Hudson Pacific Properties, Inc. Q1 FY2023 Earnings Call

Thank you all for joining. I would like to welcome you to the Hudson Pacific Properties First Quarter 2023 Earnings Conference Call. My name is Brica, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode and you will have an opportunity to ask a question after the presentation. Thank you. I would now like to turn the conference over to Laura Campbell to begin. So, Laura, you may begin.

Good morning 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. Yesterday, we filed our earnings release and supplemental on an 8-K with the SEC, and both are now available on our website. An audio webcast of this call will be available for replay on our website. Some of the information we'll share today on the call 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 macro conditions in relation to our business. Mark will provide detail on our office leasing, and Harout will review our financial results and 2023 outlook. Thereafter, we'll be happy to take your questions. Victor?

Good morning everyone and welcome to our first quarter call. In the first few months of the year, macroeconomic challenges have persisted, exacerbating uncertainty and putting downward pressure on office market fundamentals. We will touch on how this is impacting our leasing activity in a moment. Recently, however, we've seen much more of big tech return-to-work announcements, bringing employees back to office multiple days a week, citing performance and efficiency concerns. These include Amazon, Oracle, Redfin, Lyft, and DocuSign to name a few. Castle Data and Transit Ridership also show improvement across our markets. With the return to office unfolding slower than many expected, we remain cautiously optimistic that these announcements and related trends will translate into increased physical occupancy and improved tenant demand at our assets. Important indicators continue to support the notion that the Bay Area and Seattle remain epicenters for talent and capital networks that drive the tech industry. For example, the first quarter venture capital investments were in line with the historic 10-year average, with the Bay Area continuing to receive the bulk of these funds. The early 2020s brought a wave of funding accelerated by COVID-related macro forces with minimal office leasing. Beyond AI, which is currently driving approximately 600,000 square feet of requirements in the city of San Francisco alone, other sectors like cybersecurity, defense, and energy remain compelling areas for growth. While it will take time for this to positively contribute to our leasing efforts, it reaffirms our view that our office properties are located in compelling growth markets. Turning to our studios. Last week, the Writers Guild of America elected to strike, leading to a halt in domestic film and TV production. Unlike prior strikes where production ramped up in advance, this instead signifies a significant slowdown in filming through the first quarter. We suspect this is primarily the result of streaming companies' more robust existing content pipeline, although the austerity measures may also have played a role. In the L.A. market overall, first quarter filming and TV shoot days declined approximately 30% compared to the same period last year. This initial slowdown impacted independent studios and service providers such as ours first, as major studios consolidated productions on site. With the strike underway, productions at all studios have now been disrupted. This slowdown was a precursor to what we will experience during the strike, similar to past occurrences, with the overall economic impact to be felt much more broadly. In 2007 and 2008, the writers' strike, which lasted 14 weeks, cost the California economy $2.1 billion or $2.8 billion in today's dollars. There have been seven such strikes since the 1950s, ranging from two to 22 weeks, with the average being 14 weeks. Whether brief or protracted, the strike will impact the entire studio business, albeit less for our Sunset Studio assets, where nearly 70% of our square footage is under multi-year leases with guaranteed minimums for service revenue. Lack of visibility around the strike's duration led us to suspend our 2023 FFO outlook and related studio assumptions while we're still providing assumptions related to our 2023 office outlook. Harout will discuss this further on the call. These studio-related union strikes are both temporary and relatively infrequent, and we believe underlying fundamentals for content production and thus for the studio business overall remain solid. Even if spend on high-quality original content moderates in the coming years in pursuit of profitability, current estimates indicate it will be at least on par with last year's following a period of ramp-up post-strike. In these uncertain times, we stay focused on what we can control, executing on leasing, prudently allocating capital, reducing corporate expenses, proactively working on asset sales, and further fortifying our balance sheet. We continue to limit upfront capital spend for market-ready suites, common area, and base-building improvements until we have certainty around demand. We're currently evaluating the potential disposition of six distinct assets, including a land parcel. We've also recently received Board approval to reduce our dividend by 40% to 50%, with the precise amount to be finalized at our Board meeting later this month. This will align our dividend policy with other capital preservation efforts. However, even without the dividend reduction, we have a path to address all our maturities through year-end 2025, which Harout will also discuss later in this call. With that, I'm going to turn it over to Mark.

