SL Green Realty Aktie

2026 Global Real Estate Conference. I'm Jana Galan, BofA's office REIT analyst.

We're pleased to have with us SL Green's President and CIO, Harrison Sitomer; CFO, Matt DiLiberto; EVP and Director of Leasing, Steve Durels; and VP, Corporate Finance, Andrew Mehr. I'll turn it over to Harrison for opening remarks, and then we can jump into Q&A.

Thank you all for joining us today. It's an exciting time in the market for us. We put out a few announcements over the past few weeks, most recently on the sales side or disposition side recently announcing the sale of 110 Greene Street, in furtherance of our capital plan for 2026. And then on the leasing side, making big strides, actually surpassing our goal for the year through 3 -- less than 3 quarters of the year, with substantial amount of leasing in the pipeline.

So excited to answer some questions today. take you through the business plan for the rest of the year and what we see in store for 2027 and in a very exciting market backdrop for New York City.

Maybe starting there, you outlined many strategic goals for 2026 at the December 2025 Investor Day. How are you tracking against some of these goals?

Yes, I'll hit that. It's Matt. So Harrison touched on the leasing strength in New York just continues to get stronger. When we came into the year, we had actually budgeted for about 1.5 million square feet of leasing for the year. We set an objective of 1.7 million to stretch Steve, and we've -- we're at 1.8 million now through the first 8.5 months of the year with 1 million square foot pipeline. That feeds through to occupancy. And also on a mark-to-market basis, we're about 16% year-to-date with a pipeline that is in that same ZIP code. So squarely ahead of where we expected to be or our stretched goals from a leasing perspective. I'm sure we'll go through more on our acquisition, disposition and refinancing strategy. That becomes a matter of us testing the market with assets and often choosing to sell certain assets that we didn't have in our original plan and holding others that we might have originally intended to sell.

From a financing perspective though, the $7 billion plan, we are much of the way through it with the financing of 245 Park in the CMBS market, the next big execution, $2 billion execution that we expect here in the coming weeks.

As it relates to development, we are well underway vacating the 346 Madison site and commencing demolition there, while continuing our office to residential conversion at 750 Third.

And from a financial performance perspective, same-store, in keeping with the leasing strength, we're seeing our same-store NOI growth has exceeded our expectations. And if we execute the rest of our business plan, we should get through the rest of our financial objectives as well.

So by and large, doing really, really well on what we always set up outside of guidance as stretched goals.

Fantastic. I know at the Investor Day, there was also a little bit of a focus on the new mayoral administration. Just curious if there's any notable change in the day-to-day for the city for your business, and if there's any potential legislation or any policy that you're tracking that could potentially be beneficial or maybe create some challenges.

Yes, sure. So on the mayoral side, the best and clearest referendum of the city's performance right now is the businesses that are locating here and the businesses that are making long-term commitments to New York City. Throughout this year, since the Mayor has been elected, we've seen firms like American Express make a significant commitment downtown. In Midtown, we've seen JPMorgan and Citadel both make substantial commitments to Midtown East. In the AI side, we obviously will talk more about that topic, but everyone recently saw the announcement of Anthropic taking over 400,000 square feet, making New York a leader of the AI and tech initiatives of the next generation. And then even on the legal side, where we saw Simpson Thacher make a big commitment to Fifth Avenue just about a month ago.

So for us, we always believe that leasing is the biggest indicator. We don't -- we try to read through the news, we try to read through all the talk and rumors out there and try to just look to what are the big tenants doing in this market and what type of commitments are they making. I think New York City is on track this year for its biggest office leasing year since 2000, and that's a great indicator for us as the type of businesses that want to be here and their employees that want to be here.

We've been working actively with the city and the city administration over the past year. whether that be at the mayoral level, whether that be at a deputy mayoral level or with the city council and the newly elected city council speaker. I don't know if there's a way to shut that door, it may be helpful. Julie Menin, and we've been very pleased with the responsiveness and feedback that we've gotten from the city on initiatives that we brought to them. And it's been very positive signals from the mayoral administration in some of the recent hires that they've got including Anthony Shorris, from McKinsey, who came over to lead EDC. And that's a great initiative that the city put forward.

So we share the Mayor's focus on affordability. One of the projects, 750 3rd, that we're pushing forward fits right within those initiatives or goals of the Mayor to try to create more affordable housing in the city. And it's our job to work with the city to try to further their goals and make the city a better place for our businesses and our tenants.

And then for Steve, very impressive with the 1.8 million square feet year-to-date, and the pipeline behind that. Maybe if you can help us understand, where you're gaining more leverage in negotiations, how much of net effective rent has risen over the past year? And how tenants are looking to potentially do renewals, into what years are you discussing?

Sure. So we've had very strong velocity. The overall market has had, as Harry said, has been super strong this year, setting what will be a record year. Rents are rising. And I think the bigger message is that rents are rising across the board. They're not limited to just the high-end part of the market. You're seeing sort of the more affordable-priced point buildings starting to get some lift in rents as well.

The office to resi conversion phenomenon is something that has had a meaningful positive impact on the leasing environment, particularly for the more mid-priced point buildings. If you look at Third Avenue in particular where there's been a number of buildings that have been taken out of inventory and, therefore, reduced availability, you're hard-pressed to find a good-quality block of 100,000 square feet or more even on the Third Avenue corridor.

So base rents are rising both at the high end and the mid-price point across the board. Therefore, by definition, net effective rents are up substantially. You need to bifurcate between what price point building you're talking about to really understand net effective. So at the high end of the market, rents are probably up 30%. At the mid part of the market, rents are probably up 5% to 10%.

Concessions have leveled off more than a year ago, and we're starting to see some contraction on TI and free rent. So by example, if the high watermark for TI was $150 to $165 a foot a year or 2 ago, today it's more like $145 to $150. Free rent that was in the 16 to 18-month range is now 14 to 16 months. So concessions tightening, base rents rising, and then depending on what part of the market you're talking about, base rents rising dramatically.

And can you touch on any large expirations or move-outs over the next year? And any progress backfilling?

We've sort of suffered through all of our big move-outs. For the next 3 years, we actually have the lowest amount of lease expirations in each of the next 3 years that I can recall in the company's history. We're under 1 million square feet, somewhere between 800,000 to 900,000 square feet overall for each of the next 3 years.

So there's nothing of real consequence that have moved the needle for us over the next couple of years. We're more having success in backfilling where we had vacancy, in buildings like 1185 Sixth Avenue in particular.

Maybe just thoughts on the timing of how the lease percentage versus the occupancy percent gap starts to close?

Yes. For everybody's benefit, we did put out an updated deck of materials available on our website, so you can access that. In there, we put up a chart of where we expect our lease occupancy to be and where we expect our economic occupancy to be by the end of this year as well as looking back to 2020, where you see that the historical average is about 3% gap between leased occupancy and economic occupancy. By the end of this year, we expect to be north of 95% leased occupancy and in the low 90s, I think it's 90.2% from an economic occupancy perspective, meaning the gap is closing, but there's still a lot of juice yet to come. And I expect by the end of '27 to see that gap be much closer to, if not right on top of, the historical average of 3%. .

Maybe turning to One Vanderbilt and SUMMIT, how SUMMIT has been performing through September?

Yes. SUMMIT now proudly wears the badge of the #1 observatory in New York City. So kudos to that team. The summer has been a good one. Weather has worked well. We had to battle some weather issues in the first and second quarter, but SUMMIT has come back strong through July and August and into September.

And we're really looking forward to the SUMMIT Paris project coming along nicely. We now have possession of the space and are building out our space in Paris for an opening middle of next year.

And then Tokyo is?

Tokyo, we announced a deal to open SUMMIT in Tokyo, that's much further out. So we'll give more updates on that over time. .

Maybe out of curiosity, I mean always interested in how have you been able to change the destination from office buildings into resi and in terms of specification of the building, not from a legal or regulatory point of view, but if we think about an office tower, then you've got [indiscernible] in the middle and then you've got the windows and there is only one source of flight. Is it because those on [ certain ] avenues, those buildings are historical buildings, and therefore, they can fit to resi? Or you have -- you note them down and you rebuild?

I think first and foremost, the program that landlords are using to convert office to residential buildings, 467-M, was probably one of the smartest and most forward-thinking policies we've seen out of government in a long time. And we believe as a result of that policy, we'll see somewhere between 25 million to 30 million square feet across New York City be converted from office to residential.

In Midtown specifically, and we do have this in our slides that are published, we believe it's about 4.5 million square feet in Midtown East that will be converted. And those are buildings that were identified by landlords, much like I'm about to explain for us, is viable and feasible candidates to go forward.

We comb through our portfolio to identify buildings that not only could be converted, but that we'd want to convert, right? There are many buildings in our portfolio that could be converted, but there would be no reason to do it. Our portfolio, as we mentioned, is going to be over 95% leased. And most of those buildings, there's no economic reason to convert to residential.

We did identify 1 asset, right? A lot of stars have to align to make it work. Not only is it not have to be more economic to go residential, you also need most likely vacant possession to make that work, and then you need 4 plates and a building that is -- that also works for that conversion.

750 Third Avenue is the project or building that we identified in our portfolio to convert. The building is now vacant. Steve was successful in moving tenants out of that building into other buildings within our portfolio in Midtown East. We own the asset with no partners and no debt. We're in the process now of putting on financing, which should close very shortly. And we're also in the process now of securing a joint venture partner for that project as well.

In terms of what makes that building work, in some ways, we had to take extra steps to actually core-out certain elements of the Third Avenue facing facade and actually move them to the back-facing portion of the project. And that all went into a heavy design between our team, [ Gensler ], the architectural team. And every single one of those projects that's being converted is going through that type of exercise, to make sure that the building works for residential use as well as for an economic mode. Hopefully, that answers your question.

Great. Maybe turning to dispositions. You also announced, as you said, 110 Greene. There are a few more transactions in the capital plan. Maybe if you could provide kind of the update on the timing for these remaining deals?

Sure. So the -- on our last earnings call, I mentioned that we were at 4 of 11 transactions complete or announced. Now sitting here about a month later, we're now at 5 of 11. We announced, as I mentioned earlier, the sale of 110 Greene. That pricing or deal was done at roughly a 5.7% cap rate, for a nearly fully leased building. We are -- that buyer was a 1031 investor.

And I think as I look at the 5 deals over the course of this year, I think one of the most notable elements of that is the depth and widespread type of demand. When I look at those sales, we had a user buyer, we had a core buyer. We had an institutional pension plan by 10 East 53rd Street. And now in 110 Greene Street, a 1031 buyer selling out of a different asset class into office, because they see deep value in the office space.

And so one of -- again, I think the most notable element there is this type of diversification of buyer pool, that this market hasn't really seen in the past 5 to 6 years. And then I'll also mention an Asian Japanese joint venture partnership at 346 Madison.

When I look at the remainder of the year and the 6 remaining assets that are in the plan, we have -- we are in docks on 2 of those deals, and we have a term sheet that should be finalized on Third. So that would bring us to 8 on the year, that we expect to get done this year. That leaves us 3 more remaining for the balance of 2026. One of those sales is a suburban sale that I do not know if it will go forward. That's a very small transaction. I think, notably, it's only a couple of million dollars of net proceeds.

And then the other 2, we are -- one is we're considering some options in front of us and the final deal. We have just launched a couple of weeks ago, that's 245 Park, which we're having quiet off-market discussions and you will not see that be a widely marketed deal. We'll approach that deal the way we've done all of our joint venture sales. We're going to identify the right joint venture partner, at the right pricing and someone that shares our long-term vision for the asset. And we will not rush that process. We will get the right sale done at the right price and the right terms.

So we'll see if we're able to get it done by the end of the year, but we're by no means, especially with all the sales behind us and what we have in the queue for the rest of the year, in no rush to see that get done at this point.

And then, do you have a sense of kind of the different type of buyer profiles? You'd mentioned -- what type of debt financing or how they're looking to go invest in these?

Yes. I try not to speak too much about what buyers are doing or their business plans. Not my place to speak. But in the case of all of these deals, I've seen the user buyer was all cash. In the case of 10 East 53rd Street, my understanding is they put on long-term insurance rate capital -- insurance capital. And in the case of 110 Greene, again, I try not to speak for buyers, but I wouldn't be surprised if they didn't put any financing at all, as it is a 1031, and my understanding of the 1031 composition. But we're obviously all monitoring rates in the 10-year.

So far, we haven't seen any material impact on our market. There are a few big trades that are pending out there, not in our book, but in other people's books. We've always been able to navigate complicated markets far easier when the complicated market is macro than when it's micro. It's much harder to sell when people have redlined office as a couple of years ago. Now it's -- people want to be back in office and they have an allocation for it, but it's just more a negotiation around cap rates, interest rates and where the interest rate environment is. That's a far easier discussion for our team to have and one that our team knows how to navigate very well.

And maybe if you could talk a little bit about the 245 Park financing or the interest in a JV or?

Yes, absolutely. So on the financing, we are in the process or will be very shortly marketing the new financing. We expect it to be a $2 billion financing, which will be an upsize to the existing $1.760 billion financing. I expect it to be all mortgage. We do have significant interest in the bottom of the deal already. We have not yet launched, but there have been inbounds for replacement. We will formally launch in the next 1 to 2 weeks. And our expectation would be to close this financing in October of this year.

On the interest sale, I think I already mentioned that we just started our discussions. We'll be having a series of roadshows over the course of the next 2 to 3 months. And our goal will be to identify the right buyer and the right partner to join us in this venture, with a vision towards 5, 10, 15 years with this asset, not necessarily a 2 or 3-year partner. So that takes time, and we'll also take the right execution.

And then maybe quickly, just jumping back as 750 Third Avenue. Given the high-profile Pfizer building in the news, just curious if there's any kind of additional insurance or paperwork or anything that is impacting office to resi as a result of that building.

Yes. Look, both the Governor and the Mayor, I give them credit, they are fully committed to the office to residential conversions. And the data is clear that New York is leading the nation in this area of conversions.

There's been no indication of any change in that vision from political leadership. I think the political leadership has done the right thing of making sure projects are moving forward, but also keeping a close eye to make sure that they're done safely. New York City has a long history of success when it comes to conversions. This isn't a new concept for us as a market. And I think the developers in this market are highly capable to move these projects forward.

What happened at Pfizer is unfortunate, but I can assure you our team is -- and we had Bob do it on our last earnings call discussing this. taking every precaution necessary to make sure our projects are compliant, moving ahead on schedule, on budget and not taking any exposure or risk to any structural elements or any elements of these projects.

Maybe jumping to your development project ground up 346 Madison. Congratulations on getting a great JV partner. Maybe just kind of latest interest and updates on 346 Madison.

We started to bring the project to market. It's a long process. We delivered the building TCO in fourth quarter of '31. So as we sit here in the late '26, very early in the process. 840,000-square-foot building. An anchor tenant will likely be somewhere around 200,000 square feet. So early days for a tenant of that size to make any commitment.

So first step is we're out educating the brokerage community, showing them our presentation, explaining the project and our time line. And also beginning some early presentations to tenants. The feedback has been great. People love the, obviously, love the location. It's directly -- it's a block away from Grand Central. It's across from BXP's new development at 343 Madison. And it will be a highly amenitized building, like many of our new developments. It will be a very notable architecture that will stand proudly on the skyline with a very unique profile.

And has 2 floors of amenities that I think are going to really sort of set a new standard for a great workplace. We've rolled out rents to tenants, and with the most recent leasing success on high-end buildings in Midtown, tenants aren't shocked by the rents. So it's a building that will trade in the $230 at the bottom of the building and into the 3s at the top of the building. And that's what tenants are expecting for that kind of high-quality product.

And maybe the latest updates on the deployment of the debt fund, what types of opportunities are you seeing and targeted returns?

Sure. We are roughly 50% deployed out of the debt fund. Opportunities, we, as a company, but specifically with this fund, thrive in moments like today, where people are staring at the 10-year and making decisions on credit investing, bond investing. Team is hard at work deploying that capital. Our pipeline today on top of the 50% deployment is roughly another $200 million, that will put us a little shy of our public goal in our investor conference for deployment this year. We're very comfortable though with the deployment so far. We love the deals that we've gone into. I wish we could have more of those exact deals. But we're also very conscientious of credit quality and making sure that we're putting our capital only into the best deals and opportunities.

We've seen opportunities across discounted mortgage purchases, new mortgage investments, mezzanine loans, some preferred equity. We may see some repayments by the end of the year, and we're already tracking for some additional deployment over the coming weeks and months.

So very, very happy with the debt fund. I think our investors are very happy with the debt fund. And I think for us, the next focus is going to be, as we get to the end of the year, what's fun too for us, right? We've built out this registered investment manager, we've really built out our services platform across Green Loan Services, which is now the largest active SASB servicer in the country by a decent margin. We've built out our funds business, which we expect to grow into Fund II and III across varying asset classes.

And then the third segment, which we introduced last quarter, which is Green Property Services, which already had 6 assignments, doing asset management and leasing on behalf of institutional third-party capital, including Monday where we just announced about 2 months ago leading the leasing and asset management effort for 15 Lake Street. So those are 3 business lines all sitting underneath SL Green Asset Management, where we see big opportunity for growth and big fee income growth over the next 2 to 3 years.

Can you just remind us what are the core investment thesis behind your credit fund? Is it primary, secondary? What sort of return are you expecting asset classes. What is your differentiating selling point...

Within the credit fund?

Yes.

The credit fund is primarily focused on New York City commercial real estate, in only credit investments across mortgages and mezzanine, and predominantly...

Primary or secondary?

Secondary market, meaning. I would say what we've done so far is almost, say, 75% in the secondary market, acquiring positions from foreign lenders, from banks looking to trim down positions and buying those positions at discounts...

From a banking perspective it's because it brings them some risk-weighted asset benefit, something like that?

Yes. Look, we try not to, with counterparties, ask them why they're doing things. But if I were to stick to my -- if I was to sort of infer what their business rationale would be, in one case, it was a loan that was in default and, obviously, they wanted to clear an NPL. In another place, it was redemptions out of a private credit fund that needed to be met. In one case, it was trying -- it was a German lender that was actually exiting the U.S. market as part of a larger strategy.

Our job is to be able to move quickly, react quickly and be the first phone call when those opportunities arise. And we've continued to always demonstrate our ability to be the most credible and reliable partner.

What sort of return are you expecting on that?

For gross returns, mid to high teens.

A couple of questions. Steve, maybe one for you. You talked about the increase in net effective rents and base rents going up. When you think about market continuing [indiscernible] what's happening with vacancy rates, do you -- is it fair to ask you around what the pace of rent growth may look like over the next 12 months?

Well, again, I think it's -- you got to divide the market into certain asset classes, quality types of buildings, and then within the submarkets. But at the top end of the market, which has a 3.5% availability rate right now, won't continue to increase by another 15% or more next year. I mean it would surprise me if you didn't see those kind of rents go up. I think the more affordable part of the market will be more modest. So it will be another 5% to 10%.

But where I think you're going to start to see is continued compression on the concessions. As tenants end up doing more renewals or there's spillover from the high end of the market over to maybe the next tier down of buildings, because that's where tenants can find space, you'll start to see some increased flexibility and some improved net effectives in those type of buildings.

So you talked about net effective at $145, $150 today. Where do you think they could go and -- where do you think they could go?

I think it's an impossible question to answer. I think there's nothing to slow down in this market right now other than a macroeconomic event. There's no conversation in the brokerage or tenant community say that tenants are thinking about leaving our marketplace because it's too expensive. There's no initiative by the city or governments to say, let's bring on tax incentives so that we see new increase in supply.

So the fundamentals are so strong as to suggest that you'll see more redevelopment of existing buildings. You'll see continued conversions of office to resi, which will shrink supply. So where that takes us, I mean, it puts us in a very good spot. I think it'd be Harry's job talk about where we end.

