Greetings, welcome to the Hudson Pacific Properties, Inc second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Laura Campbell, Executive Vice President of Investor Relations and Marketing. Thank you. You may begin. Thank you, operator. Good morning, everyone, and welcome to Hudson Pacific Properties' second quarter 2021 earnings call. Yesterday, our press release and supplemental were filed on an 8-K with the SEC. Both are available on the investors section of our website, hudsonpacificproperties.com. An audio webcast of this call will also be available for replay by phone over the next week and on the investors section of our website. During this call, we'll discuss non-GAAP financial measures, which are reconciled to our GAAP financial results in our press release and supplemental. We'll also be making forward-looking statements based on our current expectations. These statements are subject to risks and uncertainties discussed in our SEC filings, including those associated with the COVID-19 pandemic. Actual events could cause our results to differ materially from these forward-looking statements, which we undertake no duty to update. Moreover, this quarter, we've once again included certain disclosure prompted by COVID-19 business changes, which we won't maintain once business operations normalize. With that, I'd like to welcome Victor Coleman, our Chairman and CEO, Mark Lammas, our President, and Harout Diramerian, our CFO. They will be joined by other senior management during the Q&A portion of the call. Victor? Thank you, Laura. Good morning, everyone. Welcome to our second quarter 2021 call. We had a very strong second quarter in terms of our financial results. We've also had a very busy start to our third quarter, executing on our growth strategy for Sunset Studios, and I'll talk a little bit about that more in a moment. The big picture, the tech and media industries continue to flourish in our markets. Venture investment and fundraising are at record levels. The IPO market is strong. Tech employment and hiring have recovered to essentially pre-pandemic levels, and media companies are spending billions to produce a backlog of content. Over the last few months, we've seen a real momentum towards the return of office, and we're optimistic that's going to continue. Growing vaccination rates, combined with statewide reopenings in California in mid-June, in Washington at the end of June, and forthcoming in Vancouver after Labor Day, led companies to begin implementing and formalizing plans. We are still in a wait-and-see mode regarding any major adjustments to space configurations or needs. Even with variants, we're expecting heading into fall, most companies will move forward towards at least a partial reoccupancy of existing space, potentially coupled with vaccine mandates. We're already seeing this from a few of our larger office tenants. Essentially, all of our major studio tenants, Netflix, HBO, CBS, Disney, ABC, Amazon, have resumed and are scheduled to imminently resume active production or on our lots with safety protocols in place. Production is now in overdrive given content demand and pandemic related shutdowns, particularly here in Los Angeles, where we are building a state-of-the-art global studio portfolio to meet that demand. To that end, I'm sure many of you saw we made two very exciting major announcements over the last week around our expansion of our Sunset Studios platform. The first, Sunset Glenoaks, will be the largest purpose-built studio in the Los Angeles area in over 20 years. The project is in Sun Valley, minutes from Burbank, where Disney, NBCUniversal, and WarnerMedia are headquartered, and many other production companies like Netflix are located. We're going to build approximately 240,000 sq ft, adding another seven stages to our portfolio for a total investment of approximately $170 million-$190 million. We're finalizing plans and budgets that could start construction as early as the fourth quarter of this year and complete the project in the third quarter of 2023. This is a 50/50 JV with Blackstone, and we're on point for development, leasing, and property management. The second transaction, which we announced on Monday, marks Sunset Studios' first expansion out of the U.S. into the U.K. Something I've often noted was on our agenda. The U.K. has a long history of global production and a media center. It has a deep pool of talent, crews, and services to support productions, regional infrastructure, and generous and longstanding tax credits. Further, investment in the U.K. film and TV investment has grown dramatically over the last 5-7 years, while supply and purpose-built studios remains limited. We're in the entitlement and planning stages to build what will ultimately be one of the three largest purpose-built studios in the U.K. and one of the highest quality production facilities globally for TV and film. The site comprises 91 acres on undeveloped land about 17 mi north of London in Broxbourne, Hertfordshire, minutes from public transit and close to the Heathrow Airport as well as central London. This facility will provide great access to other major studios, production houses, crew, and talent. We purchased the site for GBP 120 million through a 35/65 JV with Blackstone. Although it's early, we anticipate a total investment of around GBP 700 million. We'll be responsible for development, oversight, leasing, and property management, and we're setting up a local office and a small team to manage the day-to-day reporting to our team here in Los Angeles. Part of what's so exciting about the Sunset Studios' newest L.A. and U.K. locations is we're reimagining how studio facilities can best support future productions. Be it through architectural design, high-tech infrastructure, or sustainable buildings and operations. We're at the very positive preliminary marketing conversations with major production companies related to both projects, and we can either master lease or multi-tenant these facilities. It's still early, and we have a lot of interest and flexibility so far. I want to congratulate the Hudson Pacific team on winning the NAIOP's 2021 Development of the Year Award. It's one of the industry's most prestigious awards and NAIOP's highest honor. It's also a reflection of our company's leadership and innovation across every aspect of our business. NAIOP's recognition is especially meaningful given it's based mostly on our exceptional performance throughout 2020, which, of course, was a very atypical and challenging year. Again, very proud of the Hudson Pacific team. With that, I'm going to turn it over to Mark. Thank you, Victor. Our second quarter rent collections remained strong at 99% for our overall portfolio and 100% for office and studio properties. We've collected 100% of our deferred rents due to date. Physical occupancy at our office buildings currently ranges from 5% - 55%, depending on the asset. At the lower end, our property is largely occupied by tenants communicating