Q4 2022 SL Green Realty Corp Earnings Call
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
[music].
Thank you everybody for joining us and welcome to SL Green Realty Corp, fourth quarter 2022 earnings results Conference call.
This conference call is being recorded.
At this time the company would like to remind listeners that during the call management may make forward looking statements.
Should not rely on forward looking statements as predictions of future events actual 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 are based on assumptions and beliefs as of today.
Additional information regarding the risks uncertainties and other factors that could cause such differences to appear are set forth in the risk factors and M. DNA sections of the company's latest Form 10-K and other subsequent reports filed by the company with the Securities and Exchange Commission.
Also during today's conference call. The company May discuss non-GAAP financial measures as defined by regulation G. Under the Securities Act.
The GAAP financial measure most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on both the company's website at www Dot ESCO Green Dot com by selecting the press release regarding the.
Company's fourth quarter 2020 to earnings and in our supplemental information included in our current report on form 8-K relating to our company's fourth quarter 2022 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 to please limit your questions to two per person.
I will now turn the call over to Marc Holliday. Please go ahead Mark.
Okay. Thank you and good afternoon, everyone.
We appreciate you joining us today normally our January earnings calls or briefs coming only seven weeks after our annual Investor Conference, which we held back on December 5th we had a great conference on that day with attendance at capacity.
One Vanderbilt and we received a lot of positive feedback after the presentation not surprisingly during the conference we set out for ourselves a characteristically robust agenda for.
For 2023, which included business plan aspirational goals.
I think there were 18 or 20, some of which included one 7 million square feet of leasing over $2 billion of asset sales and joint ventures significant debt reduction and completion of several important development projects that we expect.
To deliver timely and on or under budget this year.
Notable among them is one Madison Avenue, which we actually topped out ahead of schedule in just one week after our Investor Conference There was a pretty amazing day.
We're over 700 people gathered to witness the event of the laying of the last piece of steel on this truly great project in the Midtown South Submarket, marking a turning point for the project, where we now see a completion and site and the timing of that.
Topping out was truly perfect.
As it gave us the ability to stand on that 18000 square foot penthouse floor with 18 foot slab heights, and unobstructed views of Midtown and downtown and standing there you can truly understand why our new tenant that has just joined the roster of tenants to the.
<unk>, one Madison Avenue.
Our rent roll is 777 partners. They were attracted to the opportunity and we were able to lease it up.
Over one year ahead of our underwriting.
Just stressing the importance of not only hitting our underwritten economics, but also exceeding the timing has a big positive effect on the project and we hope theres more to come.
This lease along with the others, we announced last night underscores the early leasing achievements. We had in January which is typically a slow month, but for us turned out to be a pretty good month and a good start to the year hopefully it pretends a increased activity to come in 2023 after a long holiday break.
<unk> followed by the MLK holiday weekend, we've seen a noticeable pickup in tour activity over the last 10 days and we received around a fresh new proposals. So we're optimistic we're getting stuff done.
And where we're on plan most importantly.
So on the heels of signing over 370000 square feet of office leases since our Investor Conference at the beginning of December we managed to assemble a pipeline of leases totaling 700000 square feet, where it stands today 100000 square feet of which we hope to sign over the.
Next 60 days.
We'll be moving and hustling to try and get that done. We're currently negotiating leases at $4 50 Park Avenue 919 third 45, Lex 13, 50 Avenue, the Americas and another lease at one Madison. In addition, we are just beginning to market our redevelopment project for <unk>.
45 Park Avenue, we spent quite a bit of time.
Showing off that amazing redevelopment plan that we have for $2 45 Park and we are beginning to execute this year.
And the early read from the broker community is that this.
Exciting and I think very elegant plan that we have for the asset is going to be very well received by the tenant market and there seems to be much interest already that we're generating as we are beginning to take these meetings and we're also generating interest among foreign investors for JV investment.
Recall that identifying one or more JV partners for $2 45 Park is one of the several capital markets goals, we have for the year and for a little bit more color on that I'm going to turn it over to Andrew Mathias.
Thanks Mark.
There are there is still a standoff between buyers and sellers in the market, but we definitely see.
As financing hopefully returns and as five and 10 year fixed rate financing.
The MBS market reopens, which.
We and all the rest of our market participants who are anxiously awaiting we.
We think we will see that that standoff saw a bit we've been actively in discussions with investors from around the world are.
We were in the middle East several months ago, we have a trip plan to Asia on March the team was present at the Crafts The conference in Miami.
Earlier, this month talking about financing trends.
And we think there's still a lot of interest in Prime New York City assets, particularly Park Avenue, which is a.
No secret that it's the best Submarket in New York City.
Yes.
We think we'll we'll have a lot of Willy.
Willing conversations this year.
All different types of investors from around the world are talking about $2 45, and the other aggressive capital goals that we set out for us at the Investor Conference.
Great so more to come on that.
Throughout the first half of the year, we'll keep you guys updated.
As we pursue our.
Our various goes for <unk>.
Recapitalizations Refinancings joint ventures sales.
We are full full guns, a blazing right now here at at Green and working very hard and diligently to set the seeds so that by the middle of the year.
We can hopefully start to.
Achieve and knock off some of these goals and continue on our path to what we think will be a pivot year for us in 2023 coming out of.
