Q3 2021 SL Green Realty Corp Earnings Call

Ladies and gentlemen, today's.

This is scheduled to begin shortly please continue to standby. Thank you for your patience.

[music].

Thank you everybody for joining us and welcome to SL Green Realty Corp's third quarter 2021 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.

We may make forward looking statements.

You should not rely on forward looking statements as predictions of future events as accurate as it results and events may differ from any forward looking statements that management may make today all forward looking statements made by management on this call.

Just on their assumptions and beliefs as of today <unk>.

Additional.

All information.

Yeah.

Okay.

Regarding the risks uncertainties and other factors that could cause such differences appear in the risk factors at M. D. N. 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 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 both the company's website at Ww.

W Dot SL green Dot com by selecting the press release regarding the company's third quarter 2021 earnings and in our supplemental information, but with our current report on form 8-K relating to our third quarter 2021 earnings.

Before turning the call over to Marc Holliday, Chairman and Chief Executive Officer of.

S. L. Greene Realty Corp, I ask that those of you participating in the Q&A portion of the call. So please limit your questions to two per person. Thank you.

Thank you.

I will now turn the call over to Marc Holliday. Please.

Please go ahead Marc.

Okay. Thank you and good afternoon. Thank you all for joining us today, we have.

Just come from the historic opening.

Of what I consider new York's most thrilling and unique destination summit, one Vanderbilt open to the public earlier today at 11, a M. We cut the ribbon and the transcendence room high above one Vanderbilt with the most incredible and amplified views of new.

New York City.

The room is aptly named because everything we've done with this building has been about transcending limits.

Pushing boundaries, we're doing it again today, but this time were taking it to a much higher level literally.

At the ribbon cutting ceremony, you spoke about how one Vanderbilt is representative of what.

What a true 20, <unk> century office tower can be it redefines, what it means to integrate excellence in design efficiencies sustainability amenity health wellness and commute ability.

By putting it all together, we've establish a new category building.

A new icon on the skyline.

And a new model for the workplace.

As a result, we are now more than 90% leased despite COVID-19 and despite every dire prediction of the city's demise.

Several months after we opened this building we introduce Daniel Boulud slip hobby onto the Midtown restaurant scene and that too was an important milestone for New York.

And the reopening of indoor dining.

Every available table has been booked every single night since it opened in May.

And there were there were a lot of questions. When we when we opened at restaurant about weather.

New York had enough of a population here in Midtown to support this restaurant.

Morgan has hundreds and hundreds on the waiting list every evening.

So now today at one P. M. We welcomed our first paid visitors to see and experience this new and exciting cultural destination, we call summit.

This time, we've done more than push the boundary we've completely shattered it.

We.

Spent years and designed taking the best elements of observation decks cultural institutions, experiential art and immersive technology and combined it all into summit.

The result is an experience that has the potential to not only become one of the most sought after destination in New York City, but a true global phenomenon.

Restaurant Energy and New York has been palpable this past month and now with international borders reopening hotels preparing and welcome back millions of guests live audiences returning to sporting venues and Broadway reopening New York is back on certain days of the week, we are reaching nearly 40%.

Physical occupancy in our portfolio a substantial increase that's been building up over the past few weeks.

As a sense of normalcy returns to the city ambitious projects like one Vanderbilt ensure that New York remains a top global destination people from around the world come here to shop.

To be entertained.

Chained to enjoy great food to see great architecture and visit World Class Museums Summit now becomes an important addition to that lineup.

The primary drivers of this market.

Finance technology business services media and healthcare are all doing unbelievably, well and beginning to make space.

Commitments that <unk>.

Evidenced net demand in our market that will stabilize the occupancy rate and hopefully turn into.

Meaningful positive absorption towards the end of this year in 2022.

With over 450000 square feet leased in the third.

Quarter in our portfolio and nearly one 4 million square feet leased.

So green portfolio to date, we are tracking well ahead of our leasing goals for the year.

We're doing that at rental levels that are ahead of expectations and almost flat with expiring escalated rents.

We carry this momentum into the fourth quarter with the announcement of the.

Seismic Chelsea piers lease.

56000 square foot.

Two one of the best operators of fitness wellness.

And health in New York City.

It's only the second Manhattan location, we've been negotiating with Chelsea for quite a while and.

They've selected one madison to be their east side home, where there'll be making a substantial investment to make a fitness destination that I think is going to be second to none and it's going to be awesome.

And.

That really bodes well for one Madison, which otherwise is already about six to seven weeks ahead of schedule on construction.

<unk> significantly under budget, even beyond the numbers that we.

Discussed back in December of last year.

Buy outs, which now.

Now stand at close to 92% of the total project have resulted in over $12 million of additional contingent contingency savings and thats.

Above and beyond the savings we had already.

Factored into that deal through.

Smart bidding.

Smart <unk>.

Project management.

And just given the overall state of the construction market right now.

We're experiencing savings while.

The city and I think the nation at large is experiencing experiencing cost increase as a result of supply chain of supply.

Issues that are driving our price. So we're managing that to the best we can staying well within our budget and one Madison.

With.

That new lease now done and more conversations underway, we feel very very good about that.

Chip.

During the quarter. We also completed a couple of dispositions previously announced but we closed them up most significantly.

The consummation of the sale of about a 50% interest too.

Institutional overseas institutional investor in the in the.

<unk> building.

And we have more transactions teed up that we think will be able to complete in the fourth quarter. So we continue to have great success in monetizing our assets our gains and we see that continuing into Q4.

That of course enabled us to repurchase about an additional $80 million.

<unk> stock in the fourth quarter, which brings us close but not completely rounded out I am sorry in the third quarter my mistake.

$80 million of stock in the third quarter and that.

Brings us close, but not completely rounded out to our repurchase objectives for the year.

So as we sit here.

Newsweek.

End of October with a rigorous.

Two months sprint to the finish line to get done or we need to do to close out this year and then.

Embark on what we feel is going to be.

Our solid 2022 for this company and more importantly.

Fortunately this city.

We're excited.

I think it's great.

To have the call on this day.

That is really a historic event for the company to open.

This wonderful experience.

And I hope everybody.

On this call, we will see it and see it often experience it it's truly.

It's fun, it's exhilarating, it's thrilling and it's everything we set out for it to be.

With that I think we will open up to questions.

Thank you.

To ask a question you need to press star.

And then one on your telephone to withdraw your question. Please press the pound key.

Our first question comes from the line of Caitlin Burrows with Goldman Sachs. Your line is now open.

Oh, Hi, good afternoon, everyone. I was wondering if you could just maybe talk about leasing volumes. It looked like they were pretty strong.

In the third quarter could you give more detail on what types of your properties are the most interest and ultimately signings versus which has less and I guess also have you seen this activity continue.

<unk>.

We signed over 455000 square feet, which.

As we said earlier.

We've now exceeded what was our.

Full year projections set out at the beginning of the year and we're on track to beat that significantly by end of the year.

Our pipeline has grown to over 856000 square feet the largest that it's been.

Ben.

At any point during 2021.

And.

As I think we've seen earlier in the year.

A lot of the leasing is being driven by either.

Financial service businesses in particular.

And who reached 40%.

<unk> was 40% of our current pipeline and Tami, which is about 28% of our current pipeline.

Lot of the activity seems to be focused on.

The better quality buildings thankfully in our portfolio.

The majority of our buildings.

<unk> enjoyed significant capital investment over the years as we continue.

To develop them as healthy workplace environments.

Environments.

That's paying off for us.

In helping us increase our leasing velocity, we've got a couple of projects that are in development, where amenities and infrastructure upgrades are part of that menu.

We're seeing a lot of good.

Tour activity strong proposals.

<unk>.

We feel very good about.

The overall velocity as we as we wrap up this year.

Great and then maybe just following up on that kind of investment side. I know you guys are already very.

Active from a development redevelopment perspective, but how do you think about continuing that reinvestment or desire to refresh older vintage buildings.

That hasn't been touched recently, so maybe like a 185 Avenue of the Americas 13, 50 Avenue of America's 110, Greene Street properties like those.

Well I think.

$11 85, we did recently completed renovation there.

But we have big amenity programs going in at 85 third Avenue is 753rd Avenue.

And obviously, one Madison development, so where we see that we can be accretive in.

In terms of net effective rents will make the investment in the amenities to attract that type of tenant.

But theres also a lot of demand for affordable product, which is still a good portion of our portfolio.

We don't we like having space available to address that part of the Mark.

<unk> as well.

Okay. Thanks.

Our next question comes from the line of Alexander Goldfarb with Piper Sandler Your line is open.

Hey, good afternoon, good afternoon, and congrats on the on the opening.

So of the.

The summit two.

Two questions here first just big picture I think you guys took back the garage at $15 15.

But away from there do you see parking as it as an area of focus for investment or as you look at the landscape wherever parking does become available it's already priced.

Accordingly, such that there's not as much value as they would've been.

Maybe six or seven plus months ago.

Yeah, Alex it's Matt So we did actually take back several garages.

During COVID-19 several operators one in particular.

Did not maintain their rent payments not only in our portfolio, but across the city and more broadly we elected to take it.

A total of like eight or nine garage is back.

And we started operating them really over the last three months to six months or so there'll be ramping up.

So this year not a huge impact will be more material when we start getting into into 2022.

As to additional investment.

No that's hit our radar is a deep investment pool of opportunity.

But.

Within our portfolio.

And we have found that given the current environment, we can make good money off of garage, if the opportunity presents itself within our existing portfolio to take another one back I'm sure we'd be happy to.

Okay, and then Matt while you're on the phone.

I'll hit you for another one anyway.

No I know I know.

So.

So.

Two questions. The two parter is on we work and the planned one Vanderbilt stake sale, so and we work is that.

The lease term that you booked is that the full amount or is there any more that youre going to get from them and then as far as the stake sale.

You guys have talked about doing that.

I don't know if now this gets pushed into next year I know you have the December Investor day, Youll give us the guidance, but as we start to fine tune. Our numbers ahead of the Investor day for 2022, just trying to think what sort of onetime items like a lease term or like a stake sale, we should be thinking about that may move from this year to next year.

