Q1 2024 Alexander's Inc Earnings Call

Good morning, and welcome to the Vornado Realty Trust first quarter 'twenty 'twenty four earnings call. My name is M. Jay 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.

MJ: Good morning, and welcome to the Bornado Realty Trust first quarter 2024 earnings call. My name is MJ, 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. At that time, please press star, then one on your touchtone phone. I would now like to turn the call over to Stephen Borenstein, Executive Vice President and Corporation Counsel. Please go ahead.

Our speakers will address your questions at the end of the presentation during the question and answer session.

At that time. Please press Star then one on your Touchtone phone.

I would now like to turn the call over to Steven Bernstein Executive Vice President and Corporation Counsel. Please go ahead.

Steven Bernstein: Welcome to Vornado Realty Trust's first quarter earnings call yesterday afternoon, we issued our first quarter earnings release and filed our quarterly report on Form 10-Q, with the Securities and Exchange Commission. These documents as well as our supplemental financial information packages are available on our website Www Dot V N O D.

Steven J. Borenstein: Yesterday afternoon, we issued our first quarter earnings release and filed our quarterly report on Form 10-Q with the Securities and Exchange Commission. These documents, as well as our supplemental financial information packages, are available on our website, 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 supplement.

Steven Bernstein: <unk> 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 supplement please be aware that statements made during this call may be deemed <unk>.

Steven J. Borenstein: 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, 2023, 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 statements.

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, 2023 for more information regarding these risks and.

Okay.

Steven Bernstein: 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 statements on the call today from management for opening comments are Steven Roth, Chairman and Chief Executive Officer, and Michael Franco President and Chief Financial Officer, Our senior team is also pressing.

Steven Roth: On the call today from management for our opening comments are Stephen 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 Stephen Roth.

And available for questions I will now turn the call over to Steven Roth.

Steven Roth: Thank you, Steve, and good morning, everyone. We've been busy. Let's start with Bloomberg. As a reminder, 731 Lexington Avenue, the mixed-use tower whose 950,000 square foot office condo is Bloomberg's global headquarters, is owned by Alexander's, a separately traded public REIT. Renato owns 32.4% of Alexander's.

Michael J. Franco: Thank you, Steve and good morning, everyone.

Steven Roth: We've been busy.

Steven Roth: The background facts are that Bloomberg's lease expires in February 2029, 500 million, and 500 million of debt on the office condo is due next month, June 2024. Yesterday, we announced that we renewed and extended the Bloomberg lease for an 11 year term to begin in February 2029 and take us through February 2040, so 16 years of term from now. As you can imagine, every developer in town tried to poach Bloomberg, and, of course, they looked at every opportunity as they must.

Steven Roth: Let's start with Bloomberg as a reminder, 731, let something they haven't used the mixed use tower Who's 950000 square foot office condo as Bloomberg's Global headquarters.

Steven Roth: As old, but it's owned by Alexander as a separately traded public REIT.

They don't want was 32, 4% of Alexander's backgrounds backs are Bloomberg lease expires in February 2029.

505 hundred man of debt on the office condo is due next month June 2024.

Steven Roth: Yesterday, we announced that we renewed and extended the Bloomberg lease for an 11 year term to begin in February 2029.

Steven Roth: And take us through to February 2040, So 16 years of term from now as you can imagine every developer in town tried to postpone work out of course.

Steven Roth: They looked at every opportunity as they as they bust we are delighted that they chose to stay with 731 Lexington and by the way the Bloomberg. The building is as much Mike's creation. His mind he had significant input into the design of the original building.

Steven Roth: We are delighted that they chose to stay with 731 Lexington. By the way, the Bloomberg building is as much Mike's creation as mine. He had significant input into the design of the original building.

Steven Roth: The design of the building and Bloomberg's internal fit-out are on a par with what we would have built today, but of course, now they don't need to. The terms of the lease are spelled out in yesterday's SEC filings. Tenant concessions in the form of TIs and free rent have been established.

Steven Roth: The building in Bloomberg's internal fit out on a par with what we would have built today, but of course now they don't need to.

Steven Bernstein: In terms of the Liza spilled out in yesterday's SEC filings tenant concessions in the form of Tis and free rent have been established and the net rent will be the subject of an appraisal and 2029 with the Zen rent adjusted up or down no more than 10% either way based on the then market conditions.

Steven Roth: And the net rent will be the subject of an appraisal in 2029, with the then rent adjusted up or down no more than 10% either way, based on the then market condition. We're in the process of refinancing this asset, but I must say I am not excited about paying today's market rate of 7% or even 8% for debt. With all the trappings of leasing reserves, cash suites, and such, which are admittedly protective of the lender but don't do much for our equity value. As we speak, my personal favorite is to pay the debt down and maybe even pay the debt off. We shall see.

Steven Bernstein: We're in the process of refinancing this asset, but I must say I am not excited about paying today's market rate or seven or even 8% for that with all the trappings of leasing reserves cash sweeps.

Steven Bernstein: Such which are admittedly protective of the lender, but don't do much for our equity value as we speak my personal favorite is to pay the debt down and maybe even pay the debt off we shall see.

Steven Bernstein: Now lets focus on our credit life. Additionally, we've had two separate but similar credit lines with staggered maturities. One credit line for 125 billion has been renewed through 2027 and the renewal of the second credit line was finalized last Friday at a reduced amount of $915 million.

Steven Roth: Now let's focus on our credit lines. Traditionally, we have had two separate but similar credit lines with staggered maturities. One credit line for $1.25 billion has been renewed through 2027. And the renewal of the second credit line was finalized last Friday at a reduced amount of $915 million, with a term extended to April 2029. As expected in these times, several banks have dropped out. We use our credit lines very sparingly, generally for short-term requirements with a known source of repayment, and rarely have we exceeded 25% drawdown.

Steven Bernstein: With the term extended to April of 'twenty 'twenty line.

Steven Bernstein: As expected in these times several banks dropped out.

Steven Bernstein: We use our credit lines very sparingly generally for short term requirements with a known source of repayment and really rarely have we exceeded 25% ROA Dallas.

Steven Bernstein: Now the 280 Park Avenue, we own 50% of 280 Park Avenue since our joint venture partner has already reported I'm guessing you are all pretty much up to date on the details. What we did here was to extend the maturity of the senior loan for four years, keeping the rate constant with no pay down but post.

Steven Roth: Now to 280 Park Avenue. We own 50% of 280 Park Avenue. Since our joint venture partner has already reported, I'm guessing you are pretty much up to date on the details. What we did here was extend the maturity of the senior loan for four years, keeping the rate constant with no pay down, but posting significant cash reserves for future leases. Several analysts have commented that the loan and the equity value pretty much cancel out.

Steven Bernstein: The significant cash reserves for future leasing.

Steven Bernstein: Several analysts have commented that the loan and the equity value is pretty much cancel out.

Steven Bernstein: And that's fact allowed us to D. P O. The mezz loan at 50 cents on the dollar realizing a $31.3 million gain share, which we will recognize in the second quarter.

Steven Roth: And that fact allowed us to DPO the MES loan at 50 cents on the dollar, realizing a $31.3 million gain on the share, which we will recognize in the second quarter. This is not yet a big win, but it does create a cheap warrant on a wonderful asset located on Prime Park Avenue, where there is already a very low 7% vacancy and a shortage of space. We think it's a first-class bet

Steven Bernstein: This is not yet a big win but it does create a cheap warrant on a wonderful asset located in Prime Park Avenue, where there is already a very low 7% vacancy at a shortage of space. We think it's a first class, but by the way we are leasing very well here.

Steven Roth: By the way, we are leasing very well here. We continue to protect our balance sheet with interest rate caps and swaps, but when a 3% loan matures into a 7% market, there really is no place to hide. We continue to prospect for good real estate in distress where our best-in-class operating platform can be helpful to the lender. We expect these opportunities to accelerate. The gold rush on the part of the luxury brands to own, control, and dominate the very best locations is accelerating, and the knock-on effect on prime New York City retail space is palpable.

Steven Bernstein: We continue to protect our balance sheet with interest rate caps and swaps, but when a 3% loan matures into a 7% market. There really is no place to hide.

Steven Bernstein: We continue to prospect for good real estate in distress, where our best in class operating platform can be helpful to the lender. We expect these operate opportunities to accelerate.

Steven Bernstein: The gold rush on the part of the luxury brands to own control and dominate the very best locations is accelerating and then knock on effect on Prime New York City retail space is palpable.

Steven Roth: It should be noted that in New York, we have much more prime retail space than anyone else by a wide margin. Some commentators have noted that the values of Fifth Avenue and Times Square seem to have recovered to the price of our retail JV sale five years ago. It would seem so.

Steven Bernstein: It should be noted that in New York, we have much more prime retail space than anyone else by a wide margin. Some commentators have noted that the fifth Avenue and times square values seem to have weakened recovered to the pricing of our retail JV sales five years ago. It would seem so.

Steven Bernstein: I continue to strongly believe the contrarian Bull case I've made in my annual shareholders letter that basically with frozen supply I E. No new developer office starts and nothing on the horizon tenant requirements picking up in vacancy shrinking I couldnt be more optimistic about the future.

Steven Roth: I continue to strongly believe the contrarian bull case I made in my annual shareholders letter that, basically, with frozen supply, i.e., no new developer office starts and none on the horizon. With tenant requirements picking up and vacancies shrinking, I couldn't be more optimistic about the future. And also note that while the New York market has a huge 422 million square feet, when you cancel out the non-prime space, we really only compete in a much smaller 177 million square foot market. Great things are happening in our Penn District; come by and take a look. Our team here at Renato couldn't be more optimistic. Now over to Michael.

Steven Bernstein: And also note that while the New York market has a huge 422 million square feet. When you cancel out the non prime.

Steven Bernstein: Space, we really only compete in a much smaller 177 million square foot market.

Steven Bernstein: Great things are happening in our Penn district come by and take a look our team here at vornado couldn't be more optimistic now over to Michel.

Michel: Thank you, Steve and good morning, everyone as expected the financial results for the quarter were down from last year due to items that we previously forecasted.

