Greetings, welcome to Hudson Pacific Properties' first quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference call is being recorded. I would now like to turn the conference over to your host, Laura Campbell. You may start.
Thank you, operator. Good morning, everyone, and welcome to Hudson Pacific Properties' first quarter 2020 earnings call. Earlier today, our press release and supplemental were filed on an 8-K with the SEC. Both are now available on the investors section of our website, hudsonpacificproperties.com. An audio webcast of this call will also be available for replay by phone over the next week, and on the investors section of our website. During this call, we will discuss non-GAAP financial measures which are reconciled to our GAAP financial results in our press release and supplemental. We will also be making forward-looking statements based on our current expectations. These statements are subject to risks and uncertainties discussed in our SEC filings, including various ongoing developments regarding the COVID-19 pandemic. Actual events could cause our results to differ materially from these forward-looking statements, which we undertake no duty to update.
Moreover, today we have added certain disclosures specifically in response to the SEC's direction on special disclosure of changes in our business prompted by COVID-19. We do not expect to maintain this level of disclosure when normal business operations resume. With that, I'd like to welcome Victor Coleman, our Chairman and CEO, Mark Lammas, our President, Alex Vouvalides, our COO and CIO, and Harout Diramerian, our CFO. Note they will be joined by other senior management during the Q&A portion of our call. Victor?
Thank you, Laura. Hello, everyone, welcome to our first quarter 2020 call. As we all know, these are very unprecedented times, our hearts go out to everyone impacted by COVID-19, we're grateful for all the frontline workers who are enabling us to stay safe and healthy, to keep doing what we do, albeit remotely for many of us. I'd like to start off by saying the entire Hudson Pacific team has done an absolutely phenomenal job over the last several weeks. We came off a very solid first quarter for our company and our markets, we'll cover all those details over the course of the call. Since then, every team in every vertical, whether it's construction, operations, leasing, or other, has swiftly adapted to the new realities, we are well-positioned and eagerly await the imminent reopening along the West Coast.
I am incredibly proud of where we sit today as a company and what we've built. Our leadership team is second to none. Under any and every circumstances, our employees, tenants, and shareholders benefit from their extensive expertise, their resourcefulness, and their passion for innovation, and we've always maintained a strong balance sheet and excellent credit access. Today, we have over $1 billion of liquidity at our disposal. We've invested capital wisely to modernize, transform, and build a premier portfolio in the country's most dynamic and resilient office markets, and we have high-quality tenants who are themselves innovators and adapters. Many of our tech and media tenants, like Google, Netflix, Amazon, HBO, and ABC, among others, stand to do quite well in the current environment. Further, we have very little construction risk with substantially pre-leased, fully funded development pipeline with limited remaining spend.
Mark, Alex, and Harout are going to provide further context on all of the above later in the call. Spearheaded by our emergency response task force, which was put in place on March 2nd, a multidisciplinary team of senior executives from operations, finance, leasing, HR, IT, communications, and legal, we successfully rolled out a business continuity plan across the organization. Most of our employees have been working from home since mid-March, and we're thankful to report that we are unaware of any COVID-19 cases among our team to date. Our properties remain open and operational and fully compliant with CDC and BCCDC guidelines. I'd like to give a special recognition to our essential on-site staff, our property managers, engineers, and janitorial teams. They're doing a fantastic job working and managing the day-to-day of our enhanced safety protocols, additional cleanings, and proactive communications.
We're putting the finishing touches on a robust plan to enable our tenants and employees to safely return to work once stay-at-home orders are lifted. Our reintegration program leverages the expertise of both our own internal team and outside experts. We're focused on hygiene, things like cleaning products and air filtering, on health interventions like PPE and testing. We're taking steps to ensure building access points, common areas, and on-site amenities are configured and properly managed to allow adequate social distancing. We're looking at a variety of proptech solutions in collaboration with our partner at the venture firm in Fifth Wall and thinking about vendor management best practices for this new area. We've engaged leading architects to incorporate the latest health and safety requirements and preferences into our design and best practices.
While exact timing for implementation remains unclear and a variety across all of our markets, we'll be ready to roll out these initiatives seamlessly. Relatedly, I've been asked to join various local, state, and federal communities advising on best practices for opening up the economy, and more specifically, the commercial real estate sector. I was particularly honored by and have accepted a request from the mayor of Los Angeles, Eric Garcetti, to co-chair the city's office and commercial working group. I believe it's very important that we lend our expertise where we can, especially during such extraordinary times, to benefit the greater community. I have no doubt that my work with Mayor Garcetti, his administration, and other civic leaders will inform our path going forward in our markets throughout.
Before I turn the call over to Mark, I'd like to mention that we recently released our 2019 corporate responsibility report. Along with it, we launched our new Better Blueprint ESG platform. Over the last year, our VP of sustainability and social impact, Natalie Teear, worked with our leadership team to gather feedback, review data, and align with leading institutions and local governments. Our goal was to build upon our existing initiatives to create an ESG program authentic to Hudson Pacific and rooted in the issues that matter most to our businesses and stakeholders. The concept for our Better Blueprint comes from the understanding that the choices we make reverberate in the lives of those who work, play, and live in and around our properties.
Ultimately, our ability to thrive as a company is tied to the vibrancy and resiliency of these various communities, and more broadly, as an urban-focused office REIT, our cities. Through this process, we honed in on three foundational elements for focus areas, sustainability, health, and equity. In our 2019 report, we outlined programmatic highlights and 2025 goals for each of those. I encourage all of you to download the report from our website. It's a wonderful testament to our people, our culture, and our commitment. Now more importantly than ever, to create a vibrant, thriving urban space built for long term. With that, I'm going to turn it over to Mark.
Thanks, Victor. We're pleased to report that we've collected 93% of total April rents. This includes an impressive 95% of office rents and 95% of studio rents, which no doubt reflects the quality of these respective tenants. We also collected 38% of storefront retail rents, which I will discuss more in a moment. With respect to the preponderance of uncollected rents, we've implemented a rent relief program. Early in the pandemic, as shelter-in-place requirements were beginning to disrupt many businesses, local jurisdictions throughout California and Washington adopted rent relief orders to protect commercial tenants. Those orders afforded qualifying tenants, essentially small and medium businesses impacted by the pandemic, with various protections. With few exceptions, our portfolio was covered by those governmental orders. Our program dovetails with the underlying rent relief orders, typically by deferring near-term rents with repayment requirements corresponding to local ordinances.
