Greetings, and welcome to the Hudson Pacific Properties Fourth Quarter 2014 Earnings Conference Call. [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, Ms.Tidwell. You may now begin.

Good afternoon, everyone, and welcome to Hudson Pacific Properties Fourth Quarter 2014 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's 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, 2015, 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. And now I'd our 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 February 26, 2015 conference call. The fourth quarter rounded out a highly productive year for Hudson and laid the groundwork for our company's continued growth. We had continued leasing momentum throughout our portfolio, acquired an office property in one of Los Angeles' most sought-after submarkets for technology and media users and executed agreements to sell a nonstrategic legacy asset and to purchase a large portfolio of irreplaceable office properties in Northern California from Blackstone. Our stabilized office portfolio is now 94.6% leased. We completed 211,000 square feet of new and renewal leases during the quarter with average lease rates higher than expiring rates by 13.6% on a cash basis and 14.1% on a GAAP basis. Year-to-date, we signed 632,000 square feet of new and renewal leases with an average lease rates higher than expiring rates by 44.9% on a cash basis and 56.6% on a GAAP basis. The most significant leasing transaction during the quarter was NFL's Media lease extension from 2017 through 2019 at our 10900 and 10950 Washington properties. NFL Media remains an anchored tenant at these 2 assets, now occupying a total of 137,000 square feet consisting of office space and 2 sound stages used to broadcast the NFL Network, NFL.com, and NFL Mobile. NFL Media's lease extension exemplifies our ability to not only attract but also retain high-profile media and entertainment tenants, whose -- require best-in-class office and studio spaces specifically designed to meet their unique needs. In terms of dispositions, in December we entered into an agreement to sell our 222,000 square foot First Financial property in Encino, California for $89 million, including the assumption of an existing $43 million loan. Hudson's predecessor entity acquired the property as part of our IPO, and we proceeded…

Thank you, Victor. Funds from operations excluding specified items for the 3 months ended December 31, 2014 totaled $22.2 million or $0.32 per diluted share compared to FFO excluding specified items of $15.6 million or $0.26 per share a year ago. The specified items for the fourth quarter of 2014 consisted of expenses associated with the EOP Northern California Portfolio acquisition of $4.3 million or $0.06 per diluted share and costs associated with a 1-year consulting arrangement with a former executive of $1.3 million or $0.02 per diluted share. Specified items for the fourth quarter of 2013 consisted of expenses associated with the acquisition of our Seattle office portfolio of $500,000 or $0.01 per diluted share and an early lease termination payment from Bank of America relating to the company's 1455 Market Street property of $800,000 or $0.01 per diluted share. FFO, including the specified items, totaled $16.6 million or $0.24 per diluted share for the 3 months ended December 31, 2014 compared to $15.9 million or $0.27 per share a year ago. Net loss attributable to common shareholders was $2.3 million or $0.03 per diluted share for the 3 months ended December 31, 2014 compared to net loss of $100,000 or $0.00 per diluted share for the same period a year ago. Turning to our combined operating results. For the fourth quarter of 2014, total revenue from continuing operations increased 19.8% to $68.8 million from $57.4 million a year ago. Total operating expenses from continuing operations increased 21.6% to $57.1 million from $47 million for the same quarter a year ago. As a result, income from operations increased 11.8% to $11.6 million for the fourth quarter of 2014 compared to income from operations of $10.4 million for the same quarter a year ago. I will discuss the primary reasons…

Thanks, Mark. To summarize, our fourth quarter, and all of '14 for that matter, was highly productive and, in many ways, transformational in terms of the setting of the stage for our company's future growth. We appreciate continued support of Hudson Pacific Properties as always, and we look forward to updating you on our next progress again next quarter. Now operator, with that, I'm going to turn the call over to you for any questions.

[Operator Instructions] Our first question comes from the line of Craig Mailman with KeyBanc.

