Blackstone and Hudson Pacific pay $20 million for 14 more months on a defaulted Hollywood loan

Blackstone Property Partners and Hudson Pacific Properties paid for the extension in two forms, according to Fitch ^[11][1]. They agreed to put $20 million into a leasing reserve from sources other than the buildings' cash flow ^[2]. They also accepted a full cash trap, so all excess cash flow goes to that reserve until the loan is repaid ^[3]. The $20 million is about 1.8% of the $1.1 billion balance ^[17]. The bondholders paid in coupon. Wolf Richter, who reported the terms, calls the 4.435% fixed rate far below market ^[1].

The same report holds a yardstick. The $470 million loan on Brookfield's One Allen Center and Three Allen Center in Houston floats at SOFR plus 3.08%, about 6.96% with SOFR near 3.88% ^[5][6]. At that rate the $1.1 billion Hollywood balance would owe about $76.6 million of interest a year, against about $48.8 million at 4.435%. The gap is about $28 million a year, or roughly $32 million over the 14 months ^[20][21]. On that measure the bondholders gave up more in the first year than the borrowers put up in cash. It is a loose comparison. The Houston towers were completed in 1972 and 1980, while the Hollywood offices are Class A buildings from 2008 to 2021, sitting beside three studio properties ^[5][10].

The servicer is trading that coupon for time on the leases. Netflix leases 57.8% of the space ^[13]. Its leases on 7.0% expire in January 2027 and on 17.2% in June 2028, and renewal talks are continuing, Fitch reported, citing SitusAMC ^[13]. The 20th Century Fox lease on 6.4% ends in December 2026 and waits on whether studio productions get more seasons; Fitch wrote that the "outcome will determine if the leases will be extended" ^[14]. The three expiries total 30.6% of the space ^[18]. Occupancy was 84.9% in July, down from 91% in September 2025 ^[16]. If none of the three renews, vacancy would be about 45.7% ^[19].

Richter wrote that owners now live under a new dictum: "Sell at today's price, or the lender will." ^[23] For this loan, renewal on similar terms lets the cash trap fill the reserve, and the extension then looks like sound servicing. A partial renewal at lower rent leaves the November 2027 refinancing to clear a market coupon on smaller income. If both tenants leave, a buyer prices a campus close to half empty ^[19].

I think September's record shows extensions still being granted, with the borrower now paying for them in outside money and trapped cash. That view is wrong if the servicer on the Houston loan, out of extensions, sells or forecloses at today's values ^[4], and if the next large maturity defaults go the same way.