Hudson Pacific Properties, Inc.

HPP

US4440971095

Commercial REITs

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05-20	Hudson Pacific Properties Keeps Quarterly Dividend at $0.05 a Share, Payable June 27 to Shareholders of Record June 17	MT
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Hudson Pacific Properties : Earnings Call Transcript | Fourth Quarter 2020

February 23, 2021 at 10:07 pm

CORPORATE PARTICIPANTS

Laura Campbell

Senior VP-Investor Relations & Marketing, Hudson Pacific Properties, Inc.

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Mark T. Lammas

President, Hudson Pacific Properties, Inc.

Harout Krikor Diramerian

Chief Financial Officer, Hudson Pacific Properties, Inc.

Arthur X. Suazo

Executive Vice President-Leasing, Hudson Pacific Properties, Inc.

................................................................................................................................................................................................................................

OTHER PARTICIPANTS

Nicholas Yulico

Analyst, Scotia Capital (USA), Inc.

James C. Feldman

Analyst, Bank of America Merrill Lynch

Blaine Heck

Analyst, Wells Fargo Securities LLC

Alexander Goldfarb

Analyst, Piper Sandler & Co.

Frank Lee

Analyst, BMO Capital Markets Corp.

Vikram Malhotra

Analyst, Morgan Stanley & Co. LLC

Omotayo Tejumade Okusanya

Analyst, Mizuho Securities USA LLC

David Bryan Rodgers

Analyst, Robert W. Baird & Co., Inc.

Michael Jason Bilerman

Analyst, Citigroup Global Markets, Inc.

Richard Anderson

Analyst, SMBC Nikko Securities America, Inc.

MANAGEMENT DISCUSSION SECTION

Operator: Greetings, and welcome to the Hudson Pacific Properties, Inc. Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Laura Campbell, Senior Vice President, Investor Relations and Marketing. Thank you. You may begin.

Laura Campbell

Senior Vice President - Investor Relations & Marketing, Hudson Pacific Properties, Inc.

Thank you, operator. Good morning, everyone. Welcome to Hudson Pacific Properties fourth quarter 2020 earnings call. Yesterday, our press release and supplemental were filed on an 8-K with the SEC. Both are available on the Investors section of our website, HudsonPacificProperties.com. An audio webcast of this call will also be available for replay by phone over the next week and on the Investors section of our website.

During this call, we will discuss non-GAAP financial measures, which are reconciled to our GAAP financial results in our press release and supplemental. We will also be making forward-looking statements based on our current expectations. These statements are subject to risks and uncertainties discussed in our SEC filings, including various ongoing developments regarding the COVID-19 pandemic. Actual events could cause our results to differ materially from these forward-looking statements, which we undertake no duty to update.

Moreover, today, we've added certain disclosures specifically in response to the SEC's direction on special disclosure of changes in our business prompted by COVID-19. We do not expect to maintain this level of disclosure when normal business operations resume.

With that, I'd like to welcome Victor Coleman, our Chairman and CEO; Mark Lammas, our President; Art Suazo, our EVP of Leasing; and Harout Diramerian, our CFO. Victor?

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Thank you, Laura. Hello, everyone, and welcome to Hudson Pacific's fourth quarter 2020 earnings call. 2020 certainly presented everyone with unprecedented challenges. And I remain extremely of the Hudson Pacific team and how we've navigated the pandemic to get to this point. To rollout the vaccine in the New Year gives us a line of sight on getting our tenants and employees safely back to their offices. And as you know we believe the vast majority of the companies, it's not a matter of if but when. We specialize in leasing workplace to the world's most creative and innovative businesses. Their success did not happen in a remote context. It happened because of the connections, culture, and facilities that gave them a competitive edge. Those environments designed to inspire and be infinitely better than your home office, attracted the best talent and fostered optimum creativity. I expect everyone still working from home can probably attest that hours of Zoom calls from your couch just doesn't do the same thing.

Hudson Pacific didn't slow down in 2020 and our accomplishments for the year were numerous. Even with many tenants on the sideline, we leased over 800,000 square feet with strong rent spreads 21.5% GAAP and 14.3% cash. We collected 98% of our rents during the three quarters of 2020 impacted by COVID, including 99% of office and 100% of studio rents showcasing the exceptional quality of our tenants.

Our portfolio remained open and fully operational as we swiftly implemented industry leading health and safety protocols. We completed Harlow and kept One Westside on time and on budget. In August we monetized the portion of our Hollywood studio and office properties generating $1.3 billion of proceeds which further fortified our balance sheet and liquidity position. We significantly expanded our Seattle and Denny Triangle footprint and our relationshipwith Amazon with the acquisition of 1918 Eighth capitalizing on the disconnect between public and private valuations we've repurchased over 3.5 million shares of our stock at an average price of $23. And we continue to set ourselves apart as an ESG leader in the real estate circles and beyond launching our proprietary Better Blueprint ad platform achieving 100% carbon neutral operations and earning ENERGY STAR Partner of the Year awards and the GRESB Green Star Awards among other things.

As we look to 2021, we're ideally positioned to capitalize on opportunities before us. Our markets are the center of gravity for media and technology industries, both of which accelerated as a result of the pandemic. Our balance sheet remains strong with no material in near-term maturities and ample liquidity and we also have excellent JV partners and we're actively evaluating a variety of opportunities both office and studio. We're tackling our 2021 expirations with good momentum and coverage to-date and our nearly 600,000 square foot fully One Westside leased project will deliver in Q1 next year. And our development pipeline contains some of the best sights and most exciting projects in our markets, a large portion of which are fully entitled and will be ready to break ground as conditions warrant.

In 2021, we'll take further action to ensure our cities and communities remain vibrant places to work, live and play be it through policy and advocacy, impact investing, philanthropy or other civic engagement. This will especially be important as we recover from this pandemic. Just last week, we pledged $20 million or five years to support innovative approaches to addressing the homelessness and housing affordability crisis in our markets. In Southern California especially there has been a lack of leadership from the business community on this issue and certainly not on par with what we've seen in the bay area. It's imperative that more LA based CEOs and companies become part of the solution.

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

Mark T. Lammas

President, Hudson Pacific Properties, Inc.

Thanks, Victor. Our rent recollections remain strong. In the fourth quarter, we collected 97% of total rents including 98% for office, 100% for studios and 51% for retail. To-date in January, we've collected 97% of total rents including 98% for office, 99% for studio, and 48% for retail.

Again, our high-quality office and studio tenants are continuing to perform. It's the store front retail tenants that are struggling as they await building repopulation. After nearly a full year of monitoring collections, we're seeing a clear trend that indicates our tenants have weathered the worst of the pandemic's challenges. In the second quarter of last year, we deferred rents for 60 tenants comprising 550,000 square feet. The following quarter, only 19 tenants occupying a 120,000-square feet needed a deferral.

