Good morning, welcome to the Vornado Realty Trust fourth quarter 2022 earnings call. My name is Gary, I will be your operator for today's call. This call is being recorded for replay purposes. All lines are in a listen-only mode. Our speakers will address your questions at the end of the presentation during the question and answer session. At that time, please press Star, then one on your touch tone phone. I will now turn the call over to Mr. Steve Borenstein, Senior Vice President and Corporation Counsel. Please go ahead. Welcome to Vornado Realty Trust fourth quarter earnings call. Yesterday afternoon, we issued our fourth quarter earnings release and filed our annual report on Form 10-K with the Securities and Exchange Commission. These documents, as well as our supplemental financial information packages, are available on our website www.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, 2022 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 questions. I will now turn the call over to Steven Roth. Thank you, Steven. Good morning, everyone. It's Valentine's Day. As Michael will cover in a moment, 2022 was a strong year with comparable FFO up 10%. Fourth quarter FFO was down 11% due to higher interest rates. Ex-rising interest rates, our core business is performing quite well. Not surprisingly, we expect 2023 will be a down year, negatively impacted by a full year of higher rates. I'd like to share with you a few other thoughts. Notwithstanding all the noise, New York continues to be the most important city in America. We continuously survey dozens and dozens of our tenants, all of whom reaffirm their commitment to stay and grow in New York. That goes for our clients who are headquartered in other cities who are making New York their, so to speak, second home. It's not by chance that the New York area is the tightest residential market in the country. People want to live here. Steel, concrete, and curtain wall are important, but in our business, capital is the essential raw material. We are now in the middle of a Federal Reserve tightening cycle, the result of which is interest rates are up and capital is scarce, and that's an understatement. Notwithstanding Fed funds at 5%, most run-of-the-mill real estate operators can't borrow at 10% or can't borrow at all. Here's what we have done. Seven years ago, when we began the Farley Building PENN 1 and PENN 2 projects in our all-important PENN District, we loaded in over $2 billion in cash to pre-fund 100% of our development and construction costs. We didn't know then how prescient this would be. Farley Building is now finished and paid for, PENN 1 almost so, and PENN 2 will finish around year-end. All three of these assets will be free and clear and unencumbered. That's quite a feat. We handled all of our 2023 and 2024 maturities. We put on a series of swaps and caps, but while very helpful, they provide only partial protection. I would observe that there really is no protection against loans that mature in a rising interest rate market. A further observation is that the stock market prices at then current interest rates, giving no credit to a company which might have lower rate loans, even if they're locked in for term. Beginning first quarter of this year, we declared a right-sized dividend allowing us to retain $128 million of cash annually. By the way, our stock still trades at a too high 6.5% yield. In January, we completed an important deal with Citadel at our 350 Park Fairview building, which involved their master leasing the entire 585,000 sq ft building, essentially relieving us of 225,000 sq ft of vacancy. This deal will almost certainly result in a tear down and a new build of a grand 1.7 million sq ft tower on a larger assembled site. Please see our press release of December 9th, 2022 explaining the transaction. We have lots of friends on Wall Street, and I might venture that by any measure, return on equity or return per employee or whatever, Citadel is at the head of the class, intensely focused and aggressively growing. This deal validates the quality of our site, our development team, and New York. Interestingly, Ken tells me that a significant differentiator for his firm is the simple fact that everybody comes to work every day, five days a week. I think they start at 7:30. There is a learning here. Call me crazy, but I think companies that embrace work from home will be left behind. I think it's absurd to think that years from now, tens of millions of Americans will be working from home alone at their kitchen table. By the way, Zoom may be a disruptor, but its stock is down from $588 to a still high $75 today. You will notice in our supplement that we updated our development projections for Farley PENN 1 and PENN 2, raising our aggregate projected returns. This based on the fact that in 2022, we leased 25,000 sq ft at PENN 1 at average starting rates in the 90s, and based as well on the outstanding market reaction we are getting to PENN 1 and PENN 2. Our strategy here is to achieve very strong returns at rents well below those required for new construction. The PENN 1 ground lease process is now kicking off. As required by GAAP accounting convention, in the first quarter of 2022, we estimated a ground lease of $26 million and reflected that in our statements. Based on current market conditions, we now think that number should be quite a bit lower. We expect 2023 will be challenging as business and consumers continue to feel the effect of the Fed's aggressive rate increases and generally tighten their belts and act with caution. This will likely be reflected in lower leasing volumes and flows in capital markets. We believe quality product wins today. Just look at our new builds, new lobbies, amenities at PENN 1, new skin at PENN 2, et cetera. Not long ago, new construction commanded a $20 premium. Now it commands a $100 premium or more. Does anybody think that's too high and that the market will adjust? One more point, and this is an important