Image source: The Motley Fool.
Thursday, Feb. 26, 2026 at 12 p.m. ET
Need a quote from a Motley Fool analyst? Email [email protected]
Hudson Pacific Properties (NYSE:HPP) emphasized that the year featured extensive capital recycling and meaningful expense reductions, explicitly reporting expanded liquidity and a more flexible balance sheet. Management reinstated full-year FFO guidance, specifying that sequential FFO growth is anticipated to begin in the second quarter due to stronger pipeline conversion. Asset-level execution was detailed, including studio segment stabilization and the repositioning of office product for higher-yield uses, as evidenced by the re-entitlement of 901 Market for residential and redevelopment of 6040 Sunset. Management confirmed that office demand is driven by “flight to quality,” with AI and venture activity in the Bay Area and Seattle cited as direct catalysts for recent absorption gains. Company leaders stated a commitment to further asset sales and highlighted interest from joint venture partners, particularly regarding 1455 Market’s monetization strategies.
Victor J. Coleman: Thanks, Laura. Good morning, everyone, and welcome to our fourth quarter call. 2025 was a breakthrough year for Hudson Pacific Properties, Inc. We did not just position the company for a return to earnings growth. We fundamentally transformed our capital structure and significantly enhanced our operating efficiency. We executed nearly $330,000,000 of strategic asset sales at attractive valuations and completed more than $2,000,000,000 of proactive capital transactions that extended our maturity runway and nearly doubled our liquidity. Our balance sheet now affords us the flexibility to fully execute on our business objectives, paramount of which is the lease-up and stabilization of our best-in-class office portfolio. In 2025, we drove a combined $26,000,000 in G&A and interest expense savings.
Beyond that, we continue restructuring Coyote, and to date, we have locked in $25,000,000 of annualized expense savings. And we delivered our strongest leasing performance since 2019, signing more than 2,200,000 square feet of office leases across our West Coast portfolio. Strengthening market fundamentals continue to validate our thesis. San Francisco generated over 2,500,000 square feet of net absorption for the year, the third-highest annual total on record. Silicon Valley recorded 2,900,000 square feet of positive absorption, marking five consecutive quarters of occupancy gains. The Puget Sound posted its first positive absorption quarter in three years, and in Los Angeles, our office portfolio is essentially fully leased long term, positioning us well as the broader markets recover.
In our studio businesses, we are operating in a recalibrating environment, but let us be clear, media industry consolidation favors the best-located, best-operated assets, and that is exactly what we own. Los Angeles and New York remain the epicenters of domestic production, and our Hollywood and Manhattan studios continue to lease because productions need premium creative environments, not commodity space. Now let me address the AI narrative head on. Yes, AI is reshaping workflows, but in the Bay Area and Seattle, AI is driving explosive company formation, record venture capital deployment, and aggressive hiring across multiple sectors. The narrative that AI reduces office demand ignores the reality. Well-funded, fast-growing companies need space, and they are choosing our buildings.
In studios, AI is a production tool, not a replacement for physical infrastructure. The dominant theme in both sectors is not contraction, it is flight to quality, and we are the beneficiary. Mark is going to provide details, but our office leasing pipeline has grown to 2,300,000 square feet. Fourth-quarter tours accelerated more than 50% year over year, and we are entering 2026 with the lowest office expiration schedule we have had in four years. We are not hoping for recovery. We are already capturing it.
Following our significant de-risking in 2025, our priorities are clear and executable: drive growth to unlock embedded NOI expansion, eliminate Coyote’s earnings drag by year end, and maintain capital discipline through value-driven asset sales and strategic deleveraging. On our capital recycling, we sold Element LA in the fourth quarter at a strong valuation. In 2026, we are targeting $200,000,000 to $300,000,000 of additional sales while prioritizing transactions that are FFO accretive through further deleveraging. For example, we are currently marketing 109109 Washington in Culver City, which we successfully re-entitled for 508 residential units, and we have very strong buyer and joint venture interest throughout. Here is the bottom line.
We are sharpening our focus on what we do better than anyone else, owning and operating highly selective office and studio assets in only the best locations. We are deploying capital within our existing portfolio only when returns are clear, attractive, and risk-adjusted. By executing on these priorities, we have a direct path to FFO per share inflection as we move through 2026. I will now turn the call over to Mark.
Mark T. Lammas: Thanks, Victor. Our leasing momentum once again translated into tangible occupancy gains in the fourth quarter. We signed 518,000 square feet of leases, driving our office portfolio occupancy to 76.3%, up 40 basis points sequentially, while our leased percentage increased 50 basis points to 77%. Excluding the sale of fully occupied Element LA, occupancy and leased percentages would have increased 90 and 100 basis points, respectively. This marks our second consecutive quarter of positive net absorption, with improvement across all our major markets except Los Angeles where we have one tenant asset with stable occupancy. More importantly, we have excellent visibility into continued occupancy growth.
