Q3 2025 Vornado Realty Trust Earnings Call
Speaker #4: Good morning and welcome to the Vornado third quarter of 2025 Earnings call . My name is Joe , and I'll be your operator on today's call .
Speaker #4: This call is being recorded for replay purposes . And all lines are in a listen only mode . Our speakers will address your questions at the end of the presentation .
Speaker #4: During the question and answer session . At that time , please press star . Then one on your touchtone phone . I will now turn the call over to Mr. Steven Borenstein , Executive Vice President and Corporation Counsel .
Speaker #4: Please go ahead .
Speaker #5: Welcome to Vornado Realty Trust third quarter earnings call . Yesterday afternoon , we issued our third quarter earnings release and filed our quarterly report on form 10-q with the Securities and Exchange Commission .
Speaker #5: These documents , as well as our Supplemental Financial Information package , are available on our website . Under Investor Relations section . In these documents and during today's call , we will discuss certain non-GAAP financial measures , reconciliations of these measures to the most directly comparable GAAP measures are included in our earnings Release Form 10-q and financial settlements .
Speaker #5: Please be aware that statements made during this call may be deemed forward looking statements and actual results may differ materially from these statements due to a variety of risks , uncertainties and other factors .
Speaker #5: Please refer to our filings with the Securities and Exchange Commission , including our annual Report on Form 10-K for the year ended December 31st , 2020 .
Speaker #5: Four . For more information regarding these risks and uncertainties . The call may include time sensitive information that may be accurate only as of today's date .
Speaker #5: The company does not undertake a duty to update any forward-looking statements. On the call today from management for our opening comments are Stephen Roth, Chairman and Chief Executive Officer.
Speaker #5: And Michael Franco President and Chief Financial Officer . Our senior team is also present and available for questions . I will now turn the call over to Stephen Ross .
Speaker #6: Thank you , Steve , and good morning , everyone . Today is Election Day in America . The spectacle of our entire population , all voting on a single day .
Speaker #6: The first Tuesday in November has been somewhat diluted by early voting and voting by mail . Nonetheless , today is the a critical symbol of our great American democracy .
Speaker #6: And we all know elections matter . The election in New York City , with the prospect of a Democratic socialist mayor , has attracted enormous attention .
Speaker #6: We almost admit that affordability has become a critical issue , and even a lightning rod , as is the cost and availability of housing .
Speaker #6: I'm an optimist and believe that everything will work out for the best . Importantly , with respect to the prospect of abandoning mayoralty , we have not seen any pullback or hesitancy in space demand from our customers .
Speaker #6: In fact , the opposite . Nor have we seen any canary in the coal mine indication from the stock market . Enough said .
Speaker #6: Now to business . Here in a business is good . Really good . And growing stronger . Our performance continues to lead both the national office pack and our New peers .
Speaker #6: The market seems to have recognized this as our stock has doubled in the past two years . Why ? One , we are in New York .
Speaker #6: Two our leasing stats and our mark to market stats lead the industry . Three as does our balance sheet stats . Our net debt to EBITDA ratio is down to 7.3 times .
Speaker #6: And our immediate liquidity is $2.6 billion . Four we are focused . We are stick to we are a stick to our knitting York company .
Speaker #6: Five we have our Penn District , our city within a city six we have the 350 Park Avenue development and it is in full swing .
Speaker #6: Seven we have a couple of hundred million dollars in the bank annual growth coming over the next few years . And finally , eight .
Speaker #6: We have a great portfolio of office and retail assets . We had another excellent quarter . Michael will cover our earnings shortly . And Glenn is here to answer questions on our leasing activity .
Speaker #6: Now let me cover what we're seeing on the ground , along with some of our recent activity and the accomplishments . As the noted journalist Peter Grant recently wrote , quote , New York City's office market is enjoying its biggest boom in nearly two decades , leaving the rest of the US in the dust .
Speaker #6: End quote . The rotation from a tenant's market to a landlord's market in the 180,000,000 square foot class , a better building submarket in which we compete , that we've been predicting is now happening and has even become accepted by our Doubting Thomas analysts and the critical press hot off the press .
Speaker #6: CRB reports that Midtown core better buildings vacancy is now down to 6.2% , as I said in the past , we are 90 .
Speaker #6: We are 90% prime . Pitch Manhattan centric company tenant demand is robust . Companies are expanding . Demand is broad , based across all industries and available space .
Speaker #6: In the better buildings, demand continues to evaporate quickly. Manhattan office leasing activity is on pace to exceed 40 million ft² for the year. For the first time since 2019, overseas demand is outpacing all submarkets.
Speaker #6: Sublet availability is shrinking rapidly , and we are in the foothills of strong , maybe even surging rent growth by foothills . I'm saying all the good stuff is just in the third inning , and the best stuff is yet to come .
Speaker #6: Obviously , deal activity and values will follow . Here is our industry leading leasing scorecard . We expect our 2025 leasing volume for Manhattan office to be our highest in over a decade , and our second highest year on record .
Speaker #6: Please take a look at our leasing and mark to market statistics . Our performance continues to be industry leading . During the first nine months of 2025 , Bernardo leased three point 7,000,000ft² overall , of which two point 8,000,000ft² was Manhattan office leading the marketplace in not only leasing volume during that period .
Speaker #6: We're also with the highest average rents in the city and with impressive mark to markets , excluding the one point 1,000,000 square foot master lease with NYU at 770 Broadway , the remaining one point 7,000,000ft² of leasing during the first nine months was at $99 per square foot .
Speaker #6: Average rents with mark to markets of plus 11.9% cap and plus 8.3% cash . This includes over 1,000,000ft² of leasing in Penn , one and pen two .
Speaker #6: During the third quarter , we executed 21 New York office deals totaling 594,000ft² at robust starting , robust starting rent of $103 per square foot mark to markets for the quarter were plus 15.7% cap and 10.4% cash , and the average lease term was more than 12 years .
Speaker #6: Michael and Glenn will cover specific tenants and deals in a few moments in the Pen district . Our pen at pen two leasing this quarter included 325,000ft² at average rents of $112 per foot in October , after quarter end , and not included in those leasing statistics .
Speaker #6: We completed two more large leases totaling 188,000ft² . We have now leased over one point 3,000,000ft² at Pet2 since project inception , putting us now at 78% occupancy and easily on track to hit and exceed our year end guidance of 80% based on signed leases and activity that we are seeing for the remaining space , we plan to increase our published projected incremental cash yields of 10.2% at year end .
Speaker #6: At Pen one , we least 37,000ft² during the quarter at an average starting rent of $100 a foot . Since the start of fiscal redevelopment of pen one , we have leased one point 6,000,000ft² .
Speaker #6: There at average rents of $94 at pen , we are handily exceeding both of our initial underwriting and our increased underwriting . It's clear that the tipping point for the Pen district , our three block long city within the city , is now behind us .