one. In the history of New York real estate, all great upward landlord markets followed a period of constrained supply, and here we are. Capital markets are now making it almost impossible to build new, which will be the foreteller to the next bull market and landlord's market. Now over to Michael. Thank you, Steve. Good morning, everyone. As Steve mentioned, we had a strong year despite experiencing headwinds from rising interest rates. For the year, comparable FFO, as adjusted, was $3.15 per share, up $0.29 or 10.1% from 2021. Fourth quarter comparable FFO, as adjusted, was $0.72 per share compared to $0.81 for last year's fourth quarter, a decrease of $0.09 or 11.1%. While earnings for the quarter were down, driven primarily by higher net interest expense from increased rates and the non-cash straight-line impact of the estimated 2023 PENN 1 ground rent expense, our core business had strong performance from the rent commencement on new office and retail leases. We have provided a quarter-over-quarter bridge in our earnings release in our financial supplement. We have several non-comparable items in the quarter, primarily gains from 220 Central Park South sales and other non-core asset dispositions, which in total increased FFO by $0.19 per share. As previously announced, we recorded $595 million of non-cash impairment charges during the fourth quarter, of which approximately $483 million relates to our equity investment in the Fifth Avenue and Times Square Retail Joint Venture. It should be noted as impairment charge is not included in FFO. Company-wide same-store cash NOI for the fourth quarter increased by 7.9% over the prior year's fourth quarter. Our overall same-store office business was up 8% compared to the prior year's fourth quarter, while our New York same-store office business was up 5.4%, primarily due to cash rents at Farley coming online. Our retail same-store cash NOI was up a very strong 7.9%, primarily due to the rent commencement on several important leases. Turning to 2023. While the current economic environment makes forecasting more difficult than usual, we expect our 2023 comparable FFO to be down from 2022, given the known impact of certain items. These include roughly $0.40 from additional interest expense as a result of a full year of higher rates on a variable rate debt, net of higher interest income and capitalized interest, assuming the current SOFR curve. $0.10 from the prior period property tax accrual at The Mart that was recognized during the second half of 2022, and $0.05 of lower FFO from the sale of assets in 2022. These reductions could potentially be offset by a lower result on the PENN 1 ground rent reset that is currently running through our earnings, which Steve mentioned earlier. Turning to the leasing markets. We see 2023 as a year of both challenges and opportunities. The pace of leasing has slowed in the past few months, the activity is lumpier as businesses generally are feeling cost pressures and are exercising more caution. Companies are still grappling with hybrid work policies and the right level of flexibility, overall sentiment is shifting more closely to pre-pandemic norms. We are seeing a real pickup in the return to office throughout our portfolio, particularly Tuesday through Thursday. Utilization rates are approaching 60%, the momentum is improving month by month. Both employers and employees clearly recognize the productivity, collaboration, creativity, and cultural benefits of working in the office together. Flight to quality continues to be the prevalent theme for tenants. Leasing activity is broadening out. We are seeing a pickup in activity in the traditional multi-tenant Class A buildings as tenants are dealing with the aforementioned cost pressures and are not all willing to pay new construction rents. One thing we do think will begin to emerge this year is a heightened focus on the quality of the landlord. Many landlords, particularly private ones, are beginning to struggle with high leverage levels, which may limit their ability to invest capital in their buildings or in some cases, even retain their assets. Tenants and their brokers are smart enough to figure out which buildings these issues are at and avoid them. Strong, well-capitalized landlords like Vornado will benefit. A perfect example of flight to quality with strong sponsorship is the previously announced 350 Park Avenue transaction with Citadel. We began our relationship with Citadel at 350 Park in the beginning of 2020 with an initial 120,000 square foot lease, and are proud of the relationship we have built with their team, which has culminated in this master lease and a future potential partnership for a new 1.7 million square foot world-class building at the site. Our overall leasing pipeline in New York remains healthy at almost 1.2 million sq ft of leases, with 275,000 sq ft of leases being finalized and another 900,000 sq ft of activity in various stages of negotiation. The financial sector in particular continues to be active. Turning to retail. With the rebound in tourism and daily workers, we are continuing to see more retailers searching Manhattan for new store locations. Retailer sales are generally back to pre-pandemic levels, which is spurring retailers to become more confident and active in taking new spaces. They're still concerned about inflation in the overall economy, are starting to lock in deals given rents are at much more attractive levels. Turning to the capital markets now. The financing markets remain highly constrained, driven by the volatility from the Fed's sharp rate increases. Banks are dealing with an increase in problem loans and remain cautious in lending, the CMBS market is still largely closed. While financing is available for the highest quality sponsors and properties, the markets will take some time to thaw, which likely won't happen until the Fed ends its tightening cycle. On the asset sale front, there continues to be active interest from investors in New York office and retail assets. Without a stable financing market, it remains difficult to transact large assets without in-place debt right now. In these volatile times, we remain focused on maintaining balance sheet strength. Our current liquidity is a strong $3.4 billion, including $1.5 billion of cash, restricted cash, and investments in UST bills, and $1.9 billion undrawn under our $2.5 billion revolving credit facilities. In addition, as a result of our refinancing activities early last year, we have no significant maturities through mid-2024. 