Good morning, and welcome to the Vornado Realty Trust second quarter 2022 earnings call. My name is Daryl, 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 touchtone phone. I'll now turn the call over to Steven Borenstein, Senior Vice President and Corporation Counsel. Please go ahead. Welcome to Vornado Realty Trust 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 packages, 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 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, 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 statement. 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 questioning. I will now turn the call over to Steven Roth. Thank you, Steven. 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 Penn One 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 100 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 PENN1, Farley, and PENN2. 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 Train Hall, which was another ESD-led General Project Plan, two new station entrances at 33rd and 34th Street, and a new Long Island Rail Road concourse which we'll deliver in the beginning of 2023. 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 one of a year of significant accomplishments for us in the Penn District. At PENN 1, we substantially completed the renovation, including the largest and best-in-class amenity package to overwhelming enthusiasm. Our total renovation and reimagining of our two block wide PENN 2 is more than half complete. It's exciting for us and the real estate market generally to see the steel structure for the transformative bustle taking shape. Penn One and Penn Two will be the centerpiece of our current Penn District development. As Michael will tell you, we are spot on our leasing underwriting. This 4.4 million sq ft interconnected campus will be completed and income producing in the short term. By that I mean as much as an additional incremental $300 million of NOI through stabilization. Kudos to Michael and Glenn and their team for completing $3.2 billion of refinancings, 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 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. Thank you, Steve, and good morning, everyone. As Steve mentioned, we had another strong quarter. Second quarter comparable FFO, as adjusted, was $0.83 per share as compared to $0.69 for last year's second quarter, an increase of $0.14 or 20%. This increase was driven primarily by rent commencement on new office and retail leases and the continued recovery of our variable businesses, partially offset by the straight-line impact of the estimated 2023 Penn One ground rent expense. We have provided a quarter-over-quarter bridge in our earnings release on page three in our financial supplement on page six. On our last earnings call, we said that we expected our comparable FFO per share growth for 2022 to be in the mid to high single digits. It bears repeating that this expected growth, which is driven by strength in our core operating business, primarily from previously signed leases in both office and retail, including Meta Platforms at Farley, and the continued recovery of our variable businesses, factored in the impact of rising rates on our variable rate debt. However, the pace and magnitude of Fed hikes have been greater than we anticipated. The faster than expected rise in rates will affect 2022 earnings and result in lower FFO growth than we were anticipating. Further, the additional interest expense from rising rates will have a greater impact next year as the higher rates impact our variable rate debt costs for a full year. With respect to our variable businesses, we continue to see a strong recovery in the second quarter, and the EBITDA in total is currently around 90% of pre-COVID levels now, excluding the closed core development Hotel PENN 1. Our signage business, which is the largest in the city with dominant signs in the best location in Times Square in the Penn District, had another very strong quarter and forward bookings remain strong. Our trade show business at the Mart is continuing to rebound nicely, including our hosting of the commercial furniture design industry's NeoCon, which is typically our largest trade show. No trade shows took place during last year's second quarter due to the pandemic. Our BMS business continues to perform near pre-pandemic levels. Finally, our garages are continuing to be on track to fully recover this year. We still expect to recover most of the income from our variable businesses this year with the full return in 2023. Company-wide same-store cash NOI for the second quarter increased by a healthy 8.4% over the prior year's second quarter. Our overall office business was up 5.4% compared to the prior year's second quarter, while our New York office business was up 3.9%. Our retail same-store cash NOI was up a very strong 24.8%, primarily due to the rent commencement on important new leases, including Fendi and Christofle at 595 Madison Avenue, Sephora at 4 Union Square, Wegmans at 770 Broadway, and Canada Goose at 689 Fifth Avenue. Several analysts have reported that our New York occupancy is 90.8%, but that's not really the story. That's a blend of office and retail. Our New York office occupancy ended the quarter at 92.1%, which is flat against the first quarter of 2022, but still up 100 basis points from the trough in the second quarter of 2021 and the highest of our industry peers in New York. Our New York retail occupancy decreased to 76.3% since last quarter, due entirely to the retail space at Farley that was previously under development being placed into service during the second quarter. Now turning to leasing markets. In New York, total employment has reached its highest level since March 2020, and office using jobs are near 1.5 million, which is only 6,500 jobs below its February 2020 peak. Tech sector leasing has slowed, but the financial sector has picked up the slack, now accounting for almost half of market-wide activity with some large expansion transactions in the works. Leasing velocity in higher quality buildings continues to dominate the landscape, with many large-scale tenants relocating to the most differentiated, well-located office buildings in both ground-up new builds and best-in-class redevelopments across the city. Overall tenant demand and rental pricing in the top end of the market remains strong. While older commodity product is experiencing higher vacancy rates and less tenant demand and sublease space availability continues to increase. Our office leasing results since the onset of the pandemic reflect the resiliency of our best-in-class portfolio and how it's benefiting from these trends. Our team's strong deal-making skills have resulted in more than 5 million sq ft of office leases signed since the first quarter of 2020 at average rents of $84 per sq ft and an average lease term of 12.4 years. During the second quarter, we completed 21 transactions comprising a total of 301,000 sq ft leased. We continue to outperform the market. Our consistently healthy quarter-to-quarter leasing metrics reflect the high quality of our portfolio and the immediate impact of our redevelopment program at Penn One. This foreshadows the success we're going