Earnings call transcript Q3 2022

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Operator

Good morning, and welcome to the Hudson Pacific Properties Third Quarter 2022 Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Laura Campbell, Executive Vice President of Investor Relations and Marketing. Please go ahead.

Laura Campbell

Good morning, everyone. us. joining for Thanks the Lammas, are and President; Leasing. EVP on and Art Coleman, Chairman; of Mark Harout call me Victor today CEO Suazo, With Diramerian, CFO; X-K earnings available now our website. supplemental Yesterday, both on release filed SEC, and our on we the with the are and An of will this be on for replay audio website. webcast our call available

used as and our is a on leasing, information Please reference outlook. nature. our this Some information of on will in forward-looking conditions financial non-GAAP we'll the of regarding earnings call. on reconciliation Today, share Victor and office will third provide discuss macro supplemental release and our Mark measures touch forward-looking results and Harout will as statements quarter highlights. on well the financial call detail for our

happy take Victor? be we'll questions. to your Thereafter,

Victor Coleman

of this Laura, to continue policy, you, work potential thank Pacific, our in effectively labor all hustle leveraging our today. monetary confluence and for fundamentals continuing leases hybrid and tight us a get every signed. in very the environment, navigating demand teams' we're joining and of to and Thanks, markets and proud impact efforts relationships our recession, of supply to expertise markets. day At Hudson everyone, macro dynamic persistent I'm

long-term to estate uncertainty. just is longer attempt finish companies it's get a though, face on week, and office are bring make One as Simply taking and the of decisions office to real touring over we offset to more that, days X paper. to a are employees seeing leases the tenants trading line in mid- considerable the finally level, positive X back to users acquiring,

historical our million for portfolio our this line XX% is strong cycle with year-to-date is in of square X.X levels positioned and our over activity year. over evidence leasing up challenging has last strategy year-to-date and feet optimally Our that

inspire beyond to ensure our employees. decade, the modern be, and technology campuses than turn, at what invested amenities, want define invested workspaces And partnered TIs initiatives. and well the the their Hudson employees they with create these to on-site ESG that workspace Pacific and substantial and upgrades, time that media latest more to the companies engage companies has a infrastructure above could For and tech office. We, in in and spend

testament a #X real ranked latter, XXXX companies XX estate GRESB the As assessment. to we recently just in of office

unique in We integrated demand platform sustainable a essential marketplace. the have vertically and modern portfolio to meet current a tenant

XX this range that and was and several of on of increase. for XX,XXX feet, new me highlights. let industries, feet once feet, including We square tech, and health and renewal to renewal midsize state for feet Bay square approximately large signed square saw quarter's California XX,XXX government. across Area square comprised as The XX,XXX square such of Amcor lease and leasing renewals of the a activity, deals, leases again X,XXX our including a representing XX% care tenants small driven touch of feet. for by This [ARS] Now Health new Technology some GAAP largely averaging activity over XXX,XXX rents cash

platform, Waggons a Quixote is our gear a last our as spend further leading our also a a as vehicles, and to lease production enhances our acquisitions with acquired to we provider, component the own on Sunset complement which ability stage to Studio Quixote build and opportunistic services third stage purchase the rights, well combination services robust lots. full-service and production strong in of off was of on capitalize as Star year. our premier Zio of In global We're quarter, its continue to staying conditions. market Quixote, to strategy terms production monitor we key studio

of month XX% XX%. closing, of now that be year, only segment contribution from would were back number With to we Studio approximately the start of comprises the that NOI If of our Quixote. the X our former with

on time we're JV XXX,XXX in deliver construction year. of deliver Glenoaks development, to foot XXX,XXX with of Studio, terms and X the quarter square In XX-XX budget building square we're Sunset Blackstone the next One, feet. which under third projects will in our X-stage totaling

our increase. Angeles first accommodate are XX the where same studio can in only and our supply-demand As purpose-built years, will fundamentals stages less the X% in favorable of benefit full, Los Glenoaks over we from current assets as than Hollywood

some major show-by-show as least We anticipate multistage, media a a of deal multiyear on leasing studio already Glenoaks model we company for follow a basis. more traditional have interest even stages will at from a

On Washington other doesn't construction XXXX. until deliver project, it the XXXX Seattle, in

ready continue which development are X.X properties. studio XX% pipeline, million to of foot office studio-related future approximately We or our square

So when right, is we the can construction. timing initiate

on subsequent no executed total X our and financing quarter, X to generating of During million with seller noncore X the the asset. And $XXX fourth buyers sales, of we proceeds we're in with asset separate conversations required.

dispositions, for to potential longer align location that based our portfolio potential. We continue is our that review growth with assets on strategy no and

the months this and again, have and bond over with past points flexible the and And XXX to as, well green with last XX million at quarter adequately Hollywood are offering sale to balance a debt demonstrated XXX third month, raised We stock respectively. maintain basis over Between of the preferred following of excellent green our we've liquidity ability million of the year, in access. committed XXXX bond fixed successful $XXX capital current navigate inside the XX% we our now sheet $XXX strong rates, markets. over the $XXX as offerings million we Time rates capital hedged. our or have the earlier

platform future macroeconomic to face I portfolio energized have assets to and a and headwinds, succeed, turn current and we're In we to a to will summary, our cash team, we now lease That as continue flow. a Mark. over drive

