Hudson Pacific Properties, Inc. · NYSE:HPP
Hudson Pacific Properties — Investor Presentation (December 2018)
43 slides from Hudson Pacific Properties's investor presentation, Dec 18, 2018
Slide 1: Investor Presentation | September 30, 2018
PACIFIC PROPERTIES Investor Presentation | September 30, 2018 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
Forward-Looking Statements and Non-GAAP Financial Measures FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of Section 27A ofthe Securities Act of 1933, as amended, and Section 21€ ofthe Securities Exchange Act of 1934, as amended, Such forward-look
Slide 3: Glossary of Terms
Glossary of Terms ‘ABR: ANNUALIZED BASE RENT Office: Base rent payments (defined as 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. RENT SPREADS Init
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 + 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 5: Hudson Pacific at a Glance
Hudson Pacific ata Glance YSE: HPP INVESTMENT GRADE COMPANY FOUNDED IN 97.5B 5 1 TOTAL MARKET CAPITALIZATIONS we es F OFricepROPERTies 201 0 or 723M INITIAL PUBLIC OFFERING i adlal ANNUALIZED REVENUES 5-YEAR TOTAL SER) inal captial ai i SHAREHOLDER RETURN? DEBTS / TOTAL MARKET CAPITALIZATION: 3.1% D
Slide 6: Contents
Contents 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 MiLiON SAN FRANCISCO z CALIFORNIA LOS ANGELES 79 MILLION S.| OREGON SILICON VALLEY 1.2 MILLION S.F. SUNSET HOLLYWOOD 11As of 9/30/18 See Glossary af Terms [p.3 for definitions. Square footage includes office (
Slide 9: Capital Discipline Facilitates Strategic Growth
Capital Discipline Facilitates Strategic Growth + $1.9 billion of public equity raised exclusively to fund transactions + 31% average Net Debt / Gross Assets, while growing Gross Assets 12x + Investment grade credit rated: Moody's (Baa3), S&P (BBB-), Fitch (BBB-) Gross Assets Consolidated Net Debt /
Slide 10: Minimal Exposure to Interest Rate Volatility
Minimal Exposure to Interest Rate Volatility? i) «= Total Equity Market Cap = Debt «= Fined Rate Debt «= Floating Rate Debt ane ~eailll O = Undrawn Cash Revolver »Cash = Sunset Gower/Bronson Loan = Unsecured Debt = Secured Debt 10
Slide 11: Leasing Expertise Drives Office Occupancy and Rents
SAN FRANCISCO LOS ANGELES SILICON VALLEY SEATTLE Leasing Expertise Drives Office Occupancy and Rents + 12.4 million square feet leased at 42% GAAP and 28% cash rent spreads since 2010 IPO + Stabilized and in-service office portfolios 94.6% and 91.4% leased, respectively % LEASED AT ‘CHANGE (BPS) ANN
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 51% from 2010 to 2017 + Year-to-date same-store studio cash NOI increased 12% year-over-year” + 49% of stage/production office square footage now under long-term leases? Studio Same-Store Cas
Slide 13: 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 15% of capital allocation since IPO" + Historical project costs average approximately 5% of total market capitalizatio
Slide 14: Invest Strategically to Transform Underperforming Assets
Invest Strategically to Transform Underperforming Assets $400+ Million Invested 7.7% Weighted Avg. Stabilized Yield $218 Million of Estimated Value Creation ~ Jacant warehouse redeveloped as Cass. 8 C1 0 office; 100% lease to Deluxe Media Silver ofice; 100% teased to Honey Science Corp. yA y LEsaCeI
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 * Peo” Rat ol! f i a 115,000 S.F. of Class A office ri d datet! low-rise buildings 326,000 S.F. of Class A, LEED Gold office replaced Meat
Slide 16: Energy Star-Labeled Buildings
44 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. LEED Certified (Gold, Silver, or Platinum) 100% of New Developments