an end of summer or early fall return. As physical occupancy has improved, so has our parking revenue, which grew 12% in the second quarter compared to the quarter prior. Office leasing activity continues to accelerate across our portfolio and markets, especially in terms of inquiries and tours. This activity translated into strengthening fundamentals, more so in some markets like Silicon Valley, which in the second quarter had stable rents, declining vacancy, and significant positive net absorption. In line with these trends, our deal pipeline, that is deals and leases, LOIs, or proposals, stand slightly above our long-term average at 1.4 million sq ft. That's up 75% compared to the second quarter last year and 35% year-to-date, despite our having completed over 1 million sq ft of deals so far in 2021. To that end, we've signed 510,000 sq ft of deals in the quarter, once again in line with our long-term average, with 19% GAAP and 12% cash rent spreads. Our weighted average trailing 12-month net effective rents are up close to 10% year-over-year. There are two primary drivers of this increase. First, our effective rents are up slightly, about 8%, and second, our annual TIs per sq ft are down 30%, mostly due to executing more renewal leases. Separately, our trailing 12-month lease term for new and renewal deals also increased from 4.5 to about five years year-over-year, and term has also extended from pandemic lows. Our deal activity this quarter was split relatively equally between the Bay Area, with a preponderance along the Peninsula and in the Valley, and the Pacific Northwest, that is Seattle and Vancouver, with a handful of deals in Los Angeles. We maintained our stabilized lease percentage at 92.7%. Our in-service lease percentage dipped 30 basis points due to the inclusion this quarter of Harlow, which we delivered to Company 3 in April. For Harlow, which is 54% leased, our in-service lease percentage would have risen 40 basis points to 91.8%. We have 4.4% of our ABR expiring over the rest of the year, with about 55% coverage on that space. Our remaining 2021 expirations are about 12% below market. For expirations we addressed in the first half of the year, we renewed or backfilled close to 70%. Touching on our office developments, we're on track to deliver One Westside to Google in the first quarter of next year, potentially sooner. We're also set to close on the podium for Washington 1000 late in the fourth quarter, at which point we'll have a year to further evaluate tenant interest and broader market conditions and to finalize our timeline to start construction. Now I'll turn the call over to Harout. Thank you, Mark. In the second quarter, we generated FFO excluding specified items of $0.49 per diluted share, compared to $0.50 per diluted share a year ago. Second quarter specified items consisted of $1.1 million or $0.01 per diluted share of transaction-related expenses and $0.3 million or $0.00 per diluted share of one-time prior period supplemental tax expense related to Sunset Gower, compared to $0.2 million or $0.00 per diluted share of transaction-related expenses a year ago. FFO beat our own expectations at the midpoint of our guidance by $0.02 per diluted share. This was primarily due to the reversal of reserves against uncollected cash rents and straight line rent receivables and savings on operating expenses, some of which we expect to incur in the second half of the year. Second quarter NOI at our 44 consolidated same store office properties decreased 2.1% on a GAAP basis, but increased 4.9% on a cash basis. For our three same store studio properties, NOI increased 17% on a GAAP basis and 29.3% on a cash basis. Adjusting for the one-time supplemental property tax expense at Sunset Gower, NOI for our same-store studio properties would have increased by 22.8% on a GAAP basis and 35.8% on a cash basis. At the end of the second quarter, we had $0.9 billion in liquidity with no material maturities until 2023, but for the loan secured by our Hollywood Media portfolio. This loan matures on Q3 2022 and has three one-year extensions. Our average loan term is 5.2 years. In late July, in preparation of funding our U.K. Blackstone JV, we drew down $50 million on our revolver, resulting in $550 million of undrawn capacity. We funded our remaining pro-rata acquisition costs with cash on hand. Our AFFO continued to grow in the second quarter, increasing by $11.4 million or nearly 24% compared to Q2 2020. This occurred even while FFO declined by $3.6 million for that same period. Again, this positive AFFO trend reflects the significant impact of normalizing leasing costs and cash rent commencement on major leases following the burn-off of free rent. Now I'll turn to guidance. As always, our guidance excludes the impact of unannounced or speculative acquisitions, dispositions, financings, and capital market activity. In addition, I'll remind everyone of the potential COVID-related impacts to our guidance, including variants like Delta and evolving government mandates. Clearly, the uncertainty surrounding the pandemic makes projecting the remainder of the year difficult, and we assume our guidance will be treated with a high degree of caution. As noted, many companies are still determining return-to-work requirements and the impact on space needs. Because of this, for example, our guidance does not assume a material increase in parking and other related variable income. Overall, we assume full physical occupancy and related revenues will not return to pre-COVID levels in 2021. That said, we're providing both full year and third quarter 2021 guidance in the range of $1.90-$1.96 per diluted share, excluding specified items, and $0.47-$0.49 per diluted share, excluding specified items, respectively. Specific items for the full year 2021 are the $1.1 million of transaction-related expenses and the $1.4 million of prior period supplemental property tax expense referenced in our second quarter SEC filings. There are no specified items in conjunction with our third quarter guidance. Now I'll turn the call back to Victor. Thank you, Harout. As always, I want to express my appreciation to the entire Hudson Pacific team for the exceptional work this and every quarter. Thanks to everyone for listening in today. We appreciate your continued support. Stay healthy and safe, and we look forward to updating you next quarter. Operator, with that, let's open the line for questions. Thank you. Thank you. Our first questions come from the line of Craig Mailman with KeyBanc Capital Markets. Please proceed with your questions. Hey, everyone. Victor, maybe a two-parter on the studios. Just curious, the structure of these are a little bit different, in terms of your ownership stake versus the original deal with Blackstone. Is there a reason for that? Separately, could you just talk about the equity commitment that HPP would need to make versus kind of the leverage the partnership may put on these assets? Yeah, I'll let Mark talk