Hudson Pacific Properties (HPP) 4 Aug 212021 Q2 Earnings call transcript

Company Profile

Participants

Laura Campbell	executive
Victor Coleman	executive
Mark Lammas	executive
Harout Diramerian	executive
Craig Mailman	analyst
Emmanuel Korchman	analyst
Nicholas Yulico	analyst
Arthur Suazo	executive
Alexander Goldfarb	analyst
John Kim	analyst
Blaine Heck	analyst
James Feldman	analyst
Caitlin Burrows	analyst
Dave Rodgers	analyst
Daniel Ismail	analyst
Vikram Malhotra	analyst
Michael Bilerman	analyst

Call transcript

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Operator

Greetings, and welcome to the Hudson Pacific Properties, Inc.

Second Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce Laura Campbell, Executive Vice President of Investor Relations and Marketing. you. Thank

begin. may You

Laura Campbell

the Good Quarter and our XXXX were section next hudsonpacificproperties.com. An of X-K our and the operator. available Pacific press section week to call and of audio by replay website. website, Properties supplemental with available of an be on on Second Earnings filed also Both morning, for you, our are welcome phone on Investors everyone, Hudson webcast release SEC. Thank Call. this the will over the Investors Yesterday,

to During pandemic. this be discuss our in press non-GAAP results which statements based COVID-XX measures, including risks release filings, our with financial SEC the subject current forward-looking our making to GAAP associated and call, we our uncertainties in also will are These on reconciled discussed We'll those statements and supplemental. expectations. financial are

cause Actual normalize. certain changes no won't to forward-looking undertake from materially we once which we've events again which quarter, update. our statements, operations COVID-XX business business results this maintain prompted by once to these duty we differ Moreover, disclosure included

CFO. the that, will other call. to welcome Victor our Mark Lammas, joined Coleman, be With Victor? Q&A during our portion President; I'd of senior Harout Diramerian, Chairman management and by and our like CEO; They the

Victor Coleman

is to The and of record to more billions very essentially our And a flourish strong and Venture a recovered fundraising content. and that bit quarter, companies a employment levels, are for have Sunset Thank market produce moment. very had strategy hiring markets. in tech quarter levels. second media a financial continue I'll media executing everyone. industries call. to to The strong, and Welcome in in We've picture, on talk little Good of also We you, terms to pre-pandemic spending morning, growth Laura. had start big investment are our second at a IPO Studios. our about our results. XXXX tech the our busy quarter third backlog

seen office, that's momentum combined we've formalizing and in Growing mid-June Day, led months, and few in of vaccination a Vancouver last the we're of the optimistic the at reopenings statewide June Washington end return to in towards forthcoming real California with companies Over in begin going plans. after to rates, Labor continue. and implementing

regarding forward We at mode move any configurations potentially space, most this with least existing vaccine office major fall, We're with of few mandates. coupled space will needs. we're are our But or still a a expecting towards heading tenants. a reoccupancy in adjustment already variance, even larger seeing into wait-and-see companies partial of from

safety major Disney, scheduled our are tenants, that particularly an in with is to ABC, demand. or portfolio state-of-the-art to Angeles, Netflix, now have studio on resumed protocols production our of studio all here lots imminently demand Production in Amazon, place. are a and meet building given global overdrive HBO, shutdowns, content active pandemic-related where resume we Essentially, CBS, and Los

over announcements saw, I'm of platform. expansion very Studio our major of around made Sunset sure To that you last the X end, exciting many week we our

where like The in and Valley, XX headquartered many Netflix over are first, the Warner largest Sunset Glenoaks, purpose-built Media The project production the is from studio in will Los Angeles are years. minutes in be located. Burbank other and area companies NBC Sun Universal Disney,

Blackstone budgets XX-XX XXXX. finalizing and leasing plans management. venture stages square early investment another as for construction and with of year This point the joint fourth and feet, XXX,XXX our approximately on total X million start to third for property is $XXX could the to of quarter a we're complete development, in this project and million. adding quarter build as to a We're approximately going that $XXX We're of portfolio

second announced on into expansion U.K. which of The out Studio's Monday, we first U.S. mark the Sunset the transaction,

agenda. Something and long-standing often production services in productions, of long regional infrastructure to a tax generous is support has a global crews noted media and pool history our The a credits. U.K. was and talent, deep on of I've center. It

to early, well for GBP XXX million we London. We access with although total JV a facility investment Heathrow film dramatically for be day-to-day London highest quality build million. GBP over great This the undeveloped leasing in production as and our and up will it's has on Angeles. investment while studios to and of Blackstone. XX in Airport we're X and in to the talent. purpose-built XX-XX to public management stages the and site will miles as X site and remains and X the office over north Los minutes largest U.K. major about of We'll Further, Harpeture, small Central studios, here transit and last Borne for in houses, and investment the globally years, of XXX other entitlement reporting a responsible close around Box team X TV to manage The and from film. X property production the the U.K. local And development, be setting acres ultimately land, planning anticipate TV what purchased and provide site, crew of studios a a We're facilities supply the comprises team through purpose-built XX the grown to limited.

and support reimagining L.A. marketing Part of studio the or conversations Studio's at locations interest newest infrastructure can early, what's a it we're of lease facilities. these very high-tech and we U.K. have projects, Sunset best so We're exciting master flexibility through how facilities sustainable preliminary architectural lot multi-tenant either both is design, productions, far. so can be It's and with and the future to we still related about buildings operations. and companies major production positive or

innovation also throughout of to course, of NAIOP's prestigious of the business. Hudson and one It's meaningful NAIOP's aspect our was the the it's It's Finally, of a atypical our awards of congratulate a most want reflection industry's is especially winning Award. very leadership given team year. the which, company's and exceptional across Pacific Development based XXXX I recognition on highest every and honor on XXXX challenging mostly NAIOP's our performance Year

again, So Pacific very team. Hudson proud very, of the

it Mark. going With turn to over that, to I'm

Mark Lammas

you, Thank Victor.

