Q1 2023 Hudson Pacific Properties Inc Earnings Call
One word pressure on office market fundamentals, we will touch on how this is impacting our leasing activity in a moment.
Recently, however, we have seen much more a big tech returned to work announcements, bringing employees back to office multiple days a week, citing performance inefficiency concerns. These include Amazon Oracle redfin lift and <unk> to name a few.
Castle data in transit ridership also show improvement across our markets with the return to office unfolding slower than many expected we remain cautiously optimistic that these announcements and related trends will translate into increased physical occupancy and improved tenant demand at our assets.
Important indicators continue to support the notion that the bay area and Seattle remain Epicenters for talent and capital networks that drive the tech industry. For example, the first quarter venture capital investments was in line with historical 10 year average with the Bay area continue to receive the bulk of these funds the.
The early 2000, Twenty's brought a wave of funding accelerated by Covid related macro forces with a minimal office leasing.
Beyond AI, which is currently driving approximately 600000 square feet of requirements in the city of San Francisco alone other sectors like cyber security defense and energy remained compelling areas for growth.
While it will take time for this to positively contribute to our leasing efforts.
<unk>, our view that our office properties are located in compelling growth markets.
Turning to our studios last week, the writers Guild of America elected to strike, leading to a halt and the domestic film and TV production.
And unlike prior strikes where production ramped up in advance this was instead a significant slowdown in filming through the first quarter.
We suspect this is the primary this is primarily the result of streaming companies more robust existing content pipeline, although the austerity measures as well may have played a role for example.
In the la market overall, the first quarter filming in TV shoot days declined approximately 30% compared to the same period last year.
This initial slowdown impacted independent studios and service providers, such as ours first as major studios consolidated productions on site.
With the strike underway productions at all studios have now been disrupted.
This slowdown was a precursor to what we will experience during the strike in the past with the overall economic impact to be felt much more broadly.
In 2708, the writer's strike, which lasted 14 weeks cost the California economy to $1 billion.
$2 $8 billion in today's dollars.
There have been seven such strikes since the 19 fifties.
From 2% to 22 weeks with the average being 14 weeks, whether brief or protracted strike will impact the entire studio business, albeit less for a sunset studio assets were nearly 70% of our stage square footage is under multiyear leases with guaranteed minimums for service revenue.
Lack of visibility around the strikes duration led us to suspend our 2023 <unk> outlook and related studio assumptions, while we're still providing assumptions related to our 2020 feet three office outlook for what's going to discuss this further on the call.
These studio related Union strikes are both temporary and relatively infrequent and we believe underlying fundamentals for content production and thus for the studio business overall remained solid even if spend on high quality original content moderates in the coming years and pursuit of profitability current estimates into.
Kate.
At least on par with last years following a period of ramp up post strike.
In these uncertain times, we stay focused on what we can control executing our leasing prudently allocating capital, reducing corporate expenses proactively working on asset sales and further fortifying our balance sheet. We continue to live in upfront capital spend for market ready suites common area.
And base building improvements until we have certainty around demand.
Currently evaluating potential disposition of six distinct assets, including a land parcel.
We've also recently received board approval to reduce our dividend by 40% to 50% with the precise amount to be finalized at our board meeting later this month.
This will bring our dividend policy in line with other capital preservation efforts, however, even without the dividend reduction we have a path to address all our maturities through year end 2025, which will also discuss later in this call with that I'm going to turn it over to Mark Thanks Victor.
Our 344000 square feet at first quarter leasing activity reflects tenants continued slow decision, making which notably decelerated amid recession concerns in the third and fourth quarter of last year.
Our in service office portfolio lease percentage was 88, 7% compared to 89, 7% at.
At the end of last year.
This quarter, we've added $2 902950, Washington to our future development pipeline. It is the only residential conversion we're considering at this point and we're actively working through entitlements to build approximately 500 units. Thus the decline in lease percentage was mostly attributable to small to mid size X.
<unk> at our peninsula and Silicon Valley assets.
