Q4 2020 SL Green Realty Corp Earnings Call

[music].

Thank you everybody for joining us and welcome to SL Green Realty Corp's fourth quarter 2020 earnings results Conference call.

This conference call is being recorded.

At this time the company would like to remind listeners that during the call management may make forward looking statements.

Results may differ from any forward looking statements that management may make today and.

Information regarding the risks uncertainties and other factors that could cause such differences appear in the risk factors and M&A section of the company's latest form 10-K and other subsequent reports filed by the company with the Securities and Exchange Commission.

Also during today's conference call. The company May discuss non-GAAP financial measures as defined by regulation G. Under the Securities Act to.

The GAAP financial measure most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the company's website at www Dot SL Green Dot com by selecting the press release regarding the company's fourth quarter, 2000, and 'twenty earnings and in our supplemental information and filed with.

Our current report on form 8-K relating to our fourth quarter 2000, and 'twenty earnings.

I appreciate you calling in today.

The entire S. O G team is here at <unk>.

420, Lexington Avenue, where we are doing our final earnings call from our boardroom and the landmark Graybar building as our next call will be done from our new offices at one Vanderbilt Avenue.

From was 22 years Gray bar has been our headquarters and base of operations for all that we've accomplished but now 'twenty 'twenty, one Harold and change for SL Green as we move across the street into our extraordinary newly completed building that we will soon call home and we could not be more excited about it for us.

And the move begins a new chapter for the company that coincides with a period of reconstruction and New York City marked by the rollout of the Covid vaccine the easing of Covid related restrictions the promise of federal stimulus for cities and states and a gradual return of the work force to offices and other places of business.

And there are many more reasons for optimism as we begin the return to normalcy. This year, the financial and Tech sectors, and New York City, which account for over half of the office space demand are doing extremely well and they added 5000 office using jobs in December alone. The city is forecasting a significant amount of new.

Office jobs in 'twenty and 'twenty, one such that we would return to pre pandemic office employment levels by the fourth quarter of this year Recouping all of the 165000 office jobs lost at the outset of the pandemic.

The credit markets remained quite strong with commercial mortgage interest rate levels are in and around the 2.5% level and new construction activity has substantially declined which combined with job growth will enable supply to come back into balance with tenant demand.

And on the topic of demand SL Green had a very productive seven weeks since our Investor Conference on December 7th where we held a live in person event at one Vanderbilt during that seven week period, we signed 200000 square feet of Manhattan office leases, while adding 240000 square.

Feet of new pipeline, thus, increasing our current pipeline as we sit here today to 700000 square feet higher than on December 7th.

With the leases, we expect to sign over the next 60 days, we anticipate being on schedule for a total projected volume for the year of one 3 million square feet.

One of the 18 or so goals and objectives, we laid out for everybody in the Investor Conference.

Particular note are the lease transactions, we announced yesterday, starting with the beam Suntory deal for 100000 square feet at 11, Madison Avenue filling our space, which had been vacant since April of 2019.

Centuri is relocating its headquarters from Chicago, and New York City to better aligned its global brand building efforts with all that New York offers to Suntory deal and the 92000 square foot freshly deal at 63 Madison Avenue also recently announced affirms the development strategy that is the.

Pinning of our one Madison Avenue development project, which is now fully financed and bound with the GMP construction contract from Tishman construction.

With building permit now and hand structural demolition has commenced and we will be delivering the finished project and 2023.

Leasing velocity at one Vanderbilt has been strong since the third quarter and that velocity is carried into 2021 with the signing of two notable leases our pipeline at one Vanderbilt includes three more leases and negotiation and for term sheets that are in advanced stages of discussion so.

So we are currently 73% leases. So we sit now and at this pace, we are on a trajectory to meet or exceed our year and estimate of 85%.

Furthermore, our net effective rents that we're achieving on these deals during the pandemic for all signed and pending leases remained within our underwriting assumptions.

And there is no other building in Manhattan and join this kind of success and it's it's very very gratifying to see businesses respond in such a positive way to what we've constructed.

And keeping with our custom for abbreviated opening remarks on the January <unk>.

Our earnings call that follows the deep dive we taken our December investor meetings, we will open up the line now for questions. Thanks.

Ladies and gentlemen, if you'd like to ask a question at this time. Please press the star and the number one key on your Touchtone telephone.

Withdraw your question press the pound key.

Our first question comes from the line of Michael Lewis with <unk> Securities.

Great. Thank you.

You know Marc here, and you talk about police and activity the pipeline.

Even the net effective rents at one Vanderbilt as seals.

If you have a different than a few months ago right. So.

And you had this good leasing activity for the quarter.

Two or three press releases out separately about Lisa.

Is there is there a change and psychology and you think maybe as we get closer to bringing people back to the city.

And I guess in other words.

This call feels different to me just and your brief remarks does it feel a lot different than a few months ago are things really changed and quickly on the ground or am I reading too much into this I think it's I think it's yes and no.

As it relates to the leases.

What we're closing out now or leases that we've been working on I'd say, Steve maybe for three to six months.

So while well.

And now and seeing them now and reviewing them now.

And this is I would say really since mid summer.

When the pandemic hit March April may.

And everything just stopped.

And that's across everything and then when we get to June July August at least within our portfolio. We felt things start to pick up and I think if you go back to maybe the October call.

I think you would hear some of that equity on that call as it relates to the reemergence of people who had hit the pause button coming back because people are planning for 10 15 years out not to next six to 12 months and.

Initial activity with a lot of.

Shorter dated renewal activity that change to longer dated renewal activity something I did mentioned in my remarks that has just occurred to me now is we also signed three significant deals over a 245 park.

And as agent for HMA owner and in the total of that square footage is probably also over 200000 feet between one and two.

220000 feet, so we did that as well.

It's like any other deal we had to negotiate and and get those across the finish line, which will III just did so.

So in one sense that leasing.

Production, you're seeing has been developed and pent up I'd say for the last six months, but in terms of psychology, excite you mentioned psychology, and and the feel of the market yes.

Things and I don't want to say feel better, but it feels like more than ever there.

And there is a.

And exit strategy and our path to what what the Governor calls reconstruction.

Having.

And his where it's been through a war, which I guess and sort of feels like so.

And the psychology, and I think the market vibe is much better it's no longer talking to people, who say I'll be we'll be back next year now, we're hearing and seeing schedules of moving dates that have already begun and will.

Gradually ramp up through the summer to the point, where there is an expectation that everybody will be fully vaccinated restrictions will have been.

Largely lifted and.

And then there is.

Some people, who feel like there'll be a gradual rise from there and theres, others, who feel like there'll be an explosive comeback.

Due to.

The lockup of what was going on almost one year that when the all clear signal it sounded that the resurgent won't be gradual it'll be quite quite immediate so yes, I'd say, you probably hear a little little hitching, our step and also as I said, we're really excited.

And to be moving into one Vanderbilt so.

And that's that sort of plays into everything.

Not just for.

And what it signifies but.

And it really I think at this stage and our cycle, where everything we're focused on on the.

On the investment side pretty much revolves around new development.

And it's very energizing and we want to be in the right space in order to kind of enhance that creativity, even further than gray bar and certainly anything more didn't get sitting at home.

Great. Thank you answered a couple of my questions there.

I'm going to ask one that's maybe more of a of the <unk>.

Housekeeping question and then.

And for Matt.

Maybe I was hoping you could just.

Breakdown that other income line item for me.

And that's one $6 million and are recorded and <unk>.

How much was lease termination income and anything else material I know and <unk> there was a legal settlement gain in there.

But that number is still was.

A little bit higher than maybe I was expecting.

Yes, no problem happy to do housekeeping.

The balance.

Balance at the end of the year, the $26 million recorded consistent with what we expected only over by about $1 million half of that number.

Are the fees, we alluded to and then we're able to recognize and the fourth quarter related to the sale of the JV interest and one Madison and the outright sale of 410, 10th So we had fees.

We had to wait until those deals closed to recognize that was about half we had no lease termination income and the quarter.

And the bulk of the remainder of that balance was.

Somewhere between 6% and $8 million a quarter that we recognize of third party management fees leasing fees management fees construction management fees those types of things.

Okay got it thanks, a lot okay.

Our next question comes from Rick Skidmore with Goldman Sachs.

Hey, Marc Good afternoon, just following up on the return to office comments that you just made what are the tenants that you have staying about the timing of the return to office.

And then just a follow up on the new leases that you've signed and how are the lease configurations, changing or not with those tenants regarding densification desk hotel and number of employees per square foot et cetera. Thanks.

Well.

As it relates to schedule.

Yes.

It's sort of all over the place.

I would say consistently.

And the refrain is.

And by Middle to late summer.

<unk> and back.

Unclear, if back needs, 100% or certainly greater than 50%.

But it's it's and there is it's and of work from home was the beginning of and a work from home.

At that point and there are firms already moved into one Vanderbilt and we have several hundred people a day that are occupying that building.

And we see some occupancy increases after the new year and other parts of our buildings and got quite low in December.

And.

It's hard to pinpoint anything more than to say between now and mid summer late summer and I know that sounds like Wow, that's a long way away, but it's a blink of an eye right before you know it will be and summer and therefore, there will be a vibe.

I'm confident that there will be a <unk>.

Significant.

Return.

By mid to end of summer and hopefully by end of summer.

And we're completely back completely vaccinated and everybody will be celebrating the opening of our great new observation deck at the summit at one Vanderbilt on October 21.

As it relates to configuration and Steve you want to try so well.

You're hard pressed to really good good examples of people that have share.

James.

And their design of their space.

For the long term.

Most of the people you talk to the answer to the question as well we are changing our furniture configuration.

For the next.

For immediate reentry and where they are generally means is taking the workspace is spreading it more apart.

But ultimately planning to return to densify environment, but not as dense as we were pre COVID-19 and you've heard us stood up before the trend of Densification had already started to shift back to deep densification pre COVID-19 COVID-19 accelerated that trend and.

When you speak to tenants as we speak the architects.

It's clear to me at least that long term, we're still going to be and identified world is just going to be not as much as it was before the other trend and I will say is.

There is a growing belief that.

And tenants will launch a greater amount of landlord provided amenities and.

We've certainly.

Experienced that firsthand with the with the lease up at one Vanderbilt because we have probably the single best amenity floor and the <unk>.

