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 | Smaller reporting company o | |||||||
Emerging growth company o |
Large accelerated filer o | Accelerated filer o | |||||||
Non-accelerated filer x | 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 |
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 |
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. | ||||||||
March 31, 2019 (unaudited) | December 31, 2018 | ||||||||||
ASSETS | |||||||||||
Investment in real estate, at cost | $ | $ | |||||||||
Accumulated depreciation and amortization | ( | ( | |||||||||
Investment in real estate, net | |||||||||||
Cash and cash equivalents | |||||||||||
Restricted cash | |||||||||||
Accounts receivable, net | |||||||||||
Straight-line rent receivables, net | |||||||||||
Deferred leasing costs and lease intangible assets, net | |||||||||||
U.S. Government securities | |||||||||||
Operating lease right-of-use asset | |||||||||||
Prepaid expenses and other assets, net | |||||||||||
Assets associated with real estate held for sale | |||||||||||
TOTAL ASSETS | $ | $ | |||||||||
LIABILITIES AND EQUITY | |||||||||||
Liabilities | |||||||||||
Unsecured and secured debt, net | $ | $ | |||||||||
In-substance defeased debt | |||||||||||
Joint venture partner debt | |||||||||||
Accounts payable, accrued liabilities and other | |||||||||||
Operating lease liability | |||||||||||
Lease intangible liabilities, net | |||||||||||
Security deposits and prepaid rent | |||||||||||
Liabilities associated with real estate held for sale | |||||||||||
Total liabilities | |||||||||||
Redeemable preferred units of the operating partnership | |||||||||||
Redeemable non-controlling interest in consolidated real estate entities | |||||||||||
Equity | |||||||||||
Hudson 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, respectively | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated other comprehensive income | |||||||||||
Accumulated deficit | ( | ||||||||||
Total Hudson Pacific Properties, Inc. stockholders’ equity | |||||||||||
Non-controlling interest—members in consolidated entities | |||||||||||
Non-controlling interest—units in the operating partnership | |||||||||||
Total equity | |||||||||||
TOTAL LIABILITIES AND EQUITY | $ | $ | |||||||||
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
REVENUES | |||||||||||
Office | |||||||||||
Rental (Note 2) | $ | $ | |||||||||
Tenant recoveries (Note 2) | |||||||||||
Service revenues (Note 2) | |||||||||||
Total office revenues | |||||||||||
Studio | |||||||||||
Rental (Note 2) | |||||||||||
Tenant recoveries (Note 2) | |||||||||||
Service revenues and other (Note 2) | |||||||||||
Total studio revenues | |||||||||||
Total revenues | |||||||||||
OPERATING EXPENSES | |||||||||||
Office operating expenses | |||||||||||
Studio operating expenses | |||||||||||
General and administrative | |||||||||||
Depreciation and amortization | |||||||||||
Total operating expenses | |||||||||||
OTHER EXPENSE (INCOME) | |||||||||||
Interest expense | |||||||||||
Interest income | ( | ( | |||||||||
Transaction-related expenses | |||||||||||
Other expense (income) | ( | ||||||||||
Gains on sale of real estate | ( | ||||||||||
Impairment loss | |||||||||||
Total other expense (income) | ( | ||||||||||
Net (loss) income | ( | ||||||||||
Net income attributable to preferred units | ( | ( | |||||||||
Net income attributable to participating securities | ( | ( | |||||||||
Net income attributable to non-controlling interest in consolidated real estate entities | ( | ( | |||||||||
Net loss attributable to redeemable non-controlling interest in consolidated real estate entities | |||||||||||
Net loss (income) attributable to non-controlling interest in the operating partnership | ( | ||||||||||
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | ( | $ | ||||||||
BASIC AND DILUTED PER SHARE AMOUNTS | |||||||||||
Net (loss) income attributable to common stockholders—basic | $ | ( | $ | ||||||||
Net (loss) income attributable to common stockholders—diluted | $ | ( | $ | ||||||||
Weighted average shares of common stock outstanding—basic | |||||||||||
Weighted average shares of common stock outstanding—diluted |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Net (loss) income | $ | ( | $ | ||||||||
Other comprehensive (loss) income: change in fair value of derivatives | ( | ||||||||||
Comprehensive (loss) income | ( | ||||||||||
Comprehensive income attributable to preferred units | ( | ( | |||||||||
Comprehensive income attributable to participating securities | ( | ( | |||||||||
Comprehensive income attributable to non-controlling interest in consolidated entities | ( | ( | |||||||||
Comprehensive loss attributable to redeemable non-controlling interest in consolidated real estate entities | |||||||||||
Comprehensive loss (income) attributable to non-controlling interest in the operating partnership | ( | ||||||||||
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | ( | $ | ||||||||
Hudson Pacific Properties, Inc. Stockholders’ Equity | Non-controlling interest | ||||||||||||||||||||||||||||
Shares of Common Stock | Stock Amount | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income | Units in the operating partnership | Members in Consolidated Entities | Total Equity | ||||||||||||||||||||||
Balance, December 31, 2017 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Cumulative adjustment related to adoption of ASU 2017-12 | — | — | — | ( | — | ||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | |||||||||||||||||||||||
Distributions | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||
Proceeds from sale of common stock, net of underwriters discount and transaction costs | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||
Issuance of unrestricted stock | — | — | — | — | — | — | |||||||||||||||||||||||
Shares withheld to satisfy tax withholding | ( | — | ( | — | — | — | — | ( | |||||||||||||||||||||
Declared dividend | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||
Amortization of stock-based compensation | — | — | — | — | |||||||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||||
Change in fair value of derivatives | — | — | — | — | — | ||||||||||||||||||||||||
Balance, March 31, 2018 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Balance at December 31, 2018 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Cumulative adjustment related to adoption of ASC 842 | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||
Distributions | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||
Issuance of unrestricted stock | ( | — | — | — | — | ||||||||||||||||||||||||
Shares withheld to satisfy tax withholding | ( | ( | ( | — | — | — | — | ( | |||||||||||||||||||||
Declared dividend | — | — | ( | — | — | ( | — | ( | |||||||||||||||||||||
Amortization of stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||
Net (loss) income | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||
Change in fair value of derivatives | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||
Redemption of common units in the operating partnership | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||
Balance at March 31, 2019 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
Net (loss) income | $ | ( | $ | ||||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Non-cash portion of interest expense | |||||||||||
Amortization of stock-based compensation | |||||||||||
Straight-line rents | ( | ( | |||||||||
Straight-line rent expenses | |||||||||||
Amortization of above- and below-market leases, net | ( | ( | |||||||||
Amortization of above- and below-market ground lease, net | |||||||||||
Amortization of lease incentive costs | |||||||||||
Other non-cash adjustments | |||||||||||
Impairment loss | |||||||||||
Gains on sale of real estate | ( | ||||||||||
Change in operating assets and liabilities: | |||||||||||
Accounts receivable | ( | ( | |||||||||
Deferred leasing costs and lease intangibles | ( | ( | |||||||||
Prepaid expenses and other assets | |||||||||||
Accounts payable, accrued liabilities and other | ( | ||||||||||
Security deposits and prepaid rent | |||||||||||
Net cash provided by operating activities | |||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
Additions to investment in real estate | ( | ( | |||||||||
Maturities of U.S. Government securities | |||||||||||
Proceeds from sale of real estate | |||||||||||
Deposits for property acquisitions | ( | ||||||||||
Net cash (used in) provided by investing activities | ( | ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
Proceeds from unsecured and secured debt | |||||||||||
Payments of unsecured and secured debt | ( | ( | |||||||||
Payments of in-substance defeased debt | ( | ||||||||||
Proceeds from issuance of common stock, net | ( | ||||||||||
Repurchase of common units in the operating partnership | ( | ||||||||||
Dividends paid to common stock and unit-holders | ( | ( | |||||||||
Dividends paid to preferred unit-holders | ( | ( | |||||||||
Contribution of redeemable non-controlling member in consolidated real estate entities | |||||||||||
Contribution of non-controlling member in consolidated real estate entities | |||||||||||
Distribution to non-controlling member in consolidated real estate entities | ( | ( | |||||||||
Payments to satisfy tax withholding | ( | ( | |||||||||
Payment of loan costs | ( | ( | |||||||||
Net cash provided by (used in) financing activities | ( | ||||||||||
Net decrease in cash and cash equivalents and restricted cash | ( | ( | |||||||||
Cash and cash equivalents and restricted cash—beginning of period | |||||||||||
