Q1 2024 SL Green Realty Corp Earnings Call
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Hello, everyone. Please standby we will begin momentarily. Thank you for your patience again, please standby will begin momentarily.
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Thank you everybody for joining us and welcome to the SL Green Realty Corp's first quarter 2024 earnings results Conference call.
This call is being recorded.
At this time the company would like to remind listeners that during the call.
Management may make forward looking statements.
You should not rely on forward looking statements as predictions of future events actual results and events may differ from any forward looking statements that management may make today.
All forward looking statements made by management on this call are based on their assumptions and beliefs as of today.
Additional information regarding.
Risks uncertainties and.
And other factors that could cause such differences to appear are set forth in the risk factors.
And M D and E sections of the company's latest Form 10-K.
Subsequent reports filed by the company.
With the Securities and Exchange Commission.
Also during today's conference call. The company May discuss non-GAAP financial measures as defined by regulation G. Under the Securities Act.
The GAAP financial measure most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the <unk>.
Parable GAAP financial measure can be found on both of the company's website at www Dot SL Green Dot com by selecting the press release regarding the company's fourth quarter 2020 for earnings.
And in our supplemental information included in our current report on form 8-K.
Leading to our first quarter 2020 for earnings.
Before turning the call over to Marc Holliday, Chairman and Chief Executive Officer vessel Green Realty Corp.
I ask that those of you participating in the Q&A portion of the call. Please limit yourself to two questions per person.
<unk>.
I will now turn the call over to Marc Holliday. Please go ahead Marc.
Okay. Good afternoon, and thank you all for joining US today, we appreciate the opportunity to discuss with you our results for the first quarter and review with you. Our recent announcements its been years since I've felt this optimistic about the trajectory of our business. After a challenging few years, where we navigated unprecedented.
The change by keeping focused and working harder than ever we've emerged with a stronger portfolio, a more exciting and diversified business and an even sharper strategy moving forward.
Certainly nobody did more than us when it came to leasing within our portfolio developing extraordinary projects capitalizing on market dislocation and recapitalizing deals when others didn't our reputation and extraordinary relationships within the lending community allowed us to create plans to extend their debt maturities.
Capitalized and move forward. We're in the early innings of what we believe will be a period of market improvement fueled by the strength of New York City's research and financial sector signs of a reemergence of the tech sector and a new generation of workers, who recognize that career advancement and relationship building doesn't.
Happened at home now as we enter what we expect to be a period of significant growth and opportunity. We are encouraged by the market fundamentals, which we believe are shifting to become tailwind.
Even in this higher interest rate environment. There is a solid foundation of positive economic momentum among our strong and stable tenant base. The diversity of New York City's economy is reflected in our portfolio and it's one of the core strengths of this market compared to other cities our market were a record 192 leases.
Were signed last year at triple digit rents and contrary to the media hype <unk>.
Majority of these premium leases were not signed and new construction projects, but rather in well located easily can beautiful and highly or monetize existing buildings. This aligns extremely well with SL Green's portfolio and the elevated office experience in which our hospitality group specializes in the league.
<unk> results for the first quarter certainly support the case, we leased over 630000 square feet of space at an average starting rent of $93 per square foot, one third of which were renewals and two thirds of which were new leases on the investment front.
We launched a 1 billion dollar opportunistic debt funded February the only one of this scale that isn't entirely New York City centric.
Fun will allow us to capitalize on current capital market dislocation through the discounted acquisition of existing debt investments and the origination of new high yielding debt instruments.
Fundamentally we are looking to replicate our approach for the last 26 years of investing in the best properties in New York City via strategic debt investments. The feedback is that no. One is better positioned to take advantage of the moment in this market as we are and our initial closings are targeted for sometime this summer.
Just this past week.
The governor and the legislature have reached agreement on a comprehensive office to residential conversion bill, which should be printed tomorrow and voted upon and sign this weekend.
The conversion program is particularly targeted to existing Midtown office building South of 96 Street and lower Manhattan office buildings as well SL Green has played an instrumental role in helping to get this legislation passed as part of the state's new fiscal budget and we applaud Governor Hogle, the Senate and the assembly on the door.
