Hudson Pacific Properties (NYSE:HPP) raised its full-year earnings outlook after third-quarter office occupancy improved and its studio business generated higher income, although asset dispositions weighed on revenue and impairment charges widened its net loss.
The company reported core funds from operations, or core FFO, of $18.6 million, or $0.28 per diluted share, up from $16.7 million, or $0.26 per share, a year earlier. Same-store cash net operating income rose 8.3% to $85.2 million, driven by improved office occupancy and increased studio production activity.
Hudson Pacific now expects 2026 core FFO of $1.15 to $1.21 per diluted share, compared with its previous range of $1.12 to $1.20. CFO Harout Diramerian said the midpoint increase reflected approximately $0.01 per share of third-quarter outperformance and another $0.01 from improved fourth-quarter expectations.
Revenue fell to $180.9 million from $186.6 million, primarily because of asset sales. The net loss widened to $218.1 million, or $3.38 per diluted share, from $136.5 million, or $2.12 per share, largely because of non-cash impairments at Skyport Plaza and Hill7 and a loss on the sale of 875 and 899 Howard, Diramerian said.
Office leasing and occupancy improve
Hudson Pacific signed 74 office leases covering approximately 534,000 square feet in the quarter, with activity evenly split between new leases and renewals, President Mark Lammas said. About two-thirds of the leasing was in the Bay Area.
In-service office occupancy rose to 85.6%, up 310 basis points from the prior quarter and marking a fifth consecutive quarterly increase. Adjusting for asset sales and the temporary removal of Fourth & Traction in Los Angeles from the in-service portfolio, occupancy increased 80 basis points on a like-for-like basis.
Lammas said the company expects to complete required seismic work at Fourth & Traction by the end of the second quarter of 2027. The work follows the expiration of PayPal’s lease, and Hudson Pacific is discussing potential phased occupancy with prospective tenants, he said.
The company’s leasing pipeline stood at 2.1 million square feet, including 1.1 million square feet in advanced stages, Chairman and CEO Victor Coleman said. Lammas said nearly 60% of the pipeline represented new leases.
Hudson Pacific had approximately 50% coverage for the 1.1 million square feet of leases expiring in 2027. The company defines coverage as deals in leases, letters of intent or proposals; it does not mean the space has already been leased. Lammas said that included full coverage for Salesforce and Twilio space at Rincon Center in San Francisco, where negotiations were at a late stage.
Coleman said the company had not seen recent technology-stock volatility affect its pipeline or tour activity. “We’re not seeing that at all in the deals that we’re doing,” he said during the question-and-answer session.
Debt reduction and liquidity
After the quarter ended, Hudson Pacific repurchased $200 million of senior notes at a discount to par, split evenly between its 2027 and 2028 notes. It also completed the sale of Skyport Plaza and a non-core Quixote asset, using the proceeds to reduce its revolving credit facility balance.
Including those transactions, the company’s share of debt was $2.7 billion, down $425 million, or 14%, from a year earlier. Pro forma liquidity was $840 million, including $765 million of revolver availability. That availability includes $333 million of commitments expiring in December, Diramerian said.
Hudson Pacific and its joint venture partner also extended a $1.1 billion Hollywood Media Portfolio loan to November 2027 without a principal paydown. Lammas said the company’s first priority before re-engaging with the lender is to continue discussions with the portfolio’s largest tenant.
Asked about upcoming debt maturities, Coleman said the company was not interested in raising equity at current levels and did not need to do so to address its debt. He said Hudson Pacific was evaluating a limited number of additional asset sales, as well as potential joint ventures and options involving unencumbered properties.
Diramerian said adjusted FFO, which an analyst noted was currently negative, was expected to turn around in the second half of 2027 as free-rent periods expire. He cautioned that the timing was difficult to predict because leasing capital expenditures can be volatile.
Studio results and portfolio changes
Hudson Pacific’s share of core studio net operating income improved to $4.3 million from $2.2 million in the prior quarter and a loss of $2.5 million a year earlier. Lammas attributed the improvement to higher production activity and spending at the company’s prime locations compared with a year earlier, lower operating expenses and the wind-down of non-core Quixote operations.
Lammas said only a few leases associated with the non-core Quixote business remained to be resolved and that the company expected to wrap them up by year-end. He said the remaining transportation business was close to break-even in the third quarter.
The company also secured entitlements after quarter-end to convert approximately 164,000 square feet of office space at 901 Market in San Francisco into 136 residential units above existing retail space. Lammas said Hudson Pacific was advancing construction drawings and evaluating pricing, while Coleman said a decision on the property’s future had not yet been made.
For its updated 2026 outlook, Hudson Pacific excluded rent from Weil, Gotshal & Manges for the balance of the year as a conservative measure, although Diramerian said the company had received no indication that the tenant would stop paying. He also said improvements to the company’s occupancy and same-store cash NOI growth estimates were essentially attributable to asset sales and the temporary removal of Fourth & Traction from the relevant portfolios.
About Hudson Pacific Properties (NYSE:HPP)
Hudson Pacific Properties, Inc is a real estate investment trust that owns, operates and develops office and studio properties in major technology, media and entertainment markets. The company’s portfolio is focused primarily on the West Coast of the United States and Vancouver, Canada, with properties designed for businesses in the technology, media and creative industries.
Hudson Pacific’s office business includes creative office campuses and traditional office buildings that it leases to companies across sectors such as technology, entertainment and professional services.
