Q4 2020 Vornado Realty Trust and Alexander's Inc Earnings Call

[music].

Yeah, Good morning, and welcome to the Vornado Realty Trust fourth quarter 2020 earnings call. My name is Karen and I'll be your operator for today's call. This call is being recorded for replay purposes on.

Lines are in a listen only mode. Our speakers will address your questions at the end of the presentation. During the question and answer session at that time. Please press Star then the one I had touched on phone and when I turn the call over to MS. Cathy Creswell director of Investor Relations. Please go ahead.

Thank you welcome to Vornado Realty Trust fourth quarter earnings call yesterday afternoon, we issued our fourth quarter earnings release and filed our annual report on form 10-K, with the Securities and Exchange Commission. These documents as well as our supplemental financial information package are available on our website www.

W Dot dot com under the Investor Relations section in these documents and during today's call we will discuss non-GAAP.

Financial measures reconciliations of these measures to the most directly comparable GAAP measures are included in our earnings release form 10-K and financial supplement please.

Please be aware that statements made during this call maybe deemed forward looking statements and actual results may differ materially from these statements due to a variety of risks uncertainties and other factors. Please refer to our filings with the Securities and Exchange Commission, including our annual report on form 10-K for the year ended December 30, <unk> 'twenty and 'twenty.

For more information regarding these risks and uncertainties. The call may include time sensitive information that maybe accurate only as of today's date. The company does not undertake a duty to update any forward looking statements.

On the call today from management for our opening comments are Steven Roth, Chairman and Chief Executive Officer, and Michael Franco President and Chief Financial Officer. Our senior team is also present and available for questions I will now turn the call over to Steven Roth.

Thank you Kathy and good morning, everyone I hope all of you continue to be safe and healthy.

Before Michael gets into the business review and the numbers, let me make a few comments.

Notwithstanding that this is a new year towards these when he wants it feels it still feels a lot like 2020.

The Covid pandemic remains a significant health risk normal life continues to be disrupted gatherings and travel are still restricted and office building occupancy remains quite low.

But there is light at the end of this long total sciences from farmers around the world I've worked at warp speed.

And with the rollout of various vaccines is expected to accelerate accelerate in the coming months.

We expect New York to begin to rebound with office workers and tourists returning and the second half.

While new York's recovery will take some time the city remains a magnet for talent as evidenced by leading companies renewing their leases and making margins things commitments even during the pandemic.

For all the talk about working from home and continue to believe that our natural human social inclinations and.

Demand to interrupt gather and experience all the city has to offer will carry the day.

And when life returns to normalcy, the many fees.

Positives of having employees working on the same space together with our colleagues will become self evident and me.

And I believe that working at home and wants kitchen alone day after day.

Day week after week is not on long term proposition.

Okay.

We have a new administration in Washington, which is committed to push through significant additional stimulus and New York will certainly get its fair share.

These dollars and the potential to modify growth partially reversal is that actually were to happen will greatly benefit and New York and other large cities.

Yeah.

Despite 2020 being one of the most challenging years and a lifetime.

We have made significant progress to position <unk> for future growth.

And 2020, we closed a billion dollars of apartments at 220 Central Bloc sales, that's a big number.

Which was added to our cash balances and enhance our financial strength.

Remember, we are building Farley and Penn.

And one off our balance sheet without debt.

In December 2020, but brand New Moynihan train hall opens and the public to rave reviews from.

This amendment and as the Transportation Center of New York and.

And our Penn District as the Bullseye.

<unk> was honored to be a major participant and the more to have public private partnership.

And 2020 at the height of the pandemic, we completed a lease with Facebook for all 730000 square feet and the office fortunate thus far with.

This lease was the largest office lease and New York last year.

The first phase and Facebook space was delivered in January and the remainder will be delivered later this year.

The new long Island Railroad 30, <unk> Street entrance situated between on one and two also opened in December.

It's designed as futuristic and unique and exciting and that is intentional.

In December.

We finalized our agreement with the MTA to develop the long Island railroad concourse retail stores on the north side of the concourse, our hours and Susan and one footprint.

This project will double the width of the concourse relieve overcrowding and raise the ceiling through a grant MTV and Craig has vastly improved conquest from one hundreds of thousands of commuters who use and each day.

Construction is now underway and our retail has been taken out of service.

As part of the deal here, we will gain long term control of an additional 22000 square feet of retail on the sell side of the concourse.

That will have all the retail along both sides of the heavily trafficked long Island Railroad Congress by the way in normal times Penn station is teaming with traffic and I'll.

Our retail.

The stores do really really well.

And 2021, we will deliver in phases, our redevelopment of the $2 6 million square foot Penn one.

This game changing will include 200000 square feet of net of amenities, the likes of which are unparalleled and New York.

We are targeting targeting summertime opening of the 34th Street lobby, which well completions shortly thereafter.

Also and this year, our dramatic redevelopment of the one 8 million square foot per two will be in full swing.

Sitting here today, we are more confident than ever and our design and programming of the $4 4 million square foot campus at the combined and one two.

With unique and outstanding architectural design and amenities sitting on top of New York's may and transportation hub with Apple and Facebook tendencies and other of our adjacent buildings and with the Governor's plan for significant additional investment and the Penn station area, we couldnt be more excited.

To showcase our vision for the district, we have just opened our new and district experience Center.

Actually thats, a fancy word for sales center looking at on the seventh floor and one appropriate appropriately and the heart of the action. This 12000 square foot market and said there is the best I've ever seen.

It will be the venue for our leasing and development teams to present and showcase our projects to the brokerage community and <unk>.

Respective tenants early comments from brokers and tenants have been amazingly enthusiasts.

And when gatherings are again permitted.

Permitted and we look forward to hosting all of you and the meantime, please visit our website and the latest images of our plans for the Penn District.

We update on development deals once a year and have done so for the Penn District on page 31 of our supplement.

Last evening.

Overall, the projected yields on these projects has declined modestly from eight 3% to eight zero percent, let me explain.

Volume declined to 100 basis points largely from additional <unk>, we granted Facebook to close the deal during the past debt.

We also are budgeting additional fees for retailers and falling given the environment.

Our role is to close the Facebook leasing in the middle of the pandemic and it.

He is an outstanding deal that we are proud of.

Facebook low shortly its scale its location its architecture and its huge workplace.

At Penn One we increased the budget to include the long Island Railroad concourse redevelopment, which I just mentioned as well as juices and sustainability initiatives, we have added to the scope and one.

And we're replacing all single plane and glazing with new state of the on Triple pay and a high energy performance Windows, which will dramatically improve energy more sales infiltration and tenant comfort.

We are also increasing the scope and pinpoint to included and electric electrification program to enable the ability to access more clean renewable energy.

These initiatives should command higher rents, but to be conservative, we have and adjusted for that and the budget.

And to the returns actually increased as we scrub the numbers with respect to expense and tax assumptions.

As far as <unk> Penn one and two come online they will deliver very significant incremental earnings.

As you will notice we did not publish an NAV estimate this year as we had for the past several years I foreshadowed this and my shareholders letter. The last April as every analyst has their own estimate anyway, and the market didn't seem to be placing much value on ours.

As previously announced and the fourth quarter, we implemented a program to reduce our G&A by $35 million while difficult. This was the right thing to do.

In connection with this tool of our beloved long tenured executives, David Greenbaum and Joe back now.

Net back at year end from day to day roles and became senior advisors.

Ada was indebted to them and thank them for their immense contributions.

Glen Weiss and Barry Langer, our long standing heads of leasing and development now have leadership roles as co heads of real estate and.

They have been functioning as co heads for over a year now and our successors to David.

Michael Franco has taken on the additional role of CFO, succeeding Joe.

Net Thomson Haley has been appointed Chief administrative officer, and stepping up from CFO of the New York Office Division, taking on additional responsibilities on our financial Division.

This is all a continuation of our leadership transition that we began in April 2019.

And I'm confident that our talented and next generation of leaders our season proven and up to the task.

But worried about.

ESG and we continue to be industry leader on sustainability and ESG remains our highest priority for all of US at Vornado and is further supported with oversight from our board.

The risks related to climate change are two minutes.

We are determined to reduce our carbon footprint. We lead by example through envision 2030, our 10 year plan to make our buildings carbon neutral, which starts with our commitment to reducing our energy consumption and 50% below 2000 and by base year.

I would note that since 2009, we have achieved a 24% energy reduction over the 10 year period through 2000 and.

We have a seat at the table with Apollo.

Apollo climate policymakers city state and federal levels to advise not only on what role buildings must play and climate change mitigation and even more importantly on how.

To execute.

We have also led with robust disclosure of our ESG data with early adoption of SA SD standard.

Release of our EEO data and climate scenario analysis. According to the recommendations of the task force on climate related financial disclosures with TC FTE. Our 2020 ESG report will be released in tandem with my shareholders later in April.

Yeah.

I'll finish with a shout out and thank you to our amazing and talented vornado people to our leasing teams, who did the Facebook at NYU deals, which by the way with the two largest deals in 2020.

So our development teams responsible for filing and wanted them too and more and so our operations teams, who follow all protocols and have our building satisfies and ready to welcome on tenants AUM you are on.

On a plus at the head of the class and we say thank you.

Now to Michael.

Thank you, Steve and good morning, everyone I too hope, you're all safe and healthy.

I'll first cover our financial results and then with a few comments on the leasing and capital markets.

Fourth quarter <unk> as adjusted of 66 per share compared to 89 per last year's fourth quarter.

A decrease of 23.

This decrease is reconciled for you and our earnings release on page five and then our financial supplement on page seven and.

It was driven by a few items.

Awfully, one half, which is 12 from our variable businesses still being offline.

Roughly 20%, which is <unk> from.

And from taking Penn District space out of service and the balance from the Jcpenney lease rejection, and Manhattan mall, and other tenant issues and offset by some interest savings.

None of these items, our new news and are right in line with our statements over the past couple of quarters. Furthermore, most of these are temporary and the income will return over time.

On January 29, we issued a press release summarizing fourth quarter non comparable items from both net income and <unk> <unk>.

Biggest item was a $236 $3 million non cash impairment loss relating primarily to wholly on retail properties as required by GAAP accounts.

With respect to rent collections and the fourth quarter rent collections, excluding deferrals.

200 basis points to 95% driven by a significant pickup and retail collections. The breakdown as we collected from 97% of office rents and 88% of retail ramps, excluding deferrals January and February collections are running at the same level.

While the average headline same store cash NOI numbers on a negative on their face our core New York Office business actually was a positive one 4% when.

And when you blend and Chicago and San Francisco also our office business overall was essentially flat and negative 4%.

Takeaway here is that our core office business, representing over 80% of the company is continuing to perform well and this challenging environment protected by long term leases with credit tenants.

Let me also and comment on our retail cash basis NOI.

If you annualize fourth quarter retail cash basis, NOI at $34 3 million as shown on page 15 of the supplement you got $137 million. That's a good run rate number to use for 2021.

Please don't consider this guidance, but given the potential NOI and leasing up vacant space and our properties under development. We expect this number to grow from here absent any further tenant bankruptcies.

Finally, a number of you asked for the breakdown of our previously announced $35 million overhead reduction program by period for modeling purposes.

Again, while we do not give guidance here it is.

