Hudson Pacific Properties Q1 2026 Earnings Report

Hudson Pacific Properties EPS Results

• Actual EPS: -$0.82
• Consensus EPS: -$0.92
• Beat/Miss: Beat by +$0.10
• One Year Ago EPS: N/A

Hudson Pacific Properties Revenue Results

• Actual Revenue: $181.85 million
• Expected Revenue: $175.12 million
• Beat/Miss: Beat by +$6.73 million
• YoY Revenue Growth: N/A

Hudson Pacific Properties Announcement Details

• Quarter: Q1 2026
• Date: 5/7/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, May 7, 2026
• Conference Call Time: 12:00PM ET

Hudson Pacific Properties (NYSE:HPP) (NYSE: HPP) is a self-managed real estate investment trust focused on the acquisition, development and management of high-quality office and studio properties. The company’s portfolio spans strategic West Coast markets in the United States and key markets in Canada, providing space for technology, media and creative companies as well as major film and television producers. As an owner and operator of both traditional office buildings and specialized production facilities, Hudson Pacific seeks to deliver stable income through long-term leases and strategic property enhancements.

In its office segment, Hudson Pacific targets markets with strong job growth and limited supply, including Los Angeles, Silicon Valley, San Diego and Seattle, as well as Vancouver, British Columbia. Its studio segment encompasses owned and joint-venture production campuses such as Sunset Gower Studios and Sunset Bronson Studios in Los Angeles, offering sound stages, backlots and support infrastructure. Through long-term leases with established content creators and technology firms, the company aims to maintain high occupancy rates and tenant retention while pursuing selective development and redevelopment opportunities.

Since its initial public offering, Hudson Pacific Properties has pursued a disciplined growth strategy supported by a seasoned leadership team. Victor J. Coleman serves as chairman and chief executive officer, guiding the company’s efforts to expand its footprint in core markets and optimize asset performance. By combining real estate expertise with an understanding of evolving media and technology trends, Hudson Pacific Properties strives to create long-term value for shareholders and tenants alike.

Hudson Pacific Properties Q1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Signed 554,000 sq ft and reported sequential occupancy gains — in-service office occupancy rose to 77.8% (+150 bps) with a leasing pipeline of 2.4M sq ft and tours up ~30%, signaling sustained leasing momentum.
• Positive Sentiment: Management raised full‑year Core FFO guidance to $1.10–$1.18 (from $0.96–$1.06), driven by ~ $0.04 of Q1 outperformance and a ~$0.09 benefit from reclassifying Quixote leased soundstages and Atlanta ops as discontinued operations.
• Neutral Sentiment: Prime studio assets are strong (Hollywood stages ~97% leased, Pier 94 at 100%), while Quixote will wind down leased soundstages and Atlanta operations — expected to remove a drag and yield ~$5.8M of annual cash NOI improvement but will incur wind‑down costs.
• Positive Sentiment: Balance sheet and capital recycling are priorities — total liquidity exceeds $933M (including a fully undrawn $795M revolver), and management is targeting ~$200M of FFO‑creative dispositions with a sale agreed for 10950 Washington.
• Positive Sentiment: Operating efficiency gains are underway — G&A fell ~32% YoY and interest expense declined ~13%, supporting sequential FFO per share growth (Core FFO of $0.25 per diluted share in Q1).

Presentation

[Operator]

Hello, everyone. Thank you for joining us, and welcome to the Hudson Pacific Properties First Quarter 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. I will now hand the conference over to Laura Campbell, Executive Vice President, Investor Relations and Marketing. Laura, please go ahead.

[Laura Campbell, EVP of Investor Relations and Marketing at Hudson Pacific Properties]

Good morning, everyone. Thanks for joining us. With me on the call today are Victor Coleman, Chairman and Chief Executive Officer; Mark Lammas, President; Harout Diramerian, Chief Financial Officer; and Art Suazo, Executive Vice President of Leasing. This morning, we filed our earnings release and supplemental on an 8-K with the SEC. Both are now available on our website along with an audio webcast of this call for replay. Some of the information we'll share on the call today is forward-looking in nature. Please reference our earnings release and supplemental for statements regarding forward-looking information, as well as the reconciliation of non-GAAP financial measures used on this call. Today, Victor will discuss our first quarter results and current market trends. Mark will provide detail on our office and studio operations. Harout will review our financial results and updated 2026 outlook. Thereafter, we'll be happy to take your questions. Victor?

