HPP - Earnings call transcript Q3 2017 | Hudson Pacific Properties, Inc.

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Operator

Greetings and welcome to Hudson Pacific Properties, Incorporated Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the conference over to your host, Kay Tidwell, Executive Vice President and General Counsel. you. Thank

begin. may You

Kay Tidwell

Chief and conference Hudson are call. Chief Coleman; Chairman everyone, Officer, Chief quarter Lammas. Mark the Properties XXXX and and Victor Officer, earnings With Executive Officer welcome morning, and Pacific Financial to third Company's Operating Good us today

to Potential I call and based are assumptions. them, company's could uncertainties on statements current expectations over Before SEC and subject that XXXX, Pacific please this to on and does company's from statements to the no from or of that hand results this statements. and differ the information information and periodic certain Hudson These the are cause circumstances. risks, duty All and call, business presented as materially to X, uncertainties note on risks contains discussed these forward-looking are management's described undertakes the financial update November intend time-to-time. with not future call forward-looking reports events filed is in today,

measures financial Company the and would In morning non-GAAP the measure release, of this Pacific. are addition, released reconciliations certain explanation of non-GAAP website, the Executive of which Victor Chief now Officer over and an was presents useful Hudson Coleman, Victor? Company's And believes to like information presented measures. Company's such GAAP investors. The financial to this why call available earnings on represents the is to appropriate call in turn financial I to Chairman and the

Victor Coleman

welcome quarter. We a third had morning, Thanks, call. and very everyone, to our Kay. quarter third Good strong

across at cash approximately of markets leasing XX% remain brings if feet exceptional. X.X XXX,XXX rent our to Fundamentals square deals XX% year-to-date strong, our rent and front, cash renewal feet million spreads. the we GAAP leasing GAAP spreads. On over and That square not XX% signed and activity at XX% new

our in minute, X.X in fact, on square feet. touch I'll market stands elevated, at upfront That's increased each last driven demand Valley call million demand and our noting availabilities pipeline assets. it's by a Silicon from in worth our While that for

near-term inaugural Mark assets. offering, moved in our the which addition to for a of successfully under September, capital several speak venture non-strategic contract Burbank XX% of us could combined we third II our the in continued executing the In sales use, joint Several moment, two to put put building's Pinnacle I had on public course, its significant within in dispositions a led conclude quarter, that to In we've forward a be bond sell on of of million. will joint to venture and factors softness price roll $XXX largest including partnership tenants. better run and marketplace our interest

We Pinnacle mid-November. expect transaction in the to close

of in are our prove across efforts Palo And to of these exploring XXXX Road, also assets, are Stanford our our the Hill should core markets. terms the sought-after our Park, our Research of concentrated. Palo also generated ADR outside sale Center Sand attractive, we're will portfolio dispositions, Alto rebalance Alto further two Regarding and the pricing Embarcadero holdings of where which remainder dispositions

markets. our Now

were per in again Vacancy foot. healthy. X.X and quarter the $XX square in tenants square this and had basis high-quality XX.X% Silicon flat Silicon of million for demand quarter, Valley. remains feet start the in increase essentially quarter feet Let's square in gross line, absorption at net to XXX,XXX points XX absorption. of Valley rents Bottom did

Village subleased our Square, XXX,XXX Santa square call, in from WeWork's in feet XXX,XXX campus for bulk companies. View Downtown And and the attributed under to feet good sublease X% Clara plans Amazon Google's least purchase Networks' the Microsoft X.X Apple's up about markets. million construction at Since in new site square San XXX,XXX could in Alto large last part Silicon X.X in quickly feet addition blocks million Palo of square North and on sublease. square an tech and XX% Clara subleased there's foot deliveries San Antonio activity absorption Ericsson be at pre-leased. transit-oriented We're urban While of to of is purchased subleased seeing properties magnet Valley in Santa a XX,XXX large space, those square feet XX both. which feet on this also Station become build to of recently square MapR major a took village, for declined The announced quarter. at they at and Mountain Jose significant to availabilities, have

time, and assets existing ideal deals current in and We volume Small-deal owner-user XX% this over expect robust. this of portfolio. of Valley's acquisitions draw below new in tenants, smaller for our remained our displace type Silicon feet. that is has were development Over XX,XXX square will quarter which

availability. Santa a is ability despite XXX block nearly square increased leasing asset of XXX Our Each these in to In of Techmart basis Techmart's momentum QX, deals Clara XXX, good larger example points. feet. leasing averaged percentage maintain our

select even the fact, we've acquiring XX% by leasing footage had square over rolled. while percentage the property increased and of X,XXX Techmart's improvements, In capital since making basis points,

rose San space our had made mid-XXXX, footage of has net asset, square as out since spaces absorption. Gateway the that ago. with While tightens, our We'd plans also of Jose continue feet under seeing to leases combined capture rolled XX% XX% occupancy basis to X.X about Gateway, foot. points spec points of XXX,XXX reposition still increased X% still Quality exterior suites, Plaza. significant points out the enter to of Gateway the rents lease-up working or nearly now additional Interior activity Silicon VSP north And gains, Demand straight pursuing very square which we're XX feet quarter the Valley, basis at of absorption. San A tenants we net diligently areas we increased to because year but at the roll, to third Metro its and asking More of Jose is a new build improvements, yet After to $XX square - our XXX had Peninsula demand Peninsula. we competitive. basis healthy immediately at common million along Metro per position of marketplace. The at supply, the Plaza. as repositioning XXX further built construction than and vacancy is market market pre-leased. remaining had like assets square completed VSP