The markets, we've experienced over the past couple of years and hope to see some more positive news seeping into the market throughout the year.
I did want to leave I'd say, the best for the and before opening up the call to questions.
Yesterday as I Trust, you may have heard or read it marks an incredible milestone moment for East Midtown New York City, and long island with the official opening of the long awaited Grand Central Madison station.
Underneath Grand Central terminal and one Vanderbilt representing the culmination of the $11 billion East side access project.
It is a watershed moment I think it's probably the most important and.
And largest project the MTS completed in many many decades and with its Grand opening you now have direct service from long island to Grand Central. It's finally become a reality after being I think in conception for 60 years and in development for 'twenty.
And it opens up a direct seamless trip from.
Long Island, which is a 1.4 million person workforce.
That now can look to either of Grand central or Penn station as its primary destination and.
Choose its most efficient destination. The MTA is estimating that 45% nearly half of all long Island railroad commuters will.
Our expected and will eventually commute.
Commute direct to Grand Central once full service is up and running this year instead of.
What is currently all to Penn station and that translates into a 160000 people a day and these commuters are essentially arriving literally right at our front door, where the majority of our portfolio is located.
Can't stress enough the importance of the projected 40 minutes per day or nearly three and a half hours per week of saved commutation time that.
That the business community puts a short easy safe and pleasant commute as its top requirement now coming out of post pandemic.
World and as a tool for encouraging employees to work from office. So yesterday, we celebrated with the governor and the MTA sure Jenna Lieber. The opening of this incredible terminal that spans over 700000 square feet from I'd say approximately 42nd Street.
The 48th Street.
On what must be 1233 different levels dedicated waiting areas, a beautiful new retail stores.
We'll be opening and the restaurants.
And a host of other amenities and its all well done well executed well designed.
Well conceived and I would urge anybody that hasn't yet taken the time to swing by and check it out that they do so.
Because it's pretty inspiring to see.
What can be done.
After all the time and after all the money is spent.
Look at the permanent good that will come of it before the decades.
Perhaps centuries to come the terminal contains eight tracks and four platforms, which will be in service and enable long Island railroad to increase its service from long island to Manhattan by nearly 50%.
Of capacity and one Vanderbilt in east Midtown Rezoning was really.
Our first step towards unlocking the pent up demand for new and Redeveloped office space in and around Grand Central and now Grand Central Madison will further transform and revitalize what I think is.
Undisputable, New York city's number one business district.
And we're excited by it.
As shareholders or stakeholders are followers of the company you should be excited by two in my opinion.
And.
It's a great way to start the year, so with that we'll open it up for questions.
Yes.
Ladies and gentlemen, if you have a question or comment at this time. Please press star one one on your telephone keypad, if you wish to remove yourself from the queue or if you ask questions had been answered you May press star one one again again to ask a question. It is star one why again, we ask that you. Please limit yourself to two questions.
Our first question or comment comes from the line of Alexander Goldfarb from Piper Sandler Mr.
Mr. Goldfarb Your line is now open.
Thanks, Good afternoon.
And obviously, it's great to see east side access finally finally open.
That's awesome to say.
Yes, just.
Clearly that's a positive for the grand central market and leasing, but bigger picture, especially since you guys put out your Investor Day, I think it was one 7 million square feet target for this year.
Layoffs have accelerated granted it's a lot out west and not everything is in New York, but it's still pressure obviously wall Street has had a tough year. We're reading all the headlines. So yes. The state of the leasing market do you guys feel the same that you felt back in December is it slipping are there signs that tenants are taking EBIT.
Longer or Mark your comments about people resuming activity post MLK day means that the leasing activity is sort of divorced from what we're reading in the broker reports in the headlines.
Well.
Yes.
So a lot to go.
And that question, but let me start first with the.
Reference to the tech layoffs.
I think.
The notion of what you may have termed sizable or significant layoffs.
Layoffs I'm not sure I would characterize it that way in terms of the ultimate impact and effect. It will have a new York City.
These are firms that had been on a.
And insatiable growth stage for many years Tech was probably the biggest grower in New York City.
Over the past five or six years.
And went from being a relatively small component of the market is being <unk> by 25% of the market.
Okay.
So clicking.
Alex is titled Alice.
With <unk> I'll start I'll start it.
The office and obviously one of our guys.
Wanted us back in the office and this is what you got.
So.
There's been massive growth Steve correct me, it's yes, they may be as much as 30% 35% of the total market certainly they were 30% 35% of the incremental demand.
And now.
They are pausing.
And becoming a little bit more efficient as a company.
Companies do at the peak of a cycle and.
New York City large employers are required to give warn notices wri and.
Yes.
Even though there are these advertised or announced I should say announced.
Lay offs from some of these firms they represent a fairly modest amount of the overall scope of the companies I think probably on average close to about 5%.
Many of the markets. These companies are targeting for retention.
That I've heard New York is always among that group of companies I think there are other parts of the country that will feel it more the award notices.
We have not been.
That's significant from the tech sector so far.
Which would have to reside and be received by the city. So there is no indication yet of any mass layoffs. When you look at the job numbers for 2022.
And these are the most current numbers we have.
Through December so pretty pretty current.
There were 209000 jobs added in New York City year over year and recall 2021 was also a big job growth year I'll see if I can get that number that was 270000 jobs. So 270000 in 2021.
