Hudson Pacific Properties, Inc. · NYSE:HPP
Hudson Pacific Properties — Investor Presentation (September 2018)
42 slides from Hudson Pacific Properties's investor presentation, Sep 12, 2018
Slide 1: Investor Presentation | June 30, 2018
UDSON Investor Presentation | June 30, 2018
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
Forward-Looking Statements and Non-GAAP Financial Measures FORWARD-LOOKING STATEMENTS mm Act of 1933, as amended the Securities Exchange Act of 1934, as amended. i imitation, our it i operations revenue, it i may," “will,” "plan," “could,” “should,” “expect,” “anticipate,” “target,” “continue,” “int
Slide 3: Glossary of Terms
Glossary of Terms ABR: ANNUALIZED BASE RENT RENT SPREADS NOI: NET OPERATING INCOME Rental income les rental expenses! STABILIZED YIELD FFO: FUNDS FROM OPERATIONS i performance, simi FFO MULTIPLE Share price divided by FFO per share TOTAL CAPITALIZATION Sum of total debt, Series A preferred unit ‘GRO
Slide 4: Specialize in Owning and Enhancing High-Quality Office and Studio Properties
Specialize in Owning and Enhancing High-Quality Office and Studio Properties in Select West Coast Markets oF Value creation through leasing, redevelopment of operating assets and development of ancillary sites Portfolio located in high-barrier office and studio markets poised for outsized growth, an
Slide 5: Hudson Pacific at a Glance
Hudson Pacific ata Glance YSE: HPP INVESTMENT GRADE COMPANY 2006. $8.08 FOUNDED IN we She 2000 gro SHARE ET? INITIAL PUBLIC OFFERING. ANNUALIZED REVENUE® S- —__ 88% 29.4% 5-YEAR TOTAL a DEBTS / TOTAL MARKET CAP‘ ‘SHAREHOLDER RETURN? 2.8% DIVIDEND YIELD? /@ closing price of $25.42,
Slide 6: Contents
Contents \\ SA Our Business Model — Pg. 7: Section 1 Our Portfolio Pg. 19: Section 2 Our Opportunity Pg. 28: Section 3
Slide 7: Section 1: Our Business Model
Slide 8: Portfolio Spans the Most Dynamic West Coast Office Markets
Portfolio Spans the Most Dynamic West Coast Office Markets WASHINGTON MILLION S.F, SEATTLE OREGON SILICON VALLEY 3210 q CALIFORNIA TOS ANGELES 3 |S
Slide 9: Capital Discipline Facilitates Strategic Growth
Capital Discipline Facilitates Strategic Growth + $1.9 billion of public equity raised exclusively to fund transactions + 25% average Net Debt / Gross Assets, while growing Gross Assets 11x + Investment grade credit rated: Moody's (Baa3), S&P (BBB-), Fitch (BBB-) Gross RE Assets (Sin Biltins) $8.0 $
Slide 10: Balance Sheet Enables Excellent Capital Access and Liquidity
ty ; Balance Sheet Enables Excellent Capital Access and Liqui Minimal Exposure to Interest Rate Volatility>“ + Total Equity Market Cap =Total Debt = Fixed Rate Debt + Floating Rate Debt = Undrawn Cash Revolver = Cash = Sunset Gower/Bronson Loan = Unsecured Debt = Secured Debt { loa - 1 As of a/20/18
Slide 11: Leasing Expertise Drives Office Occupancy and Rents
SILICON VALLEY SANFRANCISCO LOS ANGELES. SEATTLE Leasing Expertise Drives Office Occupancy and Rents + 11.2 million square feet leased at 43% GAAP and 31% Cash Rent Spreads since 2010 IPO + Stabilized and In-Service Office Portfolios 93.6% and 89.7% leased, respectively % LEASED AT CHANGE (BPS) ANNU
Slide 12: Operating Expertise Improves Studio Occupancy and Cash Flow
Operating Expertise Improves Studio Occupancy and Cash Flow + Full-year Studio Same-Store Cash NOI increased 56% from 2010 to 2017—23% growth year-over-year? + 41% of stage/production office square footage now under long-term lease (3 or more years)? Studio Same-Store Cash NOI Growth 2010-2017 $25.0
Slide 13: Conservative Approach to (Re)Development
Conservative Approach to (Re)Development + Focus on creating value through leasing, less capital intensive repositionings and redevelopment + Historical project costs average approximately 5% of Total Market Cap — Project Costs as % of Total Market Cap {$Bilions) $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $
Slide 14: Invest Strategically to Transform Underperforming Assets
Invest Strategically to Transform Underperforming Assets $400+ Million Invested 7.7% Weighted Avg. Stabilized Yield $220 Million of Estimated Value Creation TS BRANNAN ELEMENT LA 2401 EXPOSITION FOURTH & TRACTION SAN FRANCISCO WEST L.A SANTA MONICA L.A. ARTS DISTRICT Nasal 0. Se nnn Element LA, 3401
Slide 15: Develop Best-In-Class Office Environments for Leading Companies
