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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 June 30, 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 July 28, 2023 was 140,937,702.


Table of Contents
EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the period ended June 30, 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 June 30, 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
Table of Contents
PART I—FINANCIAL INFORMATION
ITEM 1.         FINANCIAL STATEMENTS OF HUDSON PACIFIC PROPERTIES, INC.

HUDSON PACIFIC PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

June 30, 2023
(unaudited)
December 31, 2022
ASSETS
Investment in real estate, at cost$8,856,229 $8,716,572 
Accumulated depreciation and amortization(1,686,943)(1,541,271)
Investment in real estate, net7,169,286 7,175,301 
Non-real estate property, plant and equipment, net119,526 130,289 
Cash and cash equivalents109,220 255,761 
Restricted cash18,583 29,970 
Accounts receivable, net 18,921 16,820 
Straight-line rent receivables, net294,050 279,910 
Deferred leasing costs and intangible assets, net371,525 393,842 
Operating lease right-of-use assets393,911 401,051 
Prepaid expenses and other assets, net128,836 98,837 
Investment in unconsolidated real estate entities218,422 180,572 
Goodwill263,549 263,549 
Assets associated with real estate held for sale— 93,238 
TOTAL ASSETS$9,105,829 $9,319,140 
LIABILITIES AND EQUITY
Liabilities
Unsecured and secured debt, net$4,473,107 $4,585,862 
Joint venture partner debt66,136 66,136 
Accounts payable, accrued liabilities and other274,294 264,098 
Operating lease liabilities395,170 399,801 
Intangible liabilities, net30,798 34,091 
Security deposits, prepaid rent and other92,021 83,797 
Liabilities associated with real estate held for sale— 665 
Total liabilities5,331,526 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 entities119,136 125,044 
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 June 30, 2023 and December 31, 2022
425,000 425,000 
Common stock, $0.01 par value, 481,600,000 authorized, 140,937,702 and 141,054,478 shares outstanding at June 30, 2023 and December 31, 2022, respectively
1,403 1,409 
Additional paid-in capital2,783,858 2,889,967 
Accumulated other comprehensive income (loss)6,413 (11,272)
Total Hudson Pacific Properties, Inc. stockholders’ equity3,216,674 3,305,104 
Non-controlling interest—members in consolidated real estate entities355,270 377,756 
Non-controlling interest—units in the operating partnership73,408 66,971 
Total equity3,645,352 3,749,831 
TOTAL LIABILITIES AND EQUITY$9,105,829 $9,319,140 



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


HUDSON PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except share data)
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
REVENUES
Office
Rental$203,486 $211,836 $406,143 $418,028 
Service and other revenues3,805 4,408 7,781 9,616 
Total office revenues207,291 216,244 413,924 427,644 
Studio
Rental16,374 13,438 32,627 26,832 
Service and other revenues21,503 21,748 50,880 41,467 
Total studio revenues37,877 35,186 83,507 68,299 
Total revenues245,168 251,430 497,431 495,943 
OPERATING EXPENSES
Office operating expenses76,767 78,558 150,821 152,189 
Studio operating expenses34,679 20,686 71,923 39,669 
General and administrative18,941 21,871 37,665 42,383 
Depreciation and amortization98,935 91,438 196,074 183,631 
Total operating expenses229,322 212,553 456,483 417,872 
OTHER INCOME (EXPENSES)
(Loss) income from unconsolidated real estate entities(715)1,780 (1,460)2,083 
Fee income2,284 1,140 4,686 2,211 
Interest expense(54,648)(33,719)(108,455)(64,555)
Interest income236 920 607 1,830 
Management services reimbursement income—unconsolidated real estate entities1,059 1,068 2,123 2,176 
Management services expense—unconsolidated real estate entities(1,059)(1,068)(2,123)(2,176)
Transaction-related expenses2,530 (1,126)1,344 (1,382)
Unrealized loss on non-real estate investments(843)(1,818)(4)(168)
Gain on extinguishment of debt10,000 — 10,000 — 
Gain on sale of real estate— — 7,046 — 
Impairment loss— (3,250)— (23,753)
Other income (expense)138 (21)135 (9)
Total other expenses(41,018)(36,094)(86,101)(83,743)
(Loss) income before income tax (provision) benefit(25,172)2,783 (45,153)(5,672)
Income tax (provision) benefit(6,302)763 (1,140)1,603 
Net (loss) income(31,474)3,546 (46,293)(4,069)
Net income attributable to Series A preferred units(153)(153)(306)(306)
Net income attributable to Series C preferred shares(5,047)(5,047)(10,094)(10,337)
Net income attributable to participating securities(297)(300)(850)(594)
Net income attributable to non-controlling interest in consolidated real estate entities(346)(7,081)(1,377)(15,642)
Net loss attributable to redeemable non-controlling interest in consolidated real estate entities508 1,506 1,402 3,396 
Net loss attributable to common units in the operating partnership646 93 928 323 
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS$(36,163)$(7,436)$(56,590)$(27,229)
BASIC AND DILUTED PER SHARE AMOUNTS
Net loss attributable to common stockholders—basic$(0.26)$(0.05)$(0.40)$(0.19)
Net loss attributable to common stockholders—diluted$(0.26)$(0.05)$(0.40)$(0.19)
Weighted average shares of common stock outstanding—basic140,909,747 143,816,698 140,967,066 146,487,388 
Weighted average shares of common stock outstanding—diluted140,909,747 143,816,698 140,967,066 146,487,388 
The accompanying notes are an integral part of these consolidated financial statements.
6
Table of Contents


HUDSON PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited, in thousands)
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Net (loss) income$(31,474)$3,546 $(46,293)$(4,069)
Currency translation adjustments3,760 (7,088)5,774 (8,449)
Net unrealized gains on derivative instruments:
Unrealized gains12,312 1,516 13,033 4,560 
Reclassification adjustment for realized gains(962)(916)(248)(1,495)
Total net unrealized gains on derivative instruments11,350 600 12,785 3,065 
Total other comprehensive income (loss)15,110 (6,488)18,559 (5,384)
Comprehensive loss(16,364)(2,942)(27,734)(9,453)
Comprehensive income attributable to Series A preferred units(153)(153)(306)(306)
Comprehensive income attributable to Series C preferred stock(5,047)(5,047)(10,094)(10,337)
Comprehensive income attributable to participating securities(297)(300)(850)(594)
Comprehensive income attributable to non-controlling interest in consolidated real estate entities(482)(7,081)(1,748)(15,642)
Comprehensive loss attributable to redeemable non-controlling interest in consolidated real estate entities508 1,506 1,402 3,396 
Comprehensive loss attributable to non-controlling interest in the operating partnership232 206 425 417 
COMPREHENSIVE LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS$(21,603)$(13,811)$(38,905)$(32,519)
































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

HUDSON PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF EQUITY
For the three and six months ended June 30, 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 (Loss) IncomeUnits in the Operating PartnershipMembers in Consolidated Real Estate EntitiesTotal Equity
Balance, March 31, 2023
$425,000 140,888,769 $1,403 $2,835,061 $— $(8,147)$69,605 $375,960 $3,698,882 
Contributions— — — — — — — 7,708 7,708 
Distributions— — — — — — — (28,880)(28,880)
Issuance of unrestricted stock— 48,933 — — — — — — — 
Declared dividend(5,047)— — (53,591)35,866 — (570)— (23,342)
Amortization of stock-based
compensation 		— — — 2,388 — — 4,605 — 6,993 
Net income (loss)5,047 — — — (35,866)— (646)346 (31,119)
Other comprehensive income— — — — — 14,560 414 136 15,110 
Balance, June 30, 2023
$425,000 140,937,702 $1,403 $2,783,858 $— $6,413 $73,408 $355,270 $3,645,352 
Balance, December 31, 2022
$425,000 141,054,478 $1,409 $2,889,967 $— $(11,272)$66,971 $377,756 $3,749,831 
Contributions— — — — — — — 14,205 14,205 
Distributions— — — — — — — (38,439)(38,439)
Issuance of unrestricted stock— 82,861 — — — — — — — 
Shares repurchased— (187,400)(6)(1,363)— — — — (1,369)
Shares withheld to satisfy tax withholding obligations— (12,237)— (87)— — — — (87)
Declared dividend(10,094)— — (108,959)55,738 — (1,739)— (65,054)
Amortization of stock-based compensation— — — 4,300 — — 8,601 — 12,901 
Net income (loss)10,094 — — — (55,738)— (928)1,377 (45,195)
Other comprehensive income— — — — — 17,685 503 371 18,559 
Balance, June 30, 2023
$425,000 140,937,702 $1,403 $2,783,858 $— $6,413 $73,408 $355,270 $3,645,352 
























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

HUDSON PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF EQUITY
For the three and six months ended June 30, 2022
(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 CapitalRetained Earnings (Accumulated Deficit)Accumulated Other Comprehensive LossUnits in the Operating PartnershipMembers in Consolidated Real Estate EntitiesTotal Equity
Balance, March 31, 2022
$425,000 144,559,168 $1,445 $3,063,500 $— $(676)$55,254 $398,941 $3,943,464 
Contributions— — — — — — 12,833 12,833 
Distributions— — — — — — — (34,148)(34,148)
Transaction costs— — (138)— — — — (138)
Issuance of unrestricted stock— 24,564 — — — — — — — 
Shares repurchased(2,105,359)(21)(37,185)— — — — (37,206)
Accelerated share repurchase(869,037)(9)9 — — — 
Declared dividend(5,047)— — (42,863)7,136 — (679)— (41,453)
Amortization of stock-based compensation— — — 2,343 — — 4,623 — 6,966 
Net income (loss)5,047 — — — (7,136)— (93)7,081 4,899 
Other comprehensive loss— — — — — (6,375)(113)— (6,488)
Balance, June 30, 2022
$425,000 141,609,336 $1,415 $2,985,666 $— $(7,051)$58,992 $384,707 $3,848,729 
Balance, December 31, 2021
$425,000 151,124,543 $1,511 $3,317,072 $— $(1,761)$52,199 $402,971 4,196,992 
Contributions— — — — — — — 15,457 15,457 
Distributions— — — — — — — (49,363)(49,363)
Transaction costs— — — (214)— — — — (214)
Issuance of unrestricted stock— 32,861 — — — — — — — 
Shares repurchased— (2,105,359)(21)(37,185)— — — — (37,206)
Accelerated share repurchase— (7,442,709)(75)(199,925)— — — — (200,000)
Declared dividend(10,337)— — (98,625)26,635 — (1,358)— (83,685)
Amortization of stock-based compensation— — — 4,543 — — 8,568 — 13,111 
Net income (loss)10,337 — — — (26,635)— (323)15,642 (979)
Other comprehensive loss— — — — — (5,290)(94)— (5,384)
Balance, June 30, 2022
$425,000 141,609,336 $1,415 $2,985,666 $— $(7,051)$58,992 $384,707 $3,848,729 




















The accompanying notes are an integral part of these consolidated financial statements.
9
Table of Contents

HUDSON PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Six Months Ended June 30,
20232022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(46,293)$(4,069)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization196,074 183,631 
Non-cash interest expense14,905 3,272 
Amortization of stock-based compensation11,547 11,322 
Loss (income) from unconsolidated real estate entities1,460 (2,083)
Unrealized loss on non-real estate investments4 168 
Straight-line rents(14,111)(27,621)
Straight-line rent expenses2,509 844 
Amortization of above- and below-market leases, net(3,239)(4,692)
Amortization of above- and below-market ground leases, net1,377 1,355 
Amortization of lease incentive costs603 863 
Distribution of income from unconsolidated real estate entities— 688 
Impairment loss— 23,753 
Earnout liability fair value adjustment(3,017)— 
Gain on sale of real estate(7,046)— 
Deferred tax provision (benefit)916 (1,500)
Change in operating assets and liabilities:
Accounts receivable(1,989)9,744 
Deferred leasing costs and lease intangibles(9,619)(9,807)
Prepaid expenses and other assets(23,474)(12,898)
Accounts payable, accrued liabilities and other22,993 19,428 
Security deposits, prepaid rent and other8,083 (2,256)
Net cash provided by operating activities151,683 190,142 
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of real estate100,441 — 
Additions to investment in real estate(155,948)(113,605)
Property acquisitions— (87,970)
Maturities of U.S. Government securities— 129,300 
Contributions to non-real estate investments(3,339)(11,974)
Proceeds from sales of non-real estate investments503 — 
Distributions from non-real estate investments— 329 
Distributions from unconsolidated real estate entities1,895 883 
Contributions to unconsolidated real estate entities(35,313)(14,892)
Additions to non-real estate property, plant and equipment(1,650)(6,325)
Net cash used in investing activities(93,411)(104,254)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from unsecured and secured debt263,356 389,327 
Payments of unsecured and secured debt(384,000)— 
Payments of in-substance defeased debt— (1,815)
Transaction costs— (214)
Repurchases of common stock(1,369)(34,688)
Accelerated share repurchase— (200,000)
Dividends paid to common stock and unitholders(54,960)(73,348)
Dividends paid to preferred stock and unitholders(10,400)(12,924)
Contributions from redeemable non-controlling members in consolidated real estate entities— 375 
Distributions to redeemable non-controlling members in consolidated real estate entities(4,506)(8)
Contributions from non-controlling members in consolidated real estate entities14,205 15,457 
Distributions to non-controlling members in consolidated real estate entities(38,439)(49,363)
Payments to satisfy tax withholding obligations(87)— 
Net cash (used in) provided by financing activities(216,200)32,799 
Net (decrease) increase in cash and cash equivalents and restricted cash(157,928)118,687 
Cash and cash equivalents and restricted cash—beginning of period285,731 196,876 
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH—END OF PERIOD
$127,803 $315,563 
The accompanying notes are an integral part of these consolidated financial statements.
10
Table of Contents
ITEM 1.         FINANCIAL STATEMENTS OF HUDSON PACIFIC PROPERTIES, L.P.