Sure so specific to the rework lease termination, we announced that was incremental to our plan. We did not have that baked in that was a deal that played out over several months huge.

<unk> for us.

That is the bulk of the termination payment we received but not all.

There is a portion that will come in.

It's supposed to come in early 'twenty two.

The total of those two would be 100 cents on the dollar of the.

Guarantee and letter of credit that we work had on the space. So again, a great accomplishment to get that out of that entity.

I.

I think in the face of that I got several questions as to why guidance wasn't increased by more.

If you recall back to December last year, when we gave our full year guidance, we had layered in.

Potential JV interest sales further JV interest sales in one Vanderbilt one Madison, we are working both of those but with regard.

One Vanderbilt because it's done so well and now we have the summit open and the summit just opening today ahead of it has been.

Exceeding our expectations.

We may elect to.

Defer that interest sale to 2022 or not do it at all and that sale had with the recognition of incremental.

Income at.

At closing of $9 million to $10 million. So that was baked in our original guidance. If we don't do that.

Which it seems unlikely we will do this year.

Offsets the incremental income from that we work termination.

That we recognized in the third quarter.

And getting back to where we were we increase.

Our guidance range by.

<unk> <unk> at the midpoint.

Okay, great. Thank you.

Yes.

Our next question comes from the line of Michael Lewis with <unk> Securities. Your line is now open.

Thank you.

So that was good color on the on the change in guidance I had a guidance.

Related question as well.

When I look at what the full year range implies for <unk>, it looks like about $1 35 to $1 55.

My question is really with two months left this year, what's kind of driving that range is it is it kind of just giving you some flexibility on either side or.

Or is there a swing factor in there that could go one way or the other on us.

So.

Important when we reset the range, we up the bottom end of the range by <unk> 15.

So clearly there is not a lot of downside in our numbers and there is room to the upside as you look at run rate Q3 into Q4, a couple of things one.

We have the full quarter effect of some sales that we executed in Q3, not the least which is half of to 2042nd Street, which is a material contributor. We also have a significantly lower other income amount in Q4, we had the we worked termination in Q3. We also had some other fee income now we seem to find.

Fee income every quarter, but we don't project a lot of it.

So that goes down.

We I talked about the taking out the sale of an interest in one vanderbilt potentially pushing out to 2022, if we do it at all.

And then we've layered in some conservatism as we always do and that's why we keep a range. So could we ended.

Ended up higher than our <unk> hundred 55 mid point sure, but that's not what we guide towards we guide towards our expected level.

Our levels in Q4, and that's what that's what we set the range too.

Okay got it and then my second question and Ive asked this one before but as we get closer to that 695.

And ground lease reset is there any color you could provide on that or is that something you think.

When you lay out the 2022 guidance in December that Youll kind of address some expectations for what that Covid.

So there is nothing at this point to report that's new on on 625.

There is a very.

Ascribed process, we're part of an appraisal process.

The appraiser.

<unk> set the rent, but the appraiser hasnt, even been determined yet that is not going to happen until December at the earliest and there is no timeline as to when the rent will actually be reset so until such time as the process moves along.

We don't really have anything new to add to the process.

Okay. That's good to understand that anyway. Thank you.

Our next question comes from the line of Manny Korchman with Citi. Your line is open hi.

Alright.

Michael Bilerman with Manny how are you.

Mark.

They are really excited to go up to the summit.

It's really awesome.

I was wondering if you can just sort of step back just on the office market broadly.

You have a lot of companies sort of.

It fits and starts with trying to bring their employees back.

I think that there is a lot of examples of where.

<unk> worked through a lot of examples where it hasnt.

He feels as though the employees.

May not be as excited as the Ceos of the companies may want them to be and you've already seen some companies back off from an office work.

How do you sort of see.

The sort of playing out over the next 24 months because it doesn't feel like a switches just automatically going to go on and everyone's going to rush back.

And it would seem that when companies do put those proclamations in you could see employees just leave their companies and you go to companies, where they can get a more flexible.

Flexible work environment.

How do you sort of and this is not just in New York right. We're seeing this globally.

This really was a trend that no one could have anticipated that we'd all go remote for now for the better part of almost two years.

And.

By the way while we.

You may not have been as productive.

Things still got done so how do you sort of put all this together and where do you sort of see things landing overall for the office market.

Yeah.

We talked about on the last call.

Slowly steadily the numbers are building and people.

Theyre coming back to the office I think like I said, we're averaging in excess of 30% and peak days are mid <unk>.

I think the average is closer to 35 peak days of 40.

Some companies May experiment with a day or two week of flex, but we don't see that impacting your footprint.

I can.

Eject.

He is going to do in terms of are they going to be five days, a week or builds inflection through the system, but we have pretty good visibility into is that these same companies regardless of whatever sort of flexible work model, they're going to are still.

Utilizing and mapping and consuming.

Probably the same amount of space or in some cases more and we don't see that many downsizing so.

If somebody works four days a week and they are out of the office one day, a week that person still needs a desk or an office or a workstation. It's it's not like those four days they just stand there.

And we don't see a lot of sharing.

Rough hotels Hot Desking, if anything I think COVID-19 has given rise to a little bit more.

Personal space and larger space, and partitioning and I'd say that the era of.

Sort of Hot Desking is we don't see that quite as much and we see a lot more.

Non office space being built into these tenant floor plans that we're building. So we will lease this year well in excess of a $1 five $1 5 billion square feet. These.

These are tenants that are making 10 year plus <unk>.

With the knowledge of whatever flexible work pro.

We're going to win.

With an expectation they are going to need and utilize that space or else. These are sophisticated sense, they're not going to.

Make these commitments if they don't think they can utilize the space. So.

Our role is not to sort of.

Try and get into the details of how theyre going to work their floor.

<unk> office, we put this space out there and these tenants.

The management and leadership of these tenants I would almost say to a person.

As we got to get back in the office. That's the good news is there's a recognition.

Which.

That.

The.

Flexible companies are more efficient competitive.

And better.

If there are people are together.

I could there are few and far between the heads of our tenants, who don't immediately come out and say that.

They're just going to evaluate whether there is a model that works.

Them competitively that allows them to build in some flexibility, but I don't see that in any way materially altering space demand or shrinkage in footprint.

If we see it.

To relay that to you guys.

The numbers sort of speak for themselves.

<unk>.

Works for the still well occupied.

Monetize buildings are attracting tenants.

And so we're beefing up our amenity program as Andrew said in.

We're leasing a lot of space in the pipeline I know if I don't know if I mentioned the pipeline yet.

830000 square feet of.

So that's right.

These are this is pipeline for tenants that have studied and studied where theyre going to be with their space plans in the future and that's where that demand is coming from so.

No.

There was flexible workspace before COVID-19, there's going to be flexible workspace after COVID-19.

The.

Pipelines in this activity in this city right now is as hot as we've ever seen.

Financial firm and financial profits continue to break record after record first half of the year Wall Street profits was over $30 billion and we're on track for over $50 billion again this year.

Matching last year and last year was the second best year ever recorded.

Knowledge firms are growing the startups are growing.

<unk> services are growing so.

Yes.

Thats attention right. The economy is growing everything is doing well, but then you get headlines PW.

<unk> T going all hormone Amazon thing.

Doug.

Not based on headlines.

Yes.

It's not the headlines that result.

What what.

Ends up in the results column are signed leases and in that regard we're sitting at $1.

<unk> now with an 800000 square foot pipeline, so I'm not going to go tell others tend to tell you you're not supposed to lease that space. These tenants are coming to us and they want to lease that space and we're going to lease it to them Chelsea everybody said to your point, everybody said, Oh fitness centers are going to have a really hard time people are going to one in that sit at home in their basements.

For the Wall project, an image workout by themselves guess, what Chelsea just committed to a 55000 square foot lease for a 20 year term and we.

<unk> worked with them to come up with a design plan, where theyre going to be making a big investment in that space. So.

Whatever the headlines.

Headline say Chelsea piers thinks they're going to put people and 55000 feet and you know what I think they are right now.

Yes.

New York I live in New York, and I Love every aspect of the interactions I get when all the culture activities and when I'm in the office with my team.

That's my.

My personal view right.

And what I feel.

<unk>.

Now is the office market in general and obviously, that's a green can do a lot of things for their own company, but the office market at large just feels that the employees every survey that you read the employees themselves have a lot of hesitation that from safety.

Safety they feel that they can do their job effectively and I just don't know.

So all of that will play out ultimately my view.

The case before Covid, if you polled employees before Cove, you don't think there were employees, who would have said I think I can be effectively come up.

Good morning.

But now we went through this testing.

Like if we just put the off everyone around the world.

No.

It was an experiment in.

This continued now.

To your point that maybe the product firms, who do it are going to suffer firms who do it I believe we're competitive we suffer and it'll work itself out and businesses are going to operate in a way that produces the best bottom line.

Sure.

That's our opinion if people have a difference of opinion from you Michael just difference.

In my opinion it was more so.

I'm asking the question just as we look at all of this and everything that's happening I'm just trying to get your sense of things I'm not trying to say is my opinion I enjoyed doing we are okay.

The dynamic in the city right now.

It was very strong.

Because businesses are doing well people are hiring it's hard to hire there is a.

Land grab for.

Human resources in an educated workforce, we have a pipeline of 826000 feet, we're filling our buildings.

I feel to others and we can operate well in this environment.

And the business leaders themselves say, we want to bring our people back I believe at the end of the day that will be the last word on the topic.

I appreciate the color Marc and I look forward to Investor day. Thank.

Thank you.

Our next question comes from the line of John Kim with BMO capital markets. Your line is open.

Thank you I was wondering if your view or expectations at this time and it has changed at all either visitors and revenue are now more recently the evaluation.

I can't speak due to what's happening at the edge.

Well I.

I mean some of it.

Is doing.

It just opened so I'll have to see what our results are from the first hour.

But I can tell you that in terms of advanced ticket sales.

We are at or ahead of our projections.

The.

Total online today it was like Pandemonium down there people were excited.

They were the first ones in the place I've got pictures with hundreds of people on every floor, having a fantastic time, while the feedback from our pre soft opened over the past couple of weeks really months has been tremendous social.

