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Operator: Good morning, and welcome to the Vornado Realty Trust First Quarter 2026 Earnings Call. My name is Rocco, and I will be your operator for today’s call. This call is being recorded for replay purposes. [Operator Instructions] I will now turn the call over to Mr. Steve Borenstein, Executive Vice President and Corporation Counsel. Please go ahead.

Steven Borenstein: Welcome to Vornado Realty Trust 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 package 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 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, 2025, 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 remarks 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. Business at Vornado continues to be excellent, and it’s getting better and better. We are riding the wave of strengthening more and lasting landlords market. And New York is by far and away the strongest real estate market in the country. Michael will get into the details shortly. But today, I have different fish to fry, and I will ask the first question. question. What do you make of the spat between Mayor Mamdani and Ken Griffin and how will it affect your 350 Park Avenue development? Answer, let me begin by saying that I do not and cannot speak for Ken but I do unambiguously stand with him. And notwithstanding the mistakes and bad form of the recent video that went viral, we are pulling for Mayor Mamdani to succeed.

Let me establish my credentials. Vornado was a New York company and I am in New Yorker, born in Brooklyn and attended [indiscernible] public high school in the Bronx. Both Vornado and I are lucky to be New Yorkers. My daughter and three granddaughters live in the Bronx. And my son and his family have in Brooklyn. My wife of 56 years, and I lived and worked in Manhattan. We follow the rules, and we pay our fair share. Vornado will pay $560 million in real estate taxes this year, and I’m pretty sure that’s in the top 3. And that doesn’t begin to count the personal income taxes that I and our Vornado population paid to the city and state of the York. We work our asses off, and we are not [indiscernible]. We are very proud of our lifetime of achievements.

We are the company that is investing billions to transform the PENN district. New York is a union town, and we are a union shop, employing thousands of hard-working New Yorkers in our buildings and on our construction sites. The ugly unnecessary video stunt is personal to Ken and sort of personal to me too. You see Vornado and I as the developers of both 220 Central Park South Residential building and the 350 Park Avenue Citadel Tower. We are all shocked that are young Mayor would pull this stunt in front of Ken’s home and single him out for ridicule. This was both irresponsible and dangerous. As I said, Vornado was the owner of the 65-year-old building on the Park Avenue [indiscernible] front that will be raised to make way for the Citadel New York [indiscernible] tower, which will employ thousands further cement in New York at the financial capital of the world, that pay significant taxes and on and on.

This building is being designed by the same enforcer and partner architectural team that designed JPMorgan Chase’s new headquarters down the block. This is now the if-we-move-forward project. Now a project of this scale takes years, and we have already worked with two prior city administrations, both of whom have recognized the benefits and have been enthusiastically welcoming and supporting as evidenced by the rare unanimous [ ULIP ] approval for this project. Demolition began literally days ago, and we at Vornado are ready to go. I must say that I consider the phrase “tax the rich” was spit out with anger and intent by politicians, both here and across the country to be just as hateful at some discussing racial slurs and even the phrase “from the river to the sea”.

What these [indiscernible] calls seem to be saying is that the rich are evil or the enemy or the targets or maybe even just suckers. But the rich home the politicians are targeting, started [indiscernible] on the epitome of the American dream. They are our largest employers and largest philanthropist, and it is the 1% that made 50% of New York income taxes. They are at the top of the great American economic pyramid for a reason. They should be praised and thank. Ken, our partner and friend, is the best of the best. So where are we now? As we discussed last quarter, Ken exercise this option to enter our development joint venture and build a new 1.9 million square foot tower with Citadel as the anchor tenant. We have until the middle of July to decide whether to participate with Ken in the venture or to sell there.

It’s a good bet that we will go all in. This fund cannot be amended by a short-term insincere private apology. What I beg my Mayor to do is to begin every day being business welcoming and business friendly as his first priority. That’s the only way to get the growth and financial way that will accomplish these programs, some of which I must say are interesting and balance, both with safety schools, child care, clean streets, housing affordability, homeless programs, et cetera. The election is over and now is the time for hard work and management not show boating. New York is an enormous enterprise with a city budget of $120 billion and a state budget of $250 billion. If there is a $5 billion or $10 billion budget shortfall shortly, that can be found — that money can be found by managing rather than by taxing.

It is interesting to note that high tax New York spends more than double per capita that low tax or no tax Florida or Texas. There is a lesson here. Maybe something good can come out of this blunder. Maybe we can draft tend to become active and lead an effort to educate New York voters and to elect right-minded candidates. Ken can do it. He’s the one who could galvanize the entire business community. Here is an interesting fact for us. The members of the partners in to New York City alone deploy 1 million voters. Hundreds of our business leaders with Lion up to support Ken, I would be first in that line. I was taught and I believe that — I believe in America, where after an election, all slides get behind us and support the winning candidate for the greater good.

Our Mayor is young, smart and energetic. With a little tweak and a little tweak there, his leadership could make this great city even greater. He will learn over time that growing the tax base is a winner, and raising taxes is a loser. I will say it again, he will learn over time that a growing tax base is a winner, and raising taxes is a loser. And that’s a hard-working 1% are allies, not enemies, but learn from them this mistake and move upward. Turning to Vornado. We now have a lineup of assets and in-process projects, which I am confident will deliver the highest growth in our industry. Executing on all this is now our singular focus. In this year, 2026, we will complete the heavy lifting of leasing at PENN 1 and PENN 2, as Michael and Tom have already been saying quarter after quarter, our published numbers will reflect all this by the end of 2026 and going into 2027.