At the same time, the preponderance of our first quarter leasing activity also resulted from small sub 5000 square foot tenants in those markets, our GAAP and cash rents fell approximately 3% and 5% respectively with a decline mostly driven by a significantly below market 20000 square foot short term renewal are tentative.
<unk> four in line with the trailing 12 months per square foot average, but look higher on an annual basis due to a shorter weighted average lease term.
Mailing 12 month net effective rents are nearly 6% higher than last year and in line with pre pandemic that is first quarter 2020, trailing 12 month net effective rents.
The average weighted lease term of 42 months reflects the impact of three larger short term renewals for new deals alone. Our weighted average lease term was 67 months, which is typical given an average size of 4000 square feet.
Trailing 12 months weighted average lease term is approximately 9% higher than last year and in line with our pre pandemic trailing 12 month weighted average lease term.
We still have activity on both of our 2023 large block expirations, including 60% coverage on blocks space at 14, 55 market, but given the broader dynamics and then mid market neighborhood, we expect that backfill will take time.
We also remain in discussions around a potential renewal with our full building tenant at met park, north even as we proactively market that space.
In total we currently have 47% coverage on our remaining 2023 expirations with an average tenant size of roughly 11000 square feet.
Our leasing pipeline, which includes deals in leases Lois or proposals has increased up 11% to 2 million square feet since it dipped in the third quarter of last year.
The average deal size within our pipeline has 13000 square feet above the 8000 square feet on average four signed deals over the last five years.
The weighted average lease term of deals currently within our pipeline is more closely aligned with our five year average of 82 months separately tours at our assets are at the highest level since first quarter of 2017.
And slowing in third quarter last year, the number of our tours has increased more than 30% largely driven by activity at our Silicon Valley assets.
First quarter tourists represent over one 8 million square feet of requirements up 130% since third quarter last year in part driven by an increase in average requirement size from 8000 to 14000 square feet. While it remains unclear how quickly these trends will translate into signed leases historically.
We've seen a clear correlation between an uptick in tour activity in new deals and now I will turn the call over to Arun.
Thanks Mark.
Two first quarter 'twenty relating to our first quarter 2023 revenue increased three 2% to $252 3 million, primarily due to our acquisition of <unk>, which we purchased in the third quarter of last year, our first quarter <unk>, excluding specified items, plus $49 7 million or <unk> 35 per diluted.
Sure compared to $75 2 million or 50 cents per diluted share last year.
The items in the first quarter consisted of transaction related expenses of $1 2 million or <unk> <unk> per diluted share.
Compared to transaction related expenses of <unk>.
$3 million or zero cents per diluted share and a trade name noncash impairment of $8 5 million or six cents per diluted share a year ago.
The year over year decrease in <unk> was mostly due to lower production activity impacting acuity in the lead up to the writers strike.
Though we were also impacted by higher interest expense and lower office occupancy compared to last year.
First quarter <unk> was in line with our expectations, but for studio results, particularly with respect to March projections.
Our first quarter <unk> was 35 million or <unk> 24 per diluted share compared to $58 8 million or <unk> 39 per diluted share. The decrease was largely attributable to the aforementioned items affecting <unk>.
Our same store cash NOI grew to $125 6 million or seven 2% from $117 2 million, mostly due to significant office lease commencement at Harlow and 1918 eight.
As well as higher production related revenue and lower operating expenses at Sunset Gower and Sunset Bronson Studios.
During the first quarter, we repaid 110 million series, a notes and applied $102 million of sales proceeds from Skyway landing to pay down our credit facility at the end of the quarter. We had $828 3 million of total liquidity comprised of $163 3 million of cash of unrest.
Cash cash equivalents and $665 million of Undrawn capacity on our unsecured revolving credit.
Additional capacity of $138 9 million under our one west side and it sounds like on Oaks construction loans.
At the end of the first quarter, our company share of net debt to company share of Unappreciated book value was 38, 2%.
66, 2% of our debt is unsecured and 93% is fixed or capped that.
As Victor noted.
We continue to focus on delevering by exploring asset sales financing and cost and dividend reductions.
