Hudson Pacific Properties 8-K Other Events

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

8-K

CURRENT REPORT

Pursuant to Section 13 OR 15 (d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 4, 2021

Hudson Pacific Properties, Inc.

Hudson Pacific Properties, L.P.

(Exact name of registrant as specified in its charter)

Hudson Pacific Properties, Inc.	Maryland	001-34789	27-1430478
Hudson Pacific Properties, L.P.	Maryland	333-202799-01	80-0579682
	(State or other jurisdiction	(Commission	(IRS Employer
	of incorporation)	File Number)	Identification No.)

11601 Wilshire Blvd., Ninth Floor Los Angeles, California	90025
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (310)

445-5700

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the

Form 8-K

filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Registrant	Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Hudson Pacific Properties, Inc.	Common Stock, $0.01 par value	HPP	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule

12b-2

of the Securities Exchange Act of 1934

(§240.12b-2

of this chapter).

Hudson Pacific Properties, Inc.                                                                                             ☐

Hudson Pacific Properties, L.P.                                                                                             ☐

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.                                                                                             ☐

Hudson Pacific Properties, L.P.                                                                                             ☐

ITEM 8.01. Other Events.

The following discussion provides information with respect to certain recent developments of Hudson Pacific Properties, Inc. (the “Company”). Unless otherwise expressly stated or the context otherwise requires, “we,” “us” and “our” refer collectively to the Company, Hudson Pacific Properties, L.P. (the “Operating Partnership”), a Maryland limited partnership of which the Company serves as the sole general partner, and the Company’s other subsidiaries.

We employ a conservative approach to development and redevelopment. Development and redevelopment projects have only represented approximately 18.0% of our capital allocation since our initial public offering in 2010 and estimated project costs as a percentage of our Company’s share of market capitalization have averaged approximately 8.0% over the preceding eight quarters. Estimated project costs are based on management estimates and exclude capitalized interest, personnel costs and operating expenses. Gross assets represents the sum of total assets calculated in accordance with United States generally accepted accounting principles, or GAAP, plus accumulated depreciation and amortization.

We also have a diverse concentration of tenants. The table below presents our top fifteen office tenants as of September 30, 2021.

			Company’s Share (1)
Tenant (2)	Total Occupied Square Feet		Total Occupied Square Feet		Percent of Rentable Square Feet			Annualized Base Rent (3)		Percent of Annualized Base Rent
Google, Inc.		640,726		622,117		4.9	%	$	48,521,102		8.6	%
Netflix, Inc.		722,305		368,376		2.9			24,035,884		4.2
Nutanix, Inc.		439,406		439,406		3.5			18,503,384		3.3
Riot Games, Inc.		284,037		284,037		2.2			17,864,002		3.2
Amazon		746,386		473,433		3.7			14,981,924		2.6
Qualcomm		376,817		376,817		3.0			14,940,041		2.6
Salesforce.com		265,394		265,394		2.1			14,287,683		2.5
Square, Inc.		469,056		257,981		2.0			13,267,953		2.3

			Company’s Share (1)
Tenant (2)	Total Occupied Square Feet		Total Occupied Square Feet		Percent of Rentable Square Feet			Annualized Base Rent (3)		Percent of Annualized Base Rent
Dell EMC Corporation		311,795		311,795		2.5			12,430,309		2.2
Uber Technologies, Inc.		325,445		178,995		1.4			9,644,556		1.7
NFL Enterprises		167,606		167,606		1.3			8,447,342		1.5
WeWork Companies, Inc		330,921		159,456		1.3			7,956,673		1.4
GitHub, Inc.		92,450		92,450		0.7			6,751,168		1.2
Weil, Gotshal & Manges LLP		76,278		76,278		0.6			5,747,762		1.0
PayPal Holdings, Inc.		123,097		123,097		1.0			5,545,170		1.0
TOTAL		5,371,719		4,197,154		33.1	%	$	222,924,953		39.3	%

(1) Company’s Share is calculated as the total amounts on a consolidated basis, in accordance with GAAP (where applicable), plus our company’s share of the amount from our company’s unconsolidated joint ventures (calculated based upon our company’s percentage ownership interest), minus our company’s partners’ share of the amount from our company’s consolidated joint ventures (calculated based upon the partners’ percentage ownership interests). Because we own some of our properties through significant joint ventures, we believe that presenting Company’s Share of certain measures provides investors with useful information regarding our financial condition and/or results of operations by accounting for our true economic interest in these joint ventures. In some cases, we exercise significant influence over, but do not control, the joint venture, in which case, GAAP requires us to account for the joint venture entity using the equity method of accounting, and we do not consolidate it for financial reporting purposes. In other cases, GAAP requires us to consolidate the joint venture even though our partner(s) owns a significant percentage interest.

