VNO - Earnings call transcript Q1 2022

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Operator

Welcome to the Vornado Realty Trust Earnings and Webcast for First Quarter of 2022. My name is Vanessa, and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] I will now turn the call over to Mr. President Counsel. Vice Senior Borenstein, and Corporation Steven Steven, begin. you may

Steven Borenstein

these quarterly Realty first to earnings deemed call. factors. during for and the Securities with call, financial year risks as to documents, for statements statements. these due XX-K as Relations our today’s earnings the website, financial Commission. Yesterday made this In financial our package statements these Annual and Welcome the release on Report may materially risks, earnings be Securities of Please Commission, included and of with only today’s filed the regarding measures. other during call aware be variety on Exchange company non-GAAP may XX-K certain call uncertainties uncertainties. Investor from are The not undertake well quarter section. Please may forward-looking to to XX, does duty update afternoon, December supplements. date. Trust differ any The directly we under release, that These statements information include first most and and more may refer of XXXX, to accurate discuss are quarter available www.vno.com Vornado and Exchange our Form will measures our these including results our actual filings a that time-sensitive ended we our information Form and and supplemental the comparable as measures Reconciliations documents report be Form information GAAP XX-Q our issued on in a forward-looking

and Executive Financial comments Franco, and today are Officer; call from our President the management and Steven Roth, opening Chairman Chief On Chief Officer. Michael for

Steven for is team and present to turn now senior Our the call over questions. I Roth. available will also

Steven Roth

and Steve, everyone. morning, you, good Thank

to continue FFO to our quarter Let from very we me positive trends across recovery back by in congestion. count I business, office up Borders our the see the restaurants To and streets continued in full waiting and mean, beloved we my literally saying of is with I long had pedestrian utilization pre-COVID reflecting by good booming and terms climbing. full, and are the are begin business. New year, XX% of traffic full thought with a many last lists, eye, York are

XX% things now highlight. I’d of we are We are couple over utilization a like There to as speak.

so. the Reserve in the inflation role we the this of prologue, have and and in out expect a rate but quickly then other as fighter First, Federal than floating years, every fall The is most, more XXth side. to that correct is and down of the appropriately debt the XX economy and hands their mountain, is up now year. quickly strategy slow we If economy nine rates inflation, past climb is

the our for effect this June and statements quarter, pending renewal. sheet first lease Second, XXXX income statement GAAP of X time ground financial PENN balance reflect the the

actual $XX estimated the million ground arbitration the have proceeded. rent pending We new as

X, short-term, substantial. will very, and substantial online While believe these be slow as X two PENN Farley, come our very PENN are that growth and will growth numbers we

Now, over to Michael.

Michael Franco

Thank morning, you, good Steve, and everyone.

Steve strong we another As mentioned, quarter. had

leases $X.XX on $X.XX new FFO increase our recovery commencement per and of rent to and This variable an $X.XX compared quarter continued from year’s or primarily was first for First last businesses. the was quarter, adjusted comparable share, increase of office as retail XX%.

quarter-over-quarter our Page X. earnings a bridge in supplement in release financial provided have on We Page on our X

value quarter we earnings this estimated million straight-line balance on record approximately not reduction the of earnings $XX start in This are we’ll ground first time, by of for our and our the increase a rent The liability to impact are renewal. additional actually and the million in the the Steve we this on recognizing XXXX million mentioned, impact present recognizing earnings. $XX in basis. lease financials it X the GAAP, reduced and sheet June pending will quarter until XXXX. As PENN in impact Under lease in overall full-year $X paying and our by cash in reduce our however, start we FFO, required

up mind, we’re also variable we to originally businesses. assumed our this Farley, we share projected rate office earning had to the We driven quarter. up be preview by per Looking rate mid and will hikes signed would ahead, year’s platforms than year interest but for looks now a at the particularly We in XXXX per growth of deliver initially it by double-digit in to it quarter, balances impact cash and debt this in gave variable the in this to now variable FFO Fed to of continued LIBOR percentage last recovery digits. like be growth had both the greater retail, first growth more expected year headwind of our rates when expect and to we We anticipated. now With previously to high-single we than the increase. on a primarily metal a businesses, year. XXXX, the we in move expected our our move share recovery the Keep strong FFO leases as our respect continued expect see more

Square Our the look signs in by to healthy. District, continue quarter forward and our and strongest signage bookings Times business, dominant had first led ever PENN its

the four due theMART shows show hosted pandemic. is first quarter, trade during to there the trade we continuing during Our rebound as at whereas quarter none business year’s were successful to last

expect Our to to continues pre-pandemic near garages, recover. business we perform BMS to our levels. be And continued finally, year this fully back which

of year quarter. increased NOI income the recover with prior our businesses by year’s a XXXX. return quarter from over Companywide, most this first We full in expect X.X% for the variable to first cash the same-store

up up quarter X.X%. Our was New overall the business was core first compared Office X.X% office business our year’s to prior while York

commencement the same-store Union Our Fifth XXX XX% leases and X very Avenue, XXX cash on a Broadway Madison strong at XXX up was retail Square, due NOI new primarily Avenue. rent to

the consistent trough of with quarter points. in basis by Our the XX.X%, and occupancy Office XXXX XXX quarter is the XXXX fourth New at York second the from which of ended up quarter

retail quarter and quarter after this ended flat year-end XXX for XXXX. basis York points of up first XX.X% asset the New sales bottoming Our the occupancy adjusting versus quarter at since in

expect modest of pipeline both schedule. We end to office our on expiration occupancies remaining by the year deal continue improve this and based XXXX

