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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________
FORM 10-Q
______________________________________
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 001-34789 (Hudson Pacific Properties, Inc.)
Commission File Number: 333-202799-01 (Hudson Pacific Properties, L.P.)
______________________________________
Hudson Pacific Properties, Inc.
Hudson Pacific Properties, L.P.
(Exact name of registrant as specified in its charter)
Hudson Pacific Properties, Inc.

Maryland
(State or other jurisdiction of incorporation or organization)
27-1430478
(I.R.S. Employer Identification Number)
Hudson Pacific Properties, L.P.

Maryland
(State or other jurisdiction of incorporation or organization)
80-0579682
(I.R.S. Employer Identification Number)
11601 Wilshire Blvd., Ninth Floor
Los Angeles, California 90025
(Address of principal executive offices) (Zip Code)
(310) 445-5700
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

______________________________________ 

Securities registered pursuant to Section 12(b) of the Act:
RegistrantTitle of each classTrading Symbol(s)Name of each exchange on which registered
Hudson Pacific Properties, Inc.Common Stock, $0.01 par value
HPP
New York Stock Exchange
Hudson Pacific Properties, Inc.
4.750% Series C Cumulative Redeemable Preferred Stock
HPP Pr C
New York Stock Exchange



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   
 
Hudson Pacific Properties, Inc. Yes  x   No  o
Hudson Pacific Properties, L.P. Yes  x   No  o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    
Hudson Pacific Properties, Inc. Yes  x   No  o
Hudson Pacific Properties, L.P. Yes  x   No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Hudson Pacific Properties, Inc.
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company ☐
Emerging growth company ☐

Hudson Pacific Properties, L.P.
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Hudson Pacific Properties, Inc. o
Hudson Pacific Properties, L.P. o  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   
Hudson Pacific Properties, Inc.  Yes  ☐    No  ☒
Hudson Pacific Properties, L.P. Yes  ☐    No  ☒

The number of shares of common stock of Hudson Pacific Properties, Inc. outstanding at May 5, 2023 was 140,897,681.


EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the period ended March 31, 2023 of Hudson Pacific Properties, Inc., a Maryland corporation, and Hudson Pacific Properties, L.P., a Maryland limited partnership. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “we,” “us,” “our,” or “our Company” refer to Hudson Pacific Properties, Inc. together with its consolidated subsidiaries, including Hudson Pacific Properties, L.P. In statements regarding qualification as a REIT, such terms refer solely to Hudson Pacific Properties, Inc. Unless otherwise indicated or unless the context requires otherwise, all references to “our operating partnership” or “the operating partnership” refer to Hudson Pacific Properties, L.P. together with its consolidated subsidiaries.
Hudson Pacific Properties, Inc. is a real estate investment trust, or REIT, and the sole general partner of our operating partnership. As of March 31, 2023, Hudson Pacific Properties, Inc. owned approximately 97.2% of the ownership interest in our operating partnership (including unvested restricted units). The remaining approximately 2.8% interest was owned by certain of our executive officers and directors, certain of their affiliates and other outside investors, including unvested operating partnership performance units. As the sole general partner of our operating partnership, Hudson Pacific Properties, Inc. has the full, exclusive and complete responsibility for our operating partnership’s day-to-day management and control.
We believe combining the quarterly reports on Form 10-Q of Hudson Pacific Properties, Inc. and the operating partnership into this single report results in the following benefits:
•enhancing investors’ understanding of our Company and our operating partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
•eliminating duplicative disclosure and providing a more streamlined and readable presentation because a substantial portion of the disclosures apply to both our Company and our operating partnership; and
•creating time and cost efficiencies through the preparation of one combined report instead of two separate reports.

There are a few differences between our Company and our operating partnership, which are reflected in the disclosures in this report. We believe it is important to understand the differences between our Company and our operating partnership in the context of how we operate as an interrelated, consolidated company. Hudson Pacific Properties, Inc. is a REIT, the only material assets of which are the units of partnership interest in our operating partnership. As a result, Hudson Pacific Properties, Inc. does not conduct business itself, other than acting as the sole general partner of our operating partnership, issuing equity from time to time and guaranteeing certain debt of our operating partnership. Hudson Pacific Properties, Inc. itself does not issue any indebtedness but guarantees some of the debt of our operating partnership. Our operating partnership, which is structured as a partnership with no publicly traded equity, holds substantially all of the assets of our Company and conducts substantially all of our business. Except for net proceeds from equity issuances by Hudson Pacific Properties, Inc., which are generally contributed to our operating partnership in exchange for units of partnership interest in our operating partnership, our operating partnership generates the capital required by our Company’s business through its operations, its incurrence of indebtedness or through the issuance of units of partnership interest in our operating partnership.
Non-controlling interest, stockholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of our Company and those of our operating partnership. The common units in our operating partnership are accounted for as partners’ capital in our operating partnership’s consolidated financial statements and, to the extent not held by our Company, as a non-controlling interest in our Company’s consolidated financial statements. The differences between stockholders’ equity, partners’ capital and non-controlling interest result from the differences in the equity issued by our Company and our operating partnership.
To help investors understand the significant differences between our Company and our operating partnership, this report presents the consolidated financial statements separately for our Company and our operating partnership. All other sections of this report, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures About Market Risk,” are presented together for our Company and our operating partnership.
In order to establish that the Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that our Company and our operating partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, or the Exchange Act and 18 U.S.C. §1350, this report also includes separate Part I, Item 4 “Controls and Procedures” sections and separate Exhibit 31 and 32 certifications for each of Hudson Pacific Properties, Inc. and our operating partnership.
3


HUDSON PACIFIC PROPERTIES, INC. AND HUDSON PACIFIC PROPERTIES, L.P.
TABLE OF CONTENTS

Page
ITEM 1.Financial Statements of Hudson Pacific Properties, Inc.
ITEM 1.Financial Statements of Hudson Pacific Properties, L.P.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.

4
PART I—FINANCIAL INFORMATION
ITEM 1.         FINANCIAL STATEMENTS OF HUDSON PACIFIC PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

March 31, 2023
(unaudited)
December 31, 2022
ASSETS
Investment in real estate, at cost$8,790,335 $8,716,572 
Accumulated depreciation and amortization(1,619,164)(1,541,271)
Investment in real estate, net7,171,171 7,175,301 
Non-real estate property, plant and equipment, net124,465 130,289 
Cash and cash equivalents163,327 255,761 
Restricted cash19,571 29,970 
Accounts receivable, net 15,176 16,820 
Straight-line rent receivables, net290,650 279,910 
Deferred leasing costs and intangible assets, net382,173 393,842 
Operating lease right-of-use assets399,063 401,051 
Prepaid expenses and other assets, net100,783 98,837 
Investment in unconsolidated real estate entities194,163 180,572 
Goodwill263,549 263,549 
Assets associated with real estate held for sale— 93,238 
TOTAL ASSETS$9,124,091 $9,319,140 
LIABILITIES AND EQUITY
Liabilities
Unsecured and secured debt, net$4,433,546 $4,585,862 
Joint venture partner debt66,136 66,136 
Accounts payable, accrued liabilities and other271,931 264,098 
Operating lease liabilities399,081 399,801 
Intangible liabilities, net32,443 34,091 
Security deposits, prepaid rent and other91,355 83,797 
Liabilities associated with real estate held for sale— 665 
Total liabilities5,294,492 5,434,450 
Commitments and contingencies (note 21)
Redeemable preferred units of the operating partnership9,815 9,815 
Redeemable non-controlling interest in consolidated real estate entities120,902 125,044 
Equity
Hudson Pacific Properties, Inc. stockholders' equity:
4.750% Series C cumulative redeemable preferred stock, $0.01 par value, $25.00 per share liquidation preference, 18,400,000 authorized, 17,000,000 shares outstanding at March 31, 2023 and December 31, 2022
425,000 425,000 
Common stock, $0.01 par value, 481,600,000 authorized, 140,888,769 and 141,054,478 shares outstanding at March 31, 2023 and December 31, 2022, respectively
1,403 1,409 
Additional paid-in capital2,835,061 2,889,967 
Accumulated other comprehensive loss(8,147)(11,272)
Total Hudson Pacific Properties, Inc. stockholders’ equity3,253,317 3,305,104 
Non-controlling interest—members in consolidated real estate entities375,960 377,756 
Non-controlling interest—units in the operating partnership69,605 66,971 
Total equity3,698,882 3,749,831 
TOTAL LIABILITIES AND EQUITY$9,124,091 $9,319,140 



The accompanying notes are an integral part of these consolidated financial statements.
5


HUDSON PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except share data)
Three Months Ended March 31,
20232022
REVENUES
Office
Rental$202,657 $206,192 
Service and other revenues3,976 5,208 
Total office revenues206,633 211,400 
Studio
Rental16,253 13,394 
Service and other revenues29,377 19,719 
Total studio revenues45,630 33,113 
Total revenues252,263 244,513 
OPERATING EXPENSES
Office operating expenses74,054 73,631 
Studio operating expenses37,244 18,983 
General and administrative18,724 20,512 
Depreciation and amortization97,139 92,193 
Total operating expenses227,161 205,319 
OTHER INCOME (EXPENSES)
(Loss) income from unconsolidated real estate entities(745)303 
Fee income2,402 1,071 
Interest expense(53,807)(30,836)
Interest income371 910 
Management services reimbursement income—unconsolidated real estate entities1,064 1,108 
Management services expense—unconsolidated real estate entities(1,064)(1,108)
Transaction-related expenses(1,186)(256)
Unrealized gain on non-real estate investments839 1,650 
Gain on sale of real estate7,046 — 
Impairment loss— (20,503)
Other income5,161 852 
Total other expenses(39,919)(46,809)
Net loss(14,817)(7,615)
Net income attributable to Series A preferred units(153)(153)
Net income attributable to Series C preferred shares(5,047)(5,290)
Net income attributable to participating securities(553)(294)
Net income attributable to non-controlling interest in consolidated real estate entities(1,031)(8,561)
Net loss attributable to redeemable non-controlling interest in consolidated real estate entities894 1,890 
Net loss attributable to common units in the operating partnership282 230 
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS$(20,425)$(19,793)
BASIC AND DILUTED PER SHARE AMOUNTS
Net loss attributable to common stockholders—basic$(0.14)$(0.13)
Net loss attributable to common stockholders—diluted$(0.14)$(0.13)
Weighted average shares of common stock outstanding—basic141,025,021 149,187,994 
Weighted average shares of common stock outstanding—diluted141,025,021 149,187,994 






The accompanying notes are an integral part of these consolidated financial statements.
6


HUDSON PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited, in thousands)
Three Months Ended March 31,
20232022
Net loss$(14,817)$(7,615)
Currency translation adjustments2,014 (1,361)
Net unrealized gains (losses) on derivative instruments:
Unrealized gains721 3,044 
Reclassification adjustment for realized losses (gains)714 (579)
Total net unrealized gains on derivative instruments1,435 2,465 
Total other comprehensive income3,449 1,104 
Comprehensive loss(11,368)(6,511)
Comprehensive income attributable to Series A preferred units(153)(153)
Comprehensive income attributable to Series C preferred stock(5,047)(5,290)
Comprehensive income attributable to participating securities(553)(294)
Comprehensive income attributable to non-controlling interest in consolidated real estate entities(1,266)(8,561)
Comprehensive loss attributable to redeemable non-controlling interest in consolidated real estate entities894 1,890 
Comprehensive loss attributable to non-controlling interest in the operating partnership193 211 
COMPREHENSIVE LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS$(17,300)$(18,708)



































The accompanying notes are an integral part of these consolidated financial statements.
7

HUDSON PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF EQUITY
For the three months ended March 31, 2023
(unaudited, in thousands, except share data)
Hudson Pacific Properties, Inc. Stockholders’ EquityNon-controlling Interest
Series C Cumulative Redeemable Preferred StockShares of Common StockStock AmountAdditional Paid-in Capital Retained Earnings (Accumulated Deficit)Accumulated Other Comprehensive LossUnits in the Operating PartnershipMembers in Consolidated Real Estate EntitiesTotal Equity
Balance, December 31, 2022
$425,000 141,054,478 $1,409 $2,889,967 $— $(11,272)$66,971 $377,756 $3,749,831 
Contributions— — — — — — — 6,497 6,497 
Distributions— — — — — — — (9,559)(9,559)
Issuance of unrestricted stock— 33,928 — — — — — — — 
Shares repurchased— (187,400)(6)(1,363)— — — — (1,369)
Shares withheld to satisfy tax withholding obligations— (12,237)— (87)— — — — (87)
Declared dividend(5,047)— — (55,368)19,872 — (1,169)— (41,712)
Amortization of stock-based
compensation 		— — — 1,912 — — 3,996 — 5,908 
Net income (loss)5,047 — — — (19,872)— (282)1,031 (14,076)
Other comprehensive income— — — — — 3,125 89 235 3,449 
Balance, March 31, 2023
$425,000 140,888,769 $1,403 $2,835,061 $— $(8,147)$69,605 $375,960 $3,698,882 
Balance, December 31, 2021
$425,000 151,124,543 $1,511 $3,317,072 $— $(1,761)$52,199 $402,971 $4,196,992 
Contributions— — — — — — — 2,624 2,624 
Distributions— — — — — — — (15,215)(15,215)
Transaction costs— — — (76)— — — — (76)
Issuance of unrestricted stock— 8,297 — — — — — — — 
Accelerated share repurchase— (6,573,672)(66)(199,934)— — — — (200,000)
Declared dividend(5,290)— — (55,762)19,499 — (679)— (42,232)
Amortization of stock-based compensation— — — 2,200 — — 3,945 — 6,145 
Net income (loss)5,290 — — — (19,499)— (230)8,561 (5,878)
Other comprehensive income— — — — — 1,085 19 — 1,104 
Balance, March 31, 2022
$425,000 144,559,168 $1,445 $3,063,500 $— $(676)$55,254 $398,941 $3,943,464 


















The accompanying notes are an integral part of these consolidated financial statements.
8

HUDSON PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Year Ended March 31,
20232022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(14,817)$(7,615)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization97,139 92,193 
Non-cash portion of interest expense3,606 3,390 
Amortization of stock-based compensation5,236 5,329 
Loss (income) from unconsolidated real estate entities745 (303)
Unrealized gain on non-real estate investments(839)(1,650)
Straight-line rents(10,711)(14,899)
Straight-line rent expenses1,268 422 
Amortization of above- and below-market leases, net(1,620)(2,739)
Amortization of above- and below-market ground leases, net688 668 
Amortization of lease incentive costs311 432 
Distribution of income from unconsolidated real estate entities— 393 
Loss on derivatives3,765 — 
Impairment loss— 20,503 
Gain on sale of real estate(7,046)— 
Change in operating assets and liabilities:
Accounts receivable1,756 (4,133)
Deferred leasing costs and lease intangibles(6,139)(3,799)
Prepaid expenses and other assets(3,537)(10,068)
Accounts payable, accrued liabilities and other15,294 21,964 
Security deposits, prepaid rent and other7,417 (4,634)
Net cash provided by operating activities92,516 95,454 
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of real estate100,441 — 
Additions to investment in real estate(76,452)(52,733)
Maturities of U.S. Government securities— 2,156 
Contributions to non-real estate investments(901)(10,534)
Proceeds from sales of non-real estate investments503 — 
Distributions from unconsolidated real estate entities668 422 
Contributions to unconsolidated real estate entities(12,986)(7,922)
Additions to non-real estate property, plant and equipment(774)(3,658)
Net cash provided by (used in) investing activities10,499 (72,269)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from unsecured and secured debt55,783 235,846 
Payments of unsecured and secured debt(212,000)— 
Payments of in-substance defeased debt— (918)
Transaction costs— (76)
Repurchases of common stock(1,369)— 
Accelerated share repurchase— (200,000)
Dividends paid to common stock and unitholders(36,665)(36,942)
Dividends paid to preferred stock and unitholders(5,200)(7,724)
Contributions from redeemable non-controlling members in consolidated real estate entities— 125 
Distributions to redeemable non-controlling members in consolidated real estate entities(3,248)— 
Contributions from non-controlling members in consolidated real estate entities6,497 2,624 
Distributions to non-controlling members in consolidated real estate entities(9,559)(15,215)
Payments to satisfy tax withholding obligations(87)— 
Net cash used in financing activities(205,848)(22,280)
Net (decrease) increase in cash and cash equivalents and restricted cash(102,833)905 
Cash and cash equivalents and restricted cash—beginning of period285,731 196,876 
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH—END OF PERIOD
$182,898 $197,781 
The accompanying notes are an integral part of these consolidated financial statements.
9
ITEM 1.         FINANCIAL STATEMENTS OF HUDSON PACIFIC PROPERTIES, L.P.

