Hudson Pacific Properties, Inc. (HPP) Q1 2014 Earnings Report, Transcript and Summary

Greetings, and welcome to the Hudson Pacific Properties' First Quarter 2014 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Kay Tidwell, Executive Vice President and General Counsel for Hudson Pacific Properties. Thank you. Ms. Tidwell, you may begin.

Good afternoon, everyone, and welcome to Hudson Pacific Properties' first quarter 2014 earnings conference call. With us today are the company's Chairman and Chief Executive Officer, Victor Coleman; and Chief Financial Officer, Mark Lammas. Before I hand the call over to them, please note that on this call, certain information presented contains forward-looking statements. These statements are based on management's current expectations and are subject to risks, uncertainties and assumptions. Potential risks and uncertainties that could cause the company's business and financial results to differ materially from these forward-looking statements are described in the company's periodic reports filed with the SEC from time to time. All information discussed on this call is as of today, May 8, 2014, and Hudson Pacific does not intend and undertakes no duty to update future events or circumstances. In addition, certain of the financial information presented in this call represents non-GAAP financial measures. The company's earnings release, which was released this afternoon and is available on the company's website, presents reconciliations to the appropriate GAAP measure and an explanation of why the company believes such non-GAAP financial measures are useful to investors. And now I'd like to turn the call over to Victor Coleman, Chairman and Chief Executive Officer of Hudson Pacific. Victor?