Step of passing this landmark office to residential conversion built which I believe will have a transformative effect on this office market much in the same way that we called very early on the transformative effect that Eastside access would have on the Park Avenue corridor I see.
This as being even more impactful than that event and certainly more comprehensive in Midtown and downtown encapsulated way.
By incentivizing the conversion of underutilized obsolete office space to housing. This vital legislation will uniquely address three of new York's most pressing challenges a.
Amidst record high Manhattan office vacancy the bill will create stability in the commercial office market produced the affordable and market rate housing, we need to overcome the city's housing crisis and generate foot traffic to support local retailers and restaurants in New York Central business districts, while many of these conversions under the new.
Graham will be taking pace place over the next three to five years.
The impact will be felt immediately as owners removed their buildings from office space inventory and relocate our existing tenants into other buildings.
Ultimately, we believe that somewhere between 25 to 40 million square feet of rentable space will convert under this program.
If this bears out as we think the result would be a significant reduction in available space far accelerated from whatever would otherwise have occurred simply through natural absorption of space via demand.
Thanks to the leadership of the Governor and our elected officials in Albany, as well as to mayor Adams for his city of yet zoning initiatives. The private sector is now positioned to again invest in New York city's housing future.
As part of a new conversion incentive Bill we are planning to be among the first out of the blocks with the conversion of 753rd Avenue from office to residential use.
The conversion of 753rd will spur on this important new development for the city and there'll be more to come on this throughout the year.
Lastly, we made enormous progress over the past year with our partners Caesars Entertainment Roc nation on our vision for Caesars Palace Times square, we had the opportunity to meet with hundreds of stakeholders grower coalition and gain significant support we now know that this will be a long process with bids likely not.
Due until 2025, and we will use this time to continue strengthening our bid because the project is worth the extra effort and time square stands to gain so much one thing we know for sure ours is the only proposal that is true New York approach to gaming providing benefits for B.
Its walls.
Thank you and we'd like to take your questions on the quarters results. Please.
Yeah.
Operator questions.
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Yeah.
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We.
Operator are you there or how is the operator.
Okay.
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Yes.
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Alright.
Stan last few questions. Please press star one one on your telephone and wait for your name to be enough to withdraw. Your question. Please press star one one again, please standby, while we compile the Q&A roster.
Yes.
Our first question comes from Alexander Goldfarb with Piper Sandler Your line is open.
Hey, good afternoon.
Mark Let me first go to the office to RASM conversion.
You know I guess, a two part question and hopefully Matt doesn't say, that's all my questions, but if we look at what Douglas Amitate out in Hawaii, they've been able to convert building you're building floor by floor. So they didn't have to take it out of service. Obviously for you guys. You've done you know 750, I think its pretty fully vacant but yeah. One does this axa.
<unk> your plans and thoughts on how you would convert buildings and then to the buildings that are coming out that that 25 to 40 million square feet are those really competitive with you guys, meaning if those buildings go out of service does that really forced more office demand into your portfolio or what do you think the Carryon impac.
<unk> of that $25 million to $40 million going offline as well.
Well you know the.
Some of these buildings are.
They're they're all competitive to a certain extent because they form the the bottom of the market or you know the bottom middle of the market. These are not bad buildings. They are just what I would call secondary building secondary buildings do not be bad buildings.
Some of them when I use the term obsolete. It just means that they don't really warrant the full scale capital redevelopment and amended as Asian redevelopment relative to the types of brands that can be achieved in light of the concessions that would have to be given so they're not bad buildings. There are the buildings in Midtown definitely you know buy.
Eliminate such a vast quantity of space and taking the tenants out of those buildings and relocating them into existing space like we did at 753rd is a perfect example, so good office building. It just in our eyes had a better higher and better use and we've relocated many of those tenants out into our portfolio and other surrounding buildings.
So don't don't get the impression that these midtown buildings are bad buildings simply because I use the term you know secondary or are obsolete theyre just buildings that you now have.
