Hudson Pacific Properties Inc (HPP) 2010 Q3 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Hudson Pacific Properties third-quarter 2010 earnings conference call.

During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions.

(Operator Instructions). This conference is being recorded today, Wednesday, November 10, 2010. I would now like to turn the conference over to Andrew Blazier. Please go ahead.

Good morning, everyone, and welcome to Hudson Pacific Properties' third-quarter 2010 earnings conference call. With us today are the Company's Chairman and Chief Executive Officer Victor Coleman and Chief Financial Officer Mark Lammas. Howard Stern, the Company's President, is also on hand 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, November 10, 2010. 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 represent non-GAAP financial measures. The Company's earnings release which was released last night 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 would like to turn the call over to Victor Coleman, Chairman and Chief Exactive Officer of Hudson Pacific.

Thank you, Andrew. And welcome, everyone, to our third-quarter conference call, our first full quarter of operations since the IPO on June 23. Before we get into our recent activity, I want to provide a brief summary of the conditions in our target markets where we're seeing modest and steady improvement.

In general, our property occupancy rates are better than the rates in their respective submarkets and office property occupancy rates overall have improved in the majority of our markets. As of September 30 at Tierrasanta, the total occupancy was 96.8% versus 93.9% for multitenant office including Mesa submarket.

City Plaza's occupancy was 93.2%, well above total occupancy at 68.3% in the city submarket of central Orange County. Occupancy at 9300 Wilshire was 93.1% versus 82.2% in the Beverly Hills submarket.

First Financial's occupancy rate was 86%, again better than the Encino submarket of 85% current occupancy rate today. With the relatively recent completion of 875 Howard in San Francisco, we continue to see good absorption on that asset including the expansion by [health college] approximately 12,000 additional square feet and good activity by additional tenant prospects.

Generally at its acquisition date on October 11, 222 Kearny was approximately 79% leased and we have have already net absorption since the date of acquisition of approximately 8000 square feet, taking it to approximately 85% occupancy.

Asking rents in San Francisco appear to be stabilizing and current leasing activity on those assets appear to be in line with if not better than our rent expectations as of the time of the acquisitions of these assets. We think this is consistent with the rent improvements underway in the overall San Francisco marketplace.

On the acquisition side, the prospects in California remain attractive. The state has the highest number of distressed assets of any state in the country and we're starting to see a pickup in transaction velocity.

We believe our strong balance sheet, low leverage and credit facility capacity are allowing us to take advantage of some of these opportunities already. And I will discuss this in detail in a few moments.

Including our recently completed acquisitions as of today, our portfolio now consists of 10 properties of approximately 2.2 million square feet and four properties that may support future commercial development of up to 1.4 million square feet.

These are strategically located in our target markets of Los Angeles, Orange County, San Diego and San Francisco. The overall portfolio has a weighted average lease rate of 85.5%.

On the median the entertainment side, Sunset Gower and Sunset Bronson are experiencing solid demand. The studio's third-quarter results were markedly better than the second quarter.

This was particularly true of our Sunset Gower property. Subsequent to the completion of the third-quarter production of one of the new tenants (inaudible). We have already back filled that space effective upon the expiration of that lease with additional tenancy by The Event and the popular game show, Minute to Win It.

As we said from the onset, property acquisitions are the key to our future growth. We've already begun to deliver on that promise of our acquisition pipeline, completing two deals during the third quarter and a third early in the fourth.

In mid-August, we announced the acquisition of the Del Amo office building in Torrance, California for $27.5 million. This is a five-story hundred 113,000 square feet property on 2.3 acres.

It's 100% leased to Saatchi & Saatchi North America, a leading national advertising agency which has been a tenant in that building for more than 20 years. We also acquired 9300 Wilshire, a six-story office building in Beverly Hills.

9300 Wilshire is located in the prominent intersection of Wilshire Boulevard and Rexford Drive in the heart of Beverly Hills, California. It's approximately 93% leased through a diverse mix of stable businesses including professional service firms, finance and media and entertainment companies.

Our third acquisition came in the fourth quarter, so as not to be included -- so it will be included in our year-end financials but will not be included in our third-quarter results. We acquired 222 Kearny in San Francisco's financial district for $35 million.

