Hudson Pacific Properties Inc.

05/08/2026 | Press release | Distributed by Public on 05/08/2026 13:37

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion relates to our consolidated financial statements and should be read in conjunction with the consolidated financial statements and the related notes, refer to Part I, Item 1 "Financial Statements of Hudson Pacific Properties, Inc.," "Financial Statements of Hudson Pacific Properties, L.P." and "Notes to Unaudited Consolidated Financial Statements." Statements in this Item 2 contain forward-looking statements. For a discussion of important risks related to our business and related to investing in our securities, including risks that could cause actual results and events to differ materially from results and events referred to in the forward-looking statements, refer to Part II, Item 1A "Risk Factors." In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur.
Forward-looking Statements
Certain written and oral statements made or incorporated by reference from time to time by us or our representatives in this Quarterly Report on Form 10-Q, other filings or reports filed with the SEC, press releases, conferences, or otherwise, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, as amended, and Section 21E of the Exchange Act). In particular, statements relating to our liquidity and capital resources, portfolio performance and results of operations contain forward-looking statements. Furthermore, all of the statements regarding future financial performance (including anticipated funds from operations, or "FFO", market conditions and demographics) are forward-looking statements. We are including this cautionary statement to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any such forward-looking statements. We caution investors that any forward-looking statements presented in this Quarterly Report on Form 10-Q, or that management may make orally or in writing from time to time, are based on management's beliefs and assumptions made by, and information currently available to, management. When used, the words "anticipate," "believe," "expect," "intend," "may," "might," "plan," "estimate," "project," "should," "will," "result" and similar expressions that do not relate solely to historical matters are intended to identify forward-looking statements. Such statements are subject to risks, uncertainties and assumptions and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on past forward-looking statements, which were based on results and trends at the time they were made, to anticipate future results or trends.
Some of the risks and uncertainties that may cause our actual results, performance, liquidity or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:
•adverse economic or real estate developments in our target markets;
•general economic conditions;
•defaults on, early terminations of or non-renewal of leases by tenants;
•fluctuations in interest rates and increased operating costs;
•our failure to obtain necessary outside financing, maintain an investment grade rating or maintain compliance with covenants under our financing arrangements;
•our failure to generate sufficient cash flows to service our outstanding indebtedness and maintain dividend payments;
•lack or insufficient amounts of insurance;
•decreased rental rates or increased vacancy rates;
•difficulties in identifying properties to acquire or dispose and completing acquisitions or dispositions;
•our failure to successfully operate acquired properties and operations;
•our failure to maintain our status as a REIT;
•the loss of key personnel;
•environmental uncertainties and risks related to adverse weather conditions and natural disasters;
•financial market and foreign currency fluctuations;
•risks related to acquisitions generally, including the diversion of management's attention from ongoing business operations and the impact on customers, tenants, lenders, operating results and business;
•the inability to successfully integrate acquired properties, realize the anticipated benefits of acquisitions or capitalize on value creation opportunities;
•changes in the tax laws and uncertainty as to how those changes may be applied;
•changes in real estate and zoning laws and increases in real property tax rates; and
•other factors affecting the real estate industry generally.
The risks set forth above are not exhaustive. Other sections of this report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a highly competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors, nor
can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Investors should also refer to our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for future periods and Current Reports on Form 8-K as we file them with the SEC, and to other materials we may furnish to the public from time to time through Current Reports on Form 8-K or otherwise, for a discussion of risks and uncertainties that may cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements. We expressly disclaim any responsibility to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events, or otherwise, and you should not rely upon these forward-looking statements after the date of this report.
Executive Summary
Through our interest in Hudson Pacific Properties, L.P. (our operating partnership) and its subsidiaries, at March 31, 2026, our portfolio of owned real estate included office properties comprising approximately 13.9 million square feet, studio properties comprising approximately 45 sound stages and 1.7 million square feet and land properties comprising approximately 3.7 million square feet of undeveloped density rights. Our production services assets include vehicles, lighting and grip, production supplies and other equipment and the lease rights to 20 sound stages.
The following table summarizes our consolidated and unconsolidated portfolio as of March 31, 2026:
Number of Properties
Rentable Square Feet(1)
Percent Occupied(2)
Percent Leased(2)
Annualized Base Rent per Square Foot(3)
OFFICE
Same-store(4)
37 11,372,298 75.9 % 76.2 % $ 57.22
Non-same store 1 1,532,492 92.3 94.3 30.24
Total in-service office 38 12,904,790 77.8 % 78.4 % $ 53.42
STUDIO
Same-store(5)
3 1,204,666 84.5 % 84.5 % $ 46.15
Non-same store(6)
2 475,084 25.3 25.3 44.71
Total in-service studio 5 1,679,750 67.7 % 67.7 % $ 46.25
Total 43 14,584,540
Repositioning(7)
2 519,350 0.2 % 0.2 % $ -
Development(8)
1 546,000 0.5 0.5 -
Held-for-sale 0 0 - - -
Total repositioning, development and held-for-sale 3 1,065,350 0.3 % 0.3 % $ -
Total office and studio properties 46 15,649,890
Future development(9)
6 3,162,212
TOTAL 52 18,812,102
__________________
1.Determined by management based upon estimated leasable square feet, which may be less or more than the Building Owners and Managers Association ("BOMA") rentable area. Square footage may change over time due to re-measurement or re-leasing.
