Hudson Pacific Announces Completion of Credit Facility Amendment

Rhea-AI Summary

Hudson Pacific Properties, Inc. (NYSE: HPP) announces the amendment to its unsecured revolving credit facility, refining certain definitions and covenant calculations. The company closed on the amendment to temporarily extend its unsecured leverage and total leverage thresholds, refine definitions for assets, and expand the type of assets included in the unsecured leverage and unencumbered net operating income covenants. The company's compliance with the amended covenants as of September 30, 2023, reflects favorable performance, with a reduction of $100 million in aggregate commitments from lenders under the unsecured revolving credit facility.

Insights

Financial Analyst

The amendment to Hudson Pacific Properties' credit facility is a strategic move to enhance financial flexibility. The adjustment of leverage thresholds and the refinement of asset definitions are likely to provide the company with greater maneuverability in executing its growth strategy, particularly through acquisitions. The reduction in total commitments by $100 million, while seemingly counterintuitive, could reflect a more conservative approach to debt management in anticipation of market volatility. The company's strong covenant compliance metrics, as evidenced by the proforma figures, indicate robust financial health and a disciplined approach to leverage.

From a stakeholder's perspective, the amendment may signal confidence in the company's operational strategy and its relationship with lenders. However, the reduction in available credit could be a double-edged sword, potentially limiting the company's ability to capitalize on large-scale opportunities quickly. Investors should monitor how these changes affect the company's agility in the dynamic real estate market, especially within the tech and media sectors where tenant demands can shift rapidly.

Market Research Analyst

Hudson Pacific Properties' focus on tech and media tenants positions the company at the intersection of real estate and high-growth industries. The inclusion of studio services businesses within the unsecured leverage and unencumbered NOI covenants may reflect an attempt to capitalize on the burgeoning demand for content production spaces. This strategic positioning could benefit the company as digital media consumption continues to rise.

However, the market should consider the broader economic context, including interest rate trends and the tech industry's health, when evaluating the implications of these financial maneuvers. The adjustments to the credit facility may afford Hudson Pacific the ability to pivot more effectively in response to industry-specific trends, but it also underscores the necessity for continual adaptation to maintain a competitive edge in a sector where technological advancements can rapidly alter market dynamics.

Real Estate Investment Expert

The amendment to Hudson Pacific Properties' credit facility, particularly the 'surge provision' allowing a temporary extension of leverage thresholds, indicates a proactive approach to capital management in real estate investment. This flexibility is crucial for executing timely acquisitions, which can often make or break a company's competitive position in the market. The refinement of definitions to include reposition and development projects suggests a focus on value-add strategies, which are integral to real estate portfolio growth and diversification.

Long-term, the company's ability to manage its leverage and maintain strong covenant compliance will be key in preserving investor confidence and ensuring sustainable growth. The maturity date of December 2026, with extension options, provides a reasonable horizon for the company to execute its strategy and adapt to market changes. Real estate investors should assess the potential impact of these financial adjustments on the company's operational performance and asset valuation over time.

LOS ANGELES--(BUSINESS WIRE)-- Hudson Pacific Properties, Inc. (NYSE: HPP), a unique provider of end-to-end real estate solutions for tech and media tenants, today announced the company has closed on an amendment to its unsecured revolving credit facility to refine certain definitions and adjust certain covenant calculations, with key changes including:

• Adjusting the provision allowing the company to temporarily extend its unsecured leverage and total leverage thresholds from 60% to 65% in connection with qualifying acquisitions (so called, “surge provision”);
• Refinement of definitions for assets such as reposition and development projects to improve their treatment under the total leverage and unsecured leverage covenant; and
• Expansion of the type of assets included in the unsecured leverage and unencumbered net operating income (NOI) covenants, including, but not limited to, the company’s studio services businesses.

The table below reflects the company’s compliance with its unsecured revolving credit facility covenants as of September 30, 2023 proforma for the amendment, but excluding the impact of recently announced asset sales, which the company anticipates would also be favorable to these metrics:

			9/30/2023
	Covenant		Actual Performance		Proforma
Unsecured revolving credit facility, term loans and private placement
Total liabilities to total asset value	≤ 60%		49.0%		45.9%
Unsecured indebtedness to unencumbered asset value	≤ 60%		57.7%		47.4%
Adjusted EBITDA to fixed charges	≥ 1.5x		2.1x		2.1x
Secured indebtedness to total asset value	≤ 45%		20.8%		19.5%
Unencumbered NOI to unsecured interest expense	≥ 2.0		2.4x		2.4x

In consideration for the enhancements afforded under the amendment, the aggregate commitments from the lenders under the unsecured revolving credit facility were reduced by $100 million, to $900 million of total commitments, with the maturity date remaining December 2026 (including extension options).

“Securing this amendment to our credit facility underscores our strong banking relationships and provides us with the flexibility to continue operating successfully in the current market environment and beyond,” said Harout Diramerian, Chief Financial Officer.

About Hudson Pacific Properties

Hudson Pacific Properties (NYSE: HPP) is a real estate investment trust serving dynamic tech and media tenants in global epicenters for these synergistic, converging and secular growth industries. Hudson Pacific’s unique and high-barrier tech and media focus leverages a full-service, end-to-end value creation platform forged through deep strategic relationships and niche expertise across identifying, acquiring, transforming and developing properties into world-class amenitized, collaborative and sustainable office and studio space. 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, which 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 filed with the Securities and Exchange Commission, or SEC, and other risks described in documents subsequently filed by the company from time to time with the SEC.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231227731722/en/

Investor Contact

Laura Campbell

Executive Vice President, Investor Relations & Marketing

(310) 622-1702

lcampbell@hudsonppi.com

Media Contact

Laura Murray

Senior Director, Communications

(310) 622-1781

lmurray@hudsonppi.com

Source: Hudson Pacific Properties, Inc.

FAQ

What is the company name and ticker symbol of the provider of end-to-end real estate solutions for tech and media tenants that announced an amendment to its unsecured revolving credit facility?

Hudson Pacific Properties, Inc. (NYSE: HPP) announced the amendment.

What are the key changes included in the amendment to the unsecured revolving credit facility?

The key changes include temporary extension of unsecured leverage and total leverage thresholds, refinement of definitions for assets, and expansion of the type of assets included in the unsecured leverage and unencumbered net operating income covenants.

What were the company's compliance metrics with the unsecured revolving credit facility covenants as of September 30, 2023?

The company's compliance metrics as of September 30, 2023, reflect favorable performance, with total liabilities to total asset value at 45.9%, unsecured indebtedness to unencumbered asset value at 47.4%, adjusted EBITDA to fixed charges at 2.1x, secured indebtedness to total asset value at 19.5%, and unencumbered NOI to unsecured interest expense at 2.4x.

What was the impact of the amendment on the aggregate commitments from the lenders under the unsecured revolving credit facility?

In consideration for the enhancements afforded under the amendment, the aggregate commitments from the lenders under the unsecured revolving credit facility were reduced by $100 million, to $900 million of total commitments.

Who is the Chief Financial Officer of Hudson Pacific Properties, Inc.?

Harout Diramerian is the Chief Financial Officer.