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spk_0: give everybody for joining us and welcome to sl green realty corpse fourth quarter two thousand and twenty earnings results conference call the conference call it 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 any forward looking statements that man has been may make today additional information regarding the risks uncertainties and other factors that could cause such differences appear in the risk factors and emin a section of the company's latest form ten k and other subsequent reports filed by the company with the securities and exchange commission also during today's conference all the company may discuss non get financial measures as defined by regulation g under the security that the get financial measure most directly comparable to each longer financial measured disgust and the reconciliation of the differences between each not get financial measure and the comparable get financial measure can be found on the company's website at www dot as green dot com by selecting the press release regarding the company's fourth quarter two thousand twenty earnings and and or supplemental information file with our current report on form ha relating to our fourth quarter two dozen twenty earnings before turning the call over to mark holiday german chief executive officer of sl green realty corp i ask for those of you participating in the queue and a portion of the call please limit your questions to to person think you are now trying to call over to mark holiday please go ahead mark
spk_1: to call you today
spk_2: hi the entire slg team is here i've for twenty lexington avenue where we're doing our final word is call from our board room in the landmark labour building as our next called will be done from or new offices at one vanderbilt avenue from was twenty two years ghraib always been our headquarters and base of operation for all the we've accomplished but now twenty twenty one harold in change wrestle green as we move across the street into are extraordinary newly completed building that we will soon call home and we could not be more excited about it for us to move begins a new chapter for the company that coincide with a period of reconstruction in new york city marked by the rollout of the coded vaccine the easing of covered related restrictions the promise of federal stimulus for cities and states and a gradual return of the workforce the offices and other places a bit miss and are many more reasons for optimism as we begin the return to normalcy this year
spk_1: the financial in tech sectors in new york city which account for over half of the office space the man are doing extremely well and they added five thousand off is using jobs in december alone
spk_2: the city is forecasting a significant amount of new office jobs in twenty twenty one such that we would return to prepare derek office employment levels by the fourth quarter of this year recouping all the hundred and sixty five thousand or that's just lost at the outset of the pandemic the credit markets remain quite strong with commercial mortgage interest rate levels are in and around the two and a half percent level and new construction activity has substantially declined which combined with job growth will enable supply to come back into balance with a demand and on the topic of demand sl green had a very productive seven weeks since or investor conference on december seventh where we held a live in person event at one vanderbilt during that seven week period we sign two hundred thousand square feet of manhattan office leases while eighty two hundred and forty thousand where feet of new pipeline thus increasing our current pipelines we sit here today to seven hundred thousand square feet higher than on december seventh
spk_1: with the leaves is we expect to sign over the next sixty days we anticipate being on schedule for a total projected volume for the year of one point three million square feet
spk_2: one of the eighteen or so goals and objectives we laid out for everybody in the investor conference a particular know are the least transactions we announced yesterday starting with the beam suntory deal for a hundred thousand square feet and eleven madison avenue filling a space which had been vacant since april
spk_3: i have two thousand and nineteen
spk_2: centurion relocating it's headquarters from chicago to new york city to better aligned it's global brand building efforts with all that new york offers the suntory deal in the ninety two thousand square foot freshly deal and sixty three madison avenue also recently announced affirms the development strategy that is the underpinning of our one madison avenue development project which is now fully financed and bound with a g m p construction contract from tishman construction with building permit now in hand structural demolition has commenced and we'll be delivering the finished project and twenty twenty three leasing velocity and one vanderbilt has been strong suit the third quarter and that velocity of carried into twenty twenty one with the signing of to notable leases our pipeline at one
spk_4: vanderbilt includes three more weeks is in negotiation and for turn sheets that are in advanced stages of discussion
spk_2: so we are currently seventy three percent his to we sit now and at this pace we're on a trajectory to meet or exceed our year and estimate of eighty five percent furthermore or net effect of rents that were cheating on these deals or during the pandemic for or signed impending leases remain within our underwriting assumptions there is no other building in manhattan joined this kind of success and it's so it's very very gratifying to see businesses respond in such a positive way to what we've constructed in keeping with our custom for abbreviated opening remarks on the january earnings call that follows the deep dive we taken our december investor meetings we will open up the line now for questions thanks