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Thanks, Laura. Good morning and welcome everyone to our first quarter call. 2026 is off to a strong start, building on decisive actions we took last year. We delivered improvement in both occupancy and cash flow, sequentially growing FFO in total and on a per share basis. We signed over 500,000 sq ft of office leases, our third consecutive quarter of occupancy gains, supported by leasing pipelines that remain robust. On the studio side, prime locations are performing, and operational streamlining at Quixote continues to drive annualized savings. We also achieved substantial year-over-year reductions in G&A, maintained total liquidity in excess of $930 million with our credit facility fully undrawn, and advanced an active pipeline of FFO accretive dispositions.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

From a macro perspective, a record $267 billion of venture capital was deployed in the first quarter, fueled by large-scale AI financings and broad investment across adjacent sectors. That capital is translating into leasing activity. Well-funded tech and AI-focused companies are accelerating demand across our West Coast markets, while more traditional office users are reengaging on either new leases or expansions. The Bay Area obviously is leading. San Francisco had a record 2.3 million sq ft of positive absorption, capping the strongest six-quarter run of occupancy growth to date. Leasing activity reached 4.1 million sq ft, and AI-related tenants accounted for nearly 60% of total volume, and asking rents rose close to 4% year-over-year. Silicon Valley extended its momentum with a sixth consecutive quarter of occupancy growth.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

The peninsula is also showing further signs of positive inflection, particularly in Redwood City and Foster City, where our assets are concentrated. The Puget Sound posted its second consecutive quarter of positive absorption. Downtown Seattle is beginning to capture its share of AI and tech demand. Our portfolio quality positions us to benefit as activity further extends from the east side to the urban core. In Los Angeles, fundamentals remain challenged, with our own limited near-term availability concentrated in one well-leased top-tier asset, we can be patient as conditions strengthen. Turning to studios, U.S. production activity remains subdued. The flight to quality is real. Our Hollywood stages are 97% leased. Sunset Pier 94 reached 100% leased within the first quarter of operations. The leasing results made it clear. These are the right assets in the right locations.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

We're actively refining our studio portfolio to focus on the highest performing assets and lines of businesses. On Quixote, we're making the necessary and, quite frankly, difficult decisions. As announced, Quixote will wind down leased soundstage facilities and Atlanta area operations. We remain committed to ensuring Quixote is earnings neutral by year end. On capital recycling, we're in various stages on asset sales targeting approximately $200 million this year, and these are all FFO accretive non-core dispositions. We have a buyer and agreed price at 10950 Washington, as well as another asset under contract. We look ahead, both occupancy and our leasing pipeline should remain strong. We're making the hard calls and continue to ensure our overhead's controlled, our disposition pipeline remains on track, and we have ample liquidity and a clear executable path to FFO growth through the balance of the year.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

With that, I'll turn the call over to Mark.

[Mark Lammas, President at Hudson Pacific Properties]

Thanks, Victor. Our leasing momentum continued to translate into tangible occupancy gains in the first quarter. We signed 554,000 sq ft of leases, 49% of which were new leases, driving our in-service office portfolio occupancy to 77.8%, up 150 basis points sequentially, and our lease rate to 78.4%, up 140 basis points sequentially. Occupancy improved across our core regions, except for Vancouver, where the lease percentage increased 110 basis points to 94.3%. On lease economics, GAAP rents increased 1.8%, while cash rents declined 2.4%, representing sequential improvement in these metrics by 140 and 660 basis points respectively.

[Mark Lammas, President at Hudson Pacific Properties]

Net effective rents rose 4% sequentially, though were down 2% year-over-year, with the latter comparison influenced by the large prior year lease with the City and County at 1455 Market. We have excellent visibility into continued occupancy growth. Our leasing pipeline increased again to 2.4 million sq ft, up 13% year-over-year, and we had 2.2 million sq ft of tours in the quarter, up over 30% year-over-year. Our third lease with the City and County of San Francisco, which effectively absorbs the remaining vacancy at 1455 Market, remains on track to be finalized in the second quarter.

[Mark Lammas, President at Hudson Pacific Properties]

We have close to 60% coverage, deals and leases, LOIs or proposals on approximately 600,000 sq ft expiring for the remainder of the year, including full coverage on PayPal at Fourth and Traction, and 80% coverage on Dell at 875 Howard. At Washington 1000, tenant interest has increased meaningfully. We now have coverage for approximately 60% of the project. To meet demand for pre-built space, we'll deliver 70,000 sq ft of move-in ready suites in the second quarter. We're in late stage negotiations with an amenity provider for the first and second floors to further enhance the property's marketability. Beyond that, we're in negotiations with seven office using tenants, primarily growth-oriented tech and tech-enabled companies with requirements ranging from under 10,000 sq ft to over 100,000 sq ft.

[Mark Lammas, President at Hudson Pacific Properties]

Turning to studios, our in-service stages were 72.8 leased over the trailing three months. Excluding Pier 94, which was placed in service this quarter and where stages went from 0% to 100% leased during the quarter, our in-service stages would have been 78.2 leased, up 370 basis points sequentially, driven by the lease up of Sunset Las Palmas. As Victor noted, our Hollywood stages, Sunset Bronson, Gower, and Las Palmas, were 97% leased over the trailing three months, up 280 basis points. Studio revenue was off $2.4 million sequentially, attributable to lower demand for Quixote's lighting and grip, pro supplies and fleet. Despite expenses being $2.1 million lower, this led to a sequential $300,000 decrease in studio NOI to $1.5 million.

