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| HPP > SEC Filings for HPP > Form 8-K on 17-Jan-2013 | All Recent SEC Filings |
17-Jan-2013
Financial Statements and Exhibits
In accordance with Rule 3-14 and Article 11 of Regulation S-X, the Company hereby files the following financial statement and pro forma information relating to the acquisition of Pinnacle I, located in San Francisco, California (the "Property"). The acquisition of Pinnacle I was disclosed in our Company's 10Q filed with the Securities and Exchange Commission on November 9, 2012.
(a) Financial Statements of Property Acquired.
Report of Independent Auditors
Statements of Revenues and Certain Expenses for the the years ended December 31,
2011 and nine months ended September 30, 2012 (unaudited)
Notes to Statements of Revenues and Certain Expenses
(b) Unaudited Pro Forma Financial Information. Unaudited pro forma consolidated balance sheet as of September 30, 2012 Unaudited pro forma consolidated statement of operations for the nine months ended September 30, 2012 Unaudited pro forma consolidated statement of operations for the year ended December 31, 2011 Notes to unaudited pro forma consolidated financial statements
(d) Exhibits.
Exhibit
No. Description
23.1 * Consent of Ernst & Young LLP.
* Filed herewith.
The Board of Directors and Stockholders of Hudson Pacific Properties, Inc.
We have audited the accompanying statement of revenues and certain expenses of Pinnacle I (the "Property") for the year ended December 31, 2011. This statement of revenues and certain expenses is the responsibility of the Property's management. Our responsibility is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement presentation. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Statement of Revenues and Certain Expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for the inclusion in the current report on Form 8-K of Hudson Pacific Properties, Inc., as described in Note 1, and are not intended to be a complete presentation of the Property's revenue and expenses.
In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses (as defined in Note 1) of Pinnacle I for the year ended December 31, 2011, in conformity with U.S. generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Los Angeles, California
January 17, 2013
Pinnacle I
Statements of Revenues and Certain Expenses
Year Ended December 31, 2011 and Nine-Months Ended September 30, 2012
(unaudited)
(In thousands)
Nine Months Ended
September 30, 2012 Year Ended
(Unaudited) December 31, 2011
Revenues
Rental Revenue $ 10,289 $ 14,250
Tenant recoveries 1,062 1,539
Parking and other 1,517 2,080
Total revenues 12,868 17,869
Certain expenses
Property operating expenses 3,632 4,953
Total certain expenses 3,632 4,953
Revenues in excess of expenses $ 9,236 $ 12,916
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See accompanying notes
Pinnacle I
Notes to Statements of Revenues and Certain Expenses
Year Ended December 31, 2011 and Nine-Months Ended September 30, 2012
1. Basis of Presentation
The accompanying statements of revenues and certain expenses include the operations of Pinnacle I ("The Property"), an office building located in Los Angeles, California.
The accompanying statements of revenues and certain expenses relate to the Property and have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended. Accordingly, the statements are not representative of the actual operations for the periods presented as revenues and certain operating expenses, which may not be directly attributable to the revenues and expenses expected to be incurred in the future operations of the Property, have been excluded. Such items include depreciation, amortization, management fees, certain property administrative expenses, interest expense, interest income and amortization of above-and below-market leases.
2. Summary of Significant Accounting Policies
Revenue Recognition
The Property recognizes rental revenue from tenants on a straight-line basis over the lease term when collectability is reasonably assured and the tenant has taken possession or controls the physical use of the leased asset.
Tenant recoveries related to reimbursement of real estate taxes, insurance, repairs and maintenance, and other operating expenses are recognized as revenue in the period the applicable expenses are incurred. The reimbursements are recognized and presented gross, as the Property is generally the primary obligor with respect to purchasing goods and services from third-party suppliers, has discretion in selecting the supplier and bears the associated credit risk.
Parking and other revenue is revenue that is derived from the tenants' use of telecommunications, parking and the fitness center. Parking and other revenue is recognized when the related services are utilized by the tenants.
Use of Estimates
Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenues and certain expenses during the reporting periods to present the statements of revenues and certain expenses in conformity with U.S. generally accepted accounting principles. Actual results could differ from those estimates.
3. Minimum Future Lease Rentals
There are various lease agreements in place with tenants to lease space in the Property. As of September 30, 2012, the minimum future cash rents receivable under noncancelable operating leases in each of the next five years and thereafter are as follows (unaudited):
2012 (three months ending December 31, 2012) $ 3,579
2013 14,770
2014 14,580
2015 13,183
2016 12,251
2017 8,826
Thereafter 17,577
$ 84,766
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Leases generally require reimbursement of the tenant's proportional share of common area, real estate taxes and other operating expenses, which are excluded from the amounts above.