markets. Now turning leasing to

availability recovery leasing of utilization have Manhattan first and Deal on continued an all space stabilized. out the long-term XXXX, higher has tenant the Leasing in and is the to indicating order of large high remain securing while overall media job pandemic collaboration by talent pipeline continued workplaces is fierce ever-tightening to During growth, financial trend robust expansion competition a resiliency. a labor morale leases several in and currently all market. submarkets. conditions continued across activity the foster amid quarter the asking placing rate concessions of teamwork rents, in value combination towards office-using with tech, resulted CEOs The in companies activity strong. across market are for

remains locations. redeveloped rents which at quarter, in redeveloped new in of the Accordingly, the This dominant provide amenity-rich quality XX% evidenced assets. to consisting leases flight first theme have or market. such, construction assets, signed new transit-centric increased in leasing by offerings the relocations or As the of is to best-in-class

in environment. York to New office well-positioned best-in-class portfolio Our this thrive is

our Focusing portfolio. now on

NYU X.X% During XXX,XXX of $XX metrics, the with Leasing Park completed including to feet. feet cash a first a square healthy highlights bringing starting GAAP. XX One X.X% at total we foot square in to the Avenue, XXX,XXX quarter, market included leases and their the square footprint totaling building and at rents quarter with during key expansion mark per XX,XXX-square-foot positive

unrivaled per average rent foot. transactions digits in These our building triple square the push XXs love the feet and we totaling rent of along XXX,XXX-square-foot tenants center, located operation. including life transformation first the leases foot District amenity the are has square is work starting fitness and new at work to flex with court of A facilities, plan beverage as PENNX offering operation, eight ecosystem to rents completed all starting early in square campus XXs also PENNX this food the totally now and We from space. trophy take three for health this space PENN into cylinders, on all on PENNX tenants. and conference of to our running with The validate our XX,XXX at redefined per floors XXs building’s

leasing totaling quarters with million was While strong during lower square the large by volume a than currently leases pipeline. Retail first rents per leasing negotiation driven additional XXX,XXX XX,XXX in negotiation square pending average across boost X.X all of feet forthcoming with were consists feet We an feet the anticipate the quarter leases. in foot, in new of our with leasing transactions quarters, earlier lease tenant in very of first have several we activity recent of in six quarter activity portfolio. expansions which square $XXX square starting stages our

have in We strong the leasing Island Long Rail interest recent in with the pipeline Concourse. District active Road in particular PENN and an commencement of the

Now be market direct turning to high Chicago. challenged tenant at and XX% with to historically concessions Office The continues levels. vacancy at

indicated cases continues However, the the including square throughout city new well our headquarters as showroom, feet signed theMART, square square At during to has quarter’s tenant reflected foot is positive a quarter, foot strengthen of said strong by quarter, pipeline. as an for fintech we contract last is anchor absorption. and of a new as with been our as net a leases demand XX,XXX which Recent we XXX,XXX growing Avant, leased this tenant furniture renewal steel lending tenant XX,XXX tour activity business. company, in

capital but further of continued proposal and negotiation our XXX,XXX many their theMART We program our led building is beginning XXXX have employers. forward and New of workplace. started the York quarter life end work activity X.X slowly return-to-work variant, and effort We differentiate feet MART as to of of in as plans, large a will feet activity campus our bring initiated the construction XX,XXX commencing July up monitored Mayor prospects. by picked look as another Chicago, companies will unique San leasing Francisco Francisco, which companies square San leases we the to by Omicron at ecosystem trading the has the where coordinated of towards a In in

X% and rate overall California seven-building city’s at one XX%, experiencing set, demand rates. strong is and certainly trophy vacancy at the which elevated of tenant XXX While rental is the is

complex As the Montgomery effectively such, our XXX building. fully XX,XXX-square foot a California exception XXX with leased is market-leading of

market firm with suite private During in in XXX, with well the the square the global important a to XX,XXX triple-digit Microsoft significant a completed an base of cash mark renewal as lease building’s as foot in equity rent tower. square the XX.X% we in foot new quarter, X,XXX the resulting

Finally, turning to the capital markets.

with choppier from With the and and typical up in quality, volatility move increased on a rates, become focus the market time. sponsorship, financing lease have the interest current markets lenders

portfolio after this maturities Our well-positioned last no fortunately, modest and year. debt in robust XXXX is in on capitalizing regard, material XXXX have markets maturities in the and only we

We are complete of XXX in process now quarter. this in the significant on XXXX maturity it and later expect to Broadway refinancing

and job million so near we non-core another monetize last together Island create $XXX sell to asset We in done. our we to $XXX purchasing future. the assets assets contract over five the sale, After in here planned also past continues small week went the Long we our the our leases building sold, million. major office efforts years for recently value extended and was with to under retail This City the our few XXXX, have

$X.XXX cash over and $X.XXX I’ll billion, Finally, With under in Q&A. strong it our restricted to revolving treasury $X.XX our for operator bills, U.S. billion billion undrawn current that, turn is liquidity facilities. investments billion $X.XXX of the including and credit a cash,

Operator

you. Thank

[Operator begin with We first session. will our instructions] have question Manny now We from question-and-answer Korchman our Citigroup.

Michael Bilerman

Hey. has pace Bilerman speaking. definitely year. Michael leasing Michael, start the kept It’s

that sort of a about I where the bit of some on you’re to little if detail a numbers the of terms in more that’s those momentum just activity? going can vacant talked to wondering You give in little seeing? was roll it’s stuff much How pipeline. you’re space leasing you versus seeing about bit unpack of existing

Michael Franco

take one? Yes. that Why don’t you

Glen Weiss

Hi, Michael. are It’s How Glen. you?

Michael Franco

Good.