HUDSON PACIFIC PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
March 31, 2023
(unaudited)
December 31, 2022
ASSETS
Investment in real estate, at cost$8,790,335 $8,716,572 
Accumulated depreciation and amortization(1,619,164)(1,541,271)
Investment in real estate, net7,171,171 7,175,301 
Non-real estate property, plant and equipment, net124,465 130,289 
Cash and cash equivalents163,327 255,761 
Restricted cash19,571 29,970 
Accounts receivable, net 15,176 16,820 
Straight-line rent receivables, net290,650 279,910 
Deferred leasing costs and intangible assets, net382,173 393,842 
Operating lease right-of-use assets399,063 401,051 
Prepaid expenses and other assets, net100,783 98,837 
Investment in unconsolidated real estate entities194,163 180,572 
Goodwill263,549 263,549 
Assets associated with real estate held for sale— 93,238 
TOTAL ASSETS$9,124,091 $9,319,140 
LIABILITIES AND CAPITAL
Liabilities
Unsecured and secured debt, net$4,433,546 $4,585,862 
Joint venture partner debt66,136 66,136 
Accounts payable, accrued liabilities and other271,931 264,098 
Operating lease liabilities399,081 399,801 
Intangible liabilities, net32,443 34,091 
Security deposits, prepaid rent and other91,355 83,797 
Liabilities associated with real estate held for sale— 665 
Total liabilities5,294,492 5,434,450 
Commitments and contingencies (note 21)
Redeemable preferred units of the operating partnership9,815 9,815 
Redeemable non-controlling interest in consolidated real estate entities120,902 125,044 
Capital
Hudson Pacific Properties, L.P. partners’ capital
4.750% Series C cumulative redeemable preferred units, $25.00 per unit liquidation preference, 17,000,000 units outstanding at March 31, 2023 and December 31, 2022
425,000 425,000 
Common units, 143,407,231 and 143,246,320 outstanding at March 31, 2023 and December 31, 2022, respectively
2,906,168 2,958,535 
Accumulated other comprehensive loss(8,246)(11,460)
Total Hudson Pacific Properties, L.P. partners’ capital3,322,922 3,372,075 
Non-controlling interest—members in consolidated real estate entities375,960 377,756 
Total capital3,698,882 3,749,831 
TOTAL LIABILITIES AND CAPITAL$9,124,091 $9,319,140 







The accompanying notes are an integral part of these consolidated financial statements.
10


HUDSON PACIFIC PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except unit data)
Three Months Ended March 31,
20232022
REVENUES
Office
Rental$202,657 $206,192 
Service and other revenues3,976 5,208 
Total office revenues206,633 211,400 
Studio
Rental16,253 13,394 
Service and other revenues29,377 19,719 
Total studio revenues45,630 33,113 
Total revenues252,263 244,513 
OPERATING EXPENSES
Office operating expenses74,054 73,631 
Studio operating expenses37,244 18,983 
General and administrative18,724 20,512 
Depreciation and amortization97,139 92,193 
Total operating expenses227,161 205,319 
OTHER INCOME (EXPENSES)
(Loss) income from unconsolidated real estate entities(745)303 
Fee income2,402 1,071 
Interest expense(53,807)(30,836)
Interest income371 910 
Management services reimbursement income—unconsolidated real estate entities1,064 1,108 
Management services expense—unconsolidated real estate entities(1,064)(1,108)
Transaction-related expenses(1,186)(256)
Unrealized gain on non-real estate investments839 1,650 
Gain on sale of real estate7,046 — 
Impairment loss— (20,503)
Other income5,161 852 
Total other expenses(39,919)(46,809)
Net loss(14,817)(7,615)
Net income attributable to non-controlling interest in consolidated real estate entities(1,031)(8,561)
Net loss attributable to redeemable non-controlling interest in consolidated real estate entities894 1,890 
Net loss attributable to Hudson Pacific Properties, L.P.(14,954)(14,286)
Net income attributable to Series A preferred units(153)(153)
Net income attributable to Series C preferred units(5,047)(5,290)
Net income attributable to participating securities(553)(294)
NET LOSS AVAILABLE TO COMMON UNITHOLDERS$(20,707)$(20,023)
BASIC AND DILUTED PER UNIT AMOUNTS
Net loss attributable to common unitholders—basic$(0.14)$(0.13)
Net loss attributable to common unitholders—diluted$(0.14)$(0.13)
Weighted average shares of common units outstanding—basic143,329,366 151,031,790 
Weighted average shares of common units outstanding—diluted143,329,366 151,031,790 








The accompanying notes are an integral part of these consolidated financial statements.
11


HUDSON PACIFIC PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited, in thousands)
Three Months Ended March 31,
20232022
Net loss$(14,817)$(7,615)
Currency translation adjustments2,014 (1,361)
Net unrealized gains (losses) on derivative instruments:
Unrealized gains721 3,044 
Reclassification adjustment for realized losses (gains)714 (579)
Total net unrealized gains on derivative instruments1,435 2,465 
Total other comprehensive income3,449 1,104 
Comprehensive loss(11,368)(6,511)
Comprehensive income attributable to Series A preferred units(153)(153)
Comprehensive income attributable to Series C preferred units(5,047)(5,290)
Comprehensive income attributable to participating securities(553)(294)
Comprehensive income attributable to non-controlling interest in consolidated real estate entities(1,266)(8,561)
Comprehensive loss attributable to redeemable non-controlling interest in consolidated real estate entities894 1,890 
COMPREHENSIVE LOSS ATTRIBUTABLE TO PARTNERS’ CAPITAL$(17,493)$(18,919)




































The accompanying notes are an integral part of these consolidated financial statements.
12

HUDSON PACIFIC PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF CAPITAL
For the three months ended March 31, 2023
(unaudited, in thousands, except share data)
Hudson Pacific Properties, L.P. Partners’ Capital
Preferred UnitsNumber of Common UnitsCommon UnitsAccumulated Other Comprehensive LossTotal Partners’ CapitalNon-controlling Interest—Members in Consolidated Real Estate EntitiesTotal Capital
Balance, December 31, 2022
$425,000 143,246,320 $2,958,535 $(11,460)$3,372,075 $377,756 $3,749,831 
Contributions— — — — — 6,497 6,497 
Distributions— — — — — (9,559)(9,559)
Issuance of unrestricted units— 360,548 — — — — — 
Repurchase of common units— (187,400)(1,369)— (1,369)— (1,369)
Units withheld to satisfy tax withholding obligations— (12,237)(87)— (87)— (87)
Declared distributions(5,047)— (36,665)— (41,712)— (41,712)
Amortization of unit-based compensation— — 5,908 — 5,908 — 5,908 
Net income (loss)5,047 — (20,154)— (15,107)1,031 (14,076)
Other comprehensive income— — — 3,214 3,214 235 3,449 
Balance, March 31, 2023
$425,000 143,407,231 $2,906,168 $(8,246)$3,322,922 $375,960 $3,698,882 
Balance, December 31, 2021
$425,000 152,967,441 $3,370,800 $(1,779)$3,794,021 $402,971 $4,196,992 
Contributions— — — — — 2,624 2,624 
Distributions— — — — — (15,215)(15,215)
Transaction costs— — (76)— (76)— (76)
Issuance of unrestricted units— 11,663 — — — — — 
Repurchase of common units— (6,573,672)(200,000)— (200,000)— (200,000)
Declared distributions(5,290)— (36,942)— (42,232)— (42,232)
Amortization of unit-based compensation— — 6,145 — 6,145 — 6,145 
Net income (loss)5,290 — (19,729)— (14,439)8,561 (5,878)
Other comprehensive income— — — 1,104 1,104 — 1,104 
Balance, March 31, 2022
$425,000 146,405,432 $3,120,198 $(675)$3,544,523 $398,941 $3,943,464 

















The accompanying notes are an integral part of these consolidated financial statements.
13


HUDSON PACIFIC PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Year Ended March 31,
20232022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(14,817)$(7,615)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization97,139 92,193 
Non-cash portion of interest expense3,606 3,390 
Amortization of unit-based compensation5,236 5,329 
Loss (income) from unconsolidated real estate entities745 (303)
Unrealized gain on non-real estate investments(839)(1,650)
Straight-line rents(10,711)(14,899)
Straight-line rent expenses1,268 422 
Amortization of above- and below-market leases, net(1,620)(2,739)
Amortization of above- and below-market ground leases, net688 668 
Amortization of lease incentive costs311 432 
Distribution of income from unconsolidated real estate entities— 393 
Loss on derivatives3,765 — 
Impairment loss— 20,503 
Gain on sale of real estate(7,046)— 
Change in operating assets and liabilities:
Accounts receivable1,756 (4,133)
Deferred leasing costs and lease intangibles(6,139)(3,799)
Prepaid expenses and other assets(3,537)(10,068)
Accounts payable, accrued liabilities and other15,294 21,964 
Security deposits, prepaid rent and other7,417 (4,634)
Net cash provided by operating activities92,516 95,454 
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of real estate100,441 — 
Additions to investment in real estate(76,452)(52,733)
Maturities of U.S. Government securities— 2,156 
Proceeds from sale of non-real estate investment503 — 
Contributions to non-real estate investments(901)(10,534)
Distributions from unconsolidated real estate entities668 422 
Contributions to unconsolidated real estate entities(12,986)(7,922)
Additions to non-real estate property, plant and equipment(774)(3,658)
Net cash provided by (used in) investing activities10,499 (72,269)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from unsecured and secured debt55,783 235,846 
Payments of unsecured and secured debt(212,000)— 
Payments of in-substance defeased debt— (918)
Transaction costs— (76)
Repurchases of common units(1,369)(200,000)
Distributions paid to common unitholders(36,665)(36,942)
Distributions paid to preferred unitholders(5,200)(7,724)
Contributions from redeemable non-controlling members in consolidated real estate entities— 125 
Distributions to redeemable non-controlling members in consolidated real estate entities(3,248)— 
Contributions from non-controlling members in consolidated real estate entities6,497 2,624 
Distributions to non-controlling members in consolidated real estate entities(9,559)(15,215)
Payments to satisfy tax withholding obligations(87)— 
Net cash used in financing activities(205,848)(22,280)
Net (decrease) increase in cash and cash equivalents and restricted cash(102,833)905 
Cash and cash equivalents and restricted cash—beginning of period285,731 196,876 
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH—END OF PERIOD
$182,898 $197,781 

The accompanying notes are an integral part of these consolidated financial statements.
14
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)

1. Organization

Hudson Pacific Properties, Inc. is a Maryland corporation formed on November 9, 2009 as a fully integrated, self-administered and self-managed real estate investment trust (“REIT”). Through its controlling interest in the operating partnership and its subsidiaries, Hudson Pacific Properties, Inc. owns, manages, leases, acquires and develops real estate, consisting primarily of office and studio properties. Unless otherwise indicated or unless the context requires otherwise, all references in these financial statements to “the Company” refer to Hudson Pacific Properties, Inc. together with its consolidated subsidiaries, including Hudson Pacific Properties, L.P. Unless otherwise indicated or unless the context requires otherwise, all references to “our operating partnership” or “the operating partnership” refer to Hudson Pacific Properties, L.P. together with its consolidated subsidiaries.

The Company’s portfolio consists of properties primarily located throughout the United States, Western Canada and Greater London, United Kingdom. The following table summarizes the Company’s portfolio as of March 31, 2023:
SegmentsNumber of Properties
Square Feet
(unaudited)
Consolidated portfolio
Office48 13,921,270 
Studio3 1,251,820 
Future development6 1,966,242 
Total consolidated portfolio57 17,139,332 
Unconsolidated portfolio(1)
Office(2)
1 1,515,867 
Studio(3)
1 241,000 
Future development(4)
2 1,617,347 
Total unconsolidated portfolio4 3,374,214 
TOTAL61 20,513,546 
_________________
1.The Company owns 20% of the unconsolidated joint venture entity that owns the Bentall Centre property, 50% of the unconsolidated joint venture entity that owns Sunset Glenoaks Studios and 35% of the unconsolidated joint venture entity that owns Sunset Waltham Cross Studios. The square footage shown above represents 100% of the properties.
2.Includes Bentall Centre.
3.Includes Sunset Glenoaks Studios.
4.Includes land for the Burrard Exchange and Sunset Waltham Cross Studios.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements of the Company and the operating partnership are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) applicable to interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to the Securities and Exchange Commission (“SEC”) rules and regulations. Accordingly, the interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying interim financial statements reflect all adjustments of a normal and recurring nature that are considered necessary for a fair presentation of the results for the interim periods presented.

The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements in the 2022 Annual Report on Form 10-K of Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P. and the notes thereto.

Principles of Consolidation

The unaudited interim consolidated financial statements of the Company include the accounts of the Company, the operating partnership and all wholly-owned and controlled subsidiaries. The consolidated financial statements of the operating
15
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
partnership include the accounts of the operating partnership and all wholly-owned and controlled subsidiaries. All intercompany balances and transactions have been eliminated in the consolidated financial statements.

Under the consolidation guidance, the Company first evaluates an entity using the variable interest model, then the voting model. The Company ultimately consolidates all entities that the Company controls through either majority ownership or voting rights, including all variable interest entities (“VIEs”) of which the Company is considered the primary beneficiary. The Company accounts for all other unconsolidated joint ventures using the equity method of accounting. In addition, the Company continually evaluates each legal entity that is not wholly-owned for reconsideration based on changing circumstances.

VIEs are defined as entities in which equity investors do not have:

•the characteristics of a controlling financial interest;
•sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties; and/or
•the entity is structured with non-substantive voting rights.

The entity that consolidates a VIE is known as its primary beneficiary and is generally the entity with both the power to direct the activities that most significantly affect the VIE’s economic performance and the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE. As of March 31, 2023, the Company has determined that its operating partnership and 19 joint ventures met the definition of a VIE. 13 of these joint ventures are consolidated and six are unconsolidated.

Consolidated Joint Ventures

As of March 31, 2023, the operating partnership has determined that 13 of its joint ventures met the definition of a VIE and are consolidated:
EntityPropertyOwnership Interest
Hudson 1455 Market, L.P.1455 Market55.0 %
Hudson 1099 Stewart, L.P.Hill755.0 %
HPP-MAC WSP, LLCOne Westside and Westside Two75.0 %
Hudson One Ferry REIT, L.P.Ferry Building55.0 %
Sunset Bronson Entertainment Properties, LLCSunset Bronson Studios, ICON, CUE51.0 %
Sunset Gower Entertainment Properties, LLCSunset Gower Studios51.0 %
Sunset 1440 North Gower Street, LLCSunset Gower Studios51.0 %
Sunset Las Palmas Entertainment Properties, LLCSunset Las Palmas Studios, Harlow51.0 %
Sunset Services Holdings, LLC
None(1)
51.0 %
Sunset Studios Holdings, LLCEPIC51.0 %
Hudson Media and Entertainment Management, LLC
None(2)
51.0 %
Hudson 6040 Sunset, LLC6040 Sunset51.0 %
Hudson 1918 Eighth, L.P.1918 Eighth55.0 %
__________________ 
1.Sunset Services Holdings, LLC wholly owns Services Holdings, LLC, which owns 100% interests in Sunset Bronson Services, LLC, Sunset Gower Services, LLC and Sunset Las Palmas Services, LLC, which provide services to Sunset Bronson Entertainment Properties, LLC, Sunset Gower Entertainment Properties, LLC and Sunset Las Palmas Entertainment Properties, LLC, respectively.
2.Hudson Media and Entertainment Management, LLC manages the following properties: Sunset Gower Studios, Sunset Bronson Studios, Sunset Las Palmas Studios, 6040 Sunset, ICON, CUE, EPIC and Harlow (collectively “Hollywood Media Portfolio”).

As of March 31, 2023 and December 31, 2022, the Company has determined that its operating partnership met the definition of a VIE and is consolidated.

Substantially all of the assets and liabilities of the Company are related to the operating partnership VIE. The assets and credit of certain VIEs can only be used to satisfy those VIEs’ own contractual obligations, and the VIEs’ creditors have no recourse to the general credit of the Company.

16
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
Unconsolidated Joint Ventures

As of March 31, 2023, the Company has determined it is not the primary beneficiary of six of its joint ventures that are VIEs. Due to its significant influence over the unconsolidated entities, the Company accounts for them using the equity method of accounting. Under the equity method, the Company initially records the investment at cost and subsequently adjusts for equity in earnings or losses and cash contributions and distributions.

The Company’s net equity investment in its unconsolidated joint ventures is reflected within investment in unconsolidated real estate entities on the Consolidated Balance Sheets. The Company’s share of net income or loss from the joint ventures is included within (loss) income from unconsolidated real estate entities on the Consolidated Statements of Operations. The Company uses the cumulative earnings approach for determining cash flow presentation of distributions from unconsolidated joint ventures. Under this approach, distributions up to the amount of cumulative equity in earnings recognized are classified as cash inflows from operating activities, and those in excess of that amount are classified as cash inflows from investing activities. Refer to Note 6 for further details regarding our investments in unconsolidated joint ventures.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of commitments and contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to acquiring, developing and assessing the carrying values of its real estate properties, the fair value measurement of contingent consideration, assets acquired and liabilities assumed in business combination transactions, determining the incremental borrowing rate used in the present value calculations of its new or modified operating lessee agreements, its accrued liabilities and the valuation of performance-based equity compensation awards. The Company bases its estimates on historical experience, current market conditions and various other assumptions that are believed to be reasonable under the circumstances. Actual results could materially differ from these estimates.

Lease Accounting

The Company accounts for its leases under ASC 842, which requires companies to identify lease and non-lease components of a lease agreement. Lease components relate to the right to use the leased asset whereas non-lease components relate to payments for goods or services that are transferred separately from the right to use the underlying asset.

Lessee Accounting

The Company determines if an arrangement is a lease at inception. The Company’s operating lease agreements relate to ground leases, sound stage leases, office leases and other facility leases and are reflected in operating lease right-of-use (“ROU”) assets and operating lease liabilities on the Consolidated Balance Sheets. For leases with a term of 12 months or less the Company makes an accounting policy election, by class of underlying asset, not to recognize ROU assets and lease liabilities. The Company recognizes lease expense for such leases generally on a straight-line basis over the lease term.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As the Company’s leases do not provide an implicit rate, the Company determines its incremental borrowing rate based on the information available at commencement date, or the date of the ASC 842 adoption, in determining the present value of lease payments. The weighted average incremental borrowing rate used to calculate the ROU assets and liabilities was 5.6%. ROU assets also include any lease payments made and exclude lease incentives. Many of the Company’s lessee agreements include options to extend the lease, which the Company does not include in its minimum lease terms unless the option is reasonably certain to be exercised. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. The weighted average remaining lease term was 23 years as of March 31, 2023.

17
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
Lessor Accounting

The presentation of revenues on the Consolidated Statements of Operations reflects a single lease component that combines rental, tenant recoveries and other tenant-related revenues for the office portfolio, with the election of the lessor practical expedient. For the Company’s rentals at the studio properties, total lease consideration is allocated to lease and non-lease components on a relative standalone basis. The recognition of revenues related to lease components is governed by ASC 842, while revenue related to non-lease components is subject to ASC 606, Revenue from Contracts with Customers (“ASC 606”).

Revenue Recognition

The Company has compiled an inventory of its sources of revenues and has identified the following material revenue streams: (i) rental revenues (ii) tenant recoveries and other tenant-related revenues (iii) ancillary revenues (iv) other revenues (v) sale of real estate (vi) management fee income and (vii) management services reimbursement income.
Revenue Stream
ComponentsFinancial Statement Location
Rental revenuesOffice, stage and storage rentalsOffice and Studio segments: rental
Tenant recoveries and other tenant-related revenues Reimbursement of real estate taxes, insurance, repairs and maintenance, other operating expenses and must-take parking revenues Office segment: rental
Studio segment: rental and service and other revenues
Ancillary revenuesRevenues derived from tenants’ use of power, HVAC and telecommunications (i.e., telephone and internet) and lighting, equipment and vehicle rentalsStudio segment: service and other revenues
Other revenuesParking revenue that is not associated with lease agreements and otherOffice and Studio segments: service and other revenues
Sale of real estateGains on sales derived from cash consideration less cost basisGain on sale of real estate
Management fee incomeIncome derived from management services provided to unconsolidated joint venture entitiesFee income
Management services reimbursement income
Reimbursement of costs incurred by the Company in the management of unconsolidated joint venture entities
Management services reimbursement income—unconsolidated real estate entities

The Company recognizes rental revenue from tenants on a straight-line basis over the lease term when collectability is probable and the tenant has taken possession of or controls the physical use of the leased asset.