As part of our focus on enhancing our portfolio and making great deals, we announced last week the acquisition of a 49% interest in Park [ and ] Plaza a 1.2 million square foot Class A office building along the prime stretch of Park Avenue. This asset is directly across the street from our 350 Park Avenue project. The building is 99% occupied by blue-chip tenants with an 11-year weighted average lease term and rented a 40% to 50% below market. Prime Park Avenue AAA assets rarely trade, and we believe we made an excellent purchase. We’re buying the asset at $950 per square foot, which is 65% to 70% discount to replacement cost. And we are inheriting a fixed rate — a sub-3% loan through 2031 to leverage off an enhanced return. We expect the transaction to be approximately $0.10 accretive in on a full year basis in the first year.

We are happy to be partnering with the Fisher family who owned other 51% of the assets. We have a long relationship with the Fisher family. They are first-class operator who think much like we do. With Park Avenue Plaza, our recent acquisition of 623 Fifth Avenue and the pending development of 350 Park Avenue, we will be adding [indiscernible] 2 million square feet at share of the very highest quality prime asset [indiscernible] portfolio. at very accretive economics. Speaking of 623 Fifth Avenue, our 383,000 square foot assets, which we are redeveloping to be the premier boutique office building in [ Baha ]. We are far along in our design and planning. We are receiving outstanding reaction from the market and already have active tenant interest at or above our underuse.

Demand for our retail assets is robust and accelerated. We have a handful of assets for sale in the market. I covered share buybacks in my recently posted shareholders ever. To date, under our $200 million share buyback program, we have repurchased 7 million common shares at an average of $25.80 per share totaling $180 million. Last week, our board authorized an additional $300 million buyback program. Now to Michael.

Michael Franco: Thank you, Steve, and good morning, everyone. First quarter comparable FFO was $0.52 per share compared to $0.63 per share for last year’s first quarter. This decrease is consistent with our comments from the prior quarters is primarily due to the reversal of previously accrued PENN 1 ground rent expense in the prior year’s first quarter to higher net interest expense, partially offset by higher FFO resulting from the execution of the NYU master lease at 770 in the prior year. and strong income growth at PENN 1 and PENN 2. We have provided a quarter-over-quarter bridge on Page 2 of our earnings release and on Page 6 of our financials. . We now expect full year 2026 comparable FFO to be slightly higher than 2025, ramping up each quarter due to GAAP rents coming online, lower interest expense after June 2026 bonds are repaid and some seasonality relating to our sites.

As previously indicated, we expect there to be significant earnings growth in 2027 as the positive impact from PENN 1 and PENN 2 lease-up takes effect as well as the positive impact of the recent acquisition of Park Avenue Plaza. Turning to leasing. The Manhattan office market is head and shoulders the best in the country and is off to its strongest start to a year in over a decade. Manhattan leasing volume reached nearly 12 million square feet, the highest first quarter level since 2014. There is a significant supply-demand imbalance in the $180 million Class A better building market in which we compete, as the availability rate in the prime submarkets in Midtown and the West side has tightened significantly, and there’s a little new supply coming for the foreseeable future given the significant cost and duration to build.

This is all resulting in tenants competing for space and rents rising aggressively. The landlords market we have been long predicting is very much here. While the macro environment we offer today operate in today, has gotten even more complicated in our last call. And the geopolitical volatility is as high as we’ve seen in some time. The U.S. economy just continues to chug along as it does in New York. While there is a risk of the Middle East conflict last much longer and has a greater economic impact, to date, we have not seen any change in [indiscernible]. Moreover, while there has been a lot of AI fear monitoring out there, and while we are respectful to risk, we believe it is overblown. Over the past 50 years, office-using jobs have continually evolve based on new technologies.

From the computer revolution of the 1980s and personal computers and water processes were introduced to the 2000s and the Internet transform workflows and the way we communicate and now with AI improving efficiencies and increasing productivity. In every example, office-using jobs were not reduced, but they shifted from clerical based functions to knowledge-based rules. And each new revolution spurred productivity and economic growth with new businesses and net positive jobs created. There will be winners and losers by industry, a job function and by geography. But make no mistake, New York and San Francisco will be winners as the intellectual and innovation capitals of the country, where talent will continue to aggregate and in the best buildings.

At Vornado, we are coming off our second best leasing year in our company’s history, where we leased 3.7 million square feet with 960,000 square feet of New York office in the fourth quarter. Business continues to be very good, and the momentum from last year has continued during the first quarter of 2026. In the first quarter, we released 426,000 square feet of office space overall, including 311,000 square feet in New York. Our metrics were very strong. Average starting rents in Manhattan were $103 per square foot with mark-to-markets of positive 11.7% GAAP and positive 9.7% cash and an average lease term of 9 years. Our New York office pipeline is robust and has over 1 million square feet of leases in negotiation in various stages of proposal.

Turning to the capital markets. The financing markets continue to be strong and liquid for Class A New York office assets. though pricing has widened a bit given the current geopolitical environment. The investment sales market continues to heat up as well with a broadening set of buyers keenly focused on New York City. We are very active in the capital markets in the first quarter most of which we covered on the last call. Given we’ve dealt with almost all of our 2026 and 2027 purities, we don’t have any significant financings we need to complete for the next 18 months. We do still have a few loans that we need to order through at lenders over the next 2 to 3 years. Finally, our liquidity remains strong at $2.6 billion, which is comprised of cash of $1.2 billion and our undrawn credit lines of $1.4 billion.

