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Edited Transcript of HPP earnings conference call or presentation 30-Oct-19 6:00pm GMT

Q3 2019 Hudson Pacific Properties Inc Earnings Call LOS ANGELES Nov 6, 2019 (Thomson StreetEvents) -- Edited Transcript of Hudson Pacific Properties Inc earnings conference call or presentation Wednesday, October 30, 2019 at 6:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Alexander Vouvalides Hudson Pacific Properties, Inc. - CIO * Arthur X. Suazo Hudson Pacific Properties, Inc. - EVP of Leasing * Laura Campbell Hudson Pacific Properties, Inc. - SVP of IR & Marketing * Mark T. Lammas Hudson Pacific Properties, Inc. - COO, CFO & Treasurer * Victor J. Coleman Hudson Pacific Properties, Inc. - Chairman, President & CEO * William A. Humphrey Hudson Pacific Properties, Inc. - SVP of Sunset Studios ================================================================================ Conference Call Participants ================================================================================ * Alexander David Goldfarb Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research & Senior REIT Analyst * Blaine Matthew Heck Wells Fargo Securities, LLC, Research Division - Senior Equity Analyst * Craig Allen Mailman KeyBanc Capital Markets Inc., Research Division - Director and Senior Equity Research Analyst * David Bryan Rodgers Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst * Emmanuel Korchman Citigroup Inc, Research Division - VP and Senior Analyst * James Colin Feldman BofA Merrill Lynch, Research Division - Director and Senior US Office and Industrial REIT Analyst * Michael Bilerman Citigroup Inc, Research Division - MD and Head of the US Real Estate and Lodging Research * Nicholas Philip Yulico Scotiabank Global Banking and Markets, Research Division - Analyst * Richard Charles Anderson SMBC Nikko Securities America, Inc., Research Division - Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Greetings, and welcome to the Hudson Pacific Properties Third Quarter 2019 Earnings Conference Call. (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, Ms. Campbell. You may begin. -------------------------------------------------------------------------------- Laura Campbell, Hudson Pacific Properties, Inc. - SVP of IR & Marketing [2] -------------------------------------------------------------------------------- Thank you, operator. Good morning, everyone. Welcome to Hudson Pacific Properties Third Quarter 2019 Earnings Call. Earlier today, our press release and supplemental were filed on an 8-K with the SEC. Both are now 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 supplementals. 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. Actual events could cause our results to differ materially from these forward-looking statements, which we undertake no duty to update. With that, I'd like to welcome Victor Coleman, our Chairman and CEO; Mark Lammas, our COO and CFO; and Art Suazo, our EVP of Leasing. Victor will give an overview of our performance, Art will discuss leasing activity in our markets and Mark will touch on highlights -- financial highlights. Note, they will be joined by other senior management during the Q&A portion of our call. Victor? -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [3] -------------------------------------------------------------------------------- Thank you, Laura, and welcome, everyone, to our Third Quarter 2019 Call. We had an excellent third quarter as exemplified by strong performance metrics across every aspect of our business. From rent spreads to same-store NOI growth to development and completions, to capital recycling, to balance sheet quality, you will see as we move through the call today that we continue to execute very well. This is a combination (technical difficulty) with the exceptional and still strengthening fundamentals across our West Coast markets. And it sets us up for a strong finish to the year and lays out an excellent foundation for our growth in 2020. Let's start with office leasing. In the third quarter, we signed more than 550,000 square feet of leases at a 26% GAAP and 13% cash rent spreads. And year-to-date, we leased 2.1 million square feet at 35% GAAP and 22% cash rent spreads. And even more impressive, if you take into account that our largest deal this quarter, Github's 92,000 square-foot renewal, it reflects an adjustment from a modified gross to a triple net lease structure, we estimate that in fact, we achieved 34% GAAP and 19% cash rent spreads this quarter and 39% GAAP and 25% cash rent spreads year-to-date. Our almost 1 million square feet of near-term and under construction projects are 89% pre-leased. And leasing activity throughout our markets were strong this quarter. In line with our availabilities, we signed 80% of our leases in the Bay Area. And this included 2 significant deals at 333 Twin Dolphin at Redwood Shores, which raised the leased percentage for that asset from 48% to 75%. We have coverage, that is deals and leases, LOIs or proposals on 65% of the remaining 528,000 square feet of '19 expirations, which are 19% below market. And further, we already have 40% coverage of our remaining 864,000 square feet of 2020 expirations, which are 21% below market. Note, these healthy 20-plus percent rent spreads will enable us to drive meaningful NOI growth through renewals and backfills, even with just 6% of our total office square footage rolling next year. At the end of the quarter, our stabilized and in-service office portfolios were 96.4% and 94.7% leased, respectively. Now turning to the studios. High-profile productions from the likes of ABC and Netflix continue to dominate demand for Sunset Studio's services and stages. And quarter-over-quarter, our stages are fully utilized and have been -- recently, we've seen a drop in demand for writers offices from array of clients, including Amazon, NBC, HBO, Lionsgate and Viacom. And yet this is another byproduct of streaming production doubling over the last 2 years. At the end of the third quarter, our trailing 12-month average leased percentage for our same-store studios was up 282 basis points and year-over-year to 92% -- 92.5%. While the trailing 12-month average rent was up 5.1% to $40 per square foot. And approximately 50% of our studio ABR is now derived from long-term leases as our clientele increasingly look to lock up stages for production space for 3 years or more. Earlier this month, we delivered EPIC, our $200-plus million creative office development in Hollywood which Netflix will occupy in its entirety. In addition to the significant NOI growth attributed to this project, which Mark is going to discuss, this completion is noteworthy on a number of fronts. First, it exemplifies our track record of deleveraging large-scale and complex urban projects on time and on budget and fully pre-leased. It also shows how we continue to evolve our urban campus concept, which started with Element LA, and has enabled us to attract many of the world's most successful visionary companies and tenants. It showcases our commitment to innovative and sustainable building design to high-tech and energy efficient infrastructure and to the adaptability of advances in AI-related technologies like autonomous cars. And finally, as our fourth delivered project adjacent to the Sunset Studios in Hollywood, it represents our foresight into what office markets can and will do for the media and entertainment companies of today and for the future. We did not have much of -- in the way of capital recycling activity in the third quarter other than completing disposition of the Campus Center for $448 million and proceeds for which we used primarily to repay our revolver. Noteworthy though, the Campus Center sale brings our dispositions of the former Blackstone, Peninsula and Silicon Valley assets to nearly $1 billion, close to 1/3 of the original portfolio. And we continue to strategically explore both office and studio acquisitions across our core markets. Finally, I'd like to highlight a few milestones in our ongoing work to elevate and integrate our ESG priorities throughout the company. We recently announced our portfolio operations are almost entirely carbon-neutral, 86% to be exact, thanks to the purchase of renewable energy assets. Our goal is to be 100% carbon-neutral through similar credit purchases by 2020, well in advance of any regulatory