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Hudson Pacific Properties' third-quarter revenue and leasing numbers trended in the right direction, but the office and studio REIT still posted a nine-figure loss.
HPP posted a net loss of $218.1M, up from $136.5M the same time last year, mostly due to “non-cash impairments and a loss on the sale of office properties,” the company said in a release announcing the results.
The noncash impairments were San Jose's Skyport Plaza and Seattle's Hill Seven office properties and a loss on the sale of 875 and 899 Howard St., San Francisco office buildings totaling 284K SF that sold for $65.5M. The latter two were 36% occupied and fully vacant at the time of sale, HPP Chief Financial Officer Harout Diramerian said on the quarterly call with analysts.
HPP also reached $180.9M in revenue in the quarter, a drop from the third quarter last year, when it saw $186.6M in revenue. The quarter-over-quarter drop was largely due to selling assets and partially offset by improved office occupancy and studio production activity, according to the release.
Film and television production in Los Angeles hasn't rebounded. Third-quarter LA on-location shoot days were 5% lower year-over-year and were 29% below the five-year average, HPP CEO Victor Coleman said on the call. Despite those numbers, the firm sees potential catalysts for Los Angeles production to increase in the near term, including the additional film tax credits proposed this week by outgoing Gov. Gavin Newsom.
HPP signed more than half a million square feet of office leases, putting its year-to-date total at 2.4M SF, up 40% from the first nine months of last year. In-service office occupancy grew for the fifth consecutive quarter and was nearly 86%, the bulk of which seems tied to artificial intelligence in the Bay Area. San Francisco posted its eighth consecutive quarter of positive net absorption, adding 1.3M SF.
Law firm Weil, Gotshal & Manges' wind-down will leave a 38K SF hole in HPP's portfolio, and although it said it didn't believe the firm would stop paying rent, HPP has preemptively stopped counting its rent out of an abundance of caution. The space, in a property called Redwood Shores in the Bay Area, is a high-quality building in a desirable location, and "we're confident we could re-lease it efficiently," HPP President Mark Lamas said.
"Looking ahead, our leasing pipeline remains above 2 million square feet, with more than 1 million square feet now in advanced stages, nearly twice the level of a year ago," Coleman said in a release.
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