Hudson Pacific Properties, Inc. · NYSE:HPP
Hudson Pacific Properties — Investor Presentation (March 2020)
42 slides from Hudson Pacific Properties's investor presentation, March 2020
Slide 1: Investor Presentation December 31, 2019
UDSON PACIFIC PROPERTIES INVESTOR PRESENTATION DECEMBER 31, 2019 REIMAGINING NOW. TO CREATE WHAT'S NEXT. 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
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
Forward-Looking Statements and Non-GAAP Financial Measures FORWARD-LOOKING STATEMENTS This presentation, wherein Hudson Pacific Properties, Inc. is referred to as the “Company,” “Hudson Pacific,” “we,” “us,” or “our,” contains forward-looking statements within the meaning of Section 27A of the Secur
Slide 3: 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 + Value creation through leasing and redevelopment of operating assets, and development of ancillary sites + Portfolio located in high-barrier office and studio markets poised for outsized growt
Slide 4: Hudson Pacific at a Glance
Hudson Pacific ata Glance NYSE: HPP INVESTMENT GRADE COMPANY 2006 $8.9B FOUNDED IN i 52 COMPANY'S SHARE OF © MARKET CAPITALIZATION 4 M i OFFICE PROPERTIES? 201 0 $8 67M “SouAREFER? = INITIAL PUBLIC OFFERING ih ol alallat -_ ANNUALIZED REVENUES STUDIO PROPERTIES Baa2 | BBB- 330 y MOODY'S / S&P, FITCH
Slide 5: Our Business Model
Our Business Model Pg. 6: Section 1 Our Portfolio Pg.-17: Section 2 Our Opportunity ———= ; Pg.27: Section 3 ————
Slide 6: Section 1: Our Business Model
Slide 7: Portfolio Spans the Most Dynamic West Coast Office Markets
Portfolio Spans the Most Dynamic West Coast Office Markets BRITISH 20 ¥ COLUMBIA RRC % of ABR > ] _ VANCOUVER SEATTLE WASHINGTON OREGON 2.6 Bt MILLION S.F. SRC SAN FRANCISCO 4.6 20 MILLION S.F. RTE LOS ANGELES 1.2 MILLION S.F. SUNSET STUDIOS HOLLYWOOD 64 Py ss HERES % of ABR SILICON VALLEY 1) As of
Slide 8: Capital Discipline Facilitates Strategic Growth
UDSON PACIFIC PROPERTIES. Capital Discipline Facilitates Strategic Growth + $1.9 billion of public equity raised exclusively to fund transactions + 30% average Company's Share of Net Debt / Company's Share of Gross Assets, while growing Company's Share of Gross Assets 13x + Investment grade credit r
Slide 9: Balance Sheet Enables Excellent Capital Access and Liquidity
Balance Sheet Enables Excellent Capital Access and Liquidity Minimal Exposure to Interest Rate Volatility? \4 = Total Equity Market Cap = Company's Share of Debt = Fixed Rate Debt = Floating Rate Debt $807 Million of Untapped Liquidity ee & 85% m Revolving Credit Facility = Cash = Sunset Bronson Loa
Slide 10: Leasing Expertise Drives Office Occupancy and Rents
SILICON VALLEY SAN FRANCISCO LOS ANGELES SEATTLE Leasing Expertise Drives Office Occupancy and Rents + 15.7 million square feet leased at 41% GAAP and 27% cash rent spreads since 2010 IPO + Stabilized and in-service office portfolios 96.4% and 95.1% leased, respectively % LEASED AT CHANGE (BPS) ANNU
Slide 11: Studio Operating Expertise Improves Occupancy and NOI
Studio Operating Expertise Improves Occupancy and NOI + Full-year studio same-store cash NOI increased 152% from 2010 to 2019 + Full-year same-store studio cash NOI increased 11% year-over-year + 50% of studio ABR now under long-term leases? Studio Same-Store Cash NO! Growth 2010-2019 $40.0 a2 $36.0
Slide 12: Conservative Approach to (Re)Development
Conservative Approach to (Re)Development + Focus on creating value through leasing, less capital intensive repositionings and redevelopment + (Re)Development projects represent only 17% of capital allocation since IPO? + Historical project costs average approximately 4% of Company's Share of Market
Slide 13: Invest Strategically to Transform Underperforming Assets
Invest Strategically to Transform Underperforming Assets $519 Million Invested 7.5% Weighted Avg. Stabilized Yield $263 Million of Value Creation Vacant warehouse redeveloped as Class A Vacant warehouses redeveloped as Class A, Vacant warehouse redeveloped as Class A Office; 100% leased to Github LE
Slide 14: Develop Premier Office Environments for Leading Companies
