Q2 2025 Hudson Pacific Properties Inc Earnings Call

Alex (Conference Operator): Good afternoon. My name is Alex, and I'll be your conference operator today. At that time, I'd like to welcome everyone to the Hudson Pacific Properties' second quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, please press star followed by two. At this time, I'd like to turn the call over to Laura Campbell, Executive Vice President, Investor Relations and Marketing. Please go ahead.

Good afternoon. My name is Alex and I'll be your conference operator. Today at this time, I'd like to welcome everyone to the Hudson Pacific Properties. Second quarter, 2025 earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer session.

If you'd like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad.

If you would like to withdraw your question, please press star followed by 2.

At this time, I'd like to turn the call over to Laura Campbell Executive, Vice President, investor relations and marketing. Please go ahead.

Laura Campbell: Good afternoon, everyone. Thanks for joining us. With me on the call today are Victor Coleman, CEO and Chairman, Mark Lammas, President, Harout Diramerian, CFO, and Art Suazo, EVP of leasing. This afternoon, we filed our earnings release and supplemental on an 8K with the SEC, and both are now available on our website. An audio webcast of this call will also be available for replay on our website. Some of the information we'll share on the call today is forward-looking in nature. Please reference our earnings release and supplemental for statements regarding forward-looking information, as well as the reconciliation of non-GAAP financial measures used on this call. Today, Victor will discuss industry and market trends. Mark will provide an update on our office and studio operations and development, and Harout will review our financial results and 2025 outlook. Thereafter, we'll be happy to take your questions. Victor?

Good afternoon, everyone. Thanks for joining us. With me on the call today are Victor Coleman CEO and chairman Mark lammas president harut dear Marion CFO and arts wazo EVP As we sing

This afternoon, we filed our earnings release and supplemental on an 8K with the FCC. And both are now available on our website and audio. Webcast of this call will also be available for replay on our website.

Some of the information we'll share on the call. Today is forward-looking in nature. Please reference our earnings release in supplemental for statements regarding forward-looking information as well as the reconciliation of non-gaap financial measures used on this call.

Victor Coleman: Thank you, Laura. Good afternoon, everyone, and welcome to our second quarter call. We are energized by the progress year to date on our strategic objectives, as well as the positive trends across our portfolio, sectors, and markets. Importantly, leasing, which is one of our top priorities, resulted in 1.2 million square feet of office leases signed year to date, and we're on pace for our strongest office leasing year since 2019. And poised to grow occupancy with among the sector's lowest expirations over the next two years. Our studio occupancy is also improving, and California's significantly expanded film and television tax credit is finally in effect. Since the start of the year, we've also executed on operational enhancements, asset sales, and capital transactions, all of which are contributing to the rebuilding of our foundation to drive future cash flow growth.

Today, Victor will discuss industry and market trends, Mark will provide an update on our office and Studio operations and development. And hero route will review our financial results in 2025 Outlook thereafter. We'll be happy to take your questions. Victor, thank you Laura. Good afternoon everyone and Welcome to our second quarter call.

We are energized by the progress year to date on our strategic objectives as well as the positive Trends across our portfolio. Sectors and markets, importantly leasing, which is 1 of our top priorities. Resulted in a 1.2 million square feet of office, leases signed year to date, and we're on Pace for our strongest office, leasing year since 2019 employees to grow occupancy. With among the sectors lowest expirations over the next 2 years. Our studio occupancy is also improving in California's significantly, expanded film and television tax. Credit is finally, in effect.

Victor Coleman: Following our successful CMBS financing and follow-on capital raise, we have over $1 billion of liquidity, and the refinancing of our only 2025 maturity is well underway. We are also starting to realize positive results from our ongoing efforts to enhance the company's cost profile. Specifically, we have meaningfully improved G&A and further streamlined our studio business to achieve profitability. Moving to the state of our markets, the West Coast office recovery is taking hold led by emerging AI and tech companies. Tech and leasing in San Francisco drove the single largest quarter occupancy increase in seven years and a third consecutive quarter of positive net absorption. Given year-to-date leasing activity and demand in the market, the city is also on track to have the highest annual gross leasing since 2019. In Silicon Valley, occupancy also improved for the third consecutive quarter.

Since the start of the year, we've also executed on operational enhancements, asset sales and capital transactions, all of which are contributing to the rebuilding of our foundation to drive future cash flow growth.

And the refinancing of our only 2025 maturity is well underway.

We are also starting to realize positive results from our ongoing efforts to enhance the company's cost profile. Specifically we have meaningful improved GNA and further. Streamlined our studio business to achieve profitability.

Moving to the state of our markets, the West Coast office recovery is taking hold led by emerging Ai and tech companies, Tech and leasing in San Francisco. Drove the single largest quarter occupancy, increase in 7 years and a third consecutive quarter of positive net absorption.

Victor Coleman: Over 1 million square feet of positive net absorption was driven by the tech sector, new leasing, and for the first time in a long time, deals of 100,000 plus square feet. AI and AI-enabled businesses are the next wave of economic growth on the West Coast, and billions of venture capital dollars once again flowed into the sector in the second quarter with no signs of stopping despite tariff uncertainty. AI job postings trended further upwards, and the war for the best talent is on. For AI startups especially, proximity to the broader ecosystem is the key, and this explains the reason that 60% of AI's current footprint is located in the Bay Area and why we anticipate West Coast gateway markets, which have always had a unique mix of talent, networks, funding, and research, will be the primary beneficiaries.

Given year-to-date leasing activity and demand in the market. The city is also on track to have the highest annual gross leasing since 2019 in Silicon Valley occupancy. Also improved for the third consecutive quarter over 1 million square feet of positive. Net absorption was driven by the tech sector, new Leasing and for the first time in the long time deals of a 100,000 plus square feet,

Ai and AI enabled, businesses are the next wave of economic growth on the west coast and billions of venture capital dollars. Once again flowed into the sector in the second quarter with no signs of stopping. Despite tariff uncertainty

AI job posting is credited further upwards and the war for the best talent is on.

Victor Coleman: Today, core AI techs, that is, companies creating, selling, and licensing AI models, platforms, infrastructure, or chips, represent only 10% of our ABR and are located exclusively throughout the Bay Area. Given the funding available to these companies, their office cultures, and the current offerings within our portfolio, we see a considerable runway to expand both core AI and AI-enabled companies with our tenant mix. On the studio side, there are multiple reasons we are gaining confidence in the business despite weaker overall production activity in the second quarter. Pilot shoot days were up 11% year to date and 48% on a trailing 12-month basis. There are 134 productions in active development or prep in California during the second quarter, the most in any quarter since the 2023 strikes.

For AI startups, especially proximity to the broader ecosystem, is key. This explains the reason that 60% of AI's current footprint is located in the Bay Area and why we anticipate West Coast gateway markets, which have always had a unique mix of talent, networks, funding, and research, will be the primary beneficiaries.

Today, core AI tenants, that is companies creating selling and Licensing. AI models platforms infrastructure or chips represent. Only 10% of our ABR and are located exclusively throughout the Bay Area. Given the funding available of these companies, their office cultures and the current offerings within our portfolio. We see a considerable Runway to expand both core Ai and AI enabled companies with our tenant mix.

On the studio side, there are multiple reasons. We are gaining confidence in the business, despite weaker overall production activity in the second quarter.

Victor Coleman: In the first half of 2025, $375 million was allocated under the previous California Film and Television Tax Credit Program, nearly exceeding total dollars allocated during the entirety of 2024. And of the 110 allocations made so far this year, 51 of them occurred in June alone. Productions are only just beginning to apply for the more than doubled $750 million California tax credit, which, among other new features, provides for larger allocations to more types of productions. And we expect to see increased allocation activity in the near term with the potential for show counts to begin to benefit as early as the fourth quarter of this year. Finally, turning to asset sales, we continue to strategically pursue the disposition of non-core assets.

Pilot Chute days were up 11% year to date and 48% on a trailing 12-month basis. There are 134 Productions inactive development or prep in California. During the second quarter. The most in any quarter since the 2023 strikes.

in the first half of 2025, 375 million was allocated under the previous California film and television tax credit program, nearly exceeding total dollars, allocated during the entirety of 2024

And of the 110 allocations made so far this year, 51 of them occurred in June alone.

Productions are only just beginning to apply for the more than doubled, 750 million California tax credit, which among other new features provides for a larger allocations to more types of Productions. And we expect to see increased allocation activity in the near-term with the potential for show counts to begin to benefit as early as the fourth quarter of this year.

Victor Coleman: We completed the sale of the 625 second for $28 million during the second quarter, and we are in various stages on a handful of other potential dispositions. We evaluate each transaction within the framework of our broader capital allocations priorities, seizing the opportunities to increase liquidity while optimizing our portfolio to create long-term shareholder value. And now I'm going to turn the call over to Mark.

Finally turning to asset sales, we continue to strategically pursue the disposition of non-core assets. We complete the sale of 625 seconds for 28 million dollars during the second quarter and we are in various stages on a handful of other potential dispositions. We evaluate each transaction within the framework of our broader Capital allocations priorities season the opportunities to increase liquidity. While optimizing our portfolio to create long-term shareholder value.

Mark Lammas: Thanks, Victor. We signed up 558,000 square feet of office leases in the quarter, 60% of which were new leases and 60% of which were in the Bay Area. We improved occupancy across all our major markets but for Seattle, where, as expected, a single tenant at Hill 7 vacated approximately 100,000 square feet. Quarter over quarter, our in-service occupancy was stable at 75.1%, and our lease percentage dipped only 30 basis points to 76.2%. Our rent spreads trended upward, increasing 4.9% on a GAAP basis and decreasing 1.8% on a cash basis. Our trailing 12-month net effective rents were 2% lower compared to the prior year and 11% lower versus pre-pandemic. Our tour activity increased 8% compared to the first quarter to 1.8 million square feet, the highest level in more than two years, driven by additional tours at our San Francisco Peninsula and Silicon Valley assets.

And now I'm going to turn the call over to mark.