2.Percent occupied for office properties is calculated as (i) square footage under commenced leases as of March 31, 2026, divided by (ii) total square feet, expressed as a percentage. Percent leased for office properties includes uncommenced leases. Percent leased for studio properties is calculated as (i) average square footage under commenced leases for the 12 months ended March 31, 2026, divided by (ii) total square feet, expressed as a percentage. Percent occupied/leased for studio properties is calculated based on the average percent occupied during the three months ended March 31, 2026.
3.Annualized base rent ("ABR") per square foot for office properties is calculated by multiplying (i) cash base rents under commenced leases excluding tenant reimbursements as of March 31, 2026 by (ii) 12. On a per square foot basis, ABR is divided by square footage under commenced leases as of March 31, 2026. For all expiration years, ABR is calculated as (i) cash base rents at expiration under commenced leases divided by (ii) square footage under commenced leases as of March 31, 2026. The methodology is the same when calculating ABR per square foot either in place or at expiration for uncommenced leases. Rent data is presented without regard to cancellation options. Where applicable, rental rates converted to USD using the foreign currency exchange rate as of March 31, 2026. Annualized base rent per square foot for studio properties reflects actual base rent for the 12 months ended March 31, 2026, excluding tenant reimbursements. ABR per leased square foot calculated as (i) annual base rent divided by (ii) square footage under lease as of March 31, 2026.
4.Same-store office for the three months ended March 31, 2026 defined as all properties owned and included in our stabilized office portfolio as of January 1, 2025 and still owned and included in the stabilized office portfolio as of March 31, 2026.
5.Includes studio properties owned and included in our portfolio as of January 1, 2025 and still owned and included in our portfolio as of March 31, 2026.
6.Includes 231,784 square feet related to recently completed development Sunset Pier 94 studios and 243,300 square feet related to Sunset Glenoaks Studios.
7.Refer to Repositioning table in this document for the office and studio projects under repositioning as of March 31, 2026.
8.Includes 546,000 square feet related to the office development Washington 1000.
9.Includes entitlement to develop up to 428,623 square feet (508 residential units) at 10900-10950 Washington.
The following table provides information regarding the 15 largest tenants in our office portfolio based on HPP's share of annualized base rent as of March 31, 2026:
Tenant # of Properties Lease Expiration Total Occupied Square Feet HPP's Share
Annualized Base Rent(1)
Percent of Annualized Base Rent
1 Google, Inc. 3 2028-2029 458,054
(2)
$ 40,204,174 9.0 %
2 Netflix, Inc. 3 9/30/31 722,305
(3)
27,353,579 6.1
3 Amazon 2 2030-2031 850,964
(4)
24,733,556 5.5
4 City and County of San Francisco 2 2033-2067 429,595
(5)
17,769,342 4.0
5 Nutanix, Inc. 2 2030 229,755
(6)
12,653,291 2.8
6 Salesforce.com 1 2027-2028 176,400
(7)
10,746,119 2.4
7 Dell EMC Corporation 2 2026-2032 130,021
(8)
9,354,339 2.1
8 Coupa Software Incorporated 1 11/30/33 100,654 8,077,212 1.8
9 Weil, Gotshal & Manges LLP 1 2026-2038 89,249
(9)
6,924,439 1.5
10 X.AI Corp. 1 10/31/31 105,536 6,838,733 1.5
11 PayPal, Inc. 1 7/17/26 131,701
(10)
6,549,823 1.5
12 Glu Mobile, Inc. 1 11/30/27 61,381 5,637,567 1.3
13 Redfin Corporation 2 2026-2027 115,968
(11)
5,135,569 1.1
14 Rivian Automotive, Inc. 1 4/30/28 55,805 4,980,956 1.1
15 Covington & Burling LLP 1 8/31/28 40,779 4,483,680 1.0
TOTAL 3,698,167 $ 191,442,379 42.7 %
_____________
1.Annualized base rent is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements or deferments)) under commenced leases as of March 31, 2026, by (ii) 12. Annualized base rent does not reflect tenant reimbursements. Annualized base rents related to Bentall Centre have been converted from CAD to USD using the foreign currency exchange rate as of March 31, 2026.
2.Google, Inc. expirations: (i) 208,843 square feet at Rincon Center on February 29, 2028, (ii) 207,857 square feet at 3400 Hillview on November 30, 2028 and (iii) 41,354 square feet at Ferry Building on October 31, 2029.
3.Netflix, Inc. expirations: (i) 326,792 square feet at ICON, (ii) 301,127 square feet at EPIC and (iii) 94,386 square feet at CUE.
4.Amazon expirations: (i) 659,150 square feet at 1918 Eighth on September 30, 2030 and (ii) 191,814 square feet at 5th & Bell on May 31, 2031.
5.City and County of San Francisco expirations: (i) 39,573 square feet at 1455 Market on September 19, 2033, (ii) 389,316 square feet at 1455 Market on April 30, 2045 and (iii) 706 square feet at Ferry Building on April 30, 2067.
6.Nutanix expirations: (i) 215,857 square feet at 1740 Technology on May 31, 2030 and (ii) 13,898 square feet at Metro Plaza on July 31, 2030.
7.Salesforce.com expirations at Rincon Center: (i) 83,372 square feet on April 30, 2027 and (ii) 93,028 square feet on October 31, 2028. Salesforce.com subleases to Twilio Inc. and pays base rent plus 50% of sublease rent (currently an additional $290,000 per month).
8.Dell EMC Corporation expirations: (i) 83,549 square feet at 875 Howard on June 30, 2026 and (ii) 46,472 square feet at 505 First on April 30, 2032.
