Hudson Pacific Properties, Inc.: Form 10-Q for the period ended Sep 30, 2023

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, repay indebtedness when due and maintain dividend payments;
• lack or insufficient amounts of insurance;
• decreased rental rates or increased vacancy rates;
• strikes or work stoppages;
• difficulties in identifying properties to acquire and completing acquisitions;
• our failure to successfully operate acquired properties and operations;
• our failure to maintain our status as a REIT;
• the loss of key personnel;
• environmental uncertainties and risks related to adverse weather conditions and natural disasters;
• financial market and foreign currency fluctuations;
• risks related to acquisitions generally, including the diversion of management’s attention from ongoing business operations and the impact on customers, tenants, lenders, operating results and business;
• the inability to successfully integrate acquired properties, realize the anticipated benefits of acquisitions or capitalize on value creation opportunities;
• changes in the tax laws and uncertainty as to how those changes may be applied;
• 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 September 30, 2023, our office portfolio consisted of approximately 15.3 million square feet of in-service, repositioning, redevelopment and development properties. Additionally, as of September 30, 2023, our studio portfolio consisted of 1.7 million square feet of in-service, repositioning and development properties and our future development portfolio consisted of 3.6 million developable square feet. Our consolidated and unconsolidated portfolio consists of 61 properties (36 wholly-owned properties, 17 properties owned by joint ventures and eight future development properties) located throughout the United States, Western Canada and Greater London, United Kingdom, totaling approximately 20.6 million square feet.

As of September 30, 2023, our in-service office portfolio was 83.1% leased (including leases not yet commenced). Our same-store studio properties were 83.5% leased for the average percent leased for the 12 months ended September 30, 2023.

The following table summarizes our portfolio as of September 30, 2023:

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 September 30, 2023 divided by (ii) total square feet expressed as a percentage, whereas percent leased includes uncommenced leases. Percent occupied for studio properties reflects the average percent occupied for the 12 months ended September 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 September 30, 2023 by (ii) 12. On a per square foot basis, ABR is divided by square footage under commenced leases as of September 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 September 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 September 30, 2023. Annualized base rent per square foot for studio properties reflects actual base rent for the 12 months ended September 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 September 30, 2023.

4. Same-store office for the three months ended September 30, 2023 defined as all properties owned and included in our stabilized office portfolio as of July 1, 2022 and still owned and included in the stabilized office portfolio as of September 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 September 30, 2023.

7. Includes studio properties owned and included in our portfolio as of July 1, 2022 and still owned and included in our portfolio as of September 30, 2023.

8. See Repositioning table in this document for the office and studio projects under repositioning as of September 30, 2023.

9. Includes 546,000 square feet related to the office development Washington 1000, 241,000 square feet related to Sunset Glenoaks Studios and 232,000 square feet related to Sunset Pier 94 Studios.

10. Includes pending entitlement to develop approximately 500 residential units at 10900-10950 Washington.

Overview

Business Acquisitions

We had no business acquisitions during the three and nine months ended September 30, 2023.

Property Acquisitions

We had no property acquisitions during the three and nine months ended September 30, 2023.

Property Dispositions

During the nine months ended September 30, 2023, the Company sold its Skyway Landing, 604 Arizona and 3401 Exposition properties for $102.0 million, $32.5 million and $40.0 million, respectively. 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 September 30, 2023:

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 25.6% of the ownership interest in the unconsolidated joint venture that owns Sunset Pier 94 Studios.

4. 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.

5. Pending entitlement to develop approximately 500 residential units.

6. We own 20% of the ownership interests in the unconsolidated joint venture that owns Burrard Exchange.

7. We own 35% of the ownership interests in the unconsolidated joint venture that owns Sunset Waltham Cross Studios.

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 September 30, 2023:

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Lease Expirations

The following table summarizes the lease expirations for leases in place as of September 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.

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 31 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 September 30, 2023 by (ii) 12. On a per square foot basis, ABR is divided by square footage under commenced leases as of September 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 September 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 September 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 September 30, 2023.

5. Reflects management offices occupied by the Company with various expiration dates.

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:

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 nine months ended September 30, 2023, there were $135.0 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.

In July 2023, the Company modified the existing loan agreement secured by the Hollywood Media Portfolio, whereby the LIBOR-based floating interest rate was replaced with a term SOFR-based floating interest rate.

In September 2023, the Company repaid its $50.0 million Series E notes in full.

Historical Results of Operations

This Quarterly Report on Form 10-Q of Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P. represents an update to the more detailed and comprehensive disclosures included in the 2022 Annual Report on Form 10-K of Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P. Accordingly, you should read the following discussion in conjunction with the 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 September 30, 2023 to the Three Months Ended September 30, 2022

Net Loss

For the three months ended September 30, 2023, the Company recorded net loss of $35.8 million compared to net loss of $6.8 million for the three months ended September 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 July 1, 2022 and still owned and included in the stabilized portfolio as of September 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:

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The following table summarizes certain statistics of our consolidated same-store office and studio properties:

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:

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The following table gives further detail on our change in NOI:

NOI decreased $36.1 million, or 23.2%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022, primarily resulting from:

• a $26.8 million decrease in non-same-store NOI driven by:
• a decrease in studio NOI of $20.2 million driven by a slowdown in production rentals activity due to the Writers Guild of America (“WGA”) strike and the Screen Actors Guild - American Federation of Television and Radio Artists (“SAG-AFTRA”) strike; and
• a decrease in office NOI of $6.6 million primarily due to:
• a $7.6 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 and lease expirations at our 10900-10950 Washington property; and
• a $0.7 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 $1.7 million decrease in operating expenses due to the aforementioned property sales.
• a $9.2 million decrease in same-store NOI driven by:
• a decrease in office NOI of $5.5 million primarily due to:
• a $3.9 million increase in operating expenses, predominantly due to higher property and casualty insurance renewal premiums, repairs & maintenance and parking expenses at our One Westside property; and
• a $1.6 million decrease in rental revenues driven by a lease expiration at Skyport Plaza and a reserve recognized in connection with a potential early termination at Palo Alto Square, partially offset by higher recoveries at our One Westside property and restoration fees received at our 1455 Market property in the third quarter of 2023;
• a decrease in studio NOI of $3.7 million primarily due to:
• a $5.7 million decrease in service and other revenues due to the WGA and SAG-AFTRA strikes; and
• a $2.2 million decrease in rental revenues due to a lease expiration at our Sunset Las Palmas Studios property;
• partially offset by a $4.2 million decrease in studio operating expenses due to the WGA and SAG-AFTRA strikes.

Other Income (Expenses)

Loss from unconsolidated real estate entities

We recorded a loss from unconsolidated real estate entities of $0.8 million for the three months ended September 30, 2023 compared to $0.4 million for the three months ended September 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 $0.3 million for the three months ended September 30, 2023 compared to $0.9 million for the three months ended September 30, 2022. Fee income represents the management fee income earned from our unconsolidated real estate entities.

Interest expense

The following table presents a reconciliation from gross interest expense to the interest expense line item on the Consolidated Statements of Operations:

1. Includes interest on the Company’s debt and hedging activities.

2. Includes the amortization of deferred financing costs and fair market value adjustments for our mark-to-market interest rate derivatives.

Gross interest expense increased by $14.6 million, or 33.8%, to $57.7 million for the three months ended September 30, 2023 compared to $43.1 million for the three months ended September 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 and Series E notes in September 2023.

Capitalized interest increased by $3.8 million, or 79.4%, to $8.6 million for the three months ended September 30, 2023 compared to $4.8 million for the three months ended September 30, 2022. The increase was primarily driven by development activity at Washington 1000, redevelopment activities at our Westside Two and 10900-10950 Washington properties and interest capitalized on our unconsolidated investment in the Sunset Waltham Cross Studios development. An increase in the average reference rates for the Company’s variable rate debt also contributed to the increase.

Non-cash interest expense increased by $5.6 million, or 519.9%, to $4.5 million of expense for the three months ended September 30, 2023 compared to $1.1 million of income for the three months ended September 30, 2022. The increase in non-cash interest expense was due to mark-to-market gains on the Hollywood Media Portfolio interest rate cap in the third quarter of 2022, which did not recur in the third quarter of 2023 as the interest rate cap expired in August 2023 and was replaced with an interest rate cap and an interest rate swap that were designated as cash flow hedges for accounting purposes. The increase was partially offset by a decrease in deferred financing cost amortization due to the deferred financing costs related to the Hollywood Media Portfolio debt being fully amortized as of August 2023.

Interest income

Interest income increased by $0.6 million, or 308.2%, to $0.8 million for the three months ended September 30, 2023 compared to $0.2 million for the three months ended September 30, 2022. The increase was primarily driven by interest earned on cash deposits in interest-bearing accounts in the third quarter of 2023.

Transaction-related expenses

We did not record any transaction-related expenses during the three months ended September 30, 2023. During the three months ended September 30, 2022, we recorded transaction-related expenses of $9.3 million predominantly related to the Quixote acquisition in August 2022.

Unrealized loss on non-real estate investments

We recognized an unrealized loss on non-real estate investments of $2.3 million for the three months ended September 30, 2023 compared to $0.9 million for the three months ended September 30, 2022. The activity in both periods is due to the observable changes in the fair value of the investments.

Gain (loss) on sale of real estate

During the three months ended September 30, 2023, we recognized a gain on sale of real estate of $16.1 million attributable to the sales of our 604 Arizona and 3401 Exposition properties in August 2023. During the three months ended September 30, 2022, we recognized a loss on sale of real estate of $0.2 million primarily related to the disposition of our Northview Center property in August 2022.

Impairment loss

We did not recognize any impairment charges during the three months ended September 30, 2023. During the three months ended September 30, 2022, we recognized an impairment loss of $4.8 million due to reductions in the estimated fair values of our Del Amo, 6922 Hollywood and Northview Center properties.

Other income

During the three months ended September 30, 2023, we recognized other income of $5.0 thousand. During the three months ended September 30, 2022, we recognized other income of $1.1 million primarily related to a gain recognized from insurance proceeds received for damaged property.

Income tax benefit

We recorded an income tax benefit of $0.4 million for the three months ended September 30, 2023 compared to $1.3 million for the three months ended September 30, 2022. The change was primarily due to a valuation allowance recorded against certain deferred tax assets as of September 30, 2023.

General and administrative expenses

General and administrative expenses decreased by $2.3 million, or 11.5%, to $17.5 million for the three months ended September 30, 2023 compared to $19.8 million for the three months ended September 30, 2022. The decrease was primarily driven by decreases in payroll, non-cash compensation, office expenses and travel and entertainment.

Depreciation and amortization expense

Depreciation and amortization expense increased by $5.5 million, or 5.9%, to $98.6 million for the three months ended September 30, 2023 compared to $93.1 million for the three months ended September 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.

Comparison of the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022

Net Loss

Net loss increased $71.2 million, or 655.4%, to $82.0 million for the nine months ended September 30, 2023 compared to $10.9 million for the nine months ended September 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 September 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:

The following table summarizes certain statistics of our same-store office and studio properties:

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:

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The following table gives further detail on our change in NOI:

NOI decreased $65.5 million, or 14.2%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily resulting from:

• a $54.3 million decrease in non-same-store NOI driven by:
• a decrease in studio NOI of $38.5 million driven by a slowdown in production rentals activity due to the WGA and SAG-AFTRA strikes; and
• a decrease in office NOI of $15.9 million primarily due to:
• a $21.4 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 and 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 in 2023; and
• a $3.1 million decrease in service and other revenues primarily due to non-recurring lease cancellation fees received at our Skyway Landing property in the third quarter of 2022 and a reduction in parking revenues in connection with the sales of the properties listed above;
• partially offset by an $8.7 million decrease in operating expenses due to the aforementioned property sales.
• a $11.2 million decrease in same-store NOI driven by:
• a decrease in office NOI of $8.6 million primarily due to:
• a $9.5 million increase in operating expenses, predominantly engineering, cleaning and utilities resulting from a colder winter in 2023, higher insurance premiums and higher repair and maintenance expense, which was partially offset by a prior-period property tax reimbursement at our ICON property;
• partially offset by a $0.5 million increase in service and other revenues primarily due to increased parking revenues from special events and visitor parking at our 505 First, 411 First, Ferry Building and Rincon Center properties; and
• a $0.4 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, higher percentage rent at our Ferry Building property during 2023 and restoration fees received at our 1455 Market property during 2023. The increase was partially offset by a lease expiration at our Skyport Plaza property.
• a decrease in studio NOI of $2.6 million primarily due to:
• a $7.4 million decrease in service and other revenues and a $1.6 million decrease in rental revenues due to the WGA and SAG-AFTRA strikes and a lease expiration at our Sunset Las Palmas Studios property;
• partially offset by a $6.4 million decrease in studio operating expenses due to the impact of the WGA and SAG-AFTRA strikes as well as a decrease in ground rent expense arising from the acquisition of the related land at Sunset Gower Studios in May 2022.

Other Income (Expense)

(Loss) income from unconsolidated real estate entities

We recorded $2.2 million of loss from unconsolidated real estate entities for the nine months ended September 30, 2023 compared to $1.7 million of income for the nine months ended September 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 $5.0 million for the nine months ended September 30, 2023 compared to $3.1 million for the nine months ended September 30, 2022. Fee income represents the management fee income earned from our 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:

1. Includes interest on the Company’s debt and hedging activities.

2. Includes the amortization of deferred financing costs and fair market value adjustments for our mark-to-market interest rate derivatives.

Gross interest expense increased by $54.1 million, or 48.6%, to $165.4 million for the nine months ended September 30, 2023 compared to $111.3 million for the nine months ended September 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, Quixote note in April 2023 and Series E notes in September 2023.

Capitalized interest increased by $11.1 million, or 95.1%, to $22.8 million for the nine months ended September 30, 2023 compared to $11.7 million for the nine months ended September 30, 2022. The increase was primarily driven by development activity at Washington 1000, which was acquired in April 2022, redevelopment activities at our Westside Two and 10900-10950 Washington properties and interest capitalized on our unconsolidated investments in the Sunset Waltham Cross Studios and Sunset

Glenoaks Studios developments. An increase in the average reference rates for the Company’s variable rate debt also contributed to the increase.

Non-cash interest expense increased by $17.2 million, or 779.8%, to $19.4 million for the nine months ended September 30, 2023 compared to $2.2 million for the nine months ended September 30, 2022. The increase in non-cash interest expense was due to mark-to-market gains on the Hollywood Media Portfolio interest rate cap in the third quarter of 2022 that did not recur in 2023 because we began applying hedge accounting prospectively from the fourth quarter of 2022. The increase was partially offset by a decrease in deferred financing cost amortization due to the deferred financing costs related to the Hollywood Media Portfolio debt being fully amortized in August 2023.

Interest income

Interest income decreased by $0.6 million, or 30.6%, to $1.4 million for the nine months ended September 30, 2023 compared to $2.0 million for the three months ended September 30, 2022. The decrease was primarily driven by the maturity of the U.S. Government securities in June 2022, partially offset by interest earned on cash deposits in interest-bearing accounts in the third quarter of 2023.

Transaction-related expenses

We recorded $1.3 million of income for the nine months ended September 30, 2023 predominantly related to the remeasurement of the Zio earnout liability to fair value during the nine months ended September 30, 2023. During the nine months ended September 30, 2023, we recorded $10.7 million of expense predominantly related to the Quixote acquisition in August 2022.

Unrealized loss on non-real estate investments

We recognized an unrealized loss on our non-real estate investments of $2.3 million for the nine months ended September 30, 2023 compared to $1.1 million for the nine months ended September 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 nine months ended September 30, 2023, we recognized a $23.2 million gain attributable to the sales of our Skyway Landing property in February 2023 and 604 Arizona and 3401 Exposition properties in August 2023, compared to the $0.2 million loss on sale recorded during the nine months ended September 30, 2022 primarily driven by the disposition of our Northview Center property in August 2022.

Impairment loss

We did not recognize any impairment charges during the nine months ended September 30, 2023. During the nine months ended September 30, 2022, we recognized an impairment loss of $28.5 million, of which $20.0 million was due to reductions in the estimated fair values of our Del Amo, 6922 Hollywood and Northview Center properties and $8.5 million 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 nine months ended September 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 nine months ended September 30, 2022.

Other income

During the nine months ended September 30, 2023, we recognized other income of $0.1 million. During the nine months ended September 30, 2022, we recognized other income of $1.1 million primarily related to a gain recognized from insurance proceeds received for damaged property.

Income tax (provision) benefit

We recorded an income tax provision of $0.7 million for the nine months ended September 30, 2023 compared to an income tax benefit of $2.9 million for the nine months ended September 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 nine months ended September 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 $7.0 million, or 11.3%, to $55.2 million for the nine months ended September 30, 2023 compared to $62.2 million for the nine months ended September 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 $18.0 million, or 6.5%, to $294.7 million for the nine months ended September 30, 2023 compared to $276.7 million for the nine months ended September 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.

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 and Sunset Pier 94 Studios construction loans (unconsolidated joint ventures); and
• proceeds from additional secured, unsecured debt financings or offerings.

Liquidity Sources

We had approximately $75.0 million of cash and cash equivalents at September 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 September 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 September 30, 2023, we had total borrowing capacity of $1.0 billion under our unsecured revolving credit facility, $520.0 million of which had been drawn. As of September 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 September 30, 2023, we had total borrowing capacity of $100.6 million under the Sunset Glenoaks Studios construction loan (unconsolidated joint venture), of which $78.3 million had been drawn. As of September 30, 2023, we had total borrowing capacity of $183.2 million under the Sunset Pier 94 Studios construction loan (unconsolidated joint venture), of which $0.1 million had been drawn.

Our ability to incur additional debt will be dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. If we incur additional debt, the risks associated with our leverage, including our ability to service our debt, would increase. 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 October 27, 2023, the credit ratings for our senior unsecured debt were Ba1, BB+ and BBB- from Moody’s, Standard and Poor’s and Fitch, respectively.

The following table sets forth our total consolidated market capitalization (counting Series A preferred units as debt) as of September 30, 2023 (in thousands, except percentage):

1. Excludes joint venture partner debt and unamortized deferred financing costs and loan discounts/premiums.

2. Equity capitalization represents the shares of common stock outstanding (including unvested restricted shares), OP units outstanding, restricted performance units and dilutive shares multiplied by the closing price of $6.65, as reported by the NYSE, on September 29, 2023 as well as the aggregate value of the Series C preferred stock liquidation preference as of September 30, 2023.

Outstanding Indebtedness

The following table sets forth information as of September 30, 2023 and December 31, 2022 with respect to our outstanding indebtedness, excluding unamortized deferred financing costs and loan discounts/premiums (in thousands):

The operating partnership was in compliance with its financial covenants as of September 30, 2023, although there can be no assurance that it will continue to be in compliance with these financial covenants. Our ability to maintain compliance with our debt covenants is subject to numerous risks and uncertainties, many of which are outside of our control, including general economic conditions; 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, repay indebtedness when due and maintain dividend payments; and strikes or work stoppages. Failure to meet any of these covenants could cause an event of default under the agreements governing our indebtedness and/or accelerate some or all of our indebtedness. In addition, certain of our indebtedness contain specific cross-default provisions with respect to specified other indebtedness, giving the lenders the right to declare a default if we are in default under other loans in some circumstances.

Liquidity Uses

Contractual Obligations

During the nine months ended September 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.

Dividends

The Company suspended its quarterly common stock cash dividends during the three months ended September 30, 2023. Declaration of any future common stock dividends will be determined by the Company’s Board of Directors after considering the Company’s obligations under its various financing agreements, projected taxable income, compliance with its debt covenants, long-term operating projections, expected capital requirements and risks affecting the Company’s business.

Cash Flows

A comparison of our cash flow activity is as follows:

Cash and cash equivalents and restricted cash were $94.1 million and $285.7 million at September 30, 2023 and December 31, 2022, respectively.

Operating Activities

Net cash provided by operating activities decreased by $105.5 million, or 32.1%, to $223.0 million for the nine months ended September 30, 2023 compared to $328.5 million for the nine months ended September 30, 2022. The decrease primarily resulted from a slowdown in production rentals activity due to the WGA and SAG-AFTRA strikes 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 $210.9 million, or 62.9%, to $124.5 million for the nine months ended September 30, 2023 compared to $335.4 million for the nine months ended September 30, 2022. The decrease was primarily driven by the $197.9 million Quixote acquisition during the nine months ended September 30, 2022, a $122.5 million increase in proceeds from sales of real estate during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 and $96.4 million in property acquisitions during the nine months ended September 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 $58.3 million increase in additions to investment in real estate and a $37.3 million increase in contributions to unconsolidated real estate entities during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

Financing Activities

Net cash used in financing activities increased $304.2 million, or 2,162.3%, to $290.2 million for the nine months ended September 30, 2023 compared to $14.1 million of cash provided by financing activities for the nine months ended September 30, 2022. The change primarily resulted from a $639.9 million decrease in proceeds from unsecured and secured debt and a $87.0 million increase in payments of unsecured and secured debt during the nine months ended September 30, 2023. The change was partially offset by a $235.8 million decrease in share repurchases during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, as well as the repayment of $128.2 million of in-substance defeased debt during the nine months ended September 30, 2022 and a $54.4 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 and the suspension of the common stock dividend during the third 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 September 30, 2023 (in thousands):

(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. Amounts are shown in U.S. dollars using the foreign currency exchange rate as of September 30, 2023. Subsequent to September 30, 2023, the loan agreement was amended, extending the contractual maturity date to July 1, 2027, modifying the interest rate to CORRA + 2.00% and decreasing the outstanding principal amount to $467.0 million, with an additional $22.2 million available for future funding, subject to certain requirements.

(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. The maturity date includes the effect of extension options. As of September 30, 2023, we have $22.3 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.

(3) We own approximately 26% of the ownership interests in the unconsolidated real estate investment that owns the Sunset Pier 94 Studios development. This loan has an initial interest rate of SOFR + 4.75% per annum until stabilization of the project, at which time the effective interest rate will decrease to SOFR + 4.00%. This loan is interest-only through its term. The total capacity of the loan is $183.2 million. The maturity date includes the effect of extension options. As of September 30, 2023, we have $183.1 million undrawn.

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.

The following table presents a reconciliation of net loss to FFO (in thousands):

72

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 nine months ended September 30, 2023 to the information provided in Part II, Item 7A, of our 2022 Annual Report on Form 10-K.

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.

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

There have been no changes that occurred during the third 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 third 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.

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.