The Company recognizes tenant recoveries related to reimbursement of real estate taxes, insurance, repairs and maintenance and other operating expenses as revenue in the period during which the applicable expenses are incurred. The reimbursements are recognized and presented gross, as the Company is generally the primary obligor with respect to purchasing goods and services from third-party suppliers, has discretion in selecting the supplier and bears the associated credit risk.

Other tenant-related revenues include parking stipulated in lease agreements as must-take parking rentals. These revenues are recognized over the term of the lease.

Ancillary revenues, other revenues, management fee income and management services reimbursement income are accounted for under ASC 606. These revenues have single performance obligations and are recognized at the point in time when services are rendered.

18
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
The following table summarizes the Company’s revenue streams that are accounted for under ASC 606 for the three months ended March 31, 2023 and 2022:
Three Months Ended March 31,
20232022
Ancillary revenues$27,294 $18,487 
Other revenues$5,518 $5,927 
Studio-related tenant recoveries$541 $513 
Management fee income$2,402 $1,071 
Management services reimbursement income$1,064 $1,108 

The following table summarizes the Company’s receivables that are accounted for under ASC 606 as of:
March 31, 2023December 31, 2022
Ancillary revenues$8,917 $15,503 
Other revenues$1,381 $1,193 

In regards to sales of real estate, the Company applies certain recognition and measurement principles in accordance with ASC 606. The Company is required to evaluate the sales of real estate based on transfer of control. If a real estate sale contract includes ongoing involvement with the sold property by the seller, the seller must evaluate each promised good or service under the contract to determine whether it represents a performance obligation, constitutes a guarantee or prevents the transfer of control. The timing and pattern of revenue recognition might change as it relates to gains on sale of real estate if the sale includes continued involvement that represents a separate performance obligation.

Acquisitions

The Company applies the acquisition method for acquisitions that meet the definition of a business combination. Under the acquisition method, the Company estimates the fair value of the identifiable assets and liabilities of the acquired entity on the acquisition date. The difference between the fair value of the consideration transferred for the acquisition and the fair value of the net assets acquired is recorded as goodwill and acquisition-related expenses arising from the transaction are expensed as incurred. The Company includes the results of operations of the businesses that it acquires beginning on the acquisition date.

The Company applies a cost accumulation and allocation model to acquisitions that meet the definition of an asset acquisition. Under this model, the purchase price is allocated based on the relative fair value of the assets acquired and liabilities assumed. Additionally, acquisition-related expenses associated with an asset acquisition are capitalized as part of the purchase price.

Goodwill and Acquired Intangible Assets

Goodwill is an unidentifiable intangible asset and is recognized as a residual, generally measured as the excess of consideration transferred in a business combination over the identifiable assets acquired and liabilities assumed. Goodwill is assigned to reporting units that are expected to benefit from the synergies of the business combination.

The Company tests its goodwill and indefinite-lived intangible assets for impairment at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. Goodwill is tested for impairment at the reporting unit to which it is assigned, which can be an operating segment or one level below an operating segment. The Company has three operating segments: the management entity, Office and Studio, each of which is a reporting unit. The assessment of goodwill for impairment may initially be performed based on qualitative factors to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying value, including goodwill. If so, a quantitative assessment is performed, and to the extent the carrying value of the reporting unit exceeds its fair value, impairment is recognized for the excess up to the amount of goodwill assigned to the reporting unit. Alternatively, the Company may bypass a qualitative assessment and proceed directly to a quantitative assessment.


19
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
A qualitative assessment considers various factors such as macroeconomic, industry and market conditions to the extent they affect the earnings performance of the reporting unit, changes in business strategy and/or management of the reporting unit, changes in composition or mix of revenues and/or cost structure of the reporting unit, financial performance and business prospects of the reporting unit, among other factors.

In a quantitative assessment, significant judgment, assumptions and estimates are applied in determining the fair value of reporting units. The Company generally uses the income approach to estimate fair value by discounting the projected net cash flows of the reporting unit, and may corroborate with market-based data where available and appropriate. Projection of future cash flows is based upon various factors, including, but not limited to, our strategic plans in regard to our business and operations, internal forecasts, terminal year residual revenue multiples, operating profit margins, pricing of similar businesses and comparable transactions where applicable, and risk-adjusted discount rates to present value future cash flows. Given the level of sensitivity in the inputs, a change in the value of any one input, in isolation or in combination, could significantly affect the overall estimation of fair value of the reporting unit.

As of March 31, 2023, the carrying value of goodwill was $263.5 million. No impairment indicators have been identified during the three months ended March 31, 2023.

Intangible assets with finite lives are amortized over their estimated useful lives using the straight-line method, which reflects the pattern in which the assets are consumed. The estimated useful lives for acquired intangible assets range from five to seven years. The Company assesses its intangible assets with finite lives for impairment when indicators of impairment are identified.

3. Business Combinations

Quixote Acquisition

On August 31, 2022 (“Quixote Acquisition Date”), the Company acquired 100% of the equity interests in Quixote, which rents sound stages, cast trailers and trucks and other equipment essential for media content production and will expand the Company’s service offerings for its studio platform.

The following table summarizes the Quixote Acquisition Date fair value of the consideration transferred in connection with the acquisition:
Cash$199,098 
Seller note payable160,000 
Total consideration$359,098 

20
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the Quixote Acquisition Date:

Cash and cash equivalents$5,780 
Accounts receivable7,238 
Prepaid expenses and other assets3,788 
Investment in real estate(1)
47,741 
Non-real estate property, plant and equipment65,939 
Intangible assets76,900 
Right-of-use assets106,115 
Total assets acquired313,501 
Accounts payable, accrued liabilities and other$12,700 
Lease liabilities95,112 
Total liabilities assumed107,812 
Net identifiable assets acquired$205,689 
Goodwill153,409 
NET ASSETS ACQUIRED$359,098 
_____________
1.Represents leasehold improvements related to Quixote’s leasehold interests in studio properties.

Of the $76.9 million of intangible assets acquired as part of the Quixote acquisition, $28.6 million was assigned to the registered trade name, which is not subject to amortization. The remaining $48.3 million of acquired intangible assets includes customer relationships of $45.4 million (seven-year useful life) and non-compete agreements of $2.9 million (five-year weighted-average useful life). The definite-lived intangible assets are subject to a weighted-average useful life of approximately seven years.

Goodwill of $153.4 million for the Quixote acquisition was recognized in connection with the transaction. The goodwill recognized is attributable to expected synergies and the assembled workforce of Quixote. The goodwill has been allocated to the studio reporting unit. Goodwill is deductible for tax purposes and, as a result, deferred taxes have been recorded.

4. Investment in Real Estate

The following table summarizes the Company’s investment in real estate, at cost as of:
March 31, 2023December 31, 2022
Land$1,397,711 $1,397,714 
Building and improvements6,361,773 6,342,851 
Tenant improvements894,939 868,193 
Furniture and fixtures9,730 9,639 
Property under development126,182 98,175 
INVESTMENT IN REAL ESTATE, AT COST$8,790,335 $8,716,572 

Acquisitions of Real Estate

The Company had no acquisitions of real estate during the three months ended March 31, 2023.

Impairment of Long-Lived Assets

The Company assesses the carrying value of real estate assets and related intangibles whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable in accordance with GAAP.
21
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
Impairment losses are recorded on real estate assets held for investment when indicators of impairment are present and the future undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. The Company recognizes impairment losses to the extent the carrying amount exceeds the fair value, based on Level 1 or Level 2 inputs.

The Company had no impairments of real estate during the three months ended March 31, 2023. During the three months ended March 31, 2022, the Company recorded $12.0 million of impairment charges related to its Del Amo office property, which was classified as held for sale as of March 31, 2022, due to a reduction in the estimated fair value of the property. The estimated fair value of $6.0 million was based on the estimated sales price of the property, which is classified within Level 2 of the fair value hierarchy.
Dispositions of Real Estate

The following table summarizes information on dispositions completed during the three months ended March 31, 2023. This property was considered non-strategic to the Company’s portfolio:
PropertySegmentDate of Disposition Square Feet (unaudited)
Sales Price(1) (in millions)
Skyway LandingOffice2/6/2023246,997 $102.0 
_____________ 
1.Represents gross sales price before certain credits, prorations and closing costs.

The disposition of this property resulted in a gain of $7.0 million during the three months ended March 31, 2023 recorded within gain on sale of real estate on the Consolidated Statement of Operations.

5. Non-Real Estate Property, Plant and Equipment, net

The following table summarizes the Company’s non-real estate property, plant and equipment, net as of:
March 31, 2023December 31, 2022
Trailers$70,332 $68,973 
Production equipment36,646 36,019 
Trucks and other vehicles20,525 20,306 
Leasehold improvements13,977 16,993 
Other equipment5,703 5,693 
Furniture, fixtures and equipment7,007 5,849 
Non-real estate property, plant and equipment, at cost154,190 153,833 
Accumulated depreciation(29,725)(23,544)
NON-REAL ESTATE PROPERTY, PLANT AND EQUIPMENT, NET$124,465 $130,289 

Non-real estate property, plant and equipment is carried at cost less accumulated depreciation. The Company computes depreciation using the straight-line method over the estimated useful lives of the assets, which range from three to 20 years. The Company evaluates its non-real estate property, plant and equipment, net for impairment using the same accounting model that it applies to its real estate assets and related intangibles. See Note 2 for details. The Company did not recognize any impairment charges for non-real estate property, plant and equipment during the three months ended March 31, 2023.

22
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
6. Investment in Unconsolidated Real Estate Entities

The following table summarizes the Company’s investments in unconsolidated joint ventures:
PropertyProperty TypeSubmarketOwnership InterestFunctional Currency
Sunset Waltham Cross Studios
DevelopmentBroxbourne, United Kingdom35%Pound sterling
(1)
Sunset Glenoaks Studios
DevelopmentLos Angeles50%U.S. dollar
(2)(3)
Bentall CentreOperating PropertyDowntown Vancouver20%Canadian dollar
(2)(4)
__________________ 
1.The Company owns 35% of the ownership interests in each of the joint venture entities that own the Sunset Waltham Cross Studios and the joint venture entities formed to serve as the general partner and management services company for the property-owning joint venture entity.
2.The Company serves as the operating member of this joint venture.
3.The Company has provided various guarantees for this joint venture’s construction loan, including a completion guarantee, equity guarantee and recourse carve-out guarantee. The likelihood of loss relating to the completion guarantee is remote as of March 31, 2023.
4.The Company has guaranteed the joint venture’s outstanding indebtedness in the amount of $98.3 million.

The Company’s maximum exposure related to its unconsolidated joint ventures is limited to its investment and the guarantees provided in relation to the joint ventures’ indebtedness. The Company’s investments in foreign real estate entities are subject to foreign currency fluctuation risk. Such investments are translated into U.S. dollars at the exchange rate in effect as of the financial statement date. The Company’s share of the (loss) income from foreign unconsolidated real estate entities is translated using the monthly-average exchange rate for the periods presented. Gains or losses resulting from the translation are classified in accumulated other comprehensive loss as a separate component of total equity and are excluded from net income.

The Company held ownership interests in other immaterial unconsolidated joint ventures in the total of $0.4 million and $0.1 million as of March 31, 2023 and December 31, 2022, respectively.

The table below presents the combined and condensed balance sheets for the Company’s unconsolidated joint ventures:
March 31, 2023December 31, 2022
ASSETS
Investment in real estate, net$1,136,830 $1,093,448 
Other assets63,762 62,870 
TOTAL ASSETS$1,200,592 $1,156,318 
LIABILITIES
Secured debt, net$547,446 $527,985 
Other liabilities57,467 49,027 
TOTAL LIABILITIES604,913 577,012 
Company’s capital(1)
178,494 170,656 
Partner’s capital417,185 408,650 
TOTAL CAPITAL595,679 579,306 
TOTAL LIABILITIES AND CAPITAL$1,200,592 $1,156,318 
__________________ 
1.To the extent the Company’s cost basis is different from the basis reflected at the joint venture level, the basis is amortized over the life of the related asset and is included in the (loss) income from unconsolidated real estate entities line item on the Consolidated Statements of Operations.

23
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
The table below presents the combined and condensed statements of operations for the Company’s unconsolidated joint ventures:
Three Months Ended March 31,
20232022
TOTAL REVENUES$18,471 $19,532 
TOTAL EXPENSES22,077 17,778 
NET (LOSS) INCOME$(3,606)$1,754 

7. Deferred Leasing Costs and Intangible Assets, net and Intangible Liabilities, net

The following summarizes the Company’s deferred leasing costs and intangibles as of:
March 31, 2023December 31, 2022
Deferred leasing costs and in-place lease intangibles$330,828 $328,617 
Accumulated amortization(150,602)(141,353)
Deferred leasing costs and in-place lease intangibles, net180,226 187,264 
Below-market ground leases79,562 79,562 
Accumulated amortization(18,667)(17,979)
Below-market ground leases, net60,895 61,583 
Above-market leases724 724 
Accumulated amortization(351)(324)
Above-market leases, net373 400 
Customer relationships97,900 97,900 
Accumulated amortization(15,850)(12,346)
Customer relationships, net82,050 85,554 
Non-competition agreements8,200 8,200 
Accumulated amortization(2,044)(1,632)
Non-competition agreements, net6,156 6,568 
Trade name37,200 37,200 
Parking easement15,273 15,273 
DEFERRED LEASING COSTS AND INTANGIBLE ASSETS, NET$382,173 $393,842 
Below-market leases$59,540 $59,540 
Accumulated amortization(27,832)(26,195)
Below-market leases, net31,708 33,345 
Above-market ground leases1,095 1,095 
Accumulated amortization(360)(349)
Above-market ground leases, net735 746 
INTANGIBLE LIABILITIES, NET$32,443 $34,091 
24
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)

The Company recognized the following amortization related to deferred leasing costs and intangibles:
Three Months Ended March 31,
20232022
Deferred leasing costs and in-place lease intangibles(1)
$(9,248)$(10,419)
Below-market ground leases(2)
$(699)$(679)
Above-market leases(3)
$(17)$(68)
Customer relationships(1)
$(3,504)$(1,875)
Non-competition agreements(1)
$(412)$(265)
Below-market leases(3)
$1,637 $2,807 
Above-market ground leases(2)
$11 $11 
__________________ 
1.Amortization is recorded in depreciation and amortization expenses and for lease incentive costs in office rental revenues in the Consolidated Statements of Operations.
2.Amortization is recorded in office operating expenses in the Consolidated Statements of Operations.
3.Amortization is recorded in office rental revenues in the Consolidated Statements of Operations.

8. Receivables

The Company’s accounting policy and methodology used to estimate the allowance for doubtful accounts related to receivables are discussed in the Company’s 2022 Annual Report on Form 10-K.

Accounts Receivable

As of March 31, 2023, accounts receivable was $15.4 million and there was a $0.2 million allowance for doubtful accounts. As of December 31, 2022, accounts receivable was $16.9 million and there was $0.1 million allowance for doubtful accounts.

Straight-Line Rent Receivables

As of March 31, 2023, straight-line rent receivables was $290.8 million and there was $0.1 million allowance for doubtful accounts. As of December 31, 2022, straight-line rent receivables was $279.9 million and there was no allowance for doubtful accounts.

9. Prepaid Expenses and Other Assets, net    

The following table summarizes the Company’s prepaid expenses and other assets, net as of:
March 31, 2023December 31, 2022
Non-real estate investments48,586 47,329 
Deferred tax assets10,682 5,317 
Interest rate derivative assets6,962 9,292 
Deferred financing costs, net5,325 5,824 
Inventory5,137 4,914 
Prepaid property tax1,021 2,041 
Prepaid insurance852 6,530 
Stock purchase warrant74 95 
Other22,144 17,495 
PREPAID EXPENSES AND OTHER ASSETS, NET$100,783 $98,837 

25
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
Non-Real Estate Investments

The Company measures its investments in common stock and convertible preferred stock at fair value based on Level 1 and Level 2 inputs, respectively. The Company measures its investments in funds that do not have a readily determinable fair value using the Net Asset Value (“NAV”) practical expedient and uses NAV reported without adjustment unless it is aware of information indicating the NAV reported does not accurately reflect the fair value of the investment. Changes in the fair value of these non-real estate investments are included in unrealized gain on non-real estate investments on the Consolidated Statements of Operations. The Company recognized an unrealized gain of $0.9 million on its non-real estate investments due to the observable changes in fair value during the three months ended March 31, 2023. The Company recognized an unrealized gain of $2.6 million on its non-real estate investments due to the observable changes in fair value during the three months ended March 31, 2022.

Stock Purchase Warrant

The Company holds an investment in a stock purchase warrant that gives the Company the right to purchase a fixed number of shares of common stock of a non-real estate investee. The warrant meets the definition of a derivative and is measured at fair value based on Level 2 inputs. Changes in the fair value of the derivative asset are included in unrealized gain on non-real estate investments on the Consolidated Statements of Operations. The Company recognized an unrealized loss of $20.8 thousand due to the change in the fair value of the stock purchase warrant during the three months ended March 31, 2023. The Company recognized an unrealized loss of $0.9 million due to the change in the fair value of the stock purchase warrant during the three months ended March 31, 2022.