HUDSON PACIFIC PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
June 30, 2023
(unaudited)
December 31, 2022
ASSETS
Investment in real estate, at cost$8,856,229 $8,716,572 
Accumulated depreciation and amortization(1,686,943)(1,541,271)
Investment in real estate, net7,169,286 7,175,301 
Non-real estate property, plant and equipment, net119,526 130,289 
Cash and cash equivalents109,220 255,761 
Restricted cash18,583 29,970 
Accounts receivable, net 18,921 16,820 
Straight-line rent receivables, net294,050 279,910 
Deferred leasing costs and intangible assets, net371,525 393,842 
Operating lease right-of-use assets393,911 401,051 
Prepaid expenses and other assets, net128,836 98,837 
Investment in unconsolidated real estate entities218,422 180,572 
Goodwill263,549 263,549 
Assets associated with real estate held for sale— 93,238 
TOTAL ASSETS$9,105,829 $9,319,140 
LIABILITIES AND CAPITAL
Liabilities
Unsecured and secured debt, net$4,473,107 $4,585,862 
Joint venture partner debt66,136 66,136 
Accounts payable, accrued liabilities and other274,294 264,098 
Operating lease liabilities395,170 399,801 
Intangible liabilities, net30,798 34,091 
Security deposits, prepaid rent and other92,021 83,797 
Liabilities associated with real estate held for sale— 665 
Total liabilities5,331,526 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 entities119,136 125,044 
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 June 30, 2023 and December 31, 2022
425,000 425,000 
Common units, 143,456,164 and 143,246,320 outstanding at June 30, 2023 and December 31, 2022, respectively
2,858,354 2,958,535 
Accumulated other comprehensive income (loss)6,728 (11,460)
Total Hudson Pacific Properties, L.P. partners’ capital3,290,082 3,372,075 
Non-controlling interest—members in consolidated real estate entities355,270 377,756 
Total capital3,645,352 3,749,831 
TOTAL LIABILITIES AND CAPITAL$9,105,829 $9,319,140 







The accompanying notes are an integral part of these consolidated financial statements.
11
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HUDSON PACIFIC PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except unit data)
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
REVENUES
Office
Rental$203,486 $211,836 $406,143 $418,028 
Service and other revenues3,805 4,408 7,781 9,616 
Total office revenues207,291 216,244 413,924 427,644 
Studio
Rental16,374 13,438 32,627 26,832 
Service and other revenues21,503 21,748 50,880 41,467 
Total studio revenues37,877 35,186 83,507 68,299 
Total revenues245,168 251,430 497,431 495,943 
OPERATING EXPENSES
Office operating expenses76,767 78,558 150,821 152,189 
Studio operating expenses34,679 20,686 71,923 39,669 
General and administrative18,941 21,871 37,665 42,383 
Depreciation and amortization98,935 91,438 196,074 183,631 
Total operating expenses229,322 212,553 456,483 417,872 
OTHER INCOME (EXPENSES)
(Loss) income from unconsolidated real estate entities(715)1,780 (1,460)2,083 
Fee income2,284 1,140 4,686 2,211 
Interest expense(54,648)(33,719)(108,455)(64,555)
Interest income236 920 607 1,830 
Management services reimbursement income—unconsolidated real estate entities1,059 1,068 2,123 2,176 
Management services expense—unconsolidated real estate entities(1,059)(1,068)(2,123)(2,176)
Transaction-related expenses2,530 (1,126)1,344 (1,382)
Unrealized loss on non-real estate investments(843)(1,818)(4)(168)
Gain on sale of real estate— — 7,046 — 
Impairment loss— (3,250)— (23,753)
Gain on extinguishment of debt10,000 — 10,000 — 
Other income (expense)138 (21)135 (9)
Total other expenses(41,018)(36,094)(86,101)(83,743)
(Loss) income before income tax benefit (provision)(25,172)2,783 (45,153)(5,672)
Income tax (provision) benefit(6,302)763 (1,140)1,603 
Net (loss) income(31,474)3,546 (46,293)(4,069)
Net income attributable to non-controlling interest in consolidated real estate entities(346)(7,081)(1,377)(15,642)
Net loss attributable to redeemable non-controlling interest in consolidated real estate entities508 1,506 1,402 3,396 
Net loss attributable to Hudson Pacific Properties, L.P.(31,312)(2,029)(46,268)(16,315)
Net income attributable to Series A preferred units(153)(153)(306)(306)
Net income attributable to Series C preferred units(5,047)(5,047)(10,094)(10,337)
Net income attributable to participating securities(297)(300)(850)(594)
NET LOSS AVAILABLE TO COMMON UNITHOLDERS$(36,809)$(7,529)$(57,518)$(27,552)
BASIC AND DILUTED PER UNIT AMOUNTS
Net loss attributable to common unitholders—basic$(0.26)$(0.05)$(0.40)$(0.19)
Net loss attributable to common unitholders—diluted$(0.26)$(0.05)$(0.40)$(0.19)
Weighted average shares of common units outstanding—basic143,428,209 145,662,962 143,379,060 148,332,424 
Weighted average shares of common units outstanding—diluted143,428,209 145,662,962 143,379,060 148,332,424 
The accompanying notes are an integral part of these consolidated financial statements.
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HUDSON PACIFIC PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited, in thousands)
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Net (loss) income$(31,474)$3,546 $(46,293)$(4,069)
Currency translation adjustments3,760 (7,088)5,774 (8,449)
Net unrealized gains on derivative instruments:
Unrealized gains12,312 1,516 13,033 4,560 
Reclassification adjustment for realized gains(962)(916)(248)(1,495)
Total net unrealized gains on derivative instruments11,350 600 12,785 3,065 
Total other comprehensive income (loss)15,110 (6,488)18,559 (5,384)
Comprehensive loss(16,364)(2,942)(27,734)(9,453)
Comprehensive income attributable to Series A preferred units(153)(153)(306)(306)
Comprehensive income attributable to Series C preferred units(5,047)(5,047)(10,094)(10,337)
Comprehensive income attributable to participating securities(297)(300)(850)(594)
Comprehensive income attributable to non-controlling interest in consolidated real estate entities(482)(7,081)(1,748)(15,642)
Comprehensive loss attributable to redeemable non-controlling interest in consolidated real estate entities508 1,506 1,402 3,396 
COMPREHENSIVE LOSS ATTRIBUTABLE TO PARTNERS’ CAPITAL$(21,835)$(14,017)$(39,330)$(32,936)



































The accompanying notes are an integral part of these consolidated financial statements.
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HUDSON PACIFIC PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF CAPITAL
For the three and six months ended June 30, 2023
(unaudited, in thousands, except share data)
Hudson Pacific Properties, L.P. Partners’ Capital
Preferred UnitsNumber of Common UnitsCommon UnitsAccumulated Other Comprehensive (Loss) IncomeTotal Partners’ CapitalNon-controlling Interest—Members in Consolidated Real Estate EntitiesTotal Capital
Balance, March 31, 2023
$425,000 143,407,231 $2,906,168 $(8,246)$3,322,922 $375,960 $3,698,882 
Contributions— — — — — 7,708 7,708 
Distributions— — — — — (28,880)(28,880)
Issuance of unrestricted units— 48,933 — — — — — 
Declared distributions(5,047)— (18,295)— (23,342)— (23,342)
Amortization of unit-based compensation— — 6,993 — 6,993 — 6,993 
Net income (loss)5,047 — (36,512)— (31,465)346 (31,119)
Other comprehensive income— — — 14,974 14,974 136 15,110 
Balance, June 30, 2023
$425,000 143,456,164 $2,858,354 $6,728 $3,290,082 $355,270 $3,645,352 
Balance, December 31, 2022
$425,000 143,246,320 $2,958,535 $(11,460)$3,372,075 $377,756 $3,749,831 
Contributions— — — — — 14,205 14,205 
Distributions— — — — — (38,439)(38,439)
Issuance of unrestricted units— 409,481 — — — — — 
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(10,094)— (54,960)— (65,054)— (65,054)
Amortization of unit-based compensation— — 12,901 — 12,901 — 12,901 
Net income (loss)10,094 — (56,666)— (46,572)1,377 (45,195)
Other comprehensive income— — — 18,188 18,188 371 18,559 
Balance, June 30, 2023
$425,000 143,456,164 $2,858,354 $6,728 $3,290,082 $355,270 $3,645,352 























The accompanying notes are an integral part of these consolidated financial statements.
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HUDSON PACIFIC PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF CAPITAL
For the three and six months ended June 30, 2022
(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, March 31, 2022
$425,000 146,405,432 $3,120,198 $(675)$3,544,523 $398,941 $3,943,464 
Contributions— — — — — 12,833 12,833 
Distributions— — — — — (34,148)(34,148)
Transaction costs— — (138)— (138)— (138)
Issuance of unrestricted units— 24,564 — — — — — 
Repurchase of common units— (2,974,396)(37,206)— (37,206)— (37,206)
Declared distributions(5,047)— (36,406)— (41,453)— (41,453)
Amortization of unit-based compensation— — 6,966 — 6,966 — 6,966 
Net income (loss) 5,047 — (7,229)— (2,182)7,081 4,899 
Other comprehensive loss— — — (6,488)(6,488)— (6,488)
Balance, June 30, 2022
$425,000 143,455,600 $3,046,185 $(7,163)$3,464,022 $384,707 $3,848,729 
Balance, December 31, 2021
$425,000 152,967,441 $3,370,800 $(1,779)$3,794,021 $402,971 $4,196,992 
Contributions— — — — — 15,457 15,457 
Distributions— — — — — (49,363)(49,363)
Transaction costs— — (214)— (214)— (214)
Issuance of unrestricted units— 36,227 — — — — — 
Repurchase of common units— (9,548,068)(237,206)— (237,206)— (237,206)
Declared distributions(10,337)— (73,348)— (83,685)— (83,685)
Amortization of unit-based compensation— — 13,111 — 13,111 — 13,111 
Net income (loss)10,337 — (26,958)— (16,621)15,642 (979)
Other comprehensive loss— — — (5,384)(5,384)— (5,384)
Balance, June 30, 2022
$425,000 143,455,600 $3,046,185 $(7,163)$3,464,022 $384,707 $3,848,729 





















The accompanying notes are an integral part of these consolidated financial statements.
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HUDSON PACIFIC PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Six Months Ended June 30,
20232022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(46,293)$(4,069)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization196,074 183,631 
Non-cash interest expense14,905 3,272 
Amortization of unit-based compensation11,547 11,322 
Loss (income) from unconsolidated real estate entities1,460 (2,083)
Unrealized loss on non-real estate investments4 168 
Straight-line rents(14,111)(27,621)
Straight-line rent expenses2,509 844 
Amortization of above- and below-market leases, net(3,239)(4,692)
Amortization of above- and below-market ground leases, net1,377 1,355 
Amortization of lease incentive costs603 863 
Distribution of income from unconsolidated real estate entities— 688 
Impairment loss— 23,753 
Earnout liability fair value adjustment(3,017)— 
Gain on sale of real estate(7,046)— 
Deferred tax provision (benefit)916 (1,500)
Change in operating assets and liabilities:
Accounts receivable(1,989)9,744 
Deferred leasing costs and lease intangibles(9,619)(9,807)
Prepaid expenses and other assets(23,474)(12,898)
Accounts payable, accrued liabilities and other22,993 19,428 
Security deposits, prepaid rent and other8,083 (2,256)
Net cash provided by operating activities151,683 190,142 
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of real estate100,441 — 
Additions to investment in real estate(155,948)(113,605)
Property acquisitions— (87,970)
Maturities of U.S. Government securities— 129,300 
Contributions to non-real estate investments(3,339)(11,974)
Proceeds from sale of non-real estate investment503 — 
Distributions from non-real estate investments— 329 
Distributions from unconsolidated real estate entities1,895 883 
Contributions to unconsolidated real estate entities(35,313)(14,892)
Additions to non-real estate property, plant and equipment(1,650)(6,325)
Net cash used in investing activities(93,411)(104,254)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from unsecured and secured debt263,356 389,327 
Payments of unsecured and secured debt(384,000)— 
Payments of in-substance defeased debt— (1,815)
Transaction costs— (214)
Repurchases of common units(1,369)(234,688)
Distributions paid to common unitholders(54,960)(73,348)
Distributions paid to preferred unitholders(10,400)(12,924)
Contributions from redeemable non-controlling members in consolidated real estate entities— 375 
Distributions to redeemable non-controlling members in consolidated real estate entities(4,506)(8)
Contributions from non-controlling members in consolidated real estate entities14,205 15,457 
Distributions to non-controlling members in consolidated real estate entities(38,439)(49,363)
Payments to satisfy tax withholding obligations(87)— 
Net cash (used in) provided by financing activities(216,200)32,799 
Net (decrease) increase in cash and cash equivalents and restricted cash(157,928)118,687 
Cash and cash equivalents and restricted cash—beginning of period285,731 196,876 
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH—END OF PERIOD
$127,803 $315,563 
The accompanying notes are an integral part of these consolidated financial statements.
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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 June 30, 2023:
SegmentsNumber of Properties
Square Feet
(unaudited)
Consolidated portfolio
Office49 13,925,310 
Studio3 1,256,241 
Future development6 1,966,242 
Total consolidated portfolio58 17,147,793 
Unconsolidated portfolio(1)
Office(2)
1 1,514,177 
Studio(3)
1 241,000 
Future development(4)
2 1,617,347 
Total unconsolidated portfolio4 3,372,524 
TOTAL62 20,520,317 
_________________
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.

The Company has reclassified an income tax benefit of $0.8 million and $1.6 million from other income (expense) to income tax (provision) benefit on the Consolidated Statements of Operations for the three and six months ended June 30, 2022, respectively, to conform to the presentation for the three and six months ended June 30, 2023.

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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 has reclassified a gain on derivatives of $3.5 million from gain on derivatives to non-cash interest expense on the Consolidated Statement of Cash Flows for the six months ended June 30, 2022 to conform to the presentation for the six months ended June 30, 2023.

The Company has reclassified $0.3 million and $1.2 million from change in operating assets and liabilities—prepaid expenses and other assets and change in operating assets and liabilities—accounts payable, accrued liabilities and other, respectively, to deferred tax provision (benefit) on the Consolidated Statement of Cash Flows for the six months ended June 30, 2022 to conform to the presentation for the six months ended June 30, 2023.

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 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 June 30, 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.

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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)
Consolidated Joint Ventures

As of June 30, 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 June 30, 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.

Unconsolidated Joint Ventures

As of June 30, 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
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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)
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 22 years as of June 30, 2023.

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”).

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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)
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.

The following table summarizes the Company’s revenue streams that are accounted for under ASC 606 for the three and six months ended June 30, 2023 and 2022:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Ancillary revenues$21,020 $20,476 $48,314 $38,963 
Other revenues$3,823 $5,277 $9,341 $11,204 
Studio-related tenant recoveries$465 $403 $1,006 $916 
Management fee income$2,284 $1,140 $4,686 $2,211 
Management services reimbursement income$1,059 $1,068 $2,123 $2,176 

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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 receivables that are accounted for under ASC 606 as of:
June 30, 2023December 31, 2022
Ancillary revenues$4,144 $15,503 
Other revenues$1,163 $1,193 

In regard 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.

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.
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Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)

As of June 30, 2023 and December 31, 2022, the carrying value of goodwill was $263.5 million. No impairment indicators have been identified during the three and six months ended June 30, 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 

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.
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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)

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:
June 30, 2023December 31, 2022
Land$1,397,711 $1,397,714 
Building and improvements6,387,846 6,342,851 
Tenant improvements903,557 868,193 
Furniture and fixtures9,460 9,639 
Property under development157,655 98,175 
INVESTMENT IN REAL ESTATE, AT COST$8,856,229 $8,716,572 

Acquisitions of Real Estate

The Company had no acquisitions of real estate during the three and six months ended June 30, 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. 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 and six months ended June 30, 2023. During the three and six months ended June 30, 2022, the Company recorded $3.3 million and $15.3 million, respectively, of impairment charges related to the tangible and intangible assets of its Del Amo office property, which was classified as held for sale as of June 30, 2022 and subsequently sold during the third quarter of 2022, due to a reduction in the estimated fair value of the property. The estimated fair value of $2.75 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 and six months ended June 30, 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 for the six months ended June 30, 2023, recorded within gain on sale of real estate on the Consolidated Statement of Operations.

