Alexander's, Inc.

Q3 2021 Earnings Conference Call

11/2/2021

spk_0: good morning and welcome to the or nato realty trust third quarter new thousand and twenty one earnings call my name is vanessa and i will be or operator for today's call this call is being recorded for replay purposes all lines arena listen only mode are speakers will address your questions at the end of the presentation marine a question and answer session at that time i believe a star than one on your touch tone own i went out to the call the really have the cresswell director of investor relations please go ahead
spk_1: thank you welcome to grenada realty trust their quarter early or yesterday afternoon reissued arthur order early to leave and fall or quarterly report or form a few with the securities and exchange commission these documents as well as our supplemental financial information package are available on our website that w w w dot the know that song under the in that the related factors in the darkness of during the day fall in love with that the non doubt poignant measured reconciliation the be measures to the most directly comparable data measured or to put it in our early lead or tenth you and financial supplement please be aware that statement made during the all maybe the forward looking statements an asshole result may differ materially from the statements do a variety of riff on thursdays and other factors easier for do i finally with the securities and exchange commission including our annual report on for ten pay for the year ended december thirty four but when it on me or more information regarding the ripped the most certainly the call me food time sensitive information that may be accurate only adds up to date date the company does not undertake a duty to update any forward looking statements on the call today from management for opening arm and even ron jeremy in a tube executive officer and michael franco president and chief financial officer are being your pain is the president unveiled open question i will now turned the ball over the stephen ross
spk_2: both jeffrey and good morning everyone i begin by saying that i am feeling quite optimistic about the parliament about new york city and about our business your city is recovering rapidly the motive is a case of boy it suffered a vicious the clyde to something the the occupancy nothing like that much loving you close to that has never happened before as reduce gave up their apartments in the woods from anywhere period to now haven't recovered debris go with argument deep as even higher than legal regrets this will go down as the most rapid be shared with rebounded history public transit new lives of picking up and public transportation is of course the lifeblood of the city less relevant for the news or literally jam packed and broadway another cocoa the news have reopened which travel restrictions coming off this month and potential source will be returning weekend see increase automobile and pedestrian traffic everywhere like for they should raise them of office workers are at high levels of guessing allow my be present we're hearing it honestly that our tenants want their employees back in the office or had like to be has been climbing and this week we are now at forty two percent i must admit that our tenants and we are doomed frustrated the how long the return to work possibly snaking but there is no doubt that work in office will win over work alone at the kitchen table key things we are here every day or health wellness culture collaboration purpose productivity socialization all of the the mudra of it's time to get back to work while the timing of complete returned to the office of each company's hybrid ladder still unknowable it is clear to me that the officers still and will be the center of works and of success importantly our businesses rebuilding on a trajectory of recovery and return to growth my a couple are operating results in a few moments he had a very good quarter i feel good about the trend line for the future may company throughout the economy our experiences significant post and pick up an activity and we are as well
spk_3: glad to see him as busy as they have ever been with deals in all of us citywide don't wanna be seen by the the highest level since two thousand and monkey
spk_2: arteta to an activity and the bottom of the think proposals we are working on particularly like proposal is is robust as companies are violent and clearly looking to go and the heightened activity demonstrates the importance of the office for their business the dollars in new york it's infrastructure and scale and it's eat talented and diverse workforce continue to give me off the dramatic competitive advantage in particular the tech sector that the continues to be voracious in their appetite for space it out some markets and the york as clearly emerged as the second largest a second most important pick up in the country activision appendices a full steam ahead use the latest at me we are targeting opening the pool of all analyze ninth new entrants by year end facebook said at workers proceeded with first employee awkwardly scheduled for second quarter twenty twenty two at the moon and train will we have completed twenty two retail he says we are gratified and validated that starbucks reports that his moynahan it no more than your is trending number one of it's one hundred and ninety the at location in fact vision on long island railroad caicos construction is about one third complete we will now on both sides of the federally track the topic how course it will be a big win for us the thirty fourth street half of the penguin lobby is open at it is spectacular come take a look or unique three level welfare cemented you offering will open shortly and the other half of the pedal one lobby which ones thought thirty thirty will complete will be completed and the first quarter twenty twenty two i tend to apple build a translation transformation is well underway on schedule and on budget the job is largely bought out
spk_3: the demolition of hotel pen will begin this month creating the best development site in the city with office and retail had an interest is high and the position with multiple large office users now focus on had to
