Hudson Pacific Raises $189M From Land, Studio Debt Sales

EPIC, one of the buildings in Hudson Pacific Properties’ Hollywood Media Portfolio. Image courtesy of Hudson Pacific Properties

In two separate transactions, Hudson Pacific Properties Inc. has divested a land parcel in Silicon Valley and certain tranches of a loan secured by its Hollywood Media Portfolio, for gross proceeds of $189.3 million before prorations and closing costs.

The two sales were:

• Cloud 10, a 5.3-acre land parcel at 1601 Technology Drive in San Jose, for $43.5 million before prorations and closing costs.
• 100 percent of two tranches and 49 percent of a third tranche of debt associated with its Hollywood Media Portfolio, generating gross proceeds of $145.8 million, while retaining a 51 percent ownership of the third tranche with a notional value of $30.2 million.

The company used net proceeds to repay amounts outstanding on its unsecured revolving credit facility.

A Hudson Pacific spokesperson confirmed to Commercial Property Executive that the identity of the buyer(s) is not being released at this time.

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In June 2020, funds affiliated with Blackstone Property Partners acquired a 49 percent interest in Hudson Pacific’s Hollywood Media Portfolio, which consists of three studios and five on-lot or adjacent Class A office properties, totaling 2.2 million square feet.

The studios are Sunset Bronson, Sunset Gower and Sunset Las Palmas Studios, at 5800 Sunset Blvd. and 1438 N. Gower St., Hollywood, and 1040 N. Las Palmas Ave., Los Angeles, respectively. The office assets include 6040 Sunset, ICON, CUE, EPIC and The Harlow in the Los Angeles market.

The following summer, the partners announced plans to develop the Los Angeles area’s first large-scale, purpose-built studio in more than 20 years. Sunset Glenoaks Studios was estimated to cost $170 million to $190 million and was planned to feature 240,000 square feet on more than 10 acres in Sun Valley, Calif.

High tech but soft rents

The Silicon Valley office space market is seeing availability and vacancy rising, to 21 percent and 14.6 percent, respectively, according to a third-quarter report from Kidder Mathews. The brokerage commented that many tenants approaching lease expirations are proactively reviewing their space needs in anticipation of mounting economic challenges.

Against a backdrop of negative net absorption, the average asking lease rate has declined to $4.48 per square foot.

This past August, Hudson Pacific closed the sales of two office properties in the Santa Monica submarket of Los Angeles, for a total of $72.5 million. The seller used the proceeds to repay amounts outstanding on its unsecured revolving credit facility.