Glen Weiss

the lot mentioned mean, service X.X activity the very I in and lot of call remarks, of the in the I more mix, Michael PENN a it, his XX-XX A activities a healthy new in feet would of expansion is building. renewals. million So financial it’s versus

but we we So as all to the we portfolio good to in fill forward, across said, continue spaces, continue of terms throughout a types expect types real improve looking of year, in seeing PENN occupancy the mix here. sit to we’re as

Michael Bilerman

would Can of bit the little process trying is, it, just walk bit? of is arbitration. all through in points PENN though basis as subject sounds talked XXX like in to the a Great. the return just And timing you’ve call down, the ultimately little of lease. recognizing ground XXth sort sort understand X, probably fact and through terms and targeted through then that XXX lease now But which maybe work for Michael, what seem how million just It that to put the in, about value you the West on you about help arbitration gone math just this maybe extra a you’ve given on it would impact obviously understand come ground its will that of that’s us XX.X% the financials.

Michael Franco

right, on as we – put balance it straight-line in sheet, opening we the in earnings. the Look, we remarks, stated

the the given sites that. and $XX The the of the year There’s so the I be commence be is so publicly. finalized is versus year. get we details he terms cetera. lower what on size of the going I’m to what later be it probably to lot PENN best valued. prices stated smaller comments, this get But site costs, just is our the to largest size the a put the into to risk et and as forth, of going start, to cetera. FAR we’re on And in process times be sites is nature X million. sites process and XXX. at and on not not PENN where based here to three near-term It’s next middle there guess out one valued and down into Steve’s it’s think is, of continue I can that than tend built said, by going of X The will Larger different et in data XXX. construction of number

June effect And XXXX. so the in will take of new rent

we from As guess what it will material. of yet, of be the any you renewal stated, that and what could be exactly we because have that return be year. best daylighted on our gross be the PENN now may course finalized X will rent to it outset the put the next know don’t We’ve over instead as

Michael Bilerman

about Is that? the that math, though, right thinking Michael, just

Steven Roth

the million say, basis. done $XX Michael, yield, We square the – go returns to Had I’ll making that. that if we’re let’s PENN we Why? are up we program somewhere is going to the in on rents our an it’s investment for hang foot on not to going or we’re chose disclose rent a and on – incremental building X.X $XX, something that. like X

up rent let’s they that the out $XX approximately to years. or million, leases square it So five line, as the next say – over bottom the be So million That’s $XX four okay? down go roll be $XX ground would XXX,XXX feet the we on will million. $XX think drops

together and PENN we’re that could the in two on what Furthermore, building the doing PENN so its District. creates of investing. with easily return we’re handle – get million-odd we easily in $XXX nexus the campus the the we And a partner

So it’s important. very

unique We and our totally and which have now is the prospects. largest community reviews open complete and to package, amenity a from brokerage rave tenants in-town

we it thing to absolutely was So right think the do.

start – in arbitrator the And and is end One the – before that is arbitrated XXX and negotiation that decides, of then and It’s too reasons, you arbitration. of that sometime which simply, all We a is is have arbitration words, middle In win, lots middle one the different. you’re different the a the arbitration if And there and expect different kind of more out including totally et it’s – above arbitrator of other cetera. is third and side side arbitrator years. just offices baseball to months the number – to a the comps so $X is puts fine, a chosen year. number. is correct. marketplace, the the a arbitration Now the the next a will I for two that is, selected business. other and we more number different PENN the believe neutral was that in before in prove very going the of puts correct and kinds what are see number, over the

we that’s way So it. the look at

Michael Franco

right? come on XX.X your to back math, you so go you take X%. just million and Michael, X.X% to to paying the rent If today, specifically we’re that the comments you’re XX.X the down the incremental $XX take implies

is math correct. Your

Michael Bilerman

that rent other generated. is point Steve’s lease then reality ground massive is And being a this is supports where the that’s Right. complex that of lot one

on looked at an to individual totality And in be has rather so it basis.

Steven Roth

okay? other the foot. budgeting, all the Absolutely. a of Glen’s which time. I It’s we in process worth And the as if thing, belief building is that one we offered and in doing in believe, now the the marketplace belief now – We’re do my XXs, $XXX

you on higher Yards, If Manhattan transportation at in the which higher. what’s out of site, go best a and in substantially the our and West market west are believe to and nexus at creates we us, And neighborhood. is rents the going Hudson with the look

So rents five go this of that and we in with at will head from value the $XXX believe will hundreds. foot into that asset XXs we will three, in now, the four, grow years start a

at the investment asset. healthy So or X.X% opening period the beginning whatever a return X%, the X% this or for is the is of more just

Michael Bilerman

Okay. Steve. Thanks,

Steven Roth

Michael. Thank you,

Operator

comes Our America. Feldman next with from question Jamie Bank of

Jamie Feldman

to Chairman’s you I of and morning. go you, your comments made Steve, good want some Great. back letter. the Thank to in

sooner come than employees the employers be hybrid the which with schedules are districts and will when you domino last office you resolve will First, work said activity, and teaming think.

office west half of York’s New us fits they that formal million description. said of less You creative side tenants Only office square feet XXX want space also model. tell

then now usage? does days Vornado or about invest year from back people to think comments description? looks you just of doesn’t think current to a the of how maybe this can and also your else think what going And space? us these tell future as the and and It of office or City, office like in about do use how you New terms York the sit So fit in how about what portfolio are you plans week

Steven Roth

my shift back letter. to glad It’s I’m start. extensive and you. Glen off you going to to I’m Michael Thank very a question. read that that

Michael Franco

Jamie. morning, Good

higher. of terms it’s in what So anybody’s guess, now, predictions will from utilization be of

and a Thursday consistent through Monday fairly We Tuesday of the like continue higher, highest; the trend the there’s see one Friday, in pattern Thursday, feels to commuting city. through higher; no and

if So absent it their – have the prediction. continues of think be in to to that do to continue so. Friday get number to will the a probably city, what of low But don’t not going don’t I’m I in up, know boss the and market. is. terms Glen continue come to I will will I number make trend sort

