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Hudson Pacific Raising Capital to Fund Buyout

FR HPP EXR HTA

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Hudson Pacific Properties, Inc. (HPP - Snapshot Report) is raising capital to fund its recently announced purchase deal of Seattle’s Merrill Place property. The company, in particular, has made a public offering of 8.25 million shares at $21.50 per share and granted the underwriters a 30-day option to buy up to an additional 1.24 million shares. The offering is expected to close on Jan 28, 2014.

Hudson Pacific projects to reap $170.3 million in net proceeds ($195.8 million if the underwriters exercise their option completely). With the amount generated, the company plans to finance the buyout of Merrill Place, use it for its development and redevelopment moves, other acquisitions as well as for meeting general corporate needs. Till it undertakes these moves, the company plans to use it for lowering its debt under its senior unsecured revolving credit facility.

Notably, Hudson Pacific recently penned a deal to acquire the Merrill Place property in downtown Seattle’s Pioneer Square submarket. It is an office and retail property that would be purchased from a joint venture for approximately $57.7 million.  

The acquisition is slated to complete in Feb 2014, subject to customary closing conditions. This property comprises around 179,000 square feet of office and ground floor retail, as well as a 147-stall standalone parking arrangement. Hudson Pacific plans for an exclusive repositioning of the property and deliver the new office building by 2017. It is currently 93% leased and 52% of the leases are slated to end over the next four years.

The capital infusion is a strategic fit as it would help Hudson Pacific increase its financial flexibility and aim for opportunistic acquisitions like that of Merrill Place. This acquisition would help it expand its growing office portfolio in Downtown Seattle. Moreover, the debt pay off would lower its interest expenses.

Hudson Pacific currently carries a Zacks Rank #2 (Buy). Investors interested in the REIT industry may also consider stocks like Extra Space Storage Inc. (EXR - Snapshot Report), First Industrial Realty Trust Inc. (FR - Snapshot Report) and Healthcare Trust of America, Inc. (HTA - Snapshot Report). All these stocks carry the same rank as Hudson Pacific.

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