Alexander's, Inc.

Good morning and welcome to the Bornado Realty Trust first quarter 2024 earnings call. My name is MJ and I will be your operator for today's call. This call is being recorded for replay purposes. All lines are in a listen only mode. Our speakers will address your questions at the end of the presentation during the question and answer session. At that time, please press star then one on your touch tone phone. I would now like to turn the call over to Stephen Borenstein, Executive Vice President and Corporation Counsel. Please go ahead.

Welcome to Vernado Realty Trust's first quarter earnings call. Yesterday afternoon, we issued our first quarter earnings release and filed our quarterly report on Form 10-Q with the Securities and Exchange Commission. These documents, as well as our supplemental financial information packages, are available on our website, www.bno.com, under the Investor Relations section. In these documents and during today's call, we will discuss certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in our earnings release, Form 10-Q, and financial supplement. Please be aware that statements made during this call may be deemed forward-looking statements and actual results may differ materially from these statements due to a variety of risks, uncertainties, and other factors. Please refer to our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2023, for more information regarding these risks and uncertainties. The call may include time-sensitive information that may be accurate only as of today's date. The company does not undertake a duty to update any forward-looking statements. On the call today from management for our opening comments are Stephen Ross, Chairman and Chief Executive Officer, and Michael Franco, President and Chief Financial Officer. Our senior team is also present and available for questions. I will now turn the call over to Stephen Roth.

Thank you, Stephen. Good morning, everyone. We've been busy. Let's start with Bloomberg. As a reminder, 731 Lexington Avenue, the mixed-use tower whose 950,000-square-foot office condo is Bloomberg's global headquarters... is owned by Alexanders, a separately traded public REIT. Renato owns 32.4% of Alexanders. The background facts are Bloomberg lease expires in February 2029, and $500 million of debt on the office condo is due next month, June 2024. Yesterday, we announced that we renewed and extended the Bloomberg lease for an 11-year term to begin in February 2029, and take us through February 2040, so 16 years of term from now. As you can imagine, every developer in town tried to poach Bloomberg, and of course, they looked at every opportunity as they must. We are delighted that they chose to stay with 731 Lexington. By the way, the building is as much Mike's creation as mine. He had significant input into the design of the original building. The design of the building and Bloomberg's internal fit-out are on a par with what we would have built today, but of course now they don't need to. The terms of the lease are spelled out in yesterday's SEC filings. Tenant concessions in the form of TIs and free rent have been established, and the net rent will be the subject of an appraisal in 2029 with the then-rent adjusted up or down no more than 10% either way based on the then-market conditions. We're in the process of refinancing this asset, but I must say I am not excited about paying today's market rate of 7% or even 8% for debt, with all the trappings of leasing reserves, cash suites, and such, which are admittedly protective of the lender but don't do much for our equity value. As we speak, my personal favorite is to pay the debt down and maybe even pay the debt off. We shall see. Now let's focus on our credit lines. Traditionally, we've had two separate but similar credit lines with staggered maturities. One credit line for $1.25 billion has been renewed through 2027, and the renewal of the second credit line was finalized last Friday at a reduced amount of $915 million, with a term extended to April 2029. As expected in these times, several banks dropped out. We use our credit lines very sparingly, generally for short-term requirements with a known source of repayment, and rarely have we exceeded 25% drawdowns. Now to 280 Park Avenue. We own 50% of 280 Park Avenue. Since our joint venture partner has already reported, I'm guessing you are all pretty much up to date on the details. What we did here... was extend the maturity of the senior loan for four years, keeping the rate constant with no pay down, but posting significant cash reserves for future leasing. Several analysts have commented that the loan and the equity value pretty much cancel out. And that fact allowed us to DPO the MES loan at 50 cents on the dollar, realizing a $31.3 million gain at share, which we will recognize in the second quarter. This is not yet a big win. but it does create a cheap warrant on a wonderful asset located in Prime Park Avenue, where there is already a very low 7% vacancy and a shortage of space. We think it's a first-class bet. By the way, we are leasing very well here. We continue to protect our balance sheet with interest rate caps and swaps, but when a 3% loan matures into a 7% market, there really is no place to hide. We continue to prospect for good real estate in distress, where our best-in-class operating platform can be helpful to the lender. We expect these opportunities to accelerate. The gold rush on the part of the luxury brands to own, control, and dominate the very best locations is accelerating, and the knock-on effect on prime New York City retail space is palpable. It should be noted that in New York we have much more prime retail space than anyone else by a wide margin. Some commentators have noted that the Fifth Avenue and Times Square values seem to have recovered to the pricing of our retail JV sale five years ago. It would seem so. I continue to strongly believe the contrarian bull case I made in my annual shareholders letter that basically with frozen supply, i.e., No new developer office starts and none on the horizon. Tenant requirements picking up and vacancies shrinking. I couldn't be more optimistic about the future. And also note that while the New York market has a huge 422 million square feet, when you cancel out the non-prime space, we really only compete in a much smaller 177 million square foot market. Great things are happening in our Penn District. come by and take a look. Our team here at Renato couldn't be more optimistic. Now over to Michael.