Q1 2020 Earnings Call

<unk> may differ from the forward looking statements that management may make today.

Additional information regarding factors that could cause such differences here in the M.D. and <unk> section of the company's form 10-K.

Reports filed by the company with the Securities Exchange Commission.

During today's conference call. The company May discuss non-GAAP financial measures as defined by FCC regulation G. D. GAAP financial measure most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and a comparable.

GAAP financial measure can be found on the Companys website at Www Dot L Green Dot com by selecting the press release regarding the company's first quarter 2020 earnings before turning the call over to Mark Holiday, Chairman and Chief Executive Officer outbreak in Realty Corp.

Those of you participating in the queue in a portion of the call. Please limit your questions to one per person. Thank you I'll now turn the call over to Mark Holiday. Please go ahead Mark.

Okay well.

What a difference a couple of months make.

If we had this call at the beginning of March I would have told you all about the great things happening in New York City ended SL Green recapping, another very strong year of accomplishments.

And the stock price performance relative to where New York City peers.

That was very strong.

I would have told you about a record low unemployment and record high leasing pipeline near zero vacancy across our portfolio incredible progress on the construction that leasing up one Vanderbilt.

In a sense.

Growing stability in the retail sector.

And I would have highlighted our plans to continue executing on our very defined corporate strategy of asset dispositions and stock buybacks.

But that was eight weeks ago and for all intents and purposes, a lifetime ago.

Suddenly we're living an unprecedented times experiencing a disruption to our lives in businesses, the extent of which most of us have never see.

The cobot 19 pandemic in the subsequent dramatic reduction of global economic activity have rendered the best laid plans and projections uncertain and injected volatility into the marketplace.

We don't yet know how long will take to bring the pandemic under control, nor whether new York's economy will rebound quickly as it often has in the past we're facing more protracted decline.

What we do know however is that SL green is built to withstand these times, it's in moments of crisis in market disruption, but our team shines. The brightest every member of our leadership team has been with the company for at least a dozen years and many of US had been together since the very beginning our strategic position.

And this new York's commercial real estate sharpshooters leaves that we're better prepared to not only whether difficult times, but thrive in the aftermath.

Things recover our response to this new threat with Swift and comprehensive we were at the forefront of instituting new policies to keep all of our buildings safe and secure and our tenants in their employees well informed New York City office buildings has many essential businesses organizations and agencies that way.

Work in our portfolio that are critical to keeping this is the city running.

Medical offices health care companies visiting nurses major media outlets in broadcast studios and governmental agencies all have offices in our buildings. These tenants simply don't have the option of working from home. They are the people on the frontline who need assurances that they can operate in buildings that are open.

Operating secure serviced and free from Cobot 19.

So we have Buda roll. These past few weeks is doing everything we possibly can to support the heroes who were tackling the crisis and ensure that are facilities are ready when they need them. We are tremendously grateful to our own frontline employees from property managers and building engineers to security guards and cleaning staff, who continue to make.

Our buildings best in class even in this environment.

With our buildings in construction sites secured we have turned our attention to the business a welcoming our attendance back into the portfolio as soon as the workforce limitations our east.

No one yet is certain how and when the restrictions will be lifted we're planning for a partial returned to offices sometime in the second half of may with ramping up occurring over June and July.

What we're hearing from more tenants is that employees definitely will want to return once the restrictions are lifted work from home is proven serviceable at best However businesses are currently operating far below total capacity and capability and there is simply no substitute for working in purpose built environment.

It's free of home life distractions in a collaborative setting, which nurtures creativity <unk> free and collaboration.

Help me out is someone who believes the future of work will be at home in a bad room with a laptop computer and spotty wife, I connections with family members do in video bumps, but undoubtedly cobot 19 is changed the perception of what businesses want in work environment as businesses reopened and we begin the process.

Getting back to work, we will implement new standards in the workplace to satisfy office workers with more on that let me turn it over to none other than our very own it pick an edge SL Green's Chief operating officer.

Thank you Mark and I Echo your sentiment.

We couldn't perform at the level, we're performing and this emergency if it wasn't for yours and Andrews leadership as well as a full support of the board.

Here, we are a seven weeks and it feels like seven years as many of you have been through your share of crises in emergency throughout my career everything from 1993 World Trade Center bombing 911 northeast blackout in 2003 theme Blessed in 2007, H one N. One in 2009.

And who can forget superstorm Sandy in 2012, when covert 19 first fit it was about initial risk containment and we immediately formed to steering committee to understand and address the evolving situation and we were early in implementing that expanded cleaning system.

Protocol identifying how to quickly isolate and sanitized area is exposed to covert 19 made sure that we were managing and disseminating information real time and that our tenants will fully informed but also our employees, while keeping the building fully operational.

We took our in house Technology Group, John Matthew Jeff Courage in A., J and the rest of the gang with Brian I'll talk to make sure that we were connected zoomed in like a snipers cross hair Governor Cuomo directive to restrict non essential workers from reporting to the office was reflected.

And our building occupancy as a result, we needed to make some very difficult decisions, but we held out for as long as we could because of the loyalty of the workers the mark referenced and we scaled back accordingly.

Our frontline people kept the buildings running safe sanitizing clean we're not only looking forward to ramping up operations as soon as this mandate is lifted but we already and I can assure you that the team has been Manning training equipping and as soon as this mandate is lifted we will be ready the team's been working hard.

Running.

I like human calculated Greg Mcmanus on our head of HR Lynn Courtney Hodges running necessary algorithms. The track our expenses in frontline head count as though we had a mounted GPS tracker on everyone. A few weeks ago, we shifted our focus from mirth containment to risk mitigation mode and formed what we're calling our as Phil.

The forward task force to establish a foundations of ideas the recommendations.

Guide us through with a detailed roadmap of our entire portfolio reopening.

I can guillen Lorelei are literally our in house cartographers navigating through uncharted waters. This virus, maybe no, but we have always been preparing once a year, we close shop for a couple of days the run tabletop exercise it to understand exactly our buildings work inside and out which correnti puts our building this.

Sleep like a board certified anesthesiologists and he's behind the controls to get them ready for their wake up call.

Never have I've been more proud about property management team in the laser focus as you know, we always see a behemoth of a portfolio with some 24 BMS systems.

Hundreds of fans.

Almost 20000 square feet of.

Coils, nearly 60000 tons of refrigeration machines, and 200000 tons of cooling capacity I say all that because when you behind the controls and you can bring that throttle looked down and be ready to ramp it up that's where everyone. That's key has to step in under construction side of things, we had Bob Dewitt He's perfected.

The ability to execute virtually and its filled more exception applications and probably 20 owners combined he has consistently maintained a construction workforce, albeit fluctuated at times, but kept construction crews with hammers in hand.

There's been much work completed since we jumped on this in January and of course, we're still not out of the woods, yet we grouped our efforts with into half a dozen or so categories, which comprises some 100 different line items that we considered we evaluated each and every one of them to exhaustion. Nonetheless, knowing that communication safety will be the most critical.

All aspect of our program and the providing everything with confidence that our best in class staff and facility were up to the challenge. So industry leaders, we set the standards for managing this crisis in the days and weeks. Following the first cases reported in New York City.

Topic said I'm referencing we looked at everything from how we're going to communicate with our tenants on captivate screens to building engines, making sure that our communication order from managing elevator occupancy reducing conference room capacities restricting outside visits promoting teleconferencing all the things you can think up.

And this total order is being tracked by at least you had the bench and who bought her ingenuity and leadership across the project and forms of communication dumping her flawless execution on each and every one of them. When it comes to the actual lobbies were ready ours are signage will be ramped up for Carter's turnstiles freeze.

Freestanding dispensers and trifle handouts to our tenants so they understand exactly what we're trying to achieve.

And everything from sand hand, sanitizers to lobby Q markers in the elevators as well as commanding traffic control.

