Hudson Pacific Properties, a significant studio and office operator based in Los Angeles, has experienced a decrease in its credit rating, as assessed by S&P Global.
As an ardent follower, I’ve got some disappointing news about Hudson Pacific. Standard & Poor’s (S&P) has lowered their debt rating from “BB-” to “B,” with a negative outlook. This means they anticipate ongoing challenges in the studio and office sectors might strain its crucial financial indicators and limit access to capital, possibly leading to liquidity issues and refinancing difficulties, as per their May 28 report.
2020 saw a significant boost for Hudson Pacific when Blackstone acquired a 49% share of their Hollywood Media Portfolio. This portfolio encompasses Sunset Bronson Studios in LA, where Netflix currently leases space. Last year, Hudson Pacific further strengthened its position by sealing a $360 million deal to acquire Quixote Studios, a company providing production services and stage supplies rental services. However, in 2023, the company faced a turn of events.
However, this expansion was overshadowed by the 2023 Hollywood actors’ and writers’ strikes. Consequently, significant film studios and streaming services reduced their content investments, partially due to striving for profitability on their online streaming channels.
Amidst the current trend in the industry, Hudson Pacific and Blackstone have temporarily paused their project to construct a 91-acre film and TV studio complex in the UK, marking what would have been the initial expansion of the Sunset Studios brand beyond the U.S. market. S&P Global has acknowledged the challenging economic conditions that Hudson Pacific is navigating, especially given its involvement with the California film and TV production sector, which is experiencing increased competition from other states within the U.S. and countries offering generous film tax credits to attract Hollywood studios and streaming platforms.
As a fervent admirer, I’ve noticed that our company’s EBITDA has taken a dip due to persistent challenges in its office and studio sectors. These segments have been struggling amidst ongoing market shifts and industry transformations, which are further complicated by broader economic uncertainties. Additionally, high-interest rates and the resulting macroeconomic instability have dampened transaction activity, thereby squeezing our fixed-charge coverage. S&P Global analysts echo these observations.
The report further revealed that, by March 31, 2025, Hudson Pacific’s studio properties were occupied at an occupancy rate of 73.8%, which was slightly lower than the 76.9% occupancy rate in the previous year.
Amid a historical decline in film productions in L.A., there’s been discussion about strengthening California’s film and TV tax incentive program and potentially establishing a federal film tax credit as a solution, which could encourage Hollywood to regain domestic production jobs that have been moving abroad.
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2025-05-28 22:25