spk_2: let me review again or pen district financing plan double glazed the complete folly and was and do is about a billion dollars before to eyes and that will be paid for it highly from our cash on balance sheet further follies happened one and pursue a free and clear unencumbered by any more that yet whatsoever and most importantly as these great asset come online they will produce a two hundred me about the regimental additional and annular the but have retail market has bought it will take some conference the sidelines thing again but leaving activity and seven employees are certainly picking up as residents office workers a tourist with don't listen yoga still a most favored location to refill it's over who on top of the game of particular note is i recently announced deal with men leg with the premier closer it our region at seven seventy broadway the facebook building replacing came out and that have the thing uptick he also completely rebuild bills in this corner with luxury bags and food that we have now completed the retail we had been applied ninety five madison avenue the full a building with much you that it's family and ballooning both lvmh brands and kristoff the off and stefano region and as you know we sold three minutes avenue us athlete retail average with quarter and i contracted to sell to so holy retail outlets in the first quarter of plate plate so we still believe in high speed retail and believe the man with and activity about it i'm happy to go into detail and the wise and the were for was of the sale and queue with it we reaffirm we reaffirm the updated guidance of our retail business discussed in alaska wrinkle with twenty twenty one we still expect the do a little better than cash in a live one hundred thirty five million bucks would be plenty to the guidance is just an ally of a hundred sixty million and for twenty twenty two we we gotta catch an ally of not less than one hundred and seventy five there
spk_4: the him
spk_2: hardly less hear the topic is your was recollections you should know that when collection but now and have been for a while at essentially one hundred percent collections on the limited number of went the pearls that we granted during the crisis alonso running at essentially one hundred percent the topic is you are today is an employee occupancy rates company why this week we are now at twenty three percent and at rate has been growing nicely since the summer where we are able to harvest love to the to nations about usage as employees badgett and many other operating citizens roma building level technology or buildings population by a popular abdomen populated by financial sites market makers and traders enjoy activities in the seventy and another factoid the busiest day of each week is wednesday and another factoid the number of week individual employees who came to work in the month of october was sixty one percent finally let me spend a minute on sustainability where we can prove that continue to be the leader for nato was recently selected as a global sector leader for all office rebuild diversified spotted in a twenty twenty global real estate sustainability benchmark like was the the glass be survey aggress he scored ninety four with our highest total score the day he also a second out of am people are probably just been a real estate company the americas who responded the gladly a pony most of our office beer good the bad even and his team for their leadership that you had to michael
spk_5: i guess dave and good morning everyone i will start with a third quarter financial results and then and with a few comments on the leasing capital markets with recovery and new york city occurring a described his opening remarks so as our business and financial results third quarter comparable ff how as adjusted was seventy one cents per share compared to sixty one sense for last year's third quarter in increase of ten cents or sixteen percent decrease would have been twenty six percent but for the once every three or mart real estate tax increase which is largely reimbursed by tennis next year sort of the timing issue of you will we provided a quarter of a quarter bridge parties release on page five in our fans supplemental paid seven the increase was driven by the following items tense answer ten a related activities including six cents from the commencement of new leases and four cents on the non recurrence a straight line rant antenna receive all right os imp pat in the prior period four cents from that contain improvement of businesses two cents in the acquisition of our partners forty five percent interest in one park avenue in august and to censor lowered una resulting from our overhead reduction program last december the total these increases is partially offset by the find decreases six cents from the already mentioned real estate tax expensive cruel due to an increase in the triangle taxes as dire the march which is i said will be largely bill back the tenants beginning january twenty twenty two and two cents from an increase in other miscellaneous expenses primarily related to a new preferred issuance partially i said my interest expense savings a dark color capo results are ahead of the twenty twenty fourth quarter run rate we discussed at the beginning of the year and on our last earnings call as is our expectation for this year's fourth quarter we had several non comparable items in the corner as well which total that eleven cents per share of income with respect our variable businesses we are continuing to see a recovery as a say returns to normal signage is picking up nicely with healthy bookings continuing in the fourth quarter the him as as now performing the are pre pandemic levels i garages should be fully back and twenty twenty two and finally a number of trade shows have successfully taken place a beer with lower attendants primarily to to travel restrictions oh and hotel peasant a hotel pansy income we still expect recover most the income from are available businesses next year with the fall return and twenty twenty three companywide same store cash and alive for the third quarter increased by two point eight percent over the prior years third corner and would have been a point one percent but for the after mentioned additional real estate tax expensive the mark during the quarter our core new york office visits was up seven point six percent our retail same store cash and i'll i was at fourteen point two percent are primarily due to the rent commencement a new laces at five ninety five madison avenue and for union square south and lower real estate taxes our office occupancy end of the quarter ninety one point six percent of fifty basis points in the second quarter which we believe represented the bottom for office occupancy we expect this figure to keep moving up from here based on the least as we have our signature and and negotiation retail occupancy was consistent with the second quarter at seventy seven point two percent now turning the leasing markets new york lazy volume raced it's highest volume since the onset of the pandemic with more than seven million square feet least during the quarter employment growth continues it's average ejector a asking ransom concessions of stabilize for high quality buildings even improving and some some markets and suddenly space has begun to be absorbed or moved the theme of flight equality has continued called a the assets strength of the landlord and access to transportation aka you the main focus for tenants coming out of the pandemic and we are a major beneficiary given the quality of our portfolio in the capital we invested over the past ten years to redevelop our assets notably sixty five percent of the the of i'm in the city was new and expansion leases led by fifteen deals in excess of fifty thousand square feet the majority of leasing action is being driven by the tech and financial service industries which accounted for sixty percent of all activity we enjoyed a salad third quarter mile say twenty seven office leases telling seven hundred and fifty seven thousand square feet with average starting lands of seventy seven dollars per square foot and positive gap in cash