Hudson Pacific Properties, Inc. · NYSE:HPP
Hudson Pacific Properties — Investor Presentation (November 2017)
42 slides from Hudson Pacific Properties's investor presentation, Nov 28, 2017
Slide 1: Investor Presentation September 30, 2017
Investor Presentation September 30, 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 Snapshot
5 18.2M SQUARE FEET2 101% 5-YEAR TOTAL SHAREHOLDER RETURN3 1) As of 9/30/17. 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 4.6 MILLION S.F. % of ABR 19 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 6 S E A T T L E 2.3 MILLION S.F. 16 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 + 30% average Net Debt / Gross Real Estate Assets, while growing Gross Real Estate Assets 14X + Investment grade credit rated: Moody’s (Baa3), S&P (BBB-), Fitch (BBB-) 1) As
Slide 10: Our Balance Sheet Enables Excellent Capital Access and Liquidity
10 Our Balance Sheet Enables Excellent Capital Access and Liquidity 67% 33% Total Equity Market Cap Total Debt Low Leverage—33% Debt / Equity Market Cap2 77% 23% Fixed Rate Debt Floating Rate Debt Minimal Exposure to Interest Rate Volatility34 $400 $88 $200 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 + 9.2 million square feet leased at 51% GAAP and 38% Cash Rent Spreads since 2010 IPO + Stabilized and In-Service Office Portfolios 95.9% and 91.5% leased, respectively LOS ANGELES SAN FRANCISCO SILICON VALLEY SEATTLE % LEASED AT CHANGE (BPS
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 2010-2016 38% Our Operating Expertise Improves Studio Occupancy and Cash Flow 2010 2016 1) As of 9/30/17. 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 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Est. Project Costs Total Market Cap Project Costs as % of Total Market Cap 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 S.F. Pre-Leased Est. S.F. U
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 9.7% Stabilized Yield $137 Million of Estimated Value Creation 9.2% Stabilized Yield $44 Million of Estimated Value Creation 115,000
Slide 16: We Are Committed to Sustainable Building Design and Operations
16 We Are Committed to Sustainable Building Design and Operations 45 Energy Star Labeled Buildings 90 Average Energy Star Rating (Top 10% for Energy Efficiency) 15% Energy Star Improvement from 2000 to 2016 100% of Portfolio Benchmarked in Energy Star’s Portfolio Manager 21% of Office S.F. LEED Cert
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 Our Exceptional Execution Generates Significant Cash Flow Growth FFO per Share Grew 93% from 2012 to 2016 11% FFO per Share Growth Year-to-Date2 17 93% 1) As of 9/30/17. See Glossary of Terms (p.3) for definitions and Appendix (p.36) for
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% 110.0% 120.0% 18 Our 5-Year Total Shareholder Return Outperforms Most Office REITs 101% Total Return from September 2012 to September 2017 S&P 500 74% RMZ USA 29% HPP 101% 1) As of 9/30/17. Data provided by FactSet and as of 9/
Slide 19: Section 2: Our Portfolio
Section 2: Our Portfolio
Slide 20: Los Angeles Market Snapshot
Los Angeles Market Snapshot 7-8 604 Arizona Element LA 3401 Exposition 11601 Wilshire 9300 Wilshire 10900 Washington 10950 Washington 6405 Del Amo 6922 Hollywood Pinnacle I & II Sunset Gower Studios Technicolor Sunset Bronson Studios ICON EPIC Sunset Las Palmas Studios Fourth & Traction Maxwell Uniq
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: 54% 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 O F F I C E M A R K E T D R I V E R S + Deep talent pool: 48% bachelor’s degree or higher; 1,000 people moving to Seattle each week1 + Capital infusion: $8+ billion (#7) of VC investment since 2010; U. of Washington spe
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%3.8% 3.4% 3.1% 3.1% 2.9% 2.6% 2.5% 2.3% 2.0% 1.8% 1.8% 1.6% 1.5% 1.5% 1.4% 35.3% TOTAL NASDAQ : $677B (Tencent : HKG) NASDAQ : $78B NASDAQ : $170B NASDAQ : $84B NASDAQ : $67B $68B Post-$ Valuation NASDAQ : $11B (Time Warner :
Slide 25: Many Are in Technology, Media and Entertainment
2% 4% 7% 8% 9% 12% 18% 40% Many Are in Technology, Media and Entertainment INSURANCE: 2% RETAIL: 4% FINANCIAL SERVICES: 7% BUSINESS SERVICES: 8% LEGAL: 9% OTHER: 12% MEDIA & ENTERTAINMENT: 18% TECHNOLOGY: 40% Portfolio Industry Composition (% of ABR) 251) As of 9/30/17. See Glossary of Terms (p.3) f
Slide 26: Public and Mature Companies Dominate Our Tech Tenancy
Tech Composition by Public / Private & Age (as % of Tech ABR) 63%11% 26% Private < 10 Yrs. (Exc. Uber) Private > 10 Yrs. (+Uber) Public 43% 26% 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% o
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 9/30/17. Clients re
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% 92.2% Silicon Valley 8 3,333,433 79.8% 87.2% Total 9 3,838,908 80.8% 87.5% Existing In-Service Lease-Up Portfolio
Slide 30: Re-Leasing Our Office Space at Substantially Higher Rents
$42.47 $29.42 $43.63 $47.75 $46.97 $35.95 $51.12 $55.29 $- $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 Los Angeles Seattle San Francisco Silicon Valley Expiring Rent Market Rent 199,000 Exp. S.F. 341,000 Exp. S.F. 2,030,000 Exp. S.F.554,000 Exp. S.F. Mark-To-Market Rent Growth: 2018 & 2019 Expirations
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 815,000 S.F. in Los Angeles and Seattle Future Projects 3 million S.F.—57% in Los Angeles, 43% in Silicon V
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 17.1x 20.8x Forward FFO Multiple 16.2x 19.3x HPP Pure Peers NAV Premium (Discount) (16.7%) (7.3%) 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: Net & Total Debt Reconciliation
39 Q210 Q311 Q312 Q313 Q314 Q315 Q316 Q317 Notes payable 94,020$ 298,672$ 359,454$ 891,175$ 920,860$ 2,088,335$ 2,427,440$ 2,655,946$ less : Unamortized loan premium, net (280) (575) (1,392) (5,887) (3,622) (1,746) - - less : Cash and cash equivalents (84,509) (20,715) (27,288) (29,341) (69,397) (46
Slide 40: Studio Same-Store Cash Net Operating Income
40 12/31/10 12/31/16 9/30/16 9/30/17 Net (loss) income (2,682)$ 43,758$ 15,228$ 45,617$ Adjustments: Interest expense 8,831 76,044 54,775 66,086 Interest income (59) (260) (216) (90) Unrealized (gain) loss on ineffective portion of derivative instruments (347) 1,436 1,630 82 Transaction-related expe
Slide 41: Funds From Operations (FFO) Reconciliation
41 12/31/12 12/31/16 9/30/16 9/30/17 Net (loss) income (5,006)$ 43,758$ 15,228$ 45,617$ Adjustments: Depreciation and amortization of real estate assets 57,024 267,245 200,525 215,788 Gains on sale of real estate - (30,389) (8,515) (16,866) FFO attributable to non-controlling interests (17) (18,817)
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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