about the latter, Craig. First of all, good afternoon to you. Hope you're doing well. Thank you for the question. Listen, on our Sunset Glenoaks Studios, we are the same terms and conditions as our Twilight project. That's pretty much standard for the deals that we are doing here in the U.S., and that's been based upon the capital source of Blackstone. The U.K. deals that we've announced and that we're also working on are a different structure, based on the capital structure of Blackstone and the different entities that they're contributing to this, and that's why we're doing it that way. There's no magic around it. I think uniformly we'll see some variation of that at various different times, depending on the deals that we've been sourcing that most of them are off-market transactions, so they either have maybe an additional capital partner or a JV partner that would have to alter the structure. Suffice to say, I think most of the Twilight structure that was the initial deal and the platform we're working on is going to be what we're going to see here in the U.S. Mark, you want to talk about the capital structure? Craig, the Glenoaks deal is pretty close in terms of ratable ownership. It's a 50/50 deal. We had taken the land down a while ago, and you can see how much we on a consolidated basis put in the land. The expectation is we're going to finance out the rest of it, call it about $150 million, depending on the start date, through Q3 of 2023. On a gross basis, we're 50% of that, but we think we'll end up doing about 60% asset level financing. The total remaining spend for us over the next two years is only like $30 million. That gives you kind of the capital structure for that one. On the London deal, the Park Plaza deal, I think Victor mentioned, the land's already been taken down GBP 125 million. Our piece of that's like GBP 45 million. The remaining spend gross to us is about GBP 200 million. That goes out, call it between now and 2025. Similar to the Gleno aks deal, we're thinking that's going to be 60%-65% financed on the construction side. The total remaining spend net of financing for us, phasing in over five years or so, is about GBP 80 million. Okay. All right. Yeah. Not a huge sum. About $110 million kind of on your share over the next four to five years. Okay. Correct. Could you just give us a sense, and I know you guys have done a little bit of redev on the third Sunset kind of studio you bought, but I don't recall you guys doing ground-up on studios. Maybe I'm mistaken, but just what kind of returns are you targeting? Is there a big difference between the U.K. and L.A.? These deals, well, the U.K. deal, the returns are very attractive. I'm not going to get into the actual numbers until we're prepared to sort of release them. We wouldn't be doing that deal unless it's significantly better than what we're seeing here. We haven't done any pre-leasing yet. We've only had indications of interest. Are you referring to our Sunset Las Palmas deal? We have not built the sound stage there, but clearly we built Harlow, and our returns there were very good. Have proven out better than we initially underwrote it at. We are looking at some new development of stages here in California, other than our most recent Glenoaks announcement on existing assets that we own. Those returns are also penciling out in the 7%-8% range. They're also very attractive. Just one last one, if I could. The decision behind the $46 million of ATM, doesn't seem like you guys needed the cash, and the stock price, you've been vocal that it's undervalued relative to what you guys think it's worth and what we think it's worth, just the decision there? Yeah. I think it's helpful to provide some context. In 2020 and 2021, when the stock was at a considerably lower level, we bought back more than 4.1 million shares at just a touch over $23 a share. That used about $100 million of liquidity at the time. This recent issuance under the ATM, it's a fraction of that in terms of the size. It's only 1.5 million shares, and it was just shy of $30 a share. $7 premium per share on the 1.5 million shares of reissuance. We're using the ATM in the way we've always used it, to fund customary corporate cash requirements. We mentioned we had some spend on these recently announced studio transactions. We just view it as one of our sort of a prudent measure of cash management and a way to continue to maintain our liquidity and balance sheet for future requirements. We thought it was a timely issuance given where the stock was recently. Doing small transactions like this, we're okay at the lower level, but we're not going to issue a big amount or a large equity issuance at these numbers, especially at today's number. It's helpful. Thanks, guys. Thanks, Craig. Thank you. Our next question comes from the line of Manny Korchman with Citigroup. Please proceed with your questions. Hey, everyone. Victor, last quarter you spent some time talking about value add opportunities that you're seeing in, I think, both the office and studio side. Are those progressing and just haven't closed yet, and so we should just wait for those to happen? Or has something changed there, and maybe those opportunities have fallen out? No. We are actively pursuing several of those opportunities on the office and the studio side. Majority of those are off market, so they're a little bit more complicated. There is a couple of marketed studio properties that we're working on right now, both are value-add. I'm not in a position to say whether we get them or somebody else gets them, but it's just a continual process. I do think, Manny, it is taking longer to close transactions. Like this U.K. deal, we've been working on that deal for six, seven months or something like that. It's just taken a long time to come to fruition, and that was an example of an off-market development deal, but it's something that we've been pursuing for a long time. Thanks, Victor. Just turning back to the capital sources conversation, that same light. Are dispositions something that we should think more about, especially if you land some of those deals, or would you go and maybe tap the equity markets even though Harout said you wouldn't? Well, I didn't hear Harout Diramerian say that. No, I'm just kidding. Listen, I think we've talked about the dispositions in the portfolio currently today. We've been approached on some assets. There's not a large number of them. I think it will be basically on a need-be basis, but there's nothing earmarked right now imminently on a disposition for the remainder of this year. Thanks, everyone. Thank you. Our next questions come from the line of Nick Yulico with Scotiabank. Please proceed with your question. Thanks. Hi, everyone. In terms of the guidance for the rest of the year, and maybe even just kind of a preview heading into next year, how should we think about your office lease rate? It did slightly improve this quarter. You had some positive net absorption. How should we just think