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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)
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:
June 30, 2023December 31, 2022
Trailers$70,192 $68,973 
Production equipment36,954 36,019 
Trucks and other vehicles20,629 20,306 
Leasehold improvements13,916 16,993 
Other equipment6,755 5,693 
Furniture, fixtures and equipment7,078 5,849 
Non-real estate property, plant and equipment, at cost155,524 153,833 
Accumulated depreciation(35,998)(23,544)
NON-REAL ESTATE PROPERTY, PLANT AND EQUIPMENT, NET$119,526 $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 and six months ended June 30, 2023.

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 June 30, 2023.
4.The Company has guaranteed the joint venture’s outstanding indebtedness in the amount of $100.5 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 income as a separate component of total equity and are excluded from net (loss) income.

The Company held ownership interests in other immaterial unconsolidated joint ventures in the total of $0.3 million and $0.1 million as of June 30, 2023 and December 31, 2022, respectively.

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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 balance sheets for the Company’s unconsolidated joint ventures:
June 30, 2023December 31, 2022
ASSETS
Investment in real estate, net$1,203,890 $1,093,448 
Other assets76,288 62,870 
TOTAL ASSETS$1,280,178 $1,156,318 
LIABILITIES
Secured debt, net$572,877 $527,985 
Other liabilities45,964 49,027 
TOTAL LIABILITIES618,841 577,012 
Company’s capital(1)
202,725 170,656 
Partner’s capital458,612 408,650 
TOTAL CAPITAL661,337 579,306 
TOTAL LIABILITIES AND CAPITAL$1,280,178 $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.

The table below presents the combined and condensed statements of operations for the Company’s unconsolidated joint ventures:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
TOTAL REVENUES$19,271 $26,915 $37,742 $46,447 
TOTAL EXPENSES22,600 17,873 44,677 35,651 
NET (LOSS) INCOME$(3,329)$9,042 $(6,935)$10,796 

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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)
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:
June 30, 2023December 31, 2022
Deferred leasing costs and in-place lease intangibles$328,891 $328,617 
Accumulated amortization(154,682)(141,353)
Deferred leasing costs and in-place lease intangibles, net174,209 187,264 
Below-market ground leases79,562 79,562 
Accumulated amortization(19,356)(17,979)
Below-market ground leases, net60,206 61,583 
Above-market leases673 724 
Accumulated amortization(325)(324)
Above-market leases, net348 400 
Customer relationships97,900 97,900 
Accumulated amortization(19,355)(12,346)
Customer relationships, net78,545 85,554 
Non-competition agreements8,200 8,200 
Accumulated amortization(2,456)(1,632)
Non-competition agreements, net5,744 6,568 
Trade name37,200 37,200 
Parking easement15,273 15,273 
DEFERRED LEASING COSTS AND INTANGIBLE ASSETS, NET$371,525 $393,842 
Below-market leases$59,275 $59,540 
Accumulated amortization(29,201)(26,195)
Below-market leases, net30,074 33,345 
Above-market ground leases1,095 1,095 
Accumulated amortization(371)(349)
Above-market ground leases, net724 746 
INTANGIBLE LIABILITIES, NET$30,798 $34,091 

The Company recognized the following amortization related to deferred leasing costs and intangibles:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Deferred leasing costs and in-place lease intangibles(1)
$(9,809)$(9,788)$(19,057)$(20,207)
Below-market ground leases(2)
$(699)$(698)$(1,398)$(1,377)
Above-market leases(3)
$(15)$(23)$(32)$(91)
Customer relationships(1)
$(3,504)$(1,875)$(7,008)$(3,750)
Non-competition agreements(1)
$(411)$(265)$(823)$(530)
Below-market leases(3)
$1,634 $1,976 $3,271 $4,783 
Above-market ground leases(2)
$10 $11 $21 $22 
__________________ 
1.Amortization is recorded in depreciation and amortization expenses and for lease incentive costs in office rental revenues on the Consolidated Statements of Operations.
2.Amortization is recorded in office operating expenses on the Consolidated Statements of Operations.
3.Amortization is recorded in office rental revenues on the Consolidated Statements of Operations.

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Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
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 June 30, 2023, accounts receivable was $19.1 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 June 30, 2023, straight-line rent receivables was $294.2 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:
June 30, 2023December 31, 2022
Non-real estate investments50,181 47,329 
Deferred tax assets4,402 5,317 
Interest rate derivative assets17,706 9,292 
Deferred financing costs, net4,826 5,824 
Inventory5,689 4,914 
Prepaid property tax— 2,041 
Prepaid insurance21,737 6,530 
Stock purchase warrant74 95 
Other24,221 17,495 
PREPAID EXPENSES AND OTHER ASSETS, NET$128,836 $98,837 

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 loss on non-real estate investments on the Consolidated Statements of Operations. The Company recognized an unrealized loss of $0.8 million and an unrealized gain of $16.8 thousand on its non-real estate investments due to the observable changes in fair value during the three and six months ended June 30, 2023, respectively. The Company recognized an unrealized loss of $1.4 million and an unrealized gain of $1.2 million on its non-real estate investments due to the observable changes in fair value during the three and six months ended June 30, 2022, respectively.

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 loss on non-real estate investments on the Consolidated Statements of Operations. The Company recognized no gain or loss and an unrealized loss of $21.0 thousand due to the change in the fair value of the stock purchase warrant during the three and six months ended June 30, 2023, respectively. The Company recognized an unrealized loss of $0.4 million and $1.4 million due to the change in the fair value of the stock purchase warrant during the three and six months ended June 30, 2022, respectively.

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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:
June 30, 2023December 31, 2022
Interest Rate(1)
Contractual Maturity Date(2)
UNSECURED AND SECURED DEBT
Unsecured debt
Unsecured revolving credit facility(3)(4)
$528,000 $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 debt2,693,000 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)(10)
890,186 890,186 
One Westside and Westside Two(11)
324,632 316,602 
SOFR + 1.60%
12/18/2024(12)
Element LA168,000 168,000 4.59%11/6/2025
1918 Eighth(13)
314,300 314,300 
SOFR + 1.40%
12/18/2025
Hill7(14)
101,000 101,000 3.38%11/6/2028
Quixote— 160,000 5.00%12/31/2023(15)
Total secured debt1,798,118 1,950,088 
Total unsecured and secured debt4,491,118 4,610,088 
Unamortized deferred financing costs/loan discounts(16)
(18,011)(24,226)
TOTAL UNSECURED AND SECURED DEBT, NET$4,473,107 $4,585,862 
JOINT VENTURE PARTNER DEBT(17)
$66,136 $66,136 4.50%10/9/2032(18)
_________________
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 June 30, 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 June 30, 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 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.
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Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
10.In July 2023, the Company modified the existing loan agreement secured by its Hollywood Media Portfolio property, whereby the LIBOR-based floating interest rate was replaced with a term SOFR-based floating interest rate. The amended interest rate on the loan secured by the Hollywood Media Portfolio is SOFR + 1.10%. The Company applied the relief provisions of ASC 848 and accounted for this modification as a continuation of the existing loan agreement. The interest rate on the acquired Hollywood Media Portfolio debt was also amended and the new interest rate is SOFR + 1.66%.
11.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 June 30, 2023.
12.Includes the option to extend the initial maturity date of December 18, 2023 twice for an additional six-month term each.
13.This loan is interest-only through its term. The floating interest rate on $141.4 million of principal has been capped at 5.00% through the use of an interest rate cap. The floating interest rate on the remaining $172.9 million of principal has been effectively fixed at 3.75% through the use of an interest rate swap.
14.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.
15.The note was settled in April 2023 for consideration of $150.0 million, a $10.0 million discount on the note’s principal balance.
16.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 9 for details.
17.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.
18.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 six months ended June 30, 2023, there were $143.0 million of borrowings on the unsecured revolving credit facility, net of repayments. 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.

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

In April 2023, the Company settled the Quixote note for consideration of $150.0 million, a $10.0 million discount on the note’s principal balance, which resulted in a gain on extinguishment of debt of $10.0 million during the three and six months ended June 30, 2023. The Company drew on its unsecured revolving credit facility to fund the settlement.

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 June 30, 2023:

YearUnsecured and Secured DebtJoint Venture Partner Debt
Remaining 2023$50,000 $— 
2024324,632 — 
2025741,300 — 
20261,568,186 — 
2027456,000 — 
Thereafter1,351,000 66,136 
TOTAL
$4,491,118 $66,136 
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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 June 30, 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%
47.5%
Unsecured indebtedness to unencumbered asset value
≤ 60%
53.7%
Adjusted EBITDA to fixed charges
≥ 1.5x
2.4x
Secured indebtedness to total asset value
≤ 45%
20.0%
Unencumbered NOI to unsecured interest expense
≥ 2.0x
2.6x

The following table summarizes existing covenants and their covenant levels related to the registered senior notes as of June 30, 2023:
Covenant Ratio(1)
Covenant LevelActual Performance
Debt to total assets
≤ 60%
45.7%
Total unencumbered assets to unsecured debt
 ≥ 150%
218.4%
Consolidated income available for debt service to annual debt service charge
≥ 1.5x
2.5x
Secured debt to total assets
≤ 45%
19.1%
_________________
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 June 30, 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 June 30,Six Months Ended June 30,
2023202220232022
Gross interest expense(1)
$54,425 $34,012 $107,723 $68,160 
Capitalized interest(7,311)(3,592)(14,173)(6,877)
Non-cash interest expense7,534 3,299 14,905 3,272 
INTEREST EXPENSE
$54,648 $33,719 $108,455 $64,555 
_________________
1.Includes interest on the Company’s debt and hedging activities.

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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 June 30, 2023 and December 31, 2022:
Fair Value Assets (Liabilities)
Underlying Debt InstrumentDerivative TypeAccounting PolicyNotional AmountEffective DateMaturity
Date		Interest RateJune 30, 2023December 31, 2022
Hollywood Media PortfolioCapCash flow hedge$1,100,000 August 2021August 20233.50%$2,401 $9,292 
1918 EighthSwapCash flow hedge172,865 February 2023October 20253.75%3,045 — 
1918 EighthCap
Partial cash flow hedge(1)
314,300 June 2023December 20255.00%3,398 — 
1918 Eighth
Sold cap(2)
Mark-to-market172,865 June 2023December 20255.00%(1,874)— 
Hollywood Media PortfolioSwapCash flow hedge351,186 August 2023June 20263.31%8,862 — 
TOTAL$15,832 $9,292 
_____________ 
1.$141,435 of the total notional amount has been designated as an effective cash flow hedge for accounting purposes. The remainder is accounted for under mark-to-market accounting.
2.The sold cap serves to offset the changes in fair value of the portion of the 1918 Eighth cap that is not designated as a cash flow hedge 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 June 30, 2023, the Company expects $8.5 million of unrealized gain included in accumulated other comprehensive income 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.

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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 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 provision of $6.3 million and $1.1 million for the three and six months ended June 30, 2023, respectively, and an income tax benefit of $0.8 million and $1.6 million for the three and six months ended June 30, 2022, respectively.

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. A valuation allowance is recognized when it is determined that it is more likely than not that a deferred tax asset will not be realized. As of June 30, 2023, the Company had recorded a net deferred tax asset of $4.4 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, gross deferred tax liabilities of $11.6 million and no valuation allowance, 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.

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 June 30, 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 June 30, 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 June 30, 2023:
Year Ended
Remaining 2023
$325,038 
2024605,592 
2025509,475 
2026455,109 
2027398,099 
Thereafter1,372,505 
TOTAL$3,665,818 

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 June 30, 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.

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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)
As of June 30, 2023, the present value of the remaining contractual payments of $731.3 million under the Company’s operating lease agreements was $395.2 million. The corresponding operating lease right-of-use assets amounted to $393.9 million.

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 June 30, 2023:
Year
Lease Payments(1)
Remaining 2023
$19,801 
202439,850 
202540,084 
202638,487 
202735,790 
Thereafter557,316 
Total operating lease payments
731,328 
Less: interest portion(336,158)
PRESENT VALUE OF OPERATING LEASE LIABILITIES$395,170 
_____________ 
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 June 30,Six Months Ended June 30,
2023202220232022
Variable rental expense$3,384 $2,381 $6,387 $4,486 
Minimum rental expense$11,093 $6,131 $22,180 $12,281 

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.

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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’s financial assets and liabilities measured and reported at fair value on a recurring basis include the following as of:
June 30, 2023December 31, 2022
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Interest rate derivative assets(1)
$— $17,706 $— $17,706 $— $9,292 $— $9,292 
Interest rate derivative liabilities(2)
$— $(1,874)$— $(1,874)$— $— $— $— 
Non-real estate investments measured at fair value(1)
$63 $— $— $63 $544 $— $— $544 
Stock purchase warrant(1)
$— $74 $— $74 $— $95 $— $95 
Earnout liability(2)
$— $— $(6,283)$(6,283)$— $— $(9,300)$(9,300)
Non-real estate investments measured at NAV(1)(3)
$— $— $— $50,118 $— $— $— $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.

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.

The following table summarizes changes in the carrying amount of the earnout liability during the six months ended June 30, 2023:

Balance, December 31, 2022
$(9,300)
Remeasurement to fair value3,017
Balance, June 30, 2023
$(6,283)

The remeasurement gain of $3.0 million recognized during the three and six months ended June 30, 2023 is recorded in transaction-related expenses on the Consolidated Statements of Operations.

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.

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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 represents the carrying value and fair value of the Company’s investment in securities and debt as of:
June 30, 2023December 31, 2022
Carrying Value
Fair Value
Carrying Value
Fair Value
LIABILITIES
Unsecured debt(1)
$2,693,000 $2,181,565 $2,660,000 $2,364,871 
Secured debt(1)
$1,798,118 $1,777,732 $1,950,088 $1,927,297 
Consolidated joint venture partner debt$66,136 $60,070 $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 June 30, 2023, 5.0 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 $4.22.

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. Annual PSU Plan grants made prior to 2023 consist of two portions. A portion of each award, the Relative Total Shareholder Return (“TSR”) Performance Unit, is eligible to vest based 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. The 2023 PSU Plan grants contain only an Operational Performance Unit, which is eligible to vest based on the achievement of operational 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 the Company’s TSR compared to the TSR of the FTSE NAREIT All Equity REITs index over a three-year performance period. 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.

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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 presents the classification and amount recognized for stock-based compensation related to the Company’s awards:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Expensed stock compensation(1)
$6,311 $5,993 $11,547 $11,322 
Capitalized stock compensation(2)
682 973 1,354 1,789 
TOTAL STOCK COMPENSATION(3)
$6,993 $6,966 $12,901 $13,111 
_________________
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 and six months ended June 30, 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 June 30,Six Months Ended June 30,
2023202220232022
Numerator:
Basic and diluted net loss available to common stockholders
$(36,163)$(7,436)$(56,590)$(27,229)
Denominator:
Basic weighted average common shares outstanding140,909,747 143,816,698 140,967,066 146,487,388 
Effect of dilutive instruments(1)
— — — — 
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING140,909,747 143,816,698 140,967,066 146,487,388 
Basic earnings per common share$(0.26)$(0.05)$(0.40)$(0.19)
Diluted earnings per common share$(0.26)$(0.05)$(0.40)$(0.19)
    
________________
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.

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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 and six months ended June 30, 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 June 30,Six Months Ended June 30,
2023202220232022
Numerator:
Basic and diluted net loss available to common unitholders$(36,809)$(7,529)$(57,518)$(27,552)
Denominator:
Basic weighted average common units outstanding143,428,209 145,662,962 143,379,060 148,332,424 
Effect of dilutive instruments(1)
— — — — 
DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING143,428,209 145,662,962 143,379,060 148,332,424 
Basic earnings per common unit$(0.26)$(0.05)$(0.40)$(0.19)
Diluted earnings per common unit$(0.26)$(0.05)$(0.40)$(0.19)
________________
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 June 30, 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
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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)
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.