Mark Lammas

Victor. Thanks,

in quarter July. leased, in XX.X% points, XXX,XXX ended the portfolio climate. current Jose ended quarter San But known overall XX by down square driven macroeconomic speaks in-service assets of Our feet strength have Qualcomm the in Qualcomm, basis tenants our leased, at in-service Plaza which Skyport our even for to the portfolio at XX.X% North and vacate at the would leading

providing and XXXX which large million are on XX% around In X terms to stages are of and tenant which than through our Even small with collectively in pending activity our executing coverage like. tenants we upcoming activity on quarter, have remaining with continuing below subsequent to X% includes less of us we and to we various XX% would are XXXX and the our square velocity or on pipeline, so, expirations, leasing progressing midsize with third the deals all recent We XXXX. currently leasing reload during X include our expirations expirations feet coverage market.

is on our each XX.X% priorities touch leasing our me leased. of Angeles, In Los Let in-service in portfolio markets.

City sought-after highly office one lease backfilling Our the in and location for an sulfide this negotiations. focus the lease interested the NFL's and Englewood vacate square and to sub-X% stadium have in remains leases still and early year. of entirety tenants in has Culver main move December foot X other XXXXX-XXXXX in Culver at array we known their of complex XXX,XXX of in A City users vacancy NFL the backfilling expiration Washington following space,

Los our XX% Los expirations below of the have exceeding our coverage Angeles XXXX Angeles from of in no are tenant end market. with NFL, ABR. remaining XXXX we through on and total X.X% square expiring XXXX Apart XX% Collectively, feet XX,XXX in office

the Bay Moving on to Area.

portfolio leased. in-service Francisco San Our XX.X% is

an existing in portion Our remain space. already focus quarter vacate to primary XXX,XXX expiration to which in CPPIB. at backfill footage subtenants block collectively XX-XX known with own a a as their Market, is foot feet, of as XXX,XXX XXXX XX% translates a on third to blocks additional well square new negotiations coverage tenant in square that We're square XXXX, we backfilling with which JV

block, XX% expiring feet no our through coverage square total exceeding of from Francisco office have Apart we tenant San X.X% in XXXX XX,XXX with on ABR.

market. expirations, Francisco San block, XX including below and XX remaining are X% Our

combined Valley an plan Plaza, Qualcomm portfolio, a leased. is we the and feet quarter, in-service is amenities executing buildings. of quality moved where out asset, further Our to XX.X% are and and third [Guideport] approximately interior square Silicon finishes $XX.X capital known million in vacate excluding enhance both but XXX,XXX for exterior Peninsula Skyport

of potential about discussions early We XX% space. are former with in a Qualcomm's tenant for

market remaining only about Even advance. these and have XX% expirations, to square around XXXX predominantly -- X,XXX square that are mid-sized averaging coverage we on months coverage XX% small our feet at engage XXXX feet expirations, in of so, typically market square earnest rents. our of in remaining which below essentially and XXX,XXX are X are 'XX Regarding on feet XXX,XXX tenants X% XX XXXX about renewals expirations, on which

square XXX,XXX November no XXXX in in significant In year, X is the next leased. North, and which expiring Seattle, XX.X% in-service our foot in leased discussions Park are potentially Denny lease own XXX% We through expirations with are for assets to but at we Met Triangle a submarket, which early of very renew. portfolio

in-service Square percentage Pioneer due Xst to Dell to XX.X%, EMC's Our lease vacate largely year. this XXX earlier decision is

in Amazon, expiring XXX% X.X% with below feet are currently remaining ABR. XX% XXXX from we in XX,XXX exceeding in and asset. our negotiations on of have a XXXX about office are Seattle, XXX,XXX on Rents through total for including with tenant that Apart our foot a requirement We no market. expirations square on coverage 'XX Seattle Amazon, tenant

leased. vacancy is low where remains XX.X% at around our Vancouver, in X%, Lastly, in-service portfolio

X.X% XXXX of and feet 'XX coverage total office our XX% rents square below ABR have exceeding expirations with XX% We on market. our tenant remaining and no XXX,XXX of

With to call that, the I'll turn Harout. over

Harout Diramerian

ago. revenue to X% property $XXX.X Compared cash onetime for declining a our rather year known to have $XXX.X third reassessments, XXXX, million million. and X.X% than third vacate NOI XXXX our increased would Qualcomm to quarter quarter property certain $XXX.X But Mark. increased same-store year-over-year compared prior tax million period to year-over-year Thanks, XX.X%

transaction-related extinguishment third diluted by diluted reimbursement a a $X.XX million $X.XX $X.X year in a per million specified to expenses diluted items share transaction-related or of share of per third expenses tax or Specified per diluted $X.XX onetime and compared or ago. Our last quarter property per share $X.X million prior period cost $X.X debt consisted was excluding of diluted share or onetime and million items, a share, to $X.XX of per per $X.XX or million $X.X property per or offset of diluted diluted compared $X.XX onetime $X.XX million $X.X or of quarter expense $XX.X $XX.X share the share tax FFO, year. million

share, is $X.XX diluted to Year-to-date, million per last per higher X.X% our share AFFO diluted is $X.XX or $XXX.X compared year. which or

