SL Green Realty Corp

Thank you everybody for joining us and welcome to SL Green Realty Corp's first quarter 2020 earnings results conference call. This conference call is being recorded. At this time, the company would like to remind listeners that during the call, management may make forward-looking statements. Actual results may differ from the forward-looking statements that management may make today. Thank you for your time today. Thank you for joining us. Chairman and Chief Executive Officer of SL Green Realty Corp. I ask that those of you participating in the Q&A portion of the call, please limit your questions to one per person. Thank you. I'll now turn the call over to Marc Holliday. Please go ahead, Marc.

Okay. Well, what a difference a couple of months make. If we had this call at the beginning of March, I would have told you all about the great things happening in New York City and and at SL Green, recapping another very strong year of accomplishments and a stock price performance relative to our New York City peers that was very strong. I would have told you about our record low unemployment and record high leasing pipeline, near zero vacancy across our portfolio, incredible progress on the construction and leasing of one Vanderbilt and a sense of growing stability in the retail sector. and I would have highlighted our plans to continue executing on our very defined corporate strategy of asset dispositions and stock buybacks. But that was eight weeks ago and for all intents and purposes a lifetime ago. Suddenly we are living in unprecedented times experiencing a disruption to our lives and businesses the extent of which most of us have never seen. The COVID-19 pandemic and the subsequent dramatic reduction of global economic activity have rendered the best laid plans and projections uncertain and injected volatility into the marketplace. We don't yet know how long it will take to bring the pandemic under control, nor whether New York's economy will rebound quickly as it often has in the past or face a more protracted decline. What we do know, however, is that SL Green is built to withstand these times. It's in moments of crisis and market disruption that our team shines the brightest. Thank you very much. and our tenants and their employees well informed. New York City office buildings house many essential businesses, organizations and agencies that work in our portfolio that are critical to keeping this city running. Medical offices, healthcare companies, visiting nurses, major media outlets and broadcast studios and governmental agencies all have offices in our buildings. These tenants simply don't have the option of working from home They are the people on the frontline who need assurances that they can operate in buildings that are open, operating, secure, serviced, and free from COVID-19. So we have viewed our role these past few weeks as doing everything we possibly can to support the heroes who are tackling the crisis and ensure that our facilities are ready when they need them. We are tremendously grateful to our own frontline employees, from property managers and building engineers to security guards and cleaning staff, who continue to make our buildings best in class even in this environment. With our buildings and construction sites secured, we have turned our attention to the business of welcoming our tenants back into the portfolio as soon as the workforce limitations are eased. While no one yet is certain how and when the restrictions will be lifted, we are planning for a partial return to offices sometime in the second half of May with ramping up occurring over June and July. are here with us today. Count me out as someone who believes the future of work will be at home in a bedroom with a laptop computer and spotty Wi-Fi connections with family members doing video bombs. But undoubtedly, COVID-19 has changed the perception of what businesses want in work environment. As businesses reopen and we begin the process of getting back to work, we will implement new standards in the workplace to satisfy office workers. With more on that, let me turn it over to none other than and our very own Ed Piccinich, SL Green's Chief Operating Officer.

