Q1 2023 SL Green Realty Corp Earnings Call
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Okay.
Thank you everybody for joining us and welcome to the SL Green Realty Corp. First quarter 2023 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.
Word looking statements you should not rely on forward looking statements as predictions of future events and actual results and events may differ from any forward looking statements that management may make today all.
All forward looking statements made by management on this call are based on their assumptions and beliefs as of today additional information regarding the risks uncertainties and other factors that could cause such differences appear are set forth 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 Security 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 measures 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 S. L. <unk>.
Green Dot com by selecting the press release regarding the company's first quarter.
2023 earnings and in our supplemental information included in our current report on form 8-K relating to our first quarter 2023 earnings.
Before turning the call over to Marc Holliday, Chairman and Chief Executive Officer of SL Green Realty.
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 Holliday. Please go ahead Marc.
Okay. Good afternoon, everyone and welcome to SL Green's earnings call. Thank you for joining US today as we review the first quarter's results and discuss improving trends, we see in New York City is the office sector continues its recovery from the unprecedented three years of a pandemic economy.
The commercial real estate sector seems to dominate much of the headlines. These days amplifying messages of Doom and gloom and creating what I believe to be an over anxiety in the market that is most acutely felt in New York City, where many of the market opinion makers reside overly negative voices are overshadowing some of the positive.
Signs that portend, a slow but steady recovery for a market that offers what employers want most are highly educated diverse youthful and talented workforce Midtown Manhattan also offers the most highly computable office inventory with many buildings that are highly improved and <unk> and are at the forefront.
Of innovation. It is clear that we are now in another moment of significant change as businesses rethink their office needs in cities around the world adapt to how pandemic has changed central business districts in a way no. One could have predicted however, one thing we know is that New York is resilient.
He has reinvented its economy time and time again, whether it's responding to crises like 911 or identifying trends to attract and accelerate the growth of new industries and sectors like technology and venture capital, we always find a way to remain a global capital attracting the talent that leading and growing companies need.
In times of change, there's no better place to be than here in New York City. The future of this great city relies on rethinking the arc of the workday and how we experience our C. B DS transforming them into vibrant twenty-four seven destinations our lives can no longer be neatly separated into work and leisure and entertainment.
Tainment and there's an expectation that people coming into the office, we'll have access to compelling experiences that make the trip worthwhile before during and after the work day. There are a number of positive indicators in developing trends that give reason for pragmatic optimism, though clearly challenging environment.
A rapid run up in interest rates since it shows through the real estate debt markets as lenders became concerned with decreasing interest coverage and refinance ability maturing loans. One month. So far today stands at 501 up from just a quarter percent a year ago, but as the core inflation numbers begin to normalize.
Our lives and the labor market begins to cool expectations as evidenced by the forward curve show one month term sofer receding to just 3.11% by the end of 202, four and similarly, the 10 year. So for swap rate, which peaked at 397% just six months ago has already come in 70.
Three basis points and the forward curve implies.
Now a 10 year silver swap rate of three 3% by the end of 2024, So clearly moderating interest rates will have a positive impact on the real estate debt and equity capital markets in the meantime, SL Green has hedged most of its interest rate exposure through strategic debt repayment and the use of.
Instruments like interest rate swaps cops caps and collars.
New York City employment is another area.
Area that I think is showing signs of significant improvement the labor market in New York City has shown resiliency is businesses that employ office workers have raised all comer to your losses. There is recent evidence of higher office utilization within our portfolio as physical occupancy regularly exceed 60%.
<unk> on many work days and the MTA announced that Metro North Railroad reached pandemic.
Ridership a record two days ago, with 195000 riders or 74% of the pre pandemic average so it is the highest.
Single day ridership since the beginning of pandemic and during the seven days between April nine and April 15 Long Island Railroad carried an average of 170000 daily commuters the best seven day average.
In over three years. So there is an increasing drumbeat of optimism about return to work and we.
We hear it.
<unk>.
Yeah.
From.
More and more companies that are doing business.
Here in the city, but national and global companies that are men dating people come back anywhere between three to five days a week all within the past three months or so J P. Morgan Disney Twitter, Google Goldman Sachs.
Salesforce Apple many others have.
Have come out with.
Very definitive statements about you.
A recognition that.
These businesses can be only at their most efficient and best.
When people are together in.
Purpose build collaborative office space.
Not home or remotely and I think that's why.
There has been this experiment over the past three years clearly the major companies that spanned all different office sectors have concluded that the experiment is not working and thus requiring people.