Peabody has been great.

I have big big expectations that someone is going to be a hit and I don't think thats driven by the edge or any other individual particular venue I think it is just driven by what we've Cree.

Created which really is differentiated from I think anything in the city.

I mean.

Actual meat in the world for that matter.

Hey.

As a company for.

Our shareholders in this company is going to benefit.

Tremendously from from I think.

<unk>.

An ambitious project, where I think we hit the market.

But what are you.

On the valuation that take care.

The ads.

I don't have any views on the value, which we just opened today.

Ask me in a year.

Generally I would evaluate it.

After I see.

The revenue results I have my projections.

If anything I think we're going to vastly exceed those projections, so I wouldnt value. It based on my projections, which are.

What we went through with you guys in December we haven't revised those projections is still basically the same with that said I think we're going to blow away and.

After a year of operating history.

This is a brand new I don't look at valuation is kind of the data doors open I think its value we're going to build over the next two to three years as we stabilize this asset and when we do we'll look at what.

What stabilized value looks like but.

Whatever valuation.

History, our projections I had nine months ago, I think we're going to do far better.

Okay.

And then my second question is on the right path lease at one Vanderbilt.

Based on public disclosure it came in at the high initial rent, but the.

<unk> the rent bumps are pretty modest afterwards, but I think it averaged a little bit over 1%.

Is that.

Comment between signing leases today.

Sure.

When you say as a comment it's not common to sign leases in excess of 200, a foot the comps that would be zero. So.

Oh, how common it would be too if you went out and what is the bump.

Average on a how big was the UI peso lease rate.

I mean, how big are the rents I don't know if you want go to you iPad. We obviously I wouldn't talk about you may have.

UI path was on our underwriting it's a tremendously.

Lease its a great validation of Midtown as a destination for technology tenants, which the narrative is technology tenants don't located here that's false.

We're very pleased with the lease yet any anyone who gave you the impression that the UI Panther any of the leases we're doing here are kind.

<unk>.

Underwhelming economics is got there kind of <unk>.

<unk>.

Okay. Thank you.

Yes.

Our next question comes from the line of Anthony Powell with Barclays. Your line is open.

Hi, good afternoon.

A question on the leasing activity that has been pretty strong. This year. When you look at the tenants that have been signing leases have you noticed any tenants that have a permanent flexible work arrangement signing the same amount of floor space or do you see those tenants.

Yes, redesigning or maybe.

Lowering the amount.

That they would use on a per employee basis.

Well I'm not.

Let me just clarify your question are you asking us whether or not we see.

Tenants leasing space as it includes some component of <unk>.

Next office, where they go to way, we worked hard soda or you're simply saying is from a design perspective.

Are they are they're using their space differently to be more flexible.

I'm trying to ask if tenants, who you know to be kind of going to a three or four are there any office kind of.

The arrangement.

Okay.

Okay.

I will say broadly speak.

Okay.

Let me set it up this way we have.

The greatest number of large.

Yields large term sheets being exchange leases out that I've ever seen at one point in time being large being a 100000 square foot or larger type transactions and our pie.

Speaking that I've ever seen in my entire career, having said that having said that none of these tenants really know where their requirement is going to be a year or five years from now not necessarily driven simply by a work from home component. They don't know their head counts.

Pipeline confidence that their businesses are going to remain strong, but they're changing how they use the space. They may or may not have some work from home component.

And even having said that we've seen tenants that thought they were going to have a significant work from home component that have reversed that decision come back to us in fact has said.

Where I was going to give up some space I no longer want to give up that space or hey, I actually need to lease more space. So theres a lot of I think theres a lot of uncertainty.

On the tenant side as to where their space requirements are going to go and not and not to suggest it's just on the downside.

Tenants are baking.

Head into their leases as much future growth as they are protecting themselves about having flexibility on the downside.

Got it thanks for that and just one more on the transaction activity can you give more detail on 48, then Broadway the deal there.

The third party testing the rights of.

The feeds more details on our strategy and the overall transaction.

I mean, it's the subject of a pending litigation. So I think what we've released thus far is really all we're in a position to release.

Okay. Thanks.

Our next question.

Comes from the line of Steve <unk> with Evercore ISI. Your line is open thanks.

Good afternoon.

Mark I was just wondering if you could talk a little bit more about the disposition program you didn't sell a lot other than what you had put under contract earlier, but you talked about a pretty big.

<unk>, but potentially delaying some JV.

And then how does that sort of tie in with the buyback program.

Moving into fourth quarter.

Well, we say delays in JV I think there was one in particular, just one Vanderbilt I guess I just wanted to take issue with the euro.

So I think what Matt talked about was one Vanderbilt.

We're not delaying it did you give there.

Yes.

Well, we're not until delaying it per se.

I think there may be a misunderstanding by.

By some as to the whats going on here at this building and in summit.

The results are extraordinary and it's not a delay as much as what we're assessing like we've done in the past is for.

And for the shareholders rather than sort of go forward now without leasing up the last 9% of the building and waiting for the full year results from summit or let's call. It one to one five years.

It would just be possibly ill advised to go forward at this time because the results of the building are outstripping.

For the benefit we'd be in December last year. So, we're just sort of electively, saying if were going to sell an additional interest in the building, let's make sure we're doing at the optimal time.

As it relates to <unk> I don't think there are any other jv's that we're delaying that's right.

Other than that.

We're in terms of <unk>.

New pipeline.

Of sales.

We have several assets that are in the market where were negotiating contracts and hopefully those contracts will be in the form to be executed and announced it will between now and.

December Investor I can't make any guarantees on that.

But.

We still see a pretty healthy market and we still see a couple of deals in our business plan that we hope to knock down by by the end of the year and Steve as it relates to use of proceeds I think I was asked this question first or second quarter, what we would do with the proceeds of incremental sales.

Sales and we said we're going to balance out.

Debt repayment and share repurchases. So we did share repurchases $80 million worth in the third quarter and we use some proceeds to manage the leverage point, which is something that people will push on all the time as our leverage levels. So we are balancing that out if we are able to close the transaction or two before the end of the year, we'll do the same.

Thing look at whether it's appropriate to buy stock with that.

Those proceeds or take down leverage we've been trying to maintain that leverage neutrality in when we had the leverage neutral level, we can buy with the incremental proceeds we will continue to do that.

That's the way of saying as we put more assets under contract.

Good changes.

You'll see some more buybacks right.

Got it thanks, and then I don't know if Mark you are Andrew maybe just comment on the DP activity that Youre seeing I know it wasn't there.

There weren't a lot of paybacks and there weren't a lot of originations in the quarter, but just what does that business look like today and what are your expectations moving forward.

Well.

I think there is a.

Very very aggressive first mortgage market, which.

<unk> will talk about in more depth at Investor day for sure.

And that does crowd out.

Have higher advance rate first mortgages is less demand for mezz dollars. So it's a competitive market out there to find.

New origination opportunities.

And I also think you have less transaction activity than in a normal year.

A lot of times originations come as a result of those transactions. So those two things combined I think it is a slower.

Sort of market out there for Mezz paper, but we're also taking a very conservative conservative approach after raising the liquidity we raised in 2000.

Intention is not just a turnaround.

Fire it back out.

And we're being very selective in terms of originations.

Great. Thanks.

Our next question comes from the line of Jamie Feldman with Bank of America. Your line is open.

Great. Thank you.

Just sticking with the transaction market.

Can you.

Characterize where you think we stand today in terms of risk.

We have taken.

On value add Matt that it sounds like you're more optimistic about where things are heading in New York City.

Is there more capital looking now how would you explain.

Well I think theres, a lot of capital raised and I think the.

The most notable trade that just closed probably was.

Blackrock Cbs's headquarters at <unk> 50 <unk>.

That's an older.

Dated six Avenue product that has not had any capital invested hasnt been a monetized and has a very.

Aggressive lease rollover schedule and that building traded.

For a very healthy per foot.

<unk>.

So.

<unk> traded for $871 a foot.

I think there is there is a lot of capital out there theres a lot of owners that are refinancing rather than selling because that is so cheap and you can go out long term.

<unk> at very compelling rates.

And I do think that Theres, a lot of activity sort of pending out there.

As capital comes off the sidelines and gets.

More comfortable putting money out in New York.

Okay.

And then thinking about inflationary pressures.

And your ability to offset them can you talk about where you think where from an operating perspective, where you are seeing the most and placement pressures and how you can pass that through and then I guess at the same time thinking about your ability to raise rents or at least improve.

Economic some leases like where are you.

Where do you where do you think you have the most leverage nowadays.

The improved terms.

Well I think.

Rents were not there yet on kind of the commercial space residential market is basically fully recovered.

I think 185 Broadway, which we started leasing.

In August September one.

Windup renting ahead of pro forma <unk>.

Residential rents are fully sort of corrected back commercial rents.

We don't have pricing power.

Other than our best buildings.

Everybody every landlord is holding the line I don't think theres erosion in rents by any stretch.

But in an in class a space the demand is there to to push rents a little bit.

On the expense side.

<unk>.

Added 3%.

Yes, we're 93% leased and the best defense against.

Inflation is to have a well leased portfolio.

<unk>.

The increases in operating expenses are passed through to our tenants.

93% were in a good spot.

I don't think we've seen rampant.

No we are going through our projections for next year, we to this point haven't seen a dramatic increase on the expense side, we will be looking at again before.

Before we give guidance in December.

Rates are definitely right not all pass through but the other side of that is for the first time in a long time, we're seeing a little bit of a surprise benefit on the real estate tax side, which came in we got our bills in July and they came in below our expectation right. Now that is certainly offset any any increase on the operating expense side as.

It should.

Okay.

Hi, Thank you.

Our next question comes from the line of Blaine Heck with Wells Fargo. Your line is open.

Great. Thanks, Mark to follow up on some of the.

Flex space questions.

<unk> in the context of getting we work out of 609 fifth I guess, how are you thinking about flex space in New York portfolio going forward. It seems like Theres a place in the market for this type of space, but there have certainly been difficulties with the operators. So how do you think in FL Greene will offer flexible operated locations in the future if at all.