Most of our deferrals have been about two months, with repayment either before year-end or amortized over the remaining lease term. To date, we've granted deferrals equivalent to approximately $2.2 million, or 4% of total April rents. Another approximately $1.3 million, or 2.5% of total April rents, remains in discussion for either payment or deferral. In terms of the composition of deferred rents, we've granted about $600,000 of deferrals to storefront retail tenants. These smaller shops, cafes, and restaurants have been hardest hit but only comprise a little over 3% of our total monthly rent. While they're not a large portion of our revenue, we're nonetheless working diligently to keep these types of retailers in place as they provide amenities to both local communities and our soon-to-be returning office tenants. Consequently, we expect our storefront retail to recover relatively quickly as office buildings become occupied again.
The Ferry Building Marketplace, the company's share of which comprises just 36,000 sq ft and represents 18% of storefront retail rents, may take longer to return to normal operations. We've granted about $1.1 million of deferrals to co-working tenants. We abated $250,000 of April rent at Maxwell in connection with an opportunity to recapture some or all of that co-working space. Meanwhile, WeWork paid rent at all other locations within our portfolio and has indicated it intends to continue doing so. The company's share of true co-working throughout our entire portfolio comprises just 2.6% of our monthly rent, with another 1.3% attributable to enterprise co-working. We believe there is a continued role for traditional co-working space, albeit modified for social distancing, but enterprise clients may create opportunities for us to go direct should deferred rents become delinquent.
In terms of small office and studio tenants, we've granted about $500,000 of deferrals. Specifically, only $160,000 of studio rent has been deferred or abated, which equates to just 0.3% of total April rents. This highlights, as we've always noted, both the underlying credit of our studio tenants and the fact that a prolonged shutdown's impact is most likely to be seen in production-related revenue, not rent. That aside, we believe once shelter-in-place restrictions are lifted, we'll see a normalization in production-related revenue and perhaps even an acceleration as studios look to catch up with content demand.
For example, we're hearing that productions may go from a typical four to five day a week schedule to a seven day a week schedule, which may enable us to recoup lost revenue over time. We also expect Los Angeles will be the first major studio market to resume production, bringing a surge in demand for our stages, particularly as shows and films look to curtail travel for the foreseeable future. In the first quarter, we also saw an immaterial pullback in non-contractual parking revenue across garages in Seattle, San Francisco, and Los Angeles. Harout will provide more color in connection with our guidance on the expected decline in non-contractual and transient parking revenue stemming from the various shelter-in-place measures. One final word on tenant improvement delays.
Jurisdictions across our portfolio adopted policies ranging from carve-outs for construction as an essential service to more restricted measures that temporarily delayed some of our tenant improvement projects. Thankfully, only nine tenant improvement projects involving approximately 41,000 sq ft, all in Northern California, have experienced temporary delays that may push back these deliveries. While it is too early to gauge the impact of such delays, if any, we expect it to be relatively minor. Fortunately, both San Francisco and Seattle this week lifted said restricted measures. Going forward, tenant improvements in these markets, along with those in Los Angeles, should continue unabated. Now I'll turn the call over to Alex.
Thanks, Mark. We entered the current crisis on very strong footing across our West Coast market, which had, as of the end of the first quarter, for the most part, vacancy in the mid to low single digits, record rents, and limited available new supply. Our stabilized and in-service office portfolios were 95.9% and 94.8% leased respectively. This was on the heels of completing nearly 230,000 sq ft of new and renewal deals at very healthy GAAP and cash rent spreads of 31% and 20% respectively. We made additional progress on our 2020 expirations. As of the end of the first quarter, we had only 560,000 sq ft or 4.8% of our ABR remaining to address, with no material leases expiring for the balance of the year.
We have approximately 50% coverage that is deals in leases, LOIs, or proposals on that space. Thus far, the deal terms related to those conversations have not changed. As of our fourth quarter earnings call in February, our leasing pipeline was about 1 million square feet. Today, it's around 900,000 sq ft, with tenant interest diverse across industry, size, and market. Only about 20% of those deals are officially on hold, while others are moving slowly. We've seen tours resume, albeit just a few over the last week or so. Only a handful of deals have actually died. The bigger tech companies we're talking to are still moving forward with in-process deals and trying to sort things out like density. Typically, those conversations revolve around how they can have fewer people in the same space, or if they need to expand.
While most of our efforts right now are focused on renewals, we're working on some new deals and expansions, and we've signed over 130,000 sq ft of deals since activity first began to slow in early March. We've seen no material shift in terms. That includes rates, lease length, or concessions. We only have two construction development and redevelopment projects, Harlow and One Westside, which collectively total 690,000 sq ft. Both are in Los Angeles, where construction is deemed essential. Thus far, there have been no material delays or supply chain issues, and the projects are progressing with our on-site teams wearing appropriate PPE. Harlow is on track to deliver in late second quarter this year. We recently and rather swiftly under the circumstances, received sign-off from the Department of Water and Power. One Westside remains on schedule for first quarter 2022 delivery.
Between these two projects, we have about $364 million of remaining spend, which is fully funded. In aggregate, these projects are 85% pre-leased, with One Westside fully pre-leased to Google. Leasing at Harlow continues even in the current environment, and we pivoted to multi-tenant strategy. With that, I'll turn the call over to Harout.
Thanks, Alex. In the first quarter, we generated FFO, excluding specified items, of $0.54 per diluted share compared to $0.49 per diluted share a year ago. The commencement of significant leases at Epic and 4th and Traction, as well as several other material tenant expansions and lease commencements throughout our Northern California office portfolio, were the primary drivers of this year-over-year increase. First quarter 2020 specified items were $0.1 million or $0.00 per diluted share of transaction-related expenses, and $2.6 million or $0.02 per diluted share from one-time straight-line rent relief reserve related to transitioning a co-working tenant to cash basis reporting. Specified items in the first quarter of 2019 were $0.1 million or $0.00 per diluted share of transaction-related expenses and $0.1 million or $0.00 per diluted share of one-time debt extinguishment costs.
As Alex mentioned, at the end of the first quarter, our stabilized and in-service office portfolios were 95.9% and 94.8% leased respectively. Our same-store studio trailing 12 months leased percentage was 92.4%. In the first quarter, NOI at our 39 same-store office properties increased 1.7% on a GAAP basis and 7.9% on a cash basis.