<unk> can be optimized as residential and should be optimized as residential and don't necessarily a warrant the same level of investment as buildings that we have where you know, we're achieving a $90 a square foot and above that.
Where that investment should go and these buildings that might otherwise be $60, a foot or thereabouts on office rentable might be $100 a foot unrest square footage equivalent. So it's it's you know I would say it becomes very clear and your comment about.
You know what Douglas Emmett is doing in Honolulu, I think its spot on I mean, obviously, it's a different market different size of market.
But the point is the same there was an example of one building having a fairly significant impact on in office market imagine dozens of buildings converting being taken offline tenants being relocated out of.
The way this.
Bill is structured to get the maximum tax benefits you have to file for your permits by sometime in 'twenty six that means you've got to get going right. Now this isn't one of those wait and see and I'll get to it in 27 28 29. This is intended.
Smartly to coerce not just our ultimate trance transition to building, but expedited transition to build them because we want to see this affordable housing and end market and workforce housing problem addressed right now not 510 years down the road. So the tax benefits I think so.
Me look intentionally coercive in a way that's very positive for city and positive for affordable renters, who who need solutions sooner than later.
Okay. Second question is the 2 billion of debt that you guys did you know clearly I think exceeded what anyone had expected, especially with only $40 million of debt pay down, but as you guys look to future asset sales and really the stake sales out of one Vanderbilt and others of your top tier assets did the calculus change because everything is interconnected.
You do refinancing you do better than you expect it means less pressure to sell a stake here do other things how does the 2 billion that you have achieved so far does that change anything that you've laid out at your investor day.
Either accelerating things or taken the pressure off the need off to do other things well I mean look yes.
It doesn't it's not changing our business plan.
We don't.
We don't feel pressure, where we're enjoying this this is what we do and this is what we've done and what I've done for 33 years.
We're in this because we love it we enjoy it and we view this as progress we view this as putting points on the board for our shareholders and we enjoy watching the impact on the stock and you know turning the tide in and seeing newer come back. So we don't feel any more or less pressure to do anything our business plan remains the same which is.
We do intend to.
Seller JV certain buildings, which we identified in the beginning of the year plus longer year, we may.
Ed or eliminate from that mixed but the aggregate.
Amount of activity is still our.
Goldman objective for the year, both with regards to that.
Modification extensive and restructurings as much as we just announced we still have four or five big important deals that we're working on to go and then too.
You know on the disposition front.
We think that the appetite both domestic and internationally for the best well located premium assets remains very strong and we remain committed to working through the monetization events of these assets like we've done for decades now as we harvest the harvest.
Our gains and reinvest.
Thank you.
Yes.
Thank you one moment for our next question.
Speaker Change: And our next question.
Comes from.
John Kim with BMO capital markets. Your line is now open.
Thank you.
Had a question on earnings excluding all that.
Debt extinguishment and other one time items. It was 98 cents for the quarter.
Which on a run rate basis.
Kind of modest I was wondering if this is a good run rates and what's your visibility.
Visibility on additional onetime items, whether it's.
Speaker Change: Debt extinguishment or.
Sourcing any fees in your career.
That fund.
Yes, John its Matt So I read quite a bit of commentary out there that this was a miss which kind of threw me because actually the quarter was a head on our numbers and if you look at what.
Our guidance adjustment was our new guidance range, but the adjustment you made back in January the adjustment we made.
Last night are due to the incremental.
GPO gains.
Discounted debt extinguishment gains at two Herald to 80 Park in 2019, seven that would say all of the other assumptions at fed our guidance back in December are intact. So if the first of all we don't guide on a quarter by quarter basis, We got on a full year basis and our full year guidance is the same so if it was its dropped people as low in the first quarter that's relative to.
Their model is not ours, we were ahead of our model by a few pennies.
Mostly on the NOI and summit side.
And if people need to adjust their models to reflect higher in the second third and fourth quarters to get back to the core number that we guided to.
Could do that our quarterly earnings are not linear we have fee streams that come through them make them lumpy. We have NOI building over the course of the year as we increase occupancy. So you know first quarter was better than our expectations and our full year guidance is intact.
Can I ask about 280 park.