Anticipated dividend alignment will result in 58% to $72 million of annual cash flow savings to further enhance our balance sheet.
Market conditions have rightfully heightened focus on our debt maturities and I'll take a minute to walk through our exposure following our pay down of the key only loan in April we have only one smaller maturity remaining this year $50 million private placement notes or.
Our Q2 2024 maturities are both secured debt the larger of which is one website for which we have indicative terms from third party brokers on a refinancing with respect to our $98 million, 20% ratable share of loans secured by Bento Centre maturing in July of next year are part of Blackstone has already taken the lead in.
In discussing with the existing lenders.
Yeah.
As far as 2025 maturities, 96% of that indebtedness does not mature until the final two months of 225 more than two and a half years from today three of our four 2025 maturities comprised nearly two thirds of the maturing amount are secured by high quality assets 1980, eight's element la.
And it sounds like <unk>, the first two of which enjoy high credit single tenant occupancy with the remaining lease terms into 2030 <unk> will be a fully operational state of the art studio campus before its 2025 maturity our fourth and final 2025 maturity consists of $259 million private placement loan.
<unk> scheduled to mature in December 2025.
We are more than two and a half years away from that maturity. We are focused on ensuring that we have capital availability to address the loan ahead of its repayment.
Turning to outlook, we are continuing to provide several 2023 assumptions, including those most closely associated with our office portfolio to provide continued visibility however, due to the high level of uncertainty around the duration of the writer's strike, we will not be providing a 2023 <unk> outlook our studio related.
<unk> at this time. Please note that we provided and office same store cash NOI projection, rather than our customary combined office and studio estimates.
In light of the writer's strike and uncertainty.
As always our <unk> outlook excludes the impact of any opportunistic or not previously announced acquisitions dispositions financings and capital markets activity now, we'll be happy to take your questions operator.
Thank you if you would like to ask a question. Please press Star then one on your telephone keypad.
You changed your mind, please by stocking.
The first question we have comes from.
Thank you Sandra Goldfarb Piper Sandler.
Yes, hi, good morning out there.
So two questions first on the guidance.
<unk> suspension is that solely due to the studios or were there. Some other changes in the core office and the reason I ask is the same store cash NOI guidance range.
Came down as did the joint venture <unk> contribution.
Good morning. Thank.
Thank you for the question. It's a good question. So it is 100% due to the studio operations.
The same store NOI guidance.
I don't know if you can tell us we wont disclose if it went down quarter over quarter, primarily because the previous guidance provided.
A combination of studio and office was.
Guidance provided this time is only office so while.
Yes, Theres, a decrease quarter over quarter, but you can't tell from the previous disclosure that came down but to answer your question that did come down about 50 basis points for the office NOI and that's not why that guidance is suspended at.
All due to the studio and then the drop in the JV share of <unk> is again related to the studio all of it. So offices first one was in line with our expectations and while it's not.
Blowing up.
Doing amazing, but it is consistent with our expectations.
Okay and then the second question is on cost cutting you guys laid out some planned asset dispositions land disposition, certainly cutting the dividend from a.
Platform perspective, what are some of the costs that you guys could do you think that you could reduce.
To also improve the overall cash flow.
Generation of the.
Hopkins.
I mean, you've covered.
The sort of the gamut there on where our focus is today.
<unk>.
Hi.
We continue to monitor other discretionary spend and look for ways to.
Two.
Make reductions where we can.
But I think the main impactful items or the items you listed perhaps starting with the kind of dividend at the top list.
In addition, I mean.
We originally provided in our guidance last quarter, and obviously playing in the current quarter, which is a reduction of our G&A you see at a quarter part of decrease in terms of Q1 versus Q1.
And the guidance provided guidance provided is consistent without lastly, Alex as you've probably heard in the prepared remarks, I mean, we've looked at assets and.
Some of the assets that are not in the disposition line, but other assets that we would have had some capital expenditures allocated towards them. We've held off because of maybe some lack of leasing activity or confidence in that and focus our energy on the ones that we that we see are more imminent to lease up. So there is a combination of <unk>.