Thank you, Kay, and welcome, everyone, to our First Quarter 2014 Conference Call. The first quarter was another great productive period for Hudson. Key highlights in the quarter included 2 important acquisitions in the Pacific Northwest and Southern California, and we also completed a very successful common stock offering to help finance these acquisitions and support our growth objectives in 2014. On the acquisition front, I'm especially pleased with the latest addition to our expanded footprint in the Pacific Northwest. During the first quarter, we closed previously announced acquisition of the office and retail property known as Merrill Place located in Seattle's Pioneer Square, directly adjacent to our First & King property. We acquired this asset in an off-market transaction for a gross purchase price of approximately $57.7 million. Merrill Place consists of 4 interconnected brick-and-beam buildings spanning an entire city block and comprised of approximately 180,000 square feet of office and ground floor retail, along with 147-stall standalone parking structure. At the end of the first quarter, Merrill Place was 93% leased with approximately 58% of those leases scheduled to expire over the next 4 years. Importantly, we believe that the in-place rents are more than 20% below current market levels. Looking ahead, we plan to implement an extensive repositioning of this property, including lobby and common area upgrades, new tenant amenities, an elevator mod and mechanical and electrical upgrades. Additionally, current zoning for the property allows for the potential development of a new office building fronting the soon-to-be approved Alaskan Way waterfront, which the company estimates at approximately 140,000 square feet to the project. The entitlement process for this project is currently underway with the goal of delivering a new office building by 2017. As a complement to our growing portfolio of highly sought after creative office space in Southern California, in the first quarter, we completed the acquisition of 3402 Pico Boulevard in Santa Monica. 3402 Pico consists of 3 contiguous parcels, comprising nearly 3 acres. We estimate the site can support approximately 150,000 square feet of created office space, including the complete refurbishment of an existing 40,000 square-foot vacant office building. With the future Expo Light Rail stop at the Olympic and Bundy station within walking distance, close proximity to other major transportation thoroughfares, excellent visibility and opportunity to deliver an abundant number of outdoor activities, 3402 is ideally suited for creative office users looking to be located in this highly supply-constrained market. Similar to our successful redevelopments of Element LA and 3401, our goal is to fruitfully redevelop this property into a state-of-the-art creative office campus. To fund these acquisitions and further support our growth objectives, in January, we completed the public offering of 9.5 million shares of common stock generating net proceeds of approximately $195 million. This successful offering included the full exercise of the underwriters’ over-allotment option, and we're very pleased with the high level of investor interest in the offering and appreciate the continued support for our growth strategy. First quarter leasing remained very active with the completion of new and renewal leases. Shortly following the end of the quarter, we signed a new lease at 1455 Market Street property in San Francisco with Rocket Fuel, Inc., a leading provider of artificial intelligence advertising solutions for digital marketers. This new long-term lease encompasses 24,438 square feet of initial occupancy and included an expansion for an additional 24,438 square feet for a combined 48,876 square feet of occupancy. The initial 24,000 square feet of occupancy fills a vacant floor commencing during the third quarter of '14. An additional 24,000 feet is expected to backfill another full floor subject to the early termination of a lease that is expected to expire in the first quarter of '15. And starting rents exceeding our underwritten and existing rents for the backfill space, this lease delivers excellent value to our shareholders. In terms of leasing trends, the fundamentals remained strong in each of our core markets. Looking first at San Francisco, demand remained at healthy levels during the first quarter. Market-wide vacancy continued to decline, ending the first quarter at 7.2%. This represents a 40-basis-point decline from last quarter and a year-over-year decline of 150 basis points. Among the submarkets with the biggest drops in vacancy was the South of Market, where Hudson has an extremely strong presence, with the vacancy dropping 200 basis points from the end of 2013 and now standing at nearly 5%. Market-wide asking rates rose to $56.62, an increase of 2.2% from last quarter and 11.4% from last year. With sustained tenant demand and falling vacancy rates, we believe there will continue to be pressure on available space and the rental rates in the years ahead. Furthermore, construction completions are not anticipated to alleviate this issue. With preleasing on 3.7 million feet of new construction scheduled to delivery this year and next approaching 9%, new supply is not likely to present a constraint to steady increases in asking rents for the foreseeable future. Now in Los Angeles, on the heels of 2013 slow to steady growth, the Greater L.A. office market continued to strengthen throughout the first quarter of '14. Class-A asking rates increased to $2.84 from $2.78 per square foot at the end of '13. And overall Class-A vacancy for the Greater Los Angeles region remained steady at 15.7%. West Los Angeles and the Hollywood Wilshire Corridor, 2 of our core submarkets in the region, continue to lead the overall trend. Across the West Los Angeles marketplace, asking rents increased 3.9% from the end of '13 and were up 9.3% year-over-year. The West Los Angeles submarket had vacancy of 11.7% at the end of the quarter, with deal activity in Western L.A. accounting for nearly 1/2 of the region's net absorption in the quarter. Obviously, we think this bodes well for our portfolio at Hudson. Turning to Seattle, the region's commercial real estate market kicked off 2014 on a positive note. Total vacancy declined for the third straight quarter, improving 50 basis points to 14.6% at the end of first quarter. And much of this improvement can be attributed to the new tenants in the market and the new expansion of upcoming software and tech firms. Furthermore, Class-A average asking lease rates increased 1.2% at the end of '13 and finished the first quarter at $29.61 per foot full-service. Of the other major markets, Downtown Seattle, where we have majority of our portfolio in the region, remained the leader for Class-A asking rates at $33.95 per foot, a 1.3% increase from last quarter. And in addition, with current vacancy of only 12.8%, Downtown Seattle has accounted for more than 75% of the region's net absorption during the last 4 quarters, and it significantly outperformed the region as a whole. Before I turn the call over to Mark, allow me to touch on some recent coverage of our latest development activities to expand the Sunset Bronson Studios with a property we're calling Icon, a 14-story, 315,000 square-foot multi-dimensional hi-tech creative office building. Icon is the centerpiece of approximately $150 million development that includes a 5-story, 90,000 square-foot production building and 1,635 space parking structure. The Icon project will meet the changing needs of leading entertainment companies in the digital age to accommodate related businesses to want to relocate by providing state-of-the-art office and production buildings designed as a flexible, creative workspaces. The project is being designed with large 25,000 square-foot floors, with enhanced ceiling heights that can be configured for a host of work environments, sought by creative companies. With the expansion, tenants will enjoy the exceptional opportunities that are located within the campus that offers state-of-the-art office, center stage and other production related facilities. Our leasing team is currently in proposals with several tenants with large space requirements, and the construction is expected to commence towards the end of the year with the delivery anticipated in the fourth quarter of '16. We're very pleased with the progress we've made to date, and we'll keep you informed of the milestones this project as it goes forward. And now I'm going to turn the call over to Mark, our CFO.