Well, I think the important piece there is just inflation that a lot of this market and economy have seen, we haven't been the beneficiaries of that. And we're just starting to -- in the early innings of feeling those benefits. So as Steve said, subject to some macro event that pulls the economy back, we looked at some data with [ Eastdale ] yesterday in reference a similar question. Rents for big corporations in New York used to be something around 4% to 5% of their overall revenues. Today that's sitting between 1% to 2%. And so that's a dramatic drop if you look at a denominator effect. The denominator effect is playing right to our business model.

We've got very good control of our operating expenses. But there's a big opportunity for growth in rents because as supply continues to constrain, especially in good buildings, it gives a lot of pricing power to landlords. And there is that tolerance, right? I mean we're not up against what were necessarily much bigger levels. There's a lot of tolerance that we're seeing out of tenants.

Would you take a guess, if you went from that 1% to 2% now back to the 4%, what the rent growth would be? Is that too hard to...

In theory, that's -- I mean, is my math wrong, I think that's double. I mean that's just double. To answer that trick question, that would be double, I think.

Unless revenue falls.

What was that?

Unless revenue falls.

Yes, yes. Exactly.

And maybe one last quick one to build on that point of [indiscernible] the macroeconomy. So if rates stay where they are, right, they just kind of hang out around 5%, does it change at all your approach or strategy to future refinancing in terms of how you may tackle some of that?

Yes. We're pretty aggressive when it comes to hedging strategy. We have been over the last several years. And when we came into '24, '25 and particularly '26, we thought we would find some ability to relieve a little bit of the hedging. And we were traditionally more flow. We went heavy, fixed and pre-hedging some of the refinancings we're doing. We thought we would relieve that, let some of the hedges burn off and go back to flow. And that hasn't happened. So we've continued to maintain a very biased fixed rate mentality. The financings we're doing now, we're prehedging, by and large, months before we execute on the financings. We're forward-hedging some of the hedges that are rolling off to allow us to protect against some of the floating rate corporate debt.

So it doesn't really change the financing perspective. Our perspective has always been try and get ahead of the financings early. We did a lot last year. We have another $7 billion we've done this year. And frankly, we got most of that behind us before rates really took the 100 basis points increase that they have over the last couple of months. We're set up pretty well headed into '27 and '28 with limited maturities. So it's a function of how much do we want to regulate or manage that fixed float composition.

Unfortunately, we're out of time, but I'm going to sneak in 3rapid-fire questions we're asking all the REITs. Number one, if long-term rates stay higher for longer, which has the biggest impact on your sector's earnings: higher refinancing costs, lower transaction activity or less new supply?

I'll go with less new supply for sure. I think for us, it takes a long -- I know it's a rapid, but I think it's an important question. I'm not going to go rapid. I think it's the biggest tailwind we have right now in our sector, especially New York, is it takes 6 to 7 to 8 years to plan and develop projects. We've scoped out, it's all out there, what can be delivered through NAV through 2032 in the most optimistic scenario and the inventory netting against office to resi conversion is actually negative. And as interest rates go higher, which makes sort of projects that are not of the highest caliber developer harder to develop, I think that supply will dwindle down and I think the rental appreciation that we're talking about is going to be significant.

Over the next 3 years, will third-party capital become a more important source of growth for public REITs than balance sheet capital, yes or no?

Yes. And I think we're at the forefront of that.

Then for your sector, will 2027 same-store NOI growth be higher, the same or lower than 2026?

Higher. Materially.

Thanks, Matt. Thanks, Harrison.

Thank you, everybody, for joining us, and welcome to SL Green Realty Corp. Second Quarter 2026 Earnings Results Conference Call. This conference call is being recorded. At this time, the company would like to remind listeners that during the call, management may make forward-looking statements. You should not rely on forward-looking statements as predictions of future events as actual results and events may differ from any forward-looking statements that management may make today.

All forward-looking statements made by management on this call are based on their assumptions and beliefs as of today. Additional information regarding the risks, uncertainties and other factors that could cause such differences to appear are set forth in the risk factors and MD&A sections of the company's latest Form 10-K and other subsequent reports filed by the company with the Securities and Exchange Commission.

Also, during today's conference call, the company may discuss non-GAAP financial measures as defined by Regulation G under the Securities Act. The GAAP financial measure most directly comparable to each non-GAAP financial measure discussed, and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on both the company's website at www.slgreen.com by selecting the press release regarding the company's second quarter 2026 earnings and in our supplemental information, including in our current report on Form 8-K relating to our second quarter 2026 earnings.

Before turning the call over to Marc Holliday, Chairman and Chief Executive Officer of SL Green Realty Corp., I ask that those of you participating in the Q&A portion of the call to please limit your questions to 2 per person. Thank you. I will now turn the call over to Marc Holliday. Please go ahead, Marc.

Thank you very much. Good afternoon, and thank you all for joining us. It may be the dead of summer, but our team is, of course, hard at work. This is truly when we shine the brightest, completely dialed in on our business plan and outworking the market. That hustle really showed up this quarter. Much of what we predicted at our investor conference in December is now playing out in ways that directly drive earnings and improved cash flow. We forecasted that the leasing progress we've made over the past 2.5 extraordinary years would become apparent in our economic occupancy, and it certainly did this quarter, up a remarkable 300 basis points as concessions continue to burn off and overall vacancy dwindles. At the same time, we're putting the significant leasing costs associated with the lease-up behind us and leverage and coverage ratios are improving, which we also saw in the second quarter.

On the leasing front, the story remains the same, a growing scarcity of premier space in desirable Midtown districts has turned the tables in our favor. We now know that we'll exceed our leasing goals again this year. It's just a question of whether it will be by a wide margin or a really wide margin. We don't have that visibility yet. So it's too soon to reforecast, but the trend continues to move in the right direction.

We are also seeing very positive momentum at SUMMIT, both here at One Vanderbilt and on our projects around the world. Even with reduced overall tourism in the city this year, we enjoyed the highest attendance amongst all of our competitors and introduced a number of new ticketed experiences that we expect will continue to drive revenue. We are on track to open Paris next summer in 2027 and in Tokyo in 2030 as we continue to see enormous growth potential for this business.

Most importantly, the backdrop to our performance this quarter and moving forward is the extraordinary and prolonged surge in business activity in New York City. Our economy is in a league of its own compared to any other CBD in the country or indeed, even the world, driven by financial services sector performing as well as I've ever seen it. Wall Street profits hit $21 billion in the first quarter alone, the second highest first quarter that has ever been recorded in approximately 40-plus years of tracking this metric. The Big 5 money center banks just reported and second quarter profits are up a whopping 50% year-over-year, and that's coming off a very strong year. Office-using jobs are up by 12,000 year-to-date according to the city's OMB and a strong showing for only 6 months of the year with further growth projected for the balance of the year.

We've also seen tech growth driven by AI, and we're obviously getting more than our fair share of those leases, including the lease we announced last night for 100,000 square feet at 11 Madison. It's not just the financial services and tech. It's truly a broad-based growth in demand momentum that we see here in the city. As just one example of the health care sector continues to grow and added 20,000 jobs year-to-date, many of which do land in office space like MSK at 885 Third and the hospital for special surgery at 1520 First, and NYU has a significant -- NYU Medical has a significant footprint at One Park.

New York City-based companies raised $10.8 billion in venture capital funding in Q2 alone, and that brings it to $21.1 billion year-to-date. Both of those metrics are double the same respective amounts in the measurement periods in 2025. The city is, I think, experiencing one of the largest resurgences I've seen. The tax receipts are very good. The city just passed its budget in June. It's another balanced budget with rainy day reserves. And I feel like we're in very good standing. And this is what all adds up to about 50 million square feet of office space leased in the past 4 quarters that has to be a record. It was a very strong quarter. I'm incredibly proud of our team, and I remain very optimistic about the direction of the city and the economic activity that supports our performance.

Finally, before we open it up for questions, I want to address our big guidance revision for this quarter. The revision is great news and certainly represents the culmination of efforts not just over the past 3 months, but over the many years leading up to this. We've executed a deliberate strategy to invest what was needed to move our occupancy back towards 95%, and we're now reaching a positive inflection point. This should not be a big surprise since we forecasted this positive momentum back in December. Maybe the magnitude is even more than we expected, but it's obviously a pleasant result. Matt, if you would, please elaborate on the underpinnings of this significant guidance revision.

Thanks, Marc. It is clear we have had a fantastic first 6 months of 2026, exceeding our expectations on several fronts, including our second quarter reported results. And we are excited to be able to translate these successes into a significant upward FFO guidance revision of $1.20 a share, more than 26%, the vast majority of which is recurring.

In the Manhattan office portfolio, revenues benefit from strong leasing, particularly early renewals and the lease are pre-built space, both of which have immediate earnings benefit, along with a conscious effort to accelerate GAAP revenue recognition by delivering space to tenants more rapidly, which is coupled with phenomenal expense containment as always by our operations team to drive $0.20 a share of incremental FFO in 2026 from the real estate portfolio, 10% of which we recognized in the second -- $0.10 of which we recognized in the second quarter.

While visibility into the execution of the remainder of our 2026 business plan over the next 6 months also provides us the opportunity to generate additional fee and other income, which we expect to contribute an additional $0.20 a share of FFO. Now if we had simply increased FFO guidance by $0.40 a share for these operational successes, we would have been thrilled. That equates to about a 9% increase at the midpoint. But because we built one of the most successful and more importantly, profitable buildings in the country here at One Vanderbilt, we're able to add another $0.80 of recurring, not onetime, FFO to our guidance revision. This property has generated so much cash flow that we repatriated all of our invested equity long ago. That cash flow in excess of our share of GAAP net income at the property caused the carrying value of our investment to go negative. GAAP allows you to carry a negative basis, but only up to the value of any known or potential tenant obligations.

At the end of the first quarter, our negative basis reached a maximum allowed under GAAP. So starting in the second quarter, One Vanderbilt's incremental FFO contribution is calculated based on the sum of 2 things: first, amortization of the negative carrying value over the term of the related tenant obligations. This amortization component alone is approximately $21 million a year through the early part of 2031, plus the difference between cash distributions we receive from One Vanderbilt and our share of GAAP net income. Going forward, every dollar of cash distribution out of One Vanderbilt, that's in excess of GAAP net income, is incremental FFO to us.

The total of these 2 components contributes an additional $0.80 a share of FFO in '26, $0.35 of which we recorded in the second quarter. And based on current projections, is to contribute -- is expected to contribute as much or more to FFO next year. The way I look at it, this is essentially flowing deferred cash profits from the project through earnings and further evidence of the incredible success of One Vanderbilt. More importantly, a testament to the hard work of the best employees in New York real estate that work here.

With that, operator, we can open it up for questions.

[Operator Instructions] Our first question will be coming from the line of Nicholas Yulico of Scotiabank.

Maybe if we could start on the leasing side, the mark-to-market, again, this quarter was strong, above guidance. Can you just talk about what the specific buildings driving that activity submarkets? Or is it actually just sort of a broad-based improvement?

Well, it's -- let's start with, it's a broad-based improvement. But then within that -- within the portfolio, there's some particularly notable transactions and buildings that are really seeing rent appreciation. Anything on Park Avenue, we've raised rents dramatically. 6th Avenue, for instance, 1185 6th, rents are up dramatically. And then across the portfolio, we've been consistently raising asking rents throughout the year. So 245 Park Avenue, where we've done a lot of leasing this year. We've got some deals pending to replace some tenants that at OVA rents are going to be up dramatically. So I think what we saw this quarter, we're going to see it again next quarter.

And then second question is just going back to One Vanderbilt, 100% leased. And as we think about it, I know you've said before there's a significant mark-to-market embedded in that asset. Is there any opportunity to perhaps move an existing tenant to 346 Madison, your new development project, and unlocked some of that mark-to-market in One Vanderbilt through that process?

Well, less so -- moving -- it's a little early to talk about 346 Madison since it's 5 years away. But there is -- there are opportunities that we're pursuing for tenants that have either outgrown their space and we're recapturing some of those spaces and then accommodating tenants that need expansion space in the building. So we've got several pending transactions and you'll see those leases I expect to sign this quarter, and the rents will be up to really, I think, illuminates the fact that the building's in place rents are well below current market.

And our next question will be coming from the line of Alexander Goldfarb of Piper Sandler.

Two questions. Marc or Steve, the pace of this office recovery is just -- it's incredible. I mean it's like what the dot-com was, maybe even better. Is it solely just the lack of supply? Or what do you think is causing companies to clamor for so much space so quickly and even be willing -- like it's just -- as I say, it's -- we haven't seen this in decades and just trying to understand if it's lack of supply or something else?

Four things. One, the economy in New York City is doing extremely well. And profits drive growth, growth drives demand for space. It's broad-based, as I mentioned earlier, and there's no sign of abatement right now because things are really just firing on all cylinders across almost all sectors and that is kind of like the tip of the spear, if you will. Second, we just are in a situation where there's almost no addition to space to speak of in a 400 million square foot market, and that's really looking out over the next 5 years or so. And that's because a lot of projects during 2020 and 2024 either got delayed or shelved or changed or whatever.

And as a result, you just can't flip a switch and produce that space. It takes a lot of time and effort and money and foresight to be able to open up the inventory. This isn't like one of those borderless markets that are out in other CBDs around the country where you have constant new product replacing old. Here, it's much more delta, especially in a fully built out Midtown. So scarcity, I'd say, is the second major issue.

Thirdly, you had companies that were just sitting on the sidelines uncertain as to what direction they were headed, and we had some very lean years back in 2020 through 2023. And then now we've been the beneficiary, especially in '25 and '26 of just companies that have plans for the future that are so ambitious and so affirmative that the issue we face right now is not just delivering space, it's giving tenants confidence that once they lease space, we'll have more growth options for them, either within those buildings or surrounding buildings to satisfy their future growth needs. And it kind of feeds on each other, and it's turned into smart businesses wanting to put away their long-term space plans for 10, 15, 20 years now and not have to deal with the unknown down the road.

And I would say fourth major point is convergence. You heard me on this back in '24. This was something I identified as what I thought was going to be one of the most significant trends in favor of diminishing office supply and sort of a winnowing of secondary and tertiary office space being converted into primary and very attractive residential space and much needed rental apartments. And as a result, you have an inventory that's actually dropping and is bringing up the middle and bottom of the market into rates that become economic for the business.

So that's why Steve said earlier, we're experiencing rental growth across all facets of the business. So I think that taken together really should not be surprised because we've been on these themes for months and months, maybe years and years. And I think what you're just seeing is that playing itself out in a very predictable way. And as long as the economy stays robust as it is, we don't see this abating anytime soon.

And then -- so Marc, just on that point on the office to resi conversions, do you see most of that pipeline continuing on? Or is your view that we'll suddenly get a bunch of buildings that were planned to be converted come back to office and maybe that's competition?

That's an interesting question that we'll have to see play out. I'd say right now, for the projects that have been what I'll call lit and/or have been permitted or about to be permitted, I think you're going to see them all go through as conversions because before I would say the economics were in favor of residential. I'd say office at that segment of the market is closing the gap. And maybe it's getting closer to a push, but you have to remember, aside from just the pure economics of rental value and cost to convert, you still get a pretty strong financing edge with residential where spreads are tighter than office and a stronger cap rate environment to sell into or JV into as you saw on 7 Dey, I think the cap rate was about a 5% or 5.1%. And that's -- I think some projects will command better than that depending on location.

So I think the gap is narrowing, but still tilts in favor of conversion for a number of these buildings. But that could change in a year or 2, and you may hit an equilibrium.

Our next call and question will be coming from the line of Steve Sakwa of Evercore ISI.

I know you guys had an ambitious debt refinancing and capital markets transaction program for '26. Could you maybe just kind of give us an update kind of where you are on refinancing and asset sales for the year?

Yes, sure. So just talking about the capital markets more broadly, I would say the shifting macro landscape since the start of the year and the resulting benchmark rate widening, they've tried to interfere with the natural trajectory of the market. But these are moments where New York City shines. Marc always says New York City is the AAA investment of our sector. So despite not having the wind at our back, we continue to see what I would call unending domestic and international demand for quality Midtown Manhattan product. Just this morning, we saw a report that was issued and published in Crain's about how Manhattan's investment sales market jumped 50% annually in the first half of the year, which marked the strongest first half of the year since 2022 when interest rates were just starting to rise.

So when we look at transactions over this past quarter, the development sector, we completed our partnership with Mori Building at 346 Madison. This is our third transaction with Mori Building. Mori is a remarkable partner. They've been -- they're incredible developers and visionaries and we're proud to be able to launch this project with them. We shook hands on our partnership within only a few months of us closing on our acquisition. I think that really speaks volumes to the quality of what we will be building and the trust between our 2 organizations.

In the core office sector, we entered into a contract to sell 10 East 53rd Street. That cap rate was approximately 5.7% for a side street building. That sale will complete a successful transaction for SL Green. And notably, it's about a 3.5x multiple on the acquisition of our partner's interest in 2024. And another example is our good friend's purchase of Park Avenue Plaza, which was a highly competitive process, and that's on the heels of their purchase of 623 Fifth. And then in portfolio deals, I assume everyone has seen the rumors in the press regarding a potential transaction for the Hudson Square portfolio.

So I would say, most interestingly, much of this quarter's demand was driven by domestic and long-term investors in our sector. Most of those groups were on the sidelines for quite some time. So between availability of debt capital, the strong fundamental performance that you've been hearing on this call and the diversity of investor base that we saw this past quarter, I would say this is one of the better investment sales backdrop we've seen in quite some time.

With respect to our program, more specifically, we've completed or in contract on 4 of the 11 deals in the plan. I expect we will be announcing 2 additional deals soon. And then we're going to get started on the remaining 5 deals that are in the plan. As most of you know, our disposition plan this year was weighted to the second half as we strategically launched sales throughout the year, and the team is gearing up to launch on those remaining transactions.

We can talk more about the debt capital markets, but I would say specifically to our plan, the next one up in the queue is 245 Park. That one is in advanced stages right now, and I expect that we'll have more to announce and discuss in the coming months.

Marc, I don't know if you could maybe just comment on 1515 Broadway. I know you were disappointed with the casino outcome. But have you guys kind of given more thought to sort of the long-term plans for that building? And if so, when do you think that kind of takes more shape?

Yes. Look, we shook off the disappointment back, I guess it was last September, I want to say, amazing how time goes so quickly. It's a shame because I think we would have been close to open when we all would be walking into the casino. But since then, we've had the opportunity to assess a lot of plans. And what I've come to appreciate even more is that we're in a very good spot, I think, with 1515. One, Paramount, after being acquired by Skydance and now having an agreement to merge in with -- or acquire Warner Bros to create, I think, one of the most powerful and largest media companies in the world.

One of the most powerful media companies in the world, puts 1515 kind of squarely back in the mix for longer-term use by that combined entity, I'll call it Skydance for the moment. I don't know that they have their plans all sorted out yet. My guess is not from what -- from the conversations we had and also given that, that merger is not yet closed. But certainly, the combined entity is going to employ, I think, more than 4,000 people. I think a lot of those jobs can and will stay, hopefully, in New York City, and we would expect to be a net beneficiary of that.

Now with all that said, you have to remember that the debt is on rapid amortization over there. So at the expiration of the Paramount lease, we have very low debt outstanding on that particular mortgage, which again gives us flexibility to consider other types of conversion options to maximize entertainment uses, which I think is really highest and best for Times Square and for that asset. Signage opportunities far in a way above what currently exists and really make it kind of a mixed-use destination, entertainment, theater, live theater, live music, media, office, capital of Times Square.

So I think there's going to be a lot more to say on that. Time-wise, Steve, I think is next year because I think, like I said, until things are clearer with our primary tenant over in that building, or sole tenant in that building, there won't be a lot to do. But I think as soon as that transaction is culminated, we could be very active over there. And I'm very positive on that particular property right now.

