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spk09: Thank you everybody for joining us and welcome to SL Green Realty Corporation fourth quarter 2022 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 take forward looking statements. You should not rely on forward looking statements as 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 most directly comparable to each non-GAAP financial measure discussed and 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 fourth quarter 2022 earnings and in our supplemental information included in our current report on Form 8K relating to our company's fourth quarter 2022 earnings. Before turning the call over to Mark Holliday, 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 to please limit your questions to two per person. Thank you. I will now turn the call over to Mark Holliday. Please go ahead, Mark.
spk10: Okay, thank you, and good afternoon, everyone. We appreciate you joining us today. Normally, our January earnings calls are brief, coming only seven weeks after our annual investor conference, which we held back on December 5th. We had a great conference on that day with attendance at capacity at one Vanderbilt, and we received a lot of positive feedback after the presentation. Not surprisingly, during the conference, we set out for ourselves a a characteristically robust agenda for 2023, which included business plan aspirational goals. I think there were 18 or 20, some of which included 1.7 million square feet of leasing, over $2 billion of asset sales and joint ventures, significant debt reduction, and completion of several important development projects that we expect to deliver timely and on or under budget this year. Notable among them is One Madison Avenue, which we actually topped out ahead of schedule in just one week after our investor conference. So it was a pretty amazing day. There were over 700 people gathered to witness the event of the laying of the last piece of steel on this truly great project in the Midtown South sub-market, marking a turning point for the project where we now see completion in sight and the timing of that topping out was truly perfect as it gave us the ability to stand on that 18,000 square foot penthouse floor with 18 foot slab heights and unobstructed views of midtown and downtown and standing there you can truly understand why our new tenant that has just joined the roster of tenants to the one Madison Avenue rent roll is 777 partners they were attracted to the opportunity and we were able to lease it up over one year ahead of our underwriter just you know stressing the importance of not only hitting underwritten economics but also exceeding the timing has a big positive effect on the project and we hope there's more to come this lease along with the others we announced last night Underscores the early leasing achievements we had in January, which is typically a slow month But for us turned out to be you know a pretty good month and a good start to the year Hopefully it portends of increased activity to come in 2023 After a long holiday break followed by the MLK holiday weekend. We've seen a noticeable pickup in tour activity over the last 10 days and we received around a fresh new proposal, so We're optimistic, we're getting stuff done, and we're on plan, most importantly. So on the heels of signing over 370,000 square feet of office leases since our investor conference at the beginning of December, we managed to assemble a pipeline of leases totaling 700,000 square feet where it stands today, 100,000 square feet of which we hope to sign over the next 60 days. you know, we'll be moving and hustling to try and get that done. We're currently negotiating leases at 450 Park Avenue, 919 3rd, 485 Lex, 1350 Avenue of the Americas, and another lease at 1 Madison. In addition, we are just beginning to market our redevelopment project for 245 Park Avenue. We spent quite a bit of time showing off that amazing redevelopment plan that we have for 245 Park and we are beginning to execute this year. And the early read from the tenant broker community is that this exciting and I think very elegant plan that we have for the asset is going to be very well received by the tenant market. And there seems to be much interest already that we're generating as we're beginning to take these meetings. And we're also generating interest among foreign investors for JV Investments. Recall that identifying one or more JV partners for 245 Park is one of the several capital markets goals we have for the year. And for a little bit more color on that, I'm going to turn it over to Andrew Mathias.
spk07: Thanks, Mark. There's still a standoff between buyers and sellers in the market, but we definitely see as financing hopefully returns and as five- and ten-year fixed-rate financing returns, the CMBS market reopens, which we and all the rest of our market participants here are anxiously awaiting. We think we'll see that standoff thaw a bit. We've been actively in discussions with investors from around the world. We were in the Middle East several months ago. We have a trip planned to Asia in March. The team was present at the CREFSE conference in Miami. earlier this month talking about the financing trends. And we think there's still a lot of interest in prime New York City assets, particularly Park Avenue, which is no secret that it's the best sub-market in New York City. And we think we'll have a lot of willing conversations this year from all different types of investors from around the world talking about 245 and the other aggressive capital goals that we set out for us at the investor conference.
