Alexander's Inc. Vornado Realty Trust Q1 2023 Earnings Call
Speaker 1: The.
Speaker 2: Good morning and welcome to the Varnado Reality Trust
Speaker 2: First Quarter 2023 Earnings Call. My name is Sarah and I will be your operator for today's call. This call is being recorded for replay purposes. All lines are in a listen-only mode. Our speakers will address your questions at the end of the presentation during the question and answer session.
Speaker 2: At that time, please press star, then 1 on your touch tone phone. I will now turn the call over to Mr. Steve Bornstein, Senior Vice President and Corporate Counsel. Please go ahead.
Operator: Please go ahead.
Steve Borenstein: Welcome to Vornado Realty Trust Q1 Earnings Call. Yesterday afternoon, we issued our Q1 earnings release and filed our quarterly report on Form 10-Q with Securities and Exchange Commission. These documents as well as our supplemental financial information packages are available on our website vno.com under the investor relations section. In these documents and during today's call, we will discuss certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in our earnings release, Form 10-Q, and financial supplements. Please be aware that statements made during this call may be deemed forward-looking statements, and actual results may differ materially from these statements due to a variety of risks, uncertainties, and other factors.
Speaker 3: Welcome to Bernado Realty Trust's first quarter earnings call. Yesterday afternoon, we issued our first quarter earnings release and filed our quarterly report on Form 10Q with Securities and Exchange Commission. These documents, as well as our supplemental financial information packages, are available on our website.
Speaker 3: www.vno.com under the investor relations section. In these documents and during today's call, we will discuss certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in our earnings release, Form 10-Q , and financial supplements.
Speaker 3: Please be aware that statements made during this call may be deemed forward-looking statements, and actual results may differ materially from these statements due to a variety of risks, uncertainties, and other factors. Please refer to our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2022.
Steve Borenstein: Please refer to our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended 31 December 2022, for more information regarding these risks and uncertainties. The call may include time-sensitive information that may be accurate only as of today's date. The company does not undertake a duty to update any forward-looking statement. On the call today from management for our opening comments are Steven Roth, Chairman and Chief Executive Officer, and Michael Franco, President and Chief Financial Officer. Our senior team is also present and available for questions. I will now turn the call over to Steven Roth.
Speaker 3: for more information regarding these risks and uncertainties. The call may include time-sensitive information that may be accurate only as of today's date. The company does not undertake the duty to update any forward-looking statement.
Speaker 3: On the call today from management for our opening comments are Steven Ross, Chairman and Chief Executive Officer, and Michael Franco, President and Chief Financial Officer. Our senior team is also present and available for questions. I will now turn the call over to Steven Ross.
Steven Roth: Thank you, Steve, and good morning to everyone. Let me get a few things out of the way first. Our business is performing well in this environment. Our outlook hasn't changed since last quarter. We are full speed ahead on our current projects, totaling over 5 million square feet in the Penn District. Any comment in the newspapers or industry tabloids that we have stopped is incorrect and just plain silly. Just take a look at our three-block long construction site when you next go through Penn Station or next go to a Knicks playoff game. Now some commentary on last week's dividend press release and reaction thereto. Simply stated, we are going on offense. Let me say that again, we are going on offense. A few facts for context. We know about dividends. In 2022, our dividend was $2.12, or $435 million in cash.
Speaker 4: Thank you Steve and good morning to everyone.
Speaker 4: Let me get a few things out of the way first. Our business is performing well in this environment. Our outlook hasn't changed since last quarter.
Speaker 4: We are full speed ahead on our current projects, so over 5 million square feet in the Penn District. Any comment in the newspapers or industry tabloids that we have stopped is incorrect and just plain silly.
Speaker 4: Just take a look at our three block one construction site when you next go through Penn Station or next goes to a Knicks playoff game.
Speaker 4: Now some commentary on last week's dividend press release and reaction there too.
Speaker 4: Simply stated, we are going on offense. Let me say that again. We are going on offense.
Speaker 4: A few facts for context. We know about dividends. In 2022 our dividend was $2.12 or $435 billion in cash. Over the past 10 years we have paid and happily paid $5.1 billion in regular dividends and another $400 million in special dividends.
Steven Roth: Over the past 10 years, we have paid and happily paid $5.1 billion in regular dividends and another $400 million in special dividends. Last week, an analyst characterized REIT dividends as sacred, and I agree. Well, I guess I sort of agree. For this year, we have already paid a $0.375 or $75 million cash Q1 dividend. We will pause paying dividends in the Q2 and Q3, and in the Q4, based upon known facts, actual taxable income, including asset sales, et cetera. We will pay out, as we must, taxable income, but we'll reassess whether it is wise and appropriate to pay it in cash or in a combination of cash and scrip. Shareholders should be indifferent as to whether they receive cash or scrip, but that cash, if retained by the corporation, might be more wisely employed for debt management, stock buybacks, or whatever.
Speaker 4: Last week, an analyst characterized REIT dividends as sacred, and I agree. Well, I guess I sort of agree. So this year, we have already paid a 37.5 cent or $75 million cash first quarter dividend.
Speaker 4: We will pause paying dividends in the second and third quarters, and in the fourth quarter based upon known facts, actual taxable income, including asset sales, etc., we will pay out, as we must, taxable income, but we'll reassess whether it is wise and appropriate to pay cash or in a combination of cash and script.
Speaker 4: Shareholders should be indifferent as to whether they receive cash or script, but that cash, if retained by the corporation, might be more wisely employed for debt management, stock buybacks or whatever.
Steven Roth: As most of you know, I have resisted buybacks for years and years, resisting copycatting sister industry companies, and resisting the pounding from analysts to quote, Close the NAV gap, close quote. I believe my resistance was logical and fact-based. Since last quarter's dividend announcement to this quarter's dividend announcement, our stock price has declined 35% from a low level to an even lower level. Seeing value in the stock and an opportunity to create shareholder value, last Wednesday, included in our dividend press release, our board authorized a $200 million share buyback program. We will proceed carefully and in a measured way, funding the buyback from asset sales or even cash retained from paying the dividend in scrip. Since our dividend is sized based on taxable income, not FFO earnings, here is the math. 2021 taxable income was $2.03 versus a $2.12 dividend.
Speaker 4: As most of you know, I have resisted buybacks for years and years, resisting copycatting sister industry companies and resisting the pounding from analysts.
Speaker 4: As most of you know, I have resisted buybacks for years and years, resisting copycatting sister industry companies and resisting the pounding from analysts to quote
Speaker 4: Close the NAB gap." I believe my resistance was logical and facts-based.
Speaker 4: But since last quarter's dividend announcement to this quarter's dividend announcement, our stock price has declined 35% from a low level to an even lower level.
Speaker 4: Seeing value in the stock and an opportunity to create shareholder value, last Wednesday included in our dividend press release.
Speaker 4: I've been authorized a $200 million share buyback program.
Speaker 4: We will proceed carefully and in a measured way funding the buyback from asset sales or even cash retained from paying the dividend in script.
Speaker 4: Since our dividend is sized based on taxable income, not FFO earnings.
Speaker 4: Here is the math.
Steven Roth: 2022 taxable income was $2.08 versus a $2.12 dividend. 2023 taxable income is currently projected at $1.05 without any asset sales. Surely there will be asset sales. The difference between 2022 and 2023 taxable income is primarily increased interest rates. A couple of other comments. We think we have seen the peak in work from home. More and more CEOs are now requiring their employees back to the office. With each passing week, the office buildings feel more like 2019. We believe it's just a matter of time before everyone is back for good. New York City seems to be leading the country in this regard. Lastly, with all CBD office stocks having been crushed and great concern about the future viability of office, it is important to review our financial position and our liquidity.
Speaker 4: 2021 taxable income was $2.03 versus a $2.12.
Speaker 4: 2022 taxable income was $2.08 versus a $2.12 dividend.
Speaker 4: 2023 taxable income is currently projected at $1.05 without any asset sales and surely there will be asset sales. The difference between 2022 and 2023 taxable income is primarily increased interest rates.
Speaker 4: A couple of other comments. We think we have seen the peak in work from home. More and more CEOs are now requiring their employees back to the office.
Speaker 4: With each passing week, the office buildings feel more like 2019.
Speaker 4: And we believe it's just a matter of time before everyone is back for good. New York City seems to be leading the country in this regard.
Speaker 4: Lastly, with all CBD office docs having been crushed,
Speaker 4: And great concern about the future viability of offers is important to review our financial position and how it will liquidate.
Steven Roth: We have $3.2 billion of liquidity, including $1.3 billion of cash and treasury bills. We have over $8 billion at today's marked down values of debt-free, unencumbered assets. Penn One, Penn Two, and Farley are all unencumbered. The remaining capital program to complete Penn Two has been pre-funded and will be paid for out of cash balances. These buildings have significant future embedded earnings growth, and as Penn Two rents up, that incremental income will do wonders for our debt metrics. We rely primarily on project-level non-recourse debt, old-fashioned mortgages. Only 2.5 of our debt is recourse, and that with well-laddered maturities. We are clear-eyed and realistic about the near-term financial market challenges. It is not pretty when 3% debt rolls over into 6%, 7%, or even an 8% market.
Speaker 4: We have $3.2 billion of liquidity, including $1.3 billion of cash and Treasury bills.
Speaker 4: We have over 8 billion at today's marked out values of debt-free unencumbered assets.
Speaker 4: Penone, Pensoo, and Farley are all uncovered. The remaining capital program to complete Pensoo has been pre-funded and will be paid for out of cash balances.
Speaker 4: These buildings have significant future embedded earnings growth, and as PEN2 rents up, that incremental income will do wonders for our debt metrics.
Speaker 4: We rely primarily on project-level non-recourse debt, old-fashioned mortgages.
Speaker 4: Only 2.5% of our debt is recourse and that with well-lattered maturity.
Speaker 4: We are clear-eyed and realistic about the near-term financial market challenges.