(2) Presented in order of Company’s Share of annualized base rent.

(3) Annualized base rent is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements or deferments)) under commenced leases as of September 30, 2021, by (ii) 12. Annualized base rent does not reflect tenant reimbursements.

The table below presents our office portfolio tenant industry diversification as of September 30, 2021

	Company’s Share (1)
Industry	Total Square Feet (2)(3)		Annualized Base Rent as Percent of Total (4)
Technology (5)		4,156,879		39.3	%
Media & Entertainment (6)		1,332,070		14.1
Legal		653,904		8.5
Business Services		885,931		8.3
Financial Services		813,792		7.8
Retail		946,666		5.8
Other		1,652,243		16.2
TOTAL		10,441,485		100.0	%

(1) Company’s Share is calculated as the total amounts on a consolidated basis, in accordance with GAAP (where applicable), plus our company’s share of the amount from our company’s unconsolidated joint ventures (calculated based upon our company’s percentage ownership interest), minus our company’s partners’ share of the amount from our company’s consolidated joint ventures (calculated based upon the partners’ percentage ownership interests).

(2) Excludes signed leases not commenced.

(3) Excludes 181,792 square feet occupied by Hudson Pacific Properties, Inc.

(4) Annualized base rent is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements or deferments)) under commenced leases as of September 30, 2021, by (ii) 12. Annualized base rent does not reflect tenant reimbursements.

(5) Our diverse set of technology tenants largely consist of public and other well established companies. As a percentage of annualized base rent, the businesses of our technology tenants consist of online services (31%), software (28%), hardware & tech equipment (19%), business support services (12%) and other (10%). In addition, only 7% of annualized base rent of technology tenants as a percent of total annualized base rent of technology tenants are attributable to private companies in business for less than 10 years. Furthermore, only five tenants contribute more than 5% of annualized base rent of our technology tenants: Google, Nutanix, Qualcomm, Salesforce and Square, and over half of the annualized base rent of our technology tenants is comprised of tenants contributing less than 5% to the annualized base rent of our technology tenants.

(6) As a percentage of annualized base rent, the businesses of our media & entertainment tenants consist of production & service (62%), gaming (29%), advertising & marketing (7%) and other (2%).

The table below presents certain information regarding our portfolio by market as of September 30, 2021.

				Company’s Share (1)
Market	Total Square Feet (2)			Annualized Base Rent (3)		Annualized Rent as of Percent of Total
Office:
Silicon Valley		6,438,644	��	$	293,968,845		50.0	%
Los Angeles		4,877,066			102,842,644		17.4
Seattle		2,703,452			49,458,077		8.4
San Francisco		2,561,358			111,092,692		18.9
Vancouver		1,945,738			8,389,521		1.4
Studio:
Los Angeles		1,465,403			22,669,820		3.9
TOTAL		19,991,661		$	588,421,599		100.0	%

(1) Company’s Share is calculated as the total amounts on a consolidated basis, in accordance with GAAP (where applicable), plus our company’s share of the amount from our company’s unconsolidated joint ventures (calculated based upon our company’s percentage ownership interest), minus our company’s partners’ share of the amount from our company’s consolidated joint ventures (calculated based upon the partners’ percentage ownership interests).

(2) Includes land.

(3) Annualized base rent for the office properties is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements or deferments)) under commenced leases as of September 30, 2021, by (ii) 12. Annualized base rent for the studio properties reflects actual base rent for the 12 months ended September 30, 2021. Annualized base rent does not reflect tenant reimbursements.

The table below presents certain information regarding our stabilized and

in-service

office properties by market as of various acquisition dates and September 30, 2021.