People to come back as I said anywhere between three to five days a week and that trend is something that we see on the streets in the buildings on mass transportation and we think it's only going to get.
More and more momentum this year weighs on because it makes sense and it makes sense for business. It makes sense for competitiveness and makes sense for the re imagination of our CBD is in.
And it is.
It's what people have done and how people are at their best So we're very optimistic in that regard.
Took longer than we expected, but we now feel like things are coming around in the right direction.
In terms of safety in New York City is becoming safer with crime stats heading in the right direction, including declines in overall crime in violent crime in the first few months of 'twenty. Three we're also anticipating that there'll be some level of additional bail reform.
To be included in the state budget, which will give judges clearer discretion over the imposition of Vale.
So while other cities are having difficulty.
Getting a handful of crime or some other major cities are having difficulty getting a handle on crime New York City clearly has a plan.
That is working.
For 23, New York City is on track to welcome 63 million visitors, including more than 10 million international travelers that puts projected tourism within 5% of the prior peak in 2019, which represents a remarkable recovery summit is high attendance and first quarter results.
<unk>, which eclipsed our projections for the first quarter, certainly demonstrates that domestic and foreign tourism is back in a big way with the prime travel months still ahead of us.
<unk> what are the most important developments of the year is the completion of east side access now known as Grand Central Madison Long Island commuters now have access on a direct basis into Grand Central the New terminal spans 43 to 48th Street along park in Madison Avenue corridors, where much of the SL Green portfolio.
Is situated.
So with all of that I'm pleased with the start to the year. We are having our results for the quarter were ahead of our expectations in several key areas Mark to market rents in same store NOI were both in excess of 5%. Our same store office occupancy was slightly ahead of what we internally forecasted note at just over 90%.
And leasing volume of 504000 square feet also outperformed our expectations, but the real high well highlight is forward looking.
As we are building leasing pipeline at a steady pace the pipeline of leases now stands at one 2 million square feet, which is up 70%.
From our earnings call just three months ago I think it was end of January .
And to give you a flavor for the pipeline and preempt, where I know undoubtedly be someone's question later on the pipeline is 80% financial services includes 18 individual deals that we're working on a gray bar and includes.
1 million square feet of space in same store properties, which would absorb over 300000 square feet of.
Space of vacancy in those same properties, while overall vacancy sublet and availability is not yet declining in Manhattan overall, our leasing results and current pipeline is indicative of the fact that the Park Avenue East Midtown corridor is highest performing in Manhattan and tenants are responding to our.
Well located repositioned and highly monetized buildings in a very positive way. We're also benefiting from brokers and tenants who are scrutinizing much more carefully the financial wherewithal of landlords and the stability of the capital stacks in individual buildings that tenants want to locate and these are areas where SL green.
Shines the most in the investment marketplace. There are signs that demand is forming for high quality commercial assets in Midtown and we expect to see transactions announced over the next two quarters. Initially these transactions will be for the well located assets.
Some with financing in place and some with financing that'll be arranged and generally involve buildings that are already fully repositioned in a monetized or are in the process of doing. So there is also more activity than usual in the user buyer market as evidenced by the recent sales totaling over $725 million.
Users like Hyundai Dyson and Memorial Sloan Kettering and we are aware, we are aware of several other pending transactions.
For a purchase or long term capital leases by users taken together these developing trends bode well for our 200 to three business plan and we are working hard to execute on a series of sales joint ventures and financings.
With that I'd like to open it up for questions.
Okay.
And thank you.
And one moment. Please as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby what we compile the Q&A roster and we would like to remind you to limit your questions to two questions. Please limit yourself to two questions.
And one moment for our first question.
And our first question comes from John Kim from BMO. Your line is now open.
Thank you and good afternoon.
I was wondering if you could provide an update on the $2 billion.
Dispositions that you have planned this year highlighted by 245 Park.
I know that.
It's top of mind for a lot of people on this call, but any update you can provide on those kind of conversations right now.
Well I mean, I don't think were to go through the whole $2 billion pipeline, but we're working as I mentioned in my speech I think that.
We feel pretty good about where we stand right now in terms of <unk>.
Completing our JV sales and financings that we are that form a part of the two to three business plan 919 financing I think is imminent and we're working hard on the $2 45 Park, which that development is coming along amazingly well.
The plan, we have for it I think is going to make it among the best non brand new construction buildings on park, but we'll be able to.
Lease it.
At rents that are going to be.
Well into the triple digits, we have a lot of activity. There we're trading paper with a couple of tenants and our discussions there are are good so.