Develop Premier Office Environments for Leading Companies Focus on Ancillary Sites Adjacent to Operating Assets Allows for Lower Basis and Higher Returns 115,000 S.F. of Class A office replaced dated, low-rise 326,000 S.F. of Class A, LEED Gold office replaced former 302,000 S.F. of Class A, LEED Go
Slide 15: Commitment to Sustainable, Equitable, Healthy and Diverse Communities
UDSON PACIFIC PROPERTIES. Creating Business Value Through Commitment to stainable, Equitable, Healthy and Diverse Commun LEED certified properties comprise 64% of In-Service square footage, with 95% earning Gold or Platinum certification 100% of new developments obtained/pursuing LEED certification
Slide 16: Exceptional Execution Generates Significant FFO Growth
Exceptional Execution Generates Significant FFO Growth FFO per Diluted Share Grew 88% from 2011 to 2019 Piano soe $2.03 2011 2019 UDSON 1) FFO per diluted share results represent full-year FFO per share growth from 2011 to 2019 and excludes specified items. See Appendix (p.33] 16 PACIFIC for definit
Slide 17: Section 2: Our Portfolio
Section 2: Our Portfolio a & 2 Be
Slide 18: Los Angeles Market Snapshot
Los Angeles Market Snapshot Unique Office and Studio Holdings in Leading Creative Markets 4 Sunset Bronson + Studios is 1 = Py AS (( ICON + CUE Century iy 604 Arizona Element LA 3401 Exposition G : laser d 11601 Wilshire C ¥ , iE: we @ “a. \ SunsetLas Palmas Harlow \ he i \ YP Studios 10900 Washingt
Slide 19: Silicon Valley Market Snapshot
Silicon Valley Market Snapshot Largest Public Office Owner/Operator with Lease-up Opportunities S Unicn Burlingame San Mateos. 9M ro ae Metro Center ShoreBreeze 333 Twin 555 Twin Towers at . . ste — Dolphin Dolphin Shores Center Son bared 8 Redwood City. Page Mill Hill Clocktower Palo Alto Page Mill
Slide 20: San Francisco Market Snapshot
San Francisco Market Snapshot Fully Leased, Iconic Office Assets in Prime Locations “ke Rincon Center 901 Market 875 Howard 275 Brannan 1&0 Rincon Hitt 625 Second 1455 Market Ferry Building f 49, ‘South of Market ‘Chine Basin, : S | Rodis eo + & Pission Bay " 1) U.S. Census Bureau, American Communit
Slide 21: Seattle Market Snapshot
Seattle Market Snapshot Growing Office Portfolio Focused on Transforming Urban Neighborhoods 411 First N < Vest i 505 First bie Sasusonst ing t a F [ 3 3 2 5 + + + + 450 Alaskan 95 Jackson a Met Park North Hilt? Northview Center Washington 1000 1) U.S. Census Bureau, American Community Survey, 2018.
Slide 22: Vancouver Market Snapshot
Vancouver Market Snapshot Significant Repositioning Opportunity in Downtown Core 1) Statistics Canada, 2076 Metro Vancouver Census. 2) PwC Canada / CB Insights, MoneyTree Canada Report, H2 and FY 2019. 3) Research Infosource, Inc., Canada’s Top 50 Research Universities, 2018. 4) Based on management
Slide 23: Tenancy Comprised of Leading Blue-Chip and Growth Companies
Tenancy Comprised of Leading Blue-Chip and Growth Companies 15 Largest Tenants %ABR NASDAQ : $6B Ss Vea (Microsoft: MSFT] (Technicolor SA - TCH-FR] NASDAQ : $1428 >> NASDAQ : $1018 NASDAQ : $218 (oat) oa technicolor NETFLIX om . Glsquare = EMC’ NE GitHub =m 7.8% 7.4% 2 0% 1.0% 1.0% Google a ae @ Sta
Slide 24: Tenant Concentration in Tech, Media and Entertainment
Tenant Concentration in Tech, Media and Entertainment = Online Services Software @ TECHNOLOGY: 38% MEDIA & ENTERTAINMENT: 17% Hardware & Tech Equipment BUSINESS SERVICES: 10% ™= Business Support Services Other SY) LEGAL: 8% FINANCIAL SERVICES: 7% 8% RETAIL: 5% “159 (Q) OILERS = Production & Service
Slide 25: Public and Mature Companies Dominate Tech Tenancy
Public and Mature Companies Dominate Tech Tenancy + 15% of tech ABR attributable to private companies in business less than 10 years + Only 5 tenants contribute more than 5% of tech ABR: Google, Nutanix, Qualcomm, Salesforce, Square + Over half of tech ABR comprised of tenants contributing less than
Slide 26: Facilities and Expertise Draw Media and Entertainment Users
Facilities and Expertise Draw Media and Entertainment Users + Own/operate Sunset Studios—largest collection of independent 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 netwo
Slide 27: rm PAT CAN
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Slide 28: Net Operating Income Growth Driver: Lease-Up