9.Weil, Gotshal & Manges, LLP expirations at Towers at Shore Center: (i) 29,846 square feet on August 31, 2026 and (ii) 59,403 square feet on February 28, 2038.
10.PayPal, Inc. has exercised their early termination right at Fourth & Traction for July 2026.
11.Redfin Corporation expirations: (i) 2,978 square feet at Gateway on September 30, 2026 and (ii) 112,990 square feet at Hill7 on July 31, 2027.
Overview
We had no property acquisitions or dispositions during the three months ended March 31, 2026. No properties were classified as held for sale as of March 31, 2026.
This Quarterly Report on Form 10-Q includes financial measures that are not in accordance with generally accepted accounting principles in the United States ("GAAP"), which are accompanied by what the Company considers the most directly comparable financial measures calculated and presented in accordance with GAAP. The Company presents "HPP's share" of certain of these measures, which are non-GAAP financial measures that are 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. As a result, management believes that presenting HPP's share of various financial measures in this manner can help investors better understand the Company's financial condition and/or results of operations after taking into account its true economic interest in these joint ventures.
In Process and Future Development Projects
The following table summarizes the properties currently under construction and future development projects as of March 31, 2026:
Type Submarket
Estimated Square Feet (Units)(1)
Estimated Completion Date Estimated Stabilization Date
Recently Completed:
Seattle, Washington
Washington 1000 Office Denny Triangle 546,000 Q4 2024 Q3 2027
TOTAL 546,000
Future Development Pipeline:
Los Angeles, California
Sunset Las Palmas Studios-Development(2)
Studio Hollywood 617,581 TBD TBD
Sunset Gower Studios-Development(2)
Office/Studio Hollywood 478,845 TBD TBD
Sunset Bronson Studios Lot D-Development(3)
Residential Hollywood 19,816 (33 units) TBD TBD
10900/10950 Washington Residential West Los Angeles 428,623 (508 units) TBD TBD
Vancouver, British Columbia
Burrard Exchange(3)
Office Downtown Vancouver 450,000 TBD TBD
Greater London, United Kingdom
Sunset Waltham Cross Studios(4)
Studio Broxbourne 1,167,347 TBD TBD
TOTAL 3,162,212
TOTAL RECENTLY COMPLETED AND FUTURE DEVELOPMENT 3,708,212
__________________
1.Estimated square footage represents management's estimate of leasable square footage, which may be less or more than the Building Owners and Managers Association (BOMA) rentable area. Square footage may change over time due to re-measurement or re-leasing. For land properties, square footage represents management's estimate of developable square footage, the majority of which remains subject to entitlement approvals not yet obtained.
2.We own 51% of the ownership interests in the consolidated joint venture that owns Sunset Bronson Studios, Sunset Gower Studios and Sunset Las Palmas Studios.
3.We own 20% of the ownership interests in the unconsolidated joint venture that owns Burrard Exchange.
4.We own 35% of the ownership interests in the unconsolidated joint venture that owns Sunset Waltham Cross Studios.
Properties are selected for repositioning when an asset or portions of an asset are taken offline for a change of use or if the asset requires significant base building improvements resulting in substantial down time in occupancy. Studio development properties are incorporated into the in-service portfolio on the earlier of the one year anniversary of completion or the project's estimated stabilization date. Office development properties are incorporated into the in-service portfolio on the earlier of reaching 92% occupancy or the project's estimated stabilization date.
The lease up of our recently completed and under construction office and studio developments requires no additional capital investment and provides an opportunity for near-to-mid-term cash flow growth.
The following table summarizes the portions of office and studio projects currently under repositioning as of March 31, 2026:
Location Submarket
Square Feet
Repositioning:
901 Market San Francisco 163,823
6040 Sunset Hollywood 114,958
899 Howard San Francisco 96,240
1455 Market San Francisco 49,272
Rincon Center San Francisco 38,514
Sunset Las Palmas Studios Hollywood 18,594
Bentall Centre Downtown Vancouver 18,559
Palo Alto Square Palo Alto 12,740
Sunset Gower Studios Hollywood 6,650
TOTAL REPOSITIONING 519,350
Office Lease Expirations
The following table summarizes the lease expirations for leases in place as of March 31, 2026, plus available space, at the properties in our office portfolio. Unless otherwise stated in the footnotes, the information set forth in the table assumes that tenants did not exercise any renewal options.
HPP's Share
Year of Lease Expiration
# of
Leases Expiring(1)
Square Feet Expiring
Annualized Base Rent(2)
Percent of Office Portfolio Annualized Base Rent
Annualized Base Rent Per Leased Square Foot(2)
Annualized Base Rent at Expiration(2)
Annualized Base Rent Per Lease Square Foot at Expiration(2)
Vacant 3,826,898
Q2-2026 25 135,275 5,699,522 1.3 55.16 5,737,638 55.52
Q3-2026 45 396,577 20,330,401 4.5 58.29 20,409,073 58.51
Q4-2026 22 74,443 3,394,354 0.8 51.86 3,419,836 52.25
Total 2026 92 606,295 29,424,277 6.6 56.85 29,566,547 57.13
2027 171 1,287,844 71,223,438 15.9 59.03 73,110,492 60.59
2028 146 1,459,502 91,771,847 20.4 72.06 95,799,643 75.22
2029 110 785,086 38,223,229 8.5 64.38 41,896,521 70.57
2030 79 1,558,174 60,745,910 13.5 52.45 68,088,335 58.79
2031 74 1,581,847 68,569,677 15.3 60.43 80,117,205 70.61
2032 20 255,578 11,030,420 2.5 52.37 12,194,543 57.90
2033 31 685,312 29,336,422 6.5 52.55 36,083,404 64.64
2034 16 186,707 6,903,795 1.5 37.62 11,536,149 62.86
2035 20 400,273 8,950,429 2.0 45.68 11,184,307 57.08
Thereafter 25 796,466 30,354,178 6.8 45.42 46,382,876 69.40
Building management use(3)
67 420,644 - - - - -
Signed leases not commenced 19 72,859 2,355,262 0.5 49.79 2,772,189 58.60
Portfolio Total/Weighted Average 870 13,923,485 $ 448,888,884 100.0 % $ 55.31 $ 508,732,211 $ 62.68
__________________
1.Does not include 33 month-to-month leases.
