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What changed in Hudson Pacific Properties, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Hudson Pacific Properties, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+318 added−350 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-10)

Top changes in Hudson Pacific Properties, Inc.'s 2023 10-K

318 paragraphs added · 350 removed · 228 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur 2022 achievements include: • 100% of employees at operating office and studio properties received training on subjects such as health and safety, leadership development, corporate operations and/or new employee onboarding; • Launch of a global DEI strategy for our own employees (as discussed below); • New partnership with Ghetto Film School to help traditionally under-represented youth enter the production business; • Continued progress against our five-year commitment to invest $20 million in innovative homelessness and housing solutions in our core markets; • Over $1.3 million in charitable giving, with a focus on organizations addressing homelessness, DEI and health and wellness in our core markets; and • Active employee volunteering program and robust Matching Gift benefit.
Biggest changeOur 2023 achievements include: • 100% of employees received training on key business topics such as health and safety and/or DEI • Deepened collaboration with Ghetto Film School to help traditionally under-represented youth enter the production business; • Continuation of our commitment to invest $20 million in innovative homelessness and housing solutions; • Over $800,000 in charitable giving; and • Over 1,400 hours of employee volunteering.
The Company regularly honors top performers, and generous Company policies encourage work/life balance through paid time off, subsidized gym memberships, fitness programs, events and healthy dining options. Compensation and Benefits We are a pay-for-performance organization, which means that compensation decisions are made based on individual, team/department, and overall Company performance.
The Company regularly honors top performers, and generous Company policies encourage work/life balance through paid time off, subsidized gym memberships, fitness programs, events and healthy dining options. 12 Compensation and Benefits We are a pay-for-performance organization, which means that compensation decisions are made based on individual, team/department, and overall Company performance.
In addition, we may be held directly liable for any such damages or claims regardless of whether we knew of, or were responsible for, the presence or disposal of hazardous or toxic substances or waste and irrespective of tenant lease provisions. The costs associated with such liability could be substantial and could have a material adverse effect on us.
In addition, we may be held directly liable for any such damages or claims regardless of whether we knew of, or were responsible for, the presence or disposal of hazardous or toxic 10 substances or waste and irrespective of tenant lease provisions. The costs associated with such liability could be substantial and could have a material adverse effect on us.
As capital improvement programs progress, certain ADA upgrades will continue to be integrated into the planned improvements, specifically at the studio properties where we are able to utilize in-house construction crews to minimize costs for required ADA-related improvements. However, some of our properties may currently be in noncompliance with the ADA.
As capital improvement programs progress, certain ADA upgrades will continue to be integrated into the planned improvements, specifically at the studio properties where we are able to utilize in-house construction crews to minimize costs for required ADA-related improvements. However, some of our properties may currently be in noncompliance with 9 the ADA.
As a result, management believes that presenting the Company’s share of various financial measures in this manner can help investors better understand the Company’s financial condition and/or results of operations after taking into account its true economic interest in these joint ventures.
As a result, management believes that presenting HPP’s share of various financial measures in this manner can help investors better understand the Company’s financial condition and/or results of operations after taking into account its true economic interest in these joint ventures.
We have a comprehensive and robust DEI program for employees at all levels, which includes initiatives such as: • An ongoing series of intensive, cohort-based DEI training modules for employees. • Five Employee Resource Groups each designed to connect employees with similar backgrounds and shared experiences while fostering partnership with the Company on diversity and inclusion efforts, sharing best practices and ensuring support for each other across our communities. • A thoughtfully curated DEI Library filled with educational resources to increase employee awareness and knowledge of important diversity and inclusion concepts and further develop their skills to help make meaningful change.
We have a comprehensive and robust DEI program for employees at all levels, which includes initiatives such as: • An ongoing series of intensive, cohort-based DEI training modules for employees. • Six Employee Resource Groups each designed to connect employees with similar backgrounds and shared experiences while fostering partnership with the Company on diversity and inclusion efforts, sharing best practices and ensuring support for each other across our communities. • A thoughtfully curated DEI Library filled with educational resources to increase employee awareness and knowledge of important diversity and inclusion concepts and further develop their skills to help make meaningful change.
Some of our properties contain ACBM and/or LBP and we could be liable for such damages, fines or penalties. 10 In addition, the properties in our portfolio also are subject to various federal, state and local environmental and health and safety requirements, such as state and local fire requirements.
Some of our properties contain ACBM and/or LBP and we could be liable for such damages, fines or penalties. In addition, the properties in our portfolio also are subject to various federal, state and local environmental and health and safety requirements, such as state and local fire requirements.
We take pride in the fact that our employee population across our operating office and studio portfolio reflects a balanced gender representation as well as a broad 12 cross-section of racial and ethnic backgrounds.
We take pride in the fact that our employee population across our operating office and studio portfolio reflects a balanced gender representation as well as a broad cross-section of racial and ethnic backgrounds.
We take a measured approach to ground-up development, with most under-construction, planned or potential projects located on ancillary sites that are part of existing operating assets. We also acquire and operate leading production services companies to further expand the service offerings for our studio platform and our geographic reach to other studios and on-location filming.
We take a measured approach to ground-up development, with most under-construction, planned or potential projects located on ancillary sites that are part of existing operating assets. We also acquire and operate leading production services companies to further expand the service offerings for our studio portfolio and our geographic reach to other studios and on-location filming.
Business and Growth Strategies We invest in Class-A office and studio properties located in high barrier-to-entry, innovation-centric submarkets with significant growth potential. Our world-class sustainable office and studio properties within these submarkets allow us to attract and retain quality companies as tenants, many in the increasingly synergistic technology and media and entertainment sectors.
Business Strategy We invest in Class-A office and studio properties located in high barrier-to-entry, innovation-centric submarkets with significant growth potential. Our world-class sustainable office and studio properties within these submarkets allow us to attract and retain quality companies as tenants, many in the increasingly synergistic technology and media and entertainment sectors.
For information about our segments, refer to Part IV, Item 15(a) “Financial Statement Schedules—Note 17 to the Consolidated Financial Statements—Segment Reporting.” Our portfolio of owned real estate is concentrated in California, the Pacific Northwest, Western Canada and Greater London, United Kingdom.
For information about our segments, refer to Part IV, Item 15(a) “Financial Statement Schedules—Note 17 to the Consolidated Financial Statements—Segment Reporting.” Our portfolio of owned real estate is concentrated in California, the Pacific Northwest, New York, Western Canada and Greater London, United Kingdom.
A copy of this Annual Report on Form 10-K is available without charge upon written request to: Investor Relations, Hudson Pacific Properties, Inc., 11601 Wilshire Blvd., Ninth Floor, Los Angeles, California 90025. 14
A copy of this Annual Report on Form 10-K is available without charge upon written request to: Investor Relations, Hudson Pacific Properties, Inc., 11601 Wilshire Blvd., Ninth Floor, Los Angeles, California 90025. 13
We offer in-person and virtual wellness programming at most properties, and we have a goal to achieve Fitwel certification for at least 50% of our in-service office portfolio by 2025.
We offer in-person and virtual wellness programming at most properties, and we have a goal to achieve Fitwel certification for at least 50% of our in-service office portfolio by 2030.
We believe that relations with our employees are good. 13 Available Information On the Investors section of our Company’s Website ( investors.hudsonpacificproperties.com) we post the following filings as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”): our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.
Available Information On the Investors section of our Company’s Website ( investors.hudsonpacificproperties.com) we post the following filings as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”): our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.
We also are committed to reducing our Scope 3 GHG emissions by minimizing embodied carbon in our development and construction projects and transitioning our production services fleet to zero-emission vehicles. More about our bold sustainability goals can be found in Hudson Pacific’s Corporate Responsibility Report .
We are on track to meet this target and also are committed to reducing our Scope 3 GHG emissions by minimizing embodied carbon in our development and construction projects and transitioning our production services fleet to zero-emission vehicles. More about our bold sustainability goals can be found in Hudson Pacific’s Corporate Responsibility Report .
Our 2022 achievements include: • 100% carbon neutral operations across our entire real estate operating portfolio; • 100% renewable electricity across our entire real estate operating portfolio; • 100% of our in-service office portfolio has recycling services and 74% has composting services; • 90% of our in-service office portfolio is LEED certified and 72% is ENERGY STAR certified; • Better Blueprint TM Action Plans at all operating properties; and • Sustainable Design Vision for all redevelopments and major repositionings.
Our 2023 achievements include: • 100% carbon neutral operations across our entire real estate operating portfolio; • 100% of our in-service office portfolio has recycling services and over 70% has composting services; • Over 90% of our in-service office portfolio is LEED certified and over 70% is ENERGY STAR certified; • Better Blueprint TM Action Plans at all operating properties; and • Sustainable Design Vision for all redevelopments and major repositionings.
The Company presents the “Company’s share” of certain of these measures, which are non-GAAP financial measures that are calculated as the consolidated amount calculated in accordance with GAAP, plus the Company’s share of the amount from the Company’s unconsolidated joint ventures (calculated based upon the Company’s percentage ownership interest), minus the Company’s partners’ share of the amount from the Company’s consolidated joint ventures (calculated based upon the partners’ percentage ownership interests).
The Company presents “HPP’s share” of 7 certain of these measures, which are non-GAAP financial measures that are 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 support key groups aiming to diversify the real estate and production services talent pipeline and advocate for change at the highest levels. Our supplier diversity program includes a company-wide process to track the diversity status of new vendors and a commitment to increase the use of diverse and/or local contractors on-site at all redevelopments to 15% by 2025.
We support key groups aiming to diversify the real estate and production services talent pipelines, and our supplier diversity program includes a commitment to increase the use of diverse and/or local contractors on-site at all redevelopments to 15% by 2025.
Our 2022 achievements include: • 100% of operating office and studio properties use MERV-13+ filters, among other COVID-safe procedures; • 100% of multi-tenant office properties have a mobile app that regularly promotes health and wellness through virtual fitness classes, mindfulness training, cooking sessions and more; • 97% of our in-service office portfolio is served by bike storage and 80% has showers and/or lockers • 91% of our in-service portfolio has functional outdoor space and 63% has on-site fitness amenities; • 73% of our in-service office portfolio is serviced by a mobile app that regularly promotes health and wellness through virtual fitness classes, mindfulness training, cooking sessions, and more; and • 40% of our in-service office portfolio is Fitwel certified.
Our 2023 achievements include: • All operating office and studio properties use MERV-13+ filters, among other COVID-safe procedures; • Over 90% of our in-service office portfolio is served by bike storage, showers and/or lockers • Over 60% of our in-service office portfolio has on-site fitness amenities and/or a mobile app that promotes health and wellness through virtual fitness classes, mindfulness training, cooking sessions, and more; and 11 • Over 40% of our in-service office portfolio is Fitwel certified.
We believe that each of the properties in our portfolio have the necessary permits and approvals to operate its business. 9 Americans with Disabilities Act Our properties located in the United States must comply with Title III of the Americans with Disabilities Act (“ADA”) to the extent that such properties are “public accommodations” as defined by the ADA.
Americans with Disabilities Act Our properties located in the United States must comply with Title III of the Americans with Disabilities Act (“ADA”) to the extent that such properties are “public accommodations” as defined by the ADA.
ITEM 1. Business Company Overview We are a unique, vertically integrated real estate investment trust (“REIT”) offering end-to-end real estate solutions for dynamic tenants in the synergistic, converging and secular growth industries of tech and media.
ITEM 1. Business Company Overview We are a vertically integrated real estate investment trust (“REIT”) offering end-to-end real estate solutions for dynamic tenants in the synergistic, converging and secular growth industries of tech and media. We acquire, reposition, develop and operate sustainable high-quality office and state-of-the-art studio properties in high-barrier-to-entry tech and media epicenters.
Collective Bargaining Arrangements At December 31, 2022, we had 885 employees, of which 71 were subject to collective bargaining agreements in our production services/operating companies.
Collective Bargaining Arrangements At December 31, 2023, we had 758 employees, of which 152 were subject to collective bargaining agreements in our production services/operating companies. We believe that relations with our employees are good.
Equitable: Vibrant, Thriving Cities for All We seek to create and cultivate communities that champion diversity, equity and inclusion (“DEI”) and afford opportunity for everyone to succeed.
Equitable: Vibrant, Thriving Cities for All We seek to create and cultivate communities that champion diversity, equity and inclusion (“DEI”) and afford opportunity for everyone to succeed. We strive to promote an inclusive corporate culture and advance equity across recruiting, hiring and human capital development processes.
Sustainable: Minimizing our Footprint We are committed to leadership in sustainability—whether designing a new property, reimagining a dated building, or managing our existing real estate portfolio and production services businesses.
Sustainable: Minimizing our Footprint We are committed to leadership in sustainability—whether designing a new property, reimagining a dated building, or managing our existing real estate portfolio and production services businesses. Addressing climate change is the number one focus of our sustainability program, and we have had 100% carbon neutral real estate operations since 2020 .
Regulation General Our properties are subject to various covenants, laws, ordinances and regulations, including regulations relating to common areas and fire and safety requirements.
Regulation General Our properties are subject to various covenants, laws, ordinances and regulations, including regulations relating to common areas and fire and safety requirements. We believe that each of the properties in our portfolio have the necessary permits and approvals to operate its business.
Healthy: Healthy Buildings, Healthy Lives We aim to set our properties apart by providing safe environments that promote wellness and resilience for our employees, customers and neighbors.
Healthy: Healthy Buildings, Healthy Lives We aim to set our properties apart by providing safe environments that promote wellness and resilience for our employees, customers and neighbors. Our health and safety program includes emergency response plans, fire life safety systems, MERV-13+ air filters, and regular safety training at all buildings.
We have an extensive network of long-standing relationships with real estate developers, individual and institutional real estate owners, international and regional lenders, brokers, tenants and other participants in our markets. These relationships provide us with access to attractive acquisition opportunities, including opportunities with limited or no prior marketing by sellers.
We have an extensive network of long-standing relationships with leading institutional and individual real estate owners/developers, international and regional lenders, bankers, brokers, tenants and other participants across our industries and markets.
Management believes that presenting the “Company’s share” of these measures provides useful information to investors regarding the Company’s financial condition and/or results of operations because the Company has several significant joint ventures, and in some cases the Company exercises significant influence over, but does not control, the joint venture, in which case GAAP requires that the Company account for the joint venture entity using the equity method of accounting and the Company does not consolidate it for financial reporting purposes.
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.
As of December 31, 2022, our portfolio included: • Office properties comprising approximately 15.9 million square feet; • Studio properties comprising approximately 35 stages and 1.5 million square feet of sound stages and production-supporting office and other facilities; • Land properties comprising approximately 3.6 million square feet of undeveloped density rights for future office, studio and residential space; and • Production services assets, comprising approximately 1,622 vehicles, lighting and grip, production supplies and other equipment and the lease rights to an additional 27 sound stages. 7 This Annual Report on Form 10-K includes financial measures that are not in accordance with generally accepted accounting principles in the United States (“GAAP”), which are accompanied by what the Company considers the most directly comparable financial measures calculated and presented in accordance with GAAP.
As of December 31, 2023, our portfolio included: • Office properties comprising approximately 14.7 million square feet; • Studio properties comprising approximately 48 stages and 1.7 million squa re feet of sound stages and production-supporting office and other facilities; • Land properties comprising approximately 3.2 million square feet of undeveloped density rights for future office, studio and residential space; and • Production services assets, comprising vehicles, lighting and grip, production supplies and other equipment and the lease rights to an additional 27 s ound stages.
We acquire, reposition, develop and operate sustainable high-quality office and state-of-the-art studio properties in high-barrier-to-entry submarkets in California, the Pacific Northwest, Western Canada and Greater London, United Kingdom. We invest across the risk-re turn spectrum, favoring opportunities that allow us to leverage leasing, capital investment and management expertise along with deep strategic relationships to create incremental stakeholder value.
Our primary investment markets include Los Angeles, the San Francisco Bay Area, Seattle, New York, Vancouver, British Columbia and Greater London, United Kingdom. We invest across the risk-return spectrum, favoring opportunities that allow us to leverage leasing, capital investment and operating expertise along with deep strategic relationships to create incremental stakeholder value.
Our Competitive Position We believe the following competitive strengths distinguish us and support our efforts to capitalize on opportunities to drive growth and profitability. • Experienced Management Team with a Proven Track Record of Acquiring and Operating Assets and Managing a Public Office REIT .
Specifically, aggressive leasing and proactive asset management, combined with a focus on maintaining a conservative balance sheet, are central to our strategy. Competitive Positioning We believe the following competitive strengths distinguish us and support our efforts to capitalize on opportunities to drive growth and profitability. • Technology and Media Driven Markets and Assets.
In other cases, GAAP requires that the Company consolidate the joint venture even though the Company’s partner(s) owns a significant percentage interest.
In such instances, GAAP requires us to account for the joint venture entity using the equity method of accounting, which we do not consolidate 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 .
Our senior management team has an average of over 25 years of experience in the commercial real estate and private equity industries, with a focus on acquiring, repositioning, developing and operating sustainable high-quality office and state-of-the-art studio properties and related businesses in high-barier-to-entry submarkets. • Local and Regional Expertise .
Our executive team has both significant tenure with the Company and decades of experience in commercial real estate and studio-related operating businesses. We believe the breadth and depth of their expertise enables us to execute fully on our differentiated strategy, whether acquiring, repositioning, developing, operating, or selling sustainable premier office and studio properties and related services businesses.
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Management expertise and valuable strategic relationships across disciplines support execution at all levels of our operations. Specifically, aggressive leasing and proactive asset management, combined with a focus on maintaining a conservative balance sheet, are central to our strategy.
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This Annual Report on Form 10-K includes financial measures that are not in accordance with generally accepted accounting principles in the United States (“GAAP”), which are accompanied by what the Company considers the most directly comparable financial measures calculated and presented in accordance with GAAP.
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We are primarily focused on acquiring and managing office and studio properties in high-barier-to-entry markets, where our senior management has significant expertise and relationships. Our markets are supply-constrained because of the scarcity of available land, high construction costs and restrictive entitlement processes.
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From time to time, we also look to sell assets opportunistically to recycle capital to enhance our portfolio or to otherwise further our long-term capital allocation goals. Management expertise and valuable strategic relationships across disciplines support execution at all levels of our operations.
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We believe our experience, in-depth market knowledge and meaningful industry relationships with brokers, tenants, landlords, lenders and other market participants enhance our ability to selectively identify and capitalize on attractive acquisition opportunities. • Long-Standing Relationships Provide Access to an Extensive Pipeline of Investment and Leasing Opportunities .
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We are the only publicly-traded owner and operator of both premier office and studio properties. Our focus on office properties in West Coast technology hubs and studios and related services assets in global media markets provides differentiated exposure to these synergistic and secular growth-oriented industries.
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Additionally, we focus on establishing strong relationships with our tenants to understand their long-term business needs, which we believe enhances our ability to retain quality tenants, facilitates our leasing efforts and maximizes cash flows from our properties and operating companies. • Full-Service, Vertically Integrated Platform.
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Our portfolio attracts a tenancy comprised of many of the world’s most innovative and creative companies seeking to build their businesses within established ecosystems, like Silicon Valley or Hollywood, and we are uniquely able to extend these relationships across markets and asset classes. • Deep Sector-Specific Management Expertise .
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Our diverse in-house capabilities enable us to maximize value for our stakeholders at every stage of ownership, from initial acquisition through construction, leasing, operations and ultimately the potential sale. Our diverse, full-service capabilities strengthen our exposure to quality, innovative office and studio tenants and production services users within the secular and increasingly synergistic technology and media and 8 entertainment industries.
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Beyond industry expertise, we leverage our executives’ in-depth local and regional knowledge, which we believe furthers our ability to execute and unlock value within our high-barrier-to-entry markets. • Long-Standing Relationships and Strategic Partnerships.
