SL Green Realty Corp

Thank you everybody for joining us and welcome to SL Green Realty Corp's third quarter 2023 earnings results conference call. This conference call is being recorded. At this time, the company would like to remind listeners that during the call, management may make forward-looking statements. 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 risks, uncertainties, and other factors that could cause such differences to appear are set forth in the risk factors and MDA 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 third quarter 2023 earnings and in our supplemental information included in our current report on Form 8K relating to our third quarter 2023 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.

Okay, thank you. Good afternoon, everyone. We're obviously holding this call at a moment of great global stress, but we will do our best today to focus in on the company's third quarter performance and what we're seeing in the markets. While the current market remains challenging, we did have a number of very positive developments and milestones that I'll summarize for you right now because they were hard fought and we're proud of them. First, we celebrated completion of One Madison Avenue with the receipt of our temporary certificate of occupancy, marking the completion of the building construction three months ahead of schedule and well under budget. Importantly, this milestone triggered the final $577 million equity payment from our joint venture partners, which we already received and used to repay an equivalent amount of unsecured debt. Earlier this month, we launched sales at 760 Madison Avenue, the beautifully designed and executed Giorgio Armani residences, with half of the 10 units already spoken for and negotiations pending on additional units. We have also substantially completed the Armani retail store and restaurant and are in the process of turning the space over to Armani to commence the lease. Building off our positive experience and sales momentum at 760 Madison, I'm now happy to report that we have successfully acquired the fee interest in 625 Madison Avenue through a UCC foreclosure of our mezzanine loan and we are now in control of the fee. All litigation with the previous fee owner has been resolved and we are finalizing our business plan, which we intend to unveil in December. With JV Partners, we closed on two extremely well-executed loan extensions at 719 7th Avenue and 115 Spring Street, bringing our total refinancing of extensions and modifications to $3.2 billion for the year, reducing our combined debt by $1 billion, and additional extensions and paydowns are planned for the near future. And yesterday, we announced the sale of our interests alongside our partners in 21 E 66th Street for a gross total value of $40 million, demonstrating the resiliency of demand for Upper Madison Avenue boutique and retail properties. Perhaps, and most significantly for the first time in the last 16 quarters, you got to go all the way back to December of 2019, I can report that same store occupancy trended up in this past quarter with projections of a slow but steady climb that should continue into the next quarter and on into 2024. This is an important moment that signifies the stabilizing of the operating portfolio assets. The trend is in our favor as companies continue calling people back to work with news this past week of another 500,000 workers being called back and expected back this January. It's important to note we are sitting in a good position at 1.1 million square feet of pipeline leasing activity with nearly half of that amount represented by 20 leases that are either in negotiation or out for signature, indicating a high probability of closure of those particular transactions. Those leases are split about evenly by square footage between new and renewal leases. Decision timelines for tenants are lengthier than average, which has delayed some of the occupancy gains we had hoped to achieve this year. But directionally, it appears that predictions of an existential crisis for New York City office buildings is way, way overblown. And in fact, more and more of New York City's leading businesses are championing physical presence in the workplace as the best and most meaningful way of building community, promoting teamwork, establishing relationships, and maximizing productivity. We will continue to enhance and amenitize our core properties to provide maximum convenience and benefits to a workforce today that is looking for elevated workplace experiences. We, along with the rest of the real estate industry, are impacted by the sharp and rapid rate increase experienced over just the past 18 months, but we are implementing our strategic plan to complete our development projects, lease up the portfolio, sell in JV certain assets, pay down indebtedness, refinance and extend debt maturities, and hedge our exposure to future increasing interest rates. And we are going to succeed. We will talk at greater length about our 2024 strategic plan at our upcoming investor conference, but rest assured that we are ready for this moment of great opportunity and we intend to take advantage of market repricing and the liquid borrower dislocation through growth in our asset management business. So as we look into 2024, we see reasons for real optimism. We have a plan to execute and a new generation of leaders to help execute it. That last part is bittersweet for me and for the company as we prepare to say farewell to Andrew Mathias. After 26 years of and over, on my estimation, 100 earnings calls, Today will be his last earnings call for the company. While this was an extraordinarily hard decision, it's the right time for the company and probably the right time for Andrew as well. He can speak to that, but one thing that's for certain is that he's made an invaluable contribution from the time we first embarked on a new trajectory to become the biggest and best real estate company in New York City, and the rest is history. Andrew is a partner and a friend and I'm happy that he will continue in his role as a director of the company and as an advisor to me. Andrew will undoubtedly have the opportunity to move on to other things, and we will have the opportunity to bring up some of the younger talent we've been mentoring to assume positions of leadership as we're ready for incredible opportunities that will be before us in the new year. I want to take this opportunity to thank Andrew on behalf of the entire company. Andrew's dedication and loyalty have been essential in accomplishing things for this company. that were unimaginable 25 years ago. On a personal note, Andrew and I have been side by side for nearly 30 years in work and in friendship. What an incredible ride it's been. Now I'd like to hand it off to Andrew to say a few words.

Thank you, Mark. It has truly been a long and amazing run for a kid from Buffalo who never expected anything like this kind of experience in his life. I appreciate all the relationships with shareholders and analysts I've formed over the years. I've seen many come, many go, many stay, and kept in touch with them in their new positions. It's quite an industry, quite a business, and we've ridden a lot of ups and downs together. I would just say we have a great and deep bench of talent at this company, some young, some not so young anymore. But I'm confident that SL Green will be the best positioned company by far for a recovery when it comes, and it will inevitably come. And I look forward to continued involvement in the company's success as a board member as long as they'll have me and as an advisor to Mark. And, you know, all the words and kind reach out I've gotten over the last couple weeks is greatly appreciated. So thank you.