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Operator: Good morning, and welcome to the Vornado Realty Trust First Quarter 2025 Earnings Call. My name is Nick and I will be your operator for today’s call. This call is being recorded for replay purposes. All lines are in a listen-only mode. Our speakers will address your questions at the end of the presentation during the question-and-answer session. [Operator Instructions]. I will now turn the call over to Mr. Steve Borenstein, Executive Vice President and Corporate [sic] Counsel. Please go ahead.

Steve Borenstein: Welcome to Vornado Realty Trust’s first quarter earnings call. Yesterday afternoon, we issued our first quarter earnings release and filed our quarterly report on Form 10-Q with the Securities and Exchange Commission. These documents as well as our supplemental financial information packages are available on our website, www.vno.com, under the Investor Relations section. In these documents and during today’s call, we will discuss certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in our earnings release, Form 10-Q, and financial supplement. Please be aware that statements made during this call may be deemed forward-looking statements and actual results may differ materially from these statements due to a variety of risks, uncertainties and other factors.

Please refer to our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2024, for more information regarding these risks and uncertainties. The call may include time-sensitive information that may be accurate only as of today’s date. The company does not undertake a duty to update any forward-looking statements. On the call today from management for our opening comments are Steven Roth, Chairman and Chief Executive Officer; and Michael Franco, President and Chief Financial Officer. Our senior team is also present and available for questions. I will now turn the call over to Steven Roth.

Steven Roth: Thank you, Steve, and good morning, everyone. Well, the macro environment in which we operate is certainly different today than when we last spoke three months ago. On their calls, a couple of office CEOs didn’t think all this would affect their businesses too much, but it will affect our customers, clients and tenants. So of course, this would affect all of us somewhat. I know nothing more than you all do, but the way I see it, the objectives of the tariffs are to introduce symmetry and fairness, but even more so to generate a new revenue stream for the federal government which at say, a 10% tariff is large enough to make a big dent in putting our federal budget deficit under control. And notwithstanding the tactics, reducing government flow has to be a good thing and will also reduce the deficit.

I am agnostic. Whatever the outcome, I believe the best bet is that this global kerfuffle will be resolved, settled and over much more quickly than you think. The basic dynamics that I outlined in my recent annual shareholders letter that make us so enthusiastic about the future of our business still hold. Our stock performance is at the head of the office class, having increased 49% in 2024 after having increased 36% in 2023. And while year-end is down 12%, we are down less than the other CBD office companies. Manhattan continues to be the best real estate market in the country, especially so for office, but also for apartments and retail. With a 180 million square foot Class A better building market in which we compete, demand continues to be robust.

Available space is evaporating quickly, and with the cost of a new build, i.e. replacement cost at say $2,500 per square foot and interest rates of 6% to 7%, no new supply is on the horizon. All this is the very definition of the landlord’s market. We’ve seen this all play out in past cycles and the story has always been the same. The supply and demand dynamics will push rents higher and existing better buildings will increase in value quite substantially, all good, very good. Here at Vornado, our teams have been very busy building liquidity and doing leases and deals. In January, we completed the UNIQLO sale at 666 Fifth Avenue at a record breaking $20,000 per square foot. We used the $342 million of net proceeds from the sale to partially redeem our retail JV preferred equity on the asset.

So $342 million cash to Vornado. We use this cash to pay at maturity our 3.5%, $450 million unsecured bonds. Next, last month, we completed a $450 million financing at 1535 Broadway and used the $407 million of debt proceeds to partially redeem our retail JV equity on the asset. So $407 million cash to Vornado which increased our cash balance. This financing was done in a very choppy market with skill and relationship by our capital markets team, so all thanks to them. Next, on April 22, we received a favorable ruling on the PENN 1 ground lease rent reset arbitration. The PENN 1 determined that the annual ground rent payable for the 25-year period beginning June 17, 2023, will be $15 million. There is pending litigation and the panel’s decision provides that if the fee owner prevails in a final judgment, the annual rent for the 25-year terms will be $20.2 billion retroactive to June 17 through 2023.

For GAAP, we have been accruing $26.2 billion per annum of down rent and therefore as a result of the panel determination we reversed $17.2 billion of previously over accrued rent expense in the first quarter. Of note, commencing in the first quarter of 2025, we are now paying $15 million annual rent and so our GAAP earnings will increase by $11 million annually. By the way, this PENN 1 ground lease as fully extended goes to 2098. Next, in March, we finalized a major 337,000 square foot lease in PENN 2 with Universal Music Group to world’s leading music companies think Taylor Swift and her friends. This important deal brings an exciting tenant to the Penn District and takes the building to approximately 50% leased, more leasing at PENN 2 will follow.

Next, yesterday, we finally announced the completion of an important deal with NYU at 770 Broadway completing a master lease for 1.1 million square feet on an as-is triple net basis for a 70-year lease term. Under the terms of the lease, a rental agreement under Section 467 of the Internal Revenue Code, NYU made a prepaid rent payment of $935 million and will also make annual lease payments of $9.3 million during the lease term. NYU has an option to purchase the leased premises in 2055 and at the end of the lease term in 2095. NYU will assume the existing office leases and related tenant income at the property. We used a portion of the prepaid rent payment to repay the $700 million mortgage loan, which previously encumbered the property and $200 million to increase our cash balances.