Michael J. Franco: Thank you, Steve, and good morning, everyone. As expected, the financial results for the quarter were down from last year due to items that we previously forecasted. First quarter comparable FFO as adjusted was $0.55 per share compared to $0.60 per share for last year's first quarter, a decrease of $0.05. This decrease is primarily driven by lower NOI from higher net interest expense and no move outs, partially offset by lower G&A expense. We have provided a quarter-over-a-quarter bridge in our earnings release and in our financial supplement. Overall, New York business, same store cash NOI was down 5.1%, primarily due to the aforementioned expiration.

Michel: First quarter comparable <unk> as adjusted was 55 per share compared to <unk> 60 per share for last year's first quarter a decrease of <unk>.

Michel: This decrease is primarily driven by lower NOI from higher net interest expense and known move outs, partially offset by lower G&A expense, we have provided a quarter over quarter bridge in our earnings release and our financial supplement.

Michel: Our overall, New York business same store cash NOI was down five 1% primarily due to the aforementioned explorations.

Michael J. Franco: As we indicated in our last earnings call, we expect our 2024 comparable FFO to be down from 2023 comparable FFO of $2.61 per share, primarily due to higher projected net interest expense of about $0.30 per share due to the impact of known vacancies at certain of our properties, primarily at 1290 Avenue of the Americas, 770 Broadway, and 280 Park Avenue. We anticipate the impact of these expirations in 2024 to be roughly 25 to 30 cents per share.

Michel: As we indicated on our last earnings call. We expect our 2024 comparable <unk> to be down from 2023 comparable F. F O $2 61 per share primarily.

Michel: Primarily due to higher projected net interest expense of about <unk> 30 per share and the impact of known vacancies at certain of our properties primarily at 12 90 Avenue. The Americas 770, Broadway and 280 Park Avenue, we anticipate the impact of these explorations in 2024 to be roughly 25% to 30 per share.

Michel: We expect this impact to be temporary as we have already leased up a good chunk of this space, but the GAAP earnings from these leases won't begin until sometime in 2025. We then expect earnings to increase as income from the lease up of Penn and other vacancies comes online and as rates trend down.

Michael J. Franco: We expect this impact to be temporary, as we have already leased up a good chunk of this space, but the gap earnings from these leases won't begin until sometime in 2025. We then expect earnings to increase as income from the lease-up of Penn and other vacancies comes online, and as rates trend down. Now, turning to the leasing market. The New York office market continues to show signs of strength. While first quarter office leasing in New York took a bit of a breather from the strong year-end, there is a healthy backlog of activity with a number of large deals in the works.

Michel: Now turning to the leasing markets the.

Michel: The New York Office market continues to show signs of strengthening.

Michel: Well first quarter office leasing in New York took a bit of a breather from the strong year end. There is a healthy backlog of activity with a number of large deals in the works overall tenant space requirements continue to trend upward sublease space continues to fall best in class renovated and are monetized product located in transit hubs.

Michael J. Franco: Overall, tenant space requirements continue to trend upward, sub-lease space continues to fall, best-in-class renovated and amenitized product located in transit Hubs continues to dominate leasing, and the new supply pipeline is close to zero. These dynamics set the table for continued improvement and conditions in the upper tier of the market, which we are already experiencing in our best-of-class portfolio. Overall, asking rents are stable, even rising in the top tier properties, but concessions remain stubbornly high across all submarkets.

Michel: <unk> continues to dominate leasing and the new some pipeline new supply pipeline is close to zero.

Michel: These dynamics set the table for continued improvement in conditions in the upper tier of the market, which we are already experiencing in our best of class portfolio.

Michel: Overall, asking rents are stable, even rising in the top tier properties, but concessions remain stubbornly high across all submarkets the financial services and legal sectors are continuing to drive the leasing activity is both are in growth mode.

Michael J. Franco: The financial services and legal sectors are continuing to drive the leasing activity as both are in growth. We are also seeing the first signs of life in the tech sector again after a couple of years of being on pause or downsizing. And our experience is that when they grow, they tend to leave big chunks of space.

Michel: We are also seeing the first signs of life in the tech sector again after a couple of years of being on pause or downsizing and our experience is when they grow they tend to lease big chunks of space.

Michael J. Franco: The Midtown and New West Side markets are outperforming as leasing activity in Midtown is strong, not only on Park Avenue but also on 6th Avenue and the 5th Avenue-Madison Avenue corridor. On the west side, tenant demand continues apace. If you walk from 7th Avenue to the Hudson River, you will see why.

Michel: The Midtown the new West side markets are outperforming as leasing activity in Midtown is strong not only on park Avenue, but also on sixth Avenue in the fifth Avenue Madison Avenue corridor on.

Michel: On the West side tenant demand continues at pace. If you walk from seventh Avenue to the Hudson River, you'll see why.

Michael J. Franco: Turning now to our leasing activity. After completing a slew of large leases in December 2023 and finishing last year with a market-leading 2.1 million square feet of deals, we expected a more muted first quarter of completed transactions, given where our deal pipeline stood in the negotiation process. In the first quarter, we leased 291,000 square feet at a healthy $89 per square foot, reflecting the overall quality and premium locations of our property.

Michel: Turning now to our leasing activity after completing a slew of large leases in December 2023, and finishing last year with a market, leading $2 1 million square feet of deals we expected a more muted first quarter's completed transactions given where our deal pipeline stood in the negotiation process.

Michel: In the first quarter, we leased 291000 square feet at a healthy $89 per square foot, reflecting the overall quality and premium locations of our properties.

Michael J. Franco: The highlight of the quarter was our 125,000 square foot headquarters lease with Major League Soccer at the new Penn II. MLS had been in the market for some time, looking mainly in the Midtown core until late in their process when they toured Penn and were wowed by what we've done with the building in the district. The project is now complete and really shows off well. Our new town hall event space is open. By the way, we hosted our first event just two weeks ago, attended by 300 people. And the rooftop pavilion and park are truly spectacular.

Michel: Highlights of the quarter was our 125000 square foot headquarters lease with major League soccer at the new Penn too.

Michel: MLS had been in the market for some time looking mainly in the Midtown core until late in their process when they toured pin too.

Michel: Were wowed by what we've done with the building and the district. The project is now complete and really shows terrifically, our new town Hall event spaces open by the way we hosted our first event just two weeks ago attended by 300 people and the rooftop pavilion and park a truly spectacular tenants are responding positively to everything.

Michael J. Franco: Tenets is responding positively to everything that we've done and what's still to come. We have a significant pipeline at PIMM 2 and are busy negotiating proposals with tenants across a variety of industry sectors. In addition to the significant Bloomberg lease renewal of almost 1 million square feet we just completed, our leasing pipeline is strong, with 370,000 feet of leases in negotiation and another 2.5 million feet of proposals out on the street in different stages.

Michel: We've done and what's still to come.

Michel: We have a significant pipeline of pen two and are busy negotiating proposals with tenants across a variety of industry sectors.

Michel: In addition to the significant Bloomberg lease renewal of almost 1 million square feet. We just completed our leasing pipeline is strong with 370000 feet of leases in negotiation and another $2 5 million feet of proposals out on the street and different stages.

Michael J. Franco: Much of this activity is not only addressing current vacancy but also forward-looking expiration. As discussed on the fourth quarter call, we foreshadowed an occupancy decline due to the known Q1 move-outs at properties such as 1296th Avenue and 280th Park.

Michel: Much of this activity is not only addressing current vacancy, but also a forward looking explorations.

Michel: As discussed on the fourth quarter call, we foreshadowed an occupancy decline due to the known Q1 move outs at properties such as 12 96 Avenue and 280 Park. We are pleased to report that we have already taken care of half of 2024, and 2000 22025 explorations in these properties with more activity on the horizon in each.

Michael J. Franco: We are pleased to report that we have already taken care of half of the 2024 and 2025 expirations in these properties, with more activity on the horizon in each year. Turning to retail, the retail leasing market continues to recover. As we discussed in our last call, Prada's and Kering's blockbuster retail deals on 5th Avenue that occurred in December demonstrated their long-term commitment to Manhattan and further energized the market. And there are other potential sales rumored to be in the works.

Michel: Turning to retail.

Michel: Our retail leasing market continues to recover as we discussed on our last call.

Michel: Proud of and carries blockbuster retail deals on fifth Avenue that occurred in December demonstrated their long term commitment to Manhattan and as further energize the market.

Michel: And there are other potential sales rumored to be in the works vacancy rates are now below pre pandemic 2019 levels in most Manhattan, Submarkets and retailers are willing to pay top dollar for the best locations are.

Michael J. Franco: Vacancy rates are now below pre-pandemic 2019 levels in most Manhattan submarkets, and retailers are willing to pay top dollar for the best location. Our retail leasing activity has picked up meaningfully in the last couple of quarters, with almost all our assets seeing significant interest. As evidence of the rebound, this quarter, in addition to signing many leases in the Penn District, we completed an important long-term renewal at one of our Times Square assets at the highest annual dollar rent we've achieved in our portfolio since pre-COVID, over $15 million per year.

Michel: Our retail leasing activity has picked up meaningfully in the last couple of quarters with almost all of our assets seeing significant interest.

Michel: As evidence of the rebound this quarter. In addition to signing many leases in the Penn District, we completed an important long term renewal with one of our times square assets at the highest annual dollar around we've achieved in our portfolio since pre COVID-19 over $15 million per year.

Michel: Turning to the capital markets now.

Michael J. Franco: Turning to the capital markets now, while the financing markets still remain challenging, we are starting to see some stability for high-quality products. The CMBS market has begun to selectively reopen for office, lending at conservative metrics on quality assets with long-weighted average leases. Unsecured bond spreads for office continue to tighten. The market is much more open for high-quality retail. That being said, coupons are still high.

Michel: The financing markets still remain challenging we are starting to see some stability for high quality product. The <unk> MBS market has begun to selectively reopened for office lending a conservative metrics on quality assets with long weighted average lease term unsecure.

Michel: Unsecured bond spreads for office continue to tighten.