Thanks Victor. Our 344,000 square feet of first quarter leasing activity reflects tenants' continued slow decision-making, which notably decelerated amid recession concerns in the third and fourth quarter of last year. Our in-service office portfolio lease percentage was 88.7% compared to 89.7% at the end of last year. Note, this quarter, we've added 10900-10950 Washington to our future development pipeline. It is the only residential conversion we're considering at this point, and we're actively working through entitlements to build approximately 500 units. Thus, the decline in lease percentage was mostly attributable to small to midsize expirations at our Peninsula and Silicon Valley assets. At the same time, the preponderance of our first quarter leasing activity resulted from small sub-5,000 square foot tenants in those markets. Our GAAP and cash rents fell approximately 3% and 5%, respectively, with a decline mostly driven by a significantly below-market 20,000 square-foot short-term renewal. Our tenant improvements were in line with the trailing 12 months per square foot average but look higher on an annual basis due to shorter weighted average lease terms. Trailing 12-month net effective rents are nearly 6% higher than last year and in line with pre-pandemic, that is first quarter 2020 trailing 12-month net effective rents. The average weighted lease term of 42 months reflects the impact of three larger short-term renewals. For new deals alone, our weighted average lease term was 67 months, which is typical given an average size of 4,000 square feet. Trailing 12-month weighted average lease term is approximately 9% higher than last year and in line with our pre-pandemic trailing 12-month weighted average lease term. We still have activity on both of our 2023 large block expirations, including 60% coverage on blocks space at 1455 Market. But given the broader dynamics in the mid-market neighborhood, we expect that backfill will take time. We also remain in discussions regarding a potential renewal with our full-building tenant at Met Park North, even as we proactively market that space. In total, we currently have 47% coverage on our remaining 2023 expirations, with an average tenant size of roughly 11,000 square feet. Our leasing pipeline, which includes deals and leases, LOIs or proposals, has increased, up 11% to 2 million square feet since it dipped in the third quarter of last year. The average deal size within our pipeline is 13,000 square feet, above the 8,000 square feet on average for signed deals over the last five years. The weighted average lease term of deals currently in our pipeline is more closely aligned with our five-year average of 82 months. Separately, tours at our assets are at the highest level since the first quarter of 2017. In slowing in the third quarter last year, the number of our tourists has increased more than 30%, largely driven by activity at our Silicon Valley assets. First quarter tourists represent over 1.8 million square feet of requirements, up 130% since the third quarter last year, in part driven by an increase in average requirement size from 8,000 to 14,000 square feet. While it remains unclear how quickly these trends will translate into signed leases, historically, we've seen a clear correlation between an uptick in tour activity and new deals. And now I'll turn the call over to Harout.

