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HP

Hudson Pacific Properties, Inc. (HPP)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered total revenue of $209.7M and FFO (ex specified items) of $0.11 per diluted share; GAAP diluted EPS was a net loss of $(1.18), reflecting a Quixote goodwill impairment and weaker office occupancy .
  • Sequential revenue improved vs Q3 ($200.4M), aided by studio services, but YoY declined vs Q4 2023 ($223.4M) due to One Westside sale and tenant move-outs; same-store cash NOI fell 11.4% YoY to $94.2M .
  • Management guided Q1 2025 FFO per diluted share to $0.07–$0.11 and lowered full-year G&A assumptions ($70–$76M) with non-cash revenue tailwinds (+$10–$15M) expected from upfront free rent/beneficial occupancy .
  • Estimates comparison unavailable: S&P Global consensus could not be retrieved at time of analysis; no beat/miss assessment provided (see Estimates Context section).

What Went Well and What Went Wrong

What Went Well

  • Leasing momentum: 2.0M sq ft signed in 2024 (442k in Q4), with a strong pipeline >2.0M sq ft including ~800k sq ft later-stage deals; AI-related demand and RTO mandates are supporting office activity (“AI related leasing… broader in-office mandates…”) .
  • Studio services improvement: Q4 studio service/other revenues rose (Quixote and Sunset Las Palmas), contributing to sequential revenue uptick vs Q3 .
  • Balance sheet positioning: Liquidity of $518.3M post revolver amendment, 90.7% of debt fixed/capped, no maturities until Nov 2025; asset sales (3176 Porter, Maxwell) used to repay revolver borrowings .

What Went Wrong

  • Office occupancy drifted down: In-service office ended Q4 at 78.3% occupied and 78.9% leased (vs 79.1%/80.0% in Q3), mainly due to a tenant move-out at Met Park North .
  • GAAP diluted EPS and AFFO compressed: EPS of $(1.18) and AFFO of $0.02 per diluted share, impacted by Quixote goodwill impairment and higher recurring capex .
  • Same-store NOI declines: Cash same-store NOI fell 11.4% YoY to $94.2M; management’s 2025 assumptions embed negative same-store cash NOI growth (–12.5% to –13.5%), implying near-term pressure before back-half recovery .

Financial Results

Core P&L and FFO/AFFO

MetricQ4 2023 (YoY comp)Q3 2024Q4 2024
Total Revenue ($M)$223.4 $200.4 $209.7
GAAP Diluted EPS ($)$(0.70) $(0.69) $(1.18)
FFO per diluted share ($)$0.09 $0.05 $(0.64)
FFO ex specified items per diluted ($)$0.14 $0.10 $0.11
AFFO per diluted ($)$0.15 $0.11 $0.02

Margins and Profitability

MetricQ4 2023Q3 2024Q4 2024
Operating Income ($M)$(15.1) (223.4−238.5) $(20.7) (200.4−221.1) $(14.9) (209.7−224.5)
Net Income Margin (%)(39.7%) (−88.7/223.4) (48.5%) (−97.9/200.4) (82.8%) (−173.5/209.7)
Same-Store NOI (Cash) ($M)$106.3 $96.9 $94.2
GAAP Same-Store NOI Growth YoY (%)(14.3%) —(3.1%)
Cash Same-Store NOI Growth YoY (%)(8.9%) —(11.4%)

Note: Margin computations use reported revenues and net loss; all source values cited per cell.

Segment Revenue Breakdown (Q4)

SegmentQ4 2023 ($M)Q4 2024 ($M)
Office Rental Revenues$191.3 $170.7
Office Service & Other$3.5 $3.5
Total Office Revenues$194.9 $174.2
Studio Rental Revenues$13.2 $12.1
Studio Service & Other$15.4 $23.3
Total Studio Revenues$28.6 $35.4
Total Revenues$223.4 $209.7

KPIs and Operating Metrics

KPIQ2 2024Q3 2024Q4 2024
In-service office % occupied78.7% 79.1% 78.3%
In-service office % leased80.0% 80.0% 78.9%
In-service studio % leased (total)76.1% 73.8% 73.8%
In-service stage % leased78.1% 75.9% 76.8%
Lease Square Feet Signed539,531 539,272 441,924
GAAP Rent Spread (YoY / QoQ context)(13.3%) cash; +2.6% GAAP in Q2 (mix-adjusted higher) (11.5%) GAAP; (13.3%) cash (mix-adjusted ~flat) (6.0%) GAAP; (9.9%) cash (adj: (2.8%) and (4.3%))

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
FFO per diluted shareQ4 2024$0.09–$0.13 Actual FFO ex specified items $0.11 N/A (in range)
FFO per diluted shareQ1 2025—$0.07–$0.11 New range introduced
Same-store property cash NOI growthFY 2024(14.0%) to (13.0%) —Prior year baseline
Same-store property cash NOI growthFY 2025—(13.5%) to (12.5%) Maintained negative trajectory vs 2024 baseline
GAAP non-cash revenue (SL rent, AB/Below-market)FY 2024$(14.5)M to $(9.5)M —Prior year negative
GAAP non-cash revenueFY 2025—$10.0M to $15.0M Raised (positive tailwinds expected)
GAAP non-cash expenseFY 2024$(6.5)M to $(8.5)M —Prior year
GAAP non-cash expenseFY 2025—$(6.0)M to $(8.0)M Maintained
General & Administrative expenseFY 2024$(77)M to $(83)M —Prior year
General & Administrative expenseFY 2025—$(70)M to $(76)M Lowered (cost savings)
Interest expenseFY 2024$(173)M to $(183)M —Prior year
Interest expenseFY 2025—$(173)M to $(183)M Maintained
Weighted avg diluted shares/unitsFY 2024145.0M–146.0M —Prior year
Weighted avg diluted shares/unitsFY 2025—146.0M–147.0M Slightly higher