This comprised of 144,000 square feet in two buildings, the 10-story 222 Kearny office tower and a five-story 183 Sutter Street building. The acquisition -- 222 Kearny sits at 75.9% occupancy.

Since the acquisition, we have now signed 8000 square feet of new leases, bringing the current occupancy to 85%. Also during the fourth quarter, we announced (inaudible) transaction that is expected to close by the year end. Upon successful completion of this deal, we will acquire 10950 Washington in West Los Angeles for $46 million which includes the assumption of a $30 million loan.

This 159,000 square-foot office building is 99% occupied. The main tenant is the NFL which has five years remaining on their lease.

These completed and pending acquisitions are a testament to our experience and depth of relationship in the marketplace including both brokers and institutional owners. By closing these early deals, we are beginning to realize the value of our acquisition pipeline, demonstrating our growth potential even in the face of challenging market conditions.

As we expected and previously communicated, all these acquisitions were off-market transactions within our target markets. We negotiated directly with the sellers and largely mitigated the competition from other would-be buyers.

We are currently in negotiations on several other office and media and entertainment properties in our pipeline. The valuations on these assets remains consistent with what we previously detailed.

As with the recent acquisitions I just discussed, these are all off-market opportunities stemming from relationships we've built over the last 20 years of involvement in our core markets. With that, I'm going to turn the call over to Mark Lammas, our CFO, for the discussion of our third-quarter results. Mark?

Thank you, Victor. For the third quarter of 2010, the Company reported a net loss attributable to common shareholders of $200,000 or $0.01 per diluted share compared to net income attributable to common shareholders of $100,000 for the third quarter of 2009.

Net loss attributable to common shareholders in the first nine months of 2010 was $2.1 million compared to net income attributable to common shareholders of $200,000 in the first nine months of 2009. Funds from operations for the three months ended September 30, 2010 totaled $4.1 million or $0.17 per diluted share.

Turning to our combined operating results for the third quarter of 2010, total revenue increased 51.5% to $17.5 million from $11.6 million a year ago. The increase in total revenue was attributed to a $4 million increase in rental revenue to $11.8 million and a $1.4 million increase in other property related revenue to $4.2 million.

Total operating expenses increased $6.1 million or 65.3% to $15.5 million from $9.4 million a year ago. The increase in total operating expenses was primarily the result of a $2.4 million increase in general and administrative expenses, a $1.3 million increase in office operating expenses and a $900,000 increase in media and entertainment operating expenses.

Our income from operations was $2 million compared to income from operations of $2.2 million a year ago. Interest expense during the third quarter declined 20% from the same period of 2009 to $1.8 million.

Looking at our results by segment, total revenue in our office properties segment increased 120.6% to $7.6 million from $3.5 million in the third quarter of 2009. This increase was primarily the result of a $3.6 million increase in rental revenue to $6.5 million which was largely attributable to improved occupancy and contributions from office properties we acquired in connection with the Company's initial public offering and the two office properties we acquired during the third quarter of 2010.

Property operating expenses in this segment increased 83.2% to $2.8 million from $1.5 million a year ago. At September 30, 2010, our office portfolio was 86.3% leased and 81.6% occupied.

During the quarter, we renewed leases totaling 16,037 square feet. Total revenue at our media and entertainment properties increased 22% to $90.9 million from $8.1 million in the third quarter of 2009. The increase was primarily the result of a $1.4 million increase in our other property related revenue.

Total media and entertainment expenses were $6.1 million compared to $5.1 million for the same period a year ago. As of September 30, 2010, the trailing 12-month occupancy for our media and entertainment portfolio reached 59%.

For the month of September 2010, our media and entertainment portfolio was 76.5% leased. Turning to the balance sheet, at September 30, 2010 the Company had real estate assets of $515.8 million in addition to cash and cash equivalents of $40.7 million.