So we feel good about that and then there is.
Obviously other transactions, we're working on it's Stu.
Still got a long way to go this year and.
I think the market is coming around and I think the assets. We've selected are the right ones that we'll be able to.
Either monetize via sale via joint ventures.
They are in the right locations.
And we're working hard to get it all done.
Okay.
Question is on some of your secured debt that <unk>.
Recently expired it remains on your books they were on their last quarter as well and you talked about having a resolution with the lenders I'm wondering if you could provide any color on what the resolution looks like and if defaulting on debt is an option for you and your partners.
With your question on secured debt.
Yes.
Resolution of secured depositions that work.
Past maturity.
So which means that that particular at least 717 fifth and $11 34th Street, Yes, John .
Which ones John .
Pieces that you're talking about so we can.
Got it.
Uh huh.
I apologize I've gone through the settlement, but there was some debt that expired.
December February .
This year April 17, both 717, and a less 11 west 34th Street, our retail high Street retail positions, where we are far from that we do not control.
The borrower and we have basically passive position 717 as you know we have taken all all of our investment and profit out of the asset we have a 10% passive position on that and 11 last were 30, 30% 30% of that position.
Don't control it so we're getting updates from our partners but.
Those are those are investments.
Investments that we continue to evaluate and as I said on the prior quarters' calls lenders are either going to work with us on those assets or they're not.
And John to Andrew's points, Matt.
You referenced December 'twenty, two maturity that was $50 52 Broadway and as you'll note in our supplemental that matured in December we worked with the lender and just executed an extension through to 2024.
The other one is 655th Avenue.
Expires this month.
Yes. These are these are tiny.
These are we should take it offline and these are assets, which I think.
Have notebook encore.
These are small retail assets.
And which we would have de minimis ownership of passive interest no consequence to the earnings of the balance sheet of any magnitude that I think I mean mezz.
Okay.
Is that what you're referring to or something if the faulting is an option, it's really up to the lender in these situations, which I said last quarter and I'll reiterate again.
The lenders are going to determine whether there are defaults or not.
But again, the consequence of that determination unless I don't want to understate it Matt.
Is not material.
There is no there is no book value, there's no earnings from the assets.
From your perspective.
Call that immaterial.
In my book I don't want to I don't want to I'm not trying to undermine the question John I'm just saying these are what Matt said is right that you've highlighted assets, which we sort of look at as a <unk>.
Gary and look at it zero and have no contribution to earnings.
It's just not the focus of what my commentary is about that's all I'm, saying.
Any commentary on your partners, though because.
You may have to.
Your line with them.
Well, we'd rather have no commentary.
Okay.
Yes.
Thank you.
And one moment our next question.
And our next question comes from Steve Sochua from Evercore ISI. Your line is now open.
Great. Thanks, good afternoon.
Mark or maybe Steve there Alex could you just talk a little bit more about that $1 2 million I guess, what I'm trying to figure out Mark is are these tenants.
Expanding or are they staying the same or are they shrinking if they come into your portfolio. That's great I'm trying to just think about the impact on the overall market and just trying to get a sense for how these tenants are thinking about <unk> and what's the delta.
Again, so much disclosure on it.
There's like 40 or 50 deals.
In there.
There's a lot of expansion there are a lot better staying the same there are a lot that are less I mentioned that over 300000 square feet.
As for vacant space within the same store portfolio and there's over 500000 feet. That's for vacancy within the portfolio generally same store and non same store.
Mostly financial tenants some growing some shrinking many staying the same.
All in line.
With our projections, probably slightly above in terms of velocity and clearly the first quarter. We were ahead on mark to market and same store.
But there's dozens in those 18 deals alone at Gray bar and theirs.
There is probably I don't have any deals in total on there, but what about <unk>.
Of the $1 200000 square feet, just to give you a sense of it Steve 900000 square feet or are new deals 274000 square feet of renewal deals.
Mark talked about what was filling vacancy both same store and throughout the entire portfolio, that's 45% of the $1 two was filling vacant space.
And I think.
<unk>.
Build on what Mark said about the Gray bar that I think is as big a news is anything what we're seeing is Ah.
Broad diversity of tenant sizes at all price points, so the narrative of <unk>.
Although leasing activity now taking place or previously taking place being at the very top end of the market. I think is increasingly is rapidly changing we are seeing more velocity certainly on the proposal stage and tour activity.
And the more price sensitive part of the market than we've seen in the past three years and I think thats a reawakening of the marketplace I think we're seeing a small in the mid <unk>.