Mark, on guidance, those helpful to financing kind of assumptions there, what are you guys assuming for the GAAP yield on EOP?

The GAAP yield on EOP? You mean like the going in cap rate on a GAAP basis? Is that what you're saying?

Correct. Yes, correct.

Well, I'll tell you, on -- all we have for the time being are estimates for purchase price accounting purposes, Craig. And until closing, we can't calculate the final straight line rents and, probably, more importantly, the mark-to-market on rents. And so suffice to say, we could get into some discussion around GAAP and cash cap rates. But I think, better than that, Craig, if you'll humor us, in about a month's time, we're going to actually going to close this deal and we'll have final purchase price accounting done, and I think at that time we're better having a conversation around the GAAP adjustments because then they'll actually reflect the final purchase price accounting.

Okay. And that's fair. I'm just looking at the difference between the low end of your guidance versus my estimate, and I think part of it would be probably the financing cost you guys are assuming and then likely the GAAP yield on that versus kind of the one that I'm trying to get at. Could you...

Well, just so you know, on the financing cost, of course, there is no debt being assumed, so there's no mark-to-market on debt. So all the GAAP adjustment is going to be leases in place, right? So -- and again, that's -- that purchase price accounting is pending. And we can get in -- by the way, the other thing, too, is we've tried to give you some foreshadowing on a weighted average cost of interest so you can start to get a handle around what that interest expense would look like. But we haven't finalized our debt structure yet. We have a pretty good handle on it. We haven't finalized it. And of course rates continue to move until then. So again, when we get to closing, we'll be able to give you a very definitive idea of the interest expense.

Okay. And then just financing. Generally you guys have -- the preferreds I think are callable in December, pretty high rate. I know it's early in the year but kind of what's the thought process there? Do you kind of refinance it with more preferreds? Or do you take them out on the line?

Yes, Craig, it's Victor. We -- we're definitely going to do something with it. We haven't decided what, but we're not going to obviously -- we're going to take it out at the end of the year.

Okay. And then I guess just going back to your comments, Victor, about the EOP coming better than kind of pro forma at this point. Is it just the velocity of leasing and the depths of demand in the markets that you purchase? Or is it also lease rates relative to what you guys underwrote?

It's a combination of both. I think our underwriting right now is better. I mean, the performance there is better than what we underwrote it at in terms of the lease rates. We're seeing very solid activity across the board on all the vacancy as well as the renewals. I think, as our underwriting had spoken for when we initially came out, we were looking at a year end '15 and roughly 85% leased. With the couple of large deals that were done right when we took over the day-to-day leasing in operations in December, those were executed, and subsequently we're in discussions on a formal basis for 600,000 plus square feet of deals and we are in leases or have signed an additional 400,000 plus square feet of deals. So we're way ahead of what we thought our numbers would be from a velocity standpoint. As I said, the mark-to-markets are exactly in line, if not better.

Okay. Wow, sounds good. So where do you think, end of 2015, that portfolio could be leased to?

I think -- listen, I don't want to be held to anything at this stage until we close and we get into it, but I think we will exceed our initial 85% by at least -- I don't know. On a low end, maybe a couple of hundred basis points. And on the high end, maybe 400 basis points.

Our next question is from the line of Vance Edelson with Morgan Stanley.

So looking ahead, when we think about how 2015 might play out on the acquisition front after EOP is complete, can you comment on which markets now seem most attractive for expansion, which are likely to be a greater part of the mix a year from now? Is it San Francisco and the Valley or more Seattle with more limited opportunities in Southern California? Is that a fair way of looking at it?

Vance, listen, I think our 3 core markets, San Francisco and down in the Valley, Seattle and here in Southern California, are still on the forefront. We are seeing deals in Seattle, and we're going to continue to hopefully execute on some of the opportunities that we're working on. We are also seeing deals in Los Angeles, and we're going to be executing on some deals there. I'd say of the 3 markets, the Valley and the City are probably in third place. We're not seeing as many deals, and obviously we're going to attack the existing portfolio that we're about to close and for the most part focus our energy and our team on that versus new deals. We love the quality of the assets and what we have, and so I would say it's sort of a tie between the Los Angeles market and the Seattle market going forward for the short term.