Thanks Victor. We've signed 558,000, square feet of office, leases in the quarter 60% of which were new leases and 60% of which were in the Bay Area.

We improved occupancy across all our major markets but for Seattle, where as expected a single tenant at Hill 7 vac approximately 100,000 square feet.

Quarter over quarter. Our in-service occupancy was stable at 75.1% and our least percentage shipped only 30 basis points to 76.2%.

Our rent, spreads trended upward, increasing 4.9% on a gap basis and decreasing 1.8% on a cash basis. Our trailing 12-month net effective, rents were 2% lower compared to the prior year and 11% lower versus pre-pandemic.

Mark Lammas: Tech as a percentage of our tours grew from 35% to 53%, and core AI tenants as a component of tech demand increased from 7% to 61%. Our leasing pipeline is healthy at 2.1 million square feet, including over half a million square feet of later-stage deals. Average requirement size continues to grow, approaching 20,000 square feet both for tours and our pipeline. We have approximately 50% coverage, including deals and leases, LOIs, proposals, or in discussions on our 547,000 square feet of remaining 2025 expirations, including 100% coverage on our only remaining expiration greater than 50,000 square feet. Most of our 2025 expirations are smaller tenants averaging around 5,000 square feet, and thus decision-making typically occurs within the quarter of lease expiration.

Peninsula and Silicon Valley assets.

Tech as a percentage of our tourists Grew From 35% to 53%. And core AI tenants as a component of tech demand increased from 7% to 61%

our leasing pipeline is healthy at 2.1 million square feet, including over half a million square feet of later stage deals.

Average requirement size continues to grow a protein. 20,000 square feet. Both for tours and our pipeline.

We have a approximately 50% coverage including deals and Lisas Louis proposals or in discussions on our 547,000 square feet of remaining 2025 expirations including 100% coverage on our only remaining expiration greater than 50,000 square feet.

Mark Lammas: As we have noted, from this point forward, due to both increased office demand and significantly lower expirations, we anticipate our in-service office occupancy should remain stable and should begin to grow as we move through the coming quarters. We have on average 270,000 square feet expiring per quarter through 2029, which is only about half the roughly 500,000 square feet of leases we've signed per quarter over the last two years. Turning to studios, on a trailing 12-month basis, our in-service studios were 63% leased, with related stages 63.6% leased. The quarter over quarter change for these metrics was driven by the inclusion of our Sunset Glen Oaks development for the first time.

Most of our 2025 expirations are smaller, tenants averaging around 5,000 square feet and thus decision-making typically occurs within the quarter of lease. Expiration, as we have noted from this point forward due to both increased office demand and significantly, lower expirations, we anticipate our in-service office occupancy, should remain stable and should begin to grow as we move through the coming quarters we have on average 270,000, square feet. Expiring per quarter through 2029, which is only about half the roughly 500,000 square feet of leases. We've signed per quarter over the last 2 years.

Turned to Studios on a trailing 12-month basis. Our in-service Studios were 63% leaves with related stages. 63.6% lease

Mark Lammas: But for Sunset Glen Oaks, our trailing 12-month in-service total and stage lease percentages would have increased to 74.3% and 80% respectively due to improved occupancy at Sunset Las Palmas, where 9 of 11 stages are leased. Our Q2 studios total and stage trailing 12-month lease percentages also improved quarter over quarter, up 340 basis points to 40.2% and up 410 basis points to 47.4% respectively. Quarter over quarter, our studio revenue increased 3% to $34.2 million, primarily due to additional studio occupancy and transportation utilization at Q2, even without an improvement in show counts. Studio expenses decreased by 11% to $36.6 million quarter over quarter, mostly due to elevated expenses in the first quarter associated with various one-time cost reduction initiatives at Q2. As a result, our studio NOI improved by $5.4 million quarter over quarter.

The quarter of a quarter change for these metrics was driven by the inclusion of our Sunset, glenos development for the first time. But for sunset, Glen Oaks our trailing 12-month and service, total and Stage lease percentages would have increased to 74.3% and 80% respectively due to improved occupancy at Sunset Los pomace where 9 of 11 stages are least.

Our Cod Studios, total and Stage trailing 12-month lease. Percentages also improved quarter over quarter up 340 basis points to 40.2% and up. 410 basis points to 47.4% respectively, quarter of a quarter, our studio Revenue increased, 3% to 34.2 million primarily due to additional Studio occupancy and transportation utilization at kyote. Even without an improvement in show counts.

Mark Lammas: Turning to development, construction at Pier 94 Studios in Manhattan is on time and on budget for delivery by year-end. We are in discussions with tenants regarding longer-term leases and expect show-by-show demand to pick up in the fourth quarter of this year as productions typically book two to three months out. Regarding Washington 1000 in Seattle, discussions with various potential tenants are ongoing, and we have tours scheduled for several new mid to large-size requirements. This project's exceptional quality positions it favorably in that market, especially given a diminishing pool of truly competitive supply. And with that, I'll turn the call over to Harout.

Studio expenses decreased by 11% to 36.6 million quarter over quarter mostly due to elevated expenses in the first quarter associated with various 1-time cost reduction initiatives at kyote. As a result, our studio noi improved by 5.4 million quarter over quarter.

Turning to development, construction at Pier 94 studios in Manhattan is on time and on budget for delivery by year-end.

We are a discussions with tenants regarding longer-term, leases and expect show by show demand to pick up in the fourth quarter of this year, as Productions typically Book 2, to 3 months out.

Regarding Washington, 1000 in Seattle discussions with various potential. Tenants are ongoing and we have tours scheduled for several new mid to large size requirements. This project exceptional quality positions at favorably in that market, especially given a diminishing pool of truly competitive Supply.

Harout Diramerian: Thanks, Mark. Our second quarter 2025 revenue was $190 million compared to $218 million in the second quarter of last year. The change is primarily due to asset sales and lower office occupancy. Excluding $14.3 million of one-time expenses associated with the forfeiture of executive non-cash compensation, our second quarter G&A expense improved to $13.5 million compared to $20.7 million in the second quarter last year and $18.5 million in the first quarter this year, or nearly a 35% and 27% improvement respectively, in alignment with our ongoing efforts to reduce costs. Our second quarter FFO, excluding specified items of $8 million or $0.04 per diluted share compared to $24.5 million or $0.17 per diluted share in the second quarter of last year.

And with that, I'll turn the call over to Ruth.

Thanks Mark our second quarter 2025 Revenue was 190 million dollars compared to 218 million in the second quarter of last year to change primarily due to asset sales and lower office occupancy.

Excluding 14.3 million of 1, expenses associated with the forfeiture of executive non-cash compensation, our second quarter of June a expense improved to 13.5 million compared to 20.7 million and the second quarter last year and 18.5 million and the first quarter this year, or nearly a 35% and 27% Improvement, respectively in alignment with our ongoing efforts to reduce costs.

Harout Diramerian: Specified items for the second quarter totaled $19.2 million or $0.09 per diluted share, including one-time expenses associated with forfeited non-cash compensation agreements, debt repayment, Q2 cost cutting, and transactions. By comparison, specified items for the second quarter of last year totaled $1.2 million or $0.01 per diluted share, including income related to transactions and one-time diluted fair value adjustment. Excluding specified items, the year-over-year change in FFO was mostly attributable to factors affecting revenue. Our second quarter same-store cash NOI was $87.1 million compared to $104.1 million in the second quarter last year, mostly due to lower office occupancy. Turning to the balance sheet, we continue to execute on a multipronged approach to enhance our maturity profile, increase liquidity, and strengthen key debt metrics.

Our second quarter, ffo excluding specified items of 8 million or 4 cents per diluted share compared to 24.5 million or 17 cents per diluted share and the second quarter of last year.

Specified items for the second quarter totaled, 19.2 million or 9 cents per diluted share including 1-time expenses associated with forfeited non-cash compensation agreements, get repayment Jody cost cutting and transactions.

My comparison specified items for the second quarter of last year totaled, 1.2 million, or 1 cent per diluted share including income related to transactions and 1 time due to the fair value adjustment.

Harout Diramerian: In the second quarter, we repaid all of our private placement notes, series B, C, and D, totaling $465 million, addressing significant maturities in 2025, 2026, and 2027. We also raised $690 million of gross proceeds through a common equity offering and used net proceeds to fully repay our credit facility and for general corporate purposes. In connection with this offering, we secured commitments to increase capacity under our credit facility by $20 million through the end of 2026, including extensions, and to extend $462 million of capacity through year-end 2029, including extensions. At the end of the second quarter, we had $1 billion of total liquidity comprised of $236 million of unrestricted cash and cash equivalents and $775 million of undrawn capacity under our credit facility. We had another $22.3 million of HCP share of undrawn capacity under the Sunset Pier 94 construction loan.

We continue to execute on a multi-pronged approach to enhance our maturity profile, increase liquidity, and strengthen key debt metrics. In the second quarter, we repaid all of our private placement notes Series B, C, and D, totaling $465 million.

Addressing significant maturities in 2025, 2026 and 2027.

We also raised $690 million of growth proceeds through a common equity offering and used the net proceeds to fully repay our credit facility and for general corporate purposes.

In connection with this offering we secured commitments, to increase capacity under our credit Facility by 20 million. So the end of 2026 including extensions and to extend 462 million of capacity through year end 2029 including extensions.

At the end of the second quarter, we had 1 billion dollars of total. Liquidity comprised of 236 million of unrestricted, cash and cash equivalents, and 775 million of undrawn capacity under our credit facility.

Harout Diramerian: Regarding our only remaining 2025 maturity, the loan secured by 1918/8, we expect to successfully refinance the loan. We will pursue the most cost-effective structure with closing anticipated this quarter. Turning to our outlook for our third quarter, we expect FFO per diluted share to range from $0.01 per share to $0.05 per share. Comparing our second quarter FFO of $0.04 per diluted share to our third quarter outlook, we expect gross FFO to increase, largely due to full quarter impact of deleveraging following the recent equity offering. This increase will be partially diluted by the higher weighted average share count of approximately 456,750,000 shares for the third quarter. Regarding our full-year assumptions, we anticipate both improved interest expense range of $168 million to $178 million and G&A expense ranging from $57.5 million to $63.5 million as we continue to execute on previously announced cost-saving measures.