And our next question will be coming from the line of Tom Catherwood of BTIG.

Marc, I want to go back to something you said in your prepared remarks when you were talking about the step function in economic occupancy in 2Q. Maybe view it from a different angle. We think of vacancy leasing and how it eventually drives economic occupancy, but there's a good portion of your portfolio that are leases that were signed 2020 to 2023 when tenants were focused on shorter-term renewals. Do you have a sense of kind of for that portion of COVID vintage loans or leases kind of what's the embedded mark-to-market on that, that maybe it's not reflected in economic occupancy right now, but in the next year, 2 years, 3 years, really starts to roll into the numbers?

Yes. I mean, look, I don't have that number, and I'm looking at Steve and Matt, and they're not giving me the high sign here that they have it. So I'm going to give you a little bit more gut and instinct. I would say I'm going to give you a broad range between 10% and 20%. I think just given based off of our increases in our asking and taking rents that Steve referred to earlier. I have a better sense building by building how we've moved rents up sort of incrementally over the past 2, 2.5 years.

And I think typically, the range of increase is minimally 10%, probably as much as 15% or 20%. I mean I don't know, building like One Vanderbilt worth more than that, but that's -- we're fully leased here. So I would say a safe bet is 15%-ish on when those -- what you call COVID year leases come up for renewal. But I'm giving you that more touch and feel than like I don't have the numbers in front of me. but I don't think it's less than that. Steve, do you have anything there?

Yes. I think there's a couple of thoughts with regards to it. A lot of the deals that we did during COVID were even shorter term, like we're 5, 6 years past COVID at this point. So a lot of those deals we're doing at that point in time were 3, 4, 5 years, one. Secondly is, if you'll recall, the net effectives may have dropped more than the face rents. Face rents were probably down about 10% from where they were at the end of -- beginning of 2020. And since that time, face rents have dramatically increased throughout the portfolio. And certainly, as our portfolio -- the complexion of our portfolio has changed over the years, you're seeing much bigger rent appreciation on parts of the portfolio, particularly Park and 6th Avenue buildings.

And with the stabilization of concessions over the past 1.5 years, the net effectives -- not only are the face rents going up, the net effectives are going up as well. So I think we're probably past the moment in time where those kick-the-can deals, those leases have probably already come back, and we've attended to them as part of our leasing over the last couple of years. Particularly if you look at our rollover schedule over the next couple of years, we don't have any big chunky expirations. Certainly, nothing of consequence this year that's not already being attended to. And our largest lease next year is like 150,000 square feet, and that's one lease.

Yes, but with that said, we're going to be mining opportunities that are noncontractual. I mean that's really I think you're going to see the growth come from is really 3 things -- 4 things. One, nominal face rent increases. Steve, and I just spoke about that; two, stabilized lease concessions for new deals, maybe even slightly contracting; three, a much higher prevalence of renewal to new -- well, renewal to new; as we go forth, which we're saving considerable. That's where your net effective rents are going to be far higher than 15% to 20% because you're getting that kick on face rent and then you're getting a compounded effect on reduced TI and free rent.

And then lastly, we're mining the portfolio for every expiration between now and 2032, I mean, we are out there like 5, 6 years forward, hitting every tenant right now trying to do blend and extend deals early renewals, trying to get blend in rental uptick and defer out some capital costs. And I think you're going to see in the second half of the year, we're going to get some good traction there.

And so all of that is what we are busy at work on. I mean, when the -- you got to hit the market when the market is there, and we recognize that. And we're not just focused on the next year or 2, we're focused on the next 5 or 6. And with an intense eye on saving capital dollars and trying to max out face rents.

Got it. I appreciate that color. And then last one for me, maybe, Harry, I just want to touch on the debt fund. You've had success deploying capital there. But how do you see that opportunity set potentially evolving as New York market continues to improve and traditional lenders start to get more comfortable with office? Do you have to focus on a different part of the cap stack or kind of shift strategy in any way?

Yes. Look, so we've done approximately $600 million of deployment through, call it, yesterday. We have a handful of opportunities in the pipeline today that we're working through. And I think these are moments where our team shines. I mean we had obviously a lot of opportunity in front of us last year and the beginning of this year as the capital stack start to tighten. For us, this is now about financial engineering and working with senior lenders trying to get the tightest senior financing, much like the execution you saw us do on our balance sheet years ago at 550 Madison.

And this is where we go out, work with our relationships. There's a deal we just closed in the debt fund. We're not disclosing transactions in the debt fund, but there's a deal we just did, where we went out, originated the entire stack, syndicated out of senior, syndicated out of a subordinate mezz and we're able to get to our yield requirements. So for us, this is where our team focuses on our relationships and build capital stacks to get to our yields.

Our next question will be coming from the line of John Kim of BMO Capital Markets.

I wanted to follow up on what drove the $0.20 of operational uplift this year and what surprised you? You didn't raise same-store occupancy guidance. I'm assuming a lot of this is timing and the economic occupancy is moving up, but is it purely just a better renewal rate in terms of retention of every tenants and more leasing of prebuilt space? I'm just trying to understand why such a big uplift relative to expectations?

Sure. Yes. I thought I hit that in the opening comments, but it's -- you reiterated the biggest ones, and Steve and Marc highlighted that as a catalyst to what we're seeing renewals and early renewals. If you're looking at NOI, right, we're very focused on GAAP revenue recognition and economic occupancy, renewals and early renewals are instant gratification when it comes to GAAP revenue recognition. And we're doing more of those. We've also made a conscious effort because we talk about turning on GAAP revenue recognition is triggered by the turnover space to tenants.

We are working with our tenants and our own team is hustling to try and turn over space even faster so we can turn that earnings spigot on. And then just from an expense perspective, we budget very conservatively. We're ahead on expenses. And the combination of those things at $0.10 of the $0.20 we already recognized in the second quarter. That was $0.10 ahead of our expectations just in Q2. So you have $0.10 left for the balance of the year, which is a combination of those handful of items.

Okay. And then I also wanted to follow up on the refinancing plan for the year and in particular, 245 Park. The leasing has been very strong. The redevelopment is underway. But now with the tenure moving up above the assets mortgage rate, how does that impact either the timing of some of the refinancing or sales and the valuation of the asset?

Sure. So just I spoke earlier about equity capital markets and a bit on 245, but let me just talk about the credit markets more generally. We continue to be encouraged by the strength of what we're seeing in the credit markets. We've seen approximately $11 billion of CMBS originations year-to-date. That figure, same period last year was about $8.5 billion. The 2 biggest deals that got done this past quarter was the $1.9 billion financing of 2 Manhattan West, I see the $1.8 billion financing of 9 West 57th Street. And I think what's -- one of the best data points that we've seen out there is really this tightening of the AAA spreads.

We're now seeing AAAs tight in sub-100 and overall spreads on the deals that are getting done are in the mid- to high 100s depending on last dollar LTV. And I would say, interestingly, when you compare it across all asset classes, spreads on single borrower CMBS AAAs for trophy office are now trading in line and in some cases, inside of what we're seeing for spreads on industrial, multifamily and self-storage.

So I think the bond market is starting to appreciate what we're seeing in the trophy office asset class. We're going to be big beneficiaries of that on 245 Park financing. That's in process now. And I think you'll see a lot more illumination on that as we launch the rating agencies and data becomes public. But I would say from a spread perspective, we're very confident in the execution that we're seeing. Of course, the benchmark, as you noted, is not cooperating with us, that's obviously outside of our control. But Matt can speak to some of the hedging that we're putting in, in place to ensure that we have proper protections at the right times in the market.

Yes. As has been customary for the last few years in this rate environment, we are maintaining a very cautious stance when it comes to rates. We're hedging out well ahead of time financings like 245 to protect against rising rates. The bulk of our debt remains hedged as well. We were, at one point, 70-30 fixed to flow. We remain more like 90-10. So hedging existing and hedging forward for the foreseeable future.

And our next question will be coming from the line of Blaine Heck of Wells Fargo.

Sorry if I missed this, but just on the leasing pipeline, I think it stood at 900,000 square feet last quarter. Can you give us an update there, the mix between new and renewal and how much of the renewal activity is pull forward renewals?

Well, there's a 900,000 square foot pipeline. It's roughly 50% new, 50% renewal. And of that 900,000 square feet, 400,000 square feet of it are leases that are in active negotiation and essentially very far advanced negotiations, I'll say, and the balance are term sheets, which we expect to convert over to leases. As far as the renewals, most of the renewals are, I would -- I don't have a perfect answer to it, but they're near-term renewals. They're not early renewals for the majority of that square footage.

Great. And then second question, just a follow-up for Harrison or Marc. Can you just walk us through the thought process you all had or went through kind of 346 Madison. Was there any consideration of either selling a smaller stake or waiting for some leasing activity to potentially push the valuation a little higher? Did you just see this as something you wanted to do for timing or relationship reasons?

Well, I mean, we did it first and foremost for business reasons. I love fully capitalized deals, development deals. You never want to take for granted a moment in the market. And we do have very special relationships with many of our JV partners, Mori Building on 346 Madison, certainly, certainly among them. And we've gotten to a point with many of our co-investors where it's a symbiotic relationship where we count on their partnership and they count on our delivery of opportunities in this city, which are the good ones are few and far between. We were able to get our standard package, if you will, of JV enhancements for being the ones to source and execute the deal. But in the case of Mori Building, they're also a really good codeveloper. I mean these are folks that have built as much as anybody in Tokyo, Azabudai Hills, Toranomon Hills, Roppongi Hills. These are fabulous investments. I think there'll be opportunities for us each ways, both opportunities for us and for them.

We had their commitment early on. There's a lot of planning that needs to happen and happen early. And having a good partner like Mori together with us at the early stage makes the entire development go much easier. We reserved enough that we plan in the future to probably syndicate equity further down the line, maybe when we sign our first leases or maybe when the project is completed or maybe when it's recapitalized, that will be for a later date. But the combination of derisking through capitalization day 1, getting the kind of economic deal we set out for and then some, point 2.

And the solidification of relationship, point 3, and on we go to the next one. I mean, this is -- we are a volume shop. And while developments are bespoke and long term and they get a lot of our senior level attention, there's lots more deals for this company to do in this market, both long term and opportunistic. And we want to be flush with capital to take advantage of this market. And I think we've proven our ability to do so over our decades in the business, but certainly over, I would say, the past 3 to 5 years. And we're happy with how it turned out.

And our next question will be coming from the line of Peter Abramowitz of Deutsche Bank.

First one is just, in relation to the guidance raise and this kind of expected ramp in NOI and fee income may be faster than you were expecting at the beginning of the year, just wanted to ask, how does that sort of impact when you think you'll start to see an inflection in FAD? I think previously, you've kind of messaged that the expectation would be end of '27 or early 2028. But just curious for any updated thoughts on that in relation to the guidance raise?

Yes, I would say we're -- the trajectory that we're on is slightly ahead, but '27 into '28, with the breakeven point in '28 is still the path that we are on at this point.

Okay. And then a second one, just on SUMMIT. I think Marc, you had some commentary around tourism, maybe being a little bit weaker in the city this year. Just on SUMMIT, I'm kind of curious, was there any noticeable impact from World Cup travelers in the second quarter and into the third? Sort of how are you thinking about that impact as it relates to the full year results?

Yes. Well, look, I mean, the FIFA games, there were 8 of them, including the much-watched finals. And there was definitely a bump that I think all hospitality got from those events. It's hard for me to parse how much of that was FIFA-driven versus we're in the heat of the summer right now, and SUMMIT typically does very well June, July, August. And certainly, I look at the numbers daily, and the past, I would say, 4 weeks in particular, have been very strong. Ticket sales -- daily ticket sales exceeding 400 and some-odd thousand a day is fairly typical. So that's -- those are like end of year holiday numbers, so I'm happy with that.

People love SUMMIT. It's all ages, all walks of life, domestic tourism, tri-state residents, foreign tourism. People love going. They repeat, they go back. I think our year-over-year attendance numbers are down a few points, but really modest because most of that was in the more challenging beginning of this year when we're up against weather and other issues. But I would say, since May, numbers have been sort of right back to where we had them. And I'm hoping and expecting that through the ability to manage variable operating expense and also have a big second half of the year that we'll finish up right on our numbers, which are market leading.

They're well ahead of the other observatory attractions, both in terms of average ticket price and attendance because it is a very special experience that I'm now excited to be bringing to major cities like Paris and Tokyo and more to come. We've got a lot in the queue and maybe more on that in December because I always like to hold something back for December. But we're hard at work trying to bring SUMMIT to everyone around the world for people who can't get here. And I think it's going to be -- it will just, the momentum will build and the experience will get even better and where the team is very excited about the future.

And our next question will come from the line of Anthony Paolone of JPMorgan.

Maybe give us a sense of cap rates and what to expect on your dispositions over the balance of the year, maybe and maybe even bucket them depending on whether it's things like maybe a 245 Park stake or resi or something like that?

Look, for competitive purposes, obviously, we wouldn't want cap rates on any specific transactions out there. I think the best data points to look at right now are what we completed. We just announced 10 East 53rd Street. That's a core office building on a side street and that got done at a 5.7% cap rate. We announced 7 Dey. That's a core residential asset that got done at -- residential and retail, that got done in 5.0%. And I think you'll continue to see assets trade in those types of ranges, but I don't think we'll go along any specific number or tied to any specific asset at this point.

Okay. And then just my other question on 750 Third and 346 Madison, you obviously had the incident with the other conversion close by on 750 Third and then there's some press on 346 Madison that maybe a neighboring properties delaying you or something. Just can you comment on just the progress on those 2 deals and whether anything gets interrupted on either of those in terms of time line or plans?

Okay. Let us make sure the question is 750...

And 346 litigation has been...

That's 2 questions. Okay. 346. What?

Litigation.

So 750, I want to make sure I got the question. We are -- I've got with me, Bob, we had a question about what are we doing over at our building to ensure integrity of the execution or what happened over...

It was, do we see any interruption on our project at 750?

Okay. No, there's no interruption on the project debt or equity capital from what took place at a property on 42nd Street, which I assume many of you are aware of what happened there was basically, as far as we know, it's not yet official, human error. And something that has 0 extrapolation to our project, and therefore, our debt and equity is not impacted by that in any way. We expect to have that transaction closed in the third quarter, both debt and equity. We're on a path. We feel -- I feel great about the project. I think it will be the top rental project in that, let's call it, midtown, I don't know, which -- in that particular Third Avenue Midtown submarket has expanded all the way over for -- to second and to first.

It is -- the design is extraordinary, the amenity package we have for that building is like none other. We're having a lot of fun with it, and we're able to do it in a way with domestically sourced products to keep it within our original budget, which I think was around total cost $800 million plus or minus.

I've got my head of construction here, making his debut after 122 conference calls that we've done since 1997. Robert DeWitt, the man behind the curtain who shepherds under Ed Piccinich's watchful eyes, our developments at One Vanderbilt, One Madison, now 346, certainly the conversion on 750. Bob, a little bit -- just a minute on what controls we have in place at 750 to ensure structural integrity, which, on a project like 750, is actually, I'm going to say, a fairly easy lift for us relative to the kinds of things we've done at One Madison elsewhere, but I think it could be illuminating if you can share that.

Sure. Thanks, Marc. Thanks for the intro. So we have numerous layers of oversight, review, inspection and approvals before any structural demolition or overbuild is authorized to proceed. We've got a world-class design team, independent and major New York City construction manager, third-party special inspectors as well as our own dedicated staff overseeing the day-to-day execution of the project. We have extensive procedures in place to track the execution of the structural reinforcement of columns and beams at all levels of the project. Ultimately, each location is tracked with detailed photographs and logged electronically in our online tracking software by our construction manager and design team.

Once reinforcement is confirmed, complete by the subcontractor and the construction managers, an independent third-party special inspector performs their inspection and confirms the work is complete per the plans of specifications before any further work can complete -- can continue. And finally, no structural additions, demolition or overbuild activities are permitted to commence until all required structural reinforcement has been completed, all inspections have been approved, all tracking documentation is in place and verified and all structural stability requirements have been satisfied and confirmed in a pre-transfer and pre-overbuilt conference that includes all members of the design team and development team.

This process is not only standard for our 750 project, but any project we complete across the portfolio and involve structural overbuilder or structural work.

Thank you, sir. So that is where we stand on 750. As to -- I think the question was on the 346. The litigation you're referring to is the -- is for some access across the -- to adjoining building. That's fairly, I hate to say, routine in New York City development. There should be a lot of neighborly love and access, but you often have to make a visit downtown to lay out the parameters of exactly what level of access, monitoring, building protection, et cetera. We did it on OVA. We've done it on other buildings. We did it here. When people build next to us, we're on the other side of that. And I think that will all be sorted out next month, in August. Ahead of our demolition, we anticipate no adverse outcome and no adverse impact on timeline.

And our next question will come from the line of Seth Bergey at Citi.

I guess just a first one, you kind of, you did a $14 million of buyback activity in the quarter, and I know the dispositions are kind of back half weighted. I guess just thinking about the use of those proceeds, how do additional buybacks compare to your goals of debt pay down on a relative basis?

Yes. Our goal is to make the most with what we have. And that takes different forms at different times; development, opportunistic investment, buybacks, debt pay down. We had said, I think, for a while now with when we felt we were in a position, either with deals done, deals in contract or deals within our sites that we have incremental liquidity, that we would use that incremental liquidity for buybacks. And we were in that position towards the end of the second quarter. We did dip into the market at a point in time that we felt the price was not nearly reflective of the underlying value of this platform.

I think with the intense focus of the analyst and shareholder community on earnings, and I understand that because we focus on that too, there's also an intense lift on valuation. I mean these -- our assets, which are already premier assets, are becoming more valuable with each passing day, with every bit we lease up and with every bit we improve. And winnow some of the low-growth assets and redeploying the high-growth assets. So we feel not just really good about leasing, we feel not just good about where our earnings and cash flow is headed, but we feel good about underlying valuation. And we -- so we consider it to be a structural disconnect in the second quarter.

We put some money to deploy in what I often consider to be the best and most obvious way to invest in yourselves because we believe in ourselves. And I think we'll be rewarded over the long term for those investments, which we may or may not do more of as time goes forward. We'll just see what the landscape is at that time.

The great thing is we've got so many different levers to push at any moment in time to try and optimize return for shareholders that even though our focus is in one market, it's a pretty damn big market and there's lots of opportunity and lots of ways for us to deploy capital and make money.

That's helpful. And then with just the $0.80 of FFO kind of related to some of the basis accounting and then having some component of kind of maybe fair value adjustments on derivatives, have you put any thought into disclosing either a core or a real estate FFO metric to kind of give the investor community a better sense of the underlying earnings performance of the business?

No. I don't believe in violating what NAREIT says is FFO and creating your own. So we do it as reported as everybody should, and that's the best way to compare across companies.

And our next question will come from the line of Vikram Malhotra of Mizuho.

Congrats on a strong print. Just 2 clarifications. I guess you referenced to FAD and breakeven. I was just wondering if you can clarify what do you mean by breakeven? And Matt, could you, at least for '26, give us a sense of how like the CapEx should trend in the back half relative to the first half?

Sure. Yes. We -- CapEx tends to be a little back ended just because we get budgets approved and then you got to get to spending, that's our spend and reimbursement to tenants. So historically, capital spend is higher in the back half than the first. But since that's largely out of our control, we can't say for certain how that plays out. And the commentary on '28 is the same thing we said back on our first quarter call with FAD steadily improving '26 into '27, but '28, you are breakeven as against coverage of your dividend.