City right now and that has been a huge bonus to our leasing effort and the building and I think you'll and we've started to develop some of those concepts throughout our portfolio and thank you.

Just to continue to do so.

And years going forward, particularly as we rollout the development plan for one Madison.

Thank you.

Our next question comes from Manny Korchman with Citi.

Hey, good afternoon, everyone.

Marc if we can turn to the New York City retail environment.

How long do you think we have to wait to see some green shoots there is it a matter of getting everyone and and and those.

The tenants that can help and make some money and and also new tenants looking to expand start coming in or do you think we might be I'll share a little bit of that.

During the early phases of reopening as you laid out.

Well I mean retail is.

And is a much tougher.

And then I guess, what we were just discussing to date.

It's going to I think lag.

Substantially because.

A lot of the.

And the retail green shoots as you put it are going to be dependent on.

Our return of leisure and hospitality and tourism.

Not all but certainly a big part of it.

And right now that is completely shut down in fact, while there were 5000 jobs added office jobs and in December.

There were 19000 private sector jobs eliminated.

And almost all of those jobs came out of the leisure and hospitality and restaurant.

Industries. Unfortunately.

Tragically.

So.

And that's going to take longer to come back while.

The city is forecasting a return to pre pandemic levels for office jobs, and a 21, they're not projecting a return of total private sector jobs until sometime in 'twenty three.

So you can see so that's a pretty significant lift.

And substantial so I think that restaurant and.

And retail.

Will.

Just will lag and I would say that.

While we've had some good success, so I wouldn't sort of buck the trend a little bit, but we did sign and good lease at one Vanderbilt with one medical.

In the fourth quarter, I guess that was previously announced.

And we have.

And another deal pending.

Which hopefully will be a first quarter event.

The demand is still tepid.

And the environment isn't really quite right, yet with all the restrictions where I would say.

We're seeing any kind of forward.

Forward momentum there.

Great. Thanks, and I think and you in your opening remarks, you talked about.

Stimulus for cities and sort of important factor you are thinking about.

And if there's something else doesn't come through if there are delays and the stimulus or just it doesn't shape out are you worried about sort of the longer term health of cities like New York.

And I worried or.

And we it's something we focus on and.

And so we're.

We're vigilant about it but the city has balanced its budget for 2021 and 2022 fiscal year.

With the assumption of zero stimulus. So the stimulus comes on top of.

And whats already a balanced budget the budget was balanced for 2021, obviously in June of this year you go to the new budget 'twenty, one 'twenty two and through various means the city has managed to.

To budget and in a tough operating environment I can't imagine.

And next year's operating value will be as tough as the one we just went through.

And they have attrition rules now I think three attrition for everyone new hire.

Made other cuts.

Fortunately the personal income tax.

Side of the equation is.

Reportedly better than projected so that is offsetting some of the property tax collection.

Losses or reductions that the city is experiencing and.

Net net.

They have a plan to get it done at least through the middle of 'twenty two that doesn't rely on any stimulus. So.

If you want to answer and I would also say, there's a lot of different forms of stimulus and.

And infra.

Infrastructure, and New York City has more shovel ready projects and any anywhere else and the United States and they are lobbying hard for the gateway tunnel and expansion of transportation and a bunch of other projects. So thats another way stimulus could make its way to New York not just through direct.

<unk> funds, if you will and.

And changes and the tax code, where there is a potential rework of.

The salt credit state and local tax credit, which could also benefit residents from New York. So there are other ways you can see stimulus coming to the area and not just through the direct federal.

Subsidies.

Thank you both.

Our next question comes from Alexander Goldfarb with Piper Sandler.

Hey, good afternoon.

So Marc just along those lines.

And on the office restoration and I mean.

And there are bunch of things and Theyre not yet.

Getting the opposite to reopen and employers telling the people to come back. There is what you guys have highlighted which are the incentives. So I don't know how many of your tenants are offering incentives to help their tenants or health workers.

Come back and there is also the city.

And you go into the Midtown and like past the restaurant and bars per day.

Net that supports the office workers.

Our core heavily shutdowns. So it's sort of a twofold bucket that may Earl basically November elections, and June because whoever was that.

And the mayor so there's a lot of unknowns and a lot of indicators to getting the city fully back so beyond just the office, what's your view on really doing its part to it.

No.

Okay.

Event Day club, where all the activity light among these down the street and the beyond the landlord.

So how do you go back to your <unk>.

Optimistic comments that have been fully back and part of Q4.

Well again back in Q3, Q4, but it's still going to be low occupancy levels in Q1, and probably even Q2.

Some of the things one program that.

The state is has initiated as part of the state of the state address if you heard if you heard that is something called the safe offices pledge, where we and a number of other large owners took a made a commitment to set aside space within our buildings and and <unk>.

Portfolio. They are fully identified a range for a testing provider.

To operate out of that space and the tenants make arrangements in that space with that testing provider to have all their employees.

Tested on as much as a weekly basis.

That's what they choose and with the concept being that that's our first step to building the confidence level to get people back ahead of the time when everyone is fully vaccinated. So we support that we endorse it.

We've done something similar with our own employee base for their per month now.

And we.

We think that's the kind of thing that will.

Health net.

We've contacted every tenant at least every.

Major tenant and the portfolio and mid sized tenant portfolio and Gaye.

Dave them the suite.

Incentives that we provide to our employees and.

And tried to demonstrate to them how easy it is to implement these incentives and how well received there et cetera, and we're hopeful that companies will enact those incentives as a means of bringing people back, but I will say.

Obviously as we sit here between 10 and 15% total building occupancy.

It has not yet taken hold and it may not until the third quarter.

And just may be the case and where we're hopeful that's not the case and every time another firm comes back it puts competitive pressure on the ones that haven't to get back also and I see I do see more of that but it's gradual and it's only January.

So.

We think this is.

A trend that will take some time, but there are efforts and the reopening of restaurants right. So.

As of last night with heavy.

And vocal.

Pressure being applied by the restaurant industry.

And more importantly numbers that have improved and New York state since.

And that spike as a result of the holidays. It looks like 25% indoor dining either is or maybe coming back are highly likely coming back next week or at least that's what we're hearing yesterday and this morning, and hopefully that is the case and you know again thats the start hopefully towards 50% and I think all restaurants.

Tories agree at 50% without or they can make a go of it. So the one step closer and everything will just have to build off itself I would look at the reconstruction process.

Nine to 12 month process, not something that's going to be.

The next month or two.

Okay, and then Steve at the Investor Day, you made the comment and the.

Q&A portion that sort of the easy part of your leasing job is done because the tenants who wanted to renew and have renewed the tough part is coming which is back filling the tenants who are leaving and.

And your comments were definitely striking so just sort of curious now that European months further in the vaccines are rolling out do you still see the replacement of tenants.

Tenants, who were vacating and.

And sort of as challenging as you characterized it and the Investor day is it the same is it getting better and hopefully it's not getting worse.

Well I think it's getting better and maybe the statistics I'm going to give you.

Proves that.

260000 square feet of leases that we have either out for signature.

Or and document negotiation.

120 of the 120000 square feet of that are new tenants, so new tenants migrating into the portfolio. So almost.

Almost a 50 50 split premium renewal and and.

And new tenants.

Which.

As we've also said or Marc said.

At the Investor Conference, all we need is velocity and the marketplace and.

And we have a good enough portfolio and we have and we have a good enough leasing team and.

We are here every day working very hard we're going to get more than our fair share of the deals that are and the market. So as soon as tenants that are out there we will fill the portfolio, we'll keep it full the way we have every year and the past.

Okay. Thanks.

Our next question comes from Jamie Feldman with Bank of America.

Thank you.

With your view of things getting better and I'm curious what your thoughts are on the value add acquisition market.

What do you think pricing is and when we start to see more capital step and it seems like so many of the transactions have been high.

High quality credit tenants and long term leases just curious where you think that market is right now.

Well I think the financing market is generally tightening up.

See MBS spreads are and and Theres more banks looking to lend and I think that will drive that value add market. The issue has been.

Assets like 410, 10th which is fully leased are getting the best bids.

Because of in place income, but as lenders are willing to underwrite lease up again, I think youll start to see that market get more liquid and start to have some pickup and activity.

And then would you could.

Could you pay cap rates at this point or what IRR is or what people are looking for and how much capital is out there is there a meaningful change in appetite.

People circling.

Net cash cap rates on value add.

You are saying at least stabilized cap rate or going in cap rates are not a meaningful metric because there is large vacancy.

I think people are underwriting to 10% to 12% IRR is on value add type opportunities.

And I think that means they are probably leasing the assets to my guess is.

And between five and five 5% cash on cost if theyre, taking lease up risk going in and where if theyre buying and place and comments more in that four 5% to 5% range on average.

Okay, and then for Steve. Thank you by the way and then for Steve You had mentioned financial and cash or about half of office demand and the city right now how much of that would you say is the expansion space and other large tech leases and the pipeline.

Well.

And.

And.

And our pipeline and are you asking are you talking about just generally in the marketplace channels.

Generally.

Well I Couldnt tell you how much and the.

Overall market pipeline, how much of it is.

Expansion or.

We're just.

Replacement costs within our pipeline.

And I would say were very heavily weighted towards financial services right now.

And maybe a new growing trend and I'm starting to hear from sort of early parts of searches as you're starting to see some of the law firms come back into the market as well.

They were very quiet last year.

And part of the market and it's very slow right now is the <unk>.

Advertising and media portion of the market.

But that's and that's made up obviously by the tech side. So.

Okay.

And with opportunity to sort of stress the point that I think is worth noting for everybody, which.

New York city's rebound will be driven by the fact that we have a very diversified.

Tenant base as opposed to the West coast, which is sort of a one trick pony.

New York City as Scott because of what we've seen over the past couple of decades.

Technology Education, and healthcare finance media and.

And that diversification is going to be.

The strength of our of a rebound.

Okay. Thanks for your thoughts.

Obviously.

Our next question comes from John Kim with BMO capital markets.

Thank you.

Question on and co working.

One of your peers took a standard yesterday with the write down.

Day, the journal and supporting that we weren't looking to go public potentially back can.

Can you just remind us what your views of we Werent and co working tenants are I think going concern tenants.

I think we have.

And that less than 2% I mean, yes, less and less than 2% co working that was a.

Strategic decision by Us.

I think the asset class is here to stay and they will always be demand.

Demand in the market for co working type opportunities.

And we certainly love to see we were go public and us back or otherwise.

And.

It's a.

And for us that will always be around we have our own fractional office space Division, which has been around for 20 years or so so we're.

And the business ourselves.

We just don't see it as a very large part of our portfolio.

As a follow up are they as we were current on rent.

And how did rent deferrals and abatements trend this quarter versus last quarter and is that number and excluded from your one collection number.

Well.

And it tracks too.

Two gross rent collections were about what Matt and 90 between $95, 96%, Yes, and office, we're actually at 97% and we calculate it on gross contractual rents. So we don't net out any deferral or abatement.

From that number if they owed us $100 and we agreed the day only you have to pay is 50 and they paid US 50, that's not 100%, that's 50% and Thats, how we calculated that out.

We think everybody should calculate it if we if we I think there's a lot of different ways that people seem to be doing this if we express collections based on current contractual obligations much I'd, probably be at like 90, 899% and the strength, but we're not.

And to try and give people a look into collections today versus what the rent schedule was back in let's call. It January of last year, which I think is really the only meaningful metric.

And that's where that 97% office and.

Overall, 95, and 96% when you factor and retail, which is probably down around 80% to get correct and thereabouts, yes.

The way to look at and so for somebody like.

We work.

There are 100% current as far as I know on.

Their current contractual but that represents.

A modification that was done last year, where we lowered the Rand gave a little bit of abatement and return for and.

And the enhanced security package to what was already a pretty robust security package and now it's it's.

And <unk> is very well secured.

So that was a good trade, we don't even look at that necessarily as a concession and we think we upped the credit.

Which offset whatever those.

Economic concessions were and their current on those economic concessions. So that's that's at 110 and in particular, but we've managed.

Almost 900 tenants many of them one by one if they are small business or retailers.

And there is predominantly but the vast majority of the portfolio of good credit rent paying tenants.

And Matt mentioned that the deferrals and abatements would trend down.

Is that still correct.

Yes, they did.

The bulk of the deals that were caught and we're done and second and third quarter.

Just a handful done since that time, and the fourth quarter and I'm not even aware of any into into 'twenty. One we've got we've got some very small ones that were.

Providing some additional deferral too, but nothing that really moves the needle and.

And we haven't done any abatement deals.

Certainly put it in the past six months, where we didn't get something on the trade where there was a.

Part of a restructure of the lease where we got a longer term or and have security deposits.

Or the tenants surrendered.

Some capital contributions that we were required to make so even.

Even though the majority the vast majority of and if the deals that we did were deferral deal its not abatement deals on the bigger deals that we did do we got.

We've got something for it.

Great. Thank you.

Our next question comes from Steve <unk> with Evercore ISI.

Thanks.

Going back to the comment Marc I think you talked about the pipeline being 700000, which was up a little bit from December I was just curious if you could give us kind of a broad breakdown of what was new and that and what are what are renewals.

And those renewals, mostly 2021 or is any of that and just pulling forward in terms of 'twenty two activities and pipeline.

Well.

Boy, it's hard to really give you.

A specific answer to that Steve only because.

The pipeline is very fluid from week to week or month to month. So some of them as a result of deals that were signed so it came out of the pipeline others deals just didn't make.

But it was backfill with new shows that are and there I think the easiest way from me to answer is the way I answered it before if you zero and just on the portion of the pipeline that is the leases that are out which is 260000 square feet of the 700000 foot pipeline.

Half of that or almost half of that are new transactions and.

And the other half is our renewal deals.

There are no.

No.

Significant.

Deal flow there.

There is one significant deal Thats, roughly 90000 square feet.

And the deals pending portion of the pipeline that is a new deal and Thats, a renewal deal and Thats a.

It would be and early renewal.

Other than that.

It's kind of business as usual attending to the 'twenty, one and into 'twenty two explorations.

We do every year at the beginning of the year.

Okay, and just as a quick follow up are you seeing any maybe non economic lease terms changing maybe tenants looking for maybe early.

Exit rate or termination rights is there anything changing kind of maybe below the economics and the deal that we should be tomorrow.

Well, yes.

No surprise.

As we've seen every time there is a major disruption and the marketplace when tenants go and the defensive.

Value flexibility, so whether thats shorter term deals or and ability to.

Spanned and the near term or expand midterm or shelf space midterm or right of cancellation that at some point.

And that becomes part of the conversation and I would say.

On the deals that are large enough to warrant that kind of flexibility and we're meeting the market to do it and certainly not.

Certainly not.

The vast majority of our deals. So if you are a tenant thats five or 10000 square feet, you don't get that kind of flexibility if youre a big tenant.

Multiple floors and you wanted to write to.

If I'm doing a 15 year deal with Union and want to write to shut some of the space 10 years out we have that conversation.

And the tenant pays for that right, but.

And Oh by the way as soon as the economy tightens up those concessions will get wrung out of those discussions very quickly.

Right and that makes sense, Okay, and then maybe just second question on sublease space.

And I don't know if and when they call follow on that one but are you got and notes two five.

And for Wow.

And while I was just to say sublease space in general just kind of and the New York City market and then maybe sublease within your portfolio anything Thats kind of come up lately to the concern you and the market are things within your own portfolio.

Well as you've read and the papers and Theres a lot of space, that's been added to the availability and the sublease.

From sub leases.

But what's most interesting and that statistic is the amount of sublease available today is still below the amount of sublease space that was part of the availability after 911 and as part of the availability during the financial crisis. So today, 27% of the overall.

Availability is sublease space compared to 47% of the availability with sublease space during the dot com bust and 31% during the financial crisis and what we.

What we see a lot of times is that tenants come.

Dump a lot of space on the market, but then they rapidly pull it off the market as well when things start to improve so you'll see a lot of tenants that will test the waters.

And maybe they've got a big portfolio and we see.

And this right now with a tenant and Grand Central.

Putting 500000 square feet on the market, but they have said also publicly they only intend to lease two to 250000 square feet of it so.

Skews the statistics and creates the perception that maybe not be as bad as what you otherwise from I think another point that may come out is that of the sublease space Thats on the market, 40% of it has a term of four years or less which does not make it competitive to direct.

Direct space so.

I think it's important for people to understand that just because their sublease space on the market.

It doesn't necessarily have.

And the corresponding impact to the where rents are headed or where lease up velocity will trade on a direct basis.

Got it thanks.

As a reminder, ladies and gentlemen, we ask that you limit your questions to two per person.

Our next question comes from Blaine Heck with Wells Fargo.

Great Thanks, and good afternoon.

Steve can you talk a little bit.

<unk> and free rent trends out there and especially since you guys were able to get some large long long term leases signed during the quarter, which seems to be a rarity. These days so any commentary on the concessions associated with those leases would definitely be helpful.

I think it's sort of leveled off from.

In line with where we.

Spoke about it during the Investor Conference.

I think.

And free rent is.

Up was 12 months pre Covid now it's somewhere in the 14% to 15 and there are examples of extreme extreme months of free rent beyond that but by and large it's up three or four months more than where it was pre.

Pre COVID-19 and I think Ti as if they were at a 100 to 110 pre COVID-19 the economy and that.

130 to $1 35, and if Youre very high price point building, then they're above that as well.

Above that number only because it's sort of proportionate to the.

To the right you are paying but.

And.

And I haven't sensed that they've been increasing over the past month or two they sort of spiked up and the fourth quarter I think they've sort of held and I see no reason why that won't continue to sort of stay this way at least for the next quarter or two.

And when you when you talk about net effective rents whats interesting and we've said this on the last earnings call. We said at Investor Conference was face rents are not down that much that kind of down 5% to 7%.

Where the real trade has been has been on the concession side.

And as you would expect during a time and disruption and tennis play defense and they'll pay a rent over the next 10 years, but they want their concessions upfront and they want a husband and their capital and then with the landlords and physics session. So they don't have to come out of pocket.

Okay, Great. That's helpful and then Marc or maybe even Steve can chime in on this one too, but Marc you talked a little bit about the timing on the reopening but can you give us some commentary around how and how you expect the leasing decision process and timetable to play out for large tenants I guess I'm wondering once tenants or fit.

<unk> back into the office, so whatever whatever extent they will be how long do you think it will take the business leaders to determine how work from home and hotel and our de Densification all of those trends how they are going to impact what their ultimate space requirements are going to be and obviously they typically can act.

On that until their exploration, but I'm more interested in that first assessment and planning and decision process and how long that could take.

Yes.

It's a hard question to answer because there is some tenants.

And particularly the ones we're in dialogue with now about.

And opportunities in the next 12 to 18 months.

And we seem to have a pretty definite view on.

Sure.

And what they want to do and most of those.

And that have that point of view are the ones, who are probably going to be completely or mostly work from office.

So there'll be issues.

Around physical.

Layouts, and whether they want to increase workstations by a further two and whether they want to put up some kind of glass partitioning at workstations and.

Other choices they'll get in order to enhance air filtration and and.

And that sort, but by and large.

I'd say there is a.

The school of tenants that.

Feel like Theyre going to be most or all back to back to work I don't I don't labor under the illusion that work from home is a good thing. So it's hard for me to answer. This question I think when I look at it but I'm biased I think everyone's going to be back to work because those that work from home.

Really solely to accommodate.

Commutation.

Issues or at least predominantly compensation issues I think those firms will suffer competitively it's not a question of.

Spiritually as it better and not I think it's a question of our firms more efficient and productive capable.

And.

And competitive.

And if they are and just work from office work from office is sort of just the tip of it.

It's being.

On the on the road developing relationships.

Business is just not conducted head of head of a home and.

And I don't see it happening that way I know, we could not have accomplished.

Half of what we accomplished in the past 10 months if.

If the entire workforce, where home, they're just it would have been impossible.

Given what we do in a given day and we're not and we're not even a good example of it because there are other firms that really make their living off of customers, where they have to be in the customer entertaining the customer meeting the relationships. So I just don't really see it for the bulk of the firms that we deal with there is a reason why we have nine.

<unk> tended to have substantial square footage there.

Might be more flexibility, maybe it'll be a four day week and one day at home.

Maybe some firms will.

I guess permanently go to homes and I know some of the tech firms have originally said they would and now they are we considering it and we're hearing that they are not going to go 100% work from home. So I can't really tell you what that decision matrix is only that the firms we're in dialogue with.

Tend to think there'll be.

Predominantly work from office and want to be.

For those that don't aren't we're probably not and dialogue with those centers my guess and.

Weather.

Businesses will work those things out over the next 12 to 18 months.

They will but as circumstances change their decisions may change and as they feel the need to be more competitive.

And to do what they want to do in order to be most efficient I think they may come back to the center, which is why this market has 400 million square feet of office space work from home.

Birth, new out of the pandemic, I mean, and something that's been around for years and years and has been tested and the technology. This year is the same with last year and the.

A year prior.

It just is suboptimal and I think most people would agree and those that don't will work from home.

Okay I appreciate the thoughts.

Our next question comes from Craig Mailman with Keybanc capital markets.

Hey, guys.

We've just been hearing from a couple of private owners and the city that they're tax assessments are coming in and probably lighter than they expected and I'm just kind of curious if that is the experience that you guys are having.

This year and whether you think if you are that sustainable just given kind of the fiscal situation of the city.

Well I think the assessments have come out of lower of the city Hasnt and set the mill rate yet.

So the question is.

Theres two components and the taxes and the assessment and then Theres the mill rate. So I would say, we're reserving until we see where the mill rate shakes out.

Okay.

Thanks, and then just one house cleaning for from Matt.

The leases that you did at $2 45 is that going to lead to any outsized other income from just leasing fees and.

And the first quarter.

Sure.

Housekeeping and people must know what I do at home.

And the $2 45 leasing we get paid commissions on.

We do budget for that stuff coming into the year. So it will result, and commissions that we recognized and other income but nothing outside.

Outside of what we had projected.

So if we had to kind of do a run rate quarter over quarter should we assume.

A decent step down and that is the fees from that.

And the transactions closing last quarter kind of go away.

Yes, if you look at quarter to quarter, Yes, I mean, those fees recognized in the fourth quarter would not be replicated in the first but as to the $2 45 park commissions or any other that's in that kind of $6 million to $8 million every quarter of.

Fees, we generate from our JV partners.

And for managing and leasing.

Alright. Thanks.

Our next question comes from Vikram Malhotra with Morgan Stanley.

Thanks for taking the question, Matt I'm not going to call. It housekeeping cleaning I'll just call. It. The modern model question because you are the expert there.

Yes, just on can you remind us what percent of bad debt reserves stake and the fourth quarter.

On the portfolio and then how do we how should we anticipate potential additional reserves and 21.

And potentially any reversals.

Yes, so in the fourth quarter I appreciate nickel and housekeeping.

The reserves, we took in the fourth quarter were about six point.

$6 million of between 667 on.

So actual receivable reserves.

And it's across the portfolio consolidated joint venture, we took no incremental reserves on straight line. So overall reserves are down and total and <unk>.

Roughly flat on the actual reserve around the actual.

And this year I mean, we.

We leave some conservatism in our numbers historically.

Historically and even more so in this environment from potential reserves, we can't project those forward otherwise we'd have to take them now.

And so I'll, just say, we put conservatism into our numbers for 'twenty one.

Okay Fair enough and then just maybe.

Another question just on the DTE book I think the two parts to it I think one you took some losses I believe on retained positions and I don't know if that was sort of this part of your quarterly C suite of view, but also just your view.

Recovery and the market overall can you talk about how you think DTE opportunities may trend for you and the balance of the year.

Yes, I'll take the first part of that is part of the Seas will review, we do every quarter, we sold one position.

During the quarter, but that was at par. So we didn't have to take much of a mark there.

The reserves on retained where part of seasonal and they were on retained retail investments and then I'll leave it the opportunities question too to either Andrew or David.

Well we did.

The goals and objectives talk about finding some interesting deployment opportunities and PPE to the tune of $100 million or so and I think we're starting to see that market.

Materialize, where there are some interesting capital opportunities and we're definitely.

Shingles fill out and what were still.

We're still evaluating opportunities and conveying that to everybody and the market and I think I think we will.

See some very interesting opportunities.

Hopefully and the early part of this year.

Great. Thank you.

Our next question comes from Anthony Paolo and with J P. Morgan.

Thanks, and I guess first question for Steve on one Madison can you talk about just activity there put brackets around maybe what types of requirements youre seeing and the market tech and lineup with that asset.

Yes.

And <unk>.

We've got a couple of tenants that were in early conversation with.

But let's remind everybody.

Everybody.

The process for marketing and a large development like that as we start with <unk>.

Education, and the brokerage community and we go after the tenants and we ultimately see the deals I think we're ahead of schedule as far as the level of tenant inquiries about the building and.

And.

We're feeling really strong about the feedback that we're getting from both the brokers and the tenants that we presented the building too.

With regards to the product that we're offering the development plan that we've got and.

And the timing of delivering the building.

And a 23, which I think is going to be sort of like write offs spot on is the perfect time to deliver big block of the best space and could be comes from.

Okay.

And then I guess, just one question for Matt.

Is there a way to think about you mentioned and the last I think the question around the reserves and stuff and theirs and they get 95% and collections roughly and the quarter.

The way to think about what was recognized and your NOI for <unk> purposes. Like you said, some number and between what you collected and what.

And it was actually schedules are and certainly.

There is no there is no easy way to correlate it so the answer to your question is no.

The numbers that run through your income statement.

Reflect straight line.

Smoothed out deals that you've done.

So collections are definitely correlated to.

Cash NOI.

And our cash flow, but you're not as likely to find a good correlation in the on the earnings side to collections.

Okay fair enough. Thanks.

Our next question comes from Nick <unk> with Scotiabank.

Thanks first question is just going back to the exploration this year.

If you had just a sense for kind of how many of those you feel confident about getting renewed at this point and then also just kind of relating it back to I know you had the 93% same store occupancy.

Our goal for this year and how that factored into that as well.

Well I think the answer is the same to both questions which is.

No.

There are no surprises with.

With regards to.

Lease expirations this year that no new surprises beyond.

What we already have in our budget.

Everybody that has a lease exploration for this year and next year.

And in deep dialogue with them.

Very good clarity.

As to who is likely to stay and who is likely to go.

And Theres been no.

James.

Our expectation since Investor day, when we rolled out.

Our renewal goal and objective for the year.

And I guess just in terms of just relating it back and again kind of holding occupancy somewhat flat.

For the year is that mean that you just assume a very high retention rate is there anything in terms of Vale.

And they can see being filled up and the portfolio, we should think of that.

So.

It's a combination of both of those things so when we looked out over our leasing of one 3 million square feet.

There's a good portion of that that is renewal.

What is not could be leased up later this year or into next but offsetting that additional vacancy is the lease up of vacancy that we recognized this year. So we had some vacancy at 45 Lexington. As example, our 11 and 85 that came in 2020 and early 'twenty, one that's getting leased up lay.

And 'twenty, one such that at the end of the year you rate remain roughly flat.

Okay. Thanks, that's helpful.

I guess just last question and that is on.

Marc going back to the idea about.

You seem positive about.

And the work environment, saying people now on businesses and not wanting to work from home I guess.

And so I'm wondering is are you actually actively spending time sort of surveying and broad piece of the core.

Corporate America on this topic or is a lot of that.

Based on.

Sort of what you said, where you are talking to people and that that's what they're telling you, but maybe you're missing some of the other conversation I'm just trying to understand how kind of what's backing this confidence.

And the level that you have.

Well.

In terms of surveying.

The partnership I think has done one or two surveys of all of the businesses and New York, but that was that was last year and that was more to get a sense of timeline for return as opposed to what go forward.

New program would be.

So my data points My survey, our discussions with tenants and our portfolio period. I mean, we have like I said 900 tenants big and.

We uniquely cover the gamut from.

Small tenants to the largest.

Most affordable rents to the highest premium rents and everything in between.

So I feel like man, if we don't have a good handle on a cross section of New York City business and tenants then shame on us but.

And of course, that's that's a pretty good pool of <unk>.

Sample pool, if you will to to get a sense of what business is thinking about New York City and.

There's very few conversations I have.

Where companies are saying to me, we're going to go work entirely from home were predominantly from home or even half from home.

So.

To your point and maybe people from Intel maybe people are telling me what day.

And I figure I want to hear I mean, I can't it's not.

It's not a scientific survey.

It's more anecdotal, but it's.

It's many months of many conversations and.

All I can say is that the per.

Upon their into those conversations go anything like this we can't wait to get back we're dying to get back.

This work from home sales.

And I can go on and on.

I am trying to think of people, who say boy, we're just never going to return to the office and we're going to keep a largely I don't we don't have and or at least I don't see it so.

Is that the case in California, our Silicon Valley I can't tell you.

And Thats the case for tenants not in our portfolio can tell you.

But with the large and small and medium sized financial institutions small business that really needs to have a presence here or are they become irrelevant and jewelry.

And I, which is the majority of our portfolio leased by number of tenants right.

Yes.

And the dynamics schism and.

And the action I think happens within the city I don't think it happens at home. So I'm also going a bit on my own gut instinct 30 years and the business and.

I have a point of view and I think thats, hopefully and educated point of view that by and large when the all clear signal is people will return now might there be five or 10%.

That either and it works from home or works and some kind of a hotel and basis, yes, it's possible but might not.

<unk> space requirements.

On a on a space per employee basis go up by 5% and 10% to kind of day densify, which we are we.

We have de densify right. So we're not that unique so if we took our footprint that was designed pre COVID-19 went back the densify that by about 5% to 10% I don't see why everyone is not going to do that and everyone who asked us for advice on it we give them our program, which is a 5% to 10% the densification whether they follow it.

So I guess im.

I'm thinking that those two things will largely offset and we'll be in good shape.

Once we get past this period of time, but it's not a survey it certainly not national.

And it's quite possible that im missing the voices of people not in the portfolio.

Alright, Thanks appreciate pool market.

Marc.

Thank you.

So I think with that we are at the end just right after three.

And those so.

Thank you for whoever is still made.

<unk> made it to the and and listening and let's hope for.

Better times ahead and.

Looking forward already too.

Having some good results and put up on the board and April.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

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Thank you everybody for joining us and welcome to SL Green Realty Corp, fourth quarter 2020 earnings results Conference call.

This conference call is being recorded.

At this time the company would like to remind listeners that during the call management may make forward looking statements.

Actual results may differ from any forward looking statements that management may make today.

Additional information regarding the risks uncertainties and other factors that could cause such differences appear and the risk factors and M&A section of the company's latest form 10-K and other subsequent reports filed by the company with the Securities and Exchange Commission.

Also during today's conference call. The company May discuss non-GAAP financial measures as defined by regulation G. Under the Securities Act.

GAAP financial measure most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the company's website at www Dot SL Green Dot com by selecting the press release regarding the company's fourth quarter, 2000, and 'twenty earnings and in our supplemental information filed with <unk>.

Our current report on form 8-K relating to our fourth quarter 2000, and 'twenty earnings.

Before turning the call over to Marc Holliday, Chairman and Chief Executive Officer of SL Green Realty Corp, I ask that those of you participating in the Q&A portion of the call. Please limit your questions to two per person. Thank you I will now turn the call over to Marc Holliday. Please go ahead Marc.

Okay.

I appreciate you calling in today.

The entire S. O G team is here and.

And for 'twenty Lexington Avenue, where we are doing our final earnings call from our boardroom and the landmark Graybar building as our next call will be done from our new offices at one Vanderbilt Avenue for almost 22 years Gray bar has been our headquarters and base of operations for all that we've accomplished but now.

2021, Harold and change for SL Green as we move across the street and two are extraordinary newly completed building that we will soon call home and we could not be more excited about it.

For us the move begins a new chapter for the company that coincides with a period of reconstruction and New York City March by the rollout of the Covid vaccine day.

Leasing of Covid related restrictions and the promise of federal stimulus for cities and states and a gradual return of the work force to offices and other places of business.

And there are many more reasons for optimism as we begin the return to normalcy. This year, the financial and Tech sectors, and New York City, which account for over half of the office space demand are doing extremely well and they added 5000 office using jobs in December alone.

City is forecasting a significant amount of new office jobs in 2021, such that we would return to pre pandemic office employment levels by the fourth quarter of this year Recouping all of the 165000 office jobs lost at the outset of the pandemic.

The credit markets remain quite strong with commercial mortgage interest rate levels.

And in and around the 2.5% level and new construction activity has substantially declined which combined with job growth will enable supply to come back into balance with tenant demand.

And on the topic of demand SL Green had a very productive seven weeks since our Investor Conference on December 7th where we held a live in person event at one Vanderbilt during net seven week period, we signed 200000 square feet.

And office leases, while adding 240000 square feet of new pipeline, thus, increasing our current pipelines and we sit here today to 700000 square feet higher than on December 7th.

With the leases, we expect to sign over the next 60 days, we anticipate being on schedule for a total projected volume for the year of one 3 million square feet, one of the 18 or so goals and objectives, we laid out for everybody.

And the Investor Conference.

Of particular note are the lease transactions, we announced yesterday, starting with the beam Suntory deal for 100000 square feet at 11, Madison Avenue filling our space, which had been vacant since April of 2019.

Centuri is relocating its headquarters from Chicago, and New York City to better align its global brand building efforts with all that New York offers to Suntory deal and the 92000 square foot freshly deal at 63 Madison Avenue also recently announced affirms the development strategy that is the under.

Opinion of our one Madison Avenue development project, which is now fully financed and bound with the GMP construction contract from Tishman construction.

And with building permit now and hand structural demolition has commenced and we will be delivering the finished project and 2023 at least.

Leasing velocity at one Vanderbilt has been strong since the third quarter and that velocity is carried into 2021 with the signing of two notable leases our pipeline at one Vanderbilt includes three more leases and negotiation and for term sheets that are in advanced stages of discussion.

So we are currently 73% leases. So we sit now and at this pace, we are on a trajectory to meet or exceed our year and estimate of 85%.

Furthermore, our net effective rents that we're achieving on these deals during the pandemic for all signed and pending leases remained within our underwriting assumptions.

And there is no other building in Manhattan, and enjoying this kind of success and it's a it's very very gratifying to see businesses respond in such a positive way to what we've constructed.

And keeping with our custom for abbreviated opening remarks on the January Ah.

Our earnings call that follows the deep dive we taken our December investor meetings, we will open up the line now for questions. Thanks.

Ladies and gentlemen, if you'd like to ask a question at this time. Please press the star and the number one key on your Touchtone telephone.

To withdraw your question press the pound key.

Our first question comes from the line of Michael Lewis with <unk> Securities.

Great. Thank you.

Marc here and talk about police and activity the pipeline.

And the net effective rents at one Vanderbilt is sales.

If you have a different than a few months ago right. So you had this good leasing activity for the quarter.

Two or three press releases out separately about Lisa.

Is there is there a change and psychology and you think maybe as we get closer to bringing people back to the city.

And I guess in other words.

This call feels different to me just and your brief remarks does it feel a lot different than a few months ago are things really changing quickly on the ground or am I reading too much into that.

I think it's I think it's yes, and no as it relates to the leases.

What we're closing out now or leases that we've been working on I'd say, maybe for three to six months. So.

Now, while we're announcing them now and reviewing them now.

I would say really since mid summer.

And when the pandemic hit March April may.

And everything just stopped.

And that's across everything.

And then when we got the June July August at least within our portfolio. We felt things start to pick up and I think if you go back to maybe the October call.

I think you would hear some of that echoed and I call as it relates to the reemergence of people who had hit the pause button coming back because people are planning for 10 15 years out not to next six to 12 months and.

Initial activity with a lot of.

Shorter dated renewal activity that change to longer dated renewal activity something I did mentioned in my remarks that is just occurring to me now is we also signed three significant deals over a 245 park.

And as agent for HMA owner and and the total of that square footage is probably also over 200000 feet between one and 220000 feet. So we did that as well from.

It's like any other deal we had to negotiate and and get those across the finish line, which all three just did so.

And one that leasing.

Production, you're seeing has been developed and pent up I'd say for the last six months, but in terms of psychology, excite you mentioned psychology, and and the feel of the market yes.

Things I don't want to say feel better, but it feels like more than ever.

There is a and exit.

Strategy and our path to what I, you know what the governor calls reconstruction.

Having and.

And his where it has been through a war, which I guess and sort of feels like so.

The psychology, and I think the market vibe is much better it's no longer talking to people, who say I'll be we'll be back next year now.

We're hearing and seeing schedules of moving dates that have already begun and will.

Gradually ramp up through the summer to the point, where there is an expectation that everybody will be fully vaccinated restrictions will have been.

Largely lifted and.

And then.

Some people, who feel like there'll be a gradual rise from there and theres, others, who feel like there'll be an explosive comeback.

Due to.

The the lockup.

And what was going on almost one year that when the all clear signal it sounded that the resurgent won't be gradual it'll be quite a quite immediate so yes, I'd say, you probably hear a little a little hitching, our step and also as I said, we're really excited to be moving into one Vanderbilt so.

And that's that sort of plays into everything.

Not just for you know a.

We know what it signifies but.

And it really I think is at this stage and our cycle, where everything we're focused on on the on.

And the investment side pretty much revolves around new development.

It's very energizing and we want to be in the right space in order to kind of enhance that creativity, even further than gray bar and certainly anything more didn't get sitting at home.

Okay, great. Thank you answered a couple of my questions there.

And ask one that's maybe more of a housekeeping question and then.

And for Matt.

Maybe I was hoping you could just.

No breakdown that other income line item permit.

And that's one $6 million and are recorded and <unk>.

How much was lease termination income and anything else material I know and <unk> there was a legal settlement gain in there.

But that number is still was.

A little bit higher than maybe I was expecting.

Yes, no problem happy to do housekeeping.

<unk> <unk>.

Balance at the end of the year, the $26 million recorded consistent with what we expected only over by about $1 million half of that number are the fees, we alluded to and then we're able to recognize and the fourth quarter related to the sale of the JV interest and one Madison and the outright sale of.

And a 410, 10th so we had fees.

That we had to wait until those deals closed.

Recognize that was about half we had no lease termination income and the quarter.

And the bulk of the remainder of that balance was the <unk>.

And were between 6% and $8 million a quarter that we recognize of third party management fees.

Leasing fees management fees construction management fees those types of things.

Okay got it thanks a lot.

Our next question comes from Rick Skidmore with Goldman Sachs.

Hey, Marc Good afternoon, I'm just following up on the return to office comments that you just made what are the tenants that you have staying about the timing of the return to office.

And then just a follow up on the new leases that you've signed and how are the vs configurations, changing or not with those tenants regarding densification desk hotel and number of employees per square foot et cetera. Thanks.

Well.

As it relates to schedule.

It's sort of all over the place.

I would say consistently.

The refrain is.

And by Middle to late summer back and back.

Unclear, if back needs, 100% or certainly greater than 50%.

But it's and there is it's and of work from home with the beginning of and a work from home.

At that point and there are firms already moved into one Vanderbilt and we have several hundred people a day that are occupying that building.

We see some occupancy increases after the new year and other parts of our buildings and got quite low in December.

And I think it's hard to pinpoint anything more than to say between now and mid summer late summer and I know that sounds like Wow, that's a long way away, but it's a blink of an eye right before you know it will be in summer and therefore, there will be a vibe.

And I'm confident.

And that there will be a.

Significant.

Return.

By mid to end of summer and hopefully by end of summer.

And we're completely back completely vaccinated and everybody will be celebrating the opening of our great new observation deck at the summit at one Vanderbilt on October 21, as it relates to configuration, and if you want to treat them well.

And you're hard pressed to really get good examples of people that have changed their design of their space.

And for the long term.

Most of the people you talk to the answer to the question as well we are changing our our furniture configuration.

For the next.

For immediate reentry and where that generally means is taking the workspace is spreading it more apart.

But ultimately planning to return to densify and environment, but not as dense as we were pre COVID-19 and you've heard us say that before the trend of Densification had already started to shift back to deep densification pre COVID-19 COVID-19 accelerated that trend and.

Could you speak to tell as we speak the architects.

It's clear to me at least that long term, we're still going to be and identified world is just going to be not as much as it was before the other trend and I will say is.

There is a growing belief that.

Tenants will once a greater amount of landlord provided amenities and <unk>.

Certainly.

Experienced that firsthand with the with the lease up at one Vanderbilt because we have probably the single best amenity floor and the.

And the city right now and that has been a huge bonus to our leasing effort and the building and I think youll. We've started to develop some of those concepts throughout our portfolio I think if you choose to continue to do so.

And years going forward, particularly as we rollout and development plan for one Madison.

Thank you.

Our next question comes from Manny Korchman with Citi.

Oh, Hey, good afternoon, everyone Marc.

And we can turn to the New York City retail environment.

How long do you think we have to wait to see some green shoots there is it a matter of getting everyone and and then those.

The tenants that can help and make some money and and also new tenants looking to expand start coming in or do you think we might be able to see a little bit of that.

During the early phases of the reopening as you laid out.

Well I mean retail is.

He is a much tougher.

Topic, and I guess, what we were just discussing to date.

It's going to I think lag substantially because.

A lot of the retail green shoots as you put it are going to be dependent on.

Our return of leisure hospitality and tourism.

Not all but certainly a big part of it.

And.

Right now that is completely shut down in fact, while there were 5000 jobs added office jobs and in December there were 19000 private sector jobs eliminated.

And almost all of those jobs came out of the leisure and hospitality and restaurant.

Industries. Unfortunately tragically.

So.

And that's going to take longer to come back while.

The city is forecasting a return to pre pandemic levels for office jobs, and a 21, they're not projecting.

Our return of total private sector jobs until sometime in 'twenty three.

So you can see so that's a pretty significant lift not not not insubstantial, so I think that restaurant and.

And retail.

Will.

Just will lag and I would say that.

While we've had some good success and so.

And that's sort of Buck the trend a little bit, but we did sign a good lease at one Vanderbilt with one medical.

In the fourth quarter, I guess that was previously announced.

And we have.

And another deal pending.

Which hopefully will be a first quarter event.

The demand is still tepid and.

And yes, the environment isn't really quite right, yet with all the restrictions where I would say.

We're seeing any kind of.

Forward momentum there.

Great. Thanks, and I think and you in your opening remarks, you talked about.

Stimulus for cities and sort of important factor you are thinking about.

And if there's something else doesn't come through if there are delays and the stimulus or or just and it doesn't shape out are you worried about sort of the longer term health of cities like New York now.

And my worried or.

We it's something we focus on and.

And so we're.

We're vigilant about it but the city has balanced its budget for 2021, and 2022 and fiscal year.

And with the assumption of zero and stimulus. So the stimulus comes on top of.

And whats already a balanced budget and the budget was balanced for 'twenty and 'twenty. One obviously in June of this year you go through the new budget and 'twenty, one 'twenty two and through various means the city has managed.

To budget and in a tough operating environment I can't imagine.

And next year's operating value will be as tough as the one we just went through.

And they have attrition rules now I think three attrition for everyone new higher <unk>.

Made other cuts.

Fortunately the personal income tax side.

Side of the equation is.

Reportedly better than projected so that is offsetting some of the property tax collection.

Losses or reductions that the city is experiencing and.

You know net net.

They have a plan to get it done at least through the middle of 'twenty two that doesn't rely on any stimulus. So.

And I would also say, there's a lot of different forms of stimulus and.

And infra.

Infrastructure, and New York City has more shovel ready projects and any anywhere else from the United States and they are lobbying hard for the gateway tunnel and expansion of our transportation and a bunch of other projects. So thats another way stimulus could make its way to New York not just through direct.

<unk> funds, if you will and.

And changes and the tax code, where theres a potential rework of.

The salt credit state and local tax credit, which could also benefit residents from New York. So there are other ways you can see stimulus coming to the area and not just through the direct federal subsidies.

Thank you both.

Our next.

Comes from Alexander Goldfarb with Piper Sandler.

Hey, good afternoon.

So Marc just along those lines.

On the office restoration and I mean.

And there are a bunch of things and Theyre right, it's not yet.

Getting the opposite to reopen and employers telling the people come back. There is what you guys have highlighted which are the incentives. So I don't know how many of your tenants are offering incentives to help their tenants or health workers.

Come back and there is also the city life.

And you go into the Midtown and like past the restaurant and bars per day.

We think that that supports the office workers.

Our core heavily shutdown and so it's sort of a twofold bucket that may Earl basically November elections, and June because lever with that by default. The mayor. So these are low.

All of that sort of unbalanced and a lot of indicators to getting the city fully back so beyond just the office, what's your view on maybe doing its part to it.

Okay.

That day.

All of the activity light among these on the street, but at the other landlords.

So how do you view that.

Optimistic comments that have been fully back in Q.

Q4.

Well again back in Q3, Q4, but it's still going to be low occupancy levels in Q1, and probably even Q2.

Some of the things one program that the.

And the state is has initiated as part of the state of the state address if you heard if you heard that and something called the safe offices pledge, where we and a number of other large owners took a made a commitment to set aside space within our buildings and <unk>.

Portfolio. They are fully identified a range for testing.

Testing provider to operate out of that space and the tenants make arrangements in that space with that testing provider to have all their employees.

<unk> on as much as a weekly basis.

And thats, what they choose and the concept being that that's.

First step to building the confidence level to get people back ahead of the time when everyone is fully vaccinated. So we support that we endorse it.

We've done something similar with our unemployed base for per month now.

And we.

We think that's the kind of thing that will.

Health net.

We've contacted every tenant lease every.

A major tenant and the portfolio and mid sized tenant portfolio and.

Gave them the suite of incentives that we provide to our employees and.

And tried to demonstrate to them how easy it is to implement these incentives and how well received there et cetera, and we're hopeful that companies will enact those incentives as it means and bringing people back, but I will say.

And obviously as we sit here between 10 and 15% total building occupancy.

That has not yet taken hold and it may not until the third quarter. That's just that just may be the case and where we're hopeful that's not the case and every time. Another firm comes back it puts competitive pressure on the ones that haven't to get back also and I see I do see more of that but its grads.

And it's only January.

So.

We think this is a trend and that'll take some time, but there are efforts and the reopening of restaurants right. So.

As of last night with heavy.

And vocal.

Pressure being applied by the restaurant industry.

And more importantly numbers that have improved and New York state since.

Spike as a result of the holidays it looks like 25% indoor dining either is or may be coming back and highly likely coming back next week or at least that's what we're hearing yesterday and this morning, and hopefully that is the case and you know again and Thats the start hopefully towards 50% and I think all restaurant tours.

Agree at 50% without or they can make a go of it so they're one step closer and everything will just have to build off itself I look at the reconstruction process.

As you know.

Nine to 12 month process, not something that's going to be.

The next month or two.

Okay, and then Steve.

The Investor Day, you made the comment and.

And the Q&A portion that sort of the easy part of your leasing job is done because the tenants who wanted to renew and have renewed the tough part is coming which is back filling the tenants who are leaving.

And your comments were definitely striking so just sort of curious now that youre a few months further in the vaccines are rolling out do you still see the replacement.

And the tenants who are vacating as sort of as challenging as you characterized it and the Investor day is that the same is it getting better and hopefully if not worse.

Well I think it's getting better and.

The statistics I'm going to give you.

Proves that.

The 260000 square feet of leases that we have either out for signature or and document negotiation 120 of the 120000 square feet of that are new tenants, so new tenants migrating into the portfolio. So almost.

Almost a 50 50 split between renewal and new tenants.

Which.

As we've also said or Marc said.

At the Investor Conference, all we need is velocity and the marketplace and.

And we have a good enough portfolio and we have and we have a good enough leasing team and.

We are here every day working very hard we're going to get more than our fair share of the deals that are and the market. So as soon as tenants that are out there we will fill the portfolio, we'll keep it full way we have every year and the past.

Okay. Thanks.

Our next question comes from Jamie Feldman with Bank of America.

Thank you.

With your view of things getting better and I'm curious what your thoughts are on the value add acquisition market. What do you think pricing is and where we start to see more capital step and it seems like so many of the transactions have been high.

High quality credit tenants long term leases, just curious where you think that market is right now.

Well I think the financing market is generally tightening up.

See MBS spreads are and and Theres more banks looking to lend and.

That'll drive that value add market the issue has been.

Assets like <unk>, which is fully leased are getting the best bids.

Because of in place income, but as lenders are willing to underwrite lease up again, I think youll start to see that market get more liquid and started to have some pickup and activity.

And then would you could.

Could you pay and cap rates at this point or what IRR is or what people are looking for and how much capital is out there is there a meaningful change in appetite.

People circling.

Cash cap rates on value add.

You are saying is leased so stabilized cap rate are going in cap rates are not a meaningful metric because there is large vacancy.

I think people are underwriting to 10% to 12% IRR is on value add type opportunities.

<unk>.

And I think that means they are probably leasing the assets to my guess is between.

And between five and five 5% cash on cost and if theyre, taking lease up risk going in and where if theyre buying and place and comments more in that four 5% to 5% range on average.

Okay, and then for Steve. Thank you by the way and then for Steve You had mentioned financial and cash or about half of office demand and the city right now how much of that would you say is the expansion space and I mean are there large tech leases and the pipeline.

Well.

And.

And our pipeline are you asking are you talking about just generally and the market closed and channel.

Generally.

I Couldnt tell you how much and the.

Overall market pipeline, how much of it is.

Expansion or.

We're just.

Replacement card within our pipeline.

And I would say were very heavily weighted towards financial services right now and maybe.

New growing trend and I'm, starting to hear from sort of the early parts of searches as you're starting to see some of the law firms come back into the market as well.

Were they were very quiet last year.

And part of the market is very slow right now is the <unk>.

Advertising and media portion of the market.

But that's and that's made up obviously by the tech side, so and I.

Okay.

And with opportunity to sort of stress the point that I think is worth noting for everybody, which is new York city's rebound will be driven by the fact that we have a very diversified.

Tenant base as opposed to the West coast, which is sort of a one trick pony.

And New York City, and Scott because of what we've seen over the past couple of decades.

Technology education, and healthcare Finance media.

That diversification is going to be the strength of our of a rebound.

Yeah.

Okay. Thanks for your thoughts.

Obviously weighted.

Our next question comes from John Kim with BMO capital markets.

Thank you.

Question on and co working.

One of your peers took a standard yesterday with the write down.

Today, the journals reporting that we weren't looking to go public potentially against back can.

Can you just remind us what your views of we Werent and co working tenants are as a going concern tenants.

Yes.

I think we have.

And that less than 2%.

Yeah, less and less than 2% co working that was a.

Strategic decision by Us.

I think the asset class is here to stay and they will always be demand.

Demand in the market for co working type opportunities.

And we certainly love to see we were go public and us back or otherwise.

And.

And I think it's.

A force that will always be around we have our own fractional office space Division, which has been around for 20 years or so so.

And we're in the business ourselves.

Don't see it as a very large part of our portfolio.

As a follow up are they as we were current on rents.

And how did rent deferrals and abatements trend this quarter versus last quarter.

And is that number and excluded from your run collection number.

Well James.

Is it tracks too.

Two gross rent collections were about what Matt and 90 between $95, 96% and office, we're actually at 97% and we calculated on gross contractual rents. So we don't net out any deferral or abatement.

From that number if they owed us $100 and we agreed the day only have to pay US 50, and they paid US 50, that's not 100%, that's 50% and Thats, how we calculated that toe.

Everybody should calculate if we if we I think there's a lot of different ways that people seem to be doing this if we express collections based on current contractual obligations much high probably being like 90, 899% and that's correct, but we're not we're.

And to try and give people a look into collections today versus what the rent schedule was back in let's call. It January of last year, which I think is really the only meaningful metric, that's where that 97% office and.

Overall 90, 596% when you factor and retail, which is probably down around 80%, yeah, correct or thereabouts, yes.

We look at and so for somebody like.

No.

Work.

There are 100% current as far as I know on.

Their current contractual but that represents.

A modification that was done last year, where we lowered the Rand gave a little bit of abatement and return for and.

And the enhanced security package to what was already a pretty robust security package. So now it's.

It's.

And our eyes very well secured.

Thought that was a good trade, we don't even look at that necessarily as a concession and we think we upped the credit.

Which offset whatever those are.

Economic concessions were and they are current on those economic concessions. So that's that 110 and in particular, but we've managed.

Almost 900 tenants many of them one by one if they're small business or retailers predominantly but the vast majority of the portfolio of good credit rent paying tenants.

And Matt mentioned that the deferrals and abatements would trend down.

Daryl.

Correct.

Yes, yes, they did the book.

Both of the deals that were cut and we're done and second and third quarter.

Just a handful done since that time, and the fourth quarter and I'm not even aware of any into into 'twenty, one and we've got we've got some very small ones that we are.

Sure.

Providing some additional deferral too, but nothing that really moves the needle and.

We haven't done any abatement deals.

Certainly puts and the past six months, where we didn't get something on the trade where there was a part of a restructure of the lease where we got a longer term or and have security deposits.

Or the tenants surrendered.

Some capital contributions that we were required to make so even.

Even though the majority the vast majority of and if the deals that we did were deferral deal if not abatement deals on the bigger deals.

Deals that we did do we got.

We've got something for it.

Great. Thank you.

Our next question comes from Steve <unk> with Evercore ISI.

Okay.

Thanks, I guess going back to the comment Marc I think you talked about the pipeline being 700000, which was up a little bit from December I was just curious if you could give us kind of a broad breakdown of what was new and that and what are what are renewals are.

Are those renewables, mostly 2021 or is any of that and just pulling forward in terms of 'twenty two activities and pipeline.

Well.

Boy, it's hard to really give you.

The specific answer to that Steve only because.

And the pipeline is very fluid from week to week or month to month. So some of them as a result of deals that were signed and so it came out of the pipeline others deals just didn't make.

But it was backfill with new shows that are and there I think the easiest way from me to answer is aware answered it before if you zero and just on the portion of the pipeline that is the leases that are out which is 260000 square feet of the 700000 foot pipeline.

Half of that or almost half of that are new transactions and.

And.

And the other half is our renewal deals.

There are no.

No.

Significant.

Yeah.

There is one significant deal Thats, roughly 90000 square feet.

And the deals pending portion of the pipeline that is a new deal and Thats, a renewal deal and Thats a.

It would be and early renewal.

Other than that.

And it's kind of business as usual attending to the 'twenty, one and the 'twenty two explorations.

We do every year at the beginning of the year.

Okay, and just as a quick follow up are you seeing any maybe non economic lease terms changing maybe tenants looking for maybe early.

Exit rate toward termination rights is there anything changing kind of maybe below the economics and the deal that we should be tomorrow.

Well, yes.

To no surprise.

As we've seen every time there is a major disruption and the marketplace when tenants go and the defensive.

Value flexibility, so whether thats shorter term deals or and ability to.

Spanned and the near term or expand midterm or shelf space midterm or right of cancellation that at some point.

And that becomes part of the conversation and I would say.

On the deals that are large enough to warrant that kind of flexibility and we're meeting the market to do it and certainly not.

And certainly not.

The vast majority of our deals so if you're a tenant thats five or 10000 square feet, you don't get that kind of flexibility if youre a big tenant.

Multiple floors and you wanted to write to.

If I'm doing a 15 year deal with you and you want to write to shed some of the space 10 years out we have that conversation.

And the tenant finish for that right, but.

And Oh by the way as soon as the economy tightens up those concessions, we've wrung out of those discussions very quickly.

Right and that makes sense, Okay, and then maybe just second question on sublease space.

And I don't know if and when they call fell on that one what are you guys know two and a half.

For.

Well I was just hoping sublease space in general just kind of and the New York City market and then maybe sublease within your portfolio anything Thats kind of come up lately to the concern you and the market are things within your own portfolio.

Well as you've read in the and the papers and Theres a lot of space that has been added to the availability and the sublease.

From sub leases.

But what's most interesting and that statistic.

The amount of sublease available today is still below the amount of sublease space that was.

As part of the availability after 911 and as part of the availability during the financial crisis. So today, 27% of the overall availability of sublease space compared to <unk> 47 per cent of the availability with sublease space during the dot com bust and 31% during the.

Financial crisis, and what we what we see a lot of times is that tenants come.

Dump a lot of space on the market, but then they rapidly pull it off the market as well.

And things start to improve so you'll see a lot of tenants that will test the waters.

And maybe they've got a big portfolio.

Seeing this right now and a tenant and Grand Central.

Putting 500000 square feet on the market, but they have said also publicly they only intend to lease two to 250000 square feet of it. So it skews the statistics and creates the perception that may not be things not as bad as what you otherwise might think another point to make on that is that of the sublease spaces on the mark.

40% of it has a term of four years or less which does not make it competitive to direct the direct space. So.

I think it's important for people to understand that just because they are sub lease space on the market.

It doesn't necessarily have.

And the corresponding impact to the where rents are headed or where lease up velocity will trade on a direct basis.

Got it thanks.

Okay.

And as a reminder, ladies and gentlemen, we ask that you limit your questions to two per person.

Our next question comes from Blaine Heck with Wells Fargo.

Great Thanks, and good afternoon.

Steve can you talk a little bit about Ti and free rent trends out there and especially since you guys were able to get some large long long term leases signed during the quarter, which seems to be a rarity. These days so any commentary on the concessions associated with those leases would definitely be helpful.

I think it's sort of leveled off from.

And in line with where are we.

Spoke about it during the Investor Conference.

And I think.

And free rent is.

Up was 12 months pre Covid now it's somewhere in the 14 to 15 and there are examples of extremely extremely lots of free rent beyond that but by and large it's up three or four months be more than where it was price.

Pre COVID-19 and I think <unk>, if they were at a 100 to 110 pre COVID-19, they're kind of in that.

130 to $1 35, and if Youre very high price point building, then they're above that as well.

And above that number only because it's sort of proportionate.

To the right you're paying but.

And.

And I haven't seen that.

They have been increasing over the past month or two they sort of spiked up and the fourth quarter. I think there are sort of held and I see no reason why that won't continue to sort of stay this way at least for the next quarter or two.

And when you when you talk about net effective rents whats interesting and we've said this on the last earnings call and we said at Investor Conference was face rents are not down that much they're kind of down 5% to 7%.

Where the real trade has been has been on the concession side.

And as you would expect during a time and disruption tends to play defense and they'll pay a rent over the next 10 years, but they want their concessions upfront and they want a husband and their capital and then with the landlord Fedex session. So they don't have to come out of pocket.

Okay, Great. That's helpful and then Marc or maybe even see it can chime in on this one too, but Marc you talked a little bit about the timing on the reopening but can you give us some commentary around how and how you expect the leasing decision process and timetable to play out for large tenants I guess I'm wondering once tenants that are fit.

<unk> back into the office, so whatever whatever extent they will be how long do you think it will take the business leaders to determine how work from home and hotel and we're de Densification all of those trends how they are going to impact what their ultimate space requirements are going to be and.

Obviously, they typically can act on that until their exploration, but I'm more interested in that first assessment and planning and decision process and how long that could take.

Yes.

It's a hard question to answer because there are some tenants.

And particularly the ones we're in dialogue with now about.

And opportunities in the next 12 to 18 months.

And we seem to have a pretty definite view on.

And what they want to do and most of those.

And that have that point of view are the ones, who are probably going to be completely or mostly work from office.

So there'll be issues.

Around physical.

Layouts, and whether they want to increase workstations by a further two and whether they want to put up some kind of glass partitioning at workstations and.

Other choices they'll get in order to enhance air filtration and.

And things of that sort, but by and large.

And I'd say there is a.

As a school or tenants that.

Feel like Theyre going to be most or all back to back to work.

I don't labor under the illusion that work from home is a good thing. So it's hard for me to answer this question I think.

And I look at it but I'm biased I think everyone's going to be back to work because those that work from home.

Really solely to accommodate commutation.

Issues or at least predominantly compensation issues.

Those firms will suffer competitively it's not a question of.

Spiritually as it better and not I think it's a question of our firms more efficient and productive capable.

And.

And competitive.

And if they are and just work from office work from office is sort of just the tip of it.

Being.

On the on the road developing relationships.

Business is just not conducted head of head of a home and.

And I don't see it happening that way I know, we could not have accomplished.

Half of what we accomplished in the past 10 months if.

If the entire workforce, where home, they're just it would have been impossible.

Given what we do in a given day and we're not and we're not even a good example of it because there are other firms that really make their living off of customers, where they have to be in the customer entertaining the customer meeting their relationship. So I just don't really see it for the bulk of the firms that we deal with is a reason why we have nine.

<unk> tended to have substantial square footage there.

Might be more flexibility, maybe it'll be a four day week and one day at home.

Maybe some firms will.

And I guess permanently go to homes and I know some of the tech firms have originally said they would and now they are we considering it and we're hearing that they're not going to go 100% work from home. So I can't really tell you what that decision matrix is only that the firms we're in dialogue with.

<unk> tend to think there'll be.

Predominantly work from office and want to be.

For those that don't aren't we're probably not and dialogue with those centers my guess and.

Weather.

Businesses will work those things out over the next 12 to 18 months.

Think they will but as circumstances change their decisions may change and as they feel the need to be more competitive.

And to do what they want to do in order to be most efficient I think they may come back to the center, which is why this market has 400 million square feet of office space work from home is.

Not birth, new out of the pandemic and something that's been around for years and years and has been tested and the technology. This year is the same with last year and the year prior.

It just is suboptimal and I think most people would agree and those that don't will work from home.

Okay I appreciate the thoughts.

Our next question comes from Craig Mailman with Keybanc capital markets.

Hey, guys.

We've just been hearing from a couple of private owners and the city that they're tax assessments.

Are coming in and probably lighter than they expected and I'm just kind of curious if that is the experience that you guys are having.

This year and whether you think if you are that sustainable just given kind of the fiscal situation of the city.

Well I think the assessments have come out of low or the city hasn't set the mill rate yet so.

Question is.

Theres, two components and the taxes and as the assessment and then Theres the mill rate. So I would say, we're reserving and.

While we see where the mill rate shakes out.

Alright.

Thanks, and then just one house cleaning for from Matt.

The leases that you did at $2 45 is that going to lead to any outsized other income from just leasing fees and.

The first quarter.

Sure.

Housekeeping and people must know what I do at home.

The $2 45 leasing.

And we get paid commissions on.

We do budget for that stuff coming into the year. So it will result, and commissions that we recognize and other income but nothing.

Outside of what we had projected.

So if we had to kind of do a run rate quarter over quarter should we assume.

A decent step down and that is the fees from that.

And the transactions closing last quarter kind of go away.

Yes, if you look and quarter to quarter, Yes, I mean, those fees recognized in the fourth quarter would not be replicated in the first but as to the $2 45 park commissions or any other that's and that kind of $6 million to $8 million every quarter of.

Fees, we generate from our JV partners.

And for managing and leasing.

Alright. Thanks.

Our next question comes from Vikram Malhotra with Morgan Stanley.

Thanks for taking the question, Matt I'm not going to call. It housekeeping a cleaning I'll just call. It a modest moderate questions and the view of the expert there.

Yes, just on can you remind us what percent of bad debt reserves taken in the fourth quarter.

On the portfolio and and how do we how should we anticipate potential additional reserves and 21.

And potentially any reversals.

Yes, so in the fourth quarter I appreciate that color and housekeeping.

The reserves, we took and the fourth quarter were about six point.

$6 million 266 67 on.

So actual receivable reserves.

And it's across the portfolio consolidated and joint venture we took no incremental reserves on straight line. So overall reserves are down and total and roughly flat on the actual reserve around the actual.

And trend this year.

We leave some conservatism in our numbers.

Historically and even more so in this environment from potential reserves.

We can't project those forward otherwise we'd have to take them now.

And I will just say, we put conservatism into our numbers for 'twenty one.

Okay Fair enough and then just maybe.

Another question just on the <unk> book.

The two parts to it I think one you took some losses I believe on retained positions and I don't know if that was sort of this part of your quarterly C suite of view, but also just your view.

Recovery and the market overall can you talk about how you think DTE opportunities may trend for you and the balance of the year.

Yes, I'll take the first part of that is part of the Seas will review, we do every quarter.

We sold one position.

During the quarter, but that was at par. So we didn't have to take much of a mark there.

The reserves and retained where part of seasonal and they were on retained retail investments and then I'll leave the opportunities question too to either Andrew or David.

Well we did.

The goals and objectives talk about finding some interesting deployment opportunities and PPE to the tune of $100 million or so and I think we're starting to see that market.

Materialize, where there are some interesting capital opportunities and we're definitely.

Shingles fill out and what were still.

We're still evaluating opportunities and conveying that to everybody and the market and I think I think we will.

See some very interesting opportunities.

Hopefully and the early part of this year.

Great. Thank you.

Our next question comes from Anthony Paolo and with J P. Morgan.

Thanks, and I guess first question for Steve on one Madison can you talk about.

Activity, there put brackets around maybe what types of requirements.

<unk> youre seeing and the market back and lineup with that asset.

Yes.

<unk>.

We've got a couple of tenants that were in early conversation with.

But let's remind everybody that the <unk>.

Process for marketing and a large development like that as we start with <unk>.

Katy and the brokerage community than we go after the tenants and we ultimately see the deals I think we're ahead of schedule as far as the level of tenant inquiries about the building and.

And.

We're feeling really strong about the feedback that we're getting from both the brokers and the tenants that we presented to building too.

With regards to the product that we're offering the development plan that we've got and.

And the timing of delivering the building.

And a <unk> 23, which I think is going to be sort of like write offs spot on is the perfect time to deliver b block of the best post Covid.

And so.

Okay.

And then I guess, just one question for Matt.

Is there a way to think about you mentioned and the last I think question around the reserves and stuff and theirs and they get 95% collections roughly and the quarter.

And I really think about what was recognized and your NOI for <unk> purposes. Like you said, some number and between what you collected and what.

And it was actually scheduled or external.

There is no there is no easy way to correlate it so the answer to your question is no.

The numbers that run through your income statement.

Reflect straight line.

Smoothed out deals that you've done.

And so collections are definitely correlated to.

Cash NOI.

And our cash flow, but you're not as likely to find a good correlation in the on the earnings side to collections.

Okay fair enough. Thanks.

Our next question comes from Nick <unk> with Scotiabank.

Thanks first question is just going back to the explorations this year.

If you had just a sense for kind of how many of those you feel comps and about getting renewed at this point and then also just kind of relating it back to I know you had the 93% same store occupancy.

Our goal for this year and how that factors into that as well.

Well I think the answer is assumed to both questions which is.

And so.

There are no surprises.

With regards to.

Lease expirations this year that no new surprises beyond.

What we already have in our budget.

Everybody that has a lease exploration for this year and next year.

And in deep dialogue with we have very good clarity.

As to who is likely to stay and who is likely to go.

And Theres been no.

James and our.

Our expectation since the Investor day, when we rolled out.

Our renewal Golden objective for the year.

And I guess just in terms of just relating it back and again kind of holding occupancy somewhat flat.

For the year is that mean that you just assume a very high retention rate is there anything in terms of Vale.

And they can see being filled up and the portfolio and we should think of that.

So and it's a combination of both of those things. So when we looked out over our leasing of one 3 million square feet.

There is a good portion of that that is renewal.

And what is not could be leased up later this year or into next but offsetting that additional vacancy is the lease up of vacancy that we recognized this year. So we had some vacancy at 45 Lexington. As example, our 11 and 85 that came in in 2020 and early 'twenty. One that's getting leased up later in <unk>.

One such that at the end of the year you rate remain roughly flat.

Okay. Thanks, that's helpful I.

And I guess, just the last question and that is on.

Marc going back to the idea about.

You seem positive about.

The work environment, saying people now on businesses and not wanting to work from home I guess.

And I guess I'm wondering is are you actually actively spending time sort of surveying and broad piece of EBITDA.

Corporate America on this topic or is a lot of that.

Based on.

Sort of what you said, where you are talking to people and that that's what they're telling you, but maybe I'm missing some of the other conversation I'm just trying to understand how kind of what's backing this confidence.

And the level that you have.

Well.

In terms of surveying.

The partnership I think has done one or two surveys of all of the businesses and New York, but that was that was last year and that was more to get a sense of timeline for return as opposed to what go forward.

New program would be.

So my data points My survey, our discussions with tenants and our portfolio period, I mean, we have like I said 900 tenants.

And we uniquely cover the gamut from.

Small tenants to the largest.

Most affordable rents to the highest premium rents and everything in between.

I feel like man, if we don't have a good handle on a cross section of New York City business and tenants then shame on us but.

Because that's a pretty good pool of <unk>.

Sample pool, if you will to to get a sense of what business is thinking about New York City and.

And there's very few conversations I have.

Are companies are saying to me, we're going to go work entirely from home were predominantly from home or even half from home.

So.

To your point and maybe people are and maybe people are telling me what day.

I want to hear I mean, I can't it's not it's not as scientific survey.

It's more anecdotal, but it's.

It's many months of many conversations and.

Well I can say is that the per.

Upon their into those conversations go anything like this we can't wait to get back we're dying to get back.

This work from home sales.

And I can go on and on.

I'm trying to think of people, who say boy, we're just never going to return to the office, where we're going to keep a large and I don't we don't have and I don't see it so.

Is that the case in California, our Silicon Valley I can't tell you.

And Thats the case for tenants not in our portfolio can tell you.

But with the large and small and medium sized financial institutions small business that really needs to have a presence here or are they become irrelevant and jewelry.

And I wish it was the majority of our portfolio at least by number of tenants right.

Yes.

And the dynamics schism and.

And the action I think happens within the city I don't think it happens at home. So I'm also going a bit on my own gut instinct 30 years, and the business and I have a point of view and I.

Think thats, hopefully and educated point of view that by and large when the all clear signal is people will return and now might there be five or 10%.

That either are going to work from home, where it works and some kind of a hotel and basis, yes, it's possible but might not.

<unk> space requirements.

On a on a space per employee basis go up by 5% to 10% to kind of day densify, which we are we.

We have de densify right. So we're not that unique so if we took our footprint that was designed pre COVID-19 went back day densify that by about 5% to 10% I don't see why everyone is not going to do that and everyone who asked us for advice on it we give them our program, which is a 5% or 10% the densification, whether they follow it or.

So I guess I'm.

I'm thinking that those two things will largely offset and we'll be in good shape.

Once we get past this period of time, but it's not a survey is certainly not national.

And it's quite possible that im missing the voices of people not in the portfolio.

Alright, Thanks appreciate it.

Marc Thank.

Thank you.

So I think with that we are at the end just right after three.

And those so.

Thank you for whoever is still made it to the and and listening and let's hope for.

Better times ahead and.

Looking forward already to having.

Having some good results and put up on the board and April.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.