Hudson Pacific Properties, Inc. · NYSE:HPP
Hudson Pacific Properties — Investor Presentation (March 2018)
42 slides from Hudson Pacific Properties's investor presentation, Mar 20, 2018
Slide 1: Investor Presentation December 31, 2017
Investor Presentation December 31, 2017 This document is not an offer to sell or solicitation of an offer to buy any securities. Any offers to sell or solicitations to buy securities shall be made by means of a prospectus approved for that purpose.
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
2 Forward-Looking Statements and Non-GAAP Financial Measures % of ABR 21 % of ABR 6 % of ABR FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
Slide 3: Glossary of Terms
ABR: ANNUALIZED BASE RENT Annualized cash rents before abatements under commenced leases, excludes tenant reimbursements RENT SPREADS Initial rents on new and renewal leases compared to expiring rents for same space NOI: NET OPERATING INCOME Rental income less rental expenses1 STABILIZED YIELD Quoti
Slide 4: We Specialize in Owning and Enhancing High-Quality Office and Studio Properties
We Specialize in Owning and Enhancing High-Quality Office and Studio Properties in Select West Coast Markets + We focus on unlocking value through leasing, redevelopment of operating assets and development of ancillary sites + We invest in high-barrier office markets poised for outsized growth + Our
Slide 5: Company at a glance
5 17.6M SQUARE FEET2 83% 5-YEAR TOTAL SHAREHOLDER RETURN3 1) As of 12/31/17. 2) Square footage includes office, studio and land assets. Land square footage represents management’s estimate of developable square feet, which may be subject to entitlement approvals not yet been obtained. 3) Data provid
Slide 6: Contents
Our Business Model Pg. 7: Section 1 Our Portfolio Pg. 19: Section 2 Our Opportunity Pg. 28: Section 3 Contents
Slide 7: Section 1: Our Business Model
Section 1: Our Business Model
Slide 8: Our Portfolio Spans the Most Dynamic West Coast Office Markets
8 Our Portfolio Spans the Most Dynamic West Coast Office Markets 8.6 MILLION S.F. % of ABR 52 SILICON VALLEY 3.9 MILLION S.F. % of ABR 15 L O S A N G E L E S 3 STUDIOS 7 H O L L Y W O O D 1.5 MILLION S.F. % of ABR 7 S E A T T L E 2.3 MILLION S.F. 19 SAN FRANCISCO WASHINGTON OREGON CALIFORNIA % of AB
Slide 9: Capital Discipline Facilitates Our Strategic Growth
9 Capital Discipline Facilitates Our Strategic Growth + $1.9 billion of public equity raised exclusively to fund transactions + 31% average Net Debt / Gross Assets, while growing Gross Assets 11x + Investment grade credit rated: Moody’s (Baa3), S&P (BBB-), Fitch (BBB-) 1) As of 12/31/17. See Glossar
Slide 10: Our Balance Sheet Enables Excellent Capital Access and Liquidity
10 Our Balance Sheet Enables Excellent Capital Access and Liquidity 69% 31% Total Equity Market Cap Total Debt Low Leverage—31% Debt / Equity Market Cap2 92% 8% Fixed Rate Debt Floating Rate Debt Minimal Exposure to Interest Rate Volatility3 4 $300 $79 $220 Undrawn Cash Revolver Cash Sunset Gower/Br
Slide 11: Our Leasing Expertise Drives Office Occupancy and Rents
11 Our Leasing Expertise Drives Office Occupancy and Rents + 9.8 million square feet leased at 52% GAAP and 38% Cash Rent Spreads since 2010 IPO + Stabilized and In-Service Office Portfolios 96.7% and 92.1% leased, respectively LOS ANGELES SAN FRANCISCO SILICON VALL EY SEATTLE % LEASED AT CHANGE (BP
Slide 12: Our Operating Expertise Improves Studio Occupancy and Cash Flow
$0.0 $5.0 $10.0 $15.0 $20.0 $25.0 12 Studio Same-Store Cash NOI Growth 2010-2017 56% Our Operating Expertise Improves Studio Occupancy and Cash Flow 2010 2017 1) As of 12/31/17. Based on Same-Store Studios only—Sunset Gower and Sunset Bronson. See Glossary of Terms (p.3) for definitions and Appendix
Slide 13: We Take a Conservative Approach to (Re)Development
$0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Est. Project Costs Total Market Cap Project Costs as % of Total Market Cap Pre-Leasing S.F. as % of Construction S.F. 13 We Take a Conservative Approach to (Re)Development 7% 7% 7% 5% 5% 4% 7% 1
Slide 14: We Invest Strategically to Transform Underperforming Assets
$300+ Million Invested 8.2% Weighted Avg. Stabilized Yield $198 Million of Estimated Value Creation 14 We Invest Strategically to Transform Underperforming Assets Vacant warehouse redeveloped as Class A office; 100% leased to Github Vacant warehouses redeveloped as Class A LEED Gold office; 100% lea