Dividend. Okay. That makes sense. And then I guess just now given what you talked about in terms of more interest to capital markets opening even wider. Is there a way you can share with us like, as of today, you sold East 53rd, I think it was 5.7%. But how should we think about the range of cap rates for, say, like newer built core asset versus maybe an older need CapEx or just a lease-up opportunity? How should we think about Manhattan and the range of cap rates older versus new product?

So Vikram, cap rates, I subscribe are really driven by 2 things: embedded growth, expected growth within the asset and a view on rates. You can get a low cap rate with an old building, a high cap rate with a newer building. It's not really new versus old. It's when cap rates compress is when the market believes you're going to have above-average earnings momentum and growth. And if that growth in NOI projection over 3, 5, 7, 10 years outstrips your view of where rates are headed, then you're going to have a compressed cap rate and it can often be below your financing costs. It's not uncommon to have cap rates drift lower than your financing costs when you have embedded growth.

And right now, when we see nominal rents and net effective rents increasing at these kind of rates, as long as interest rates are roughly stable, and that's caveat, then I think you'll see cap rates compress notwithstanding it's a higher than historical interest rate environment because people are investing for growth. They want to borrow in 2026 dollars and repay in 2036 dollars and have a lot of nominal growth along the way. And when you have that circumstance, you can have premier growth assets sub-5. I think the bulk of what we own is between 5 and 6. And there's really not much in our portfolio that trades north of 6, in my opinion.

That's not -- I'm not giving you market cap rates. I'm giving you cap rates for our portfolio. The way I look at our assets, I don't think we have much of an appetite to trade in the 6.5% to 7% range even if that were the market, which I don't think it is for our assets. So I think it's decidedly between 5 and 6, certain assets are sub-5, very few might be a touch over 6. That's kind of a broad range of how we view and the more -- the tighter, I think, occupancy in the city in our portfolio gets and the more net effective rents improve. I think the more you may see those cap rates dip.

And then if you get a little interest rate relief, then it's all bets off. And we've seen that. We've seen how fast it can go in your direction or 5 years ago, go against your direction. But I think right now, we're in the place we want to be. And I think that's why you saw us dip into the buyback market, again, which we haven't done in many years. And I think that's a fair assessment of cap rates.

Okay. And then that was helpful. Just one last one, Matt. You have a fair amount of debt coming due next year, and I guess, concurrently also a bunch of swaps expiring. You talked about asset sales, but just maybe can you give us an update specifically the plan for 2027?

Yes. I plan to do that in December. Thanks for your Third question.

Any early preview?

No.

And our next question will be coming from the line of Ronald Kamdem of Morgan Stanley.

Just 2 quick ones. My first one, I know we talked about sort of the leased occupancy target of 95% and potentially exceeding that. But any sort of color where the commenced occupancy ends the year? And the reason I asked is at the Investor Day, I think you guys called a lot of attention on the same-store NOI for '27 over 10% potentially? And just would love to understand where the commenced occupancy ends and if that's still sort of a good target or realistic?

Yes, it's a good question. We are trending ahead of our same-store NOI projections for 2026, which is great, but then it calls into question, well, that's increasing your benchmark, so what does it mean for 2027? But the trajectory into '27 is such that we still expect to be in excess of 10% same-store NOI, cash NOI growth in '27 as well, even though '26 is outperforming.

As to occupancy, you're talking about commenced occupancy. I think the more relevant is probably economic occupancy. That's what flows through earnings, commenced is more of a legal term. Economic occupancy, we expected to close the gap to leased occupancy by at least half of what it was at the end of 2025 by the end of 2026, and we are on that trajectory.

Great. And then my follow-up is on the alternative strategy portfolio, just any updates on 2 Herald Square. I mean I see 650 Fifth Worldwide Plaza. Just any traction there? What -- any movement on those assets?

Ron, Harry had to leave for 3. We hung in there as long as we could. And -- but he had a hard stop at 3. He really is the one to hit those questions. I will have him call you on those.

Okay. We'll follow up. No issue.

In terms of what I can say sort of broadly, is that they're good assets that, for different reasons, need to be recapitalized. I mean I think that's obvious. Worldwide Plaza, it was the move out of the main tenant, Cravath. In the case of 2 Herald, there was the Amazon/WeWork lease expiration, I guess, it will be. And 650, that one, I think there's -- that's still yet to be played out. I mean it needs to be recap, but it will be recapped, but that's a good piece of real estate on Fifth Ave leased to a great tenant.

So I look at all of those as assets that have some challenges, not fundamental real estate challenges, but capitalization challenges. I think we've proven time and time again in that ASP portfolio and otherwise an ability to get in and work with the various stakeholders to try to get to a solution for everybody. That's the optimal solution on the table. And we're committed to trying to make it work on each of those assets, but each one needs to be restructured and either we'll be successful or we won't. But just to reiterate, those are assets that contribute little in the way of earnings and really nothing in the way of NAV as we perceive it. We have no recourse to speak of on those assets.

And I look at them as just 3 opportunities that we are giving attention to, we're not committing a lot of capital to and probably won't, but we might under the right set of circumstances, commit some. And yet to be played out, but we're hanging in there. And I think the stakeholders recognize we've done all we could do in those circumstances. And I think we're kind of in the batter's box, if you will, to be the ones to help put those assets back on safe footing. And if we do, we may get a surprise to the upside.

And our next question will come from the line of Brendan Lynch of Barclays. [Operator Instructions].

On the concession environment, one of your peers has argued it's hard to get free rent down below a month per year of lease term, what you guys were able to do this year -- or excuse me, this quarter and the argument being that you need the time to build out space, clients kind of resist having double cash rent during the build-out period, and they'd rather have higher face rents. So the question is how low do you anticipate you can get free rent going forward?

Well, you didn't differentiate between new tenants coming into the portfolio versus renewal leases. And as I think Marc made the point earlier that the net effectives and the concessions -- net effective rise and the concessions tighten when we're doing renewal deals. So assuming that it's a typical 5-year renewal, when the market is at its peak, generally, it's -- free rent is maybe 2 or 3 months. Today, we're kind of in the 3 to 4 months, 3 probably being the average on typical kind of 5-year renewal for most of the deals that -- these small to midsized deals. New transactions, if it's a 10-year lease, I think that's generally when -- I would not be surprised to see free rent ultimately get down to kind of the 10-month free rent for a 10-year transaction.

And our next question will come from the line of Caitlin Burrows of Goldman Sachs.

Just a quick one on the One Vanderbilt $0.80 of additional income. I guess it seems like something that you guys would have had some visibility into. So I guess why wait until now to talk about the boost to FFO? And then more importantly, what will cause fluctuations over each quarter going forward? So like if the 2Q contribution was $0.35, why isn't 2Q to 4Q total like over $1?

So the first answer is we -- if we have visibility into it and we get affirmation of the treatment, we would include it. So we didn't have that until we included it this quarter, embedded it all the way through all of the rules, auditors, NAREIT and everybody else involved. So when that was vetted through and we had eclipsed the threshold only after the end of the first quarter. So it wouldn't apply till the second quarter, and that's when we employed it, and we'll use it going forward.

What impacts it going forward is, most importantly, distributions. As I went through the math earlier, there's a fixed -- what I'll call a fixed component of the calc and a variable component of the calc. The variable component is cash distributions as compared to what would conventionally be GAAP equity pickup. And as cash distributions increase or decrease, so does the FFO contribution. It's almost equivalent to a cash basis of accounting.

So as we look forward, we look carefully at distributions if we need cash or something, we'll hold it back. If we don't, we'll distribute more and those distributions will impact quarter-to-quarter income -- FFO recognition.

Okay. And then just on SUMMIT, One Vanderbilt, you guys were talking about how well it's doing. I know last year, Ascent was offline for part of 2Q, but I believe it was online for all of 2Q '26. So I was just wondering if the 2Q '26 expectations were in line with your expectations and if there's any changes to the full year '26 expectations?

No. Caitlin, as I said earlier, I think that I started seeing the turn in numbers late May, June. So the latter part of 2Q, I think Q3, you're going to see some good numbers. The downs I referenced were really Jan through May or Jan through part of May. It's not really Ascent driven. I mean we had to reintroduce Ascent because we had it down for maintenance for a while. It's back up. It's running. It's great, very popular, and that will be a part of what you'll see in Q3 is the multiple effect of Ascent at full throttle plus ticket sales back to many, many days where we're selling out.

Weather has been great, et cetera. So I'm very optimistic for SUMMIT in what is a challenging market. I think if you look around at some of the other objects, where foreign tourism particularly has been substandard for the year, it's made up a little bit by domestic tourism, but it's still down overall. And I think some of our competitors have had to resort to discounting tickets, we've been able to keep our rents high. We don't participate in the past program, probably the only object, I know that doesn't participate in that program, which generally discounts tickets just because we have a great following. And it serves as a great traction, both for new attendees and repeat attendees. And I think we're going to have a very good second half of the year. And whatever we experienced in the first half, we were able to somewhat mitigate through management of variable expenses. I think the team did a great job there.

And our next question will come from the line of Michael Lewis of Truist Securities.

So the AI leasing is obviously very strong. And I know some of those tenants are large players, some of the largest companies in the world, but some of them are not. So kind of similar to when the early days of the Internet, the Internet worked, but not all the companies did and there's a lot of AI companies, I'm just wondering, from an office landlords perspective, what are you seeing in terms of credit quality? And are there AI tenants where you say, "Oh, I'm going to pass on that one. It worries me a little?" Alternatively, are the ones where you say, "Wow, the growth could be really explosive there. That one might be worth a shot?" I'm just wondering what you kind of see the breadth of the AI demand.

Well, let's -- I think there's a couple of things to point out to. The good news is, broadly speaking, the technology industry is back in a big way leasing space in Manhattan. There's 9.5 million square feet of active tech searches going on right now. Of that, 2.5 million square feet are AI tenants. So important to differentiate. So people don't believe that just because it's tech, therefore, it must be AI. That's not the case. That's one.

Two, during the dot-com days, we were very conscious about not having -- being overexposed to that industry, and we were very limiting as to the deals and the size of deals that we did. So -- but there's a big difference between what we saw of dot-com tenants during that market period versus the AI tenants that we're seeing today. Most of the tenants that -- of any consequence that have come through our doors are firms with -- that are well capitalized, they have big revenue versus the dot-com tenants, which many of them had no revenue.

A lot of these tenants have big, big revenue in place. But having said that, there will be winners and losers, no doubt about it. And we've consciously limited our exposure to the AI industry to somewhere between 1% to 2% of the portfolio. And most of that industry is Midtown South as far as where the tech and AI tenants like to locate themselves, and our buildings in that part of town at this moment in time for the foreseeable future are 100% leased.

Okay, great. And then my last question, somebody earlier asked about an alternative FFO metric. I don't -- I'd prefer not to have another FFO metric to worry about, but I might propose something to all the office companies as far as net effective rent comparison. So this 18% cash spread is great. And I've done this on your call, and I've done this on other office calls, right? I pulled up your 2Q '16 sup and your 2Q '21 sup . And I just -- I look at the rent, the free rent divided by the term, the TI divided by the term, whatever I look over, it seems like net effective rental was up like 2.5%, 3% a year.

I don't know if it keeps up with OpEx. But I guess my question is, right, when you look at that 18% cash rent spread, which tells us a lot what would it be if you looked at the annual rent on a net effective basis, right? You talked about those are spiking up. But I can never see it in the number. Does that make sense?

I guess you're -- we're trying to interpret your question, Mike. You're asking what...

I guess I’m asking if net effective rents are really going up that much because I can't see it.

Okay. So the question is what is net effective rent growth, 18% is the face rent, what's net effective?

What's net effective rent growth.

Well, let's just go this way. I mean if concessions have been stable for the past, call it, at least 1.5 years, so if the base rents are up materially, net effectives are up materially.

I think a measure of it would be -- but you have to look over a 2-, 3-year period. If you have FFO growth and AFFO growth that exceeds the FFO growth, that differential largely would be or at least partially driven by leasing cost savings -- on first gen, at least, right?

We don't track, what do you call it, net effective growth because it's very hard -- I'll give you an example. Just the question becomes, do you amortize all the TI over the period of the lease to calculate net effective? Or do you assume some salvage value? Some leases, yes, some no. And TI is one of the biggest components. And to just assume that all TI is written off over a 10-year lease term, I don't think is accurate, or it's sort of dependent on the quality of the tenant's installation. So it's just not that simple.

And I mean, really, the way we -- I'm striving for like as higher renewal probability as possible, 75% plus, and keeping the concessions down to 3 to 6 months on a renewal and TIs of paint and carpet, that's the ultimate, in which case you're -- even if rents are flat, replacement rents, your net effectives will be up by almost 100%.

So it's -- in order to drive the rental rates, it's not just leasing concessions, you have to invest in your buildings. And you have to invest in amenities and lobbies, roofs and everything. So that's why what may seem like, geez, I should be looking at 50% net effective growth, yes, but we spend a lot of capital on the buildings themselves in order to drive nominal rents. It's not just about direct leasing costs.

So I think that -- I mean, we're managing to try and get FFO growth at a consistent level, and I think 3% to 5% a year, nominal growth, anything above that is gravy. And that or more on cash flow growth. And you should see that in our numbers as we're -- as '26 compares to '25 and then when we get to '27 and '28. I think you'll see it. But to give you an exact percentage increase net effective, we don't have that number.

All right. Thank you for the calls, everyone, and have a great rest of your summers. We will be heading right back into the pit and start to put together, plant the seeds for a great Q3, and we'll speak to you all in October.

And this concludes today's conference call. Thank you for participating. You may now disconnect.

Thank you, everybody, for joining us, and welcome to SL Green Realty Corp.'s First Quarter 2026 Earnings Results Conference Call. This conference call is being recorded. At this time, the company would like to remind listeners that during the call, management may make forward-looking statements. You should not rely on forward-looking statements as predictions of future events as actual results and events may differ from any forward-looking statements that management may make today. All forward-looking statements made by management on this call are based on their assumptions and beliefs as of today. Additional information regarding the risks, uncertainties and other factors that could cause such differences to appear are set forth in the Risk Factors and MD&A sections of the company's latest Form 10-K and other subsequent reports filed by the company with the Securities and Exchange Commission.

Also, during today's conference call, the company may discuss non-GAAP financial measures as defined by Regulation G under the Securities Act. The GAAP financial measure most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on both the company's website at www.slgreen.com by selecting the press release regarding the company's first quarter 2026, earnings and in our supplemental information included in our current report on Form 8-K relating to our first quarter 2026 earnings.

Before turning the call over to Marc Holliday, Chairman and Chief Executive Officer of SL Green Realty Corp. I ask that those of you participating in the Q&A portion of the call, please limit yourself to 2 questions per person. Thank you.

I will now turn the call over to Marc Holliday. Please go ahead, Marc.

Thank you for joining us today at the conclusion of what was an excellent quarter here at SL Green. We achieved nearly all of our objectives and then some. I know there's some misunderstanding in the analyst community about the cadence of our quarterly earnings. But internally, we were right on our numbers for Q1 and advanced many of our objectives for the year.

The headline news starts with our leasing, where we had the single biggest first quarter in the 28-year history of this company. We signed 51 leases totaling 930,000 square feet with a mark-to-market that was 16% higher than the previously fully escalated rents on the same spaces. The takeaway is pretty clear and consistent with what we've been saying for some time now. There is a massive imbalance in the prime office market. At its core, we lease premium space to sophisticated users. And right now, demand far outstrips remaining supply after so many years of lease-up both in our portfolio and city at large, especially in East Midtown. The vacancy rate for trophy buildings dropped again to 3.4% at the end of the first quarter which is essentially saying there's no space at all in that segment of the market. As a result, we are seeing continued escalation of rent levels for these buildings and significant improvement in net effective rents, which greatly benefits our portfolio, which, as you know, is mostly centered in this area. And I don't expect this situation to abate anytime soon.

On the one hand, the business climate in New York remains really good. Look at some year-end '25 stats that came out in the first quarter. City tax revenues reached $80 billion in '25, 16% higher than pre-pandemic and that's a record level. Real estate tax collections grew by almost 3% year-over-year. Personal income taxes were up nearly 12% year-over-year just shows you the enormity of the bonuses and compensation being paid out in the primary business sectors in New York City.

$65 billion of record Wall Street Securities industry profits in 2025, the prior record was just $61 billion, and that was back in 2009. The 160 unicorn start-ups in New York City, private startups that are valued over $1 billion, and that's the second largest start-up ecosystem behind Silicon Valley. $31 billion was raised in venture capital last year, up 25% from the prior year. And New York City ranked #1 as the Talent Hub for 2025 graduates were 1 in 9 graduates, college graduates came to New York City.

And so on top of a fundamentally strong local economy, we hope and expect to see macroeconomic improvement in the coming months, which will simply add to the momentum in the leasing market. After leasing more than 1 million square feet of space in our portfolio year-to-date, we still have a pipeline of approximately 900,000 square feet of space, most of which we expect to consummate. The demand continues to be there.

On the other side of the equation, there is really no end in sight to the supply crunch. There are 0 new space deliveries anticipated for the next 3 years with recently completed projects like the Rolex building, 525th have now in the rearview and new projects like 343 Madison and 625 Madison, not expected to complete until sometime around '29 or 2030. It is simply physically impossible for any other new construction to be delivered between now and the end of 2029 in Midtown Manhattan. This presents us with one of the most favorable dynamics that we've seen in quite some time. Therefore, we are proceeding at a very rapid pace on our very owned project at 346 Madison, our next great office tower. We just closed on the site in the fall and already we're issuing 100% schematic design on May 1, just 6 months from the acquisition and proceeding immediately into design development.

We expect to be filing the project into Europe, the city's land use approval process by the end of this year. That is a much faster pace than we achieved with One Vanderbilt. I'm also very happy with the way the design programming of the building is progressing. We've already been out talking to select potential tenants, top brokers, presenting the project and getting extremely good feedback confirming we're heading in the right direction with this new development. I expect on the next call to be able to give you some financial details after we price the project with our construction manager and obtain some major trade feedback in the coming months.

Our other big development project at 750 Third Avenue is also making great progress as we sit in last quarter. We now have an agreement with our final remaining tenant for full vacant possession which enabled us to start fully mobilizing and commencing execution of contracts for work. We are now in the early stages of procurement. And so far, we are tracking on or below budget by successfully navigating tariffs and inflation. Work is for advanced Ontario demolition in the coming months. We hope to finalize our arrangements for debt and equity capital. We also made progress on our disposition goals this quarter, entering into contract to sell the residential and retail components of our 7-day project and closing on the sale of 690 Madison Avenue with our JV partner. More to come in the ensuing months as we progress our way through the $2.5 billion disposition plan.

We also took advantage of compelling opportunities in the credit market via our debt fund, which is really performing well thus far. We put out $226 million since our last call, including a transaction closing today, bringing total committed to about $567 million out of the total $1.3 billion fund. All of this positive activity is propelled by a very strong city economy. And we don't expect a somewhere low this year as sometimes incurs in years past.

In fact, we're expecting a big summer with FIFA World Cup and the nation's 250th birthday celebrations bringing big crowds and lots of economic activity to the city in June and July. We are forecasting a big boost and shot in the arm, which bodes well for SUMMIT, in particular, for our restaurant venues and for the city generally. We feel good about the city and state budget situation as well. The rating agencies did send a message to the new administration about wanting to see some efficiencies in the budget being negotiated now and the budget that will be in place at the city level by June. And I have every confidence the budget gap will be solved through revenue enhancements, expense control and support from the state.

As has been reported, one piece of that sounds like it will be a new [indiscernible] tax, which the governor announced yesterday with the support of the Mayor and the City Council speaker. Once you get past the notion that we need to find some revenue enhancements as part of this budget process, I give credit to the governor for taking a pragmatic and surgical approach to ensure that all New Yorkers, residents are not are paying a fair share. This is a concept that has the support of many New Yorkers because it narrows the focus and impact to the highest earning non-New York City residents who otherwise pay no New York City income tax and benefit from New York City's exceptionally low residential real estate taxes.