Steven Roth: We have a few workouts to deal with over the next couple of years, but that is the point of having non-recourse debt. We have no maturities this year, limited property level maturities next year, and no corporate maturities until 2025, with sufficient capacity on our line that matures in December 2027. We don't have to finance in the current hostile market. Thank you. Now over to Michael to cover the financials and the market.
Speaker 4: It is not pretty when 3% debt rolls over into 6%, 7% or even an 8% market.
Speaker 4: We will certainly have a few workouts to deal with over the next couple of years. But that is the point of having non-recourse fit.
Speaker 4: We have no maturities this year. Limited property level maturities next year and no corporate maturities until 2025 with sufficient capacity on our line that matures in December 27 so that we don't have to finance in the current hospital market.
Michael Franco: Thank you, Steve. Good morning, everyone. During our last earnings call, we said that we expect 2023 comparable FFO to be down from 2022 and provided the known impact of certain items totaling a $0.55 reduction, primarily from the effect of rising interest rates. Though the current economic environment makes forecasting more difficult than usual, this remains a decent assumption, absent the impact of any asset sales. As expected, Q1 comparable FFO, as adjusted, was $0.60 per share, compared to $0.79 for last year's Q1, a decrease of $0.19 or 24.1%. This decrease was driven primarily by higher net interest expense from increased rates. Our company-wide same store cash NOI for Q1 increased by 1.5% over the prior year's Q1. We have provided a quarter over quarter bridge in our earnings release and in our financial supplement.
Speaker 5: Thank you, and now over to Michael to cover the financials and the market. Thank you, Steve, and good morning, everyone. During our last earnings call, we said that we expect 2023 comparable FFO to be down from 2022 and provided a known impact of certain items totaling a 55 cents reduction, primarily from the effect of rising interest rates.
Speaker 5: Though the current economic environment makes forecasting more difficult than usual, this remains a decent assumption, absent the impact of any asset sales. As expected, first quarter comparable FFO as adjusted was 60 cents per share, compared to 79 cents for last year's first quarter.
Speaker 5: a decrease of 19 cents or 24.1%. This decrease was driven primarily by higher net interest expense and increased rates.
Speaker 5: Our company-wide same-store cash and a Y for the first quarter increased by 1.5% over the prior years. We have provided a quarter over quarter bridge in our earnings release and in our financial supplement.
Michael Franco: Our core office and retail businesses remain resilient with long-term credit leases. Turning to leasing markets. Amidst the backdrop of interest rate volatility and recessionary concerns, we remain encouraged by the level of activity year to date. Leasing activity has been led by strong demand from traditional industries, financial services, and law firms in particular, with many financial firms growing their footprint and accounting for 40% of the 7.4 million square feet leased in Q1. The availability rate in newly constructed properties has substantially declined, with much of the new trophy space now largely absorbed at record level rents. Tenants in the market are increasingly focused on the highest quality, redeveloped Class A buildings that are well amenitized, have strong sponsorship, and are near transportation in Midtown and on the West Side, which is resulting in rents moving up in these buildings.
Speaker 5: Our core office and retail businesses remain resilient with long-term credit leases.
Speaker 5: Now turning to leasing markets. Amidst the backdrop of interest rate volatility and recessionary concerns, we remain encouraged by the level of activity year to date.
Speaker 5: leasing activity has been led by strong demand from traditional industries.
Speaker 5: financial services and law firms in particular, with many financial firms growing their footprint and accounting for 40% of the 7.4 million square feet leased in the first quarter.
Speaker 5: The availability rate of newly constructed properties has substantially declined, with much of the new trophy space now largely absorbed at record level rents.
Speaker 5: Tenants in the market are increasingly focused on the highest quality redeveloped Class A buildings that are well-immanitized, have strong sponsorship, and are near transportation in Midtown and on the Westside.
Michael Franco: Our office portfolio is filled with these types of buildings. Companies are clearly willing to pay more for the right work environment that they believe will help them retain and attract talent as well as motivate their employees back to the office. While there is solid activity in the market, large requirement deal flow is lagging, and concessions remain stubbornly high. Focusing on our portfolio. During Q1, we completed 22 leases totaling 777,000 square feet with healthy metrics, including starting rents at $101 per square foot and a positive mark-to-market of 1.7% cash and 8.5% GAAP. This included our full building, 585,000 square foot deal with Citadel at 350 Park Avenue and 82,000 square feet at Penn One at $92 starting rents.
Speaker 5: which is resulting in rents moving up in these buildings.
Speaker 5: Our office portfolio is filled with these types of buildings. Companies are clearly willing to pay more for the right work environment that they believe will help them retain and attract talent as well as motivate their employees back to the office.
Speaker 5: While there is solid activity in the market, large requirement deal flow is lagging and concessions remain stubbornly high.
Speaker 5: focusing on our portfolio.
Speaker 5: During the first quarter we completed 22 leases totaling 777,000 square feet with healthy metrics including starting rents at 101 dollars per square foot and a positive mark to market 1.7% cash and 8.5% gap.
Speaker 5: This included our full building 585,000 square foot deal with Citadel at 350 Park Avenue and 82,000 square feet at PEN1 at $92 starting rents.
Michael Franco: If we exclude the Citadel deal from our statistics, our team completed 21 leases totaling 192,000 sq ft at $83 starting rents with a very strong cash mark-to-market of 13.1%. We are continuing to experience good momentum in the Penn District with a steady stream of new leases at Penn One at ever increasing rents, now in the high 90s and breaching $100 per sq ft in the building's tower floors, reflecting tenants' attraction to the unique amenity offering we have in the most accessible location in the city. Tour activity is picking up at Penn Two as well now. The project is nearing completion, and tenants can better appreciate the redeveloped product. Overall, we have very good activity in many of our assets, generally at higher rents than a year ago. Our leasing pipeline in New York remains healthy.
Speaker 5: If we exclude the Citadel deal from our statistics, our team completed 21 leases, totaling 192,000 square feet, at $83 starting rents, with a very strong cash mark to market of 13.1%.
Speaker 5: We are continuing to experience good momentum in the Penn District.
Speaker 5: with a steady stream of new leases at Penn One at ever increasing rents. Now in the high 90s and breaching $100 per square foot in the building's power floors.
Speaker 5: reflecting tenants attraction to the unique amenity offering we have in the most accessible location in the city.
Speaker 5: Tour activity is picking up at PEN2 as well now. The project is nearing completion and tenants can better appreciate the redeveloped product. Overall, we have very good activity in many of our assets.
Michael Franco: We have more than 400,000 square feet of leases in negotiation, plus an additional 1.4 million square feet in our leasing pipeline. Much of this activity is at buildings where we have significant move-outs this year and next. The financial sector, in particular, continues to be active. With that, I'll turn it over to the operator for Q&A.
Speaker 5: generally at higher rents than a year ago.
Speaker 5: Our leasing pipeline in New York remains healthy. We have more than 400,000 square feet of leases in negotiation, plus an additional 1.4 million square feet in our leasing pipeline.
Speaker 5: Much of this activity is at buildings where we have significant move outs this year and next.
Speaker 5: The financial sector in particular continues to be active. With that, I'll turn it over to the operator for Q&A.
Operator: Thank you. We will now begin the question-and-answer session. If you have a question, please press star then one on your touchtone phone. If you wish to be removed from the queue, please press star then two. If you are using a speakerphone, you may need to pick up your handset first before pressing the numbers. Once again, if you have a question, please press star then one on your touchtone phone. Each caller will be allowed to ask a question and a follow-up before we move on to the next caller. Our first question comes from Steve Sakwa with Evercore. Please proceed.
Speaker 5: in particular continues to be active. With that, I'll turn it over to the operator for Q&A. Thank you.
Speaker 2: We will now begin the question and answer session. If you have a question, please press star, then 1 on your touch tone phone.
Speaker 2: If you wish to be removed from the queue, please press star then 2. If you are using a speakerphone, you may need to pick up your handset first before pressing the numbers.
Speaker 2: Once again, if you have a question, please press star, then 1 on your touch tone phone. Each caller will be allowed to ask a question and a follow up before we move on to the next caller.
Speaker 2: If you have a question, please press star, then 1 on your touch tone phone. Each caller will be allowed to ask a question and a follow up before we move on to the next caller.
Speaker 6: Our first question comes from Steve Sockwell with Evercore. Please proceed. Yeah, thanks. Good morning. Steve, I appreciate the comments on the dividend and the additional color there. I just want to make sure when you talk about going on offense...
Steve Sakwa: Thanks. Good morning. Steve, I appreciate the comments on the dividend and the additional color there. I just want to make sure when you talk about going on offense, does that really just mean buybacks, or could that include potentially buying buildings as well? Is buybacks really the only thing on the table at this point?
Speaker 6: Does that really just mean buybacks or could that include potentially buying buildings as well or is buybacks really the only thing on the table at this point? Yes, the best value is in buying back our stock.
Steven Roth: The best value is in buying back our stock. We will focus on our stock at the expense of buying a building here and there. If we buy a building that used to be $1,000 a foot for $700 a foot, that potential pales in relation to the value that we see in our stock.
Speaker 4: So we will focus on our stock at the expense of buying a building here and there. If we buy a building that used to be $1,000 a foot for $700 a foot, that potential pales in relation to the value that we see in our stock.
Steve Sakwa: Great. Then as a follow-up, Michael, I'm just wondering if you could maybe talk about the leasing dynamics sort of between Penn Two and Penn One. It sounds like with the renovation of Penn One, you're getting really good traction at the triple-digit rents you'd sort of talked about when you did the redevelopment. I'm just curious, are you getting closer to getting some tenants in and secured at Penn Two? Is that project kind of near completion by the end of this year? I guess what's the hold up on getting leases signed at Penn Two?
Speaker 6: Great. And then as a follow up, uh, Michael, I, you know, I'm just wondering if you could maybe talk about the leasing dynamics sort of between pen two and pen one, it sounds like with the renovation of pen one, you're getting really good traction at, you know, the, the triple digit rents you'd sort of talked about when you did the redevelopment. And I'm just curious, are you getting closer to getting some, you know, tenants in and secured at pen two is that project kind of nearest.