Things.
Between what.
Marc said and then obviously the dispositions of some assets.
Okay. Thank you Victor.
You got it out.
We now have Michael question.
Yeah.
Thanks, It's actually Nick Joseph here with Michael just on the studio platform, obviously recognize.
Yep.
We're moving the guidance the uncertainty on the timing, but as you look back to history, and maybe 2007 2008.
Does it create pent up demand when it ends or is it really more just kind of lost revenue as a strike.
Their way.
And as I said Thats a great question I'll tell you. This we were around in the last strike and you heard our prepared remarks, we don't unfortunately.
Have a seat at the table.
Currently to sort of give it says to us.
As to what is going on we have a very sophisticated board of which three are very involved in the entertainment business. So we're getting some firsthand information of how negotiations are going but that being said I would attend this too specific to your question more correlated to COVID-19.
When COVID-19 hit us production stopped and yes, there was writing.
All production has stopped for a period of time and then it also.
When it came back and there is a downtime to ramp up but when it came back it came back better than anybody expected and we are assuming that the same example will occur here there will be enough of a pipeline demand and.
Every.
Major.
Studio has come out to date and said they are not adjusting their budgets for content spend so that would lead us to believe that it's going to.
Ill come back aggressively if is going to come back in your direct question correlated to year end 'twenty three I don't know how they can produce all that content.
When they when they're losing time, but it will flow into seasonality of first quarter, which typically is the case first quarter is always a seasonal time lower.
And it gets back up in the second quarter.
Youre going to see some some seasonality on the positive side late this year and then early next as well.
Thanks, and then just on guidance would your intention be resumed full year guidance. Once the strike ends when you get more clarity or would you even wait a little longer than that to see kind of.
The pickup as as things resume.
We will soon as we have knowledge of the strike.
And then and then indicative knowledge of activities when we will resume guidance, but yes, when the when the strike is over we should see a.
Correlation to the.
The amount of activity on.
The studio business in general and Thats, when we will reinstate guidance that's the intent.
Thank you very much.
Your next question comes from Nick <unk> from Scotiabank.
Thanks. So first question I guess is on the studios is there any way to give us any rough feel for how this could work from a maybe like every months.
Yes, there is a strike and how it's going to impact your business realized I think second quarter and third quarter is where you have more seasonal benefit from the studio business just trying to see if there's any parameters we can think about.
Hi.
<unk>.
If we if we thought we could give you too much specifics Nick we obviously wouldn't have pulled guidance, but you can look to our NOI detailed page of the supplemental to give you at least a sense of what the underlying expenses look like on a quarterly basis.
<unk>.
And kind of what.
Low revenues look like on a quarterly basis, we can't.
It really give you much more to go buy than that at this point because we don't know what revenues could look like even in a strike scenario.
And what inroads, perhaps we can make on expenses, depending on how long the strike.
Goes for and Nick listen this is.
The strike is a week old.
We have access to our facilities, we have access to all of our products all of our comms all of our Transco and we are looking at alternative sources of revenue. This is this is new to the usage of those revenue, but we will look to.
Live events, and we're going to look to short term production or various different venue host deans and and the like so that so there will be some revenue. We just have no idea what its going to be but the sales team is out there and that being said as I said earlier in the last in the last question, we're looking at expense reduction.
Throughout the entire.
Studio business.
So the combination of that will sort of come out over the next couple of months. If this last that long.
Okay Fair enough. Thanks second question just has to do with the covenants.
The credit facility.
Have you guys done a stress test on that in regards to a certain period of the strike and then also factoring in some of the known move outs you have this year. If you don't box or are those just your confidence in being as we roll forward through the year.
You guys still being okay with your covenants in your credit facility.
It's a good question so.
We.
Periodically.
Regularly look at our covenants and project out at least a year, sometimes through depending on circumstances.
And in this case, we feel barring anything bizarre happening.
Even though the three months strike.
Sure.
Completely in line with our covenants.
Okay. Thanks, you said <unk>.
<unk> some of that something like a three month strike you feel like Youre still good within your covenants.