26
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
10. Debt

The following table sets forth information with respect to the Company’s outstanding indebtedness:
March 31, 2023December 31, 2022
Interest Rate(1)
Contractual Maturity Date(2)
UNSECURED AND SECURED DEBT
Unsecured debt
Unsecured revolving credit facility(3)(4)
$335,000 $385,000 
SOFR + 1.15% to 1.60%
12/21/2026(5)
Series A notes— 110,000 4.34%1/2/2023
Series B notes259,000 259,000 4.69%12/16/2025
Series C notes56,000 56,000 4.79%12/16/2027
Series D notes150,000 150,000 3.98%7/6/2026
Series E notes50,000 50,000 3.66%9/15/2023
3.95% Registered senior notes
400,000 400,000 3.95%11/1/2027
4.65% Registered senior notes
500,000 500,000 4.65%4/1/2029
3.25% Registered senior notes
400,000 400,000 3.25%1/15/2030
5.95% Registered senior notes(6)
350,000 350,000 5.95%2/15/2028
Total unsecured debt2,500,000 2,660,000 
Secured debt
Hollywood Media Portfolio$1,100,000 $1,100,000 
LIBOR + 0.99%
8/9/2026(7)
Acquired Hollywood Media Portfolio debt(209,814)(209,814)
LIBOR + 1.55%
8/9/2026(7)
Hollywood Media Portfolio, net(8)(9)
890,186 890,186 
One Westside and Westside Two(10)
321,179 316,602 
SOFR + 1.60%
12/18/2024(11)
Element LA168,000 168,000 4.59%11/6/2025
1918 Eighth(12)
314,300 314,300 
SOFR + 1.40%
12/18/2025
Hill7(13)
101,000 101,000 3.38%11/6/2028
Quixote(14)
160,000 160,000 5.00%12/31/2023
Total secured debt1,954,665 1,950,088 
Total unsecured and secured debt4,454,665 4,610,088 
Unamortized deferred financing costs/loan discounts(15)
(21,119)(24,226)
TOTAL UNSECURED AND SECURED DEBT, NET$4,433,546 $4,585,862 
JOINT VENTURE PARTNER DEBT(16)
$66,136 $66,136 4.50%10/9/2032(17)
_________________
1.Interest rate with respect to indebtedness is calculated on the basis of a 360-day year for the actual days elapsed. Interest rates are as of March 31, 2023, which may be different than the interest rates as of December 31, 2022 for corresponding indebtedness.
2.Maturity dates include the effect of extension options.
3.The annual facility fee rate ranges from 0.15% to 0.30% based on the operating partnership’s leverage ratio. The Company has an option to make an irrevocable election to change the interest rate depending on the Company’s credit rating or a specified base rate plus an applicable margin. As of March 31, 2023, no such election had been made and the unsecured revolving credit facility bore interest at SOFR + 1.30%.
4.The Company has a total capacity of $1.0 billion available under its unsecured revolving credit facility, up to $250.0 million of which can be used for borrowings in pounds sterling or Canadian dollars. Subject to the satisfaction of certain conditions and lender commitments, the operating partnership may increase the commitments held under the Amended and Restated Credit Agreement up to a total of $2.0 billion either in the form of an increase to an existing unsecured revolving credit facility or a new loan, including a term loan.
5.Includes the option to extend the initial maturity date of December 21, 2025 twice for an additional six-month term each.
6.An amount equal to the net proceeds from the 5.95% Registered senior notes has been allocated to new or existing eligible green projects.
7.Includes the option to extend the initial maturity date of August 9, 2023 three times for an additional one-year term each.
8.The Company owns 51% of the ownership interests in the consolidated joint venture that owns the Hollywood Media Portfolio. The joint venture holds a $1.1 billion mortgage loan secured by the Hollywood Media Portfolio. The Company purchased bonds comprising the loan in the amount of $209.8 million.
9.The floating interest rate on the full principal amount has been capped at 3.50% through the use of an interest rate cap. The interest rate cap matures in August 2023, at which time the floating interest rate on $351.2 million of principal will become effectively fixed at 3.31% through the use of an interest rate swap.
27
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
10.The Company owns 75% of the ownership interests in the joint venture that owns the One Westside and Westside Two properties. The full amount of the loan is shown. The Company has the ability to draw up to $414.6 million under the construction loan, which is secured by the One Westside and Westside Two properties and includes a completion guarantee provided by the Company. The likelihood of loss relating to the completion guarantee is remote as of March 31, 2023.
11.Includes the option to extend the initial maturity date of December 18, 2023 twice for an additional six-month term each.
12.The Company owns 55% of the ownership interests in the consolidated joint venture that owns the 1918 Eighth property. The full amount of the loan is shown. This loan is interest-only through its term. The floating interest rate on $172.9 million of principal has been effectively fixed at 3.75% through the use of an interest rate swap.
13.The Company owns 55% of the ownership interests in the consolidated joint venture that owns the Hill7 property. The full amount of the loan is shown. This loan bears interest only at 3.38% until November 6, 2026, at which time the interest rate will increase and monthly debt service will include principal payments with a balloon payment at maturity.
14.On April 18, 2023, we settled the Quixote note for consideration of $150.0 million, a $10.0 million discount on the note’s principal balance. We drew on our unsecured revolving credit facility to fund the settlement.
15.Excludes deferred financing costs related to establishing the Company’s unsecured revolving credit facility, which are reflected in prepaid expenses and other assets, net on the Consolidated Balance Sheets. See Note 2 for details.
16.This amount relates to debt attributable to Allianz U.S. Private REIT LP (“Allianz”), the Company’s partner in the joint venture that owns the Ferry Building property.
17.Includes the option to extend the initial maturity date of October 9, 2028 twice for an additional two-year term each.

Current Year Activity

During the three months ended March 31, 2023, there were $50.0 million of repayments on the unsecured revolving credit facility, net of borrowings. The Company generally uses the unsecured revolving credit facility to finance the acquisition of properties and businesses, to provide funds for tenant improvements and capital expenditures and to provide for working capital and other corporate purposes.

On January 3, 2023, the Company repaid its $110.0 million Series A notes in full.

Indebtedness

The Company presents its financial statements on a consolidated basis. Notwithstanding such presentation, except to the extent expressly indicated, the Company’s separate property-owning subsidiaries are not obligors of or under the debt of their respective affiliates and each property-owning subsidiary’s separate liabilities do not constitute obligations of its respective affiliates.

Loan agreements include events of default that the Company believes are usual for loans and transactions of this type. As of the date of this filing, there have been no events of default associated with the Company’s loans.

The following table provides information regarding the Company’s future minimum principal payments due on the Company’s debt (after the impact of extension options, if applicable) as of March 31, 2023:

YearUnsecured and Secured DebtJoint Venture Partner Debt
Remaining 2023(1)
$210,000 $— 
2024321,179 — 
2025741,300 — 
20261,375,186 — 
2027456,000 — 
Thereafter1,351,000 66,136 
TOTAL
$4,454,665 $66,136 
_________________
1.Includes the $160.0 million Quixote note which was repaid on April 18, 2023, before its contractual maturity date.

28
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
Debt Covenants

The operating partnership’s ability to borrow under its unsecured loan arrangements remains subject to ongoing compliance with financial and other covenants as defined in the respective agreements. Certain financial covenant ratios are subject to change in the occurrence of material acquisitions as defined in the respective agreements. Other covenants include certain limitations on dividend payouts and distributions, limits on certain types of investments outside of the operating partnership’s primary business and other customary affirmative and negative covenants.

The following table summarizes existing covenants and their covenant levels as of March 31, 2023 related to our unsecured revolving credit facility, term loans and note purchase agreements, when considering the most restrictive terms:
Covenant RatioCovenant LevelActual Performance
Total liabilities to total asset value
≤ 60%
44.9%
Unsecured indebtedness to unencumbered asset value
≤ 60%
47.6%
Adjusted EBITDA to fixed charges
≥ 1.5x
2.6x
Secured indebtedness to total asset value
≤ 45%
20.7%
Unencumbered NOI to unsecured interest expense
≥ 2.0x
2.5x

The following table summarizes existing covenants and their covenant levels related to the registered senior notes as of March 31, 2023:
Covenant Ratio(1)
Covenant LevelActual Performance
Debt to total assets
≤ 60%
46.3%
Total unencumbered assets to unsecured debt
 ≥ 150%
233.5%
Consolidated income available for debt service to annual debt service charge
≥ 1.5x
2.6x
Secured debt to total assets
≤ 45%
21.0%
_________________
1.The covenant and actual performance metrics above represent terms and definitions reflected in the indentures governing the 3.25% Senior Notes, 3.95% Senior Notes, 4.65% Senior Notes and 5.95% Senior Notes.

The operating partnership was in compliance with its financial covenants as of March 31, 2023.

Repayment Guarantees

Although the rest of the operating partnership’s loans are secured and non-recourse, the operating partnership provides limited customary secured debt guarantees for items such as voluntary bankruptcy, fraud, misapplication of payments and environmental liabilities.

The Company guarantees the operating partnership’s unsecured debt.

Interest Expense

The following table represents a reconciliation from gross interest expense to the interest expense on the Consolidated Statements of Operations:
Three Months Ended March 31,
20232022
Gross interest expense(1)
$57,063 $30,731 
Capitalized interest(6,862)(3,285)
Amortization of deferred financing costs and loan discounts/premiums3,606 3,390 
INTEREST EXPENSE
$53,807 $30,836 
_________________
1.Includes interest on the Company’s debt and hedging activities.

29
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
11. Derivatives

The Company enters into derivatives in order to hedge interest rate risk. Derivative assets are recorded in prepaid expenses and other assets and derivative liabilities are recorded in accounts payable, accrued liabilities and other on the Consolidated Balance Sheets.

The Company has agreements with its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness.

The Company’s derivatives are classified as Level 2 and their fair values are derived from estimated values obtained from observable market data for similar instruments.

The fair market value of derivatives is presented on a gross basis on the Consolidated Balance Sheets. The following table summarizes the Company’s derivative instruments as of March 31, 2023 and December 31, 2022:
Fair Value Assets (Liabilities)
Underlying Debt InstrumentNumber of DerivativesNotional AmountEffective DateMaturity DateInterest RateMarch 31, 2023December 31, 2022
Interest rate swaps
1918 Eighth(1)
1$172,865 February 2023October 20253.75%$88 $— 
Hollywood Media Portfolio(1)
1351,186 August 2023June 20263.31%817 — 
Interest rate capStrike Rate
Hollywood Media Portfolio(1)
11,100,000 August 2021August 20233.50%6,057 9,292 
TOTAL$6,962 $9,292 
_____________ 
1.These derivatives were designated as effective cash flow hedges for accounting purposes.

The Company reclassifies unrealized gains and losses related to cash flow hedges into earnings in the same period during which the hedged forecasted transaction affects earnings. As of March 31, 2023, the Company expects $4.3 million of unrealized gain included in accumulated other comprehensive loss will be reclassified as a reduction to interest expense in the next 12 months.

12. Income Taxes

Hudson Pacific Properties, Inc. has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2010. Provided that it continues to qualify for taxation as a REIT, Hudson Pacific Properties, Inc. is generally not subject to corporate-level income tax on the earnings distributed currently to its stockholders.

In general, the Company’s property-owning subsidiaries are limited liability companies and are treated as pass-through entities or disregarded entities (or, in the case of the entities that own the 1455 Market, Hill7, Ferry Building and 1918 Eighth properties, REITs) for federal income tax purposes. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements for the activities of these entities. In the case of the Bentall Centre property and the Sunset Waltham Cross Studios development, the Company owns its interest in the properties through non-U.S. entities treated as TRSs for federal income tax purposes.

The Company has elected, together with certain of its subsidiaries, to treat each such subsidiary as a taxable REIT subsidiary (“TRS”) for federal income tax purposes. Certain activities that the Company may undertake, such as non-customary services for the Company’s tenants and holding assets that the Company cannot hold directly, will be conducted by a TRS. A TRS is subject to federal and, where applicable, state income taxes on its net income. The Company recognized an income tax benefit of $5.3 million for the three months ended March 31, 2023 and an income tax benefit of $0.8 million for the three months ended March 31, 2022 within other income on the Consolidated Statements of Operations.
30
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)

Deferred tax assets and liabilities are recognized for the net tax effect of temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. As of March 31, 2023, the Company had recorded a net deferred tax asset of $10.7 million, consisting of gross deferred tax assets of $22.8 million and gross deferred tax liabilities of $12.1 million, within prepaid expenses and other assets, net on the consolidated Balance Sheet. As of December 31, 2022, the Company had recorded a net deferred tax asset of $5.3 million, consisting of gross deferred tax assets of $16.9 million and gross deferred tax liabilities of $11.6 million, within prepaid expenses and other assets, net on the Consolidated Balance Sheet. Significant components of the Company’s deferred tax assets and liabilities relate to depreciation and amortization, unrealized gains and losses on non-real estate investments and net operating loss carryforwards. As of March 31, 2023 and December 31, 2022, the Company had not recorded a valuation allowance against its deferred tax assets.

The Company is subject to the statutory requirements of the states in which it conducts business.

The Company periodically evaluates its tax positions to determine whether it is more likely than not that such positions would be sustained upon examination by a tax authority for all open tax years, as defined by the statute of limitations, based on their technical merits. As of March 31, 2023, the Company has not established a liability for uncertain tax positions.

The Company and certain of its TRSs file income tax returns with the U.S. federal government and various state and local jurisdictions. The Company and its TRSs are no longer subject to tax examinations by tax authorities for years prior to 2018. The Company has assessed its tax positions for all open years, which as of March 31, 2023 included 2019 to 2021 for federal purposes and 2018 to 2021 for state purposes, and concluded that there are no material uncertainties to be recognized.

13. Future Minimum Rents and Lease Payments

The Company’s properties are leased to tenants under operating leases with initial term expiration dates ranging from 2023 to 2040.

The following table summarizes the future minimum base rents (excluding tenant reimbursements for operating expenses and termination fees related to tenants exercising early termination options) for properties as of March 31, 2023:
Year Ended
Remaining 2023
$486,179 
2024599,051 
2025502,100 
2026448,994 
2027392,213 
Thereafter1,357,899 
TOTAL$3,786,436 

Operating Lease Agreements

The Company is party to long-term non-cancellable operating lease agreements in which it is a lessee, consisting of 12 ground leases, 10 sound stage leases, six office leases and 17 other leases as of March 31, 2023. The Company’s operating lease obligations have expiration dates ranging from 2023 through 2067, including extension options which the Company is reasonably certain to exercise. Certain leases provide for variable rental payments based on third-party appraisals of fair market land value, CPI adjustments or a percentage of annual gross income. There are no notable restrictions or covenants imposed by the leases, nor guarantees of residual value.

As of March 31, 2023, the present value of the remaining contractual payments of $740.5 million under the Company’s operating lease agreements was $399.1 million. The corresponding operating lease right-of-use assets amounted to $399.1 million.

31
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
The following table provides information regarding the Company’s future minimum lease payments for its operating leases (including the impact of the extension options which the Company is reasonably certain to exercise) as of March 31, 2023:
Year
Lease Payments(1)
Remaining 2023
$29,584 
202439,724 
202539,958 
202638,361 
202735,671 
Thereafter557,227 
Total operating lease payments
740,525 
Less: interest portion(341,444)
PRESENT VALUE OF OPERATING LEASE LIABILITIES$399,081 
_____________ 
1.Future minimum lease payments for operating leases denominated in a foreign currency are translated to U.S. dollars using the exchange rate in effect as of the financial statement date.

The following table summarizes rental expense for operating leases:
Three Months Ended March 31,
20232022
Variable rental expense$3,007 $1,730 
Minimum rental expense$11,082 $6,524 

14. Fair Value of Financial Instruments

The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

•Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
•Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
•Level 3: prices or valuation techniques where little or no market data is available that require inputs that are both significant to the fair value measurement and unobservable.

The Company’s financial assets and liabilities measured and reported at fair value on a recurring basis include the following as of:
March 31, 2023December 31, 2022
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Interest rate derivative assets(1)
$— $6,962 $— $6,962 $— $9,292 $— $9,292 
Non-real estate investments measured at fair value(1)
$69 $— $— $69 $544 $— $— $544 
Stock purchase warrant(1)
$— $74 $— $74 $— $95 $— $95 
Earnout liability(2)
$— $— $(9,300)$(9,300)$— $— $(9,300)$(9,300)
Non-real estate investments measured at NAV(1)(3)
$— $— $— $48,517 $— $— $— $46,785 
___________ 
1.Included in prepaid expenses and other assets, net on the Consolidated Balance Sheets.
2.Included in accounts payable, accrued liabilities and other on the Consolidated Balance Sheets..
3.According to the relevant accounting standards, certain investments that are measured at fair value using the NAV practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Balance Sheets.

32
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
Level 1 items include an investment in common stock of a publicly traded company which is valued on a quarterly basis using the closing stock price. Level 2 items include an interest rate cap and swaps which are valued on a quarterly basis using a linear regression model, as well as investments in preferred stock and warrants of a publicly traded company value which are valued on a quarterly basis using the closing stock price and a Black-Scholes model, respectively. Level 3 items include the earnout liability which is valued on a quarterly basis using a probability-weighted discounted cash flow model. Inputs to the model include the discount rate and probability-weighted earnout payments based on a Monte Carlo simulation with one million trials. Fair value measurement using unobservable inputs is inherently uncertain, and a change in significant inputs could result in different fair values.

Other Financial Instruments    

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities are reasonable estimates of fair value, using Level 1 inputs, because of the short-term nature of these instruments. The fair value of the investment in U.S. Government securities is an estimate based on Level 1 inputs. The fair values of debt are estimates based on rates currently prevailing for similar instruments of similar maturities using Level 2 inputs.

The table below represents the carrying value and fair value of the Company’s investment in securities and debt as of:
March 31, 2023December 31, 2022
Carrying Value
Fair Value
Carrying Value
Fair Value
LIABILITIES
Unsecured debt(1)
$2,500,000 $1,956,645 $2,660,000 $2,364,871 
Secured debt(1)
$1,954,665 $1,933,594 $1,950,088 $1,927,297 
Joint venture partner debt$66,136 $61,055 $66,136 $60,327 
_________________
1.Amounts represent debt excluding unamortized deferred financing costs and loan discounts/premiums.

15. Stock-Based Compensation

The Company’s 2010 Incentive Plan permits the Company’s board of directors (the “Board”) to grant, among other things, restricted stock, restricted stock units, operating partnership performance units and performance-based awards. As of March 31, 2023, 5.2 million common shares were available for grant under the 2010 Plan. The calculation of shares available for grant is determined after taking into account unvested restricted stock, unvested operating partnership performance units and unvested RSUs, assuming the maximum bonus pool eligible ultimately is earned and based on a stock price of $6.65.

The Board awards restricted shares to non-employee Board members on an annual basis as part of such Board members’ annual compensation and to newly elected non-employee Board members in accordance with the Non-Employee Director Compensation Program. The time-based awards are generally issued in the second quarter, in conjunction with the director’s election to the Board, and the individual share awards vest in equal annual installments over the applicable service vesting period, which is three years. Additionally, certain non-employee Board members elect to receive operating partnership performance units in lieu of their annual cash retainer fees. These awards are generally issued in the fourth quarter and are fully-vested upon their issuance.

The Board awards time-based restricted shares or time-based operating partnership performance units to certain employees on an annual basis as part of the employees’ annual compensation. These time-based awards are generally issued in the first or fourth quarter and vest in equal annual installments over the applicable service vesting period, which is generally three years. Additionally, certain awards are subject to a mandatory holding period upon vesting if the grantee is an executive officer. Lastly, certain employees elect to receive operating partnership performance units in lieu of their annual cash bonus. These awards are generally issued in the first quarter of the year subsequent to the year in which they were earned and are fully-vested upon their issuance.

Beginning in 2020, the compensation committee of the Board (the “Compensation Committee”) adopted an annual Hudson Pacific Properties, Inc. Performance Stock Unit Plan (“PSU Plan”). Under the PSU Plan, the Compensation Committee awards restricted stock units or performance units in the operating partnership to certain employees. PSU Plan grants consist of two portions. A portion of each award, the Relative Total Shareholder Return (“TSR”) Performance Unit, is eligible to vest based
33
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
on the achievement of the Company’s TSR compared to the TSR of the FTSE NAREIT All Equity REITs index over a three-year performance period, with the vesting percentage subject to certain percentage targets. The remaining portion of each award, the Operational Performance Unit, becomes eligible to vest based on the achievement of operational performance metrics over a one-year performance period and vests over three years. The number of Operational Performance Units that becomes eligible to vest based on the achievement of operational performance metrics may be adjusted based on the Company’s achievement of absolute TSR goals over a three-year performance period by applying the applicable vesting percentages. Certain of the awards granted under the PSU Plan are subject to a two-year post-vesting restriction period, during which any awards earned may not be sold or transferred.

