Good morning, welcome to the Hudson Pacific Properties Second Quarter 2023 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. 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. 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. Both are now available on our website. Our 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. Today, Victor will discuss macro conditions in relation to our business. Mark will provide detail on our office and studio operations and development. Harout will review our financial results and 2023 outlook. Thereafter, we'll be happy to take your questions. Victor? Thanks, Laura. Good morning, everybody, and thanks for joining our call. During the second quarter, we worked diligently to position Hudson Pacific optimally as we continue to navigate the unprecedented confluence of an unfavorable macroeconomic environment, the lingering impacts of remote work, and most recently, a historic and prolonged studio union strike. Office fundamentals across the West Coast markets remained challenged in the second quarter, with gross leasing either flat or decelerating quarter-over-quarter, sublease activity either stable or rising, negative net absorption in all but Vancouver. As expected, studio production in Los Angeles slowed significantly, with shoot days in the quarter falling 60%-70% year-over-year for TV comedies and dramas, and 20%-25% across film, unscripted TV, commercials, and photo shoots. Our focus in this environment remains on occupancy, preservation, and expense reductions, both at the corporate level and within our office and studio portfolios, as well as proactively managing our balance sheet. Mark and Harut will be discussing our progress on all these fronts in detail. Beyond today's challenges are a variety of bright spots emerging that have the potential to shift the dynamics around our business and provide for significant upside and opportunity specific to Hudson Pacific as we move to 2023 and beyond. On the office front, according to a recent JLL study, the broader U.S. office market is starting to show some signs of recovery. To date, the West Coast has lagged due to big tech rightsizing and tenants broadly staying defensive. With mounting data pointing to historic declines in innovation, productivity, and human capital development, big tech has taken notice. The 10 largest tech companies now have concrete hybrid attendance policies impacting most of their workforce, with the focus shifting into enforcement. These policy changes are starting to make positive contributions to Hudson Pacific's portfolio. As a sign of reintegration, year-to-date parking revenue was up in our portfolio 18% compared to last year, including 25% in San Francisco and 15% in Seattle, where Amazon returned to work May 1st. More recently, Amazon asked employees to move closer to team hubs or apply for new jobs within the company, or they will be considered to have voluntarily resigned. Office demand increased quarter-over-quarter in both Seattle and in the Bay Area, increasing 18% in Seattle, 25% in San Francisco, and 11% across the Peninsula and Silicon Valley. As we've communicated in the past, upon reintegration, tenants often realize that they don't have enough workspace or conference rooms to comfortably accommodate employees on peak days. Given the growth in tech's workforce through the pandemic for FAANG tenants, even net of layoffs, we're conservatively estimating a 45% increase in headcount. Reintegration could begin to place expansionary pressures specific to our tenants and our markets. Couple this with the slowing of new office deliveries and accelerated conversions of older office space assets to non-office space uses, and we will see vacancy rates begin to turn as we approach year-end. We continue to believe in our markets driven by tech and media, and we're going to provide a significant growth for long term. Although in its infancy, AI promises a wave of innovation and growth not seen since the advent of the internet or the smartphone. Once again, the Bay Area, more specifically, San Francisco, is the cradle for this groundbreaking industry, and our portfolio is well located to benefit from its growth. VC funding to generate AI in the first five months of the year grew 650% in the city, with companies there garnering 90% of the global AI-related funding. This is translating into office demand, and there are currently nine requirements totaling 870,000 sq ft in the city. We're optimistic AI and relative service industry growth will begin to alleviate the lack of large square footage requirements and serve as a catalyst for sustained positive net absorption, especially in the Bay Area. Now, turning to our studios. While the directors reached a new contract in June, the actors joined with the writers on strike in mid-July, This is the first time since the 1960s that both unions have been on strike simultaneously, That strike lasted 22 weeks. We're hopeful all parties are going to reach a fair agreement soon, although it appears currently that they remain far apart on important issues like streaming residuals, AI, and writers' rooms. The simultaneous strikes do mean that previously written production activity that still could be filmed is now on pause. We're nine weeks into the strike relative to an average strike of 14 weeks, and we continue to expect a significant ramp in production post-strike like we experienced following COVID. It's going to take time to fully reengage. While studios have strategically spread out new releases, they could face significant shortfalls in 2024 if production isn't up and running before the fall. Netflix, as an example, recently affirmed its intent to maintain content spend through 2024 at levels in line with 2022, albeit with some lumpiness post-strike, similar to coming out of COVID. Comcast too noted a relative increase in content spend likely in 2024, and with subscriber growth and engagement across multiple broadband applications trending up, the underlying demand