quarter dividend conservative, the payout our and reflect AFFO Our cash coming from and does not for and yet flow XX%, online respectively, XX% not year-to-date third Harlow. making extremely if it stable, were ratios One Westside as

unsecured balance had $XXX.X we to quarter, total the our $XXX.X reflects repay We on the sheet. from amounts of credit to on the capacity comprised third undrawn to proceeds of At our Amo facility. the and financing asset credit revolving cash million million execute cash facility. of million continue $XX $XXX of outstanding sales million equivalents, fortify sale and of on use end unrestricted Northview of of and of our This liquidity, Del

total Hollywood $XX million million $XXX Upon have our currently $XX.X and additional to Sunset $XXX.X payment proceeds of $XXX.X liquidity. One and of loan, undrawn undrawn credit loan construction million of capacity of under capacity. our Including sale million from in currently billion revolving of an Glenoaks facility access under October, have our total we $X.X the our we Westside construction million on of with XXXX capacity

XX% and or post-quarter quarter, of term of offering, of proceeds fixed our revolving and unsecured this adjusted net of bond as facility debt, a well Northview credit As a maturity related X.X of sales extensions. paydown Amo our cash the XX.X% our Del net from company cash facility billion, sale of hedged. the debt Again, fixed in weighted $XXX or repayments of including XXXX, and of share from average of of secured years, of with was equivalents credit our million is for green factors which hedged was our $X.X as end to

guidance. Now I'll turn to

always, guidance activity. acquisitions, excludes As markets and financings the our dispositions, announced and opportunistic capital not previously impact any of

excluded Specified diluted share, $X.X narrowing year XXXX our full of noncash items to million specified range items. XXXX in $X.XX million $X.XX expenses; as items trade impairment; to million excluding name are onetime consist year-to-date per guidance tax expense FFO. of $X.X property We transaction-related FFO a $XX.X our identified and

Now we'll to take be Operator? questions. happy your

Operator

Alexander Piper question Goldfarb line [Operator the Sandler. of comes first Instructions] The with from

Alexander Goldfarb

to go leasing just the stuff, Amazon I the on fun tech mobile especially before and into get news, some First, want to the the of just we back studios.

businesses assess much historically, As you you parallel guys how you found And see durable the of have those how that? the do earnings?

studios just as more in facilities for mobile Hollywood. those from those that earnings are the mobile the Hollywood, get are I'm on-site just Are the sense quality studios to durable? the in have a durable in you studios versus or of the trying

Victor Coleman

Listen, Victor. thanks Alex, the for it's -- I question. think

part, they're lot I say without the filming the revenue for think ancillary you you locations, equipment most they're Even one services, because the the that on it's would have or or whether on studios can't the XX% relationships we it's itself, location, other. location do our filming parallel and the XX% overall. mobile in on for and they're that studio studios, studios, using vice whether versa, of the in we type both have studios

backup So equipment line that bathrooms, actual in business inclusive is all with these of the we trailers of studio LNG, the probably general. facilities, and use, generators, that in

more day-to-day stages now The that versus only we the owned purchase commitments. lot are Quixote long-term XX difference the I a show-to-show with would add sound is

Alexander Goldfarb

they not companies coming a rents, moving Fran, Just leasing, out hiring, about for news that for TIs? they other real obviously, office renewal, moving as the pretty or had tenants cautious space, of expectations But overall, Coast West maybe your to encouraging. the shrinking? taking and to leasing headlines the tech are you're sense tech how just Amazon to to the trying of as the same trying San up the amount Peninsula obviously, competitors get as are space Okay. at Or what color to appreciate on the tenants now they're And And because, the for far market would compare one that getting backfill. markets? you been guys have you comments of maybe freezing relocating the today some then just are

Victor Coleman

question sort is Listen, your of mean I a wide very critically. don't vague open. that

Just -- there. there's lot a

high talk some and jump of sort aspects. in level on can me let Art So factual

it, and is maybe is. the what have off commented of Amazon of even back is Overall, time plan your reversing of exactly and paths their a is one see laying this understanding space and where tenants many slowness is which game tenants on tech giving that we people. pause,

And so seeing we're that.

I currently forward, see we're our they're effectively, end in. conversations but have, we we And an on think with I portfolio, they're North, they're Park are to 'XX let laying Met what us of going they're between go, to or out won't us know us months' we do. let's that. going June, X and not potentially in stay in going those to they know say, to optimistic May give specific and, impact or of conversations now as until don't telling And really what notice think terms whether

between So question. I calls to not know now we've know. going couple telling the are and then got they're know because ask us a going people to we're not going to of We're

making not in we're or general, deals of rents increasing being just That we're said, basis. on we're conversations a that any having seeing the TIs the material on or lowering

are supported to mean, the a I to you happen, that capital most Art, not say and standpoint, for jump rates but now, being that's rental TIs are deals not the or do talking Now part. it supported want being in? could we're about right happen from won't

Arthur Suazo

how a much It's deal in of condition on construction really function function a really the down from What so space right? we out is spend. And most we markets. what really and leverage a cost, of is figure perspective, not to It's TI. Yes. function it a space as comes need a to condition of the the

place and Again, we prebuilt We're because to minor in that's pretty of much program, construction space have with improvements. great go costs. a our ready DSD

bit free TIs pressure this environment rent. situated, well like pressure so and there And a I is on -- especially where little we're on of feel in

Operator

from question next Heck with comes of Blaine Wells the Fargo. line The

Blaine Heck

market. the leasing on of kind follow-up a Just

guys upcoming been transparent and recent You with move-outs expectations. Qualcomm, to really respect which Black, of has and been Nutanix setting very in helpful, NFL, think, have I

future. out? about at any in sure not be that past Amazon, quite this large there and Or out the tenants large I spoken you that, like kind likely point, Victor, past lower know about, role talked the you're feel singled are to kind you've to of just you of move the those but do additional is

Victor Coleman

out I I no you tell mean, to it's or particular think, Blaine, tenants we've or that listen, going we leave, you, in potentially they're Qualcomm to Art's NFL perceive I'll from the leave and after are laid as then months know and X them. And Amazon. is what be got next an about in gone listed on then one we Block/Square, that. And now. next wave that is update the

that's Uber. substance After until of and that, 'XX, we nothing have

So think and of really now. reality the is the on But the I us lot activity got tenants think we've the that mentioned. of our see out after signing see are the and and where we've in a I that ones where deals, possibility stable laid -- we've we pretty portfolio large right we vacancies

Blaine Heck

Victor, And helpful. a That's going couple with to then out Francisco all be Great. you, for second we're in San in of weeks. NAREIT

other issues And to while in to wanted of about talked Should kind return some to You've and social much CBD whether thoughts of safety just are and impacting see the the the think still markets your on the there. affecting past. expect I we crime decision we're and improvement you office? your to get the issues social

Victor Coleman

about we've Seattle, listen, marketplaces as as where in not more or more not Angeles. environment but as pretty specific the Los political myself, others maybe and Francisco a mean, in much been more as maybe than few San to is vocal, than I our others

we sea San was a Los Francisco. it's seen have that think little Angeles. be -- got We're change. to Next of San week there bit but hoping way it's Specific is a a I there change to for Francisco, in a big may week go, a long like

you mayor on where have them. going Monday event to loud are being this to the ours voices mayor we're on is and the to well, low and chat, the there our going one we're before the to NAREIT. a about fireside I come think encourage talk former of enough, as would I which specifically Monday,

think, not absolute with going think, as I messages are to do There reality that and I is I'm Blaine, but you stand progression. efficient. fast said, to hard shoebox beliefs, do out are is I there. that survive decisions in give my that political business there needs a and and those

in and to ago the surprised would caution flow been the X Francisco. not pleasantly and who've activity on those there weeks I I streets was the I the down Ferry Financial traffic, specifically ridership I of out of the But last building, Building. areas, think up District Monday, by both that. San was in completely in of a our is the people result do that as

progressive move been Now you likes San game south, a and cleaned back force. not towards the and see of of Mission South to to has that sketchiness there's will avenues there's will hopeful But tenants that, still and in you motive entice and come residents to other the plan, a Francisco, city up be up. and maybe that, as full continue I'm

Operator

next with The from Citi. Griffin comes Michael the of question line

Michael Griffin

tenants exposure And broadly, maybe in to sectors? continue nontech your demand about and seeing be expect average think do you a demand future? space. for . from away X,XXX smaller seems tech in to remarks prepared you're Is portfolio The mentioned you see taking I from more your trend maybe tenants this from a growing Mark, you that see the pivot the that other to of this quarter. kind

Mark Lammas

a in of it particular which to and Silicon look kind add we've the interesting largely will response, the did size And a average Valley, Lately, cater the -- to base, that Art higher made dive our in We Peninsula that to pipeline seeing. X,XXX midsized of actually trend I tenant with start which I'll at an feet tenant base. to market. came kind small Yes. portfolio been was the That is to deeper color. to square think feet, actually is relation some does tenant smaller and comment closer what than touch X,XXX the in like looks is watch.

sizing, the and where But -- you gives is that sense so coming from. of kind demand of a

more this a in making is, the up seeing seen, other a Art? tenant component for professional we've seen quite services: been a now firms, demand. a talking The while, in about would real we've Law a I slowdown activity bit of uptick thing we're say of and that we've even significant as tech

Arthur Suazo

professional in Yes, by that's uptick tech services. right. And Valley, driven completely said, with it's exactly Mark the as still the of

the this will Seattle, the So number -- for sector. in going done of deals professional to . X the has say, back I service taken have taken in lead time first quarters, really of kind relative of is terms

Michael Griffin

other sort you. Got compare was certainly are you color? curious turning the recent in Park originally color. bigger about transaction of Maybe execution market. I'm if additional curious when to kind of insights provide pricing on any How any helpful. the And I'm the can building, Trailer activity. marketed? Hollywood. deal there I at then did XXXX that versus the or trading assets block know some That's

you there provide anything would can So be helpful. .

