Vornado Realty Trust

Good morning and welcome to the Vornado Realty Trust fourth quarter 2023 earnings call. My name is Andrea and I will 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 touch tone phone. I will now turn the call over to Mr. Steve Borenstein, Senior Vice President and Corporate Counsel. 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 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-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 for 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, 2023, 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 Stephen 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. We ended the year on a high note with a good fourth quarter. The quarter and the year were right on target. Although, as expected, our results were negatively affected by the dramatic increase in interest rates. This will carry through next year, but I expect we'll reverse as interest rates recede. It's important to note that our business has continued to perform well. Michael will review the quarter and the year with you in a moment. This year, our New York City office leasing team won the gold medal. In the fourth quarter, we leased 840,000 square feet. For the full year, we leased 2.1 million square feet. Average starting rents for the quarter and the year were record-breaking at $100 and $99 per square foot, respectively. In more gold medal stuff, for the year, we leased 1.2 million square feet at over $100 a square foot rents. The office leasing market is on the foothills of recovery, but the capital markets still remain challenged. and are even tightening slightly as we speak. The foreclosures and givebacks are still in front of us, and therefore, so is the opportunity. As Michael and I have said on the last few calls, retail in New York City has bottomed and is recovering rapidly. While rents have a way to go to reach peak pricing of five years ago, we feel very good about the activity, level, and strength of the retail recovery. And there's more big retail news. In two blockbuster deals announced in December, major global luxury retailers Prada and Kering bought prime upper Fifth Avenue properties for their own use as stores. One deal was $835 million and the other was $963 million. So in round numbers, call it about $900 million for a half block front on upper Fifth Avenue. So we now have the most important retailers in the world investing aggressively in real estate for their own use on the most important retail street in our country. This is only happening in the most important world cities, New York, London, Paris. Now we take this mark very personally because we own in our retail joint venture, so 52% our share. a 26% market share of available upper fifths avenue and four half blocks of similar AAA quality. I'm sure you can all do the math here. We also own in that same joint venture the two best full blocks, so that would be four half blocks in Times Square, and we have the largest signed business in town. It's been a long ride, and we have now just about completed construction of our renovation of the double-block-wide Pen 2, and we are about 90% complete with the surrounding plazas. The huge plaza in front of Pen 2, combined with the 33rd Street Promenade and the 33rd Street setback at Pen 1, have created an enormous open public space, which I might say will be quite majestic. Directly across 7th Avenue, the Hotel Penn is now down to ground, creating our Penn 15 site. All this taken together is for sure a game changer. If you are a shareholder of Renato or are interested in Renato, this is an immediate must-go-see. The world turns in funny ways and creates opportunity. The retail apocalypse is now passing, having handily survived the e-commerce attack. But now we have a CBD office apocalypse involving the work-from-home threat and the total blacklisting of office in the capital markets. In the end, the major cities of America will continue to grow and thrive with New York, our hometown, leading the pack. Office workers will gather in offices with their colleagues rather than be alone at home at their kitchen table. And in the end, the supply-demand equation will come into balance and bring on a landlord's market by a total cutoff of new supply. You can't build anything in these frozen capital markets. And in New York, the evaporation or irrelevance of, say, 100 million square feet of old, obsolete, unrentable space. This cycle is not over yet. There remain challenges. But for forward-looking investors, the time is now. My colleagues and I at Renato are optimistic and excited. Now over to Michael.