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH—END OF PERIOD | $ | $ | |||||||||
March 31, 2019 (unaudited) | December 31, 2018 | ||||||||||
ASSETS | |||||||||||
Investment in real estate, at cost | $ | $ | |||||||||
Accumulated depreciation and amortization | ( | ( | |||||||||
Investment in real estate, net | |||||||||||
Cash and cash equivalents | |||||||||||
Restricted cash | |||||||||||
Accounts receivable, net | |||||||||||
Straight-line rent receivables, net | |||||||||||
Deferred leasing costs and lease intangible assets, net | |||||||||||
U.S. Government securities | |||||||||||
Operating lease right-of-use asset | — | ||||||||||
Prepaid expenses and other assets, net | |||||||||||
Assets associated with real estate held for sale | |||||||||||
TOTAL ASSETS | $ | $ | |||||||||
LIABILITIES AND CAPITAL | |||||||||||
Liabilities | |||||||||||
Unsecured and secured debt, net | $ | $ | |||||||||
In-substance defeased debt | |||||||||||
Joint venture partner debt | |||||||||||
Accounts payable, accrued liabilities and other | |||||||||||
Operating lease liability | — | ||||||||||
Lease intangible liabilities, net | |||||||||||
Security deposits and prepaid rent | |||||||||||
Liabilities associated with real estate held for sale | |||||||||||
Total liabilities | |||||||||||
Redeemable preferred units of the operating partnership | |||||||||||
Redeemable non-controlling interest in consolidated real estate entities | |||||||||||
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. | |||||||||||
Accumulated other comprehensive income | |||||||||||
Total Hudson Pacific Properties, L.P. partners’ capital | |||||||||||
Non-controlling interest—members in consolidated entities | |||||||||||
Total capital | |||||||||||
TOTAL LIABILITIES AND CAPITAL | $ | $ | |||||||||
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
REVENUES | |||||||||||
Office | |||||||||||
Rental (Note 2) | $ | $ | |||||||||
Tenant recoveries (Note 2) | |||||||||||
Service revenues (Note 2) | |||||||||||
Total office revenues | |||||||||||
Studio | |||||||||||
Rental (Note 2) | |||||||||||
Tenant recoveries (Note 2) | |||||||||||
Service revenues and other (Note 2) | |||||||||||
Total studio revenues | |||||||||||
Total revenues | |||||||||||
OPERATING EXPENSES | |||||||||||
Office operating expenses | |||||||||||
Studio operating expenses | |||||||||||
General and administrative | |||||||||||
Depreciation and amortization | |||||||||||
Total operating expenses | |||||||||||
OTHER EXPENSE (INCOME) | |||||||||||
Interest expense | |||||||||||
Interest income | ( | ( | |||||||||
Transaction-related expenses | |||||||||||
Other expense (income) | ( | ||||||||||
Gains on sale of real estate | ( | ||||||||||
Impairment loss | |||||||||||
Total other expense (income) | ( | ||||||||||
Net (loss) income | ( | ||||||||||
Net income attributable to non-controlling interest in consolidated real estate entities | ( | ( | |||||||||
Net loss attributable to redeemable non-controlling interest in consolidated real estate entities | |||||||||||
Net (loss) income attributable to Hudson Pacific Properties, L.P. | ( | ||||||||||
Net income attributable to preferred units | ( | ( | |||||||||
Net income attributable to participating securities | ( | ( | |||||||||
NET (LOSS) INCOME AVAILABLE TO COMMON UNITHOLDERS | $ | ( | $ | ||||||||
BASIC AND DILUTED PER UNIT AMOUNTS | |||||||||||
Net (loss) income attributable to common unitholders—basic | $ | ( | $ | ||||||||
Net (loss) income attributable to common unitholders—diluted | $ | ( | $ | ||||||||
Weighted average shares of common units outstanding—basic | |||||||||||
Weighted average shares of common units outstanding—diluted |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Net (loss) income | $ | ( | $ | ||||||||
Other comprehensive (loss) income: change in fair value of derivatives | ( | ||||||||||
Comprehensive (loss) income | ( | ||||||||||
Comprehensive income attributable to preferred units | ( | ( | |||||||||
Comprehensive income attributable to participating securities | ( | ( | |||||||||
Comprehensive income attributable to non-controlling interest in consolidated entities | ( | ( | |||||||||
Comprehensive loss attributable to redeemable non-controlling interest in consolidated real estate entities | |||||||||||
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO PARTNERS’ CAPITAL | $ | ( | $ |
Hudson Pacific Properties, L.P. Partners’ Capital | ||||||||||||||||||||
Number of Common Units | Common Units | Accumulated Other Comprehensive Income | Total Partners’ Capital | Non-controlling Interest—Members in Consolidated Entities | Total Capital | |||||||||||||||
Balance at December 31, 2017 | $ | $ | $ | $ | $ | |||||||||||||||
Cumulative adjustment related to adoption of ASU 2017-12 | — | ( | — | — | ||||||||||||||||
Contributions | — | — | — | — | ||||||||||||||||
Distributions | — | — | — | — | ( | ( | ||||||||||||||
Proceeds from sale of common units, net of underwriters’ discount and transaction costs | ( | — | ( | — | ( | |||||||||||||||
Issuance of unrestricted units | — | — | — | — | ||||||||||||||||
Units withheld to satisfy tax withholding | ( | ( | — | ( | — | ( | ||||||||||||||
Declared distributions | — | ( | — | ( | — | ( | ||||||||||||||
Amortization of unit-based compensation | — | — | — | |||||||||||||||||
Net income | — | — | ||||||||||||||||||
Change in fair value of derivatives | — | — | — | |||||||||||||||||
Balance at March 31, 2018 | $ | $ | $ | $ | $ | |||||||||||||||
Balance at December 31, 2018 | ||||||||||||||||||||
Cumulative adjustment related to adoption of ASC 842 | — | ( | — | ( | — | ( | ||||||||||||||
Distributions | — | — | — | — | ( | ( | ||||||||||||||
Issuance of unrestricted units | — | — | — | |||||||||||||||||
Units withheld to satisfy tax withholding | ( | ( | — | ( | — | ( | ||||||||||||||
Declared distributions | — | ( | — | ( | — | ( | ||||||||||||||
Amortization of unit-based compensation | — | — | — | |||||||||||||||||
Net (loss) income | — | ( | — | ( | ( | |||||||||||||||
Change in fair value of derivatives | — | — | ( | ( | — | ( | ||||||||||||||
Redemption of common units | ( | ( | — | ( | — | ( | ||||||||||||||
Balance at March 31, 2019 | $ | $ | $ | $ | $ |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
Net (loss) income | $ | ( | $ | ||||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Non-cash portion of interest expense | |||||||||||
Amortization of unit-based compensation | |||||||||||
Straight-line rents | ( | ( | |||||||||
Straight-line rent expenses | |||||||||||
Amortization of above- and below-market leases, net | ( | ( | |||||||||
Amortization of above- and below-market ground lease, net | |||||||||||
Amortization of lease incentive costs | |||||||||||
Other non-cash adjustments | |||||||||||
Impairment loss | |||||||||||
Gains on sale of real estate | ( | ||||||||||
Change in operating assets and liabilities: | |||||||||||
Accounts receivable | ( | ( | |||||||||
Deferred leasing costs and lease intangibles | ( | ( | |||||||||
Prepaid expenses and other assets | |||||||||||
Accounts payable and accrued liabilities and other | ( | ||||||||||
Security deposits and prepaid rent | |||||||||||
Net cash provided by operating activities | |||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
Additions to investment in real estate | ( | ( | |||||||||
Maturities of U.S. Government securities | |||||||||||
Proceeds from sale of real estate | |||||||||||
Deposits for property acquisitions | ( | ||||||||||
Net cash (used in) provided by investing activities | ( | ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
Proceeds from unsecured and secured debt | |||||||||||
Payments of unsecured and secured debt | ( | ( | |||||||||
Payments of in-substance defeased debt | ( | ||||||||||
Proceeds from issuance of common units, net | ( | ||||||||||
Repurchase of common units in the operating partnership | ( | ||||||||||
Dividends paid to common stock and unit-holders | ( | ( | |||||||||
Dividends paid to preferred unit-holders | ( | ( | |||||||||
Contribution of redeemable non-controlling member in consolidated real estate entities | |||||||||||
Contribution of non-controlling member in consolidated real estate entities | |||||||||||
Distribution to non-controlling member in consolidated real estate entities | ( | ( | |||||||||
Payments to satisfy tax withholding | ( | ( | |||||||||
Payment of loan costs | ( | ( | |||||||||
Net cash provided by (used in) financing activities | ( | ||||||||||
Net decrease in cash and cash equivalents and restricted cash | ( | ( | |||||||||
Cash and cash equivalents and restricted cash—beginning of period | |||||||||||
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH—END OF PERIOD | $ | $ | |||||||||
Segments | Number of Properties | Square Feet (unaudited) | ||||||||||||
Office | ||||||||||||||
Studio | ||||||||||||||
TOTAL(1) |
Entity | Property | Ownership Interest | ||||||||||||
Hudson 1455 Market, L.P. | 1455 Market | % | ||||||||||||
Hudson 1099 Stewart, L.P. | Hill7 | % | ||||||||||||
HPP-MAC WSP, LLC | One Westside and 10850 Pico | % | ||||||||||||
Hudson One Ferry REIT, L.P. | Ferry Building | % |
Revenue Stream | Components | Financial Statement Location(1) | ||||||||||||
Rental revenues | Office rentals, stage rentals and storage rentals | Office and studio segments: rental | ||||||||||||
Tenant recoveries and other tenant-related revenues | Reimbursement of real estate taxes, insurance, repairs and maintenance, other operating expenses and must take parking revenues | Office segment: rental Studio segment: rental and service revenue and other | ||||||||||||