Everyone is going to be on on call understanding how before decals will indicate where you go in how you get to your destination. We are running algorithms on our elevators and there will be staggered shifts as needed but for the most part we've changed and ensure that are wait times will be man.

Manageable, while maintaining social distancing and we'll get people exited and out through the elevators listening to anything and everything that has to be done in order to make it happen.

We've also looked at consumables and we're making sure that all these consumables everything from surgical mask the latex gloves.

Rachel Bonnie yellows tracking that with our unrelenting encouragement proving to us during this time, but there's more than 24 hours and today, we have state we evaluated passenger elevator proctors that are going to be pushing elevated button directing tenants into cabs and we do think.

Density as necessary. These are passive and noninvasive ways of dealing with the situation at hand, we've looked at overhead thermal scanners as well as handheld thermal scanners and although there's something to be said about the interpretation of how you. These were currently using them successfully at all construction sites and the volume we expect here.

But to detect anyone with high body temperatures and the accuracy.

We'll be done to perfection look no one is perfect, but I've been talking to my contemporaries Real estate Board in New York Real estate Advisory Board building on its management Association and our tenants and they understand how critical their behavior as and I'm sure they'll be implementing that.

In the weeks the comp.

Additionally, we looked at some long term items everything ranging from.

No vapor many of you have seen televised as well as.

Photo hydronic technology to Blue light to tracking frontline employees the hands free turnstile enhancements, we've we've looked at and already and have started ordering for retrofitting of our turnstiles, even though we have a card recognizing system, we want to create a bluetooth system that can.

Universally pickup.

Your approach to the turnstile and allow you access once your within feet from the turnstile shout out to Tony I Quinto Dania Iranian Sam you. We that led that are led by our harvests walking off portfolio everyday seven days, a week and really redefining what real estate and security at all about the.

Tell me at the contact sport and no doubt, it's proven to be such indeed.

And these last seven weeks as far as occupancy protocol, we're working with.

Our own in house specialists to determine what antibody test any vaccination stations, we might consider but we will be surrounding all lobby with the necessary support to understand exactly how everything should should flow through.

And back to some of the other things that we're doing to make sure that we.

Our understanding how our protocol throughout the buildings is aligned.

We're going to also be looking at.

Attendance back to work and making sure that when we agreed.

At the entrance, it's not going to be any different than it was pre cove at some of you may think well how are you going to do that with a with a a mask on your face what what we're going to do it was going to make sure that we obviously don't embrace them, but obviously they'll see the wrinkles around our eyes. When we when we give them. The smile. There is not a single thing that we haven't looked at so we're very confident.

Whether it's the greeting of our tenants at the lobby or any air quality enhancement from carbon filtration to electrostatic filtration to real time monitoring you'll be admit emitters bipolar I innovation, we've looked at it all and we expect to be able to.

Cover each and every aspect and it's like anything else.

I don't want to go off and.

Say that we're better at containment our risk management, we were always good at risk management can payment, but we are better today, it's like anything else on life, we've proven that to wash shelter in place that we are we're all respectful of each other's well being and I'm confident that when the tenants returned to our buildings and we get full occupancy there will be a country.

Renewed improvement and the way, we do things I can't help but think of Vince from our mailroom every time I've seen them over the past two decades, I pass them up and running through many always turns to me hopefully he's trademark this.

A phrase you. He tells me maintaining not complaining and through it all he has not wavered. He's been here every day. So on that no mark like doesn't take a day off no matter, how you slice it people want to do the right thing.

We thrive during these challenging situations and I assure you.

And Andrew Me My team remain committed and we got this.

Okay. Thank you it there's no question about your passion and commitment to.

To the to the task at hand, and you got to great team on it.

We thank you for the tenants are gonna be better off for it.

And now it's time for us to look ahead.

As you can imagine we're completely reassessing our business plan for 2020 to recognize and adapt to the current situation and to be prepared to move decisively as conditions continue to evolve through late spring and beyond.

Fortunately the moves we made over the past four years now look crushing and put us in a position that come out of this crisis stronger than ever by monetizing nearly $10 billion real estate since 2016 deleveraging our balance sheet with proceeds and buying back stock on an accretive basis, we've created a more streamlined company.

That is narrowly focused on our very best Manhattan office assets, we couldn't have predicted the current moment, but we're comfortable with where we sit today with substantial cash and liquidity generally long dated assets and liabilities and stable base of credit tenants.

On the tendency and leasing front, we're very fortunate to have largely credit worthy office tenants and long term rent rolls and accordingly, we did not experience significant delinquency for fall out on office collections in April having collected over 90% of our office rents over 60% of our retail rents.

And we will exceed 86% of collections overall those are stats, we are enormously proud of.

Not only because.

Of the tenant base that we built.

Knowing that they were built like we are to withstand times like this but also we've had conversations with every single tenant in the portfolio and everyone who can pay for all intents and purposes has april's not over yet we think we're going to end up April office collections around 92% we think.

Retail rents based on the commitments we have in place today, we'll approach, 64% and we will actually end up at around 87% overall come April Thirtyth. So we've got still.

A week left.

We're working with these tenants and we understand the challenges that some of them are facing particularly our retailers.

There will be.

You know extraordinarily challenged during these times were attempting to work with them smaller tenants that had been most impacted during this time, we certainly have asked that are larger tenants in credit tenants.

Pay their pay their share as the as it was evidenced they did so that it gives us the latitude and flexibility to work with the most impaired generally smaller tenants generally in the retail community, who right now have been shut out of business and we've been doing that we've been doing that well we work for the shareholders, but tenants.

Their employees, our customers and we will try to be there for them throughout.

One Great example of this is the food first initiative, we launched this week in partnership with Danielle Blued to help alleviate the ongoing food shortage in New York City that has now been further amplified our mission is to help feed emergency service workers and our neighbors, who have limited access to food by partnering with SL Green's foodservice tenants.

Across our entire portfolio in a way that we believe will also help to revitalize our food and beverage tenants at a time when the industry needs. Most we kicked off phase one of this initiative. This morning, but firing up Daniels lower east side prep kitchen with the objective of initially cooking 1000 meals a day for nurses and.

First responders in New York City, SL Green's contributed $1 million, it's a down payment to the food first initiative and investment that we expect will in of itself enable the preparation and delivery of over 150000 meals to the frontline heroes and those new Yorkers in need of our more than 30 food service tenants north.

Folio, we expect nearly half of them to join US in this initiative and opened their doors during phase two of this program next week to help feed local community and bring workers back into the kitchen for the purposes, a beginning the process of re emergence from this pandemic and serving the people of the city that we love.

Pre coated we had an extremely robust leasing pipeline and while much of that is temporarily on hold we had a strong first quarter of leasing Nonetheless, and we know we will rebuild that pipeline. Once this crisis passes in fact, our current pipeline.

Exclusive of all the covert delay tenants still stands at an impressive 815000 square feet and that's top of the 426000 square feet of leasing we've already concluded year to date with over 100000 square feet of that leasing.

Occurring in April alone so in fact.

We know that in situations like this companies will want to work with trusted partners and we'll move toward the quality service capabilities and experience that SL Green best exemplifies in a moment of uncertainty you can count on US we will ride out the storm together.

I wanted now just take a moment to focus in on debt preferred equity Andrew is going to is going to.

Give you sort of an overview of the.

The accounting charges.

That took place during the first quarter. So a lot of commentary on that I thought.

For a program that has delivered to us $1.8 billion of revenues over the past 10 years, not including 20 $21.8 billion 2010 to 2019, we took total losses in that period of time $32 million I believe that 3 million to year.

Against a billion data revenues I.

I think it's an extraordinary track record.

Very proud of that.

I think when you look around at the what's taken place among some of the Levered finance companies out there today, we really appreciate the.

The quality credit worthiness of our assets our borrowers our program or underwriting that has created such an extraordinarily profitable program for us over that period of time in the first quarter as a result of Cecil in some trading activity. We took some further reserves and I'll, let andrews come in and.

