Greetings, and welcome to Hudson Pacific Properties First 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. Please note this conference call is being recorded. I would now like to turn the conference over to your host Laura Campbell. You may start.

Thank you, operator. Good morning, everyone and welcome to Hudson Pacific Properties' First Quarter 2020 Earnings Call. Earlier today, our press release and supplemental were filed on an 8-K with the SEC. Both are now 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 have 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; Alex Vouvalides, our COO and CIO; and Harout Diramerian, our CFO. Note, they will be joined by other senior management during the Q&A portion of our call. Victor?

Thank you, Laura. Hello, everyone and welcome to our first quarter 2020 call. As we all know, these are very unprecedented times and our hearts go out to everyone impacted by COVID-19. We're grateful for all the frontline workers who are enabling us to stay safe and healthy and to keep doing what we do albeit remotely for many of us. I'd like to start off by saying the entire Hudson Pacific team has done an absolutely phenomenal job over the last several weeks. We came off a very solid first quarter for our company and our markets and we'll cover all those details over the course of the call. Since then, every team in every vertical, whether it's construction or operations, leasing or other, has swiftly adapted to the new realities and we are well-positioned and eagerly await the imminent reopening along the West Coast. I am incredibly proud of where we sit today as a company and what we've built. Our leadership team is second to none. Under any circumstances, our employees, tenants, and shareholders benefit from their extensive expertise, resourcefulness, and passion for innovation. We've always maintained a strong balance sheet and excellent credit access. Today, we have over $1 billion of liquidity at our disposal. We've invested capital wisely to modernize, transform and build a premier portfolio in the country's most dynamic and resilient office markets. We have high-quality tenants, who are themselves innovators and adapters. Many of our tech and media tenants like Google, Netflix, Amazon, HBO, and ABC stand to do quite well in the current environment. Further, we have very little construction risk with a substantially pre-leased, fully funded development pipeline with limited remaining spend. Mark, Alex, and Harout are going to provide further context later in the call. We are heading our emergency response task force, which was put in place on March 2, a multi-disciplinary team of senior executives from operations, finance, leasing, HR, IT, communications, and legal. We successfully rolled out a business continuity plan across the organization. Most of our employees have been working from home since mid-March and we're thankful to report that we are unaware of any COVID-19 cases among our team to date. Our properties remain open and operational and fully compliant with CDC and BCCDC guidelines. I would like to give special recognition to our essential on-site staff: our property managers, engineers, and janitorial teams. They're doing a fantastic job working and managing the day-to-day of our enhanced safety protocols, additional cleanings, and proactive communications. We're putting the finishing touches on a robust plan to enable our tenants and employees to safely return to work once stay-at-home orders are lifted and our reintegration program leverages the expertise of both our internal team and outside experts. We're focusing on hygiene, things like cleaning products and air filtering; on health interventions like PPE and testing. We're taking steps to ensure building access points, common areas, and on-site amenities are configured and properly managed to allow adequate social distancing. We're looking at various PropTech solutions in collaboration with our partner at the Venture Firm and Fifth Wall and thinking about vendor management best practices for this new area. We've engaged leading architects to incorporate the latest health and safety requirements and preferences into our design and best practices. While exact timing for implementation remains unclear and varies across all of our markets, we'll be ready to roll out these initiatives seamlessly. Relatedly, I've been asked to join various local, state, and federal communities advising on best practices for opening up the economy and more specifically the commercial real estate sector. I was particularly honored by, and have accepted a request from the Mayor of Los Angeles, Eric Garcetti, to co-chair the city's office and commercial working group. I believe, it's very important that we lend our expertise where we can especially during such extraordinary times to benefit the greater community. I have no doubt that my work with Mayor Garcetti's administration and other civic leaders will inform our path going forward in our markets. Before I turn the call over to Mark, I'd like to mention that we recently released our 2019 corporate responsibility report. Along with it, we launched our new Better Blueprint ESG platform. Over the last year, our VP of Sustainability and Social impact, Natalie Teear, worked with our leadership team to gather feedback, review data, and align with leading institutions and local governments. Our goal is to build upon our existing initiatives to create an ESG program authentic to Hudson Pacific and rooted in the issues that matter most to our businesses and stakeholders. The concept for our Better Blueprint comes from the understanding that the choices we make reverberate in the lives of those who work, play, and live in and around our properties. Ultimately, our ability to thrive as a company is tied to the vibrancy and resiliency of these various communities and more broadly as an urban-focused office REIT, our cities. Through this process, we honed in on three foundational elements for focus areas: sustainability, health, and equity. In our 2019 report, we outlined programmatic highlights and 2025 goals for each of those. I encourage all of you to download the report from our website. It's a wonderful testament to our people, our culture, and our commitment, now more importantly than ever, to creating a vibrant, thriving urban space built for the long term. With that, I'm going to turn it over to Mark.

