On August 7, 2024, Hudson Pacific Properties Inc (HPP, Financial) released its 8-K filing detailing the financial results for the second quarter of 2024. Hudson Pacific Properties Inc is a real estate investment trust that acquires, operates, and owns office buildings and media and entertainment properties on America's West Coast. The company focuses on developed, urban markets in Northern California, Southern California, and the Pacific Northwest.
Performance Overview
Hudson Pacific Properties Inc reported total revenue of $218.0 million for Q2 2024, a decrease from $245.2 million in the same quarter last year. This decline was primarily due to asset sales and tenant move-outs, partially offset by improved studio ancillary revenue. The net loss attributable to common stockholders was $47.0 million, or $0.33 per diluted share, compared to a net loss of $36.2 million, or $0.26 per diluted share, in Q2 2023.
Funds from Operations (FFO), excluding specified items, stood at $24.5 million, or $0.17 per diluted share, down from $34.5 million, or $0.24 per diluted share, in the previous year. Adjusted Funds from Operations (AFFO) were $24.2 million, or $0.17 per diluted share, compared to $31.1 million, or $0.22 per diluted share, in Q2 2023.
Leasing Activity and Market Conditions
During the second quarter, Hudson Pacific Properties Inc signed 540,000 square feet of office leases, marking the highest activity since 2022. Significant leases included a 157,000-square-foot new lease with the City and County of San Francisco at 1455 Market and a 48,000-square-foot renewal lease with a financial services company at the Ferry Building. Despite these achievements, the in-service office portfolio ended the quarter at 78.7% occupied and 80.0% leased, slightly down from the previous quarter.
With over 500,000 square feet of office leases signed in the second quarter, we have continued to build on our strong start to the year. While still challenging, our west coast office market conditions are gradually improving," stated Victor Coleman, Hudson Pacific's Chairman and CEO.
Financial Metrics and Balance Sheet
Hudson Pacific Properties Inc reported $706.5 million in total liquidity, comprising $78.5 million of unrestricted cash and cash equivalents and $628.0 million of undrawn capacity under the unsecured revolving credit facility. The company's net debt to undepreciated book value ratio was 37.3%, with 92.2% of debt fixed or capped and no maturities until November 2025.
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Total Revenue | $218.0 million | $245.2 million |
| Net Loss | $47.0 million | $36.2 million |
| FFO (excluding specified items) | $24.5 million | $34.5 million |
| AFFO | $24.2 million | $31.1 million |
Outlook and Challenges
Hudson Pacific Properties Inc provided an FFO outlook for the third quarter of $0.08 to $0.12 per diluted share and updated its full-year assumptions. The company anticipates lower studio NOI in the third quarter due to slower than expected absorption within its same-store studio portfolio. Additionally, office lease expirations in the second and third quarters are expected to result in lower average office occupancy and NOI for the third quarter.
Despite the challenges, Hudson Pacific Properties Inc remains focused on deleveraging and has no debt maturities until the end of 2025. The company continues to navigate the fluid industry dynamics and aims to leverage its streamlined model for future growth.
For more detailed financial information, readers can access the full 8-K filing.
Explore the complete 8-K earnings release (here) from Hudson Pacific Properties Inc for further details.