Ancillary revenues | Revenues 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 revenues | Parking revenue that is not associated with lease agreements | Office segment: service revenue Studio segment: service revenue and other | ||||||||||||
Sale of real estate | Gains on sales derived from cash consideration less cost basis | Gains on sale of real estate |
March 31, 2019 | March 31, 2018 | |||||||||||||
Ancillary revenues | $ | $ | ||||||||||||
Guest parking revenues | $ | $ | ||||||||||||
Studio related tenant recoveries(1) | $ | N/A |
March 31, 2019 | December 31, 2018 | |||||||||||||
Ancillary revenues | $ | $ | ||||||||||||
Guest parking revenues | $ | $ | ||||||||||||
Studio related tenant recoveries | $ | N/A |
Standard | Description | Effect 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 Purposes | The 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 Income | The 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. |
Standard | Description | Effective Date | Effect on the Financial Statements or Other Significant Matters | |||||||||||||||||
ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments | The FASB amended its standards on credit losses, hedging, and recognizing and measuring financial instruments to clarify them and address implementation issues. | Effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. | The Company is currently evaluating the impact of this update. |
March 31, 2019 | December 31, 2018 | ||||||||||
Land | $ | $ | |||||||||
Building and improvements | |||||||||||
Tenant improvements | |||||||||||
Furniture and fixtures | |||||||||||
Property under development | |||||||||||
INVESTMENT IN REAL ESTATE, AT COST(1) | $ | $ |
March 31, 2019 | |||||
ASSETS | |||||
Investment in real estate, net | $ | ||||
Deferred leasing costs and lease intangible assets, net | |||||
Prepaid expenses and other assets, net | |||||
ASSETS ASSOCIATED WITH REAL ESTATE HELD FOR SALE | $ | ||||
LIABILITIES | |||||
Accounts payable, accrued liabilities and other | $ | ||||
LIABILITIES ASSOCIATED WITH REAL ESTATE HELD FOR SALE | $ |
March 31, 2019 | December 31, 2018 | ||||||||||
Deferred leasing costs and in-place lease intangibles | $ | $ | |||||||||
Accumulated amortization | ( | ( | |||||||||
Deferred leasing costs and in-place lease intangibles, net | |||||||||||
Below-market ground leases | |||||||||||
Accumulated amortization | ( | ( | |||||||||
Below-market ground leases, net | |||||||||||
Above-market leases | |||||||||||
Accumulated amortization | ( | ( | |||||||||
Above-market leases, net | |||||||||||
DEFERRED LEASING COSTS AND LEASE INTANGIBLE ASSETS, NET(1) | $ | $ | |||||||||
Below-market leases | $ | $ | |||||||||
Accumulated amortization | ( | ( | |||||||||
Below-market leases, net | |||||||||||
Above-market ground leases | |||||||||||
Accumulated amortization | ( | ( | |||||||||
Above-market ground leases, net | |||||||||||
LEASE INTANGIBLE LIABILITIES, NET(1) | $ | $ |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Deferred leasing costs and in-place lease intangibles(1) | $ | ( | $ | ( | |||||||
Below-market ground leases(2) | $ | ( | $ | ( | |||||||
Above-market leases(3) | $ | ( | $ | ( | |||||||
Below-market leases(3) | $ | $ | |||||||||
Above-market ground leases(2) | $ | $ |
March 31, 2019 | December 31, 2018 | ||||||||||
Derivative assets | $ | $ | |||||||||
Goodwill | |||||||||||
Non-real estate investments | |||||||||||
Investment in unconsolidated joint venture | |||||||||||
Other(1) | |||||||||||
PREPAID EXPENSES AND OTHER ASSETS, NET(2) | $ | $ |
March 31, 2019 | December 31, 2018 | Interest Rate(1) | Contractual Maturity Date | |||||||||||||||||||||||
UNSECURED AND SECURED DEBT | ||||||||||||||||||||||||||
Unsecured debt | ||||||||||||||||||||||||||
Unsecured revolving credit facility(2)(3) | $ | $ | LIBOR + 1.05% to 1.50% | 3/13/2022 | (4) | |||||||||||||||||||||
Term loan A(2)(5) | LIBOR + 1.20% to 1.70% | 4/1/2020 | (6) | |||||||||||||||||||||||
Term loan B(2)(7) | LIBOR + 1.20% to 1.70% | 4/1/2022 | ||||||||||||||||||||||||
Term loan D(2)(8) | LIBOR + 1.20% to 1.70% | 11/17/2022 | ||||||||||||||||||||||||
Series A notes | 1/2/2023 | |||||||||||||||||||||||||
Series E notes | 9/15/2023 | |||||||||||||||||||||||||
Series B notes | 12/16/2025 | |||||||||||||||||||||||||
Series D notes | 7/6/2026 | |||||||||||||||||||||||||
3.95% Registered senior notes | 11/1/2027 | |||||||||||||||||||||||||
Series C notes | 12/16/2027 | |||||||||||||||||||||||||
4.65% Registered senior notes(9) | 4/1/2029 | |||||||||||||||||||||||||
Term loan C | LIBOR + 1.30% to 2.20% | N/A | ||||||||||||||||||||||||
Total unsecured debt | ||||||||||||||||||||||||||
Secured debt | ||||||||||||||||||||||||||
Met Park North(10) | LIBOR + 1.55% | 8/1/2020 | ||||||||||||||||||||||||
10950 Washington(11) | 3/11/2022 | |||||||||||||||||||||||||
Sunset Bronson Studios/ICON/CUE(12) | LIBOR + 1.35% | 3/1/2024 | ||||||||||||||||||||||||
Element LA | 11/6/2025 | |||||||||||||||||||||||||
Hill7(13) | 11/6/2028 | |||||||||||||||||||||||||
Sunset Gower Studios/Sunset Bronson Studios | LIBOR + 2.25% | N/A | ||||||||||||||||||||||||
Total secured debt | ||||||||||||||||||||||||||
Total unsecured and secured debt | ||||||||||||||||||||||||||
Unamortized deferred financing costs and loan discounts(14) | ( | ( | ||||||||||||||||||||||||
TOTAL UNSECURED AND SECURED DEBT, NET | $ | $ | ||||||||||||||||||||||||
IN-SUBSTANCE DEFEASED DEBT(15) | $ | $ | 10/1/2022 | |||||||||||||||||||||||
JOINT VENTURE PARTNER DEBT(16) | $ | $ | 10/9/2028 | |||||||||||||||||||||||
Year | Unsecured and Secured Debt | In-substance Defeased Debt | Joint Venture Partner Debt | |||||||||||||||||
Remaining 2019 | $ | $ | $ | |||||||||||||||||
2020 | ||||||||||||||||||||
2021 | ||||||||||||||||||||
2022 | ||||||||||||||||||||
2023 | ||||||||||||||||||||
Thereafter | ||||||||||||||||||||
TOTAL | $ | $ | $ |
March 31, 2019 | December 31, 2018 | ||||||||||
Outstanding borrowings | $ | $ | |||||||||
Remaining borrowing capacity | |||||||||||
TOTAL BORROWING CAPACITY | $ | $ | |||||||||
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 |
Covenant Ratio | Covenant 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 |
Covenant Ratio | Covenant 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% |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Gross interest expense(1) | $ | $ | |||||||||
Capitalized interest | ( | ( | |||||||||
Amortization of deferred financing costs and loan discounts | |||||||||||
INTEREST EXPENSE | $ | $ |
Interest Rate Range(1) | Fair Value Asset | |||||||||||||||||||||||||||||||||||||||||||||||||
Underlying Debt Instrument | Number of Hedges | Notional Amount | Effective Date | Maturity Date | Low | High | March 31, 2019 | December 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||
Met Park North | $ | August 2013 | August 2020 | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
Term loan A(2) | July 2016 | April 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||
Term loan B(2) | April 2015 | April 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||
Term loan D(2) | June 2016 | November 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||
TOTAL | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Carrying Value | Fair Value | ||||||||||
Due in 1 year | $ | $ | |||||||||
Due in 1 year through 5 years | |||||||||||
TOTAL | $ | $ |
Year Ended | Non-Cancellable | Subject to Early Termination Options | Total (1) | ||||||||||||||
Remaining 2019 | $ | $ | $ | ||||||||||||||
2020 | |||||||||||||||||
2021 | |||||||||||||||||
2022 | |||||||||||||||||
2023 | |||||||||||||||||
Thereafter | |||||||||||||||||
TOTAL | $ | $ | $ |
Property | Expiration Date | Notes | ||||||||||||
3400 Hillview | 10/31/2040 | The 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 Square | 9/26/2056 | The 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 Amo | 6/30/2049 | Rent 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 Building | Various | The 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 Center | 6/30/2039 | The 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 Porter | 7/31/2040 | The 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 Center | 4/29/2054 | Every 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 Center | 11/30/2041 | The 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 Hill | 11/17/2049 | The 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 Square | 11/30/2045 | The 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 Studios | 3/31/2060 | Every 7 years rent adjusts to 7.5% of FMV of the land. | ||||||||||||
Techmart | 5/31/2053 | Rent 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. |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Contingent rental expense | $ | $ | |||||||||
Minimum rental expense | $ | $ |
Year | Lease Payments(1) | |||||||
Remaining 2019 | $ | |||||||
2020 | ||||||||
2021 | ||||||||
2022 | ||||||||
2023 | ||||||||
Thereafter | ||||||||
TOTAL | $ |
March 31, 2019 | December 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||||||||||||||
Derivative assets(1) | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
Non-real estate investments(1) | $ | $ | $ | $ | $ | $ | $ | $ |
March 31, 2019 | December 31, 2018 | ||||||||||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||
Assets | |||||||||||||||||||||||
U.S. Government securities | $ | $ | $ | $ | |||||||||||||||||||
Liabilities | |||||||||||||||||||||||
Unsecured debt(1)(2) | $ | $ | $ | $ | |||||||||||||||||||
Secured debt(1) | $ | $ | $ | $ | |||||||||||||||||||