Thanks, Victor. We're pleased to report that we've collected 93% of total April rents. This includes an impressive 95% of office rents and 95% studio rents, which no doubt reflects the quality of these respective tenants. We also collected 38% of storefront retail rents, which I will discuss more in a moment. With respect to the preponderance of uncollected rents, we've implemented a rent relief program. Early in the pandemic, as shelter-in-place requirements began to disrupt many businesses, local jurisdictions throughout California and Washington adopted rent relief orders to protect commercial tenants. Those orders afforded qualifying tenants, essentially small and medium businesses impacted by the pandemic, various protections. With few exceptions, our portfolio was covered by those governmental orders. Our program dovetails with the underlying rent relief orders, typically by deferring near-term rents with repayment requirements corresponding to local ordinances. Most of our deferrals have been about two months, with repayment either before year-end or amortized over the remaining lease term. To date, we've granted deferrals equivalent to approximately $2.2 million, or 4% of total April rent. Another approximately $1.3 million, or 2.5% of total April rents remains in discussion for either payment or deferral. In terms of the composition of deferred rents, we've granted about $600,000 of deferrals to storefront retail tenants. These smaller shops, cafes, and restaurants have been hardest hit, but only comprise a little over 3% of our total monthly rent. While they're not a large portion of our revenue, we're nonetheless working diligently to keep these types of retailers in place, as they provide amenities to both local communities and our soon-to-be returning office tenants. Consequently, we expect our storefront retail to recover relatively quickly as office buildings become occupied again. The Ferry Building marketplace, the company's share of which comprises just 36,000 square feet and represents 18% of storefront retail rent, may take longer to return to normal operations. We've granted about $1.1 million of deferrals to co-working tenants. We abated $250,000 of April rent at Maxwell in connection with an opportunity to recapture some or all of that co-working space. Meanwhile, WeWork paid rent at all other locations within our portfolio and has indicated it intends to continue doing so. The company's share of true co-working throughout our entire portfolio comprises just 2.6% of our monthly rent, with another 1.3% attributable to enterprise co-working. We believe there is a continued role for traditional co-working space, albeit modified for social distancing, but enterprise clients may create opportunities for us to go direct should deferred rents become delinquent. In terms of small office and studio tenants, we've granted about $500,000 of deferrals. Specifically, only $160,000 of studio rent has been deferred or abated, which equates to just 0.3% of total April rents. This highlights, as we've always noted, both the underlying credit of our studio tenants and the fact that a prolonged shutdown's impact is most likely to be seen in production-related revenue, not rent. That aside, we believe once shelter-in-place restrictions are lifted, we'll see a normalization in production-related revenue and perhaps even an acceleration as studios look to catch up with content demand. For example, we're hearing that productions may go from a typical four to five-day-a-week schedule to a seven-day-a-week schedule, which may enable us to recoup lost revenue over time. We also expect Los Angeles will be the first major studio market to resume production, bringing a surge in demand for our stages, particularly as shows and films look to curtail travel for the foreseeable future. In the first quarter, we also saw an immaterial pullback in non-contractual parking revenue across garages in Seattle, San Francisco, and Los Angeles. Harout will provide more color in connection with our guidance on the expected decline in non-contractual and transient parking revenue stemming from the various shelter-in-place measures. One final word on tenant improvement delays. Jurisdictions across our portfolio adopted policies ranging from carve-outs for construction as an essential service to more restricted measures that temporarily delayed some of our tenant improvement projects. Thankfully, only nine tenant improvement projects involving approximately 41,000 square feet in Northern California have experienced temporary delays that may push back these deliveries. While it is too early to gauge the impact of such delays, if any, we expect it to be relatively minor. Fortunately, both San Francisco and Seattle this week lifted said restricted measures, so going forward, tenant improvements in these markets along with those in Los Angeles should continue unabated. And now, I'll turn the call over to Alex.