Though this transaction is a lease, the GAAP which can be a little wacky, it is treated as a sale. As such, we will recognize the GAAP financial statement gains of approximately $800 million in the second quarter. We will retain the Wegmans retail condo which will produce $4.7 billion in income this year. The NYU lease absorbs 500,000 square feet currently vacated at the asset. Overall, the transaction is accretive by $25 million annually if we pro forma leasing the vacancy at market rents with related capital spends, downtime and free rent, it would have been a pro forma push as you might expect. We are delighted to expand our relationship with NYU and congratulate NYU Board Chair, Evan Chester, and President, Linda Mills, and their team. We are excited about their ambitions for this project.

As I have said before, this is all very good for NYU and is very good for New York. NYU’s press release issued yesterday is available at www.nyu.edu. All tone so far this year as a result of the web activity, we reduced our debt by $915 million, increased our cash by $500 million and our retail JV preferred equities, which is an asset on our balance sheet, which began the year at $1,828 million is now down to $1,079 million. Our cash balances are now $1.4 billion. Together with our undrawn credit lines of $1.6 billion, we have a median liquidity of $3 billion. The above transactions will increase GAAP earnings by approximately $36 million, $25 million from the NYU transaction and $11 million from the PENN 1 ground rent reset result. Tom, that would be Tom Sanelli, who all of you know in a more complete analysis including debt repayments and the loss of preferred income calculates $30 million of accretion.

I’m happy to defer this half. In a moment, Michael, will review the quarter and the financials, but here are a few headlines of a very good first quarter. Comparable FFO is $0.63, increased by $0.08 versus last year’s first quarter and is $0.09 higher than annual consensus. Our overall GAAP same-store NOI is up 3.5%, released 1,039,000 square feet overall of which 709,000 square feet was New York office at $95 starting rents with mark-to-market with 6.5% cash and 9.5% GAAP and an average lease term of 14.7 years. In addition to the 337,000 square foot lease with Universal Music at PENN 2, we leased 153,000 square feet at PENN 1. We completed leases totaling 222,000 square feet at our 555 California, Road Officer Tower in San Francisco at $120 starting rents, 555 continues to be the preferred financial services headquarters in San Francisco and even in this historically soft market 555 continues to outperform.

It is proving that it is the best building in San Francisco. We are big fans of the new San Francisco Mayor Dan Lurie, a really increasing pipeline is a robust 2 million square feet. As I said in my annual shareholder letter released on April 8, the lease up of PENN 2 and the lease up of our retail vacancies alone will generate incremental NOI of $125 million and $50 million respectively over the next several years. Tom here is Tom again specifies that while NOI for PENN 2 is budgeted to increase by $125 million FFO is budgeted to increase by $95 million, the difference being capital interest. By the way, these are big numbers and with PENN 2 built and ready, this $125 million a year as close to a 4 — is as close to a short thing as there is.

The Penn District that three block long — three block lawn city within a city continues to abase and receive outstanding reviews. We show on top of Penn Station adjacent to our good neighbors to the West Manhattan for 100 yards. The three of us combined are what I call the new booming west side of Manhattan. One of our analysts calls the Penn District one of the largest mixed use projects in the country. Even as it may, the Penn District will be a growth engine for our company for years to come. As I said in my annual letter, we raised market rents in the Penn District from $50 to $100. Our neighbors to the west are achieving rents of over $150 and I predict that we will do the same in the bankruptcy for the due time. You can all do the math as to what an incremental $50 on 12.3 million square feet will do to our earnings and values.

350 Park Avenue the Citadel as our anchor tenant and Ken Griffin as our subsequent partner has begun the developed process to create a grand 1.8 million square foot headquarters tower on the best site on Park Avenue. The new building will stand out as being truly the best-in-class. And we have several other assets for sale in the market. We recently filed our very comprehensive sustainability report, which can be found in the sustainability page of our website. But it was the first in the nation to achieve 100% certification across our entire portfolio of its service business. The many awards we have achieved can also be found on the sustainability into on our website, kudos to Lauren Moss and her team. Finally, one other observation I would make is that the majority of our secured loans reflect current market rates while others are still living on their low rate loans.

As I have said before there is really no protection against loans that mature into a rising rate market. Now to Michael.

Michael Franco: Thank you, Steve, and good morning, everyone. First quarter comparable FFO was $0.63 per share, compared to $0.55 per share for last year’s first quarter, an increase of $0.08. The increase was primarily due to the impact of positive ground rent reset determination at PENN 1 higher signage NOI and higher NOI from rent commitments, partially offset by the impact of known move-outs and lower interest and investment income. We have provided a quarter-over-quarter bridge on Page 2 of our earnings release and on Page 5 of our financial supplement. On our last earnings call, we said that we expected 2025 comparable FFO to be slightly lower than 2024 comparable FFO of $2.26 per share. As a result of the lower than originally estimated PENN 1 ground rent, we now expect 2025 comparable to FFO to be essentially flat compared to last year.

Looking beyond that, we expect the lease up of PENN 1 and PENN 2 to occur with full positive impact in 2027, resulting in significant earnings growth by 2027. Turning to occupancy. As expected, our New York office occupancy decreased this quarter to 84.4% from 88.8% last quarter, which as previously mentioned is primarily the result of PENN 2 being placed fully into service. However, with the full building master lease at 770 Broadway now completed, our current office occupancy has increased to 87.4% and we anticipate it will tick up over the next year or so into the low-90s. The New York office leasing market maintains strong momentum during the first quarter with the strongest quarterly volume since fourth quarter 2019. Availability in the best Class A market continues to shrink and with only 500,000 square feet of new construction set to deliver during the next several years and 13 million square feet of office to residential conversions in the process or announced, we expect the market to continue to tighten, which sets the sale for strong rental rate growth.