We have only 1,000,000 square feet expiring in 2026, and we already have 60% coverage on first-quarter expirations with 55% coverage on the remainder. On our few large expirations, we have full coverage on Picture Shop’s 115,000 square feet at 6040 Sunset and PayPal’s 132,000 square feet at Fourth & Traction. We also have 60% coverage on Dell EMC’s 84,000 square feet at 875 Howard, and we recently renewed Weil, Gotshal & Manges covering 80% of their 76,000 square foot lease. Underlying this execution is accelerating tenant demand.
Our leasing pipeline now stands at 2,300,000 square feet, up 15% year over year, and we had 2,100,000 square feet of tours in the fourth quarter, up more than 50% year over year. What is particularly notable, average requirement size increased to 25,000 square feet. In short, tenants are not just leasing, they are expanding. On lease economics, fourth-quarter GAAP rents increased 0.4% while cash rents decreased 9%, a sequential improvement from third quarter. Full-year spreads improved year over year, and our 2026 expirations are 3% below market with in-place rents essentially at market, positioning us for spread improvement as we continue lease-up. For studios, our operating results reflect steady progress in a disciplined production environment.
Our in-service trailing twelve-month stage occupancy increased 330 basis points quarter over quarter to 69.1%, driven by full lease-up of stages at Sunset Las Palmas. Specific to our in-service Hollywood stages, trailing twelve-month occupancy was notably higher at 86.2%, while Coyote stages reached 53.3%, up 500 basis points quarter over quarter. Studio revenue increased $3,600,000 sequentially and studio NOI increased $2,100,000. As Victor outlined, we are evaluating additional targeted cost reductions to mitigate Coyote’s earnings drag by year end. On our two development projects, at Washington 1000, we are in early discussions with several large requirements ranging from 125,000 to 200,000 square feet.
In the second quarter, we will deliver 70,000 square feet of prebuilt spec floors, and we have strong activity from mid-sized, growth-oriented tenants for that space. 94 Studios delivered on time and under budget, achieving 90% occupancy within its first quarter of operations. Our pipeline of productions looking to film at the studio underscores the demand for high-quality, purpose-built studio space in Manhattan. I will now turn the call over to Harout. Thanks, Mark.
Harout Krikor Diramerian: I will walk through our fourth-quarter results and 2026 outlook. Total revenues were $256,000,000 compared to $209,700,000 in the prior year, driven by the Element LA lease termination fee. G&A was 33% lower at $13,000,000 compared to $19,500,000 in the prior year, representing a substantial improvement in our cost structure. FFO, excluding specified items, was $13,600,000 or $0.21 per diluted share compared to $15,500,000 or $0.74 per diluted share in the prior year. Specified items totaled $213,600,000 or $3.27 per diluted share, primarily consisting of noncash Coyote impairment and the Element LA lease termination fee net of transaction costs. Same-store cash NOI was $84,800,000 compared to $94,300,000 in the prior year, primarily reflecting lower average office occupancy.
On our balance sheet, we fundamentally strengthened our capital structure in 2025. We reduced our share of net debt by 22% and debt to undepreciated book value improved 680 basis points to 31.9%. Cash more than doubled to $138,000,000 and undrawn revolver capacity increased to $795,000,000, giving us total liquidity of $934,000,000. We also saved over $5,000,000 of interest expense, mitigating any remaining floating-rate exposure, and drove broad improvement across our covenant metrics. This gives us significant financial flexibility to execute our strategy, as Victor mentioned. For the Collared Media portfolio alone, together with our partner, we are working on a resolution ahead of the August 2026 maturity date.
We remain fully engaged with Netflix and believe this portfolio is the optimal long-term solution for their LA office needs given the quality, location, and expansion potential of these assets. Turning to our 2026 outlook. Due to the progress Victor and Mark described, we are reinstating full-year FFO guidance at $0.96 to $1.06 per diluted share. We anticipate slightly lower FFO in the first quarter relative to the fourth quarter 2025 followed by steady sequential growth throughout the year as our leasing pipeline converts to cash flow. We are introducing annual average in-service office occupancy guidance of 80% to 82%. Clearly, our year-end occupancy will exceed this range.
This assumes completion of a third lease with the City and County of San Francisco at 1455 Market by midyear with additional material occupancy gains weighted to the fourth quarter. This also reflects the removal of 901 Market and 6040 Sunset from our in-service due to change of use. We are re-entitling the office portion of 901 Market for residential and repositioning 6040 Sunset from post-production to Class A office to meet existing tenant demand. We expect full-year same-store property cash NOI growth of negative 1.75% to negative 0.75%, a significant improvement versus 2025 as our office occupancy ramps up and strong studio NOI growth offsets near-term pressure.