spk10: Great. So more to come on that throughout the first half of the year. We'll keep you guys updated as we pursue our various goals for recapitalizations, refinancings, joint ventures, sales. You know, we are full-time. Full guns are blazing right now here at Green and working very hard and diligently to set the seeds so that by the middle of the year, we can hopefully start to achieve and knock off some of these goals and continue on a path to what we think will be a pivot year for us in 2023, coming out of the markets we've experienced over the past couple of years and hope to see some you know, more positive news seeping into the market throughout the year. I did want to leave, I'd say, the best for the end before opening up the call to questions. Yesterday, as I trust you may have heard or read, it marked an incredible milestone moment for East Midtown, New York City, and Long Island with the official opening of the long-awaited Grand Central Madison Station right underneath Grand Central Terminal and one Vanderbilt, representing the culmination of the $11 billion Eastside Access Project. It is a watershed moment. I think it's probably the most important and largest project the MTA has completed in many, many decades. And with its grand opening, you now have direct service from Long Island to Grand Central, It's finally become a reality after being, I think, in conception for 60 years and in development for 20. And it opens up a direct, seamless trip from Long Island, which has a 1.4 million person workforce that now can look to either of Grand Central or Penn Station as its primary destination and choose its most efficient destination. destination the MTA is estimating that 45% nearly half of all Long Island Railroad commuters will are expected and will eventually commute direct to Grand Central once full service is up and running this year instead of you know what is currently all to Penn Station and that translates into 160,000 people a day And these commuters are essentially arriving literally right at our front door where the majority of our portfolio is located. I can't stress enough the importance of the projected 40 minutes per day or nearly three and a half hours per week of saved commutation time that the business community puts a short, easy, safe, and pleasant commute as its top requirement now coming out of post-pandemic world and as a tool for encouraging employees to work from office. So yesterday we celebrated with the governor and the MTA chair, Jana Lieber, the opening of this incredible terminal that spans over 700,000 square feet from, I'd say, approximately 42nd Street to 48th Street on, what must it be, one, two, three different levels, dedicated waiting areas, beautiful new retail stores that'll be opening and restaurants and a host of other amenities. And it's all well done, well executed, well designed, well conceived. And I would urge anybody that hasn't yet taken the time to swing by and check it out that they do so, because it's pretty inspiring to see what can be done after all the time and after all the money is spent You look at, you know, the permanent good that will come of it for the decades and, you know, perhaps centuries to come. The terminal contains eight tracks and four platforms, which will be in service and enable Long Island Railroad to increase its service from Long Island to Manhattan by nearly 50% of capacity. And one Vanderbilt and East Midtown rezoning was really a first step towards unlocking the pent-up demand for new and redeveloped office space in and around Grand Central. And now Grand Central Madison will further transform and revitalize what I think is undisputably New York City's number one business district. And we're excited by it. As shareholders or stakeholders or followers of the company, you should be excited by it too, in my opinion. And, you know, it's a great way to start the year. So with that, We'll open it up for questions.
spk09: Ladies and gentlemen, if you have a question or comment at this time, please press star 1-1 on your telephone keypad. If you wish to remove yourself from the queue or if your questions have been answered, you may press star 1-1 again. Again, to ask a question, it is star 1-1. Again, we ask that you please limit yourself to two questions. Our first question or comment comes from the line of Alexander Goldfarb from Piper Sandler. Mr. Goldfarb, your line is now open.
spk12: Thanks. Good afternoon. And obviously it's great to see ESAT access finally open. So that's awesome to see. But, you know, just, you know, clearly that's a positive for the Grand Central market and leasing. But bigger picture, especially since you guys put out your investor day, I think it was 1.7 million square feet target for this year, You know, the tech layoffs have accelerated. Granted, you know, it's a lot out west and not everything is New York, but it's still, you know, pressure. Obviously, Wall Street's had a tough year. You know, we're reading all the headlines. So, you know, the state of the leasing market, do you guys feel the same that you felt back in December? Is it slipping? Are there signs that tenants are taking even longer? Or, Mark, your comments about people resuming activity post-MLK Day means that, you know, the leasing activity is sort of divorced. from what we're reading in the broker reports and the headlines?
spk10: Well, there's a lot to go back in that question, but let me start first with the reference to the tech layoffs. You know, I think the notion of what you may have termed, you know, sizable or significant layoffs, I'm not sure I would characterize it that way in terms of the ultimate impact and a fact it'll have in New York City. These are firms that had been on an insatiable growth stage for many years. Tech was probably the biggest grower in New York City over the past five or six years, and went from being a relatively small component of the market to being, I think almost, Steve, a 25% of the market. Someone's clicking notes. Alex is typing. Alex.
spk12: Sorry, I'll stop typing. I'm in the office. I was looking around the table.
spk15: I thought it was one of our guys.
spk12: No, you wanted us back in the office, and this is what you got typing on the speakerphone.
spk10: So, you know, there's been massive growth. Steve corrects me. They may be as much as 30% or 35% of the total market. Certainly, they were 30% or 35% of the incremental demand. And, you know, now... they're pausing and becoming a little bit more efficient as companies do at the peak of the cycle. And New York City, large employers are required to give warrant notices, W-A-R-N. And even though there are these advertised or announced, I should say, announced layoffs from some of these firms, they represent a fairly modest amount of the overall scope of the companies, I think. probably on average close to about 5%. And many of the markets these companies are targeting for retention that I've heard, New York is always among that group of companies. I think there are other parts of the country that'll feel it more. The worn notices have not been that significant from the tech sector so far, which would have to reside and be received by the city. So there's no indication yet of any mass layoff. When you look at the job numbers for 2022, and these are the most current numbers we have through December, so pretty current, there were 209,000 jobs added in New York City year over year. And recall 2021, was also a big job growth year. I'll see if I can get that number right. That was 270,000 jobs. So 270,000 in 2021, 209,000 in 2022, office using jobs, 63,000 jobs added. That is the second most office using job count ever added with the first one being back in 2021. 83,000 but in a normal year the city grows by about 20 25,000 office using jobs and last year was triple that number now the growth is decelerating as office using jobs now have eclipsed pre pandemic levels I've mentioned that before that the office using job count is about a hundred and six percent of pre pandemic and total jobs are about 90 percent of pre pandemic and And the city's forecast for the year, and we've always found the city's forecast to be pretty spot on, is only for very modest job losses in the first half of the year. I want to say somewhere on the order of 10 or 15,000 job losses in the first half of the year, with about 5,000 of that made back up in the second half of the year. So I think our approach, in terms of what we're expecting, and I let Steve speak a little bit more about what he's seeing in the real is that, um, you know, certain sectors are bell tightening, certain other sectors continue to expand. Um, I think all businesses are still figuring, you know, their way as to how they're going to be navigating and, um, you know, and dealing with work from office versus remote work and, you know, encouraging workers so that we get above this 50, 60% utilization rate back to, you know, 70, 80%, which would be, you know, in our opinion, full utilization. Um, but the market is not setting up to be in our mind, uh, any measure of a major pullback in jobs or economic activity based on what we see. So if you want to address specifically some of Alex.