Glen Weiss: I'll just take that, Glen.
Glen Weiss: Sure. It's Steve. Glen. Yes, Penn One is on fire. Leasing activity is strengthening really week to week. Great tenants, financial, technology, accounting, consulting, and rents are now piercing $100. We're really pleased how Penn One's coming along. Really as Penn Two unfurls month to month, the project is looking better and better. Just amazing product we're delivering. As the Penn One activity continues to strengthen, that seamlessly flows in the Penn Two action. We now have tenants who are getting boxed out of Penn One looking at Penn Two. Our tour activity is higher than ever right now with Penn Two. Some large activity, some single, double, two-floor activity. The building will lease. It is the best product available in the market. It is in a perfect location. It is at transportation with amenities like no one else has. We're supremely confident
Speaker 7: So we're really pleased how Pad 1 is coming along. And really is pen to unfurls month to month.
Speaker 7: The project is looking better, better, and better. Just amazing product we're delivering. And as the PEN1 activity continues to strengthen, that seamlessly flows in the PEN2 action.
Speaker 7: So we now have pen and two are getting boxed out of pen one looking at pen two our tour activity is Higher than ever right now with pen two some large activities some single double two-floor activity The building will lease it is the best product available in the market
Speaker 7: It is in a perfect location. It is at transportation with amenities like no one else has. So we're supremely confident in the product and we look forward to great success early to us.
Glen Weiss: In the product, we look forward to great success there leasing wise.
Steve Sakwa: Great. Thank you.
Steven Roth: Steve, you should know, hang on for one more minute. You should know that earlier, we had the opportunity to lease the bustle floors, half of the bustle floors, to two different prospects, important companies, we turned them down. We have a great deal of confidence in the product and the building. As Glen says, the building will lease.
Speaker 4: Steve, hang on for one more minute. You should know that earlier we had the opportunity to lease the bustle floors, but half of the bustle floors to two different prospects, important companies, and we turned them down.
Speaker 4: So we have a great deal of confidence in the product and the building as Glenn says, the building will leave.
Operator: Our next question comes from.
Speaker 8: Our next question comes from... Next question. Next question, please.
Steven Roth: Next question, please.
Operator: Our next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.
Alexander Goldfarb: Good morning. Thanks for taking my questions. Two questions. First, Steve, in your Q3 call, you outlined the potential to resize the dividend, which you guys did, then a few months later decided to suspend it. Obviously, the rate environment has remained up and to the right. The office leasing, the capital needs of the company, everything else sort of stayed the same. What changed in your view, the board's view, between deciding to resize the dividend from $0.53 quarterly to the $0.375, to then suspending it? I'm just trying to figure out what changed, because the macro and the leasing fundamentals and the balance sheet all seem to be the same.
Speaker 2: Our next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.
Speaker 9: Good morning and thanks for taking my questions. So two questions. First, Steve, you guys recently, in your third quarter call, you outlined the potential to resize the dividend which you guys did, and then a few months later decided to suspend it. Obviously the rate environment has remained up and to the right.
Speaker 9: the office leasing, the capital needs of the company, everything else sort of stayed the same. So what changed in your view, the board's view, between deciding to resize the dividend from 53 cents quarterly to the 37 and a half, to then suspending it? I'm just trying to figure out what changed because the macro and the leasing fundamentals.
Steven Roth: Alex, hi. Actually, you're correct. Nothing changed. The only thing that really changed was that our stock went down 35% from, as I said in my remarks, from a low level to an even lower level. We put our heads together, and we decided that after years and years of avoiding buying back stock for lots of very good logical financial reasons, we decided that the time was now. We consider buying back stock to be an offensive move, and we decided that we were going to buy back stock. That's the first point. We think the value is there. By the way, I'm not calling a bottom. What I am saying is that our company is going to devote financial resources to buying back stock. That's the first thing, and we announced it.
Speaker 9: and the balance sheet, you know, all seem to be the same.
Speaker 4: Alex, hi. Actually, you're correct. Nothing changed. The only thing that really changed was that our stock went down 35% from, as I said in my remarks, from a low level to an even lower level.
Speaker 4: For lots of very good logical financial reasons, we decided that the time was now. We consider buying back stock to be an offensive move and we decided that we were going to buy back stock. So that's the first point. We think the value is there. We think it's, by the way, I'm not calling a bottom. What I am saying is that our company is going to devote financial resources to buying back stock. So that's the first thing and we announced it, by the way, it was a little awkward for us to announce a stock buyback in a dividend.
Steven Roth: By the way, it was a little awkward for us to announce a stock buyback in a dividend press release, but nonetheless, we thought that they matched together, they were a pair. That's the stock. We're going to buy back stock. We consider that to be an offensive move, and we're very excited about it. Now, the next question is the dividend, and where do we get the resources to buy back stock? Well, the first question is that the taxable income is moving around. Things are changing. We will be selling assets, presumably. We cannot yet predict how much the asset sales will be, what will be the taxable income from them. We just don't know yet. That's the first thing.
Speaker 4: the asset sales will be, what will be the taxable income from them, we just don't know yet.
Steven Roth: The second is that we announced in the dividend release that we will pay the dividend at the end of the year, as we must, but we don't consider suspending the dividend or postponing the dividend for two quarters to be a big deal. Actually, I don't. We will pay the dividend as we must in Q4, and we will pay the dividend in whatever the appropriate size is. That's one unknown. The second unknown is we announced that we would pay it either in cash or in a combination of cash and scrip. I think that it's not impossible that we will pay the dividend in scrip. I'm not making a prediction, but I'm saying we are retaining that option. Why? We believe that a shareholder receives stock in lieu of cash in a dividend should be indifferent. It's exactly the same.
Speaker 4: So that's the first thing. The second is that we announced in the dividend release
Speaker 4: that we will pay the dividend at the end of the year as we must.
Speaker 4: But we don't consider suspending the dividend or postponing the dividend for two quarters to be a big deal. Maybe you do, but actually I don't. So, we will pay the dividend as we must in the fourth quarter.
Speaker 4: And we will pay the dividend in whatever the appropriate size is, so that's one unknown.
Speaker 4: The second unknown is we announced that we would pay it either in cash or in a combination of cash and script.
Speaker 4: that it's not impossible that we will pay the dividend in script. I'm not making a prediction, but I'm saying we are retaining that option Why? We believe that a shareholder receives stock in lieu of cash in a dividend should be indifferent. It's exactly the same You can sell the stock and turn it into cash, etc. So we believe that it is is By the way as a sort of humorous you did spend a significant amount of time In our council room and in our boardroom going round and round on let's just think about this
Steven Roth: You can sell the stock and turn it into cash, et cetera. We believe that, by the way, as sort of humorous, we did spend a significant amount of time in our council room and in our boardroom going round and round on, Well, let's just think about this. We're going to be perhaps issuing stock in lieu of cash for a dividend, but we're going to be buying back stock. Isn't that circular? The answer to that is no, it's not, because the issuing stock for a dividend is pro rata. Everybody has exactly the same percentage ownership in the company the minute before they get the stock and the minute after they get that stock.
Speaker 4: We're going to be perhaps issuing stock.
Speaker 4: In lieu of cash for a dividend, but we're going to be buying back stock isn't that circular? and the answer that is no it's not because the The issuing stock for a dividend is pro rata. Everybody has exactly the same percentage ownership in the company
Steven Roth: When a buyback, however, is discriminate because people will make a decision to sell and reduce their percentage ownership in the company or to not sell and increase their percentage ownership in the company. Anyway, the fact of the matter is that we will size the dividend at the end of the year. We will make a determination as to whether to pay it in all cash or part cash and stock. If we pay it in part stock, that will go a long way to funding buybacks or whatever. That's our thinking.
Speaker 4: The minute before they get the stock and the minute after they get that stock when a buyback however is is Discriminate because people will make a decision to sell and reduce their percentage ownership in the company or to not sell and increase their percentage ownership in the company
Speaker 4: So anyway, the fact of the matter is that we will size the dividend at the end of the year, we will make a determination as to whether to pay it in all cash or part cash and stock. And if we pay it in part stock...
Alexander Goldfarb: Okay.
Steven Roth: Our thinking is it's offensive, and we think actually, the right thing to do.
That will go a long way to funding buybacks or whatever. So that's our thinking
go a long way to funding buybacks or whatever. So that's our thinking. OK. This is an up.
I think it's offensive and we think actually the right thing to do.
Alexander Goldfarb: That segues-
Steven Roth: Go ahead, Alex.
Alexander Goldfarb: Yeah, that segues into the next question. Obviously you've seen your crosstown peer do a few billion. Hudson did a buyback. There's not a lot of evidence that buybacks help, but when we look at your balance sheet, it looks like you have $2.4 billion of debt where the swaps expire later this year. My question is, wouldn't the $200 million be better spent paying down that debt? Michael, in the $0.55 that you said this year would be down versus last year, that includes these swaps burning off, or these swaps burning off are incremental to that?
So that segues into the next question. So I mean obviously you've seen your cross town peer do a few billion, you know Hudson did a buyback. I mean there's not a lot of evidence that buybacks help but when we look at your balance sheet it looks like you have 2.4 billion of debt where the swaps expire later this year. So my question is.
Michael Franco: No, Alex, whatever we mentioned last quarter reflect our expectation of swaps, caps, et cetera, that roll off this year. That's in that number.
Alexander Goldfarb: Using.
Steven Roth: Alex, we have a great deal of confidence in the strength of our balance sheet. We think that our maturities are well-laddered. We think that most of our debt, the vast majority of our debt is non-recourse, and that's a crucial and very important element in the strength of our balance sheet. We obviously will consider management of our debt in contrast to buying back our stock each time we get into the situation of making that choice. We have confidence that we will make the right decision, by the way.