Last but definitely not least, since we last met, we announced the promotion of Harrison Sitomer to President and CIO. When Andrew Mathias left the President seat 25 years -- after 25 years of service, we didn't rush to find his permanent successor. And instead, we took a measured approach to filling this important position. I wanted someone who truly represents our culture, ethos and excellence, which is what distinguishes and defines who we are, and Harry is all of those things.

So as our company turns 30 years of age in 2027, this promotion is a big step towards identifying, growing and supporting the next generation of leaders here, and I hope to have more announcements in the years to come about the continued ascension of our rising starts.

So to wrap things up, I think this was a great quarter, and we've made significant early progress on our goals. But when we get together in 3 months, my instinct is that we will have a lot more to talk about next time on the leasing front, the transaction front and the company performance front.

So thank you, and we're now ready to open the line for questions. again.

[Operator Instructions] And our first question comes from Steve Sakwa with Evercore ISI.

Maybe Steve or Marc, could you just comment on the pipeline activity that you quoted, Marc? I think you said it was 900,000 feet, how much of that is kind of new or expansion tenants? How much of that's just maybe pull forward renewals? And maybe just talk a little bit about kind of tenant expectations on expansions and space and how they're thinking about space usage?

Well, look, I've got the pipeline in front of me. It's predominantly consistent with last quarter, mostly a large number of medium-sized tenants, which is really good and what you'd expect because we don't have a lot of big blocks of space left now that One Madison is fully leased.

So you got to remember, the -- the nature of our pipeline doesn't necessarily tie into the nature of the pipeline generally for tenants in the market. What it relates to is what's available in our portfolio. And what's available in our portfolio right now where I think 2/3 of our buildings are projected to be at 95% or better on average by -- 98% or better. 2/3, 98% or better by the end of this year, we're really just doing new leasing in some of the projects that still have more than that kind of vacancy 420 Lex, 1185 Avenue Americas. Those are the 2 most prevalent buildings I see on this pipeline, along with a little bit of 1,350 6th Avenue, a little bit at 100 Park and then everything else is a deal here or there at 45 Lex, 500 Park, et cetera. So it's -- I wouldn't extrapolate that, that's the market because there are a lot of big tenants in the market, and Steve can can talk about that. There's tenants in that 150 to 250 to 0.5 million square foot users a 1 million square foot users, but you got to have the inventory, a, which is why we're leasing up the portfolio so rapidly and b, why we launched so quickly on 346 where we'll have 850,000 square feet of brand new, state-of-the-art space to deliver right across the street from One Vanderbilt. Anything you want to add to, Steve?

Well, of the pipeline of the 900,000 square feet, 30% of that pipeline is leases out. So we're on a path to wrap those up in short order. As we've seen throughout the year, still financial services, professional services and tech tenants are predominantly driving the market. And I think Marc makes a strong point, which is our pipeline is not dominated by best of the best buildings versus a year or 2 ago, we're seeing real velocity in the mid-price point buildings where we're seeing exceptional rent growth as well.

Gray bar by way of example, and I've been involved with that building for longer than I want to admit, is that the high water mark in the building's history as far as rents that are being achieved. And I guess, lastly, I would say on the concession side, where, clearly, we've seen rents rise but TIs have flatten and in some cases, particularly where we have a lot of leverage, they're coming down modestly, but free rent is clearly starting to come down. And in particular, on our renewals, we're having a great deal of success in controlling our concessions.

Great. That's good color. Maybe, Marc, just on the transaction front, I'm just curious what feedback or data points you're getting from some of the overseas investors. I don't know to what extent any of the Middle Eastern investors either are distracted or have other uses of capital that may not want to come to the U.S. at this point? Just any thoughts or things you could share about overseas investors looking at the U.S. market in New York in particular? .

Well, our counterparties for the most part, whether it be partners, co-lenders, groups that are giving us special servicing assignments, groups, we asset management -- managed for the predominant country of origins tend to be Asia, Europe, Canada and domestic. Just you know by the nature of our partners, we don't have a lot of partnerships or counterparties in the Middle East, so I can't really give you any direct feedback there, only anecdotal feedback, which is -- as you would expect, countries like in sovereigns from Saudi Arabia and Qatar and UAE, maybe not to the same extent, but you throw your way in there as well are definitely, I think, pulling in their horns at the moment, while they assess that which they're committed for versus how they look at deployment of new capital. But that's really just there. I'm not seeing that, and we're not seeing that in the other markets. If anything, we're still seeing what we talked about 3 months ago on the phone where I think Harry gave you good color on the feedback we were getting, particularly on the heels of the last trip we did out to Asia and Japan, Korea and elsewhere. That's still, to this day, I would say, strong appetite in both for credit and for equity. But again, equity for well-located assets of the highest quality and generally relationships we have, so factoring in our sponsorship and relationship there.

So I think we feel very good about being able to execute the joint ventures and the financings that we have scheduled for this year with counterparties from those parts of the region, and I don't think we've seen any material shift in those folks albeit if you're dependent on Middle East Capital, I'm sure it's a different story. Harry?

Yes. The only thing I would add there is just moments of macroeconomic uncertainty proven hard assets and proven locations continue to demonstrate resiliency. We saw that obviously with the One Madison Avenue financing that we got done that was sort of, I think, we met with some of you down at city as we were pricing that deal in the early days of the Middle East conflict, that deal ended up having 44 investors across all of the classes -- sort of classes in that deal were 7x oversubscribed.

I think one piece that our business specifically is going to benefit from is over the past few years, we have not been heavily reliant on private credit. This industry was -- what we invested has not been boosted up. We have not seen big valuations coming out of big private credit loans. And as a result of that, I think we're far more resilient for what's going on right now than probably most, if not all, other industries.

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

So you're at 94.4% leased occupancy. Your target for the year is 94.8% and you have 900,000 square foot pipeline. So I'm just wondering if there's upside to that target that you have for the year. And some question on leasing spreads, given you at 16% for the quarter and your target figure is around 10%.

It's Matt. So we increased in our press release last night, our year-end same-store occupancy target from 94.8% to 95%. So we've gotten the upside there. Mark-to-market, we had a health objective. It was clearly a very healthy number in the first quarter. We still got 9 months to go, but well on track for our objective there. We typically don't revisit leasing objectives after just 3 months. You kind of want to get at least 6 months in before we do that. But obviously, the momentum we have come out of the first quarter puts us on a great track to meet or exceed even the objectives we laid out back in December.

Okay. And then on your dynamic occupancy went up sequentially this quarter to 85.9%, which is positive, but it's still below your -- I think guidance or target for the year, which is around 89%. So I'm just wondering if you can talk about how the cadence of economic occupancy goes for the remainder of the year and the impact that we'll have on same-store NOI?

Sure, I'll give you a flippant answer, but it's the truth. It's obviously going up sequentially over the course of the next 3 quarters to get to that 89% objective that we set up for the end of the year. We're on the path for that, which then sets up to our 10% same-store cash NOI growth objective for 2027. All in all, the first quarter on every metric we look at was on or ahead of our expectations as the leasing metrics were speak for themselves a record quarter, not just on volume, but on starting rents, but the trajectory from earnings to spend all as good or better than what we expected. So great cadence into the back half of the -- back 3 quarters of the year.

Our next question comes from Alexander Goldfarb with Piper Sandler.

Harrison, just first, congrats. I have a question for you, just following up on your comments to Steve, on private credit. Just as you talk to the various lenders, capital providers and everyone, do you feel pretty comfortable that private credit is not going to infect real estate, meaning private credit has its own little issues and whether it's software or whatever, but this is not like the second coming of the GFC, like it doesn't seem to be rippling anywhere else? Or do you feel in talking to people that there's some concern that maybe it could broaden?

The simple answer is we're just not seeing it. I mean, it's -- if anything, I would say the inverse is, some of these private credit investors have been -- have felt their pain through the, let's call it, software cycle right now, and they're looking for hard assets. And this is one of the first places they're going to look is, as I said earlier, proven locations and proven assets.

Right now, I see no sign of any direct impact to our industry or our capital markets environment. And again, where the beneficiary of having gone through the past few years have not -- we didn't get to see that run up and big private credit demand into our space. And so now there's not a lag hangover effect of those groups pulling out of certain markets. So I don't see any direct impact in our business.

Again, I think you have to look to One Madison, which we priced probably in the toughest week you could have imagined between a conflict in the Middle East and all of the redemptions that you saw in the news in private credit, and as I said, 44 distinct investors, certain classes, 7x oversubscribed, we didn't feel 1 ripple effect of any private credit lender in the market.

Okay. And the second question is, Steve, you mentioned you have the strength of the more value proposition. We've had a focus this cycle on Premier, amenity, et cetera. But do you see an opportunity for you guys to acquire B buildings, especially right around your core Park Avenue Grand Central, where maybe now is the chance to buy the B assets and sort of create more density of your portfolio in your target submarkets?

Well, Alex, I mean it depends how you -- when you say B assets, we're buying assets to convert. We're buying assets to develop. We're not buying B assets to hold and operate if B is defined as kind of real commodity space, even though there's probably on a relative basis, a lot of upside in those assets. So I would expect -- you're not wrong, there will be a tail effect here and you will see "Your B asset rents go up". But we're trying very hard and intentionally to deal not just in the sector where we think rents are going up, but where we think net effective rents can be maximized. And for that, you're really looking mostly for the highest nominal headwinds, whether they be $100, $150, $200 a foot or more for new development, even rents in the 90s or 100.

If you're dealing with assets where rent points might be in the 50s, 60s and 70s. Even though you may experience some pretty good nominal rent growth, 5, 10, you could see rent spikes of 10% or more, you still have concessions for those leases that are relatively the same in terms of number of free rent and a PTI per foot, construction costs as for the much higher nominal rents, so we just think there's more margin by a lot in dealing in the $90 and up $100 and up square foot rents. And that drives us for hold assets or let's call it redevelopment candidates into that sector. So unless we feel we can ultimately execute a program, drive rents into those upper categories, then I don't think you'll see us participate there, even though I do think rents and prices are moving in the B assets, and it's not a bad play.

Our next question comes from Nicholas Yulico with Scotiabank.

First question is just going back to the idea that there's really not much new supply coming to market in the city for 4 years or so. Can you just talk a little bit more about how that you think that actually plays out then in the market kind of relative to your portfolio submarkets in terms of -- I mean, it sounds like it should be a benefit, but in some cases, too, I imagine like the new supply is being looked at by tenants that have lease expirations 4 years out. So there's no real benefit sort of today to buildings from that. So maybe you could just unpack that dynamic a little bit more.

Well, I think there's 2 things to take away from that. One is tenants are getting smart to the market, and they're seeing that rents are rising, and that's driving those that are paying attention to do early renewals. In some cases, we're in front of tenants that have expirations 3, 4 years out in time, which is great. It's a smart landlord play to be able to do early renewals, take the risk of downtime or vacancies off the table. But then there's also the spillover effect where you're seeing tenants needing to go farther afield or going to one avenue over from where they want it to be. And that's giving lift to some of the other buildings. And within our portfolio, probably the best example of that is 1185 6. I mean we're seeing some pretty heady rents by comparison to historical rents in that building with a tremendous amount of leasing velocity. And it's a building that had a lot of tenants vacated over the last several years, and we're on a path to that building being fully stabilized this year with rents into the mid-80s to mid-90s a square foot.

All right. That's helpful. Second question, I guess, Matt, is going back to sort of quarterly FFO and I know it's a plan to give guidance and that there's often a lot of moving parts in the quarter and create some volatility when you guys report. But I guess if we just think about the first quarter number, and then getting back to the full year guidance range. Maybe you could just talk at a high level about some of the components that will sort of accelerate FFO throughout the year?

Yes, no problem. Yes. Our quarterly, the reason we don't provide -- one of the many reasons we don't provide quarterly guidance and I'm a big advocate for eliminating quarterly reporting is quarters are -- can be choppy and people tend to read too much into whatever a quarterly result is the reality of our first quarter numbers is that we were not even $0.01 off from our internal expectations, not $0.01 above, not $0.01 below property NOI was better than we expected as offset by SUMMIT. It was a tough weather quarter, and so SUMMIT underperformed our expectations. But net-net, right on top of what we expected.

As we look out over the balance of the year, we are headed right to the midpoint of our guidance range as well. Those -- the FFO results quarter-to-quarter might be choppy, it's driven by not NOI, which doesn't move that substantially in the direction, but by fee income. We have businesses that are growing, third-party fee businesses that are growing. And a lot of those fees come in big chunks as opposed to ratably over time. Success fees out of special servicing fees from transactions, we didn't close big transactions in the quarter. To say nothing for DPOs that we still have in our projections for the balance of the year. So definitely feel comfortable about where we are in the guidance range biased to the higher end versus the lower end of our range. And that will be a cadence that will bounce around quarter-to-quarter, no doubt.

Yes. I would add to that, just Matt's comment about SUMMIT. Just SUMMIT is an enormous success. Every year, we're pushing ahead the envelope on the earnings capacity of SUMMIT. So for '26 over '25, we had yet another big increase baked in, in terms of our expected financial performance. It was off a bit -- just a small bit in the first quarter but was far away the leading object in the first quarter amongst all the object demand in the city. And I think where other decks might have been down 1% or more, some it really held its own. And I am completely confident just based on what I've seen in April alone as the weather has improved heading into what's going to be an extraordinarily good summer for the reasons I mentioned in my opening commentary, I think we're actually going to end up the year at SUMMIT ahead our ambitious targets that we set back in December.

And we are actually now extending our hours even more than what we originally had budgeted in response to excess demand that we're now seeing for May and June as we're preselling those tickets, and how that translates into your point about Nick, future ramp in FFO for the company, I think SUMMIT will be a contributor.

Our next question comes from Anthony Paolone with JPMorgan.

First question is on your 95% targeted leased rate for year-end versus kind of where your economic occupancy is? I know the gap is pretty wide. And that's assumed to be narrowing. But can you give us some sense as to maybe where a normal spread between those 2 should be over time for the portfolio?

Is -- that's a question that's come up a bit. We only started reporting economic occupancy last quarter. So we don't have a perfect vision in reverse. Clearly, it's at the wides right now and will be narrowing substantially over the course of the year to probably half as wide as it was at the end of last year by the end of 2026. Whereas on a stabilized normalized basis, it's always going to lag behind lease. But if you're in a, what I'll call, a fully leased portfolio, 95-plus percent with limited role, which is the period of time that we're headed into, I could see that being 200 basis points of difference on kind of a recurring basis as space rolls and you re-tenant space, that seems like a comfortable place to be. Maybe it's tighter than that, but 200 feels about right.

Okay. Got it. And then second, on the capital market side, you touched on, I guess, some B assets maybe and some foreign investments. But maybe can you give us a sense as to just how you characterize liquidity broadly in the market right now, whether there's a lot of buyers that are back, a lot of product for sale, the cap rates for the best versus more commodity product. Just a more broad sense of liquidity and capital markets at the moment.

Yes. I think I'll try to break it into equity and debt. On the equity side, I think, first and foremost, we always have our head down focused on our business plan ahead of us, and the plan is on track, and we feel good about executing that plan this year. Just as a data point for you, we have 11 transactions in the business plan for this year. Just to give you a couple of segmented data points. On the last earnings call, I said we had for dispositions that we were working on. When I went to city, I said that we had 5 dispositions that we are working on and now where we sit today, that number is 6. 2 of those 6 were the already announced deals at 690 and 7-day, and the other 4 transactions are progressing very well. I would expect all 4 of those to close or be in contract in the second quarter. So those were the 6 that we had identified for the first half of the year. And those 6 are on plan, on target and expected to get done in the first half of the year.

With respect to the credit markets, I would say the market is very strong right now, especially because of the CMBS market and the SASB market that is -- that we just experienced at One Madison. I'll give you 2 data points there. One Madison was the largest office deal done in the U.S. since January of 2025. And the bottom of that deal, again, just to reiterate one last time, priced at a very complicated and difficult week, that was the tightest new issuance office spreads at the bottom of the deal since when we did One Vanderbilt in 2021. So we continue to see new capital coming into the credit markets. We're not feeling any of the lag effects of any of the private credit pullback, and liquidity continues to get stronger in the credit markets as we're seeing it.

Our next question comes from Seth Bergey Berge with Citi.

I guess my first one is just going back to kind of some of the SUMMIT commentary and some of the demand you're seeing there. Are you seeing with the strong demand and opportunity for kind of premium experience upsells? Or just how is the pricing side coming along there?

Well, again, I don't think Q1 is necessarily a good representation of what the next 9 months or 8.5 months are going to look like. So there's a question about what it was and what it's going to be. The tourism in the city is off a bit. So whether that directly translates into a slightly higher or lower percentage of domestic versus foreign visitation. I don't have that right in front of me at the moment. I do know domestic accounts for about 30%, which is quite high. It's a very popular local attraction as much as it's a tourist attraction, which we worked hard to transcend both markets from both observatory in nature and sort of culturally intriguing in nature as well as thrill features and great place to hang out at night.

So we sort of pull from all of the above. But clearly, when I look at the advanced sales that we're starting to book now, it would indicate that tourism is picking up a bit and that we will be hopefully able to recoup whatever slight ammunition that there was in visitation in the first quarter over the next 9 months. And I think by the end of the year, it's going to be fairly typical in profile to last year except we're going to see these summer months with a lot of international travel. I think there's expected to be over 1 million people coming in for the FIFA World Cup games that are going to be held 8 games over in New Jersey at MetLife Stadium. And then there's supposed to be something like 8 million people plus, 8 million to 10 million people that are coming in for sale 250 to celebrate around the independence day, the birthday of the country. And we are strategically situated to sell out, hopefully, every day of those months of events. So I can't give you much more on that. ASCENT, which is the only upsell we have, you mentioned upsells, there's only one. It's the ASCENT elevator rights. When the weather is very cold as it was and the winds are blowing, we don't run that as often as we do periods like now. So on the margins, those ticket sales were down a bit, but they've completely bounced right back and more. So nothing there to assess other than some it's hitting on all 4s and where opening SUMMIT next summer in Paris, and it's going to be an extraordinary great day for SUMMIT and for this company when we have our first global location accepting visitors with hopefully an additional announcement pending in the coming months.

Great. And maybe just a follow-up to some of Harrison's comments on the capital markets side, specifically with the kind of equity markets and the dispositions, can you talk about a little bit about the profile of those buyers are for office and residential. Is there a core bid for office? Is it people looking for value at or opportunistic? And then just any impact on willingness to kind of buy or sell office from thinking about long term about the impact of AI and unemployment?

Yes, sure. In terms of the buyer composition pool, I think Marc hit it in his earlier commentary about who some of our investors have been, and I would say that composition of investor groups have not changed. We spent a lot of time in the beginning of the year on our first road show in Asia. We're in the process of closing out a handful of transactions that I mentioned earlier. And I would say those buyers are looking at a range.

Again, if you look at our disposition plan for the year includes everything from ground-up office buildings to core office buildings to value-add office buildings. And that market continues to be there for all those different types of products. In terms of the -- I think you also asked about the residential side. I mean you can look very clearly at the latest comp in the market, which is the sale that we did at 7 day to a buyer that is a core residential buyer, that is continuing to accumulate more product through a public listing that they have in Canada.

In terms of your final question about AI and impact, the investors that we speak to and do business with, they're looking at the same stats that we listed to you at the beginning of this call that we announced yesterday, the best first quarter of the year for us. New York City, I looked right before this call had. It's the best first quarter for New York City office leasing since 2014. Some of that leasing is driven by AI tenants, some of which we've announced. And investors are actually very optimistic about what they're seeing on that front.

Our next question comes from Ronald Kamdem with Morgan Stanley.

