Rich Anderson : So you guys have done really good work converting your studio business into longer-term leases. I know this topic has come up a couple of times now. But as an exit out of the actors strike situation, do you think the market or the business could step back in and want to continue this theme of more short-term leases at the outset and that you’ll have to absorb more of that as you kind of get back to work? Or do you think that won’t be sort of something you have to give away to get rolling again?
Victor Coleman : I don’t know we’re going to give away, Rich, but the fact of the matter is, I think what we said in the past consistently is we think when the strikes are over, we’ll see a tremendous upswing in activity in all forms and functions, and we’ll decide whether short term or long term is the most equitable decision tree for us to move forward on. I think we’re going to have lots of options. We already are having — I can have Jeff jump in and talk a little bit about the sales team and what they’re seeing, but he’s getting a lot of inflows on the sales side for various different options. We started this industry with show to show, and we were extremely successful on that. We flipped over and did long-term leases, and we’ve been extremely successful on that.
And I think we’re prepared to look at what’s the best economic term. We’re not afraid of either one. Candidly, which we’ve mentioned — and you’ve been a part of this for a long time, so you should know this, we’ve mentioned that show to show is much higher revenue stream than long-term leases. And so I think we are prepared and comfortable with either direction. And I think the numbers are going to bear out because there’s going to be, as I said, a tremendous upswing in activity soon as the strikes are over and we get back to stabilized revenue, which hopefully will be seen. Jeff, do you want to jump in on the sales?
Jeff Stotland : Yes. I would just add that, Rich, when we go a show-by-show model, I think it separates us as a differentiator in the industry because we have a really good team capable with all of our relationships with the studios and understanding how shows get greenlit, booked in that whole process. It really enables a company like ours to succeed. Whereas anybody who’s got sort of a one-off studio development, who doesn’t have those relationships, just hoping a long-term lease is going to save them, is going to have more trouble. So I actually think we’re in a competitive advantage situation when the industry goes back to predominantly show by show. And that’s how we’re really building the business to capitalize on that.
Rich Anderson : Okay. Second question. Douglas Emmett has Warner Brothers known [vacant] for next year, not related to you, but perhaps a systemic observation about the industry, does that give you pause at any level about just the longer-term sort of view on content and the studio business overall? Or did you see that as completely unrelated?
Victor Coleman : Totally unrelated, I think. It’s like — as I said, we’re seeing a feverish activity of interest around studio occupancy and content and growth. I can’t comment on Warner Brothers, and I can’t comment on their write-off of $500 million last quarter either and whatever else decisions they’re making, candidly. But they’re not the only animal in the room. We’ve got Apple and Amazon and Netflix and HBO and Showtime and Cinemax and Disney and ABC and NBC and CBS and Paramount and everybody else, who were looking for space and content in our markets that we’re in and other markets around the world. And I think that’s just part and parcel of the growth [rate].
Rich Anderson : Okay. And then last for me is New York City, very interesting expansion there. But is that — I imagine that’s sort of a starting point for you and — at least in the metropolitan area. There’s a Netflix development going on very close to where I live in Fort Monmouth in New Jersey. I’m just curious, how much you see the New York City metropolitan area as a growth story for you, going forward? What kind of opportunity set do you see, longer term?
Victor Coleman : I think New York is, as I mentioned in my prepared remarks, a marketplace that we’ve been very eager to get into. I give the team high marks for being disciplined and not buy in to the marketplace, on the upswing. This is a purpose-built facility that will be first of its kind in the City of Manhattan. And I think as a result of that, it will give an entree for us to look at some other opportunities in our venture with Blackstone, which is their interest level there and other markets as well. As I said, discipline has been something that we’ve been very focused on. This is a 3-year deal in the making. And at the end of the day, our team, which is already doing business through our opcos with Quixote and Zio and Star Waggons and the likes of that in the surrounding areas of New York and all the other studios in that and the outside areas, in Queen and Brooklyn and at Bronx, et cetera, we’ll see that ends up, going forward.
But right now, we’re positioned to continue to evaluate and be disciplined.
Operator: Our next question from Ron Kamdem of Morgan Stanley.
Ronald Kamdem : Two quick ones. Just going back to the covenant question, taking a different take at it, what are some of the hurdles to actually adding Quixote to the calculation, right? Because presumably, that would help. But just trying to figure out, what are some of the hurdles for that to get into the calculation? Or is that even realistic?
Mark Lammas : It’s realistic. I wouldn’t describe it as a hurdle. It is running through our [TAV]. At the time that we reset the facility in ’21, we had line of sight to what at that time was two relatively small operating businesses. The lenders were amenable to flowing it through [TAV]. We did not anticipate the growth of that part of our business. And so we did not anticipate through, for the unencumbered metrics, the potential impact that those could have. We’re in constant contact with our lenders, we have amazing relationships with them. They are very aware that those businesses grew and that had anticipated that type of growth, they would have been factored into those unencumbered metrics. And I do think that we’re watching our calculations, our metrics and so forth. And there may be a time and an opportunity to pull those into the unencumbered metrics, and they’re amenable to that.
Ronald Kamdem : Helpful. And then just switching gears, I want to follow up on comments on Washington [1000] that’s delivering on 1Q. Obviously, no pre-leasing done. Just curious what kind of activity — is there any more sort of color there, tenants looking, LOIs? Just any sort of sense or pulse on the activity there? And what would be a reasonable expectation for getting those first leases signed?
Arthur Suazo : Yes. First of all, yes, it’s not really [pre-lease market], but we’re very well situated right now. It’s the newest best-in-class building in the market. In addition to that, there are no other deliveries through the end of ’24. So again, we’re very well situated. As Victor mentioned on one of the other questions, we’re starting to see an uptick in large deals in the CBD and across Bellevue. There’s a lot of quality sublease space, it’s going to get leased up here, you’ll read about in the following quarters, which makes us even more desirable, again. And in turn, it’s ticked up our early interest and tours.