Shed some light on that please.

Thanks, Mark on the dead preferred equity book, we received 98% of our scheduled interest payments in the first quarter with two positions representing approximately 25 million a book balance having not paid both the assets our retail assets, where the tenants didn't pay rent one.

Of those interest payments as additionally, backed by a Dutch surface guarantee.

We took some marks at the end of the fourth quarter and over the first quarter.

Partly attributed to see so where we ran multiple different scenarios and based on percentage likelihood of each scenario adjusted book balances those reserves may or may not come to pass, but it's important to note that we did take reserves through Cecil against the two positions that did not pay in the first quarter that I just mentioned.

There's obviously a lot of uncertainties surrounding rental payments over the next few months and if that Choppiness continues its possible that the rating actions may temporarily fall below the level, we achieved for the first quarter and not as any and all downturns. Some assets may end up in foreclosure, that's part of this business and an hour.

Calm that we're comfortable with that's the way we underwrite every position this to the worst outcome.

Given the roughly 70% of our portfolio is comprised of loans secured by office properties and another 23% by residential properties. We wouldn't expect the level of non payment to rise dramatically and any ryzen nonpayment will most likely be short lived.

Additionally, we took reserves against assets that we anticipate selling in the second quarter based on management's best estimates of where the loans would price in today's market.

Based on where we sit today, we hope to have $100 million to $150 million or so of loan sales closed in the next four weeks and pricing may well exceed the levels, we mark them too we don't see any data assets trading below their marks.

There's been a lot of chatter in the market with respect to loan sales people are obviously free to believe what they want a press reports, but shareholder shouldn't confuse SL green evaluating bids on multiple loans in our portfolio with a mortgage rates must trade bid list in a for sale due to repo debt margin call.

Yes.

Across the entire de PE portfolio, we have a $140 million of total debt against only first lien debt positions and as we sit here today, we expect that balance to be down to 50 million or so within the next couple of weeks based upon a repayment we expect to come in that's already been committed.

Hi, takeout lenders.

If we're not in the market at least evaluating opportunities to optimize our portfolio. We're raising liquidity. Our view is we're not doing our jobs.

With that Matt I'll turn it over to you to take take us through earnings.

Thank you Andrew before I get to guidance I, just want to touch on liquidity, where an underpinning of our corporate credit profile has always been maintaining a sufficient amount of liquidity, both as a protective measure and when market conditions dictate that it's prudent to be opportunistic and the current environment cash is king and we've taken our desire for liquidity one step further.

There by looking to increase our cash balances from the $580 million, we had at quarter end to at least $1 billion over the next 45 to 60 days. The most cash we've ever had by executing a solid plan that we have a high degree of confidence in we actually called is the $1 billion plan.

As a first step we drew an additional $150 million off our credit facility in early April, bringing us to within $50 million of total capacity and putting our cash balance at $730 million.

Drawing down the credit facility seems to be the norm. These days, but thats actually a playbook out of the SL Green.

Playbook that from back in the financial crisis, and just protects us from any dislocation that may happen in the broader financial markets.

That said, we always strive to keep our line balance as close to zero as possible and we expect to pay down the facility with other cash sources in the near term, including the pending financing of 220 East 42nd Street, which will generate proceeds of about half a billion dollars.

Also on the financing front, we are moving ahead with our refinancing of for 10, 10th Avenue given the incredible leasing success, we have had there.

Closing will not only repatriate about $25 million of cash to us, but it will also cover any future spend would have come out of our pockets.

In the debt preferred equity portfolio, Andrew highlighted our active marketing of between 100 million in $150 million of sales most if not all which we expect to close in the second quarter. In addition, repayments of existing positions will total another $100 million, allowing the DP portfolio to bring in 200, a $250 million of.

Cash and just a matter of weeks.

Rounding out the plan, we have the expected completion of two joint ventures, one for Madison Avenue, which isn't it very advanced stage and another for 1006 Nassau. These transactions in total will Ics, we expect to generate about $40 million of cash proceeds just at closing.

These activities put us comfortably at $1 billion target and if we elect to sell more DP positions well above with our share buyback program paused no material debt maturities until 2021 development projects, requiring very little equity funding because financing is in place and our operations generating free cash flow, having a billion dollars of cash provide.

Slides as an enormous amount of protection for many years to come.

Turning to guidance given the incredible level of uncertainty in this environment. Many may have expect this in some even encouraged us to pull our 2020 AFFO guidance entirely and revisit it when there is greater clarity.

We see many companies and Reits have done it and many more likely intending to however, we believe that our shareholders and the broader investment community deserve and expect us to provide them with a confident view of the company's position and trajectory on a go forward basis.

So we undertook a full re budgeting process in just four weeks so incredibly daunting task in a real credit goes the entire company from our office and retail leasing teams to operations to our investments group entity incredible finance team, who have all been focused on the situation at hand, and I've worked 24 seven since mid March to four.

Simulate this plan across all aspects of our business.

Our new FFO guidance range of six six to 710 reduces our mid 0.6% from 730 down to 685 and is wider than our customary tencent range to account for the high degree of uncertainty.

Actually there are many assumptions incorporated into our revised guidance, so I'll summarize them and as concise matter as possible using the same broad categories I do when providing our initial guidance in December.

First I will address our diluted share count on which all of our per share numbers are based as I read some of the research out there I believe there was confusion about the impacts of certain parts of our business because consideration was not given to the fact that our share repurchase program has been curtailed.

Through early March we executed $238 million of share buybacks in 2020, along with LP unit redemptions.

Anticipating the closing of two twenties, 42nd Street in the Olivia.

While the Olivia did close without the proceeds from 2042nd Street, We announced we would be can tailing our share buyback program until other sources of liquidity can be established.

In our revised guidance, we have assumed no further real estate sales and therefore, no further share repurchases.

This leaves us more than $300 million short of the buybacks. We included in our initial guidance and increases our diluted share count for earnings purposes by 2.1 million shares to 81.4 million versus the 79.3, we utilized in December.

This as a material dilutive effect, which has been incorporate into each of the line items in the guidance roll forward in last Night's press release.

Now, let's get into the components of the business starting in the real estate portfolio, where the assumption of no more property sales for the rest of the year is the driver very positive contribution to FFO of between three and 16 cents a share.

Largest contributor to this so obviously to twenties, 42nd Street, where the buyers failed purchase allows us to retain over $45 million of gap and ally and ultimately the $35 million deposit as well we've not included the deposit in our guidance as it is a long process to access the deposit.

Within the now larger retain portfolio, Steve the rails and bright horizon fell but they are leasing teams have gone back and revisited every single leasing assumption on every single space for 2020.

To reflect the slower pace of leasing, albeit not stopped and a moderation in their view of rents.

We then layered in a conservative view of early tenant vacates predominately in smaller tenant spaces and considered the rent relief request, we have already received as well as effective for additional rent relief request that might come.

The fact of early tenant vacate hits earnings, but rent relief that comes in the form of a short term deferral as little to no effect on GAAP NOI because that rent will be paid it simply sits on the books as receivables.

The conservatism, we have built into our real estate revenues.

Our partially offset by operating expense savings that had taken and his team has implemented over the last few weeks, while the portfolio is that low occupancy and savings that can be implemented on a more permanent basis. While also factoring in any additional costs, we will need to incurred our properties to operate at a class a standard in a post colvin world.

All told on a dollar basis at the midpoint of our new guidance range GAAP NOI increases by $28 million.

In the debt and preferred equity portfolio, we see a portfolio size will be trending lower from the $1.8 billion at the end of the first quarter as we have assumed no new originations for the balance of the year just the fund funding of future funding obligations, along with $222 million of repayments.

And the aforementioned 100 $250 million of sales.

This results in a projected yearend balance of between 1.5 and $1.55 billion and an average balance during the year of $1.65 billion versus an average we showed back in December of $1.85 billion lower balances coupled with lower rates reduces investment income.