209000 in 2022 office using jobs.
63000 jobs added that is the second most.
Office using job count ever added with the first one being back in 2021 83000, but in a normal year. The city grows by about 2000 25000 office using jobs.
And last year was triple that number now the growth is decelerating.
As office using jobs now have eclipsed pre pandemic levels I've mentioned that before that the office using job count is about 106% of pre pandemic and total jobs or about 90% of pre pandemic.
And the city is forecast for the year and we've always found the <unk> forecast will be pretty spot on is only for very modest job losses in the first half of the year I want to say somewhere in the order of 10 or 15000.
Job losses in the first half of the year with about 5000 of that made back up in the second half of the year.
No.
I think our approach in terms of what we're expecting and let Steve speak a little bit more about what he's seeing in the real.
Is that.
You know.
Certain sectors are belt tightening certain other sectors continue to expand.
I think all businesses are still figuring.
They're way as to how theyre going to be navigating and.
And dealing with work from office first remote work and encouraging workers. So that we get above this 50%, 60% utilization rate back to 70% to 80%, which would be in our opinion full utilization.
But the market is not setting up to be in our mind.
Any measure of a major pullback in jobs or economic activity based on what we see Steve you want to address specifically some of Alex yes.
I'll make a couple of points.
One is with regards to technology guys I think it's it's.
Important to recall that it's not like.
Decades past, where we had the tech wreck.
The dot com boom, where all those businesses went bust.
Is that are there have announced layoffs. These are mature technology businesses. So they are their businesses.
We saw obligations that they have those are secure rent payments. So it may not be adding bodies and theyre driving therefore, driving additional leasing velocity, but.
It is still a very significant part of the overall, New York City economy, which is the most diversified.
Business.
Economy of the United States right now, it's not like the West Coast, which is a one trick.
Pony.
Secondly is that.
What we're seeing generally from a leasing velocity standpoint, we saw you referenced some of the brokers reports that you read.
And if you really get granular on those reports.
October and November were the weakest parts of the fourth quarter December showed.
A notable amount of leasing increase.
Even though the overall quarter was was down.
There was a sort of a starting to repair itself in December and as you see from the announcement, we made yesterday.
We obviously had some significant transactions that we're working on that ended up closing in the first couple of weeks of January and as Mark referenced earlier.
Even with all of that early days success on leasing of over 340000 square feet. In the first couple of weeks, we still have a very robust pipeline of about 700000 square feet.
In that are several technology businesses, but also like we saw all of last year heavily weighted towards the fire sector.
So between fire Tech and in legal those continues to be to be drivers and I will make last point, which is we continue to see sort of that smaller part of the market still coming back to life. We've got nine leases out at the Graybar building, which has always been a good barometer for me to show, where the small space market is and Thats, an important part of our own.
<unk>.
We're seeing success for the year alright.
So that was.
That was the entire market recap right there.
That's why we questions Alex we're going after.
Have a good it sounds good.
We're going to move on but thanks for the question hopefully that addresses some of the issues you inquired about.
Thank you. Our next question or comment comes from the line of Tom Catherwood from <unk> T. I G. Mr. Catherine Your line is open.
Excellent thanks, everyone.
Maybe just sticking with leasing for a bit.
Steve you mentioned that broker reports and pick up in December but the broker ports also noted what seemed to be a <unk>.
A reacceleration in tenant concessions, but I know that can be swayed by a handful of leases, especially when overall volume is down. So what are you seeing on the ground as far as concession trends and how are those trends impacting your portfolio specifically.
You know what.
I don't really see it I mean, it's I think it's been fairly stable throughout all of last year I think it depends on where.
Where the where the leases are being signed there is no doubt about it when you. When you have two thirds of the leasing activity being done in the class a market. So it's the highest part of the rent spectrum and therefore, you would expect.
Also has the greatest amount of concessions to support those high rents.
It starts to skew the statistics, because when you get so many triple digit rents you expect a bigger concession package visa.
Deals in the $60 rents.
If you took the 340000 square feet that we signed in the first several weeks of January .
Our weighted average we had $43 a foot in Ti and five months of free rent now granted some of those are renewals that are five year deals.
A combination of.
That was some other deals that are 10 or 15 year deals, but I think that number would have been pretty much in line with the kind of concessions that we would've reported all of last year. So I don't.
I really don't sense that there's a movement.
That's negative.
Okay I appreciate that color and then maybe Steve or Mark I can't remember, who touched on this last quarter, but.
For 245 Park.
You had over.
Over 1 million square feet of leases that expired in <unk>, but as you mentioned in <unk>.
The majority of those had sublet tenants already in place.
So it looks at the actual roll down was just a hair over 130000 square feet for the quarter.
Are those tenants.
Are they all now direct with you and if so what is the magnitude of the rent and expense reset going forward.
Well, there's a couple of different moving parts there I think what we had.
Probably referred to as we had.
A pretty large lease with major league baseball that was.
Where that had moved out of the building several years ago relocated over the six Avenue and then they had back filled or weird backfill.
The majority of that.
Six floor seven floors whenever they had.
With some short term some are long term, but most of them were short term direct deals.
So those those leases will burn off in the next year or three.
With regards to your the rent reset I don't know if maybe you can weigh in on that.
No.
Steve made the point on the rents.
