Art Suazo: Yeah. I mean, relative to our vacancy in that, I mean, the preponderance of it is in 1455 for the reasons Victor described. In addition to that, remember, it’s really two buildings in one, right? It’s not just the build out that — the residual value in the build out, but it’s 90,000 foot plates on the on the podium and 25,000 square foot plates in the tower, which is quite appealing to the users we’re talking to. Yes, there’s 150,000 square feet that we’re actively negotiations on right now. I just want to underscore that the growth behind it from within these tenants will have would happen fairly imminent.
Blaine Heck: Great. That’s helpful. Last question for me. Can you talk about the impairment charge you guys took in the quarter and what that was driven by just the situation around that?
Harout Diramerian: Yeah. Sure. We were required to evaluate our assets. It’s a GAAP evaluation, not a market evaluation, to be clear. It’s not an indication of fair value, but just kind of an indication of where there might be some impairment in terms of the valuation compared to our book balance. And so it’s primary, I mean, I don’t want to get specific on it, but it primarily relates to a couple of assets that compared to the undiscounted cash flow don’t seem to be long-term value adds. So, I mean, I don’t know what I’ll say about that, but that’s it.
Blaine Heck: Okay. So just to be clear, this isn’t to suggest that you guys are looking to kind of dispose of any assets, but this was a revaluation that was triggered by something else.
Harout Diramerian: Correct.
Blaine Heck: Okay. Thank you, guys.
Operator: Our next question comes from Caitlin Burrows with Goldman Sachs. Please go ahead.
Julien Blouin: Hi. This is Julien Blouin for Caitlin. Thanks for taking the question. I had a question on G&A. It looks like G&A is going to be a little bit higher year-over-year and certainly higher than we were expecting. I guess, last year, I think you mentioned, you were you were looking to reduce costs and re-evaluating G&A and the company has yet to reinstate the regular dividend to common shareholders. I guess what is driving G&A higher and are there any opportunities to lower it?
Harout Diramerian: Let me answer the second one first. Yes, there’s opportunities to lower it and we’re going to constantly evaluate the G&A to make sure it’s right size. The increase year-over-year is primarily driven by an incentive plan. So it’s — while the expense is high, it’s really going to be driven by stock price and return. So it aligns the management’s interest with the investor’s interest, meaning the shares won’t be issued unless we achieve certain hurdles. So for accounting purposes, they’re valued at target and those numbers can seem high year-over-year. But that doesn’t mean you actually incur those costs, because if you don’t achieve those goals, none of those shares are issued.
Mark Lammas: Harout and just mortgage last year.
Harout Diramerian: Yeah. And also — thank you, Mark, just remind me, in the prior year, we removed that portion of the incentive plan in 2023, which caused an increase year-over-year from 2023 to 2024. If you compare that to — if you compare G&A from 2024 to 2022, the increase isn’t as stagnant. It’s a small increase, but that’s what drove the year-over-year increase. There’s a lack of the same plan in 2023 compared to 2024.
Julien Blouin: Got it. Okay. That’s helpful. And then maybe one quick one on the covenants. I guess the debt service coverage and adjusted EBITDA covenants tightened again in the fourth quarter. I know some of the others got sort of amendments and were helped by the flexibility received. I guess, how do you expect those specific covenants to trend in the coming quarters and will an improvement in the studio NOI eventually start to help these metrics?
Harout Diramerian: Yeah. For sure. Let me just — I don’t want to gloss over the improvement. Remember last quarter, the one covenant that everyone was concerned about was the unsecured indebtedness to unencumbered asset value, which was at 57.7% and this quarter is at 41.8%. I don’t want to gloss over the improvement there. Yes, some of it relates to the adjusted definition, but the rest of it is driven by the management’s reduction of debt, payoff of debt from asset sales. So, that is important. It’s not just the definitional changes associated with a line of credit. But to address your specific points around the EBITDA and fixed charges, so that’s a trailing number. So right now we’re trailing a lot of the higher interest expense before the pay down that once that burns off, it will start changing directions.
And yes, the studio business will help that number as it starts improving. So we expect that to start improving. I’m not saying it’s going to be immediately up to back to 2.6%, but our projections assume it’s going to improve over the year.
Julien Blouin: Okay. Great. That’s really helpful. Thank you.
Operator: The next question comes from John Kim with BMO Capital Markets. Please go ahead.
John Kim: Thank you. On the studio and service ramp in the second half of the year, getting you to about $0.30 FFO per quarter. Does it improve in 2025 as you realize some of those synergies in Quixote and you get the full benefit of Glenoaks or is $0.30 maximum?
Harout Diramerian: Oh! No, no. We expect. Sorry, John. So just to be clear, it’s not, I just want to make sure I’m not misconstruing. It’s not $0.30 for the media business. It was $0.30 overall based on the math, okay. But the media business, we expect it to continue to improve year-over-year. So we definitely think there’ll be improvement, not only from the synergies of the business, but also just the overall business itself as it continues to get back to normalization. So 2024, again, because a Q1 is a much lower year, just that alone is going to increase in 2025 without everything else that we just mentioned.