[Mark Lammas, President at Hudson Pacific Properties]

That said, Sunset Studio NOI, excluding Quixote, increased $1 million sequentially and was up $1.8 million year-over-year to $7.4 million, driven by the lease up at Sunset Las Palmas and increased production activity at Sunset Bronson. On Quixote, the wind down of leased soundstage facilities and Atlanta area operations would equate to approximately $5.8 million of annual cash NOI improvement. Finally, we continue to actively explore adaptive reuse opportunities across our portfolio. In second quarter, we'll submit for re-entitlement of 901 Market's 164,000 sq ft office component as residential, with expected resolution by year-end. We're also evaluating the potential to redevelop excess surface parking at select assets across Palo Alto, Redwood Shores, and Foster City as mixed use.

[Mark Lammas, President at Hudson Pacific Properties]

These initiatives, along with others under evaluation, allow us to better align our portfolio with market demand while leveraging our deep entitlement and redevelopment expertise. Now I'll turn the call over to Harout.

[Harout Diramerian, CFO at Hudson Pacific Properties]

Thanks, Mark. I'll walk through our first quarter results and updated 2026 outlook. Total revenues were $181.9 million, compared to $198.5 million in the prior year, primarily due to the sale of Element L.A. and office tenant move-outs. Most specifically, Uber's departure from 1455 Market midway through the first quarter of 2025, with studio production activity remaining stable. G&A declined 32% to $12.6 million compared to $18.5 million in the prior year, further reflecting the progress we've made to streamline our cost structure. Core FFO increased to $16.5 million or $0.25 per diluted share, up from $12.9 million or $0.61 per diluted share in the prior year.

[Harout Diramerian, CFO at Hudson Pacific Properties]

Adjustments to FFO totaled $1.5 million or $0.02 per diluted share, compared to $9.8 million or $0.47 per diluted share in the prior year. Same store cash NOI was $85.2 million compared to $92 million in the prior year, driven by lower office revenues from tenant move-outs, again, largely Uber's departure at 1455 Market, partially offset by higher studio revenue from increased production activity at our Hollywood assets. On our balance sheet, total liquidity of $933 million includes $138 million of cash and full availability of $795 million on our credit facility. Interest expense was 13% lower year-over-year, representing $5.5 million of savings. All of our debt was fixed or capped.

[Harout Diramerian, CFO at Hudson Pacific Properties]

We continue to work with our partner on a resolution for the Hollywood Media portfolio loan maturity. Conversations with the lender, as well as those with Netflix regarding their long-term space needs, are productive and ongoing. Turning to our updated 2026 outlook, we're increasing our full year Core FFO range to $1.10-$1.18 per diluted share, up from the prior range of $0.96-$1.06. This revised range reflects two key drivers. First, approximately $0.04 of outperformance in the first quarter compared to our initial expectations. Super Bowl parking revenue, lower repairs and maintenance expense, and favorable CAM reconciliations account for the outperformance. Second, a $0.09 benefit from the reclassification of Quixote's leased soundstages and Atlanta area operations as discontinued operations beginning in the second quarter of 2026.

[Harout Diramerian, CFO at Hudson Pacific Properties]

Note, the $0.09 benefit is based upon projections for the discontinued operations included in our previously provided full year outlook. As always, our outlook excludes potential dispositions, acquisitions, or capital market activity. With that, I'll turn the call over to Victor.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Thanks, Harout. Let me bring it together. The first quarter demonstrates that our markets are recovering. Importantly, the deliberate decisions we're making ensure Hudson Pacific can capture this recovery better than most. Our outlook is up, occupancy is growing, Prime Studios are performing, and Quixote's drag is being addressed. We're doing all this while keeping our liquidity and balance sheet intact. Each of these actions reinforces the same outcome, a clear and credible path to FFO growth through the balance of 2026. That's what we're committed to do. Thank you for your continued interest in HPP. Operator, I'd like you to open the line for any questions.

[Operator]

Your first question is from Dylan Burzinski with Green Street. Please go ahead.

[Dylan Burzinski, Analyst at Green Street]

Hi, guys. Maybe if you can sort of just talk about what you're seeing in the overall capital markets environment. Has pricing changed at all? Are you seeing any change to buyer appetite? Maybe if you can just talk a little further about the deal that you said you have a pricing set. I think in the past you talked about various ways that can go, it sounds like you guys are now gonna fully dispose of that piece. Is that sort of correct?

