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

PART I—FINANCIAL INFORMATION This part presents unaudited consolidated financial statements and management's discussion for Hudson Pacific Properties entities ITEM 1. Financial Statements of Hudson Pacific Properties, Inc. This section presents Hudson Pacific Properties, Inc.'s unaudited consolidated financial statements, including balance sheets, income, comprehensive loss, equity, and cash flow statements Consolidated Balance Sheets Presents the unaudited consolidated balance sheets for Hudson Pacific Properties, Inc. as of June 30, 2025, and December 31, 2024 Consolidated Balance Sheet (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Total Assets | $8,126,052 | $8,132,239 | -$6,187 | | Total Liabilities | $4,440,936 | $4,954,508 | -$513,572 | | Total Equity | $3,630,332 | $3,118,637 | +$511,695 | | Cash and cash equivalents | $236,025 | $63,256 | +$172,769 | | Unsecured and secured debt, net | $3,690,429 | $4,176,844 | -$486,415 | Consolidated Statements of Operations Details the unaudited consolidated statements of operations for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Operations (Three Months Ended June 30, 2025 vs. 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | | :--------------------------------- | :------------------ | :------------------ | :------------------ | | Total revenues | $190,002 | $218,000 | -$27,998 | | Total operating expenses | $230,580 | $220,759 | +$9,821 | | Net loss | $(87,760) | $(47,557) | -$40,203 | | Net loss attributable to common stockholders | $(83,149) | $(47,027) | -$36,122 | | Basic and Diluted EPS | $(0.41) | $(0.33) | -$0.08 | Consolidated Statements of Operations (Six Months Ended June 30, 2025 vs. 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | | :--------------------------------- | :------------------ | :------------------ | :------------------ | | Total revenues | $388,461 | $432,023 | -$43,562 | | Total operating expenses | $455,406 | $442,379 | +$13,027 | | Net loss | $(168,038) | $(100,912) | -$67,126 | | Net loss attributable to common stockholders | $(157,857) | $(99,229) | -$58,628 | | Basic and Diluted EPS | $(0.92) | $(0.70) | -$0.22 | Consolidated Statements of Comprehensive Loss Presents the unaudited consolidated statements of comprehensive loss for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Equity Outlines the unaudited consolidated statements of equity for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Cash Flows Provides the unaudited consolidated statements of cash flows for the six months ended June 30, 2025 and 2024 ITEM 1. Financial Statements of Hudson Pacific Properties, L.P. This section presents Hudson Pacific Properties, L.P.'s unaudited consolidated financial statements, including balance sheets, income, comprehensive loss, capital, and cash flow statements Consolidated Balance Sheets Presents the unaudited consolidated balance sheets for Hudson Pacific Properties, L.P. as of June 30, 2025, and December 31, 2024 Consolidated Balance Sheet (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Total Assets | $8,126,052 | $8,132,239 | -$6,187 | | Total Liabilities | $4,440,936 | $4,954,508 | -$513,572 | | Total Capital | $3,630,332 | $3,118,637 | +$511,695 | | Cash and cash equivalents | $236,025 | $63,256 | +$172,769 | | Unsecured and secured debt, net | $3,690,429 | $4,176,844 | -$486,415 | Consolidated Statements of Operations Details the unaudited consolidated statements of operations for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Operations (Three Months Ended June 30, 2025 vs. 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | | :--------------------------------- | :------------------ | :------------------ | :------------------ | | Total revenues | $190,002 | $218,000 | -$27,998 | | Total operating expenses | $230,580 | $220,759 | +$9,821 | | Net loss | $(87,760) | $(47,557) | -$40,203 | | Net loss available to common unitholders | $(85,358) | $(48,252) | -$37,106 | | Basic and Diluted EPS | $(0.41) | $(0.33) | -$0.08 | Consolidated Statements of Operations (Six Months Ended June 30, 2025 vs. 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | | :--------------------------------- | :------------------ | :------------------ | :------------------ | | Total revenues | $388,461 | $432,023 | -$43,562 | | Total operating expenses | $455,406 | $442,379 | +$13,027 | | Net loss | $(168,038) | $(100,912) | -$67,126 | | Net loss available to common unitholders | $(162,460) | $(101,683) | -$60,777 | | Basic and Diluted EPS | $(0.92) | $(0.70) | -$0.22 | Consolidated Statements of Comprehensive Loss Presents the unaudited consolidated statements of comprehensive loss for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Capital Outlines the unaudited consolidated statements of capital for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Cash Flows Provides the unaudited consolidated statements of cash flows for the six months ended June 30, 2025 and 2024 Notes to Unaudited Consolidated Financial Statements This section provides detailed notes to the unaudited consolidated financial statements, covering organization, accounting policies, investments, debt, equity, and other disclosures Note 1. Organization Hudson Pacific Properties, Inc. operates as a REIT, managing office and studio properties through its operating partnership across the U.S., Canada, and UK - Hudson Pacific Properties, Inc. is a REIT and the sole