Good morning and welcome to the Vornado Realty Trust Q4 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 Vornado Realty Trust Q4 Earnings Call. Yesterday afternoon, we issued our Q4 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.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-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, Steve. And good morning, everyone. At Vornado, 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 sq ft of office, we really only compete in a narrower market of about 188 million sq ft 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, it's a 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 New York 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 would not last. That did 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 sq ft overall, of which 2.65 million sq ft was New York office, at market-leading $104 starting rents with mark-to-markets of 2.5% cash and 10.9% GAAP. 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 sq ft. We completed three of the top 10 largest office deals in New York. We completed 285,000 sq ft of deals at PENN 1 at $98 starting rents, exceeding our underwriting. We completed 25 retail leases totaling 187,000 sq ft, 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 sq ft. 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 sq ft 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 sq ft 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. PENN 2, we are only weeks away from signing a 300,000 sq ft lease. PENN 2 is being very well received by tenants and brokers, with commentary that it is the best redevelopment anyone has ever seen, and together PENN 1, has by far the biggest and best amenity package anywhere. We are also engaged in multiple tenant proposals PENN 2, including negotiating an LOI for a major headquarters lease. I'm predicting PENN 2 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 soundstages in Manhattan. Now, for those interested in Alexander's, our 32.4% owned affiliate. In the second quarter of 2024, we early renewed the 947,000 sq ft 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 One, to our adjacent Rego Two shopping center, thereby filling up Rego Two and creating a fully vacant blank canvas at Rego One 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 than 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 Vornado teams all are of our accomplishments to date in the PENN DISTRICT. Take a look at Meta at the Farley Building, PENN 1, PENN 2, the Moynihan Train Hall, the Long Island Rail Road 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 Pennsylvania 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. Thank you, Steve, and good morning, everyone. Comparable FFO was $2.26 per share for the year. As previously forecasted, this was down from 2023 due to lower NOI from the known move-outs that we discussed throughout the year and higher net interest expense. But overall, our results were better than we had anticipated earlier in the year. This is primarily due to the acceleration of our leasing activity at 330 West 34th Street, where we recognize lease termination income in connection with executing a 304,000 sq ft lease with WeWork on behalf of Amazon. Also, net interest expense ended up being lower versus our original projection due to short-term rates coming down. By the way, we already have almost 80% of the vacant space from the known move-outs spoken for. Q4 comparable FFO was $0.61 per share, compared to $0.63 per share for Q4 2023. This decrease was primarily attributable to higher net interest expense and lower NOI from the known move-outs, partially offset by the lease termination income at 330 West 34th Street and lower G&A expense. We have provided a quarter-over-quarter bridge on page three of our earnings release and on page six of our financial supplement. Now turning to 2025. Though our practice is not to give earnings guidance, we can tell you that similar to current consensus, we expect 2025 to be slightly lower than 2024. This is partly due to the previously mentioned lease termination income at 330 West 34th Street that positively impacted 2024 comparable FFO. As indicated during last quarter's call, the GAAP earnings impact from the backfilling of vacancies and the lease-up PENN 2 won't occur until towards the end of 2026, with full positive impact in 2027, resulting in significant earnings growth by 2027. A few words on occupancy. Our year-ended office occupancy was 88.8%, up from 87.5% last quarter. With the pending full building master lease at 770 Broadway, our office occupancy increases by 330 basis points to 92.1%. As we previously mentioned, our first quarter 2025 occupancy will decrease due PENN 2 being placed into service. We anticipate that this decrease will be temporary PENN 2 occupancy stabilizes over the next year and we get to the low 90s. Our New York leasing pipeline remains robust as we enter 2025. We have significant activity across our portfolio with 750,000 sq ft in negotiation, on top of the 1 million sq ft master lease being finalized with NYU at 770 Broadway. Additionally, we have another 1.3 million sq ft in various stages of proposals and negotiation. Turning to the capital markets, both the financing and investment sales markets are showing encouraging signs over the past few months. The CMBS market is wide open for large, high-quality assets such as ours, with appropriate metrics and loan structures. AAA and overall spreads for recent financings on The Spiral and 299 Park Avenue have shown significant tightening over the past six months to levels consistent with pre-COVID. While we expect banks will largely remain on the sidelines this year, some banks are beginning to look at financing smaller office deals, a hopeful first sign in a trend we expect to continue. The one negative is that short-term rates, after coming down 100 basis points last year, look likely to remain around current levels for the foreseeable future, keeping borrowing costs high. The investment sales market continues to pick up also, with several high-quality office assets trading recently, including interest in 320 Park Avenue by Munich Re and 1345 Avenue of the Americas by Blackstone. With that, I'll turn it over to the operator for Q&A. Thank you. We will now begin the question and answer session. If you have a question, please press star, then one on your touchtone phone. If you wish to be removed from the queue, please press star, 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 star, then one on your touchtone phone. Each caller will be allowed to ask a question and a follow-up question before we move on to the next caller. Steve Sakwa from Evercore ISI is on the line with a question. Please proceed. Yeah, thanks. Good morning. Steve, thanks for those great comments about the leasing activity. It sounds like you're close to punching a few things into the end zone here. But maybe you or Glen could just provide a little bit more commentary around some of the timing PENN 2, i guess, in particular, and just maybe the competitive dynamic that you're seeing for that space and the confidence level you had to raise the yield on PENN 2. Hi, Steve. It's Glen. How are you doing? So PENN 2 is more than often running. Every large tenant in the market has it in their top three list of what to see. There are only five buildings in Manhattan with blocks available of 500,000sq ft or more. We have the best block. So as you heard in the remarks, we have a lease out with one tenant that's going to get done in short order for 330,000sq ft. We have an LOI in very serious stages for another very large headquarter tenant. And behind all that, we have tenants battling for space from anywhere between 60,000 and 200,000sq ft. So PENN 2 is now the bull's eye for many people's searches, and we're in complete fifth year on our leasing. Okay. And just any comments on just kind of the rents, I guess, that you're sort of seeing? I guess that speaks to kind of the yield being pushed up at that by 70 basis points. We've raised our rents across the entire building, from bottom to the top. John Kim from BMO is on the line with a question. Please proceed. I wanted to follow up on Steve's commentary on $1 billion of new cash proceeds you expect. You have $700 million debt paid out at 770 Broadway, $400 million freed up at 1535 Broadway as well, and then on top of that, new dispositions, so I was wondering how much in new dispositions that you anticipate. How much in new dispositions do you anticipate? The math of what you just said, the $700 million is going to pay off debt. There's a little more, a couple hundred million dollars more than that coming in on that building. It's $400 million coming in from refinancing 1535, and there'll be enough in short-term dispositions to round it up to a billion dollars. Will those be focused on retail or non-core office or any color you can provide on what you're looking to sell? Not going to get specific about that, John. Jeff Spector with Bank of America is on the line with a question. Please proceed. Great. Thank you. And congratulations on a great 2024. Can you tie Steve's comments on the spike? I can't let that go by without saying thank you. Okay. Absolutely. If you could please tie, Steve, your opening comments on the expectation for a rent spike to Michael's comment on growth in 2027. I think we all understand 2025. Can you tie in 2026 at all to any of those comments, please? Thank you. Oh, God, I don't know. We've been through these kinds of cycles four or five times. What I said, which I thought I was pretty clear, was that there's lots of space in New York, but we compete in a much smaller subset of the better space, which is somewhat below 200 million sq ft. So that's the first point. The second point is that the current availability in that subset of space is 10% and going down very quickly because there's a shortage of space. We haven't had a recession, and all of our clients are expanding and aggressively expanding in New York. Their businesses are good. The stock market is good. So, business is healthy and robust, and demand for space in New York is actually pretty terrific. So, with availabilities limited and shrinking and no new supply, that's critical. No new supply coming on the market for lots of different reasons. Construction costs are hysterically high. Interest rates have not fallen, actually. Long-term rates have not fallen at all. And so the ability to create new supply is very, very limited, and I use the word frozen. Take all that together, that's a landlord's market. We expect rents to go up significantly next year, and dare I use the word spike. Now, with respect to Michael's comments about 2026, you want to chime in, please? Yeah. Jeff, what I would say is that as we look at our portfolio, we've got a number of drivers. We have filling up the empties. And so we know that a significant part of that is going to come PENN 2 and to some PENN 1. we have, as leases roll over, we're now on the other side of that as we move into a landlord's market where we have positive mark-to-market, so it takes some time for that to flow through. 2026 will be an improvement, but we think very significant improvement comes in 2027. Okay. Thank you. Oh, please. I'll give you something else to think about, okay? Now, PENN 2, we are leasing now in the $100 range, maybe just a pinch higher. There's nothing that says, but if you go to our neighbors, if you go to Manhattan West and you go to Hudson Yards, the market rents for those buildings, albeit they are newer buildings, actually they're new buildings, is substantially, monumentally higher than $100 a foot. As this market tightens and as the PENN DISTRICT matures and gets to be accepted as the single best location in the West Side, there's nothing that says that market rents PENN 2 can't go from $100 a foot to $125 a foot and then maybe even substantially higher. That kind of appreciation in income will cause values to increase monumentally. So, for example, help me on this, Tom. $25 a foot times 5 million feet is $125 million a year, okay? $125 million a year is worth $1.5 billion-$2 billion of value without any capital expense. So we're unbelievably enthusiastic about the market, about the tightening of the market, and about the inventory that we own. Thank you. Very helpful. My follow-up question is on the comment that you're working with a large anchor, not looking for specifics, of course, on who, but can you just talk about the demand for anchor space? Is it a particular industry, technology, financials? Is it more broad-based? And I don't know if you could tie that to the Hotel PENNsylvania site. Thank you. Hi, Jeff. It's Glen. But generally speaking, the big demand drivers are financial, legal, and tech. That's what we're seeing, not just in PENN, but across the entire portfolio. Dylan Burzinski is on the line from Green Street with a question. Please proceed. Okay. Thanks for taking the question. Steve, just wanted to go back to your comments on you guys not, or in your guys' opinion, the public market not seeing the value in Alexander's and your comments about doing something about it. Can you kind of talk about what you mean by that? Anything we can expect? Well, thanks. If you take the assets of Alexander's and you do some of the parts analysis, that number by any construct has to be very substantially higher than the trading price of the stock. So it's a very simple concept, and it's based upon NAV. And if you calculate the value of the asset piece by piece, it greatly exceeds the stock price. Now, think about it for a second. So Rego One, which I guess you might say is a failed shopping center, we had IKEA move out, so it's shrinking down. So we end up with a 66-year-old building. The capital cost of re-tenanting that building is huge and obviously not economic. So what we did very simply is we took the two remaining, actually, Burlington and Marshalls, two great tenants. Marshalls has been there for 30 years, 40 years, some very long period of time. Anyway, so we're in the process of. We have signed documents, by the way. We are in the process of moving them into Rego Two, which will fill up Rego Two, which is a relatively new shopping center we built at the better part of 10 years ago. So that makes Rego Two a success. And it empties out Rego One, which is a grand five-acre piece of land, which will be either sold or developed. So that creates value. Now, it doesn't have income today. So somebody who's looking at Alexander's from the income-only approach is going to be substantially incorrect as to what the values are. But the piece of land is in the middle of Queens at the intersection of Main, Main, Main, and Main, and we think is extraordinarily valuable. So we'll see. Appreciate those comments. And then I guess just one more broader strategic question. I know several years ago you guys floated the idea of doing a tracking stock and ultimately shelved it until things started to recover in the New York office market. Now that things are seemingly recovering quite significantly, I mean, is that something that's back on the table? Can you kind of talk us through where that sort of sits in the grand strategic set of things? The easy answer to that is no, but I think about a tracking stock at least every day. I think it continues to be a very, very, very good idea. I can honestly tell you I can't get any support from the idea from any of you guys and even from my guys inside, but I continue to think about it every day. You never know. It may come up as being a useful tool sometime in the future. But the short-term answer is no. Although I do think it's a. I do love the idea. Great. Than ks. Dijkum is on the line with a question. Please proceed. Hey. Thanks. Just curious, your commentary on rents, obviously, at the PENN DISTRICT being significantly higher than what you probably originally underwrote. I recall you talking about $150 million or I guess we've estimated about $150 million of NOI growth at your three PENN DISTRICT assets, PENN 1, PENN 2, and Farley. As you think now on the progression of market rents, has your NOI growth expectation increased and, I mean, fully stabilized? This thing could generate more than $300 million of NOI? The answer to that is that obviously with the rents going up, that prediction will go up, but it will go up only marginally, and I'm told by my finance people who are smarter than I am that you have to take into account that there will be capitalized interest. Roll it off. That will roll off. So, I mean, it's a complicated calculation, which my guys can help you with offline. But basically, what I'm looking for is PENN 2 leases up and as PENN 1 completes its fill-up, and then there is some retail space in the Farley Building. As all that happens, the income from that cluster of buildings will go up the better part of $150 million. And that's incrementally going up. That doesn't count, so it'll be more than that. Take it all together. So, I mean, I read your piece that you put out, I think, last week, and I think it is absolutely directionally correct. Steve, maybe a thought. But, Floris, by the by, as we keep developing the neighborhood, and for example, as I said in the prepared remarks, the PENN 15 site, the old Hotel PENNsylvania site is next up. It's already razed and down to the ground. As we build a world-class office building, which I've said the building is frozen, but we're going to attack that as if the land cost in PENN 15 is sunk. So if we look at it as having zero land cost for the moment, we can get the new building off the ground. So anyway, as you look at this as a neighborhood, as we build on PENN 15, a world-class office building, that will in order to increase the market value of the across-the-street PENN 1 and PENN 2 by at least $25 or $50 a foot. So what we think, as we continue to work on our neighborhood, the value creation will be quite substantial, and I might even say enormous. Yeah. If you start adding those pieces. The follow-up question, I guess, is on the acquisitions front. I know that it's hard to acquire assets. Maybe if you could talk a little bit about the environment and the types of transactions you're looking at and where you think you're going to source or where you're more likely to source transactions. And would you consider allocating capital outside of Manhattan to maybe markets like San Francisco or Chicago that are further behind in the recovery phase? That question's right up Michael's alley. Good morning, Floris. So I think in terms of acquisitions, you're accurate in the sense of it's been more challenging in New York, and as the cycle's turning here, sellers are getting a little more optimistic. That being said, there's still a lot of maturities to work through, and I think that's going to present opportunities in the next year or two. So, yeah. But our target is it has to be the right asset to fit into our portfolio, right, from a quality perspective. So I think there will be some, but it's going to be fewer rather than more. San Francisco, we are constructive on. We believe in the market. I think we've been consistent on that. I think the signs are positive there. New leadership. City is certainly turning a corner. So the answer is yes, we are open-minded regarding San Francisco. Chicago, I think we're content with what we have. I don't think you'll see us add anything there. That market has many more challenges, and it's going to take some time for that to recover. So we're not focused on adding there. And I don't think we'll look beyond that. Thanks, Michael. Michael Griffin with Citi is on the line with a question. Please proceed. Great. Thanks. Appreciate all the color around the leasing pipeline and demand. I'm curious, maybe Steve or Glen, could you give us some insights into whether or not tenants are coming to you earlier to try to renew space, just given that limited availability? And you've talked about landlord pricing power. Have you started to see concessions drop off at all as a result of this demand you've seen? Hi, it's Glen. So in terms of the demand, we're seeing it from every angle. Multiple expansions, multiple renewal discussions for deals that are years out from expiring. And the immediate demand for space from tenants who are either new to the market or want to move immediately is more robust than I've seen in many years. As it relates to concessions, I think they're neutralized. They have not come down generally yet, but rents have gone up. And that effectively things are better. And as this market more and more becomes a landlord's market, the concessions will come down. If I would add on to what Glen said, I think there's a couple of dynamics there, right? First, Glen talked about these expansions. We're going through our pipeline the last few days, and there's a handful of tenants that we did leases with very recently that have already come back for more space. And I think that's a reflection of a couple of dynamics that have occurred. One is I think there was a level of conservatism on behalf of tenants as they leased space coming out of COVID because they didn't know exactly how they'd use it or how much they would need, right? And they're now all fully backed, and they recognize that they need more as a result of that. Two, as both Steve and Glen said, business is booming, right? Law firms are booming, financial services are booming, tech is booming, etc. So all these businesses are growing. So when you take both those dynamics, you have a very robust market overlaid onto a very tightening level of supply of where these tenants want to be. So I think that's why Steve said what he said in terms of the expectation for rent growth over the next several years. Thanks, Michael. Appreciate the additional commentary there. And then just maybe following back up on your comments and prepared remarks around the financing markets and capital availability. Obviously, we've seen more transactions come to market as of recent. The CMBS market seems more open. For the mortgages that you guys have coming due this year, whether it's PENN 11, 888, those properties are very well leased. Do you have a sense or maybe give us some insight on where you'd expect the refinancing rate to be relative to the current interest rate? And any other commentary on sort of the debt capital markets would be helpful. So look, I think if you think about where we are today versus where we were, let's say, a year ago, I think it's night and day. And we really opened up the market on the office side with the Bloomberg Financing. And since then, certainly with respect to New York City, there's been a floodgate of high-quality office that's been financed. So you think about the transactions that have gotten done, many of them in excess of a billion, in a couple of cases, multi-billion. So I think that is evidence of just the demand from fixed-income investors for high-quality New York City office. I think it's very encouraging. And so obviously, our portfolio plays in that. So as we look out in terms of the financings that are going to roll this year, look, we're coming off some low rates in a couple of cases, particularly on a couple of fixed-rate deals. I think we'll see upticks in rates there. At the same time, something like a Union Square, the demand for high-quality retail is very strong, and that may well be lower. So net head, I think it's probably a little higher, but we're also delevering with some paydowns of the 770, etc. So I think from Vornado's perspective, I think we obviously took some hits the last couple of years with interest expense going up pretty significantly. I think by and large, we're done with that in total. Could it be a little bit higher this year? Maybe. Could it be a little bit lower? Maybe. I think we're sort of on par year over year, and I think generally the worst is sort of over for us. Great. That's it for me. Thanks for the time. Vikram Malhotra with Mizuho is on the line with a question. Please proceed. Good morning. Thanks for the questions. Steve, I guess you've done a great job on the PENN DISTRICT on various assets. You talked about sort of the, I guess, the next evolution or the next jump in stabilized NOI. I'm wondering from an actual development or an asset standpoint, what's next in PENN? How would you sequence sort of the various other parcels or redevelopment opportunities you have? Thanks for the question, Vic. We're studying that now. We believe that we should, in the PENN DISTRICT, have one or two buildings under construction and rolling forward for the next 10 years, but we're not ready to announce anything yet. Obviously, the PENN 15 site is sitting there, probably, I believe, the best site in Manhattan ex Park Avenue. So that obviously is the next site. We are considering all options for that site. There will clearly be an office building on the front of that site, but we're also considering apartments as well. Got it. And then just maybe to follow up, you talked about the office pipeline. I'm wondering if you can give a little bit more color on sort of how street retail is evolving on Fifth and Madison. Any color on tenants in the market there and what pricing may be doing and how that translates into your leasing prices? Thanks. Yeah. Good morning, Vikram. So on the retail pipeline, I'd say just on the market in general, the market continues to strengthen. Vacancy rates continue to decline, and rents are certainly for the best spaces, I think, returning to close to peak levels. So we signed a significant lease in Times Square last year. There's activity in that submarket. Again, we own the two best blocks, and we have some active dialogue going at some very strong rents, not too far off the peak there. Fifth Avenue, same dynamic in terms of tenants looking for space. I think we've seen, certainly since COVID, the most activity of retailers cruising around looking for space. And so I think that will pick up. And again, for the right spaces, I think tenants recognize they're going to have to pay rents that aren't too far off the peak there, if not the peak. The bottom line is, and what's driving all this is that the sales figures that the retailers are doing and the recognition that New York remains the global city in the U.S., maybe number one in the world, and they have to have locations here. We're close to lease with some sort of new-to-market tenants as well as some tenants that are already here. We continue to have good activity throughout the PENN DISTRICT, and we're working on some leases there as well. We're pretty constructive on the retail market as well. We own great assets, and those tend to be where the retailers are most focused. I'll give you an anecdotal story. So we have an important asset on Fifth Avenue. Actually, we have a lot of them. But on one particular important asset on Fifth Avenue, we had a major retailer come in knowing that the incumbent tenant in that space had an expiry in three years and no renewal option, trying to actually say, "I would like to sign for that space now, and I'll wait for that tenant's lease to expire." So that's things that happen only for extraordinary property in tight markets. So that was kind of fun. The other thing that I'll say is on Fifth Avenue, tenants would prefer to buy rather than rent. And so the buy prices are higher than would be reflected by the market rent. So the arbitrage there is that it's more economic to sell some of these assets than to rent some of these assets. And we're open for business. Thank you. Michael Lewis with Truist Securities is on the line with a question. Please proceed. Thank you. So Steve, you often emphasize you run this as a cash business, a focus on cash, which we agree with. The FAD of $1.75 per share in 2024 was the lowest in at least the last 25 years, probably longer. I realize leasing up a lot of space costs money, but maybe help us understand the health of the New York office business in the context of REITs like yourself making less cash money than ever before, and this 25-year trend of FAD kind of consistently going down. Are we at an inflection? Do you expect that to kind of rapidly increase? Do we get back to kind of pre-COVID cash flow levels? Complicated question. I'm familiar with the trend. I'm familiar with the capital intensity of our business. I'm familiar with the fact that we're in the multi-tenant. Me and all of our colleagues in the industry are in the multi-tenant business where the spaces turn over. I'm familiar with the cost of turning over those spaces, all of which creates the trend that you mentioned. So clearly, and Glen alluded to this, the TI and the tenant inducements to turn over a floor in a building is very sticky, and we're struggling to try to get them to go down. They will only go down in a very tight market. So that's in our future, not in our past. On the other hand, if you look at the rents, rents have gone up already to sort of alleviate that problem. I'm expecting that the cash, the actual cash flow or AFFO or whatever you want to term it, we are at the bottom of that cycle, and that's going to go up in a market which I think is going to get much tighter. Now, that is something that I'm predicting for New York. I believe New York is unique in the nation. Other cities, as great as they might be around the country, I don't believe are going to benefit from that trend. Okay. Great. And then my second question, I just wanted to ask about the New York office in-place rent versus market rent. So the in-place rent looks like it's right around $90 a sq ft. Where do you think market rents for the operating portfolio are compared to that? Hi, it's Glen. We say this often. Quarter to quarter, it's going to ebb and flow, flat, positive, etc. We feel confident that our markets will be positive. I'm not going to predict how much that means, but we like our spot in terms of our rolling expirations the next few years. We like where we're now pegging rents. As we mentioned, we've increased rents generally across the whole portfolio. So we feel good about that metric over the next two to three years. I'm not bashful, and I'll predict. So let's just go to PENN for a minute because that's easy. So I believe that we signed a wonderful lease for 730,000 sq ft in the Farley Building in the middle and the depth of COVID. I believe when that lease comes for renewal, albeit that's 11 years from now, the market for that renewal will be very substantially higher than the in-place rent. I've already said that I believe PENN 1 and PENN 2, which we're very happy to get $100 or a pinch more today, that in the short-term future, three, four, five years from now, the market rents for those buildings will be very, very substantially higher. So that's what I think. Thank you. By the way, we're betting on that. Alexander Goldfarb from Piper Sandler is on the line with a question. Please proceed. Good morning, Steve. And first, congrats [inaudible], on the improved yields at PENN and the positive reception you guys have had from the market. So that's quite a compliment from the market for you guys there. Two questions. First. Alex, thank you, my friend. No, it's true. I mean, you spent time walking us through, and it's evident at your ability to rethink in the campus environment. So it's good to see that the rents are moving the way you had hoped. My two questions are first on Alexander's and appreciate your comments. What would be I mean, right now, given how much of the original assets have been sold off, and I would think you could get a good price for the apartment tower in Rego Two, why not just blend in Alexander's into Vornado? You'd eliminate the G&A. Instead of paying a dividend, that cash flow would accrue to Vornado. You'd have 731, which certainly fits in your portfolio. Why not just incorporate Alexander's into Vornado? What would prevent that? Nothing if not tenacious. That idea has been floated for 20-odd years, and I have said we're not going to do that for 20-odd years. And actually, I probably will continue to say it now. Alexander's, the pricing of it, the melding of it, it's just not something that's on the front of my mind today. Okay. I mean, it has cash needs, and it certainly, as you've wound it down, would seem to fit more and more, but I guess that's a conversation for offline. No, hang on, Alex. Let me give you a fantasy, okay? I love fantasy. Okay. I'm trying to please you. If we merged Alexander's into Vornado, I have no idea how we would price it and how we could get both sides to be happy. Very difficult to do, okay? Alternatively, if we left Alexander's as we are going to do, that's what I'm saying, as a freestanding independent public entity, and we narrowed it down to nothing but the Bloomberg office building. Which shortly will have approximately $100 million of net income, and that was the only asset in that property, and it had very low debt or maybe no debt. What would that sell for in the stock market? And I submit to you that that would sell for much, much higher than the current trading price of the stock. That's just a fantasy, though. Okay. Second question is, Michael, you walked through and created. Actually, hang on. What I'm really saying is, from a value point of view, we think that we can get Alexander's value to be above what Vornado might be willing to pay for it, and that Alexander's shareholders will on behalf of Alex, that's what we're pursuing. Okay. Michael, you appreciate the comments on 25, some perspective, but you guys have outlined some asset sales, vacating at 350 Park, and just the remnants of refinancing. In addition, you have the capitalized interest, I think, $51 million PENN 2 that would burn off as those leases take effect. So as we think about the next two years, how much FFO net is coming off of Vornado relative to FFO coming on from PENN? Yeah. I think that, look, as we've said, a couple of things. One is in terms of capitalized interest, right? We've talked about that being lower this year versus last year PENN 2 is going to roll off this year. And I think that's why consensus is down appropriately, and that's reflected there. So 350, when that comes off, we don't think that has much of an impact relative to the master lease we're getting today. There'll be no debt on the asset at that point. We'll get capitalized interest on that. So that's not going to really have an impact on the numbers. So look, we've talked the last year about the success we've had, backfilling 770, 1290, 280, now leasing up PENN. That's going to start flowing through a little bit this year, more materially next year, and dramatically in 2027. And so sort of model that out as you want based on that comment, but I think that's your trajectory. Okay. Thank you. Yep. Ronald Kamdem from Morgan Stanley is on the line with a question. Please proceed. Hey, just two quick ones for me. So one is just on the same-store NOI for New York office, ended down 3.3%. Just as you're thinking about the next two to three years, just any high-level thoughts on what that same-store number could look like in this sort of strong environment? Ronald, I don't have those numbers at my fingertips, and I don't want to give you numbers that are too much of a guesstimate, and so on, so let us look at that, and we'll try to get a little more visibility there. Sure thing. Going back to the—I was having the same sort of question on CapEx, maybe asking it a different way. When I think about sort of the $250 million of CapEx spent this year, which includes $72 million on sort of first-generation space, any sort of thoughts about what 2025, 2026 could look like? Are we coming down from those numbers? Are we staying in place? Just any sort of thinking on CapEx as we're thinking about the model. Thanks. I mean, I think the CapEx, we erased it a little bit because and it's a best guess every year, right, in terms of timing of when you make those payments, and it doesn't necessarily line up to when you actually finalize the lease. But we know the leases that are in process. We have an expectation of what we're going to get done beyond that. And so I think that's reflective of the pretty strong leasing environment, in addition to some base building capital. So last year, I think we were dead on our prediction. Most years, we're frankly not because you're taking a high-level guess. So I think directionally, we're still in the same bucket. 250-275 is frankly not that different, right? It's just a matter of what space you end up leasing in a particular year and how much capital you have to spend on the portfolio beyond that. So I think that's a pretty good number directionally for this year, just given some of these big leases that are in the works on PENN and beyond. And as we get into next year, we'll see what's left. But I think that number will start coming down as the portfolio fills back up. Helpful. Thanks so much. Anthony Paolone with J.P. Morgan is on the line with a question. Please proceed. Yeah, thanks. Steve, you mentioned just given the cost or basis around the Hotel Pennsylvania site has sunk at this point. Can you tell us just what it costs to build something and go vertical right now then, and what kind of yield on that you would want? What do you think is the building cost? My young development son says $1,900 a foot ex land for a Class A building. I won't contest that. In the yield? Well, if you put land in, so you get to a number which is $2,000 and I don't know, pick a number, $2,000-$2,500 a foot, some number like that. I don't know. And you put a yield on it of what would you build for now with a debt market of 6%? Let's say you need to get 7% or 8% or something like that because equity is more valuable than debt. So what's 7% times $2,500? 175. Now, that's a number that's net of taxes and operating costs, so the answer is that to build a new building today, the rents that you would need to get are in the high 100s. You're shaking your head. Why are you shaking your head? I agree, which is why you talk about being frozen. The math doesn't work in the. But think about that for a second. So one of the reasons that I'm so enthusiastic about the rents at PENN 1 and PENN 2 and the rest of our office portfolio, the overriding from $100 a foot is because you have to figure that a new build is $200 a foot or something like that, maybe a pinch less, maybe a pinch more. So the in-place buildings and the better inventory in the great locations will become much more valuable. That's the whole punch line to those things. That's the punch line to today. Okay. I guess that's what I wanted to understand because, I mean, you mentioned your vantage point being that the sort of cost thus far has sunk, and so I guess you're just looking at the incremental and what it could do for the whole area, not so much thinking about that $2,500 basis and a yield on that. Yeah. But the fact of the matter is that I own the land. I bought the land a long time ago. I have no debt on the land. And so given a choice between leaving the land empty or building on it, we'll make those choices. That's what we get paid to do. Okay. I understand that. And then just a quick follow-up. I think you bought a non-performing B- note on a Midtown deal last year. Can you give us any update on that or plans or what's happening there? No, sir. Sorry. It's okay. Thank you. Yep. Thank you. Nick Yulico with Scotiabank is on the line with a question. Please proceed. Great. Thanks. In terms of the PENN project, can you just talk a little bit about whether any of the sublease space that's available on Hudson Yards is, if you're actually finding that to be competitive when tenants are looking at your project? Hi, Nick. It's Glen. So the answer is yes, which if you think about it, PENN 2 and PENN 1 are competing with new space. That's a great thing. And as Steve said, our pricing is not near their pricing, even the sublet pricing. So we feel good about the fact that any tenant touring the west side, whether