Mhm refinancing it seems like Theres very little residual equity in the asset you didn't have to pay down any of the senior mortgage.
Although part of that what was really an AD for a senior lender on the transaction.
First I just said.
Make a statement upfront disagree with the assessment about the residual equity.
Not at all.
With respect to just the market in general and then I'll speak about $2 80.
As we saw with all of these extensions and what we're seeing both in the CBS and the balance sheet side.
And as we demonstrated with all of those announcements.
We're able to get substantial runway in term on all of these deals and in return the lenders want to see some form of skin in the game.
At $2 80, we put up reserves for leasing costs that were otherwise going to spend at the asset.
And in assets that have free cash flow.
The lenders are looking for some form of skin in the game, which we demonstrated there is some symbolic paydowns. So as we've been telling people on the past few earnings calls.
Lenders that we have big relationships with.
And they are working and have tremendous faith in us. So you should expect to see more of what we got done over the past quarter as we get down the balance of the $5 billion program.
Great. Thank you.
Yes.
Thank you one moment for our next question.
And our next question comes from Tom Catherwood.
With <unk> your line is now open.
Thank you and good afternoon everybody.
Obviously very strong quarter on the leasing front end Mark you sound convinced on the durability of this demand how does your leasing pipeline compare to the.
One 4 million square feet roughly that you had at the start of last quarter and could you provide some more color on the reemergence of the tech sector that you mentioned in your remarks, yes, I would actually.
And therefore, if the Steve <unk>. So we can go right to the source here because he's in charge of that pipeline, obviously and can go into some discussion about after having done by the way big leasing in the fourth quarter Big leasing in the first quarter.
I would think that pipeline is depleted, but maybe not.
On the tech sector I can we have some thoughts on that as well. So sure. So just to give you a little color on the pipeline.
We're actually have grown the pipeline despite very strong leasing in the first quarter. We are now.
Current pipeline of over one 6 million square feet.
That million six 840000 square feet of it is actually leases that are out and current negotiation as opposed to.
Over 700000 square feet of term sheets that are in negotiation.
Of that two thirds of the space.
As our new.
Tenants as opposed to renewal tenants.
And I think another point to make within the pipeline.
Is that.
The leases that are out.
Most 500000 square feet of those leases cover current vacancy within the same store portfolio.
With regards to the.
Increasing demand from the tech sector.
There's over 5 million square feet of.
Current tech tenants that are being tracked in the market today not necessarily just within our portfolio, obviously, but active tech requirements that are with tenants that are searching the market.
That's a 53% increase from a year ago, and just give you a flavor we've seen tenants like intuit and fanatics and Sigma in a couple of other big four.
Household names that have started to kick tires in the markets.
As a result of adding head count to their Manhattan.
Our employee population.
Okay.
That's great. Thank you for that Steve and then maybe on dispositions. Obviously it was great to see 719, seven and Palisades go into contract.
We understand that the mix can potentially shift throughout the year, though the aggregate remains the same that said is olivier the partial interest sale, they're still in the plan and what is the expected closing on 625 Madison.
Yeah.
Those assets are still.
Very much in the plan inactive negotiations documented big deals big deals don't happen quick.
Nor do they need to be rushed.
But we're confident in their outcome.
And in terms of timing I don't know if we've given any guidance beyond this year I mean, we hope to get them buttoned up sooner than later, certainly Oh, VA, which is more advanced.
The second one you said was.
625.
620, 565, closeout that was a contract. So there's a question there about closing timeframe at 645, yes, Okay, yes that deal.
Is slated to close at the end of this month.
And such.
As such you know another two weeks or so and.
We are we are going through the motions with.
The buyer to go through that closing process.
I expect that to happen in this second quarter.
And over I mentioned, we're steaming away on and then to 45 Park.
<unk> is another one that.
We're getting enormous traction on leasing we have more that we have more leases pending that are in that $1 six.
The JV execution has enhanced for all of us.
The company shareholders everybody the more leasing we get done the better so we're just going to keep leasing.
Ahead of even really having started the redevelopment, but on the promise of the redevelopment and the commitment of the redevelopment, which I think is going to make it one of the best non new buildings on Park Avenue.
