Good morning, and welcome to the Hudson Pacific Properties' first quarter 2022 conference call. All participants will be in listen- only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To enter the question queue at any time, please press the star key followed by one on your touchtone phone. If you are using a speakerphone, note you will need to pick up your handset before pressing the keys. Please note, this event is being recorded. I would now like to turn the conference over to Laura Campbell, Executive Vice President, Investor Relations and Marketing. Please go ahead. 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 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 and in those materials. Today, Victor will touch on our strategy and capital allocation priorities. Mark will discuss our first quarter business highlights and upcoming opportunities, and Harout will review our first quarter financial results and outlook. Thereafter, we'll be happy to take your questions. Victor. Thank you, Laura, and thank you, everyone, for joining us today. We had a productive first quarter focused on our 2022 priorities that include capitalizing on leasing opportunities, progressing our development pipeline, pursuing capital recycling opportunities, maintaining our strong balance sheet, and furthering our ESG leadership. On today's call, we'll provide updates on each of them. At Hudson Pacific, our long-term strategy is to create shareholder value by selectively growing our real estate portfolio as we meet the needs of the secondary growth in increasingly convergent tech and media industries. We've had great success at the forefront of this multifaceted shift, delivering tech campuses along studio lots and finding ways to innovate physical design and to streamline leasing and operations for these synergistic types of space. As tech and media business models have expanded, so has our opportunity set. We will continue to build our portfolio around pure-play office in urban West Coast tech hubs, which attract significant talent and capital, like the Bay Area and Seattle. In major global media markets like Los Angeles and the U.K., we're focused on synergistic studio and office campuses and pure-play studio facilities. Our fully vertically integrated platform gives us the ability to allocate capital in several ways to generate long-term shareholder value by delivering and operating world-class, amenitized, and sustainable workplaces for tech and media tenants. Our primary focus remains executing on embedded opportunities and identifying attractive value-add projects, targeting stabilized yields of 6%-8% or more. Over the last 10 quarters alone, through projects like Epic, Harlow, One Wests ide, we've demonstrated our ability to identify and invest capital in unique office and studio- related opportunities that generate returns in line with or well in excess of those yields. Going forward, we expect to take advantage of even more embedded development- related growth opportunities as well as identify and pursue capital- attractive acquisitions in a disciplined manner. We have a significant existing value creation pipeline, most of which is studio or studio- related office development, and more than half of which we expect to have the ability to commence construction by mid-next year. There are two types of compelling opportunities we look to pursue. One is our core- plus opportunities, targeting stabilizing yields of 5%-6% or more to purchase assets that are accretive and strategically aligned with our long-term growth objectives in the right markets with the key tenants. Our acquisition of Amazon-anchored Denny Triangle located at fifth & Bell last year is an example of that. We'll also look to grow our studio production services offering to further differentiate our facilities and deepen our relationships with key tenants. From a return perspective, these profitable businesses expand our media-derived revenue and operating margins and increase our studio portfolio stabilized yields. Continuing to return capital to shareholders remains an option as well as part of our balanced approach to shareholder value creation. Over the last four years, we've repurchased $380 million of our common stock, which will reach $580 million or approximately 15% of our market cap at the conclusion of our accelerated share repurchase in the third quarter of this year. To date, during this period, we've also paid approximately $543 million of dividends. Our ESG platform, Better Blueprint, is a major differentiator for our company, and over the last several years has become essential in the increased alignment with the media and tech tenants that we serve. ESG is now fully integrated into our strategy and capital allocation priorities at both the corporate and property levels. In terms of the E in ESG, we're ahead of the game. Our operations are already fully carbon neutral, and we have the highest percentage of LEED- certified buildings among our direct peers. We manage climate risk in accordance with TCFD and the Paris Agreement, and we're readily able to comply with the SEC's recently proposed climate-related disclosures. Our approach to ESG prioritizes real impact on issues we view as integral to our stakeholders. We're very focused on DEI, and much like our approach to sustainability, we're not satisfied with simply just checking the box. In addition to diversifying our leadership and board. Our heads of DEI and ESG are building on a variety of existing internal and externally facing initiatives, and we recently launched an innovative impact investing platform, EquiBlue, to leverage our expertise to promote DEI holistically in our industry and communities. We look forward to sharing more on these initiatives in the coming quarters. As we look ahead, we'll continue to work to execute on the multiple levers we have to maximize value for our shareholders. Our niche expertise and deep relationships with the secular synergistic converging media and tenant businesses will create many long-term cash flow- enhancing opportunities. We also continue to weigh these growth opportunities against return of capital to shareholders, again, with the ultimate long-term goal of maximizing shareholder value. Now with that, I'm going to turn the call over to Mark. Thanks, Victor. We're making good progress on our 2022 priorities. We signed