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 touch tone 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 touch tone phone. Each caller will be allowed to ask one question and a follow-up question before we move on to the next caller. Our first question comes from Steve Sakwa with Evercore ISI. Please go ahead. Thanks. Good morning. I guess I wanted to start with the developments and the yield, Steve, that you talked about. I guess I can understand maybe the PENN 1 return going up a bit since you've got kind of active leasing and maybe good mark to market and a little more visibility there. I guess I was a little curious about PENN 2. You did take the yield up there, but I don't think you've done any incremental leasing. Maybe that's part of the pipeline that Michael talked about. Could you maybe just sort of address those two? We took the yield up on PENN 2. We took the yield up on PENN 1 and PENN 2. We took the yield down very marginally on Farley. We did that based upon now we have, you know, a year, 1.5 years, even two years of experience with these assets. We know what the market's reaction is. We have signed 220,000 sq ft of leases at PENN 1. We know what the bid and ask is for PENN 1. We know what the bid and ask is for PENN 2. It exceeds our initial underwriting, and that's why we made, we adjusted the returns. Okay. Maybe as a follow-up, Michael, when you talked about some of the headwinds to growth in 2023, I kinda get the interest expense hit, the $0.05 a sales. Sounds like the ground lease may be a little bit better. I didn't quite understand the $0.10 from the property taxes. I was just hoping you could maybe clarify that, because I thought in the first half of the year, that might have been a bit of a tailwind, but just wanted to make sure I understood that point properly. You know, we had a prior period accrual. It obviously benefited us at the end of 2022. We didn't have it in the first half of 2022, that gets reversed at the beginning of this year and that's a ding. It's a timing difference. It benefited last year, it got hurt at the beginning of this year. Net-net, you know, there was a reduction, but, you know, we, it affects us in the beginning half of 2023. Great. Thank you. The next question is from John Kim with BMO Capital Markets. Please go ahead. Hi. Thank you. Wanted to ask about the write down you took, particularly at 650 Madison. That's an asset where it was pretty well occupied. There's no loan, upcoming. I was wondering why you decided to impair it now. What are your plans with the asset? Morning, John. You know, the accounting for joint venture assets is different from wholly owned assets. You know, as a result of that process, you know, and if you look at what's happened since we bought the asset, you know, resulted in an impairment this quarter. You know, retail rents are obviously not what they were at the time we bought the asset, and what we underwrote. You know, we had a large tenant move out unexpectedly, you know, in the hospital last year. You know, and so you run it through the accounting model, and that's the conclusion. Now, again, keep in mind it's a non-cash item. We still own the asset, you know, the value could recover. We have debt with term on that asset at a very favorable rate, and we'll continue to work the asset and hopefully create value. You know, as we sit here today based on the accounting methodology, you know, that's the byproduct. John, you used the words in your question, why we decided to take an impairment. The impairment process is rigorous, and is to a large degree formulaic, and is to a large degree overseen by our independent accountants. We try to keep as much subjective judgment as possible out of it and make it more of an academic formulaic kind of an exercise. The math showed that the write down was appropriate there. Okay. My second question is on the Mart, with the occupancy falling this quarter really driven by the showroom and trade show. What's going on with such a big drop in occupancy this quarter? If you could also comment on variable businesses, which in the past few quarters have been a driver of earnings growth, and it's not really disclosed so much this quarter. Wanted to know what's been going on with signage and trade shows. Go ahead, Marc. Yeah, I'll start. Hi, it's Glen Weiss. On the Mart, the increase in vacancy was due to the casual business leaving Chicago for Atlanta. We are converting that showroom business into office space, and that's the increase in the vacancy at the Mart. You know, there are headwinds in Chicago, unlike New York, in terms of, you know, leasing volume, pipeline, et cetera. Our 2.0 program's coming along great that we expect to be complete in June. Our tour volume has been very good of late. We have a couple leases in negotiation right now. The increase in the vacancy is the casual business, which moved out of town to Atlanta in the fall. Yeah, John, on the, on the variable businesses, I think the punchline, if you will, is that, you know, all the variable businesses except for the trade shows are back to pre-COVID levels. You know, we had a very strong 2022. I think signage had our most successful year ever, and that was with a little bit offline. Fourth quarter saw a little bit more of that. You know, we've got a couple signs located at PENN Two and Hotel PENN that are impacted by the development. Fourth quarter was a little bit off from fourth