x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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) |
Hudson Pacific Properties, Inc. Yes x No o | Hudson Pacific Properties, L.P. Yes x No o |
Hudson Pacific Properties, Inc. Yes x No o | Hudson Pacific Properties, L.P. Yes x No o |
Large accelerated filer x | Accelerated filer o | Non-accelerated filer o |
(Do not check if a smaller reporting company) | ||
Smaller reporting company o | Emerging growth company o |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer x |
(Do not check if a smaller reporting company) | ||
Smaller reporting company o | Emerging growth company o |
Hudson Pacific Properties, Inc. o | Hudson Pacific Properties, L.P. o |
Hudson Pacific Properties, Inc. Yes o No x | Hudson Pacific Properties, L.P. Yes o No x |
• | 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 applies 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. |
Page | ||
ITEM 1. | Financial Statements of Hudson Pacific Properties, Inc. | |
ITEM 1. | Financial Statements of Hudson Pacific Properties, L.P. | |
ITEM 2. | ||
ITEM 3. | ||
ITEM 4. | ||
ITEM 1. | ||
ITEM 1A. | ||
ITEM 2. | ||
ITEM 3. | ||
ITEM 4. | ||
ITEM 5. | ||
ITEM 6. | ||
June 30, 2017 | December 31, 2016 | ||||||
ASSETS | (unaudited) | ||||||
Real estate assets | |||||||
Land | $ | 1,413,269 | $ | 1,265,399 | |||
Building and improvements | 4,765,915 | 4,502,235 | |||||
Tenant improvements | 403,359 | 373,778 | |||||
Furniture and fixtures | 7,230 | 4,276 | |||||
Property under development | 247,634 | 295,239 | |||||
Total real estate held for investment | 6,837,407 | 6,440,927 | |||||
Accumulated depreciation and amortization | (506,118 | ) | (419,368 | ) | |||
Investment in real estate, net | 6,331,289 | 6,021,559 | |||||
Cash and cash equivalents | 73,242 | 83,015 | |||||
Restricted cash | 17,284 | 25,177 | |||||
Accounts receivable, net | 4,088 | 6,852 | |||||
Straight-line rent receivables, net | 93,093 | 87,281 | |||||
Deferred leasing costs and lease intangible assets, net | 282,272 | 309,962 | |||||
Derivative assets | 5,858 | 5,935 | |||||
Goodwill | 8,754 | 8,754 | |||||
Prepaid expenses and other assets, net | 32,777 | 27,153 | |||||
Investment in unconsolidated entities | 15,377 | 37,228 | |||||
Assets associated with real estate held for sale | — | 66,082 | |||||
TOTAL ASSETS | $ | 6,864,034 | $ | 6,678,998 | |||
LIABILITIES AND EQUITY | |||||||
Notes payable, net | $ | 2,598,780 | $ | 2,688,010 | |||
Accounts payable and accrued liabilities | 134,237 | 120,444 | |||||
Lease intangible liabilities, net | 66,438 | 80,130 | |||||
Security deposits | 35,655 | 31,495 | |||||
Prepaid rent | 33,344 | 40,755 | |||||
Derivative liabilities | 987 | 1,303 | |||||
Liabilities associated with real estate held for sale | — | 3,934 | |||||
TOTAL LIABILITIES | 2,869,441 | 2,966,071 | |||||
6.25% Series A cumulative redeemable preferred units of the operating partnership | 10,177 | 10,177 | |||||
EQUITY | |||||||
Hudson Pacific Properties, Inc. stockholders’ equity: | |||||||
Common stock, $0.01 par value, 490,000,000 authorized, 155,301,850 shares and 136,492,235 shares outstanding at June 30, 2017 and December 31, 2016, respectively | 1,553 | 1,364 | |||||
Additional paid-in capital | 3,656,009 | 3,109,394 | |||||
Accumulated other comprehensive income | 5,960 | 9,496 | |||||
Accumulated income (deficit) | 7,592 | (16,971 | ) | ||||
Total Hudson Pacific Properties, Inc. stockholders’ equity | 3,671,114 | 3,103,283 | |||||
Non-controlling interest—members in consolidated entities | 299,898 | 304,608 | |||||
Non-controlling interest—units in the operating partnership | 13,404 | 294,859 | |||||
TOTAL EQUITY | 3,984,416 | 3,702,750 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 6,864,034 | $ | 6,678,998 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
REVENUES | |||||||||||||||
Office | |||||||||||||||
Rental | $ | 133,602 | $ | 118,047 | $ | 267,118 | $ | 234,274 | |||||||
Tenant recoveries | 25,038 | 21,303 | 42,439 | 41,836 | |||||||||||