Yes, and even going further out we're in line with those covenants.
Okay, great. Thanks, I guess, just one last question if I could.
Victor.
The board the board addressed the dividend I guess I'm wondering if there is another step that the board is going to consider to address meaning that at some point you make.
More crystallized a certain level of asset sales to raise liquidity to to address future.
Debt maturities.
Just wondering what the thoughts are on that.
Yes, Nicholas thanks. Thanks.
On that specific aspect.
I think we laid out pretty concisely that between now and the end of.
20.
Four.
Four we don't have anything major coming due and then considering 25, we only have one piece of that given just the liquidity that we currently have with a dividend savings that effectively can be taken care of on a dollar for dollar basis. The rest of it is asset level. So.
I hope that we sort of alleviate that thought process that has been sort of hovering over Hudson for the last several months that other than other than asset related debt, which are high quality single tenant assets.
That we don't have any aspects of that that we're concerned about replacing through end of 'twenty five.
That being said I think the board is.
As looked at this as a onetime cut.
And given where we feel that the evaluation of what will transpire with some of the leasing that we project.
And hopefully the recovery of the entertainment business and the shorter.
<unk>.
Based on the strike being resolved, we should be in great shape to continue to grow going forward.
Okay. Thanks Victor.
Your next question comes from Brian <unk> of Green Street.
Hi, guys. Thanks for taking the question just curious and kind of give you overview of sort of the San Francisco market in general today recently, we've seen several retailers announced that theyre going to be closing stores. So just curious.
How do you guys see the recovery of the airplane back and maybe.
Things are a little bit worse on the ground today versus where we were call. It three to six months ago.
Yes, I mean, I'll jump in a little bit and then Arkansas.
You're obviously.
Seeing what's on the ground on the retail side I think it is really a tale of two ends of the city right I mean, when youre looking at our assets at RIN corn or.
In theory, the activity is fairly robust, we don't have any any vacancy coming due to.
To speak of and what we're seeing is a lot of interest a lot of inquiries and interest if we did have vacancy on high quality assets.
And that I think trends.
As evidenced throughout the whole city.
On that end of the city for high quality assets as you move towards the Tenderloin you are seeing some impact here.
I will say that the announcements.
Some of the retailers are not surprising given the safety and security concerns and crime.
You know the city is looking too.
Fulfillment obligation on a somewhat similar to a focused plan that the mayor's office is trying to revive.
Intown, San Francisco into mid market areas.
And the Civic center areas.
I think that that process and plan is being laid out and the intent is to sort of spend $25 million in.
And the police departments and expanding.
Street response teams and the likes of that which will hopefully turn the city into a positive Avenue and get out of what we're currently in today.
On a highlight which is limited in San Francisco right right now.
Im sure Youre hearing about the demand for AI.
And the demand for AI is what we've seen and what our people on the ground in the valley in the city of scene is really only in the city right now and it's somewhere around 600000 square feet of inquiries.
One tenant is already signed and it looks like Theres. Another six tenants in the marketplace looking for space, so that could boost.
Some form of a next step recovery or at least a step recovery for San Francisco that we're keeping an eye on and evaluate yes, that's definitely bolster demand in the market.
I think you set up about 600000 square feet, which is now brings the demand up to about $3 5 billion square feet.
Forget the gross leasing has remained.
North of a million square feet a quarter.
And so we're battling the headwinds.
Net absorption but.
Relative to our portfolio we've got.
In addition to the coverage we have on block so about 270000 square feet, we have 150000 square feet.
No.
Action on our vacancy out there so we are seeing.
That demand in that segment.
I was looking.
Taking a finger off the pause button.
Looking to transact so.
It's a it's definitely a positive sign.
That's very helpful commentary you guys I appreciate that maybe just one more if I could you guys mentioned, having or going to market with fixed assets. Maybe if you can just talk about sort of the profile of these assets the geographies that would be helpful. Thanks.
Yes, one asset we have.
Currently today is.
Is.
Is in negotiations on contracts.
The assets we have.