Our from of rent Physical depending our collections currently for at strong due second and studio on portfolio today. XXX% remained deferred quarter at the to We've and XX% XXX% asset. office rents buildings XX%, occupancy for office ranges X% our collected overall properties. our

end, of our properties lower early end fall tenants an or communicating the summer At return. occupied largely by

into which occupancy second quarter especially the accelerate so Office has physical portfolio grew significant more absorption. the Valley, so strengthening inquiries in parking positive quarter markets, vacancy which and like the to quarter second leasing the in declining Silicon This compared and improved, markets As has translated some net of rents, terms tours. XX% and had in continues prior. to activity revenue, fundamentals our activity in our stable across

or XX% despite over deal deals quarter deals feet. average feet second our million X.X In leases, pipeline slightly these in compared LOIs XX% our is last of that stand proposals line long-term above to That's square X year-to-date, so far having with XXXX. our and square completed in up the year trends, at million

XX% deals feet average rent the XXX,XXX GAAP signed spreads. quarter, XX% in we with cash our again, once in and line of square end, that with To long-term

effective year-over-year. XX-month to net trailing weighted rents are Our up XX% close average

our X.X drivers Separately, X First, more and of per executing are are second, foot XX% There trailing to pandemic our lease and increase: years deals slightly, our up to increased due TIs primary from leases. are renewal about term term year-over-year rents this renewal X has mostly from down effective also also annual lows. extended and X%; square about and XX-month

of Area the in quarter preponderance the Pacific between along XX.X%. We the maintained our relatively Seattle and in Angeles. stabilized deals percentage and Los Bay Northwest, Vancouver this that activity with Valley, and the deal split a lease Our with is at the equally was Peninsula handful

Our lease April. quarter to due for Harlow, XX points delivered dipped leased. a which of is we in-service X percentage which company inclusion the Harlow, in XX% But basis this

XX risen to in-service points basis XX.X%. Our would percentage lease have

X.X% expiring rest about the We on with that over space. of of our XX% coverage have ABR the year

are remaining market. XXXX Our expirations about below XX%

we addressed XX%. half year, in backfilled expirations, or close the first to For of the we renewed

start office track first XXXX at and construction. next Touching to evaluate to close the late on One for Google market to fourth of further in potentially which our deliver we're year our quarter in quarter the the point, Westside have to to podium broader we'll tenant line also to time set finalize on Washington developments, We're and on a year conditions sooner. interest

turn to I'll now Harout. over the And call

Harout Diramerian

to share per $X.XX generated you, Mark. FFO, excluding a specified ago. year In share quarter, second items, diluted we diluted per compared the of $X.XX Thank

diluted or to Gower a supplemental million $X.X or and of of quarter prior share transaction-related of share items period onetime ago. $X transaction-related Sunset million to per Second year or per expenses related $X.X expense of share expenses consisted specified per million diluted $X.XX $X.X diluted $X compared tax

per expect half FFO reserves some and and beat of which was we primarily rents of the by receivables to operating against share. second on at in midpoint savings $X.XX the our cash the diluted our of to guidance expectations expenses, reversal of This incur own straight-line due year. the uncollected rent

quarter a our a XX on on properties GAAP X.X% X.X% basis, same-store office decreased Second consolidated increased NOI at basis. but cash

XX.X% cash XX% on Adjusting by a a properties, our basis studio studio the basis basis. property XX.X% cash XX.X% expense on onetime same-store GAAP X a for same-store tax and Gower, have our basis. at increased GAAP For would supplemental on properties NOI a for NOI Sunset increased on and

second XXXX matures in This we extensions, capacity, $XX average for our resulting July, funded remaining until has X X.X the secured costs pro funding acquisition in material of our the years. by but of on rata on with quarter, At loan is Blackstone In term the drew hand. with $XXX Hollywood million down had billion our portfolio. our million in maturities loan Media late JV, preparation our X-year of XXXX, no cash end QX loan on we undrawn and we $X.X U.K. revolver, liquidity

following $XX.X grow AFFO major the quarter, to by significant increasing Our XX% XXXX. by reflects FFO leases QX in trend AFFO million continued costs on off $X.X the declined impact free rent burn the occurred period. normalizing this to nearly cash of rent. This second compared Again, leasing while or of positive and same million commencements even for the

Now I'll turn guidance. to

excludes impact capital or financings our speculative acquisitions, As market always, activity. of unannounced dispositions, and guidance the

guidance, addition, makes degree evolving In of impacts potential year of including the Clearly, caution. be COVID-related pandemic and high we remind guidance our Delta and the the the surrounding projecting treated the like of remainder uncertainty will our variants difficult, everyone mandates. assume a to I'll with government

excluding the quarter million prior this, our related for companies guidance. referenced conjunction not $X.XX and As million our the supplemental are assume noted, parking of per on our in and many other specified $X.XX variable no specified income. in third third pre-COVID year and and expenses XXXX to guidance related needs. There Overall, items, to Specific expense are revenues of period full share in does the example, transaction-related increase filings. $X.XX diluted XXXX. return full the return both $X.XX said, requirements $X.X of material SEC items diluted and second property we of work occupancy providing and still That levels will in Because year full for XXXX range excluding per share we're a are specified in items $X.X to impact space quarter items assume determining guidance quarter respectively. tax to the not physical with

now turn And back turn the I'll call to Victor. -- I'll back

Victor Coleman

Harout. Thank you,

updating quarter. entire and As continued quarter, the this to and healthy Stay always, to we my specific for express work today. and thanks Hudson appreciation for next safe, listening forward appreciate want to look your exceptional in and every the to team We everyone, support. I you

with let's for open the that, questions. line Operator,

Operator

Our come the line first Mailman Markets. Instructions] KeyBanc [Operator of with questions from Capital Craig