By the fourth quarter the number had dropped to a mere 9 tenants and 82,000 square feet. As for the collection of deferred rents, while we're still early in the payback period for most tenants, we've already collected 54% of the 5.6 million of deferred rents. Nearly three quarters of which, we received in the fourth quarter. Again, this highlights the improving strength of even our most challenged tenants. On the development front, at One Westside side we've begun space planning with Google. The project remains on track to deliver in Q1 of next year which once fully online will generate nearly $43 million of annual consolidated cash NOI. Our future development pipeline comprises nearly 3.2 million square feet of which over a 1 million square feet is fully entitled. This includes our state-of-the-art 538,000 square foot Washington 1000 projects in Seattle's Denny Triangle which we've designed to be at the forefront of health and wellness and any COVID safety related considerations. It also includes approximately 480,000 square feet of net new development at Sunset Gower Studios. Obviously, ideally positioned to cater to growing demand from content producers.

We're perfecting designs and our entitlements for other unique sites and projects in Hollywood, West LA, the Vancouver CBD, and North San Jose too as Victor's mentioned, ensure we're ready to move forward with tenant interest.

And now I'll turn it over to Art.

Arthur X. Suazo

Executive Vice President - Leasing, Hudson Pacific Properties, Inc.

Thanks, Mark. In the fourth quarter, our stabilized and in-service portfolio held steady at 94.5% and 93.5% leased, respectively. We signed nearly 280,000 square feet of new and renewal leases. Our best quarter for 2020 in terms of volume at GAAP and cash rent spreads of 4.9% and 4.7% respectively. GAAP and cash rent spreads would have been 9.9% and 9.2% respectively but mostly for a 44,000 square foot renewal we completed with 24 Hour Fitness at Met Park North in Seattle.

And as Victor noted our GAAP and cash rent spreads for all of 2020 were 21.5% and 14.3% respectively which would have been even higher at 22.3% and 15.4% respectively but for short term deals.

Tenant interest tours and activity continued to accelerate in the New Year across all our markets. For example, we're seeing increased interest from larger tenants particularly in Los Angeles, we're now in discussions with multiple multi-floor users at Harlow. We also had a notable uptick in tours and proposals from smaller tenants in Redwood Shores and North San Jose.

Our deal pipeline that deals in leases, LOIs, or proposals increased quarter-over-quarter more than 30% to 1.1 million square feet and aligns with our availabilities across our markets. As of the end of Q4, we had 10.7% of our ABR expiring this year with a 13% mark-to-market. We have about 45% coverage on those expirations that is deals in leases, LOI or proposals. For expirations over 20,000 square feet, we have 65% coverage. Our two largest expirations by far are Google at 3400 Hillview in Palo Alto and Dell EMC at 505 First Street in Pioneer Square. Renewal discussions are underway and addressing these two leases alone will reduce our ABR exposure for 2021 to 7.6%. We also have nothing expiring of significance in either Los Angeles or San Francisco this year.

I'd like to reiterate that our lease economics have remained intact during the pandemic. Our average net effective rent for 2020 actually increased slightly year-over-year just over 1% to $46 per square foot. Comparing Q4 2020 to Q4 2019, our net effective rent was up 14% to $42 per square foot. One of the immediate impacts of COVID was shorter-term leases particularly for renewal deals. However, since Q2, we've seen a sequential uptick in lease term across the board. Our Q4 2020 new deals were on par with Q1 with an average of six-year term. For our Q4 2020 renewals, the average term was 3.8 years or up over 100% from Q2.

Now, I'll turn the call over to Harout.

Harout Krikor Diramerian

Chief Financial Officer, Hudson Pacific Properties, Inc.

Thanks, Art. In the fourth quarter, we generated FFO excluding specified items of $0.44 per diluted share compared to $0.55 per diluted share a year ago. Fourth quarter specified items in 2020 consisted of one-time tax reassessment management cost of $5.5 million, or $0.04 per diluted share, and one-time prior period net property tax savings of $700,000 or $0.00 per diluted share, compared to transaction related expenses of $200,000 or $0.00 per diluted share and one-time debt extinguishment costs of $600,000, or $0.00 per diluted share. The year-over-year decrease in our FFO resulted from the partial sale of our Hollywood Media portfolio, lower parking revenue due to COVID-19 impacted occupancy, reserves against uncollected rents and lower service and other revenue at our studios partly offset by gains from lease commencements at EPIC, Fourth & Traction, Foothill Research Park (sic) [Foothill Research Center] (00:12:41) and 1455 Market.

Fourth quarter 2020 FFO excluding specified items includes approximately $0.02 per diluted share of write-offs against uncollected cash rents and approximately $0.01 per diluted share of charges to revenue relate to reservesagainst straight-line rent receivables. This resulted in a total negative impact to fourth quarter 2020 FFO of approximately $0.03 per diluted share, some or all of which may be ultimately collected. Fourth quarter 2020 FFO also reflects $0.02 per diluted share decrease in parking revenue some or all of which will resume with tenant reintegration. Despite the pandemic, we continue to post relatively strong same-store NOI, cash NOI growth within our office portfolio. We have same-store office NOI growth of 4.2% in Q4 and 0.6% for the year. However, adjusting for prior period property tax expense our same-store office cash NOI would have been 5.7% for Q4 and 0.9% for the year.

Following our 1988 acquisition, as well as repurchasing another 900,000 shares of common stock in Q4. We have $1 billion in liquidity. We have no material maturities until 2023 save for the loan secured by our Hollywood Media portfolio which matures on Q3 2022 and has three one-year extension options.

Our average loan term is 5.8 years. In short as Victor said, we have ample capital to manage our properties, complete our development projects and pursue new opportunities. Once again, this quarter we've had a steady and meaningful AFFO growth. Specifically, AFFO increased by $11 million or 27% in Q4 2020 compared to Q4 2019. This occurred even while FFO declined by [ph] $20.6 million (00:14:40) for the same period due to temporary impacts of both our Hollywood Media JV and COVID-19. Similarly, our year-over-year 2020 AFFO increased $55.9 million or 40% despite a $32 million decrease in FFO for the same period largely due to our JV and COVID-19.

In both cases, this positive AFFO trend reflects the significant impact of normalizing leasing costs and cash rent commencements on major leases following the burn-off of free rent. We're providing guidance for Q1 2021 FFO of $0.45 to $0.47 per diluted share excluding specified items. At the midpoint, this is $0.02 per diluted share higher than our Q4 2020 per diluted share excluding specified items. The increase is primarily driven by the following Q1 2021 compared to Q4 2020 items. We expect our office GAAP NOI to increase approximately 5.5% excluding the $1.6 million one-time prior period property tax expense that occurred in Q4 2020. The 5.5% increase is primarily due to our acquisition of 1918 Eighth.