Great. Just 2 quick ones. First, just starting on postmortem on the dividend cut. Just wondering if you could talk a little bit more about just what went into the thinking of cutting it to that level, whether it's taxes or cash flow? And sort of why not cut more, right? Because I think you guys have talked about NOI coming online. But with the high interest costs, investors are not getting a lot of that flow through. Why not cut the dividend any more to sort of offset that?

Yes. We did spend a lot of time discussing dividend. There are a lot of factors that go into, I think Marc laid out a bunch of them when we did our call back in January. Ultimately, taxable income is what above all else, drives the dividend. And our business plan for this year was consistent with the dividend level that we had established. We can maneuver within taxable income to some extent. But if we're going to execute on the business plan that we laid out, and we are on a path to do that, as we've been talking about so far on this call, then you have to pay the dividend at a certain level, and that dividend is where we established it at 247. At the same time, it does allow us to retain almost $50 million of incremental capital that we can put to other uses, accretive uses, DPOs, maybe buybacks. And then we will continue to see capital spend go down such that when you get to the back half of '27 into 2028, there's a big shift in cash flow to the positive. And then we'll continue to revalue the dividend every year based on taxable income.

Great. That's really helpful. My second question is just I know FAD is obviously not cash flow and it was a little bit down sort of in the quarter. Maybe -- as you think about this ramp on NOI that is anticipating as you get sort of commenced occupancy like any sense of the magnitude of dollars that are coming through that are going to flow through FAD would be helpful.

I might be having a flash background, but I feel like you asked this question last quarter as well, but -- so I'll probably give you a similar answer. The spend in 2026 like in 2025 is the funding of a lot of leasing, 9 million square feet of leasing, we did over a 3-year period. That swage is in back half of '27 into '28, like I just said, and will drive NOI growth north of 10% on a same-store cash basis next year and enhance earnings and enhance FAD, magnitudes, we'll talk about it as time progresses.

I would just say, either you look -- there's 2 ways to look at it. I only see one way, which is we are leasing the hell out of this portfolio. And I don't see any other way to look at it. With that does come leasing capital that we will muscle through in '25, '26 and '27. But we're going to try and get this portfolio to like in its entirety, 96%, 97%, 98% leased, which which it would be unprecedented in this market for 31 million square feet, unprecedented because no one owns 31 million square feet of real estate.

And certainly, if anyone can appreciate what it would take to get that beyond what I would call the frictional vacancy point of 97%, we are vastly out competing and getting more than our fair market share when it comes to these tenancies, we'll pay for that tenancy because there was a lot of out-migration which was for, what I would call, unnatural reasons in 2020 through 2024. But when we get back by this time, let's say, next year, to the kind of levels I think we're going to get. Forget about this year-end, we're already going to work on 2027. And I'm looking beyond 95%. That's -- we're sitting here in April. I'm working on stuff in '27, '28 and '29, trying to -- I want to get this portfolio to full occupancy. And there will be a cost to that.

But when you attain that and then you're living in a world mostly of renewal, there will be an enormous rightsizing of the capital like we experienced in the past, LIFO experience in the future. That's our business plan. And I think we're not just on track, I think we're ahead of track. And so when I look at these increases in rents, look at our average rents right now, our expenses are going up by about 2% here or thereabouts. The rents are going up significantly higher than that. Steve is starting to rein in the capital first on those all important renewal tenants.

And then we'll see about new tenants I just -- I think this is what shareholders want us to be doing, redeveloping our buildings, having a premium Class A portfolio leasing it to its absolute fullest and investing in a portfolio that's going to have an unparalleled residual value in 2027, '28. And we're on track for that. So there's a lot of minutia and nuance to getting there, but I'd say step back and look at the big picture of what we're doing here, it's pretty positive from my vantage point of 36 years in the business, I've never seen a market as good as this one.

That's really helpful. And I think, Matt, you're right. I did ask about FAD and cash flow last quarter.

Our next question comes from Blaine Heck with Wells Fargo.

Great. Maybe just following up on dispositions. Harrison, you mentioned thinking you'd have closed or be under contract on 6 of the 11 targeted sales by mid-year I guess, in rough terms, would those proceeds put you at about half or a little bit more than half of the targeted $2.5 billion of sales this year? Or do those 6 kind of skew smaller or larger than the remaining 5?

The answer is approximately half.

Okay. Great. And then, Marc, we're now several months into the new mayor's time in office. I appreciate your commentary on the budget. But past that, can you just talk about anything that's been a positive or negative surprise relative to your initial expectations when was elected? And whether you see any risks or opportunities in your business arising from any policy changes?

Look, I think it's still very early. And it's too early to assess any Mayoralty in the first 100, 115 days, whatever it's been, probably not even 100 days. It's -- this is something that's going to be measured over years, not months.

I think right now, as I mentioned earlier, when you look at -- forget about my opinion -- the opinions of the stakeholders in the city, people buying condos. Q1 was a record of $10 million in condo sales from January through March. I think it was up like 47%. I don't have the baseline number, but I know the percentage was up like 47% or thereabouts on condo sales.

Wall Street profits, expansion of tenants. I take my rhythm to how are tenants reacting to the first 100 days, let's call it. And I'm seeing tenants who are on a scale of 5 or 6:1 expanding rather than contracting. I see a lot of economic activity, not just in financial services, but tech is back. So I said this -- I was on a -- I did a piece on CNBC a couple of weeks ago. And the issue is affordability, right? I mean that is the key issue, and there's different ways to tackle it, different mayors are going to tackle in different ways. But we're all sort of in agreement, it's best for the city to make the city more affordable.

And we'll just may differ about the means of getting there. But I do think the current administration's focus to me seems to be on how do we get more production in housing in order to help stabilize or even bring down rents if that's possible in a market like this. And some of those things are -- you see the cutting through the red tape on city of yes, outside the city, there's [ secret ] revisions, land use revisions that are meant to make it better, easier to make this happen. There's the conversion, which I know the current administration supports 467 app and wants to see more buildings delivered under that program. A day or 2 ago, you read something about a program coming out to try and reduce insurance premiums with the city's direct assistance to help reduce insurance premiums for affordable uncontrolled housing.

Having that kind of focus on that area, I think is productive as long as there is an appreciation that what makes all this work are the tax collections and what makes the tax collection work as our industry. And our industry right now is firing on all cylinders. So if that is left unimpeded, and we can hopefully not only equal but exceed tax receipts this year on top of record receipts last year, then there'll be money in the system to take care of some of this administration's priorities, whether it comes to trying to reduce the cost of mass transportation or trying to reduce -- increase affordability or bring down cost of goods for groceries. Again, different means of getting there. But the objectives, I think, align. And right now, I see a city that's poised for a very good year.

Our next question comes from Peter AbramowitzBraatz with Deutsche Bank.

Matt, I just want to go back to your comments. I think you said you'd sort of be biased towards the high end of your guidance range. I know you talked earlier about some of the items, particularly fee income that kind of impacts the ramp throughout the year from first quarter to the rest of the year. But in terms of your expectation potentially to get to the high end, could you talk about some of the specific items that kind of possible to get you there? Is it NOI? Or is it other items? And just any other commentary on kind of underlying assumptions and whether those have changed.

Yes, sure. I did mention that in the first quarter, NOI was running ahead of our projections. That also flowed through not just earnings, but through same-store cash NOI that 2.6% positive was 300 basis points higher than what we expected for the first quarter. So NOI will be a contributor. Marc discussed SUMMIT and the momentum we're seeing already in April, and we expect over the balance of the year to make up whatever small shortfall there was in the first quarter.

Fee income. We -- our third-party business which Harrison spoke about earlier, our third-party fee business is growing. If we can exceed our initial projections, that's very, very high margin, high multiple business. And we have a DPO in our guidance. If we can source more of that, then that's even beyond what we -- what I'm talking about. But I think the momentum coming out of the first quarter on our numbers was certainly biased to the midpoint or higher.

Okay. That's helpful. And then maybe a question for Marc on the administration. You mentioned the tax that was kind of first reported yesterday. I believe the estimate for how much revenue incrementally raise for the city is around $500 million. So that still always a pretty big budget shortfall to. Just kind of curious from the first 100 days or so of the new administration, we've also talked about taxes on higher income household as well as higher operating taxes and those have not gotten a lot of support. So with still a gap to fill in the budget, I guess just curious what other things you think are possible from a legislative perspective to -- that might fill that and how that potentially could impact your business?

I think you're going to -- I mean the City Council and the new City Council Speaker, Julie Menon, I thought came out very thoughtfully with their own budget, remember that Mayoress budget counsel as a budget -- and their emphasis is going to be on cost cutting. I think the budget last year was like $115 billion. This year is projected $127 billion, okay? So you're not going to get all $12 billion of increase. That's called an initial stab at it. And there'll be efficiencies, reductions from that, that will be achievable with -- I think it was about a $5 billion budget. So if you assume the state is going to solve $500 million to $1 billion of it, you're talking about 3% to 4% of a gap that needs to be closed with revenue projections that I think will be reassessed higher just based on the first quarter's tax receipt recognition that will be expected to ripple through for some portion of the remainder of this year, plus new PTET tax, plus the council had some proposals on modifying PTET that- which is state and federal tax revenue enhancement for the city not something we're particularly want to see as New Yorkers, but there was a modification of UBT, and they're going to close that gap. I would say, certainly, when you get to June, there will be a balanced budget through this incremental tax, some revenue reforecast and some expense reductions. And the city has gotten there every year since the 70s, we'll get there again. .

Our next question comes from Vikram Malhotra with Mizuho.

I guess just maybe Marc and Matt, I just want to push maybe a bit more on sort of you've done a lot of good work getting up the occupancy. You're seeing TIs coming in. You have less to lease. You just said you're dealing with '27 expirations. So I just want to figure out like can you give us a bit more guardrails on how this ultimately translates to any measure of cash flow you think prudent FAD, cash flow from operations. You said 10% same-store next year. But really at this point, given you have so much done, it would be nice to get like some broad guardrails rather than wait like 9, 12 months to get that. So like how does this translate, whether it's '27, '28, and maybe if you can just clarify your comment on TI spend in '26 and '27. Do we just wait till '28 before the growth picks up?

Well, I mean I don't know when you say guardrails, I'm not exactly sure which mean by guardrails, but...

I mean like is it at least 2% -- at least 4%, is it at least 6%, that 10%...

We've given all of that in December. Our projections are unchanged with respect to -- and you can -- it's very -- there's plenty in the supplemental and our other disclosures to get a handle on the amount of capital that's going to be necessary for our leasing. I mean that's pretty arithmetic. And you see every quarter how much we spend on TIs, I know commission spend on free rent based on a quantum of leasing, and we're going to be -- as we approach 96%, 97%, 98% occupancy in this portfolio, I hope we get to 98%.

There are going to be spend years for the balance of this year and next, but we said I thought we were pretty clear that by the time we get to '28, we expect our FAD to be in line with our dividend that we just recently recalibrated to and then hopefully and more. But we'll get there probably with that kind of guidance in '27, but not today.

Okay. So sorry, just to clarify, you said by 2028, you think your FAD will be similar to the dividend?

Well, yes, but I think if you look at my commentary previously on the dividend and what Matt had said in the release we did when we came out with the new dividend level after our last board meeting, we had said that the new dividend level set to a level where we expected to be able to cover that dividend and more by 2028.

So I'm reiterating that, but yes, that's our feeling. That's our belief. That's our -- that's how we got to that very specific number. It wasn't -- I mean it's not a gut instinct. It's based on our models and calculations. And there's lots of scenarios that can play out, and I hope it will be far in excess of that because as you know, I think you know we try to be very conservative when it comes to our estimations of NAV and growth and projections. But yes, I mean, I think we're headed to a great spot both in earnings and cash flow.

Okay. No, that's great. Yes. I mean, you've -- as I said, you've done a lot of great work. So we're all hoping this is like translating into a very solid '27, '28 growth. I just -- just maybe going back to the SUMMIT question. It makes sense that the World Cup should drive like a nice uptick. I guess I just wanted to clarify, you said 1Q was a bit depressed so you're expecting a pickup and then the boost in -- boost, hopefully with the World Cup. But is there anything else like I guess the other projects in other regions. Can you give us an update where we are? When could we see like the next SUMMIT really driving NOI by the way...

We expect to open Paris in summer of '27. So it's a little more than a year of -- and I'll come out in December with some monetary guidance on that for '27. It will only be open half a year. So you have to adjust for that. But I expect it's going to be like a seismic popular, well-attended, hot new opening. What we've designed is kind of like SUMMIT 2.0 with lots of new features. And it's very exciting. It's very very thrilling for me to work with Kenzo and Rob Schiffer on these projects that are now starting to come to life, and we have more beyond. But the next the next locations would not be '27. They'll be announced this year with future earnings. So the first one off would be Paris next year.

I actually live next to SUMMIT. I've been there 5 times last year and it's great.

Thank you. And I book your ticket for the ribbon-cutting in June of next year.

We'll what some World Cup matches from the 19th floor?

Perfect. You'll have a good bird's eye view from there. All right. Is that it -- do we have any -- we'll take one last question.

We have a question from Brendan Lynch with Barclays. .

You got a nice reduction in your spread to SOFR with the new revolving line of credit, and you've been bringing down your cost of debt for the past year. Obviously, it's quite macro dependent. But do you see other opportunities within your control to reduce your weighted average cost of debt further?

I mean, yes, the great execution on the credit facility and I appreciate the work of our team and certainly the banks that participated in that. We had a strong financing market backdrop there with the support from the institutions was really extraordinary.

Harrison spoke earlier, and I'll let him expand on where the broader financing market stands. The reality is we have about $3 billion or so left of our a $7 billion financing plan for the balance of this year and then not a lot thereafter. So we talked in December about increasing some floating rate exposure because we do expect the curve to not at the pace we would like, but eventually come down. So we'll let some of our fixed rate derivatives, things like that burn off and take advantage of a lower SOFR curve overall. I'll let Harrison speak to the financings that we have in our pipe and what we're seeing in the market there.

Yes. We have 3 financings left in the business plan for this year, the largest of which is 245 Park Avenue. We just started on that process as of yesterday. So we'll see that play out through the second and third quarter of this year. More on that to come on the next call.

And I would say just in terms of pricing, obviously, the base rate, we have no influence over. So we'll continue to monitor both SOFR and the treasury indexes. But as we turn to spreads, we continue to be optimistic about the tightening in spreads, especially in the CMBS market. I gave you a few stats earlier, but especially at the bottom of the deals, we're seeing spreads that are tightening even from where we saw One Vanderbilt price. So each deal will be dependent on the quality of the real estate and the execution, but I would definitely expect to see a strong execution at 245 Park.

Great. That's helpful. And the press release alluded to using some -- maybe turning more active on share repurchases. Matt, I think you mentioned that earlier in the call as well. Could you just talk about what type of conditions or what you would incentivize you to be more active on executing on the existing authorization going forward?

Well, this also, I thought I've been pretty clear on in the past. I think the stock is terribly mispriced. And I don't even think you got to look that hard to sort of appreciate the magnitude of the discounted valuation relative to a fairly liquid and active market where it's not that hard to get price discovery and value discovery of assets we own, especially the kind of assets we have, which are well leased and the debt and equity cost of capital is kind of well known for these assets. So I look at it as a significant opportunity that I mentioned, we would take a very, very hard look at with incremental liquidity to the business plan. I forget where exactly we had said that, but I know we've talked about that in the past, in the recent past.

And we've got our plan. Our plan includes investment in new development projects. Our plan includes reduction in indebtedness, both secured and unsecured. And then with incremental liquidity above and beyond that plan share repurchases are going to get the first and hardest look.

Okay. Okay. Operator, we're all set.

This concludes the question-and-answer session. I would now like to turn it back to Marc Holliday for closing remarks.

Thank you, everyone, we kind of ran a little longer than usual. So thank you for all the questions, for those still on and look forward to speaking in 3 months' time.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Welcome to Citi's 2026 Global Property CEO Conference. I'm Nick Joseph here with Seth Bergey with Citi Research. I'm pleased to have with us SL Green and CEO, Marc Holliday. This session is for Citi clients only and disclosures have been made available at the corporate access desk. To ask a question, you can raise your hand or go to liveqa.com and enter code GPC26 to submit questions. Marc, we'll turn it over to you to introduce your company and team, provide any opening remarks, and tell the audience the top reason an investor should buy your stock today, and then we'll get into Q&A.

[Technical Difficulty]

I think you have to press the button to make it red.

How is that?

There we go. We have to do that again.

I got here, Harry Sitomer and Matt DiLiberto, and we got a lot to talk about today. And I guess I'll begin by reiterating what I stated on the last earnings call that this continues to be absolutely one of the best office markets and leasing markets that I've ever seen in my career. There were over 27 million square feet of leasing in 2025 with over 1 million square feet of absorption and the financial and legal sector is accounting for about half of that demand. Availability has now shrunk for 6 consecutive quarters, and it's decidedly, what I would call a landlord market for the better, well-located assets. Sublease availability is the lowest it's been in the past 5 years. And as we roll into 2026, Midtown has accounted for 77% of leasing activity in January and February with now on the heels of our announcement this morning, 7 deals over 100,000 square feet in size.

We're taking full advantage of these market conditions by coming out of the gate strong in 2026. In just the first 60 days of the year, we have signed nearly 500,000 square feet of leases and increased our lease portfolio occupancy. We now have expectations for over 600,000 square feet of leases to be signed in Q1 with 1.1 million square foot pipeline that we are currently working on, which obviously evidences the exceptional strong start to the year. We are now projecting that 2/3 of our portfolio or about 20 million square feet will have a weighted average occupancy of 98% by year-end, allowing us to drive net effective rental gains in those buildings. And even buildings like 1185 Avenue of the Americas, which was slow to lease in the past few years are now -- is now benefiting from increased demand and activity with some leases already signed this year and more in the pipeline.

While people's focus turn to the impact of tech and AI on the office leasing market, New York City continues to be the location of choice when it comes to making long-term commitments. There were over 8 million square feet of tech and AI leasing in 2025, and there remains over 8 million square feet of current demand in that sector. New York has been a decided winner in attracting these new businesses given the unique advantages. New York holds in having a young, educated and diverse workforce with a focus on innovation and disruption and entrepreneurialism.

And while there is a concern over the impact of AI that may have on our tenant base, I'm emboldened by the fact that our tenants to be -- our tenants tend to be HQ, front offices, functions like sales and marketing, high-touch services, legal, which I don't think will be readily replaced. You should take note that the leases we're currently signing overwhelmingly represent expansion leases in '25 and year-to-date '26. These are leases that we're doing with sophisticated credit tenants with terms of 10, 15 and 20 years. So I don't see these firms taking on those kind of increased obligations for that tenure unless they expect to be growing their headcount, not shrinking their headcount during the terms of those very extended leases. These favorable market conditions are compounded by the fact that there will be essentially no new deliveries of space in Midtown during the next 3 years. That's a market condition we haven't experienced since before Hudson Yards when conditions were very, very tight.

Only the Rolex Building is expected to deliver this year with less than 80,000 square feet of spec space. All other deliveries will be at least 36 to 40 months from now, resulting in an extreme imbalance in Midtown between supply and demand for quality assets in a manner that is decidedly in favor of property owners of existing quality assets. Even looking out 4 years from now, the aggregate amount of addition to inventory is more than covered by almost 1 million square feet by the expected reduction in inventory from Midtown office buildings converting to residential usage with 3 projects already in construction and 9 more expected to pull permits in 2026 and '27. Strong demand and non-existent new supply are the reasons we are emboldened to continue with our measured offensive position to the market that you've heard us about since the end of 2024.

I'm going to turn it over to Harry and Matt now to talk about kind of the state of the macro market and our specific plans.