Speaker #6: Tenants and brokers are wowed by our transformation , which is reflected in our leasing activity . We sit on top of the nexus of Pennsylvania Station and the New York City Subway system , adjacent to our good neighbors to the west , Manhattan West and Hudson Yards .
Speaker #6: The three of us combined represent the new booming West side of Manhattan . As I said before , the ten district will be a growth engine for our company for years to come .
Speaker #6: With rising rents and future development projects at our Pen15 site , we are now responding to a request for proposals for substantial blocks of space .
Speaker #6: We are now well along in the planning process for a 475 unit rental residential building on our owned 34th Street site , catty corner to Moynihan Train Hall .
Speaker #6: We plan to begin construction next year . It is time and we will now transform the tired old May I even say junky retail on both sides of seventh Avenue and along 34th Street .
Speaker #6: That we inherited into attractive , modern and exciting retail offerings . This is the gateway to our Penn District and a transformation here will have a big impact .
Speaker #6: We also continue to add to our already impressive food offerings in the district with our newest restaurant , Avra . At the 33rd Street and ninth Avenue corner of the Farley Building , which recently opened to crowds and great reviews .
Speaker #6: The space is spectacular , sits right in the heart of the new West Side , and really ties us all together . Our new city office leasing pipeline remains strong , with more than one point 1,000,000ft² of leases in negotiation and various stages of proposal .
Speaker #6: We are growing in Manhattan and growing smartly . In September , we added to our prime pitch portfolio with the acquisition of 623 Fifth Avenue .
Speaker #6: This building , originally built to the highest standards by Swiss Bank Corporation , sits on top of Saks Fifth Avenue flagship store . Stores .
Speaker #6: Like a trophy on top of a podium . So our our lowest floor is the 11th , 175ft off the ground with 25 column free , 15 square thousand square foot floors above the location is pretty amazing , being merely a block west of both JPMorgan Chase's new heroic headquarters and our 280 Park Avenue , our 623 Fifth Avenue has unique light and air and views being set back from Fifth Avenue on the east side of the Saks landmark , with the cathedral to the north and the Channel gardens of the skating rink of Rockefeller Center to the west .
Speaker #6: The best in unique part of this deal is that the building is 75% vacant , with the few remaining tenants on relatively short leases .
Speaker #6: Ironically , the vacant building is a big plus . Let me explain . We will not be penalized by a gaggle of low rent longer term obsolete leases and will not have to wait five to 7 to 10 years for them to roll off .
Speaker #6: We will redevelop this building into the very best elite boutique office building , sort of the 220 Central Park south of office . We will begin to deliver space by year end 2027 .
Speaker #6: So in two years . Well , less than half the time it would take for a new build . And importantly , at half the cost .
Speaker #6: Here's the math . We acquired the building for $218 million , so $570 per foot . We will invest in another , say , $600 a foot in the development .
Speaker #6: So call it $1,200 a foot for the finished project , which will be every bit as good as a new build at half the cost .
Speaker #6: The team is budgeting 9% yield on costs for this project . I am pushing to crack double digits . There is high demand for and a shortage of this product .
Speaker #6: We couldn't be more excited . Over one point 8,000,000 square foot 350 Park Avenue . New build the Citadel as our anchor tenant and Ken Griffin as our 60% plaza continues right on schedule .
Speaker #6: The City Council unanimously approved the final year . And I did say unanimously , we will commence demolition in March 2026 . We remain very excited about the prospects for this new foster and Partners designed Best in class , one point 8,000,000 square foot tower , as is the brokerage and tenant communities .
Speaker #6: We are already getting incomings for spec space from clients seeking the very best and for whom our delivery date fits their needs . There hadn't retail market also continues to show a growing strength and the best spaces are at high demand .
Speaker #6: Again , tenants are recognizing that rents are moving up and availability is declining on the best streets and are beginning to approach landlords for early renewals to lock up their spaces .
Speaker #6: Importantly , we are achieving rents consistent with historical highs at our Times Square properties . We have the largest owner of signage in New York City with our unique cluster of premier signs in Times Square and in the Penn District , and that business continues to grow .
Speaker #6: Signage revenue for 2025 is projected to be our highest year ever . You should note that all of our signs are attached to buildings , which we own , which gives us perpetual control of unique , competitive advantage and the highest margins in the business .
Speaker #6: There was some news a couple of weeks ago regarding the loan on 650 Madison Avenue going into default, which I should comment on.
Speaker #6: We were a 20% of a group of institutional investors who purchased the 600,000 square foot building in 2013 with an $800 million non-recourse mortgage .
Speaker #6: The primary play was to capitalize on the below market retail rents and upgrade the retail tenancy . What would the retail apocalypse ? The fear that e-commerce would obliterate all physical retail and the pandemic .
Speaker #6: This didn't work out three years ago . In 2022 , we recognized this asset impairment and wrote the asset off entirely to zero .
Speaker #6: Bad stuff happens every once in a while , even to us . Three days ago , the court came down with a ruling vacating the arbitration panel's ten one ground lease rent reset .
Speaker #6: We were surprised and disappointed . We are optimistic that this will be reversed on appeal . Lastly , turning to San Francisco at our five by five California complex , arguably the best building in town , we continue to lead the market during the quarter , we signed 224,000ft² of leases at triple digit average rents and 15% mark to market .
Speaker #6: This includes the lease with new Wharton School for the cube . We said 2 or 3 years ago that San Francisco would recover , given that it is the capital city of the world's greatest tech and innovation centers , and that is what's happening .
Speaker #6: Thank you all . Now over to Michael .
Speaker #7: Thank you , Steve , and good morning , everyone . We had a very strong quarter as office demand in New York City remains robust .
Speaker #7: Third quarter comparable FFO was $0.57 per share , compared to $0.52 per share for last year's third quarter , beating analysts consensus by $0.02 .
Speaker #7: This increase was primarily due to higher FFO resulting from the NYU master lease at 770 Broadway and higher NOI . From our signage business , partially offset by Lower NOI due to asset sales and capitalized interest beginning to burn off at Penn two , we have provided a quarter over quarter bridge on page two of our earnings release and on page six of our financial supplement same store GAAP NY for a York business overall was up 9.1% for the quarter , while same store cash was down 7.4% .
Speaker #7: Let me explain. GAAP, which smooths everything, is more relevant to earnings given the cash numbers hit by free rent from the significant amount of leasing.
Speaker #7: In recent quarters , as well as the adjustment in cash rent related to the Penn One ground lease . Given all our activity to date this year , we now expect 2025 comparable FFO to be slightly higher compared to 2024 , comparable FFO .
Speaker #7: While we are still in the process of finally finalizing our 2026 budget as we've previously said , we expect 2026 comparable FFO to be flattish compared to 2025 .
Speaker #7: As we are anticipating some non core asset sales and taking income offline to effectuate the 34th and seventh retail redevelopment . As we indicated on our previous calls , we expect 2027 to be the inflection year and there to be significant earnings growth in 2027 as the full positive impact of Penn one and Penn two lease up takes effect .