2000, Twenty's and G&A as published yesterday was a $159 million, excluding the onetime costs associated with the overhead reduction program two.

<unk> 2021, G&A is budgeted at $141 million and $18 million reduction.

22 will benefit from a further reduction of $9 million and thereafter by a reduction of $1 6 million.

Total and these reductions is $28 $6 million and addition, there are $6 4 million and reductions budgeted for 2021 that do not flow through G&A from lower operating expenses and capitalized payroll.

While 2020 was a difficult year, we have planted the seeds for significant growth once the city begins to return to normal level of activity.

In addition to the savings we will realize from the $35 million overhead reduction program, we executed in December.

And we expect significant growth from the return of our variable businesses and the Farley building fully coming online in 2022, followed by the redevelop Penn one and Penn two and reduced interest costs as we rollover our debt.

Now turning to leasing markets.

2020 office leasing activity and metrics were greatly impacted by the pandemic across all three of our markets total leasing volume across Manhattan was the lowest since 2000 and while new leasing activity was at an all time record low of $12 3 million square feet net.

Negative net absorption during the year driven by sublease space being put on the market led to an increase and the overall availability rate. This sublease space will certainly present and near term challenge to stabilizing net effective rents.

Well taken and rents have come down on a measured way concessions have spiked, though we believe now have generally stabilized as landlords are doing what they need to do to be competitive in this environment to fill space we.

We've seen this movie before though the market is following the same pattern, we have experienced and predicting the downdraft and then the recovery. If one is willing to look out a year or two.

During 2020 with post Covid leasing activity down dramatically, we still leased two 2 million square feet and 54 separate leasing transactions and New York.

Our initial rents were strong at $89 33 per square foot and average term of these leases was 14 four years Mark to market was a positive four 6% cash.

And most notably and as Steve mentioned, we executed the two largest leases and Manhattan during 2027.

730000 square foot Facebook lease at Farley, and <unk> long term renewal of 633000 square feet and our one Park Avenue.

Our 336000 square foot lease with Apple and kind of 11, and 120000 square foot lease with Citadel and $3 50, part also highlighted the solid leasing year.

And the fourth quarter, we completed 16 office leases comprised of 163000 square feet.

We signed a new office lease with <unk> for 24000 square feet and $5 95, Madison Avenue to go along with their flagship vending and <unk> retail leases in the building further reinforcing its bull's eye location.

We also signed 64000 square feet of deals at Penn, one, including an important and 24000 square foot renewal with Wells Fargo.

Initial cash rents for the quarter were $75 55 per square foot and cash Mark to market was positive <unk>, 5%.

We ended the year with New York Office occupancy at 93, 4%.

We are feeling more optimistic given what we're seeing and the first six weeks of 2021.

Tour volume is up.

Seeing more tenant proposals coming until these space, particularly on the financial services sector and companies are looking to take advantage of current market conditions.

And importantly, as large companies begin to plan for their employees return to the office. They are also beginning to focus on their future lease expirations and interviewing brokers as first steps and the process.

We know of at least four companies with large space needs and the need to plan ahead, which held interviews during the month of January alone in this regard.

Additionally, as the initial shock of Covid wears off and companies begin to look forward most of the pause negotiations and our portfolio of restarting.

Notwithstanding some of the positive signs and we anticipate leasing activity will remain slow for the first half of 2021.

It is obvious that flight to quality is accelerating as tenant not only are seeking the best available products, namely Redeveloped and new construction the more than ever want to do business with the strongest landlords. We are certainly getting more than our fair share of the deals that are out there on.

And our leasing team is very active and the market and has their pulse on and tenant activity all of which is reflected in our pipeline and we have some 300000 square feet of leases out negotiation and these include a 55000 square foot lease with a tech company at 12 90 Avenue the Americas of 33000 square foot lease expansion with a financial services company and every day.

Seventh Avenue, and a 75000 square foot lease out with a nationally recognized non profit at a $25 seven and seven.

Beyond this we have an additional 1 million square feet and discussions the majority of which is with tenants, which would be new to our portfolio.

As we have said in the past our office expirations during 2021, and 2022, a very modest helping us mitigate against more challenging near term conditions and each of 2021 and 2022, we have less than five per cent of our space Rolling 742000 square feet of leases expiring in 2021 and seven.

126000 square feet, and 2022 of which 352000 square feet during that two year period is that the newly Redeveloped and 10 one.

Turning now to Chicago and our margin.

And the Chicago market, New leasing continues to be slow while short term renewals are dominating activity.

And our of course and dialogue on many of our expiring tenants, including a 44000 square foot renewal, which we expect to be signed and the next few days.

During 2020, we completed a 10 year renewal through 2030 to 448000 square feet with Paypal and signed 49 showroom leases comprising 190000 square feet at very strong starting rents of almost $55 per square foot, including 60 to 62000 square feet and the fourth quarter.

Sure.

Turning to San Francisco.

505, California Street continues to outperform the market. We recently completed for renewal transactions, reflecting the market resiliency of the best in class assets and reinforcing our status as the Premier building and the city and.

Impressively during the period of our 14 year ownership, we have never lost a major tenant and this building.

Goldman Sachs renewed its entire 90000 square foot lease the mark to market on this renewal was 58, 7%.

While bank of America committed long term to the building by tacking on an additional 10 years to their current lease term to bring this exploration to 2035.

The bank will consolidate all of San Francisco offices into its existing 247000 square feet and $5 five returning to its original home.

This was the largest leasing done in San Francisco and 2020.

It is important to note, we have no leases expiring and San Francisco and 2021, and only 48000 square feet expiring in 2022, where we are in advanced discussions with these tenants to renew.

Turning to retail now on the retail environment remains challenging and rents continue to be under pressure.

Retailers have little visibility on sales given the uncertainty over timing of tariffs and office workers returning.

And thus most remained reluctant to commit to new space.

And the retailers are starting to kick the tires again on space.

And Theyre also continues to be a flight to quality with retailers upgrade and their locations or accessing high foot traffic locations that were previously unavailable as evidenced by our lease this quarter with Christophe will at $5 95, Madison, where they will join <unk>.

Demand for the retail at Farley remained strong with particular interest and the food Hall.

We have now signed 14 leases and have another eight out for signature.

We ended the year with New York retail occupancy to 78, 8% the decline primarily JC Penney related.

Turning to the capital markets now the real estate financing markets continue to improve with spreads tightening back to pre pandemic levels for high quality office, all and coupons are now at historically low levels. We are actively working on a number of refinancings and expect that we will term out these loans and lower rates from the current ones.

Finally, our current liquidity is a strong $3 91 billion and.

Including $173 billion of cash and restricted cash and $2, one 8 billion undrawn under our $2 75 billion revolving credit facilities.

With that I'll turn it over the operator for Q&A.

Yes.

And.

Thank you we will now begin the question and answer session. If you have a question. Please press Star then one on your Touchtone phone if you wish to be removed from the queue. Please press the pound Brian are the hash key senior Speakerphone, you may need to pick up the handset first before pressing the numbers.

Once again, if you have a question. Please press Star then one on you.

On phone.

Each caller will be allowed to ask a question and a follow up question before we move on to the next caller.

And we do have our first question from Manny Korchman from Citi.

Hey, good morning, everyone.

Michael you talked about your explorations and 'twenty one 'twenty two I think you said 325000 square feet at Penn one.

How much of that is captured in the mark to market.

You provided there that goes from the $81 to 75% to $85.

And especially on the <unk> piece.

Pre pandemic you spoke to a lot higher of a roll up there are you roll up expectations still in line with your previous comments.

Let me take the second question first and then I'll go at the first and Glenn jump in here I think our expectations remain the same.

Manny.

And our confidence and the product is.

Steve referenced given.

Sure.

And with brokers, we're seeing particularly on the experience center and bring it to light as we continue to evolve the amenity package.

We think even more so coming out of this right. This is what tenants want.

And I work live play in that environment and so on.

Our expectations remain the same for both Penn one and Penn two.

On the Rollouts and so I think that reflects that comment on your question in terms of that 352000 and feet on San Juan No difference and <unk>.

Expectations on the rollout at the mix of what rolls over a year by year.

In terms of that.

Square footage and what the what the range of rents is what's the mix of space and I'll have to pull out.

The detail is but.

It's our best guess in terms of what those particular spaces may rollout fourth but excluding panel on.

And you want to add going on right.

And maybe it's Glenn and I will tell you as it relates to the roll up and to build this thing and we're being very careful because we know the product we're delivering is going to be fantastic and the reception and the market's been spectacular even as we work through the pandemic.

And so we're not going to jump to deals if we don't like the deals as early as per our initial underwriting and I will tell you we have a ton of action on the building.

From a bunch of small tenant to tenants and largest 70 80000 feet.

So we feel very good about where this is going and where the rents are going on this asset.

And then going back from them.

Thank you and your remarks and.

On the lease and the last night, you talked about a return to trade shows and 2021 how.

How much confidence you have on that and approximate timing is that at some point in 'twenty, one on or enough to sort of make a difference to income.

Our calendar currently we start coming back with the trade shows and August our major show Neocon comes back we have scheduled for the first week of October So we're readying for those events as we speak.

Okay. Thanks, everyone.

And we do have a next question.

Lisa Chua from Evercore.

Thanks, Good morning, Steve I don't know if you can say much about.

The asset sales you brought to market last year at $12 90, and $5 55, and just sort of the refinancing expectations I realize the sales market was challenged last year.

But I would've thought a refinancing of that would have been perhaps easier just given the low leverage level. So just any comments that you could sort of make on those assets and how you are sort of looking at those in 2021.

Sure Hi, Steve So first of all I will tell you that I was disappointed.

<unk>.

Reception to.

The other buyers to those assets.

We found debt.

They are the buyers were in two groups they were bottom fishers.

Which we're not for us.

And the conventional and long term.

Institutional investors were.

Dave.

They couldnt travel they couldnt see the product.

And so as a result, we werent getting the kind of reception that I had anticipated and so we did the <unk>.

We did the appropriate thing we took them off the market. These are great buildings that should and will command premium pricing.

And deserve premium pricing with respect to that with respect to refinancing the buildings.

That's basically a layup there 555 is extremely under Levered, probably somewhere in the neighborhood of 25%.

Market value or EBIT lower.

And so we are gearing up to refinance that now.

We are.

It has not yet been decided as to how much we will refinance that building core but refinancing net building is in process and will not be a problem at all.

And.

And still call it 90 days.

And it doesn't mature and later next year right. So.

Our current plan would not be to refinance debt yet anyway.

Is that.

We were not happy with the sales market reception.

The refinancing.

Refinancing of those buildings is in process and we will not be a problem at all.

Okay, and I guess my follow up Michael you sort of talked about a number of tenants in the market today and maybe you are Glen could you just sort of speak to I guess, what I'm really looking for space planning, how companies are thinking about densities and particularly for new deals which.

I think everybody a blank slate to think about their footprint and what are you seeing from tenants today that we're looking at new space, how are they configuring and where the densities look like and what does that portend for <unk>.

Rollovers on on other deals moving forward.

And yes, that's glenn's question, David Scott how are you on.

The first thing I would tell you we're seeing a very large uptick in our presentation to big tenant coming out of the wood work thus far this year.