We had another 22.3 million of HCB. Share of undrawn capacity under the sunset Pier. 94 construction loans.

Regarding our only remaining 2025 maturity, the loan secured by 19188. We expect to successfully refinance the loan

We will pursue the most cost-effective structure, with closing anticipated this quarter.

Turning to our Outlook.

Harout Diramerian: Estimated weighted average share counts now range from $319 million and $321 million for the full year. Finally, please note that consistent with this quarter's filing, our full-year same-store cash NOI now reflects the inclusion of our metro center office property, resulting in a range of -11.5% to 12.5%, which would have been identical to last quarter's range of -12.5% to -13.5%, but for that adjustment. As always, our outlook excludes the impact of any potential dispositions, acquisitions, financings, and/or capital market activity. Now we'll be happy to take your questions. Operator?

For our third quarter, we expect ffo per diluted share to range from 1 penny per share to 5 cents per share. Comparing our second quarter, ffo of 4 cents per diluted share to our third quarter Outlook. We expect gross ffo to increase largely due to full order impact of deleveraging following the recent Equity offering. This increase will be partially diluted by the higher weighted average share count of approximately 456,750,000 shares for the third quarter regarding our full year assumptions. We anticipate both improved interest expense range of 168 million to 178 million and Jeanne expense, ranging from 57.5 million to 63.5 million as we continue to execute on previously, announced cost-saving measures

Estimated weighted, average share accounts. Now, range from 319 million and 321 million for the full year.

Finally, please note that consistent with this quarter's filing are full year. Same store cash and AI. Now reflects the inclusion of our Metro Center office property. Resulted in a range of negative 11.5% to 12.5%, which would have been identical to the last quarter's range of negative 12.5% to negative 13.5%. But for that adjustment

As always our Outlook excludes the impact of any potential dispositions Acquisitions, financing and or Capital Market activity.

Now, we'll be happy to take your questions, operator.

Alex (Conference Operator): Thank you. As a reminder, if you'd like to ask a question, please press star followed by one on your telephone keypad. Our first question for today comes from Blaine Heck of Wells Fargo. The line is now open. Please go ahead.

Thank you as a reminder, if you would like to ask a question. Please press star 5 by 1 on your telephone keypad,

Our first question for today comes from Blaine. Heck of Wells Fargo. Well, land is now open. Please go ahead.

Blaine Heck: Hi, thanks. Good afternoon. So it seems as though the building blocks that are in place for office occupancy growth now that you're effectively past the large no move-outs, but just wanted to make sure that there were no incremental concerns that came up this quarter around significant move-outs in future years or tenant credit situations that could make it a more bumpy recovery.

um, so it seems

Typically passed the large know, move outs, but just wanted to make sure that there were no incremental concerns that came up this quarter around significant move outs in in future years or tenant credit situations that could make it um, a more bumpy recovery.

Victor Coleman: Not at all.

Not at all.

Blaine Heck: Blaine? Okay. Yeah, go ahead.

Okay, um, yeah. Go ahead.

Victor Coleman: No, not at all. There aren't any significant issues with any tenant in the portfolio on any level that would change the dynamic around what we've announced and what we have going forward with leasing.

No, not at all. There are there aren't any significant issues with any tenant in the portfolio on any level. That would change the dynamic around what we've announced and what we have going forward with Leasing.

Blaine Heck: Okay. No, that's helpful. I guess, you know, following up on that, Victor, I guess, how do you think about the pace of which you can recover this occupancy? Is this, you know, it certainly seems like a multi-year rebuilding effort, but you know, maybe give us a little bit of color around how we should be thinking about this.

Okay, no, that's helpful. I guess, you know, following up on that Victor. I guess. How do you think about? Uh, the pace of which you can? You can recover this occupancy, is this, you know, it certainly seems like a multi-year, um, rebuilding effort, but, you know, maybe give us a little bit of color around how we should be thinking about this.

Victor Coleman: I mean, listen, Blaine, I think you heard them prepare remarks specifically around Mark with, you know, we have had quarter over quarter sequential increase in leasing. We've had quarter over quarter, more importantly, tours and activity and pipeline has been stable. You know, we've gotten, I shouldn't say we, Mark got in trouble one time for sort of projecting where leasing was going. I think we feel very comfortable given the activity, the deals we have in the pipeline that we're shooting for somewhere around a low 8, high 7 handle year-end, and then 26, a mid 8 handle given everything we're working on right now. And it was indicative of sort of the playbook that we laid out with the tenant occupancy and lease differential. I'm referring to a lease number there.

I mean, listen, bla. I think you, you heard the preferred remarks specifically around Mark with, you know, we have had quarter of a quarter, sequential increase in leasing, we've had quarter over quarter more importantly, tours and activity and pipeline has been stable. You know, we've gotten, um, I shouldn't say we Mark got in trouble 1 time for sort of projecting where leasing was going. I think we feel feel very comfortable given the activity, the deals we have in the pipeline that we're shooting for summer around a, a low 8 High 7 handle year, end and then 26, a mid 8. Handel given everything we're working on right now, and it was indicative of sort of the Playbook that we laid out with the tenant occupancy, um, and least, differential, I'm referring to a lease number there.

Blaine Heck: Yeah. Okay. That's really helpful. You know, clearly, you guys accomplished a lot with respect to the balance sheet this quarter. So do you feel as though you've completely kind of shifted your focus to leasing and occupancy growth in both office and studios, kind of, you know, driving at an improvement in your overall cost of capital as that comes through? Or is there anything substantial that you're working on with respect to the balance sheet in the near term that we should be aware of, obviously, outside of 1918, which Harout touched on?

Yeah. Okay, that's really helpful. Um,

You know, clearly you guys accomplished a lot with respect to the balance sheet this quarter. So do you feel as though you've completely kind of shifted, your focus to Leasing and occupancy growth and, and both offices and Studios. Kind of, you know, driving at and Improvement in your overall cost of capital as that comes through, or, is there anything substantial that that you're working on with respect to the balance sheet, in the near term that we should be aware of obviously outside of 1918 which which true touched on

Victor Coleman: Yeah, I mean, indicative around 1918, you know, as Harout said in his prepared remarks, you know, we're very close to finalizing that deal. On a balance sheet standpoint, we have excess liquidity that we've not had access to in some time. And there really isn't any next major step on the balance sheet/liquidity basis for us to accomplish everything we need to accomplish on the office and studio side over the next, you know, 36 months, probably, with the exception of us renewing the media loan a little over a year from now. I think that it does put us in a much stronger position to work on the execution, which is, you know, clearly around leasing and ops. And that's where we see the upside here. And that's why I think we're very confident. And, you know, we've clearly bottomed out in every market we're in.

Yeah. I mean indicative of around 1918 you know as as herut said in his prepared remarks you know we're very close to finalizing that deal on the balance sheet standpoint we have um excess liquidity that we've not had access to in some time. And there really isn't any next major step on the balance sheet, liquidity basis for us to accomplish everything. We need to accomplish in the office and Studio side over the next, you know, 36 months probably with the exception of um, us. Renewing. The media alone, uh, it a little over a year from now I I think that um, it does

Victor Coleman: And more than just bottomed in some of the markets, it's really made a dramatic turn, as you can see by the activity, not just within our portfolio, but also in our peers' portfolios in the similar markets.

Put us in a much stronger position to work on the execution, which is, you know, clearly around leasing and opiates. And that's where we see the upside here. And that's why I think we're very confident. And, you know, we've clearly bottomed out in every market we're in and more than just bottomed out. In some of the markets, it's really made a dramatic turn, as you can see by the activity, not just within our portfolio but also in our peers' portfolios in similar markets.

Blaine Heck: Okay, great. That's helpful. Last one for me with respect to Q2. It seemed as though there were some lease terminations and sales of the fleet. I guess, can you talk about the drivers behind those lease terminations and just give us an update on maybe how much more you can cut on the cost side and your ultimate plans for that business?

Okay, great, that's helpful. Last 1 for me with respect to kiote. Uh, it seemed as though there were some lease terminations and sales at the fleet, I guess. Can you talk about the drivers behind those? Those leases uh, lease terminations and and just give us an update on maybe how much more you can cut on the cost side and your ultimate plans for that business.

Victor Coleman: Yeah. So, Blaine, it's, you know, the downsize of the fleet, the lease terminations, all part of that cost-cutting efforts that we've been underway on. Last quarter, the update on that front was that we had cut about 14 million of expenses on a pro forma basis. We thought relative to, say, 2024 actual results, that 14 million of cost cutting translates into about $10 million of improved NOI pro forma to '24. That effort continues. In the latest quarter, we cut another 10 million. That was largely downsizing of the fleet, including the location services part of that fleet. So we're at the current annualized expense cutting efforts coming in at around 24 million. The update on the NOI side, again, pro forma to 2024 results is 14 million of NOI improvement, cash NOI improvement.

Yeah. Um, so, Blaine, it's um,

You know, the the, the downsides of the fleet, the lease terminations, all part of that cost cutting efforts that we've been, um, underway on. Uh, last quarter. Um, the update on that front was that we had caught cut about 14 million of expenses. On a pro-forma basis. We thought, um, relative to say 2024 actual results that 14 million of cost cutting translate to new about 10 million, dollars of improved, noi proforma to 24, uh that effort continues. Um uh in the latest quarter, we cut another 10 million uh that was largely downsizing of the fleet including the location services part of that Fleet. Um, so we're at uh the current annualized expense cutting efforts, uh, coming in at at around 24 million. Um, the update on the noi side, again pro forma to 2024 results is 14.

Victor Coleman: I think importantly, when we last updated you, we thought that break-even based on those cost-cutting efforts were like mid to upper 90 show count levels. Based on the latest cost cutting, we think that's now down into the low 90s, gets us closer to break-even. And I think last but not least, we still think we're in that $30 to $40 million cash NOI range if we can see show counts get somewhere back to the 110 to 120 level.

