Q2 2026 Hudson Pacific Properties Inc Earnings Call Transcript
Key Points
- Record leasing quarter with 1.3 million square feet signed, including a landmark 891,000 square-foot, 24-year lease with the City and County of San Francisco, providing long-term cash flow visibility.
- Occupancy increased 470 basis points sequentially to 82.5%, marking the fourth consecutive quarter of gains, with same-store NOI up 7.5%.
- Core FFO nearly tripled to $23.1 million, with a 30% increase on a per-share basis, driven by improved operations and cost reductions.
- Quixote restructuring is progressing well, improving annualized cash NOI by approximately $14.3 million, closing about 75% of the gap to breakeven.
- Leasing pipeline reloaded to 2.4 million square feet, with 70% new leases and strong demand from a diversified tenant base including tech, AI, and professional services.
- Disposition program is on track, with strong buyer demand for Bay Area office assets, and the company has exceeded expectations on three of four assets being sold.
- Cash rent spreads decreased 11.4% overall, and even excluding the City and County lease, cash rents were down 9.9% due to leases rolling off pre-pandemic peak rents.
- Third-quarter expirations are expected to negatively impact occupancy and earnings, with a rebound only anticipated in the fourth quarter.
- The Hollywood Media portfolio loan has transferred to a special servicer, and while terms for an extension are agreed, the final documentation is pending, creating uncertainty.
- Quixote's noncore businesses, including stage and Atlanta operations, are being wound down, and the fleet business still generates negative annualized cash NOI of approximately $4 million.
- AFFO is expected to be volatile in the near term due to ongoing leasing capital expenditures, which will delay the full cash flow benefits from recent leasing activity.
- The studio production landscape remains mixed, with show counts not improving as expected, and the company is not assuming any improvement in show counts in its guidance.
Hello, everyone. Thank you for joining us, and welcome to the Hudson Pacific Properties second-quarter 2026 earnings call. (Operator Instructions)
I will now hand the conference over to Laura Campbell, Executive Vice President, Investor Relations and Marketing. Laura, please go ahead
Good afternoon, everyone. Thanks for joining us. With me on the call today are Victor Coleman, Chairman and CEO; Mark Lammas, President; Harout Diramerian, CFO; and Art Suazo, EVP of Leasing. This morning, we filed our earnings release and supplemental on an 8-K with the SEC, and 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
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