Thank you, Victor. Funds from operations, excluding specified items for the 3 months ended March 31, 2014, totaled $17.9 million or $0.27 per diluted share compared to FFO, excluding the specified items, of $14.1 million or $0.26 per share a year ago. The specified items for the first quarter of 2014 consisted of costs associated with a 1-year consulting arrangement with a former executive of $800,000 or $0.01 per diluted share and expenses associated with the acquisitions of the Merrill Place and 3402 Pico Boulevard properties of $100,000 or $0.00 per diluted share. Specified items for the first quarter of 2013 consisted of an early lease termination payment from Bank of America relating to our 1455 Market Street property of $1.1 million or $0.02 per diluted share and a property tax reimbursement stemming from the reassessment of the Sunset Gower media and entertainment property of $800,000 or $0.01 per diluted share. FFO, including the specified items, totaled $16.9 million or $0.25 per diluted share for the 3 months ended March 31, 2014, compared to $16 million or $0.29 per share a year ago. Net income attributable to common shareholders was $1.3 million or $0.02 per diluted share for the 3 months ended March 31, 2014, compared to net loss of $2.9 million or $0.06 per diluted share for the same period a year ago. Turning to our combined operating results for the first quarter of 2014. Total revenue from continuing operations increased 17.3% to $55.6 million from $47.4 million a year ago. The increase was primarily the result of an $8.9 million increase in rental revenue to $41.5 million and a $400,000 increase in parking and other revenue to $4.6 million, largely resulting from the acquisition of the Pinnacle II building by our joint venture with MDP/Worthe on June 14, 2013; our acquisition of the Seattle portfolio on July 31, 2013; and our acquisition of the Merrill Place property on February 12, 2014. Total revenue from continuing operations was partially offset by a $900,000 decrease in other property-related revenue to $3.6 million, primarily resulting from lower production activity compared to the same quarter a year ago. Total operating expenses from continuing operations increased 5% to $44.4 million from $42.3 million for the same quarter a year ago. The increase was primarily the result of the office property acquisitions mentioned earlier. As a result, income from operations increased 118.7% to $11.2 million for the first quarter of 2014 compared to income from operations of $5.1 million for the same quarter a year ago. Interest expense during the first quarter increased 16.7% to $6.5 million compared to interest expense of $5.6 million for the same quarter a year ago. At March 31, 2014, the company had $827.4 million of notes payable compared to $931.3 million as of December 31, 2013, and $530 million at March 31, 2013. At March 31, 2014, our stabilized office portfolio was 94.5% leased. During the quarter, the company executed 7 new and renewal leases totaling 29,014 square feet. As of March 31, 2014, the trailing 12-month occupancy to the company's media and entertainment portfolio decreased to 69.1% and 74.1% for the trailing 12-month period ended March 31, 2013. Turning to the balance sheet. At March 31, 2014, the company had total assets of $2.2 billion, including cash and cash equivalents of $29.1 million. At March 31, 2014, we had $250 million of total capacity under our unsecured revolving credit facility, of which $40 million had been drawn. Shortly following the end of the first quarter, we drew an additional $10 million on our unsecured credit facility. During the quarter, we paid a quarterly dividend on our common stock of $0.125 per share, and we paid a quarterly dividend on our Series B Cumulative Preferred Stock equivalent to 8 3/8% per annum. The company is increasing its full year 2014 FFO guidance from the range of $1.07 to $1.11 per diluted share, excluding specified items, to a revised range of $1.08 to $1.12 per diluted share, excluding specified items. The guidance reflects the company's FFO for the first quarter ended March 31, 2014, of $0.27 per diluted share, excluding specified items. The company has designated it's Tierrasanta property in San Diego as held-for-sale in anticipation of a potential sale of that property toward the end of the this second quarter. This guidance reflects that potential sale. In addition, this guidance reflects all acquisitions, financings and leasing activity referenced in this press release and all previously announced acquisitions, dispositions, financing and leasing activity, including the January 2014 common stock offering. The cost associated with the 1-year consulting arrangement with Howard Stern has been excluded from the guidance estimates as nonrecurring costs. As is always the case, the company's guidance does not reflect or attempt to anticipate any impact to FFO from speculative acquisitions. The full year 2014 FFO estimate reflects the management's view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels and the earnings impact of events referenced in this release, but otherwise excluding any impact from future unannounced or speculative acquisitions, dispositions, debt financings or repayments, recapitalizations, capital market activity or similar matters. And now I'll turn the call back to Victor.

Thanks, Mark. Our first quarter was highly productive, marked by the closing of key strategic acquisitions and the important progress of our Icon development projects. As always, we appreciate your continued support of Hudson Pacific Properties and look forward to updating you as our progress, again, continues throughout the quarters to come. Now operator, we can open the call up to any questions.

[Operator Instructions] Our first question comes from the line of Brendan Maiorana from Wells Fargo.