Our same-store studio NOI decreased by 12.2% on a GAAP basis and 10.6% on a cash basis, would have increased 6.7% and 9.5% respectively if not for the impact of a $1.85 million one-time inactive fee payment we received in the first quarter of 2019. As Victor commented, we have $1.1 billion in liquidity and no maturities until 2022, except for our $65 million loan secured by Met Park North, which we intend to pay with our revolver. This gives us ample liquidity as we preserve capital and manage our buildings in the near term and as we deliver Harlow and build out One Westside for Google. It should also provide us enough dry powder to pursue new opportunities at some point in the future.
Specifically, after our March draws on our revolving credit facility, we have $390 million of unrestricted cash and cash equivalents and $110 million of undrawn capacity on our revolver. We also have $230 million of excess capacity on a separate revolver secured by Sunset Bronson, Icon, and CUE, which we can access at our discretion. We also have $409 million of undrawn capacity on our One Westside construction loan, which will more than sufficiently fund the entirety of that project. Due to the ongoing disruption and uncertainty related to COVID-19, we are offering the following assumptions in lieu of formal guidance. We've based these assumptions on what we know today to help you assess our potential earnings results for the remainder of 2020. We expect our rent relief program to have a minimal impact from a GAAP perspective.
In terms of cash, we have deferred approximately $2.2 million of April cash rents across all segments, with another approximately $1.3 million remaining in discussion for payment or deferral. Additional deferral may be appropriate over the coming months. The duration of deferred cash rents will depend on various shelter-in-place time frames across the portfolio. As previously mentioned, we abated approximately $400,000 of April cash rents, which we expect will continue throughout the year. Non-contractual parking income totals approximately $1.2 million of NOI per month. As with deferred cash rents, we expect the duration of the impact of this income to coincide with the shelter-in-place time frames. With respect to our studios, we anticipate some delay in occupancy on a handful of stages at Sunset Las Palmas, resulting in approximately $1 million reduction in NOI compared to our original guidance.
Due to the temporary shutdown in production activity across our studio portfolio, we anticipate an approximately $3.5 million-$4.5 million reduction in NOI compared to our prior expectations, depending on the acceleration in activity as content production resumes and intensifies. While our leasing pipeline remains healthy, we currently estimate that the slowdown in leasing activity stemming from shelter-in-place ordinances, excluding parking and other impacts already mentioned, could result in a 2.5%-3.5% decline in the company's share of full-year NOI compared to our original guidance. Again, depending on the duration of shelter-in-place ordinances. As Mark and Alex noted, we've had minimal delays in terms of tenant improvement projects, and we're on track to deliver and recognize revenue at Harlow once leased and One Westside. Even though as of this call, construction has resumed and/or continues across all our markets, ongoing shelter-in-place requirements may still impact timing.
Now I'll turn the call back over to Victor.
Thank you Harout, Alex, Mark, and Laura. Again, I want to applaud the entire Hudson Pacific team and thank them for their tenacity, adaptability, and unwavering passion for excellence even in these challenging times. I know we're all looking forward to being back in the office together in some form or fashion extremely soon. To everyone listening, we appreciate your support. Stay healthy and safe. We look forward to updating you next quarter. Operator, with that, let's open the line for questions.
Thank you. At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions. Our first question comes from Nick Yulico with Scotiabank. Please proceed with your question.
Thanks. Hi, everyone. I appreciate the numbers you gave on some assumptions here. I guess in terms of the 2.5%-3.5% decline in full-year NOI, that's I think you said a leasing NOI, excluding studios, other parking, stuff like that, is that mostly just a vacancy decline that's driving that number? Do you mind just unpacking that a little bit?
A little bit. This is Harout. A little bit. It's more delays in leasing as companies try to figure out their space needs. That's slowed down the leasing a little bit.
Okay. Effectively it's some assumption on just less backfill of expirations or something along those lines.
Not less, just slower. I think companies are taking a little bit longer to make decisions on their future space needs.
Okay. Got it. I know you guys said earlier that you think your markets are benefiting from little new supply. Can you just talk about what you're seeing in terms of sublease space in your market and even in your own portfolio, whether you're seeing any pickup in sublease requests, and particularly I'm thinking about some of your exposure to smaller tech companies, maybe not as well capitalized, haven't been around as long.
I'll let Mark sort of jump in, but this is Victor, Nick. At the end of the day, what we're looking at is San Francisco, from our standpoint, had some sublease with Uber, that's still in the market. That's the largest piece of sublease up and down Market Street, not just our asset at 455, but others. There's been not a lot of material change in the peninsula. I think the sublease space has increased to about 3 million square feet, but it's still the lowest it's been in three years. We've seen no sublease material changes here in Southern California or in Washington or in Vancouver. Overall, I think on a general basis, we've not seen much at all of sublease space increase.
Yeah. I'll add, and certainly not in the smaller tech realm, as you mentioned.
Okay. I guess just lastly, can you remind us where the portfolio stands right now in terms of exposure to tech companies that aren't public, private, smaller, not as well capitalized? Is that the piece of the portfolio where you would worry more about in this environment, and what's your exposure like there?
Well, I think, Mark, 40% of the companies are either public or larger than 100,000 sq ft.
Yeah. You can see in our industry diversification table, Nick, if you want the latest breakout. Yeah, only a small percentage of our overall tech exposure are privately held companies that have been in existence for less than 10 years. I don't think there's any indication, judging by, say, April collections, that tech is somehow more vulnerable. Indeed, I would say one indication of how strong tech has been is if you look through, regardless of size, at our overall Bay Area exposure, which is where the predominance of our tech exposure is, while it comprises 65% of our ABR, only 58% of what we didn't collect, which isn't a big number to begin with, but if you just look at the non-collection number, only 58% is in that Bay Area portfolio.
Just to take it a step further, the Bay Area portfolio also happens to have a disproportionately large amount of storefront retail, which is making up a disproportionate amount of the non-collected rents. Which means that regardless of size, and we've got quite a bit of smaller tech tenants throughout the Northern California portfolio, they've performed extremely well It's early going on it, but in the midst of this pandemic, they've been really reliable in terms of rent-paying tenants.
Okay, thanks everyone.
Thanks, Nick.
Our next question comes from Alex Goldfarb with Piper Sandler. Please proceed with your question.