To the tune of about $23 million at our guidance midpoint.

With regard to reserves, we've taken even closer look at every single investment in the DP portfolio.

As well as any other loans, we have the partners as part of the implementation of the new current expected credit loss or Cecil accounting rules that market Andrew both referenced.

Recall that Cecil rules are being implemented over the course of 2019 by all institutions that have a loan portfolio. So this is something we've been working on for very very long time.

As a result of these reviews in the first quarter, we recorded $43.5 million of total reserves related to Cecil the bulk of which is recorded through equity and only 4.3 million of which was recorded through earnings reflecting any changes in the views from 12 31 to 331.

In addition to reserves for Cecil we also recorded $6.9 million of reserves related to positions that we have a high degree of confidence we will sell.

Could we sell more definitely and that's what we have left room for in our guidance on reserves.

Rounding out the revenue side and other income we model a reduction of $4 million at our guidance midpoint as we did not recognize any lease termination income during the first quarter versus our expectation of about $2 million per quarter. So we have reduced our generic full year projection down to $6 million from eight.

We've also reduced our assumption of leasing commissions, a joint ventures, where we earn them due to a slower pace of leasing and reduced other fees from transactions that we don't expect to move forward.

Moving to liability side at the refinancing 10 east 53rd for a fresh five years, and repaying 250 million of unsecured bonds.

During the first quarter, we have no meaningful debt maturities until 2021.

Further maximizes retention of liquidity.

While an interest expense rates have clearly taking a huge plunge falling LIBOR benefits us as we have a meaningful level of floating rate debt.

On average over 2020, LIBOR is about 100 basis points lower than it was in our initial guidance.

Modeling forward LIBOR curve, plus our customary 50 basis point cushion on top of that curve saves us a meaningful amount of interest expense.

While we feel our level of floating rate debt and where it's used as appropriate you may see as take advantage of low fixed rates as well. We did recently when we executed $350 million a fixed rate swaps against an issuance of corporate bonds that mature next year, we're certainly considering doing more of that.

Offsetting the benefit of low rates were carrying more debt than we typically do and what we originally anticipated because we elected to keep $1 billion of cash in the bank versus having it as available liquidity on our credit facility.

They stated earlier, we expect to bring that line bounce back down in the coming weeks by roughly $500 million with the financing of two twentys 40 seconds.

That also extends in term of our debt.

And we could reduce our line balance even further with additional asset sales.

In total the combination of lower rates higher debt balances and the cost of new financings increases interest expense by $12 million at the guidance midpoint.

And finally, we expect to reduce DNA by at least another $5 million.

On top of the nearly $2 million reduction, we originally projected versus last year.

This reduction reflects the underperformance of our stock as well as deterioration in our operating performance both of which will have a direct effect on cash and stock based compensation expense as the vast majority of executive compensation is performance based.

This reduction also takes into consideration the million dollar seed funding of food first which mark discussed earlier.

As well as additional Kobin related Charlie contributions, we expect to make this year.

Concluding with revised Fad guidance or AFFO dipping anyway, what you want to call it.

We did not highlight that in our earnings release, but at our Investor Conference in December we projected fed of just over $380 million a very healthy number.

After taking into consideration all of the FFO impacts that I've outlined thus far which totaled $28 million of decline at our guidance midpoint.

We are actually increasing our fad guidance by $20 million to $400 million.

Reflecting a substantial reduction in second generation capital, both leasing related and elective base building a recurring capital at our properties even.

Even after considering additional investments we will make it the properties to enhance the safety and security of our tenants a testament to our ability to manage costs and cash flow.

Mark.

Okay well.

This was a little longer than usual, we had elected not to say not only.

Thats a detail on the revised guidance, but also sort of the state of the market as we see it steps we've taken to reopen the portfolio.

To welcome back tenants, which I think is it was the most exciting thing we look forward to and May right. Now is just getting people back into the city and I think the governor may or hope, we committed to doing that if the.

The trends keep going into right direction for the next two four weeks so.

We want to open it up for questions.

We're going to let's take two questions per operator will.

We'll try to it but let's try and cut to equip consumes a lot of people on the line lot of questions. So already quarter three so let's start out with two questions East, we'll see if we cut throat, so turn it over for questions.

Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered and you'd like to move yourself from the Q. Please press the pound key as reminder, please limit yourself to two questions. Each our first question comes from the line that Michael Lewis from Suntrust. Your question. Please.

Great. Thank you.

First question I wanted to ask a little more about the key bookends decision to sell some loans here, presumably below par.

You have some some investments maturing anyway.

You have some cash filled up.

So maybe just talk about the decision to do that and instead of the direct use of proceeds beyond growing the cash balance.

Well I think.

They broke breakdown into a couple of different categories.

Some of the sales that were doing our of senior positions, where we're optimizing our retained yield some of the sales were doing our.

Just opportunistic where.

There are assets that we feel we want to trade out over we have better use of the cash and then some of them are strictly for liquidity purposes. So.

It goes it's sort of cuts across those different categories.

We have discussed with the board of plan as Matt said to have a billion plus of cash liquidity available to us and our unencumbered DP positions are our best source of shorter term liquidity.

So we have turned to that book and the market is is going to mandate less than par.

Just based on required yields on some of the assets some of the assets, we expect to clear very close to par.

Yes, Thats billion does liquidity that Andrew references.

It is it's a measured number but it's also an arbitrary number. It's the number we think if we have that kind of liquidity in the bank with our liability structure and our asset structure. It makes us as close as impenetrable as we can get and that's where we want to be could it be 900 sure could be 800.

We are cash flow positive. So you you can argue to be a lot less net.

But.

With that we feel like anything beyond the billion.

Which we will raise.

And probably be raising those monies after the second half of the year. That's offensive capital I mean, we will be in this market in the future.

With offensive capital after we have what we consider what I would refer to as the impenetrable hard deck and just recognize that we were obviously there with the closing of 2042nd we were there and more so all we're doing really substituting.

Different forms of capital for sale that Didnt go as as planned, but we still have the asset and it's a great asset and its long term leases credit tenants. So it's I think it shows the.

Testament to the program that even in this market, which is a tough market.

We do have extraordinary liquidity.

In that debt book.

Which I don't think everybody can can say so I think it's a testament to New York City kind of assets.

We underwrite not to say there won't be some charges there have been and that's that's part of the business, but it's dwarfed as a measure of the revenues, we generate and the other benefits we get in the program.

Okay.

My second question I wanted to ask about one Vanderbilt how.

This.

Unprecedented situation, how that impacts the timeline, how construction is progressing I still expect certificate of occupancy increased to 20.

Is there anything to San hat timeline looks like and maybe what the.

The initial yield and whatever else say about how this impacts that project specifically the under construction.

We were three months ahead of schedule that you probably know.

And so this will eat into that time somewhat we havent fully given up on August 4th.

We have.

There are people, we have we have a fairly robust crew on site right now because remember there was a lot of transit work.

That is that and public improvements and other site and safety work that is being undertake we probably have 200 people plus on site.

And have today and that will grow as the construction sites reopened in May. So we've lost some time some of that we can make up.

By going to multiple shifts starting in May June and hopefully the city of New York, we'll consider in the right locations waving some of the after hours work rules. That's one of the things that we in a lot of others and are in the industry will be pushing for I think a lot of the workers will.

Wave premium time or substantially reduced premium time, so it was not too.

To get people bat working working through ships by working in shifts you can keep distancing because you can allow them space you don't have to be 100%.

For one shift you can be 50% for two or three shifts or even less so there's some changes that are going to take place. There are opportunities to make up time, we still expect to finish ahead of schedule.

Whether it's like I said, it's going to be August 4th or not I think thats going to be a task. We are hopeful for August hopefully not later than.

Beginning in September so, we're certainly not projecting more than a month or so of delay.