Steve’s I started accelerated think on – that pre-pandemic, type want people the comments post-pandemic. trend the of companies space want,

what doing want. what I exactly PENN we’re in is companies think

think seeing we’re reception that’s with PENN a now PENN X they’ve plans, PENN although seen the off. still and X I XX seeing the why bit that’s we’re as even and

XXXs XXth just XXX at We’re so the – go it the seeing but XX west side, on. the So right? and doesn’t up Park and the demand

was clearly that It’s consistent market but own to XX but selling a X, fine that fall bring assets, about, – building, to category. is at that to we years. being shortly. that that’s we think we going that in City, comments, want an in we’re an said, least asset Island where not which doesn’t So Long asset my XX and talked in Fulton,

So we’re portfolio. going to prune the

and want do to make to time. assets reflect assets to us rents can those? think we where to to rental are see push then over we you what going we not into going have want most we see We continue to going tenants or those own Would we’re sure going actively category, of growth right? you’ll believe that to importantly, add are believe over We’re time prune fall assets upgrade, that I

Glen Weiss

industry size the fits sector it’s I positive And But tell business will It’s PENN-specific. a tenant in see it, and all think of Michael very not covered their momentum. terms I one what answer. It’s you, specific Jamie. is. we very

there, are banks have to the lot and lot time people velocity and large of back So higher other deal week. on more yesterday much large number week last year which is a signed more one, deals, this a on year. deals this of global the coming been side. than new There’s Leasing out west

I back, terms think environment. more had coming seeing in And improving predicted back in momentum. of more new be think the cetera. talent will their to now it’s their an year: wanting you’re getting continuing theme, space, into office. definitely people, back last month continues to market that’s recreating terms people and I unwinding recruiting now there it to office month, a be I out improve culture and People the of we more So brand, think et But what to comfortable are to there the starting come are

Steven Roth

the Jamie, design employees of This and I while. your the what implied and think work teams have there a for that employers the our long our something is that focused in want. and company on the been space was of question, culture

suspenders on west whether industry you’re of you’re in side. are business finance industry thing today, So the community the we the tie suit that in the Park the believe in the or on striped whether past and and a tech Avenue

and what have So our and very hospitality to tried of is our aspect very space. the buildings hard successfully done, we think, at on we focus

go you XXX,XXX-odd Penn, if amenity which the feet. package in One square So through is

offering if And buildings So single than building. we have have one that a have a in larger to you have it’s you a afford to can of campus, much put strategies is that enormous. – cluster of a amenity if you the

you through food offerings. we if so there, have go And

We to hang. have places

to places have We chat.

We have gyms.

health We facilities. have

of manners all have We things.

rooms. can so X,XXX a have have devote square to center to conference conference and XX,XXX feet not that We take tenant a of those also feet square

it. have We

also in co-working have space building. We the

as we the is Know want they they to as staff our hotel. that were the tenants other welcome treat be the building that their think if them at that’s And a the in greeted. we greet and of to part them names, them, it guests treat So future. want

entire the not in the at only what an think York, will we’re done New We And this future. unique. the we’re of but front we’re by is way So doing cultural owners there’s of universal, are work the in pretty doing. way, thing better but be not the it, sort

Jamie Feldman

thoughts All you everyone’s that. Thank right. for on

So just and of around maybe it it on versus so where there’s today early then District. that similarly, maybe you that? you you up some think of the could demand? the the Penn. more further? signed I discussions How to about buzz lease, on just have I crime you’re was initiatives works guess following Can do Two big like year talk MSG a leasing on the a know that just based would PENN you just it’s having? And stack around but gauge you much and Or out the kind how ago view feel do still safety it improve

Glen Weiss

new the is top best terms user In market. of at market for the or coming building redevelopments the PENN of the leasing either any in into looking X, at the very very of for construction the list the

brokers in no are So asset. in continuous bustled structure But up. just tenants, has gone presenting the The meetings we we’re rush. with

and and just be. start space better, will project how goes the spectacular feel a better As get going Jamie, each better unique to into bringing physically. this on just then people it’s month to We’ll this year, get

So we’re seeing everybody.

reception A-plus. it showing been to The We’re has everybody.

who’s around important New every York for We’re client walking every of space. tour on

we’re As it improved district, are relates streets from this think to – the the I time year. last noticeably

submarket safety et the district, of our owners the it year or seeing And into daily said with the day enormous. as been and the jurisdictions X and we’ve We’re, We improved building course, is course, PENN and mission. at for over to the in still offering. rents from districts, the program the has improvement from to terms in continue we’re, that of all it of X, Avenue, focused, got excellent. really coming think remarks, in of NYPD, into and has district the in tours. course, all that place, do every Park Mayor’s working other and on And every coming business the But we’re Sixth PENN They’re Avenue, do between I amending the this on of tenants, reception The colleagues rise, honing work action major neighborhood. office, the I over cetera, tenants the city, mean in year. we’re on downtown, campus the

Michael Franco

I say, the talked would to just I mean, Glen year-over-year.

other the that think are feel side, Is I more to some better, Streets it the of maybe to better, streets think, That the station. traffic the on the the activity It’s is, I right, right? level other push quarter-over-quarter, to increased has the Street, streets out safer. made areas. made elements feel the

I think see improvement. going in the area So I but to you’ve you’ll you’re in think you’re know noticeable to done a know I don’t the time soon, be Still last been though. I work through district, walk

Operator

you. Thank

Steve question our We with have next Sakwa ISI. from Evercore

Steve Sakwa

be New just be morning. part licensing project if to more get you’re Thanks. your to stand-alone of it’s to City just it Manhattan? big do Steve, little bid can in about a bit winning heart were comment if integrated still you kind I wondering a could York one. of casino curious looking I’m how If the casino able agreement. of be be resort needs was part you desire a of Good be? of or to of just space? think think convention rooms landlord. the landlord it the you ultimately the more side, on to do be a need operations Or hotel and or you’re And looking and appetite an if Does to