Hey, good morning out there. Just a few questions here. First, Mark and Harout, just from a modeling perspective, you threw out a bunch of numbers both on a GAAP and on a cash basis, and some of those were monthly, some of those sounded like it was annual. Just big picture, and I guess easiest from a GAAP perspective, because that's what we model off of for FFO, what is the sort of net impact that we're looking at? Because it sounds like a lot of the rents that you're deferring, you're actually going to recapture. From an FFO perspective, what's the GAAP impact?
Yeah, right. Right. You're just trying to cut to the chase. We obviously gave you some tools for the toolbox because we were not providing a full-blown reset on FFO, right? The reason why we've given you, in some cases, a monthly amount is because in some cases, the amount of time and the amount of impact will depend entirely on how long the shelter-in-place orders go. For example, there's no GAAP and cash difference between non-contractual parking revenue. We've given you a monthly amount on that because we don't know if the parking will restore to normalcy in a month, two, three, or four. That's why in some cases you're seeing a monthly amount. In some cases, we have reason to believe that you can get to a pretty good estimate of a full-year impact, regardless of how long the pandemic goes for.
That's why we gave you a full-blown remainder-of-the-year studio number that you can model in for the full balance of the year, that $4 million. That's a look ahead to the end of the year. We did likewise on the overall leasing slowdown, and that's your 2.5%-3.5% adjustment on NOI. Some are highly, highly time-dependent, and that's why we try to give you a monthly amount because we don't know exactly when all of the shelter-in-place orders across the entire portfolio will get lifted. In those cases, there's really no cash and GAAP difference. That's why we just gave you the NOI impact. In some cases, we can forecast to the end of the year.
So-
Okay.
Just to add to that, this is Harout, by the way. The largest component of our FFO is our office NOI. You have the biggest piece to start getting from point A to point B. You layer on the studio numbers, then you just make an estimate around the parking, I think you have almost all you need to make a pretty decent estimate. Those are the building blocks, at least, to get you there. We're not providing direct guidance, we're giving you the tools to build your own estimate.
Right. That's the point, is from a GAAP FFO perspective, it's our estimate of the monthly parking revenue, the $4 million studio, the balance of the year, down $2.5 million-$3.5 million on NOI for impact under delayed leasing. Those are the sort of the components.
Yeah. That's right.
Those are the building blocks.
Okay. Switching subjects, I mean, everyone's been binge-watching Netflix and probably waiting for them to restart production to get the new series going. It would seem like, you guys from a tech, from a video game, from a studio demand, I mean, you guys should be seeing, I would think, increased demand for your space out of this, in contrast to other markets where people are worried about whether or not employees are going to go back to office or start leasing. It would seem to be that you guys should be benefiting from here, and that you would have even stronger demand in those three respective areas. Is that the case? Is it oversimplification or is this sort of the right way to think about it?
Alex, no, you're absolutely right. I briefly read some of the pieces this morning that various analysts did. I can't remember who, but somebody had sort of said, "Hey, it was a negative." Something about it's a negative in the studio business. I mean, it could not be farther from the truth. Some touch points here. Our team has been reached out by virtually every production company saying, "We need office space and we need studio space." The demand for production right now is at the height. This is effectively like it's a strike. Writers are writing. They're doing virtual table reads. They can't wait to start filming. They've already come out and said. Amazon said all their domestic filming is moving to Los Angeles. Netflix is saying all of their location shoots are now going to move to studio shoots.
They're going from three to four days a week, trying to get the unions to approve and SAG to approve seven days a week filming. The demand is going to be voracious. So, you're just looking at the obvious, and I guess I said I can't remember who it was. Mark will probably tell me after I say something. I mean, L.A. will be the number one location shoot, given the fact that talent does not want to travel or may not be able to travel for a while. So the lockup around this, when it opens, and we've got a pretty good indication of when they're looking to open, but it's going to be beneficial for us. It's like the waterfall of production will absolutely proliferate because of the fact that Netflix and all the others are running out of content.
I mean, they're pushing their content through right now, where they had backflow of content through this year and probably first half of next. There's an interesting article, by the way, of them filming, that's in the LA Times. I think it's today or yesterday, that Ted Sarandos wrote about their current filming already up and running in Japan, and I think in South Korea and Iceland, and what they're going to mirror to do here, so.
Okay. Thank you, Victor.
Thanks.
Our next question comes from Craig Mailman with KeyBanc Capital Markets. Please proceed with your question.
Hey, guys. Maybe just a two-parter on the studios here. Just back of the envelope, it seems like it's maybe an 80-100 basis point drag on the studio business, which doesn't seem very big relative to maybe some of the concerns out there. I just wanted to clarify that. Also, just from the way the leases are structured, Netflix's long-term lease, can you just kind of remind us how much ancillary fees they're on the hook for and how that works versus some of your other tenants?
I'll take the beginning and we can sort of roll into it a little bit, Craig. Yes, it's roughly that number, and I think Harout has adequately looked at that being the drag going forward. As I mentioned, when they start filming, unlike rent, which is lost and cannot be recovered if you abate rent, the ancillary can get picked up by additional shoot days on the variability. The other aspect is, we negotiated with Netflix and others where, on the long-term leases, where they have to pay us a fixed amount, whether they shoot or not. They have so many days a year that they get basically, they don't have to pay. They are basically earning those days out by not paying currently today, and they will be able to pay, they're going to have to sort of pay automatically going forward.
This is not a complete loss at the end of the day. This would've been annualized. I don't know what the number is, but annualized, we would've had some impact of lost day shoots anyways on the ancillary. Typically, we've always said the ancillary rent mark is like 30%.
Yeah. Just to kind of take Victor's point and give you a sense of analytics around it. If you're looking at, say, Q1 annualized cash NOI in the studios, that's about $36 million. If you think, as Victor points out, about a third of that revenue is ancillary driven and 20 of the 36 stages are under long-term deals, just looking through those numbers, you'd see that about $7 million, a bit shy of $7 million of the ancillary revenue is under contractual long-term deals that require, as Victor points out, the tenant to pay for production-related services, even if they're not in production. That gives you a sense of what is the contractual component of the ancillary revenue sitting inside the annualized NOI now.
Okay. That's helpful then. I'm assuming that the $4 million drag does not assume a seven-day production schedule. Can you kind of tell us how long that kind of assumes production is down for?