Alexander Goldfarb: Okay. Thank you, Steve.
Steven Roth: Yes, sir. By the way, one last point, okay? There's no other company that I'm aware of that is spending multiple billions of dollars.
Operator: Our next question comes from Michael Griffin with Citi. Please go ahead.
Michael Griffin: Great. Thanks. Maybe just piggybacking on Goldfarb's question there about the stock buybacks. Steve, you just used the phrase, I'm not calling the bottom. I guess, what gives you the confidence that the stock is trading so cheaply relative to your expectation, right? We've known that office NAVs relative to the stock price have been pretty materially depressed recently, but your share price relative to GFC times is down 30-plus percent from the beginning of 2009. Have you run some analysis? Is there really some kind of thought behind it, or is there a worry that this could be akin to catching a falling knife, so to speak?
the stock price had been pretty materially depressed recently, but your share price relative to GFC times is down 30 plus percent from the beginning of 09. So, you know, if you'd run some analysis, is there really some kind of thought behind it? Or is there a worry that this could be akin to catching a falling knife, so to speak? It's Michael Griff. Good morning.
Michael Franco: It's Michael Griffin. Good morning. The answer is, when I think Steve says he's not calling the bottom, I think that commentary relates to the macro environment is likely going to remain choppy near term. The Fed appears to be coming to the end of their tightening cycle, but it's not definitive. We don't know whether rates will stay higher for a more extended period of time. I think as we evaluate the company, and we look at the price throughout the intrinsic asset value, even on a stress case, we think it is heavily discounted, right? We think that the pricing has become irrational. Every day there's negativity about office in the media. Some of that's warranted, but we think that's the whipping boy for today, and so that's going to continue, and that obviously has an effect on sentiment.
I don't know whether rates will stay higher or more than the period of time.
But I think as we evaluate the company and we look at the price throughout the intrinsic asset value, even on a stress case, we think it is heavily discounted, right? So we think the pricing has become irrational. Every day there's negativity about office and the media and some of that's warranted, but we think that's...
Michael Franco: It's gotten a bit extreme, right? I think our action is a reflection of that. As we stress the valuation and we have, we think there is a significant margin still.
Michael Griffin: That's helpful. Maybe just one on leasing for Glenn. I guess ex-Citadel this quarter is about 200,000 sq ft of leasing. Was there anything really driving that? Do you have any big updates on, I guess, the move-out at 770 Broadway? I think there's potential expiration at 1290 AOA. I think it's with AXA Advisors, but if you could just update us on that would be great.
That's helpful. And then maybe just one on leasing for Glenn. I guess Ex-Citadel this quarter is about 200,000 square feet of leasing. Is there anything really driving that? And then do you have any big updates on, I guess, the move out at 770 Broadway and then I think there's potential expiration at 1290 AOA. I think it's with AXA Advisors, but if you just update us on that, that would be great.
Glen Weiss: Yeah, sure. The color on the 200,000 feet that we leased outside of Citadel was substantially Penn One and then some strong financial service deals at our Plaza District buildings. With rents that started $83 a foot, cash mark to market of 13% on those deals.
Yeah, sure. So the color on the 200,000 feet that we leased outside of Citadel was substantially pen one and then some strong financial service deals at our Plaza District buildings, you know, with rents that started at $83 a foot, cashmarked the market at 13% on those days.
Operator: Pardon me, this is your conference operator. Please proceed. It seems we had a bit of interference. The main speaker line is connected. Please proceed with your response.
Hello? Pardon me. This is your conference operator. Please proceed. It seems we had a bit of interference.
Glen Weiss: That was the Q1 non-Citadel activity. As it relates to 1290, 770, and other expirations this year and in 2024.
The main speaker line is connected. Please proceed with your response. So that was the first quarter non-citadel activity. As it relates to 1290, 770, and other expirations this year and in 24, we're obviously in the market, and we're seeing very strong demand for those properties.
Michael Franco: We're obviously in the market, and we're seeing very strong demand for those properties. If you think about the portfolio, we think it's the strongest in the city, and those buildings particularly have underwent great redevelopments in the past. We're adding some of our work-life amenity programs to those assets currently on the board being drawn up. A lot of our pipeline is at the 1290s, the 770s, the 280 Parks, the Penn Ones, et cetera. We're out there. We're already in paper on a lot of space at some of those assets, and I feel good about those properties and those spaces coming back in terms of making matches with the tenants who are in demand in the market right now.
If you think about the portfolio, we think it's the strongest in the city and those buildings particularly have underwent great redevelopments in the past. We're adding some of our work life amenity programs to those assets currently on the board being drawn up.
So a lot of our pipeline is at the 1290s, the 770s, the 280 parks, the Penn Ones, et cetera. So we're out there, we're already in paper on a lot of space at some of those assets, and I feel good about those properties and those spaces coming back in terms of making matches with the tenants who are in demand in the market.
Michael Franco: Griffin, I may just add to that. I think I mentioned this in my opening remarks. If you look at what's happened in the market, right? The new trophy space that was delivered, which has seen record rents, significant demand, that's largely spoken for. I think we talked last quarter about a broadening out of tenant activity. Not everybody wants to pay high $100, $120 square foot rents. Well-located, redeveloped assets near the transit hubs are what is seeing that demand. The buildings where we have holes in them, the 280s, the 1290s, et cetera, we're seeing very good tenant activity there. Rents are starting to move up in those assets. I think that's important, right?
And I think we talked last quarter about a broadening out of tenant activity, you know, not everybody wants to pay high $100, $200 square foot rents. You know, well-located, redeveloped, you know, assets, you know, near the transit hubs are, you know, what is seeing that demand. So it's all about spite once people, Thank you again, so many thanks very much. Okay, so let's see one last question,
you know the buildings where we have holes in them the 280s the 1290s etc. you know we're seeing very good tenant activity there and you know rents are starting to move up in those assets and so I think I think that's important right concessions are high but rents are starting to move up from these other assets because there's such a Delta between you know the new buildings
Michael Franco: Concessions are high, but rents are starting to move up in these other assets because there's such a delta between the new buildings and these redeveloped assets that are well located. Proximity to transit is critical. Obviously, the state of the building's important. That's a continuing trend we're seeing, and we're pleased with the activity at a number of our assets that are consistent with that theme.
and these redeveloped assets that are well located. And proximity to transit is critical. Obviously the state of the building's important, but that's a continuing trend we're seeing. And we're pleased with the activity at a number of our assets that are consistent with that theme.
Michael Griffin: All right. That's it for me. Thanks for the time.
Michael Franco: Thank you.
Operator: Our next question comes from John Kim with BMO Capital. Please go ahead.
Alright, that's it for me. Thanks for the time.
All right, that's it for me. Thanks for the time. Thank you.
John Kim: Thank you. Good morning. I wanted to follow up on the dividends and the singular aspect of suspending it at this time. Two questions on that. One, do you anticipate your share count will be reduced by year-end? Two, when you decide whether or not to pay the dividend in scrip, are you committed to only issue it at a higher share price than where you're buying it back at?
Two, when you decide whether or not to pay the dividend in Scripp, are you committed to only issue it at a higher share price than where you're buying it back at? John , I think that we anticipate the share count being, I think it all depends on the execution of the buyback. We're going to monitor the marketplace and decide when to execute, how to execute. I think it's difficult to answer your first question today. Obviously, the dividend wouldn't get paid out until year end. So the likelihood is the share count could go down and then back up. I think there's people who do in terms of similar...
Michael Franco: John, I think that we anticipate the share count. I think it all depends on the execution of the buyback, right? We're going to monitor the marketplace and decide when to execute, how to execute. I think it's difficult to answer your first question today. Obviously, the dividend wouldn't get paid out until year-end, so the likelihood is the share count could go down and then back up as Steve alluded to in terms of similar, we increased the stock dividend. Issuance, again, when it comes to year-end and we evaluate how to pay it, everything will be taken into consideration. We'll evaluate the cash versus scrip component and decide at that time based on what we've bought back and how much we generated from asset sales, et cetera. What's the right mix? Too early to answer all those things.
We increased the stock dividend. And then issuance, again, when it comes to year end and we evaluate how to pay it, everything will be taken into consideration. We'll evaluate the cash versus script component and.
based on what we've bought back and you know how much regenerated from asset sales you know etc etc what's the right what's the right mix to to really answer all those things okay
John Kim: Okay. It just seems like if you're buying it back at a 10. Sorry, go ahead.
Steven Roth: I'm remote, and my equipment stinks. Sorry if I cut out. I'm back. The reason for the pause in the dividend is to give us time to evaluate all of those things that Michael just mentioned.
It just seems like if you're buying it back and it's in... Sorry, go ahead. I'm remote and my equipment stinks. Sorry, I cut out from the back. The reason for the pause in the dividend is to give us time to evaluate all of those things that Michael just mentioned. I was just going to say, it makes sense to buy back at these levels, I suppose, at a 10% implied cap rate or so, but then if you issue it back at 10%, then it doesn't really...
John Kim: I was just going to say, it makes sense to buy back at these levels, I suppose, at a 10% implied cap rate or so. If you issue it back at 10%, then it doesn't really make an impact. My second question is.
Michael Franco: John, it does for an individual holder, right? In other words, all that's pro rata, as Steve said. If you hold throughout, you own more of the company going forward.
make an impact. But my second question is... It does for an individual holder, John . John , it does for an individual holder. In other words, if you... All that's pariah, as Steve said. If you hold the route, you owe more of the company going forward. Got it. Okay. My second question is on the leasing pipeline. As I said, John , as I said, that's the circular argument.