Million of noi Improvement, cash on the line Improvement. Um, I think importantly, uh, when we last updated you, we thought that break even based on those costs cutting efforts. We're like mid to Upper 90s, show, count levels, um, based on the latest cough cutting. We think that's now down into the low 90s, um, uh, gets us closer to break even and I think last

Last but not least, we still think we're in that 30 to 40 million cach noi range. If we can see show counts, get somewhere back to the 110 to 120 level.

Blaine Heck: Great. Very helpful. Thanks, everyone.

Great. Very helpful. Thanks everyone.

Victor Coleman: Thanks, Blaine.

Thanks Blane.

Alex (Conference Operator): Thank you. Our next question comes from Alexander Goldfarb of Piper Sandler. Your line's now open. Please go ahead.

Blaine Heck: Hey, good afternoon out there. So, Mark, maybe just sticking with Blaine's question on Q2 and the studios, I think if memory serves, it was about 100 million of EBITDA that went away, you know, when the studios shut down a few years ago. Obviously, you've retooled the business, and it's great, Victor, to hear about the, you know, increasing show counts and the tax credits. Where should we think about, you know, I don't know if it's 100 million that you guys will get back to, but where should we think about that revenue or that EBITDA recovery? And if we think about the length of time, is it two years, three years? Do you think it'd be quicker?

Blaine Heck: Just trying to get a sense of how much we'll get back and a timing of when you think we'll get back based on, you know, how productions are coming back.

Hey, uh, uh, good afternoon out there. Uh, uh, so Mark, maybe just, uh, sticking with Blaine's question on coyote and the studios I think if memory serves, it was about a 100 million of IBA that went away. You know, when the studio shut down a few years ago, obviously, you retool the business and it's a great Victor to hear about the, you know, increasing show counts and the tax credits, where should we think about? You know, I don't know if it's 100 million that you guys will get back to, but where should we think about that revenue or that Evita recovery? And if we think about the, the length of time is it 2 years, 3 years, do you think it'd be quicker? Just try to get a sense of how much we'll get back in a timing of when you think it will get back based on, you know, how Productions are are coming back.

Victor Coleman: Yeah. So the last point I was making, Alex, really points to where we think it could trend to at that 110, 120-ish level. 120 was average show counts in 2022. In '21 and 2019, we saw show counts above 130, even in certain months 140. But I don't think we're thinking that that's peak television is necessarily in the cards. But, you know, with the tax credit now more than doubled to the 750 level and officially in the budget, hopeful that we could see show counts get above, say, the 110 level, which should get us somewhere in the neighborhood of about 30 million of NOI. I don't know that it makes sense to revisit, you know, the initial pro forma back when we purchased the company starting in 2021, which is that 100 million or so that you're pointing to.

Yeah. So the last point I was making, Alex, really points to where we think it could trend to, um, at that 101 to 120-ish level. 120 was average show counts in 2022. In 2021 and 2019, we shot show counts above 130, even in certain months, 140. But I don't think we're thinking that that's, uh, peak television is necessarily in the cards. But, you know, with the tax credit now more than doubled to the $750 level and officially in the budget, hopeful that uh, we could see show counts get above, say, the 110 level, which should get.

Victor Coleman: For now, I think the key is getting closer to break-even, which I mentioned is around that 90-ish show count level, and trying to get back into positive EBITDA territory like that, you know, 30, 40 million range that I think we could potentially get to.

Us somewhere in the neighborhood of about 30 million million of noi? Um, I don't know that it makes sense to revisit, you know, the initial proforma back when we purchased the company starting in 2021, which is that 100 million or so that you're pointing to for now, I think the the key is getting closer to break even which I mentioned is around that 90th show, count level and trying to get back into positive view, but its territory like that, you know, 30, 40 million range that I think, uh, a week could potentially get to

Blaine Heck: Okay. And then the second question is, Victor, I think you mentioned that you guys, and obviously nice job on the capital raise, that you have the capital that you need for the next 36 months. But just want to make sure I understand. As you think about, you know, the leasing CapEx, the free rent, and everything that you need to do to get the portfolio back into, I guess, sort of the low 90s on the office front, is that correct that you don't need any additional capital? Or I just want to make sure I understand that correctly.

Victor Coleman: I mean, I think what we're referring to is that we've got a plan in place that can access additional capital as need be, and the balance sheet will shape up that way. I'm not saying we're not selling any more assets because that's not the case, because you heard it as my prepared remarks. We have a few assets that we are working on. I think the expediency of selling a couple of quarters ago was ramped up, and now we're taking more of a moderate timeline on that because we don't need the capital today. Doesn't mean we're not going to be pruning the portfolio as we typically do.

Okay, and then the second question is Victor. I think you mentioned that you guys and obviously nice job on the capital race that you have the capital that you need for the next 36 months. But just want to make sure I understand as you think about, you know, the leasing capex, the free rent uh, and everything that you need to do to get the portfolio back into, I guess. Sort of the low 90s on the office front. Is that correct that you don't need any additional capital or I just want to make sure I understand that correctly.

I mean, I think what, what what we're referring to is, is that we've got a plan in place that can access additional Capital as need be. Um and the balance sheet will shape up that way. I'm I'm not saying we're not selling any more assets because that's not the case because you you heard is my preferable. March we have a few assets that we are working on. I think the expediency of selling uh a couple quarters ago was ramped up and now we're taking more of a moderate timeline on that because we don't need the capital.

Today, that doesn’t mean we’re not going to be pruning the portfolio as we typically do.

Blaine Heck: And then as part of that, the line of credit, which I think Harout said is 70-75 undrawn, is your view to use like maybe a little bit of that, or as you think, or as we think about this plan, the line of credit would form a meaningful part of the capital spend?

and then as part of that, the line of credit, which I think Haru said is 775, undrawn, is your view to use, like maybe a little bit of that or as you think, or as we think about this plan, the line of credit would form a meaningful part of the capital spend,

Victor Coleman: I mean, typically, we use the line of credit on a need-be basis. And, you know, right now, there's no need because we have cash on the balance sheet in excess of, you know, almost $200 million. So we're in good shape there. And we've always used the credit facility when we need it. If there are opportunities that we have to access it, we will. There's no set game plan as to when we're going to draw down on it.

I mean, typically we use a line of credit on a need basis and, you know, right now there's no need because we have, um, we have cash on the balance sheet in excess of, you know, almost hundred million dollars. So we're we're in good shape there and we've always used the credit facility when we need it. If there are opportunities that we have to access it, we will there's no set game plan as to when we're going to draw down on it.

Blaine Heck: Okay, perfect. Listen, thank you.

Okay, perfect. Listen. Thank you.

Victor Coleman: Thank you, Alex.

Thank you, Alex.

Alex (Conference Operator): Thank you. Our next question comes from Caitlin Burrows of Goldman Sachs. Your line is now open. Please go ahead.

Thank you. Our next question comes from case land Burrows of Goldman Sachs.

Caitlin Burrows: Hi, everyone. I guess I was wondering if you could just comment on the leasing environment. It seems like you guys have been maintaining this kind of average quarterly pace in the 500,000 square foot range for a while now. I feel like also in line with what you guys were saying that there's a lot of commentary about West Coast picking up. So I guess I was wondering if you could just comment on are you seeing a pickup? Are you seeing what you've been seeing sustaining, just how those volumes are going?

Your lines now open, please go ahead.

Hi everyone. Um, I guess I was wondering if you could just comment on the leasing environment, it seems like uh, you guys have been maintaining this uh kind of average quarterly Pace in the 500,000 square foot range for a while now. Um I feel like also in line with what you guys were saying that there's a lot of commentary about West Coast picking up, so I guess I was wondering if you could just comment on, are you seeing a pickup? Are you seeing what you've been seeing sustaining? Um just how those volumes are going.

Victor Coleman: Hi, Caitlin. This is Art. Yeah, so that pace, that 500, that magical 500,000 square feet, we've well surpassed. If you look at the last two quarters, I think we're averaging about 590,000 square feet. So yes, to answer your question, it is picking up. Not only is it picking up, but we're starting to see the front end of that engine, which is tours, pick up as well. We're up 10% quarter over quarter in just tours, up to 1.8 million square feet, which is really the highest we've had in about six years. So that's the good news behind what's in our pipeline and what we're executing on. And additionally, the tour activity, the average deal size is increasing. That's telling us, that's informing us that, you know, these mid-size deals are really back into the market and we're availing ourselves of them.

And just tours up to 1.8 million square feet, which is really the highest we've had in probably about 6 years. So that's the good news behind what's in, you know, what's in our Pipeline and what we're executing on and uh, Additionally the tour activity the, uh, average deal size is increasing. That's telling us that's informing us, uh, that you know, the midsize deals are really back into the market and we're availing ourselves of of of them.

Caitlin Burrows: Got it. And then I guess maybe could you just differentiate by some of the markets? I know you were talking before about the strength in tech and AI, mostly in the Bay Area. Would you say that's driving the strength, or would you say the kind of pickup that you were just talking about is across markets?

Victor Coleman: No, it's 100% driving the strength across the Bay Area, San Francisco in particular. It's the tech, it's the relationship to the tech into the pipeline itself. It's up in the Valley, it's up to about 68%. In the city, it's up, you know, very close to 60%. And AI is roughly about 25% of that and growing, by the way. In Seattle, you know, a little bit more modest increases, but increases nevertheless. We've seen year over year probably 25% increase in demand and gross leasing. And the tech pipeline, though again, a little bit more muted than San Francisco, we're starting to see migration. We're starting to see the front end of some of the top name tech companies, AI companies getting a foothold in Seattle, availing themselves of the talent pool in Seattle. For example, you know, OpenAI, Anthropic, NVIDIA, Databricks, to name a few.

Got it and then I guess maybe. Could you just differentiate by some of the markets? Um, I know you were talking before about the strength in uh Tech and AI mostly in the Bay Area. Um, would you say that's driving the strength or would you say the kind of pickup that you were just talking about is across markets?