Mid sized tenants come back to the market.
They have a healthy 400 million square foot market Thats, what we need.
It's good it's a good news day to be able to say that.
Okay, Great maybe just moving on to one Madison are you still expecting the TCE O in the fourth quarter and I guess, Matt when you do get the proceeds in from the joint venture partner, how do we think about the applicability of that those proceeds which I think are just shy of 600 million.
Yes, we are getting $577 million from our partners down at one Madison when we get <unk>.
We are running ahead of schedule on the construction there. So we had slated for for fourth quarter.
The early fourth quarter those proceeds immediately go to pay down corporate debt. The first $425 million goes to pay down our short term unsecured facility, we put in place last year and the increment above that another $150 million or so goes to.
It is a line of credit or other corporate debt.
Okay.
Alright, thank you.
Okay.
And thank you.
Yes.
And one moment our next question.
And our next question comes from Alexander Goldfarb from Piper Sandler Your line is now open.
Thank you good afternoon.
Matt maybe just.
Moving on from from Steves question.
I think he was.
On the TCR for one Vanderbilt I think Youre getting I think you just mentioned that the sort of $570 million, but you guys also have potential for Jv's I think further about <unk> at $2 45 Park I think you may or may not do more at one Madison, there's the condos Uptown that you guys are doing.
So net can you just sort of lay out in total obviously, the one Vanderbilt has pretty much certainty correct, but what the potential of cash proceeds that you guys are looking at taking in this year potentially through the different JV sales or outright condo sales that are contemplated.
So I'm going to just correct on the addresses a bit there.
Proceeds are coming in from our partners at one Madison on Tcl.
I'm sorry, so either there is no other contemplated partners down at one Madison and we had talked about potentially an additional partner at one Vanderbilt we talked about for last couple of years, and we may or may not do that this year.
I don't want to step through every component of our business plan in that business plan, obviously changes over time to 45 is the most significant and we are working hard on that as Mark said earlier.
And then we have some other assets.
Either.
Wholly owned outright sales JV interests.
Other things that we are working on but I'm not going to step through every one of those except to say we're focused on trying to get to our $2 billion target. The most significant component, which is 245 park.
Okay and then you also have the $5 70 from one Vanderbilt. That's later this year as well correct.
Yes that is the only the only condition of that is completing one Madison, that's obviously happening.
Okay, Great and then second question is.
The real deal had an article.
In a few weeks ago.
With the latest on 625 Madison had a little as they always do a little extra color, but maybe you guys could just provide us an update where where the litigation or negotiation stands what any pending resolution any sort of update that you can provide.
Well with respect to the leasehold position there we expect the rent reset arbitration to conclude eminently.
As we've discussed in prior quarters, we may update our business strategy for that leasehold position following the resolution of that rental reset process.
And if we ultimately decided to adopt a different strategy for that that leasehold position that could impact the carrying value of that lease hold position going forward obviously.
So what does that mean impact the value thats up down what does that mean.
It depends on the rent arbitration.
It's up to the arbitrator.
Yes, okay.
It's a fairly binary outcome there there's a wide disparity a view as to what that rent should be we've been it's been the subject of a disagreement for a while now and.
There'll be a conclusion, we think imminently and then based on that conclusion.
At least with respect to the leasehold battle.
Clarify for us.
The direction.
We're going to go with it whether it's something we feel.
We can stay with or whether they are if you get a rent.
Amount that's non economic non economic then we will have to deal with that but.
That's an investment that we've had 15 years plus net leased to polo, we've taken we've certainly.
As Andrew mentioned was 717.
Redeemed all of our capital on that investment has been successful.
In addition to that leasehold position we have.
Mezzanine interests on.
On the fee position as well also related to <unk> and <unk>.
Okay, that's a different investment and we don't anticipate any impact on the value of that investment based on the outcome of the rent reset arbitration.
Okay listen thank you.
And thank you.
And one moment our next question.
And our next question comes from Anthony <unk> from JP Morgan. Your line is now open.
Great. Thank you and good afternoon.
First question on Green loan servicing.
Just wondering like maybe you could talk about that or how we should be thinking about that because it seems like that could be a good business at the moment and wondering if you think about that as just a fee generator or if theres something more strategic in terms of that potentially helping you find investment opportunities or other strategic benefits.
No I mean, I think it's primarily a fee generator. Obviously, we have to service every loan to the servicing standards. So we can sort of consider our own interest when we service loans as a third party as a fiduciary so.