drivers for production remains strong. A strike of this magnitude, while impactful, is rare and has historically proven to be relatively short term in nature. Over the first half of the year, we've made significant enhancements to our studio cost structure. These equated to a $12 million annual savings around labor and fixed operating expenses, as well as another $15 million of savings attributable to deferred capital expenditures. While we'll continue to evaluate additional operating and capital adjustments, we'll do so in a manner that weighs short-term cost savings against capitalizing on long-term value creation. Not all industry players have the ability to make this trade-off, which could present a compelling opportunity for us post-strike. We'll also be able to fully capitalize on the economies of scale from our now fully integrated service acquisitions post-strike, and we expect these synergies to result in approximately $15 million of additional annual NOI in a normal operating environment. Despite these current challenges, we've thus far been able to navigate the ever-changing landscape in a manner which speaks to the well-located portfolio we've assembled, our diversified asset classes, and the fortitude and experience of the entire Hudson Pacific team. We understand this was going to take time to overcome, but we believe in our strategy, and our long-term positioning sets us up to generate even stronger results in the coming quarters. With that, I'm going to turn it over to Mark. Thanks, Victor. We've signed approximately 60 office leases, roughly 50% new deals, totaling just over 400,000 sq ft in the quarter. The average lease size was approximately 7,000 sq ft, and 50% of that activity was in the San Francisco Bay Area. Small and mid-sized tenants in tech and other industries continue to drive the preponderance of activity across our markets. Gap and cash rents were approximately 4% and 8% lower, respectively, on backfill and renewal leases, with the change largely driven by a few mid-sized leases, both new and renewal, across the Peninsula and Silicon Valley and in Vancouver. Our in-service portfolio ended the quarter at 87% leased, off about 170 basis points compared to first quarter, due primarily to the move-out of mid-sized tenants in those same markets. Our leasing economics improved across the board quarter-over-quarter, with net effective rents up close to 9% to $44 per sq ft. Tenant improvement and leasing commission costs improved close to 50%, down to $6 per sq ft per annum, and lease term increased by six months or 13% to 48- months. In terms of our two larger 2023 expirations, we're still negotiating a renewal of our 140,000 sq ft tenant in Seattle at Met Park North, whose lease expires in late November. We're in discussions with two requirements that could potentially partially backfill the 469,000 sq ft block lease at 1455 Market in San Francisco, which expires at the end of September. One for approximately 25,000 sq ft, the other for approximately 275,000 sq ft, with additional tenant interest behind these. In regard to our remaining 2023 expirations overall, which are about 5% below market, we have 50% coverage, that is, deals and leases, LOIs or proposals, with another 5% in discussion. Outside of the two large expirations I mentioned, the average expiring lease size is roughly 5,000 sq ft. We're staying creative and flexible as we work to boost occupancy, that even as the growing number of tenants commit to a 3-to-5 day in-office schedule, thus far, they continue to transact very slowly. Our current leasing pipeline totals 2 million sq ft, slightly above our last call, even with continued leasing, and that pipeline includes over 285,000 sq ft of deals and leases. We also have close to 1.2 million sq ft of tours across our portfolio, roughly on par with this time last year, although down from last quarter. We did see an increase in both aggregate and average sq ft of requirements for our assets across the Peninsula and Silicon Valley. This coincides with a rise in early interest we have seen more broadly in the Bay Area and Seattle, even as the timeline for getting leases across the finish line remains unpredictable. Turning to the studios, our in-service studio stages remained well leased at 95.7% on a trailing 12-month basis and 94.1% on a trailing 3-month basis due to the preponderance of long-term, greater than 1-year leases. On a trailing 3-month basis, we actually experienced a 490 basis point increase in lease percentage at our Quixote Studios. This was largely due to the commencement of a handful of long-term leases at our Central Valley and recently delivered North Valley facilities, as well as a general influx of short-term, non-strike impacted production, such as commercials and photo shoots. This activity led to an additional $1 million of rental and lighting and grip revenue quarter-over-quarter at our Quixote Studios. However, revenue from pro supplies, transportation, and other services was off by approximately $4 million in aggregate, even as we still had activity from non-strike impacted productions, such as music festivals and other large-scale events. That said, we expect these service-related categories are likely to be further impacted given seasonality and the expanded strike as long as it continues. Throughout our portfolio, we're continuing to limit capital improvements until we have certainty around demand. This includes staying conservative on new development. We do, however, have two in-process developments close to completion. We're on track to deliver our state-of-the-art Sunset Glenoaks Studios in Los Angeles by year-end, as expected, pending receipt of Los Angeles Department of Water and Power permits. We've continued to tour major production companies despite the strike. We anticipate leveraging a more traditional show-by-show sales model for at least a portion of the facility, which we will be able to execute on to the fullest extent post-delivery. There is no directly