<unk> offers on and two assets. We are getting offers on on Friday the assets are all in.
In California.
I don't want to talk specifics around which asset.
But one is a land parcel land.
And the other three active office buildings.
Sorry, six five active office buildings.
Hi.
Yeah.
Okay.
Now that go into that single tenant longwall value add type or any any additional detail there.
Yes, I think.
The two of them are single tenants in the other three are multi tenant assets.
Awesome I appreciate it thanks.
Thanks.
We now have John Kim of BMO capital markets.
Thank you good morning.
Wanted to ask about the amount of the dividend cut.
In.
When you compare that versus the studio NOI, which was about 13% of total NOI in the fourth quarter and this strike may last about a quarter. So why did you cut it or decide to cut it at 40% 50%.
Yes, so really not correlated to the studios at all I mean, we plan our dividend for the long term.
The studio the strike is a temporary then.
If you look historically.
We've had a return of capital similar a bit north of 30% last year, we had a return of capital north of 50%.
<unk>.
Kind of on a run rate basis that is to say without trying to handicap gains or losses on sale of assets our.
Our view is that 2023 from a P&L point of view can accommodate.
50%.
Yeah.
We've obviously.
Hi.
Monitored what the implied yield of the dividend is and.
50% cut is still.
Sizable yield.
<unk>.
The.
We're looking for ways to.
Yeah.
We retain our lowest cost of capital and so all of those considerations factored into the decision around the 50% cut but the studio performance is real.
Nothing to do with that.
And what would be your priority as far as use of proceeds.
Yes, deleverage of the balance sheet and liquidity.
Okay.
On the studio NOI can I, just ask with the strike happening now what percentage of your rental revenue goes to zero.
And also the same question on services and other and on the Opex side, how much of the expenses are fixed versus variable.
But I'd point, you back to the NOI detail.
You can see in the same store NOI studios same store NOI detail, how well the legacy brick and mortar held up right. That's the 35 stages at Sunset Gower, Boston Las Palmas.
We mentioned in our prepared remarks that roughly 70% of the stages, there which are largely drive the revenue there are under long multi year agreements that have guarantees on ancillary revenue on.
It shows up in how well those studios, how that there'll be a bit of impact.
From the strike because not all of the stages, there like roughly 30% of the stages are a non under multi year agreements it will be a little bit of impact.
Then you can see how the non same store, which is key.
<unk> <unk> <unk>.
How they performed.
In the lead up to an anticipated strike so.
I encourage you to look at that detailed.
Thanks for the color.
Thank you, we'll now have Blaine heck of Wells Fargo.
Great. Thanks, Good morning out there Victor we've heard a lot of optimism around the return to office for some of the tech tenants that were both consistent on hybrid or remote work in the midst of the pandemic have there been any kind of tangible signs yet that maybe they are rethinking some of the sublease space that they put on the market or given back.
Back too much space in your markets as their head count actually grew throughout the pandemic or is it maybe too early to tell if thats going to happen.
Yeah. So blayne the answer is yes.
I don't want to get into the details, but there are specific to our portfolio, but there is a single tenant that has come back to us now and said that they're interested in revisiting. This current space that they had indicated that they were either going to sublease or or or leave.
On the sort of general market conditions I do know.
That just recently in Seattle, and Bellevue that same circumstance occurred.
With not with our portfolio, but with another portfolio of assets.
A couple of tenants, who come out and said that they want to retain their current space on evaluate how the space will layout.
So we sort of assumed that was going to happen as you have seen there has been a massive pushback today wire houser was another tenant that came back out and said they are demanding other tenants coming back and Melissa tenants I gave you is.
On top of where Amazon started last month.
So youre seeing youre seeing a movement.
It is still Blaine disturbing.
Sure.
Quality of portfolio that this is really a has become really a west coast issue.
And not a not a rest of the country issue and so its sort of a little under well.
Well, meaning that most of the west coast companies have not made decisions.
To to either expand space, but maybe just maintain their current platform, but we anticipate that it takes to take a little more time and we're optimistic that it's going to.