Craig Mailman

the a maybe studios. Victor, on X-parter

separately, talk original ownership of need there put curious, Blackstone. about could partnership leverage make for that the these then you assets? versus on structure commitment versus that? you reason equity deal the may Is would Just your of the HPP in terms different little just stake these a with kind bit may -- of a to is the And the

Victor Coleman

talk latter, I'll let Yes. Craig. Mark about the

First you're Thank doing the of well. question. for all, I you hope

Blackstone that conditions Valley our project. and much structure we're working a we source terms to the it been the on based Sun listen, in that's asset, that on deals different structure they're deals pretty that of for in contributing based So upon this, way. that announced doing we capital the And doing are the standard Blackstone. Twilight here capital same why and that's U.S., The the and Glenoaks, are the that's we've of and as we're that our different are U.K. Sunset also on entities

no it. magic it's there's So around --

that we'll I these sourcing times see different off-market transactions. most uniformly, that think deals some that on depending we've at are variation of of been various them

talk maybe most have have initial your do either that JV the on -- U.S. the the of a partner they be structure is to an think capital additional partner So suffice what was capital the you the structure. to and that or working we're structure? about we're see I deal in alter say, want Twilight to going But going platform to to the Mark, would here

Mark Lammas

Yes.

can we're the depending start you we about land the in through about And a see of ownership, is much the asset-level the rest So a we'll expectation of up QX do Craig, it, of think terms end a gross basis, $XXX deal the put XX% we, deal. call ago, taken on -- a We XX% XXXX. on XX-XX how while is on out of close financing. finance it, going that, to ratable and had consolidated down but But in land. it's doing basis, the date Glenoaks we're pretty million

So X $XX like next for remaining years only the over spend is million. the total us

you that kind for gives that the So capital one. of structure

mentioned, On GBP I been think the already Park London land deal, Plaza million. down deal, has the Victor XXX taken the

The million like goes is to going and deal, financed Our on to out, Glenoaks piece XXXX. Similar it GBP of that gross us call XXX million. side. to spend we're GBP now is about the to XX% between thinking XX that that's remaining the XX% construction be

spend phasing of us, GBP remaining total X net for or XX over the about in financing million. so years So is

Craig Mailman

Okay. right. Yes.

huge not sum. So a

your X share kind on X the years. next to about So $XXX of million over

Okay?

Mark Lammas

Correct.

Craig Mailman

Sunset you us you sense give I studio recall the you -- returns don't And what between redev kind big but bought, mistaken, then maybe kind I'm just I kind a L.A.? the could U.K. are guys there and of studios, of have on a a doing third ground you bit done know guys little Is on up just but you targeting? of difference of

Victor Coleman

until of doing be well, unless only -- we're we I very prepared we're to the actual better them. the to seeing deal, we But here. haven't And preleasing indications No, returns these significantly deals U.K. But get what going had I'm mean, sort are not attractive. it's release into of deal done the wouldn't than interest. any numbers We've that yet.

Las Sunset our deal. to referring You're Palmas

it sound have We and built very, were good. initially very but there, better underwrote proven Harlow than not clearly, out we built they a have at. we returns, stage our

to also that announcement here looking And X% are most stages of new the assets than returns X% range. We in California at Glenoak's recent some other our on existing we development own. out are in those penciling

also so And they're attractive. very

Craig Mailman

ATM. stock of you undervalued the vocal The been just it's what and needed million and cash $XX you decision the the doesn't Then price, could. just think it's that behind you've it's if what I last It relative a think like to there? one, guys one worth decision guys worth, we seem

Mark Lammas

Yes.

share, issuance helpful a think XXXX $XX shy a and of that fraction under in a we was some of and $XXX the a more when time. just share. million and of the ATM, to touch the size, liquidity it about X.X level, at shares I shares only of provide used terms this that a million million In it's $XX X.X stock the it's considerably just recent it's XXXX, is at than lower over was bought context. back at that

the on shares a $X premium million X.X reissuance. of share So per

corporate we We're used the announced way ATM it We requirements. studio customary recently to always some these we've the in using cash on fund mentioned had spend transactions.

future balance a thought So given timely we sheet where continue we was a was requirements. and a one just of prudent liquidity recently. as for the it cash in of way management issuance, our to And of our stock sort measure maintain a view it to

Victor Coleman

we're doing big I issue numbers, we're to this, going lower issuance small today's at level, number. these especially transactions okay addition, at the but at large not In mean, or equity amount a like

Operator

questions come with Korchman from Citigroup. next Our Manny of the line

Emmanuel Korchman

out? And you those spent opportunities I fallen seeing. think side, have and both changed And value-add just haven't quarter, the studio that some talking last you're so wait progressing maybe office and Victor, Or to time about and yet, just opportunities are should closed something there? for those we has those happen?

Victor Coleman

No.

are those Majority We of are the pursuing studio off-market. the opportunities of several office on actively those and side.

working both studio it's somebody complicated. or I'm that the get bit they're them There are in say on a to them, marketed gets is just properties process. couple value-add. not and more right little but -- So continual whether we a position And a a now are we else of

transactions. taking deal, I mean, working do think is that it that. I something X Manny, But U.K. close X, we've like months longer on to or for deal been like this

taken come so but we've an an that just that for long to And long example to fruition. of And it's pursuing time a time. been a development it's something deal off-market was

Emmanuel Korchman

Harout And Or think go if light. would that to of deals? capital just same said about, those conversation, markets, Are then you tap something and the turning you that back land we sources equity especially he maybe should some more the even won't. dispositions though

Victor Coleman

the about approached a them. I in I on didn't remainder earmarked decisions Listen, on think portfolio on basis, nothing right basically of there's year. been of hear number assets. EV an for today. the think but large some say be the There's Well, currently no. a this not will it we Harout I you talked We've disposition that, And now

