Hudson Pacific Properties, Inc. (“Hudson” or the “Company”) (NYSE:
HPP) announced today the completion of its acquisition of Equity
Office Properties’ San Francisco Peninsula and Silicon Valley portfolio
(“EOP Northern California Portfolio”) from Blackstone Real Estate
Partners V and VI (“Blackstone”) for approximately 63.5 million common
shares and operating partnership units and $1.75 billion in cash (before
certain credits, prorations and closing costs). The EOP Northern
California Portfolio consists of 26 high-quality office assets totaling
approximately 8.2 million square feet and two development parcels in
prime Bay Area submarkets. In addition to a roster of blue-chip tenants,
the portfolio’s in-place, below-market rents and occupancy afford Hudson
the opportunity to create value by leveraging leasing and repositioning
expertise. Upon closing, Hudson’s combined portfolio totals 53
properties or 17.3 million square feet, including land for development,
across Northern and Southern California and the Pacific Northwest.
“Following several months of impeccable execution by the entire Hudson
team on all fronts – diligence, leasing, operations, financing, asset
sales and joint ventures, we completed the acquisition of the EOP
Northern California Portfolio, which represents a transformative event
in our young company’s history,” said Victor J. Coleman, Hudson’s
Chairman and Chief Executive Officer. “We view this transaction and
integration of the new assets as a marathon, not a sprint, and will
continue to work tirelessly to realize each carefully-crafted,
asset-specific business plan to the benefit of our tenants and
ultimately, our stockholders.”
“We are thrilled to own a major stake in Hudson and have been very
impressed by the management team and their excellent progress on leasing
to date. We continue to believe strongly in the upside potential of the
company and look forward to working closely together,” said Frank Cohen,
Senior Managing Director of Blackstone and Global Head of Core + Real
Estate.
Effective April 1, 2015, Hudson’s Board of Directors has appointed Frank
Cohen, Senior Managing Director of Blackstone and Global Head of Core +
Real Estate, Michael Nash, Senior Managing Director of Blackstone and
Chief Investment Officer of Blackstone Real Estate Debt Strategies, and
John Schreiber, Partner and Co-Founder of Blackstone Real Estate
Advisors, as members of the Company’s Board of Directors.
Hudson funded the EOP Northern California Portfolio acquisition’s $1.75
billion cash consideration and approximately $54.3 million of closing
costs from a combination of sources, including $1.3 billion of unsecured
term loan indebtedness, details of which are discussed more fully below,
and approximately $261.7 million of net proceeds from the Company’s
joint venture with CPPIB with respect to its 1455 Market Street property
and the sale of its First Financial property, both of which funded the
transaction pursuant to a 1031 exchange. After accounting for various
credits, proration adjustments and closing costs, the remaining
approximately $189.7 million required to close the acquisition was
funded from cash on hand from the Company’s January equity offering.
In anticipation of closing, Hudson amended and restated its unsecured
revolving and term loan facility to, among other things, increase the
unsecured revolving credit facility from $300.0 to $400.0 million,
increase the five-year unsecured term loan facility from $150.0 to
$550.0 million, and add a seven-year $350.0 million unsecured term loan
facility. Hudson also entered into a two-year $550.0 million unsecured
term loan to facilitate an expedited closing. A detailed explanation of
the terms of these facilities can be found in the 8-K filed with the
Securities and Exchange Commission in connection with the EOP Northern
California Portfolio acquisition.
For purposes of the acquisition, nothing was drawn under the $400.0
million revolving unsecured credit facility.
The $550.0 million five-year term facility was fully drawn by Hudson at
closing to replace its existing $150.0 million five-year term loan
facility, with the incremental $400.0 million applied toward the EOP
Northern California Portfolio acquisition. Similar to Hudson’s prior
five-year term loan facility, this facility bears interest at a rate
equal to LIBOR plus 130 to 220 basis points per annum depending on the
Company’s leverage ratio. At closing, Hudson entered into interest rate
contracts with respect to $300.0 million of the five-year term loan
facility which, effective as of May 1, 2015, swaps one-month LIBOR to a
fixed rate of 1.36% through the loan's maturity on April 1, 2020. Based
on the Company’s current leverage ratio and the rate under these swaps,
$300.0 million this facility bears interest at a rate of 2.66% per annum
commencing May 1, 2015. The remaining $250.0 million bears interest at a
rate equal to LIBOR plus 130 to 220 basis points per annum depending on
the Company’s leverage ratio. Amortization of deferred financing costs
associated with this facility is projected to increase interest expense
by 0.20% per annum.
