Pacific Properties, L.P.) concluded, as of that time, that Hudson Pacific Properties, L.P.’s disclosure controls and procedures were effective in providing a reasonable level of assurance that information Hudson Pacific Properties, L.P. is required to disclose in reports that Hudson Pacific Properties, L.P. files under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial

60



Officer of Hudson Pacific Properties, Inc. (the sole general partner of Hudson Pacific Properties, L.P.), as appropriate, to allow for timely decisions regarding required disclosure.


56
Changes in Internal Control Over Financial Reporting (Hudson Pacific Properties, Inc.)


There have been no changes that occurred during the thirdfirst quarter of the year covered by this report in Hudson Pacific Properties, Inc.’s internal control over financial reporting identified in connection with the evaluation referenced above that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


Changes in Internal Control Over Financial Reporting (Hudson Pacific Properties, L.P.)


There have been no changes that occurred during the thirdfirst quarter of the year covered by this report in Hudson Pacific Properties, L.P.’s internal control over financial reporting identified in connection with the evaluation referenced above that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


61
57



PART II—OTHER INFORMATION


ITEM 1.LEGAL PROCEEDINGS

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are a party to various lawsuits, claims and other legal proceedings arising out of, or incident to, our ordinary course of business. We are not currently a party, as plaintiff or defendant, to any legal proceedings that we believe to be material or that, individually or in the aggregate, would be expected to have a material adverse effect on our business, financial condition, results of operations or cash flows if determined adversely to us.


ITEM 1A.
ITEM 1A. RISK FACTORS


There have been no material changes to the risk factors included in the section entitled “Risk Factors” in our 20162018 Annual Report on Form 10-K.Please review the Risk Factors set forth in our 20162018 Annual Report on Form 10-K.


ITEM 2.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


(a)Recent Sales of Unregistered Securities:

During the thirdfirst quarter of 2017,2019, our operating partnership issued partnership units in private placements in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, in the amounts and for the consideration set forth below:


During the thirdfirst quarter of 2017,2019, the Company issued an aggregate of 950128,923 shares of its common stock to certain of its non-employee directors as compensation in lieu ofconnection with restricted stock awards for no cash consideration, out of which no126,880 shares of common stock were forfeited to the Company in connection with tax withholding obligationsrestricted stock awards for a net issuance of 9502,043 shares of common stock. For each share of common stock issued by the Company in connection with such an award, our operating partnership issued a restricted common unit to the Company as provided in our operating partnership’s partnership agreement. During the thirdfirst quarter of 2017,2019, our operating partnership issued an aggregate of 950128,923 common units to the Company. Additionally, during the first quarter of 2019 our operating partnership issued 169,804 operating partnership performance units pursuant to the 2016 OPP Plan.


All other issuances of unregistered equity securities of our operating partnership during the thirdfirst quarter of 20172019 have previously been disclosed in filings with the SEC. For all issuances of units to the Company, our operating partnership relied on the Company’s status as a publicly traded NYSE-listed company with over $6.91$7.37 billion in total consolidated assets and as our operating partnership’s majority owner and sole general partner as the basis for the exemption under Section 4(a)(2) of the Securities Act.

(b)Use of Proceeds from Registered Securities: None


(c)Purchases of Equity Securities by the Issuer and Affiliated Purchasers:None


ITEM 3.
DEFAULTS UPON SENIOR SECURITIES

During the three months ended March 31, 2019, certain employees surrendered common shares owned by them to satisfy their statutory federal income tax obligation associated with the vesting of restricted common shares of beneficial interest issued under our 2010 Incentive Award Plan.
Not applicable.    

58
The following table summarizes all of the repurchases of the Company equity securities during the first quarter of 2019:
Period Total Number of Shares Purchased 
Average Price Paid Per Share(1)
Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs
Maximum Number (or Dollar Value) That May Yet Be Purchased Under The Plans or Programs(2)
January 1 - January 31, 2019 98,620 $27.95 N/A N/A 
February 1 - February 28, 2019 — — N/A N/A 
March 1 - March 31, 2019 28,260 28.33 N/A N/A 
TOTAL126,880 $28.04 — $200,000,000 
_____________
1.The price paid per share is based on the closing price of our common stock, as reported by the NYSE, as of the date of the determination of the statutory federal tax income.
2.On January 20, 2016, our board of directors authorized a share repurchase program to buy up to $100.0 million of the outstanding common stock of Hudson Pacific Properties, Inc., which our board of directors increased to a total of $250.0 million on March 8, 2018. The program does not have a termination date, and repurchases may be discontinued at any time.

The following table summarizes all of the repurchases of operating partnership equity securities during the first quarter of 2019:
Period Total Number of Units Purchased 
Average Price Paid Per Unit(1)
Total Number of Units Purchased As Part of Publicly Announced Plans or Programs
Maximum Number (or Dollar Value) That May Yet Be Purchased Under The Plans or Programs(2)
January 1 - January 31, 2019 98,620 $27.95 N/A N/A 
February 1 - February 28, 2019 — — N/A N/A 
March 1 - March 31, 2019 28,260 28.33 N/A N/A 
TOTAL126,880 $28.04 — $200,000,000 
_____________
1.The price paid per unit is based on the closing price of our common stock, as reported by the NYSE, as of the date of the determination of the statutory federal tax income.
2.On January 20, 2016, our board of directors authorized a share repurchase program to buy up to $100.0 million of the outstanding common stock of Hudson Pacific Properties, Inc., which our board of directors increased to a total of $250.0 million on March 8, 2018. The program does not have a termination date, and repurchases may be discontinued at any time. For each share of common stock repurchased pursuant to the program, the operating partnership redeems one common unit from Hudson Pacific Properties, Inc.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

None.

