Hollywood Strikes Threaten Hudson Pacific with $100M Loss

Hudson Pacific Properties, a Los Angeles-based real estate investment trust, anticipates a staggering loss of $100 million in earnings this year due to a six-month halt in studio production caused by ongoing entertainment labor strikes. The CEO, Victor Coleman, remains optimistic, foreseeing a significant surge in activity across all facets once the strikes conclude.

 

The Impact on Studio Business

Mark Lammas, the president of the Brentwood-based REIT, estimates that Hudson Pacific's Hollywood studios could have potentially generated up to $120 million in net operating income. However, the strikes have limited the studio business to a mere $10 million in profits this year. The aftermath of the strikes has led to a decrease in studio occupancy, with Hudson Pacific's studios now 83.5 percent leased.

 

Unprecedented Vacancy at Sunset Las Palmas

For the first time since its acquisition in 2017 for $200 million, Hudson Pacific faces a vacancy at its Sunset Las Palmas complex. The departure of a tenant, driven away by the strikes, resulted in six vacant soundstages. Despite this setback, Victor Coleman speculates that the departing parent company might return once the actors' strike concludes, expressing interest in utilizing the studio space.

 

Financial Setbacks and Future Expectations

The impact of the strikes is evident in Hudson Pacific's financials, with studio revenue for the third quarter dropping by 40.5 percent to $27.9 million compared to the same period last year. If the ongoing SAG-AFTRA strike concludes this month, the REIT anticipates a return to normal production levels by the second quarter of the following year. Despite challenges, Hudson Pacific has not shied away from future plans, filing proposals for a new 134,000-square-foot movie studio near its Sunset Las Palmas complex.

 

Moody's Downgrade and Future Resilience

Last year, Moody's Analytics downgraded Hudson Pacific's credit rating due to the strikes and diminishing office leases. Despite reporting a $31 million loss in the second quarter, compared to a $20 million loss in the previous period, the REIT remains resilient. With ongoing plans for a new movie studio, Hudson Pacific is positioning itself for a rebound once the storm of labor strikes subsides.