Operator

Yulico of questions next come line the with Nick Bank. from Scotia Our

Nicholas Yulico

quarter kind preview for year heading guidance we rate. year. How of just just heading the improve should of some think had a forward bottom? hit and a this at of this you absorption. think about future into we stabilized should volume and positive of net leased leasing maybe did and the point, rest terms whether your office next in think about even quarter, It rate you leased slightly kind has How your the So

Victor Coleman

vacates. Well, We about the X-plus comment. I just for sort it from year. mean some mean, last general of seen I comment percent remaining already a flattening. I'll this identified the have is your known talk only level. we've We've accurate

comfortable so And pretty think -- we're we're I that. with

not The trends, mean, about an know both jump Art we're and the seeing fact I bit talk towards leaning rate from going size that I standpoint, of we're a in? anybody obviously, Nick, we of to can of time. little was gone But in have to that mean, that at this a and the activity term up, sort jump want that. just on But you horizon vacate

Arthur Suazo

what true. which we it's that's of the always right, of leasing, to net Yes, or in always backfill been kind down -- over the increase over the those known have Nick, to comes the to from lease-up vacates. continuing days on XX it and year last as does some new holes pipeline, has certainly

there's with kind I lease chop number a peg see on And for in the we're a leases think the lot can't starting new new year. still the -- to so the expirations percentage, of pipeline. but I this of wood to on you

On side, see starting the we're good to backfill progress. some

Nicholas Yulico

question also now those does that think return very office, new there getting on I of guess, dynamic in the some some delayed follow-up little market where kind some how of out markets guess policies to a that provisions removed. leasing mass in change place. about you helpful. had you as of just bit a the is That's I getting Okay.

a on more I with tours, in of playing thoughts of that's terms out some et leasing the volume, basis Now mean on real-time just there's kind leasing how delay Delta. cetera? concern any

Victor Coleman

don't think in I it tours. Well, and volume us impacted terms of

line activity push decision-making seeing out and I which now, think to I the of September said, hasn't impact it well. space right well. trees just that do as as activity to I that some we've not days, coming and a making strong larger the decisions got attract users, in and we're years at that are moment-to-moment keeps of anticipated news vacates X is sort predominantly not And mix good have, going in fourth sight we've to right as date, third we down X, mean, some some think I all information XX the them now, the that in real the that XX, X quarter X larger day got of it's to pretty quarter in is least time thing. effectively going XX, on known portfolio the we've XX and move our road months and sort very from

be them dramatically. off And XX, we days, impacted shouldn't XX, so moves XX if it that

Operator

Sandler. of Our line come next with questions from the Goldfarb Alexander Piper

Alexander Goldfarb

questions, Victor. X So

guessing as guys is, market, north think not obviously an it movie question of additional sort run certainly you risk Because to as and the studio first probably U.K. side. U.K. on but do additional include? as about what it's The is in you great Sun Valley I'm the efficient

additional returns foreign the lack the overseas? you're looking for just risk the because So for to it's two, efficiency the And of FX and -- foreign both compensate risk. economy what are that

Victor Coleman

think, I the if mean a press this of facility. first about the and of world-class release like to around I opportunity this. be listen, And read that, is you we're super an sort all, excited going Well,

there and front-ended. mean, I Angeles. start-up a be, out to commitment do we're think sales go that be obviously, said, our be based which Alex, going going economies I since of team making That a costs and project, a will it's being personnel, And line likes are ground-up fairly so Los back-office of going with that's that, in office the then on is to to

it's or side economies in in the New think Angeles, whether opco Vancouver, it's here U.K., the some very from it. York I Los of in So see impressive whether in it's whether you'll

we of different have and and the and to the into U.S. than between of terms spend there's debt At in Vancouver aware side, early capital cognizant and the I the think pound around capital we're and U.S. get it's In we time, dollar. spread as of do no a lot deeper the the not this and between it's dollar capital what of be structure dollar, the Canadian that I'm at I equity, on discuss of that. it's this to evaluate conscious would only that to likes dollars. in we will to time, platform going be Haruna building make and a of and the that hedging just material effort this doing early are say come that be me assuming Mark deal our over we'll the we But the and shouldn't there. U.K., too would

So we're more. going to do continue to

Alexander Goldfarb

Okay. occupancy a Then from the in the question XX%, on was second actually is is quarter rate studios, the the domestic the quarter. which smidge down first

full, Just filming, given I have higher. there would ramp-up mean all I the been of thought would recently out the were productions, I have filming, toward, mean, lots this filming, in we're like occupancy

that just watched out you time to I every there. mean sort can I that it's everyone it rerun there. some there's any of mean is believe and So -- downtime hard has been watched

used believe being space to XX/X. studio isn't hard it's that So

versus we more at it occupancy So how something being do in look dip actual the in XXs? the

Victor Coleman

Yes. basis XX,XXX XXX dip Alex, it's sequential is XX,XXX just feet, point of feet. shy about that

out, their unrelated do the you across usage that X but They're really the office there's to XXX,XXX has feet associated stage use about nothing office As committed. stage all it is stage -- usage. high, use. with And to utilization point with are studios spread

people of people And working we call about, sit in it, XX% byproduct that's -- it's not utilized. direct COVID, a as really offices. today, And just

over of last a some X, footage X seen quarters square a the of giveback of that of we've So COVID. bit

the casting in the that want of people that back As start to back other occupancy its XX-plus to be up entertainment-related we to to expect to agents and location tenants get office, office. coming tick on But norm percent historical need we occupancy. the back

Alexander Goldfarb

are when to the studios you offices office. and write they script are that? -- to These these And small little the suites people book not that are this small little go whatever, where isn't the office like like sit do that say next or their whatever those with age you're other or Netflix tech

Victor Coleman

it's typically proximity media nonstage are are -- other in that Considering stage to they're nonmedia want that users companies media media-like users. that a be to companies

Operator

of questions with Capital come John the BMO next Our Kim from line Markets.