2.Annualized base rent per square foot for office properties is calculated by multiplying (i) cash base rents under commenced leases excluding tenant reimbursements as of March 31, 2026 by (ii) 12. On a per square foot basis, ABR is divided by square footage under commenced leases as of March 31, 2026. For all expiration years, ABR is calculated as (i) cash base rents at expiration under commenced leases divided by (ii) square footage under commenced leases as of March 31, 2026. The methodology is the same when calculating ABR per square foot either in place or at expiration for uncommenced leases. Rent data is presented without regard to cancellation options. Where applicable, rental rates converted to USD using the foreign currency exchange rate as of March 31, 2026.
3.Reflects management offices occupied by the Company with various expiration dates.
Historical Office Tenant Improvements and Leasing Commissions
The following table summarizes historical information regarding tenant improvement and leasing commission costs for tenants at our office properties:
Three Months Ended March 31,
2026 2025
Renewals(1)
Number of leases 41 27
Square feet 282,654 215,180
Tenant improvement costs per square foot(2)(3)
$ 50.49 $ 18.61
Leasing commission costs per square foot(2)
12.75 8.28
Total tenant improvement and leasing commission costs(2)
$ 63.24 $ 26.89
New leases(4)
Number of leases 44 35
Square feet 271,367 415,115
Tenant improvement costs per square foot(2)(3)
$ 63.64 $ 72.95
Leasing commission costs per square foot(2)
16.31 14.37
Total tenant improvement and leasing commission costs(2)
$ 79.95 $ 87.32
TOTAL
Number of leases 85 62
Square feet 554,021 630,295
Tenant improvement costs per square foot(2)(3)
$ 56.54 $ 55.32
Leasing commission costs per square foot(2)
14.39 12.39
TOTAL TENANT IMPROVEMENT AND LEASING COMMISSION COSTS(2)
$ 70.93 $ 67.71
__________________
1.Excludes retained tenants that have relocated or expanded into new space within our portfolio.
2.Assumes all tenant improvement costs and leasing commissions are paid in the calendar year in which the lease is executed, which may be different than the year in which they were actually paid.
3.Tenant improvement costs are based on negotiated tenant improvement allowances set forth in leases, or, for any lease in which a tenant improvement allowance was not specified, the aggregate cost originally budgeted at the time the lease commenced.
4.Includes retained tenants that have relocated or expanded into new space within our portfolio.
Financings
During the three months ended March 31, 2026, there were no repayments or borrowings on the unsecured revolving credit facility. The Company generally uses the unsecured revolving credit facility to finance the acquisition of properties and businesses, to provide funds for tenant improvements and capital expenditures and to provide for working capital and other corporate purposes.
Historical Results of Operations
This Quarterly Report on Form 10-Q of Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P. represents an update to the more detailed and comprehensive disclosures included in the 2025 Annual Report on Form 10-K of Hudson Pacific Properties, Inc. and Hudson Pacific Properties, L.P. Accordingly, you should read the following discussion in conjunction with the information included in our 2025 Annual Report on Form 10-K, as well as the unaudited financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
In addition, some of the statements and assumptions in this Quarterly Report on Form 10-Q are forward-looking statements within the meaning of Section 27A of the Securities Act or Section 21E of the Exchange Act, including, in particular, statements about our plans, strategies and prospects as well as estimates of industry growth for the quarter and beyond. Refer to "Forward-looking Statements."
All amounts and percentages used in this discussion of our results of operations are calculated using the numbers presented in the financial statements contained in Part I, Item 1 of this Quarterly Report rather than the rounded numbers appearing in this discussion. The dollar amounts included in the tables in this discussion of our results of operations are presented in thousands.
Comparison of the Three Months Ended March 31, 2026 to the Three Months Ended March 31, 2025
Net Loss
Net loss decreased $29.4 million, or 36.6%, to $50.9 million for the three months ended March 31, 2026 compared to $80.3 million for the three months ended March 31, 2025. The reasons for the change are discussed below with respect to the decrease in net operating income during the three months ended March 31, 2026, offset by the decrease in depreciation and amortization, general and administrative expenses and the change in other income and expenses.
Net Operating Income
We evaluate performance based upon net operating income ("NOI"). 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 net income, 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 net income. 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, interest income, transaction-related expenses and other non-operating items. We define NOI as operating revenues (including rental revenues, other property-related revenue, tenant recoveries and other operating revenues), less property-level operating expenses (which includes 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.