At September 30, 2010 the Company had availability of approximately $75 million on its $200 million secured credit facility which as of September 30, 2010 remained undrawn. During the third quarter of 2010, the Company's Board of Directors declared two dividends on its common stock of $0.21 per share for the period from June 29, 2010 to June 30, 2010 and $0.095 per share for the third quarter of 2010. Both dividends were paid on October 15, 2010 to stockholders of record on September 30, 2010.

Turning to our outlook, we are providing full-year 2011 FFO guidance in the range of $0.82 to $0.86 per diluted share. This guidance includes the impact of the Del Amo office property, 9300 Wilshire property, 222 Kearny property and 10950 Washington Blvd. property acquisition including related borrowings under our secured credit facility.

In establishing this guidance, we're assuming that indebtedness maturing during 2011 continues in place in our current term including the effect of any associated interest rate hedges and that one-month LIBOR will average 50 basis points during 2011. We're also accounting for the impact of anticipated property tax reassessments triggered by our initial public offering.

Except as noted, this guidance excludes any impact of future acquisitions, dispositions, equity purchases, debt financings or repayment, recapitalizations or similar matters. Finally as we discussed throughout the IPO process and more recently on our last earnings call, we expect property acquisitions to be a driver of our future growth. That acquisition activity has materialized in line with our expectations and we believe there will be further acquisition opportunities in the near term.

Given the pace of the current activity and the number of transactions already completed, we are evaluating all potential options to increase available capital to pursue the next generation of opportunities. We will be carefully evaluating all capital market alternatives with a sensitivity to efficient and accretive redeployment. And now, I'll turn the call back to Victor for some final thoughts.

Thanks, Mark. So we have made substantive progress during our first full quarter as a public company. These initial acquisitions have already begun to exceed our high expectations for 2010 and we expect to have additional news on our pipeline in the next few weeks.

Our experienced and driven management team, our track record and our private/public company experience has given us significant advantages and we're making full use of these attributes to build a quality portfolio based on long-term growth.

We're very excited about our early results but we have much good work ahead of us. We appreciate your continued interest and support in Hudson Pacific Properties and we look forward to updating you on our progress again next quarter. Now, operator, we will open the call for questions.

(Operator Instructions) Jamie Feldman, Bank of America-Merrill Lynch.

I was hoping you could talk a little bit more about the acquisition pipeline just in terms of what markets you're looking at and how is the current pipeline versus say when -- during the IPO?

Sure, Jamie, how are you doing? Listen, so we have got 10950 Washington Blvd. in West LA as our $46 million acquisition that we announced. We're hopefully going to close that acquisition on loan approval through the servicing group within the next two to four weeks.

The delay has been through the processing of that. We also have a deal right now in San Francisco that we have got a signed LOI with a deposit up that we're negotiating a long-term lease on the asset as well as a purchase and sale agreement combined, and that asset we hope to have the complete lease and the purchase and sale agreement done by the end of this month and closed by the first week in December, that's the anticipated date.

The combined amount of those two deals is in excess of $140 million. We are negotiating now on another asset here in -- a media and entertainment asset here in Los Angeles and we have also got an additional Class A asset in San Francisco that we are in letter of intent form.

As we mentioned earlier when we were on the road and generally when we've talked to you in the past, all these deals that I'm referring to now are off-market transactions. The latter two deals will close in our anticipation in the first month or two -- I'm sorry, the latter deals that I mentioned, one was close in the first quarter, the other one will close in the second quarter.

It is a deferred close because of the (inaudible) issue with the existing debt. I think we are right on track.

We may be a little ahead of track in terms of the number of acquisitions that we have from a dollar volume. In terms of cap rates and valuations going in, we are right on pace with what we talked about this summer.

And then, Mark, can you talk a little bit more about the mechanics of the credit line? You said $75 million of capacity on a $200 million line. How is that going to work? When do you start to have enough unsecured assets to use that full $200 million?

Right, the mechanics are tied to the underlying asset base. As we acquire assets, we make those assets available to secure the facility which in turn increases the availability on the line.

And so for example, we are right now in the process of qualifying 222 Kearny for example for borrowing base availability purposes in the line. And that in turn enhances the availability.

So the $75 million of availability that we mentioned was premised on the existing assets already qualified for borrowing purposes and that amount goes up as we buy assets with that availability and put those assets into the line.