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Yeah, Dylan. Hey, it's Victor. Thanks. Let's first of all, we'll take the second question first. On 10950, we're fully disposing of it. We indicated, our last call, we had a series of offers on JVs and on outright sales. On the outright sale number that we've agreed upon and are about to go under contract, but the diligence timeframe has been clicking. It's a deal that we just felt compelled that it was a good enough price, better than good enough, and it exceeded our expectations to where a JV structure would've been more applicable. Yes, we are selling that asset and currently today, that's going very well.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

In terms of the overall marketplace, I can give you sort of a, you know, high level in the three markets that we're in. Starting in Seattle, 505 First, as an example, had a series of people that were interested at a fairly high price per foot, per foot on a leased asset that is probably 50% of it needs repositioning in the marketplace. Pleasantly surprised at the activity around that. There has been a couple of deals in Bellevue that are priced relatively aligned to what we would say is, you know, the new market cap rate pricing in the 5.5%-6.5% range for stabilized walled assets. People are looking right now at a couple assets in Seattle at more buying vacancy.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

I think that trend started in the Bay Area, where we've seen quite a number of assets trade at vacant assets that are more inclined for value-add and upside than we used to see walled assets. The material numbers in both those markets are still nowhere near where peak activity is. There's a few more coming to market second half of this year that we were indicated will come out at some pretty good pricing levels. We mentioned that we have an asset on the market right now. We've got 120 NDAs signed and a lot of activity that's a value-add asset in the Bay Area. I think that's indicative of where the market is.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

I would say, you know, closer to home in Los Angeles, where our corporate offices are, as you know, we're really seeing very little activity on the West Side, very little activity in all of the markets, even in the South Bay, of sales at this time. We haven't seen that. There's a couple of deals that are being tossed around at some good price per foot numbers, but not good yield numbers right now in the Southern California marketplace.

[Dylan Burzinski, Analyst at Green Street]

That's helpful, Victor. Really appreciate that color. Then just maybe one on sort of the overall demand environment. It sounds like things continue to pick up and you're seeing increased activity in Seattle coming out of Bellevue. Can you kind of just talk about sort of any of the reasons why you think or what is sort of causing this continuation of accelerated leasing activity across your guys' footprint?

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Yeah, you know, as I mentioned in my prepared remarks, and then Mark followed up on it, you know, sort of 50%+of it's tech and tech related and AI related leasing activity. I think the most interesting aspects are you know what's happening in the Bay Area, but if you really permeate down into the Silicon Valley, from Foster City, Redwood City, Redwood Shores, all the way through to Palo Alto, Mountain View, and then even North San Jose, what we're seeing is an influx of larger tenants. I think last quarter our team said there was six transactions over 100,000 sq ft and two over 450,000 sq ft. We're seeing that activity start to permeate to take space off the marketplace.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

The kind of space that's getting off the market is two levels. One is space that is built out and ready to occupy, two is space that has energy efficiencies for additional power. Fortunately, from our standpoint, we have an asset like that in the market today that's getting some pretty interesting activity around that because we have a lot of power on our asset in North San Jose. We think the marketplace is shifting to that. I think you're seeing in San Francisco the same trends of tech and AI related. Fire related, from our standpoint, has been very consistent. In Seattle, we are finally seeing that turn of Puget Sound's positive absorption. It was led by Bellevue, clearly. We're seeing the activity in that marketplace consistently pick up quarter-after-quarter.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Lastly, in Los Angeles, I think, you know, it's definitely bottomed out. We have little exposure here, but the exposure that we do have is very active. We got a couple 100,000 sq ft of proposals in the marketplace today, and the rates are as good as we've seen them since 2019. Art, you wanna comment any further?

[Arthur Suazo, EVP of Leasing at Hudson Pacific Properties]

No, I think you said it.

[Dylan Burzinski, Analyst at Green Street]

Great. That's incredibly helpful. Appreciate it.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Thanks, Dylan.

[Operator]

Your next question is from the line of Alexander Goldfarb with Piper Sandler. Please go ahead.

[Alexander Goldfarb, Managing Director and Senior Research Analyst at Piper Sandler]

Hey. Good morning out there, great to see vibrancy back in office. Well done. Two questions. First, Harout, can you just go through the mechanics on the Quixote wind down, the $0.09 disc ops, just what the mechanics are of how that impacts the guidance? Clearly understand the outperformance, the strong leasing, that makes sense for raising guidance, but it's the $0.09 part just want a little bit more clarity on.

[Harout Diramerian, CFO at Hudson Pacific Properties]

Sure, Alex. Good morning. All that is in our previous guidance, we had assumed $0.09 related to the items that we're specifying and winding down. All we're doing is we're moving that from our continuing operations or Core FFO, that's what we're gonna remove effectively. It's really that simple. On a go forward basis, that's no longer gonna drag our earnings.

[Alexander Goldfarb, Managing Director and Senior Research Analyst at Piper Sandler]

Okay. Got it. Got it. Not a drag that's no longer there. Perfect. Okay.

[Harout Diramerian, CFO at Hudson Pacific Properties]

Correct.