about future quarter leasing volume heading forward and whether your lease rate at this point you think has kind of stabilized and hit a bottom? I'll sort of just talk about it from a general level. Your last comment is the accurate comment. We've seen some flattening. We only have 4%+ remaining for this year. We've already identified the known vacates, I think we're pretty comfortable with that. The trends, obviously, Nick, have gone up both from a rate term and an activity standpoint. Art can jump in and sort of just talk a little bit about that. We're not least leaning towards the fact that we're seeing anybody on the horizon of size that is going to vacate that we know of at this time. You want to jump in? That's true. Nick, as it always does, comes down to net new leasing, right, on what we have in the pipeline, which has been continuing to increase over the year, certainly over the last 60 days, to kind of backfill or lease up some of those holes from the known vacates. I think there's still a lot of wood to chop on the expirations this year. I can't peg a number for you on a lease percentage, but we're starting to see with the kind of the new leases in the pipeline, on the backfill side, we're starting to see some good progress. Okay. Thank you. That's very helpful. I guess just a follow-up question on that is as you think about return to office getting delayed a little bit in some markets now, also some new mask policies in place. I guess, how does that kind of change the dynamic of the leasing market out there where you had some of those provisions getting removed, now there's some more concern with Delta. Just any thoughts on how that's kind of playing out on a real-time basis in terms of does it delay leasing volume, leasing tours, et cetera? I don't think it's impacted us in terms of volume and tours. I think we've all sort of anticipated a September 1 date, and if that's pushed 30, 60, 90 days, it's not going to impact the decision-making trees that we're seeing right now. At least to date, real time right now, it just hasn't. We've got very strong activity in the third quarter and some pretty good line of sight in the fourth quarter as well. We have, as I said, some known vacates and some larger space that we've got activity on as well. I do think the moment-to-moment news and information that keeps coming out is not going to detract the larger users, which is predominantly our portfolio mix from them making decisions that are 7-10 years down the road and effectively move-ins in three-nine months sort of thing. If it moves them off 30, 60, 90 days, we shouldn't be impacted that dramatically. Appreciate it. Thanks, Victor. Thanks, Nick. Thank you. Our next questions come from the line of Alexander Goldfarb with Piper Sandler. Please proceed with your question. Hey, good morning out there. Two questions, Victor. The first question is, as you guys think about the U.K., and certainly great movie market, but what sort of additional risks do you include? Because I'm guessing it's probably not as efficient to run U.K. as it is obviously an additional studio in Sun Valley on the north side. What are the additional returns that you're looking for, both to compensate for the lack of efficiency because it's overseas, and 2, just the FX risk, and foreign economy risk? Well, listen, I think, first of all, we're super excited about an opportunity like this, as you've sort of read the release and the press around that, this is going to be a world-class facility. I do think that there is going to be, obviously since it's a ground-up project, Alex, startup costs are going to be fairly front-ended. That being said, we're making a commitment, personnel, office, and the likes of that, which will then go in line with economies on our sales and back office team that's going to be based out of Los Angeles. Whether it's in the U.K., whether it's in Vancouver, whether it's in New York, or here in Los Angeles, I think you'll see some very impressive economies from the opco side of it. In terms of the capital side, I do think we have to be cognizant of the spread between the pound and the U.S. dollar, and it's no different than what we're aware of in Vancouver between the Canadian dollar and the U.S. dollar. At this time, it's early, and there's not a lot of capital spend. As we get into deeper capital and the structure around debt and equity, I'm assuming that Harout and Mark will come to me, and we'll discuss hedging and the likes of that on material dollars. At this time, it's just too early to evaluate that. I would say that we are going to make a conscious effort of building our platform over in the U.K., and this shouldn't be the only deal that we would be doing there. We're going to continue to do more. Okay. The second question is, on the domestic studios, the occupancy rate in the quarter was 88%, which is actually down a smidge from the first quarter. Just given all of the ramp up in productions, we're out there recently toured. The lots were full, filming. I would've thought this occupancy would've been higher. It's hard to believe that there's any downtime out there. Everyone has binge-watched and watched every sort of rerun, that you can out there. It's hard to believe that studio space isn't being used 24/7. How do we look at the actual dip in occupancy versus it being something more in the 90s? Yeah. Alex, that 160 basis point sequential dip is about 20,000 feet, just shy of 20,000 feet. As you point out, it has nothing to do with stage usage. They're all committed. The office utilization associated with stage usage is high, but there's about 235,000 feet spread across the three studios that are really office use unrelated to stage use. As we sit today, that's about, call it, 63% utilized. It's really just a direct byproduct of COVID-19, people not working in offices. We've seen a bit of a give back of some of that square footage over the last four, five quarters of COVID-19. As people get back in the office, we expect that occupancy to tick back up to its historical norm of 90%+ occupancy. We need the casting agents and other entertainment-related tenants that want to be on location to start coming back to the office. When you say that, this isn't like the Netflix type office. No. These are those small little office suites that are next to the studios where the people go to sit and write script or do whatever they book with their agent, whatever. These are all those small little offices. This is what's originating from that. Think of them as non-media. They're typically media companies that are non-stage users that want to be in a proximity to other media companies that are stage users. Okay. Thank you. Thank you. Our next question comes from the line of John Kim with BMO Capital Markets. Please proceed with your questions. Thanks. Good morning. I was wondering if you could provide more commentary on the demand environment for new studio space in the U.K. and how you plan to position your studio versus the existing