Hudson Pacific Properties Reports First Quarter 2024 Financial Results

– 509,000 Square Feet of Leasing Activity –

– Purchased Partner's 45% Interest in 1455 Market –

– Provides Second Quarter FFO Outlook and Updates Full-Year Assumptions –

Hudson Pacific Properties, Inc. (NYSE:HPP) (the "Company," "Hudson Pacific," or "HPP"), a unique provider of end-to-end real estate solutions for dynamic tech and media tenants, today announced financial results for the first quarter 2024.

"Our office leasing momentum accelerated to start off the year, as we signed over 500,000 square feet of leases in the first quarter. Leveraging our well-positioned portfolio and the strength of our platform, our team is executing on leasing even as adverse market conditions persist, and we view long-term demand drivers for our office space as compelling," commented Victor Coleman, Hudson Pacific's Chairman and CEO. "While we remain focused on further strengthening our balance sheet through targeted asset sales, in the first quarter, we purchased our partners' stake in 1455 Market in San Francisco. Already in the second quarter, we signed a 157,000-square-foot new lease at that asset, which is the largest lease executed in downtown since 2021, and we have another 290,000 square feet throughout our portfolio in leases or LOIs.

"In the first quarter, revenues across essentially all our studio business segments increased quarter-over-quarter, and we now have leases, activity or interest in the majority of our stages. While the long-term fundamentals related to content and subscriber growth remain intact, production has ramped more slowly than anticipated post-strikes, partly attributable to the upcoming expiration of the IATSE and Teamsters Local 399 union contracts. Until visibility improves for our Quixote business, which is primarily leased on a show-by-show basis, we are adjusting our outlook to account for this industry uncertainty."

Financial Results Compared to First Quarter 2023

• Total revenue of $214.0 million compared to $252.3 million, with the primary drivers being asset sales, followed by a large tenant vacating space at 1455 Market, and lower occupancy and utilization of studio stages and services, respectively
• Net loss attributable to common stockholders of $52.2 million, or $0.37 per diluted share, compared to net loss of $20.4 million, or $0.14 per diluted share, due to the aforementioned changes to revenue
• FFO, excluding specified items, of $24.2 million, or $0.17 per diluted share, compared to $49.7 million, or $0.35 per diluted share, with the change mostly due to the items affecting revenue, offset by reduced interest expense and less FFO allocable to non-controlling interests. Specified items consisted of transaction-related expenses of $2.2 million, or $0.01 per diluted share, compared to prior year transaction related expenses of $1.2 million, or $0.01 per diluted share
• FFO of $22.0 million, or $0.15 per diluted share, compared to $48.5 million, or $0.34 per diluted share
• AFFO of $28.5 million, or $0.19 per diluted share, compared to $35.0 million, or $0.24 per diluted share, largely attributable to the items affecting revenue, offset by higher cash and lower GAAP revenue and reduced recurring capital expenditures
• Same-store cash NOI of $108.3 million, compared to $124.4 million, mostly driven by two tenant move outs, one at 1455 Market and one at Sunset Las Palmas Studios

Leasing

• Executed 73 new and renewal leases totaling 508,615 square feet, with significant leases including:
  • 82,000 square feet of new and renewal leases with consumer electronics company TDK InvenSense at Concourse with an eight-year term
  • 54,000-square-foot new lease with a software company at Bentall Centre with an approximately 11-year term
  • 36,000-square-foot new lease with a bio-tech company at Metro Center with an approximately five-year term
  • 24,000-square-foot new lease with a semiconductor company at Metro Plaza with an approximately six-year term
• Subsequent to the quarter, signed a 157,000-square-foot new lease with the City of San Francisco at 1455 Market with a 21-year term
• GAAP rents increased 6.2% and cash rents decreased 5.4% from prior levels, with the decrease in cash rents primarily resulting from the aforementioned new and renewal leases at Concourse
• In-service office portfolio ended the quarter at 79.0% occupied and 80.5% leased, compared to 80.8% and 81.9%, respectively, in fourth quarter of last year, with the decreases attributable to small to mid-size tenants vacating space in the San Francisco Bay Area and Seattle
• On average over the trailing 12 months, the in-service studio portfolio was 76.9% leased, and the related 34 stages were 79.4% leased, compared to 80.4% and 84.7%, respectively, in the fourth quarter of last year, with the decreases due to the aforementioned tenant move out at Sunset Las Palmas Studios