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

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Operator: [Operator Instructions] First question comes from Stephen Sakwa at Evercore ISI.

Steve Sakwa: Steve, thanks for your opening comments on the city and the administration. I guess maybe going to Michael’s commentary on just the pipeline of the 1 million feet. I didn’t know if Michael or Glen could maybe expound a little bit on how much of that is for upcoming lease expirations, how much of that is for kind of vacancy within the portfolio? And I guess most of that’s probably in New York, but maybe discuss kind of the New York versus Chicago versus San Francisco demand trends.

Glen Weiss: Stephen, it’s Glen. So our pipeline is extremely well balanced of the 1 million feet. It’s right down the middle, 50% new expansion, 50% renewal. The other thing I’ll note is on renewals due to the lack of quality state available in the market, we’re seeing many of our tenants coming to us early on renewals since they can’t find quality alternatives, which is a key indicator of a rising landlord market. As it relates to City to City, San Francisco is coming on very strong. While we have some vacancy, as you see from the first quarter numbers, we have tremendous activity on all the vacancy. Our deals in the Tower 555 are now north of $160 a foot. Volume in San Francisco overall is strengthening week-to-week. And certainly, everyone out there is doing a lot better and deals are happening in a very rhythmic pace.

Chicago is starting to come on demand is improving. The deals are tough, but there are certainly tenants coming new to the market, and we’re seeing a lot more foreign proposals coming at the mark as we go into the second quarter and into the summer.

Steve Sakwa: Great. And then maybe just as a follow-up. We did notice that in terms of lease commencements, the Verizon lease kind of had a little bit of a change in status. And I’m just wondering if you could maybe talk about kind of what their, I guess, ultimate status is with the building? And did that lease kind of start earlier? And is that a benefit to the ’26 earnings growth?

Thomas Sanelli: Stephen, it’s Tom Sanelli. I’ll take the first part of it, and I guess, Glen, you could talk about the status. So [indiscernible] Verizon told us they’re not going to build out their space and they put them a sublet market, GAAP allows us to start revenue recognition early, so you’ll see that flow through all of 2026. It started in the first quarter.

Glen Weiss: On the leasing front, the block of space is excellent. It’s 200,000 feet and includes 30,000 feet of outdoor space. We’re in a great position. We have a rise in public parent guarantee for the entire week to begin with great credit. We continue to show this pace as does Horizon. There’s very good action. And whatever the outcome, Vornado in a great spot as it relates to that position.

Operator: And our next question today comes from John Kim at BMO Capital Markets.

John Kim: Steve, really appreciate your opening remarks and really provide a lot of clarity on how you’re thinking about moving forward. But I wanted to ask you about your statement that you’re all in at 350 Park. Are you all in even if Citadel would not commit to the building? And how should we think about the put option you have in July? .

Steven Roth: I didn’t hear the last part.

Michael Franco: How should we think about — how should we think about the put options as you said, John?

John Kim: Yes, that’s right. Is that something that you’ll let pass? Or is that something that could be — the day could be extended?

Steven Roth: The answer is that can exercise to go ahead. We have until the summer to decide whether we are a participant or a seller. And I expect that we will take all of that time, which is the smart and correct thing for us to do. There are still some documents and other details to be hired now. But my remarks that I say where I expect we will be all in, I do expect we will be all in, but that’s not a legal commitment at this time yet.

John Kim: And that’s all in with or without Citadel’s commitment?

Michael Franco: No, the answer is — the question is, is it all in regardless of whether Citadel is committed or not from a lease standpoint?

Steven Roth: Just — Citadel has to be committed. They will be committed. So I mean, this whole deal is based upon the fact that [indiscernible] will be the anchor tenant taking no less than 850,000 square feet, although we expect more. And [ Ken Griffin ] is the 60% partner, we are a 36% partner and the [ Rudi ] family is a 4% partner. That’s the state of play. This whole thing Ken has committed to start this whole thing will all come together and become very clear in the mid-summer.

John Kim: Okay. And then I wanted to ask about the $200 million of signed leases not commenced figures that you provided last quarter. If there’s an update to that figure in terms of dollar value timing? And if there’s any offsets through known move-outs during that time frame?

Michael Franco: I would say the number is still in that general neighborhood. It’s probably a touch larger today, but it’s generally in the same ballpark. And I think in terms of thinking about it, probably 10% to 12% comes in per quarter over the next couple of years from a pacing standpoint, there are some offsets whether it’s expiries, vacancies, et cetera. I think, Steve, on the last call sort of said from a modeling standpoint, assume $0.40 a share flow through to the bottom line. So we’re going to stick with that for now, but that will give you a sense in terms of the pacing of that $200-ish million, and that started this first quarter.

Operator: Our next question today comes from Floris Van Dijkum with Ladenburg.

Floris Gerbrand Van Dijkum: I appreciate some more color on that large [ SNO ] pipeline. Could you maybe just expand on that a little bit, what percentage of that [ SNO ] pipeline is in the PENN District. And how much of your — does it include retail leases, you’ve done some leasing on Upper Fifth Avenue in particular. Maybe you could give us a little bit more color of the PENN District versus other areas in your portfolio?

Michael Franco: Floris. That number is pretty much all office. So I can’t give you the retail number as we sit here right now. obviously, the lease with Meta is a big positive. And in terms of the $200 million in terms of PENN versus others, I would say it’s probably 2/3 in it should not be imposing given the lease-up of PENN 2 and the balance in PENN 1.

