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Hudson Pacific Properties(HPP) - 2025 Q1 - Quarterly Results

First Quarter 2025 Financial Results Highlights & Management Commentary The company reported strong leasing activity and liquidity, focusing on strategic asset sales and debt reduction amid AI-driven demand - Signed 630,000 square feet of leases and ended the quarter with $839 million of liquidity1 - The office leasing pipeline increased to 2.1 million square feet, with over 700,000 square feet in later-stage deals3 - Management noted record venture capital flows into West Coast AI companies, which are expected to drive office demand3 - The company is executing on a strategy of asset sales, cost savings, and debt reduction to improve its financial position4 Financial Results (Q1 2025 vs Q1 2024) Key financial metrics declined year-over-year due to asset sales, lower occupancy, and one-time expenses Q1 2025 vs. Q1 2024 Financial Comparison | Metric | Q1 2025 | Q1 2024 | Change Driver | | :--- | :--- | :--- | :--- | | Total Revenue | $198.5M | $214.0M | Asset sales, lower office occupancy | | Net Loss Attributable to Common Stockholders | $(74.7)M or $(0.53)/share | $(52.2)M or $(0.37)/share | Lower revenue, one-time costs, impairment | | FFO (excl. specified items) | $12.9M or $0.09/share | $24.2M or $0.17/share | Lower revenue | | FFO | $3.1M or $0.02/share | $22.0M or $0.15/share | Lower revenue, one-time costs | | AFFO | $1.7M or $0.01/share | $28.5M or $0.19/share | Lower FFO, increased recurring capital expenditures | | Same-Store Cash NOI | $93.2M | $103.4M | Lower office occupancy | - The wider net loss was significantly impacted by one-time lease termination fees from Quixote cost-cutting and a non-cash impairment related to a potential asset sale5 Operational & Portfolio Update The company executed significant leasing activity but saw a decline in office occupancy while advancing its asset disposition strategy - Leasing Activity: - Executed 62 new and renewal leases totaling 630,295 square feet10 - Signed a significant 20-year, 232,000 square foot lease with the City and County of San Francisco at 1455 Market10 - GAAP rents increased 4.8%, while cash rents decreased 13.6% from prior levels, largely due to San Francisco leasing activity10 - Portfolio Occupancy: - In-service office portfolio occupancy ended the quarter at 75.1%, down from 78.3% in Q4 202410 - In-service studio portfolio was 73.8% leased on a trailing 12-month basis, in line with the prior quarter10 - Asset Dispositions: - Sold two office properties (Foothill Research Center and Maxwell) for an aggregate of $69.0 million10 - Entered into a contract to sell 625 Second in San Francisco for $28.0 million subsequent to quarter-end10 - Dividend: - The Board of Directors declared and paid a dividend of $0.296875 per share on its 4.750% Series C cumulative preferred stock9 Balance Sheet and Liquidity The company maintained strong liquidity of $838.5 million and actively managed its debt profile with no maturities until late 2025 - Total liquidity was $838.5 million, comprising $86.5 million in unrestricted cash and $752.0 million of undrawn capacity on its revolving credit facility10 - Completed a $475 million commercial mortgage-backed securities (CMBS) financing with a five-year term, using proceeds to repay a $168 million loan and reduce borrowings on the credit facility10 - HPP's share of net debt to undepreciated book value was 39.0%, with 85.4% of debt being fixed or capped10 - Subsequent to the quarter, the company tendered for the repayment of all private placement notes (Series B, C, and D), totaling over $304.0 million10 2025 Outlook The company issued Q2 2025 FFO guidance of $0.03 to $0.07 per share and updated full-year assumptions, projecting a decline in same-store cash NOI - Provides FFO outlook for Q2 2025 of $0.03 to $0.07 per diluted share11 Full Year 2025 Assumptions (Unaudited, in thousands) | Metric | Low | High | | :--- | :--- | :--- | | Growth in same-store property cash NOI | (13.50)% | (12.50)% | | GAAP non-cash revenue | $8,500 | $13,500 | | General and administrative expenses | $(67,000) | $(73,000) | | Interest expense | $(185,000) | $(195,000) | | FFO from unconsolidated joint ventures | $1,000 | $3,000 | | Weighted average common stock/units outstanding—diluted | 146,500,000 | 147,500,000 | Financial Statements & Reconciliations This section provides detailed unaudited financial statements and non-GAAP reconciliations for the period ended March 31, 2025 Consolidated Balance Sheets Total assets were approximately $8.0 billion and total equity was $3.04 billion as of March 31, 2025, both showing slight declines Consolidated Balance Sheet Highlights (in thousands) | Account | 3/31/25 (Unaudited) | 12/31/24 | | :--- | :--- | :--- | | Investment in real estate, net | $6,356,453 | $6,442,178 | | Cash and cash equivalents | $86,474 | $63,256 | | Total Assets | $7,998,391 | $8,132,239 | | Unsecured and secured debt, net | $4,178,343 | $4,176,844 | | Total Liabilities | $4,903,235 | $4,954,508 | | Total Equity | $3,038,385 | $3,118,637 | Consolidated Statements of Operations For Q1 2025, the company reported revenues of $198.5 million and a net loss of $74.7 million, wider than the prior year Consolidated Operations Highlights (in thousands, except per share data) | Account | Three Months Ended 3/31/25 | Three Months Ended 3/31/24 | | :--- | :--- | :--- | | Total Revenues | $198,459 | $214,023 | | Total Operating Expenses | $224,826 | $221,620 | | Impairment loss | $(18,476) | $— | | Net Loss | $(80,278) | $(53,355) | | Net Loss Attributable to Common Stockholders | $(74,708) | $(52,202) | | Net Loss per Share - diluted | $(0.53) | $(0.37) | Funds from Operations (FFO) Q1 2025 FFO was $3.1 million, or $12.9 million excluding specified items, a significant decrease from the prior year FFO Reconciliation Highlights (in thousands, except per share data) | Metric | Three Months Ended 3/31/25 | Three Months Ended 3/31/24 | | :--- | :--- | :--- | | FFO to common stock/unit holders | $3,058 | $22,041 | | FFO per common stock/unit—diluted | $0.02 | $0.15 | | FFO (excluding specified items) to common stock/unit holders | $12,865 | $24,191 | | FFO (excluding specified items) per common stock/unit—diluted | $0.09 | $0.17 | Adjusted Funds from Operations (AFFO) AFFO for Q1 2025 was $1.7 million, a sharp decline from $28.5 million in Q1 2024, driven by lower FFO and higher capital expenditures AFFO Highlights (in thousands, except per share data) | Metric | Three Months Ended 3/31/25 | Three Months Ended 3/31/24 | | :--- | :--- | :--- | | FFO (excluding specified items) | $12,865 | $24,191 | | Recurring capital expenditures, TIs & commissions | $(29,658) | $(15,743) | | AFFO | $1,711 | $28,491 | | AFFO per common stock/unit—diluted | $0.01 | $0.19 | Net Operating Income (NOI) Total NOI was $85.2 million, while same-store cash NOI was $93.2 million, both declining year-over-year due to lower occupancy NOI Reconciliation Highlights (in thousands) | Metric | Three Months Ended 3/31/25 | Three Months Ended 3/31/24 | | :--- | :--- | :--- | | Net Loss | $(80,278) | $(53,355) | | NOI | $85,201 | $103,967 | | Cash NOI | $86,305 | $107,552 | | Same-store cash NOI | $93,198 | $103,395 |