The following table reconciles the beginning and ending balances of redeemable non-controlling interests:
Three Months Ended June 30, 2023Six Months Ended June 30, 2023
Series A Redeemable Preferred UnitsConsolidated Real Estate EntitiesSeries A Redeemable Preferred UnitsConsolidated Real Estate Entities
BEGINNING OF PERIOD$9,815 $120,902 $9,815 $125,044 
Distributions— (1,258)— (4,506)
Declared dividend(153)— (306)— 
Net income (loss)153 (508)306 (1,402)
END OF PERIOD$9,815 $119,136 $9,815 $119,136 

18. Equity

The table below presents the activity related to Hudson Pacific Properties, Inc.’s accumulated other comprehensive (loss) income (“AOCI”):
Derivative Instruments
Currency Translation Adjustments
Total Accumulated Other Comprehensive (Loss) Income
BALANCE AT DECEMBER 31, 2022
$(1,280)$(9,992)$(11,272)
Unrealized gains recognized in AOCI12,521 5,614 18,135 
Reclassification from AOCI into income(1)
(450)— (450)
Net change in AOCI12,071 5,614 17,685 
BALANCE AT JUNE 30, 2023
$10,791 $(4,378)$6,413 
_____________
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) Income
BALANCE AT DECEMBER 31, 2022
$(1,260)$(10,200)$(11,460)
Unrealized gains recognized in AOCI12,876 5,774 18,650 
Reclassification from AOCI into income(1)
(462)— (462)
Net change in AOCI12,414 5,774 18,188 
BALANCE AT JUNE 30, 2023
$11,154 $(4,426)$6,728 
_____________
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
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Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
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.

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:
June 30, 2023December 31, 2022
Company-owned common units in the operating partnership
140,937,702 141,054,478 
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 June 30, 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 and six months ended June 30, 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 and six months ended June 30, 2023. A cumulative total of $65.8 million has been sold as of June 30, 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 and six months ended June 30, 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 first quarter 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 first quarter 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-
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Notes to Unaudited Consolidated Financial Statements
(Unaudited, tabular amounts in thousands, except square footage, share and unit data)
weighted average price during an initial hedge period. Final settlement of the agreement occurred during the third 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, 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 June 30,Six Months Ended June 30,
2023202220232022
Common stock$0.125 $0.25 $0.375 $0.50 
Common units$0.125 $0.25 $0.375 $0.50 
Series A preferred units$0.3906 $0.3906 $0.7812 $0.7812 
Series C preferred stock(1)
$0.2968750 $0.2968750 $0.5937500 $0.7421875 
Performance units$0.125 $0.25 $0.375 $0.50 
Payment dateJune 30, 2023June 30, 2022N/AN/A
Record dateJune 20, 2023June 20, 2022N/AN/A
_________________ 
1.Dividends paid during six months ended June 30, 2022 include a $0.2968750 per share dividend declared and paid in each of the first and second quarters 2022 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.

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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 June 30,Six Months Ended June 30,
2023202220232022
Office segment
Office revenues$207,291 $216,244 $413,924 $427,644 
Office expenses(76,767)(78,558)(150,821)(152,189)
Office segment profit130,524 137,686 263,103 275,455 
Studio segment
Studio revenues37,877 35,186 83,507 68,299 
Studio expenses(34,679)(20,686)(71,923)(39,669)
Studio segment profit3,198 14,500 11,584 28,630 
TOTAL SEGMENT PROFIT$133,722 $152,186 $274,687 $304,085 
Segment revenues$245,168 $251,430 $497,431 $495,943 
Segment expenses(111,446)(99,244)(222,744)(191,858)
TOTAL SEGMENT PROFIT$133,722 $152,186 $274,687 $304,085 

The table below is a reconciliation of the total profit from all segments to net (loss) income:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
NET (LOSS) INCOME$(31,474)$3,546 $(46,293)$(4,069)
General and administrative18,941 21,871 37,665 42,383 
Depreciation and amortization98,935 91,438 196,074 183,631 
Loss (income) from unconsolidated real estate entities715 (1,780)1,460 (2,083)
Fee income(2,284)(1,140)(4,686)(2,211)
Interest expense54,648 33,719 108,455 64,555 
Interest income(236)(920)(607)(1,830)
Management services reimbursement income—unconsolidated real estate entities(1,059)(1,068)(2,123)(2,176)
Management services expense—unconsolidated real estate entities1,059 1,068 2,123 2,176 
Transaction-related expenses(2,530)1,126 (1,344)1,382 
Unrealized loss on non-real estate investments843 1,818 4 168 
Gain on sale of real estate— — (7,046)— 
Impairment loss— 3,250 — 23,753 
Gain on extinguishment of debt(10,000)— (10,000)— 
Other (income) expense(138)21 (135)9 
Income tax provision (benefit)6,302 (763)1,140 (1,603)
TOTAL PROFIT FROM ALL SEGMENTS$133,722 $152,186 $274,687 $304,085 

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.

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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)
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 and six months ended June 30, 2023, the Company recognized $1.1 million and $2.1 million, respectively, of reimbursement income in management services reimbursement income—unconsolidated real estate entities on the Consolidated Statement of Operations. During the three and six months ended June 30, 2022, the Company recognized $1.1 million and $2.2 million, respectively, 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 June 30, 2023, the Company’s right-of-use assets and lease liabilities related to these lease obligations were $5.9 million and $6.0 million, respectively, as compared to right-of-use assets and lease liabilities of $6.8 million and $6.9 million, respectively, as of June 30, 2022. During the three and six months ended June 30, 2023, the Company recognized $0.2 million and $0.5 million, respectively, 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 and six months ended June 30, 2022, the Company recognized $0.3 million and $0.5 million, respectively, 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 June 30, 2023, the Company has contributed $36.5 million to these funds, net of distributions, with $11.5 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 June 30, 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 June 30, 2023, the Company had $3.1 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 June 30, 2023, the Company had $201.7 million in related commitments.

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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)
22. Supplemental Cash Flow Information

Supplemental cash flow information for Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P. is included as follows:
Six Months Ended June 30,
20232022
Cash paid for interest, net of capitalized interest$89,393 $56,467 
Non-cash investing and financing activities
Accounts payable and accrued liabilities for real estate investments$143,881 $185,823 
Ground lease remeasurements$4,111 $23,177 
Lease liabilities recorded in connection with right-of-use assets$— $2,377 
Accrued liability for common stock repurchases settled after quarter-end$— $2,518 

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 and Hudson Pacific Properties, L.P.:
Six Months Ended June 30,
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$109,220 $266,538 
Restricted cash18,583 49,025 
TOTAL$127,803 $315,563 

23. Subsequent Events

On August 2, 2023, the Company entered into an interest rate cap agreement to cap SOFR at a rate of 5.698% effective as of August 15, 2023 through August 15, 2024 on the $1.1 billion loan secured by the Hollywood Media Portfolio.

On August 2, 2023, the Company sold an interest rate cap with a fixed rate of 5.698% effective as of August 15, 2023 through August 15, 2024 on $561.0 million of indebtedness, which amount corresponds to our pro rata share of the loan secured by the Hollywood Media Portfolio. The sold cap serves to offset the effect of our pro rata share of the $1.1 billion interest rate cap on the Hollywood Media Portfolio loan.
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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, including as a result of further downgrades in the credit ratings of our unsecured indebtedness;
•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;
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•changes in the tax laws and uncertainty as to how those changes may be applied;
•changes in real estate and zoning laws and increases in real property tax rates;
•an epidemic or pandemic, and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities may implement to address it, which may precipitate or exacerbate one or more of the above-mentioned factors and/or other risks, and significantly disrupt or prevent us from operating our business in the ordinary course for an extended period; and
•other factors affecting the real estate industry generally.

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 June 30, 2023, our office portfolio consisted of approximately 15.4 million square feet of in-service, repositioning, redevelopment and development properties. Additionally, as of June 30, 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 62 properties (38 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 June 30, 2023, our in-service office portfolio was 87.0% leased (including leases not yet commenced). Our same-store studio properties were 86.5% leased for the average percent leased for the 12 months ended June 30, 2023.

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The following table summarizes our portfolio as of June 30, 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)
4413,599,41585.7 %87.0 %$54.94 
Stabilized non-same store(5)
1183,12387.4 87.4 62.44 
Total stabilized4513,782,53885.7 87.0 55.04 
Lease-up(5)(6)
1725,36675.3 88.0 59.08 
Total in-service office4614,507,90485.2 87.0 55.22 
STUDIO
Same-store(7)
31,230,99786.5 86.5 45.42 
Total 31,230,997
Repositioning(5)(8)(9)
3410,827— — — 
Development(5)(10)
2787,000— — — 
Total repositioning and development51,197,827
Total office and studio properties5416,936,728
Future development(11)
83,583,589
TOTAL6220,520,317
____________
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 June 30, 2023 divided by (ii) total square feet expressed as a percentage, whereas percent leased includes uncommenced leases. Percent occupied reflects the average percent occupied for the 12 months ended June 30, 2023.
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 June 30, 2023 by (ii) 12. On a per square foot basis, ABR is divided by square footage under commenced leases as of June 30, 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 June 30, 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 June 30, 2023. Annualized base rent per square foot for studio properties reflects actual base rent for the 12 months ended June 30, 2023, excluding tenant reimbursements. ABR per leased square foot calculated as (i) annual base rent divided by (ii) square footage under lease as of June 30, 2023.
4.Same-store office for the three months ended June 30, 2023 defined as all properties owned and included in our stabilized office portfolio as of April 1, 2022 and still owned and included in the stabilized office portfolio as of June 30, 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 June 30, 2023.
7.Includes studio properties owned and included in our portfolio as of April 1, 2022 and still owned and included in our portfolio as of June 30, 2023.
8.See Repositioning table below for the office and studio projects under repositioning as of June 30, 2023.
9.As of June 30, 2023, our 875 Howard and 899 Howard buildings are counted as separate properties, increasing the number of repositioning properties and the total number of properties in our portfolio by one as compared to the previous quarter.
10.Includes 546,000 square feet related to the office development Washington 1000 and 241,000 square feet related to Sunset Glenoaks Studios.
11.Includes pending entitlement to develop approximately 500 residential units at 10900-10950 Washington.


Overview

Business Acquisitions

We had no business acquisitions during the three and six months ended June 30, 2023.

Property Acquisitions

We had no property acquisitions during the three and six months ended June 30, 2023.

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Property Dispositions

During the six months ended June 30, 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.

Under Construction and Future Development Projects

The following table summarizes the properties currently under construction and future development projects as of June 30, 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 offline for a full building 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 June 30, 2023:

LocationSubmarket
Square Feet
Repositioning:
Westside TwoWest Los Angeles96,322 
899 HowardSan Francisco96,240 
Page Mill CenterPalo Alto79,056 
Rincon CenterSan Francisco36,905 
95 JacksonPioneer Square35,905 
Metro PlazaNorth San Jose28,415 
Sunset Las Palmas StudiosHollywood18,594 
Palo Alto SquarePalo Alto12,740 
Sunset Gower StudiosHollywood6,650 
TOTAL REPOSITIONING410,827 
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Lease Expirations

The following table summarizes the lease expirations for leases in place as of June 30, 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)
Vacant2,810,670 2,650,663 21.1 %
Q2-20237 27,926 26,598 .2 2,233,440 .4 83.97 2,233,440 83.97 
Q3-202334 659,130 438,761 3.5 24,300,794 4.2 55.39 24,469,255 55.77 
Q4-202350 417,045 382,234 3.0 18,098,936 3.2 47.35 18,040,202 47.20 
Total 202391 1,104,101 847,593 6.7 44,633,170 7.8 52.66 44,742,897 52.79 
2024194 1,832,613 1,537,385 12.2 87,063,470 15.3 56.63 90,184,484 58.66 
2025151 1,894,454 1,554,519 12.5 96,889,118 17.0 62.33 101,660,775 65.40 
202690 725,516 660,963 5.3 40,344,828 7.1 61.04 43,834,392 66.32 
202797 993,368 846,721 6.7 51,253,568 9.0 60.53 56,955,218 67.27 
202860 1,143,546 945,960 7.5 66,628,473 11.7 70.43 75,041,661 79.33 
202927 414,590 303,379 2.4 22,212,890 3.9 73.22 26,022,392 85.78 
203022 1,565,992 1,202,859 9.6 59,461,723 10.4 49.43 74,555,631 61.98 
203115 1,112,867 676,215 5.4 37,233,976 6.5 55.06 50,508,806 74.69 
20329 243,697 143,507 1.1 8,368,809 1.5 58.32 10,764,158 75.01 
Thereafter20 1,105,506 747,552 6.0 42,315,690 7.4 56.61 61,674,109 82.50 
Building management use(5)
40 206,161 181,159 1.4 — — — — — 
Signed leases not commenced36 270,313 263,898 2.1 13,536,172 2.4 51.29 16,571,876 62.80 
Portfolio Total/Weighted Average852 15,423,394 12,562,373 100.0 %$569,941,887 100.0 %$57.50 $652,516,399 $65.83 
_____________
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 do not control, the joint venture. In such instances, GAAP requires us to account for the joint venture entity using the equity method of accounting, in which case 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 June 30, 2023 by (ii) 12. On a per square foot basis, ABR is divided by square footage under commenced leases as of June 30, 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 June 30, 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 June 30, 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 June 30, 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 June 30,Six Months Ended June 30,
2023202220232022
Renewals(1)
Number of leases30 39 69 86 
Square feet191,362 471,939 386,779 732,158 
Tenant improvement costs per square foot(2)(3)
$9.91 $19.17 $10.60 $16.29 
Leasing commission costs per square foot(2)
6.95 14.52 5.75 12.31 
Total tenant improvement and leasing commission costs(2)
$16.86 $33.69 $16.35 $28.60 
New leases(4)
Number of leases31 41 67 75 
Square feet211,869 241,757 360,521 485,123 
Tenant improvement costs per square foot(2)(3)
$23.96 $45.02 $42.13 $62.06 
Leasing commission costs per square foot(2)
9.42 17.06 11.54 16.52 
Total tenant improvement and leasing commission costs(2)
$33.38 $62.08 $53.67 $78.58 
TOTAL
Number of leases61 80 136 161 
Square feet403,231 713,696 747,300 1,217,281 
Tenant improvement costs per square foot(2)(3)
$17.58 $27.88 $26.45 $34.73 
Leasing commission costs per square foot(2)
8.31 15.37 8.66 14.01 
TOTAL TENANT IMPROVEMENT AND LEASING COMMISSION COSTS(2)
$25.89 $43.25 $35.11 $48.74 
_____________
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 six months ended June 30, 2023, there were $143.0 million of borrowings on the unsecured revolving credit facility, net of repayments. 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.

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

In April 2023, the Company settled the Quixote note for consideration of $150.0 million, a $10.0 million discount on the note’s principal balance. The Company drew on its unsecured revolving credit facility to fund the settlement.