Steven Roth

New contested that to Yonkers, at of a industry, the business to to although who pursuing should of probably, industry, process – as restaurant it, It’s are be theater is entertainment one center must. industry believe industry, casino, going the et a We answers to With be is the there the think not political that going engine two When the and be one to the one course, last we questions going leadership, written best hotel downstate about And to and place third of respect would are these the in to in the to best going believe you Aqueduct are it’s of Manhattan. the it decisions. government industry, is But we for the your to as the goes idea This of there the voting interest some served political license, be Manhattan. Manhattan we that of of I’ve are into well. the be Well, the officials population letters center three cetera. who time York aggressively that of economic current that we go we are as the might and everything. make unknowable. I’ve goes said the anomalies third believe is while the is the the by necessarily And far, license licenses.

thing. So that’s interesting an

the are as casino and landowners. are talking of process We industry to people in to operators the multiple talking our – multiple

be hybrid, the whatever. an debating process that and landlord kicker or the being part a we’re being understatement, is with landlord a operation a of being as which whether we in just landlord a are of would a We just or or

the complex entertainment, With right both the of which with hotel so a know okay? that arrangements. in one, to offerings, pursue throes and isolated be whether bid, the cetera, is or financial we them. of We respect I talking don’t about an small we’re debating casino rooms, entire about the can et would and to thinking So food, believe speak, winning Las Vegas-style

the the if Garden. the Madison We intend District, bid Square District, Madison biggest have the is of example, PENN to entertainment The in certainly thing sites Square dates teams, Square we with. year Garden and far And take in about and you what’s multiple the most Madison and that of the PENN middle just XXX is for complex maybe concerts. important York New a area Garden has addition wide. and interesting to it in

talk and sites There’s as top music is Square, center to industry So of about on to is Times and Square – the have it’s on Garden some which interesting. And we adjacent well. land the there. is transportation of network, which the Madison our sits top of been sits interesting, also it

than We we – to over, very this read are be one And all expect going we So the – of that to direction the near in next time year. as it’s to don’t the end transcript – lot of longer before are try we’re I exploring think year. going that think to to we to the will resolution process this different get early well going some and go over quarter of what working that’s probably I exploring days, hard is we is a take first going be in somebody that. somewhere to I anywhere a thinks options.

As deliberate important. it’s a it process and it’s should,

license. to And it. right the We thing. So believe bidders. a opening is to determinant for of speed third to important the last economics Manhattan one the that get think to speed of be aggressively venue we or of compete intend We very is the market going

take of could in that this new if build calculation. take billions a retrofitting complex, dollars years three, five years, are one it a to could you’re half to if building me for difference that That’s a you on that one and and there topic. So have or

Steve Sakwa

Great. in has us maybe a is kind you market of give market just us that. of could speak I maybe like of financing just the refinancing. for kind to Michael, and you just a It for how where second changed? and the Thank little sounds kind XXX Broadway debt. an pricing markets. that guess, question. update And for size today mortgage on of more bit sense you give Can is

Michael Franco

Yes. particular to buyers, Look, clearly would say, the we’re volatility, some bond of extent, now, more in really market. banks on think the although get hesitancy of, in part so periods which anytime I you CMBS in you the right and get it’s I into it’s – much

you you So a started CMBS think cap caused year I or supply that volume of had out. and rates gap out spread uncertainty to heavy with economic then the the

size, to both a right any CMBS spreads it’s on don’t So rates. open, and don’t to to you market but a a probably in prefer and have market’s go you you market that. if had issue into double in not we need now, going that of bit to

well that’s a so that it’s in spread. bank up a will an asset received getting high-quality at asset XXX It’s done tenant the the great market. and bank So with – we’ll a over and roll end in market

where to comfortable pretty on think today at we’re building. that I

aren’t XX still they And said, as assets. so I but much handle but I ago, more months spreads much. So high-quality where only can market market, CMBS were X, for attractive the bank think than liquid that the

for one-off has the go XXX, now. market, stability there’s good a both bank markets, but again, our which demand right more on in it’ll I think So in basis, assets

Steven Roth

Fixed or floating.

Michael Franco

So bank market… given the

Steven Roth

or questions Steve, now. a going few Fixed I’m ask to floating?

Michael Franco

likely given market, don’t that floater, I in we’ll out will it as a of else but of anything a bank the portion other the for Well, situations, done number swap we’ve have all terms. in the market. things for it’s question. a material I will really other any no finance. of done, mean but XXXX financing and other We – had don’t answers XXXX. get we material that your XXX financings couple Hopefully, small beyond be have

lot we So had maturities a We last a year. number obviously that’s opportunity year. that – did last of of

the active didn’t So being we anticipate even markets, XXXX. very notwithstanding in really

Steve Sakwa

Thanks. Got it, okay.

Operator

And you. thank

next with John Capital Our from question Kim is Markets. BMO

John Kim

I think works rates again. years But high floating rate your a mention down in will Steve, XX did strategy remarks, you that question. and answered having come opening my you just back

So maintaining wanted rate comfortable you’re to in just strategy I that a high floating the near-term. confirm

Steven Roth

more and and balance spent We but important. sheet Liquidity deal defensive, is business. is important the of to this Yes. offensive be time we safety extremely very a ability our us ability think to in even great be to the running on

to them goes opportunity, a was points, debt, the – debt time. X.X at It points, enormous. most rate you So XX-year what basis most floating is X.X% of compare the to, the look fixed if financing every that XXX you rate spread a a time

