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

PART I—FINANCIAL INFORMATION Financial Statements Presents unaudited consolidated financial statements for Q1 2025, showing increased net loss and decreased revenues Financial Statements of Hudson Pacific Properties, Inc. HPP, Inc. reported a net loss of $80.3 million in Q1 2025, with declining operating cash flow and positive investing cash flow Consolidated Balance Sheet Highlights - HPP, Inc. (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $7,998,391 | $8,132,239 | | Total Liabilities | $4,903,235 | $4,954,508 | | Total Equity | $3,038,385 | $3,118,637 | Consolidated Statement of Operations Highlights - HPP, Inc. (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues | $198,459 | $214,023 | | Net Loss | $(80,278) | $(53,355) | | Net Loss Attributable to Common Stockholders | $(74,708) | $(52,202) | | Net Loss per Share (Basic & Diluted) | $(0.53) | $(0.37) | Consolidated Cash Flow Highlights - HPP, Inc. (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $30,536 | $65,128 | | Net cash provided by (used in) investing activities | $15,945 | $(71,360) | | Net cash (used in) provided by financing activities | $(11,732) | $20,648 | Financial Statements of Hudson Pacific Properties, L.P. HPP, L.P. reported a net loss of $80.3 million in Q1 2025, mirroring the REIT's financial performance Consolidated Statement of Operations Highlights - HPP, L.P. (in thousands, except per unit data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues | $198,459 | $214,023 | | Net Loss | $(80,278) | $(53,355) | | Net Loss Available to Common Unitholders | $(77,102) | $(53,431) | | Net Loss per Unit (Basic & Diluted) | $(0.53) | $(0.37) | Consolidated Capital Highlights - HPP, L.P. (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Liabilities | $4,903,235 | $4,954,508 | | Total Capital | $3,038,385 | $3,118,637 | Notes to Unaudited Consolidated Financial Statements Detailed notes explain accounting policies, portfolio, debt, and compliance, confirming adherence to all debt covenants - As of March 31, 2025, the company's portfolio consisted of 55 properties totaling 19.3 million square feet, primarily office and studio space in the U.S., Canada, and the U.K.[48] - In Q1 2025, the company sold two office properties, Maxwell and Foothill Research Center, for gross proceeds of $46.0 million and $23.0 million, respectively, resulting in a net gain of $10.0 million[64][65] - An impairment charge of $18.4 million was recorded in Q1 2025 related to the 625 Second office property, which is classified as held for sale[67] Debt Summary as of March 31, 2025 (in thousands) | Debt Type | Amount | | :--- | :--- | | Unsecured Debt | $2,138,000 | | Secured Debt | $2,060,667 | | Total Unsecured and Secured Debt | $4,198,667 | | Joint Venture Partner Debt | $66,136 | - The company was in compliance with all its unsecured debt covenants as of March 31, 2025, including total liabilities to total asset value (46.9% vs. ≤65% limit) and adjusted EBITDA to fixed charges (1.7x vs. ≥1.4x limit)[98][99] - Subsequent to quarter-end, the company tendered for the full repayment of its Series B, C, and D notes, financed with borrowings on its unsecured revolving credit facility[171] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, portfolio, and liquidity, noting increased net loss and decreased NOI, while maintaining sufficient liquidity - Management notes that West coast office fundamentals are strengthening, with record quarterly gross leasing and improving sublease availability[178] - The studio business is seeing growing interest for multi-year leases[178] Portfolio Leasing Status as of March 31, 2025 | Portfolio | Percent Leased | | :--- | :--- | | In-service office | 76.5% | | Same-store studio (12-month avg.) | 73.8% | - Net Operating Income (NOI) decreased by 18.0% to $85.2 million in Q1 2025 from $104.0 million in Q1 2024[223][228] - The decline was driven by a $7.9 million decrease in same-store NOI and a $10.8 million decrease in non-same-store NOI[228] - The company secured a new $475.0 million Office Portfolio CMBS loan and used proceeds to repay other debt[215] - It also amended its revolving credit facility, reducing capacity from $900.0 million to $775.0 million[215] Funds From Operations (FFO) Reconciliation (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Loss | $(80,278) | $(53,355) | | Adjustments (Depreciation, Gain on Sale, etc.) | $86,474 | $80,066 | | FFO to Common Stockholders and Unitholders | $3,058 | $22,041 | Historical Results of Operations Net loss increased to $80.3 million and total NOI decreased by 18.0% in Q1 2025 due to various factors Net Operating Income (NOI) by Segment (in thousands) | Segment | Q1 2025 NOI | Q1 2024 NOI | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Office NOI | $92,934 | $102,128 | $(9,194) | (9.0)% | | Studio NOI | $(7,733) | $1,839 | $(9,572) | (520.5)% | | Total NOI | $85,201 | $103,967 | $(18,766) | (18.0)% | - Same-store NOI decreased by $7.9 million (7.9%), driven by a $6.2 million drop in office NOI from lease expirations and a $1.7 million drop in studio NOI from lower production activity at Sunset Gower Studios[228] - Non-same-store NOI decreased by $10.8 million, primarily due to a $7.8 million decline in studio NOI, which included a one-time $5.9 million lease termination fee related to Quixote cost-cutting initiatives[228] - General and administrative expenses decreased by 6.2% to $18.5 million due to lower travel, IT, and shareholder relations costs[242] Liquidity and Capital Resources The company maintains liquidity through cash, operating cash flow, and credit facilities, despite a decrease in operating cash flow - Principal sources of liquidity include cash on hand, cash from operations, strategic dispositions, and borrowings under its credit facilities[244][247] Borrowing Capacity as of March 31, 2025 (in thousands) | Facility | Total Capacity | Amount Drawn | Remaining Capacity | | :--- | :--- | :--- | :--- | | Unsecured revolving credit facility | $775,000 | $23,000 | $752,000 | - Net cash provided by operating activities decreased by 53.1% to $30.5 million in Q1 2025, primarily due to property dispositions, tenant move-outs, and lower production activity[258][259] - Net cash from investing activities was a source of $15.9 million in Q1 2025, a reversal from a $71.4 million use in Q1 2024, driven by $63.2 million in proceeds from real estate sales[260] Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes to the market risk disclosures provided in the company's 2024 Annual Report on Form 10-K - There have been no material changes for the three months ended March 31, 2025, to the market risk information provided in the 2024 Annual Report on Form 10-K[274] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting - For both Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P., the CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[277][280] - There were no changes in internal control over financial reporting during the first quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[281][282] PART II—OTHER INFORMATION Legal Proceedings The company is not currently a party to any legal proceedings expected to have a material adverse effect on its operations - The company is not currently a party to any material legal proceedings[284] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - No material changes have been made to the risk factors disclosed in the 2024 Annual Report on Form 10-K[285] Unregistered Sales of Equity Securities and Use of Proceeds The company issued 177,980 shares of common stock for vested restricted awards and repurchased 64,672 shares for tax withholding - In Q1 2025, the company issued 177,980 shares of common stock upon vesting of restricted stock awards, with no cash consideration[286] - 64,672 shares were repurchased to satisfy tax withholding obligations related to the vesting of restricted stock units at an average price of $3.00 per share[288][289] - As of March 31, 2025, $35.3 million remained available for repurchase under the company's authorized share repurchase program[288] Defaults Upon Senior Securities The company reports no defaults upon its senior securities during the period - None[290] Mine Safety Disclosures This item is not applicable to the company - None[292] Other Information During the first quarter of 2025, no officers or directors adopted or terminated a Rule 10b5-1 trading plan - No officers or directors adopted or terminated any Rule 10b5-1 trading plans during the quarter[293] Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents and certifications - Exhibits filed include modifications to credit agreements, new loan agreements, and required CEO/CFO certifications[295]