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We are well-positioned to capture the resulting multiple revenue streams derived from real estate and related services, contributing to our ongoing efforts to drive cash flow growth over the long-term. • Growth-Oriented, Flexible and Conservative Capital Structure .
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These relationships provide us with optionality and access to unique and attractive value creation opportunities, whether through investment transactions, leasing activities, or asset-level or corporate (re)financings. • Proactive Balance Sheet Management. We seek to prioritize having a strong, flexible balance sheet with multiple avenues to access capital through market cycles from both secured and unsecured financings.
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We have remained well-capitalized with excellent capital access, which we believe provides us with a competitive advantage over our private and public competitors. Available cash on hand and our unsecured credit facility give us significant capital to pursue acquisitions and execute our business plan while maintaining a flexible and prudent capital structure.
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We seek to prudently allocate capital to achieve growth while maintaining conservative leverage. We are willing to consider accessing equity markets to fund attractive investment opportunities. We believe we have the discipline to work consistently to achieve long-term leverage targets while ensuring optionality for future growth. 8 • Sustainability and ESG Leadership.
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As of December 31, 2022, we had total borrowing capacity of approximately $1.0 billion under our unsecured revolving credit facility, $385.0 million of which had been drawn, and we have the ability to draw up to $414.6 million under our construction loan secured by our One Westside and 10850 Pico properties, $316.6 million of which had been drawn.
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Through our Better Blueprint program, the Company is an established industry leader in sustainability and ESG and has received accolades from the Global Real Estate Sustainability Benchmark (GRESB), the National Associate of Real Estate Investment Trusts (NAREIT), and the National Association of Office Properties (NAIOP) among many others.
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As of December 31, 2022, we also had total borrowing capacity of $100.6 million under the construction loan secured by our Sunset Glenoaks development (unconsolidated joint venture), $41.3 million of which had been drawn.
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Sustainability and ESG both in terms of our portfolio and operations are important for our stakeholders and provide a key point of differentiation for those who invest, partner, lease, or work with or for us.
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Addressing climate change is the number one focus of our sustainability program, and i n 2020, we were one of the first major North American landlords to achieve carbon neutrality across all real estate operations .
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We are already more than halfway toward this target and plan to reach it by 2030, if not earlier, by continuing to lean into our sustainable technology innovation pipeline and clean energy procurement strategy.
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Health and safety is a top priority for the Company, and our Fitwel Viral Response Module 11 certified response to the COVID-19 pandemic included hundreds of capital improvements, thousands of new MERV-13+ air filters, and implementation of a mobile tenant app at most multi-tenant office properties.
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This commitment starts with our own employees—we value our diverse employee base, and we have multiple systems and policies in place to celebrate different perspectives, promote an inclusive corporate culture, and advance equity across recruiting, hiring and human capital development processes. We also aim to advance equity externally in our industry and in our local communities.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe will continue to monitor and evaluate the potential impact on our debt payments and value of our related debt and derivative financial instruments. We may become subject to litigation, which could have an adverse effect on our financial condition, results of operations, cash flow and the per share trading price of our securities.
Biggest changeWe may become subject to litigation, which could have an adverse effect on our financial condition, results of operations, cash flow and the per share trading price of our securities. In the future we may become subject to litigation, including claims relating to our operations, offerings, and otherwise in the ordinary course of business.
If we lose our REIT status, we will face serious tax consequences that would substantially reduce the funds available for distribution to our stockholders for each of the years involved because: • we would not be allowed a deduction for distributions to stockholders in computing our taxable income and would be subject to federal corporate income tax on our taxable income; • we also could be subject to increased state and local taxes; and 26 • unless we are entitled to relief under applicable statutory provisions, we could not elect to be taxed as a REIT for four taxable years following the year during which we were disqualified.
If we lose our REIT status, we will face serious tax consequences that would substantially reduce the funds available for distribution to our stockholders for each of the years involved because: • we would not be allowed a deduction for distributions to stockholders in computing our taxable income and would be subject to federal corporate income tax on our taxable income; • we also could be subject to increased state and local taxes; and • unless we are entitled to relief under applicable statutory provisions, we could not elect to be taxed as a REIT for four taxable years following the year during which we were disqualified.
In particular, our ability to dispose of one or more properties within a specific time period is subject to certain limitations imposed by our tax protection agreements, as well as weakness in or even the lack of an established market for a property, changes in the financial condition or prospects of prospective purchasers, changes in national or international economic conditions, such as the current economic downturn, and changes in laws, regulations or fiscal policies of jurisdictions in which the property is located.
In particular, our ability 20 to dispose of one or more properties within a specific time period is subject to certain limitations imposed by our tax protection agreements, as well as weakness in or even the lack of an established market for a property, changes in the financial condition or prospects of prospective purchasers, changes in national or international economic conditions, such as the current economic downturn, and changes in laws, regulations or fiscal policies of jurisdictions in which the property is located.
Under various federal, state and local laws and regulations relating to the environment, as a current or former owner or operator of real property, we may be liable for costs and damages resulting from the presence or discharge of hazardous or toxic substances, waste or petroleum products at, on, in, under or migrating from such property, including costs to investigate, clean up 21 such contamination and liability for harm to natural resources.
Under various federal, state and local laws and regulations relating to the environment, as a current or former owner or operator of real property, we may be liable for costs and damages resulting from the presence or discharge of hazardous or toxic substances, waste or petroleum products at, on, in, under or migrating from such property, including costs to investigate, clean up such contamination and liability for harm to natural resources.
We cannot assure you that we will have access to such capital on favorable terms at the desired times, or at all, which may cause us to curtail our investment activities and/or to dispose of assets at inopportune times, and could adversely affect our financial condition, results of operations, cash flow, cash available for distributions to our stockholders, and per share trading price of our securities.
We cannot assure you that we will have access to such capital on favorable terms at the desired times, or at all, which may cause us to curtail our investment activities and/or to dispose of assets at inopportune times, and 27 could adversely affect our financial condition, results of operations, cash flow, cash available for distributions to our stockholders, and per share trading price of our securities.
Certain provisions of the Maryland General Corporation Law (“the MGCL”) may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could be in the best interest of our stockholders, including: • “business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof or an affiliate or associate of ours who was the beneficial owner, directly or indirectly, of 10% or more of the voting power of our then outstanding voting stock at any time within the two-year period immediately prior to the date in question) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter impose fair price and/or supermajority and stockholder voting requirements on these combinations; and • “control share” provisions that provide that “control shares” of our Company (defined as shares that, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
Certain provisions of the Maryland General Corporation Law (the “MGCL”) may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could be in the best interest of our stockholders, including: • “business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof or an affiliate or associate of ours who was the beneficial owner, directly or indirectly, of 10% or more of the voting power of our then outstanding voting stock at any time within the two-year period immediately prior to the date in question) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter impose fair price and/or supermajority and stockholder voting requirements on these combinations; and • “control share” provisions that provide that “control shares” of our Company (defined as shares that, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
Although our board of directors has no such intention at the present time, it could establish a class or series of preferred stock that could, depending on the terms of such series, delay, defer or prevent a 24 transaction or a change of control that might involve a premium price for our securities or that our stockholders otherwise believe to be in their best interest.
Although our board of directors has no such intention at the present time, it could establish a class or series of preferred stock that could, depending on the terms of such series, delay, defer or prevent a transaction or a change of control that might involve a premium price for our securities or that our stockholders otherwise believe to be in their best interest.
If we do incur material environmental liabilities in the future, we may face significant remediation costs, and we may find it difficult to sell any affected properties. Our properties may contain or develop harmful mold or suffer from other air quality issues, which could lead to liability for adverse health effects and costs of remediation.
If we do incur material environmental liabilities in the future, we may face significant remediation costs, and we may find it difficult to sell any affected properties. 21 Our properties may contain or develop harmful mold or suffer from other air quality issues, which could lead to liability for adverse health effects and costs of remediation.
Some of our policies, like those covering losses due to terrorism or earthquakes, are insured subject to limitations involving large deductibles or co-payments and policy limits that may not be sufficient to cover losses, which could affect certain of our properties that are located in areas particularly susceptible to natural disasters.
Some of our policies, like those covering losses due 29 to terrorism or earthquakes, are insured subject to limitations involving large deductibles or co-payments and policy limits that may not be sufficient to cover losses, which could affect certain of our properties that are located in areas particularly susceptible to natural disasters.
Our charter contains a provision whereby we have elected to be subject to the provisions of Title 3, Subtitle 8 of the MGCL relating to the filling of vacancies on our board of directors. Certain provisions in the partnership agreement of our operating partnership may delay or prevent unsolicited acquisitions of us.
Our charter contains a provision whereby we have elected to be subject to the provisions of Title 3, Subtitle 8 of the MGCL relating to the filling of vacancies on our board of directors. 24 Certain provisions in the partnership agreement of our operating partnership may delay or prevent unsolicited acquisitions of us.
We believe that our operating partnership is properly treated as a partnership for federal income tax purposes. As a partnership, our operating partnership is not subject to federal income tax on its income. Instead, each of its partners, including us, is allocated, and may be required to pay tax with respect to, its share of our operating partnership’s income.
We believe that our operating partnership is properly treated as a partnership for federal income tax purposes. As a partnership, our operating partnership is not subject to federal income tax on its income. Instead, each of its partners, including us, 26 is allocated, and may be required to pay tax with respect to, its share of our operating partnership’s income.
As a result, we rely on distributions from our operating partnership to pay any dividends we might declare on our common stock and on shares of our series C preferred stock. We also rely on distributions from our operating partnership to meet our obligations, including any tax liability on taxable income allocated to us from our operating partnership.
As a result, we rely on distributions from our operating partnership to pay any dividends we might declare on our common stock and on shares of our series C preferred stock. We also rely on distributions from our operating partnership to meet our obligations, including any tax liability on taxable income 25 allocated to us from our operating partnership.
Any failure to maintain effective controls or timely effect any necessary improvement of our 20 internal and disclosure controls could harm operating results or cause us to fail to meet our reporting obligations, which could affect our ability to remain listed with the NYSE.
Any failure to maintain effective controls or timely effect any necessary improvement of our internal and disclosure controls could harm operating results or cause us to fail to meet our reporting obligations, which could affect our ability to remain listed with the NYSE.
If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. As part of our ongoing monitoring of internal controls we may discover material weaknesses or significant deficiencies in our internal controls.
If we cannot provide reliable financial reports or prevent fraud, our 19 reputation and operating results would be harmed. As part of our ongoing monitoring of internal controls we may discover material weaknesses or significant deficiencies in our internal controls.
We are susceptible to adverse developments in the economic and regulatory environments of Northern and Southern California, the Pacific Northwest, Western Canada and the United Kingdom (such as business layoffs or downsizing, industry slowdowns, relocations of businesses, increases in real estate and other taxes, costs of complying with governmental regulations or increased regulation), as well as to natural disasters that occur in our markets (such as earthquakes, windstorms, landslides, droughts, fires and other events).
We are susceptible to adverse developments in the economic and regulatory environments of Northern and Southern California, the Pacific Northwest, New York, Western Canada and the United Kingdom (such as business layoffs or downsizing, industry slowdowns, relocations of businesses, increases in real estate and other taxes, costs of complying with governmental regulations or increased regulation), as well as to natural disasters that occur in our markets (such as earthquakes, windstorms, landslides, droughts, fires and other events).
Our charter contains various provisions that are intended to preserve our qualification as a REIT and, subject to certain exceptions, authorize our directors to take such actions as are necessary or appropriate to preserve our qualification as a REIT.
Our charter contains various provisions that are intended to preserve our qualification as a REIT and, subject to certain exceptions, authorize our directors to take such actions as are necessary or 23 appropriate to preserve our qualification as a REIT.
Any adverse developments in the economy or real estate market in Northern and Southern California, the Pacific Northwest, Western Canada or Greater London, United Kingdom, or any decrease in demand for office space resulting from the California regulatory or business environment, could adversely impact our financial condition, results of operations, cash flow and the per share trading price of our securities.
Any adverse developments in the economy or real estate market in Northern and Southern California, the Pacific Northwest, New York, Western Canada or Greater London, United Kingdom, or any decrease in demand for office space resulting from the California regulatory or business environment, could adversely impact our financial condition, results of operations, cash flow and the per share trading price of our securities.
If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds. 17 Our unsecured revolving credit facility, registered senior notes, term loan facility and note purchase agreements restrict our ability to engage in some business activities.
If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds. 16 Our unsecured revolving credit facility, registered senior notes, term loan facility and note purchase agreements restrict our ability to engage in some business activities.
The series A preferred units are senior to any other class of securities our operating partnership may issue in the future without the consent of the holders of the series A preferred units.
The series A preferred units are senior to any other class of 22 securities our operating partnership may issue in the future without the consent of the holders of the series A preferred units.
Thus, our 23 stockholders bear the risk of our future offerings reducing the per share trading price of our common stock and diluting their interest in us.
Thus, our stockholders bear the risk of our future offerings reducing the per share trading price of our common stock and diluting their interest in us.
Consequently, we are susceptible to adverse developments affecting the demand by tenants in these industries for office, production and support space in Northern and Southern California, the Pacific Northwest, Western Canada and Greater London, United Kingdom and, more particularly, in Hollywood and the South of Market area of the San Francisco submarket.
Consequently, we are susceptible to adverse developments affecting the demand by tenants in these industries for office, production and support space in Northern and Southern California, the Pacific Northwest, New York, Western Canada and Greater London, United Kingdom and, more particularly, in Hollywood and the South of Market area of the San Francisco submarket.
These restrictions could limit our ability to sell an asset at a time, or on terms, that would be favorable absent such restrictions. 16 Our growth depends on external sources of capital that are outside of our control and may not be available to us on commercially reasonable terms or at all.
These restrictions could limit our ability to sell an asset at a time, or on terms, that would be favorable absent such restrictions. 15 Our growth depends on external sources of capital that are outside of our control and may not be available to us on commercially reasonable terms or at all.
Risks Related to Our Properties and Our Business Our properties are located in Northern and Southern California, the Pacific Northwest, Western Canada and Greater London, United Kingdom, and we are susceptible to adverse economic conditions, local regulations and natural disasters affecting those markets.
Risks Related to Our Properties and Our Business Our properties are located in Northern and Southern California, the Pacific Northwest, New York, Western Canada and Greater London, United Kingdom, and we are susceptible to adverse economic conditions, local regulations and natural disasters affecting those markets.
Some of our properties are subject to ground leases, the termination or expiration of which could cause us to lose our interest in, and the right to receive rental income from, such properties. Twelve of our consolidated properties are subject to ground leases (including properties with a portion of the land subject to a ground lease).
Some of our properties are subject to ground leases, the termination or expiration of which could cause us to lose our interest in, and the right to receive rental income from, such properties. Eleven of our consolidated properties are subject to ground leases (including properties with a portion of the land subject to a ground lease).
Among other things, these restrictions may relate to fire and 22 safety, seismic or hazardous material abatement requirements.
Among other things, these restrictions may relate to fire and safety, seismic or hazardous material abatement requirements.
Our properties are located in Northern and Southern California, the Pacific Northwest, Western Canada and Greater London, United Kingdom, which exposes us to greater economic risks than if we owned a more geographically dispersed portfolio.
Our properties are located in Northern and Southern California, the Pacific Northwest, New York, Western Canada and Greater London, United Kingdom, which exposes us to greater economic risks than if we owned a more geographically dispersed portfolio.
Many of our senior executives have extensive experience and strong reputations in the real estate industry, which aid us in identifying opportunities, having opportunities brought to us, and negotiating with tenants 19 and build-to-suit prospects.
Many of our senior executives have extensive experience and strong reputations in 18 the real estate industry, which aid us in identifying opportunities, having opportunities brought to us, and negotiating with tenants and build-to-suit prospects.
Any one of these events may cause decline in the demand for our office and studio leased space, delay the time in which our new or renovated properties reach stabilized occupancy, increase our operating expenses, such as those attributable to increased physical security for our properties, and limit our access to capital or increase our cost of raising capital.
Any one of these events may cause decline in the demand for our office and studio leased space, delay the time in which our new or renovated properties reach stabilized occupancy, increase our operating expenses, such as those attributable to increased physical security for our properties, and limit our access to capital or increase our cost of raising capital. 31 ITEM 1B.
All of the properties we currently own are located in Northern and Southern California, the Pacific Northwest, Western Canada and Greater London, United Kingdom. Many of these areas are especially susceptible to earthquakes.
All of the properties we currently own are located in Northern and Southern California, the Pacific Northwest, New York, Western Canada and Greater London, United Kingdom. Many of these areas are especially susceptible to earthquakes.
As of December 31, 2022, these units h an aggregate liquidation preference of approximately $9.8 million and have a preference as to distributions and upon liquidation that could limit our ability to pay dividends on series C preferred stock and common stock.
As of December 31, 2023, these units have an aggregate liquidation preference of approximately $9.8 million and have a preference as to distributions and upon liquidation that could limit our ability to pay dividends on series C preferred stock and common stock.
If Google, Inc., Amazon and Netflix, Inc. were to experience a downturn or a weakening of financial condition resulting in a failure to make timely rental payments or causing a le ase default, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment.
If Google, Inc., Amazon and Netflix, Inc. were to experience a downturn or a weakening of financial condition resulting in a failure to make timely rental payments or 17 causing a lease default, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment.
Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on co-venturers’ financial condition and disputes between us and our co-venturers. As of December 31, 2022, we had 19 joint ventures.
Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on co-venturers’ financial condition and disputes between us and our co-venturers. As of December 31, 2023, we had 20 joint ventures.
The maximum tax rate applicable to “qualified dividend income” payable to U.S. stockholders that are individuals, trusts and estates is 20%. Dividends payable by REITs, however, generally are not eligible for these reduced rates.
Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends. The maximum tax rate applicable to “qualified dividend income” payable to U.S. stockholders that are individuals, trusts and estates is 20%. Dividends payable by REITs, however, generally are not eligible for these reduced rates.
Some of our workforce is covered by collective bargaining agreements and our business may be adversely affected by any disruptions caused by union activities. As of December 31, 2022, approximately 8% of our employees are covered by collective bargaining agreements.
Some of our workforce is covered by collective bargaining agreements and our business may be adversely affected by any disruptions caused by union activities. As of December 31, 2023, approximately 20% of our employees are covered by collective bargaining agreements.
A security breach or other significant disruption involving our IT networks and related systems could: • disrupt the proper functioning of our networks and systems and therefore our operations and/or those of certain of our tenants; • result in misstated financial reports, violations of loan covenants, and/or missed reporting deadlines; • result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT; • result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes; • result in our inability to maintain the building systems relied upon by our tenants for the efficient use of their leased space; • require significant management attention and resources to remedy any resulting damages; • subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; or • damage our reputation among our tenants and investors generally. 31 Any or all of the foregoing could have an adverse effect on our financial condition, results of operations, cash flow and the per share trading price of our securities.
A security breach or other significant disruption involving our IT networks and related systems could: • disrupt the proper functioning of our networks and systems and therefore our operations and/or those of certain of our tenants; • result in misstated financial reports, violations of loan covenants, and/or missed reporting deadlines; • result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT; • result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes; 30 • result in our inability to maintain the building systems relied upon by our tenants for the efficient use of their leased space; • require significant management attention and resources to remedy any resulting damages; • subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; or • damage our reputation among our tenants and investors generally.
We may be unable to renew leases, lease vacant space or re-let space as leases expire. As of December 31, 2022, approxi mately 19.3% of the Company’s share of the square footage of the office properties (including our development and redevelopment properties) in our portfolio was available, taking into account uncommenced leases signed as of December 31, 2022.
We may be unable to renew leases, lease vacant space or re-let space as leases expire. As of December 31, 2023, approxi mately 24.5% of the HPP’s share of the square footage of the office properties (including our development and redevelopment properties) in our portfolio was available, taking into account uncommenced leases signed as of December 31, 2023.
