Q3 2024 SL Green Realty Corp Earnings Call

Speaker Change: Ladies and gentlemen, thank you for sending by. Today's conference will begin momentarily in about one minute, thank you for sending by.

Unknown Executive: Today's conference will begin momentarily in about one minute.

Unknown Executive: Thank you for sending by.

Speaker Change: Thanks for watching!

Speaker Change: Thank you for watching!

Unknown Executive: Thank you, everybody, for joining us. Welcome to the SL Green Realty Corp.

Unknown Executive: 3rd quarter, 2024. Before turning the call over to Marc Holliday, Chairman and Chief Executive Officer of SL Green Realty Corp, I ask that those of you participating in the Q&A portion of the call to please limit your questions to two per person.

Speaker Change: Thank you everybody for joining us and welcome to the S.O. Green Realty Corpse 3rd quarter 2020 24 earnings results conference call. This conference call is being recorded at this time the company will like to remind the centers that they're in the call. Management may make forward-looking statements.

Speaker Change: You should not rely on forward-looking statements as predictions of future events as actual results and events may differ from any forward-looking statements that Management may make today. Off-over-looking statements may by management on this call or based on their assumptions and beliefs as of today. Additional information regarding the risks.

Speaker Change: and other factors that could cause such differences to appear or set forth in the risk factors in MD&A. Sections of the company's latest form 10K and other subsequent reports followed by the company with the Securities and Exchange Commission.

Speaker Change: Also during today's conference call the company may discuss non-gap financial measures as we define as defined by a regulation G under the Security Act.

Speaker Change: the Gap Financial Mesters.

Speaker Change: most directly comparable to each non-gap financial measure discussed and a reconciliation of the differences.

Speaker Change: Between each non-gap financial measure and the comparable gap financial measure can be found on both the company's website at

David W: David W. The S.O.Grain.com

Speaker Change: By selecting the press release regarding the company's third quarter, 2020-24 earnings and in our supplemental information included in our current report on form 8K relating to our third quarter, 2020-24 earnings. Before turning the call over to Marc Holliday, Chairman and Chief Executive Officer of SL Green Realty Corp, I ask that those of you participating in the Q&A portion of the call to please limit your questions to two per person. Thank you. I will now turn the call over to Marc Holliday. Please go ahead, Marc.

Unknown Executive: Thank you.

Unknown Executive: I want to turn the call over to Marc Holliday. Please go ahead, Marc.

Marc Holliday: Okay, good afternoon, and thank you for joining us at SL Green's third quarter earnings call. By now, you will have seen the exciting news that we put out last night, which was the culmination of another great quarter of activity since we last spoke. We called the pivot in the market about one year ago, and since then, we've seen four consecutive quarters of positive market momentum that reinforces our belief that New York City has turned the corner, and we are now meeting or exceeding many of our goals.

Mark Holliday: Okay, good afternoon and thank you for joining us at SL Green's third quarter earnings call.

Mark Holliday: By now you will have seen the exciting news that we put out last night, which was the culmination of another great quarter of activity since we last spoke.

Mark Holliday: We called the pivot in the market about one year ago, and since then we've seen four consecutive quarters, a positive market momentum that reinforces our belief that New York City has turned the corner and we are now meeting or exceeding many of our goals. Since we were last together and that was just three short months ago, a lot has happened. Last month, IBM cut the ribbon and took occupancy of their incredible new space at one Madison Avenue, effectively christening the building, that rightly takes its place alongside one Vanderbilt as a shining example of the new model for modern and innovative office buildings.

Marc Holliday: Since we were last together, and that was just three short months ago, a lot has happened. Last month, IBM cut the ribbon and took occupancy of their incredible new space at One Madison Avenue, effectively christening the building that rightly takes its place alongside One Vanderbilt as a shiny example of the new model for modern and innovative office buildings. One Madison, now fully complete, has come alive as other tenants are moving in, such as the Franklin Templeton companies, the opening of Chelsea Pears, the activation of the fabulous rooftop, which is already hosting many, many special events, and proof positive that the city is thriving for demand of space for this kind, punctuated by Danielle Ballouz, Newstake House, Lutettor, designed by David Rockwell, completed construction this month and will open to the public in November.

Mark Holliday: One Madison now fully complete has come alive as other tenants are moving in, such as the Franklin Templeton companies, the opening of Chelsea Pears, the activation of the fabulous rooftop, which is already hosting many, many special events.

Mark Holliday: and...

Mark Holliday: Proof positive that the city is thriving for demand of space, for this kind, and you know punctuated by Danielle Baludes, New State House, Latetta or designed by David Rockwell, completed construction.

Marc Holliday: Be sure to get your reservations and be among the first to be there over the holidays, special place and a great new addition to the Flat Iron area. And just another, you know, great step in the right direction for New York City.

Mark Holliday: This month and will open to the public in November. Be sure to get your reservations and be among the first to be there over the holidays, special place and a great new addition to the flat iron.

Mark Holliday: and just another great step in the right direction for New York City.

Marc Holliday: On Monday, we will celebrate the third anniversary of Summit One Vanderbilt. We are now closing in on six million guests. I think in November, we will host our six millionth guest through the turn styles at Summit. And I think that just really speaks volumes to what an enormous attraction Summit has turned out to be: many day sellouts, most day sellouts. It has been named, you know, accolades as a special bucket list destination for New York City, and everyone comes out of there with a smile.

Mark Holliday: On Monday, we will celebrate the third anniversary of Summit 1 Vanderbilt. We are now closing in on 6 million guests.

Mark Holliday: I think in November we will host our six millionth guest through the Turnstiles at Summit and I think that just really speaks volume to what an enormous attraction Summit has turned out to be many day sellouts, most day sellouts. It has been named, you know, accolades as a special. Thank you very much.

Mark Holliday: Bucket List Destination for New York City, and everyone comes out of there with a smile, we're very proud of it, and we're even more excited to begin the global expansion as we bring the unique summit experience to other cities around the world with Paris being first up in the queue. Expect an announcement with further details on our Paris Initiative sometime later this quarter.

Marc Holliday: We're very proud of it, and we're even more excited to begin the global expansion as we bring the unique summit experience to other cities around the world, with Paris being first up in the queue. Expect an announcement with further details on our Paris initiative sometime later this quarter. Also, earlier this week, many of you may have seen the press yesterday and this morning. Mr. Giorgio Armani made a rare trip to New York to celebrate the opening of his new boutique and residences on Madison Avenue, developed in conjunction with SL Green. As you know, the residences are completely sold out, and Armani's flagship store has anchored a complete revival of luxury retailing and elevated experiences on Madison Avenue, as many of the world's prominent luxury retailers have relocated or recommitted to Madison Avenue after the announcement of the Armani project.

Mark Holliday: Also, earlier this week, many of you may have seen the press yesterday and this morning, Mr. George O. Armani made a rare trip to New York to celebrate the opening of his new boutique and residences on Madison Avenue developed in conjunction with SL Green. As you know, the residences are completely sold out and Armani's flagship store has anchored a complete revival of luxury retailing and elevated experiences on Madison Avenue. As many of the world's prominent luxury retailers have relocated or recommitted to Madison Avenue after the announcement of the Armani project.

Marc Holliday: If you're in the area, please be sure to come by, check it out, and pick out something special with the profits those of you have made on SL Green stock.

Mark Holliday: If you're in the area, please be sure to come by, check it out, pick out something special with the profits, those of you have made on SL Greenstock.

Marc Holliday: Back. After nearly a four-year hiatus, we are now fully back in the DPE business, lending on and investing in mortgage and mess loans and debt securities. This quarter, we invested nearly $110 million in various debt and debt-like investments, and that's on top of the other DPE investment activity we did earlier this year. This marks the return to an extremely profitable business, where we typically have achieved outsized market share and market returns. The debt investments we've closed thus far, combined with our extensive pipeline that we've been building throughout the year, will serve to seed our debt fund that we anticipate having an initial closing on in the fourth quarter.

Mark Holliday: and I'm here with you today. After nearly a four-year hiatus, we are now fully back in the D.P.E. business, lending on and investing in mortgage and measles and debt securities.

Mark Holliday: This quarter we invested nearly $110 million in various debt and debt-like investments and that's on top of the other DPE investment activity we did earlier this year. This marks the return to an extremely profitable business where we typically have achieved outside market share and market returns.

Mark Holliday: The debt investments we've closed thus far, combined with our extensive pipeline that we've been building throughout the year, will serve to see our debt fund that we anticipate having an initial closing on in the fourth quarter.

Marc Holliday: The fund will provide additional capital resources, enabling us to reestablish ourselves as the dominant provider of subordinate capital for New York City commercial assets.

Mark Holliday: The phone will provide additional capital resources enabling us to re-establish ourselves as the dominant provider of subordinate capital for New York City commercial assets.

Marc Holliday: I guess the highlight of highlights was something we announced after business closed yesterday. Further evidence of what I would say is really incredible leasing momentum. Some of the best I can recall seeing in my 26 years here at the company, we achieved a 925,000 square foot renewal and expansion of Bloomberg over at 919 Third. This was not really within the expectations at the beginning of this year, so it was a very pleasant surprise, and I'd say it was even more telling about the strength of this market, Bloomberg being one of the great worldwide media companies, not only renewing the upwards of 750,000 feet, but they expanded by almost 25% within 919 for a total of 925,000 square foot footprint, which speaks volumes, I think, to the amazing partnership we have with Bloomberg, who started out as a relatively small tenant in the building some years ago. Steve, you recall 200,000 foot 10 and how long ago?

Mark Holliday: and I guess the highlight of highlights was something we announced after business closed yesterday.

Mark Holliday: Further evidence of what I would say is really incredible leasing momentum. Some of the best I can recall seeing in my 26 years here at the company. We achieved a...

Mark Holliday: 925,000 square foot.

Mark Holliday: Renewal and Expansion of Bloomberg over at 9.19 Third.

Mark Holliday: This was not really within the expectations at the beginning of this year, so it was a very pleasant surprise, and I'd say it was even more telling about the strength of this market, Bloomberg being one of the great worldwide media companies, not only renewing the upwards of 700 million dollars.

Mark Holliday: 25,000 feet, but they expanded by almost 25% within 919 for a total of 925,000 square foot footprint.

Mark Holliday: which speaks volumes, I think, to the amazing partnership we have with Bluber, who started out as a relatively small tenant in the building some years ago, Steve, you were called.

Marc Holliday: 2015, less than 10 years later, now closing in on a million square feet. So I think it's a great story about, you know, partnership, about, you know, complementary businesses, us being able to serve Bloomberg's growth needs and Bloomberg, you know, being there to help us fill this space in the building. And it's, I think, further proof positive about the radiation of demand away from what we have traditionally referred to as the Park Avenue spine. You know, the story goes that the demand is limited to trophy buildings on Park Avenue. You've heard us say it's just not the case, particularly not this year when we have consummated 2.8 million square feet of leasing year to date and this being an example, as well as other examples in the portfolio of that demand, you know, not being so much geographically focused as it is generally within East Midtown in renovated, Class A buildings with strong sponsorship. And that's where we're having our success such that we now expect to have leasing achievement this year, eclipsing 3 million feet and achieving a projected occupancy at year end in same store and hand of 92 and a half percent.

Speaker Change: 200,000 foot 10 in how long ago

Speaker Change: 2015, less than 10 years later now closing in on a million square feet. So I think it's a great story about...