It's a good active business, we have a great staff and team that runs that business.
And we've been we've had a lot of successful resolutions on behalf of our clients and customers there and we do intend to grow that business.
For sure.
Theres more situations that sort of need servicing and special servicing.
Okay, and then just my second one.
I know, it's early but any thoughts on credit Suisse and their space at a rather Madison and.
What I guess UBS may ultimately do with that like or how youre thinking about it.
Well.
It's a long term lease.
I mean is.
It was announced credit Suisse has merged with UBS UBS is going to be the surviving entity.
I think we look at that as credit upgrade to the lease although.
Credit Suisse was.
It was a good tenant of ours for over 15 years. So I think the merged entity will just be that much stronger.
In terms of.
What they may or may not do with their space.
We don't have any visibility.
Visibility into but it is I don't know what you guys have the expiration on that 2037th.
Lease that expires in 2037, so I guess another.
14 years or so to run.
And.
So therefore that will be up to them, but.
Is intact and we think.
When we think the buildings in good shape.
Okay. Thank you.
And thank you.
And one moment our next question.
And our next question comes from Tom Catherwood from <unk>. Your line is now open.
Thank you and good afternoon, everyone.
Steve maybe just pivoting back to the leasing pipeline.
I think in the second half of last year, you had talked about.
Some deals coming off the market as tenants were kind of evaluating the economic situation and evaluating the businesses is some of this jump up in pipelines since earnings.
January let's call. It is that the 2022 deals re engaging with the market or do you have a sense that this is kind of incremental new leasing above and beyond that.
I think it's both.
This clearly whatever pause that we saw by tenants got.
Sort of.
Spooked in the fourth quarter with rising interest rates and spreads strict threatening recession environment and things like that and they put their searches on hold that explains kind of the leasing slowdown, but then we came out of it pretty strong we certainly did in our portfolio of 500000 square feet in the first quarter I think is a.
Significantly as a significant print.
And I think the growing pipeline.
As both tenants that have confidence in their business clarity on the on the overall economic situation and.
Add to that the return to the office.
Narrative.
As prevalent today, whether you're a small business or you are taking your cue from the meters of major businesses across the country.
So we're seeing it both in the small medium and large tenant marketplace financials.
Add to that.
Financial services, the private equity hedge fund World still continues to be a driver on leasing.
And we're seeing up and down Park Avenue a lot of demand.
I could have easily rationalized another five to 600000 square feet.
Of pipeline.
Two our pipeline based upon term sheets that were exchanging but it's just too early in the process to really have clarity on.
And so I think Thats a.
Good harbinger as to where the market is headed.
I appreciate that thanks, Steve and then kind of.
Focusing on a specific asset here you moved two herald into the redevelopment bucket this quarter, you've talked about but we work, leaving 180000 plus square feet, there and potentially looking at either extended stay or dormitory use can you talk to the timing of the expected vacancies.
There and any updates on the redevelopment.
Yes.
As the vacancy we work is out there.
They vacated earlier in the first quarter.
And we're evaluating the redevelopment opportunities of the asset right now.
Got it thanks, everyone.
And thank you.
And one moment our next question.
And our next question comes from Camille will now from Bank of America. Your line is now open.
More of a big picture question on a lease.
I wish I could check is growing just given this industry has been accelerating layoffs and pushing to bring on planes back into the office.
Hello.
Do you think about your overall exposure so that's what I'm listening in from your experience in managing overall panel.
Your particular industry next year.
Portfolio.
I think our.
Yes, I look at our exposure to tech is good exposure.
I think it's has been and continues to be a big positive within our portfolio and I assume the question is within the portfolio as opposed to market wide.
IBM is a great example of a recent deal we did over it.
One Madison can drill as a deal we did over here.
One Vanderbilt Steve we've got some Bloomberg Bloomberg.
Media and tech over at 919.
They expanded I think last year I'm not mistaken.
Big footprint, so I think in general.
One I think we have marginally less exposure to tech depending how you define tech.
Most others in the city although.
We would welcome more and we think that.
That sector went from literally nothing about a decade ago to being a major player in the city right up there with.
Business services and financial.
Now obviously they are taking a pause.
There are announced layoffs, but I think those global national announcements tend to hit Manhattan, less so than other markets that they've expanded into because this workforce I think is more of the type.
Of workforce that there'll be retaining and engineering et cetera, and less so skewed solely to marketing like in many other smaller markets.
Around the country, so I think that.
So far when you look at the jobs picture in New York I mentioned it earlier.
