Hudson Pacific Properties (HPP) 7 Aug 242024 Q2 Earnings call transcript

Hello, everyone. Thank you for attending today's Hudson Pacific Properties Second Quarter 2024 Earnings Call. My name is Sierra, and I'll be your moderator for today. [Operator Instructions].

I'd now like to turn the conference over to our host, Laura Campbell, Executive Vice President of Investor Relations and Marketing. proceed. Please

Art and Thanks Victor on With Mark Coleman, our Harout CFO; filed available be X-K with everyone. are call website. on Lammas, joining Leasing. available call Diramerian, website. will An audio for on the our are of today supplemental an CEO on and and for afternoon, we SEC, me us. earnings the both President; This this replay Good release afternoon, EVP our Suazo, and now webcast Chairman; of

Some today as of supplemental Please earnings the reconciliation on the information information we'll call. financial and as well share reference is on call non-GAAP for release forward-looking used of trends market as will nature. forward-looking financial operations regarding the review and industry results statements in well measures our quarter. other and will XXXX from office discuss will an development outlook. Victor provide and highlights Mark our and on the update our studio Harout as and Today, this

Thereafter, to take Victor? questions. we'll be happy your

Thank to expectations. The our better with office our everyone, performing FFO quarter this outlook second and in our were portfolio welcome you, we reported call. with results than quarter our afternoon, Laura. Good line

feet requirement ago. XXXX. XX,XXX the is over years second last in This square year. healthy X.X feet, quarter activity leasing million of up Even strong strong to at compared of and deals is average of X,XXX from was leases, in most XX% of execution with about feet. square our first This since proposals of X/X quarter, leases XXXX, our another above an the square resulted our quarter million team's up feet our or leasing new, X were highest square since quarter year-to-date those leasing, leasing after LOIs pipeline X

markets our a a through is team's ability this across our sublease challenging, requirements office is uniformly, gradual development trailing And pipeline average testament successfully the there's leases falling available diminished, to the Coast tenant growing, attract improving. move and West while demand still strengthening and ridership are capture to X-quarter is and declining, is of execution. to are All almost space Prime to relative pipelines transit

this is highest net million had absorption, second the the The submarkets feet third there deals. quarter experiencing with in its at were leasing best San kudos in XX,XXX years city of evident of largest XX our feet, number Francisco. X X XXXX quarter Nowhere square deals over positive near team positive for than square XX signed to signing more and X the since several or

reaching Tenant year-over-year this XXXX. seen million requirements to late not feet continue increase, X.X square quarter, to XX% since up levels

feet leasing in square the especially feet market strong of markets, AI AI Francisco XXX,XXX the is spilling extent, Silicon over office is Seattle. leases another on of year-to-date our be already XXX,XXX to signed in some With tenants XXXX Continued AI pace San reigniting San Francisco over into Valley year. significant investment other in to and and and market AI square

mega AI $XX that Area to investment X nearly market's by gaining allocate we $XXX in of U.S. of of Second investors the confidence billion quarter half and have the quarter was performance highest years, all billion are funds VC and more deals. leasing VC powder. in of the driven The LPs from getting We're with first energized significant by Reportedly, Bay dry continues pressure positive U.S. to are core our relative where in this of receive choosing AI largest obviously for significant presence the allocation momentum markets. businesses funding funding locate a year. the in to by along XX% about

our closing, leases as further we strengthen on timing office the control fundamentals move ahead. gradually cannot we we While expect will

delayed and their clearing of strikes television contract our activity months follows week, for the last XX for begin unprecedented motion productions XXX and potential much to and way quarter, which Teamsters typical ratified negotiations, in resolution greenlighting there compared This additional picture producers, normalize. July. that XX only demand for about an overshadowed studios, second the approximately during favorable weighed to Angeles finally of Los of difficult the seasonality. estimate as in the As with production on are only Presently, alliance the strikes we

of the of level the levels some unclear. expect balance we through remain to what While increased year production

but number cost-cutting shifting episodes consolidation, content and and of budgets. just also strikes, are counts the type, not mix altering Beyond show production

All and Los Angeles. demand of both of Angeles these outside our for stages influence and factors services, in Los

years, the epicenter will credits have remain While tax production, recent implemented has in other global Los we lost the and enhanced substantial and in infrastructure city of film their lead incentives. entertainment, believe sector-specific favorable the Angeles of state some locations

While less this total industry trend to X% exacerbated the growth region's production from was up than the XXXX strike to capture Angeles in XXXX, scripted X% in scripted Los output. total compared

the nearly due leaving credits. for lost Angeles projects production spend of billion In $X to state tax XXXX, Los