requirements. We also pursued these offsets as an immediate and impactful way to address our carbon footprint. However, we're taking a holistic approach to addressing climate change. This includes active participation in benchmarking programs such as ENERGY STAR and LEED, where we are also making significant strides. Our development program has always been 100% LEED-certified. But we anticipate that by year-end 2020, 60% of our portfolio will be LEED-certified and almost 70% will be ENERGY STAR-certified. I'm also pleased to report that this year, we earned GRESB's 5-star and Green Star designations, our second time receiving the latter. And for industry leadership, an absolute performance on ESG-related initiatives as well as GRESB's recognition for our excellent ESG disclosure, which has been in the area -- an area that we've tried to focus over the last year. With that, I'm going to turn it over to Art who's going to further comment on our leasing and our markets. -------------------------------------------------------------------------------- Arthur X. Suazo, Hudson Pacific Properties, Inc. - EVP of Leasing [4] -------------------------------------------------------------------------------- Thanks, Victor. Strong demand and continued positive net absorption has uniformly contributed to supply constraints across our markets. Our pipeline of activity, which accounts for deals in leases, LOIs or proposals, remains over 1 million square feet. In Los Angeles, tech and creative companies are driving growth while more traditional industries like aerospace and financial service contract. This is radically redefining which locations and product types command the most rent, the transition that directly benefits our portfolio. In Hollywood this quarter, Class A rent increased nearly 1% to $61 per square foot while Class A vacancy was down 40 basis points to 6.4% with 24,000 square feet of positive net absorption. We're in negotiations for the entirety of Harlow, which we'll deliver next year. Our only remaining 2019 expiration of significance in Los Angeles is Saatchi & Saatchi's year end lease termination at Del Amo, which we are exploring all our options to address. Our stabilized Los Angeles portfolio is 98.7% leased and in-place rents are 14% below market. In San Francisco, the only thing slowing the pace of absorption is constrained supply as there is simply not enough large-block space to meet demand. Half of the 6.8 million square feet of requirements in the market are 100,000 square feet or more; while there are only 8 such blocks, totaling 1.9 million square feet available. Class A rents rose 1.8% this quarter to $91 per square foot, bringing year-over-year rent growth to 11.7%. Class A vacancy ticked up 20 basis points but remained incredibly low at 2.7% with 473,000 square feet of positive net absorption. We've essentially addressed all our remaining 2019 San Francisco expirations. Our stabilized San Francisco portfolio is 98.8% leased and in-place rents are 30% below market. In Q3, which was another strong quarter for the Peninsula for the purposes of this discussion, which includes Palo Alto, Class A rents increased 2% to $90 per square foot, bringing year-over-year growth to 6.5%, while Class A vacancy fell 10 basis points to 7.4% with 163,000 square feet of positive net absorption. We've got 114,000 square feet of remaining 2019 expirations along the Peninsula, all sub-25,000 square-foot spaces with 60% coverage. And those are 14% below market. Our stabilized Peninsula portfolio is 89% leased and in-place rents are 8% below market. Silicon Valley, which had the most active quarter in terms of gross leasing with 4.2 million square feet of deals. North San Jose is a standout as the market continues to tighten. Class A rents increased 2.5% in the quarter and $50 per -- to $50 per square foot, resulting in year-over-year growth of 16.2% while Class A vacancy fell 20 basis points to 10.8% with 139,000 square feet of positive net absorption. We have a 131,000 square feet of Silicon Valley 2019 expirations remaining, also all sub-25,000 square-foot spaces with 65% coverage. Those are 22% below market. Our stabilized Silicon Valley portfolio is 97.7% leased and in-place rents are 7% below market. Downtown Seattle continues to show strength as pre-leasing has become a necessity for companies looking to secure large blocks of contiguous space. This level of demand bodes well for all our properties in the market but particularly for Washington 1000 development, which we have begun to market. Class A rents in Downtown increased 2% in the quarter to $47 per square foot, up 5.9% year-over-year and Class A vacancy dropped 60 basis points to 6.3% with 583,000 square feet of positive net absorption. We have nothing substantial in the way of remaining 2019 expirations in Seattle. Our stabilized Seattle portfolio is 95.4% leased and in-place rents are 21% below market. Downtown Vancouver is the metro area's most competitive submarket in terms of demand. Class A rents in the quarter held at $61 per square foot, up 10.4% year-over-year and Class A vacancy remains very low at 2.5%, down 30 basis points with 22,000 square feet of positive net absorption. Deloitte's 93,000 square-foot lease at Bentall remains a known Q4 vacate. We plan to reposition the space and are in negotiations on several floors. Otherwise, we had about 42,000 square feet of 2019 expirations remaining with over 90% coverage on that space. Collectively, our remaining 2019 Vancouver expirations are 40% below market. Our stabilized Vancouver portfolio is 97.7% leased and in-place rents are 23% below market. And with that, I'll turn the call over to Mark for financial highlights. -------------------------------------------------------------------------------- Mark T. Lammas, Hudson Pacific Properties, Inc. - COO, CFO & Treasurer [5] -------------------------------------------------------------------------------- Thanks, Art. In the third quarter, we generated FFO, excluding specified items, of $0.51 per diluted share compared to $0.47 per diluted share a year ago. Higher occupancy and rental rates across both our office and studio portfolios, together with asset acquisitions, specifically 10850 Pico and the Ferry Building, were the primary drivers of this year over year increase. Specified items consisted of transaction-related expenses of $300,000 or $0.00 per diluted share compared to transaction-related expenses of $200,000 or $0.00 per diluted share a year ago. In the third quarter, NOI at our 35 same-store office properties increased 8% on a GAAP basis and 7.5% on a cash basis. Given these strong results as well as our expectation of that portfolio's continued performance throughout year-end, we are increasing our full year same-store office cash NOI guidance for the third consecutive quarter from a 4.5% to a 5.5% midpoint. Our same-store studio NOI increased by 22.9% on a GAAP basis and 29.3% on a cash basis. In light of these impressive results, we are increasing full year same-store studio cash NOI guidance midpoint to 7.5%. In terms of capital market activity, we recently issued $400 million of senior notes at 99.268% of par value with a 3.25% coupon and January 2030 maturity. We used net proceeds to repay our $300 million 5-year term loan due April 2020 as well as all outstanding amounts on our revolving credit facility, with the remainder available for general corporate purposes. This is simply a continuation of our efforts to address near-term maturities and improve liquidity. We now have only $64.5 million of debt maturing next year with no maturities in 2021. We also have all $600 million available under our revolving credit facility, which when combined with our -- with $230 million available under our revolving Sunset Bronson secured loan and cash on hand, gives us close to $900 million of immediate liquidity. In light of our commitment to sound balance sheet management among other strengths, earlier this month, Moody's upgraded our credit rating, including our long-term issuer and senior unsecured ratings, from BAA3 to BAA2 with a stable outlook. We are pleased that in doing so, Moody's recognized the quality of our team; portfolio and markets; our overall liquidity profile, including our large unencumbered asset base and strong fixed charge coverage; our successful track record; and our commitment to owning and operating sustainable