We're at one 5 million office using jobs Tech falls into that category information services.
So there hasnt been any.
Material.
Showings to date.
Concern over over bodies in the tech world and even if.
There is some trimming there it's been equally made up for by <unk>.
Finance and business services so.
I don't know if that answers the question, but I think <unk> been I think tech will grow again, they are going through a right sizing right now as everybody does so after the tens of millions of square feet that they consumed in Manhattan and once that right sizing occurs alright, I think growth will happen again and there'll be.
They are here to stay and we're excited by that.
Okay.
And for my second question, you've made good progress versus your initial targets on the leasing and revenue front.
Like you mentioned it doesn't seem like investors are willing to accept any credit today's performance.
I wanted to get your thoughts on what you think is being priced into the equity markets today and at these valuation levels do you see potential for equity to equity consolidation in this backdrop.
Well I said earlier I do think.
That there is what I termed over anxiety.
We have been.
As a company we've been at this for 26 years.
And many of US who've been in it for 30 35 years almost all of it in New York. So we've been here before.
This has a lot of the.
Rhythms.
What happens first the narrative and the debt markets.
Frees up.
Than theirs.
There's little shoots of deals generally are smaller ones first bigger ones later and.
The market.
By most standards I would consider this.
Relatively.
Good market, because we've got the jobs.
We still have good occupancy at least within our portfolio and I'd say within the better buildings and better Submarkets of Manhattan.
Rates are much higher than they were but on absolute terms. There is still relatively low and lenders seem to be working by and large with their borrowers.
To extend in situations, where you know.
Good borrowers good properties need another year or two or three two.
To write things out.
We're <unk>.
Sometimes where there a servicer, sometimes where theres lenders, sometimes where theres borrower. So we see that as a trend and.
So I can't really.
Respond to how people what people are pricing with or not but I do think.
The battery of headlines the Doom and gloom.
The pessimism.
We think is overblown just based on our results in our pipeline.
Our business is sort of a simple business at the end of the day.
We buy space, we are developed space.
Improve it to best in class are as high as high as we can and we lease it to to users and between that which we've leased in that which we hope to lease in our pipeline. We think we're getting things done and.
Hopefully the debt markets will start to fall a little bit.
And once it does I think youll see things snap back quickly.
Thank you.
And thank you.
And one moment our next question.
And our next question comes from Blaine Heck from Wells Fargo. Your line is now open.
Great. Thanks. Good afternoon, just following up on the asset recycling front is there any color you can give on the pricing of some of those sales that youre looking at for this year has your expected pricing on the sale of especially $2 45 Park changed at all.
The last kind of three months.
I don't think we're going to go through pricing asset by asset.
That's it.
We're shooting for.
Best execution.
We think everything we set out for in the year is very reasonable I would say historically low yeah.
Compared to where pricing was a year or two ago I think there's a lot of equity out there that is looking at this moment in time as a way to enter or reenter Manhattan at.
Pretty attractive levels I mean, we've all been doing the rounds travelling domestically and overseas.
A lot of interest in New York City, I don't know if that's something that.
The market definitely feels or appreciates, but.
In terms of investing within the U S.
There is a lot of foreign capital.
And domestic capital that is looking at today's environment like.
Good entry point, we've got reasonable expectations on.
Everything that were.
That we're looking to accomplish we don't we don't set unrealistic expectations, we set things.
Where we think our market clearing levels and.
It's up to us to execute.
So following up on that Mark and just based on your conversations that you guys are having can you talk about kind of the return hurdles.
As foreign capital entities and sovereign wealth funds from maybe the private equity.
Rather do it with.
When the deals are done.
There is no reason to spec.
We have a firm handle on where we think that market is so.
Let us go execute and then it'll all be illuminated.
Yeah.
Alright fair enough thanks, guys.
And thank you.
And one moment our next question.
And our next question comes from Derek Johnston from Deutsche Bank. Your line is now open.
Hi, everyone.
Thanks for taking the question and I guess this maybe for Andrew.
Can we get a sense of the mark to market value or perhaps fair value.
The GTE book.
And.
Secondly.
What percentage of the of the loans in the book are coming due over the next two years.
Good morning.
I mean.
In terms of Mark to market I would say, it's our carrying value for the loans, we make we make that evaluation with the accounts quarterly.
The DP book obviously.
As you know has paid down pretty significantly.
A couple of couple of large position 625 being.
Madison being the largest of it.
<unk>.
It's.
Residential.
Office assets.
And.
The.
The second part was.
What was the second part of <unk> value and then what did you say the.