On Coyote, we are assuming only modest NOI improvement in 2026 driven by completed or planned cost savings. However, the fourth-quarter noncash impairment drives $23,000,000 in annual depreciation savings at midpoint, meaningfully benefiting FFO in 2026. Due to our balance sheet optimization and cost discipline, we are projecting interest expense of $151,000,000 to $161,000,000 and G&A of $49,000,000 to $55,000,000, representing $50,000,000 and $— million in savings at the midpoints respectively versus 2025. As always, our outlook excludes potential dispositions, acquisitions, or capital markets activity. With that, I will turn the call back to Victor.
Victor J. Coleman: Thanks, Harout. Let me be direct about where we stand. First, we fundamentally transformed Hudson Pacific Properties, Inc. in 2025 through $330,000,000 of asset sales and $2,000,000,000 of capital transactions. We extended our maturity runway, nearly doubled our liquidity, and reduced costs by tens of millions of dollars annually. We are not just surviving in a challenging environment, but aligning the company to fully realize embedded growth. Second, demand is accelerating and we are capturing it. Office tours are up 50%. Our pipeline has grown to 2,300,000 square feet, and prime studios continue to lease despite production headwinds. With only 1,000,000 square feet expiring in 2026, we have strong coverage in hand.
We have a clear line of sight to occupancy growth and NOI expansion. Third, our execution roadmap is clear and achievable. Convert our leasing pipeline, eliminate Coyote’s earnings drag, and maintain capital discipline. This gives us line of sight to sequential FFO growth starting the second quarter of this year and to strengthened earnings power in 2027 and beyond. The structural advantages of our markets remain intact. What has changed is our cost structure, balance sheet strength, and the ability to capture the flight to quality. To provide greater transparency and detail on our multiyear strategy, we will be hosting an investor day in 2026, and we look forward to sharing more details soon on that.
With that, I am going to turn the call over to you, operator, for any questions.
Operator: Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please raise your hand now. If you have dialed in to today’s call, please press 9 to raise your hand and 6 to unmute when called upon. Your first question comes from the line of Blaine Matthew Heck with Wells Fargo Securities. Your line is now open.
Blaine Matthew Heck: Great. Thanks, and good morning. Victor, I wanted to ask if there was really anything to read into the write-down of Coyote with respect to your ultimate plans for that business. Would you be open to exploring a sale during the year? And do you think there are interested buyers in the market? And then similarly, on the studio portfolio side, would you be open to broader sales in that segment?
Victor J. Coleman: Hi, Blaine. How are you? Let me be specific to Coyote and Glen Oaks. As we mentioned in our prepared remarks, we are looking to manage that business down so it will be a flat business by the end of the year. Alternatively, there is nothing to read into on Glen Oaks in terms of our current situation there. That asset has not performed to our liking, and I think by the end of the year, we will evaluate what our alternatives are going to be with that asset. In terms of the marketplace and selling off in the marketplace, it is still early in evaluating all of the studio business. There are some green shoots, as we commented on.
There is also some slowdown. I think we are proving out that the asset quality is performing in our location given our Sunset portfolio is virtually 100% leased, and the track record has been very strong. So we continue to evaluate the alternatives, and we do not have a set game plan at this stage to say this is the direction we are going to go in.
Harout Krikor Diramerian: And then for the Coyote business, the write-down, because it is an operating business, there are different accounting rules that govern that, and you are required to evaluate that business on a regular basis. That is what drove the write-down in the fourth quarter.
Blaine Matthew Heck: Okay. Great. That is all very helpful. Just a couple of questions on the upcoming CMBS maturity on the Hollywood Media portfolio. Can you talk about the tenor of those conversations with the lenders? Do you see an extension as a potential outcome? And would you expect to need an equity infusion of any sort for the refinancing or potential extension there?
Victor J. Coleman: Blaine, we are unable to discuss our loan extension negotiations because currently today, there is ongoing dialogue, and we are focused on the best outcome for us and our shareholders, including the respective capital allocation. So we are not going to get into an open dialogue on a conference call as to the status, but we are in constant communication, and we are happy with the progress so far.
Blaine Matthew Heck: Okay. Fair enough. Last question. The City has an option to purchase 1455 Market for no less than $200 a square foot by 2027. Is there any opportunity to monetize that asset prior to that if and when the additional leasing is executed? Would the City have a right of first refusal? Can you talk through the terms of that agreement?
Victor J. Coleman: First of all, the structure of that deal with the City is a floor of $200, so it is a fair market value purchase, and it is a one-time window of opportunity. We are looking at expanding them, which you know of right now, and we are very confident in the ability for us to execute that in the near term, at which point the City has not indicated any interest at all to buy it, and they would have to float a bond. But they do have that in their current agreement, and our assessment of the value of that is well in excess of $200 a foot.