[Alexander Goldfarb, Managing Director and Senior Research Analyst at Piper Sandler]

Victor, bigger picture Netflix. They were in the news a few weeks ago, possibly buying the Hackman, CBS Studio. Can you just give a little bit more color on, you know, what you think, you know, that would mean. Obviously, you guys built a very nice project office, et cetera. I don't know the age of the CBS Studios. It sounds like it's been there a long time given the shows that have been produced. I don't know what the physical plant is like, and if that's even something that they conceivably could consolidate to. Would certainly appreciate your perspective.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

From a color standpoint, I'm gonna, you know, sort of get it out of the way so we don't get asked throughout the call, Alexander Goldfarb, and I appreciate the comments. You know, with the conversation around Netflix, obviously in deference to the tenant and our conversations with them, I can't talk about what's going on. Suffice to say that our relationship is intact, and it's positive. On the Radford, you know, situation and what their intent is, I know we've had conversations with them. Again, it's a 21 sound stage facility that is really directed to production and creative production as a campus. There's very little office on that campus right now, and the office that is intact is leased to CBS for a long period of time.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Whether or not they buy it, is really up to them, and it's gonna be a campus facility for sound stages. You know, that's their call. It's not gonna interfere with our relationship with them and our conversations with them going forward.

[Alexander Goldfarb, Managing Director and Senior Research Analyst at Piper Sandler]

Awesome. Listen, thank you.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Thanks, Alex.

[Operator]

Your next question is from Seth Bergey with Citi. Please go ahead.

[Seth Bergey, Analyst at Citi]

Hey, thanks for taking my question. I guess just the first one on the Washington 1000 comment. You mentioned some activity kind of on that space, which is, you know, positive. Kind of can you give some color on, you know, what stages those kind of negotiations are in?

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Yeah, I'll sort of talk top level and let Art jump in in terms of, you know, sort of the activity. The activity has increased dramatically. We mentioned on our last call, we're in the final phase this month of opening up our spec suites there, which the activity around those has been very strong. Couple floors of negotiations on that. As we mentioned, you know, ready space is ready space, and people are interested in moving in a ready space. The building's in phenomenal shape. The amenities that we're putting through the building are very well accepted in the marketplace. We're starting to see not just smaller tenants, and what I mean by smaller is, you know, 15,000 to 40,000 square footers.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Now we've got a four or five over 100,000 sq ft tenants that are in the marketplace that we are their, you know, first, second, or third choice. Art, you can comment on where we stand with that.

[Arthur Suazo, EVP of Leasing at Hudson Pacific Properties]

Yeah. Victor touched on a couple of things that are important to note. Just the greater demand. He talked about earlier, the greater demand in Seattle has picked up tremendously. We're benefiting from the tightness of the market in Bellevue. We're benefiting from, and we have benefited from the diminishing trophy sublease space that had been on the market. We're starting to see these tenants out in the market that were kind of greater Puget Sound now focusing on the downtown core. By comparison, our, you know, our tours have increased. We talked about tours increasing. Well, they haven't increased anywhere more than in Seattle. The tour activity was up quarter-over-quarter, it was up 20%. In the pipeline, the pipeline is now 25% of our entire pipeline is in Seattle.

[Arthur Suazo, EVP of Leasing at Hudson Pacific Properties]

That tells you about kind of the depth of the demand out there and our team's ability to pull those deals forward. Washington 1000 is also benefiting from this. We've got seven deals, as we mentioned in the prepared remarks. Four of these deals, these are deals in negotiation. Four of these deals are on the ready, move-in-ready suites that Victor just alluded to.

[Arthur Suazo, EVP of Leasing at Hudson Pacific Properties]

Deliver this this month. As you know, that is approaching, tenants are getting more, really more excited about the delivery of this space. These are high growth tenants that perhaps weren't in the market before or had a small presence, mainly tech. We're capturing that activity in a big way. Your question, the top of the call was, you know, what is the stage of these deals? I will say that they're all in negotiations. Two of the deals which are for ready, the ready-built suites, are in later stage negotiations. We're not in leases. We are hopeful that with the momentum we've had thus far, that in the coming quarters, we'll execute on the ready-built suites.

[Seth Bergey, Analyst at Citi]

Great. Just a bit more broadly on kind of the pipeline. You know, just how much of that pipeline is kind of the, you know, kind of AI tech demand that you've cited and, you know, for those types of tenants, what's kind of the average deal size? You know, just any changes in terms of, you know, how quickly that's kind of converting or, you know, late stage versus early stage.

[Arthur Suazo, EVP of Leasing at Hudson Pacific Properties]

Yeah. It's really market to market, it's all over the board. We are, I would say, for our pipeline, and the deals that we are negotiating on right now, and even the deals that we're touring, are some of the smaller deals, some of the smaller deals are early stage funding. There are, we have captured some larger deals, that is to say 50,000 sq ft or greater, I would say. The bread and butter is really closer to about 10,000-15,000 sq ft. A lot of these tenants, especially the smaller ones, are looking for ready build space. They're looking for space that is high-end, second gen build outs. Obviously the spend is top of mind for many of these tenants. Highly amenitized space, which really is our wheelhouse.

[Arthur Suazo, EVP of Leasing at Hudson Pacific Properties]

We've done a great job across the portfolio of capitalizing on these AI tenants. It has increased in our portfolio from 10% of our deals in negotiation or as a pipeline, to about 25% of all the tech deals that we're seeing. That's just across the board. Obviously, across the valley and in San Francisco, the number is greater than that.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Yeah, Seth, just a little follow up to that. As I mentioned earlier, you know, if you look at the entire Bay Area, we are benefiting from these larger deals that have finally come to fruition. As I said, there's six deals that were completed last quarter at big numbers. That's taken a lot of space off the marketplace, which helps our portfolio and all our, you know, peer portfolios around. We're seeing that impact immediately.

