SLG - Earnings call transcript Q2 2019

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Operator

Thank you, everybody for joining us, and welcome to SL Green Realty Corp.'s Second Quarter 2019 Earnings Results Conference Call. This conference call is being recorded. At this time, the company would like to remind listeners that during the call, management may make forward-looking statements. Actual results may differ from the forward-looking statements that management may make today.

Additional information regarding the factors that could cause such differences appear in the MD&A section of the company's Form 10-K and other reports filed by the company with the Securities and Exchange Commission.

call, by may SEC conference measures non-GAAP today's defined as Regulation during the discuss company financial Also, G. company's differences the The comparable GAAP GAAP press company's of financial and on be the selecting the website to directly earnings. non-GAAP the the reconciliation the each non-GAAP measure release measure financial financial second measure comparable measure and XXXX between each most at quarter found by financial can discussed regarding www.slgreen.com Instructions]. [Operator

call over you. Andrew would I turn the Thank go Please Andrew. to ahead, now Mathias.

Andrew Mathias

you, everyone. is call Thank the unfortunately It's Mathias, with here filling he the operator, death family so team join a to today. who me though. Marc The Andrew was and good unable night, last rest afternoon, in of had in management for the

a market the business operate. across which quarter which everyone earnings another this City chance our that Hopefully, review York release, in was New to convey should strong we and the had

we way have are continues justified We plan New it by environment. portfolio capital and a drives York to leasing across that in and be markets robust a our on executing jobs, value City very deliberate and a

OMB XXXX for private by to as the job date jobs from FIRE and sectors the raised York major both continue XX,XXX employment again space each pace York away City. about the office respectively. forecast using category sector in And diversify hiring New sector XX% continues to City XX,XXX, its in and New in to most

covering XXX,XXX this of leasing of our SL no We all pay of slowing ahead very busy Green. than projections business support this feet leases, plan XX shows were quarter in Well as signs of We in up. quarter. signed areas more

our a Savanna compounded generate recapitalization to by then Green period over loan our acquisition, of XXX hold recapitalization on and long very then the to equity hold that with that XXXX, a joint with found the concluding XX-year equity by over closed building, and an venture joint for in mezzanine with additional generating continued period way. We XX-plus our an which IRR began returns successful a SL a easy to a sale Avenue, Fifth ends history sale venture but a XX.X% Not asset.

investment also converted controlling property, closing. of XXth the XXX to Republic West finally We financing with our and equity major structure a into signing Bank the in of efficient in prior a masterstroke Street acquisition coupled the to interest First property lease

west for significant the acquired Greene newly well interest West very Street the in redeveloped achieved. far Also, upside we and expect performed to us signature yet believe We has XXX side. quarter, XXth in that's an asset asset be in a become us we Street, XXX to a for remaining the

to million quarter, highly for than will opening the we In ahead more nearly and the this liquid. more the debt of announced a DPE face remaining building we ceremony Vanderbilt us Partners out portfolio, equity September. our first markets the with firm $XXX planned The Capital XX% construction for year is month over topping the next One private to TCO. of where remained turn space brings Sentinel lease -- leased tenants we than ahead originated with schedule

mark-to-market our X.X leasing pending share on leasing remain remain leasing conditions quarter, would continuing rely and unchanged. to robust annual this successfully transactions. stock performance and expect trade buybacks over clearly million based prudently if this on price significant staunchly buyback purchased and the we to consistently discount volume We The program a to X million at we remains exceed square to feet pipeline anticipate on and fund targets date With NAV, to to and the program. shares committed additional portfolio strong continuing to aggressive at dispositions an continuing

Green business The here disciplines real executing and seen at active is our plan. all of SL the days the busy various we here summer as as in estate are it dog on have business

plan. development Street, Herald X and planning operations Broadway with generating making great teams XXX the all Madison source XXX XXth team building and others. X The We Vanderbilt, heavy scouring lending blackouts team their heat sure efforts. and of One the on transaction world investment it finance waves, selling, West capital volume, is all and are XXX for teams the Fifth, The is are and the of the teams leasing great dealing and and stays buying, on next business are appreciate

any answer to happy have. we're that, with questions you may And

Operator

Instructions]. [Operator

question comes Korchman line Manny of Our from first the of Citi.

