SL Green Realty Corp

Thank you everybody for joining us and welcome to SL Green Realty Corp's fourth quarter 2024 earning 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 prediction 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 and 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 Security and Exchange Commission. Also during today's conference call, the company may discuss non-GAAP financial measures as defined by Regulations G under the Securities Act. The GAAP financial measures 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 the company's website in our current report on Form 8K relating to our fourth quarter 2024 earnings. Before turning the call over to Mark Holliday, Chairman and Chief Executive Officer of SL Green Road T-Corps, 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'll now turn the call over to Mark Holliday. Please go ahead, Mark.

Okay, thank you, and thank you for all dialing in today. It's great to speak to everyone as we kick off another exciting year, 2025. We're ready to dive into it. In years past, my opening remarks in January are typically brief, coming on the heels of what is a very comprehensive presentation we do for our institutional investors at the December Investor Conference, which was just seven weeks ago. It was a very exciting moment for the company in December, and for our team, because it really capped a pinnacle year where we achieved so much. Having come through some fairly tough years, It was nice to see our strategy pay big dividends for our shareholders, and we posted market-leading returns, and it was a great affirmation, if you will, of a strategy that we stuck to and hung in there, and now I think we're entering a period of time, which I mentioned in December, I think this is going to be possibly some of the best years we've had at the company possibly ever, given the dynamics of what we see in this market. We finished the year strong with 188 individual leasing deals, totaling 3.6 million square feet. That's our third highest leasing year ever. We closed on our opportunistic debt fund in December. That really came just within a short period of time of when we launched it earlier in the year. I think it was February or March, and we have additional closings occurring that we expect We'll round the fund out to over $1 billion in the first half of the year. There are opportunities that are far, far beyond what that $1 billion will provide for us. So the good news is we expect to have opportunities to deploy and to continue our historically successful debt-preferred equity platform in this fully discretionary fund format, and I think it's a real feather in the cap of this team and this platform to have been able to close this fund that quickly and what will be, you know, robustly in terms of amount for a first-time closed-end fund issuer, and we look forward to rolling out many additional strategies in the future. At its core, the most important stat is that we ended the year at 92.5% occupancy, and we're projecting over 93% leased occupancy in the coming year. Our business is fundamentally about filling office buildings with tenants. And when we get close to that 95% range and we are closing in on it, that's when we can really begin to push rents, rein in concessions, and see building values increase at above average rates. In December, we had 900,000 square feet of pipelines. That was the stat that we announced at our investor conference. We've already leased just in those seven weeks, 250,000 square feet since then. And we still have about 900,000 square feet of pipeline. So we're getting stuff done, but we're also immediately refilling that pipeline, which is what it's all about, refilling and growing that pipeline. And it's only January, which is usually a slow time in the market, but not here and not this year. In fact, there was a lot of good news in the earnings release yesterday. We had very strong profits that you saw. We continued on a path of, you know, sort of making the market in New York City with a lot of transactional activity. And we certainly got a lot of leasing done as well. I think close to 1.8 million square feet in the fourth quarter. Since that time, so as not to let too much grass grow into the feet, we've announced two big expansions already with leading companies this year. Yesterday, we announced the signing of IBM to a 93,000 square foot expansion at One Madison. That's about a 33% expansion over the square footage that they had originally committed to just within the past 18 to 24 months. So rapid growth Good for IBM. I'm sure part of that is due to their, you know, successes they're having, particularly, you know, a rapidly growing footprint in the AI industry. And also, you know, they're one of the many, many firms out there that are getting people back to work five days and are benefiting from, you know, collaboration in, you know, buildings that are designed, you know, to accommodate tenants like them. Aries added another 38,000 square feet. That was about a 10% growth in footprint, a little more actually, at 245 Park. And that's a building that's undergoing a significant repositioning and is also now a massive success. So we leveraged off that success that we're having leasing in our premier buildings and our premier Park Avenue portfolio by closing on 500 Park Avenue. We closed a couple of days ago. It's a great post-war landmark building designed by SOM. It's a building where we can bring our brand of hospitality, high-end amenities, service, capital improvements to move rents meaningfully higher and make it another key holding of ours on Park Avenue. We're very proud to make that addition. And we got brand new debt from Wells Fargo on that property. on terms that I think were very competitive and reflective of the building, its location, the opportunity, and sponsorship. The market on PARC, I'll just sort of keep harping on that, it's about as tight as I've ever seen it. Its least occupancy is about 7%, vacancy, I should say, is 7% or less, and dropping. And you can extrapolate that to trophy buildings throughout New York. There's about 38 buildings defined as trophy buildings. They account for 46 million square feet. That's over 10% of the market is trophy. The availability rate in those 46 million square feet is 6.7%. Notably, that's down almost 200 basis points from where it was just in the third quarter of 2025. That's what I mean when I talk about, you know, the rapidity with which things can tighten up when you get a confluence of diminishing supply and escalating demand. When I look out at the year ahead, my optimism is driven by all of this activity that I'm talking about, but also just by the fundamental economic success of New York City on so many levels. On job creation, the city's OMB is forecasting about 38,000 new office-using