Slide 15: We Develop Best-In-Class Office Environments for Leading Companies
15 We Develop Best-In-Class Office Environments for Leading Companies Focus on Ancillary Sites Adjacent to Operating Assets Allows for Lower Basis and Outsized Returns 10.2% Stabilized Yield $152 Million of Estimated Value Creation 9.2% Stabilized Yield $44 Million of Estimated Value Creation 115,00
Slide 16: We Are Committed to Sustainable Building Design and Operations
16 We Are Committed to Sustainable Building Design and Operations 53 Energy Star-Labeled Buildings 90 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. LE
Slide 17: Our Exceptional Execution Generates Significant Cash Flow Growth
$- $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 $1.80 $2.00 $2.20 Our Exceptional Execution Generates Significant Cash Flow Growth FFO per Share (Excl. Specified Items) Grew 84% from 2011 to 2017 and 12% Year-over-Year2 17 84% 1) As of 12/31/17. See Glossary of Terms (p.3) for definitions and App
Slide 18: Our 5-Year Total Shareholder Return Outperforms Most Office REITs
-10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 18 Our 5-Year Total Shareholder Return Outperforms Most Office REITs 83% Total Return from December 2012 to December 2017 S&P 500 86% RMZ USA 28% HPP 83% 1) As of 12/31/17. Data provided by FactSet and as of 12/31/17 and based
Slide 19: Section 2: Our Portfolio
Section 2: Our Portfolio
Slide 20: Los Angeles Market Snapshot
Los Angeles Market Snapshot Unique Office and Studio Holdings in Leading Creative Markets 20 O F F I C E M A R K E T D R I V E R S + Streaming networks: Netflix, Amazon, Google establishing significant foothold to access talent + Production increase: Networks spent over $15 billion on content in 201
Slide 21: Silicon Valley Market Snapshot
Silicon Valley Market Snapshot Largest Institutionally Held Office Portfolio with Lease-up Opportunities 21 O F F I C E M A R K E T D R I V E R S + Deep talent pool: Proximity to Stanford University—47% have bachelor’s degree or higher1 + Capital infusion: $43 billion (#2) of VC investment since 201
Slide 22: San Francisco Market Snapshot
San Francisco Market Snapshot 7-8 Fully Leased, Iconic Office Assets in Prime Locations 22 O F F I C E M A R K E T D R I V E R S + Deep talent pool: 57% bachelor’s degree or higher1 + Capital infusion: $101 billion (#1) of VC investment since 20102; + Urban sensibility: Tech companies expanding into
Slide 23: Seattle Market Snapshot
Seattle Market Snapshot Growing Office Foothold in Transforming Urban Markets 23 411 First 83 King 505 First Met Park North Hill 7 O F F I C E M A R K E T D R I V E R S + Deep talent pool: 63% bachelor’s degree or higher; 1,000 people moving to Seattle each week1 + Capital infusion: $8+ billion (#7)
Slide 24: Tenancy Comprised of Leading Blue-Chip and Growth Companies
24 Tenancy Comprised of Leading Blue-Chip and Growth Companies % A B R 3.1%6.3% 3.5% 3.1% 3.1% 2.9% 2.6% 2.6% 2.3% 2.1% 1.8% 1.6% 1.6% 1.4% 1.3% 1.1% 37.3% TOTAL NASDAQ : $744B (Tencent : HKG) NASDAQ : $126B NASDAQ : $211B NASDAQ : $96B NASDAQ : $86B $68B Post-$ Valuation NASDAQ : $18B $80B + Valuat
Slide 25: Many Are in Technology, Media and Entertainment
2% 4% 8% 9% 9% 12% 13% 43% Many Are in Technology, Media and Entertainment INSURANCE: 2% RETAIL: 4% FINANCIAL SERVICES: 8% BUSINESS SERVICES: 9% LEGAL: 9% OTHER: 12% MEDIA & ENTERTAINMENT: 13% TECHNOLOGY: 43% Portfolio Industry Composition (% of ABR) 251) As of 12/31/17. See Glossary of Terms (p.3)
Slide 26: Public and Mature Companies Dominate Our Tech Tenancy
Tech Composition by Public / Private & Age (as % of Tech ABR) 65% 11% 24% Private < 10 Yrs. (Excl. Uber) Private > 10 Yrs. (+Uber) Public 46% 23% 31% Public and Mature Companies Dominate Our Tech Tenancy 26 Tech Composition by % Contribution to Tech ABR (as % of Tech ABR) <1% >1% and < 5% > 5% + 11%
Slide 27: Our Facilities and Expertise Draw Media & Entertainment Users
27 Our Facilities and Expertise Draw Media & Entertainment Users 10 Stages 308,000 S.F. Clients: Netflix HQ, KTLA, CBS, Showtime 12 Stages 572,000 S.F. Clients: Technicolor HQ, ABC, Netflix, Amazon, HBO 13 Stages 377,000 S.F. Clients: MTV, Disney, Comedy Central, Netflix 1) As of 12/31/17. Clients r
Slide 28: Section 3: Our Opportunity
Section 3: Our Opportunity