Speaker Change: you know, partnership about you know, complementary businesses us being able to serve Bloomberg's growth needs and Bloomberg you know, being there to help us fill the space in the in the building and it's I think further proof positive about the radiation.

Speaker Change: of Demand.

Speaker Change: away from what we have traditionally referred to as the Park Avenue spine. The story goes that the demand is limited to trophy buildings on Park Avenue. You've heard us say it's just not the case, particularly not this year when we have a date.

Speaker Change: and this being example as well as other examples in the Portfolio.

Speaker Change: of that demand, you know, not being so much geographically focused as it is, generally within.

Speaker Change: East Midtown in renovated, class A buildings with strong sponsorship and that's where we're having our success such that we now expect to have leasing achievement this year, eclipsing 3 million feet and achieving a projected occupancy at year end in same storm and hadn't of 92 and a half percent. [inaudible] the end of this year, the end of this year,

Marc Holliday: So those are some pretty pretty good stats. We're proud of them.

Marc Holliday: Great job by the team. You know, again, that's a good three months in my book. I think it illustrates what we've been saying now for a while that business is back in New York. The worst is without question behind us. You know, this is now in our eyes, you know, a market for being affirmative and offensive, and our portfolio is well positioned to capitalize on that market as there is a scarcity of well-located and a mentalized class A assets in the East Midtown market, which is where we call home.

Speaker Change: So there's some pretty good stats we're proud of them, great job by the team.

Speaker Change: You know, again, that's a good three months in my book.

Speaker Change: I think it illustrates what we've been saying now for a while that business is back in New York.

Speaker Change: The worst is without question behind us.

Speaker Change: You know, this is now in our eyes.

Speaker Change: you know, a market for being affirmative and offensive and

Speaker Change: Our portfolio is well positioned to capitalize on that market as there is a scarcity of well-located and amendentized class ASETs in the East Midtown market, which is where we call home. So with that, I'd like to open it up for some questions on the quarter.

Unknown Executive: So, with that, I'd like to open it up for some questions on the quarter. Thank you. And at the time, we'll conduct the question-and-answer session to ask a question. You want to press star one one on your telephone and wait for your name to be announced to draw a question. Please press star one one again. Again, please introduce yourself to two questions. Please sound Bob. We compile the Q&A roster. One moment for first question.

Speaker Change: Thank you, and at the time we'll conduct the question and answer session to ask the question you need to press start one one on your telephone and wait for your name to be announced. To enjoy a question, please press start one one again. Again, please introduce yourself to two questions.

Speaker Change: Please soundingly, compared to Q&A roster.

John Kim: Our first question comes line up. John Kim from BMO Capital Markets.

Speaker Change: Our first question, I'm going to line up John Kim from BMO, Capital Markets. You'll find this open.

John Kim: Your line is open. Thank you. Congrats on the Bloomberg transaction.

Marc Holliday: I just wanted to confirm that it was not in your pipeline that you left described that 1.2 million square feet just given the size of this lease. And I think you described it; the pipeline is being pretty diversified. And also if you could share with us any of the economics on the rent versus the in place of 66 bucks. And how much you offered in and concessions. So it was not in our reported pipeline. The deal came together very quickly. So it's not something that we were including in our pipeline because one, because it was so large, and two, was so anticipated, and three.

John Kim: Thank you, congrats on the Bloomberg transaction. I just wanted to confirm that it was not in your pipeline that you left described at 1.2 million square feet, just given the size of this lease. And I think you described that the pipeline is being pretty diversified. And also if you could share with us any of the economics on the rent versus the in place of 66 bucks.

Speaker Change: and how much you offered me in confessions.

Speaker Change: So, it was not in our reported pipeline that you came together very quickly.

Speaker Change: It's not something that we were including in our pipeline because one because it was so large and two was

Marc Holliday: It happened so rapidly.

Speaker Change: Someone anticipated in three, it happened so rapidly. With regards to the economics runner in NDA, so we can't really share specific details other than to say that, obviously the size of the lease, it's a 15 year lease from today, so it's a 10 year extension, 15 year term on the expansion, there is substantial positive mark to market, and the concessions are appropriate for renewal, but significantly below what they would have been if we had to replace the tenants for vacant space.

Marc Holliday: With regards to the economics runner in India. So we can't really share specific details other than to say that, obviously, the size of the lease. It's a 15-year lease from today. So it's a 10-year extension, 15-year term on the expansion. There is substantial positive mark-to-market. And the concessions are appropriate for renewal, but significantly below what they would have been if we had to replace the tenant for vacant space. And with regards to, I think you asked about diversity on the pipeline. Like in past corners, it's heavily weighted towards financial services. I think that's a reflection of where we have vacancy.

Speaker Change: and...

Speaker Change: with regards to you. I think you just about diversity on the pipeline. You know, like in past quarters, it's heavily weighted towards financial services. I think that's a reflection of where we have vacancy. Not just because it's the only industry that's in the market right now. We're seeing law firms, Tammy, tenants, business services and financial services, but specific to our current pipeline, a lot of it is weighted towards financial services. [inaudible]

Marc Holliday: Not just because it's the only industry that's in the market right now. We're seeing law firms, Tammy tenants, business services, and financial services but specific to our current pipeline. A lot of it is weighted towards financial services.

Marc Holliday: Okay, and my second question is on One Vanderbilt.

Marc Holliday: We didn't give an update on the joint venture sale.

Speaker Change: Ok, and my second question is on one Vanderbilt, we didn't give an update on the joint venture sale, so I wanted to ask if it's still on track, and also if you really need to sell a stake in the asset at this point in time, just given the fundamentals and sentiment on New York has shifted positively over the last few months. Your cost of capital has improved, so there's other, you know, access to our sources of capital that you could tap, so just wanted an update on that and whether or not you used your copyplating knot on your stake.

Marc Holliday: So I wanted to ask if it's still on track. And also if you really need to sell a stake in the asset at this point in time, just given the fundamentals and sentiment on New York has shifted positively over the last few months. Your cost of capital has improved, so there's other access to resources of capital that you could tap.

Marc Holliday: So just wanted an update on that and whether or not you're contemplating not starting the state. Yeah, it's going great at One Vanderbilt, and we're confident that we'll be able to close a transaction in the fourth quarter. You know, the transaction really will be the culmination or conclusion of a process that affirms an hour-mind, you know, One Vanderbilt's position as not only in the premier office tower in New York, but also this global icon of modern development. So, you know, two measurements of our restaurants, the continues to assess its summit, a fully least red roll, and long-term fixed rate debt, and the story here keeps getting better, and we're looking forward to expanding the partnership at the building.

Speaker Change: Yeah, it's going great at one Vanderbilt and we're confident that we'll be able to close a transaction in the fourth quarter.

Speaker Change: The transaction really will be the...

Speaker Change: The culmination or conclusion of a process.

Speaker Change: that affirms an hour-mind, you know, one Vanderbilt's position is not only the premier office tower in New York, but also this global icon of modern development. So, you know, two missions are restaurants that continue to assess its summit.

Speaker Change: a fully-leased red roll and long-term fixed-rate debt and the story here keeps getting better and we're looking forward to expanding the partnership at the building.

Marc Holliday: The second piece of your question I'll leave to Mark. Yeah, you know, on the question of, you know, do we have to sell, we don't have to do anything. I mean, we're in great shape. We have lots of tools that are disposal to generate capital organically, monetizing assets, third-party, you know, money, debt fund, etc. And if, you know, I would not look at anything related to One Vanderbilt as I have to do. We do it because it was part of our original business plan to sell down to somewhere between 50 and 60%. Maybe 55% and 60% that was the original business plan.

Speaker Change: The second piece of your question I'll leave to Marc. Yeah, you know.

Marc: On the question of, do we have to sell, we don't have to do anything. I mean we're in great shape. We have lots of tools that are disposal.

Marc: to generate capital organically, monetizing assets.

Marc: 3rd party, you know money, that fund, etc.

Marc: and if you know I would not look at anything related to one Vanderbilt as I have to do.

Marc: We do it because it was part of our original business plan to sell down to somewhere between 50 and 60%.

Marc: May be 55 and 60% that was the original business plan. That's where we think the asset is optimized.

Marc Holliday: That's where we think the asset is optimized for the perspective of shareholders between return, and enhanced a future generation of the asset. It is a, you know, One Vanderbilt is transformational for this market. It was; it's now the building block of this company. We expect to hold and own it, you know, for quite some time. But we welcome the opportunity to bring in some of the great international partners from around the world. And we expect, as Harry said, to conclude that in the fourth quarter. But that will just be one component of what we expect to close from this point forward through the remainder of the year by monetizing certain assets of the company that should yield to us in excess of 500 million dollars of net proceeds.

Speaker Change: for the perspective of shareholders between return and enhanced a few generations off the asset. It is a, you know, one Vanderbilt is transformational for this market. It was, it's now the building block of this company. We expect to hold and own it, you know, for quite some time. But we welcome the opportunity to bring in some of the great international partners from around the world.

Speaker Change: and we expect, as Harry said, to conclude that in the fourth quarter, but that will just be one component.

Speaker Change: of what we expect.

Speaker Change: to close from this point forward through the remainder of the year by monetizing certain assets of the company that should yield to us in excess of $500 million of net proceeds, which we will use in the interim to pay down the line to bring it into the levels that we had projected in December of last year. So we're on track or possibly a little head on that and it will set us up, I think quite well leading into 2025, which I think is going to be a big year for this company.

Marc Holliday: Which we will use in the interim to pay down the line to bring it into the levels that we had projected in December of last year. So we're on track or, you know, possibly a little ahead on that, and it will set us up. I think, you know, quite well leading into 2025, which I think is going to be a big, big year for this company.

Unknown Executive: Thank you.

Steve Sakwa: One moment for next question. Next question of Conflanos Steve Sakuwa from Evercore ISI. Your line is open.

Speaker Change: Thank you.

Speaker Change: Our next question of conflanas Steve Sakuwa from Evercore ISI, Iranis Open.

Steve Sakwa: Yes, thanks.

Marc Holliday: Good afternoon. Mark, I just wanted to see if you could come in a little bit more on the transaction market. Obviously, you guys are back in the DPE business. I'm just curious what you're seeing on the direct side of things. And are the opportunities more pronounced in the DPE side than the direct purchase side? Well, I think, you know, Steve, it's kind of both, and it's really a function in my mind of debt and equity liquidity coming back to this market. And when it comes to comes, you know, pretty, pretty fast and pretty strong. And...

Steve Sakuwa: Yes, thanks. Good afternoon. Marc, I just wanted to see if you could come in a little bit more on the transaction market. Obviously you guys are back in the DPE business. I'm just curious what you're seeing on the direct-sided things and are the opportunities more pronounced in the DPE side than the direct-part-to-side.

Marc: Well, I think, you know, Steve, it's kind of both and it's really a function in my mind of debt and equity liquidity coming back to this market and when it comes, it comes, you know, pretty, pretty fast and pretty strong.