Mayor related to working While governing Angeles' city Los Angeles of a on other committed with the industry commission thrive use elected on closely in this we are is experts strategize to and topics. Bass established front and the ensuring Mayor officials Los Bass, and incentives to industry and has continues

But new when to result, And better will cautious with our remains get lack certainty, how quarter, All currently start assess that production as globally believe will operations and fluid. as dynamics investment we and of distributed. these by visibility the even normalize. more we they fourth studio should the and content normalize, to are very a reasonable

peak early value. anywhere a strikes, the fourth Importantly, reference near during Angeles. SAG productions the of impacts began to studio Los XXXX experience we point At for when quarter were to we we of filling approximately XXXX businesses levels the WGA there our pending meaningful create do and production not estimate XXX require return of to after our

$XX NOI studios annualized same that and in-service businesses NOI generated an $XX of During million. million our period, generated annualized TOD our an of

top Further our to balance priority. our turning Finally, deleveraging remains sheet.

and end will flow our We further have of seen until comment improvements of XXXX have on strengthen anticipate that these already increasing we some we Harout in metrics, which organically. shortly, no cash debt studio will maturities leverage while the

As our to managing opportunistic continue we buyer to on part will proactive approach of interest dispositions several strong our have and assets. pursue multipronged leverage,

expect We as type of able transactions these to year. on successfully did to just execute last we be

With that, I'm going to it turn to Mark. over

Thanks, Victor.

the and earnings signed lease of declines with those occupancy This dip On XX and half first new square in quarter, we percentages percentages likely XXX,XXX we our the consistent are indicated The this feet potential indications. improve early would our lease basis renewal to quarter in year, with point leases. and thereafter. first call XX and occupancy this

in both of delta to was of up X.X%, foot The GAAP in space off rent were lease driven be would rent with our the quarter signed at X.X%, the have less. excluding by square peak and square cash grew increases most space, to were turned rents while leases to our of years Market, X in renewal foot GAAP our Note signed plus leased yet with than XXX,XXX city rents large-sized which cash at Francisco that former mid- box $XX more leased rents $XXX notable $XX-plus signed in rents. increased the effective XXXX this and X% Our on the rents, would the San XX.X%, XX-year at Bay respectively. mid-XXXXs city square per whereas block half be of and Area net the the some by square market footage foot significantly

Year-to-date quarter, X.X first time million again activity aggregate representing tour We last to in Francisco Washington office at this have had XX% in unique XX% from large-sized roughly we square of year. feet to square and San toured over Compared in XXX,XXX this XXXX, feet Seattle. mid- tours quarter, XX% up demand. tenants increased

tours square Washing if only that very prospects entire with feet to XX,XXX another interest, project is XXXX the in have the CBD. for early we not represents best, underscore, are among representing the region from bigger. pursuing also We the product planned but best, Seattle all this

we've On quarter. hills, the strong another yet leasing

XX is million discussion coverage, quarter our quarter X% and our includes including mentioned, our Victor X% to year. and from second us coverage. This should XX% square over square foot expirations. last on Market, On XXXX pipeline and Hill, deals top last assets compared up XXXX Mill remaining like about total to This feet, As we which begin Page XX at X allow million King. Market XXX occupancy vacancies, X First, collectively to increase XXX have XX%

To put through we expiring a office expirations, upcoming and year-end feet point expiring on finer square square XXX,XXX our have feet million in XXXX. X roughly

square per feet we Over average. on X quarter the leased last have XXX,XXX years,

exactly expirations. we accomplish to only a X next square nothing continue total million X.X all quarters, remaining would announced have we XXXX that the to address more, XXXX over of Assuming leased feet and and

peers. will office just substantially Thereafter, lower, improve, a our as comparison of there modestly even in If continues pace in conditions to not and of become or leasing growth expirations accelerate path clear including our annual sustained occupancy. whereby we achieve market is majority preserve office

Turning vacant additional Sunset compared to in-service stage On Palmas. at a the reflects an XX.X% XX.X% XX-month Studios. leased our to stages were quarter, basis, first trailing which Las in

representing have from leased, are have over in we event XX XX requirements, contract active XX negotiations. Our major Sunset have Glenoaks North and signed stages. Valley. client a which currently stage tours in May, Quixote to we held lease networks asset, opening of and attendance. up XX.X% leases grand We last clients X or for with stages our our stages streamers on film were due in that stage at X conducted increased occupancy at on TV XX.X% Quixote with unique quarter resulted interest studio Year-to-date, XX In at

production compared offering have is had in activity the what testament basis approximately early XX% points and in share gaining market been and with sales Transportation production activity the second to accomplish quarter. as later normalizes. utilization We half This to declined XXX even increased first our integrated to can unique a the of quarter. more team as levels quarter