spk01: Yeah. I mean, I'll, I'll, I'll, I'll make a couple of points. Um, One is with regards to technology, guys. I think it's important to recall that it's not like in decades past where we had the tech wreck, where you had the dot-com boom, where all those businesses went bust. The guys that have announced layoffs, these are mature technology businesses. So their businesses and the lease obligations that they have, those are secure rent payments. So they may not be adding bodies and therefore driving additional leasing velocity, but it is still a very significant part of the overall New York City economy, which is the most diversified business economy in the United States right now. It's not like the West Coast, which is a one-trick pony. What we're seeing generally from a leasing velocity standpoint, you referenced some of the brokerage reports that you read. If you really get granular on those reports, October and November were the weakest parts of the fourth quarter. December showed a notable amount of leasing increase, even though the overall quarter was down. there was a sort of a starting to repair itself in December. And as you see from the announcement that we made yesterday, we obviously had some significant transactions that we were working on that ended up closing the first couple of weeks of January. And as Mark referenced earlier, even with all of that early day success on leasing of over 340,000 square feet in the first couple of weeks, we still have a very robust pipeline of about 700,000 square feet In that are several technology businesses, but also, like we saw all of last year, heavily weighted towards the fire sector. So between fire, tech, and legal, those continue to be the big drivers. And I'll make the last point, which is we continue to see sort of that smaller part of the market still coming back to life. We've got nine leases out at the Graybar Building, which has always been a good barometer for me to show where the small space market is, and that's an important part of our overall leasing success for the year. All right.
spk10: So that was the entire market recap right there. And that's all the questions, Alex. We're going to have to – if we're going to have a – Sounds good. Sounds good. We're going to move on. But thanks for the question. Hopefully that addresses some of the issues you inquired about.
spk09: Thank you. Our next question or comment comes from the line of Tom Catherwood from BTIG. Mr. Catherwood, your line is open.
spk14: Excellent. Thanks, everyone. Maybe just sticking with leasing for a bit. Steve, you mentioned the broker reports and pickup in December. But the broker reports also noted what seemed to be a reacceleration in tenant concessions. but I know that can be swayed by a handful of leases, especially when overall volume is down. So what are you seeing on the ground as far as concession trends and how are those trends impacting your portfolio specifically?
spk01: You know what? I don't really see it. I mean, I think it's been fairly stable throughout all of last year. I think it depends on the where the where the leases are being signed there's no doubt about it when you when you have two-thirds of the leasing activity being done in the class a market so it's the highest part of the rent spectrum and therefore you would expect uh also has the greatest amount of concessions to support those high rents then it starts to skew the statistics because when you get you know so many triple digit rents you expect a bigger concession package vis-a-vis deals in the $60 rents. If you took the 340,000 square feet that we signed in the first several weeks of January, you know, weighted average, we had $43 a foot in TI in five months of free rent. Now, granted, some of those are renewals that are five-year deals and a combination of that with some other deals that are 10 or 15-year deals. But I think that number would have been pretty much in line with the kind of concessions that we would have reported all of last year. So I don't I really don't sense that there's a movement that's negative.
spk14: Appreciate that color. And then maybe Steve or Mark, I can't remember who touched on this last quarter, but for 245 Park. You had just over a million square feet of leases that expired in 4Q, but as you mentioned in 3Q, the majority of those had sublet tenants already in place. So it looks like the actual roll down was just a hair over 130,000 square feet for the quarter. Are those tenants that stayed, are they all now direct with you? And if so, What is the magnitude of the rent and expense reset going forward?
spk01: Well, there's a couple of different moving parts there. I think what we had probably referred to is we had the, a pretty large lease with major league baseball. That was where they had moved out of the building several years ago, relocated over the sixth Avenue. And then they had backfilled or we had backfilled a, majority of that six floors, seven floors, whatever they had, with some short-term, some were long-term, but most of them were short-term direct deals. So those leases will burn off in the next year or three. And with regards to the rent reset, I don't know, maybe you can weigh in, Matt.
spk16: No, I mean, Steve made the point on the rents. The rents that were
spk01: uh that we took on the shorter duration deals they're not really market rents so we'll be resetting those rents to market as we re-tenant the space so kind of you know temporary tenants so to speak but you know i will use this an opportunity just to sort of reinforce what market said earlier we're out there in a big way now with a very well established development plan and a very strong marketing presentation for the building and that is already paying dividends as we are already receiving proposals that we think have a very credible chance of converting over to leases of significant size.
spk10: Why don't you talk about how much space is going to be marketed and what that rental range is high to low?