We expect studio GAAP NOI to increase approximately 7.5% excluding the $2.2 million one-time prior period property tax savings that occurred in Q4 2020. This 7.5% increase is primarily due to heightened production activity. We expect our G&A to decrease approximately 1% excluding the $5.5 million one-time tax reassessment management cost that occurred in Q4 2020. We expect interest expense to increase 2.8% as a result of our loan secured by 1918 Eighth which commenced mid-December 2020.

Finally, we expect our FFO attributable to non-controlling interests to increase approximately 23% again as a result of acquisition of 1918 Eighth. Our $0.46 per share of Q1 2021 guidance midpoint and the underlying components just outlined provide a helpful reference for forecasting our current full year expectations. More specifically, we're expecting both Q1 2021 office and studio GAAP NOI to remain consistent throughout the balance of the year.

We are, however, anticipating some improvement in a few key components, a full year 2020 FFO compared to Q1 2020 guidance annualized as follows. G&A is expected to be $2.5 million lower and interest expense is expected to be $3.6 million lower.

And now I'll turn it back to Victor.

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Thanks, Harout, Art, Mark, and Laura. To close at Hudson Pacific, we've always operated a premier your portfolio and through the years we've strategically invested in unique and highly accretive growth opportunities be it through development, redevelopment or repositioning. And in doing so, we've ensured we own the best assets and attract the best tenants in prime West Coast tech and media hubs. There is no doubt that we have political hurdles to overcome in both California and in Washington. But the West Coast professional networks and talent clusters were built over many decades and thus are difficult if not if not impossible to replicate.

We like our peers will be fully engaged and committed to ensuring our markets continue to thrive that they are favorable for both businesses and residents alike. And once again I want to express my sincere appreciation to the fantastic Hudson Pacific team for all their work and dedication this year. And thanks to everyone for listening today and we appreciate your continued support. Stay healthy and safe. And we look forward to updating you next quarter. And operator, with that, let's open the line for questions.

QUESTION AND ANSWER SECTION

Operator: Thank you. Ladies and gentlemen at this time we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Nick Yulico with Scotiabank. Please proceed with your question.

Nicholas Yulico

Analyst, Scotiabank

Thanks. Hello, everyone. So, I guess just first off in terms of the full year you talked about, first it sounds like fourth - first quarter is a good kind of run rate to think about for the year. Maybe you can just give us a feeling for how you guys are thinking about you know occupancy and you know in terms of releasing on the lease expirations for the year, how we should think about kind of occupancy trending for the year?

Arthur X. Suazo

Executive Vice President-Leasing, Hudson Pacific Properties, Inc.

Hi, Nick. It's Art. Yeah so, I mean as I said in my prepared remarks that we've got. So, we start the year with $1.5 million worth of expirations. It's encouraging early in the quarter already we've got 45% coverage on those expiring tenants. The two largest obviously Google, 207,000 square feet in Palo Alto and Dell EMC, 185,000 square feet in Seattle. We're well in front of them, we're down the road with those tenants. I think if you look at our uptick in pipeline activity just from the beginning of the year, we probably pushed that 45% number closer to 50% of coverage early. And we're still having conversations. I think we're early. Tenants are starting to experience kind of a renewed confidence as they look beyond the vaccine and schools opening. And I think that's exactly why the numbers are increasing quarter-over-quarter.

Mark T. Lammas

President, Hudson Pacific Properties, Inc.

And Nick, just on your initial question, as we completed budgets right towards the end of the year and kind of looked ahead to where they pointed on a lease percentage by year-end, it looks to us like we should be able to maintain our lease percentage. As we ended the year, we should be able to maintain that throughout the year. So, we don't expect to see any deterioration in that number.

Nicholas Yulico

Analyst, Scotiabank

Okay, great. Thanks. So, it sounds like you guys feel pretty optimistic about getting the lease expirations renewed with Google in Palo Alto and Dell in Pioneer Square, is that fair?

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

I'd say this Nick. It's Victor. How are you? I'd say that we feel very good about our lease expiration timeline that's coming due in 2021. And of the big two, we are in leases on one right now. And the other one we're negotiating back and forth on paper. So, we feel pretty good about it.

Nicholas Yulico

Analyst, Scotiabank

Okay. Appreciate that. Thanks, Victor. I guess just one other follow-up is as we think about the expirations this year. You do have some more waiting in Silicon Valley which now is some of this is smaller tenant market. Thinking about that portfolio where you've got. You've had I think a little bit more tenant churn over the past couple of years some of that's planned because you're repositioning assets. How should we kind of think about some of the smaller tenant leasing trends right now that you're seeing in your portfolio?

Arthur X. Suazo

Executive Vice President-Leasing, Hudson Pacific Properties, Inc.

Sure, Nick. Absolutely. I think you hit it on the nose in Silicon Valley and on the Peninsula, it's a smaller tenant market. The churn that you're referring to was larger tenants that had either rolled out or downsized and you know obviously takes time to kind of release it with smaller tenants. We're going to continue to successfully deploy our VSP program which has been super successful for us not only in those markets but across our portfolio. And with the uptick in tenant - small tenant activity we sure going to be poised to capture that activity.

Nicholas Yulico

Analyst, Scotiabank

All right. Thanks, Art. Thanks, everyone.

Arthur X. Suazo

Executive Vice President-Leasing, Hudson Pacific Properties, Inc.

Thanks, Nick.

Operator: Our next question comes from the line of Jamie Feldman with Bank of America. Please proceed with your question.

James C. Feldman

Analyst, Bank of America Merrill Lynch

Great. Thank you. I guess can you guys talk about what you're seeing in terms of space usage any changes I can see you're working on the Google and Dell leases or anything else large are they kind of rethinking how they want to use this space?

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Sure. So hey, Jamie, listen, right now because the preponderance of our tenants are not back but now, they are preparing to go back and we see the light not just because of the vaccinations but the activity in the schools coming back and all the positive news that you know we're not out of the woods, but we're seeing it. You know people are looking at the existing utilization and to-date you know when we've been saying this all way through you know the reason, we're collecting at 97%, people are not giving backspace. I mean they're looking for the next gen office space going forward. And there's a number of factors that run around between safety and protocol, you know obviously the opportunity to reimagine the future space connectivity with personnel, climate change, all the protocols that they've been working through the last multiple months are being enacted. But I think you knowthe back-ended answer to what your question is, is that we're not seen in our instances with the tenants that we're talking to right now, tenants coming back and saying we're giving up space. With the exception of one large tenant in our portfolio who said you know we may end up restructuring and giving back space. But I mean the numbers are well in our favor of tenants that are keeping the existing foot - footprints. Art?

Arthur X. Suazo

Executive Vice President-Leasing, Hudson Pacific Properties, Inc.