Parking and other | 8,212 | 5,050 | 14,111 | 10,582 | |||||||||||
Total Office revenues | 166,852 | 144,400 | 323,668 | 286,692 | |||||||||||
Media & Entertainment | |||||||||||||||
Rental | 9,105 | 6,857 | 15,790 | 12,885 | |||||||||||
Tenant recoveries | 129 | 213 | 794 | 412 | |||||||||||
Other property-related revenue | 4,361 | 2,810 | 8,403 | 7,779 | |||||||||||
Other | 53 | 41 | 130 | 90 | |||||||||||
Total Media & Entertainment revenues | 13,648 | 9,921 | 25,117 | 21,166 | |||||||||||
TOTAL REVENUES | 180,500 | 154,321 | 348,785 | 307,858 | |||||||||||
OPERATING EXPENSES | |||||||||||||||
Office operating expenses | 55,468 | 49,091 | 103,422 | 96,794 | |||||||||||
Media & Entertainment operating expenses | 7,003 | 6,295 | 14,254 | 12,247 | |||||||||||
General and administrative | 14,506 | 13,016 | 28,316 | 25,519 | |||||||||||
Depreciation and amortization | 75,415 | 66,108 | 146,182 | 134,476 | |||||||||||
TOTAL OPERATING EXPENSES | 152,392 | 134,510 | 292,174 | 269,036 | |||||||||||
INCOME FROM OPERATIONS | 28,108 | 19,811 | 56,611 | 38,822 | |||||||||||
OTHER EXPENSE (INCOME) | |||||||||||||||
Interest expense | 21,695 | 17,614 | 43,625 | 34,865 | |||||||||||
Interest income | (16 | ) | (73 | ) | (46 | ) | (86 | ) | |||||||
Unrealized loss on ineffective portion of derivative instruments | 51 | 384 | 45 | 2,509 | |||||||||||
Acquisition-related expenses | — | 61 | — | 61 | |||||||||||
Other income | (576 | ) | (47 | ) | (1,254 | ) | (23 | ) | |||||||
TOTAL OTHER EXPENSES | 21,154 | 17,939 | 42,370 | 37,326 | |||||||||||
INCOME BEFORE GAINS ON SALE OF REAL ESTATE | 6,954 | 1,872 | 14,241 | 1,496 | |||||||||||
Gains on sale of real estate | — | 2,163 | 16,866 | 8,515 | |||||||||||
NET INCOME | 6,954 | 4,035 | 31,107 | 10,011 | |||||||||||
Net income attributable to preferred units | (159 | ) | (159 | ) | (318 | ) | (318 | ) | |||||||
Net income attributable to participating securities | (255 | ) | (196 | ) | (495 | ) | (393 | ) | |||||||
Net income attributable to non-controlling interest in consolidated entities | (2,974 | ) | (2,396 | ) | (6,011 | ) | (4,341 | ) | |||||||
Net income attributable to units in the operating partnership | (13 | ) | (445 | ) | (215 | ) | (1,867 | ) | |||||||
Net income attributable to Hudson Pacific Properties, Inc. common stockholders | $ | 3,553 | $ | 839 | $ | 24,068 | $ | 3,092 | |||||||
Basic and diluted per share amounts: | |||||||||||||||
Net income attributable to common stockholders—basic | $ | 0.02 | $ | 0.01 | $ | 0.16 | $ | 0.03 | |||||||
Net income attributable to common stockholders—diluted | $ | 0.02 | $ | 0.01 | $ | 0.16 | $ | 0.03 | |||||||
Weighted average shares of common stock outstanding—basic | 155,290,559 | 95,145,496 | 151,640,853 | 92,168,432 | |||||||||||
Weighted average shares of common stock outstanding—diluted | 156,095,603 | 95,995,496 | 152,431,897 | 93,000,432 | |||||||||||
Dividends declared per share | $ | 0.250 | $ | 0.200 | $ | 0.500 | $ | 0.400 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 6,954 | $ | 4,035 | $ | 31,107 | $ | 10,011 | |||||||
Other comprehensive (loss) income: change in fair value of derivative instruments | (2,760 | ) | (8,430 | ) | 104 | (23,905 | ) | ||||||||
Comprehensive income (loss) | 4,194 | (4,395 | ) | 31,211 | (13,894 | ) | |||||||||
Comprehensive income attributable to preferred units | (159 | ) | (159 | ) | (318 | ) | (318 | ) | |||||||
Comprehensive income attributable to participating securities | (255 | ) | (196 | ) | (495 | ) | (393 | ) | |||||||
Comprehensive income attributable to non-controlling interest in consolidated entities | (2,974 | ) | (2,396 | ) | (6,011 | ) | (4,341 | ) | |||||||
Comprehensive (income) loss attributable to units in the operating partnership | (3 | ) | 2,474 | (233 | ) | 7,040 | |||||||||
Comprehensive income (loss) attributable to Hudson Pacific Properties, Inc. stockholders | $ | 803 | $ | (4,672 | ) | $ | 24,154 | $ | (11,906 | ) |
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 Entities | Total Equity | ||||||||||||||||