Transactions

• Purchased for $43.5 million (before prorations and closing costs) a joint venture partner's 45% ownership interest in 1455 Market, a 1.0 million-square-foot office property in San Francisco, California, and subsequently signed the aforementioned 157,000-square-foot new lease

Development

• Subsequent to the quarter, substantially completed the 546,000-square-foot Washington 1000 office development in Seattle and the 241,000-square-foot Sunset Glenoaks studio development in Los Angeles

Balance Sheet as of March 31, 2024

• $734.3 million of total liquidity comprised of $114.3 million of unrestricted cash and cash equivalents and $620.0 million of undrawn capacity under the unsecured revolving credit facility
• $15.7 million and $183.1 million of undrawn capacity under construction loans secured by Sunset Glenoaks Studios and Sunset Pier 94 Studios, respectively
• HPP's share of net debt to HPP's share of undepreciated book value was 37.0% with 91.9% of debt fixed or capped and no material maturities until November 2025

Dividend

• The Company's Board of Directors reinstated and declared a quarterly dividend on its common stock of $0.05 per share, and declared a quarterly dividend on its 4.750% Series C cumulative preferred stock of $0.296875 per share

Corporate Responsibility

• Subsequent to the quarter, issued the Company's 2023 Corporate Responsibility Report, detailing awards and recognition received, and success in achieving and progressing on related goals

2024 Outlook

Hudson Pacific's in-service office and studio portfolios continue to perform in line with the Company's full-year 2024 outlook provided in February of this year. The Company is therefore providing an FFO outlook of $0.15 to $0.19 per diluted share for the second quarter, but updating only key assumptions for its full-year 2024 FFO outlook, including same-store property cash NOI growth. This reflects the Company's office leasing momentum and gradual improvements within the office operating environment, as well as long-term leases and the swift return of productions filming prior to the WGA and SAG-AFTRA strikes at our in-service studio assets. However, as has been well documented in the press, post-strikes, the film and television industry has recovered far more slowly than anticipated. Contributing factors include: pending expiration of the IATSE and Teamsters Local 399 union contracts in May and July, respectively; logistical and resource constraints as multiple productions attempt to re-start simultaneously; and industry consolidation and shifting business models as networks pursue profitability. Hudson Pacific's limited visibility at this time as to the precise impact of each of these factors, presents challenges to estimating how and when production counts will normalize, and, by extension, cash flow related to the Quixote business, the primary drivers of which are stages and services leased show-by-show. For clarity, Hudson Pacific's same-store property portfolio and full-year outlook assumptions exclude Quixote. Further, the Company's outlook assumes IATSE and Teamsters do not strike, and production begins to pick up in early June following successful resolution of IATSE contract negotiations. There are no specified items in connection with this guidance.

The Company's FFO outlook and the related assumptions reflect management's view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels and the earnings impact of events referenced in this press release and in earlier announcements. It otherwise excludes any impact from new acquisitions, dispositions, debt financings, amendments or repayments, recapitalizations, capital markets activity or similar matters. There can be no assurance that actual results will not differ materially from these estimates.

Below are some of the assumptions the Company used in providing this guidance:

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

Supplemental Information

Supplemental financial information regarding Hudson Pacific's first quarter 2024 results may be found on the Investors section of the Company's website at HudsonPacificProperties.com. This supplemental information provides additional detail on items such as property occupancy, financial performance by property and debt maturity schedules.

Conference Call

The Company will hold a conference call to discuss first quarter 2024 financial results at 9:00 a.m. PT / 12:00 p.m. ET on May 2, 2024. Please dial (833) 470-1428 and enter passcode 651313 to access the call. International callers should dial (404) 975-4839 and enter the same passcode. A live, listen-only webcast and replay can be accessed via the Investors section of the Company's website at HudsonPacificProperties.com.

About Hudson Pacific Properties

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

Forward-Looking Statements

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

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