Q4 2024 Vornado Realty Trust Earnings Call
Betsy: Good morning and welcome to the Bornado Realty Trust 4th Quarter 2024 Earnings Conference Call. My name is Betsy and I will be your operator for today's call.
Betsy: Please be aware that statements made during this call maybe deemed forward looking statements and actual results may differ materially from these statements due to a variety of risks uncertainties and other factors. Please refer to our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31 2024.
Betsy: For more information regarding these risks and uncertainties the call.
Betsy: So time sensitive information that maybe accurate only as of today's date. The company does not undertake any duty to update any forward looking statements.
Betsy: On the call today from management for our opening comments are Steven Roth, Chairman and Chief Executive Officer, and Michael Franco President and Chief Financial Officer, Our senior team are present and available for questions I will now turn the call over to Steven Roth.
Michael Franco: Thank you, Steve and good morning, everyone that Vornado business is good really good and getting better.
Michael Franco: New York is our home and everyone agrees that the New York Real estate markets are head and shoulders strongest in the nation.
Michael Franco: As I have said before while New York has over 400 million square feet of office, we really only competes in a narrower market of about 188 billion square feet of the better space.
Michael Franco: Availability of the better space market is 10, 7% versus 21%.
Michael Franco: Better space market.
Michael Franco: And that 10, 7% availability is evaporating very quick block and when he was already under 7%.
Michael Franco: Add to that that the cost of a new build tower in New York has just about doubled over the last six to seven years.
Michael Franco: And with the cost of debt its a 6% new supply is frozen there.
Michael Franco: There hasn't been a major new building starts in five years at one started delivery takes five to seven years.
Michael Franco: Taken together this all creates a landlord's market. We expect words derives aggressively one might even say rich the spike.
Michael Franco: And in fact rents have already started to rise so all good.
Michael Franco: Good.
Michael Franco: Why New York, New York as America's World City.
Michael Franco: Walks human and physical capital is is irreplaceable.
Michael Franco: The largest most educated workforce the best transit system for commuting from our best suburbs you May read this as a plug for the Penn District, and I guess it is.
Michael Franco: The largest number of corporate headquarters the best restaurants in museums and a professional sports team, even though the damn Yankees can't seem to beat the Brooklyn office.
Michael Franco: I would like to focus on a few points at a handful of our recent accomplishments.
Michael Franco: Work from home was a scare but as we predicted it would not last that is not the best.
Michael Franco: Most of it left their kitchen tables that are backing.
Michael Franco: Yes.
Michael Franco: Our stock price increased 49% in 2024 after increasing 35% in 2023.
Michael Franco: In 2024, we leased three odd thing for.
Michael Franco: 4 million square feet overall of which $2 six 5 million square feet was New York office at market, leading $104, starting rents with mark to markets of two 5% cash.
Michael Franco: 10.5% GAAP.
Michael Franco: For the second year in a row, we completed the most premium 100 dollar plus deals in New York and 18 transactions for 136 million square feet.
Michael Franco: And we completed three of the top 10 largest office deals in New York.
Michael Franco: We completed 285000 square feet of deals that had one at 90 $98 starting with exceeding out otherwise.
Michael Franco: We completed 25 retail leases totaling 187000 square feet highlighted by Manhattan's first frameworks in the peds.
Michael Franco: We completed the Uniqlo sale at 666 fifth Avenue at a record price of two of $20000 per square foot.
Michael Franco: Last month, we repaid at maturity, our three 5% $450 million unsecured bonds out of cash on its balance sheet at 108 million off our credit line.
Michael Franco: Our entire portfolio was 100% LEED certified and we have Chris in relation to achieve.
Michael Franco: Sure.
Michael Franco: We are on the two yard line with a handful of important deals.
Michael Franco: We finally complete we will finally complete the master lease to NYU at a one 1 million square foot 770 Broadway by the end of the month.
Michael Franco: This deal will relieve our balance sheet of $700 million of debt on this asset and eliminate 500000 square feet of vacancy.
Michael Franco: By the way this large and impressive building on the edge of the NYU campus will be the science Center I have seen the plans it will be a world class education facility, which will make NYU at even greater elite higher education institution, that's great for Bayou and Thats, great for New York.
Michael Franco: We will shortly be financed 15, 35, Broadway, which will allow us to redeemed for cash over $400 million of our retail J J D preferreds.
Michael Franco: And we have several of asset sales in the works taken together these transactions will shortly generates an incremental additional $1 billion of Luke.
Michael Franco: Cash.
Michael Franco: At <unk>, we are only weeks away from signing a 300000 square foot lease.
Michael Franco: <unk> is being very well received by tenants and brokers with commentary that it is the best redevelopment anyone has ever seen.
Michael Franco: Together with Penn one has by far the biggest and best amenity package anywhere.
Michael Franco: We are also engaged in multiple tenant proposals had been too including negotiating an LOI for a major headquarters lease on predicting the sensor will likely be 80% leased by year end.
Michael Franco: We are achieving rents here about our underwriting and accordingly, we have increased the incremental yield on page 16 of our supplement to 10, 2%.
We will deliver we will deliver peer 94 on Manhattan's west side by year end 'twenty five the first ever purpose built film and TV south stages in that.
Michael Franco: Okay.
Michael Franco: Now for those interested in Alexandra there are 32, 4% owned affiliate.
Michael Franco: In the second quarter of 2024, we early renewed the 947000 square foot Bloomberg office lease at 731, Lexington Avenue, whose expertise is now pushed out to 'twenty four.
Michael Franco: And Regal Park in Queens, we are moving Burlington Marshalls, the last remaining tenants at Regal one two hour adjacent Regal two shopping centers, thereby filling up we go to and creating a fully vacant blank canvas said, we go one for either sale or development.
Michael Franco: Obviously, we believe this unique five acre parcel of land wonderfully located at the intersection of Queens Boulevard injunction Boulevard and bordering the long Island Expressway is worth more as land than the 66 year old building.
Michael Franco: I believe alexanders stock is substantially undervalued assets and we will have to do something about that.
Michael Franco: 350 Park Avenue development is on schedule. The new building is now fully designed and it will stand out as being truly truly best in class. We are in the formal approval process under the Midtown rezoning and Citadel, a major tenant and Ken Griffin our partner will shortly begin moving out of <unk>.
Michael Franco: 250 bought into swing space. So the demolition can begin early next year.
Michael Franco: Yeah.
Michael Franco: I end by noting how proud of her native teams all of.
Michael Franco: Of our accomplishments to date in the Penn District.
Michael Franco: Take a look at med at Fawley pet.
