$1.1B Hudson Pacific loan moves

Hudson Pacific Properties and Blackstone have moved a $1.1 billion commercial mortgage-backed securities loan into special servicing as they work to extend debt tied to a Hollywood studio-and-office portfolio before its Aug. 9 maturity, according to Hudson Pacific executives and property trade reports. The transfer puts a large Los Angeles media real estate financing into the part of the CMBS market used when borrowers need workout negotiations, maturity extensions or other modifications. Hudson Pacific Chief Financial Officer Harout Diramerian told investors on the company’s Aug. 5 earnings call that the borrower and special servicer had agreed on terms for a longer-term extension and a 30-day extension to complete documentation. The loan is one of the clearest current examples of how leasing uncertainty at a handful of large office buildings can flow through to refinancing risk in office commercial real estate. ### Which loan moved, and who is behind it? The financing is the $1.1 billion loan secured by Hudson Pacific and Blackstone’s Hollywood Media Portfolio, a 2.2 million-square-foot collection of studio facilities and adjacent office buildings in Hollywood. Blackstone said in 2020 that affiliated funds would buy a 49% interest in the portfolio at a gross valuation of $1.65 billion, with Hudson Pacific retaining 51% and operating control. In 2021, Commercial Observer reported that the partners refinanced the portfolio with a two-year, floating-rate, interest-only CMBS loan co-originated by Barclays, Bank of America, Wells Fargo and Société Générale. (bisnow.com) Hudson Pacific said on Aug. 5 that it is responsible for roughly half the debt, or about $566 million. Executives declined to discuss additional extension details on the earnings call, according to Bisnow’s account of the remarks. ### What properties back the debt? The collateral includes Sunset Gower Studios, Sunset Las Palmas Studios and Sunset Bronson Studios, plus office properties 6040 Sunset, Harlow, Icon, Cue and Epic, Bisnow reported from the earnings call. (blackstone.com) Blackstone’s 2020 announcement described the same portfolio as three Hollywood studios and five on-lot or adjacent Class A office properties totaling 2.2 million square feet, including 966,000 square feet of office space. (bisnow.com) The 2021 refinancing was pitched against strong occupancy and long leases. Commercial Observer, citing ratings analysis, reported the portfolio was 86% occupied at the time and that Netflix was the largest occupier, with more than 700,000 square feet leased and long-term commitments for stage and production space. (bisnow.com) ### Why does Netflix matter so much here? Netflix is central because it anchors a large share of the office component that supports the studios. Bisnow reported that Netflix’s lease across the Hollywood office properties totals 722,000 square feet and runs through 2031. Hudson Pacific Chief Executive Victor Coleman said on Aug. 5 that the company’s “relationship and conversations are completely ongoing” with Netflix, while stopping short of giving a fuller update on the tenant’s long-term plans. (commercialobserver.com) CoStar reported earlier this year that an extension on the loan could give Hudson Pacific time to negotiate a longer lease with Netflix, and a Jefferies analyst cited by CoStar said Netflix’s agreement was a key factor in the portfolio’s long-term credit profile. That framing links tenant retention directly to the lender’s willingness to extend or refinance the debt. (bisnow.com) ### Why would a loan go to special servicing before maturity? Special servicing is where troubled CMBS loans are transferred when a borrower needs a workout, extension or other change to loan terms. In this case, Hudson Pacific said the transfer happened ahead of the third-quarter maturity, and Bisnow reported the move came before the Aug. 9 due date. The immediate issue was not that the buildings were empty: Hudson Pacific President Mark Lamas said the Hollywood studio properties were 95.5% leased. (costar.com) The pressure point was refinancing a large, floating-rate office-and-studio loan while questions lingered around a major office tenant. ### How does this fit into Hudson Pacific’s broader position? Hudson Pacific paired the loan update with stronger second-quarter operating numbers elsewhere in the company. The REIT said on Aug. 5 that in-service office occupancy rose 470 basis points to 82.5%, it signed 1.3 million square feet of office leases, and it ended the quarter with $876 million of total liquidity. Victor Coleman said Hollywood stages remained 95.5% leased, while the company raised its full-year guidance. (finance.biggo.com) The next concrete step is documentation. Harout Diramerian said on Aug. 5 that Hudson Pacific and the special servicer had agreed to a 30-day extension while they finalize a longer-term extension, leaving the Aug. 9 maturity and the completion of that paperwork as the immediate milestones for Hudson Pacific, Blackstone and the servicer. (bisnow.com) (investors.hudsonpacificproperties.com)