In addition, a change in our investment policies, including the manner in which we allocate our resources across our portfolio or the types of assets in which we seek to invest, may increase our exposure to interest rate risk, real estate market fluctuations and liquidity risk.
Higher leverage also increases the risk of default on our obligations. In addition, a change in our investment policies, including the manner in which we allocate our resources across our portfolio or the types of assets in which we seek to invest, may increase our exposure to interest rate risk, real estate market fluctuations and liquidity risk.
In addition, we may incur additional variable rate debt in the future. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve Board. If the Federal Reserve Board increases the federal funds rate, overall interest rates will likely rise.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve Board. If the Federal Reserve Board increases the federal funds rate, overall interest rates will likely rise.
Moreover, if we are compelled to liquidate our investments to meet any of these asset, income or distribution tests, or to repay obligations to our lenders, we may be unable to comply with one or more of the requirements applicable to REITs or may be subject to a 100% tax on any resulting gain if such sales constitute prohibited transactions. 28 Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
Moreover, if we are compelled to liquidate our investments to meet any of these asset, income or distribution tests, or to repay obligations to our lenders, we may be unable to comply with one or more of the requirements applicable to REITs or may be subject to a 100% tax on any resulting gain if such sales constitute prohibited transactions.
As of December 31, 2022, our three largest tenants were Google, Inc., Amazon and Netflix, Inc., which together accounted for 22.2% of the Company’s share of the annualized base rent generated by our office properties.
As of December 31, 2023, our three largest tenants were Google, Inc., Amazon and Netflix, Inc., which together accounted for 20.6% of the HPP’s share of the annualized base rent generated by our office properties.
As we continue our development and potential acquisition activities in markets populated by knowledge-and creative-based tenants in the technology and media and entertainment industries, our tenant mix could become more concentrated, further exposing us to risks in those industries, including layoffs.
As we continue our development and potential acquisition activities in markets populated by knowledge-and creative-based tenants in the technology and media and entertainment industries, our tenant mix could become more concentrated, further exposing us to risks in those industries, including layoffs, strikes or work stoppages, such as the strikes that significantly affected our media and entertainment properties during 2023.
Such actions, as well as higher costs or operating complexities in connection with these collective bargaining agreements or a significant labor dispute, could have an adverse effect on our tenants’ businesses by causing delays in production, added costs or by reducing profit margins, which in turn could affect our ability to collect rent from those tenants.
Such actions, as well as higher costs or operating complexities in connection with these collective bargaining agreements or a significant labor dispute, have resulted, and may in the future result, in halted production activity and reduced demand for our studios, stages and ancillary services, and could have an adverse effect on our tenants’ businesses by causing delays in production, added costs or by reducing profit margins, which in turn could affect our ability to collect rent from those tenants.
An additional approximately 13.2% of the Company’s share of the square footage of the office properties in our portfolio is scheduled to expire in 2023 (includes leases scheduled to expire on December 31, 2022).
An additional approximately 12.7% of the HPP’s share of the square footage of the office properties in our portfolio is scheduled to expire in 2024 (includes leases scheduled to expire on December 31, 2023).
Failure to hedge effectively against interest rate changes may adversely affect our financial condition, results of operations, cash flow, cash available for distribution, including cash available for payment of dividends on and the per share trading price of our securities. As of December 31, 2022, we had $1.9 billion in variable rate debt.
Failure to hedge effectively against interest rate changes may adversely affect our financial condition, results of operations, cash flow, cash available for distribution, including cash available for payment of dividends on and the per share trading price of our securities.
Although we do not intend to hold any properties that would be characterized as held for sale to customers in the ordinary course of our business, such characterization is a factual determination and we cannot assure you that the IRS would agree with our characterization of our properties or that we will always be able to make use of the available safe harbors, which, if met, would prevent any such sales from being treated as prohibited transactions. 27 Our ownership of taxable REIT subsidiaries is subject to certain restrictions, and we will be required to pay a 100% penalty tax on certain income or deductions if our transactions with our taxable REIT subsidiaries are not conducted on arm’s length terms.
Although we do not intend to hold any properties that would be characterized as held for sale to customers in the ordinary course of our business, such characterization is a factual determination and we cannot assure you that the IRS would agree with our characterization of our properties or that we will always be able to make use of the available safe harbors, which, if met, would prevent any such sales from being treated as prohibited transactions.
Ineffective internal and disclosure controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the per share trading price of our securities. Risks Related to the Real Estate Industry Our performance and value are subject to risks associated with real estate assets and the real estate industry.
Ineffective internal and disclosure controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the per share trading price of our securities.
Our business strategy includes the acquisition of underperforming office properties. These activities require us to identify suitable acquisition candidates or investment opportunities that meet our criteria and are compatible with our growth strategies.
Our business strategy includes the acquisition of underperforming office properties. These activities require us to identify suitable acquisition candidates or investment opportunities that meet our criteria and are compatible with our growth strategies. We 14 continue to evaluate the market of available properties and may attempt to acquire properties when strategic opportunities exist.
We compete with numerous developers, owners and operators of office properties, many of which own properties similar to ours in the same submarkets in which our properties are located.
We face significant competition, which may decrease or prevent increases in the occupancy and rental rates of our properties. We compete with numerous developers, owners and operators of office properties, many of which own properties similar to ours in the same submarkets in which our properties are located.
Any claim against such tenant for unpaid, future rent would be subject to a statutory cap that might be substantially less than the remaining rent owed under the lease.
In addition, a bankrupt or insolvent tenant may be authorized to reject and terminate its lease with us. Any claim against such tenant for unpaid, future rent would be subject to a statutory cap that might be substantially less than the remaining rent owed under the lease.
Risks Related to General and Global Factors Adverse economic and geopolitical conditions and dislocations in the credit markets could have a material adverse effect on our financial condition, results of operations, cash flow and per share trading price of our securities.
Also, the law relating to the tax treatment of other entities, or an investment in other entities, could change, making an investment in such other entities more attractive relative to an investment in a REIT. 28 Risks Related to General and Global Factors Adverse economic and geopolitical conditions and dislocations in the credit markets could have a material adverse effect on our financial condition, results of operations, cash flow and per share trading price of our securities.
If the rental rates for our properties decrease, our existing tenants do not renew their leases or we do not re-let a significant portion of our available space and space for which leases will expire, our financial condition, results of operations, cash flow and per share trading price of our securities could be adversely affected. 18 The COVID-19 pandemic has had, and may continue to have, significant impacts on workplace practices, or other office space utilization trends, which could materially adversely impact our business, operating results, financial condition and prospects.
If the rental rates for our properties decrease, our existing tenants do not renew their leases or we do not re-let a significant portion of our available space and space for which leases will expire, our financial condition, results of operations, cash flow and per share trading price of our securities could be adversely affected.
We continue to evaluate the market of available properties and may attempt to acquire properties when strategic opportunities exist. 15 However, we may be unable to acquire any of the properties that we may identify as potential acquisition opportunities in the future.
However, we may be unable to acquire any of the properties that we may identify as potential acquisition opportunities in the future.
Our charter, bylaws, the partnership agreement of our operating partnership and Maryland law also contain other provisions that may delay, defer or prevent a transaction or a change of control that our stockholders otherwise believe to be in their best interest. 25 Our board of directors may change our investment and financing policies without stockholder approval and we may become more highly leveraged, which may increase our risk of default under our debt obligations.
Our charter, bylaws, the partnership agreement of our operating partnership and Maryland law also contain other provisions that may delay, defer or prevent a transaction or a change of control that our stockholders otherwise believe to be in their best interest.
Furthermore, our unsecured revolving credit facility and term loan facility 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. We face significant competition, which may decrease or prevent increases in the occupancy and rental rates of our properties.
Furthermore, our unsecured revolving credit facility and term loan facility 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. Further downgrades in our credit ratings could materially adversely affect our business and financial condition.
We generally intend to vigorously defend ourselves; however, we cannot be certain of the ultimate outcomes of any claims that may arise in the future.
Some of these claims may result in significant defense costs and potentially significant judgments against us, some of which are not, or cannot be, insured against. We generally intend to vigorously defend ourselves; however, we cannot be certain of the ultimate outcomes of any claims that may arise in the future.
As a result, our financial condition, results of operations, cash flow and the per share trading price of our securities could be adversely affected. We depend on significant tenants.
As a result, our financial condition, results of operations, cash flow and the per share trading price of our securities could be adversely affected. We depend on significant tenants. As of December 31, 2023, the 15 largest tenants in our office portfolio represented approximately 42.4% of the HPP’s share of the total annualized base rent generated by our office properties.
Our investment and financing policies are exclusively determined by our board of directors. Accordingly, our stockholders do not control these policies. Further, our organizational documents do not limit the amount or percentage of indebtedness, funded or otherwise, that we may incur. Our board of directors may alter or eliminate our current policy on borrowing at any time without stockholder approval.
Further, our organizational documents do not limit the amount or percentage of indebtedness, funded or otherwise, that we may incur. Our board of directors may alter or eliminate our current policy on borrowing at any time without stockholder approval. If this policy changed, we could become more highly leveraged, which could result in an increase in our debt service.
If a tenant becomes bankrupt or insolvent, federal law may prohibit us from evicting such tenant based solely upon such bankruptcy or insolvency. In addition, a bankrupt or insolvent tenant may be authorized to reject and terminate its lease with us.
The inability of a significant tenant to pay rent or the bankruptcy or insolvency of a significant tenant may adversely affect the income produced by our properties. If a tenant becomes bankrupt or insolvent, federal law may prohibit us from evicting such tenant based solely upon such bankruptcy or insolvency.
Such events may result in restrictions, curfews, or other actions and give rise to significant changes in regional and global economic conditions and cycles, which may adversely affect our financial condition and operations. There have been recent demonstrations and protests in cities throughout the U.S. as well as globally in connection with civil rights, liberties, and social and governmental reform.
Such events may result in restrictions, curfews, or other actions and give rise to significant changes in regional and global economic conditions and cycles, which may adversely affect our financial condition and operations. Potential losses, including from adverse weather conditions, natural disasters and title claims, may not be covered by insurance.
Our business and operations would suffer in the event of IT networks and related systems failures.
Any or all of the foregoing could have an adverse effect on our financial condition, results of operations, cash flow and the per share trading price of our securities. Our business and operations would suffer in the event of IT networks and related systems failures.
Removed
A s of December 31, 2022, the 15 largest tenants in our office portfolio represented approximately 44.1% of the Company’s share of the total annualized base rent generated by our office properties. The inability of a significant tenant to pay rent or the bankruptcy or insolvency of a significant tenant may adversely affect the income produced by our properties.
Added
As of December 31, 2023, we had $1.1 billion in variable rate debt, excluding debt that is effectively fixed through the use of interest rate swaps. In addition, we may incur additional variable rate debt in the future.
Removed
The resulting remote working arrangements for personnel in response to the pandemic may result in long-term changed work practices that could negatively impact us and our business. For example, the increased adoption of and familiarity with remote work practices, and the recent increase in tenants seeking to sublease their leased space, could result in decreased demand for office space.
Added
We have modified certain of our leverage ratio covenants for periods through December 31, 2024 to provide for a maximum ratio of 65% for such covenants which previously required a maximum ratio of 60%.
Removed
If this trend was to continue or accelerate, our tenants may elect to not renew their leases, or to renew them for less space than they currently occupy, which could increase the vacancy and decrease rental income. The increase in remote work practices may continue in a post-pandemic environment.
Added
There is no assurance that we will be able to obtain future waivers or modifications of these or other covenants, and future compliance with our financial covenants is dependent upon the results of our operating activities, our financial condition, and the overall market conditions in which we and our tenants operate.
Removed
The need to reconfigure leased office space, either in response to the pandemic, or tenants' needs may impact space requirements and also may require us to spend increased amounts for tenant improvements.
Added
The credit ratings assigned to us or our securities could change based upon, among other things, our results of operations and financial condition.
Removed
If substantial office space reconfiguration is required, the tenant may explore other office space and find it more advantageous to relocate than to renew its lease and renovate the existing space. If so, our business, operating results, financial condition and prospects may be materially adversely impacted.
Added
These ratings are subject to ongoing evaluation by credit rating agencies, and we cannot assure you that any rating will not be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant.
Removed
If this policy changed, we could become more highly leveraged, which could result in an increase in our debt service. Higher leverage also increases the risk of default on our obligations.
Added
Moreover, these credit rating do not apply to our common stock and are not recommendations to buy, sell, or hold our common stock or any other securities.
Removed
Also, the law relating to the tax treatment of other entities, or an investment in other entities, could change, making an investment in such other entities more attractive relative to an investment in a REIT.
Added
If any of the credit rating agencies that have rated us or our securities downgrades or lowers its credit rating, or any credit rating agency indicates that it has placed any such rating on a so-called “watch list” for a possible downgrading or lowering or otherwise indicates that its outlook for the rating is negative, it could have a material adverse effect on our costs and availability of capital, which could in turn have a material adverse effect on our financial condition, results of operations, cash flows, the trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
Removed
Our business and results of operations and financial condition may be materially or adversely impacted by the outbreak of a pandemic.
Added
For example, the Writers Guild of America (“WGA”) and the Screen Actors Guild (“SAG-AFTRA”) collective bargaining agreements expired in 2023, and WGA and SAG-AFTRA members went on strike in May 2023 and July 2023, respectively.
Removed
The outbreak of a pandemic could have material and adverse effects on our ability to successfully operate our business and on our financial condition, results of operations and cash flows due to, among other factors: our tenants’ ability to pay rent on their leases; our inability to re-let space in our properties on favorable terms; ability to access capital markets on favorable terms and potential delays with development and re-development activities resulting in failure to achieve expected occupancy and/or rent levels within the projected time frames. 29 The full adverse impact of any pandemic is impossible to predict.
Added
We have suspended paying dividends on our common stock and we cannot assure you of our ability to pay dividends in the future or the amount of any dividends.
Removed
Nevertheless, any future pandemic may present material uncertainty and risk on our ability to successfully operate our business and on our financial condition, results of operations and cash flows. Social, political, and economic instability, unrest, and other circumstances beyond our control could adversely affect our business operations.
Added
In September 2023, we suspended our quarterly dividend on our common stock in order to address liquidity considerations in light of general office industry trends and the impact of the Writers Guild of America (“WGA”) strike and the Screen Actors Guild - American Federation of Television and Radio Artists (“SAG-AFTRA”) strikes.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table summarizes information relating to the consolidated and unconsolidated in-service office properties owned as of December 31, 2022: Location Submarket Square Feet (1) Percent Occupied (2) Percent Leased (3) Annualized Base Rent (4) Annualized Base Rent Per Square Foot (5) Same-store: Vancouver, British Columbia Bentall Centre (6) Downtown Vancouver 1,511,723 93.6 % 94.6 % $ 40,808,030 $ 28.85 Subtotal 1,511,723 93.6 94.6 40,808,030 28.85 Greater Seattle, Washington Met Park North Denny Triangle 189,511 100.0 100.0 5,788,583 30.54 Hill7 (7) Denny Triangle 285,310 99.6 99.6 11,612,252 40.87 1918 Eighth (7) Denny Triangle 668,888 100.0 100.0 26,186,074 39.15 450 Alaskan Pioneer Square 171,026 99.5 99.5 7,286,950 42.82 411 First Pioneer Square 163,668 67.2 67.8 4,202,332 38.21 505 First Pioneer Square 287,907 36.0 36.0 3,600,752 34.75 83 King Pioneer Square 184,055 69.2 69.2 5,645,198 44.34 Subtotal 1,950,365 84.8 84.8 64,322,141 38.90 San Francisco Bay Area, California 1455 Market (7) San Francisco 1,033,682 97.1 97.1 54,939,790 54.74 275 Brannan San Francisco 57,120 100.0 100.0 4,830,939 84.58 625 Second San Francisco 138,354 59.8 59.8 5,509,774 66.56 875 Howard (8) San Francisco 191,201 96.8 96.8 15,149,051 81.81 901 Market San Francisco 205,903 79.9 79.9 11,684,232 71.01 Rincon Center San Francisco 533,723 97.8 97.8 33,138,659 63.46 Ferry Building (7) San Francisco 266,446 98.4 98.4 23,421,420 89.35 Towers at Shore Center Redwood Shores 335,332 93.4 94.8 23,133,434 73.84 Shorebreeze Redwood Shores 230,932 83.1 85.4 12,960,839 67.55 555 Twin Dolphin Redwood Shores 200,881 84.7 90.8 10,500,082 61.74 Palo Alto Square Palo Alto 317,877 94.0 95.1 29,186,044 97.68 3176 Porter Palo Alto 42,899 100.0 100.0 3,446,506 80.34 3400 Hillview Palo Alto 207,857 100.0 100.0 15,800,042 76.01 Clocktower Square Palo Alto 100,655 100.0 100.0 9,053,117 89.94 Foothill Research Center Palo Alto 195,121 93.6 93.6 14,078,246 77.07 Page Mill Center Palo Alto 94,539 82.4 82.4 6,423,270 82.41 Page Mill Hill Palo Alto 178,179 83.9 89.1 11,625,740 77.75 Gateway North San Jose 611,054 77.0 77.8 21,385,133 45.43 1740 Technology North San Jose 215,857 100.0 100.0 9,562,465 44.30 Concourse North San Jose 945,419 83.3 92.5 33,553,098 42.62 Metro Plaza North San Jose 422,111 82.7 83.0 16,291,714 46.69 Skyport Plaza North San Jose 418,667 10.2 10.2 1,801,398 42.17 Techmart Santa Clara 284,903 77.8 78.3 11,112,828 50.11 Subtotal 7,228,712 84.4 86.2 378,587,821 62.06 Los Angeles, California 6040 Sunset (9) Hollywood 114,958 100.0 100.0 6,805,309 59.20 ICON (9) Hollywood 326,792 100.0 100.0 20,679,184 63.28 CUE (9) Hollywood 94,386 100.0 100.0 6,043,400 64.03 33 Location Submarket Square Feet (1) Percent Occupied (2) Percent Leased (3) Annualized Base Rent (4) Annualized Base Rent Per Square Foot (5) EPIC (9) Hollywood 301,127 100.0 100.0 21,861,820 72.60 Fourth & Traction Downtown Los Angeles 131,701 100.0 100.0 5,994,016 45.51 Maxwell Downtown Los Angeles 102,963 100.0 100.0 4,857,684 47.18 604 Arizona West Los Angeles 44,260 100.0 100.0 3,352,098 75.74 3401 Exposition West Los Angeles 63,376 100.0 100.0 3,227,369 50.92 10900 Washington West Los Angeles 9,919 100.0 100.0 514,915 51.91 10950 Washington West Los Angeles 159,198 100.0 100.0 8,185,847 51.42 11601 Wilshire West Los Angeles 499,800 89.7 94.7 22,320,351 49.78 Element LA West Los Angeles 284,037 100.0 100.0 18,399,922 64.78 Subtotal 2,132,517 97.6 98.8 122,241,915 58.74 Total same-store 12,823,317 87.7 89.1 605,959,907 53.87 NON-SAME-STORE Greater Seattle, Washington 5 th & Bell Denny Triangle 197,136 99.0 99.0 7,198,528 36.87 Subtotal 197,136 99.0 99.0 7,198,528 36.87 San Francisco Bay Area, California 333 Twin Dolphin Redwood Shores 183,123 95.4 95.4 10,936,229 62.59 Subtotal 183,123 95.4 95.4 10,936,229 62.59 Los Angeles, California Harlow (9) Hollywood 129,931 100.0 100.0 7,760,741 59.73 One Westside (10) West Los Angeles 590,403 100.0 100.0 36,640,824 62.06 Subtotal 720,334 100.0 100.0 44,401,565 61.64 Total Non-Same-Store 1,100,593 99.1 99.1 62,536,322 57.36 Total Stabilized 13,923,910 88.6 89.9 668,496,229 54.18 LEASE-UP LEASE-UP Metro Center Foster City 725,311 76.9 87.2 33,488,344 60.05 Subtotal 725,311 76.9 87.2 33,488,344 60.05 Total lease-up 725,311 76.9 87.2 33,488,344 60.05 TOTAL IN-SERVICE 14,649,221 88.0 % 89.7 % $ 701,984,573 $ 54.43 _____________ 1.