and efficient properties. As Victor noted, this month, we completed EPIC. And including our Fourth & Traction and Maxwell redevelopments, we have now recently placed into service 3 such value-creation projects, and we are poised to see significant NOI growth associated with these projects in the fourth quarter and beyond. We anticipate those projects will generate a 5.5% increase in the company's share of the fourth quarter GAAP NOI compared to third quarter, which as a point of reference, was $124.7 million. We anticipate those projects will generate a 6% increase in full year 2020 GAAP NOI compared to the company's share of annualized third quarter GAAP NOI. We will also ultimately see similar growth in our cash NOI as upfront abatement associated with leases at those projects phase out. Turning to guidance. We are increasing our full year 2019 FFO guidance range from $1.98 to $2.04 per diluted share, excluding specified items; to $2 to $2.06 per diluted share, excluding specified items, raising our midpoint from $2.01 to $2.03 per diluted share. Specified items consist of transaction-related expenses of $500,000 identified in connection with our first and third quarter results and onetime debt extinguishment cost of $700,000, $100,000 of which was identified in connection with our first quarter results and another $600,000 of which would be identified in connection with our fourth quarter results stemming from the repayment of our $300 million, 5-year term loan due April 2020 as described earlier. Combined, these specified items total $1.2 million or $0.01 per diluted share. This guidance otherwise excludes the impact of unannounced or speculative acquisitions, dispositions, financings and capital markets activity. With that, I'll turn the call back to Victor -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [6] -------------------------------------------------------------------------------- Thanks, Mark, Art and Laura. As I mentioned at the start of the call, our results speak for themselves. In the third quarter and year-to-date, we've continued to demonstrate robust leasing activity, exceptional rent spreads, significant same-store NOI growth, successful execution on both our development pipeline and noncore assets and solid yet still improving credit metrics. Such strong performance is hardly new for Hudson Pacific, and as always, I would like to congratulate our entire team on yet another great quarter. And to everyone listening, we appreciate all of your support. With that, we look forward to updating you next quarter. And operator, let's open the lines for questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from the line of Blaine Heck with Wells Fargo. -------------------------------------------------------------------------------- Blaine Matthew Heck, Wells Fargo Securities, LLC, Research Division - Senior Equity Analyst [2] -------------------------------------------------------------------------------- Victor, I wanted to touch a little bit on the studio business. It seems like you guys have a very strong platform, maybe the strongest out there. But there are competitors that are growing and acquiring at high prices in this space. So how do you see the competition and any increased supply influencing your operating results and your ability to continue to grow that part of the business going forward? -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [3] -------------------------------------------------------------------------------- Thanks, Blaine. So listen, we wouldn't have this conversation about a year or so ago, right, about competition. So it's not a bad thing. At the end of the day, it validates our pricing, it validates the structure and the business model for others, not just ourselves. And for 10-plus years, we've been telling people it's a great business. Now the competition is albeit very limited, it's really only one other player. And currently today, it's only 1 studio because the other studio is a development opportunity and the third opportunity is Amazon's corporate campus. That being said, there is very little supply in the marketplaces today, which enhances our business model for us to continue to grow organically on our own portfolio, which is the Sunset Studios that we have, about another 11 million square feet to build. And we're evaluating studio components at the same time. We've also -- feel that there are opportunities in our backyard here and other markets that we've talked about that we're evaluating and continuing to look to grow. Interestingly enough, the content players are expanding in the key markets that we are looking at. So we're going to grow with them, hopefully, and we've had conversations with multiple players in that basis. And I think the opportunities are going to avail themselves for Hudson to continue to move forward. Obviously, pricing is an issue, as you mentioned, and it's something that we are very cognizant of. But you know what? I do think that the facts sort of say for themselves. The reality is, for us to go in second-tier marketplaces, we've put our line in the sand and said that's not something we're going to do. For us to go into the primary markets that have showed traction and stickiness, we said we're going to continue to grow in those marketplaces. And I do think that the opportunities will be very economically beneficial once we sort of move into those areas. And it's something that we're going to spend a lot of time and effort as we have been, and we're going to continue to do so. -------------------------------------------------------------------------------- Blaine Matthew Heck, Wells Fargo Securities, LLC, Research Division - Senior Equity Analyst [4] -------------------------------------------------------------------------------- Great, really helpful. And then 2 questions on Seattle. It looks like you guys had a move-out at Northview Center. So I was wondering how you guys view that asset in terms of the longer-term fit within your portfolio at this point. And number two, you guys don't currently have any exposure in Bellevue where there has been a ton of activity recently. How would you characterize your interest in that market? And are there any opportunities out there to maybe gain a foothold or is that too expensive at this point? -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [5] -------------------------------------------------------------------------------- Blaine, I'm going to sort of talk top line on both those and I'll let Art deal with the ADP and the move-out activity there, what our thoughts are, and then I'll have Alex jump in on Bellevue. Generally speaking, Northview is not an asset that we would want to keep long term. It has proven to be a very great cash-flowing asset. We have some opportunity that value increase can be achieved over the next year to 2 there. And we're evaluating the retenancy and the aspects there. The market is still very strong, but it is an outlying asset from our standpoint. As to Bellevue, it's a market that we're highly focused on right now. We are looking at an opportunity or 2 that we'll have a substantial foothold if we are successful in that marketplace. And we think it's very synergistic to what we're currently -- what we currently own and what we're about to build in Seattle itself. Art, you want to jump in? -------------------------------------------------------------------------------- Arthur X. Suazo, Hudson Pacific Properties, Inc. - EVP of Leasing [6] -------------------------------------------------------------------------------- Sure. ADP was a known vacate, 29,000 square feet in August, as we all know. And currently, the team is negotiating with multiple tenants for the entire space. So we feel pretty good about it. And the mark-to-market on that space, we're probably talking about 5% to 10%. -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [7] -------------------------------------------------------------------------------- Alex? -------------------------------------------------------------------------------- Alexander Vouvalides, Hudson Pacific Properties, Inc. - CIO [8] -------------------------------------------------------------------------------- Yes. As it relates to Bellevue, just to further on Victor's comments, it was important when we first got into Seattle to really build the platform and infrastructure around downtown, which now with