John Kim

more existing may also environment I if commentary be studio the you was on could demand it's whether targeting? your you competition, the price the point new position and plan to you pseudospace by type whether in the of wondering and provide it's how -- versus U.K. tenants for

Victor Coleman

looking demand a And John, of Listen, desire over surveyed levels and all the levels we've voracious. content new been long There question. one now. in been there the right a extremely are is demand U.K. Yes, utilization high for built facility is space. now built not players our every And very a in right the the and it's has of here the out like facility new new there time. great and there relationships, hasn't reached a

is an facility, the the probably literally to the world's succeed dramatic which basis. is Shepperton And it's but add-on most existing facility. The so we is recent, on are very confident best-in-class Pinewood going a that best purpose-built, to

get so are lease. those positive around sort has foothold And this the for reaction suit. in what that's we're of trying a to long-term our a and looking follow terms of very relationships And who to very, been

a that nice we're So be of percentage confident we'll capturing that demand.

John Kim

opportunities the other would plus in But far and core that those the focused? markets, York, Or how development alluded markets? more I opportunities as enter be New And potential as think entry to Toronto, you expect studios. other to Vancouver, is you some they

Victor Coleman

in markets looking John. opportunities we're opportunities the at I and think time. a multiple it's of core multiple combination development in at same markets, at looking We're both,

Operator

questions Wells of next line with from Blaine Our Fargo. come the Heck

Blaine Heck

growth step ultimately portfolio the has A Clearly, studio I on guys the side lot of of I focus And my before, back, on kind of questions through but think think the how you growing talked have about been the asked. share any studio been big get bit part update But a taking I Victor. to could guess of your a give for us we've the you business business. you of a things this of can think just NOI?

Victor Coleman

great a it's question. Blaine, listen, Well,

were now people darlings committed of growing being got area a capitalize think you've long of of You've how brand to the Blackstone. inception through Sunset business an and we're covered around I to growth one we on, negativity we with so where trying and our to the seen alternative estate. studio much sort our time, us that It's it on real the our can understand was game plan portfolio what from

see of The the that opportunities not uniform. product the and commitment And our portfolio in of development I in to office are over we'll detract that NOI office got attractive from maintain out time I you'll are hand type. coming that is and going business portfolio increase our the around think us we've in substantially growing believe hand. It's that and sort ground office, go and very us in

for are sort and you're what X:X, earnestly office working in it, ballpark, don't can underwriting But deals. a more are I If to is tell or know. studio X:X you, on than I deals right monitoring asking we is we of it me and now

I a very the And you spectacular. are on on now opco better debt. don't studio I have mean, There's pricing for just and studio know structure the demand a we right around it, industry around -- are side numbers businesses, saw business we that. listen, the is and high but I very, capital say structure that never seeing mean, now. -- the debt the to

so that. encouraging And partner. the to it's obviously, around coming a great educated becoming is we've got market And see that and

Blaine Heck

EMC and specifically rate lease the I commentary. bit but October, there's in side, you space? have guys back ask user? it's maybe formally or of interest space helpful splitting be and Art. know to yet for little you that there Mark occupancy a Dell will the up get on given demand large And whether Very that then just you Great. space, to think for single your to I whether a from any X going blocks box Or of you largest have be guys wanted early that more

Arthur Suazo

Sure. This the That's about the is floor floor piece. a question. feet XX,XXX great is Remember, square is Art. -- a

somewhere market, uptick It's tenants So feet over kind millennial X demand. the the almost the days, mostly XX and were way now. the taking year, in are interesting. interest plates million they of the if breaks over last that -- Seattle beginning We've it's square it large million interest out leads the from in X.X and of seen, in the with floor certainly

market seeing with which that and Square I specifically are think be in north XX%. the We opportunity, in will Pioneer of

feet Jackson that We've square activity that's market in the XXX, got just Pioneer really XXX and XX King, it, forth. XX XXX,XXX call -- alone, about so of and

activity with. And when the on. I mean over last in I So mean, just we've come seen XXX,XXX XX say I has don't days feet, negotiations over really tours, the

that and impressive space So it's we pretty feel good about actually. pretty space

about So we feel [indiscernible] that.

Operator

Jamie of of Bank Our come from next line America. the Feldman with questions

James Feldman

that's talk maybe maybe number? backfill you blocks. EMC, to to if bit more or but know get little to on changed? I about out moving that I you the year. tenants occupancy, staying And Great. potential you Mark, about could that a on largest just with the anything think change remaining XX% just there guess think, said or you think expirations any are I either tenants are in sticking coverage been Has for that the color Dell you talked

Mark Lammas

with beginning covered EMC. towards Art covered the small the the There's new expiration Other very only on remaining we've year deals the on absorption rate of Hill. the as we're balance about net expirations just and decent-sized than on right? really difference one line. of got that currently the top And McGraw really on for XX,XXX the call, about So Art that, of it's XX% feet pointed those getting that, really question there. talking backfill over then Dell footage, we're out

Art? anyway, So

Arthur Suazo

Yes.

is that So mark XX covered.

about kind year. full indicated of We over close also XX% we that on coverage the probably feet. we're the were year, pretty on million remarks, we to XX%, think you prepared X.X -- If full square

average really, balance this of again, feet. The which the square piece. X,XXX to X,XXX of are maybe remaining is So

there's so made. lot a be And still of to decisions

team There's is We retention, have deal get work at and hard through we're really trying converted days, it to of over the vacate to probably the last -- converted to tenants to XX line. those with, into close work to lot goal XXX going some a and get continue the over likely again. we to

James Feldman

think your then in they've about And also, moved net are what's Okay. And rents, the your mean, you thoughts mark-to-market? latest helpful. -- your on I market you That's would what at as effective say yet? all