To account for what we've gone into but look we don't know until we're back to full complement and.

And we see how the city operates through the summer, but we're very we're going into that time at the right period, because with the summer hours, we can really make up a lot of talk so that's that in terms of yield I mean, we know we lease we had a very substantial pipeline of leases going.

Into Cove it.

We were on track to meet or exceed the guidance, we'd originally given back in December.

We nonetheless got some leases signed actually last week, increasing occupancy to 67%.

Steve's got one more tenant pending.

That we hope you know is.

Can be rounded out in the near term that might bring us closer to 70% and then I think the goal for the year met was 82.

2%.

We'll have to there is a pipeline.

Beyond a lot of tenants still telling us there have every intention of going ahead with leases, we have been pretty negotiating but I think people do want to take a month or two pause while we work through the situation. Steve can you hear us and you have anything to add to that.

I'll add to the fact that.

Covert.

Another seven deals.

We're in ongoing term sheet negotiation totaling about 150000 square feet.

We've kept in touch with those tons obviously.

The larger ones of the group still or signaling.

They want to reengage ones that have clarity.

When everybody's back in the office.

So.

Close this these past two deals out.

Im pretty quick order over the past 10 days in the one another lease that we've got pending for about 27000 square feet.

With an ongoing series of meetings with them.

Video Chuck's obviously.

That.

And just move forward.

Thank you next question.

Thank you aren't next question comes in line of Derrick Johnson from Deutsche Bank. Your question. Please.

Yes.

Hi, everybody good afternoon.

I appreciate the strong liquidity position. However, what levers can you pulled a raise further cash to reignite the buyback program.

Actually at this valuation and I do mean, besides DP book and I guess, it's really part of the same question, but what are your thoughts on the capital recycling environment going forward.

Okay.

Well I think we'll look to JV is most likely and potentially asset sales.

[music].

You know, where we're out in a very soft away with some different scenarios trying to gauge the market right now and obviously the most of the capital that's running around the market right now is sort of opportunistic capital our capital it's looking for distressed type situations, but we think.

As as in past cycles that will quickly turned to core buyers recognizing that they have a good opportunity to get into a market. This is the type of market, where we bought in the last cycle 600, Lax and 125 park in a really strong assets a good pricing.

So.

We've seen a turn quickly from sort of a distressed buyer environment to a more core stable buyer environment and as those core stable buyers reenter the market they will be.

Interested in in the type of assets will be offerings.

Okay, Great and just a quick.

Rick Warren for Matt on the accounting and assumptions in place for the 11.2 million reserve set aside for DTA.

Does this only relate to the loans, you're looking to sell and what's the time period. This reserve covers.

So there are two components of that number that you referenced the 11 plus million dollar number about 4 million of that is related to Cecil. So Cecil is implemented in in two phases. One is a larger number that reflects your view as of December 30, Onest and is recorded in the first quarter, especially the implementation. The initial implementation of the rule and then you.

Record any changes in that view through earnings each quarter, that's the incremental $4 million.

That we took so we really thoroughly reviewed every position and beat them up pretty hard and took another $4 million charge for Cecil.

The other.

6 million in change is for.

The sale positions the 100 plus million dollars that we've talked about we expect those to sell in the next couple of weeks.

Yes, those sales positions by the way I don't have Andrew if you made the point earlier, probably did their credit wise money. Good. These are.

It's a shame because not all reserves are created equal I guess, we took about $10 million. So reserves on trade assets as we intend to so.

Yes, yes, we'll have less less havent six six entre and.

That's cost of capital that's cost of capital to get to where we want to be little bit of a penalty for not having close to 20 deal.

But.

None of the assets, which rating our credit issues and you know anything in the portfolio, we largely dealt with prior to coded because you know we had taken we approved a lot of the portfolio and.

I guess the seasonal charges hopefully taking care of.

Whatever else is in there and kind of a statistical basis. So that's where we are right now in that portfolio and.

We will look at it as a source of continued liquidity for us.

If we want to monetize those assets and we have great places to deploy it into as you mentioned like our stock or otherwise.

Thanks, guys.

Thank you. Our next question comes from a line of Alexander Goldfarb from Piper Sandler Your question. Please.

Oh, Yes, hi, good afternoon.

Just a few questions here and thank you.

Can you just talk a little bit you mentioned about the JV that you're thinking about for one Madison and and I forgot the other property, but maybe could just talk a little bit about what percent of the property that you're planning on doing joint venturing into specific around one Madison and then as we think about value creation.

Seem like you're better created value one Madison, 100% and then JV later as you did sort of with one Vanderbilt so thoughts on selling more down at one Vanderbilt versus initial JV at what Madison or maybe that the JV. Initially is a small part of the one Madison, Therefore, SL green as Keith.

Most of the value of the value upside.

Okay compound question Im going to hit one Madison first 49.5%.

What we're anticipating to sell there. So I don't know if there was a further question on one mass and beyond that one Vanderbilt no intentions this year to sell any additional.

Percentage of that deal now we're going to.

Complete the lease up there finished the construction, we believe that would be something we explore for the.

Future years.

Beyond that the rest of the question Andrew.

Was there the ad market.

Mark It was it was if you're doing that much JV at one Madison you guys created a lot of value of one Vanderbilt to why Q about half of one Madison on the value creation before I got it.

You know because that's it's a good by the way we couldn't said the same thing on one.

On one Vanderbilt and it's a good question, it's it's really.

How we intended to.

A structured the deal where by contributing the deal as it sits.

It and raising 49% via upfront equity, we don't have to fund any incremental equity I think thats, where I may either either de minimis or no incremental equity on top of the construction loan that were.

We intend to close on late in the summer. So that's just how we can see the deal.

Right or wrong I mean, yes.

We're selling off upside in an asset we think like one Vanderbilt has tremendous upside, but also you got to remember those dollars have been and we'll continue to go into the stock buyback program. I mean, we're still committed to that program and.

But we've always said ruling committed to it out of sale proceeds at 220 close we would've bought out of those proceeds so.

[music].

You know that's still what we considered to be the best investment in our landscape it's even.

Putting aside.

The market at the moment.

At today's prices, we think it's even more compelling obviously than than where it was so it's still.

Where our general direction is to.

Create monetizations to redeploy into our own stock because we're just buying more of the best assets, we own and that really fundamentally hasn't change we've just taken oppose.

Okay and then the second question as you gave Brent collection.

For April is it your do you think that May will be the same you think you'll be.

Worse, better just some thoughts that maybe nuanced around the office versus street retail.

Well I mean look that conjecture I mean, we hope it's the same I guess.

We hope it's not worse, because hopefully in may there will be.

There will be movement towards a reopening and I think just that sheer element of retailers getting being able to get back into their locations and restaurants being able to open and.

Whatever else if there's that much light on the horizon than people, who had a muscled through hopefully the worst of it in April will.

It will feel at least is good in may and and see light at the end of the tunnel I can't really.

Give you a projection on that beyond.

That being or.

Matt.

Our intension I don't know, we're not modeling improvement or unimproved mint were I guess thinking it will be roughly similar.

The collections were very good as I mentioned, you asked about retail.

I don't know that we have a breakdown between street retail in high speed rail.

Regular retail, but the overall retail I think as it should end somewhere between 63 and 64% in that range, where over 60% today and this still I think one or two tenants that have indicated that they're going to pay in whole or part.

Before the month is over.

Thank you Mark.

Thanks.

Thank you answered my Dear, ladies and gentlemen, please limit yourselves to two questions. Each our next question comes from the line of a manual.

Your question please.

Hey, Thanks for that maybe maybe to follow up analysis question.

The math, the NOI projections and I guess, the deferral projections you guys have given all of those follow the.

And to Mark presented were with a partial reopening in May and then on more Fuller engineers are lies at the right way to think about it.

Thats accurate.

Okay, and then on Android or are you in your teams still underwriting new HDP deals.