over 500,000 sq ft of leases in the quarter with a 12% gap and 5.8% cash increase in rents from prior levels. We signed Bank of Montreal's 100,000 sq ft plus approximately 11-year renewal and expansion lease in Vancouver at Bentall Centre, a testament to the success of our substantial repositioning of that asset over the last three years. We also expanded global production firm Company three with an approximately 11-year, 60,000 sq ft lease at Harlow, such that they now lease the entire 130,000 sq ft LEED Gold Fitwel certified building. Arlo's state-of-the-art design and location at the Sunset Las Palmas Studio lot were a major draw for Company three as they look to unite Hollywood employees in a highly collaborative environment and enhance proximity to content production clients. Our in-service office portfolio ended the quarter at 91.1% occupied and 92.3% leased. Our current leasing pipeline, including deals and leases, LOIs, or proposals, comprises 2.2 million sq ft of activity, still up about 35% from our long-term average. Our 2022 expirations are approximately 10% below market. Excluding Qualcomm, we are in leases, LOIs, or proposals on 55% of the balance. We have another 15% or so in discussions, largely comprised of smaller tenants along the peninsula and in Silicon Valley with late year expirations who will engage more fully in the coming quarters. We continue to deliver on our value creation pipeline. Tenant improvements are underway at both One Westside and Harlow. Gap rents commenced in November 2021 for One Westside and in April 2021 and January 2022 for the original and expansion leases, respectively at Harlow. Upon stabilization, these projects will generate a combined $45 million of additional NOI annually. Our under- construction and near-term planned studio and office development projects total over 2.3 million sq ft. Construction at Burbank-adjacent Sunset Glenoaks Studios, our seven-stage, 241,000 sq ft purpose-built studio, remains on budget and on schedule to deliver in third quarter 2023. The project will generate another $15 million of NOI annually upon stabilization, and we're building it to a 7.5%-8% stabilized yield in comparison to recent studio trades at sub-4% cap rates. We're making good progress on entitlements for our 21-stage, 1.1 million sq ft Sunset Waltham Cross Studios development. This project is located just north of London, where demand for stages continues to notably exceed supply. Sunset Glenoaks Studios and Sunset Waltham Cross Studios together will double the size of our studio portfolio on a square footage basis and to a total of 63 stages. We expect a near-term closing on the podium for our 546,000 sq ft Washington 1000 office development in Seattle, and our plan is to commence construction in Q2 2022 with delivery in early 2024. The Denny Triangle Lake Union submarkets where Washington 1000 is located are thriving, and vacancy remains sub 10%. Washington 1000's sustainable, healthy design is state-of-the-art and highly differentiated, and we believe it will have considerable appeal to the global tech companies looking to grow in that market. Upon stabilization, Washington 1000 will generate approximately $27 million of NOI annually. We're also working on entitlements for our 450,000 sq ft Burrard Exchange hybrid mass timber office building in Vancouver, with very positive feedback thus far. As the tallest such building in North America, this groundbreaking project once again showcases Hudson Pacific's innovation and leadership in terms of world-class sustainable design and development. Vancouver market fundamentals, already extraordinarily tight pre-pandemic, remain strong with sub 6% vacancy. We're marketing for sale all four non-strategic assets we identified as held for sale last quarter. These include 6922 Hollywood, Del Amo, Northview Center, and Skyway Landing, and we view them as non-strategic based on location, tenancy, and asset quality. Based on buyer feedback and momentum to date, we anticipate dispositions of these assets before the end of the third quarter of this year. We'll initially use the anticipated $325 million-$350 million of proceeds to pay down our credit facility and ultimately to fund our development pipeline as required. Expected pricing represents an annualized GAAP cap rate of approximately 2.25% on the collective sales. Now I'll turn the call over to Harout. Thanks, Mark. Compared to first quarter of 2021, our first quarter 2022 revenue increased 14.7% to $244.5 million. Our first quarter FFO, excluding specified items, increased 2.3% to $75.2 million and 3% to $0.50 per diluted share. Specified items in the first quarter consist of a trade name impairment of $8.5 million or $0.06 per diluted share, and transaction-related expenses of $0.3 million or $0.00 per diluted share. Note, the trade name impairment is unrelated to our operations. It instead reflects the write-off in accordance with GAAP accounting rules and the NAREIT definition of FFO of the value associated with the Zio Studio Services name, which we retired upon folding that production service business under Sunset Studios brand. Our AFFO grew 11.8% to $58.6 million, and our same-store property cash NOI was up 1.4% to $120.3 million. This quarter, our press release and outlook present a combined same-store property cash NOI for office and studio. This change reflects the growing synergies and similarities we and other institutional players see between our office and studio assets, including increasingly similar, if not identical tenancy and credit, and length of lease term. It is more in sync with our long-term strategy and vision for the company and brings our same-store reporting in line with peers who also own and operate non-office assets, be it residential, retail, or hotel. At the end of the first quarter, we had over $800 million of total liquidity, comprised of $137.6 million of unrestricted cash and cash equivalents and $665 million of undrawn capacity on our unsecured revolving line of credit. We also have access to $147.4 million of undrawn capacity under our One Westside construction loan and $90.2 million of undrawn capacity under our Sunset Glenoaks Studios construction loan. Our weighted average loan term with extension is four point nine years. Now I'll turn to guidance. As always, our guidance excludes the impact of any new opportunistic acquisitions, dispositions, financings, and capital markets activity. We're narrowing the full- year 2022 FFO guidance to a range of $2.02-$2.08 per diluted share, excluding specified items, and maintaining our midpoint at $2.05 per diluted share. Specified items consist of the non-cash trade name impairment of $8.5 million and transaction-related expenses of $0.3 million, both of which were identified as excluded items in our first quarter FFO. We expect same-store property cash NOI growth in the range of 2%-3%, which includes the full impact of Qualcomm's expiration without renewal or backfill of their entire space at Skyport Plaza. Adjusted for Qualcomm, expected same-store property cash NOI growth would be 3.5%-4.5%. Our guidance assumes the successful disposition of our four held-for-sale properties before the end of the third quarter this year for gross proceeds in the range of $325 million-$350 million. Now, we'll be happy to take your questions. Operator? We will now begin the question and answer session. As a reminder, to ask a question, you may press star then one on your touch- tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. The first question comes from Jamie Feldman with Bank of America. Your line is open. Great. Thanks for taking the call. I guess just to start, just thinking about some of the sequential portfolio metrics in the quarter. Like, the change in leasing or the change in same-store NOI presentation, can you talk about, you know, has your outlook changed at all, you know, why you're blending those now, and kinda how much office has changed and how much studio has changed to get to that two to three? Hey, Jamie, this is Harout. Thanks for the question. We made the change now because it's the first quarter, and we decided to simplify our financials. It happens that there is a sequential down quarter-over-quarter, but it's not material. I think 50 basis points in total and attributable to both office and media. Remember, that's just the cash same-store NOI. That's the impact quarter-over-quarter. Can you talk about what drove that? Maybe if, you know, maybe tying into that, like your percent lease decline, I know a lot of it was Dell EMC. Maybe just give a little bit more color about anything that's changed in the core outlook, whether we can see it through guidance or not, or maybe nothing's changed. I don't know. Sure. I'll address the why. I think I addressed it in our prepared remarks, but ultimately, we wanted to simplify our financials. We wanna be in line with our peers. We think the businesses are synergistic, the exact same tenants, longer-term leases, all those pieces I mentioned before. That's the why. In terms of how it's impacting our guidance and projections, even though cash same-store NOI is down a little bit, it's not impacting the total FFO and NOI dramatically, primarily because it's just a Well, let me backtrack. First, the reason for the decrease from previous year, we had some tenants that we were in leases with that ended up not closing, and we deferred the lease-up of that. Ultimately, that's the driver of it. It's just some delayed leasing, even though, and Art can touch upon this, you know, on the leasing program. Okay. That's helpful. Maybe just to talk. Can you talk more about the leasing market? It sounds like maybe Art. Yeah. Hi, Jamie. ... you know, with, uh- Sure, I will. You know- Hi. Listen, I'm still very much encouraged that our markets have continued to show positive momentum. That is starting with demand that drives everything, and gross leasing. Our active deals in negotiation grew in the same period of time that we're talking about, 280,000 sq ft quarter-over-quarter. So the demand is there. It's, you know, I think all markets showed a little bit of a slowdown in leasing velocity. That is deals signed in the early part of the year, early part of the quarter. And then, as we started working through Omicron, we really saw a big pop, ourselves included, in active leases signed. You know, I think the majority of our leases signed in the month of March. There's no slowdown in terms of demand and active deals in the market. We've actually seen three-quarters of very positive demand. If you look back year over year, it's not even close. Would you say that pickup in the pipeline is it small tenant? Is it large tenant? What markets? What types of sectors? Yeah. I mean, I think across all markets, it's chiefly deals over 10,000 sq ft, although we are seeing an uptick in interest in tenants under 10,000 sq ft, in particular, Silicon Valley. I would attribute it to, you know, if you think about the demand growth, the two markets where we've seen the most demand growth are Silicon Valley and the Peninsula. I mean, we picked up 40 basis points on 5.7 million sq ft just in the quarter. We've got another of that kind of 280,000 sq ft, you know, 200,000 was attributable to the Valley and the Peninsula. We feel really good there. Then the other was West LA, or excuse me, LA, where, you know, we're already kind of close to 99% leased. We've got 35,000 sq ft to lease in this building. The demand across L.A., including Hollywood, has picked up. Okay. Just to clarify, the change in percent leased sequentially, how much of that was Dell versus other buildings or other tenants? Well, Dell was 95 basis points. You know, the sequential decline, this is Mark speaking, was 50 basis points. You know, but for the known vacate of Dell, we actually had positive net absorption of, you know, roughly, call it 40-ish basis points. Oh, it actually would've been up without Dell. It would've been up. Yeah. Up 50 basis points. Yeah, it would've been up. Yeah ... around 50 basis points. That's right. Wow. Okay. All right. That's good. All right, I guess, Just to shift gears to Washington 1000. Can you just talk more about that investment? You know, what gives you comfort on starting that project? What does the leasing pipeline look like in that market? Well, I mean, in terms of comfort. It sounds like, Victor, you were gonna jump in on that. No, go ahead. Sorry about that. Yeah, in terms of comfort, I mean, I think we've mentioned this in the past. I mean, a combination of, I think, you know, factors gives us confidence around it. One, we are in at a extremely attractive level in terms of all-in costs at roughly $650 per sq ft. I mean, anything of that quality in that market is trading well north of $1,000 per sq ft. I mean, there's $1,100, even $1,200 per sq ft comps, and we're gonna be all in with land included at $650 per sq ft. There's also really strong indications of good tenant demand. There's at least three tenants north of 100,000 sq ft that we are already in discussions on. There's a growing pool of other large requirements, 75,000 sq ft requirements that are also in the market as we speak. You know, the South Lake Union sub-market has sub-10% vacancy and even below that for premier quality. I think all the forces are aligned to make that project just, you know, what could be a screaming success. Jamie, Mark, if I can add to that. To put a finer point on the demand, I mean, we've seen four quarters of elevated demand in Seattle. We've seen, you know, deals over 100,000 sq ft. There were probably three a year ago, now there's closer to eight. On top of that, the demand is probably about 85% or maybe 90% of pre-pandemic levels. That's demand in the market, right? In the sub-markets that we operate in, there was positive absorption quarter-over-quarter. The drag on absorption was simply all in the CBD. South Lake Union, Denny Triangle, and even Pioneer Square were all positive. That's the sentiment on where demand has come. Okay. All right. Thanks for the color. Thank you, Mr. Feldman. The next question is from the line of John Kim with BMO Capital Markets. Your line is open. Thanks. Good morning. Can you, Harout, explain again why you combine office and studio guidance? Does that mean the studio is less predictable than office potentially? Maybe bigger picture with Netflix's issues, and I guess the company being more cost- conscious, it seems like we've reached peak content spend. Does that change your development plans at all for studio? John, hey, it's Victor. I'm gonna answer the question for Harout. It's as simple as what he said. The combined is what every other company has done in our peer set and non-peer set, and we're doing the same thing. There's no hidden secret to it. If you look at companies that have office and life science, they report the same. Office and multifamily, they report the same. Office and residential, they report the same. Mixed use and office, they report the same. There's no hidden secret here. Let's just move on from that point, okay? In terms of your question on Netflix, clearly, if you wanna go back and look at the transcript of Ted Sarandos, he claims, which you know, Ted Sarandos is co-CEO of Netflix, that his spending on content is going to be equal, or more than they've done in the past. The streaming company's perception on this is a downturn is absolutely not relevant to, first of all, the demand that we have in our studio space, one, and two, the amount of capital that's being put into the marketplace. I think the quality is what they're focused on, the content versus quantity, and they're prepared to spend equal or more money on that. I would suggest, you know, as opposed to looking at Hudson and what we're saying, I suggest going to the transcript based upon what Netflix says directly about their company, as probably you'll hear from Amazon, and Apple, and everybody else. Victor, you mentioned about half of your developments will be started in the next, I guess by mid-next year. Can you give any figures as far as dollar amounts of CapEx for the developments? Oh, no, I didn't mean. How you plan to fund it? I didn't mention half of our developments because what I mentioned in my prepared remarks is that two of our developments, which is what Mark just walked through, which is Washington 1,000, which we will commence because of entitlement processes. What I mentioned is that we should have Burrard Exchange, which is our Vancouver development, for approximately $500,000. Our Sunset Waltham Cross, which is our 1 million sq ft, $1 billion development, will have entitlements by hopefully by summer, but if not, by the end of third quarter. The commencement of those two projects have yet to be determined, but that is not all our developments. I mean, we have another 500,000 sq ft at Sunset Gower. We have 500,000 sq ft in the Peninsula. We have 500,000 sq ft at Sunset Las Palmas, and we have other development opportunities that we have not disclosed yet, but are coming out of the ground. In terms of the capital amount for those projects, I mean, it's all outlined in our supplemental, so you can take a look there. How will it be funded? Is that through additional asset sales or joint venture partners? As we mentioned in our prepared remarks, the funding of the development will be through asset sales, that was outlined in Mark's prepared remarks, and the availability of capital we have on our balance sheet currently today. All the developments that we are talking about are going to be funded with capital that is already accessible and available. Yeah, I would just add that, you know, we have a construction loan for Glenoaks, all of that. So all the construction costs for Glenoaks are already accounted for in the construction loan. Great. Thank you. Thank you, Mr. Kim. The next question is from the line of Manny Korchman with Citi. Your line is open. Hey, everyone. Art, maybe one for you. On the Company three expansion, were those lease terms the same for the expansion space as the original lease at Harlow? Yes. The lease terms were the same as well as the terms. Okay. Then, Harout, going back to same-store, no, Victor, don't yell at me, I'm not asking about guidance. The Quixote and Star Waggons, when do those- Okay. This would be the first call in, like, three of them that you're not asking for it, so thank you. Quixote and Star Waggons, when do those come into the same store pool? Because they're not office or studio properties, we don't consider them same- store, so they'll always be sitting outside of same- store just 'cause they're not actual real estate. Okay. No stores, so they won't come in. Just the same- store in the quarter for studios was weaker than I had anticipated. Anything specific driving that? How does that recover through the year? Yeah, Manny, I wouldn't really think of it as a weakness per se in the first quarter of this year. I mean, you can see expenses are essentially identical. The revenue is a bit lower, but that's really more a reflection of a very, very strong first quarter of last year, a very high level of production activity. As you know, it doesn't take much to move the needle on the studios. I mean, your denominator is pretty small there. You know, relatively small differences in, say, top-line revenue, can make a fairly big difference on a percentage basis when you look at it on the same-store. Hey, Victor. Hey, Victor. Victor, just a question on sort of capital allocation. You have the $200 million accelerated buyback, which I would assume should be done shortly in You'll net out there probably, you know, somewhere around the $25-$26 range when all is said and done. You know, north of a 7% cap, which is pretty hard to replicate. Sounds like you really have some exciting development opportunities and some stuff that you want to accelerate, so perhaps additional capital there. How do you sort of balance the development, some of these value add, core- plus, core acquisitions, with potentially re-upping your share buyback, even under an accelerated basis? Well, I think. Listen, I've mentioned this before, you know, it's not a simple science, that it's one versus the other. If there are opportunities, as I mentioned in my prepared remarks, on you know stabilized assets that we're looking to buy, whether it's value add or core- plus, you know, the numbers are gonna be in the 6%-8% range on the value add and, you know, the 5%-6% range on the core- plus. The development deals, as you pointed out, taking a look at the supplemental and March remarks, I mean, the ones we're talking about right now, specifically Washington 1000 and the next will be Waltham Cross and Burrard Exchange. I mean, these are, you know, seven and eight, so that falls in line with the yield structure of buying back stock. You know, we just did $200 million. You're right, we are 90% of the way done virtually with that. I mean, the remainder's coming due in the next couple of months. We're always looking at the alternatives around that. As Mark mentioned, we've got about $300 million and approximately $350 million, maybe a little bit more, of dispositions that are gonna close in the next 90 days or less. Right. You'll be flush with cash to be able to go do something. Can I come back just on, as we think about the studio and office split, and I don't want it to get hostile because I think it, maybe people have read it perhaps the wrong way. You're When you report, you're gonna continue, as you did in the first quarter, split out all the numbers, report same store. You're just, from a guidance perspective, will say, "Look, we're gonna forecast our total same store NOI pool," which has a multitude of different business lines that have a lot of similarities and credit to them, "and we're gonna give you a total number. When we report, we're gonna break it all out for you, and we're gonna call out in the future," I suspect, and please confirm this, that we're gonna call out if there's gonna be some volatility given, you know, the studio business is a little bit more volatile than your office business, which in itself could have, some issues, either delay on timing on leasing, or other variables. Can you talk through some of that? Listen, I think consistency is key, right? Being consistent, which we have done in the past, and then transparent, which we have in our supplemental, we'll have all the information that you will need to determine. We're not here to say on good quarters versus bad quarters. This is how we're reporting. This will be consistent going forward. If you really look at the materiality, which Mark just mentioned, I mean, you're talking, you know, the same store on the studios was 12% versus 15%. Okay? It's still, you know, a big number, but if you look at the dollar amount, as Mark said, it was inconsequential, specifically in the fact that we only own half of it versus two years ago, we owned 100% of it. The information will all be there, and it will be able to be deciphered by anybody who wants to do the work. To be consistent with what we think is easier for reporting, as I mentioned, and to be consistent with what our peers are doing, going forward, you will see one number, but all the backup information will be available. Great. Thank you so much. By the way, at the same time, as I mentioned, it has nothing to do with the timing of specific reporting. It's just that we did it for this quarter, and it's gonna be going forward. It would've been the same thing if the studio was 25%, and the office was 3%. We still would've done it. I Right You know, there's no difference. It's just the fact is we're doing it for this quarter going forward. As a learning lesson, I know you've been in the public markets a long time, and you've been extraordinarily successful. I think the change in hindsight, you know, hindsight's 20/20, probably deserved a little bit more explanation in the press release. If it wasn't in the press release, given the notes that came out overnight and the way the stock was reacting, probably something that could have been more eloquently addressed in the public comments, including the numbers and impact, and just putting it away because, you know, unfortunately, I think it negatively affected your stock. Hopefully, that's a good lesson learned for the future. Thank you. Thank you, Mr. Korchman. The next question is from the line of Alexander Goldfarb with Piper Sandler. Your line is open. Hey. Good morning out there. I'll try to ask some lighter questions. Going on the studios and the office, Mark, appreciate your comments on the occupancy decline and, you know, that we shouldn't worry. My question is, as you guys look to the office leasing demand, you know, what's the breakdown between demand for traditional office versus non-studio users who would want office on the studios? I guess what I'm getting at is, are the economics to you guys better because people, for whatever reason, even though they're not stage, they wanna pay up more, and maybe the TIs are the same, or is it truly different leasing trends such that we could see strong general leasing for office that may not necessarily correlate with the demand that we would see at the same time for non-stage users of studio office? Ooh, there's a lot going on in that question, Alex, so forgive me if I'm not hitting exactly in response. Let me try to illustrate. There's a few 100,000 sq ft of what we classify as office, but it's on-site alongside of the stages themselves. Its main use is for those associated with the stage use, that is to say, the production part of the stage use to have a space to office in. Writers, post-production people that need space to operate from associated with the use of a stage. Okay. Historically, that square footage has never been 100% occupied by stage users. We've traditionally had some amount of square footage available for other potential tenants that wanna be located next to an active studio lot. Casting agents, psychiatrists. I mean, there's been all sorts of interesting, different types of tenants like that. Okay. They've never made up the majority of the tenancy in the office component associated with the sound stages. Okay. What we saw during the pandemic was because those tenants tended to be under shorter-term leases, they, like everyone else in the world, were starting to work from home. There was also, for a stretch there, until production resumed again, less activity happening on the lots. We saw some loss, some deterioration in tenancy of those tenants. Okay. That's what you're seeing reflected in the sequential decline in the overall studio occupancy. By the way, that number is a trailing 12-month number. If you've had weaker prior quarters, it shows up in the current quarter, but the current quarter number is not just that quarter, it's a number trailing behind it all the prior 12-month period. We think we've turned the corner. We are seeing a pickup in demand of the non-stage- using office tenants. There's no. By the way, just to clarify another thing you raised, there's no TIs or commissions associated with that tenancy. People approach us directly. We have our own sort of internally driven marketing campaign where we reach out through our contacts to potential non-stage- using office tenants that might wanna locate there, and we are seeing a pickup in that activity. The expectation is, as quarters roll forward here and that activity begins to roll through our trailing 12-month number, we hope to see an improvement in that occupancy. Does that address your- Okay. That, that's helpful. Okay. Yeah, yeah. That's good. Second question is, Harout, you guys have about a little over $800 million floating rate debt after you pay off with the proceeds later this year, the $500 million on the floating rate. Is that, you know, I realize there's always a good mix that you want between floating and fixed. Is $500 million, you know, or that percentage of total debt, is that where you'd be comfortable at, or you would think about further reducing that? Just curious. Let me, and Mark probably wanna jump in, but let me address that. All of our floating rate debt, with the exception of our line of credit, is within joint ventures. That's part of the challenge. It's, you know, the preponderance of it is in our Hollywood Media portfolio. Right. Yeah. I might just say, if you look at the floating rate debt, our company share running through the supplemental, that 24.6%, Harout is correct that the majority of it is associated with JVs. To put a finer point on it, 35% of the floating rate debt relates to two JV assets that you know we obviously are gonna have to work with our JV partner on whatever the longer- term goals would be with respect to that floating rate debt. In total, that amount of debt is only 8.6% of our total indebtedness, so it's a small component. Yes, there's another part in our JV that it's roughly 25% of our floating rate debt, but in our JVs, that is construction debt, and all of the interest on it is capitalized, so it doesn't affect our earnings. The goal there would be to replace that debt upon completion of those construction projects, which is what you would typically do. All of the remaining floating- rate debt is the line. It's 40% of the floating rate debt. 100% of that outstanding line balance is gonna be addressed through the asset-related, the sales, the pending sales. Alex, the overall goal of the company has always been to manage its floating rate exposure, and you see it time and time again, where the majority of our floating rate exposure is often on the line, and then we pay the line back to zero, which is exactly what we expect to do here in the very near term. There's sometimes some construction-related debt. All the interest is capitalized, and then there's a little JV debt. Okay. Thank you. Appreciate it. Thank you. Thank you, Mr. Goldfarb. The next question is from Nick Yulico with Scotiabank. Your line is open. Thanks. Just wanted to ask about, you know, the San Jose airport sub-market. Maybe you could talk a little bit more about, you know, types of demand you're seeing for the Qualcomm asset. Also as well, you know, you have Cloud 10, which, you know, I'm sure that fits into some discussion as well as you're talking to some users down there about, you know, looking at space in the market. Sure, Nick. This is Art. Thanks for the question. The market, you know, as I mentioned before, the demand across the valley, the demand has been up, you know, for several quarters now, gross leasing kind of closing in on pre-pandemic levels. In our particular portfolio, we're looking at about 120,000 sq ft of deals right now on new deals with this elevated demand that we've had, new deals that are in negotiation, some form of negotiation at this point. We feel really good about that. Most of that just put a finer point on it, most of that is capitalizing on our VSP program that we put in place because tenants want to get in quicker. They don't want a protracted build-out period and so forth. That's where our chief demand is in Silicon Valley. Moving over to the Qualcomm space, as you know, they're out at the end of July. You know, we're still aggressively marketing the project to all the users over 100,000 sq ft that are throughout the valley and beyond. The work that we're doing, the freshening up of the property, will probably likely take us into end of Q1, which will again, just to refresh your memory, include landscape, hardscape, and refreshing of the common areas in the building and amenitizing it quite substantially. We feel pretty good about those prospects. By the time we're done with the work, we hope to be, you know, kind of deep into negotiations. In terms of Cloud 10, I mean, we've got some reverse inquiries. You know, as you know, the demand for large tenants in the valley and specifically in San Jose, all the way through Palo Alto is really large tenants. Cloud 10 has being that it's a new development, that seems to be the attractive level here at most of these tenants. And we're seeing our fair share of inquiries on that right now. One of the competitive advantages we do have with the Qualcomm space in and of itself is for users who see significant growth in the near future. We've got Cloud 10. We've also got another 2.1 million sq ft to leverage across the airport for that particular type of user. Okay, thanks. The other question is on the guidance for interest expense went up about $9 million. You know, I guess you do have the higher line balance right now. The curve shifted. I guess I just wanted to be clear if there was anything else that was driving that besides those issues. Also, I want to be clear that, you know, that guidance for interest expense does assume that, as you mentioned, the asset sales are paying down the line later this year. This is Harout. Yes. You hit it on the head. We are using the asset sales to pay down the line. As a reminder, that's the gross interest expense. Any portion related to our JV partners is also reflected. The offset is reflected in their earnings side of it. That, the interest expense line item is 100%, it's a consolidated number. It does reflect, you know, the updated curve, LIBOR curve. Okay. Got it. All right. That's helpful. Thanks. Appreciate it. Thank you, Mr. Yulico. The next question is from the line of Ronald Kamdem with Morgan Stanley. Your line is open. Thanks for taking the question. Just a couple of quick ones from me. Just on the big picture, following on the question that was just asked, we've been just trying to bridge the guidance given at the beginning of the year, the $205 before, and then the updated guidance of $205. Just trying to figure out what went up and what went down. You know, just a quick look. Looks like obviously interest expense was the big one on the upside. Can you just maybe walk us through, really quickly, what were the offsets to get back to sort of the same level? Hopefully, that question made sense. Sure. Yeah, that's a great question. The biggest offset is our share repurchase. When we announced guidance back in February, we didn't have that in our guidance, and therefore, we're effectively reaping the benefits of that by offsetting the interest expense. That's the biggest piece. There's other small pieces, but that's the biggest one. Okay. Got it. I figured. All right, just a bigger picture question, just taking a step back. Maybe if you can update us on what you're hearing from on sort of the return to office, on the utilization. Is that something that, you know, what levels can we expect, sort of by the end of the year? What are you hearing from tenants? Thanks. Yeah, listen, I mean, I think you're hearing what we're hearing, and you're seeing what we're seeing. The large tenants in our portfolio are virtually all back. Now we're seeing a fairly aggressive move on the small tenants to come back somewhere around three or four days a week. Utilization has picked up dramatically in the last 30 days. Really, since March 1, I guess. We anticipate that to sort of roll through, barring any other strain that may have people go back. You know, we're seeing it. I don't think we're seeing the same kind of transient parking numbers yet come to fruition, but we're definitely seeing the actual parking and office occupancy much higher. If I could add to that, you know, the confidence that Victor talked about kind of beginning March 1 throughout the markets, has really created this demand that I've been talking about. I said that the, you know, beginning of the year started off a little slow because of Omicron, but really started to pick up later. It really tracks with this uptick in demand everywhere. It is tracked with exactly what Victor said, kind of that March 1 date. Great. If I could sneak one more in. Can you just remind us, how do you guys think about recurring CapEx for the business, and, how should we expect that to trend over the next, I don't know, two, three, four, five years? Well, oh, sorry. No, go ahead. Go ahead and start, and I'll add. You know, in terms of how we think about it, I mean, the main components of recurring CapEx are TIs and commissions. They tend to track the level of leasing activity. I do think you see in our numbers that, as we have kind of projected some time ago a leveling off in recurring CapEx, including in the most recent quarter, I encourage you to kind of go back and look at where this how this quarter compares to previous quarters. You know, in the end, what it's really done is shown this steady improvement in AFFO, which on a trailing 12-month basis is up 25%, year-over-year. I would add that that is on top of a more than 40% increase from the prior year. We've seen this leveling off on recurring CapEx. It's showing up, you know, materially in AFFO. I don't know what else to add about how else we see it. Another way we look at it is, you know, because the TIs are very lumpy, looking at one individual quarter can sometimes be misleading. We have maybe a very large tenant that gets reimbursed all their TIs in one quarter, that doesn't mean it's gonna be repeated. We do tend to look out at it on a, you know, a forward three-year or two-year basis just to see where it goes. When you look at that, we see that our recurring capital is more normalized now than it has been in the past. With you know, there'll be some bumps here and there, primarily because if there's a large tenant who takes a large TI, that's, you know, it's gonna happen in one quarter and therefore come down in the following. Great. Thanks so much. Thank you, Mr. Kamdem. The next question is from Rich Anderson with SMBC. Your line is open. Thanks. Good morning. Still out there. If I can make a quick comment and then a question on Netflix. You know, they're experiencing competitive challenges. They are a company within an industry. This is not an industry conversation, it's a company. No one wants to see Netflix stock down 68%, but isn't the silver lining, or perhaps a silver lining for you is you expand, you know, your diversification in that world, and that ultimately would be a good thing in my mind, in my view. Like, I think of Amazon scaling back in industrial, that's actually a good thing for the industrial REITs because it allows them to, you know, expand and diversify their exposure in e-commerce. Same rule would apply here, I would think, that you would expand your diversification in streaming and content providers. Is that a fair way to think about it? Well, Rich, listen, nobody said Hudson's only content tenant that occupies our stages and office space is Netflix. I mean. My point exactly. We have leases with Amazon. My... Yeah. I mean, we have leases with Amazon, Apple, you know, Disney, and Warner Bros., and HBO. I mean, yes, you're absolutely right. They're not the only content spenders, even though they're saying that they're not gonna slow their content, the others are saying they're increasing their content. You're absolutely right. I mean, competition's good. I don't think anybody's implying that, you know, as Netflix goes, Hudson goes. Thank you for that. Yes. That's exactly the point I was trying to make. Second question is, you know, everyone on this call recognizes that Hudson trades, you know, at a pretty steep discount. You know, the market's saying 45%. I don't know what your internal NAV number is, but it's, but we can all agree that it's a discount. You know, Victor, you sold Arden back in, I guess, was it 2005? I'm not gonna litigate a sale of the company or anything like that, but you now have two distinct businesses that have synergies, of course, between them, the studios and the office. is there, you know, now an opportunity to find a way to unlock that value, price discovery, you know, for some segment of your business and really sort of demonstrate to the market in action, in a transformational way that could really bite into that NAV discount that's, I'm sure, been a thorn in your side for a while now. I'm curious if you're strategizing around that at all. Let me make a couple of comments on that. First of all, clearly it's without saying, but I will say it, the discount to NAV, whatever number you put on it, is large, and it is not something that we're happy about, and we've never said that we're happy about it, and we're not going to be happy about it. Of course. Second of all, I think we have demonstrated the value of assets both on the studio side and on the office side, that they are not valued today what they would be if they were sold on a one-off basis. I think thirdly, which is even more importantly than us, is the value of the assets that the third party markets have come out and you're seeing comps on single-tenant office or multi-tenant office or studios that are trading in, you know, combined numbers at, you know, three, four, five caps. You're seeing independent evaluations from the likes of other people who are on this call, like Green Street, and looking at valuations of, you know, the portfolio at a four to five cap or four and a half to five and a half, whatever the number is. I don't think what you're saying is in order to validate. I think the validation is there, Rich. I think, you know, it's the desire of what we do next, and the answer is, as a fiduciary, we will always, and are currently always looking at alternatives that do not just maintain a status quo position. In order to validate what we see or what the market wants to see in terms of the asset quality and pricing and value of those assets, I think it's done within the company, but it's done a lot more outside the company now, and the comps are there. Yep. Okay. Fair enough. Thanks. Thanks, Rich. Thank you, Mr. Anderson. The next question is from Daniel Ismail with Green Street. Your line is open. Great. Thank you. I recognize we're getting close to the top of the hour, but just wanted to ask a big picture question regarding rising rates. Maybe Victor or Mark, I'm curious if you're noticing any tangible impacts as you guys are out there, either marketing those four assets for sale or looking to acquire new assets, if there's been any tangible move in pricing because of the rise in rates. Daniel, I think it's a great question. On the disposition side, albeit we have two buildings that are multi-tenant, one building, which the market knows is an asset that is relatively worthless to us as a company, and it's been vacant for a long time and doesn't fit. And then the third is an asset that is gonna be a complete repositioning. I can say, you know, we are almost in contract. We're under a letter of intent for all of them. In contract with a couple of them, and there is no, there has been no pushback on financing. Now that being said, I'm going off of sort of memory here. I believe two out of fpur or maybe three out of four have no financing contingencies at all. They're all cash buyers. I'm sorry, none of them have financing contingencies, but they're all cash buyers. Three are cash buyers and some is self-financing. That being said, it's not impacted us. On the flip side, there have been assets that we have looked at that are value add assets with stabilized yields, as our prepared remarks stated, that I think have been taken off the market because they can't execute at this time. I think that is very far and few between from what we're seeing in the marketplace and transactions that are gonna be announced or that have already been announced. I'd say, you know, the easy answer is the impact, yet today is still very minimal in terms of transactions, both on the acquisition and disposition side, with the movement of interest rates. Got it. That's helpful. No, you know, so no other impacts elsewhere in the business like, you know, obtaining construction loans or anything like that in terms of what you've seen on, you know, some of the other ripple effects that, you know, rising rates could have? No. At this time, no. I mean, everything we're looking at has been, you know, very, very much intact even though the rates have moved. I believe, you know, the reasoning is that the market already perceived that these rates were moving and so it was already baked into people doing business. Got it. Thanks for the color. Thank you, Mr. Ismail. This concludes our question and answer session. I would like to turn the conference back over to Victor Coleman, Chairman and CEO, for any closing remarks. Thank you so much for participating, and we'll talk to everybody next quarter. Thanks, operator, for the work. The conference has concluded. You may now disconnect.