it's the sublet availability in Hudson Yards or Manhattan West or PENN 1 or PENN 2, we are squarely in that mix every day. So we like that. We feel very competitive with it and very comfortable with it. Okay. Thanks. And thanks, Glen. And then second question is just going back to the yield PENN 2. can you just remind us? I think that the yield, when you quote the yield, does not include TIs and leasing commissions being built into the cost there. So if we assume that, I think at one point in the notes, I saw that it was around $140 a TI leasing commission cost there per foot. I just want to see if that's still right. And if we build that in, is the yield on the project inclusive of that closer to like 7.5%-8%? Is that ballpark correct? Yeah. I mean, the answer is they will calculate. I mean, I think the thesis is that we would have had to spend the TI dollars leasing commissions anyway, right? And typically, given what's happened, we'd be spending those to generate rents that were not economic now, given the quality of the old building. So we talked about the incremental cost. It was cost that we spent that we wouldn't have had to spend, right? That's how we got to the number that's in the supplemental. What's the yield on that? So the answer is we can factor in the TIs, etc., to see, but we would have spent that money anyway. Okay. And then is the TI leasing commission per foot there, we should assume around, is it around $140? Is that the number? It's about right, maybe a touch higher depending on the deal. All right. Thanks. Appreciate it. Brendan Lynch with Barclays is on the line with a question. Please proceed. Great. Thanks for taking my question. It looks like you've got about 14% of ABR expiring at 555 California in the third quarter and 18% for the year. Any details that you can give on renewal discussions? It sounds like you're optimistic on San Francisco in general. Just get some more clarity, please. Hi. Hi. It's Glen. We remain extremely bullish on our building in San Francisco 555. It's the best building in the city, probably the state, and certainly one of the best in the country. So when you look back from 2021 forward, we had a boatload, hundreds of thousands of sq ft expiring from 2021 to 2026. We have leased almost 700,000sq ft thus far during that period. We have some more expirations coming in 2025 and then some more in 2026. We're attacking those now. Some of those tenants will stay. Some may not stay, but we feel great about what we've done. Our rents are clearly leading that market. It's not even close. And our tenant roster continues to be five-star. So we feel great about 555 as we sit here. Great. Maybe just one follow-up on that. Is the 14% in the third quarter, is that one tenant or is that split between multiple different tenants? The third quarter or so in 2025, there's multiple tenants expiring, call it five or six tenants throughout the year in different quarters. None of them huge, but as you add it up, you get to that roll. Okay. Very good. Thank you. Steve Sakwa with Evercore is on the line with a question. Please proceed. Yeah. Thanks. Just one quick follow-up. On 770, I realized that lease, Steve, isn't quite finished, but sounds like it's going to get over the finish line soon. Are there any sort of unique accounting, I guess, adjustments that we need to be taking into consideration given the unique nature of this? Or is this just a typical normal long-term lease that would have straight-line rent and we'll have to figure out what kind of the GAAP rent is and straight-line adjustments? I realize you get a lot of cash upfront, but just trying to think if there are any nuances of this deal because it is a little bit different. I'm not going to comment on that transaction. It will be final. It is finalized, actually, but it will be announced, I would hope, by the end of this month, and so the announcements that we make will press release, and we'll have all the detail that we need to give you guys so that you can understand it. But I mean, you get it, so I don't want to get into the detail now prematurely. Okay. Thank you. Yes, sir. John Kim from BMO is on the line with a question. Please proceed. Thank you for taking the follow-up. Steve, you mentioned the lack of new office development in New York for several years and how tough it is as far as getting the math to work on some of these sites. But how many projects do you think will get off the ground right around the same time as 350 Park? There's been a few out there in various stages. None. So there's not enough demand? No. There's plenty of demand. It's just not the cost of building. I don't know what's going to happen with the cost of steel now, but who knows? The cost of building and the fact that interest rates remain stubbornly high and the lack of availability of aggressive capital will make the market frozen. Now, 350 Park is an isolated, different point of view because we already have a lease for a major tenant, and we already have a 60% capital partner. So 350 Park will get off the ground. My prediction is that almost no other building will get off the ground. And by the way, that could very well include for the short-term PENN 15. Where would rents have to go to justify new development outside of? I've already answered that question. $200 a foot is an interesting point. Got it. Great. Thank you. There are no further questions at this time. Thank you all for participating. I think you can tell from the remarks of our management team, we are extremely enthusiastic about our business and extremely enthusiastic about New York and wildly enthusiastic about the PENN DISTRICT. So thank you all very much for participating, and we'll see you next quarter.