Valley, grew $X was $X.X utilization. quarter, studio and includes and of revenue of incremental initial occupancy revenue studio at production services Sunset Sunset to at due revenue X% It stage services occupancy also Gower Netflix million higher North first additional ancillary million from and Glenoaks. location relative higher this from Quixote transportation of at to more production Our

for Pier and of on Finally, XXXX. I'll planned opening note is that end in construction on at Sunset XX time budget

with single and are As multiple discussions Manhattan's garnered first significant and interest leases. productions, tenants studios multi- the we in for stage studio, from and purpose-built has high-profile project

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

Thanks, Mark.

million at production the second improved Sunset second X Sunset Palmas partially Gower. Market due sales primarily ancillary asset Studios, and revenue to $XXX was by offset at revenue XXXX compared year, increased from last at move-outs, to activity and X Our Las in quarter studio X million quarter $XXX.X XXXX

last year. $X.XX Our or $X.XX share items, the was per million second to compared in quarter per quarter $XX.X specified or share FFO, million diluted $XX.X second diluted excluding

of Specified affecting in income mostly consisted or $X.X due share derivative fair $X.XX a Market. interest the to is diluted our items per to and purchase per partner's following interest FFO $X.X in revenue noncontrolling ownership million adjustment items diluted year-over-year onetime or transaction-related value with share. of FFO our along less allocated of of $X.XX change XXXX million The

or less with the to change to Our AFFO in was share in and reduced second diluted adjustment CapEx partially improved items million per $X.XX mentioned quarter revenue quarter spend. $X share million largely $X.XX noncash attributable million $XX.X compared previously per year, the second the or affecting diluted recurring FFO, by $XX.X last

equivalents move-outs Sunset same-store million quarter approximately of also our end tenant liquidity $XX million comprised additional and on is quarter at last capacity our mostly revolving undrawn cash driven of of Sunset million the $XXX quarter, $XXX to $XXX.X and total construction our and million $XXX.X unsecured unrestricted Sunset Our $XX was the share second which previously credit million million. had represents At second million XX XXXX Pier the cash, of loads, second to Market $XXX we Palmas. by specific in Las of facility. of capacity There of Glenoaks year, compared cash mentioned NOI

by steps of fixed XXX proactive of our year we percentage undepreciated relative net debt take XX.X% related of share ago, reduce to to or leverage basis to Compared points capped basis to debt increased our book XX.X%. points continue to XXX and our to metrics. share a improved We by value and strengthen

housekeeping a of second we One construction Importantly, Victor discuss XXXX. our as outlook. now as Sunset before With noted, no November complete are we accounting property. as we have quarter, until for it the consolidated maturities on Glenoaks matter

our outlook. to Turning

with share providing of are FFO third no to diluted We outlook $X.XX quarter per items. specified $X.XX

take of time quarter studio outlook Teamsters and the that given and third will year, new Quixote third and of to prep half assumes the conditions the productions. less favorable than following it for is businesses are NOI Our in our quarter first operating ratification lower currently in-service the the the recent greenlight agreement

office was of our performance ahead Our in the expectations. second quarter leasing

quarter we by second potential third average quarter. has However, be quarter, the and occupancy third anticipate expirations third our lower driven and end outlook the occupancy the flat in at NOI and lease assumes to of even as the

year same-store assumptions, full Studio. are Palmas. to the studios Sunset specifically at same-store we of our same-store our our FFO absorption that now to the due property cash XX.X% Las XX.X% negative and consolidate A growth NOI Regarding Sunset range Quixote business lowering to portfolio excludes reminder Glenoaks lower

any As and always, our activity. dispositions, potential our financings of capital outlook excludes the acquisitions, impact market

and related Quixote production studio show once assets, we We our guidance point can FFO return to service levels project accurately cash to normalized and flows will that we more business. outlook show anticipate at believe by have a providing lease to full primarily year future

be to we'll Operator? Now questions. take happy

comes [Operator with Heck question Fargo. Wells Blaine Instructions] Our today from first

hoping was had how I little might And quarter color again could a in potential bit reception the pricing? you has you a the where quarter. that more be maybe and about been, this on talked process? sales that any Victor, maybe asset last comment Maybe just guys little on bit you

Blaine, hear thanks. Good your Yes, to voice.

don't are sales I we still details we're the and So our sales, don't at confident asset execute assets. on least into details on in get year. to few but the beyond we want want conversations, on -- that on active I amounts, asset last and like did in going into numbers, a get we're to to discussions just

helpful. That's Okay.