to have at Penn Two also. Our portfolio-wide average starting rent this quarter was strong at $85 per sq ft, including $97 per sq ft for 75,000 sq ft of deals at our highly monetized Penn One, which exceeds our underwriting and further validates our program to significantly increase rents in our redeveloped Penn assets. Other transaction highlights this quarter include a 45,000 sq ft headquarters expansion relocation lease with a private equity firm at 650 Madison. A new 60,000 sq ft transaction with a nonprofit at 825 7th Avenue, and 61,000 sq ft of various deals at 150 East 58th Street. Importantly, the average lease term of this quarter's activity was 11.5 years, while our mark-to-market on these deals was positive 5.1% GAAP and 1.7% cash. Overall, our pipeline remains active with more than 700,000 sq ft of deals in lease negotiation and an additional 700,000 sq ft in lease proposal stages. Now turning to Chicago, where the market is lagging behind New York's recovery. At the Mart, while our office leasing pipeline is active with more than 800,000 sq ft in discussion, conversions are taking longer and concessions remain elevated. We recently commenced our capital program to add world-class fitness, conferencing, and other amenities, which will be completed by summer 2023, and it is already having a positive impact on our leasing efforts. During the quarter, we leased 59,000 sq ft, a majority of which were leasing renewals and expansions within our showroom industries at an average starting rent of $56 per sq ft. In San Francisco, while the market overall is experiencing record level vacancy rates and low return to work numbers, our 555 California Street campus remains full other than our vacant 78,000 sq ft building at 345 Montgomery Street. We are currently in renewal expansion dialogue with more than 200,000 sq ft of existing tenants within the trophy 555 tower, and we continue to see market leading triple digit rents at 555 with very healthy mark-to-markets. Retail leasing results were fairly modest for the quarter, with the highlight being a new long-term deal with Chase for 7,500 sq ft at PENN 2 at a significant positive mark-to-market. This deal set a new high water mark for retail rents in the Penn District along Seventh Avenue. Retail leasing activity in the city continues to be concentrated in the highest footfall locations. This is proving true for our newly renovated retail spaces in the Long Island Rail Road Concourse, typically Penn Station's busiest thoroughfare. We have leases out for signature for almost half of the 30 spaces fronting the concourse and at rents exceeding the previous high water mark for retail rents in Penn Station. These commitments demonstrate retailers' belief in public transportation and specifically in Penn Station. More broadly, the city is bustling, with New York City tourism projected to reach 56 million visitors in 2022 and to return to pre-pandemic levels in 2023. However, this positive momentum is being offset by retailer concerns about inflation and recession, and many retailers are becoming more conscious about making commitments. Turning to the capital markets now. Overall, the increased market volatility and spike in interest rates is impacting the capital markets with the volume of both asset sales and debt financings down significantly from last year. The CMBS and balance sheet markets are being much more selective, which accrues to the benefit of stronger sponsors and high quality properties. As such, spreads have generally widened out with lower leverage available. As previously announced in June, we completed $3.2 billion in refinancings, which consisted of extending one of our two $1.25 billion unsecured revolving credit facilities and our $800 million unsecured loan to December 2027, as well as refinancing 770 Broadway and 100 West 33rd Street. We're quite pleased with these executions as they were completed at attractive spreads, a reflection of lenders' heightened focus on sponsorship and quality properties. We had anticipated the financing markets becoming more challenging, and with all but 770, we refinanced these loans early. While the forward curve has historically overpredicted rates, we fixed 770 Broadway, improving our fixed to floating ratio to 60/40, which is more in line with our historical operations. Importantly, with these refinancings, we have dealt with all of our significant maturities through mid-2024. We also announced the completion of the sale of our Long Island City office building for $173 million during the quarter, continuing our efforts to monetize non-core assets. Despite the challenging market, we are hard at work on our other non-core asset sales as well. Finally, our current liquidity is a strong $3.5 billion, including $1.6 billion of cash, restricted cash, and investments in U.S. Treasury bills, and $1.9 billion undrawn under our $2.5 billion revolving credit facilities. With that, I'll turn it over to the operator for Q&A. Thank you. We'll now begin the question-and-answer session. If you have a question, please press zero then one on your touch tone phone. If you wish to be removed from the queue, please press zero then two. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press zero then one on your touch tone phone. Each caller will be allowed to ask a question and a follow-up question before we move on to the next caller. I'm standing by for questions. Our first question comes from Jamie Feldman. Go ahead, Jamie. Thank you, and good morning. Maybe just starting with the, you know, your change in your outlook for earnings for this year, next year. Can you just talk more about the magnitude of the drag from higher rates, you know, both on 2022 and 2023 and just, you know, as we're thinking about how to model it, but, you know, where your assumption was and where it is now? Good morning, Jamie. It's Michael. Look, you know, if you look at where we said last time, we were mid- to high single digits early in the year double digits. You're now still projecting to be up, if you just take what we've done in the first two quarters and you model out the rest of the year You know, you're looking at roughly 100 basis points impact on LIBOR from where we thought it would be, you know. With floating rate debt of around $4.25 billion, you know, you're looking at about $0.20 a share, you know, impact from, you know, from where we thought it could be. Now obviously, you know, rates change every day. We've already seen the forward curve come down. What I've told you on 2023 would have been higher two weeks ago than I would tell you today. You know, we can't predict. Obviously, that reflects really two quarters of impact on, you know, on our variable rate debt versus where we expected. Next year, we'll have a full year impact on that. You know, could it be another 100 basis points overall? You know, potentially. Again, you know, I don't wanna sit here today and give you a number. It's driven by, you know, what the curve will be. Relative to the original expectations, you know, it's probably in the ballpark. Jamie, a little bit more on this floating rate debt. First of all, we did very well to fix a little bit more of it to reduce to $4.2 billion. We may pay some of it