The rents that were.
That we took on the shorter duration deals, they're not really market rent. So we'll be resetting those rents to market as we re tenanted space.
Temporary tenants so to speak.
We'll use it as an opportunity just to sort of.
Reinforcement market said earlier, we're out there in a big way now with a very well established the development plan and a very strong marketing our presentation for the building and that is already paying dividends as we are already receiving proposals that we think have a very credible chance of.
Of converting over to leases of.
Significant size, which stood about how much space is going to be marketed and what that rental ranges Heidelberg well. We have we have between now over the next.
30 months 36 months about 800000 square feet in the building that rolls the majority of that space is in the mid to top portions of the building.
Rents.
In the building are call it roughly a 110 to $140 a foot.
And the proposals that we're that we have received in the conversations that we're entertaining with tenants.
Those rents are in those tenant expectations are in line with our underwritten rents.
Okay.
Got it I appreciate the answers thanks, everyone.
Okay.
Our next question or comment comes from the line of John Kim from BMO capital markets. Mr. Kim Your line is now open.
Yes.
On the Cvs renewal it looks like they downsize by about 40% from the space that they had and if that's the case, it's quite different from the Fox and Newscorp.
Renewals, which I think was all the space that they had at 12, 7% added Americas.
Is your anticipation that CBS .
Is taking space elsewhere in New York or they can truly downsizing their space requirements.
Downsize the majority of the people that are there.
Sort of an independent group of operating units are separate and distinct from the groups that are over 15, 15 Broadway where are they.
Occupy the entire building so no I think I don't.
Our conversations with them if not suggested that they're on an active program to downsize as we sit here today.
But it's like a lot of these big firms are all trying to figure out.
Their long term plan as a result of hybrid work environments and work from home and things like that but even though there are big they are a big advocate of bring everybody back to the office.
Okay, and then on page 39 of your stock.
A notable change in your mark to market or the implied mark to market of the lease is expiring in 2023 versus the asking rent and in turn.
Positive on your wholly owned asset last quarter it was negative.
It looks like it's the same amount of square feet of putting similar I'm wondering what that change was.
To get to that positive mark to market.
It's actually a function John its Matt that's actually a function of the leases. We were just talking about at 245 Park, where the large tenants.
Rent rolled off so.
<unk> spent rent rolled off which was a market rent and it rolls down to what the rent that the old subtenant current short term direct tenant is paying.
And then those <unk>.
Short term.
New small direct tenants.
Rents will flow through the exploration years in whatever year, those leases expire and the mark to market is based on.
Those lower rents as compared to the previous market rats, none of the changes as a result of our.
Our view of a change in market rents its simply a function of a change in the.
Starting rent that is based on expiring.
Expiring okay.
Thanks, a lot.
Thank you.
Our next question or comment comes from the line of Michael Lewis from Truest. Mr. Lewis. Your line is now open.
Our next question is from Mr. Michael Griffin from Citi. Mr. Griffin Your line is open.
Great. Thanks, Marc in your conversations with business leaders I'm. Just curious you talk about getting that utilization rates back to that 70% to 80%, but I think the worry is are we stuck in this kind of impaired level of call. It the low to mid fifties I guess as we look forward to the balance of this year I mean, how confident are you that.
That these firms can get their people back in and and is it possible to get back to that previous high watermark.
I think there is.
I think theres a lot of confidence around three or four days a week I think the bigger question is.
As is Friday, becoming more and more like a like a remote work day for now.
Many but not all firms.
And that doesn't really impact the space decision. That's just more of a business philosophy decision when people arent going to I don't think take more or less space based on how they gear their fridays.
I mean.
We look at Friday, it's like an equally productive day to the rest of the week I think a lot of firms do but.
I think that's the that's the one areas to me I'm not so sure about but I think for the balance of the week. We just feel like every week as more and more energy emphasis lobbies more crowded trades or more crowded streets in more crowded or retailers are small and bigger reporting better better better results.
No.
It feels like that.
As.
I think the job market.
Normalizes was very very tight market for the last several years I think that's going to start to reverse itself although.
Inflation is still labor wage inflation still stubbornly higher than where I.
I think where the fed would like to see it but I do think that will moderate I think that will be this year I think we'll get incrementally more gains whether we get all the way back to pre pandemic or not don't know, but I also don't think that's a determinant.
The ultimate space occupied I think that's just going to be.
Business by business, how they evaluate competitive factors about.
How we can optimize there.
There are their work plans.
With what type of.
Hybrid work model, but.
We find more and more the.
Meeting or alive.
Very little Zoom these days relative to certainly the past couple of years.
It's just part of it's the numbers part of it is anecdotal and part of it is speaking to the leaders I would say across the board every leader.
They want to be on a three to four day in the office work week for the majority of their companies and I think Friday will sort of just be a case by case.
Great. Thanks, and then Matt on the debt maturities I noticed that some on the unconsolidated joint ventures were passed their due date I think you did a good job at the Investor day kind of laying out that but some of this might be outside of Greens control, but do you have any sense on a potential resolution or how these things ultimately get worked out.
Yes, so you're talking about $50 52, Broadway and rise 34th Street, Yes, Youre right I mean, we don't.
Laterally control those things, we get out of or ahead of our maturities.
The wholly owned ones and the ones that we control well ahead of maturity.