Emmanuel Korchman

point with capital. scouring world a Andrew, you the for ended on

it Just where you're seeing about? your the Is wondering what are. sort and talk it that trying uses acquire Where construction And another all capital of you current now? that spots building? of right that Is to that going that is? capital sort for out of brightest

Andrew Mathias

it using disciplines. various all across Well, I say those we're would

senior we're our mezzanine efficient lever to the capital DPE the in using up to in So, portfolio, returns position. try

bringing As in owners, we're JV partners.

that's that So capital play. into comes where

that meet we're we a As -- up a selling in wound sellers, met the in we'll that often to capital group to building past. selling so with we times downtown Israel

United Asia, the met Middle David, and of sources So, Canada I'd have meeting the American months, last across in you office capital different our in South East, say, in some six States, too. teams here with Actually the the with capital. been Europe,

say haven there of debt an and seems So, interest ways covered capitals new every the and I the People York of still sidelines of that on to is the with steps capital. both from group City equity it lot continents of enormous we forward. to come up as would get we're the allocation a amount view to most still full a New safest in for new and have looking kind group into market for money their as

Emmanuel Korchman

for one is this Maybe Matt.

looking the couple years, of big over next projects, obviously through. spending your needs been we've at While you which the have

the XXth, Matt? those XXX, over we share. types of of is going How spent on West money total updates sort the at next What years? buildings, about XXX or like the of do how $XXX million buildings much think sort all couple You got be of some that about the to brightening of

Matthew DiLiberto

Sure.

most projects with of place our development funded put we've in are already. financing So, that

So, One financing, we quarter. in equity completed the the second Vanderbilt,

rent to Those Madison, that be That's and doing XXX process. equity have So, in all anything Fifth construction XXX out. in sight project, more further we we Fifth largest Broadway won't we some XXX until what ground Madison will have the put line now is to financed. and financed. Madison really that's -- the have also happens funding XXX financed. reset, construction into no be projects. with through there X near-term is earnest the construction of financing. XXX sorry, we XXX are

funded actually at lows point from you're funding the we talking and redeveloped at or building rest -- and enhancing about everything capital. are So, all or capital for perspective, the portfolio of just nonrevenue historic it's this base throughout is is spoken given a that

So, our funding we in a couple cash flow great free plan years, are shape. of over next is of also lot the generating

Operator

And O'Neill. next Sandler from question comes Alexander Goldfarb of

Alexander Goldfarb

So, two questions.

Matt, of on guys end guidance looks where your First, upper like towards you are sort range. trending it trending year-to-date, guys current of looking the are FFO you at just maybe

it fees may a outlined trending term basis, few that looks you or on happen. or some JVs lease may you're not for upper run-rate think like investor potential towards more happen end. may may I that a days, the but not

boost just what negatives, would in the could versus of the will, that maybe headwinds that range something half the to high So or about what may even lower would or in above? you talk get the some the you end you some maybe if be of second you either

Matthew DiLiberto

Sure.

We've of into half year, first first months. we whether of we're that which remaining so, half we've events you just better-than-expected look in at over if performance much. range, guidance, year, why lease this our offsetting are first the come some had the positives anticipate this some $X.XX of so or some the the we over million and the just didn't $X at million unclear have any $XX year of balance million wired that but our We to how our numbers, income $X.XX still the X will squarely we the running income. of guidance the adjusted we portfolio in that is recognized the a termination for far So, but year, not year, had on on mentioned ahead balance through that within and If point. $X that's

this forward those Madison JV fee year. Vanderbilt, into X point We this had shall income million laid and year. we at not of We We $XX elected see. layered of to X Madison, happen market guidance. also our this into or our joint JVs of We $XX million and of ventures move both between off venture did a and joint One not may which Vanderbilt in interest may guidance further One

not the thus recorded have of any of balance the For year, that we far.

the keeping the of told, us guidance all So, in range balance for our year.