Balance at January 1, 2016 | 89,153,780 | $ | 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 costs | 47,010,695 | 470 | 1,449,111 | — | — | — | — | 1,449,581 | |||||||||||||||
Issuance of unrestricted stock | 590,520 | 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, 2016 | 136,492,235 | 1,364 | 3,109,394 | (16,971 | ) | 9,496 | 294,859 | 304,608 | 3,702,750 | ||||||||||||||
Contributions | — | — | — | — | — | — | 3,870 | 3,870 | |||||||||||||||
Distributions | — | — | — | — | — | — | (14,591 | ) | (14,591 | ) | |||||||||||||
Proceeds from sale of common stock, net of underwriters’ discount and transaction costs | 18,656,575 | 187 | 647,322 | — | — | — | — | 647,509 | |||||||||||||||
Issuance of unrestricted stock | 273,301 | 3 | (3 | ) | — | — | — | — | — | ||||||||||||||
Shares withheld to satisfy tax withholding | (120,261 | ) | (1 | ) | (4,202 | ) | — | — | — | — | (4,203 | ) | |||||||||||
Declared dividend | — | — | (78,835 | ) | — | — | (328 | ) | — | (79,163 | ) | ||||||||||||
Amortization of stock-based compensation | — | — | 6,868 | — | — | 1,338 | — | 8,206 | |||||||||||||||
Net income | — | — | — | 24,563 | — | 215 | 6,011 | 30,789 | |||||||||||||||
Change in fair value of derivatives | — | — | — | — | 86 | 18 | — | 104 | |||||||||||||||
Redemption of common units in the operating partnership | — | — | (24,535 | ) | — | (3,622 | ) | (282,698 | ) | — | (310,855 | ) | |||||||||||
Balance at June 30, 2017 | 155,301,850 | $ | 1,553 | $ | 3,656,009 | $ | 7,592 | $ | 5,960 | $ | 13,404 | $ | 299,898 | $ | 3,984,416 |
Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
Net income | $ | 31,107 | $ | 10,011 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 146,182 | 134,476 | |||||
Amortization of deferred financing costs and loan premium, net | 2,373 | 2,134 | |||||
Amortization of stock-based compensation | 7,788 | 6,643 | |||||
Straight-line rents | (5,781 | ) | (11,281 | ) | |||
Straight-line rent expenses | 160 | 750 | |||||
Amortization of above- and below-market leases, net | (10,405 | ) | (9,302 | ) | |||
Amortization of above- and below-market ground lease, net | 1,470 | 1,070 | |||||
Amortization of lease incentive costs | 758 | 655 | |||||
Bad debt (recovery) expense | (75 | ) | 512 | ||||
Amortization of discount and net origination fees on purchased and originated loans | — | (208 | ) | ||||
Unrealized loss on ineffective portion of derivative instruments | 45 | 2,509 | |||||
Gains on sale of real estate | (16,866 | ) | (8,515 | ) | |||
Change in operating assets and liabilities: | |||||||
Accounts receivable | 3,177 | 10,001 | |||||
Deferred leasing costs and lease intangibles | (15,216 | ) | (25,725 | ) | |||
Prepaid expenses and other assets | (5,873 | ) | (5,882 | ) | |||
Accounts payable and accrued liabilities | 6,304 | 5,619 | |||||
Security deposits | 3,667 | 4,214 | |||||
Prepaid rent | (7,779 | ) | (8,814 | ) | |||
Net cash provided by operating activities | 141,036 | 108,867 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
Additions to investment property | (147,476 | ) | (104,112 | ) | |||
Property acquisitions | (257,734 | ) | — | ||||
Proceeds from sales of real estate | 81,707 | 283,855 | |||||
Contributions to unconsolidated entities | (1,071 | ) | (28,393 | ) | |||
Distributions from unconsolidated entities | 14,893 | — | |||||
Deposit for property acquisitions | — | (20,000 | ) | ||||
Proceed from repayment of notes receivable | — | 28,892 | |||||
Net cash (used in) provided by investing activities | (309,681 | ) | 160,242 | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Proceeds from notes payable | 230,000 | 677,000 | |||||
Payments of notes payable | (321,270 | ) | (597,416 | ) | |||
Proceeds from issuance of common stock, net | 647,509 | 293,628 | |||||
Payment for redemption of common units in the operating partnership | (310,855 | ) | (294,209 | ) | |||
Distributions paid to common stockholders and unitholders | (79,163 | ) | (59,119 | ) | |||