lobbies or sub-X% nation, ceremony and vacancy seen Alto amenities ongoing, Alto new demand best been the mid-XXXX, pipeline with appeal in Next key Alto Those are at rents. week, and, square upgraded square foot rooms, our our our We've that an challenging and interest Palo overlooked headwinds property, reopening in Improvements Market Palo Square. a tenants Square. Palo in the per either that hold grand XX% modernized fitness to the has of since quarters. Broadening conference conditions include center asset efforts. among from $XXX indoor-outdoor we'll leased and was areas. of common and show construction now But that subside footage should asset's with particular, tech in elevated Alto the for rolled coming component it's growing space. already anticipated to over Palo and repositioning the previously

Foster XXX are is larger, square being Office theme. outdated XX,XXX Peninsula Peninsula, in in the Park Shores of XX,XXX and and ShoreBreeze Center share foot a Dolphin in comprised more and Twin Vacancy along say, assets lease-up Redwood other City, San to Metro spaces. Mateo Our common

XX,XXX needed good should the demand feet tenants we an to the approximately December upgrade February. are tenants of instances, square activity we large which to lease-up tenants' in market at still the many demand about and our XX,XXX early So, and, appeal up space those submarkets. supply-constrained hit In and San on robust break continues. feet have suites Collectively, as driving in to suites small the tech about pipeline, We'll assets, end reload VSP between and in marketplace. these of Francisco, in another increasingly square VSP vacate

Asking for feet with rents XXX,XXX Dropbox flat feet. and Vacancy the Facebook points XXX,XXX were net square basis over signed: square were Two line feet breaking foot. of square square quarter absorption. dropped at $XX XXX,XXX per X.X%, for for to in leases XX

Our stabilized at a renewal and XX% Market, XXX% XXX HotelTonight XX.X% rent, blended XXX and on which rent. includes is with mark-to-market Snap leased. square at had now mark-to-market San expansion with That our feet Francisco which portfolio Howard, XX,XXX had

XXX,XXX feet of market. over expirations below and XX% now have are in We square which XXXX XXXX combined,

pleased Vice have Beacon asset platform he I'm acquisitions expertise, grow give suspect us you'll will relationship and competitive meet to we a And Senior ran Andy's and in Seattle. Northwest. to most I'm Wattula. Andy as addition Seattle I operations, to announce President push of all marketplace. And a that as a where chance him. to was to tenure our edge development. confident recently team, sales Turning Pacific with our Capital, joins management, us terrific He the Andy

X.X Class square asking under nearly to construction in Downtown year delivered of leased. X absorption. per square to than And You'll companies feet The more square rates million to with improve A Vacancy in equally square this as quarter-over-quarter. Seattle XX% XX XXX,XXX basis over the foot, thus continued be hit points along X% impressed. feet XX% up is with $XX is pre-leased, fell far feet million tech QX Seattle's net core. city's X.X%, fundamentals urban flocked

building Lyft our to fully In lease is for of XX,XXX at WeWork our with leased. Likewise, the XXX% leased to XX,XXX bottom floors. Alaskan. HillX quarter, to King feet Way feet That the deal subsequent foot terms brought XX Jackson foot brings and leased Jackson XX square at approximately our following Alaskan with that square assets, two at XX% And leased. XX,XXX XXX XX% square XX,XXX and leased we to approximately square

A to $XX of rents Angeles. rents. well year-to-date absorption tech We're in great square seeing are fuel XX% a importance our feet Angeles of continues tracking - activity to at square we're $XX office So, other conditions basis very remained absorption industries media Shifting of a down ZipRecruiter up per that demand nearly we of those caused foot, square Los convergence up demand year-over-year. per and West of XXX,XXX net availabilities tight. Angeles Los saw and million absorption to for basis Los In rents, But the foot XXX re-leased XX.X%, And Class our of and XXX for XXX outpaces square all having X.X% so, growth in Hollywood, and the X project, demand marketplace. and over feet to submarkets, needs. their soundstages points building meet consider net X% and in alternative being all to in mark-to-market to second Amazon's access square which feet vacancy for our space. submarkets. feet on straight is to has increased XX,XXX Studios are makes square we quarter Rents Organic office QX, high-quality ability impacted offices Rising cases, XXX,XXX despite construction XX.X%. of space take to quickly newest points in deliver vacancy Arizona access qualified of this some feet decision square to EPIC. recent our north These even content at extent. tenants some of user studio type. XXX,XXX Culver to premier highlights uniquely our Hollywood production streaming to office and creators, portfolio to all

these In Las XX future Sunset Palmas, through and project working With at Mark, going pipeline, months and of going with for the call Las thereafter. terms master additional at footages and on that, square XX to approximately projects approvals we're our turn plans square development and also expect financial two I'm quarter highlights. two our designs We're finalizing an office walk that additional entitled years months XXXX, who's to of approximately ground feet XXX,XXX out. of as for Sunset entitlements to QX we square to development for Palmas as third XXX,XXX of early to Studios, break Sunset related are to foot delivery over office Gower