Thanks Mark. We entered the current crisis on a very strong footing across our West Coast market, which had, as of the end of the first quarter, for the most part, vacancy in the mid to low single-digits, record rents, and limited available new supply. Our stabilized and in-service office portfolios were 95.9% and 94.8% leased respectively. This was on the heels of completing nearly 230,000 square feet of new and renewal deals at very healthy GAAP and cash rent spreads of 31% and 20%, respectively. We made additional progress on our 2020 expirations. As at the end of the first quarter, we had only 560,000 square feet, or 4.8% of our ABR remaining to address, with no material leases expiring for the balance of the year. We have approximately 50% coverage with deals in leases, LOIs, or proposals on that space, and thus far, the deal terms related to those conversations have not changed. As of our fourth quarter earnings call in February, our leasing pipeline was about one million square feet. Today, it's around 900,000 square feet with tenant interest diverse across industry, size, and market. Only about 20% of those deals are officially on hold, while others are moving slowly. We've seen tours resume albeit just a few over the last week or so. Only a handful of deals have actually died. The bigger tech companies we're talking to are still moving forward with in-process deals and trying to sort things out like density. Typically, those conversations revolve around how they can have fewer people in the same space or if they need to expand. While most of our efforts right now are focused on renewals, we're working on some new deals and expansions, and we've signed over 130,000 square feet of deals since activity first began to slow in early March. Again, we've seen no material shift in terms that include rates, lease length, or concessions. We only have two under construction development and redevelopment projects, Harlow and One Westside, which collectively total 690,000 square feet, both in Los Angeles where construction is deemed essential. Thus far, there have been no material delays or supply chain issues, and the projects are progressing with our on-site teams wearing appropriate PPE. Harlow is on track to deliver in late second quarter this year. We recently, and rather swiftly under the circumstances, received sign-off from the Department of Water and Power. One Westside remains on schedule for first quarter 2022 delivery. Between these two projects, we have about $364 million of remaining spend which is fully funded. In aggregate, these projects are 85% pre-leased, with One Westside fully pre-leased to Google. Leasing at Harlow continues even in the current environment, and we pivoted to a multi-tenant strategy. And with that, I'll turn the call over to Harout.