down. Second, over the last 10 or 12 years, we have benefited enormously from the low interest rates and floating rate debt. Every time we fixed or took a fixed rate loan during that 12-year period, we were wrong and wronger. That's all very interesting, but it doesn't matter going forward. The next thing is that many of our assets are in transition. Some of our assets are on the for-sale list, and floating rate debt, of course, facilitates that because getting out of fixed rate debt when you have a transitional asset involves defeasance, which in many cases can be extremely expensive. Some of the floating rate debt and fixing activities we got perfectly right. For example, 555 California, we executed, it was about a year and a half ago, Michael? Yes. About a year and a half ago, a very attractive loan at a very attractive spread on a floating rate basis, and we fixed our share of it. That was very good. A very good outcome and a real asset. When we did the 1290 refinancing, which was a similar team, I guess I'll take the blame for it, we didn't fix it, and that was, in retrospect, a mistake. The next thing about floating rate debt to think about is that there is really no protection against interest rate increases. By that, I mean when rates go up, you get the fairly small benefit of the protection of a fixed rate piece of debt for as long as it lasts. On expiry, which is three, four, five years or whatever it is, you have to go to whatever the market rate is. Cap rates, of course, reflect the current interest rate environment. There you have it. We will give some of it back in this year and next year. We expect rates to come down perhaps quite substantially, depending upon what the depth of the business slowdown is. There you have it. Our next question comes from Michael Bilerman. Go ahead, Michael. Thank you. Steve, in your opening comments. Mr. Bilerman, welcome. Welcome. Thank you. Steve, you talked a little bit about sort of choppy conditions, given everything that's going on in the marketplace, and how does that sort of forward outlook change your sort of strategic direction? Obviously, you still have the tracker that you've been thinking about, asset sales. There's so many things going on. Is it affecting sort of the path forward for Vornado? I recognize you're not happy with where the stock price is, today, and if it was stupid cheap, it's now stupid stupid. I don't know how many stupids you wanna put. How are you gonna go about, you know, getting to the other side of this? Good morning. First of all, you know, we've been through this, I don't know, five or six times and five or six business cycles over the last 40 years or so. There is always an end. Our job is to rigorously focus on the important things. For example, protecting our balance sheet, preserving our liquidity, and preserving the safety and sanctity of our balance sheet. Number two, we have certain missions that we have to do, which is, for example, keep the buildings leased to the extent that the market permits us to do that, specifically with respect to our fairly grand plans in the Penn District for PENN 1, PENN 2. We will have a spectacular outcome based upon the increased value of those buildings and the surrounding Penn District. Those basically are. We are New York-centric. We continue to have an open to buy in terms of acquisitions if something comes around that we think hits our skill set and hits our price aspirations. Basically, it's business as usual with a more rigorous focus on the important things and the balance sheet. In the beginning of COVID, we cut our G&A and began to get very tough on expenditures. We reduced non-essential capital expenditures, et cetera. Those are the kinds of things that one has to do going into a business slowdown. I've said a couple of times, I think it looks to me like we're on the foothills of a recession. We are in a don't bet against the Fed mode, which I think probably everybody is. As I said, we're in the foothills of a business correction. We are hopeful that the Fed will be disciplined, will keep their foot to the pedal, and will accomplish their objectives as quickly as possible. Does that alter at all sort of the progression of whether it's asset sales or thinking differently about, you know, doing a tracking stock at, for the Penn District? Like, where is your mindset today knowing of where we're headed, and trying to, you know, you had this Alexander's activist, and obviously, that's out there. You know, I don't get the sense that you're happy sort of with where the stock market is valuing Vornado. I'm just trying to better understand. You've spent the last, you know, decade simplifying and doing so many value-creating activities, and even continued this year. I'm just trying to understand what potentially could change into the future, given the environment that we're in. Let me unpack that a couple of places. First of all, I still continue to believe that separating the Penn district into a separately tradable security, whether it be a tracker or some other technique, is absolutely the right strategy for our shareholders. We expect the Penn district to be a grower, and we think that our shareholders should have the ability to invest in that as an isolated pure play investment. That's one. The timing of that is still up in the air. I mean, we're on both sides of that deal, so to speak. We have no counterparty. We can time it whenever we want to, and we will, you know, subject to lots of different things that could occur in between. I continue to believe in that strategy. Secondly, we have a whole group of non-core assets that we are in the process of selling, where we think we could get pricing which is not as good as it would have been, you know, a year or two ago, but good enough to execute. That's, you know, somewhere between, I don't know, $500 million-$750 million, something like that. We already executed on one, on the Long Island City asset. There are other buildings in our portfolio that we would be very happy to sell, although we're more price sensitive to those buildings because, you know, once you get out of the non-core basket, the buildings are more important and better quality. Nonetheless, if we can, we get incomings all the time, and if we can execute at a price that we think is reasonable, which will create value for our shareholders and improve our balance sheet, we will do so. I think the last part of your statement was with respect to the activist investor at Alexander's, which I was gonna hold my answer to that to Alex. I think I'll continue to hold for Alex. Our next question comes from Steve Sakwa. Go ahead, Steve. Thanks. Good morning. Steve, I was wondering if you could just spend a little more time on, you know, the new Penn Station proposal, the 10 sites, the four that are owned by you, and maybe just give us a little flavor for sort of how you see those evolving over time, and how much of that would be office versus residential. You know, I've said multiple times over recent years that the Penn District was our what did I say? our The big kahuna. Our big kahuna was, you know, the bull's eye, et cetera. We have been accumulating property in the Penn District for 20 years now. We believe that Penn Station is the most important piece of transportation infrastructure in the region. We believe that it's the entire district has been benefited by the adjacencies of Hudson Yards and Manhattan West, where there were very successful and very large projects, which really actually sort of put us on the map. We're very appreciative of the efforts of our neighbors. There is an enormous amount of demand for the district. I mean, we get incomings all the time. Basically, the GPP is a zoning matter. It's an overlay of the existing city zoning, where the state has basically become the dominant party. There are multiple things involved in it. One is that we will have the option to increase the square footage that is allocable for each site by buying FARs at fair market value. We can build larger buildings, you might say, okay? I think in round numbers, there's 5 million, is that right, Barry? 