Hudson Pacific Properties, Inc. (HPP) stock intrinsic value fair value estimate & owner earnings analysis

Hudson Pacific Properties owns Class-A office buildings in Los Angeles, the San Francisco Bay Area, Seattle and Vancouver, plus film and television studios (Sunset Gower, Sunset Las Palmas, Sunset Pier 94 in New York and studio sites near London). Office leased about 77.0% at the end of 2025 and studios about 78.8% on a trailing 12-month basis. Revenue has fallen from $1,026M in 2022 to $831M in 2025, and asset sales are part of that. How we measure earnings. We start from operating cash flow, remove swings in receivables and payables, subtract stock-based compensation as a real cost, and subtract the capital spending needed to keep the buildings competitive. Because revenue has been flat to falling, we treat all spending on properties as upkeep and give no credit for growth spending. That is a strict reading, because the spending includes some development (10900 Washington, Washington 1000) and about $39M of capitalized interest in 2025. On this basis the company's owner earnings were about $90M in 2022, then negative $71M in 2023, negative $69M in 2024 and negative $24M in 2025. Property spending fell from $299M in 2023 to $199M in 2024 and $144M in 2025, and that fall is why the loss narrowed. The earlier years in the series were mostly negative too, because property spending of $250M to $400M a year outran operating cash flow. Per-share figures in the stored history are restated for the one-for-seven reverse split on December 1, 2025. What changed in 2025. The company sold 33.9M shares plus pre-funded warrants for 10.3M more (post-split figures) for gross proceeds of $689.3M, and sold Element LA. It used the money to repay debt, including $206.3M on the office CMBS loan, and refinanced 1918 Eighth with a $285M CMBS loan maturing September 2030. The share count rose from about 20M to about 64.5M diluted in the first quarter of 2026, so each share now claims a much smaller slice of the business. We value per share on that larger count. We did not credit large interest savings from the repayment. Gross interest expense fell only 6%, from $210M to $197M, because much of the repaid debt was replaced with new borrowing. Base case: owner earnings stay at the 2025 level of about negative $24M a year. We use 2025 as the starting point because the recapitalization and asset sales changed the business, and it is the most recent year at the reduced spending level. We do not credit an improvement, although the first quarter of 2026 was better: about negative $8M against negative $30M a year earlier, with cash flow of $44.3M against $30.5M and property spending of $24.4M against $37.1M. One quarter is not enough to move the level. Year-1 growth is zero against a trailing actual improvement of about $45M, so we assume no continuation of that improvement, and we found no dated, filed reason to expect it. Leases signed but not yet started (77.0% leased versus 76.3% in place) are too small to credit. Over ten years this comes to about negative $2.75 per share. Nothing named and evidenced continues after year ten, so the case ends there. We do not add the company's cash on top, and we do not subtract its debt, because the cash flows already reflect interest paid. Bear case: 2023 and 2024 repeat, with owner earnings of about negative $70M a year, from cash flow falling to about $100M against roughly $144M of property spending and $30M of stock compensation. The evidence is those two years, revenue down 8% in the first quarter of 2026, a 77% leased office portfolio and a heavily leveraged balance sheet. The bear case ends after ten years and comes to about negative $8.00 per share. On these numbers the company would owe more to fund its buildings than the business earns, and the gap would have to be met by new borrowing, asset sales or more share issuance. Preferred stock ranks ahead of common shareholders and is not deducted separately here. Bull case: the first-quarter improvement holds, about half of it, and owner earnings reach about positive $21M a year. That rests on property spending running well below 2023-2024 levels (the first-quarter 2026 pace) and on the cash flow gain shown in the filings. We credit 20 years, with no growth, because the buildings continue to earn only as long as the spending needed to maintain them continues, and that spending is already deducted. That comes to about positive $3.70 per share. Overall, on our strict method the shares are worth roughly zero to negative in the middle case, with a modest upside only if spending stays low. Beyond the horizons above nothing is credited, so remaining value in each case is $0. Large intangible amortization is not a factor here because depreciation is the main non-cash charge and it is already added back. What would make this wrong. If the company can cut property spending to about $100M a year while holding cash flow near $165M, owner earnings would be around +$40M and the shares would be worth more than our bull case. If the asset sales and refinancing continue to lower interest costs faster than we assume, the base case would move up. If office leasing weakens further, the bear case is closer. We could not reconcile how much of the 2025 property spending was development that will end versus lease-up spending that will continue, because the filings show it as one line.