Yeah, to put a finer point on it, Victor, you know what we're reading, what we're all reading, we're all reading the same things, and what we are hearing and granted its kind of a smaller subset of that is some of the tenants are still building for maximum density. I mean, they need to for sure, they need to solve in the short-term but their plans on I would say larger block of space or for you know kind of pre-COVID densities, if that's an indication for you.

James C. Feldman

Analyst, Bank of America Merrill Lynch

Okay. So even if they're keeping that same footprint, are you seeing a different type of usage like less, less desks more collect, more meeting space or you can't really even see that yet?

Arthur X. Suazo

Executive Vice President-Leasing, Hudson Pacific Properties, Inc.

It's hard for us to sort of see through that right now. As they said, we're still running it. I think we - maybe occupancy, physical occupancy in the assets are now in the low 20s. So, it's too hard to see. And the bigger guys are not back yet. They're getting ready to come back over you know several months all the way through the fall. But you know we're not - we don't have a clear line on that yet.

James C. Feldman

Analyst, Bank of America Merrill Lynch

Okay. And then, Art, you talked about a pickup in LA, smaller tenants in Redwood Shores in North San Jose. What - can you talk about what's driving that? Is it you know we've seen a lot of capital raise in the Bay Area? Is that a big part of it? And then how do you think about CBD San Francisco, it seems like the sublease space seems to still be on the rise there?

Arthur X. Suazo

Executive Vice President-Leasing, Hudson Pacific Properties, Inc.

Yeah. So, in LA it's chiefly in Hollywood I'll say. It really kind of larger 10 deals and we're obviously it's bolstering our efforts at Harlow. In Silicon Valley and the Peninsula, it is small tenant activity. I think it's renewed confidence. I think some of these tenants are kind of got to the end of the year. They're starting to see the light at the end of the tunnel. And they were on the sidelines. We've talked about you know kind of the decrease in tenants in the market. Well, a lot of those tenants were on the sidelines. And I think those tenants you're starting to see the front end of those tenants come back and start to kick the tires again and re-engage. And in San Francisco, they - believe it or not you know there's been about a 20% uptick in activity in San Francisco. We don't have - as you know we don't have any exposure. We're 98% leased. We've got maybe 50,000 square feet expiring this year. So, we're in really good shape. But it's refreshing to see that some of those tenants have come back in the sidelines in San Francisco. The sublease space as you know, we've seen a deceleration right in the sublease space is being put on the market and you know obviously we feel confident about the direction it's going.

James C. Feldman

Analyst, Bank of America Merrill Lynch

So, would you say CBD San Francisco seeing a similar pick up to these submarkets or not necessarily?

Arthur X. Suazo

Executive Vice President-Leasing, Hudson Pacific Properties, Inc.

In activity?

James C. Feldman

Analyst, Bank of America Merrill Lynch

Yeah.

Arthur X. Suazo

Executive Vice President-Leasing, Hudson Pacific Properties, Inc.

Yeah. Yeah. No. So like I said we've specifically seen their tenants in the market, it dropped to 2.8 million square feet off of 6 million feet. We're back over 3.5 million feet. So, yeah, we're starting to see some of those tenants reengaged.

James C. Feldman

Analyst, Bank of America Merrill Lynch

Okay. All right. Thank you.

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Thanks, Jamie.

Operator: Our next question comes from the line of Blaine Heck with Wells Fargo. Please proceed with your question.

Blaine Heck

Analyst, Wells Fargo Securities LLC

Thanks. Good morning up there. So, in terms of future development projects, you guys have been able to build to some pretty solid yield - yields over the last few years and you've added to your land bank. So, I guess can you talk about that shadow pipeline, I'm guessing you'd be more willing to build something with a studio component rather than traditional office at this point? But what do you think could be the next developments or when could that happen and what level of pre-lease if any would you need to start something in this environment?

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Yeah. Well, Blaine, listen I think you know given our pipeline right now, I think it would be the bolt-ins of our market. So, in Vancouver at Bentall Centre, we're evaluating 0.5 million feet. The demand in that marketplace seems to still be as consistent as it was pre-COVID. And so, we're looking through a design right now and deciding is the opportune time in pre-leasing. We've got some activity with some larger tenants that are currently in the marketplace and expanding the marketplace. We have Washington 1000, that is a planned fully entitled build for 2023 for us to start. We could start earlier if we wanted to, maybe as early as end of 2022. I do think thatthat's going to be based upon a pre-leasing component. We have not seen the two or three candidates that came to us initially, have been on the sidelines during this timeframe. But I think our team is fairly confident that that for us to break ground there, we will have a level of pre-leasing, as to the percentage amount not really sure. Then you come down to Los Angeles and we are in the final stages of our Sunset Gower development which would be two - two development opportunities about 0.5 million square feet. Wherein we are a year away from being fully ready to break ground there. And that would also depend on some prelease component and that's going to be a combination of office and studios. And the activity there has been fairly stable with our existing tenants and new tenants in the marketplace that want to expand.

Blaine Heck

Analyst, Wells Fargo Securities LLC

Great. Thanks. That's helpful. And just to circle back on your Washington 1000 asset, if my recollection is correct, I think that project is somewhat tied to what goes on with the convention center expansion there which seems to be delayed and over budget. Can you just comment on what effect if any that has under plans there?

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Yeah. I mean listen, it is slightly delayed, and the budgetary aspects are not our issue but when it's delivered, we'll be compelled to do at least initially complete the podium through the retail component there, which is part and parcel of our commitment. After that, we will have a timeline that can extend a little longer than our anticipated timeline to build the tower. And so, we're not concerned about the state of Washington completing it and candidly it actually works in our benefit. If the timeline works then we have preleasing component done, we can hold off on us breaking ground until they're completed.

Blaine Heck

Analyst, Wells Fargo Securities LLC

Great. That's helpful. Last for me, in terms of studio acquisitions obviously interest in the property type has increased recently and there have been a couple of studios that have been on the market or traded recently. I'm sure you guys looked at those assets. Was it just pricing that held you back or was there any other reason? And I guess what are the main features that you guys are looking for in in studio assets and acquisition opportunities?

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

I mean other than the Raleigh Studio that just was a portion of that that showed there really has not been anything else in the market. There are several deals on coming to market at market and several deals that we are negotiating exclusively off market. So, I think it would be fair to say that our plate is going to be relatively full in that area in the near future. And announcements should be anticipated shortly. And so, you know what. We we've been very disciplined into our markets. We're interested in the core markets that we've always talked about. And our venture with Blackstone is completely active right now. And I would venture to say that you'll see a number of deals come our way both of existing deals and ground up.

Blaine Heck

Analyst, Wells Fargo Securities LLC

Great. Thanks, Victor.

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Thank you. Take care.

Operator: Our next question comes from the line of Alexander Goldfarb with Piper Sandler. Please proceed with your question.

Alexander Goldfarb

Analyst, Piper Sandler & Co.