jobs in 2025. Those jobs will be coming out of the finance, business services, and information technology sectors. That translates into millions and millions of square feet of new absorption for each one of those bodies, and those are not work-from-home bodies for the most part. Combine that with the fact that on-site attendance is rising every month as companies are calling people back to the office four and five days a week, we expect to see very strong demand for office space throughout 2025, and we'll just continue to monitor and keep you all updated on these quarterly calls throughout the year. The revenue line item, moving away just from office-specific metrics, looking at the city overall, personal income tax receipts are way up, driven largely by the extraordinary profits being realized in the finance sector. You know we track and bring to your attention from time to time, the Wall Street member firm profits. They were $36 billion through September. They're expected to be $48 billion of profits through the end of 24 when they finally report on that. That would make it the third highest year ever in that category. And that drives corporate tax collections. That drives personal income tax collections on increased compensation. Combine that also with the fact that the city has been spending over the past couple of years three to four billion annually on dealing with the severe migrant crisis that New York City was experiencing more acutely than many other cities throughout the country. But now we've seen a trend towards shelter closures, which should accelerate, I believe, under this new administration and should be a big pickup for the city in saved costs as that crisis begins to become more manageable for the city, both in terms of space and support services for those community people. All of this occurs at a time when there's real scarcity of well-located, amenitized space in Manhattan. I said in the December investor conference, there are zero new ground-up office projects currently underway in core Midtown. And with four to seven-year timelines for major projects, The reality is that inventory is only going to get scarcer in the coming years due to that imbalance between timeline for demand and the realities of when the space can be delivered, in the best case. Space is going to be even more constrained. You've heard us talk about the office to residential conversion trend, which is moving ahead, and it's moving ahead rapidly. We are tracking about 15 million square feet of residential space that's being built out of office buildings being converted. Some of those deals are moving ahead. Some are announced. Some are being capitalized. But that subset is the subset we track. And I think it marries up with the city's numbers. That's extraordinary. If you look back over decades and decades, the city office inventory does not shrink. It stays static. It goes up modestly. It rarely shrinks, and if so, by tiny amounts. But to be talking about 15 million square feet possibly coming off the rolls as we sit here today, and I think that number could be in excess of 25 million square feet when you look back in time five to seven years from now, that is kind of like a double compounder to have accelerating demand while you've got diminishing supply and no obvious path for immediate delivery of new product because of the long lead times. And that is a recipe that I think makes us very optimistic for achieving our goals in 25 and beyond. I've always said that this conversion opportunity is kind of a triple win. It takes obsolete space off the market, it addresses the housing crisis in a big way, and it revitalizes New York's prime and primary central business district, Midtown, that needs 24-7 activity, not activity just during business hours. So we'll keep tracking that. We're participating in that as well. And you heard us announce that we are kicking off this year. We have kicked off, to be more accurate, the conversion of 750 3rd Avenue. The plans, which we unveiled in December, I think are spectacular. We're going to add approximately 650 units of new housing on 3rd Avenue, take that space off the market, and create real lifestyle amenity in that location, which will only act as an incentive to other buildings on 3rd and 2nd to do the same. And that's on top of the Pfizer former headquarters. That's a lot of square feet. It's probably over a million square feet in the headquarters, well over a million square feet that is coming off the market and is being converted by Metroloft. Yeah, by Metroloft. So anyway, it's just going to build and build on itself. And, you know, I would keep your eye, you know, fixedly attuned on to that. You know, so when we said in December we are out there on the hunt for another big development site in Manhattan, something we could do on a scale of a one Vanderbilt or one Madison. Uh, those are the reasons, you know, we think now is the time, uh, but you know, taking into account the lead time that, uh, it, it takes to get those buildings control approved and built. Um, you know, finally it's been exciting couple of months on the hospitality and entertainment side of our business. We're quickly becoming, you know, uh, a hospitality, branded hospitality, and a great restaurateur within the city. Not only did Mike Williams summarize a record-breaking year for Summit One Vanderbilt with over two and a quarter million visitors upstairs, we've now done over six million visitors since we opened at Summit One Vanderbilt, and it's contributing significant profits at the building level and to our company. But we also, it was announced yesterday The new location for the Paris expansion of Summit will be at the incredibly designed Triangle Tower in the 15th arrondissement of Paris. It has the most amazing views of the Eiffel Tower in the entire city. We're working again with our partner and incredible artist, Kenzo Digital, on a new bespoke concept for Paris. And it's going to be a lot of shared DNA with what we've got at Summit One Vanderbilt, but bringing everything up a level beyond anything we could have comprehended when we designed this first four years ago for New York. And we opened, in partnership with Danielle Ballou, Danielle's first steakhouse, La Tete d'Or, at One Madison. For my liking, it's the best steakhouse in the city, and I think maybe one of the best restaurants in New York, period. And combined with our Michelin-starred restaurants, Joji and Le Pavillon, I think we've proven our chops in the high-end culinary world with the incredible Dynex team and Danielle Balloud. And you could say we're only an Italian restaurant away from having most of the major food groups covered. So thank you for your support in 24. We hope and look forward to being on this journey with you in 25. And let's open it up for questions.