Victor, I apologize if I missed this but -- so on Icon, did you say that you were going to go in the fourth quarter? Would that be spec that you would go? Or do you need some preleasing before you would go vertical on that project?

Hey, Brendan. So we're planning on starting the construction of the parking facility as early as late third quarter and the office building potentially as early as December. Right now, we've got activity of sort of considering large tenants looking at over 800,000 square feet of guys who have been looking it. And we've got proposals on the property of over 275,000 feet. So our plan is to go ahead and build based on the activity that we see.

And do you think -- I mean, I know there's a couple of other projects that are out there. Do you feel like -- I'd assume that those 800,000 square feet of tenants that are looking are looking at some of those other projects. Do you feel like the level of demand that's out there is enough to kind of satisfy not only Icon, but some of the other projects that are scheduled to deliver as well?

Yes, absolutely. Listen, the Hollywood marketplace right now hasn't seen a new building come to market since our Technicolor building. And prior to that, the building prior to that was built 30 years prior to on the commercial office spaces. I think you're looking at, obviously, Columbia Square, which was Kilroy's project. Their deliverable is going to be sometime around between early to late fourth quarter of '15. And we're looking at our property as we're talking about as some time delivery in late '16 to late '17, depending on the build-out and the activity there. I don't think there's anything really -- I'm sorry, late '16, fourth quarter '16. I don't think there's anything out there that's competitive to those 2 projects. And then we are very comfortable about the amenity base that we bring with the studios, the other amenities around the facilities that it's the only building that will be on our actual lot with all the other access to the amenities that we bring. Right now, we're gaining tremendous amount of surge around it.

Okay. No. That's helpful. And just last one on Icon, is -- or so the current plans, does that include taking the KTLA studio? Is that part of the current plan? Or could that facility stay in place and be due the development of both the office and the 90,000 square foot production facility?

Right now, the actual production building and the office tower do not anticipate taking out any of the existing KTLA office space.

Okay, okay. Great. And then just the -- I just wanted to ask about Salesforce. I don't know if you have any color on what they may do longer term, but do you have any sense of what their plans may be longer term for Rincon, given that they announced the big lease at Transbay Tower?

Yes. Well, we were pretty much on top of that. When Transbay was leased, our guys up in San Francisco spent some time with Salesforce, and they are in full build-out mode right now at Rincon. It is a different user. It's a different group, and there is no overlap on that going forward. And we were obviously questioning whether that, that would be utilized that way or not. And we're very comfortable with this user group that's going into Rincon as totally different than what's going to go into the other space not only curious, but we even bought some awesome properties.

So given that they're still committed to go in, are you getting any more traction on the retail space at Rincon?

We've got 1 deal on the smaller space and then the other space that we have, which is the larger corner spot, but we don't have the activity on it.

Our next question comes from the line of Jamie Feldman from Bank of America Merrill Lynch.

I guess, for Mark, can you just walk us through the same-store NOI comparisons and what the big moving pieces were on both the office, media and both revenue and expense side?

Yes. So on -- there's not a lot of lease movement going on. I think you look on the office piece, Jaime, in terms of GAAP or cash, right? I mean, cash is basically on top of each other in terms of revenue. Expense is a little higher. I think it's worth pointing out, Jaime, that our same-store group of assets are only -- there's only 14 office assets, right? So on -- but basically, there some incremental pickup on the percent occupancy on the office. I mean, it's about 150 basis points of occupancy, which in turn, drove a little bit of the increase in expenses. We're -- some of our take-up in the occupancy still carries with it some free rent, which is why you don't see any pickup on the cash rents. And there's still some -- a little bit of delay on 1455. So I mean, there's not a lot to talk about on the office side. On the media side, like -- that's where you see the bigger difference, right? Because you see on both GAAP and cash basis quite a bit of falloff, 12% falloff on revenues, not quite as much on expense on both GAAP and cash. And that is largely other property related revenue associated with the studios and, more specifically, mostly a falloff in other property related on Gower. That really reflects that accelerated production schedule last year by Dexter in their last season of production. We got a big pickup in the first quarter, and it's somewhat of an unseasonal trend. And then this quarter, while we had decent occupancy, not great occupancy, decent occupancy in the first quarter, we didn't nearly have that level of production activity. So that's what's driving that falloff in same-store in the studio.

Okay. So just a reminder, so were there actual leases that moved out in the quarter that drove it or -- like expected move-out? Or is it more...

