Hudson Pacific Properties Wants To Sell 3 Office Buildings As It Doubles Down On San Francisco Property
Hudson Pacific Properties wants to sell three office properties from its West Coast and Pacific Northwest holdings totaling around 900K SF, the company said in its earnings report Friday.
Two of the listings are off-market and one is already under contract, HPP Chairman and CEO Victor Coleman said on the company's quarterly earnings call.
On the same call, HPP announced it bought out its partner in 1455 Market St., a 1M SF Mid-Market office tower that once housed some of the country’s biggest names in finance and technology, for $43.5M — a fraction of its peak value.
Coleman said the Los Angeles-based office and studio REIT is exploring the sale of three office properties totaling approximately 900K SF.
The REIT didn't disclose the addresses of the three properties and wouldn't confirm or deny they are in the Bay Area. HPP owns 26 office properties in the region.
“We continue to opportunistically pursue potential sales with the goal of further deleveraging and fortifying our balance sheet,” Coleman said in the call.
On the earnings call, HPP also reported strong office leasing momentum, to the tune of 500K SF at its Bay Area office properties, including a 157K SF lease signed in March at 1455 Market St. by the city of San Francisco.
Despite the positive momentum, HPP’s revenues and net income declined on a year-over-year basis. Its first-quarter revenue was $214M, down from $252.3M in Q1 2023, while first-quarter funds from operations totaled $24.2M, or 17 cents per diluted share, down from $49.7M, or 35 cents per diluted share, in 2023.
HPP tied some losses to its studio-related businesses, which were battered by a series of union strikes in Hollywood over the past year, including a five-month strike by the Writers Guild of America.
On the earnings call, Coleman said the 46-year-old 1455 Market St. has “massive upside.”
HPP bought its first stake in 1455 Market St. in 2010 for $93M. This year, it bought out the 45% stake of its former partner, the Canada Pension Plan Investment Board, in the 22-story tower. Coleman said the pension board lacks the financial wherewithal to invest any additional capital into the building.
Originally a financial fortress with a bank vault, 1455 Market St. housed thousands of Bank of America employees and a data center for the bank.
Eventually repositioned, the building became a tech hub housing big-name occupants who flocked to Mid-Market in the 2010s, including Uber and fintech Block, formerly Square.
Today, the neighborhood looks much different. Gone are the days of tech workers buzzing up and down Market Street on e-scooters and throwing parties until all hours of the night. Civil servants tend to keep traditional 8-to-5 schedules when they aren’t working from home two or three days a week.
The city leases space from HPP for a discounted rate of $40 per SF, about half of the building’s pre-pandemic office rent average. The city also has an option to buy the entire building carved into its lease agreement.
CORRECTION, May 7, 3:33 P.M. PT: This story has been updated to remove references to specific geography in which Hudson Pacific is looking to sell property.