The $350.0 million seven-year term facility was fully drawn by Hudson at
closing to partially fund the EOP Northern California Portfolio
acquisition. This facility bears interest at a rate equal to LIBOR plus
160 to 255 basis points per annum depending on the Company’s leverage
ratio. At closing, Hudson entered into interest rate contracts with
respect to the seven-year term loan facility, which, effective as of May
1, 2015, swapped one-month LIBOR to a fixed rate of 1.61% through the
loan's maturity on April 1, 2022. Based on the Company’s current
leverage ratio and the rate under these swaps, this facility bears
interest at a rate of 3.21% per annum, commencing May 1, 2015.
Amortization of deferred financing costs associated with this facility
is projected to increase interest expense by 0.16% per annum.
Finally, the $550.0 million two-year term facility was fully drawn by
Hudson at closing to partially fund the EOP Northern California
Portfolio acquisition. This facility bears interest at a rate equal to
LIBOR plus 130 to 220 basis points per annum depending on the Company’s
leverage ratio, and may be prepaid without penalty. Hudson is
considering longer-term debt alternatives to refinance this facility.
2015 Outlook
Hudson is increasing its full-year 2015 FFO guidance from a range of
$1.42 to $1.48 per diluted share (excluding specified items) to a
revised range of $1.50 to $1.56 per diluted share (excluding specified
items). This guidance reflects the acquisitions, dispositions,
financings and leasing activity previously announced and referenced
herein. For purposes of this estimate, we have assumed that the interest
rate with respect to the $250.0 million portion of the five-year term
facility, which remains floating at closing, and the interest rate with
respect to the $550.0 million two-year term facility, which remains
floating at closing, will be fixed, effective as of May 15, 2015, to a
combined rate of 4.25% per annum (including estimated amortization of
deferred financing costs). The full-year 2015 FFO estimate reflects
Hudson management’s view of current and future market conditions,
including assumptions with respect to rental rates, occupancy levels and
earnings from events referenced in this release, but otherwise excludes
any impact from future unannounced or speculative acquisitions,
dispositions, debt financings or repayments, recapitalizations, capital
market activity or similar matters.
About Hudson Pacific Properties
Hudson Pacific Properties is a vertically-integrated real estate company
focused on acquiring, repositioning, developing and operating
high-quality office and state-of-the-art media and entertainment
properties in select West Coast markets. Hudson invests across
the risk-return spectrum, favoring opportunities where it can employ
leasing, capital investment and management expertise to create
additional value. Founded in 2006 as Hudson Capital, the Company went
public in 2010, electing to be taxed as a real estate investment trust.
Through the years, Hudson has strategically assembled a portfolio of 53
properties totaling approximately 17.3 million square feet, including
land for development, in high-growth, high-barrier-to-entry submarkets
throughout Northern and Southern California and the Pacific Northwest.
The Company is a leading provider of design-forward, next-generation
workspaces for a variety of tenants, with a focus on Fortune 500 and
industry-leading growth companies, many in the technology, media and
entertainment sectors. As a long-term owner, Hudson prioritizes tenant
satisfaction and retention, providing highly-customized build-outs and
working proactively to accommodate tenants’ growth. Hudson trades as a
component of the Russell 2000® and the Russell 3000® indices. For more
information visit hudsonpacificproperties.com.
Forward-Looking Statements
This press release may contain forward-looking statements within the
meaning of the federal securities laws. Forward-looking statements
relate to expectations, beliefs, projections, future plans and
strategies, anticipated events or trends and similar expressions
concerning matters that are not historical facts. In some cases, you can
identify forward-looking statements by the use of forward-looking
terminology such as “may,” “will,” “should,” “expects,” “intends,”
“plans,” “anticipates,” “believes,” “estimates,” “predicts,” or
“potential” or the negative of these words and phrases or similar words
or phrases that are predictions of or indicate future events or trends
and that do not relate solely to historical matters. Forward-looking
statements involve known and unknown risks, uncertainties, assumptions
and contingencies, many of which are beyond the Company’s control that
may cause actual results to differ significantly from those expressed in
any forward-looking statement. All forward-looking statements reflect
the Company’s good faith beliefs, assumptions and expectations, but they
are not guarantees of future performance. Furthermore, the Company
disclaims any obligation to publicly update or revise any
forward-looking statement to reflect changes in underlying assumptions
or factors, of new information, data or methods, future events or other
changes. For a further discussion of these and other factors that could
cause the Company’s future results to differ materially from any
forward-looking statements, see the section entitled “Risk Factors” in
the Company’s Annual Report on Form 10-K for the year ended December 31,
2014 filed with the Securities and Exchange Commission, or SEC, on
March 2, 2015, as amended, and other risks described in documents
subsequently filed by the Company from time to time with the SEC.
Copyright Business Wire 2015