Floris Gerbrand Van Dijkum: And maybe my follow-up question, as it relates to your Park Avenue Plaza acquisition, I mean, what caused that deal to happen? Why did the Fisher Brothers, I guess, sell out? It looks like it’s like a 6%, 7% yield on cost, if I’m not mistaken, to get to the $0.10 accretion, that seems pretty attractive. Is that a cash yield or is that a GAAP yield? And how much of a mark-to-market — how much more growth in terms of earnings do you expect to get from that property going forward?

Michael Franco: I can remember everything you asked here, Floris. Look, we’re thrilled about the acquisitions. These types of assets don’t trade very often on Park Avenue. It’s certainly one of the best assets on Park Avenue. And in terms of the yields on a cash basis, given the in-place debt, it’s roughly 8% on a GAAP basis, it’s well in the double digits. And as Steve said in his remarks, rents are well below market here, probably at least $50 a foot below market. So over time, things are not static. There’s action with tenants, we’ll capture that and that’s without rents growing. So if rents go further, that gap should widen. So we’re excited. The Fishers did not sell out. They remain — they still hold their 51%. And I think their track record of performance on the asset is stellar.

It’s a blue-chip set of tenants, at least long term. They’re quite effective at signing long-term leases with high-quality tenants and that’s reflected in this asset. So — and the tenants, some of which we spoke to about their experience, couldn’t have raved anymore about the quality of the asset, and they have grown over time there. So — we’re excited about the asset. We think there’s tremendous value to be created over time. And so I think I addressed all your comments, questions.

Operator: Our next question today comes from Alexander Goldfarb at Piper Sandler.

Alexander Goldfarb: Steve, yes, echoing I appreciate your comments upfront, just crazy. But thank you for your statements. Michael, just following up on Floris’ question. The two items in the ’26 guidance. One, the $0.10 accretion for Park Avenue, was that the GAAP impact or that’s the cash just as we think about FFO? And then the second part of that guidance question is, there was an item about the master lease changing at 350 and just want to know how that impacts the earnings for this year. That’s my first question.

Michael Franco: Park Avenue Plaza the $0.10 is a full year run rate. So obviously, we’re not going to have that for ’26. That’s a GAAP number. And on the 350, the change there was done given Citadel wanted to kick off the development. They want to vacate. We couldn’t start demolition without defusing the old CMBS loan. And so that along with the fees as you saw in our Q, the master lease was modified, there were a number of changes made in the documents. And so that was a negative to ’26 earnings, which when we talked about it given our comments.

Steven Roth: Alex, the deal always contemplated that when Citadel vacated the building so that the building would be demolished that the rent would be reduced.

Unknown Executive: Or even go away.

Steven Roth: The earnings sting by that reduction, much of it will be made up by capitalizing interest, et cetera. So while the earnings what exactly is going to happen.

Glen Weiss: So in 2026, for the next few months until we decide whether we’re going into the JV, there’s a wash. There’s no earnings coming out of 350. Once we make that decision, assuming we go into the JV, we’re going to start capitalizing interest in cost. We start seeing…

Steven Roth: Will that equal or exceed or be less than the [indiscernible] at?

Alexander Goldfarb: Initially be a little less and then eventually over ’27, ’28, ’29, basically equates to what we were getting.

Michael Franco: Like for 5 or 6 months, there’s a negative thing given the master lease. But again, that’s previously communicated out. Does that satisfy you, Alex?

Alexander Goldfarb: That’s awesome. Second question, Steve, is big picture. With regard to Citadel and the whole attention with the Mayor, back in 2019, Amazon wanted to open in Queens, they were a bust. But I don’t recall this amount of instant negativity in political nervousness today, it’s clearly escalated a lot quicker. What do you think has changed? I mean certainly, politics have become more left, more progressive here. But why do you think can this time the politicians seem to be much more eager to make this everyone be happy versus Amazon, the city and the state seemed happy it wasn’t even a ripple when Amazon walked from Queens, it doesn’t seem that. What’s the difference now versus then?

Steven Roth: Yes, I don’t know. But you’re correct that the body politic doesn’t seem to have any remorse about losing Amazon. On the other hand, the body politics thinks that the civil team is important and an enormous contributor and there is a significant feeling amongst the political leadership and the business leadership that this was a mistake which I described as a blunder and this is something that should be repaired. And we’ll see where it goes.

Operator: Our next question today comes from Dylan Burzinski at Green Street. .

Dylan Burzinski: Michael, I think you mentioned that pricing has widened given some capital markets volatility associated with the Warner on. Curious if you can just provide more color on that. And then maybe if you can sort of flavor in some commentary around, I think, last quarter, you guys mentioned looking to put assets in the market. Just sort of any sort of color you can provide on sort of how that — those processes are going?

Michael Franco: On the financing markets, financing markets were incredibly strong in the last year, beginning of this year as tight as spreads as we have seen in some time. Given the volatility, it’s back off a little bit, like there’s still depth in the market. Deals still can get done, particularly for high-quality assets. I wouldn’t call it a huge impact, but the reality is, look, treasuries are probably up 30 basis points or so, and spreads have widened out a little bit. So that makes the borrowing costs a little wider, but not wildly different. Just — this is still a very functioning marketplace for high-quality assets, but off maybe 40, 50 basis points. I’m glad we did what we did when we did it. So we’re not really dealing in today’s markets, but again, you can get deals done.