[Seth Bergey, Analyst at Citi]

Great. Thank you.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Thanks, Seth.

[Operator]

Your next question is from Ronald Kamdem with Morgan Stanley. Please go ahead.

[Ronald Kamdem, Managing Director and Head of US REITs and CRE Research at Morgan Stanley]

Great. Just two quick ones. Starting with the same store NOI guidance, just in terms of the cadence, maybe can you talk about sort of the rest of the year, when we should expect that inflection to get to the middle of the range? Is that primarily driven by commencements? Thanks.

[Harout Diramerian, CFO at Hudson Pacific Properties]

Hey, Ronald. Good talking to you. I think we previously said the first quarter was gonna be our weakest quarter, primarily driven by 1455 Market, Uber specifically moving out last year, and that reflected. We expect the rest of the year to improve primarily, you know, we expect the third quarter to be. Sorry. We expect the second quarter to improve, maybe a bit weaker in the third quarter, and then to again, improve again in the fourth quarter. That's kind of the cadence for the rest of the year. Obviously much stronger than the first quarter.

[Ronald Kamdem, Managing Director and Head of US REITs and CRE Research at Morgan Stanley]

Got it. That makes sense. Just a quick one on the AFFO. You know, obviously negative because of the elevated recurring CapEx. Just any line of sight as you're getting through, you know, a lot of these leasing, when that CapEx run rate can start to sort of moderate, and how we should think about that. Thanks.

[Mark Lammas, President at Hudson Pacific Properties]

Hi, Ron. Yeah, we were, you know, looking at it at the latest sort of estimates just recently. For the rest of the year, it looks to us like it's gonna average pretty close to where first quarter TI, LC, and recurring CapEx shook out. If you kind of do the math on Core FFO for the balance of the year, it points to higher FFO per quarter than we posted in the first quarter. Assuming the TIs, LCs recurring are, you know, close to what first quarter results are, but FFO is modestly higher, our expectation is that AFFO for the balance of the year should be at least as good, if not modestly better than first quarter results.

[Ronald Kamdem, Managing Director and Head of US REITs and CRE Research at Morgan Stanley]

Got it. Makes sense. Thank you.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Thanks, Ron.

[Operator]

Your next question is from Richard Anderson with Cantor Fitzgerald. Please go ahead.

[Richard Anderson, Managing Director at Cantor Fitzgerald]

Thanks. Good morning. Any impact from your disposition activity on the occupancy and lease gains that you've seen during the quarter?

[Mark Lammas, President at Hudson Pacific Properties]

Not dispositions. We did, as we announced sort of, I wanna say at least a quarter ago, we are repositioning and re-entitling 901 Market. We took footage off for repositioning just the office component. 6040 likewise is going to be fully repositioned. It was used for decades as a post-production hub. Neither of these assets are particularly big. They were in our fourth quarter results. If you remove the, and they're not in our first quarter results, but if you removed them, just to kind of give you an apples to apples comparison, from our first quarter, you're still sequentially higher.

[Mark Lammas, President at Hudson Pacific Properties]

The 150% on the lease percentage drops to 140% if you pulled 6040 and 901 out of the fourth quarter results. The 100% sequential increase drops to 80% without either of those two assets.

[Richard Anderson, Managing Director at Cantor Fitzgerald]

Okay. 10 or 20 basis points impact.

[Mark Lammas, President at Hudson Pacific Properties]

Yeah.

[Richard Anderson, Managing Director at Cantor Fitzgerald]

When you talk about, you know, the wind down of Quixote. I think it was mentioned $5.8 million of upside from just exiting the leases. If I just correct me if I have that wrong. I'm curious, along as you get to that point, are we looking at potential some, you know, one-time lease termination fees or costs to you or anything like that's gonna make it a sort of a nonlinear process to get through this?

[Mark Lammas, President at Hudson Pacific Properties]

Yeah. I mean, you know, it's just the nature of discontinuing operations, right? We're gonna wind down revenue. We're gonna wind down expense. You know, we're gonna manage that as cost effectively as we can. Lease, you know, as you look at getting out of leases early, that often entails some kind of payment. I would say over the course of the year, we'll be incurring some expense associated with discontinuing those ongoing leases and other wind down expenses. Yeah.

[Richard Anderson, Managing Director at Cantor Fitzgerald]

Okay.

[Mark Lammas, President at Hudson Pacific Properties]

Towards that number. Yeah, that number.

[Richard Anderson, Managing Director at Cantor Fitzgerald]

At the end of the day, should we just think of you guys sort of keeping the fleet, but not the leases? Is that the way to think about it outside of Atlanta?

[Mark Lammas, President at Hudson Pacific Properties]

Yeah. So far, based on the, what we've announced on discontinued ops, the fleet is still part of our continuing operations.