John Kim: Got it. Okay. My second question is on the leasing pipeline. I think, Michael, you mentioned-
Steven Roth: John, as I said, that's a circular argument, which we spend a great deal of time on in our council room and even in our boardroom. The issuance is pro rata. You own exactly to the penny, the same percentage ownership of the company that you used to own. You have a few more shares, but it's the same percentage ownership, whereas the buyback is the opposite of pro rata.
which we spend a great deal of time on in our council room and even in our boardroom, but the issuance is pro rata. You own exactly to the penny the same percentage ownership of the company that you used to own. You have a few more shares, but it's the same percentage ownership, whereas the buyback is the opposite of pro rata.
deal of time on in our council room and even in our board room but the the issuance is pro rata you own exactly to the penny the same percentage ownership of the company that you used to own you have a few more shares but it's the same percentage ownership whereas the buyback is the opposite of pro rata right okay
John Kim: Right. Okay. My second question is on your leasing pipeline. I think, Michael, you mentioned 400,000 square feet in negotiations currently. I wanted to see how that compared versus the last quarter. I think you mentioned last time it was 1.2 million square feet, 275,000 being finalized. I know those terms are a little bit different, but apples to apples, where does your pipeline compare today versus a few months ago?
My second question is on your leasing pipeline. I think Michael, you mentioned 400,000 square feet in negotiations currently. I wanted to see how they compared versus the last quarter. I think you mentioned last time it was 1.2 million square feet, 275,000 being finalized. I know those terms are a little bit different.
Glen Weiss: Hi, it's Glen Weiss, John. I would say it's very consistent. When we talk about 400,000 feet out, that's leases, documents in negotiation, where the term sheets are final, and the lease documents are being negotiated. The additional 1.4 million feet are deals that we're speaking with brokers and tenants. We have proposals in the house. We've responded to those proposals, and we have a rhythmic back and forth on the deal-making. It's consistent, I think, quarter to quarter what we're seeing. Mainly the activity is financial service and law firms in that pipeline. Across the board, I'd say the rhythm of the deal-making, the tenant demand, the tours, have been consistent the last, call it two to three quarters.
But apples to apples, where does your pipeline compare today versus a few months ago? Hi, it's Glenn Weistraun. I would say very consistent. So when we talk about 400,000 feet out, that's leases, documents in negotiation.
So it's consistent, I think quarter to quarter what we're seeing. Mainly the activity is financial service and law firms in that pipeline. But across the board, I'd say the rhythm of the deal making, the tenant demand, the tours.
John Kim: Can you break that out geographically?
have been consistent the last, call it two to three quarters. And can you break that out geographically? I would say between Penn and Midtown, for us,
Glen Weiss: I would say, between Penn and Midtown, for us, pretty well averaged out between the two sub-markets. In Midtown, mainly the Plaza District buildings, which attract the financial service tenants.
pretty well averaged out between the two sub-markets. And in Midtown, mainly the Plaza District buildings, which attract the financial service tenants.
John Kim: Very helpful. Thank you.
Operator: Our next question comes from Camille Bonnel with Bank of America. Please go ahead.
Very helpful. Thank you. Our next question comes from Camille Bonnell with Bank of America. Please go ahead. Guys, do you,
Camille Bonnel: Good morning. Could we touch on the financing market? We've been hearing over recent weeks that the credit spreads have moved higher since the issues around regional banks. Noticed you completed a refi on Roseland Plaza this month and the spread came in slightly lower. Was this a surprise or more of a reflection of other characteristics of the loan?
Good morning. Could we touch on the financing market? We've been hearing over recent weeks that the credit spreads have moved higher since the issues around regional banks, but notice you completed a refi on Roslyn Plaza this month and the spread came in slightly lower. Was this a surprise or more of a reflection of other characteristics of the loan?
Steven Roth: Michael?
Michael Franco: Yeah. Camille, look, I think every asset is an individual situation, right? In that particular situation, it's not a large loan. We de-levered it a bit and our job is to find the best lenders for each situation. It was a good execution. As a general matter, I agree with your first comment. The markets are challenging, spreads have widened out, but again, it's asset dependent, sponsor dependent. There is capital out there. It's not robust by any measure, but there is capital out there for the right sponsors, right assets, and with good term or at the right loan-to-value levels. The spreads, albeit wider than a couple of years ago, are still okay. I think it's where you have assets that are higher levered or where there's much more volatility in the income stream near term, where it's more challenging.
Michael? Yeah. Camille, I think every asset is an individual situation, right? So in that particular situation, it's not a large loan. We de-levered it a bit and our job is to find the best lenders.
robust by any measure but there is capital out there for the right sponsors, right assets and with good term or the right loan to value levels, the spreads, albeit wider than a couple years ago are still okay.
I think it's where you have assets that are higher levered or where there's much more volatility in the income stream near term where it's more challenging. So I think Roslyn was a small asset, good execution and reflective of a high quality location.
Michael Franco: Look, I think Roseland was a small asset, good execution, and reflective of a high-quality location.
Steven Roth: My take on this, Camille, is markets are extremely hostile. This is the time in the cycle where you're best to not have to refinance or finance. If you have to finance, you're at a huge disadvantage, and one of the things that I like about our strategy is we have very little that we have to finance. Especially with our cash hoard, which is financing our Penn construction. The markets are really hostile, and the best bet is just stay out of them.
My take on this Camila is markets are extremely hostile.
This is the time in the cycle where your best should not have to refinance or finance. If you have to finance, you're at a huge disadvantage.
And one of the things that I like about our strategy is we have very little that we have to finance.
So, especially with our cash hoard, which is financing our pen construction. So, the markets are really hostile and the best bet is just stay out of them. You were cutting out a bit, Steve, but I think I got parts of your message. So, thank you....
Camille Bonnel: You were cutting out a bit, Steve, but I think I got parts of your message. Thank you. Just switching, in the last quarter, Glen talked about the opportunity of converting showroom space at theMART to office. I was wondering how that specific business plan is progressing and how interest has been tracking so far into April.
And then just switching, in the last quarter, Glenn talked about the opportunity of converting showroom space at the Mart to office. I was wondering how that specific business plan is progressing and how interest has been tracking so far into April . So the casual business departed for Atlanta in the fourth quarter.
Glen Weiss: The casual business departed for Atlanta in Q4. We're now preparing that space for office leasing. In general, we have a pretty good pipeline in Chicago. Our amenity program will be complete by June. We're going to be out there for NeoCon and another broker event this summer, which we're looking forward to really bring the program out to the market. The pipeline is good in Chicago. The market is tough. There's not a huge lot of tenant demand, and particularly not a large tenant demand at the present. Our showroom business continues to perform. We've leased about 60,000 feet this quarter at $60 starting rent on the showroom business. The office business, we've leased over a half a million feet of office the last 3 years. We have modest expirations the next 3 years. We're grinding out the office.
market. So you know the pipeline is good in Chicago, but the market is tough. There's not a huge a lot of tenant demand and particularly not a large tenant demand except the present. Our showroom business continues to perform. We've leased about 60,000 feet this quarter at $60 starting rent on the showroom business. orders on oursorry chain or firm.
The office business, we've leased over a half a million feet of office the last three years. We have modest expirations the next three years. We're grinding out the office. We're getting looks from all the majors. We're in very solid discussions now with a couple tenants looking to move their headquarters to the mart. So starting to feel better, but certainly tough conditions in Chicago as we sit here.
Michael Franco: We're getting looks from all the majors. We're in very solid discussions now with a couple of tenants looking to move their headquarters to theMART. Starting to feel better, but certainly tough conditions in Chicago as we sit here.
Operator: Our next question comes from Julian Bluman with Goldman Sachs. Please go ahead.
Our next question comes from Julian Bloulin with Goldman Sachs. Please go ahead. Okay.
Julian Bluman: Hi. Good morning. Thank you for taking the question. I wanted to go back maybe to the potential for asset sales. I know on the last call, I think the comment was that you didn't foresee being able to de-lever via asset sales for the next 24 months. Now it sounds like you see a real potential for asset sales this year. Has your thinking changed at all? Is it really down to maybe the share price and now thinking that even at sort of distressed pricing, you can get some accretion from repurchasing shares? Just curious to sort of get your thoughts on that.
Hi, good morning. Thank you for taking the question. I wanted to go back maybe to the potential for asset sales. I know on the last call I think the comment was that you didn't foresee being able to de-lever via asset sales for the next 24 months, but now it sounds like you see a real potential for asset sales this year.
Has your thinking changed at all? Is it really down to maybe the share price and now thinking that even at sort of distressed pricing you can get some accretion from repurchasing shares? I'm just curious to sort of get your thoughts on that.
John Kim: Michael?
Michael Franco: Julian, I had seen your, I guess Caitlin's note, and I was a little surprised by the comment about no assets over the next 24 months. I don't think we said that on the last call. I think we said it's a more difficult market to sell assets in, but I don't think we said we weren't going to try to sell assets. I think we said we're going to be targeted and recognize that you have to be realistic and thoughtful about what you sell. I don't know that our outlook has changed that significantly. It continues to be a difficult market to sell assets in. We think we have some that, as we think about which assets we want to sell, it's a mix of retail and office assets. We do think they're saleable.
Michael? Yeah, Julian. You know I had seen your, I guess Caitlin's note, and I was a little surprised by the comment about you know no assets those next 24 months. I don't think we said that on the last call. You know I think I think we said it's a
more difficult market to sell assets in, but I don't think we said we weren't going to try to sell assets. You know, I think we said we're going to be targeted and you know, recognize that you know, you have to be realistic and thoughtful about what you sell. So, you know, I don't know that our outlook has changed that significantly. It continues to be a difficult market to sell assets in. You know, we think we have some that you know, as we think about which assets we want to sell.
Michael Franco: I think your comment sort of at the end of that while the market may not be as strong or as strong as it was, and pricing's been impacted, our share price has been impacted more. I think that's exactly right. We may not love the price of some assets today relative to where they were a few years ago, but relative to our stock price, we do like that pricing. The answer is, we're not a forced seller. We don't have to sell anything. We're going to be targeted. We think we can execute some sales. We have some dialogues going on certain assets. We're going to pursue sales on a couple of other things that probably were not in our thing a little bit earlier in the year. Our expectation is we're going to be able to execute on some of that.