In-substance defeased debt | $ | $ | $ | $ | |||||||||||||||||||
Joint venture partner debt | $ | $ | $ | $ |
Assumption | |||||
Expected price volatility for the Company | |||||
Expected price volatility for the particular REIT index | |||||
Risk-free rate | |||||
Dividend yield |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Expensed stock compensation(1) | $ | $ | |||||||||
Capitalized stock compensation(2) | |||||||||||
TOTAL STOCK COMPENSATION(3) | $ | $ |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Numerator: | |||||||||||
Basic and diluted net (loss) income available to common stockholders | $ | ( | $ | ||||||||
Denominator: | |||||||||||
Basic weighted average common shares outstanding | |||||||||||
Effect of dilutive instruments(1) | |||||||||||
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | |||||||||||
Basic (loss) earnings per common share | $ | ( | $ | ||||||||
Diluted (loss) earnings per common share | $ | ( | $ |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Numerator: | |||||||||||
Basic and diluted net (loss) income available to common unitholders | $ | ( | $ | ||||||||
Denominator: | |||||||||||
Basic weighted average common units outstanding | |||||||||||
Effect of dilutive instruments(1) | |||||||||||
DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING | |||||||||||
Basic (loss) earnings per common unit | $ | ( | $ | ||||||||
Diluted (loss) earnings per common unit | $ | ( | $ |
Series A Redeemable Preferred Units | Consolidated Entities | |||||||||||||
Balance at December 31, 2018 | $ | $ | ||||||||||||
Contributions | ||||||||||||||
Declared dividend | ( | |||||||||||||
Net income (loss) | ( | |||||||||||||
BALANCE AT MARCH 31, 2019 | $ | $ |
Hudson Pacific Properties, Inc. Stockholders’ Equity | Non-controlling interests | Total Equity | ||||||||||||||||||
Balance at December 31, 2018 | $ | $ | $ | |||||||||||||||||
Unrealized loss recognized in OCI due to change in fair value | ( | ( | ( | |||||||||||||||||
Gain reclassified from OCI into income (as interest expense)(1) | ( | ( | ( | |||||||||||||||||
Net change in OCI | ( | ( | ( | |||||||||||||||||
BALANCE AT MARCH 31, 2019 | $ | $ | $ |
March 31, 2019 | December 31, 2018 | ||||||||||
Company-owned common units in the operating partnership | |||||||||||
Company’s ownership interest percentage | % | % | |||||||||
Non-controlling units in the operating partnership(1) | |||||||||||
Non-controlling ownership interest percentage(1) | % | % |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Common stock(1) | $ | $ | |||||||||
Common units(1) | $ | $ | |||||||||
Series A preferred units(1) | $ | $ | |||||||||
Performance units | $ | $ |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Office segment | |||||||||||
Office revenues | $ | $ | |||||||||
Office expenses | ( | ( | |||||||||
Office segment profit | |||||||||||
Studio segment | |||||||||||
Studio revenues | |||||||||||
Studio expenses | ( | ( | |||||||||
Studio segment profit | |||||||||||
TOTAL SEGMENT PROFIT | $ | $ | |||||||||
Segment revenues | $ | $ | |||||||||
Segment expenses | ( | ( | |||||||||
TOTAL SEGMENT PROFIT | $ | $ |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Total profit from all segments | $ | $ | |||||||||
General and administrative | ( | ( | |||||||||
Depreciation and amortization | ( | ( | |||||||||
Interest expense | ( | ( | |||||||||
Interest income | |||||||||||
Transaction-related expenses | ( | ( | |||||||||
Other (loss) income | ( | ||||||||||
Gains on sale of real estate | |||||||||||
Impairment loss | ( | ||||||||||
NET (LOSS) INCOME | $ | ( | $ |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Cash paid for interest, net of capitalized interest | $ | $ | |||||||||
Non-cash investing and financing activities | |||||||||||
Accounts payable and accrued liabilities for real estate investments | ( |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Beginning of period: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
TOTAL | $ | $ | |||||||||
End of period: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
TOTAL | $ | $ |
In-Service Portfolio | Number 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 stabilized | 40 | 10,432,676 | 94.4 | % | 95.2 | % | $ | 49.45 | ||||||||||||||||||||||||
Lease-up(6)(7) | 7 | 1,871,220 | 69.9 | % | 80.4 | % | $ | 49.78 | ||||||||||||||||||||||||
Total in-service | 47 | 12,303,896 | 90.7 | % | 92.9 | % | $ | 49.49 | ||||||||||||||||||||||||
Redevelopment(6) | 2 | 683,090 | ||||||||||||||||||||||||||||||
Development(6) | 2 | 408,227 | ||||||||||||||||||||||||||||||
Held for sale(6) | 1 | 471,580 | ||||||||||||||||||||||||||||||
Total office | 52 | 13,866,793 | ||||||||||||||||||||||||||||||
Studio | ||||||||||||||||||||||||||||||||
Same-store(8) | 3 | 1,171,707 | 92.4 | % | $ | 38.89 | ||||||||||||||||||||||||||
Non-same-store(6) | — | 52,696 | (9) | 100.0 | % | $ | 40.70 | |||||||||||||||||||||||||
Total studio | 3 | 1,224,403 | ||||||||||||||||||||||||||||||
Land | — | 2,639,562 | (10) | |||||||||||||||||||||||||||||
TOTAL | 55 | 17,730,758 |
Location | Submarket | Estimated Square Feet(1) | Estimated Completion Date | Estimated Stabilization Date | ||||||||||||||||||||||
Redevelopment: | ||||||||||||||||||||||||||
Maxwell | Downtown Los Angeles | 99,090 | Q1-2019 | Q4-2019 | ||||||||||||||||||||||
One Westside | West Los Angeles | 584,000 | TBD | TBD | ||||||||||||||||||||||
Total redevelopment | 683,090 | |||||||||||||||||||||||||
Development: | ||||||||||||||||||||||||||
EPIC | Hollywood | 302,102 | Q4-2019 | Q3-2021 | ||||||||||||||||||||||
Harlow | Hollywood | 106,125 | Q1-2020 | Q3-2021 | ||||||||||||||||||||||
Total development | 408,227 | |||||||||||||||||||||||||
TOTAL REDEVELOPMENT AND DEVELOPMENT | 1,091,317 | |||||||||||||||||||||||||
Future Development: | ||||||||||||||||||||||||||
Element LA—Development | West Los Angeles | 500,000 | TBD | TBD | ||||||||||||||||||||||
Sunset Bronson Studios Lot D—Development | Hollywood | 19,816 | TBD | TBD | ||||||||||||||||||||||
Sunset Gower Studios—Development | Hollywood | 423,396 | TBD | TBD | ||||||||||||||||||||||
Sunset Las Palmas Studios—Development | Hollywood | 400,000 | TBD | TBD | ||||||||||||||||||||||
Cloud10 | North San Jose | 350,000 | TBD | TBD | ||||||||||||||||||||||
TOTAL FUTURE DEVELOPMENT | 1,693,212 |
Year of Lease Expiration | Expiring Leases | Square Footage of Expiring Leases | Percentage of Office Portfolio Square Feet | Annualized Base Rent(1) | Percentage of Office Portfolio Annualized Base Rent | Annualized Base Rent Per Leased Square Foot(2) | ||||||||||||||||||||||||||||||||
Vacant | N/A | 1,446,701 | 10.5 | % | N/A | N/A | N/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 use | 21 | 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 |
Three Months Ended March 31, | ||||||||||||||
2019 | 2018 | |||||||||||||
Renewals(1) | ||||||||||||||
Number of leases | 16 | 19 | ||||||||||||
Square feet | 97,123 | 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 leases | 29 | 36 | ||||||||||||
Square feet | 947,013 | 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 leases | 45 | 55 | ||||||||||||
Square feet | 1,044,136 | 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 |
Three Months Ended March 31, | Dollar Change | Percent Change | |||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||||
Net (loss) income | $ | (36,895) | $ | 52,563 | $ | (89,458) | (170.2) | % | |||||||||||||||
Adjustments: | |||||||||||||||||||||||
Interest expense | 24,350 | 20,503 | 3,847 | 18.8 | |||||||||||||||||||
Interest income | (1,024) | (9) | (1,015) | 11,277.8 | |||||||||||||||||||
Transaction-related expenses | 128 | 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 loss | 52,201 | — | 52,201 | 100.0 | |||||||||||||||||||
General and administrative | 18,094 | 15,564 | 2,530 | 16.3 | |||||||||||||||||||
Depreciation and amortization | 68,505 | 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 NOI | 36,404 | 29,507 | 6,897 | 23.4 | |||||||||||||||||||
NOI | $ | 125,465 | $ | 111,214 | $ | 14,251 | 12.8 | % |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Revenues | |||||||||||
Office | |||||||||||
Rental | $ | 170,197 | $ | 130,082 | |||||||
Tenant recoveries | — | 20,904 | |||||||||
Service revenues | 5,661 | 5,546 | |||||||||
Total office revenues | 175,858 | 156,532 | |||||||||
Studio | |||||||||||
Rental | 12,394 | 10,383 | |||||||||
Tenant recoveries | — | 354 | |||||||||
Service revenues and other | 9,137 | 6,849 | |||||||||
Total studio revenues | 21,531 | 17,586 | |||||||||
TOTAL REVENUES | $ | 197,389 | $ | 174,118 |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Revenues | |||||||||||
Office | |||||||||||
Rental | $ | 145,460 | $ | 130,082 | |||||||
Tenant recoveries | 24,737 | 20,904 | |||||||||
Service revenues | 5,661 | 5,546 | |||||||||
Total office revenues | 175,858 | 156,532 | |||||||||
Studio | |||||||||||
Rental | 11,930 | 10,383 | |||||||||
Tenant recoveries | 464 | 354 | |||||||||
Service revenues and other | 9,137 | 6,849 | |||||||||
Total studio revenues | 21,531 | 17,586 | |||||||||
TOTAL REVENUES | $ | 197,389 | $ | 174,118 |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Same-store office | |||||||||||
Number of properties | 31 | 31 | |||||||||
Rentable square feet | 7,842,466 | 7,842,466 | |||||||||
Ending % leased | 94.9 | % | 94.3 | % | |||||||
Ending % occupied | 94.1 | % | 93.2 | % | |||||||
Average % occupied for the period | 93.0 | % | 92.8 | % | |||||||
Average annual rental rate per square foot | $ | 48.61 | $ | 45.77 | |||||||
Same-store studio | |||||||||||