Thank you. At this time, we'll conduct the question and answer session. To ask a question, you'll need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please limit yourself to two questions. Please stand by while we compile the Q&A roster. And our first question comes from the line of Nick Uliko of Scotiabank. Your line is now open.

Great. Thanks. I guess first question is maybe, you know, Matt, you can just walk through a bit how, you know, Q4 and the year played out because I think there was a little bit of confusion about, you know, the FFO number given the gains and whatnot. But it does seem like you actually beat on the year even versus the December forecast that you just gave, you know, even if you exclude all the gains. So can you just maybe walk through some of the

items there and and if there was a beat uh what what drove that thanks yeah uh absolutely uh you know what one topic mark didn't cover and all the the good news he laid out there was that fourth quarter was also well ahead of our expectations from an earnings perspective even going back to december where we indicated you know that's on a reported basis and on a normalized basis we indicated back in december that without all the you know dpo gains which are real gains but i'll exclude those or mark to market on derivatives that what I'll call our normalized FFO midpoint would be 486. Looking at the posted results and taking out those same components, mark-to-market on derivatives and any DPO gains, we ended up at 495. So nine cents ahead on the quarter and therefore the year as driven by better performance at the property, so higher NOI. Other income, so fee income, we continue to generate incremental fee income. Summit performed better than expectations in the fourth quarter. And incremental debt and preferred equity investing. So we said we would be out searching for new investments, primarily on the debt side. The equity raise we did in November would have helped fund that. We did some of that investing and recognized incremental income in late December off of those investments. So all told,

nine cents better excluding all the uh the gains and marked market on derivatives just in the fourth quarter all right thanks and then mark you know you talked about the leasing pipeline you know uh essentially being up because you you removed some leased activity versus december uh can you talk a little bit about kind of what's the the incremental pipeline where it's um focused any any other sort of commentary either you or steve can provide on that thanks yeah well um

I guess in terms of color, we could talk a little bit about, Steve, where it's coming from. But I just would start off, it's broad-based. I made this statement earlier about how tight Park Avenue is and it is from an occupancy standpoint as well as trophy buildings as defined throughout the city. But some of the biggest deals we did last year We're in great buildings. Maybe they're, you know, considered trophy, but I don't know how those definitions are exactly, you know, handed around. But 919 Third, you know, we did a lot of, you know, we did massive leasing and expansion with Bloomberg. 100 Park, Alvarez and Marcell. So, you know, one's information and media, the other financial, you know, business services, consultings. Those were, you know, Alvarez and Marcel was like 220,000 square feet at 100 Park. And Bloomberg was 900,000 feet expansion and renewal. We did Travelers Insurance Company at 485 Park. You know, I'm sorry, 45 Lexington. I got Park on my mind. 45 Lexington right across from 245 Park. And, you know, that's a building we've owned since I think like 2003 or something. And, you know, it's a great building. And Travelers has been there for, you know, a decent amount of time. And they renewed there. And so there's lots more anecdotally you can go through, Steve. But in terms of the 800 or 875,000 feet of pipeline that we have today, how would you characterize it?

Yeah. So I think Mark hit one of the key features, which is that it's broad based, not dominated by anyone, particularly large transactions. As a matter of fact, it's composed of 59 separate tenant transactions. In the 900,000, it's roughly 600,000 square feet of leases that are out, another 300,000 square feet of advanced term sheets. Coincidentally, it's the same number, about 600,000 square feet of new tenant leases as opposed to renewals. And it's spread everything from 810 7th Avenue to the Graybar Building to a little bit of leasing on Park Avenue, which we don't have a lot of space left on Park Avenue. So it's, you know, a wide variety of different kinds of businesses, different size, geographic locations, financial services, law firms, entertainment, some media type and general business uses. So I take a lot of comfort from that because, you know, we had this conversation a year or two ago, it would have been heavily dominated by the top end of the market and only financial services. And now we're seeing a much broader type of tenant demand and broader geographic and different price points. All right. Thanks, guys.

Thank you. One moment for our next question. And our next question comes from the line of Alexander Goldfarb of Piper Sandler. Your line is now open.

Hey, good afternoon. Two questions. Steve, maybe I'll just continue on the leasing discussion. From the investor day till now, it seems like there's been an uptick in activity. And as Mark noted in his commentary, the holiday times, January, is not exactly a hot leasing activity market. You had two big expansions. So could you just give a little bit more color as to what was going on? Were these just sort of deals in the pipeline that were stalled because of the election? Or what was driving this, you know, sort of holiday January surge, if you will?

Well, I think, you know, I recall that when we talk about our pipeline of deals that are pending for that component of the pipeline, that's, you know, where... transaction term sheets have just advanced to a set stage where we have a high degree of uh probability that it'll convert over to a lease so you know some of that uh is now uh those conversations maturing so that they may have started two or three months prior to uh uh to us now adding it to the pipeline some are just new requirements that have come out of the woods um but you know what's most notable of that is that it's two-thirds of it are new tenants as opposed to just renewal transactions. So, yeah, I mean, listen, we did a quarter million square feet of leasing since investor conference, kept the pipeline basically at the same level, and I think it's a combination of factors. I don't think there was an unnatural pause of deals other than the fact that people took a powder for two, two and a half weeks over vacation. and now they're sort of restarting the engine. So I think what would be most notable is what we see over the next two or three months now that everybody's back in the office and there's a lot of enthusiasm in the tenant market for where the economy's headed and particularly for New York City commitments.

Okay, second question is on the debt paydowns or payoffs. You guys, if my math is right, you now have four deals that you've paid off mortgages either below par or repaid MES below par. You know, the 690 Madison, I think that's a fully leased asset. Can you just give a little bit more color on, you know, sort of the secret sauce or how you're able to, especially at this point in the market where things seem to be improving, you're still able to get lenders to accept cents on the dollar? And, you know, are we still, there's still a lot more deals like this possible? Or are we at the tail end of this, you know, these payoffs?

Yeah, sure. This is Harry. You know, look, we have great relationships with all of our lenders. We work closely with them. We don't, you know, get into their motivations. Everyone in every cycle has their motivations as to why they want to either keep paper or move paper. And our job is to work closely with them to find the best outcome for everybody.

And as to the last part of your question, Alex, you know, we layered into our guidance another 20 million of gains in 25. I think we stretched that goal. to 50 like we did last year, you know, do we have opportunities? Potentially, but we'll have to work them.

Thank you.

Thank you. One moment for our next question. And our next question comes from the line of John Kim of BMO Capital Markets. Your line is now open.

Thank you. So this quarter, leased occupancy went up, but your financial occupancy went down sequentially, and this is not just one or two assets, it's across several assets. I was wondering why that happened this quarter, and also if you can give us maybe some guidance or an idea of how financial occupancy trends this year.

Yeah, John, it's Matt. So I telegraphed a bunch of this in December, There were move outs, you know, in the fourth quarter, the late third, early fourth. That's a factor in the same store NOI guidance we gave in December because occupancy, you know, least occupancy is on a distinct trajectory upward, was in 24, got to our goal. We're expecting it again in 25, but you have to roll through the move-outs, build the space for the new leases, and then bring them on. So that kind of, you know, mutes the same store cash and ROI growth you see in 25, but that, you know, and you do your capital spend in 25, which then leads to the NOI growth and economic returns in 26 and beyond.

I mean, I think it's definitional that financial is always going to trail least, because you're only leasing, you know, when You're either leasing to renew or you're leasing to replace vacant. So lease can't really be ahead of financial, I don't think. I've got to think that through. But I think you'll always see it. It'll trail. So as lease occupancy rises, financial occupancy should follow suit after the downtime.

Okay. My second question is on the New York City congestion tax, which certainly seems like it's had an impact on traffic patterns. But I'm wondering if you could comment on any impact you've seen on the office side, whether it's tenant preferences for certain neighborhoods or office utilization or anything that maybe has impacted demand in a negative way.

I think it's too early. I mean, it's only been a couple of weeks. We'll have, I guess, some data on that after a quarter or two. It's very tough because at this time, everyone's commutation patterns change a bit after the holidays and in January. So I think the stats MTA is putting out there is that the traffic is lighter than usual in the congestion zone. How much of that is an account of the new tax? How much of it is a result of what Januaries are like sometimes in New York City when it's very cold? I think we need more time to get the data, assess it, and speak to our tenants, which we really haven't had a chance to do, to see if they're making any changes in their preferences and choices based on that. I've not seen that.

I don't know if you have, Steve. We haven't heard any commentary to it, but common sense would tell you that if more people are going to take public transit, then proximity to Grand Central Terminal and major transportation hubs will be a driver, and of course, you know, that's where our portfolio is most centrally located.