The following table presents the classification and amount recognized for stock-based compensation related to the Company’s awards:
Three Months Ended March 31,
20232022
Expensed stock compensation(1)
$5,236 $5,329 
Capitalized stock compensation(2)
672 816 
TOTAL STOCK COMPENSATION(3)
$5,908 $6,145 
_________________
1.Amounts are recorded in general and administrative expenses on the Consolidated Statements of Operations.
2.Amounts are recorded in investment in real estate, at cost on the Consolidated Balance Sheets.
3.Amounts are recorded in additional paid-in capital and non-controlling interest—units in the operating partnership on the Consolidated Balance Sheets.

16. Earnings Per Share

Hudson Pacific Properties, Inc.

The Company calculates basic earnings per share using the two-class method by dividing the net income available to common stockholders for the period by the weighted average number of common shares outstanding during the period. Unvested time-based restricted stock awards, unvested time-based performance unit awards and unvested restricted stock units (“RSUs”) that contain non-forfeitable rights to dividends are participating securities and are included in the computation of earnings per share pursuant to the two-class method. The Company calculates diluted earnings per share using the two-class method or the treasury stock and if-converted method, whichever results in more dilution. For the three months ended March 31, 2023 and 2022, both methods of calculation yielded the same diluted earnings per share amount. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower earnings per share amount.

The following table reconciles the numerator and denominator in computing the Company’s basic and diluted earnings per share to net loss available to common stockholders:
Three Months Ended March 31,
20232022
Numerator:
Basic and diluted net loss available to common stockholders
$(20,425)$(19,793)
Denominator:
Basic weighted average common shares outstanding141,025,021 149,187,994 
Effect of dilutive instruments(1)
— — 
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING141,025,021 149,187,994 
Basic earnings per common share$(0.14)$(0.13)
Diluted earnings per common share$(0.14)$(0.13)
    
________________
1.The Company includes unvested awards and convertible common and participating units as contingently issuable shares in the computation of diluted earnings per share once the market or performance criteria are met, assuming that the end of the reporting period is the end of the contingency period. Any anti-dilutive securities are excluded from the diluted earnings per share calculation.

34
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
Hudson Pacific Properties, L.P.

The operating partnership calculates basic earnings per unit using the two-class method by dividing the net income available to common unitholders for the period by the weighted average number of common units outstanding during the period. Unvested time-based restricted stock awards, unvested time-based performance unit awards and unvested RSUs that contain non-forfeitable rights to dividends are participating securities and are included in the computation of earnings per unit pursuant to the two-class method. The operating partnership calculates diluted earnings per unit using the two-class method or the treasury stock and if-converted method, whichever results in more dilution. For the three months ended March 31, 2023 and 2022, both methods of calculation yielded the same diluted earnings per unit amount. Diluted earnings per unit reflects the potential dilution that could occur if securities or other contracts to issue common units were exercised or converted into common units, where such exercise or conversion would result in a lower earnings per unit amount.

The following table reconciles the numerator and denominator in computing the operating partnership’s basic and diluted earnings per unit to net loss available to common unitholders:
Three Months Ended March 31,
20232022
Numerator:
Basic and diluted net loss available to common unitholders$(20,707)$(20,023)
Denominator:
Basic weighted average common units outstanding143,329,366 151,031,790 
Effect of dilutive instruments(1)
— — 
DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING143,329,366 151,031,790 
Basic earnings per common unit$(0.14)$(0.13)
Diluted earnings per common unit$(0.14)$(0.13)
________________
1.The Company includes unvested awards and convertible common and participating units as contingently issuable shares in the computation of diluted earnings per unit once the market or performance criteria are met, assuming that the end of the reporting period is the end of the contingency period. Any anti-dilutive securities are excluded from the diluted earnings per unit calculation.

17. Redeemable Non-controlling Interest

Redeemable Preferred Units of the Operating Partnership

As of March 31, 2023 and December 31, 2022, there were 392,598 Series A preferred units of partnership interest in the operating partnership, or Series A preferred units, which are not owned by the Company.

These Series A preferred units are entitled to preferential distributions at a rate of 6.25% per annum on the liquidation preference of $25.00 per unit. The units are convertible at the option of the holder into common units or redeemable into cash or, at the Company’s election, exchangeable for registered shares of common stock.

Redeemable Non-controlling Interest in Consolidated Real Estate Entities

On March 1, 2018, the Company entered into a joint venture agreement with Macerich to form the HPP-MAC JV. On August 31, 2018, Macerich contributed Westside Pavilion to the HPP-MAC JV. The Company has a 75% interest in the joint venture that owns the One Westside and Westside Two properties. The Company has a put right, after a specified time, to sell its interest at fair market value. Macerich has a put right, after a specified time, to sell its interest at fair market value, which is a redemption right that is not solely within the control of the Company. Therefore, the non-controlling interest related to this joint venture is included as temporary equity. The put right is not probable of becoming redeemable.

On October 9, 2018, the Company entered into a joint venture with Allianz to purchase the Ferry Building property. The Company has a 55% interest in the joint venture that owns the Ferry Building property. The Company has a put right, if certain events occur, to sell its interest at fair market value. Allianz has a put right, if certain events occur, to sell its interest at fair market value, which is a redemption right that is not solely within the control of the Company. Therefore, the non-controlling interest related to this joint venture is included as temporary equity. The put right is not currently redeemable.
35
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)

The following table reconciles the beginning and ending balances of redeemable non-controlling interests:
Three Months Ended March 31, 2023
Series A Redeemable Preferred UnitsConsolidated Real Estate Entities
BEGINNING OF PERIOD$9,815 $125,044 
Contributions— — 
Distributions— (3,248)
Declared dividend(153)— 
Net income (loss)153 (894)
END OF PERIOD$9,815 $120,902 

18. Equity

The table below presents the activity related to Hudson Pacific Properties, Inc.’s accumulated other comprehensive loss (“AOCI”):
Derivative Instruments
Currency Translation Adjustments
Total Accumulated Other Comprehensive Loss
BALANCE AT DECEMBER 31, 2022
$(1,280)$(9,992)$(11,272)
Unrealized gains recognized in AOCI653 1,825 2,478 
Reclassification from AOCI into income(1)
647 — 647 
Net change in AOCI1,300 1,825 3,125 
BALANCE AT MARCH 31, 2023
$20 $(8,167)$(8,147)
_____________
1.The gains and losses on the Company’s derivative instruments classified as hedges are reported in interest expense on the Consolidated Statements of Operations.

The table below presents the activity related to Hudson Pacific Properties, L.P.’s AOCI:
Derivative Instruments
Currency Translation Adjustments
Total Accumulated Other Comprehensive Loss
BALANCE AT DECEMBER 31, 2022
$(1,260)$(10,200)$(11,460)
Unrealized gains recognized in AOCI932 2,014 2,946 
Reclassification from AOCI into income(1)
268 — 268 
Net change in AOCI1,200 2,014 3,214 
BALANCE AT MARCH 31, 2023
$(60)$(8,186)$(8,246)
_____________
1.The gains and losses on the operating partnership’s derivative instruments classified as hedges are reported in interest expense on the Consolidated Statements of Operations.

Non-controlling Interests

Common Units in the Operating Partnership

Common units of the operating partnership and shares of common stock of the Company have essentially the same economic characteristics, as they share equally in the total net income or loss distributions of the operating partnership. Investors who own common units have the right to cause the operating partnership to repurchase any or all of their common units for cash at a value equal to the then-current market value of one share of common stock. However, in lieu of such payment of cash, the Company may, at its election, issue shares of its common stock in exchange for such common units on a one-for-one basis.
36
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)

Performance Units in the Operating Partnership

Performance units are partnership interests in the operating partnership. Each performance unit awarded will be deemed equivalent to an award of one share of common stock under the 2010 Plan, reducing the availability for other equity awards on a one-for-one basis. Under the terms of the performance units, the operating partnership will revalue its assets for tax purposes upon the occurrence of certain specified events and any increase in valuation from the time of grant until such event will be allocated first to the holders of performance units to equalize the capital accounts of such holders with the capital accounts of common unitholders. Subject to any agreed upon exceptions, once vested and having achieved parity with common unitholders, performance units are convertible into common units in the operating partnership on a one-for-one basis.

Ownership Interest in the Operating Partnership

The following table summarizes the ownership interest in the operating partnership, excluding unvested restricted units and unvested restricted performance units, as of:
March 31, 2023December 31, 2022
Company-owned common units in the operating partnership
140,888,769 141,054,478 
Company’s ownership interest percentage
98.2 %98.5 %
Non-controlling common units in the operating partnership(1)
2,518,462 2,191,842 
Non-controlling ownership interest percentage
1.8 %1.5 %
_________________ 
1.Represents common units held by certain of the Company’s executive officers, directors and other outside investors. As of March 31, 2023, this amount represents both common units and performance units of 550,969 and 1,967,493, respectively. As of December 31, 2022, this amount represents both common units and performance units in the amount of 550,969 and 1,640,873, respectively.

Common Stock Activity

The Company has not completed any common stock offerings during the three months ended March 31, 2023.

The Company’s ATM program permits sales of up to $125.0 million of common stock. The Company did not utilize the ATM program during the three months ended March 31, 2023. A cumulative total of $65.8 million has been sold as of March 31, 2023.

Share Repurchase Program

The Company is authorized to repurchase shares of its common stock up to a total of $250.0 million under the share repurchase program. During the three months ended March 31, 2023, the Company repurchased $1.4 million of its common stock, before transaction costs. Since commencement of the program, a cumulative total of $214.7 million has been repurchased. Share repurchases are accounted for on the trade date. The Company may make repurchases under the program at any time in its discretion, subject to market conditions, applicable legal requirements and other factors.

Accelerated Share Repurchase Agreements

On February 25, 2022, the Company entered into an uncollared accelerated share repurchase (“ASR”) agreement to purchase $100 million of its outstanding common stock. During the three months ended March 31, 2022, the Company made an initial payment of $100 million and received an initial delivery of approximately 3.3 million shares of common stock representing 85% of the total $100 million agreement based on the closing price of our common stock on the transaction date. Final settlement of the agreement occurred during the second quarter 2022 based on the daily volume-weighted average price during the measurement period, less a negotiated discount.

On February 25, 2022, the Company entered into a collared ASR agreement to purchase $100 million of its outstanding common stock. During the three months ended March 31, 2022, the Company made an initial payment of $100 million and received an initial delivery of approximately 3.3 million shares of common stock based on an estimated cap price calculated using the daily volume-weighted average price during an initial hedge period. Final settlement of the agreement occurred during the third
37
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
quarter 2022 based on the daily volume-weighted average price during the measurement period, subject to a floor and cap, less a negotiated discount.

Series C Cumulative Redeemable Preferred Stock

Series C cumulative redeemable preferred stock relates to the 17,000,000 shares of our Series C preferred stock, $0.01 par value per share. Holders of Series C preferred stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 4.750% per annum of the $25.00 per share, equivalent to $1.1875 per annum per share. Dividends are payable quarterly in arrears on or about the last day of December, March, June and September of each year. In addition to other preferential rights, the holders of Series C preferred stock are entitled to receive the liquidation preference, which is $25.00 per share, before the holders of common stock in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company’s affairs. Generally, shares of Series C preferred stock are not redeemable by the Company prior to November 16, 2026. However, upon the occurrence of a change of control, holders of the Series C preferred stock will have the right, (unless the Company has elected to redeem the Series C preferred stock) to convert into a specified number of shares of common stock.

Dividends

The Board declares dividends on a quarterly basis and the Company pays the dividends during the quarters in which the dividends are declared. The following table summarizes dividends per share declared and paid for the periods presented:
Three Months Ended March 31,
20232022
Common stock$0.25 $0.25 
Common units$0.25 $0.25 
Series A preferred units$0.3906 $0.3906 
Series C preferred stock(1)
$0.2968750 $0.4453125 
Performance units$0.25 $0.25 
Payment dateMarch 30, 2023March 31, 2022
Record dateMarch 20, 2023March 21, 2022
_________________ 
1.Dividends paid during the three months ended March 31, 2022 include a $0.2968750 per share dividend declared and a $0.1484375 per share dividend declared during the fourth quarter of 2021.

Taxability of Dividends

Earnings and profits, which determine the taxability of distributions to stockholders, may differ from income reported for financial reporting purposes due to the differences for federal income tax purposes in the treatment of loss on extinguishment of debt, revenue recognition, compensation expense and the basis of depreciable assets and estimated useful lives used to compute depreciation.

19. Segment Reporting

The Company’s reporting segments are based on the Company’s method of internal reporting, which classifies its operations into two reportable segments: (i) office properties and related operations and (ii) studio properties and related operations. The Company evaluates performance based upon net operating income of the segment operations. General and administrative expenses and interest expense are not included in segment profit as the Company’s internal reporting addresses these items on a corporate level. Asset information by segment is not reported because the Company does not use this measure to assess performance or make decisions to allocate resources; therefore, depreciation and amortization expense is not allocated among segments.

38
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
The table below presents the operating activity of the Company’s reportable segments:
Three Months Ended March 31,
20232022
Office segment
Office revenues$206,633 $211,400 
Office expenses(74,054)(73,631)
Office segment profit132,579 137,769 
Studio segment
Studio revenues45,630 33,113 
Studio expenses(37,244)(18,983)
Studio segment profit8,386 14,130 
TOTAL SEGMENT PROFIT$140,965 $151,899 
Segment revenues$252,263 $244,513 
Segment expenses(111,298)(92,614)
TOTAL SEGMENT PROFIT$140,965 $151,899 

The table below is a reconciliation of the total profit from all segments to net loss:
Three Months Ended March 31,
20232022
NET LOSS$(14,817)$(7,615)
General and administrative18,724 20,512 
Depreciation and amortization97,139 92,193 
Loss (income) from unconsolidated real estate entities745 (303)
Fee income(2,402)(1,071)
Interest expense53,807 30,836 
Interest income(371)(910)
Management services reimbursement income—unconsolidated real estate entities(1,064)(1,108)
Management services expense—unconsolidated real estate entities1,064 1,108 
Transaction-related expenses1,186 256 
Unrealized gain on non-real estate investments(839)(1,650)
Gain on sale of real estate(7,046)— 
Impairment loss— 20,503 
Other income(5,161)(852)
TOTAL PROFIT FROM ALL SEGMENTS$140,965 $151,899 

20. Related Party Transactions

Employment Agreements

The Company has entered into employment agreements with certain of its executive officers, effective January 1, 2020, that provide for various severance and change in control benefits and other terms and conditions of employment.

Cost Reimbursements from Unconsolidated Real Estate Entities

The Company is reimbursed for certain costs incurred in managing certain of its unconsolidated real estate entities. During the three months ended March 31, 2023, the Company recognized $1.1 million reimbursement income in management
39
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
services reimbursement income—unconsolidated real estate entities on the Consolidated Statement of Operations. During the three months ended March 31, 2022, the Company recognized $1.1 million of such reimbursement income.

Related Party Leases

The Company’s wholly-owned subsidiary is party to long-term operating lease agreements with an unconsolidated joint venture for office space and fitness and conference facilities. As of March 31, 2023, the Company’s right-of-use assets and lease liabilities related to these lease obligations were $5.9 million and $6.1 million, respectively, as compared to right-of-use assets and lease liabilities of $7.2 million and $7.3 million, respectively, as of March 31, 2022. During the three months ended March 31, 2023, the Company recognized $0.2 million of related rental expense in management services expense—unconsolidated real estate entities on the Consolidated Statement of Operations related to these leases. During the three months ended March 31, 2022, the Company recognized $0.2 million of related rental expense.

21. Commitments and Contingencies

Fund Investments

The Company invests in several non-real estate funds with an aggregate commitment to contribute up to $48.0 million. As of March 31, 2023, the Company has contributed $34.1 million to these funds, net of distributions, with $13.9 million remaining to be contributed.

Legal

From time to time, the Company is party to various lawsuits, claims and other legal proceedings arising out of, or incident to, the ordinary course of business. Management believes, based in part upon consultation with legal counsel, that the ultimate resolution of all such claims will not have a material adverse effect on the Company’s results of operations, financial position or cash flows. As of March 31, 2023, the risk of material loss from such legal actions impacting the Company’s financial condition or results from operations has been assessed as remote.

Letters of Credit

As of March 31, 2023, the Company had $3.9 million in outstanding letters of credit under the unsecured revolving credit facility. The letters of credit are primarily related to utility company security deposit requirements.

Contractual Obligations

The Company has entered into a number of construction agreements related to its development activities at various properties and its obligations under executed leases. As of March 31, 2023, the Company had $208.1 million in related commitments.

22. Supplemental Cash Flow Information

Supplemental cash flow information for Hudson Pacific Properties, Inc. is included as follows:
Three Months Ended March 31,
20232022
Cash paid for interest, net of capitalized interest$39,943 $16,511 
Non-cash investing and financing activities
Accounts payable and accrued liabilities for real estate investments$147,196 $190,194 
Ground lease remeasurement$3,667 $23,177 

40
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
Supplemental cash flow information for Hudson Pacific Properties, L.P. is included as follows:
Three Months Ended March 31,
20232022
Cash paid for interest, net of capitalized interest$39,943 $16,511 
Non-cash investing and financing activities
Accounts payable and accrued liabilities for real estate investments$147,196 $190,194 
Ground lease remeasurement$3,667 $23,177 

Restricted cash primarily consists of amounts held by lenders to fund reserves such as capital improvements, taxes, insurance, debt service and operating expenditures. The following table provides a reconciliation of cash and cash equivalents and restricted cash at the beginning and end of the periods presented for Hudson Pacific Properties, Inc:
Three Months Ended March 31,
20232022
BEGINNING OF PERIOD
Cash and cash equivalents$255,761 $96,555 
Restricted cash29,970 100,321 
TOTAL$285,731 $196,876 
END OF PERIOD
Cash and cash equivalents$163,327 $137,598 
Restricted cash19,571 60,183 
TOTAL$182,898 $197,781 

The following table provides a reconciliation of cash and cash equivalents and restricted cash at the beginning and end of the periods presented for Hudson Pacific Properties, L.P.:
Three Months Ended March 31,
20232022
BEGINNING OF PERIOD
Cash and cash equivalents$255,761 $96,555 
Restricted cash29,970 100,321 
TOTAL$285,731 $196,876 
END OF PERIOD
Cash and cash equivalents$163,327 $137,598 
Restricted cash19,571 60,183 
TOTAL$182,898 $197,781 

23. Subsequent Events

On April 18, 2023, we drew on our unsecured revolving credit facility to settle the Quixote note for consideration of $150.0 million, a $10.0 million discount on the note’s principal balance.