As I said earlier quality assets will prevail.
And so we're seeing that in our portfolio.
Okay, Great. That's helpful. And then just back on the studio space can you talk about whether you expect to see less willingness to sign longer term leases on studio space as a result of the.
Tougher environment, and even potentially as a result of the threat now reality of the strike and maybe a reversion to the show by show or a season by season leasing that used to be a lot more prevalent.
I'm going to have Jeff answer that.
Hey, Brian .
This is Jeff Yeah, I think the way the industry generally works is it it's fundamentally predicated on that show by show model that you're referring to.
To a lesser extent, there obviously are long term leases, but most of the stages in most of the inventory is really going on a show by show basis, meaning when a show gets greenlit.
Get all of the services, including a staged but long term leasing, it's a big benefit to our portfolio and sunset, but as we expand that business and we scale fundamentally you do get into the show by show model, which is kind of how the industry works. So it's just the nature of the industry that I don't think there is.
To necessarily be less demand.
Demand from studios going forward for long term leasing it's just us.
It's a smaller subset of the overall demand for stages.
Got it thanks guys.
Thank you as a reminder, ladies and gentlemen to ask a question.
And our next question comes from Tomorrow.
Welcome.
Hey, just a couple quick ones for me just going back to the leasing pipeline.
Which I think you talked about I think close to $2 million 2 million fee, if I got that number correct.
If I compare that to some of the expiring leases commence leases can you just put it all together and where.
Where are you thinking occupancy ended the year at order sort of the right ZIP codes on the occupancy at the end of 2013.
Yeah.
Yes.
Deja Vu.
We finished the quarter at 88, 7% leased.
We've got two sizable exploration, 60% coverage on the block space in discussions on the other.
Exploration with Amazon on towards the end of the year.
Our success on both of those.
<unk> can make a material difference obviously.
<unk>.
Pipelines really healthy pace non deals is an <expletive>.
Slower than we like.
And so I think it's.
Where we end up at the end of the year in terms of occupancy or lease percentages.
Predicated on how quickly we get deals done how successful we are on those.
Backfill or renewals that I mentioned and it won't have to leave it at that.
Yeah.
Understood.
If I could just pivot to the balance sheet.
You ended the quarter at eight and a half.
Debt to EBITDA is in the supplement so when you put it all together in the asset sales maybe can you talk about.
Potentially how much dollar SKU you get out of that and then the dividend cut.
What's the potential for bringing that down this year.
Well, yes, I mean.
It will go down I mean, youre seeing an aberration in large part driven off of the.
The impact of the slowdown at the studios and so we finished last quarter quarter prior at like 74 debt to EBITDA.
<unk>.
<unk> had a slowdown in this quarter don't know exactly how quickly that our resolve itself once it normalizes.
That component of the portfolio will contribute EBITDA and we will continue to make inroads on debt repayment in connection with asset sales. So the goal remains to get back into the sector and mid sixes or lower if we can.
And as soon as the studio business resumes I think youll see that trend.
Continue.
Great if I could just sneak one in on Onewest side, any any sort of early indications of what the right LTV either could be on that thanks.
Thanks.
Oh, well, yes, I mean I mean.
Right now the loan kind of fully funded.
Is that.
Over $400 million.
You can run.
Your own numbers, but that.
Conservatively should be.
<unk> may be less than 50% on any reasonable range of values and we've got indeed indicative indications from our from third party brokers that we could readily refinance that level.
Great.
On the interest rate.
Yes, Im sorry, I Didnt hear that yes, I mean again, it will depend on kind of where indices move.
<unk> now in end of 2024, but our view is today it would it would be a fiction made six type of.
Right all in.
Great helpful. Thanks, so much.
Thank you I would like and that's key for any final remarks.
Thank you so much for participating in our quarterly call and as always I want to call out the Hudson Pacific team for all their hard work and dedication in these challenging times.
Good day.
Thank you. This does conclude today's call. Please have a lovely day.
May now disconnect your lines.
[music].
This does conclude today's call. Please have a lovely day and you may now disconnect your line.
Yeah.