spk01: Well, we have between now, over the next 30 months, 36 months, about 800,000 square feet in the building that rolls. The majority of that space is in the mid to top portions of the building. Rents in the building are, call it, roughly $110 to $140 a foot. And the proposals that we have received and the conversations that we're entertaining with tenants, those tenant expectations are in line with our underwritten rents.
spk14: Got it. Appreciate the answers. Thanks, everyone.
spk09: Thank you. Our next question or comment comes from the line of John Kim from BMO Capital Markets. Mr. Kim, your line is now open.
spk03: On the CBS renewal, it looks like they downsized by about 40% from the space that they had. And if that's the case, it's quite different from the Fox and News Corp renewals, which I think was all the space that they had at 1211 Everett Americas. Is your anticipation that CBS is taking space elsewhere in New York or are they just truly downsizing their space requirements?
spk01: No, it was just downsize. You know, the majority of the people that are there, um, uh, it's sort of an independent group of, of operating units, uh, separate distinct from the groups that are over at 15, 15 Broadway, where they, you know, they occupy the entire building. So no, I think I don't, uh, I've, Our conversations with them have not suggested that they are on an active program to downsize as we sit here today. But, you know, it's like a lot of these big firms are all trying to figure out their long-term plan as a result of hybrid work environment and work from home and things like that. But even though they're a big advocate of bringing everybody back to the office.
spk03: Okay. And then on page 39 of your stuff, there was a – A noticeable change in your mark-to-market or the implied mark-to-market of the lease is expiring in 2023 versus the asking rent, and it turned positive on your wholly owned assets. Last quarter, it was negative. It looks like it's the same amount of square feet. It's pretty similar. I'm wondering what that change was to get to that positive mark-to-market.
spk16: That's actually a function, John. It's Matt. That's actually a function of the leases we were just talking about at 245 Park, where the large tenants rent rolled off. So say MLB spent rent rolled off, which was a market rent, and it rolls down to what the rent that the old subtenant current short-term direct tenant is paying. And then those short-term new small direct tenants rents will flow through the expiration years and whatever year those leases expire. And the mark-to-market is based on those lower rents as compared to the previous market rents none of the changes as a result of uh our view of a change in market rents it's simply a function of a change in the uh starting rent that it's based on how inspiring okay thanks a lot thank you our next question or comment comes from the line of michael lewis from truest mr lewis your line is now open
spk09: I'm sorry. Our next question is from Mr. Michael Griffin from Citi. Mr. Griffin, your line is open.
spk04: Great. Thanks. Mark, in your conversations with business leaders, you know, I'm just curious, you talk about getting that utilization rates back to that 70 to 80%, but I think the worry is, you know, are we stuck in this kind of impaired level of call it the low to mid 50s? I guess as we look forward to the balance of this year, I mean, how confident are you that these firms can get their people back in and And is it possible to get back to that previous high watermark?
spk10: Well, I think there's a lot of confidence around three or four days a week. I think the bigger question is, you know, is Friday becoming, you know, more and more like a remote workday for, you know, many but not all firms. And, you know, that doesn't really impact The space decision, that's just more of a business philosophy decision. People aren't going to, I don't think, take more or less space based on how they gear their Fridays. You know, I mean, we look at Friday as like an equally productive day for the rest of the week. I think a lot of firms do. But, you know, I think that's the one area to me I'm not so sure about. But I think for the balance of the week, we just feel like every week there's more and more energy emphasis, lobbies more crowded, trains are more crowded, streets are more crowded, or retailers, small and big, are reporting better results. It feels like that as I think the job market normalizes, it was a very, very tight market for the last several years, I think that's going to start to reverse itself, although wage inflation is still stubbornly higher than where the Fed would like to see it. But I do think that'll moderate. I think that'll be this year. I think we'll get incrementally more gains, whether we get all the way back to pre-pandemic or not, don't know. But I also don't think that's a determinant of the ultimate space occupied. I think that's just going to be you know business by business how they evaluate competitive factors about how they can optimize their you know their their work plans with what type of hybrid work model but you know we find more and more the meetings are live doing very little zoom these days relative to you know certainly the past couple of years You know, it's just part of it's the numbers, part of it's anecdotal, and part of it's speaking to the leaders. I tell you, across the board, every leader says they want to be on a three to four day in the office work week for the majority of their companies. And I think Friday will sort of just be a case by case.
spk04: Great, thanks. And then, Matt, on the debt maturities, I noticed that some on the unconsolidated joint ventures were past their due date. I think you did a good job at the investigate kind of laying out that some of this might be outside of Green's control. But do you have any sense on a potential resolution or how these things ultimately get worked out?
spk16: Yeah, so you're talking about 1552 Broadway and 11 West 34th Street. Yeah, you're right. I mean, we don't unilaterally control those things we get ahead of our maturities. um you know the wholly owned ones and the ones that we control you know well ahead of maturity um you know there we are in active discussions with the the borrowers on uh likely some form of extension uh we did short-term extensions you know to get pushed you know the the maturity dates pushed out 30 60 90 days um just as a path to getting to something longer duration done and that's in process i think lenders are going to have to work with borrowers at this time so
spk07: You know, it's somewhat in our partner's hands and it's somewhat in the lender's hands.