Number of properties | 3 | 3 | |||||||||
Rentable square feet | 1,171,707 | 1,171,707 | |||||||||
Average % occupied for the period(1) | 92.4 | % | N/A |
Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||||||||||||||||
Same-Store | Non-Same-Store | Total | Same-Store | Non-Same-Store | Total | ||||||||||||||||||||||||||||||
Revenues | |||||||||||||||||||||||||||||||||||
Office | |||||||||||||||||||||||||||||||||||
Rental | $ | 93,020 | $ | 52,440 | $ | 145,460 | $ | 86,675 | $ | 43,407 | $ | 130,082 | |||||||||||||||||||||||
Tenant recoveries | 17,344 | 7,393 | 24,737 | 16,445 | 4,459 | 20,904 | |||||||||||||||||||||||||||||
Service revenues | 4,166 | 1,495 | 5,661 | 4,104 | 1,442 | 5,546 | |||||||||||||||||||||||||||||
Total office revenues | 114,530 | 61,328 | 175,858 | 107,224 | 49,308 | 156,532 | |||||||||||||||||||||||||||||
Studio | |||||||||||||||||||||||||||||||||||
Rental | 11,417 | 513 | 11,930 | 10,383 | — | 10,383 | |||||||||||||||||||||||||||||
Tenant recoveries | 146 | 318 | 464 | 354 | — | 354 | |||||||||||||||||||||||||||||
Service revenues and other | 9,348 | (211) | 9,137 | 6,849 | — | 6,849 | |||||||||||||||||||||||||||||
Total studio revenues | 20,911 | 620 | 21,531 | 17,586 | — | 17,586 | |||||||||||||||||||||||||||||
Total revenues | 135,441 | 61,948 | 197,389 | 124,810 | 49,308 | 174,118 | |||||||||||||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||||||||||
Office operating expenses | 35,397 | 25,418 | 60,815 | 33,439 | 19,801 | 53,240 | |||||||||||||||||||||||||||||
Studio operating expenses | 10,983 | 126 | 11,109 | 9,664 | — | 9,664 | |||||||||||||||||||||||||||||
Total operating expenses | 46,380 | 25,544 | 71,924 | 43,103 | 19,801 | 62,904 | |||||||||||||||||||||||||||||
Office NOI | 79,133 | 35,910 | 115,043 | 73,785 | 29,507 | 103,292 | |||||||||||||||||||||||||||||
Studio NOI | 9,928 | 494 | 10,422 | 7,922 | — | 7,922 | |||||||||||||||||||||||||||||
NOI | $ | 89,061 | $ | 36,404 | $ | 125,465 | $ | 81,707 | $ | 29,507 | $ | 111,214 |
Three Months Ended March 31, 2019 as compared to Three Months Ended March 31, 2018 | |||||||||||||||||||||||||||||||||||
Same-Store | Non-Same-Store | Total | |||||||||||||||||||||||||||||||||
Dollar Change | Percent Change | Dollar Change | Percent Change | Dollar Change | Percent Change | ||||||||||||||||||||||||||||||
Revenues | |||||||||||||||||||||||||||||||||||
Office | |||||||||||||||||||||||||||||||||||
Rental | $ | 6,345 | 7.3 | % | $ | 9,033 | 20.8 | % | $ | 15,378 | 11.8 | % | |||||||||||||||||||||||
Tenant recoveries | 899 | 5.5 | 2,934 | 65.8 | 3,833 | 18.3 | |||||||||||||||||||||||||||||
Service revenues | 62 | 1.5 | 53 | 3.7 | 115 | 2.1 | |||||||||||||||||||||||||||||
Total office revenues | 7,306 | 6.8 | 12,020 | 24.4 | 19,326 | 12.3 | |||||||||||||||||||||||||||||
Studio | |||||||||||||||||||||||||||||||||||
Rental | 1,034 | 10.0 | 513 | 100.0 | 1,547 | 14.9 | |||||||||||||||||||||||||||||
Tenant recoveries | (208) | (58.8) | 318 | 100.0 | 110 | 31.1 | |||||||||||||||||||||||||||||
Service revenues and other | 2,499 | 36.5 | (211) | (100.0) | 2,288 | 33.4 | |||||||||||||||||||||||||||||
Total studio revenues | 3,325 | 18.9 | 620 | 100.0 | 3,945 | 22.4 | |||||||||||||||||||||||||||||
Total revenues | 10,631 | 8.5 | 12,640 | 25.6 | 23,271 | 13.4 | |||||||||||||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||||||||||
Office operating expenses | 1,958 | 5.9 | 5,617 | 28.4 | 7,575 | 14.2 | |||||||||||||||||||||||||||||
Studio operating expenses | 1,319 | 13.6 | 126 | 100.0 | 1,445 | 15.0 | |||||||||||||||||||||||||||||
Total operating expenses | 3,277 | 7.6 | 5,743 | 29.0 | 9,020 | 14.3 | |||||||||||||||||||||||||||||
Office NOI | 5,348 | 7.2 | 6,403 | 21.7 | 11,751 | 11.4 | |||||||||||||||||||||||||||||
Studio NOI | 2,006 | 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 March 31, | |||||||||||||||||||||||
2019 | 2018 | Dollar Change | Percent 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 discounts | 1,591 | 1,658 | (67) | (4.0) | |||||||||||||||||||
TOTAL | $ | 24,350 | $ | 20,503 | $ | 3,847 | 18.8 | % |
March 31, 2019 | ||||||||
Debt(1) | $ | 2,735,237 | ||||||
Series A preferred units | 9,815 | |||||||
Common equity capitalization(2) | 5,406,531 | |||||||
TOTAL MARKET CAPITALIZATION | 8,151,583 | |||||||
Series A preferred units & debt/total market capitalization | 33.7 | % |
March 31, 2019 | December 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 |
Three Months Ended March 31, | |||||||||||||||||||||||
2019 | 2018 | Dollar Change | Percent 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) | % |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | ||||||||||
Net (loss) income | $ | (36,895) | $ | 52,563 | |||||||
Adjustments: | |||||||||||
Depreciation and amortization | 68,505 | 60,553 | |||||||||
Corporate-related depreciation and amortization | (523) | (484) | |||||||||
Gains on sale of real estate | — | (37,674) | |||||||||
Impairment loss | 52,201 | — | |||||||||
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 |
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 | ||||||||||||||||||||||
TOTAL | 126,880 | $ | 28.04 | — | $ | 200,000,000 |
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 | ||||||||||||||||||||||
TOTAL | 126,880 | $ | 28.04 | — | $ | 200,000,000 |
Incorporated by Reference | ||||||||||||||||||||||||||||||||
Exhibit No. | Description | Form | File No. | Exhibit No. | Filing Date | |||||||||||||||||||||||||||
3.1 | S-11/A | 333-164916 | 3.1 | May 12, 2010 | ||||||||||||||||||||||||||||
3.2 | 8-K | 001-34789 | 3.1 | January 12, 2015 | ||||||||||||||||||||||||||||
3.3 | 10-K | 001-34789 | 10.1 | February 26, 2016 | ||||||||||||||||||||||||||||
3.4 | 10-Q | 001-34789 | 3.4 | November 4, 2016 | ||||||||||||||||||||||||||||
10.1 | 8-K | 001-34789 | 4 | 4.2 | February 27, 2019 | |||||||||||||||||||||||||||
10.2 | ||||||||||||||||||||||||||||||||
31.1 | ||||||||||||||||||||||||||||||||
31.2 | ||||||||||||||||||||||||||||||||
31.3 | ||||||||||||||||||||||||||||||||
31.4 | ||||||||||||||||||||||||||||||||
32.1 | ||||||||||||||||||||||||||||||||
32.2 | ||||||||||||||||||||||||||||||||
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 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** |
* | 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. |
HUDSON PACIFIC PROPERTIES, INC. | |||||||||||
Date: | May 6, 2019 | /S/ VICTOR J. COLEMAN | |||||||||
Victor J. Coleman Chief Executive Officer (Principal Executive Officer) |
HUDSON PACIFIC PROPERTIES, INC. | |||||||||||
Date: | May 6, 2019 | /S/ MARK T. LAMMAS | |||||||||
Mark T. Lammas Chief Operating Officer, Chief Financial Officer and Treasurer (Principal Financial Officer) |
HUDSON PACIFIC PROPERTIES, L.P. | |||||||||||
Date: | May 6, 2019 | /S/ VICTOR J. COLEMAN | |||||||||
Victor J. Coleman Chief Executive Officer (Principal Executive Officer) |
HUDSON PACIFIC PROPERTIES, L.P. | |||||||||||
Date: | May 6, 2019 | /S/ MARK T. LAMMAS | |||||||||
Mark T. Lammas Chief Operating Officer, Chief Financial Officer and Treasurer (Principal Financial Officer) |
Date: | May 6, 2019 | /s/ VICTOR J. COLEMAN | |||||||||
Victor J. Coleman Chief Executive Officer |
Date: | May 6, 2019 | /s/ MARK T. LAMMAS | |||||||||
Mark T. Lammas Chief Operating Officer, Chief Financial Officer and Treasurer |
Date: | May 6, 2019 | /s/ VICTOR J. COLEMAN | |||||||||
Victor J. Coleman Chief Executive Officer |
Date: | May 6, 2019 | /s/ MARK T. LAMMAS | |||||||||
Mark T. Lammas Chief Operating Officer, Chief Financial Officer and Treasurer |
Date: | May 6, 2019 | /s/ VICTOR J. COLEMAN | |||||||||
Victor J. Coleman Chief Executive Officer | |||||||||||
Date: | May 6, 2019 | /s/ MARK T. LAMMAS | |||||||||
Mark T. Lammas Chief Operating Officer, Chief Financial Officer and Treasurer |
Date: | May 6, 2019 | /s/ VICTOR J. COLEMAN | |||||||||
Victor J. Coleman Chief Executive Officer Hudson Pacific Properties, Inc., sole general partner of Hudson Pacific Properties, L.P. | |||||||||||
Date: | May 6, 2019 | /s/ MARK T. LAMMAS | |||||||||
Mark T. Lammas Chief Operating Officer, Chief Financial Officer and Treasurer Hudson Pacific Properties, Inc., sole general partner of Hudson Pacific Properties, L.P. |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
May 01, 2019 |
|
Entity Information [Line Items] | ||
Entity Registrant Name | Hudson Pacific Properties, Inc. | |
Entity Central Index Key | 0001482512 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Common Stock, Shares Outstanding | 154,375,000 | |
Hudson Pacific Partners L.P. | ||
Entity Information [Line Items] | ||
Entity Registrant Name | Hudson Pacific Properties, L.P. | |
Entity Central Index Key | 0001496264 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Emerging Growth Company | false | |
Entity Small Business | false |
CONSOLIDATED BALANCE SHEETS (Parentheticals) - $ / shares |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Common Stock: | ||
Common Stock, par value per share (in dollars per share) | $ 0.01 | $ 0.01 |
Common Stock, shares authorized (in shares) | 490,000,000 | 490,000,000 |
Common Units, shares outstanding (in shares) | 154,373,581 | 154,371,538 |
Common Units | Hudson Pacific Partners L.P. | ||
Common Stock: | ||
Common Units, shares outstanding (in shares) | 155,094,354 | 154,940,583 |
Common Units, shares issued (in shares) | 156,218,170 | 154,940,583 |
Organization |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization | 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 studio 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. 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 March 31, 2019:
