Hudson Pacific Properties is showing signs of recovering from the pandemic, reporting net income of $5 million in the first quarter — a steep upswing from its net loss of $8.5 million in the fourth quarter of last year.
The company’s profit matched analysts’ estimates of $0.03 per share, though it fell short of the $10.7 million in net income it earned in the first quarter of 2020, before the pandemic.
Hudson Pacific earned $213 million in revenue, a 3.3 percent increase from a year earlier, while funds from operations were $0.48 per share.
Hudson Pacific’s markets like Silicon Valley “remain the center of gravity” for large tech tenants such as Amazon and Google, despite the disruption to the office market caused by the pandemic, CEO Victor Coleman said on a Thursday earnings call.
The Los Angeles-based office and production studio landlord said it was finally collecting previously deferred and delinquent rents and received fewer requests for rent relief from January through March. That led to the profitable first quarter and the revenue increases compared with the last two quarters.
All of its studio tenants and 99 percent of its office tenants are current on their rent, though only 54 percent of rents from storefront retail tenants have been collected, the company said.
And the REIT is still signing new tenants. As more people are vaccinated and preparing for a return to offices, Hudson Pacific signed 524,000 square feet of new office leases in the first quarter, almost double the amount of space in the fourth quarter of last year.
Hudson Pacific renewed two major leases for space in Palo Alto — a 207,857-square-foot lease with Google and 42,899 square feet with Lockheed Martin. Amazon also added 35,524 square feet to its existing lease at its 1918 Eighth Ave. tower in Seattle, which the company acquired in December.
But until the company’s tenants bring more employees back to the office, Coleman said he can’t give a full picture of its expected FFO this year.
“There’s no gaming here,” Coleman said in response to an analyst’s question. “ When the buildings are populated, we can actually come up with a number.”
The REIT is still betting on its office tenants coming back to the office, but recognized density will be lower, potentially affecting cash flow. “It’s not a one-size fits all,” but tenants are looking at flexible office solutions with options to spread out employees, Arthur Suazo, HPP’s head of leasing, said on the call.
Beyond office space, the company also is betting on the growth of production studio usage in Hollywood. Studio revenues only made up around 10 percent of its total, after the company sold a 49 percent stake of its $1.65 billion Hollywood studio portfolio to Blackstone last year.
The REIT is still expanding in the sector. It signed a 70,285-square-foot lease with Company 3, a post-production firm, earlier this year, set to start in the second quarter of 2022.
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