The Real Deal Los Angeles

Hudson Pacific considers $250M stock buyback

Move would be a way to increase the firm’s public valuation
By Natalie Hoberman | November 01, 2018 03:30PM

Victor Coleman, Epic and Icon buildings

Hudson Pacific Properties could buy back as much as $250 million worth of its outstanding stock as early as next week.

In an earnings call Thursday, Victor Coleman, HPP Chairman and CEO, said the firm had already received board approval for the repurchase.

A stock buyback on the open market would drive up the company’s stock price, which is currently trading at about $30 per share.

Coleman said HPP is “keenly aware of a disconnect between private and public valuations.” The firm is currently trading at a 30 percent discount, “much wider than its peer set,” an analyst from Citigroup noted.

“From a valuation standpoint, we are hurting dramatically in the public markets,” Coleman said. “That does not go unnoticed in this company or private investors. We performed poorly this year, and we’re not happy about it.”

The company has a market cap of roughly $4.7 billion.

Otherwise, the firm had a strong quarter overall. While revenue decreased to $180.7 million, a 4.9 percent drop from the same time last year, net income rose 57 percent to $17.4 million, from $11.1 million.

HPP closed 1.2 million square feet of office leases, a quarterly record for the company. It also sold the remaining properties of the San Mateo Office Park for $210 million.

In Los Angeles, the firm’s headquarters, the company closed its largest and third-largest leases this quarter. Netflix inked the largest deal, leasing all 302,000 square feet of commercial space at the Epic building until 2031. Hudson also signed Honey to its Fourth & Traction redevelopment in the Arts District, reflecting the third largest deal this quarter.

On the Westside, Hudson said it is making progress on securing entitlements for the redevelopment of the Westside Pavilion, a project slated to bring 500,000 square feet of new office space. The firm also said it has received interest from several tenants considering full or partial uses.

Hudson also completed its acquisition of the ground lease of the historic Ferry Building in San Francisco this quarter, adding a fully leased property to its portfolio. Hudson took a 55 percent stake in the deal, while Germany-based Allianz claimed the remaining 45 percent stake.