5 million sq ft of additional FARs that can be allocated in the district, which we obviously intend to avail ourselves of. Remember, we're paying fair market value for those FARs. The second thing is that the state and the ESD of the state becomes basically our overseer and our regulator with respect to zoning, et cetera. The third is that the revenues that come off the new builds is allocated first to the city, to what the taxes that were payable to the city had been historically. Then basically into a pot that is basically subject to an agreement between the city and the state, where most of that will be allocated towards the reconstruction and of the actual Penn Station. Okay? Some of it, a relatively small amount, on the scale of what Hudson Yards tax incentive was, will be allocated to the developer, to incentivize and allow the construction to go forward on an economic basis. What have I forgotten, Barry? Anything? About 600 units of apartments as well. Yeah. The zoning requires about 600 units of apartment. The intention has been for a long time that this will be principally office development. Okay? How the mix might or might not change, you know, we will determine over time. Now, remember, this is a long-term project involving a huge and irreplaceable piece of location. The first part of it is the existing buildings that are there, PENN 1, PENN 2, and Farley, which we are ankle-deep in or up to our eyeballs in redeveloping. As I have said before, we are right on our underwriting. We expect this to be relatively short term, meaning, you know, between now and, you know, three, four, five years from now to stabilization. We expect those buildings to generate an incremental $300 million of new additional NOI. Great. Well, that leads into my follow-up, because on that $300 million, Steve, I know you've laid out return hurdles and the dollar spent in the supplemental. I guess, where we and I think others are maybe struggling or trying to understand is how much of that income, say in a PENN 1, is already flowing into the income statement as you're marking to market some of these leases. We wanna give you credit, but we wanna make sure we're not double counting or overstating. Is there a way you can sort of help us think about what's contributing from Farley, from One Penn today, and then, you know, when would Two Penn start to actually contribute? You know, I'm gonna let my finance team take care of that offline, because whenever I say they're going equivalent and lapping. Nonetheless, the numbers are approximately like this, maybe $70 million from Farley, which has just begun to come online and will come online over the next year or so. PENN 1 is, you know, 90% occupied, something like that. I don't know the exact number. At an average rent in the 50s, high 50s. We expect the market rent for that building to be $100 a foot. We have. As Michael said, we signed 71. Is it 71,000? $75 thousand. 75,000. See, they're slapping me already. 75,000 sq ft of leases, four or five, a handful of leases in PENN 1 this quarter at $97 a foot average, which we think justifies and validates our underwriting. We expect the same for PENN 2. What I'm saying is, over time, as leases turn over, PENN 1 will go from, say, pick a number, $60 a foot to $100 a foot. That's $40 a foot times 2.5 million sq ft. That's $100 million. That's new, fresh, coming in as the leases turn over, you pick the period of time. In PENN 2, the building basically has one tenant for 400,000-odd sq ft, which means it has 1.4 million sq ft, which is not income producing today. That will come over time, and the building will be completed, you know, less than two years. With lease up and stabilization and what have you. The two years will turn out to be four, maybe even five years. That's okay with me. That 1.4 million sq ft of now vacant space will produce, you know, we think $100 a sq ft. There's your math. You can, you know, I hope that'll help you to model it, but that's the way I do the math. As I said, you know, my finance team, which is very expert at conversion with this will give you more detail, if you like. Our next question comes from Alexander Goldfarb. I want to go back to Steve Sakwa for a minute. Okay, hold on a second. I don't know any other public company that has a development of this magnitude and this unique prospects out there, okay? You know, obviously, I think the stock doesn't reflect. I think the stock is selling for way less than what we have now. It doesn't begin to reflect the opportunities we have here. I'm sorry. Go ahead. Okay. Our next question comes from Alexander Goldfarb. Go ahead, Alexander. Morning, Steve, and thank you for holding off on the Alexander's question. I think we get two questions. Is that correct? Yes. Great. Okay. Steve- I'm here to serve you. I'm here to serve my wife and kids, so we all serve someone, don't we? Let's get back to business. Okay, the two questions are, first, going off from Steve's question on Penn District. One, it sounds like, you know, you guys will only have a few of the buildings, like four or five, not all 10 that are outlined. But second, and I guess more importantly, you guys entered New York with Mendik. You've been talking about Penn for 25 years. Hard to believe that in the next five or even 10 years that you'll get, you know, four or five buildings up online, not because of you, but just how long it takes to build office to stabilize and lease. As far as the question of earnings, because you guys are earnings, you're paying dividends. You spoke of more asset sales. There's rising rates. We're still waiting for the existing stuff that you've already put, you know, under construction to deliver. How is this, you know? I understand in a private vehicle where timelines are much longer, but in a public vehicle where investors expect earnings growth, and that's something that a lot of us have been waiting for from you guys. How are we to think about this investment, you know, versus other things that are more near-term tangible? Because all this stuff seems to be out multiple years, nothing in the near term. You know, I do real estate. I don't do stock market. You do stock market. I can only tell you that as I model the business and the prospects of the business and the future values that we are creating, and by the way, I too work for my kids. I believe that the