Thank you. Thank you. One moment for our next question. Our next question comes from the line of Steve Sacqua of Evercore ISI. Your line is now open.

Yeah, thanks. Good afternoon. Mark, you've noted, you know, the tightness in the market, and I'm just wondering, you know, how is that translating into the brokerage community? And are you getting a sense from the brokers and maybe tenants that there's a little bit more angst on their side to start thinking about even 26 and 27 expirations? And are they coming to you earlier to talk about renewals?

Yeah, I mean, you know, I don't know about angst. I think the tenants are increasingly aware that that their window of opportunity is closing. You know, the market is not yet tight. I mean, we're tight because we're just out there and we're getting stuff done. And other prime buildings are tight and Park Avenue is tight. But there's still vacancy in the secondary and tertiary buildings and some of the outlying markets. And I think tenants kind of got lulled into thinking they had time, they could defer on decisions, they could stay loose and flexible. And with the dynamics I mentioned earlier about escalating demand and decreasing inventory specifically in that secondary and tertiary inventory world, that window is going to close quickly. And whether we see it now or we'll see it in the next few quarters, tenants are going to come to the realization very soon, if everything stays on its current trajectory, that the that that moment is going to be passed, and there will be competition for space, and that's when we'll have an opportunity to revisit rents and concessions. We're seeing it in some buildings. I hope we'll see it across the board. I mentioned in the earlier remarks, I look at this as one of the real moments in time for us. We're looking at over the next two, three years. I know everyone is focused quarter to quarter, but we've got a two, three, five year horizon, uh, and we like the landscape we see. And, you know, we want to accumulate more product into that, develop more into that and, you know, deploy as much capital as we can, uh, out of our new discretionary funds to, uh, take advantage of, you know, the present day opportunities because not everyone is realizing that same level of success. Uh, there is, you know, there are deals out there that are upside down and, uh, some sponsors are getting through and some aren't.

Okay. I guess that leads to my second question. You had talked at the investor day about trying to find another Midtown development site. You just mentioned here, you'd like to do more development. Just can you kind of update us on that process? And to the extent that you are underwriting a new development, like what sort of hurdle would you want to see on a, on a new deal today to the extent that you could put one under contract and, you know, bring it to market and say three to four years?

Well, you're going to, Steve, you're going to have to reserve that one for the next quarter because a group of us are saddling up and heading out to do about a 12-day roadshow in Asia. We've got a lot of partners and capital and equity partners out there. We try and be out there several times a year because they have a significant appetite for for the best of the best product and the best of the best markets. And we've got really great relationships that now are broad and diverse throughout several different markets in Asia. And we'll have it really dialed in on those yield expectations for prime development. I don't think it's changed much over time. I think secondary product, risk product, those spreads gap out, they contract. I think good core class, you know, AAA properties, trophy properties in Midtown Manhattan. You don't see those prices change a whole lot. And we've demonstrated that over the years on, you know, deals that we've done where people take a very long-term view, you know, not, not, you know, three to five or seven to 10, I'm talking 15 years and beyond for good core product. That's kind of irreplaceable and top of the market. And, you know, those, those, Those returns on a levered basis could be in the low teens. I don't think it would be much more than that, but I think that's consistent with where it's been.

Great. Thank you.

Thank you. We'll move on to our next question. Our next question comes from the line of Jeffrey Spector of Bank of America Securities. The line is now open.

Great. Thank you. Mark, one follow-up to that conversation around international interest or foreign capital interest working with you or New York City. I guess, could you share any comments, any views, or anything you're hearing since the election over the last couple of weeks, given all the, at least it seems like, interest in the U.S.?

I have not, but to be honest, we haven't really... been in that mode in the past four or five weeks. So I think that's what we're embarking on. We've got new agenda, new deals we want to get done this year, all sorts of debt and equity deals. When we go, we go with a full menu of opportunities. And I think we'll get a good read on that. But I can't say, I'm looking around at the rest of the room, whether anyone's had that input, but I haven't had anything directly on those lines.

Yeah, I think it's worth noting a few of the transactions we've completed were post-election, whether it be one Vanderbilt, the financing of 500 Park. So we haven't seen anything getting in the way. And if anything, we're seeing continued momentum coming off the election.

Okay, thanks. It'd be interesting to hear after your trip some of the feedback. Yep, sure. I guess maybe keep it high level, Mark. You touched on you know, one of the policy initiatives, immigration potential changes coming in New York City. Any other high-level thoughts you can share with us on some of the executive orders or, again, policy shifts that you think Essel Green will benefit Essel Green or you're thinking about?