While we are of course mindful of companies potentially becoming more cautious in their decision making, given the current market volatility, we do not believe it will impact most tenants’ ultimate decisions to lease space and we remain very constructive on the market and the deal pipeline across our portfolio. The recent major commitments by NYU at 770 Broadway, Deloitte at Hudson Yards and Amazon at 522 Fifth Avenue are perfect examples. During the first quarter, our leasing activity once again led the marketplace. We completed 31 transactions totaling 709,000 square feet, an average starting rent of $95 per square foot and 6.5% positive mark-to-market. Our activity was highlighted by the largest new lease done in the market, in the quarter.

Universal Music Group’s 337,000 square foot lease at our new PENN 2 anchoring the base of the building on floors four through seven. We are delighted with this transaction and look forward to Universal creating a world class office and studio production headquarters in Penn District. The transaction strongly reflects the overall quality of the project’s new modern high quality workspace and continued attraction to our robust work life amenity program across the Penn District campus. Leasing at PENN 1 continues at a healthy space as we leased 163,000 square feet here during the quarter, including a 61,000 square foot lease renewal of Cisco along with a 36,000 square foot relocation with UnitedHealthcare and a new lease with Dish Network’s for 27,000 square feet.

Our deal pipeline at PENN 1 and PENN 2 is very strong with a variety of new transactions already in lease documentation for a deepened letter of intensity. Excluding the just completed master lease with NYU at 770 Broadway, a New York pipeline consists of 2 million square feet of leases in negotiations at various stages of proposal. In San Francisco at 555 California Street, we completed two large headquarter renewal and expansion deals with Dodge & Cox and Goldman Sachs both at positive cash mark-to-markets. 555 continues to strongly outperform the market As we have leased 657,000 square feet in 2022. 555 is the city’s flagship office tower with world class tenants and is brilliantly leased in a market which has been one of the more challenging in the country coming out of the pandemic.

The market though is finally showing signs of improvement. The new mayor is off to a great start. We are confident that he will help restore the city health and vibrancy. Lastly, turning to the capital markets. During the first quarter, the CMBS market was wide open for large high quality assets such as ours with spreads continuing to tighten. Since the President announced his new tariff policy on April 2, there’s been significant volatility in the financing markets with spreads widening out and new issuances being delayed. Despite this volatility, we were able to complete our 1535 Broadway financing. We expect the market to settle near-term and high quality issuers and assets continuing to have access to it. We are hard at work on refinancing or extending our upcoming maturities with many in process.

With that, I’ll turn it over to the operator for Q&A.

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions]. And your first question today will come from Steve Sakwa with Evercore ISI. Please go ahead.

Steve Sakwa: Thanks. Good morning. Michael, I was wondering if you could just maybe break down that 2 million square foot, I guess lease negotiation between PENN 1, PENN 2 and then the balance of the portfolio. I guess, I wanted to just maybe circle back to Steve’s comment last quarter about PENN 2 being 80% leased and just trying to understand the volume of activity that you’ve got, particularly at PENN 2.

Michael Franco: Good morning, Steve. Why don’t you start off, and then I’ll squeeze in.

Glen Weiss: Hi Steve, it’s Glen Weiss. So the 2 million pipeline about 50% is PENN 1, PENN 2 to start off, there’s a lot of great activity at PENN 2. We finished obviously Universal. We got more to come and PENN 1 continues to flood with new tenants and at the same time as all this is going on, we continue to take rent upwards by the week. So PENN is really in fifth year. It’s a big part of the pipeline, not all the pipeline. The portfolio overall is performing very well right now. So we’re feeling very, very good about where we are along all of our portfolio.

Steve Sakwa: And just I guess confidence level around kind of getting to that 80% mark by the end of the year at PENN 2.

Michael Franco: I mean, Steve, look, what I would say is as we sit here today, we still feel good about it, right? Whether it happens by the end of the year, first quarter or whatnot, I think as Steve said in his opening remark, we’re going to lease the building, right? We’re generally going to hit the numbers that we laid out. There’s a significant uptick. And whether it happens in quarter for earlier quarter later, from our perspective, it’s not going to have a meaningful impact. So we’re going to get there. The rents that we’re going to achieve as we published last quarter are higher. Glen started pre build program at PENN 2. The rents we’re achieving there are spectacular. We may do a little bit more of it. And so I wouldn’t get focused on whether it happens exactly by year. But yes, we sit here today; our confidence level is the same as it was last winter.

Glen Weiss: We lower our spot here. If you think about it, Steve, there’s a dwindling supply of quality blocks in the market and showing nothing like what we did at PENN 2. So we think even with more patience, the rents will keep rising; the quality of tenants will keep getting better. And so we’re feeling better and better as we go here overall.

Steve Sakwa: Okay. And maybe just a follow-up to, I think Steve made a comment. I don’t know if I caught all of it, about 350 Park. I just can’t remember what your decision to fully go or no go on that project is. And just can you remind us kind of the milestones and maybe achievements that you need to see or want to see in the market to ultimately make that decision?

Steven Roth: Steve, good morning. Our disclosure on the details that you just asked about is very robust, go back and read the 10-K and the press release. I think that will be the best way to do it.

Operator: And your next question today will come from Dylan Burzinski with Green Street. Please go ahead.

Dylan Burzinski: Hi guys, thanks for taking the question, and congrats on closing the NYU transaction. I guess, Steve, I think you mentioned now after all the transactions closed, so seeking to quarter end that you have about $1.4 billion of cash on the balance sheet. I guess can you guys just talk about some of those proceeds might be earmarked for?

Michael Franco: Sure. Good morning, Dylan. First of all, I want to commend you on your report you published. I think you nailed 770 better than anybody. So kudos to you and the team. In turn and overall quite thoughtful, in terms of the cash like we’re…

Steven Roth: What that means is that he likes a report. Go ahead.