Management further analyzes NOI by evaluating the performance from the following groups:
•Same-store properties, which include all of the properties owned and included in our stabilized portfolio as of January 1, 2025 and still owned and included in the stabilized portfolio as of March 31, 2026; and
•Non-same-store, which includes:
•Stabilized non-same-store properties
•Lease-up properties
•Repositioning properties
•Development properties
•Redevelopment properties
•Held for sale properties
•Operating results from studio service-related businesses
The following table reconciles net loss to NOI (in thousands, except percentage change):
Three Months Ended March 31, Dollar Change Percentage Change
2026 2025
NET LOSS $ (50,904) $ (80,278) $ 29,374 (36.6) %
Adjustments:
Loss from unconsolidated real estate entities 437 1,254 (817) (65.2)
Fee income (1,107) (1,359) 252 (18.5)
Interest expense 37,994 43,505 (5,511) (12.7)
Interest income (1,649) (435) (1,214) 279.1
Management services reimbursement income-unconsolidated real estate entities (1,124) (975) (149) 15.3
Management services expense-unconsolidated real estate entities 1,124 975 149 15.3
Transaction-related expenses 101 - 101 -
Unrealized loss on non-real estate investments 1,962 449 1,513 337.0
Gain on sale of real estate, net - (10,023) 10,023 (100.0)
Impairment loss - 18,476 (18,476) (100.0)
Loss on extinguishment of debt - 1,858 (1,858) (100.0)
Other income (158) (8) (150) 1,875.0
Income tax provision 348 194 154 79.4
General and administrative 12,575 18,483 (5,908) (32.0)
Depreciation and amortization 80,722 93,085 (12,363) (13.3)
NOI $ 80,321 $ 85,201 $ (4,880) (5.7) %
Same-store NOI $ 87,345 $ 91,840 $ (4,495) (4.9) %
Non-same-store NOI (7,024) (6,639) (385) 5.8
NOI $ 80,321 $ 85,201 $ (4,880) (5.7) %
The following table summarizes certain statistics of our consolidated same-store office and studio properties:
Three Months Ended March 31,
2026 2025
Same-store office
Number of properties 37 37
Rentable square feet 11,372,298 11,470,493
Ending % leased 76.2 % 74.5 %
Ending % occupied 75.9 % 73.2 %
Average % occupied for the period 75.1 % 72.8 %
Average annual rental rate per square foot $ 57.22 $ 58.36
Same-store studio
Number of properties 3 3
Rentable square feet 1,204,666 1,204,666
Average % leased for the period(1)
84.5 % 73.9 %
__________________
1.Percent leased for same-store studio is the average percent leased for the 12 months ended.
The following table gives further detail on our NOI (in thousands):
Three Months Ended March 31,
2026 2025
Same-store Non-same-store Total Same-store Non-same-store Total
REVENUES
Office
Rental revenues $ 145,167 $ 61 $ 145,228 $ 148,709 $ 9,684 $ 158,393
Service and other revenues 3,451 (5) 3,446 4,913 1,905 6,818
Total office revenues 148,618 56 148,674 153,622 11,589 165,211
Studio
Rental revenues 11,095 2,702 13,797 10,377 3,275 13,652
Service and other revenues 8,514 10,867 19,381 6,622 12,974 19,596
Total studio revenues 19,609 13,569 33,178 16,999 16,249 33,248
Total revenues 168,227 13,625 181,852 170,621 27,838 198,459
OPERATING EXPENSES
Office operating expenses 68,706 1,116 69,822 67,787 4,490 72,277
Studio operating expenses 12,176 19,533 31,709 10,994 29,987 40,981
Total operating expenses 80,882 20,649 101,531 78,781 34,477 113,258
Office NOI 79,912 (1,060) 78,852 85,835 7,099 92,934
Studio NOI 7,433 (5,964) 1,469 6,005 (13,738) (7,733)
NOI $ 87,345 $ (7,024) $ 80,321 $ 91,840 $ (6,639) $ 85,201
The following table gives further detail on our change in NOI (in thousands, except percentage change):
Three Months Ended March 31, 2026 as compared to
Three Months Ended March 31, 2025
Same-store Non-same-store Total
Dollar change Percentage change Dollar change Percentage change Dollar change Percentage change
REVENUES
Office
Rental revenues $ (3,542) (2.4) % $ (9,623) (99.4) % $ (13,165) (8.3) %
Service and other revenues (1,462) (29.8) (1,910) (100.3) (3,372) (49.5)
Total office revenues (5,004) (3.3) (11,533) (99.5) (16,537) (10.0)
Studio
Rental revenues 718 6.9 (573) (17.5) 145 1.1
Service and other revenues 1,892 28.6 (2,107) (16.2) (215) (1.1)
Total studio revenues 2,610 15.4 (2,680) (16.5) (70) (0.2)
Total revenues (2,394) (1.4) (14,213) (51.1) (16,607) (8.4)
OPERATING EXPENSES
Office operating expenses 919 1.4 (3,374) (75.1) (2,455) (3.4)
Studio operating expenses 1,182 10.8 (10,454) (34.9) (9,272) (22.6)
Total operating expenses 2,101 2.7 (13,828) (40.1) (11,727) (10.4)
Office NOI (5,923) (6.9) (8,159) (114.9) (14,082) (15.2)
Studio NOI 1,428 23.8 7,774 (56.6) 9,202 (119.0)
NOI $ (4,495) (4.9) % $ (385) 5.8 % $ (4,880) (5.7) %
NOI decreased $4.9 million, or 5.7%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily resulting from:
•a $4.5 million decrease in same-store NOI driven by:
•a decrease in office NOI of $5.9 million primarily due to:
•a $3.5 million decrease in rental revenues driven by the 2025 lease terminations and downsizes at our 1455 Market, Hill7, and Concourse properties; and
•a $1.5 million decrease in service and other revenues due to a tenant move out at our Shorebreeze property in 2025; partially offset by
•a $0.9 million increase in office operating expenses primarily due to higher ground lease expense at our Palo Alto Square property and higher engineering, cleaning, security and owner's expenses at various properties, partially offset by capitalization of expenses at our 901 Market property that is undergoing repositioning, as well as a prior year property tax refund received at our Skyport Plaza property during the first quarter of 2026;
•further offset by an increase in studio NOI of $1.4 million driven by higher production activity at our Sunset Gower Studios and Sunset Las Palmas Studios properties during the first quarter of 2026;
•a $0.4 million decrease in non-same-store NOI driven by:
•a decrease in office NOI of $8.2 million primarily resulting from the sales of our Element LA and Foothill Research Center properties in 2025 and increased operating expenses at Washington 1000 that became operational during the first quarter of 2026, partially offset by a reduction of expenses due to the sale of 625 Second in 2025; further offset by
•an increase in studio NOI of $7.8 million mainly due to cost savings initiatives at Quixote.
Other (Expenses) Income
Loss from unconsolidated real estate entities
We recorded a $0.4 million loss from unconsolidated real estate entities for the three months ended March 31, 2026 compared to a loss of $1.3 million for the three months ended March 31, 2025. The change was primarily driven by mark-to-market adjustments for an interest rate swap that does not qualify for hedge accounting.
Fee income
We recognized fee income of $1.1 million for the three months ended March 31, 2026 compared to $1.4 million for the three months ended March 31, 2025. Fee income represents the management fee income earned from our unconsolidated real estate entities.
Interest expense
The following table presents a reconciliation from gross interest expense to the interest expense line item on the Consolidated Statements of Operations:
Three Months Ended March 31,
2026 2025 Dollar Change Percentage Change
Gross interest expense(1)
$ 42,185 $ 49,127 $ (6,942) (14.1) %
Capitalized interest (5,683) (10,080) 4,397 (43.6)
Non-cash interest expense(2)
1,492 4,458 (2,966) (66.5)
TOTAL $ 37,994 $ 43,505 $ (5,511) (12.7) %
_________________
1.Includes interest on the Company's debt and hedging activities.
2.Includes the amortization of deferred financing costs and fair market value adjustments for our mark-to-market interest rate derivatives.
Gross interest expense decreased by $6.9 million or 14.1%, to $42.2 million for the three months ended March 31, 2026 compared to $49.1 million for the three months ended March 31, 2025. The decrease was primarily related to a lower outstanding balance on the unsecured line of credit and lower reference rates on our floating rate debt during the first quarter of 2026, as well as the 2025 repayments of the Element LA loan and Series B, C and D notes. The decrease was partially offset by the interest expense related to the Office Portfolio CMBS loan, which was obtained in March 2025.
Capitalized interest decreased by $4.4 million or 43.6%, to $5.7 million for the three months ended March 31, 2026 compared to $10.1 million for the three months ended March 31, 2025 primarily due to Washington 1000 becoming operational in 2026 and completion of Sunset Glenoaks Studios development in 2025. The decrease was partially offset by an increase in development activity at our 6040 Sunset property.
Non-cash interest expense decreased by $3.0 million, or 66.5%, to $1.5 million for the three months ended March 31, 2026 compared to $4.5 million for the three months ended March 31, 2025. The decrease was primarily related to changes in the fair value of our derivative instruments.
Interest income
Interest income increased by $1.2 million, or 279.1%, to $1.6 million for the three months ended March 31, 2026 compared to $0.4 million for the three months ended March 31, 2025. The change was driven by an increase in cash deposits in interest-bearing accounts and interest earned on a refundable payroll tax credit.
Unrealized loss on non-real estate investments
We recognized an unrealized loss on non-real estate investments of $2.0 million for the three months ended March 31, 2026 compared to an unrealized loss of $0.4 million for the three months ended March 31, 2025, which were due to the observable changes in the fair value of the investments.
Gain on sale of real estate, net
During the three months ended March 31, 2025, we recognized a net gain on sale of $10.0 million attributable to the sales of our Foothill Research and Maxwell properties. No gain or loss on sale was recognized during the three months ended March 31, 2026.
Impairment loss
During the three months ended March 31, 2025, we recorded an impairment loss of $18.5 million due to a reduction in the estimated holding period for our 625 Second property. We did not record any impairment charges during the three months ended March 31, 2026.
Loss on extinguishment of debt
During the three months ended March 31, 2025, we recognized a loss on extinguishment of debt of $1.9 million related to repaying the loan secured by our Element LA property. No gain or loss on extinguishment of debt was recognized during the three months ended March 31, 2026.
General and administrative expenses
General and administrative expenses decreased by $5.9 million, or 32.0%, to $12.6 million for the three months ended March 31, 2026 compared to $18.5 million for the three months ended March 31, 2025. The decrease was primarily due to a reduction in payroll, bonus, stock-based compensation expense and professional fees during the three months ended March 31, 2026.
Depreciation and amortization expense
Depreciation and amortization expense decreased by $12.4 million, or 13.3%, to $80.7 million for the three months ended March 31, 2026 compared to $93.1 million for the three months ended March 31, 2025. The decrease was primarily driven by Quixote impairment adjustment during the fourth quarter of 2025, resulting in a lower depreciable basis, and the accelerated depreciation of tenant improvements related to early lease terminations at our 6040 Sunset and Hill 7 properties in 2025 with no comparable activity in 2026. The decrease was partially offset due to commencement of depreciation and amortization on Washington 1000, which became operational in 2026.