No, it's 100% driving. The strength, across the bay area of San Francisco, in particular, um, it's, it's the tech. It's the relationship to the tech into the pipeline itself, it's up in the valley, it's up to about 68% in the city. It's up, you know, very close to 60%, and AI roughly about 25% of that. And, and, and growing, by the way, uh, in in in uh, Seattle, um, you know, a little bit more modest increases. But increases nevertheless, we've seen year-over-year, probably 25% increase in demand, and gross leasing. Um, and the tech pipeline, uh, though again, a little bit more muted than the San Francisco. We're starting to see my migration, we're starting to see the front end.

Victor Coleman: And so we're seeing these tenants take 8, 10, 50 thousand feet and then grow. So, you know, if you're paying attention to the last cycle, that's precisely what happened and drove the engine in Seattle.

Of some of the, you know, top name tech companies, AI companies, getting a foothold in in, uh, Seattle availing themselves of the of the talent pool in Seattle, for example, you know, open AI, anthropic Nvidia, uh, data bricks to name to name a few. And so we're seeing these tenants, take 8, 10, 15 thousand feet and then grow. So you know, if if you're paying attention to the last cycle, that's precisely what happened in drove the engine in Seattle.

Caitlin Burrows: Got it. Thanks.

Got it, thanks.

Alex (Conference Operator): Thank you. Our next question comes from Seth Bergey of City. Your line's now open. Please go ahead.

Thank you. Our next question comes from my asset that burgie of the city, the Line is now open. Please go ahead.

John Kim: Hi, thanks for taking my question. I just wanted to talk touch on third quarter guidance. You know, what kind of at this point and where we sit in August, with July kind of already in the books, kind of gets you towards the lower end or the higher end of guidance?

Hi. Thanks for taking my question. I guess I wanted to talk touch on, um, third quarter guidance. You know, that what kind of is at this point and where we sit in August, um, with July kind of already in the books. Kind of get you towards the lower end or the the higher end of guidance.

Victor Coleman: Yeah, thanks for the question. I think, you know, a lot of this stems from the studio business. I think if we get surprised and the activity increases more than we expect, you know, we can get in the higher end of the guidance. And I think if the studio business is slower than we expect, it may go to the lower end of the business. Obviously, if we get some, you know, different type of leasing, if we execute on leases that give us more beverage occupancy, that can also help on the higher end of the range. But as it relates to other costs and interest, I think those things are pretty well known as we fix our interest and our G&A costs are pretty known at this point.

um,

yeah, thanks for the question. I think, you know, a lot of the stems from the studio business. I think if we, uh, get surprised and the activity increases more than we expect, um, you know, we can get on the higher end of the guidance, and I think, if the student is slower than we expect, it may go to the lower end of the business. Um, obviously if we get some, you know, different type of leasing if we execute on leases that give us more

temperature occupancy, that can also help on the higher end of the range, but as it relates to other costs and interest

I think those things are pretty well known as we fixed our interests and our DNA costs are, um, pretty known at this point.

John Kim: Okay, great. And then, you know, I think in your prepared remarks, you said that, you know, there's around 500,000 square feet of, you know, the leasing pipeline is kind of in later stages. Any of that at Washington 1000?

Okay, great. And then, you know, I think in your prepared remarks, you said that, you know, there's around 500,000 square feet of um, you know the leasing pipeline is kind of in later stages. Any of that at Washington 1000

Victor Coleman: Yeah, so I think it was the number is actually closer to 600. I think we said five, but it's moved up. Not at Washington 1000, no later stage deals. The deals that we have at Washington 1000 is, you know, based upon the market information I shared with Caitlin just a second ago, we're starting to see more multi-tenant deals in the market of which we are touring. And so tours are up significantly quarter over quarter. And then we have, there's three 100,000 square foot deals in the market right now that we're engaged with. So not later stage lease or LOI yet.

Yeah. So I think it was the, the numbers actually closer to 600. I think we said 5, but, um, it's, it's moved up, um, not at Washington without and no later stage deals, the deals that we have in Washington. 1000 is, you know, based upon the, the market information, I shared with Kay was just a second ago, we're starting to see more multi-tenant deals in the market of which We are touring. And so tours are up, uh, significantly, quarter over quarter. And then we have, there's 3 100 square foot, uh, deals, uh, in the market right now that we're engaged with. So not not later stage or lease or Loi, yet.

John Kim: Okay, great. Thank you.

Okay, great. Thank you.

Alex (Conference Operator): Thank you. Our next question comes from Tom McEthelwood of BTIG. The line's now open. Please go ahead.

Thank you. Our next question comes from Tom caswood of btig.

The lines now open, please go ahead.

Tom Catherwood: Thank you. And good afternoon, everybody. Following up on Alex's leasing CapEx question, with the incremental capital on your balance sheet right now, can you get more aggressive pursuing new leases and kind of capturing more of the 2 million plus square foot pipeline that you have, or is the plan to hold more cash for other uses in the next 12 to 18 months?

Thank you and good afternoon. Everybody following up on Alex's leasing capex. Question with the incremental capital on your balance sheet right now. Can you get more aggressive pursuing, new leases and kind of capturing more of the 2 million plus square foot pipeline that you have? Or is the plan to hold more cash for other uses in the next 12 to 18 months?

Victor Coleman: Thanks, Tom. Good question. Listen, we've never detracted our business plan around spending capital if the quality and size and quantity of leasing is available to ourselves. So it's not about whether we have capital or not. We've never constrained ourselves to not doing deals because of capital at the end of the day. So we're trying to expedite the process. We're not losing deals because we're being aggressive or not being aggressive. We're losing deals to competitors who may have space that's readily accessible. And that marketplace has been drying up dramatically, specifically in Seattle. I mean, the deals that we've lost in Seattle have been to move-in ready space. So the majority of that sublease space in the marketplace is now gone. In the Bay Area, both in the Peninsula and San Francisco, we're at a massive level playing field there right now.

Victor Coleman: The activity, as Art mentioned, and Mark in his prepared remarks has never been higher. So we're comfortable in the ability for us to execute. It's really just a timing situation. And, you know, I do think that the comment about, you know, we're a month into the quarter, remember, it's also the quietest quarter being summer. We've already seen great activity for this quarter in leasing, and we expect September to be a pretty strong month for us.

It's a quality and and and size and quantity of leasing is, is available to ourselves. So it's not about whether we have capital or not. We've never constrained ourselves to not doing deals because of because of capital at the end of the day. So we're we're trying to expedite the process. We're not losing deals, um, because we're being aggressive or not being aggressive, we're losing deals to competitors who may have space. That's readily accessible. Um, and and that that Marketplace has been drying up dramatically specifically in Seattle. I mean, the deals that we've lost in Seattle, have been to move in ready. Space. So the majority of that sub lease space in the marketplace is now gone in the in the Bay Area, both in the peninsula and San Francisco Ward, a massive Level Playing Field, there right now, the activity as art mentioned, um, and Market is prepared and Marx has never been higher. So we're comfortable in the ability for us to execute. It's really just a timing situation. And, you know, I I do think that, that, that the comment about

You know, we're we're a month into the quarter or remember, it's, it's also the quietest quarter being summer. We've already seen a great activity for this quarter and Leasing, and we expect September to be a pretty strong month for us.

Tom Catherwood: Got it. Appreciate that, Victor. Then kind of when we think of institutional investor interest in West Coast CRE, but especially office, it seems like that's ramped recently, whether they're, you know, owner-users, whether they're financial investors. What have you seen in terms of valuation improvements across your markets? And is that changing how you're approaching asset sales? Are you moving certain assets in or out, just depending on the change in values recently?

Appreciate that Victor. Um, then kind of when we think of Institutional Investor interest in West Coast,

CRA, but but especially office seems like that's ramped recently. Um, whether they're, you know, owner users, whether they're Financial investors, what have you seen in terms of valuation improvements across your markets, and is that changing how you're approaching asset sales? Are you moving certain Assets in or out just depending on the change in values recently?

Victor Coleman: That's an excellent question. I think you've got to look at a couple of factors right now that are sort of leaning towards the valuation and institutional capital coming to, you know, specific office, but, you know, in general, into CRE overall on the West Coast. You know, the venture capital drive has put the capital forefront into the Bay Area specifically, and then Seattle secondarily. I mean, the Bay Area is 60% of the AI is going into the Bay Area, and the VCs are funding companies that are putting their companies and corporations and headquarters in the Bay Area. And so that has taken a very positive shift in terms of valuations and increased price per foot.

Victor Coleman: The number of transactions has picked up in terms of sales and dispositions or sales, whichever side of the table you're at, but it's not materially changed quarter over quarter to a point where you're seeing a massive decrease in cap rates and a valuation shift. We think that's coming. Clearly, those who ventured into the marketplace in the Bay Area, both in the Peninsula and the city, you know, 12 to 18 months back all the way through till the beginning of this year have made really, really solid buys for the most part. And so we're seeing those valuations increase, but I think it's still a little too early to sort of capture a, well, this is where cap rates have gone from too, but that is coming.

That's an excellent question. I think you got to look at a couple of factors right now that are sort of leaning towards the valuation and institutional Capital coming to, you know, specific office but but you know in general and to see overall on the west coast. You know, the Venture Capital Drive has has put the capital Forefront into the Bay Area, specifically, and then Seattle, secondarily. I mean, the areas 6% of the AI is going into the area and the VCS are funding companies that are putting their companies and corporations and headquarters in the Bay Area. And so that has taken a, a a very positive shift in terms of valuations and increased price per foot, the number of transactions has picked up in terms of sales, um, and, and dispositions, or sales whichever side of the table. You're at, but it's not materially changed quarter of a quarter. To a point where you're seeing massive, um, decreasing cap rates,

Victor Coleman: In terms of your latter part of your question, you know, right now we have really looked at only one asset in the Bay Area that could be a disposition candidate left in our portfolio that would make some sense and be priced out at a good number. So we're not reevaluating that, and I don't see us doing so. I'd rather see the leasing pick up and then maybe look down the road of a more stabilized asset.