Yeah. I do think, and I was going to say this when Victor was giving you guys the update on overall expectations regarding studios. I do think it's super important to remember that when we're giving you a number, we're giving you a number from here till the end of December 31st. There's going to be this temporary lull, and we're experiencing it now in production, and we have 16 of our 36 stages not under contract, which gives us a contractual assurance that we're getting that production revenue. It's going to ramp up, and it's going to ramp up quite a bit. It's just we're not going to see the full benefit of that ramp-up by the time the calendar year that we gave you that number for comes and goes, right?
You're going to see a ton of it in the first quarter and the second quarter of next year. We're going to make it all up. It's just that, in a sense, we're going to get cut off by the end of the year before all of that real sizable ramp-up occurs.
That's helpful.
That's exactly right. Just to add to that. Just to answer your question a little more clearly. We have not included additional days of production in our projections. We've done kind of a conservative number, I'd say. It really depends on, like we said earlier, the stay-at-home measures. When and if they come on board, we do have some catch-up of ancillary production revenue. We were conservative in that assumption.
Okay. That's helpful. Just switching gears to the co-working. You touched on Maxwell potentially getting some of that space back or all of it back. Is that the Spotify deal? sorry, my daughter just ran in here.
Take some tea, but you won't be working at home for long.
Daycare just has to reopen. The Maxwell, is that the Spotify space?
Yes.
Could you just go into just the defer or the cash accounting and kind of, is any of that on the 1.3 enterprise or is that all on the non-enterprise space?
Let me just take the sort of top level on this. On Maxwell, that's not Spotify, that's Accenture. Our deal with WeWork was agreed upon very early on in this process. It was in March that we had conversations with them. Our deal with them is they're paying every location with the exception of Maxwell, where we have a rev share component there. Yes, we have the ability to take it back at our option over a period of time. It's a fairly short period. I think it's like 45 days or something like that. Whether we can make a deal with Accenture or whether we make a deal with Spotify or whether we just take it back and reconfigure the space.
We have a very good resolution with WeWork, and as I said, it was negotiated early on, and they are one of only two deals that we did any abatement with in the portfolio. Do you want to walk through the economics?
Sure. As a result of switching over to a different type of lease agreement, we're required to adjust our straight line rent receivable as that straight line rent receivable is based upon their initial terms. That space is the only one impacted. It doesn't impact any other space, and there is a small component of, or 20%, I believe, component of enterprise in that space that we can take back and go direct. The remainder would be what we'd have to deal with. It's only isolated to Maxwell, and it kind of ensures us the ability to make sure the rest of the WeWork space is collecting and not impacted by this pandemic.
Great. Thank you.
Thanks, Craig.
Our next question comes from Jamie Feldman with Bank of America. Please proceed with your question.
Thank you. I was hoping you guys can talk a little bit more just about the conversations you're having with tenants and as they do start thinking about what longer-term design changes might be implemented, or even if you're working on any spaces now that people have already decided to change some of their designs before they move in. Any color you can provide?
Yeah. Jamie, listen, I'm sure you've been talking to other landlords, and my guess is they're probably similar to us. For the most part, the conversations we're having are all relatively positive conversations around higher density. Even if tenants have decided, specifically the tech tenants have decided to lay off people or lower their current staff needs, nobody's giving us space back. Nobody's even indicated that they want to give space back. I think the misconception here is the increased density will be based upon the lesser amount of people. So we're having those conversations. Some tenants are working on their own configurations. We have engaged in two specific architects to design what we would consider 2.0 space post everybody moving back in, and we are going to prototype one space specifically and work on that. We've been working with Gensler exclusively on that.
It is going to be a lot higher level of densification. I think when people start thinking about coming back.
At the end of the day, there's going to be some interesting attributes that we've already been reached out to, and Art has. Obviously you can see by our numbers, we have a very poor response to our retail tenants paying rent. Ground-floor office retail will be attractive to office tenants. Tenants will want to have access to their own space without going into an elevator. Art already had people say, "If this space becomes available from an office standpoint, we'd like to occupy it." Specifically tech and tech-related media tenants have come to us and said, "We want that space." Which when before, that space was, quite frankly, the lowest denominator for office tenants' interest levels to be in our portfolio. We're going to see an adaptability around that.
It's got to be patient in terms of how we deal with it, and I think it's going to be ever-moving at the end of the day.
Art, you want to comment on it?
Art's done some deals in the last 30 days.
Yeah. No, as we mentioned in our prepared remarks, we've done about 130,000 sq ft of deals since the slowdown at the beginning of March. Categorically, we have not seen a change in any floor plans, going back to the drawing board, redoing architectural, anything of that nature. I think, as we're talking to tenants large and small, I think, as Victor said, it's going to be a wait-and-see. They literally don't know. They don't know how their employees are going to react, and so that's what they're waiting for, and so we're standing by.
Okay, that's helpful. Just to confirm, Victor, you kept saying higher density. Space per employee-
I meant-
Are you saying that number goes up or down?
Lower density. More space for less people.
More space for less people. Okay. As you think about the 4% of rents that you've given abatements to, and then the 1% you're still working on, how do you think about just the long-term credit risk of those tenants?
Okay.
Kind of bigger picture, just making it through the downturn. What is the portfolio look like?
Jamie, let's just clarify. The 4% is not abated. We've only abated two tenants in the whole portfolio. A very small amount. That's just rent relief. By law, rent relief in Washington and California is two months. The deals we've done are based upon if tenants qualify, and some don't. The deals we've done has enabled them to defer their rent, they have to pay us back that rent over either a bullet or by year-end or various different negotiated aspects. The intent is that they will all pay us back. In terms of the question around whether they default or not, we don't have any indication of any tenant that's come to us and said, "Hey." We literally have not one tenant said, "Here's the keys." At the end of the day.
Of the two tenants we talked to you about WeWork, the other tenant was in conjunction with pure abatement, was a lawsuit that we settled and gave them a month and a half rent based on the settlement of the lawsuit. There's no indication that we're talking any future abatement. That's April. Those are the numbers for April.
Okay. I guess as you think through the rent roll and what may change coming out of this, are you more concerned about the credit quality of the portfolio, or do you feel like everyone's pretty much buttoned up?
95% office, 95% studio is pretty good from guys that have paid. I think we're pretty comfortable with what it is. May will be May, we'll have to see how that changes. We feel pretty good about our quality of tenants, our quality of the portfolio, and the responses that we've received to date.