the convention center, we're up to 2 million feet. We like the fundamentals in Bellevue, it's eventually becoming Amazon's H2Q (sic) [HQ2]. Vacancy, low single digits. So for the right opportunity, we definitely would like to enter the market and think it could complement what we have in Seattle proper. -------------------------------------------------------------------------------- Operator [9] -------------------------------------------------------------------------------- Our next question comes from the line of Jamie Feldman with Bank of America Merrill Lynch. -------------------------------------------------------------------------------- James Colin Feldman, BofA Merrill Lynch, Research Division - Director and Senior US Office and Industrial REIT Analyst [10] -------------------------------------------------------------------------------- If our estimates and The Street are correct, looks like you guys are on track for kind of mid- to high single digits earnings growth next year. As you think about the investment activity, whether it's Bellevue or anywhere else, I mean, how do you think about balancing FFO growth versus putting fresh capital to work in maybe something that might be disruptive to that growth rate? -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [11] -------------------------------------------------------------------------------- I mean, listen, Jamie, we've recycled capital out of assets. I think you can -- you heard in my prepared remarks, we're a little over $1 billion now in the Blackstone portfolio. There could be a few more assets that we're looking at that have performed very well and we'll be able to recycle that capital that way. We also have talked about, in concert with our 3 joint venture partners, expanding those relationships and capturing the opportunities in the marketplaces that have been our business -- our main business line. Which is not to say that we will grow to grow, we are growing in assets and markets that are going to be conducive to what our existing portfolio is. And we've been very disciplined, as you know more than most, in our decision-making tree and the assets that we bought. And when it has come to either overpricing or areas of concern, we've walked away from transactions. And I think that discipline will be maintained going forward. And Mark? -------------------------------------------------------------------------------- Mark T. Lammas, Hudson Pacific Properties, Inc. - COO, CFO & Treasurer [12] -------------------------------------------------------------------------------- Yes. Jamie, let me just underscore maybe some of that thought around opportunities. A lot of our capital recycling, if you think back on where capital has been deployed, it's been in non-income-producing real estate, a lot of it has. And a lot of the opportunities that the team has been working on more recently are income-producing real estate. And so hard to know whether or not you're -- if we did do recycling, exactly how cap rates would compare immediately. Although the goal would obviously be look to accretive investments. So even if there was some recycling and redeployment into new real estate, and by comparison to the past couple of years, you'll probably see a closer yield on the sold assets and the redeployment. And then we would expect to see more accretion down the road on whatever it was redeployed into. So I don't think you would experience as much dilution. -------------------------------------------------------------------------------- James Colin Feldman, BofA Merrill Lynch, Research Division - Director and Senior US Office and Industrial REIT Analyst [13] -------------------------------------------------------------------------------- Okay. That's very helpful. And then can you talk about your exposure to WeWork-ing, co-working? And any conversations you've had with them about plans for some of the spaces they have with you guys? And just what's your expectation on what happens with some of those spaces going forward? -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [14] -------------------------------------------------------------------------------- Well, listen, first of all, everybody in this call knows. I mean listen, I've been pretty direct as to our thought process on co-working, and it's been a decision that we've made since the beginning. We think there's an absolute role, whether it's Regus or whether it's WeWork or whomever. And in -- I think we have a very enviable position in our portfolio where currently, we have space in Vancouver, in LA, in San Francisco and Seattle, where we have WeWork there. The preponderance of that space is enterprise at the end of the day. And I don't think we're exposed at all for a number of reasons. One, the enterprise tenants are solidified and have nowhere to go in a supply-constrained marketplace like Seattle, like San Francisco and Los Angeles and our markets. In Vancouver, they have a nice portfolio that has enterprise for the most of it, and their co-working space is full and there's a waiting list. And so there's an opportunity there. That being said, we have a direct correlation and conversations on a regular basis, Art and his team do with WeWork. And they also have a direct relationship with a lot of our enterprise tenants. There are actual tenants in the same markets that we're in. And so we don't -- we're not worried about the overexposure at all. It's less than 1.5% in the portfolio from our standpoint. And we don't -- we're not worried at all about the ability for: One, for us to take over if need be; two, for us to do direct deals with these tenants on a short-term basis, there's no more capital outlay from our standpoint; or longer-term leases with these tenants. But the fact of the matter is, is that we're in markets that, as you heard the statistics, the vacancies are all-time lows in these 3 markets that we have exposure to them. And I think the opportunity for -- if WeWork decided to give back space, we would not be the one that they would give it back for. -------------------------------------------------------------------------------- James Colin Feldman, BofA Merrill Lynch, Research Division - Director and Senior US Office and Industrial REIT Analyst [15] -------------------------------------------------------------------------------- Okay. And then last for me. Just as you think about the pipeline of tenant demand in Silicon Valley or the Peninsula, how does that match up with your buildings that have space to lease and vacancy? -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [16] -------------------------------------------------------------------------------- Well, I can just say -- and listen, in Silicon Valley and the Peninsula and then in San Jose, I mean, the numbers are staggering as to what's coming down in terms of opportunity to tenants. And in terms of our space, we've -- we're outperforming even our greatest expectations in terms of rent values and numbers on that basis. The 2 big ones that we're talking about is Metro and 333. 333, we got 2 leases. We're on the cusp right now of that being stabilized. There's lots of activity, Art can jump in on that. And then on Metro, we have -- I think it's high 70s right now. The demand is there, and I have no concern whether or not we're going to hit not just the leasing expectations but well exceed our rental numbers. And Art, do you want to jump in on that? -------------------------------------------------------------------------------- Arthur X. Suazo, Hudson Pacific Properties, Inc. - EVP of Leasing [17] -------------------------------------------------------------------------------- Yes. I would say even on our pipeline, we talk about our pipeline being over 1 million square feet, probably 450,000 square feet or more, resides in the Peninsula, chiefly in Silicon Valley. And 333, as Victor mentioned, we just moved it 2,600 basis points. We've probably got another -- probably another 15,000 square feet in leases there, Metro Center. We've got 65,000 square feet in leases and deals behind that. So as you've seen and we've talked about our VSP program really at work, the team is executing on the ground and we're getting these smaller spaces leased up. So more things to come in Redwood Shores and in Metro Center as well. -------------------------------------------------------------------------------- Operator [18] -------------------------------------------------------------------------------- Our next question comes from the line of Craig Mailman from KeyBanc Capital Markets. -------------------------------------------------------------------------------- Craig Allen Mailman, KeyBanc Capital Markets Inc., Research Division - Director and Senior Equity Research Analyst [19] -------------------------------------------------------------------------------- Mark, I just wanted to clarify. The 5.5% uplift in 4Q from the development deliveries. EPIC wouldn't be contributing to that at all, right. Just looking at the commencement schedule on Page 44, doesn't look like... -------------------------------------------------------------------------------- Mark T. Lammas, Hudson Pacific Properties, Inc. - COO, CFO & Treasurer [20] -------------------------------------------------------------------------------- Yes, which has Q4. We were -- Chris and the team did a great job. We delivered on October 1. So right at the beginning of the quarter, first day of the quarter. So it does contribute for Q4 in GAAP. -------------------------------------------------------------------------------- Craig Allen Mailman, KeyBanc Capital Markets Inc., Research Division - Director and Senior Equity Research Analyst [21] -------------------------------------------------------------------------------- So does the entire project commence on a GAAP basis going forward? Or is it just the first stage? -------------------------------------------------------------------------------- Mark T. Lammas, Hudson Pacific Properties, Inc. - COO, CFO & Treasurer [22] -------------------------------------------------------------------------------- Yes. For all intents and purposes, we turned over all of it for tenant improvement purposes. So they have possession of the entire building starting on October 1. -------------------------------------------------------------------------------- Craig Allen Mailman, KeyBanc Capital Markets Inc., Research Division - Director and Senior Equity Research Analyst [23] -------------------------------------------------------------------------------- Okay. All right. That's helpful. Can you remind us what the GAAP yield on that is? -------------------------------------------------------------------------------- Mark T. Lammas, Hudson Pacific Properties, Inc. - COO, CFO & Treasurer [24] -------------------------------------------------------------------------------- Well, you can -- I think you can see it right in our development page. But it's 9.8% is the stabilized yield. Now that looks ahead to the burn-off of abatements. So it's a cap -- I mean, it's a cash yield, not a GAAP yield. Yes, it's a stabilized cash yield. And I mean I haven't converted in my mind to what a stabilized GAAP yield would look like. [It is not -- a typical]. Yes, right, because you got straight-line kicked in at the time of it. If you picked the data stabilization and you ran a straight line number, it would be higher than the cash number. -------------------------------------------------------------------------------- Craig Allen Mailman, KeyBanc Capital Markets Inc., Research Division - Director and Senior Equity Research Analyst [25] -------------------------------------------------------------------------------- Right. Okay. That's helpful. And then Victor, just your comments going back to the studio. 50% of ABR is kind of coming from longer-term leases. what do you think you guys could or would want to push that to going forward? -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [26] -------------------------------------------------------------------------------- I mean, listen, at the deals that we're talking about, we were looking at 29% increase in cash flow on that, we'd push all of it. But the fact is I think we're maintaining flexibility for a number of reasons. I think the market is moving, the demand is extremely high. There are no stages available for any of these tenants that need stages. And I think our team and Bill are planning on just measuring occupancy based on the returns. And right now, when we've basically given a stage away for a year-to-year basis, they haven't left. And they just keep staying. So I think the flexibility is there. The comfort level is very high. And obviously, Craig, as you know, the credit is huge. -------------------------------------------------------------------------------- Craig Allen Mailman, KeyBanc Capital Markets Inc., Research Division - Director and Senior Equity Research Analyst [27] -------------------------------------------------------------------------------- Okay. And just thinking about it, Las Palmas is kind of a newer asset for you guys. It was not institutionally managed. I mean is there a disproportionate amount of the upside coming from that asset? Or is it pretty consistent across the 3 of them? -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [28] -------------------------------------------------------------------------------- No. It's -- I would say it's consistent across. So listen, we've gone through a massive cycle with ABC at Gower. And so now that's all rolled to a new benchmark on marketplace right, Bill? -------------------------------------------------------------------------------- William A. Humphrey, Hudson Pacific Properties, Inc. - SVP of Sunset Studios [29] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [30] -------------------------------------------------------------------------------- And so that's been obviously transposed over to higher returns, Netflix clearly over at Bronson, and yes, in Las Palmas. But those stages are in hot demand, and I think that's where our most recent ABC gains were, right? -------------------------------------------------------------------------------- William A. Humphrey, Hudson Pacific Properties, Inc. - SVP of Sunset Studios [31] -------------------------------------------------------------------------------- Yes. And also, we have Viacom and HBO. They're interested in doing long-term-- longer-term deals with us. They've formally already approached us. -------------------------------------------------------------------------------- Craig Allen Mailman, KeyBanc Capital Markets Inc., Research Division - Director and Senior Equity Research Analyst [32] -------------------------------------------------------------------------------- And just the last one for me. Art, could you just give a little bit more detail on kind of the demand you're seeing at Washington 1000? -------------------------------------------------------------------------------- Arthur X. Suazo, Hudson Pacific Properties, Inc. - EVP of Leasing [33] -------------------------------------------------------------------------------- Sure. As you know, that market has about 5.5 million square feet of active requirements right now, which is fantastic. Washington 1000, we’re currently in negotiations for about 300,000 square feet as we've began our marketing campaign. And we're in discussions with 2 additional tenants each for about 200,000 to 250,000 square feet. -------------------------------------------------------------------------------- Operator [34] -------------------------------------------------------------------------------- Our next question comes from the line of Rich Anderson with SMBC. -------------------------------------------------------------------------------- Richard Charles Anderson, SMBC Nikko Securities America, Inc., Research Division - Research Analyst [35] -------------------------------------------------------------------------------- So when you think about your growth profile going into the 2020 -- I'm not looking for FFO guidance yet, of course, unless you want to give it. But do you think when you drill down to the AFFO number, would it be a greater number -- a greater level of growth or a lesser level of growth in 2020 or 2019? Whatever year you want to dive into. -------------------------------------------------------------------------------- Mark T. Lammas, Hudson Pacific Properties, Inc. - COO, CFO & Treasurer [36] -------------------------------------------------------------------------------- Yes. I think it looks -- and again, you're right. We'd be getting ahead of ourselves here. The way we've been looking at it, Rich, is with some level of caution around on the spend and TIs in particular that are forecast in '20 and '21. And the reason for