assets those has Just to of quarter? same on you Or that. were change that targeting potential follow any up these the to kind Are been last the quickly there sales? composition of

They it. about the think predominantly with the me X. same exception Let are assets of

helpful. that's Okay,

exploring, any had alternatives quarter all I were gave table. still then thought Okay. Got the kind and there you about that last of essentially guys a it. very options strategic asked were whether be And answer you I might on candid

So up I consideration and you changes whether wanted your subject there update thoughts and to to just that follow for a still get maybe on larger any guys? are

I all to Chairman, said a as obviously, always going be I last company to whether as listen, time, they're evaluate potential of the for always at today. place imminent maximize all shareholders. discussed to acutely alternatives. look value viable. Directors going currently said, and as they're Board nothing at that we're There evaluating looking as our Well, would is And what long-term determine opportunities, at in the is and But we're as

comes today Kamdem Stanley. Ronald question next from Our with Morgan

me. Just X for quick ones

is sort bridge quarter-to-quarter. one, a to Just to quick there from of $X.XX going way $X.XX

Just Just the figure are to driving trying of what components what out that? that? are pieces

Sure.

of in and NOI at the then related that's by occupancy. counts to So which second the expirations, in drop drivers our We a quarter the third in that lower in quarter show studios. quarter. in and Quixote activity end lower are we however, could to we be And NOI expect, same-store the main second line Gower occupancy what average third at results in office lower reported general. the same-store in also with And in still lower related the quarter,

makes Got you And sense. feet terminations, the it. then quarter. XXX,XXX noticed early disclosed we That square in of that

Just thinking that And what that the sort be office about? were of should curious, any was one-timers figures we by? rent there in driven

major that in default that a on negotiations there good drivers. for or then And those we XX,XXX space. most the One to of X behind square There on totality for feet, pipeline backfill already ones. those news is big those news there and good have is, The is XXX,XXX really that Yes. This a feet. Art. is were was are square WeWork was

that And revenue did the we half termination not lease of to get question, from the any WeWork. second answer

any So that's not in of numbers. the

with next Our question Nick comes Scotiabank. from Yulico

know the Mark, a And XXXX I share just I expirations? think have you if year. don't could to on you something said said earlier, was I then for XX sure coverage on I right. you thought about the you expirations make want this number that

Yes.

look 'XX That's just on year it or and the right XX. the the Art. you're coverage back find So XXX on up at the we on so

Yes.

So on a on we're 'XX coverage about right it, at on XX% point the XX. sitting now, find

below are lot guys of average Our is these right just size X,XXX now. tenant barely feet. A engaging square

XX clearly. up go So that -- that very number can

Okay. AI. turning And then to I guess,

you You in else they put just think city Francisco to maybe what don't that that you heard talked versus about in that about to create many is they've earlier, we've issue, want valley? of you've how whether anything could space it's a or these Can much prebuilt bit situated capital space you that sublease tenant the suites in. firms be spec because your will that cases, of talk or have San more that competitive want to portfolio, taken

Yes.

So it's bifurcated right.

and deal I'll about in big Valley, we've AI is large talking XXX,XXX butter. growth the Peninsula they -- off immediate you're planet, don't of tenants early-stage about square our space about the they it's In these the and That with have X the have first. think with feet attracting Valley. it, valley. prebuilt because don't So and kind the we have and which get deal AI of -- our with the talking to space with we the second about we movements. And the to bread through been you're get that on

So we're well doing really those. in

they're floors, has matter, the multiple In which larger for floor. really this we space. to multiple that spaces, for why sublease top-end built looking why anyone is we'll gravitating floors, -- On haven't single nor been they've case, oftentimes, is prebuild if out a which

activity pipeline the of or AI composition I in Okay. done, of some to just of just able think you firms? share were been the leasing like what the And you've terms up has following

yes, I'll share and AI with tech, you.

has more square quarter-over-quarter, prepared million X a little remarks, I It's in the this, XX%, renew still say year-over-year, So bit XX% We're composition our tech pipeline to mentioned also we see seeing to the XX% more new grow. almost right? the to the feet. as And starting our it's will than tech chiefly it's of as So year, grown tenant size deals. in the grown of we're pipeline.