Yeah.
Great I appreciate the answers thanks, everyone. Thanks.
Thank you one moment for our next question.
And our next question comes from Ronald Camden with Morgan Stanley. Your line is now open.
Great Hey, just.
Two quick ones for me.
Just staying on the leasing front, if I could just add if you could talk about sort of the mark to market on our leases in the pipeline.
You reiterated sort of expectation on both sort of the occupancy targets as well as the leasing volumes this year, which based on the pipeline it sounds like Youre well on track, but can you talk a little bit about the mark to market.
Just to give some color on.
The negative mark to market in the first quarter were really driven by two buildings we had.
A number of leases at Graybar building 803rd Avenue.
Yes.
Sort of what drove the negative mark to market for the overall leasing for the quarter.
On balance most of the leases signed in the rest of the portfolio.
We're generally positive so it's unfortunate that we had a couple of.
A couple of stragglers that pulled us down, but as we look forward into our leases that are out right now and then beyond that the overall pipeline of 1.600 million square feet.
We've got some big positive mark to markets and that's what gives us confidence.
To assure ourselves that we're going to be positive for the year.
Great and then just my last one in.
I guess, it kind of ties into asset sales, which you just touched on but just taking a step back on terms of the target of the year upon that sort of that you wanted to take out on the balance sheet.
If you think about sort of the refinancing success you had the plan for the asset sales how is that sort of trending as they're in line with expectations could you even do better just trying to get a sense of how much that can come off the balance sheet. This year. Thanks.
What Mark said earlier is that our business plan remains intact and that's that's true. So we laid out in December you know north of $1 billion of debt reduction through execution of this plan.
So at a minimum we would expect that but we have had some additional success in things like the discounted debt extinguishment at two herald in some.
Asset sales, we didn't have wired in like 717 and 719 in palisade. So.
That would see us be.
Even ahead of that original target that we laid out back in December if we execute the entire business plan, we have laid out.
Great. Thanks, so much.
Thank you one moment for our next question.
Our next question comes from Michael Griffin with Citi. Your line is now.
Great. Thanks.
Maybe just going back to the refinancings for a bit that you did in the quarter should we take this as an indication that lenders are more willing to work with owners as opposed to having to take back the keys or.
Was that mainly specific to the existing relationships that you have in the market.
Yes, I don't want to generalize the activity to anything beyond.
SL green our assets, our relationships et cetera.
I think it is.
A tough market out there.
And.
As Harry said earlier.
It is going to come a lot down too.
Belief in the sponsor the sponsor's plan, making sure of skin is in the game equity in the deal et cetera, and where it all lines up I think lenders many lenders have and will conclude that.
That's the best path towards at loan resolution optimization and pay off.
But that isn't necessarily every case you see throughout the city there's.
Examples of what we've done and there's examples that have gone in the other direction and it's going to take a while to work through all of the.
Effects of the interest rate increases, which have occurred over the past two years.
But we feel very fortunate that we're positioned in a way that we think we can manage through all of that.
In a very.
Steady responsible way and positioned ourself for growth this year, which I think is what youre hearing and now.
So with the backdrop of an improving leasing market.
Officer Rajiv conversion program.
Harkens back to what I said earlier today I think the trajectory. We're on is very very good and.
We are optimistic but I.
I don't think you can really.
Just sort of generalize or from that or extrapolate them.
Got you that's helpful. And then maybe a question on the 10 East 50, <unk> transaction, maybe just looking at this property the rent seem relatively attractive call. It in the mid to high Eighty's fully leased it seems cash flow positive I'm curious if you can give any insight as to why.
Why your JV partner decided to exit that building and could we see I guess the potential for more of the same for some of your other joint venture relationships and exiting some of these properties.
We have a policy here not to comment on what our partners are lenders are thinking and don't want to put words in their mouth, but we'll continue to look for opportunity we invest in real estate and if we see opportunities that make sense for us we're going to continue to do it.
Great. That's it for me thanks for the time.
Okay. Thank you one moment for our next question.
Our next question comes from Camille Bonnell with Bank of America. Your line is now open.
Hi, everyone can you speak to the thought process of moving forward with the disposal of our southern 19 end. The conference Centre just given these assets are not in December.
And how should we be thinking about further.
Hey, leveraging opportunities since youre working on another $3 billion.
Yes.
Both instances those are opportunities that were in front of us they came up.
Certainly as it pertains to Palisades it was.
Not an asset that we had a long term strategy for us.
Of our core business plan.
But again continue to see look for us to mine opportunities as they sit in front of us even if they are not in the main business plan.
Okay.
Okay, and as you work through disposition and deleveraging program. How do you think about the earnings volatility when more and more of your cash flows are coming related to ancillary income.
Yes, no I don't think Thats the case at all but we are building ancillary income streams hours I don't think it's becoming disproportionate to that we're trying to grow things like our special servicing business that we're going into.
The fund business and we're managing.
Joint venture interests. That's that's good business its diversifying the revenue streams that you should do separate and aside we have plans as we always do to acquire assets dispose of assets. We have had a deleveraging strategy for a couple of years, we have more of that this year and then we're going back on offense. So I think they're kind of separate and distinct will continue to shine.
Grow and diversify the income streams, while managing the balance sheet and the portfolio with <unk>.
<unk> opportunistic acquisitions and dispositions.
I wouldn't want to.
Minimalize.
The attractiveness or the importance of our business lines like summit, and some entertainment and the ability to grow that globally.
Technically you can call it I guess, an ancillary business.
Income line, but I look at it as a substantial additional attractive attractive business that we've developed organically in house, it's very profitable it was fairly capital light.
We're working to expand that into other locations now, we're making good progress and I think it's quite important.
Reason overall to be interested in track to Tesla Green stock is not only our prowess in what we do in commercial space in New York City, but what we're doing the areas of hospitality food and beverage.
Entertainment.
Soon hopefully in the funds management business.
Definitely already deep into the special servicing business, which.
As a as a fee for service business, where we've got an incredible traction over the past well really since inception I don't know, we Didnt mentioned, we just got a.
An additional rating from <unk>.
<unk> from Morningstar, which the acronym DB Dvr's D. Brs Morningstar, just gave us our third.
<unk> designation.
As an accredited a special servicer large loans SaaS B loans. These are these are accreditation is not easy to come by and having that now from S&P and Fitch and Morningstar.
It gives us an ability to create all sorts of new client.
And customer relationships I think we've got close to 10 billion specialty service right now and that's on top of about another 7 billion that we've serviced previously and we're just getting started there. So they are important business lines.
We focus on them, we have people internally, who specialize in those areas and we're looking to grow all of them.
Yes.
Okay.
Thanks.
Our next question comes from the line of Tayo Okusanya.
With Deutsche Bank. Your line is now open.
Tayo. Your line is open please check your mute button.
Hi, good afternoon Tami.
We can now.
Excellent could you talk a little bit about the lumpiness.
Okay.
Summit.
Specifically I'm kind of wondering whether that's why you may have been getting some of these notes in first quarter thing or it wasn't earning mix given that probably most of the earnings associated with that business happens over the summer.
Alright got it.
I've got a restricted marks and hold me down because about your earnings Miss one more time im probably going to lose my mind. So there was no Miss if we missed anybody's model it because your model was wrong not the numbers.
Separately.
As to summit.
It is actually fairly linear the fourth quarter is slightly better than the first quarter is slightly lower we actually do only shut down for two weeks a year at summit and that happens in the first quarter.
Honestly, the fourth quarter's buoyed by holiday sales, but generally speaking the summit is pretty linear because we're sold out just about every time slot in everyday.
Maxed out.
Okay. Thank you.
Yes.
Yeah.
Thank you.
One moment for our next question.
Our next question.
Comes from the line of Peter Abramowitz with Jefferies. Your line is now open.
Thank you yes.
Continuing on kind of the topic of the earnings trajectory throughout the year I think if we back out the debt extinguishment and onetime items.
Applying implying about a $1 11.
Peter Dylan Abramowitz: Per quarter for a second through fourth quarter.
<unk> kind of at the 98.
The debt extinguishment in the first quarter.
So just kind of curious if you could provide an overview I know you said, it's lumpy throughout the year, but if we average it out should be getting to that 111, so what kind of bridges the gap from first quarter to to where you expect it to be for the rest of the year. So I'm not going to give quarterly guidance, we don't never well, we give annual guidance.
The earnings can be lumpy depending on.
Success fees that are coming through special servicing or fees recognized on <unk>.
Sale transactions or the like so.
We gave full year guidance.
And there is an acceleration of income obviously off the first quarter as the first quarter is low and obviously, that's not going to if you run rate that it's not going to get to the full year guidance that we gave highway.
It bounces quarter to quarter is going to be dependent on how deals close or special servicing fees are recognized or how occupancy take shape.
But we are confident in the full year number and that's why we maintained.
Got it so I guess to the extent that.
If you are expecting say acceleration on the NOI side is that mainly just mainly.
Mainly just improving occupancy.
Yes of course, we released the 1 million eight square feet last year, we have we're going to at least 2 million square feet. This year occupancy is increasing rents are increasing that translates into.
Peter Dylan Abramowitz: NOI increasing.
Yes.
That's all for me thanks.
Speaker Change: Thank you one moment for our next question.
Our next question comes from Steve Sochua with Evercore ISI. Your line is now open.
Yeah, great. Thanks, Matt I was wanted to ask about the earnings Miss in the quarter I'm just kidding.
Your band Steve that's it.
Okay.
Mark I know you don't like to talk about kind of partners, but I guess the transaction of $2 80, your ability with vornado to basically pay off the mezz portion of that at 50 cents on the dollar was just a bit eye opening and I know you can't speak for your partners, specifically, but was that a situation where maybe their cost basis.
At full par and that gave them some flexibility to do something with you at a lower rate because.
There was viewed to have a lot of.
Equity value in the building I know if you were sitting in their shoes, you know you might not sell it at 50 cents on the dollar. So I think we're just trying to get our arms around.
It's a great execution on your part how that sort of maybe played out I got to tell you I think in times like this trying to overthinking over read piece.
People's motives.
Dangerous.
This is a.
A foreign lender.
Who has their own set of you know me.
Man dates.
Issues objectives.
Speaker Change: Things that we don't know and can't get into and don't really want to get into.
Speaker Change: There are this is not at all unusual there are lenders that.
Speaker Change: I'll have mandates to kind of reduce real estate as a percent of assets.
Period.
Speaker Change: And that's not a wrong or right objective. It's it's an objective and it's not an unusual objective and in those cases, there can be negotiations.
Around you know what is and isn't the right price and value for <unk>.
That instrument at a moment in time that looks to Wanna be liquefied and monetize it in an environment that I said earlier is still capital constrained, but getting better.
And then there are those that will restructure and.
Term out and.
Hanging in there and have different objectives. So.
To say that.
We all know how to calculate how much equity is and isn't in a deal you run the numbers the numbers derive a current and a stabilized value and that's how we've always done it and you know rates vary and values vary, but I don't think it's a black box and we believe there is equity in the deal I think the lender probably believed there was.
Certainly stabilized future equity in the deal, but I think that's disconnected from what any party.
Decides to do at a moment in time here in <unk>.
April or.
March or April of 'twenty 'twenty four.
You do what's in your best interest at the moment and.
You know to take any Ah Ah moment like that and try and extrapolate as to what this building is going to be worth when does the debt.
Mature here.
Number 20 September 28, so.
We'll revisit this issue like close to 29.
And we will have the conversation then about.
The equity in the deal in 2009, I think just building.
He is going to ultimately respond well to this market I mean, we're working hard to lease it up I think we did the antara sleeves right with such lists are 76 vessels for 76000 square feet, where the perhaps on that Steve software come on baby.
And we've got more pending so us and vornado are in it for the duration.
<unk> the duration is to find I guess for the next four and a half years.