_________________ 1.Includes redevelopment, development and held for sale properties.
|
Summary of Significant Accounting Policies |
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Summary of Significant Accounting Policies | 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, 2019. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements in the 2018 Annual Report on Form 10-K of Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P. and the notes thereto. 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 and controlled subsidiaries. The consolidated financial statements of the operating partnership include the accounts of the operating partnership and all wholly owned and 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 entities 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 do not have: •the characteristics of a controlling financial interest; •sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other 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 both the power to direct the activities that most significantly affect the VIE’s economic performance and 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 March 31, 2019, the Company has determined its operating partnership and five joint ventures met the definition of a VIE. Four of the joint ventures are consolidated entities and one joint venture is an unconsolidated entity. Consolidated Entities As of March 31, 2019, the operating partnership has determined that four of its joint ventures met the definition of a VIE and are consolidated:
As of March 31, 2019 and December 31, 2018, the Company has determined that its 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. Unconsolidated Entity 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. 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 share of net income or loss from the entity is included within other income on the Consolidated Statements of Operations. The Company’s net equity investment of the 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. Lease Accounting In February 2016, the FASB issued guidance codified in ASC 842, Leases (“ASC 842”), which amends the guidance in former ASC 840, Leases (“ASC 840”). The standard 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 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 on January 1, 2019 using the modified retrospective transition approach that must be applied for leases that exist or are entered into after January 1, 2019. ASC 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 whereas non-lease components relate to payments for goods or services that are transferred separately from the right to use the underlying asset. 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 is governed by ASC 842, while revenue related to non-lease components is be subject to ASC 606. 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 may 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 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.
_________________ 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 probable and the tenant has taken possession of or controls the physical use of the leased asset. 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 the Company is generally the primary obligor with respect to purchasing goods and services from third-party suppliers, has discretion in selecting the supplier and bears 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 following table summarizes the Company’s revenue streams that are accounted for under ASC 606:
_________________ 1.Studio related tenant recoveries are accounted for under ASC 606 effective January 1, 2019. The following table summarizes the Company’s receivables that are accounted for under ASC 606:
_________________ 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:
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 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.
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Investment in Real Estate |
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Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment in Real Estate | Investment in Real Estate The following table summarizes the Company’s investment in real estate, at cost as of:
_____________ 1.Excludes balances related to properties that have been classified as held for sale. Acquisitions The Company had no acquisitions during the three months ended March 31, 2019. On March 26, 2019, the Company entered 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 second quarter of 2019. Dispositions The Company had no dispositions during the three months ended March 31, 2019. Held for Sale The Company had one 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, 2018. The following table summarizes the components of assets and liabilities associated with real estate held for sale as of:
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.
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Deferred Leasing Costs and Lease Intangibles, net |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Leasing Costs and Lease Intangibles, net | Deferred Leasing Costs and Lease Intangibles, net The following summarizes the Company’s deferred leasing costs and lease intangibles as of:
_____________ 1.Excludes balances related to properties that have been classified as held for sale. The Company recognized the following amortization related to deferred leasing costs and lease intangibles:
__________________ 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. 3.Amortization is recorded in rental revenues in the Consolidated Statements of Operations.
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Receivables |
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Receivables [Abstract] | |
Receivables | Receivables The Company’s accounting policy and methodology used to estimate the allowance for doubtful accounts related to service revenues are discussed in the Company’s 2018 Annual Report on Form 10-K. The Company's accounting policy and methodology used to assess 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 of $362 thousand. As of December 31, 2018, accounts receivable was $16.5 million and there was an allowance for doubtful accounts 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.
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Prepaid Expenses and Other Assets, net |
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Prepaid Expenses and Other Assets, net | Prepaid Expenses and Other Assets, net The following table summarizes the Company’s prepaid expenses and other assets, net as of:
_____________ 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. 2.Excludes balances related to properties that have been classified as held for sale. Goodwill No goodwill impairment indicators have been identified during the three months ended March 31, 2019. Non-Real Estate Investments The Company 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 Company 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 receivable.
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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt The following table sets forth information with respect to the Company’s outstanding indebtedness:
_________________ 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 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 February 27, 2019, the Company completed an underwritten public offering of $350.0 million of senior notes, which were issued at 98.663% of 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 balloon payment at maturity. 12.The Company has a total capacity of $235.0 million under the Sunset Bronson Studios/ICON/CUE revolving credit facility. This loan is secured by the Company’s Sunset Bronson Studios, ICON and CUE properties. 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. 14.Excludes deferred financing costs related to establishing the Company’s unsecured revolving credit facility 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 Company owns 75% of the ownership 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 partner 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 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 -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:
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:
_________________ 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:
The following table summarizes existing covenants and their covenant levels related to the registered senior notes:
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 gross interest expense to the interest expense line item in the Consolidated Statements of Operations:
_________________ 1.Includes interest on the Company’s debt and hedging activities and extinguishment costs related to paydowns in the term loans.
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Derivatives |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives | DerivativesThe Company enters into derivatives in order to hedge interest rate risk. The Company had six interest rate swaps with aggregate notional amounts of $839.5 million as of March 31, 2019 and December 31, 2018. These derivatives were designated as effective cash flow hedges for accounting purposes. 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 accelerated by the lender due to the Company’s default on the indebtedness. The Company’s derivatives are classified as Level 2 and their fair values are derived from estimated values obtained from observable market data for similar instruments. The fair market value of derivatives is presented on a gross basis on the Consolidated Balance Sheets. The following table summarizes the Company’s derivative instruments as of March 31, 2019 and December 31, 2018:
_____________ 1.The rate is based on the fixed rate from the swap and the 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 March 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 will 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 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 March 31, 2019, the Company expects $6.5 million of unrealized gain included in accumulated other comprehensive income will be reclassified as a reduction to interest expense in the next 12 months.
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U.S. Government Securities |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Government Securities | 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:
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Income Taxes |
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Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 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”), 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, Hill7 and Ferry 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 March 31, 2019, the Company has not established a liability for uncertain tax positions. 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 2014. The Company has assessed its tax positions for all open years, which include 2014 to 2017, and concluded that there are no material uncertainties to be recognized.
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Future Minimum Rents and Lease Payments |
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Future Minimum Lease Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Future Minimum Lease Payments | 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:
_____________ 3.Excludes rents under leases at the Company’s studio properties with terms of one year or less. 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:
Contingent rental expense is recorded in the period in which the contingent event becomes probable. The following table summarizes rental expense for ground leases as follows:
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 March 31, 2019:
_________________ 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. 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.