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 3 1,150,707 82.5% 92.8% Seattle 1 35,904 74.3% 92.2% Los Angeles 1 95,987 84.9% 93.6
Slide 29: Net Operating Income Growth Driver: Re-Leasing at Higher Rents
Net Operating Income Growth Driver: Re-Leasing Office Space at Substantially Higher Rents 20% Mark-to-Market on 2020 and 2021 Expirations 14% Mark-to-Market on In-Place Leases Mark-to-Market Rent Growth: 2020 & 2021 Expirations 229% Los Angeles Silicon Valley San Francisco Seattle Vancouver 146,494
Slide 30: Net Operating Income Growth Driver: (Re)Development Pipeline
Net Operating Income Growth Driver: Building Pipeline of (Re)Development Projects Under Construction and Near-Term Planned Over 690,000 S.F. in Los Angeles—85% pre-leased Potential Future Projects? 2.7 million S.F.—50% in Los Angeles, 50% in Seattle / Vancouver / Silicon Valley Over 840,000 S.F. of
Slide 31: HPP Offers a Compelling Investment Opportunity
P 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 excell
Slide 32: Stable team with minimal senior executive turnover
Stable team with minimal senior executive turnover Average 25+ years of public company and real estate expertise Long-standing industry relationships Insider's perspective as a result of senior leadership in each core market Full in-house capabilities—leasing, property management and construction 32
Slide 33: Appendix: Definitions, Reconciliations
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Slide 34: Definitions
Definitions ABR: ANNUALIZED BASE RENT Office: Base rent payments (cash rent payments before abatements) under commenced leases, multiplied by 12, excluding tenant reimbursements Studio: Actual base rent for the trailing 12 months, excluding tenant reimbursements COMPANY'S SHARE! Anon-GAAP financial
Slide 35: Definitions (cont.)
Definitions (cont.) FFO MULTIPLE Share price divided by FFO per share COMPANY'S SHARE OF GROSS ASSETS Company's Share of total assets plus Company's Share of accumulated depreciation IN-SERVICE PROPERTIES Stabilized and Lease-Up Properties LEASE-UP PROPERTIES Office properties that have not reached
Slide 36: Definitions (cont.)
Definitions (cont.) 1) Due to several significant joint ventures, we believe that the Company's Share of certain measures, by accounting for our true economic interest in these joint ventures, provides investors with useful information regarding our financial condition and/or results of operations.
Slide 37: Estimated Value Creation Calculations
Estimated Value Creation Calculations Total Project Stabilized Value SF! Costs” Cap Rate Nol Value Creation Yield? 3401 Exposition 63,376 $ 37.4 5% $ 2.6 § 52.1 $ 14.7 7.0% Element LA 284,037 190.6 5% 15.6 311.6 120.9 8.2% 12655 Jefferson 100,756 60.1 5% 4A 88.0 27.9 7.3% 275 Brannan 57,120 16.7 5%
Slide 38: Non-GAAP Reconciliations
Non-GAAP Reconciliations 02-2010 04-2010 04-2011 04-2012 04-2013 04-2014 04-2015 04-2016 04-2017 04-2018 04-2019 Total Assets, net $ 621,780 $ 1,004,576 $ 1,152,791 $ 1,559,690 $ 2,131,274 $ 2,340,885 $ 6,254,035 $ 6,678,998 $ 6,622,070 $ 7,070,879 $ 7,466,568 Accumulated depreciation $ 21,442 § 27,
Slide 39: Non-GAAP Reconciliations (Cont.)
Net (loss) income Adjustments: Loss from unconsolidated real estate entity - - Non-GAAP Reconciliations (Cont.) Twelve Months Ended 12/31/10 12/31/18 $ (2,682) $ 111,781 $ 8,831 83,167 Interest expense Interest income (59) (1,718) Transaction-related expenses 4,273 535 Other (income) loss 192 (822)
Slide 40: Non-GAAP Reconciliations (Cont.)
UDSO! PACIFIC PROPERTIES. Non-GAAP Reconciliations (Cont.) Net (Loss) income Adjustments: Depreciation and amortization-Consolidated Depreciation and amortization-Corporate-related Depreciation and amortization-Company's Share from unconcolidated real estate investment Gains on sale of real estate I
Slide 41: Non-GAAP Reconciliations (Cont.)
Non-GAAP Reconciliations (Cont.) CAPITAL STRUCTURE Aggregate Principal Shares/Units Amount or $ Equivalent Unsecured revolving credit facility $ 75,000 Unsecured term loans 475,000 Unsecured private placement 625,000 Unsecured registered senior notes 1,300,000 Secured debt 370,459 Add: Series A pref
Slide 42: Contact
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