Speaker #7: New York office occupancy increased this quarter to 88.4% from 86.7% last quarter , primarily due to leasing activity at Penn two , comprised of a 200,000 square foot headquarters lease with Verizon and new leases signed with FGS global and Pernod Ricard .
Speaker #7: If you factor in the additional 188,000ft² recently signed at Penn two , occupancy increases further . We continue to execute on our leasing pipeline and still anticipate that our occupancy will increase into the low 90s over the next year or so , while our retail occupancy also improved this quarter based on leases , we signed .
Speaker #7: You will note a further jump in occupancy resulting from taking the retail in Manhattan Mall out of services quarter . Turning to the capital markets , the financing markets for New York City assets are liquid , with CMBS spreads hovering at year to date lows , and even the banks are beginning to selectively return to lending on higher quality assets .
Speaker #7: The unsecured bond market remains robust and has become much more constructive for office credits , with new issue spreads , over 200 basis points tighter and all in yields over 300 basis points lower than 2023 .
Speaker #7: In the past quarter , we have been active in refinancing our near maturities and we have several other deals in the works . The investment sales market has also heated up significantly in the past few months as indicated by the many recent deal executions .
Speaker #7: The market is active for quality product irrespective of size , and there is ample liquidity in the debt capital markets to facilitate deals getting done .
Speaker #7: Capital sources have all types are beginning to return to investing in New York City office . Given the strong leasing fundamentals as we have previously discussed , focusing on delivering the balance sheet has been a priority for us since the beginning of the year .
Speaker #7: We have generated $1.5 billion in net proceeds from sales , financings and the NYU deal paid down $900 million in debt and increased our cash by $500 million .
Speaker #7: Our cash balances are now $1.15 billion , and together with our undrawn credit lines of $1.44 billion , we have immediate liquidity of $2.6 billion .
Speaker #7: Our net debt to EBITDA metric has improved to 7.3 times from 8.6 times at the start of the year , and our fixed charge coverage ratio , as expected , is steadily rising .
Speaker #7: We expect these ratios will continue to improve as income from Penn one and Penn two comes online . Please see page 23 of our financial supplement for detail .
Speaker #7: With that , I'll turn it over to the operator for Q&A .
Speaker #4: Thank you . We will now begin the question and answer session . If you have a question , please press star . Then one on your touch tone phone .
Speaker #4: If you wish to be removed from the queue , please press star then two . If you using a speakerphone , you may need to pick up the handset first before pressing the numbers .
Speaker #4: Once again , if you have a question , please press star . Then one on your touch tone phone . Each caller will be allowed to ask a question and a follow up question before we move on to the next caller .
Speaker #4: And up first , Steve Sakwa from Evercore ISI is on the line with a question . Please proceed .
Speaker #8: Yeah , thanks . Good morning everybody . I don't know , Glenn . Maybe you could just start . Obviously . Sounds very promising given the activity levels at Penn two .
Speaker #8: I guess I'm curious , how are you sort of changing kind of the leasing strategy with , I guess , only 20% of the building left , you know ?
Speaker #8: How are you thinking about tenants kind of in the pipeline and maybe talk about how rents are maybe changing for the remaining space ?
Speaker #9: Hi , Steve , I'm sorry . Changed . You heard the script . Average rent is quarter or $112 a foot of Penn .
Speaker #9: Two . So the rents keep moving up , up and up . We keep repricing the space almost on a daily basis . In terms of the remaining space , it's a lot of single floors , mainly in the tower .
Speaker #9: So if you're really good about that , confident in our approach , we have a lot of deals . You know , in the works right now , as we said in the script , you know , we expect to be at or above our 80% goal by the end of the year .
Speaker #9: And if you look at the tenant roster , the credit profiles excellent . The mix of industry sectors is really good . So we're pleased and we expect to continue that strategically .
Speaker #8: Okay . Thanks . And then maybe as a follow up , Steve , on your comments around 623 , you know , how do you sort of approach the leasing of that building ?
Speaker #8: Is that something that you'd sort of start to pre-lease , or do you , you know , kind of wait till early 27 till there's more of a product to show people ?
Speaker #8: I mean , how do you sort of think about the timing of that and the rents for that building ?
Speaker #6: Hi , Steve , how are you ? We're going to do that pretty much on the same path as we did two , 220 Central Park South at 220 Central Park South .
Speaker #6: What we did was we had complete designs and they were spectacular . Knockout designs . as we started construction . And we did an awful lot of selling of 220 from those designs .
Speaker #6: What we did was we had complete designs and they were spectacular . Knockout designs . Even Our objectives are to make it the most interesting high end boutique office in the city .
Speaker #6: We're going to do very much the same at six , two , three Fifth Avenue . So we're going to get it designed .
Speaker #6: And once we get that done , we'll then we'll go into the market with very high aspirations .
Speaker #8: Great . Thank you .
Speaker #6: Thank you .
Speaker #4: And up next is Floris Van Dyke with Lundberg . Please proceed .
Speaker #10: Hey , guys . Thanks . Thanks for taking my question , Michael . Maybe this is for you . I was trying to get a sense of what is your current signed ?
Speaker #10: Not open pipeline in terms of , you know , basis points and then also in terms of of dollar value , if you can give us a sense of the scope of rents that are going to come online over the next two years .
Speaker #7: Good morning . I don't I don't know if I follow you on the basis points . I think Steve , in his opening remarks , sort of alluded to , you know , a couple of hundred million dollars sort of in the bag over the next , you couple of years or so .
Speaker #7: And , you know , I think when we looked at our sign , not commence number , you know , that's that's that's what that is .
Speaker #7: Right . So and we've talked about what the ramp is when the bulk of that , you know , comes in in 2027 , there'll be a little bit next year .
Speaker #7: But the bulk is really 2027 . And it'll slip over into 2028 . But you know Steve's comment on on that couple hundred million dollars I think is a pretty good proxy .
Speaker #10: Just to just to make sure a couple hundred million is that is that 200 million or is that 300 million .
Speaker #7: That's let's , let's , you know , we're still finalizing let's use more of the 200 right now . Okay . In terms of the over the next two , two years or so .
Speaker #10: Okay . Fair enough . But but in terms of percentage , do you have the percent that the difference between what's occupied and what's what's actually leased right now ?
Speaker #7: You're talking from a physical versus a what's online ? I mean , you know , I think the occupancy numbers we give you are what's reflective of actually what's been signed .
Speaker #7: Yeah . Right . So that's those are those are signed leases . Not all those tenants are in place yet . I can't tell you what the physical is relative to that .
Speaker #7: We'd have to come back to you on that .
Speaker #10: Okay . And maybe .
Speaker #11: You know .
Speaker #7: That gap rent is not started yet . On on many of those leases , right ?