Distributions paid to preferred unitholders | (318 | ) | (318 | ) | |||
Contributions from non-controlling member in consolidated entities | 3,870 | 103 | |||||
Distributions to non-controlling member in consolidated entities | (14,591 | ) | (663 | ) | |||
Payments to satisfy tax withholding | (4,203 | ) | (1,776 | ) | |||
Payments of loan costs | — | (1,334 | ) | ||||
Net cash provided by financing activities | 150,979 | 15,896 | |||||
Net (decrease) increase in cash and cash equivalents and restricted cash | (17,666 | ) | 285,005 | ||||
Cash and cash equivalents and restricted cash—beginning of period | 108,192 | 71,561 | |||||
Cash and cash equivalents and restricted cash—end of period | $ | 90,526 | $ | 356,566 | |||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||
Cash paid for interest including amounts capitalized | $ | 42,462 | $ | 38,714 | |||
NON-CASH INVESTING ACTIVITIES: | |||||||
Accounts payable and accrued liabilities for real estate investments | $ | (3,427 | ) | $ | (8,866 | ) | |
Reclassification of investment in unconsolidated entities for real estate investments | $ | 7,835 | $ | — |
June 30, 2017 | December 31, 2016 | ||||||
ASSETS | (unaudited) | ||||||
Real estate assets | |||||||
Land | $ | 1,413,269 | $ | 1,265,399 | |||
Building and improvements | 4,765,915 | 4,502,235 | |||||
Tenant improvements | 403,359 | 373,778 | |||||
Furniture and fixtures | 7,230 | 4,276 | |||||
Property under development | 247,634 | 295,239 | |||||
Total real estate held for investment | 6,837,407 | 6,440,927 | |||||
Accumulated depreciation and amortization | (506,118 | ) | (419,368 | ) | |||
Investment in real estate, net | 6,331,289 | 6,021,559 | |||||
Cash and cash equivalents | 73,242 | 83,015 | |||||
Restricted cash | 17,284 | 25,177 | |||||
Accounts receivable, net | 4,088 | 6,852 | |||||
Straight-line rent receivables, net | 93,093 | 87,281 | |||||
Deferred leasing costs and lease intangible assets, net | 282,272 | 309,962 | |||||
Derivative assets | 5,858 | 5,935 | |||||
Goodwill | 8,754 | 8,754 | |||||
Prepaid expenses and other assets, net | 32,777 | 27,153 | |||||
Investment in unconsolidated entities | 15,377 | 37,228 | |||||
Assets associated with real estate held for sale | — | 66,082 | |||||
TOTAL ASSETS | $ | 6,864,034 | $ | 6,678,998 | |||
LIABILITIES | |||||||
Notes payable, net | $ | 2,598,780 | $ | 2,688,010 | |||
Accounts payable and accrued liabilities | 134,237 | 120,444 | |||||
Lease intangible liabilities, net | 66,438 | 80,130 | |||||
Security deposits | 35,655 | 31,495 | |||||
Prepaid rent | 33,344 | 40,755 | |||||
Derivative liabilities | 987 | 1,303 | |||||
Liabilities associated with real estate held for sale | — | 3,934 | |||||
TOTAL LIABILITIES | 2,869,441 | 2,966,071 | |||||
6.25% Series A cumulative redeemable preferred units of the operating partnership | 10,177 | 10,177 | |||||
CAPITAL | |||||||
Hudson Pacific Properties, L.P. partners’ capital: | |||||||
Common units, 155,870,895 and 145,942,855 issued and outstanding at June 30, 2017 and December 31, 2016, respectively. | 3,678,536 | 3,392,264 | |||||
Accumulated other comprehensive income | 5,982 | 5,878 | |||||
Total Hudson Pacific Properties, L.P. partners’ capital | 3,684,518 | 3,398,142 | |||||
Non-controlling interest—members in consolidated entities | 299,898 | 304,608 | |||||
TOTAL CAPITAL | 3,984,416 | 3,702,750 | |||||
TOTAL LIABILITIES AND CAPITAL | $ | 6,864,034 | $ | 6,678,998 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
REVENUES | |||||||||||||||
Office | |||||||||||||||
Rental | $ | 133,602 | $ | 118,047 | $ | 267,118 | $ | 234,274 | |||||||
Tenant recoveries | 25,038 | 21,303 | 42,439 | 41,836 | |||||||||||
Parking and other | 8,212 | 5,050 | 14,111 | 10,582 | |||||||||||
Total Office revenues | 166,852 | 144,400 | 323,668 | 286,692 | |||||||||||
Media & Entertainment | |||||||||||||||
Rental | 9,105 | 6,857 | 15,790 | 12,885 | |||||||||||
Tenant recoveries | 129 | 213 | 794 | 412 | |||||||||||
Other property-related revenue | 4,361 | 2,810 | 8,403 | 7,779 | |||||||||||
