Vornado Realty Trust

Good morning and welcome to the Vornado Realty Trust second quarter 2022 earnings call. My name is Darrell and I will be the 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 zero then one on your touch tone phone. I'll now turn the call over to Steve Borenstein, Senior Vice President and Corporation Counsel. Please go ahead.

Welcome to Vernado 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 of the Securities and Exchange Commission. These documents, as well as our supplemental financial information packages, are available on our website, www.bno.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, 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, our opening comments are Steven Roth, 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 Roth.

Thank you, Stephen. Good morning, everyone. As Michael will cover in a moment, we had another very good quarter with comparable FFO of 20% from last year's second quarter. While the first half of the year was right on our expectations and our business continued to perform well, we are now projecting the second half to be below what we had forecasted. given interest rates and the incremental non-cash accounting charge from the PEN1 ground lease. Overall, this year is still expected to be up year over year. By the way, we reaffirm retail guidance of cash NOI of not less than $175 million for the year. While headline inflation numbers remain very high, it seems like the Fed's efforts are beginning to have their desired effect. There are signs of a slowdown all around, a rapidly slowing housing market, falling consumer confidence, and companies announcing hiring pauses or even layoffs. The inverted yield curve signals market participants expect a recession, and the forward yield curve predicts that rates will come back down within a couple of years. While we are protected by long-term leases with about 1,500 tenants, we do expect and are prepared for choppy conditions. Pennsylvania Station is by far the most important piece of transportation infrastructure in our region. In a manner of speaking, I might say that every transportation project in the last hundred years either started at Penn, ended at Penn, or has gone through Penn. All of this, of course, makes the surrounding Penn District critically important, and we have a large and unique holdings here. Last week, as many of you may have seen, the Empire State Development Corporation approved the general project plan for the Penn District. This is an important piece in Governor Hochul and Mayor Adams' plan to finally fix Penn Station. The GPP is essentially a zoning overlay for transit-oriented development to create a modern mixed-use district that maximizes public benefits, including new station entrances, robust subway improvements, and addresses overcrowding and accessibility, public realm improvements, and affordable housing. Out of the 10 sites involved in the GPP, we own four and part of a fifth. We have long invested in our properties around Penn Station and in the district, including $2 billion in Farley, Penn 1, and Penn 2. We've also led in multiple successful public-private partnerships that have delivered meaningful transit and public realm improvements for New Yorkers, including the Moynihan Trade Hall, which was another ESD-led general project plan, two new station entrances at 33rd and 34th Streets, and a new Long Island Railroad concourse, which will deliver in the beginning of 2023. And the MTA is now advancing the design work for the reconstruction of the remainder of Penn Station. In addition to finalizing the GPP, this has been a year of significant accomplishments for us in the Penn District. At PennOne, we substantially completed the renovation, including the largest and best-in-class amenity package to overwhelming enthusiasm. Our total renovation and re-imagining of our two block wide Pen 2 is more than half complete. It's exciting for us and the real estate market generally to see this deal structure for the transformative bustle taking shape. Pen 1 and Pen 2 will be the centerpiece of our current Pen District development. As Michael will tell you, we are spot on our leasing underwriting. This 4.4 million square foot interconnected campus will be completed and income-producing in the short term, and by that I mean as much as an additional incremental $300 million of NOI through stabilization. Kudos to Michael and Jan and their team for completing $3.2 billion of refinancing, which Michael will tell you about shortly. I end with a plug for our new Fasano restaurant at 280 Park Avenue on 49th Street. We imported Fasano from from Brazil, and they certainly are living up to their notices as being one of the best new restaurants in town. Call me if you can't get a reservation. Now to Michael.