Equity

3 Months Ended

Mar. 31, 2019

The table below presents the effect of the Company’s derivatives on accumulated other comprehensive income (“OCI”):


	Hudson Pacific Properties, Inc. Stockholders’ Equity		Non-controlling interests		Total Equity
Balance at December 31, 2018	$	17,501	$	64	$	17,565
Unrealized loss recognized in OCI due to change in fair value	(5,926)		(28)		(5,954)
Gain reclassified from OCI into income (as interest expense)⁽¹⁾	(1,901)		(9)		(1,910)
Net change in OCI	(7,827)		(37)		(7,864)
BALANCE AT MARCH 31, 2019	$	9,674	$	27	$	9,701

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1.The gains and losses on the Company’s derivatives are reported in the interest expense line item on the Consolidated Statements of Operations. Interest expense was $24.4 million for the three months ended March 31, 2019.

Non-Controlling Interests

Common Units in the Operating Partnership

Common units of the operating partnership and shares of common stock of the Company have essentially the same economic characteristics, as they share equally in the total net income or loss distributions of the operating partnership. Investors who own common units have the right to cause the operating partnership to repurchase any or all of their common units for cash equal to the then-current market value of one share of common stock or, at the Company’s election, issue shares of the Company’s common stock in exchange for common units on a one-for-one basis.

Performance Units in the Operating Partnership

Performance units are partnership interests in the operating partnership. Each performance unit awarded will be deemed equivalent to an award of one share of common stock under the 2010 Plan, reducing the availability for other equity awards on a one-for-one basis. Under the terms of the performance units, the operating partnership will revalue its assets for tax purposes upon the occurrence of certain specified events and any increase in valuation from the time of grant until such event will be allocated first to the holders of performance units to equalize the capital accounts of such holders with the capital accounts of common unitholders. Subject to any agreed upon exceptions, once vested and having achieved parity with common unitholders, performance units are convertible into common units in the operating partnership on a one-for-one basis.

Current Year Activity

The following table summarizes the ownership interest in the operating partnership, excluding unvested restricted units and unvested restricted performance units as of:


	March 31, 2019		December 31, 2018
Company-owned common units in the operating partnership	154,373,581		154,371,538
Company’s ownership interest percentage	99.5	%	99.6	%
Non-controlling units in the operating partnership⁽¹⁾	720,773		569,045
Non-controlling ownership interest percentage⁽¹⁾	0.5	%	0.4	%

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1.Represents units held by certain of the Company’s executive officers, directors and outside investors. As of March 31, 2019, this amount represents both common units and performance units of 550,969 and 169,804, respectively.

On January 17, 2019, a common unitholder requested the operating partnership repurchase 18,076 common units and the Company elected, in accordance with the limited partnership agreement of the operating partnership, to settle in cash to satisfy the redemption. On March 11, 2019, 169,804 performance units were granted and vested related to the completion of the 2016 OPP performance period.

Common Stock Activity

The Company has not completed any common stock offerings in 2019.

The Company’s at-the-market, or ATM, program permits sales of up to $125.0 million of common stock. The Company did not utilize the ATM program during the three months ended March 31, 2019. A cumulative total of $20.1 million has been sold as of March 31, 2019.

Share Repurchase Program

There have been no repurchases in 2019. On March 8, 2018, the Board increased the amount authorized under its share repurchase program to a total of $250.0 million. A cumulative total of $50.0 million has been repurchased as of March 31, 2019. The Company may make repurchases under the program at any time in its discretion, subject to market conditions, applicable legal requirements and other factors.

Dividends

The Board declared dividends on a quarterly basis and the Company paid the dividends during the quarters in which the dividends were declared. The following table summarizes dividends declared and paid for the periods presented:


	Three Months Ended March 31,
	2019		2018
Common stock⁽¹⁾	$	0.25	$	0.25
Common units⁽¹⁾	$	0.25	$	0.25
Series A preferred units⁽¹⁾	$	0.3906	$	0.3906
Performance units	$	0.25	$	0.25

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1.The first quarter of 2019 dividends were paid on March 28, 2019 to shareholders and unitholders of record on March 18, 2019.

Taxability of Dividends

Earnings and profits, which determine the taxability of distributions to stockholders, may differ from income reported for financial reporting purposes due to the differences for federal income tax purposes in the treatment of loss on extinguishment of debt, revenue recognition, compensation expense and the basis of depreciable assets and estimated useful lives used to compute depreciation.