So I guess realistically, how do you think it will scale up?

I think it will scale up -- on the acquisitions that we have either completed, announced or just recently mentioned, we have -- we anticipate availability off the line to fund all those remaining acquisitions and we estimate that the borrowed capacity on the line at the completion of that is roughly $140 million.

Okay, and then when you think about 2011 guidance, what are you including for office NOI and what are you including for media NOI? Do you have a sense of what that year-over-year growth rate is? Will.

Well, let's see. I've got to think about it, Jamie, the breakup between media and entertainment and office NOI.

But I think the way to look at it would be our media and entertainment number that for NOI purposes that's running through that guidance is in line with the media and entertainment -- our expectations on a forward 12 months basis that we discussed during our road show which at the time, that number was -- let's see, our Q1 annualized number, Jamie, was 13.7 and our expectations on that number before property tax savings was approximately 15.6.

Our guidance is consistent with that forward 12-month expectation. The remaining guidance -- so we get back into that NOI number with the new acquisitions but maybe that's something we can do off-line.

But suffice to say that the core portfolio, Jamie, is almost identical to what we talked about when we went through the Q1 number and what we felt that would translate to on a forward 12-month basis including the media and entertainment approximately at that 15.6 before property tax savings. Does that help you?

Yes, thanks. We can talk more off-line. And then the final question is 875 Howard, what was the economic occupancy during the quarter? So I guess if we were going to adjust upward for leasing, what is the delta there?

Right, so you have 56,000 (inaudible) to deal. That's maybe the difference from the last identified amount, Jamie. (inaudible) remains at that 30 or so -- 34,000 or so and then you have Burlington in for that 90,000 feet and that's the occupancy at the end of Q3 against 290,000 feet of total footage.

Okay, alright, thank you.

Jordan Sadler, KeyBanc Capital Markets.

It's Craig Mailman here with Jordan. Mark, just on the guidance, following up on Jamie's question, do you guys maybe have an occupancy assumption of where you think the portfolio of office and media and entertainment shakes out next year? Maybe some level of G&A? Just any more data points that we could point to?

Well I think the strongest data point you could point to would be -- our occupancy in the already stabilized assets, it remains really the same. The only difference in occupancy for guidance purposes compared to today is absorption at 875 Howard.

We anticipate that we are high 80% occupied by the end of the year at 875 Howard, by the end of 2011. So the material difference in office occupancy occurs (inaudible) some pickup on occupancy on First Financial.

Right now that asset is in the high 80% leased. We see 200 or 300 basis points of pickup on occupancy on First Financial. And then on 222 Kearny we've announced an 8000 square-foot deal.

We by year-end -- 2011 year-end anticipate some net absorption there, taking that to the low 90% occupancy, somewhere between 90 to 92%. So that's on the office side.

On the media and entertainment side, the trailing 12-month occupancy number is a strong indicator. The better indicator will be the trailing 12-month weighted average occupancy by year-end because our 2011 media and entertainment assumptions for purposes of guidance assumes performance in line with 2011 results for the combined campuses.

And a lot of that occupancy pickup at September 30 is the delta relative to the average. Can we assume that was back-end weighted? And maybe you can go through how that affects the terms of income?

That's exactly right. As you know, to give a stronger indication of occupancy performance on media and entertainment, due to the short-term nature of much of the leasing, we published a trailing 12-month occupancy to give a longer period of time over which to gauge occupancy.

And so we have seen -- as indicated by that September 30 weighted average occupancy of 76.5%, we have seen steady improvement on occupancy at both campuses over the prior two quarters. And so what you're seeing on a trailing 12-month basis is us pulling behind lower weighted average occupancy in earlier periods, namely third quarter of 2009, first quarter of 2010 and steady improvement thereafter which will which we expect as we continue to head towards stabilized occupancy rates, that trailing 12-month number will continue to reflect that upward direction.

Just on the service revenue, it sounds pretty big sequentially. I'm assuming a part of that is the pickup at back end of the quarter. How should we think --

If you looked at that sequentially, what you would find is our media and entertainment other property related revenue increased a little bit more than 100%. We have always been -- tried to be as clear as we could with everyone about the seasonality of that revenue.