Alexander Goldfarb

the Okay. the guys funding, the second will buy to time, sells that and your got very more is maybe stock. clear, you have Building match on been And then back once using same out the that which but News buybacks, which you have The DPE fund just question reducing presumably there, stock, at guys spoken you about

So maybe you stand. just you where update could on us

to is had you rather you and just buying would just given of DPE, But on meaningfully. guidance. buybacks million then also out $XXX be like think stock I the stand attractive reducing and where where seem

Andrew Mathias

year. are wire repayment bringing we actually the additional We've the some close were and continue taking DPE quarter we On gotten throughout some the of expected down the front, repayments to the since DPE balances. that repayments plan

stock and as So, it those not DPE but... well we originations on the is. new do as for instead had we much price to We expect lower it that very or trend allocate with planned into funds where to balance may buyback reinvest stock elect

Matthew DiLiberto

to trying is of fund credit. sales debt, because asset of the of use our repayment we that, addition nearer-term buybacks are the to line funds with particularly In match

to quarter, than line at keep the historically using of as the line. it is the we down Our so repayments those higher balance the in DPE near-term, we're pay end

Operator

from Kim Markets. of Capital next BMO John question And comes

Piljung Kim

wondering, influenced on market markets York. in office that are valuations markets? and are at the REITS any pricing On And the has I'm as private the all the I discussion New basically global into York New was of public capital private same wondering the the if incorrect.

Andrew Mathias

not Short at answer, all.

any where REIT the as of look repricing we market. strong indicator somewhat very and indicator, out indicator think spot make speak their the is of only Unfortunately, leading I They even there. it new the private still that the really to market a or of an players repricing they're view volatility They're returns. but capital investors building into equities, actual stands. it own and attract long-term long-term equities interested difficult demand somewhat the in not indicator reality divorced kind from don't or to an to as market

You no City there look enormous have for and demand XXX Lexington, the private for New for still have York markets Madison, Fifth, is the real transactions goes further for strongly XXX The to list spoken than estate. on XXX that on. very

Piljung Kim

And have into capital on your capital at conversations do those you the they are but value? as sources as they buy far discounted contributions any one And level much buy assets could stock a could with happening?

Andrew Mathias

the time, the the would don't view they same the estate was say, of mark-to-market have prior the to that All my they and real genesis REIT where anathema to necessity is, volatility stocks I long-term as and in issue. which investing comment,

the these we and and REITs, everybody unfortunately, scared -- I away meet wants volatility with lot these guys, to has unfortunately, guess to as of fortunately, go everybody the own real investors. direct wants own estate a So

Operator

question Scotiabank. Nick Yulico next comes Our of from

Nicholas Yulico

active Durels, like Steve feels Madison? in leasing And a talk guess, city. market on it's getting maybe seeing? the update about little I interest the early you tech, more X know you in you're giving a I it's then, but early I lot mind guess, trends can

Steven Durels

Sure.

for in the sector quarter of comment Manhattan. leasing a XX% Just on was TAMI the tech, second the

it's clearly of driver big leasing. a So,

to TAMI, proposals is couple buildings as traded examples prospective a specifically. active active in of continued One with a financial extremely and be in both the guess has about continues being So, and the well. a dozen across-the-board talk Vanderbilt to coworking half services active I be driver all tenants. still We're to marketplace demand seeing with

finance has and we're dominated quarter, the the by of see price major points, well. well Andrew both and So, a That partly We're of X renewals, or legal, expansions three that the been and this two starting some growing since all first to early busy portfolio. of We've as by hopeful TAMI said, of feet. the got safely pipeline -- one for hit strong sectors tenant those across year. driven pipeline we'll throughout lease-up very target we're over million our end as square land XX%

tenants tenets, a and trading paper the in quarter, Concessions, we're have said some got hopper as driven last as early couple deals we're into well. that seeing with we've new So, off. of by big we renewals the come portfolio leveled

We of are rents up. haven't seen movement off And modestly that. any

Nicholas Yulico

That's helpful. a And guess for question Andrew then or I Matt.