general partner of Hudson Pacific Properties, L.P., owning approximately 97.5% of the operating partnership as of June 30, 2025[13] Portfolio Summary (June 30, 2025) | Segment | Number of Properties | Square Feet | | :---------------------- | :------------------- | :------------ | | Consolidated Office | 41 | 12,687,098 | | Consolidated Studio | 4 | 1,473,568 | | Consolidated Future Development | 5 | 1,616,242 | | Total Consolidated Portfolio | 50 | 15,776,908 | | Unconsolidated Office | 1 | 1,524,254 | | Unconsolidated Studio | 1 | 232,000 | | Unconsolidated Future Development | 2 | 1,617,347 | | Total Unconsolidated Portfolio | 4 | 3,373,601 | | TOTAL | 54 | 19,150,509 | Note 2. Summary of Significant Accounting Policies This note outlines the basis of financial statement presentation, consolidation principles, revenue recognition, and recent accounting pronouncements - The Company consolidates its operating partnership and 13 out of 19 joint ventures identified as VIEs. Six joint ventures are unconsolidated and accounted for using the equity method[55][56][59] Revenue from Contracts with Customers (Three Months Ended June 30, 2025 vs. 2024) | Revenue Stream | 2025 (in thousands) | 2024 (in thousands) | | :--------------------------------- | :------------------ | :------------------ | | Ancillary revenues | $19,016 | $26,187 | | Other revenues | $5,928 | $4,257 | | Studio-related tenant recoveries | $636 | $519 | | Management fee income | $1,476 | $1,371 | | Management services reimbursement income | $1,123 | $1,042 | - Goodwill carrying value remained at $156.5 million as of June 30, 2025, with no impairment recognized during the six months ended June 30, 2025 and 2024. Recently issued accounting pronouncements include ASU 2023-09 (Income Taxes) effective after December 15, 2024, and ASU 2024-03 (Income Statement Expenses) effective after December 15, 2026[61][62][63] Note 3. Investment in Real Estate This note details the Company's real estate investments, including cost breakdown, property dispositions, and impairment charges Investment in Real Estate, at Cost (June 30, 2025 vs. December 31, 2024) | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | | Land | $1,225,230 | $1,235,974 | | Building and improvements | $6,201,663 | $6,101,787 | | Tenant improvements | $727,451 | $728,186 | | Property under development | $51,292 | $161,444 | | TOTAL | $8,211,478 | $8,233,286 | Dispositions of Real Estate (Six Months Ended June 30, 2025) | Property | Segment | Disposition Date | Square Feet | Sales Price (in millions) | (Loss) Gain on Sale (in millions) | | :---------------------- | :-------- | :--------------- | :---------- | :------------------------ | :------------------------------ | | Maxwell | Office | 1/22/2025 | 102,963 | $46.0 | $(2.2) | | Foothill Research Center | Office | 3/4/2025 | 195,121 | $23.0 | $12.2 | | 625 Second | Office | 5/30/2025 | 138,354 | $28.0 | $— | - The Company recorded an impairment charge of $18.4 million during the six months ended June 30, 2025, related to the 625 Second office property due to a shortened expected holding period[69] Note 4. Non-Real Estate Property, Plant and Equipment, net This note provides a breakdown of the Company's non-real estate property, plant, and equipment, net of depreciation Non-Real Estate Property, Plant and Equipment, net (June 30, 2025 vs. December 31, 2024) | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | | Non-real estate property, plant and equipment, at cost | $193,615 | $182,050 | | Accumulated depreciation | $(64,362) | $(54,983) | | NON-REAL ESTATE PROPERTY, PLANT AND EQUIPMENT, NET | $129,253 | $127,067 | - No impairment charges were recognized for non-real estate property, plant, and equipment during the six months ended June 30, 2025 and 2024[71] Note 5. Investment in Unconsolidated Real Estate Entities This note details investments in unconsolidated joint ventures, including property types, ownership interests, and financial summaries Unconsolidated Joint Ventures (June 30, 2025) | Property | Property Type | Submarket | Ownership Interest | Functional Currency | | :-------------------------- | :------------------ | :------------------ | :----------------- | :------------------ | | Sunset Waltham Cross Studios | Future Development | Broxbourne, United Kingdom | 35% | Pound sterling | | Bentall Centre | Operating Property | Downtown Vancouver | 20% | Canadian dollar | | Sunset Pier 94 Studios | Development | Manhattan | 51% | U.S. dollar | Combined and Condensed Balance Sheets for Unconsolidated Joint Ventures (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | | Total Assets | $1,219,222 | $1,131,128 | | Total Liabilities | $533,405 | $496,696 | | Total Capital | $685,817 | $634,432 | Combined and Condensed Statements of Operations for Unconsolidated Joint Ventures (Six Months Ended June 30, 2025 vs. 