Had five different presentations for large headquarter tenant and the last two weeks.

<unk> and so you're starting to see people come out and start to see things and the reception has been excellent on our pen projects and 350 Park number one number two as it relates to tenant plan.

And we've been reviewing that and a very.

Are you focused way, we've seen no change to what tenants we're doing pre pandemic.

And what we see them doing now during the pandemic per future occupancy and.

So I do not see change at all.

I think the one thing people are focused on is product type.

As we keep saying quarter to quarter people are more and more focused on the best building.

As it relates to redevelopments or new builds and most importantly, even more recently is the landlords that theyre going to marry with as it relates to services and amenities infrastructure sustainability and everything people care about as we work through this cycle.

But in terms of your specific questions, we have not seen a change and planning from a space design standpoint.

Steve we were.

The history of all this is that and the old days it used to be 250, or even 300 square foot per per employee.

And then and.

Along came Adam Newman, and we work and he tried to jam it down to 60 square feet per capita which was is.

Marketing and Thats why he is based on its cheaper because you put more into the.

And the same amount of space.

And so both extremes are absurd.

And so we see it settling and somewhere in between and we don't see any major change as Glenn said, we were on the phone yesterday with the senior team with blood against other who I think thats, probably more of this place designs and anybody else and they confirmed what Glenn is seeing and the marketplace.

So people have already gone to space planning, which is less formal and less rigid and the old fashion.

This is lightning the perimeter windows.

So the one thing that we are seeing is that there is a reluctance on the part of people sharing offices, our desk with other people.

And so that's sort of and a funny way seems to indicate that the concept of hotels and hot desk is not going to be as popular going forward.

So on the whole.

And there's more activity and space planning activity is pretty much the same as it was before all this started.

Great. Thanks.

Okay.

And we just have a next question from Jamie Feldman from Bank of America.

Great. Thank you and good morning.

Steve Owen and go back to your comments about fiscal stimulus and how you think New York City might benefit can you just talk about generally what you think could be coming and how that will impact.

The local economy, and then also I mean, we've seen plans from the governor on net.

Just on west and uneven conversions of vacant office buildings to maybe residential I just wanted to get your thoughts on kind of all of those topics and how you think that might impact the market and Fernando going forward. Thank you.

Good morning, Jamie how are you so.

You know the world has changed radically.

And now have a.

A buys and the White house.

And we haven't Chuck Schumer majority leader and the Senate.

Who I remind you is Brooklyn, born and bred.

And.

On a thread.

And so we believe that there is an enormous.

Trend now toward.

Fiscal stimulus.

Towards.

Supporting obviously.

The people who have been harmed by the Covid pandemic, but also to.

The major cities in this country.

Well lubricated with finance and money because they've been hurt and enormously. So we are and we are expecting.

Lots of government assistance.

To be supported by the new political regimes, including the majority leader who is all powerful.

So there's that.

Now.

The governor.

Who is the master builder of our generation.

Has put football a loves pit.

<unk> continues to be the economic and transportation center of the universe and if you look at his powerpoints and Slideshows and his last number of state of the state speeches etcetera, and you can see that very vividly. So his programs for the west side is.

Lots of work and pad.

Which are both aesthetic and logistical.

Including expanding the track.

Our capacity.

By acquiring and developing the 780 block which is the block.

As to the sales.

And that is expanding it with four tracks I think it is.

Also including the Gateway total.

I am corrected by my head of development.

And a track, okay ill address and <unk> in that space.

Side by side a challenge.

So I'll have to go with Barry because he is.

<unk>, which is an enormous increase and the capacity and pet.

The Gateway tunnel, we know about.

Pending the Highline and building a new.

Unbelievably more efficient with much with <unk>.

Simple the capacity and bust.

And I hope et cetera, et cetera, So net the west side of Manhattan will be getting and the enormous increase and infrastructure dollars over time.

And the major concentration on the part of the government. So we're pretty enthusiastic about it I would say very enthusiastic and obviously, we think we have the bulls eye location. So that we couldnt, we couldnt be more excited about all that.

Now the one.

Unknown was the campaign promises that they would reverse that the Trump tax bill.

The major portion of which was reversing salt.

Or if not reversing sold significantly modifying that.

On the awhile.

I think thats very good for New York residents at the Big City residents.

And I don't think Thats it.

That's biggest land book as the as the stimulus dollars that will come in but were that to happen I think that that would be another major boost from New York.

And if that doesn't happen and New York will do just fine without it.

Great. Thank you for the thoughts and then how do you think about vornado as participation and and expanding Midtown West and other Port authority is on the docket for renovation.

See a lot more growth and your development pipeline or our ability to get active and these projects.

The bus getting active in and we look forward.

And we understand public private partnerships, we were the major a private partner.

And development program.

As you know so we're pretty familiar with this.

And we are very very intimate with the with the government at the sales teams that do that kind of stuff.

As I sit here right now I don't think the bus terminal is for us.

I would remind you we have the better part of 10 million square feet on future development in our neighborhood.

Across the street.

And down the block and around the bed. So we have our handfuls with what we already own.

In terms of deploying that we will look at other other opportunities as well.

But right now.

Our plate is full.

And our growth potential is huge and if something else comes along and our neighborhood of course, we will look at it.

Okay. Thanks, a lot.

And by the way what I would add one last thing.

I would expect and history shows us to be the fact that and when it comes to the government seeking a private partner where the first call.

And we have been on all of these things so.

The question is how aggressive are we at answering that call.

Do you see the Midtown West plan.

Competing with I guess, you can develop more to the east over and alike.

Manhattan Mall I mean, it sounds like this is farther west and North how do you think about just the interplay between those two.

Current land bank versus where it sounds like the governor wants to expand.

Well I mean, most of that most of the stuff that the government is working on is infrastructure.

Honestly on the 780, <unk> block, which is 33% to 30 <unk> Street.

Yes.

Adjacent to the.

Distinction the plan there is to build.

And only 304 million feet.

Three or four main fee on top of the new expanded eight track.

Expansion now obviously those buildings are interesting, but 15 years away. So we're worried about them when the time comes.

We believe and we believe and and.

Mass, we believe and gathering we believe and clustering so.

More square for example, and what we're doing with Penn One and Penn two we believe that having $4 five main street and one cluster interconnected underground and over ground, where we can share amenities. We can move tenants around and we can provide space for everybody that needs expansion is an enormous plus infinitely more valuable that four separate one.

Million square foot building, which is spread around the neighborhood. So we think that the.

Clustering.

In the neighborhood.

Creates value for the entire neighborhood. So we're okay with somebody building and building on the river that's okay with us.

Okay. Thanks again.

And.

And we do have our next question from Michael Michael Lewis from <unk>.

Thank you.

And I wanted to come back to Steve <unk> question on about the mortgages coming to you.

Also on 909 third and the Mark This year and then 770 Broadway next year.

Should we just assume those are all straightforward refinancing and then as far as clarify Paris, California and $12 90.

And do you think the presence of your current.

Percent partner approach the reception of those assets and the market.

And maybe that needs to be addressed to the whole value and where do you think that's going to have much to do with it.

This is a very interesting and controversial man, who has a lot of people who are like them and a lot of people who dumped as I remember the accounts of 74 million people, who lack of 81 people who adopt.

From our point of view.

He is.

Our partner, we bought these buildings and 2007.

He was not a politician then and he was.

This guy like us.

His role in these buildings is totally passive.

And he is okay with that and I'm delighted with that.

And there are some people who who.

And as president affect negatively that's true okay.

It is not a sufficient issue to be of any trouble to us at all.

Okay and on your second.

And there was something else on that.

I'm, sorry, Mike on it and the other mortgages I would say they are all straightforward refinancings couple are well down the road right now including 909.

And again as I referenced in my comments, given how much the markets have recovered.

I think youll see the rates come down on the assets that were rolling over near term and then and then.

We will start focusing on the mark.

Right. After that 770 matures next year. So all of these are sort of normal course business given the strength and the markets, we're going to we're going to push a lot through the system here near term.

But Michael just said is what Michael just said is the point to emphasize and dwell on for a moment, okay interest rates are at lifetime lows.

The markets are extremely receptive the markets are clamoring for product.

And we have product.

It's not easy.

Each of US has our own opinions as to whether interest rates are staying where they are we're going to go lower and go higher.

And I don't think its relevant to get into that right. Now there are plenty low enough. So our mission is to.

<unk> enhanced our balance sheet by refinancing at lower interest rates and also terming out where we can.

Which is our objectives. So this is <unk>.

Time to finance.

On a product and actually probably in my career and we're taking advantage of it and a very aggressive but measured way.

Okay and then.

And for my second question.

And you did a good job explaining the sensors and the development yields on that portfolio I. Just wanted to ask since you have kind of spot development and yields of your supplemental.

Should we think of it more as a range around those and yield given cost changed a little bit this time.

Maybe it's the leasing environment next time, what do you think is the likely range of outcomes is that a narrow range around those spot sales.

Comfortable with those.

Or maybe a total wider given we're in a pretty uncertain environment right now.

Budgets budgets of budgets.

Locked in stone and not guaranteed theyre not actual numbers their budget. So they will move they are.

And we take these budgets very seriously.

We spent an awful lot of time on them. There are reams of data that support the four or five numbers that finally get published and our supplement.

We have great confidence and the numbers that we have offered.

But the other.

And our budget, we do not.

And we are and we are on the conservative side of life on that.

We do not expect them to change.

Obviously, they can change a little here and there.

By the way they have as much of a and.

<unk> opportunity of change and positively then change and negatively but there are budget. They are well thought through where we're confident in them and.

It's a serious piece of it.

Okay. Thank you.

And we do have our.

Our next question from Alexander Goldfarb from Piper Sandler.

Okay.

Thank you. Thank you good morning, good morning, Steve Good morning, Michael.

So just just quick clarification and hopefully you don't think of any other question and your response to Michael Lewis' question on five 5% and 12 90.

It sounds like we should take from your response to him that the refinancing of our $5 five and any normal course leasing.

Stop that nothing has been impacted by.

The fallout from January and so basically your ability to repay and Anne lease all of that stuff is on track. There is nothing that we should concern ourselves with I just wanted to just confirm that and your response to Michael Lewis.

Your statement is a little bit too on the.

The positive side, obviously, we wish.

As every American wishes that January six Hasnt happened, okay. So obviously and thats not a good thing, obviously and the stuff that happened and the Senate last week is also <unk>.

Same comment having said that.

We.

We have.

And some great buildings.

Great tenants and the buildings and those assets speak for themselves. This is business businesses business.

We will run the buildings without any and issue we will finance the buildings without any issue and everything will be fine okay.

Okay.

So that's the accounts from my first question, Steve you guys have always.

Promoted your environment.

By the way Alex by the way and there was a big article which started all this stuff.

On Wall Street Journal was probably a couple of weeks ago.

Which I read and it was an interesting article much of which was actually news to me.

Go ahead.

And.

Given the past few years, the big news versus real news, we'll leave that Bruce Efird, Wisconsin and Steve.

I'm not I'm not getting into that.

Yeah.

You guys have always been a leader and environmental right you've been energy efficient.

All of that stuff right and yet and your latest release on the pen development. The cost went up by 125 billion part for partly retail part for sustainability.