Mark Lammas

third the Funds Thanks, third items excluding or $XX.X XX, per per $XX.X share three specified or transaction-related quarter Specified excluding of $XXX,XXX specified from diluted $XXX,XXX September share for ended expenses compared operations XXXX, $X.XX of per or $X.XX million FFO to million quarter a FFO of $X.XX totaled for diluted XXXX consisted items Victor. share. items $X.XX consisted for per XXXX expense of of diluted months or the transaction-related of share. items the or Specified ago. of year

WeWork lease the points entertainment quarter XXX drivers The basis. As primary percentage foot quarter GAAP continues points up quarter XX.X% properties XXX XX.X% second percentage production XX.X% stabilized XX, XX,XXX in-service XX.X%, on a trailing our quarter on GAAP foot a Howard Bronson. due and in offices. entertainment reflect The quarter portfolio a lease ended Net on for for cash and square year. same-store our at X.X% versus occupancy Metro to with Snap our media roughly XX,XXX basis. demand third in was X.X% during increased income This the deal at to trend higher and the upward year-over-year. the the with this of and by This XX.X% was, same-store and increases media XX-month increased and properties XX.X% Center our were our basis office XX,XXX in XX basis operating these stages the and both production heightened at respectively, for and deals a income multiple and Gower again, with and XX net HillX, on Same-store square totaling third and Sunset office cash Sunset studio basis XXXX, respect at leased, to and of operating feet. basis September second square deal of XX.X% at

to turning few on a touch items. guidance, other I'll Before

First, lease XX targets remaining EOP eight assets XX% former XX% the I for will Northern comment and year-end lease-up and California on the the assets.

in end third third square assets the quarter the their absorption footage X.X% X.X% related despite the former continued former EOP anticipate of assets over of EOP expiring as even We square quarter. representing the through address of were at the of quarter, leased quarter we leased, net positive expirations, fourth over XX points As basis year-end last footage. up XX.X%

square of Regarding these of expiring in the end the as properties quarter. basis quarter up the XX.X% the were leased, in eight XX assets, third third lease-up quarter, despite related points X.X% the of footage

the expect X through the year-end. assets on we Looking lease-up percentage improve lease to ahead,

touch our in leased fourth quarter useful success of to the million do Silicon total with we Jose, of X.X% our it X.X leasing percentage However, to lease square our footage, affecting target. With have briefly square expirations X.X that we located thought significant Valley in approach to over submarket. footage San on million

essentially of XX.X% the were as percentage with That of when assets last lease them XX.X% Jose leased second the in San over XXXX. quarter, quarter. in five XX is Our points up end quarter the basis acquired we line

maintained time, lease XX.XXX% more by percentage oversubscribed. At improved following of I'll footage than the early and also have NOI of significant inherently we more of as square on of touch the XX% XX% a of it's slow balance offering, ownership, X nearly has our offering we our at senior stabilized the a although successful coupon XX%. X.XX% assets million term, attainment The of have such generating expired. During with public lease growth. cash even will these the threshold, in sheet October. the same par precisely what's NOI times $XXX was of value notes priced a XX-year Remember, than

liquidity. X% the our of debt our of hand, our and being floating-rate our our at debt sources percentage and debt. of capacity $XXX balance well Sunset of as of grow superior relief, metrics, Together of commitment Pinnacle a on as indebtedness we repaid the exemplifies and a Gower high-quality As with portion entire sheet only only strong with access the sits of total business. to a Between have cash our part offering immediate our capital indebtedness, credit upon balance XX% transaction, we our of Bronson to flexibility of of north million along I that to credit Sunset the In facility floating-rate upcoming five-year with secured. sale variety of and availability short, having facility, II, $XXX revolving line million under the

that any horizon, with XXXX. I'll we turning expirations XXXX sizable don't to and the items Finally, increasingly impactful on have potentially focus note in

largest them further XX which expirations expiration on expire X.X to are over Coat portfolio's next XX,XXX Pages end the footage we of supplemental. along square at totaling X the feet but less is be about year of square Howard minimal our about right, and Francisco our scheduled on the an details XX Burlington expect year, they square in next impact which footage Note on lease Plus, of San Valley. XX% of extension at is the have our in quarters would Peninsula of million Silicon XX% ADR. QX, than or exercise. next to As XXX Factory square is the feet,

guidance. Turning to

of repayment announced the share. We approximately $XXX,XXX our write-off to diluted Specified maintaining guidance excluding $X.XX per is to consists specified X-year includes associated guidance previously April range approximately as to our original range in are of compared a of of previous original narrowing due the $X.XX $X also of costs, per our FFO term the the $XX $X.XX loan of $X.XX repayment This per share, and midpoint issuance of XXXX Pinnacle November items, anticipated items full-year costs sale upon full-year $XXX of I such diluted $XXX,XXX write-off share, with interest specified to XXXX. loan for FFO our five-year of items. associated the purposes excluding our of revised XXXX of this term financing due cost diluted of of with million XXXX issuance of million II. deferred the It

estimate XXXX respect As including full the current always, to rental assumptions our on FFO of release call, activity earnings this and in year or conditions, market that's speculative repayments, impact referenced rates, occupancy financings earnings market management's the future levels matters. view with reflects or It of or announcements. similar in excludes acquisitions, recapitalizations, our future capital impact debt dispositions, unannounced and prior and

of guidance differ that There For Hill results assurance over the not With sake be back to turn estimate. call either a does disposition I'll of that, potential no the Sand Center XXXX this reflect Embarcadero not Road. the actual materially from of the clarity, impact this or can will Victor.

