Hudson Pacific Properties (HPP) Q2 2024 earnings summary

Executive summary

• Q2 2024 saw the highest office leasing activity since 2022, with over 540,000 sq ft of new and renewal leases signed and a robust pipeline, though office occupancy and lease percentages declined slightly.

• West Coast office markets are gradually improving, with increased tenant requirements, declining sublease space, and growing AI-driven demand, but challenges persist, especially in San Francisco.

• Studio operations remain challenged post-strike, with contract ratifications expected to support normalization by Q4, but timing and visibility remain limited.

• Deleveraging is a top priority, supported by strong liquidity and no debt maturities until late 2025.

• Portfolio as of June 30, 2024: 44 office and 7 studio properties totaling 16.4 million sq ft in service, with 80.0% office leased and 76.1% studio leased.

Financial highlights

• Q2 2024 revenue was $218 million, down from $245.2 million in Q2 2023, mainly due to asset sales and tenant move-outs.

• Net loss attributable to common stockholders was $47.0 million ($0.33/share), compared to $36.2 million ($0.26/share) in Q2 2023.

• FFO excluding specified items was $24.5 million ($0.17/share), down from $34.5 million ($0.24/share) year-over-year.

• AFFO was $24.2 million ($0.17/share), compared to $31.1 million ($0.22/share) in Q2 2023.

• Same-store cash NOI was $105.2 million, down from $119.3 million in Q2 2023.

Outlook and guidance

• Q3 2024 FFO outlook is $0.08–$0.12 per diluted share, with full-year same-store cash NOI growth expected to decline 12.5–13.5%.

• Leasing execution is expected to remain strong, but office occupancy and NOI may decline due to lease expirations.

• Studio business contribution is expected to improve over time, but not necessarily to prior peak levels.