that is -- and as you can see it in the numbers that we've reported. TIs can be fairly volatile because it's unpredictable when tenants are going to request allowances and so forth. And I think maybe more importantly, as we think about that trend and kind of where it -- how it compares to 2019, it looks like we're going to -- we're on a quarterly run rate average basis, TIs are going to be right around $30-ish or so million per quarter and AFFO is $33.3 million year-to-date and probably finishes the year, on a quarterly run rate basis, right around that level. And then if you look ahead to 2020 and 2021 collectively, the ingredients with FFO growth and sort of the leveling off of TIs because I think TIs will level off in 2020 compared to 2019. So I don't think we think, on a quarterly run rate basis, it's going to go up from 2019. But then it's -- the model suggests that it's going to go down fairly steeply in 2021. But it's not uncommon for our TIs to push out a bit. So let's say you leveled those out through '20 and '21, if you look that a leveling off over, say, an 8-quarter trend and you take where FFO was trending to, the ingredients over that 8-quarter period suggest that AFFO compared to 2019 could be over 40% higher on a quarterly run rate basis, maybe even a touch higher than that. Now I realize you were asking about 2020, but I want to be extra cautious about that because '20 -- the TIs forecasted for 2020 could easily spill over into 2021. And so what is a very drastic increase in 2021 of AFFO could be a bit less drastic, and we could see a lot of the benefit actually spill over into 2020 if we don't spend quite as much in 2020. So that's where -- what the trends are suggesting. I don't know if there's much more at this point we can say about it. When we provide guidance in February, we'll try to give you a little bit more color on that. -------------------------------------------------------------------------------- Richard Charles Anderson, SMBC Nikko Securities America, Inc., Research Division - Research Analyst [37] -------------------------------------------------------------------------------- But I mean you can safely say that the growth profile, the FFO level is probably lower than the AFFO level, just simply because the TI is trending down on a quarterly basis. -------------------------------------------------------------------------------- Mark T. Lammas, Hudson Pacific Properties, Inc. - COO, CFO & Treasurer [38] -------------------------------------------------------------------------------- Yes. That's -- well, yes. I think that's right. If you're -- right. If you were to look -- if you were just to compare the growth trend on FFO compared to AFFO, you are correct. I think there is a more steep growth trend on AFFO over the next 2 years, 2020, '21, compared to FFO. -------------------------------------------------------------------------------- Richard Charles Anderson, SMBC Nikko Securities America, Inc., Research Division - Research Analyst [39] -------------------------------------------------------------------------------- Okay. Great. As far as the same-store growth that you're achieving today, is there any amount of CapEx behind that, that's driving the revenue number? But you don't get -- it doesn't show up on the expense line? Or is this a fairly clean sort of growth profile that's potentially repeatable into the future? -------------------------------------------------------------------------------- Mark T. Lammas, Hudson Pacific Properties, Inc. - COO, CFO & Treasurer [40] -------------------------------------------------------------------------------- Well, I can't think of any extraordinary CapEx driving that. So is it repeatable? Yes. It's hard to say for sure. But yes, I think, it is repeatable. If what you're asking is did we have to do something extra special to make this happen? The answer is no. -------------------------------------------------------------------------------- Richard Charles Anderson, SMBC Nikko Securities America, Inc., Research Division - Research Analyst [41] -------------------------------------------------------------------------------- Okay. Great. And then lastly to Victor. 1/3 of the Blackstone portfolio that's been sold. How did that compare when you think back to 2015 to your expectations? And is there any more left to do in your mind? -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [42] -------------------------------------------------------------------------------- Well, there's a couple of assets that we've talked about that we would consider opportunities to dispose of, but nothing material. We're not going to dispose of our North San Jose or our Palo Alto assets at all. And that's the preponderance of what we have left. In terms of the return on it, I mean, I don't have the calculation. But it's been extremely successful in terms of our return on the sales in the... -------------------------------------------------------------------------------- Richard Charles Anderson, SMBC Nikko Securities America, Inc., Research Division - Research Analyst [43] -------------------------------------------------------------------------------- No, no. I meant, what are the level of dispositions, how did that compare to your expectations of dispositions when you originally bought the portfolio? -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [44] -------------------------------------------------------------------------------- No. Rich, that's a good question. When we originally bought the portfolio, we did not benchmark to say, "Hey, we're going to dispose of x number of assets over this period of time." But there were a few obvious layup assets that we said we're going to dispose of. And some came based on tenant buy and some came based on just market demand. But I would say overall, if we were sort to reflect back, it's probably a higher number than we originally thought but not by much. -------------------------------------------------------------------------------- Operator [45] -------------------------------------------------------------------------------- Our next question comes from the line of Nick Yulico from Scotiabank. -------------------------------------------------------------------------------- Nicholas Philip Yulico, Scotiabank Global Banking and Markets, Research Division - Analyst [46] -------------------------------------------------------------------------------- You bought the Ferry Building a year ago. Any update on the retail plan there? -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [47] -------------------------------------------------------------------------------- Yes. I mean, listen, the retail plan is in full force right now. I believe December 1, I am seeing a complete design model of the interior, exterior and the process by which were going to go through a 2-plus-year redevelopment plan? Is that about right, guys? 2-plus years. Yes. -------------------------------------------------------------------------------- Nicholas Philip Yulico, Scotiabank Global Banking and Markets, Research Division - Analyst [48] -------------------------------------------------------------------------------- Okay. Any -- I mean any just preliminary thoughts you could share with us on what you plan to do there? -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [49] -------------------------------------------------------------------------------- No. It's going to be very exciting though. Go take a look. Buy a coffee. -------------------------------------------------------------------------------- Nicholas Philip Yulico, Scotiabank Global Banking and Markets, Research Division - Analyst [50] -------------------------------------------------------------------------------- Okay. At One Westside, I don't think you've given an update on this, but what's the latest on securing a construction loan there? And how are the lenders thinking about pricing for that asset on like a per square foot basis? -------------------------------------------------------------------------------- Mark T. Lammas, Hudson Pacific Properties, Inc. - COO, CFO & Treasurer [51] -------------------------------------------------------------------------------- So we're in the process of securing a loan. We've selected a lead lender. It's going to be a syndicate of a handful of lenders with 1 group in particular running point on it. But we anticipate that will