competitive supply for this project, which has a delivery date potentially quite well-timed to capture pent-up demand post-strike. In Seattle, Washington One Thousand is also on track and should deliver in the first quarter of next year. While we expect even greater interest once the project is complete, we're already in early discussions with three tenants, each with requirements over 100,000 sq ft. As Victor mentioned, Amazon's push earlier this year to bring employees back at least three days a week, and more recently, telling workers to return to its main hub, has accelerated return to work for many local businesses. Washington One Thousand will be one of the nicest buildings in the city and is the only new product of its kind under development. Our all-in basis is only $640 per square foot, representing as much as a 30%-40% discount to comparable trades. Now I'll turn it over to Harout. Thanks, Mark. Our second quarter 2023 revenue was $245.2 million, compared to $251.4 million in the second quarter of last year, primarily due to Qualcomm and NFL vacating Skyport Plaza and 10900-10950 Washington, respectively. The sales of office properties, 6922 and Skyway Landing. Our second quarter FFO, excluding specified items, was $34.5 million or $0.24 per diluted share, compared to $74.6 million or $0.51 per diluted share a year ago. Specified items in the second quarter consisted of transaction-related income of $2.5 million or $0.02 per diluted share, which includes lowering of accruals for future earn-outs related to our Zio Studio Services acquisition. Prior period, property tax reimbursement of $1.5 million or $0.01 per diluted share, deferred tax asset write-off expense of $3.5 million or $0.02 per diluted share, and a gain on debt extinguishment, net of taxes of $7.2 million or $0.05 per diluted share. Prior year, second quarter specified items consisted of transaction-related expenses of $1.1 million or $0.01 per diluted share, and prior period property tax expense of $500,000 or $0.00 per diluted share. The year-over-year decrease in FFO is attributable to the aforementioned office tenant move-outs and asset sales, as well as higher studio production, higher studio operating expenses associated with Quixote acquisition and increased interest expense. Our second quarter AFFO was $31.1 million or $0.22 per diluted share, compared to $60.3 million or $0.41 per diluted share, with a decrease largely attributable to the aforementioned items affecting FFO. Our same-store cash NOI grew $127.6 million, up 4.7% from $121.9 million, with same-store cash office NOI up 5.1%, largely driven by significant office lease commencements at One Westside and The Harlow. During the second quarter, we repaid the Quixote note for $150 million, a $10 million discount on the principal balance, with funds from our unsecured revolving financing, revolving credit facility. At the end of the quarter, we had $581.2 million of total liquidity, comprised of $109.2 million of unrestricted cash and cash equivalents, and $472 million of undrawn capacity on our unsecured revolving credit facility. We have additional capacity of $122.4 million under our One Westside and Sunset Glenoaks construction loan. At the end of the second quarter, our company share of net debt to the company's share of undepreciated book value was 38.7%, and 85.3% of our debt was fixed or capped. We remain focused on deleveraging. This quarter, our board reduced our quarterly common stock dividend to $0.00125 per share, which resulted in an additional $17.9 million of cash flow savings this quarter. We also continued to selectively explore asset sales. We currently have three deals under contract, including two office assets and one land parcel, which could collectively generate over $100 million in gross proceeds within the next several months. We're also in negotiations to sell two more office assets, the pricing and timing of which are under discussion. Regarding our upcoming maturities, we only have one small maturity remaining in 2023, our $50 million private placement note due next month, which we'll repay with our line of credit. We have two maturities in 2024. Blackstone is leading discussions around the extension of our Bentall Center loan, which matures in July 2024, of which our 20% ratable share is $100.5 million. We've received indicative terms and are now formally commencing discussions around refinancing our One Westside/Westside Two loan, which matures in December 2024, and of which our 75% ratable share is $243.5 million. As for 2025, 96% of our indebtedness does not mature until the final two months of the year, and three of our four 2025 maturities, comprising nearly two-thirds of the maturing amount, are secured by high-quality assets: 1918, Element LA, and Sunset Glenoaks. The first two of which have high credit, single-tenant occupancy with remaining lease terms into 2030. Sunset Glenoaks should be stabilized and 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 that matures in December 2025. While this is still nearly two and a half years out, we're focused on ensuring that we have capital available ahead of repayments. Turning to outlook. Due to continued uncertainty around the duration of the studio union-related strikes, we're continuing to withhold our 2023 FFO outlook and studio-related assumptions, while providing certain assumptions related to our office outlook, including reaffirming an office same-store cash NOI growth projection range from 1%-2%. This range includes the impact of a block lease expiration in September 2023, but does not include any of the aforementioned potential dispositions. We continue to expect FFO to be negatively impacted as long as the strike persists. As always, our 2023 outlook excludes the impact of any opportunistic and not previously announced acquisitions, dispositions, financings, and capital market activity. Now, we're happy to take your questions. Operator? Thank you. We will now begin the question and answer session. As