Okay. I know you talked about thoughts on smaller tech firms that maybe haven't been around very long. Just as you think about CBD San Francisco, the Peninsula, and Silicon Valley, and kind of compare those three, how do you think those different sub-markets act throughout this downturn based on the tenants that are there and the supply story and any other factors we should be thinking about?
Yeah, it's a good question. Listen, the supply is limited in all those marketplaces, and what is coming on the market is virtually 80%+ pre-leased anyways. I think San Francisco has a lot of large tenants. Obviously, Palo Alto is a very secure marketplace in the Peninsula as well. I would've thought we would've had more pushback from some of the smaller tenants in those markets. Candidly, I think the tenants that didn't pay in our marketplace, ironically, were some L.A.-related tenants, that were financial-related people that asked for relief, that we said, "No, you don't qualify." Those who asked for relief that do qualify that will eventually pay, they just wanted a break. There's going to be a couple of aspects around social shaming of tenants that should've paid that were running their business.
There's going to be aspects of tenants that just ask for something because they can. I don't think that is going to be a long-term prospect there when they start coming back to work on a partial basis. Alex, you want to comment on that?
Yeah. Jamie, I think when you look at each of those markets, the preponderance of the tenants are still the large tech companies that are well-capitalized, healthy. While there is a slowdown right now in leasing, it's for them really to take stock, I think, on how they want to reconfigure space. Are they going to be mandated by any of the cities or states on how they can reoccupy and what the space might look like? These are all growth companies, and the conversations that we're having, the long-term plan is still for these companies to grow. Every conversation we have had is around how they think they're going to go to a less dense environment. Whether or not, even if they didn't hire another employee, that should equate to just them needing the same amount of space, if not more.
There's been chatter about are people going to keep working from home because they've grown accustomed and we can prove that they can. There's not one tenant we're talking to that's large where they think that's going to be the norm. Many of these companies, it's about the culture and having their employees together to collaborate, the creative thinking, the dynamic environments of these companies. We haven't heard anything heading down that path. I think when you look at supply-demand, just this conversation around people going to a less dense work footprint and the continuation of them feeling like they have to still be in the office in some capacity, we think it bodes well for our markets in particular, and the types of companies we have exposure to and the health of those companies.
Okay. Thank you.
Thanks, Jamie.
Our next question comes from Emmanuel Korchman with Citi. Please proceed with your question.
Hey, everyone. Good afternoon. If we think about the concept of sort of going back to work, and we think about the studio business, are there density issues or sort of occupancy issues there? Everything we've heard so far is 50% capacity. It's going to take a while to get beyond that. You think about a sound stage, you think about a production, guys are next to each other. Actors certainly on stage are next to each other, if not doing things beyond that. How does production resume under a different sort of occupancy scenario?
Well, Emmanuel, listen, I think production is already resuming. As I think I mentioned earlier, they are filming in markets around the world already. I don't think there is any correlation to whether it's 25% or 50% going to 75%- 100% of office occupancy in the production business, how that correlates to production. Production in itself will be different. There's already a roadmap by which they are doing that. They are not going to have a mass food line outside. They're having prepackaged food. They're not going to have 50 union security people, they're going to have 10. They're not going to have two backup boom guys and grip people on the set. They're going to have a limited set as if they would where they're doing a private set or a nude set optionality where they have less people on the set. They've figured this out already.
They're still going to film. To assume that there won't be filming because of a 25%, 50%, or 75% is zero correlation. They're going to figure out how they do that. As I said earlier, they've already made the determination that they're going to be filming more on set than on location, because on location, they still have parameters by which they can't control. Sets they can. These are controlled environments, and they're going to have less people. How they test and how they temperature control people and they deal with that is not going to be any dissimilar to how athletes do with professional sports or how potential private companies do, having people come in and out of space. There's no magic around it. They're going to make up their own rules.
It's going to be driven based on talent and based on unions and based on SAG organizations and the likes of that. They're going to execute, and that's what they're doing now.
All right. If we go back to your comments on sort of the, whether it be the street level retail becoming office or the less dense office layouts, how does that come back to correlate with the rents, essentially the total rental expense rather than maybe the per head rental expense that a company has to deal with to provide that level of lighter density?
Well, I think that's to be determined, clearly. Right now, fortunately for Hudson, we have 4% of our tenants. Our portfolio is rolling this year, and then next year's another light year. Tenants still have obligations under their current lease terms. Going forward, how they negotiate that on the rent basis, we're going to have to see. We've got a pretty good window through the end of 2021 and for the most part in 2022 before we have to sort of see any effectiveness around that. I can tell you that tenants aren't, as I said earlier, tenants aren't asking to give back space. It's pretty near impossible to say we want to give back partial space on leases. As cases may or may not arise, we'll have to deal with those on a one-off basis. Fortunately, now we don't have to.
As Art sort of intimated, the deals that we've done and the deals that have come back to us in the last few weeks that were pretty much quiet and sheltered across the board, rent has not been a conversation. We've not given on rent yet. By the way, that's not to say that we won't. Our objective as a landlord is to keep every single tenant that we currently have. We don't want to lose anybody. I shouldn't say anybody because there's a couple maybe we wouldn't mind. For the most part, we don't want to lose anybody, and so we're trying to make every deal going forward as possible.
One final one from me. You guys mentioned 1% or maybe a little bit more than 1% of tenants that you haven't necessarily deferred, but they haven't paid, and you're in discussions. What would be driving those discussions? Are they waiting for other forms of aid, whether it be the government programs, or are they deciding whether to pay at all? Why are those up in the air rather than either an agreement with you or sort of just not paid?
That's a great question, and I'll tell you, and Mark's going to jump in on this, but the reality is, as I mentioned earlier, we are under a shelter in place in California and in Washington, where the governors of both those states have said you have two months of rent deferral. Some tenants have chosen to reach out to us. We have chosen to reach out to others, and there's a contingent of tenants that we just haven't gotten a hold of, and they're not responding. By law, they don't have to respond, and they will have to respond at the end of May as of June 1st. They do not disavow themselves of the obligation to pay the rent. They just don't have to pay it now.
Yes.
That's the number. Mark going to jump in.