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Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | 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. The Company’s financial assets and liabilities measured and reported at fair value on a recurring basis include the following as of:
___________ 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 debt are estimated 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 investment in securities and debt as of:
_________________ 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.
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Stock-Based Compensation |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation The Company has various stock compensation arrangements, which are more fully described in the 2018 Annual Report on Form 10-K. Under the 2010 Incentive Plan, as amended (the “2010 Plan”), the Company’s board of directors (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. These time-based awards are generally issued in the fourth quarter and vest in equal annual installments over the applicable service vesting period, which is generally three years. Additionally, certain awards are subject to a mandatory holding period upon vesting if the grantee is a named executive officer. In December 2015, the compensation 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. The Compensation Committee annually adopts a Hudson Pacific Properties, Inc. Outperformance Program (“OPP Plan”) under the 2010 Plan. With respect to OPP Plan awards granted 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 50% of the earned award will vest in equal annual installments over the two years thereafter, subject to the participant’s continued employment. OPP Plan awards are settled in common stock and, in the case of certain executives, in operating partnership performance units. Commencing with the 2017 OPP Plan, 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 grants from the 2019 OPP Plan was estimated on the date of grant using the following assumptions in the Monte Carlo valuation:
The following table presents the classification and amount recognized for stock-based compensation related to the Company’s awards:
_________________ 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.
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Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings Per Share 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. 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 restricted stock awards, unvested time-based performance unit awards and unvested restricted 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. The following table reconciles the numerator and denominator in computing the Company’s basic and diluted earnings per share for net (loss) income available to common stockholders:
________________ 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. 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. 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 restricted stock awards, unvested time-based performance unit awards and unvested RSUs 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 the Company’s basic and diluted earnings per unit for net (loss) income available to common unitholders:
________________ 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.
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Redeemable Non-Controlling Interest |
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Temporary Equity Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Redeemable Non-Controlling Interest | 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:
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Equity |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity | Equity The table below presents the effect of the Company’s derivatives on accumulated other comprehensive income (“OCI”):
_____________ 1.The gains and losses on the Company’s derivatives are reported in the interest 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. Performance Units in the Operating Partnership 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:
_________________ 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. Common Stock Activity The Company has not completed any common stock offerings in 2019. 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 three months ended March 31, 2019. A cumulative total of $20.1 million has been sold as of March 31, 2019. Share Repurchase Program There have been no repurchases in 2019. On March 8, 2018, the Board increased the amount authorized under its share repurchase program to a total of $250.0 million. A cumulative total of $50.0 million has been repurchased as of 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 The Board declared dividends on a quarterly basis and the Company paid the dividends during the quarters in which the dividends were declared. The following table summarizes dividends declared and paid for the periods presented:
_________________ 1.The first quarter of 2019 dividends were paid on March 28, 2019 to shareholders and unitholders of record on 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.
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Segment Reporting |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting | Segment ReportingThe 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. The table below presents the operating activity of the Company’s reportable segments:
The table below is a reconciliation of the total profit from all segments to net (loss) income:
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Related Party Transactions |
3 Months Ended |
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Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 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. Ferry Building Acquisition from an Affiliate of Blackstone On October 9, 2018, the Company entered into a joint venture with Allianz to purchase the Ferry Building from certain affiliates of Blackstone for $291.0 million before prorations, credits and closing costs. At the time of the transaction, Michael Nash, a senior managing director of an affiliate of Blackstone, was a director of the Board. Mr. Nash resigned from the Board on March 14, 2019.
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Commitments and Contingencies |
3 Months Ended |
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Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 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 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 March 31, 2019, the Company has outstanding letters of credit totaling approximately $2.6 million under the unsecured revolving credit facility. The letters of credit are primarily related to utility company security deposit requirements.
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Supplemental Cash Flow Information |
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Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information | Supplemental Cash Flow Information Supplemental cash flow information is included as follows:
Restricted cash primarily consists of amounts held by lenders to fund reserves such as capital improvements, taxes, insurance, debt service and operating expenditures. The following table provides a reconciliation of cash and cash equivalents and restricted cash at the beginning and end of the periods presented:
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Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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, 2019. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements in the 2018 Annual Report on Form 10-K of Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P. and the notes thereto. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 and controlled subsidiaries. The consolidated financial statements of the operating partnership include the accounts of the operating partnership and all wholly owned and 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 entities 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 do not have: •the characteristics of a controlling financial interest; •sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other 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 both the power to direct the activities that most significantly affect the VIE’s economic performance and 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 March 31, 2019, the Company has determined its operating partnership and five joint ventures met the definition of a VIE. Four of the joint ventures are consolidated entities and one joint venture is an unconsolidated entity.
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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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 is governed by ASC 842, while revenue related to non-lease components is be subject to ASC 606. 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 may 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 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.
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Revenue Recognition | 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 probable and the tenant has taken possession of or controls the physical use of the leased asset. 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 the Company is generally the primary obligor with respect to purchasing goods and services from third-party suppliers, has discretion in selecting the supplier and bears 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.
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Recently Issued Accounting Pronouncements | 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:
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 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.
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Organization (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio of properties | The following table summarizes the Company’s portfolio as of March 31, 2019:
_________________ 1.Includes redevelopment, development and held for sale properties.
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Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of consolidated entities | As of March 31, 2019, the operating partnership has determined that four of its joint ventures met the definition of a VIE and are consolidated:
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Schedule of sources of revenues | 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.
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Receivables subject to new accounting standards | The following table summarizes the Company’s revenue streams that are accounted for under ASC 606:
_________________ 1.Studio related tenant recoveries are accounted for under ASC 606 effective January 1, 2019. The following table summarizes the Company’s receivables that are accounted for under ASC 606:
_________________ 1.Studio related tenant recoveries are accounted for under ASC 606 effective January 1, 2019.
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Schedule of 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:
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Investment in Real Estate (Tables) |
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Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of investment in real estate | The following table summarizes the Company’s investment in real estate, at cost as of:
_____________ 1.Excludes balances related to properties that have been classified as held for sale.
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Schedule of components of assets and liabilities associated with real estate held for sale | The following table summarizes the components of assets and liabilities associated with real estate held for sale as of:
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Deferred Leasing Costs and Lease Intangibles, net (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of deferred leasing cost and lease intangibles | The following summarizes the Company’s deferred leasing costs and lease intangibles as of:
_____________ 1.Excludes balances related to properties that have been classified as held for sale.
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Schedule of amortization during period | The Company recognized the following amortization related to deferred leasing costs and lease intangibles:
__________________ 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. 3.Amortization is recorded in rental revenues in the Consolidated Statements of Operations.
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Prepaid Expenses and Other Assets, net (Tables) |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of prepaid expenses and other assets, net | The following table summarizes the Company’s prepaid expenses and other assets, net as of:
_____________ 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. 2.Excludes balances related to properties that have been classified as held for sale.
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Debt (Tables) |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt instruments | The following table sets forth information with respect to the Company’s outstanding indebtedness:
_________________ 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 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 February 27, 2019, the Company completed an underwritten public offering of $350.0 million of senior notes, which were issued at 98.663% of 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 balloon payment at maturity. 12.The Company has a total capacity of $235.0 million under the Sunset Bronson Studios/ICON/CUE revolving credit facility. This loan is secured by the Company’s Sunset Bronson Studios, ICON and CUE properties. 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. 14.Excludes deferred financing costs related to establishing the Company’s unsecured revolving credit facility 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 Company owns 75% of the ownership 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 partner in the joint venture that owns the Ferry Building property. The maturity date may be extended twice for an additional two-year term each.
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Schedule of maturities of long-term debt | 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:
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Summary of balance and key terms of the unsecured revolving credit facility | The following table summarizes the balance and key terms of the unsecured revolving credit facility as of:
_________________ 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.
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Summary of existing covenants and their covenant levels | 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:
The following table summarizes existing covenants and their covenant levels related to the registered senior notes:
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Schedule of interest costs incurred | The following table represents a reconciliation from gross interest expense to the interest expense line item in the Consolidated Statements of Operations:
_________________ 1.Includes interest on the Company’s debt and hedging activities and extinguishment costs related to paydowns in the term loans.
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Derivatives (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of derivative instruments | The following table summarizes the Company’s derivative instruments as of March 31, 2019 and December 31, 2018:
_____________ 1.The rate is based on the fixed rate from the swap and the 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 March 31, 2019, which may be different than the interest rates in prior periods for corresponding indebtedness.
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U.S. Government Securities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the carrying value and the fair value of securities | The following table summarizes the carrying value and fair value of the Company’s securities by the contractual maturity date March 31, 2019:
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Future Minimum Rents and Lease Payments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lessee, Lease, Description [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of future minimum base rents | 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:
_____________ 3.Excludes rents under leases at the Company’s studio properties with terms of one year or less.
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Summary of ground lease terms | 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:
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Schedule of rent expense | The following table summarizes rental expense for ground leases as follows:
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Ground Lease | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lessee, Lease, Description [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of future minimum lease payments | 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 March 31, 2019:
_________________ 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.
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Fair Value of Financial Instruments (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of estimated fair value of derivatives measured by level of fair value hierarchy | The Company’s financial assets and liabilities measured and reported at fair value on a recurring basis include the following as of:
___________ 1.Included in the prepaid expenses and other assets, net line item on the Consolidated Balance Sheets.
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Schedule of carrying value and fair value of notes payable | The table below represents the carrying value and fair value of the Company’s investment in securities and debt as of:
_________________ 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.
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Stock-Based Compensation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair value assumptions | The per unit fair value of the grants from the 2019 OPP Plan was estimated on the date of grant using the following assumptions in the Monte Carlo valuation:
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Schedule of classification and amount recognized for stock-based compensation | The following table presents the classification and amount recognized for stock-based compensation related to the Company’s awards:
_________________ 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.
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Earnings Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of earnings per share | The following table reconciles the numerator and denominator in computing the Company’s basic and diluted earnings per share for net (loss) income available to common stockholders:
________________ 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.
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Hudson Pacific Partners L.P. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of earnings per share | The following table reconciles the numerator and denominator in computing the Company’s basic and diluted earnings per unit for net (loss) income available to common unitholders:
________________ 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.
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Equity (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss) | The table below presents the effect of the Company’s derivatives on accumulated other comprehensive income (“OCI”):
_____________ 1.The gains and losses on the Company’s derivatives are reported in the interest expense line item on the Consolidated Statements of Operations. Interest expense was $24.4 million for the three months ended March 31, 2019.