spk_0: ladies and gentlemen if you'd like to ask the question at this time please press the star than the number one key on your touchstone telephone to withdraw your question press the pound key our first question comes for line michael lewis to a securities
spk_5: great thank you i'm you know mcnerney talk about the listener to tv the pipeline i'm even the net effect of arts of one magical is feels the feel different than a few months ago right so you're you have this business activity for the quarter of two or three press release and out separately about lisa you know is there is there a change in psychology think maybe as we get closer to you know bringing people back to the city when did i guess in other words that the schofield different to me just in your brief remarks does it feel lot different than a few months ago are things really you know changing quickly on the ground or my reading too much into this i think it's a think it's yes and no as it relates to the is you know what we're closing our now releases
spk_2: that we've been working on i'd say he hopes the maybe for three to six months so oh wow lol where you announcing them now and and reviewing them now this is i would say really says bids for yeah when the pandemic hit march april may it if everything just stopped and i think that's across everything and then when we get the june july august at least you know within our portfolio we felt things started to pick up and i i think if you go back to maybe the october call on i think you would hear some of that echoed and that call as it relates to the reemergence of people who had hit the pause button coming back because people are planning for ten fifteen years out not the next six to twelve months and the or initial activity with a lot of far shorter dated renewal activity that changed the longer data renewal activity something i didn't work mention in my remarks that is just occurred to me now as we also signed three significant deals over a to forty five part ah as agent for h and a owner and in the total of of that squarepants probably also over two hundred thousand feet twenty two hundred twenty thousand feet so yeah we did that as well who'd for us it's like any other deal it's the we had a negotiating and and get those across the finish line which or three just that settled ah yes it is so in in one sense that leasing production you see is has been developed and and pent up i'd say for the last six months but in terms of psychology excite you mention psychology and and the feel of the market yes ah things and i want to say feel better but if it it feels like more than ever there is a yacht an exit strategy and day a path to what are you know what the governor cause reconstruction ah you know having in you know in his words been through a war which i guess is sort of feels like so yeah the psychology and i think the market vibe is much better it's no longer talking to people who said he i'll be yeah we'll be back next year now we're we're we're hearing and seeing schedules of move in dave that have already begun and well will gradually ramp up through the summer or to the point where there's an expectation that everybody will be fully vaccinated restrictions will have been
spk_6: ah largely lifted and
spk_1: and then you know the there's some people who feel like they'll be a gradual rise from there there's others who feel like they'll be an explosive come back i do too
spk_2: the the lock up of what it was going on almost one year that when the all clear signal is sounded that the resurgent won't be gradual it'll be you know quite quite a media so yeah i'd say you probably hear a little law little hits and our step and also as i said we're really
spk_4: side to be moving toward vandeveld for help i that at sort of plate and everything ah not just for you know we're we have what it signifies but on
spk_2: you know it it really i think is at this stage in our psycho where everything we're focused on on the yeah on and on the investment side pretty much revolves around new development ah you know that it's is very energizing and here we want to be in the right space in order to kind of yup and he is that korea tivoli even further and gray barn certainly anything more didn't get sitting at home
spk_5: great that it it's had a couple of my questions they're gonna i'm asked that needs marvel of the housekeeping question then i'm from that the videos hoping to just your breakdown that other income line item for me in once and that when he sits million dollars and recorded and for you you know how much was with termination income than anything else material i know and three key there was not a legal settlement gain in there and but but that number still with no other bit higher than the i was expecting
spk_7: ah yeah no prob ah happy do housekeeping the balance at the end of the year you know the tweeting me recorded die consistent with what we expected my only over by about a million dollars are half of that number or the fees we alluded to and then were able to recognize in the fourth quarter related to the sale of the jv interest in one madison and yeah right sale of var a for ten tenth so we had fees
spk_8: that we had to wait till those deals close to earth to recognize that was about half ah we had no least termination come in the quarter in the bulk of their remainder of that that balance was that you know somewhere between six and eight million dollars a quarter that we recognize of of third party management fees leasing fees measured fees contract emergency those that are they
spk_9: and guy they caught