Victor Coleman

Excellent job. Mark. Thanks,

positive to our positioned capitalize core on in well into As XXXX, trends are the and of markets. we each head fundamentals we growth

of unmatched an in pipeline opportunities development have Hollywood. We

We're in confident we're opportunities deliver the mark-to-market the value-add remainder NOI expand outsized to San Peninsula our next. Seattle, during Valley. leasing to of and Silicon of through on shareholders year this additional people platform have Downtown significant the Francisco. portfolio right in I'm markets, lease our and we've generating additional got We poised value that expirations for And and along and

going call, want call and I with on their questions. forward and, this thank to I'm to updating your for to Hudson for support quarter. turn to Pacific always, As senior quarter. the the Hudson appreciate team management Properties, entire hard the look work everyone And Pacific we Operator, our of particularly, next to you over that, you we

Operator

Craig Markets. question with [Operator is from KeyBanc Instructions] Capital Our Mailman first

Craig Mailman

I like Mark, to back the guys. the clarify. Is Valley Hey, XX% want bit just Silicon from walking It that for sounds you're lease a portfolio. target accurate?

Mark Lammas

of First number the you cut What all, said? you out. was

Craig Mailman

said XX% quarter. The guys last target had you

Mark Lammas

No, at not all.

Victor Coleman

walking indication back. not What's We're that? your it on

Craig Mailman

going impact When and sounded Mark guys... the was it it, through on the expirations you like

Victor Coleman

he facts. walking the just just was facts. giving is back. No, He was not He giving

Craig Mailman

feet Okay. that Right. you that of Could of I And I just guys you hit Valley. to looks is could you Silicon of wanted million, the good of to a maybe percentage give like it about of that. breakout what need square give - you double-check. X.X kind can XXX,XXX just said kind amount mean, the be?

Victor Coleman

What percentage of what?

Craig Mailman

The million X.X foot demand pipeline. square

Victor Coleman

right seems million in Peninsula, feet and million, you're X the I the since square in I laser-focused, now, the that. like, it Yes. Valley, the of mean, of X.X about between - at pipeline is looking the we're mean, Valley

XXX,XXX Seattle. in in XX%, XXX,XXX feet There's so like about that. or and it's about Angeles So, Los feet something XX%,

Craig Mailman

on studios? Great. doing Las thought that the And would? was better NOI Is what Mark, better then, Palmas you same-store guys guidance than it the driving

Mark Lammas

I X%, a we're think to early Palmas they're will we and this mean, - I in year performance It's this well it's as get we'd Well, expectation, X% was relative higher the I really better year-end. our at year, incredibly we Gower mean, looking just trending to Bronson. and last. Las rate. same-store quite when nearing bit that early maybe guided than had be first

Craig Mailman

Great. Thank you, guys.

Operator

Alex proceed Goldfarb Our O'Neill. Please your is question. next from question with Sandler with

Alexander Goldfarb

morning, Good there. out

demand-driven. - the of job there, a on got sort people call. market fall said of off as sort from just and summer cools wasn't in do just to the They very about Essex And in then of this it sort broader it was just the seasonality, hire. whereby as may off the It guys it demand out be they First, do tech far slowdown talking lack strong year. of were What later of And there? notice companies the year? employers you in see the you a and

Victor Coleman

we an shifts. not you I it's factor modest jobs. - seasonality I ground the I'm qualified the there's do is to I Alex, seasonality, tech impact employees Pacific to there. jobs availability I I driver housing Google And sort if a I next Area, with think of employment. that again, thus before X,XXX think any the in of seeing Well, on job on in don't XX,XXX-plus touch But for Amazon's year-over-year, million because feet the or up similar you the X is looking that sort Apple think populate. their think, definitive a job that tech of full near obviously, and there's about that Bay there seasonality Northwest a far. in Facebook basis at see think, built are mean, to losses we X,XXX I But two demand do factor. number we're years. don't I to do then for the I talk think think September. But people people. of Seattle, on sort be look need I can additional is tell you're crunch And square which that - and alone think in we they about a qualified for seems for still,

jobs that lot there's those to a need are where sure be so coming and people So, I'm filled, of from. not

Alexander Goldfarb

to obviously think own, It and about studio is Can given asset would just the it big like talk and seems in about, a price. Culver the venture you Studio little cat's for a that seems how two, guys seem much bag out one, there City CBS on your it just on bringing the is question on second my then And Okay. just lease others, given which doing market. their perhaps, a be And of like where so joint the then, news is, space. your Amazon partner? equity you

give of if Palmas guys your how last this when versus on expectations may sort change bid you can for year. pricing on So, you Las