mark to market a four point two percent and one point four percent respectively the highlight for the quarter which also happen to be the largest least done in the market was an early lead her know for it with interpublic group for five hundred and fourteen thousand square feet at one hundred west thirty third street this important transaction reaffirms ip geez can them into the pen district and resolves what was our largest twenty twenty three expiration importantly we also execute on a full for expansion with google and eighty five tenth avenue increasing their total footprint in the building to just under three hundred thousand square feet our buildings which cater to financial service users continue to thrive during the cold air deals we completed include fifty two thousand square feet of to eighty park avenue thirty that at thirty seven thousand square feet and eight and a seventh avenue and nineteen thousand square feet at six fifty madison avenue we are busy across our portfolio with more to come or leasing pipeline is very strong we have one million square feet of leases in negotiation with an additional one and a half million square feet tray paper or an advanced discussions our office expirations are very modest for the remainder of twenty twenty one and twenty twenty two with only nine hundred and thirty six thousand square feet expiring and total representing only five percent of the portfolio and hundred eighty nine thousand square feet is in penn one pentium twenty twenty three office expirations total one and a half million square feet and which three hundred fifty thousand is in panel on and pen to the toggles down significantly since last quarter duty interpublic loop growth least or know rachel leasing activity in the third quarter included ten leases totaling one hundred and eleven thousand square feet with average starting around seven hundred and ten dollars per square foot and positive gap and cash mark to market a forty five point three percent in nineteen point six percent respectively the largest transaction for the quarter was the previously announced eighty two thousand five hundred square foot least simon wegmans and seven seventy broadway in addition we can play the lease up with the retail the fuller building with the least stefano ricci giving us for luxury retailers there with new long term deals and reflecting the recovering market for the that
spk_6: as locations
spk_5: we also completed deals with citibank had one part in capital one at seven thirty one lexington reflect in return of the banks the marketplace finally a war on the capital markets the investment sales market is picking up again with a couple recent strong office sales in addition to several other assets now in the market investor interest in new york is clearly rebounding is a see the city has bottomed in find the relative value compelling on the dead side pricing and of financing markets is as tight as we've ever seen and we continue to be active and refinancing are dead to take advantage of the low rates in september we also took advantage of the tighter preferred market to refinance or three hundred million five point seven percent perpetual preferred shares with a four point four five percent issuance of the same sighs a very attractive rate for for ever money finally a current liquidity as a strong four point four four three billion including two point two six eight billion of cash and restricted cash and two point one seven five billion undrawn underwrite two point seven five billion revolving credit facilities with that i'll turn over the operator for q any
spk_0: thank you we will now be get a question an after thought that if you have a question of star that one on your touchdown found if you wish to be removed from it you may affect the pound sign on a half if you're using a speaker fallen you may need to pick up the handset first before prepping the number one again you have a question when pressed our backline on your touch count on each bar will be allowed to ask a question at a follow up question before we moved to the next caller we have our first class then from an annual much man with city
spk_7: taken one it's like a bomb and here of money than a day hiking to start on putting capital to work what's your current appetite to go out on me now i said see ya the he did the park avenue by out of your time counterpart or and so it is that something like you talked about the market in l with with increased activity that you want to participate on or are you just hoarding your capital of this point to pursue all the development and redevelopment ah types of activities or no be just for talk a little bit about and if you are going to go external that the you look at other poppy types that rather than just office
spk_5: ah share good morning my god what be the in terms of the capital deployments and you know we look at everything in the marketplace it as you know there's been very little it's transacted you know for by the first twelve months of the pandemic in frankly you know with with short term raid said basically zero and long term rates quite low as well as been very low pressure on cellar cell you know you seem very low transaction activity you're starting to see that pick up now with asset being brought out ah and and out to date and you know the the by our universe would it's a jelly been driven by players that use higher leverage although we're still in the early days so did extent we see compelling opportunities as yeah we we would act on those in out so far the pricing is frankly not been compelling and as we compare both to what we're doing and pan and prospectively will we can do and pen you know those continue to be more attractive then you know just buying another asset there were going in at a five percent yield after spending a lot of money and and and and and you know capital the least it up or or just the by itself and we we we luck are going to contain a lock and we find something interesting we would certainly act on it we have the key apple the do that but you know to date capital continues to price assets and you know quite quite aggressively now is standing at irvine activity still down
spk_8: i'm on an athlete has died off my god i might michael hang on just data
spk_9: at the
spk_10: alone that the wall
spk_11: michael said
spk_2: and luck
spk_12: there has been made a creation
spk_2: ah
spk_13: he had anything that we would buy right now that more is pepsi turk so our stock fell to the marketplace at a wedding is because go and eight percent
spk_2: ah as acid in our it in that hat of office buildings that we would even consider also had some five so you can get on that though that madness topsy turvy it makes no sense the biological for five percent and by the way we take the capital that's required for his episode of the that that the earlier and a catch up caches for for
spk_10: i said ah well as back to sell intercept said so anything that we would do there would be the one of the shareholder well as obviously we're not going to do that
spk_2: if we saw an empty building by the way or that we can either we thought we could create a great deal of that believe we might do that