Thanks Mark. Compared to first quarter 2022, our first quarter 2023 revenue increased 3.2% to $252.3 million, primarily due to our acquisition of Quixote, which we purchased in the third quarter of last year. Our first quarter FFO, excluding specified items, was $49.7 million or $0.35 per diluted share compared to $75.2 million or $0.50 per diluted share last year. Specified items in the first quarter consisted of transaction-related expenses of $1.2 million or $0.01 per diluted share compared to transaction-related expenses of $0.3 million or $0.00 per diluted share and a trade name non-cash impairment of $8.5 million or $0.06 per diluted share a year ago. The year-over-year decrease in FFO was mostly due to lower production activity impacting Quixote and the lead-up to the writers' strike, though we were also impacted by higher interest expense and lower office occupancy compared to last year. First quarter FFO was in line with our expectations, but for studio results, particularly with respect to March projections. Our first quarter AFFO was $35 million or $0.24 per diluted share compared to $58.8 million or $0.39 per diluted share. The decrease was largely attributable to the aforementioned items affecting FFO. Our same-store cash NOI grew to $125.6 million or 7.2% from $117.2 million, mostly due to significant office lease commencement at Harlow and 1918 Eighth, as well as higher production-related revenue and lower operating expenses at Sunset Gower and Sunset Bronson Studios. During the first quarter, we repaid $110 million Series A notes and applied $102 million of sales proceeds from Skyway Landing to pay down our credit facility. At the end of the quarter, we had $828.3 million of total liquidity, comprised of $163.3 million of unrestricted cash and cash equivalents and $665 million of undrawn capacity on our unsecured revolving credit. We have additional capacity of $138.9 million under our One Westside and Sunset Glenoaks construction loans. At the end of the first quarter, our company's share of net debt to company share of undepreciated book value was 38.2%. 66.2% of our debt is unsecured, and 90.3% is fixed or capped debt. As Victor noted, we continue to focus on de-levering by exploring asset sales, financing, and cost and dividend reductions. Our anticipated dividend alignment will result in $58 million to $72 million of annual cash flow savings to further enhance our balance sheet. Market conditions have rightfully heightened focus on our debt maturities, and I'll take a minute to walk through our exposure. Following our paydown of the Quixote loan in April, we have only one smaller maturity remaining this year, a $50 million private placement note. Our two 2024 maturities are both secured debt, the larger of which is One Westside for which we have indicative terms from third-party brokers on refinancing. With respect to our $98 million 20% ratable share of loans secured by Bentall Centre maturing in July of next year, our partner, Blackstone, has already taken the lead in discussions with the existing lenders. As for our 2025 maturities, 96% of that indebtedness does not mature until the final two months of 2025, more than two and a half years from today. Three of our four 2025 maturities comprised nearly two-thirds of the maturing amount are secured by high-quality assets: 1918 Eighth, Element L.A., and Sunset Glenoaks, the first two of which enjoy a high credit single-tenant occupancy, with the remaining lease terms extending into 2030. Sunset Glenoaks will be a fully operational state-of-the-art studio campus before its 2025 maturity. Our fourth and final 2025 maturity consists of a $259 million private placement loan scheduled to mature in December 2025. While we are more than two and a half years away from that maturity, we are focused on ensuring that we have capital availability to address the loan ahead of its repayment. Turning to our outlook. We are continuing to provide several 2023 assumptions, including those most closely associated with our office portfolio to provide continued visibility. However, due to the high level of uncertainty around the duration of the writers' strike, we will not be providing a 2023 FFO outlook or studio-related assumptions at this time. Please note that we provided an office same-store cash NOI projection rather than our customary combined office and studio estimate in light of the writers' strike and uncertainty. As always, our 2023 outlook excludes the impact of any opportunistic or not previously announced acquisitions, dispositions, financings, and capital markets activity. Now, we'll be happy to take your questions.

Thank you. The first question we have comes from Alexander Goldfarb of Piper Sandler.

Yes. Hi, good morning out there. So, two questions. First, Harout, on the guidance, the FFO suspension, is that solely due to the studios? Or were there some other changes in the core office? The reason I ask is the same-store cash NOI guidance range came down, as did the joint venture FFO contribution.

Good morning Alex. Thank you for the question. It's a good question. So, it is 100% due to the studio operations. The same-store NOI guidance, I don't know if you can tell us when we disclosed if it went down quarter-over-quarter, primarily because the previous guidance provided had a combination of studio and office, whereas the guidance provided at this time is only office. So, while, yes, there's a decrease quarter-over-quarter, you can't tell from the previous disclosure that it came down. But to answer your question, it did come down about 50 basis points for the office NOI, and that's not why that guidance was suspended. It's all due to the studio and then the drop in the JV share of FFO is again related to the studio, all of it. The office's first quarter was in line with our expectations. And while it's not blowing up and doing amazing, it is consistent with our expectations.