Yeah. Most of them are in process. Where we're discussing with them exactly what Victor mentioned, a deferral. Things have been challenging logistically, right? We have a lot of tenants, especially smaller tenants, which may not even be really using their space. Logistics has slowed down a little bit just on the ordinary routine of cutting checks for rent and so forth. Even the numbers we provided, Emmanuel, are really just a moment in time. April rents continue to come through even as we speak. Those that ultimately don't come through are largely in process just to be documented as a deferral.
Thanks, everyone.
Thank you.
Our next question comes from Blaine Heck with Wells Fargo. Please proceed with your question.
Great. Thanks. Victor or Alex, you guys have talked about seeking out acquisition opportunities both on the office and studio sides in recent quarters. I guess a couple of questions on your updated thoughts there. Number one, do you anticipate there being more potential opportunities and better pricing later this year as a result of the pandemic? Number two, I know you guys have the liquidity and debt capacity to invest, but how does the weakness in your share price affect your willingness to be aggressive if those opportunities do arise?
Blaine, listen, and thanks for that question. At the end of the day, effectively right now, we have seen very few opportunities. There are some out there, but unless somebody's super desperate, they're not going to bring an asset to market, in our opinion, now. Going forward, I think we will see some opportunities. We are looking at some marketed and non-marketed items, transactions that may or may not come to fruition at the end of the day. I think our game plan has always been the same, Blaine, and I think you've heard me say this for many years and several quarters.
If there's an opportunity that's part and parcel of an additive asset that fits in our portfolio, we will look at it because it's part of how we are as a company, how we've gotten to where we are, and where we're going to go going forward. I would be hopeful to see opportunities. Right now, I think it's just way too early to see any impact in cap rates and the like for that. Right, Alex?
I think there's kind of a wait and see in various markets on all transactions, whether that's new investment opportunities or leasing. I think a big driver on the investment side is that the debt markets have essentially been frozen for the time being. Without financing, people can't transact. I think we are hopeful, and you're starting to see it now, that there could be some deal activity starting to come about. I think the studio vertical, clearly those are unique opportunities. I think it's an area we want to continue to scale and grow. If we see something that's compelling, we'll take a look. Same on the office side. We have a handful of markets. We have a specific thesis, and if something is accretive long-term, we're going to spend time on it.
Right now, there's no opportunities because of the current environment and the lack of financing options.
All right, great. That's fair. Can you just quickly update us on redevelopment or renovation plans at Bentall Centre? Obviously, you guys had success on getting some leases done there recently. The market was very strong pre-COVID, does this pandemic delay some of your plans there, and to what extent?
Listen, that market is still really strong. I think our asset now is 99% leased with the new deal. It's extremely strong. It actually had positive rent growth in the first quarter of over 4%. We are in the design phase. Interestingly enough, Blaine, we had engaged and executed our design around the retail to be completely reconfigured, which will be a positive given where the world has gone to. We were taking all the retail from the subterranean level and bringing it up to the ground to the street level. The other aspects are building new office components there on a pre-lease basis. There's no change in terms of how we're designing this. We are configuring some things differently on ingress and egress and the likes of that.
We had meetings last week and the week before with our architect and our construction team on that. I do think that we're still a ways away from finalizing design, getting entitlements, and then deciding to break ground. I'm assuming that's going to be part and parcel of the process.
Got it. Thanks, guys.
Our next question comes from Rich Anderson with SMBC Nikko Securities. Please proceed with your question.
Thank you and good afternoon. First question, somewhat maybe symbolic, but for the 38% of retail that you collected, talk about what kind of retail is that? How sticky is it, and how does it sort of fit in the 38% bucket, and is there a risk that that could perhaps go away?
Well, I kind of think listen, we got a couple of household name tenants that pay. We got a couple of banks that have paid.
Okay.
Those are pretty sticky, and I think that seems pretty good. Listen, Mark can get into detail. Rich, the biggest exposure we have is our Ferry Building, because it's probably 75,000 ft of retail. Remember, our retail numbers are really small overall.
Yeah.
75,000 ft or so.
Yeah. It's like 18% of our storefront in the.
Right. San Francisco's like everywhere else, just completely shut down. When that opens up, they're looking at, as opposed to an inside out flow of retail, an outside in. Those tenants are already there. They'll come back. They'll service people coming from the outside. That will be a big movement for us on that standpoint. The other retail component, even though they haven't paid, are still, I think we believe are going to be fairly sticky in that their office component retails, whether they're office amenity coffee shops and the like that. When the office buildings start to populate again, these tenants will come back because that's who their customers are. It's not like they're looking for outside customers. We feel good about that. Clearly, some of the restaurants and some of the other related tenants, potentially maybe a big one here or there.
Yeah
may be problematic.
I think, Rich, we're talking about roughly $600,000 of April rents collected from the retail that paid. Dissecting such a relatively small number, it gets a little unwieldy, but as Victor points out, we do have some big-name tenants. They have a relatively small footprint. For example, Nordstrom Rack, they paid, or financial institutions that have branch locations, they paid, down the list. We only had one retail tenant that even breaks the top 50, that was Nordstrom. Really, the deferred rents are, I think as Victor points out, these smaller tenants, Ferry Building was pretty hard hit. They are 18% of our storefront retail tenants. We abated the lion's share there. We did collect some of the rents there from bigger brand names, like Sur La Table.
Really the 60% or so that didn't get collected is really made up of a lot of small cafes and little shops that simply were not getting any foot traffic. As soon as the buildings resume normal operations, they'll be right back in business along with it.
Okay. Second question. I know it's only Cinco de Mayo. Any sense on May rents in the sense that perhaps there's a significant percentage that's due on May 1st? I'm wondering if you have any observation, even at this point.
It's way too early to know. Look, it looks like it's tracking in the early days here pretty well, but until the full month is behind us, it's just way too early to know.
Okay, fair. Lastly, maybe a bigger picture kind of thought. A lot of talk about lower density model in the future, which perhaps is easiest found in the suburbs. I'm wondering if you see, maybe for Victor, many of you have been around California office real estate for a long time, what about a systemic change to how office operates from a standpoint of going from urban to more of a suburban play? Perhaps there's some space there ready for use, even in your Peninsula, Silicon Valley type of portfolio. Just curious if you see that happening as an outtake from all of this.
Rich, it's too early to see that. We don't see any light that way in terms of moving from the urban to the suburban marketplaces. I think this is something that we all need to sort of take note of.
