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HP

Hudson Pacific Properties, Inc. (HPP)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 revenue was $186.6m and GAAP EPS was $(0.30); FFO/share was $0.03 (FFO ex-items $0.04). Revenue modestly missed S&P Global consensus ($189.6m*) while FFO/share was essentially in line with consensus (~$0.03*) .
  • Leasing momentum continued: 515k sq ft signed (67% new), office occupancy improved to 75.9% with positive absorption, and 80% of activity occurred in the Bay Area; management highlighted a “clear inflection point” and 2.2m sq ft pipeline, largely AI-driven .
  • Studios: cost actions pushed studio NOI into positive territory on an adjusted basis; management expects seasonal 4Q softness and guided Q4 FFO/share to $0.01–$0.05; CA’s expanded tax credit has allocated 74 projects since July, with production impact more visible into 1H26 per 180-day start deadlines .
  • Balance sheet: liquidity of $1.0bn; 100% of debt fixed/capped; next maturity is Q3 2026; refinanced 1918 Eighth ($285m) and amended/extended the revolver ($795m capacity through YE’26; access to $462m through YE’29) .
  • Likely stock catalysts: sustained AI-led Bay Area demand converting to leases (Page Mill AI win; growing tour sizes), progress at Washington 1000/Hill7, and clarity on studio ramp as CA tax credits translate into higher show counts from Q2–H2 2026 .

What Went Well and What Went Wrong

  • What Went Well

    • Leasing and occupancy inflected: “positive absorption” and best YTD leasing since 2019; 515k sq ft in Q3 and 1.7m sq ft YTD; office occupancy rose to 75.9% and leased to 76.5% . Quote: “We delivered another quarter of strong operational execution…positive absorption…momentum is building across our West Coast markets, driven by AI and technology companies” – CEO Victor Coleman .
    • Cost discipline: G&A down 30% YoY to $13.7m; FFO ex-items up $2.4m YoY despite lower office NOI, driven by G&A and interest savings and higher studio NOI .
    • Studio progress: sequential improvement with adjusted studio NOI turning positive; Pier 94 on time/on budget with strong interest for multi-quarter commitments . Quote: “studio NOI…in positive territory for the first time in more than a year” – President Mark Lammas .

  • What Went Wrong

    • Revenue/Same-store NOI pressure: Total revenue fell to $186.6m from $200.4m YoY; same-store cash NOI declined to $89.3m from $100.0m on lower office occupancy .
    • Rent spreads on cash basis were negative (–10.0%) reflecting Palo Alto backfills rolling from peak rents; GAAP –6.3%; WALT shortened on mix .
    • GAAP EPS loss widened YoY (driven by deconsolidation loss at Sunset Glenoaks); revenue slightly missed S&P consensus; management guided to seasonally lower 4Q studio NOI, tempering near-term earnings .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025 (Actual)Q3 2025 (Consensus)
Total Revenues ($m)$200.393 $198.459 $190.002 $186.617 $189.603*
GAAP EPS (Diluted) ($)$(0.69) $(0.53) $(0.41) $(0.30) $(0.20)*
FFO/share (Diluted) ($)$0.05 $0.02 $(0.05) $0.03 $0.03*
FFO ex-items/share (Diluted) ($)$0.10 $0.09 $0.04 $0.04 n/a

Values with asterisks retrieved from S&P Global.

Same-Store Cash NOI ($m)Q3 2024Q1 2025Q2 2025Q3 2025
Amount$99.952 $93.198 $87.096 $89.300

Segment revenues

Segment Revenues ($m)Q3 2024Q3 2025
Office – Rental$162.908 $148.290
Office – Service & Other$4.034 $6.289
Total Office Revenues$166.942 $154.579
Studio – Rental$13.720 $13.567
Studio – Service & Other$19.731 $18.471
Total Studio Revenues$33.451 $32.038

Operating KPIs

KPIQ2 2025Q3 2025
Office Occupied % (In-service)75.1% 75.9%
Office Leased % (In-service)76.2% 76.5%
Studio Total Leased % (TTM)63.0% 64.6%
Studio Stages Leased % (TTM)63.6% 65.8%
Leasing Volume (sq ft)558,055 515,450
GAAP/Cash Rent Change on New Leases+4.9% / –1.8% –6.3% / –10.0%
Liquidity$1.0bn $1.0bn

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
FFO/share (REIT)Q3 2025 vs Q4 2025Q3: $0.01–$0.05 Q4: $0.01–$0.05 New quarter issued; level maintained
GAAP non-cash revenueFY 2025$5.5m–$10.5m $3.0m–$8.0m Lowered
Interest expenseFY 2025$(168)m–$(178)m $(166)m–$(176)m Lowered
G&A expenseFY 2025$(57.5)m–$(63.5)m $(57.5)m–$(63.5)m Maintained
FFO from unconsolidated JVsFY 2025$0.6m–$2.6m $(1.5)m–$0.5m Lowered (from deconsolidation)
FFO attributable to NCIFY 2025$(13)m–$(17)m $(15)m–$(19)m More negative
Diluted weighted avg sharesFY 2025319m–321m 319m–321m Maintained

Management expects Q4 FFO at the low-to-mid end depending on studio seasonality; increased activity from CA tax credits likely impacts show counts with a lag (recipients have up to 180 days to begin filming) .