I mean, if the question is what do we think about co working as a viable sector that has could have tenancy within the building in our portfolio. If that's the question then I would say.

We like the co working sector, we have co working tenants.

We don't have a lot of exposure to that industry.

Without that we work, it's got to be below 3%, well below 1% to two 1% to 2% so.

It's in the scheme of the portfolio, it's kind of.

It has no significant.

Representation.

With that being said we have some very good.

Co working businesses, some of whom had been around for like.

Long as I can remember 10 to 20 years or longer so.

I think the business model.

Model is fine.

Examples of where people run that business.

But well we have emerged.

And emerge has been alive and kicking in for 20 years, and we have two or three facilities at any one point in time, they stay relatively lease like they are now and.

They serve a role in this market so we.

It's not a role we focus on but I do believe there is.

Model and important and legitimate role that.

That co working plays.

As long as it's.

Based on our founder.

Our sound fundamental model, where.

Those tenants are renting at rents more than they can sustain or.

They are they don't over improve the space they improve it to a level that is sustainable and that's what I've seen the better ones do and Thats what <unk> does.

But I.

I like the space, it's just.

It's not a very it's not a it's not a.

A driver if you will within the city at this time it was.

Maybe five.

Five years ago or so.

Three to five years ago, there was a lot more talk about that space, but I think right now it's kind of settling back to the mean.

Great. That's helpful. And then congrats on the lease at one Madison It seems like a great tenant to have in place to drive further interest.

We think there is there anything you guys can say about the rent Chelsea is paying and the concessions involved with that lease versus maybe what you were expecting in your pro forma and then if you could give us any update on any leasing process progress at the office space at one Madison that would be great.

So Chelsea lease.

It was for them.

It's right on pro for probably a little bit more capital, but we had not anticipated.

What is being built for.

Outstrips or exceeds what we had intended for this space. So it's not a fair comparison, we were looking for a little bit more of what we were looking forward.

We had modeled more of a.

Traditional build out if you will we probably didn't have the 60 foot climbing wall and we probably didn't have liquidity number for retail.

Full floor retail presence.

That Chelsea piers wants because they want that retail.

But so the configuration is different and the product exceeds our expectation that capital is probably a little bit higher but in the context of that deal.

We have massive savings.

The the excess is added.

Presence engine C. There is zero issue to the budget as mentioned earlier the budget is still far under and.

The use is as good as we could've Ashworth number would have been yes.

And now it's like it's our number one amenity for us too.

Go to market.

<unk>, Chelsea piers knows that and once it's too.

To continue drive business to their their place and we want to use that as an example of the best of the best kind of tenants that will be attracted to one Madison.

And want to make it their home or campus.

This is a step in that direction, we have other negotiations going with other tenants that I think are equally.

Sure.

Consistent with that with that theme.

And then on the office side, we have.

Very robust tenant interest.

We've got active term sheet is being changed.

We're not in a position to say, whether we will make any of those deals yet but as.

Because they wanted today by comparison to where we were in the life lifecycle of the development of one Vanderbilt.

The level of large scale tenant interest at one Madison is much earlier to the game then it wasn't one Vanderbilt I think that speaks a lot about what we're building the quality location.

And.

As we said the desire of these large tenants to want to be an interesting healthy <unk> work environment that is hard to find on the east side of Manhattan.

So, we're we're pretty pumped about that but.

We don't want to we don't want to count on anything it's a little too early to the game, but.

<unk>.

Lots and lots of very good positive.

Term sheets being exchanged.

Great. Thanks.

Our next question comes from the line of Ronald Camden.

With Morgan Stanley Your line is open.

Great two quick ones from me.

Back to I think the leasing question.

Year to date sort of leasing activities is above 2019, which is pretty impressive I think you provided color in terms of some of the subsectors, whether it's financials or Tammy.

Just curious can we slice it a different way in terms of size large versus <unk>.

<unk> gone all is there any sort of notable.

Trends or differences between sort of now and sort of pre COVID-19 levels.

Yes, as I said earlier.

I've never experienced.

It's a large number of large.

Specs.

In our pipeline.

And some more in time.

As we sit here today, we have we have a significant number of large tenants being defined as tenants above 100000 square feet.

And I think compared to prior market disruptions. It always seemed in the past it was a small tenants.

Just wanted to come back into the market.

And it was new business is being formed or layoffs and people went off on their own.

In this case it seems that the.

Leasing recovery is being led by the large tenants who are looking past COVID-19.

Our wanting to make long term commitments and spend the capital to reinvest.

With their workplaces to give their employees a reason to want to be in the office.

And.

I think thats it.

A unique differentiator.

But.

The good news is.

The Big boys out there and there and they are serious about making commitments.

Great and then the second question was just thinking about one Madison.

Just curious was there any sort of lessons learned after executing one vanderbilt whether it's design construction or the leasing plan and sort of getting all these moving pieces together is there any sort of lessons learned are best practices that.

A couple of other one Madison is your sort.

Barking on that project.

Yeah, well the lessons learned definitely trends related from one project to the next because the team is almost identical in most respects so thats a big bonus for us So if nothing else just the.

The communication.

Our option and workflow between the myriad of.

Companies.

Consultants et cetera.

Is this is as good now as ever and there is no learning curve that's great.

In terms of the development plan, there are pretty different kinds of.

Development I think some of what we learned here is that.

Tenants.

Greatly appreciate.

I think amenity finished design thoughtfulness in a way that I think.

Is underappreciated in the market generally.

Having the sort of best of class hospitality like spaces, where you don't really cut corners.

But did the tenants kind of feel it and see it and.

And they know when you've gone to 100% distance to deliver a great product and include <unk>.

Food and beverage experience.

As part of that and an outdoor experience and.

In space that they can utilize for events in their own uses either during business hours or after sometimes.

Developers will build these spaces and they can advertise they have it but it's not <unk>.

<unk> that tenants really want to bring their guess of hundreds.

<unk> <unk>, there is not a food and beverage hospitality program to support it so putting together the human resource element, which is a great hospitality.

Sure.

Division and personnel.

Now with really well executed food beverage with really well design space and functional thoughtful that package together, it's pretty powerful and trying to differentiate product and so we're just trying to do more of that and do it better one Madison.

Health healthy workplace.

I think it's something that is borne out of one Vanderbilt, but also borne out of COVID-19. So.

We're putting extra energy and effort into one Madison.

To try and make it at the very top of what it can be from a health wellness and sustainability aspect the dose system that I.

I think Steve has spoken about previously if not today.

Sort of a hallmark of that project, Steven one of which will be one of the largest spec buildings to deploy those for those who don't know what it is.

<unk> has an ability to 100% circulated outside or as opposed to re circulating.

Related to interior so it makes the workplace are healthier.

Healthier work environments.

It's something that we had designed into the project pre COVID-19, but it was an emphasis on using cutting edge technology to create an emphasize healthy workplace that we.

We saw firsthand at one Vanderbilt that the tenants put a lot of value into that so I think to Mark's point.

Great architecture heavily <unk> weighted towards food and beverage and outdoor spaces and a healthy work in place environment. Those were all key factors that has made one vanderbilt.

So successful and why I think we're seeing such strong interest in one Madison and at this point in time.

Great. Thanks.

That.

Last question.

Our last question comes from the line of Nick <unk> with Scotiabank. Your line is open.

Sure.

Just a couple quick ones here in terms of one Vanderbilt can you just remind us just on a rough number.

What percentage or rather what is the GAAP NOI that was actually achieved in the quarter as we're thinking about the ramp that still has to happen and then also on capitalized interest can you just remind.

Just kind of work with that project.

When it gets removed from construction in progress and just how to think about capitalized interest over the next year.

Sure I will get into capitalized interest more in December when I give guidance, but generically speaking the building opened.

About a year ago. So one year is your timeframe after.

As how can capitalize on vacant space, we can still capitalize while space at least is being built out so we'll ramp down as spaces coming online over the course of 2022 GAAP NOI for the quarter for one Vanderbilt was $9 5 million.

Sure.

Okay, great. Thanks.

Last.

Last question is on I guess.

The fact that leasing volume youre talking about.

Higher than expected this year the pipeline is as strong as well you did hit your you are going to hit your guidance on occupancy for the year, but you are still down versus pre COVID-19. So I guess any.

What's your thoughts on the ability to get back from 93%.

Where youre at today versus 90, 596% I think you were at some point in 2019.

Hello.

Still a very unsettled market.

So we're pleased with the velocity.

<unk> seen and we've got good tenant demand but.

It's hard to predict there's a lot of wood to chop still going forward.

Well ill take it one day at a time, yes, I just wanted to make sure I don't know if.

If people are still left off alignment.

People, but.

We're compare.

This environment to what it was.

12, 18 months ago, 612, 18 months ago, and it feels really good.

We're still at a level in this market right now that starting from like 17, or 18% vacancy rate, which is very very high and it's going to take a lot.

<unk> to absorb that space and it will be absorbed.

But I would guess most of 'twenty two will be spent absorbing that space. The good news is going to be directionally, we're going to be headed in the right direction and the deals are going to firm up and we expect our occupancy to rise.

But.

It's not.

The switch kind of thing.

The deals just don't roll out that way, we can only do so much leasing in the year and the market can only do so much leasing in the year. So I.

I think we're very optimistic but I think we're also very realistic that we're going to have to be on our best game with their best product to.

Not flip.

Back to the levels, we want to be back to I think I heard there was $95 I mean, we want to get back to like 97.

That's when the portfolio is really cooking and Thats. When you have a market environment that is sub 9% vacancy market.

There are anywhere close to there now so.

We will have to.

To do our best within that framework.

Hope we can deliver.

To deliver the results in 'twenty, two and honestly Nick in this market, where rents are not truly reflective of the value of the space because of the.

They can see in the market that mark was talking about.

Actually I'd like to just told some space off.

And not lease it aggressively.

So that will just.

We do want to get back to that 97%, but we're going to do it appropriately from an accounting perspective as well.

Alright, I appreciate it thanks, Matt Mark everyone.

Alright.

Operators.

Last question.

And there are no further questions.