Slide 17: Exceptional Execution Generates Significant FFO Growth
Exceptional Execution Generates Significant FFO Growth FFO per Diluted Share Grew 84% from 2011 to 2017 2011 2017 11 FFO per luted share results represent ul-year FFO per share growth from 2011 02017 and excludes specified items, See Glossary of Terms 47 (0.3 for definitions and Appendix 9.37) for i
Slide 18: 5-Year Total Shareholder Return Outperforms Most Office REITs
a 5-Year Total Shareholder Return Outperforms Most Office REITs 90% Total Return from September 2013 to September 2018 EE 100.0% | S| —_ - 7 gh gh eh gg gh ah eh at gh gh gh Qh oh ra ey ra ™ ra ys ra ra 2 r= 1A 288m prod Fate and 97/8 sae pr, ig
Slide 19: Section 2: Our Portfolio
Section 2: Our Portfolio -ro dA LBB ee
Slide 20: Los Angeles Market Snapshot
Los Angeles Market Snapshot Unique Office and Studio Holdings in Leading Creative Markets ES edad 6040Sunset Sunset Bronson Studios ICON + CUE Sunset Las Palmas Harlow ‘Studios 10950 Washington Fourth & Traction Maxwell OFFICE MARKET DRIVERS Streaming networks: Netflix, Amazon, Gogle establishing si
Slide 21: Silicon Valley Market Snapshot
Silicon Valley Market Snapshot Largest Institutionally Held Office Portfolio with Lease-up Opportunities a a az <Z i . MotroCenter ShoreBreeze 339 Twin 555 Twin Toworeat eimn —Daghn—_shrer ater SiywayLandi Papen Clecttwer Palle Pape camer . tue in Ww iia a § a iti ll 2VePorer —20Mlviow Foch Rsearch
Slide 22: San Francisco Market Snapshot
San Francisco Market Snapshot Fully Leased, Iconic Office Assets in Prime Locations Rincon Center 901 Market 875 Howard tat 275 Brannan Pa 625Second «USS Market Ferry Building’ OFFICE MARKET DRIVERS ‘Deep talent poo: 57% bachelor’s degree or higher’ Capital infusion: $101 bition #1) of VCinvestment
Slide 23: Seattle Market Snapshot
Seattle Market Snapshot Growing Office Foothold in Transforming Urban Markets 411 First 450 Alaskan a eal . 83 King 195 Jackson i Northview Center 505 First Met Park North OFFICE MARKET DRIVERS Deep talent pot: 63% bachelor’s degre or higher; 1,000 people moving to Seattle each week! Capital infusio
Slide 24: Tenancy Comprised of Leading Blue-Chip and Growth Companies
Tenancy Comprised of Leading Blue-Chip and Growth Companies 15 Largest Tenants %ABR $628 Post-$ e Valuation NASDAQ : $1008 asoAa : $7248 —— pags (1WG Plc IWG:LN) EURONEXT: 80M at Pion) salesforee < (oew ut technicolor woes UBER Feats 6.6% 4.7% 3.3% 0 2.7% b 1.7% NETFLIX Disquare — Quatcommm—@) Stanf
Slide 25: Tenant Concentration in Tech, Media and Entertainment
Tenant Concentration in Tech, Media and Entertainment = Online Services (i=) TECHNOLOGY: 40% + Software MEDIA & ENTERTAINMENT: 16% Hardware & Tech Equipment «= Business Support Services LEGAL: 9% Other @ BUSINESS SERVICES: 8% S FINANCIAL SERVICES: 7% 8% RETAIL: 6% ia .Q] Wes / Wn yr + Production & S
Slide 26: Public and Mature Companies Dominate Tech Tenancy
Public and Mature Companies Dominate Tech Tenancy + 11% of tech ABR attributable to private companies in business less than 10 years (excludes Uber) + Only 6 tenants contribute more than 5% of tech ABR: Google, Square, Uber, Qualcomm, Salesforce, Nutanix + Nearly half of tech ABR comprised of tenant
Slide 27: 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 28: Section 3: Our Opportunity
Section 38) y Our Opportunity--—27| /
Slide 29: NOI Growth Driver: Lease-Up of Office Acquisitions and Delivered (Re)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 4 1,607,628 14.3% 87.0% Seattle 2 202,633 69.4% 92.4% Los Angeles 1 95,987 84.9% 89
Slide 30: NOI Growth Driver: Re-Leasing Office Space at Substantially Higher Rents
