Hudson Pacific Properties signed 1 million square feet of leases in the first quarter, the company announced in an earnings report that meets Wall Street expectations.
One reason for the robust numbers? After months of rumblings, the office and production studio operator finally executed its long-term leases with Google and WeWork in the first months of the year. But as the prolific developer makes deals with the co-working giant, it’s also plotting its own entry into the arena.
In an earnings call Thursday, Hudson Pacific’s [HPP] CEO and Chairman Victor Coleman said the firm has had “multiple conversations on multiple levels” about how to enter the crowded space. “I believe that’s something we will do either independent of WeWork or in conjunction with WeWork,” Coleman added.
WeWork, which recently filed paperwork for an IPO, leased all of Hudson Pacific’s 95,000-square-foot Maxwell development through 2031, as well as another 66,000 square feet in San Francisco. Roughly half of the space in the Arts District will be used for its enterprise brand.
Hudson Pacific’s revenue in the first quarter increased 13.4 percent year-over-year to $197.4 million. Funds from operations — the key metric for REITS — totaled $76.7 million. That’s up 9.5 percent from the first quarter of 2018.
The company reported a net loss of $39.4 million, which it attributed to the pending sale of Campus Center office campus, near San Jose. It’s expecting to offset that loss with its anticipated sale of the adjacent land and development rights, set to occur in the second quarter.
At this time last year, Hudson Pacific reported net income of $48.6 million.
Much of Thursday’s call focused on Hudson Pacific’s foray into Vancouver, a market which it plans on becoming “an active player” in. The firm recently teamed up with Blackstone Property Partners to buy and renovate a 1.5 million-square-foot office and retail complex, dubbed Bentall Centre, in the Canadian city. Blackstone will own 80 percent, while Hudson Pacific claims 20 percent.
As for its studio business, Hudson Pacific reported higher occupancy and rental rates across its three Hollywood studios. Revenue in that segment rose 22.4 percent year over year to $21.5 million.
While the company explores other markets for studio space, such as Vancouver, Coleman said the firm’s focus remains in L.A. The company also expects to benefit, either in its office or studio operations, as major streaming services like Netflix and HBO spend billions to ramp up their content, Coleman added.
As a way to accommodate growing demand, the firm is expanding at Sunset Gower Studios, as well as Sunset Las Palmas. Coleman said the firm is in the design development phase for a 467,000-square-foot addition at Gower, expected to secure approval in about a year. Things are moving slower at Sunset Las Palmas, where a 128,000-square-foot office building is expected for approval in about 18 months.