Marc Holliday: And you know, as a case in point, last year there was, I think there was zero dollars of New York, Manhattan, SaaS, Belone, origination, zero, which is quite unusual. This year, including the Rock Center deal, which is pricing today and 299 Park, which is pending pricing next week, is going to be 5.3 billion of SaaS B deal, illuminating spreads, levels, values, demand, etc. And you know, that's quite a different picture along with we're seeing now lend balance sheet lenders quoting deals and the conduit market is firming up and spreads are coming in irrespective of where underlying sofa and treasuries are headed. Spreads themselves are compressing and you know, the equity follows the debt and you know, we've seen some deals trade some you know known 250 Park was it was a trade Harry couple others off the top of your head, 980 Madison, 980 Madison, that was to a user Bloomberg philanthropies, you know, obviously we've been a lot of user trades or been some investor trade and there's deals in the market that we're tracking.

Marc: You know, as a case in point, last year there was, I think there was zero dollars of New York, Manhattan, Sazby Loan, originally, zero, which is quite unusual.

Marc: This year, including the Rock Center Deal, which is pricing today and 299 Park, which is...

Marc: pending pricing next week is going to be 5.3 billion of sands be deal, illuminating spreads, levels, values, demand, et cetera, and you know that's quite a different picture along with we're seeing now lend balance sheet lenders quoting deals, and the conduit market is firming up and spreads are coming in irrespective of

Marc: of where underlying sofa and treasuries are headed, spreads themselves are compressing. And, you know, the equity follows the debt, and, you know, we've seen some deals trade, some, you know, known to 50 park, was a trade-hary, a couple others off the top of your head.

Speaker Change: Thanks for watching, see you next time!

Speaker Change: 1980 Madison, that was to...

Speaker Change: that was to a user of Bloomberg, Philanthropies, you know, obviously we've been a lot of user trades or been some investor trades and there's deals in the market that we're tracking.

Marc Holliday: Our focus isn't really on the direct equity side at the moment; it's more development oriented and longer term, but there are a couple of deals that we are paying particular attention to. But you know, if you want to look at just dollars allocated, we do expect that most of our activity will be focused to DPE, which is very customary and routine coming out of a downturn like we had in 20 through 23 to start there and then sort of evolve into direct equity.

Speaker Change: Our focus isn't really on the direct equity side at the moment. It's more development oriented and longer term, but there are a couple of deals that we are paying particular attention to. But, you know, if you want to look at just dollars allocated, we do expect that most of our activity will be focused to DPE, which is very customary in routine coming out of a downturn like we had in 20 through 23 to start there and then sort of evolve into direct equity.

Matthew DiLiberto: Great. And then, as a follow-up, Matt, I did notice that things like real estate taxes and op-ex were at least much lower than what we had modeled. I just didn't know if there was some timing issues there, if there were some maybe refunds that you got on the tax side. Just anything was at sort of a normalized level, or there's some one-timers that might have pulled those down, and those might bounce back up in Q4. Nothing unusual in there. I think they moved, you know, given the size of the line item, not much. They do bounce seasonally from time to time, certainly operating expenses too.

Speaker Change: Great, and then as a follow-up, Matt, I did notice that things like real estate taxes and op-x were at least much lower than what we had modeled. I just didn't know if there was some timing issues there, or if there were some maybe refunds that you got on the tax side. Just anything was at sort of a normalized level, or if there's some one timers that might have pulled those down and those might bounce back up in Q4. [inaudible]

Speaker Change: Nothing unusual in there. I think they moved, you know, given the sides of the line item, not much. They do bounce seasonally from time to time, certainly operating expenses too. No, I think the team's done a great job. We work very hard on a real estate taxes and the operations team does a fantastic job with our operating expenses keeping them contained. They've done an even better job this year, so we saw some savings. They're working right now on how that looks going forward, but nothing unusual within the quarter now.

Matthew DiLiberto: No, I think the team's done a great job. We work very hard on real estate taxes. And the operation seems as a fantastic job with our operating expenses, keeping them contained. You know, they've done an even better job this year, so we saw some savings. They're working right now on how that looks going forward, but nothing unusual within the quarter now.

Unknown Executive: Great, thanks. Thank you.

Speaker Change: Great thanks.

Unknown Executive: One moment for our next question.

Speaker Change: Thank you, one moment for our next question.

Ronald Kamdem: Our next question on Kaplan, a Ronald Camden from Morgan Stanley.

Speaker Change: and the next question of covering a Ronald Camden from Oregon Stanley, the line is open.

Ronald Kamdem: Your line is open. Hey, just two quick ones. Starting with the same sort of calf, same sort of Y. Celebrated to 2.9%.

Speaker Change: Hey, just two quick ones starting with the same store, a cat, same store and a lie.

Matthew DiLiberto: And in the quarter, just hopefully you could sort of talk through what the expectations are for the back half for the rest of the year and maybe into 2025. What age are sort of building releases? We should be thinking about as we're trying to think about 2025. Thanks. Yeah, I appreciate you trying to ask about 2025.

Speaker Change: Calerate to 2.9% in the quarter, just hopefully you can sort of talk through what the expectations are for the back half for the rest of the year, maybe to 25, what the major sort of building releases.

Speaker Change: we should be thinking about as we're trying to think about 2025. Thanks.

Matthew DiLiberto: We'll talk about that on December 9th at the investor conference when we give guidance. But you know, the results for 2024 through the first nine months reflect the portfolio that has been performing better than expectations as part of the reason we raised guidance back in July with earnings. And you know, we continue to trend ahead through the third quarter, fourth quarter, you know, is trending in a similar direction. I do when I'm not changing where our same store full year guidance ended up, but we have trended better than we expect. in the first nine months list.

Speaker Change: Yeah, I appreciate you trying to ask about 2025. We'll talk about that on December 9th at the semester conference when we give guidance.

Speaker Change: But the results for 2024, through the first nine months reflect the portfolio that has been performing better than expectations as part of the reason. We raised guidance back in July with earnings and we continued to trend ahead through the third quarter, fourth quarter is trending in a similar direction. I'm not changing where our seams to our full year guidance ended up, but we have trended better than we expected through the first year. For the first nine months at least.

Matthew DiLiberto: Great. And then look, my second question would just go back to the alternative strategy portfolio. I think you talked about sort of the threat coming in, maybe the environment being a little bit better, but qualitatively, does that help in terms of conversations in terms of those negotiations? Any sort of color you could provide on how that's progressing would be helpful. Thanks. Well, again, I just want to refresh for everybody, ASP, the alternative strategy portfolio, is a category we created at the end of last year to address assets that shareholders perceived, or we think the market perceived more accurately, as having little value, or a little current value, even though in many cases, and we believe there could be long-term value, particularly when we work to recapitalize the underlying indebtedness on those assets, or in some cases, the results, in ways that are advantageous win-win scenarios for the lender and for us as holders of those assets.

Speaker Change: Great, and then look, my second question would just go back to the alternative strategy portfolio. I think you talked about sort of the threat coming in, maybe the environment being a little bit better, but qualitatively, does that help in terms of conversations in terms of those negotiations, any sort of color you could provide on how that's progressing would be helpful. Thanks. Well, again, I just want to refresh for everybody, ASP, the alternative strategy portfolio is a category we created at the end of last year.

Speaker Change: to address assets.

Speaker Change: that shareholders perceived where we think the market perceived more accurately as having little value.

Speaker Change: We're a little current value even though in many of the cases.

Speaker Change: Uh...

Speaker Change: and we believe there could be a long-term value, particularly.

Speaker Change: when we work to recapitalize.

Speaker Change: the underlying indebtedness on those assets or in some case of results.

Speaker Change: in ways that are advantageous, win-win scenarios for the lender and for us as holder of those assets.

Matthew DiLiberto: And I think you've seen that strategy bear fruit already; probably hadn't anticipated ourselves the early returns, but year to date, I think we've had very good results. As I recall, 717-5th, 719-7th, two herald or three that stick out of my mind, there might be one other, and there's others we're working on where we've been able to get creative and do what we do, and mind value out of the ASP assets, and we'll continue to do so as we work that portfolio down. I think the real takeaway, or one of the reasons for the illumination of that portfolio, was to dispel the notion that there was any recourse liability, or guarantees, or peril associated with those assets. They're almost in every case non-recourse.

Speaker Change: and I think you've seen that strategy bare fruit already.

Speaker Change: Probably hadn't anticipated ourselves.

Speaker Change: The early returns, but year to date, I think we've had very good results as I recall, 717-5th, 719-7th [inaudible]

Speaker Change: Two heralds or three that stick out of my mind.

Speaker Change: there might be one other and these others were working on.

Speaker Change: where we've been able to...

Speaker Change: You know, get creative and do what we do, and mind value out of the ASP assets.

Speaker Change: and we'll continue to do so as we work that portfolio down, I think the real...

Speaker Change: Takeaway, one of the reasons for the illumination of that portfolio was to dispel the notion that there was any...

Speaker Change: You know, recourse liability or guarantees or peril associated with those assets, they're almost in every case.

Matthew DiLiberto: With that said, out of respect and deference to our partners and lenders, we would do everything possible to try and optimize those assets and get as full of recoveries we can on those assets. We continue to do that, and with respect to the three examples I gave, very successfully. So we're going to stay at it. The market, to your point, the market coming back a bit certainly helps. There's no question, and we can re-evaluate some of those assets, which we do quarterly, and doesn't mean we pop them out of the portfolio.

Speaker Change: with that said.

Speaker Change: out of respecting the difference to our partners and lenders we do everything possible.

Speaker Change: to try and optimize those assets and get as full of recoveries we can on those assets. And we continue to do that and with respect to the three examples I gave, you know, very successfully. So we're going to stay at it.

Speaker Change: You know, the market, to your point, the market coming back a bit certainly helps. There's no question and we can reevaluate some of those assets which we do quarterly and doesn't mean we pop them out of the portfolio. It just means that, you know, we may have an accelerated timeline for this ultimate disposition of those assets. But, you know, there are some ability, there's some good assets in that portfolio. We hope to work those assets. [inaudible]

Matthew DiLiberto: It just means that we may have an accelerated timeline for this ultimate disposition of those assets, but there are some ability; there's some good assets in that portfolio. We hope to work those assets as far as we can, and maintain as much value as we can.

Speaker Change: and you know maintain as much values as we can.

Unknown Executive: Helpful color, thank you. Thank you, one moment for an explosion.

Speaker Change: Thank you.

Michael Griffin: Our next question, Conflando, Michael Griffin from City, thanks.

Speaker Change: Our next question, I'm going to find a Michael Griffin from City, Your Line is Open.

Michael Griffin: Maybe on the leasing front, for the man you're seeing outside of Park Avenue, maybe on the third or sixth, is this just a function of limited availability along Park or tenants, maybe out there looking for better deals, and then can you kind of quantify maybe where concessions are and some of those submarkets relative to Park, and then maybe broadly as a fair to say, we've passed key concessions in New York overall.

Speaker Change: Great, thanks. Maybe on the leasing front, for the man you're seeing outside of Park Avenue, maybe on the third or sixth. Is this just a function of limited availability, along park or tenants, maybe out there looking for better deals, and then can you kind of quantify maybe where concessions are and some of those submarkets relative to park, and then maybe broadly as a fair to say we've passed key concessions in New York overall.

Marc Holliday: Well, when I start the last question first, we've said for I think the better part of a year that we've that concessions peaked last year. We've seen no increase in free rent or TI on the average deal. Obviously, you saw for our deals for this particular quarter they went up, but they were influenced by a lot of high rent deals that were signed, a lot of new leases, filling vacancy that was signed as opposed to renewals. And in one particular case, a very large deal where we actually contributed, made a dollar allowance for the tenant to perform base building work, which skewed the number as to what we reported for TI.

Speaker Change: Well, let's start at the last question first. We've said for, I think, the better part of a year that we've, that concessions peaked.

Speaker Change: Last year, we've seen no increase in free rent or TI on the average deal. Obviously, it's all...

Speaker Change: for our deals for this particular quarter they went out, but they were influenced by a lot of high rent deals that were signed, a lot of new leases, filling vacancy that was signed as opposed to renewals. And in one particular case, a very large deal where we actually contributed, made a dollar allowance for the tenant to perform base building work, which skewed the number as to what we reported for TI. But at its core, the TI number has not changed.

Marc Holliday: But at its core, the TI number has not changed throughout all of this year. I think we're going to see rents rise more materially before we see concessions come down. But concessions will start to tighten up, and I think the first thing you'll see come off the table is some of the free rent, and then ultimately the TI allowances will be the probably the last thing that changes.

Speaker Change: throughout all of this year. I think we're going to see rents rise more materially before we see concessions come down. But concessions will start to tighten up, and I think the first thing you'll see come off the table is some of the free rents. And then ultimately, the TIL bounces will be probably the last thing that changes.

Marc Holliday: With regards to the Park Avenue versus some of the other avenues, we've been saying consistently this year that we've seen a lot more activity in the value part of the marketplace. There are those tenants that are paying $55 to $75 or $80 rents, so those are not Park Avenue type tenants, whether they be on Third-legs or Sixth Avenue in particular where we see us do a lot of leasing at 8, 10, 7th and 11, 8, 5, 6th, and then obviously this newest announcement on Third Avenue with Bloomberg. Some of that is spillover from Park Avenue, but a lot of it I think is just an awakening of the market by the, you know, those smaller to mid-sized tenants that are chasing sort of the value part of the marketplace, and I think we're going to continue to see that strengthening the market.

Speaker Change: with regards to the Park Avenue versus, you know, some of the other avenues.

Speaker Change: We've been saying consistently this year that we've seen a lot more activity in the value part of the marketplace. They're those tenants that are paying $55 to $75 or $80 rents. So those are not parking avenue type tenants. Whether they be on third-legs or sixth avenue in particular, where we've seen us do a lot of leasing at 8, 10, 7th and 11, 8, 5, 6th and then obviously this newest announcement on third avenue with Bloomberg. Some of that is spillover. From park avenue. But a lot of it I think is just an awakening of the market by the, you know, those smaller to mid-size tenants that are chasing.

Speaker Change: sort of the value part of the marketplace. And I think we're going to continue to see that strengthening the market. In fact, there was a new market report that just came out the other day that their statement was non-trophy leasing is on pace to reach its highest level this year versus all the way back to 2019. So I think that really puts a pin in there for you.

Steve Sakwa: In fact, there was a new market report that just came out the other day that their statement was non-trophy leasing is on pace to reach its highest level this year versus all the way back to 2019, so I think that really puts a pin in it for you. Great, appreciate the color there, Steve.

Marc Holliday: And then just maybe on the financing markets, Mark and I talked a little bit about the CNBS market maybe being more open, but have you gotten a sense maybe more traditional enders have started to warm up to, you know, lending on commercial real estate and office, probably again, and then maybe you can give us some insights you obviously had a number of modifications and extensions this year where you paid down a pretty small amount of principle, but he gave us a sense why lenders are willing to kind of cut those deals on refinances that would only require you to pay down a smaller amount than the mortgages come due.

Speaker Change: I appreciate the color there, Steve, and then just maybe on the financing markets, Marc and I talked a little bit about the CNBS market maybe being more open but have you gotten a sense maybe more traditional lenders have started to warm up to lending on commercial real estate and office probably again and then maybe you can give us some insight you obviously had a number of modifications and extensions this year we paid down a pretty small amount of principle but he gave us a sense why lenders are willing to kind of cut those deals on refinances that would only require you to pay down a smaller amount in the water just come do.

Marc Holliday: Well, okay, the question about portfolio lending, absolutely.

Speaker Change: Well, okay.

Speaker Change: The question about portfolio lending absolutely. I think you're going to see 2025. I think the focus with a lot of the major lending institutions will kind of start to revert back to increasing net interest income.

Marc Holliday: I think you're going to see in 2025, I think the focus with a lot of the major lending institutions will kind of start to revert back to increasing net interest income, with less of a focus, if any, on establishment of reserves. Because I think the view is that the banks are properly reserved, and then some, based on what the expectations were going back over the past four years. And you've seen in the announcements the earnings trajectory and growth of the money center banks is extraordinary. I mean, there's big profits there; they're making money; they're expanding.

Speaker Change: with less of a focus.

Speaker Change: If any on establishment of reserves because I think the view is that the banks are properly reserved and then some based on what the expectations we're going back over the past four years. And you've seen in the announcements.

Speaker Change: the earnings trajectory.

Speaker Change: and Growth of...

Speaker Change: of the Money Center banks.

Speaker Change: is extraordinary. I mean, there's big profits there. They're making money. They're expanding. It's broad base, you know, high net worth, banking, trading, operations, all contributing.

Marc Holliday: It's broad base, you know, high net worth, banking, trading operations, all contributing. And I think, you know, the view is going to be growth, new business, new lending and commercial, you know, prime commercial asset to New York City and good locations. I think it will be eligible for balance sheet lending, and we're seeing that. And I think, you know, you'll see more to come from us and others in the ensuing months on that, on that exact topic.

Speaker Change: and I think...

Speaker Change: You know, the view is going to be growth.

Speaker Change: New Business, New Lending and Commercial Prime Commercial Assets in New York City and good locations.

Speaker Change: I think it will be eligible for balance sheet lending and we're seeing that.

Speaker Change: and I think, you know...

Speaker Change: You'll see more to come from us and others in the ensuing months on that, on that exact topic. So that's that, you know, as to some of the modifications we're doing, we have great relationships with our banks, we have great assets. The buildings typically are not in an over-leverage state, and we're, you know, able, you know, again, under the thesis that some of these banks want to maintain outstanding earnings assets.

Marc Holliday: So that's that, you know, as to some of the modifications we're doing. It's, I mean, we have great relationships with our banks. We have great assets. The buildings typically are not in an over levered state. And we're, you know, able, you know, again, under the thesis that some of these banks want to maintain outstanding earning assets on great, on great buildings with good sponsorship. Sometimes the balances have to be tweaked with a paydown or some additional posting or reserves, but just remember that we're projecting 92 and a half percent leasing in the portfolio, which means we are, you know, swinging our back our way back to hopefully a fully leased state in the years to come.

Speaker Change: on great buildings with good sponsorship. Sometimes the balances have to be tweaked with a paydown or some additional posting or reserves, but just remember, we're projecting 92 and a half percent leasing in the portfolio, which means we are swinging our way back to hopefully a fully leased state in the years to come. The buildings are in great shape, they're fully repositioned. And in most cases are meditized and well leased. So those are not necessarily the assets you read and hear about that where there are problems and for those assets. I think it's quite, you know...

Marc Holliday: The buildings are in great shape. They're fully repositioned and, in most cases, are monetized and well leased. So those are not necessarily the assets you read and hear about that, you know, where there are problems, and for those assets. I think it's quite, you know, natural for lenders to work with us on extensions until the market is fully back. And then when it is, there'll be, you know, more traditional refinancing for that portfolio. But I think it's very consistent and makes sense.

Speaker Change: Natural for lenders to work with us on extensions.

Speaker Change: and told the market is fully back and then when it is they'll be more traditional refinancing for that portfolio. But I think it's very consistent and makes sense.

Unknown Executive: Great. That's it for me. Thanks for the time.

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

Unknown Executive: Thank you.

Unknown Executive: As a reminder, please themself to two questions. One moment for our next question.

Speaker Change: Thank you. As a reminder, please introduce yourself to two questions. One moment for our next question.

Alexander Goldfarb: Our next question comes from an Alexander code Farb from Pi percenter.

Speaker Change: Our next question of confluence of Alexander Coetfarb from Pipeer Sander, your line is open.

Alexander Goldfarb: The line is open. Hey, good afternoon. And first, congrats on the strong leasing. Really unreal. Well, you guys have achieved their since last quarter.

Alexander Coetfarb: Hey, good afternoon, and first congrats on the strong leasing, really unreal what you guys have achieved there since last quarter. Two questions are first. On the mortgage servicing business, it looks like you guys currently have 5 billion and there's another 6.8 potential, you know, depending on I guess if that goes to special service or not. Matt, how do we think about the income that comes off of this? I mean it seems rather lucrative as Mark just described things are getting better. So how much income are you currently getting? And how should we think about that 6.8, you know, how much of that will you think could come on and how do you think? Where do you think this earnings could go?

Matthew DiLiberto: Two questions are first on the mortgage servicing business. It looks like you guys currently have five billion, and there's another 6.8 potential, you know, depending on, I guess, if that goes to special service or not. Matt, how do we think about the income that comes off of this? I mean, it seems rather lucrative, as Mark just described. Things are getting better. So how much income are you currently getting? And how should we think about that 6.8? You know, how much of that will you think could come on, and how do you think where do you think this earnings could go?

Matthew DiLiberto: Sure, I'll try. There's like eight questions, but the business is obviously throwing off a substantial amount of fee income. We had, you know, layered some of that fee income into our original projections back in December. We're trending ahead of that. You know, we stay away from how, you know, because each deal is slightly unique on how much these fees, how they roll through what they are. I'll let Harrison expand on a little bit, but you know, generically these are, you know, once they're in special service and you're earning a monthly, I'll call it a stipend, almost monthly modest fee.

Speaker Change: Sure I'll try and there's like eight questions, but out the...

Speaker Change: The business is obviously throwing off a substantial amount of fee income. We had layered some of that fee income into our original projections back in December. We're trending ahead of that. We stay away from how, you know, because each deal is slightly unique.

Speaker Change: and how much these fees.

Speaker Change: how they roll through what they are. I'll let Harrison expand on a little bit, but, you know, generically these are, you know, once they're in special servicing, you're earning a monthly, I'll call it a stipend, almost, a monthly modest fee. And then on Resolution, there's something more sizable, Harrison, want to.

Harrison Sitomer: And then on resolution, there's something more sizable.

Harrison Sitomer: Harrison, you want to expand on that a bit? Yeah, I mean, this business has been remarkably fast growing. Most of the people coming to us are looking for, you know, expertise and working out large loans, not just in New York, but across the country. And, you know, just to give you a sense of scale, as you just noted, it's fine. We have five billion of active assignments today. We have another 6.8 billion of assignments where we are named special servicer, but the assets are currently not in special servicing. And then, in addition to that, we have another $3 billion of pipeline.

Speaker Change: Expand on a bit. Yeah, I mean, this business has been remarkably past growing.

Speaker Change: Most of the people coming to us are looking for expertise in

Speaker Change: Working out large loans, not just in New York but across the country, and just to give you a sense of scale, as you just noted, it's 5 billion of active assignments today, we have another 6.8 billion of assignments where we are named Special Services but the assets are currently not in Special Services. Thank you.

Speaker Change: and then in addition to that, we have another $3 billion of pipeline and those are appointments that we're currently working on documentation to get name special service or some of which are in special, some which may get into special in the coming months or years.

Harrison Sitomer: And those are appointments that we're currently working on documentation to get named special servicer, some of which are in special, some which may get into special in the coming months or years. So, you know, for us, this is a very scalable business. We run it with our current team, and the revenues, as I said on the last call, they're almost entirely going to the bottom line. So we're continuing to grow this and working our relationships to get on more assignments. And I think one thing that's new in this past quarter is now our existing servicing clients when they're doing new HRR positions or CCR positions.

Speaker Change: So for us, this is a very scalable business. We run it with our current team and the revenues as I said on the last call, they're almost entirely going to the bottom line. So we're continuing to grow this and working our relationships to get on more assignments. And I think one thing that's new in this past quarter is now our existing service and clients when they're doing new HRR positions or CCR positions, they're pointing us up front on these new sassy loans.

Harrison Sitomer: They're pointing us up front on these new SASB loans. A lot of the business we've done over the past year in growth is just organic, you know, reaching out. But now we're getting new appointments on new origination. So, you know, we see this being a sticky business for us. Okay.

Speaker Change: A lot of the business we've done over the past year and growth is just organic, you know, reaching out. But now we're getting new appointments on new origination, so we see this being a sticky business for us.

Harrison Sitomer: And then the second question is on great to see you're back in the DPE. It's been a good business for you guys historically. As you think about the JV debt fund, how do you bifurcate which goes in the DPE and which goes in the JV fund? Yeah, so just as an update on where we stand on the fund raise process, you know, it's been going great. We've reached a deal with our anchor investor. And we're now documenting their investment, which we expect to close in the next 45 days. We also have significant follow-on investor demand that we expect will need or exceed our billion-dollar goal through the final closing.

Speaker Change: Okay, and then the second question is, I'm great to see you're back in the DPE. It's been a good business for you guys historically. As you think about the JV debt fund, how do you buy for Kate? Which goes in the DPE and which goes in the JV fund?

Speaker Change: Yes, so just as an update on where we stand on the fun raised process.

Speaker Change: You know, it's been going great. We've reached a deal with our anchor investor and we're now documenting their investment, which we expect to close in the next 45 days.

Speaker Change: We also have significant follow-on investor demand that we expect will meet or exceed our billion dollar goal through the final closing and the setup of the fund is in terms of what goes into the fund and what doesn't is that this will be our primary credit vehicle for new DPE investments until that billion dollars or whatever we end up closing on is deployed and so you know we look at that's with the shareholder feedback last year which is against this business this is how we'll be able to be deploying dollars into the credit space until the dollars are deployed and you know we'll continue to to mine these investors for potential follow-on funds whether it be in debt or equity businesses

Matthew DiLiberto: And the setup of the fund is in terms of what goes into the fund and what doesn't: this will be our primary credit vehicle for new DPE investments until that billion dollars or whatever we end up closing on is deployed. And so, you know, we will get best with the shareholder feedback last year, which begins this business. This is how we'll be deploying dollars into the credit space until the dollars are deployed. And, you know, we'll continue to mine these investors for potential follow-on funds whether it be in debt or equity businesses. Thank you.

Nicholas Yulico: One moment for our next question. Next question, a couple of lines of Nick Yulico from Scotiabank. Your line is open.

Speaker Change: Thank you.

Speaker Change: Thank you for watching!

Speaker Change: Thanks question, confline, of Nick Ulico from Skorscher Bank, you're on his open.

Nicholas Yulico: Thanks. Yeah. First question is just in terms of, you know, the mark to market year to date, you know, outperforming versus expectations. I think some of that I know is, you know, helped by some one police is like areas to 45 Park, but we had success. But how do we think about like how much rents are, you know, maybe out surpassing expectations so far based on the leasing year to date?

Speaker Change: Thanks. Yeah, first question is just in terms of, you know, the market market year-to-date, you know, outperforming versus expectations. Yeah, I think some of that I know is, you know, helped by some one police is like areas to 45 park, but we had success. But how do we think about like how much rents are, you know, maybe out surpassing expectations so far based on the least. I think you're a date.

Marc Holliday: Well, it's a, you got, I think you got to slice and dice the market a little bit, you know. If you look at Park Avenue, which is sort of the easiest example. It's the best sub market in the country right now. Rents are clearly on the rise. It's a landlord-favored market. We've raised rents four times in the past year on our assets on Park Avenue.

Speaker Change: Well, it's a...

Speaker Change: You got, I think you got to slice and dice the market a little bit, you know?

Speaker Change: If you look at Park Avenue, which is sort of the easiest example.

Speaker Change: is the best sub-market in the country right now, rents are clearly on the rise, it's a landlord.

Speaker Change: Favorite Market?

Speaker Change: We've raised rents four times in the past year on our assets.

Marc Holliday: I think you're seeing the early days of a similar situation on Sixth Avenue. But then I think, as we look forward, I think you're going to see, you know, broadly speaking in mid-town specific, rent increasing on a lot of parts of the market, a lot of types of buildings next year. You know, a good barometer I always go to is the Gray Bar Building, right? Pre-war building, big building, lots of different kinds of tenants, lots of different sizes. Building that, coming out of COVID, had a historically high vacancy of like 18 percent. We're now down approaching the 10 percent vacancy.

Speaker Change: on Park Avenue.

Speaker Change: I think you're seeing the early days of a similar situation on 6th Avenue.

Speaker Change: But then I think as we look forward.

Speaker Change: I think you're gonna see, you know, broadly speaking, in Midtown, specific.

Speaker Change: Renting, increasing on a lot of parts of the market and a lot of types of buildings.

Speaker Change: next year, you know.

Speaker Change: They're good barometer. I always go to is the gray bar building, right? Pre-war building, big building, lots of different kinds of tenants, lots of different sizes.

Speaker Change: building that coming out of COVID had a historically high vacancy of like 18% were now down approaching the 10% vacancy and I would fully expect it will see rents rising that building next year.

Marc Holliday: And I would I would fully expect it. We'll see rents rise in that building next year. So that's a, you know, very good indicator of the kind of the, you know, the mid-price point product in the marketplace. If that rents go up in that building, then you'll see rents go up broadly across most assets, most quality assets in mid-town. All right, that's helpful. Thanks, Steve.

Speaker Change: So that's a very good indicator of the mid price point product in the market place. If that runs go up and not going, then you'll see what runs go up broadly across most assets, most quality assets in the town.

Marc Holliday: I guess the second question is just on going back to the acquisitions environment and, you know, how you think about funding that. I mean, how we're, how's the company right now thinking about, you know, using common equity stocks on quite well in terms of, you know, funding investments, you know, and how much of that could be on actually property investments versus debt investments. Thanks.

Speaker Change: All right, that's hopeful. Thanks, Steve. I guess the second question is just on going back to the Acquisition's environment and how you think about funding that. I mean, how is the company right now thinking about using Common Equity Stocks on quite well in terms of funding investments and how much of that could be on actually property investments versus debt investments. Thanks. You know, I think that's Nick which something will.

Marc Holliday: You know, I think that's the quits, something will go into a fair amount of detail on in December. You know, we're not, I mean, what you're really getting at is kind of a 2025 business plan. Anything we're working on now that we're closing next two and a half months, we know what it is, and, you know, we're in the process of closing typically. Not to say we can't knock down a late inning deal, maybe, you know, in November or December, but most of, most of the balance of this year's activity is allocated, modeled, thought through, et cetera.

Speaker Change: going to a fair amount of detail on in December, you know, we're not, I mean, what you're really getting at is kind of a 2025 business plan, anything we're working on now that we're closing next to an a month, we know what it is and you know, we're in the process of closing typically, not to say we can't knock down a late in and deal maybe, you know, November or December, but most of the balance of this year's activity is, uh,

Speaker Change: is allocated, modeled, thought through, et cetera.

Marc Holliday: And we are right now preparing our plans for 25 and beyond. And we'll be able to give some good color. I don't really, I know there's a lot of question between equity and debt, equity and debt. To me, it's a spectrum, you know, it's real estate. And we just want to find the best point on that spectrum to invest. If we think we're getting a really good equity deal, we're going to do equity. You know, if we think we're getting a really good debt deal, and that's where there's some, you know, advantageous or misprice, we'll do debt.

Speaker Change: and we are right now preparing our plans for 25 and beyond.

Speaker Change: and...

Speaker Change: will be able to give some good color, I know there's a lot of question between equity and debt, equity and debt. To me it's a spectrum.

Speaker Change: You know, it's real estate.

Speaker Change: and we just want to find the best.

Speaker Change: Point on that spectrum to invest. If we think we're getting a really good equity deal.

Speaker Change: We're going to do equity. If we think we're getting a really good debt deal and that's where there's some...

Marc Holliday: It's not always one or the other. A lot of these opportunities we approach, which I think is something that's, I don't know about unique to us, but it definitely differentiates for us, is that we can do any aspect of these deals from senior financing, you know, BEZ, pref, common equity, servicing, combination thereof. And we don't always know because we got to evaluate where do we want to be in a particular deal. And we don't know what deals are coming up in, you know, in the next 12 or 18 months. So, you know, we like to consider ourselves Fox, fairly fluid and fairly opportunistic.

Speaker Change: you know, advantageous or mispresso will do debt. It's not always one or the other. A lot of these.

Speaker Change: Opportunities, we approach, which I think is something that's under about unique to us, but it definitely differentiates for us, is that we can do any aspect of these deals from senior financing, you know, men's, preff, common equity, servicing, combination thereof, and we don't always know, because we gotta evaluate where do we want to be in a particular deal, and we don't know what deals are coming up in the next 12-18 years. So, you know, we like to consider ourselves...

Marc Holliday: We're very comfortable investing along that spectrum that I mentioned to you. And, you know, we've done some equity deals, obviously through the pandemic, we did 450 Park, we did 245 Park, we did 625 Madison; those are the three big ones that come to mind. We've done some debt deals recently, and I would expect you're going to see a mixture of opportunities we will be pursuing, which will be both debt and equity in the months to come.

Speaker Change: Fairly fluid and fairly opportunistic. We're very comfortable investing along that spectrum that I mentioned to you and you know we've done some equity deals obviously through pandemic we did 450 park we did 245 park we did 625 Madison those are the three big ones that come to mind we've done some debt deals recently and I would expect you're going to see a mixture of opportunities will be pursuing which will be both debt and equity in the in the months to come and I think we can give better planning and guidance on that in December but the

Marc Holliday: And I think we can give better planning and guidance on that in December, but the, you know, that's where that is. And in terms of how we fund it, you know, I mentioned to you, I mean, we have whole tools available. I sort of alluded to that earlier. We have, you know, a prolific group here that has great relationships throughout Asia, the Middle East, domestically in Canada, where we can turn to capitalize both debt and equity deals. We're closing on a debt fund. I mentioned in my opening remarks in excess of 500 million of asset monetizations; we expect to close this quarter.

Speaker Change: You know, that's where that is and in terms of how we fund it

Speaker Change: You know, I mentioned to you, I mean, we have all tools available. I sort of alluded to that earlier. We have...

Speaker Change: group here that has

Speaker Change: Great relationships throughout Asia, Middle East, Domestically in Canada.

Speaker Change: where we can turn to capitalize both debt and equity deals.

Speaker Change: We're closing on a debt fund.

Speaker Change: I mentioned in my opening remarks.

Speaker Change: In excess of 500 million of asset monetizations, we expect to close this quarter, and you know, that'll certainly fund a lot of activities and you know, get a revolving balance down to where we wanted to be for year end. And you know, as in prior years, we'll evaluate stock along the way as a

Marc Holliday: And, you know, that'll certainly fund a lot of activities and, you know, get a revolving balance down to where we wanted to be for your end. And, you know, as in prior years, will evaluate stock along the way as a, you know, as a source of potential equity if the, if we feel the price is approaching something that, you know, is, is reasonable in light of the opportunities that exist. So the more you know, more, the more favorable and juicy the opportunity, the more, and the larger the opportunity, you know, we certainly wouldn't shy away from issuing equity for new opportunities or to, you know, rebalance the balance sheet.

Speaker Change: You know.

Speaker Change: as a source of potential equity.

Speaker Change: If we feel the price is approaching something that is reasonable in light of the opportunities that exist.

Speaker Change: So the more, yeah.

Speaker Change: The more favorable and juicy the opportunity, the larger the opportunity, we certainly wouldn't shy away from issuing equity for new opportunities or to rebalance the balance sheet. But we're in a really good place right now.

Marc Holliday: But, you know, we're in a really good place right now. We've shrunk our share count down considerably. We've retired a lot of debt along the way. You know, we're at levels that are very comfortable for us right now. And I think we have a lot of access to capital in all those various ways, including potential stock issuances. So, you know, it's a good position to be in.

Speaker Change: We've shrunk our share count down considerably, we've retired a lot of...

Speaker Change: of that along the way.

Speaker Change: We're at levels that are very comfortable for us right now and I think we have a lot of access to capital in all those various ways including potential stock issuances. So it's a good position to be in. We're going to use it wisely and we're going to hopefully use it very creatively. Thank you very much.

Marc Holliday: We're going to use it wisely, and we're going to hopefully use it very creatively. All right.

Marc Holliday: Thanks, Mark.

Jeffrey Spector: One moment for our next question. Our next question on confluent of Michael Lewis from Truer Securities line is open.

Speaker Change: All right, thanks Marc.

Speaker Change: One moment for our next question.

Speaker Change: The next question, confline of Michael Lewis from True Securities, you're on this open.

Matthew DiLiberto: So thank you. First one maybe for math, but Summit Op-eth went up more than the revenue. I think it was like the op-eth was actually higher than the revenue in the quarter.

Michael Lewis: Thank you. First one may be from Math, but some at op-ax went up more than the revenue I think so. It was like the op-ax was actually higher than the revenue in the quarter. Is that just seasonality? Is there something in that number? They pay their percentage rent in the third quarter.

Matthew DiLiberto: Is that just seasonality, or is there something in that number? They pay their percentage rent in the third quarter.

Marc Holliday: So, that is a, if you, that their calendar year, their fiscal year runs from another calendar, the fiscal year runs. October through September, they pay based rent and percentage rent; they hit the percentage rent levels generally in the third quarter and pay it. So, you'll see that same type of trend every time. Okay, got it.

Speaker Change: So that is their calendar year. They're fiscal year runs from another calendar. They're fiscal year runs October through September. They pay base rent and percentage rent. They hit the percentage rent levels, generally in the third quarter and pay it. So you'll see that same type of trend every year.

Marc Holliday: And then my second question is bigger picture. You know, to your credit, Marc, and I guess everybody at SL Green said New York would recover. It always does. And it is. So, to your credit, and I understand, you know, all the enthusiasm is well learned. When things are tough, I tend to think about how they might get better. When there's a lot of enthusiasm, I tend to wonder, you know, where that might be. You know, people might get out over their ski.

Speaker Change: Okay, got it. And then my second question is, is bigger picture, you know, to your credit, Marc, and can I guess everybody at Custell Green said, New York would recover it always does.

Speaker Change: and it is. So to your credit and I understand, you know, all the enthusiasm it's well earned.

Mark Holliday: When things are tough, I tend to think about how they might get better.

Mark Holliday: when there's a lot of enthusiasm, I tend to wonder where that might be.

Marc Holliday: So, you know, as I look at SL Green, right, you mentioned the alternative strategy portfolio, you know, worldwide, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah.

Mark Holliday: You don't have, you know, people might get out over their skis. So, you know, as I look at SL Green, right? You mentioned the alternative strategy portfolio, you know, worldwide blaza, lots of large 10 and I've expected. 753rd is not in that portfolio, but it's going to be a rising conversion. 185 Broadway, I think you'll sell. I guess. I'm sorry. I'm sorry.

Speaker Change: You know, is this a tie-less all boats kind of New York recovery or do you think?

Speaker Change: You know, you need to be almost more creative here and it's still kind of a battle out there and you know is there anything in this recovery that concerns you.

Marc Holliday: You know, is there anything in this recovery that concerns you? Okay, I just, I want to make sure I've got. I like to, I like to credit part, thank you very much for that. I do have to extend credit to the entire team, as I always do, because I think one of the most differentiating factors of this is the tenure that people have here. I don't know if people recognize that we've got so many people at all various levels throughout the company that are in the 20 and 25 year club. It's been 20, 25 years.

Speaker Change: Okay, I just, I want to make sure I've got...

Speaker Change: I like the credit part, thank you very much for that, but I do have to extend credit to the entire team as I always do because I think one of the most differentiating factors of this is the tenure that people have here. I don't know people recognize that we've got so many people at all various levels throughout the company that are in the 20 and 25 year club. And I think we get great results because of that.

Marc Holliday: This is a family we work well together. And I think, you know, we get great results because of that, you know, that history together and the level of excellence because we have a certain culture here, and if it fits and it works for you and you're committed to it. It's a great, it's a great opportunity. And, you know, if it's not, we've had, you know, people move on. But, you know, the group we have today is the best I've ever worked with. You know, in terms of just a whole new, you know, group of young folks in particular coming up through the ranks, taking on, you know, middle level and senior positions and just carrying on the, you know, the culture and theme of this company.

Speaker Change: you know that history together and the level of excellence because we have a certain culture here and the fits and it works for you and you're committed to it, it's a great opportunity and you know if it's not we've had you know people move on but you know the group we have today is is the best I've ever worked with you know in terms of just a whole new you know group of young folks in particular coming up through the ranks taking on you know middle-level senior positions and just carrying on the

Marc Holliday: In terms of your question about, is there anything in the recovery that concerns? I mean, you know, I mean, in an odd way, the more rapid the market recovers, the thinner our opportunity set gets. And it's kind of an interesting dynamic. I think the real estate market generally is hoping for lower rates to help right size some of other people's investments and reinflate values a bit. But you got to make sure that rates are falling for the right reason, meaning taming inflation and not, not because, you know, you have recession and clearly the way the equity markets are reacting right now.

Speaker Change: you know the culture and theme of this company. In terms of your question about, is there anything in the recovery that concerns?

Speaker Change: I mean...

Speaker Change: You know, I mean in an odd way.

Speaker Change: The More Rapid

Speaker Change: The Market recovers.

Speaker Change: The thinner our opportunity set gets.

Speaker Change: and it's kind of an interesting dynamic, I think the real estate market generally is hoping for lower rates.

Speaker Change: to help right-size some of...

Speaker Change: Other People's Investments.

Speaker Change: and...

Speaker Change: Reinflate values a bit.

Speaker Change: But you gotta make sure that rates are falling for the right reason, meaning taming inflation and not because you have recession and clearly

Marc Holliday: And what we see in our tenant base, there does, you know, it seems to be a pretty robust and strong market. So to see a good market and have rates decreased, that's positive for values and positive for the economy. But it also does.

Speaker Change: The way the equity markets are reacting right now and what we see in our tenet base.

Speaker Change: It seems to be a pretty robust and strong market, so to see a good market and have rates decrease, that's positive.

Speaker Change: for values and positive for the economy.

Marc Holliday: I think it's changed the landscape of opportunity, so the other way to look at it is higher for longer in terms of getting more money out the door because, at the end of the day, we want to improve this portfolio, grow this portfolio, make smart investments at this period of time so that when we look back in five years, we've added a lot of seeds of growth whether they're development conversion projects like a 7.53rd or doing more office redevelopment and development opportunities, which we hope to do because we have a good team to do it, and we've got the prospect of hopefully helping to transform and boost Times Square with our casino.

Speaker Change: but it also dies.

Speaker Change: Change the landscape of opportunity. So the other...

Speaker Change: The way to look at it is higher for longer, in terms of getting more money out the door because at the end of the day we want to improve this portfolio, grow this portfolio, make smart investments at this period of time so that when we look back in five years we've added a lot of seeds of growth, whether they're development conversion projects like a 7.53rd or you know doing more

Speaker Change: Office, redevelopment and development opportunities, which we hope to do because we have a good team to do it. And we've got the prospect of hopefully helping to transform and...

Marc Holliday: With our casino proposal in conjunction with Caesars and Rock Nation, I think could be one of the most important developments for New York City in terms of really having benefits that radiate out far, far beyond the building itself with Caesars Palestine Square casino. There's a lot of good stuff out there going on, and I think whether rates stay where they are, they go a bit higher, they go a bit lower, we're prepared in all cases. We're hedging our floating rate exposure, we want to be offensive with our capital, and we're also going to benefit by compressing spreads and a yield curve that says so far is declining.

Speaker Change: and you know, boost time square with Arcasino. With our Casino proposal in conjunction with Caesar's and Roc Nation, I think could be one of the most important.

Speaker Change: Development.

Speaker Change: for New York City, in terms of really having benefits that radiate out, far, far beyond the...

Speaker Change: The building itself.

Speaker Change: you know, with Caesar's Palestine Square casino. So there's a lot of good stuff out there going on and I think whether rates stay where they are, they go a bit higher, they go a bit lower, we're prepared in all cases, we're hedging our floating rates, bozier. We want to be offensive with our capital.

Speaker Change: and we're also going to benefit by compressing spreads and...

Marc Holliday: I don't have great concern at this moment, like the kind of concern we had back in 2021. Those were tough periods of time, but this is by all measures a very good period of time. Restaurants are full, mass transit is full, traffic is back, buildings are, people are back in the office.

Speaker Change: You know, a yield curve that says, so far, is declining. So, you know, I don't have great concern at this moment, like the kind of concern we had back in 2021. Those were, those were tough periods of time. But this is, by all measures, a very good period of time, restaurants are full, you know, mass transit is full. Traffic is back, you know, buildings are people are back in the office. We don't get any questions now. Hybrid work, model work from home, it's, it's not even in, in this office, it's not a talking point.

Unknown Executive: We don't get any questions now hybrid work model work from moments; it's not even in this office, it's not a talking point, and you know we're excited, and we're excited you know in December to unveil the new plan. Thank you.

Speaker Change: and you know we're excited and we're excited, you know, in December to unveil the new plan.

Unknown Executive: Thank you. One moment for next question.

Speaker Change: Thank you.

Speaker Change: Thank you, one moment for next question.

Anthony Paolone: Next question come from an Anthony Paolo from JP Morgan, your language is open.

Speaker Change: Next question, go from line of Anthony Paul Loan from JP Morgan, your language is open.

Anthony Paolone: Great, thank you.

Matthew DiLiberto: First one is on Georgia or Amani, can you tell us when you expect to actually start closing the units there, what the proceeds back to you are and remind us if any gains there get booked in FFO. Yeah, I mean in our business plan we expected it was a goal and objective to put everything under contract in the year, which we've done, and our expectation is we will close all those inside the calendar year as well. That's part of the number mark was thrown around earlier in terms of proceeds off of dispositions; it's roughly $160 million or so dollars.

Speaker Change: Great, thank you. First one is on Georgia or Monty. Can you tell us when you expect to actually start close in the units there? What the proceeds back to you are in Remindus if any gains they're get booked in FFO?

Speaker Change: Yeah, I mean, in our business plan, we expected it as a goal and objective to put everything under contract in the year, which we've done in our expectation is we will close all those inside the calendar year as well as part of the number of Marc with Stone Round earlier in terms of.

Speaker Change: Proceeds off of dispositions. It's roughly $160 million dollars. There's not an FFO impact other than the use of Proceeds to pay down debt, which is what those Proceeds are earmarked for, but that wouldn't show up until 2025.

Matthew DiLiberto: There's not an FFO impact other than the use of proceeds to pay down debt, which is what those proceeds are earmarked for, but that wouldn't show up until 2020. 25. Okay, got it.

Matthew DiLiberto: And then just second one, you bought some CNBS in the quarter.

Speaker Change: Okay, got it. And then just second one, you bought some CMS in the quarter. And so it's wondering if you can give us some details on that. You don't have it on the DP page and just didn't know if that was because it's securities or if the thrust of that investment is just different than your sort of DP investments.

Matthew DiLiberto: And so I was wondering if you can give us some details on that. You don't have it on the DP page. And just didn't know if that was because it's securities or if the thrust of that investment is just different than your sort of DP investments.

Matthew DiLiberto: Yeah, it's not in our, you know, DP line because it is a different type of investment. We've invested in securities from time to time in the past. We did do more this quarter. They have very unique accounting rules around securities. So we had to, you know, add a couple new lines to the financial statements for the end of the day. It's, you know, $109 million-dollar investment in securities. We are very careful to stay away from, you know, specifics on those as we do with DP in terms of properties and yields and strategies and things like that.

Speaker Change: Yeah, it's not in our DPE line because it is a different type of investment. We've invested in securities from time to time in the past.

Speaker Change: We did do more this quarter. They have very unique accounting rules around security. So we had to, you know, add a couple of new lines, the financial statements for the end of the day. It's, you know, $109 million investment in securities. We are very careful to stay away from, you know, specifics on those as we do with DP in terms of properties and yields and strategies and things like that. But this is a, you know, furtherance of our previously announced strategy to source this type of opportunity and, you know, dislocated debt stacks in our backyard. And we'll continue to do that.

Matthew DiLiberto: But this is a, you know, furtherance of our previously announced strategy to sort of source this type of opportunity and, you know, dislocated debt stacks in our backyard. And we'll continue to do that.

Matthew DiLiberto: But is it the sort of thing that you're just looking to get paid back and make a return on it, or is this something where there's something to do with the property? That's. I'm going to stay away from the strategy on those types of investments. They're all, they're all different. Okay, thank you.

Speaker Change: But is it the sort of thing that you're just looking to get paid back and make a return on it, or is this something where there's something to do with the property? That's I'm going to stay away from this strategy on those types of investments. They're all, they're all different.

Unknown Executive: Thank you. One moment for a next question.

Speaker Change: Okay, thank you.

Tyo: Our next question is going to find out how to break from Deutsche Bank. Your line is open.

Speaker Change: Our next question, I'm going to go ahead, Gregman from Deutsche Bank, the line is open.

Tyo: Oh, yes, good afternoon. This is actually Tyo from Deutsche Bank. In terms of the DPE book, again, back in the days, that book was kind of a substantial size. Just curious, you know, when you guys look at the outlook, how quickly you think, you know, DPE can continue to kind of grow. You guys found really much more constructive on that on that business segment now. Yeah, just understand we're doing the DPE business in a different format this year. So it's not going to be the same as our, you know, prior 26-year track record, if you will, 22 of those 26 where we were investing heavily.

Speaker Change: I ask it after doing this is actually a title from Durchabank in terms of the DPE book, again back in the days that book was kind of a substantial size. Just curious, you know, when you guys get out look how quickly you think.

Speaker Change: You know, DPE can continue to kind of grow you guys sound really much more constructive on that, on that business segment now.

Speaker Change: Yeah, just understand we're doing the DP business in a different format.

Speaker Change: This year so it's not

Speaker Change: Can to be the same as our prior 26-year track record, if you will.

Marc Holliday: But, you know, we're going to be doing a fun format. So the, you know, the capital commitment is going to be fund by fund, typically, where we have percentage of the fund, which will be able to illuminate. When we announce a closing, but clearly, you know, it other than putting together pipeline and seed opportunities, the intent is for, as Harry said earlier, everything to go into the fund. And, and then we'll own our piece of the fund. So it'll be, we think highly profitable based on the returns that we expect. And there were certain fees, you know, associated with the fund that we didn't necessarily have previously, but we won't have, we don't expect the same amount of balance sheet capital commitment to DPE as we've had in the past because of the new format.

Speaker Change: 22 of those 26 where we were investing heavily.

Speaker Change: but you know we're going to be doing a fun format so the you know the capital commitment.

Speaker Change: and then we'll own our piece of the fund so it'll be, we think highly profitable based on the returns that we expect and there are certain fees associated with the fund that we didn't necessarily have previously but we won't have, we don't expect the same amount of balance sheet capital commitment to DPE as we've had in the past because of the new format.

Marc Holliday: Gotcha. That's helpful.

Marc Holliday: And then just a quick one on, as we kind of start thinking about fourth quarter, 24 and first half of 25, any significant move out to a right horizon of office space that we should be aware of as we're tweaking our models. There's nothing, there's nothing that, there's no new surprises. I mean, everything, you know, anything that we've got, budgeted or scheduled in our business plan, it's, you know, I'd say it's just the opposite. You know, we're doing more renewals than, then we had originally anticipated. So nothing significant as far as any kind of move out.

Speaker Change: Gotcha, that's helpful. And then just a quick one on, as it kind of started thinking about fourth quarter, twenty four and first half of twenty five, any significant move out to a right-facing of office space that we should be aware of as it's weekend our models.

Speaker Change: There's nothing that there's no new surprises. I mean, everything, you know, anything that we've got, budgeted or scheduled in our business plan, it's, you know, I'd say it's just the opposite. You know, we're doing more renewals than we had originally anticipated. So, nothing significant as far as any kind of move out.

Marc Holliday: Perfect, congrats on the thought at least.

Speaker Change: Perfect, congrats on a solid leasing.

Unknown Executive: One moment.

Jeffrey Spector: For our next question. Our next question comes from the land of Jeff Spector from Bank of America. Your line is open.

Speaker Change: One moment for our next question.

Speaker Change: Our next question of conflan of Jeff Spectre from Bank of America, your line is open.

Jeffrey Spector: Great. Good afternoon. Marc, when we saw you in May, you talked about the office-to-Reggie conversion as a, you know, an opportunity. I don't think you discussed that yet on this call. Can you provide your latest views on that? Well, you know, I feel like we're on target with them. I'm going to stand by those comments. You know, there's an accelerator program down at the city that takes applications, if you will, to help accelerate projects that are, you know, not necessarily committed to going resi, but, you know, thinking somewhere between committed to or thinking about or tending to.

Jeff Spectre: Good afternoon. Marc, when we saw you in May, you talked about the office to Reggie conversion as an opportunity. I don't think you discussed that yet on this call. Can you provide your latest views on that?

Speaker Change: Well, you know, I feel like we're on target with them, to stand by those comments. You know, there's an accelerated program down at the city that takes...

Speaker Change: Applications, if you will, to help accelerate projects that are, you know, not necessarily committed to going

Speaker Change: you know, somewhere between Committed 2 or thinking about or tending to and at last count my understanding was that accelerated program was up around 75 applications. I think the total square footage.

Marc Holliday: And at last count, my understanding was that accelerator program was up around 75 applications. I think the total square footage. Identified by those applications is an excess of 25 million square feet. That's not to say old 25 million square feet are going to happen. And I don't think I could give you a projection in the near term of what's going to happen. I do believe there will be over 25 million square feet. In the next five to seven years, for sure. And that was a number I'd floated out at that same time: 25 to maybe as much as 40 million square feet.

Speaker Change: Identified by those applications is an excess of 25 million square feet. That's not to say old 25 million square feet are going to happen. And I don't think I could give you a projection in the near term of what's going to happen. I do believe there will be over 25 million square feet in the next five to seven years for sure. And that was...

Speaker Change: a number I'd float at that same time, 25 to maybe as much as 40 million square feet. When you think about all of the secondary and tertiary office buildings, the need and the demand for workforce housing and affordable housing, I don't want to say it's endless, but it's strong. There's a lot of demand out there at those price points for that kind of...

Marc Holliday: When you think about all of the secondary and tertiary office buildings, the need and the demand for workforce housing and affordable housing. I don't want to say it's endless, but it's strong. There's a lot of demand out there at those price points for that kind of studio, one, and two-bedroom housing in Manhattan. And, you know, we've between the projects we're working on projects. We know others are working on buildings that we know have taken their space off the available office inventory list. You know, I'd say there's at least solidly, you know, however you might have the number 10 million square feet.

Speaker Change: New studio, one in two bedroom housing, in Manhattan and...

Speaker Change: Um...

Speaker Change: You know, we've between the projects we're working on, projects we know others are working on buildings that we know have taken their space off the...

Speaker Change: Available Office Inventory List. You know, I'd say there's at least solidly, you know, Harry, you might have the number 10 million square feet. That's kind of what I would say is I think pretty well dialed in and locked in. Maybe in December we can share some locations and more data on that. I don't think we're prepared to on the phone right now, but you know deals that are, like I said, pretty well dialed in. Most are rental, summer condo, summer other uses, life sciences, etc. But most will be under the affordable program. It's not easy, but it's certainly not undoable for people who have experience with the product. It's a big opportunity. And I think that is

Marc Holliday: That's kind of what I would say is I think pretty well dialed in and locked in, maybe in December.

Marc Holliday: We can share some locations and more data on that. I don't think we're prepared to on the phone right now. But you know deals that are, like I said, pretty well dialed in. Most are rental summer condo, summer other uses, life sciences, etc. But most will be under the affordable program. It's not easy. But it's certainly not undoable for people who have experience with the product. It's a big opportunity. And I think that is a major contributor to what, you know, you'll see as net absorption in this market, which you saw in Q3 as of 9/30.

Speaker Change: A major contributor to what you'll see as...

Speaker Change: Networks, net absorption in this market would you saw in Q3 as of 930? I think you'll see more in the...

Marc Holliday: I think you'll see more in Q4. You know, it's also, there was a question earlier about investment sale volume. And there is, there are deals that are being traded now with the intent to convert. You know, 625 is one end of that spectrum, which we sold to Related for condo conversion on Madison. And then there's other deals that are being sold now for an affordable conversion. And all of that just, you know, contributes to a winnowing supply of office. Now, the only thing I think that could derail that is if the office sector gets tight enough, you know, and renderizing and occupancies falling, you know, then you may get back into that zone of indifference where buildings, you know, may look equally attractive as office and resi.

Speaker Change: and Q4.

Speaker Change: You know, it's also, there was a question earlier about an investment sale volume and there is.

Speaker Change: There are deals that are being...

Speaker Change: I traded now with the intent to convert.

Speaker Change: Um

Speaker Change: You know, 625 is one end of that spectrum.

Speaker Change: which we, which we sold to related for condo conversion on Madison and then there's other deals that are being sold now for a part for affordable conversion.

Speaker Change: and all of that just contributes to a winnowing supply of office. Now, the only thing I think that could derail that is if the office sector gets tight enough and renzerizing and occupancies are falling, then you may get back into that zone of indifference where buildings may look equally as attractive as the office and the resident. But for right now, I think that that... [inaudible]

Marc Holliday: But for right now, I think that that, you know, that trend is bearing out on conversions. And, you know, we're hopeful to see a lot happen over the coming years.

Speaker Change: you know that trend is bearing out on conversions and you know we're hopeful to see a lot happen over the coming years.

Marc Holliday: Thank you, and if I could ask for, as my second question, a follow up, Steve, earlier in the call you talked about concessions will tighten up and a free rent would be first. I think it's an important comment. There is so much focus on effective rents. Can you clarify that a bit? I don't know if you can talk about expectations on timing, and I assume you're talking about the broader market for New York City. Yeah, I think, well, it was a three-parter ride. At first, I said that I thought you'd see a continuation of rents rising, and you're seeing that on Park Avenue in 6th Avenue.

Speaker Change: Thank you. And if I could ask for as my second question, a follow-up Steve earlier in the call you talked about concessions will tighten up and free rent would be first. I think it's an important comment, there is so much focus on effective rents. Can you clarify that a bit? I don't know if you can talk about expectations on timing and I assume you're talking about the broader market for New York City. Yeah.

Steve Sakuwa: I think it was a three-part, right? At first I said that I thought you'd see a continuation of rents rising.

Steve Sakwa: I think you'll see it more broadly next year. So that'll be the first of the three components that to change. Then I think, with specific concessions, free rent is most likely to tighten. I can't really put a timing on that. That's anybody's guess, but it certainly feels like the trend line is there; the leasing velocity is there to support it. The tenant demand is there, and I think you'll start to see it specific to where the strong of some markets are right now, Park in 6th Avenue. The last component will be TI, and I think that's probably much further off in time.

Steve Sakuwa: and you're seeing that on Park Avenue in 6-7, I think you'll see it more broadly.

Steve Sakuwa: Um...

Steve Sakuwa: next year.

Steve Sakuwa: Um...

Steve Sakuwa: So that'll be the first of the three components that to change.

Steve Sakuwa: and then I think with specific discussions.

Steve Sakuwa: Free Rent is most likely to tighten. I can't really put a timing on that, you know, that's anybody's guess, but it certainly feels like the trend line is there. The leasing velocity is there to support it. The tenant demand is there.

Steve Sakuwa: and...

Steve Sakuwa: I think you'll start to see it specific to where the strongest some markers are right now, Park in 6,000.

Steve Sakuwa: and the last component will be TI, and I think that's probably much further off in time because there's rents rise to stretching costs, haven't slowed down, so tenants are still looking for the landlord to support them on with these elevated TI contributions.

Steve Sakwa: Because, as rents rise, construction costs haven't slowed down. So tenants are still looking for the landlord to support them with these elevated TI contributions.

Steve Sakwa: Thank you.

Speaker Change: Thank you.

Linda Peter: One moment for our next question. Our next question will come from Linda Peter, a bromo with from Jeffries.

Speaker Change: Thank you, one moment for our next question.

Speaker Change: Our next question, I'm going to line the Peter Brahmowitz from Jeffree's, your line is open.

Linda Peter: Your line is open.

Linda Peter: Thank you.

Steve Sakwa: Yeah, my first one is for Steve. You mentioned still financial services kind of leading the market, but just wondering if you can talk about any updates on tech, their presence in the market, any changes in their appetite for state. Yeah, they continue to be an increasing part of the marketplace. There's over 6 million square feet of active tech ongoing searches. So if you compare that first as a year ago, it was a little over 3 million square feet of active searches. And you've seen some of the combination of some of the, you know, the household big names that are in the market.

Speaker Change: Thank you. Yeah, my first one first Steve you mentioned still financial services kind of leading the market But just wondering anything to talk about any updates on on tech their presence in the market Any changes in their app type space. Yeah, they continue to be an increasing part of the market place there's

Steve Sakuwa: over six million square feet of active tech ongoing searches. So if you compare that, first is a year ago, it was a little over three million square feet of active searches, and you've seen some of the combination of some of the household big names that are in the market, and won't be too specific, but I think a lot of us heard some of the big names whether it be, you know.

Steve Sakwa: I won't be too specific, but I think a lot of us heard some of the big names whether it be, you know, Amazon or Apple or whoever may be, but as to what their specific requirements are. But you're also seeing sort of a smaller to mid-size requirements driven by a couple of different things. AI initiatives are creating new businesses and creating new initiatives and existing businesses. There's organic growth in some of these businesses that are driving it, and clearly a, you know, a return to office mentality are bringing a lot more people back, enforcing some of these existing tenants to come back into the market.

Steve Sakuwa: and Amazon or Apple or whoever may be, but it's to what their specific requirements are. But you're also seeing sort of a small-ish to mid-sized requirements.

Steve Sakuwa: Driven by a couple of different things.

Steve Sakuwa: AI initiatives are creating new businesses and creating new initiatives and existing businesses.

Steve Sakuwa: there's organic growth in some of these businesses that are driving it.

Steve Sakuwa: and clearly a return to office mentality are bringing a lot more people back and forcing some of these existing tenants.

Steve Sakwa: Where they had laid off space because I thought they were going to have a more robust, you know, hybrid work environment. Now they're bringing the bodies back; is forcing them to take more space. I mean, we're enjoying it right now. We've got a very significant least going out, and as a result of exactly that of that function. Simon, it feels like that whole industry is coming back to life in a material way. So time will tell us what it means for next year, but it certainly feels good right now. That's helpful, thanks, Steven.

Steve Sakuwa: to come back into the market where they had laid off space because I thought they were going to have a more robust, you know, hybrid work environment. Now they're bringing the body's back. It's forcing them to take more space. I mean, we're enjoying it right now. We've got a very significantly scaling out and as a result of exactly that function.

Steve Sakuwa: So, it feels like that whole industry is coming back to life in a material way. So, the time will tell us what it means for next year, but it certainly feels good right now.

Harry Olsen: My second question, just to sort of follow up on Jeff's question, some of Marc's comment, round resident conversion.

Speaker Change: That's helpful. Thanks, Steven. My second question is to sort of follow up on Jeff's question, some of Marc's comments around residents conversion. What are you going to comment on five times square and he's also on the strategy there? I know it's been in the press that it's something new and your partner are considering to convert at least part of the bill into residential.

Harry Olsen: One of you can comment on Five Times Square any thoughts on the strategy there. I know it's been in the press that it's something new in your partner considering to convert at least part of the building to residential.

Harry Olsen: Yeah, this is this is Harry. This is an ASPS that we're working with our lenders and our partners, and we'll share more at the appropriate time.

Speaker Change: Yeah, this is Harry. This is an ASPS that we're working with our lenders and our partners and we'll share more at the appropriate time.

Linda Peter: All right, with all for me.

Unknown Executive: Thanks. Thank you.

Speaker Change: Alright, let's offer me a thanks.

Caitlin Burrows: One moment for our next question. Our next question.

Speaker Change: Thank you, one moment for our next question.

Caitlin Burrows: Confluent of Caitlin Burrows from Goldman Sachs.

Speaker Change #100: Our next question, confline of Caitlyn Burrows from Goldman Sachs, your line is open.

Caitlin Burrows: Your line is open. Hi, everyone.

Matthew DiLiberto: Maybe following up on Tyo's earlier question, you increased your least occupancy rate for the end of the year. Just wondering if you could provide any commentary on how you expect that to flow through the economic occupancy and recognizing runs.

Caitlyn Burrows: Hi everyone. Maybe following up on Tio's earlier question, you increased your least occupancy rate for the end of the year. Just wondering if you could provide any commentary on how you expect that to flow through the economic occupancy and recognizing runs.

Matthew DiLiberto: Yeah, it's Matt. So, you know, when we're leasing up vacancy, that income recognition typically has a delay on it because you're typically building out space. So generally speaking, we would say at the very short end, you know, six to nine months, typically more like 12 months after lease up, you start income recognition. So we'll start to see the benefits of, you know, 300 plus basis points of occupancy pick up this year over the course of, you know, 2025 and beyond. Got it. Okay.

Matt: Yes, Matt. So, you know, when we're leasing up vacancy, that income recognition typically has a delay on it because you're typically building out space. So generally speaking, we would say at the very short end, you know, six to nine months, typically more like 12 months after lease up, you start income recognition.

Matt: So we'll start to see the benefits of, you know, 300 plus basis points of occupancy pick up this year over the course of, you know, 2025 and beyond.

Matthew DiLiberto: And then just wondering if you could give a quick update on 245 Park regarding the redevelopment, leasing, and thinking on timing of a JV sale there.

Speaker Change #103: and then just wondering if you could give a quick update on 245 Park regarding the redevelopment leasing and thinking on timing of a JB Silver.

Marc Holliday: Oh, it's a, or I realized we're a trio. One of the latest on 25th Park. Well, you got the leasing, the development, and the JV in there. So the development, I'll start the development is going right on schedule. It's approximately $200 million plus or minus redevelopment, which is really touching many, many areas: the building from podium facade to a great new plaza, fully landscaped, relit and new seating, new signage, new everything. It's going to be a really vastly improved plaza and front door, if you will, approach to the building, spectacular lobby. I think it's a 20,000 foot amenity with fitness and other clubs, lounges, and amenities, food and beverage offerings.

Marc Holliday: You know, and a fully serviceable rooftop garden in the spirit of what we did over at One Madison. So it's, you know, it's, it's exciting. It's, it's what all that leasing, you know, it's all about leasing has been sort of activated based off the excitement around these improvements, which have begun. They'll be done in about 18 months, or they're about. We're already doing selective demolition, and closing portion is Lexington closed. Yeah, I think Lexington entrance is closed, so works are underway. And the tenant, you know, community reception has been spectacular. And then on the leasing front, you know, we posted a lot of big lease announcements this year.

Marc Holliday: I'm fully expecting to have another big announcement in the very near term that will take the building above a 90% occupancy, which puts us in a great spot, given the fact that there is no. No, no, no, near-term lease explorations, that building is going to be stabilized before we ever get, you know, halfway through our recent strike. and with the redevelopment underway and Steve getting the building over 90% at least. The asset is going to be positioned as one of the fortress office assets in New York City. It's sitting right across from JP Morgan's new headquarters, and we expect on the investor side the opportunity is going to resonate well with investors.

Marc Holliday: We kicked off our discussions a little while ago.

Marc Holliday: We're meeting with potential LPs, and we're going on a road show in the coming weeks to further discuss the interest, along with some of the other capital markets executions we have for the end of this year and into early next. Got it.

Marc Holliday: Thanks. Thank you.

Unknown Executive: That's all the time we have for our question-answer session.

Marc Holliday: I want to turn it back over to Marc Holliday for closer months. Okay, thank you for those still with us. The investor conference date is December. 9th this year due to the dates around Thanksgiving late in the late November December 9th, One Vanderbilt and we look forward to seeing everybody there for our annual and you know, should hopefully have a lot of great things to talk about then and see you soon.

Unknown Executive: Thank you for your participation in today's conference that does conclude the program. You may now disconnect. Everyone have a great day. Thank you.