Hey. Good morning. Good morning, Victor and everyone out there. It's just you know a few questions here. I guess the first question is just sort of going back to Jamie's question. You know we care a lot about you know what's going on at San Francisco versus the Peninsula. And it sounds like the Peninsula is sort of like the sunbelt of you know sort of California where everyone sort of either moving out of San Francisco to live in Peninsula or business whatever totally different dynamic between the business situation there versus the political and the business situation in San Francisco, vis-à-vis lockdowns et cetera. Do you see any of your tenants? So, Victor I hear you that you guys are committed to California the West Coast but are you seeing more tenants sort of rethink their San Francisco plans and instead focus on the Peninsula? And then are you seeing that translate to any actual discussions as far as leasing or development potential? Or right now you know people are just making decisions based on their existing holdings or existing square footage and so far, it's not really translating into anything that's longer term visible?

Arthur X. Suazo

Executive Vice President-Leasing, Hudson Pacific Properties, Inc.

Yes. Alex this is Art. You know we're not - we're not seeing that you know that exodus out of San Francisco at all. I mean, in fact we - our leasing teams are connected up and down you know from the city down to San Jose. All of these are - they are being - you know all these deals that are coming back are really deals that were on pause and are seeing a kind of renewed interest. But we're not. They're made independently of you know any of those things you mentioned.

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

I think Alex, you're spot on the Peninsula. I think you'll be surprised to hear when we announce some of the renewals that we're working on as the terms and conditions they are at, the activity in the Peninsula has picked up dramatically in the last 90 days. And our team up there is entertaining a number of - a number of deals that were pretty much stagnant all through spring and summer. And so, as Art said they are coming back. In terms of the city, you know listen I think you're spot on in the political environment. There is not a good situation. Does that mean you throw it out? The answer is no. The city will recover. It just depends on when and you know we're just poised very, very fortuitously that we don't have a lot of expirations in the city and those that are coming up we actually have a reverse increase by our tenants that are asking to renew for longer term some of the larger tenants now in years 23 and beyond.

So, we've had some activity around that at the same time. So, you know I'm not saying that the picture is actually spectacular by any means, but there is activity and people are planning for the future. The future is going to come on us pretty quickly. And I think these tenants understand that when they're back, they are going to be back on some form that's greater than it is clearly today and maybe not as great as it was a year ago today but they're pretty excited about the opportunities to get people back in the office. And that's the central thing.

Alexander Goldfarb

Analyst, Piper Sandler & Co.

Okay. And then Harout, to put you on the spot it's like I can ask markets and the markets he gave you the CFOring. The - it sounds like for the first quarter, yeah, it sounds like it's a pretty good number called $0.46 at the midpoint, which sort of annualized is a $1.85. So, things are getting better. I think you said lower interest expense. But you know is there any reason that sort of a $1.85 is not a good 2021 number that we should think about or are there some things, I mean I'm sure there's some things that are variables, but it seems like you know they're all positives right. There's uncollected rents, parking. There's studios, you know retail coming back out, I mean these are all sort of positives. So, is there any reason that we shouldn't think about sort of a $1.85 is as sort of being, this sort of implied low end of a guidance range for the year?

Harout Krikor Diramerian

Chief Financial Officer, Hudson Pacific Properties, Inc.

Alex, that's - yeah, I think that implies basically the right thing. I think we did provide in our prepared remarks, there are some items that we feel would be even better. Through the remainder of the year which was G&A and interest. So theoretically if those do also come on by the $1.85 is low. So, I think if you want to start off with $1.85 as the low end of the range, I think that that works well.

Alexander Goldfarb

Analyst, Piper Sandler & Co.

Okay. So, I mean all these other things sounds like it could come on sometime over the course of the year, that would sort of bring that off, meaning that from what you see right now there are no negatives that would bring that, that would be a detriment, that are unforeseen that would be a detriment to this number.

Harout Krikor Diramerian

Chief Financial Officer, Hudson Pacific Properties, Inc.

Right. I mean the only negative is anything COVID related, right. I think if there's...

Alexander Goldfarb

Analyst, Piper Sandler & Co.

Right. Yeah. Yeah.

Harout Krikor Diramerian

Chief Financial Officer, Hudson Pacific Properties, Inc.

...things like that. But so far, we like the trend. I mean just to be clear it's not going to be straight throughout the year. There'll be ebbs and flows, right. The media business being an item, right. Q2 is usually are slowest quarter. So, just you got to factor that in. But ultimately, what you've said is accurate.

Alexander Goldfarb

Analyst, Piper Sandler & Co.

Okay. Then just final question, Victor, you know the announcement about a week or two ago about the departure of Alex and Josh, obviously we all got to know Alex quite well, great guy. But it does seem to be a trend that we're seeing not just you but some other REITs where people are going to the private side just seeing the disconnect in opportunity comp and all that. Do you foresee this being a bigger issue? You know is it going to lead to G&A pressure for you or is this sort of your more view is this the natural ebb and flow and their departure allows opportunity for people to grow and therefore you don't see like a G&A issue or any sort of those sorts of things?

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Well, first of all Josh is a really good guy too. But we never - I don't want you just think Alex is the nicest guy of the two that left, I think Josh is a pretty good guy. Maybe I'm in the minority but I'm going to support him.

Arthur X. Suazo

Executive Vice President-Leasing, Hudson Pacific Properties, Inc.

Well, Alex has a full bar cart in his office and you never put Josh on the sacrificial lamb for in front of us public analysts?

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Listen they're both great assets and they've been with us for a long time and I would say first and foremost, we wish the greatest success in their new venture that they're launching hopefully imminently. And any help that we can do as a company and friends we're going to support them. The issue around Hudson specifically and then generally, I'll comment it this way. This is the first time we've ever had any senior people leave the company that's been by their choice not our choice. I will say it that way. And we've got a massive bench and great depth and the team here is energized and excited to take over and grow.

I think you point out an interesting dynamic in that the public markets versus the private markets are constrained. And when you have talented, energetic individuals, this comes up and it shouldn't be expected that this is a onetime thing. I think from our standpoint, the company doesn't anticipate any more exodus. But you never know what happens in time. And that's why you're not run by one person. You're run by a team of professionals. And the team is ready to move forward on this. As economic aspects changed, I think you're going to see gravitation to or from the public to private markets.

Alexander Goldfarb

Analyst, Piper Sandler & Co.

Okay. Thanks, Victor.

Operator: Our next question comes from the line of Frank Lee with BMO Capital Markets. Please proceed with your question.

Frank Lee

Analyst, BMO Capital Markets Corp.

Hi. Morning, everyone. I have a follow-up on the studio business. You mentioned the various opportunities you're looking at. Can you talk about how competitive and how the buyer pool has changed in market such as Burbank, Culver City and in the Valley and then longer-term, do you foresee any potential disruptions this could have in your Hollywood market as supply increases?