On the little bit more focused and puzzled by the sustainability part and one because you guys have always been doing that so I'm sort of curious what's driving this increase and cost and is this something that metric now have to think about as far as impact to returns and that.

What you guys were doing was already baked into buildings quite green and now theyre mandates that are.

Foreign except that Youre, not getting a payback on I just wanted a bit more color on that because that definitely jumped out from your updated schedule.

And I would rephrase. Your question since you guys are such leaders in I'll Rephrase. Your question now for you since you guys have such leaders and sustainability.

I was and these two items, the triple play and glazing and the electrification and the original budget to start with okay.

I have no real answer for that okay.

We decided as we went along and planning the building that we.

We wanted to.

But and the Triple play I think the Triple play and glazing is the first and New York is it not so it's the first of this by the way.

And it's all over Europe, it's almost mandatory and Europe is nowhere in and the United States or in New York, We're the first ones to do it here, we spent a great deal of time.

I think we're the first and flexibility are you sort of a radical things and though it is not done.

In New York construction and development. So we spent a great deal of time researching it and we must set up we did everything and we decided that it was worth the uptick and the.

And the dollars and the budget to bring the building into the 'twenty, one and 2002nd century in terms of its glazing. So we did it okay electric expectation is.

Actually pretty simple all buildings are going to go all electric because of.

The carbon footprint and the future. So anyway I think these things speak for themselves.

And we're not boastful.

And.

We are leaders in sustainability is very important to us we take price from the us.

And take private debt and the team that does obviously.

Our sustainability.

And as acknowledged to be I think probably the best team around so you are right but.

Yes.

I don't want you to think that this was an afterthought or this was an add on or a mistake. Okay. This was our hour.

Making sure that the buildings were up too.

Totally up to snuff.

As good as they could be as tenant friendly as they could be and as carbon friendly as they could be.

Okay and then the second question Steve.

Or maybe for Michael is the all favorite.

I know you guys don't do guidance and certainly the funnel covering Zeno is the modeling aspect but.

Is the fourth quarter of this year is that a good run rate or are there some big move outs or roll downs that we should be thinking about impacting.

On the <unk> 'twenty 'twenty one numbers.

Good day.

Youre talking about.

Vornado overall, just the retail.

And overall, Michael overall, and obviously there are a lot of moving on parts, but just anything big that we should think about or you would say hey, Alex fourth quarter <unk>.

66 number ex items.

That's probably a pretty good.

Number to think about.

Look I think.

Couple of 30000 foot comments.

I think its a decent number to use as a run rate and I will say just keep in mind in terms of first quarter first quarter and 'twenty, one will be down from 20, right because first quarter 'twenty was a pre COVID-19 quarter, and so obviously with the variable business as being offline.

The first quarter over the last quarter that roll through but on a run rate basis I think your comment isn't.

He is an appropriate one.

Okay. Thank you.

Yes.

Thank you and we do have our next question from Anthony <unk> from J P. Morgan.

Okay. Thank you my first question relates to the retail joint venture and $1 $8 billion. There can you talk about your plans to.

Potentially redeem that this year if I recall.

I think there was like a two year tax matter that prompted you to maybe wait before you would get that money back.

What the what that.

Is that.

That's a two year blackout on there.

<unk>.

Net provisions after the two years.

We can refinance it.

Can't redeem it or pay it off and refinance it.

Because if we if we if we if we did.

If we if we turned that into liquidity that would trigger the $1 $8 billion exit with the FERC. Okay. So the preferred to EBITDA stays there.

Or we can sell it.

As long as it stays there or we can refinance it with debt, which is a different proposition. So but there is nothing eminent and our plans to transact with respect to that preferred right now.

Okay.

As a debt market there for those types of assets today.

And the debt market would be less hospitable that I would like it to be.

Because of the turmoil and the retail industry non.

Withstanding the fact that we have long term leases on most of those assets okay.

Mark to market on those.

And on those properties is on.

Unfavorable and the and the debt market.

And we can do something and there, but the debt market is not as favorable as we would like it to be.

Okay and then just.

Second quick one hopefully I think and prior years and the K you would give a budget for the year ahead on capex for things like Ti and commissions maintenance Capex I may have missed it but.

Do you have that for 'twenty one.

Okay.

Hang on our financing is scrambling and I don't have the page number.

And it's in the 10-K, we can get you the page number.

As Brian and I may have missed it I appreciate it.

I'll come back to it.

And we'll tell you Tom.

Tom will tell you what the base number is.

Supplemental and the supplementary.

Okay, that's fine I'll find it I just missed it.

Okay.

And we do have our next question from John Kim from BMO capital markets.

Thanks, Good morning.

There's been some news of sublease space and your portfolio, whether it's yelp at the Mart or Apple taking from Macy's space.

Can you provide to us how much space and your portfolio is up for sublease and preferably by market.

Hi, John It's Glen Weiss.

Apple was actually a direct lease where we took macys out so that was a positive as it relates to the sublease space and the portfolio.

And the only the big one.

And we're aware of who's Pwc at 90 park thinking about doing something with that block otherwise.

Otherwise, it's a bunch of smaller tenants, who have been thinking about putting space on.

And what's the term on the day the Pwc latest growth. Both 2033. So obviously, we have great credit on that lease long term, so not a concern for us.

Macy's is sub leasing and the remaining piece of aerospace and he is trying to which is the space moving.

And that apples and uptake.

And generally speaking.

And for our portfolio not a lot of major overhang as it relates to that question.

Sub lease space is interesting.

It is a great deal of sublease space and the market.

With.

Tenants, who are willing to take.

Huge discounts significant discounts to clear the space.

That obviously affects the entire market when.

When you have sublease laying out of a tenant sub leasing and and one of our buildings. That's an interesting thing.

Because if we have term debt than we as landlords have no risk.

If there is shorter term.

Mark and ability of the sublease space depends upon the new tenant coming in dealing with us at which point we have an advantage.

<unk>.

Sublease space at our building generally strength is an opportunity for us.

And advantage to us, but too much sublease and everybody else's buildings, where the tenants and prepared to think much lower prices actually distort the market and hurts the market we've been through this and every cycle.

And define a recovery is when the sublease space starts to clear.

Or being taken back because the tenant decided they need the space rather than get rid of it.

And the sublease space and something Youre right to watch and it is very important and.

And at times.

It's an issue and a challenge at times, its an advantage and opportunity as it relates to the Mark you asked about beam and Yelp.

<unk> been announced.

Move on their executive office to Manhattan, but that in no way shape or form will impact their sublease from Motorola Google at the more in favor of 113000 feet. There. That's a long term deal for them till 'twenty eight we've spoken to them recently and they will remain in that space and there is no plans to put that based on the <unk>.

Market as it relates to Yelp day of about 130000 feet. There are lease has another three years remaining and they have announced theyre going to try to sublease about half that space.

And we'll see how successful they are or not and and see if we can maybe take advantage of that situation as they go through their process, we'll see what happens.

Okay. Thanks on that.

My second question is on your expectation for <unk>. This year as a follow up to Alex's question.

What are you expecting as far as the timing of reopening of your variable businesses are.

Are you expecting to provide any more write offs.

Or deferrals and abatements next year and it didn't seem like and move that much as far as deferrals on payments and this past quarter, but if you could provide any color on some of these <unk> items and that'd be great if you're talking about the <unk>.

Good morning, John on the tenant side on the latter part abatements and deferrals.

Yes.

Okay.

I think we and our view when you get a pretty good job of vetting.

Tenants were still a risk.

On the second or third quarter third quarter and particular in terms of.

I really assessing after several months based on discussions with tenants.

Which ones would not be able to continue to pay or not make it.

And so obviously you saw the number come down dramatically and the fourth quarter and we feel like we've generally dealt with and obviously anything can still happen, but theres nothing we see on the horizon that is going to give rise to and certainly anything material there.

So so that's the current on the tenant on the variable businesses, yes, we're generally not expecting that.

Up until the second half of the year.

I think it tracks, Steve said when do office workers come back when the tourists come back that's going to be third and fourth quarter and.

And so therefore.

On the garage income BMS, which.

And which are directly related to tenant on occupancies and the buildings flow from that and so that's going to be in the latter part of the year signage.

Same thing depending on charge and it comes back so that the second half of the year and that's a.

It's not a.

And all of a sudden and light.

And the switches turned on and it comes back immediately and we expect it to take some time to ramp up.

And are there any more thoughts on providing.

<unk> guidance, just given you're not providing your NAV estimate anymore.

That was the first question I got asked by and our people when I when I assume Jos role, which is difficult shoes to fill.

But.

And at that Joe did a phenomenal job and a lot of areas and Thats a job.

<unk>.

A path we're going to continue so we have no plans to.

To provide guidance certainly starting the middle of Covid would not be otherwise this thing but.

No plans to do that.

Okay. Thank you.

Yes.

Okay.

And we do have our next question from Vikram Malhotra from Morgan Stanley.

Thanks for taking the question two questions just first on street retail.

And wondering if you can maybe give us a bit more on the puts and takes you referenced sort of <unk> and being a good run rate, but given the bumps in the portfolio and the lease up opportunity as you reference I'm just sort of wondering.

Whats sort of the other day, what's sort of keeping the NOI flat for the year and related to that.

Just any lumpy explorations, we should know about over the next call it to ask them 18 months.

I think that look.

And.

And 'twenty, one as I said I think it's a pretty good run rate.

And remember we have as we start coming later in the year, we have leases that we've signed that are going to start kicking in.

Whether that's been the <unk>.

And 95, Madison, Sephora and Union square and.

And so forth.

So you.

<unk> got <unk> got leases that are kicking in and you have some rent bumps.

And frankly and not a lot of expertise this year and.

And I think even next year I would say nothing that that material right now none of the real high Street as we characterized in our fifth Avenue and times square.

And <unk> and 'twenty, one 'twenty two.

We had a couple of issues at $50 40 in terms of bankruptcies and Thats, obviously already made its way through the numbers. So.

That's why in terms of giving you that debt debt.

And that run rate number.

And as you said, there's rent steps so theres enough things that are coming online that have built and contractual bumps that even if theres a few rollouts.

Which again are not material on any one particular property.

Minimum and will stay flat before beginning to grow from the lease up of both the vacancy as well as the underdeveloped and properties like barley.

Like Penn, one and and ultimately come to.

Okay got it and then just a bigger picture question.

Maybe for Steven and you might address that.

And your letter.

But just give us if you could give us a sense of how youre thinking about bigger picture strategic moves whether it.

Spinoffs or buybacks or a bigger JV or anything like that just given where we are I know, it's still and the pandemic, but given.

All the all the growth drivers the volte client on a multiyear basis for both retail and office, just wondering how youre thinking about bigger and bigger from a strategic move.

We have nothing to announce or talk about about that now.

I'll address that in my letter.

Clearly we have talked about.

Potentially separating the Penn District.

I think last year I said.

And perhaps.

The tracking stock.

That's still on the table.

So there's other things that we're thinking about.

But we have nothing nothing to talk about right now.

Okay. Thanks.

Okay.

And we have no further questions at this time I will now turn the call over to CEO, Steve Roth.

Thanks, everybody. We appreciate everybody joining us this morning, please stay safe and healthy.

Our first quarter 2021 earnings call will be on Tuesday may 4th.