most likely close before year end. And on the value per square foot, I don't -- we're somewhat at this point locked in to some confidentiality. But assume that on an stabilized basis, it's a big number. -------------------------------------------------------------------------------- Nicholas Philip Yulico, Scotiabank Global Banking and Markets, Research Division - Analyst [52] -------------------------------------------------------------------------------- Okay, that's helpful. And then just lastly. I wanted to see if you can give us a feel for which assets are going to be entering the same-store office pool next year. I mean you have a number of them on -- that are in the stabilized pool this year. And so I'm just wondering if you can walk through some of these assets that will be added to the pool next year. -------------------------------------------------------------------------------- Mark T. Lammas, Hudson Pacific Properties, Inc. - COO, CFO & Treasurer [53] -------------------------------------------------------------------------------- Yes. So it's likely the 35 that qualified for this quarter's same-store treatment. And you could find precisely what those are in our disclosure, they're indicated. -------------------------------------------------------------------------------- Nicholas Philip Yulico, Scotiabank Global Banking and Markets, Research Division - Analyst [54] -------------------------------------------------------------------------------- Right. I just meant -- sorry, the ones that are non-same-store that are listed as in your stabilized pool right now. Which of those would get added next year? -------------------------------------------------------------------------------- Mark T. Lammas, Hudson Pacific Properties, Inc. - COO, CFO & Treasurer [55] -------------------------------------------------------------------------------- Yes. Well -- so Nick, take the full stabilized portfolio. You'll see we break down precisely what is in the same-store in the list of properties, exactly what's in the same store. And then we know if the property qualified for the current quarter's same-store of 35 or if it's in the year-to-date same-store of the 31. So it'll be the list of the -- within the stabilized portfolio that's identified as same-store. -------------------------------------------------------------------------------- Nicholas Philip Yulico, Scotiabank Global Banking and Markets, Research Division - Analyst [56] -------------------------------------------------------------------------------- Okay. So the non-same-store assets that are in your stabilized pool are not -- like Hill7, other assets, they are not enter -- Ferry Building are not going to enter same-store next year? -------------------------------------------------------------------------------- Mark T. Lammas, Hudson Pacific Properties, Inc. - COO, CFO & Treasurer [57] -------------------------------------------------------------------------------- Right. That's right. For the full year, right. We're assuming you mean for the full year, for next year, as opposed to quarterly treatment. -------------------------------------------------------------------------------- Operator [58] -------------------------------------------------------------------------------- Our next question comes from the line of Manny Korchman with Citi. -------------------------------------------------------------------------------- Emmanuel Korchman, Citigroup Inc, Research Division - VP and Senior Analyst [59] -------------------------------------------------------------------------------- Art, maybe one for you. Just how has conversations about early renewals been going with tenants, given the tight vacancies in each of your markets? -------------------------------------------------------------------------------- Arthur X. Suazo, Hudson Pacific Properties, Inc. - EVP of Leasing [60] -------------------------------------------------------------------------------- Well, we're out in front -- we're usually out in front of the larger tenants that have 10,000 square feet, probably 1.5 years, 2 years out. I don't think that's changed. The smaller tenants, they probably lag a little bit, but we're aggressively pursuing them in every market. So it's business as usual for us. -------------------------------------------------------------------------------- Emmanuel Korchman, Citigroup Inc, Research Division - VP and Senior Analyst [61] -------------------------------------------------------------------------------- And then maybe in a similar light, on a couple of calls earlier this season, people talked about companies sort of outgrowing, specifically in San Francisco, their space and looking elsewhere. Is that a trend you're seeing, where you've either got people looking around in markets that might have been more secondary previously? Or vice versa, growing out of the primary markets and having to look elsewhere? -------------------------------------------------------------------------------- Arthur X. Suazo, Hudson Pacific Properties, Inc. - EVP of Leasing [62] -------------------------------------------------------------------------------- I think that's the case with -- if you're over 100,000 square feet in the city, you're having problems, right? There's probably inside of 8 opportunities over 100,000 square feet. I mean you noticed Stripe just moved out of the city to South San Francisco. That's one good example, one glaring example. And I think we've been the beneficiary of that, by and large, down in Redwood Shores. -------------------------------------------------------------------------------- Michael Bilerman, Citigroup Inc, Research Division - MD and Head of the US Real Estate and Lodging Research [63] -------------------------------------------------------------------------------- It's Bilerman speaking. So Victor, you're going to be batting cleanup on November 11 after investors get to go visit with Emmett, BXP, Kilroy. So I don't know, A, how you got that spot. But B, what do you want investors to focus on with the other companies? And then what are you hoping that they take away from your presentation and your portfolio and your current outlook relative to your peer set? -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [64] -------------------------------------------------------------------------------- Well, first of all, Laura did all the heavy lifting to make sure that the calendars swung our way for us to be at the end. Listen, I think our presentation and our vent is going to be much different than anybody else's that you're going to see. We have a specific business strategy around a specific topic, which is Los Angeles. And we're going to talk about Los Angeles and the future of Los Angeles. I have no idea what John or Jordan are doing, but my guess is it's not that because they would have been talking to Laura about it. So the market here in LA is going to be something that everybody's going to focus on because we're here. And it's right now as active as we've ever seen it. And it's revolving around the industry of tech and media and entertainment. And those 3 industries is what we're going to be focusing on in our prepared presentation and the guest speakers that we currently have. So I think it's going to be unique. And you know what, you'll have a good time as you always do when you come to a Hudson Event. -------------------------------------------------------------------------------- Operator [65] -------------------------------------------------------------------------------- Our next question comes from the line of Alexander Goldfarb with Sandler O'Neill. -------------------------------------------------------------------------------- Alexander David Goldfarb, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research & Senior REIT Analyst [66] -------------------------------------------------------------------------------- First, just going back to sort of a few of the questions that were talking about 2020 growth. Mark, if we look at it, you guys commented on dispositions, that you really aren't planning anything or anything that's too disruptive. Looking at your rent rolls, it looks like sort of 8% expiring over the next rolling 4 quarters. So is there anything extraordinary that we should think about that would disrupt the growth trajectory that we're all looking at? Because capital markets, you're fine. Is there anything