Victor Coleman

Well, bag the out I you of of have, kind leave I of studio on the the know early They've think what since know bag concept don't XXXXs, business. been but cat what concept I the cat is. out I'll sort don't But that of any don't movie business the so there's cat running that at that.

of a content Amazon We've Culver, pike, It's moving for as terms the has deal in the cap In into Angeles feather that's known others - another fantastic been that coming industry. been thing about down Los the are. providers. we've for that talking

so, positive. stages referring know marketplace to. number. expensive allocated a don't owned that's studios off it's taking number CBS, you're at quite terms specific think It's posted are what core I and of is not There of I don't the negative guys. a all, the to in And And no frankly, that big

we're that we've a that and them of deal a unless suited in marketplace to leaders that's and the well to get not, be a at want deals and is that rags, the that won't even off expectations that. leaders future leaders it's current your go up. We tied fantastic industry. remotely Clearly, of I it's we and you think ahead inaccurate, in on If all, comment working what piece rags - But on and are. property read we're information think read the

else about going that. anything to I'm say not So,

Alexander Goldfarb

appreciate. Thank you. I Victor,

Victor Coleman

Thanks.

Operator

of Our next Please from your question Feldman question. Bank is proceed America Merrill with Jamie Lynch. with

James Feldman

frustrated. you're all to out Victor, here? far want responses you - your seem the something Is getting... Or get there any is pretty so other question else message

Victor Coleman

if comments you accurate write-ups your that Jamie, wow, nice. would be in some I be today guess frustrated I'd had

were be. you I the think one at think we right? looked But that said consensus, who the you Is we'd I met. if

You read Angeles. No, you quickly your information. all in it's write so Los shouldn't before raining

that's from. think my feelings probably where You can talk frustration later. is I question? your about What's coming

James Feldman

Yes, okay.

as I Craig. thing the same guess, I heard So,

you EOP guys answer the target. So, you're are with saying Is assets, still question? comfortable that on XX% to the his the

Victor Coleman

Yes, yes.

James Feldman

assets, not - not But you comfortable. quite you're the lease-up you're eight like sound as there,

Mark Lammas

were a on I XX than do they relay deals assets. in done get higher there's percentage see. trying the all is we'll Well, assets that of relatively to mean, speaking, we do have that, eight to

little I think look, a I would a myopic about there's I one eight thing at to and guess tendency those assets add look is, it. that to get

portfolio the here doing those provided market assets. does a And our dissect a mean, it overall goal direction in we're reflection Valley only assets. holistically think, I on assets could rather I the moving also at that, that assets. bigger portfolio, a one, not one we eight should those underperforming. to commentary we of portfolio than right XX the Jose, bought is want of choose performance. was stabilize wider can our the of got just subset of it's as to way, are Our isolating some against and subset than By mean, of San Silicon and you whatever If they indicator our in better see against well looked how our but that that strength in we opinion, be reflect performance, also,

reflection leasing those and is targets Our that, is that XX think on walking back of better assets only not the we a point at we're all.

James Feldman

than And sense. Jackson makes are listed and then is so That Okay. now the you supplemental? hear the on along farther Alaskan in Way construction both did XXX say pipeline, I XX

Mark Lammas

did the in post-quarter. That's signed you'll right. that a We in supplemental, was see footnotes, the deal,

given information around so can of but it naturally, tables, impact up see you what the that, is. the that we've in doesn't show So the

James Feldman

leasing you what L.A. And Downtown Okay. then - developments, the there? progress talk about Fourth can about & any Traction,

Victor Coleman

listen. mean, I Yes.

the right feet for completed. now, project. the really, we're it's in whether large going I chicken one Traction back & think on got We're of that forth couple of and We've Jamie, Fourth that we very a a do And wait XXX,XXX demand egg, process sort - or for terms to on. smaller square piece of of that decide and it's deals. about tenant the

that we one a we're could have signed asset as more astutely of spotlight I a leases as or smaller we're scale, different haven't be very think going we're or tenant on one process, early still we on quite two And end story that's be seems lot leased. is to signed level year. Maxwell and tenants. of being a would of little the the the that Traction aware leases of of that think tenants. at to couple to a comfort we two frustrated maybe say candidly, and that not activity be & that But announce I activity frankly, of even I'd Fourth date. construction about surrounded on the because the

James Feldman

leased Okay. to you those just assets before appetite they're move any on? and have sell Did

Victor Coleman

We it. are marking to don't they not not us and But never be selling there in think those to that - came. to if us, Nobody's that I user would ever a have interested really considered and obviously, assets. users come come we no we're

James Feldman

And press on part then you're good your release Center? any of that Okay. seeing. update in think I demand you said Campus that's the