Where you might actually have an opportunity to lend against or on assets that others aren't looking at in this environment or is the GP program in contraction no new investment mode.

Yes, I think as Matt said, we haven't modeled new investments.

Over the course of the year, because the capital will likely be.

Conserved as cash or deployed as mark outlined in our all offensive plan.

That said, we have a lot of interested third party sources of capital that we manage.

On behalf of and that'll keep us active in the investment market, David Schonbraun could give an overview of wire, where we think some of the opportunities may lie and what kind of early early indications are you seeing a good opportunities out there David.

Sure. Thanks, Andrew I think our team has always focused on working and underwriting and making sure we see everything out there so whether or not.

License to putting more money out or selling positions. We're always looking at things speaks to the end of age as cost of capital.

And where the best opportunities are so we're always engaged in the market and seeing opportunities I think right now.

Some of the bridge stuff is as it real gap just because of the mortgage rates were levered.

And some of the other specialty finance companies.

Can't put that money out of than some of them as guys are on the side and.

A local player who knows all the buildings like we do as advantage because of people aren't able to tour right now we're kind of travel to the extent people need to do something quickly we have an advantage.

We'll see how much or if we take advantage of it but that's definitely a position we have that no one else does.

Thanks, guys.

Thank you. Our next question comes from the line of Jamie Feldman from Bank of America. Your question. Please.

Great. Thank you and I appreciate all that detail in the call. So you had switched to a monthly distribution.

Other than quarterly and you're talking about actually rising. So can you talk more about that decision then your visibility.

Distribution going forward.

It was question about dividends.

Well I mean look that's a board level decision so as not much.

We can really add here, we did go monthly because we felt that.

For this period of time that we wanted to have very real time visibility into collections.

As well as.

Whatever kind of revised guidance, we come out within you're right. We we.

Came out we didn't know where we're going to come out at the end. We came out we said Oh My God half was up 20 million Bucks and we didn't really sacrifice anything to be honest I mean, a lot of its really just deferred leasing capital.

So it's called the good news money when we do the leasing there'll be the capital.

If we defer that out the AFFO went up we deferred couple of projects, but nothing nothing that in any way were open immersion nature or anything to deal with this year. So so we feel like we're in a reasonably good position, but we think it's prudent to monitor this monthly.

We will have a conversation with the board more frequently than usual now it's on this month, we basis and.

And come to a decision, but you know clearly.

You know April for all the things that could have been we we did reasonably well.

Okay.

And then.

However, discussions with some of your largest pending exploration changed in terms of likelihood of renewals or just maybe even across the market.

Obviously people tend to stay in place a lot longer.

I have any of that maybe Tennessee.

It might be moving out now talking renewals or is it still too early.

Good News America later this year in advance.

Yeah.

We will recall that.

At some 50 threerd.

We're coming to us which is part of advance.

All of that Smith private previously been Sublets.

I think you're spot on your inquiry is that.

As a result of sort of the current circumstance, we reduced the number of those sub tenants were previously we would expect them to vacate and are now in discussion with them about the potential of a good number of them staying for some significant pieces of spoke.

I think we'll probably see some of that across the portfolio tenants that were.

Thinking about consolidations or relocations.

We've been in hence chance of.

Retaining them in the portfolio.

And probably doing on shorter deals you know two to five year type deals from the tenants perspective, where we want to preserve the capital into she will the world shakes up but from from our side of the table with a 95% occupied portfolio and a return of that we can renew and return capital.

But those costs is big news for us.

Thank you. Our next question comes from the line of Nick Yulico from Scotiabank. Your question. Please.

Thanks.

Hoping to get a feel for how.

Your cash same store NOI guidance might be changing.

Yes.

I could generically say lower but I assume you want more detailed in that.

It is.

As currently modeled.

Adjusting for the two things, we just released termination income and the free rent 15, 15 Broadway we expect to be.

Down between one and 2%.

Okay. That's that's helpful and I guess, maybe just a follow up some of the drivers it might be behind that in terms of how we should think about.

Occupancy at the end of year, how much loss, you're expecting this year and then also.

Yes in terms of rents.

Your mark to market assumption I'm assuming is also.

Lower kind of hard to gas where market rents are but any any info and that would also be helpful. Thanks.

So I mean part part of the things you're getting into their Nick deal with some of our goals and objectives. I think we had 16 or 18 of on that we set out at the beginning of the year and.

We're gonna have to re review those.

Weve did everything we could to come out with this updated guidance for this call and commended team for.

Basically doing.

Four weeks three three months of works and four weeks, we have not yet updated the goals and objectives. We in looking at them I think we're still optimistic we can achieve about half of them.

Others like occupancy, we had out there aggressively 96 and change.

I don't know that we'll be able to get there by year end all as possible, but yes, I think we've got to wait till the next call. Our goal is our goal is to do revised goals and objectives in July three months from now and we have better visibility into that and like I said I. We're hopeful that half will hold in half will change, but I don't we don't have those numbers exactly yet.

You know, but.

This is the type of.

Platform, where.

Stat like occupancy is going to change that much even in the worst at times I don't know the wherever below 92, 3%.

Although Matt you might have a better.

Insight into that and we went into this downturn in a very healthy.

Market from job growth perspective, and supply and demand perspective.

And so I think that's helping here because there was very really very little.

No go space overlay there was.

Just all the metrics for December Jan and Feb, very very good. So we're hopeful to still be able to come out of this thing over the summer and then start to rebuild and.

Hopefully not lose much in the way of occupancy, but we'll have more on that in a few months.

Okay appreciate that thanks.

Thank you. Our next question comes from the line of John Kim from BMO capital markets. Your question. Please.

Thank you just summarizing FIFO accounting you assess the entire DC portfolio to fair market value at least once a quarter.

The only write it down but you can't write it off and falling period.

Did I summarize that correctly.

Generically, yes, I mean, the Cecil requirement.

In human before C.. So we had to assess every position every quarter what see so requires is a much more robust process around it much more analysis, introducing probabilities and stress test and things like that.

And we pushed on those really really hard at the end of year can take the them the.

The majority of the hit upon implementation through equity.

In the first quarter.

Then you do reassess every position on a quarterly basis.

Position by position, but also market conditions and so we stress them further in the first quarter two to come up with the incremental $4 million Charger. So we took through earnings any charges on a go forward basis.

Our through earnings, but there is the.

Chance that goes the other way too so there are fluctuations.

And your thoughts around reserves that can cause you to reverse previously taken reserves I'll also say even beyond Cecil if we sell a position because andrew alluded to it.

We sell a position at a better price than where we marked it we reversed that reserve as well. So if in one of these loan positions, we execute at better than where we marked it and there's a reasonable likelihood that we will we would reverse that portion of the reserve.

Does seasonal change your views on the size of the DP book and I know you're shrinking at this year already but.

Going forward and also your views on reporting a core ethical figure going forward.

So our view of DP is separate aside from Cecil Cecil's of a rule that we in every other lender has to abide by among other rules that didn't influence our view of the size of the portfolio.

The market we're in the size of the company the opportunities are out there really dictate and our liquidity position dictate.

The size of the book.

As the reporting core FFO, we tried to be very diligent diligent about reporting FFO in accordance with neighborhoods rules and not not try to create our own.

We do put the information out there in our release to say here are the things that are nonrecurring.

So that people can derive their own FFR, they want to and we call out the reserves that you can add those back as they are nonrecurring in nature, but as to presenting an unusual form of FFO.

I don't know that that's the best practice.

Thank you.

Thank you. Our next question comes from the line of Jon Corzine from Stifel. Your question. Please.

Great.

First thank you very much for this much effort, particularly at nice job.

Two quick questions. One is that what you're thinking about the observatory at one Dandy. These days and then second Andrew when you you had said that year DP book was 90, 898% collected how much of that is.

Hey, mankind.

Or how much of that is out of a reserve account and how much of that is actually the property generating the cash to pay the debt service.