So floating think the on advisor firms what go said happens right used was decision costing years, financing for an that years, last life if points as XX fixed, of every the of more. during the last you yourself XXX And the over rather XX go one are basis we I you than fixed. for to elect to XX-year the certain single month

answer floating. basis the that points pay go you is you or XXX So

too. it, of parts other there’s Now

the that, If in. or defuse term, decide the or sell you which building you to want a And a of loan, proposition. before you locked refinance the expensive are normally whatever in very is very, fixed-rate you to you’re have building the if end

improve So sell it the takes away all going of your or flexibility are if or asset. whatever to you

that’s an important So extremely thing. and

expense fixed, had on than debt all increasing, to Now would been in or of we have and if we would interest while our have more expense currently now at are we floating our substantially it have that we expect rate paid. books is interest paying be

with where have you – flexibility. what being you industry, are in fixed-rate for it think not it’s rate we more much certain encumbering why So mortgage a safer, flexibility, while expensive, strategy, heat less get folks debt you a the strategy. strategy unsecured and or that still the in seem floating like to we which for believe certain believe seems superior I the much still the But that as is can route the most asset

John Kim

contemplated a rates fixed-rate four-year all could at with in particular, highs, have to I’m risk inflation just for is remain that at if wondering a that fixed-rate as Broadway with mortgage for And fixing? XXX there’s higher longer. that

Michael Franco

your question, XXX? couldn’t which I understand John,

John Kim

to Or that heading… is you have have hedge With decided near-term? definitely it XXX, and floating

Michael Franco

because but level to is at of base swap corporate that intent loan the in to be The time. a for Yes. it’s going will our period floater be a market, bank the

John Kim

one Okay. And question. final then

lease the addressed given particular? and already With provide of forward the just guidance not why uncertainty with amount market FFO there retail going and guidance is provided, in in ground the the company your reset

Michael Franco

long-term real outs. a The like of estate ins lot is business, a there’s answer and is

some of and given preview the to back that a rates. walking little We’re phase year beginning and difficult in a do. the it’s we’re generally, at now heavy bit, development We gave you

So We’ve reasonable XXXX, for it’s I think, thing high-single given mid a digits. to to sense do. difficult you,

best that’s I that’s this for change. business, our this year. Things that’s pretty So That’s year. – best fluid think our It’s guidance a for but good guess. guess

Operator

And thank you.

Alexander Piper Our next with question Sandler. is from Goldfarb

Alexander Goldfarb

morning, Hey, Good good morning. Steve.

a questions few here. So

of The first guys is, cash. the $X.X you billion had

as of rate T-bills, to some why just debt but buying not use that bought the floating portion pay You to down of the opposed some a T-bills? cash

Michael Franco

Alex, the – good morning.

Alexander Goldfarb

Good Good morning, morning. Michael.

Michael Franco

deploy go we Those But PENN up in T-bills months. that did in into is finish than staggered nine, the that little and The order XX at to of put what’s a our PENN three, more banks. lot more was X X. of in And Since six, answer in the going what capital into in of left a some still of left development benefit earning we capital deploy the of get is the to lot quarter intend PENN. some activities to and a end, way, bit cash to by the T-bills. is are maturities, Farley we

all New So tax, do you of that’s down issue money have X%. which it If would again. we be in on additional that mortgage right, financing you longer-term, wasted wasn’t York, is terms that never In have in why the all debt. would you the to before intent on pay debt, over to our rationale those costs have we’ve the the that mortgage flows recording assets pay paid once have the

don’t want to we So do lightly. that

Steven Roth

it pay replacing hostile, choppy we debt, market, markets financing the if this in difficult. going on more the later to are Alex, down capital need where is be if short-term and extremely we

And The we other which places strategy our the and for need we our if capital and budgets. and take is allocated you we cash, all plan it. can in it’s hedge have

And cash and by so so hedge can if it. we my pick it we arbitrage let’s treasuries, say,

on treasuries. XXX on earn interest the would less particular than we of capital that points the is basis So expense slug

but That’s points, basis it needle. let’s $X of is XXX million. the lot doesn’t money, billion say, So a move $XX on

than it. debt I’d rather when be not have we easily need So pay down able liquidity the replace the to rather and and quickly it

we are… So think I

Alexander Goldfarb

the look in I $XXX you’re that we as lease run rate And having $X.XX but ground an look from helpful. distinct That’s – There’s a at giving the Yes. quarter, of Michael, as interest fourth know extra rates. gave – you’re million you disposed higher not that now we reset. guidance,

like sounds number? number, It pieces, you extra these despite your $X.XX into online. lower lower that the a moving than say are guys extra So given an amount we coming did number but $X.XX lower just bake when is sort of from in an you ballpark, did all Facebook guidance talking fair that $X.XX

collectively for get So much of a at. off rate $X.XX how run just that trying to we’re looking gauge

Michael Franco

Yes. because, again, mean fluid steeper originally just LIBOR the beginning precise, to today. at was go the curve in environment. did is we I be a we’re don’t going want year Alex, that assume the The to I up. of

steeper So there’s what don’t it that. tremendous $XXX are will – earnings it’s of know not we originally million a certainly it’s we off sales, but coming up up, The that than look, lot of end where projected.

that’s the to think producing a There a have I don’t are lot impact. a smaller of assets that lot not capital. are So huge going of

million that high-single – of there’s what lot off coming think to and So you year. terms a a on sort of range, gave I in of we don’t earnings, so deduce of the can you the I digits, for mid $XXX But look, that’s plug think in run depending material. rate you last

Steven Roth

to on whip my going Alex, and me, are limb a out I’m go guys to going so… financial

Alexander Goldfarb

Steve. way. whipping goes the whipping They would Steve. other other the The The whip way, goes you, never