Victor Coleman

about of through let's million square a excellent I interest, run feet it's short of just It's sort it. Well, X.X think so list demand. of

well to on ahead of ahead underway. think our we're of I access we're now. the schedule schedule. space right construction Repositioning the is I and know

was there two think I I up ago. the weeks building first

February first they're the entire doing to work looking the targeted still We rent, got access even so we're great. The for building reposition though paying is The now. is XXXX. of early property,

the XXX,XXX XX,XXX tenants way one of sort thing or each. there's at it's million of on - But ahead feet importantly, feet, that schedule up smallest with square them lands top an are these So, not, looking the tenants XX then the and four to prospects these new feet, feet for of are prospects, all and in of the half proposals in feet. us to feet then X.X running relocated. The XXX,XXX XXX,XXX another interesting X.X XXX,XXX between million that. marketplace, is of tenant half XXX,XXX and additional of whether are and I'm we're more And for them that are almost on

thereafter. of off absorption, off in six our it's two-thirds So some months one-third else. not us underwriting XX we're XX area that's that will whether not going for the be And months and great or - of sign in a moving we're somebody of January, there

James Feldman

Okay, all you. right. Thank

Operator

Nick question your question. next Yulico with Our with Please UBS. proceed from is

Nicholas Yulico

those on Thanks, first, going same-store year? a the next of assets entering Are questions, portfolio. any to couple be your lease-up of

Mark Lammas

they been the have to stabilized They the year. have been quarterly - have prior won't. same-store, for They in to have

they're to And same-store there if be your would stabilization, but same-store, even could them That the not the they is to ability so, qualify reach - say next they year. won't as to they put since currently stabilize in stabilized, pool. no

Nicholas Yulico

some and you also leasing leasing to then just with the That's Okay. the Regus at WeWork. you Seattle in did like also and the of building. this back then development did with going And helpful. It at quarter some I guess Hill looks

market? of kind was that what space? thoughts demand And workspace do how that on you in of So, driving think shared some I your guess, that, about

Mark Lammas

that's - sought we for That's Well, deal a that in the because our Square, their I'll and XXX huge they and We we and space was would new quarter, some what demand the done tenant. consider tenant of building. amount that for some a in small after start on focused best with that time. for took space considerable - working basically concept, time was Way. for this use There's love been deal not on is over the Alaskan that Pioneer had and a Regus we that use and concept, that's team at Regus

worked it well us. So, out for

the building we made That's In that that look point of fully at - from the building on. terms floors the WeWork space. of took two HillX, that lowest leased

deal XXX% think I at of it. TIs - amount the have And building I alone, included triple again, that of co-working mean, end serviced that beside both buildings substantial net of had us, vacant buildings at that It just leases a us $XX just It vacant to was rent. rent. day to to attractiveness Amazon, space. so very the over that high beside was a took the kind

other the So, sense having flex to Amazon made space marketplace be larger in users a from next tenants that have some standpoint. of our or of sort lot to

Victor Coleman

going whole - only does go have in I'm at, not the sort I WeWork unnoticed. Nick, where it portfolio. That's lease you're of kind get of not and we the

Nicholas Yulico

you Okay. with done Regus have before? you - leases had have And do

Victor Coleman

California. on Northern Southern is that Regus in one asset then right? in two properties, here We And Yes. inherited California also

Nicholas Yulico

Thanks it, Got okay. Victor.

Operator

Next question question. Please Rodgers Robert is with your with Dave proceed from W. Baird.

David Rodgers

discussions you're you there key Center Victor, any for to How of questions much I a have that you're a component couple be is I Cisco. your mean, the of demand of interested on that tracking office? to kind following would up in other kind that backfilling discussions having Campus you ask of than today? excess discussion wanted that just that the something and land of and the

Victor Coleman

Dave. So, there's that two of to sort question, parts

tenants Some the - tenants, them they're Fortune... Fortune all is - are and absolutely a to expand, these the existing ability are I but some of they're tenants one mean, of of - the want not tech

Mark Lammas

Fortune XX.

Victor Coleman

XX campus they office And is for facility. tech, and this that definitely would and for expansion. not a want company be it office-related

they're to heard think is I campus That space bought away us literally their new space right mile on. took Microsoft the going within they you next that probably one almost. to build

of desire And and likes because that. in the access force transportation the so, and that that of area to you're labor the seeing

because underwritten it and you not the to on you those But We've you looked it broke you field flex want close this is The second is flex office. developer see or received if already. put and we've the most in question seems for a be that they to It's first the it's building stood on project is interest ground flex. gotten two-story necessarily that by part California, leased level acreage and and of campus conversations. was not a it flex, yet pure desire whatever the not space, of fully land a a where sort building your in is also across and And on to here space. up, literally, the thing our we've excess it's so that the call - or or [indiscernible] it Southern and that development

and look that going tenants our the evaluate bigger not existing going that. is on be, to process, early The decision standpoint, contemplating now. the in table But for the one into we're to to up to we're we're who's So, from is are sort at of split XXX. the project tenant leave going grow again, going going XXX what space that, or, of to to like. it take how is we're the take It's sort to

David Rodgers

said think signing for X having there? X million Okay, demand. with of just feet you're level What's square the current that Are interest different yes. X, conversations I what On those a you're EPIC, market? of Is near-term you tenants? that X, tracking in the kind

