Greetings, and welcome to the Hudson Pacific Properties Fourth Quarter 2013 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. (Operator Instructions). As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Kay Tidwell, Executive Vice President and General Counsel. Thank you. You may begin.

Good afternoon, everyone, and welcome to Hudson Pacific Properties' fourth quarter 2013 earnings conference call. With us today are the company's Chairman and Chief Executive Officer, Victor Coleman; and Chief Financial Officer, Mark Lammas. Other members of the company senior management team are also here to answer questions. Before I hand the call over to them, please note that on this call, certain information presented contains forward-looking statements. These statements are based on management's current expectations and are subject to risks, uncertainties and assumptions. Potential risks and uncertainties that could cause the company's business and financial results to differ materially from these forward-looking statements are described in the company's periodic reports filed with the SEC from time to time. All information discussed on this call is as of today, February 26, 2014, and Hudson Pacific does not intend, and undertakes no duty, to update future events or circumstances. In addition, certain of the financial information presented in this call represents non-GAAP financial measures. The company's earnings release, which was released this afternoon and is available on the company's website, presents reconciliations to the appropriate GAAP measure and an explanation of why the company believes such non-GAAP financial measures are useful to investors. Now, I'd like to turn the call over to Victor Coleman, Chairman and Chief Executive Officer of Hudson Pacific. Victor?

Thank you, Kay, and welcome everyone to our fourth quarter 2013 conference call. The fourth quarter was an extremely productive one for Hudson. Noteworthy accomplishments included the completion of significant new long-term leases, the execution of a purchase contract for a major acquisition announced at the end of the quarter and preparations for what proved to be a very successful common stock offering following the end of the quarter. Leasing activity remained robust during the quarter with the completion of new and renewal leases totaling more than 415,000 square feet during the quarter. Highlights included a 15-year 284,000 square foot lease for our entire Element LA office campus, with Riot Games, a developer and publisher of premium competitive online games. This was the largest new lease transaction in the region in the last five years. As you recall, Element LA consists of more than 12 acres with five buildings totaling approximately 284,000 square feet and a five-story parking garage currently under construction. The property is currently being redeveloped as a premiere creative office headquarters campus for Riot Games, the company which was recently named one of the 50 best small and medium-sized companies to work for by Fortune Magazine. Commencement of the lease with Riot Games is scheduled for the second quarter of 2015. During the fourth quarter, we also entered into a new 12-year lease for our entire 63,400 square foot 3401 Exposition Blvd. property with Deluxe Entertainment Services group, a leading provider of services and technology for the global digital media and entertainment industries. This lease was executed five months following the acquisition of this property. 3401 Exposition is currently undergoing a full base building redevelopment including new and exterior facades, a new roof, new mechanical and electrical systems and a complete interior remodel. The renovation process is…

Thank you, Victor. Funds from operations excluding such line items for the three months ended December 31, 2013 totaled $15.6 million or $0.26 per diluted share compared to FFO excluding such line items of $11.6 million or $0.23 per share a year ago. The specified items for the fourth quarter of 2013 consisted of expenses associated with acquisition of our office portfolio in Seattle Washington, a $500,000 or $0.01 per diluted share and an early termination payment from Bank of America relating to the company's 1455 Market Street property of $800,000 or $0.01 per diluted share. Specified items for the fourth quarter of 2012 consisted of expenses associated with the acquisition of the Pinnacle office property in Burbank, California of $200,000 or $0.00 per diluted share. FFO including the specified items totaled $15.9 million or $0.27 per diluted share for the three months ended December 31, 2013 compared to $11.4 million or $0.23 per share a year ago. Net loss attributable to common shareholders was $100,000 or $0.00 per diluted share for the three months ended December 31, 2013 compared to net loss of $5.9 million or $0.13 per diluted share for the same period a year ago. Turning to our combined operating results, for the fourth quarter of 2013, total revenue from continuing operations increased 30.4% to $37.4 million from $44 million a year ago. Total operating expenses from continuing operations increased 12.3% to $47 million from $41.9 million for the same quarter a year ago. As a result, income from operations increased 378.5% to $10.4 million for the fourth quarter of 2013 compared to income from operations of $2.2 million for the same quarter a year ago. I will discuss the primary reasons for the increases in total revenue and total operating expenses in connection with our segment…

Thanks Mark. To summarize, our fourth quarter and all of '13 for that matter was highly productive and very rewarding. Leasing activity continues to demonstrate the strength in our submarkets and we're executing on our asset growth strategy as evidenced by our recent acquisitions in both Seattle and West LA. As always, we appreciate your continued support of Hudson Pacific Properties and we look forward to updating you on our progress again next quarter. Now, operator, I'm going to open the call up for questions.