spk_0: our next question comes hamrick skidmore with of fact
spk_10: hey mark a good afternoon i'm just following up on the returned off as common for he just made at what that tenants that you have thing about the timing and then returned to office and and then just a follow up on the new leaf is that you've signed and at howard the eight configurations changing her not with those tenants regarding the i'm suffocation and desk of telling number employees per square foot of cetera thanks
spk_2: well as it relates to schedule
spk_11: ah yeah it's it's it's sort of all over the place
spk_2: i'd say consistently every with the refrain is ah
spk_12: by middle to late summer
spk_2: back and know back yogi the unclear back me the hundred percent or certainly greater than fifty percent but it's it in their eyes it's and of work from home with the beginning of and of work from home it at that point and there are problems already you know moved into one vanderbilt and we have several hundred people with a that are occupying that building
spk_4: you know we see some occupancy increases after the new year in other parts of our buildings or got quite low in december
spk_3: and you know it's i think it's hard to pinpoint anything more than to say between now and mid summer late summer i know that sound like while it's long way away but it's a blink of an eye right before you know it will be in summer and therefore you know there will be a vibe i'm i'm i'm i'm i'm i'm
spk_4: confident that there will be a a significant
spk_13: return by mid end of summer and hopefully by end of summer in a we were completely back completely vaccinated and everybody will be celebrating the opening of our great new observation deck at the summit one not vanderbilt on october twenty first as it relates a configuration
spk_14: you want to for them up you know i tinkered with your hard pressed the really good good examples of people that have shoes their design of their space
spk_13: for the long term of most of the people you talk to the answer to the question is well we're changing our our furniture configuration for the next you know for immediate reentry where the generally means is taking the workspace is spreading it more apart
spk_15: but ultimately planning to return to identify the environment but not as dense as we were pre calvin and of up before that the trend of identification had already started to shift back to the densification freak of it covered accelerated that trend and when you speak to tennessee speak
spk_13: architects is cleared to me at least that long term we're still going to be identified world's is going to be not as much as it was before the other try i will say is ah there is a growing belief that tenants will once a greater amount of landlord provided amenities and we've certainly experience that first hand with the real out or with the lease up at one vanderbilt because we have probably the single best amenity floor in the in the city right now and that has been a huge bonus to are leasing effort in the building and i think your you know we started to have developed some of those concepts are our portfolio i think if you just continue to do so ah
spk_0: ah in years going forward particularly as we are roll out the develop level in madison
spk_16: thank you our next question comes on made a commitment with city
spk_2: i had good afternoon everyone on march of return to the on your city retail environment
spk_17: allocating the have to wait to see some green shoots there is at a matter of getting everyone and and a nose on the tenants that there can be only other make some money and and off new tenants looking expanse are coming energy think we can make feel of her that i'm drinks certain that the early phases of reopening as he laid out
spk_2: well i mean yet retail into is a much tougher topic
spk_4: then i guess what we were just discussing today
spk_2: it it it's gonna i think lag substantially because
spk_4: a lot of you know the the retail green shoots as you put it are gonna be dependent on ah return of families your hospitality tourism
spk_18: not all but certainly be part of it
spk_2: and you know right now that is completely shut down in fact wow there were five thousand jobs added or office job at in december there were nineteen thousand private sector jobs eliminated and almost all of those jobs came out of the our leisure
spk_3: hospitality and restaurant the industries unfortunately answer at tragically
spk_2: so
spk_19: i'm in that yeah that's going to take longer to come back while the city is forecasting a return to pre pandemic levels for office job and of twenty one they're not projecting ah a return of total private sector jobs until sometime in twenty three
spk_4: so you can see that that that's a pretty significant lead not not not insubstantial so i think that restaurant and and and retail
spk_17: we'll just will lag and i would say that while we've had some good success he accepts a when sort of bucks the trend all bit but we we did sign a good to one vanderbilt with one medical ah i'm in the fourth quarter i guess that was previously announced and we have
spk_16: another deal pending which hopefully will be a first quarter them it is that it has a demand is still tepid and yeah the environment isn't really quite right yet with all the restrictions were i would say ah
spk_2: i we see any kind of vibe forward momentum there
spk_4: great thanks and i think you're in your opening remarks he talked about on stimulus for cities as answer an important factor you thinking out
spk_20: if that's the emails doesn't concern of their delays in the sennheiser are just a dozen shape out are you worried about sir the longer term health of city like new york now you know i mean i mean my with my word of it up with we we we it's something we focus on and and you know so where where
