Hudson Pacific Cuts Dividend, Won't Offer Outlook As Writers Strike Injects Uncertainty
Studio and office landlord Hudson Pacific Properties has decided, in light of the ongoing writers strike, to cut its dividend and that it will not give guidance for the rest of the year.
"Lack of visibility around the strike's duration led us to suspend our FFO outlook and related studio assumptions," Hudson Pacific Properties CEO Victor Coleman said on the company's first-quarter earnings call Tuesday.
The REIT is slashing its dividend by 40%-50%, Bloomberg reported, with the exact amount to be decided later this month.
Whether the strike is short or drawn out, it will affect the company's studio business, executives told investors. However, they also offered the caveat that at HPP's Sunset Studio assets, almost 70% of those soundstages are booked on long-term leases with guaranteed minimums for service revenue.
As of the close of market on Tuesday, the company's stock was trading at $4.78, an almost 24% drop compared to this time last month.
HPP's total revenue in the first quarter was $252.3M, but its net loss attributable to common stockholders was $20.4M. It said the loss was "largely the result of higher interest expense on debt associated with the Quixote acquisition," according to a filing with the Securities and Exchange Commission.
HPP bought Quixote Studios in 2022 for $360M.
Cash rents dropped almost 5% while vacancies rose in the Bay Area. In Southern California, Google began to pay cash rent at One Westside, which should contribute $43.2M net operating income per year, the company said.
Its funds from operations in the first quarter, minus a few specified items, was $49.7M, compared to $75.2M the same time last year, "primarily due to lower production activity impacting Quixote and, to a lesser extent, higher interest expense and lower office tenancy," SEC filings said.
Production has slowed consistently over the last three quarters, according to Film LA, a nonprofit that tracks and issues filming permits in the city.
"The post-COVID production surge seen at this time last year was nowhere to be found in early 2023," the nonprofit wrote in an April 2023 report.
"Over three consecutive quarters, we’ve seen a significant slowdown across all of the most economically important categories of on-location production,” FilmLA President Paul Audley said in an April release for the report. “Particularly in the television world, decisions about future content direction are on hold, pending the outcome of corporate restructuring actions and industry labor negotiations.”
By some analysts' expectations, the boom days for the entertainment industry that were brought on by the streaming wars are on their way out, shown the door by an excess of content and reduced spend on new projects, the Los Angeles Times has reported.
HPP leadership says that it anticipates post-strike there will be a production boom similar to what was seen following the filming stoppages brought on by pandemic lockdowns.
"We believe underlying fundamentals for content production and industry for the studio business overall remain solid, even if spend on high-quality original content moderates in the coming years in pursuit of profitability," Coleman said.
Hudson Pacific operates 60 soundstages as well as holding a portfolio of office properties largely on the West Coast, according to Bloomberg.