ITEM 5.
ITEM 5. OTHER INFORMATION

Not applicable.

None.


62
59


Table of Contents

ITEM 6. EXHIBITS

Incorporated by Reference
Exhibit No.DescriptionFormFile No.Exhibit No.Filing Date
3.1S-11/A333-1649163.1May 12, 2010
3.2 8-K001-347893.1January 12, 2015
3.310-K001-3478910.1 February 26, 2016
3.410-Q001-347893.4 November 4, 2016
10.18-K001-3478944.2 February 27, 2019
10.2
31.1
31.2
31.3
31.4
32.1
32.2
101The following financial information from Hudson Pacific Properties, Inc.’s and Hudson Pacific Properties, L.P.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Operations (unaudited), (iii) Consolidated Statements of Comprehensive (Loss) Income (unaudited), (iv) Consolidated Statements of Equity (unaudited), (v) Consolidated Statements of Capital (unaudited), (vi) Consolidated Statements of Cash Flows (unaudited) and (vii) Notes to Unaudited Consolidated Financial Statements**
____________
ITEM 6.EXHIBITS

    Incorporated by Reference
Exhibit No. Description Form File No. Exhibit No. Filing Date
3.1 
Articles of Amendment and Restatement of Hudson Pacific Properties, Inc.
  S-11/A 333-164916 3.1 May 12, 2010
3.2 
Second Amended and Restated Bylaws of Hudson Pacific Properties, Inc.
 8-K 001-34789 3.1 January 12, 2015
3.3 
Fourth Amended and Restated Agreement of Limited Partnership of Hudson Pacific Properties, L.P.
 10-K 001-34789 10.1 February 26, 2016
3.4 
Certificate of Limited Partnership of Hudson Pacific Properties, L.P.
 10-Q 001-34789 3.4 November 4, 2016
4.1 
Indenture, dated October 2, 2017, among Hudson Pacific Properties, L.P., and U.S. Bank National Association
 8-K 001-34789 4.1 October 2, 2017
4.2 
Supplemental Indenture No. 1, dated October 2, 2017, among Hudson Pacific Properties, L.P., Hudson Pacific Properties, Inc. and U.S. Bank National Association
 8-K 001-34789 4.2 October 2, 2017
10.1 
Amended and Restated Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P. 2010 Incentive Award Plan*
 8-K 001-34789 10.1 May 25, 2017
10.2 
Indemnification Agreement, dated August 16, 2017, by and between Hudson Pacific Properties, Inc. and Andrea Wong
        
31.1 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Hudson Pacific Properties, Inc.
        
31.2 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Hudson Pacific Properties, Inc.
        
31.3 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Hudson Pacific Properties, L.P.
        
31.4 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Hudson Pacific Properties, L.P.
        
32.1 
Certifications by Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Hudson Pacific Properties, Inc.
        
32.2 
Certifications by Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Hudson Pacific Properties, L.P.
        
101 The following financial information from Hudson Pacific Properties, Inc.’s and Hudson Pacific Properties, L.P.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Operations (unaudited), (iii) Consolidated Statements of Comprehensive Income (Loss) (unaudited), (iv) Consolidated Statements of Equity (unaudited), (v) Consolidated Statements of Capital (unaudited), (vi) Consolidated Statements of Cash Flows (unaudited) and (vii) Notes to Unaudited Consolidated Financial Statements **        
____________
*Denotes a management contract or compensatory plan or arrangement.
**Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.




63
60



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
HUDSON PACIFIC PROPERTIES, INC.
Date:May 6, 2019HUDSON PACIFIC PROPERTIES, INC.
Date:November 3, 2017/S/ VICTOR J. COLEMAN
Victor J. Coleman
Chief Executive Officer (Principal Executive Officer)


HUDSON PACIFIC PROPERTIES, INC.
Date:May 6, 2019HUDSON PACIFIC PROPERTIES, INC.
Date:November 3, 2017/S/ MARK T. LAMMAS
Mark T. Lammas
Chief Operating Officer, Chief Financial Officer and Treasurer 
(Principal Financial Officer)


64
61



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
HUDSON PACIFIC PROPERTIES, L.P.
Date:May 6, 2019HUDSON PACIFIC PROPERTIES, L.P.
Date:November 3, 2017/S/ VICTOR J. COLEMAN
Victor J. Coleman
Chief Executive Officer (Principal Executive Officer)


HUDSON PACIFIC PROPERTIES, L.P.
Date:May 6, 2019HUDSON PACIFIC PROPERTIES, L.P.
Date:November 3, 2017/S/ MARK T. LAMMAS
Mark T. Lammas
Chief Operating Officer, Chief Financial Officer and Treasurer 
(Principal Financial Officer)



65


62