spk_2: where vigilant about it but the city has balanced it's budget for twenty twenty one and twenty twenty two fiscal year ah with the assumption of zero stimulus said the stimulus comes on top of i was already a balanced budget is the budget was bound for twenty twenty one obviously june and is here you go to new budget twenty one twenty two and through various means the city has managed to ah
spk_4: did it in a tough operating environment i can imagine the next year's operating by will be as tough as the one we just went through
spk_2: and you know they have a attrition rules now i think three attrition for everyone to hire ah they made other cuts
spk_3: the i fortunately the personal income tax or side of the equation is
spk_21: reportedly better than projected so that is offsetting some of the property tax collection losses or or or or or reductions that the city is experiencing and you know net net they i they have a plan to to get it done at least through the middle of twenty two that doesn't rely on stimulus so
spk_0: i'm glad that i would also say there's there's a lot of different forms of stimulus and you know infrastructure new york city has more shovel ready projects than any anywhere else in the united states and their lobbying hard for the gateway tunnel and expansion of transportation and a bunch of other abroad
spk_22: jax so that's another way stimulus could make it's way to new york not just through your director bailout funds of he will and you know changes on in the tax code where there's a potential rework over the salt credit state local tax credit which can also benefit residents of new york's there are there are other ways you can see stimulus coming to the area not just through the direct federals substance think about a next question comes from alexander go fast with paper sandler ah kei as good afternoon ah joe i shipped along that line your name on it or the office restoration engine iraq but you take them there right not yet yeah getting the option to reopen any players telling people combat others what you guys have highlighted which are the incentive outside of know how many of your tenants are offering incentives
spk_2: to add their tenants are help workers that the back at it off with the city life again get in the make and and like half the weblog far today get your everything that that supports yeah pick it up there or clothes or get heavily shut down sell it to them to both bucket of mayoral eight that he ended up with me or election in june because never with that it by default the mayor said a lot of to the unknown in a lot of energy to getting it city fully back out the adjust the off it's what's your view on get it be doing it's hard it you know could make any event deeper my body pretty like a negative down the street that of the on the landlord of daddy agree that optimistic problem that abu ali back in court acute what
spk_4: what a again you're back and que three to four but it it's still going to be low occupancy levels and to one and probably be to to ah yes some of the things we have one program
spk_2: that ah the state is is initiated was part of the state the state address if if you heard if you heard that is something called the save offices pledge where we and of and and and and a number of other large owners took out your made a commitment to set aside space with in our buildings and in our portfolio they're fully identified arranged for a job testing provider to operate out of that space and the tenants make arrangements in that space with that a provider have all their employees are tested on as much as a weekly basis that's what they choose an ear with the concept being that that's a first step for building the confidence level to get people back ahead of the time when everyone is fully vaccinated so we support that we endorse it
spk_4: we've done something similar with our own employee base where for months now
spk_23: and we think your that the kind of thing that will help that we've we've contacted every tenant a brit yeah with every yeah major ten in the portfolio and and bids i tend to propose and yeah gave them the sweet
spk_24: have incentives that we provide to our employees and tried to demonstrate to them how easy to implement these incentives and how well received their etc and we're hopeful that companies will enact those in senators me to bring people back but i will say ah obviously as we sit here between tentative
spk_4: the present a total building occupancy you know that has not yet taken hold and it may not until the third quarter in oh that's just a just may be the case and where we're hopeful that not the case and every time another from comes back he puts competitive pressure on the ones that haven't to get back
spk_2: also and i see i do see more of that but it's gradual it's only january so ah know we think this is a trend it'll take some time but you're there are efforts at it and the reopening a restaurants right so
spk_4: as of last night with heavy yeah and vocal on
spk_22: pressure being applied by the restaurant industry
spk_16: the and more importantly number is that have improved in new york state since