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Well, I'll take the latter first. I mean listen our stabilized assets in Hollywood are best-in-class and they're - they were - they're historical purpose-built assets. So, there's not going to be any variability around that. The demand is absolutely off the charts from the competitive landscape that's out there right now because of the growth and the product that's in the marketplace. And as a result, I think the competition for soundstages is as high as it's ever been. I do think that the - in terms of the competition it's so ironic that of everybody who covers us for years they didn't talk about this business being competitive and we were the only ones doing it. And now that there's a competitor out there it really is just a competitor, it's all of a sudden, a concern. There is - on our office side,which is 80-plus-percent of the portfolio, we've got countless competitors, and nobody seems to talk about that aspect.

So, I welcome the competition. I think the opportunities that we have are extremely impressive. As I said, I'm not worried about it. I think it does validate our thesis that we've been publicly dealing with for 10 years, which has said from day one there's massive values in these assets and the pricing around them is not solely based on what we think values are. Other people are out there now pricing them. So, I think it just proves that you know the markets have undervalued, the value of this real estate. And we have now - I would say yes, a competitor, but a benchmark and others that have come into the marketplace that are validating our values which is currently trading way below what NAV is by the private market valuation.

Frank Lee

Analyst, BMO Capital Markets Corp.

Okay. Great. And then, there has been some discussions that San Francisco is looking to take more of a proactive approach in reducing property taxes given you know declining property values from the pandemic. Just want to get your thoughts, should we think other California markets you're into follow suit? And if this plays out there could be any potential property tax savings within your portfolio?

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Well, we did announce that we had a great property tax saving interest recently on this quarter. And I think - I think there could be additional property tax savings throughout the entire portfolio in California. I do see that there is a little bit of a sea change with Prop 15 getting defeated. And there is a pushback and there's political realization that it can't continue the way it has been that's gotten us to this point right now. So those are all positive aspects of where I think people realize that businesses in place do you have some sort of control and aspects as to where values are put in place. And then you can't continually tax the same entities going forward. So, the coalitions four are starting to build to the coalitions against. And I think that's encouraging. We still have a lot of room to go. And I think more companies and more CEOs are become becoming more vocal. And as a result, I think you'll see a change but it's going to take some time.

Frank Lee

Analyst, BMO Capital Markets Corp.

Okay. Thank you.

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Thanks.

Operator: Our next question comes from the line of Vikram Malhotra with Morgan Stanley. Please proceed with your question.

Vikram Malhotra

Analyst, Morgan Stanley & Co. LLC

Thanks for taking the questions. Maybe just going back to sort of you know the core market San Francisco versus sort of the broader Bay Area. I know you talked about you know overall demand sort of picking up the pipeline looking good. You know sublease space is high. So I'm just sort of wondering if you were just if you were to sit here across sort of the key markets and particularly the city given where sublease rates are today what - is therea bifurcation in what you're seeing in terms of the need for landlords to reduce rents on what may be tenants are looking for you know and how wide could that be like where what areas are you seeing sort of you know pricing hold or rental hold versus what types of properties are you seeing going to rent rents needed to go down pretty dramatically to see incremental demand?

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Yeah, Vikram. I just think it's a great question. And I do think that you have to look at the quality of the real estate first and then and then candidly you know if you're a landlord in that marketplace like we are you know our goal is to maintain occupancy. So, it depends how much pain you want to take, right. And so, if you've got a loan on the asset, you've got expenses that you need to hear to, and you haven't got a deep pockets to protect yourself in the asset quality in terms of what's happening, you're going to be a little bit more desperate to lower your rent versus not. I think all landlords in today's marketplace are going to be dictated towards the demand of a tenant. And so, none of us want to lose tenants. How far down you're going to go. I don't think there's a benchmark that says that. I think that the irony and we've, we've made this comment before and it's important for me to highlight is that the tenants they're coming due today whether it's 2021, 2022 whatever it is you know typically have been tenants that signed in you know 2015, 2016 maybe even seven years back to 2014. And so, it's 2014 or 2015 or 2016, the mark to market is still well above where even your reduced rent is. So, we're all still making more money than our current in-place rents were as these tenants come into play. These aren't mark-to-market deals that, that were 2019 in late 2019 and obviously first quarter 2020 that were the peak of the marketplaces. So, you know when we look at some of our space and you've been following us for a long time and supporting us for a long time, you've seen that. You know we had mark-to-market in San Francisco at 50% or a 100%. And so, if those mark-to-market are now 20% or 25%, it's still much greater than what, what the tenants were willing at.

So, we still have some what I would say is a floor or a cushion or whatever you want to classify it to be. So, we're not saying that we're giving space away. So yes, it's a mark-to-market towards the peak was pre-COVID, but not necessary to where the rent started and we're eve accreted to in-place rents and we're even accreted to in-place rents over the last five or seven years.

Vikram Malhotra

Analyst, Morgan Stanley & Co. LLC

Okay. That's fair enough. That's helpful. Maybe one for Harout. We think about sort of the same-store cash number for the year and maybe we're just looking beyond little bit 18 months out, you obviously have the bumps. You have some leases you've signed, so some pre-rent converting. But offset to that, it sounds like and correct me if I'm wrong that on the expiration side and maybe just tenants deciding they may need less space. There is an occupancy likely an occupancy headwind. And so, with the bumps in the portfolio, an occupant, potentially occupancy headwinds, how should we think about the trajectory of cash NOI over the next call it 4 to 6 quarter - 12 to 18 months?

Harout Krikor Diramerian

Chief Financial Officer, Hudson Pacific Properties, Inc.

Well, what you said is accurate. We do have those headwinds. However, to remind you we also have below market leases. So, we're going to renew a percentage of our tenants and they're below market. So that's going to bring up our cash NOI. And I think we're pretty confident on our prospects. But I think we continue to see growth in cash NOI. It may not be as high as a plus 6% we got this quarter after removing the onetime items. But we still think we have a lot of upside as pre-rent continues to burn off and the bumps start coming in.

Vikram Malhotra

Analyst, Morgan Stanley & Co. LLC

Okay. And just maybe just to clarify like I know you're not - we don't have specific numbers around it. But just kind of high level to put kind of guardrails around the occupancy kind of in your own budgeting high-end versus low-end, how should we think about kind of where occupancy could shake out towards year end?

Mark T. Lammas

President, Hudson Pacific Properties, Inc.

Well, I think I mentioned. Vikram, this is Mark. I mentioned that in completing year end budgets and looking at where we ended up on a lease percentage basis at year end and how it compares to where it will trend towards the end of the current year, we were materially in line with those two numbers. So, whether it's a common, it's obviously a combination of our renewals and its success on renewals plus expectations on absorption of existing vacancy, but through the combination of that are in our in-service portfolio appears to trend so that we maintain our current lease percentage.

Vikram Malhotra

Analyst, Morgan Stanley & Co. LLC

Got it.