Thanks, Alex. In the first quarter, we generated FFO excluding specified items of $0.54 per diluted share compared to $0.49 per diluted share a year ago. The commencement of significant leases at EPIC and Fourth & Traction as well as several other material tenant expansions and lease commencements throughout our Northern California office portfolio were the primary drivers of this year-over-year increase. First quarter 2020 specified items were $0.1 million or $0.00 per diluted share of transaction-related expenses and $2.6 million or $0.02 per diluted share from one-time straight-line rent relief reserve related to transitioning a co-working tenant to cash basis reporting. Specified items in the first quarter of 2019 were $0.1 million or $0.00 per diluted share of transaction-related expenses and $0.1 million or $0.00 per diluted share of one-time debt extinguishment costs. As Alex mentioned, at the end of the first quarter, our stabilized and in-service office portfolios were 95.9% and 94.8% leased respectively. Our same-store studio trailing 12 months leased percentage was 92.4%. In the first quarter, NOI at our 39 same-store office properties increased 1.7% on a GAAP basis and 7.9% on a cash basis. Our same-store studio NOI decreased by 12.2% on a GAAP basis and 10.6% on a cash basis, but would have increased 6.7% and 9.5% respectively if not for the impact of a $1.85 million one-time inactive fee payment we received in the first quarter of 2019. As Victor commented, we have $1.1 billion in liquidity and no maturities until 2022 except for our $65 million loan secured by Met Park North, which we intend to pay with our revolver. This gives us ample liquidity as we preserve capital and manage our buildings in the near term and as we deliver Harlow and build out One Westside for Google. It should also provide us enough dry powder to pursue new opportunities at some point in the future. Specifically, after our March draws on our revolving credit facility, we have over $390 million of unrestricted cash and cash equivalents and another $110 million of undrawn capacity on our revolver. We also have $230 million of excess capacity on a separate revolver secured by Sunset Bronson ICON and CUE, which we can access at our discretion. We also have nearly $409 million of undrawn capacity on our One Westside construction loan, which will more than sufficiently fund the entirety of that project. Due to the ongoing disruption and uncertainty related to COVID-19, we are offering the following assumptions in lieu of formal guidance. We've based these assumptions on what we know today to help you assess our potential earnings results for the remainder of 2020. We expect our rent relief program to have a minimal impact from a GAAP perspective. In terms of cash, we have deferred approximately $2.2 million of April cash rents across all segments with another approximately $1.3 million remaining in discussion for payment or deferral. Additional deferral may be appropriate over the coming months. The duration of deferred cash rents will depend on various shelter-in-place time frames across the portfolio. As previously mentioned, we abated approximately $400,000 of April cash rents, which we expect will continue throughout the year. Non-contractual parking income totals approximately $1.2 million of NOI per month. As with deferred cash rents, we expect the duration of the impact of this income to coincide with the shelter-in-place time frames. With respect to our studios, we anticipate some delay in occupancy on a handful of stages at Sunset Las Palmas, resulting in approximately $1 million reduction in NOI compared to our original guidance. Due to the temporary shutdown in productivity in our studio portfolio, we anticipate an approximately $3.5 million to $4.5 million reduction in NOI compared to our prior expectations depending on the acceleration in activity as content production resumes and intensifies. While our leasing pipeline remains healthy, we currently estimate that the slowdown in leasing activity stemming from shelter-in-place ordinances excluding parking and other impacts already mentioned could result in a 2.5% to a 3.5% decline in the company's share of full-year NOI compared to our original guidance, again depending on the duration of shelter-in-place ordinances. As Mark and Alex noted, we've had minimal delays in terms of tenant improvement projects and we're on track to deliver and recognize revenue at Harlow once leased and One Westside. Even though as of this call construction has resumed and continues across all our markets, ongoing shelter-in-place requirements may still impact timing. And now I'll turn the call back over to Victor.

Thank you, Harout, Alex, Mark, and Laura. Again, I want to applaud the entire Hudson Pacific team and thank them for their tenacity, adaptability, and unwavering passion for excellence even in these challenging times. I know we're all looking forward to being back in the office together in some form or fashion extremely soon. To everyone listening, we appreciate your support; stay healthy and safe, and we look forward to updating you next quarter. Operator, with that, let's open the line for questions.

Thank you. At this time, we will be conducting a question-and-answer session. Our first question comes from Nick Yulico with Scotiabank. Please proceed with your question.

Thanks. Hi everyone. I appreciate the numbers you shared based on some assumptions here. Regarding the 2.5% to 3.5% decline in full-year NOI, you mentioned that this pertains to leasing NOI, excluding studios and parking. Is that mainly due to a decrease in vacancy that is affecting that number? Could you elaborate on that a bit?

This is Harout. There have been more delays in leasing as companies assess their space requirements, which has slowed down the leasing process.

Okay. So effectively, it's some assumption on just less backfill of expirations or something along those lines?

Not less, just slower. I think companies are taking a little bit longer to make decisions on their future space needs.

Okay. Got it. And you guys said earlier that you think your markets are benefiting from little new supply. Can you just talk about what you're seeing in terms of sublease space in your market? And even in your own portfolio, whether you're seeing any pickup in sublease requests? And particularly, I'm thinking about some of your exposure to smaller tech companies that maybe are not as well capitalized and haven't been around as long?

So I'll let Art sort of jump in, but this is Victor, Nick. At the end of the day what we're looking at is San Francisco from our standpoint had some sublease with Uber that's still in the market. That's the largest piece of sublease up and down Market Street, not just our asset at 455, but others. There's been not a lot of material change in the Peninsula. I think the sublease space has increased to about three million square feet, but it's still the lowest it's been in three years. We've seen no sublease material changes here in Southern California or in Washington or in Vancouver. So overall, I think on a general basis, we've not seen much at all of sublease space increase.

Yes. And I'll add just certainly not in the smaller tech realm as you mentioned.

Could you remind us about the current status of the portfolio regarding exposure to private, smaller, and less capitalized tech companies? Is this area of the portfolio a concern in the current environment, and what does your exposure look like?

Well, I think, Mark 40% of the companies are either public or larger than 100,000 square feet?