Okay. And then the second question is on cost cutting. You guys laid out some planned asset dispositions, land disposition, certainly cutting the dividend. From a platform perspective, what are some of the costs that you think that you could reduce to also improve the overall cash flow generation of Hudson?

I mean you've covered the sort of the gamut there on where our focus is today. We continue to monitor other discretionary spend and look for ways to make reductions where we can. But I think the main impactful items are the ones you listed, perhaps starting with the dividend at the top of the list.

In addition, I mean we originally provided in our guidance last quarter and obviously playing in the current quarter, which is a reduction of our G&A, you see the quarter-to-quarter decrease in terms of Q1 versus Q1, and the guidance provided is consistent with that.

Lastly, Alex, as you probably heard in the prepared remarks, we have looked at assets. And some of the assets that are not in the disposition line, but other assets that we would have had some capital expenditures allocated towards them, we've held off because of maybe some lack of leasing activity or confidence in that and focused our energy on the ones that we see are more imminent to lease up. So, there's a combination of things between what Harout and Mark said, and then obviously, the dispositions of some assets.

Okay. Thank you, Victor.

We now have Michael Griffin of Citi.

Thanks. It's actually Nick Joseph here with Michael. Just on the studio platform, obviously, recognize kind of we're moving the guidance, the uncertainty on the timing. But as you look back to history and maybe 2007-2008, does it create pent-up demand when it ends or is it really more just kind of lost revenue as the strike is underway?

Hey Nick, that's a great question. I'll tell you, listen, you were around in the last strike, and you heard our prepared remarks. We don't unfortunately have a seat at the table currently to sort of give an eye as to what is going on. We have a very sophisticated Board, of which three are very involved in the entertainment business. So, we're getting some firsthand information on how negotiations are going. But that being said, I would answer this too specifically to your question, more correlated to COVID. When COVID hit us, production stopped. Yes, there was writing, but all production had stopped for a period of time. And then it also, when it came back and there is a downtime to ramp up, but when it came back, it came back better than anybody expected. We are assuming that the same scenario will occur here. There will be enough of a pipeline demand, and every major studio has come out to date and said they are not adjusting their budgets for content spend. That would lend us to believe that it's going to come back aggressively. If it's going to come back, in your direct question correlated to year-end 2023, I don't know how they can produce all that content when they're losing time. But it will flow into seasonality of the first quarter, which typically is a lower seasonal time, and then it dips back up in the second quarter. I think you're going to see some positive seasonality late this year and then early next as well.

Thanks. And then just on guidance, would your intention be to resume full-year guidance once the strike ends and you get more clarity? Or would you even wait a little longer than that to see the pickup as things resume?

Well, as soon as we have knowledge of the strike, and then indicative knowledge of activity is when we will resume guidance. But yes, when the strike is over, we should see a correlation to the amount of activity in the studio business in general, and that's when we will reinstate guidance. That's the intent.

Thank you very much.

Your next question comes from Nick Yulico from Scotiabank.

Thanks. So, first question, I guess, is on the studios, is there any way to give us any rough feel for how this could work from a maybe like every month there is a strike and how it's going to impact your business? I realize I think second quarter and third quarter is where you have more seasonal benefit from the studio business. Just trying to see if there's any parameters we can think about.

If we thought we could give you too much specifics, Nick, we obviously wouldn't have pulled guidance. But you can look to our NOI detailed page of the supplemental to give you at least a sense of what the underlying expenses look like on a quarterly basis and kind of what low revenues could look like on a quarterly basis. We can't really give you much more to go by than that at this point because we don't know what revenues could look like even in a strike scenario and what inroads perhaps we can make on expenses, depending on how long the strike goes for.