spk_3: so generally speaking it's very difficult to for us the transact and blow right now and so at but we do have the other side of that is we'll have liquidity we do have a very very very
spk_10: dry powder balance it
spk_7: up as the do have great opportunities did it until a creatively spend that capital it's all about it in the pen this so laptop and as by the hours that the pessimistic some i'm just sort of dollars down with like michael said i'm well that's how for one and maybe to follow ups gave just on the pen district where do things currently stand in terms of pursuing the tracker am i know it's probably a little bit longer than ah you would like to have everything prepared and ready to go so maybe just give us a little bit of an update where you are internally in terms of preparing all the financial than getting all that done and also externally with you know a lot of new governmental partners coming in
spk_2: into new see you know how it that all playing in twos or the timing of getting this tracker out to the marketplace ah michael face i question i remain committed to the tracker
spk_3: ah and of understand what i remain committed to i remain committed to allow in our investors to lose he played are stable core business or the one hand and then that pen district which is our high or development ha a segment of my business and to be able to invest in either of those individually or or both of those
spk_10: we are a very very very strong believers that we will create an enormous values and as district will create a district that will add for new by said ah and we we could be more excited about
spk_14: so i remain committed to a number one of the to is we are well along with the the paperwork and what has you that would be required
spk_2: to do so much
spk_3: we recognize what you said and that the as we are seeing a complete turn over in government and senior government officials and we have pending man's with them
spk_15: and so are you know obviously were going to make these live a little bit as we as that or plays out we are very very very optimistic that the new government leaders at the city's day
spk_11: it will be
spk_3: ah many see how do i say this will be constructive
spk_16: it will be business friendly and and recognize that the pendennis display is something that requires at the man's their attention and we believe we will get that they're they're they're positive attention
spk_2: ah the next thing is i've read and
spk_3: seattle is some skepticism about the the idea of separating offended
spk_10: ah ha a very surprised that that
spk_11: this sort of a yoyo i'm it of as enthusiastic about this or that have been about any project and my career so of average problem of this bit
spk_10: also we have had conversations with the bulk of the or real estate investors as opposed the stock investors who share our our judgment in my judgment about that schedule defenses
spk_2: ah so but from the point of view of the hours community i am almost bought into believe that we are in a show the mode
spk_3: so what that means is is that we have the knuckle have some more leading to be able to surface the badges so left basically mean what's going on we had no counterpart eat and me
spk_7: in the to the tracker if we had no timetable it's gonna smile a little bit not too much ah and that we think of going to be specially successful and i appreciate those comments and like steve i think part of the skepticism app out of the investment community and i think everyone recognizes what the pen district represent for in i've been following your company for almost twenty five years and now we've watched that area transform and it's always been an opportunity couldn't go through the listeners think you've called it the big kahuna ten a lot of other things i think it is a similar to the this is that you are in
spk_17: even know i would concur with your phrasing that you have core assets in this big development opportunity i think trackers has typically been use where it it's a business that i'm in a different then the parent company and has other comps are other things in their i'm in terms to do it in a to highlight that that
spk_2: you you're confident the private market i'm are much more akin to where i think investors sort of want to be able to highlight that value but can up to your point you don't want to give up a part of that project to a private i'm not going to make all the money versus something that you believe should endure to for nader shareholder smith that fair
spk_3: comment ah
spk_18: i guess i'll have in common with so like the didn't really follow and that bad and live
spk_19: the answer is in and i understand the skepticism i said
spk_0: out looking at it as a showman budget
spk_2: oh believe me we will show you
spk_20: right i think so times and thank you are next question as from me back off whatever car i isi
spk_5: ah thanks good morning i guess first michael i wanted to just follow up in your comments about the robot leasing pipeline if you just maybe provide a little more color on
spk_21: i'm a kid and activity is who are you know either pen to or some of the other developments in in on how much as for a current vacancy your amateur that is is you know for renewables i guess what kind of a split on new vs renewals would be helpful thanks
spk_22: my lead and the like glenn take it does david the answer's yes
spk_2: glenn once you get some colorado and
spk_20: has they've
spk_22: so it's a very strong mix of everything new deals both in penn new deal in the core portfolio strong you will activity throughout all of it
spk_20: and expansion everywhere we're seeing strength throughout the portfolio both in pain and the corporate folio in all different shapes and sizes when all different industries not pipes things have picked up really well since we last spoke
spk_2: and maybe just as a quick follow up with when you're sort of talk talking to the tenants about space needs and space planning you know what is the densities look like particularly on current the do deals and he added a compare from a space promptly perspective to the or maybe deals from two years ago
spk_5: edit black couple cause we've seen no change at all and amputee
spk_23: we're seeing maybe if their current make the a collaborative space communal space earth to office but generally no change
spk_5: people are planning to the future their back added a lot of them were acting as if it's pre pandemic times growth new fresh start all about palin recruitment and moving forward in the even and your question and and a lot of the questions or comments in the reports and different analyst you know they are there remains a skepticism as to whether you know new york is going to recover whether people wanna be in the office you know like cetera and in a little bit thick of us is common in our the course of and a show me and mode and terms of that when we put the points up on the board people see it but his his his we look at the pipeline and i mean there is act
spk_24: david a literally add every building at all types of users and is steve comment on the voracious appetite of tack ah is stronger now than it was pretty calm and and at the financial types are a booming we're seeing heavy activity there you have an economy where come