Okay, makes sense. And then related to that, could you just provide an update on the cap rates you're seeing and the liquidity up and down the coast? Are there any signs that in some specific cases the bidding might be getting ahead of the fundamentals? Or from what you're seeing, is everything still quite reasonable?

No, I think what we're seeing right now in the Seattle marketplace, the fundamentals and the cap rates, obviously there is some disparity there. I think in Seattle we're probably looking at a 6% to 7% range on the cap rates, which is fundamentally in line with the leasing. I think obviously here in Los Angeles, in line with the comps you see in the market, you're really talking about somewhere around the 4% to 5% range, where rental rates still haven't moved into place yet. But I believe there's going to be some substantial comps coming to the marketplace on a rental rate basis which is going to make that gap a lot smaller. And cap rates are probably going to stabilize in the 5% range, seems to be where we're looking at going forward.

Okay. That's helpful. And then just from a procedural standpoint on EOP. Can you give us a feel on the integration process? Is the heavy lifting already done, would you say? Does it even have to be complete before closing? Or could there be odds and ends that remain for a while since its full integration isn't really achieved for a year, for example?

So let's say, I think as we had commented on initially in our December announcement, we started integrating then. We have not stopped. It is a process. I am very confident that it's been as smooth as we could have possibly imagined. The retention and hiring is almost complete. I think the heavy lifting, as you would put it, is really mostly behind us, but there is going to be a tremendous amount of integration and Hudson culture or processes put in place. I do think from an accounting and operating side, we're way ahead of target as to where we were, where we would have been if we hadn't sort of started this in December. But it is an ongoing process. I am sure, like anything else, when you're taking on 8.2 million feet in a marketplace that we've got a spectacular staff around it day-in and day-out, we will encounter issues that will be surprising. And I think the team is fully prepared to deal with them on a foremost basis, and I'm confident that the execution is going to continue through probably the first couple of quarters of operations. But no surprises should derail us from this phenomenal opportunity.

Our next question is from the line of Ian Weissman with Crédit Suisse. Ian C. Weissman - Crédit Suisse AG, Research Division: Just going back to the guidance for a second. How should we think about sort of the legacy portfolio, just a comp store revenue growth number?

We, ourselves, talked about this and thinking it could likely come up. I think the challenge of the legacy portfolio and what the incremental impact of the Redwood transaction has to it is, it starts with difficult -- the starting point of that can be a challenge because we've done a lot of things that change that underlying legacy portfolio leading up to this transaction. So in order to get to a same-store point of reference, you'd have to make certain decisions around whether or not you assume First Financial is sold, whether or not you assume the JV at 1455 is done. You'd have to make an assumption around the equity offering and other events that have transpired as it relates to legacy portfolio that have been done and proceeds of which now get redeployed into this particular opportunity. But if there weren't this opportunity, then there is other uses of proceeds. And so the challenge, Ian, is coming up with what that base case number is, and I think -- but I do think it's a fair question. But I just think it probably deserves a bit of development in terms of what you'd want as your starting point so that we could give you -- use that as the point of reference so you could see the impact. And I think, by the way, a month from now, we'll give full sets of numbers around the actual final debt structure and timing and interest rates and everything. And at that point, what we'll try to do is give people points of reference, like the incremental cash NOI, incremental GAAP NOI that came through from the Redwood transaction so you can see what the legacy portfolio did. Ian C. Weissman - Crédit Suisse AG, Research Division: I guess what I'm struggling with here or trying to figure out is -- I mean, if we sit here and we don't know the FAS 141 number, we don't have a good number on the legacy internal growth number, why put out a -- and you guys put out a guidance range way above the Street. I just want to know what that range is based on and how we can sort of bridge the gap between where the Street is today, which is significantly below that to that number. Now the financing costs were very helpful. I just want to make sure that I'm modeling the company correctly and -- so are you basically essentially telling us we need to wait?

