News Column

Hudson Pacific Properties, Inc. Announces First Quarter 2014 Financial Results

May 23, 2014



By a News Reporter-Staff News Editor at Real Estate Weekly News -- Hudson Pacific Properties, Inc. (the "Company," "we," "us" or "our") (NYSE: HPP) announced financial results for the first quarter ended March 31, 2014. Financial Results Funds From Operations (FFO) (excluding specified items) for the three months ended March 31, 2014 totaled $17.9 million, or $0.27 per diluted share, compared to FFO (excluding specified items) of $14.1 million, or $0.26 per share, a year ago. The specified items for the first quarter of 2014 consisted of costs associated with a one-year consulting arrangement with a former executive of $0.8 million, or $0.01 per diluted share, and expenses associated with the acquisitions of the Merrill Place and 3402 Pico Boulevard properties of $0.1 million, or $0.00 per diluted share. Specified items for the first quarter of 2013 consisted of an early lease termination payment from Bank of America relating to our 1455 Market Street property of $1.1 million (after the write-off of non-cash items), or $0.02 per diluted share, and a property tax reimbursement stemming from the reassessment of the Sunset Gower media and entertainment property of $0.8 million, or $0.01 per diluted share. FFO, including the specified items, totaled $16.9 million, or $0.25 per diluted share, for the three months ended March 31, 2014, compared to $16.0 million, or $0.29 per share, a year ago.

The Company reported net income attributable to common stockholders of $1.3 million, or $0.02 per diluted share, for the three months ended March 31, 2014, compared to net loss attributable to common stockholders of $2.9 million, or $(0.06) per diluted share, for the three months ended March 31, 2013.

"Our first quarter highlights included the closing of important acquisitions and a successful primary common stock offering," said Mr. Victor J. Coleman, Chairman and Chief Executive Officer of Hudson Pacific Properties, Inc. "During the quarter, we completed the previously announced acquisition of an office and retail property known as 'Merrill Place' located in downtown Seattle'sPioneer Square submarket for $57.7 million. This asset is a great complement to our expanding Seattle portfolio and provides Hudson with an opportunity to leverage our operational, leasing and development expertise to create value through an extensive repositioning and re-development of the property. In Southern California, we acquired 3402 Pico Boulevard located in Santa Monica for $18.5 million. Consisting of three contiguous parcels comprising nearly three acres, we believe this development project could support approximately 150,000 square feet of creative office space. To fund these acquisitions and further support our growth objectives in 2014, we completed a primary public offering of 9.5 million shares of common stock, generating approximately $195.8 million in proceeds to the Company before transaction costs."

Mr. Coleman continued, "First quarter leasing remained active, with the completion of new and renewal leases totaling 29,014 square feet. Subsequent to the end of the quarter, we signed a new lease at our 1455 Market Street property in San Francisco with Rocket Fuel, Inc., a leading provider of artificial intelligence advertising solutions for digital marketers. At starting rents exceeding our underwritten and existing rents for backfilled space, we believe this long-term lease to a high-quality tenant delivers excellent value to our stockholders." First Quarter Highlights FFO (excluding specified items) of $17.9 million, or $0.27 per diluted share, compared to $14.1 million, or $0.26 per share, a year ago;

Completed new and renewal leases totaling 29,014 square feet;

Stabilized office portfolio leased rate of 94.5% at March 31, 2014;

Completed acquisition of 179,000 square feet of an office and retail property known as "Merrill Place" located in downtown Seattle'sPioneer Square submarket, for a gross purchase price of approximately $57.7 million (before closing costs and prorations).

Completed acquisition of 3402 Pico Boulevard in Santa Monica, California for $18.5 million (before closing costs and prorations). The property consists of three contiguous parcels comprising nearly three acres and upon redevelopment, could support approximately 150,000 square feet of creative office space.

Completed primary offering of 9,487,500 shares of common stock (including the full exercise of the underwriters' option to purchase additional shares) generating total proceeds to us of $195.8 million (before transaction costs);

Declared and paid quarterly dividend of $0.125 per share; and

Declared and paid dividend of $0.52344 per share on 8.375% Series B Cumulative Preferred Stock. Combined Operating Results For The Three Months Ended March 31, 2014 Total revenue from continuing operations during the quarter increased 17.3% to $55.6 million from $47.4 million for the same quarter a year ago. Total operating expenses from continuing operations increased 5.0% to $44.4 million from $42.3 million for the same quarter a year ago. As a result, income from operations increased 118.7% to $11.2 million for the first quarter of 2014, compared to income from operations of $5.1 million for the same quarter a year ago. The primary reasons for the increases in total revenue and total operating expenses are discussed below in connection with our segment operating results.

Interest expense during the first quarter increased 16.7% to $6.5 million, compared to interest expense of $5.6 million for the same quarter a year ago. At March 31, 2014, the Company had $827.4 million of notes payable, compared to $931.3 million as of December 31, 2013 and $530.0 million at March 31, 2013. Segment Operating Results For The Three Months Ended March 31, 2014 Office Properties Total revenue from continuing operations at the Company's office properties increased 26.3% to $46.1 million from $36.5 million for the same quarter a year ago. The increase was primarily the result of a $9.2 million increase in rental revenue to $36.0 million and a $0.6 million increase in parking and other revenue to $4.5 million, largely resulting from the acquisition of the Pinnacle II building by our joint venture with MDP/Worthe on June 14, 2013, our acquisition of the Seattle portfolio on July 31, 2013, and our acquisition of the Merrill Place property on February 12, 2014.

Office property operating expenses from continuing operations increased 20.1% to $15.9 million from $13.3 million for the same quarter a year ago. The increase was primarily the result of the acquisitions of the office properties described above.

At March 31, 2014, the Company's stabilized office portfolio was 94.5% leased. During the quarter, the Company executed 7 new and renewal leases totaling 29,014 square feet. Media and Entertainment Properties Total revenue at the Company's media and entertainment properties decreased 12.6% to $9.5 million from $10.9 million for the same quarter a year ago. The decrease was primarily the result of a $0.9 million decrease in other property-related revenue to $3.6 million, primarily resulting from lower production activity at the Company's Sunset Gower media and entertainment property compared to the same quarter a year ago.

Total media and entertainment operating expenses increased 7.8% to $6.0 million from $5.6 million for the same quarter a year ago. The increase primarily reflects a property tax reimbursement occurring in the first quarter of 2013 stemming from the reassessment of the Sunset Gower media and entertainment property of $0.8 million.

Keywords for this news article include: Real Estate, Property Tax, Hudson Pacific Properties Inc..

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Source: Real Estate Weekly News


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