Arthur Suazo

our the indicated as effective, mark-to-market in right remainder net up is it's the had our that On coupled for of because fact our rent, less chiefly really we of about very X%. of spending holding XX%. Well, remarks, on been in and XX%, remained steady, we're trailing we've the year, Mark rent, the of XX are base our the kind has because with mostly TIs, renewals.

new deals kind the right? We'll about it a is effective. basis, forward, reduced of markets lesser of tenant renewals we see start level effective non-view a we'll are will But carry good because of X/X assets below to on start of to you maybe situation. spend going competitive be feel net lot to in quality XX% our commodity super and like a on Our kind going X% space, net have probably into renewals are so these a about which very grow then improvements. day, where to see trophy you space, XX%, off

that So we're doing exceptionally well regard. in

Mark Lammas

us Yes. it's no affected of trailing focus these bit XXXX, effective X better I comparison surprising you back quarters how just skin higher. the mean, if by better a even trend on net XX-month do even I a the little to way at you the look all COVID on the -- the to, it's not is trends. most say, compared that. all of rents think It's than are matter basis, some Jamie, it, there's how little been been

level. translates over of have think translates trended. and improvement these numbers how both the it quarter I just lose And of there's almost that focus measurement, the effective And a rent on on tendency track at how trended any they the favorably level, through tenant to period through

it's the think we've mean, have that's I of all focus too, I maybe gotten much least, our basis, on just to up, a on doesn't And to don't us know, other through comment the that how per don't the gotten, as at I then it's percentage surprising think, how trend. translated is -- think share, AFFO would And I I that percent. tried thought AFFO hasn't to overlooked. XX-plus thing, as on that have we seems

James Feldman

cash flow point. where mean, to flow about trajectory, I capital like? work guess, some actually put that in in good going looks a coverage distribution you trajectory to now general? you was growth to distribution and do or ask starting the That's you're think cash studios, the I I

Arthur Suazo

Based soon, upon think distribution what to and revisit we point, within we've that quarters, I of seen, then amounts we and I it's trend the the think And a going are it's comments dividend is to that's previous AFFO months, this mean continue. pretty to and the XX consistent fairly with direction XX certain going at our on next kind headed.

James Feldman

lot markets. to mean finally, that the are of you Coast guess, West in across the do you submarkets. seeing I individual leasing about demand? And guess all I could Okay. is think then markets. translate seen you a Area, And raised to just We've Bay talk happen your I if going the maybe here? what into how capital tied

Mark Lammas

and about worked Yes. Well, it's And going back that I and an ultimately how tenant clearly fundraising VC decade, demand. between mean, correlated. on it's. a the into on We analysis correlation translates

are $XX Area. the in through But Bay of raised not drive if history than billion. how have tenant more closely continue Bay funds look end raised VC effect. XXX second at tracking. demand and throughout been just there's I'm that the there's So should sure But a you if quarter the lag fundraising funds they've people holds, Area, to the the closed

Bay an more had that prior into in raised entire context, XXXX, put than to $XX never And year. the Area to billion

and XXXX that likely pretty our into And and in about ultimately pretty then where it. talking to we're about maybe But trending years. And that's you just 'XX closed. deals were we're will 'XX, and not translate where fundraising record-breaking if in so up think fundraising end exceptional to today close but view --

And pace Bay so a is the fact, right record-breaking X,XXX Area on a record we're which at now pace. completed in in far,

all So of to in and VC think closed, are terms there to deals we demand. continue fundraising drive the ingredients tenant

James Feldman

you Silicon San may? think benefit Francisco do or that CBD Valley or the And

Mark Lammas

Both.

Operator

Our next Caitlin of line questions the Sachs. Burrows come with from Goldman

Caitlin Burrows

is quick maybe weighted been I the than past. lease the just shorter had it on like term. it's average It a X seems in

for this reasoning So wondering any other give your detail going outlook lengthening was could you if for and or kind it there of forward?

Mark Lammas

what of terms period you Yes. of since time depends been onset sort longer of definitely on it. It's trending the It been at trending the pandemic. have longer kind -- of look

XX basis, on back looking XX So trailing months, trailing weighted about the prior a X%. it's months it's up average up compared to

right it's So trending the in direction.

the a durations mean, I up could? Although if shortened Art, you you go have that, back mean, bit. I further than

Arthur Suazo

Yes. Yes.

renewal new there was over other just the -- months on -- right, skewed was you're If deals actually, X X is the really deals we have close up. X there because you But that XXX one you're looking to just were it been -- XXX number quarter-over-quarter, -- that -- were months, the looking over that you up, and kind Mark the look, plus, you of that of how made footage been the said. little trending quarter-over-quarter. -- just square years, were again, X as And we've deals the were then months XX if there numbers a that's on side, up X/X

Mark Lammas

this it the can or get term, I for exploration and the to in Yes, sector, to But reflects of degree less. done of will as a getting And somewhat think on elevated case XX renewals that trend that been in kind uncertainty are amount short-term are. for shorter are months expect their everyone obviously needs some people renewal tables long-term exploration say, kind tenants renewal we is of of work, than what generally in of a kind normal amount annual you of down. amount back higher has I the space that start would tables, there speaking, see just that

Caitlin Burrows

it. Got

could would I maybe on watch first was one be on again Blackstone. plans the current out something you expectations or mention pre-leasing congrats timing have to with what U.K., it's approvals permitting then that announced now in the your yet might for else and something maybe relevant? the milestone of wondering And project terms then just be or Okay. for the in that if for and between or them

Victor Coleman

between it's right be think somewhere Yes, you'll see, for and we've first hurdle going that. around aspects been to think I local several with process. in that months the approval XX last would some the from that months around you're And now, contact close see the major I

we're moving So the yes, we're in direction. and really excited right

Operator

from Our Dave line come has Baird. the with next of question Rodgers

Dave Rodgers

earlier a of start questions. you, Art, maybe with on to the some derivative

large a the have decent-sized pretty strong obviously, Peninsula side. got But talked pretty portfolio guys assets, tech on about plate smaller you've Valley. throughout tenants Silicon floor tenant leasing the You larger of demand in down from

specifically guess, shorter-term So just of Are can demand build from you the rollover? seeing? about portfolio? those specifically kind where the seeing tenants, seeing you're what I Is specific addressing you're that talk a part you that of of

Arthur Suazo

Yes. everywhere. driven portfolio across has would the to midsized just tenants, demand entire large kind say -- say by Dave, been of I the would Well, I

driving kind of last the early right I in right? With a exception large mixed said, tenants. small now in market, of of uptick and we've activity last Vancouver, But quarter, pipeline the which -- like tenant an translates which those into been it's Valley, over is bag, midsize are larger over Silicon deals seen the and the we Peninsula but right, small kind seeing deals, the

started of it with early pipeline. and tours kind so then inquiries And and

kind and you later into fruition the driving quarter But large it, to really said again, it the see in the and those we'll the come start it of -- mid started some of And with market. quarter. fourth so deals to

Dave Rodgers

maybe up then the studios a of when And then about explicit guideposts it. color. you Victor ago, maybe, are any and some lower rate development implied joint is levering around ventures? you using or do is, years cap leverage the were Victor, talk implicit to handful question changing were you office buying just that appreciate the of And question as you Mark, maybe I Yes. a

or asset. work? stand-alone a you Now you've that buying cap rate does making business? which I a a financing lower higher that weight maybe different got rate before guess, think office, implied toward And long a that way is how of your cap long how XX% a about

Victor Coleman

been And side, leverage development the the at done. we've on So past would I think I side. look leverage the conservative deals listen, development, we've looking on at very the

leverage been that out using and to develop the For taking on the ratio. leverage then most part, based and we've success

going that's I so do continue. that, think to And

so going forward side. could studio And the you on sort of that pattern same expect

lifespan. -- we've bring we're mentioned alternative got I making around We'll have You platform runway wait this before, obviously question and we And a in we've a investments you long that what a about. that see up Twilight is talked some that with it's and have X we the multiple Obviously, -- buckets, the as of capital around -- good this we've longer lot terms know the a and Blackstone in Blackstone of they contributing and to as structure our that's partner. we bucket the that structure platform.

down And the with flexibility not lost this at and look we valuation, to us so what's out, what it on the have execution. timing and best timing. paying around we size But do road it and we on is platform if roll

we be So part conversation continue our grow of as that this. to always will

Operator

Green Street. come with line questions Ismail Daniel next of from Our the

Daniel Ismail

just You today the seeing looking Washington starting last mentioned this attractive funds use office least the the of like was, you're I'm across a reviewing XXXX on it. development curious, quarter? on is more trends potentially or at say, ground based it portfolio, than later if year

Victor Coleman

little differently it look look at a I I than in office activity. Well, and the and the would asset Daniel, at demand development mean, would the this trends, I for

at determination whether the we'll are But the Washington activity XXXX, going and a so And today. time, we demand not we're the to making that announcements specifically for seeing ground. break we're make appropriate

Daniel Ismail

continue for the hunting to to development forward? you to going going the new space expect just side? Or Studio are the installment guys sites source we on footprint, Maybe be should your office -- across back

Victor Coleman

there's done that anything development attractive looked head. my I we've -- we know in and Northern development recently. of Seattle in and demand in I of California bid a top in just some and at we've nothing standpoint sites at terms Seattle are the in markets, particularly on don't And don't the high going that Vancouver the I from for looked of think office. off California we've markets. been I Southern adjacent that think our mean,

then other opportunities clearly the side. So markets Northwest portfolio-wide would and in on evaluate say Studio are Pacific the to on the the the the continue yes, side I things that office in we'll

Daniel Ismail

or And of between U.S., we for Studios X U.K. or say, U.K. side. anything there the the how studio revenue me the be revenue aware term development of and versus lease acquisition versus different in or the Great. splits structurally of? Is last variable in run fixed that terms should -- just on have anything

Victor Coleman

of here we're the No. Disney HBO are that ever -- try No. the in permeated leases recently parcel it short- what over we to longer-term I and same. that long-term with U.K. signing think most be into model part going marketplace. runs and that to and that attract of the and has leases, mean Netflix to will I changing do

to that we're permeate see So over happy there. from sort trend the of U.S.

the be same. will that hopeful we're So

Operator

Our from Stanley. line Vikram of Malhotra come next with questions the Morgan

Vikram Malhotra

congrats on more there office a or a specifically, is even getting combo of the just in a and certainly U.K. the potential U.K. Victor, room investment, good office in big studio investment, that have you step. recreate in studio just U.K. wondering, or U.K.? L.A. I'm the sort to the the plan

Victor Coleman

born. There's and -- is. attractiveness deal Yes. campus initial the I pure office for that's facility in just a studio we Box definitely but mean there are not of Studio, our demand

studio well. at component to looking that office opportunity with is a successful are another adjacent aligned combined We there that that, has component, as

very and I sort for that on, the campus style much focused is is high something very that. of think project that is that yes, So purpose-built demand we're

Vikram Malhotra

don't know And for getting Office? might and differently, zoning be if getting so both the you you'll potential in be the Studio -- initial but permitting zoning you works are, I

Victor Coleman

Correct.

Vikram Malhotra

in mentioned may potentially of just markets in of exploring. then I'm wondering the Okay. investments sort alternative the be terms alternative just U.S. you And that about

big look markets Any the the term? obviously in acquired near Austin. Sunbelt portfolio at you'd One over a peers any of of your just chance

Victor Coleman

at for typical That's spent looking us. not markets. time We

sort those think in the of portfolio. grow attractiveness to looking be are the We're still office to build media Coast we're trying the been to have the out akin And of studio world. West that I some but attractive, And at in trying to our in the markets think tech going office markets combined we're portfolio. and still Vancouver I of

plan And the so that's for much now. game pretty

Vikram Malhotra

on quickly, then maybe clarification the or just last, occupancy Harout a And Mark. Okay. for

the of looking leased can Is hit year-end With just sense EMC the you're there can of, Dell move provide terms what's in just to like give a out, goal, you you or us that range occupancy? us or occupancy? occupant a

Mark Lammas

don't the forth. the target would off what see I We release. provided leveraging an guidance of earlier press mean remaining we've part as of Victor can But sort occupancy information. you and include I of of just in Art so from in expirations coverage just say, on our comments terms and

expirations, it does pretty look that think year-end. speaking, stable like pretty expirations level tick be on relative lower tick and those I by at our Generally now. feels to activity But is right could now. a on we percentage maybe a it look us It stable higher, as lease a right through to we're

Vikram Malhotra

to you already clarify, coverage then terms mentioned have the And Okay. in Great. so, just of expirations. you

in to assume resurgence, it the fair is of of variant whether part period, periods, way to XX-month on delta XX-, a or renewal third the sort lease sort terms given sort leases, of new that good wondering, near-term about just leasing recent I'm term? that term So it's think quarter maybe is of lease the of

Mark Lammas

-- might it that if lease it. distorts continue I over you have it out Yes. look X could a last at mean big I mean, It basis, we stretch the on we you X X-quarter to it purely been really can vary. get quarters. as

So it's a dangerous. little

better we'd we've of compared say, at And quarters it's longer last to pre-pandemic out, stretch to think to as been over I at. out. the look wouldn't terms the trends. quarters, to getting -- kind continue but in pandemic to in think we'll I the next we I we And X X don't think pointed started where term than of levels I that get term

Operator

with Our of Citigroup. next the questions line come Korchman from Manny

Michael Bilerman

Victor, it how sort one of to a Can up side, just responsible of there given you just fast-growing things stuff a the talking Blackstone? partner walk And LA? I the appreciate of I in your call staying talk versus each on and the does So on of about allocating them. role answer about couple their U.K. XX% capital but how to history region, by you're recognize business, taking where different is and of that Bilerman. role in X% and the to your responsibilities on Michael the for it i.e., long-term the HPP to? through we XX% differs? I follow Studio It's spent are just they're and they differ and what Just presence wanted

Victor Coleman

a differentiation venture on to both manager, question ventures with with ventures Yes. our But our and in and business with of the Sunset Twilight date ownership. fair at our the the consistently developer It's very operations them our them given in our to the brand valid the marketing, the day-to-day throughout together. is leasing date, operator, U.K.

under the take our lesser or Sunset there as what Sunset is. That's projects the role it's operations said, around options it's be that But case. a other brand. whether being going and we as the Studio are That to evaluate may the long not Studio and brand

and will compensated well we getting that do role, are we so. continue so And for to

Michael Bilerman

the brand? you you of are And outright an ownership own share -- you the or brand do

Victor Coleman

No, we it. share

Michael Bilerman

different that Europe trying in I'm are and all is just like Europe all understand tax to structuring they then than the L.A. And in Okay. stuff? Like

Victor Coleman

No.

are exactly specific doing We doing for project. here there we're what this

Michael Bilerman

that consistent bought? the the to holding the stabilized of fund do everything stuff balance projects they in equity, to their in trying the is Are do how they the to of of do they the And equity these parts their understand of you equity example. larger different using to versus on development obviously just individual going the ownership they have you are Europe fund the they next then just sheet. to Are But firm Europe all BREIT platform. opportunity doing Are have deal? the I'm terms originally on? is using

Victor Coleman

say, that's get structure. into everything we I not To comfortable relationship what capital their I with the business, Listen, with we're date, to want Suffice doing We're currently sources they're is not and under don't Twilight equity using ours. Yes. the to have. consistent. because it's X. mean comfortable all

a else, working we're combination Twilight capital my either reporting. The it's dollars which going not tell of or other but to on something projects that's be to place are they're

Michael Bilerman

or guess sort buy-in or that another of I taking a in And any bringing modernization spinning their a more out different structures on cost or side, way public. you Does shareholders to by could your ownership aggregate? we're business. with from this inhibit a further money But partner any that you of or sale it it the off complicate or

Victor Coleman

know I both is answer sides. with No. it's you're structure with I throughout provisions where going out buy/sell that. The mean on very exercisable and no. a consistent

have so And changed not to those deal. and terms deal conditions from

for going portfolio owned to be asset just always by any the be consider like transaction And is so or be there we totality executed it the not of positive to XXX%. And ability going we'll asset, the versus we X Obviously, forward, another. going would negative that's to if case.

the rights So just that because the are different. percentages are mean different doesn't

Michael Bilerman

don't or found they on but Okay. I deals the that exclusive just each studio that sort exclusivity studio each what investments? side there you does partners on work? of know all effectively studio between land on you And if this then land, partner finds, Are is -- it how found

Victor Coleman

no, without look could we us, could a Sunset if the way. effectively brand they Well, we of chose complicated, not do not Sunset us. tranches. because I'm think use at it's it with easier the It's could I -- to different use not sort this brand, sorry, transaction to Under relatively but there's they but if Sunset the brand

own the control So though collectively. even we it brand, we

you be off that running that brand. of an we're that's what to think and So gives idea that going of I aspect,

deal but and deal I a if them they could I They of do a I we here, -- go fair without studio said, we think say we that approval. do deal them being brought I'm ourselves. it said, can't brought if to know our memory still That and it's we still no, going a think off can --

Operator

over questions to the no back are to any I call comments. turn for There further time. closing Coleman Victor like at would this

Victor Coleman

long and call next input, to quarter. forward everybody's having we today, over our appreciate next but went we and that look Sorry consideration I

Operator

today's That participation. teleconference. you. conclude Thank you does your Thank for

You a may this disconnect Have time. day. your lines at great

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