Vornado Realty Trust

Good morning and welcome to the Vornado Realty Trust fourth quarter 2024 earnings conference call. My name is Betsy 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, Executive 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 supplements. 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, 2024, 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 Chief Financial Officer. Our senior team is also present and available for questions. I will now turn the call over to Steven Roth.

Thank you, Steven. Good morning, everyone. At Drenado, business is good, really good, and getting better. New York is our home, and everyone agrees that the New York real estate markets are head and shoulders, strongest in the nation. As I have said before, while New York has over 400 million square feet of office, we really only compete in a narrower market of about 188 million square feet of the better space. Availability in the better space market is 10.7% versus 20.1% in the not better space market. And that 10.7% availability is evaporating very quickly. Park Avenue is already under 7%. Add to that that the cost of a new-build tower in New York has just about doubled over the last six to seven years, and with the cost of debt at, say, 6%, new supply is frozen. There hasn't been a major new building start in five years, and once started, delivery takes five to seven years. Taken together, this all creates a landlord's market. We expect rents to rise aggressively. One might even say rents to spike. And in fact, rents have already started to rise. So all good, very good. Why New York? New York is America's world city. New York's human and physical capital is irreplaceable. We have the largest, most educated workforce, the best transit system for commuting from our vast suburbs. You may read this as a plug for the Penn District, and I guess it is. The largest number of corporate headquarters, the best restaurants and museums, and eight professional sports teams, even though the damn Yankees can't seem to beat the Brooklyn Dodgers. I would like to focus on a few points and a handful of our recent accomplishments. Work from home was a scare, but as we predicted, it will not last and is not last. Most have left their kitchen tables and are back at the office. Our stock price increased 49% in 2024 after increasing 35% in 2023. In 2024, we leased 3.4 million square feet overall, of which 2.65 million square feet was New York office, at market-leading $104 starting rents with mark-to-markets of 2.5% cash and 10.9% gap. For the second year in a row, we completed the most premium $100-plus deals in New York in 18 transactions for 1.36 million square feet. and we completed three of the top 10 largest office deals in New York. We completed 285,000 square feet of deals at 10-1 at $98 starting rents, exceeding our underwriting. We completed 25 retail leases totaling 187,000 square feet, highlighted by Manhattan's first Primark in the Penn District. We completed the Uniqlo sale at 666 Fifth Avenue at a record price of $20,000 per square foot. Last month we repaid at maturity our 3.5% 450 million unsecured bonds out of cash on balance sheet and 108 million off our credit line. Our entire portfolio was 100% LEED certified and we are the first in the nation to achieve this milestone. We are on the two yard line with a handful of important deals. We will finally complete the master lease to NYU at our 1.1 million square foot 770 Broadway by the end of the month. This deal will relieve our balance sheet of $700 million of debt on this asset and eliminate 500,000 square feet of vacancy. By the way, this large and impressive building on the edge of the NYU campus will be their science center. I have seen the plans. It will be a world-class education facility, which will make NYU an even greater elite higher education institution. That's great for NYU, and that's great for New York. We will shortly refinance 1535 Broadway, which will allow us to redeem for cash over $400 million of our retail JV preferreds. And we have several asset sales in the works. Taken together, these transactions will shortly generate an incremental additional $1 billion of new cash. At PEN2, we are only weeks away from signing a 300,000 square foot lease. PEN2 is being very well received by tenants and brokers with commentary that it is the best redevelopment anyone has ever seen, and together with PEN1 has by far the biggest and best amenity package anywhere. We are also engaged in multiple tenant proposals at PEN2, including negotiating an LOI for a major headquarters lease. I'm predicting that PEN2 will likely be 80% leased by year end. We are achieving rents here above our underwriting, and accordingly, we have increased the incremental yield on page 16 of our supplement to 10.2%. We will deliver Pier 94 on Manhattan's west side by year end 2025. the first ever purpose-built film and television southpages in Manhattan. Now for those interested in Alexander, our 32.4% owned affiliate. In the second quarter of 2024, we early renewed the 947,000 square foot Bloomberg office lease at 731 Lexington Avenue, whose expiry is now pushed out to 2040. At Rego Park in Queens, we are moving Burlington and Marshalls, the last remaining tenants at Rego 1, to our adjacent Rego 2 shopping center, thereby filling up Rego 2 and creating a fully vacant blank canvas at Rego 1 for either sale or development. Obviously, we believe this unique five-acre parcel of land, wonderfully located at the intersection of Queens Boulevard and Junction Boulevard and bordering the Long Island Expressway, is worth more as land and the 66-year-old building. I believe Alexander's stock substantially undervalues its assets and we will have to do something about that. 350 Park Avenue development is on schedule. The new building is now fully designed and it will stand out as being truly, truly best in class. We are in the formal approval process under the Midtown East zoning and Citadel, our major tenant, and Ken Griffin, our partner, will shortly begin moving out of 350 Park into swing space so that demolition can begin early next year. I end by noting how proud our Renato teams all are of our accomplishments to date in the Penn District. Take a look at Mehta at Farley, Penn 1, Penn 2, the Moynihan Train Hall, the Long Island Railroad Concourse, the 33rd Street Plaza, and even Penn 11, and how excited we all are about the future of our city within a city. Next up is the Hotel Penn site, now down to the ground and ready to go. Our Penn district is clearly a site to be seen. If you haven't already seen it, please call me to arrange a tour. Now to Michael.