Well.

On our deck.

I'll just take that one I guess, David will give you give you a chance to try and calculate that number. If you do you have the resources to do that.

[music].

On the odd deck.

John.

I think it's going to be spectacular.

What were designing and we'll unveil. This December we've always kind of sort of said not quite there yet not quite there yet. This december we will be able to share with you. Our plans for not just the observatory per se, but the entire experienced front to back.

I think it will really find its place in the market UBS.

You know of good objects throughout the city.

It is its a.

We experienced by its nature is I think is very conducive to whatever people's feelings are going to be about in 2022 about distancing.

Because it is.

A large facility spread over three floors column free.

Tool ceilings course.

Slave removed, so and a lot of outdoor experience. So I think it's it's not a very congested experienced device design. It's a it's intended to be almost what we call a like a borderless or boundary less experience and people will have the opportunity.

To to wander to experience and I think not to feel very compressed because we're only I think our models our underwriting as I've mentioned team to pass is only 2 million people a year, which I think would put it at the low end of all objects in terms of occupancy that's not because we don't think it'll be populations because that's.

The experiences not we haven't designed it for a high volume.

You know.

Close in proximity mass market experience so.

The launch of our deck is end of 21, I don't think we project stabilization into our five year bridge, you'll seems like a long time ago, we did that five year bridge, but back in December.

The real numbers, Rob that kick in I think in 24 25, so I'm very hopeful that by then this will not only farewell, but it will actually be the kind of.

The kind of experienced almost like a form of escapism, where everybody who's been cooped up and can't wait to.

Go out and experience you know things on a destination basis, that's other than.

Like I said earlier your bedroom or your kitchen or wherever it is I think this will play extremely well into that and we're still very optimistic what was the other I think I think we've got to come back yet I don't want to give you a number that's not completely accurate the breakdown between what comes from reserves, what I mean, the vast majority writing whats pick and once.

I just want to make up anonymous alright, John we're getting a lot of funded reserves on the alone the pay interest so has that.

Thats that we would view as cash receipts not pricing so John if somebody's put up as part of your closing equity reserves to pay interest I mean, that's we get our interest paid its just they put the money up in advance it's prudent on our part and then we draw from the reserve I don't know thats pick or not in your mind, but I.

I think he wishes to this do we know what's true pick forget everything else just what's what's pay in accrue forget everything else.

Well I can only take up like okay.

I don't think it's much jumbo have come back.

Alright, thank you very much well done.

Thanks.

Thank you. Our next question comes from the line that Peter Rumblings from Jefferies. Your question. Please.

Oh, Yes, my my questions were answered it actually thank you.

Thank you. Thank you.

Thank you. Our next question comes on line as Craig Mailman.

Keybanc capital markets. Your question please.

Thanks, guys could you give a little bit more color on the the Nassau deal in terms of kind of dollars out the door. I think you guys had maybe you're going to.

JV partner, there and maybe just timing.

Sure I think we're planning on starting construction on that project them a fall.

And we plan to put a construction loan and a JV partner in place before.

We start building there.

And we've made significant progress on both those fronts.

Which we expect to be successful and announcing both a construction loan on a JV partner.

In the next three to three to five months I would say.

So it's it's a build to suit for a large institution downtown and we don't expect to have a significant equity investment there we expect.

Really building a primarily on behalf of third party capital.

That's helpful. Then.

I know, it's when maybe a little bit tough to answer to a little barely here.

Yes, I mean, obviously you guys are kind of trying to put the opportunistic dollars today kind of where would you try to underwrite market rents first in place rents and may be kind of breakdown it was an office or or retail asset.

Yes, I mean, I think we got to let we got to let this market play out a little bit.

See I mean im not we're hopeful that.

Rents.

Yes.

Are going to hold because I think what you're going to see it just a period of stalemate, it's not going to be a period of rent decline I think you're going to see people who have quick deals on full.

And we'll revisit and Steve you can add onto US we'll revisit we're hoping they all come back you know that pipeline I gave you earlier I just want to be clear that 815000 pipeline that was excluding 600000 feet.

Of additional pipeline that was we would have told you two months ago, we were going to make and has been put on hold not that deals, but hope now not all that 600 will come back.

Even if you know half of that 600 comes back for a fraction of it on top of the existing pipeline that would still you know support our business plan I mean, maybe tenants were going to.

Look for some additional concession on free rent.

Yeah.

That Steve you want to speak to that.

Well, let me.

Moving to be helpful down a little granularity to our pipeline.

No as we sit here today, we have 275000 square feet of leases that are out for execution or an active document negotiation.

We have another 540000 square feet of.

Term sheets those are term sheets that we think about reasonably high probability of converting over to leases, but then on the transactions that were delude as a result of cope with 267000 square feet of leases that were out negotiations and another 340000 square feet of term sheets. So no 600000.

A few the makeup the combination of all that as the going in for the market talking about.

The lead.

Amount of deals I don't think those requirements are going away. So.

We have a high degree of hope that.

Systems, Reengaged with us as matter of time and win.

And I think most marched wrote on as the what the feedback that we're getting from tenants right now is.

People are going to wait and see as far as where the market goes but the immediate reaction is probably a push on.

The concession site with its a few more most rerun or a little more.

Not as much as a dramatic drop in efficiency.

Great. Thank you.

Thank you. Our next question comes on line of Steve Sakwa from Evercore ISI. Your question. Please.

Thanks, just a clarification on collections numbers Mark you provided.

Our cash numbers or does that in any way includes security deposits I don't want to be appears gave numbers kind of both ways.

That is that is pure cash Steve to me that hurts come on.

Hi, Mike.

I just clarifying. Thank you really got to you really got asked that question.

Cash cash all cash rent.

Thank you.

And then secondly, Steve just as it relates to light ends and kind of their space needs as they think about that coming back in and right getting people into into the buildings. How do you think they're thinking about.

Sort of space and I guess secondly on the under rent side.

[music].

You know you do so kind of mark to markets or at least projections of market ran against explorations in the.

In the supplemental in those numbers did come down quite a bit from the fourth quarter. So I'm just curious to know how youre thinking about.

Those declines because it did seem there was about a 10 or 15% change in the spreads in 20 and 21.

Yes, let me take that one first.

I think from our perspective on the rents.

The kind of the immediate.

Quick shock to the to the rents I don't think those are where we view the markets.

Certainly in the medium to long term.

But as Bob.

After the office in over the next.

Quarter or too.

We took the rents down just I think as a measure of conservatism.

Not knowing where the world actually huts.

As far as space needs.

Interesting conversation.

There's a lot of discussion with tenants, who are trying to figure out exactly how they're going to plan for their space. There's no doubt that the phenomenal densification, which really started in 2011.

Played itself out that even before co. Good there were lot of businesses that we're starting to build the opposite direction where that we're.

Well, there's going to assign more square footage per employee a good before and I think now as a result of cold.

Theres a consistent machines that were feeling we're getting back from tenants that.

They're going to come back they're going to redesign spaces. They are going to allocate more square footage in order to provide distancing between employees and.

So does that mean that tenets eventually end up taking more space. The loan maybe just maybe no it'll probably be offset by some tons that.

Don't do consolidations, but split their operations.

For diversity, so as I think.

Story still needs to be written but clearly the phenomenon of Densification that is that's that's that's gone.

Great. Thank you.

Yes.

Thank you. Our next question comes from line of the criminal trial from Morgan Stanley. Your question. Please.

Thanks, seeing the question. So just wanted to clarify that on more so on street retail you talked about just those numbers in the exploration being conservative.

But maybe just give us some specific color around.

Your views on Street weekend rent and then see the deferrals.

In Street retail any center.

Feedback the length of the deferral anymore color on that would be helpful.

Well.

What's the questions Street retail retail.

Directionally rents.

We are we're most focused on getting the businesses back open getting the.