quarter 2021. You know, really everything, whether it's signage, garages, BMS, had a strong year, generally up, as I said, except for signage quarter-over-quarter or year-over-year, I should say. The trade shows, you know, a little bit of timing difference from the prior year fourth quarter when we were cranking it back up. You know, some of the shows got moved to fourth quarter, this year back on their normal pace. Trade shows are not back to peak yet. We think they'll get there, you know, in the next couple of years. The rest of the businesses are performing quite well. I think our, you know, in particular, the signage where, you know, we got the dominant signs in Times Square, we're actually redoing the sign on 1540 right now, which will bookend both sides of the bow tie and hopefully allow us to drive additional revenue, given the fact we control, you know, 2 mega signs at the heart of the bow tie. We think that's a positive. Obviously what we're doing in PENN over time, we think will perform, continue to perform well, you know, once the construction is completed. That's in a nutshell where we're at on the variable businesses. Net is variable going up or down this year? You know, in 2023, we're gonna have. I mean, look, the answer is, it's hard to predict, I would say. You know, because we took a couple signs offline in PENN. You know, and a lot of this is based on, you know, what comes in third-party roadblocks. Net, net, we think it's probably comparable to 2022. It could be down a little bit just 'cause of what's offline on the signage side and the fact that we're, as I said, rebuilding 1540, right? We're taking some revenue offline. I think, you know, overall, probably down a little bit just given the fact we're taking some stuff offline. Great. Thanks, and happy Valentine's Day. You too. The next question is from Camille Bonnel with Bank of America. Please go ahead. Hello. I know the opportunity with Citadel is still a bit down the road, but are you able to speak to the financing strategy there in context with your existing development pipeline around PENN District? Just generally, like, how are you thinking about the capital allocation and sourcing for these future projects? You know, Camille, I think the good news is we don't have to do it today because it would be very, very difficult to line up construction financing and very expensive. With respect to 350, you know, that project is not ripe yet, right? It'll be ripe in two, three years. It's not ripe today, hopefully the markets are more hospitable then. We expect they will be. I think the same goes with respect to PENN. Again, you know, we're not as I think Steve commented on last call, you know, the market really is not conducive for new development today. Construction financing is very expensive, if available, which it generally is not as banks have pulled back. You know, I think it's challenging. Again, today, you know, is not the day we have to line that up, but in the future, you know, the markets should settle down. You know, with respect to 350, you know, we'll put on a traditional construction loan at 50%-60%, and the partners will fund the balance with equity. Most of our equity will come from our land contribution. We're pretty excited about 350 Park Avenue, and maybe even more importantly, Ken is even more excited about it. Our strategy there is actually very simple. The land value, our land value will constitute our equity contribution. Our land value will represent the equity. We will not have to put in maybe another, you know, a very tiny $10 million, $20 million, $30 million of cash to represent our share of the equity. The balance of it should be easily in a normalized market, borrowable under in a construction financing or permanent financing. The deal comes along with a very substantially sized anchor lease. Everything is in place. Our land will be our equity. We have an anchor tenant. That all, you know, is very, I think, very well conceived. What's more, our development teams and construction teams that are hard at work down at PENN will have completed PENN 1, PENN 2 at Farley, and we'll swing right into 350 Park. Part of our arrangement is that we are immediately starting the design of the building. Actually, we're probably halfway through it. We are immediately starting the approval process so that in a relatively short period of time, maybe not more than two years from now, we would be ready to commence and start construction. The cash requirements in any kind of a normal financing market are basically almost zero on our part. Really appreciate- By the way. By the way, it's going to be a great one. Yes. Thanks. Really appreciate all the details on 350 Park. Just for my follow-up, you've done a great job in terming out your maturities, but your leverage on a net debt basis is above 10 times. Can you talk to how you're thinking about leverage today, and where are your near to medium term targets? Michael. You know, our leverage is, you know, I think you characterized it probably a little bit lower than we characterized. You know, our goal over time is to have less leverage. You know, I think importantly, we don't have any maturities this year. If any of you know, we have a couple small, which are in process of being pushed out. Our preference is to have less leverage. You know, over time, you know, we think that'll be accomplished through growing earnings and, you know, likely some asset sales. You know, is that going to change in the next 24 months just given the environment? You know, probably not. You know, over time, we foresee that happening. Thank you. The next question is from Michael Griffin with Citi. Please go ahead. Hold on. Hey, thanks. I wanna go back for a second. Hang on, I wanna go back for a second. I wanna emphasize what Michael said. In terms of the leverage ratio that you referenced, Camille, we sort of have our hands tied behind our back. Number one, we've had a decrease in earnings, which is going to