Thanks, Marc. So shifting to capital markets. As a result of the fundamentals that Marc was just discussing, we saw in 2025, significant elevated levels of transaction activity such that 2025 was in line with the transaction activity that we saw in 2019. I can tell you after coming off a significant capital markets roadshow, that we're seeing the same type of activity and demand from investors rolling into 2026. And a lot of that we'll discuss when we get into our disposition and capital market strategy for the year. And I think with all the market volatility that we're seeing, New York City is continuing to prove to be a safe haven for capital, looking to deploy capital into New York City commercial real estate.

And then shifting to investor composition, just looking at who the investors are and where they're deploying dollars. One trend that we've seen looking out into '25 and '26 is that international investors are proving to put more capital into funds and domestic vehicles as opposed to direct investments. This is going to prove to be advantageous to us in multiple ways. One is, as we look to grow our asset management strategies and our asset management dollars, this is a way in which we can deploy dollars on behalf of third-party international investors. And then the other reason is, as we look to do direct deals through our disposition strategies, usually, those investors are looking to transact with known entities, groups they've done business with groups that have track records. And for us, that's a big way for us to capitalize on the pipeline that we have.

Looking at -- and if you have the available slides online, looking at the types of transactions that have gotten done in the market over the past 12 months, you'll see a wide array of transaction activity from different geographies, represented by the Middle East and where we saw residential conversions dollars raised from -- at 845 Third Avenue from Israel, 70 Hudson Yards that raised capital from Kuwait, looking at One Vanderbilt, where we were able to raise capital from a Japanese investor or 1177 AOA, where Norges deployed dollars.

And then going further into our disposition plan for the year, if you followed our earnings call about a month ago, I said we had 4 transactions that we were in deep negotiations on. Pleased to report this morning that we completed one of those, which was the sale of 690 Madison Avenue. That was an ASP asset. We DPO-ed the debt out of ASP about 15 months ago. We realized a 40% IRR on a sale at $54.5 million. And then for those following, we have 5 transactions now in pipeline or in deep negotiations as part of that $2.5 billion plan. And that would bring us to a total of 6 versus where we were a month ago at 4 transactions. So we're seeing big progress with that disposition and capitalization strategy.

Let's shift it to Matt.

Yes. Just to talk about our -- the financing markets and our strategy a bit. Looking back at where we were back in 2019, the composition of Manhattan financing was predominantly through banks. They were roughly 50%. If you fast forward to 2025, during the pandemic, obviously, financing markets slowed a bit, and there was some uncertainty. The financing markets tend to be a little slow, so they didn't really come back in earnest until 2024. But in 2025, the CMBS market opened up and the CMBS market ended up being about 55% of the Manhattan office financings that took place in 2025, and that market continues to be open.

If you compare the first 60 days of 2025 to the first 60 days of 2026, what you see today is not just the CMBS market functioning and not just the bank market functioning, but it's CMBS, bank and private capital that's driving deals that have tighter spreads than a year ago. And with the benchmark yield being in, all-in rates are significantly below where they were a year ago. A year ago, when Spiral got done in the CMBS market at just south of 6%, that was pretty eye-opening to people that didn't think deals could get done below 6%.

We did a CMBS deal on Park Ave Tower in January at 5.25%. So that sets us up very nicely for a $7 billion financing plan that we have underway right now with the financing at Park Ave Tower and our $2.4 billion recast of our credit facility and a CMBS execution at One Madison, both of those are in process and tracking nicely for March. We could be $4.5 billion through the $7 billion plan just in the first quarter.

Look out through the balance of the year, we have 2 assets that based on the work that Harrison and his team are doing, could be sold before we execute a financing at 7-day at Landmark Square, which sets us up really for 245 being the big financing attend to before the end of the year. We've assumed that $1.8 billion financing would be extended. -- and then we'd sell an additional JV interest to roughly 25%. Given the strength of the financing market and the attractiveness of Manhattan office to the CMBS market, I wouldn't be surprised to see us put completely new financing in place at an upsized amount because the value creation there has been extraordinary.

I'll turn it back to Marc.

Okay. Thanks. Wrap up with a couple of additional thoughts. First, we're always focusing on laying the seeds of future growth. And we're proud to show you on that deck online some early images of SL Green's next new great development, 346 Madison Avenue directly across from One Vanderbilt on Manhattan 44th Street. We will once again, work to redefine the skyline and design a skyscraper, which at 900 feet tall is going to deliver innovative office space, best-of-class amenities, outdoor spaces that's going to build upon the successes we've had at One Vandy and One Madison. We just closed on the land, I think, in October, and we're already deep into concept development. You could see how great this building is going to be. It's going to be the building of choice for tenants looking for midsized floor place, which is the deepest part of the demand of the market. So I feel it's both right product, right time. It's also a bit risk mitigated from having to rely on big block tenancies.

We will ensure the building is impactful from ground to top, and I hope you interpret that in the images that you see and the project is expected to be completed by the end of 2030 with tenants taking occupancy in 2031. I'm going to save some of the questions about New York City, New York State, which I had some slides on in the deck as well.

And I'll just end, Nick, with your question about what's the #1 reason to own the stock. I think that was the question. Easy answer, leadership. Today, this morning, I'm proud to have announced to the market that we have re-upped the tour of duties for both Matt Di and Ed Piccinich for 3 years. And we've promoted one of our own homegrown talents, Harry Sitomer to the role of President and CIO. Harry is truly so it represents our culture, ethos, excellence, and it really helps to distinguish who and what we are. Harry is a rising star. He is a star. And thank you for that opportunity to take you through that.

All right. Great. That was a lot to get through. Maybe just starting out, you kind of laid out the refinancing plan at Investor Day, the disposition plan. You've touched on kind of some of the progress. How has kind of some of the pricing changed since you laid that plan out initially? Any changes to kind of the buyer pool, competitive landscape? And I guess, just what's kind of surprised you the most since you first announced that plan back in December?

Yes. I would say no real change to that plan. I mean we put a lot of thought into that strategy when we developed it in December and announced it to the public. Right now, everything is going consistent with our expectations. And if anything changes, we'll report back. But so far, no changes.

And then kind of beyond the debt reduction goal, how are you thinking about capital allocation between pursuing new asset acquisitions, debt opportunities. You mentioned the increased interest in kind of fund vehicles versus direct investment and versus opportunistic share buybacks.

Well, capital allocation, we've got a $2.5 billion plan. We're going to deploy a fair bit of that to the -- to paying down debt now that we've spent the past few years very opportunistically growing, laying the seeds of future growth. We want to rightsize the balance sheet with part of the money. And the rest we're investing into new development projects like 750 Third Avenue and 346 Madison. We are growing the asset management business, as you said, but that's not really an allocation of monetary capital, that's an allocation of human capital. And we are unlocking the untapped, and I think underappreciated value in our platform because as we've gone around the world, raised money for vehicles and joint ventures, we've recognized this kind of insatiable desire and need to have SL Green work on both asset management and asset repositioning plans for institutional partners.

And we're going to evaluate heavily stock buyback at these levels. I mean we're very confident in our internal assessment at NAV. We're always in the market testing valuations. Sometimes we transact, sometimes we don't, but we always have a very good handle on the underlying value of our assets. I always like to say where we tend to be within 3% plus or minus of our own internal assessments as confirmed by market participants and market trades, whether it's inbound unsolicited or deals we go into contract on. And I do think that you'll see us have to give heavy consideration as we've done in the past to a buyback program.

And then just on that, you kind of laid out some frameworks about how you think about NAV at the Investor Day. You kind of mentioned in your opening comments that the transaction volume is picking up, the debt markets are available. What steps do you think you can take kind of beyond selling assets that can kind of close the disconnect between where the stock trades and kind of your views on NAV?

I mean, I think the plan we laid out in our eyes ought to do that, whether it does or doesn't. I think we're not selling assets to prove a point, although it does illuminate value. We're selling assets because we believe the price we're getting is accretive to what we can deploy elsewhere and/or we feel it's the right time in the market to either sell assets or bring in JV partners to go down our path of an asset-light program, optimize both returns and fee revenue and then reinvest those dollars.

So I think the combination of being a dividend payer as opposed to a non-dividend payer, having been active in the buyback arena before and maybe soon again and also having a balance sheet that I think is both long-dated in terms of maturity, $1 billion plus of capacity and gives us the flexibility we have to execute this program. So I think those are the kinds of things that will hopefully awaken a market that fears of New York City or a mayoral change or AI, I mean, those are the themes we hear about. Right now, we're just executing and the market is decidedly in our favor right now, and we want to get as much done in '26 as we can.

You just hit on two of the biggest topics that we get asked about for you specifically and I guess, office more broadly. So maybe starting with just the mayoral and local politics in New York. How much does that impact the business? How much does that impact leasing either in the near, medium or longer term? How do you think about kind of headline noise versus actual impact?

Look, I think the political and fiscal landscape in New York City and New York State right now is quite good. We have a governor, who's now a seasoned governor running for reelection this year, big approval -- she's at an all-time high for her approval ratings. I think she's got a sizable lead over her other party competitor. And she, I think, does a very good job of getting sensible things through the state legislature. So the ratings of New York State are as high as it's been. I think it's AA+, she's proposed a $260 billion budget with no new tax increases and state revenue growth is projected at 10%. I mean, show me another major city or state that's got a 10% revenue projection. It's quite impressive.

At the city level, you've got, obviously, Mayor Mamdani, who's been elected on a platform to effectuate trying to provide more affordability to his constituents, whether it's in rental housing or mass transportation, et cetera. And the mayor in New York has to work with the Governor and the City Council. Julie Menin is a terrific speaker of the council. She was just elected. She's someone -- we and I know quite well and is very pragmatic, I think which is why she was elected to that position. And I have every confidence that between the City Council, the legislature, the Governor or the mayor, they will find common ground to, in no way derail the sort of extraordinary momentum right now in New York State, New York City fiscal economy, while trying to solve some real problems in the city as it relates to high cost of living. I mean, make no bones about it. But I think we want to be a participant and a partner in that exercise. And that's how we presented ourselves always in the past to the city and the state, and we look forward to doing our part.

Are there any policies that have been either proposed or part of the platform that you think really would have a potential negative impact? Is there anything that you're really keeping an eye on or...

I think there's always -- the city always starts out their fiscal process with a deficit that's got to be closed, and they close it through what's called a PEG program, plugging the gap. To do that, they've got multiple tools such as revenue reestimates, debt service management, vacancy control. I think the deficits that are being discussed in the $4 billion to $5 billion range sound quite large, put in the context of a $120 billion budget, I have every confidence that, that budget will be balanced, notwithstanding by law, it has to be balanced. And I don't think it will take new taxes to do so, but that's going to be negotiated over the coming months. And I think that through revenue growth and some cost efficiency, we're going to march on the city and state have big reserves, $14 billion at the state level, over $6 billion at the city level. So pretty good fiscal health. And I think the city is rated A or A+ as well. So we're dancing on the head of a pin. We've got 2 very good fiscal credits that we benefit from in New York State right now.

Makes sense. And does any of this come up with conversations with tenants on leasing?

No. I would say -- I mean, when we say it comes up. Generally, the negotiations during leasing are not over budgetary items. So I wouldn't say -- I mean, Steve Durels would have a better answer to that, but we haven't seen anyone really back off as a result of any kind of concern over what you're referring to or AI or anything else. If anything, I'd say Q1 so far is outstripping our projection. Remember, the current state of affairs has been on the table for over 6 months now. So there's no surprises here. I think everyone knows what lies ahead of us and everyone feels, I think, fairly confident. And as a result, we've got not just good leasing, but great pipeline. And even things like look at condominium sales in New York City. I mean that to me would be an early indicator is some kind of slowdown in condo sales, February 2026 recorded the most $10 million contracts signed in the past 4.5 years. There were 49 condo contracts over $10 million and representing almost $1 billion of gross aggregate condo sales year-to-date. And that's substantially more than the same period in 2025. So that seems to be an accelerating trend.

And then maybe just turning to AI. We had a question come in on it, so I'll try to weave that in. But I guess the question is the efficiencies that some of your tenants are either seeing now or potentially see in the future, how do you think about the impact to office more broadly from that and space needs from tenants? And how -- how do you get ahead of that potentially? And how could it actually impact your business over the coming years?

Yes. I mean, look, the first thing to hit is we're just not seeing it from our tenants. I mean, I think that's important to realize is despite all the headlines and what everyone is seeing and the reactions to the stock, it's just not translating from our tenants. We have almost 1,000 tenants in the portfolio, and we speak to across the board, almost every single one of them across a variety of industries. And the most active data point is what are they doing within their own portfolios and their own footprints. And the data is in what we released this morning, 500,000 square feet of leasing in 60 days of the year. And so for us, when we're working with our tenants and speaking to them, it's their signature page on a 15-, 20-year lease that's the best indication of the impacts we're seeing or hearing from AI. And just so far, that has not come or have been realized in our portfolio.

I guess the question is on renewals or in 3 years or 5 years, like maybe we're not seeing it quite yet, but I think, New York City we've seen some efficiencies. I'm going to ask you specifically for your company. Do you not think that these companies will see efficiencies? And how does that impact their space needs going forward?

I can only -- talking about our own company, I hope to do a lot more with the same amount of people that we have. I think that the tools are extraordinary. We're just really diving into it in different ways that are exciting and heavily productive. But in my estimation, that means let's go do more business. I'm not looking necessarily to figure out a way to go backward, if you will, but a way to just get more out of our team. And there are some powerful tools out there that won't take the place of the ingenuity that we have or the negotiations that we undertake or the relationships that we make around the world, but they'll certainly help us do things smarter, better, quicker. And I would hope that's how the leading companies in New York will use that technology, but we have no crystal ball.

I think Marc made -- if I could add to that, Marc made a very important point earlier, too. What the impact will be on office space because you said generally office. I mean we're mono market. So we can only focus on what's going on in New York, and we're seeing no contractions and significant expansions for 15 years plus because this is -- these are the decision makers. These are the headquarters leases. What happens in the back offices? Don't know. Will there be efficiencies there? Don't know. But what's being determined here are those who are making strategic decisions and leading the largest companies in the world, which is a very different dynamic in New York than you may see in other markets.

Makes sense. And just specific to SL Green, are you in terms of your own AI deployment, are you building it yourself? Are you partnering? Are you buying? How are you thinking about the efficiencies that you can...

No, we're partnering. We're soliciting, buying. I don't think we're, at the moment, developing in-house products because it's very efficient what's out there. But there are -- it could be anything from auditing -- preparing and auditing cash flows, lease abstracting, incredibly useful for SUMMIT in terms of data management and targeting for our marketing of those ticket sales. It's just a whole area that I think we're just coming up to speed on that will -- that we're going to commit a lot of resources to. But I think a lot of it is we're going to look to build upon what some of the leading firms out there have done in pioneering in these areas.

And they happen to be our tenants. The beauty of having so many AI tenants, if you look at the -- this is in our deck, some of the largest AI leases done in New York are in our portfolio, names like Harvey AI. So we have the beauty of partnering with existing tenants to build out AI. I know my group, specifically in finance is using AI. And by the way, I'm not saying build this out, and then I'm going to get rid of all of you. I just repurpose them for higher functioning duties, but we're building that out with tenant partners.

I think the last piece to add there is how much proprietary data we have that nobody else in the market has. I mean we've invested in almost 1/3 of the commercial market. We have evaluated and underwritten probably another 20% to 30% of the market. Our ability to use that data in these types of technologies can make us smarter and better than our competitors just using that data. And we don't plan to share that data with others. So that's just going to make us a better investor and better thinker as we evaluate the market.

Hi, guys, have you [indiscernible].

Well, I mean, the companies were -- I wouldn't -- we were not -- we didn't lean into fractional office. That was a big point of ours way back when because we thought the credit exposure couldn't necessarily be secured with 6 to 12 months of security. These companies are -- appear to be very well capitalized and have real business plans that I feel differently about. And so I just want to -- they probably account for less than 1% of the portfolio. I'm -- top of my head, maybe 1 million square feet or less.

Maybe even a little less.

Maybe a little less. So I mean, it's not something I'm like losing sleep over, if you will, when we think about credit. Our credit losses are infinitesimally low, and that's been through many different cycles. I think we're really good at making sure we secure our TIs commission and free rent periods and have an ability to relet in a down -- if something happens. So I think the combination of keeping exposure to any new industry at a 1%, 2% level, something like that and taking good steps on securing those leases is what we traditionally do, and then we'll see. But 99% of our demand is coming from seasoned Fortune 500 type tenancies. And I don't -- credit loss, I couldn't even begin maybe less than 0.25 point a year it sounds like.

Maybe a couple [indiscernible].

Yes. We take the same approach. You got to -- you're looking to secure your TI, your commissions and your free rent. I mean you don't want to be caught out-of-pocket. You're not going to get 3 years of security in this market and secure not only your out-of-pockets, but also multiyears of rental stream. So as long as my view is you've covered your costs and your free rent period, then you go replace the tenant and life goes on. And as long as you're limiting your exposure to those types of industries for a couple of percentage points, then it's really not -- it's not pivotal for us, if you will.

We got a question coming in from the audience. What percent of your tenant base is software-focused?

Somebody recently looked at it. I think they found one tenant that was greater than 5,000 feet. And then maybe 1 or 2 that were less than that, software specific. We have fintech, we have AI, but software. That's -- typically in New York, you don't see a software company.

I just -- getting a couple of questions. Our portfolio is Midtown centric. We don't have downtown except for 100 Church. That's not really a tech building. And we've got some great buildings in Midtown South, which is where we probably have almost exclusively our technology software and our [ AR ] tenants in 11 Madison and One Madison. Those buildings are leased. So I mean -- and they're not leased to software tenants by and large. I think we have Palo Alto in One Madison, and we signed up a few AI tenants. But it's -- the portfolio is really comprised not so much of AI tech and software companies, and I don't expect it to be over the next 3 to 5 years.

Another one from the audience. What do you think your normalized FFO per share growth will be when the portfolio gets to full occupancy?

It's a good question. Matt?

That is a good question. Look, we're in a period where we are -- we've leased the portfolio from 88% to 93% at the end of last year, getting to close to 95% this year, burning through the build-outs and the free rent periods, and that puts NOI on a significant growth trajectory. What's -- that's -- we highlighted 10% same-store NOI growth in 2027, and we're clearly on the trajectory for that, actually came out of the gates better than we expected in early 2026, although that materializes further out. Typically, leases roll through earnings closer to 24 months than 12 months after the lease is signed. But if we can get a rate environment that's a little bit more constructive with the NOI growth, we are on a significant growth trajectory.

All right. Moving into our rapid fire. What will net effective rent growth would be for your property sector overall, not your company in 2027?

Net effective rent in the better properties you said or which properties?

Net effective rent for New York City next year.

Net effective rent for New York City.

New York City?

New York City.

If headline rents are in the 5% range, I think net effective rents will be compounded in the 10% range.

And then will your sector have more, fewer or the same number of companies next year?

More or fewer or the same number of companies next year in our sector?

Fewer.

Thank you.

Thank you.

Thank you, everybody, for joining us, and welcome to the SL Green Realty Corp.'s Fourth Quarter 2025 Earnings Results Conference Call. This conference call is being recorded.

At this time, the company would like to remind listeners that during the call, management may make forward-looking statements. You should not rely on forward-looking statements as predictions of future events as actual results and events may differ from any forward-looking statements that management may make today. All forward-looking statements made by management on this call are based on their assumptions and beliefs as of today. Additional information regarding the risks, uncertainties and other factors that could cause such differences to appear are set forth in the Risk Factors and MD&A sections of the company's latest Form 10-K, and other subsequent reports filed by the company with the Securities and Exchange Commission.