that would disrupt it? Or it looks pretty good that you guys should be delivering the almost 10% growth for next year? -------------------------------------------------------------------------------- Mark T. Lammas, Hudson Pacific Properties, Inc. - COO, CFO & Treasurer [67] -------------------------------------------------------------------------------- Alex, nothing teed up that should disrupt that. I mean we are always looking at opportunities. There's a possibility that we could discover something that could be enhancing to that growth. Maybe there's a recycling that we would do. But there's certainly nothing we've got currently on our plate that should disrupt that. -------------------------------------------------------------------------------- Alexander David Goldfarb, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research & Senior REIT Analyst [68] -------------------------------------------------------------------------------- Right. So the Saatchi -- whatever you do with Saatchi, whether you replace or sell the building; Bentall, the backfill there from that expiration, none of that is really disruptive materially to the growth, correct? -------------------------------------------------------------------------------- Mark T. Lammas, Hudson Pacific Properties, Inc. - COO, CFO & Treasurer [69] -------------------------------------------------------------------------------- No, yes, right. I mean we've been -- we anticipate the vacate in Del Amo. We might actually get a little lucky and get a hold over there. That might add some NOI in 2020 for a little while. But yes, there's nothing material. -------------------------------------------------------------------------------- Alexander David Goldfarb, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research & Senior REIT Analyst [70] -------------------------------------------------------------------------------- Okay. And then Victor, on Bellevue, that's a topic that's been discussed on prior calls. So it sounds like you guys have had a shift. Or maybe before, you were just playing it incredibly close to the vest, what your plans were. So maybe you can just talk, was it just preserving your competitive advantage why you demurred previously on the Bellevue topic? Or did something change in the market that made you guys now want to go and take a look at acquiring in that -- over there. -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [71] -------------------------------------------------------------------------------- No. Critical mass is really the key. It's -- the opportunities that we saw, we either were unsuccessful or they were not appropriately priced for something that we were interested in. And so -- but we've been on that marketplace for a long time. But where -- as you know I said before, we're not going to go out to that market and buy 1 asset. It's just not our -- it's been -- it's never been our business plan to do that and then think about growing from that point on. So we'd have to find some critical mass. And if we do, we would be entertaining an opportunity to be an owner in that market. -------------------------------------------------------------------------------- Operator [72] -------------------------------------------------------------------------------- Our next question comes from the line of David Rodgers with Robert W. Baird. -------------------------------------------------------------------------------- David Bryan Rodgers, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [73] -------------------------------------------------------------------------------- Maybe first question for Mark and Victor together. Victor, have you had discussions with Macerich about maybe them getting out of the venture in One Westside. And Mark, you have a good sense for what development spend might be in '20, given what you're committed to already? -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [74] -------------------------------------------------------------------------------- Yes. I'll take the first one. Listen, any time -- the reality is, I think our documentation is such that there is a lock-out provision. But if Macerich is interested in getting out, they know our position there. We would be more than willing to take them out of their limited interest in that asset. That being said, it's a great opportunity for them. They've been a great partner from our standpoint and extremely complimentary of our team to let them to do what they do best, which is execute at the highest levels. They get Google in on time and on budget. And so -- but we would welcome that opportunity and they know that. -------------------------------------------------------------------------------- Mark T. Lammas, Hudson Pacific Properties, Inc. - COO, CFO & Treasurer [75] -------------------------------------------------------------------------------- On development spend, kind of looking ahead to next year. We've got a little bit on Harlow and EPIC that's going to mostly just going to be the TI allowance at that. Because that EPIC done, but for that amount, there's a little spill over there. So it looks like $50-ish million there. Harlow, similarly, it's like 20 -- call it $27 million in 2020. One Westside is a bit chunkier. As Alex mentioned, looks like we have a construction loan for all of it. But -- so this won't be -- we won't have to use our current capital availability for that or rely on our revolver, our studio revolver. But that's -- we'll see how this pans out, but we're expecting somewhere around $150 million of spend in 2020. -------------------------------------------------------------------------------- David Bryan Rodgers, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [76] -------------------------------------------------------------------------------- That's just -- the $150 million is just the One Westside project, and then add the other 2 into it? -------------------------------------------------------------------------------- Mark T. Lammas, Hudson Pacific Properties, Inc. - COO, CFO & Treasurer [77] -------------------------------------------------------------------------------- Yes. That's right. But I think if you're really honing in on sources and uses, it's really just Harlow and EPIC that are -- have utilization of our existing uses -- our sources, right, because we have a dedicated construction loan for One Westside. -------------------------------------------------------------------------------- David Bryan Rodgers, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [78] -------------------------------------------------------------------------------- Got you. And that maybe going back to Art. Just the small tenants and kind of maybe discussing the VSP program a little bit. Are you still seeing pretty strong use of the VSP program? Or is that kind of now fading, given the amount of demand that you're just kind of seeing come out of the city and activity that you're seeing? If you could just update us where you're at on that. -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [79] -------------------------------------------------------------------------------- No. I mean we're stronger than ever. I mean 333 is a great example of that. Like I said, we moved that building 2,600 basis points. And that's because of these suites that we're building in advance of. It helps us them to lease them faster with less downtime. So we're trying to deploy more VSP spots strategically throughout the Peninsula. -------------------------------------------------------------------------------- Operator [80] -------------------------------------------------------------------------------- There are no further questions. I'd like to hand it back to Mr. Victor Coleman for closing remarks. -------------------------------------------------------------------------------- Victor J. Coleman, Hudson Pacific Properties, Inc. - Chairman, President & CEO [81] -------------------------------------------------------------------------------- All right. I appreciate everybody's time and consideration this morning on our quarterly call. We look forward to talking to you all soon. And see you in Los Angeles for NAREIT. -------------------------------------------------------------------------------- Operator [82] -------------------------------------------------------------------------------- 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.