Liquidity and Capital Resources
We have remained capitalized since our initial public offering through public offerings, private placements, joint ventures and continuous offerings under our at-the-market ("ATM") program. We currently expect that our principal sources of funds to meet our short-term and long-term liquidity requirements for working capital, strategic acquisitions, capital expenditures, tenant improvements, leasing costs, dividends and distributions, share repurchases and repayments of outstanding debt financing will include:
•cash on hand, cash reserves and net cash provided by operations;
•strategic dispositions of real estate;
•sales of non-real estate investments;
•proceeds from additional equity securities;
•our ATM program;
•borrowings under the operating partnership's unsecured revolving credit facility;
•proceeds from joint venture partners;
•proceeds from the Sunset Pier 94 Studios construction loan (unconsolidated joint venture); and
•proceeds from additional secured, unsecured debt financings or offerings.
Liquidity Sources
We had approximately $138.0 million of cash and cash equivalents at March 31, 2026. Our principal source of operating cash flow is related to leasing and operating the properties in our portfolio. Our properties provide a relatively consistent stream of cash flow that provides us with resources to pay operating expenses, debt service and fund quarterly dividend and distribution requirements.
Our ability to access the equity capital markets will be dependent on a number of factors as well, including general market conditions for REITs and market perceptions about us.
We have an ATM program that allows us to sell up to $125.0 million of common stock, $65.8 million of which has been sold through March 31, 2026. Any future sales will depend on several factors, including, but not limited to, market conditions, the trading price of our common stock and our capital needs. We have no obligation to sell the remaining shares available for sale under this program.
The following table sets forth our borrowing capacity under various loans as of March 31, 2026 (in thousands):
Loan Total
Borrowing Capacity 		Amount Drawn Remaining Borrowing Capacity
Unsecured revolving credit facility
$ 795,250 $ - $ 795,250
Sunset Glenoaks Studios construction loan(1)(2)(3)
52,092 52,092 -
Bentall Centre(1)(2)(4)
94,813 94,813 -
Sunset Pier 94 Studios construction loan(1)(2)
46,810 39,819 6,991
TOTAL $ 988,965 $ 186,724 $ 802,241
__________________
1.Amounts are presented at HPP's share.
2.This loan is held by an unconsolidated joint venture.
3.Total borrowing capacity includes an original borrowing capacity of $50.3 million and accrued payment-in-kind interest of $1.8 million as of March 31, 2026 (amounts at HPP's share).
4.The loan was transacted in Canadian dollars. Amounts are shown in U.S. dollars using the foreign currency exchange rate as of March 31, 2026.
Our ability to incur additional debt will be dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. If we incur additional debt, the risks associated with our leverage, including our ability to service our debt, would increase. As of March 31, 2026, the credit ratings for our senior unsecured debt were B2, B and B+ from Moody's, Standard and Poor's and Fitch, respectively.
The following table sets forth our ratio of debt to total market capitalization (counting Series A redeemable preferred units as debt) as of March 31, 2026 (in thousands, except percentage):
Market Capitalization
Unsecured and secured debt(1)
$ 3,365,350
Series A redeemable preferred units
2,795
Total consolidated debt 3,368,145
Equity capitalization(2)
817,951
TOTAL CONSOLIDATED MARKET CAPITALIZATION $ 4,186,096
Total consolidated debt/total consolidated market capitalization 80.5 %
__________________
1.Excludes joint venture partner debt and unamortized deferred financing costs and loan discounts/premiums.
2.Equity capitalization represents the shares of common stock outstanding (including unvested restricted shares), pre-funded warrants, OP and LTIP units outstanding, restricted performance units and dilutive shares multiplied by the closing price of $5.91, as reported by the NYSE, on March 31, 2026, as well as the aggregate value of the Series C preferred stock liquidation preference as of March 31, 2026.
Outstanding Indebtedness
The following table sets forth information as of March 31, 2026 and December 31, 2025 with respect to our outstanding indebtedness, excluding unamortized deferred financing costs and loan discounts/premiums (in thousands):
March 31, 2026 December 31, 2025
Unsecured debt $ 1,650,000 $ 1,650,000
Secured debt $ 1,715,350 $ 1,717,850
Joint venture partner debt $ 66,136 $ 66,136
The operating partnership was in compliance with its financial covenants as of March 31, 2026.
Liquidity Uses
Contractual Obligations
During the three months ended March 31, 2026, there were no material changes outside the ordinary course of business in the information regarding specified contractual obligations contained in our 2025 Annual Report on Form 10-K. Refer to Part I, Item 1 "Note 9 to the Consolidated Financial Statements-Debt" for information regarding our future minimum principal payments due on our outstanding debt. Refer to Part I, Item 1 "Note 12 to the Consolidated Financial Statements-Future Minimum Rents and Lease Payments" for information regarding our future minimum operating lease payments. Refer to Part I, Item 1 "Note 20 to the Consolidated Financial Statements-Commitments and Contingencies" for more detail.
Cash Flows
Comparison of the cash flow activity for the three months ended March 31, 2026 to the three months ended March 31, 2025 is as follows (in thousands, except percentage change):
Three Months Ended March 31,
2026 2025 Dollar Change Percentage Change
Net cash provided by operating activities
$ 44,292 $ 30,536 $ 13,756 45.0 %
Net cash (used in) provided by investing activities $ (34,314) $ 15,945 $ (50,259) (315.2) %
Net cash used in financing activities $ (9,666) $ (11,732) $ 2,066 (17.6) %
Cash and cash equivalents and restricted cash were $162.4 million and $162.1 million as of March 31, 2026 and December 31, 2025, respectively.
Operating Activities
Net cash provided by operating activities increased by $13.8 million, or 45.0%, to $44.3 million for the three months ended March 31, 2026 compared to $30.5 million for the three months ended March 31, 2025. The increase primarily resulted from favorable working capital movements during the three months ended March 31, 2026, including the timing of cash receipts and payments, which more than offset a reduction in net operating income during the same period as compared to the three months ended March 31, 2025, mainly driven by the 2025 tenant move-outs and asset sales.
Investing Activities
Net cash used in investing activities increased by $50.3 million, or 315.2%, to $34.3 million for the three months ended March 31, 2026 compared to $15.9 million of cash provided by investing activities for the three months ended March 31, 2025. The decrease primarily resulted from a $63.2 million decrease in proceeds from sales of real estate partially offset by a $12.7 million decrease in additions to investment in real estate during the three months ended March 31, 2026.
Financing Activities
Net cash used in financing activities decreased by $2.1 million, or 17.6%, to $9.7 million for the three months ended March 31, 2026 compared to $11.7 million for the three months ended March 31, 2025. The decrease primarily resulted from a $494.0 million decrease in proceeds from unsecured and secured debt, largely offset by a $482.2 million decrease in payments of unsecured and secured debt during the three months ended March 31, 2025. The change was further offset by the $12.1 million payment of loan costs, net of loan premium during the three months ended March 31, 2025 that did not recur during the three months ended March 31, 2026.
Off-Balance Sheet Arrangements
Unconsolidated Joint Venture Indebtedness
We have investments in unconsolidated real estate entities accounted for using the equity method of accounting. The following table provides information about our unconsolidated joint venture indebtedness as of March 31, 2026 (in thousands, except for percentages):
Ownership Interest Amount Drawn Undrawn Capacity Total Capacity Interest Rate Contractual Maturity Date
Bentall Centre(1)
20 % $ 474,067 $ - $ 474,067 CORRA + 2.30% 7/1/2027
Sunset Glenoaks Studios(2)(3)
50 % $ 104,183 $ - $ 104,183 SOFR + 3.10% 1/9/2027
Sunset Pier 94 Studios(4)
26 % $ 155,841 $ 27,359 $ 183,200 SOFR + 4.75% 9/9/2028
__________________
(1)The loan was transacted in Canadian dollars. Amounts are shown in U.S. dollars using the foreign currency exchange rate as of March 31, 2026. This loan is interest-only through its term.
(2)This loan has an initial interest rate of SOFR + 3.10% per annum until certain performance targets have been met, at which time the effective interest rate will decrease to SOFR + 2.50%. This loan is interest-only through its term. The maturity date includes the effect of extension options.
(3)Amount drawn includes principal of $100.6 million and accrued payment-in-kind interest of $3.6 million as of March 31, 2026.
(4)This loan has an initial interest rate of SOFR + 4.75% per annum until stabilization of the project, at which time the effective interest rate will decrease to SOFR + 4.00%. This loan is interest-only through its term. The maturity date includes the effect of extension options.
Critical Accounting Policies
Our discussion and analysis of our historical financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our financial statements in conformity with GAAP requires us to make estimates of certain items and judgments as to certain future events, for example with respect to the assignment of the purchase price of an acquired property among land, buildings, improvements, equipment and any related intangible assets and liabilities, or the effect of a property tax reassessment of our properties. These determinations, even though inherently subjective and prone to change, affect the reported amounts of our assets, liabilities, revenues and expenses. While we believe that our estimates are based on reasonable assumptions and judgments at the time they are made, some of our assumptions, estimates and judgments will inevitably prove to be incorrect. As a result, actual outcomes will likely differ from our accruals and those differences-positive or negative-could be material. Some of our accruals are subject to adjustment, as we believe appropriate, based on revised estimates and reconciliation to the actual results when available.
Refer to Part I, Item 1 "Note 2 to the Consolidated Financial Statements-Summary of Significant Accounting Policies," for information regarding our critical accounting policies.
Non-GAAP Supplemental Financial Measure: Funds From Operations
We calculate FFO in accordance with the White Paper issued in December 2018 on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). The White Paper defines FFO as net income or loss calculated in accordance with GAAP, excluding gains and losses from sales of depreciable real estate and impairment write-downs associated with depreciable real estate, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets) and after adjustment for unconsolidated partnerships and joint ventures. The calculation of FFO includes the amortization of deferred revenue related to tenant-funded tenant improvements and excludes the depreciation of the related tenant improvement assets. In the December 2018 White Paper, NAREIT provided an option to include value changes in mark-to-market equity securities in the calculation of FFO. We elected this option retroactively during the fourth quarter of 2018.
We believe that FFO 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.
The following table presents a reconciliation of net loss to FFO (in thousands):
Three Months Ended March 31,
2026 2025
Net loss $ (50,904) $ (80,278)
Adjustments:
Depreciation and amortization-consolidated 80,722 93,085
Depreciation and amortization-non-real estate assets (3,441) (9,649)
Depreciation and amortization-HPP's share from unconsolidated real estate entities 1,476 1,045
Gain on sale of real estate, net - (10,023)
Impairment loss-real estate assets - 18,476
Unrealized loss on non-real estate investments 1,962 449
FFO attributable to non-controlling interests (6,714) (4,854)
FFO attributable to preferred shares and units (5,091) (5,193)
FFO TO COMMON STOCK/UNIT HOLDERS $ 18,010 $ 3,058
Hudson Pacific Properties Inc. published this content on May 08, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 08, 2026 at 19:37 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]