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Schedule of ownership of common units including unvested restricted units | The following table summarizes the ownership interest in the operating partnership, excluding unvested restricted units and unvested restricted performance units as of:
_________________ 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.
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Schedule of dividends payable | The following table summarizes dividends declared and paid for the periods presented:
_________________ 1.The first quarter of 2019 dividends were paid on March 28, 2019 to shareholders and unitholders of record on March 18, 2019.
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Segment Reporting (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Operating Activity for Reporting Units | The table below presents the operating activity of the Company’s reportable segments:
The table below is a reconciliation of the total profit from all segments to net (loss) income:
|
Supplemental Cash Flow Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of cash flow, supplemental information | Supplemental cash flow information is included as follows:
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Schedule of cash and cash equivalents | The following table provides a reconciliation of cash and cash equivalents and restricted cash at the beginning and end of the periods presented:
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Restrictions on cash and cash equivalents | The following table provides a reconciliation of cash and cash equivalents and restricted cash at the beginning and end of the periods presented:
|
Investment in Real Estate - Summary of Real Estate Held for Investment (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Real Estate [Abstract] | ||
Land | $ 1,313,411 | $ 1,372,872 |
Building and improvements | 4,941,701 | 4,991,770 |
Tenant improvements | 547,427 | 510,217 |
Furniture and fixtures | 9,451 | 9,320 |
Property under development | 178,430 | 175,358 |
Investment in real estate, at cost | $ 6,990,420 | $ 7,059,537 |
Investment in Real Estate - Real Estate Held For Sale (Details) ft² in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Jun. 07, 2018
ft²
|
Mar. 31, 2019
USD ($)
property
|
Mar. 31, 2018
USD ($)
|
Dec. 31, 2018
USD ($)
property
|
|
Business Acquisition [Line Items] | ||||
Number of properties held for sale | property | 1 | 1 | ||
Sales Price | $ 150,000,000 | |||
ASSETS | ||||
Investment in real estate, net | 99,703,000 | |||
Deferred leasing costs and lease intangible assets, net | 14,000 | |||
Prepaid expenses and other assets, net | 104,000 | |||
Assets associated with real estate held for sale | 99,821,000 | $ 0 | ||
LIABILITIES | ||||
Accounts payable, accrued liabilities and other | 732,000 | |||
Liabilities associated with real estate held for sale | 732,000 | $ 0 | ||
Long-lived asset impairment charges | $ 52,200,000 | $ 0 | ||
Bentall Centre in Vancouver, Canada | ||||
Business Acquisition [Line Items] | ||||
Square feet of assets acquired | ft² | 1,450 |
Deferred Leasing Costs and Lease Intangibles, net - Amortization (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Finite-Lived Intangible Assets [Line Items] | ||
Amortization of above- and below-market leases, net | $ (4,179) | $ (3,811) |
Below-Market Leases | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortization of above- and below-market leases, net | 4,489 | 4,285 |
Above-Market Ground Leases | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortization of above- and below-market leases, net | 11 | 11 |
Deferred leasing costs and in-place lease intangibles | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortization of above- and below-market leases, net | 11,882 | 11,696 |
Below-market ground leases | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortization of above- and below-market leases, net | 626 | 635 |
Above-market leases | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortization of above- and below-market leases, net | $ 310 | $ 474 |
Receivables (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Receivables [Abstract] | ||
Accounts receivable | $ 18,300 | $ 16,500 |
Allowance for doubtful accounts | (362) | (2,500) |
Straight-line rent receivables, net | $ 159,004 | $ 142,369 |
Prepaid Expenses and Other Assets, net (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Oct. 05, 2018 |
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||
Derivative assets | $ 10,463,000 | $ 16,687,000 | |
Goodwill | 8,754,000 | 8,754,000 | |
Non-real estate investment | 3,138,000 | 2,713,000 | |
Investment in unconsolidated entities | 86,000 | 86,000 | |
Other | 60,000,000 | 27,393,000 | |
Prepaid expenses and other assets, net | 82,441,000 | $ 55,633,000 | |
Deposits for future acquisitions | 35,600,000 | ||
Commitment to fund real estate technology venture capital fund | $ 20,000,000.0 | ||
Purchase of U.S. Government securities | 425,000 | ||
Remaining contribution amount | $ 19,600,000 | ||
VIE, Not Primary Beneficiary | |||
Variable Interest Entity [Line Items] | |||
Ownership Interest | 21.00% |
Debt - Schedule of Maturities of Long-term Debt (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Unsecured and Secured Debt | |
Debt Instrument [Line Items] | |
Remaining 2019 | $ 424 |
2020 | 365,095 |
2021 | 632 |
2022 | 720,085 |
2023 | 160,000 |
Thereafter | 1,489,001 |
Total | 2,735,237 |
In-Substance Defeased Debt | |
Debt Instrument [Line Items] | |
Remaining 2019 | 2,387 |
2020 | 3,323 |
2021 | 3,494 |
2022 | 128,213 |
2023 | 0 |
Thereafter | 0 |
Total | 137,417 |
Joint Venture Partner Debt | |
Debt Instrument [Line Items] | |
Remaining 2019 | 0 |
2020 | 0 |
2021 | 0 |
2022 | 0 |
2023 | 0 |
Thereafter | 66,136 |
Total | $ 66,136 |
Debt - Covenant Summaries (Details) |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Unsecured Debt | 3.95% Registered Senior Notes | |
Debt Instrument [Line Items] | |
Debt to total assets | 60.00% |
Total unencumbered assets to unsecured debt | 150.00% |
Consolidated income available for debt service to annual debt service charge | 150.00% |
Secured debt to total assets | 45.00% |
Hudson Pacific Partners L.P. | |
Debt Instrument [Line Items] | |
Total liabilities to total asset value | 0.60 |
Unsecured indebtedness to unencumbered asset value | 0.60 |
Adjusted EBITDA to fixed charges | 1.50 |
Secured indebtedness to total asset value | 0.45 |
Unencumbered NOI to unsecured interest expense | 2.00 |
Debt - Interest Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Debt Disclosure [Abstract] | ||
Gross interest expense | $ 27,465 | $ 22,431 |
Capitalized interest | (4,706) | (3,586) |
Amortization of deferred financing costs and loan discounts | 1,591 | 1,658 |
Interest Expense | $ 24,350 | $ 20,503 |
U.S. Government Securities (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Investments, Debt and Equity Securities [Abstract] | ||
U.S. Government Securities | $ 145,000 | $ 146,900 |
Gross unrealized gain | 2,900 | |
Carrying Value | ||
Debt Securities, Available-for-sale [Line Items] | ||
Due in 1 year | 4,274 | |
Due in 1 year through 5 years | 140,718 | |
Total | 144,992 | |
Fair Value | ||
Debt Securities, Available-for-sale [Line Items] | ||
Due in 1 year | 4,281 | |
Due in 1 year through 5 years | 143,632 | |
Total | $ 147,913 |
Future Minimum Rents and Lease Payments - Schedule of Future Minimum Lease Payments (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Future Minimum Lease Payments [Abstract] | ||
Contingent rental expense | $ 2,514 | |
Minimum rental expense | $ 4,603 | |
Contingent rental expense | $ 3,095 | |
Minimum rental expense | $ 3,337 |
Segment Reporting (Details) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019
USD ($)
segment
|
Mar. 31, 2018
USD ($)
|
|
Segment Reporting [Abstract] | ||
Number of reportable segments | segment | 2 | |
Segment Reporting Information [Line Items] | ||
Revenues | $ 197,389 | $ 174,118 |
Operating expenses | (71,924) | (62,904) |
Gross Profit | 125,465 | 111,214 |
General and administrative | (18,094) | (15,564) |
Depreciation and amortization | (68,505) | (60,553) |
Interest expense | (24,350) | (20,503) |
Investment income | 1,024 | 9 |
Transaction-related expenses | (128) | (118) |
Other income | (106) | 404 |
Gains on sale of real estate | 0 | 37,674 |
Impairment loss | (52,201) | 0 |
Net (loss) income | (36,895) | 52,563 |
Office Segment | ||
Segment Reporting Information [Line Items] | ||
Revenues | 175,858 | 156,532 |
Operating expenses | (60,815) | (53,240) |
Gross Profit | 115,043 | 103,292 |
Studio Segment | ||
Segment Reporting Information [Line Items] | ||
Revenues | 21,531 | 17,586 |
Operating expenses | (11,109) | (9,664) |
Gross Profit | $ 10,422 | $ 7,922 |
Related Party Transactions - Narrative (Details) $ in Millions |
Oct. 09, 2018
USD ($)
|
---|---|
Ferry Building Property | |
Related Party Transaction [Line Items] | |
Payments to acquire new property | $ 291.0 |
Commitments and Contingencies - Narrative (Details) $ in Millions |
Mar. 31, 2019
USD ($)
|
---|---|
Unsecured Debt | Revolving Credit Facility | |
Loss Contingencies | |
Letters of credit, amount outstanding | $ 2.6 |
Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid for interest, net of capitalized interest | $ 13,543 | $ 12,915 | ||
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||
Accounts payable and accrued liabilities for investment in real estate | (813) | 20,462 | ||
Cash and cash equivalents | 52,445 | 64,080 | $ 53,740 | $ 78,922 |
Restricted cash | 13,626 | 10,900 | 14,451 | 22,358 |
Total | $ 66,071 | $ 74,980 | $ 68,191 | $ 101,280 |
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