And evaluation shift. We think that's coming clearly those who ventured in to the marketplace in the Bay Area, both in the peninsula and the city, you know, 12 to 18 months back. Um all the way through till the beginning of this year have made really, really solid advice for the most part. And so we're we're seeing those valuations increase but I think it's still a little too early to to sort of capture a. Well, this is where Cap rates have gone from too but that's that is, that is coming in terms of your latter part of your question, you know? Right now we have really looked at only 1 asset in the Bay Area. Um, that that could be a disposition candidate left in in in our portfolio. Uh, that we make some sense and be priced out at a good number. So, we're not we're not reevaluating that and I don't see us doing so, I'd rather see the leasing pick up, and then maybe look down the road of a more stabilized asset.

Tom Catherwood: Got it. Thanks for that, Victor. And last one for me, Mark. You mentioned Sunset Las Palmas. I think it was 9 out of the 11 studios are leased, but in the SUP, it's still sub 50% from a leased percent. Is there a lag when it comes to when a stage is spoken for to when the actual occupancy is taken and that percentage ramps? How do we think through it with Las Palmas specifically?

Got it. Thanks for that, Victor. And last one for me. Mark, you mentioned Sunset Los Palmos. I think it was 9 out of the 11 studios are leased, but in the sub, but still.

Sub 50% from, uh, from a least percent, is there a lag when it comes to when a stage is spoken for to when the actual occupancy is taken and and that percentage of ramps, how do we think through it with loss?

Victor Coleman: Yeah. Yeah, for all the stages, we track occupancy on a trailing 12-month basis, which is, you know, how we've done it, you know, historically since 15 years now. Its origin relates to really the period of time of really show-by-show occupancy on the stages. And the trailing 12-month occupancy looks were designed to give a more, you know, sort of robust look at ongoing occupancy unaffected by temporary expirations and then backfills across different stages. So what you're seeing there is really just lower occupancy in earlier periods at Sunset Las Palmas.

Almost specifically.

See an earlier period. That Sunset lost promise.

Tom Catherwood: So then at the end of the quarter, what did the occupancy or the percent lease look like for Las Palmas?

So then, at the end of the quarter, what did the occupancy percentage look like for Lots of Balls?

Victor Coleman: Well, 9 of the 11 stages were leased. I don't know. It's, you know, probably in the neighborhood of about 80% leased right now.

Uh, well uh 9 of the 11 stages released. Um,

Uh, I don't know. It's, you know, probably on the, in the neighborhood of about 80% least, right now,

Tom Catherwood: Understood. That's it for me. Thanks, everyone.

Understood. That's it for me. Thanks, everyone.

Alex (Conference Operator): Thank you. Our next question comes from Peter Abramovich of Jeffries. Your line is now open. Please go ahead.

Thank you. Our next question comes from Peter abramovitz of Jeffrey. The Line is now open. Please go ahead.

Blaine Heck: Yes, thank you for taking the question. I just want to go back to Victor's comments around increasing occupancy, and I think you mentioned the target for getting leased occupancy back to the mid-80s by the end of next year. Obviously, the Bay Area, despite the pickup in activity, is still kind of trailing the rest of the portfolio. So I'm just curious, you know, what's kind of a realistic target, you know, for stabilized occupancy in the Bay Area in your view, and how long do you think it can take to get there?

Yes, thank you for taking a question. Uh, just want to go back to Victor's comments, um around, increasing occupancy and and I think you mentioned a target for getting least occupancy back to

Uh, the mid 80s by the end of next year, um, obviously the the Bay Area um, despite the pickup in activity is still kind of trailing the rest of the portfolio. So, um, just curious, you know, what's kind of a realistic Target um, you know for stabilized occupancy in the Bay Area and your view and and and how long do you think it can take to get there?

Victor Coleman: So when you're defining the Bay Area, are you defining the entire marketplace from San Francisco all the way down to the Peninsula? Are you looking at just San Francisco?

Blaine Heck: Yeah, yeah, kind of kind of looking at both. Yeah.

Victor Coleman: Yeah, I mean, the lag has really been, you know, candidly, in the airport area at Santa Clara at the end of the day. I mean, the numbers we're looking at right now, if you look at the entire marketplace, it's right around 70. And if you look at, you know, the city, it's, you know, Palo Alto being the highest, sorry, at like 92. Redwood is like 73, and Foster City is like 87, and Santa Clara is like 90. And then the low end, you've got North San Jose, which is bringing everything down in the mid-50s. But the activity in North San Jose right now has been exceptional. And as Mark made, sorry, as Art made the comment, we're seeing, you know, we were doing 7 to 20 thousand square foot deals. We're now seeing 30 and 40 thousand square foot deals, and even some, even higher.

So when we, when you're defining the Bay Area, are you defining the uh, the entire Marketplace from San Francisco all the way down to the peninsula? Are you looking at just San Francisco first? Yeah, yeah kind of kind of looking at both. Yeah.

Yeah, I mean the lag is really been um, you know, candidly in in the airport area Santa Clara at at the end of the day, I mean the numbers we're looking at right now, um if you look at the entire Marketplace, it's right around 70. Um, and if you look at, you know, the city is it's it's it's, you know, pallaso being the highest. Sorry at like 92 red Redwood is like 7073. Um and Foster cities like 87 and Santa Clara is like 90 and then the low end you've got North San Jose, which is bringing everything down in the in the mid-50s, but the activity in North San Jose right now has been

Victor Coleman: Yeah, that's, so that's really the average, Peter. This is Art. We were talking about the Valley, you know, you talked about an increase in deals that are 100,000 square foot or more. There were 8 a year ago. There's 18 today. We're even seeing, mind you, we're talking specifically about the airport with our portfolio. We're seeing there's four deals over 100,000 square feet that we're in discussions or negotiations on. As you know, that's a small tenant market. The average tenant size in our portfolio is roughly 7 to 8 thousand square feet, right? And we're in discussion and negotiation with four tenants over 100,000 square feet. That's really going to move the needle in a big way. And as you move north, the two biggest vacancies that we have, we're negotiating, you know, one is 80,000 square feet, the other is 50,000 square feet.

Exceptional and as Mark made, sorry, it's art made the comment. We're seeing, you know, we were doing 7 to 20,000 square foot deals. We're now seeing 30 and 40,000, square foot deals and even some even higher. Yeah, that's so that's really the average Peter. This is Art. Um, when you're talking about the valley, you know, you talk about a, an increase in deals that are 100,000 square foot or more. There were 8 a year ago, there's 18 today. Um we're even seeing mind you, we're talking specifically about the the airport with our portfolio. We're seeing there's 4 deals over 100,000 square feet that were in discussions or negotiations.

Negotiations on, as you know, that's a small tenant Market, the average tenant size in our portfolio is roughly 7 to 8,000 square feet, right? And we're in in discussion and negotiation with 4 tenants over over 100,000 square feet. That's really going to move the needle in a big way. And as you move north, uh the 2, biggest the 2 biggest, um,

Victor Coleman: We're negotiating both spaces with multiple users. So we feel pretty bullish about leasing, you know, that pace of lease up, you know, over the next year and a half. And then, of course, as you get into the city, our largest vacancy is 1455, and we're in discussions right now for a lion's share of that space. So we're feeling, again, we're feeling good about what's in the pipeline and what's behind it in terms of tours.

Uh, vacancies that we have we're negotiating, you know, 1 is 80,000 square feet. The other is 50,000 square feet. We're negotiating both both spaces with multiple users. So we feel pretty bullish about uh, leasing. You know that pace of lease up, you know, over the next year and a half. And then, of course, as you get into the city, um, our large our largest vacancy is 1455. And we're in discussions right now, for for a line, share of that space. Uh, so we're feeling again what we're feeling good about what's in the pipeline and what's behind it, in terms of Tours,

Blaine Heck: Okay, that's helpful. I appreciate the color. And maybe just to follow up on the tour activity, I think you mentioned it was up 10% quarter over quarter. Could you just specify how tour activity is trending specifically in Los Angeles?

Okay, that's helpful. I appreciate the color and maybe just to follow up on the tour activity, I think you mentioned, it was up 10% a quarter over a quarter could could you just specify um, out for activity trending specifically in Los Angeles?

Victor Coleman: Yeah, you know, so let me start with the tour. Yes, it is up 10%, but I'll give you numbers. It's up to 1.8 million square feet. At the same time, quarter over quarter, the average deal size popped 30%, right? So it's closing in, closing in on 20,000 square feet. Those are the tours we're seeing. That's what's going to feed the pipeline, which is going to inform what we close downstream. And actually, our hit rate on tours is pretty high. It's about 30%. So we can start to look favorably about what's going to happen in the coming quarters. In LA, you know, we really only have this 11601 building that we're sitting in right now. We're 96% leased. It's really become a small tenant building, and we're, you know, we're garnering, you know, the highest rents in the market.

Yeah, you know, uh so let me start with the with the tour. Yes, it is up 10%, but I'll give you numbers. It's up to 1.8 million square feet at the same time, uh, quarter over quarter. The average deal size popped 30%, right? So it's closing in closing in on 20,000 square feet. Those are the tours, we're seeing that's what's going to feed the pipeline, which is going to inform what we've closed Downstream. Uh, and our actually, our hit rate on on uh, tours is pretty high. It's about 30%. So we can, we can start to look, uh,

Victor Coleman: But the LA market in general is really driven by West LA. It always has been, and certainly well through the pandemic. The demand drivers are there, right? The demand's probably up 20% year over year. More importantly, the gross leasing still remains robust. So not that concerned about LA, and certainly not this building at the moment because we have a pipeline for this building of about 50,000 square feet, which doesn't sound like much, but we're, yeah, we're closing in on 97% lease.

Favorably about what's, what's going to happen in in the coming quarters in La. You know, we really only have uh this 11601 building that we're sitting in right now, uh we're 96% least, it's really become a small tenant building and we're, you know, regarding you know, the highest rents in the market. Um,

Well, through the pandemic, the demand drivers are there, right? The demand is probably up 20% year-over-year. More importantly, the gross leasing still remains robust, so I’m not that concerned about LA. Um, and certainly not this building at the moment because we have a pipeline for this building of about 50,000 square feet, which doesn't sound like much, but we're closing in on 97% leased.