a reminder, to ask a question, you may press Star, then One on your touchtone 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. Our first question today comes from the line of Alexander Goldfarb with Piper Sandler. Alexander, please go ahead. Your line is now open. Hey, good afternoon, or good morning out there. Again, thanks for moving the call time to avoid the overlap. So two questions. First, you know, it sounds like, you know, the sale so far, not contemplating One Westside. I don't know if One Westside is, is in the potential two additional for sale. Haru, when you think about all the assets that you guys may sell, what is the NOI impact that we should think about? Then more to Victor's opening comment on, you know, corporate expense, if you're selling a bunch, what does this mean about, you know, the need to reduce the cost structure of the company overall? Let me answer the first question, which is we're not going to provide any NOI detail yet, primarily because the sales are uncertain. Once we have confirmation of the sales and feel confident, we will share all the relevant details around them. Doing that is not appropriate at this time. As far as the G&A goes, I think we said before, we constantly look for ways to reduce our costs and reevaluate them, and depending on the sales and the impact, which will also garner our ability to reevaluate G&A. They're always being evaluated and, and thought through. Okay. The second question is on, on Hollywood. Clearly, I mean, you guys benefit from owning independent studios, which is, which is good. When we think about some of the headlines we read, Disney and others who are talking about trouble with their, you know, their, their screen productions or streaming services, how do you weigh, like, overinvestment in streaming or ways that Hollywood may retrench after some tough goes with the resurged demand once the strike ends? Just trying to figure out, are we back to the races, or is Hollywood reconsidering how much it puts into its, its production investments, just given some of the headlines we've read recently? Alex, you know, as I mentioned in my prepared remarks, I mean, so far, what we've found between the, the bigger streaming entities to date, they are on budget, at least as we know, through 2024, to spend at or more than their run rate has been in the past. And that's been, you know, Netflix's and Apple's and Amazon's and Disney's and Comcast's tone to date. I think it's approximately a 2% increase year-over-year. That, I believe, will probably be greater given the fact that they're not spending the money currently today because they're on strike. You're going to have a massive ramp-up. After that, I believe, you know, we, we feel from what the industry is looking at, that, that we've always mentioned that there will be some form of consolidation. Whatever that consolidation looks like, we don't know. I don't think it's going to impact the stage use and the production use because there is still a very limited number of stages, and the demand in peak times are much higher than the stages that are available. Jeff, do you have any comment to that? The only thing I would add, Alex, is that, you know, what's clear with all the streamers is that original production drives a lot of subscriber growth, and it also mitigates their churn. It's a key economic ingredient into their, their playbooks. If consolidation happens, they all know that they have to invest in original content production, and hopefully, obviously, we'll benefit from that. Okay, thank you. The next question comes from Blaine Heck with Wells Fargo. Blaine, please go ahead. Your line is open. Great, thanks. Just to follow up on the sales, Victor, you guys have talked openly about evaluating dispositions recently, and that there are no sacred cows within the portfolio. I mean, Harut's commentary was helpful, but just more generally, can you talk about what you've learned about the investment sales market throughout this process? You know, whether there's more interest in certain segments of the market, and, you know, just as you've gone through the process, whether the composition in the bucket of assets up for disposition has changed based on what you've learned? Yeah, I think, listen, we've the three assets that we have under contract right now are, as we mentioned, two individual assets and one, and one parcel of land. The demand for those were relatively high on smaller user, or owner user or family office type investors. The other couple of assets that we're working on right now, I think, have a makeup of a more of a institutional play, change of use play. And I think that's the, the drive that we're looking at right now. I you know, listen, as, as Harut said, we're not gonna get into identifying the assets in the open marketplace. I believe that, you know, we have not explored true institutional ownership sales for large assets at this time. Not to say that that won't be something that we look at in the future, but that's not part of the game plan and the assets that we're talking about right now. You know, I, I think the, the bottom line is the activity is relatively good. Clearly, financing around those assets is the hurdle, and so the size of the assets from our standpoint, and the, and the type of buyer, is gonna be identified based on the access to liquidity and capital. All right, great. That's helpful color. Then just taking a little bit of a step back on the studios, Victor, can you just talk a little bit more about any insight you have into the negotiations going on related to the writers and actors strikes? And just what your best guess is, or maybe even what you're hearing from any insiders you're talking to, on how long these strikes could last, kinda based on the, the current state of negotiations. Well, listen, I'll take the first part. I mean, listen, what we're hearing is there's, as I mentioned in my prepared remarks, there are a few issues on the table that are hurdles that they're gonna