As a at have the top and your and the buildings lot of look where several we outs look they at years. portfolio over think some move about -- tenant you see people page next

thought bars got as of we clear. that what out others and Madison, I Americas, the be someone a say, can know like that and Avenue willing building, now? not you deal is Are to the there? let this both there think CapEx for Or type you for with building and you retenanting? it's ride process what right it's sell Even for the if assets of figure else with like, try it's deal is the pick maybe to market XXXX to buying better the releasing out

Steven Durels

square before or on a Avenue, Well, a some some to a of tenant buildings. give of going for couple for the that for this, off little out some that a to XXX,XXX Andrew those let put years. that's early respond either me as tenant space we X-floor Matt to of we're the in close renewal. lease rolling market in just what you for XXXrd of a is XXXX, a almost for lease to color foot

XXX everybody's extremely well we list particular, demand seems tenant right the and be that have advance are So, suited XXXrd, any Third inquiry of which on out. locations space we're perfectly those price all great assets within in in buildings the great points be to in of rolling with to at of already Avenue where seeing roll market competitive

Andrew Mathias

is leased lot XXX What roll we and the good building would mean, example. and redeveloped as bunch East a tenants. do, institute we ton I see of a to other up Street opportunity. services I of visiting nurse building, say Yes. roll, had that a That of we XXnd adult young great it a

Now we for market have the asset the sale. on

think So, because moving core still some That's to tenants, buildings, making sell business I hopefully, we're in roll, those is of we the don't having and up our redeveloping vacancy. would afraid the bringing sort look of rent better. new assets

return. to try any is of likely assets to those then require a then higher a core sell to more we're buyer redevelop and buyer sell going So, to to redevelopment a

Operator

Our comes John question of Stifel. from the Guinee of next line

John Guinee

of you the the Just big that At mentioned final that there a Steve, a ground couple to I fee the Or lease operating like than Americas, at lease, Is sooner relatively get the of had nit XXXX. to time, questions. the -- about year but ground do you'd looks you is out there. the ground XXXX how it strategy a Avenue and same lease think get of days? these later? lease think leases short-term has

Andrew Mathias

lease try the obviously, lease fee because figure dialogue always in wants condition Well, at to time the to get always term as it's to to owners John, the hold to kind the of owner asset the with wants a of And the leaseholder right in of the offer the also best test say, prospective will we're end positions. I'd out possible our tenants. and fee of much various

that's asset screen to on we're detail there's but are this dialogue always fee certainly -- at in but no nothing further always owners. ongoing the dialogues and is constantly with an those point XXXX So radar report

John Guinee

is about cetera. feet, et square X then at some another like just your Looks X.X Suburban And one. asset million drive,

$XXX an which is asset, list? is for-sale about think thought the your You're the process foot. of on to on a which $XXX I there What's levering million, up tune

Andrew Mathias

very plan; decided saw buyer is an term much Landmark still aggressive Stamford a disposition the capital from it, the Yes. that we'll in have bid future There in way care a of in efficient the is we of we we that may efficient advantage in to may that part same provider future. -- very the at a short and It take Chase. take Square Morgan least be did decided the assumable capitalization loan attractive the lender loan building with a to of this and from on JP in as the we however, was

Operator

next of Craig Our Capital question Mailman from KeyBanc comes Markets.

Craig Mailman

more back I your kindly bit just a joint little you Can just go decision Matt, Vandy additional the color want process to and for on earlier to proceed. to maybe on comment you the reason guys give why? venture ran One the not

Andrew Mathias

Yes.