We've for So in users. is We've actually Most year-over-year. the XX,XXX midsized AI, AI deals XX% of carrying the really X you've that, of Valley, but that square of would and Seattle, all XX,XXX the seen the midsized in tech in of start-up Of preponderance that's of in say maybe just or that the is in day, is kind as is again, in the of AI. city. the Francisco. up feet, city I X tenant larger that the the you, maybe that is I to most realm. it mentioned to seen seen, the that of And San XX%

helpful. That's Okay.

we if tech, Yes, AI. XX% of XX% carry is that .

next Burrows Goldman Caitlin question from Sachs. Our comes with

could talk maybe any you into X you I expirations. year? year, expectation a was And have way lease then or insight little of look for larger any to yet retention, whether about rest how XXXX, it as bit the what the maybe of wondering if it's forward you this compares been other the on office history, the the

than Sure. This quarter. that the fourth can there's that think We had of about yet retention. in we of it a is XX% smaller tenants lot still better mentioned it's the Art. Mark Why? haven't engaged Because that. get

last, on would XX% it and But I XX%. can can the again, we that for of up it's to We about say, have sure. the those of X north feel XX%, or early, coverage last expirations. X north we we That XX%. very So get stacks years, get

that going to number grow. obviously, is So

that that X you . half to to that I second stuff for think expirations. there XX%. happen is coverage XX% coincidentally, mentioned must XX% just be different Is And clarify, retention, just the

Yes.

but different And stats both on be happened Okay. -- then to just X XX%. that

have No, on He's no, expiration. the represents That to no. that coverage just retain the feet. XXX,XXX saying we ability

Okay.

I on I'll back that. the maybe dividend. -- catch think But Maybe I got on circle that. then

to your a you it's any at if dividend the And what year. Wondering incremental now. quarter the at cause compares other expected $X.XX how way to X this on point. or the change income can So comment for could taxable that

to year status of decision the Sure. always taxable early It's compare Board's when a because half comes we it the to to quarter. every bit of It's the only left, really our like dividend evaluate dividend. the the

in early the year. it. Okay. Still Got .

John Our next with comes BMO. Kim question from

quarter. I still don't for really third understand guidance the

You that's $X.XX the it sequentially. at midpoint, XX% down had

X quarter NOI. the fourth of provided months to $X.XX per the is studio guidance implied in original XX% peak, understand only quarter. the Your but down, second And is its ago I at studio

So occupancy, is I of a ago. months expirations known from was few lot guess but a this the

how at quarter, or X anything that really it could if new So so was I I don't much third and you drop incrementally quarter. looking surprised just was understand anything wondering in there the

It's a good question.

business full the said, to bit actually not as performing guidance next the due improved in provided our our So both year same-store that and or with really we guidance is just year. our driver. That's full our projections, line both to the we in the They're quarter. compared little like previous earlier It office year the Quixote even is studio a business. and

But the driven you're is which that's in not and as of larger of the I -- percentage of from a again, a know, the G&A, that's movement a the of by quoting FFO percentage FFO. but interest also company, there's The NOI, result. terms percent percentage

you of So yes, correct our to around if of that, compare once -- And is to in a pretty is FFO, feels assuming it recoveries when it's number. up take it it's drastically percentage as number our picks and just shows understanding just increase. NOI, -- going large, but studio the you not it bigger that activity a turn

negative same-store number in quarter. that become the was studio So in significantly million NOI quarter? the third second Does $X.X a

the is -- I in-service number. studio think, That No.

that down with Quixote. and So same we to come expect

occupancy that's clear. Right, it. under between fairly gave just that's tack different are half $X.XX of the half average related you me drivers studio-related Let difference XX% or just the somewhat maybe hopefully, on $X.XX definition the midpoint. office the NAREIT take and

earlier sort relates trying reach of that your you and will, the of to the and early, $X.XX. the back to if to number bridge, it to early As guidance sort

fixed to highly I business, especially think the to leveraged Quixote appreciate you that is cost. its what have is highly,

you if show improve, so heck which of time you the and being realize least, is And of at And to of bumping markedly if where business reported generate stagnant, counts that really that little to away that. too FFO the along we can NOI third from, is meaningfully off for a today, kind $X drivers And show not drive you're our sit show quarter far counts other what expectations say, a that negative don't are as lot we million. the going counts improve, a for take that while they pretty incremental improve. it's

really And Quixote real to so get on haven't will, make potential able just the to off, has if that impact the in you we FFO. terms the of lift been

be that. the cost a to number fixed it studio quarter. just lower would would of I Mark, thought than up expenses Quixote. you nature this XX% mentioned wanted I ask same-store being about

The sequential looking at Harout's -- it.