Michael Franco: So in terms of the cash like, we’re obviously pleased with what we’ve done. We’ve done quite a bit. These are our large substantial transactions. If you think about it, we’ve been able to delever the balance sheet meaningfully and yet still have that significant cash balance, right? So we’re in a very good spot. What are our plans, right? In an environment like this where there’s clearly a little bit more volatility, having more cash things, we hope and expect that’s going to lead to some opportunity to pull some of that cash into investments, we’re looking. At the same time, we have some higher cost debt that we might either pay down or pay off. So I think you’ll see a combination of a) leaving in cash as is our history to make sure we have an appropriate buffer for anything. Two, tackle some of the debt and then three, is hopefully deploy that into new opportunities we see.

Steven Roth: Taking it a little bit further, we are loading in cash to pay off an unsecured bond that comes through in a year and a fraction. We are loading in cash because we are going to have a robust development program over 350 Park at the Penn District and perhaps more other site that we control. And so the cash is a good thing and we’re going to be using it to grow the company.

Dylan Burzinski: That’s helpful, and appreciate the comments on our report from last night. I guess, just maybe one other follow-up, obviously you guys have done a successful job monetizing some of the press and selling some of the assets within the sure retail joint venture. I guess, I think last quarter you guys alluded to having additional dispositions or looking to go out and execute additional dispositions. I guess can you kind of talk about just the appetite of some of these luxury retailers and the desire to want to continue to own the real estate versus lease the real estate.

Steven Roth: So I think I said this in my letter. I advertised in a very subtle way that some of the buildings that are outside of New York are might be for sale at the right price. That continues to be true. These are a couple of very large assets. So that we’ll see how that works. In Manhattan, we have a couple of non-core buildings that are in the, for sale market now and I think, as I said in my letter, there are no sacred towns. So the other thing is we have shown a willingness to sell some of these important retail assets when we get a buyer that is willing to pay an appropriate price. That continues to be the case. The interesting thing is it’s not just the retailers that are buying these assets. Like for example, Amazon is coming in and buying significant assets in Midtown Manhattan for I guess their HQ3 or whatever it might be.

So there is lots of examples of some of these larger companies, which are switching their strategy from leasing to buying and that’s a good thing. We know that that’s aggressively happening in New York. I’m not aware of whether that’s true in the rest of the country, but for New York and for the New York real estate market that’s a very good thing.

Dylan Burzinski: Great. Appreciate the color and congrats team, thanks.

Operator: And your next question today will come from John Kim with BMO Capital Markets. Please go ahead.

John Kim: Can I just follow-up on real estate valuations? We’ve seen high street retail kind of go back to 2019 levels on the assets that you’re looking to potentially sell, whether in New York or outside. And including 555 Cal, are we going to go back to 2019 valuations or exceed them?

Steven Roth: Sure.

Michael Franco: I think John, I would just add on to what Steve said. I think if you look at what we’ve done to-date; I don’t know that any of these assets were quote on the market, right? We’re being targeted opportunistic about the right counterparty. That continues to generally be the case. The capital markets continue to improve on the sales side. But you’ve got to be — you’ve got to figure out who the right buyer investor is. And I think what this cycle is once again validated is that great assets command great prices, right? The best is always the best. And maybe out of favor for a little bit of time but if you’re patient, you weather the storm then that’s going to recover, right, and that clearly was the case in street retail. I think that’s going to be the case if you look at some of the financing with the implied values for New York office and certainly the trophy assets in San Francisco. So the best is generally always the best.

Steven Roth: My succinct one word answer sure. Really to interpret that was that we are not going to sell great assets at distressed prices that came from COVID or whatever. So the benchmark is pre-COVID which is 2019 and these assets have recovered, they are recovering and they will command increasing prices over time.

John Kim: That’s great color. Thank you. On the leasing pipeline, which increased pretty significantly from last quarter. Can you describe how much of that is on your in service portfolio or leases that could drive occupancy within the next couple years versus maybe 350 Park or an early renewal that won’t drive SSL?

Glen Weiss: A very significant portion of the pipeline will increase occupancy without a doubt. So a lot of its absorption, a lot of new deals, a lot of expansion, there’s a lot of expansion in New York in our properties right now. So a lot of our significant activity will absorb vacant space over the next 9, 12 months without a doubt.

Steven Roth: This is the first time on this call that the word occupancy came up. So will somebody cover occupancy? Because the occupancy number that we reported is aberrantly low and let’s see if we can get an accurate portrayal of what our expected occupancy is into this call.

Michael Franco: So John, to follow Steve’s comment, I think we had telegraphed this the last couple quarters that our occupancy was going to go down and we brought PENN 2 in service which we did fully this quarter, right? So we published 84.4%. We talked about pro forma what it is when you add in 7.70% which goes to 87.4%. And then I said in my remarks that we expect it to be 90% plus in the next 12 months or so. And obviously a lot of that’s driven by PENN 2. I think as we look more broadly in New York, if we lease up PENN 1 and PENN 2 or when we lease up PENN 1 and PENN 2 fully, and let’s say that, that, that happens in the next 24 months and a couple of things here and there, we’re going to be at about 94% occupancy. So I can’t tell you exactly when that’s going to happen.