spk_25: these are doing very well either and growth mode and that's reflective reflected in our pipeline citing the leasing market ascending a very strong signal that in the arse going to be fine the arse going to be one of the winners companies want to located here and other you gonna see this into any get posted over the next several quarters obviously this quarter was
spk_13: get star but as much more in the kill ah you know prosser portfolio
spk_26: gray and then again
spk_2: no a that a good boy luck the stock market will look at the price of are spot on mr companies in the end they're are all extremely extremely depressed and they're doubling the place where they want free pokemon
spk_11: there is in the stocks that said in my mind that said the that that know when everybody is judge was uncertain
spk_2: and worry about the what from all of how it will upset with the the the office that they went knowledge that we believe so things about what ah
spk_27: well actually our the number one we believe in they walk we are seeing in the feel that people are committed to the odd that committed to stay in the author committed the glowing the york
spk_2: that's for the financial services them as re et cetera the media and as they entered the tree and doubled and tripled in the tech industry
spk_28: because the body of a scale of the not can't be replicated anywhere i mean that of just a contested two or three of the leading trillion dollar tech firms the leases banks find the last fourteen had a month they need fifteen thousand engineers the fill that space you can't get that in austin or or or that
spk_2: fellow wherever okay xo the scale of new york is winning the day
spk_16: plus the talent pool
spk_2: so that's factoid number one that's the number two is is the business leaders that when you deal with every day they have the spotlight for all the grappling with if what their policies are gonna be what the hybrid solutions within a day or those are the always foods that for the the whenever it they know that they're grappling ago with it that yet they continue to believe that they the office space left of it and back higher quality off his face that to recruit that out and retain their talents or were finding in the marketplace of economy between actually a very aggressive a robust the man for space from them a boy in each of the major industries and the the uncertainty back the the skepticism of what from all in the marketplace so were betting that our tenants know what they're doing and we think that so
spk_3: got up we said that worked from the office will win on the nypd around the edges by some i thing people were from on some number of days a week but the people who thought everybody they want the people back in the office that's the way to well give it as if as their whims just about so we
spk_20: think that that's the answer up we are very very pleased with eight that man the space notwithstanding the uncertainty that in
spk_5: in the security spot great and just as a quick second question i'm michael you did trade shows you know i know we're back a little bit in the third quarter and i know glass last quarter you had mentioned that the neo con was moving in the fourth quarter do you have any sense at this point is that how big trade shows you know could be in the fourth quarter in and you know i guess what's on the books for it for next year already in and and added the size and shape up to kind of pre pandemic you know he had done since july and steve we produced a trade shows including our to larger shows the con and and the armoury shown the york and obviously there were travel restrictions particularly internationally which you know impacted attendance and so i would say levels are probably closer to half of what they were historically but you know they they were put on successfully got the machine working again and obviously you know performance a year over year was positive so yeah your expectation is that we're going to put on a full set of that trade shows next year
spk_1: you know we're going to see a substantial recovery you know they just being realistic we don't the trade shows come back fully and twenty two it's probably twenty three before that and you know fully stabilizes but you know in in twenty twenty one overall you know trade shows don't contribute a lot to our van
spk_2: well businesses as as we currently project at and you know the next year of you know we think we think the number of the you know several million hours and carmel and want to give you a number to day just because you know we need to spend more time with our team refine that and honestly it's a gas but dad but we do they the trend line as the machineries is working people are getting used to i you know international travels open back up you will see a decent recovery next year
spk_29: a spray dang the oh that has been the overriding the overriding fact is is that these trade shows are desperately important to our clients as the major sales activity for each of the that the with your whoa
spk_0: the at it differently than individual copies sold the trade shows i hear the stay there really and for okay so we can't predict what's going to happen though this call the next quarter but our budgets show that couple years out the trade your business will get back to where it was free coat
spk_30: and the main reason is because this is really important business do our clients
spk_22: right thank the dead and thank you so much we love our next lesson from nyc unique out which not the bank
spk_30: ah thanks adam when everyone i just gone back to leasing activity in a you like pipeline been pretty strong not that much an expiration next year i'm in actually there a preview even give us about how to think about your occupancy and alec a trend a now i guess in particular particularly new york city off his portfolio blend so michael neck michael mentioned it in his remarks we believe our off as i can see the bottom when i would ninety one point six percent and we think it's going to continue to improve quarter to quarter based on the action we have historically we were at ninety six ninety seven presents so in a where we are with all due to with waterway back with you're getting better and that we have had the inflection point and going back up okay thanks and then a second question is yes you know about the pen district and talk about your hotel pan yeah being mowed prime development site in the city
spk_2: ah and gone back to your prior disclosures on that you had to think about friend your any a v estimate five hundred million dollars for that project which is about two hundred and fifty dollars of sort of zoning ah
spk_3: persona i guess i get some wonder if that's still the thought on on the value of that there and and as well how we should think about ten wine or where you have the grammys reset coming and twenty twenty three get any update their how he should think about it was his hotel pen at two hundred and fifty hours of what number
spk_2: a good way to think about in our yeah potential land diary said at penn want
spk_30: we continue to be happy with the number that's a and i'll add a the and