Harout Krikor Diramerian

Chief Financial Officer, Hudson Pacific Properties, Inc.

Also, just a reminder in terms of renewals, the largest renewals that we have are happening at the end of the year. So, the impact on cash seems for NOI at least for 2021 isn't going to be that large for those tenants. So those are going to be more in 2022 and beyond in terms of occupancy headwinds.

Vikram Malhotra

Analyst, Morgan Stanley & Co. LLC

Okay. That makes sense. Okay. Great. Thanks so much.

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Thanks, Vikram.

Operator: Our next question comes from the line of Omotayo Tejumade Okusanya with Mizuho. Please proceed with your question.

Omotayo Tejumade Okusanya

Analyst, Mizuho Securities USA LLC

Yes. Good afternoon. Most of my questions have been answered. But a quick one on studio at the same store studio [indiscernible] (00:50:23) it kind of went down this quarter also went down in 3Q. I think in 4Q the general impression was you know maybe it would be a positive trend as production started coming back. So, just been a curious little bit about the 4Q stat and the outlook going forward?

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Yeah. You know when we talk about the studios, we so often focus on stage utilization because that's really the driver of success at the studios. But it's - so it's easy to lose track a little bit that there's about a third of the footage is office, ancillary office footage that supports those studios. But it's not the office isn't entirely occupied by stage using tenants that is to say some of the office utilization is riders and other production related users. But some of it are people that simply just want to be on a studio lot, casting people and people like that. And due to the disruption from COVID some of those users who don't - again are not there because of this stage use and who were under say shorter term leases or whose leases expired we saw a bit of a pullback, if you will, on what would be a normal renewal rate for those users. And as production has begun to resume again our view is we're going to see a lot of those non-stage office users return to the lot, you know just to be affiliated again with all the other studio users.

Omotayo Tejumade Okusanya

Analyst, Mizuho Securities USA LLC

Got you. That's helpful. And then just another follow-up on the studio stuff again in regards to just the Sunset Studios and potential development there. Did I hear you correctly that is at least a year away before you break ground on any potential additional studio development?

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Oh. You mean on Sunset Gower. Yeah, I think I think that would be an accurate statement. We probably would not break ground until first quarter of 2022.

Omotayo Tejumade Okusanya

Analyst, Mizuho Securities USA LLC

2022. Great. Thank you.

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Thank you.

Operator: Our next question comes from the line of Dave Rodgers with Robert W. Baird. Please proceed with your question.

David Bryan Rodgers

Analyst, Robert W. Baird & Co., Inc.

Yeah. Good morning. Victor you talked about acquisitions on the studio side, but could you revisit your thoughts around acquisitions and investments sell side of development on the traditional office side. Are you feeling any better there are you seeing more opportunities like you saw with AEs, is that something you're interested in today? And maybe juxtapose that against the buyback which I know it's not one before the other but maybe update on your thoughts there and kind of the allocation of capital?

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Yeah, Dave. No, thank you. Listen the buyback position is still the same as these levels. When the opportunities avail themselves, we will consistently buyback. I think we've proven that track record out all through last really 12 months plus and so, that's going to continue. We have not seen a massive inflow of trend - of deals on the commercial side as of now. I do think that the team has been evaluating a few value-add deals and so ourappetite would be consistent with that given the opportunities that some of those value-add deals are significantly cheaper than they were a year ago. And so, if we were interested in them at that time, why would we not be interested at this time if they're accretive to the portfolio. You know 1918 Eighth was a great acquisition opportunity and we have a great partner in CPP that we've done several deals with. And their appetite as I mentioned on the prepared remarks as are other two JV partners appetite is still very strong both for commercial assets.

David Bryan Rodgers

Analyst, Robert W. Baird & Co., Inc.

Just to do one follow-up on the value-add, obviously the deals last year they're still in the market. Are you seeing more, having more off market conversations about more of those deals happening, I mean are we turning that corner yet or is that still a little bit way in front of us?

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

I think we're seeing more value-add deals now than when we maybe talked about it at our last caller for sure our summer call where really nobody was prepared to put a value-add deal because there were zero bids out there and the price differentiation was so extreme. There may be a little bit of what I would consider desperateness from some sellers that want to get out and they are mostly you're spot on those conversations are off market. They're not marketed deals. And so, we're seeing more and there's a few attractive opportunities that we're underwriting. So, I'm anticipating that, that could be a good opportunity for a company like Hudson.

David Bryan Rodgers

Analyst, Robert W. Baird & Co., Inc.

Great. Thanks. And then maybe just a follow-up for Art if I could. Are you, you went there is linked economics for the fourth quarter and you talked about healthy economics overall? It looks like there was a bigger and on maybe CI package this quarter that, that [indiscernible] (00:55:26) maybe weighed on some portion of those numbers. But correct me if I'm wrong or then maybe explain the outlier?

Arthur X. Suazo

Executive Vice President-Leasing, Hudson Pacific Properties, Inc.

Sure. Yeah. So, if I can repeat you know the - on a blended basis, we're actually are our TI and leasing commissions were down $21. If you're focused on the, on the new deals, yes, that was, that was the Rivian deal which we were building the space from, from really raw space up to warm shell where the tenant took it. Preponderance of our space is not in that condition. It's usually kind of ready, ready move in space. So that was the outlier.

David Bryan Rodgers

Analyst, Robert W. Baird & Co., Inc.

That's helpful. Thanks, all.

Operator: Our next question comes from the line of Emmanuel Korchman with Citi. Please proceed with your question.

Michael Jason Bilerman

Analyst, Citigroup Global Markets, Inc.

Hey. It's Michael Bilerman here with Manny. Victor, just two questions. The first on Alex and Josh, did they nothave non-competes or are they just not competing in their new venture with you. And when you say you're going to provide them all the support, are you capitalizing their venture in any way or providing them any capital?

Mark T. Lammas

President, Hudson Pacific Properties, Inc.

Vic, can I just say take - it's Mark, can I just take the initial question and Victor later. On non-competes, you know California does not, it's pretty employee friendly state as its law goes and you can't, yeah, there is no such thing as enforceable non-competes. It's a typical arrangement and this would be the case not just with respect to Alex or Josh or candidly any executive is you know we have standard non-solicitations. We have standard confidentiality clauses and not that it would ever be necessary in this case because it's - as Victor has outlined that all of our agreements also have things like non disparagement clauses. Again, this standard clause is. That's about what you can do in California and that's what our typical agreements are.

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Yeah. And then in terms - in terms of the latter part of the question listen they're - they're not looking in our markets currently today. They're looking in the Sunbelt and other marketplaces and the answer to the capitalization is you know if they came to us with opportunities of course since we trust them and like them, we would obviously entertain, not to say that we're going to do any assurances that we would do it, but we would obviously help them out in any way.

Michael Jason Bilerman

Analyst, Citigroup Global Markets, Inc.