inherent values and the IRRs even out over a period of time are extraordinary and unique. Okay? You know, if investors wanna be short-sighted, that's, you know, each investor can make their own decision. I would remind you, and you know full well that the stock market is an all-knowing being, and the stock market chooses to give companies with no sales and no earnings, you know, multiple billions of value because the stock market is saying that the values to be created in future will justify the investment. I can only tell you that if you're focused on time and you're impatient, I'm focused on time, and I'm focused on what the IRRs will be over time as we deliver these buildings. It takes almost no imagination to begin to model what one Penn, two Penn, Farley can be worth and put a risk-adjusted adjustment on that which is very high certainty. You know, once you do that, you know, I think that speaks for itself. Okay. The second question just goes to Alexander's. You know, on Alexander's, one, you know, your thoughts around the dividend given, you know, it's uncovered and doesn't look to be covered for the next, you know, as far out as we forecast the next few years. Two, as Michael said, you do have an activist, although, you know, seems pretty tough given that two-thirds of the company is basically, you know, either Interstate or Vornado. Maybe just some thoughts around, you know, is a Vornado Alexander's tie-up something in the offing? Your thoughts around the Alexander's dividend. Let's spend a minute on the activist. The activist is a small company. I think they said in their letter they have large, very significant shareholders. The way we see it, they have about 10,000 shares, which I wouldn't call very significant. There are some other names on the shareholder list that, you know, could be affiliated with them or what have you. Your point is that it's pretty, you know, either courageous or whatever, you know, to target a company that has two entities that are closely aligned, that control or that own two-thirds of the business. Take that for what you will. We got an incoming, and very simply and very quickly, we treated it with the highest of respect, notwithstanding the shareholdings of I think that they notified us. We got a letter from them in April. I think we invited them in to present to the full board of Alexander's at the next meeting, which was in May. They presented, we exchanged views. The Alexander's board then very carefully and very seriously deliberated about the pros and cons of their suggestions. We sent them a response letter. We did not stiff on them. We listened to them very carefully, and we treated them with the highest of respect. We sent them a letter, basically, saying that the Alexander's board preferred the status quo. What they had suggested was that we internalize management as opposed to externally managed by Vornado, which would raise the expenses of Alexander's by a huge amount, very significant amount, which we had, you know, which we debated over the years. They suggested that we take the cash. Alexander's sits on about $540 million, Gary? Alexander's has $540 million, which is a big number for a small company which has 5 million shares. They suggested that we leverage the company up more, pay a special dividend out. Basically, you know, traditional activist techniques to recap the company with an objective of juicing the stock. Basically, because of uncertain times, because of projects that have the potential, because of lease expiries that are uncertain, all the many different reasons the Alexander's board chose to be more conservative and to not pursue that idea. There was one other thing, and I think that was that Alexander's go into the PR, IR business. You know, I believe in the stock market. I think the stock market knows everything that's going on without having to have a pitch man tell them what's going on. Apparently they were uns- And is- Hang on, let me just finish. Apparently, they were unsatisfied, and they made their point of view public, which is fine. Basically, I'm going to say that this last minute or two or three, but my remarks will be my formal response to their going public. I speak now sort of half and half. This is a Vornado call, and I speak on behalf of Vornado and Alexander's. Vornado owns a third of Alexander's, and externally manages Alexander's. The management teams are overlapping, and the investment is a very significant investment for Vornado. Let me just give you a little bit of math because I was curious, so I looked it up recently. Vornado's total investment in Alexander's is $73 million, which was made about twenty years ago, which is $44 a share. Over time, seventy-three million dollars was the investment. Over time, Vornado has received $520 million of dividends from Alexander's. Vornado is receiving on an annual basis $18 a share, which constitutes a 41% return on the purchase price of the Alexander's shares. I think it's my friend Bruce Flatt who talks about compounding. This is the very definition of compounding. Now, you talk about the dividend. You know, I don't know where you get your math, but Alexander's has the option of doing multiple things which would cover the dividend and what have you. The dividend is, I guess what you're saying is the dividend may or may not be covered. I don't know what your math is, but let's just give it a shot. There are some retail vacancies, which is, you know, part of the result of market conditions, which have caused Alexander's income to decline. Now, that's not a permanent thing. Tenants come and tenants go. Cycles come and cycles go. I don't think that the Alexander's board is very interested in raising, lowering the dividend as tenants come and go out. We, you know, try to get some kind of regularity and smoothness to it. The second thing is Alexander's has, I think, $600-$700 million of floating rate debt, which is obviously costing a little bit more. If you think about it. We're sort of arbitraged on that floating rate debt because we have $540 million of cash. To the extent that we put that $540 million of cash to work earning interest, I think you will find that the dividend is covered. That's, I think, all that I have to say about this. I just wanna reiterate to my friends at Land & Buildings that these remarks will constitute my formal response to their most recent letter. Thanks, everyone. Thank you, Steve. Our next question comes from John Kim. Go ahead, John. Good morning. Michael, you talked about the impact of interest rates on your outlook of FFO for the rest of the year. I was wondering if your second quarter NOI of $289 million GAAP, $285 million cash, is a good run rate for the remainder of 2022. Of the NOI, John? Mm-hmm. Yeah, the answer is, you know, generally yes. I don't wanna give you specificity. You know, like, the first half was very strong. There's some things that phased in the second half that, you know, I don't think you're gonna see as strong a growth in the second half. I think the answer is generally yes. Okay. Yeah. I just wanted to clarify there was nothing one-time in nature on your variable income. You do have a fair amount of expirations at the Mart, but the rest of your portfolio is pretty