Steven Roth

no. no, No,

serious. Let’s get

business, win. And Penn and expensive handle hands Reserve they I highly the the even the as Our budgets, should faster curve exaggerates believe frequently and But that the that rates with of One curve Reserve inflation, revised than which five pass. are so and our months at the – are the as with way, economy in rising Federal XX% had expected internal recently makes too the ago, reset predicted lease interest my a with show anyway, will always will interest yield by rising, show they even even which it taken we as by this of or be. actual rate remarks The yield internal four three budgets, as off rising rates now time is detailed facts. – said that the that the reasonably way, in I Federal or ground the a and

our years grow are – and statistic, through but – believe right otherwise, a through couple wanting grow have going that we So will our maybe it. will of we we out earnings that’s another earnings as to

me whip to going you that I I’m Now they’re going give for. know something to

show $XXX of year of our current period excess next above Penn numbers of Two coming over Penn well a Our in budgets from time. NOI Farley, One the and million in

our the to is okay? the those is, in earnings It time come three just year. job $XXX quarter during land over piece complete what period we predict My another will Your projects. get not is to of the District, earnings. – in a or PENN this without will of from But those increase million as job a even program, by touching well

Alexander Goldfarb

That’s or aggregate? annually

Steven Roth

Annually.

Alexander Goldfarb

million? $XXX

Steven Roth

Now that people throwing here. in that, me on I knives said got I’ve a lot of

Alexander Goldfarb

some… thought I And

Steven Roth

okay. math, the That’s

Alexander Goldfarb

Okay. Steven, you Or a in can note, of the the that be no, high if just operator, be landlord? I you studio would those participation end I – Steve, active studios? works, if contemplating an on would that a business you’re with

Steven Roth

do be going anybody. a York, deal is to it’s the that Well, what development in better We than that’s do. we answer New

we partner. full a – we’re be So will

a the full the and skill There’s work that customers so maker. they and these customers We’re to the for things a designing tenants decision tenants. the –

part. So his we operator he’s experienced a and hooked very going up with to do talented

part. it boroughs studios fine down the a have the think We our result. else. And believe or in or across do to studios as a will going are We’re in or we very asset to opposed that unique Manhattan river somewhere

Operator

Street. Green with Ismail Daniel from question next our have we And

Daniel Ismail

discussion how million of. assets dispose year, Great. impacting of Thank you. of on you to both overall the of you’re interest rates I’m through do think just looking to and curious, dispose that’s the plan the $XXX cap given rates course and the the

Michael Franco

Daniel, what’s forth. think rates, of to impact to if the too so where early it terms higher, rates tell. and certainly. financing it rates going Look, settle is cap I it’s impact, it’s in out – on depends But are

answer but are tell, will assets. So it I The it of impact. think those it’s too early a Sure, lot some $XXX affect to the will small is million. have

somebody last borrows. basis value-add in where it’s on nature. don’t think Some the is are dependent point I

didn’t happen where was we execute think this a sense to have So but can good that, I going as to we we all year. pretty necessarily it say

you it. when But So said into that I want if year. close, go this will to just planned the it market TBD. to clarify Certainly

basis Daniel, is wait probably to literally if and financing for see. more this rate – as if you you’re I think, rise, I somewhat now, so got doesn’t look you up at to go paying So we’ve you’re basis in spreads mean historically, financing that right point than rates will. all-in This point. the think tend compress the markets I market do

is spread have with environment what’s cetera., going economy, to do, out, We’re given rate in happen now the the exactly to existing the the what going Fed uncertainty gap with expectations risen. et an right that’s where

not a great be market to borrowing it’s So in.

will – I here. settles change think get that we it as down as

up, the impact rates on impact. look, will have it will TBD. borrowing so are cap But rates And what some be if

Steven Roth

It’s much I strategy have market rather higher these X% to rates lower. assets X% it would or we will the assets sale it for sell But on for price the is. were when These execute. interest is price it these assets company Daniel, doesn’t the two if we years margin, put and ago right just at are get more what lower – our matter.

Daniel Ismail

sense. clarification That the the And on it. Michael. thanks makes timing, Got for

an there potential curious, variety additional what’s and on versus us been the just update a Just rezoning, plans. on cities question going there’s and District I’m of me well? you a going the timeline on last give to PENN news back articles rezoning any and potential density overall about that potential as forth any and states can as with for the

Steven Roth

about the GPP PENN District? and talking You’re

Daniel Ismail

yes. I am,

Steven Roth

Yes.

a Station basically the a I be and expended State is will Penn mean, transit pat capital. that. York and government. the is is of basically, that this state New The – and the state I partners and City New capital plan on think we’ll stand of the basically are York asset, MTA

lots are multiple not charge, at proposal. the The both use of – I’m think really terms for zoning be And for to it in leadership the it. development I sense public an to the So multiple, the there’s endorsed city of support and the the the all The we and have cooperating political the this it. of governor There’s on the going state that’s that extensive that’s on word, plan. makes historic and state Obviously, and about have plan in I say been the mayor in precedents word process. hearings to that. about accurate

Daniel Ismail

it. Got color. Appreciate the

Operator

Thank you.

is from with Stanley. question next Ron Our Kamdem Morgan

Ron Kamdem

of for sort couple is ones quick A CapEx. on me. just the of One

you million this a you K about were of $XX $XXX I XQ sort mentioned think the range. for in looking million that year.

year. know for I – of you Just about you pipeline but about how talked that’s the the CapEx leasing potentially accelerating, just rest are thinking more the

Steven Roth

know. don’t I Michael,

Michael Franco

would at pipe, That and let both actual mean million is based renewal volume. year a of what’s million, comment on rest estimate whether the dependent lease, we it’s say on new to I the Glen the what the right? expect It’s the that’s in our down beginning transaction process best on on come the CapEx of the It the $XXX I’ll for on year. lease, $XXX depends I obviously

obviously lower, this lower about talked was is our while quarter volume leasing as being we so And and significant. well,

I today. So that number will the vary from wouldn’t $XXX normalize.