Slide 29: Leasing Up Our Below-Market-Occupancy Office Acquisitions
Net Operating Income Growth Driver Leasing Up Our Below-Market-Occupancy Office Acquisitions 29 Region Properties Square Feet % Leased Submarket % Occupancy2 Los Angeles 1 500,475 88.1% 91.9% Silicon Valley 8 3,338,433 78.9% 87.0% Total 9 3,838,908 80.1% 87.3% Existing In-Service Lease-Up Portfolio
Slide 30: Re-Leasing Our Office Space at Substantially Higher Rents
$40.39 $29.46 $55.56 $47.78 $45.92 $36.23 $66.10 $55.55 $- $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 Los Angeles Seattle San Francisco Silicon Valley Expiring Rent Market Rent 196,499 Exp. S.F. 265,628 Exp. S.F. 2,034,615 Exp. S.F.308,591 Exp. S.F. Mark-To-Market Rent Growth: 2018 & 2019 Expi
Slide 31: Building Our Pipeline of (Re)Development Projects
Net Operating Income Growth Driver Building Our Pipeline of (Re)Development Projects 31 Under Construction Projects To Produce Estimated Weighted Avg. 6.9% Stabilized Yield3 Under Construction 430,748 S.F. in Los Angeles and Seattle Potential Future Projects 2.7 million S.F.—53% in Los Angeles, 47%
Slide 32: Enhancing Facilities and Operations at Sunset Las Palmas Studios
Net Operating Income Growth Driver Enhancing Facilities and Operations at Sunset Las Palmas Studios 32 + Investing $3 million to improve facilities and optimize stage and support space mix + Increasing stage occupancy from 78% to 95% by closing multi-year, multi-stage production deals + Increasing b
Slide 33: Our Valuation is Favorable Relative to Other West Coast Office REITs
Our Valuation is Favorable Relative to Other West Coast Office REITs 33 HPP Pure Peers Current FFO Multiple 17.4x 21.7x Forward FFO Multiple 16.6x 20.3x HPP Pure Peers NAV Premium (Discount) (18.4%) (5.2%) Analyst Coverage Reinforces HPP’s Unrealized Value HPP Trades at a Significant Discount 1) As
Slide 34: HPP Offers a Compelling Investment Opportunity
34 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 excel
Slide 35: Our Executive Team Has Deep Real Estate and Public Company Experience
Our Executive Team Has Deep Real Estate and Public Company Experience Alexander Vouvalides 35 Dale Shimoda Victor J. Coleman Chairman & CEO Founded Hudson Capital in 2006 and served as Managing Partner. Formerly Co-Founder, President, COO and Director at Arden Realty. Sold to GE. Mark T. Lammas COO
Slide 36: Appendix: Definitions, Calculations & Reconciliations
Appendix: Definitions, Calculations & Reconciliations
Slide 37: Expanded Definitions
37 Expanded Definitions NOI: NET OPERATING INCOME NOI is not a measure of operating results or cash flows from operating activities as measured by GAAP and should not be considered an alternative to income from continuing operations, as an indication of our performance, or as an alternative to cash
Slide 38: Value Creation Calculations
38 Value Creation Calculations 1) Square footage for office properties as determined by management based on estimated leasable square feet, which may be less or more than the Building Owners and Managers Association (BOMA) rentable area. Square footage may change over time due to re-measurement or r
Slide 39: Cash / GAAP Reconciliations
39 Cash / GAAP Reconciliations NET & TOTAL DEBT Q210 Q411 Q412 Q413 Q414 Q415 Q416 Q417 Notes payable $94,020 $399,871 $582,085 $931,308 $960,508 $2,279,755 $2,707,839 $2,439,311 less : Unamortized loan premium, net 280 (1,965) (1,201) (5,320) (3,056) (1,310) - - less : Cash and cash equivalents (84
Slide 40: Cash / GAAP Reconciliations (Cont.)
40 Cash / GAAP Reconciliations (Cont.) STUDIO SAME-STORE CASH NET OPERATING INCOME Twelve Months Ended 12/31/10 12/31/16 12/31/17 Net (loss) income $(2,682) $43,758 $94,561 Adjustments: Interest expense 8,831 76,044 90,037 Interest income (59) (260) (97) Unrealized (gain) loss on ineffective portion
Slide 41: Cash / GAAP Reconciliations (Cont.)
41 Cash / GAAP Reconciliations (Cont.) FUNDS FROM OPERATIONS (FFO) Twelve Months Ended 12/31/12 12/31/16 12/31/17 Net (loss) income $(5,006) $43,758 $94,561 Adjustments: Depreciation and amortization of real estate assets 57,024 267,245 281,773 Gains on sale of real estate - (30,389) (45,574) FFO at
Slide 42: Contact: Laura Campbell, Investor Relations
42 Contact: Laura Campbell VP, Head of Investor Relations (310) 622-1702 lcampbell@hudsonppi.com
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