Okay, we're all going back to the summit so everybody there Paul.

We will see in December at the back.

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

[music].

Okay.

Yes.

Yes.

[music].

[music].

Thank you everybody for joining us and welcome to SL Green Realty Corp, third quarter 2021 earnings results conference.

This 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 you should not rely on forward looking statements as predictions of future events as accurate as it results and events may differ from any forward looking statements that management.

It may make today all forward looking statements made by management on this call are based on their assumptions and beliefs as of today.

Additional information.

Hmm.

Regarding the risks uncertainties and other factors that could cause such differences appear in the risk factors at M. D. N. A section of the company's latest form 10.

<unk> 10-K, and other subsequent reports filed by the company with the Securities and Exchange Commission.

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

<unk> financial measure most directly comparable to each non-GAAP financial measure discussed and the reconciliation.

Nation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on both the company's web site at Www Dot SL Green Dot com by selecting the press release regarding the company's third quarter 2021 earnings and in our supplemental information filed with our current report on form eight.

K well dive into our third quarter 2021 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. So please limit your questions to two per person.

Thank you.

I will now turn the call over to.

Marc holiday.

Please go ahead Marc.

Okay. Thank you and good afternoon. Thank you all for joining US today, we have just come from the historic opening.

What I would consider new York's most thrilling and unique destination summit, one Vanderbilt open to the public earlier today.

At 11, a M. We cut the ribbon and the transcendence room high above one Vanderbilt with the most incredible and amplify views of New York City.

The room is aptly named because everything we've done with this building has been about transcending limits and pushing boundaries. We're doing it again today, but this time.

We're taking it to a much higher level literally.

At the ribbon cutting ceremony, you spoke about how one Vanderbilt is representative of what the true 20, <unk> century office tower can be it redefines what it means to integrate excellence in design efficiencies sustainability amenity health wellness.

Commute ability.

By putting it all together, we've established a new category building.

A new icon on the skyline and a new model for the workplace.

As a result, we are now more than 90% leased despite COVID-19 and despite every dire prediction of the city's demise.

Several of them.

After we opened this building, we introduce Danielle balloons little hobby onto the Midtown restaurant scene and that too was an important milestone for New York, marking the reopening of indoor dining.

Every available table has been booked every single night since it opened in May and there were there were a lot of questions when we.

When we opened that restaurant about whether the New York had enough of a population here in Midtown to support this restaurant and the restaurant has hundreds and hundreds on waiting list every evening.

So now today at one P. M. We welcomed our first paid visitors to see and experience this new and exciting.

Citing cultural destination, we call summit.

At this time, we've done more than push the boundary we've completely shattered it.

We spent years and designed taking the best elements of observation decks cultural institutions, experiential art and immersive technology and combined it all into summit there.

The result is an experience that has the potential to not only become one of the most sought after destination in New York City, but a true global phenomenon the.

The energy and New York has been palpable this past month and now with international borders reopening hotels preparing to welcome back millions of guests live audiences returning.

To sporting venues and Broadway reopening New York is back.

On certain days of the week, we are reaching nearly 40% physical occupancy in our portfolio a substantial increase that's been building up over the past few weeks.

As a sense of normalcy returns to the city ambitious projects.

Like one Vanderbilt ensure that New York remains a top global destination people from around the world come here to shop.

To be entertained to enjoy great food to see great architecture and visit World Class Museums Summit now becomes an important addition to that lineup.

Primary drivers.

Ivers, if this market finance technology business services media and healthcare are all doing unbelievably, well and beginning to make space commitments that evidence.

Evidenced net demand in our market that will stabilize the occupancy rate and hopefully turn into.

Meaningful positive absorption in towards the end of this year in 2022.

With over 450000 square feet leased in the third quarter in our portfolio and nearly one 4 million square feet leased and SL Green portfolio to date, we are tracking well ahead of our leasing goals for the year.

Year, and we're doing that at rental levels that are ahead of expectations and almost flat with expiring escalated rents. We carry this momentum into the fourth quarter with the announcement of the.

Seismic Chelsea piers lease.

56000 square.

Foot lease.

Lease to one of the best operators of fitness wellness.

In health in New York City, it's only their second Manhattan location, we've been negotiating with Chelsea for quite a while and.

They've selected one madison to be their east side home.

We'll there'll be making a substantial investment to make a fitness destination that I think is going to be second to none and it's going to be awesome.

And that really bodes well for one Madison, which otherwise is already about six to seven weeks ahead of schedule on construction.

And significantly under.

Your budget even beyond the.

The numbers that we.

Discussed back in December of last year.

Buy outs, which now stand at close to 92% of the total project have resulted in over $12 million of additional contingent contingency savings and thats.

Above and beyond.

The savings we had already.

Factored into that deal through.

Smart bidding.

Smart.

Project management.

And just given the overall state of the construction market right now.

We're experiencing savings while.

The city and I think the nation at large is experiencing experiencing cost increase as a result of supply chain of supply.

Chain issues that are driving our price. So we're managing that to the best we can staying well within our budget and one Madison.

With.

That new lease now.

Done and more conversations underway, we feel very very good about that development.

During the quarter. We also completed a couple of dispositions previously announced but we closed them most.

Most significantly.

The consummation of the sale of about a 50% interest too.

Institutional overseas institutional investor in the in the news building.

And we have more transactions teed up that we think will be able to complete in the fourth quarter. So we continue to have great success in monetizing.

Our assets are gains and we see that continuing into Q4 that of course enabled us to repurchase about an additional $80 million of stock in the fourth quarter, which brings us close but not completely rounded out I am sorry in the third quarter my mistake.

$80 million of stock in the third quarter and that.

Matt.

<unk> brings us close, but not completely rounded out to our repurchase objectives for the year. So as we sit here.

End of October with a rigorous.

Two months sprint to the finish line to get done all we need to do to close out this year and then.

Embark on what we feel is going to be.

Our solid 2022 for this company and more importantly, this city.

We're excited.

I think it's great.

To have the call on this day.

That is really.

<unk> historic event for the company to open.

Wonderful experience.

I hope everybody on this call, we will see it and see it often experience it it's truly it's.

It's fun, it's exhilarating, it's thrilling and it's everything we set out for it to be.

With that I think we will open up to questions.

Thank you.

To ask a question you will need to press Star then one on your telephone.

<unk>. Your question. Please press the pound key.

Our first question comes from the line of Caitlin Burrows with Goldman Sachs. Your line is now open.

Open.

Hi, Good afternoon, everyone. I was wondering if you could just maybe talk about leasing volumes. It looked like they were pretty strong.

In the third quarter could you give more detail on what types of your properties are the most interest and ultimately signings versus which has lessen I guess also have you seen this activity continue.

<unk>.

Yeah.

We signed over 455000 square feet, which.

As we said earlier.

We've now exceeded what was our.

Full year projections set out at the beginning of the year and we're on track to beat.

Beat that significantly by the end of year.

<unk>.

Our pipeline has grown to over 856000 square feet the largest that it's been.

At any point during 2021.

<unk>.

As I think we've seen earlier in the year.

A lot of.

Leasing is being driven by either.

Financial service businesses in particular.

Who reached 40% of it was 40% of our current pipeline and Tami, which is about 28% of our current pipeline and a lot of the activity seems to be focused on the.

The better quality buildings thankfully at <unk>.

Portfolio.

The majority of our buildings.

<unk> enjoyed significant capital investment over the years as we continue to.

Develop them as healthy workplace environments.

Environments.

That's paying off for us.

In helping us increase our leasing velocity, we've got a couple of projects.

<unk> that are in development where amenities.

Structure upgrades are part of that menu.

We're seeing a lot of good.

Tour activity strong proposals.

<unk>.

We feel very good about.

The overall velocity as we.

As we wrap up this year.

Great and then maybe just following up on that kind of investment side. I know you guys are already very active from a development redevelopment perspective, but how do you think about continuing.

That reinvestment or desire to refresh older vintage buildings.

That hasn't been touched.

Recently, so maybe like a 185 Avenue of the Americas $13 50 Avenue of America's 110, Greene Street properties like those.

Yes.

Well I think <unk>.

185, we did recently completed renovation there.

But we have big amenity programs going in at 85 third Avenue.

750 <unk> Avenue.

And obviously, one Madison the development, so where we see that we can be accretive in terms of net effective rents will make the investment.

In the amenities to attract that type of tenant.

But theres also a lot of demand.

For affordable product, which is still a good portion of our portfolio.

We don't we like having space available to address that part of the market as well.

Okay. Thanks.

Our next question comes from the line of Alexander Goldfarb with Piper Sandler.

Handler your line is open.

Hey, good afternoon, good afternoon, guys and.

Congrats on the on the opening.

So the summit.

Two questions here first just big picture I think you guys took back the garage at $15 15.

But away from there do you see parking.

Is it.

Area of focus for investment or as you look at the landscape wherever parking does become available it's already priced.

Accordingly, such that there's not as much value as there would have been.

Maybe six or seven plus months ago.

Yeah, Alex it's Matt.

So we did actually take back several garages.

During COVID-19.

Several operators one in particular.

Did not maintain their rent payments not only in our portfolio, but across the city and more broadly we elected to take.

It's really a total of like eight or nine.

Nine garage is back.

And we started operating them really over the last.

Three months to six months or so there'll be ramping up.

So this year not a huge impact will be more material when we start getting into <unk>.

Into 2022.

As to additional investment.

I don't know that its hit our radar is a deep investment pool of opportunity.

But.

Within our portfolio, we have found that given the current environment.

We can make good money off of garage, if the opportunity presents itself within our existing portfolio to take another one back I'm sure we'd be happy to.

Okay, and then Matt while you're on the phone.

Fair enough.

Right.

No.

I know.

So.

Two question. The two parter is on we work and the planned one Vanderbilt stake sale, so and we work is that.

The lease term that you booked is that the full amount or is there any more that youre going to get from them and then as far as the stake sale.

You guys have talked about doing that so I don't know if now this gets pushed into next year. I know you have the December Investor day, Youll give us the guidance, but as we start to fine tune. Our numbers ahead of the Investor day for 2020.