Michel: The market is much more open for high quality retail that being said coupons are still high.

Michael J. Franco: Banks remain on the sidelines and generally in workout mode, and there's more pain to come for all lenders given the volume of office maturities in the next few years. This will create opportunities for us. We have been and continue to be very active on the capital markets front. In addition to the recent extensions on 280 PARC and 435.7, we're also in the process of extending our other 2024 maturities, which we expect to complete soon.

Michel: <unk> remain on the sidelines and generally in workout mode, and there's more pain to come for all lenders given the volume of office maturities in the next few years this will create opportunities for us.

Michel: We have been and continue to be very active on the capital markets front. In addition to the recent extensions on 280 park and $4 $35 seven.

Michel: Also in the process of extending our other 2024 maturities, which we expect to complete soon.

Michel: Finally, and importantly, as Steve mentioned, just a few days ago, we finalized the recast of our revolver that was scheduled to mature in 2026 for $915 million completing this refinancing solidify the key portion of our liquidity through 2029 and gives us significant runway to deal with any challenges over the next few years.

Michael J. Franco: Finally, and importantly, as Steve mentioned, just a few days ago, we finalized the recast of our revolver that was scheduled to mature in 2026 for $915 million. Completing this refinancing solidified a key portion of our liquidity through 2029 and gives us significant runway to deal with any challenges over the next few years. It also highlights the continued support of our key banks in this challenging environment. We thank them for their support.

Michel: It also highlights the continued support of our key banks in this challenging environment, we thank them for their support.

Michael J. Franco: Our balance sheet remains in very good shape with strong liquidity. Pro forma for the new revolver size, our current liquidity is a strong $2.7 billion, including $1.1 billion of cash and restricted cash and $1.6 billion undrawn under our $2.17 billion revolving credit facilities. With that, I'll turn it over to the operator for Q&A.

Michel: Our balance sheet remains in very good shape with strong liquidity.

Michel: Pro forma for the new revolver size, our current liquidity is a strong $2 7 billion.

Michel: Including $1 $1 billion of cash and restricted cash and $1 6 billion Undrawn under our two $1 7 billion revolving credit facilities with that I'll turn it over to the operator for Q&A.

Speaker Change: Thank you very much.

Operator: Thank you very much. We will now begin the question-and-answer session. If you have a question, please press star, then 1 on your touchtone phone. 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 the handset first before pressing the numbers. Once again, if you have a question, please press star, then 1 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. Today's first question comes from Steve Skwa with Evercore ISI. Please go ahead.

Speaker Change: I'll now begin the question and answer session. If you have a question. Please press Star then one on your Touchtone phone.

Speaker Change: We wish to be removed from the queue. Please press Star then two if you are using a speakerphone you may need to pick up the handset first before pressing the numbers.

Speaker Change: Once again, if you have a question. Please press Star then one on your Touchtone phone.

Speaker Change: Each caller will be allowed to ask a question and a follow up before we move on to the next caller.

Speaker Change: Okay.

Stephen Thomas Sakwa: Yes, hi, good morning. Michael, I was wondering if you could just follow up a little bit on the comments you made about the pipeline and just maybe help us think through, you know, how much of that two and a half million square feet is maybe earmarked for Penn 2 and the development and how much is geared for, I guess, future rollovers and how much is geared to kind of current vacancy in the portfolio.

Speaker Change: Today's first question comes from Steve Scala with Evercore ISI. Please go ahead.

Steven Roth: Yes, Hi, good morning, Michael I was wondering if you could just follow up a little bit on the comments you made about the pipeline.

Steven Roth: Maybe help us think through you know how much of that two and a half million square feet is maybe earmarked for Penn two into development and how much is geared for.

Steven Roth: I guess future rollovers and how much is geared to kind of current vacancy in the portfolio.

Michael J. Franco: Good morning, Steve. Glen, do you want to take the lead on that? Sure.

Michael J. Franco: Good morning, Steve.

Steven Roth: Glenn do you want to take the lead on that.

Glen J. Weiss: Sure. Hi Steve. It's Glen.

Steven Roth: Sure Hi, David squad How're you doing.

Steven Roth: So I would say, it's a very very balanced mix of what you just described.

Glen J. Weiss: How are you doing? So I would say it's a very, very balanced mix of what you just described. We're seeing a surge in proposals coming in on Penn, both Penn One and Penn Two, coming off the heels of our Major League Soccer lease. We're seeing expirations, outbound expirations, and tenants coming to us to early renew, just like we did with Bloomberg this week. And in addition, much of the pipeline is attacking expirations at the buildings where we have space available today. So I'd say it's a healthy mix across the portfolio, pen and otherwise.

Steven Roth: Seeing a surge in proposals coming in on Penn well.

Steven Roth: Penn one and Penn two coming off the heels of our major League Soccer League.

Steven Roth: We're seeing.

Steven Roth: Explorations outbound exploration kind of coming to us to early renew just like we did with Bloomberg This week and in addition.

Steven Roth: Much of the pipeline is attacking exploration.

Steven Roth: At the buildings, where we have space available today.

Steven Roth: It's a healthy mix across the portfolio.

Steven Roth: And then otherwise.

Steven Roth: Okay.

Speaker Change: Okay, Thanks, and as a follow up Michael just to I guess go back to some of the information you provided on I guess the earnings drag from the lost.

Stephen Thomas Sakwa: Okay, thanks. And as a follow-up, Michael, just to, I guess, go back to some of the information you provided on, I guess, the earnings drag from the lost, you know, occupancy this year. Just to be clear. If you took the 30 cent hit from the interest expense, and now you're sort of quantifying this 25 to 30 cent hit from the known vacant land, some of which I know has been released and will rebound maybe in 25 and beyond.

Michael J. Franco: Occupancy this year just to be clear.

Michael J. Franco: If you took the 30 <unk> hit from the interest expense and now you're sort of quantifying. This 25 to 30 hit from the known Vacates some of which I know has been re leased them will rebound maybe in 'twenty five and beyond you're kind of suggesting that there is sort of the 60 cent drag this year as we think about 'twenty four and then I'll.

Stephen Thomas Sakwa: We're kind of suggesting that there's sort of a $0.60 drag this year as we think about $24, and then other positive offsets that might sort of take that number a little bit up from, say, the $2 level.

Speaker Change: Are there other positive offsets that might sort of take that number a little bit up from say the two dollar level.

Michael J. Franco: Yeah.

Michael J. Franco: Yeah, so look, in terms of your sort of detail there, I think that's accurate, right? We talked about interest last quarter and sort of reaffirmed the $0.30 this quarter. Yeah, the $0.25 to $0.30 are sort of the known vacants. And as we've mentioned, you know, we've backfilled a lot of that already at $12.90 and $2.80. Like we have a lot that we're working on.

Speaker Change: Look in terms of your.

Michael J. Franco: So the detail there I think that's accurate we talked about interest last quarter and sort of reaffirmed the 30 this quarter the 25 to 30.

Michael J. Franco: Sort of a known vacates.

Michael J. Franco: And as we've mentioned we back filled a lot of that already at 12, 90 and $2 80.

Speaker Change: Look we have a lot that we're working on there are some things that could certainly make that number more positive, but I think we're trying to give you the downside version today.

Michael J. Franco: There are some things that could certainly make that number more positive, but I think we're trying to give you the downside version today. And so I can't tell you where exactly it's going to come out. But I think if you say, look, let's take sort of a worst case, you know, the $0.30 plus the $0.25 to $0.30 gets you down to $0.55 to $0.60. I think that's a good baseline. And, you know, our objective is to beat that. But, you know, there's still a lot going on.

Michael J. Franco: And so I can't say, where exactly it's going to come out, but I think if you say look let's take sort of worst case patient out of the 30, plus the 25 to 30 gets you down 55% to 60 cents I think thats a good baseline and our objective is to beat that but theres still a lot moving around.

Speaker Change: Great. Thanks, that's it for me.

Michael J. Franco: Great, thanks. That's it for me. Let me just add to that for a second. So, I mean, the numbers that you mentioned and that Michael just mentioned are, you know, accurate for this year. Let's build from there and see what the company's future is.

Michael J. Franco: David Let me just talk on that for a second.

Michael J. Franco:

David: The numbers that you mentioned.

David: And then Michael just mentioned Acura.

Speaker Change: Accurate for this year, it's still from there and see what the company's future.

Speaker Change: It looks like Oh.

Steven Roth: I think that's what it looks like on an almost certain basis. If you start with re-renting the vacancies, and we get back from whatever we are now to our normal, you know, 96, 97, 98% occupancy. That adds a big number to our earnings. When Two-Pen comes online... That's another $100 million, give or take, of earnings that come online that is brand new. If interest rates settle down to some kind of civilized number, that also improves earnings enormously.

Speaker Change: Almost certain basis so.

Speaker Change: If you start with re renting the vacancies and we get back from wherever we are now do our normal.

David: 90, 690, 798% occupancy.

David: That it's a big number to earnings when one Penn two Penn comes online.

David: Another $100 million give or take.

David: Our earnings that comes online that is brand new.

David: If interest rates.

David: Settle down into some kind of stabilized number.

David: That also.

David: Improves earnings enormously so the company has the earnings potential of being.

Steven Roth: So the company has the earnings potential to be, you know, pretty spectacular. And that's what we're shooting for. So we're looking at it, not on a one month, one quarter basis; we're looking at what the company's earning power would be, pick a number two, three years out, okay? And we are extremely excited about that.

David: We think pretty spectacular and that's what we're shooting for so we're looking at it.

David: One month, one quarter basis, we're looking at what the company's earning power would be pick a number two or three years out okay and we are extremely excited about that.

David: Thank you. The next question is from John Kim with BMO capital markets. Please go ahead.

Operator: Thank you. The next question is from John Kim with BMO Capital Markets. Please go ahead.

David: Okay.

John P. Kim: Thank you. Michael, in your prepared remarks, you talked about the tech sector coming back to the market in Manhattan and also referenced retailers potentially looking to purchase their flagship stores similar to Prada. Is your commentary more of a market commentary, or do you see Veneto involved in either one of those two?