minimal. Yeah. Yeah, just wanted to clarify. The positives offset some of the negatives that are known, so I'd probably say generally yes. You know, I think as we said in the prepared remarks, you know, the core business is performing well. You know, NOI growth was very good. We expect that there continue to be growth. You know, when you flow it down to FFO with the impact of rising rates, you know, that's where you see that growth, you know, being moderated. Okay. My second question is on your 2023 expirations. You have a fair amount in office, 11%, retail is 9%. Can you provide any commentary or color on what percentage you know today are known to vacate versus leases that you have a high confidence in renewing or backfill immediately? You wanna take office? Sure. As it relates to office, John, this is Glenn. You know, in 2023 we have about 1.3 million sq ft expiring. Of that, 300,000 sq ft of Penn One, which as Steve alluded to, as that rolls, we look forward to that lease-up program to get to the new rents. As it relates to the remaining 1 million sq ft, we're all over it. We're in paper on a lot of it. We probably expect a 50/50 split of people staying versus leaving. But we're in paper for much of it now in terms of the people who are gonna stay or lease the space, which is expiring. You wanna take retail? Sure. Our 2024 expirations, we are laser focused on, and we believe that the rise in tourism to New York City, which is growing rapidly and could reach pre-pandemic levels by next year, will be timed very well for our expirations. We know that our tenants have a desire to stay. It'll be a matter of what the rents are. I mean, John, in 2023, I'm looking down the retail list. I think we feel pretty good about most of those. Obviously we announced, I think, I don't know, maybe three calls ago, that Swatch exercised their termination option at St. Regis. You know, we own about half of that building. That's a known move-out in 2023. You know, we got a meaningful termination payment along the way when they exercise that. That, you know, from a 2023 expiry, you know, that's a notable one. The others, you know, we're in active discussion and, you know, we'll see what happens. What would be the mark to market on that Swatch space? Too early to tell you. Got it. Okay. Thank you very much. Our next question comes from Ronald Kamdem. Go ahead, Ronald. Hey, just following up on some of the breadcrumbs for 2023. I think we touched on the interest expense already. Maybe going back to the Penn District, asking the question a different way. Given that's such a big part of the modeling into next year, any sense how we should think about the year-over-year change in contribution potentially in 2023 versus 2022? Clearly the $300 million makes sense long term. Just trying to think about the 2023 versus 2022 difference, if that makes sense. Say that last piece again, Ronald. For the Penn District, the contribution and the delta between 2023 versus 2022, contribution to NOI, if that makes sense. Yeah. I don't have the numbers at my fingertips. We can get that to you offline. In 2023 though, when you think about it, you know, PENN 2 is not gonna be contributing yet. PENN 1, you know, as we roll over those leases, you know, you'll see contribution there, although again, you know, that's gonna take time to phase in. You know, PENN 1, you know, every year, right, we're gonna roll that space over. We've done an average of five years. Glenn and his team are just gonna knock that out quarter by quarter. You'll see that flow in. PENN 2, you're not gonna see flow in for a period of time. Farley, you know, you're gonna start to see that, you know, flow in more substantially as the retail comes online. You know, we'll give you some quantification offline, and probably along the lines of what Steve asked as well. Yeah, there's gonna be an improvement in 2023. Again, not significant because of, you know, PENN 2 really is not gonna start contributing until 2024 probably. You know, realistically even a year or two beyond that. The others, you know, year by year, as the leases roll. Remember, in Penn, we have the PENN 1 ground lease, repricing, appraisal process. We predicted. An accounting number, in accordance with the accounting convention, I think it was last quarter of $26 million for the new rent. You know, I get asked about that all the time. The process has not begun, although it will begin probably in the fall. I think, you know, we are in the process of preparing. We think the other side is doing the same. You know, there's gonna be multiple experts involved, and it's a fairly significant kind of process. Interestingly, a little bit about it. Interestingly, these are old-fashioned ground leases with old-fashioned kinds of terms. Most of the old ground leases call for an appraisal process, which is based upon the highest and best use for the land as if vacant and unimproved, with a willing buyer and a willing seller in a normalized market, no distress, no economic issues. This particular lease, we believe, is oriented towards a real estate broker kind of a situation, which would require that the renewal price be based upon what the land could actually be sold at a particular point in time, which we believe is significantly different than the smoothed out traditional appraisal process. What's more, you know, this is a date certain. We are now in a situation in the macroeconomy where rates are rising significantly, debt markets are in turmoil, and one of the interesting things is most real estate capital markets players admit that the debt markets are not conducive to buying and selling assets because they're just not there. If they are there, they're at much lower amounts and at much higher interest rates. In addition, construction costs are going up aggressively. In addition, tenant demand is slowing. In addition, this is an extremely large asset where very few buyers could have the financial wherewithal to do it. We think that all sort of plays to a constructive kind of a process where the outcome will be something that we can certainly live with. This is a very large, very important asset. Everybody knows we have spent $400-odd million in capital improvements to improve this asset. We're very happy with it. Whatever the outcome might be of this ground lease reappraisal, we will still have enormous equity value in our lease going forward. Can I ask if I could ask a second question just on the retail. You know, last quarter, you took the guidance up, reiterated this quarter. Clearly it's been coming in better than expected. Any other sort of large leases or anything we should think about as we're rolling into next year just on that retail contribution, that $175 million? Thanks. No, I don't think so, Ronald. I mean, you know, there's, you know, a number of leases we've talked about that are now contributing. There's other signed leases that'll contribute next year, but nothing of a magnitude that's, you know, worth mentioning. You know, it's just a series of leases. Our next question comes from Nick Yulico. Go ahead, Nick. Thanks. I was hoping to hear just a little bit more about, you know, the first quarter of this year to second quarter. You did have an increase in property revenue on