Michael Franco: <unk> had to the Moynihan train Hall, the long Island Railroad concourse, the 30, <unk> Plaza and even pet 11, and how excited we all are about the future of our city within a city.
Michael Franco: Next up is the hotel Penn site now down to the ground and ready to go.
Michael Franco: Our Penn District is clearly a sight to be seen if you haven't already seen it. Please call me to arrange a tour.
Michael Franco: Now to Michael.
Michael Franco: Thank you, Steve and good morning, everyone.
Michael Franco: Comparable <unk> was $2 26 per share for the year.
Michael Franco: As previously forecasted this is down from 2023 due to lower NOI from the known move outs that we discussed throughout the year and higher net interest expense, but overall our results were better than we had anticipated earlier in the year.
Michael Franco: This is primarily due to the acceleration of our leasing activity at 330 West 34th Street.
Michael Franco: We recognized lease termination income in connection with executing a 304000 square foot lease with we work on behalf of Amazon.
Michael Franco: Also net interest expense ended up being lower versus our original projections due to short term rates coming down.
Michael Franco: By the way, we already have almost 80% of the vegan space from the known move outs spoken for.
Michael Franco: Fourth quarter comparable <unk> was <unk> 61 per share compared to <unk> 63 per share for fourth quarter 2023.
Michael Franco: This decrease was primarily attributable to higher net interest expense and lower NOI on the non move outs, partially offset by the lease termination income at 330, West 34th Street and lower G&A expense, we have provided a quarter over quarter bridge on page three of our earnings release and on page six of our financials.
Michael Franco: Right.
Now turning to 2025 <unk>.
Michael Franco: Though our practice is not to give earnings guidance. We can tell you that similar to current consensus we expect 2025 to be slightly lower than 2024. This is partly due to the previously mentioned lease termination income of 330 West West 34th Street that positively impacted 2024 comparable SSO and as any.
Speaker Change: Katie during last quarter's call the GAAP earnings impact from the back filling our vacancies and the lease up with Penn One and Penn two wont occur until towards the end of 2026 with full positive impact in 2020, resulting in significant earnings growth by 2027.
Michael Franco: A few words on occupancy.
Michael Franco: Our year ended office occupancy was 88, 8% up from 87, 5% last quarter with the pending full building master lease at 770 Broadway our office occupancy increases by 330 basis points to 92, 1%.
Michael Franco: As we previously mentioned our first quarter 2025 occupancy will decrease dependency being placed in service. We anticipate anticipate that this decrease will be temporary as perm to occupancy stabilizes over the next year and we get to the low ninety's.
Michael Franco: And New York leasing pipeline remains robust as we enter 2025, we have significant activity across our portfolio with 750000 square feet in negotiation on top of the 1 million square foot master lease being finalized with NYU at 770 Broadway.
Additionally, we have another one 3 million square feet in various stages of proposals in negotiation.
Michael Franco: Turning to the capital markets, both the financing and investment sales markets are showing encouraging signs over the past few months. The CBS market is wide open for large high quality assets, such as ours with appropriate metrics and loan structures AAA and overall spreads for recent financings on the spiral and 299 Park Avenue.
Michael Franco: Have shown significant tightening over the past six months the levels consistent with pre COVID-19, while we expect banks will largely remain on the sidelines. This year. Some banks are beginning to look at financing smaller office deals all hope will first sign in a trend we expect to continue.
Michael Franco: The one negative is that short term rates after coming down 100 basis points last year look likely to remain around current levels for the foreseeable future keeping borrowing costs.
Michael Franco: The investment sales market continues to pick up also was so high quality office assets trading recently, including interest and $3 20 Park Avenue.
Michael Franco: Agree and $13 45 Avenue of the Americas by Blackstone with that I'll turn it over to the operator for Q&A.
Speaker Change: Thank you we will now begin the question and answer session.
Speaker Change: If you have a question. Please press Star then one on your Touchtone phone.
Speaker Change: If you wish to be removed from the queue. Please press Star then two.
Speaker Change: If you are using a speakerphone you may need to pick up the handset first before pressing the numbers.
Speaker Change: Once again, if you have a question. Please press Star then one on your Touchtone phone.
Speaker Change: Each caller will be allowed to ask a question and a follow up question before we move on to the next caller.
Speaker Change: Yeah.
Speaker Change: Steve Sochua from Evercore ISI is on the line with a question. Please proceed.
Steve Sochua: Yeah. Thanks, Good morning, Steve Thanks for those great comments about the leasing activity it sounds like you're close to punching a few things you know into the into the endzone here, but maybe your Glen could you just provide a little bit more commentary around some of the timing for Penn to I guess in particular and you know.
Steve Sochua: Just maybe the competitive dynamic that you're seeing for that space and the confidence level you had to raise the yield on Penn too.
Steve Sochua: Hi, Steve It's Glenn how are you doing.
Steve Sochua: So tend to is more than all up and running.
Steve Sochua: Every large pad in the market has it in their top three list of what they see.
Steve Sochua: There were only five buildings in Manhattan with blocks available below 500000 feet or more we have the best block.
Steve Sochua: So as you heard in the remarks, we have a lease out with one tenant that's going to get done in short order for 330000 feet.
Steve Sochua: We have a LOI in very serious stages for another very large headquarter tenant and behind all of that we have a tenant battling for space from anywhere between 60000 to 200000 feet.
Steve Sochua: So <unk> two is now the bullseye for many people searches.
Steve Sochua: Complete fifth year on or Elisa.
Steve Sochua: Yeah.
Steve Sochua: Okay.
Steve Sochua: Just any comments on just kind of the rents I guess that you're sort of saying I guess that speaks to kind of the yields being pushed up the debt by 70 basis points.
Steve Sochua: We've raised our rents across the entire building.
Steve Sochua: From bottom to the top.
Speaker Change: John Kim from BMO is on the line with a question. Please proceed.
John Kim: I wanted to follow up on Steve's commentary on $1 billion of new cash proceeds do you expect.
Speaker Change: You have $700 million debt pay down at 770 Broadway.
<unk> $400 million freed up at $15 35.
Speaker Change: Broadway as well and then on top of that new new dispositions. So I was wondering how much in new dispositions that you anticipate.
Speaker Change: Yes.
Speaker Change: Switching to dispositions we anticipate.
Speaker Change:
Speaker Change: Well the math of what you just said the $700 million is going to pay off debt.
Speaker Change: There's.
Speaker Change: A little more a couple of hundred million dollars more than that coming in on.
Speaker Change: That building is 400 odd million dollars coming in from refinance existing 35.
Speaker Change: And that'll be it.
Speaker Change: Yes.
Speaker Change: Short term dispositions, the rounded up to $1 billion.