And we'll see you then if not before thanks very much.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for your participation you may now disconnect.

[music].

Okay.

And.

[music].

And then.

And.

[music].

[music].

Good morning, and welcome to the Vornado Realty Trust fourth quarter 2020 earnings call. My name is Karen and I will be your operator for today's call. This call is being recorded for replay purposes. All lines are in a listen only mode. Our speakers will address your questions at the end of the presentation. During the question and answer session.

At that time. Please press Star then the one I would touch on phone and watch and they'll call over and as Cathy Creswell director of Investor Relations. Please go ahead.

Thank you welcome to Vornado Realty Trust fourth quarter earnings call yesterday afternoon, we issued our fourth quarter earnings release and filed our annual report on form 10-K, with the Securities and Exchange Commission. These documents as well as our supplemental financial information package are available on our website www.

W Dot dot com under the Investor Relations section in these documents and during today's call we will discuss non-GAAP.

Natural measures.

Conciliations of these measures to the most directly comparable GAAP measures are included in our earnings release and form 10-K and financial supplement.

Please be aware that statements made during this call maybe deemed forward looking statements and actual results may differ materially from these statements due to a variety of risks uncertainties and other factors. Please refer to our filings with the Securities and Exchange Commission, including our annual report on form 10-K for the year ended December 31 and 2020.

For more information regarding these risks and uncertainties and the call may include time sensitive information that maybe accurate only as of today's date. The company does not undertake a duty to update any forward looking statements.

On the call today from management for our opening comments are Steven Roth, Chairman and Chief Executive Officer, and Michael Franco President and Chief Financial Officer. Our senior team is also present and available for questions I will now turn the call over to Steven Roth.

Thank you Kathy and good morning, everyone I hope all of you continue to be safe and healthy.

Before Michael gets into the business review and the numbers, let me make a few comments.

Notwithstanding that this is a new year towards each other they want steel still feels a lot like 'twenty and 'twenty.

The Covid pandemic remains a significant health risk normal life continues to be disrupted gatherings and travel are still restricted and office building occupancy remains quite low.

But there is light at the end of this long tunnel scientists and farmers around the world I've worked at warp speed.

And with the rollout of various vaccines is expected to accelerate accelerate in the coming months, We expect New York and began to rebound with office workers and tourists returning and the second half.

Well, New York's recovery will take some time the city remains a magnet for talent as evidenced by leading companies with more net leases and making margins things commitments even during the pandemic.

For all the talk about working from home and continue to believe that our natural and human social and Coordinations.

And that interest gather and experience all the city has to offer will carry the day.

And when life returns to normalcy and the many positives.

Positives of having employees working on the same space together with our colleagues will become self evident.

And then I believe that working at home and wants kitchen alone day. After day week. After week is not a long term proposition.

Sure.

We Havent no administration in Washington, which is committed to push through significant on additional stimulus and New York will certainly get its fair share fees.

These dollars and the potential to modify a partial reversal is that actually were to happen will greatly benefit and New York and other large cities.

Despite 2020 being one of the most challenging years and a lifetime.

We have made significant progress to position per dado for future growth.

And 2020, we closed a billion dollars of apartments at 220 Central Bloc sales, that's a big number.

Which was added to our cash balances and enhance our financial strength.

And remember we are building Farley and one off our balance sheet without debt.

In December 2020, the Grand New Moynihan train on a local to the public to rave reviews further cement and as the Transportation Center of New York.

And our Penn District as the Bullseye.

Nader was honored to be a major participant and the more that is public private partnership.

And 2020 at the height of the pandemic, we completed a lease with Facebook for all 730000 square feet and the office portion at Farley.

This lease was the largest office leasing in New York last year.

The first phase of Facebook space was delivered in January and the remainder will be delivered later this year.

The new long Island Railroad three of 30, <unk> Street entrance situated between and one and tend to also opened in December.

It's designed as futuristic and unique and exciting and that is intentional.

In December.

We finalized our agreement with the MTA to develop the long Island railroad concourse retail stores on the north side of the countless hours and Susan and one footprint.

This project will double the width of the concourse relieve overcrowding and raise the ceiling through a grant 18 feet and Craig has vastly improved conquest from hundreds of thousands of commuters who use and each day.

Construction is now underway and our retail has been taken out of service.

As part of the deal here, we will gain long term control of an additional 22000 square feet of retail on the sales side of the concourse.

So we now have all the retail along both sides of the heavily trafficked long Island Railroad Congress.

By the way in normal times Penn station is teaming with traffic and our retail.

The stores do really really well.

And 2021, we will deliver in phases on a redevelopment of the $2 6 million square foot tenant wants.

This game changing will include 200000 square feet of net of amenities the likes of which are unparalleled and New York, we are targeting targeting summertime opening of the 34th Street lobby, which well completions shortly thereafter.

Also and this year, our dramatic redevelopment of the one 8 million square footprint will be and full sweat.

Sitting here today, we are more confident than ever and our design and programming of the $4 4 million square foot campus at the combined and one and two.

With unique and outstanding architectural design at amenities sitting on top of New York's may and transportation hub with Apple and Facebook tenancies and other of our adjacent buildings and with the Governor's plan for significant additional invested and the Penn station area, we couldnt be more excited.

Yes.

To showcase our vision for the district, we have just opened our new and district experience Center.

Actually thats, a fancy word for sales center located on the seventh floor and one appropriate appropriately and the heart of the action. This 12000 square foot market and said there is the best I've ever seen.

And it will be the venue for our leasing and development teams to present and showcase our projects to the brokerage community and per.

Respective tenants early comments from brokers and tenants have been amazingly enthusiastic.

And when gatherings are again permitted permitted and we look forward to hosting all of you and the meantime, please visit our website and the latest images of our plans for the Penn District.

We update on development deals once a year and have done so for the Penn District on page 31 of our supplement.

Filed last evening overall, the projected yields on these projects has declined modestly from eight 3% to eight zero percent, let me explain.

Volume declined 100 basis points largely from additional <unk>, we granted Facebook to close the deal during the pandemic.

We also are budgeting additional fees for retailers and folly, given the environment.

Our role is to close the Facebook leasing in the middle of the pandemic and it is an outstanding deal that we are proud of.

Facebook low shortly its scale its location its architecture at a huge floor plates.

At Penn One we increased the budget to include the long Island Railroad concourse redevelopment, which I just mentioned as well as Twosies and sustainability initiatives, we have added to the scope and one we're replacing all single play and paying glazing with new state of the on Triple pay and a high energy performance windows, which will dramatically improve.

Energy loss sound infiltration and tenant comfort.

We are also increasing the scope and pet and want to include and electric electrification program to enable the ability to access more clean renewable energy.

<unk>.

And this should command higher rents, but to be conservative, we have and adjusted for that and the budget.

At 10, two and returns actually increased as we scrub the numbers with respect to expense and tax assumptions.

And as far the Penguin and do come online they will deliver very significant incremental earnings.

As you will notice we did not publish an NAV estimate this year as we had for the past several years I foreshadowed this and my shareholders letter last April.

Every analyst has their own estimate anyway, and the market didn't seem to be placing much value on the hours.

As previously announced and the fourth quarter, we implemented a program to reduce our G&A by $35 million while difficult. This was the right thing to do.

In connection with this two of our beloved long tenured executives, David Greenbaum and Joe backed out.

Step back a year and from day to day roles and became senior advisors.

Grenada was indebted to them and thank them for their immense contributions.

Glen Weiss and Barry Langer, our long standing heads of leasing and development and now have leadership roles as co heads of real estate.

Actually they have and functioning as coeds for over a year now and our successors to David.

Michael Franco has taken on the additional role of CFO, succeeding Joe.

At Thompson and <unk> has been appointed Chief administrative officer, and stepping up from CFO of the New York Office Division, taking on additional responsibilities on our financial Division.

This is all a continuation of our leadership transition that we began in April 2019.

I am confident that our talented and next generation of leaders are seasoned proven and up to the task.

Yes.

But worried about ESG and we continue to be industry leader on sustainability and ESG remains our highest priority for all of us and Fernando and is further supported with oversight from our board.

The risks related to climate change are two minutes.

We are determined to reduce our carbon footprint. We lead by example through vision 2030, our 10 year plan to make our buildings carbon neutral rich.

Which starts with our commitment to reducing our energy consumption and 50% below a 2000 and by base year.

I would note that since 2009, we have achieved a 24% energy reduction over the 10 year period through 2000 and.

We have a seat at the table with.

Climate policymakers at city state and federal levels to advise not only on what role buildings must play and climate change mitigation and even more importantly on how to.

Execute.

We have also led with robust disclosure of our ESG data with early adoption of SA SD standard.

The release of our EEO data and climate scenario analysis. According to the recommendations of the task force on climate related financial disclosures with TC FTE. Our 2020 ESG report will be released in tandem with my shareholders later in April.

I'll finish with a shout out and thank you to our amazing and talented people to our leasing teams, who did the Facebook and <unk>.

While <unk> deals, which by the way with the two largest deals in 2022, our development teams responsible for quality Penn one and Penn two and more and to our operations teams, who follow oil protocols and have our building sanitized and ready to welcome on tenants.

You are all a plus at the head of the class and we say thank you.

And now to Michael.

Thank you, Steve and good morning, everyone I too hope, you're all safe and healthy.

I'll first cover our financial results and then with a few comments on the leasing and capital markets.

Fourth quarter <unk> as adjusted was <unk> 66 per share compared to 89 for last year's fourth quarter.

A decrease of 23.

This decrease is reconciled for you and our earnings release on page five and and our financial supplement on page seven and it was driven by a few items roughly one half, which is 12 from our variable businesses still being offline.

And roughly 20% which is five from.

Taking Penn District space out of service and the balance from the Jcpenney lease rejection and the Manhattan mall and other tenant issues and offset by some interest savings.

None of these items, our new news and are right in line with our statements over the past couple of quarters. Furthermore, most of these are temporary and the income will return over time.

On January 29, we issued a press release summarizing our fourth quarter non comparable items from both net income and <unk>. The biggest item was a $236 $3 million noncash impairment loss relating primarily to wholly on retail properties as required by GAAP accounts.

With respect to rent collections and the fourth quarter rent collections, excluding deferrals and improved 200 basis points to 95% driven by a significant pickup and retail collections. The breakdown as we collected 97% of office rents and 88% of retail ramps, excluding deferrals January and February collections are running at the <unk>.

Same level.

While the area of headline same store cash NOI numbers are negative on their face our core New York Office business actually was a positive one 4%.

And when you blend and Chicago and San Francisco also our office business overall was essentially flat and negative 4%.

The big takeaway here is that our core office business, representing over 80% of the company is continuing to perform well and this challenging environment protected by long term leases with credit tenants.

Let me also and comment on our retail cash basis NOI.

If you annualized fourth quarter retail cash basis, NOI at $34 3 million as shown on page 15 of the supplement you got $137 million.

That's a good run rate number to use for 2021.

Please don't consider this guidance, but given the potential NOI and leasing up vacant space and the properties under development. We expect this number to grow from here absent any further tenant bankruptcies.

And finally, a number of you asked for the breakdown of our previously announced $35 million overhead reduction program by period for modeling purposes.

Again, while we do not give guidance here it is.