spk04: Nope, that's great color. That's it for me. Thanks for the time.
spk09: Thanks. Thank you. Our next question now comes from the line of Mr. Michael Lewis from Truist. Mr. Lewis, your line is now open.
spk05: So, I saw an entrance to yesterday when I was on my way to my Metro North train. I was actually kind of shocked. So you beat me to it because I was going to ask about that. I guess. I guess I never thought it would open either. So congratulations on that. But my 1st question, I wanted to ask about an update on the properties you're looking at now this year. So Andrew mentioned a standoff in the market, and he gave some color. But maybe you could just add to that, is it a question of waiting on financing markets? Are there very different opinions of price? And then also, have you given any guidance in terms of expected transaction timing, particularly for the interest in 245 Park and M1 Vanderbilt?
spk07: No change in guidance on timing from December. I think just looking at the curve you have short rates at four and a half and long rates at three and a half so naturally buyers want to borrow long and the providers of long debt right now are being very cautious about the deals that they choose and bond buyers are sort of slowly coming back to the cmbs market so i think when you see that long market materialize and start to get more liquid On the debt side, you'll see buyers reemerge for assets. It's less a matter of there's a big gap in the price people pay because sellers aren't really entertaining offers until they know they can get realistic and they don't want to sell at a time when there's a real lack of financing available. So I think you're just going to have to see the long financing come back, and then we'll see where the market settles.
spk05: Okay, great. And then second for me, a question about the financial leverage and how you're looking at that. You know, you fixed a lot of your debt now. And I'm wondering if that makes it, you know, does it become less of a priority to kind of delever to the extent you want to? And does it change at all, you know, how you consider other uses for disposition proceeds, you know, relative to stock buybacks or other investments or other uses?
spk16: For 2023, the answer simply is no. The fixing of debt was something that we very carefully choreographed the middle to later half of last year. And the timing of the debt that we fixed coincides with our expected timing of asset sales dispositions and other funding sources that allow that debt to get repaid. So what we laid out in December was a plan to reduce debt by $2.4 to $2.5 billion, you know, through dispositions in excess of $2 billion and other sources of capital like the funding from our partners at One Madison. To the extent any of that debt that we are repaying is floating and we have swapped to fixed, we put swaps in place that coincide with our expected repayment timing. So it all lines up, you know, the fixing of the debt and the repayment schedule with what we said in December.
spk09: Okay, got it. Thank you. Thank you. Our next question or comment comes from the line of Anthony Payalone from J.P. Morgan. Mr. Payalone, your line is now open.
spk11: Hi, thank you. Can you hear me?
spk16: Yes, I can.
spk11: Oh, great. Thanks. So first question, I guess, for Mark or Andrew on the third-party capital side, can you give us a sense as to what type of return you're pitching prospective investors on 245 Park and just a general sense as to maybe what kind of return that market requires right now for a New York City office project?
spk07: Sure, Tony. I mean, that's a unique asset because we have fixed-rate financing there that's very much in the money, if you will, very attractive fixed-rate financing. And we're expecting a range of returns there in the low-teens type levered IRRs. And I think that type of return is a very attractive relative return for an asset of that quality with in-place financing in place. It's part of the reason we're confident. We got a good buy on the resolution, if you will. We took it over at an attractive price, and we're confident we'll be able to find partners to come into the equity there with us.
spk11: Got it. Okay, and then just one quick one, I guess, for Matt. On one Vanderbilt, can you give us the fourth quarter cash and gap NOI contributions and try to think about where that was relative to the kind of stabilized level you're getting to?
spk16: Sure. For – spare me one second. I like when you ask detailed questions. Tony makes me look for stuff quickly. Gap, our share, about $27 million. Cash, $16 million. That's our share of fourth quarter.
spk11: Great. Thank you.
spk09: Thank you. Our next question or comment comes from the line of Ronald Camden from Morgan Stanley. Mr. Camden, your line is now open.
spk13: Hey, just going back to the transaction markets, number one, just don't wind Vandy, just any update there on the 10% JV prospects, as well as sort of the $2 billion-plus
spk07: plan for this year just what's being marketed what's the interest like any color there would be helpful one Vanderbilt no update from December you know it's still a goal of this year to get that interest sold and we're hopeful to make it happen the second part of the question I did not hear you repeat the second question yeah just a two billion of dispositions for this year
spk13: You know, I think some had already been marketed or in the process of being marketed just where are we in that process? What kind of interest?
spk16: Are you seeing there? The biggest component of that is 245 which I think we've covered at length so far seven days in the seven days in the market or is a minutes 121 green went the contract we announced that in the release last night that's a component of it and we have a couple more assets that are out to market or will be shortly and So I think, as Andrew said in his commentary earlier, you know, we're trying to make a lot of headway on that plan in the first half of the year. And we're, you know, doing an admirable job on plan with that strategy.
