Hudson Pacific Properties Feeling The Burn Of Strike-Related Leasing Slowdown
With the Writers Guild of America strike over and the Screen Actors Guild-American Federation of Television and Radio Artists strike still ongoing, studio and office landlord Hudson Pacific Properties is holding on for the resolution of the latter but continues to feel the crunch of dramatically slowed leasing.
One tenant’s decision not to renew six soundstages at the Sunset Las Palmas campus due to the strike dropped the 12-month trailing lease activity for the property by 5.8% to 90% in the third quarter — the lowest since 2017, the company reported.
Stages under the Quixote brand, a company HPP acquired in 2022 for $360M, were just 41% leased on a trailing 12-month basis in the same period, “which obviously includes the strike's impact and is therefore not indicative of the asset's long-term potential,” HPP President Mark Lammas said on the company’s third-quarter earnings call Thursday.
Hudson Pacific Properties CEO Victor Coleman said new leases for soundstages can't be signed until the actors strike resolves, though leases for writers rooms and office space can be inked now that the writers strike has ended.
“Year-to-date, the combined studio businesses generated approximately $10M of cash NOI due to the impact of the strikes,” Lammas said. “By contrast, our same-store studios generated approximately $34M of cash NOI in 2022, and we estimate that our Quixote stages and services have the potential to generate $80M to $85M of annual cash NOI once normalized production activity resumes.”
HPP’s total revenue in Q3 was $231.4M, down from $245.2M in Q2 and $260.4M in Q3 2022.
HPP Chief Financial Officer Harout Diramerian said the year-over-year fall was “primarily due to the sales of 6922 Hollywood, Skyway Landing and Northview Center, previously communicated tenant move-outs at Skyport Plaza and 10900 to 10950 Washington [Blvd. in Culver City], as well as a reduction in studio services and other revenue due to the related union strikes.”
Hudson Pacific’s net loss in the third quarter was approximately $39.4M, up from the previous quarter’s $31.5M loss. In the same period in 2022, HPP posted a $6.8M net loss.
The company’s net loss attributable to common stockholders in the third quarter was $37.6M, up from $36.2M the previous quarter and $17.3M the same time the previous year.
HPP has studio projects in progress, including Sunset Glenoaks Studios in the San Fernando Valley, which is expected to be complete by the end of 2023, and Sunset Pier 94 Studios in New York City, which is expected to be complete by the end of 2025. HPP said potential tenants seeking show-by-show and long-term leases are touring the properties.
“We're already seeing writers rooms and activity around that up and running,” Coleman said. “When the actor strike is over, purpose-built facilities will have the highest demand. And I think we're very comfortable that this is not a trend — this is a moment in time.”