Market	Percent Leased at Acquisition Date			Percent Leased at September 30, 2021 (1)			Annualized Base Rent (2) at Acquisition Date per square foot		Annualized Base Rent at September 30, 2021 per square foot
Office:
Silicon Valley		85.7	%		87.5	%	$	41.15	$	56.95
Seattle		84.8			90.1			26.80		33.39

Market	Percent Leased at Acquisition Date		Percent Leased at September 30, 2021 (1)		Annualized Base Rent (2) at Acquisition Date per square foot		Annualized Base Rent at September 30, 2021 per square foot
San Francisco		83.0		93.8		30.53		61.30
Los Angeles		37.7		94.6		35.40		56.13

(1) Does not include signed leases not commenced.

(2) Annualized base rent for office properties is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements or deferments)) under commenced leases as of September 30, 2021, by (ii) 12. Annualized base rent per square foot for the office properties is calculated as (i) annualized base rent divided by (ii) square footage under commenced leases as of September 30, 2021. Annualized base rent does not reflect tenant reimbursements.

The following tables present and reconcile the Company’s Share of net debt and debt for the periods presented (in thousands).

	Net Debt & Total Unsecured / Secured Debt ($ in Thousands)
	Q2 2010		Q4 2010			Q4 2011			Q4 2012			Q4 2013			Q4 2014			Q4 2015			Q4 2016			Q4 2017			Q4 2018			Q4 2019			Q4 2020			Q3 2021
Total unsecured and secured debt, net	$	94,020	$	342,060		$	399,871		$	582,085		$	931,308		$	918,059		$	2,260,716		$	2,688,010		$	2,421,380		$	2,623,835		$	2,817,910		$	3,399,492		$	3,910,405
Unamortized deferred financing cost		—		—			—			—			—			—			19,039			19,829			17,209			15,898			26,235			31,599			32,480
Unamortized loan discount/ (premium), net		280		(643	)		(1,965	)		(1,201	)		(5,320	)		(3,056	)		(1,310	)		—			722			648			1,314			1,185			1,088
Debt related to held for sale property		—		—			—			—			—			42,449			—			—			—			—			—			—			—
Company’s share of unconsolidated joint venture debt		—		—			—			—			—			—			—			—			—			—			97,053			99,973			102,722
Partner’s share of consolidated debt		—		(51,940	)		—			(2,257	)		(76,139	)		(75,747	)		(75,330	)		(121,050	)		(45,450	)		(45,450	)		(46,862	)		(654,403	)		(780,945	)
Total unsecured and secured debt	$	94,300		289,477		$	397,906		$	578,627		$	849,849		$	881,705		$	2,203,115		$	2,586,789		$	2,393,861		$	2,594,931		$	2,895,650		$	2,877,846		$	3,265,750
	Q2 2010		Q4 2010			Q4 2011			Q4 2012			Q4 2013			Q4 2014			Q4 2015			Q4 2016			Q4 2017			Q4 2018			Q4 2019			Q4 2020			Q3 2021
Cash and cash equivalents	$	84,509	$	48,875		$	13,705		$	18,904		$	30,356		$	17,753		$	53,551		$	83,015		$	78,922		$	53,740		$	46,224		$	113,686		$	110,500
Company’s share of unconsolidated real estate entity cash and cash equivalents		—		—			—			—			—			—			—			—			—			—			2,690			(3,060	)		(11,359	)
Partner’s share of cash and cash equivalents		—		(2,030	)		—			(1	)		(1,865	)		(1,664	)		(3,251	)		(9,285	)		(1,594	)		(7,659	)		(8,846	)		(17,002	)		(31,269	)
Company’s share of net debt	$	9,791	$	242,632		$	384,201		$	559,724		$	821,358		$	865,616		$	2,152,815		$	2,513,059		$	2,316,533		$	2,548,850		$	2,855,582		$	2,778,102		$	3,175,160
	Q2 2010		Q4 2010			Q4 2011			Q4 2012			Q4 2013			Q4 2014			Q4 2015			Q4 2016			Q4 2017			Q4 2018			Q4 2019			Q4 2020			Q3 2021
Unsecured debt		—	$	111,117			—		$	55,000		$	155,000		$	280,000		$	1,555,000		$	2,025,000		$	1,975,000		$	2,275,000		$	2,475,000		$	1,925,000		$	2,225,000
Secured debt	$	94,300		178,360			397,906			523,627			694,849			601,705			648,115			561,789			418,861			319,931			420,650			952,846			1,040,750
Total company’s share of debt	$	94,300	$	289,477		$	397,906		$	578,627		$	849,849		$	881,705		$	2,203,115		$	2,586,789		$	2,393,861		$	2,594,931		$	2,895,650		$	2,877,846		$	3,265,750