Blaine Heck: All right. That's all for me. Thank you.

Victor Coleman: Thank you.

All right. That's all for me. Thank you.

Thank you.

Alex (Conference Operator): Thank you. Our next question comes from Vikram Malhotra of Mizuho. Your line's now open. Please go ahead.

Oh my next question. Comes from back from my ultra of me. Your lines are open. Please go ahead.

Dylan Bozinski: Awesome. Thanks for taking the question. I guess just going back to the point about target occupancy, you know, or next year, maybe if you can just step back and give us a sense of like over the next two years, let's say you're able to achieve this occupancy, you do have a fair amount of expirations over the next three years. Is it fair to say that once you achieve this occupancy, cash flow growth or AFFO growth will probably still be a probably 27, 28 time at the earliest?

Uh, afternoon, thanks for being the question. Um,

I guess just going back to the point about Target occupancy. Um, you know, or next year, it maybe if you can just step back and give us a sense of like over the next 2 years. Let's say you're able to achieve this occupancy. You do have a fair amount of expirations over the next 3 years. Is it fair to say that 1 feet?

Victor Coleman: So, Vikram, let me just clarify your comments because they're not accurate. Okay. First of all, we're not talking occupancy. The numbers I talked about was leasing. I specifically said leasing versus occupancy. Second of all, we have the lowest amount of expiration in the next three years than we've had in the last eight. We average at around 5 to 600 a quarter. Sorry, yes, 5 to 600 thousand a quarter. We are sub 250. So if you look at that and you look at what we talked about earlier and you correlate it to leasing, not occupancy, we're very comfortable that 26 year-end will be at the range that we're talking about right now, which will correlate to occupancy and cash flow that will increase at a substantial amount from an FFO and an AFFO basis.

So Victor, let let me just clarify your your comments because they're not accurate. Okay. First of all, we're not talking occupancy, the numbers, I talked about was Leasing and specifically said, leasing versus occupancy. Second of all, we have the lowest amount of expiration in the next 3 years. Then we've had in the last 8, we averaged at around 5 to 600 a quarter. Uh, sorry. Uh, yes. 5 to 600,000 a quarter. We are sub 250. So if you look at that and you look at what we talked about earlier and you correlated to leasing not occupancy, were very comfortable that 26 year, end will be at the range that we're talking about right now which will correlate to occupancy and cash flow. That will increase at a substantial amount from an ffo and an afo basis.

Dylan Bozinski: Okay. Yeah, I mean, I was just looking at the expirations of the percent over the next, you know, several years, kind of 25 to 28.

Victor Coleman: You said three years. So it's several years could be three, but if you look at three years, it's about 750,000 to 800,000 versus a million and a half to two.

Okay. Um, yeah. I mean, I was just looking at the expiration, does a percent over the next, you know, several years—kind of 25 to 28. But, um, you said, you said, you said 3 years. So, it's several years; it could be 3. But if you look at 3 years, it's about 750,000 to 800,000 versus a million and a half to 2.

Dylan Bozinski: Okay. Just going back to the studio business, you talked about reaching, you know, hopefully the number of shows and then reaching sort of a run rate, break-even, an OI level, or rent level. I just want to go back. I guess it was two quarters ago. Part of the plan was maybe looking at it more strategically. It is a challenge business today, but is divesting it still on the cards? And if not, I guess do you look for more partners or do you just, are you still focused on the Kyoto, like having the Kyoto business as part of the company? Thanks.

Okay. Um, just going back to the studio business. You talked about reaching, uh, you know, hopefully there's a number of shows and then reaching sort of a run rate Break Even uh in oil level or rent level. Um I just want to go back. I guess it was 2 quarters ago, part of the plan was maybe looking at it more strategically uh it is a challenge business today but is is divesting it still on the cards and if if not I guess you look for more Partners or do you just um are you still focused on the Kyoto like having the Kyoto business as part of the company? Thanks.

Victor Coleman: Well, I don't recall us ever talking about divesting. What we talked about, which we've executed on, is divesting on certain leases and obligations that are not income-producing to lower the overhead and costs, which we've accomplished and we've outlined. And in Mark's prepared remarks, he reiterated again. We have not talked about divesting out of the Kyoto business, the Sunset portfolio business, or the real property of the opcos.

Well, I don't recall since we're talking about divesting what we talked about, which we've executed on, is divesting on certain leases and obligations that are not income-producing to lower the overhead and costs, which we've accomplished and we've outlined. In March, we prepared for March; he reiterated again. Um, we have not talked about divesting out of the Kyote business, the sunset portfolio of business, or the real property or the off coast.

Blaine Heck: Thanks.

Victor Coleman: Thank you.

Thanks.

Thank you.

Alex (Conference Operator): Thank you. Our next question comes from John Kim of BMO Capital Markets. Your line's now open. Please go ahead.

Thank you. Our next question, comes from John Kim of BMI Capital markets.

The lines start open. Please go ahead.

John Kim: Thank you. I just wanted to clarify your guidance for the year, I guess, for Harout. Same share NOI is basically unchanged from last quarter. G&A assumption is down. Interest expense is down. Yet, it doesn't look like earnings are moving that much. I know it's a pretty wide range, but what are the offsets to the positive contributors in your guidance? And what would you bring you to the low end of guidance, the one if I assume third quarter?

Thank you. Um, I just wanted to clarify your guidance for the year. I guess for who wrote, um, seems there are no, is basically unchanged from the last quarter. G&A assumption is down, interest expenses down, yet it doesn't look like, uh, earnings are moving that much. I know it's a pretty wide range, but what are the offsets to the positive, uh, contributors, uh, in your guidance?

And what would you bring me to the low end of guidance? The 1 to 5 cents in the third quarter.

Victor Coleman: Sure. Just to clarify, the annual numbers, you know, obviously some of which are reflected in the third quarter numbers, right? So they're still the fourth quarter. But I think I touched on this a second ago. For the third quarter, you know, what the biggest variable numbers would be is the studio business, right? I think if show counts improve, if things are more active and more robust, that'll get us closer to the higher end of the range. And then if things are weaker than we expect, it'll bring us closer to the lower end of the range. That to us is the biggest X factor in our guidance for the next quarter.

And our guidance.

Uh, for the next quarter.

John Kim: Okay. On the studio business with Sunset 294 looking to get complete, looking for its completion date this quarter, when do you expect occupancy to commence? And if you could break down the stages that you're in negotiation with as far as the longer-term leases versus the show-by-show? And also if there's any services component as part of the NOI of the studio?

Okay, on on the studio business, uh, with uh Sunset P94 looking to get complete or looking for completion date this quarter. When do you, um, expect occupancy to commence,

And you could, if you could, break down the stages of your negotiation with as far as the longer-term leases versus the show-by-show.

and also, if there's any Services component as part of the the noi of of this studio,

Victor Coleman: Well, listen, right now, John, we are in conversations with a couple of shows that are year-to-year name shows that have come to us. It's still a little early because some are trying to film as of Jan 1, which means they would be in office space prior to that. And so that's still in limbo. For the most part, though, we've indicated we are going to, the activity is around show-to-show. There's not a lot of long-term leasing that is available in any of the marketplaces throughout the states right now in the three main markets of Atlanta, Los Angeles, and New York. But we are seeing some very solid activity around name company shows that will have hopefully repetitive seasons.

Conversations with, um, a couple of shows that are year to year. Um, name shows that have come to us. Um, it's still a little early because, uh, some are trying to film as of January 1, uh, which means they would be in office space prior to that. Um, and so that's still in limbo. Um, for the most part though, we've indicated we are going to the activity is around, show to show. Um, there's not a lot of long-term leasing that is available in any of the marketplaces throughout the states right now in the three main markets that land in Los Angeles and New York. But we are seeing some very...

Victor Coleman: To answer your second part of your question, the economics around that are, you know, fully integrated with how we do every one of our deals, which is going to be package deals, which include all services, all amenities, all sound stages, all offices, and all of our lighting and grip packages. So that will be a total number at the end of the day. We will have no differentiation between Pure 94 or any of our other studio facilities in terms of how our revenue collections and charges are.

Solid activity around. Um, name company shows that will have hopefully repetitive seasons. Um, to answer your second part of your question, the, uh, economics around that are, you know, fully integrated with how we do every one of our deals, which is going to be package deals, which include all services, all amenities, all sound stages, all offices, and, um, all of our lighting and grip packages. So that will be a total. A total number at the end of the day, we will have no differentiation between Pure 94 or any of our other studio facilities in terms of how our revenue collections and charges are.

John Kim: Okay, that's helpful. And then my final question is on the leasing activity. It was pretty healthy this quarter. It looks like your 26 expirations actually went up this quarter versus last. Were there a lot of short-term leases that you've done or just like short-term renewals that got you there because it, you know, it's a little bit of a...

Okay, that's helpful. Um and then my final question is on um the the leasing activity it was pretty healthy this quarter. Uh looks like you're 26 expirations actually went up. Uh, this quarter versus this is last

Victor Coleman: Yeah, that's generally the case. It went up slightly. Yeah, it went up slightly, but you know, some of the tenants are holding over or in the short-term situation.

Um, were there a lot of short term leases that you've done or just like short term renewals that? Got you there? Because it you know, it's a little bit of a yeah that's generally the case as well as it will have slightly. Yeah, it went it went up slightly but you know some of the tenants are are holding over or in the short term situation.

John Kim: Okay. Thank you.

Okay, thank you.

Alex (Conference Operator): Thank you. Our next question comes from Ronald Camden of Morgan Stanley. Your line's now open. Please go ahead.

Blaine Heck: Hey, just wanted to circle back to the Lost and One Thousand. Just wondering if you could provide just a little bit more commentary on just the activity and the market overall and how that asset is differentiated. And I think it sounded like you're leaning more towards sort of multi-tenant versus maybe a big tenant and so forth. Just would love to dig in there a little bit more. Thanks.