Victor Coleman

feet are million, feet, in have asked that its basically, RFPs there marketplace, South. proposals said for area. and specific toured million another tenants five And tenants that XX So, tenants, or million I feet million is which say, over X and in and/or X.X those X.X in are million are we not that are X.X I tracking X.X feet that they additional Palo area it's The on. would Alto for the and are

feet, of it so, totals our we get And X.X so that. about hope to million fair share

David Rodgers

And you're from track you you commitment. and you and much I expanding maybe the the think same to a then of either re-entitling you you'd there, on next previous think start those those tenants tenants help that? soon Obviously, that seeing question was quickly? of do alternate then that any And Amazon guess precludes over at areas? have in is, commitments the Are Las that one campus, [west]. fairly remarks I made those more those your Do Palmas, Netflix building

Victor Coleman

Dave, sorry. on, I'm hang So,

know. guys campus. has to out, I currently come that's expanding an were requested up were still thought tenant had that And from to we've Hollywood. three multiple the On building. entire from increase the You and one in we XXX,XXX one had and Netflix. those proposal West - we They're feet, going were of They're the tenant asking not multiple expanding about don't locations, for in about right? pointed EPIC, at right? from EPIC. marketplace have I talking are locations tenant moving side. These They're That's

Las your to right? Going question, Palmas the XXX,XXX,

Mark Lammas

XXX,XXX.

Victor Coleman

On be building consider, that now, be we've feet, so the in facility. we mean, - that have we we XXX,XXX as past, to multi-tenanted, I building. right and would It a anticipating pre enhance spec. It's space will the space A that, a at are it building, currently, no, we're small to the what - since production-type post studio really is production there Class currently in said

we'll rates have will our and be that to design high-level And hopefully. But to facility in our April are haven't not shown ground what we demand that it Gower like but so, the tenant, converting by go single would couple break that Bronson, - similar of review looks and the as X, through hopefully, we months, wouldn't next we there. did to over even that a rent on We're yet. asset seeing we

David Rodgers

lot All Thanks right, on that for EPIC clarity great. make more the sense. Appreciate a it.

Operator

with Our proceed next your from Please Wells is Heck with question Fargo. Blaine question.

Blaine Heck

portfolio. leased. of you or there's good nothing bit little market doesn't you back enough to Hey stabilization part that really Place that be think second before Hill? to specifically get try market guys. Can it's that it make Sand you selling And do about of a a XX% about talk is Would that your to the to question, guys just guys, matter? under non-core on and a concerning your it's it Just beneficial sure Embarcadero little decision to Embarcadero, want more more for it really to demand and XXXX

Victor Coleman

said is clearly, hottest are market who Well, let consistent me mean with it perceptibly we rents seeing concerning Alto continues from we're anybody I our tackle and your the first estate It's show conditions the nothing highest and question. building are. has in there. standpoint seeing we're that Palo the or or now our that all we market to have real activity else the owns the have think I rents. Valley clearly what And repositioned The there.

thought had for not a outskirts us would of that it, about sell. those on It maintain sell why So, assets conversation it of asset, or as marketing was Alto. those sort Alto is candidate great be us on there's there's a one always and no is, to that but its to hidden to Palo Palo it ability are for we've no hidden fortunately, Embarcadero we core portfolio. always we're secret of to our at Alto, secret and the The assets a assets. Palo

from got is I packages out. packages so transact would your we on what requests is I [indiscernible] our And telling mean in for we've to be is, XXX our what the vacancy I of think zone in terms of us, guidelines question, think able on. far - comfort pricing response well

It's we concerns Road Hill some with selling Sand the Hill what think no showing small. frankly, a Road. there. is we're This boutique Sand is that it's building. So, that on aspect I have attractive vacancy vacancy. Quite

we're to asset, think plain sell roll and sell a going little we I hit to going we small we have a of it. we're terms I mean, some that's and But it's simple. a such And won't there. numbers this at. do if in of don't, coming historic where bit

XX I days. So, on it's and out XXX that in worth again, that the I attracting think got first year. some has with next packages coming offers in high coming of think And Zoox calling out, owner/users, asset another quarter this or net for we're the so

Blaine Heck

know rate was given don't of there Okay, that? rate the did or sounds sale? on I a - good. Pinnacle cap cap are missed, that but of cap Any you range for targeting also, I rates if guys And then sort you

Victor Coleman

I'm So, disclose we obvious? we, not talk that no, on So, is asset. that, think. on rate you And we we this didn't of in if kind be cap on Mark? cap to right? the don't rate about a give then a rates cap that give of Pinnacle, of the call, pricing, terms Did answer going Wouldn't I kind

Mark Lammas

Well, in terms I impact don't far closed, the would you comment we have I not and feel I'm don't in things closed seen we guidance. - so that I affect know at somewhat historically or it would in Alex don't you've whether the mean, yet, it indirectly know. our or so... looking as until anything. sale on haven't it of things that of

Blaine Heck

into guys all a that with out investments about finding office the are guess there You little I probably CBS. talk can then talked bit back Victor And on side All fair. about right you the Alex, environment? any more coming opportunistic or in, little that's you capital bit in acquisition just can it. But I a general?

Alexander Vouvalides

actually, we've right fairly That's smaller We've project And that project a got I So Angeles yes, Francisco Seattle. project billion contract we're redevelopment We that We've looking Los in we we that number off-market. San a Blaine. have got at, that's be a mean, for value-add absolutely, shortly play. at. value-add we're a $X everybody another project. looking bigger under have I nice for while. been working CBS now, substantial-sized is announcing off-market a obviously a that that on in thinks asset mean, should also

So, share. we are finding fair our

to I'm closing we're a by we fair year, they I we'll not I share. our mean, in give sort tie up are a right? to get an the interesting come project, not as to fruition. time year-end. going think line to it when Even we time of of if were

maybe everything with a the of that will right it's the working on quarter smaller exception Seattle. executed, up first in - be So, now project we're

Blaine Heck

Thank guys. All right, great.

Operator

from proceed Instructions] Please Mizuho. with question. is Our next Anderson [Operator with Rich your question

Richard Anderson

Thank you.

on I the same-store, the explanation. So, Mark appreciate

to they is to now that X% a you it both range? is it add the don't for A about conservative that previous of so so you're it, is sustainable from XX% - while isn't roll guidance XX% do term. the more that's look occupancy adjusted it it. XX% way. other You want XX% the getting type that is or foreseeable to for need X% period, certain that get there a How upside, benefit expect something a and while? appreciate kind The from in to way number which Is XX% much until anything don't they're to that question to in and of to own high this this is lot just great. XX% year-ago markets it stabilized just or five lease Cisco the REITs owned years or assets shown should in so They we single-digit-type however in do period, of

Mark Lammas

I - certainly look. I Well, mean,

embedded on to focused which which is XX% the the right we're driver is where key XXXX, like high NOI XXXX. mark-to-market to they XXXX expirations. be XX%, to of mark-to-market I to is lot of XXXX XX% the around - stabilized in the you kind expirations, driver that mark-to-market. growth. still is If And the look And going XXXX, portfolio, is on going the blend more there's on primary the XXXX, mean, of be in teens. the

and you, so way. are cash by giving And - those the numbers I'm

years know. our cash year, look, I peer I It And from get possible. now, think any five us growth. terms sort from Could to seems in to group now, reasonable year-over-year? NOI expect So, XX% of projection. don't it's two outpace we But years I think beyond of one I

Richard Anderson

bit next more whole than mean, later? lease The you or idea maybe while I would bit of some early little good mentioned earlier color. of is don't you think expiring a - attack you I that's capture a leases rather little XX%, have early and a year, - this kind pursue lot sooner

Mark Lammas

of doing are with We conversations a we're an option that, in and And they do consistently tenants that expire there, to in We that. now Rich. mean, we have of larger course. right I'd XXXX. there's that, I from doing are say go couple that

Richard Anderson

guess thinking you Yes. more, than I been, I I but... have was guess

Mark Lammas

And by that example. advantage can last way, - opportunities always blend - is whatever the Not BofA, a extend. quarter. Oracle large looking for did an opportunity. we to mean, always take just with we're We'll I extend blend of and to there's and we them

Richard Anderson

Okay.

identify Properties Second XX%. going why information few want things Valley, They might subleased they see than they Investor I and up. different. mentioned you pre-leased XX%, any just have question a is different percentage you have And Slide - to have about I space on and Boston so yours. the if Silicon Day attended XXX, They they talked be of

just said recent or their see, you what because comment gap think I have what closed metrics know has there down. activity no they curious. maybe you don't some and see been just between you the that what you going I'm Has do are?

Victor Coleman

get XXX Slide I and either. listen. mean, Well, XXX, I I didn't didn't get Slide

speak So, numbers to include. what can can't do. ours you I I what their tell

approved. and that be projects going First of include all, delivered been to ours have construction active are

Palo of south everything include Ours Alto.

because not not R&D Ours our space. competitive it's include to do

Richard Anderson

Okay.

Victor Coleman

We owner/user basis. do that on include data

on us with that. confident that we're give experts the information that So,

what's And Alto In Santa City, mean those market. and terms out market Palo Foster I we is. the JLL as sublease what's that we go terms that Mateo coming of And I can where there market the markets. we are by in sublease, leased look the to at numbers and the again, Clara and by in in CB given experts San verifying and we and of see are

I So, don't know if...

Richard Anderson

I might under think be at have it feet. even just geographic. million lower They square construction X.X

X.X million feet. You square said

differentials something on So, see or had to it. like any getting... I be I might geography comment believe I you I'm it think if just wanted just that.

Victor Coleman

Yes. heavily and part not San landscape. Jose look San Don't don't. their Jose, North mean, I they we at of and forget, That's

Richard Anderson

fair Yes, enough.

Okay, thanks much. very

Operator

comments. for of the this call session. the gentlemen, we've like and question-and-answer end Ladies back the reached Victor At turn to point, I'd to Coleman final

Victor Coleman

to work exceptional for Thank Pacific making I'd what to and like their again, senior you team dedication the a so Hudson participating. much good And for Have today. day. it thank management is

Operator

This concludes conference. today's

time, we for disconnect your may your this lines You and thank you at participation.

Hudson Pacific Properties (HPP) 5 Nov 172017 Q3 Earnings call transcript