Biggest changeAs of December 31, 2023, the weighted average remaining lease term for our in-service office portfolio was 4.3 years The following table summarizes information relating to the consolidated and unconsolidated in-service office properties owned as of December 31, 2023: Location Submarket Square Feet (1) Percent Occupied (2) Percent Leased (3) Annualized Base Rent (4) Annualized Base Rent Per Square Foot (5) Los Angeles, California ICON (6) Hollywood 326,792 100.0 % 100.0 % $ 21,278,557 $ 65.11 EPIC (6) Hollywood 301,127 100.0 100.0 22,512,255 74.76 Harlow (6) Hollywood 129,931 100.0 100.0 7,983,344 61.44 6040 Sunset (6) Hollywood 114,958 100.0 100.0 7,009,468 60.97 CUE (6) Hollywood 94,386 100.0 100.0 6,224,702 65.95 11601 Wilshire West Los Angeles 500,243 90.2 98.4 21,835,358 48.38 Element LA West Los Angeles 284,037 100.0 100.0 18,951,920 66.72 Fourth & Traction Downtown Los Angeles 131,701 100.0 100.0 6,173,837 46.88 Maxwell Downtown Los Angeles 102,963 100.0 100.0 5,003,414 48.59 San Francisco Bay Area, California Concourse North San Jose 943,789 85.4 85.8 35,597,539 44.16 Gateway North San Jose 609,278 64.3 68.0 18,322,351 46.75 Metro Plaza North San Jose 451,036 58.3 61.6 12,940,697 49.18 Skyport Plaza North San Jose 418,465 5.4 6.1 805,446 35.36 1740 Technology North San Jose 215,857 100.0 100.0 10,986,935 50.90 1455 Market (7) San Francisco 1,033,682 45.3 45.3 26,072,041 55.70 Rincon Center San Francisco 533,076 97.6 97.6 33,974,980 65.31 Ferry Building (7) San Francisco 265,916 97.4 98.3 23,727,015 91.65 901 Market San Francisco 206,113 78.8 78.8 11,888,684 73.17 875 Howard San Francisco 191,201 100.0 100.0 15,603,499 81.61 625 Second San Francisco 138,354 64.2 64.2 6,019,851 67.73 275 Brannan San Francisco 57,120 100.0 100.0 4,975,867 87.11 Palo Alto Square Palo Alto 317,845 91.9 91.9 28,762,617 98.47 33 Location Submarket Square Feet (1) Percent Occupied (2) Percent Leased (3) Annualized Base Rent (4) Annualized Base Rent Per Square Foot (5) 3400 Hillview Palo Alto 207,857 100.0 100.0 16,274,043 78.29 Foothill Research Center Palo Alto 195,121 93.6 93.6 14,500,594 79.38 Page Mill Hill Palo Alto 178,179 53.6 53.6 7,553,762 79.06 Clocktower Square Palo Alto 100,655 100.0 100.0 9,324,711 92.64 Page Mill Center Palo Alto 94,539 58.8 58.8 4,447,002 80.06 3176 Porter Palo Alto 46,759 100.0 100.0 3,422,759 73.20 Towers at Shore Center Redwood Shores 335,285 89.8 89.8 22,864,776 75.96 Shorebreeze Redwood Shores 230,932 79.6 79.6 11,900,074 64.75 555 Twin Dolphin Redwood Shores 200,785 70.8 73.2 9,217,303 64.88 333 Twin Dolphin Redwood Shores 183,118 87.4 87.4 10,211,901 63.78 Metro Center Foster City 723,848 77.7 84.3 34,745,538 61.80 Techmart Santa Clara 284,903 71.1 74.3 10,243,529 50.59 Seattle, Washington 1918 Eighth (7) Denny Triangle 667,724 99.4 100.0 28,531,929 43.00 Hill7 (7) Denny Triangle 285,310 99.6 99.6 11,962,994 42.11 5th & Bell Denny Triangle 197,136 100.0 100.0 7,470,367 37.89 Met Park North Denny Triangle 189,511 99.7 99.7 6,446,825 34.14 505 First Pioneer Square 287,853 36.0 36.0 3,714,511 35.85 83 King Pioneer Square 183,898 70.1 70.1 5,720,210 44.39 450 Alaskan Pioneer Square 171,014 99.5 99.5 7,481,307 43.96 411 First Pioneer Square 163,719 78.2 81.2 4,882,158 38.15 95 Jackson Pioneer Square 35,905 100.0 100.0 512,547 14.28 Vancouver, British Columbia Bentall Centre (8) Downtown Vancouver 1,521,084 90.1 90.1 42,065,607 30.70 Total In-Service 13,853,005 80.8 % 81.9 % $ 620,144,824 $ 55.43 _____________ 1.
Presented on an annualized basis and is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements or deferments)) under commenced leases as of December 31, 2022, by (ii) 12. Annualized base rent does not reflect tenant reimbursements. 5.
Presented on an annualized basis and is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements or deferments)) under commenced leases as of December 31, 2023, by (ii) 12. Annualized base rent does not reflect tenant reimbursements. 5.
Annualized base rent is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements or deferments)) under commenced leases as of December 31, 2022, by (ii) 12. Annualized base rent does not reflect tenant reimbursements.
Annualized base rent is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements or deferments)) under commenced leases as of December 31, 2023, by (ii) 12. Annualized base rent does not reflect tenant reimbursements.
Calculated as (i) square footage under commenced leases as of December 31, 2022, divided by (ii) total square feet, expressed as a percentage. 3. Calculated as (i) square footage under commenced and uncommenced leases as of December 31, 2022, divided by (ii) total square feet, expressed as a percentage. 4.
Calculated as (i) square footage under commenced leases as of December 31, 2023, divided by (ii) total square feet, expressed as a percentage. 3. Calculated as (i) square footage under commenced and uncommenced leases as of December 31, 2023, divided by (ii) total square feet, expressed as a percentage. 4.
Annualized base rents related to Bentall Centre have been converted from CAD to USD using the foreign currency exchange rate as of December 31, 2022. 3.
Annualized base rents related to Bentall Centre have been converted from CAD to USD using the foreign currency exchange rate as of December 31, 2023. 2.
Annualized base rent per square foot 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 December 31, 2022. 7.
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 December 31, 2023. 4.
Dell EMC Corporation expirations by square footage and property: (i) 42,954 square feet at 505 First expiring on December 31, 2023, (ii) 83,549 square feet at 875 Howard expiring on June 30, 2026 and (iii) 46,472 square feet at 505 First expiring on January 31, 2027.
Dell EMC Corporation expirations: (i) 42,954 square feet at 505 First in December 2023, (ii) 83,549 square feet at 875 Howard in June 2026 and (iii) 46,472 square feet at 505 First in January 2027. 9.
Calculated as (i) annualized base rent divided by (ii) square footage under commenced leases as of December 31, 2022. Annualized base rent does not reflect tenant reimbursements. 6. We own 20% of the ownership interest in the unconsolidated joint venture that owns Bentall Centre.
Calculated as (i) annualized base rent divided by (ii) square footage under commenced leases as of December 31, 2023. Annualized base rent does not reflect tenant reimbursements. 6. We own 51% of the ownership interest in the consolidated joint venture that owns ICON, EPIC, Harlow, 6040 Sunset and CUE. 7.
Percent leased for same-store studio is the average percent leased for the 12 months ended December 31, 2022. 5. Annual base rent for same-store studio reflects actual base rent for the 12 months ended December 31, 2022, excluding tenant reimbursements. 6.
Percent leased for in-service studio is the average percent leased for the 12 months ended December 31, 2023. 2. Annual base rent for in-service studio reflects actual base rent for the 12 months ended December 31, 2023, excluding tenant reimbursements. 3.
Historical Tenant Improvements and Leasing Commissions The following table represents 100% share of consolidated and unconsolidated joint ventures, summarizing historical information regarding tenant improvement and leasing commission costs for tenants at our office properties: Year Ended December 31, 2022 2021 2020 Renewals (1) Number of leases 162 120 90 Square feet 1,172,126 1,070,864 459,921 Tenant improvement costs per square foot (2)(3) $ 11.66 $ 7.31 $ 4.40 Leasing commission costs per square foot (2) 9.50 6.92 5.04 Total tenant improvement and leasing commission costs $ 21.16 $ 14.23 $ 9.44 New leases (4) Number of leases 140 122 72 Square feet 943,650 730,235 340,415 Tenant improvement costs per square foot (2)(3) $ 65.71 $ 62.00 $ 66.09 Leasing commission costs per square foot (2) 18.10 14.69 12.30 Total tenant improvement and leasing commission costs $ 83.81 $ 76.69 $ 78.39 TOTAL Number of leases 302 242 162 Square feet 2,115,776 1,801,099 800,336 Tenant improvement costs per square foot (2)(3) $ 36.41 $ 28.63 $ 29.13 Leasing commission costs per square foot (2) 13.44 9.95 7.95 TOTAL TENANT IMPROVEMENT AND LEASING COMMISSION COSTS $ 49.85 $ 38.58 $ 37.08 _____________ 1.
Reflects management offices occupied by the Company with various expiration dates. 37 Historical Office Tenant Improvements and Leasing Commissions The following table represents 100% share of consolidated and unconsolidated joint ventures, summarizing historical information regarding tenant improvement and leasing commission costs for our office properties: Year Ended December 31, 2023 2022 2021 Renewals (1) Number of leases 149 162 120 Square feet 1,125,614 1,172,126 1,070,864 Tenant improvement costs per square foot (2)(3) $ 8.77 $ 11.66 $ 7.31 Leasing commission costs per square foot (2) 6.80 9.50 6.92 Total tenant improvement and leasing commission costs $ 15.57 $ 21.16 $ 14.23 New leases (4) Number of leases 117 140 122 Square feet 572,833 943,650 730,235 Tenant improvement costs per square foot (2)(3) $ 38.15 $ 65.71 $ 62.00 Leasing commission costs per square foot (2) 10.73 18.10 14.69 Total tenant improvement and leasing commission costs $ 48.88 $ 83.81 $ 76.69 TOTAL Number of leases 266 302 242 Square feet 1,698,447 2,115,776 1,801,099 Tenant improvement costs per square foot (2)(3) $ 18.49 $ 36.41 $ 28.63 Leasing commission costs per square foot (2) 8.10 13.44 9.95 TOTAL TENANT IMPROVEMENT AND LEASING COMMISSION COSTS $ 26.59 $ 49.85 $ 38.58 _____________ 1.
Amazon expirations by square footage and property: (i) 139,824 square feet at Met Park North expiring on November 30, 2023, (ii) 659,150 square feet at 1918 Eighth expiring on September 30, 2030 and (iii) 191,814 square feet at 5th & Bell expiring on May 31, 2031.
Amazon expirations: (i) 139,824 square feet at Met Park North in November 2025 (early termination right starting in December 2024), (ii) 659,150 square feet at 1918 Eighth in September 2030 and (iii) 191,814 square feet at 5th & Bell in May 2031. 4.
We own 51% of the ownership interest in the consolidated joint venture that owns Sunset Gower Studios and Sunset Las Palmas Studios. 4. We own 50% of the ownership interest in the unconsolidated joint venture that owns Sunset Glenoaks Studios. 5.
We own 50% of the ownership interest in the unconsolidated joint venture that owns Sunset Glenoaks Studios and 25.6% of the ownership interest in the unconsolidated joint venture that owns Sunset Pier 94 Studios.
Annualized base rent is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements or deferments)), including uncommenced leases, as of December 31, 2022 (ii) by 12. Annualized base rent does not reflect tenant reimbursements. Lease Expirations The following table summarizes the lease expirations for leases in place as of December 31, 2022, including vacancies.
Annualized base rent is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements or deferments)), including uncommenced leases, as of December 31, 2023 (ii) by 12.
Google, Inc. expirations by square footage and property: (i) 182,672 square feet at Foothill Research Center expiring on February 28, 2025, (ii) 208,843 square feet at Rincon Center expiring on February 29, 2028, (iii) 207,857 square feet at 3400 Hillview expiring on November 30, 2028, (iv) 41,354 square feet at Ferry Building expiring on October 31, 2029 and (v) 590,403 square feet at One Westside expiring on November 30, 2036.
Google, Inc. expirations: (i) 182,672 square feet at Foothill Research Center in February 2025, (ii) 208,843 square feet at Rincon Center in February 2028, (iii) 207,857 square feet at 3400 Hillview in November 2028 (early termination right between March 2025 and February 2027) and (iv) 41,354 square feet at Ferry Building in October 2029. 3.
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.
Excludes retained tenants relocated or expanded into new space within our portfolio. 2. Assumes tenant improvement and leasing commissions paid in the calendar year of lease execution which may be different than year actually paid. 3. Tenant improvement costs based on negotiated tenant improvement allowances set forth in leases, or the aggregate cost originally budgeted at lease commencement. 4.
We own 55% of the ownership interest in the consolidated joint venture that owns Ferry Building and 75% of the ownership interest in the consolidated joint venture that owns One Westside.
We own 55% of the ownership interest in the consolidated joint ventures that own 1455 Market, Ferry Building, 1918 Eighth and Hill7. 8. We own 20% of the ownership interest in the unconsolidated joint venture that owns Bentall Centre.
Annualized base rent and rental rates have been converted from CAD to USD using the foreign currency exchange rate as of December 31, 2022. 7.
Where applicable, rental rates converted to USD using the foreign currency exchange rate as of December 31, 2023. 3.
ITEM 2. Properties As of December 31, 2022, our portfolio of owned real estate consisted of 64 properties (41 wholly-owned properties, 16 properties owned by joint ventures and seven land properties) located primarily in California, the Pacific Northwest, Western Canada submarket and Greater London, totaling approximately 21.0 million square feet.
ITEM 2. Properties As of December 31, 2023, our portfolio of owned real estate consisted of 58 properties (36 wholly-owned properties, 15 properties owned by joint ventures and seven land properties) totaling approximately 20 million square feet and located primarily in Los Angeles, the San Francisco Bay Area, Seattle, New York, Vancouver, British Columbia and Greater London, United Kingdom.
We define our studio properties as owned real estate primarily used for the physical production of media content, such as television programs, feature films, commercials, music videos and photographs.
For clarity, our studio properties are real estate used for the physical production of media content, such as television programs, feature films, commercials, music videos and photo shoots. These properties feature a fully integrated environment which our tenants can access production, post-production, office and support facilities in a collaborative and efficient setting.
Total expiring square footage does not include 27,932 square feet of month-to-month leases. 4. Total expiring square footage does not include 16,418 square feet of month-to-month leases. 5. Annualized base rent for office properties is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements or deferments)) as of December 31, 2022, by (ii) 12.
Does not include 22 month-to-month leases. 2. 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 December 31, 2023 by (ii) 12. On a per square foot basis, ABR is divided by square footage under commenced leases as of December 31, 2023.
Unless otherwise stated in the footnotes, the information set forth in the table assumes that tenants did not exercise any renewal options.
Annualized base rent does not reflect tenant reimbursements. 36 Office Lease Expirations The following table summarizes the lease expirations for in-place office leases as of December 31, 2023, including vacancies. Unless otherwise stated in the footnotes, the information set forth in the table assumes that tenants did not exercise any renewal options.
Does not include 241,000 square feet related to Sunset Glenoaks Studios which is currently under construction. We own 50% of the ownership interest in the unconsolidated joint venture that owns Sunset Glenoaks Studios.
Does not include 241,000 square feet related to Sunset Glenoaks Studios and 232,000 square feet related to Sunset Pier 94 Studios, which are both currently under construction.
We own 55% of the ownership interest in the consolidated joint venture that owns 1918 Eighth. 5. Netflix, Inc. expirations by square footage and property: (i) 326,792 square feet at ICON, (ii) 301,127 square feet at EPIC and (iii) 94,386 square feet at CUE.
Netflix, Inc. expirations: (i) 326,792 square feet at ICON, (ii) 301,127 square feet at EPIC and (iii) 94,386 square feet at CUE. 5. Riot Games, Inc. has an early termination right at Element LA in March 2025. 6.
Annual base rent per leased square foot for same-store studio calculated as (i) annual base rent divided by (ii) square footage under lease as of December 31, 2022. 7. Acquired July 15, 2022.
Annual base rent per leased square foot for in-service studio calculated as (i) annual base rent divided by (ii) square footage under lease as of December 31, 2023. 4. 6,650 square feet located at Sunset Gower Studios was taken off-line for repositioning. 5. 18,594 square feet located at Sunset Las Palmas Studios was taken off-line for repositioning. 6.
Annualized base rent per leased square foot and annualized base rent per square foot at expiration for signed leases not commenced reflects uncommenced leases for spaces not occupied as of December 31, 2022 and is calculated as (i) base rental payments (defined as cash base rents at expiration (before abatements or deferments)) under uncommenced leases for vacant space as of December 31, 2022, divided by (ii) square footage under uncommenced leases as of December 31, 2022.
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 December 31, 2023. The methodology is the same when calculating ABR per square foot either in place or at expiration for uncommenced leases. Rent data is presented without regard to cancellation options.
Nutanix, Inc. expirations by square footage and property: (i) 57,354 square feet at Metro Plaza expired on December 31, 2022, (ii) 51,256 square feet at Metro Plaza expiring on May 31, 2023, (iii) 117,001 square feet at Concourse expiring on May 31, 2024 and (iv) 215,857 square feet at 1740 Technology expiring on May 31, 2030. 7.
Nutanix, Inc. expirations: (i) 117,001 square feet at Concourse in May 2024 and (ii) 215,857 square feet at 1740 Technology in May 2030. 7. Salesforce.com expirations: (i) 83,016 square feet in July 2025, (ii) 83,372 square feet in April 2027 and (iii) 99,006 square feet in October 2028.
Thereafter, Salesforce.com has paid us 50% of any amounts received pursuant to the sublease, such that we began receiving an average of $340,000 per month of sublease cash rents starting June 2020, with annual growth thereafter. 9. We own 55% of the ownership interest in the consolidated joint venture that owns 1455 Market. 10.
Salesforce.com subleased 259,416 square feet at Rincon Center to Twilio Inc. in 2018 and in 2020 began paying us 50% of cash rents received pursuant to the sublease, or an average of $340,000 per month with annual growth thereafter, in addition to contractual base rent. 8.
Studio Portfolio Our owned studio portfolio, excluding studios under repositioning, redevelopment and development consists of four properties, comprising an aggregate of 1.3 million squar e feet predominantly located in the Hollywood submarket of Los Angeles.
Office Portfolio Our office portfolio consists of 46 office properties totaling approximately 14.7 million square feet located in Los Angeles, the San Francisco Bay Area, Seattle and Vancouver, British Columbia. In-Service Office Portfolio Our in-service office portfolio consists of owned office properties, excluding repositioning, redevelopment, development and held for sale properties.
Removed
Office Portfolio Our office portfolio consists of 52 office properties comprising an aggregate of approximately 15.9 million square feet. Our office properties are concentrated in California, the Pacific Northwest and Western Canada. As of December 31, 2022, the weighted average remaining lease term for our stabilized office portfolio was 5.0 years.