Thank you. Our next question comes from Ronald Camden of Morgan Stanley. Your line is now open. Please go ahead.

Hey, just wanted to circle back to the Washington 10,000. Uh, just wondering if you could provide just a little bit more commentary on the activity and the market overall, and how that asset is differentiated. And I think it sounded like you were leaning more towards sort of multi-tenant versus maybe a big tenant and so forth. Just would love to dig in there a little bit more. Thanks.

Victor Coleman: Yeah, we're exploring them all. I mean, you know, at this point, you know, there's an uptick in multi-floor tenants as I said, multi-floor deals, as I said. We're touring. The touring has picked up. There are three, there are really five hundred thousand square foot tenants in the market, three of which we are in front of for Washington 1000, and the other two are really a Pioneer Square kind of location that we're in negotiations with, which is the good news. So no, we continue, you know, we continue with tech. Of those 300,000 square foot tenants, actually two are tech. One is Biomed, and you know, we're going to see, you know, in the coming quarters, we can't execute on one of these.

Yeah, we're exploring all. I mean you know at this point you know, there's there's an uptick in multi-floor tenants as I uh multifloor deals. As I said, uh we're touring, the touring is picked up, there are 3 there, really 5, uh, hundred thousand square foot tenants in the market, 3 of which we are in front of 4, Washington, 10000 and the other 2 are really a Pioneer Square. Uh um kind of location that we're in negotiations with uh which is the good news. Um, so no we we continue, you know, we continue with tech uh of those 300,000 square foot, tenants, actually 2 or Tech 1 is 1 is biomed. And uh, you know, we're going to see, you know, in the coming quarters we can't. Um,

Victor Coleman: But the good news is behind it, the tours that we have lined up already as we come kind of through the summer, well, I really think it's going to start to pay dividends for us there. But to answer your question on the building, it's one of one. It is, if you want new construction, state-of-the-art asset, especially if you need more than 200,000 square feet, we're one of one. So we feel really good about our prospects.

Execute on 1 of these but the good news is is behind it. Uh, the tours that we have lined up already as we as we come kind of through the summer, uh,

Well, I really think it's going to start to pay dividends for us there. But to answer your question on the building, it's 1 of 1. It is, if you want new construction state-of-the-art, um,

Asset, especially if you need more than 200,000 square feet, we're one of one. So we feel really good about our prospects.

John Kim: That's helpful. And then my second one is just going back to the same store NOI sort of guidance. I guess when you're thinking about when we're connecting the dots with the occupancy commentary, what are some of the higher-level sort of takeaways in terms of what that does for same store as you're going to 26 and 27, right? Because presumably the comp is easier and you're gaining occupancy. So how should we think about just high-level what that same store should be doing? Thanks.

Helpful. And then my second 1 is just going back to the same store.

um, Andy sort of guidance, I guess when you're when you're thinking about, when we're connecting with the dots with the occupancy, commentary,

What are some of the higher levels? Sort of takeaways, in terms of what that does for same store as you're going to 26 and and and 27, right? Because presumably the comp is is easier.

High level, what that same store should be doing. Thanks.

Victor Coleman: Well, I'll take a good, it's Mark. I'll take a crack. Yeah, I mean, they're obviously correlated. You're going to see GAAP, same store NOI begin to improve typically sooner than cash. Typically, a reflection of the component of the leasing activity that has front-loaded free rent. But you know, hard to pinpoint precisely when you see the turn. But you know, our sequential flat occupancy of 75.1, I think, you know, sort of reinforces our belief that we've likely hit the bottom on occupancy. We'll see a steady march, you know, a positive net absorption that should first materialize in GAAP, like I said, and then you'll start seeing it show up in cash rent.

Well, I'll take a look at this, Mark. I'll take a crack. Um, yeah, I mean, there are obviously correlated. You're going to see gap. Um, uh, same-store. I don't know why I begin to improve, uh, typically sooner than cash. Um, uh, typically, a reflection of, uh, the component of the leasing activity that has front-loaded free rent. Um, uh, but, you know, it's hard to pinpoint precisely when you see the terms. But, um, you know, our sequential flat occupancy of 75.1, I think, you know, sort of reinforces our belief that we've, uh, like we hit the bottom on occupancy. We'll see a steady march, you know, a positive net absorption. Um, that should first materialize in gap, like I said, and then you'll start seeing it, uh, show up in cash rents.

John Kim: Great. That's it for me. Thanks so much.

Great. That's it for me. Thanks so much.

Alex (Conference Operator): Thank you. Our next question comes from Dylan Bozinski of Green Street. Your line's now open. Please go ahead.

Thank you. Our next question comes from Dillon Buzinski of Green Street. You may go ahead.

Dylan Bozinski: Hi guys. Thanks for taking the question. Just sort of on the sort of lease trajectory, it looks like you guys noted that PayPal has executed a lease termination starting next year. Are there any other larger potential move-outs that we should be aware of as we think about the 2026 ramp?

Okay, thanks for checking the question. Uh,

Just just sort of, on the sort of least trajectory looks like you guys. Noted, that PayPal is, is executed, at least termination starting next year. Are there any other larger potential move out? So we should be aware of as we think about the 2026 ramp

Victor Coleman: No, no, we didn't ask that answer that. That was the first question that was asked. No, there's nobody else there.

No, no, we need to ask to answer that, that was the first question I was asked, no, there's there's, there's nobody else there.

Dylan Bozinski: Great. And then I guess, you know, given the limited amount of near-term lease signings that seem to be expected at Washington 1000, can you kind of talk about how we should expect that to sort of roll into earnings? It seems like that should sort of come off capitalization sometime towards the end of this year, but is that sort of incorrect?

Great. And then I guess you know, given the limited amount of near-term lease signings that seem to be expected at Washington, 10,000, can you kind of talk about how we should expect that to sort of roll into earnings? It seems like that should sort of come off capitalization sometime towards the end of this year, but, uh, is that sort of incorrect?

Victor Coleman: No, that's right. I mean, it'll, at the end of this year, we'll no longer be capitalizing interest on it. And then you can, you'll see in our supplemental that as we sit today, we're currently anticipating stabilization on it first quarter of '27, which, you know, you know, that's 92-ish percent cash paying occupancy. So you can kind of, you know, ramp your way up towards that because we would obviously expect there to be occupancy absorption and cash rent paying rent before that time. That gives you sort of a timeframe over which, you know, we expect to see it stabilized.

No, that that's right. I mean, it'll at the end of this year, will no longer be capitalizing interest on it. Um, and then you can you'll see in our supplemental that as we sit today. Um, we're currently anticipating and stabilization on it, uh, first quarter of 27, which, you know, uh, you know, that's 92% cash paying um, occupancy. Um, so you can kind of, you know, ramp your way, uh, up towards that because we would, obviously expect there to De occupancy, uh, of, you know, absorption and cash rent paying rent before that time, that gives you sort of a time frame.

Name, uh, over which, you know, we expect to see it stabilized.

John Kim: Okay, that's actually helpful. Really helpful. Thanks, guys.

Okay, that's actually helpful really helpful. Thanks guys.

Victor Coleman: Thank you, John.

Thank you, John.

Alex (Conference Operator): Thank you. Our final question for say comes from Blaine Heck of Wells Fargo. Your line's now open. Please go ahead.

Upon a question for sake and it's from Blaine hack of Wells Fargo the lines now open, please go ahead.

Blaine Heck: Yeah, thanks for taking the follow-up. We're hearing a lot about the streaming platforms pushing to have more of a foothold in the sports entertainment area. I was wondering if you guys had any view on how that could, you know, impact dynamics in the studio space and just overall demand there.

Yeah, thanks for taking the follow-up. Um, we're hearing a lot about the streaming platforms pushing to have more of a foothold in the sports entertainment area. I was wondering if you guys had any view on how that could, you know, impact dynamics in the studio space and just overall demand there.

Victor Coleman: Yeah, listen, you're hearing accurately. And what you're finding is live content has been an additional driver of capital for these streaming companies. And so it's in all forms. But yes, the majority of the capital is going towards sports and sports-related content. It has not, though, taken anything away from the budgetary issues that they've allocated for all the other content, whether it's features or shows that are streaming. So it's just, it's an addition too. And Netflix is the biggest contributor. It started with the NFL, and now there's, you know, there's follow-ons with Apple and soccer and lots of American football, European football, etc. But there's a lot of those examples that are coming to play. We had commented on this, Blaine, on the last call.

yeah, I I listen I

You're you're you're hearing accurately um and and what you're finding is live content is been um an additional driver of capital for these streaming companies and so it it's in all forms. But yes, the majority of the capital is going towards Sports and sports related, uh, content. It has not though taken anything away from the budgetary issues that they've allocated for, uh, for all the other content, whether it's features, or, or shows, um, that are streaming. So it's just, it's an addition too. Um, and Netflix is the, is the biggest contributor it started with the NFL and now there's, you know, there's, uh, follow on to, with apple and soccer. And, and

Victor Coleman: Amazon, as an example, which does Thursday Night Football, as everybody knows, has decided to make their sports center here in Los Angeles. So as to the tune of Netflix, so their desks that they're going to be reporting from and conducting the live sports commentators are going to be out of LA. Others are in New York. And so that's going to continue, and I think you're going to see more and more capital driven that way. But to date, the capital has not shifted on a budgetary basis away from them creating new content.

But to date, the capital has not shifted on a budgetary basis away from them, creating new content.

Blaine Heck: Okay, great. Thank you.

Okay, great. Thank you.

Alex (Conference Operator): Thank you. There are no further questions at this time. I'd like to turn the call back to Victor Coleman, CEO and Chairman, for closing remarks.

Thank you. There are no further questions at this time. I'd like to turn the call back to Victor Coleman, CEO and Chairman, for closing remarks.

Victor Coleman: Thank you so much for participating in our call, and we look forward to speaking to everybody sometime in fall.

Thank you so much for participating in our call. We look forward to speaking to everybody sometime in the fall.

Alex (Conference Operator): This concludes today's conference call. You may now disconnect your lines.

This concludes today's conference call. You may now disconnect your lines.