That being said, we have been approached by multiple JV partners who are interested in participating in some form of a JV on that asset once it is stabilized, and we will review that at the right time. It will not impair the conversations around the City, and if they decide to purchase it, it will be at the valuation that we have created with a JV partner, which is a win-win for all of us.
Blaine Matthew Heck: Okay. Great. Thank you. Nice quarter.
Victor J. Coleman: Thanks so much.
Operator: Thank you. Your next question comes from the line of Alexander David Goldfarb with Piper Sandler. Your line is now open.
Victor J. Coleman: Alex, you there? Hey.
Alexander David Goldfarb: Yeah. Just hitting the unmute. Do you hear me?
Victor J. Coleman: Yep. We can now.
Alexander David Goldfarb: Excellent. Thank you. And obviously, the return of annual guidance is a good thing. Two questions. First, as you look at the leasing costs of what you have signed already and the pipeline you have outlined versus asset sales, do you feel comfortable that you will have enough cash generated internally from asset sales and cash on hand to do all the leasing? Or do you think you will have to contemplate some other sort of capital event?
Mark T. Lammas: Hi, Alex. This is Mark. We saw that in your note. I think your estimate of $250,000,000 to $300,000,000 is a decent estimate. I would just say when you do a complete sources and uses and you look at all cash flow relative to requirements, including fully loaded amounts for all TI, both renewal and new leasing, and preferred dividends and the like, what you see is you peak out on the line balance at about $160,000,000, and thereafter, that line balance just goes down on its own, and that is without assuming any asset sales of any kind. So we never even get there.
We have more than ample liquidity to get the portfolio into the low 90s and could obviously improve that quite a bit if we did any kind of capital raise like an asset sale or anything like that.
Alexander David Goldfarb: Okay. And then the second question is on the studio business. I think last time you spoke about the tax credits and there was sort of a shot clock in when people had to start production versus when they were granted the tax credits. With that in mind, should we expect a strong ramp in the back half of this year on the studio production? Or are things taking a little bit slower even though there is the shot clock?
Mark T. Lammas: It is possible, Alex, that we will see improvement. You should know, though, that the guidance we have given you does not assume an improvement. It holds show counts in line with average show counts that we saw in 2025, which were in the high 70s.
Alexander David Goldfarb: So is the shot clock not applicable then? I thought people had to go in for the production once they are granted.
Victor J. Coleman: It is applicable, and we have seen little fallout from the tax credits that have been granted to the ones that have not started production at this stage, but they are allowing it to be a little bit longer in terms of pre-prep, stage prep, and the like. As Mark said, we have underwritten this as a minimal amount of growth with the upside and a potential green shoot that this will kick in second half of this year, and we are confident that is going to happen. But we have been very conservative in our underwriting.
One other thing, though, there is one green shoot, which is the proliferation of these microdramas, which are really led here in Los Angeles. By way of background, this was a marketplace in 2021 that had a total of $500,000,000 of revenue for microdramas. In 2025, that number increased to $7,000,000,000 and is projected to be $11,000,000,000 in 2026. We are going to capitalize on that in the production business in Los Angeles. That is not included in our numbers, but we look to that to be a potential good sign.
Alexander David Goldfarb: Thank you.
Victor J. Coleman: Thanks, Alex.
Operator: Thank you. Your next question comes from the line of Richard Anderson with Cantor Fitzgerald. Your line is now open. Please go ahead.
Richard Anderson: Good morning out there. On the Coyote wind-down, as you described it, how does that happen? Do you allow leases to expire unrenewed, or can you provide any color on what that might look like? And what might be left behind as we fast forward to this time next year in the Coyote platform?
Victor J. Coleman: Rich, obviously I cannot discuss our game plan on an open call like this because we have fiduciary obligations and we have obligations with specific landlords that we are tenants of. Suffice to say, this business has no debt on it, so it is a unique opportunity for the company to retain certain assets that are debt free and get out of certain obligations that we can get out of in a clean manner. We are evaluating which obligations we want to get out of, and at the end of the day, we will still have an OpCo business that, as I said, is debt free and will have revenue producing.
If it is on track to where we look at the current usage rate right now, we make some money on that business. If it is greater than that, we make a lot more money in that business. I just cannot sit here and tell you this is what we are going to drop and this is what we are going to work with because that would be a disadvantage to the enterprise and to Hudson in general.
Richard Anderson: Fair enough. For the office space and the 1,000,000 square feet or thereabouts expiring in 2026, what is your expectation on the retention rate in that process? And with regard to the 2,300,000 square feet of leasing pipeline, how much of that is outside of this expiration schedule? How much of it is existing vacant space? Is there any way to paint that picture for us? I am wondering if the demand is going toward a flight-to-quality type of movement that we are hearing a lot in the space these days.
Victor J. Coleman: You took the words out of my mouth. What we are seeing is flight to quality, which is the quality that we own as a company. It has been attractive, and we have seen that momentum shift upward. Overall, we started seeing it highly at the end of last year. We have seen our portfolio have a tremendous amount of interest and tours over the renewal process and the new tenant process. Specific to your question, I am going to have Art jump in here and address some of the facts. Suffice to say, we are very confident. Given we have a million square feet of expirations in 2026, the activity on those expirations has been very strong.
Some are going to be front-ended. Some are going to be back-ended, but we are comfortable that we are going to be higher in terms of our retention rate. Overall, to the square footage, we are well on track for this year given the activity and some of the large tenants that we are negotiating with right now. Art, jump on.
Arthur X. Suazo: Rich, to put a finer point on it, we feel great because we are pacing well ahead of last year or the previous years because tenants are engaging. This is the key. Tenants are engaging much earlier and with more conviction and more confidence in what the requirement is. That is really the reason we are pacing well ahead of schedule. We have much lower expirations this year, and the average tenant renewal size is 7,800 square feet, and we are managing that process very well.
Richard Anderson: What amount, if any, is being early renewals into out years 2027 and 2028 from that pipeline?
Mark T. Lammas: Beyond 2026, how much is early renewal? The average tenant size in 2027 is likewise pretty small, and they do not tend to engage nearly that early. So the 2.3 will have a very small component that would be early 2027 renewals.
Richard Anderson: Okay. Thanks very much. Good quarter.
Victor J. Coleman: Thanks, Rich.
Operator: Thank you. Your next question comes from the line of Ronald Kamdem with Morgan Stanley. Your line is now open.
Ronald Kamdem: Great. Hopefully, you can hear me. Just two quick ones. Thanks on the guidance. Starting with the occupancy guidance, just trying to get the apples to apples on the delta of 2026. This 80% to 82%, is that comparable to the 76.3% reported? And can you talk about the trajectory of that build? I think you said it was second-half weighted and so forth.
Harout Krikor Diramerian: That is right. You are exactly on. It does start from the 76.3% that we reported, and it grows from there. So that is comparable, and it is back weighted. Like I said in my prepared remarks, it has an influence on the City deal that we have been talking about as well, the fourth quarter being the strongest as momentum builds throughout the year.
Ronald Kamdem: Great. My follow-up is on the same-store NOI, and I know that is maybe not the same-store occupancy trajectory. If occupancy is up, is it just the spreads that are keeping it negative? Can you give some of the pieces into the same-store NOI number?
Harout Krikor Diramerian: That is a great question. There are a few pieces to that. One, we are still carrying in 2025 a drag from the Square lease, so that is still carrying a negative trend. In fact, once you go past Q1 2025 versus Q1 2026, we are going to see a positive same-store cash NOI throughout the rest of the year. The second part of it is also free rent in some of our leases in 2026, so that is also dragging it. Yes, we are going to have great occupancy, and it is being dragged a little bit by the free rent, but you are going to see a constant improvement in our same-store cash NOI starting Q2.
Ronald Kamdem: Quick one, just an update on Washington 1000 and the leasing there would be great. Thank you.
Victor J. Coleman: The activity on Washington 1000 has picked up. We are starting the process of our spec suite business, so we have a fair amount of activity around a few floors of activity there. Specific to size, Art, do you want to talk about some of the range of size tenants that we are looking at for Washington 1000?
Arthur X. Suazo: The increase in activity on the larger side—the over 100,000 square foot large block size—we have four tenants we are in discussions with, one in LOI, one in proposals. On the ready-built, move-in-ready space for high-growth tenants, we have proposals out for four of those tenants. They range from 8,000 square feet to 50,000 square feet. Over the last quarter, as Bellevue has tightened and the greater Puget Sound has shown positive absorption, the high-demand tenants coming from the Bay Area have really added to the increase in demand. Our tour activity spiked in the fourth quarter to over 700,000 feet, which is 35% of our total tour activity. That usually is a precursor of what is to come.
Victor J. Coleman: Just as a sidebar, Ron, at the end of the day, because you brought it up, Washington 1000’s input for our overall leasing is very small for 2026 in terms of the overall number.
Ronald Kamdem: Helpful. That is it for me. Thank you.
Operator: Thank you. Your next question comes from the line of Jana Galan with Bank of America. Your line is now open.
Jana Galan: Thank you. Good morning out there. Following up on the occupancy comments and the 81% guidance, in the past, you have talked about a mid-80% leased target at year-end 2026. Is that still intact, or is that conservative now?
Mark T. Lammas: The range implies ending the year higher to get to that average. I would leave it at that.
Jana Galan: And congrats on the success of Sunset Pier 94. Is there something that New York City is doing to incentivize or encourage the media industry that maybe LA should implement?