Customers back in stores and so it will be premature it's a really speculate at all about the direction of rents I mean, there's there's there's no retail pipeline right now that's there's there's office pipeline, there's no retail pipeline.

It's a business and transformation and we have a lot of.

Very strong tenants that are we're hoping will reopen and customers will get back in their stores.

So that's the primary focus right now in terms of market rent direction.

The retail the collections and retail we're all over the.

All over the.

The spectrum in terms of most of our big credit tenants paid rent as is the obligation.

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Some didn't and some we have deals in place deferral deals.

With several of them some we do not and the smaller tenants interestingly it was sort of the same.

Many smaller tenants pay rent as.

For their leases and then then tenants that were negatively affected.

We're working with as Mark said, so it's a generalized in terms of.

How April collections went on the retail front.

I mean retail.

Tenuous as we went into Covance. So I mean, we where we thought we felt like we have found.

A reasonable place. This certainly is not going to be helpful.

Most of our retail portfolio is long term credit lease. So what is interesting sort of Nichey commentary. We had good collections in April and that doesn't include some of the tenants, who didnt pay who really our credit otherwise I mean these numbers be higher.

And again I just want to.

State that I think it's unfortunate that.

That larger credit retail tenants be an office or retail.

Don't step up to the plate like almost everybody else in this portfolio and pay because all the doing is making it harder for us to work with the smaller guys. It's not just doesnt mean, its everybody in this industry. So I mean, it's.

The.

You know the the latitude Gotta go to the small guys who are.

If we needed the most and by and large everyone did that but as Andrew reference there were a couple small counting on one hand or less.

My fingers are less.

Who didn't see it that way.

That rent is still money goodness collections would be higher because we will obtain they will eventually.

I have to have to step forward and and that's the way it should be because we need to focus whatever resources, where we have our own obligations as you know and whatever.

Resources, we can focus to help the street retail community who needs at the most were going to do that.

Your next question comes on line up Blaine Heck from Wells Fargo. Your question. Please.

Thanks for taking the question so to me it sounds like you guys aren't too broken up about not getting the 220 deal done and you're expecting to close on the new financing in the near term I guess, how should we think about that and that asset longer term, maybe when the investment sales market comes back is that.

Earmarked to put back on the market or is there any sort of change in strategy that asset.

Well I think it's because of the long term nature of the leases there, it's a great JV asset coming.

Out of sort of the Tom I'll turn the market.

We do intend to put the financing in place as Matt said.

Obviously preference would have been to close the deal that we contracted on but.

The buyer didn't perform and.

It's our job to adapt and react and.

We did that in terms of lining up financing.

And ultimately, we'll probably look to jvs.

Okay. That's helpful. And then just wanted to ask about we work in particular and maybe you can comment on co working in general, but obviously it's been.

Widely reported that we were may not pay ran at some assets you guys have two leases with them. So are they current on rent is your expectation that bill continue to pay rent for the remainder of the year.

Yes, I think we're their current on.

Two of their leases with us and.

Our current one and not current on the other and those discussions ongoing so probably can't comment beyond that.

Alright. Thanks.

Thank you our final question pertains to follow up from a line of caution from Citi. Your question. Please.

Great. Thank you, it's Michael Bilerman.

Mark I wanted ask you sort of a big picture more strategic question kicking off your comments about the future of office space needs from corporate.

And I do agree with you in a remote environment, it's really hard to have the team building the collaboration the creativity that come Rotring.

But the covered 19 pandemic is basically force a trial of work from home for every single office tenant Thats out there and I would imagine that theres a lot of.

Chairman Ceos Board will look at something financially and say you know what and I'm going to put aside the social distancing.

And the density part because we're going to hopefully well get over that.

But a lot of I would thank a lot of corporates will say, let's see let's try more remote let's use less office space.

See how it goes and then react to cease I'm not getting the right outcomes. So I guess what gives you the confidence that there is not going to be a bigger shift because we're going to start from a base of 100% of tenants that are working remote.

That a portion of them I would assume are going to try to do it more effectively going forward.

Well I look part of his my opinion part of it is what I'm hearing from our tenant base I mean, we're talking to these guys and.

Look there's always someone who.

Yes, if people want to be at home.

This is always even before co bid there are people, who want want to work from home I mean, there's some people rather be home to be a work thats not whether thats.

Going to be heightened now or not.

We'll see but we're hearing from our tenant base. Most people are saying why this this doesnt work how do you do new business solicitations. How do you you know, it's one thing to do internal meetings or or Friday happy hours amongst your employees or may be having these.

Virtual happy hours or maybe doing some other kinds of meetings with existing relationships, but the business itself is a personal physical business. It has to be done more safely because people you know, especially if you know with koby being is.

It was bureau and is it but.

I haven't heard anybody I haven't heard anybody say.

It's prefer are able to be on a on a computer screen at home.

Then then in the office and all this technology Michael existed pre covert this is not new technology.

There are people had been doing video conferencing as we Havent I'm sure you guys have for years and years, there's nothing new whenever I'm looking at right now is exactly what I've done 50 to 100 times previously.

Never like to Dan and don't like it now so.

Look.

Now everyone's been exposed to as opposed to some people and maybe there'll be some people say well it works or maybe even preferable, but I think the combination of what we're going to benefit by.

From the lack of Densification, what like now like with with the pendulum that was already swinging back in the direction of Densification. The pendulum was already swing now it's just.

As I think Steve said as he was I can see when the video. He was he was saying rest in peace Densification.

And that's I think what were you know how we look at it so whatever we gain there will hopefully more than offset whatever we might lose to work from home technology, but there's nothing that we have room for work from home if people into its technology. Its efficiency, we don't want tends to take more space than.

They need because that only create problems down the future they should only take within need and.

More often than not they don't take enough in the knee growth space and that causes problems for them, if they feel that five or 10% of their workforce can work from home on a video screen then have at it but.

It's just not like I said, it's not for US. We are we're office century people. We believe that people are at their best.

In the kind of space, we have at one Vanderbilt. It's it's not even just is it okay. It's it's enhancing to the experience natural light toll ceilings.

You know collaboration but.

With with bigger workstations the ability to.

You know mix in.

Cafe conferencing workstation. It all I think still works, it's just going have to be done with new rules that at elaborated on and when we do that and if there's no recursion cobot.

I think I think we'll look at it in the rear view mirror after we get under control.

And I remember if it was not there was this investor day or the one before everything's blending in of your video on the Densification, calling the end of it.

Which totally in mix well I was you don't always have to be right for the for the right reasons, but right.

David side again mounting rest in peace I see him right now.

Gross.

Ill briefly to through a market selling equipment when other component of that people are to our thinking about there's a lot of good company hoteling.

No the concept of.

Having 120 employment, but only 100 seats.

Thats phenomenon, who is going to start to go away such that every employee going to want their own.

Going to want to share my seat with somebody else because everybody is going to have a sense of.

Cleanliness and.

With that close Densification will.

Space allocation per employee as we go forward.

Helped to offset.

In no small amount of employees that work from home.

Well clearly the.

The element of.

Being together and collaborating mix.

We all want to get back to that point.

As for sure Michael Thank you for the question. Thank you everybody. This was.

Yes, a little longer than usual, but it certainly I think was warranted and hopefully a informational, but most importantly, hopefully everyone.

Stakeholders of this company come away with the feeling that we're doing our best under very difficult search situations like everybody is around the city in country right. Now I don't think anybody has having these you talked a bit and.

The best you know the best Antiseptic to this will be.

You know getting getting back to work whenever that time comes and hopefully come soon and then hopefully with that we begin.

We begin normalization, however, lower and if that takes three months six months 912, whatever it is with a billion dollar hard deck.

We are ready for it and hopefully beyond that we'll be back to our usual position of being able to.

Invest and take advantage of opportunities on behalf of shareholder so thank you.

Thank you, ladies and gentlemen shoe participation in today's conference. This does program you may now disconnect. Good.

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