Speaker Change: And we will be focused on retail or non core office or any color you can provide on what.
Speaker Change: Kind of looking at that.
John Kim: Im not going to get specific about that John.
Speaker Change: Jeff Spector with Bank of America is on the line with a question. Please proceed.
Jeff Spector: Great. Thank you and congratulations on a great 2024.
Speaker Change: Can you tie Steve's comments on the spike here.
Speaker Change: Can't let that go by without saying thank you.
Speaker Change: Okay absolutely.
Speaker Change:
Speaker Change: If you could please tie Steve your opening comments on.
Speaker Change: The expectation for a rent spike to Michael's comment on growth in 27, I think we all understand 25.
Speaker Change: Can you tie in 26 at all to any of those comments. Please thank you.
Speaker Change: Oh God I don't know.
Speaker Change: We've been through this site these kinds of cycles, four or five times.
Speaker Change: What I said, which I thought I was pretty clear was that.
Speaker Change: There's lots of space in New York, but we compete in a much smaller subset of the better space, which is.
Speaker Change: Somewhat below 200 million square feet.
Speaker Change: So that's the first point the second point is that the current availability in that subset of space is 10% and going down very quickly.
Speaker Change: Of course, there is a shortage of space, we haven't had a recession at all of our clients are expanding.
Speaker Change: And aggressively expanding in New York their businesses are good.
Speaker Change: The stock market is good.
Speaker Change: Business is business is healthy and robust and demand for space in New York as is.
Speaker Change: It was actually pretty terrific.
Speaker Change: So.
Speaker Change: With availability is limited and shrimp and no new supply that's critical no new supply coming on the market for lots of different reasons construction costs.
Speaker Change: Hysterically high interest rates have not fallen.
Speaker Change: That's the wallet actually locked in rates therefore.
Speaker Change: At all.
Speaker Change: And so the ability to create new supply is very very limited and I use the word frozen take all that together that the landlords market, we expect rents to go up significantly.
Speaker Change: Next year and there I use the word spike now.
Speaker Change: Now with respect to Michaels comments about 2026.
Jeff Spector: Yes, so Catherine please Jeff what I would say is that.
Jeff Spector: We look at our portfolio right. We've got we've got a number of drivers we have filling up the empties.
Jeff Spector: We have a.
Jeff Spector: And so we know that significant part of that is going to come from Penn two and to some extent Penn one.
Jeff Spector: We have the.
Jeff Spector: As leases rollover, we're now on the other side of that as we move into a landlord's market, where we have positive mark to market. So it takes some time for that to flow through 26 will be an improvement, but we think very significant when it comes in 2027.
Jeff Spector: Well. Thank you hopefully I'll give you something I'll give you something else to think about okay.
Jeff Spector: Now.
Jeff Spector: At Penn one and Penn two we are leasing now.
Jeff Spector: 100 dollar range may be just a pinch higher.
Jeff Spector: There's nothing that says that.
But if you go to our neighbors, if you go to Manhattan, West and you go to.
Jeff Spector: Hudson yards, the market rents for those buildings, albeit they are newer buildings actually the new buildings is substantially.
Jeff Spector: Substantially monumentally higher than $100 a foot.
Jeff Spector: As this market tightens and as the Penn District matures it gets to be accepted as the single best location in the West side. There is nothing that says that market rents and pay more than they had to go from $100 a foot to $125 a foot and then maybe have been substantially higher.
Is that kind of appreciation.
Income.
Jeff Spector: We will cause values to increase.
Jeff Spector: Monumentally. So for example.
Jeff Spector: Help me on this Tom $25 a foot times.
Speaker Change: <unk> 5 million feet is $125 million a year okay.
Jeff Spector: $5 million a year is worth.
Jeff Spector: They are big enough to have the $2 billion of value accretion without any capital expense.
Jeff Spector: We are unbelievably enthusiastic about the market.
Jeff Spector: About the tightening of the market and about the inventory that we own.
Speaker Change: Thank you very helpful and my follow up question is on the comment that you're working with a large anchor not looking for specifics of course on who but can you just talk about the demand for anchor space is at a particular industry technology financials is it more broad based.
Jeff Spector: And I don't know if you could tie that to the hotel Penn site. Thank you.
Speaker Change: Hi, Jeff it's Glenn.
Speaker Change: Generally speaking the big demand drivers are financial legal and tax.
Speaker Change: What we're seeing I've, just been patent but across the entire portfolio.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Your line Brzezinski he's on the line from Green Street with a question. Please proceed.
Speaker Change: Hi, guys. Thanks for taking my question Steve.
Speaker Change: Steve just wanted to go back to your comments on you guys not.
Speaker Change: Or are you in your guys opinion public market not seeing the value of Alexander's in your comments about doing something about it can you kind of talk about sort of what you mean by that anything we can expect.
Speaker Change: Well.
Speaker Change: Thanks.
Speaker Change: You take the asset that was there and.
Speaker Change: And you do a sum of the parts analysis.
Speaker Change: That number by any construct has to be very substantially higher than the trading price of the stock. So it's a very simple concept and.
Speaker Change: It's.
Speaker Change: Based upon an AAV and if you just if you calculate the value of the asset piece by piece.
Speaker Change: Greatly exceeds the stock price now.
Speaker Change: Think about it for a second so.
Speaker Change: We go wide.
Speaker Change: Which I guess you might say is a failed shopping center.
Speaker Change: We had.
Speaker Change: A move out.
Speaker Change: So it's shrinking down so we ended up with a 66 year old building the capital cost of re tenant that building is.
Speaker Change: Huge and obviously bad economics.
Speaker Change: So what we did very simply is we took the two remaining actually both at <unk> and Marshalls do great tenants Barstool has been there for 30 years 40 years very long periods of time anyway.
Speaker Change: So we moved then into we're in the process that we have signed documents by the way we are.
Speaker Change: Moving to V go too.
Speaker Change: Which will fill up we go to which is a relatively new shopping center that we built at the better part of 10 years ago.
Speaker Change: So that makes regal to a success.
Speaker Change: And it empties out we go one which is a grant six five acre piece of land.
Speaker Change: Which will be either sold or developed so that creates that you've now it doesn't have it done today. So if somebody was looking at Alexander from the income only approach is going to be.
Speaker Change:
Speaker Change: Substantially incorrect as to what the values are but the piece of land is in the middle of Queens at the intersection of bold named database.
Speaker Change: Zinc is extraordinarily valuable.
Speaker Change: We'll see.
Speaker Change: I appreciate those comments and then I guess, just one more broader strategic question.
Speaker Change: Several years ago, you guys floated the idea of doing a tracking stock and ultimately shelved until things started to recover and the New York office market now that things are seemingly recovering quite significantly I mean is that something that's back on the table can you kind of talk us through or that sort of fits in the grand strategic set of things.
Speaker Change: The easy answer to that is no.
Speaker Change: I think about the tracking stock at least every day.
Speaker Change: I think it continues to be a very very very good idea.
Speaker Change: I can honestly tell you I can't get any support from the idea from any of you guys and even from my side.
Speaker Change: But I continue to think about it every day.
Speaker Change: You never know it may come up.
Speaker Change: More useful tools upside in the future.
Speaker Change: But the short term answer is no.
Speaker Change: Although I do think it is.
Speaker Change: I do love the idea.
Speaker Change: Great. Thanks.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Floris Van Dotcom is on the line with a question. Please proceed.
Speaker Change: Hey, thanks.
Speaker Change: I was just curious your commentary on on rents obviously at at.
Speaker Change: At the Penn Plaza district, being significantly higher than what you probably originally underwrote.
Speaker Change: I recall you talking about.
Speaker Change: Mm $150 million.
Speaker Change: I guess, we've estimated about $150 million of NOI growth.
Speaker Change: It's your Threep.
Speaker Change: Plaza District assets, <unk>, <unk> and Farley.
Speaker Change: As you think now.
Speaker Change: The progression of above market rents.
Speaker Change: Has your NOI growth expectation increase then I mean.
Speaker Change: Fully stabilize this thing could generate.
Speaker Change: More than $300 million of NOI.
Speaker Change: Okay.
Speaker Change: Well the answer to that is is that.
Speaker Change: Obviously with the rents go up.
Speaker Change: That prediction will go up but it will go up only marginally.
Speaker Change: And I'm told by my Finance people, who are smarter than I am.
Speaker Change: You have to take into account that there will be capitalized.
Speaker Change: Capitalized interest rollout that will roll off so I mean, it's a copy of it.
Speaker Change: Complicated calculation with my guys can help you with offline.
Speaker Change: But basically what I'm looking for is as pen.
Speaker Change: Two leases.
Speaker Change: And as pen one completes its fill up.
Speaker Change: And then there is some retail space and the Farley.
Speaker Change: Building as all that happens.
Speaker Change: The income from that cluster of buildings will go up the better part of a $150 million.
Speaker Change:
Speaker Change: And thats incrementally going up.
Speaker Change: So it will be more than that to take it all together.
Speaker Change: So I mean I read your piece that you put out I think last week.
Speaker Change: And I think it is absolutely directionally correct.
Steve Sochua: So Steve.
But as far as by the by.
Steve Sochua: As we keep developing the neighborhood.
Steve Sochua: For example.
Steve Sochua: As I said in the prepared remarks.
Steve Sochua: <unk> side, the old Hotel, Pennsylvania sizes next up.
Steve Sochua: It's already raised and down to the graph as we build a world class office building.
Steve Sochua: Which I've said the building is frozen, but we're going to attack.
Steve Sochua: That as just the land cost in pet shifting his stock.
Steve Sochua: So if we look at it as having zero land cost for the moment, we said, we can get the new building off the ground.
Steve Sochua: So anyway, if we.
Steve Sochua: As you look at this as a neighborhood.
Steve Sochua: As we build on 10 15, a world class office building.
Steve Sochua: That will inure to the to increase the market value of the across the street and want to buy at least 25 or $50 a foot.
Steve Sochua: What we think as we continue to do so.
Steve Sochua: No.
Steve Sochua: Work on our neighborhood the value creation will be.
Steve Sochua: Quite substantial and I might even say in Wallace.
Speaker Change: Yes have you started having those piece of the follow up question I guess is.
Speaker Change: On the acquisitions front I know that it's hard to acquire assets, maybe if you could talk a little bit about the environments and the types of.
Speaker Change: Transactions Youre looking at.
Speaker Change: And where you think youre going to stores, where you.
Speaker Change: We're more likely to source transactions.
Speaker Change: And would you consider.
Speaker Change: Allocating capital to.
Speaker Change: Outside of Manhattan to maybe maybe markets like San Francisco or Chicago. There are further further behind in the in the recovery phase.
Speaker Change: That question is right up Michael Daly.
Speaker Change: Good morning floors.
So I think in terms of acquisitions.
Youre accurate in the sense of it's been more challenging in New York and as the cycle is turning here.
Speaker Change: Sellers are getting a lot more optimistic that being said, there's still a lot of maturities to work through and I think thats going to present opportunities in the next year or two so.
Speaker Change: But our target is it has to be the right asset for.
Speaker Change: To fit into our portfolio from a quality perspective.
Speaker Change: There will be some but it's going to be fewer rather than more.
Speaker Change: San Francisco, we're constructive on.
Speaker Change: We believe in the market I think we've been consistent on that I think the signs are positive there new leadership.
Speaker Change: City is.
Speaker Change: Sure My turning a corner. So the answer is yes, we are.
Speaker Change: We are open minded regarding San Francisco, Chicago, I think we're content with what we have I don't think Youll see us add anything there are market has.
Speaker Change: Many more challenges.
Speaker Change: And it's going to take some time for that.
Speaker Change: So.
Speaker Change: We're not we're not focused on that.
Speaker Change: I don't think well I don't think we will look beyond that.
Michael Franco: Thanks, Michael.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Michael Griffin with Citi is on the line with a question. Please proceed.
Speaker Change: Great. Thanks, I appreciate all the color around the leasing pipeline and demand I'm curious, maybe Steve or Glenn could you give us some insights into whether or not tenants are coming to you earlier to try to renew space just given that limited availability and you've talked about landlord pricing power have you started to see.
Speaker Change: See concessions.
Speaker Change: Drop off at all as a result of this demand <unk> seen.
Glenn: Alright, it's Glenn.
So in terms of demand we're seeing it from every angle.
Glenn: Multiple expansions.
Glenn: Multiple renewal discussions for.
Glenn: You'll have better years out from expiring.
Glenn: And the demand the immediate demand for space from tenants, who were either new to the market or want to move immediately.
Glenn: More robust than I've seen in many years.
Glenn: As it relates to concessions.
Glenn: There are neutralized they have not come down generally yet, but rents have gone up and that effectively things are better and as this market more and more becomes a landlord's market the concessions will come down.
Speaker Change: Chris I would add onto it Glenn said I think I think it was a couple of dynamics there right.
Im talking about these expansions.
Speaker Change: One through our pipeline last few days.