John P. Kim: Thank you Michael in your prepared remarks, you talked about tech sector coming back to the market in Manhattan, and also reference retailers potentially looking to purchase there.

John P. Kim: Flagship stores.

John P. Kim: No.

John P. Kim: Is your commentary more of a market commentary or do you see the NATO involved in it.

John P. Kim: Either one of those two.

Michael J. Franco: I mean, look, I think it's both, John. I mean, we've got, you know, we've got some of the best products in town in both categories. I think we've done more tech leasing than any other landlord in the city. We have all the big four in our portfolio, so we maintain an active dialogue with all those players. So I would expect that if the tech sector becomes active again, we're going to get more than our fair share.

Speaker Change: Look I think it's I think it's both John.

Speaker Change: We've got.

We've got some of the best product in town in both categories.

Speaker Change: I think we've done more tech leasing than any other landlord in the city.

Speaker Change: Have all the big four in our portfolio. So we maintain an active dialogue with all of those players so.

Michael J. Franco: I would I would expect that if the tech sector becomes active again.

Speaker Change: Get more than our fair share.

Speaker Change: And in terms of the pipeline.

Michael J. Franco: In terms of the pipeline, I think the tech sector was pretty dormant for the last 18-24 months, either on pause or, in some cases, downsizing space. You know, we've seen in the last 90 days a real pickup there, started small, and now we're seeing some more significant requirements.

Michael J. Franco: I think the tech sector was pretty dormant for the last.

Speaker Change: 18, 24 months, they're on pause or in some cases downsizing space and.

Speaker Change: We've seen in the last 90 days a real pickup there started small and now we're seeing some some more significant requirement. So we.

Michael J. Franco: We do think some of those will convert to activity and were quite optimistic about that sector turning on again on the retail side.

Michael J. Franco: So, we do think some of those will convert to activity, and we're, you know, quite optimistic about that sector turning on again. You know, on the retail side, I think you know better than anybody, given the discussions we've had in the past, we own, you know, the best retail in the city. So, if you want to be on Fifth Avenue, particularly given the shrinking amount of availability that's, you know, can be leased, we're the first, you know, second, third call. Times Square, we own both sides, so activity has picked up significantly in both those submarkets.

Michael J. Franco: I think you know better than anybody given the discussions we've had in the past.

Speaker Change: We own.

Michael J. Franco: The best retail in the city.

Michael J. Franco: So if you want to be on fifth Avenue, particularly given the shrinking amount of availability.

Michael J. Franco: Uh huh.

Speaker Change: Can be leased.

Speaker Change: Uh huh.

Speaker Change: We are the first second third call times square, we on both sides of the bowtie. So activity level has picked up significantly in both those submarkets yeah. The <unk>.

Michael J. Franco: You know, the animal spirits are alive and well amongst retailers. They see that Manhattan is thriving again, and their sales numbers reflect that. And, you know, Prada and Caring's announcements obviously garnered worldwide attention and, you know, I think they made every other retailer question, what are we doing, right? Both from a leasing standpoint and a buying standpoint. There's obviously been other transactions rumored, but I don't think you've seen the last of the retailer purchases, and obviously given our portfolio, you know, we are, we're fertile ground. So we expect to be in the.

Animal spirits are alive, and well amongst retailers they see that Manhattan is thriving again their sales numbers reflect that.

Steven Roth: And Prada and Schering's announcements.

Michael J. Franco: Obviously.

Michael J. Franco: Arner worldwide attention and.

Michael J. Franco: Like every other retailer question what are we doing right now both from a leasing standpoint buying standpoint has obviously been other transactions rumored.

Michael J. Franco: But.

Michael J. Franco: I don't think you've seen the last of the retailer purchases and obviously given our portfolio.

Michael J. Franco: We are where fertile ground so are we.

Michael J. Franco: It could be in the mix there.

Michael J. Franco: Okay and my follow up is on 350 Park Avenue.

John P. Kim: Okay, my follow-up question is on 350 Park Avenue. The leasing environment and the interest rate environment, or the outlook, has changed a lot in the past year and a half since you struck the deal. What is the likelihood that either Citadel or you will exercise your option?

John P. Kim: The leasing environment and interest rate environments or the outlook has changed.

Speaker Change: In the past year and a half since you.

John P. Kim: Since we struck the deal what is the likelihood that either stood at all or you exercise your options at that point.

Speaker Change: Theres always a likelihood but right now we're on full steam ahead to build a world class headquarters for citizens. We've started the public approval process and.

Michael J. Franco: It's a couple of years process to design the building, complete the drawings, get through the public approval process, and obviously, we will reappraise the financial markets at that time. Citadel's growing, they want the space, they're committed to the deal, as are we.

John P. Kim: It's a couple of year process to design the building complete the drawings.

Michael J. Franco: Yeah.

Michael J. Franco: Get through the public approval process, and obviously, we will reappraise the financial markets at that time digital is growing.

Michael J. Franco: Want the space they are committed to the deal as are we.

Michael J. Franco: And can you confirm.

Michael J. Franco: And can you confirm that the starting rent for Citadel is reported at $35 million?

Michael J. Franco: The starting rent for Citadel was reported at $35 million.

Speaker Change: No Sir we can.

Michael J. Franco: It's a formulaic rents with just <unk>.

Michael J. Franco: It's a formulaic rent, which depends upon what the cost of financing is at the time that we go into the financing market.

Michael J. Franco: <unk> upon on what the.

Michael J. Franco: What the cost of financing is at the time that we have.

Michael J. Franco: At the time, we go into the financing markets.

Speaker Change: Got you okay. Thank you.

John P. Kim: Gotcha. Okay. Thank you.

John P. Kim: Thank you. The next question is from Michael Griffin with Citi. Please go ahead.

Operator: Thank you. The next question is from Michael Griffin with Citi. Please go ahead. Great, thanks.

Michael Anderson Griffin: Great. Thanks, Michael I wanted to go back to your comments around concessions being stubbornly high and I imagine that's the case driven market overall, but if you look at it.

Michael Anderson Griffin: Great, thanks. Michael, I wanted to go back to your comments around concessions being stubbornly high. You know, I imagine that's the case for the market overall, but if you look at, you know, maybe better-off submarkets like Park Avenue or even some of your properties, you know, on the west side, the Penn District, how are you seeing concessions there, given that the environment seems to have improved?

Michael Anderson Griffin: It may be better off Submarkets like Park Avenue or even some of your properties.

Michael Anderson Griffin: You're on the West side, the Penn District, how are you seeing concession there given that the environment seems to have improved.

Michael: Well anyway.

Glen J. Weiss: GLEN WEISS. Yes, sure. Hi, it's Glen.

Michael: Yes sure.

Glen J. Weiss: Hi, It's Glenn I would tell you no matter the sub market on new leases.

Glen J. Weiss: I would tell you, no matter the submarket, on new leases, TIs are somewhere between 140 and 150 a foot, and free rent is somewhere in the 13, 15 month range. I think as it relates to specific submarkets, it's really about the rent. So in some of the submarkets, we are seeing an uptick in rent where supply is tightening, as you would expect.

Glen J. Weiss: T is there is somewhere between $1 $41 50, a foot.

Glen J. Weiss: And you know free rent is somewhere in the 13 to 15 month range I think as it relates to sub market specific it's really about the rents.

Glen J. Weiss: So when some of the Submarkets, we are seeing an uptick in rents where supply is tightening as you would expect.

Glen J. Weiss: Yes.

Speaker Change: Got you that's helpful. And then maybe just some color on lease expirations. This year. It looks like there is a big one in the second quarter.

Michael Anderson Griffin: Gotcha. That's helpful.

Michael Anderson Griffin: And then maybe just some color on lease expirations this year. It looks like there's a big one in the second quarter, about 3% of the overall rents. The face rent there right now seems pretty high. What's the likelihood of renewing or backfilling this space? Or is this one of those known move-outs that you described earlier?

Michael Anderson Griffin: 3% of the overall rents.

Michael Anderson Griffin: Right there right now seems pretty high what's the likelihood of renewing or backfill in this space are those known move outs that you described earlier.

Glen J. Weiss: It's the meta space that comes back to us in June that we spoke about on our last earnings call. That's the leash you're referring to.

Michael Anderson Griffin: Hum.

Glen J. Weiss: It's the meta space.

Glen J. Weiss: It comes back to us in June that we spoke about on our last earnings call.

Glen J. Weiss: The lease you're pertaining to.

Glen J. Weiss: Okay.

Glen J. Weiss: And in terms of potential of back billing renewing the space, what's demand looking like on it.

Glen J. Weiss: And in terms of the potential for backfilling or renewing the space, what's demand looking like for it?

Michael Anderson Griffin: We have action on the space that's part of our pipeline that we've described. We feel very good about the asset and very good about backfilling that space. It's the most unique asset of Midtown South. We feel good about it.

Glen J. Weiss: We have action on this space.

Michael Anderson Griffin: That's part of our pipeline that we described we feel very good about the asset and very good about back filling that space.

Michael Anderson Griffin: The most unique assets in Midtown south.

Michael Anderson Griffin: Feel good about it.

Michael Anderson Griffin: Yes.

Speaker Change: Great. That's it for me thanks for the time.

Operator: Great, that's it for me. Thanks for the time.

Operator: Thank you. The next question is from Floris Van <unk> with Compass point. Please go ahead.

Floris Van Diekem: Thank you. The next question is from Floris Van Diekem with Compass Point. Please go ahead.

Speaker Change: Hi, Thanks for taking my question.

Michael J. Franco: Thanks for taking my question. Rather than get into the details on the leasing, which is obviously very important as well, but I wanted to ask a question on sort of the market and get Steve and Michael's view on the opportunity that's going to be representing itself, I think, when the $200 billion of office loans mature in 2024, as well as the other $100 billion next year. What do you see happening with, you know, some of those are obviously unlikely to be refinanced?

Michael J. Franco: Rather than get into the details on the on the leasing, which obviously isn't a very important as well, but I wanted to ask a question on <unk>.

Michael J. Franco: Sort of the market and and and.

Michael J. Franco: And get a SKU.

Michael J. Franco: Steve Michaels view on.

Michael J. Franco: But the opportunity there.

Michael J. Franco: That's going to be.

Michael J. Franco: Presenting itself I think win.

Michael J. Franco: The $200 billion of.

Michael J. Franco: Office loans mature over the next you know actually in 24 as well as the other 100 billion next year.

Michael J. Franco: What do you see happening.

Michael J. Franco: With you know some.

Michael J. Franco: Some of those obviously are unlikely to be could be refinanced and so where do you see.

Michael J. Franco: And so where do you see Vornado in that situation? Do you have, can you play a role in maybe buying some assets? And maybe that could help cause some of the bullishness in Steve's tone on the outlook for the next two years?

Michael J. Franco: NATO in that situation do you have can you play a role in maybe buying some assets and maybe does that hope.

Michael J. Franco: Caused some of the bullishness in Steve's tone on the outlook for the for the next two years.

Michael J. Franco: Yeah.

Michael J. Franco: Good morning, Floris. So, like, I think in terms of the debt rolling over, which is significant over the next few years, as we all know, the capital markets are not there to support, you know, refinancing, the vast majority. And so I think, you know, what happens there is, is, you know, going to take, you know, one of a few forms, depending on the quality asset, the sponsor, the asset, and what its future looks like.

Michael J. Franco: Good morning Floris.

Michael J. Franco: So look I think in terms of the debt rolling over which is significant over the next few years as we all know.

Michael J. Franco: The capital markets are not there to support our refinancing the vast majority of that.

Michael J. Franco: And so I think what happens there is going to take one of our few farms.

Michael J. Franco: Hands on the quality asset the sponsor of the asset and what its future looks like and we've seen some examples where.

Michael J. Franco: And we've seen some examples where, you know, the older obsolete buildings where debt rolls, don't have a future as an office building, or certainly with that sponsor and the lenders have taken it back, or there's been a consensual sale of some of those assets, something like 1740 Broadway would be a recent example. So I think we'll see a fair amount of that on some of those older buildings.

Michael J. Franco: The older obsolete buildings, where debt rolls.

Michael J. Franco: Have a future as an office building or certainly with that sponsor and the lenders have taken it back or there has been a consensual.

Michael J. Franco: Sale of some of those assets something like a 17 40 Broadway it would be a recent example, so I think we will see a fair amount of that on.

Michael J. Franco: Some of those older buildings.

Michael J. Franco: Then there is a category where theyre just overleverage, where there is a future and again I think the lender will assess.

Michael J. Franco: Then there's a category where it's just over leveraged, where there is a future. And again, I think the lender will assess whether the sponsor has the wherewithal and the capability to, you know, either re-tenant or support the asset. And in some cases they will; in many cases they won't.

Michael J. Franco: Whether the sponsor has the wherewithal.

Michael J. Franco: And the capability too.

Michael J. Franco: Either re tenant or support the asset and in some cases, they will in many cases they won't.

Michael J. Franco: You know, we're talking to lenders about that, and I think they'll look for solutions, right? I think lenders, in general, know that taking back assets and operating them, certainly in office space, is not a winning strategy. Value deteriorates fairly quickly. Tenants don't want to go into those dollars.

Michael J. Franco: We're talking to lenders about that and I think they'll look for solutions right I think.

Michael J. Franco: Lenders in general know that taking back assets and operating them certainly the office space is not a winning strategy value deteriorate fairly quickly tenants don't want to go into those buildings. So we do think theres going to be opportunity to work with existing lenders.

Michael J. Franco: So, we do think there's going to be an opportunity to work with existing lenders and be a solutions provider. You know, we have a leading operating platform. We expect to deploy capital there, and I think it could be in either one of those buckets. It could be buildings that are, you know, that with our capabilities can be leased back, stabilized, and value could be created, or it could be assets that can be repurposed from, you know, office space to residential, potentially. So, the answer is that we are actively looking.

Michael J. Franco: Solutions provider, we are a leading operating platform, we expect to deploy capital there.

Michael J. Franco: And I think it could be in either one of those buckets. It could be buildings that are.

Michael J. Franco: With our capabilities can be leaseback up stabilized value could be created or it could be assets that can be repurposed from office to residential potentially so the answer is we are actively looking we expect to play on that and.

Michael J. Franco: We're still at the beginning stages.

Speaker Change: And I know, it's early in terms of what transactions would look like but presumably for you to utilized part of your significant cash wards, which again sets you apart from some of your peers.

Floris Van Diekem: And I know it's early in terms of, you know, what transactions would look like, but presumably, for you to utilize part of your significant cash awards, which again sets you apart from some of your peers, you would have to have, I would imagine, returns that are in excess of the, you know, 7% plus financing rates that you would have to pay today if you were to Theoretically, get assets. Is that the right way to think about it? You're returning to the rules of the controlling war.

Floris Van Diekem: You would have to have I would imagine returns that are in excess of the 7% plus.

Floris Van Diekem: Dancing rates that you would have to pay today, if you were to.

Floris Van Diekem: You radically get assets is that the right way to think about it you're your returns. Thanks Harlan.

Floris Van Diekem: Plus.

Michael J. Franco: Yeah, I mean, look, I think our objective of deploying cash is not to, you know, invest in, you know, real estate. It's going to generate core returns, right? And this is an opportunity that is, Unknown Speaker, Unknown Speaker, Unknown Speaker, Unknown Speaker. Right, maybe one follow-up question in terms of your retail segment, and again, particularly your Fifth Avenue, which is, again, as you highlight, unique. Where do you think market rents are today?

Speaker Change: Yeah, I mean look I think with our objective of deploying cash does not.

Speaker Change: Best in.

Michael J. Franco: Real estate is going to generate core returns right and this is an opportunity that is.

Speaker Change: Probably not for the fan apart right I mean, you're taking risk.

Michael J. Franco: And you want to get rewarded for that so the returns need to be attractive. So yes, I think the stabilized yields I think it depends a little bit on the nature of the asset and where do you think ultimate cap rates settle out for particular assets, but.

Michael J. Franco: No question that they required yields.

Speaker Change: In the neighborhood that you mentioned.

Speaker Change: Great maybe one follow up in terms of.

Speaker Change: Your retail segment again, particularly your fifth Avenue, which is again as you highlight.

Michael J. Franco: Hmm.

Speaker Change: Where do you think market rents are today and I know you have 92% I think is your <unk>.

Michael J. Franco: And I know you have 92%, I think, is your occupancy rate in your Times Square JV, sorry, Fifth Avenue and Times Square JV, but if you were to sign rents today on Fifth Avenue, where would you say market rents are for that space?

Speaker Change: Occupancy rate in your times square JV I saw your fifth Avenue and times square JV, but if you were to sign rents today.

Michael J. Franco: On fifth Avenue, where would you say market rents are for that for that space.

Michael J. Franco: You know, I think it's, it's, um... There's been a couple of transactions that we signed, probably, I guess, last year, and that would indicate that rents, at the time, were in the mid to high $2,000 per square foot. Now, maybe there was a tick or a bottom in the $1,000, $1,500 neighborhood, but I think realistically, it's back into that mid twos, maybe even low threes, depending on the situation. And I think for luxury, given there's such a scarcity, it could be higher.

Speaker Change: I think it's.

Michael J. Franco: There's been a couple of transactions.

Michael J. Franco: We signed.

Michael J. Franco: Probably I guess last year.

Michael J. Franco: And now it indicate that rents at the time were in the mid to high $2000 per square foot right. Now maybe there was a tick where bond and 1500 neighborhood, but I think realistically it's back into that mid twos, maybe even low threes depending on the.

Michael J. Franco: Situation I think for luxury given there is such a scarcity it could be higher so at fifth Avenue.

Michael J. Franco: So, you know, at Fifth Avenue, it's hard to paint a broad brush. It's a very scarce asset class. And for the right situation, you can command rents that are not too far off the peak. For the wrong asset, you know, what retailers don't think it configures well, you can't achieve that.

Michael J. Franco: Hard to paint a broad brush, it's a very scarce asset class and for the right situation. You can command rents that are not too far off the peak.

Michael J. Franco: For the wrong asset with retailers don't think a configure as well you can achieve that so look I think rents have recovered quite a bit there theyre continuing to recover obviously with times square lease we signed recently I think is evidence of that.

Michael J. Franco: So, look, I think rents have recovered quite a bit. They're continuing to recover. Obviously, the Times Square lease we signed recently is evidence of that. And so, you know, we expect that to continue.

Michael J. Franco: And so.

Michael J. Franco: We expect that to continue.

Michael J. Franco: Thank you. Our next question comes from Dillon Brzezinski with Green Street. Please go ahead.

Operator: Thank you. The next question comes from Dylan Burzinski with Green Street. Please go ahead.

Dylan Robert Burzinski: Hi guys, thanks for taking the question. I guess just sort of going back to the acquisitions point, is there any desire to, given the lack of debt financing available out there, to sort of go into it from a debt perspective and possibly from a loan-to-own, or is this purely, as you guys are looking at things, more so looking at things on the equity side today?

Dylan Robert Burzinski: Hi, guys. Thanks for taking the question I guess, just sort of going back to the acquisitions point is there any desire to given the lack of debt financing available out there to sort of go into it from a debt perspective, and possibly from a loan to own or is this purely as you guys are.

Dylan Robert Burzinski: Looking at things more so looking at things on the equity side today.

Dylan Robert Burzinski: The easiest way to buy a building is through the debt.

Steven Roth: The easiest way to buy a building is through debt, so that's obviously target number one.

Steven Roth: So thats, obviously target number one.

Steven Roth: Got it and then as you guys think about opportunities that just purely a guess purely focused on office or are there other retail opportunities that you guys think we'd also makes sense.

Dylan Robert Burzinski: Got it. And then as you guys think about opportunities, is this purely, are you guys purely focused on office space, or are there other retail opportunities that you guys think would also make sense? We're open to buying.

Steven Roth: We're open to buy office space, obviously, and retail space, obviously. So those are the two areas that we specialize in.