spk_31: without reason to raise it
spk_2: the
spk_3: and with respect to the though when arbitration we have no comments
spk_2: okay i guess shit in terms of ah i mean sure we think about you know that two hundred fifty hours of foot value that with imply for hotel pending a reasonable number to think about email pen one which is right across the street you know i'm
spk_30: when were you with with it would be an appropriate for us to leave you either way in terms of your internal calculation
spk_3: i am not going to do that i don't think it's appropriate
spk_32: and i'm not either for our about i'm not going to talk about a very important financial lot of creation ah
spk_0: in this format
spk_33: okay yeah may just retired could you go that's what known the supplement talking about the ground value research could be material impact in the on on the project so at some point would be helpful understand yeah potential land diary said there thanks i think i think i've been the the disclosure of the foot though is appropriate and obviously the final answer is unknowable and dub know that will go to the partisan will and will hope for the best
spk_5: thanks thank you and we have our next question from any feldman west bank of america i thank you in the morning and i'd like to go back your comment and retail i'd done with you think it could be bottoming here the to hear your thoughts on lion and what we should expect going forward i'm jamie like i think the comments on retail or reflective of you know what we're seeing on the ground from tenants and you know tenants were in a shell for year obviously you know them a few people on the streets vacancy was was was high and now much was going on right now the transaction machines working again people are back out on the streets you're seeing tourism pick up i'll be it's all been domestic so far young international tourism i will kick off faction next week which should be another shot in the arm for the city and and there you know when inspect the snap back the sixty million people anyway but that sir you know that the trend line from the city being opening in the attended sit down at sporting events and broadway shows no things is is is quite good in clay indicative of
spk_2: will we think is going to happen so you know retailers one another shoppers out there and you know they're clearly shoppers out there again ah and you know we talked about the flight equality quality in the best locations and that's containing a curly been a beneficiary of that at a place like a fuller for example at a place like a seven seventy which is a prime spot for wagner's daigo tail and you not fundamentally we're just seeing more interest from retailers my way that's all some markets right they that the tourist oriented some markets of fifth avenue in times square obviously you would expect to be the ones to come back to last because that so dependent on tourism and and that now opening up ah you to retailers one she had happened but you know again even there you know we're seeing a curry from tenants involve the sub markets rents are obviously down and as inducing demand and so and you know there's that there's there's discussions that are underway and and action that to carry south yeah that's that's what gives us at a the confidence to make that statement nxt was pretty clear as you know activity has to happen before you start getting rental movement and it's gonna take i think a decent amount of activity before that happened so i wouldn't expect rents to rise as you know where near term but you know once we start getting some pace transactions ah i think they'll be a shot in the arm for the market
spk_34: but the nuclear clear that is it misses going to be a multiyear recovery this is that going to be a asia at a rapid v shape that guy has a years for this market to recover
spk_2: on it may never recover to the peak that
spk_3: that were around five or seven years ago
spk_2: okay thank you ah of and then i gotta put it on it as bother and it will recover and get i'll think about this way they shut down from poland was probably the most dramatic event that any of us have ever lived through that total shutdown of the global economy and a that never happened before they're retail retailers
spk_33: the hotels airlines etc or in the the suffering of as by the battle so the first reaction from the retailers was the go into a shell stop everything and
spk_20: shed liability
spk_3: so the market with stone cold for the that one or two years people are now at the fairly the phillies like they have that people are succeeding that better retailers are actually fly then fled from bethesda up the man and we are seeing a very very robust picked up an interest as the man we are not seeing and aggressive increase in it and and places that people are willing to pay
spk_2: so wary of were bottom where in a recovery we are budgeting and other adding that the markedly cuddly will be slow pace okay thank you ah and then i got that he picked the husband of upside just just a good the know nothing and we did reaffirm our guidance on detail in my in my book at the box
spk_35: right
spk_18: you see and are you prepared you might you you'd mentioned the sale and you do for yourself selling marty to use of actually buying buying flowers
spk_2: ah when we have we certainly are open the by we are certainly as and probably the most decks work in retail around ah and oh we will buy the highest quality as
spk_3: at very attractive places and there hasn't been that kind of availability or offered yet
spk_2: ah i said let me give you have a feeling for the five assets that we have either so that type that the old what to tell what are they okay number one those i said this year a losing actually have a negative income bob bob more than three million dollars i think we said the press release that the outcome as he was very the said the vacancy therefore with seventy two that that is accurate that is actually of course but there's one factoid that apple consider there is one tenant in again in those five properties that is basically a job ah a swing at it is a rebuilding a store
spk_3: ah and so if you take that out and we know for sure that that senate is going to leave as a couple of years because it a swing set up up at the slate that
spk_2: add some if you take that out i think the occupancy is eleven percent so it'll take that into account and by the way of you take the dates of them when they are like goes away the earnings are the a negative earnings are greater than three million dollars ah the capital if you add the capital that would be required to lease up those five properties and we have to lisa ninety percent of them so that of it's a it's almost a total these of job you take the time and you take our underwriting is how long will take to climb up to a decent return ah judgment was that for our business
spk_3: it's a proper strategy to sell know that as of the proceeds well as it or uncover that of that on the as it so that will bring in one hundred and nineteen eighty four they by the about of blue jays that we think we can put to better use now we are selling that as an avid you access to a friend