Earnings Call Themes & Trends

TopicQ1 2025 (prev)Q2 2025 (prev)Q3 2025 (current)Trend
AI/Tech demand (Bay Area)Pipeline 2.1m sq ft; City & County of SF 232k sq ft at 1455 Market; “record flows of venture capital…hyper-growth, office-first AI” Tours/pipeline rising; tech tours grew to 53% with core AI up to 61% of tech; expecting occupancy growth 80% of leasing in Bay Area; 106k sq ft AI lease at Page Mill; rents stabilizing in Peninsula/SV Strengthening
Studios/tax creditEarly optimism on policy support; building interest CA program in effect; studio NOI improving; Pier 94 on track Adjusted studio NOI positive; 74 tax credit allocations; Pier 94 YE delivery; Q4 seasonal softness; ramp more visible by Q2–H2’26 Sequential improvement, delayed revenue impact
Capital structure/liquidity$838.5m liquidity; CMBS executed; deleveraging plan $1.0bn liquidity after equity raise and note repayment; revolver upsized/extended $1.0bn liquidity; 100% fixed/capped; no maturities until Q3’26; 1918 Eighth refi done Solid, stable
Leasing pipeline/occupancyBest leasing in ~3 years; expirations set to decline H2 1.2m sq ft 1H25; tours +8%; expecting occupancy growth Positive absorption; pipeline 2.2m sq ft; tours +20% seq/+60% YoY; lease expirations at multi-year lows Improving
Asset recyclingSold assets to reduce debt and fund plan Sold 625 Second for $28m; evaluating selective sales Opportunistic; evaluating non-core sales as pricing improves Opportunistic
Seattle (Washington 1000/Hill7)Project under lease-up evaluation Washington 1000 tours up; multi-tenant focus likely Hill7: acquired partner stake; negotiating ~139k sq ft; Washington 1000 tours up to 371k sq ft; multiple >50k prospects Improving demand indicators

Management Commentary

  • Strategic positioning and AI demand: “Our strategic positioning in the epicenters of innovation is resulting in unprecedented demand…Our 2.2 million square foot leasing pipeline…positions us to further capitalize on this recovery” – CEO Victor Coleman .
  • Balance sheet and flexibility: “With $1 billion of liquidity, 100% of debt fixed or capped, and no maturities until the third quarter next year, we are now in a position of strength to capitalize on ample embedded growth opportunities” – CEO Victor Coleman .
  • Studios inflection: “Studio NOI adjusted for one-time expenses increased by $4 million sequentially, finishing in positive territory for the first time in more than a year” – President Mark Lammas .
  • Near-term outlook: “For the fourth quarter, we anticipate FFO of $0.01-$0.05 per diluted share…we expect lower studio NOI due to typical seasonality” – CFO Harout Diramerian .

Q&A Highlights

  • Occupancy trajectory and same-store NOI: Management expects continued positive net absorption, with same-store NOI turning as occupancy rises and studios stabilize; Q3 office occupancy 75.9% vs higher YoY comp; studio seasonality weighs near term .
  • Studios recovery milestones: CA tax credits (74 allocations) require filming within 180 days; meaningful show-count lift should emerge by Q2–H2 2026; near-term seasonal dip in Q4 .
  • Rent dynamics: Rents stabilizing in Peninsula/SV; San Francisco sublease space declining as tenants reclaim for growth; cash rent spreads –10% driven by Palo Alto backfills from peak rents .
  • Quixote cost reductions: Annualized savings ~$23–24m vs 2024; breakeven targeted by early 2026; adjusted studio NOI turned positive in Q3 .
  • Seattle assets: Hill7 in talks with ~139k sq ft of multi-floor tenants; Washington 1000 tours up to 371k sq ft with multiple large prospects .

Estimates Context

  • Revenue: $186.6m actual vs $189.6m S&P Global consensus* (miss), driven by asset sales and lower office occupancy .
  • FFO/share: $0.03 actual vs ~$0.03 S&P Global consensus* (essentially in line) .
  • GAAP EPS: $(0.30) actual vs ~$(0.20) consensus*; reported loss driven in part by deconsolidation loss at Sunset Glenoaks .

Values with asterisks retrieved from S&P Global.

Key Takeaways for Investors

  • AI-led Bay Area demand is translating to leases and positive absorption; sustained 500k+ sq ft quarterly leasing alongside a low expiration profile should support occupancy and same-store NOI recovery through 2026 .
  • Near-term earnings cadence likely governed by studio seasonality in Q4 and the 180-day CA tax credit lag; expect increasing contribution from mid-2026 as show counts rise .
  • Balance sheet risk is contained: $1.0bn liquidity, fully fixed/capped debt, and no maturities until Q3’26 provide runway to execute the leasing plan and address the Hollywood Media refi in 1Q’26 planning .
  • Watch Seattle execution: Hill7 leasing and Washington 1000 tenant conversion are potential upside levers given improved tour volumes and limited true Class A competition .
  • Cash rent headwinds on select Palo Alto backfills (–10% cash spreads) should abate with demand stabilization; studio adjusted NOI turning positive is an early proof point on restructuring .
  • Guidance tweaks imply slightly lower 2025 interest expense and non-cash revenue; deconsolidation shifts JV/NCI lines—monitor FFO mix as leasing and studios rebuild .
  • Tactical asset recycling remains on the table as pricing improves; management is opportunistic but not dependent on sales for liquidity, reducing execution risk .

Note: All financials are as reported by the company unless labeled with an asterisk (S&P Global consensus).