have to try to figure out. Writers' rooms, the issue obviously on AI, which is an undeterminable issue and a new issue for all parties. The residual issue are the big issues. I think the, the dollar issues, and the issues around healthcare and, and all the perks around that are, are pretty much agreed to. Couple things. The fact that SAG-AFTRA is at the table, I believe, helps the process because you've got now another constituent with, with thousands of people now involved, that are more than the 3,000 writers that were involved in the past. Hopefully, that will set a precedent on some of this. Real time, you know, we just heard last night, they're going back to the table Friday. The writers are, they have not been at the table, I believe, for a month and a half or so. That's that's a good sign. In terms of, you know, what we're hearing on the ground, you know, we, we are, as I, as I mentioned in the past, we don't, we don't have a seat in the table. We, we obviously have a lot of constituents around that are giving us information. It could start in a heated conversation, to hopefully settle something out as early as, you know, September, and maybe, you know, as late as year-end. You know, I think as every day goes by, Blaine, we're all hugely aware of the shrapnel around just the industry in general and all the residual businesses that are getting affected. It will start to feel fairly painful for these residual companies and employees and individuals that work in the industry. It will be damaging, and I think everybody's very cognizant of that. Hopefully, we'll try to get to some resolution quicker than we all anticipate. Great. Thanks, Victor. Thanks, Blaine. The next question comes from Nick Yulico with Scotiabank. Nick, please go ahead. Your line is now open. Thanks. I guess just going back to the asset sales, is there, is there anything you can provide us in terms of, you know, a view of if you get a certain level of asset sales done, you know, this year, what that's gonna do to improve your, you know, debt-to-EBITDA metric, which is, you know, went up again this quarter? Addressing that is a little bit too outside the range of what we wanna talk about right now, but ultimately, it will improve it over the long term, which is, you know, kind of our main point, which is we're going to delever, and that's kind of the focus that we have. And we're gonna use different tools to do so. Not only debt to EBITDA, but also the covenant calculations, all those things, you know, we have a very strong eye on, and, you know, we're projecting out. In fact, this quarter was in line with our projections, and we're not in a risk of breaking any of them. Like we said earlier, the, the delevering is a high priority for the company. Yeah, Nick, just to add to that, you know, the assets that, that were in escrow- we're under contract with, and the other two we're talking about, and then the next sort of tiers that we're looking at, none of those assets currently have debt. Effectively, all the cash flow, sorry, all the proceeds from the sale will go to pay down current debt. We're not replacing, we're not getting rid of existing, encumbered debt on assets in any asset at this stage. It's all gonna be very helpful. Just to touch upon the net debt-to-EBITDA. Okay. I mean, it is. Real quick, sorry. To address your EBITDA comment, it's being artificially reduced by the strike, and so it doesn't really reflect a normalized net debt-to-EBITDA as a result of the strike. So it is being, like I said, artificially being reduced or increased, I guess. Right. I guess I just I wasn't sure if there was any, you know, specific, you know, target you're trying to get to, you know, on that metric, you know, realizing that, you know, the EBITDA for the studio business, there's uncertainty about how long that could be under pressure. You also have some, you know, some move-outs still on the back half of the year. Yeah ... that haven't been released. I wasn't sure if you just, there was a sort of plan in place where you have a target and, and you think that, you know, the dispositions can get you to that target. Yeah, there's a plan in place. The plan is get it lower, we're doing that through these announced disposition goals. I'll add to the comments that Harut and Victor have already shared. One of the asset sales is land, that's 100% accretive to debt to EBITDA because there's no EBITDA associated with it, and it goes all to debt reduction. The plan is to get it lower. We have always said that we want to be below 7x debt to EBITDA. We understand that there are, you know, tenants rolling, there's other, you know, areas impacted, like the studio and the strike, things we don't control. Everything we can control, we are laser focused on, on following through with, in, with the goal of getting that metric, you know, improving that metric. Okay, thanks. Then just one other question, if I could, on, you know, Silicon Valley and, you know, thinking about your portfolio there. You know, I think historically there was talk that, you know, the portfolio would benefit at times from, you know, just ancillary services supporting, you know, the large tech community there. I guess I'm just trying to, you know, trying to understand better the dynamic right now, where we all hear that, you know, large tech is more on hold with leasing, and I'm not sure if that's also impacting some of the kind of ancillary, you know, companies that support tech. Is that, is that also sort of affecting that tenant base as well, or is it more that, you know, just large tech is, is slowing your in Silicon Valley? I, I think it's, it's not affecting it as much as I think we would have thought it would, Nick, to be candid with you, because as you can see by our numbers, the majority of leases that we're doing in the Peninsula, in the Valley, are smaller tenants. I mean, we've got a handful of tenants in the 50,000 sq ft range, but the majority of those tenants are, you know, 5- to- 5- to- 20. So, and as you can see by our numbers this, this quarter and, and the number of deals we've done, you know, there's a lot of activity in the Peninsula, in the Valley. You know, also, you know, the physical occupancy is, is in the valley and, and the Peninsula has increased dramatically, and that's, you know, converted to more people looking at space and touring and the likes of that. Art, you want to comment on that? The answer is, you know, as tenants are starting to discover how they're going to utilize space, right? Return to office is really kind of on the forefront and, you know, they're enforcing these return to office mandates. They're discovering how much space they're going to need to rightsize. We're seeing those rightsizes cut both ways, but we are seeing tenants coming back and looking for more space. That's going to affect both the large and the smaller users. It's gonna, it's gonna play all the way through. Okay, thanks. That's all for everyone. Thanks, Nick. The next question comes from Michael Griffin with Citi. Michael, please go ahead. Your line is now open. Great, thanks. I wondered if you could expand on what you mentioned in the release about, you know, extended times for decisions to be made on leases. Is this just a function of space takers more hesitant to take space? Is it supply? You know, any incremental commentary you could give there would be helpful. Yeah, I mean, listen, it's so hard to pinpoint. Every, every case is a case by case. You know, we've seen tenants come and negotiate, you know, feverishly and, and have leases out for signature, and we've waited. I mean, we've got two fairly substantial leases that have been on the, the desks of the legal counsel, fully negotiated for a matter of months, one, one overseas and one domestic. Michael, I just think that it's just taking time, and maybe if you want to read into it a little deeper, I don't think it's about looking at the footprint or the competitive landscape, I just think it's a need currently versus a need in the future, and maybe that's where the decision tree is right now. Obviously, things have changed expeditiously in terms of back to work and the, the number of tenants that have come out and companies have come out with policies. The next phase of policy is enforcement, and I think that level of enforcement goes to executional leases, and I think that's exactly where we are right now. We're on that precipice of. Everybody's policies are in place. Now they're gonna be enforced, as, you know, the example we gave with Amazon, which is, which is a great example. Now, the enforcement comes into place, so now they recognize the need, and then the executions are, are the next stage. Art? Yeah, we've seen, you know, we've seen forward thinking on this relative to all the, the tenants based across our portfolio. Why? Because over the first half of the year, we've seen a spike in tours, early activity. That early activity is gonna translate into actual transactions downstream. They've already been thinking about this, and, and the, the return to work, I think, which has caused this spike in early interest. Great, thanks. Then just going back to the writers' strike. I mean, obviously, I think it's anybody's guess as to when this thing ends, but is there a worry if it gets protracted kind of into the, the latter, you know, part of this year, that given you have a seasonal aspect to this business, that production could be slower to ramp up into 2024? Yeah, it's a great question. Listen, I think we're very confident that when this ends, the ramp-up will be non-seasonal, and it will just go. As I said, we just had an example of this with COVID, or, you know, two years ago, and we saw the results, and they were pretty spectacular. I think seasonality is out the window. I do caution, I know Harut has made it evident to everybody who he speaks with, you know, we're not saying the next day things jump. I mean, this is a business and an industry that, you know, you're gonna have scripts written, you're gonna have sets designed, you're gonna have actors hired, then you're gonna have production in play, and that does take time. I think they're getting prepared for it, behind the scenes, but there will be some form of a ramp-up. I don't know whether it's gonna be. When it's up and running, we're gonna benefit from it, and we think it's gonna be fairly, you know, expeditious and furious. Great. That's it for me. Thanks for the time. Thanks, Michael. Our next question comes from John Kim with BMO Capital Markets. John, please go ahead. Your line is open. Morning. With the repayments of the Coyote note, you now have $528 million outstanding on the line. I was wondering how you plan to pay that down, whether it's disposition proceeds, I'm not sure if the five assets are enough to fully pay that down, free cash flow or long-term debt refinancing? Yeah, I mean, I think the first two are the sources along with the dividend cut. You know, expect to see cash flow and our coverage on dividend continue to improve, especially when studio operations return to normal. That at net cash flow, net of debt service and dividends will go towards either the payment of capital requirements that otherwise would have required the use of the line or reduction of the line. It'll just depend on the, you know, the period of time that we're talking about. That'll do it. The asset sales also go to reduce that the line balance. The use of... It's possible if the, if the capital markets are, you know, more available and the cost of secured debt is attractive, potentially we would access the secured markets to reduce it. I think the, the excess cash flow and asset sales are really where we're gonna get the debt reduction. Okay. Some of the multifamily companies this quarter talked about property tax relief in Seattle. I don't think we've heard you or other office companies talk about this, but I'm wondering if you see a similar trend, either in Seattle or just property taxes in general, being alleviated, being alleviated. Yeah. Listen, I think, we, we are all over it in all of our markets. We are seeing a very good resetting of valuations and property tax benefits to the company in all of our assets in California and in Washington at the same time. I think our team is way ahead of the curve on that, and you'll see some impacts in the quarters to come. We have already gotten wins. I think the wins will then impact the bottom line, expense reduction on taxes and potentially some rebates as well across the board. Okay, Victor, you, you talked about AI demand and the potential opportunity. I was wondering if you had seen or, or talking to any tenants currently in your portfolio, either direct or sublease, and if there's any way to quantify how much demand there is out there? Well, I can tell you, like, in, in my prepared remarks, you know, as, as I said, San Francisco seems to be leading the pack, on where the AI demand is. You know, it's currently today at about almost $900,000 sq ft. We've seen a couple of deals done. Hayden is an AI company. They did $42,000 sq ft in the city. I also think that another Hive, which is another AI company, did I think about $60,000 sq ft. There's another $800+ thousand sq ft of activity right now. Some of it is been for sublease space, and some of it is direct deals. I think the numbers that we're quantifying, at least that, that are real, it's about 600,000 sq ft of net absorption. Then just, just like was asked about the residual, then, then, then you're gonna see the follow on, on ancillary companies that are servicing these AI companies, hopefully growing. You know, we're optimistic that it's gonna make some kind of an impact. It's, it's real, it's now, and we'll see, we'll see where it goes in the next couple of quarters. We're looking at a couple of tenants that are, that, that are very active in the marketplace and trading paper back and forth. We're hopeful that we can execute on that. That's great color. Thank you. Thanks, John. Our next question comes from Julian Blouin with Goldman Sachs. Julian, please go ahead. Your line is open. Yeah, thank you for taking my question. Harut, maybe for you, what, what is causing the increase in the interest expense guidance? Is it just the forward curve going up and the impact on floating rate debt and, and I guess also the interest rate cap expirations you have coming up this quarter? It's a few things, but you hit upon a couple of them. One is the forward curve increase. While this doesn't help interest expense, it does accrete to us, which is we pay off the Coyote note and generate a $10 million savings. The cost of that loan versus the current curve is increasing interest expense. Got it. Okay, that makes sense. I was encouraged to hear that the covenants came in line with your projections. Sounds like you don't really expect any issues there. I guess just could you sort of walk us through what the deterioration in the unsecured indebtedness to unencumbered asset value was? I guess also when you say you don't expect any issues, does that sort of assume any length of strike, or is there maybe a minimum level of leasing or tenant retention through the end of 2024 that needs to happen? Yeah, the deterioration is really a combination of the increase in the unsecured debt balance, stemming from the repayment of the Coyote note, which was a secured debt that went that became unsecured upon repayment. You know, there's almost 40 assets running through the unencumbered asset calculation, and some of them increased in the quarter, some of them decreased. The net decrease was about $112 million. We've stress tested the metric, including a protracted strike, all the way through the end of 2024, and even in the most impacted quarter, we still, on that metric, remain more than 300 basis points above the threshold. The studios, neither of the studios, I should mention, run through the unencumbered asset base or 1455, which I think some people may focus on due to the block expiration, doesn't affect those valuations at all. There's an indirect effect due to the cash flow, right? To the extent that we are generating more cash flow from the studios, it would be available to repay the debt, which will eventually take hold. That metric improves as we see the studios normalize. And we've factored in or sensitized that for, like I said, the protracted strike, all the known move-outs, you know, you know, everything we can project all the way through the end of 2024. Got it. That's very helpful. Thank you. Thanks, Julian. The next question comes from Camille Bonella with Bank of America. Camille, please go ahead. Your line is open. Hello. I wanted to pick up on the comment about how mark to market opportunities are around 5% for 2023 expirations. If we think about the negative cash rent spreads on the leases you've signed to date, has this been in line with your expectations, given you're still seeing positive rent growth, net effective rent growth? Yes, and our mark on the remaining 23 expirations remains a positive 5%. A couple of deals really account for that 8% drag on the mark to market. It's the Rivian, 60,000 sq ft extension through 2028, with an. We had hit that Rivian deal at literally peak market rents in Palo Alto. We're obviously glad we were able to get that significant extension, but it reflects, you know, current market, so it was a negative 18% mark. We also did a three-month extension with Luminar. It also dragged that number down a bit. If you account for those two deals, you're essentially flat mark to market. Yeah, our numbers still show that the remaining expirations are, one, that was our expectation for the quarter, two, we expect to see something like 5% mark. Yeah, more, more color. That both of those deals happen to be in the same, exact same market where we, we hit peak rents, now we're gonna be adding market rent, which is also a very healthy rent, happen to be well below the mark. Just specifically within that market, then, just given demand still remains below, I guess, where you need to, be to support stronger pricing power there, do you expect that these negative rent growth trends will continue over the next 18 months, or any thoughts if we're? close to a bottom here? Well, I, I mean, our numbers, which, you know, reflect refreshed MLA assumptions that get done every, you know, I mean, we're constantly refreshing our MLAs, show a positive for the balance of 2023, and we're essentially flat on our expirations in 2024. In 2025, there's a slight positive. Looking through the lens of our assets and assumptions associated with our assets, it suggests, you know, sort of a, a bottoming out. Thank you. Thanks, Camille. Our next question comes from Dylan Buzynski with Green Street. Dylan, please go ahead. Your line is open. Thanks for taking the question. I guess just, just going back to big tech leasing, and I appreciate your comments so far. One of your peers recently mentioned that they don't expect big tech leasing to materialize or recover even through next year. Just curious, is that how you guys are sort of viewing this tenant cohort? If so, what do you think ultimately brings them back to wanting to lease more space? Hey, listen, I don't know, you know, what other landlords are saying. What, what, what we're seeing is, we're seeing activity in big tech in certain markets. We're seeing a, already a, a decision tree that's made as to how space is gonna look, and now they're looking to find out where they're gonna accommodate in the space. You know, obviously, we're seeing a flight to quality, just still, you know, dealing like everybody else is. Our, our higher quality assets, the highest quality assets, have the most activity, and there's, there's tech activity around that. You know, I'm not gonna, you know, venture into saying big tech's not coming back or they're not coming back anytime soon. You know, I just know that what, what Art's team is seeing is that, you know, I believe that I believe that our tours are higher than most that we've seen in the past, and we're seeing that activity. I do think that, you know, in reference to specific to big tech, I mean, just look at Amazon. I think, you know, their return to the hub messaging last last week was dramatic and absolute. When there was pushback, they said, "You know what? If, if you aren't gonna be within an hour's timeline of where your current office is, you can apply to another job, and if you don't, you know, you're expected to be considered as unemployed going forward. Right. It's not just big tech, right? We're seeing it from these comments from AT&T, Farmers, et cetera. You know, you're starting to see, you know, kind of the trickle down. Yep. I guess just in, in those discussions, any noticeable trends with regards to changing space layouts? Yeah. I mean, listen, Dylan, we're, we're getting a handle on this, you know, real time, and we're seeing the same thing. As, as I mentioned in my prepared remarks, you're seeing a lot more conference room facilities. You're a lot more space per head. You know, we, we've seen that number go up to, like, 165, you know, or, or more, maybe even, you know, to, to close to 200 feet per person, when it was as low as, like, 120. So those numbers are, are, are consistent throughout, you know, more space for less people. I think that's, that seems to be the, the trend. Obviously, amenity driven, that's the, that's the trend, and, you know, location and quality, which we've, which we've talked about, you know, since the beginning of this downturn. Great. Appreciate those comments, guys. Have a good one. You too, Dylan. Our next question comes from Ronald Kamdem with Morgan Stanley. Ronald, please go ahead. Your line is open. Just going back on the leasing, really helpful color on the 2023, two large expiration in the Amazon deal. Any sort of updates on the remind us on the Nutanix, the Nutanix space, as well as the Towers at Shore Center coming due in 2024? Any, any sort of color or context there, how are conversations going? Sure. This is Art. Nutanix, Nutanix, is remember, it's a contractual giveback. We extended them for 215,000 sq ft for an additional seven years. This was part of their contractual giveback. The piece that came back in the quarter, it's about 51,000 sq ft. We're i n leases for half, half of that, currently. Going forward, the next large piece in 2023, which is up in May, we're, we're just currently marketing the space. We don't have a, a backfill user in sight. We are, we are touring, currently. Got it. Then Poshmark? Sorry. Yeah. Poshmark, we're in negotiations. There are, If you think about it, they're a 3-floor tenant. We're in negotiations for two floors at the current time, right? We'll see, you know, as they assume what kind of footprint they're looking for. It might be all three, but right now we're focused on two. Got it. Then zooming out to the... You talked about the 2 million square feet in the pipeline. Is there a way to thematically break that down a little bit? Like, is there, like, AI, financial services, tech? Is there a way to sort of dive into that number a little bit more? Yeah. I, I don't-- Right now, I mean, I don't dissect it in that fashion, but I will tell you, the sense that I'm getting on that 2 million feet. By the way, that 2 million feet is up 100,000 sq ft quarter-over-quarter, after, you know, having leased 400,000 feet. That's the early interest that I had been talking about that I'll, you know, repeat, is, is real, and it's starting to work its way into our pipeline, which again, bodes well. I would say that because of the markets that we're in, I would say, you know, probably 60% of that is 60%-65% of that is tech. Now, I can't break it down to AI versus hardware, software, but it's 65% squarely is tech. Got it. Helpful. Thank you so much. Thanks, Ron. 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 in this quarter's call. We'll speak to you all in the next quarter. The conference is now concluded. You may now disconnect.