I for the I to jobs we're if there's like and discount risk it It's closer really variability not we that time think risk want get a to lot and price the to feel get between opening feel a leg opening. don't a view XXX% good we the take out too you leasing and and we to as activity -- just can we the construction the the Mark higher going a at now was for building. -- really short and answer, of the bought opening, because

You the -- at for are And get to still that the this lease discount discount is obviously, leasing on activity we deck in because you the feel point. take operations list a space observation speculative then a to see left ability a and highly leased. confident see our we --

of future considered and felt really maximizing felt So it, pulling venture we and we was stabilization. a building we closer that once use off short-term better we really -- the offers we in potential get the of as sort back joint very weren't had reintroducing it we for aggressive the that and sat some we for it to

Craig Mailman

expansions? changed of kind terms you're another uses. way general what tenant seeing in on space or in of it just on then of employee? materially one That's Steve, space these curious some per tenant in terms Is helpful. leasing And Or just of

Steven Durels

No.

I although migrate densifying they continue thought intensify it's could. think people open more to or operation, not environment at people much concluding people they that a we dense time continue plan as one a can't at to successful hear to as with really as

in per square to anywhere when to are they're sort their where their of sort So, employee. an they XX lot a clearly was tenants been portfolio think communal of to factor down and and Once ago XXX years per idea it's support businesses or space how thinking I to That's compared metric feet wishful that's lot on. ending XXX space. XXX foot of that lot. space a But layouts. A they're away. in They're of open I space is coming changing going changing people good of going landing the have at plan environment, that meeting of still the employee think and X are they their kind square use -- from up our don't office always a that's

Operator

Blaine of of Our question Wells Fargo. Heck from line comes next the

Blaine Heck

private follow-up a Just investment on market the sales discussion. and

the Some with in suggest core than this year. we've core there's and brokers had conversations that plus deals interest and market value-add more

what pricing market for are there if guys those within And any that's implications wondering as on the if seeing Just well? you market? are the segments of

Andrew Mathias

as is It as had about XXX Yes. XX can vacancy. and Madison Yards, Hudson occupied was I sale characterized about leaseback would've core as XXX a is some fairly you certainly, XX%? poor XX% deal, or a which get.

Matthew DiLiberto

Not XX%. XX%.

Andrew Mathias

occupied. XX%

basically just got here. core is demand plus still And and level, development well. Fifth So, is at recapitalized I Avenue as we every value-add there development XXX side don't core, -- really at really see

think we're of sector strong property seeing I across demand investing. So, each

Blaine Heck

you whether partner then about now. One That's X talk well? getting reconsidered on JV to partner related a as given the or decision that And you'd process fair. Madison foregoing Vandy the Can at and for Okay. your

Andrew Mathias

there's blank the There's really meet all to top very so for is everything obviously opinions building. building process. expectations. of had well. model X up the different no -- new that'll There's levels and Hard and we're there, trying lot can we haven't exact we're great, Steve we've -- we base that model a is different while foot which with different we're commenced expansion fine-tune the tenant an having canvas doing and a close to testing which then running building, on somebody go at to to I'd the and out building, say with plan development No. a the present economic million conversations on scenarios of as their

fully early still venture, in I not is been exercise. building the the for the year second or to leasing say, next the joint building type has So, in it's would for it yet if just market year and half but of of trips

Operator

comes question Steve of next Evercore Our ISI. Sakwa from

Stephen Sakwa

the be could looking upside or What on move speak maybe the just outs. I that obvious up like tenant the some of and end of income not net some of some leases some or the around we Suisse of guess or year that at Matt, leasing questions the I following to may some Polo at conversations on of opportunities off? replace that can the should the, coming of Crédit guess, you lost are that the be positives side? lease so other