We both witnessed the actual realization of that seasonality, but it was further enhanced by the fact that as I think we were -- we tried to be clear as of Q2, we had a tenant, a large tenant that was in place in Q2, Heroes, that occupied 125,000 feet who even though their lease was in place through the quarter wasn't in production.

When they left and we backfilled them with three shows, we picked up all of that space and occupancy plus 25,000 feet. But importantly we saw all three of those shows go into production.

So we both experienced a carryover and some improvement in base rental revenue. But importantly we saw all of the pickup in production that we would've seen had Heroes been in place and in production and even more pickup in that because with three shows and comparable footage, we see higher production activity associated with that footage.

Okay, so that can basically trend higher through Q4 into 2011 and then maybe trail off towards the summer when some of these shows kind of halt production?

You should be aware, while we still expect there to be good activity in Q4 associated with those replacement tenants, we typically see towards the holiday season a trailing off of production activity which carries over to the beginning of the first quarter. So you should not associate with the other property related revenue seen in Q3 with the expectation of that same level of production activity in the fourth quarter.

Great, thank you.

Chris Caton, Morgan Stanley.

Following up on the guidance question, I think maybe you could talk a little bit more about a couple of one-off revenue items that we talked about over the last period of time. One would be, what will the tax reimbursement look like in terms of timing and how are those negotiations with the municipalities shaping up? And second --

They are all underway --

Yes, go ahead.

Go ahead, finish. Finish your question.

The second is I think -- do you get clawbacks for taxes that you should not have been paying in this year but you realize it next year?

Yes, so on your first question, those are all underway. We are in communication with the -- all the county assessor offices and in the markets where the -- the IPO assets reside in.

We have been conferring with our property tax consultants and our expectation going into the IPO was that we should see the completion of those property tax reassessments within the third quarter of 2011. We believe we remain on pace for that.

And without getting into specifics on an asset by asset basis because we certainly don't want to sort of influence our efforts on that front, we anticipate on an annualized basis property tax savings in the range of $1.3 million for the core portfolio. And to your second question, that would be attributable to the period from and after the change of ownership which occurred on June 29.

And the savings can be realized as an offset to your property tax bill even if it relates to a prior period. So, some of that annualized number will apply to -- some of the things will apply to the period of taxes that we actually realized the savings in and some will apply to the prior year period.

Gotcha. Another one-off was I think you were exploring signage revenue at the media assets that might offer also a bump. Is that something that you continue to evaluate?

We are looking -- we do have signage rights there. We are exploring two alternatives there. The possible sale of those signage rights and the possible lease of those signage rights with the signage company. We haven't decided at this point which direction we're going to go with it.

Got it. And then a follow-up on seasonality. The amount of other income was up significantly at the media assets versus a year ago.

Is there a component of that is hard to repeat or one-time? As we think about next year and we think about timing, that might be something you can either meet or exceed depending on market conditions?

Well, two things. We did have a very strong third quarter on very high production activity. I think you're thinking about the ability to sustain that type of revenue though. I want to be clear that for guidance purposes, we have looked to what we expect to be our full-year results which both account for that high level of activity in the third quarter, but also levels of activity in prior quarters this year where we did not see that level of production, including for example in Q2 because Heroes never went in production for example.

And so for purposes of giving you an indication of where we believe 2011 results will be on media and entertainment, we are both including levels of activity that were perhaps weaker than historical periods in the same quarter and some level of activity which were perhaps a bit higher than where we have seen historically in that same quarter in prior periods.

Just one last general question about the media industry. Can we get an update on how that business and I suppose also leasing and showing are trending broadly in the industry in the greater LA area and how the assets are doing in terms of competing for new tenants? You talked about a couple that you have got to backfill but I wonder how it's doing as economic activity maybe picks up from a bottom here.

I can certainly comment on that. The amount of content demand now going to this season has been the highest it's been in several years, first and foremost because of the fact that the reality TV shows have fallen off in terms of being the profile and back to the one-hour drama or 30-minute sitcoms had more influx than anything else.