re-recover, variable businesses and what have you. Number two is we have zero income coming in basically from 2 PENN, which will be over $100 million of income when it gets online. We have less than underwritten optimal earnings from 1 PENN. If you pro forma forward, when we get all these different parts of our business stabilized, our leverage ratio will come down very significantly. I'm sorry. Go ahead. Mr. Griffin, please go ahead. Yep. Hey, thanks. Michael Griffin here with Citi. Just maybe getting back to leasing. Michael, you mentioned in your prepared remarks, your leasing is slow, transactions are lumpier. You pointed to about 1.2 million sq ft in the pipeline. Just looking over the cadence of this year, you know, with some bigger upcoming maturities, I mean, how confident are you in executing on that? And is there any update on maybe some of those more larger notable upcoming expirations? I think there's one at 770 Broadway coming up here maybe at the end of this quarter. Any update there would be great. Yep. Go ahead, Glen. Hi, Michael, it's Glen Weiss. We really had, you know, 4, you know, bulky expirations that constitute our expirations in 2023. 1 was 350 Park, which is now taken care of by Citadel. The other 3 is continuous expirations coming off low rents from PENN 1. Two blocks, one of which comes back this quarter, three floors from Verizon at 770. At the end of the year, we get the AXA Equitable block back at 1290. As you can imagine, we're all over it. We're attacking the market, presenting the buildings, marketing the product, tours, you know, weekly. We think both assets are very high-quality assets. 770 is probably the most unique block of space in Midtown South. You know, excellent building, great bones, in the market now with those three floors. 1290 by the end of the year will be, you know, ready for action. You know, already showing the product, showcasing some amenity programming that we're gonna undertake in 2024. So that's the, you know, real outline of what's coming this year in terms of experts. I guess to that point, you know, you have this pitch around, you know, the building around the high-quality transportation hubs. An asset like 770 Broadway maybe doesn't really fit into that strategy. I guess, you know, how do you measure demand relative to that versus, you know, opportunities you might have within the PENN District? 770 is a great spot. It's right at the subways that link you to Grand Central and PENN very easily. It's right at NYU, right in the Village. It's in the sweet spot of Midtown South. Geographically, we think it's excellent. Okay, thanks. Maybe one for Steve. I'm just curious, you focused some of your prepared remarks about, you know, the importance of getting employees back to the office. In your conversations that you're having with business leaders, I mean, how much more do you think they can really push their employees to get back in? I think you talked about that 60% kind of occupancy number maybe on Tuesdays and Thursdays. Do you see that potentially getting back to that pre-COVID, call it the 70%-80% range? I think normal is more like 70% because there's always people who are traveling, not in the offices and what have you. To try to get to 90% is fictitious. I mean, I think we're, you know, getting close to 60% now on Tuesdays, Wednesdays and Thursdays. I think you can, you can assume that Friday is dead forever. Friday is gonna be a holiday forever. Monday is touch and go. I think that, I think that the world is coming back to normal slowly but surely. Multiple things are happening. Number one, every boss wants his people back. Number two is now many of the people wanna come back. They find that being alone, they find that they wanna come back with their colleagues, they wanna get back into the, you know, the activity, excitement and what have you, of collaboration and being in the city. Slowly over time, I think that that will all revert to normal. Your question was, what power do the bosses have? Some of the bosses have total power, and some of the bosses have no power. I can't comment, you know, on that either way. The most important trend is people are wanting to come back themselves. Employees actually do wanna come back. Great. Well, that's it for me. Thanks for the time. The next question is from Alexander Goldfarb with Piper Sandler. Please go ahead. Hey, good morning, Steve. First, mazel tov on 350 Park Avenue. Awesome deal. Well done to you and Michael and everyone. That's awesome. Two questions. First, on the retail JV, the impairment that you guys took, what prompted that? Big picture, you know, as we think about the rents that are in place versus the market, and it seems like the market has settled and, you know, hopefully is recovering, where would you peg the mark to market? Then do you think that there will be future impairments? Like, is this an annual exercise? Just trying to get some more color on this. Well, I can't predict the future, nor do I want to. We went through a rigorous process. The math showed that there was an impairment, and we do what the math shows. There's that. What the market rents are, is something that, you know, there... It's a very thin market. There are very few transactions on Fifth Avenue and in Times Square. You can make the assumption that this is still a sluggish impaired market. It hasn't recovered entirely. There is not the same lust for space that there was five years ago. But that will come back too, for sure. Okay. The second question is, you know, you guys appeared in the press recently that you're still in the hunt for a casino. It's been a while since you talked about movie studios. The Manhattan Mall, you know, seems to be a great spot for potential studios. Just sort of an update of what you can provide us? You know, do you have an operating partner for studios? Do you have an operating partner for casino? Are both of those, you know, 2 items, you know, things that more are back burner and less, you know, front