Hudson Pacific Properties, Inc.

Greetings and welcome to the Hudson Pacific Properties Inc. Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Anyone to require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Laura Campbell, Senior VP of Investor Relations and Marketing. Thank you. You may begin.

Thank you, Operator. Good morning, everyone, and welcome to Hudson Pacific Properties' third quarter 2020 earnings call. Yesterday, our press release and supplemental were filed on an 8K with the SEC. Both are available on the investor 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 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 Lamas, our President, Alex Vivalides, our COO and CIO, and Harut Girimirian, our CFO. Note they will be joined by other senior management during the Q&A portion of our call. Victor?

Thank you, Laura. Hello, all. Welcome to our third quarter 2020 call. I hope you are all healthy and well. I'm pleased to report that we've had a very safe and very productive third quarter. Our outstanding Hudson Pacific team, which throughout the pandemic has brought tremendous talent and expertise to every aspect of our business, continues to successfully navigate this complex environment. As an essential business, we've had 100% of our workforce back in the office since Labor Day on a rotating schedule with all the necessary precautions, and it's been fantastic to be together again and productive. There's no doubt that we, like others in our markets, have been impacted by the extended shutdowns in California and Washington, which have tempered the recovery we've seen accelerate in other parts of the country. Regardless, our buildings are fully operational with industry-leading health and safety protocols in place. Our tenants are paying rent, our office and studio assets are well-leased, our leasing activity is starting to accelerate, and our rent spreads were made at pre-COVID levels. Our development pipeline is on time and on budget, and we've got ample capital augmented by premier, well-aligned JV partners to operate and invest. The bottom line is we're still poised to make visionary-type strategic moves that consistently reinforce our position as one of the most creative, dynamic players in our industry. We are, however, starting to see some positive signs throughout our markets. Last week, San Francisco allowed non-essential offices to open, albeit at 25% capacity. Los Angeles schools can now welcome back 25% of high-need students, and this includes younger learners, which in turn helps working parents return to the office. And physical occupancy at our office properties across our markets has reached about 15%, which are slightly higher in the U.S., Sorry, slightly lower in the U.S. and slightly higher in Canada. We're in constant dialogue with all of our tenants and clients. We know that despite bold statements regarding work from home and seemingly far-out return to the office dates, particularly by tech companies, most are simply on hold to figure out how, not whether, to use their space. Should cities open sooner than anticipated, we'd not be surprised to see CEOs accelerate at least a partial return to work. Further, the media has really focused on permanent work-from-home shifts, when the reality is many companies, most recently Microsoft, are simply making moves towards a more flexible schedule. For example, working one out of four or two out of five days a week at home. Our office tenant base is made up of the world's most creative, innovative companies that build their businesses, their competitive edge around culture, creativity, collaboration. And our work environments are that are so dynamic that they're exponentially better than being at home. And then there are types of work that you simply can't do at home. Security infrastructure, for example, are major issues for tech companies. If you ever toured our Element LA campus in West Los Angeles, it perfectly exemplifies all these aspects. This is the type of office space we provide throughout our entire portfolio. As for our studios, despite some delays getting content producers, guilds, and unions on the same page about health protocols. Production recommenced in late August on 10 of our stages, and we're expected to have 34 out of 35 stages active by next month. Clients currently utilizing the stages include a who's who of major media, CBS, Fox, Netflix, Disney, ABC, and HBO, and to date, we've experienced no further shutdowns. Given the pent-up content spend in production, particularly the non-feature film, single-camera episodic dramas perfect for streaming, for which all of our stages are ideal, we anticipate demand to remain extremely robust. The bottom line is we believe tech and media will lead this recovery. Digital has only accelerated during this pandemic, spurring major VC investment in cybersecurity and the cloud, e-commerce, healthcare, business services, fintech, and edtech. At $38 billion, Third quarter 2020 was the third highest quarter for U.S. VC investment in a decade, surpassed only by the second quarter 2020, also during the pandemic, and the fourth quarter of 2018. Software companies still dominate allocations. Money has flowed to pharma and biotech, but it's a fraction. 2020 is shaping up to be a good year also for first-time venture financing. And the money keeps coming. Fundraising has already surpassed 19 levels at $56 billion. and so far making 2020 the second highest year ever. Also in the third quarter, pent-up demand for Unicorn led to near-record U.S. IPO activities in terms of valuations, and these trends are expected to continue and are extremely positive for tech and the resiliency of office demand across all of our markets. At this point, we also have had firsthand knowledge of the incredible pent-up demand for streaming content. Netflix, Amazon, Apple+, Hulu, Disney+, and HBO Max have had tens of millions of new subscriptions this year. Now, 80% of U.S. consumers subscribe to at least one streaming service. Nearly a quarter of them have also streamed a first-run movie, with 90% likely to do it again. Nearly half have participated in some sort of gaming activity as well. These statistics are even higher for Gen Z and millennials. Even pre-COVID These six streaming companies I mentioned intend to spend approximately $35 billion on content for 2020, so the demand for backlog for stages and support space is huge in the near term. In the mid to longer term, it bodes incredibly well for Los Angeles studio and office space at large as the productions and gaming companies continue to grow. Before I turn the call over to Mark, I'd like to highlight our corporate responsibility initiatives. As most of you know, in May, we launched our industry-leading ESG platform, Better Blueprint. The pandemic's challenges have only increased the value and importance of making bold moves across three focus areas, sustainability, health, and equity. And we've done just that. On the heels of rolling out our new diversity, equity, and inclusion programs, adopting Fifth Wall's viral response module, and directing significant charitable giving to populations most impacted by the current levels, we've achieved 100% covered neutral operations, garnering the recognition of the World Green Building Council as one of the first major real estate organizations to do so. We originally anticipated achieving this milestone in 2025, but given the increased energy associated with COVID-19 health and safety measures, we moved quickly and creatively to get this done now. Our solutions eliminate barriers all scope one and two GHG emissions by leveraging our energy-efficient portfolio, the use of on-site renewables, and a combination of renewable energy certificates and carbon offsets. But we've got a lot more to do. We're pursuing additional on-site renewables and innovative technology solutions to reduce further operational carbon. We're also working to reduce our scope three GHG emissions from non-operational carbon, specifically building materials. So, as I said, much more to come. and we'll continue to lead the industry on this and other related fronts. With that, I'm going to turn it over to Mark.