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
AI/tech demand, RTOWest Coast office conditions gradually improving; strikes ratified; deleveraging focus AI office-first; rising venture funding in Bay Area; RTO mandates (Amazon, Dell, Salesforce) “AI related leasing… in-office mandates” supporting pipeline; SF Bay Area AI venture funding strength Improving demand indicators
Studio productionRatified contracts clear path to normalize, but limited visibility; lower studio NOI expected near-term LA show counts rising; holds point to 2025 demand; tax credit proposal to $0.75B Wildfires temporarily delayed Q1; seeing high-caliber shows returning; tax credit push gaining momentum Recovery delayed near term; upside in H2 2025
Macro/regulatory (CA tax credit)—Governor’s proposal to $750M mid-2025 Broad coalition support for $750M credits; potential demand stimulus H2 2025 Positive catalyst building
Balance sheet/liquidityNo maturities until late-2025; focus on deleveraging Asset sales/JV/secured financings; liquidity ~$696M Liquidity $518.3M post amendment; 90.7% debt fixed/capped; asset sales proceeds used to repay revolver Active de-risking; capacity adequate
Seattle/portfolioWashington 1000 noted; pipeline building Tours rising; midsized demand returning; occupancy impacts from Met Park North Washington 1000 discussions (45k–250k); broader Seattle demand, policy debates (Prop 1A/1B) Leasing interest improving

Management Commentary

  • “Our leasing pipeline is currently more than 2.0 million square feet, including nearly 800,000 square feet of later stage deals… AI related leasing as well as broader in-office mandates… drive companies to evaluate the need for additional space in well-located, high-quality properties.” — Victor Coleman, CEO .
  • “Factoring in the recent amendment, we have $518.3 million of total liquidity… and 90.7% of debt fixed or capped… no debt maturities until November 2025.” — Harout Diramerian, CFO .
  • “We signed approximately 442,000 square feet of new and renewal leases in the quarter with nearly 60% new deals… net effective rents have held up incredibly well.” — Mark Lammas, President .
  • “We are beginning to see high-caliber shows returning and looking to ramp up production later in the year… strong and growing sentiment… film and television tax credit program… could stimulate additional demand.” — Victor Coleman, CEO .

Q&A Highlights

  • Leasing pipeline confidence: ~800k sq ft late-stage LOIs/leases; urgency rising as RTO deadlines hit; coverage on large expirations >50% at 1455 Market (Uber, BofA) .
  • Secured financing and asset sales: Multiple concurrent efforts expected “fairly imminent” to right-size balance sheet; proceeds at favorable pricing .
  • Studios/Quixote: $7.5M fixed expense cuts completed (~$4.2M NOI annualized), pursuing $6M additional savings ($5M NOI); ceased New Orleans ops; impairment was goodwill, reflecting slower post-strike recovery .
  • Occupancy cadence: Dip in Q1 given weighted expirations; potential recovery starting Q2; steady improvement anticipated thereafter .
  • Pricing vs term: Cash spreads negative, but net effective rents holding near pre-pandemic levels due to longer terms and controlled TIs/LCs .
  • Washington 1000: Negotiations with 45k–250k sq ft prospects; NOI realization timing aligns with lease commencements (2026 windows) .
  • Seattle policy: Discussion of Proposition 1A/1B impacts on Seattle vs Bellevue; rent differentials and limited Class A availability frame decisions .

Estimates Context

  • Attempted to retrieve S&P Global Wall Street consensus for Q4 2024 EPS and revenue; data unavailable due to API request limit at the time of analysis. As a result, no quantified beat/miss assessment against consensus is provided.
  • Implication: Given FFO ex specified items of $0.11 landed within prior Q4 guidance ($0.09–$0.13), and Q1 2025 guide is $0.07–$0.11, sell-side models may need to reflect near-term occupancy and studio delays, lower G&A, and non-cash revenue additions from upfront free rent/beneficial occupancy .

Key Takeaways for Investors

  • Near-term: Expect Q1 FFO ex items pressured by office expirations and wildfire-affected studio demand; management guided $0.07–$0.11 and flagged sequential studio ($0.02) and office ($0.01) NOI headwinds at midpoint .
  • Leasing trajectory: Pipeline later-stage deals and AI/RTO catalysts support stabilization and potential occupancy growth in H2 2025; net effective rents resilient despite negative cash spreads .
  • Studio optionality: LA tax credit proposal to $750M and improving show activity could lift stage occupancy and services utilization into H2 2025; watch Quixote cost actions and mix shift toward stickier episodic TV .
  • Balance sheet: Revolver amendment increases flexibility; with liquidity of $518.3M and 90.7% fixed/capped debt, active asset sales and pending secured financings aim to address 2025–2026 maturities .
  • Asset recycling: Completed sales (3176 Porter; Maxwell) at favorable pricing, with additional dispositions in process; use of proceeds to delever is a positive rerating catalyst if executed consistently .
  • Watch list: Washington 1000 lease signings (scale matters for Seattle recovery), Q2/Q3 occupancy progression, and confirmation of CA tax credit timing and specifics .
  • Positioning: Trade around narrative shifts—evidence of H2 studio rebound and large-office wins could drive sentiment; conversely, prolonged studio delays or leasing slippage would pressure multiples.

Additional Source Notes

  • Q4 2024 earnings press release and 8-K exhibits with detailed financial tables and outlook .
  • Q4 2024 earnings call transcript providing operational detail, guidance bridge, and Q&A insights .
  • Prior quarters for trend analysis: Q3 press release and call ; Q2 press release .
  • Other relevant press releases: portfolio update (wildfires), asset sales (Maxwell; 3176 Porter), and preferred dividend .