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Annualized base rent and rental rates have been converted from CAD to USD using the foreign currency exchange rate as of December 31, 2023. 34 Office Tenant Diversification The following table provides information regarding the 15 largest tenants in our office portfolio based on HPP’s share of annualized base rent as of December 31, 2023: Tenant # of Properties Lease Expiration Total Occupied Square Feet HPP’s Share Annualized Base Rent (1) Percent of Annualized Base Rent 1 Google, Inc. 4 2025-2029 640,726 (2) $ 51,963,161 10.1 % 2 Amazon 3 2025-2031 990,788 (3) 28,214,335 5.5 3 Netflix, Inc. 3 2031 722,305 (4) 25,507,912 5.0 4 Riot Games, Inc. 1 2030 284,037 (5) 18,951,920 3.7 5 Nutanix, Inc. 2 2024-2030 332,858 (6) 15,870,596 3.1 6 Salesforce.com 1 2025-2028 265,394 (7) 15,036,621 2.9 7 Dell EMC Corporation 2 2023-2027 172,975 (8) 10,235,000 2.0 8 Uber Technologies, Inc. 1 2025 325,445 10,232,000 2.0 9 GitHub, Inc. 2 2024-2030 92,450 (9) 7,086,069 1.4 10 PayPal, Inc. 1 2030 131,701 (10) 6,173,837 1.2 11 Weil, Gotshal & Manges LLP 1 2026 76,278 6,097,801 1.2 12 Regus 5 2024-2030 123,583 (11) 6,015,427 1.2 13 Poshmark, Inc. 1 2024-2029 75,876 (12) 5,636,341 1.1 14 Glu Mobile, Inc. 1 2027 61,381 5,313,948 1.0 15 TDK Corporation of America/Invensense 1 2025 139,336 5,200,020 1.0 TOTAL 4,435,133 $ 217,534,988 42.4 % _____________ 1.
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In-Service Portfolio Our in-service office properties include stabilized office properties and lease-up office properties. Stabilized office properties consist of same-store properties and non-same-store properties. Same-store properties include all of the properties owned and included in our stabilized portfolio as of January 1, 2021 and still owned and included in the stabilized portfolio as of 32 December 31, 2022.
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GitHub Inc. expirations: (i) 35,330 square feet at 625 Second in December 2024 and (ii) 57,120 square feet at 275 Brannan in June 2030. 10. PayPal, Inc. has an early termination right at Fourth & Traction in July 2026. 11.
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Lease-up properties are defined as those properties that have not yet reached 92.0% occupancy since the date they were acquired or placed under redevelopment or development.
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Regus expirations: (i) 20,059 square feet at 11601 Wilshire in February 2024, (ii) 27,369 square feet at Techmart in April 2025, (iii) 9,739 square feet at Palo Alto Square in April 2026, (iv) 45,120 square feet at Gateway in September 2027 and (v) 21,296 square feet at 450 Alaskan in October 2030. 12.
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We own 55% of the ownership interest in the consolidated joint ventures that own Hill7, 1918 Eighth, 1455 Market, and Ferry Building. 8. 96,240 square feet at 875 Howard previously occupied by Burlington Coat Factory was taken off-line for repositioning as of first quarter 2022 for the purposes of conversion to a combination of office and ground floor retail space. 9.
Added
Poshmark, Inc. expirations: (i) 25,549 square feet in May 2024 and (ii) 50,327 square feet in December 2029. 35 Office Industry Diversification The following table summarizes information relating to the industry diversification within our office portfolio based on HPP’s share of annualized base rent as of December 31, 2023: HPP’s Share Industry (1) Square Feet (2) Annualized Base Rent as Percent of Total Square Feet (2) Annualized Base Rent as Percent of Total Technology 3,345,255 33.1 % 3,044,305 36.7 % Media and Entertainment 1,520,650 16.2 986,325 12.9 Retail 1,475,150 9.8 1,114,479 9.0 Legal 633,748 7.7 588,630 8.9 Financial Services 990,140 8.5 654,806 7.6 Business Services 979,983 7.7 672,689 7.1 Other 733,234 6.3 600,313 6.8 Real estate 430,047 3.2 261,611 2.7 Healthcare 202,185 2.0 193,509 2.4 Education 145,759 1.7 140,736 2.0 Insurance 230,804 1.8 176,714 1.9 Government 218,854 1.5 176,859 1.5 Advertising 44,667 0.5 44,667 0.5 Total 10,950,476 100.0 % 8,655,643 100.0 % _____________ 1.
Removed
We own 51% of the ownership interest in the consolidated joint venture that owns 6040 Sunset, ICON, CUE, EPIC and Harlow. 10. The entire premises was delivered for construction of tenant improvements to Google, Inc. during fourth quarter 2021. Monthly base rent payments commenced July 31, 2022.
Added
Determined by management using Thompson Reuters Business Classification. 2. Excludes signed leases not commenced.
Removed
Subsequently, monthly base rent is abated for the eight-month period from September 2022 through April 2023 with cash rents expected to commence again on May 1, 2023. Upon second quarter 2023 stabilization, estimated yields will range between 8.00% - 8.25% based on total estimated project costs in the range of $500.0 - $525.0 million.
Added
Office Lease Distribution The following table sets forth information relating to the distribution of leases in our office portfolio, based on net rentable square feet under lease as of December 31, 2023: HPP’s Share Square Feet Under Lease Number of Leases Total Leased Square Feet Annualized Base Rent (1) Number of Leases Total Leased Square Feet Annualized Base Rent (1) 10,000 or Less 611 2,205,381 $ 114,461,829 640 1,941,251 $ 105,846,379 10,001-25,000 93 1,421,321 75,613,497 80 1,232,885 74,249,574 25,001-50,000 54 1,940,562 119,643,329 48 1,671,353 108,574,537 50,001-100,000 28 1,911,259 114,491,195 21 1,429,120 88,673,278 Greater than 100,000 15 3,471,953 195,934,975 12 2,381,035 136,662,199 Building Management Use 43 236,687 — 43 207,760 — Signed Leases Not Commenced 31 167,911 9,358,839 31 162,911 9,293,342 Total 875 11,355,074 $ 629,503,664 875 9,026,314 $ 523,299,309 _____________ 1.
Removed
We own 75% of the ownership interest in the consolidated joint venture that owns One Westside. 34 Tenant Diversification The following table summarizes information regarding the 15 largest tenants in our office portfolio based on Company’s share of annualized base rent as of December 31, 2022: Tenant (1) Property Lease Expiration Total Occupied Square Feet Company’s Share Total Occupied Square Feet Percent of Rentable Square Feet Annualized Base Rent (2) Percent of Annualized Base Rent 1 Google, Inc.
Added
HPP’s Share Year of Lease Expiration # of Leases Expiring (1) Square Feet Expiring Square Footage of Expiring Lease % of Office Portfolio Square Feet Annualized Base Rent (2) % of Office Portfolio Annualized Base Rent Annualized Base Rent Per Leased Square Foot (2) Annualized Base Rent at Expiration Annualized Base Rent Per Lease Square Foot at Expiration (3) Vacant 3,297,287 2,921,572 24.5 % Q4-2023 23 155,239 142,627 1.2 7,206,259 1.4 50.53 7,206,260 50.53 Total 2023 23 155,239 142,627 1.2 7,206,259 1.4 50.53 7,206,260 50.53 2024 189 1,539,790 1,378,142 11.5 77,258,172 14.8 56.06 78,381,562 56.87 2025 165 1,978,453 1,605,458 13.4 94,399,116 18.0 58.80 98,100,254 61.10 2026 99 699,959 633,136 5.3 39,608,525 7.6 62.56 42,179,316 66.62 2027 106 1,070,124 913,527 7.6 55,674,372 10.6 60.94 60,868,879 66.63 2028 67 1,187,514 986,859 8.3 70,013,934 13.4 70.95 77,938,801 78.98 2029 47 551,223 428,319 3.6 30,245,912 5.8 70.62 33,255,339 77.64 2030 25 1,642,992 1,279,627 10.7 68,116,580 13.0 53.23 79,662,632 62.25 2031 18 1,091,700 678,810 5.7 39,016,297 7.5 57.48 49,873,088 73.47 2032 10 245,879 143,943 1.2 8,505,128 1.6 59.09 10,784,667 74.92 Thereafter 30 775,147 460,037 3.9 23,695,205 4.5 51.51 30,985,284 67.35 Building management use (4) 43 236,687 207,760 1.7 — — — — — Signed leases not commenced 31 167,911 162,911 1.4 9,293,342 1.8 57.05 10,967,294 67.32 Portfolio Total/Weighted Average 853 14,639,905 11,942,728 100.0 % $ 523,032,842 100.0 % $ 57.98 $ 580,203,376 $ 64.32 _____________ 1.
Removed
Various Various 1,231,129 (3) 1,064,919 8.2 % $ 77,880,580 13.4 % 2 Amazon Various Various 990,788 (4) 694,171 5.3 26,097,994 4.5 3 Netflix, Inc. Various 9/30/2031 722,305 (5) 368,376 2.8 24,778,047 4.3 4 Nutanix, Inc. Various Various 441,468 (6) 441,468 3.4 19,192,095 3.3 5 Riot Games, Inc.
Added
Includes retained tenants relocated or expanded into new space within our portfolio. Studio Portfolio Our studio portfolio includes five owned purpose-built properties with 48 sound stages totaling approximately 1.7 million square feet located in Los Angeles and New York.
Removed
Element LA 3/31/2030 284,037 (7) 284,037 2.2 18,399,922 3.2 6 Salesforce.com Rincon Center Various 265,394 (8) 265,394 2.0 14,736,111 2.5 7 Block, Inc. 1455 Market (9) 9/27/2023 469,056 257,981 2.0 13,708,676 2.4 8 Dell EMC Corporation Various Various 172,975 (10) 172,975 1.3 9,940,988 1.7 9 Uber Technologies, Inc. 1455 Market (9) 2/28/2025 325,445 178,995 1.4 9,933,916 1.7 10 NFL Enterprises Various 12/31/2022 167,606 (11) 167,606 1.3 8,700,762 1.5 11 Company 3 Method, Inc.
Added
We also own the lease rights to another 6 studios with 27 sound stages totaling approximately 0.5 million square feet located in Los Angeles and New Orleans.
Removed
Various Various 193,307 (12) 129,641 1.0 7,185,347 1.2 12 WeWork Companies Inc. Various Various 318,208 (13) 146,743 1.1 7,146,469 1.2 13 GitHub, Inc. Various 6/30/2025 92,450 (14) 92,450 0.7 6,879,679 1.2 14 Paypal, Inc.
Added
We own and operate an array of production-related services, including transportation assets, lighting and other production equipment and supplies, which we provide for lease in Los Angeles, New York, and New Orleans, as well as Albuquerque and Atlanta. We operate owned purpose-built stages under the Sunset Studios brand, and leased stages and production services assets under the Quixote brand.
Removed
Fourth & Traction 5/31/2030 131,701 (15) 131,701 1.0 5,994,016 1.0 15 Weil, Gotshal & Manges LLP Towers at Shore Center 8/31/2026 76,278 76,278 0.6 5,920,195 1.0 TOTAL 5,882,147 4,472,735 34.3 % $ 256,494,797 44.1 % _____________ 1. Presented in order of Company’s Share of annualized base rent. 2.
Added
Our transportation assets, including trucks, trailers, high-end motorhomes, lighting and other production equipment and supplies, collectively our production services assets, cater to the same type of tenants, but capture revenue derived from both on and off-lot productions, as well as non-production related large-scale events. 38 In-Service Studio Portfolio Our in-service studio portfolio consists of owned purpose-built studio properties, excluding repositioning, redevelopment, development and held for sale properties.
Removed
Google, Inc. may elect to exercise its early termination right at Rincon Center for 166,460 square feet effective April 15, 2025 by delivering written notice on or before January 15, 2024.
Added
The following table provides occupancy and rental rate information relating to the consolidated and unconsolidated in-service studio properties owned as of December 31, 2023: Property Owned/Leased Submarket # of Stages Square Feet Stage % Leased Total % Leased (1) Annual Base Rent (2) HPP’s Share Annualized Base Rent Annualized Base Rent Per Square Foot (3) Los Angeles, California Sunset Gower Studios (4) Owned Hollywood 12 558,295 100.0 % 82.4 % $ 21,370,272 $ 10,898,839 $ 46.55 Sunset Bronson Studios Owned Hollywood 10 310,006 100.0 95.1 12,701,849 6,477,943 43.22 Sunset Las Palmas Studios (5) Owned Hollywood 13 362,977 56.2 64.9 11,226,714 5,725,624 47.71 Total in-service studio (6) 35 1,231,278 84.7 % 80.4 % $ 45,298,835 $ 23,102,406 $ 45.88 _____________ 1.
Removed
Google, Inc. may elect to exercise its early termination right at 3400 Hillview for 207,857 square feet effective no earlier than February 1, 2025 and no later than February 1, 2027 by delivering written notice at least 12 months prior to the early termination date. 4.
Removed
We own 51% of the ownership interest in the consolidated joint venture that owns ICON, EPIC and CUE. 6.
Removed
Riot Games, Inc. may elect to exercise its early termination right for the entire premises effective February 28, 2025 by delivering written notice on or before February 29, 2024. 8.
Removed
Salesforce.com expirations by square footage: (i) 83,016 square feet expiring on July 31, 2025, (ii) 83,372 square feet expiring on April 30, 2027, (iii) 93,028 square feet expiring on October 31, 2028 and (iv) 5,978 square feet of month-to-month storage space. Salesforce.com subleased 259,416 square feet at Rincon Center to Twilio Inc. during third quarter 2018.
Removed
Effective January 30, 2019, we entered into an agreement to reimburse Salesforce.com approximately $6.3 million for costs incurred in connection with the sublease. We are entitled to recoup this cost from amounts paid pursuant to the sublease commencing February 1, 2019, of which we have been fully reimbursed as of March 31, 2020.
Removed
Dell EMC Corporation may elect to exercise its early termination right at 505 First for 46,472 square feet effective January 31, 2025 by delivering written notice on or before January 31, 2024. 11. NFL Enterprises by square footage and property: (i) 157,687 square feet at 10950 Washington and (ii) 9,919 square feet at 10900 Washington.
Removed
NFL Enterprises elected to exercise its early termination right for the entire premises effective December 31, 2022. 35 12.
Removed
Company 3 Method, Inc. expirations by square footage and property: (i) 63,376 square feet at 3401 Exposition expiring on September 30, 2026, (ii) 59,646 square feet at Harlow expiring on October 31, 2032 and (iii) 70,285 square feet at Harlow expiring on March 31, 2033.
Removed
Company 3 Method, Inc. may elect to exercise its early termination right at Harlow for 59,646 square feet effective November 30, 2029, December 31, 2029, January 31, 2030 or February 28, 2030 by delivering written notice on or before November 1, 2028. We own 51% of the ownership interest in the consolidated joint venture that owns Harlow. 13.
Removed
WeWork Companies Inc. expirations by square footage and property: (i) 54,336 square feet at Hill7 expiring January 31, 2030, (ii) 51,205 square feet at Maxwell expiring June 30, 2031, (iii) 66,056 square feet at 1455 Market expiring October 31, 2031 and (iv) 146,611 square feet at Bentall Centre expiring October 31, 2033.
Removed
We own 55% of the ownership interest in the consolidated joint ventures that own Hill7 and 1455 Market, and 20% of the ownership interest in the unconsolidated joint venture that owns Bentall Centre. 14. GitHub Inc. expirations by square footage and property: (i) 57,120 square feet at 275 Brannan and (ii) 35,330 square feet at 625 Second. 15.
Removed
Paypal, Inc. may elect to exercise its early termination right for the entire premises effective July 17, 2026 by delivering written notice on or before July 17, 2025. Industry Diversification Our office portfolio is currently leased to a variety of companies.
Removed
The following table summarizes information relating to the industry diversification in our office portfolio as of December 31, 2022: Company’s Share Industry (1) Square Feet (2)(3) Annualized Base Rent as Percent of Total Square Feet (2)(4) Annualized Base Rent as Percent of Total Technology 4,691,094 38.6 % 4,019,347 40.6 % Media and Entertainment 1,778,038 15.8 1,243,524 13.4 Legal 685,062 7.1 640,071 8.3 Business Services 1,142,813 (5) 8.3 827,178 (6) 7.9 Retail 1,414,421 (7) 8.0 1,068,056 (8) 7.4 Other 804,314 6.1 646,583 6.6 Financial Services 925,705 6.9 649,264 6.6 Real Estate 541,964 3.2 287,689 2.5 Healthcare 232,708 2.0 222,432 2.4 Insurance 249,201 1.6 190,459 1.7 Educational 101,243 1.0 94,411 1.1 Government 155,655 0.8 112,274 0.8 Advertising 60,075 0.6 55,656 0.7 Total 12,782,293 100.0 % 10,056,944 100.0 % _____________ 1.
Removed
Determined by management using Thompson Reuters Business Classification and presented in order of Company’s Share of annualized base rent. 2. Excludes signed leases not commenced. 3. Excludes 189,312 square feet occupied by the Company. 4. Excludes 163,310 square feet occupied by the Company. 5. Includes 493,771 square feet occupied by co-working tenants (represents 3.5% of total annualized base rent). 6.
Removed
Includes 298,915 square feet occupied by co-working tenants (represents 2.7% of the Company’s Share of total annualized base rent). 7. Includes 329,573 square feet of storefront retail (represents 1.7% of total annualized base rent). 8.
Removed
Includes 279,826 square feet of storefront retail (represents 1.8% of the Company’s Share of total annualized base rent). 36 Lease Distribution The following table sets forth information relating to the distribution of leases in our office portfolio, based on net rentable square feet under lease as of December 31, 2022: Company’s Share Square Feet Under Lease Number of Leases Total Leased Square Feet Annualized Base Rent (1) Number of Leases Total Leased Square Feet Annualized Base Rent (1) 10,000 or Less 640 2,288,823 $ 116,891,780 671 2,018,689 $ 108,588,838 10,001-25,000 103 1,571,607 82,270,999 87 1,338,980 79,718,601 25,001-50,000 56 2,060,547 128,415,177 53 1,902,942 121,941,858 50,001-100,000 32 2,179,821 122,259,398 23 1,564,431 91,899,372 Greater than 100,000 18 4,681,495 256,338,195 15 3,231,901 179,004,736 Building Management Use 43 189,312 — 43 163,310 — Signed Leases Not Commenced 38 265,515 14,198,540 38 252,933 13,773,153 Total 930 13,237,120 $ 720,374,089 930 10,473,186 $ 594,926,558 _____________ 1.
Removed
Company’s Share (1) Year of Lease Expiration Number of Leases Expiring (2) Square Footage of Expiring Leases (3) Square Footage of Expiring Leases (4) Percent of Office Portfolio Square Feet Annualized Base Rent (5) Percentage of Office Portfolio Annualized Base Rent Annualized Base Rent Per Leased Square Foot (6) Annualized Base Rent at Expiration Annualized Base Rent Per Lease Square Foot at Expiration (7) Vacant 2,613,113 2,507,618 19.3 % 2022 23 335,609 318,236 2.5 $ 15,925,373 2.7 % $ 50.04 $ 15,925,373 $ 50.04 2023 181 1,715,646 1,386,136 10.7 74,185,115 12.5 53.52 74,354,963 53.64 2024 177 1,817,628 1,538,321 11.8 87,453,071 14.6 56.85 92,183,394 59.92 2025 145 1,889,511 1,550,542 12.0 94,240,589 15.9 60.78 101,095,277 65.20 2026 71 704,681 641,128 4.9 39,767,322 6.7 62.03 43,867,132 68.42 2027 92 970,573 822,819 6.3 49,181,270 8.3 59.77 55,353,025 67.27 2028 43 989,186 818,986 6.3 57,449,900 9.7 70.15 66,664,159 81.40 2029 22 378,524 271,028 2.1 20,317,704 3.4 74.97 24,074,742 88.83 2030 17 1,543,298 1,180,165 9.1 57,081,566 9.6 48.37 72,898,772 61.77 2031 14 1,103,292 674,300 5.2 38,343,420 6.4 56.86 50,432,614 74.79 Thereafter 25 1,306,413 838,865 6.5 46,759,609 7.9 55.74 66,916,815 79.77 Building management use (8) 43 189,312 163,310 1.3 — — — — — Signed leases not commenced (9) 38 265,515 252,933 2.0 13,773,153 2.3 54.45 16,628,634 65.74 Portfolio Total/Weighted Average 891 15,822,301 12,964,387 100.0 % $ 594,478,092 100.0 % $ 56.85 $ 680,394,900 $ 65.07 _____________ 1.