Speaker #10: Right , right . And that's that's the that's the , you know , more than 200 million that's coming online . My follow up , if you don't mind , I was just curious on you talk a little bit about or Steve talked a little bit about the the billboard business being at record high .
Speaker #10: Can you talk a little bit about the opportunity that you have in the Penn District ? Because I believe you own 100% of that , as opposed to the Times Square , where you're in a JV .
Speaker #10: How much room do you see to expand that ?
Speaker #7: You're right . We do own 100% of of all the signs in the Penn District . And I think what's unique about the Penn District relative to Times Square , which , you know , Times Square is still , you know , probably the most important signage marketplace in the country .
Speaker #7: Maybe the world is , you know , we own the dominant signs there , too , you know , in that , in that retail joint venture .
Speaker #7: But you know , at Penn , we because we we basically control the district , you know , other than I think one sign , you know , we we have all the signs .
Speaker #7: Right . And so that allows us to market them in a variety of ways . You know , we can we do I think when you were over there recently , you know , we can market one by one .
Speaker #7: We can market entire takeover where you can take over the district for a period of time , different , different slice of of an hour or something more extended .
Speaker #7: So , you know , it allows us to optimize the income . We can drive out of that . Historically , I think if you look over an extended period , you know , the signage business kind of goes up 4 to 5% a year in terms of revenue .
Speaker #7: Some are some years are greater , some years are lesser . But I think it's a decent , you know , annual run rate .
Speaker #7: And , you know , when you when you put a new sign in , you know , the payback period is pretty quick .
Speaker #7: You know , 12 , maybe 18 months max . So , you know , we continue to see organic growth just coming from , you know , revenue naturally going up , you know , every year as it's historically done .
Speaker #7: And then , you know , there's probably a little bit of signage we can add as we are definitely some signage , we can add as we as we build , you know , additional buildings in the district over time .
Speaker #7: But that'll , that'll take some time . So , you know , there'll be there'll be some , some signage that comes back online next year .
Speaker #7: And at the same time, you know, we're going to rebuild a different sign. So that sort of cancels each other out.
Speaker #7: But you said very , very healthy business . That tends to have pretty steady growth . You know , if you if you look at it over a period of time , what I tried .
Speaker #6: To do in my remarks was to talk about the strategic benefit that we have in that , in that business . So the first thing is , is that we all clusterings in exactly the right place for signage .
Speaker #6: Times Square and , and , and the Penn Station area , the fact that we own the buildings and the signs are attached to us , we don't have leases , we don't have the expensive leases , we don't have the renewal risk of leases .
Speaker #6: So basically , we have perpetual control over this inventory . So that's the first thing . The second thing is , is that because of that , we have the highest margins .
Speaker #6: So we have the best signs and the best districts in quantity . And that creates a very important strategic business at Times Square .
Speaker #6: You know , we have our we have obviously we have the best , the two best blocks on the bow tie . We have the best signs .
Speaker #6: And so that's fine . In Penn Station , I don't think that we've scratched the surface to the amount and quantity of signs that we can develop .
Speaker #6: There .
Speaker #10: Thanks , Steve .
Speaker #6: Thank you .
Speaker #4: John Kim from BMO Capital Markets is up next with the next question . Please proceed .
Speaker #12: Thank you . I wanted to go on the the commentary of flattish earnings in 26 , which I think you pushed out a little bit last quarter .
Speaker #12: But it seems like it will be impacted by non-core asset sales . So I was wondering if you could talk about the timing and the dollar amount of those dispositions , and also what you think the trajectory of occupancy will be next year ?
Speaker #12: I know , Steve , you mentioned in the past that it would it could go to the mid 90% range . And I was wondering how next year shapes up .
Speaker #7: Morning , John . Hope you're well . You know , flattish 26 . You know is I think we've been consistent last couple quarters in terms of 26 and 27 .
Speaker #7: You know , in terms of the magnitude of non-core sales . You know , I can't be specific on that because , you know , there's a number of things that could drive that .
Speaker #7: But , you know , I would say it's it's at least in the , you know , 250 , $300 million neighborhood . It could be it could be , could be more than that , you know , in timing , you know , just depends on when we execute on those .
Speaker #7: So I can't give you much more specificity just because , you know , you're dealing with counterparties and things take a little time and you know , some things are still on the drawing board .
Speaker #7: But but you know , I think by middle of the year , my guess is , you know , much of that is probably done .
Speaker #7: But but again , you know , we we've got a track record of , you know , certain things we hadn't planned . We end up executing on and you know , and that may well happen again , you know , on the trajectory of occupancy .
Speaker #7: Look , I think as we look at , you know , Glenn's pipeline , you know , I think there's a reasonably good probability we're going to get to 90% in the next quarter or two , you know , and then beyond that , you know , we'll continue to build occupancy .
Speaker #7: And , you know , we think over the next couple of years , we'll get that , you know , into the , you know , back to sort of the historical levels , you know , whether that's , you know , 94 , give or take , you know , but if not higher .
Speaker #7: So I think , you know , as we sit here today , that's probably , you know , as much specificity as I can give you .
Speaker #12: Okay . And then my follow up is any insight you can provide on the Penn Station transformation project , how involved Vornado will be as part of it , if there's any impact to commercial development opportunities going forward and any views on whether or not MSG will will relocate .
Speaker #6: So I think that it's highly unlikely to impossible . MSG is going to relocate . So that's step one . So with respect to the .
Speaker #6: The the Penn Station project , we are absolutely in favor of anything that makes Penn Station and the Penn District better , more user friendly , more transformational .
Speaker #6: It's the that's the best thing that the best thing for us is constant improvements . And the fact that the government is involved now with with a large budget , that's a very good thing .
Speaker #6: We will be involved in the process of with one of the bidding groups , primarily with respect to the retail that we dominate in the station and in the surround there .
Speaker #6: You have anything to add to that ? No , thank you . But we're rooting this process of improving Penn Station . We are the biggest rooters for that , that there are .
Speaker #4: And Dylan Brzezinski with Green Street is our next question . Please proceed . Hi guys .
Speaker #13: Thanks for taking the question . I guess just sort of given the significant demand backdrop that you guys are seeing , obviously continuing to push rents across the pen district , I know one of your peers , when they report earnings , talked about , call it a 20 to 25% cumulative net effective rent growth expectations over the next 4 to 5 years .
Speaker #13: So just wondering if you can sort of put any of your thoughts around that ? I mean , you guys are expecting sort of significant rent spikes as space continues to get tight , especially for , you know , the quality of you guys portfolio .
Speaker #7: Like Dylan , I think , you know , 20 to 25% over 4 to 5 years , I think we'd be disappointed if it's not quite a bit more than that .
Speaker #7: Look at all the dynamics . .
Speaker #6: Agreed , agreed .
Speaker #7: Okay . You mean you look at all the dynamics in the marketplace ? And I think this is as favorable to backdrop as we've had in decades .