2000, Twenty's and G&A as published yesterday was a $159 million, excluding the onetime costs associated with the overhead reduction program.

2021, G&A is budgeted at $141 million and $18 million reduction.

2022 will benefit from a further reduction of $9 million and thereafter by a reduction of $1 6 million. The total of these reductions is $28 $6 million. And addition, there are $6 4 million of reductions budgeted for 2021 that do not flow through G&A from lower operating expenses and capitalized payroll.

While 2020 was a difficult year, we have planted the seeds for significant growth once the city begins to return to normal level of activity and.

In addition to the savings we will realize from the $35 million overhead reduction program, we executed in December.

We expect significant growth from the return of our variable businesses and the Farley building fully coming online in 2022.

Followed by the Redeveloped Penn, one and Penn two and reduced interest costs as we rollover our debt.

Now turning to leasing markets.

2020 office leasing activity and metrics were greatly impacted by the pandemic across all three of our markets total leasing volume across Manhattan was the lowest since 2000 and while new leasing activity was at an all time record low of $12 3 million square feet.

Negative net absorption during the year driven by sublease space being put on the market led to an increase and the overall availability rate. This sublease space will certainly present, a near term challenge to stabilizing net effective rents.

Well taken and rents have come down on a measured way concessions have spikes that we believe now have generally stabilized as landlords are doing what they need to do to be competitive in this environment to fill space.

We've seen this movie before though the market is following the same pattern, we have experienced and predicting the downdraft and then the recovery. If one is willing to look out a year or two.

During 2020 with post Covid and leasing activity down dramatically, we still leased two 2 million square feet and 54 separate leasing transactions and network.

Our initial rents were strong at $89 33 per square foot and average term of these leases was 14 four years Mark to market was a positive four 6% cash and.

And most notably and as Steve mentioned, we executed the two largest leases and Manhattan during 2020.

730000 square foot Facebook lease at Farley and NYU is a long term renewal of 633000 square feet and our one Park Avenue.

Our 336000 square foot lease with Apple and kind of 11, and 120000 square foot lease with Citadel and $3 50, part also highlighted the solid leasing year.

And the fourth quarter, we completed 16 office leases comprised of 163000 square feet.

We signed a new office lease with <unk> for 24000 square feet at $5 95, Madison Avenue to go along with their flagship Fendi and <unk> retail leases in the building further reinforcing its bull's eye location.

We also signed 64000 square feet of deals at Penn, one, including an important and 24000 square foot renewal with Wells Fargo.

Initial cash rents for the quarter were $75 55 per square foot and cash Mark to market was positive <unk>, 5%.

We ended the year with New York Office occupancy at 93, 4%.

We are feeling more optimistic given what we're seeing and the first six weeks of 2021 tour volume is up.

And more tenant proposals coming and to lease space, particularly on the financial services sector and companies are looking to take advantage of current market conditions and.

Importantly, as large companies begin to plan for their employees return to the office. They are also beginning to focus on their future lease explorations and interviewing brokers as first steps and the process.

We know of at least four companies with large space needs and the need to plan ahead, which held interviews during the month of January alone in this regard.

Additionally, as the initial shock of Covid wears off and companies begin to look forward most of the pause negotiations and our portfolio of restarting.

Notwithstanding some of the positive signs we anticipate on leasing activity will remain slow for the first half of 2021.

It is obvious that flight to quality is accelerating as tenant not only are seeking the best available products, mainly redeveloped and new construction and the more than ever want to do business with the strongest landlords and we're certainly getting more than our fair share other deals that are out there on.

And our leasing team is very active and the market and has a pulse on and tenant activity all of which is reflected in our pipeline and we have some 300000 square feet of leases out negotiation leasing.

With a 55000 square foot lease with a tech company at 12, 90 Avenue, the Americas of 33000 square foot lease expansion with a financial services company and 80 day Seventh Avenue, and a 75000 square foot lease out with a nationally recognized non profit at a $25 77.

Beyond this we have an additional 1 million square feet and discussions the majority of which is with tenants, which would be new to our portfolio.

As we have said in the past our office expirations during 2021, and 2022, a very modest helping us mitigate against more challenging near term conditions and each of 2021 and 2022, we have less and five 5% of our space Rolling 742000 square feet of leases expiring in 2021 and <unk>.

126000 square feet, and 2022 of which 352000 square feet during that two year period is that the newly Redeveloped pen one.

Turning now to Chicago, and a mark and.

And the Chicago market, New leasing continues to be slow while short term renewals are dominating activity.

We are of course and dialogue with many of our expiring tenants, including a 44000 square foot renewal, which we expect to be signed and the next few days.

During 2020, we completed a 10 year renewal through 2030 to 148000 square feet with Paypal and signed 49 showroom leases comprising 190000 square feet at very strong starting rents of almost $55 per square foot, including 60 to 62000 square feet and the fourth quarter.

Turning to San Francisco.

505, California Street continues to outperform the market.

And we recently completed for renewal transactions, reflecting the market resiliency of this best in class assets and reinforcing our status as the Premier building and the city.

Impressively during the period of our 14 year ownership, we have never lost a major tenant and this building.

Goldman Sachs renewed its entire 90000 square foot lease and <unk>.

Mark to market on this renewal was 58, 7%.

While bank of America committed long term to the building by tacking on an additional 10 years to their current lease term to bring this exploration to 2035 the.

And the bank will consolidate all of San Francisco offices into its existing 247000 square feet and $5 five returning to its original home.

This was the largest leasing done in San Francisco and 2020.

It is important to note, we have no leases expiring and San Francisco and 2021, and only 48000 square feet expiring in 2022, where we are in advanced discussions with these tenants to renew.

Turning to retail now the retail environment remains challenging and rents continue to be under pressure.

Retailers have little visibility on sales given the uncertainty over timing of insurers and office workers returning.

And thus most remained reluctant to commit to new space, but.

But retailers are starting to kick the tires again on space. There also continues to be a flight to quality with retailers upgrading their locations or accessing high foot traffic locations that were previously unavailable as evidenced by our lease this quarter with Christophe will at $5 95, Madison, where they will join <unk>.

Demand for the retail it's fairly remained strong with particular interest and the food Hall.

We have now signed 14 leases and have another eight out for signature.

We ended the year with New York retail occupancy to 78, 8% the decline primarily JC Penney related.

Turning to the capital markets now the real estate financing markets continue and improve with spreads tightening back to pre pandemic levels for high quality office. All on coupons are now at historically low levels. We are actively working on a number of refinancings and expect that we will term out these loans at lower rates from the current <unk>.

And like our current liquidity is a strong $3 91 billion.

Including $1 73 billion of cash and restricted cash and $2. One 8 billion undrawn under our $2 75 billion revolving credit facilities with that I'll turn it on really operator for Q&A.

And.

Sure.

Thank you we will now begin the question and answer session. If you have a question. Please press Star then one on your Touchtone phone, if you wish to be removed from the queue. Please.

And are the hash key if we can see and your speaker phone you may need to pick up the handset first before pressing the numbers.

And once again, if you have a question. Please press Star then one on your.

Touched on phone.

And let's call it will be allowed to ask a question and a follow up question before we move on to the next caller.

And we do have our first question from Manny Korchman from Citi.

Hey, good morning, everyone.

Michael you talked about your explorations and 'twenty one 'twenty two I think you said on a 325000 square feet at Penn one.

How much of that is captured in the mark to market.

Footnote you provided there that goes from the $81 to 75% to $85.

And especially on the pen one piece.

Pre pandemic you spoke to a lot higher of a roll up there are you roll up expectations still in line with your previous comments.

Let me take the second question first and then I'll go back to the first and Glenn jump in here I think our expectations remain the same.

Manny.

And our confidence and the product.

Steve referenced given.

<unk>.

And with brokers received particularly experience center they bring it to light as we continue to evolve the amenity package.

We think even more so coming out of this right. This is what tenants want.

And I work live play in that environment, and so our expectations remain the same for both Penn one and Penn sale.

On the Rollouts and so I think that reflects that comment on your question in terms of that 352000 and feet on San Juan No difference and expectations on the rollout at the mix of what rolls over a year by year.

In terms of that.

Square footage and what the what the range of rents is what's the mix of space I'll have to pull out.

The detail is but.

It's the best guess in terms of what those particular spaces may rollout fourth but excluding <unk>.

And you want to add going great.

And maybe it's Glenn and I will tell you as it relates to the roll up of the building and we're being very careful because we know the product we're delivering is going to be fantastic and the reception and the market's been spectacular even as we work through the pandemic.

And so we're not going to jump to deals if we don't like the deals as early as per our initial underwriting and I will tell you we have a ton of action on the building from.

A bunch of small tenant through Tennant's largest 70 80000 feet.

So we feel very good about where this is going and where the rents are going on this asset.

Thanks, and then going back from them.

Thank you and your remarks and.

On the lease and the last night, you talked about a return to trade shows and 2021 how.

How much confidence you have on that and.

The approximate timing is that at some point in 'twenty, one or enough to sort of make a difference to income.

Our calendar currently we start coming back with the trade shows and August.

Our major show Neocon comes back we have scheduled for the first week of October So, we're ready and for those events as we speak.

Okay. Thanks, everyone.

And we do have our next question, Steve <unk> from Evercore.

Thanks, Good morning, Steve I don't know if you can say much about.

The asset sales you brought to market last year at $12 90, and $5 55, and just sort of the refinancing expectations I realize the sales market was challenged last year.

But I would've thought a refinancing of that would have been perhaps easier just given the low leverage level. So just any comments that you could sort of make on those assets and how you are sort of looking at those in 2021.

Sure Hi, Steve.

So first of all I will tell you that I was disappointed and the.

Reception to.

The part of buyers to those assets.

We found debt.

They are the buyers were in two groups they are bottom fishers.

Sure and not for us and the conventional and long term.

Institutional investors were tentative.

They couldnt travel they couldnt see the product.

And so as a result, we werent getting the kind of reception that I had anticipated and so we did the.

And the appropriate thing we took them off the market. These are great buildings that should and will command premium pricing.

And deserve premium pricing with respect to that with respect to refinancing the buildings.

And that's basically a layup they're side by five is extremely under Levered, probably somewhere in the neighborhood of 25%.

Market value or EBIT lower.

And so we are gearing up to refinance debt now.

<unk>.

It has not yet been decided as to how much we will refinance that building core but refinancing that building is in process and will not be a problem at all.

And Steve Carell 90 doesn't.

And so obviously, that's a mature and later next year right. So.

Our plan would not be to refinance debt yet anyway.

The takeaway is is that.

We were not happy with the sales market reception.

The net.

Refinancing of those buildings.

And process and we will not be a problem at all.

Okay, and I guess my follow up Mike you sort of talked about a number of tenants in the market today and maybe you are Glen could you just sort of speak to I guess, what I'm really looking for space planning, how companies are thinking about densities and particularly for new deals which.

And I think everybody a blank slate to think about their footprint and what are you seeing from tenants today that we're looking at new space, how are they configuring and whether the densities looked like and what does that portend for rollovers on on other deals moving forward.

And yes, that's the last question, David Scott and how are you.

On the first thing I would tell you we're seeing a very large uptick in our presentation to big tenant coming out of the woodwork. Thus far this year.