So that in itself is a great sign of the industry pickup and where we sort of look for the next 12 to 24 months on a projected basis. Secondarily which also increases in the ad revenues and the networks which should overall take the production dollars at a much higher level from the television side.

From a feature side, there has been -- I think it's been a medium year. It hasn't been a stellar year in terms of revenues at the box office which is how they benchmark it.

But the production is still fairly consistent and California is specifically seeing a lot more feature startups here in California than we did in the last couple of years. But it's nowhere near to where the level of the peaks are. So television is holding its own beyond the expectations and the feature business is I think secondary.

(Operator Instructions) Brendan Maiorana, Wells Fargo.

So, Mark, just -- sorry, but I wanted to kind of follow up on guidance also. The media NOI guidance I think of $15.6 million, I think if I heard you, you mentioned that that was based off of kind of the expectations from a Q1 outlook and kind of adjusting for some seasonality. But weren't the assets barely -- there was a low level of occupancy then? So shouldn't we sort of expect just kind of a pickup in NOI outside of any of the tax ramifications or anything like that?

Maybe I could've been clearer, Brendan. I was both trying to draw a point of comparison to Q1 because that was a number which during the road show we were able to speak to and I think a lot of people kind of still look to as an indication of what a full 12-month period might look like.

But I -- and maybe if I could've been more clear about -- for 2011 purposes, our forecast is based off of our full-year performance including forecasts for fourth quarter this year and estimate of 2011 performance off of that 2010 full year with some modest growth on revenue and expense. And so to your question about expectation on occupancy, it will reflect an occupancy for the full calendar year 2010.

2011 will reflect an occupancy consistent with that weighted average occupancy for 2010 with some modest improvement on that reflected in that uptick in revenue and expense. So it's really not tied to Q1 in particular. It's really tied to the full calendar 2010 results.

That's helpful. So I guess maybe just to distill it down to kind of basic terms. Is the expectation still that a normalized level of occupancy for the media and entertainment assets is high 70s to low 80%?

Yes, right. We're seeing that now in September. We are at 76.5%. And importantly, Brendan, they are -- in that 76.5% is our 6050 Sunset building which is 17,500 square feet of existing vacancy but with promising leasing activity [or looks] on it. In fact if we can get a deal done in line with our expectations for timing next year on that, that will further improve that occupancy.

Sure, and the expectations for next year are kind of in line with -- sort of where the occupancy pickup that you spoke of is kind of in line with where we are today.

Yes.

That's helpful. And then, in terms of kind of sources and uses as we look at it, I think as of now, you guys have -- if you're able to improve the availability on the line of credit, you've got that full potential capacity, assuming you get enough deals done to support that base of borrowing and then you've got the cash on hand.

So adjusted for kind of the deals that have been announced but haven't yet been closed, I think you have somewhere around a total of $190 million of capacity as compared to the $200 million of line of credit capacity. So it sounds like the deal activity is pretty brisk and if you get above that level of acquisition, what are some of the additional sources of capital that you could use to potentially fund additional growth?

So right now we're evaluating a number of things. We're looking at our current credit facility and having conversations with the lead banks on that, on modifying the facility.

Secondarily we're looking at the alternatives in the marketplace for a follow-on offering or a preferred deal at this time. And so given the timing of the acquisitions with closing and the market conditions, we're looking at various different cycles of different [growth] capital.

Combined with that, we are in conversations with a couple of the deals we're on on some form of equity in the transactions where they would take stock in lieu of cash. So the [various plays] is diversified and we're cognizant of them. We feel very comfortable with our optionality here that these acquisitions we are working on and our timeframe on traditional sources of capital are going to match.

Okay, so there is not additional mortgage financing that could be put on any of the assets that could potentially allow you to borrow a little bit more?

No, there is actually. One of the things we're doing right now, we're in the marketplace for our Sunset Gower asset which is fully unencumbered for a separate loan that we have gone out to the marketplace through (inaudible) secured and we are actually getting bids on that as well. That's all part of our capital plan.

Okay and where do you think is a reasonable level that you could price preferreds at?