Speaker #7: Right ? There is scant supply . The demand is broad based and very strong . You know , companies are expanding here . And , you know , there's just and the vacancy factor , I mean , it's I think Steve referenced it in his opening remarks .
Speaker #7: You know , the better buildings in in Midtown . You know , we're now talking about 6% vacancy . That's almost frictional . You think particularly on large spaces .
Speaker #7: So I think that's going to result in two things . I think one , you're going to see renewal probabilities start to go up in the next , you know , two , three years because there's just no no place for a lot of those companies to move to .
Speaker #7: And then secondly , you know , to to rent space , you know , it's it's , you know , it's become a landlord's market , as you said .
Speaker #7: So you know , when these when these cycles happen , if you look in history , you know , it can go up 15 , 20% in a year .
Speaker #7: Now I'm not telling you what's going to happen . It could happen . It's not a 0% . But we think we think that the probability of the numbers you talked about is much higher on the upside than the alternative .
Speaker #6: You know, there's another way to look at this also, and that is the elasticity of demand on the part of the marketplace.
Speaker #6: And our customers . So not that long ago , $100 was a top , top , top tick . Rent because of the increase in costs , because of the shrinkage of supply , because of the increase in interest rates , rents like overnight when into the mid hundreds of dollars a foot or something like that .
Speaker #6: Interestingly , we found that there was no pushback from the marketplace . If a customer , a growing , expanding , important client needed the space they paid what it took to get the space .
Speaker #6: So what I'm saying is , is that the marketplace is able to pay for the space and the dynamics of the marketplace will will determine what the rents are .
Speaker #6: But clearly the rents are going to go up and we think they're going to go up . Obviously , we think they're going to go up more than you do .
Speaker #13: That's helpful commentary . I really appreciate that . Maybe just one more . If I could . You guys mentioned non-core asset sales , and I know you guys didn't give a number , but as you guys sort of think about redeployment of that proceeds , I mean , is it is it likely to go into asset acquisitions ?
Speaker #13: You guys going to hold it to De-lever ? Just sort of curious plans with that capital that you guys expect to come in next year .
Speaker #6: Good .
Speaker #7: You know , I think it could go into a number of places . Dylan . Look , if you look at what we've done to date , whether it's non-core or gentle asset sales , which has been quite significant .
Speaker #7: You know , we've delivered the balance sheet meaningfully at the same time , you know , we made a we think a very attractive acquisition .
Speaker #7: And that's not something that we program . Right . We don't we don't sit around here in our council rooms saying we're going to buy X amount per year .
Speaker #7: You know , if we find the right opportunity , we'll act on it . If not , we're perfectly content to , you know , buy our time until the right thing comes along .
Speaker #7: So , you know , I would tell you that that as we look at , as we look at capital , you know , we're going to continue to strengthen the balance sheet and we find something compelling externally .
Speaker #7: Obviously , we'll look at that . We have some internal capabilities or requirements . You know , in terms of we've talked about developing the residential .
Speaker #7: We've got 350 Park in the out years . So you know we have a number of uses . And by the way , and you know let Steve jump in here as well .
Speaker #7: I mean our stock still we think trades at a huge discount . So I think everything's on the table .
Speaker #4: And our next question will come from Alexander Goldfarb with Piper Sandler . Please go ahead . Hey .
Speaker #14: Good morning . Good morning . Steve . So two questions . You definitely piqued my interest in 1015 that their conversations ongoing . Would you say that the tenants that you're speaking to are willing to pay the rents necessary for you guys to go forward on an economic basis or are they not quite there at where rents would need to be ?
Speaker #6: Oh , God , I don't know how to answer that clearly , there are there are a significant number of anchor type tenants who are in the marketplace that are looking for new builds .
Speaker #6: We're not the only opportunity . There are other . There are other opportunities . All of us need approximately similar rents to have an economic build , new build and the the tenants that we're talking to , they understand the math .
Speaker #6: They're advisors and and brokers understand the math . So the rents are available . It's just a matter of of making making a deal , having a tenant select the site , etc.
Speaker #6: .
Speaker #14: Okay . And then the second question .
Speaker #11: Is .
Speaker #6: Alex , what I'm saying is this is not just kicking the tires . This is serious business .
Speaker #14: No , no , that that I understand . It's just the size of the building . Like these are big rent checks . Yeah .
Speaker #14: It's not like the like at the Saks Tower or some of the boutique buildings that are being , you know , undertaken , I mean , 2 million plus square feet .
Speaker #14: Those are big rent checks . So that's why it's just impressive that tenants are willing to actually engage because that's that's serious . That's a serious , you know , rent , as I say , we the .
Speaker #5: We agree .
Speaker #14: Second question is on the litigation on the Penn , you know , the courts can drag things out forever . People appeal appeal and lawyers love to run up the the meter .
Speaker #14: So the two part question on this is one , are you guys booking the economic impact based on , you know , sort of the , the most punitive and second is that when you say that the yields on the Penn District have improved is that at what you think the ground rent should be or at the sort of the worst case scenario in the in the ground rent ?
Speaker #6: Well , the first thing is the Penn two yields have clearly increased dramatically . The Penn one yield . We're pretty happy with what we projected with respect to the litigation .
Speaker #6: What had been a known number is now a is now subject to some uncertainty in our minds . We have parameters around that .
Speaker #6: We are booking . We are booking a number which we think is a realistic number , and we will see . But with respect to this litigation , I don't really have a lot to say about it .
Speaker #14: Understood . Steve understood . Listen . Thank you .
Speaker #6: Thank you Alex .
Speaker #4: And our next question will come from Liana Gillan with Bank of America . Please go ahead .
Speaker #15: Thank you . Good morning . Maybe another one on dispositions following up on your prior comments on the willingness to maybe part with five , five , five California or the Mart .
Speaker #15: Anything you can share on the amount of incoming interest and and or valuation or given the improvements in San Francisco , are you thinking differently strategically about those assets ?
Speaker #6: Not really . I thought we were pretty clear in sort of how would I say it subtly advertising those two assets last quarter ?
Speaker #6: We don't have very much to talk about in terms of specific pricing or values or whatever . I can tell you that we think that the 555 California complex in California is the eighth wonder of the world .
Speaker #6: As you can see from our our remarks and our documents , the leasing , their is extraordinary . Even going back a year or two in a in a , in a chaotic declining market , the the rents that we were able to get for that unique best in the marketplace building were rising .
Speaker #6: So we we think that that's a great asset . We're delighted to own it . And for the right price . We're delighted to sell it .
Speaker #6: And I think I'm , you know , I'm pretty well known as not being an easy seller with respect to Chicago . That's a different story .
Speaker #6: The market there is not as strong . And if opportunistically , we'll see what happens .
Speaker #15: Thank you . And then just in terms of developing future residential , just curious , your thoughts around for sale versus for rent components given kind of different changes going on in New York City ?
Speaker #6: Oh boy . We have multiple land pieces , land that we could build either office or residential . We do the math and the analytics as to which is more favorable .