We had five different presentations from large headquarters tenants and the last two weeks that's non.

<unk> and so you're starting to see people come out and start to see things and the reception has been excellent on our pen projects and 350 Park number one number two as it relates to tenant plan.

And we've been reviewing that.

Or are you focused way, we've seen no change to what tenant we're doing pre pandemic.

And what we see them doing now during the pandemic per future occupancy.

I do not see a change at all.

I think the one thing people are focused on is product type were as we keep saying from quarter to quarter people are more and more focused on the best building.

As it relates to redevelopment or new builds and most importantly, even more recently is the landlords that theyre going to marry with as it relates to the services and amenities infrastructure sustainability and everything people care about as we work through this cycle.

But in terms of your specific questions, we have not seen that change and planning from a space design standpoint.

And we were.

The history of all this is that and the old days it used to be 250, or even 300 square foot per per employee.

And then and.

Along came Adam Newman, and we work and he tried to jam it down to 60 square feet per capita which was is.

Marketing and Thats why his face was cheaper because you put more into the.

And the same amount of space.

And so both extremes are absurd.

And so we see it settling and somewhere in between and we don't see any major change as Glenn said, we were on the phone yesterday with the senior team with bladder cancer, who I think thats, probably more of this place designs and anybody else and they confirmed what Glenn and seeing in the marketplace.

So people have already gone to space planning, which is less formal and less rigid and the old fashion.

This is lightning the perimeter windows.

So the one thing that we are seeing is that there is a reluctance on the part of people sharing offices, our desks with other people.

And so that's sort of and a funny way seems to indicate that the concept of hotels and hot desk is not going to be as popular going forward. So on the whole.

And there's more activity and the space planning activity is pretty much the same as it was before all this started.

Great. Thanks.

Okay.

And we just from our next question from Jamie Feldman from Bank of America.

Great. Thank you and good morning.

And Steve Owen and go back to your comments about fiscal stimulus and how you think New York City might benefit can you just talk about generally what you think could be coming and how that will impact the.

The local economy, and then also I mean, we've seen plans from the governor on Midtown West and then even conversions of vacant office buildings to maybe residential just wanted to get your thoughts on kind of all of those topics and how you think that might impact the market and Fernando going forward. Thank you.

Good morning, Jamie how are you so.

The world has changed radically.

And we now have a.

A buys and the White house.

And we haven't Chuck Schumer majority leader and the Senate.

And I remind you is Brooklyn, born and bred and a threat.

Net.

And so we.

We believe that there is an enormous.

Trends now.

Fiscal stimulus.

Towards.

Supporting obviously.

The people who have been harmed by the Covid pandemic, but also to.

The major cities in this country, well lubricated with finance and the money because they've been hurt enormously.

So we are we on.

Our expecting lots of government assistance.

To be supported by the new political regimes, including the majority leader who is all powerful.

So there's that.

Now.

The governor.

Who is the master builder of our generation.

Has put football loves pit.

And is it to be the economic and transportation center of the universe and if you look at his powerpoints and Slideshows and his last number of state of the state speeches etcetera, and you can see that very vividly.

So his programs from the west side is.

Lots of work and pad.

Which are both aesthetic and logistical and.

<unk> expanding the track.

Capacity and.

By acquiring and developing the 780 block which is the block.

And you as to the sales.

And that is expanding it with four tracks I think it is.

Also including the Gateway total.

I am corrected by my head of development that day.

And a track Okay, alright, lets say day tracks in that space.

Side by side I challenge.

So I'll have to go with Barry because he is.

<unk>, which is an enormous increase and the capacity of the pit.

The Gateway tunnel, we know about.

Spending the highline and building a new.

Unbelievably more efficient with much.

Triple the capacity bust.

Et cetera, et cetera, so that the west side of Manhattan will be getting and the enormous increase and infrastructure dollars over time.

And the major concentration on the part of the government. So we're pretty enthusiastic about it I would say very enthusiastic and obviously, we think we have the bulls eye location. So we couldnt, we couldnt be more excited about all that.

Now the one.

Unknown was with campaign promises that they would reverse that the Trump tax bill.

The major portion of which was reversing salt.

Or if not reversing sold significantly modifying that.

And while sort of I think thats very good for New York residents and the Big City residents.

And I don't think Thats it.

And as biggest land book as the interest as the stimulus dollars that will come in but were that to happen I think that that would be another major boost from New York.

If that doesn't happen and new vehicles do just fine without it.

Great. Thank you for the thoughts and then how do you think about the vornado participation and and expanding Midtown West and other Port authority is on the docket to for renovation.

See a lot more growth and your development pipeline or our ability to get active and these projects.

The bus getting active in.

We we understand public private partnerships, we were the major a private partner.

And development program.

As you know so we're pretty familiar with this.

But we are very very intimate with the with the government and state teams that do that kind of stuff.

As I sit here right now I don't think the bus terminal is for us.

I would remind you we have the better part of 10 million square feet on future development in our neighborhood.

Across the street.

And down the block and around the bed. So we have our handfuls with what we already on.

In terms of deploying that we will look at other other opportunities as well.

But right now.

Our plate is full.

And our growth potential is huge and if something else comes along in our neighborhood of course, we will look at it.

Okay. Thanks, a lot.

And by the way what I would add one last thing.

I would expect and history shows us to be the fact that and when it comes to the government seeking a private partner we are the first call.

And we had been on all of these things so.

The question is how aggressive are we at answering that call.

Do you see the Midtown West plan.

Competing with I guess, you can develop more to the east over to Mike.

Manhattan Mall I mean, it sounds like this is further west and North how do you think about just the interplay between those two.

Current land bank versus where it sounds like the governor wants to expand.

Well I mean, most of it most of the stuff that the government is working on is infrastructure.

Obviously on the 780 block, which is 33 to 30 <unk> Street.

Hi.

Adjacent to the.

The station the plan there is to build.

And only $3 4 million of fee free.

And three or four main fee on top of the newly expanded eight track.

Expansion now obviously those buildings are interesting, but 15 years away. So we're worried about them when the time comes.

We believe and we believe and and.

We believe and gathering we believe clustering so.

More square for example, and what we're doing with Penn One and Penn two we believe that having $4 five Mg and one cluster interconnected underground and over ground, where we can share amenities. We can move tenants around and we can provide space for everybody that needs expansion is an enormous plus infinitely more valuable that four separate one.

1 million square foot building, which is spread around the neighborhood. So we think that the.

Clustering.

In the neighborhood.

Creates value for the entire neighborhood. So we're okay with somebody and building a building on the river that's okay with us.

Okay. Thanks again.

Okay.

And we do have our next question from Michael Lou Michael Lewis from <unk>.

Thank you.

I wanted to come back to <unk> question on about the mortgages coming through.

You also have 909 third and the Mark This year and then 770 Broadway next year.

Should we just assume those are all straightforward refinancing and then as far as California.

California and $12 90.

Do you think the presence of your 30% partner for the reception of those assets and the market.

And maybe that needs to be addressed full value and where do you think that is.

And it would have much to do with it.

This is a very interesting and controversial man, who has a lot of people who are like them and a lot of people who adopt as I remember the accounts and 74 million people, who are like on the 81 people who adopt.

And from our point of view.

He is.

Our partner, we bought these buildings and 2007.

He was not a politician then and you was.

Business Guy like us.

He has his role in these buildings is totally passive.

And he is okay with that and I'm delighted with that.

And there are some people who who.

And it is present affect negatively that's true okay.

It is not a sufficient issue to be on.

Any trouble to us at all.

Okay and on your second and.

And there was something else on the question and I think I'm, sorry, Mike on it and the other mortgages I would say they are all straightforward refinancings couple are well down the road right now including 909.

And again as I referenced in my comments, given how much the markets have recovered.

I think youll see the rates come down on the assets that were rolling over near term and then.

We'll start focusing on the Mark right. After that 770 matures next year. So all of these are sort of normal course business given the strength of the markets, we're going to we're going to push a lot through the system here near term.

But Michael just said is what Michael just said is the point to emphasize and dwell on for a moment, okay interest rates are at lifetime lows.

The markets are extremely receptive markets are clamoring for products.

And we have product.

It's not.

Each of US has on our own opinions as to whether interest rates are staying where they are we're going to go lower and go higher.

And I don't think its relevant to get into that right. Now there are plenty low enough. So our mission is to.

Enhance our balance sheet by refinancing at lower interest rates and also terming out where we can.

And as our objectives. So this is.

The best time to finance.

On a product and actually probably in my career and.

We're taking advantage of it and a very aggressive but measured way.

Okay.

And then for my second question.

And you did a good job explaining the changes and the development yields correct per.

I just wanted to ask since you have kind of spot development and your supplemental.

Should we think of it more as a range around those chicken cost changed a little bit this time.

And maybe for leasing environment next time, what do you think is the likely range of outcomes is that a narrow range around those spot sales.

Comfortable with those.

Or maybe a total wider given we're in a pretty uncertain environment right now.

Budgets budgets of budgets.

I'd like to install and they are not guaranteed theyre not actual numbers their budget. So they will move they are.

And we picked these budgets very seriously.

We spent an awful lot of time on them. There are reams of data that support the four or five numbers that finally get published and our supplement.

We have great confidence and the numbers that we have offered.

But the other remedies.

And our budget, we do not.

And we are and we are on the conservative side of life on that.

We do not expect them to change.

Obviously, they can change a little here and there.

By the way they have as much of a and.

And opportunity of changing positively then change and negatively but there are budget. They are well thought through where we're confident in them and.

It's a serious piece of it.

Okay. Thank you.

And we do have our.

Next question from Alexander Goldfarb from Piper Sandler.

Okay.

Thank you. Thank you good morning, good morning, Steve Good morning, Michael.

So just just quick clarification and hopefully you don't think my other question and your response to Michael Lewis' question on five 5% and 12 90.

It sounds like we should take from your response to him that the refinancing of our $5 five and any normal course leasing.

Stuff that nothing has been impacted by.

The fallout from January so basically your ability to repay enhanced leased all of that stuff is on track and Theres nothing that we should concern ourselves with I just wanted to just confirm that and your response to Michael Lewis.

Year on year statement is a little bit too on the.

A positive side, obviously, we wish.

As every American wishes that January six Hasnt happened, okay. So obviously and thats not a good thing, okay, obviously and the stuff that happened and the Senate last week is also <unk>.

Same comment having said that.

We we have.

Some great buildings.

Great tenants and the buildings and those assets speak for themselves. This is business businesses business.

We will run the buildings without any and issue we will finance the buildings without any issue and everything will be fine okay.

Okay.

So that accounts for my first question, Steve you guys have always.

Promoted your environment.

By the way Alex by the way and there was a big article which started all this stuff.

On Wall Street Journal was probably a couple of weeks ago.

And which I read and it was an interesting article much of which was actually news to me.

Go ahead.

And.

Given the past few years and fake news versus real news, we'll leave that for San Francisco and Steve.

I'm, not saying I'm not getting into that.

Yeah.

You guys have always been a leader and environmental right you've been energy efficient.

All of that stuff right and yet and your latest release on the pen development. The cost went up by 125 billion part for partly retail part for sustainability.

I'm, a little bit more focused and puzzled by the sustainability part and one because you guys have always been doing that so im sort of curious what's driving this increase and cost and is this something that metric now have to think about as far as impact to returns and that.