Removed
Calculated based on the Company’s consolidated portfolio, plus the Company’s share of the amount from the Company’s unconsolidated joint ventures (calculated based on the Company’s percentage ownership interests), minus the Company’s partners’ share of the amount from the Company’s consolidated joint ventures (calculated based on the partners’ percentage ownership interests). 37 2. Does not include 39 month-to-month leases. 3.
Removed
Annualized base rent does not reflect tenant reimbursements. Rent data for our office properties is presented on an annualized basis without regard to cancellation options. 6.
Removed
Annualized base rent per leased square foot and annualized base rent per square foot at expiration for signed leases not commenced reflects uncommenced leases for spaces not occupied as of December 31, 2022 and is calculated as (i) base rental payments (defined as cash base rents at expiration (before abatements or deferments)) under uncommenced leases for vacant space as of December 31, 2022, divided by (ii) square footage under uncommenced leases as of December 31, 2022. 8.
Removed
Reflects management offices occupied by the Company with various expiration dates. 9.
Removed
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.
Removed
These properties feature a fully integrated environment within which our studio-focused tenants can access production, post-production, traditional office component and support facilities 38 that enables them to conduct their business in a collaborative and efficient setting. In addition, we require tenants at our studio properties to use our lighting, equipment rental, parking, power, HVAC and telecommunications (telephone and internet).
Removed
Accordingly, our other property-related revenues typically track overall occupancy of our studio properties.
Removed
The following table summarizes information relating to each of the studio properties owned as of December 31, 2022: Property Square Feet Percent Leased Annual Base Rent Annual Base Rent Per Leased Square Foot Same-store studio: Los Angeles, California Sunset Gower Studios (1) 556,401 81.8 % $ 21,342,032 $ 46.16 Sunset Bronson Studios 308,026 91.7 10,833,750 37.27 Sunset Las Palmas Studios (2) 366,027 82.8 14,805,599 50.49 Total same-store studio (3) 1,230,454 84.6 (4) 46,981,381 (5) 44.74 (6) Non-Same-store studio: Albuquerque, New Mexico 5801 Bobby Foster Road (7) 35,562 — % Total non-same-store studio 35,562 — % TOTAL STUDIO (8) 1,266,016 _____________ 1. 6,650 square feet located at Sunset Gower Studios was taken off-line for repositioning. 2. 18,594 square feet located at Sunset Las Palmas Studios was taken off-line for repositioning. 3.
Removed
Same-store studio defined as all studios owned and included in our portfolio as of January 1, 2021 and still owned and included in our portfolio as of December 31, 2022. We own 51% of the ownership interest in the consolidated joint venture that owns Sunset Gower Studios, Sunset Bronson Studios and Sunset Las Palmas Studios. 4.
Removed
Property is located approximately 2.5 miles from Netflix’s Albuquerque studios and includes approximately 29 acres of land utilized to operate more than 90 trailers and other assets serving surrounding production industry. Existing improvements have a history of use under production leases with media companies. 8.
Removed
Through our production services-related operating companies, we own 1,622 vehicles, including trucks, trailers and high-end motor homes, lighting and grip, supplies and other equipment and the lease rights to 27 sound stages.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMine Safety Disclosures Not applicable. 41 PART II
Biggest changeMine Safety Disclosures Not applicable. 39 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeITEM 4. Mine Safety Disclosures 41 PART II ITEM 5. Market for Hudson Pacific Properties, Inc.’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 42 Market for Hudson Pacific Properties, L.P.’s Common Capital, Related Unitholder Matters and Issuer Purchases of Units 43
Biggest changeITEM 4. Mine Safety Disclosures 39 PART II ITEM 5. Market for Hudson Pacific Properties, Inc.’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 40 Market for Hudson Pacific Properties, L.P.’s Common Capital, Related Unitholder Matters and Issuer Purchases of Units 41

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe price paid per share is based on the closing price of our common stock, as reported by the NYSE, as of the date of the vesting of restricted stock.
Biggest changeIncludes shares of common stock remitted to Hudson Pacific Properties, Inc. to satisfy tax withholding obligations in connection with the vesting of restricted stock units. 4. The price paid per share is based on the closing price of our common stock, as reported by the NYSE, as of the date of vesting of the restricted stock units.
Long-term incentive plan units may also, under certain circumstances, be convertible into common units on a one-for-one basis, which are then exchangeable for shares of the Company’s common stock as described above. All other issuances of unregistered equity securities of our operating partnership during the year ended December 31, 2022 have previously been disclosed in filings with the SEC.
Long-term incentive plan units may also, under certain circumstances, be convertible into common units on a one-for-one basis, which are then exchangeable for shares of the Company’s common stock as described above. All other issuances of unregistered equity securities of our operating partnership during the year ended December 31, 2023 have previously been disclosed in filings with the SEC.
Equity Compensation Plan Information Our equity compensation plan information required by this item is incorporated by reference to the information in Part III, Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report on Form 10-K. 42 Market for Hudson Pacific Properties, L.P.
Equity Compensation Plan Information Our equity compensation plan information required by this item is incorporated by reference to the information in Part III, Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report on Form 10-K. 40 Market for Hudson Pacific Properties, L.P.
Issuer Purchases of Equity Securities During the fourth quarter of 2022, certain employees surrendered common shares owned by them to satisfy their statutory federal income tax obligation associated with the vesting of restricted common shares of beneficial interest issued under our 2010 Incentive Award Plan.
Issuer Purchases of Equity Securities During the fourth quarter of 2023, certain employees surrendered common shares owned by them to satisfy their statutory federal income tax obligation associated with the vesting of restricted common shares of beneficial interest issued under our 2010 Incentive Award Plan.
Recent Sales of Unregistered Securities During the fourth quarter of 2022, 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.
Recent Sales of Unregistered Securities During the fourth 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.
For all issuances of units to the Company, our operating partnership relied on the Company’s status as a publicly traded NYSE-listed company with approximately $9.32 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.
For all issuances of units to the Company, our operating partnership relied on the Company’s status as a publicly traded NYSE-listed company with approximately $8.3 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.
Dividends We intend to pay dividends each taxable year (not including a return of capital for federal income tax purposes) equal to at least 90% of REIT taxable income. We intend to pay regular quarterly dividends to our stockholders. Currently, we pay dividends to our stockholders quarterly in March, June, September and December.
Dividends We intend to pay dividends each taxable year (not including a return of capital for federal income tax purposes) equal to at least 90% of REIT taxable income. We intend to pay regular quarterly dividends to our stockholders. Historically, we have paid dividends to our stockholders quarterly in March, June, September and December.
Common Capital, Related Unitholder Matters and Issuer Purchases of Units Overview There is no established public trading market for our operating partnership’s common units. As of February 3, 2022, there were 21 holders of record of common units (including through our general partnership interest).
Common Capital, Related Unitholder Matters and Issuer Purchases of Units Overview There is no established public trading market for our operating partnership’s common units. As of February 9, 2024, there were 21 holders of record of common units (including through our general partnership interest).
The following graph shows our cumulative total stockholder return for the five-year period ending on December 31, 2022. The graph assumes a $100 investment in each of the indices on December 31, 2017 and the reinvestment of all dividends.
The following graph shows our cumulative total stockholder return for the five-year period ending on December 31, 2023. The graph assumes a $100 investment in each of the indices on December 31, 2018 and the reinvestment of all dividends.
ITEM 5. Market for Hudson Pacific Properties, Inc. Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Overview As of February 3, 2022, Hudson Pacific Properties, Inc. had 77 stockholders of record of our common stock. Hudson Pacific Properties, Inc. common stock has traded on the NYSE under the symbol “HPP” since June 24, 2010.
ITEM 5. Market for Hudson Pacific Properties, Inc. Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Overview As of February 9, 2024, Hudson Pacific Properties, Inc. had 86 stockholders of record of our common stock. Hudson Pacific Properties, Inc. common stock has traded on the NYSE under the symbol “HPP” since June 24, 2010.
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. The operating partnership also issued 345,578 long-term incentive plan units during the fourth quarter of 2022.
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. The operating partnership also issued 291,971 long-term incentive plan units during the fourth quarter of 2023.
For each share of common stock issued by the Company in connection with such an award, our operating partnership issued a restricted common unit to the Company as provided in the partnership agreement of our operating partnership. During the fourth quarter of 2022, our operating partnership issued 131,158 common units to the Company.
For each share of common stock issued by the Company in connection with such an award, our operating partnership issued a restricted common unit to the Company as provided in the partnership agreement of our operating partnership. During the fourth quarter of 2023, our operating partnership issued 97,104 common units to the Company.
The following table summarizes all of the repurchases of Hudson Pacific Properties, Inc. equity securities during the fourth quarter of 2022: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs December 1 - December 31, 2022 70,722 (2) $ 9.73 (3) — 36,623,832 TOTAL 70,722 $ 9.73 — _____________ 1.
The following table summarizes all of the repurchases of Hudson Pacific Properties, Inc. equity securities during the fourth quarter of 2023: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (2) December 1 - December 31, 2023 52,393 (3) $ 9.31 (4) — 35,250,164 TOTAL 52,393 $ 9.31 — _____________ 1.
During the fourth quarter of 2022, the Company issued an aggregate of 201,880 shares of its common stock in connection with restricted stock awards for no cash consideration, out of which 70,722 shares of common stock were forfeited to the Company in connection with tax withholding obligations for a net issuance of 131,158 shares of common stock.
During the fourth quarter of 2023, the Company issued an aggregate of 149,497 shares of its common stock in connection with restricted stock units for no cash consideration, out of which 52,393 shares of common stock were forfeited to the Company in connection with tax withholding obligations for a net issuance of 97,104 shares of common stock.
Our stock price performance shown in the following graph is not indicative of future stock price performance. 43 Period Ending Index 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 Hudson Pacific Properties, Inc. 100.00 87.50 116.68 77.71 83.00 35.03 S&P 500 100.00 95.62 125.72 148.85 191.58 156.88 MSCI U.S.
Our stock price performance shown in the following graph is not indicative of future stock price performance. 41 Period Ending Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Hudson Pacific Properties, Inc. 100.00 133.35 88.82 94.86 40.03 40.88 S&P 500 100.00 131.49 155.68 200.37 164.08 207.21 MSCI U.S.
Removed
A cumulative total of $213.4 million had been repurchased under the program as of December 31, 2022. 2. Includes shares of common stock remitted to Hudson Pacific Properties, Inc. to satisfy tax withholding obligations in connection with the vesting of restricted stock. 3.
Added
In September 2023, the Company suspended its quarterly dividend in order to address liquidity considerations in light of general office industry trends and the impact of the WGA and SAG-AFTRA strikes. Our Board will reassess the resumption of the dividend program when appropriate.
Removed
REIT 100.00 95.43 120.09 110.99 158.79 119.87 Dow Jones Equity All REIT 100.00 95.90 123.46 117.54 165.97 124.47 Dow Jones U.S. Real Estate Office 100.00 86.95 114.14 95.18 117.00 75.40 FTSE NAREIT All Equity REITs 100.00 95.96 123.46 117.14 165.51 124.22 ITEM 6. [Reserved] 44
Added
A cumulative total of $214.7 million had been repurchased under the program as of December 31, 2023. 2. The maximum that may yet be purchased under the plans or programs is shown net of repurchases. 3.
Added
REIT 100.00 125.84 116.31 166.39 125.61 142.87 Dow Jones Equity All REIT 100.00 128.74 122.57 173.07 129.79 144.46 Dow Jones U.S. Real Estate Office 100.00 131.28 109.47 134.57 86.72 86.20 FTSE NAREIT All Equity REITs 100.00 128.66 122.07 172.49 129.45 144.16 ITEM 6. [Reserved] 42

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

87 edited+40 added−34 removed86 unchanged
Biggest changeManagement further analyzes NOI by evaluating the performance from the following property groups: • Same-store properties, which include all of the properties owned and included in our stabilized portfolio as of January 1, 2021 and still owned and included in the stabilized portfolio as of December 31, 2022; 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 54 The following table reconciles net income to NOI (in thousands, except percentage change): Year Ended December 31, 2022 2021 Dollar Change Percentage Change NET (LOSS) INCOME $ (16,517) $ 29,012 $ (45,529) (156.9) % Adjustments: Income from unconsolidated real estate entities (943) (1,822) 879 (48.2) Fee income (7,972) (3,221) (4,751) 147.5 Interest expense 149,901 121,939 27,962 22.9 Interest income (2,340) (3,794) 1,454 (38.3) Management services reimbursement income—unconsolidated joint ventures (4,163) (1,132) (3,031) 267.8 Management services expense—unconsolidated joint ventures 4,163 1,132 3,031 267.8 Transaction-related expenses 14,356 8,911 5,445 61.1 Unrealized loss (gain) on non-real estate investment 1,440 (16,571) 18,011 (108.7) Loss on extinguishment of debt — 6,259 (6,259) (100.0) Loss on sale of real estate 2,164 — 2,164 — Impairment loss 28,548 2,762 25,786 933.6 Other (income) expense (8,951) 2,553 (11,504) (450.6) General and administrative 79,501 71,346 8,155 11.4 Depreciation and amortization 373,219 343,614 29,605 8.6 NOI $ 612,406 $ 560,988 $ 51,418 9.2 % Same-store NOI $ 492,063 $ 504,657 $ (12,594) (2.5) % Non-same-store NOI 120,343 56,331 64,012 113.6 NOI $ 612,406 $ 560,988 $ 51,418 9.2 % The following table summarizes certain statistics of our consolidated same-store office and studio properties: Year Ended December 31, 2022 2021 Same-store office Number of properties 42 42 Rentable square feet 11,311,594 11,311,594 Ending % leased 88.3 % 92.7 % Ending % occupied 86.9 % 91.5 % Average % occupied for the period 89.0 % 92.3 % Average annual rental rate per square foot $ 57.46 $ 54.40 Same-store studio Number of properties 3 3 Rentable square feet 1,230,454 1,230,454 Average % occupied over period (1) 84.6 % 85.7 % _____________ 1.
Biggest changeManagement further analyzes NOI by evaluating the performance from the following property groups: • Same-store properties, which include 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 December 31, 2023; and • Non-same-store, which includes: • Stabilized non-same store properties • Lease-up properties • Repositioning properties • Development properties • Redevelopment properties • Held for sale properties • Operating results from studio service-related businesses 53 The following table reconciles net loss to NOI (in thousands, except percentage change): Year Ended December 31, 2023 2022 Dollar Change Percentage Change NET LOSS $ (170,700) $ (16,517) $ (154,183) 933.5 % Adjustments: Loss (income) from unconsolidated real estate entities 3,902 (943) 4,845 (513.8) Fee income (6,181) (7,972) 1,791 (22.5) Interest expense 214,415 149,901 64,514 43.0 Interest income (2,182) (2,340) 158 (6.8) Management services reimbursement income—unconsolidated real estate entities (4,125) (4,163) 38 (0.9) Management services expense—unconsolidated real estate entities 4,125 4,163 (38) (0.9) Transaction-related expenses (1,150) 14,356 (15,506) (108.0) Unrealized loss on non-real estate investment 3,120 1,440 1,680 116.7 Gain on extinguishment of debt (10,000) — (10,000) — Loss on sale of bonds 34,046 — 34,046 — (Gain) loss on sale of real estate (103,202) 2,164 (105,366) (4,869.0) Impairment loss 60,158 28,548 31,610 110.7 Other expense (income) 6 (8,951) 8,957 (100.1) Income tax provision 6,796 — 6,796 — General and administrative 74,958 79,501 (4,543) (5.7) Depreciation and amortization 397,846 373,219 24,627 6.6 NOI $ 501,832 $ 612,406 $ (110,574) (18.1) % Same-store NOI $ 454,412 $ 491,243 $ (36,831) (7.5) % Non-same-store NOI 47,420 121,163 (73,743) (60.9) NOI $ 501,832 $ 612,406 $ (110,574) (18.1) % The following table summarizes certain statistics of our consolidated same-store office and studio properties: Year Ended December 31, 2023 2022 Same-store office Number of properties 40 40 Rentable square feet 11,389,050 11,389,050 Ending % leased 80.5 % 88.2 % Ending % occupied 79.5 % 86.8 % Average % occupied for the period 83.4 % 89.0 % Average annual rental rate per square foot $ 58.80 $ 57.15 Same-store studio Number of properties 3 3 Rentable square feet 1,231,278 1,231,278 Average % leased over period (1) 80.4 % 84.6 % _____________ 1.
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.
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.
An integrated set of assets and activities would fail to qualify as a business if either (i) substantially all of the fair value of the gross assets acquired is concentrated in either a single identifiable asset or a group of similar identifiable assets or (ii) the integrated set of assets and activities is lacking, at a minimum, an input and a substantive process that together significantly 48 contribute to the ability to create outputs (i.e., revenue generated before and after the transaction).
An integrated set of assets and activities would fail to qualify as a business if either (i) substantially all of the fair value of the gross assets acquired is concentrated in either a single identifiable asset or a group of similar identifiable assets or (ii) the integrated set of assets and activities is lacking, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs (i.e., revenue generated before and after the transaction).
We operate our production services business in key US media markets in California, New Mexico, Louisiana, Atlanta and New York. Positive or negative changes in economic or other conditions in any of the markets in which we own real estate and/or 47 operate, including state budgetary shortfalls, employment rates, natural hazards and other factors, may impact our overall performance.
We operate our production services business in key US media markets in California, New Mexico, Louisiana, Atlanta and New York. Positive or negative changes in economic or other conditions in any of the markets in which we own real estate and/or operate, including state budgetary shortfalls, employment rates, natural hazards and other factors, may impact our overall performance.
To qualify as a REIT, we are required to distribute at least 90% of our REIT taxable income, excluding net capital gains, to our stockholders and meet the various other requirements imposed by the Code relating to such matters as operating results, asset holdings, distribution levels and diversity of stock ownership.
To 50 qualify as a REIT, we are required to distribute at least 90% of our REIT taxable income, excluding net capital gains, to our stockholders and meet the various other requirements imposed by the Code relating to such matters as operating results, asset holdings, distribution levels and diversity of stock ownership.
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 50 flows of the reporting unit, and may corroborate with market-based data where available and appropriate.
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.
The fair value debt assumed is based on the estimated cash flow projections utilizing interest rates available for the issuance of debt with similar terms and remaining maturities. The Company applies a cost accumulation and allocation model to acquisitions that meet the definition of an asset acquisition.
The fair value debt assumed is based on the estimated cash flow projections utilizing interest rates available for the issuance of debt with similar terms and remaining maturities. 47 The Company applies a cost accumulation and allocation model to acquisitions that meet the definition of an asset acquisition.
For performance-based awards, stock-based compensation is valued utilizing a Monte Carlo Simulation to estimate the probability of the performance vesting conditions being satisfied. 51 The stock-based compensation is amortized through the final vesting period on a straight-line basis and graded vesting basis for time-based awards and performance-based awards, respectively. We account for forfeitures of awards as they occur.