The following table presents and reconciles the Company’s Share of gross assets for the periods presented (in thousands).
	Gross Asset Value ($ in Thousands)
	Q2 2010		Q4 2010			Q4 2011		Q4 2012			Q4 2013			Q4 2014			Q4 2015			Q4 2016			Q4 2017			Q4 2018			Q4 2019			Q4 2020			Q3 2021
Total Assets, net	$	621,780	$	1,004,576		$	1,152,791	$	1,559,690		$	2,131,274		$	2,340,885		$	6,254,035		$	6,678,998		$	6,622,070		$	7,070,879		$	7,466,568		$	8,350,202		$	8,803,997
Accumulated depreciation		21,442		27,113			53,329		85,184			116,342			134,657			269,074			419,368			533,498			695,631			898,279			1,102,748			1,285,137
Accumulated depreciation related to held for sale		—		—			—		—			—			7,904			3,650			4,582			15,913			—			—			—			—
Partner’s share of gross assets		—		(94,606	)		—		(3,897	)		(127,795	)		(128,740	)		(194,809	)		(289,075	)		(163,559	)		(406,815	)		(453,722	)		(1,421,834	)		(1,526,056	)
Company’s share of depreciation of the unconsolidated		—		—			—		—			—			—			—			—			—			—			976			1,197			768
Company’s Share of Gross Assets	$	643,222	$	937,083		$	1,206,120	$	1,640,977		$	2,119,821		$	2,354,706		$	6,331,950		$	6,813,873		$	7,007,922		$	7,359,695		$	7,912,101		$	8,032,313		$	8,563,846

The table below presents a reconciliation of net income to FFO (as defined below) for the years ended December 31, 2011 and 2020 (in thousands except per share data):

	Year Ended December 31,
	2011			2020
Net income	$	(2,238	)	$	16,430
Adjustments:
Depreciation and amortization—Consolidated		44,660			299,682
Depreciation and amortization—Corporate-related		—			(2,286	)
Depreciation and amortization—Company’s share from unconsolidated real estate investments		—			5,605
Gain on sale of real estate		—			—
Impairment loss		—			—
Unrealized loss on non-real estate investments		—			2,463
FFO attributable to non-controlling interests		(1,297	)		(37,644	)
FFO attributable to preferred stock and units		(8,108	)		(612	)
FFO to common stockholders and unitholders	$	33,017		$	283,638
Specified items impacting FFO:
Transaction-related expenses		1,693			440
One-time tax reassessment management cost		—			5,500
One-time straight line rent reserve		—			2,620
One-time prior period property tax adjustment		—			(937	)
One-time debt extinguishment cost		—			2,654
FFO (excluding specified items) to common stockholders and unitholders	$	34,710		$	293,915
Weighted average common stock/units outstanding—diluted		32,004			154,084
FFO per common stock/unit—diluted		1.03			1.84
FFO (excluding specified items) per common stock/unit—diluted		1.08			1.91

We calculate funds from operations, or FFO, in accordance with the White Paper issued in December 2018 on FFO approved by the Board of Governors of NAREIT. The White Paper defines FFO as net income or loss calculated in accordance with generally accepted accounting principles in the United States (“GAAP”), excluding 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 fourth quarter 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.

Recent Developments

We are currently in negotiations to refinance our revolving credit facility to, among other things, increase the capacity under such facility. Our current expectation is that any refinancing transaction would likely close during the fourth quarter of 2021, although we cannot provide assurance that any refinancing transaction will occur on that timeline, or at all.

SIGNATURE

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 hereunto duly authorized.

Date: November 4, 2021

Hudson Pacific Properties, Inc.
By:	/s/ Mark T. Lammas
	Mark T. Lammas
	President

Hudson Pacific Properties, L.P.
By:	Hudson Pacific Properties, Inc.
	Its General Partner
By:	/s/ Mark T. Lammas
	Mark T. Lammas
	President