spk_2: bob and they are a cat extremely substantial ah offshore buyer cool have a history of can a very intelligent distress buys we know that we respected and in a were friends with that about of each other ah days we expect that the buyer the madison avenue properties will they that money and at a very satisfactory investment but it will be and our judgment over a ten year whole the that timeframe made us to be a shallow rather than a holder of those accidents so we believe that the buyer will do well and with think the seller that us will do well on this one that point twenty five years ago madison avenue was an isolated away sisters in new york there was one some market that bad worked in terms of luxury high and center and that was the up lisa
spk_33: over the twenty five an hour and i'm so obviously a luxury brands all clustered in in madison avenue and nice for those who had effectively at oligopoly or a monopoly on luxuries shop shopping in the city of new york because all the customers live within walking distance of that at all
spk_2: a tourist basically spain and upper east side logic over the years that has been diluted enormously so that every some pocket whether it be and johnson your try becker and of those let let's village where the upper west side every some market now is widening
spk_3: with with the a customer's was these plants so obviously over the years instead of having what's going out as soon as the never five stores one of the meatpacking one of one jump in one ear them so madison avenue has been deleted but at the looted and enormously it was bad
spk_33: demographics think you get also managed to the a seller of those assets
spk_36: by by the way that thinking is totally different than fifth avenue or times square would continue to be of enormous attractions
spk_37: so as you think about putting capital to work i mean he do you still think luxury the way to go for it now you're you thinking actually more
spk_2: the middle the road type ran now when i asked read agnostic the that
spk_38: we know we are retail investors we love our
spk_2: that's where assets which are obvious which are not really luxury we love our shit that you assets to tell where agnostic as the the price point of our customers were a land on the spot in the reach of it's okay
spk_33: and i could just as you talk about know dad on any the advocate temptation i leave to develop and redevelopment out that what's the plan their to put more permanent capital on those projects and how do you think about using us fun ah we will obviously and a public financing plan for the growth of the pen district
spk_2: ah we were very comfortable now having those assets on an average for the moment and i think it's premature the spot getting into oh what are what what we would what we how we will permanently for that was as if if we do
spk_39: on balance sheet
spk_0: a strange is based upon a mix of secured that unsecured debt lines of credit and other combinations are important part of that elect our guy can't go out know that the couple of cupboard were even more comfortable with adding i don't know the know those assets or
spk_40: worse
spk_30: an office a lot of money many billions of dollars were very comfortable having those assets available i shouldn't have her available as a source of credit should be opportunities come up
spk_31: okay anything that helps with the tracking fact with their
spk_41: not encumbered i didn't have nothing to do that
spk_5: ah the tracking shot that will have it's own financing plan ah or which will get to when we when we launch the tracker by okay yes hi thanks for you pay the adding loaded on the tracker isn't one water that's right okay i thank you
spk_42: and we have our next question from john cam what been or capital market
spk_30: thank you to morning
spk_5: am i realized be had at the mark in backward looking for are you surprised by the level of increase
spk_41: and have given you renovated after five years ago of a last year and out on with two years you've been allotted disruption to the trade show not an apartment few of the asset i'm just wondering if he replied but amount of our interests are on tap either he had questioned ah john like i would say and any time in a your taxes go up there forty seven percent you know you're year year surprised at the magnitude of and so and you know we knew they would be an increase setting the magnitude a surprise the entire market and we were not alone right and good been a number of articles written about how most large landlords had been impacted by similar increases so it's high
spk_43: i was certainly going to appeal it
spk_2: make any promises on on on that my damn you know it is what it is and is we said you know
spk_44: the you know the me for pushing out will be reimbursed by tenants said beginning in twenty twenty two and you know where were you know i think we're no different than than the bound to the market frankly
spk_43: a few years ago you gave
spk_45: an indication that you thought to collect eighty percent of the tax increase of autonomy berkman do you feel like you to fill the pain that level of armor we britain from atlanta
spk_41: yeah net and the legitimacy depending on the occupancy and in the building which is down a little bit now but are they gonna seventy five eighty percent is not a is not a piano way incorrect assumption you know be it'll be an ad in their neighborhood
spk_2: for the ah
spk_0: my second question as on facebook
spk_46: on now manner of i'm looking to fans in new york i'm wondering if if they do it and at seven seventy broadway can you a them without losing rise in it and the planet no so the net impact would be
spk_1: like than nothing
spk_11: you know federal reserve i wasn't clients at these are pending transactions or will really that gotta speak about that thing that really got going to get into the detail on it but obviously if it's headed boys and that it moves out of the the net result would be
spk_46: pretty much the same
spk_2: are you looking elsewhere new people and
spk_47: say again
spk_11: if a prick looking out for you provided fan
spk_2: what we're not going to comment on and on facebook are pending transactions with important clients i a good and thank you as a reminder if you have a question please press star than one to queue up our next question as from alexander gone far with piper sandler
spk_48: hey iga morning when it enters the if i had his you just wanna go back to my goals opening questions ah i think you can to skepticism amy the original penn station was around for about fifty years and you guys have been talking about redevelopment for twenty clearly enhanced by which gonna west side but if you're vino shareholder
spk_2: are you may or may not be able to hold the tracking stock when it's been out for whatever fun mandates you have and if the whole thing that we've been looking at the past ten fifteen years has been this holy grail of conflict between midtown thousand and the far west side now penn station gonna be there in your vino shareholder who was held out for
