Hudson Pacific Properties swung to a loss in the third quarter, leaving a recent run of profitability in the wake of it’s massive plan to expand its studio platform with Blackstone.
The Los Angeles-based commercial developer reported a net loss of $9.3 million in the third quarter, red ink that flowed after two profitable quarters in a row. The production studio and office landlord reported $2.3 million in net income in the second quarter and $5 million in income in the first quarter of this year.
The third quarter loss was $4 million more than the same period 2020, which it then attributed to the pandemic’s impact on revenue from office leases.
Hudson Pacific reported $227.6 million in revenue for the third quarter of this year, with $77.3 million in funds from operations — $0.50 per share, slightly more than the prior quarter.
The loss is mostly attributable to a 16 percent increase in operating expenses and costs associated with several major acquisitions. Through a joint venture with Blackstone, the firm acquired 91 acres outside of London for $165 million in July, with plans to spend $961 million to redevelop the site into a production campus.
Hudson Pacific also ventured outside of its core real estate dealings in the third quarter to acquire two trailer and studio logistics services firms for $222 million.
Across its studio properties, revenue increased 65 percent year-over-year to $25.8 million, though operating expenses grew 33 percent year-over-year. The firm said its three studio properties — Sunset Gower, Sunset Las Palmas and Sunset Bronson — were 87 percent leased on average over the past year.
Hudson Pacific is keeping its focus on its office properties, which make up around 80 percent of its total portfolio.
On an earnings call, CEO Victor Coleman said there is a “growing momentum” among its tenants to return to the office, adding that some have backed away from putting office space up for sublease. But, the firm is assuming “full occupancy will not return to pre-pandemic levels” this year, said CFO Harout Diramerian.
The firm signed over 318,000 square feet of leases in the third quarter, bringing its portfolio to around 92 percent leased — a drop from more than 510,000 square feet of new office leases signed in the second quarter.
In Culver City, Hudson Pacific said NFL Media will not be renewing its lease for 170,000 square feet across two buildings located at 10950 and 10900 Washington Boulevard once it expires next year. There are ongoing discussions with two firms to take the space, the company said.
The company also said it’s on track to complete construction and tenant improvement renovations for Google at the 584,000-square-foot One Westside redevelopment by early next year. Google’s 14-year lease will start once redevelopment is complete.
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