a GAAP basis. I think you said signage, lease commencements were some of the, you know, benefits. I just wanted to see if lease termination fees were also, you know, any impact. I guess just how we should think about, you know, the incremental benefits still from the rest of the year from signage upside, commencements, you know, anything from a GAAP revenue standpoint as we think about, you know, the back half of the year versus what you've done in the first half of the year. Look, like I'd say overall, first half was, you know, quite good with the contribution broad-based. We've got contribution coming from, you know, leases coming online, both office and retail. We've got lower expenses that we've been managing. Our variable business is doing quite well. There is a small piece of, maybe a little piece of lease termination, but also, you know, this quarter, we got about $3.5 million from bankruptcy recovery as related to New York & Company from 330 West 34th. But, you know, I wouldn't characterize that as very significant. Overall, you know, the bulk of the contribution is from traditional, you know, recurring items. Our expectation is that will continue. You know, the trajectory of that growth we've seen the first couple quarters is gonna level off, you know, in the second half just as you know, some of the things that started to flow in last year, second half, you know, will be in again this year. You won't get that as much of an uplift year-over-year. You know, on a quarter-to-quarter basis, you know, it'll continue. Again, probably not as significant a growth rate as we've been the last couple of quarters. Okay, thanks. I guess the second question is just in terms of, you know, guidance. I know you are now giving some pieces, you know, on a cash basis for, you know, retail NOI, et cetera. I guess I'm wondering, you know, if your philosophy, if you're willing to revisit your philosophy of not providing FFO guidance. The reason why I ask is that, you know, if you look at estimates for your company for this year on FFO, for next year on FFO, there's some of the widest that we see, which really doesn't make that much sense for an office company. There's a lot of, you know, I think there's a lot of impact that we're all trying to figure out, right? Projects coming online, offline, commencements, difficult to really understand from a GAAP NOI standpoint, as well, you know, some of the highest floating rate debt exposure, which is going to be an issue over the next year. Just trying to, you know, understand if you guys at all are gonna revisit this approach on guidance, particularly as, you know, it feels like over the next year, the estimates are really all over the place for FFO. You know, Nick, at this time, you know, we don't have any plans to revisit. I think we've given you more guidance than we've historically given over the last 18 months. You know, as you're seeing, you know, this quarter, last quarter, you know, particularly in an environment like this, it's hard to do it, right? It's hard to do it given the significant redevelopments we have underway and the impact of when things come online. Obviously, the impact from LIBOR going up, you know, is causing impact in the back half of this year versus original expectations. There's a lot of ins and outs. You know, we don't manage the business quarter to quarter. We do manage it, you know, to drive growth. You know, if we feel like it makes sense to wait to lease space a little bit longer because we can extract better terms, you know, we'll do that. You know, it's sort of an artificial view in our mind quarter to quarter. As I said, I think we gave reasonable guidance at the outset of this year. Obviously, that proved too optimistic given the environment's changing. You know, given the lack of clarity in the current environment across the board, whether it's rates, leasing, et cetera, I don't think it's something we're gonna start right now. Yeah, I would say, I mean, look, I mean I guess. Sorry, go ahead. I guess I'm the heavy in this, and the board as well. We have on our board, you know, a group of very seasoned people, very familiar with public companies. My feeling, my personal feeling is that we are not in a quarter-to-quarter business. We are not in a day-to-day business. We are in a business which cycles over five and 10 years. Our objective is to create value over five and 10-year cycles. We think we've done a, you know, awfully good job of that over long periods of time. The emphasis on, you know, short-term modeling and getting down to a penny a share and, you know, beat a penny, raise a penny, you know, that kind of stuff is not for me. To the extent that guidance focuses, in my mind and in some members of our board's mind, on short-termism, that's not what we're about. However, over time, we have had several different occasions where we had things happen which were issues. For example, this could be, I don't know, 15 years ago, we had the USPTO, the United States Patent and Trademark Office, move out, multiple millions of feet in our Crystal City complex at the time when we continued to own what is now the JBG SMITH business. We chose at that time to in a fairly detailed way with multiple pages of documentation to model out exactly how much space was emptied and how and our process in re-releasing that space. Similarly, recently, when the retail business fell off a cliff, we thought it was prudent to give our investors and the analysts our opinions as to what the retail income would be, at least from a downside point of view. I think there was one or two others that I can't recollect right now. That's my thinking about guidance. Basically, it's a very strong disagreement with short-termism in our business. I know, I understand all those points. I would just say that, you know, look, interest rates are volatile. We can all model that. We can decide what we think the interest rate curve is. You know, GAAP NOI is something that would just be really useful to understand, you know, for this year, what is the GAAP NOI number? How should we think about GAAP NOI next year? It would just help. It's not a quarter-to-quarter number, it's an annual number we're talking about, you know, something. Because, look, your stock doesn't just trade on NAV, which is cash NOI and other factors, right? It does trade on an earnings multiple. I think your, you know, your earnings estimates are, you know, very wide range versus where, you know, they could be if you actually just, you know, gave some level of guidance. Thanks. Thank you. Our next question comes from Vikram Malhotra. Go ahead, Vikram. Thanks for taking the question. I just have two. One, just maybe given the news around, you know, Meta, any thoughts or updates on 770 Broadway kind of ins and outs, and how we should think about that? The lease with Verizon expires in the first quarter of 2023. They've renewed for one of the four floors, so there's three floors remaining, which is about 240,000 sq ft. The space is unique, terrific, in a great location. We're in the market to lease it now. We feel good about the prospects. That's the status of that block. Okay, great. Just maybe a bigger picture question. You know, I guess, Steve, you many years ago