competition, whether it's by price point and also the type of tenants you may be targeting. Yeah, John, it's a great question. Listen, the demand right now over in the U.K. is voracious. All of our relationships, we've reached out and surveyed the demand levels and desire levels. Every one of the new content players are looking for space. The utilization there is extremely high right now. There has not been a new facility built there, like there hasn't been a new facility built here in a very long time. We are very confident that purpose-built best-in-class is going to succeed on a dramatic basis. The Pinewood Shepperton is the most recent, it's an add-on to the existing facility, which is literally probably the world's best facility. That's what we're sort of trying to follow suit. The reaction around this has been very positive in terms of our relationships and those who are looking to get a foothold for a long-term lease. We're confident that we'll be capturing a nice percentage of that demand. As far as the other opportunities and the other potential entry markets, Toronto, Vancouver, New York, I think you alluded, Victor, to some core plus opportunities in studios, but is that how you expect to enter those markets or will they be more development focused? I think it's a combination of both, John. We're looking at development opportunities in multiple markets, and we're looking at core opportunities in multiple markets at the same time. Got it. Thank you. Thank you. Our next question comes from the line of Blaine Heck with Wells Fargo. Please proceed with your question. Great. Thanks. Good morning out there. A lot of my questions have been asked, but I guess, just taking a bit of a step back, Victor, clearly, I think the focus for you guys on the growth side of things has been growing through the studio business. I think we've talked about this before, but can you give us any update on how big a part of the portfolio you think the studio business could ultimately get to, kind of at your share of NOI? Well, listen Blaine, it's a great question, and you've covered us a long time, so you've seen it from the inception where people were trying to understand what the studio business was and how much negativity we got around it to now it being sort of one of the darlings of alternative real estate. It's an area that we can capitalize growth on, and I think we're committed to growing our portfolio, on our game plan through our Sunset brand with Blackstone. The commitment is uniform, and I believe that you'll see us substantially increase our NOI over time in that product type. It's not going to detract us from maintaining and growing in the office business and our portfolio around office. We've got development opportunities that are coming out of the ground in the office portfolio that I think are very attractive and will sort of go hand in hand. If you're asking sort of for me to ballpark what is it, a 2: 1 or a 3: 1, I don't know. I can tell you we are right now monitoring and underwriting and working earnestly on more studio deals than we are on office deals. All right. That's fair. You know, listen, I don't have to say it, but the capital structure is just a better structure right now for that. There's a high demand on debt, and we never saw pricing around the debt on studio businesses, the studio industry and business around the opco side that we are seeing now. The numbers are spectacular. It's encouraging to see that the market is coming and becoming educated around that. Obviously, we got a great partner. Great. Very helpful commentary. Just a little bit more specifically on the occupancy and lease rate side, maybe for Mark or Art. I know you guys have yet to formally get back the Dell EMC space in October, but given that it's going to be one of your largest blocks of space, I wanted to ask whether you guys have any early interest there, and whether you think there's demand for that large a block from a single user, or will you be splitting up that space? Sure. This is Art. That's a great question. Remember, the floor's about 45,000 sq ft a piece. It breaks out. Those large floor plates are in demand. It's interesting. We've seen as I said, at the beginning, an uptick in interest from the beginning of the year, mostly over the last 60 days. Seattle kind of leads the way with that uptick in interest and tenants in the market from where they were. We're over 3 million, almost 3.5 million sq ft now. We are seeing specifically in Pioneer Square and with that opportunity, which I think the market will be kind of north of 40%. We've got about 200,000, call it 250,000 sq ft of activity just really in that Pioneer market alone. That's the 505, 83 King, 95 Jackson and so forth. The activity we've seen over the last 60 days has really come on. When I say over 200,000 sq ft, I don't mean just tours, I mean in negotiations with. We feel pretty good about that space and it's pretty impressive space, actually. We feel even better about that. Great. Thanks, Art. Our next questions come from the line of Jamie Feldman with Bank of America. Please proceed with your questions. Great. Thank you. I guess just sticking with occupancy. I think Mark you had said 55% coverage on the remaining expirations for the year. Has there been any change in either tenants you think that are staying or tenants you think that are moving out to get to that number? Maybe if you could just talk about the largest blocks. I know you talked about Dell EMC, maybe a little bit more color on potential to backfill or anything that's changed. Art covered the backfill question on Dell EMC. There's really only one decent size expiration on top of that. We've got 24,000 feet. McGraw. With McGraw Hill. Other than that, we're really talking about very small expirations for the balance of the year. We're currently 55% covered on that remaining footage. It's really just about getting those deals over the line, and then as Art pointed out towards the beginning of the call on net new absorption on the difference there. Anyway, Art. That 55% market covered. The full year, we're at over 1.4 million sq ft. On the prepared remarks, we also indicated that. We're pretty close to 70%, probably 69% coverage on full year. This is really, again, the remaining piece. The balance of which are maybe average of 5,000- 6,000 sq f t. There's still a lot of decisions to be made. We have really converted over the last 60 days, converted some likely to vacate into retention. We're going to continue to work through it. Again, there's probably close to 100 tenants to deal with. The team is hard at work trying to get those over the goal line. Okay. That's helpful. As you think about net effective rents, would you say they've moved at all in the market yet? What are your latest thoughts on your mark-to-market? Well, for the remainder of the year, our mark-to-market is right in about 13%. 12%. 