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

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

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

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

M W adopt the N O dot com under the Investor Relations section in these documents and during today's call we will discuss.

GAAP financial measures.

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

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

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

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

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

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

Notwithstanding that this is the new year 2021 steel for still feels a lot like 2020.

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

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

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

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

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

Demand for the indirect gather and experience all of the city has the offer will carry the day.

When life returns to normalcy, the many positives of having employees working on the same space together with their colleagues will become self evident.

And the and I believe that working at home and once the kitchen alone day. After day week. After week is not on long term proposition.

Okay.

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

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

Despite 2020 being one of the most challenging use of our lifetime.

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

And 2020, we closed a billion dollars of apartments at 220 central blocks out that's a big number.

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

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

In December 2020 of the brand New Moynihan train and I'll open to the public the rave reviews for.

For the cementing Penn as the Transportation Center of New York and of our Penn District as the Bullseye.

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

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

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

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

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

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

In December.

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

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

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

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

Now of all of the retail along both sides of the heavily trafficked long Island Railroad Congress by the way in normal times Penn station is teaming with traffic and our retail students the.

The stores do really really well here.

And 2021, we will deliver and faces our redevelopment of the $2 6 million square foot and one.

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

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

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

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

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

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

Actually that's the fancy word for sale center looking at on the seventh floor and one appropriate appropriately and the heart of the action. The 12000 square foot market and said there is the best I've ever seen.

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

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

And when gatherings are again permitted the.

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

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

All of last evening.

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

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

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

Our role with the close of the Facebook lease and the middle of the pandemic and it is an outstanding deal that we are proud of.

Facebook low shortly its scale its location its architecture and it's huge for fleets.

At Penn One we increased the budget to include the long Island Railroad concourse redevelopment, which I just mentioned.

As well as tusa and sustainability of initiatives, we have added to the scope and one.

We were of placing all single plane and glazing with new state of the art Triple pay and a high energy performance windows, which will dramatically improve energy loss and infiltration and incentive comp.

Sure.

We are also increasing the scope and fed once the including the electric electrification program to enable the building to access more clean renewable energy. These.

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

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

As far the Penn one and Penn to come online they will deliver very significant incremental earnings.

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

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

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

And in connection with this two of our beloved long tenured executives, David Greenbaum of Joe back now.

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

The data was indebted to them and thank them for their immense contributions.

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

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

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

At comps and early has been appointed Chief administrative office of the stepping up from CFO of the New York Office Division, taking on additional responsibilities on our financial Division.

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

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

Yes.

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

The risks related to climate change are two minutes.

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

Note that since 2000 and I, we have achieved the 24% energy reduction over the 10 year period through 2019.

We have a seat at the table with Apollo.

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

To execute.

We have also led with robust disclosure of our ESG data with early adoption of SA as the standard release of our E of data and climate scenario analysis of according to the recommendations of the task force on climate related financial disclosures with TC FTE, Our 2020 ESG report will be.

Released in tandem with my shareholders later in April.

I'll finish with the shout out and the thank you to our amazing and talented related for people to our leasing teams, who did the Facebook and NYU deals, which by the way with the two largest deals in 2022 of development teams responsible for filing and more than 10, two and more and so our operations teams who follow oil protocol.

And have our building sanitized and ready to welcome on and its own.

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

The out of Michael.

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

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

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

A decrease of 23.

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

It was driven by a few items roughly one half of which is 12 from our variable businesses still being offline.

The 20% which is <unk>.

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

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

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

Biggest item was of $236 $3 million non cash impairment loss relating primarily the wholly owned retail properties as required by GAAP accounts.

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

At the same levels.

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

When you blend and Chicago and San Francisco also our office business overall was essentially flat and negative <unk>, 4% the <unk>.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Now turning to leasing markets.

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

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

While taking the rents have come down on a measured way concessions of Spice, though we believe now have generally stabilized as landlords are doing with the need to do to be competitive in this environment to fill space.

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

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

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

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

730000 square foot Facebook leased at Farley, and NYU and long term renewal of 633000 square feet and our one per gallon.

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

And the fourth quarter, we completed 60 and office leases comprised of 163000 square feet.

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

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

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

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

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

The order volume is up.

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

Importantly, as large companies begin to plan for their employees return to the office. They are also beginning to focus on the future lease expirations and interviewing brokers as first steps and the process. We know of at least for companies with large space needs and the need the plan ahead with shell of interviews during the month of January alone in this regard.