I was hoping to just understand given this environment.
What percentage of the book is where the loans are coming due over the next two years.
Yeah.
I think the maturity there is a maturity table in the supplemental Derrick.
That has all of the.
Maturities most of them I mean, it's all sorts of our short term <unk> has always been a short term one to three years. So I'd say over next two years the majority well yes.
Yes, we have one large <unk> equity position, which is February 27.
$20 million residential position, which is December 29, and then the balance are on the relatively near term.
And Derik, it's Matt I just want to make.
Expand on.
The mark to market.
Question.
Accounting doesn't require us to mark to market book, So the carrying value is representative of accounting carrying values, but the mark to market is pretty close to the carrying value of the debt.
The deposition.
Okay.
Thanks, Matt that's helpful.
That would be it for me guys. Thank you. Thank.
Thank you.
And thank you.
Okay.
And one moment our next question.
And our next question comes from Teo Oksana from Credit Suisse. Your line is now open.
Hi, yes, good afternoon, everyone.
Thanks for all the color around just how you're progressing with the asset sale.
I'm just curious I mean, if credit markets remain soft.
Do you want to get financing.
That's the kind of pulled it all I mean, how do you kind of think about if I may use the what's plan b.
In regards to trying to either delever the balance sheet kind of looking for an alternative source of capital.
Can you just kind of help us think through what product did you say where.
We're focused on plan a.
Yes.
Skepticism in the market is evident on this call.
I mean.
We feel like we're going to get stuff done.
So I mean sure there's plenty of Bdcs were but.
I think what you're hearing from US now is were going to.
We've got.
I mean, it's not like I would say, we have eight months, but we have whatever time, we need.
Maybe we will get this stuff done in next three or four months five months six months nine months or could be nine months, but whatever it is we have premier assets.
That have a lot of institutional domestic and four an attraction.
And we're keeping them well leased there.
They are highly improved and what you're hearing from us is.
There is a market for that.
And it's up to us to go out there and do it. So we will do whatever we have to do to get.
Things done.
Yes.
And that's where we're going but when you say a plan b that sort of implies that there is no plan. We're planning does and that's what we're focused on right now.
So I mean, there is a myriad or countless amount of other plans or strategies or capital or forms of capital that one could avail themselves on but.
We are very.
Simple about this we have certain assets were going to look to sell like we do every year and have done for 25 years, we have other ones great core holdings.
Long term holdings for us that we will look to JV with Premier partners.
And then I think we have one financing or is it just I mean.
It's just one financing, which I said in my commentary, we felt was imminent. So I can't really give more color than that other than that one financing I think its imminent.
So there is no plan b for that but.
Yes, we will.
Regroup in three months.
And we'll give you a further update on these things hopefully we'll have a couple of announcements between now and then and we're going to keep going.
Fair enough. Thank you gentlemen.
Thank you.
And thank you.
And one moment our next question.
And our next question comes from Peter Abramowitz from Jefferies. Your line is now open.
Thank you.
Just wanted to ask about 919.
I know you probably cant can speak in any detail, but I guess.
How is the pricing kind of coming out relative to what you were expecting.
Well.
That sort of goes back to the question I was asked earlier about perhaps.
There's some pricing as soon as we have something to announce youll have the announcement of the price.
It's just it's not typical for us to talk about transactions in the market that we're working we've never done it and I wouldn't do it now.
Sure no reasonable, but as soon as we announce it because it's imminent.
Youll have the pricing.
Right, but I guess curious to kind of what you're planning for and what Youre, hoping for.
Don't forget, but give a number but relative to that.
Have you learned anything through the process relative to what you've done in the market before I guess question.
We planned for.
Yes.
I would say if we have a successful conclusion then what.
<unk> learned.
Learn to reaffirm is that.
For good sponsors good assets good locations.
With relatively low ltvs, there's a market to consummate deals yes.
We've learned that I would say that we just maybe.
Confirmatory, if we can get that done.
Sure.
I guess just in general how.
Lenders thinking about LTV.
General Gist.
Just over the last thing the lenders are probably in about five to 10 percentage points from let's call. It the peak of illiquid market, so much more than that.
$50 to 55% LTV range.
Got it that's helpful. That's all for me thanks.
Thank you.
And thank you.
And one moment our next question.
And our next question comes from Ronald Camden from Morgan Stanley . Your line is now open.
Great couple quick ones. So the quarter had a lot of sort of moving pieces.
The 29 cents Jasmine proceeds 10 cents on loss reserves.