Net Operating Income Growth Driver: Re-Leasing Office Space at Substantially Higher Rents 20% Mark-to-Market on 2018 and 2019 Expirations 21% Mark-to-Market on In-Place Leases Mark-to-Market Rent Growth: 2018 & 2019 Expirations a Los Angeles Silicon Valley Sanfrancisco Seattle 1.931. SF. 11132196. $
Slide 31: NOI Growth Driver: Building Pipeline of (Re)Development Projects
Net Operating Income Growth Driver: Building Pipeline of (Re)Development Projects Under Construction 507,317 S.F. in Los Angeles - 60% pre-leased Potential Future Projects 3.1 million S.F.—59% in Los Angeles, 41% in Silicon Valley Over 840,000 S.F. of studio-adjacent opportunities? Under-Constructio
Slide 32: NOI Growth Driver: Enhancing Facilities at 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: NOI Growth Driver: Driving Rent Growth at the Ferry Building
Net Operating Income Growth Driver: Driving Base and Percentage Rent Growth at the Ferry Building + Rolling 25% of leased office and retail square footage at a blended 28% mark-to-market by 2020 + Additional revenue drivers (not underwritten): improvements to retail mix, programming and events, acti
Slide 34: 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 MM MMOL Current FFO Multiple 17.6. 19.4x Forward FFO Multiple 16.0x 18.3x \ \ WN % NWN Analyst Coverage Reinforces HPP’s Unrealized Value TELL fs HEME, tLTZ HPP Pure Peers i al NAV Premi
Slide 35: 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 36: 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 Chairman & CED 008 cro co VP, Development & Capital Founded Hudson Capital Joined in 2009s. — Funded Hutson Capitan nein 2009250. Inne in 2009 Pir rolesas fs 20
Slide 37: Appendix: Definitions, Calculations & Reconciliations
Rbpendix:- j gee. Definitions, Calculations-&— Reconciliations;
Slide 38: Expanded Definitions
Expanded Definitions NO: NET OPERATING INCOME NOlis nota measure of operating results or cash lows from operating activities as measured by generally accepted accountng principles inthe United States ("GAAP"), and should not be considered an alternative to income from continuing operations, as an in
Slide 39: Value Creation Calculations
Value Creation Calculations Total Project Stabilized Value SF! Costs* Cap Rate Nol Value Creation Yietd* 3401 Exposition 63,376 $ 37.4 5% $ 26 $ 521 § 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% bh 88.0 9 7.3% 275 Brannan 54,673 16.7 5% 25 50.9 34.2 15
Slide 40: Cash / GAAP Reconciliations
Cash / GAAP Reconciliations 02-2010 04-2010 4-201 42012 04-2013 04-2016 O4-2015 42016. L207 03-2018 ‘Unsecured and Secured Debt, net $ 94,020 $ 347,060 $ 399,871 $ 582,085 $ 931,308 $ 918,059 $ 2,260,716 $ 2,688,010 $ 2,421,380 $ 2,332,795 ‘Unamortized loan premium/discount and deferred financing co
Slide 41: Cash / GAAP Reconciliations (Cont.)
Cash / GAAP Reconciliations (Cont.) Twelve Months Ended Nine Months Ended 12/31/17 12/31/10 9/30/18 9/30/17 Net income (loss) $ 94,561 $ (2,682) $ 92,524 $ 45,617 Adjustments: Interest expense 90,037 8,831 59,965 66,086 Interest income (97) (59) (493) (90) Unrealized gain on non-real estate investme
Slide 42: Cash / GAAP Reconciliations (Cont.)
ee Cash / GAAP Reconciliations (Cont.) Twelve Months Ended 12/31/17 12/31/11 Net income (loss) $ 94,561 $ (2,238) Adjustments: Depreciation and amortization of real estate assets 281,773 44,660 Gains on sale of realestate (45,574) - FFO attributable to non-controlling interests (24,068) (1,297) Net
Slide 43: Contact
Contact: Laura Campbell ‘SVP, Investor Relations & Marketing (310) 622-1702 \campbell(@hudsonppi.com
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