Nothing significant, right? I mean, which you can see -- you see a little bit of a drop-off in the quarterly average occupancy, right? But the end of occupancy starts to pick it up. So there's a little bit of it in the office segment, Jaime, but there's not much.

I guess I'm looking at the 4.1% decline in office.

Yes, so top line office revenue?

Yes.

Right. That, basically -- if you look at the quarterly average percent occupancy, you can see it, some slight drop-off in that quarterly percent occupancy, right?

Got it. Okay. All right. And then I guess, just bigger picture on L.A., can you guys talk a little bit more about how we should be thinking about the different submarkets? I mean, we clearly know that tech and media and entertainment are looking at the Far West side. They're looking at Hollywood, but how should we be thinking about what's happening in the rest of the submarkets and the submarkets in between the 2?

Well, Jaime, there's really no development on Westside Los Angeles. And so as a result, when you're talking about true occupancy numbers and rental rate growth that we are seeing in the markets that you see people spend a lot of attention in. There is really the next level, which is what you're talking about, whether it's -- whether you go beyond Playa Vista and you talk about El Segundo or Culver City or you go the other way. And you're talking about be the Studio City, Encino; Woodland Hills marketplace, those areas will be affected on a positive basis because tenants don't have the options of going anywhere else. They've got a little bit of an activity that you're seeing right now on the occupancy side on the mid-Wilshire corridor, which is the South of Beverly Hills. And then there's the obvious Los Angeles bogey of defining what's happening with what Downtown. And there's 2 stories in Downtown right now. There is your core Downtown old guard office markets, which are not seeing any pickup for the most part in rental rates or occupancy, but you are seeing some of the bigger box, larger floor plate deals that are being taken down at decent rates and decent occupancy levels in the marketplace. And so there's your combination.

Our next question comes from the line of Craig Mailman from KeyBanc.

On Icon, could you just remember us -- or remind us what kind of yield you guys are targeting there?

So Craig, because of our land basis, which we're putting in at the cost as what we've always had it on our balance sheet at, we're looking at a stabilized basis of just under an 8% right now, so it's somewhere between 7.5% and an 8%.

Is that cap or cash?

Cash.

Cash.

Cash. And then on Rocket Fuel, what -- or is that the BofA they're backfilling? Or was there -- do you guys -- I didn't think you guys had a lot of other availability right now.

That's the GSA space. That was the last piece of that space that was done for the first floor and for the first 24,000-plus feet -- square feet, and the second 24,000 was the BofA space.

No. It's the other way. The first 24,000 is vacancy, the second 24,000 is backfilling and GSA space?

Right. Go ahead.

No, continue with what you're going to say.

No. I said, with that, there is no more vacant space that's left in the property.

Okay. I thought someone had an expansion option from -- was it Square or -- don't kind of remember. Is it -- did their extension option expire?

Yes, they didn't exercise it. There are 322,000 feet.

Okay. And what type of mark-to-market do you guys get on this?

48,000 versus what, 24,000, 25,000? And so we're 48,000. 48,000, so it's double.

Okay, okay. And then just quickly, I mean, with the equity offerings you guys backfilled the dry powder here. I think you guys have looked between $300 million and $400 million at this point. Kind of how does that stack up versus the acquisition pipeline? And where are you seeing the best opportunities? And at this point, given what pricing is, are you seeing a lot of opportunities?

Well, I'll take the latter part first. We are seeing opportunities. They're not plentiful, but we're pretty focused on our relationships and some of the off-market stuff that we've been working are still coming to fruition. We are seeing stuff in the Pacific Northwest that we're pretty excited about. We've got 2 deals that we're looking at currently, right now, in San Francisco that is, I think, pretty exciting for us. And then we've got some smaller stuff here in Los Angeles that we're building on some redevelopment play. I would say, normally, you'd ask that question in terms of our pipeline and where we look at that's sort of a dollar amount. We've been somewhere between the $750 million to $1 billion of pipeline right now, and I think we're probably talking about $350 million to $500 million right now that we're pretty actively looking at.

Our next question comes from the line of Vance Edelson from Morgan Stanley.

So first, maybe just an update on rental rates and rent bumps in particular. What are you able to include in your contracts now? How is that market trending? And do you think the traditional 3% is starting to move higher?