Other | 53 | 41 | 130 | 90 | |||||||||||
Total Media & Entertainment revenues | 13,648 | 9,921 | 25,117 | 21,166 | |||||||||||
TOTAL REVENUES | 180,500 | 154,321 | 348,785 | 307,858 | |||||||||||
OPERATING EXPENSES | |||||||||||||||
Office operating expenses | 55,468 | 49,091 | 103,422 | 96,794 | |||||||||||
Media & Entertainment operating expenses | 7,003 | 6,295 | 14,254 | 12,247 | |||||||||||
General and administrative | 14,506 | 13,016 | 28,316 | 25,519 | |||||||||||
Depreciation and amortization | 75,415 | 66,108 | 146,182 | 134,476 | |||||||||||
TOTAL OPERATING EXPENSES | 152,392 | 134,510 | 292,174 | 269,036 | |||||||||||
INCOME FROM OPERATIONS | 28,108 | 19,811 | 56,611 | 38,822 | |||||||||||
OTHER EXPENSE (INCOME) | |||||||||||||||
Interest expense | 21,695 | 17,614 | 43,625 | 34,865 | |||||||||||
Interest income | (16 | ) | (73 | ) | (46 | ) | (86 | ) | |||||||
Unrealized loss on ineffective portion of derivative instruments | 51 | 384 | 45 | 2,509 | |||||||||||
Acquisition-related expenses | — | 61 | — | 61 | |||||||||||
Other income | (576 | ) | (47 | ) | (1,254 | ) | (23 | ) | |||||||
TOTAL OTHER EXPENSES | 21,154 | 17,939 | 42,370 | 37,326 | |||||||||||
INCOME BEFORE GAINS ON SALE OF REAL ESTATE | 6,954 | 1,872 | 14,241 | 1,496 | |||||||||||
Gains on sale of real estate | — | 2,163 | 16,866 | 8,515 | |||||||||||
NET INCOME | 6,954 | 4,035 | 31,107 | 10,011 | |||||||||||
Net income attributable to non-controlling interest in consolidated entities | (2,974 | ) | (2,396 | ) | (6,011 | ) | (4,341 | ) | |||||||
Net income attributable to Hudson Pacific Properties, L.P. | 3,980 | 1,639 | 25,096 | 5,670 | |||||||||||
Net income attributable to preferred units | (159 | ) | (159 | ) | (318 | ) | (318 | ) | |||||||
Net income attributable to participating securities | (255 | ) | (196 | ) | (495 | ) | (393 | ) | |||||||
Net income available to Hudson Pacific Properties, L.P. common unitholders | $ | 3,566 | $ | 1,284 | $ | 24,283 | $ | 4,959 | |||||||
Basic and diluted per unit amounts: | |||||||||||||||
Net income attributable to common unitholders—basic | $ | 0.02 | $ | 0.01 | $ | 0.16 | $ | 0.03 | |||||||
Net income attributable to common unitholders—diluted | $ | 0.02 | $ | 0.01 | $ | 0.16 | $ | 0.03 | |||||||
Weighted average shares of common units outstanding—basic | 155,859,604 | 145,549,363 | 152,647,055 | 145,518,523 | |||||||||||
Weighted average shares of common units outstanding—diluted | 156,664,648 | 146,399,363 | 153,438,100 | 146,350,523 | |||||||||||
Dividends declared per unit | $ | 0.250 | $ | 0.200 | $ | 0.500 | $ | 0.400 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 6,954 | $ | 4,035 | $ | 31,107 | $ | 10,011 | |||||||
Other comprehensive (loss) income: change in fair value of derivative instruments | (2,760 | ) | (8,430 | ) | 104 | (23,905 | ) | ||||||||
Comprehensive income (loss) | 4,194 | (4,395 | ) | 31,211 | (13,894 | ) | |||||||||
Comprehensive income attributable to preferred units | (159 | ) | (159 | ) | (318 | ) | (318 | ) | |||||||
Comprehensive income attributable to participating securities | (255 | ) | (196 | ) | (495 | ) | (393 | ) | |||||||
Comprehensive income attributable to non-controlling interest in consolidated entities | (2,974 | ) | (2,396 | ) | (6,011 | ) | (4,341 | ) | |||||||
Comprehensive income (loss) attributable to Hudson Pacific Properties, L.P. partners’ capital | $ | 806 | $ | (7,146 | ) | $ | 24,387 | $ | (18,946 | ) |
Hudson Pacific Properties, L.P. Partners’ Capital | ||||||||||||||
Number of Common Units | Common Units | Accumulated Other Comprehensive (Loss) Income | Non-controlling Interest—Members in Consolidated Entities | Total Capital | ||||||||||
Balance at January 1, 2016 | 145,450,095 | $ | 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 costs | 47,010,695 | 1,449,581 | — | — | 1,449,581 | |||||||||
Issuance of unrestricted units | 590,520 | 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, 2016 | 145,942,855 | 3,392,264 | 5,878 | 304,608 | 3,702,750 | |||||||||