Speaker #6: Constantly we are putting our big toe . Actually , we're putting our whole foot up . Up to our ankles , into doing a form in 75 unit rental project rental project not for sale project at the corner of 34th Street and eighth Avenue .
Speaker #6: We think it's a very good site . It's catty corner to catty corner to the Moynihan Train Hall , and it also benefits for all of the renewal that we're doing in the neighborhood .
Speaker #6: So we're excited about that, and we'll see how that goes. We'll make decisions going forward.
Speaker #15: Thank you .
Speaker #6: Thank you .
Speaker #4: And our pieces of next question will come from Seth Bergey with Citi. Please go ahead.
Speaker #16: Thanks for taking my question . You mentioned in the opening script , you know , easily exceed the 80% in the one point 1,000,000 square foot leasing pipeline .
Speaker #16: I believe , you know , how is that leasing pipeline kind of split between Penta and other leasing and kind of where do you think that 80% could kind of land by year end ?
Speaker #9: Hi , it's Glenn . So the 80% is specific to Penn two . I just want to make sure you're clear on that as it relates to the pipeline .
Speaker #9: It is generally 50/50 in the Penn District versus others in our pipeline right now, which is generally the balance we've been able to achieve quarter to quarter as we've been on this big leasing run over the past bunch of quarters.
Speaker #9: So basically 5050 .
Speaker #16: Okay , thanks . And then as a follow up , you mentioned that it's highly unlikely or implausible for MSG to relocate . You know , how do you kind of see the permitting process playing out just , you know , with your knowledge of kind of how you know , that process works in New York and then , you know , do you see that kind of creating any additional opportunities for Vornado , kind of outside of the Penn Station transformation ?
Speaker #7: Like , I think Steve talked about this a bit , right ? That the government is , you know , they've issued an RFP and they're going to run a select a group to to redevelop and complete the remainder of Penn Station improvements .
Speaker #7: You know , we expect there'll be a retail component in that , which is our interest . But our main interest is , is Steve said , being a a cheerleader for something getting done because that endures to the benefit of our holdings .
Speaker #7: There . So , you know , look , they've issued the RFP . You know , we're being told that they'd like to start the project by the end of 27 .
Speaker #7: And , you know , from there , assume it'll take , you process to know , you know , a couple years to get done .
Speaker #7: But we'll see . We'll see whether the timeline sticks . But that's that's generally what we've been told .
Speaker #16: Great . Thanks .
Speaker #4: And our next question will come from Michael Lewis with Truist . Please go ahead .
Speaker #17: Thank you . So I apologize I'm going to ask a question that was asked earlier , but ask it a little differently . The New York portfolio is 87.5% occupied .
Speaker #17: So I take that to mean there's a tenant in there paying rent . How much of the New York portfolio is leased ? Is it close to 90% of the space that's leased ?
Speaker #17: Is it is it less than that ? Is it more than that ?
Speaker #7: No. The occupancy figure we gave you is what is leased.
Speaker #17: Okay . I understand that . So . I guess that speaks to , you know , has there been any change in free rent period .
Speaker #17: So , you know , a lease that's already signed but not paying rent until 2027 ? Feels a little long to me . But you have you sometimes have very long leases , so maybe that's not long at all .
Speaker #17: Has there been any movement in , you know , free rent or other concessions ?
Speaker #9: Hi , it's Glenn , so there's been movement in two ways in that regard . One is downtime is less . So companies are making decisions much more quickly than they were previously , which is important .
Speaker #9: And then once that happens , the free rent periods are declining . So I would say downtime is lower and free rent is lower as it relates to your comment .
Speaker #9: You're right . A lot of our leasing has been 15 to 20 year deals , which is why you're seeing free rents longer than you might have otherwise on , you know , 5 to 10 year leasing .
Speaker #9: But certainly on balance , downtime , free rents coming down as the market improves .
Speaker #17: Okay . So good to see that moving in the right direction , as you might expect . And then lastly , for me , this is a small one .
Speaker #17: But in going from FFO to FFO as adjusted , I saw there was a there was 6.7 million of other looks like gains that were backed out .
Speaker #17: I was just curious. It's a few pennies, but I was wondering if there was anything interesting or notable in that $6.7 million of other that was deducted.
Speaker #17: And get into your core FFO .
Speaker #5: Yeah , it's made up of .
Speaker #9: Several items I can .
Speaker #18: Get you to list offline if that's something you want me to follow up on.
Speaker #17: That's okay. If it was nothing, nothing material that stood out, I was just curious.
Speaker #7: Material .
Speaker #17: All right. Okay. Thank you.
Speaker #7: Thank you . Michael .
Speaker #4: And our next question will come from Vikram Malhotra with Mizuho. Please go ahead.
Speaker #19: Morning . Thanks for the question . I guess just maybe , Michael , if you could just remind us , you've talked a lot about the flattish FFO , but do you mind just going over some of the big sort of building blocks you've shared in the latest on those ?
Speaker #19: Just as we think about kind of the big puts and takes that get you to flat . For next year .
Speaker #7: Yeah .
Speaker #11: Like .
Speaker #7: Yeah , yeah . It's you know , I think I referenced a couple of things . Right . We've got . Some income .
Speaker #7: We're taking off line . You know Steve referenced the retail redevelopment on 34th and seventh . We're going to take a little bit of signage on offline to rebuild .
Speaker #7: One of the signs , which we think will produce greater returns . You know , once that's back online . But , you know , it'll probably affect us for four months , you know , next year .
Speaker #7: You know , we've got we talked about , you know , some asset sales that are producing FFO , but you know , assuming those will those will get sold in the first half of the year .
Speaker #7: Most likely or certainly for the end of the year . So get all that has a has an impact on FFO . At the same time , you know , we've got other items that are that are positive , which gets us sort of flattish .
Speaker #7: And , you know , the big growth is , you know , in 27 where , you know , we've got significant income .
Speaker #7: I mean , like it's signed , right ? We know everything that's talked about on Penn two that , you know , probably everything outside of major MSG won't really started to a large extent until .
Speaker #7: Back end of 26th . And really in 27 . Right . So you're going to see significant growth in 27 . But we don't really get the benefit from that on a GAAP basis .
Speaker #7: In 26 . And I think the same goes for a number of the other vacancies . You know , we've had a lot of success backfilling the 1290s and two 80s and so forth .
Speaker #7: And some of that’s hit, you know, but a lot of that won’t hit until the end of the year of 2026 or 2027.
Speaker #19: Okay . And then I just wanted to understand sort of the , the comment you made about rents and you'd be unhappy about a lot more rent growth than was referenced , but , you know , we used to talk a decade ago about how many leases signed were $100 rents or more .