Well, I don't know we need to wait. What I think we could do, Ian, is -- obviously, not anything that wasn't discussed on today's call, but what we could do is we could spend some time with you focusing on what the non-Redwood portfolio's performance has been off the record and then we can hone in with you on what that -- would have meant in 2015 but for the Redwood impact. And by the way, as it relates to the current consensus estimate, which I think you're probably seeing a $1.37, that's what we see, I can tell you the composition of that reflects certain numbers which haven't been updated for quite some time and, in fact, don't reflect the announcement on Redwood at all, and some have been updated. So it itself is sort of a combination of numbers with a very wide range of estimates in it. So on -- I don't really know that our number, as it relates to the Street's expectations, that the Street's expectations is that good a point of comparison. Ian C. Weissman - Crédit Suisse AG, Research Division: Right. Okay. And then just a question, just given your leasing success so far out of the gate in the EOP Portfolio, any plans -- and I know there's a lot to digest there, but any plans about thinking about selling some of those noncore assets or markets sometime this year?

Listen, we've addressed that before, Ian. And at the end of the day our position is we've got perhaps 1 or 2 assets that we may consider disposing of sometime in '15. But for the most part, the portfolio in place is what we're going to keep, and we're excited about the opportunity of having the combined portfolio, which makes a lot of synergetic sense going forward to be with what we have.

[Operator Instructions] The next question is from the line of Ryan Peterson with Sandler O'Neill.

Couple of questions. First one, since you guys started kind of managing the EOP portfolio in December, leasing it, is there any offset there? Do you guys receive a fee from managing it? Or do you just benefit from kind of getting in there early and starting to set up the portfolio the way you want?

Good idea, Ryan. Maybe we should have asked for a fee. I don't -- didn't think of that one. No, the answer is that obviously we're going to be the benefactors in the capital, but where overseeing is going to come out of us going forward. So all the good going forward will be a combined benefit to Blackstone as a shareholder and the current Hudson shareholders in the portfolio going forward. We took over the day-to-day decision-making process with a phenomenal team in place, and I think the combination has proven itself to be as successful as we could have imagined. And as I said, the capital outlay will be Hudson-related dollars once these leases are -- have been executed and the ones that have been executed once the capital improvement and tenant improvement dollars and leasing commissions are deployed, so...

Okay. And then the G&A uptick this quarter I assume is the beginnings of the integration?

Is the question whether or not the G&A is reflected in the current guidance estimate?

Yes -- well, no, sorry. The G&A in the fourth quarter was a bit higher. I'm assuming that's because of the leasing of the EOP portfolio?

Not, not exactly. I mean, there is maybe some incremental G&A associated with anticipated hires. But no, the G&A is sort of a reflection of a combination of the adoption of a new outperformance plan, which we've been doing incrementally every year. And the present value analysis of that is somewhat factored in. And then also just performance-related, somewhat higher bonuses.

Okay. And then one more question, just kind of switching gears on the -- you said the Icon development that you have 2 million square feet of demand, I think. How are the rents looking on that versus what you were originally underwriting?

We're seeing rents higher than what we underwrote, and that is obviously given the fact that some of the comps set in the area had been higher rents. And Viacom, being the most specific one, was at a higher rent that we had initially even underwrote our assets to be stabilized, which really we're anticipating in September of '16 as to where those effective rents would be coming into play. So we're happy to see the flow of tenancy, and we're even happier at some of the quarter rates that we're looking at and discussions that we're having.

Our next question is coming from the line of Rich Anderson with Mizuho Securities.

I'm sorry if I missed this. I got on a little bit late. But the occupancy level now of the EOP portfolio?