12%, 13%. On our net effectives, we are up really kind of trailing 12 as Mark had indicated in the remarks. Chiefly because of our rent, we've been holding our base rent. It's remained very steady, coupled with the fact that we're spending less on TIs, mostly because of the renewals. Our renewals are going to probably carry the day. We'll have about two-thirds of our deals will be renewals going forward, we'll see a reduced level of spend on tenant improvements. We feel good about it, because a lot of these markets in kind of lesser quality space, you're starting to see a very competitive situation, where trophy to new assets are kind of 5% off on a net effective basis, and you start to grow into non-view super commodity space, which is like 15%, maybe 20% below net effective. We're doing exceptionally well in that regard. Yeah. Jamie, I do think it's been a little bit surprising to all of us how little focus there's been on some of these trends. No matter how you skin it, net effective rents are Are higher. It's not just on a trailing 12-month comparison basis. It's even better if you look at the five quarters most affected by COVID, compared to, say, all the way back to the 2018, the trend is even better than that. That translates through both at the effective rent level. It translates through on the tenant improvement level. I think there's a tendency to focus on just the quarter and lose track of how these numbers have trended over almost any period of measurement, how favorably they've trended. Then I think the other thing too, that we've tried to comment on that maybe hasn't gotten, I don't think, as much focus as we would have thought is how that's translated through on the AFFO trend. On a percentage basis, our AFFO per share is up, I don't know, 30%+. It's surprising at least, I think to all of us, just how that seems to have gotten overlooked. That's a good point. I was actually going to ask you about just cash flow in general. Now that you're starting to put some capital to work in the studios, what do you think the cash flow trajectory and, I guess, distribution growth or distribution coverage trajectory looks like? Based upon what we've seen, I think it's pretty consistent with our comments in previous quarters. We think this AFFO trend is going to continue, and at a certain point, we are going to revisit the dividend distribution amounts, and then fairly soon, I mean that within the next 12- 24 months. That's kind of the direction it's headed. Okay. Finally, just tied to the leasing markets. We've seen a lot of capital raised in the Bay Area, and I guess, across all your West Coast markets. How are you seeing that translate into demand, and what do you think is going to happen here? I guess, maybe if you could talk about the individual sub-markets. It's interesting. We worked on an analysis on the correlation between VC fundraising and how that ultimately translates into tenant demand. Going back about a decade, it's clearly correlated. There's a lag effect, if history holds, the VC fundraising should continue to drive tenant demand throughout the Bay Area. I'm not sure how closely people are tracking, if you look at just funds raised through the end of the second quarter in the Bay Area, there's been 130 funds that have closed, and they've raised more than $30 billion. To put that into context, prior to 2018, the Bay Area had never raised more than $30 billion in an entire year. 2019 and 2020 were pretty exceptional years. If you just think about where we're trending in fundraising today and where that's likely to end up in 2021, we're talking about maybe not record-breaking fundraising, but pretty close to it. That will ultimately translate into deals closed. In fact, we're on a record pace right now in the Bay Area at 1,500 completed so far, which is a record-breaking pace. In terms of VC fundraising and deals closed, we think all the ingredients are there to continue to drive tenant demand. Do you think that benefits the CBD San Francisco or Silicon Valley or a mix? Both. Okay, great. Thanks for your thoughts. Thanks, Jamie. Thank you. Our next questions come from the line of Caitlin Burrows with Goldman Sachs. Please proceed with your questions. Hi there. I just had a quick one, maybe on the weighted average lease term. It seems like it is shorter than it's been in the past. I was wondering if there was any other kind of detail or reasoning you could give for this and your outlook for it lengthening going forward. Yeah. It depends on kind of what period of time you look at it. It's definitely been trending longer. Terms have been trending longer since sort of the onset of the pandemic. It's up on a weighted average basis. Looking back trailing 12 months compared to the prior trailing 12 months, it's up about 7%. It's trending in the right direction. Although if you go back further than that, the durations have shortened up a bit. Art, maybe you could. Yeah. If you're just looking quarter-over-quarter, you're right. It's because actually there were two new deals. That one was 145 months, the other was close to 120 months. It really skewed the number up. We have been over the year, we've been trending up, as Mark said. On the renewal side, again, there were two deals that made up a little over two-thirds of the square footage that were 60+ months, and that's kind of how the numbers look if you're just looking quarter-over-quarter. I would just say, generally speaking, I think this has been the case for everyone in the sector, and you can kind of see it in annual expiration tables. There is a somewhat higher than normal amount of renewals that are getting done that are shorter in term, 12 months or less. That obviously reflects a degree of uncertainty for some amount of the renewal tenants on kind of what their long-term space needs are. We expect as people get back to work, that kind of elevated short-term renewal amount will start to trend down. Got it. Okay. Congrats again on the announced plans with Blackstone. I was wondering if you could just mention for the one in the U.K., your current expectations, if you have them yet, in terms of timing for that project and what the first maybe milestone to watch out for between now and then would be. Maybe it's something on permitting or approvals or pre-leasing or something else that might be relevant. Yeah. We've been in close contact for the last several months with the local approval process. I think that would be the first hurdle that you're going to see. It's somewhere between right around 12 months from now, I think you'll see some major aspects around that. Yeah, we're really excited and we're moving in the right direction. Thank you. Got it. Thanks. Thank you. Our next question has come from the line of David Rodgers with Baird. Please proceed with your questions. Hey, everyone. Art, maybe to start with you, a derivative on some of the earlier questions. You guys have talked about large floor plate leasing, pretty strong demand from tech tenants on the larger side. But you've got a pretty decent size portfolio of smaller tenant assets, obviously throughout the peninsula and down into Silicon Valley. So can you talk specifically about what you're seeing? Is that where you're seeing the shorter-term rollover? Are you seeing a build of demand from those tenants? I guess, just specifically addressing kind of that specific part of the portfolio? Well, David, I would say the demand across the entire portfolio has been driven by mid-size to large tenants, just everywhere. With the exception of Vancouver, which it's been a mixed bag, right? Small and large tenants. We are seeing those larger mid-size deals driving the market. Like I said, over the last quarter, we've seen an uptick in small tenant activity in the Peninsula in Silicon Valley, which right now kind of translates into early pipeline deals, right? It started with inquiries and tours and then early pipeline. We'll start to see some of those come to fruition later in the quarter into the fourth quarter. It really, again, you said it started with the mid and large deals driving the market. Yeah, appreciate that color. Thanks, Art. Maybe Victor or Mark, just maybe the explicit question is, are you changing any guideposts around leverage as you talk about development and levering up some of the joint ventures? Maybe Victor, the implicit question is, when you were buying studios a handful of years ago, you were using a lower office implied cap rate to do it. Now you've got a 95% of your weight toward office, which is a higher implied cap rate, buying a lower cap rate asset. I guess, how long does that work and how long before you think about maybe financing that a different way or making that a standalone business? On the leverage side, listen, I think we've been very conservative on the leverage side. Looking at the development, I would look at the past development deals we've done. For the most part, we've been using leverage to develop and then taking that leverage out and based on the success ratios. I do think that that's going to continue, and so you could sort of expect that same pattern going forward on the studio side. You bring up a good question, and it's obviously one that we've talked about. We'll wait and see what the platform and some of the alternative investments that we're making around this platform. As I mentioned before, we've got a long runway with Blackstone, and the capital structure around Blackstone that is contributing to this as our partner. Obviously, you know they have multiple buckets. We have in the Twilight structure a bucket that's a lot longer in terms of the lifespan, and so we have flexibility around timing. It is not lost on us to look at, down the road, depending on size and valuation, what we do with this platform, and if we roll it out, what's the best timing and execution. That will always be some part of our conversation as we continue to grow this. Thanks, Victor. Thanks, Dave. Thank you. Our next question comes from the line of Daniel Ismail with Green Street. Please proceed with your questions. Great. Thank you. You mentioned potentially starting Washington 1000 later this year, or at least reviewing it. I'm just curious, based on the trends you're seeing on the ground across the portfolio, if office development is looking like a more attractive use of funds today than it was, say, last quarter. Well, Daniel, I would look at it a little differently than in office development and the trends. I would look at the demand for this asset and the activity. We're not making any announcements today. The demand and the activity that we are seeing, specifically for Washington 1000, we'll make a determination at the appropriate time whether we're going to break ground. Maybe just going back to the across your footprints, are you guys hunting for new development sites on the office side, or should we expect studio space to continue to be the source of development going forward? We've looked at development sites that we bid on and have been in high demand in some of our markets, particularly in the Vancouver and Seattle, and adjacent Seattle markets. Just going off the top of my head, I don't think we've done anything in Southern California in terms of attractive for office. I know there's been nothing in Northern California that we've looked at from a development standpoint recently. Yeah, I would say the opportunities are things that we'll continue to evaluate in the Pacific Northwest on the office side, and then clearly, portfolio-wide in the other markets on the studio side. Great. Thanks. Just last one for me on the U.K. studio acquisition or development site. Is there anything structurally different between how studios are run in the U.K. versus the U.S., say in terms of lease term or the splits of fixed revenue and variable revenue or anything that we should be aware of? No. It runs the same. I do think that we are ever-changing the model of short to long-term leases, and that will be part and parcel of what we're going to try to attract here. That has permeated into that marketplace, most recently with Disney and HBO and Netflix signing longer-term leases over in the U.K. We're happy to see that trend sort of permeate from the U.S. over there. We're hopeful that will be the same. Great. Appreciate the color, Victor. Thanks, Daniel. Thank you. Our next question comes from the line of Vikram Malhotra with Morgan Stanley. Please proceed with your questions. Thanks for taking the questions. Victor, congrats on getting the U.K. investment, the U.K. studio investment. Certainly a good and a big step. I'm just wondering, is there room or potential plan to recreate sort of the office studio combo that you have in L.A. in the U.K., or more specifically, even just office in the U.K.? There definitely is. There's a demand for not just pure studio, but office studio, campus facility, and that's the attractiveness of our initial deal in Broxbourne. We are looking at another opportunity that is aligned with that has a successful office component adjacent to a combined studio component there as well. That campus sort of style project that is purpose-built is something that we're very much focused on, and I think the demand is very high for that. In the initial permitting, you might be getting, I don't know if the zoning works differently, but you'll be getting potential zoning for both studio and office? Correct. Okay. Just in terms of the alternative investments that you mentioned sort of potentially exploring, I'm wondering just about alternative markets, maybe in the U.S. One of your peers obviously just acquired a big portfolio in Austin. Any chance you'd look at any of the Sun Belt markets over the near term? That's not typical for us. We've spent time looking at markets, and some of those markets have been attractive, but I think we're still trying to build out our West Coast portfolio. We're still trying to grow in Vancouver and in the office portfolio. I think the attractiveness of the combined studio office in the markets that we're looking at are going to be sort of akin to