spk10: Yeah, I would just – there was some comment about has been in the – I mean, has been in the market. This is – these are all pretty fresh initiatives, some of which, you know, we haven't begun yet. I mean, we give a plan in December that covers – uh, a 12 and a half month period, there are certain, uh, disposition plans that will be bringing to market, uh, spring and by, uh, by summer. Um, there are some, as Andrew mentioned, we're currently underway with, uh, all of which are pretty fresh, all of which we've reiterated a couple of times on the call where, you know, we're, we're standing by the guidance and, you know, uh, it's not, it's not an easy market. It's never an easy market, easier to buy than sell, but, uh, We're pretty good sellers. I think we've demonstrated over 25 years as a public company the ability to monetize more assets than certainly anybody else in our market here in New York and I think quite a bit even measured on a larger basis. So we own and we have ownership interest currently I think about 46 million square feet. We've owned and monetized interest since day one on 124 million square feet. So we've monetized and repatriated far more than we have today. We have a business plan on these, I think it's about five assets for Sailor JV. We feel pretty good about it. Markets... Markets may be not as good as it was, but we wouldn't characterize it as a bad market either. There's pockets of equity. There's opportunities for debt. We're marketing very, very good positions. We think we'll get good pricing. And that's where we are now. And there'll be more updates to come, as I mentioned in the opener of my narrative, by roughly mid-year.
spk13: Great. and then just my second one was just earlier in the month the new york gaming board released the request for applications um you know there was no artificial debt bonds i think those are the first rounds of questions through february 3rd just sort of wondering from that release are you do you plan on asking questions was there anything surprising not surprising just just what's the update on the on the plan for the casino thanks well um i mean we are
spk10: We've got a robust team and growing daily for this casino project. Both our investor team, strategic team, grassroots supporters, coalition members, we're all over this thing. This is a real priority for us. We're leaning into it very hard. We're gonna put our best foot forward here to make it happen because We feel it's great for Times Square. We feel it's great for New York City and Manhattan. We think it's good for this company. We think it's good for the state. And gaming, when executed at a high level, a targeted boutique level where it's really an integration of gaming, entertainment, hospitality, live entertainment, and not solely focused around the casino element itself. I think it's something that when it's done that way, it's incredibly good for the immediately surrounding areas. There's a big halo effect that can come for it if the facility is built as an integration to its neighborhood and not as kind of like a moated destination where, you know, people go and they don't leave until, you know, until they're done. So, you know, we have a project that's the exact opposite of that. It's something that really is a bid, you know, on behalf of all Times Square businesses in an area that I think, you know, hasn't fully recovered from pandemic that can use the help, even though, you know, every day it's getting better and better. This would be a significant investment of capital in a part of town that is one of New York City's treasures. Times Square is the crossroads of the world. It does have 60 million tourists and visitors a year. It has 350 or 60,000 people a day coursing through it, both visitors and locals. And it should be as great a calling card to the city as as all other parts and and We think you know this project will help You know continue to direct it in that in that direction and You know, we're going through the RFA and You know, there's no no surprises to date where we're going to be responsive we're going to be competitive and and hopefully at the end we'll be victorious. Thank you.
spk09: Thank you. Our next question or comment comes from the line of Steve Sacqua from Evercore ISI. Your line is open.
spk02: Questions have been asked. I just had one quick question on the ground lease at 625 Madison. I know the kind of reset day came and went, and I'm just wondering if you could provide Any update on the timing or how those conversations are going?
spk07: We're currently in an arbitration process to determine that rent as leaseholder, and with respect to the rest, unfortunately, as we've said on prior calls, there's a lot of controversy and litigation surrounding that asset, and we're not really able to comment further.
spk02: I can appreciate you can't give a lot of detail, but I guess would it be your expectation that that gets resolved sometime in 2023, or is it too difficult to even handicap that kind of timing?
spk07: We would expect the rent on the leasehold to be resolved in 2023, yes.
spk02: Okay, great. Thanks. That's it for me. Thanks.
spk09: Thank you. Our next question or comment comes from the line of Camille Bonnell from Bank of America. Ms. Bonnell, your line is now open.
spk00: I wanted to follow up on the capital structure and strategy behind it. Do you see any difference in the longer-term leverage levels between your consolidated and JV portfolios?
spk16: So, you know, our view of leverage is first one of LTV, not debt to EBITDA, because that's how real estate leverage is measured. um and you know we we look at it obviously at a corporate level um you know rolled up combined basis and you know are comfortable where we are um we're a little higher than typical right now because of some asset acquisitions we did and so that's part of the reason we're targeting debt repayment over the course of this year but where we were prior to that and where we'll be at the end of this year based on the plan we have in place we are completely comfortable with as it relates to you know consolidated unconsolidated We tend to have, as we move more into this asset management model, more unconsolidated JVs than we have in the past. I'm sure it'll continue to move that way. That leverage level will be taken on a case-by-case basis based on the asset that the JV invests in and then rolled up through the company to make sure that we maintain an prudent amount of leverage as a company. So where it sits is not necessarily something we're as focused on as the overall leverage profile.
spk00: Okay. And just taking another angle on the transaction market, more of our conversations with brokers seem to indicate that we won't see pricing discovery over the next 12 months. Can you update us on how you think about this in the context of opportunistic investments and how much of your pipeline is based on distressed opportunities?