And then, second question just in terms of capital deployment and Victor I know there's a lot of different buckets you can deploy capital and obviously you've done the share buybacks given the significant discount to NAV, you're obviously doing development and activating as much of the pipeline for the future as possible. There's redevelopment. You've talked in the last question about the value-add opportunities that you're looking at. How does the buying of stabilized assets even with a joint venture partner? How does that sort of marry up with really the value side of all those other activities? I guess, why put money in? Is it a market share? Is it supporting your joint venture partner? Just help us understand that part of your capital deployment when all those other activities that you have in front of you seem better sort of return opportunities?

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

So, listen you know where you're getting on that. And in specific to that I think each opportunity will stand alone. We're going to make the right decisions. And you're right. I mean, we are heavily weighted on value add and development that's I'm not going to dissipate in terms of our game plan and what we're currently working on as we speak. In terms of 1918 Eighth, that was a conscious decision on three-fold. One, in no particular order. It was a relationship with the tenant being Amazon and our exceptional relationship with them and it's enhancing that going forward given what we have with them in that market and other markets. It's a Class A asset with them for 10-plus years and the new CEO's offices just happened to be in our project. And it's - it was a great opportunity for us to capitalize on. Two, you mentioned it. It is a JV structure with an existing partner that we are 55/45 which is a standard deal that we do with them. And three, the economics around that transaction were effectively great. I mean we did a L plus, I think 170 loan for 50% of the transaction, where effectively gets us our going in yield somewhere in the mid-sevens or so going up. And the capital deployment is minimal for us to - for us over the next 10 years. So it wasn't, hey this is a stabilized deal, why you're buying a bond. It was a combination of I think all three of those things.

Michael Jason Bilerman

Analyst, Citigroup Global Markets, Inc.

Okay. Thanks for the color, Victor.

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

You got it.

Operator: Our next question comes from the line of Rick Anderson with SMBC. Please proceed with your question.

Richard Anderson

Analyst, SMBC Nikko Securities America, Inc.

Thanks, and thanks for hanging a little bit longer. I just had a quick question related to what you said, Victor earlier. You're negotiating a bunch of potential opportunities in the studio space. And you mentioned both development and acquisition opportunities. I'm wondering about kind of repurposed real estate or re-entitled real estate. Is that something that studio - the studio business can kind of come to the rescue of some see-through assets that are out there whether it's the anchor space of a department store or in an old mall or even in an industrial asset that's probably obsolete by now.

Are these opportunities that you could see studios kind of expand that way or am I just barking at the wrong tree?

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Listen I think I think, Rich, you are commenting on something that people have been looking at. I do and as have we and we have not looked at it and said this is absolutely a non-starter. The cost return analysis for non-purpose-built studios is still very challenging. And then the quality is challenging. Now I do want to caution, and this is no way of me hedging that saying hey does that mean Hudson is doing this or not. The level of technology in the entertainment and media business that is evolving may avail themselves for this given that smaller sized stages for certain types of technological filming and the likes of that could be applicable for conversion space like that. But in terms of a "savior" to existing space that is not purpose built and at the end of the day is void given the changes of the economic structure, I don't see that as a as a mainstream for that business."

Richard Anderson

Analyst, SMBC Nikko Securities America, Inc.

Okay. That's all I have. Thanks very much.

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Thanks, Rich.

Operator: There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

Victor J. Coleman

Chairman & Chief Executive Officer, Hudson Pacific Properties, Inc.

Thank you so much. I appreciate the interest in Hudson. And again, this quarter and the entire Hudson team appreciates all the support by everybody in the call. Have a great rest of your day and everybody be safe. Thanks so much, operator. Bye-bye.

Operator: Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

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Hudson Pacific Properties Inc. published this content on 23 February 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 February 2021 22:06:22 UTC.

Latest news about Hudson Pacific Properties, Inc.

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Hudson Pacific Properties, Inc. acquired 45% stake in Office property in San Francisco, California from unknown joint venture partners for $43.50 million.	04-30	CI
Morgan Stanley Trims Price Target on Hudson Pacific Properties to $6 From $7, Maintains Equalweight Rating	03-28	MT
Piper Sandler Adjusts Price Target on Hudson Pacific Properties to $9 From $11, Maintains Overweight Rating	03-22	MT
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Hudson Pacific Properties Reinstates Common Stock Quarterly Dividend, Payable on March 28, 2024	03-08	CI
Transcript : Hudson Pacific Properties, Inc. Presents at Citi's 2024 Global Property CEO Conference, Mar-04-2024 11:00 AM	03-04
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Transcript : Hudson Pacific Properties, Inc., Q4 2023 Earnings Call, Feb 13, 2024	02-13

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Company Profile

Hudson Pacific Properties, Inc. is a real estate investment trust serving technology and media tenants. The Company acquires, repositions, develops and operates sustainable office and studio properties in high-barrier-to-entry technology and media epicenters. The Company's segments include office segment and studio segment. The Company's portfolio includes office properties, studio properties, land properties and production services assets. Its studio properties comprise of approximately 48 stages, sound stages and production-supporting office, and other facilities. Its land properties comprise of undeveloped density rights for future office, studio and residential space. The Company's production services assets comprise of vehicles, lighting and grip, production supplies and other equipment and the lease rights to an additional approximately 27 sound stages. It owns real estate in California, the Pacific Northwest, Western Canada and Greater London, United Kingdom.

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Commercial REITs

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30/07/2024 - Q2 2024 Earnings Release (Projected)

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ESG Refinitiv

A-

More Ratings

Analysts' Consensus

Sell

Buy

Mean consensus

OUTPERFORM

Number of Analysts

Last Close Price

4.8 USD

Average target price

6.885 USD

Spread / Average Target

+43.43%

Consensus

EPS Revisions

Estimates Revisions

Quarterly earnings - Rate of surprise

Company calendar

Sector Office REITs

	1st Jan change	Capi.
HUDSON PACIFIC PROPERTIES, INC.	-48.44%	667M
BOSTON PROPERTIES, INC.	-12.81%	9.59B
NIPPON BUILDING FUND INC.	-8.18%	6.25B
DEXUS	-15.04%	4.82B
JAPAN REAL ESTATE INVESTMENT CORPORATION	-12.84%	4.56B
KDX REALTY INVESTMENT CORPORATION	-2.18%	4.03B
EMBASSY OFFICE PARKS REIT	+8.83%	4B
KILROY REALTY CORPORATION	-21.36%	3.68B
SL GREEN REALTY CORP.	+23.67%	3.57B
INMOBILIARIA COLONIAL SOCIMI, S.A.	-16.95%	3.07B

Office REITs

Hudson Pacific Properties, Inc.

Equities

HPP

US4440971095

Commercial REITs

Hudson Pacific Properties : Earnings Call Transcript | Fourth Quarter 2020

EPS Revisions