I love the five-day-a-week mandate. I mean, let's get back to work. I mean, it's... you know, corporate America is largely back. I think now, you know, federal government people think of it as Virginia and DC. We've got a lot of federal buildings in the city, you know, leased and owned. It's a big deal to get, you know, everybody back. And I think it's, it just, you know, further cements, you know, for us, the business activity, the profitability, the energy is all there. We just, you know, want to see the bodies back. And I think, That being one of the early executive orders signed was just directionally a very positive statement on productivity and just getting people back together. I think it's a big deal, certainly for our market directly and indirectly.

Thank you. Thank you. One moment for our next question. Our next question comes from the line of Anthony Piloni of J.P. Morgan. Your line is now open.

Great. Thank you. First question is on just the capital markets and building sales side. So maybe putting aside something like one Vanderbilt that's pretty unique, but in the past few months it seems like buildings are starting to transact again, and yet in the last month you've had this big move in treasury yields. Is there a point where there's a pause again, or do you think that's a – Limiting factor or just there's enough momentum to keep this going?

Not after today's mandate from President Trump. Interest rates down immediately. Did you get the memo? I'm not going to bet against. Pause.

Not whatsoever. I mean, we're seeing very strong momentum from investors right now. Look, they're focused on the fundamentals. all the things that you're hearing Steve talk about, all the results we're posting, that it takes up almost the entirety of our discussions with investors today. And so, you know, I continue to see more momentum of investors wanting to participate in recaps, outright sales. And as Mark said, we're going to be out in Asia very shortly and we'll be digging in on those conversations as part of execution of our 25 business plan.

Okay, thanks. And then Just second one, just a little bit more details. You've given out numbers now in special servicing in terms of like what's active and where you've been designated. Just curious, are you all like designated, you know, more as events become highly probable and thus there's a high likelihood of this, you know, the 8.2 billion, for instance, converting to active or just trying to think about that. Like, is that a pipeline or, you know, just how to think about it, I guess.

Yeah, look, those events are particularly, they're out of our control. So I wouldn't feel comfortable commenting on, you know, the outcomes of those assets and those assignments. Some may go into servicing, some may not. You know, for us, the priority is working with controlling class bondholders and the capital stacks to be properly aligned with them. So you're not, I don't think there's any way to wait how many of those go into special servicing or not.

Okay. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Michael Griffin of Citi. Your line is now open.

Great. Thanks. Maybe just going back to the leasing pipeline and the tenant interest you're seeing out there. Durrell, I know you mentioned a number of different industries, but I didn't hear tech as being a a bigger part of that. I know that tech doesn't make up a big part of your portfolio, but just curious if you're seeing more demand from those kind of companies, given, you know, we've seen the press about more stringent return to office requirements.

Yeah. So, you know, overall in the market right now, there's generally roughly 300 active tenant searches covering over 25 million square feet of that. There's 7 million, over 7 million square feet of known tech, tenant searches ongoing. Compare that to 3.7 million square feet in January of 24. So you've seen a doubling in demand over the past year. Not a big part of our portfolio other than we are in, I'd say, diligence discussions with a couple of tech tenants who seem to be focused on One Madison Avenue.

Great, that's helpful. And then maybe just a little more color on the financing, the new mortgage at 500 Park. Should we take this as lenders are more willing to dip their toes into the office financing market? I mean, I imagine there's an aspect that's driven with relationships that you have with lenders, but curious if that market's opening up more. And then just on the term, is there 10-year debt out there for mortgages you had on office buildings, or is 5 really kind of pushing it for what's out there?

No, look, lenders are back. You know, we've already, we're mid-January, we've already seen some very large transactions get done. I talked about the spiral at the end of last year's investor conference. We just saw that get done, $2.85 billion. I think it's even worth noting that the AAA spreads on that got done just over 1%. I mean, I think it's now even trading inside of that when I looked at the screen before the call. So we're seeing big momentum from lenders right now, closing into both balance sheet and CMBS 2025 is going to be a very active year for the credit markets. Some of the deals that you should look out for will be 299 Park, 200 Park, 3 Bryant, and 5 Manhattan West, all of which are out for pricing and should close in Q1 and Q2 of this year.

Great. That's it for me. Thanks for the time. Thanks.

Thank you. One moment for our next question. Our next question comes from the line of Ronald Camden of Morgan Stanley. Your line is now open.

Hey, just two quick ones from me. So going back to the leasing, I think the commentary on Park Avenue was pretty clear. I'm wondering if there's moving to sort of the west side assets and that part of the portfolio, any sort of

color on the interest tenants uh on that piece of it yeah we've got we've got you know we did a substantial amount of leasing at 11 85 6 and 8 10 7 last year and that momentum was carried into uh this year where we have you know a number of leases out at both those buildings and that you know they're for our west side part of our portfolio they're probably the two big you know two of the three or four biggest uh that we have in that part of town.

Great. That's helpful. And then my second one is just on the FAD funds available for distribution. I know this year the guidance has some CapEx and speculative CapEx. Just any comments or as you're sort of leasing up this portfolio really quickly, how we should think about that recurrent CapEx line and maybe getting better in 26 and 27. Just high level thoughts would be helpful.

