SL Green Realty Corp

Good day everyone. Our conference call will be starting soon. It will be starting within approximately two minutes. Thank you for standing by. Please continue to stand by. Thank you everybody for joining us and welcome to SL Green Realty Corp's first quarter 2026 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 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 first quarter 2026 earnings and in our supplemental information included in our current report on Form 8K relating to our first quarter 2026 earnings. Before turning the call over to Mark Holliday, Chairman and Chief Executive Officer of SL Green Realty Court, I ask that those of you participating in the Q&A portion of the call, please limit yourself to two questions per person. Thank you. I will now turn the call over to Mark Holliday. Please go ahead, Mark.

Thank you for joining us today at the conclusion of what was an excellent quarter here at SL Green. We achieved nearly all of our objectives and then some. I know there's some misunderstanding in the analyst community about the cadence of our quarterly earnings, but internally, we were right on our numbers for Q1 and advanced many of our objectives for the year. The headline news starts with our leasing, where we had the single biggest first quarter in the 28-year history of this company. We signed 51 leases totaling 930,000 square feet with a mark-to-market that was 16% higher than the previously fully escalated rents on the same spaces. The takeaway is pretty clear and consistent with what we've been saying for some time now. There is a massive imbalance in the prime office market. At its core, we lease premium space to sophisticated users, and right now, demand far outstrips remaining supply after so many years of lease up, both in our portfolio and city at large, especially in East Midtown. The vacancy rate for trophy buildings dropped again to 3.4% at the end of the first quarter, which is essentially saying there's no space at all in that segment of the market. As a result, we are seeing continued escalation of rent levels for these buildings and significant improvement in net effective rents, which greatly benefits our portfolio, which, as you know, is mostly centered in this area. And I don't expect this situation to abate anytime soon. On the one hand, the business climate in New York remains really good. Look at some year-end 25 stats that came out in the first quarter. City tax revenues reached $80 billion in 25, 16% higher than pre-pandemic, and that's a record level. Real estate tax collections grew by almost 3% year-over-year. Personal income taxes were up nearly 12% year-over-year. Just shows you the uh enormity of the uh bonuses and compensation being paid out in the primary business sectors of new york city 65 billion dollars of record wall street securities industry profits in 2025 the prior record was just 61 billion and that was back in 2009 160 unicorn startups in new york city private startups that are valued over a billion dollars And that's the second largest startup ecosystem behind Silicon Valley. 31 billion was raised in venture capital last year, up 25% from the prior year. And New York City ranked number one as the talent hub for 2025 graduates, where one in nine graduates, college graduates, came to New York City. And so on top of a fundamentally strong local economy, we hope and expect to see macroeconomic improvement in the coming months. which will simply add to the momentum in the leasing market. After leasing more than a million square feet of space in our portfolio year to date, we still have a pipeline of approximately 900,000 square feet of space, most of which we expect to consummate. The demand continues to be there. On the other side of the equation, there is really no end in sight to the supply crunch. There are zero new space deliveries anticipated for the next three years. With recently completed projects like the Rolex building, 525th Ave, now in the rear view, and new projects like 343 Madison and 625 Madison not expected to complete until sometime around 29 or 2030, it is simply physically impossible for any other new construction to be delivered between now and the end of 2029 in Midtown Manhattan. This presents us with one of the most favorable dynamics that we've seen in quite some time. Therefore, we are proceeding at a very rapid pace on our very own project at 346 Madison, our next great office tower. We just closed on the site in the fall and already we're issuing 100% schematic design on May 1st, just six months from the acquisition and proceeding immediately into design development. We expect to be filing the project into EULER, the city's land use approval process, by the end of this year. That is a much faster pace than we achieved with One Vanderbilt. I'm also very happy with the way the design programming of the building is progressing. We've already been out talking to select potential tenants, top brokers, presenting the project, and getting extremely good feedback confirming we're heading in the right direction with this new development. I expect on the next call to be able to give you some financial details after we price the project with our construction manager and obtain some major trade feedback in the coming months. Our other big development project at 753rd Ave is also making great progress as we sit in last quarter. We now have an agreement with our final remaining tenant for full vacant possession. which enabled us to start fully mobilizing and commencing execution of contracts for work. We are now in the early stages of procurement, and so far we are tracking on or below budget by successfully navigating tariffs and inflation. Work is far advanced on interior demolition, and in the coming months we hope to finalize our arrangements for debt and equity capital. We also made progress on our disposition goals this quarter, entering into contract to sell the residential and retail components of our seven-day project, and closing on the sale of 690 Madison Avenue with our JV partner. More to come in the ensuing months as we progress our way through the $2.5 billion disposition plan. We also took advantage of compelling opportunities in the credit market via our debt fund, which is really performing well thus far. We put out $226 million in since our last call, including a transaction closing today, bringing total committed to about $567 million out of the total $1.3 billion fund. All of this positive activity is propelled by a very strong city economy, and we don't expect a summer lull this year as sometimes occurs in years past. In fact, we're expecting a big summer with FIFA World Cup and the nation's 250th birthday celebrations and bringing big crowds and lots of economic activity to the city in June and July. We are forecasting a big boost and shot in the arm, which bodes well for Summit in particular, for our restaurant venues, and for the city generally. We feel good about the city and state budget situation as well. The rating agencies did send a message to the new administration about wanting to see some efficiencies in the budget being negotiated now and the budget that will be in place at the city level by June, and I have every confidence the budget gap will be solved through revenue enhancements, expense control, and support from the state. As has been reported, one piece of that sounds like it will be a new pied-a-terre tax, which the governor announced yesterday with the support of the mayor and the city council speaker. Once you get past the notion that we need to find some revenue enhancements as part of this budget process, I give credit to the governor for taking a pragmatic and surgical approach to ensure that all New Yorkers, residents or not, are paying a fair share. This is a concept that has the support of many New Yorkers because it narrows the focus and impact to the highest earning non-New York City residents who otherwise pay no New York City income tax and benefit from New York City's exceptionally low residential real estate taxes. Last but definitely not least, Since we last met, we announced the promotion of Harrison Satomer to president and CIO. When Andrew Mathias left the presidency 25 years after 25 years of service, we didn't rush to find his permanent successor, and instead we took a measured approach to filling this important position. I wanted someone who truly represents our culture, ethos, and excellence, which is what distinguishes and defines who we are, and Harry is all of those things. So as our company turns 30 years of age in 2027, this promotion is a big step towards identifying, growing, and supporting the next generation of leaders here, and I hope to have more announcements in the years to come about the continued ascension of our rising stars. So to wrap things up, I think this was a great quarter, and we've made significant early progress on our goals, but when we get together in three months, my instinct is that we will have a lot more to talk about,

next time on the leasing front the transaction front and the company performance front so thank you and we're now ready to open the line for questions to ask a question please press star one one on your telephone and wait for your name to be announced to withdraw your question please press star one one again please stand by while we compile the q a roster And our first question comes from Steve Sakwa with Evercore ISI. Your line is open.