Hudson Pacific Properties(HPP) - 2025 Q2 - Quarterly Results

Overview & Highlights Hudson Pacific Properties reported strong leasing activity and robust liquidity, driven by AI-related office demand and studio business recovery - Executed 1.2 million square feet of office leases in H1 2025, with 558,000 square feet signed in Q2[1][2] - The company maintains a strong leasing pipeline exceeding 2.0 million square feet, anticipating portfolio stabilization[2] - Positive trends observed from AI-related office demand and studio business recovery, with in-service studio and stage leased percentages rising to 74.3% and 80.0% respectively (excluding new development)[3] - Ended the quarter with $1.0 billion of liquidity and achieved a 35% year-over-year improvement in recurring G&A expenses, totaling $13.5 million[1][4] Financial Performance Hudson Pacific's Q2 2025 financial performance showed decreased revenue and increased net loss, primarily due to asset sales and lower office occupancy Q2 2025 vs. Q2 2024 Financial Comparison | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Revenue | $190.0 million | $218.0 million | | Net Loss Attributable to Common Stockholders | $(83.1) million | $(47.0) million | | Net Loss per Diluted Share | $(0.41) | $(0.33) | | FFO, excluding specified items | $8.0 million | $24.5 million | | FFO per Diluted Share, excluding specified items | $0.04 | $0.17 | - Revenue decline primarily attributed to asset sales and reduced office occupancy[4] - Increased net loss largely due to lower revenue, accelerated depreciation from Quixote lease terminations, and disposal of obsolete fleet[4] - FFO impacted by specified items, including a $14.3 million one-time expense for canceling non-cash compensation agreements and $3.2 million for early debt repayment[4] Operational & Portfolio Update The company demonstrated strong operational execution in Q2 2025 through significant leasing activity, strategic asset sales, and a strengthened balance sheet Leasing Activity HPP executed 72 new and renewal leases totaling 558,055 square feet in Q2, maintaining stable office occupancy and increased core studio leasing - Executed 72 leases for 558,055 sq. ft., including a 77,000 sq. ft. renewal and a 65,000 sq. ft. new lease[9] - In-service office portfolio ended Q2 75.1% occupied and 76.2% leased, stable compared to Q1 2025[9] - Excluding new Sunset Glenoaks development, in-service studio total and stage leased percentages increased to 74.3% and 80.0% respectively[3][9] - GAAP rents on new and renewal leases increased 4.9%, while cash rents decreased 1.8% from prior levels[9] Transactions The company completed the sale of its 625 Second office property for $28.0 million, using net proceeds to repay its unsecured revolving credit facility - Sold the 625 Second office property in San Francisco for $28.0 million[7] - Net proceeds from the sale were used to pay down the company's unsecured revolving credit facility[7] Balance Sheet and Liquidity As of quarter-end, HPP had $1.0 billion in total liquidity, proactively managing debt by repaying $465.0 million in notes and raising $690.0 million through a common equity offering - Total liquidity stood at $1.0 billion, comprising $236.0 million in unrestricted cash and $775.0 million of undrawn capacity on the revolving credit facility[9] - Repaid $465.0 million of private placement notes, addressing maturities in 2025, 2026, and 2027[9] - Raised $690.0 million in gross proceeds from a common equity offering to repay the credit facility and for general corporate purposes[9] - HPP's share of net debt to undepreciated book value was 31.3%, with 99.2% of debt fixed or capped[9] Dividend The company's Board of Directors declared and paid a dividend of $0.296875 per share on its 4.750% Series C cumulative preferred stock - A dividend of $0.296875 per share was declared and paid on the 4.750% Series C cumulative preferred stock[10] 2025 Outlook Hudson Pacific issued FFO guidance for Q3 2025 and updated full-year assumptions, anticipating a decline in same-store property cash NOI - Provides third-quarter 2025 FFO outlook of $0.01 to $0.05 per diluted share[11] Updated Full Year 2025 Assumptions | Metric | Low Assumption | High Assumption | | :--- | :--- | :--- | | Growth in same-store property cash NOI | (12.50)% | (11.50)% | | General and administrative expenses (in thousands) | $(57,500) | $(63,500) | | Interest expense (in thousands) | $(168,000) | $(178,000) | | Weighted average common stock/units outstanding (in units) | 319,000,000 | 321,000,000 | Consolidated Financial Statements This section provides detailed unaudited financial statements as of June 30, 2025, including balance sheets, statements of operations, and non-GAAP reconciliations for FFO, AFFO, and NOI Consolidated Balance Sheets As of June 30, 2025, Hudson Pacific reported total assets of $8.13 billion, with total liabilities decreasing and stockholders' equity increasing, reflecting the recent common equity offering Selected Balance Sheet Data (in thousands) | Account | 6/30/2025 | 12/31/2024 | | :--- | :--- | :--- | | Total Assets | $8,126,052 | $8,132,239 | | Unsecured and secured debt, net | $3,690,429 | $4,176,844 | | Total Liabilities | $4,440,936 | $4,954,508 | | Total HPP stockholders' equity | $3,366,415 | $2,855,470 | Consolidated Statements of Operations For Q2 2025, total revenues decreased to $190.0 million while operating expenses increased, resulting in a net loss of $87.8 million Q2 Statement of Operations Summary (in thousands) | Account | Three Months Ended 6/30/25 | Three Months Ended 6/30/24 | | :--- | :--- | :--- | | Total Revenues | $190,002 | $218,000 | | Total Operating Expenses | $230,580 | $220,759 | | Net Loss | $(87,760) | $(47,557) | | Net Loss Attributable to Common Stockholders | $(83,149) | $(47,027) | | Net Loss per Share (Diluted) | $(0.41) | $(0.33) | Funds from Operations (FFO) FFO attributable to common stock/unit holders for Q2 2025 sharply declined to $(11.2) million, with adjusted FFO at $8.0 million FFO Reconciliation Summary (in thousands, except per share data) | Metric | Three Months Ended 6/30/25 | Three Months Ended 6/30/24 | | :--- | :--- | :--- | | FFO to common stock/unit holders | $(11,197) | $23,305 | | FFO per common stock/unit—diluted | $(0.05) | $0.16 | | FFO (excluding specified items) | $7,995 | $24,502 | | FFO (excluding specified items) per share | $0.04 | $0.17 | Adjusted Funds from Operations (AFFO) AFFO for Q2 2025 was negative $(6.1) million, a significant decrease from Q2 2024, driven by lower FFO and increased capital expenditures AFFO Reconciliation Summary (in thousands, except per share data) | Metric | Three Months Ended 6/30/25 | Three Months Ended 6/30/24 | | :--- | :--- | :--- | | AFFO | $(6,070) | $24,241 | | Recurring capital expenditures, TIs & commissions | $(28,957) | $(18,645) | | AFFO per common stock/unit—diluted | $(0.03) | $0.17 | Net Operating Income (NOI) In Q2 2025, same-store cash NOI decreased to $87.1 million from $104.1 million in Q2 2024, driven by lower same-store office cash revenues Same-Store Cash NOI (in thousands) | Metric | Three Months Ended 6/30/25 | Three Months Ended 6/30/24 | | :--- | :--- | :--- | | Same-store office cash revenues | $152,152 | $166,762 | | Same-store studios cash revenues | $15,525 | $20,186 | | Same-store cash NOI | $87,096 | $104,120 |