You mentioned in the press release.
That it was 13 cents ahead of expectations. So I know you don't really update havent comment our updated guidance, but is there when youre thinking about that guidance you put out for the year is there any other sort of takeaways that we should think about about all these moving pieces.
How that changes your views or it doesn't change your views at all and so we view this as sort of a 13th.
<unk> essentially.
So let's talk about the quarter real quick we had a couple of things we highlighted in there the resolution of the situation of Victoria's secret is a huge win a huge positive.
That's $20 million.
The cash coffers 13 cents of that was not in guidance.
Offsetting that though was 10 cents of reserves also not in our guidance. So your net three positive there.
Remainder of the beat for the quarter is the best quality beat you can have it all out of NOI our properties significantly outperformed expectations you saw that in same store cash NOI you saw that in earnings.
That's on the revenue side and also even more significantly on the operating expense side, where our operations team did a spectacular job saving on overhead costs and we also benefited from from lower utilities. So all of that said we were ahead of our expectations for the quarter, but we give a 30 cent range for guidance. So we sit within that range.
We're still.
Watching very closely the forward curve, we only have <unk>.
10% less than 10% floating rate debt at this point, so it's not as impactful, but we're very.
<unk> focused on it and so that's why we keep our range as.
As wide as we do when we when we launched the beginning of the year and three months in we're not going to touch that we'll reevaluate in three months.
Okay, but is there a way to figure out if you're getting closer to the higher end at the lower end.
You're just keeping the whole range.
That's why it ranges are keeping all range.
Alrighty.
The next question was I had a question on 909 third Avenue.
As well, but maybe.
Since you can't comment if it's eminent just broader just a broader sort of thought in terms of the refinancing environment any sense, we can get at.
Some specific numbers in terms of rate.
LTV, that's I think you touched on a little bit before.
Potentially more collateral just any sort of color on what the environment looks like and how it changed over the past month or two it would be helpful.
Okay.
Well it feels like we are.
Sort of the same territory, but.
Look thanks.
Banks had breakout earnings.
Sure.
Earlier, this week or last week so.
Yes.
Thank you.
It's all iterative.
First the leasing is a big I think it's going to be a big help.
I think the fact that the banks at least the bigger banks that.
Provide a lot of liquidity at least here in Manhattan for Manhattan deals, having big top line is very positive and I think eventually.
Two distant there'll be back buying the tripoli's double as all the.
We will secure its tranches of the debt and.
I think the liquidity dries up quickly. It comes back quickly we've seen it just time and time and time again so.
It's going to change weekly.
But.
The only thing I can say to you if you're looking for trend direction is I think its headed in the right direction.
Hopefully we've seen.
The worst of the pause and I do think as deals get done they set marks and then more deals get done before you know it we're back to.
<unk> equilibrium market so.
We'll see.
What you're hearing is let's let's wait another three months and reassess.
On the next call and hopefully we'll be able to give you a lot more specific data.
Helpful. If I could sneak one quick and any update on sort of the casino license, but I don't think it has been asked.
Where that stands how you guys are thinking about it. Thanks so much.
Well I mean look we are.
Where I am.
Mentioned on other calls there is really no update.
From the last call, which I think is mostly what.
You are asking about but we are.
Pursuing it vigorously full gaming license in times square.
We firmly believe that a world class gaming entertainment.
Hotel destination like we planned in the heart of times square is is to everybody's benefit everybody.
Businesses.
Residents and Broadway.
Benefit from.
The type of.
Multibillion dollar development, that's planned us in conjunction with Caesars Entertainment of Roc nation.
It would be an enormous catalyst for revitalizing and reinvigorating.
No.
What's new York's and I'd argue the world's number one most important tourist destination.
We've got the support of an ever growing coalition of small businesses labor restaurants, we've got hotels, we've got many local residents.
And I feel we're in we're in a good position to compete for one of those three licenses now where the process stands.
We are we've.
In the process of the request for applications.
Questions were submitted.
Want to say back in February .
And where.
State feedback on next steps.
Thanks, so much helpful.
Thanks.
And thank you.
I think we're going to take one more.
Well I'm actually showing no further questions. So I would now like to go ahead and turn the call back over to Marc Holliday for closing remarks.
Well.
Made it to the end here in the call.
Call and.
Looking forward more than most you're getting on the call to next.
Three months from now and.
Hopefully a lot of.
What youre hearing now will be able to.
Speak about in more detail then.
And.
I appreciate the continued support of our shareholders.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
[music].
Okay.
Okay.