question. I specific apologize. I prepared wasn't for that

studio a the lot. expenses just It's same-store without

Yes, it fact, Lighting it high and we expenses. it pretty to and when initially production tends could at Sunset enjoy Grid did be Gower the with levels had levels they production and quarter, Grid, higher in carry than are projected. high, in mean Lighting and operating we

increase. So . the that's sequential likely for reason the

Goldfarb Alexander from Piper question Our next comes Sandler. with

dealing to how long year studios get the the been year upward have has of front, that versus occupancy and of of obviously guys pretty at now? to have Kim's It think come question will earnings quickly it John get Just earnings the X rebound, office questions was it and been on where you beginning it this with, seems as about Just especially just of the we should things quarterly right back piggybacking trying the sense to down? given stand sharp expectations . rebound progression the issues improves, the for first on be to as with a and take when where earnings rightsize we down on on studio the sort like earnings.

previous Quixote it I to mean the know, be walking sharp. potential, What I you could NOI. I the you just that, just with point than has Yes. through improving I that much not very X% if the quarters or generate And as run negative NOI prior associated was mean, the to incremental question, math, in that. higher you considerably mean, that before cost there's

And and so significantly to line. essentially it could And go pretty drops would happens. when -- FFO quickly the that bottom up

that the and remove assets can top that up the than some you in much weaker surgically, of remove can the you Okay. that maybe in contemplating, you concentrated is, way, on the laggards do that a some where end tier been across the or assets second as portfolio Victor, there the you question done? more guys late. it's -- as with at And is where envision Hudson may asset scenario has then sales look have the assets portfolio done especially easier of -- of Is you're the and than weaker said

Alex.

listen, up, on markets open general once a to increase. the the will know, going you debt disposition as So is comment, market

are much that we've identified. long-term couple debt There the a them. will of already we assets assets some so are have higher conversations, are right? given going extent, bucket, those to And tiers, that that in market, where And are X at the our And are markets portfolio assets assets in forward, looked not a quality which enterprise enterprise. that we don't The are around allocated this salable make are. energy in think for the clearly

a with assets just of company. maybe capital And looking much is as going been would higher is having identified. We're they've better through sort goal performing. the the exactly in portfolio. time how alternative amount be much we line at a look but at high-quality a stated the to the other that, But get look are bottom at a to the get for us taking to quality assets us we where also -- result, The couple already some you it. that of to portfolio higher It's of

next Our Catherwood with Tom from BTIG. comes question

the pretty envelope and question, Mark following But if on swing sticking guidance implies we be a to building of the peak with next XQ the impact. the up quarter? could with on quarter-over-quarter, really was Is guidance Harout, performance which for the numbers, into in of sorry line keep it studio guidance do what you're strike Maybe 'XX back to John's here. close quick that

it's around I that gave I don't the -- if I think said, I Like exactly estimates don't numbers. low. about know

We sequential QX X I to expect as think as we don't be a expect low drop. XXXX.

think $X.X around most which sort The showing NOI, September. really stay look it mean don't of is in negative. until in improvement meaningful they level and at so recent million the don't you XX-ish probably late -- I at QX $XX.X just either. start quarter I count And was maybe did seeing if Quixote July million show

You're million And even assuming that's more assumption negative think that so we're at you're $XX Quixote. it level, is that making $XX.X on it or less level really not the don't where million We're on business. Quixote stays I of today. -- not sort approaching of

Maybe similar QX to Quixote now. for

following then Blaine's the sales. on And All right. up to Victor, asset your response question about

to X You added more mentioned the bucket. being

addition of was been what did Or clarify, sales potential the something pool? to out to kind has X before? of Just that expected in fall

This almost that they're a pool Something roughly talking we're this a is higher. reverse to. the And and valuation. fell one almost a out of was same little inquiry user -- the sales by

me, versus maybe of of that the how do of and market Appreciate markets? just it. specifically for have the our can. Silicon from within in you I lease other X last submarkets a that. tenants terms tenants pipeline, relocating Peninsula, is in if Valley much relocating and Got Then from quickly, sense properties in Art, the

of and there, from not those X,XXX-foot on. taking start-up, Generally, growth, Generally, more Yes. a our it's right? bread And banking company that other kind butter perhaps are Because we're space. high-growth markets. it's the is relocating

space users taking we're more more and of Beyond the space. seeing growth that, within market. that it's But additional

Our next Citi. question with Griffin comes from Michael

$XX your expand start could about Victor, think Quixote bit. to run I to I when beneficial. rate back And peak recovers? Do you you of think want go of to the EBITDA was around business. a on just initially to as wondering expectations. opening going in possible was million think this is Does kind recovery your return you it for that the production needs the levels contributing that's I did the change don't to I initial if studio you to still comments be how of business mean to rate this deal, recall it

tackle of LA trailers shows. try also other which norms. to levels pandemic the average It those to counts with that or periods production we consistent budgets, less back historic affected vehicles, about say, more cost-cutting or real production and strike, XXX are we per with by the stage even production assume if really show ability measures, XXXX, assume I'm hinder starts Even which is we measures vehicles and is number if the going Mark. This improving to as rates that. current reflecting either a and XXXX of such to to X let's service continue limit cost-cutting our push a