Yeah, I touched on this a bit back in December as well when we gave guidance. We leased, as Mark said, 3.6 million square feet, third highest year ever, and took our occupancy up 300 plus basis points. The dollars that we spend on that new leasing are investment dollars. It happens to run through FAD. That's just a categorization that the industry likes, but it's investment capital. As we get closer to stabilized occupancy, 93 this year, 94, 95 thereafter, the leasing capex obviously comes down as occupancy goes up. The other side of that you talked about, maintenance capex or just other forms of capital. We're spending on the leasing capital, investment capital, but the base building kind of non-revenue generating capex is very, very nominal. Our operations and construction team does a phenomenal job It's a mostly redeveloped portfolio. They spend a little bit every year to maintain the high standards. But, you know, in total dollars on a 30 plus million square foot portfolio, you know, we spend, call it, you know, 20, somewhere between 20 and 30 million dollars a year on, you know, non-revenue enhancing CapEx, which is very nominal overall. So it's investment dollars that we feel are very valuable and look forward to spending them because it means occupancy and NOI is going up. Thanks so much.

Thank you. One moment for our next question. Our next question comes from the line of Michael Lewis of True Securities. Your line is now open.

Thank you. So that CapEx question was my first question too. And so, you know, obviously when you have a lot of leasing activity and success like you had, you also have CapEx, right? So you got it to 88 million spec this year, 99 million committed. And then you've got base building and the other stuff, which is smaller, like you said. I was wondering if there is there committed capital that you think builds into 26? And, you know, do you expect the capex to remain high until you get close to that 95 percent occupancy or does it kind of normalize first? And I guess to maybe put a point on it, you know, this verges on guidance, I guess. I mean, do you think the dividend is covered in 26 or is the capex still you know, really heavy for another year.

Let me, you know, I'll weigh in from the TI side of that question for capital. You know, I'll make a couple points. One is that where we saw the higher end of our TI in the fourth quarter, those were transactions generally associated with long-term, meaning longer than 15-year leases or the higher end price point deals. So where I sort of see those conversations going right now and improving throughout the rest of this year, I think the high end of the market, you're going to start to see TIs come down because there's a shortage of supply and just, you know, that's going to give the landlord more leverage to push that number down. I also think you're going to see a tightening of TI on the renewal side of transactions because, you know, tenants have fewer spaces to to select from, it's going to drive them to a higher probability renewal, and there's just less TI that one has to spend in order to retain an existing tenant. So I think those are both really positive factors to see the capital side of the equation come down over the next year and going forward.

Okay. And is there any capital that, you know, $100 million committed this year that needs to be spent? Is there anything committed beyond 2025 that's sizable like that?

So, you know, when we commit capital tenants, we have to, unless we're doing the work, we have to, you know, rely on, you know, a best guess as to when the capital will be requested and spent. So in any given year, you know, stuff spills over. There may be some spillover in 25 and 26. We accelerated some capital from 25 back into 24. So yeah, on the margins, it does move around a little bit year to year because we're not in control of every nickel of that capital.

Okay. And too early or not appropriate to comment on whether the dividend will be covered?

The dividend is covered this year. And, you know, we, we look at the dividend every year from a perspective of not just taxable income, which is what governs it, but coverage and fad is not the metric. I'll say it for the hundredth time, fad is not the right metric to look at coverage of dividend because fad is not cashflow.

Okay. Understood. And my second question or last question, I guess, you know, you mentioned the, you know, continuing to close commitments for the debt fund and just at the kind of leading edge is starting to deploy some capital. You know, over the next, like, several months, you know, what should we expect, you know, the pace of kind of deploying what your expectations are? And then also, you know, how do we kind of follow along? I know in your supplemental package you've got some good disclosure on the DP book. You know, I don't know if we'll see something similar or if that's necessary, at least until you launch more funds and it gets complicated. But, you know, what can we expect to kind of see out of that over the next few months?

You know, there's a big opportunity in front of us right now. We have term sheets and documents and negotiation on pipeline deals that are what we want to see ourselves investing in, what our investors in the fund want to see us invested in. And we expect to deploy the capital over the coming months and through the end of the year. As to how you can track that, I've got to push that to Matt if there's anything to cover.

No. All right. Thank you, guys.

Thank you. One more. Our next question. And our next question comes from the line of Blaine Heck of Wells Fargo. Your line is now open.

Great. Thanks. Just following up on the investment side, it sounds like your focus might be on debt transactions at the moment, but we're hearing that there are higher quality properties that have come to the market and more potentially coming to the market. So if you were to make more direct property acquisitions, are they most likely to be done in a JV structure or would you consider full ownership? And, you know, if it required a big check, what are your thoughts around issuing equity at these levels for the right transaction?

Question about, um, new property acquisitions. I mean, you know, generally we've taken an asset light approach for the past several years now since we shifted direction, but you know, there's still many assets, uh, We'll own at a point in time, or sell at 500, part is a great case in point. We own it. We're going to execute a program. We're going to lease it up. And then down the road, maybe we'll bring in a JV partner and recapitalize it. But that's a down the road thing. And that's after the value creation. But that's for a deal that we can comfortably fit on balance sheet. There might be very significantly large deals, like the new development deal we spoke about in concept. that we really would only want to undertake something like that in venture with others because the equity commitments could be a billion dollars plus. And that's inconsistent with our asset-light program. So it's situational. We don't run the book here looking at investments, JV, non-JV, et cetera. Our goal is first and foremost to identify and execute upon good opportunities and then figure out the optimum capitalization approach after. Because fortunately, we're in an envious position of having ample liquidity that gives us the flexibility to act first and then optimize, as opposed to a lot of our competitors that have to have all the various capital sources tied up even to be able to be competitive. That's why you invest with us, or hopefully invest with us, is in part because of the flexibility we have with our billion-dollar-plus of corporate liquidity that enables us really to be very tactical, fleet, flexible when it comes to those kinds of decisions. But that's a secondary consideration. It's never the primary consideration. Primary is always finding the best deal and deal we want to do. And then second is how do we optimize the capital structure?

Okay, great. And any thoughts on issuing equity for the right transaction?

Um, I mean, you know, we, we did an equity issue and says, you know, a month and a half ago, uh, or thereabouts. Um, I wouldn't say that was for new opportunities. I mean, that was a more general raise. There were various purposes to that raise. I think prior to that, we hadn't raised equity in a long time. I forget, 10 years? So it's a tool in the quiver. I mean, it's an arrow in the quiver, a tool in the shed, sorry. And we're pretty stingy with our equity, as you know, in fact. I guess, over the past six, seven years, we've reduced share accounts substantially from about 105 million shares to now, I think, 75 million shares. So it's always an option. It's usually never the primary option, but you never rule it out either if we think that there's a moment in time where we have uses. Those uses might be new investment, might be debt reduction, might be any number of items. If we think there's a moment in time. We certainly won't shy from that, but if you look at our 10-year track record, it's not a primary source of our raising capital.

Great. And then second question, you invested in a relatively small amount of CMBS this quarter, but can you talk about the profile of those investments, whether they're collateralized by office properties in New York or whether there's any exposure to other sectors and potentially other markets, and I guess what sort of attributes from a return and profile perspective you're looking for in an additional CMBS investment?

Yeah, the only color at this point would be New York City commercial properties.

All right, fair enough. Thanks.

Thank you. One moment for our next question.

Yeah, we're going to, and I apologize, we do have a hard stop. We had it for 3 o'clock because of commitments we have out of the office immediately after this call. I think we have time for maybe one or two and we've got to run. I apologize. It's more than, you know, we're on to 16, 17, et cetera, and that's just more than usual, which we hadn't anticipated. But hopefully we can limit it to just one or two more.

Thank you. We'll move on to our next question. Our next question comes from the line of Caitlin Burrows of Goldman Sachs. Your line is now open.

Hi, thanks for taking the question. Maybe I'll just go on the other income side. I know this was a volatile line item in 2024. So wondering if you can go through what drove it to be so high in 4Q and then beyond the full year guidance you've given, maybe your expectation for 2025 main drivers and cadence.

Yeah, so 2025, I just refer you back to the investor conference deck where we gave guidance and broke out all the categories. Q4 was nominally ahead of what we expected, maybe $1 million or $2, just through incremental fee income that we generate in a bunch of different ways. The large number in Q4 was all expected. We generated fee income off of our JV interest sale in One Vanderbilt that was included in guidance going all the way back to December of 2023 and was again included in the numbers that I presented for 24 back in early December. Nothing really unusual or unexpected in the Q4 numbers, maybe a million or two more than we expected. 25, you can look at the investor deck.

Got it. Okay. And then just back to a question earlier on the least first economic occupancy. I was wondering if you could talk about your expectation for economic occupancy this year. And do you think it goes down before up or like how quickly will it rise?

No, it's going to trail, as we said earlier, it's going to trail the least first occupancy by a little bit because we have to get the space built and the leases commence and then into financial or physical occupancy. But that will trend upward throughout the course of 25 and beyond and ultimately catch up to the leased occupancy, but it does generally lag.

Thanks. Thank you. I'm showing no further questions at this time. I would now like to turn it back to Mark Holliday for closing remarks.

Okay, thank you, everyone who is still listening in. Appreciate your participation on the call and look forward to getting back together in a few months' time.

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.