On May 2, 2023, the Writers Guild of America (WGA) labor union elected to strike due to a lack of agreement between the WGA and the Alliance of Motion Picture and Television Producers. The strike has resulted in a halt in domestic film and TV production, and has impacted independent studios and service providers, including the Company’s. Productions at all studios have been disrupted, and there is no indication of when the strike will end.

On May 4, 2023, the Compensation Committee approved the grant under the Second Amended and Restated Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P. 2010 Incentive Award Plan (the “Plan”) to Victor J. Coleman, Mark T.
41
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
Lammas, Harout K. Diramerian, Arthur X. Suazo, Steven Jaffe and Kay L. Tidwell (collectively, the “Executives”) of performance units of the operating partnership, of which the Company serves as the sole general partner (such units, the “Performance Units”), as well as distribution rights. The Performance Units were granted effective May 4, 2023; the following is a brief description of the material terms and conditions of the Performance Units.

General Description of Performance Units

Performance Units may be issued to eligible participants for the performance of services to or for the benefit of the operating partnership. Performance Units that have not vested generally receive quarterly per-unit distributions equal to ten percent of the distributions made with respect to an equivalent number of common units in the operating partnership (“Common Units”), which equal the per-share distributions on the common stock of the Company (“Common Stock”).

Initially, Performance Units do not have full parity with Common Units with respect to liquidating distributions. If such parity is reached, vested Performance Units may be converted into an equal number of Common Units at any time thereafter, and, upon conversion, enjoy all the rights of Common Units. Common Units are redeemable for cash based on the fair market value of an equivalent number of shares of Common Stock, or, at the election of the Company, an equal number of shares of Common Stock, each subject to adjustment in the event of stock splits, specified extraordinary distributions or similar events.

A partner’s initial capital account balance is equal to the amount the partner paid (or contributed) to the operating partnership for its units and is subject to subsequent adjustments, including with respect to the partner’s share of income, gain or loss of the operating partnership. Because a holder of Performance Units generally will not pay for such units, the initial capital account balance attributable to such units will be zero. However, the operating partnership is required to allocate income, gain, loss and deduction to the partners’ capital accounts in accordance with the terms of the Fifth Amended and Restated Agreement of Limited Partnership of the operating partnership (as may be amended from time to time, the “Partnership Agreement”), subject to applicable Treasury Regulations. The Partnership Agreement provides that holders of Performance Units generally will receive special allocations of gain in the event of an actual sale or “hypothetical sale” of assets of the operating partnership ahead of the allocation of gain to the Company or other limited partners with respect to their Common Units. The amount of such allocation will, to the extent of any such gain, be equal to the difference between the capital account balance of a holder of Performance Units attributable to such units and the Company’s capital account balance attributable to an equivalent number of Common Units. If and when such gain allocation is fully made, a holder of Performance Units will have achieved full parity with holders of Common Units. To the extent that, upon an actual sale or a “hypothetical sale” of the operating partnership’s assets as described above, there is not sufficient gain to allocate to a holder’s capital account with respect to Performance Units, or if such actual sale or “hypothetical sale” does not occur, such units will not achieve parity with Common Units. In order to achieve full parity with Common Units, Performance Units must be fully vested and the holder’s capital account balance in respect of each such Performance Unit must be equal to the per-unit capital account balance with respect to the Common Units owned, directly and indirectly, by the Company.

The term “hypothetical sale” refers to circumstances that are not actual sales of the operating partnership’s assets but that require certain book adjustments to the value of the operating partnership’s assets and the partners’ capital account balances. Specifically, the Partnership Agreement provides that, from time to time, in accordance with applicable Treasury Regulations, the operating partnership will adjust the book value of its assets to equal their respective fair market values, and adjust the partners’ capital accounts, in accordance with the terms of the Partnership Agreement, as if the operating partnership sold its assets for an amount equal to their value. Times for making such adjustments generally include the liquidation of the operating partnership, the acquisition of an additional interest in the operating partnership by a new or existing partner in exchange for more than a de minimis capital contribution, the distribution by the operating partnership to a partner of more than a de minimis amount of partnership property as consideration for an interest in the operating partnership, or in connection with the grant of an interest in the operating partnership (other than a de minimis interest) as consideration for the performance of services to or for the benefit of the operating partnership (including the grant of a Performance Unit).

Performance Units

Vesting. Each Performance Unit award is eligible to vest based on the achievement of operational performance metrics over a one-year performance period beginning January 1, 2023 and ending December 31, 2023.

42
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
The following table shows the dollar-denominated value of the Performance Units awarded to each Executive; the number of Performance Units actually granted will be determined by dividing the dollar-denominated value by the per share grant-date fair value, at maximum, of the applicable portion.
Name
Performance Units
Victor J. Coleman
$2,000,000
Mark T. Lammas
$875,000
Harout K. Diramerian
$312,500
Arthur X. Suazo$250,000
Steven Jaffe$250,000
Kay L. Tidwell$250,000

The operational performance metrics that apply to the Performance Units, and their respective weightings, are as follows:

Operational Goal
Percentage of Performance Units
Leasing Volume
40 %
Annual Net Debt to Annual Gross Asset Value30 %
G&A to Consolidated Gross Assets
30 %

With respect to each operational performance metric, the applicable portion of the Performance Units is eligible to vest based on the achievement of performance goals at the “Threshold”, “Target” and “Maximum” levels, as follows:

Operational Performance Vesting Percentage
“Below Threshold”
0 %
“Threshold Level”
25 %
“Target Level”
50 %
“Maximum Level”
100 %

If performance with respect to an operational performance metric falls between the “Threshold”, “Target” and “Maximum” levels, then the percentage that is eligible to vest will be determined using straight-line interpolation between the applicable levels.

The number of Performance Units that become eligible to vest based on the achievement of operational performance metrics may be adjusted downwards based on the achievement of our total shareholder return compared to the total shareholder return of the FTSE NAREIT Equity Office Index over the three-year performance period commencing January 1, 2023 and ending December 31, 2025, by applying the applicable vesting percentage as set forth in the following table.

Relative TSR Performance Vesting Percentage
“Threshold Level”
60 %
“Target Level”
80 %
“Maximum Level”
100 %

If our relative total shareholder return falls between the “Threshold”, “Target” and “Maximum” levels, then the vesting percentage will be determined using straight-line interpolation between the applicable levels.

Certain Terminations of Employment; Change in Control. If an Executive’s employment is terminated by the Company other than for “cause”, by the Executive for “good reason” or due to death or “disability” (each, as defined in the Executive’s employment agreement), or the performance period ends upon a change in control, then the number of Performance Units that vest will equal the greater of (x) 50% of the Performance Units and (y) the number of Performance Units that would vest based on actual achievement of each operational performance goal and the relative TSR performance through the qualifying termination.
43
Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P.
Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
Any Performance Units that do not become fully vested will automatically be cancelled and forfeited as of the date of the qualifying termination without payment of any consideration therefor, and the Executive will have no further right to or interest in such Performance Units. Upon an Executive’s termination of employment for any other reason, any then-unvested Performance Units automatically will be cancelled and forfeited by the Executive.

In addition to these Performance Units, each award entitles its holder to a cash payment equal to the aggregate distributions that would have been paid during the three-year performance period on the total number of Performance Units that vest, had such Performance Units been vested throughout the performance period, but reduced by the aggregate amount of the distributions received during the performance period on the total number of Performance Units granted.

The foregoing description of the awards of the Performance Units is a summary only and does not describe all terms and conditions applicable to these awards. The description is subject to and qualified in its entirety by the terms of the form of Performance Unit Agreement, a copy of which is filed herewith as Exhibit 10.1.
44
ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion relates to our consolidated financial statements and should be read in conjunction with the consolidated financial statements and the related notes, see Part I, Item 1 “Financial Statements of Hudson Pacific Properties, Inc.,” “Financial Statements of Hudson Pacific Properties, L.P.” and “Notes to Unaudited Consolidated Financial Statements.” Statements in this Item 2 contain forward-looking statements. For a discussion of important risks related to our business and related to investing in our securities, including risks that could cause actual results and events to differ materially from results and events referred to in the forward-looking statements, see Part II, Item 1A “Risk Factors.” In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur.

Forward-looking Statements

Certain written and oral statements made or incorporated by reference from time to time by us or our representatives in this Quarterly Report on Form 10-Q, other filings or reports filed with the SEC, press releases, conferences, or otherwise, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, as amended, and Section 21E of the Exchange Act). In particular, statements relating to our liquidity and capital resources, portfolio performance and results of operations contain forward-looking statements. Furthermore, all of the statements regarding future financial performance (including anticipated funds from operations, or FFO, market conditions and demographics) are forward-looking statements. We are including this cautionary statement to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any such forward-looking statements. We caution investors that any forward-looking statements presented in this Quarterly Report on Form 10-Q, or that management may make orally or in writing from time to time, are based on management’s beliefs and assumptions made by, and information currently available to, management. When used, the words “anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” “result” and similar expressions that do not relate solely to historical matters are intended to identify forward-looking statements. Such statements are subject to risks, uncertainties and assumptions and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on past forward-looking statements, which were based on results and trends at the time they were made, to anticipate future results or trends.

Some of the risks and uncertainties that may cause our actual results, performance, liquidity or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:

•adverse economic or real estate developments in our target markets;
•general economic conditions;
•defaults on, early terminations of or non-renewal of leases by tenants;
•fluctuations in interest rates and increased operating costs;
•our failure to obtain necessary outside financing or maintain an investment grade rating;
•our failure to generate sufficient cash flows to service our outstanding indebtedness and maintain dividend payments;
•lack or insufficient amounts of insurance;
•decreased rental rates or increased vacancy rates;
•difficulties in identifying properties to acquire and completing acquisitions;
•our failure to successfully operate acquired properties and operations;
•our failure to maintain our status as a REIT;
•the loss of key personnel;
•environmental uncertainties and risks related to adverse weather conditions and natural disasters;
•financial market and foreign currency fluctuations;
•risks related to acquisitions generally, including the diversion of management’s attention from ongoing business operations and the impact on customers, tenants, lenders, operating results and business;
•the inability to successfully integrate acquired properties, realize the anticipated benefits of acquisitions or capitalize on value creation opportunities;
•changes in the tax laws and uncertainty as to how those changes may be applied;
45
•changes in real estate and zoning laws and increases in real property tax rates; and
•other factors affecting the real estate industry generally, including the impact of the COVID-19 pandemic.

The risks set forth above are not exhaustive. Other sections of this report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a highly competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Investors should also refer to our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for future periods and Current Reports on Form 8-K as we file them with the SEC, and to other materials we may furnish to the public from time to time through Current Reports on Form 8-K or otherwise, for a discussion of risks and uncertainties that may cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements. We expressly disclaim any responsibility to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events, or otherwise, and you should not rely upon these forward-looking statements after the date of this report.

Executive Summary

Through our interest in Hudson Pacific Properties, L.P. (our operating partnership) and its subsidiaries, at March 31, 2023, our office portfolio consisted of approximately 15.4 million square feet of in-service, repositioning, redevelopment and development properties. Additionally, as of March 31, 2023, our studio portfolio consisted of 1.5 million square feet of in-service, repositioning and development properties and our future development portfolio consisted of 3.6 million developable square feet. Our consolidated and unconsolidated portfolio consists of 61 properties (37 wholly-owned properties, 16 properties owned by joint ventures and eight future development properties) located throughout the United States, Western Canada and Greater London, United Kingdom, totaling approximately 20.5 million square feet.

As of March 31, 2023, our in-service office portfolio was 88.7% leased (including leases not yet commenced). Our same-store studio properties were 86.3% leased for the average percent leased for the 12 months ended March 31, 2023.

The following table summarizes our portfolio as of March 31, 2023:
Number of Properties
Rentable Square Feet(1)
Percent Occupied(2)
Percent Leased(2)
Annualized Base Rent per Square Foot(3)
OFFICE
Same-store(4)
4413,574,58387.6 %88.8 %$54.47 
Stabilized non-same store(5)
1183,12389.5 89.5 62.10 
Total stabilized4513,757,70687.6 88.8 54.57 
Lease-up(5)(6)
1725,41674.7 86.1 59.82 
Total in-service office4614,483,12286.9 88.7 54.80 
STUDIO
Same-store(7)
31,226,57686.3 86.3 45.03 
Total 31,226,576
Repositioning(5)(8)
2433,259— 5.2 — 
Development(5)(9)
2787,000— — — 
Total repositioning and development41,220,259
Total office and studio properties5316,929,957
Future development(10)
83,583,589
TOTAL6120,513,546
____________
1.Determined by management based upon 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 re-leasing.
2.Percent occupied for office properties is calculated as (i) square footage under commenced leases as of March 31, 2023 divided by (ii) total square feet expressed as a percentage, whereas percent leased includes uncommenced leases. Percent leased for studio properties percent occupied reflects the average percent occupied for the 12 months ended March 31, 2023.
46
3.Annualized base rent per square foot for office properties is calculated by multiplying (i) cash base rents under commenced leases excluding tenant reimbursements as of March 31, 2023 by (ii) 12. On a per square foot basis, ABR is divided by square footage under commenced leases as of March 31, 2023. For all expiration years, ABR is calculated as (i) cash base rents at expiration under commenced leases divided by (ii) square footage under commenced leases as of March 31, 2023. The methodology is the same when calculating ABR per square foot either in place or at expiration for uncommenced leases. Rent data is presented without regard to cancellation options. Where applicable, rental rates converted to USD using the foreign currency exchange rate as of March 31, 2023. Annualized base rent per square foot for studio properties reflects actual base rent for the 12 months ended March 31, 2023, excluding tenant reimbursements. ABR per leased square foot calculated as (i) annual base rent divided by (ii) square footage under lease as of March 31, 2023.
4.Same-store office for the three months ended March 31, 2023 defined as all properties owned and included in our stabilized office portfolio as of January 1, 2022 and still owned and included in the stabilized office portfolio as of March 31, 2023.
5.Included in our non-same-store property group.
6.Includes office properties that have not yet reached 92.0% occupancy since the date they were acquired as of March 31, 2023.
7.Includes studio properties owned and included in our portfolio as of January 1, 2022 and still owned and included in our portfolio as of March 31, 2023.
8.See Repositioning table below for the office and studio projects under repositioning as of March 31, 2023.
9.Includes 546,000 square feet related to the office development Washington 1000 and 241,000 square feet related to Sunset Glenoaks Studios.
10.Includes pending entitlement to develop approximately 500 residential units at 10900-10950 Washington.

Overview

Business Acquisitions

We had no business acquisitions during the three months ended March 31, 2023.

Property Acquisitions

We had no property acquisitions during the three months ended March 31, 2023.

Property Dispositions

During the three months ended March 31, 2023, the Company sold its Skyway Landing property for $102.0 million. See Part I, Item 1 “Note 4 to the Consolidated Financial Statements—Investment in Real Estate” for details.

47
Under Construction and Future Development Projects

The following table summarizes the properties currently under construction and future development projects as of March 31, 2023:
TypeSubmarket
Estimated Square Feet(1)
Estimated Completion DateEstimated Stabilization Date
Under Construction:
Los Angeles, California
Sunset Glenoaks Studios(2)
StudioLos Angeles241,000 Q4-2023Q2-2024
Seattle, Washington
Washington 1000OfficeDenny Triangle546,000 Q1-2024Q1-2026
Total Under Construction787,000 
Future Development Pipeline:
Los Angeles, California
Sunset Las Palmas Studios—Development(3)
StudioHollywood617,581TBDTBD
Sunset Gower Studios—Development(3)
Office/StudioHollywood478,845TBDTBD
Sunset Bronson Studios Lot D—Development(3)
ResidentialHollywood33 units/19,816TBDTBD
Element LA—DevelopmentOfficeWest Los Angeles500,000TBDTBD
10900/10950 Washington(4)
ResidentialWest Los AngelesN/ATBDTBD
San Francisco Bay Area, California
Cloud10OfficeNorth San Jose350,000TBDTBD
Vancouver, British Columbia
Burrard Exchange(5)
OfficeDowntown Vancouver450,000TBDTBD
Greater London, United Kingdom
Sunset Waltham Cross Studios(6)
StudioBroxbourne1,167,347TBDTBD
Total Future Development Pipeline3,583,589 
TOTAL UNDER CONSTRUCTION AND FUTURE DEVELOPMENT4,370,589 
_____________
1.Estimated square footage represents management’s estimate of leasable square footage, 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 re-leasing. For land properties, square footage represents management’s estimate of developable square footage, the majority of which remains subject to entitlement approvals not yet obtained.
2.We own 50% of the ownership interests in the unconsolidated joint venture that owns Sunset Glenoaks Studios.
3.We own 51% of the ownership interests in the consolidated joint venture that owns Sunset Bronson Studios, Sunset Gower Studios and Sunset Las Palmas Studios.
4.Pending entitlement to develop approximately 500 residential units.
5.We own 20% of the ownership interests in the unconsolidated joint venture that owns Burrard Exchange.
6.We own 35% of the ownership interests in the unconsolidated joint venture that owns Sunset Waltham Cross Studios.













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Properties are selected for repositioning when an asset or portions of an asset are taken offline for a change of use or if the asset requires significant base building improvements resulting in substantial down time in occupancy. Subsequently, when the square footage off line reaches 92.0% occupancy, it would be included in our in-service population.