We may not love the price of some assets today relative to where they were a few years ago, but relative to our stock price, we do like that pricing. So the answer is we're not a forced seller. We don't have to sell anything. We're going to be targeted. We think we can execute some sales. We have some dialogues going on certain assets.
We're going to pursue sales on a couple of other things that probably were not in our thing a little bit earlier in the year. And our expectation is we're going to be able to execute on some of that. But given the uncertainty in the market, we're not going to guarantee it and nor are we going to be forced to sell anything. So we'll see how the rest of the year plays out, but it is our intent to try to execute on some of it.
Michael Franco: Given the uncertainty in the market, not going to guarantee it, and nor are we going to be forced to sell anything. We'll see how the rest of the year plays out, but it is our intent to try to execute on some of those sales.
Julian Bluman: Okay, great. Thank you.
Operator: The next question comes from Daniel Ismail with Green Street. Please go ahead.
Daniel Ismail: Hi, guys. Dylan on here. Just touching on the asset sales, I guess, do you guys have anything in the market today? If you could provide sort of further detail or color on sort of what the profile of these assets are. Should we expect these to be some of the higher quality properties with long WALT?
And if you could provide sort of further detail or color on sort of what sort of the profile of these assets are Should we expect these to be some of the higher quality properties with long wall?
Michael Franco: Daniel, not going to get into specifics. The answer is, we have discussions going on a few assets. This is not generally a market that you blast things out. You've got to focus on who has capital, willing to deploy. I will say there are a number of investors that view this as an interesting time to enter New York. In some cases, there's decent duration on the leases. Other cases, it's more traditional rollover in terms of buildings, certain percentage every year. As I mentioned, it's a mix of both retail and office. Not going to get any more specific to that until we have something to announce. As I said, we do think that they're executable if you find the right investor and you're realistic on price.
You know, Daniel, we're not going to get into specifics. The answer is we have discussions going on with a few assets. You know, this is not generally a market that you blast things out. You know, you've got to focus on who has capital, who's willing to deploy. I will say there are a number of investors that view this as an interesting time to enter New York. And in some cases, you know, there's decent duration on the leases, other cases.
It's more traditional rollover in terms of buildings, certain percentage every year. And as I mentioned, it's a mix of both retail and office. So not gonna get any more specific to that until we have something to announce. But as I said, we do think that they're executable if you find the right investor and you're realistic on price.
Daniel Ismail: Okay, that's helpful. Just, we're three years through the pandemic. Office utilization still remains fairly low relative to the 2019 levels. Just curious if you guys have seen any changes with regards to how tenants are building out their space?
Okay, that's helpful. And then just, you know, we're three years through the pandemic, you know, office utilization still remains fairly low relative to the 2019 levels. I'm just curious if you guys have seen any changes with regards to how tenants are building out their space. Okay, thank you.
Glen Weiss: This is Glen. Yeah, generally, I would say more collaborative, collegial spaces, open workplaces, like I always call it hangout spaces. If you look across the portfolio generally, you're still seeing some private office mixed with the traditional cube open areas. In terms of densification, some industry types are more dense, some are the same density they were. It's really a mixed bag. I wouldn't say a consistent layout of any industry type as you relate one to the next.
This is Glenn. Generally, I would say
more collaborative collegial spaces, open workplaces, I always call it hangout spaces. But if you look across the portfolio generally, you're still seeing some private office mixed with the traditional cube open areas.
You know in terms of densification, you know some industry types are more dense, some are the same density they were. It's really a mixed bag, I wouldn't say a consistent layout of any industry type as you relate one to the next.
Glen Weiss: Generally, I don't think there's much of a new theme than what we've seen previously, other than the hangout, collaborative, collegial environment. The one thing that we have focused on in terms of the workplace is what we've done in the buildings, particularly at Penn One, what we're doing at Penn Two, what we've done at theMART, what we're going to do shortly at 1290, where we believe tenants want to be in these buildings because of the way we have really improved the experience when you first enter the asset. The first experience, that impact, we think is most important to our success. When people come in, they're comfortable, they could eat, they could drink, they could hang out, they could go to the gym, whatever they're going to do.
Generally I don't think there's much of a new theme than what we've seen previously other than the quote-unquote hangout collaborative collegial environment.
I mean the one thing that we have focused on in terms of the workplace is what we've done in the buildings, particularly at Penn 1, what we're doing at Penn 2, what we've done at the MART, what we're going to do shortly at 1290, where we believe tenants want to be in these buildings because of the way we have really improved the experience when you first enter the asset.
So the first experience that impact we think most important power success when people come in they're comfortable They could eat they could drink they could hang out they could you know go to the gym whatever they're going to do We look at it like they're coming into a concierge hotel environment, and that's how we've created these new workplaces in our portfolio
Glen Weiss: We look at it like they're coming into a concierge hotel environment, and that's how we've created these new workplaces in our portfolio, which has been working extremely well as it relates to our program.
which has been working extremely well as it relates to our program.
Daniel Ismail: Great. Appreciate the color. Thank you.
working extremely well as it relates to our program. Great. Appreciate the color. Thank you.
Operator: Our next question comes from Derek Johnston with Deutsche Bank. Please go ahead.
Our next question comes from Derek Johnson with Deutsche Bank. Please go ahead. Years ago in 2018 which seems like another world, you hosted Seinfeld at 555 California Street for investors.
Derek Johnston: Yeah. Years ago in 2018, which seems like another world, you hosted Seinfeld at 555 California Street for investors. Stay with me. Jerry's bit was about, you know me, I could be anywhere. Why am I at a tent in San Francisco? Steve, look, we all know you. You could be anywhere, but you're right here. You're sticking this out. Which means to us that you see a way out of this negative office REIT narrative. I guess the question, how do you envision, what's it going to take for Vornado to get past this environment and emerge stronger?
So stay with me. So Jerry's bit was about...
You know me, I could be anywhere. Why am I at a tent in San Francisco?
So Steve, look we all know you. You could be anywhere, but you are right here. You are sticking this out which means to us that you see a way out of this negative office breed narrative. So I guess the question
Steve, look we all know you. You could be anywhere, but you are right here. You are sticking this out which means to us that you see a way out of this negative office read narrative. So I guess the question, how do you envision?
What's it going to take for Vornado to get past this environment and emerge stronger?
Steven Roth: Well, I need to get Jerry Seinfeld to help me answer this question. I think it's happening now. I think time is our friend here. I think that it's very clear that employers want their employees back in the office. They want to be able to have people working together. They want the managers to be able to manage their people. They have been struggling because there is a cadre of employees that are sort of fighting coming back to the office. I think that over time, if you go forward, rather, you look out 5 or 7 years, I think we will go back to what was considered normal 5 years ago. I think time is our friend here. By the way, just to add to that, it's pretty clear people want to be in the cities.
Well, I need to get Jerry Seifelt to help me answer this question.
You know, I think it's happening now. I think time is our friend here.
I think that it's very clear that employers want their employees back in the office. They want to be able to have people working together. They want the managers to be able to manage their people. And so they have been cz spur
are struggling because there is a cadre of employees that are sort of fighting coming back to the office. I think that over time if you go back...
If you go forward rather you look out five or seven years I think we will go back to what was considered normal five years ago. I think time is our friends here It's pretty clear people want to be in the cities
Steven Roth: The apartments are full, the restaurants are full, the cities are full, the streets are full. There is a reluctance on the part of certain demographic of actually going to work in the office. Okay? That is starting to evaporate. Okay? Time is our friend.
So the apartments are full, the restaurants are full, the cities are full, the streets are full, there is a reluctance on the part of certain demographic of coming, actually going to work in the office. That is...
Derek Johnston: Thanks, Steve. That's it from me, guys.
That is starting to evaporate. Time is our friend. Thanks Steve. That's it for me guys.???
Operator: Our next question comes from Vikram Malhotra with Mizuho. Please go ahead.
Vikram Malhotra: Thanks for taking the question. Just first, I wanted to clarify, you said nothing's changed between when you adjusted the dividend down a couple of months ago and then now, but I'm just sort of looking at the dividend run rate you had then, and now the taxable income you're projecting. Can you just help bridge what appeared to be sort of your projected taxable income run rate of, let's call it $0.37, $0.38, and today it's more like $0.25. I'm just wondering, your debt is fixed now. I'm assuming you had outlined, I think, a $0.50 impact, and that was to FFO, I know. You had outlined various impacts that you'd baked in. I'm just trying to bridge the two numbers.
Our next question comes from Vikram Malhotra with Mizzouho. Please go ahead. Thanks for taking the question. So just first I wanted to clarify, you said nothing changed between when you adjusted the dividend down a couple of months ago and then now. I am just sort of…
looking at the dividend run rate you had then and now the taxable income you're projecting. Can you just help bridge, you know, what appeared to be sort of your projected taxable income run rate of let's call it 37, 38 cents and today it's more like 25 cents.
I'm just wondering, your debt is fixed now. I'm assuming you had outlined I think a 50 cent impact and that was too FFO I know, but you had outlined various impacts that you baked in. So I'm just trying to bridge the two numbers. What has changed in driving that projection lower?
Vikram Malhotra: What has changed in driving that projection lower from here, and can you just comment if that projection now includes a change in the way expirations may be renewed?
Can you just comment if that projection now includes a change in the way exploration may be renewed? As I said, nothing has changed. We have left room for some asset sales. By the way, if you read the...
Steven Roth: As I said, nothing's changed. We have left room for some asset sales. By the way, if you read the Boston Properties CFO's comment in their earnings call, you'll see basically exactly the same statement that I just made. What I'm saying is that we right-sized the dividend, and we left room for asset sales.
What's in property CFOs comment in their? Earning call you'll see basically exactly the same statement that I just made so what I'm saying is is that we We right-sized the dividend and we left room for asset sales
Orson Property CFO's comment in their earnings call, you'll see basically exactly the same statement that I just made. So what I'm saying is that we right-sized the dividend and we left room for asset sales. Okay, that makes sense.