Mark Lammas

Pricing heading softer Sure. into, bit initial kind of -- quarter this in than year. around say, expectations let's of the a was first our

give execution. Northview still what initial get either the to a economics building or of initial the but to the expectations, you close to, a Trailer of kind purposes handle think the than Hollywood Park you still refer points with you that lower can me let use, I bit on look in for came expectations, pleased a held up couple building, we're pretty modeling data of so like. kind

a basis, give so On buildings, me did three we let GAAP sell you that.

it So in your kind straight get you can model. of

a of X-X Amo GAAP sold X-X and half in basis, and NOI NOI at asset on cap. assets a year this negative. we If cap. had it a back actually it you the And cash rate came take came in cap Del X on basis, a at the

two cash. a in, NOI, half cap cash. You both came of X at -- interested they kind year are and think X I the top on a is essentially on and in of came in at which GAAP cap just people They other back gap each this take assets, the again, of

up I -- were about assets. being those they were cash cash the thinking sell, basis, for rate like X as was just rate cap indicated, of a we we in talking a And three cap we on when X assets, in our came at like X for X. kind indications Early three

really they're just final value. -- help different initial a in not softer a was, what our So little of much but touch from terms

Victor Coleman

just Yes, jump I'll in. and Michael,

know think underwriting transactions that X markets prepared buyer Park that the Trailer all-cash probably few is asking we there's at A buyers the a days say, weren't for at with the or us, getting the interest, where they bit are little of these XXX just you that for X we're in, went in I are on very lot to seller was, let's we initial But there. weakness of terms had clearly do the transactions XX few executed XXXX ago, deal. the we of wanted, so seller financing. and it solid financing, with sure some them and that or real a That's wanted

the where marketplace the right is obviously, the that perceive challenged in of be. values execution in stuff multi-tenant getting very see stuff people now, terms we The to

Operator

comes The of the question next Markets. John line BMO Capital with Kim from

John Kim

going expirations, addressing has an to leasing is occupancy slowed. about a have sorry, the changed wondering of to update think -- if . and your backfilling talked your you lot upcoming portfolio? You environment bottom economic in we're seeing I'm also recognizing some when has decision-making as and you but

Victor Coleman

through you deals. main I our think sure. big I of mean, can -- mean, listen, Yes, walk Art sort I

of is now. Francisco in backfill to San on a big that when Our we NFL. think I be and Seattle execute couple deals balance effective right the we're then going And occupancy working

other type I currently And building, don't moved few about, that we would Art, any hoped out lots building. specifics they with want after that? Qualcomm remarks to perceptive execute buildings get have we of for, in we're Mark's than of you we want just that other can activity, what have that hopeful to were do don't we're deals. that analysis talking into some August. But a give on the and prepared our the we activity have

Arthur Suazo

absolutely. Yes,

the we set NFL, in we that. obviously, backup which block are already that the two, square and next XXX,XXX deal everybody And have the that. leases XX% feet on up coverage confident one staring on behind next So the year. comes a feel is in about of that's then have We face pretty that, September in of

XXX,XXX and we're keep that negotiating there to about mean? X subtenancy deals We're square square that both going feet way. to Well, XX% What footprint does on XXX,XXX year And by collectively we're deal these subtenants, within coverage negotiating, we're to a effectively of that bringing going feet some new them keep the us currently. out. of number, of in net that a is

aggressively to And to so we we're in being get need as to market. do that deals activity closed and get

John Kim

on did that side. studio I Is what about up . And to basis the sequentially. XX that occupancy continue momentum points next going noticed pick over the couple of quarters?

Mark Lammas

the that the are we've result the some around background occupancy in component of studios use. mean, users use that giving space been Yes, office stage improved I of to it that. That's should. sort unrelated of

people the stage actual the business, So in users. not entertainment but

studios improve quarters. X COVID on the on that we a that or saw during we've of we indicated and since basis, we've bit pullback occupancy, a over X that seen the think measure trailing I XX-month And of a occupancy type last on

on -- so a basis, And expect XX-month you you're see trailing improve. to going should that to steadily

John Kim

you it the was if acquisition. Mexico. like looks Sticking acquisition discuss business, if really and . a New pricing to I the you Quixote made the was with in wondering small due could rationale studio it

Mark Lammas

business. is services related it to Well, production

occupancy nature has is. feet had what that media most footnote, the color a around to get of industrial read some of you of for try property this If It's companies, -- Warner. part recently XX,XXX we the historically office, kind part

very, and XX Netflix, transportation owned a away very busy other importantly, vehicles, X.X Waggons that serve in on and miles all both studio is sits of by the about the it But which media we more market. currently over surrounding parcel, a parcel, Albuquerque studio parked Star business vehicles, large which Albuquerque, and XX-acre is

even opportunity ability perhaps busy the a that lease road, us our so park had to trailers, service most to production services we maybe to that secure to this market. to there importantly, it's down give And But long-term very user. feet site an XX,XXX the

John Kim

what And was the price?

Mark Lammas

Well, when we buy $X we there's in giving was because it didn't cap rate it bought and it million. wasn't point no approximately . that a purpose, occupied but it for

Operator

of comes The line from next Rodgers question Dave with Baird. the

David Rodgers

opening talked in market I your think Quixote. you're about was being today. probably in on the acquisition and into comments, opportunistic had what your seeing with curious that you entry But Victor, acquisitions,

half took a is you in and then dovetail have it. And obviously, studios cut it maybe to that now tripled

sense where give opportunistic you of might with this at be going can that all? acquisition a kind here of us So comment

Victor Coleman

Yes. it, correlated the I we we that. mean, talked But XXX% the it you because was to really closed transaction. since listen, around acquisition hadn't it about Quixote correlated nailed

start on off side. the I'll

I are see know see, be of market, to pricing very come trade play. of markets, some some marketplace debt where deals seeing increase where the institutional our or As in that to we're marketplace. I just on whether off-site flow are the in given that I you're are interesting in cap near an the the rate the sell going quality people appetite into and they not to markets nowhere to assets going going to said, do think to into comes

on bids understanding, to so seeing don't is asset. that today, in I marketplace. currently that very side, potential that, curious from that's But first we'll rate studio and what after that it's to depth ground side. marketplace price there asset be where studio and on of a -- the a possibly is But lot that we're there's fairly one another to come is. the aggressive see the On asset see comes far, increase cap minimal

for did side, see us, or acquisition to I two services the they're be out. coming not but an in going do maybe

So Waggons Star the is and last out our I is valuation our there. nowhere [indiscernible] gives that snapshot think in year Quixote you the would what the on so it past. where support of plus, obviously and we've in what's is near sort flow deals of But that apparent purchases that of a seen

David Rodgers

color, the appreciate I Victor.

comps good coming those company? you market, On one your you're to are think going . in the the and to Or are studio asset maybe bidding asset, those just for the one be on? assets market

Victor Coleman

to bid One the market of marketplace, one in now. on, is that the we which assets the we is did . one to coming the be the are on bidding not going

David Rodgers

follow-up, Appreciate to that. a shifting just NFL. maybe over And then

maybe any You've like It closer is to Can about negotiating close the you here rate to get expiration? tenants a inking the talk for been about then and you're maybe talking as leases we while. . sounds those deal. those as two one downtime

Victor Coleman

it talked not second as We're time. it the viable Yes. deal Can't into like ago. we've 'XX in And it's rate. some transaction. with came get it backup. getting think a negotiations up don't We've rate long think behind leases in We're early too point. first a quarter, been at not that. we into going on we But complicated of -- quarter really I It's But and about occupancy. feel do be specifics of you deal this kind to for

Operator

The the comes Daniel line from Street. next question Green of with Ismail

Daniel Ismail

included being also that deal, going assuming back Great. is New Mexico deal to Blackstone in partnership? the the Maybe

Mark Lammas

Mark. is this Dan,

short the is no. to Before, answer that

own production production we business. services know, service -- sort is that this business, you of acquisition and part, supports this As the

own. it own we on our So

of have in question, it you which note the we're to add the Dan, do regarding if dividend the to going day anyway. realize you coverage, not back phone, take While we the but on your on other to we to I response wanted will, is some information, your opportunity

bit go math little we more math only to So kind of And let some around around if by. math just us give you give a your ran it. to our investors

for XXXX. -- had quarters have for dividend actual, who essentially those are is You at we note, quarter our That X only read X projected. XX% you the distribution year haven't

we relative more distributed XX% to to Off 'XX. NOI, be year expect of like actual -- essentially our

-- in took Now convention. out the even to relative probably to your point under of the you note that mean normalize your you're careful recurring and recurring. We difference XXXX TIs, LTE CapEx, your is normalization convention

against to 'XX putting not to what aside spend XX, under actual. convention mention your we to again, that's actually So expect XX. we even And get

some thing And it's these XX%, period to of all never But forward X-year did, over of in with the ran kind percentage forward, but amount spend our XX%. X- it just forward to relative distributed and convention dealing while this bigger to check of and that X too, X-year NOI, projections during peak using we're against period, period we exceeds that's NOI. terms X-year vacancies. the year at X-year other we forward, in is your the X-year The of

we any where XXXX get similar XX%. to never landed, So remotely close to

And again, on using your convention that's recurring CapEx.

that spending to go back So you're sector-wide think I recurring. the add we explanation. anyway, also we we've XXXX, think just convention the thought I on for If it's using what convention, NOI way I it's all a we're CapEx out know to recurring -- -- been actually that, important on closer I the round NOI. we to XX% worth, went to relative back would

higher convention, XXX historical been. your at, than or our we're under what points XXX has spend basis So say,

Daniel Ismail

I the nonetheless. have and take to differences functions appreciate happy I it more methodology. go But Okay. to offline look to my comments. in at the those We'll and comments, chat appreciate about back and

if the how financing. regarding comps just difficulty curious have the working was being in heard L.A., Maybe financing you Del assets more the is for market term. was there? Amo obtaining believe long just I lack anything of have been transaction second you the question deals. a included have pretty market. two in the I you assets mentioned bidders you of I going decent marketing else -- marketing quality attracting And believe on Downtown and Victor, We in assets. curious those out than that's any those I'm guys

Victor Coleman

that. some up exception of going that's portfolio the we're form I'm Daniel, not offers are We've got marketing. Obviously, on But They Yes, in all of terms with one that to include two the of seller it's financing. and XX%, assets to there limit. and them. get the into conditions the multiple

then on on They individual we're assets a pricing do. what to we'll have been play, people from decision and going bids both assets. Depending comes into where make

whole to them the the a there's asset get of is building fully X for for more But an more is interesting ability years. user one which for One leased buyers back.

So we'll keep you posted as things go forward.

the I industry and talked asset, his asset, for of we life a Mark it we just way, And The ago remarks, of quarters Skyway X Yes. sold mentioned prepared sort also and the -- couple fourth forgot, X science being attractiveness asset, has where that. we our the in of of been assets. as that by about prepared

market for We've we come intent, was buyers do as on The Our asset to cooled had said, well. back. that a three result, as got not that. that, it's and as potential

Daniel, So forward. we'll one, posted too, on keep that you going

to talk three in the future. there's about So

Operator

Morgan line comes Stanley. the question Kamdem next Ronald from with of Your

Sumit Sharma

for You Ronald. on Sumit have

wanted the up follow prepared Just to remarks. on

I a you XX% think that's tenant said you interested space. of had in the Qualcomm

of us if expecting are move -- you tenant forth? in, so to be remind that in Just downtime was what terms and would there

Victor Coleman

thanks. Listen,

As potential I a tenant. the user have a It's said, maybe ownership. look, we of

way back vacancy credit I that transparency we're the I I would put you large that other the projections amount too stuff and buildings we're a it's two some assets and in tremendous about. to versus and giving disclosure you, not of what those just have on we said underwrite us think give I'll to for that earlier. Of early that. go the talking

Sumit Sharma

your year you to Got year some are due take care it. follow-up a that. after of plans coming And -- the that? then next and have just on debt What

Mark Lammas

million line, I line. happened the we've focused likely that the almost use asset sales the probably that got would improve of we've available capacity. any on on mean, if Well, $XXX just been

XX and accommodate all can on the can due next very the little a year, year, the then the happen also on way got on So line. end of that's now at the a we in line, And XXX, can term, the the easily lot near between -- address January, if that we've the coming necessary. later the then. final again line. we'll in in XXX But

Harout Diramerian

the review markets. We capital always

look but private we all to help market, term market the So needs. bond us the we use address the line as the our market, our at placement financing always temporary holding . of period,

Victor Coleman

say, sheet mean, lot through comes nothing until had the balance we've what Mark to liquidity now right a I -- suffice us major got get 'XX. of due mentioned on But to after

Operator

line America. question next The Bonham] with of [Camille Bank comes the from of

Unidentified Analyst

are short. Following leases, questions. given were still many that to footprint. up occupiers lease are term hearing on been average office of your on we've I their their the earlier for the on understand And working noticed pretty hybrid looking impact trying in renewals flexibility that

Are you are you structures clauses expansion or for even change are put early breaks? whether are you or lease -- in there additional place contraction, in signing, being seeing able the any

Arthur Suazo

basis. a term We of Yes, sequential Camille, tick down true. this is Art. in Yes, it length had blended is a lease on

about there up look It X of our that's the take new really the probably from X us. has dragged was were -- trending trim XX months. at you that about X renewals. really dragged in QX really for to months. deals if renewals it There down, it average you months If average look, down the But bottomed been XXXX, where of length where out on

term We've somewhere steadily been XX months. on XX from increasing of -- again, our around from deals length months to

would the side And on think drag to so X quarterly it. average. just comfortable the we pretty deals the Directionally, it really I just down feel renewal -- about

Victor Coleman

some on just look of it's the of year, at add just at renewals, months X quarter, on influenced Yes. X could recently XX.X if the -- period Art's couple if on can If same months, at overly X% on, this analytics be a which look not of actually you just the you maybe to deals, full months for I just around completed the -- it's point the XX.X compared because X last by about up dead year.

So we're actually improvement. an seeing

that to even would if I add you contextualize want more to that.

look completed lease recently trailing XX-months a and most trailing look, XX-month say, while quarter pre-COVID. you if quarter at compare overall to, basis you at down, for basis, the this you If terms, on was sequential that particular a say,

they're of back XXXX lower than were quarter in essentially last like the pre-COVID. X.X% So line. We're XX months, going we

Unidentified Analyst

what us as rate was new I appreciate retention details for around view basis the you a all And this you do the what remind Can go-forward Okay. on the so leasing company? pipeline. quarter? far the the for normal

Arthur Suazo

Yes.

we've the So been -- last XX%, -- think, X we've retention. XX XX% on or the so quarters around last -- I certainly somewhere around been trending that

I be to pretty to going think we're close that.

Unidentified Analyst

this $XXX this XXXX? you were financing swaps talk What's quarter? exposure believe what costs through the thinking swaps the to side. have your about rate Can soon. floating obtained million And for hedging caps and you I you of the switching just off embedded to burning And

Arthur Suazo

Yes.

preexisted. supplemental we enumerated we caps that all did the and knock So of swaps the had in

it instruments incur in relates didn't we anything So to as hedging the quarter.

Harout Diramerian

think I Glenoaks quarter. maybe did loan the X.X% think, the and in happened, of construction happened when exception I which we the the with Center [indiscernible] the that was as financing But current instrument. Howard Bentall of of on

Mark Lammas

we're that's off, and swap, it had that to floating keep relates place Where we to We term offset continue place. bit rate opportunities year, exposure. -- in we look it a then this debt as in actually off ago. point. And we were little debt looks further a burns that later we at hedging we're when to how more then in at while swap than what to XXX that paid might to depending And monitoring a it's put rate floating able hedges have, going and that always on

Operator

Nick of Scotiabank. with next question comes The Yulico line the from

Nicholas Yulico

balance debt-to-EBITDA overall gone bit. question First thinking a is up has the on just about leverage, sheet

One get an also you I next factored You EBITDA have aren't EBITDA. also know issue of Westside. over where the move outs from some into the some year

maybe how you level would or address have the going and to should in over year? regards to manage more, next about asset say, we think the that sales whether a leverage let's something do sheet how your you balance are else But leverage contemplated

Harout Diramerian

the debt is of this net to month Sure. primarily address I because little elevated quarter, Quixote there's only just value. mean, a It X to EBITDA. adding

normalize it that, you a little. If comes down

correct, are like that One One the more significantly all the burn-off impactful one. rolling. you reflected that Westside -- you're said, off future is in tenants burn are is But But almost than the current tenants isn't the of of the Westside. the And expiring neither

obviously, continue. pretty feel perspective, And from leasing. to we to about focused on good So going going that's we're be that how

cash cash in the starting from forget, -- to And debt, sorry, addition quarter in Harlow, provided let's net any EBITDA current has in to not not that QX.

Victor Coleman

Yes.

that to I you X towards we those drops ran to end for the expect specifics One it, a But on like like of And kick a Quixote. Just next. for year bit indications a Nick, in cash is past X for Harlow, X it you adjustments We've would was could this. into around it given pro forma that do little basis. pro add -- Westside, materialize from we below as can look over likewise and what what see mean, more time quickly, rents in forma Last that the debt-to-EBITDA. this the

Nicholas Yulico

All right. That's helpful.

have I a The second question in is you on believe place. XXXX. don't loan construction Washington

Just you something your wanted hear there? to latest thoughts. Are to trying pursue

attractive terms from And uncertain and a design more we time, project a moving environment in realizing but of very that and into attractive also, then location at same leasing -- are standpoint. the

And forward wait pausing leasing right so just it trying a and going you to understand now or capital would preserve why with project less maybe that for that there's you're actually chance environment? still consider if confident uncertain a standpoint any in from construction to

Mark Lammas

capital leasing. address side, will or just then Victor question around the the address I'll Art and

got we're no only are probably being we've to we're -- Nick. out point. locked underway. close contract, guaranteed under fully -- cost topped capital, All of a terms costs this by got we in It's have We've costs, risk. -- In so on

only million to to There's left spend about complete that. $XXX go of

availability. of terms which tow, [indiscernible] be happy not there's going than in particularly tenant capital more -- obviously be we in have it's There's spend would to once So we spend to the with a commission, burdensome, and associated obviously.

availability. a burden So capital Nick, it really not, material our is on

Arthur Suazo

Yes.

right great location. square the XXX,XXX negotiations particular out it, XXX,XXX said large There's you to It's now to with in a all talking Nick We're asset. of We're also from mean handful feet. of in I X a them. market. fantastic So deals it's a in

large we yes, is trophy newer tenant the that attention. demand. all states the is the assets, feel And still So on garnering

feel So still about good it. we

time, as of one get We bit have little tenant hoping a not to behind next we're of this but the kind well.

Victor Coleman

asset. listen, It's turning stop in be to a There's Nick, flight be though, let's to We lastly, going you is going Yes. very building where believe we're And then quality there's back then this this now candid. construction be there's like not know, and -- no situation as not here. in completed.

specifically in the full we that to around we'll And and war that's a leased. is we a already activity, of ground XXX,XXX it rest have got means and to So square X footers. spend to deals, what do as Mark said, lot of of capital couple the go place, get do

Operator

Okusanya comes line question next The with of Credit the Suisse. Tayo from

Omotayo Okusanya

first the just Again, past, the like of some I of little First better. it it? was the was cap-type like that, that you done around that looks you right kind just September which was the to all, may [indiscernible] Quixote know look just annualize transaction. and we NOI I like the deal. understand guys kind if think way at when the deal in you the a announced, [X.X]. just why that the do be not it in XX But I analyzing don't in take provided of is at was a numbers business, if us -- help Could September bit thought XX seasonality there's it

Mark Lammas

you Yes. nailed I it. mean,

You got X month of results there.

existing month we off You when were guiding, But result. shakes full can't where of we'll account full of we takes gauge the And having we valuation this with a because business. business with into see business under 'XX structure, were have be more our it our ownership -- of year pretty on XXXX would ultimately where really other opportunities that out. combined it's this X focused of

multiple multiple. to we have are off closely on continue EBITDA. X.X X to business to it have paid we XXXX how this around million put $XXX achieving months to like the that is disclosure we confident of you see more the just to you'll front still to are an to that in monitor we of as And relative for And that

Omotayo Okusanya

just in may new think we I about -- think in all kind then slowdown regards to start Is question, forward do of when second lease? do about to potential landing all? how new, given around it. that that going start That's if how . a tech you demand, And again, kind something just the conversation mean, starts development big of we at

Victor Coleman

to in has would break have where and functions, that deals ground for be market in component. it the would mean one a to to pre-leasing currently we a led the position shift have I us multiple be forms obviously do various we of

But tenant pre-leasing the wherever obviously The up we it's changed the in quality air. looked in amount is the from of and past.

Operator

concludes to Coleman, like the question-and-answer Chairman back That turn conference our session. and to over Victor I CEO. would

Victor Coleman

forward and seeing we Thank you two you questions, participation the most of weeks. for so about look much at all the appreciate NAREIT to in and

Operator

Thank for your concludes the call. That conference you participation.

You may lines. disconnect now your

Hudson Pacific Properties (HPP) 3 Nov 222022 Q3 Earnings call transcript