The following table summarizes the portions of office and studio projects currently under repositioning as of March 31, 2023:

LocationSubmarket
Square Feet
Repositioning:
Westside TwoWest Los Angeles96,322 
875 HowardSan Francisco96,240 
Page Mill CenterPalo Alto79,056 
Metro PlazaNorth San Jose50,847 
Rincon CenterSan Francisco36,905 
95 JacksonPioneer Square35,905 
Sunset Gower StudiosHollywood18,594 
Palo Alto SquarePalo Alto12,740 
Sunset Las Palmas StudiosHollywood6,650 
TOTAL REPOSITIONING433,259 
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Lease Expirations

The following table summarizes the lease expirations for leases in place as of March 31, 2023, plus available space, beginning January 1, 2023 at the properties in our office portfolio. Unless otherwise stated in the footnotes, the information set forth in the table assumes that tenants did not exercise any renewal options.
HPP’s Share(1)
Year of Lease Expiration
# of
Leases Expiring(2)
Square Feet Expiring Square Footage of Expiring Lease% of Office Portfolio Square Feet
Annualized Base Rent(3)
% of Office Portfolio Annualized Base Rent
Annualized Base Rent Per Leased Square Foot(3)
Annualized Base Rent at Expiration
Annualized Base Rent Per Lease Square Foot at Expiration(4)
Vacant2,575,139 2,464,149 19.6 %
Q1-202310 82,396 62,531 0.5 $3,636,781 0.6 %$58.16 $3,636,779 $58.16 
Q2-202343 352,080 299,148 2.4 16,895,575 2.9 56.48 17,117,133 57.22 
Q3-202341 766,799 535,896 4.3 30,550,590 5.3 57.01 30,725,383 57.33 
Q4-202351 362,970 329,098 2.6 13,875,233 2.4 42.16 14,009,384 42.57 
Total 2023145 1,564,245 1,226,673 9.8 64,958,179 11.2 52.95 65,488,679 53.39 
2024184 1,784,114 1,510,466 12.0 87,539,362 15.2 57.96 89,850,506 59.49 
2025148 1,893,675 1,553,740 12.4 95,794,247 16.6 61.65 101,499,249 65.33 
202682 737,131 673,578 5.4 41,865,736 7.2 62.15 45,948,899 68.22 
202797 994,600 845,868 6.7 50,930,454 8.8 60.21 56,888,885 67.26 
202849 1,042,599 858,472 6.8 59,847,752 10.4 69.71 68,411,900 79.69 
202925 401,209 291,978 2.3 21,442,037 3.7 73.44 25,321,620 86.72 
203019 1,551,784 1,188,651 9.5 57,886,662 10.0 48.70 73,510,429 61.84 
203114 1,103,292 674,300 5.4 36,725,734 6.4 54.46 50,432,767 74.79 
20328 241,487 141,297 1.1 8,107,167 1.4 57.38 10,615,939 75.13 
Thereafter19 1,076,943 703,038 5.6 38,836,521 6.7 55.24 56,599,605 80.51 
Building management use(5)
38 183,529 158,527 1.3 — — — — — 
Signed leases not commenced38 271,520 267,620 2.1 13,605,835 2.4 50.84 17,275,356 64.55 
Portfolio Total/Weighted Average866 15,421,267 12,558,357 100.0 %$577,539,686 100.0 %$57.21 $661,843,834 $65.57 
_____________
1.Non-GAAP financial measures calculated as the measure on a consolidated basis, in accordance with GAAP, plus our operating partnership’s share of the measure from our unconsolidated joint ventures (calculated based upon the operating partnership’s percentage ownership interest), minus our partners’ share of the measure from our consolidated joint ventures (calculated based upon the partners’ percentage ownership interests). We believe that presenting HPP’s share of these measures provides useful information to investors regarding the Company’s financial condition and/or results of operations because we have several significant joint ventures and, in some cases, we exercise significant influence over, but does not control, the joint venture. In such instances, GAAP requires us to account for the joint venture entity using the equity method of accounting, which we do not consolidate it for financial reporting purposes. In other cases, GAAP requires us to consolidate the venture even though our partner(s) own(s) a significant percentage interest.
2.Does not include 30 month-to-month leases.
3.Annualized base rent per square foot for office properties is calculated by multiplying (i) cash base rents under commenced leases excluding tenant reimbursements as of March 31, 2023 by (ii) 12. On a per square foot basis, ABR is divided by square footage under commenced leases as of March 31, 2023. For all expiration years, ABR is calculated as (i) cash base rents at expiration under commenced leases divided by (ii) square footage under commenced leases as of March 31, 2023. The methodology is the same when calculating ABR per square foot either in place or at expiration for uncommenced leases. Rent data is presented without regard to cancellation options. Where applicable, rental rates converted to USD using the foreign currency exchange rate as of March 31, 2023.
4.ABR per square foot at expiration for all lease expiration years is calculated as (i) base rental payments (defined as cash base rents (before abatements or deferments)) under commenced leases, divided by (ii) square footage under commenced leases as of March 31, 2023.
5.Reflects management offices occupied by the Company with various expiration dates.

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Historical Tenant Improvements and Leasing Commissions

The following table summarizes historical information regarding tenant improvement and leasing commission costs for tenants at our office properties:
Three Months Ended March 31,
20232022
Renewals(1)
Number of leases39 47 
Square feet195,417 260,219 
Tenant improvement costs per square foot(2)(3)
$11.24 $10.97 
Leasing commission costs per square foot(2)
4.63 8.26 
Total tenant improvement and leasing commission costs(2)
$15.87 $19.23 
New leases(4)
Number of leases36 34 
Square feet148,652 243,366 
Tenant improvement costs per square foot(2)(3)
$66.67 $78.31 
Leasing commission costs per square foot(2)
14.39 16.00 
Total tenant improvement and leasing commission costs(2)
$81.06 $94.31 
TOTAL
Number of leases75 81 
Square feet344,069 503,585 
Tenant improvement costs per square foot(2)(3)
$36.39 $44.34 
Leasing commission costs per square foot(2)
9.06 12.10 
TOTAL TENANT IMPROVEMENT AND LEASING COMMISSION COSTS(2)
$45.45 $56.44 
_____________
1.Excludes retained tenants that have relocated or expanded into new space within our portfolio.    
2.Assumes all tenant improvement and leasing commissions are paid in the calendar year in which the lease is executed, which may be different than the year in which they were actually paid.
3.Tenant improvement costs are based on negotiated tenant improvement allowances set forth in leases, or, for any lease in which a tenant improvement allowance was not specified, the aggregate cost originally budgeted at the time the lease commenced.
4.Includes retained tenants that have relocated or expanded into new space within our portfolio.

Financings

During the three months ended March 31, 2023, there were $50.0 million of repayments on the unsecured revolving credit facility, net of borrowings. The Company generally uses the unsecured revolving credit facility to finance the acquisition of properties and businesses, to provide funds for tenant improvements and capital expenditures and to provide for working capital and other corporate purposes.

On January 3, 2023, the Company repaid its $110.0 million Series A notes in full.

Historical Results of Operations

This Quarterly Report on Form 10-Q of Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P. represents an update to the more detailed and comprehensive disclosures included in the 2022 Annual Report on Form 10-K of Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P. Accordingly, you should read the following discussion in conjunction with the
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information included in our 2022 Annual Report on Form 10-K, as well as the unaudited financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

In addition, some of the statements and assumptions in this Quarterly Report on Form 10-Q are forward-looking statements within the meaning of Section 27A of the Securities Act or Section 21E of the Exchange Act, including, in particular, statements about our plans, strategies and prospects as well as estimates of industry growth for the quarter and beyond. See “Forward-looking Statements.”

All amounts and percentages used in this discussion of our results of operations are calculated using the numbers presented in the financial statements contained in Part I, Item 1 of this Quarterly Report rather than the rounded numbers appearing in this discussion. The dollar amounts included in the tables in this discussion of our results of operations are presented in thousands.

Comparison of the Three Months Ended March 31, 2023 to the Three Months Ended March 31, 2022

Net Loss

Net loss increased $7.2 million, or 94.6%, to $14.8 million for the three months ended March 31, 2023 compared to $7.6 million for the three months ended March 31, 2022. Net loss increased for the reasons discussed below with respect to the decrease in net operating income for the same period.

Net Operating Income

We evaluate performance based upon property net operating income (“NOI”). NOI is not a measure of operating results or cash flows from operating activities or cash flows as measured by generally accepted accounting principles in the United States (“GAAP”) and should not be considered an alternative to net income, as an indication of our performance, or as an alternative to cash flows as a measure of liquidity, or our ability to make distributions. All companies may not calculate NOI in the same manner. We consider NOI to be a useful performance measure to investors and management because when compared across periods, NOI reflects the revenues and expenses directly associated with owning and operating our properties and the impact to operations from trends in occupancy rates, rental rates and operating costs, providing a perspective not immediately apparent from net income. We calculate NOI as net income excluding corporate general and administrative expenses, depreciation and amortization, impairments, gains/losses on sales of real estate, interest expense, interest income, transaction-related expenses and other non-operating items. We define NOI as operating revenues (including rental revenues, other property-related revenue, tenant recoveries and other operating revenues), less property-level operating expenses (which includes external management fees, if any, and property-level general and administrative expenses). NOI on a cash basis is NOI adjusted to exclude the effect of straight-line rent and other non-cash adjustments required by GAAP. We believe that NOI on a cash basis is helpful to investors as an additional measure of operating performance because it eliminates straight-line rent and other non-cash adjustments to revenue and expenses.

Management further analyzes NOI by evaluating the performance from the following groups:

•Same-store, which includes all of the properties owned and included in our stabilized portfolio as of January 1, 2023 and still owned and included in the stabilized portfolio as of March 31, 2023; and

•Non-same-store, which includes:
•Stabilized non-same-store properties
•Lease-up properties
•Repositioning properties
•Development properties
•Redevelopment properties
•Held for sale properties
•Operating results from studio service-related businesses
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The following table reconciles net loss to NOI:
Three Months Ended March 31,Dollar ChangePercent Change
20232022
Net loss$(14,817)$(7,615)$(7,202)94.6 %
Adjustments:
Loss (income) from unconsolidated real estate entities745 (303)1,048 (345.9)
Fee income(2,402)(1,071)(1,331)124.3 
Interest expense53,807 30,836 22,971 74.5 
Interest income(371)(910)539 (59.2)
Management services reimbursement income—unconsolidated real estate entities1,064 1,108 (44)(4.0)
Management services expense—unconsolidated real estate entities(1,064)(1,108)44 (4.0)
Transaction-related expenses1,186 256 930 363.3 
Unrealized gain on non-real estate investments(839)(1,650)811 (49.2)
Gain on sale of real estate(7,046)— (7,046)— 
Impairment loss— 20,503 (20,503)(100.0)
Other income(5,161)(852)(4,309)505.8 
General and administrative18,724 20,512 (1,788)(8.7)
Depreciation and amortization97,139 92,193 4,946 5.4 
NOI$140,965 $151,899 $(10,934)(7.2)%
Same-store NOI$136,261 $134,162 $2,099 1.6 %
Non-same-store NOI4,704 17,737 (13,033)(73.5)
NOI$140,965 $151,899 $(10,934)(7.2)%

The following table summarizes certain statistics of our consolidated same-store office and studio properties:
Three Months Ended March 31,
20232022
Same-store office
Number of properties4343
Rentable square feet12,058,71612,058,716
Average % occupied for the period86.6 %91.7 %
Average annual rental rate per square foot$57.87 $55.46 
Same-store studio
Number of properties33
Rentable square feet1,226,5761,226,576
Average % leased for the period(1)
86.3 %84.1 %
_____________
1.Percent leased for same-store studio is the average percent leased for the 12 months ended.

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The following table gives further detail on our NOI:
Three Months Ended March 31,
20232022
Same-StoreNon-Same-StoreTotalSame-StoreNon-Same-StoreTotal
Revenues
Office
Rental$191,045 $11,612 $202,657 $186,515 $19,677 $206,192 
Service and other revenues2,954 1,022 3,976 3,222 1,986 5,208 
Total office revenues193,999 12,634 206,633 189,737 21,663 211,400 
Studio
Rental13,470 2,783 16,253 12,873 521 13,394 
Service and other revenues8,919 20,458 29,377 7,515 12,204 19,719 
Total studio revenues22,389 23,241 45,630 20,388 12,725 33,113 
Total revenues216,388 35,875 252,263 210,125 34,388 244,513 
Operating expenses
Office operating expenses68,096 5,958 74,054 64,363 9,268 73,631 
Studio operating expenses12,031 25,213 37,244 11,600 7,383 18,983 
Total operating expenses80,127 31,171 111,298 75,963 16,651 92,614 
Office NOI125,903 6,676 132,579 125,374 12,395 137,769 
Studio NOI10,358 (1,972)8,386 8,788 5,342 14,130 
NOI$136,261 $4,704 $140,965 $134,162 $17,737 $151,899 





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The following table gives further detail on our change in NOI:
Three Months Ended March 31, 2023 as compared to
Three Months Ended March 31, 2022
Same-StoreNon-Same-StoreTotal
Dollar ChangePercent ChangeDollar ChangePercent ChangeDollar ChangePercent Change
Revenues
Office
Rental$4,530 2.4 %$(8,065)(41.0)%$(3,535)(1.7)%
Service and other revenues(268)(8.3)(964)(48.5)(1,232)(23.7)
Total office revenues4,262 2.2 (9,029)(41.7)(4,767)(2.3)
Studio
Rental597 4.6 2,262 434.2 2,859 21.3 
Service and other revenues1,404 18.7 8,254 67.6 9,658 49.0 
Total studio revenues2,001 9.8 10,516 82.6 12,517 37.8 
Total revenues6,263 3.0 1,487 4.3 7,750 3.2 
Operating expenses
Office operating expenses3,733 5.8 (3,310)(35.7)423 0.6 
Studio operating expenses431 3.7 17,830 241.5 18,261 96.2 
Total operating expenses4,164 5.5 14,520 87.2 18,684 20.2 
Office NOI529 0.4 (5,719)(46.1)(5,190)(3.8)
Studio NOI1,570 17.9 (7,314)(136.9)(5,744)(40.7)
NOI$2,099 1.6 %$(13,033)(73.5)%$(10,934)(7.2)%

NOI decreased $10.9 million, or 7.2%, for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily resulting from:

•a $13.0 million decrease in non-same-store NOI driven by:
•a decrease in studio NOI of $7.3 million driven by a slowdown in production rentals activity in anticipation of a potential strike by the Writers Guild of America; and
•a decrease in office NOI of $5.7 million primarily due to:
•an $8.1 million decrease in rental revenues primarily resulting from the sales of our Northview Center, 6922 Hollywood and Skyway Landing properties in August 2022, October 2022 and February 2023, respectively, as well as lease expirations at our 10900-10950 Washington and Metro Center properties; and
•a $1.0 million decrease in service and other revenues primarily due to a reduction in parking revenues in connection with the sales of the properties listed above;
•partially offset by a $3.3 million decrease in operating expenses due to the aforementioned property sales.
•a $2.1 million increase in same-store NOI driven by:
•an increase in studio NOI of $1.6 million primarily due to:
•a $1.4 million increase in service and other revenues and a $0.6 million increase in rental revenues due to increased activity at Sunset Gower, Sunset Bronson and Sunset Las Palmas studios for resident television productions;
•partially offset by a $0.4 million increase in studio operating expenses corresponding to the increased studio activity, which was partially offset by a decrease in ground rent expense at Sunset Gower Studios due to the acquisition of the related land in May 2022.
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•an increase in office NOI of $0.5 million primarily due to:
•a $4.5 million increase in rental revenues mainly driven by the commencement of must-take parking and recoveries revenue at our One Westside property in July 2022 and higher percentage rent at our Ferry building property, partially offset by lease terminations at our Skyport Plaza and 505 First properties;
•partially offset by a $3.7 million increase in operating expenses, predominantly engineering, cleaning and utilities, resulting from a colder winter in 2023 and higher utilization of office space due to an increase in the number of tenant employees returning to in-person work; and
•a $0.3 million decrease in service and other revenues primarily resulting from lease cancellation fees at our 11601 Wilshire and Shorebreeze properties in the first quarter of 2022 partially offset by increases in visitor parking at several properties across our same-store portfolio during the first quarter of 2023.

Other Income (Expenses)

Loss (income) from unconsolidated real estate entities

Income from our unconsolidated real estate entities decreased by $1.0 million, or 345.9%, to $0.7 million of loss for the three months ended March 31, 2023 compared to $0.3 million of income for the three months ended March 31, 2022. The decrease was primarily driven by higher interest expense at the unconsolidated entities due to an increase in the average reference rates for variable rate debt.

Fee income

We recognized fee income of $2.4 million for the three months ended March 31, 2023 compared to $1.1 million for the three months ended March 31, 2022. Fee income represents the management fee income earned from the unconsolidated real estate entities. The increase is primarily due to the recognition of fee income related to development oversight services provided to the Sunset Waltham Cross joint venture commencing during the fourth quarter of 2022.

Interest expense

The following table presents a reconciliation from gross interest expense to the interest expense line item on the Consolidated Statements of Operations:
Three Months Ended March 31,
20232022Dollar ChangePercent Change
Gross interest expense$57,063 $30,731 $26,332 85.7 %
Capitalized interest(6,862)(3,285)(3,577)108.9 
Amortization of deferred financing costs and loan discounts/premiums3,606 3,390 216 6.4 
TOTAL$53,807 $30,836 $22,971 74.5 %

Gross interest expense increased $26.3 million, or 85.7%, to $57.1 million for the three months ended March 31, 2023 compared to $30.7 million for the three months ended March 31, 2022. The increase was primarily driven by an increase in the average reference rates for the Company’s variable rate debt, increases in the average outstanding borrowings on the Company’s unsecured revolving credit facility and One Westside construction loan and interest incurred on the Quixote secured note and the 5.95% registered senior notes, which were issued in August 2022 and September 2022, respectively. The overall increase was partially offset by a decrease in interest expense due to the repayment of the Series A notes in January 2023.

Capitalized interest increased $3.6 million, or 108.9%, to $6.9 million for the three months ended March 31, 2023 compared to $3.3 million for the three months ended March 31, 2022. The increase was primarily driven by development activity at Washington 1000, which was acquired in April 2022, as well as redevelopment activities at our Westside Two and 10900-10950 Washington properties.

Amortization of deferred financing costs and loan discounts/premiums increased $0.2 million, or 6.4%, to $3.6 million for the three months ended March 31, 2023 compared to $3.4 million for the three months ended March 31, 2022. The increase was
56
primarily driven by the amortization of new issuance costs associated with the 5.95% registered senior notes, which were issued in September 2022.

Interest income

Interest income decreased $0.5 million, or 59.2%, to $0.4 million for the three months ended March 31, 2023 compared to $0.9 million for the three months ended March 31, 2022. The decrease was primarily driven by the maturity of the U.S. Government securities in June 2022.

Unrealized gain on non-real estate investments

We recognized an unrealized gain on non-real estate investments of $0.8 million for the three months ended March 31, 2023 compared to an unrealized gain on non-real estate investments of $1.7 million for the three months ended March 31, 2022. The activity in both periods is due to the observable changes in the fair value of the investments.

Gain on sale of real estate

During the three months ended March 31, 2023, we recognized a $7.0 million gain on the sale of our Skyway Landing property. No gain or loss on sale was recognized during the three months ended March 31, 2022.

Impairment loss

We did not recognize any impairment charges during the three months ended March 31, 2023. During the three months ended March 31, 2022, we recognized an impairment loss of $20.5 million, $12.0 million of which was due to a reduction in the estimated fair value of our Del Amo property and $8.5 million of which was due to the full impairment of the Zio trade name in connection with a rebranding of the business under the Company’s Sunset Studios platform.