What you guys were doing was already baked in the buildings quite green and now Theyre mandates that are.

Foreign except that Youre, not getting a payback on I just wanted a bit more color on that because that definitely jumped out from your updated schedule.

And I would rephrase. Your question since you guys are such leaders and I'll Rephrase. Your question now for you since you guys have such leaders and sustainability.

I was on these two items, the triple play and glazing and the electrification and the original budget to start with okay.

I have no real answer for that okay.

We decided as we went along and planning the building that we.

We wanted to.

Yes.

And the Triple play, but I think the triple play and glazing is the first and New York is it not so it's the first of this by the way.

And it's all over Europe, it's almost mandatory and Europe is nowhere in and the United States or in New York, We're the first ones to do it here. We spent a great deal of time and so by saying, we're the first and flexibility are you sort of a radical thing to do it's not done.

And in New York construction and development. So we spent a great deal of time researching it and we marked it up we did everything and we decided that it was worth the uptick in the.

And the dollars and the budget to bring the building into the 'twenty, one and 2002nd century in terms of its glazing. So we did it okay electric expectation is.

Actually pretty simple all buildings are going to go all electric because of.

The carbon footprint and the future. So anyway I think these things speak for themselves.

And we're not boastful.

And.

We are leaders in sustainability is very important to us we take price and us.

And the team that does.

Our sustainability.

The balance to be I think probably the best team around so you are right but.

<unk>.

I don't want you to think that this was an afterthought or this was an add on or a mistake. Okay. This was our hour.

Making sure that the buildings were up too.

Totally up to snuff.

As good as they could be as tenant friendly as they could be and as carbon friendly as they could be.

Okay and then the second question Steve.

Or maybe it's for Michael is the all favorite.

I know you guys don't give guidance and certainly the funnel covering zeno is the modeling aspect but.

Is the fourth quarter of this year is that a good run rate or are there some big move outs or roll downs that we should be thinking about impacting.

On the.

And the 'twenty 'twenty one numbers.

Okay.

Youre talking about.

Vornado overall, just the retail no no overall Michael overall.

And there are a lot of moving on parts, but just anything big that we should think about or you would say hey, Alex fourth quarter asset though.

Six number ex items.

It's probably a pretty good.

And number to think about.

Look I think.

Couple of 30000 foot comments.

I think its a decent number to use as a run rate.

I will say just keep in mind in terms of first quarter.

First quarter and 'twenty, one will be down from 20, right because first quarter 'twenty was a pre COVID-19 quarter, and so obviously with the variable business as being offline.

The first quarter will be the last quarter that roll through but on a run rate basis I think your comment.

Isn't appropriate.

Okay. Thank you.

Yes.

Thank you and we do have a next question from Anthony Pallone from J P. Morgan.

Okay. Thank you my first question relates to the retail joint venture and $1 $8 billion. There can you talk about your plans to.

Potentially redeem that this year, if I recall I think there was like a two year tax matter that prompted you to maybe wait before you would get that money back.

What drove.

That is is that.

There is a two year blackout.

On the.

Provisions.

After the two years.

We can refinance it we can't redeem it or pay it off we can refinance it.

Because if we if we if we if we if we if we turned it into liquidity that would trigger the $1 8 billion in tax that was deferred okay. So the preferreds and stays there.

Or we can sell it.

And as long as it stays there or we can refinance it with debt, which is a different proposition.

But there is nothing eminent and our plans to transact with respect to that preferred right now.

Okay as a debt market there for those types of assets today.

And then.

Debt market would be less hospitable that I would like it.

And because of the turmoil and the retail industry. Notwithstanding the fact that we have long term leases on most of those assets okay.

Mark to market on those.

On those properties is on.

Favorable and.

And the debt market.

And we can do something and there, but the debt market is not as favorable as we would like it to be.

Okay and then just.

Second quick one hopefully I think and prior years and the K you would give a budget for the year ahead on Capex for things like Ti commissions maintenance Capex I may have missed it but do you have that for 'twenty one.

Okay.

Hang on our financing is scrambling and I don't have the page number.

And it's in the 10-K, we can get you the page number.

As Brian and I may have missed it I appreciate it.

I'll come back on it isn't.

And we'll tell you Tom.

Tom will tell you what the page number as.

Supplemental and the supplementary.

Okay. That's fine I'll finally, I just missed it that's all.

Okay.

And we do have our next question from John Kim from BMO capital markets.

Thanks, Good morning.

There's been some news of sublease space and your portfolio, whether it's yelp at the Mart or Apple, taking some of the Macy's space.

Can you provide to us how much space and your portfolio is up for sublease and preferably by market.

Hi, John It's Glen Weiss.

Apple was actually direct lease where we took macys out so that was a positive as it relates to the sublease space and the portfolio.

The only the big one.

And we're aware of news Pwc and Langley Park thinking about doing something with that block.

Otherwise, it's a bunch of smaller tenants, who have been thinking about putting space on.

Hello, and what's the term on that.

The pwc weighted scope till 2033, so obviously, we have great credit on that lease long term, so not a concern for us.

Macy's is a sub leasing the remaining piece of aerospace and he is trying to which is the space.

That Apple and uptake.

Generally speaking.

Relative to our portfolio not a lot of major overhang as it relates to that question.

Sublease space is interesting.

If there's a great deal of sublease space and the market.

With.

Tenants, who are willing to take some huge discounts significant discounts to clear the space.

That obviously affects the entire market.

When you have sublease swing out of a tenant sub leasing and and one of our buildings that's an interesting thing.

Because if we have term debt than we as landlords have no risk if.

And if there is shorter term.

Mark and ability of the sublease space depends upon the new tenant coming in dealing with us at which point, we have an advantage and so the sublease space at our building generally speaking is an opportunity for us.

And advantage to us, but too much sublease and everybody else's buildings, where the tenants are prepared to take much lower prices actually distort the market and hurts the market.

We've been through this and every cycle.

And the final recovery is when the sublease space starts to clear.

Or be taken back because the tenant decides they need the space rather than get rid of it so the sublease space and something you like to watch and it's very important and.

At times.

It's an issue and a challenge at times, its an advantage and opportunity as it relates to the Mark you asked about beam and Yelp.

<unk> announced a move of their executive office to Manhattan, but that in no way shape or form will impact their sublease from Motorola Google at the more favorable 113000 feet. There. That's a long term deal for them booked 28, we've spoken to them recently and they will remain in that space and.

There is no plans to put that based on the market as it relates to yelp. They are about 130000 feet. There are lease has another three years remaining and they have announced theyre going to try to sublease about half that space.

We'll see how successful they are or not and.

And see if we can maybe take advantage of that situation as they go through their process, we'll see what happens.

Okay. Thanks on that.

My second question is on your expectation for <unk>. This year as a follow up to Alex's question.

What are you expecting as far as the timing of reopening of your variable businesses.

Are you expecting to provide any more write offs.

Or deferrals and abatements next year, it doesn't seem like and move that much as far as deferrals on payments and this past quarter, but if you could prevent and Brian any color on some of these <unk> items it'd be great if you're talking about the <unk>.

You're talking on a good morning, Jenn Don on the tenant side on the latter part abatements and deferrals.

Yes.

Okay.

I think we I think we and our view, we did a pretty good job of vetting.

What tenants were still a risk.

On the second or third quarter third quarter and particular in terms of.

Really assessing after several months based on discussions with tenants.

Which ones would not be able to continue to pay or not make it.

And so obviously you saw the number come down dramatically and the fourth quarter and we feel like we've generally dealt with and obviously anything can still happen, but theres nothing we see on the horizon that is going to give rise to and certainly anything material there.

So so that's the current on the tenant on the variable businesses, yes, we're generally not expecting that.

Up until the second half of the year.

I think attracts Steve said when do office workers come back when the tourists come back that's going to be third and fourth quarter and.

And so therefore.

The garage income BMS and <unk>.

Correct related to tenant occupancies and the buildings flow from that and so that's going to be in the latter part of the year.

Lineage.

Same thing, depending on and charge and it comes back so that the second half of the year and that's a.

It's not a.

All of a sudden and light.

Switch is turned on and it comes back and really we expect it to take some time to ramp up.

And are there any more thoughts and providing <unk> guidance, just given you're not providing your NAV estimate anymore.

That was the first question I got asked by and our people.

And assume Jos role, which is difficult shoes to fill.

But.

Joe did a phenomenal job and a lot of areas and Thats a job.

The path, we're going to continue so we have no plans to.

To provide guidance certainly starting the middle of Covid would not be otherwise this thing but.

No plans to do that.

Okay. Thank you.

Yes.

Okay.

Yes.

And do you have on our next question from.

Vikram Malhotra from Morgan Stanley.

Thanks for taking the question two questions just first on street retail.

Wondering if you can maybe give us a bit more on the puts and takes you referenced sort of <unk> as being a good run rate, but given the bumps in the portfolio and the lease up opportunity you referenced I'm just sort of wondering.

Whats sort of the other day, what's sort of keeping the NOI flat for the year and related to that.

Just any lumpy explorations, we should know about over the next call. It 12 from 18 months.

Yes.

I think that look and.

And 'twenty, one as I said I think it's a pretty good run rate.

And remember we have as we start coming later in the year, we have leases that we've signed that are going to start kicking in.

And whether that's been the.

595, Madison, Sephora and Union square and <unk>.

So forth.

So you've got you've got leases that are kicking in and you have some rent bumps.

And frankly and not a lot of expertise this year.

And I think even next year I would say nothing that material right now none of the real High Street as we characterize fifth Avenue times square and our role.

<unk> and 'twenty, one 'twenty two.

We had a couple of issues at $50 40 in terms of bankruptcies and Thats, obviously already made its way through the numbers. So.

And that's why in terms of giving you that debt debt.

And that run rate number.

And as you said, there's rent steps so theres enough things that are coming online that have built and contractual bumps and even if theres a few rollouts.

Which again are not material on any one particular property.

Minimum and will stay flat before beginning to grow from a lease up and both the vacancy as well as the redevelopment properties like barley.

Like Penn, one and and ultimately tend to.

Okay got it and then just a bigger picture question.

Maybe for Steven and you might address that.

And you'll let up.

But just give us if you can give us a sense of how youre thinking about bigger picture strategic moves whether it.

Spinoffs or buybacks or bigger JV and trying to make that just given where we are I know, it's still and the pandemic, but given.

All the all the growth drivers you've outlined on a multiyear basis for both retail and office, just wondering how youre thinking about bigger and bigger sort of strategic moves.

We have nothing to announce or talk about about that now.

I'll address that in my letter.

Clearly we have talked about.

Potentially separating the Penn District.

I think last year I said.

And perhaps.

The tracking stock.

That's still on the table.

So there's other things that we're thinking about.

But we have nothing nothing to talk about right now.

Okay. Thanks.

And we have no further questions at this time I will now turn the call over to CEO, Steve Roth.

Thanks, everybody. We appreciate everybody joining us this morning, please stay safe and healthy.

Our first quarter 2021 earnings call will be on Tuesday may 4th.

And we'll see you there and if not before thanks very much.

Thank you ladies and gentlemen. This concludes today's conference. Thank for your participation you may now disconnect.