On the asset sales side, where — I think Steve referenced, we’re working on some asset sales. And that is true. And when we have some rate of announce, we’ll announce. But the answer is, we got a few things that are meaningful in the pipeline. We’re in active discussions with potential buyers. I would say the interest in New York City. As I said in my remarks, continues to expand in terms of the type of buyer. I think there is consensus on New York being head and shoulders best market. Assets are — rents are rising assets at a discount or placement cost, it’s a recognition, there’s not a lot of supply coming. And so I think Global Capital has a lot of comfort in it. I think one of the things we’re hearing from capital sources around the world is the U.S. remains the safest, most liquid market, particularly given everything going on around the world.

And I think you’re going to continue to see capital M&A from other parts of the world to come into the U.S. I mean, New York City is going to get a heavily disproportionate share of that. So that’s what we’re seeing. And when we have specifics to announce, we’ll announce it, but we’re encouraged by what we’re working on.

Dylan Burzinski: And then just on the rent growth piece, I think several quarters ago, I asked 20%, 25% rent growth if you saw that over the next 5 years, what were your thoughts to be on that, Steve, I think you mentioned like while that’s good, that would be disappointing given everything you’re seeing on the supply and demand imbalance, especially for high-quality office. I mean can you guys just talk about how far rent growth could go in your mind? And has your thoughts around that cumulative rent growth that you changed at all?

Michael Franco: I think we’d still be disappointed in that, Dylan. Look, as I think we’ve said in the last couple of calls, right, the backdrop for of is as favorable as it’s been in a long, long time. And it’s very difficult to add supply here, which at some point, we’re going to meet. So there’s going to be a building a year maybe as we get into the next decade. But that’s very little. At the same time, we have supply coming out of the bottom end of the market. So the fundamentals are great companies, as we’ve said, continue to want to grow here. We’re seeing still significant activity from the financial service sector, law firms, accounting firms, frankly, AI has picked up more recently. So I think all that results in rents continue to rise. So I don’t know that it makes sense to give you a prediction, but we’d be disappointed at 25% over a I don’t know if you want to add any comments on what you’re seeing from…

Glen Weiss: I mean, look, a tenant, rent sensitivity is not even high on the list right now, tenants want to be in the best buildings with the best landlords. And if you think about our leasing performance, $100 a foot become a norm for us, because of the quality of our product. When over the PENN [indiscernible], our average starting rent is $100 a foot, that’s a great trend. So as we go on here and the way we’re shaping the portfolio, with the addition of 623 Park Avenue plus of the New 350 Park. And we think rents are going to continue to spike. And the way we’re balanced on the west side and on Park Avenue, and we’re really excited about that. We think we’re in a perfect position for what’s to come on rents and tenant demand.

Operator: Our next question today comes from Jana Galan with Bank of America.

Jana Galan: Congrats on the strong start to the year. Michael, I appreciate your comments on the 2026 FFO now expected to exceed [ $25 million ] just curious if that’s primarily from the Park Avenue Plaza closing in 2Q or also from 1Q being slightly ahead and carrying throughout the year?

Michael Franco: I’d say it’s the latter.

Jana Galan: Great. And then maybe on 555 California, if you could give some update on kind of demand, leasing and rents there? And are AI tenants becoming a bigger part of the pipeline there and in the New York pipeline as well.

Glen Weiss: So rents in San Francisco are rising a lot. As I said earlier, our rent in the tower have now gone north of $160 a foot, for substantial leases, 50,000 feet and great are not small deals. So we are leading the market by far at 555 [ Cal ]. We’re also seeing a lot of really good activity at 315 Montgomery in the campus, with more technology, AI type tenants. So certainly, that activity we’re seeing at our projects that are complex as well. But other than tech and AI, Financial services is growing in San Francisco, something we’ve kept a very keen eye on as well as law firms. So it is in just AI, although it’s helping a lot as the city improves, but the other industry sectors are really coming on strong. And the city overall feels great. I was out there a few months ago, walking the streets, meeting with people. It’s really feeling good out there, and people are already positive again in San Francisco.

Operator: Our next question today comes from Anthony Paolone with JPMorgan.

Anthony Paolone: You talked about having some assets out in the market for sale. But if we think about just whether it’s 350, 54th Street and then Fifth Avenue, some of these projects that are going to be on the pipeline. How are you thinking about just your pro rata leverage level over the next couple of years and whether there’s going to likely be a bigger disposition program or whether you think you’ll just use project financing and take on a bit more leverage?

Michael Franco: Tony, we’ve got the capital earmarked for all these opportunities in our cash forecast. We’ve got some asset sales in the works that — like we obviously have a lot going on between these investments that we’ve made recently, 623, Park Avenue Plaza, the buybacks, some of the future developments. And I would say about the future development, something like the 350. The bulk of our equity is coming from our land contribution, right? So any incremental capital is really not required from Vornado for probably close to 3 years. So we’ve got ample time to plan for that and so forth. So when you look at our sort of capital needs, if you will, over the next few years, it’s fairly well laddered. But at the same time, as we execute hopefully, on some of these asset sales, that’s going to give us some additional firepower, frankly, beyond just we’re talking about in term of these developments.