Contributions | — | — | — | 3,870 | 3,870 | |||||||||
Distributions | — | — | — | (14,591 | ) | (14,591 | ) | |||||||
Proceeds from sale of common units, net of underwriters’ discount and transaction costs | 18,656,575 | 647,509 | — | — | 647,509 | |||||||||
Issuance of unrestricted units | 273,301 | — | — | — | — | |||||||||
Units withheld to satisfy tax withholding | (120,261 | ) | (4,203 | ) | — | — | (4,203 | ) | ||||||
Declared distributions | — | (79,163 | ) | — | — | (79,163 | ) | |||||||
Amortization of unit-based compensation | — | 8,206 | — | — | 8,206 | |||||||||
Net income | — | 24,778 | — | 6,011 | 30,789 | |||||||||
Change in fair value of derivative instruments | — | — | 104 | — | 104 | |||||||||
Redemption of common units | (8,881,575 | ) | (310,855 | ) | — | — | (310,855 | ) | ||||||
Balance at June 30, 2017 | 155,870,895 | $ | 3,678,536 | $ | 5,982 | $ | 299,898 | $ | 3,984,416 |
Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
Net income | $ | 31,107 | $ | 10,011 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 146,182 | 134,476 | |||||
Amortization of deferred financing costs and loan premium, net | 2,373 | 2,134 | |||||
Amortization of unit-based compensation | 7,788 | 6,643 | |||||
Straight-line rents | (5,781 | ) | (11,281 | ) | |||
Straight-line rent expenses | 160 | 750 | |||||
Amortization of above- and below-market leases, net | (10,405 | ) | (9,302 | ) | |||
Amortization of above- and below-market ground lease, net | 1,470 | 1,070 | |||||
Amortization of lease incentive costs | 758 | 655 | |||||
Bad debt (recovery) expense | (75 | ) | 512 | ||||
Amortization of discount and net origination fees on purchased and originated loans | — | (208 | ) | ||||
Unrealized loss on ineffective portion of derivative instruments | 45 | 2,509 | |||||
Gains on sale of real estate | (16,866 | ) | (8,515 | ) | |||
Change in operating assets and liabilities: | |||||||
Accounts receivable | 3,177 | 10,001 | |||||
Deferred leasing costs and lease intangibles | (15,216 | ) | (25,725 | ) | |||
Prepaid expenses and other assets | (5,873 | ) | (5,882 | ) | |||
Accounts payable and accrued liabilities | 6,304 | 5,619 | |||||
Security deposits | 3,667 | 4,214 | |||||
Prepaid rent | (7,779 | ) | (8,814 | ) | |||
Net cash provided by operating activities | 141,036 | 108,867 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
Additions to investment property | (147,476 | ) | (104,112 | ) | |||
Property acquisitions | (257,734 | ) | — | ||||
Proceeds from sales of real estate | 81,707 | 283,855 | |||||
Contributions to unconsolidated entities | (1,071 | ) | (28,393 | ) | |||
Distributions from unconsolidated entities | 14,893 | — | |||||
Deposit for property acquisitions | — | (20,000 | ) | ||||
Proceed from repayment of notes receivable | — | 28,892 | |||||
Net cash (used in) provided by investing activities | (309,681 | ) | 160,242 | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Proceeds from notes payable | 230,000 | 677,000 | |||||
Payments of notes payable | (321,270 | ) | (597,416 | ) | |||
Proceeds from issuance of common units, net | 647,509 | 293,628 | |||||
Payment for redemption of common units | (310,855 | ) | (294,209 | ) | |||
Distributions paid to common unitholders | (79,163 | ) | (59,119 | ) | |||
Distributions paid to preferred unitholders | (318 | ) | (318 | ) | |||
Contributions from non-controlling member in consolidated entities | 3,870 | 103 | |||||
Distributions to non-controlling member in consolidated entities | (14,591 | ) | (663 | ) | |||
Payments to satisfy tax withholding | (4,203 | ) | (1,776 | ) | |||
Payments of loan costs | — | (1,334 | ) | ||||
Net cash provided by financing activities | 150,979 | 15,896 | |||||
Net (decrease) increase in cash and cash equivalents and restricted cash | (17,666 | ) | 285,005 | ||||
Cash and cash equivalents and restricted cash—beginning of period | 108,192 | 71,561 | |||||
Cash and cash equivalents and restricted cash—end of period | $ | 90,526 | $ | 356,566 | |||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||
Cash paid for interest including amounts capitalized | $ | 42,462 | $ | 38,714 | |||
NON-CASH INVESTING ACTIVITIES: | |||||||
Accounts payable and accrued liabilities for real estate investments | $ | (3,427 | ) | $ | (8,866 | ) | |
Reclassification of investment in unconsolidated entities for real estate investments | $ | 7,835 | $ | — |
Number of Properties | Square Feet (unaudited) | ||||
Office properties: | |||||
Northern California(1) | 29 | 9,595,286 | |||
Southern California(2) | 16 | 2,817,509 | |||
Pacific Northwest(3) | 7 | 1,490,613 | |||
Total Office properties | 52 | 13,903,408 | |||
Media & Entertainment properties: | |||||
Southern California(2) | 3 | 1,256,577 | |||
Total Media & Entertainment properties | 3 | 1,256,577 | |||
Total | 55 | 15,159,985 |
(1) | Includes the San Francisco, Redwood Shores, Palo Alto, Milpitas, North San Jose, San Mateo, Foster City and Santa Clara submarkets. |
(2) | Includes the Burbank, Hollywood, Torrance, West Los Angeles and Downtown Los Angeles submarkets. |
(3) | Includes the Lynnwood, South Lake Union and Pioneer Square submarkets. |
Standard | Description | Effect on the Financial Statements or Other Significant Matters | ||
ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment | This 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. |
Standard | Description | Effect on the Financial Statements or Other Significant Matters | ||
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, 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 Improvements | The 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. | ||
ASU 2016-17, Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control | This 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 Payments | This 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. |
Standard | Description | Effect on the Financial Statements or Other Significant Matters | ||
ASU 2016-07, Investments—Equity Method and Joint Ventures (Topic 323), Simplifying the Transition to the Equity Method of Accounting | The 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 Relationships | The 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. |
Standard | Description | Effective Date | Effect on the Financial Statements or Other Significant Matters | |||
ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting | The guidance clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. It is required to apply this guidance prospectively. | Effective for annual reporting periods (including interim periods) beginning after December 15, 2017 | The 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 Assets | The 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, 2017 | The 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. |
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 purchase 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 re-measured and allocated to land and building. |
(4) | This parcel is adjacent to the Sunset Las Palmas Studios property. |
Sunset Las Palmas Studios(1) | 11601 Wilshire land | 6666 Santa Monica | Total | ||||||||||||
Investment in real estate, net | $ | 202,723 | $ | 50,034 | $ | 3,091 | $ | 255,848 | |||||||
Deferred leasing costs and in-place lease intangibles(2) | 1,741 | — | 145 | 1,886 | |||||||||||
Total asset 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. |
Property | Date of Disposition | Square Feet (unaudited) | Sales Price(1) (in millions) | ||||||
222 Kearny Street | February 14, 2017 | 148,797 | $ | 51.8 | |||||
3402 Pico Boulevard | March 21, 2017 | 50,687 | 35.0 | ||||||
Total dispositions | 199,484 | $ | 86.8 |
(1) | Represents gross sales price before certain credits, prorations and closing costs. |
June 30, 2017 | December 31, 2016 | ||||||
Above-market leases | $ | 21,881 | $ | 23,430 | |||
Accumulated amortization | (14,706 | ) | (12,989 | ) | |||
Above-market leases, net | 7,175 | 10,441 | |||||
Deferred leasing costs and in-place lease intangibles | 371,813 | 378,540 | |||||