of house, if you will? The answer is yes and yes in terms of operating partners. No, they're not really back burner. Anything more to elaborate or? Not really. I mean, we have a wonderful Manhattan property, that is going to be converted to studios. We have a great operating partner. We are in conversations with multiple users, and the demand is actually very actually extraordinary. With respect to the casinos, I don't have a lot to say. We're still mulling and studying and thinking and what have you about that. We have a great site, and whether we throw it into the game is to be decided. Okay. Thank you, Steve. The next question is from Vikram Malhotra with Mizuho. Please go ahead. Morning. Thanks for taking the question. First one, going back to sort of your view of the dividend or the Board's view, if you can just give us some more color, you know, what are you baking in in terms of occupancy for the core portfolio, just the business as it stands in terms of street retail. I ask that because it sounded like, you know, the 40 expiration you outlined, am I correct in that they're all move-outs? I just want to understand, like, what is baked into the core portfolio relative to where the dividend is. Just some big picture metrics or guideposts would be helpful. Well, the dividend is based upon a minimum of taxable income. Our taxable income allowed us to reduce, or I like to use the word right-size our dividend. I mean, our dividend was 9.5% on our stock price, which, you know, everybody knows is kinda like mispriced and a mistake. We felt that it was inappropriate to overpay the dividend substantially over our taxable income. The board felt also that it was appropriate for you to retain the extra $130 odd million of cash. That's, you know, that's what happened with the dividend. Okay. Might just follow up, if I can dig into street retail, you know, two parts to it. First, I think you have a couple of key expirations in Times Square in 2023, and I'm wondering, you know, the latest on, you know, renewal there. Second part of that is just, I think there are two big leases, if I'm not wrong, Swatch and Levi's that have early termination rights in 2023 and 2024. They don't expire till 2031, but I believe they have the option to terminate. Any updates or color you can give on those two as well would be great. Thank you. We are, as you would expect, we are in active negotiations with those clients, those tenants, as well as all the other tenants. We are hopeful to retain all of the tenants, but the rents will be lower than the in-place rents. The market is lower than it was years ago when we made those leases. You can assume that we will retain the tenants, but at lower rents. Okay. I just thought because Swatch and Levi, I thought they would have had to give you notice if they were gonna terminate, is it just sort of like a rolling, like they can elect any time in the year to give you that notice? Vikram, just to be able to put a finer point on. Swatch had to exercise their notice in fall of 2021. They did. You know, we have as Steve alluded to, you know, we finalized an agreement for them to stay at a lower rent. They, you know, at the time they exercised the termination, we didn't know what they were gonna do, but that agreement has recently been finalized. They will stay. As Steve said, at a lower rent. With respect to Levi's, you know, they as well have a termination option, I believe that comes up in 2024, not this year. So, you know, we'll see what they do. You know, again, as Steve, you know, alluded, the likelihood is that, just as Swatch did, you know, that they may exercise that, and our hope expectation is we'll keep them, albeit at a lower rent. The other leases that expire in 2023, you know, some of those are, you know, those have been sort of, I'll call it shorter-term leases, which we've continued to keep those tenants in place. I think we'll continue to do that. And, you know, beyond that, I think there's probably only one substantive expiration in 2023 in Times Square, and, you know, that happens middle of the year, and that's an active discussion right now. Great. Thank you so much. The next question is from Dylan Burzinski with Green Street. Please go ahead. Hey, guys. Thanks for taking the question. I'm just curious, you know, on the overall strategy of the company. I think in the past, you guys have mentioned about possibly doing a tracking stock. Just curious, you know, is that still on the table? If so, could we see that happen in 2023? Yes, it's still very much on the table. We are not ready to talk about the timing, which will not be set until we actually make the decision and announce it. Just going back to the ground lease reset, I think you had mentioned that, you know, that $26 million might be less today. Just curious, can you kind of give us an update on how that process works? Our initial thought was when we saw that the yields increase at the PENN District redevelopments, that we thought that the ground rent might reset higher. Just curious to see kind of an update on sort of the arbitration process and how that works. Oh, boy. Well, the each ground lease is a little bit unique and a little bit different. This one basically involves brokers negotiating. If they can't agree, then a third party is appointed as a neutral. The interpretation is that it's a determination by brokers with 20 years of experience, active brokers, of what the value of the land vacant and unimproved would be. I interpret that to mean, what could you sell that piece of land for now? Which is somewhat different than what an appraisal process might be, which is a willing buyer and a willing seller, et cetera. We think it's a brokerage process, so that's the way it's set. We think that the value of the land is lower today than it was a year and a half ago when we set the $26 billion. Actually, maybe even quite a bit lower. That's the de-determining factor. The fact that, and most of these analysis are done by, what is the