Matthew DiLiberto

of redevelopment turning see Vanderbilt year. of next that losing year if kind will retenant you office month then goes a expect structure we in to capitalization some at are December, buildout, said think see year. this but retail The we're out year next the Steve. time, But One Andrew way. Not Avenue over start upside next Yes. I some expect XXX the income portion, the space as of you're the least of end later income the next to as until it XXX portion We're spend then out off which the Fifth up, years going several properties. to in off coming more opens going a of year sometime Madison, building. we'll -- fulsome the laying and into these of be some Polo so of that

and into the Steve are to Third There there. X on other Avenue then to properties are that's well that going NOI And that XXX year. leasing that's properties and some we there mentioned the like So, going almost contributing We're is have the an of next be headed lost our square year. through goal. as XXX this million offset feet

some move So, growth on to the the and properties we're redevelopment more lay December. those going detail give alone, offsetting of potential outs, profile of the in out

Stephen Sakwa

then timing And could of when and you and of just sort of about going to kind sale think just you get guess back talk the asset ultimately sold? Okay. level that I asset XXX. the Can the interest

Andrew Mathias

Well, in we -- been we hopefully and get calendar we're in third this year agreement interest through any certainly so in on it's a get what chance. give bids quarter has to we're Look, on sellers expect would Obviously, tours we're there get. got this sold, great it to have Steve. sellers them depending But because are not we ongoing. an great, The a to position everybody of summer kind product. but of for expect

So, we're versus other and working us. going the which alternatives to is capital the now evaluate most all we're efficient the for on decide bids

Stephen Sakwa

then perspective, XXXX that I on to and timing And mortgages might just sales but Okay. on a that out interest-level like from get the know is just perspective? Westchester from looking put assets, a the pushed you

Andrew Mathias

No. more specifically. assets the we'll is as We're certain year still for some hoping sure. Stamford, sold this balance, there. Connecticut not And asset in address to timing The get

Operator

Our next of Stanley. Morgan Vikram comes Malhotra question from

Vikram Malhotra

related just is of view Madison retail was is were Spring. bit and DPE street you a bottoming? still investments know there tenants then that retail. where to some your prospecting you And wanted that, you book, The assets. update? Street on in XXX then to they potentially Just assets I the of that bought were a focus couple back, for Any made those

Andrew Mathias

more The for a is do the marketing holiday XXX XXX occupied assets, Green and the and a XXX tenant the now, through through assets. the of season. XXX while Sure. the Spring, are a season X XXX Spring, holiday tenant. longer-term different much Green there the Each worldwide Madison, we we've situation. pretty sort XXX fulsome signed both

Albeit hasn't been XXX we temporary it. and a the basis. So, currently vacant that's only on one is -- filled there

strongly we we Madison basis good core has tenants level different and So, more there's tenants the as our feel a you good from there, do on and there's of demand that and feel a of bottomed still street. those say, interest about out activity the lot and assets from

move David when is already we're there, So, back for XXX increase with Madison we who entertaining out, that Yurman's space. do the see tenant

we'll we filled. be it So, get confident to feel that able

Vikram Malhotra

sort And Okay. your you that that market good peers, at of as big the just and bigger cap doing Do Vornado the then own comp of with for picture for may your question portfolio? rate. a be one JV view

Andrew Mathias

and and it's Avenue also of shrink years I Stabilizing are quite can't JV. including really to dire the really the XXX I to as attributable selling I hard our -- Fifth it that's to still we've last there's to the capital a year. as over last of speak the I retail. worked XXX of retail. X amount NOI and New their few strong assets our specifics sales the a don't for is view City of bid think think markets making York out mean, be people

feel be on I questions, strong it for further part we basis. of continues like retail and very a but selective there's Any So, think operator? to it's still out -- strategy there bid our a

Operator

sir. No,

Andrew Mathias

I'm and you, us back again. Thank be sure three joining months when in Marc everybody, speak we for will Okay.

Operator

and gentlemen, participation concludes you and this Ladies have for wonderful Thank a today's your conference. day.

at time. may You disconnect lines your this

SL Green Realty (SLG) 18 Jul 192019 Q2 Earnings call transcript