For performance-based awards, stock-based compensation is valued utilizing a Monte Carlo Simulation to estimate the probability of the performance vesting conditions being satisfied. The stock-based compensation is amortized through the final vesting period on a straight-line basis and graded vesting basis for time-based awards and performance-based awards, respectively. We account for forfeitures of awards as they occur.
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.
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 62 assets that form the core of our activity and assists in comparing those operating results between periods.
Cost Capitalization We capitalize costs associated with development and redevelopment activities, capital improvements, tenant improvements and leasing activity. Costs associated with development and redevelopment that are capitalized include interest, property taxes, insurance and other costs directly related and essential to the acquisition, development or construction of a real 49 estate project.
Cost Capitalization We capitalize costs associated with development and redevelopment activities, capital improvements, tenant improvements and leasing activity. Costs associated with development and redevelopment that are capitalized include interest, property taxes, insurance and other costs directly related and essential to the acquisition, development or construction of a real estate project.
We periodically evaluate our 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 December 31, 2022, we have not established a liability for uncertain tax positions.
We periodically evaluate our 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 December 31, 2023, we have not established a liability for uncertain tax positions.
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 or placed under redevelopment or development as of December 31, 2022. 7.
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 or placed under redevelopment or development as of December 31, 2023. 7.
The amount of rental revenue generated by us also depends on our ability to maintain or increase rental rates at our properties. We believe that the average rental rates for our office properties are generally below the current average quoted market rate.
The amount of rental revenue generated by us also depends on our ability to maintain or increase re ntal rates at our properties. We believe that the average rental rates for our office properties are generally below the current average quoted market rate.
We and certain of our TRSs file income tax returns with the U.S. federal government and various state and local jurisdictions. We and our TRSs are no longer subject to tax examinations by tax authorities for years prior to 2018.
We and certain of our TRSs file income tax returns with the U.S. federal government and various state and local jurisdictions. We and our TRSs are no longer subject to tax examinations by tax authorities for years prior to 2019.
Percent leased for studio properties is calculated as (i) average square footage under commenced leases for the 12 months ended December 31, 2022, divided by (ii) total square feet, expressed as a percentage. 3.
Percent leased for studio properties is calculated as (i) average square footage under commenced leases for the 12 months ended December 31, 2023, divided by (ii) total square feet, expressed as a percentage. 3.
Percent occupied for office properties is calculated as (i) square footage under commenced leases as of December 31, 2022, divided by (ii) total square feet, expressed as a percentage. Percent leased for office properties includes uncommenced leases.
Percent occupied for office properties is calculated as (i) square footage under commenced leases as of December 31, 2023, divided by (ii) total square feet, expressed as a percentage. Percent leased for office properties includes uncommenced leases.
Rental Revenue The amount of net rental revenue generated by the properties in our portfolio depends principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space that becomes available from lease terminations.
Rental Revenue The amount of net rental revenue generated by the properties in our portfolio depends principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space that becomes available fro m lease terminations.
The increase was primarily driven by an increase in the average reference rates for the Company’s variable rate debt, increases in the outstanding borrowings on the Company’s unsecured revolving credit facility and One Westside construction loan and interest incurred on the Quixote secured note and the 5.95% registered senior notes, which were issued in August 2022 and September 2022, respectively.
The 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 dollar amounts included in the tables in this discussion of our results of operations are presented in thousands. 53 Comparison of the year ended December 31, 2022 to the year ended December 31, 2021 Net Operating Income We evaluate performance based upon property net operating income (“NOI”).
The dollar amounts included in the tables in this discussion of our results of operations are presented in thousands. 52 Comparison of the year ended December 31, 2023 to the year ended December 31, 2022 Net Operating Income We evaluate performance based upon property net operating income (“NOI”).
Impairment loss During the year ended December 31, 2022, we recognized an impairment loss of $28.5 million, of which $20.0 million was related to reductions in the estimated fair values of our Del Amo, Northview Center and 6922 Hollywood properties and $8.5 million was due to the full impairment of the Zio trade name in connection with a rebranding of the business.
During the year ended December 31, 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.
As such, no provision for federal income taxes has been included for the operating partnership. We have elected, together with certain of our subsidiaries, to treat such subsidiaries as taxable REIT subsidiaries (“TRSs”) for federal income tax purposes.
As such, no provision for federal income taxes has been included for the operating partnership. We have elected, together with certain of our subsidiaries, to treat such subsidiaries as TRSs for federal income tax purposes.
We own 20% of the ownership interests in the unconsolidated joint venture that owns Burrard Exchange. 4. We own 35% of the ownership interests in the unconsolidated joint venture that owns Sunset Waltham Cross Studios. 5.
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.
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 Sunset Glenoaks construction loan (unconsolidated joint venture); and • proceeds from additional secured, unsecured debt financings or offerings.
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; • strategic dispositions of real estate; • sales of non-real estate investments; • proceeds from additional equity securities; • our ATM program; • borrowings under the operating partnership’s unsecured revolving credit facility; • proceeds from joint venture partners; • proceeds from the Sunset Glenoaks construction loan (unconsolidated joint venture), Sunset Pier 94 Studios construction loan (unconsolidated joint venture) and Bentall Centre loan (unconsolidated joint venture); and • proceeds from additional secured, unsecured debt financings or offerings.
No loss on extinguishment of debt was recognized during the year ended December 31, 2022. Loss on sale of real estate During the year ended December 31, 2022, we recognized a $2.2 million loss on sale of real estate in connection with the dispositions of our Del Amo, Northview Center and 6922 Hollywood properties.
During the year ended December 31, 2022, we recognized a $2.2 million loss on sale of real estate in connection with the dispositions of our Northview Center and 6922 Hollywood properties.
Liquidity Sources We had approximately $255.8 million of cash and cash equivalents at December 31, 2022. Our principal source of operating cash flow is related to leasing and operating the properties in our portfolio.
Liquidity Sources We had approximately $100.4 million of cash and cash equivalents at December 31, 2023. Our principal source of operating cash flow is related to leasing and operating the properties in our portfolio.
Annualized base rent per square foot for studio portfolios is calculated as (i) annual base rent divided by (ii) square footage under leased as of December 31, 2022. 4. Includes office properties owned and included in our stabilized portfolio as of January 1, 2021 and still owned and included in the stabilized portfolio as of December 31, 2022. 5.
ABR per leased square foot calculated as (i) annual base rent divided by (ii) square footage under lease as of December 31, 2023. 4. Includes office properties owned and included in our stabilized portfolio as of January 1, 2022 and still owned and included in the stabilized portfolio as of December 31, 2023. 5.
Unrealized loss (gain) on non-real estate investments We recognized an unrealized loss on non-real estate investments of $1.4 million for the year ended December 31, 2022 compared to an unrealized gain on non-real estate investments of $16.6 million for the year ended December 31, 2021.
Unrealized loss on non-real estate investments We recognized an unrealized loss on non-real estate investments of $3.1 million for the year ended December 31, 2023 compared to an unrealized loss on non-real estate investments of $1.4 million for the year ended December 31, 2022.
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.
(2) 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 maturity date includes the effect of extension options.
Our production services assets included approximately 1,622 vehicles, lighting and grip, production supplies and other equipment and the lease rights to 27 sound stages. As of December 31, 2022, our in-service office portfolio was 89.7% leased (including leases not yet commenced). Our same-store studio properties average percent leased for the twelve months ended December 31, 2022 was 84.6%.
Our production services assets include vehicles, lighting and grip, production supplies and other equipment and the lease rights to 27 sound stages. As of December 31, 2023, our in-service office portfolio was 81.9% leased (including leases not yet commenced). Our same-store studio properties average percent leased for the twelve months ended December 31, 2023 was 80.4%.
(our operating partnership) and its subsidiaries, at December 31, 2022, our portfolio of owned real estate included office properties comprising approximately 15.9 million square feet, studio properties comprising approximately 35 sound stages and 1.5 million square feet and land properties comprising approximately 3.6 million square feet of undeveloped density rights.
(our operating partnership) and its subsidiaries, at December 31, 2023, our portfolio of owned real estate included office properties comprising approximately 14.7 million square feet, studio properties comprising approximately 48 sound stages and 1.7 million square feet and land properties comprising approximately 3.2 million square feet of undeveloped density rights.
As of December 31, 2022, the percent leased for our in-service office properties was approximately 89.7% (or 88.0%, excluding leases signed but not commenced as of that date). As of December 31, 2022, the percent leased, based on a 12-month trailing average, was approximately 84.6% for same-store studio properties.
As of December 31, 2023, the percent leased for our in-service office properties was approximately 81.9% (or 80.8%, excluding leases signed but not commenced as of that date). As of December 31, 2023, the percent leased, based on a 12-month trailing average, was approximately 80.4% for same-store studio properties.
When we are the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed.
If the lease provides for tenant improvements, we determine whether the tenant improvements, for accounting purposes, are owned by the tenant or us. When we are the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed.
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.
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.
Internal direct compensation costs and external legal fees related to the execution of successful lease agreements that do not meet the definition of initial direct costs under ASC 842 are accounted for as office operating expense or studio operating expense in our Consolidated Statements of Operations.
Internal direct compensation costs and external legal fees related to the execution of successful lease agreements that do not meet the definition of initial direct costs under ASC 842 are accounted for as office operating expense or studio operating expense in our Consolidated Statements of Operations. 49 We elected the lessor’s practical expedient to present revenues on the Consolidated Statement of Operations as a single lease component that combines rental, tenant recoveries, and other tenant-related revenues for the office portfolio.
No loss on sale was recognized during the year ended December 31, 2021.
No gain or loss on sale of bonds was recognized during the year ended December 31, 2022.
Annualized base rent per square foot for office properties is calculated as (i) annualized base rent divided by (ii) square footage under commenced leases as of December 31, 2022. Annualized base rent does not reflect tenant reimbursements.
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 December 31, 2023 by (ii) 12. On a per square foot basis, ABR is divided by square footage under commenced leases as of December 31, 2023.
As of December 31, 2022, the recorded fair value of the earnout liability was $9.3 million. Off-Balance Sheet Arrangements Joint Venture Indebtedness We have investments in unconsolidated real estate entities accounted for using the equity method of accounting.
Off-Balance Sheet Arrangements Joint Venture Indebtedness We have investments in unconsolidated real estate entities accounted for using the equity method of accounting.
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. 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 taxable REIT subsidiaries (“TRS”) for federal income tax purposes.
Interest rates with respect to indebtedness are calculated on the basis of a 360-day year for the actual days elapsed. 2. Reflects our projected interest obligations for fixed rate debts, which includes $17.2 million of projected interest related to our joint venture partner debt. 3.
Interest rates with respect to indebtedness are calculated on the basis of a 360-day year for the actual days elapsed. 2. Reflects our projected interest obligations for fixed rate debts, including those that are effectively fixed as a result of derivatives.
Capitalized interest decreased $3.7 million, or 16.9%, to $18.0 million for the year ended December 31, 2022 compared to $21.7 million for the year ended December 31, 2021.
Capitalized interest increased $14.2 million, or 78.9%, to $32.3 million for the year ended December 31, 2023 compared to $18.0 million for the year ended December 31, 2022.
Other (Income) Expense Income from unconsolidated real estate entities Income from our unconsolidated real estate entities decreased by $0.9 million, or 48.2%, to $0.9 million of income for the year ended December 31, 2022 compared to $1.8 million of income for the year ended December 31, 2021.
Fee income Fee income decreased by $1.8 million, or 22.5%, to $6.2 million for the year ended December 31, 2023 compared to $8.0 million for the year ended December 31, 2022. Fee income represents the management fee income earned from the unconsolidated real estate entities.
General and administrative expenses General and administrative expenses increased $8.2 million, or 11.4%, to $79.5 million for the year ended December 31, 2022 compared to $71.3 million for the year ended December 31, 2021.
General and administrative expenses General and administrative expenses decreased $4.5 million, or 5.7%, to $75.0 million for the year ended December 31, 2023 compared to $79.5 million for the year ended December 31, 2022.
The following table presents a reconciliation of net (loss) income to FFO (in thousands): Year Ended December 31, 2022 2021 Net (loss) income $ (16,517) $ 29,012 Adjustments: Depreciation and amortization—Consolidated 373,219 343,614 Depreciation and amortization—Non-real estate assets (23,110) (7,719) Depreciation and amortization—Company’s share from unconsolidated real estate entities 5,322 6,020 Loss on sale of real estate 2,164 — Impairment loss—Real estate assets 20,048 2,762 Unrealized loss (gain) on non-real estate investments 1,440 (16,571) Tax impact of unrealized gain on non-real estate investment — 3,849 FFO attributable to non-controlling interests (71,100) (64,388) FFO attributable to preferred shares and units (21,043) (2,893) FFO TO COMMON STOCKHOLDERS AND UNITHOLDERS $ 270,423 $ 293,686 64
The following table presents a reconciliation of net loss to FFO (in thousands): Year Ended December 31, 2023 2022 Net loss $ (170,700) $ (16,517) Adjustments: Depreciation and amortization—consolidated 397,846 373,219 Depreciation and amortization—non-real estate assets (33,389) (23,110) Depreciation and amortization—HPP’s share from unconsolidated real estate entities 4,779 5,322 (Gain) loss on sale of real estate (103,202) 2,164 Loss on sale of bonds 34,046 — Impairment loss—real estate assets 60,158 20,048 Unrealized loss on non-real estate investments 3,120 1,440 FFO attributable to non-controlling interests (42,335) (71,100) FFO attributable to preferred shares and units (20,800) (21,043) FFO TO COMMON STOCKHOLDERS AND UNITHOLDERS $ 129,523 $ 270,423
The increase was primarily related to the completion of the One Westside development in November 2021, the depreciation and amortization of property, plant and equipment and finite-lived intangible assets acquired as part of the Zio and Star Waggons transactions in August 2021 and the Quixote transaction in August 2022 and the acquisition of the 5th & Bell property in December 2021.
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.
Investing Activities Net cash used in investing activities decreased by $376.1 million, or 49.9%, to $378.1 million for the year ended December 31, 2022 as compared to $754.2 million for the year ended December 31, 2021.
Investing Activities Net cash provided by investing activities increased by $845.9 million, or 223.7%, to $467.8 million for the year ended December 31, 2023 as compared to $378.1 million of cash used in investing activities for the year ended December 31, 2022.
During the year ended December 31, 2021, we recognized an impairment loss of $2.8 million related to a reduction in the estimated hold period of our Del Amo property.
Impairment loss During the year ended December 31, 2023, we recognized an impairment loss of $60.2 million due to a reduction in the estimated fair value of our Foothill Research Center property.
The following table sets forth our ratio of debt to total market capitalization (counting series A preferred units as debt) as of December 31, 2022 (in thousands, except percentage): Market Capitalization December 31, 2022 Unsecured and secured debt (1) $ 4,610,088 Series A redeemable preferred units 9,815 Total consolidated debt 4,619,903 Equity capitalization (2) 1,833,281 TOTAL CONSOLIDATED MARKET CAPITALIZATION $ 6,453,184 Total consolidated debt/total consolidated market capitalization 71.6 % _____________ 1.
The following table sets forth our ratio of debt to total market capitalization (counting series A preferred units as debt) as of December 31, 2023 (in thousands, except percentage): Market Capitalization December 31, 2023 Unsecured and secured debt (1) $ 3,960,067 Series A redeemable preferred units 9,815 Total consolidated debt 3,969,882 Equity capitalization (2) 1,801,645 TOTAL CONSOLIDATED MARKET CAPITALIZATION $ 5,771,527 Total consolidated debt/total consolidated market capitalization 68.8 % _____________ 1.
Includes studio properties owned and included in our portfolio as of January 1, 2021 and still owned and included in our portfolio as of December 31, 2022. 8.
Includes studio properties owned and included in our portfolio as of January 1, 2022 and still owned and included in our portfolio as of December 31, 2023. 8. See Repositioning table in this document for the office and studio projects under repositioning as of December 31, 2023. 9.
We recognize rental revenue from tenants on a straight-line basis over the lease term when collectability is probable and the tenant has taken possession or controls the physical use of the leased asset. If the lease provides for tenant improvements, we determine whether the tenant improvements, for accounting purposes, are owned by the tenant or us.
For our rentals at the studio properties, total lease consideration is allocated to lease and non-lease components on a relative standalone basis. We recognize rental revenue from tenants on a straight-line basis over the lease term when collectability is probable and the tenant has taken possession or controls the physical use of the leased asset.
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.
This loan is held by an unconsolidated joint venture. Amounts are presented at HPP’s share. 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.
Financing Activities Net cash provided by financing activities decreased by $389.2 million, or 80.0%, to $97.4 million for the year ended December 31, 2022 as compared to $486.7 million for the year ended December 31, 2021.
Financing Activities Net cash used in financing activities increased by $964.1 million, or 989.4%, to $866.7 million for the year ended December 31, 2023 as compared to $97.4 million of cash provided by financing activities for the year ended December 31, 2022.
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 December 31, 2022. 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.
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 December 31, 2023.
Operating Activities Net cash provided by operating activities increased by $54.6 million, or 17.4%, to $369.5 million for the year ended December 31, 2022 as compared to $314.9 million for the year ended December 31, 2021.
Operating Activities Net cash provided by operating activities decreased by $137.2 million, or 37.1%, to $232.3 million for the year ended December 31, 2023 as compared to $369.5 million for the year ended December 31, 2022.
Our properties provide a relatively consistent stream of cash flow that provides us with resources to pay operating expenses, debt service 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.
Our properties provide a relatively consistent stream of cash flow that provides us with resources to pay operating expenses, debt service and fund quarterly dividend and distribution requirements.
As of December 31, 2022, the Company has contributed $33.2 million, net of recallable distributions, with $14.8 million remaining to be contributed. 62 The terms of the securities purchase agreement for the acquisition of Zio require the Company to pay up to $20.0 million of additional consideration to the business’s former shareholders in 2024, subject to certain performance thresholds being met (the “earnout”).
The terms of the securities purchase agreement for the acquisition of Zio require the Company to pay up to $20.0 million of additional consideration to the business’s former shareholders in 2024 and 2025, subject to certain performance thresholds being met (the “earnout”). $5.0 million was subsequently paid in January 2024, with a maximum potential earnout of $7.5 million and $7.5 million remaining in 2024 and 2025, respectively.
We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2010.
Accordingly, a provision for foreign income taxes has been recorded in the accompanying consolidated financial statements based on the local tax laws and regulations of the respective tax jurisdictions. We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2010.
Critical Accounting Policies and 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 as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Because a taxable REIT subsidiary is subject to federal income tax, and state and local income tax (where applicable), as a regular C corporation, the income earned by our taxable REIT subsidiaries generally will be subject to an additional level of tax as compared to the income earned by our other subsidiaries. 46 Critical Accounting Policies and 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 as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Under Construction and Future Development Projects The following table summarizes the properties currently under construction and future developments as of December 31, 2022: Location Submarket Estimated Square Feet (1) Estimated Completion Date Estimated Stabilization Date Under Construction: Sunset Glenoaks Studios (2) Los Angeles 241,000 Q3-2023 Q2-2024 Washington 1000 Denny Triangle 546,000 Q1-2024 Q1-2026 Total Under Construction 787,000 Future Development Pipeline: Burrard Exchange at Bentall Centre (3) Downtown Vancouver 450,000 TBD TBD Sunset Waltham Cross Studios (4) Broxbourne 1,167,347 TBD TBD Sunset Gower Studios—Development (5) Hollywood 478,845 TBD TBD Sunset Las Palmas Studios—Development (5) Hollywood 617,581 TBD TBD Cloud10 North San Jose 350,000 TBD TBD Element LA — Development West Los Angeles 500,000 TBD TBD Sunset Bronson Studios Lot D —Development (5) Hollywood 19,816 TBD TBD Total Future Development Pipeline 3,583,589 TOTAL UNDER CONSTRUCTION AND FUTURE DEVELOPMENT PIPELINE 4,370,589 _____________ 1.