the media tech world. That's pretty much the game plan for now. Okay. Maybe just last quickly, a clarification on the occupancy for Harout or Mark. With the Dell EMC move-out, can you just give us a sense of what's the goal year-end occupancy? Is there a range you can provide us that you're looking to hit in terms of leased or just occupancy? We don't include an occupancy target as part of our guidance information. You can see what we've provided in the press release. I would say, just sort of leveraging off of the earlier comments from Art and Victor in terms of just coverage on remaining expirations and so forth. Generally speaking, it does look to us that our lease percentage is pretty stable right now. It could be a tick higher, maybe a tick lower by year-end. I think as we look through on expirations and on activity relative to those expirations, it feels like we're at a pretty stable level right now. Okay, great. Sorry, just to clarify, you mentioned the coverage you already have in terms of expirations. I'm just wondering, given the Delta variant resurgence, is it fair to assume that sort of the recent lease term periods, whether it's the 60, 70, 80-month periods on renewal or maybe new leases, is that sort of a good way to think about near-term sort of third quarter credit leasing in terms of lease term? Yeah, we might continue to stretch it out as we have been over the last four quarters. It can vary. If you look at it purely on a one-quarter basis, you could get one big lease that distorts it. It's a little dangerous. I think it's better to look at trends, and as we pointed out, we've been getting to longer term than in the last say four quarters compared to where we kind of started the pandemic at. I don't think we get to pre-pandemic levels in terms of term over the next two quarters, but I think we'll continue to stretch that out. Great. Thank you so much. Thank you. Our next question comes from the line of Manny Korchman with Citigroup. Please proceed with your questions. It's Michael Bilerman. Victor, I just wanted to follow up on a couple of things on the studio side. I recognize we've spent 75% of the call talking about 5%-10% of your business, but it is a fast-growing one where you're allocating capital too, so I appreciate your staying on to answer them. Can you just walk through just the role and responsibilities of HPP and Blackstone, and does that differ by region, i.e., are they taking a different role in the U.K. given their presence there and long-term history versus the stuff in L.A.? Just talk about sort of how each partner and what they're responsible for and how it differs. Yeah. No, it's a very fair, valid question given the differentiation on ownership. No, ours is consistently throughout in our venture with them to date, in our ventures with them to date, both at the U.K. and with Twilight and our Sunset Studios brand is the operator, the developer, the manager, the marketing, leasing, day-to-day operations of our ventures together. That being said, there are other projects that we may take a lesser role and evaluate whether or not it's going to be the case. As long as it's under the Sunset Studios brand and the operations are under the Sunset Studios brand, that's what our operations is. We are getting well compensated for that role, and we will continue to do so. Do you own the brand outright, or you share in ownership of the brand? No, we share it. Okay. Like in Europe, are they doing all the tax structuring and all that stuff? I'm just trying to understand, is Europe different than L.A.? No. We are doing exactly what we're doing here, there for this specific project. Then just in terms of equity, everything you have is obviously on balance sheet, but are they holding their equity in different parts of the firm? Example, are they using the Europe fund to do the Europe deal? Are they using the BREIT to do the stabilized stuff they originally bought? Are they doing the opportunity fund to do the next development that you have going on? I'm just trying to understand how consistent the ownership of their equity is to all of these individual projects versus the larger platform. Yeah. Listen, I don't want to get into what equity sources they're doing and using because that's their business, not ours. We're comfortable with the capital structure. We're comfortable with the relationship that we currently have. Suffice to say, it's not all consistent. To date, everything under Twilight is one. The other projects we're working on are going to be a combination of either Twilight or something else. It's not my place to tell which capital dollars. That's their reporting. I know we're further out from a monetization of this business, but I guess with the different ownership structures on their side, could that complicate a sale or a buy-in by you or bringing another partner or spinning it off or taking it public? Yeah. Does that inhibit you in any way or cost your shareholders any more money to sort of aggregate it up? No. I know where you're going at with that, and the answer is no. It's a very consistent structure throughout with buy-sell provisions and exercisable on both sides. Those terms and conditions have not changed from deal to deal. There is not going to be any positive or negative ability for one transaction to be executed versus another. Obviously, we'll consider the totality of the portfolio asset by asset, just like we would if we owned it 100%. Going forward, that's always going to be the case. Just because the percentages are different doesn't mean that the rights are different. Okay. What sort of exclusivity between each partner on studio deals that each finds? I don't know if you found this land or they found that land, but just how does it work? Are you effectively exclusive partners on the studio side, on all studio investments? Well, I think it's easier to sort of effectively look at it this way. It's relatively complicated because there's different tranches. Under the Sunset brand, I'm sorry, they could not use the Sunset brand without us, but we could if they so chose not to do a transaction with us. We control the brand even though we own it collectively. I think that gives you an idea of that aspect, and that's what we're going to be running off of that brand. That being said, I think it's fair to say that if we brought them a deal, and I'm going off of memory here, but I think if we brought them a deal and they said no, I know we could still do it ourselves. They can't go do a studio deal without our approval. Right. Okay. I appreciate the color, and thank you so much. Okay. Thanks. Thank you. There are no further questions at this time. I would like to turn the call back over to Victor Coleman for any closing comments. All right. Sorry that we went over long today, but I appreciate everybody's consideration and input, and we look forward to having our next call next quarter. Thank you. That does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time. Have a great day.