I higher What stabilized. tenant that? stabilized add the They’re think they’ve up on we’ve further. generally like, any but having else would you commented to improvements not going we than

Glen Weiss

it’s very quarter-to-quarter, Look, always the leasing fluid.

year, ahead next years always coming looking We’re of the core or value on further expirations, two with all tackling it’s and creating ahead, even buildings year releases away. in way or this blocking our whether up, opportunities

the believe really definitely stabilized and a expansion always renewals. to predictable completely not due we the have So and that’s against TIs, the mix it’s new number. weighted But deals of certainly, quarter-to-quarter quarter-to-quarter deals

Ron Kamdem

okay. already been questions have you. it, my Got All Thank asked.

Steven Roth

Ron. Thanks,

Operator

from our Goldman next with have question Caitlin Burrows We Sachs.

Caitlin Burrows

was what PENN Earlier, would wondering, you reported XQ leasing included And you a X. New the at been was York share if spreads? spreads have there. Hi so, I could mentioned Office it? in lease just excluding that

Michael Franco

for you’re stats answer – I’m the saying on quarter? talking you’re was The sorry, first – the about

Caitlin Burrows

Yes.

Glen Weiss

Yes.

exclude The you it. deal X a be leasing low-single digits because X in mark-to-market the not all high-single would PENN the digits. PENN had to activity If

range. positive. was to it’s X% that X% So still It in

Caitlin Burrows

And it. Got then… Okay.

Glen Weiss

involve deal. X PENN It the

Caitlin Burrows

at this through regarding of and a of and retroactive represent payments ground just does forward? increase while whether amount accruing wondering if the And go catch-up you then I was XXth arbitration could it was in financials impact the this there. XXX the you much versus West how had will been going lease

Steven Roth

That’s and been all recognized trued already. up

Caitlin Burrows

Okay.

you. thank Okay,

Steven Roth

Thank Yes. quarter, last I think. happened That you.

Operator

thank And you.

question We Vikram from with next Malhotra our have Mizuho.

Vikram Malhotra

the questions. much so for Thanks taking

specifically, recognized? confirm Just was maybe the not, Farley you recognized GAAP and recognized be that was will XQ? to GAAP revenue, and when first cash if clarify. in Can Facebook was that And

Michael Franco

Vikram, was some Yes. GAAP point cash that second will quarter. in quarter. the recognized at be first

Vikram Malhotra

street Okay. and can retail, hearing Great. Madison and of us Avenue on you where rent specifically occupancy for And in then on terms Fifth correction understand think what help vacancies on this we demand of just cycle more some Fifth? you are in you’re terms just specific broadly costs of your in now

Steven Roth

off the we’re Vikram, bottom. just coming

alluded – letter. in so what And I and my this think recent I to

retail no If now go and what we That’s interest months no this And way There market in off The prime is, in demand, prime, is was the the where the business, Avenue. work. improve, bottom right up. expect prime, rents the go demand will fishing just tours, of accelerate it but years, at markets call beginning low amount at get prime, markets on in period some whatsoever happens fair will we and we’re are will is generally rents. there a vacancies ago, demand, prime, business changed. the back is pricing. you characterized XX now even What that cycle still the I this tighter coming of model. at will The no point absorbed will and of be over Fifth

Vikram Malhotra

then new, much. your on but so in for in in say, co-working environment? not maybe How WeWork updated or thanks tenant What’s just specifically your portfolio, And your I And partner’s? either are the own last and your would Great. thoughts room you this, thinking roster. co-working evolving question, Okay.

Glen Weiss

Hi, it’s Glen.

long-term we’ve up we with co-working operation our for X we’re earlier already certainly role great seeing there co-working flex the early And success think PENN in opened a XX,XXX-foot there space portfolio. year. So is at this

that to roll go in more to we building. as expect portfolio the We of building

or coming projects they’re to are a while their as there it one utilizing for space space district think flexible benefit for business from rebuilding. their out themselves park relates X the reconstructing co-working there certainly, in a our coming to seeing more their facility folks if in specifically PENN town the certainly at I tenants facility of to need thing So There’s existing short-term into to of in opportunities. they’re buildings there’s is out the operate short-term or we’re One role. our that

operating even built. seeing PENN tenants cases home X their we’re their while waiting where We’re now into for where new they space us space there to wait They’re be to with leases be for want built. they’re signing coming as to

operation role, in opportunities certainly certainly those create PENN what more Manhattan. And see think out more at we expect we and as in I X to is a I roll the So by there’s think we that and far best the arise. portfolio

Steven Roth

– and class One The package that is as Penn use interesting asset to Barry believe We our co-working for co-working. is strategy Glen you an the co-working creating how amenity space. to Kudos stay. and of is in the thing here

that food, other an enormous facility they want amenity could that everything have centers, a gyms, that co-working a Penn. So offerings. complex tenant X.X use, co-working that space package million-square-foot you got feet the they we PENN they X could of have They is for or clients, possibly where of have in they is neighborhood that And XX,XXX they conference looking our having or PENN We that’s or that remember, in for an X they huge an to complex. into have have believe whether be space One a advantage they advantage. our existing the put they in inside have entrepreneur

part strategy of and put better our is well, co-working, to million-square-foot available they is all square complex our in to round feet neighborhood in as the So are the of complex. massive and in that XXX,XXX numbers, use the facilities X.X which tenants to this can

into That’s our has nothing seven that, XX,XXX advantage thinking. feet competitive think co-working couches blocks of a and a else. going than away that’s we that’s space and So square

Operator

over session. will call the for now this question-and-answer And to our turn concludes remarks. Steven I Roth closing

Steven Roth

have very you Thank and we look a you the will much to next participating. for all then. great Thank you, day. We forward see call, and

Operator

Ladies participating. you. gentlemen, this for thank and And concludes thank We our conference. you

You may now disconnect.

Vornado Realty Trust (VNO) 3 May 222022 Q1 Earnings call transcript