Speaker #19: Now in multiple pockets , we're talking $200 rents . And I want to take that Fifth Avenue acquisition , maybe as an example , but just your perspective on what are the pockets where you can sustain and types of buildings where you can see those $200 rents and then similar to the Fifth Avenue acquisition , like , is there a pipeline of assets you're exploring with with similar unique opportunities like that for Vornado ?
Speaker #9: Hi , it's Glenn , I think what Steve was referring to think about what's happening quarter to quarter . We have been printing on average $100 average rents across our activity , very strong in the market .
Speaker #9: There are deals being printed in the newer stock at one 51 , 75 , 200 . So there's a lot of runway for us from here forward in our existing portfolio .
Speaker #9: So we think those $100 numbers are going to go up, up, and up as the market continues to strengthen, which we're very confident is going to strengthen.
Speaker #9: Already seeing that , as you can see from some of the things we've said this morning about our average rents , 623 is a great example of of what we really believe is going to happen .
Speaker #9: That's that's a five star building . We're going to make it great . There'll be nothing like it in the market . It is perfectly located .
Speaker #9: In order to achieve rents , you know , higher into those ranges for sure . We're already getting great tours , great responses from the marketplace .
Speaker #9: So that is definitely an example of where you'll see higher rents in our portfolio . So .
Speaker #6: The the tightening of the market creates multiple benefits . As you can imagine , rents will rise . And we're not going to greedily push rents .
Speaker #6: We just follow the market . We don't make the market . We're important in the market , but we don't make the market .
Speaker #6: So rate rents will rise and then inducements will come in . So I don't know , and I don't think Glenn agrees . Or is projecting that tenant improvement allowances , which is money they use to build their space , is going to come in because the cost of building the space is not coming in .
Speaker #6: But for sure , free rent is going to come in . Free rent is very important . And and it could come in a lot .
Speaker #6: So those are all very constructive. I want to spend a minute on 6 to 3 Fifth Avenue for a second. Think about the math.
Speaker #6: So I've already said that that we're budgeting at least a 9% return on cost unleveraged on that asset and that we're going to deliver that asset , you know , in the next two years to a waiting and prime marketplace .
Speaker #6: It's going to be the best asset, the best building. And there's a shortage of supply in that. We're already getting indications from the marketplace that it is in short supply.
Speaker #6: So, if you take $1,200 a foot times an almost 400,000-foot building, that gives you the better part of $500 million of cost on that building.
Speaker #6: If we can achieve what I think , which is 10% return , you can calculate what the what the what the the income will be .
Speaker #6: Now , what's the exit ? What's the value ? I believe that an asset of that quality in this market will be , will will have an exit value , let's say in the 5% cap rate .
Speaker #6: So if that math turns out to be correct, we will double our money on that asset in a very short period of time.
Speaker #6: And this is not that hard . The key to it is , is we have to turn that asset into something that's unique in the marketplace , which is exactly what we did with 220 Central Park South .
Speaker #19: Great . Thank you so much .
Speaker #4: And our next question will come from Nicholas Yulico with Scotiabank . Please go ahead .
Speaker #20: Thanks . Yeah . Just I guess going back to the , you know , the FFO flat commentary for next year . Michael , can you can you just maybe touch on interest expense and how to think about that trending next year ?
Speaker #20: And , you know , capitalized interest burn off ? I don't know if that's also something we should be thinking about for next year .
Speaker #7: I think a lot of the capitalized interest has will have burned off by next year . There might be a little bit left , right , but not a lot .
Speaker #7: I mean , Tom , you want to give specifics on that .
Speaker #18: Yeah . So on the capitalized relates to pen two , that's obviously going to burn off . But keep in mind 623 Fifth Avenue and 350 interest as it Park when that comes off line , both of those will have capitalized interest .
Speaker #18: So you won't really see 26 as compared to 25 . But pen two would obviously be burning off .
Speaker #7: I don't think it's that meaningful in 2016 with respect to 350 . And there's a difference relative to this year . 623 is obviously a new one .
Speaker #7: So , Nick , there was another part of your question .
Speaker #20: No , I mean , like at a high level , if there's a way to think about , you know , capitalized interest as a , you know , is it a is it flat next year ?
Speaker #20: Is it , you know , net it comes down a bit and that , you know , weighs on interest expense next year .
Speaker #7: Yeah , I would say it's probably going to be higher principally because of 623 . And yeah that's shifting in the it's going to be higher because of the items that Tom mentioned .
Speaker #7: But but you know net net , I would say the principal difference will be from 6 to 3 . The the interest expense overall .
Speaker #7: You know , I think we generally hit assuming , you know , the forward curve is , is accurate . I think , you know , it's it's either peak or close to peak of where we're at .
Speaker #7: You know , we absorb some pain over the last , couple of years ago , you know , we're now rolling over a lot of debt generally when you sort of blend it all together at same or lower rates , you know , sofas coming down , you know , we've deleveraged .
Speaker #7: So , you know , even when there's higher coupons , we've got , we've got , you know , given the fact we've got less aggregate debt , you know , the overall interest expense line item , you know , is certainly no worse than flat .
Speaker #7: So you know , we'll see . Depends on how we deal with some of our upcoming maturities in 26 . Whether we pay those off , whether we pay them down , whether we just roll them over , you know , all that will factor into what the interest expense is for 26 .
Speaker #7: But but I think just in terms of , you know , the impact from rates , I think , you know , it feels like the worst is behind us on that front .
Speaker #20: Okay . Thanks . It's helpful . And then .
Speaker #11: Just .
Speaker #6: While we're on the topic of balance sheet , I think you have to we all have to focus on the fact first . I am unbelievably proud of what our organization has done over the recent past in terms of getting our debt ratio down from much higher into the eights and now into the sevens .
Speaker #6: Heading into even lower . So that's number one . Number two is is the I'm also extremely proud that we pre-funded all of the massive development that we're doing at Penn and loaded in our balance sheet a couple of years ago , getting all the cash .
Speaker #6: So so that we had the capital already on balance sheet to complete our massive development program . Number three is , is that we did all that keeping the major Penn assets unencumbered .
Speaker #6: So that we have a huge source store of value . There in the future . So I think that we are that I think Michael and his team and maybe me a little bit , Glenn , a little bit even Barry a little bit .
Speaker #6: We get a gold star for how we've managed our balance sheet and we're not done with that yet .
Speaker #20: Okay , thanks . And then just the second question is , you know , maybe any latest thoughts you can share on Farley ?
Speaker #20: You know , as you're thinking about as a source of capital , whether it's putting a loan on the asset or selling an interest in the building for , you know , to create some funds for some of the future development capital .
Speaker #20: You're talking about . Thanks .
Speaker #6: Well , Farley is a unique , unbelievable , interesting asset . It's a double block wide space . It's one of the very few blocks in Manhattan that is double wide .
Speaker #6: It's . We leased it in the middle of Covid to all of it . 730,000ft . I think it's meta . The feedback that we get from meta is they think it's like the single best of their real estate installations in the country .
Speaker #6: Probably just second to Menlo to the Menlo Park headquarters . The lease has probably another 1112 years to go . The 12 has 12 years to go .
Speaker #6: There's an option to renew at market . So if we were to compare what what the what the incumbent rent is to what we think market is now versus what we think market will be at the expiration of that lease .
Speaker #6: It's very , very , very significant . So that's a fact based upon that fact , we would not consider selling that asset or selling a piece of that asset .
Speaker #6: Now chronically , it's interesting . We did an analysis of this recently . We basically don't do lots of partner deals based upon capital .
Speaker #6: We do some partner deals based upon , you know , if somebody controls the site or we do something together in the real .
Speaker #6: So we do real estate partnerships . We don't really do capital partnerships , although we think about it . So the the Moynihan that you're the Farley that you referencing , we think it's nationally on the market .
Speaker #6: We think the future of it is great . We think it's the unique piece of space . We would never we would not consider selling it , nor would we consider taking it apart .
Speaker #6: Financing it is a whole different story because , you know , you're basically just borrowing money on the credit of the tenant .
Speaker #20: Okay . Thanks , Steve .
Speaker #6: Yep . Thank you .
Speaker #4: And our next question will come .
Speaker #11: From Alex .
Speaker #6: Alex , I got a note from you . Very generous . Thank you . What's next ?
Speaker #4: Our next question will come from Ronald Camden with Morgan Stanley . Please go ahead .
Speaker #21: Hey , just two quick ones sticking on the 2026 . If I can ask about same store on Hwy . I mean , I think on the cash basis , it sounds like there was the reset this year .
Speaker #21: There was some free rent , presumably some of that burned off in 26 , maybe a lot in 27 . So just mechanically , same store .
Speaker #21: And why is it somewhat positive next year ? And then really positive in 27 . Or how do we think about that .
Speaker #7: You're talking on the cash front .
Speaker #21: On the cash basis . Yep .
Speaker #7: Yeah I think like gap we still think will continue to be positive cash just given the timing of the free rent whatnot . I think it's towards the end of 26 that that'll turn positive .
Speaker #7: And then obviously significantly . So in 27 great .
Speaker #21: And then the my second one is just just adding to the dispositions questions maybe . Can you talk about sort of the hotel Penn site and maybe even sort of more retail monetization .
Speaker #21: Just what's the interest and how are you guys thinking about those ? Thanks .
Speaker #7: The hotel Penn site , we don't have any plans to dispose of that . That's the that's the Penn 15 . Development that Steve mentioned .
Speaker #7: The script and talked about . And here's some of the incoming tenant interest . But that's a that's a long term hold . And you know well , you know unbelievably well located across from Penn one and Penn two core holding .
Speaker #7: You know on the retail side you know we obviously sold Uniqlo there . They're their store . And I would say the interest from retailers to purchase assets .
Speaker #7: You know , remains actually pretty strong . I would say generally , you know , we're seeing very good activity across the portfolio , retail wise .
Speaker #7: And , you know , Times Square feels like it's it's picked up , you know , quite a bit here recently . So good demand there .
Speaker #7: Good demand . Times Square obviously we've been active in Penn . And you know tenants are really responding to everything we've done at Penn One Penn two , which is going to lead into our redevelopment on 34th and seventh .
Speaker #7: But you know retailers you know , understand the dynamics , the market tightening as well , which is why they're approaching to renew early in many cases .
Speaker #7: And I would say in some cases looking to potentially buy the space there in or look to buy another space . So , you know , I think you'll , you know , like it's been episodic , you know , you can point to a few things a couple of years ago , you can point to a couple major transactions recently on the retail side , I think we'll continue to see those .
Speaker #7: And , you know , we're we're open to being a participant in that . To the extent that we get rewarded with the right value .
Speaker #7: So , you know , stay stay tuned . And , you know , maybe , maybe something will occur there in the future .
Speaker #7: While we're on .
Speaker #6: The topic of retail on 34th Street , but let me just say a little more color around it . So on 34th Street , both sides of Seventh Avenue and then down Seventh Avenue to 33rd Street is basically now populated with retail that we inherited , which is really I used the word in my script lovingly .
Speaker #6: Junk . We are in the process of cancelling all those leases . We will . Basically redevelop all of that space into modern , exciting , sought after retail offer .
Speaker #6: Obviously trained at our office occupiers and the market . Now the 34th Street and seventh Avenue corner and . Has been historically the second or third most active subway station in the city , in the city and the whole city .
Speaker #6: 34th Street . Not that many years ago was the second best shopping street in the city . It has deteriorated over time . We intend to bring it back and we think bringing it back , bringing it back is .
Speaker #6: Not a difficult thing to do . Macy's , which is across the street , fluctuates in volume , you know , close to $1 billion .
Speaker #6: And it goes down , goes up . But it is clearly the highest volume department store in the United States . So we like the we like the real estate , the real estate has deteriorated .
Speaker #6: We're going to rejuvenate the real estate in addition , that's the that's the gateway to our entire Penn district . So we think it's very important .
Speaker #6: And we think it will have an enormous effect on the Penn District overall values .
Speaker #21: Helpful . Thanks so much .
Speaker #6: Pardon me for advertising. Just a little bit.
Speaker #4: And our next question will come from Brendan Lynch with Barclays . Please go ahead .
Speaker #22: Great . Thanks . Just one question from me . Follow up on the Penn Access project . And bringing Metro-North into Penn , specifically .
Speaker #22: It's been delayed . It seems there is a coordination issue between Amtrak and the MTA . To what extent are you involved with the various government agencies , and is there any prospect of getting that project timeline back on track for completion prior to the current 2030 target , or even preventing it from slipping further ?
Speaker #6: Barry Langer will take that question . And then and then Michael and I'll ad lib .
Speaker #23: So as you can imagine , we're intimately involved with the MTA through all of our work around Penn Station . Great partnership there .
Speaker #23: If you speak directly to the MTA , what you'll hear is that they plan on running service on Metro-North starting in 2027 , utilizing the existing two tracks that already connect Penn Station straight up through Westchester to Boston .
Speaker #23: The part that was delayed is the construction of the four new stations in the Bronx and adding two new tracks , which allows them to run express service .
Speaker #23: So we expect that service will begin in 2027 . On the New Haven Line into Penn Station .
Speaker #22: Great . Thank you .
Speaker #4: And at this time , there are no further questions remaining in queue .
Speaker #6: Thank you everybody . We actually are very proud of the results that we delivered this quarter . In terms of the scale of our leasing and the price , the rental rates and the value creation , the occupancy is is easily going to be over 80% this year in Penn , two .
Speaker #6: And we think we had a great quarter . We're very proud of our balance sheet activity , and we . Love , love , love the 6 to 3 Fifth Avenue acquisition .
Speaker #6: So with that , with that advertisement , I'll sign off . We and we we are excited to talk to you again episodically .
Speaker #6: And also in the fourth quarter . Thank you .