Thank you, Marc. And I echo your sentiments. We couldn't perform at the level we're performing in this emergency if it wasn't for yours and Andrew's leadership as well as full support of the board. Here we are seven weeks and it feels like seven years. As many of you have been through your share of crises and emergencies throughout my career, Everything from 1993 World Trade Center bombing, 9-11, Northeast Blackout in 2003, the steam blast in 2007, H1N1 in 2009, and who can forget Superstorm Sandy in 2012. When COVID-19 first hit, it was about initial risk containment, and we immediately formed a steering committee to understand and address the evolving situation. And we were early in implementing that expanded cleaning system and protocol identifying how to quickly isolate and sanitize areas exposed to COVID-19. We made sure that we were managing and disseminating information real time and that our tenants were fully informed, but also our employees while keeping the building fully operational. We took our in-house technology group, John Matthews, Jeff Karachian, A.J., and the rest of the gang with Brian Alleycock to make sure that we were connected, zoomed in like a sniper's crosshair. Governor Cuomo's directive to restrict nonessential workers from reporting to the office was reflected in our building occupancy. As a result, we needed to make some very difficult decisions, but we held out for as long as we could because of the loyalty of the workers that Mark referenced and we scaled back accordingly. Our frontline people kept the buildings running, safe, sanitized, and clean. We're not only looking forward to ramping up operations as soon as this mandate is lifted, but we are ready, and I can assure you that the team's been manning, training, equipping, and as soon as this mandate is lifted, we will be ready. The team's been working hard, running like human calculators. Greg McManus and our head of HR, Lynn Courtney Hodges, running necessary algorithms that track our expenses and frontline head counts as though we had a mounted GPS tracker on everyone. A few weeks ago, we shifted our focus from risk containment to risk mitigation mode and formed what we're calling our SLG Forward Task Force to establish the foundations of ideas and recommendations that will guide us through with a detailed roadmap of our entire portfolio reopening. Megan Gill and Laura Bouaille are literally our in-house cartographers navigating us through uncharted waters. This virus may be new, but we have always been preparing. Once a year we close shop for a couple of days and run tabletop exercises to understand exactly how our buildings work inside and out. Richard Currenti puts our buildings to sleep like a board certified anesthesiologist and he's behind the controls to get them ready for their wake up call. Never have I been more proud of our property management team and their laser focus. As you know, we oversee a behemoth of a portfolio with Some 24 BMS systems, hundreds of fans, almost 20,000 square feet of coils, nearly 60,000 tons of refrigeration machines, and 200,000 tons of cooling capacity. I say all that because when you're behind the controls and you can bring that, throttle it down, and be ready to ramp it up, that's where everyone that's key has to step in. On the construction side of things, we had Bob DeWitt. He's perfected the ability to execute virtually. and has filled more exception applications than probably 20 owners combined. He has consistently maintained a construction workforce, albeit fluctuated at times, but kept construction crews with hammers in hand. There's been much work completed since we jumped on this in January, and of course, we're still not out of the woods yet. We've grouped our efforts into half a dozen or so categories, which comprises some 100 different line items that we considered. We evaluated each and every one of them to exhaustion. Nonetheless, knowing that communication and safety would be the most critical aspect of our program and that providing everything with confidence that our best-in-class staff and facility were up to the challenge. So as industry leaders, we set the standards for managing this crisis in the days and weeks following the first cases reported in New York City. Topics that I'm referencing, we looked at everything from How we're going to communicate with our tenants on captivate screens through building engines, making sure that our communication order from managing elevator occupancy, reducing conference room capacities, restricting outside visits, promoting teleconferencing, all the things you can think of. And this toll order is being tracked by Alicia Gabenchin, who brought her ingenuity and leadership across the project and forms of communication, dubbing her flawless execution on each and every one of them. When it comes to the actual lobbies, we're ready. Our signage will be ramped up for corridors, turnstiles, freestanding dispensers, and trifold handouts to our tenants so they understand exactly what we're trying to achieve. And everything from hand sanitizers to lobby queue markers in the elevators, as well as commanding traffic control, everyone is going to be on hand. on call, understanding how these floor decals will indicate where you go and how you get to your destination. We've been running algorithms on our elevators, and there will be staggered shifts as needed, but for the most part, we've changed and ensured that our wait times will be manageable while maintaining social distancing, and we'll get people exited in and out through the elevators, listening to anything and everything that has to be done in order to make it happen. We've also looked at consumables, and we're making sure that all these consumables, everything from surgical masks to latex gloves, Rachel Boniello's tracking that with her unrelenting encouragement, proving to us during this time that there's more than 24 hours in a day. We evaluated passenger elevator proctors that are going to be pushing elevator buttons, directing tenants into cabs, and reducing density as necessary. These are passive and non-evasive of dealing with the situation at hand. We've looked at overhead thermal scanners as well as handheld thermal scanners. And although there's something to be said about the interpretation of how you use these, we're currently using them successfully at our construction sites. And the volume we expect here to detect anyone with high body temperatures and the accuracy will be done to perfection. Look, no one is perfect, but I've been talking to my contemporaries, Real Estate Board of New York, Real Estate Advisory Board, Building Owners Management Association, and our tenants. And they understand how critical their behavior is. And I'm sure they'll be implementing that in the weeks to come. Additionally, we looked at some long-term items, everything ranging from nano vapor, many of you have seen televised, as well as photo hydronic technology, to blue light, to tracking frontline employees, to hands-free Turnstile Enhancements. We've looked at and already and have started ordering for retrofitting of our turnstiles. Even though we have a card-recognizing system, we want to create a Bluetooth system that can universally pick up your approach to the turnstile and allow you access, once you're within feet from the turnstile. Shout out to Tony Iacuinto, Dana Rainey, and Sam Yui that are led by Ari Maharis. walking our portfolio every day, seven days a week, and really redefining what real estate and security are all about. They tell me it's a contact sport, and no doubt it's proven to be such in these last seven weeks. As far as occupancy protocol, we're working with our own in-house specialists to determine what antibody tests, any vaccination stations we might consider, but We will be surrounding our lobby with the necessary support to understand exactly how everything should flow through. Getting back to some of the other things that we're doing to make sure that we are understanding how our protocol throughout the buildings is aligned. We're going to also be looking at our tenants back to work and making sure that when we greet them, Thank you very much. Real-time monitoring, UV emitters, bipolar ionization. We've looked at it all, and we expect to be able to cover each and every aspect, and it's like anything else. I don't want to go off and say that we're better at containment and risk management. We were always good at risk management and containment, but we are better today. It's like anything else in life. We've proven that through our shelter in place, that we're all respectful of each other's well-being. And I'm confident that when the tenants return to our buildings and we get full occupancy, there will be a continued improvement in the way we do things. I can't help but think of Vince from our mailroom. Every time I've seen him over the past two decades, I pass him up and run into him and he always turns to me. Hopefully he's trademarked this little phrase. He tells me, maintaining, not complaining. And through it all, He's not wavered. He's been here every day. So on that note, Marc, life doesn't take a day off. No matter how you slice it, people want to do the right thing. We thrive during these challenging situations, and I assure you and Andrew, me and my team remain committed, and we got this.