spk_13: ah you know that that spike as a result of the holidays or it looks like twenty five percent indoor dining either is where may be coming back are you harry like coming back next week or least yeah that's what we're hearing guessing this morning and hopefully that is the case and yoga mats the start hopefully towards fifty percent and i think all restaurant on towards agree at fifty percent with outdoor they can make a go of it so the other one step closer and everything will just have to build off itself i'd look at the reconstruction process as you know is it nine to twelve month process not not something that's going to be you know the next month or two okay and then steve i at the investor a you made the comment in a queue and eight portion that yet sort of the easy part of your leasing job done because the tenants you want a renewed joe have renewed the tough part is coming which is your back filling the can into our are leaving and you had your comments were definitely striking so just started curious now that you're months for and the in odd vaccines are rolling out you still see the replacement of tended to or vacating as yeah sort of it's challenging is he kept writing and the of after day he did the same as getting better public that worse i think it's getting better and maybe that that is becoming to give you have
spk_25: proves that of the two hundred and sixty thousand square feet of leases that we have either out the signature or in document negotiation a hundred and twenty of that hundred twenty thousand square feet of that are new tenants so new tenants migrating into the portfolio
spk_0: it's almost the almost a fifty fifty split when renewal and in and in new tenants
spk_26: i'm which you know as we've as officer or more said i'm at the investor conference you know all we need is velocity in the marketplace
spk_27: and we have a good enough portfolio and we have a and we have a good at of leasing team and were in a were here everyday working very hard we're gonna get more than our fair share of the deals that are in the market so as whose parents are out there will fill the portfolio with you before the way we have every year in the past okay thanks our next question comes from jamie feldman with bank of america
spk_26: you have to deal with you
spk_21: fewer think it's better accuracy thoughts are on the value add equity market fixed price to see more capitol steps like some the transactions hi hi quality
spk_26: octopuses his jersey to get market is right now
spk_28: as i think the financing market is generally tightening up
spk_21: cmbs spreads around and there's more banks looking to lend i think that will drive that value add market the issues been you know assets like for ten tant which is fully least are getting the best bids because of in place income but as lenders are willing to underwrite lease up again i think you'll start to see that market yet more liquid and starts have some pick up an activity
spk_26: which were to fire when iraq are looking for how much capitals out there appetite
spk_13: cycling well on tap tap rates on value add your you're saying as least so stabilize car parade or you're going and rates are not a meaningful metric as as large vacancy i think people are underwriting you know to ten to twelve percent i rr is on value add type opportunities some and i think that i mean to pry leasing the assets to my guess is far between five and five not percent cash on cost if they're taking lee suppress going in where if they're buying and place and com it's more not for an hour to five percent arranged you know on average okay and then for steve thank you are by the way and then for steve you'd mentioned financial and hacker about half of the office demand and the city right now how much it i would say expansion space and and the other large tech leave them in the pipeline well you knew the our pipeline one are you have you thought about is generally in the marketplace generally well i couldn't tell you how much we the in the overall market the pipeline how much of it is doug expansion or or or disturb you know replacing can within our pipeline wow i would say we're very heavily weighted towards financial services right now in maybe you know a new growing trend that i'm starting to hear from through the early parts of searches is you started to some a law firms come back in the market as well
spk_29: where they were very quiet zone last year was the polymer his very slow right now as the advertising on advertising media portion of the market
spk_0: but that than that made up obviously by the tech side so you know and i it
spk_30: you know this because we have to this or stress a point that i think is worth noting for everybody which is new york city's rebound will be driven by the fact that we have a very diversified
spk_31: tennant base as opposed to the west coast which is her a one trick pony
spk_21: i'm from new york city is god's you know because will be seen over the past couple decades technology education healthcare fine as media and that diversification is going to be the in of the strength of our of our rebound
spk_6: okay your thoughts
spk_21: i'm actually
spk_30: i next question comes from john him with piano capital markets you i'm a crossman coworking am one of appear to the stance yesterday with the right down at today the journal is reporting that we work is looking to go public potentially get fat he needed to might have what you've used as we work in code and can entire as a going concern tenants
spk_32: and i think we'd we have with him had less than two percent from him
spk_8: yeah less than two less than two percent coworker now is a strategic decision by us i i think the asset classes here to stay and know always be you know demand in the market for coworkers type opportunities ah we'd certainly love to see we were go public us back or otherwise
spk_2: and yet i think it's it's a it's a a fourth it'll always be around we have our own fractional off as based division which has been around for twenty years or so so ah in were in the business ourselves
spk_3: we just don't see it as a very large part of our portfolio
spk_2: at the fall of are they as we were current than ranch and how didn't rent the frozen abatement trend of corner vs last corner
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