[Richard Anderson, Managing Director at Cantor Fitzgerald]

Okay. Last question from me. you know, Mark, you mentioned 60% coverage on the remaining 600,000 sq ft. I assume you'd rather see 100% or more on that. I mean, with the sort of the leasing pipeline that we've talked about in the past, 2 million sq ft or so. I mean, how quickly can that 60 ramp up to something in the triple digit territory, you know, by this time next quarter?

[Arthur Suazo, EVP of Leasing at Hudson Pacific Properties]

Yeah, I'll answer that, Rich. This is Art. Yeah. First of all, the pipeline has grown to $2.4 million.

[Richard Anderson, Managing Director at Cantor Fitzgerald]

Okay.

[Arthur Suazo, EVP of Leasing at Hudson Pacific Properties]

Higher, 2 million sq ft, just to clarify that. Just remember, you know, so we have of the remaining 606,000 sq ft, you know, roughly 70% are second half of the year. Although we are engaged earlier with the smaller tenants, roughly averaging about 6,000 sq ft. Once we start negotiating with those tenants, we feel good that we can increase that number. Again, some of these smaller tenants wait till kind of last minute. The good news is that we are engaged with them right now in discussion. Whereas years past, and certainly through the pandemic, it was really there was really no early discussion with these tenants. We are encouraged about that. They just feel more confident.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Yeah, Rich, I would also just comment. I mean, you know, emphasize that, you know, we just announcing first quarter numbers. We have three more quarters. The expirations aren't all in the first quarter. They're spread out for the year. We've consistently increased occupancy quarter-over-quarter, and signed at least half a million plus square feet a quarter. That number matched to what we've done in the past from what we foresee in the future compared to the 600 is not that material.

[Richard Anderson, Managing Director at Cantor Fitzgerald]

Yeah. Okay. Fair enough.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Thank you.

[Arthur Suazo, EVP of Leasing at Hudson Pacific Properties]

Thank you.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

See you, Rich.

[Operator]

Your next question is from Andrew Berger with Bank of America. Please go ahead.

[Andrew Berger, Equity Research Associate at Bank of America]

Great. Good morning and congratulations on the strong quarter. It sounds like Seattle is definitely improving, and you've said in the past that Seattle's typically 12-18 months behind San Francisco. I'm curious if you could talk about how much of this improvement in Seattle is existing tenants that are now starting to get more active versus new to market tenants. If you're seeing, given your scale in San Francisco Bay Area, if you're seeing, you know, smaller AI tenants, I guess, who are already in your portfolio in the Bay Area now grow into Seattle.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Drew, that's a good question. I think we look at it in two levels. One, name brand tenants are entering Seattle or expanding in Seattle. Combination of both. Apple is an example. People know they're in the marketplace. REI, they're in the marketplace. You're looking at Microsoft in the city and in Bellevue, they're in the marketplace. Amazon has not clearly been growing. They've been contracting. The big name guys, xAI example, are in the marketplace. Now you're seeing a shift because of the labor pool of other smaller tech and tech affiliated companies, and then support companies around that are expanding and looking to expand because Bellevue has populated itself to a point where there's not a lot of space that's quality that's left.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

They're coming to the city in the core aspects of South Lake Union and Denny and Pioneer Square. That's sort of the area that we're tackling. I think if you look at our pipeline right now, we've got more tenants in the 15-40 range than we've had in a long time. There's a couple, as I mentioned earlier, large 100,000 footers. Their ability to execute leases on an expedited basis is based upon the fact that there's access to space immediately. That's what we're trying to accommodate with our portfolio. Success wise, I think we're positioned very well. I sort of laugh at the comment about 'Cause I say it, I've said it now on three calls that Seattle is, you know, 12-18 months behind San Francisco.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

That timeline should hopefully, you know, blossom in terms of the 12 months expiring. We should see it this summer, 'cause that's really where it is. It is slower than that. I would lean more to the 18 months than the 12 months, but we're still seeing it and it's at least on a positive trend.

[Andrew Berger, Equity Research Associate at Bank of America]

Great. Thank you. I wanted to get your view on Bellevue, actually. You know, a lot of great momentum there, and it sounds like Could spill over into Seattle proper. Is Bellevue a market that you would like to have a presence in as we think over, you know, the medium term, and what would be your strategy to enter in, just kind of given the dynamics you've talked about, so far? Thanks.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

It's seamless for us to enter that marketplace, and the answer is, you know, every time we've sort of looked at it, the market's popped. Every time we've sort of said, "Oh, let's not go in it," it's, you know, it's gone the other way. I would say yes. As an owner in the area, I think we're top four owners in Seattle right now. Yeah, it would make logical sense for us to eventually enter that marketplace at the right time. Right now though, there's not a lot of product, and the product that's there, you know, is just being held and leased. Our goal in Seattle is to lease up our portfolio. I think we're gonna be right on track on doing that.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Once we get through that, we'll address, you know, the expansion if that's the direction we want to go in. Bellevue's proved to be a very strong marketplace. The benefactors of Bellevue have done very well. We're just hoping now that we get to see the flow to the city.