We are in active discussions with the borrowers on <unk>.
Likely some form of extension.
Good short term extensions to get pushed the maturity dates pushed out 30, 60 90 days.
Just as a path to getting to something longer duration done and thats in process.
I think lenders are going to have to work with borrowers at this time.
It's somewhat in our partners' hands and it somewhat in the lenders' hands.
No. That's that's great color that's it for me thanks for the time.
Thanks.
Thank you. Our next question now comes from the line of Mr. Michael Lewis from Truest. Mr. Lewis. Your line is now open.
Yes.
So I saw the <unk> yesterday, when I was on my way to Metro Dark China. It was actually kind of shop. So you beat me to it because I was going to ask about that I guess.
I never thought it would open either so congratulations on that.
My first question.
I wanted to ask about an update on the property.
This year so.
Andrew mentioned, a standoff in the market and you gave some color, but maybe you could just add to that is that a question of waiting on financing financing market are.
Are there very different opinion the price.
And then also have you given any guidance.
In terms of expected transaction timing, particularly for the interest in 245 Park and one Vanderbilt.
Okay.
No change in guidance on timing from December .
I think.
Just looking at the curve you have short rates at four and a half.
Long rates of three and a half so.
Naturally buyers want to borrow along and the providers of long debt right now are being very cautious about the deals that they choose and bond buyers are sort of slowly coming back to the <unk> market. So.
When you see that long market materialize and start to get more liquid on the debt side Youll see buyers reemerge for assets.
It's not it's less a matter of.
There's a big gap in the price people will pay because.
Sellers arent really entertaining offers until they know they can get realistic and they don't want it they don't want to sell at a time when there is there's a real lack of financing available. So I think you're just going to have to see the long financing come back and then we'll see where the market settles.
Okay.
Okay, Great and then.
Second for me a question about the the financial leverage and how you looked at that.
You fixed a lot of your debt now.
And I'm wondering if that makes it does it become less of a priority to kind of delever to the extent you want to and does it change at all how you consider other uses for disposition proceeds relative to stock buybacks or other investments or other uses.
For 2023, the answer simply is no.
The fixing of that was something that we very carefully choreographed.
Middle to later half of last year, and the timing of the debt.
Debt that we fixed it coincides with our expected timing of asset sales dispositions debt and other funding sources that allowed that debt to get repaid.
So what we laid out in December was a plan to reduce debt by two 4% to $5 billion through dispositions in excess of $2 billion and other sources of capital like the funding from our partners at one Madison.
The extent any of that debt that we are repaying.
Is floating and we have swapped to fixed we put swaps in place that coincide with our expected repayment timing so it all lines up.
Fixing of the debt and the repayment schedule.
With what we said in December .
Okay got it thank you.
Thank you.
Our next question or comment comes from the line of Anthony pay alone from J P. Morgan Mr. Pay alone. Your line is now open.
Hi, Thank you can you hear me, yes, I can.
Sure Tony I mean, that's that's a unique asset because we have fixed rate financing there thats very much.
In the money, if you will very attractive fixed rate financing.
And.
We're expecting.
Our range of returns there.
Low teens type Levered IRR.
And I think that that type of return is a very attractive relative return for an asset of that quality without.
With in place financing in place.
As part of the reason we're confident.
We got a goodbye.
The resolution if you will we took it over at an attractive price and we're confident we'll be able to find partners to come into the equity there with us.
Got it Okay and then just one quick one I guess for Matt on one Vanderbilt can you.
Give us the fourth quarter cash and GAAP NOI contribution is to try to think about where that was relative to the kind of stabilized level, you're getting too sure.
Four.
Sparing the one second like when you're as detailed questions. Tony makes me look for stuff quickly.
GAAP, our share about $27 million cash 16, thats our share fourth quarter.
Great. Thank you.
Thank you.
Our next question or comment comes from the line of Ronald Camden from Morgan Stanley Mr. Camden. Your line is now open.
Hey, just going back to the transaction markets.
Number one just don't one vandy just any update there on the 10% JV.
Prospects as well as sort of a $2 billion plus planned for this year, just what's being marketed what the interest like.
Any color there would be helpful.
One Vanderbilt no update from December it's still a goal of this year to get that interest.
Bold and.
We're hopeful to make it happen.
The second part of the question I did not hear you.
To repeat the second question, yes, just the $2 billion.
Dispositions for this year.
I mean, I think summit already been marketed.
The process of being marketed just where are we in that process.
Kind of interest are you seeing there.
The biggest component of that is $2 45, which I think we've covered at length. So far seven days and seven days in the market or is I mean, it's.
121 Green went to contract we announced it in the release last night, that's a component of it and we have a couple more assets that are out to market or will be shortly so I think as Andrew said in his commentary earlier, we're trying to make a lot of headway on that plan in the first half of the year and where.
Sure.
<unk>.
Admirable job on plan with that strategy, Yeah, I would just there was some comment about has been in the more I mean it has been in the market. This is these are all pretty fresh initiatives.
Some of which we haven't begun yet I mean, we give a plan in December that covers.
$12 five month period, there are certain <unk>.
Disposition plans that we'll be bringing to market spring and by by summer.
There are some as Andrew mentioned, we are currently underway with.
All of which are pretty fresh all of which.
We've reiterated a couple of times on the call, where we are standing by the guidance.