Vikram Malhotra: Okay. That makes sense.
Steven Roth: Yeah. Go ahead.
Vikram Malhotra: Go ahead.
Steven Roth: I'm sorry, go ahead.
Vikram Malhotra: I was just going to say, you talked about asset sales, not knowing where pricing is or what could be achieved. From your vantage point, we've seen a variety of different trades, some in New York, some in California, with handles that we probably didn't think we would see this maybe a few years ago, $300, $400 a foot. Some other buildings are maybe higher. I'm just trying to understand, A, how are you identifying what asset to sell? Then, is there a point in which you say the sale doesn't make sense given pricing? I guess I'm just trying to get a sense of where do you see values shaking across a variety of office types.
I was just going to say you talked about asset sales not knowing where pricing is or what could be achieved but from your vantage point we have seen a variety of different trades, some in New York, some in California with handles that are, we probably didn't think we would see this maybe a few years ago, $300, $400 a foot. Some other buildings are maybe higher.
But I'm just trying to understand, A, how are you identifying what assets to sell and then is there a point in which you say the sale doesn't make sense given pricing. I guess I'm just trying to get a sense of where do you see values shaking across a variety of office types. You're familiar with the...
Steven Roth: We're familiar with what you're referring to. We are not a distressed seller. We are not a weak seller. In fact, we are focusing on a very select pool of assets, a few assets, where we consider ourselves to be offensive sellers because the proceeds will be, if we can execute, the proceeds will be invested extremely accretively. You can count on a couple of things. We will be very selective. We are not in the wholesale selling business. By the way, we know how to walk away. We know how to say no. If we do execute, it will be extremely accretive.
where we consider ourselves to be offensive sellers because the proceeds will be, if we can execute, the proceeds will be invested extremely accretively. So you can count on a couple of things. We will be very selective. We are not in the wholesale selling business.
And if we do, by the way, we know how to walk away, we know how to say no. If we do execute, it will be extremely accretive.
Vikram Malhotra: Okay. Thank you.
Operator: Our next question comes from Anthony Paolone with J.P. Morgan. Please go ahead.
Okay, thank you. Our next question comes from Anthony Palone with JP Morgan. Please go ahead. Yeah, thank you. Just on the Penn District, apologies if I've lost the thread on just the back and forth with the press and your comments. Thanks.
Anthony Paolone: Yeah, thank you. Just on the Penn District, apologies if I've lost the thread on just the back and forth with the press and your comments. If we look out the next couple of years, is there a way to crystallize what you intend to do or spend beyond what's underway right now with the buildings and stuff that you're doing that's in the SOP? What's committed to or what do you intend to do outside of that, if anything?
Steven Roth: We haven't gotten into that. We haven't announced that. We haven't quite gotten that far. We have already, in the Penn District, done heroic accomplishments. We did the Moynihan Train Hall in a private-public partnership. We did the widening of the Long Island Rail Road Concourse. We have retail on both sides of that concourse. We completed the 730,000 square foot Facebook deal in Farley. We have done a massive and very successful renovation of Penn 1, where we have driven the rents from $55, $60 to the sunny side of $100 a foot, and delivered value to our tenants. We are in the middle of a billion-dollar renovation of Penn Two. Together with that, we are doing area-wide improvements, infrastructure to the public realm. We're going to take a breath. The prospect of doing ground-up development, we will likely start with an apartment project.
of that if anything? We haven't gotten into that, we haven't announced that, we haven't we haven't quite gotten that far. We have already in the Penn District done heroic accomplishments.
We did the Moynihan Train Hall in a private-public partnership. We did the widening of the Long Island Railroad Concourse. We have the retail on both sides of that concourse. We completed the 730 odd thousand square foot.
Facebook deal in Farley. We have done a massive and very successful renovation of Penn 1 where we have driven the rents from 5560 to the stunning side of $100 a foot.
and delivered value to our tenants. And we are in the middle of a billion dollar renovation of 10, 2.
Together with that we are doing
area-wide improvements, infrastructure to the public realm, and we're going to take a breath. The prospect of doing ground-up development, we will likely start with an apartment project.
Steven Roth: We have not yet announced what we're doing. We're in the middle of planning that, and we're actually very excited about it.
But we have not yet announced what we're doing. We're in the middle of planning that, and we're actually very excited about it.
Anthony Paolone: Okay, thanks. Just one maybe clarification question for me, or just a reminder. If I look on your balance sheet, the 14 or so million Class A units seem to have a redemption price of, I think, about $23.5 a share. Given where the stock is there any thought that those holders could exercise, and am I looking at that right?
Okay, thanks. And then just one clarification question for me or just reminder, like if I was on your balance sheet, the 14 or so million Class A units seem to have a redemption price of I think about 23 and a half bucks a share. I mean given where the stock is, is there a reason why you're not paying attention to
Steven Roth: Michael or Tom, you're going to have to help me with that one.
Michael Franco: Yeah. Andy, let us come back to you on that one.
Anthony Paolone: Okay. Thank you.
Operator: Our next question comes from Nick Yulico with Scotiabank. Please go ahead.
Let us come back to you on that one.
Okay, thank you.
Our next question comes from Nick Ulica with Scotiabank. Please go ahead.
Nick Yulico: Thanks. I wanted to see if there's any update you could provide on the retail JV. I know the loans there that matured, where you're still talking to the lenders. Just how should we think about that? Is that a situation where you are prepared to walk away from the assets? Specifically as well, that one mortgage, 645 Fifth, which matures next year, which is one of your loans that is recourse to the company. What should we think about the plan on that specifically?
Thanks. I wanted to see if there's any other update you could provide on the retail JV and I know the loans that matured, we're still talking to the lenders, just how we should think about that as a situation where you are prepared to walk away from the assets and specifically as well that one mortgage, 645th.
which matures next year, which is one of your loans that is recourse to the company. What should we think about the plan on that specifically?
is one of your loans that is recourse to the company. What should we think about the plan on that specifically? Michael?
Steven Roth: Michael?
Michael Franco: Morning, Nick. On the first asset, St. Regis, which we talked about a little bit last Q, that continues to be in discussion with the lenders. We are, I think, getting towards a mutually acceptable resolution there. Hopefully that will be done in the next 90 days. With respect to 640, which matures next May, that is something that we have started to work on now, start to gauge the financing markets, talk with an existing bank loan. Obviously, the existing lender is somebody that we will continue to have discussions with as well. Too early to tell exactly what is going to happen there, obviously, the intent is to refinance that asset, and whether we do it at par or pay it down a little bit. The expectation is that that asset will get refinanced.
Yeah. Morning, Nick. On the first asset, St Regis, which we talked a little bit last quarter, that continues to be in discussion with the lenders.
And you know we're heading towards a mutually acceptable resolution there So hopefully that'll be done in the next you know 90 days And you know with respect to 640 which matures next May You know that's something that you know we started to work on now start to
And whether we do it at par or pay it down a little bit, but the expectation is that that <expletive> will get re-financed.
Michael Franco: I will say, Nick, I think one interesting dynamic, sort of two, three, four years ago, retail was a four-letter word. Nobody wanted to touch it. That's changing. It's changing. Unfortunately, office is now in that category for most people. For retail, it's flipped. Retail, I think people view the worst is behind us. The capital markets are more constructive, both investors as well as lenders. Yes, they have to sort of understand and think about how to deal with above-market rents in some cases. I think in general, the capital markets are more constructive on retail today than they have been in a few years.
I will say Nick, I think one interesting dynamic, you know, sort of two, three, four years ago, right, retail was a four letter word, nobody wanted to touch it. That's changing, you know, it's changing, unfortunately, you know, office is now in that category for most people. But for retail...
it's flipped. Retail is, I think people view it the worst is behind us. The capital markets are more constructive, both investors as well as lenders. And so, yes, they have to sort of understand and think about how to deal with above market rents in some cases. But I think in general, the capital markets are more constructive on retail today.
Nick Yulico: Okay. Yeah. Thanks, Michael. Just one other question is going back to the commentary on a potential buyback. The debt capital markets right now seem as bad as they've been for office since the great financial crisis. There's a bearish argument that maybe the lending markets don't come back in a way that they existed in the past decade. It seems to me that if you're talking about asset sales to fund a potential stock buyback, there's implicitly a view that you think the lending markets improve. I guess I'm wondering why make that call now instead of paying down debt? You have a balance on your line of credit. You have maturities you're dealing with over the next year or so. Why isn't that the better use of capital?
Than they have been in a few years Okay, yeah, thanks Michael just one other question is going back to the you know the the commentary on a potential buyback You know I mean the debt capital markets right now seem as bad as they've been For office since the great financial crisis, and you know there's a bearish argument that maybe the lending markets Don't come back in a way that they existed in the past decade
So it seems to me that if you're talking about asset sales to fund a potential stock buyback, there's implicitly a view that you think the lending markets improve. And I guess I'm wondering why make that call now instead of paying down debt. I mean you have a balance on your line of credit, you have maturities you're dealing with.
Nick Yulico: Sell assets, pay back debt, and perhaps that would even reward your stock price more so than a buyback.
over the next year or so, why isn't that the better use of capital? Sell assets, pay back debt and perhaps that would even reward your stock price more so than a buy back. Michael, why don't you try that? Yeah, Nick, I don't think, I mean, to be clear, I don't think we said buy back and not, I mean, we said asset sales, I don't think we said just buy back, right? I think, I think we did.
Steven Roth: Michael, why don't you try that?
Michael Franco: Yeah, Nick, just to be clear, I don't think we said buyback and not, I mean, when we said asset sales, I don't think we said just buyback. Right? I think we said that, first of all, the buyback amount we put out, I would characterize as fairly modest, and as Steve said earlier, could be funded largely from retained cash from the dividend. In terms of asset sales, yeah, I don't think we've said anything about it's just oriented towards buyback. If we execute on asset sales, of course, we're going to look at the proceeds and what the best use for that is. We're very mindful. Our number one priority is making sure our balance sheet remains strong, we can tackle anything and de-levering certain situations or pushing out maturities by paying down. Of course, that's going to be in the toolbox. We agree.
Depending on, I think we said that first of all, the buyback amount we put out, I would characterize as fairly modest. And as Steve said earlier, you know, could be funded largely from retained cash from the dividend. But in terms of asset sales, yeah, I don't think we've said anything about, you know, that's just oriented towards buyback. You know, if we execute on asset sales, of course we're going to look at, you know, the proceeds and what the best use for that is.
And, you know, we're very mindful. Our number one priority is making sure our balance sheet remains strong, we can tackle anything and, you know, de-levering certain situations or pushing out maturities by paying down. You know, of course that's going to be in the toolbox. So we agree. We, you know, we're going to focus on making sure the balance sheet is strong and, you know, asset sales are going to be used for a variety of different things. Appreciate it.
Michael Franco: We're going to focus on making sure the balance sheet's strong and asset sales are going to be used for a variety of different things.
Nick Yulico: Appreciate it. Thank you.
Operator: Our next question comes from Ronald Kamdem with Morgan Stanley. Please go ahead.
Our next question comes from Ronald Camden with Morgan Stanley . Please go ahead. Because of a –
Ronald Kamdem: Hey, just a couple quick ones. I was looking at the cash flow statement and looking at the $92 million of operating cash flow this quarter. Obviously, there's some working capital seasonality. Just one, can you talk about what happened to OpEx in the quarter? It looked elevated and I suspect sort of flowed through. Two, I know you said nothing changed, was this sort of cash flow in Q1 part of the connecting the dots about postponing the dividend and thinking about doing a scrip dividend just to preserve cash flow?
Hey just a couple quick ones so I was looking at the CASFLOW statement and looking at the 92 million dollars of operating CASFLOW this quarter you know obviously there's some working capital seasonality but but just one can you talk about what happened to OPEX in the quarter looked elevated and I suspect sort of flowed through and then two I know you said nothing changed but was this sort of CASFLOW in 1q
part of the connecting the dots about postponing the dividend and thinking about doing a script dividend just to preserve cash flow. On your second question, Ryle, definitely not. You know, I mean again, nothing has changed. So, no. You know, on the OPEX, maybe there's some seasonality. You know, Ryle, we could work offline and take a look at your model.
Michael Franco: On your second question, Ronald, definitely not. Again, nothing has changed. No. On the OpEx.
Michael Franco: Maybe there's some seasonality. Ron, we could work offline and take a look at your model.
Michael Franco: I don't think it's material.
Michael Franco: I don't think it's material, though.
Ronald Kamdem: Great. Just the last one, just on the refinancing. You already hit on the Fifth Avenue property, which I was going to ask about, but any comments on 280 Park as well, which is coming next year? Just any general color when we're thinking about the model, what sort of rates, potential pay down? How are you guys thinking about that? Thanks.
I don't think it's material though. Great. And then just the last one, just on the refinancing, you already hit on the Fifth Avenue property, which I was going to ask about, but any comments on 280 Park as well, which is coming next year, and just any general color when we're thinking about the model, what sort of rates?
Michael Franco: Yeah. What I would say as a general comment, Ronald, is your existing lender is your best new lender. I think most lenders appreciate that it's going to be difficult to refinance certainly large assets for the foreseeable future. They're going to have to work with their borrowers, sponsors they feel are the right stewards of the asset, which I think clearly we are. I think on a number of these situations, you're going to see extensions for these loans. In some cases there might be pay downs, in other cases there might not be. The answer is, discussions have started there, and we'll see how they ensue. I think on these larger near-term situations, I think the lenders and the borrowers are fairly tied together for the near term.
Potential pay down. How are you guys thinking about that? Thanks? Yeah, what I would say is a general comment Ronald is your existing lender is your best new lender So, you know, I think most I think most lenders appreciate that that you know It's going to be difficult to refinance certainly large assets for the foreseeable future. So they're going to have to work with their borrowers You know sponsors they feel are the right stewards of the asset
which clearly we are. And so I think on a number of these situations, you're going to see extensions for these loans. So in some cases they might be paid out, in other cases they might not be. So the answer is discussions have started there and we'll see how they ensue. But I think on these larger neotrim situations.
Ronald Kamdem: Thank you.
Operator: Our next question is a follow-up from Alexander Goldfarb with Piper Sandler. Please go ahead.
Alexander Goldfarb: Hey, thank you for taking the follow-up. Maybe I missed it, but did you guys talk about 555, one, the debt restructuring with the servicer, what you guys are thinking about that? Two, just given all the stories that we hear about just the state of San Francisco's office market, what's going on with leasing in the building, the Montgomery Street box, et cetera?
One, the debt restructuring with the servicer, what you guys are thinking about that, and two, just given all the stories that we hear about, you know, just the state of San Francisco's office market, what's going on with leasing in the building, the Montgomery Street box, et cetera. Yeah, I'll touch on the first, then I'll have Glenn touch on the second, Alex. You know, it's, you know, it can be a bit frustrating when things are written, which are just not fact-based. You know, there's this notion that 555 was in a workout or there was something going on. The answer is, the building is performing extraordinarily well.
Michael Franco: Yeah. I'll touch on the first, and then I'll have Glen touch on the second, Alex. It can be a bit frustrating when things are written which are just not fact-based. There's this notion that 555 was in a workout or there was something going. The answer is, the building is performing extraordinarily well. There's no issue with the loan. We took at an outstanding loan two years ago, and it was structured as a two-year initial loan with a series of five-year, one-year as-of-right extensions. Right? By as-of-right, if you want the additional term, all you have to do is send in a letter and you get it. Right? Once a year, we're going to send a letter to the servicer. We're going to extend the loan, and that'll be that. Right? There's no threat of default. There's never been a threat of default.
There's no issue with the loan. We took out an outstanding loan two years ago, and it was structured as a two-year initial loan with a series of five-year, one-year as-of-right extensions, right? By as-of-right, if you want the additional term, all you have to do is send in a letter and you get it, right? So once a year, we're gonna send a letter to the servicer, we're gonna extend the loan, and that'll be that, right? So there's no threat of default, there's never been a threat of default, there's never been an issue with this loan, it was a seven-year loan structured that way, so all the articles written on this thing, nobody did their homework. And by the way, there may be other situations like that.
Michael Franco: There's never been an issue with this loan. It was a seven-year loan structured that way. All the articles written on this thing, nobody did their homework. By the way, there may be other situations like that. It bears understanding how the loans were structured and what the real story is, which everybody that wrote on that just got it dead wrong. In terms of the building, I'll let Glen talk about it, but again, it continues to be, I think, the best-performing asset in San Francisco with just a premier lineup of financial service tenants.
Glen Weiss: Hi, Alex, it's Glenn.
Michael Franco: Michael. The rate is swapped.
Steven Roth: Yep. That's right, Steve.
Michael Franco: Alex.
Steven Roth: Alex, first of all, it's really a 7-year loan.
Steven Roth: Right
Steven Roth: An accommodation to the lender was structured as a two plus five ones.
First of all, it's really a seven-year loan which has right combination to the lender was structured as a two plus five ones Okay, seven year loan And so anything so, you know newspapers got it all wrong
Michael Franco: Okay.
Michael Franco: It's really a seven-year loan. The newspapers got it all wrong. The second thing is that it was a floater that we swapped at a very favorable rate, and we swapped it for, I don't know, six and a half years or something like that. The second thing is, it's the best financial services building in the marketplace. It's full. Glen, you want to comment about the quality of the building?
The second thing is that it was a floater that we swapped at a very favorable rate and we swapped it for, I don't know, six and a half years or something like that. And the second thing is the best financial services building in the marketplace is full. Glenn, you want to comment about the quality of the building?
Glen Weiss: Look, the building has been perfectly insulated against everything you're reading about in that marketplace. We've lost zero tenants to anything. Goldman Sachs, KKR, Microsoft, BofA, all renewed their leases during the last three-year period, which speaks to the asset. I think that's all you really need to know, and none of them reduced in size. We're obviously in the market with The Cube 345. That's our only vacancy. It's 77,000 feet. We finished the redevelopment, obviously, a couple of years ago. We continue to show it. The campus, the three buildings, has performed perfectly during this period, and it's clearly shown that it's the best asset in the city.
Well, the building has been perfectly insulated against everything you're reading about in that marketplace. We've lost zero tenants to anything. Goldman Sachs, KKR, Microsoft, B of A all renewed their leases during the last three-year period, which speaks to the may fellSAG Night. In a new era of
I think that's all I really need to know and none of them reduced in size. We're obviously in the market with the cube 345 that's our only vacancy of 77,000 feet. You know, we finished the redevelopment obviously a couple years ago, you know, we continue to show it. But the campus, you know, three buildings has performed perfectly during this period. And it's clearly shown that it's the best asset in the city.
Alexander Goldfarb: Okay. I appreciate both comments, so thank you.
Steven Roth: You'll pardon us if we get a little bit annoyed at the misinformation.
Okay, I appreciate both comments, so thank you. You'll pardon us if we get a little bit annoyed at the disinformations. That's the beauty of these earnings calls. This concludes the question in the process.
Alexander Goldfarb: That's the beauty of these earnings calls.
Operator: This concludes the question and answer session. I would like to turn the call back over to Steven Roth for any closing remarks.
Steven Roth: Well, thank you all very much for joining us. We are actually very excited about beginning a buyback program. We think what we're doing with the dividend is extremely logical, and we understand and appreciate your support. Thanks for joining, and we'll see you all in three months.
beginning a buyback program. We also think what we're doing with the dividend is extremely logical and we understand and appreciate your support. Thanks for joining and we'll see you all in three more. Ladies and gentlemen, this concludes today's conference.
Operator: Ladies and gentlemen, this concludes today's conference. Thank Thank you for your participation. You may now disconnect.
Thank you for your participation. You may now disconnect.
