Vornado Realty Trust

Good morning and welcome to the Bornado Realty Trust second quarter 2020 earnings call. My name is Richard and I'll be your operator for today's call. This call is being recorded for replay purposes. All lines are in listen-only mode. Our speakers will address your questions at the end of the presentation during the question and answer session. At that time, please press star then one on your touch-tone phone. We also ask that you please limit your questions to one question and one follow-up question only. I'll now turn the call over to Ms. Kathy Cresswell, Director of Industrial Relations. Please go ahead.

Thank you. Welcome to Vornado Realty Trust's second quarter earnings call. Yesterday afternoon, we issued our second quarter earnings release and filed our quarterly report on Form 10-Q with the Securities and Exchange Commission. These documents, as well as our supplemental financial information package, are available on our website, www.vno.com. Under the Investor Relations section. In these documents and during today's call, we will discuss certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in our earnings release, Form 10-Q, and financial supplement. Please be aware that statements made during this call may be deemed forward-looking statements and actual results may differ materially from these statements due to a variety of risks, uncertainties, and other factors. Please refer to our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2019, and our quarterly report on Form 10-Q for the quarter ended June 30, 2020, for more information regarding these risks and uncertainties. The call may include time-sensitive information that may be accurate only as of today's date. The company does not undertake a duty to update any forward-looking statements. On the call today from management for our opening comments are Steven Roth, Chairman and Chief Executive Officer, and Michael Franco, President. And our senior team is present and available for questions. I will now turn the call over to Steven Roth.

Thanks, Kathy, and good morning, everyone. I hope all of you are continuing to stay safe and healthy. Yesterday, after the close, we announced a very important 730,000 square foot lease with Facebook at our Farley Building. We now know the answer to these questions is yes. This commitment is a dramatic statement from one of the most important global tech companies that even in the midst of a pandemic, commerce must continue. This deal reinforces New York City as a great and unique place to do business with an unlimited, highly educated workforce. New York continues to be the place to be. Farley is a unique property like none other in New York. It occupies a double wide block. It is actually part of the Penn Station complex, the busiest transportation hub in the nation. Across the street from Madison Square Garden, you get the picture. Most importantly, this deal further validates the west side of Manhattan as the place to be, and it further validates our plans to redevelop our 10 million square feet of Penn District holdings into the Bullseye location in New York. Facebook's commitment here expands our longstanding relationship with them at our 770 Broadway property, with at least 757,000 square feet. Facebook is now our largest tenant by both revenue and square footage. Kudos to Glen Weiss, our deal captain, and to Barry Langer, who led construction and development support. 220 Central Park South is the most successful residential development ever. We are 92% sold or under contract, and we are now reaping the financial rewards from 220. It is a financial engine feeding our liquidity and financial strength. Year-to-date through July, we have closed on 13 units for net proceeds of $598 billion, all of this during the health crisis. From inception through July, we have closed 67 units for net proceeds of $2.42 billion. We expect closings in the balance of the year will bring in an additional $496 billion in net proceeds. Our current liquidity is $3.8 billion, including $2.1 billion of cash and restricted cash, and almost $1.74 billion undrawn under our $2.75 billion revolving credit facilities. Adding in the $496 million coming in from 2020, we might say our liquidity is this year now $4.3 billion. Consistent with my comments in my shareholder letter in April, that we would be more aggressive in selling assets given the persistent discount in our share price, and that in many instances we would rather have the cash than the buildings, in June we announced that we were going to market to recapitalize two large, highly high-quality assets, 555 California Street, which has to be a top five in the nation trophy, and 1290, one of the premier buildings on Avenue of the Americas. We understand that this is a contrarian move as some believe the capital markets are frozen and now is not the right time. We disagree. The world is increasingly awash with liquidity and there really are no great assets in the marketplace to compete. In the end, the market will speak. We are early in the process. We have been talking to investors for about a month and interest in these high quality assets is quite strong. This process is fluid and could have various different outcomes. As an example, we could simply refinance. We have indications of upsizing the 555 California Street mortgage from the existing $550 million to as much as $1.5 billion. Such has been the increase in value of this asset during our ownership. This process will play out over the next few months. Now to the topic du jour. Rent collections in the second quarter we collected. 93% of office rents. 98% including agreed to rent deferrals, 72% of retail rents, 78% including agreed to deferrals, and 88% on a combined basis, 94% including deferrals. The trend for July collections is consistent with if not a bit better than the second quarter. Rents which we have agreed to defer are generally scheduled to be repaid over the course of the next year. Quarterly earnings are important, very important, but my hope is that you not focus on the very short term or on the volatility caused by a passing crisis. Our game is won by creating value out two to five years and sometimes even longer. I submit to you that this is undoubtedly a great time to be looking through the fog and putting capital to work. Now about our common dividend. Our company, by mandate, pays out by dividend all of its taxable earnings. Our intention is to have a smooth and predictable dividend that increases with our growth. We believe the dividend is sort of sacred, but not more sacred than our balance sheet, our financial strength, and our liquidity. While we certainly have the wherewithal to continue to overpay the dividend forever, our management and board believe that in this crisis period, our dividend should mirror our taxable earnings. Accordingly, last Thursday, the board concluded to right-size the dividend to 53 cents per quarter. By the way, I'm not a big fan of paying dividends in stock. Truth be told, recovering in the nation and in our city will be slow. Residential neighborhoods have decent activity and street traffic. The canyons are commercial boulevards, not so much, with office building census about 8%. Street traffic is very light. As you would imagine, it's really tough to be in a retail or restaurant business in these quiet streets. Most office tenants do not plan on coming back in scale until Labor Day or even until year end. And truth be told, it may even take a couple of years for New York's ecosystem, tourism, sports, concerts, Broadway, museums, restaurants, nightlife, etc., to return to normal levels. The headline of the day is that everyone will work from home, or almost everyone will work from home, or whatever, forever. Which would, of course, have a negative effect on office demand and taxes. I don't believe it, and I'm betting against it. There will always be some work from home, even a little bit more now that we have Zoom, etc. But in the end, culture, productivity, collaboration, innovation, and talent happen in office buildings. That's actually, that's my view on work from home. Now over to Michael who will talk about our earnings and about the markets.