And Nick, the strike is a week old. We have access to our facilities, all our products, communications, and transport, and we are exploring alternative sources of revenue. This is a new way to utilize those revenues, but we will consider live events and short-term productions, as well as various venue hostings. There will be some revenue, though we cannot predict what it will be, but the sales team is actively working. Additionally, as I mentioned earlier, we are focusing on reducing expenses across the entire studio business. The results of this will become clearer over the next couple of months, depending on the duration of the strike.

Okay, fair enough. Second question just has to do with the covenants in the credit facility. Have you guys done a stress test on that in regards to a certain period of the strike and then also factoring in some of the new move that you have this year if you don't backfill those? Just your confidence in being as we roll forward through the year, are you guys still being okay with your covenants in your credit facility?

It's a good question. So, we periodically or regularly look at our covenants and project out at least a year, sometimes two depending on circumstances. And in this case, we feel, barring anything bizarre happening, even with a three-month strike, we are completely in line with our covenants.

Okay. Thank you. You said assuming something like a three-month strike, do you feel like you're still good within your covenants?

Yes, and even going further out, we're in line with those covenants.

Okay, great. Thanks. I have one last question. Victor, the Board discussed the dividend, and I'm curious if the Board will consider any additional steps regarding asset sales to enhance liquidity for upcoming debt maturities. What are your thoughts on that? Thanks.

Yes. Nick, thanks. On that specific asset, I think we laid out pretty concisely that between now and the end of 2024, we don't have anything major coming due. Considering 2025, we only have one piece of debt. Given just the liquidity that we currently have with dividend savings, that effectively can be taken care of on a dollar-for-dollar basis. The rest of it is asset-level. So, I hope that we sort of alleviated that thought process that has been sort of hovering over Hudson for the last several months that other than asset-related debt, which are high-quality, single-tenant assets, that we don't have any aspects of debt that we're concerned about replacing through the end of 2025. That being said, I think the Board has looked at this as a one-time cut. Given where we feel that the evaluation of what will transpire with some of the leasing that we project and hopefully the recovery of the entertainment business in a shorter form based on the strike being resolved, we should be in great shape to continue to grow going forward.

Okay. Thanks, Victor.

We now have Dylan Burzinski of Green Street.

Hi guys. Thanks for taking my question. Just curious if you can kind of give me an overview of the San Francisco market in general today. Recently, we've seen several retailers announced that they're going to be closing stores. So, just curious, how you guys see the recovery there playing back, and maybe if it seems worse on the ground today versus where we were, call it, three to six months ago?

Yes, I mean I'll jump in a little bit, and then Art can sort of take the precedent. I mean you're obviously seeing what's on the ground on the retail side. I think it is really a tale of two ends of the city, right? I mean if you're looking at our assets at Rincon or at Ferry, the activity is fairly robust. We don't have any vacancy coming due to speak of, and what we're seeing is a lot of inquiries and interest if we did have vacancy on high-quality assets. And that, I think, is evident throughout the whole city, on that end of the city for high-quality assets. As you move towards the Tenderloin, you are seeing some impact here. I will say that the announcements of some of the retailers are not surprising, given the safety and security concerns and crime. I do know this city is looking to fulfill an obligation on a somewhat similar focused plan that's being laid out by the mayor's office to revive downtown San Francisco in the mid-market areas and the specific sets areas. I think that process and plan is being laid out and the intent is to sort of spend $25-plus million in the police departments and expanding the street response teams and the likes of that, which will hopefully turn the city into a more positive avenue and get out of what we're currently in today. On a highlight, which is limited in San Francisco right now, Dylan, I'm sure you're hearing about the demand for AI. The demand for AI is what we've seen, and what our people on the ground in the Valley, in the city have seen is really only in the city right now. It's somewhere around 600,000 square feet of inquiries, and one tenant is already signed, and it looks like there are another six tenants in the marketplace looking for space. That could boost some form of a next-step recovery or at least a step recovery for San Francisco that we are keeping an eye on and evaluating.

Yes, that has definitely increased demand in the market. As Victor mentioned, it's up about 600,000 square feet, bringing the total demand to around 3.5 million square feet. It's important to note that gross leasing has consistently stayed above 1 million square feet per quarter, and we are facing challenges with net absorption. However, in relation to our portfolio, we have about 270,000 square feet covered on Block and an additional 150,000 square feet of activity regarding our vacancies. We are witnessing demand from that segment looking to move forward and engage in transactions. This is certainly a positive indication.

That's very helpful commentary guys. Appreciate that. Maybe just one more, if I could. You guys mentioned having or going to market with six assets. Maybe if you can just talk about sort of the profile of these assets, the geographies, that would be helpful. Thanks.

Yes, one asset we have currently today is in negotiations on contracts. Three assets we have offers on. And two assets we are getting offers on, on Friday. The assets are all in California, but I don't want to talk specifics around which asset, but one is a partial land; and the other three are active office buildings. Sorry, five active office buildings. I don't know why I said three.

Could you provide more details about the office building? Is it a single tenant, long wall, value-add type?

Yes, I think of the two of them are single tenants and the other three are multi-tenant assets.

Awesome. Appreciate it. Thanks.

Thanks.

We now have John Kim of BMO Capital Markets.

Thank you. Good morning. I wanted to ask about the amount of the dividend cut in relation to the studio NOI, which was about 13% of total NOI in the fourth quarter. Considering that this strike may last about a quarter, why did you decide to reduce it to 40% to 50%?

It's not related to the studios at all. We focus on planning our dividend for the long term. The strike is just a temporary situation. Historically, our return of capital has been a bit over 30%, and last year it exceeded 50%. Based on expectations, we believe that for 2023, from a profit and loss perspective, we can support a 50% return. We've kept an eye on the implied yield of the dividend, and a 50% reduction still offers a significant yield. We are exploring ways to maintain our lowest cost of capital. All these factors contributed to the decision regarding the 50% reduction, but the performance of the studios did not influence that decision.

And what would be your priority as far as the use of proceeds?

Yes, to deleverage the balance sheet and ensure liquidity.

Okay. On the studio NOI, can I just ask, with the strike happening now, what percentage of your rental revenue goes to zero, and also the same question on service and other? And on the OpEx side, how much of the expenses are fixed versus variable?

You can refer to the NOI detailed page to see how well the legacy brick-and-mortar studios held up, particularly the 35 stages at Sunset Gower, Bronson, and Las Palmas. We noted that around 70% of the stages there, which are primarily responsible for revenue, are under long multi-year agreements with guarantees on ancillary revenue, and this is reflected in their performance. However, there will be some impact from the strike since about 30% of the stages are not part of our multi-year agreements. Therefore, it will have a slight effect. You can also examine the performance of the non-same store segments, like Quixote and Zio Star Waggons, leading up to the anticipated strike. I encourage you to review those details.

Thanks for the color.

Thank you. We now have Blaine Heck of Wells Fargo.

Great. Thanks. Good morning out there. Victor, we've heard a lot of optimism around the return to office for some of the tech tenants that were most consistent on hybrid or remote work in the midst of the pandemic. Have there been any kind of tangible signs yet that maybe they're rethinking some of the sublease space they put on the market or given back too much space in your markets? Has their headcount actually grown throughout the pandemic? Or is it maybe too early to tell if that's going to happen?

Yes, the answer is yes. I don't want to get into specifics, but they relate to our portfolio. A single tenant has recently approached us expressing interest in reconsidering the current space they had planned to sublease or vacate. Regarding market conditions, I know that just recently in Seattle and Bellevue, similar situations have occurred with another portfolio where a couple of tenants indicated they want to keep their current space and assess how it will be utilized. We anticipated this would happen. There has been significant pushback lately; for example, Weyerhaeuser has also stated that they want other tenants to return. The list of tenants I provided is in addition to what Amazon initiated last month, indicating movement. However, it is concerning for our quality portfolio that this appears to be primarily a West Coast issue rather than a national one. It is somewhat disappointing that many West Coast companies have not decided to expand their space and are instead opting to maintain their current setups. We expect this process to take more time, but we are optimistic that, as mentioned earlier, quality assets will be prioritized, and we are witnessing that in our portfolio.

Okay, great. That's helpful. And then just back on the studio space. Can you talk about whether you expect to see less willingness to sign longer-term leases on studio space as a result of the tougher environment and even potentially as a result of the threat now, reality of the strike and maybe a reversion to the show-by-show or season-by-season leasing that used to be a lot more prevalent?

I'm going to have Jeff answer that.

Hey Blaine, this is Jeff. Yes, I think the way the industry generally works is it's fundamentally predicated on that show-by-show model that you're referring to. To a lesser extent, there obviously are long-term leases. Most of the stages and most of the inventory is really going on a show-by-show basis, meaning when a show gets green-lit, they get all the services, including a stage. But long-term leasing is a big benefit to our portfolio in Sunset. But as we expand the business and we scale fundamentally, you do get into the show-by-show model, which is just the nature of the industry. I don't think there's going to necessarily be less demand from studios going forward for long-term leasing. It's just a smaller subset of the overall demand for stages.

Got it. Thanks guys.

Thank you. Our next question comes from Ronald Kamdem of Morgan Stanley.

Hey. Just a couple of quick ones from me. Going back to the leasing pipeline, which I think you talked about, I think, close to 2 million feet, if I got that number correct. If I compare that to some of the expiring leases and commenced leases, can you just put it all together? And where are you thinking occupancy ends the year at? What are sort of the right ZIP codes on the occupancy at the end of 2023?

Yes, déjà vu. We finished the quarter at 88.7% leased. We've got two sizable expirations, 60% coverage on the block space, in discussions on the other expiration with Amazon towards the end of the year. Our success on both of those can make a material difference, obviously. Pipelines are really healthy, pacing on deals is slower than we'd like. Where we end up at the end of the year in terms of occupancy or lease percentages is predicated on how quickly we get deals done and how successful we are on those backfills or renewals that I mentioned, and we'll have to leave it at that.

Understood. If I could just pivot to the balance sheet. I see you ended the quarter at 8.5% debt-to-EBITDA. When you put it all together in the asset sales, maybe can you talk about how many dollars you could get out of that? And then the dividend cut, what's the potential for bringing that down this year?

Well, it will go down. You're seeing an aberration, largely driven off of the impact of the slowdown at the studios. We finished last quarter prior at around 7.4% debt-to-EBITDA and had a slowdown this quarter. Don't know exactly how quickly that will resolve itself. Once it normalizes, that component of the portfolio will contribute EBITDA, and we will continue to make inroads on debt repayments in connection with asset sales. The goal remains to get back into the mid-6s or lower if we can. As soon as the studio business resumes, I think you'll see that trend continue.

Great. If I could just sneak one in on One Westside. Any sort of early indications of what the rate LTVs could be on that?

Well, right now, the loan fully funded is at a touch over $400 million. You could run your own numbers. But that conservatively should be 50-ish or maybe less than 50% on any reasonable range of values. We've got indicative terms from our third-party brokers that we could readily refinance that level.

Great. And on the interest rate?

Yes, sorry, I didn't hear that. It will depend on where indices move between now and end of 2024. Our view is that today, it would be a fixed mid-six type of rate, all in.

Great. Helpful. Thanks so much.

Thank you. I'd like to hand back to Victor for any final remarks.

Thank you so much for participating in our quarterly call. As always, I want to call out the Hudson Pacific team for all their hard work and dedication in these challenging times. Have a good day.

Thank you. I can confirm this does conclude today's call. Please have a lovely day, and you may now disconnect.