But if you just think about, if we execute on PENN 1, PENN 2, a little bit of space, 1290, 280, we’re going to be at that 94% level and we love that position, right? So from our standpoint in terms of driving growth, we have our best assets that have some holes in them today. There’s fewer options in the market. We’ve just deployed a significant amount of capital in these assets. Glen talked about how the rents are rising not just in the market, but specifically at these assets. And so that’s all going to translate into growth. And I think as we’ve said in the last couple calls, that really kicks in, in 2027. So we feel good about the position and that I think from an occupancy standpoint, we always ran the business at around 95%, 96%. And I think when we get a couple years out; our expectation is we’re going to get back there.

Glen Weiss: The most significant thing to keep in your mind is that as occupancy rises, earnings rise and they rise significantly. And so that’s a very interesting factor.

John Kim: Yes, good stuff. Thank you.

Glen Weiss: Yes.

Operator: And your next question today will come from Floris van Dijkum with Compass Point. Please go ahead.

Floris van Dijkum: Hey, good morning, guys. Thanks for taking my question. Getting back to your comment on the — one of the most valuable mixed use projects in the country, which the Penn District is.

Steven Roth: Who said that?

Floris van Dijkum: I don’t know. Somebody mentioned that. Hopefully that caught your attention. The — one of the, obviously $300 million of NOI once PENN 1, PENN 2 are stabilized is pretty impressive. But can you talk about one of the things we noticed this quarter, and I suspect it’s going to be the case for the next couple of quarters is the GAAP. There’s roughly a $20 million GAAP between GAAP NOI and cash NOI, presumably as free rents in these — in PENN 2, as that comes online before you actually get the actual cash. How long is that going to last? And at some point, are you going to see when do you think you’re going to inflect and see cash NOI actually be stronger than your GAAP NOI going forward?

Glen Weiss: Yes, I think Floris, that’s a great question. I think we should probably take it offline. Most of that is going to happen in the later years, as Michael indicated. We start seeing 2027 earnings, really pop. So that’s probably the years you’re going to see, but that’s something that we probably should take offline in more detail.

Floris van Dijkum: Great. And then the other thing, and again, I think you guys sometimes do yourself a disservice by being as transparent as well, transparent in some ways as you are with the occupancy in particular. Have you ever thought about showing what your core occupancy is or in line or in service properties? Because obviously you’ve got a couple of assets that you’re keeping vacant right now, particularly in your retail portfolio, which impact your stated occupancy level significantly.

Steven Roth: We have thought about that, Floris, but your comment now make us think a little bit harder about whether we should do that because we are — we have kept certain assets offline and continue to do that pending either redevelopment or maybe in a case or two a workout. So that’s a fair comment.

Floris van Dijkum: Thanks, guys. That’s it for me.

Steven Roth: Thank you.

Operator: And your next question today will come from Alexander Goldfarb with Piper Sandler. Please go ahead.

Alexander Goldfarb: Hey, good morning, down there. Steve, question for you, looking at the Deloitte deal, pretty impressive 800,000 square feet to anchor a new development. How does the math behind that project compare to what you guys would need for PENN 15? And just trying to understand if we’re getting closer where a $2 million plus project can pencil or if the market is still limited to call it million two type developments.

Steven Roth: Good morning, Alex. Before we get into that, you wrote a piece on Alexander’s that came out, I think yesterday.

Alexander Goldfarb: Yes, yesterday.

Steven Roth: And so I think you’re the only person that I know covers it. But in any event, let me help you by saying, correcting you in two things. Number one, we will not, let me emphasize the word not use our cash to pay down the 731 retail loan. We’re not doing that.

Alexander Goldfarb: Okay. We’ll note that. We will note that.

Steven Roth: And the second thing is, we are not merging Alexander’s into Vornado, okay? So once we get the Oscar, we get beyond that. Look, we were showing the Deloitte deal as was all of the developers in town. We think we have the best vacant piece of land on the west side of Manhattan. I’ve said frequently, that I think it’s the second best piece of land in town, the first best being our Park Avenue site. And so the deal that was made was a very aggressive deal for the tenant. The pricing was very tight. We’re not as to say no to a deal that doesn’t give us the financial results that we think our shareholders are entitled to. So we’re getting there, and we’re on the foothills of a landlord bull market and we think that values prices as transactions are going to go up.

We think the number of new builds will be very scarce. And so we think we’re in a pretty good spot. We are patient, if you just look at what happens with the Alexander’s deal, which was a long time ago, but nonetheless, we let deal and the the deal pass by until we did the deal with Bloomberg, which turned out to be extraordinary. So we’re getting there, and we’re very happy with our position.

Alexander Goldfarb: Okay.

Steven Roth: By the way, the interesting thing is that a lot of this comes from our financial strength. So we can be relatively patience because of our financial state. So the PENN 15 lot has no debt on it. The PENN 1 building has no debt on it. The PENN 2 building has no debt on it. The Farley Meta building has no debt on it. So that’s a pretty good spot to be in. And it’s not — we’re basically a secured lender is the way we structure our business. Those assets have no debt, and that’s a great place to be.

Alexander Goldfarb: Okay. So let me ask you, you wrote a Chairman’s letter, as you always do. You talked about the attractiveness of apartment developments in part because of the smaller size. However, if you look at some of the legislation that Albany has passed, it makes the math tougher if you do tax incentive deals, the bigger the projects. So as you think about our apartment potential, are you thinking about it on as-of-right sites? Or are you thinking about smaller scale projects? Or how are you thinking about apartments fitting in as you expand your thoughts on development and harvesting your different sites? Are these existing sites, new sites, your thoughts?

Steven Roth: You know, when you have the kind of city down at PENN that we have, you have to consider both office — we are principally an office company. We like the dynamics of the office business. We like them as they are improving today. But you cannot disregard the fact that if you look back over the past decades, apartments have created more value than office has. The office market is volatile over more periods of time, the apartment markets are very — are less volatile. Nonetheless, the political overtone of the apartment business is much more complicated than the office business. So there’s a little bit of this, a little bit that we will be building some apartments in the Penn District. It will not be a total apartment development project.