Other income

Other income increased $4.3 million, or 505.8%, to $5.2 million for the three months ended March 31, 2023 compared to $0.9 million for the three months ended March 31, 2022. The increase was predominantly related to an income tax benefit recorded in the first quarter of 2023 related to the studio service-related businesses.

General and administrative expenses

General and administrative expenses decreased $1.8 million, or 8.7%, to $18.7 million for the three months ended March 31, 2023 compared to $20.5 million for the three months ended March 31, 2022. The decrease was primarily driven by a decrease in payroll and non-cash executive compensation, professional fees, travel and entertainment and office expenses.

Depreciation and amortization expense

Depreciation and amortization expense increased $4.9 million, or 5.4%, to $97.1 million for the three months ended March 31, 2023 compared to $92.2 million for the three months ended March 31, 2022. The increase was primarily related to the depreciation and amortization of non-real estate property, plant and equipment and finite-lived intangible assets acquired as part of the Quixote transaction in August 2022.

Liquidity and Capital Resources

We have remained capitalized since our initial public offering through public offerings, private placements, joint ventures and continuous offerings under our at-the-market (“ATM”) program. We currently expect that our principal sources of funds to meet our short-term and long-term liquidity requirements for working capital, strategic acquisitions, capital expenditures, tenant improvements, leasing costs, dividends and distributions, share repurchases and repayments of outstanding debt financing will include:

•cash on hand, cash reserves and net cash provided by operations;
57
•proceeds from additional equity securities;
•our ATM program;
•borrowings under the operating partnership’s unsecured revolving credit facility and One Westside construction loan;
•proceeds from joint venture partners;
•proceeds from the Sunset Glenoaks Studios construction loan (unconsolidated joint venture); and
•proceeds from additional secured, unsecured debt financings or offerings.

Liquidity Sources

We had approximately $163.3 million of cash and cash equivalents at March 31, 2023. Our principal source of operating cash flow is related to leasing and operating the properties in our portfolio. Our properties provide a relatively consistent stream of cash flow that provides us with resources to pay operating expenses, debt service fees and fund quarterly dividend and distribution requirements.

Our ability to access the equity capital markets will be dependent on a number of factors as well, including general market conditions for REITs and market perceptions about us.

We have an ATM program that allows us to sell up to $125.0 million of common stock, $65.8 million of which has been sold through March 31, 2023. Any future sales will depend on several factors, including, but not limited to, market conditions, the trading price of our common stock and our capital needs. We have no obligation to sell the remaining shares available for sale under this program.

As of March 31, 2023, we had total borrowing capacity of $1.0 billion under our unsecured revolving credit facility, $335.0 million of which had been drawn. As of March 31, 2023, we had total borrowing capacity of $414.6 million under our construction loan, secured by our One Westside and Westside Two properties, $321.2 million of which had been drawn. As of March 31, 2023, we had total borrowing capacity of $100.6 million under the Sunset Glenoaks Studios construction loan (unconsolidated joint venture), of which $55.1 million had been drawn.

Our ability to incur additional debt will be dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. If we incur additional debt, the risks associated with our leverage, including our ability to service our debt, would increase.

The following table sets forth our total consolidated market capitalization (counting Series A preferred units as debt) as of March 31, 2023 (in thousands, except percentage):
March 31, 2023
Unsecured and secured debt(1)
$4,454,665 
Series A redeemable preferred units
9,815 
Total consolidated debt4,464,480 
Equity capitalization(2)
1,397,834 
TOTAL CONSOLIDATED MARKET CAPITALIZATION$5,862,314 
_____________
1.Excludes joint venture partner debt and unamortized deferred financing costs and loan discounts/premiums.
2.Equity capitalization represents the shares of common stock outstanding (including unvested restricted shares), OP units outstanding, restricted performance units and dilutive shares multiplied by the closing price of $6.65, as reported by the NYSE, on March 31, 2023 as well as the aggregate value of the Series C preferred stock liquidation preference as of March 31, 2023.

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Outstanding Indebtedness

The following table sets forth information as of March 31, 2023 and December 31, 2022 with respect to our outstanding indebtedness, excluding unamortized deferred financing costs and loan discounts/premiums (in thousands):
March 31, 2023December 31, 2022
Unsecured debt$2,500,000 $2,660,000 
Secured debt$1,954,665 $1,950,088 
In-substance defeased debt$— $— 
Joint venture partner debt$66,136 $66,136 

The operating partnership was in compliance with its financial covenants as of March 31, 2023.

Liquidity Uses

Contractual Obligations

During the three months ended March 31, 2023, there were no material changes outside the ordinary course of business in the information regarding specified contractual obligations contained in our 2022 Annual Report on Form 10-K. See Part I, Item 1 “Note 10 to the Consolidated Financial Statements—Debt” for information regarding our future minimum principal payments due on our outstanding debt. See Part I, Item 1 “Note 13 to the Consolidated Financial Statements—Future Minimum Rents and Lease Payments” for information regarding our future minimum operating lease payments. See Part I, Item 1 “Note 21 to the Consolidated Financial Statements—Commitments and Contingencies” for more detail.

Cash Flows

A comparison of our cash flow activity is as follows:
Year Ended March 31,
20232022Dollar ChangePercent Change
Net cash provided by operating activities
$92,516 $95,454 $(2,938)(3.1)%
Net cash provided by (used in) investing activities$10,499 $(72,269)$82,768 (114.5)%
Net cash used in financing activities$(205,848)$(22,280)$(183,568)823.9 %

Cash and cash equivalents and restricted cash were $182.9 million and $285.7 million at March 31, 2023 and December 31, 2022, respectively.

Operating Activities

Net cash provided by operating activities decreased by $2.9 million, or 3.1%, to $92.5 million for the three months ended March 31, 2023 compared to $95.5 million for the three months ended March 31, 2022. The change primarily resulted from the sales of our Northview Center, 6922 Hollywood and Skyway Landing properties in August 2022, October 2022 and February 2023, respectively.

Investing Activities

Net cash provided by investing activities increased by $82.8 million, or 114.5%, to $10.5 million for the three months ended March 31, 2023 compared to $72.3 million of net cash used in investing activities for the three months ended March 31, 2022. The change primarily resulted from $100.4 million of proceeds from the sale of our Skyway Landing property in February 2023 and a $9.6 million decrease in contributions to non-real estate investments, partially offset by a $23.7 million increase in additions to investment in real estate and a $5.1 million increase in contributions to unconsolidated real estate entities during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

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Financing Activities

Net cash used in financing activities increased $183.6 million, or 823.9%, to $205.8 million for the three months ended March 31, 2023 compared to $22.3 million for the three months ended March 31, 2022. The change primarily resulted from $212.0 million of payments of unsecured and secured debt and a $180.1 million decrease in proceeds from unsecured and secured debt during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, partially offset by a $200.0 million cash outflow for the accelerated share repurchase program in 2022.

Off-Balance Sheet Arrangements

Joint Venture Indebtedness

We have investments in unconsolidated real estate entities accounted for using the equity method of accounting. The following table provides information about joint venture indebtedness as of March 31, 2023 (in thousands):
Principal AmountInterest RateContractual Maturity DateHPP’s Share
Bentall Centre(1)
$491,668 CDOR + 1.75%7/1/2024$98,333 
Sunset Glenoaks Studios(2)
$55,149 SOFR + 3.10%1/9/2025$27,575 
_____________
(1)We own 20% of the ownership interests in the unconsolidated real estate investment that owns Bentall Centre. The loan was transacted in Canadian dollars. The principal balance is shown in U.S. dollars using the foreign currency exchange rate as of March 31, 2023. The floating interest rate on the full principal amount has been effectively capped at 4.56% through the use of an interest rate cap.
(2)We own 50% of the ownership interests in the unconsolidated real estate investment that owns the Sunset Glenoaks Studios development. This loan has an initial interest rate of SOFR + 3.10% per annum until the construction at Sunset Glenoaks Studios is complete and certain performance targets have been met, at which time the effective interest rate will decrease to SOFR + 2.50%. This loan is interest-only through its term. The total capacity of the loan is $100.6 million. As of March 31, 2023, we have $45.5 million undrawn. The floating interest rate on the full principal amount has been effectively capped at 4.50% through the use of an interest rate cap.

Critical Accounting Policies

Our discussion and analysis of our historical financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our financial statements in conformity with GAAP requires us to make estimates of certain items and judgments as to certain future events, for example with respect to the assignment of the purchase price of an acquired property among land, buildings, improvements, equipment and any related intangible assets and liabilities, or the effect of a property tax reassessment of our properties. These determinations, even though inherently subjective and prone to change, affect the reported amounts of our assets, liabilities, revenues and expenses. While we believe that our estimates are based on reasonable assumptions and judgments at the time they are made, some of our assumptions, estimates and judgments will inevitably prove to be incorrect. As a result, actual outcomes will likely differ from our accruals and those differences—positive or negative—could be material. Some of our accruals are subject to adjustment, as we believe appropriate, based on revised estimates and reconciliation to the actual results when available.

Refer to Part I, Item 1 “Note 2 to the Consolidated Financial Statements—Summary of Significant Accounting Policies,” for information regarding our critical accounting policies.

Non-GAAP Supplemental Financial Measure: Funds From Operations

We calculate FFO in accordance with the White Paper issued in December 2018 on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). The White Paper defines FFO as net income or loss calculated in accordance with GAAP, excluding gains and losses from sales of depreciable real estate and impairment write-downs associated with depreciable real estate, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets) and after adjustment for unconsolidated partnerships and joint ventures. The calculation of FFO includes the amortization of deferred revenue related to tenant-funded tenant improvements and excludes the depreciation of the related tenant improvement assets. In the December 2018 White Paper, NAREIT provided an option to include value changes in mark-to-market equity securities in the calculation of FFO. We elected this option retroactively during the fourth quarter of 2018.

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We believe that FFO is a useful supplemental measure of our operating performance. The exclusion from FFO of gains and losses from the sale of operating real estate assets allows investors and analysts to readily identify the operating results of the assets that form the core of our activity and assists in comparing those operating results between periods. Also, because FFO is generally recognized as the industry standard for reporting the operations of REITs, it facilitates comparisons of operating performance to other REITs. However, other REITs may use different methodologies to calculate FFO, and accordingly, our FFO may not be comparable to all other REITs.
    
Implicit in historical cost accounting for real estate assets in accordance with GAAP is the assumption that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies using historical cost accounting alone to be insufficient. Because FFO excludes depreciation and amortization of real estate assets, we believe that FFO along with the required GAAP presentations provides a more complete measurement of our performance relative to our competitors and a more appropriate basis on which to make decisions involving operating, financing and investing activities than the required GAAP presentations alone would provide. We use FFO per share to calculate annual cash bonuses for certain employees.
    
However, FFO should not be viewed as an alternative measure of our operating performance because it does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, which are significant economic costs and could materially impact our results from operations.

The following table presents a reconciliation of net loss to FFO (in thousands):
Three Months Ended March 31,
20232022
Net loss$(14,817)$(7,615)
Adjustments:
Depreciation and amortization—consolidated97,139 92,193 
Depreciation and amortization—non-real estate assets(8,392)(4,432)
Depreciation and amortization—HPP’s share from unconsolidated real estate entities
1,263 1,369 
Gain on sale of real estate(7,046)— 
Impairment loss—real estate assets
— 12,003 
Unrealized gain on non-real estate investments(839)(1,650)
FFO attributable to non-controlling interests(13,637)(20,004)
FFO attributable to preferred shares and units(5,200)(5,443)
FFO TO COMMON STOCKHOLDERS AND UNITHOLDERS$48,471 $66,421 

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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information about our market risk is disclosed in Part II, Item 7A, of our 2022 Annual Report on Form 10-K and is incorporated herein by reference. There have been no material changes for the three months ended March 31, 2023 to the information provided in Part II, Item 7A, of our 2022 Annual Report on Form 10-K.

ITEM 4.    CONTROLS AND PROCEDURES

Disclosure Controls and Procedures (Hudson Pacific Properties, Inc.)

Hudson Pacific Properties, Inc. maintains disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in Hudson Pacific Properties, Inc.’s reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) under the Exchange Act, Hudson Pacific Properties, Inc. carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures as of the end of the period covered by this report.

Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded, as of that time, that Hudson Pacific Properties, Inc.’s disclosure controls and procedures were effective in providing a reasonable level of assurance that information Hudson Pacific Properties, Inc. is required to disclose in reports that Hudson Pacific Properties, Inc. files under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

Disclosure Controls and Procedures (Hudson Pacific Properties, L.P.)

Hudson Pacific Properties, L.P. maintains disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in Hudson Pacific Properties, L.P.’s reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer of Hudson Pacific Properties, Inc. (the sole general partner of Hudson Pacific Properties, L.P.), as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) under the Exchange Act, Hudson Pacific Properties, L.P. carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer of Hudson Pacific Properties, Inc. (the sole general partner of Hudson Pacific Properties, L.P.), of the effectiveness of the design and operation of the disclosure controls and procedures as of the end of the period covered by this report.

Based on the foregoing, the Chief Executive Officer and Chief Financial Officer of Hudson Pacific Properties, Inc. (the sole general partner of Hudson Pacific Properties, L.P.) concluded, as of that time, that Hudson Pacific Properties, L.P.’s disclosure controls and procedures were effective in providing a reasonable level of assurance that information Hudson Pacific Properties, L.P. is required to disclose in reports that Hudson Pacific Properties, L.P. files under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer of Hudson Pacific Properties, Inc. (the sole general partner of Hudson Pacific Properties, L.P.), as appropriate, to allow for timely decisions regarding required disclosure.
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Changes in Internal Control Over Financial Reporting (Hudson Pacific Properties, Inc.)

There have been no changes that occurred during the first quarter of the year covered by this report in Hudson Pacific Properties, Inc.’s internal control over financial reporting identified in connection with the evaluation referenced above that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Changes in Internal Control Over Financial Reporting (Hudson Pacific Properties, L.P.)

There have been no changes that occurred during the first quarter of the year covered by this report in Hudson Pacific Properties, L.P.’s internal control over financial reporting identified in connection with the evaluation referenced above that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

From time to time, we are a party to various lawsuits, claims and other legal proceedings arising out of, or incident to, our ordinary course of business. We are not currently a party, as plaintiff or defendant, to any legal proceedings that we believe to be material or that, individually or in the aggregate, would be expected to have a material adverse effect on our business, financial condition, results of operations or cash flows if determined adversely to us.

ITEM 1A.     RISK FACTORS

There have been no material changes to the risk factors included in the section entitled “Risk Factors” in our 2022 Annual Report on Form 10-K. Please review the Risk Factors set forth in our 2022 Annual Report on Form 10-K.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)    Recent Sales of Unregistered Securities:

During the first quarter of 2023, our operating partnership issued partnership units in private placements in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, in the amounts and for the consideration set forth below:

During the first quarter of 2023, we issued an aggregate of 33,928 shares of our common stock in connection with the vesting of restricted stock awards for no cash consideration, out of which 12,237 shares of common stock were forfeited to us in connection with tax withholding obligations for a net issuance of 21,691 shares of common stock. For each share of common stock issued by us in connection with such an award, our operating partnership issued a restricted common unit to us as provided in our operating partnership’s Agreement of Limited Partnership. During the first quarter of 2023, our operating partnership issued an aggregate of 21,691 units to us in connection with these transactions. The operating partnership also issued 326,620 long-term incentive plan units during the first quarter of 2023.

All other issuances of unregistered equity securities of our operating partnership during the three months ended March 31, 2023 have previously been disclosed in filings with the SEC. For all issuances of units to us, our operating partnership relied on our status as a publicly traded NYSE-listed company with $9.1 billion in total consolidated assets and as our operating partnership’s majority owner and sole general partner as the basis for the exemption under Section 4(a)(2) of the Securities Act.

(b)    Use of Proceeds from Registered Securities: None.

(c)    Purchases of Equity Securities by the Issuer and Affiliated Purchasers:

The following table summarizes the repurchases of the Company equity securities during the first quarter of 2023:
PeriodTotal Number of Shares PurchasedAverage Price Paid Per ShareTotal Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum That May Yet Be Purchased Under The Plans or Programs(2)(3)
March 1 - March 31, 2023199,637 
(1)
$7.44 187,400 $35,250,164 
TOTAL199,637 $7.44 187,400 
_____________
1.Includes shares of common stock remitted to Hudson Pacific Properties, Inc. to satisfy tax withholding obligations in connection with the vesting of restricted stock.
2.Our board of directors authorized a share repurchase program to buy up to $250.0 million of the outstanding common stock of Hudson Pacific Properties, Inc. The program does not have a termination date, and repurchases may commence or be discontinued at any time.
3.The maximum that may yet be purchased under the plans or programs is shown net of repurchases.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

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ITEM 4.    MINE SAFETY DISCLOSURES

None.

ITEM 5.    OTHER INFORMATION

None.

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ITEM 6.    EXHIBITS
Incorporated by Reference
Exhibit No.DescriptionFormFile No.Exhibit No.Filing Date
3.1 S-11/A333-1649163.1May 12, 2010
3.28-K001-347893.1January 12, 2015
3.38-K001-347893.1March 22, 2022
3.48-K001-347893.2November 16, 2021
3.510-Q001-347893.4November 4, 2016
10.1
31.1
31.2
31.3
31.4
32.1
32.2
101
The following financial information from Hudson Pacific Properties, Inc.’s and Hudson Pacific Properties, L.P.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Operations (unaudited), (iii) Consolidated Statements of Comprehensive Loss (unaudited), (iv) Consolidated Statements of Equity (unaudited), (v) Consolidated Statements of Capital (unaudited), (vi) Consolidated Statements of Cash Flows (unaudited) and (vii) Notes to Unaudited Consolidated Financial Statements*
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____________
*Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
**Denotes a management contract or compensatory plan or arrangement.
+Filed herewith.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
HUDSON PACIFIC PROPERTIES, INC.
Date:May 9, 2023
/s/ VICTOR J. COLEMAN
Victor J. Coleman
Chief Executive Officer (Principal Executive Officer)
HUDSON PACIFIC PROPERTIES, INC.
Date:May 9, 2023
/s/ HAROUT K. DIRAMERIAN
Harout K. Diramerian
Chief Financial Officer (Principal Financial Officer)

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
HUDSON PACIFIC PROPERTIES, L.P.
Date:May 9, 2023
/s/ VICTOR J. COLEMAN
Victor J. Coleman
Chief Executive Officer (Principal Executive Officer)
HUDSON PACIFIC PROPERTIES, L.P.
Date:May 9, 2023
/s/ HAROUT K. DIRAMERIAN
Harout K. Diramerian
Chief Financial Officer (Principal Financial Officer)

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