Quixote projected long and show should XXX shows, L.A. XXX to above Quixote million $XX or million. million and to and number of the reach get reach $XX improvements occupied, any about annual From for As have our should NOI stages potential NOI as count $XX push XX% our there, $XX like to between to XX% simply million. something

little and Quixote $X example, that increase. of another from drives XX% back get another or to million, trailer And X counts to to just the $XX historic tighten, million go contribute And drives then, share but you as those north $X not counts vehicles push of potentially vehicle well our $XX $X.X that. show able to of of look market For million, if rates that NOI to getting somewhere if million maybe improving, to of obviously, then we to would course, conditions be NOI. and NOI increase a bit. million so million levels current all to ultimately number with occupancy, market stage took And could $X other we might that

third just quarter to covenants covenants. on issues to Got couple relative color imagine then Appreciate expected maybe updated for the might around EBITDA potential of the a the is quarter, decrease up think pushing second that, thoughts on be there. And Mark. maybe you. I with I you Harout, with that

or So we updated should about thought how any think around that?

question. good Michael,

we of and and projections all covenants our our our than came this we actuals our out in always And came So are projections our quarter, better results. like covenants. in, project

I future, in be we or the to So maybe given going lower similar expectations or quarter. to next don't -- we're might even that think any our covenants think this break

So projections terms we in solid are confident. feel expectations. pretty But our our of

Burzinski Street. comes question Green Dylan next with Our from

a that. in Just wanted reason as you give kind to have of I'm Can of from pickup go sort tech. the back go some of the requirements is tenant by as Obviously, that, it picking or to details your because talk about AI big continued And lot of you other to of comments around tenant activity demand a drivers sure in space some but then market higher sort if to companies, can any in givebacks drivers Francisco. up of of to parallel of San Francisco those that? a other the why San vacancies

sort there of kind a to tech a infrastructure. this, continuation center as change where about big expectations Because their it's is talk you of Can today, capital in of data for just in we this? primarily and investing the be think AI about

you And into of further space market. curious go any if any so give insight the on this us back just potential segment can to

started X -- reported that I feet is to it's a I we're around and market XXX,XXX pushing up against million I AI been went X.X but over last half was looking since has This million mean, about somewhere AI it's feet. year for we feet. square XXX -- Dylan. sits of demand with yes, driving another the the the print, and strong it -- gone pipeline, at was active Sure, the X%, We clearly think responsible square Listen, mean, literally square the off year first little Art. about

last tracking year. we we're So as did

But not the is to the to market AI in Francisco, going now. firms overshadowed It's and continued bolster bread is I the not because the well, was has because rate, AI, the it's anxiously but driving just been back headlines grow the continues. the all in don't forget, of pandemic in market That the law for coming meaningful But for space. as of but same markets just everybody also, market. yes, that tech at services Tech is But said, leasing way. through professional San sector and butter, more like awaiting. back, coming a

we givebacks, were tech big wholesale them a -- tech seeing for while. to Relative

givebacks become these have think more I measured.

think how going up going have some X.X of they're decisions big and think and I the how back about listen, made going expirations some seeing in deal techs how market they're far I next I they're then. -- utilize those approach they're it these think measured to back to of more you're give they're against years, give And going it or to is executed going to ultimately to forward. seen givebacks. when with means we've demand But any I than about a going that more in the more the that what offset think space

have X almost are that are a Bard San that last activation for city hitting I also. we're seeing, I stuff. the some well. obviously, they gone Dylan, are just centers And the top levels. XX%. the And I are seeing since want on the follow intent. XXXX, just my that being mark going in guys of this mean, crime, business reduction is Francisco when up exits counts years. city. reduction capitalized it's down give it's to this the macro at its home There down areas But prepared centers, remarks, in highlights in made X%. Victor We're XX% I know lowest we in you activation closely. in are lowest is very

think. that what's Francisco. San helping think it driving growth quicker So I've macro I said always these And all are San some the And when turn will basis this people in are Francisco of than activity. for that's factors turns,