Alexander Goldfarb: Thank you, Steve.

Steven Roth: Thank you, Alex. And remember, we’re not paying off that both of cash.

Alexander Goldfarb: I’ll tell my colleague Connor that.

Operator: And your next question today will come from Jana Galan with Bank of America. Please go ahead.

Jana Galan: Thank you. Good morning, and congrats on a strong start to the year. It seems like a recent big trend in New York City is of a kind of owner occupiers, both in office and retail. And I was just curious if you could kind of comment on what you’re seeing in particular with some of the dispositions you may be looking to do.

Steven Roth: I think we covered a lot of that. Mike, I’ll give it another shot.

Michael Franco: Thanks, Jana. I appreciate the comment. Look, I think you’re seeing the owner occupiers. In retail, I think we’ve talked about going back over the last year, where you saw that activity first. You saw with Prada, you saw with Caring, you saw with UNIQLO and there continues to be interest there. And I think that’s a function and all that was on Fifth Avenue, although you saw a couple of situations down in — so recently, if you look at what Ralph Lauren just did in Soho, a significant number for that store, Dyson down in Soho. And so what these retailers are basically saying, is that in these great forever spots, Fifth Avenue, SoHo, Madison Avenue, Times Square that are sort of the key areas of Manhattan, they want to be here forever, right?

These sales volumes that they do in Manhattan are multiples of what they do anywhere in the U.S. and in many cases around the world, so they want to be here forever. And rather than wrangling with the Vornado’s of the world every 10 or 15 years, they just want to own it, right? And they’re prepared to pay a significant number to control that forever. So that’s a good thing. We’ve had some additional income on that. And if we get the right numbers on situations, then we’ll transact. But that, that continues to be an area where retailers are active. On the office side, as well, you’ve seen some honor user activity. And again, let’s go back to what that is a function of, right? And I think Steve made the distinction that we really haven’t seen that elsewhere.

Maybe it’s a occurred, I don’t think it’s occurred in the volume here. And I think it’s fundamentally driven by talent wants to be in New York, right? And it really is driving every asset class. And so Alex, to your point, how can you make the math work? The math works on these bigger sites. Notwithstanding your comment on the 99, the math works. Why does it work because rents are continuing to go up. We have a massive handset shortage in New York City. It’s not going to get eradicated in the next decade. So anybody that build apartments are probably going to do fine, all right, the backed off. So talent wants to be here. Employers have no issue getting their employees in the office. This is where all the young people want to come to. And so they’re basically sticking out their ground.

And many of these companies’ cases, they borrow cheaper than real estate counties that are cheaper than any companies for that matter, and they’re using that capital, right? So in Amazon’s case, where they have stepped up in a big way here recently, they want to be here. They want to grow here and they’re going to use their balance sheet aggressively given, again, the fact that they want to be here long-term and the amount of capital they’re going to deploy in their assets above what a landlord would normally play a significant. So they want to own that forever. And so when you think about NYU, NYU didn’t buy the building from us, but they committed to lease it for a long-term, so they can amortize the capital they’re going to deploy in that asset.

And so they have long-term control of that asset. So is it going to be something we’re going to see every week? Probably not. But I don’t think this will be the last of those given companies that have significant capital and can deploy that cost effectively, it’s a good solution.

Jana Galan: Thank you.

Operator: And your next question today will come from Seth Bergey with Citi. Please go ahead.

Seth Bergey: Hi, thanks for taking my question. I guess, it sounds like demand has improved. Your leasing pipeline has grown, what types of behavior are you seeing change from tenants? Like are you seeing any improvement on concessions or early renewal activity in addition to the rent growth that you’re seeing?

Glen Weiss: Hi, it’s Glen. Certainly, we’re seeing rent growth. That’s the first discussion. Rents are going up and tenants realize rents are going up. Number two, we are starting to see a reduction in the free rent packages. On the TIs have suddenly say basically at the same levels. So I would say rents are improving and free rents are starting to come down. As part of early renewals, we’re definitely seeing people come to us earlier now because they’re concerned about where the market is going to go more and more towards the landlords market. So we have some larger deals in this pipeline as it relates to early renewals for sure. But I’ll tell you, the one takeaway I would tell you is expansion. The expansions in New York, there’s the expansions going on all over the market in every submarket and definitely in our portfolio.

So a lot of growth in New York and not just financials, you are seeing tech now grow, the law firm’s growth, consulting firms grow, media, entertainment, like the Universal deal. So I mean that’s basic around what you’re asking.

Seth Bergey: Yes. Thanks. That’s helpful. And then I guess for a follow-up, I just wanted to go back to your comments about the capital intensiveness of office buildings versus apartments. I guess, does that — it sounds like there’s kind of puts and takes to both asset classes, but does that change how you think about investing in the portfolio over the longer-term?

Michael Franco: Look, I think it oriented to is you want to own high-quality buildings, the highest-quality buildings, right? Because that — those are the buildings that are experiencing the demand where you can push rents the most, where you going to start to tighten some of the concessions. You’re seeing that play out now, and we think that’s going to continue to play out. So the capital is not going to be avoided, right? Even if TIs go down a little bit every time you turn these spaces over every 10, 15 years of a tealeaves, there’s going to be meaningful capital requirements there. So in order for that to be an appropriate investment rents have to rise and that oriented towards the higher-quality buildings. So I think what we’ve tried to do in the last several years is reshape our portfolio.

