SL Green Realty Corp

The conference will begin shortly. To raise your hand during Q&A, you can dial star 1 1. The conference will begin shortly. To raise your hand during Q&A, you can dial star 1 1.

Thank you everyone for joining us and welcome to SL Green Realty Corp's third quarter 2022 earnings results conference call. This conference is being recorded. At this time, the company would like to remind listeners that during the call, management may make forward-looking statements. You should not rely on these forward-looking predictions of future events as actual results and events may differ from any forward-looking statements that management may make today. All forward-looking statements made by management on this call are based on their assumptions and beliefs as of today. Additional information regarding the risk, uncertainties, and other factors that could cause such differences to appear are set forth in the risk factors and MD&A sections of the company's latest Form 10-K and other subsequent reports filed by the company with the Securities and Exchange Commission. Also during today's conference call, the company may discuss non-GAAP financial measures as defined by Regulation G under the Securities Act. The GAAP financial measure is most directly comparable to each non-GAAP financial measure discussed in the Reconciliation Of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on both the company's website at www.slgreen.com by selecting the press release regarding the company's third quarter 2022 earnings and in their supplemental information included in our current report on 48 relating to our third quarter 2022 earnings. Before turning the call over to Mark Holliday, Chairman and Chief Executive Officer of SL Green Realty Corp. I would ask that those of you participating in the Q&A portion of the call, please limit yourself to two questions per person. Thank you. I will now turn the call over to Mark Holliday. Please go ahead, Mark.

Thank you. Good afternoon, everyone. We appreciate you dialing in today, and we look forward to giving you an overview of our quarter's results, taking your questions. I just want to remind everyone that since 2019, we've faced many new challenges, which in turn caused us to raise our bar even higher and respond in ways that have been beneficial for our tenants, our shareholders, and our community. In less than three years, we signed over 5 million square feet of office leases. We completed two dozen individual sales transactions at a gross price at share of $5 billion. We developed and acquired new world-class assets, oversaw and executed $2.25 billion of physical construction projects for on-time deliveries, reduced our DPE balance to $663 million at quarter end. We created a new iconic global entertainment destination, Summit. We managed our portfolio in a safe, secure, and efficient manner, launched a portfolio-wide hospitality and amenity program, and we did all of this throughout by working five days a week from office, the only possible way we could have realized these extraordinary accomplishments. I want to once again express my extreme gratitude to the amazing and talented workforce here at SL Green, who came together, all of us on the floor of the New York Stock Exchange, to ring the closing bell and celebrate 25 years of excellence in improving the way which New Yorkers live, work, and play. And this momentum carried through into the most recent quarter. I'm extremely, extremely pleased with the leasing performance in Q3, highlighted by the Franklin Templeton deal at 1 Madison Avenue and the Memorial Sloan Kettering deal at 885 3rd Avenue, which took a total of over 750,000 square feet of vacancy out of the SL Green portfolio in economic terms that were consistent with our expectations. As pleased as I am with the leasing performance in Q3, I'm just as happy that we were able to retire $800 million of maturing public bonds through a series of paydowns and financings that were done on attractive terms. Furthermore, we're highly focused on implementing strategies to mitigate our exposure to rising interest rates by executing on a series of swaps, caps, and debt repayment. Understandably, a lot of the focus from the market is on the leasing performance and tenant demand. And on that front, we feel quite good about where we are given the portfolio is highly improved and our overall asset quality has never been better. We continue to amenitize our best assets to attract top tenants. And as a result, the portfolio is still well occupied today at 92%. And we have marketing and capital plans in place that we believe will enable us to operate during this market cycle at or above 90% or better until things begin to turn around. Rising interest rates, on the other hand, are more of a concern given the impact it has on our earnings, making interest rate hedging and debt reduction our number one priority for the foreseeable future. I think Matt and his team have done an excellent job with this, as evidenced by the $1.25 billion of corporate swaps entered into during the third quarter to hedge interest future floating rate exposure. In addition, during the most recent quarter, we entered into cap contracts in another $270 million of variable rate property debt. And just yesterday, we swapped another $200 million on a floating rate mortgage. Notwithstanding the current interest rate environment, the underlying New York City economy is still chugging along, based on employment data showing that NYC added 24,000 private sector jobs in August and is now 100,000 jobs ahead of New York City OMB's original 2022 forecast. More to the point, 22,500 office-using jobs have been created in just the last three months reported, now bringing the total office-using jobs recovery to 104% of pre-pandemic high-water mark. And contrary to what you may see in the media, I expect September's numbers due out momentarily to show positive as well. The numbers confirm what we feel that New York City is finally back to normal. The roads, sidewalks, and commuter trains are packed and the subways are coming back. Tourism and hospitality are near pre-pandemic levels. Residential rental market remains tight and the enablement of conversion of office to resi to help solve this problem is gaining momentum at the state and city levels. Meetings, conferences, parties, they fill the calendars and the rhythm of New York social life has returned. Before opening up the line for questions, I want to acknowledge a few other milestone moments for the company. First, Summit One Vanderbilt is celebrating its one-year anniversary tomorrow. We will all be there to recognize the successful launch of this world-class attraction that has quickly become one of New York's hottest experiences, having welcomed 1.4 million guests to Summit during the first year of operation, with far more expected next year. During the third quarter, we prevailed in consolidating ownership and control of 245 Park Avenue, a trophy asset in the SL Green corridor of owned properties, after a contentious bankruptcy litigation. We have plans to improve 245 Park over the next 24 months to make it one of the most desirable buildings on Park Avenue. Last week, we received the excellent news that Le Pavillon received a Michelin star less than 18 months after opening during the pandemic. And finally, this morning, we announced a partnership with Caesars Entertainment to pursue a downstate casino license for a world-class gaming hotel and entertainment venue in the heart of Times Square. In connection with this effort, we have formed a coalition for a better Times Square that seeks to make significant investment in security, traffic mitigation, mass transit improvements, and accelerate economic recovery for surrounding businesses and create good paying jobs for local New Yorkers. With that summary, we'd like to open up the line for questions on the quarter and whatever else is on people's minds.