called out the shift in office in Manhattan office, you know, to kind of the West Side and South. I'm just wondering, given sort of all the changes we're seeing, both cyclically and potentially some structural changes, in your mind, sort of, you know, as you said, you wanna create value over the next five years. What is the biggest opportunity in terms of value creation? Is it hard assets? Is it in debt investments? Perhaps your own stock in terms of buybacks? I'm just taking a longer term view, what would you do if you were to start looking at external growth? Wow, that's a metaphysical question of the highest order, Vikram. Look, we have done debt investments over, you know, a 25-year period. We have not, you know, recently, and I don't think that we're going to get into the debt business for lots of different reasons. With debt, a couple of things. Number one, the best that you can hope for is that a publicly traded debt business trades for 110% of its book value. Basically, it's not a capitalization of earnings. It's basically a book value kind of a thing. We don't believe that debt gives equity returns. That's step one. Although we have done it in the past, and we may do it in the future but not likely. With respect to our stock, we agree that our stock is uniquely, and I think I'll acquiesce to Mr. Bilerman, stupidly super cheap. Without saying anything, we have stayed away from investing in our stock or buying back our stock for many quarters now, but we are starting to get kind of tempted about it. We think it's, you know, actually a little crazy. We have to balance the returns that we could get by buying back our stock with the returns that we can get in the Penn district and other investments. We don't have a hankering for small potatoes. If we were going to buy back our stock, we would wanna do it in a fairly significant way. The rest of it is we are kind of baked in our business. Our assets are our assets. We may sell some. We certainly would buy assets in our skill set to the extent that we had the opportunity to make the entrepreneurial returns that we think we have traditionally made. I'm not sure I handled all of the alternatives that you mentioned, but at least I tried to handle some of them. Our next question is a follow-up from Michael Bilerman. Go ahead, Michael. Great. Thank you. Steve, I just have a few follow-ups. Just on 770, I know you have 18 months to achieve perhaps greater loan proceeds. What are some of the conditions, and how much additional capital can you draw out of that asset per the terms of your agreement? The agreement provides for an additional $300 million draw. It's conditioned upon leasing the Verizon space and one other condition. We are planning as if we will not make that draw. Okay. Just on going back to Alexander's, I appreciate all the comments you gave to Alexander. You know, I go back, I don't know, maybe 16, 17 years ago when Alexander's was trading at a discount, and you proactively put in the annual letter that, you know, you were gonna take a deep look at a variety of options. A year later, the stock market corrected itself and the stock had gone up, and there was nothing to do. How does the current situation compare to back then in relation to Alexander's, but also, you know, stepping back as it relates to Vornado, where you have been very active? Can you just sort of compare and contrast the environment back then versus the environment now in trying to do something with Alexander's? Michael, you know, stocks fluctuate. Alexander's is no different. Alexander's has traded as high as $400-some-odd a share and as low as $100, high 100s of dollars per share. Alexander's now sells for an 8% dividend, I guess basically, or at least it was a couple of days ago. You know, a business with the credit of Alexander's, the assets, the quality of the assets of Alexander's, the balance sheet, which basically has $500-some-odd billion of cash on it, should not trade for an 8% dividend. That's totally misplaced. It would not be stupid for Alexander's to trade at a 4% dividend based upon the money market comparables, et cetera, which would mean that Alexander's, based upon its dividend, valuation alone, you know, would be fairly priced if the stock would double. The stock market is gonna do what the stock market does. From our point of view, we are going to preserve the $500 billion of cash for lots of different reasons. That may change, but it's not gonna change in the short term. We're going to continue to pay out whatever dividend the board determines to be appropriate. As I said multiple times, it's almost impossible for Vornado and Alexander's to combine. It's impossible to figure out what a price would be that would make the Vornado shareholders happy and/or the Alexander's shareholders happy at the same time. Yeah. For the moment, Alexander's sort of sits where it sits, and its shareholders should enjoy the dividend and the future prospects. Okay. And then just the last one, Steve. In response to my question at the opening on the tracker, you talked about, you know, being committed to the tracker or other techniques, and I don't wanna pick up too much on that word. But in your mind, is there other avenues in the separation of the Penn District that you're evaluating other than just a tracking stock. I know you and I disagree, but that's fine. You know, we can. But is there other ways that you're thinking about structurally of separating the company that way? Oh, sure. We're not gonna talk about them today. Our next question comes from Jamie Feldman. Go ahead, Jamie. Great. Thanks. Just a quick follow-up. Glenn, I think you had said, you're in discussions for 50% of the 23 expirations, and you think 50% may move out. A, I wanna make sure that's correct. B, you know, how does that compare to this time in prior years? And can you talk about some of the larger known move-outs? You know, the 50/50 production is today's target. That moves down, as you know, weekly, quarterly, et cetera. We'll keep you up to speed. As always, we're way ahead of it, have been ahead of it over the past quarters, tackling all those expirations. I don't wanna get into specific tenants or specific buildings, Jamie, but you know, you could be assured we're on top of every one of them, particularly a larger variety expirations. Is that about where you are typically this time of year, or do you think next year is gonna be a tougher year? Every year is different, but I mean, year to year, you know, 50/50, 60/40. I mean, it's always in that range. I'd say it's not far off the standard fare, but you know, it's. You know, predicting all this is, as you know, difficult. Things change every day with our tenants and our buildings, always putting the pieces together the best we can to create value. It's hard to say, you know, yes, exactly that or exactly this. That's where we are today. Okay. All right. Thank you. We have no more questions at this time. Let me say we appreciate everybody joining us this morning. We look forward to seeing you all again soon. Our third quarter earnings call will be on Tuesday, November 1 at 10:00 A.M., and we look forward to your participation again. Take good care. Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect.