Hudson Pacific Properties Secures $475 Million CMBS Loan Amid Industry Challenges
Los Angeles-based Hudson Pacific Properties (HPP), a prominent real estate investment trust (REIT) specializing in media and technology-focused properties, has successfully closed a significant financing deal amounting to $475 million. This commercial mortgage-backed securities (CMBS) loan is linked to several of its key office properties situated across the West Coast, including locations in Los Angeles, the San Francisco Bay Area, and Seattle.
Details of the Financing Deal
The financing arrangement, led by Goldman Sachs, is structured over a five-year term and has co-leads from Morgan Stanley and Wells Fargo. This strategic move allows HPP to not only manage its debts more effectively but also reinforces its financial standing during a time when many in the commercial real estate sector are facing challenges, including those spurred by the pandemic and recent labor strikes in Hollywood.
Among the notable properties involved in this CMBS financing are two office buildings located in the Sawtelle neighborhood of Los Angeles at 11601 Wilshire Boulevard and 12333 West Olympic Boulevard. Element LA, home to Riot Games, a major player in the video game industry, is particularly significant in this transaction. The loan proceeds will be utilized to retire an existing $168 million loan associated with Element LA, with the additional funds earmarked for repaying HPP’s outstanding amounts on its unsecured revolving credit facility and for various corporate uses.
Financial Outlook and Future Strategy
According to Harout Diramerian, HPP’s Chief Financial Officer, “This financing provides us with nearly half a billion dollars of gross proceeds to fully repay our Element LA secured loan and outstanding amounts on our credit facility. Along with recent and potential asset sales, we continue to increase liquidity and balance sheet flexibility, putting us at a positive inflection point in our overall strategy to address our remaining maturities in the coming years.”
Tenant Dynamics and Industry Hurdles
While HPP gains financial ground with its secured debt relief for Element LA, the future occupancy of this space remains uncertain. Riot Games, which relocated its headquarters to the Sawtelle office in 2015 under a 15-year lease, announced significant layoffs last year, affecting 11% of its workforce. This reduction followed a period of expansion but was also marred by allegations of a toxic workplace environment, leading to lawsuits related to harassment and discrimination.
Beyond HPP’s dealings with Riot, the company is grappling with broader industry conditions. Although it manages over 2 million square feet of soundstages and has a strong relationship with Netflix, HPP has experienced substantial headwinds. The impact of the COVID-19 pandemic, along with recent labor strikes in Hollywood, has led to a remarkable decline in stock value—around 92% from its pre-pandemic peak. Additionally, the company recently shelved plans for a new studio project near London, further highlighting the pressures facing creative space developers in today’s market.
For further insights or information, please contact Nick Trombola.