No.
Not it's not an easy market is never an easy market easier to buy and sell but.
We're pretty good sellers I think we've demonstrated over 25 years as a public company the.
The ability to monetize more assets.
Then certainly anybody else in our market here in New York.
I think.
Think quite a bit even measured on a on a larger basis. So.
We own and we have ownership interest currently and I think about.
46 million square feet.
We've owned.
And monetized.
<unk> since day, one on 124 million square feet. So we've.
We monitor monetize the repatriated far more than we have today.
We have a business plan on these I think its about five assets for sale or JV.
We feel pretty good about markets.
Markets, maybe not as good as it was but it's we wouldn't characterize it.
As a bad market either there is pockets of equity as opportunities for that were marketing very very good positions. We think we'll get good pricing.
That's where we are now and will be more updates to come as I mentioned in the opener.
My narrative.
By roughly mid year.
Great.
Then just my second one was just earlier in the month that <unk>.
Gaming Board released a request for applications.
There was no artificial deadlines I think that is the first rounds of questions. Due February 3rd just sort of wondering from that release.
Do you plan on asking questions was there anything surprising not surprising just just whats the update on the on the plan for the casino.
Well I mean, we are.
We've got a robust team.
And growing daily on this for this casino project both.
Our <unk>.
Investor team strategic team.
<unk> supporters coalition members.
We're all over this thing I mean this is this is a real priority for us we're leaning into it.
Very hard for me to put our best foot forward here to make it happen because.
We feel it's great for.
Times Square, we feel it's great for New York City and Manhattan, We.
I think it's good for this company.
We think it's good for the state.
<unk>.
Gaming when executed at a high level.
Our targeted boutique level.
Sure.
It's really an integration of gaming entertainment hospitality.
Yes.
Live entertainment and not solely focused around.
The casino element itself.
I think it's something that.
When it's done that way it's incredibly good.
For the immediately surrounding areas is a big Halo effect.
That can come for it.
If the facility is built as an integration to its neighborhood and not as kind of like a moated destination, where people go and they don't leave until until they're done. So we have a project that's the exact opposite of that.
Something that really is a bid.
On behalf of all times square businesses, and an area that I think hasnt fully recovered from pandemic that can use to help even though every day.
Getting better and better.
This would be a significant investment of capital.
And a part of town that is one of New York city's treasures.
Times square is the crossroads of the world.
It does have 60 million tourists and visitors a year. It has 350 or 60000 people a day coursing through it both visitors and locals and it should be.
Great calling card to the city as well other parts and.
And we think this project will help.
Continue to directed in that in that.
Direction.
And where.
We're going through the RFA in.
There is no no surprises to date, where we're going to be responsive where.
Going to be competitive.
And hopefully at the end will be victorious.
Bob.
Thank you.
Yes.
Thank you.
Our next question or comment comes from the line of Steve <unk> from Evercore ISI. Your line is open.
<unk> had been asked I just had one quick question on the ground lease at 625 Madison I know the reset date came and went and I'm. Just wondering if you could provide any update on the timing or how those conversations are going.
Right.
We're currently in an arbitration process to determine that rents.
As leaseholder.
And.
With respect to the rest Unfortunately, as we've said on prior calls there is a lot of controversy in litigation surrounding that asset.
And we're not really able to comment further.
Yes.
I can appreciate you can't give a lot of detail, but I guess would it be your expectation that that gets resolved sometime in 'twenty, three or is that too difficult and handicap that kind of timing.
You would expect the rent on the lease hold to be resolved in 2023, yes.
Okay, great. Thanks, that's it for me.
Thank you.
Our next question or comment comes from the line of Camille Bonnell from Bank of America as Bonnie Your line is now open.
And then just follow up on the capital structure and strategy behind it.
Do you see any difference in the longer term leverage levels between your consolidated and JV portfolios.
So our view of leverage is first one of LTV not debt to EBITDA, because thats, how real estate leverages measured.
And we look at it obviously at a corporate level.
<unk> rolled up combined basis.
And are comfortable where we are.
We're a little higher than typical right now because of some asset acquisitions, we did and so thats part of the reason we're targeting debt repayment over the course of this year, but where we were prior to that and where it would be at the end of this year based on the plan. We have in place we are completely comfortable with as it relates to consolidated unconsolidated we tend to have as we move more into this asset management model.
More unconsolidated jv's than we have in the past I'm sure it'll continue to move that way.
That leverage level.
It will be taken on a case by case basis based on the asset that the JV investment and then rolled up through the company to make sure that we maintain a prudent amount of leverage as a company. So where it sits is not necessarily something were as focused on is the overall leverage profile.
Okay.
Just taking another angle on the transaction market more and more of our conversations with brokers seem to indicate that we wont see pricing discovery over the next 12 months can you update us on how you think about this in the context of opportunistic investments and how much of your pipeline is based on distressed opportunities.
Well, we hope to have price discovery on five of our assets certainly within 12 months.
So thats doesn't dictate the market, but certainly.
Is sufficient for us.
We definitely pride ourselves on having a good pulse on.
Our pricing is I would not call. This a market where pricing is undiscovered well I mean, we've seen those markets I don't think thats. This market this market.
I think there will be trades done this year certainly.
We anticipate doing trades.
You have to have.