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :--------------------------------- | :------------------ | :------------------ | | Total Revenues | $32,266 | $39,065 | | Total Expenses | $39,158 | $53,696 | | Net Loss | $(6,892) | $(14,631) | Note 6. Deferred Leasing Costs and Intangible Assets, net and Intangible Liabilities, net This note details deferred leasing costs, intangible assets, and intangible liabilities, including their accumulated amortization Deferred Leasing Costs and Intangible Assets, net (June 30, 2025 vs. December 31, 2024) | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | | Deferred leasing costs and in-place lease intangibles, net | $124,887 | $127,595 | | Lease incentives, net | $70,176 | $33,149 | | Below-market ground leases, net | $52,023 | $53,304 | | Above-market leases, net | $12 | $199 | | Customer relationships, net | $50,512 | $57,520 | | Non-competition agreements, net | $1,195 | $3,274 | | Trade name | $37,200 | $37,200 | | Parking easement | $15,273 | $15,273 | | TOTAL DEFERRED LEASING COSTS AND INTANGIBLE ASSETS, NET | $351,278 | $327,514 | Intangible Liabilities, net (June 30, 2025 vs. December 31, 2024) | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | | Below-market leases, net | $19,790 | $21,838 | Amortization of Deferred Leasing Costs and Intangibles (Six Months Ended June 30, 2025 vs. 2024) | Category | 2025 (in thousands) | 2024 (in thousands) | | :--------------------------------- | :------------------ | :------------------ | | Deferred leasing costs and in-place lease intangibles | $(17,353) | $(16,500) | | Lease incentives | $(1,862) | $(222) | | Below-market ground leases | $(1,302) | $(1,345) | | Above-market leases | $(166) | $(29) | | Customer relationships | $(7,009) | $(7,008) | | Non-competition agreements | $(2,080) | $(823) | | Below-market leases | $2,048 | $2,732 | | Above-market ground leases | $— | $21 | Note 7. Accounts Receivable This note provides balances for accounts receivable and straight-line rent receivables, with allowances for doubtful accounts Accounts Receivable (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | | Accounts receivable | $13,800 | $15,000 | | Allowance for doubtful accounts | $300 | $500 | Straight-Line Rent Receivables (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | | Straight-line rent receivables | $204,000 | $199,700 | | Allowance for doubtful accounts | $— | $— | Note 8. Prepaid Expenses and Other Assets, net This note details prepaid expenses and other assets, net, including non-real estate investments and fair value changes Prepaid Expenses and Other Assets, net (June 30, 2025 vs. December 31, 2024) | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | | Non-real estate investments | $48,460 | $50,373 | | Deferred tax assets | $27 | $8 | | Interest rate derivative assets | $4,047 | $4,325 | | Prepaid insurance | $17,033 | $10,074 | | Deferred financing costs, net | $1,716 | $2,165 | | Prepaid property tax | $— | $2,129 | | Other | $26,196 | $21,040 | | TOTAL | $97,479 | $90,114 | - The Company recognized an unrealized gain of $0.2 million for the three months ended June 30, 2025, and an unrealized loss of $0.2 million for the six months ended June 30, 2025, on non-real estate investments. The cumulative unrealized gain as of June 30, 2025, is $6.6 million[86] Note 9. Debt This note provides comprehensive information on the Company's outstanding unsecured and secured debt, including terms and covenants Outstanding Indebtedness (June 30, 2025 vs. December 31, 2024) | Debt Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | | Unsecured debt | $1,650,000 | $2,435,000 | | Secured debt | $2,059,000 | $1,752,667 | | Joint venture partner debt | $66,136 | $66,136 | | TOTAL UNSECURED AND SECURED DEBT, NET | $3,690,429 | $4,176,844 | - During the six months ended June 30, 2025, the Company repaid $320.0 million on the unsecured revolving credit facility, secured a $475.0 million Office Portfolio CMBS loan, amended its unsecured revolving credit facility to decrease capacity to $775.0 million, and fully repaid Series B, Series C, and Series D notes, resulting in a $1.6 million loss on extinguishment of debt[95][96][97][98] Future Minimum Principal Payments (as of June 30, 2025) | Year | Unsecured and Secured Debt (in thousands) | Joint Venture Partner Debt (in thousands) | | :---------------- | :-------------------------------- | :-------------------------------- | | Remaining 2025 | $314,300 | $— | | 2026 | $1,069,767 | $— | | 2027 | $500,600 | $— | | 2028 | $451,000 | $— | | 2029 | $500,000 | $— | | Thereafter | $873,333 | $66,136 | | TOTAL | $3,709,000 | $66,136 | Note 10. Derivatives This note describes the Company's derivative instruments used for interest rate hedging, their fair value, and reclassification expectations Derivative Instruments Fair Value (June 30, 2025 vs. December 31, 2024) | Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | | Total Fair Value Assets | $2,660 | $4,022 | | Total Fair Value Liabilities | $(1,387) | $(303) | - The Company expects $1.8 million of unrealized gain from cash flow hedges to be reclassified as a reduction to interest expense in the next 12 months[112] Note 11. Income Taxes This note explains Hudson Pacific Properties, Inc.'s REIT status, tax treatment, and deferred tax asset and liability recognition - Hudson Pacific Properties, Inc. has elected to be taxed as a REIT, generally exempting it from corporate-level income tax on distributed earnings[113][114] - The Company recorded an income tax provision of $0.6 million for the six months ended June 30, 2025, compared to $0.5 million for the same period in 2024[116] - A valuation allowance has been recorded against substantially all deferred tax assets due to uncertainty regarding their realizability[117] Note 12. Future Minimum Rents and Lease Payments This note outlines the Company's future minimum base rents from tenant leases and its operating lease obligations as a lessee Future Minimum Base Rents from Properties (as of June 30, 2025) | Year | Amount (in