spk10: Well, we hope to have price discovery on five of our assets certainly within 12 months. So that's doesn't dictate the market, but certainly, you know, is sufficient for us. I mean, we definitely pride ourselves on having a good pulse on, you know, where pricing is. I would not call this a market where pricing is undiscoverable. I mean, we've seen those markets. I don't think that's this market. This market, you know, I think there will be trades done this year. Certainly, you know, we anticipate doing trades. You know, you have to have – you know, bring a realism to the table as to, you know, current values. And I think, you know, we're good about that because we constantly are refreshing our internal NAVs throughout the year, asset by asset, lease by lease, and, you know, making adjustments for market factors like growth and cap rates and required returns, et cetera. So, you know, I think there will be It's like a tale of two cities. There'll be a normalized market for better sponsors and better assets like we have, which I think have largely retained their values and I think for which there will be a market. And then there's going to be properties that either have less solid sponsorship or capital stacks that are far too over leveraged. or a sponsorship that doesn't have the liquidity and capacity to muscle through redeveloping or amenitizing or re-tenanting their buildings. And those properties will fall into an opportunistic bucket that in the second half of this year, I would think you might see us start to poke our heads up again. I did mention that in December that we definitely have our own capital resources. We have access to third party capital resources that could make us acquisitive or reentering the investment market opportunistically, probably in the second half of this year. And there'll be some opportunities, but for all that people anticipate in terms of what kind of distress there might be in the market or otherwise like that, It rarely evidences itself these days in New York City, specifically in Manhattan, because, again, you've got the top 10 or 12 owners controlling 50 or 55% of the inventory in the market, and these companies tend to be best liquid and capable of weathering through this market, you know, already we're starting to see the rate rise moderate. We've seen the long end actually come in quite a bit, over 50 basis points from its peak. I think, as Andrew mentioned, when the long-term financing market comes back, and it will, then you're going to see that liquidity spigot back on and, you know, and on we go. You know, we think this is more of a mini correction. We don't think this is, you know, something else that maybe some of the brokers are implying. But, you know, we'll see how the year goes. And right now, you know, we're still sticking with our plan and, you know, we feel we can execute it.
spk00: Thank you.
spk09: Thank you. Our next question or comment comes from the line of Derek Johnston from Deutsche Bank. Your line is open.
spk06: Hi, everyone. Thank you. You know, as the DPE balance decreases and loans mature, are repaid, I think this quarter was $57 million. How do you plan to put that capital at work? Can you just remind us, are there any restrictions how those repayments or capital can be deployed?
spk16: and and then you know just an update on the dpe strategy i think we have the 23 strategy for the near term but you know what are the thoughts for for the midterm so as it relates to you know use of capital upon repayment we have no restrictions um 57 million was alone right that was that 57 million was repaid we anticipated the repayment to come in 20 It came in late in 22, and we simply paid down debt with it, which is what we've been doing along with Sherry Purchases with a lot of the repayments and sales proceeds that we've gotten off the DPE book for the last couple of years. But we don't have any specific restrictions as to how we use those proceeds.
spk07: We don't treat the DPE book as sort of a closed system where money has to get redeployed into DPE. Those dollars are fungible and can go towards debt repayment or investment into assets or investment into new assets. Uh, we, we're, you know, we look at evaluate all the investment opportunities across all our business lines, try to figure out where the best risk reward is and we'll allocate dollars there.
spk06: Okay. Thanks. Got it. And then maybe a fun one, uh, if you would, um, you know, what gives you guys confidence, um, that the casino license that, you know, your, your, um, you know, a Times Square project is superior and what kind of, you know, makes it stand out versus the others and now even a potential Penn District application being submitted. Thanks, guys.
spk10: Well, you know, I'm not speaking about other locations, just speaking strictly about Times Square. I don't know if the question is rhetorical or not, but I cannot think of a better location in the United States for a high-end gaming entertainment five-star hospitality hotel with live entertainment, sports betting, restaurants, and outdoor space with which to be able to you know, integrate into the surroundings of what goes on in Times Square on New Year's Eve and otherwise than in Times Square. I mean, I just, it's certainly in New York State and certainly in New York City, I couldn't conceive of a better location. I think it's a district that was actually conceived in its use group 12, large format entertainment with the theater overlay, with, you know, the mandate of, you know, having exciting signage and technology and entertainment uses. I mean, those are all celebrated within this Times Square district and celebrated fairly uniquely in the city. And when you take that very commercial district and then you layer on top of that unprecedented access to public transportation with 11 subway lines that service Times Square a block from the Port Authority which is about to go through its own redevelopment almost equidistant between Grand Central Penn Station Obviously New Grand Central Madison, put a plug in for that. And you think about a facility that's going to be drawing millions and millions of visitors and yet making the least impact because of the ability to maximize usage of public transit relative to almost any other location. that might be vying for this award. You put those two things together, the incredible nature of the district, the compelling nature for attracting not only domestic tourism but foreign tourism that will come to New York to gamble at a Times Square casino, I think it just puts it at sort of the top of the chart. That's not to say there aren't other viable sites. At the end of the day, it's going to come down to an analysis about economics, job creation, incremental tourism creation, lease disruption to the surrounding grid. Recall 1515 Broadway is an existing building. It exists. It's built. It doesn't have to be developed. It's not going to displace... anything in its place it won't you know you know come at the expense of housing or parks or schools or anything of those lines it's a commercial building it exists so you know I'm pretty excited that we just have the good fortune to happen to have a site there that you know is a viable candidate for this casino licensing it's going to be very competitive there's going to be lots of proposals I imagine And, you know, there'll be some real competition, which is what New York City is all about. And there's three licenses on the table. Hopefully, SL Green and Caesars and Roc Nation will come away with one of them.
spk06: Yeah, and the great partners. Thank you, Mark.
spk09: Thank you. Our next question or comment comes from the line of Blaine Heck from Wells Fargo. Your line is open.
spk16: times here in the Q&A, you've commented about how businesses are still navigating, how they're going to deal with in-office versus remote work. Are you seeing any signs that tenants are looking at hoteling as a way to more efficiently use their office space? And I guess, do you think the hoteling strategy could be more widespread in a more hybrid environment? Well, just second part of that. The second part again, Blaine, just the last one. Yeah, just to repeat it, do you think the hotelling strategy is going to be more widespread given that we're in a little bit more of a hybrid environment?
spk10: Hotelling has been around for a long, long time. So the concept of shared desk, hot desk, hotelling, that's decades. Is there more of it now than there was? There was a trend in that direction leading up to the pandemic. Then I think there was a trend away from that immediately post-pandemic where it was almost like, you know, forbidden because everybody, I mean, remember it wasn't too long ago where, you know, there was like plexiglass up between cubicles and cubicles were being, you know, separated by, you know, by feet and, you know, they were depopulating floors. So we've passed all that. And I think we're now trending back to the way people thought about it initially hoteling has and always has had a role I think in New York office whether it's more or less prevalent now I can't really say maybe Steve you can but I don't I mean not that I'm aware of but you know it's I'd say it's more than it was maybe coming right out of pandemic but I can't say it's more than it was in the years leading up to it well it's also only applicable to very large tenants you know if you really think about the average tenant in New York City
spk01: that's less than 25,000 square feet, hoteling is not a viable way of them operating their business. If you're talking about a tenant with hundreds of thousands of square feet, then it's a conversation. And typically where we see it, it's very specific to certain types of industries. So sales businesses, consulting, media businesses. But when you go into the big financial firms and things like that, we see it far less frequently.
spk05: All right, that's very helpful.
spk16: And then just to follow up on a couple of earlier questions, I was hoping you could just comment a little bit more in general on debt availability for office assets and landlords today and how you expect that availability and even pricing on debt to trend throughout 2023. Beyond the commentary we did, Yeah, we touched on it a bit earlier. I think we're getting some real-time feedback because we're out in the market with a $500 million refinancing of 919 3rd Avenue. And the interest has been good. I mean, you have to have a floating rate, shorter duration is widely available. I think I just said earlier, sponsorship and building quality location all matter more so than ever. So we're out with good product. We're obviously a good sponsor and the feedback has been good.
spk10: I think we expect that, you know, second half of the year that you'll see, you know, a little bit of return of the long part of the fixed rate market. So, you know, again, these are pretty short. You know, it sounds long. I mean, if you're going to blink your eyes, you're going to be – we'll be sitting here on our second or third quarter conference call. And hopefully by that point, you know, we'll be talking about more capacity in the market. Fortunately, we don't have any projects ourselves geared –
spk09: for that kind of execution this year right so yeah we're in good shape thanks guys thank you thank you okay next question operator operator uh next question comes from the line of peter abramowitz from jeffries sir your line is now open
spk15: Thank you. Just one more on the financing market, because I think you talked about 919 3rd Avenue, and then you also have 220 East 42nd. I guess 3rd Avenue or Lexington, depending on where you ask, has kind of been cited as the cutoff for how assets are performing differently by sub-market with a little bit less activity, both leasing and then utilization east of that cutoff. Do you sense any kind of difference in the conversations when it comes to that, just in terms of 919 versus would it be easier to refi a similar asset closer to Park Avenue? No.
spk07: I mean, you didn't hear that commentary from us. So not at all. If you look at our tenant base at 919, it's about as institutional a roster as you get. We sold 885 3rd Avenue to a hospital at a great price at the end of last year, if whoever gave that commentary missed that print. And I don't – it makes absolutely no difference in the financing model.
spk16: And 220 East 42nd Street matures in 2025, so we're not discussing that right now.
spk09: Right. Okay. Got it. Thank you.
spk10: Credit operator?
spk09: Thank you. I'm not showing any additional questions in the queue at this time, sir.
spk10: Okay. Well, for anyone who's still on the phone, I would encourage you to check out highlights from today's 2023 State of the City address that Mayor Adams gave this morning. And, you know, it announced, amongst a host of other things, several exciting investments. that were born out of the new New York plan that a lot of stakeholders worked on, including us here at Green, in order to create an action plan to really bring New York forward. And it was great to see how quickly the recommendations were developed, how executable they were in their communication, and now to see Mayor Adams including much of that in his State of the City, which includes hundreds of millions of dollars in investment in new public spaces and permanent open streets, which we think is great for the city to make CBDs 24-7 cities in Manhattan and all five boroughs. He reaffirmed his commitment to building more housing and more affordable housing through what he calls his city of yes by making the necessary modifications to zoning. and you know you know working with council to make that happen and making the incentives in place there for conversion of office to residential as well as new development and other investments in quality of life initiatives in and around the commercial corridors throughout the city which I think you know are very much needed and appreciated so the city and state are working together towards common goals making the city safer cleaner better and You know, it's a good thing to see and, you know, more on that to come. So thank you for joining in today.
spk09: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.
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