Develop Best-In-Class Office Environments for Leading Companies Focus on Ancillary Sites Adjacent to Operating Assets Allows for Lower Basis and Outsized Returns : yi fl i i“ ul } | E Plies | Eo sm eo i, ee “aR Pie. Peau ea 115,000 5.F. of Class A office’ replaced datéd, low-rise buildings 327,000 S
Slide 16: Committed to Sustainable Building Design and Operation
ommitted to Sustainable Building Design and Operatio n N 44 Energy Star-Labeled Buildings 89 Average Energy Star Rating (Top 10% for Energy Efficiency) 17% Energy Star Improvement from 2015 to 2017 100% of Office Portfolio Benchmarked in Energy Star’s Portfolio Manager 23% of Office S.F. LEED Certif
Slide 17: Exceptional Execution Generates Significant Cash Flow Growth
Exceptional Execution Generates Significant Cash Flow Growth FFO per Share Grew 84% from 2011 to 2017 2011 2017 1170 per full-year FFO per S00 Glossery of Terms (p.3 for information and 2 W7
Slide 18: 5-Year Total Shareholder Return Outperforms Most Office REITs
5-Year Total Shareholder Return Outperforms Most Office REITs 88% Total Return from June 2013 to June 2018 Hg gg gh ag og? gt gt gt gh og? Fh oF Ah goo oh taf ot ot SS _agh gh se ws s Las of 201 18
Slide 19: Section 2: Our Portfolio
Section 2: Our Portfolio -rorihLiade@da@d”
Slide 20: Los Angeles Market Snapshot
Los Angeles Market Snapshot Unique Office and Studio Holdings in Leading Creative Markets 1 604 Arizona Sunset Gower ‘Studios 6040 Sunset ‘Sunset Bronson Studios ICON + CUE 1“ = - Sunset Las Palmas ‘Studios 10950 Hartow See FFICE MARKET DRIVERS ‘Streaming networks: Netflix, Amazon, Gogle establishin
Slide 21: Silicon Valley Market Snapshot
Silicon Valley Market Snapshot a Largest Institutionally Held Office Portfolio with Lease-up Opportunities _—— SE ‘3167 Porter. Metro Plaza a me a ee a) ‘KOO Hilviow Concourse Peninsula foe Skyway Landing Park a Reovae by Shrereee ge mii 7 illReseateh Canter 1740 Tectmlogy . . ae aa P agai SBNTwinDl
Slide 22: San Francisco Market Snapshot
lUDSON’ San Francisco Market Snapshot Fully Leased, Iconic Office Assets in Prime Locations s 5 901 Market ‘625 Second —_—_ > 6 875 Howard “55 Market OFFICE MARKET DRIVERS Deep talent pool: 57% bachelor's degree or higher? Capital infusion: $101 bition #1) of VC investment since 2010 ‘Urban sensibil
Slide 23: Seattle Market Snapshot
Seattle Market Snapshot Growing Office Foothold in Transforming Urban Markets A Qos | a ait 411 First 450 Alaskan Bp a: _ 98 Jackson i EP Northview Center 505 First Met Park North 11US, Consus Sureay, Amor 1 Colliers Intraoral, Seatte Oice Update 6F3018.2) 99 Piichbook, r o ‘3018
Slide 24: Tenancy Comprised of Leading Blue-Chip and Growth Companies
Tenancy Comprised of Leading Blue-Chip and Growth Companies 15 Largest Tenants %ABR 08 Valu (Tencent - 700:HK) NASDAQ: $9B : om [lwo Pic -1W6:tN) be ed NASDAQ: $968 NASDAQ : $268 x (ett de gle Quaicomm — &) Square 4 EMC Regus NETFLIX Ca @ Stanford TM netsuite BankotAmeria Loita UBER es $288 Endowmen
Slide 25: Tenant Concentration in Tech, Media and Entertainment
Tenant Concentration in Tech, Media and Entertainment Portfolio Industry Composition (% of ABR) TECHNOLOGY: 40% @ @ BUSINESS SERVICES: 8% ss MEDIA & ENTERTAINMENT: 15% FINANCIAL SERVICES: 8% LEGAL: 9% RETAIL: 4% @ OTHER: 16% 114s of 6/30/18, See Glossary of Terms [p.l for definitions, 25
Slide 26: Public and Mature Companies Dominate Tech Tenancy
Public and Mature Companies Dominate Tech Tenancy + 10% of tech ABR attributable to private companies in business less than 10 years (excludes Uber) + Only 5 tenants contribute more than 5% of tech ABR: Google, Uber, Qualcomm, Salesforce, Square + More than half of tech ABR comprised of tenants cont
Slide 27: Facilities and Expertise Draw Media and Entertainment Users
Facilities and Expertise Draw Media and Entertainment Users + op Sunset Studios—largest collection of i studios in Hollywood and U.S. + 1.3 million S.F. of existing/under construction Class A office space adjacent to stages + Deep relationships with traditional and streaming networks (e.g., Netflix,
Slide 28: Section 3: Our Opportunity
Our Opportunity=——37) ¢
Slide 29: NOI Growth Driver: Lease-Up of Office Acquisitions and Developments