thousands) | | :---------------- | :-------------------- | | Remaining 2025 | $250,237 | | 2026 | $484,450 | | 2027 | $427,945 | | 2028 | $360,852 | | 2029 | $291,715 | | Thereafter | $819,634 | | TOTAL | $2,634,833 | - As of June 30, 2025, the present value of operating lease liabilities was $358.5 million, with corresponding ROU assets of $347.7 million. The weighted average remaining lease term was 22 years, and the weighted average incremental borrowing rate was 5.7%[123] Future Minimum Lease Payments for Operating Leases (as of June 30, 2025) | Year | Lease Payments (in thousands) | | :---------------- | :-------------------------- | | Remaining 2025 | $18,046 | | 2026 | $36,635 | | 2027 | $37,611 | | 2028 | $36,897 | | 2029 | $34,725 | | Thereafter | $493,631 | | Total operating lease payments | $657,545 | Note 13. Fair Value of Financial Instruments This note details fair value measurements of the Company's financial assets and liabilities, categorized by input levels Fair Value of Financial Instruments (June 30, 2025 vs. December 31, 2024) | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | | Interest rate derivative assets (Level 2) | $4,047 | $4,325 | | Interest rate derivative liabilities (Level 2) | $(1,387) | $(303) | | Non-real estate investments (measured at NAV) | $48,460 | $47,373 | Fair Value of Debt (June 30, 2025 vs. December 31, 2024) | Debt Type | Carrying Value (in thousands) | Fair Value (in thousands) | | :--------------------------------- | :-------------------------- | :------------------------ | | Unsecured debt (June 30, 2025) | $1,650,000 | $1,500,677 | | Unsecured debt (December 31, 2024) | $2,435,000 | $2,040,075 | | Secured debt (June 30, 2025) | $2,059,000 | $2,054,087 | | Secured debt (December 31, 2024) | $1,752,667 | $1,741,090 | | Consolidated joint venture partner debt (June 30, 2025) | $66,136 | $61,292 | | Consolidated joint venture partner debt (December 31, 2024) | $66,136 | $60,637 | Note 14. Share/Unit-Based Compensation This note describes the Company's share/unit-based compensation plans, including restricted stock and performance units, and related expenses - As of June 30, 2025, there were 10.1 million common shares available for grant under the 2010 Incentive Plan[131] - The top three executive officers agreed to cancel their 2024 performance unit equity awards, resulting in an accelerated recognition of $14.3 million in compensation expense during the three and six months ended June 30, 2025[135] Total Share/Unit-Based Compensation (Six Months Ended June 30, 2025 vs. 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :--------------------------------- | :------------------ | :------------------ | | Expensed share/unit-based compensation | $23,029 | $13,485 | | Capitalized share/unit-based compensation | $862 | $1,089 | | TOTAL | $23,891 | $14,574 | Note 15. Earnings Per Share This note details the calculation of basic and diluted earnings per share for Inc. and per unit for L.P. using the two-class method Hudson Pacific Properties, Inc. Basic and Diluted EPS (Six Months Ended June 30, 2025 vs. 2024) | Metric | 2025 | 2024 | | :--------------------------------- | :----- | :----- | | Net loss attributable to common stockholders | $(157,857) | $(99,229) | | Weighted average common shares outstanding—basic | 172,195,534 | 141,151,893 | | Basic and Diluted EPS | $(0.92) | $(0.70) | Hudson Pacific Properties, L.P. Basic and Diluted EPS (Six Months Ended June 30, 2025 vs. 2024) | Metric | 2025 | 2024 | | :--------------------------------- | :----- | :----- | | Net loss available to common unitholders | $(162,460) | $(101,683) | | Weighted average common units outstanding—basic | 177,214,424 | 144,673,725 | | Basic and Diluted EPS | $(0.92) | $(0.70) | Note 16. Redeemable Non-controlling Interest This note describes redeemable preferred units and non-controlling interests in consolidated real estate entities, including terms and activity - As of June 30, 2025, 235,768 Series A preferred units were outstanding, entitled to 6.25% preferential distributions. During the six months ended June 30, 2025, 156,830 units were redeemed for $3.9 million cash[145][146] - Redeemable non-controlling interest in consolidated real estate entities relates to the 55% interest in the Ferry Building property joint venture, where the partner (Allianz) has a put right, classifying it as temporary equity[147] Reconciliation of Redeemable Non-controlling Interests (Six Months Ended June 30, 2025) | Metric | Series A Redeemable Preferred Units (in thousands) | Consolidated Real Estate Entities (in thousands) | | :--------------------------------- | :--------------------------------- | :--------------------------------------- | | Beginning of Period | $9,815 | $49,279 | | End of Period | $5,894 | $48,890 | Note 17. Equity This note details accumulated other comprehensive income (loss) activity for Inc. and L.P., non-controlling interests, and common stock Hudson Pacific Properties, Inc. AOCI (December 31, 2024 to June 30, 2025) | Metric | Derivative Instruments (in thousands) | Currency Translation Adjustments (in thousands) | Total AOCI (in thousands) | | :--------------------------------- | :---------------------------------- | :------------------------------------ | :------------------------ | | Balance at December 31, 2024 | $2,785 | $(11,202) | $(8,417) | | Balance at June 30, 2025 | $18 | $2,142 | $2,160 | Hudson Pacific Properties, L.P. AOCI (December 31, 2024 to June 30, 2025) | Metric | Derivative Instruments (in thousands) | Currency Translation Adjustments (in thousands) | Total AOCI (in thousands) | | :--------------------------------- | :---------------------------------- | :------------------------------------ | :------------------------ | | Balance at December 31, 2024 | $2,889 | $(11,602) | $(8,713) | | Balance at June 30, 2025 | $(36) | $2,232 | $2,196 | Ownership Interest in Operating Partnership (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Company-owned common units | 379,150,864 | 141,279,102 | | Company's ownership interest percentage | 98.7% | 97.4% | | Non-controlling common units | 4,941,964 | 3,796,346 | | Non-controlling ownership interest percentage | 1.3% | 2.6% | Note 18. Segment Reporting This note presents the Company's financial performance by office and studio property segments, evaluated based on net operating income Total Segment Profit (Six Months Ended June 30, 2025 vs. 2024) | Segment | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | | :--------------------------------- | :------------------ | :------------------ | :------------------ | | Office net operating income | $177,266 | $202,863 | $(25,597) | | Studio net operating income | $(10,116) | $5,848 | $(15,964) | | TOTAL SEGMENT PROFIT | $167,150 | $208,711 | $(41,561) | Reconciliation of Net Loss to Total Profit from All Segments (Six Months Ended June 30, 2025 vs. 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :--------------------------------- | :------------------ | :------------------ | | Net loss | $(168,038) | $(100,912) | | Total profit from all segments | $167,150 | $208,711 | Note 19. Related Party Transactions This note discloses related party transactions, including employment agreements, cost reimbursements, and related party leases - The Company recognized $2.1 million in management services reimbursement income from unconsolidated real estate entities for the six months ended June 30, 2025, a slight decrease from $2.2 million in the prior year[171] - Related rental expense from unconsolidated real estate entities was $0.5 million for the six months ended June 30, 2025, compared to $0.6 million in the prior year[172] Note 20. Commitments and Contingencies This note outlines the Company's commitments and contingencies, including fund investments, legal proceedings, and contractual obligations - The Company has an aggregate commitment of $51.0 million to non-real estate funds, with $8.2 million remaining to be contributed as of June 30, 2025[173] - Management believes the ultimate resolution of current legal claims will not have a material adverse effect on the Company's financial position[174] - As of June 30, 2025, $9.6 million in outstanding letters of credit were primarily related to the Sunset Pier 94 Studios development. The Company also had $98.7 million in commitments related to construction agreements and executed leases[175][176] Note 21. Supplemental Cash Flow Information This note provides supplemental cash flow information, including cash paid for interest, non-cash activities, and cash reconciliation Cash Paid for Interest (Six Months Ended June 30, 2025 vs. 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :--------------------------------- | :------------------ | :------------------ | | Cash paid for interest, net of capitalized interest | $79,116 | $78,981 | Cash and Restricted Cash Reconciliation (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | | Beginning of Period | $99,177 | $119,156 | | End of Period | $267,127 | $99,940 | Note 22. Subsequent Event This note discloses a subsequent event regarding the redemption of Series A preferred units after the reporting period - On July 18, 2025, 123,991 Series A preferred units were redeemed for $3.1 million in cash[179] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of financial condition and operations, covering executive summary, segment performance, liquidity, and accounting policies Forward-looking Statements This section provides a cautionary statement regarding forward-looking statements, noting that actual results may differ due to risks - Forward-looking statements are identified by words such as "anticipate," "believe," "expect," "intend," "may," "might," "plan," "estimate," "project," "should," "will," "result" and similar expressions[181] - Key risks include adverse economic or real estate developments, tenant defaults, fluctuations in interest rates, failure to obtain necessary financing, and inability to maintain REIT status[182][183] Executive Summary This executive summary provides a high-level overview of the Company's real estate portfolio, including office and studio properties and leasing status - As of June 30, 2025, the portfolio included approximately 14.2 million square feet of office properties, 45 sound stages and 1.7 million square feet of studio properties, and 3.2 million square feet of land for undeveloped density rights[185] - The in-service office portfolio was 76.2% leased, and same-store studio properties were 73.8% leased for the 12 months ended June 30, 2025[186] Office Portfolio Statistics (June 30, 2025) | Category | Number of Properties | Rentable Square Feet | Percent Occupied | Percent Leased | Annualized Base Rent per Square Foot | | :-------------------------- | :------------------- | :------------------- | :--------------- | :------------- | :----------------------------------- | | Same-store | 40 | 13,420,243 | 75.1% | 76.2% | $54.49 | | Total in-service office | 40 | 13,420,243 | 75.1% | 76.2% | $54.49 | Overview This overview details recent business and property activities, including acquisitions, dispositions, development projects, and financing Business Acquisitions Reports no business acquisitions during the six months ended June 30, 2025 - The Company had no business acquisitions during the six months ended June 30, 2025[199] Property Acquisitions Reports no property acquisitions during the six months ended June 30, 2025 - The Company had no property acquisitions during the six months ended June 30, 2025[200] Property Dispositions Details the sale of Maxwell, Foothill Research Center, and 625 Second properties during the six months ended June 30, 2025 - During the six months ended June 30, 2025, the Company sold its Maxwell ($46.0 million), Foothill Research Center ($23.0 million), and 625 Second ($28.0 million) properties. A portion of the net proceeds was used to repay outstanding amounts on the unsecured revolving credit facility[201] In Process and Future Development Projects Outlines current and future development projects, including under construction, recently completed, and pipeline projects - Under construction: Sunset Pier 94 Studios (Studio, Manhattan) with 232,000 sq ft, estimated completion Q4-2025 and stabilization Q3-2026. Recently completed: Washington 1000 (Office, Denny Triangle) with 546,000 sq ft, completed Q4-2024 and estimated stabilization Q1-2027[202] - Future development pipeline includes projects like Sunset Las Palmas Studios, Sunset Gower Studios, Element LA, 10900/10950 Washington (residential), Burrard Exchange, and Sunset Waltham Cross Studios, totaling 3,233,589 square feet[202] - Repositioning projects as of June 30, 2025, include 899 Howard, Page Mill Center, Rincon Center, Sunset Las Palmas Studios, Bentall Centre, Palo Alto Square, and Sunset Gower Studios, totaling 270,353 square feet[209] Historical Office Tenant Improvements and Leasing Commissions Presents historical tenant improvement and leasing commission costs for office properties for new leases and renewals Tenant Improvement and Leasing Commission Costs (Six Months Ended June 30, 2025 vs. 2024) | Lease Type | Metric | 2025 | 2024 | | :-------------------------- | :----------------------------------- | :----- | :----- | | Renewals | Tenant improvement costs per square foot | $17.88 | $26.23 | | | Leasing commission costs per square foot | $9.88 | $12.25 | | New leases | Tenant improvement costs per square foot | $64.90 | $50.24 | | | Leasing commission costs per square foot | $14.33 | $12.43 | | Total | Tenant improvement costs per square foot | $47.24 | $41.46 | | | Leasing commission costs per square foot | $12.65 | $12.37 | Financings Details recent financing activities, including debt repayments, new loans, credit facility amendments, and equity offerings - During the six months ended June 30, 2025, the Company repaid $320.0 million on its unsecured revolving credit facility and fully repaid its Series B, Series C, and Series D notes[219][222] - The Company secured a $475.0 million Office Portfolio CMBS loan, using proceeds to repay $259.0 million on its unsecured revolving credit facility and a $168.0 million loan secured by the Element LA property[220] - The unsecured revolving credit facility agreement was amended, decreasing its total capacity from $900.0 million to $775.0 million. Additionally, the Company sold 237,553,442 shares of common stock and pre-funded warrants, generating $689.3 million in gross proceeds[221][224] Historical Results of Operations This section compares the Company's financial performance for the three and six months ended June 30, 2025 and 2024, focusing on net loss and NOI Comparison of the Three Months Ended June 30, 2025 to the Three Months Ended June 30, 2024 Compares financial results for the three months ended June 30, 2025, versus the same period in 2024, highlighting changes in net loss and NOI - Net loss increased by $40.2 million (84.5%) to $87.8 million for the three months ended June 30, 2025, compared to $47.6 million for the same period in 2024[227] - Net Operating Income (NOI) decreased by $22.8 million (21.8%) to $81.9 million. This was driven by a $15.0 million decrease in same-store NOI (due to lower office rental revenues from lease terminations and reduced studio production activity) and a $7.8 million decrease in non-same-store NOI (due to property sales and lower studio activity)[230][237] - General and administrative expenses increased by $7.1 million (34.2%) to $27.8 million, primarily due to $14.3 million in accelerated compensation expense related to the cancellation of 2024 performance unit equity awards. Depreciation and amortization expense increased by $8.0 million (9.2%) to $94.8 million due to accelerated depreciation from early lease terminations and asset disposals[252][253] Comparison of the Six Months Ended June 30, 2025 to the Six Months Ended June 30, 2024 Compares financial results for the six months ended June 30, 2025, versus the same period in 2024, highlighting changes in net loss and NOI - Net loss increased by $67.1 million (66.5%) to $168.0 million for the six months ended June 30, 2025, compared to $100.9 million for the same period in 2024[254] - Net Operating Income (NOI) decreased by $41.6 million (19.9%) to $167.2 million. This was driven by a $22.2 million decrease in same-store NOI (due to lower office rental revenues and studio production) and a $19.4 million decrease in non-same-store NOI (due to lower studio activity and property sales)[257][260] - The Company recognized a net gain of $10.0 million on real estate sales and an impairment loss of $18.5 million. A $3.5 million loss on extinguishment of debt was also recorded. General and administrative expenses increased by $5.8 million (14.5%) due to accelerated compensation expense, and depreciation and amortization expense increased by $9.2 million (5.1%) due to accelerated depreciation[271][272][273][276][277] Liquidity and Capital Resources This section discusses the Company's liquidity sources and uses, including cash, debt, equity, and contractual obligations, and its financial capacity Liquidity Sources Details the Company's liquidity sources, including cash, equity offerings, ATM program, and borrowing capacity - The Company had $236.0 million in cash and cash equivalents at June 30, 2025. In June 2025, an equity offering generated $689.3 million in gross proceeds. The ATM program has sold $65.8 million of common stock out of $125.0 million authorized[279][280][281] Borrowing Capacity (as of June 30, 2025) | Loan | Total Borrowing Capacity (in thousands) | Amount Drawn (in thousands) | Remaining Borrowing Capacity (in thousands) | | :--------------------------------- | :------------------------------------ | :-------------------------- | :------------------------------------------ | | Unsecured revolving credit facility | $775,000 | $— | $775,000 | | Sunset Glenoaks Studios construction loan | $50,300 | $50,300 | $— | | Bentall Centre (HPP's share) | $97,038 | $95,640 | $1,398 | | Sunset Pier 94 Studios construction loan (HPP's share) | $46,810 | $24,481 | $22,329 | | TOTAL | $969,148 | $170,421 | $798,727 | - The Company's senior unsecured debt ratings are B2 (Moody's), B (Standard and Poor's), and B+ (Fitch), indicating non-investment grade. The Company is in the process of refinancing the $314.3 million 1918 Eighth property loan and extending $462 million of revolving credit commitments. The ratio of total consolidated debt to total consolidated market capitalization was 68.7% as of June 30, 2025[284][285][287] Liquidity Uses Reports no material changes in contractual obligations from the prior annual report - There were no material changes outside the ordinary course of business in the information regarding specified contractual obligations contained in the 2024 Annual Report on Form 10-K[290] Cash Flows Summarizes cash flow activities from operations, investing, and financing for the six months ended June 30, 2025 and 2024 Cash Flow Summary (Six Months Ended June 30, 2025 vs. 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | Dollar Change (in thousands) | Percent Change | | :--------------------------------- | :------------------ | :------------------ | :-------------- | :------------- | | Net cash provided by operating activities | $28,496 | $100,750 | $(72,254) | (71.7)% | | Net cash used in investing activities | $(8,078) | $(121,030) | $112,952 | (93.3)% | | Net cash provided by financing activities | $147,532 | $1,064 | $146,468 | 13,765.8% | - The decrease in net cash provided by operating activities was primarily due to property dispositions, lease terminations, and lower production activity. The decrease in net cash used in investing activities resulted from proceeds from real estate sales and decreased contributions to unconsolidated entities. The increase in net cash provided by financing activities was mainly from the equity offering, offset by debt repayments[293][294][295] Off-Balance Sheet Arrangements Details unconsolidated joint venture indebtedness and related borrowing capacities Unconsolidated Joint Venture Indebtedness (as of June 30, 2025) | Loan | Ownership Interest | Amount Drawn (in thousands) | Undrawn Capacity (in thousands) | Total Capacity (in thousands) | | :-------------------------- | :----------------- | :-------------------------- | :------------------------------ | :---------------------------- | | Bentall Centre | 20% | $478,199 | $6,992 | $485,191 | | Sunset Pier 94 Studios | 26% | $95,811 | $87,389 | $183,200 | Critical Accounting Policies This section refers to Note 2 for critical accounting policies, emphasizing estimates and judgments impacting financial reporting - The preparation of financial statements requires management to make estimates and judgments, such as the assignment of purchase price for acquired properties and the effect of property tax reassessments. These determinations, though subjective, affect reported amounts, and actual outcomes may differ materially from estimates[298] Non-GAAP Supplemental Financial Measure: Funds From Operations This section defines FFO per NAREIT guidelines, explains its utility as a REIT performance measure, and reconciles it from net loss - FFO is calculated in accordance with NAREIT's White Paper, excluding gains/losses from sales of depreciable real estate and impairment write-downs, plus real estate-related depreciation and amortization, and after adjustment for unconsolidated partnerships and joint ventures[300] - FFO is considered a useful supplemental measure for comparing operating performance among REITs, but it should not be viewed as an alternative to GAAP operating performance as it does not reflect depreciation, amortization, or capital expenditures[301][303] Reconciliation of Net Loss to FFO (Six Months Ended June 30, 2025 vs. 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :--------------------------------- | :------------------ | :------------------ | | Net loss | $(168,038) | $(100,912) | | FFO to common stockholders and unitholders | $(8,138) | $45,252 | ITEM 3. Quantitative and Qualitative Disclosures About Market Risk This section reports no material changes to market risk disclosures from the Company's 2024 Annual Report on Form 10-K - There have been no material changes to the market risk disclosures for the six months ended June 30, 2025, compared to the 2024 Annual Report on Form 10-K[305] ITEM 4. Controls and Procedures This section details disclosure controls and procedures for Inc. and L.P., confirming effectiveness and no material changes in internal control Disclosure Controls and Procedures (Hudson Pacific Properties, Inc.) Confirms the effectiveness of Hudson Pacific Properties, Inc.'s disclosure controls and procedures as of June 30, 2025 - Hudson Pacific Properties, Inc.'s management, including the Chief Executive Officer and Chief Financial Officer, concluded that its disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance for timely and accurate reporting[307][308] Disclosure Controls and Procedures (Hudson Pacific Properties, L.P.) Confirms the effectiveness of Hudson Pacific Properties, L.P.'s disclosure controls and procedures as of June 30, 2025 - Hudson Pacific Properties, L.P.'s management, including the Chief Executive Officer and Chief Financial Officer of its general partner, concluded that its disclosure controls and procedures were effective as of June 30, 2025, ensuring timely and accurate reporting[310][311] Changes in Internal Control Over Financial Reporting (Hudson Pacific Properties, Inc.) Reports no material changes in Hudson Pacific Properties, Inc.'s internal control over financial reporting during Q2 2025 - There were no changes that occurred during the second quarter of 2025 in Hudson Pacific Properties, Inc.'s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting[312] Changes in Internal Control Over Financial Reporting (Hudson Pacific Properties, L.P.) Reports no material changes in Hudson Pacific Properties, L.P.'s internal control over financial reporting during Q2 2025 - There were no changes that occurred during the second quarter of 2025 in Hudson Pacific Properties, L.P.'s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting[313] PART II—OTHER INFORMATION This part provides other information, including legal proceedings, risk factors, equity sales, defaults, and exhibits ITEM 1. Legal Proceedings The Company is not involved in any material legal proceedings expected to adversely affect its business or financial condition - The Company is not currently a party to any legal proceedings that are believed to be material or that would be expected to have a material adverse effect on its business, financial condition, results of operations, or cash flows[315] ITEM 1A. Risk Factors This section reports no material changes to the risk factors previously disclosed in the Company's 2024 Annual Report - There have been no material changes to the risk factors included in the section entitled "Risk Factors" in the Company's 2024 Annual Report on Form 10-K[316] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details unregistered equity sales by the operating partnership and Company, and the use of proceeds from a public offering - During Q2 2025, the operating partnership issued partnership units in private placements. The Company issued 208,178 shares of common stock upon vesting of restricted stock awards, with 3,166 shares forfeited for tax withholding[317] - A public offering closed on June 13, 2025, selling 237,553,442 common shares and pre-funded warrants for 71,863,597 shares, generating $689.3 million in gross proceeds ($656.9 million net). The proceeds were used to fully repay the unsecured revolving credit facility and for general corporate purposes[319][320] - During Q2 2025, 3,166 shares of common stock were remitted to satisfy tax withholding obligations in connection with the vesting of restricted stock units, at an average price of $2.74 per share[322] ITEM 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities during the reporting period - There were no defaults upon senior securities during the period[324] ITEM 4. Mine Safety Disclosures The Company reported no mine safety disclosures - There were no mine safety disclosures[325] ITEM 5. Other Information No officers or directors adopted or terminated Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - During the three months ended June 30, 2025, none of the Company's officers or directors adopted or terminated any Rule 10b5-1 trading arrangements[326] ITEM 6. Exhibits This section lists all exhibits filed with Form 10-Q, including organizational documents, plans, agreements, certifications, and XBRL data - Exhibits include Articles of Amendment, Bylaws, Partnership Agreements, Form of Pre-Funded Warrant, Incentive Award Plan, Registration Rights Agreement, and various certifications (302, 906). Financial information is provided in iXBRL format[330] SIGNATURES This section contains the official signatures of the Chief Executive Officer and Chief Financial Officer, certifying the report - The report was signed by Victor J. Coleman (Chief Executive Officer) and Harout K. Diramerian (Chief Financial Officer) for both Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P. on August 7, 2025[334][335][339][340]