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions). Thank you. Our first question comes from the line of Philip Shen with ROTH Capital. Please proceed with your question. Mr. Shen, please begin.

Operator, let's go to the next one.

Thank you. Our next question comes from the line of Vance Edelson with Morgan Stanley. Please proceed with your question.

Great. Thanks a lot. So, I guess in no particular order, you had a lot of success last year proactively backfilling space. This year you have a lot less expiring. I'd imagine it makes it that much easier to proactively get a jump on it. So is that nearly all taken care of?

Yes, Vance. For this year coming up, we have very little expiring that we're not already in conversations or we're already dealing with at the time. We've got really, I'd say, about six tenants that we're working through right now that have material numbers at the end of the day. 40% of that is already spoken for. The overall portfolio that we've pre-negotiated, so it's one of the lowest rolling years we had.

Okay, great. And then on Merrill Place, could you just remind us the pattern of the expirations over the next four years? It sounds like there's a big mark to market opportunity. But of that 50% or so that's expiring, is it frontend or backend loaded over the four-year stretch?

So, we have approximately 20% rollup and it's pretty much weighted throughout the next two years, '15 and '16. And there is, for the most part, I think we've got about 20% this year and the remaining – of the rollup, the remaining is pretty equal over the next two years.

Okay. So kind of 20% this year and then equal over the remaining two years?

Yes.

Okay, got it. Okay. And let's see what else. So how do you feel about the prospects for a recovery in media and entertainment occupancy? You had some fairly bullish comments on Hollywood in general. So do you think we've seen the bottom in occupancy there?

Well, in term of – so that's sort of a two-loaded question, right. So the occupancy and activity for the general office space in Hollywood for Class A space is exceptionally frothy right now. We've got lots of activity and very little space that's either available or coming online. As I mentioned in my prepared remarks, we've got very, very low vacancy there right now. In terms of the actual media facilities, we're full. We are seeing a big activity and gross up right now and demand coming to our suite season in May. There's a lot of interest. Fourth quarter has typically been always a slow quarter, because it's not a full working quarter for actual production and I think that is reflected in our numbers. And perhaps this year, our fourth quarter was lower than year-over-year last. But overall, the media business year-over-year continues to increase on a gross revenue basis. And we're pretty excited about this spring.

Terrific. And then maybe just one last question, if I may, on Element LA, the campus renovation. I guess it's very early days, but any surprises so far that you think might put you ahead or behind schedule or ahead of or behind what you're expecting on the cost front?

No. Right now, we're right on budget and it looks like we're right on time. I think we're about to complete the parking facility, which is the major piece of the new construction. That will be done in the next 30 to 45 days and then the core and shell [ph] build out should be done by July for the tenant build up to start for occupancy, as I said, in early '15.

Okay. That's great. Thanks, guys.

Thanks, Vance.

Thank you. Our next question comes from the line of Rich Anderson with BMO Capital Markets. Please proceed with your question.

Good afternoon, guys.

Hi, Rich.

So, when you look at the pipeline of potential deals that you're kind of looking at today, how much of it is in Seattle?

I think easier said, Rich, is that the provider of the stuff we're looking at is a combination of Seattle and Los Angeles. We're not seeing marketed deals that sort of fit the prototype of the stuff we purchased in the past in San Francisco. Pricing has hit levels that I think we are seeing a much greater flow of activity in Seattle and we're really focusing a lot of our attention in the Pioneer Square area. Also, we are seeing a nice, solid flow of off market deals in the core markets of LA, which we've been working through, which is really the West Los Angeles through Hollywood marketplace.

How much as a percentage of the total portfolio would you say is a reasonable target for Seattle say, three or four years from now?

I don't know. I can't put a peg on that. As I think you can tell by our prepared remarks, we're very excited about Seattle. We're excited about our existing acquisition. We're excited about our new acquisition and the potential development. I was actually up there yesterday with architects and our team up in Seattle looking at our future development opportunities up there, and I think the opportunities there are pretty good. And more importantly, the fundamentals are excellent in terms of the rental rate growth, job growth and just the overall tenure of that marketplace, it's pretty exciting.

Okay. So bigger picture, this time last year you provided FFO guidance of $0.90 to $0.94 and you reported $0.99 adjusting for everything. So a nice uptick. First of all, how would you – would you characterize – almost all of that is just from your acquisition activity or did you think some of it is from outperformance from a leasing perspective? How would you characterize the uptick in your performance relative to initial guidance?