Steven Roth: If you look at our history, with respect to capital planning, we have three or four things that we have historically done. Number one, we generally hold $1 billion-plus cash balance. The second is that we almost always prefund well in advance of our capital needs. So for example, we loaded in, I don’t know, $2 billion, $2.5 billion of capital 2 years before we started the PENN 1 and PENN 2 developments. So that notwithstanding the fact that the capital markets got a little bit rough and volatile when we were actually building, we have the capital on our balance sheet. So that’s what you can look at for what we do. The other thing is that we like to operate with lower rather than higher debt levels for the obvious reason.

The last is that our philosophy is that we like nonrecourse project level debt as opposed to unsecured credit, which basically makes the entire corpus. I guess you could say personally liable, so we like nonrecourse project level debt, which is the majority of the way we finance our business.

Anthony Paolone: Okay. Got it. And then just follow-up question on the leasing side. I think there’s about 600,000 square feet in the fourth quarter that comes up. Is there anything larger in there that’s a known vacate. I just can’t remember if there’s any big deals in that mix to watch out for?

Glen Weiss: There is two larger tenants ties in the second half of this year, and we believe both will renew their leases. So we feel good about our exploration, and as you would expect, we’re all over the ’27, ’28 expirations as well. But 26, we’re pretty well taken care of. We feel good about what’s going to happen.

Operator: Our next question today comes from Vikram Malhotra with Mizuho.

Vikram Malhotra: I guess first one, given all the kind of activity you’ve had with all the PENN assets. Any update on Hotel PENN and PENN [indiscernible] Mall in terms of users, monetization, et cetera.

Steven Roth: No update.

Vikram Malhotra: Okay. And then just on the earnings side, you mentioned 2027 FFO, nice pickup. I’m wondering two things. One, are there any offsets we should be thinking about for ’27? And then in particularly FAD, given the ramp in FFO, I’m assuming there’s still going to be elevated TI into’ ’27. So should we think about FAD really perhaps picking up on 2028?

Michael Franco: Vikram. On the…

Steven Roth: I would make one comment, okay? I can’t wait for the free rent to burn off. That’s when this business will get to be real fun and will generate substantial positive cash, that happens over the next year or 2. I can’t wait for that. Now go ahead, Michael. So Glen, take note of what I say.

Michael Franco: So on the Fed side, Vikram, your comment is right, right? There will be continued elevated TIs this year, next year, even on deals we’ve committed this year, tenants on don’t call those for a while. So that will go into next year. And then we expect to see that drop materially and cash flow be much higher. So I think your general direction is accurate. On the earnings side, there’s always ins and outs. So there’s always offsets. I can’t tell you specifically what those are, but in the history of Vornado, I think we’ve given you as much guidance as we can give you with respect to next year in terms of what the bottom line is going to be.

Operator: Our next question today comes from Nick Yulico at Scotiabank.

Nicholas Yulico: I just wanted to go back to 350 Park and just be clear on a couple of things. One, in terms of the new $16 million annual rent versus the old rent, did that already happen in the first quarter? Is that a second quarter accounting impact? And then I also want to be clear on that new rent that’s being paid. Does that — what is the maturity on that lease? Is that concurrent with the debt, the new mortgage that matures next year? Or does it extend beyond that?

Michael Franco: Nick. So on your first question, new rents started — I mean there are a few days in March where it started. But by and large, it will be second quarter. So I don’t know, maybe 15 days in the first quarter where the new rent was reflected.

Steven Roth: Because the new rent is coterminous with the execution of the new mortgage. So I don’t know what that data is, but it’s a couple of weeks or 3 weeks ago or whatever.

Michael Franco: Yes. So that’s a new lease runs until early your question why is that? Because there be a resolution on the other. The venture will be formed, we’ll put the asset, something will happen prior to that maturity.

Nicholas Yulico: Okay. So the rents and new rents is only in place until the point at which the mortgage matures. There’s no rent being paid beyond that date under the new agreement?

Michael Franco: Correct. But there’ll be a resolution or A or Board B before that, which the rent have gone away anyway.

Steven Roth: There’s no building for the tenant to pay rent for.

Nicholas Yulico: Got it. Okay. I just wanted to be clear on that. And then I guess second question is, obviously, I mean, you’ve talked a lot about giving some of the bread crumbs on 2027, how to think about that. It is also 2027 FFO is a piece of the executive comp per the proxy plan. So I guess I’m just wondering like if you — any new thoughts on this, Steve, about finally giving earnings guidance. You’re at the point now where the tide is turning, you’re being measured by that from a comp standpoint. Why not give formal FFO guidance at some point?

Steven Roth: Oh Lord, how do I answer that question? The two sides of it is that we have a simple business which has complexity, and the numbers are moving. It’s very — I mean, we find that it’s sort of difficult to guide and counterproductive. So Warren Buffett, who’s not a friend of mine, but an acquaintance of mine. He didn’t guide for his whole career. So that’s one thing. And the big bank guy, he doesn’t guide either. So — but all of our competitors seem to be able to guide to what’s wrong with us. But right now, we have no plan to guide other than the snippets that we put in these calls here and there, which I think — I hope you find helpful. Now what I think you’re saying is that if our earnings are slow up with, why don’t we just take a pad on the bed for that and guide to that.

So that’s something that I’m going to put under my pillow and think about because that sounds like maybe it’s a good idea. But as of right now, our policy is we selectively in a limited way guide, but we don’t give full guidance. And I think you could probably guess that, that’s going to continue for the future Tom, what do you think?

Thomas Sanelli: I agree.

Steven Roth: Tom saying he’s happy doesn’t that the guide.

Operator: Our next question today comes from Seth Bergey at Citi.

Seth Bergey: In the annual shareholder letter, you kind of referenced the no sacred cows policy again. It sounds like the New York office trends market is improving. You mentioned possible kind of inflows given it’s a liquid market in the U.S. is just safety. How do you kind of think about potential asset sales. Should we think about those being more noncore dispositions or any core asset sales that you’re kind of thinking about?

Michael Franco: Some asked the questions for me. It’s come — mentioned you add it in no sacred cows. Is that just New York or is that some other assets we should think about noncore dispositions.

Steven Roth: I mean I don’t want to shock you, but basically, I’m in it for the money. And so therefore, there are no sacred cow. There are assets that are critical to the business. There are assets that are important to the business. There are assets that we love more than other assets. But based upon price economics and business strategy, there are no sacred cow. Now what does that mean? There’s a handful of assets that we actually have already determined that we don’t want in the business mix, and those assets are for sale. Our intensivity, if that’s a word, to liquidate those assets, rises and falls with the market. But over a short period of time, there’s a handful of assets that will not be part of our portfolio. Now getting to the rest of it, there are assets that we hold near India that we think are very valuable that we underwrite as being much more valuable than apparently the stock market underwrite it.

Even those assets, if I think [ San ] say that Garth [indiscernible] phrase the Godfather bid, it’s some very aggressive bid came in for one of those important assets we would execute on that because that would be the right thing to do, that’s the right thing for us for the management to do, and more importantly, it’s providing to the shareholders. So there are no sacred assets. There are prices that are critical. But in terms of whether we would execute on selling something, it’s over a function of what the price is.

Seth Bergey: Great. And then for my second question, I guess, how do you think about kind of incremental potential acquisitions versus accelerating the share buyback and balancing that versus your current leverage levels?

Steven Roth: So there’s three things inherent in that question. There’s acquisitions versus stock acquisition and leverage levels. So the answer to that is, is that we think — no, let me rephrase that, we are certain that we can basically do over it. We are certain that we can buy selectively important assets that come up in the bulls-eye location of our heartland. We are certain that we can — we have the capital to buy back our stock in a measured way. And we are also certain that we are able to keep our leverage in — through a measure of the control level. So we think we can do all of that, and we have some things that are in process that will augment all of that. So our two most recent acquisitions of 623 Fifth Avenue which we think — I mean I’ve written about that, we think is a terrific deal.

And the Park Avenue Plaza acquisition that we just announced a couple of weeks ago, we think is equally terrific deal. And we think buying back our stock is $30 a year is a terrific deal as well. So we’re doing all of that. And I hope that answers your question.

Operator: Our next question today comes from Caitlin Burrows at Goldman Sachs.

Caitlin Burrows: Maybe just on the pricing side. I realize the reported leasing spread drilling on a second-generation space. So first, I was just wondering if you can go through your expectations today of portfolio mark-to-market across New York, San Francisco and the mark? And then also whether you expect that portion that gets included in the spreads to increase as in like could downtime become smaller?

Glen Weiss: It’s Glen. So on the question of mark to markets, we expect to continue the performance we’ve had over the past couple of years, which are positive, positive and positive. During the last 2 years, we’ve only had 1 quarter negative, which we like, and we expect to continue. Many have been in the double-digit positives. We expect free rent to continue to reduce and even TIs are starting to come down. So we’re working hard on that piece, of course. And San Francisco is the same. With the rents we’re achieving, the mark-to-markets will continue to improve. Chicago, as I said, is still most challenging, although demand is picking up. renter same firm, concessions are high in Chicago, those have yet to break downwards, but demand is certainly improving.

Steven Roth: I mean think about just economics at or macroeconomics, focusing on New York for the moment. I mean we’ve said and I’ve written about that we compete in a subset of better building Class A space, which is under 200 million feet. So the fact that there may be 400 million feet in New York is relevant because we really compete in a market which is about half that size. The availabilities of space in that market is evaporating very quickly. I mean somebody used the analogy of an ice cube at a microwave. We are getting — I mean, we know that because we are a key factor in the market. We know that because the incoming calls from brokers looking to place for their clients deciding to get more access and even more desperate.

So as the availability of space shrinks, obviously, the price goes up. Now there’s something else going on, which is equally important, and that is the cost of a new building has gone from whatever to somewhere around thickener $2,500 a foot. Interest rates and the cost of capital has gone from 0% to 2% to 5%, 6% and 7%. So the rent that has to be achieved to make a new building economic are well into the $200 a foot and even touching $300 of it. That’s never happened before. So obviously, rents on older buildings, which are still great buildings and great locations are going up because of scarcity and because of the cost of new supply coming on the market. So this is just basic economics 101. The next bottom is that I believe and my team can speak for themselves.

I believe that we are in a long, long, long-term landlord market where these dynamics will continue. Why is that? Because there’s nothing in the short term that can change that other than if interest rates dip down to 2% or something like that, which you can make your own judge whether that might or might not happen. So if that happens, basically I’m not in a big rush to rent space at today’s prices because I think tomorrow’s prices are going to be higher and maybe even a are a lot higher.

Caitlin Burrows: I guess maybe just to follow up on that last point. I know leasing volume in the first quarter was relatively low. So would you just say that that’s lumpy. Is it more about that you’re not in a rush because rents could be rising or something else?

Steven Roth: Glen is in the business of lending space as quickly and aggressively and as hungry as he can be. So if there is any falloff in volume, it’s not because I direct the led to get out of the market. Glen’s in the market every day working his ass off. Thank you, Glen.