4. Tenant Concentrations
For the year ended December 31, 2011 and the nine-months ended September 30, 2012, two tenants represented 76.4% and 79.3% (unaudited), respectively, of the Property's rental revenues.
5. Related Party Transactions
An affiliate of the owner of the property provides engineering services to the property. For the year ended December 31, 2011 and the nine-months ended September 30, 2012, $62 and $53 (unaudited) of engineering related services, respectively are included in the Property's property operating expenses
6. Commitments and Contingencies
The Property is subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. Management believes that the ultimate settlement of these actions will not have a material adverse effect on the Property's results of operations.
7. Subsequent Events
The Property evaluated subsequent events through January 17, 2013, the date the financial statements were available to be issued.
The following unaudited pro forma consolidated balance sheet of Hudson Pacific Properties, Inc. (the "Company" or "Our") as of September 30, 2012 and unaudited pro forma consolidated statements of operations of the Company for the year ended December 31, 2011 and the nine months ended September 30, 2012 have been prepared as if the acquisition of Pinnacle I and related financing had occurred on September 30, 2012 for the pro forma consolidated balance sheet, and as if the acquisition of Pinnacle I and concurrent financing had occurred on January 1, 2011 for both pro forma consolidated statements of operations.
Our pro forma consolidated financial statements are presented for informational purposes only and should be read in conjunction with the historical financial statements of the Pinnacle I and related notes thereto included elsewhere in this filing and our forms 10-K and 10-Q's filed with the Securities and Exchange Commission. The adjustments to our pro forma consolidated financial statements are based on available information and assumptions that we consider reasonable. Our pro forma consolidated financial statements do not purport to (1) represent our financial position that would have actually occurred had the acquisition of the Pinnacle I and related financing occurred on September 30, 2012, (2) represent the results of our operations that would have actually occurred had the acquisition of the Pinnacle I and related financing occurred on January 1, 2011 and (3) project our financial position or results of operations as of any future date or for any future period, as applicable.
HUDSON PACIFIC PROPERTIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of September 30, 2012
(in thousands, except per share data)
Hudson Pacific Financing Acquisition of Pinnacle
Properties, Inc. Transactions I and related financing Company Pro forma
(A) (B) (C)
ASSETS
Investment in real estate, net $ 1,183,757 $ - $ 197,053 $ 1,380,810
Cash and cash equivalents 27,288 87,116 (83,423 ) 30,981
Restricted cash 10,697 - 3,356 14,053
Accounts receivable, net 8,833 - - 8,833
Mortgage Receivable 4,000 - - 4,000
Straight-line rent receivables 14,047 - - 14,047
Deferred leasing costs 74,389 - 16,110 90,499
Deferred finance costs, net 6,331 484 1,015 7,830
Interest rate contracts 92 - - 92
Goodwill 8,754 - - 8,754
Prepaid expenses and other assets 6,630 - - 6,630
TOTAL ASSETS $ 1,344,818 $ 87,600 $ 134,111 $ 1,566,529
LIABILITES AND EQUITY
Notes payable $ 359,454 $ 87,600 $ 129,000 $ 576,054
Accounts payable and accrued liabilities 22,882 - 928 23,810
Below-market leases and above-market ground
leases 28,714 - 2,731 31,445
Security deposits 5,974 - - 5,974
Prepaid rent 7,143 - - 7,143
TOTAL LIABLITIES 424,167 87,600 132,659 644,426
6.25% Series A Cumulative Redeemable
Preferred units of the Operating
Partnership 12,475 - - 12,475
EQUITY
Hudson Pacific Properties, Inc.
shareholders' equity
Series B Cumulative Redeemable Preferred
Stock 145,000 - - 145,000
Common stockholders 472 - - 472
Additional paid-in capital 730,783 - - 730,783
Accumulated other comprehensive loss (1,283 ) - - (1,283 )
Accumulated deficit (24,709 ) - - (24,709 )
Total Hudson Pacific Properties, Inc.