Accumulated amortization | (161,756 | ) | (145,551 | ) | |||
Deferred leasing costs and in-place lease intangibles, net | 210,057 | 232,989 | |||||
Below-market ground leases | 71,210 | 71,423 | |||||
Accumulated amortization | (6,170 | ) | (4,891 | ) | |||
Below-market ground leases, net | 65,040 | 66,532 | |||||
Deferred leasing costs and lease intangible assets, net | $ | 282,272 | $ | 309,962 | |||
Below-market leases | $ | 134,472 | $ | 141,676 | |||
Accumulated amortization | (69,018 | ) | (62,552 | ) | |||
Below-market leases, net | 65,454 | 79,124 | |||||
Above-market ground leases | 1,095 | 1,095 | |||||
Accumulated amortization | (111 | ) | (89 | ) | |||
Above-market ground leases, net | 984 | 1,006 | |||||
Lease intangible liabilities, net | $ | 66,438 | $ | 80,130 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Above-market leases(1) | $ | 1,911 | $ | 3,695 | $ | 3,267 | $ | 7,414 | |||||||
Below-market leases(1) | 6,584 | 8,146 | 13,672 | 16,716 | |||||||||||
Deferred leasing costs and in-place lease intangibles(2) | 20,644 | 22,098 | 40,437 | 44,666 | |||||||||||
Above-market ground leases(3) | 11 | 11 | 22 | 22 | |||||||||||
Below-market ground leases(3) | 844 | 546 | 1,492 | 1,092 |
(1) | Amortization is recorded in revenues in the Consolidated Statements of Operations. |
(2) | Amortization is recorded in depreciation and amortization expense and office rental revenues in the Consolidated Statements of Operations. |
(3) | Amortization is recorded in office operating expenses in the Consolidated Statements of Operations. |
June 30, 2017 | December 31, 2016 | ||||||
Accounts receivable | $ | 5,857 | $ | 8,697 | |||
Allowance for doubtful accounts | (1,769 | ) | (1,845 | ) | |||
Accounts receivable, net | $ | 4,088 | $ | 6,852 |
June 30, 2017 | December 31, 2016 | ||||||
Straight-line rent receivables | $ | 93,210 | $ | 87,417 | |||
Allowance for doubtful accounts | (117 | ) | (136 | ) | |||
Straight-line rent receivables, net | $ | 93,093 | $ | 87,281 |
June 30, 2017 | December 31, 2016 | ||||||
Notes payable | $ | 2,616,568 | $ | 2,707,839 | |||
Deferred financing costs, net(1) | (17,788 | ) | (19,829 | ) | |||
Notes payable, net | $ | 2,598,780 | $ | 2,688,010 |
(1) | Excludes deferred financing costs related to establishing the Company’s unsecured revolving credit facility of $1.2 million and $1.5 million as of June 30, 2017 and December 31, 2016, respectively, which are included in prepaid expenses and other assets, net in the Consolidated Balance Sheets. |
June 30, 2017 | December 31, 2016 | |||||||||||||||||||
Principal Amount | Deferred Financing Costs, net | Principal Amount | Deferred Financing Costs, net | Interest Rate(1) | Contractual Maturity Date | |||||||||||||||
UNSECURED LOANS | ||||||||||||||||||||
Unsecured Revolving Credit Facility(2) | $ | 210,000 | $ | — | $ | 300,000 | $ | — | LIBOR+ 1.15% to 1.85% | 4/1/2019 | (3) | |||||||||
5-Year Term Loan due April 2020(2)(4) | 450,000 | (2,972 | ) | 450,000 | (3,513 | ) | LIBOR+ 1.30% to 2.20% | 4/1/2020 | ||||||||||||
5-Year Term Loan due November 2020(2) | 175,000 | (650 | ) | 175,000 | (745 | ) | LIBOR +1.30% to 2.20% | 11/17/2020 | ||||||||||||
7-Year Term Loan due April 2022(2)(5) | 350,000 | (2,049 | ) | 350,000 | (2,265 | ) | LIBOR+ 1.60% to 2.55% | 4/1/2022 | ||||||||||||
7-Year Term Loan due November 2022(2)(6) | 125,000 | (852 | ) | 125,000 | (931 | ) | LIBOR +1.60% to 2.55% | 11/17/2022 | ||||||||||||
Series A Notes | 110,000 | (852 | ) | 110,000 | (930 | ) | 4.34% | 1/2/2023 | ||||||||||||
Series E Notes | 50,000 | (277 | ) | 50,000 | (300 | ) | 3.66% | 9/15/2023 | ||||||||||||
Series B Notes | 259,000 | (2,144 | ) | 259,000 | (2,271 | ) | 4.69% | 12/16/2025 | ||||||||||||
Series D Notes | 150,000 | (851 | ) | 150,000 | (898 | ) | 3.98% | 7/6/2026 | ||||||||||||
Series C Notes | 56,000 | (515 | ) | 56,000 | (539 | ) | 4.79% | 12/16/2027 | ||||||||||||
TOTAL UNSECURED LOANS | 1,935,000 | (11,162 | ) | 2,025,000 | (12,392 | ) | ||||||||||||||
MORTGAGE LOANS |