Vornado Realty Trust

Good morning and welcome to the Bornado Realty Trust fourth quarter 2021 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 a 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 touchtone phone. I will now turn the call over to Mr. Steve Bornstein. Senior Vice President, Incorporation Council. Please go ahead.

Welcome to Vernado Realty Trust's fourth quarter earnings call. Yesterday afternoon, we issued our fourth quarter earnings release and filed our annual report on Form 10-K 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 relief, Form 10-K, 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, 2021, 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 Ross, Chairman and Chief Executive Officer, and Michael Franco, President and Chief Financial Officer. Our senior team is also present and available for questions. I will now turn the call over to Stephen Ross.

Thanks, Steve, and good morning, everyone. By any measure, Vernado just reported an outstanding industry-leading quarter at the head of the class of our industry peers. Comparable FFO for the fourth quarter increased 19.1% from last year's fourth quarter. Company-wise, Same-store cash NOI for the fourth quarter increased 10.1% from last year's fourth quarter. Same-store cash NOI from our New York business for the fourth quarter increased 11.3% from last year's fourth quarter. Company-wide, we leased 2.9 million square feet for the year, of which 2.5 million square feet was in New York, where our leasing teams landed the second and third largest office leases and the second largest retail lease. For the quarter, We leased 1,036,000 square feet company-wide, of which 1,008,000 square feet was in New York. You will hear more about our leasing activity in Michael Franco's comments shortly. New York office cash starting rents were $83 for the year and $88 for the quarter. New York office cash mark-to-markets were a positive 10.8% for the year and a positive 29.1% for the quarter. Importantly, our triple-digit Madison Square Garden anchor lease at Penn II and our current leasing successes at Penn I validate our Penn District program. Here's a short update on the Penn District. The acclaimed Moynihan Train Hall is open to the public. Our retail leasing in the train hall is nearly complete with 26 leases executed. The doubling in width and doubling in height of the Long Island Railroad Concourse is scheduled to be completed by year end. We own the retail on both sides of the LIRR Concourse, all of which space was vacated to accommodate the construction. We are now finalizing with over 30 retailers for that space, many of them food-oriented at terms that are better than pre-COVID levels. And finally, we have turned over all of Facebook's 730,000 square feet to them for tenant fit-out. At 10-1, our grand new lobby and multi-floor amenity offerings are largely completed and open. Our amenities here are extensive. We believe them to be the largest amenity package in the city by far and unique, tailored to the demographic of our workforce and is receiving rave reviews from tenants and brokers. After all, We are in the hospitality business, and that means pleasing our tenants and pleasing their employees. On the seventh floor of Pen 1, our experienced leasing center is open and busy. This 14,000-square-foot facility, complete with multiple scale models and floor-to-ceiling wall-to-wall videos, vividly illustrates and brings to life our vision and plans for the buildings, restaurants, retail, amenities, lifestyle, and work styles that the Penn District will become. At Penn II, we are give or take 25% into construction. Our construction operations in the Penn District span three full blocks, 31st Street to 34th Street, along the west side of 7th Avenue. In a few short months, everything in our Penn District will come to life, as shiny modern curtain wall continues to be erected on the Penn II facades. As steel is erected, giving shape to the massive two-block long bustle, an architectural statement in scale and substance that will announce the entrance to Pennsylvania Station, Madison Square Garden, and our office building. And as the hotel pen across the street begins to come down, daylighting that unique sight. My excitement and conviction about our pen district grows quarter by quarter. I still believe that a winning strategy is to allow investors to choose between the high-growth, development-oriented Penn District or our other, pretty terrific in their own right, Class A traditional core assets, or both. Nonetheless, we have decided to pause the execution of a separation by tracker. This is a purely internal transaction with no counterparty or deadlines. and I believe a delay until COVID is resolved and New Yorkers return en masse to the office is appropriate and warranted. A word about our retail business. The Manhattan retail market has definitely bottomed and activity has accelerated. For 2021, our retail cash NOI was $160.8 million, blowing away our guidance of $135 million. Further, We are increasing our 2022 retail cash NOI guidance by $15 million, from $160 million to $175 million. While we own a very large and very important trophy quality asset in each of San Francisco and Chicago, Renato is primarily a Manhattan-centric company. As we interact with our tenants, other occupiers, and market participants, our conviction about Manhattan's future performance, importance, and even dominance is stronger than ever. Case in point, Manhattan has become the second home to all of the tech giants, specifically the New West Side, and they continue to grow here. With inflation at the top of the jour, I should point out that replacement costs for New York office buildings is rising pretty aggressively. I submit that replacement cost has always been a leading indicator for telling that our existing stock of office buildings will be increasing in value. In the same vein, the Manhattan residential market is, I believe, also a leading indicator. It went from 100% occupancy pre-COVID down to 70% at the height of COVID and is now back to 100% at higher than pre-COVID rents, by the way, as New Yorkers have returned. Restaurants are full and standing room only. So the city is full, but office buildings, not so much. That last domino will be when employers and employees resolve hybrid work schedules and the office districts are again teeming with activity. And I submit that will come sooner than you think. That concludes my remarks. Now to Michael.