Operator: Our next question today comes from Ronald Kamdem at Morgan Stanley.

Ronald Kamdem: Okay. Great. Just two quick ones. Just number one, I think last call, you talked about some guidepost for occupancy over the next 12 to 18 months and thinking sort of mid-90s on a lease basis. Just wondering if you could provide an update both on the lease and on a physical occupied basis. What that occupancy target to look like over the next 12 to 18 months again?

Michael Franco: Look, we’ve historically run our portfolio in the mid- to high 90s, and we expect to get back there. So that probably is over a couple of year period. But that’s — and again, I think given all the dynamics that Steve alluded to and we’ve talked about in the market and the lack of space availability, that’s going to happen. So obviously, leasing up 10% is a key part of that. But — and I think one of the analysts picked up this quarter that our occupancy actually went up 70 basis points, not the 40 because we took 350 Park out of service. So that’s what we expect in it. I can’t tell you exactly what quarter it’s going to be, but over the next couple of years or so, that’s where we expect to get back to.

Steven Roth: But there’s a couple of things to focus on. There is a couple of buildings that we are not winning. Why is that? Because they are overleveraged and underwater, and we — it’s uneconomic for us to rent bases in those buildings which really — they’re almost owned by the banks. And if we put TI into those buildings, it’s basically burning money. So if you take those — as we have chosen, I don’t know whether this is a good decision or not, we’ve chosen to leave those in the aggregate statistics with some of the folks in our industry have taken those buildings out of the numbers, which makes their occupancy higher. So if you take those numbers — those buildings out of our numbers, our occupancy goes to what something like that, 95% — 94%.

So we know that number, although we don’t publish that number, and maybe we should. Although right now, I’m publishing. So that’s the first thing. The second thing is that I look upon in a landlords market like this, I look upon vacant and available space as it has been because that will — as we ramp that space, and we will with 100% certainty that will grow our earnings. So when you think about investing, maybe the best company to invest in a company that does have available space in this market as opposed to a company that has a space already rented. You can make out of that whatever you will.

Ronald Kamdem: Really helpful color. And then my second one, if I may, was just a lot of the footnotes in the supplement. Just on — I guess on PENN 1, any idea when that litigation will be — just in terms of timing, obviously, can’t comment either way, but just in terms of timing, is that something that can be done this year? And also the change in retail from the base of the office buildings being put in the office segment, just the thinking there.

Steven Roth: I’ll take the litigation. I have absolutely no comment on anything having to do with that litigation other than I’m optimistic. What about the retail?

Glen Weiss: Yes. So we didn’t change our segment reporting. Obviously, we have two segments in New York and other. This is a subsegment. Ron, what we did here is we tried to align the subsegment more on how we view the assets. So we grouped over retail assets together and the office assets. So the base of 1,290 retail is now included an office as opposed to being in retail. And any ancillary office space that’s in a retail building is obviously in the retail subsegment. And it’s all disclosed, obviously, in the supplement, and we give you the exact buildings that are in each subsegment, so you could follow along. I think this is the better way of looking at it. as opposed to the way we would do in previously.

Operator: Our next question today comes from Brendan Lynch at Barclays.

Brendan Lynch: First one on Sunset Pure Studio. Is there any interest in the current term tenants and converting to longer-term leases? And just some update on that?

Glen Weiss: It’s Glen. There’s great interest in Sunset and the studios. We’re at least right now place is great. unbelievably great, I would say, best in a great location. We have very good activity, long-term folks looking short-term folks looking. So we expect to of the project once this year’s leases expire. But it’s off the chart. The reception has been plus what we expect to do really good things are on the leasing.

Steven Roth: But a direct answer to your question, I would definitely prefer to be in the long-term leasing business with that asset rather than in month-by-month leasing in that asset. So the answer is the ownership of that asset prefers to be in the long-term leasing if the market gives us that opportunity.

Brendan Lynch: Okay. That’s helpful. And then a follow-up on the Verizon space at PENN 2. Can you just walk us through if they find a subtenant versus you finding a tenant and how we should think about potential termination fees? And any accounting around the TIs that you might still be responsible for if it’s just a sublease instead of a cancellation in new lease.

Steven Roth: Glen, for first ad, I don’t talk about it. Go ahead.

Glen Weiss: As I said earlier, we’re in a great spot to matter how it comes up out. And we will only be opportunistic to make money on this space. We have a very good lease position, and we’ll see how it plays out, but that’s as much as I think I want to talk about it for now.

Steven Roth: What do we have? It’s basically a 19- or a 20-year lease. So we have a long-term lease with a super credit, that lease will — we will never terminate that lease under any conditions. So the only thing that might happen is around the dynamics of a subtenant coming in because Verizon wants to reduce their liability. But we don’t have anything to say other than that long-term credit lease is not something that we are going to terminate or monkey with.

Operator: There are no further questions at this time. So I’d like to hand it back to Steven Roth for any closing remarks.

Steven Roth: Thank you all very much. I mean, the — I think the team and I are delighted with our activity over the last 3, 4, 6 months, we are excited. We think we — and I didn’t make the statement in my remarks this morning. that I am certain that over the next year or 2, we will have the highest growth performance of any company in our sector. And we’re excited about that. We’ve got a lot of great stuff going on and thank you for participating. We’ll see you next quarter.

Operator: Thank you. That concludes today’s conference call. We thank you all for attending today’s presentation. You may now disconnect your lines, and have a wonderful day.

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