return to a new, to a new building and what the residual value would be for the land. If we think we can get $5 or $10 a foot more, on a $90 or $100 lease in PENN 1, that has no bearing on what the value of the land might be. Okay, that's helpful. Appreciate that. The next question is from Anthony Paolone with JP Morgan. Please go ahead. Great. Thank you. Michael, you went through a whole number of the parts of the business in terms of the impact on FFO in 2023 versus 2022, but can you maybe help bottom line just the core office and retail, NOI, and whether that's higher or lower this year? Tony, you're trying to box me in the guidance here. Mm-hmm. Look, we're in a fluid environment, right? It's hard to predict. Overall, you know, we think the performance will be, you know, comparable to this year, I would say. That's not trying to give you guidance. It's just, you know, we have some, we have some ins, some outs. We can't predict exactly what will come along. It depends on which tenants we renew, which may roll out. You know, in general, look, we have some known positives, we have some known move-outs, as we just talked about. You know, overall, you know, as we sit here today, it's probably neutral. Okay. Thanks for that. The second question is on 350 Park. I mean, you crystallized value there at a level that seems to be pretty well north of what, you know, I think most people probably had in their numbers and where you're getting credit for it in the stock, most likely. Just wondering how you thought about, you know, the ability to just completely exit, I think, you know, next year versus staying in what could be another, I guess, 7+ years or so. Like, you know, how you think about that being worth it versus just saying you did well with the deal you cut to, you know, use that capital otherwise. Well, first of all, I would quibble with well north of value. The pricing of that deal, we think was fair to both parties. In terms of what our financial strategy will be a year or two from now, when we have to make the decision as to whether to invest in the long-term building project and own 40% of a 1.7 million sq ft brand new super-duper Times Square tower, or to take the money and run, that's a decision we'll make at the time. It is an interesting fact that we have the option to do either. Okay, thank you. Yes, sir. Excuse me. The next question is from Nick Yulico with Scotiabank. Please go ahead. Thanks. I just want to touch on this, the St. Regis retail, where you had the default in the JV. Can you just tell us why the lender not refinance the loan? Can you explain the earnings impact from this, I guess right now, how it's working, since it looks like there's some sort of cash flow sweep? Then, you know, if for some reason you can't get this resolved, you know, does the joint venture just walks away from the property? How does that ultimately, you know, all get resolved and, you know, what could the earnings impact be? Look, the loan matured at year-end. You know, the asset is not re-financeable today, right? Quite frankly, like many assets in this market. You know, we signed two leases at the peak of the market. One of those, you know, we just discussed, terminated and we re-let at a lower rent. You know, the asset was not re-financeable. Loan lend default. You know, we were talking with the lenders before that happened. We continue to talk to them today. We're in active discussions to, you know, restructure the loan and extend the maturity. If we can't, you know, we can't, and the asset will go back to the lenders. You know, just like everything we do, we're gonna be disciplined and thoughtful about, you know, whether it's worth, you know, staying with the asset, investing capital, et cetera. You know, we're sort of groping towards a deal that we think makes sense for the partnership. That's the benefit of non-recourse debt. You know, if you can't reach an agreement, we have the option to walk away. Do I think that'll happen? Probably not. I think we'll end up with a deal 'cause it's in the lender's best interest, too. That's the state of play. You know, to date, you know, I know there was some commentary and a couple of the reports about, you know, 8.5% interest, you know, at default rate. The answer is that's the case, but the answer is that rate's never gonna get paid. We're either gonna toss the keys back, or we're gonna restructure the deal, and the rate will get reset to what it's supposed to be, and that, you know, that interest is not gonna get paid. You know, that's the state of play. I don't think the earnings impact is really. If it went away, you know, today, you know, I think based on frankly, where it was in the fourth quarter, I don't know if there's that much FFO that's flowing through, given the fact that, you know, it's a floating rate loan where, you know, relevant income, you know, there's some cash flow, but it's not significant. Okay, understood. Thanks, Michael. Appreciate that. Then going back to 650 Madison. I know you talked about this a little bit. You know, I mean, it looks like that asset got refinanced in 2019, and I think there was a $1.2 billion appraisal on it. There's $800 million of debt on the asset right now, and so if you're saying the equity is zero, basically, I guess the building's worth $800 million. That would be about a 35%, you know, asset value decline since 2019 when it was refinanced. Please correct me if I'm wrong on those numbers, but, you know, I guess what I'm wondering is, from that standpoint, you did talk about occupancy being down. I know rates are higher as well, how would you kind of frame out that level of an asset value decline for office and retail, you know, now versus 2019? Is that indicative of, you know, a lot of the portfolio or only, you know, the pieces where you do have some more structural vacancy right now? Yeah. Look, I think, you know, first of all, you reference, you referenced two or three things. We did refinance in 2019. It was, you know, pretty