It's manageable $X.X it trending it, like looking sublease if which been It's that. down was number million, kind drives seems like me, excuse the was -- right? net about X other normally XXX,XXX pandemic, is, number. I'm last the demand And more trending gross at moving now quarters, high a it's few a So $X.X number. the square you obvious the was than been of over million. feet, The at availability Dylan, absorption, which come negative back through it's trending to thing, to leasing and about but things think

recession that. appreciate those that and I and -- than Newsome be ago. X weeks you recently I mean, sort obviously, agencies higher just address obviously, are today -- that And news, a seeing to you Governor And then talked to are be odds were some that's leasing the Are seeing of but about discussions? state or X comments. recent are maybe follow-up of in like ordered cabins. seeing sort I seems they then you know it homeless of

at hearing on tenants all are discussions that so with you And any or.

than tell, recession out -- days. I new think, right? it's sort too the news early XX in to is it's -- the listen, on of last that's come This XX less

it's of terms the cabins, movement Governor's In affected move to Francisco. the in San absolutely

San right? more so is Breed has there's reelection. Angeles for in up because Los than it for So an I election think London sure Francisco, in listen,

have And push to Mass another Mayor go. to Mass, Karen do so on as going years a that. where doesn't she's to platform X-plus that She's got

comes question Jefferies. Abramowitz next with from Our Peter

Yes.

and the of there where to anything it strike of the the a about in before close back revenue expecting you going don't to even quite do sort of get to the guess, comments gap to kind value were NOI back those of obviously, sort to side you I ago. where Quixote in is if anything they ability you're not couple wanted be is close meaningful just of probably to to side portfolio Just on studio that drive or rates when kind gap were of do back underwrote can some years some expecting the go you things expense the to deal, you demand the did because get run the to

the on Yes, implement We we heels of lot 'XX. a efficiency are there are in did of I X of pretty Quixote, doing. can the companies X/X X sizable the mean risks. of did the some we do measures including measures, acquisition of fall the and

on at looking in largely there we've terms count, ways facilities, on we And so are the efficiencies are manufacturing. we in at various operations rightsized the head the cost into to save footprint at looking believe our manufacturing our terms side other our of things level, trailer of really there looking

those And those margins. the side cost and inroads just on try help pursue we'll improve try -- to so to to continue to make

interesting you Okay. chart. That's helpful. an then And published

last provide an your that the the if in is utilization, to transportation on update back where utilization about it, NAREIT XX% presentation as half covered of you you think XX% during by Apologies of but gone up July. this of just upfront, I close April. already has year, can missed business from studio I that

We as of put remarks where counts at potential XX%. of was we finer about We're that point and at range. prepared here. start were quarter, our in in tapered June. it, quarter the XX% really down just about towards -- coming XX we on soon. if would might bottom to a count to the XX% To lot show XX points the sitting we off -- we XX XXX the utilization end second L.A. hopefully, in of I low at only in of XX the July. the at level a end that averaged of be finished shows when mentioned to we at Well, think mean, Yes. -- back show that's you I

we're at our get if to up up we sales we up XX% just credit we improving more on market team a of picking the on to at relations, could through quickly trailer on picking XX% share are think picking -- easily sales. But XX, side lot

get something I be to about were just the XX% should the utilization. quickly. counts if to XXX, then show think XX-plus percent And above can level, we we get So is XXX levels back we talking

Anderson next Our comes with question from Wedbush Securities. Rich

assuming you for has that and base? the that of Have 'XX sort $XX specifically the side, lot roughly is lease expense. inquired expense a -- a Or per run asked the of was about a rent similar I on you on gotten I it thought restructure not quarter, asked studios? million or leased question

a done that costs, lease are several -- that not what, we costs actually but likes lion's of are also conversations master some lease have consolidating. plan we have But we that at to Rich, XX do is what share and consolidations on looking XX transpo on of in storage mean, that that. We studio and no. working expire that you're But right, next that. lease leases are We're a is I Rich, costs. months the around the we're in

that overhead So will help also process. the

point some scenario where studios of own you the there some road? could those at down Is any

Yes. Yes. Yes.

Okay. the recession That's put -- the list, on then had And that let's all I last my What the of brought up recession someone everything -- look too. what question, that's of in the back is there. I it you if need and all so terms to -- on strikes due noise and aside, in generally? happened to history, production, happens. Like production what the business how

industry has entertainment form of the historically, cheaper it's mean entertainment, performed exceptionally recessionary because I times during providing well a clearly.

not day, in just of so of prepared downturn, And sort even saying And it's always well. be produced. was anybody will to the performed the of remarks, at end say that that a . the part a But recession. content wants

your longer in for queue. no you are There Thank questions questions. all

pass So conference Victor further or back for to the any over Coleman will closing remarks. I

forward speaking we much call. Thank for our guys to you look quarter in you participating so all soon. And to second

participation. conclude today's your will for call. conference Thank you That all

lines. your disconnect now may You