Please refer to Part IV, Item 15 (a) “Exhibits, Financial Statement Schedules—Note 4 to the Consolidated Financial Statements—Investment in Real Estate” for details. 43 Under Construction and Future Development Projects The following table summarizes the properties currently under construction and future development pipelines as of December 31, 2023: Type Submarket Estimated Square Feet (1) Estimated Completion Date Estimated Stabilization Date Under Construction: Los Angeles, California Sunset Glenoaks Studios (2) Studio Sun Valley 241,000 Q1-2024 Q2-2024 Seattle, Washington Washington 1000 Office Denny Triangle 546,000 Q1-2024 Q2-2026 New York, New York Sunset Pier 94 Studios (3) Studio Manhattan 232,000 Q4-2025 Q3-2026 Total Under Construction 1,019,000 Future Development Pipeline: Los Angeles, California Sunset Las Palmas Studios—Development (4) Studio Hollywood 617,581 TBD TBD Sunset Gower Studios—Development (4) Office/Studio Hollywood 478,845 TBD TBD Sunset Bronson Studios Lot D—Development (4) Residential Hollywood 33 units/19,816 TBD TBD Element LA—Development Office West Los Angeles 500,000 TBD TBD 10900/10950 Washington (5) Residential West Los Angeles N/A TBD TBD Vancouver, British Columbia Burrard Exchange (6) Office Downtown Vancouver 450,000 TBD TBD Greater London, United Kingdom Sunset Waltham Cross Studios (7) Studio Broxbourne 1,167,347 TBD TBD Total Future Development Pipeline 3,233,589 TOTAL UNDER CONSTRUCTION AND FUTURE DEVELOPMENT 4,252,589 _____________ 1.
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 $9.73, as reported by the NYSE, on December 30, 2022 as well as the aggregate value of the Series C preferred stock liquidation preference as of December 30, 2022. 61 Outstanding Indebtedness The following table sets forth information as of December 31, 2022 and December 31, 2021 with respect to our outstanding indebtedness, excluding unamortized deferred financing costs and loan discounts (in thousands): December 31, 2022 December 31, 2021 Unsecured debt $ 2,660,000 $ 2,050,000 Secured debt $ 1,950,088 $ 1,714,874 In-substance defeased debt $ — $ 128,212 Joint venture partner debt $ 66,136 $ 66,136 The operating partnership was in compliance with its financial covenants as of December 31, 2022.
Outstanding Indebtedness The following table sets forth information as of December 31, 2023 and December 31, 2022 with respect to our outstanding indebtedness, excluding unamortized deferred financing costs and loan discounts (in thousands): December 31, 2023 December 31, 2022 Unsecured debt $ 2,307,000 $ 2,660,000 Secured debt $ 1,653,067 $ 1,950,088 Joint venture partner debt $ 66,136 $ 66,136 The operating partnership was in compliance with its financial covenants as of December 31, 2023.
The decrease was partially offset by a $602.9 million decrease in payments of notes payable and a $38.2 million decrease in distributions to non-controlling members in consolidated real estate entities. Non-GAAP Supplemental Financial Measures We calculate FFO in accordance with the White Paper issued in December 2018 on FFO approved by the Board of Governors of NAREIT.
Non-GAAP Supplemental Financial Measures We calculate FFO in accordance with the White Paper issued in December 2018 on FFO approved by the Board of Governors of NAREIT.
Reflects minimum lease payments through the contractual lease expiration date, including the impact of the extension options which the Company is reasonably certain to exercise. Refer to Part IV, Item 15(a) “Exhibits, Financial Statement Schedules—Note 11 to the Consolidated Financial Statements—Future Minimum Base Rents and Lease Payments” for details of our lease agreements.
Refer to Part IV, Item 15(a) “Exhibits, Financial Statement Schedules—Note 11 to the Consolidated Financial Statements—Future Minimum Base Rents and Lease Payments” for details of our lease agreements. The Company has entered into a number of construction agreements related to capital improvement activities at various properties.
Cash Flows Comparison of the cash flow activity for the year ended December 31, 2022 to the year ended December 31, 2021 is as follows (in thousands, except percentage change): Year Ended December 31, 2022 2021 Dollar Change Percentage Change Net cash provided by operating activities $ 369,501 $ 314,863 $ 54,638 17.4 % Net cash used in investing activities $ (378,094) $ (754,208) $ 376,114 (49.9) % Net cash provided by financing activities $ 97,448 $ 486,681 $ (389,233) (80.0) % Cash and cash equivalents and restricted cash were $285.7 million and $196.9 million at December 31, 2022 and 2021, respectively.
The maturity date includes the effect of extension options. 61 Cash Flows Comparison of the cash flow activity for the year ended December 31, 2023 to the year ended December 31, 2022 is as follows (in thousands, except percentage change): Year Ended December 31, 2023 2022 Dollar Change Percentage Change Net cash provided by operating activities $ 232,256 $ 369,501 $ (137,245) (37.1) % Net cash provided by (used in) investing activities $ 467,841 $ (378,094) $ 845,935 (223.7) % Net cash (used in) provided by financing activities $ (866,672) $ 97,448 $ (964,120) (989.4) % Cash and cash equivalents and restricted cash were $119.2 million and $285.7 million at December 31, 2023 and 2022, respectively.
Generally, we have assessed our tax positions for all open years, which as of December 31, 2022 include 2019 to 2021 for Federal purposes and 2018 to 2021 for state purposes, and concluded that there are no material uncertainties to be recognized. 52 Results of Operations The following table summarizes our portfolio as of December 31, 2022 : The following table summarizes our consolidated and unconsolidated portfolio as of December 31, 2022: Number of Properties Rentable Square Feet (1) Percent Occupied (2) Percent Leased (2) Annualized Base Rent per Square Foot (3) OFFICE Same-store (4) 43 12,823,317 87.7 % 89.1 % $ 53.87 Stabilized non-same store (5) 4 1,100,593 99.1 99.1 57.36 Total stabilized 47 13,923,910 88.6 89.9 54.18 Lease-up (5)(6) 1 725,311 76.9 87.2 60.05 Total in-service office 48 14,649,221 88.0 89.7 54.43 STUDIO Same-store (7) 3 1,230,454 84.6 84.6 44.74 Non-same-store (5) 1 35,562 — — — Total 4 1,266,016 Repositioning (5)(8) 2 433,259 — 4.4 Development (5)(9) 2 787,000 — — Held-for-sale (5)(10) 1 246,997 30.1 30.1 56.37 Total repositioning, redevelopment, development and held-for-sale 5 1,467,256 Total office and studio properties 57 17,382,493 Land 7 3,583,589 TOTAL 64 20,966,082 ____________ 1.
Generally, we have assessed our tax positions for all open years, which as of December 31, 2023 include 2020 to 2022 for Federal purposes and 2019 to 2022 for state purposes, and concluded that there are no material uncertainties to be recognized. 51 Results of Operations The following table summarizes our portfolio as of December 31, 2023 : Number of Properties Rentable Square Feet (1) Percent Occupied (2) Percent Leased (2) Annualized Base Rent per Square Foot (3) OFFICE Same-store (4) 41 12,910,134 80.8 % 81.6 % $ 55.10 Stabilized non-same store (5) 2 219,023 89.5 89.5 54.71 Total stabilized 43 13,129,157 80.9 81.8 55.10 Lease-up (5)(6) 1 723,848 77.7 84.3 61.80 Total in-service office 44 13,853,005 80.8 81.9 55.43 STUDIO Same-store (7) 3 1,231,278 80.4 80.4 45.88 Total 3 1,231,278 Repositioning (5)(8) 1 278,600 — 2.2 Development (5)(9) 3 1,019,000 — 0.3 Total repositioning and development 4 1,297,600 Total office and studio properties 51 16,381,883 Future development (10) 7 3,233,589 TOTAL 58 19,615,472 ____________ 1.
Comparison of the year ended December 31, 2021 to the year ended December 31, 2020 Refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Comparison of the year ended December 31, 2021 to the year ended December 31, 2020” of the Form 10-K for the fiscal year ended December 31, 2021. 60 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.
Comparison of the year ended December 31, 2022 to the year ended December 31, 2021 Refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Comparison of the year ended December 31, 2022 to the year ended December 31, 2021” of the Form 10-K for the fiscal year ended December 31, 2022.
The decrease was primarily driven by higher interest expense at the unconsolidated entities due to an increase in the average reference rates for variable rate debt. Fee income Fee income increased by $4.8 million, or 147.5%, to $8.0 million for the year ended December 31, 2022 compared to $3.2 million for the year ended December 31, 2021.
An increase in the average reference rates for the Company’s variable rate debt also contributed to the increase. Non-cash interest expense increased $16.7 million, or 324.3% to $21.9 million for the year ended December 31, 2023 compared to $5.2 million for the year ended December 31, 2022.
Government securities in June 2022. 46 In August 2022, the Company modified the existing loan agreement secured by its 1918 Eighth property, whereby the LIBOR-based floating interest rate was replaced with a term SOFR-based floating interest rate. In August 2022, the Company acquired Quixote.
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.
Includes 546,000 square feet related to the office development Washington 1000, adjacent to the Washington State Convention Center and 241,000 square feet related to Sunset Glenoaks. 10. Includes Skyway Landing.
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.
Reflects our projected interest obligations for variable rate debts, including those that are effectively fixed as a result of derivatives and in instances where interest is paid based on an applicable LIBOR or SOFR margin . We used the average December LIBOR or SOFR, as applicable, and the applicable margin as of December 31, 2022. 4.
Also includes $14.2 million of projected interest related to our joint venture partner debt and debt that is effectively fixed through the use of interest rate swaps. 3. Reflects our projected interest obligations for variable rate debts, including instances where interest is paid based on an applicable SOFR margin.
The increase was primarily driven by lower non-cash compensation expense during 2021 due to the forfeiture of stock awards granted to certain departing members of management, which did not recur in 2022, in addition to higher professional fees, personnel-related and office expenses during 2022. 59 Depreciation and amortization expense Depreciation and amortization expense increased $29.6 million, or 8.6%, to $373.2 million for the year ended December 31, 2022 compared to $343.6 million for the year ended December 31, 2021.
The decrease was primarily driven by a decrease in payroll, non-cash compensation, office and travel and entertainment expenses. 58 Depreciation and amortization expense Depreciation and amortization expense increased $24.6 million, or 6.6%, to $397.8 million for the year ended December 31, 2023 compared to $373.2 million for the year ended December 31, 2022.
The change resulted primarily from proceeds from the sales of real estate in the amount of $137.7 million, a $123.5 million increase in proceeds from maturities of U.S.
The change primarily resulted from a $705.3 million increase in proceeds from the sales of real estate and a $295.6 million decrease in expenditures for the acquisition of businesses and properties. The change was partially offset by a $129.3 million decrease in proceeds from the maturities of U.S.
Determined by management based upon estimated leasable square feet, which may be less or more than the BOMA rentable area. Square footage may change over time due to re-measurement or re-leasing. 2. We own 50% of the ownership interests in the unconsolidated joint venture that owns Sunset Glenoaks Studios. 3.
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.
Please refer to Part IV, Item 15 (a) “Exhibits, Financial Statement Schedules—Note 4 to the Consolidated Financial Statements—Investment in Real Estate” for details.
The decrease primarily resulted from a slowdown in production rentals activity due to the WGA and SAG-AFTRA strikes as well as the 2022 and 2023 property dispositions. Refer to Part IV, Item 15(a) “Financial Statement Schedules—Note 4 to the Consolidated Financial Statements—Investment in Real Estate” for detail on the dispositions.
Transaction-related expenses Transaction-related expenses increased $5.4 million, or 61%, to $14.4 million for the year ended December 31, 2022, which primarily related to the Quixote acquisition in August 2022, compared to $8.9 million for the year ended December 31, 2021, which primarily related to the acquisition of Zio and Star Waggons in August 2021.
Transaction-related expenses We recorded $1.2 million of income predominantly related to the remeasurement of the Zio earnout liability to fair value during the year ended December 31, 2023. During the year ended December 31, 2022, we recorded $14.4 million of expenses primarily related to the Quixote acquisition in August 2022.
Other (income) expense Other income increased $11.5 million, or 450.6%, to of $9.0 million for the year ended December 31, 2022 compared to other expense of $2.6 million for the year ended December 31, 2021. The increase was predominantly related to an income tax benefit recorded in 2022 primarily related to the studio service-related businesses.
The change was primarily due to the presentation of an income tax benefit of $7.5 million within this line item on the Consolidated Statement of Operations for the year ended December 31, 2022. The tax benefit recorded in 2022 primarily related to net operating losses at the studio service-related businesses.
As of December 31, 2022, we have $59.3 million undrawn. The interest on the full principal amount has been effectively capped at 7.60% per annum (4.50% strike rate + 3.10% spread) through the use of an interest rate cap.
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) 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%.
The Company invests in several non-real estate funds with an aggregate commitment to contribute up $48.0 million.
As of December 31, 2023, the Company had $108.3 million in outstanding obligations under the agreements, of which $82.6 million is expected to be incurred within one year from December 31, 2023. The Company invests in several non-real estate funds with an aggregate commitment to contribute up $51.0 million.
Government securities, a $61.8 million decrease in additions to investment in real estate, a $35.5 million decrease in contributions to unconsolidated real estate entities and a $22.4 million decrease in expenditures on property acquisitions during the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Government securities, a $28.7 million increase in contributions to unconsolidated real estate entities and a $22.0 million increase in additions to investment property.
Credit Ratings The following table provides information with respect to our credit ratings at December 31, 2022: Agency Credit Rating Moody’s Baa3 Standard and Poor’s BBB- Fitch BBB- Liquidity Uses Contractual Obligations The following table provides information with respect to our commitments at December 31, 2022, including any guaranteed or minimum commitments under contractual obligations (in thousands): Payments Due by Period Contractual Obligation Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Principal payments on unsecured and secured debt $ 4,610,088 $ 320,000 $ 1,057,902 $ 1,881,186 $ 1,351,000 Principal payments on joint venture partner debt 66,136 — — — 66,136 Interest payments—fixed rate (1)(2) 541,311 114,109 207,942 158,279 60,981 Interest payments—variable rate (1)(3) 166,605 92,108 74,497 — — Operating leases (4) 745,388 39,054 78,746 73,063 554,525 TOTAL $ 6,129,528 $ 565,271 $ 1,419,087 $ 2,112,528 $ 2,032,642 _____________ 1.
On January 12, 2024, Standard and Poor’s downgraded our credit rating from “BB+” to “BB”. 60 Liquidity Uses Contractual Obligations The following table provides information with respect to our commitments at December 31, 2023, including any guaranteed or minimum commitments under contractual obligations (in thousands): Payments Due by Period Contractual Obligation Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Principal payments on unsecured and secured debt $ 3,960,067 $ — $ 2,153,067 $ 907,000 $ 900,000 Principal payments on joint venture partner debt 66,136 — — — 66,136 Interest payments—fixed rate (1)(2) 467,558 126,189 198,519 123,531 19,319 Interest payments—variable rate (1)(3) 73,855 51,945 21,910 — — Operating leases (4) 715,344 41,311 79,527 70,702 523,804 TOTAL $ 5,282,960 $ 219,445 $ 2,453,023 $ 1,101,233 $ 1,509,259 _____________ 1.
Our world-class sustainable office and studio properties within these submarkets allow us to attract and retain quality companies as tenants, many in the increasingly synergistic technology and media and entertainment sectors. The purchase of properties with a value-add component, typically sourced through off-market transactions, also facilitates our long-term growth.
This allows us to attract and retain quality companies as office tenants and/or studio and production services clients, many in the increasingly synergistic technology and media and entertainment sectors. Our focus on value-add opportunities, as well as selective ground-up development further facilitates our growth.
The activity in both periods is due to the observable changes in the fair value of the investments.
The activity in both periods is due to the observable changes in the fair value of the investments. Gain on extinguishment of debt During the year ended December 31, 2023, we recognized a $10.0 million gain on extinguishment of debt due to the settlement of the Quixote note at a discount.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe following table summarizes the terms our derivative instrument used to hedge interest rate risk as of December 31, 2022 (notional amount and fair value in thousands): Underlying Debt Instrument Type of Instrument Notional Amount Effective Date Maturity Date Strike Rate Fair Value Assets (Liabilities) Hollywood Media Portfolio Interest rate cap 1,100,000 August 2021 August 2023 3.50% $ 9,292 The following table summarizes our fixed and variable rate debt as of December 31, 2022 (in thousands): Unsecured and Secured Debt Joint Venture Partner Debt Carrying Value Fair Value Carrying Value Fair Value Variable rate $ 1,906,087 $ 1,906,087 $ — $ — Fixed rate 2,704,001 2,386,081 66,136 60,327 TOTAL (1) $ 4,610,088 $ 4,292,168 $ 66,136 $ 60,327 _____________ 1.
Biggest changeThe following table summarizes our fixed and variable rate debt as of December 31, 2023 (in thousands): Unsecured and Secured Debt Joint Venture Partner Debt Carrying Value Fair Value Carrying Value Fair Value Variable rate $ 1,052,016 $ 1,052,016 $ — $ — Fixed rate (1) 2,908,051 2,554,062 66,136 59,966 TOTAL (2) $ 3,960,067 $ 3,606,078 $ 66,136 $ 59,966 _____________ 1.
Financial Statements and Supplementary Data Our consolidated financial statements included in this Annual Report on Form 10-K are listed in Part IV, Item 15(a) of this report. ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. 65
Financial Statements and Supplementary Data Our consolidated financial statements included in this Annual Report on Form 10-K are listed in Part IV, Item 15(a) of this report. ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. 64
Excludes unamortized deferred financing costs. For sensitivity purposes, if the reference rates (either LIBOR or SOFR, as applicable) for our variable rate debt as of December 31, 2022 were to increase by 100 basis points, or 1.0%, the resulting increase in annual interest expense would decrease our future earnings and cash flows by $19.1 million.
For sensitivity purposes, if the reference rates for our variable rate debt as of December 31, 2023 were to increase by 100 basis points, or 1.0%, the resulting increase in annual interest expense would decrease our future earnings and cash flows by $10.5 million.
Removed
However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure.
Added
However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure. 63 The following table summarizes the terms our derivative instruments used to hedge interest rate risk as of December 31, 2023 (notional amounts and fair value in thousands): Underlying Debt Instrument Type of Instrument Accounting Policy Notional Amount Effective Date Maturity Date Interest Rate Fair Value Assets (Liabilities) 1918 Eighth Swap Cash flow hedge $ 172,865 February 2023 October 2025 3.75% $ 1,075 1918 Eighth Cap Partial cash flow hedge (1) $ 314,300 June 2023 December 2025 5.00% 952 1918 Eighth Sold cap (2) Mark-to-market $ 172,865 June 2023 December 2025 5.00% (520) Hollywood Media Portfolio Cap Partial cash flow hedge (1) $ 1,100,000 August 2023 August 2024 5.70% 59 Hollywood Media Portfolio Sold cap (2) Mark-to-market $ 561,000 August 2023 August 2024 5.70% (29) Hollywood Media Portfolio Swap Cash flow hedge $ 351,186 August 2023 June 2026 3.31% 4,355 TOTAL $ 5,892 _____________ 1. $141,435 and $539,000 of the notional amounts of the 1918 Eighth and Hollywood Media Portfolio caps, respectively, have been designated as effective cash flow hedges for accounting purposes.
Added
The remainder of each is accounted for under mark-to-market accounting. 2. The sold caps serve to offset the changes in fair value of the portions of the 1918 Eighth and Hollywood Media Portfolio caps that are not designated as cash flow hedges for accounting purposes.
Added
Includes debt that is effectively fixed through the use of interest rate swaps. 2. Excludes unamortized deferred financing costs.

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