Every party did what was in their best interests, it's not a it's not a war it's not a fight is not a gamesmanship thing I think it was this was a sensible business deal everybody decided where they want it to be and on we go.
Okay, great. Thanks for the color, maybe Matt on the dividend.
Just how are you guys thinking about the dividend if you've got these investment opportunities in front of you just remind us kind of where the dividend is in relation to taxable net income and might that dividend be served better either through debt reduction or through kind of the investments that you've made to your attorneys hidden third yes.
The dividend was set based on taxable income, which are 100% of taxable income that is the basis for it.
And we've been monitoring that closely because we've been generating incremental gains these depot gains or taxable income as well.
But we have strategies, we can employ in.
Tried to maintain that that taxable income trajectory that we've been on to keep the $3.
So very comfortable with our $3 as we were reset out even more so now.
And we'll we'll look at the dividend again at the end of the year, but we've said over and over again, how important the dividend is to us.
Great. Thank you.
Thank you one moment for our next question.
Our next question comes from Caitlin Burrows with Goldman Sachs. Your line is now open.
Hi, good afternoon, everyone.
Like you mentioned earlier <unk> with an active leasing quarter, one <unk>, we've heard from some industrial companies that we've heard from some in industrial Reits that companies are being hesitant about signing big Lisa. So I was just wondering are you seeing any of this hesitancy related to macro uncertainty play out in your pipeline or.
Or does it just seemed like a different story.
No not at all I mean, there's no doubt that.
If you've looked at the stats for overall market stats for the first quarter.
Big Challenge.
There was a dearth of big leases signed.
But if you looked scratched the surface on the pipeline and deals pending not only within our portfolio.
If you looked at our tenants in the market list.
Active tenant searches that are out there.
Some very very large requirements.
I don't recall at a moment in time, where I had the same number of large leases out or term sheets out with large tenants that we do today. So I think what you saw in the first quarter is simply a.
Cork and timing there are a lot of big deals signed in the fourth quarter.
And I think youre going to see a bunch of big leases on second quarter and through the balance of this year.
Okay, and one other point I'll make is that.
<unk>.
The vast majority of big leases that are that are being signed or worst side of the first quarter were all relocations and those are long term commitments by tenants of size.
As they as they bring their employees back to the office.
Got it.
I know earlier, you guys talked about some of the disposition and JV outlets just going back to 245 briefly what are you, saying that youre planning to maybe do more leasing before focusing on the additional JV sale or is that something thats kind of moving along and could be done any time any.
Any update on the 245 park JV in particular.
Yes message, we I think also deliver Dennis city was.
The big focus of ours for the second half of the year.
Got some leasing pipeline that we're trying to complete as Mark noted.
And I think it all package very well as we get into the second half of the year and get some more of these business plan objectives done through the first half of the year.
Got it okay. Thanks.
Yes.
Operator, do we have any more questions.
Okay.
Our next question comes from Blaine Heck with Wells Fargo.
Please go ahead.
Great. Thanks, just two quick ones for me just following up on the potential sales of interests at over 245 Park. Obviously, we've seen some fluctuation in foreign exchange rates and a pretty dramatic recent increase in the 10 years. So I guess the question is have those dynamics impacted the interest level from any other prospective investors on those deals.
I guess has anyone falling out of the running.
No.
Alright fair enough and then.
I think you mentioned, putting some leasing cost reserves in as part of the modification of the 280 Park loan can you quantify how much that was.
The amount that we put in collectively with vornado was approximately $68 million.
So great. Thanks Ernie.
Yes.
Yes.
Okay.
We get towards the end.
Thank you. This concludes the question and answer session.
I would now like to turn the call back over to chairman and CEO, Marc Holliday for closing remarks. Thank you.
Again.
Kudos to the.
The whole team here at SL Green I know they listen then.
On this call it was a great great launch to the year.
Fantastic three months.
And.
We're busy at work here, making sure that when we speak again in three months, we'll have.
Hopefully some equally good news, maybe even better news.
And.
We look forward to it thank you.
Yeah.
Thank you. This concludes today's conference call.
Thank you for participating you may now disconnect.
[music].
Okay.
Okay.
Okay.