Bring a realism to the table is too.
Current values and I think.
We're good about that because we we constantly are refreshing our internal NAV.
Throughout the year asset by asset lease by lease.
Making adjustments for market factors like growth in cap rates and required returns et cetera. So.
I think there there will be.
It's like a tale of two cities there'll be a normalized market for better sponsors and better assets.
Like we have which I think is.
Largely retained their values and I think for which there.
<unk> will be a market and then theres going to be.
Property is that either have.
Less solid sponsorship.
For capital stacks that are.
Far too over leveraged.
Or.
Sponsorship that doesn't have the liquidity and capacity to muscle through redevelopment or amended ties or re tenant in their buildings and those properties.
We'll fall into an opportunistic bucket that in the second half of this year.
Would think you might see us start to poke our heads up again I did mention that in December that we definitely have our own capital resources, we have access to third party capital resources that could make us.
Quizzing, Dave or re entering the.
The investment market Opportunistically, probably in the second half of this year.
And there'll be some opportunities but.
For all the people we anticipate in terms of.
But you know kind of.
Distress, there might be in the market or otherwise like that.
It rarely evidences itself. These days in New York City in specifically in Manhattan because.
Again, you've got like the top 10, or 12 owners controlling 50 or 55% of the inventory in the market and these companies tend to be.
Best.
Liquid and capable of.
Weathering through this market already we're starting to see the rate rise.
A moderate we've seen the long end actually come in quite a bit over 50 basis points from its peak.
I think as.
Andrew mentioned when the long term financing market comes back and it will then youre going to see that liquidity spigot back on.
And on we go so we think this is more of a mini correction. We don't think this is.
Something else that maybe some of the brokers are implying but we'll see how the year goes and right now.
Where we're still.
Sticking with our plan and we feel we can execute it.
Thank you.
Thank you. Our next question or comment comes from the line of Derek Johnston from Deutsche Bank. Your line is open.
Hi, everyone. Thank you.
As the <unk> balance decreases in loans mature are repaid.
This quarter was $57 million or how do you plan to put that capital to work can you just remind us are there any restrictions how that how those repayments or capital can be deployed and then just an update on the DPA strategy I think we have the 23 strategy for the near term, but what are the thoughts.
For the midterm.
Yes.
So.
As it relates to use of capital upon repayment, we have no restrictions.
Total of $7 million was alone the Fisher right that was $57 million was repaid we anticipated the repayment to come in 2003. It came in late in 'twenty, two and we simply pay down debt with it which is what we've been doing all along with share repurchases with a lot of the repayments and sales proceeds that we've gotten off the DP book for the last couple of years, but we don't have any.
Specific restrictions as to how we use those proceeds.
Treat the DP book is sort of a closed system, where money is to get redeployed into GP. Those dollars are fungible and can go towards debt repayment, our investment in assets our investment into new assets.
We look at evaluate all the investment opportunities across all our business lines and try to figure out where the best risk reward is and will allocate dollars there.
Okay.
Okay. Thanks got it and then maybe a final one if you will.
Good.
What gives you guys confidence that the.
The casino license that.
Your U R.
Times Square project is superior and what kind of stands makes it stand out versus the others and now even a potential pan desk correct.
Application being submitted thanks guys.
Well.
Not speaking about other locations just speaking strictly bad times square.
And I don't know if the question is rhetorical or not but I cannot think of a better location.
In the United States for a high end gaming.
Entertainment.
Five star hospitality.
Hotel with.
Live Entertainment sports betting.
Our restaurants.
And.
Outdoor space with which to be able to.
Integrate into the surroundings of what goes on in times square on New year's Eve and otherwise than in times square I just.
It's certainly in New York State and certainly in New York City. It couldn't conceive a better location I think its a district.
That was actually conceived and its use group 12 large format entertainment.
With the theater overlay with the.
The mandate of.
Having.
Exciting signage and technology and entertainment uses I mean, those are all celebrated within this time square district and celebrated fairly uniquely.
In the city.
And.
When you take.
That.
Very commercial district.
<unk>.
And then you layer on top of that unprecedented access to public transportation with 11 subway lines that <unk>.
Service.
Times square a block from the Port authority, which is about to go through its own redevelopment.
Equidistant between Grand Central.
Penn station, obviously, new grid grid Grand Central Madison put a plug in for that.
And you think about.
A facility that's going to be drawing.
Millions and millions of visitors and yet, making the least impact.
Because of the ability to maximize usage of public transit relative to almost any other location that that might be.
That might be vying for this word you put put those two things together the incredible nature of the district.
The.
The compelling nature for attracting not only domestic tourism, but foreign tourism that will come to New York to Gamble at a times square casino.
I think it just puts it at that at sort of the top of the chart. That's not to say there aren't other viable sites just at the end of the day, it's going to come down to an analysis about economics job creation incremental tourism creation least disruption to the surround.
<unk> grid recall 15, 15 Broadway is an existing building. It exists. It's built it doesn't have to be developed it doesn't it's not going to displace.
Anything in its place it won't.
<unk>.
Come at the expense of housing or parks or schools or anything of of those lines. It's a commercial building. It exists. So I'm pretty excited that we just have the good fortune to happen to have a site there.
That is a viable candidate for this.
Casino licensing, it's going to be very competitive.
There's going to be lots of proposals I imagine and.