[Andrew Berger, Equity Research Associate at Bank of America]

Thank you.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Thanks, Drew.

[Operator]

A reminder to analysts, if you wish to ask a question, to please dial star one to raise your hand. Our next question will be from Caitlin Burrows with Goldman Sachs. Please go ahead.

[Caitlin Burrows, VP at Goldman Sachs]

Hi. Good morning. Maybe to stay on Seattle some more and back to Washington 1000. I think you mentioned seven deals in process, four could be for spec suites, where someone could move in. I guess for the other potentially larger leases, say 100,000 sq ft or more, how long do you think it would take them to build out their space and be ready to move in if they signed a lease near term? Like, would that take one, six, 12 months?

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Yeah.

[Mark Lammas, President at Hudson Pacific Properties]

That's about right.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Yeah. That's exactly right.

[Mark Lammas, President at Hudson Pacific Properties]

12 months, call it.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Yeah.

[Mark Lammas, President at Hudson Pacific Properties]

Yeah.

[Caitlin Burrows, VP at Goldman Sachs]

Okay. Earlier in the call you mentioned that you could be looking at some surface parking redevelopments in the San Francisco Bay Area. Just wondering if you could talk about that a little bit more. Perhaps it's still early stages, but would that be like a retail type outparcel or ground lease?

[Mark Lammas, President at Hudson Pacific Properties]

Yeah.

[Caitlin Burrows, VP at Goldman Sachs]

What could you be thinking?

[Mark Lammas, President at Hudson Pacific Properties]

Yeah. I mean, as you know, a lot of cities throughout California are undersupplied on housing. Those municipalities are looking for ways to be to work with landowners to add density where there's land availability. We've, yeah, we have several locations, Palo Alto, Redwood Shores, Foster City, where the configuration of the land and the goals of the municipality to add density sort of line up very well. We're exploring opportunities in most cases just to, like, add density where we can. There may be limited opportunities for conversion, but really the emphasis is on adding densification.

[Caitlin Burrows, VP at Goldman Sachs]

Thanks.

[Operator]

Your next question is from John Kim with BMO Capital Markets. Please go ahead.

[John Kim, Analyst at BMO Capital Markets]

Thank you. I wanted to ask a similar question on your resi conversion at 901 Market. Is it safe to assume that you are planning to entitle this for residential development and then sell it to a developer? Can you discuss timing as well as other resi conversions that you see either in your portfolio or in the City of San Francisco?

[Mark Lammas, President at Hudson Pacific Properties]

Yeah. I mean, I think we mentioned in our prepared remarks the timing for securing the entitlements. We're targeting it somewhere around year-end.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Yeah. I think, John, listen, we like that 10950. We're looking at Palo Alto. We're gonna address what our decision tree is based on when we get the entitlements. It will be worth a lot more once the entitlements are in play. That process, as Mark said, is ongoing right now, and we feel good about year-end on that. At that time, we're gonna look at, you know, the market. We're gonna look at the amount of product coming in the marketplace, and whether it's a JV, whether it's a sale, or we do it ourselves. We'll make that determination at that time.

[John Kim, Analyst at BMO Capital Markets]

Okay. Can you clarify your statement on the City of San Francisco taking remaining space at 1455 Market? I'm just wondering what the confidence level you have on them signing that lease transaction, and if that impacts your occupancy guidance for the year.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Well, we've talked about that deal quite extensively. I mean, the impact on it, on occupancy has been outlined in terms of the status of that deal. you know, I don't see the pen in the hand of the mayor yet, but we hope that it's getting to that point relatively soon. I think we're confident that we're gonna execute that, as we said, this quarter.

[John Kim, Analyst at BMO Capital Markets]

Okay. Thank you.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

Thanks, John.

[Operator]

There are no further questions at this time. I will now turn the call back to Victor Coleman, Chief Executive Officer and Chairman, for closing remarks.

[Victor Coleman, Chairman and CEO at Hudson Pacific Properties]

I thank you very much for participating in today's call. I appreciate the team at Hudson for all the hard work. We look forward to talking to everybody next quarter.

[Operator]

This concludes today's call. Thank you for attending. You may now disconnect.

Participants

Executives

• Arthur Suazo, EVP of Leasing
• Harout Diramerian, CFO
• Laura Campbell, EVP of Investor Relations and Marketing
• Mark Lammas, President
• Victor Coleman, Chairman and CEO

Analysts

• Alexander Goldfarb, Managing Director and Senior Research Analyst at Piper Sandler
• Andrew Berger, Equity Research Associate at Bank of America
• Caitlin Burrows, VP at Goldman Sachs
• Dylan Burzinski, Analyst at Green Street
• John Kim, Analyst at BMO Capital Markets
• Richard Anderson, Managing Director at Cantor Fitzgerald
• Ronald Kamdem, Managing Director and Head of US REITs and CRE Research at Morgan Stanley
• Seth Bergey, Analyst at Citi