outstanding execution by our team, frankly, in pushing that loan out till 2029 at about 3.5%. We have, we have time, right? As we talk about this impairment today, I think the most important thing to recognize is it's a non-cash charge. We continue to own the asset. We continue to work it. We have time. Secondly, you know, the appraisal that was done was a lender appraisal, you know, sort of as Steve's comments before. You know, is... Was that where the asset would have traded when the, when the loan was made? You know, I can't comment. I can't think back to 2019, the exact circumstances at that time. It was an appraisal done at the time. There's some specific facts that have changed since then. Probably most notably, you know, we had a major tenant move out. The reality is rents, I think, you know, generally office and retail have declined since then, you know, to varying degrees. I think all that's reflected in there. As Steve talked about, the impairment analysis, particularly for joint ventures, is a very much accounting-driven methodology, and that's what the accounting produced today. Nothing that says that over time, that value can't, you know, go back up. As we sit here, you know, at the end of 2022, that's the net result. Thank you. The next question is from Ronald Kamdem with Morgan Stanley. Please go ahead. Hey, good morning, guys. This is Toby Vaughn for Ronald Kamdem. You know, just you guys laid out some of the FFO headwinds next year pretty clearly in the prepared remarks. Just as we think about PENN 1 and maybe some of the upside there in 2023 versus 2022. You know, rents are $76 a foot today, embedded. Where do you think that is year-end 2023? Thank you. Hi, it's Glen Weiss. You know, we're coming off rents in the high $60s, low $70s. You know, we have leases out right now that are piercing $100 in the tower of this building. That gives you a feel of where we believe rents will go as we sign up leases for our in-place vacancy and for the expirations going forward. Great. Thank you. The next question is from, a follow-up from Steve Sakwa with Evercore ISI. Please go ahead. Yeah, thanks. Just one follow-up, Michael, on some of the swaps and caps that are maybe burning off or are coming to maturity here in 2023 and 2024. Should we assume that you're just gonna let those kind of float? Are you gonna put new caps in and, you know, swaps in? Or just how should we be thinking about that, as the Fed kind of nears the end of the tightening cycle? Yeah. You know, it's something we wrestle with every day, Steve. I mean, some of those are, you know, let's talk about 2023, because 2024... You know, again, when we have a loan maturity, we have to determine what type of loan we're going to refinance that with, which is a more of a 2024 issue than a 2023 issue, right? On those that mature in 2024, if we roll into a fixed rate loan, obviously no need to swap there. You know, we'll see. I think the expectation for most of the loans that expire certainly on caps is we'll roll those I'm looking at down our list right now. You know, we got two or three that expire middle to latter part of the year. I would expect that we would roll those, you know, the next few months. You know, those tend to be an annual basis, although you can go out a couple of years. Then on the, you know, on the swaps, you know, we'll continue to look for opportunities to, you know, term some of those out too. You know, you are getting to a point where, you know, the Fed is looking like they're close to being done and the curve is coming down. So, you know, I think we benefited waiting a little bit and locking some of those in more recently. You know, but we'll look at that as well and terming some of those out. Again, we got a couple that expire this year with, you know, maturities next year, and we have to make a decision on what type of financing we're gonna do on the asset before we finalize that decision. Great. Thanks. That's it. The next question is a follow-up from Vikram Malhotra with Mizuho. Please go ahead. Thanks for taking the follow-up, Michael. Just on the $0.55 you outlined in terms of the headwinds, does that incorporate these, the known office move-outs and the lower street retail rent that you referenced? I mean, Vikram, the only data points I gave you were on interest, the margin, and asset sales. You know, the rest is, you know, we'll see how the business performs. You know, as I said, I think there's some pros, cons, you know, by and large, we think probably neutral, but, you know, we can't predict. You know, it depends on what happens, you know, in terms of, you know, pace of leasing. Okay. Then just. I can't- The other follow-up just. I know there are those moving pieces. Do we take that as the... Based on your current view of taxable income for 2023, you kind of right-size the dividend, but if some of these moving pieces don't go your way, you might have to revisit the dividend? Have you incorporated some of the slack, basically that you just outlined? The dividend is a board decision. You know, we're certainly not gonna speculate on what might happen to the dividend, and certainly not in it from a negative point of view. That's a question that we can't answer and won't answer now. Thank you. There are no further questions at this time. I would like to turn the conference back over to Steven Roth for any closing remarks. Thank you everybody. You know, this is an interesting time. We're in the middle of a Federal Reserve tightening cycle. I think Owen Thomas said in his opening remarks of his call a couple of days ago that commercial real estate is in a recession. I wouldn't quibble with that either way. But markets are soft, which we think makes it a fairly exciting time. We will get through this easily. We will see what opportunities come up, and we think the world will be a lot better on the other side. Happy Valentine's Day, and we'll see you at the next quarter. Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect.