Hudson Pacific Properties Reports Second Quarter 2025 Financial Results

Unaudited, in thousands, except share data

Full Year 2025

Assumptions

Metric

Low

High

Growth in same-store property cash NOI⁽¹⁾⁽²⁾

(12.50)%

(11.50)%

GAAP non-cash revenue (straight-line rent and above/below-market rents)⁽³⁾

$5,500

$10,500

GAAP non-cash expense (straight-line rent expense and above/below-market ground rent)

$(6,500)

$(8,500)

General and administrative expenses⁽⁴⁾

$(57,500)

$(63,500)

Interest expense⁽⁵⁾

$(168,000)

$(178,000)

Non-real estate depreciation and amortization

$(33,000)

$(35,000)

FFO from unconsolidated joint ventures

$600

$2,600

FFO attributable to non-controlling interests

$(13,000)

$(17,000)

FFO attributable to preferred units/shares

$(21,000)

$(21,000)

Weighted average common stock/units outstanding—diluted⁽⁶⁾

319,000,000

321,000,000

(1)

Same-store for the full year 2025 is defined as the 39 office properties and three studio properties, as applicable, owned and included in the Company's stabilized portfolio as of January 1, 2024, and anticipated to still be owned and included in the stabilized portfolio through December 31, 2025. Beginning this quarter, Metro Center is included within the same-store office properties. Same-store property cash NOI growth outlook would have been in-line with last quarter at (12.50)% to (13.50)% without Metro Center.

(2)

Please see non-GAAP information below for definition of cash NOI.

(3)

Includes non-cash straight-line rent associated with the studio and office properties.

(4)

Includes share/unit-based compensation expense, which the Company estimates at $16,000 in 2025. General and administrative expenses and the share/unit-based compensation exclude the impact of the one-time voluntary cancellation of non-cash compensation agreements of $14,280.

(5)

Includes non-cash interest expense, which the Company estimates at $8,500 in 2025. Interest expense excludes the one-time expenses associated with early repayment of indebtedness of $3,213.

(6)

Diluted shares represent ownership in the Company through shares of common stock, OP Units and other convertible or exchangeable instruments. The weighted average fully diluted common stock/units outstanding for 2025 includes an estimate for the dilution impact of stock grants to the Company's executives under its long-term incentive programs. This estimate is based on the projected award potential of such programs as of the end of the most recently completed quarter, as calculated in accordance with the ASC 260, Earnings Per Share.

Consolidated Balance Sheets

In thousands, except share data

6/30/25

12/31/24

(Unaudited)

ASSETS

Investment in real estate, at cost

$

8,211,478

$

8,233,286

Accumulated depreciation and amortization

(1,895,060

)

(1,791,108

)

Investment in real estate, net

6,316,418

6,442,178

Non-real estate property, plant and equipment, net

129,253

127,067

Cash and cash equivalents

236,025

63,256

Restricted cash

31,102

35,921

Accounts receivable, net

13,454

14,505

Straight-line rent receivables, net

204,031

199,748

Deferred leasing costs and intangible assets, net

351,278

327,514

Operating lease right-of-use assets

347,698

370,826

Prepaid expenses and other assets, net

97,479

90,114

Investment in unconsolidated real estate entities

242,785

221,468

Goodwill

156,529

156,529

Assets associated with real estate held for sale

—

83,113

TOTAL ASSETS

$

8,126,052

$

8,132,239

LIABILITIES AND EQUITY

Liabilities

Unsecured and secured debt, net

$

3,690,429

$

4,176,844

Joint venture partner debt

66,136

66,136

Accounts payable, accrued liabilities and other

222,645

193,861

Operating lease liabilities

358,528

380,004

Intangible liabilities, net

19,790

21,838

Security deposits, prepaid rent and other

83,408

84,708

Liabilities associated with real estate held for sale

—

31,117

Total liabilities

4,440,936

4,954,508

Redeemable preferred units of the operating partnership

5,894

9,815

Redeemable non-controlling interest in consolidated real estate entities

48,890

49,279

Equity

HPP stockholders' equity:

4.750% Series C cumulative redeemable preferred stock, $0.01 par value, $25.00 per share liquidation preference, 18,400,000 authorized; 17,000,000 shares outstanding at 6/30/25 and 12/31/24

425,000

425,000

Common stock, $0.01 par value, 722,400,000 authorized and 379,150,864 shares outstanding at 6/30/25; 481,600,000 authorized and 141,279,102 shares outstanding at 12/31/24

3,779

1,403

Additional paid-in capital

2,935,476

2,437,484

Accumulated other comprehensive income (loss)

2,160

(8,417

)

Total HPP stockholders' equity

3,366,415

2,855,470

Non-controlling interest—members in consolidated real estate entities

153,574

169,452

Non-controlling interest—units in the operating partnership

110,343

93,715

Total equity

3,630,332

3,118,637

TOTAL LIABILITIES AND EQUITY

$

8,126,052

$

8,132,239

Consolidated Statements of Operations

Unaudited, in thousands, except per share data

Three Months Ended

Six Months Ended

6/30/25

6/30/24

6/30/25

6/30/24

REVENUES

Office

Rental revenues

$

150,533

$

172,596

$

308,926

$

344,023

Service and other revenues

5,300

3,443

12,118

7,091

Total office revenues

155,833

176,039

321,044

351,114

Studio

Rental revenues

13,889

14,441

27,541

28,041

Service and other revenues

20,280

27,520

39,876

52,868

Total studio revenues

34,169

41,961

67,417

80,909

Total revenues

190,002

218,000

388,461

432,023

OPERATING EXPENSES

Office operating expenses

71,501

75,304

143,778

148,251

Studio operating expenses

36,552

37,952

77,533

75,061

General and administrative

27,776

20,705

46,259

40,415

Depreciation and amortization

94,751

86,798

187,836

178,652

Total operating expenses

230,580

220,759

455,406

442,379

OTHER (EXPENSES) INCOME

Loss from unconsolidated real estate entities

(205

)

(2,481

)

(1,459

)

(3,224

)

Fee income

1,476

1,371

2,835

2,496

Interest expense

(48,137

)

(44,159

)

(91,642

)

(88,248

)

Interest income

2,123

579

2,558

1,433

Management services reimbursement income—unconsolidated real estate entities

1,123

1,042

2,098

2,198

Management services expense—unconsolidated real estate entities

(1,123

)

(1,042

)

(2,098

)

(2,198

)

Transaction-related expenses

(451

)

113

(451

)

(2,037

)

Unrealized gain (loss) on non-real estate investments

212

(1,045

)

(237

)

(1,943

)

(Loss) gain on sale of real estate, net

(16

)

—

10,007

Impairment loss

—

—

(18,476

)

—

Loss on extinguishment of debt

(1,637

)

—

(3,495

)

—

Other (expense) income

(93

)

1,334

(85

)

1,477

Total other expenses

(46,728

)

(44,288

)

(100,445

)

(90,046

)

Loss before income tax provision

(87,306

)

(47,047

)

(167,390

)

(100,402

)

Income tax provision

(454

)

(510

)

(648

)

(510

)

Net loss

(87,760

)

(47,557

)

(168,038

)

(100,912

)

Net income attributable to Series A preferred units

(121

)

(153

)

(267

)

(306

)

Net income attributable to Series C preferred shares

(5,047

)

(5,047

)

(10,094

)

(10,094

)

Net income attributable to participating securities

—

(207

)

—

(409

)

Net loss attributable to non-controlling interest in consolidated real estate entities

6,675

3,751

14,142

7,920

Net loss attributable to redeemable non-controlling interest in consolidated real estate entities

895

961

1,797

2,118

Net loss attributable to common units in the operating partnership

2,209

1,225

4,603

2,454

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS

$

(83,149

)

$

(47,027

)

$

(157,857

)

$

(99,229

)

BASIC AND DILUTED PER SHARE AMOUNTS

Net loss attributable to common stockholders—basic

$

(0.41

)

$

(0.33

)

$

(0.92

)

$

(0.70

)

Net loss attributable to common stockholders—diluted

$

(0.41

)

$

(0.33

)

$

(0.92

)

$

(0.70

)

Weighted average shares of common stock outstanding—basic

202,666

141,181

172,196

141,152

Weighted average shares of common stock outstanding—diluted

202,666

141,181

172,196

141,152

Funds from Operations⁽¹⁾

Unaudited, in thousands, except per share data

Three Months Ended

Six Months Ended

6/30/25

6/30/24

6/30/25

6/30/24

RECONCILIATION OF NET LOSS TO FUNDS FROM OPERATIONS ("FFO")⁽¹⁾:

Net loss

$

(87,760

)

$

(47,557

)

$

(168,038

)

$

(100,912

)

Adjustments:

Depreciation and amortization—consolidated

94,751

86,798

187,836

178,652

Depreciation and amortization—non-real estate assets

(8,785

)

(8,211

)

(18,434

)

(16,192

)

Depreciation and amortization—HPP's share from unconsolidated real estate entities⁽²⁾

1,113

2,006

2,158

3,157

Loss (gain) on sale of real estate, net

16

—

(10,007

)

—

Impairment loss—real estate assets

—

—

18,476

—

Unrealized (gain) loss on non-real estate investments

(212

)

1,045

237

1,943

FFO attributable to non-controlling interests

(5,152

)

(5,576

)

(10,005

)

(10,996

)

FFO attributable to preferred shares and units

(5,168

)

(5,200

)

(10,361

)

(10,400

)

FFO to common stock/unit holders

(11,197

)

23,305

(8,138

)

45,252

Specified items impacting FFO:

Transaction-related expenses

451

(113

)

451

2,037

Forfeiture of non-cash compensation agreements

14,280

—

14,280

—

One-time termination of Quixote leases (cost-cutting initiatives)

622

—

6,487

—

Write-off of transportation assets (cost-cutting initiatives)

626

—

626

—

One-time termination of Quixote non-compete agreement (cost-cutting initiatives)

—

—

1,402

—

One-time expenses associated with early repayment of debt

3,213

—

5,071

—

Non-cash revaluation associated with a loan swap (unqualified for hedge accounting)

—

1,310

682

1,310

FFO (excluding specified items) to common stock/unit holders

$

7,995

$

24,502

$

20,861

$

48,599

Weighted average common stock/units outstanding—diluted

208,411

145,657

340,837

145,647

FFO per common stock/unit—diluted

$

(0.05

)

$

0.16

$

(0.02

)

$

0.31

FFO (excluding specified items) per common stock/unit—diluted

$

0.04

$

0.17

$

0.06

$

0.33

(1)

We calculate Funds from Operations ("FFO") in accordance with the White Paper on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts. The White Paper defines FFO as net income or loss calculated in accordance with generally accepted accounting principles in the United States ("GAAP"), excluding gains and losses from sales of depreciable real estate and impairment write-downs associated with depreciable real estate, plus the HPP’s share of real estate-related depreciation and amortization, excluding amortization of deferred financing costs and depreciation of non-real estate assets. The calculation of FFO includes the HPP’s share of amortization of deferred revenue related to tenant-funded tenant improvements and excludes the depreciation of the related tenant improvement assets.

FFO is a non-GAAP financial measure we believe is a useful supplemental measure of our operating performance. The exclusion from FFO of gains and losses from the sale of operating real estate assets allows investors and analysts to readily identify the operating results of the assets that form the core of our activity and assists in comparing those operating results between periods. Also, because FFO is generally recognized as the industry standard for reporting the operations of REITs, it facilitates comparisons of operating performance to other REITs. However, other REITs may use different methodologies to calculate FFO, and accordingly, our FFO may not be comparable to all other REITs.

Implicit in historical cost accounting for real estate assets in accordance with GAAP is the assumption that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies using historical cost accounting alone to be insufficient. Because FFO excludes depreciation and amortization of real estate assets, we believe that FFO along with the required GAAP presentations provides a more complete measurement of our performance relative to our competitors and a more appropriate basis on which to make decisions involving operating, financing and investing activities than the required GAAP presentations alone would provide. We use FFO per share to calculate annual cash bonuses for certain employees.

However, FFO should not be viewed as an alternative measure of our operating performance because it does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, which are significant economic costs and could materially impact our results from operations.

(2)

HPP's share is a Non-GAAP financial measure calculated as the measure on a consolidated basis, in accordance with GAAP, plus our Operating Partnership’s share of the measure from our unconsolidated joint ventures (calculated based upon the Operating Partnership’s percentage ownership interest), minus our partners’ share of the measure from our consolidated joint ventures (calculated based upon the partners’ percentage ownership interests). We believe that presenting HPP’s share of these measures provides useful information to investors regarding the Company’s financial condition and/or results of operations because we have several significant joint ventures, and in some cases, we exercise significant influence over, but do not control, the joint venture. In such instances, GAAP requires us to account for the joint venture entity using the equity method of accounting, which we do not consolidate for financial reporting purposes. In other cases, GAAP requires us to consolidate the venture even though our partner(s) own(s) a significant percentage interest.

Adjusted Funds from Operations⁽¹⁾

Unaudited, in thousands, except per share data

Three Months Ended

Six Months Ended

6/30/25

6/30/24

6/30/25

6/30/24

FFO (excluding specified items)

$

7,995

$

24,502

$

20,861

$

48,599

Adjustments:

GAAP non-cash revenue (straight-line rent and above/below-market rents)

(3,704

)

(118

)

(4,375

)

1,900

GAAP non-cash expense (straight-line rent expense and above/below-market ground rent)

1,788

1,638

3,492

3,304

Non-real estate depreciation and amortization

8,159

8,211

16,406

16,192

Non-cash interest expense

5,065

1,764

9,174

3,610

Share/unit-based compensation expense

3,584

6,889

8,699

13,421

Recurring capital expenditures, tenant improvements and lease commissions

(28,957

)

(18,645

)

(58,615

)

(34,388

)

AFFO

$

(6,070

)

$

24,241

$

(4,358

)

$

52,638

Weighted average common stock/units outstanding—diluted

208,411

145,657

340,837

145,647

AFFO per common stock/unit—diluted

$

(0.03

)

$

0.17

$

(0.01

)

$

0.36

(1)

Adjusted Funds from Operations ("AFFO") is a non-GAAP financial measure we believe is a useful supplemental measure of our performance. We compute AFFO by adding to FFO (excluding specified items) HPP's share of non-cash compensation expense and amortization of deferred financing costs, and subtracting recurring capital expenditures related to HPP's share of tenant improvements and leasing commissions (excluding pre-existing obligations on contributed or acquired properties funded with amounts received in settlement of prorations), and eliminating the net effect of HPP’s share of straight-line rents, amortization of lease buy-out costs, amortization of above- and below-market lease intangible assets and liabilities, amortization of above- and below-market ground lease intangible assets and liabilities and amortization of loan discounts/premiums. AFFO is not intended to represent cash flow for the period. We believe that AFFO provides useful information to the investment community about our financial position as compared to other REITs since AFFO is a widely reported measure used by other REITs. However, other REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not be comparable to other REITs.

Net Operating Income⁽¹⁾

Unaudited, in thousands

Three Months Ended

6/30/25

6/30/24

RECONCILIATION OF NET LOSS TO NET OPERATING INCOME ("NOI") AND SAME-STORE CASH NET OPERATING INCOME ("NOI")

Net loss

$

(87,760

)

$

(47,557

)

Adjustments:

Loss from unconsolidated real estate entities

205

2,481

Fee income

(1,476

)

(1,371

)

Interest expense

48,137

44,159

Interest income

(2,123

)

(579

)

Management services reimbursement income—unconsolidated real estate entities

(1,123

)

(1,042

)

Management services expense—unconsolidated real estate entities

1,123

1,042

Transaction-related expenses

451

(113

)

Unrealized (gain) loss on non-real estate investments

(212

)

1,045

Loss on sale of real estate, net

16

—

Loss on extinguishment of debt

1,637

—

Other expense (income)

93

(1,334

)

Income tax provision

454

510

General and administrative

27,776

20,705

Depreciation and amortization

94,751

86,798

NOI

$

81,949

$

104,744

Straight-line rent, net

(2,633

)

1,147

Share/unit-based compensation expense

243

62

Amortization of above/below-market leases, net

(1,016

)

(1,284

)

Amortization of lease incentive costs

1,393

361

Amortization of above/below-market ground leases, net

651

662

Cash NOI

80,587

105,692

Less: Non-same-store cash NOI

(6,509

)

1,572

Same-store cash NOI

$

87,096

$

104,120

NOI Detail

Same-store office cash revenues

152,152

166,762

Straight-line rent

3,837

531

Amortization of above/below-market leases, net

1,016

1,147

Amortization of lease incentive costs

(1,384

)

(261

)

Same-store office revenues

155,621

168,179

Same-store studios cash revenues

15,525

20,186

Straight-line rent

111

109

Amortization of lease incentive costs

(9

)

(9

)

Same-store studio revenues

15,627

20,286

Same-store revenues

171,248

188,465

Same-store office cash expenses

70,107

70,288

Straight-line rent

367

371

Share/unit-based compensation expense

12

15

Amortization of above/below-market ground leases, net

641

641

Same-store office expenses

71,127

71,315

Same-store studio cash expenses

10,474

12,540

Share/unit-based compensation expense

113

40

Same-store studio expenses

10,587

12,580

Same-store expenses

81,714

83,895

Same-store NOI

89,534

104,570

Non-same-store NOI

(7,585

)

174

NOI

$

81,949

$

104,744

(1)

We evaluate performance based upon property Net Operating Income ("NOI") from continuing operations. NOI is not a measure of operating results or cash flows from operating activities or cash flows as measured by GAAP and should not be considered an alternative to income from continuing operations, as an indication of our performance, or as an alternative to cash flows as a measure of liquidity, or our ability to make distributions. All companies may not calculate NOI in the same manner. We consider NOI to be a useful performance measure to investors and management because when compared across periods, NOI reflects the revenues and expenses directly associated with owning and operating our properties and the impact to operations from trends in occupancy rates, rental rates and operating costs, providing a perspective not immediately apparent from income from continuing operations. We calculate NOI as net income (loss) excluding corporate general and administrative expenses, depreciation and amortization, impairments, gains/losses on sales of real estate, interest expense, transaction-related expenses and other non-operating items. We define NOI as operating revenues (rental revenues, other property-related revenue, tenant recoveries and other operating revenues), less property-level operating expenses (external management fees, if any, and property-level general and administrative expenses). NOI on a cash basis is NOI adjusted to exclude the effect of straight-line rent and other non-cash adjustments required by GAAP. We believe that NOI on a cash basis is helpful to investors as an additional measure of operating performance because it eliminates straight-line rent and other non-cash adjustments to revenue and expenses.