'twenty two just trying to think what sort of one time items like lease term or like a take sale, we should be thinking about that may move from this year to next year sure. So specific to the we work lease termination, we announced that was incremental to our plan. We did not have that baked in that was a deal that played out.

Out over several months huge.

Win for us.

That is the bulk of the termination payment we received but not all.

There is a portion that will come in.

It's supposed to come in early 'twenty two.

And the total of those two would be 100 cents on the dollar of the.

Guarantee and letter of credit that we work had on the space. So again.

Great accomplishment to get that out of that entity.

I think in the face of that I've got several questions as to why guidance wasn't increased by more if.

If you recall back to December last year, when we gave our full year guidance we had.

In.

Potential JV interest sales further JV interest sales in one Vanderbilt one Madison.

We are working both of those but with regard to one Vanderbilt because it's done so well and now we have the summit open and the summit.

Opening today ahead of it has been.

Exceeding our expectations.

Layer they elect to.

Defer that interest sale to 2022 or not do it at all and that sale had with the recognition of incremental income at at closing of $9 million to $10 million. So that was baked in our original guidance. If we don't do that.

It seems unlikely we will do this year.

We met that offsets the incremental income from that we worked termination.

That we recognized in the third quarter.

And getting back to where we were we increased our guidance range.

By <unk> at the midpoint.

Okay, great. Thank you.

Yes.

Our next question comes from the line of Michael.

Year with <unk> Securities. Your line is now open.

Thank you.

So that was good color on the on the change in guidance I had a guidance related question as well.

When I look at what the full year range implies for <unk>, it looks like about $1 35 to $1 55.

And.

My question is really what.

With two months left this year, what's kind of driving that range is it is it kind of just giving you some flexibility on either side or is there a swing factor in there that.

One way or the other on us.

So important when we reset the range, we up the bottom end of the range by <unk> 15.

Michael clearly theres not a lot of downside in our numbers and there is room to the upside as you look at run rate Q3 into Q4, a couple of things one we have the full quarter effect of some sales that we executed in Q3, not the least which is half of 2042nd Street, which is a material contributor. We also have a significantly.

So lower other income amount in Q4, we had the we worked termination in Q3. We also had some other fee income now we seem to find fee income every quarter, but we don't project a lot of it so.

So that goes down.

We I talked about the taking out the sale of an interest in.

One vanderbilt potentially pushing out to 2022, if we do it at all.

And then we've layered in some conservatism as we always do that's why we keep a range. So could we ended up higher than our 685 midpoint sure, but that's not what we guide towards we guide towards our expected levels.

Our levels in Q4 and Thats.

And that's what we set the range too.

Okay got it and then.

My second question.

I asked this one before but as we get closer to that 625 Madison ground lease reset is there any color you could provide on that or is that something you think.

When you lay out the 2022 guidance in December that Youll kind of addressed some expectation.

What for what that could be.

So there's nothing at this point to report that's new on on 625%.

There is a very prescribed process, we're part of an appraisal process.

The appraiser.

<unk> set the rent, but the appraiser hasnt, even been determined yet that is not.

Patients have been until December at the earliest and there is no timeline as to when the rent will actually be reset so until such time as the process moves along we don't really have anything new to add to the process.

Okay, that's good to understand that anyway.

Our next question comes from the line of.

Going to have Korchman with Citi. Your line is open.

Alright.

Michael Bilerman with Manny how are you.

Mark My Kids are really excited to go up to the summit.

It's really awesome.

I was wondering if you can just sort of step back just on the office market broadly.

You.

Many of the other companies that have.

Fifth we start trying to bring their employees back.

But there is a lot of examples.

Where it's worked through a lot of examples where it hasnt.

It definitely feels as though the employee.

<unk> may not be as.

I did see it.

Those are the companies.

They want them to be and we've already seen some companies back off from an office more.

How do you sort of see the sort of playing out over the next 24 months because it doesn't feel like a switches just automatically going to go on and everyone's going to rush back.

It would seem that when companies do put those proclamations.

Could see employees just leave their companies and go to companies, where they can get a more flexible work environment.

How do you sort of and then this is not just in New York right. We're seeing this globally.

This really was a.

And no one could have anticipated that we would all go remote for now the better part of almost two years.

How do you.

While we may not have been as productive.

Things still got done so how do you sort of put all this together and where do you sort of see things landing overall for the office market.

Yes.

No.

We talked about on the last call.

Slowly steadily.

The numbers are building and people are coming back to the office I think like I said, we're averaging in excess of 30% in <unk>.

Days or mid term.

I think the average is closer to 35 peak days or 40.

Trent.

Some companies May experiment with a day or two week of flex, but we don't see that impacting your footprint.

I can't project.

He is going to do in terms of.

Are they going to be five days, a week or builds inflection through the system.

We have pretty good visibility into is that these same companies.

Our list of whatever sort of flexible work model, they're going to are still.

Utilizing and mapping and consuming roughly the same amount of space or in some cases more and we don't see that many downsizing so.

If somebody works four days, a week and they're out of the office one day, a week that person still needs a desk or.

As regards our workstation, it's it's not like those four days they just stand there.

And we don't see a lot of sharing.

Hotels Hot Desking, if anything I think COVID-19 has given rise to a little bit more personal space and larger space and partitioning and I'd say the.

An officer of <unk>.

Sort of Hot Desking is we don't see that quite as much and we see a lot more.

Non office space being built into these tenant floor plans that we're building so.

We will lease this year well in excess of a $1 five $1 5 billion square feet.

These are tenants that are making 10 year plus commitments.

With the knowledge of whatever flexible work program Theyre going to.

With an expectation they are going to need and utilize that space or else. These are sophisticated sense. They are not going to.

Make these commitments if they don't think they can utilize the space. So.

Our role is not to sort of.

Try and get into the details of how theyre going to work their flexible office, we put the space out there and these tenants.

The management and leadership of these tenants I would almost say to a person.

Says, we got to get back into.

The office that's the good news is there's a recognition.

Debt.

The companies are more efficient competitive and better.

If there are people who are together.

There are few and far between the heads.

Of our tenants, who don't immediately come out and say that.

They're just going to evaluate whether there is a model that works for them competitively that allows them to build in some flexibility, but I don't see that in any way materially altering space demand or shrinkage in footprint.

If we see it.

We're going to relay that to you guys.

The numbers sort of speak for themselves.

We're still well occupied.

Monetized buildings are attracting tenants.

And so we're beefing up our amenity program as Andrew said.

No.

We're leasing a lot of space in the pipeline I know if I don't know if I mentioned the pipeline yes.

830000 square feet a pipeline so.

These are this is pipeline for tenants that have studied and studied where theyre going to be with their space plans in the future and that's where that demand is coming from so.

No.

Yeah.

There was flexible workspace before COVID-19, there's going to be flexible workspace after COVID-19.

The business activity in this city right now is as hot as we've ever seen.

Financial firm and financial profits continue to break record after record the firm.

Wall Street profits was over $30 billion and we're on track for over $50 billion again, this year kind of matching last year and last year was the second best year ever recorded.

Acknowledging firms are growing the startups are growing.

Business services are growing so.

First half.

I think thats attention right. The economy is growing everything is doing well, but then you get headlines pwc going all remote Amazon thing.

So normally it's not based on headlines.

Yes.

No.

It's not the headlines that result.

What.

Ends up in the results column.

<unk> signed leases and in that regard, we're sitting at $1 49, with an 800000 square foot pipeline. So I'm not going to tell all those tenants hey, you're not supposed to lease that space. These tenants are coming to us and they want to lease that space and we're going to lease it to them Chelsea everybody said to your point.

Everybody said, Oh fitness centers are going to have a really hard time people are going to want to now sit at home in their basements look at a wall project an image workout by themselves guess, what Chelsea just committed to a 55000 square foot lease for a 20 year term and we.

Yes.

<unk> worked with them to come up with a design plan, where theyre going to be making a big investment in that space. So yes.

Whatever the headlines say Chelsea piers thinks they're going to put people and 55000 feet and you know what I think they are right now.

No.

New York I live in New York, and I Love every aspect.

The interactions I get when all the culture activities and when I'm in the office with my team.

That's my personal view right.

And what I feel.

<unk>.

Now is the office market in general and obviously you have a green can do a lot of things for their own company, but the office market at large.

That those that the employees every survey that you read the employees themselves have a lot of hesitation that from safety. They feel that they can do their job effectively and I just don't know.

All of that will play out ultimately in my view.

The case before Covid, if you pulled employees before koby you don't think.

Just feel as you would have said I think I can be effective but have you come up.

No.

But now we went through this task as a guide.

We just put the off everyone around the world where remote.

It was an experiment.

It has continued now.

To your point that maybe the prop firms who do it are going to suffer firms who do it I believe.

They were competitively suffer and it'll work itself out and businesses are going to operate and the way that.

Produces the best bottom line.

It's our opinion if people have a difference of opinion from you Michael just difference of opinion.

My opinion it was more so I'm asking the question just as we look at all of this and everything that's happening I'm just trying to get your sense.

Because I'm not trying to say is my opinion I enjoyed doing okay.

The dynamic in the city right now I feel is very strong.

Because businesses are doing well people are hiring it's hard to hire there is.

Like a land grab for.

So to pull resources in an educated workforce, we have a pipeline of 826000 feet.

Filling our buildings I can't speak to others, and we can operate well in this environment.

And the business leaders themselves say, we want to bring our people back I believe at the end of the day.

Human would be the last word on the topic.

Yes, I appreciate the color Mark and look forward to Investor day. Thank.

Thank you.

Our next question comes from the line of John Kim with BMO capital markets. Your line is open.

Thank you I was wondering if your views or.

Dave allocations.

The stomach changed at all either visitors and revenue or more recently the evaluation of the summit due to what's happening at the edge.

Well.

So it is doing it.

Open so I'll have to see what our results are from the first hour.

But.

I can tell you that in terms of advanced ticket sales.

We are at or ahead of our projections.

The people online today it was like Pandemonium down there people were excited.

They were the first ones in the place I've got pictures with hundreds of people on every floor, having a fantastic.