I think it's too early to look at right now. We're in conversations with our lead banks and I think -- we're not looking at convertible, we're looking at straight preferred and it's probably somewhere in the (inaudible)

Okay, and then just, Victor, I just want to make sure I heard you right. So you were considering potentially a common offering if you have the right call it portfolio deal or setup deal? And if that's the case, I mean would you be comfortable issuing equity at this level if the source of I guess the acquisition was appropriate enough?

I think the answer to the question is at this level of our stock, we wouldn't be comfortable issuing common. But that being said, we are looking at -- if we were to do a follow-on offering, it would not be now, it would be probably first quarter of 2011.

And so initially our existing acquisitions that we're working on right now would be imputed and our guidance would shift obviously dramatically for 2011 and that would be the consideration. That being said, we're not looking at a portfolio buy right now that is attractive or accretive enough to justify a common.

Jordan Sadler, KeyBanc Capital Markets.

I just wanted to touch base on the pipeline. I heard San Francisco media and entertainment in LA and then another I think San Francisco. Could you just maybe expand upon that a little bit for us, like total size of these assets, return expectations, range?

Well (inaudible) stuff that we're looking at right now is in the existing deal list that we announced is -- IRR for that as we're looking at right now for like a seven-year IRR is in the 13s on a levered IRR. Cap rate going in on that asset is in the mid 7s. So it's higher than our expectations. We're looking at (multiple speakers)

That's the media and entertainment one that you're talking about?

No, that's the office property that we are buying in West Los Angeles with a small media component there. The square footage of that asset is about 150,000 feet.

We are looking at -- the other asset that I mentioned in San Francisco is a slightly larger asset, its purchase price in the $100 range. It's effective today, about $8.5 million in cash flow on that asset, so it's a fairly high cap rate. And we're confident we're going to complete that transaction by the end of this year.

We then are in conversations in San Francisco on another larger asset of that size (inaudible) office as well. And that asset is in the 500,000 square-foot range and is in the low [7 to 7] cap range.

The media and entertainment assets that we were talking about, here is also a -- here in Los Angeles is an asset that is in the $90 million range and the yield expectations on that are more in line with some of the other media and entertainment stuff that we have bought in the past.

But there's a little bit more vacancy on that than initially going in. One of the things we have not looked at, we're in processing conversations on that, is the synergies of operating the key additional media and entertainment assets out of our current ones right now which would help the cash flow. It gives you sort of a little flavor for what we are working on.

There's one media and entertainment asset that you're looking at right now or two?

Yes (multiple speakers)

It's 90 to 100 million? Is that the (multiple speakers)

Yes.

In that range. The 500,000 square-footer in San Fran and the other office building in West LA, are these stabilized buildings?

Yes.

It's fair to say that from a capital standpoint, your needs are becoming increasingly imminent given sort of where you are in the process here.

Jordan, the answer to that, easy answer to that question is yes. We've said we are a growth oriented company, acquisitions is going to be the lifeblood of our growth for the next 12 to 24 months.

The initial IPO was to complete a year-end portfolio which I think we are much further ahead than we anticipated in the deals that we are going to be closing. We have enough capital sufficient to do those deals and then a little bit more. But our 2011 growth, it was always anticipated some other form of debt or capital that would help us grow the Company through all of 2011 and we will revisit it at that time.

That's fair. Mark, I know in your guidance, you specifically said you're not including any incremental acquisitions, so I guess the stuff we are talking about here is off the table for that 82 to 86 number. I'm just curious if you factor in a capital event of some sort and you roll it all together with your expectation of what will close here of these assets that we have just discussed, is it fair to say that the 82 to 86 would be conservative? (multiple speakers) the range should be higher?

If the acquisitions which Victor is mentioning materialize, yes, that would be a conservative estimate.

There are no further questions at this time. I will now turn it back over to Mr. Coleman for any closing remarks.

Thank you, operator. Well thanks everybody for participating in our quarterly call. We look forward to having a follow-up with anybody who wants to chat with Mark later on this week and look forward to some good productive news in the months to come.

Ladies and gentlemen, this concludes the Hudson Pacific Properties third-quarter 2010 earnings conference call. You may now disconnect. Thank you for your participation.