Victor J. Coleman: That is a great question. What we said all along when we were building this project is it was the first purpose-built studio. We have a tremendous amount of eyes on it. The two tenants that we put in are very high-quality tenants. It is going to show very well on the production side. I do think the activity in New York has picked up greater than we thought. We are monitoring all of our competitive set in that marketplace right now, and the activity just seems slightly stronger. In terms of the tax credits, I think they are equal for Los Angeles and New York.
I believe overall, what you are going to find is the two barbells of the country, Los Angeles and New York, are really doing much better than anywhere else when it comes to production. I will hold my comments to leadership because I think both cities are in the same boat when it comes to that.
Jana Galan: Thanks. And then on the FFO guidance, I just want to clarify that excludes debt refinancing, but could you give some thinking around the spread between where the CMBS or whatever path you choose to refinance—what the difference in spread there could be?
Harout Krikor Diramerian: We are not prepared to comment on that. It is part of negotiation, and we would like to keep that outside of our discussion. We have never provided any speculative financing in any of our FFO guidance.
Jana Galan: Sure. Thank you.
Operator: Thanks, Jana. Your next question comes from the line of Tom Catherwood with BTIG.
Tom Catherwood: Thanks, guys. Victor, following up on the comment that you made that you are not hoping for a recovery, you are seeing it, if that continues and everything goes according to plan in 2026, what does HPP look like this time next year? What is that longer-term vision?
Victor J. Coleman: Tom, at the end of the day, what we are looking at is a stabilized occupancy. We have been conservative, even though the numbers are large, coming from the base of a mid-76% number in terms of occupancy to an average that we think is year-end somewhere in the low to mid-80s. You are going to see the stabilized portfolio perform the way we have envisioned it in the last few years to where we are getting to that point.
In a year from now, the focus is still going to be on the core business, which is somewhere around 87% of the portfolio as our core office business, and it is going to be even greater when it comes to the revenue stream. The banter and conversation around the studio business, if it is just flat to down, will go away relative to where the performance of the office building business is. We are a pure-play office company with a studio component.
In the last few years, with the massive headwinds we have had with return to office with COVID and with the strike around studios, people have jaded their thought process and focused a lot of attention on the studio business when really, from a revenue standpoint, it is less than 15% of the company, and that will be even less a year from now. As a company, you will see we are going to be a best-in-class office REIT, which is what we have always strived to be.
Tom Catherwood: I appreciate those thoughts and thinking bigger picture, Victor. What has us a little concerned is if you execute as expected, but for whatever reason, whether it is AI fears or a broader economic slowdown, the market does not recognize the progress and you do not get a cost of capital that you think is appropriate, what do you do then? If you achieve everything you set out to and you do not get recognized for it, what happens next?
Victor J. Coleman: What happens next is exactly what we have been evaluating all the way through, which is, depending on the capital structure and the markets, we will look. The Board always looks for alternatives for the highest value of the company. In the last few years, those alternatives have not been on the table. Those alternatives are on the table now, and the reverse inquiries have been coming our way in a much more feverish pitch. We will evaluate it at the time. I am confident that we are going to execute on all forms of our platform.
As you have seen in the past ninety days, we have not made an announcement on anything, and yet our stock has been affected dramatically. It is not based upon the fact of what we are doing. Give us the chance to get it done, and then we will revisit the process at that time.
Tom Catherwood: Appreciate those answers. That is it for me. Thanks, everyone.
Victor J. Coleman: Thanks, Tom, for the follow-up.
Operator: Thank you. Your next question comes from the line of Seth Eugene Bergey with Citigroup. Your line is now open.
Seth Eugene Bergey: Hey. Thanks for taking my question. Going back to the impairment, should investors think about the impairment as a final true-up, or is there a risk of additional impairment if utilization and show counts are below expectations? And then, curious on the shift from hoping to get to breakeven by early 2026 to now year end. What changed? I believe you have talked about 95 show counts as the KPI to get breakeven. Is that still the right way to think about it?
Victor J. Coleman: Seth, let me clarify. We never came out and said early 2026 to be breakeven. We said we are tracking to year-end 2026. We have always said that we would be at breakeven. Nothing has changed on that process, and it does not include us looking at show counts going up, as Mark said. We are going to be consistent on the show count basis. I do think there will be a thought process, and I am not saying that we are going to have any further write-downs, or I am not saying we are not going to have further write-downs.
We have taken, effectively, goodwill to zero, and there is a ton of name recognition and marketing value in these enterprises that we own, and we have taken those to zero from a conservative standpoint. We will see where we sit in six to twelve months from now. The thought process has always been we are going to ride this through 2026, and at that time, I think we will be in a much clearer position to discuss actual valuation and actual growth or flatlining or where the status is of that business. We are confident by year end we will be, at worst, flat.