We've not quoted occupancy now. I mean, going in, our occupancy, Rich, was 80%, just a tick over 80%. And we've not quoted occupancy, but what we've stated is we -- in our remarks, we've seen a tremendous flow of leasing activity. And we've got somewhere in the range of about 600,000 square feet of deals that are in discussions and another 450,000 feet of deals that are either signed or in leases. So we've got a lot of activity, but we've not quoted a change yet. And that's exclusive of the deals that we had referred to when we first took it over, which was Walmart and Google, which is an additional 200,000 feet.

Okay. And I -- if I could get back to Ian's question, you kind of gave all the pieces of the puzzle to the guidance range except for maybe the most important one, which is the yield on the transaction, the GAAP yield. We know what the GAAP...

Well, we had indicated, Rich, at the time of the transaction, that the projected in-place yield on a cash basis was about 5.1%. And we...

Is that what you're assuming? Is that what you're assuming in guidance, then, that 5.1%?

No, no, no. We've made an assumption around a GAAP adjustment, but it is only a preliminary assumption for straight line rents and mark-to-market on in-place. Now I suppose we could have given an FFO estimate on a strictly cash basis, but I think we all -- then the question would have been, "Why didn't you give us some idea of what the GAAP adjustment might be?" But the -- we can discuss with you what our underlying thinking is. But in a month's time, we are going to have an actual purchase price accounting done. And until that time, we won't have true straight line rents or the actual mark-to-market on rents. So the best case we can do is some estimate for it, and it strikes me that it's probably a more useful and more -- it has more veracity if we can do it once the purchase price accounting is done.

Okay. But you don't want to share what that estimate is just so everyone doesn't have to sit around for 30 days? I mean, it just seems like -- okay, what's the assumption? We get it. It's an assumption. It might change in a month's time, but it might be helpful just to...

Okay. All right. Look, I think it's safe to assume that on a GAAP basis that 5.1% cap rate approaches very close to a 6% cap rate on a GAAP basis.

Okay. I appreciate that. And then this is small potatoes but it just may be one of the canary in the coal mine type questions I tend to ask. But Rocket Fuel I know is not a huge tenant of yours but had a tough quarter. Is there anything there that you're worried about for them or any -- beyond them, any tenants that have kind of had maybe a little bit of a stumble out of the gates more recently that are kind of on your radar screen beyond the larger ones?

Well, specific to Rocket Fuel, listen, we monitor a lot of tenants, and we know what's going on with those guys. I think the easy answer to that, at the end of the day, Rich, is their space is absolutely, perfectly built out. And I think their rent, off of memory, is close to $46, and we're doing deals there at $60. So the spread is substantial enough for us to see what happens in that space. Because as is, we could probably get $60 all day long. And I do know our guys are in conversations with them, and I'm sure they're very comfortable with the answers they're getting from Rocket Fuel. And if not, they're entertaining other conceptual ideas with some of the existing tenants who are desperately in need of expansion.

Sure. Any others that you're kind of having some conversations about, about near-term future plans based on their recent performance?

No.

Our next question comes from the line of Jamie Feldman with Bank of America.

Can you talk a little bit more about your relationship with CPP? You think we'll see more sales or more joint ventures with them? And then also just, beyond them specifically, what was the... [Technical Difficulty]

Well, we lost Jamie, I think. Maybe he'll call back in if he wants to pick up the answer. The relationship with CPP is in -- specific is around 1455. We have an understanding that we will take a look at some more deals with them. They're interested in some of the existing deals, and obviously some new deals that we're looking at together. I think that's a strong long-term joint venture partner with the right kind of structure in place. We're excited about that opportunity and doing other deals together.

There are no additional questions at this time. I'll turn the floor back to Mr. Victor Coleman for closing comments.

Thanks so much, and I appreciate the opportunity to present our fourth quarter results and questions. And we look forward to speaking to you all again at the end of this quarter. Thank you.

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