Well the feedback from our pre soft opened over the past couple of weeks really months has been tremendous social media has been great.

I have big big expectations that some of it is going to be a hit and I don't think thats driven by the edge or any other individual particular venue I think it is just.

Driven by what we've created which really is differentiated from I think anything in the city.

I mean anything in the world for that matter and I think.

As a company for shareholders in this company is going to benefit.

Tremendously from from I think.

An ambitious project, where I think we hit the market.

But what are your views on the valuation that take care.

<unk> edge.

I don't have any views on the value, which we just opened today.

I mean, yes.

Generally I would evaluate it.

Okay.

After I see.

The revenue results.

Have my projections of it I think we're going to vastly exceed those projections. So I wouldnt value. It based on my projections, which are.

What we went through with you guys in December we haven't revised those projections, there's still basically.

Same.

With that said I think we're going to blow them away and.

After a year of operating history and this is a brand new I don't look at valuation is kind of the data doors open I think its value we're going to build over the next two to three years as we stabilize this asset.

When we do.

<unk> will look at.

What stabilized value looks like but.

<unk>.

Whatever valuation or projections I had nine months ago, I think we're going to do far better.

Okay.

And then my second question is on the U S.

<unk> at least at one Vanderbilt I.

I guess based on public disclosure it came in at the high initial rent, but the.

The rent bumps are pretty modest afterwards, but I think it averaged a little bit over 1%.

Is that.

Comment between signing leases today.

When you say.

It's not common to sign leases in excess of 200, a foot the comps that would be zero.

So I don't know how common it would be too if you went out and said what is the bump.

Average on a how big was the U ipso lease rate.

I mean, how big are the rents I don't know.

<unk>, obviously I wouldn't talk about you may have related to that but you ipass was on our underwriting it's a tremendous lease its a great validation of Midtown as a destination for technology tenants, which the narrative as technology tenants don't located here that's false.

We're very.

If you want to go to the police, yes, anyone who gave you the impression that the UI path or any of the leases. We're doing here are kind of.

Underwhelm, the economics get there kind of screws.

Okay. Thank you.

Our next question comes from the line of Anthony Powell with Barclays. Your line is open.

Hi, Good afternoon question on our leasing activity has been pretty strong this year.

Look at the tenants that have been signing leases.

Have you noticed any tenants that have a permanent flexible work arrangement.

Signing the same amount of floor space or do you see those tenants.

Redesigning or maybe.

Lowering the amount that they would use on a per employee basis.

Well.

Let me just clarify your question are you asking us whether or not we see.

Tenants leasing space.

Some component of.

Flex office, where they go to a we worked out to tender or you're simply saying from a design perspective are they are they're using their space differently to be more flexible.

I was trying to ask if tenants to you know to be kind of going to a three or four.

And the office kind of.

Including arrangement.

And okay.

Are they.

Okay.

I will say broadly speaking.

When we set it up this way we have.

The greatest number of large.

Deals large term sheets being exchanged.

Pieces out that I've ever seen at one point in time being large being a 100000 square foot or larger type transactions.

In our pipeline that I've ever seen in my entire career, having said that having said that.

None of these tenants really know where their requirement is going to be a year or five.

<unk> Li now not necessarily driven simply by a work from home component.

Their head counts they have confidence that their businesses are going to remain strong.

But they're changing how they use the space they may or may not have some work from home component.

And even having said that we've seen tenants.

Years thought they were going to have a significant work from home component that have reversed that decision I've come back to us in fact, and said Hey, where I was going to give up some space I no longer want to give up that space or hey, I actually need to lease more space. So theres a lot of I think there is a lot of uncertainty.

From on the tenant side is.

That where their space requirements are going to go and not and not to suggest it's just on the downside tenants are baking into their leases as much future growth as they are protecting themselves about having flexibility on the downside.

Got it thanks for that and just one more on.

As to Max activity can you give more detail on 48, then Broadway at the deal there.

Third party contesting the rights of the feeds more details on our strategy and the overall transaction.

I mean, it's the subject of a pending litigation. So I think what we've released thus far is really all we're in a position.

On the <unk> release.

Okay. Thanks.

Our next question comes from the line of Steve <unk> with Evercore ISI. Your line is open.

Thanks, Good afternoon.

Mark I was just wondering if you could talk a little bit more about the disposition program you didn't.

<unk> tell a lot other than what you had put on your contract earlier, but you talked about a pretty big pipeline, but potentially delaying some JV and then how does that sort of tie in with the buyback program move.

Moving into fourth quarter.

Well, we say delaying some JV I think there was one in particular, just one Vanderbilt I'm just I just wanted to take issue with.

Hello.

I think what Matt talked about was one Vanderbilt.

We're not delaying it did you give the restaurant.

So we're not delaying it per se.

I think there may be a misunderstanding.

Some as to the whats going on here at this building and in summit.

The results are extraordinary and it's not a delay as much as what we're assessing like we've done in the past is for the benefit of shareholders rather than sort of go forward now without leasing up the last 9% of the building and waiting for the full year results from summit or let's call. It one to one and.

<unk>.

It would just be possibly ill advised to go forward at this time because the results of the building are outstripping, where we thought we'd be in December last year. So.

We're just sort of electively, saying if were going to sell an additional interest in the building, let's make sure we're doing it at the optimal time.

The half year as it relates to <unk> I don't think there are any other jv's debt.

Helane that's right.

Other than that in terms of.

New pipeline.

Of sales.

We have several assets that are in the market where were negotiating contracts.

Hopefully those contracts will be in the form to be executed and announced it will between now and December investor I can't make any guarantees on that.

But.

We still see a pretty healthy market and we still see a couple of deals in our business plan that we hope to knock down by by.

And Steve as it relates to use of proceeds I think I was asked this question first or second quarter, what we would do with the proceeds of incremental sales and we said, we're going to balance out debt repayment and share repurchases. So we did share repurchases $80 million worth in the third quarter and we use some proceeds to manage the leverage point, which is something that.

End of <unk>, all the time as our leverage levels. So we are balancing that out if we are able to close the transaction or two before the end of the year. We will do the same thing and look at whether it's appropriate to buy stock with that.

With those proceeds or take down leverage we've been trying to maintain that leverage neutrality and when we're at the leverage neutral level, we can buy with the incremental.

People proceeds will continue to do that.

That's the way of saying as we put more assets under contract.

Good chance, you'll see some more buybacks right.

Got it thanks, and then I don't know if Mark you are Andrew maybe just comment on the DP activity that youre seeing I know it wasn't that.

We're in a lot of paybacks and there weren't a lot of origination.

Rental pros in the quarter, but just what does that business look like today and what are your expectations moving forward.

Okay.

Well I think there is a.

Very very aggressive first mortgage market, which we'll talk about in more depth at Investor day for sure.

And that does crowd out.

Nation have higher advance rate first mortgages is less demand for mezz dollars. So it's a competitive market out there to find new origination opportunities.

<unk>.

And I also think you have less transaction activity than in a normal year.

Yes.

No.

And a lot of times originations come as a result of those transactions. So those two things combined I think it is a slower.

Sort of market out there for Mezz paper, but we're also taking a very conservative conservative approach after raising the liquidity we raised in 2000.

<unk> is not just a turnaround in fire it back out.

And we're being very selective in terms of originations.

Great. Thanks.

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

Line is now open.

Thank you.

Just thinking with the transaction market.

Can you.

Characterize where you think we stand today in terms of.

We're taking on value add Matt that it sounds like you're more optimistic about where things are heading in New York City.

Is there more capital looking now.

Can you explain.

Well I think there's a lot of capital raised and I think the most.

Notable trade that just closed probably was Blackrock cbs's headquarters at <unk> 50 <unk>.

And older.

Dated six Avenue product that has not had any capital.

Last it hasnt been a monetized and has a very aggressive.

Aggressive lease rollover schedule and that building traded for a <unk>.

Healthy per foot.

So.

Traded for $871 a foot.

There.

The amount of capital out there theres a lot of owners that are refinancing rather than selling because that is so cheap and you can go out long term at very compelling rates.

And I do think that Theres, a lot of activity sort of pending out there.

As capital comes off the sidelines and gets.

More.

There is a comfortable putting money out in New York.

Okay.

And then thinking about inflationary pressures.

Your ability to offset them can you talk about.

Or do you think we're from an operating perspective, where you are seeing the most.

Facing pressures.

How you can pass that through and then I guess at the same time thinking about.

More comparability to re brand or at least improve.

Economics, some leases like where are you.

Where do you where do you think you have the most leverage now to improve terms.

Well I think.

Rents were not there yet on kind of the commercial space.

<unk>.

It is basically fully recovered.

I think 185 Broadway, which we started leasing.

In August September, we'll wind up renting ahead of pro forma.

Residential rents are fully sort of corrected back commercial rents.

We don't have pricing power.

<unk> other than our best buildings I think everybody every landlord is holding the line I don't think theres erosion in rents by any stretch.

But in an in class a space the demand is there to to push rents a little bit.

On the expense side.

We're 93%.

Anyway, Yes, we're 93% leased and the best defense against.

Inflation is to have a well leased portfolio.

Increases in operating expenses are passed through to our tenants and a 93% were in a good spot.

I don't think we've seen ramping.

No.

Going through our projections for next year, we have to this point, we haven't seen a dramatic increase on the expense side, we will be looking at again before we give guidance in December electric rates are definitely right and.

Pass through but the other side of that is for the first time in a long time, we're seeing a little bit of a surprise benefit on the real estate tax side.

Which came in we got our builds in July and they came in below our expectation right. Now that is certainly offset any any increase on the operating expense side as it should.

Okay.

Thank you.

Our next question comes from the line of Blaine Heck with wells.

Your line is open.

Great. Thanks, Mark to follow up on some of the.

Flex space questions in the context of getting we work out of 609 fifth I guess, how are you thinking about flex space in New York portfolio going forward. It seems like Theres a place in the market for this type of space, but there are certainly.

I'll start and difficulties with the operators. So how do you think in FL Greene will offer flexible operated locations in the future if at all.

If the question is what do we think about co working as a viable sector that has could have tenancy within the building.

Certainly in our portfolio. If that's the question then I would say.

We like the co working sector, we have co working tenants.

We don't have a lot of exposure to that industry.

Without that we work, it's got to be below 3%, well below 1% to 2% to 2%.

Building.

In the scheme of the portfolio, it's kind of.

It has no significant.

Representation, but with that being said we have some very good co.

Co working business is some of whom have been around for as long as I can remember 10 20 years right Steve.

Our longer so.

<unk>.

I think the business.

Model is fine there.

Examples of where people run that business model, well, we have emerged and.

And emerge has been alive and kicking in for 20 years, and we have two or three facilities at any one point in time.

Stay relatively lease like they are now and.

They serve a role in this market. So it's not a role we focus on but I do believe there is.

An important and legitimate role that.

That co working plays.

As long as.

It's based on a found.

A sound fundamental model where.

Those tenants are renting at rents more than they can sustain or.

They don't over improve the space they improve it to a level that is sustainable and.

And that's what I've seen the better ones do and Thats, what <unk> does.

But I like the space it's just.

It's not a very it's not a it's not a <unk>.

Driver if you will within the city at this time it was maybe five.

Five years ago or so.

Three to five years ago, there was a lot more talk about that space, but I think right now it's kind of settling.

<unk> back to the mean.

Great that's helpful and then.

Congrats on the lease at one Madison seems like a great tenant to have in place to drive further interest in leasing there is there anything you guys can say about the rent Chelsea is paying and the concessions involved with that lease versus maybe what you were expecting in your pro forma and then if.

If you could give us any update on any leasing process and our progress at the office space at one Madison and that would be great.

So Chelsea lease was for them.

<unk> pro for probably a little bit more capital, but we had not anticipated.

What is being.

Built for.

Outstrips or exceeds what we had intended for this space. So it's not a fair comparison, we were looking for a little bit more of that than.

We were looking for but we had modeled more of a.

Traditional build out if you will we probably didn't have the 60 foot climbing wall and we probably.

Didn't have completed over for retail.

Full floor retail presence.

Chelsea piers wants because they want that retail presence so the configuration is different.

And the product exceeds our expectation that capital is probably a little bit higher but in.

The context of that deal.

We have massive savings.

The the excesses out of contingency there is zero issue to the budget.

During the budget is still far under and.

The use is as good as we could've ashworth.

Yeah, and now its like its our number one amenity for us too.

To market off of Chelsea piers knows that and wants us to because they want to drive business to their their place and we want to use that as an example of the best of the best kind of tenants that will be attracted to one Madison.

And want to make it their home a campus.

This is a step in that direction, we have other negotiations going with other tenants that I think are equally.

<unk> with that with that theme.

And then on the office side, we have.

Very robust tenant interest.

We've got active term sheets being exchanged.

We're not in a position to say, whether it will make any of those deals yet, but as we sit here today by comparison to where we were in the life lifecycle of the development of one Vanderbilt with.

The level of large scale tenant interest at.

Edison as much earlier to the game then it wasn't one Vanderbilt I think that speaks a lot about what we're building and the quality and location.

And the.

The desire of these large tenants to want to be an interesting healthy <unk> work environment that is hard to find on the east side of Manhattan.

One Matt.

So, we're we're pretty pumped about that but.

We don't want to we don't want to count on anything it's a little too early to the game, but.

Lots of lots of very good positive.

Term sheets being exchanged.

Great. Thanks.

Our next question comes from the line of Ronald Camden with Morgan Stanley. Your line is open.

Great two quick ones from me going back to I think the leasing question.

Year to date sort of leasing activities is above 2019, which is pretty impressive I think you provided color in.

Some of the Subsectors, whether it's financials or Tammy.

Just curious can we slightly a different way in terms of size large versus medium and small is there any sort of notable track.

Trends or differences between sort of now and sort of pre COVID-19 levels.

Yes, as I said earlier.

Tom I've never experienced.

It's a large number of large.

Prospects.

In our pipeline at any one time.

As we sit here today, we have we have a significant number of large tenants being defined as tenants above 100000 square feet.

And I think compared to prior market disruptions. It always seemed in the past it was a small tenants that sort we are the first ones to come back into the market whether it was new business is being formed or their layoffs and people went off on their own.

In this case it seems that the leasing recoveries.

Being led by the large tenants who are looking past COVID-19.

Our wanting to make long term commitments and spend the capital to reinvent their workplaces to give their employees a reason to want to be in the office.

I think thats.

A unique differentiator.

<unk>.

But.

The good news is.

Big Boys out there and there and they are serious about making commitments.

Great and then the second question was just thinking about one Madison.

Just curious was there any sort of lessons learned after executing.

<unk>, Andrew Bell, whether it's design construction or the leasing plan.

And sort of getting all these moving pieces together is there any sort of lessons learned are best practices that are applicable to one Madison is your sort of embarking on that project.

Yes, well the lessons learned definitely trends.

When needed from one project to the next because the team is almost identical.

In most respects, so thats a big bonus for us so if nothing else just the.

The communication and workflow between the myriad of.

Companies.

And consultants et cetera.

Ladies.

<unk> is as good now as ever and there is no learning curve that's great.

In terms of the development plan, there are pretty different kinds of development I think some of what we learned here is that.

Tenants.

Greatly appreciate.

Is.

I think amenity finish design thoughtfulness in a way that I think.

Is underappreciated in the market generally.

Having the sort of best of class hospitality like spaces, where you don't really cut corners.

But did the tenants kind of feel.

See it.

And they know when you have gone to 100% distance to deliver a great product and include <unk>.

Food and beverage experience.

As part of that and an outdoor experience.

And space that they can utilize.

For events.

All it in their own uses either during business hours or after sometimes.

Developers will build these spaces and they can advertise they have it but it's not spaces that tenants really want to bring their guess of hundreds to <unk> theres, not a food and beverage hospitality.

Our program to support it so putting together the human resource element, which is a great hospitality.

<unk>.

Division and personnel with really well executed food beverage with really well design space and functional thoughtful that package together, it's pretty powerful.

<unk> is a differentiator product and so we're just trying to do more of that and do it better one Madison.

Okay health healthy workplace I think is something that is borne out of one Vanderbilt, but also borne out of COVID-19. So.

We're putting extra energy.

In chart into one Madison.

To try and make it at the very top of what it can be from a health wellness and sustainability aspect the dose system that I think Steve has spoken about previously if not today.

As sort of a hallmark of that projects do you want to just.

It will be.

An effort largest spec buildings to deploy <unk> for those who don't know what it is.

<unk> has an ability to 100% circulate the outside as opposed to recirculating interior air So it <unk>.

Makes the workplace are healthier.

Healthier work environments.

And it's something that we had designed.

One of the project pre COVID-19, but it was an emphasis on using cutting edge technology to create an emphasize healthy workplace that we we saw firsthand at one Vanderbilt that the tenants put a lot of value into that so I think to me.

<unk> points.

Great architecture heavily.

<unk> weighted towards food and beverage and outdoor spaces and a healthy work in place environment. Those were all key factors that has made one vanderbilt. So so successful and why I think we're seeing such strong interest in one Madison at this point in time.

Great.

Heavily.

Last question.

Our last question comes from the line of Nick <unk> with Scotiabank. Your line is open.

Thanks, just a couple quick ones here in terms of one Vanderbilt can you just remind us just on a rough number.

What percentage or rather.

The GAAP NOI that was actually achieved in the quarter as we're thinking about the ramp that still has to happen and then also on capitalized interest can you just remind us how it is going to work with that project.

When it gets removed from construction in progress and just how to think about capitalized interest over the next year.

Sure I will get into capitalized interest more in December.

What did when I give guidance, but generically speaking the building opened.

About a year ago. So one year is your time frame after which you can't capitalize on vacant space, we can still capitalize while space. That's leased is being built out so we will ramp down as spaces coming online over the course of 2022.

December GAAP NOI for the quarter for one Vanderbilt was $9 5 million.

Sure.

Okay, great. Thanks.

Just last question is on I guess the.

The fact that leasing volume youre talking about.

Higher than expected this year the pipeline is as strong as well.

You did hit your you are going to hit your guidance on occupancy for the year, but you're still down versus pre COVID-19. So I guess any high level thoughts on the ability to get back from 93%.

Where you're at today versus 90, 596% I think you were at some point in 2019.

It's still it's still a very.

Settled market.

So we're pleased with the velocity that we've seen and we've got good tenant demand but.

It's hard to predict.

There's a lot of wood to chop still going forward.

Well, if you take a one day to Tom.

I just.

Sure and I don't know.

If people are still left off the line that I don't know how many people but.

We're comparing this environment to what it was.

<unk> 18 months ago, 612, 18 months ago, and it feels really good.

We are still at a level.

Wanted to market right now that starting from like 17, or 18% vacancy rate, which is very very high and it's going to take a lot.

To absorb that space and it will be absorbed.

But I would guess most of 'twenty two will be spent absorbing that space. The good news.

<unk> is going to be Directionally, we're going to be headed in the right direction and the deals are going to firm up and we expect our occupancy to rise.

But.

It's not flip a switch kind of thing.

The deals just don't roll out that way, we can only do so much leasing in the year and the market can only do so much leasing in the year. So.

I think we're very optimistic but I think we're also very realistic that we're going to have to be on our best game with our best product too.

Get back to the levels, we want to be back to I think I heard there was $95 I mean, we want to get back to like 97, that's where that's when the portfolio is really cooking.

Looking and that's when you have a market environment that is sub 9% vacancy market.

We're not there or anywhere close to there now so.

We will have to.

We do our best within that framework.

Hope we can.

Deliver the results in 2002 and honestly Nick in this market where rents.

They're not truly reflective of the value of the space because of the <unk>.

They can see in the market that Mark was talking about we actually I'd like to just told some space off.

And not lease it aggressively.

So that will just we.

We do want to get back to that 97%, but we're going to do it appropriately from an accounting perspective as.

Alright, I appreciate it thanks, Matt Mark everyone.

Alright.

Operator.

Last question.

There are no further questions.

Okay, we're all going back to the summit so everybody in this call.

Well see in December at the event.

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