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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 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 June 30, 2023 to the Three Months Ended June 30, 2022

Net Loss

For the three months ended June 30, 2023, the Company recorded net loss of $31.5 million compared to net income of $3.5 million for the three months ended June 30, 2022. The reasons for the change are 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 April 1, 2022 and still owned and included in the stabilized portfolio as of June 30, 2023; and

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•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

The following table reconciles net loss to NOI:
Three Months Ended June 30,Dollar ChangePercent Change
20232022
Net (loss) income$(31,474)$3,546 $(35,020)(987.6)%
Adjustments:
Loss (income) from unconsolidated real estate entities715 (1,780)2,495 (140.2)
Fee income(2,284)(1,140)(1,144)100.4 
Interest expense54,648 33,719 20,929 62.1 
Interest income(236)(920)684 (74.3)
Management services reimbursement income—unconsolidated real estate entities(1,059)(1,068)9 (0.8)
Management services expense—unconsolidated real estate entities1,059 1,068 (9)(0.8)
Transaction-related expenses(2,530)1,126 (3,656)(324.7)
Unrealized loss on non-real estate investments843 1,818 (975)(53.6)
Impairment loss— 3,250 (3,250)(100.0)
Gain on extinguishment of debt(10,000)— (10,000)— 
Other (income) expense(138)21 (159)(757.1)
Income tax provision (benefit)6,302 (763)7,065 (926.0)
General and administrative18,941 21,871 (2,930)(13.4)
Depreciation and amortization98,935 91,438 7,497 8.2 
NOI$133,722 $152,186 $(18,464)(12.1)%
Same-store NOI$131,186 $135,501 $(4,315)(3.2)%
Non-same-store NOI2,536 16,685 (14,149)(84.8)
NOI$133,722 $152,186 $(18,464)(12.1)%

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The following table summarizes certain statistics of our consolidated same-store office and studio properties:
Three Months Ended June 30,
20232022
Same-store office
Number of properties4343
Rentable square feet12,085,23812,085,238
Ending % leased86.6 %92.0 %
Ending % occupied85.2 %90.5 %
Average % occupied for the period85.6 %91.2 %
Average annual rental rate per square foot$58.15 $56.25 
Same-store studio
Number of properties33
Rentable square feet1,230,9971,230,997
Average % leased for the period(1)
86.5 %84.0 %
_____________
1.Percent leased for same-store studio is the average percent leased for the 12 months ended.

The following table gives further detail on our NOI:
Three Months Ended June 30,
20232022
Same-StoreNon-Same-StoreTotalSame-StoreNon-Same-StoreTotal
Revenues
Office
Rental$189,786 $13,700 $203,486 $192,416 $19,420 $211,836 
Service and other revenues3,780 25 3,805 2,942 1,466 4,408 
Total office revenues193,566 13,725 207,291 195,358 20,886 216,244 
Studio
Rental13,093 3,281 16,374 13,110 328 13,438 
Service and other revenues4,468 17,035 21,503 7,552 14,196 21,748 
Total studio revenues17,561 20,316 37,877 20,662 14,524 35,186 
Total revenues211,127 34,041 245,168 216,020 35,410 251,430 
Operating expenses
Office operating expenses70,432 6,335 76,767 68,298 10,260 78,558 
Studio operating expenses9,509 25,170 34,679 12,221 8,465 20,686 
Total operating expenses79,941 31,505 111,446 80,519 18,725 99,244 
Office NOI123,134 7,390 130,524 127,060 10,626 137,686 
Studio NOI8,052 (4,854)3,198 8,441 6,059 14,500 
NOI$131,186 $2,536 $133,722 $135,501 $16,685 $152,186 





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The following table gives further detail on our change in NOI:
Three Months Ended June 30, 2023 as compared to
Three Months Ended June 30, 2022
Same-StoreNon-Same-StoreTotal
Dollar ChangePercent ChangeDollar ChangePercent ChangeDollar ChangePercent Change
Revenues
Office
Rental$(2,630)(1.4)%$(5,720)(29.5)%$(8,350)(3.9)%
Service and other revenues838 28.5 (1,441)(98.3)(603)(13.7)
Total office revenues(1,792)(0.9)(7,161)(34.3)(8,953)(4.1)
Studio
Rental(17)(0.1)2,953 900.3 2,936 21.8 
Service and other revenues(3,084)(40.8)2,839 20.0 (245)(1.1)
Total studio revenues(3,101)(15.0)5,792 39.9 2,691 7.6 
Total revenues(4,893)(2.3)(1,369)(3.9)(6,262)(2.5)
Operating expenses
Office operating expenses2,134 3.1 (3,925)(38.3)(1,791)(2.3)
Studio operating expenses(2,712)(22.2)16,705 197.3 13,993 67.6 
Total operating expenses(578)(0.7)12,780 68.3 12,202 12.3 
Office NOI(3,926)(3.1)(3,236)(30.5)(7,162)(5.2)
Studio NOI(389)(4.6)(10,913)(180.1)(11,302)(77.9)
NOI$(4,315)(3.2)%$(14,149)(84.8)%$(18,464)(12.1)%

NOI decreased $18.5 million, or 12.1%, for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022, primarily resulting from:

•a $14.1 million decrease in non-same-store NOI driven by:
•a decrease in studio NOI of $10.9 million driven by a slowdown in production rentals activity due to the Writers Guild of America (“WGA”) strike; and
•a decrease in office NOI of $3.2 million primarily due to:
•a $5.7 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, partially offset by the collection of past due rents and the reversal of the related reserve at our Westside Two property; and
•a $1.4 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 $3.9 million decrease in operating expenses due to the aforementioned property sales.
•a $4.3 million decrease in same-store NOI driven by:
•a decrease in office NOI of $3.9 million primarily due to:
•a $2.6 million decrease in rental revenues driven by a lease expiration at Skyport Plaza and a non-recurring restoration fee received at our Concourse property in the second quarter of 2022, partially offset by the commencement of must-take parking and recoveries at our One Westside property in the third quarter of 2022; and
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•a $2.1 million increase in operating expenses, predominantly due to an increase in insurance premiums in April 2023, which was partially offset by a prior-period property tax reimbursement at our ICON property;
•partially offset by a $0.8 million increase in service and other revenues primarily resulting from increases in visitor parking at several properties across our same-store portfolio during the second quarter of 2023.
•a decrease in studio NOI of $0.4 million primarily due to:
•a $3.1 million decrease in service and other revenues due to the WGA strike;
•partially offset by a $2.7 million decrease in studio operating expenses mainly due to a decrease in ground rent expense arising from the acquisition of the related land at Sunset Gower Studios in May 2022.

Other Income (Expenses)

(Loss) income from unconsolidated real estate entities

We recorded $0.7 million of loss from unconsolidated real estate entities for the three months ended June 30, 2023 compared to $1.8 million of income for the three months ended June 30, 2022. The change 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 $2.3 million for the three months ended June 30, 2023 compared to $1.1 million for the three months ended June 30, 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 June 30,
20232022Dollar ChangePercent Change
Gross interest expense$54,425 $34,012 $20,413 60.0 %
Capitalized interest(7,311)(3,592)(3,719)103.5 
Non-cash interest expense7,534 3,299 4,235 128.4 
TOTAL$54,648 $33,719 $20,929 62.1 %

Gross interest expense increased by $20.4 million, or 60.0%, to $54.4 million for the three months ended June 30, 2023 compared to $34.0 million for the three months ended June 30, 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 5.95% registered senior notes, which were issued in September 2022. 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 by $3.7 million, or 103.5%, to $7.3 million for the three months ended June 30, 2023 compared to $3.6 million for the three months ended June 30, 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.

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Non-cash interest expense increased by $4.2 million, or 128.4%, to $7.5 million for the three months ended June 30, 2023 compared to $3.3 million for the three months ended June 30, 2022. The increase was primarily driven by the amortization of amounts recorded in accumulated other comprehensive income related to the interest rate cap on our Hollywood Media Portfolio loan, which was designated as a cash flow hedge for accounting purposes in December 2022.

Interest income

Interest income decreased by $0.7 million, or 74.3%, to $0.2 million for the three months ended June 30, 2023 compared to $0.9 million for the three months ended June 30, 2022. The decrease was primarily driven by the maturity of the U.S. Government securities in June 2022.

Transaction-related expenses

Transaction-related expenses decreased by $3.7 million, or 324.7%, to $2.5 million of income for the three months ended June 30, 2023 compared to of $1.1 million of expense for the three months ended June 30, 2022. The change was predominantly related to the remeasurement of the Zio earnout liability to fair value during the three months ended June 30, 2023.

Unrealized loss on non-real estate investments

We recognized an unrealized loss on non-real estate investments of $0.8 million for the three months ended June 30, 2023 compared to an unrealized loss on non-real estate investments of $1.8 million for the three months ended June 30, 2022. The activity in both periods is due to the observable changes in the fair value of the investments.

Impairment loss

We did not recognize any impairment charges during the three months ended June 30, 2023. During the three months ended June 30, 2022, we recognized an impairment loss of $3.3 million on our Del Amo property due to a reduction in the estimated fair value of the property.

Gain on extinguishment of debt

During the three months ended June 30, 2023, we recognized a $10.0 million gain on extinguishment of debt due to the settlement of the Quixote note payable at a discount. No gain or loss on extinguishment of debt was recognized during the three months ended June 30, 2022.

Income tax (provision) benefit

For the three months ended June 30, 2023, we recorded an income tax provision of $6.3 million compared to an income tax benefit of $0.8 million for the three months ended June 30, 2022. The change was primarily due to a valuation allowance recorded against certain deferred tax assets as well as the tax impact of the gain on extinguishment of debt recognized during the three months ended June 30, 2023.

General and administrative expenses

General and administrative expenses decreased by $2.9 million, or 13.4%, to $18.9 million for the three months ended June 30, 2023 compared to $21.9 million for the three months ended June 30, 2022. The decrease was primarily driven by a decrease in payroll, non-cash compensation, office expenses and travel and entertainment.

Depreciation and amortization expense

Depreciation and amortization expense increased by $7.5 million, or 8.2%, to $98.9 million for the three months ended June 30, 2023 compared to $91.4 million for the three months ended June 30, 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.

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Comparison of the Six Months Ended June 30, 2023 to the Six Months Ended June 30, 2022

Net Loss

Net loss increased $42.2 million, or 1,037.7%, to $46.3 million for the six months ended June 30, 2023 compared to $4.1 million for the six months ended June 30, 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

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, 2022 and still owned and included in the stabilized portfolio as of June 30, 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

The following table reconciles net loss to NOI:
Six Months Ended June 30,Dollar ChangePercent Change
20232022
Net loss$(46,293)$(4,069)$(42,224)1,037.7 %
Adjustments:
Loss (income) from unconsolidated real estate entities1,460 (2,083)3,543 (170.1)
Fee income(4,686)(2,211)(2,475)111.9 
Interest expense108,455 64,555 43,900 68.0 
Interest income(607)(1,830)1,223 (66.8)
Management services reimbursement income—unconsolidated real estate entities(2,123)(2,176)53 (2.4)
Management services expense—unconsolidated real estate entities2,123 2,176 (53)(2.4)
Transaction-related expenses(1,344)1,382 (2,726)(197.3)
Unrealized loss on non-real estate investments4 168 (164)(97.6)
Gain on sale of real estate(7,046)— (7,046)— 
Impairment loss— 23,753 (23,753)(100.0)
Gain on extinguishment of debt(10,000)— (10,000)— 
Other (income) expense(135)9 (144)(1,600.0)
Income tax provision (benefit)1,140 (1,603)2,743 (171.1)
General and administrative37,665 42,383 (4,718)(11.1)
Depreciation and amortization196,074 183,631 12,443 6.8 
NOI$274,687 $304,085 $(29,398)(9.7)%
Same-store NOI267,446 269,663 (2,217)(0.8)%
Non-same-store NOI7,241 34,422 (27,181)(79.0)
NOI$274,687 $304,085 $(29,398)(9.7)%
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The following table summarizes certain statistics of our same-store office and studio properties:
Six Months Ended June 30,
20232022
Same-store office
Number of properties43 43 
Rentable square feet12,085,238 12,085,238 
Ending % leased86.6 %92.0 %
Ending % occupied85.2 %90.5 %
Average % occupied for the period86.1 %91.5 %
Average annual rental rate per square foot$58.15 $56.25 
Same-store studio
Number of properties3 3 
Rentable square feet1,230,997 1,230,997 
Average % occupied for the period(1)
86.5 %84.0 %
_____________
1.Percent occupied for same-store studio is the average percent occupied for the 12 months ended.

The following table gives further detail on our NOI:
Six Months Ended June 30,
20232022
Same-StoreNon-Same-StoreTotalSame-StoreNon-Same-StoreTotal
Revenues
Office
Rental$380,829 $25,314 $406,143 $378,931 $39,097 $418,028 
Service and other revenues6,734 1,047 7,781 6,164 3,452 9,616 
Total office revenues387,563 26,361 413,924 385,095 42,549 427,644 
Studio
Rental26,563 6,064 32,627 25,982 850 26,832 
Service and other revenues13,387 37,493 50,880 15,068 26,399 41,467 
Total studio revenues39,950 43,557 83,507 41,050 27,249 68,299 
Total revenues427,513 69,918 497,431 426,145 69,798 495,943 
Operating expenses
Office operating expenses138,527 12,294 150,821 132,661 19,528 152,189 
Studio operating expenses21,540 50,383 71,923 23,821 15,848 39,669 
Total operating expenses160,067 62,677 222,744 156,482 35,376 191,858 
Office NOI249,036 14,067 263,103 252,434 23,021 275,455 
Studio NOI18,410 (6,826)11,584 17,229 11,401 28,630 
NOI$267,446 $7,241 $274,687 $269,663 $34,422 $304,085 
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The following table gives further detail on our change in NOI:
Six Months Ended June 30, 2023 as compared to Six Months Ended June 30, 2022
Same-StoreNon-Same-StoreTotal
Dollar ChangePercent ChangeDollar ChangePercent ChangeDollar ChangePercent Change
Revenues
Office
Rental$1,898 0.5 %$(13,783)(35.3)%$(11,885)(2.8)%
Service and other revenues570 9.2 (2,405)(69.7)(1,835)(19.1)
Total office revenues2,468 0.6 (16,188)(38.0)(13,720)(3.2)
Studio
Rental581 2.2 5,214 613.4 5,795 21.6 
Service and other revenues(1,681)(11.2)11,094 42.0 9,413 22.7 
Total studio revenues(1,100)(2.7)16,308 59.8 15,208 22.3 
Total revenues1,368 0.3 120 0.2 1,488 0.3 
Operating expenses
Office operating expenses5,866 4.4 (7,234)(37.0)(1,368)(0.9)
Studio operating expenses(2,281)(9.6)34,535 217.9 32,254 81.3 
Total operating expenses3,585 2.3 27,301 77.2 30,886 16.1 
Office NOI(3,398)(1.3)(8,954)(38.9)(12,352)(4.5)
Studio NOI1,181 6.9 (18,227)(159.9)(17,046)(59.5)
NOI$(2,217)(0.8)%$(27,181)(79.0)%$(29,398)(9.7)%

NOI decreased $29.4 million, or 9.7%, for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, primarily resulting from:

•a $27.2 million decrease in non-same-store NOI from driven by:
•a decrease in studio NOI of $18.2 million driven by a slowdown in production rentals activity due to the WGA strike; and
•a decrease in office NOI of $9.0 million primarily due to:
•a $13.8 million decrease in rental revenues mainly 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 a lease expiration at our 10900-10950 Washington property, partially offset by the collection of past due rents and the reversal of the related reserve at our Westside Two property; and
•a $2.4 million decrease in service and other revenues primarily due to non-recurring lease cancellation fees received at our Skyway Landing property in 2022 and a reduction in parking revenues in connection with the sales of the properties listed above;
•partially offset by a $7.2 million decrease in operating expenses due to the aforementioned property sales.
•a $2.2 million decrease in same-store NOI driven by:
•a decrease in office NOI of $3.4 million primarily due to:
•a $5.9 million increase in operating expenses, predominantly engineering, cleaning and utilities, resulting from a colder winter in 2023 and an increase in insurance premiums in April 2023, which was partially offset by a prior-period property tax reimbursement at our ICON property;
•partially offset by a $1.9 million increase in rental revenues mainly due to the commencement of must-take parking and recoveries at our One Westside property in the third quarter of 2022. The increase was partially offset by a lease expiration at Skyport Plaza.
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•an increase in studio NOI of $1.2 million primarily due to:
•a $2.3 million decrease in studio operating expenses mainly due to a decrease in ground rent expense arising from the acquisition of the related land at Sunset Gower Studios in May 2022;
•partially offset by a $1.7 million reduction in service and other revenues due to the WGA strike.