spk_1: that how was the tracking stock helpful in that if not every vino shareholder can own the tracker and also you know that's what that's where lot of that revenue growth or sorry earnings growth is going to come from and as lease up so i think that the area where people are grappling which is how does this help an existing been
spk_2: oh shit
spk_46: our be able to actually only tracker vs right now they can pencil and model all this upside that you guys have been laying out well obviously if you sell the tractor you're not going to benefit from it
spk_2: and the that goes without saying right but something that every find can only tracker because of mandate that we are we are unhappy with the fact that as you say some of our shareholders will have to sell the tracker with done the calculation with it at the margin in is about a significant transfer the and
spk_5: you know so the it's unfortunate that some some investors had to sell it but what we were looking at is the greater good is be investors best is that to keep it or by it we think will be enormously of it has by be by the jets action said another way we say that the penn district future in the larger company where is deluded is not as good at outcome as if and separated where it's pure pure a few a playful and a had just we understand what you're say we're happy about that that some funds will have to sell they are not large numbers we think they're it we think it's handle about ah but what we believe is the greater good will be enhanced by the by the idea
spk_46: but it's still a synthetic steven and i mean it's just laying you know sort of it paper claim to the it's not like alexander's which physically out those assets it's it's just laying claim on paper it's a synthetic it's not like it's direct correct ah it is the answer is yes
spk_2: but you know that sort of argumentative out of the that tracker should perform as the as that ah of the underlying assets that it is or that tracks
spk_3: it as they before
spk_49: okay alex if you think about anti gay alexander's analogy actually is an interesting one
spk_2: maybe think about alexander's alexander's is an externally advised entity right the public owns one third yeah it's done is done at when you look at it from the time that development really convinced substantially in that company is done extraordinarily well and so i think the corollary here is actually quite similar right where are you know where in the yes we've been talking matter for a long time but the reality is the development really just commenced in the last couple of years right is underway right now with farley pen one pentium and obviously a lot more behind that so you know we've talked about the public owning and you know a portion of it's not all of it by less than half of it and so you know be think about it is kind of like alexander's in the sense of that public tracker is sort of an externally advise entity managed by born a a very similar alexander's and in terms of the shareholders that yeah there's no it the only shareholders that they're going to be forced to sell this are somebody the index funds valley not all them that most of them but some of them any investor that is a active investor that makes you know dedicated decisions about specific companies can contain on both pieces know way they can solve up even more of the tracker cell and we talk about this like this for sellers is now by years on the other side you know we know for a fact their investors that that have a tremendous believe in the pan district would like to just down the pan district like the higher risk high reward believe in well with what's going on in that part of the city and what we're doing and in our preferred to on that directly and now with everything else cell and you know there gonna be an obvious he'll settle out when we distributed and obese and net selling from somebody finds as you alluded to that that have to sell but we also think there is a group of investors that are not and tornado that will solve up that the manner and our goal is for that the trade in a very well and i think your alexander's analogy combat that
spk_13: as a very good analogy in terms of the trajectory that come the ones that that element commenced away and i'm steve going back to the politics clearly the mayor race yeah we can only do better on and either candidate is yeah obviously much more pro business much more understanding of the city and the prior but when you look at the governor's race
spk_2: you know they're at poker with catholic tracking to last as he tries to veer off you know what attorney state attorney general james so if you look at what's going on in with that eviction pie and up with statewide rent control why are you optimistic at the state level that it will be as productive and supportive of real estate and business in new york as the mayor election when they yeah yeah when you look at the politics it seems to be taking the opposite ankle ah how i can't answer that question alec and it in l a we've met the governor she's a seasoned politician with a twenty five year career she has as an entire career have been supportive of business she understands what's going on in the old she understands the fences with and we believe that she will be a perfectly fine
spk_46: leader
spk_0: yeah other than that
spk_50: you know i can't get into it i want to get back for a moment to michael's very finances the your question about the tracker
spk_2: there are tradeoffs yeah in order to create a separate legal entity a spill for example which we had done twice before with said he does that an urban area who would have the had a totally separate management team totally separate board totally separate everything that's an untenable or that's not a doable prospect and it's untenable and we can't do it
spk_50: we need the same people without lisa him develop a team for example okay i also it would be would be very of
spk_2: the the the additional overhead would be a at this so the trade off is is that we can use the same team the same board the same governance but we can get investors to be able to invest in which ever part of our company they want the or both okay so it's interesting i expect that many investors will continue to hold both securities which is excellent at which is actually the same thing as if we did nothing in terms of separating the tracker but at the margin there will be a new group as michael said of investors who actually have a enormous level of those yeah
spk_51: as for the west side of the york for check dominant in the north and the what we're doing in the third district and at the margin with a good will be a very successful very successful investment
spk_52: okay thank you steve thank you michael
spk_0: and we have our last question from ronald camp then what morgan stanley
spk_2: ah too quick ones from me one is just gone back to sort of the retail or polio is terrorism charges for commentary when retailers are looking at speak today what are they focused on it is it occupancy cause that gross margin is it a traffic levels to sort of what's making the marginal disses retailers maybe today that may have a different sort of pre pandemic so forth
spk_0: it's it's the same as it's always been forever and that is what sales volume can they do in a particular store
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