shareholders' equity 850,263 - - 850,263
Non-controlling unitholders in Operating
Partnership 57,913 - - 57,913
Non-controlling interest in consolidated
real estate entity - - 1,452 1,452
TOTAL EQUITY 908,176 - 1,452 909,628
TOTAL LIABILITIES & EQUITY $ 1,344,818 $ 87,600 $ 134,111 $ 1,566,529
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HUDSON PACIFIC PROPERTIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the nine months ended September 30, 2012
(in thousands, except per share data)
Hudson Pacific Financing Acquisition of Pinnacle Other proforma
Properties, Inc. Transactions I and related financing adjustments Company Pro forma
(AA) (BB) (CC) (DD)
Revenues
Office
Rental $ 68,522 $ - $ 10,207 $ - $ 78,729
Tenant recoveries 15,942 - 1,062 - 17,004
Other 7,103 - 1,517 - 8,620
Total office revenues 91,567 - 12,786 - 104,353
Media & Entertainment
Rental 17,331 - - - 17,331
Tenant recoveries 1,071 - - - 1,071
Other property-related revenue 10,797 - - - 10,797
Other 146 - - - 146
Total media & entertainment revenues 29,345 - - - 29,345
Total revenues 120,912 - 12,786 - 133,698
Operating Expenses
Office operating expenses 38,176 - 3,632 - 41,808
Media & entertainment operating
expenses 17,993 - - - 17,993
General and administrative 12,822 - - - 12,822
Depreciation and amortization 39,422 - 6,326 - 45,748
Total operating expenses 108,413 - 9,958 - 118,371
Income from operations 12,499 - 2,828 - 15,327
Other Expense (Income)
Interest expense 13,977 1,507 3,901 - 19,385
Interest income (149 ) - - - (149 )
Acquisition-related expenses 815 - - - 815
Other expense (109 ) - - - (109 )
14,534 1,507 3,901 - 19,942
Net loss $ (2,035 ) $ (1,507 ) $ (1,073 ) $ - $ (4,615 )
Less: Net income attributable to
preferred stock and units (9,693 ) - - - (9,693 )
Less: Net income attributable to
restricted shares (226 ) - - - (226 )
Less: Net (income) loss attributable
to non-controlling members in
consolidated real estate entities - - 19 - 19
Add: Net loss attributable to
unitholders in the Operating
Partnership 704 - - 169 873
(Loss) income attributable to Hudson
Pacific Properties, Inc.
shareholders' / controlling member' s
equity $ (11,250 ) $ (1,507 ) $ (1,054 ) 169 $ (13,642 )
Net (loss) attributable to
shareholders' per share-basic and
diluted $ (0.28 ) $ (0.34 ) (EE)
Pro Forma weighted average shares
outstanding-basic and diluted 39,945,249 39,945,249 (EE)
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HUDSON PACIFIC PROPERTIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 2011
(in thousands, except per share data)
Hudson Pacific Financing Acquisition of Pinnacle Other proforma
Properties, Inc. Transactions I and related financing adjustments Company Pro forma
(AA) (BB) (CC) (DD)
Revenues
Office
Rental $ 75,343 $ - $ 14,141 - $ 89,484
Tenant recoveries 22,102 - 1,539 - 23,641
Other 7,763 - 2,080 - 9,843
Total office revenues 105,208 - 17,760 - 122,968
Media & Entertainment
Rental 21,617 - - - 21,617
Tenant recoveries 1,539 - - - 1,539
Other property-related revenue 13,638 - - - 13,638
Other 187 - - - 187
Total media & entertainment revenues 36,981 - - - 36,981
Total revenues 142,189 - 17,760 - 159,949
Operating Expenses
Office operating expenses 44,740 - 4,953 - 49,693
Media & entertainment operating
expenses 22,446 - - - 22,446
General and administrative 13,038 - - - 13,038
Depreciation and amortization 44,660 - 8,433 - 53,093
Total operating expenses 124,884 - 13,386 - 138,270
Income from operations 17,305 - 4,374 - 21,679
Other Expense (Income)
Interest expense 17,480 2,009 5,203 - 24,692
Interest income (73 ) - - - (73 )
Acquisition-related expenses 1,693 - - - 1,693
Other expense 443 - - - 443
19,543 2,009 5,203 - 26,755
Net loss $ (2,238 ) $ (2,009 ) $ (829 ) $ - $ (5,076 )
Less: Net income attributable to
preferred stock and units (8,108 ) - - - (8,108 )
Less: Net income attributable to
restricted shares (231 ) - - - (231 )
Less: Net (income) loss attributable
to non-controlling members in
consolidated real estate entities (803 ) - 14 - (789 )
Add: Net loss attributable to
unitholders in the Operating
Partnership 946 - - 196 1,142
(Loss) income attributable to Hudson
Pacific Properties, Inc.
shareholders' / controlling member' s
equity $ (10,434 ) $ (2,009 ) $ (815 ) 196 $ (13,062 )
Net loss attributable to
shareholders' per share-basic and
diluted $ (0.35 ) $ (0.44 ) (EE)
Pro Forma weighted average shares
outstanding-basic and diluted 29,392,920 29,392,920 (EE)
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