Speaker Change: And Theres a handful of tenants that we did leases with very recently they've already come back for more space and I think that's your flight of a couple of dynamics that has occurred that occurred yet one is I think there was a level of conservatism on behalf of tenants as they lease space coming out of Covid, because they didn't know exactly how they would use it or how much they would be.
Speaker Change: Right and they are now all fully back.
Speaker Change: And they recognize that they need more than that to as both Steve and Glen said business is booming right law firms are booming financial services Tech is booming et cetera. So all of these businesses are growing so when you take both of those dynamics you have a very robust market overlaid onto a very tightening low.
Speaker Change: We will supply of where these tenants want to be so.
I think Thats Thats why Steve said, what he said in terms of.
Speaker Change: Vacation around growth over the next several years.
Michael Franco: Thanks, Michael appreciate the additional commentary there and then just maybe following back up on your comments in the prepared remarks around the financing markets and capital availability, obviously, we've seen more transactions come to market as of recent see MBS market seems more open.
Michael Franco: For the mortgages that you guys have coming due this year, whether it's pan 11 888.
Michael Franco: Properties are very well leased do you have a sense or can you maybe give us some insight on where you would expect the refinancing rate to be relative to the current interest rate and any other commentary on sort of the debt capital markets would be helpful.
Michael Franco: Look I think if you think about where we are today versus where we were let's say a year ago. I think it's I think it's night and day.
Michael Franco: And we really opened up the market on the office side with the Bloomberg financing.
Michael Franco: And since then certainly with respect to New York City, that's been a floodgate hi.
Michael Franco: High quality office had been finance so.
Michael Franco: You think about the transactions that have gotten done many of them in excess of 1 billion.
Michael Franco: Couple of cases, multibillion, so I think that is.
Michael Franco: Evidence of the just the demand from fixed income investors for high quality, New York City Office I think it's very encouraging.
Michael Franco: And so.
Michael Franco: Obviously, our portfolio plays in that so as we as we look out.
Michael Franco: In terms of the financings that are going to roll. This year, we're coming off some low rates and a couple of cases, particularly on a fixed on a couple of fixed rate deals I think we will see upticks in rates there at the same time.
Speaker Change: Something like a union square.
Speaker Change: The demand for high quality retail is very strong and that may well be lower so net net I.
Speaker Change: I think it's probably a little higher but.
Speaker Change: We're also delevering with some pay downs of the 770 et cetera. So I think from Vornado perspective, I think that we obviously took some hits the last couple of years with interest expense going up pretty significantly I think by and large we're done with that in total it could be a little bit higher this year maybe.
Speaker Change: Little bit lower maybe I think we're sort of par.
Our year over year.
And I think generally the worst is sort of a workforce.
Speaker Change: Great. That's it for me thanks for the time.
Speaker Change: Vikram Malhotra with Mizuho is on the line with a question. Please proceed.
Vikram Malhotra: Good morning.
Speaker Change: Questions.
Speaker Change: Steve I guess, you've done a great job on the.
Speaker Change: It depended strict on various assets you talked about sort of the.
Speaker Change: I guess, the next evolution or the next jump in the stabilized NOI Im wondering from an actual development Orient asset standpoint, what's next in band how would you sequence of the various other parcels are redevelopment opportunities you have.
Speaker Change: Yeah. Thanks for the question.
We're studying that now we believe that we should and independents that have one or two buildings.
Speaker Change: Under construction are rolling forward for the next 10 years.
Speaker Change: But we're not ready to announce anything yet obviously the pen 15 site is sitting there.
Speaker Change: Probably I believe is the best site in Manhattan Ex Park Avenue.
Speaker Change: So that obviously is the next site.
Speaker Change: We are considering all options for that site.
Speaker Change: There will clearly be an office building on the front of that site, but we're also considering apartments as well.
Speaker Change: Yes.
Speaker Change: Got it and then just maybe to follow up.
Speaker Change: You talked about the office pipeline I'm wondering if you can give a little bit more color on sort of how street retail is evolving on shift in Madison any color on.
Speaker Change: Tenants in the market, there and what pricing may be doing and how that translates into your leasing costs.
Speaker Change: Thanks.
Good morning Vikram.
Speaker Change: So on the on the pipeline I would say just on the market in general market.
Speaker Change: <unk> two.
Speaker Change: Strengthen vacancy rates continue to decline in rents or.
Speaker Change: Certainly for the best spaces, I think returning to.
Speaker Change: To close to peak levels. So.
Speaker Change: We signed a significant lease in times square last year Theres activity in that sub market again, we own the two best blocks and we have some active dialogue going at some very strong rents.
Speaker Change: Not too far off the peak their fifth Avenue same dynamic in terms of.
Speaker Change: In terms of tenants looking for space I think we've seen certainly since COVID-19. The most activity of retailers cruising around looking for space.
Speaker Change: And so I think that pick up and again for the right spaces I think tenants recognize they are going to have to pay.
Speaker Change: Rents that aren't too far off the peak there if not the peak so.
Speaker Change: The bottom line is and what's driving all of this.
Speaker Change: Is that the sales figures at the retailers Youre doing and the recognition that New York remains.
Speaker Change: The global city in the U S may be number one in the world.
Speaker Change: And they have to have.
Speaker Change: Locations here so.
Speaker Change: We're close to lease with some sort of new to market tenants as well as some tenants that are already here.
Speaker Change: We continue to have good activity throughout the Penn District, and were working on some leases there as well.
Speaker Change: So we're pretty we're pretty constructive on the.
Speaker Change: On the retail market as well.
Speaker Change: Great assets.
Speaker Change: And those tend too.
Speaker Change: Those tend to be where the retailers are most focused.
Speaker Change: I'll give you an anecdotal story.
Speaker Change: So we have an important asset.
Speaker Change: Actually we have a lot of them.
Speaker Change: One particular important fifth Avenue, we had a.
Speaker Change: A major retailer come in.
Speaker Change: Knowing that the it.
Speaker Change: The incumbents in that space.
Speaker Change: Actually three years no renewal option.
Trying to actually say I would like to slide for that space now and I'll wait for that tenant lease to expire.
Speaker Change: So that's things that happened only for <unk>.
Speaker Change: Extraordinary profit.
Speaker Change: Type markets.
Speaker Change: So that was kind of fun.
Speaker Change: The other thing that I'll say is our fifth Avenue.
Speaker Change:
Speaker Change: Tenants would prefer.
Speaker Change: To buy.
Speaker Change: Rather than read and so the buy prices.
Speaker Change: Our higher than it would be reflected by the market risk. So the arbitrage. There is is that it's more economic to sell some of these assets.
Speaker Change: The words out of these assets and.
Speaker Change: And we're open for business.
Speaker Change: Thank you.
Speaker Change: Michael Lewis with true Securities is on the line with a question. Please proceed.
Speaker Change: Thank you.
Speaker Change: So Steve you often emphasize you run this as a cash business. So our focus on cash, which we agree with.
Speaker Change: Fad of $1 75 per share in 2024 was the lowest in at least the last 25 years, probably longer and I realize leasing up a lot of space cost money, but maybe help us understand the health of the New York Office business in the context of reach like yourself, making less cash money than ever before.
Speaker Change: This 25 year trend of kind of consistently going down and are we at an inflection you expect that to kind of rapidly increase until we get back to kind of pre COVID-19 cash flow level.
Speaker Change: Okay.
Speaker Change: Complicated question.
Speaker Change: I'm familiar with the trends.
Speaker Change: With the capital intensity of our business.
Speaker Change: They do with the fact that we're in a multi tenant we had all of our colleagues in the industry are in the multi tenant business, where the spaces turned over.
Speaker Change: Maybe with the cost of serving overlays spaces, all of which creates the trough that you mentioned.
Speaker Change: So clearly and Glenn alluded to this.
Speaker Change: The.
Speaker Change: Yes.
Speaker Change: Inducements to turnover a floor in a building.
Speaker Change: It is very sticky.
Speaker Change: We're struggling to try to get them to go down they will only go down in a very tight market.
Speaker Change: So thats in our future.
Speaker Change: On the other hand, if you.
Speaker Change: You look at the Reds, that's had gone up already.
Speaker Change: Sort of alleviate that problem, so I'm expecting that the cash actual cash flow or <unk> or whatever you want a terabyte.
Speaker Change: We are at the bottom of that cycle and Thats going to go up in a market, which I think is going to get much tighter.
Speaker Change: Tighter.
Speaker Change: Now.
Speaker Change: That is something that I'm predicting for New York I believe New York is unique in the nation other cities as great as they might be around.
Speaker Change: Around the country I don't believe I've got a benefit from that trial.
Speaker Change: Okay, Great and then my second question I, just wanted to ask about the New York office in place rent versus market rent. So the in place rent looks like it's right around 90 Bucks a square foot.
Speaker Change: Where do you think market rents for the operating portfolio are compared to that.
Glenn: Hi, it's Glenn.
Glenn: We say this often quarter to quarter, it's going to ebb and flow flat positive et cetera.
Glenn: We feel confident that our mark to market will be positive I'm not going to predict how much that means but we like our spot in terms of her rolling exploration for the next few years we.
Glenn: We like where we are now pegging rents.
Glenn: As we mentioned we have increased rents generally across the whole portfolio.
Glenn: So we feel good about that metric over the next two to three years.
Speaker Change: I'm not bashful at all predict.
Glenn: So.
Glenn: Let's just go to <unk> for a minute because that's easy.
Glenn: So.
Glenn: I believe that the.
Glenn: We signed.
Glenn: A wonderful lease.
Glenn: 730000 square feet in the Farley building.
Speaker Change: In the middle and the depth of the Covid I believe when that lease comes for renewal, albeit it is from all the markets where that renewal will be very substantially higher than what you had in place with.
Speaker Change: I've already said that I believe headwater to which we are very happy to get $100 of a pinch more today that in the short term future drilling four to five years from now the market rents for those buildings will be very very substantially higher so that's what is it.
Speaker Change: Thank you either way we're bidding on that.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Alexander Goldfarb from Piper Sandler is on the line with a question. Please proceed.
Speaker Change: Hi, Good morning, good morning, Steve.
First.
Speaker Change: <unk> model hub on the improved yields.
Speaker Change: The reset and the positive reception you got back from the market. So that's quite a quite a compliment.
Speaker Change: On the market for you guys. There two questions first Alex Alex Alex. Thank you my friend.
Speaker Change: It is true I mean, you spend time walking us through and it's evident at your ability to rethinking the campus environment. So it's good to see that the rents are moving the way you had hoped my two questions are first on Alexander's and I appreciate your comments.
Speaker Change: What would be.
Speaker Change: I mean right now given how much of the original assets have been sold off and I would think you could get a good price for the apartment tower in Rio two why not just let Dan Alexander's into into vornado you'd eliminate the G&A.
Speaker Change: Paying a dividend that cash flow would accretive to vornado, <unk> 731, which certainly fits in your portfolio why not just incorporate alexander's into into Vornado what would.
Speaker Change: What would prevent that.
Speaker Change: Yes.
Speaker Change: Well, yes.
Speaker Change: Yes.
Speaker Change: Tenacious.
Speaker Change: That idea has been floated for.
Speaker Change: Plenty of ideas that I have said, we're not going to do that for 20 odd years.
Speaker Change: And actually I, probably will continue to say it now.
Speaker Change: The.
Speaker Change:
Alexander's.
Speaker Change: The pricing of it.
Speaker Change: Melding of the.
Speaker Change: Thats something thats on the front of my board today.
Speaker Change: Okay.
Speaker Change: Ed.
Speaker Change: It has.
Speaker Change: It has cash needs and it certainly as.
Speaker Change: As you wound it down would seem to fit more and more but I guess, that's a conversation for offline.
Speaker Change: Yes.
Speaker Change: Alex Let me, let me give you a fantasy okay.
Speaker Change: I love that.
Speaker Change: Okay, I'm, sorry, I'm trying to please.
Speaker Change: Yes.
Speaker Change: If we if we merged alexanders into Renee, though I have no idea, how we would price it and how we could get both sides happy.
Speaker Change: It's very difficult to do okay.
Speaker Change: Alternatively, if we left alexanders as we are going to do that's what I would say as a freestanding independent public entity.
Speaker Change: And we.
Speaker Change: <unk> narrowed it down to nothing but the Bloomberg office building.
Speaker Change: Shortly we will have approximately $100 million of debt.
Speaker Change: Income.
Speaker Change: And that was the only asset in that in that property and it had very low debt or maybe no debt what would that sell for as it is what would that sell for the stock market and I submit to you that that would sell for.
Speaker Change: Much much higher than the current trading price of the stock.
Speaker Change: Just the fantasy.
Speaker Change: Okay.
Speaker Change: Second question is Michael <unk>.
Speaker Change: I'm really glad I'm really saying is.
Speaker Change: From a value point of view, we think that we can make Alex Alexanders bad.
Speaker Change: To be above what we might be willing to pay for it and that Alexander's shareholders.
Speaker Change: That's why we are pursuing.
Speaker Change: Okay.
Speaker Change: Michael you I appreciate the comments on 25.
Speaker Change: Some perspective, but you guys have outlined some asset sales.
Speaker Change: Vacating at $3 50.
Speaker Change: Park and.
The remnants of refinancing. In addition, you have the capitalized interest I think $51 million at 10, two that would burn off when that when those leases take effect. So as we think about the next two years, how much <unk> net is coming off of vornado relative to <unk> coming on from plan.
Speaker Change: Yes, I think that.
Speaker Change: Okay.
Speaker Change: Said a couple of things one is in terms of capitalized interest right. We've talked about that being lower this year versus last year, given two is going to roll off.
Speaker Change: This year.
Speaker Change: Uh huh.
Speaker Change: And I think Thats why consensus is down.
Speaker Change: Appropriate Lee and.
Speaker Change: So.
Speaker Change: 350.
Speaker Change: And that comes off we don't think that has much of an impact.
Over to the Master lease we're getting today there'll be no debt on the asset at that point.
Speaker Change: Capitalized interest on that so that's not going to really have an impact on the numbers.
Speaker Change: So.
Speaker Change: Correct.
Speaker Change: Talked for the last year about the success, we've had back billing.
Speaker Change: 770, <unk> 12, 90, 280, now leasing up Pan that's going to start flowing through a little bit this year more materially next year and dramatically in 2027, and so sort of model that out as you want based on that comment but.
Speaker Change: I think that sort of trajectory.
Speaker Change: Okay. Thank you.
Speaker Change: Yes.
Speaker Change: Ronald Camden from Morgan Stanley is on the line with a question. Please proceed.
Ronald Camden: Hey, just two quick ones for me. So one is on just on the same store NOI for New York Office and it is down $3 three just as Youre thinking about the next two to three years, just any high level thoughts on what that same store number could look like in this sort of strong environment.
Ronald Camden: And Ah Ronald I don't I don't have those numbers at my fingertips, and I don't want to.
Ronald Camden: To give you numbers that are too much of a guesstimate. So on so let us let us look at that and we'll try to give a little more visibility there.
Ronald Camden: Sure thing.
Ronald Camden: Going back to the.
Ronald Camden: At the same sort of question on Capex, maybe asking a different way.
Ronald Camden: When I think about sort of the 250 million of Capex spent this year, which include 72 million on sort of first generation space any sort of thoughts about lot of 'twenty five 'twenty six could look like are we already coming down from those numbers are we staying in place just any sort of thing.
Ronald Camden: Our capex as we're thinking about the model. Thanks.
Ronald Camden: I mean, I think I think the capex.
Ronald Camden: We raised it a little bit because.
Ronald Camden: And it's our best guess every year right in terms of timing of when you make those payments and it doesn't necessarily lineup to when you're actually.
Ronald Camden: Finally, as the lease but.
Ronald Camden: We know the leases that are in process, we have an expectation of lower and you have done beyond that and so I think thats reflective of.
Ronald Camden: Pretty strong leasing environment. In addition to some base building capital so.
Ronald Camden: Last year.
Ronald Camden: I think we're dead on our prediction most years, we're frankly not.
Ronald Camden: Because we're taking a high level, yes, so I think directionally, we're still in the same bucket $2 $52 75 is frankly not that different right. It's just a matter of what space you end up leasing a particular year.
Ronald Camden: How much capex spend on the portfolio beyond that so I think thats a pretty good number.
Ronald Camden: Directionally for this year just given some of these big leases that are in the works on Pan and beyond.
Ronald Camden: And as we get into next year.
So we'll see we'll see what the lift but I think that number will start coming down as the portfolio fills back up.
Ronald Camden: Helpful. Thanks, so much.
Ronald Camden: Yeah.
Speaker Change: Anthony <unk> with J P. Morgan is on the line with a question. Please proceed.
Ronald Camden: Yes. Thanks.
Steve You mentioned just viewing the cost basis around the hotel Penn site has shrunk at this point can you tell us just like what it costs to build something and go vertical right. Now then and what kind of yield on that you would want.
Ronald Camden: Yeah.
What do you think the building costs.
Speaker Change: My developed by developments My young development for US is $9800 a foot ex land for a class a building.
Ronald Camden: Okay.
Ronald Camden: And the yield.
Ronald Camden: Well if you if you put landed.
Ronald Camden: So we get through a number which as you know.
Ronald Camden: But the 2000 and I don't know pick it up in 2000, $2500 a foot, but like that I don't know.
Ronald Camden: You put a yield on it.
Ronald Camden: Would you builds we're now in that with a debt market of 6%, let's say you need to get 7% or 8% or something like that because equity is more valuable than the debt.
Ronald Camden: One 7% on slide five of it.
Ronald Camden: 175 now.
Ronald Camden: That's a number that's net of taxes and operating costs.
Ronald Camden: So.
Ronald Camden: The answer is is that.
To build a new building today.
Ronald Camden: Are you the risk that you would need to get our.
Speaker Change: Oh in the high one hundreds.
Ronald Camden: You're shaking your head why Youre, saying.
Ronald Camden: I agree which is why it's you're talking about being frozen the math doesn't work.
Ronald Camden: And so so but thinking about that for a second.
Speaker Change: So one of the reasons that I'm, so enthusiastic about the rents at Penn one and Penn two as the rest of upward shortly arising from $100 a foot is because asset.
Ronald Camden: You asked us.
Ronald Camden: Figured that newbuild is $200 or floors or something like that maybe there's less maybe a pinch more.
Ronald Camden: So the in place buildings.
Ronald Camden: And the better inventory and the great locations will become much more valuable that's the whole bunch lines.
Ronald Camden: The punch line to today.
Speaker Change: I guess, that's what I wanted to understand I mean, you mentioned your your vantage point being that.
Speaker Change: Sort of costs, thus far has shrunk and so I guess youre just looking at the incremental and what it could do for the whole area not so much thinking about that 2500 dollar basis and a yield on that.
Speaker Change: Yes.
Speaker Change: The fact of the matter is I own the land.
Speaker Change: I bought a long time ago.
Speaker Change: I have no debt on the land and so given a choice between leasing the land density.
Speaker Change: Or building on it.
We will make we will make those choices and that's what we get paid to do.
Okay. I understand then and then just quick follow up I think you brought a nonperforming being out on a midtown.
Speaker Change: Deal last year can you give us any update on that or plans or what's happening there.
Speaker Change: No Sir.
Speaker Change: Okay.
Speaker Change: Okay. Thank you.
Speaker Change: Yep. Thank you.
Speaker Change: Nick <unk> with Scotiabank is on the line with a question. Please proceed.
Speaker Change: Great. Thanks in terms of the.
Speaker Change: Penn Project can you just talk a little bit about whether any of the sublease space Thats available on Hudson yards is if youre actually finding that to be.
Speaker Change: <unk> when tenants Youre looking at your project.
Mike: Hi, Mike its Glen.
Mike: The answer is yes.
Mike: Do you think about it <unk>.
Mike: <unk> and Penn, one or competing with new space, that's a great debt and.
Steve Sochua: And as Steve said, our pricing is not near their pricing, even the sublet pricing so.
Steve Sochua: We feel good about the fact that any tenant touring the west side, whether it's the sublet availability in Hudson yards, Manhattan, West or pen one or two we are squarely in that mix every day.
Steve Sochua: So we like that we feel very competitive with very comfortable with it.
Speaker Change: Okay. Thanks, and thanks, Glenn and then second question is just going back to the yield on 10 two.
Can you just remind us I think that the yield when you quote the yield does not include <unk>.
Speaker Change: And leasing commission being built into the cost there.
Speaker Change: If we assume that I think at one point in the notes.
Speaker Change: I saw that it was around $140 was.
Speaker Change: Around like a Ti leasing commission.
Speaker Change: Cost there per foot.
Speaker Change: Want to see if that's still Ryan if we build that in as is the yield on the project inclusive of that.
Speaker Change: So like 75, 8% is that ballpark correct.
Speaker Change: Yes.
Speaker Change: Sure.
Speaker Change: Yes, yes, I mean, the answer is they work Tycho.
Speaker Change: The thesis is.
Speaker Change: That we would have had to spend the ti dollars leasing commissions anyway, right in particularly given whats happened with respect those to generate rents that were not economic now given the quality old buildings. So.
Speaker Change: Without the incremental costs. It was cost that we would that we spent that we wouldn't have had to spend right. That's how we got to the number that's in the supplemental and what what's the yield on that.
Speaker Change: Andrew we can factor in the Ti et cetera to see but we would have spent that money anyway.
Speaker Change: Okay. So and then as the Ti leasing commission per foot. There was just zoom around is it around $140 does that number.
Speaker Change: Yes.
Speaker Change: Yes, its about right, maybe a touch higher depending on the deal.
Speaker Change: Okay.
Speaker Change: Alright, Thanks I appreciate it.
Speaker Change: Brendan Lynch with Barclays is on the line with a question. Please proceed.
Speaker Change: Great. Thanks for taking my question.
Speaker Change: It looks like you've got about 14% of ABR expiring at 555, California in the third quarter and 18% for the year.
Speaker Change: Any details that you can give on renewal discussions it sounds like you're optimistic on San Francisco General Gist.
Speaker Change: Got some more client.
Glenn: Hi, it's Glenn.
Speaker Change: We remain extremely bullish on our building in San Francisco five five its the best in the city property that states and certainly one of the best in the country.
Glenn: No.
Glenn: When you look back from 2021 forward, we had a boatload hundreds of thousands of feet expiring from 'twenty one to 'twenty six.
Glenn: We have leased almost 700000 feet, thus far during that period.
Glenn: Some more explorations coming in 'twenty five and then some more in 2006.
Glenn: Tackling those now some of those tenants will stay so it may not stay but we feel great about what we've done our rents are clearly leading that market, it's not even close and our tenant roster continues to be five star.
Glenn: So we feel great about $5 five as we sit here.
Glenn: Great and maybe just one follow up on that is the 14%.
Glenn: In the third quarter or is that one tenant or is that split between multiple different tenants.
Glenn: The third quarter.
Glenn: So at 25.
Glenn: There is multiple tenants expiring call it five or six tenants throughout the year in different quarters, none of them huge.
Glenn: But as you ended up you get you get to that role.
Speaker Change: Okay very good thank you.
Glenn: Okay.
Steve <unk> with Evercore is on the line with a question. Please proceed.
Speaker Change: Yes. Thanks, just one quick follow up on 770, I realized at least Steve isn't quite finished but it sounds like it's going to get over the finish line. Soon are there any sort of unique accounting.
Speaker Change: Guess adjustments that we need to be taken into consideration given the unique nature of this or is this just typical normal long term lease it.
Speaker Change: Straight line rent and we'll have to figure out what kind of the GAAP rent is in straight line adjustments I realize you've got a lot of cash upfront, but just trying to think if there are any nuances of this deal because it is a little bit different.
Speaker Change: Im not going to comment.
Speaker Change: Yeah.
Speaker Change: That.
Speaker Change: Action It will be final it will it is finalized actually.
Speaker Change: But it will be announced I would hope by the end of this month and so the announcements that we make will.
Speaker Change: Press release, and they will have all the detail that we need to.
It gives you guys said that you can understand it but.
Speaker Change: But I mean you get.
So I don't want to get into the details out prematurely.
Speaker Change: Okay. Thank you.
Speaker Change: Yes, Sir.
Speaker Change: John Kim from BMO is on the line with a question. Please proceed.
Speaker Change: Thank you for taking the follow up Steve you mentioned, the lack of new office development in New York for several years.
Speaker Change: And how tough it as far as getting the math to work on some of these sites.
Speaker Change: But how many projects do you think we'll get off the ground.
Speaker Change: Right around the same time as 350 park, there's been a few out there in various stages.
Speaker Change: None.
Speaker Change: So theres not enough demand.
Speaker Change: No there's plenty of demand there is just not.
Speaker Change: The cost of building.
Speaker Change: What's going to happen with the cost of steel now, but who knows the cost of building and the fact that interest rates remain stubbornly high.
Speaker Change: And that.
Speaker Change: And.
Speaker Change: Lack of availability of.
Speaker Change: Aggressive capital.
Speaker Change: Will.
Speaker Change: Make the market grows at about 350 Park is a.
Speaker Change: Isolated different point of view.
Speaker Change: The costs.
Speaker Change: We already have a lease for a major tenet and we already have a 60% capital.
Speaker Change: 350 Park will get off the ground my prediction is that.
Speaker Change: Almost no other building, we will get off the ground.
Speaker Change: And by the way that could very well include for the for the short term <unk>.
Speaker Change: Where would <unk> have to go to justify new development I've already inside of that question.
Speaker Change: I already answered that question.
Speaker Change: $200 a foot is an interesting both.
Speaker Change: Got it.
Speaker Change: Great. Thank you.
Speaker Change: There are no further questions at this time.
Speaker Change: Thank you all for participating.
Speaker Change: I think you can tell from.
Speaker Change: The remarks of our management team, we are extremely enthusiastic about our business and extremely enthusiastic about New York and wildly enthusiastic about the Penn District. So thank you all very much for participating and we'll see you next quarter.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Ladies and gentlemen. This concludes today's conference. Thank you for your participation you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].