Sell assets that we viewed as not best positioned for the future and have a portfolio that we think is well-positioned for that. And we 100% there? No, but we’re pretty close. And we feel good about it. And so I think that’s where you have to be investing a modernized our assets. We’re in the right locations. I think your portfolio has to be oriented that way to succeed given the capital requirements.

Steven Roth: A couple of things. We expect rents to rise. We expect free rent to start to come in as the market tightens. We don’t believe that cash TIs are going to come in because the tenants really are spending a lot more than that to develop the space. So rent and free rent, base rents and free rent will go — will improve, we don’t believe that cash TIs will improve. So there’s that. With respect to the mix of between apartments and office, we’re an office company in our major development activities, we will be developing office. In the Penn District, we will be sprinkling in, I want to say, a not insignificant amount of apartments as well. I don’t believe that we will be a buyer of existing apartment buildings. We’ve looked at some, but basically, I think we’ll be — we’d be a developer of apartments, but a reluctant buyer of apartments.

Seth Bergey: Great. Thank you.

Steven Roth: Thank you.

Operator: And your next question today will come from Anthony Paolone with JPMorgan. Please go ahead.

Anthony Paolone: Yes, thanks. So I guess, just following-up to some of these questions around Penn District and apartments versus office. I mean what do you think is the next project that Vornado pursues in the Penn District, like is it apartments because it’s smaller versus PENN 15? Or how should we think about that? And also in the same vein, your thoughts on federal government getting involved with the planning of Penn Station and how that might impact you?

Steven Roth: We’re not getting pregame what we’re doing by announcing today what the mix of a public. We’ll do that when we actually start to do something, that’s a real project, we’ll notify the market. We’ve already said that we are focused on doing a small apartment project on Eighth Avenue and 34th Street on a piece of land, we — a smallest piece of demand we own there. So that’s in the works. Otherwise, we will announce development starts when they start. With respect to the question about the federal government getting involved in PENN, we think that’s great. I’m going to turn that over to Barry because he likes to talk about that. Go ahead, Barry.

Barry Langer: Good morning. As you’re aware, we’ve spent a lot of time over the last several years working on several public private partnerships, making Penn Station better, whether or not that’s the Moynihan Train Hall, the Walnut River, 33 Street consoles for a couple of new entrants as we work with the government building on Seventh Avenue. Anyone that wants to keep investing in Penn Station and continuing the good work we’ve done to continue to make the Penn Station that we support.

Steven Roth: So that. By the way, when was the last time that you walked through the Penn District?

Anthony Paolone: Last weekend.

Steven Roth: Oh, good. So I think that you’ll agree that the Penn District, the legacy idea that PENN is what’s a good word, that PENN is a sloppy, sloppy district that’s past. So when you work down there now, what we’ve done on Seventh Avenue, what we’ve done with the buildings all the rent that we put into sidewalk, the Moynihan Train Hall is spectacular. The train hall is spectacular. The Long Island Railroad Congress too. So the Penn District looks a lot different today than it did five years ago, and we’re pretty proud of that. Anybody that wants to come in and help us finish the job below ground. Basically, we own all of the above ground. So — but the governments and the railroads on the below ground, anybody that wants to help us fix that we’re in favor of.

Anthony Paolone: Okay. Thanks. And then just a quick follow-up. I may have missed this. It might be in the queue, but just what is the remaining par value for the preps that you have in the Fifth Avenue JV now and the yield on that?

Steven Roth: It’s about $150 million in round numbers. And the yield on that is $5.5 million?

Michael Franco: It probably blends to about 5%, Tony. It’s — is about 5%, so Steve [indiscernible]

Anthony Paolone: Okay. Thank you.

Steven Roth: Yes.

Operator: And your next question today will come from Caitlin Burrows with Goldman Sachs. Please go ahead.

Caitlin Burrows: Hi, good morning. Maybe first, I feel like it’s been talked about it a couple of different ways. But you mentioned in the prepared remarks at the very beginning, how you didn’t think the uncertainty in the macro would impact leasing. So I was just wondering if you could talk about that a little bit more, kind of what gives you that confidence? And any more specific detail you can give on like trends through 1Q and April and now into May.

Glen Weiss: We have not seen an impact on our leasing as of yet. But of course, we’re mindful of it. We’re getting our deals done, and we’d be irresponsible enough to be thinking about it and paying attention to it. But thus far, we’ve had no impact yet on the leasing.

Michael Franco: Caitlin, what I would say is, just to add on what Glen said that if you look at the Amazon announcement, the Deloitte announcement, the NYU announcement, I mean these are all done in the last couple of weeks. So of course, companies, tenants fully aware of what’s going on and making decisions and still foresee. Now that’s not to say every deal is going to proceed. But I think there’s a bias towards we’re in some volatility. And I think as Steve said in the outset, this is going to get settled in the near-term. On the retailer side, those that source product overseas obviously, it’s got a more dramatic impact on the business, right? They’re going to certainly pause until they see what that — what exact translates into. And so we’ve seen a little impact from some of those players. So I think Glen characterized it right. To date, not much, but you have to be mindful of it.

Caitlin Burrows: Got it. Okay. And then you guys did talk about how of this kind of NOI and earnings will come on over the next couple of years, and you have great visibility, but that there will also be some refi headwinds. So I was just wondering, as it relates to maybe even the remaining 2025 and early 2026 maturities, if there’s any guidepost? Or how do you think about the amount of refi headwinds that it could be? Like would you assume similar spreads that are in place or those go up as well? Anything on that topic.