Other Income (Expense)

(Loss) income from unconsolidated real estate entities

We recorded $1.5 million of loss from unconsolidated real estate entities for the six months ended June 30, 2023, compared to $2.1 million of income for the six months ended June 30, 2022. The change 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 $4.7 million for the six months ended June 30, 2023 compared to $2.2 million for the six months ended June 30, 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:
Six Months Ended June 30,
20232022Dollar ChangePercent Change
Gross interest expense$107,723 $68,160 $39,563 58.0 %
Capitalized interest(14,173)(6,877)(7,296)106.1 
Non-cash interest expense14,905 3,272 11,633 355.5 
TOTAL$108,455 $64,555 $43,900 68.0 %

Gross interest expense increased by $39.6 million, or 58.0%, to $107.7 million for the six months ended June 30, 2023 compared to $68.2 million for the six months ended June 30, 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 5.95% registered senior notes, which were issued in September 2022. 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 by $7.3 million, or 106.1%, to $14.2 million for the six months ended June 30, 2023 compared to $6.9 million for the six months ended June 30, 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.

Non-cash interest expense increased by $11.6 million, or 355.5%, to $14.9 million for the six months ended June 30, 2023 compared to $3.3 million for the six months ended June 30, 2022. driven by the amortization of amounts recorded in accumulated other comprehensive income related to the interest rate cap on our Hollywood Media Portfolio loan, which was designated as a cash flow hedge for accounting purposes in December 2022, as well as favorable valuation adjustments on our mark-to-market derivative instruments during the six months ended June 30, 2022.

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Interest income

Interest income decreased by $1.2 million, or 66.8%, to $0.6 million for the six months ended June 30, 2023 compared to $1.8 million for the three months ended June 30, 2022. The decrease was primarily driven by the maturity of the U.S. Government securities in June 2022.

Transaction-related expenses

Transaction-related expenses decreased by $2.7 million, or 197.3%, to $1.3 million of income for the six months ended June 30, 2023 compared to $1.4 million of expense for the six months ended June 30, 2023. The change was predominantly related to the remeasurement of the Zio earnout liability to fair value during the six months ended June 30, 2023.

Unrealized loss on non-real estate investments

We recognized an unrealized loss on our non-real estate investments of $4.0 thousand for the six months ended June 30, 2023 compared to an unrealized loss on non-real estate investments of $0.2 million for the six months ended June 30, 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 six months ended June 30, 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 six months ended June 30, 2022.

Impairment loss

We did not recognize any impairment charges during the six months ended June 30, 2023. During the six months ended June 30, 2022, we recognized an impairment loss of $23.8 million, of which $15.3 million 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.

Gain on extinguishment of debt

During the six months ended June 30, 2023, we recognized a $10.0 million gain on extinguishment of debt due to the settlement of the Quixote note payable at a discount. No gain or loss on extinguishment of debt was recognized during the six months ended June 30, 2022.

Income tax (provision) benefit

For the six months ended June 30, 2023, we recorded an income tax provision of $1.1 million compared to an income tax benefit of $1.6 million for the six months ended June 30, 2022. The change was primarily due to a valuation allowance recorded against certain deferred tax assets as well as the tax impact of the gain on extinguishment of debt recognized during the six months ended June 30, 2023, partially offset by a deferred tax benefit recognized in connection with net operating losses in certain of our taxable REIT subsidiaries.

General and administrative expenses

General and administrative expenses decreased $4.7 million, or 11.1%, to $37.7 million for the six months ended June 30, 2023 compared to $42.4 million for the six months ended June 30, 2022. The decrease was primarily driven by a decrease in payroll, non-cash compensation, office expenses and travel and entertainment.

Depreciation and amortization expense

Depreciation and amortization expense increased $12.4 million, or 6.8%, to $196.1 million for the six months ended June 30, 2023 compared to $183.6 million for the six months ended June 30, 2022. The increase was primarily related to the
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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;
•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 $109.2 million of cash and cash equivalents at June 30, 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 June 30, 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 June 30, 2023, we had total borrowing capacity of $1.0 billion under our unsecured revolving credit facility, $528.0 million of which had been drawn. As of June 30, 2023, we had total borrowing capacity of $414.6 million under our construction loan, secured by our One Westside and Westside Two properties, $324.6 million of which had been drawn. As of June 30, 2023, we had total borrowing capacity of $100.6 million under the Sunset Glenoaks Studios construction loan (unconsolidated joint venture), of which $68.2 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. In addition, our ability to incur additional debt may be affected by our senior unsecured debt ratings as provided by the major credit rating agencies in the United States. Certain of the major U.S. credit rating agencies have previously downgraded our senior unsecured debt rating to non-investment grade. These and any further ratings downgrades could adversely impact our ability to access debt markets in the future and increase the cost of future debt. As of July 28, 2023, the credit ratings for our senior unsecured debt were Ba1, BB+ and BBB- from Moody’s, Standard and Poor’s and Fitch, respectively.

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The following table sets forth our total consolidated market capitalization (counting Series A preferred units as debt) as of June 30, 2023 (in thousands, except percentage):
June 30, 2023
Unsecured and secured debt(1)
$4,491,118 
Series A redeemable preferred units
9,815 
Total consolidated debt4,500,933 
Equity capitalization(2)
1,043,036 
TOTAL CONSOLIDATED MARKET CAPITALIZATION$5,543,969 
_____________
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 $4.22, as reported by the NYSE, on June 30, 2023 as well as the aggregate value of the Series C preferred stock liquidation preference as of June 30, 2023.

Outstanding Indebtedness

The following table sets forth information as of June 30, 2023 and December 31, 2022 with respect to our outstanding indebtedness, excluding unamortized deferred financing costs and loan discounts/premiums (in thousands):
June 30, 2023December 31, 2022
Unsecured debt$2,693,000 $2,660,000 
Secured debt$1,798,118 $1,950,088 
Joint venture partner debt$66,136 $66,136 

The operating partnership was in compliance with its financial covenants as of June 30, 2023.

Liquidity Uses

Contractual Obligations

During the six months ended June 30, 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:
Six Months Ended June 30,
20232022Dollar ChangePercent Change
Net cash provided by operating activities
$151,683 $190,142 $(38,459)(20.2)%
Net cash used in investing activities$(93,411)$(104,254)$10,843 (10.4)%
Net cash (used in) provided by financing activities$(216,200)$32,799 $(248,999)(759.2)%

Cash and cash equivalents and restricted cash were $127.8 million and $285.7 million at June 30, 2023 and December 31, 2022, respectively.

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Operating Activities

Net cash provided by operating activities decreased by $38.5 million, or 20.2%, to $151.7 million for the six months ended June 30, 2023 compared to $190.1 million for the six months ended June 30, 2022. The decrease primarily resulted from a slowdown in production rentals activity due to the WGA strike as well as 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 used in investing activities decreased by $10.8 million, or 10.4%, to $93.4 million for the six months ended June 30, 2023 compared to $104.3 million of net cash used in investing activities for the six months ended June 30, 2022. The decrease was primarily driven by $100.4 million of proceeds from the sale of our Skyway Landing property in February 2023 and $88.0 million spent toward the acquisitions of Washington 1000 and a land parcel at Sunset Gower Studios during the six months ended June 30, 2022. The change was partially offset by cash proceeds received in connection with the maturity of $129.3 million of U.S. Government securities in the second quarter of 2022, a $42.3 million increase in additions to investment in real estate and a $20.4 million increase in contributions to unconsolidated real estate entities during the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

Financing Activities

Net cash used in financing activities increased $249.0 million, or 759.2%, to $216.2 million for the six months ended June 30, 2023 compared to $32.8 million of cash provided by financing activities for the six months ended June 30, 2022. The change primarily resulted from $384.0 million of payments of unsecured and secured debt and a $126.0 million decrease in proceeds from unsecured and secured debt during the six months ended June 30, 2023, partially offset by a $233.3 million decrease in share repurchases during the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, as well as an $18.4 million decrease in dividends paid to common stock and unitholders due to a 50% reduction in the per share dividend during the second quarter of 2023.

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 June 30, 2023 (in thousands):
Principal AmountInterest RateContractual Maturity DateHPP’s Share
Bentall Centre(1)
$502,365 CDOR + 1.75%7/1/2024$100,473 
Sunset Glenoaks Studios(2)
$68,184 SOFR + 3.10%1/9/2025$34,092 
_____________
(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 June 30, 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 June 30, 2023, we have $32.4 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.

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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.

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.

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The following table presents a reconciliation of net (loss) income to FFO (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Net (loss) income$(31,474)$3,546 $(46,293)$(4,069)
Adjustments:
Depreciation and amortization—consolidated98,935 91,438 196,074 183,631 
Depreciation and amortization—non-real estate assets(8,832)(4,485)(17,224)(8,917)
Depreciation and amortization—HPP’s share from unconsolidated real estate entities
1,195 1,320 2,458 2,689 
Gain on sale of real estate— — (7,046)— 
Impairment loss—real estate assets
— 3,250 — 15,253 
Unrealized loss on non-real estate investments843 1,818 4 168 
FFO attributable to non-controlling interests(13,239)(18,687)(26,862)(38,687)
FFO attributable to preferred shares and units(5,200)(5,200)(10,400)(10,643)
FFO TO COMMON STOCKHOLDERS AND UNITHOLDERS$42,228 $73,000 $90,711 $139,425 

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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 six months ended June 30, 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 second 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 second 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 second 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 second quarter of 2023, we issued an aggregate of 48,933 shares of our common stock in connection with the vesting of restricted stock awards for no cash consideration, out of which no shares of common stock were forfeited to us in connection with tax withholding obligations. 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 second quarter of 2023, our operating partnership issued an aggregate of 48,933 units to us in connection with these transactions.

All other issuances of unregistered equity securities of our operating partnership during the six months ended June 30, 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: None.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.    MINE SAFETY DISCLOSURES

None.

ITEM 5.    OTHER INFORMATION

During the six months ended June 30, 2023, none of our officers or directors adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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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 June 30, 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:August 4, 2023
/s/ VICTOR J. COLEMAN
Victor J. Coleman
Chief Executive Officer (Principal Executive Officer)
HUDSON PACIFIC PROPERTIES, INC.
Date:August 4, 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:August 4, 2023
/s/ VICTOR J. COLEMAN
Victor J. Coleman
Chief Executive Officer (Principal Executive Officer)
HUDSON PACIFIC PROPERTIES, L.P.
Date:August 4, 2023
/s/ HAROUT K. DIRAMERIAN
Harout K. Diramerian
Chief Financial Officer (Principal Financial Officer)

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Exhibit 10.1
INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (“Agreement”) is made and entered into as of the 13th day of March 2023, by and between Hudson Pacific Properties, Inc., a Maryland corporation (the “Company”), and Barry Sholem (“Indemnitee”).
WHEREAS, at the request of the Company, Indemnitee currently serves as a director of the Company and may, therefore, be subjected to claims, suits or proceedings arising as a result of her service; and
WHEREAS, as an inducement to Indemnitee to continue to serve as such director, the Company has agreed to indemnify and to advance expenses and costs incurred by Indemnitee in connection with any such claims, suits or proceedings, to the maximum extent permitted by law; and
WHEREAS, the parties by this Agreement desire to set forth their agreement regarding indemnification and advance of expenses;
NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:
Section 1.    Definitions. For purposes of this Agreement:
(a)    “Adjudged” shall mean adjudged finally by a court or arbitral or other authority of competent jurisdiction.
(b)    “Change in Control” means a change in control of the Company occurring after the Effective Date of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the Company is then subject to such reporting requirement; provided, however, that, without limitation, such a Change in Control shall be deemed to have occurred if, after the Effective Date (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of all of the Company’s then-outstanding securities entitled to vote generally in the election of directors without the prior approval of at least two-thirds of the members of the Board of Directors in office immediately prior to such person’s attaining such percentage interest; (ii) the Company is a party to a merger, consolidation, sale of assets, plan of liquidation or other reorganization not approved by at least two-thirds of the members of the Board of Directors then in office, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors thereafter; or (iii) at any time, a majority of the members of the Board of Directors are not comprised of (A) individuals who were directors as of the Effective Date and/or (B) individuals whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by the affirmative vote of at least two-thirds of the directors then in office who were directors as of the Effective Date or whose election for nomination for election was previously so approved.
(c)    “Corporate Status” means the status of a person as a present or former director, officer, employee or agent of the Company or as a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any Enterprise.

Exhibit 10.1    
(d)    “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification and/or advance of Expenses is sought by Indemnitee.
(e)    “Effective Date” means the date set forth in the first paragraph of this Agreement.
(f)    “Enterprise” means any foreign or domestic corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise in which Indemnitee is or was serving as a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent at the request of the Company. As a clarification and without limiting the circumstances in which Indemnitee may be serving at the request of the Company, service by Indemnitee shall be deemed to be at the request of the Company if Indemnitee serves or served as a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise (i) of which a majority of the voting power or equity interest is owned directly or indirectly by the Company or (ii) the management of which is controlled directly or indirectly by the Company.
(g)    “Expenses” means any and all disbursements or expenses incurred by Indemnitee in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in or otherwise participating in a Proceeding, including, without limitation, reasonable attorneys’ fees and costs, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, and any ERISA excise taxes and penalties. Expenses shall also include (i) expenses incurred in connection with any appeal resulting from any Proceeding including, without limitation, the premium, security for and other costs relating to any cost bond, supersedeas bond or other appeal bond or its equivalent, (ii) expenses incurred in connection with recovery under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether the Indemnitee is ultimately determined to be entitled to such indemnification, advancement or expenses or insurance recovery, as the case may be, and (iii) expenses incurred by Indemnitee in establishing or enforcing her right to indemnification or reimbursement under this Agreement. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments, fines or penalties against Indemnitee (other than ERISA excise tax penalties).
(h)    “Independent Counsel” means a law firm, or a member of a law firm, that is of outstanding reputation, experienced in matters of corporation law and neither is, nor in the past five years preceding the date of selection has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement or of other indemnitees under similar indemnification agreements), or (ii) any other party to or participant or witness in the Proceeding giving rise to a claim for indemnification or advance of Expenses hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees and expenses of the Independent Counsel.
(i)    “Proceeding” means any threatened, pending or completed action, suit, arbitration, mediation, alternate dispute resolution procedure, investigation, inquiry, administrative hearing or any other proceeding, whether brought by or in the right of the Company or otherwise and whether of a civil (including intentional or unintentional tort claims), criminal, administrative or investigative (formal or informal) nature, including any appeal therefrom, in which Indemnitee was, is, will or might be involved as a party or otherwise, by reason of any action taken by or

Exhibit 10.1    
omission by Indemnitee, or of any action or omission on Indemnitee’s part, in each case in or in connection with Indemnitee’s Corporate Status and whether or not acting or serving in such capacity at the time any liability or Expense is incurred for which indemnification, reimbursement or advancement of Expenses can be provided under this Agreement, except one pending or completed on or before the Effective Date, unless otherwise specifically agreed in writing by the Company and Indemnitee. If Indemnitee reasonably believes that a given situation may lead to or culminate in the institution of a Proceeding, such situation shall also be considered a Proceeding. The term “Proceeding” shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration or appeal of, and the giving of testimony in or related to, any threatened, pending or completed claim, action, suit or other proceeding, whether of a civil, criminal, administrative or investigative nature.
Section 2.    Services by Indemnitee. The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce the Indemnitee to serve or continue to serve as a director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving or continuing to serve as a director. However, this Agreement shall not impose any independent obligation on Indemnitee or the Company to continue Indemnitee’s service to the Company. This Agreement shall not be deemed an employment contract between the Company (or any other entity) and Indemnitee.
Section 3.    General. The Company shall indemnify, hold harmless and exonerate, and advance Expenses to, Indemnitee (a) as provided in this Agreement and (b) otherwise to the maximum extent not prohibited by (and not merely to the extent affirmatively permitted by) Maryland law in effect on the Effective Date and as amended from time to time; provided, however, that no change in Maryland law shall have the effect of reducing the benefits available to Indemnitee hereunder based on Maryland law as in effect on the Effective Date. The rights of Indemnitee provided in this Section 3 shall include, without limitation, the rights set forth in the other sections of this Agreement, including any additional indemnification permitted by Section 2-418(g) of the Maryland General Corporation Law (the “MGCL”).
Section 4.    Indemnification. If Indemnitee is, or is threatened to be, made a party to any Proceeding, the Company shall indemnify, hold harmless and exonerate Indemnitee against all judgments, penalties, fines and amounts paid in settlement and all Expenses actually and reasonably incurred by him or on her behalf in connection with any such Proceeding unless (and only to the extent) it is established that (a) the act or omission of Indemnitee was material to the matter giving rise to the Proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty, (b) Indemnitee actually received an improper personal benefit in money, property or services or (c) in the case of any criminal Proceeding, Indemnitee had reasonable cause to believe that the act or omission was unlawful.
Section 5.    Certain Limits on Indemnification. Notwithstanding any other provision of this Agreement (other than Section 6), Indemnitee shall not be entitled to:
(a)    indemnification hereunder if the Proceeding was one by or in the right of the Company and Indemnitee is Adjudged to be liable to the Company;
(b)    indemnification hereunder if Indemnitee is Adjudged to be liable on the basis that personal benefit was improperly received in any Proceeding charging improper personal benefit to Indemnitee; or
(c)    indemnification or advance of Expenses hereunder if the Proceeding was brought by Indemnitee unless: (i) the Proceeding was brought to establish or enforce indemnification rights under this Agreement, and then

Exhibit 10.1    
only to the extent in accordance with and as authorized by Section 12 of this Agreement, or (ii) the Company’s charter or Bylaws, a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors or an agreement approved by the Board of Directors to which the Company is a party expressly provide otherwise.
Section 6.    Court-Ordered Indemnification. Notwithstanding any other provision of this Agreement, a court of appropriate jurisdiction, upon application of Indemnitee and such notice as the court shall require, may order indemnification in the following circumstances:
(a)    if it determines Indemnitee is entitled to reimbursement under Section 2-418(d)(1) of the MGCL, the court shall order indemnification, in which case Indemnitee shall be entitled to recover the Expenses of securing such reimbursement; or
(b)    if it determines that Indemnitee is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not Indemnitee (i) has met the standards of conduct set forth in Section 2-418(b) of the MGCL or (ii) has been Adjudged liable for receipt of an improper personal benefit under Section 2-418(c) of the MGCL, the court may order such indemnification as the court shall deem proper. However, indemnification with respect to any Proceeding by or in the right of the Company or in which liability shall have been Adjudged in the circumstances described in Section 2-418(c) of the MGCL shall be limited to Expenses.
Section 7.    Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that Indemnitee was or is made a party to (or otherwise becomes a participant in) any Proceeding and is successful, on the merits or otherwise, in the defense of such Proceeding, Indemnitee shall be indemnified for all Expenses actually and reasonably incurred by her or on her behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee under this Section 7 for all Expenses actually and reasonably incurred by her or on her behalf in connection with each such claim, issue or matter, allocated on a reasonable and proportionate basis. For purposes of this Section 7 and, without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
Section 8.    Advance of Expenses for a Party. If Indemnitee was, is, or is threatened to be, made a party to any Proceeding, the Company shall, without requiring a preliminary determination of Indemnitee’s ultimate entitlement to indemnification hereunder, advance all reasonable Expenses incurred by or on behalf of Indemnitee in connection with such Proceeding within ten days after the receipt by the Company of a statement or statements requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by a written affirmation by Indemnitee of Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Company as authorized by law and by this Agreement has been met and a written undertaking by or on behalf of Indemnitee, in substantially the form attached hereto as Exhibit A or in such form as may be required under applicable law as in effect at the time of the execution thereof, to reimburse the portion (if any) of any Expenses advanced to Indemnitee relating to claims, issues or matters in the Proceeding as to which it shall ultimately be established that the standard of conduct has not been met by Indemnitee and which have not been successfully resolved as described in Section 7 of this Agreement. Advances shall be interest-free and unsecured. The undertaking required by this Section 8 shall be an unlimited general obligation by

Exhibit 10.1    
or on behalf of Indemnitee and shall be accepted without reference to Indemnitee’s financial ability to repay such advanced Expenses and without any requirement to post security therefor.
Section 9.    Indemnification and Advance of Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee was, is or may be made a witness or otherwise asked to participate in any Proceeding, whether instituted by the Company or any other party, and to which Indemnitee is not a party, he shall be advanced all reasonable Expenses and indemnified, held harmless and exonerated against all Expenses actually and reasonably incurred by her or on her behalf in connection therewith within ten days after the receipt by the Company of a statement or statements requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee. Advances shall be interest-free and unsecured.
Section 10.    Procedure for Determination of Entitlement to Indemnification.
(a)    To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. Indemnitee may submit one or more such requests from time to time and at such time(s) as Indemnitee deems appropriate in her sole discretion. The officer of the Company receiving any such request from Indemnitee shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification.
(b)    Upon written request by Indemnitee for indemnification pursuant to Section 10(a) above, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall promptly be made in the specific case: (i) if a Change in Control shall have occurred, by Independent Counsel, in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee, which Independent Counsel shall be selected by the Indemnitee and approved by the Board of Directors in accordance with Section 2-418(e)(2)(ii) of the MGCL, which approval will not be unreasonably withheld; or (ii) if a Change in Control shall not have occurred, (A) by the Board of Directors by a majority vote of a quorum consisting entirely of Disinterested Directors or, if such a quorum cannot be obtained, then by a majority vote of a duly authorized committee of the Board of Directors consisting solely of one or more Disinterested Directors, (B) if Independent Counsel has been selected by the Board of Directors in accordance with Section 2-418(e)(2)(ii) of the MGCL and approved by the Indemnitee, which approval shall not be unreasonably withheld, by Independent Counsel, in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee or (C) if so directed by a majority of the members of the Board of Directors, by the stockholders of the Company. If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination in the discretion of the Board of Directors or Independent Counsel if retained pursuant to clause (ii)(B) of this Section 10(b). Any Expenses incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company shall indemnify and hold Indemnitee harmless therefrom.
(c)    The Company shall pay the reasonable fees and expenses of Independent Counsel, if one is appointed.

Exhibit 10.1    
Section 11.    Presumptions and Effect of Certain Proceedings.
(a)    In making any determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 10(a) of this Agreement, and the Company shall have the burden of proof and the burden of persuasion by clear and convincing evidence to overcome that presumption in connection with the making of any determination contrary to that presumption.
(b)    The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, upon a plea of nolo contendere or its equivalent, or entry of an order of probation prior to judgment, does not create a presumption that Indemnitee did not meet the requisite standard of conduct described herein for indemnification.
(c)    The knowledge and/or actions, or failure to act, of any other director, officer, employee or agent of the Company or any other director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any Enterprise shall not be imputed to Indemnitee for purposes of determining any other right to indemnification under this Agreement.
(d)    For purposes of any determination as to Indemnitee’s entitlement of indemnification, Indemnitee shall be presumed to have met the standard of conduct for indemnification if, among other things and without limitation, Indemnitee relied on any information, opinion, report or statement, including any financial statement or other financial data or the records or books of account of the Company or any other Enterprise, prepared or presented by an officer or employee of the Company or any Enterprise whom Indemnitee reasonably believed to be reliable and competent in the matters presented, by a lawyer, certified public accountant, appraiser or other person or expert, as to a matter which Indemnitee reasonably believed to be within the person’s professional or expert competence, or, if Indemnitee was serving on the Board of Directors of the Company or as a member of any similar body of any Enterprise, by a committee of the Board of Directors or such other body on which Indemnitee does not serve, as to a matter within its designated authority, if Indemnitee reasonably believes the committee to merit confidence. The provisions of this Section 11(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee meet, or be presumed to have met, the applicable standard of conduct set forth in this Agreement.
(e)    For purposes of this Agreement, Indemnitee shall be considered to have been wholly successful with respect to any Proceeding if such Proceeding is disposed of, on the merits or otherwise (including a disposition without prejudice), without (i) the disposition being adverse to Indemnitee, (ii) it being Adjudged that Indemnitee was liable to the Company, (iii) a plea of guilty by Indemnitee, (iv) it being Adjudged that an act or omission of Indemnitee was material to the matter giving rise to the Proceeding and was (A) committed in bad faith or (B) the result of Indemnitee’s active and deliberate dishonesty, (v) it being Adjudged that Indemnitee actually received an improper personal benefit in money, property or services or (vi) with respect to any criminal proceeding, it being Adjudged that Indemnitee had reasonable cause to believe the act or omission was unlawful.
Section 12.    Remedies of Indemnitee.
(a)    If (i) a determination is made pursuant to Section 10(b) of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advance of Expenses is not timely made pursuant to Section 8 or Section 9 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 10(b) of this Agreement within 60 days after receipt by the Company of the request for

Exhibit 10.1    
indemnification, (iv) payment of indemnification is not made pursuant to Section 7 of this Agreement within ten days after receipt by the Company of a written request therefor, or (v) payment of indemnification pursuant to any other section of this Agreement or the charter or Bylaws of the Company is not made within ten days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication in an appropriate court located in the State of Maryland, or in any other court of competent jurisdiction, of her entitlement to such indemnification or advance of Expenses. Alternatively, Indemnitee, at her option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence a proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a); provided, however, that the foregoing clause shall not apply to a proceeding brought by Indemnitee to enforce her rights under Section 7 of this Agreement. Except as set forth herein, the provisions of Maryland law (without regard to its conflicts of laws rules) shall apply to any such arbitration. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.
(b)    In any judicial proceeding or arbitration commenced pursuant to this Section 12, Indemnitee shall be presumed to be entitled to indemnification or advance of Expenses, as the case may be, under this Agreement and the Company shall have the burden of proving that Indemnitee is not entitled to indemnification or advance of Expenses, as the case may be. If Indemnitee commences a judicial proceeding or arbitration pursuant to this Section 12, Indemnitee shall not be required to reimburse the Company for any advances pursuant to Section 8 of this Agreement until a final determination is made with respect to Indemnitee’s entitlement to indemnification (as to which all rights of appeal have been exhausted or lapsed). If Indemnitee commences a judicial proceeding or arbitration pursuant to this Section 12, the Company may not refer to or introduce into evidence any determination pursuant to Section 10(b) of this Agreement adverse to Indemnitee for any purpose and any judicial proceeding or arbitration commenced pursuant to this Article 12 shall be conducted in all respects as a de novo trial or arbitration. The Company shall, to the fullest extent not prohibited by law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 12 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all of the provisions of this Agreement.
(c)    If a determination shall have been made pursuant to Section 10(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 12, absent a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification.
(d)    In the event that Indemnitee, pursuant to this Section 12, seeks a judicial adjudication of or an award in arbitration to enforce her rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to advancement from the Company, and shall be indemnified and held harmless by the Company for, any and all Expenses actually and reasonably incurred by her in such judicial adjudication or arbitration in accordance with this Agreement.
(e)    Interest shall be paid by the Company to Indemnitee at the maximum rate allowed to be charged for judgments under the Courts and Judicial Proceedings Article of the Annotated Code of Maryland for amounts which the Company pays or is obligated to pay for the period commencing with the date on which the Indemnitee requests indemnification or advancement of Expenses in accordance with this Agreement and ending on the date such payment is made to Indemnitee by the Company.

Exhibit 10.1    
Section 13.    Defense of the Underlying Proceeding.
(a)    Indemnitee shall notify the Company promptly in writing upon being served with any summons, citation, subpoena, complaint, indictment, request or other document relating to any Proceeding which may result in the right to indemnification or the advance of Expenses hereunder and shall include with such notice a description of the nature of the Proceeding and a summary of the facts underlying the Proceeding. The failure to give any such notice shall not disqualify Indemnitee from the right, or otherwise affect in any manner any right of Indemnitee, to indemnification or the advance of Expenses under this Agreement unless the Company’s ability to defend in such Proceeding or to obtain proceeds under any insurance policy is materially and adversely prejudiced thereby, and then only to the extent the Company is thereby actually so prejudiced.
(b)    Subject to the provisions of the last sentence of this Section 13(b) and of Section 13(c) below, the Company shall have the right to defend Indemnitee in any Proceeding which may give rise to indemnification hereunder using a law firm of the Company’s choice, subject to the prior written approval of the Indemnitee, which shall not be unreasonably withheld; provided, however, that the Company shall notify Indemnitee in writing of any such decision to defend within 15 calendar days following receipt of notice of any such Proceeding under Section 13(a) above. Indemnitee shall have the right to retain a separate law firm in any such Proceeding at Indemnitee’s sole expense. The Company shall not, without the prior written consent of Indemnitee, which shall not be unreasonably withheld or delayed, consent to the entry of any judgment against Indemnitee or enter into any settlement or compromise which (i) includes an admission of fault of Indemnitee, (ii) does not include, as an unconditional term thereof, the full release of Indemnitee from all liability in respect of such Proceeding, which release shall be in form and substance reasonably satisfactory to Indemnitee or (iii) would impose any Expense, judgment, fine, penalty or limitation on Indemnitee. This Section 13(b) shall not apply to a Proceeding brought by Indemnitee under Section 12 of this Agreement, a Proceeding by or in the right of the Company or in the case of clause (ii) of Section 13(c).
(c)    Notwithstanding the provisions of Section 13(b) above, if in a Proceeding to which Indemnitee is a party (i) Indemnitee reasonably concludes, based upon an opinion of counsel approved by the Company, which approval shall not be unreasonably withheld, that she may have separate defenses or counterclaims to assert with respect to any issue which may not be consistent with other defendants in such Proceeding, (ii) Indemnitee reasonably concludes that an actual or apparent conflict of interest or potential conflict of interest exists between Indemnitee and the Company, or (iii) if the Company fails to assume the defense of such Proceeding in a timely manner, Indemnitee shall be entitled to be represented by separate legal counsel of Indemnitee’s choice, subject, except in the case of (ii) or (iii) above, to the prior approval of the Company, which shall not be unreasonably withheld, at the expense of the Company. In addition, if the Company fails to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any Proceeding to deny or to recover from Indemnitee the benefits intended to be provided to Indemnitee hereunder, Indemnitee shall have the right to retain counsel of Indemnitee’s choice, at the expense of the Company (subject to Section 12(d) of this Agreement), to represent Indemnitee in connection with any such matter.
Section 14.    Jointly Indemnifiable Claims.
(a)    Given that certain Jointly Indemnifiable Claims may arise, the Company acknowledges and agrees that the Company shall, and to the extent applicable shall cause any Enterprise to (i) be fully and primarily responsible for, and be the indemnitor of first resort with respect to, payment to or payment on behalf of the Indemnitee in respect of indemnification or advancement of Expenses in connection with any such Jointly Indemnifiable Claim,

Exhibit 10.1    
irrespective of any right of recovery the Indemnitee may have from the Third-Party Indemnitors, and (ii) be required to advance the full amount of Expenses incurred by the Indemnitee and shall be liable for the full amount of all Expenses, judgments, fines, penalties and amounts paid in settlement to the extent not prohibited by (and not merely to the extent affirmatively permitted by) applicable law and as required by the terms of this Agreement, without regard to any rights the Indemnitee may have against the Third-Party Indemnitors. Under no circumstance shall the Company or any Enterprise be entitled to, and the Company hereby irrevocably waives, relinquishes and releases, any claims against the Third-Party Indemnitors for subrogation, contribution or recovery of any kind and no right of advancement or recovery the Indemnitee may have from the Third-Party Indemnitors shall reduce or otherwise alter the rights of the Indemnitee or the obligations of the Company or any Enterprise. The Company further agrees that no advancement or payment by any Third-Party Indemnitor on behalf of Indemnitee with respect to any Proceeding for which Indemnitee has sought indemnification, exoneration or hold harmless rights from the Company shall affect the foregoing and the Third-Party Indemnitor(s) shall have a right to receive from the Company, contribution and/or be subrogated, to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company. The Company and the Indemnitee agree that each of the Third-Party Indemnitors shall be third-party beneficiaries with respect to this Agreement entitled to enforce this Section 14 as though each such Third-Party Indemnitor were a party to this Agreement.
(b)    For purposes of this Agreement “Third-Party Indemnitor” means any person or entity that has or may in the future provide to the Indemnitee any indemnification, exoneration, hold harmless or Expense advancement rights and/or insurance benefits other than (i) the Company, (ii) any Enterprise and (iii) any entity or entities through which the Company maintains liability insurance applicable to the Indemnitee.
(c)    For purposes of this Agreement, “Jointly Indemnifiable Claims” shall mean any Proceeding for which the Indemnitee shall be entitled to indemnification, advancement of expenses or insurance from (i) the Company and/or any Enterprise pursuant to this Agreement, the charter or Bylaws or other governing documents of the Company or any Enterprise, any agreement or a resolution of the stockholders of the Company entitled to vote generally in the election of directors or of the Board of Directors, or otherwise, on the one hand, and (ii) any Third-Party Indemnitor pursuant to any agreement between any Third-Party Indemnitor and the Indemnitee pursuant to which the Indemnitee is indemnified, the laws of the jurisdiction of incorporation or organization of any Third-Party Indemnitor and/or the certificate of incorporation, certificate of organization, bylaws, partnership agreement, operating agreement, certificate of formation, certificate of limited partnership or other organizational or governing documents of any Third-Party Indemnitor, on the other hand.
Section 15.    Non-Exclusivity; Survival of Rights; Subrogation.
(a)    The rights of indemnification and advance of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the charter or Bylaws or other governing documents of the Company or any Enterprise, any agreement or a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors, or otherwise. Unless consented to in writing by Indemnitee, no amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in or by reason of her Corporate Status prior to such amendment, alteration or repeal, regardless of whether a claim with respect to such action or inaction is raised prior or subsequent to such amendment, alteration or repeal. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right or remedy shall be cumulative and in addition to every other right or remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion of any right or remedy hereunder, or otherwise, shall not prohibit the concurrent assertion or employment of any other right or remedy.

Exhibit 10.1    
(b)    Except as set forth in Section 14, in the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
Section 16.    Insurance. The Company will use its reasonable best efforts to acquire directors and officers liability insurance, on terms and conditions deemed appropriate by the Board of Directors, with the advice of counsel, covering Indemnitee or any claim made against Indemnitee by reason of her Corporate Status or by reason of alleged actions or omissions by Indemnitee in such capacity and covering the Company for any indemnification or advance of Expenses made by the Company to Indemnitee for any claims made against Indemnitee by reason of her Corporate Status or by reason of alleged actions or omissions by Indemnitee in such capacity. Without in any way limiting any other obligation under this Agreement, the Company shall indemnify Indemnitee for any payment by Indemnitee arising out of the amount of any deductible or retention and the amount of any excess of the aggregate of all judgments, penalties, fines, settlements and Expenses incurred by Indemnitee in connection with a Proceeding over the coverage of any insurance referred to in the previous sentence. The purchase, establishment and maintenance of any such insurance shall not in any way limit or affect the rights or obligations of the Company or Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Company and the Indemnitee shall not in any way limit or affect the rights or obligations of the Company under any such insurance policies. If, at the time the Company receives notice from any source of a Proceeding to which Indemnitee is a party or a participant (as a witness or otherwise) the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies.
Section 17.    Coordination of Payments. Except as set forth in Section 14, the Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable or payable or reimbursable as Expenses hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.
Section 18.    Reports to Stockholders. To the extent required by the MGCL, the Company shall report in writing to its stockholders the payment of any amounts for indemnification of, or advance of Expenses to, Indemnitee under this Agreement arising out of a Proceeding by or in the right of the Company with the notice of the meeting of stockholders of the Company next following the date of the payment of any such indemnification or advance of Expenses or prior to such meeting.
Section 19.    Duration of Agreement; Binding Effect.
(a)    This Agreement shall be effective as of the Effective Date and may apply to acts or omissions of Indemnitee taken in or in connection with Indemnitee’s Corporate Status which occurred prior to such date if Indemnitee was an officer, director, employee or agent of the Company or was a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any Enterprise at the time such act or omission occurred.
(b)    This Agreement shall continue until and terminate on the later of (i) the date that Indemnitee shall have ceased to serve as a director, officer, employee or agent of the Company or as a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any Enterprise and (ii) the date that Indemnitee is no longer subject to any actual or possible Proceeding (including any rights of appeal thereto and any Proceeding commenced by Indemnitee pursuant to Section 12 of this Agreement).

Exhibit 10.1    
(c)    The indemnification and advance of Expenses provided by, or granted pursuant to, this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any Enterprise, and shall inure to the benefit of Indemnitee and her spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.
(d)    The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
(e)    The Company and Indemnitee agree herein that a monetary remedy for breach of this Agreement, at some later date, may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm. Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which she may be entitled. Indemnitee shall further be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertakings in connection therewith. The Company acknowledges that, in the absence of a waiver, a bond or undertaking may be required of Indemnitee by a court, and the Company hereby waives any such requirement of such a bond or undertaking.
Section 20.    Section 409A. It is intended that any indemnification payment or advancement of Expenses made hereunder shall be exempt from Section 409A of the Internal Revenue Code of 1986, as amended, and the guidance issued thereunder (“Section 409A”) pursuant to Treasury Regulation Section 1.409A-1(b)(10). Notwithstanding the foregoing, if any indemnification payment or advancement of Expenses made hereunder shall be determined to be “nonqualified deferred compensation” within the meaning of Section 409A, then (i) the amount of the indemnification payment or advancement of Expenses during one taxable year shall not affect the amount of the indemnification payments or advancement of Expenses during any other taxable year, (ii) the indemnification payments or advancement of Expenses must be made on or before the last day of the Indemnitee’s taxable year following the year in which the expense was incurred, and (iii) the right to indemnification payments or advancement of Expenses hereunder is not subject to liquidation or exchange for another benefit.
Section 21.    Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

Exhibit 10.1    
Section 22.    Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. One such counterpart signed by the party against whom enforceability is sought shall be sufficient to evidence the existence of this Agreement.
Section 23.    Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.
Section 24.    Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
Section 25.    Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:
(a)    If to Indemnitee, to the address set forth on the signature page hereto.
(b)    If to the Company, to:
Victor J. Coleman, Chief Executive Officer
Hudson Pacific Properties, Inc.
11601 Wilshire Blvd., Ninth Floor
Los Angeles, California 90025

or to such other address as may have been furnished in writing to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

Section 26.    Governing Law. The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland, without regard to its conflicts of laws rules.
Section 27.    Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate.

[SIGNATURE PAGE FOLLOWS]


Exhibit 10.1    
    IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

HUDSON PACIFIC PROPERTIES, INC.:
By:/s/ Victor J. Coleman
Name:
Title:
Victor J. Coleman
Chief Executive Officer
INDEMNITEE:
/s/ Barry Sholem
Name:
Barry Sholem

Exhibit 10.92    
EXHIBIT A
FORM OF UNDERTAKING TO REPAY EXPENSES ADVANCED
The Board of Directors of Hudson Pacific Properties, Inc.

Re: Undertaking to Repay Expenses Advanced

Ladies and Gentlemen:

This undertaking is being provided pursuant to that certain Indemnification Agreement dated the ____ day of ______, 20___, by and between Hudson Pacific Properties, Inc., a Maryland corporation (the “Company”), and the undersigned Indemnitee (the “Indemnification Agreement”), pursuant to which I am entitled to advance of Expenses in connection with [Description of Proceeding] (the “Proceeding”).
Terms used herein and not otherwise defined shall have the meanings specified in the Indemnification Agreement.
I am subject to the Proceeding by reason of my Corporate Status or by reason of alleged actions or omissions by me in such capacity. I hereby affirm my good belief that at all times, insofar as I was involved as a director of the Company, in any of the facts or events giving rise to the Proceeding, I (1) did not act with bad faith or active or deliberate dishonesty, (2) did not receive any improper personal benefit in money, property or services and (3) in the case of any criminal proceeding, had no reasonable cause to believe that any act or omission by me was unlawful.
In consideration of the advance of Expenses by the Company for reasonable attorneys’ fees and related Expenses incurred by me in connection with the Proceeding (the “Advanced Expenses”), I hereby agree that if, in connection with the Proceeding, it is established that (1) an act or omission by me was material to the matter giving rise to the Proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty or (2) I actually received an improper personal benefit in money, property or services or (3) in the case of any criminal proceeding, I had reasonable cause to believe that the act or omission was unlawful, then I shall promptly reimburse the portion of the Advanced Expenses relating to the claims, issues or matters in the Proceeding as to which the foregoing findings have been established.
    IN WITNESS WHEREOF, I have executed this Affirmation and Undertaking on this ___ day of ______, 20__.


Name:
Address:
Exhibit 31.1

CERTIFICATION
I, Victor J. Coleman, certify that:
 
1) I have reviewed this quarterly report on Form 10-Q of Hudson Pacific Properties, Inc.;
2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3) Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
August 4, 2023
/s/ VICTOR J. COLEMAN
Victor J. Coleman
Chief Executive Officer
Exhibit 31.2

CERTIFICATION
I, Harout K. Diramerian, certify that:
 
1) I have reviewed this quarterly report on Form 10-Q of Hudson Pacific Properties, Inc.;
2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3) Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
August 4, 2023/s/ HAROUT K. DIRAMERIAN
Harout K. Diramerian
Chief Financial Officer
Exhibit 31.3

CERTIFICATION
I, Victor J. Coleman, certify that:
 
1) I have reviewed this quarterly report on Form 10-Q of Hudson Pacific Properties, L.P.;
2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3) Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:August 4, 2023/s/ VICTOR J. COLEMAN
Victor J. Coleman
Chief Executive Officer
Exhibit 31.4

CERTIFICATION
I, Harout K. Diramerian, certify that:
 
1) I have reviewed this quarterly report on Form 10-Q of Hudson Pacific Properties, L.P.;
2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3) Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:August 4, 2023/s/ HAROUT K. DIRAMERIAN
Harout K. Diramerian
Chief Financial Officer
Exhibit 32.1

WRITTEN STATEMENT
PURSUANT TO
18 U.S.C. SECTION 1350
The undersigned, Victor J. Coleman, Chief Executive Officer, and Harout K. Diramerian, Chief Financial Officer of Hudson Pacific Properties, Inc. (the “Company”), hereby certify as of the date hereof, solely for the purposes of 18 U.S.C. §1350, that:
(i) the Quarterly Report on Form 10-Q for the period ended June 30, 2023 of the Company (the “Report”) fully complies with the requirements of Section 13(a) and 15(d), as applicable, of the Securities Exchange Act of 1934; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

 
Date:August 4, 2023/s/ VICTOR J. COLEMAN
Victor J. Coleman
Chief Executive Officer
Date:August 4, 2023/s/ HAROUT K. DIRAMERIAN
Harout K. Diramerian
Chief Financial Officer
The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.


Exhibit 32.2

WRITTEN STATEMENT
PURSUANT TO
18 U.S.C. SECTION 1350
The undersigned, Victor J. Coleman, Chief Executive Officer, and Harout K. Diramerian, Chief Financial Officer of Hudson Pacific Properties, Inc. in its capacity as sole general partner of Hudson Pacific Properties, L.P. (the “Company”), hereby certify as of the date hereof, solely for the purposes of 18 U.S.C. §1350, that:
(i) the Quarterly Report on Form 10-Q for the period ended June 30, 2023 of the Company (the “Report”) fully complies with the requirements of Section 13(a) and 15(d), as applicable, of the Securities Exchange Act of 1934; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date:August 4, 2023/s/ VICTOR J. COLEMAN
Victor J. Coleman
Chief Executive Officer
Hudson Pacific Properties, Inc., sole general partner of Hudson Pacific Properties, L.P.
Date:August 4, 2023/s/ HAROUT K. DIRAMERIAN
Harout K. Diramerian
Chief Financial Officer
Hudson Pacific Properties, Inc., sole general partner of Hudson Pacific Properties, L.P.
The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.