Hudson Pacific and Macerich Complete $700 Million Sale of One Westside and Westside Two
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Insights
The divestiture of One Westside and Westside Two by Hudson Pacific Properties and Macerich represents a strategic move that could have significant implications for their financial health and operational strategy. The sale for $700 million, before adjustments, indicates a substantial capital inflow for both entities. Hudson Pacific's decision to use the proceeds to repay its unsecured revolving credit facility not only improves its liquidity but also demonstrates prudent financial management by addressing debt maturities well in advance of the 2025 deadline. This preemptive measure will likely be viewed favorably by investors and credit rating agencies, as it suggests a lower risk profile and enhanced creditworthiness.
Furthermore, the reduction in Hudson Pacific's net debt to undepreciated book value ratio, from 39% to 35%, is a positive indicator of the company's leverage position. This deleveraging aligns with broader industry trends where real estate firms are striving to maintain optimal balance sheet structures to withstand market volatilities. Macerich's intent to utilize the net proceeds to further deleverage and enhance liquidity aligns with prudent capital management practices, particularly in the context of the retail sector, which has been facing headwinds from the e-commerce shift. The transaction also underscores the increasing value of mixed-use properties in top markets, reflecting a shift in real estate dynamics towards diversification of use cases to drive asset value.
The transaction between Hudson Pacific Properties, Macerich and the Regents of the University of California is indicative of emerging trends in the commercial real estate market, particularly in urban areas like Los Angeles. The sale of these assets, which total approximately 687,000 square feet, demonstrates the attractiveness of modern, flexible campus environments for high-quality end-users. Hudson Pacific's ability to transform the former Westside Pavilion mall into a sought-after space is reflective of the growing demand for properties that can accommodate tech and media tenants, a sector that continues to show resilience and growth.
This sale may also signal confidence in the long-term value of commercial real estate in prime locations, despite current market uncertainties. The involvement of a stable end-user like the University of California could be seen as a testament to the enduring appeal of well-located, well-developed properties. For stakeholders, the transaction highlights the importance of strategic asset management and the potential for real estate companies to unlock value through redevelopment and repositioning of assets.
Analyzing the financial implications of this transaction from a broader market perspective, the sale's impact on Hudson Pacific's and Macerich's stock performance will depend on how the market interprets their post-transaction strategies. Hudson Pacific's improved debt profile and covenant compliance may lead to a re-rating of the stock as the market prices in the lower risk and enhanced financial flexibility. For Macerich, applying the proceeds towards deleveraging could be perceived as a strategic move to shore up its balance sheet amidst the challenging retail environment, potentially leading to a more favorable risk assessment by investors.
The transaction's timing and size are also noteworthy, as they may influence the valuation benchmarks for similar properties and companies within the real estate sector. The successful sale at a significant valuation could serve as a reference point for future transactions, potentially affecting the market's perception of asset values within the tech and media real estate niche. Additionally, the long-term impact on the companies' stock will depend on how effectively they reinvest the capital from the sale into growth opportunities that align with their respective strategic objectives.
“The opportunistic sale of One Westside and Westside Two significantly bolsters our balance sheet and we now have no debt maturities until year-end 2025,” said Victor Coleman, Chairman and CEO of Hudson Pacific. “We transformed the former Westside Pavilion mall into a multi-award winning, modern and flexible campus environment that attracted not one, but two distinct large-scale, high-quality end-users, a testament to our ability to create value through development expertise, commitment to quality and strong relationships.”
Macerich Chief Executive Officer Tom O’Hern noted that, “This transaction is an excellent example of how Macerich consistently makes the most of our opportunities to maximize value for our stakeholders. Net proceeds enable us to further deleverage and improve our liquidity profile, allowing us to more aggressively advance Macerich’s successful densification-diversification strategy, which adds new uses—from fitness, grocery and medical to residential, hotel, office and more—to our high-quality portfolio of Regional Town Centers in attractive
Hudson Pacific used net proceeds from the sale to repay amounts outstanding on its unsecured revolving credit facility. This transaction addresses the company’s debt maturities until December 2025, and further strengthens the company’s compliance with its unsecured revolving credit facility covenants as recently amended. Further, the company’s share of net debt to the company’s share of undepreciated book value as of September 30, 2023 proforma for all announced asset sales improved to
About Hudson Pacific Properties
Hudson Pacific Properties (NYSE: HPP) is a real estate investment trust serving dynamic tech and media tenants in global epicenters for these synergistic, converging and secular growth industries. Hudson Pacific’s unique and high-barrier tech and media focus leverages a full-service, end-to-end value creation platform forged through deep strategic relationships and niche expertise across identifying, acquiring, transforming and developing properties into world-class amenitized, collaborative and sustainable office and studio space. For more information visit HudsonPacificProperties.com.
About Macerich
Macerich is a fully integrated, self-managed and self-administered real estate investment trust (REIT). As a leading owner, operator and developer of high-quality retail real estate in densely populated and attractive
Macerich uses, and intends to continue to use, its Investor Relations website, which can be found at investing.macerich.com, as a means of disclosing material nonpublic information and for complying with its disclosure obligations under Regulation FD. Additional information about Macerich can be found through social media platforms such as LinkedIn. Reconciliations of non-GAAP financial measures, including NOI and FFO, to the most directly comparable GAAP measures are included in the earnings release and supplemental filed on Form 8-K with the SEC, which are posted on the Investor Relations website at investing.macerich.com.
Hudson Pacific Properties Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events, or trends and that do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond the company's control, which may cause actual results to differ significantly from those expressed in any forward-looking statement. All forward-looking statements reflect the company's good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Furthermore, the company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause the company's future results to differ materially from any forward-looking statements, see the section entitled "Risk Factors" in the company's Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, and other risks described in documents subsequently filed by the company from time to time with the SEC.
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Hudson Pacific Properties
Investor Contact: Laura Campbell
(310) 622-1702
lcampbell@hudsonppi.com
Media Contact: Laura Murray
(310) 622-1781
lmurray@hudsonppi.com
Macerich
Karen Maurer
(602) 953-6471
Karen.maurer@macerich.com
Source: Hudson Pacific Properties, Inc.
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