It's hard to move. Tenants are going to have a challenging time to move. There is a lease obligation. They're in place for whatever period of time. Our average leases go for another six to seven years. It's not going to be easy just to sort of say pick up and leave. That's the assumption is that at the end of the day, there's increased demand. Tenants today are in place to where they're at. They're going to try to make it work. Do you want to comment, Alex?
Yeah, I was just going to add, for our specific markets on the West Coast, I think it still comes down to where can these companies attract and retain talent. As long as the talent wants to still live in the urban hubs, and we don't see that changing even in this environment right now, I think those tenants will continue to have their offices there. I think in markets where you're already seeing in the peninsula, look at from San Francisco down to San Jose, a lot of that's just driven based on the employee base. I think market by market is still going to be about where the talent lives and wants to work. We don't see near term any changes in a shift as far as where the geographic footprints of these companies are going to be.
Okay. A real quick one. Are there any lease extensions being negotiated into these deferral packages that you're providing?
In some cases, yeah. We did as a matter of sort of the way we were looking at inbounds and ultimately collections looked at leases that had relatively near-term expirations, and it became part of the ongoing discussion with any tenant that fell into that near-term expiration that we look to do extensions.
Okay, great. Thanks very much.
Thanks, Rich.
Our next question comes from Omotayo Okusanya with Mizuho. Please proceed with your question.
Yes, good afternoon. Just two quick ones from me. Given the positive commentary you had around the media business and the studio business, could you just give us a sense of how lease-up of Harlow is shaping up? I know you talked about going to a multi-tenant strategy, but just curious how you expect that to unfold over the next quarter or two.
That's a great question. Harlow, we actually I think it was in our prepared remarks, during this time, it's challenging to get stuff done, get sign-offs in the city. The cities have been very positive on signing stuff off, and we just got DWP sign-off, so we're fully up and operational now. We are virtually touring. Hopefully, we will be moving back into tours. Art has seen a flat, consistent amount of multi-tenants. We actually changed our brokerage group before the pandemic. We changed it in January. We still have one tenant that's looking at the whole thing. You want to comment on it?
No. Yeah. It's still the same tenants. Obviously, they're evaluating their space needs, as we discussed, and we feel good that really kind of once this is behind us, that decision-making is going to accelerate.
Okay. That's helpful. Also, any commentary at this point in regards to Prop 13's split roll, any kind of new rumblings on the ground?
Well, listen. The Prop 13 roll has been sort of put on the back burner. I'm assuming that it's still going to try to get on the ballot. I think everybody knows our position at the end of the day. I think it's going to be very challenging for it to get approved. As I made a comment, I believe it was the last call, and I believe our peers, John at Kilroy and Jordan at Emmett made the same comment. I mean, real estate prices don't consistently go up. As we're seeing today, whether you think where values are, virtually everybody on this call has readjusted our NAV down. That would mean that if Prop 13 went through at the levels that we were currently paying our taxes on to where they will, the money there that they're going to get is going to be less.
I made that comment some time ago, and that's going to be concurrent. We'll see what happens. There's a massive opposition group that has been formed around it. There's capital that has been raised. We'll see what happens over the summer months in terms of the battle around Prop 13. As I said, we're not concerned about the outcome at this time.
Great. Thank you. Best of luck.
Thank you.
Our next question comes from the line of Emmanuel Korchman with Citi. Please proceed with your question.
Didn't you already ask?
Well, now it's Michael Bilerman.
Oh.
Emmanuel is on the phone if you want him to ask it, he can, but I had a few questions I wanted to follow up on. Good afternoon. Hope you guys are well. I guess just in terms of buyback and I know it didn't look like you had done anything in the quarter or post-quarter. I know, Victor, you were frustrated with where the stock had been, even though it started to finally break out late last year and early part of this year. I still think there was a frustration level in terms of where the shares were trading pre-COVID. Clearly, this pandemic has caused the stock to come down to pretty low levels. Why not use any of the capacity to buy back, or how are you thinking about that?
We did. We started to buy back up until the point where we couldn't, where we got blacked out. The answer is we did. I think we maybe bought $50 million. Listen, we're definitely interested in levels that we got down to like $16 a share at the end of the day. We were buying back, and I don't know what our average price is, but Mark will probably get back to you guys as to what it is. He's calculated it out. Yes, the answer is we did. There was obviously, I don't know if we were one of the first, but we were early on this process, and there was a little bit of a backlash in the public markets about companies buying back stock, as you know.
We were there, and we were clearly excited about buying back our stock at those levels.
Can you talk about the relationship you have with Blackstone? Obviously, you go back to the big original transaction on the EOP portfolio, then coming into the stock. I think they got out of the stock. I think it was early 2017. You had bought the Ferry Building. You did the joint venture with them on the Vancouver asset. They've been out there talking about going into the public markets. Can you talk a little bit about whether there are opportunities for you to work with them, either as a stockholder or for future purchases?
Listen, I think there's opportunities with them and others that we've had multiple conversations with over the last year or so. Those conversations are consistent, and I think it's both on the JV level for asset level assets, both our assets and new assets that we would look to, as well as the public market structure around the stock. We're an attractive company. We have excellent assets. We've got a phenomenal management team that's performing well, and I'm confident that the opportunities will be such for Hudson that we'll be positive going forward.
On One Westside, is there an opportunity to buy Macerich out of their remaining stake? Is that on the table today to provide them liquidity that they need? You're fortunate to have collected the amount of rents that you have on the retail side. You can imagine on the mall side, it's extraordinarily less. Is that a potential near-term transaction that you can execute on?
We've been in that venture with them for a little over a year. We had a two-year lockout that both sides would have to agree on. I'm assuming that at the right time, there will be an opportunity for us to buy their piece out. It's not a piece that anybody else can get. The timeframe would be based on desire and opportunity.
Last one for me. The line draw down, the $415, that was just out of abundance of caution, or were there other needs for that capital in the near term?
No, 100% abundance of caution. My guess is, given where our rent collections were so high for this past month, I'm assuming that Harout and Mark are probably going to pay that line down imminently anyways because we have ample cash, our sources are already allocated for what we need right now.
Great. I appreciate the time. Thanks.
Thanks for jumping back in.
We have reached the end of the question and answer session. At this time, I'd like to turn the call over to Victor Coleman for closing comments.
I appreciate everybody's support for Hudson and your participation, and we look forward to updating you throughout this quarter as well as at the end of the quarter.
This concludes today's conference. You may disconnect your lines, and thank you for your participation.