Hudson Pacific Properties Inc (HPP) and Farallon Capital Enter Into Lock-Up Agreement

Hudson Pacific Properties Inc (NYSE:HPP) and Farallon Capital Management,  a fund founded by Thomas Steyer, have entered into a lock-up agreement. An amended 13D filing with the SEC detailed the agreement, which was dated January 12, the same day Hudson announced an underwritten public offering of an additional 9.5 million shares of common stock. At the time of the filing, Farallon owned 8.72 million common shares of HPP, with an aggregate of 8.74 million shares.

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Farallon Capital has been a major shareholder of Hudson Pacific Properties Inc (NYSE:HPP) for several years, dating back to their first 13D filing concerning the company in June 2010, shortly after HPP went public. At the time, Farallon’s aggregate of 7.11 million shares represented 32% of the company’s outstanding stock. They increased their position in the company to more than 10 million shares by the end of 2011, and to over 12 million shares by the end of 2012. They held those shares throughout 2013 before selling 3.51 million shares near the end of the first quarter of 2014.

Hudson Pacific Properties Inc (NYSE:HPP) was the most valuable holding of Farallon Capital at one point, though it has since slipped to sixth. The $215 million worth of HPP stock they hold represented 3.45% of their $6.23 billion equity portfolio as of September 30. Farallon’s largest holdings as of September 30 were DIRECTV (NASDAQ:DTV) with 3.65 million shares worth $315 million, Covidien plc (NYSE:COV) with 3.64 million shares, also worth $315 million, and Safeway Inc. (NYSE:SWY) with 7.12 million shares worth $244 million.

The lock-up agreement entered into between Farallon and Hudson Pacific Properties Inc (NYSE:HPP) stipulates that for a period of 60 days from the date of the agreement on January 12, Farallon agrees not to sell any of their common stock in the company. It is common practice between companies making public offerings, and major shareholders to enter into such agreements for the sake of maintaining the integrity of the stock’s value, which is beneficial to both parties. The 60-day lock-up period is relatively short however, as many such agreements run for 120 to 180 days, with some lasting as long as 365 days.

The day after the public offering was announced was a brisk trading day in HPP’s stock, with 682,309 shares trading hands, up 46% from the January 12 session. The stock had spiked in price in after-hours trading following the announcement, though it ended up finishing the January 13 session down from the previous day’s close.

Hudson Pacific Properties Inc (NYSE:HPP) announced on January 20 that they had completed their public offering, which led to the sale of 12.65 million common shares at the offering price of $31.75 per share. HPP was trading at $32.67 at the close of trading on January 23, up 8.68% year-to-date, and 51.95% during the last calendar year.

Hudson Pacific Properties Inc (NYSE:HPP), with a market cap of $2.55 billion, is a full-service real-estate company with a focus on business properties in select growth markets. HPP most recent quarterly results, for the third quarter of 2014, showed that their Funds From Operations had increased to $20.8 million from $14.0 million during the same year-ago period. Some of their highlights during the quarter included the sale of their 112,300 square-foot Tierrasanta property in San Diego, California for $19.5 million, as well as the leasing of 40,558 square feet of their 901 Market Street property in San Francisco, California to Saks & Company for one of that brand’s Saks Fifth Avenue Off 5th retail outlets. That store is scheduled to open later this year, in March.

Hudson Pacific Properties Inc (NYSE:HPP) has declared that the net proceeds from their latest public offering, which amount to approximately $385.6 million, will be used to fund their previously announced acquisition of the San Francisco Peninsula and Silicon Valley portfolios of Equity Office Properties. Should that deal fail to reach completion, the money will be used for other development activities and potential acquisitions.

Farallon has been the only hedge fund we track to take a major position in Hudson Pacific Properties Inc (NYSE:HPP) over the years, though a few other funds do have smaller stakes in the company. As of September 30, 2014, Ken Griffin’s Citadel Investment Group owned 1.29 million shares, Dmitry Balyasny’s Balyasny Asset Management owned 740,000 shares, and Israel Englander’s Millennium Management owned 311,826 shares.

Disclosure: None