Net Operating Income Growth Driver: Lease-Up of Office Acquisitions and Delivered (Re)Developments Existing In-Service Lease-Up Portfolio Region Properties Square Feet % Leased Submarket % Occupancy? Silicon Valley 5 2,216,721 78.4% 86.4% Seattle 2 202,633 69.4% 92.7% Total 7 2,419,354 71.1% 86.9% N
Slide 30: NOI Growth Driver: Re-Leasing Office Space at Higher Rents
Net Operating Income Growth Driver: Re-Leasing Office Space at Substantially Higher Rents 15% Mark-to-Market on 2018 and 2019 Expirations 15% Mark-to-Market on In-Place Leases Mark-to-Market Rent Growth: 2018 & 2019 Expirations Las Angeles Seattle San Francisca Silicon Valley 703,201 Exp. SF. 109357
Slide 31: NOI Growth Driver: Building Pipeline of (Re)Development Projects
Net Operating Income Growth Driver: Building Pipeline of (Re)Development Projects Under Construction 505,215 S.F. in Los Angeles Potential Future Projects 2.6 million S.F.—51% in Los Angeles, 49% in Silicon Valley Over 800,000 S.F. of studio-adjacent opportunities? Under-Construction Projects To Pro
Slide 32: NOI Growth Driver: Enhancing Sunset Las Palmas Studios
Net Operating Income Growth Driver: Enhancing Facilities and Operations at Sunset Las Palmas Studios + Investing $5 million to improve facilities and optimize stage and support space mix + Increasing stage occupancy from 78% to 90-95% by closing multi-year, multi-stage production deals + Increasing
Slide 33: Favorable Valuation Relative to Other West Coast Office REITs
Favorable Valuation Relative to Other West Coast Office REITs HPP Trades at a Significant Discount HPP Pure Peers Current FFO Multiple 18.6x 20.5x Forward FFO Multiple 16.7% 19.2 Analyst Coverage Reinforces HPP’s Unrealized Value HPP Pure Peers NAV Premium (Discount) (13.3%) (4.8%) 1 sof a2 15.40, P
Slide 34: HPP Offers a Compelling Investment Opportunity
HPP Offers a Compelling Investment Opportunity Exceptional track record of unlocking value through leasing, redevelopment and development of ancillary sites Blue-chip tenants in high-growth West Coast markets and industries, like technology, media and entertainment Strong balance sheet with excellen
Slide 35: Executive Team With Deep Real Estate and Public Company Experience
Executive Team With Deep Real Estate and Public Company Experience Victor J. Coleman Mark T. Lammas Alexander Vouvalides. Christopher Barton Chaiman & CEO 00 &cFO EVP, Development & Capital Investments ned in 209, rales as ‘016 and served as Joined in 2006, Pro roles as Formerly EVP, SVP an¢ ‘SVP, A
Slide 36: Appendix: Definitions, Reconciliations
Appendix: ze: Definitions, ralcitaor a. 3 Reconciliations, 7 ep ites Loss emery Lag Th vith =
Slide 37: Expanded Definitions
Expanded Definitions NOI: NET OPERATING INCOME GAAP"), and should not cur ability to make rental if any, and r other non-cash adjustments to revenue and expenses, FO: FUNDS FROM OPERATIONS "FFO") FFO") isa non i ewe i measure of pe pe iat Trusts. The White Paper it i inary it i it ie i related ur ac
Slide 38: Value Creation Calculations
3401 Exposition Element LA 12685 Jefferson 275 Brannan Fourth & Traction Technicolor ICON lUDSON’ Value Creation Calculations PROJECT in Millions) Total Project Stabilized Value SF Costs? Cap Rate Nol Value Creation Yield? 63,376 $37.4 5% $2.6 $52.1 $147 7.0% 286,037 190.6 5% 156 a6 1209 8.2% 100,75
Slide 39: Cash / GAAP Reconciliations
Cash / GAAP Reconciliations UNDEPRECIATED REAL ESTATE ASSETS a) ait aziz 0213 214 0215 0216 0217 0218 Investmentin realestate, at cost $509,378 $868,882 $1,166,561 $1,605,597 $2,127,351 $5,909,672 $5,747,717 $6,897,407 $6,418,882 plus: Real estate held for sale . - 61,656 13,963 : 51,672 : 211,001 p
Slide 40: Cash / GAAP Reconciliations (Cont.)
Cash / GAAP Reconciliations (Cont.) Net income (loss) ‘Adjustments: Interest expense Interest income ‘STUDIO SAME-STORE CASH NET OPERATING INCOME Unrealized gain on non-real estate investment Transaction-related expenses Other (income) expense Gains on sale of real estate Adjustments: General and ad
Slide 41: Cash / GAAP Reconciliations (Cont.)
Cash / GAAP Reconciliations (Cont.) FUNDS FROM OPERATIONS (FFO) Net income (loss) ‘Adjustments: Depreciation and amortization of realestate assets Gains on sale of realestate FO attributable to non-controlling interests Net income attributable to preferred stock and units Specified items impacting F
Slide 42: Contact
Hudson Pacific Properties — Investor Presentation (September 2018) on 6ix