Michael Franco: Yes. I mean, look, we — the team is hard at work on everything that’s maturing. We’re feeling great about the pricing, about 45 days ago. Obviously, that’s gapped out a little bit. But the market is definitely open and you can execute. And so we have a number of things in process that we hope to get done over the course of the next — this quarter. So we feel pretty good about executing everything. I think in terms — I’m just looking through the list right now in terms of pricing and amounts I think generally, and I think reflective of the market, all these can be refinanced at par. Now whether we choose to do that or not based on pricing, we’ll make that decision as we get closer. But the market is supportive of the proceeds level because, again, that high leverage to start with.

And I think you have to go asset by asset. In some cases, we’ll roll those over pretty close to where they are today. In other cases, for example, like an Independence Plaza, we’re coming off a 4.25% fixed rate loan. That’s not going to hold given that treasuries themselves are at 4% today. So we’ll have some coupon expansion there. In other cases, I think it will roll over pretty close to flat. So — but all that sort of baked in the guidance that we sort of talked about where we thought we’d be this year and where really will be the next couple of years. So look, we’ll have to see where the markets are when we actually price the assets by the markets open, we expect to tackle these over the next couple of quarters. And in total, I think there’ll be a little bit of increase in terms of interest but not dramatic.

Caitlin Burrows: Thank you.

Operator: And our next question today will come from Ronald Kamdem with Morgan Stanley. Please go ahead.

Ronald Kamdem: Hey just two quick ones. The first is just the occupancy trajectory was really helpful. Just wondering if we could sort of take that a step further, should we be expecting sort of the same-store NOI and so forth to also be sort of accelerating through to 2027 or are there sort of other considerations? Thanks.

Michael Franco: Yes. I think in terms of 2027, absolutely, this year, we’ll see. I think, again, it’s flattish as we talked about. So I don’t think you’ll see it this year. But I think as we get — as the assets get leased up, we’ll follow that same trajectory, yes.

Ronald Kamdem: Great. And then my second one is just on capital allocation, if you could just remind us what sort of the waterfall is now between development, redevelopment, buying back stock and so forth? And any update on sort of the Hotel Penn site, and potential sale. Thanks.

Michael Franco: We look at — the answer is, we look at all opportunities and decide where we can best deploy that capital. And obviously, we don’t want to sort of spend down realized dollar. But development is a long process, right? So some things we’re talking about today, you may proceed. But that capital doesn’t get spent for really several years as you ramp that up. I think in terms of stock buybacks, not front of mind today, we still see good value there, but it was — obviously, back in the teens when we started the program that was more dramatic. So that’s — I’d say today, the focus is on investing in our existing business, whether that’s new development or paying down some debt. And then as I said, we are looking at some external opportunities and just hard to put the odds on whether any of those move forward or not yet.

Ronald Kamdem: Thank you.

Operator: And your next question today will come from Nick Yulico with Scotiabank. Please go ahead.

Nick Yulico: Hi, thanks. Just going back to the NYU transaction. I think you said it’s accretive by $25 million annually. So paying off the mortgage, it looks like is a $35 million benefit. So can you just walk us through what’s the offset from that? And then also on the NOI side, how we should think about if there’s any difference on the cash versus GAAP treatment going forward there?

Steven Roth: That sounds like a Tom.

Thomas Sanelli: Sure. So I think you’re 35, you’re including the swap that we have that’s at the corporate level. So we’re moving that swap. So if you exclude the swap with the interest expense on that asset is $47 million. The current NOI is around $49.50. So that gets you the current NOI at about flat. When you look forward and you include the payment that we’re going to get from NYU plus the Wegmans deal, plus the interest on the 200-plus that we’re retaining. That gets you to about $29 million, that’s the $25 million, $26 million Steve referenced in the prepared remarks.

Nick Yulico: Okay. Thanks. That’s very helpful. Just second question is on, I think you gave the lease number for PENN 2 at around 50%. Is it possible to get the lease number for PENN 1? I know it’s 88% occupied. Is the lease number higher than that?

Glen Weiss: It’s the same number.

Nick Yulico: Great. Thank you.

Operator: And your final question today will come from Alexander Goldfarb of Piper Sandler with a follow-up. Please go ahead.

Alexander Goldfarb: Hey, thank you for taking the follow-up. Steve, I realize you’re probably not going to give the intimate details of the ground rent litigation. But from a big picture perspective, the arbitration panel agreed to $15 million, but now there’s litigation pursuing $20 million. From a big picture perspective, can you help us understand how this works? I would have thought the arbitration panel was the final determinant.

Steven Roth: Alex, it is. The arbitration — the litigation pending, that litigation will extend through appeals for who knows how much longer. By the way, we think we have a very good position there, but be that as it may. The arbitration panel handled the eventuality as to whether the landlord or the tenant, where the tenant wins that arbitration. So the $15 million is set for the base case if we win the litigation, the $15 million continues for the 25 years, if we lose the litigation, the $15 million becomes $20 million. So we’re in a pretty good spot. We have a — the values have been established in whichever way the litigation goes. So it’s as simple as that, Alex.

Alexander Goldfarb: Okay. That’s helpful. Thank you.

Steven Roth: Yes.

Operator: That concludes our question-and-answer session. I would like to turn the conference back over to Steven Roth for any closing remarks.

Steven Roth: Thank you, everyone. We’ve had a very robust conversation this morning. The first quarter was very active, very constructive with lots of good stuff. And we look forward to seeing you at the next call, which will be — when that?

Steve Borenstein: August 5.

Steven Roth: The next call is August 5, so we look forward to that. Have a good summer so far.

Operator: Ladies and gentlemen, this concludes today’s conference. Thank you for your participation. You may now disconnect.