There'll be some some real competition, which is which is what New York City is all about.
And there's three licenses on the table, hopefully SL green and Caesars and Roc nation will come away with one of them.
Yes, it'd be great partners.
Thank you Mark.
Okay.
Thank you. Our next question or comment comes from the line of Blaine Heck from Wells Fargo. Your line is open.
Times here in the Q&A you've commented about how businesses are still navigating how theyre going to deal with in office versus the remote work are you seeing any signs that tenants are looking at hotels as a way for you to more efficiently use their office space and I guess do you think the selling strategy could be more widespread.
Brett in a more of a hybrid environment.
This is equivalent.
The second part again.
Just to repeat it do you think the hotel strategy is going to be more widespread given that we're in or is it more of a hybrid environment hotels has been around for a long long time. So the concept of shared this hotbed for telling it's decades.
Is there more of it now than there was.
Was a trend in that direction, leading up to the pandemic.
Then I think there was a trend away from that immediately post pandemic.
Where it was almost like forbidden because everybody I.
I mean remember it wasn't too long ago, where.
There was like plexiglass up between cubicles and cubicles were being separated.
Bye bye.
There were depopulated floors. So so we've we passed all of that and I think we're now trending back to.
The way people thought about it.
Initially hotel in.
As in.
<unk> always had.
Role I think in New York office, whether it's more or less prevalent now I can't really say, maybe Steve you can but I don't I mean, not that I'm aware of but.
I'd say, it's more than it was maybe coming right out of pandemic, but I can't say, it's more than it was in the years, leading up to it and it's also only applicable to a very large tenants. If you really think about the average tenant in New York City.
That's less than 25000 square feet hotels is not a viable way of them operating their business you've been talking about a tenant with hundreds of thousands of square feet. Then it's a conversation.
Typically where we see it.
Specific to certain types of industries, so sales businesses consulting.
<unk> businesses, but when you go into the big financial firms and things like that.
We see far less frequently.
Yeah.
Alright, that's very helpful. And then just a follow up on a couple of the earlier questions. I was hoping you could just comment a little bit more in general on debt availability for office assets and landlords today, and how you expect that availability and even pricing on that to trend throughout 2023.
Okay.
Yes.
Beyond the commentary we gave we.
You touched on it a bit earlier.
Zinc.
We're getting some real time feedback because we're out in the market with a $500 million refinancing of 919 third Avenue.
And the interest has been good I mean, you have to have.
Floating rate floating rate shorter duration as widely available as widely available I think Angie said early sponsorship and building quality location all matter more.
More so than ever so we are out with good product are obviously, a good sponsor and the feedback has been has been good I think we expect that second half of the year that.
Youll see a little bit of a return of the longest charter more fixed rate market. So.
Again. These are these are pretty short.
Sounds like you've got a bleak your eyes youre going to be we'll be sitting here on our second or third quarter conference call and hopefully by that point.
We will be talking about more capacity in the market. Fortunately, we don't have any projects ourselves geared.
For that kind of execution this year right. So we're in good shape.
Thanks, guys. Thank you.
Thank you.
Okay.
Last question operator, our next question comes from the line of Peter Abramowitz from Jefferies. Sir Your line is now open.
Okay.
Just one more on the financing market because I think you are.
You talked about 919 third Avenue and then you'll also have.
Two 2014 second.
I guess third avenue or electric to independent <unk>.
So it's kind of been cited as the cutoff for <unk>.
How assets are performing differently by Submarket.
With a little bit less activity, both both leasing and utilization east.
That cut off do you sense any like kind of a difference in the conversations.
When it comes to that just in terms of.
919 versus would it be easier to refi similar asset co.
Closer to Park Avenue.
No I don't I mean, you did.
I hear that commentary from us.
So.
Not at all if you look at our tenant base of 919, it's about as institutional roster as yet.
We sold 85 third Avenue to a hospital at a great price at the end of last year.
Whoever gave that commentary miss that that print and I don't that makes absolutely no difference in the financing market and $2 28 to 42nd Street matures in 2025, so we're not discussing that.
Right, Okay got it thank you.
Okay.
Operator, thank you I'm not showing any additional questions in the queue at this time Sir.
Okay well.
For anyone who is still on the phone.
I would encourage you to check out highlights from todays.
2023 state of the city address that Mayor Adams gave this morning.
And it announced amongst a host of other things several exciting investments.
That were born out of the New New York plan that.
A lot of steak.
Stakeholders worked on including US here at Green.
In order to create an action plan to really bring New York forward and it was great to see how quickly. The recommendations were developed how executable. They were in their communication and now to see major items, including much of that in this state of the city, which includes.
Hundreds of millions of dollars of investment in new public spaces and permanent open streets, which we think is great for the city to make Cbd's 27 cities in Manhattan in all five boroughs.
The reaffirmed his commitment to building more housing and more affordable housing through what he calls his city of yes bye.
No.
Making the necessary modifications to zoning.
And working with counsel to make that happen and making the incentives in place there for conversion of office to residential as well as new development.
And other investments in quality of life initiatives in and around the commercial corridor throughout the city, which I think are very much needed and appreciated so.
The city and state are working together towards common goals, making this city safer cleaner better and.
It's a good thing to see and.
More on that to come so thank you for joining us today.
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day.
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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