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

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

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

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

For the 55000 square foot lease with the Tech company of 12, 90 Avenue, the Americas of 33000 square foot lease expansion with the financial services company and eight of the seventh Avenue and of 75000 square foot lease out the nationally recognized nonprofit at a $25 seven debt.

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

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

726000 square feet, and 2022 of which 352000 square feet. During the two year period is that the newly Redeveloped pen one.

Turning now to Chicago and the margin.

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

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

During 2020, we completed a 10 year renewal through 2032 for 148000 square feet with Paypal and signed 49 showroom leases comprising 190000 square feet at very strong starting rents of almost $55 per square foot, including 62, the 62000 square feet and the fourth quarter.

And.

Turning to the San Francisco.

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

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

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

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

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

This was the largest lease none and San Francisco and 2020.

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

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

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

And thus most remained reluctant to commit the new space.

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

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

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

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

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

Finally, our current liquidity is a strong $3 $91 billion <unk>.

Including $1 73 billion of cash and restricted cash and to one 8 billion undrawn under our $2 75 billion revolving credit facilities.

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

Okay.

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

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

You touched on the phone.

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

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

Hey, good morning, everyone.

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

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

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

And especially on the <unk> piece.

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

Let me take the second question first and then ill go ahead for the first and Glenn jump in here I think our expectations remain the same.

Manny.

Our confidence and the product is.

Steve referenced given.

<unk>.

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

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

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

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

In terms of that.

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

And what the detail is but.

It's the best guess in terms of what those particular spaces may rollout for it but excluding panel on.

And you want to add going great.

And Manny, it's Glenn and I'll.

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

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

From a bunch of small tenants to tenants as largest 70 80000 feet. So we feel very good about where this is going and where the rents are going on this asset.

Thanks, and then going back to the of the Mark.

Think of it in your remarks and the.

The least for the last night, you talked about a return to trade shows and 2021.

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

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

Thanks, everyone.

And we do have our next question Steve.

The stock loss from Evercore.

Thanks, Good morning.

Steve I don't know if you can say much about.

The asset sales you've brought to market last year at $12 90, and $5 55, and just sort of the refinancing expectations I realize the <unk>.

Sales market was challenged last year.

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

Sure of Hiseq. So first of all I will tell you that.

Was disappointed in the.

Yes.

The reception to the.

And the part of buyers for those assets.

We found debt.

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

Which were it not for us and the conventional over the long term.

Institutional investors were tested.

Yes.

They couldnt travel they couldnt see the product.

And so as the result, we werent getting the kind of reception that I had anticipated and so we did the we did the the appropriate thing we took them off the market.

Great buildings that should and will command premium pricing.

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

And that's basically a lay up there.

<unk> five is extremely under Levered, probably somewhere in the neighborhood of 25% of.

The market value or EBIT lower.

And so we are gearing up to refinance debt now.

<unk>.

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

And still called 90 doesn't mean.

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

Our current plan would not be the refinance that yet anyway.

Is that.

We were not happy with the sales market reception.

The net.

Refinancing of those buildings is in process and will not be a problem of Apple.

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

I think if everybody a blank slate to think about their footprint and what are you seeing from tenants today that we're looking at new space. How are the configuring. It what are the densities look like and what does that portend for the.

Rollovers on on other deals moving forward.

And yes, that's <unk>.

<unk> question, Hey, Steve It's Glenn how are you on.

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

We've had five different presentations for the large headquarters tenants and the last two weeks.

Number one and so you're starting to see people come out and start to see things and the reception has been excellent on our pet projects and 350 Park number one.

Number two as it relates to the tenants plan.

<unk> been reviewing debt and a very focused way we've seen no change to what tenants we're doing pre pandemic.

So what we see them doing now during the pandemic for future occupancy.

So I do not see a change at all.

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

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

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

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

Steve we were.

The history of all of this is that and the old days it used to be 250, or even 300 square foot for for <unk>.

Employees.

And then and.

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

The marketing that's why his face with cheaper because you put more into the the same amount of space.

And so both extremes are absurd.

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

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

And this is lightning of the perimeter of Windows.

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

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

And so on the whole of.

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

Great. Thanks.

Okay.

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

Great. Thank you and good morning.

Steve Owen and go back to your comments about fiscal stimulus and how you think of New York City might benefit.

Can you just talk about generally what you think could be coming and how that will impact the <unk>.

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

Good morning, Jamie how are you.

The world has changed radically.

Now have a.

A buys and the White house.

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

Who I remind you is Brooklyn, born and bred.

Fred.

And so we believe that there is an enormous.

The trend now.

Fiscal certainty of stimulus.

Towards.

Supporting obviously.

The people of it but harmed by the Covid pandemic, but also to.

The major cities in this country, well lubricated with finance and the money because they've been hurt and enormously. So we are and we are expecting lots of government assistance.

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

So solid mirrors that of.

Now.

The governor.

Who is the master builder of our generation.

Has put put for a loves pets.

The concern is it to be the economic and transportation center of the universe and if you look at his powerpoints and Slideshows and his last number of state of the state features et cetera, you can see that very vividly. So his programs for the west side is.

Lots of work and pad.

Which are both aesthetic and logistical.

Including expanding the track.

Capacity of pad.

By acquiring and developing the 780 block, which is the block contiguous to the south.

And that is expanding with for trucks I think it is.

Also including the Gateway total.

I am corrected by my head of development that day.

The eight tracks, Okay ill, let most of it eight tracks in that space.

Side by side of challenge.

So I'll have to go with Barry because he's got so eight tracks, which is an enormous increase and the capacity of pets.

Of the Gateway tunnel, we know about.

Pending the Highline and building a new.

Unbelievably more efficient with much with <unk>.

Triple the capacity bust.

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

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

Now the one of.

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

The major portion of which was reversing salt.

Or if not reversing sold significantly modifying that.

Amit.

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

And I don't think Thats it.

The biggest land book as the as the stimulus dollars that will come of it but where that the happen I think that that would be another major boost for New York.

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

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

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

On the bus getting active in the outlook.

We we understand public private partnerships, we were the major private part the.

And.

The development program.

As you know so we're pretty familiar with this but we are very very intimate with the with the government at the state teams that do that kind of stuff.

As I was thinking of right now I don't think the bus terminal is for us.

I would remind you we have the better part of 10 billion square feet of future development and our neighborhoods.

Across the street.

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

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

But right now.

Our plate is full.

And our growth potential is huge and if some.

The thing else comes along in our neighborhood of course, we will look at.

Okay. Thanks, a lot.

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

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

We had been on all of these things so where the.

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

Do you see the Midtown West plan.

Competing with I guess, you can develop more of the east of where like.

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

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

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

Obviously on the 780 block, which is the 30th speak the 31st Street.

Hi.

Adjacent to the EBIT.

The station the plan there is the bill.

But only $3 4 million of seat for.

Three of 4 million feet on top of the new expanded eight track.

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

We believe and we believe and and.

We believe and gathering we believe clustering.

So the more.

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

Millions of square foot building, which is spread around the neighborhood.

So we think that the.

Clustering.

In the neighborhood.

Creates value for the entire neighborhood. So we're okay with somebody building a building on the rib and thats, Okay with us.

Okay. Thanks again.

Okay.

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

Thank you.

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

And also have 909 third and the Mark the sooner and then 707 day, probably by next year.

Should we just presume those are all straightforward refinancing and then as far as the pipeline, California and $12 90.

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

And maybe that needs to be for us to get full value and where do you think.

That said it has much to do with it.

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

From our point of view.

He is.

Our partner, we bought these buildings and 2007.

He was not a politician then and you was <unk>.

This guy like us.

He and his role in these buildings is totally passive.

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

And there are some people who who.

And as presence affect negatively the that's true okay.

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

Okay and on your second.

And there was something else on the question.

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

Again as I referenced in my comments, given how much of the markets have recovered.

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

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

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

The markets are extremely receptive of the markets are clamoring for products.

And we have product.

And it's not of each of US has our own opinion as to whether interest rates are staying where they are we're going to go lower and go higher.

And I don't think its relevant to get into that right now they are plenty lowered up so our mission is to.

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

And as our objectives. So this is the.

The best time to finance.

On a product and actually probably in my career and.

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

Okay.

And then for my second question.

And you did a good job of explaining the changes and the development yields for that portfolio.

Wanted to ask since you have kind of spark development yields of your supplemental.

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

Maybe for leasing and.

<unk> next time, what do you think is the likely range of outcomes is that a narrow range of around the spot.

Comfortable with those.

Or maybe a total wider given where the pretty uncertain environment right now.

Budgets budgets of budgets.

And I've locked in stone and not guaranteed theyre not actual numbers the budget. So they will move and they are.

And we pick these budgets very seriously.

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

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

But the remedy.

And their budgets, we do not.

And we are and we are on the conservative side of life on that so we do not expect them to change.

And obviously, they can change a little here and there by the.

The way they have as much of a of.

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

It's a serious piece of business.

Okay. Thank you.

And we do have our.

Our next question from Alexander Goldfarb from Piper Sandler.

<unk>.

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

And so just just quick clarification and hopefully you don't think any of the question for us, but and your response to Michael Lewis. The question on by five five and 12 90.

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

Sort of stop that nothing has been impacted by.

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

You're on your statement is a little bit too on the.

The positive side, obviously, we wish.

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

Same comment having said that.

We.

We have.

Some great buildings, we have great tenants and the buildings and those assets speak for themselves. This is business businesses business.

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

Okay.

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

Promoted your environment.

By the way of Alex by the way I think was the big article.

We started all the stuff.

The Wall Street Journal was probably a couple of weeks ago, which I read and.

It was an interesting article much of which was actually news to me.

Go ahead.

Okay.

And.

Uh huh.

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

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

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

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

On the little bit more focused and puzzled by the sustainability part and one because you guys have always been doing that so im sort of curious what's driving this increase and cost and is this something that metric now have to think about as far as impact of returns and that what you guys were doing was already baked for the buildings quite green.

And now they're mandates that are.

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

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

Since you guys of such leaders and sustainability why wasn't these two items the.

Triple play and glazing and the electrification and the original budget to start with okay.

I have no real answer for that okay.

And we decided as we went along and planning the building.

That.

And we wanted to.

The.

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

And it's all over Europe, it's almost mandatory and Europe is nowhere in the United States or in the off where the first once the do it here. We spent a great deal of time and so I think we're the first of all one facility or are you sort of a radical things and do it is not done in New York construction and development. So we spent the <unk>.

Deal of time researching it we marked it up we did everything and we decided that it was worth the uptick in the in the.

And the.

And the dollars and the budget to bring the building into the 'twenty, one and 2002nd century and terms of its glazing. So we did it. Okay. Electrification is it's actually pretty simple of all buildings are going to go all electric because of.

And.

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

And we're not boastful.

And.

We are leaders in sustainability is very important to us we take pricing from the US we take pride in it and the things that does obviously.

The say the ability is has acknowledged that the I think probably the best team around so you are right but.

I don't want you to think that this was it after the thought for this was an add on or a mistake. Okay. This was our our making.

And making sure that the buildings were up to <unk>.

Totally up to snuff.

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

Okay and then the second question Steve.

Or maybe for Michael is the all favorite.

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

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

The the.

'twenty 'twenty one numbers.

Okay.

You are talking about.

The Vornado overall, just the retail no no.

Overall, Michael overall, I mean, obviously there are a lot of moving on parts, but just anything big that we should think about or you would say hey, Alex fourth quarter asset, though the six.

Six Denver ex items.

It's probably a pretty good.

The number to think about.

Look I think.

Couple of 30000 foot comments.

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

I will say just keep in mind in terms of first quarter first quarter 'twenty, one will be down from 20, right because first quarter 'twenty was of free COVID-19 quarter, and so obviously with the variable business as being offline.

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

He is an appropriate one.

Okay. Thank you.

Yes.

Thank you and we do have the next question from Anthony <unk> from Jpmorgan.

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

Potentially redeem that this year if I recall.

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

What the.

And what that is is that.

That's a two year blackout under the.

The tax provision after the two years.

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

Because if we if we if we if we.

And if we if we turned that into the liquidity that would trigger the $1 $8 billion tax that was the okay. So the preferred and the stays there.

Or we can sell it.

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

Okay is it.

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

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

Cost of the turmoil and the retail industry notwithstanding the fact that we have long term leases on most of those assets okay.

The mark to market on those on.

Those properties.

The unfavorable and and the debt market.

I mean, we can do something and there, but the debt market is not as favorable as we would like at the bank.

Okay and then just.

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

And all.

Hey.

Hang on.

Financing is scrambling and I don't have the page number.

And the 10-K, we can get you the page number.

Brian and I may have missed it I appreciate it.

Just coming back to the hit them.

The.

Tom will tell you what the page number is.

Supplemental and the supplement of really okay.

Got it that's fine I'll find it I just missed it.

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

Thanks, Good morning.

There's been some news of sublease space and your portfolio, whether it was Yale, but the March of Apple, taking some of the Macy's space.

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

Yes.

Hi, John It's Glen Weiss.

Apple was actually the of direct lease where we took macys out so the.

The positive as it relates to the sublease space and the portfolio the AUM.

Really the big one that we're aware of is Pwc at 90 park thinking about doing something with that block of.

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

What's the term on the necessarily the block of the Pwc Lady's skirt. The 2033. So obviously, we have great credit on the lease long term so not of concern for us.

Macy's is sub leasing the remaining piece of aerospace and he is trying to which is the space, we didn't that apples and uptake, but generally speaking and.

Is it really is the our portfolio not a lot of major overhang as it relates to that question.

Some of the space is interesting.

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

With.

Tenants, who are willing to take the gift.

Huge discounts significant discounts to clear the space.

And that obviously affects the entire market.

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

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

If there is shorter term.

The marketability of the sublease space depends upon the new tenant coming in dealing with us at which point, we have an advantage so of the.

Sublease space at all of our building generally speaking is the opportunity for us.

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

And the sign of recovery is when the sublease space thoughts the clear.

Or be taken back because the the tenant decides they need the space rather than get rid of it so the sublease space and something Youre right to watch and it is very important and.

At times.

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

So <unk> announced a move of their executive office to Manhattan, but that in no way shape or form will impact their sublease from Motorola Google at the more in favor of 113000 feet. There that's on.

Long term deal for them for 28, we've spoken to them recently and they will remain in that space and there is no plans to put that space on the market as it relates to Yelp day of about 130000 feet. The at least has another three years remaining and they have announced theyre going to try to sublease about half of that space.

We will see how successful they are or not and you can see.

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

Okay, Thanks, and thanks for that.

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

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

Are you expecting to provide any more write offs.

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

Good morning, John on the tenant side on the latter part the payments and the boroughs.

Yes.

Okay.

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

The tenants we are still of risk.

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

Really assessing after several months based on discussions with tenants.

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

And so obviously you saw the number come down dramatically and the fourth quarter and we feel like we have.

Generally dealt with and obviously anything can still happen, but there is nothing we see on the horizon that is going to give rise to and certainly anything material there.

So that's the kind of on the tenants on the variable businesses, yes, we are.

Generally not expecting much of the gear up until the second half of the year.

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

And so therefore.

On the garage income BMS and what.

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

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

It's not a all of a sudden the light.

Switches turned on and it comes back and we expect it to take some time to ramp up.

And are there any more thoughts of providing.

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

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

But.

Joe did a phenomenal job and a lot of areas and that's the job.

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

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

No plans to do that.

Okay. Thank you.

Yes.

Okay.

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

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

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

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

Just any lumpy explorations, we should know about over the next go on at Wesco 18 months.

I think that.

And the.

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

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

And whether that's been the.

At $5, 95, Madison, Sephora and Union square and.

So forth.

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

And frankly not of lot of expertise this year.

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

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

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

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

And that run rate number.

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

Which again are not material on any one particular property.

And the minimum stay flat before beginning to grow from the lease up of both the vacancy as well as the underdeveloped and property like Farley.

And like Penn, one and and ultimately tend to.

Okay got it and then just the bigger picture question.

Maybe for Steven and you might address the signor.

The annual letter.

But just given the given the sense of how youre thinking about bigger picture strategic moves whether it.

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

All the all of the growth drivers of the Volte client on a multiyear basis for both retail and office, just wondering how youre thinking about bigger and bigger sort of strategic moves.

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

I'll address that in my letter.

Clearly we have talked about.

Potentially separating the Penn District.

I think last year I said.

Perhaps.

The tracking stock.

And that's still on the table.

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

But we have nothing nothing to talk about right now.

Okay. Thanks.

Okay.

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

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

Our first quarter 2021 earnings call will be on Tuesday, the fourth.

We'll see you there and if not before thanks very much.

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

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And.

And.

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Okay.