Well, as you know, we don't benchmark our guidance on future acquisitions. It's only on in-place acquisitions and assets that are in-place at the time we give guidance. And so last year, the preponderance of our tick up was performance of the existing portfolio and rental rate movement in some of our key areas. And then we obviously had acquisition specifically in Seattle, which was our biggest acquisition of the year. That ended up focusing the shift. But we also add an offering last year at the same time. So that was diluted. So the combination – I think it's a combination of all three.

Okay. And is there anything about the vibrancy of the markets today? You're talking about Southern California more than Seattle, that suggest that your performance – your leasing and kind of looking internally could be even better in 2014 versus 2013? How would you describe the canvas that you're working on relative to last year?

Well, if I go market by market in our three core marketplaces, as I mentioned, in Seattle it had a very nice movement in terms of rental rate growth and I think we're looking at that this year. I think we would be very comfortable estimating – given the activity and the lack of space that's coming online in that marketplace, we're going to see as good if not better rental rate growth and activity in the Seattle and surrounding markets that we're in, in the Seattle area. I think if you look at San Francisco, clearly that question has been asked year after year, which is what's happening in that marketplace and is it bottoming out? And I think that the number was almost a 14% rental rate growth for the full year of '13 and I think right now, we still see in the deals that we are working on right now, we're working on substantial sized deals and leasing activity and our leasing team up there is still seeing rental rate growth numbers that are very, very healthy. And so I'm very optimistic at the deals that we're going to announce over the course of this year are going to be very good rental rates and in excess to where they were in '13. I think the biggest movement that's fundamental is that in Los Angeles and the West LA side, the statistics are pretty evident that in West LA you had substantial positive absorption relative to the overall marketplace, which had – which nowhere near performed at the same levels. And there was a definite spread in rental rate growth and absorption of square footage in the West LA marketplace relative to the rest of the market. So, overall I think the fundamentals in those three markets where our core portfolios are, are very exciting and I think '14 should prove out to be a pretty good year.

Okay, great. And then last question and I don't know if you can comment on this, but can you give any color on the circumstances for Howard Stern's departure? Was it a mutual thing? Was it him? Was it you? Any comment at all that you can provide there?

Yes. Listen, there's no secret there at all. We've commented on this before. It was an absolute mutual decision. That was something that's we've been in the works for some time and a desire for him to do some other things and we're excited that he's going to be on board to help us through the transition period and we're excited for him and his future opportunities going forward, and very grateful for all he's added to us in the past.

Okay. Thank you.

Thank you. (Operator Instructions). Thank you. Our next question comes from the line of Craig Mailman with KeyBanc. Please proceed with your question.

Hi, guys. On guidance, Mark, can you give some of your underlying assumptions, particularly G&A?

Yes, I can give you an idea on that. I mean, you know now that 2013 G&A came in cash and non-cash right around 22.5. We're not – I'm sorry, right around 20. As we've announced, we've adopted another outperformance plan and that's really the difference as we see it. And so we're seeing it coming in right around 22.5. So call it 20 compared to 22.5, give or take.

Okay. And I know you're excluding Howard's consulting agreement from this. Would G&A have been – I mean, I guess it would have been – you guys kind of are pulling him out of consulting agreement fees also out of the run rate? Is that a fair way to look at it? Or, are we going to see…?

He's in that number. For FFO purposes, because it's a non-recurring number, we naturally didn't include it in our guidance. But the number I just provided you factors his consulting cost in.

Okay. Then moving on to the leasing side of things, the – lease term fee, is that space that you guys didn't know you were getting back and now would be available to release? Or are you guys still really only have, I think, the fifth floor available for 1455?

You're referring that – I reference that one-time item with BofA.

We had struck a deal with BofA back in November of last year, so we knew we were going to get that floor back, those floors back.

Okay. So those have already been released or they are available now to lease?

They've been released. We've been doing early surrenders in connection with taking advantage of lease-up opportunities.

Right. Okay, that's helpful. And then just – I know you guys have a pretty active deal pipeline here. And now you have the proceeds from the equity deal. I know it's not in guidance, but just curious; your thoughts or your tentative thoughts on potential timing of redeploying that capital?

Craig, we typically don't comment on that. As deals come and we've committed to deals and put them in escrow, that's when we make our announcements. I mean suffice it to say we've been an active acquirer in markets that we're very comfortable with growing and enhancing our portfolio, and there are some synergies in certain assets that we're looking at right now. And as times come over the course of this year, we'll keep you guys informed on the acquisitions.

Great. Thank you.

Thank you.

Thank you. We have no further questions in queue at this time. I'd like to return the floor back over to Victor Coleman for closing comments.

Thank you, operator, and thank you so much for supporting Hudson as usual. Last year was a great year and we're looking forward to a better '14. Have a good afternoon.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.