Yes, you can refer to our industry diversification table for the latest breakdown. A small portion of our total tech exposure consists of privately held companies that have been in business for less than 10 years. Additionally, based on our April collections, there isn't any evidence to suggest that the tech sector is more vulnerable. In fact, one sign of the resilience of tech is seen in our Bay Area exposure, which represents 65% of our annual base rent. Notably, only 58% of our non-collection amounts, which are relatively small, are from this Bay Area portfolio. Furthermore, this portfolio has a significant amount of storefront retail, which accounts for a large share of the unpaid rents. This indicates that even among smaller tech tenants in our Northern California portfolio, they have performed very well during the pandemic and have been reliable in paying their rents.

Okay. Thanks everyone.

Thanks, Nick.

Our next question comes from Alex Goldfarb with Piper Sandler. Please proceed with your question.

Hey, good morning out there. Just a few questions here. First, Mark and Harout, just from a modeling perspective, you threw out a bunch of numbers both on a GAAP and on a cash basis and some of those were monthly, some of those sounded like it was annual. So just big picture, I guess easiest from a GAAP perspective, because that's what we model off of for FFO. What is the sort of net impact that we're looking at? Because it sounds like a lot of the rents that you're deferring you're actually going to recapture. So from an FFO perspective, what's the GAAP impact?

Yes, you're trying to get straight to the point. We provided some tools for you because we are not giving a comprehensive reset on FFO. The monthly figures we provided in some instances are tied to the duration and impact of shelter-in-place orders. For instance, there is no difference in cash flow between contractual and non-contractual parking revenue, so we shared a monthly figure since we cannot predict if parking will return to normal in one month, two, three, or four. That's why you see some monthly estimates. In other cases, we believe we can estimate the full year's impact regardless of how long the pandemic lasts, which is why we provided a full-year studio number of $4 million for your modeling. We also did the same for the overall leasing slowdown, reflected in the 2.5% to 3.5% adjustment on NOI. Some impacts are highly time-sensitive, so we aimed to provide monthly figures because we can't pinpoint when the shelter-in-place orders across our entire portfolio will be lifted.

So just to add to that, this is Harout by the way. The largest component of our funds from operations is our office net operating income. You start with the biggest piece to move from point A to point B, then you layer on the studio numbers, and finally, you make an estimate for parking. With that, you have almost everything you need for a solid estimate. Those are the foundational elements to get you there. While we're not providing direct guidance, we're equipping you with the tools to create your own estimate.

Right. So that's the point. It's from a GAAP FFO perspective. It's our estimate that monthly parking revenue, the $4 million studio for the balance of the year and then down 2.5% to 3.5% on NOI for impact on the delayed leasing, those are the sort of the components?

Yes, that's right. Those are the building blocks.

Okay. And then switching subjects. I mean, everyone's been binge watching Netflix and probably waiting for them to restart production to get the new series going. But it would seem like you guys, from a tech, from a video game, from a studio domain, you guys should be seeing, I would think, increased demand for your space out of this in contrast to other markets where people are worried about whether or not employees are going to go back to office or start leasing. It would seem to be that you guys should be benefiting from here and that you would have even stronger demand in those three respective areas. So is that the case? Is it oversimplification, or is this sort of the right way to think about it?

Alex, you're completely right. I read some analyst pieces this morning, and someone remarked that there was a negative aspect to the studio business, but that's far from the truth. Our team has been approached by nearly every production company looking for office and studio space. The demand for production is at an all-time high—it's almost like a strike situation. Writers are actively working, conducting virtual table reads, and eager to start filming. Companies like Amazon have announced that all their domestic filming will shift to Los Angeles, and Netflix is moving their location shoots to studio shoots, trying to increase their filming days with union approvals. The demand will be immense. As I mentioned, I can’t recall who made that negative comment, but it’s clear that Los Angeles will be the top location for shoots, especially since talent is hesitant to travel. We're confident about the timing of our operations' reopening, which will be advantageous for us. The surge in production will definitely increase since Netflix and other companies are running out of content. They are currently pushing content rapidly, having previously accumulated a backlog, which should carry through to this year and the first half of next year. There’s also an interesting article in the LA Times recently where Ted Sarandos discussed their ongoing filming in Japan, South Korea, and Iceland, showcasing what they plan to replicate here.