Dylan Robert Burzinski: We are open to buy office, obviously in retail obviously.

Steven Roth: So those are the two areas that we specialize in.

Steven Roth: And then I guess, just a broader capital allocation question I know in the past you guys have floated opportunistically.

Dylan Robert Burzinski: And then I guess just a broader capital allocation question. I know in the past, you guys have floated, you know, opportunistically selling assets. Is that still on the table, or are you guys now more focused on sort of going out and acquiring assets and growing the company on an external growth base? We have.

Dylan Robert Burzinski: Opportunistically selling assets.

Dylan Robert Burzinski: I guess is that still on the table or are you guys now more focused on sort of going out and acquired assets and growing the company on an external growth basis.

Dylan Robert Burzinski: We have.

Steven Roth: We have... We have, I think, basically four fairly significant sales transactions that are in various stages of conversation right now.

Steven Roth: We have I think basically for fairly significant.

Steven Roth: Sale transactions that are in various stages of conversations right now as we speak.

Steven Roth: Thank you very much. The next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.

Operator: Thank you very much. The next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.

Alexander David Goldfarb: Hey, good morning, and thank you. So I have two questions here, and first, Michael, it's good to hear about the rebound in street retail rents. That's really amazing. What a journey it's been, so the first question is Steve on the Bloomberg lease, so when we read the queue, the rents that are cited in there are basically a sliding scale that a negotiation in the future will address. So it's not as though we take that one rent and then it slides up to the next. It's that range that the negotiation will be in.

Operator: Hey.

Speaker Change: Good morning.

Speaker Change: Uh huh.

Alexander David Goldfarb: So two questions here first.

Alexander David Goldfarb: Good to hear about the rebound in street retail rents, it's really amazing what a journey it's been.

Alexander David Goldfarb: So the first question is.

Alexander David Goldfarb: Steve on the Bloomberg lease so when we read the Q. The rents that are excited and they are basically a sliding scale better negotiation in the future. We'll address so it's not as though we take that one Ryan and then it slides up to the to the next.

Alexander David Goldfarb: The range that the negotiation will be in.

Alexander David Goldfarb: Alex.

Steven Roth: Alex, you published something that said there was a 25% discount on the rent. I don't know how you got that math, and it's incorrect.

Alexander David Goldfarb: <unk> published something that there was a 25% discount on the rent.

Steven Roth: I Dunno how are you.

Speaker Change: And thats incorrect so the way.

Steven Roth: So the way, pardon me, the way the deal is structured is that the basic rent on that building is basically net. There's a very small portion, maybe 50,000 feet out of the 950,000 feet, that's gross. But 900,000 feet of it is net. So let's call it a net, police have a bump between now and 2029. And so when we get to the end of 2029, where we basically start, The Net Rent is... $98 a foot, which grosses up to well into the 150s of dollars a foot. So, that's the starting point.

Steven Roth: Pardon me the way the deal is structured is there.

Steven Roth: Basic rent on that building is basically net.

Steven Roth: There is a very small portion maybe 50000 feet out of the 950000 feet that's gross.

Steven Roth: 900000 feet as Nick So let's call it a net lease.

Steven Roth: The lease.

Steven Roth: Has a bump.

Steven Roth: Between now and 2029 and so when we get to the end of 'twenty 'twenty lines, where we basically start.

Steven Roth: The net rent is.

Steven Roth: $98, a foot, which grosses up to well into the $150 a foot.

Steven Roth: So that's the starting point now.

Steven Roth: Now, we establish, first of all, that we are renewing and extending a lease five years before the lease expires. (Inaudible) The starting rent is frozen. And then from there, there is a market-based appraisal as to what the proper market rate would be. If we applied the rule at the then expiry of the lease in 2029, taking into account the already established tenant concession, but the color is so that it can't be more than 10% more than the $98 a foot net, or 10% less.

Steven Roth: Establishing first of them.

Steven Roth: We are renewing and extending a lease.

Steven Roth: Five years before the mature before the lease expires.

Steven Roth: And so you have to take.

Steven Roth: The future unknown future contingency. So what we did there was we established what the tenant concessions ti's and leasing commissions were those of frozen.

Steven Roth: The starting.

Steven Roth: Red is frozen and then from there there is a market based.

Steven Roth: Yes.

Steven Roth: Our appraisal as to what the proper market rate would be.

Steven Roth: If we did do a little less than <unk> of the lease in 2029, taking into account the already established.

Steven Roth: <unk> <unk>.

Steven Roth: But the color is it so that.

Steven Roth: It can't be more than 10% more than the $98 a foot or 10% less so we have certainty.

Steven Roth: So we have certainty on the, on the, bottom as to what the rent would be, and it will be established as a fair rent in the Venn market, which we think was a very clever, by the way, old tenant landlord think was a fair deal, and a clever way of handling the. There's nothing in this deal whatsoever that contemplates any reduction in the rent.

Steven Roth: Yeah.

Steven Roth: On the bottom as to what the rent would be and it will be established as a fair rent.

Steven Roth: End market, which we think was a very clever by the way both tenant and landlord think was a fair deal at a clever way of handling the future is.

Steven Roth: Nothing in this deal whatsoever that contemplates any reduction in the rate it will be OK filtration dose on the market.

Steven Roth: Steve, thank you, and I apologize for getting that incorrect. That was my fault. So your clarification is that the rent that's cited...

Steven Roth: Steve Thank you and I apologize for getting that incorrect that was my apologies. So youre a clarification is that the rent decided it.

Steve: Let me just say that I accept your apology. Thank you that's very generous.

Alexander David Goldfarb: Wait a second. I accept your apology. Thank you. That's very generous. Well, I've made an edit. So basically, the way that rent is characterized now is that the 29 million a quarter is characterized as gross, whereas the rents that are in the queue for the terms are now net. And it sounds like that's the confusion that I had on my end. Is that correct?

Alexander David Goldfarb: I've made it so basically in the way. The rent is characterized now is the $29 million a quarter is characterized as gross whereas the rents that are in the queue for the terms are now net and it sounds like that's the confusion that I had on my end is that correct.

Steven Roth: I won't get into why you were confused; I'm just happy that you admit that you were confused. That's okay; I just... great.

Speaker Change: I do.

Speaker Change: I'll get into why you were confused I'm just happy that you admit that you were confused.

Steven Roth: Okay.

Alexander David Goldfarb: Great. The next question is on the rents for this year. To Steve Sakwa's question, Michael. You mentioned that originally it was down $0.25 to $0.30. Now it seems to be down $0.55 based on further lease move outs, etc. Was there some stuff that fell out of bed that was unexpected, or did I not hear correctly? I just want to understand, was there stuff that came up that surprised you, or what's driving the additional earnings impact this year?

Speaker Change: Great. The next question is.

Alexander David Goldfarb: On the rents for this year to Steve <unk> question, Michael You mentioned that originally was down 25% to 30.

Alexander David Goldfarb: Now it seems to be down 55 cents.

Alexander David Goldfarb: Based on further lease move outs, what have you was there some stuff that fell out of bed that was unexpected or what car or did I not hear correctly I just wanted to understand like what is their stuff that came up and surprised or what drove that's driving the additional earnings impact this year.

Michael: Yes, yes.

Alexander David Goldfarb: Maybe a little bit more confusion there Alex.

Alexander David Goldfarb: So that last call.

Michael J. Franco: That's right. On the last call, you know, we talked about it being early in the year. I gave you clarity on the interest reduction because, you know, a lot of that was baked in with hedges that were going to roll off. We knew where those were going to roll off to, and we mentioned that there would be an impact from the known move-outs, right, and cited what those were, but obviously, there are a lot of people moving out, so it wasn't, you know, we didn't quantify what the impact of those numbers were.

Alexander David Goldfarb: On the last call.

Michael J. Franco: We've talked about it it was early in the year I gave clarity on the interest.

Michael J. Franco: Duction.

Michael J. Franco: Because a lot of that was baked in with hedges that were going to roll off we knew those windows is going to roll off and we mentioned that there would be an impact from the known move outs right and cited those were but.

Michael J. Franco: Obviously, theres a lot of moving out so it was.

Michael J. Franco: You can quantify what the impact of those numbers were.

Michael J. Franco: We're quantifying that for everybody's benefit on this call, so I don't think, no surprises, right, just trying to put a little more precision on it now that we're in May, as opposed to where we were, and, you know, look, there's going to be more that moves around, and that number, you know, could be less, but I think in terms of where we sit today, we have a known set between Obviously, we talked about, you know, releasing a lot of that, and a lot of those deals have been announced, but just trying to get more precision on just the

Michael J. Franco: Quantifying that for everybody's benefit on this call.

Michael J. Franco: So I don't think no surprises just trying to put a little more precision on it now that we're in may as opposed to where we were and you know what there's going to be more of that moves around and that number could be less but.

Michael J. Franco: I think in terms of.

Michael J. Franco: Where we sit today, we have we have a known set between particularly 12 90 $772 80.

Michael J. Franco: To drive the bulk of that obviously, we've talked about re leasing a lot of that in one of those deals have been announced but just trying to get more precision to just the general statement, we made last quarter.

Michael J. Franco: Thank you. The next question is from Michael Lewis with <unk> Securities. Please go ahead.

Operator: Thank you. The next question is from Michael Lewis with Truist Securities. Please go ahead. Great, thank you.

Michael Lewis: Great, thank you. I'm just going to follow up on that question about the releasing activity on some of the known move-outs. So I could probably triangulate an occupancy rate on that 25 cents drag, but could you share, you know, maybe just share how much square footage is related to known move-outs this year and how much of that square footage you've already addressed?

Michael Lewis: Great. Thank you I'm just going to follow up on that question about the re leasing activity on some of the known move outs.

Michael Lewis: So I could probably triangulate.

Michael Lewis: And occupancy rate on that 25 drag.

Michael Lewis: But could you share maybe just share how much square footage is related to known move outs. This year and how much of that square footage you've already addressed.

Michael Lewis: Okay.

Michael Lewis: But anyway, thanks, Darren take that.

Michael J. Franco: Do you want to take that, or do you want to leave that?

Speaker Change: So the bulk of the.

Glen J. Weiss: The bulk of the number is at 280 Park, 770 Broadway, and 1290 Avenue in America. At 1290 and 280, we've taken care of, as Michael said in his remarks, 51% of the roll, so call it 500,000 feet. And as we said, it's 770 Broadway, we have metarolling in June, along with the current vacancy, we have pipeline activity on that space. So that's how we're, you know, approaching the big ones that are in that occupancy number.

Glen J. Weiss: The number is that a 280 park 770 Broadway and 12 nine do you have in the Americas.

Glen J. Weiss: At 12, 90 and $2 80.

Glen J. Weiss: We've taken care of as Michael said in his remarks, 51% of their roles. So call. It 500000 of 1 million feet.

Glen J. Weiss: And as we said at 770 Broadway.

Glen J. Weiss: We have met a rolling in June.

Glen J. Weiss: Along with the current vacancy we have pipeline of activity on that space.

Glen J. Weiss: So that's how we're approaching.

Glen J. Weiss: The big ones that are in that occupancy number so as we take into account or a pipeline of deals as we take into account our exploration going through 'twenty four.

Glen J. Weiss: So, you know, as we take into account our pipeline of deals, as we take into account our expirations going through 24. You know, we may see more of a dip in occupancy, and as we complete transactions during the next, you know, six to nine months, we expect that occupancy to then climb back as we get into 2025. All right, great. Thanks.

Glen J. Weiss: We may see more of a dip in occupancy and as we complete transactions. During the next six to nine months, we expect that occupancy did that inclined back as we get into 2025.

Speaker Change: Okay, Great. Thanks, and then my second question is about the Mart so.

Michael Lewis: gets down to 77.6% in the most recent quarter. You know, pre-pandemic, that was always 95 to 100. Could you maybe talk a little bit about kind of the roadmap there and, you know, what you think stabilized occupancy or, you know, given that there's obviously some volatility at that asset, what might be a stabilized kind of revenue figure might look like for March?

Michael Lewis: Occupancy dipped down to 77, 6% in the most recent quarter.

Michael Lewis: Pre pandemic that was always.

Michael Lewis: 95 to 100 could you maybe talk a little bit about kind of the roadmap there.

Michael Lewis: What you think stabilized occupancy or or given that there is obviously some volatility at that asset what maybe like a stabilized kind of revenue figure might look like.

Michael Lewis: Tomorrow.

Speaker Change: So I'll start and then ill jump in.

Michael J. Franco: So, I'll start, then you jump in. Like the Chicago market, obviously. So I think the sponsorship and the strength is well known by the brokers and the tenants, and I think that's helping us. You know, we just finished what we call Mark 2.0, which is the second stage of amenities that we've put in, fitness, conferencing, etc. And again, the reaction has been positive. So the market's tough, you know, cannot dismiss that, but you know, I think we're seeing more than our fair share there, and I think it's going to take, you know, probably three years to get back to stabilized occupancy realistically.

Michael J. Franco: The Chicago market is obviously.

Michael J. Franco: The challenging right now probably one of the more challenging ones in the country.

Michael J. Franco: But we do have decent activity on the asset.

Speaker Change: Say that.

Speaker Change: Alluding to some of the prior questions, yes, theres quite a bit of distress in Chicago office, many landlords do not have the.

Michael J. Franco: You don't have the wherewithal to lease our assets given the debt situation. There you know we have an asset that has no debt on it and so I think the sponsorship the strength is.

Michael J. Franco: As well known by the brokers and the tenants and I think that's helping US. We just finished what we call March 2.0, which is the second stage of amenities that we've put in.

Michael J. Franco: Fitness conferencing et cetera.

Michael J. Franco: And again the reaction that has been positive so like markets top.

Michael J. Franco: Yeah.

Michael J. Franco: Cannot cannot dismiss that but I think we're seeing more than our fair share there and I think thats going to take.

Speaker Change: No prob.

Michael J. Franco: Probably three years to get back to stabilized occupancy realistically, maybe it's too, but I think when the income fully comes online probably in the neighborhood and our objective is to get it back into the 96% occupied at 95 plus percent.

Michael J. Franco: Maybe it's two, but I think when the income fully comes online, it's probably in a neighborhood, and our objective is to get it back into the 90% occupied, you know, get it 95 plus percent and get the income back up to that 90 to $100 million cash NOI basis. So there's a fair amount of growth to come there, but you know, the market is, as I said, challenging.

Michael J. Franco: And get the income back up to that $90 million to $100 million.

Michael J. Franco: Cash NOI basis, so theres, a fair amount of growth to come there.

Michael J. Franco: But you know.

Michael J. Franco: The market is as I said challenging right now.

Michael J. Franco: Thank you. The next question is from Caitlin Burrows with Goldman Sachs. Please go ahead.

Operator: Thank you. The next question is from Caitlin Burrows with Goldman Sachs. Please go ahead. Hi, this is Julien.

Julien Blouin: Hi, this is Julien on behalf of Caitlin. Thanks for taking the question. So one quick one, can you comment on whether the leasing spreads in the quarter benefited from the Penn District leasing and what that, that leasing spread might have been, ex-Penn leases?

Julien: Hi, This is Julian on for Caitlin and thanks for thanks for taking the question. So one quick one can you comment on whether the leasing spreads in the quarter.

Speaker Change: Benefited from the Penn District leasing and what.

Julien Blouin: That leasing spread might've been X 10 leases.

Julien Blouin: Thank you.

Michael J. Franco: Yeah, I think the answer is that, you know, the spread, Penn 2 was, you know, Major League Soccer was the big lease in this quarter, you know, that's a new lease, first generation, so it didn't affect the spread.

Julien Blouin: Yes, I think I think the answer is that the spa.

Michael J. Franco: Spreads tend to as your major League soccer was the big lease in this quarter.

Michael J. Franco: New lease first generation, so didn't didn't affect the spreads.

Julien Blouin: Okay, good to know. And then on the debt covenants, it looked like interest coverage and fixed charge coverage tightened a bit in the quarter. I know longer term the metric is going to benefit from the occupancy game you talked about from Penn District, NOI, and it also sounds like you have some sales underway. But can you give us a sense of maybe the trajectory over the coming quarters given the fact that I know there's that sort of big swap expiration at 555 California.

Michael J. Franco: Okay. Good to know and then.

Julien Blouin: Second one on the debt covenants it looked like interest coverage and fixed charge coverage tightened a bit in the quarter I know longer term metric is going to benefit from the occupancy gains you talked about from Penn District NOI.

Julien Blouin: And it also sounds like you have some sales underway, but can you give us a sense of maybe the trajectory over the coming quarters, given the fact that I know theres that sort of big swap exploration at <unk>.

Julien Blouin: By $5 five cow.

Julien Blouin: Yes.

Michael J. Franco: Yeah, no, you're you're accurate. Yeah, I think the impact this quarter was predominantly the big item was the swap increase on Pen 11, which we were coming up on, I think, if I go from memory, I think it was 17 basis points. So, you know, too bad that couldn't go forever, but, you know, that was the material item this quarter. There were a couple other things as well, but that was the big one.

Julien Blouin: You're accurate.

Michael J. Franco: I think the impact this quarter was predominantly the.

Michael J. Franco: The big item was the swap.

Michael J. Franco: The increase on <unk> 11, which we are coming up I think they go from recollection. It was 17 basis points out.

Michael J. Franco: Too bad that Couldnt go forever, but.

Michael J. Franco: That was the material item this quarter, a couple of other things as well, but that was a big one.

Michael J. Franco: You know, next quarter, second quarter, if you will, you're accurate, 5-5-5, you know, we put in place another swap, that would kick in, you know, an increase, you know, as we as we look forward, you know, we continue to have sufficient cushion, you know, in our covenants, fixed charge will tighten up, you know, over the next couple quarters, but you know, we still have, you know, sufficient buffer there. And then as the income comes online from some of these leases, you know, that number will grow again, but it will tighten up a little bit based on the 555. Swap Rating.

Michael J. Franco: Next quarter.

Michael J. Franco: Second quarter, if you will you're accurate 555, we've put in place another swap that would kick in and increase so.

Michael J. Franco: As we look forward, we continue to have sufficient cushion in our covenants fixed charge will tighten up.

Michael J. Franco: You know over the next couple of quarters, but we still have sufficient buffer there and then as the income comes online from some of these leases that number will grow again, but it will tighten up a little bit based on the 555.

Michael J. Franco: What rate increase.

Michael J. Franco: Thank you. The next question is from Nick <unk> with Scotiabank. Please go ahead.

Operator: Thank you. The next question is from Nick Yulico with Scotiabank. Please go ahead.

Nicholas Philip Yulico: Thank you. I just wanted to go back to the, you know, the 25, 30 cents impact this year from vacancy. So I guess, you know, that adds up to about 55, 60 million of NOI versus, you know, your total NOI share last year of 1.14 billion. So it's somewhat like a 5% NOI loss on that math, if that's correct. So I guess I'm just wondering, you know, how that works, you know, there are other moving parts here besides.

Nicholas Philip Yulico: Thank you I just wanted to go back to the you know the.

Nicholas Philip Yulico: 25 to 30 cents impact this year from you know vacancy.

Nicholas Philip Yulico: So I guess that adds up to about $55 $60 million of NOI versus you know your total NOI share last year, a 1.14 billion. So it's someone like a 5%.

Nicholas Philip Yulico: NOI loss.

Nicholas Philip Yulico: On that math that's correct.

Nicholas Philip Yulico: I'm just wondering you know how does that.

Nicholas Philip Yulico: Is there other moving parts here besides just.

Nicholas Philip Yulico: You know, some of the vacancy impact you talked about, because if I look at your supplement, you know, in the fourth quarter, you had 5% of your rent expiring in New York and, you know, you're obviously not, it's not all expiring. The 5% on the wine loss number seems a little bit, you know, high relative.

Nicholas Philip Yulico: Some of the vacancy impact you talked about because if I look at your supplement you know in the fourth quarter, you had 5% of your rent expiring in New York and you know you're obviously not on all expiring so the 5% NOI loss number seems a little bit.

Nicholas Philip Yulico: High relative to what your expirations were this year.

Michael J. Franco: There may have been one time when it expired, December 31st last year, but I think, in a nutshell, that's it. It's pure and simple. You know, the vast majority of it is 1290, 6, 280 Park, and 770. You know, and when you get to that sort of number, there's a little bit of positives, a little bit of negatives, but, you know, those are the three main drivers. So, you know, we just came through a period where there were some known move outs.

Michael J. Franco: There may be one tenant that expired December 31 last year, but I think in a nutshell that's it.

Michael J. Franco: It's pure and simple.

Michael J. Franco: The vast majority of it is 12 96 280 park in 770.

Michael J. Franco: And you get to that sort of number I mean, theres a little bit.

Michael J. Franco: Positives or negatives, but.

Michael J. Franco: Those are the three main drivers.

Michael J. Franco: We came through a period, where there was some known move outs.

Michael J. Franco: And we're back to you on those as we discussed but but.

Michael J. Franco: And, you know, we're back on those, as we discussed. But, you know, and it just occurred at various stages everywhere from December 31st, you know, through probably the last one, Meadow, which is in the middle of this year.

Speaker Change: That's it.

Michael J. Franco: Occurred at various stages everywhere from December 31.

Michael J. Franco: Through.

Michael J. Franco: Probably the last one is a matter which is in the middle of this year.

Speaker Change: Okay. Thanks, and then I just wanted to be clear on you know you know.

Nicholas Philip Yulico: Okay, thanks. And I just want to be clear on, you know, you know, the way to think about occupancy and Michael's last last quarter, when you're talking about sort of a flattish occupancy this year, does that mean that, you know, by the time we get to the fourth quarter of this year, it's, you know, sort of a flat year over year occupancy? I'm assuming it's not a sort of average occupancy for Yeah, I would do that.

Nicholas Philip Yulico: But the way to think about occupancy and Michael asked last quarter, when you're talking about sort of a flattish.

Nicholas Philip Yulico: Occupancy this year does that mean that by the time, we get to the fourth quarter of this year. It's a you know sort.

Nicholas Philip Yulico: Sort of a flat year over year occupancy I'm, assuming it's not a sort of average occupancy for the year that would be flat year over year based on that.

Michael J. Franco: Yeah, yeah, I would say, you know, by the end of the year. I mean, again, it depends on the timing of certain things. And, you know, I don't know that I can tell you with precision, you know, this will happen by the fourth quarter, as opposed to January, etc. But, you know, we think, you know, rough numbers, it'll end up there. So we'll say, you know, there's still We're still, you know, in the first half of the year, and we just have to see how it plays out.

Speaker Change: Yes, I would say by the end of the year I mean again it depends on timing of certain things in.

Michael J. Franco: I don't know that I can tell you with precision yet this will happen by the fourth quarter as opposed to January whatnot, but we think rough numbers.

Michael J. Franco: We ended up there so but we'll see.

Michael J. Franco: Theres still were still.

Michael J. Franco: In the first half of the year and.

Michael J. Franco: We just have to see how it plays out, but I think like occupancy it's down.

Michael J. Franco: But I think, like occupancy, you know, down now, it's going to trend down a little more given, you know, for example, the meta move out, you know, in June. But we have some other things in the works that, you know, we're going to pick that up. So we'll see where it comes out in total. I think as we look at the trend line, it will, you know, it'll, you know, we think increase meaningfully over time. We are going to bring pin two into numbers next year.

Michael J. Franco: Down now, it's going to trend down a little bit more given for example, the met a move out in June.

Michael J. Franco: But we have some other things in the works that.

Michael J. Franco: You know, we're going to pick that up so we'll see where it comes out in total I think as we look at frontline.

Michael J. Franco: <unk>.

Michael J. Franco: It will.

Michael J. Franco: They can increase meaningfully over time, we're going to bring <unk> into the numbers next year, depending on where we are from a leasing standpoint, there that number could bring the average down but obviously, that's sort of an extraneous events, that's being added to the denominator. So we'll evaluate it as we.

Michael J. Franco: Yeah, depending on where we are from a leasing standpoint there, that number could bring the average down, but obviously that's sort of an extraneous event that's being added to the denominator. So we'll evaluate it, you know, as we get closer.

Michael J. Franco: As we get closer.

Michael J. Franco: Thank you. The next question is a follow up from Michael Lewis with <unk>. Please go ahead.

Operator: Thank you. The next question is a follow-up from Michael Lewis with Truist. Please go ahead.

Michael Lewis: Yeah, thanks. I just have one more.

Michael Lewis: Yes. Thanks, I just have one more at you told to condo units at 220 Central Park South.

Michael Lewis: For about $32 million or the remaining four units similar in value roughly $16 million a unit I don't know if you have maybe you have a penthouse last year you have smaller units I was just wondering about that.

Michael Lewis: You know, you sold two condo units at 220 Central Park South for about $32 million. Are the remaining four units similar in value, roughly 16 million a unit? I don't know if you have, you know, maybe you have a penthouse left, or you have smaller units.

Michael Lewis: No. The remaining four units are smaller lower.

Speaker Change: Our view impaired so they're much less valuable.

Speaker Change: Basically thank you.

Speaker Change: My job is basically sold out.

Speaker Change: Perfect. Thanks.

Michael Lewis: Yeah.

Michael Lewis: Thank you. The next question is a follow up from Alexander Goldfarb with Piper Sandler. Please go ahead.

Steven Roth: I was just wondering about that.

Steven Roth: No, the remaining four units are smaller, lower, and view-impaired, so they're much less.

Speaker Change: Thank you Steve.

Steve: Steve with the new.

Steven Roth: Office to conversion incentives does this open the door for you.

Steven Roth: To contemplate.

Steven Roth: Either assets from the existing portfolio or perhaps assets that are that.

Steven Roth: That <unk> always I'd is would be great for conversion and it seemed to maybe have a motivated owner who would be willing just seems like the.

Steven Roth: The incentive package that they passed is pretty lucrative for office landlords to convert.

Steven Roth: That job is basically sold out.

Steven Roth: Alex.

Speaker Change: Good morning, again, yes, the answer is yes of course.

Steven Roth: So there's a couple of things first of all.

Operator: Thank you. The next question is a follow-up from Alexander Goldfarb with Piper Sandler. Please go ahead.

Operator: The.

Operator: Building.

Alexander David Goldfarb: Thank you. Steve, with the new office conversion incentives, does this open a door for you to contemplate either assets from the existing portfolio or perhaps, you know, assets that are, you know, that you've always eyed as would be great for conversion and seem to maybe have a motivated owner who would be willing? Just seems like the incentive package that they passed is pretty lucrative for office landlords to convert.

Alexander David Goldfarb: That you are going to be converting the target building has the price somewhere in the neighborhood of $200 a foot was up to $1 a foot.

Steven Roth: Alex, good morning again. Yes, the answer is yes, of course. So there are a couple of things. First of all, the building that you're going to be converting. The target building has a price somewhere in the neighborhood of some $200 a foot or some $200 a foot. So these are really.

Steven Roth: So these are really.

Steven Roth: Distressed office buildings They're not, you know; they're distressed office buildings. Let me leave it at that. The pricing and the economics really don't allow you to pay more. Maybe even a pinch more, but probably not. So, step number one, step number two, is that, obviously, if those are the economics and those are the target buildings, these are the B and C buildings in the office market. So when those buildings are taken out of the conventional office market, they really don't help the prime A market because the tenants that we deal with who are interested in prime space don't really ever look at that.

Steven Roth: Distressed office building.

Steven Roth: First off let me leave it at that so the pricing and the economics really don't allow you to pay.

Steven Roth: More maybe even <unk>, but probably not so that's step number one step number two is is that obviously if those are the economics and those are the targets.

Steven Roth: Buildings.

Steven Roth: These are the B and C buildings in the office market.

Steven Roth: When those buildings are taken out of the conventional.

Steven Roth: Office market.

Steven Roth: <unk> health.

Steven Roth: The.

Steven Roth: Prime a market because the tenants that we deal with who are interested in a space.

Steven Roth: <unk> really ever look at that so the answer is that we will be able to as an industry convert a decent number of buildings.

Steven Roth: So the answer is that we will be able to, as an industry, convert a decent number of buildings. It will make a dent, not a big dent, but a dent in the residential market and the demand for residential space, but it'll have a marginal, a marginal..., effect on the conventional class A office market. But clearly, we're looking at that. It's an interesting thing, something that we will look at. I'm not 100% sure that the returns on capital are going to be what some people think they are, but anyway, we are looking at it pretty closely.

Steven Roth: We will make is that not a big debt, but that in the residential market and the demand for residential space.

Steven Roth: It will have a marginal module.

Steven Roth: Effect on the conventional class a office market.

Steven Roth: But clearly we're looking at that.

Steven Roth: It's interesting.

Steven Roth: Activity.

Steven Roth: But.

Steven Roth: It's something that we will look at another 100% sure that the returns on capital.

Steven Roth: Are going to be what some people think they are but any way we are looking at it pretty aggressively.

Speaker Change: Thank you very much there are no further questions at this time.

Operator: Thank you very much. There are no further questions at this time.

Operator: Okay.

Speaker Change: Okay. Thank you all very much we appreciate your joining us this morning, and we will be just too.

Steven Roth: Okay, thank you all very much. We appreciate you joining us this morning, and we will be anxious to we always learn from these calls, and so thank you for that. We are excited about the next quarter in the future, and we'll see you at the next earnings call. Thank you.

Steven Roth: We always learn from these calls and so thank you for that we are at.

Steven Roth: Excited about the next.

Steven Roth: The quarter in the future and we'll see you at the next earnings call. Thank you.

Speaker Change: Ladies and gentlemen. This concludes today's conference. Thank you for your participation you may now disconnect your lines.

Operator: Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect your lines.

Operator: Okay.

Operator: [music].