Seth Eugene Bergey: Okay. Great. As we think about the leasing momentum, how should we think about CapEx for this year and next year as that picks up?
Mark T. Lammas: Think about a run-rate spend, quarterly, somewhere in the range of where we came out in the fourth quarter, which was roughly $31,000,000. From an average run-rate point of view, that is probably a decent estimate for where 2026 TI/LC and recurring should shake out. It gets lumpy, as you know, but on average, that is a decent run rate.
Seth Eugene Bergey: Okay. Thank you for that.
Operator: Your next question comes from the line of Dylan Robert Burzinski with Green Street. Your line is now open. Please go ahead.
Dylan Robert Burzinski: Hi, guys. Thank you. Most of my partner ones have been asked. Diving into Seattle as a market, we are seeing strong trends and demand growth in San Francisco. Seattle has been a market of really two different cities, Bellevue and the Seattle CBD. Are you finally starting to see further green shoots as it relates to your portfolio being located primarily in the Seattle CBD? And can you layer on any concern associated with what seems to be a changing political environment that leaned more progressive this last election cycle?
Victor J. Coleman: Dylan, thanks. Let me take the first part of your question. We have always been in the thought process that it is a 12 to 18-month lag to San Francisco, and we still feel that is exactly the direction. There are two large tech companies—one of the largest in the world is going to sign a 300,000 square foot lease almost any day now in the city. Another large tech company is going to sign over a 125,000 square foot lease in the city. That effectively takes the remaining space in that marketplace that has been sublease space and low commodity price space off the market. Bellevue is Bellevue, as you well know.
It has performed very well, and it virtually has no vacancy of any size for large blocks in that marketplace. The last bigger block is in negotiation right now, which is also 400,000 square feet. It is trending the right way. The labor force is exactly what we thought it would be. It is strong, tech related, AI centric. The growth prospects there have shown us that we are on the precipice of seeing Seattle turn this year sometime. You bring up the political situation. If you take a look at San Francisco and Mayor London Breed or San Jose and Mayor Mahan, the progressive growth around being centric has really helped pro-business in those markets.
I think it is early for us to look at the City and the current mayor standing there, but so far, the word that our teams on the ground are telling us is that there is some pro-business growth. Now this millionaire’s tax bill—it is a very complicated bill. The bottom line is we are optimistic that this is not going to pass.
The writers of the bill included a word, which is “the terms of the receipt,” in front of the word “income.” Effectively, this is an excise tax, not an income tax, and as a result, it is like—you could say it is like a tax on sleeping guests based on how many shoes they have in the closet. It should be a tax on the shoes, not on the guests. Effectively, this is going to go away, and what we are seeing as a negative could turn to be flat and maybe positive.
Overall, we are optimistic, and as our prepared remarks and Art mentioned earlier, we are seeing a lot of tenant activity right now in what we have not seen, which is larger space.
Dylan Robert Burzinski: That was incredibly helpful, Victor. Thanks so much. That is it for me.
Victor J. Coleman: You got it, Dylan. Take care.
Operator: Your next question comes from the line of John P. Kim with BMO. Your line is now open.
Arthur X. Suazo: John, you there?
Operator: Maybe having trouble getting to John, but we will just move on to Caitlin Burrows with Goldman Sachs. Caitlin, your line is now open. Please go ahead.
Caitlin Burrows: Hi, everyone. This is the first time in a while that you have had full-year guidance. Could you go through what you think has changed that gives you confidence in issuing full-year 2026 guidance versus recent years?
Harout Krikor Diramerian: Sure thing. Hey, Caitlin. We feel a lot more comfortable in our ability to look beyond maybe a quarter out for Coyote. We feel comfortable in our ability to project, and that is really the main driver that has been holding us back for a while from providing full-year guidance. The other components of our guidance have actually already been provided. We provided a grid that provided all the other components, including all the other parts of guidance.
Caitlin Burrows: On the office side, I realize the main focus is probably on occupancy and leasing. On the rent and pricing side, can you give your updated thoughts on how in-place rents compare to market, and how that varies by market?
Mark T. Lammas: We mentioned in our prepared remarks we are 3% below on expiring 2026. We are a little bit above on 2027, so blended slightly above on a combination of 2026 and 2027. That is why we feel like there is a chance we are going to see a quarter, or maybe more, sometime this year where we actually post positive cash spreads. It will depend on the makeup of whatever flows through that quarter in terms of the lease composition, but we are heading in that direction.
Caitlin Burrows: Got it. A quick one on Pier 94. You mentioned it is 90% leased now. Could you give any other detail on how long those leases are and what we should expect in terms of contribution for 2026?