That's a great question. I think we've pretty much without any pushback, hence, got the 3% across-the-board on an annual basis. I do think that, that is offset by the lack of free rent that we're seeing virtually across all markets that we're in. What we are seeing on the flip side is it's basically because of the age of the properties, the increase intended improvement is from second-generation space to really is the defined number of our first-generation space TI build-out. Are we seeing the ability to push 3-plus percent? I don't think we're seeing that as of yet, but in certain submarkets like Santa Monica and West L.A. and San Francisco, I think we pushed 3.5% at times and maybe even 4% and got very little pushback on that. So I'm not so sure where's the ceiling is on that. But typically, across-the-board, 3% is pretty easy to get.

Okay. Terrific. And then just to be sure we're clear on the BofA space, how is the progress backfilling that? And what did the mark-to-market opportunity currently look like there?

Well, so BofA has nothing coming due until '15, is their next window, and I'm highly confident that, that space will be backfilled at rates that are also in the double plus of what they're currently at today.

Okay. Double or more. All right. And then shifting gears to the disposition side. What's your feel for how cap rates are moving? And how is that played into your disposition plans? How did it affect the decision to place Tierrasanta on a block? And does it move you closer to selling anything else that might be considered noncore?

So the only other -- well, regarding Tierrasanta, it really is because of the location. I mean, we don't find that the opportunities in San Diego are not marrying us to have a presence down there to date. And we're getting a very good execution from our basis. I don't know if you recall, we had bought Merrill Place and did a reverse 1031 identifying Tierrasanta as a sale. So the proceeds of that will go to offset the purchase of Merrill. And the -- without getting into the pricing of that asset, we're very happy with the yield, and we're very happy with our return on that asset. And then we got to deploy that capital instantly upon close. In terms of other assets in our portfolio, I think we've positioned our portfolio very well that everything is part of our core holdings currently today. We may have an asset or 2 that we would consider given where cap rates are, but we've not identified anything specifically to the market to say this is something that we're prepared to launch third quarter or fourth quarter this year. So it will really depend on what [indiscernible] at the time. We're pretty much down to 3 to our core portfolio right now with the exception of maybe 1 or 2 assets.

Our next question is a follow-up question from the line of Brendan Maiorana.

So Mark, I just -- I wanted to follow-up, I was a little bit confused in your commentary with Jamie before. So my recollection was that when the BofA had 150,000 square feet of vacate at December 31, 2013, and that was going to be backfilled by Square, and then I think there was a little bit of vacancy associated with that. And then Hoover came in, right? So wasn't there some downtime between the BofA vacate and when Hoover came in?

Yes, yes. So they had 155,000-or-so square feet of 1231 on 13 Aspiration. That -- about 130,000, 129,000 feet of that was committed already to Square. We -- right now, they're in the process of inspecting the space in the anticipation of commencing their build-out. Our current estimate for a lease commencement on that, there's a free rent period on it, is end of June. And so you're right. There is downtime associated with that 130,000 feet of backfill of BofA space. The rest is picked up by Hoover occupancy.

Right. So that's really causing the downdraft in the rental revenue, the decline in same-store rents, as we would -- if you look of the same-store portfolio, is that correct?

That's right. That's the main driver.

Okay, okay. That's helpful. Is there an update on the backfill prospects at 901 Market with Stantec that moved out at the end of the year?

Yes. We're -- without getting into great detail on it, we're -- we've got leases underway.

Okay. And then how about -- and then at the studios, what's the likelihood or the activity level with Dexter that's now out? What's the activity level like to backfill that and any other shows that may take some occupancy?

Yes. I mean, right now -- I mean, well, on the studio side of Huron, Bronson's currently 100% occupied on the studio side, and we've got commitments for all of Galer. And they are all the way through basically the current forms that we're seeing in the next -- at least next 2 quarters. We're currently 100% committed on those stages.

Yes. And Brendan, just to be clear, we're talking about the stages, of course, right?

Yes. Okay, okay. And then just last one. I mean, can you -- on the Rocket Fuel deal, can you comment on where those rents are? And if you can't give specifics, maybe is that in line with kind of your last big deal, which I think was the Hoover one in that building?

Yes. So we commented on it. It's $48 modified. I think, modified, right?

That's for IT.

Yes, modified.

$48, okay. And then kind -- $48 modified, and I think it was Hoover with sort of like $41 or somewhere around there. So has the market move that much since that time?

It was $46, I believe.

$46.

This concludes our Q&A session. I'd like to hand the call back over to Mr. Coleman for closing comments.

Thank you, operator, and thank you for participating in this quarter's earnings call, and we look forward to sharing more information as the quarter continues.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.