Victor J. Coleman: First of all, our size—we are only a 25% holder of that asset. Yes, we have management fee income and the like, so that is going to be constant throughout our ownership. We have two tenants right now occupying 100% of the space. One is a longer-term lease. The other is a shorter-term lease. We have backup for the shorter-term lease right now. The downtime potentially will be maybe a month or two from the move-out to the move-in of the new tenants, and the activity around the new tenants is also a longer-term lease. We are comfortable that, like our Sunset portfolio in Hollywood, we are going to outpunch our competitors in terms of progress.
I do not believe there is a studio out there in New York, but one, that is even remotely close to the occupancy levels and has the activity that we do. We are confident we are going to consistently see that going forward. If you get a chance, Caitlin, you should go see it. It is pretty impressive.
Caitlin Burrows: I have definitely driven by, but I have not been inside. Sounds good. Thanks.
Victor J. Coleman: You got it.
Operator: Your next question comes from the line of Vikram L. Malhotra with Mizuho. Your line is now open.
Vikram L. Malhotra: Good morning, guys. You have given a lot of information on the trajectory, very low expirations. As you say, you hope to build occupancy. AI is in the crosshairs of at least fear, if not reality, at this point. We do not know what is going to happen. Have you been able to look through your tenant list? Can you give us more specifics—what is your exposure, not IT broadly but more specific software—and any bucketing you have done in what may be deemed a watch list?
Mark T. Lammas: Absolutely. We read your note with a lot of interest. It was a really good, comprehensive note. On our side, identifying which companies may face hiring freezes or ultimately downsize is challenging, particularly since we have not seen any broad-based indications of AI-driven disruption across the sector yet. That said, we have reviewed our tenant base carefully, and we estimate that somewhere between, say, 1.5% and 2.5% of our total ABR is associated with software tenants that might, at some point, experience AI-related pressures.
Vikram L. Malhotra: That is helpful. Going back to the Coyote business, I understand it might be tough to predict breakeven or improvement in shows, but more from a valuation perspective—how should we think about valuing your cash flows and ultimately when NOI is positive? At this point, is there anything you can share in terms of comps or how we should think about separating that away from the core office business in terms of valuation? Given the uniqueness of the Coyote business, it is hard to value. Any thoughts on how to think about that?
Victor J. Coleman: The fact that you are mentioning the word Coyote and value in the same sentence is more than anybody on the Street has mentioned. The market and the Street give us zero value for it, and frankly, they have been giving us negative value. We look at it as, if we get to a flat level, that will determine it. We have not put anything in 2026 in terms of a value to the bottom line for Coyote to the company overall. That is where we have evaluated our full-year guidance based on Coyote not contributing value, and that has been the variable the last couple of years that we have been impacted by.
We have a six to twelve-month timeline internally to determine where that company goes and what the value of that company is. Because there is no debt, there will be some value. We just have not attributed it at this time. You can look at it that way.
Vikram L. Malhotra: Can you clarify, as you have more leases or deals being struck on new stage requirements, is there anything changing in the structure of these agreements or leases versus, say, two years ago?
Victor J. Coleman: That is a good question. Overall, the demand still is primarily for four-wall sets and then the ancillary revenue, which is lighting and grip, trailers, all the services—whether it is catering, equipment rentals—that is all been consistent. It is packaged in a vertical integration for the leasing of the studios. That business has not changed. The demand for that business has not changed once the productions start. As I mentioned earlier, the microdrama business is going to change that a little bit because set design and the like will not be the same.
There are going to be sets that will be designed and in place, and the revolving production on that will be a much quicker turnaround, but the revenue stream should be the same.
Vikram L. Malhotra: Thank you.
Operator: Thank you, and we will try one more time with John P. Kim from BMO. John, your line is open if you can try to unmute.
Victor J. Coleman: Well, operator, it looks like John is busy today. Thank you.
Operator: Thank you. That concludes the question-and-answer session. I will now turn the call back to Victor J. Coleman, Chief Executive Officer and Chairman, for closing remarks.
Victor J. Coleman: Thank you for participating in our call today, and we appreciate all the input from everybody. We will keep you posted and updated as the quarter continues and the year continues. Have a great day.
Operator: This concludes today’s call. Thank you for attending. You may now disconnect.
Before you buy stock in Hudson Pacific Properties, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Hudson Pacific Properties wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $445,995!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,198,823!*
Now, it’s worth noting Stock Advisor’s total average return is 927% — a market-crushing outperformance compared to 194% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
*Stock Advisor returns as of February 26, 2026.
This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool’s insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company’s SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.
The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
—
Blog powered by G6
Disclaimer! A guest author has made this post. G6 has not checked the post. its content and attachments and under no circumstances will G6 be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever (including, without limitation, any direct or indirect damages for loss of profits, business interruption or loss of information) resulting or arising directly or indirectly from your use of or inability to use this website or any websites linked to it, or from your reliance on the information and material on this website, even if the G6 has been advised of the possibility of such damages in advance.
For any inquiries, please contact [email protected]