During today's conference call the company may discuss non-GAAP financial measures as defined by Regulation G under the Securities Act. The GAAP financial measure most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measures can be found on both the company's website at www.slgreen.com by selecting the press release regarding the company's fourth quarter 2025 earnings, and in our supplemental information included in our current report on Form 8-K relating to our fourth quarter 2025 earnings.

Before turning it over to Marc Holliday, Chairman and Chief Executive Officer of SL Green Realty Corp., I ask that those of you participating in the Q&A portion of the call to please limit your questions to 2 per person. Thank you.

I will now turn the call over to Marc Holliday. Please go ahead, Marc.

Okay. Thank you for joining us this afternoon as we kick off the year. It's been just weeks since our investor conference, but we've already hit the ground running on our business plan for 2026. We are about a month into the Mamdani administration and know there's a lot of pressure and focus on the Mayor coming out of the gate. But it's going to take some time for the Mayor Mamdani to put an imprint on how he'll govern. He's still putting his team together and they're at the very early stages of getting their arms around the city.

We did see an early test this week with a major snowstorm here in New York, about a foot of snow in Manhattan on Sunday, and the administration did a great job getting the city back to normal quickly with the Mayor being very visible and communicating effectively. At the same time, there's a lot of political maneuvering going on as we enter budget season in Albany. This is the time of year when the city makes its case to get the biggest chunk of the state budget as possible for the coming fiscal year, reflecting the city's enormous contribution to the state economy.

This is especially true with the new administration eager to invest in the initiatives and promises made on the campaign trail. I know there's been a lot of talk recently about potential city budget deficits, $2 billion this coming fiscal year and up to $10 billion, the following. My own view is that the city starts off every budgetary period with a gap that needs to be plugged and this year is no different. It's not just about expenditures on the revenue side, there's a lot of good news with tax collections 8.5% up in 2025, a big portion of which came from growth in personal income.

One thing that's certain is that the business economy in New York City had an incredible year in 2025, and I believe that when the new revenue forecast come out in the next few weeks we'll see that the city will be projecting significant additional revenue increases that will help defray the current deficit. Remember, the city's budget is required by law to be balanced at the beginning of every fiscal year, and we continue to remain confident in the city's fiscal stability and strength.

Let's not forget that New York City's credit rating is AA and was reaffirmed by S&P as recently as October, which noted that the city has the budgetary reserves needed to navigate any near-term risks. At our Investor Conference in December, I made the case for what I believe was shaping up to be a stellar 2026. As we sit here on January 29, I feel the same. In short, I think 2026 is setting up to be quite an amazing year for the commercial office sector in terms of occupancy gains, rental achievement and business growth. Given the lens I look through today, the fundamentals are strong. Businesses are still leasing space and expanding, growing their businesses and making lots of money. The big 5 banks just reported increases to earnings year-over-year with profits in the fourth quarter up 6.7%, and investment banking revenues up 12.6%.

And we're expecting when Wall Street member firms finally report fourth quarter profits, they will come close to meeting, or exceeding the current all-time high of $61 billion, as the number stood at $48 billion through the first 9 months. Between Wall Street, the big 5 banks reporting and what we see going on in our own portfolio, it all reaffirms our view at investor conference that New York City is differentiating itself from other U.S. cities in significant ways, and will continue to be the central focus of investors looking to deploy capital in debt and equity this year and beyond.

Case in point, I led a contingency from SL Green that just finished a 10-day swing through Asia, where we collectively held two dozen meetings with debt and equity capital sources, investors, buyers, sellers, asset managers and sovereigns. I can tell you that the appetite to invest in New York was as strong as I have ever seen. As we continue our travels around the world, we expect to see a similar theme play out. I expect that transaction volume for 2026 will be even higher than last year, which was $23 billion, an amount that was roughly equivalent to that of 2019. And it will only facilitate the company's execution on our $7 billion refinance plan and our $2.5 billion disposition plan.

We set lofty goals for ourselves in December, as we always do, and note you all will be monitoring our progress every step of the way. As you should. We like that pressure, and we've never been more motivated to meet or exceed those goals in this year.

What emboldens me is that the private markets completely get it. One point I highlighted at investor conference, Paramount trading at under $4 a share and then selling for nearly $7 was not lost on anyone. The private markets see economic growth in real terms, the coalescing of young and highly educated talent and strong business demand right here in New York City. So we're going back to work on what we can control and keep putting numbers on the board until we see it reflected in stock price, which I know we will because the disconnect now is simply too big to ignore, between the value of our premier assets in this company and our share price.

And to be clear, one of those premier assets is our human capital. The people of SL Green, who will generate more than $100 million in fee revenue from institutional investors who look to us to develop, manage and monetize investments on their behalf. I hope everyone out there appreciates our efforts and the enormity of the plan we have for 2026, and thank you for continuing to support our company.

Now I'd like to turn it over to our Chief Investment Officer, Harry Sitomer, who will add some color on how we're progressing on our business plan.

Thank you, Marc. On the capital markets front, 2026 is off to a busy start. First, in the credit markets, we have seen a continued tightening of senior loans as demonstrated by our recent financing of Park Avenue Tower, which priced at a spread of 1.58% at our full proceeds ask. Most notably, we saw AAAs representing over 50% of the transaction, sell as tight as 112 basis points over the treasury rate. While this rate is a compelling borrowing rate I will remind everyone that in 2018 and '19, we saw similar classes trading in the 60 basis point range over treasuries. So there's still a substantial amount of room for further rate tightening across the capital stack and, of course, in the index.

We will continue to benefit from this momentum as we execute on our $7 billion financing strategy this year, highlighted by the refinancings of One Madison Avenue, 245 Park Avenue and our corporate credit facility, which total approximately $5 billion of the $7 billion plan. We are in various stages of executing on each of these financings, and you should expect to see us roll out a series of announcements through the balance of the year as we enjoy a tightening senior borrowing market for quality assets and sponsors.

In the equity markets, we are seeing a wide array of new entrants rejoin this market as a result of improving sentiment and investors realizing the relative value of New York City commercial office properties, versus alternative investment opportunities in an economic climate where hard assets are otherwise trading at premiums. We had a busy New Year's Eve closing out our partnership with [ Rockpoint ] at [ 100 Park ] where we quickly realized on a substantial premium from the acquisition 11 months prior.

With the building now 100% leased, us and Rockpoint together will fund the necessary cost to complete the capitalization of the project. We welcome Rockpoint to our blue-chip roster of reliable partners. They are a great firm, and we expect to do more together. This was Rockpoint's first major office deal in 6 years, a testament to the recovery in New York City. We are in negotiations on contracts and term sheets on 4 additional transactions in our $2.5 billion plan, and look forward to sharing updates as we further our JV and counterparty roster.

On that note, and to reiterate Marc's earlier color, I will add what a difference a few years makes in the private markets. After our investor conference, my phone and inbox was flooded with inbounds looking to explore participating in our capital markets plan for the year. And Marc talked about Asia, but the interest is really across the globe. I'm seeing it domestically in Canada, Europe and the Middle East as well. I haven't seen this widespread of demand since pre-2020, and New York is clearly defining itself as far and away the city to invest capital in today.

On the fund side, while we have seen stability in the senior lending markets where we are borrowers, we still are seeing inefficiencies and imbalance in the subordinate credit space where our fund is focused. We are tracking for $150 million to $175 million of deployment per quarter, and the team is hard at work deploying that capital for our customers. We are also pleased to announce that we will be launching fundraising for our next fund focused on senior credit lending as we continue to bulk up our fund business. More on this to come over the next few months.

Finally, last but not least, a [ shadow ] to [ Green Loan Services ], which is now the largest active special servicer of SASB loans in the country, now servicing 5 of the top 10 largest specialty serviced loans.

With that exciting news, I will pass it over to Matt.

Thanks, Harry. Clearly, out of the gates, strong here in January, no matter how many snow days people in the market seem to want to take recently. As excited as we are for what's ahead, I want to take a minute to highlight the results we posted for the fourth quarter where many of our operating metrics exceeded the expectations we just laid out in early December at our investor conference.

From an earnings perspective, we printed an FFO beat of $0.02 a share, driven by higher NOI due to lower expenses, net of reimbursements, which came through both in the earnings beat and in same-store cash NOI that was better than we expected for the quarter. Results in improved contribution from our hospitality business, which saw a solid fourth quarter of activity and lower G&A, which, as I highlighted back in December, is already low based on our AUM and relative to the comparable peer set. These positives were partially offset by lower operating profit from Summit, which is affected by the later-than-expected opening of the Ascent premium experience in mid-November, and some additional maintenance costs we incur related to it. And finally, for those who like to refer to FAD, hopefully, you took note that we actually beat the initial guidance we gave back in December of 2024 by $65 million, almost $20 million of which happened in the fourth quarter alone.

On the leasing front, we closed out another banner year. Congrats to Steve and his team with almost 800,000 square feet of Manhattan office leasing in the quarter, bringing the annual total to 2.6 million square feet, and our 3-year total to almost 8 million feet. And the strong leasing in December specifically allowed us to ultimately exceed our mark-to-market expectations for both the fourth quarter and the full year.

Our same-store leased occupancy objective was also met, albeit a couple of weeks later than we expected. We ended the year at 93%, which is sector-leading and reflects an increase of almost 400 basis points since the lows at the end of the first quarter of 2024. Yes, we did say we would end the year at 93.2%. However, some tenants in our pipeline that we expected to sign in December, decided they wanted to enjoy the holidays with friends and family, versus answering Steve's phone calls and signing leases, so they waited until January. Including the same-store leases that were signed after January 1 in our December occupancy, we would have been at 93.2%. So it's simply a matter of timing, nothing more.

More importantly, with 142,000 square feet signed so far in January, and a pipeline of more than 1 million square feet behind that, we are well on our way to achieving our 2026 leasing goals, including our same-store occupancy objective 94.8% by the end of the year. All in all, a very solid fourth quarter, puts us on great footing to achieve the objectives we laid out for 2026, and for earnings growth in the years beyond.

With that, I'll turn it back over to the operator for questions.

[Operator Instructions] Our first question will come from the line of Alexander Goldfarb from Piper Sandler.

Steve, maybe just hitting AI upfront. We've now had AI out there for quite a while. And the market seems to be shaking out. But you see like law firms, for example, they're bidding aggressively for associates. You see the demand that you guys and others are showing for office. And at the same time, other industries are talking about downsizing from AI.

So can you just give an update how your tenants and the tenants who are driving the market, how they are incorporating AI? And are they truly downsizing any people? Or this is just all like part of the mix, and therefore, AI is part of their business, but it's not affecting their hiring plans or how their -- or how much space they need to take?

Well, that's a lot of ask to get that insightful into exactly what our tenants are using [indiscernible]. But I'll give you what we're seeing from a leasing perspective, which is, I've not heard of a single instance of the deals that we've done where tenants have downsized as a result of AI. Just the opposite, many of the deals that we're working on, I would say, quite frankly, the vast majority of the deals we're working on have some element of growth. Whether that's growth because AI is making it more efficient and more profitable and delivering more opportunities to develop their business, one can only speculate.

But maybe pivoting a little bit more on to the AI demand side of the equation. The AI tenants leased 1 million square feet last year. There's currently 80 tech tenants in the market right now with active searches for over 8 million square feet. Of that, there are 13 known AI requirements for over 1,200,000 square feet. So to the extent that there's any space savings on other businesses, is clearly being offset by an exploding growth of AI demand in the marketplace.

Okay. And then, Marc, on your Asian adventure, you sound like some productive meetings over there. Are there any areas of interest where the overseas investors want that surprised you? Or how are they talking to you about the money in terms of, are you giving them the ideas of, hey, we can invest here and there? Or they're saying, hey, here are the areas that we want to focus on, and this is where we'll give you more money? I'm trying to figure out which way the horse race is being driven and if it's countering up some new opportunities or maybe just reaffirming your existing game plan?

Well, I think the way I would characterize it is the way I've seen it in the past, but really only several years out of 3 decades where the money inflows into these institutions seems to be so great and real estate has to, sort of, maintain a certain percentage of total AUM for these different investors. And many of these country investors have kind of maxed out their investments in their local economies. And they really can't invest more. So they, [ A ], are almost forced, if you will, to look outside their borders. And when they do that, it was quite evident to me that there's really only a couple of areas that they feel comfortable investing in worldwide and certainly in the U.S.

And the constant theme of New York City, Midtown Manhattan real estate being sort of the real estate equivalent of U.S. treasuries, I think, really resonated in terms of risk-adjusted downside safety and a path towards real returns where you can still earn double-digit returns on good core, real estate assets. Because interest rates in the U.S. are still relatively high and cap rates are still relatively high and that translates well for a lot of these investors.

So there was a lot of our counterparties telling us that they are looking to us to help them deploy capital in various different ways, debt and equity, development and core assets. Some is more opportunistic. In some cases, people have interest in the Summit platform and sponsoring growth in the Summit platform in various markets, et cetera. So it was -- it's just great meetings. Our franchise in those markets is very well known and highly regarded.

There seems to be a lot of capital deployed in '26 and notwithstanding some of the geopolitical events with -- particularly with tariffs, both ways. U.S. tariffs of forward goods and foreign tariffs are American goods. It seems that there's still a desire to convert money to dollars and put it to work in New York City and in many cases with us. So it was a very good triple around.

Our next question will come from the line of John Kim from BMO Capital Markets.

On the new disclosure that's provided on Page 31, Matt, on the difference between the physical and economic occupancy. I guess, it would suggest that there's another $7 million $8 million of rental revenue coming to SL Green from leases that have already commenced. So I'm wondering when as far as timing, when you will recognize that on both a GAAP and cash basis?

That's about the most specific question I've got in a while. Look, we gave economic occupancy as a new stat we would be referring to back in December. So -- and we guided to where it was going to end 2026 property by property. Obviously, you need a starting point for that, so we threw it into December.

How the growth from the December number, December '25 to December '26 number plays out, we don't give quarterly guidance, so I'm not going to layer it in first quarter, second, third and fourth. But we gave you full year NOI guidance. It translates into significant same-store NOI growth, 3.5% to 4.5% over the course of the year. So you say it's coming in over the course of the year. How it bleeds in somewhat out of our control because the tenants control when they finish their space and can move in, and that's what triggers revenue recognition. So for that, among other reasons, we give it on an annual basis and can't give you how it bleeds in over the course of the year.

But can you give us like a rough estimate, like would half of it come this year and half in the following years?

I cannot.

Okay. My second question for you is the [indiscernible] outperformance that you mentioned, $20 million this quarter, what drove that? Is any of this timing related? And how does that impact your views on the dividend?

How does it impact [indiscernible]

On maintaining the dividend?

So FAD and dividend are unrelated topics. So I'll start with that. As it relates to FAD outperformance, I think part of that is being very vigilant about capital spend. And also gives evidence to the unpredictability of FAD, which is why office companies like us don't guide to it, because it's largely out of our control when it comes to the tenant's capital spend. If they elect to build out space and call capital that we have to fund that. If they defer, or just spend slower we can't control that. So I think the combination of those things plus just FFO outperformance, pure earnings outperformance all drove the overall FAD beat.

As it relates to dividend, FAD is not the governor of dividend. FAD is a stat just like FFO is. And so the dividend is an accumulation of taxable income items, and that's what will drive our dividend on a go-forward basis.

Our next question will come from the line of Nicholas Yulico from Scotiabank.

I guess just going to the asset sales guidance that you've given, the $2.5 billion, and you gave some NOI impact this year that was expected. Is it right to think that, that's the timing of the asset sales is more of a back half of the year impact? And can you just give us any sort of range on how to think about cap rates for the different asset classes that you're selling?

So you're right to say that it's mostly back half. We do have some asset sales, Harrison commented that there are term sheets contracts in advanced discussions. So maybe we can get some of those wrapped up in the first half of the year. But by and large, a lot of it is second half. And we're selling probably the most diverse group of assets we ever have. We have some stabilized office. We have development sites. We have residential. We have retail, a little bit of everything. I wouldn't hazard to put a blanket cap rate on all of that. And when you talk about the development side, there is no cap rate. I don't know, Harrison, do you want to add anything to that?

No, I think that's right. Also for competitive purposes, I wouldn't want to put a cap rate out there that you want us negotiating the best price. But I would add that we put out that business plan only a couple of weeks ago. We have a very high degree of confidence in executing on that plan. That's why we put it in front of everybody. And we are hard at work at getting that plan done. And as I mentioned, 4 of those deals are already in term sheet, or contract negotiations. So hopefully, some more news to come over the coming months.

Okay. And then I just want to follow up on the dividend question. I know you mentioned on FAD and how it doesn't impact necessarily the thinking on the dividend. But I was just wanting to see if you could give us a little bit more of the thought process of the Board. Because ahead of the March decision on the dividend, how the Board is thinking about it? Because we're all seeing that FFO and likely FAD is going down this year, and so it kind of raises questions about the dividend. Any additional commentary there would be helpful.

Yes. I would -- it's premature to have a dividend conversation right now. We'll take it up with the Board. I can tell you the Board doesn't just look at the next quarter, 2 or 3. The Board takes a holistic look and we're going to look at things in the coming years. I think '27 is going to be a really strong year. So we don't -- we don't peg the policy quarter-to-quarter. It's intended to be underpinning of a long-term plan of investment, and harvesting, repatriation and creating free cash flow. And one of the biggest parts of that plan now, which is different than it used to be, is the creation of pure net fee income, unlocking the value in the platform over and above just our asset value. And that money, if you will, is kind of in place of what used to be DPE income.

And I think you get a much higher multiple, it's much stickier, and it's core to who we are to build up this asset management business. Further, you heard Harry talk about the launching of a new fund, which we will do in '26, and that's not even in those numbers. So I feel very good about the earnings trajectory of the company as all this development we did and all these leases start activating and coming into recurring FFO in '26, maybe back half and certainly beyond, '27 and beyond. And those are the kinds of things we're looking at in addition to taxable income. And in addition to cash flow, when setting a dividend policy.

So I think what you're hearing is we're generally optimistic as it relates to the business plan. Where we peg the dividend at a moment in time is something the Board will take up in, I guess, March or April. March. March. And there's not a lot more I can add to that. But you mentioned something about declining or falling earnings this year. This portfolio is without question, the best portfolio of assets with the highest earning capacity this company has ever had. And at the end of our $7 billion refinancing plan, our $2.5 billion disposition plan, the balance sheet is going to be exactly set to where we wanted to be at the end of this year. And we're poised for opportunity and growth, earnings growth and value growth.

So the dividend we'll have to [ suss ] out in March. But this is not a company that feels like it's in a moment of decline. I think we're at a moment of expansion on all levels. And I think the private market gets that. And I hope the public market comes to realize the great successes we're having in this market and follow suit with support. But until then, we're happy it's a necessity that we have extraordinary support from global investors.

Our next question will come from the line of Anthony Paolone from JPMorgan.

Great. And Matt, maybe just to clarify, just to make sure you got this right. This new occupancy, or economic occupancy, you gave us the 86.7% for year-end 2025 for the same store. So the number in your guidance for '26, is that apples-to-apples with that for year-end '26? Or is that the average across the year? Just to make sure we got this right.

The economic occupancy we published at the investor conference is your question, Tony? Was that end of year was...

What's the year-end?

That was -- year-end is higher. Year-end is higher.

Okay. And that -- but that is apples-to-apples then with this 86.7% that you now gave us?

Yes, the -- well, the published number is as of the end of December we guided to in at the investor conference for '26 was on average, the year-end '26 number would be higher, but in order to kind of get people to an average annual guidance to give a year-end number. It's not really given a picture as to how the earnings growth might look over the course of the year, we did an average by building.

Okay. Got it. That's helpful. And then just second one for me. Just curious, [ Worldwide Plaza ] has been in the news a bit. Can you remind us like what that FFO impact is? Like is that thing running at an FFO loss, or is interest in like penalty interest? Like how does that work for your earnings right now?

It generates $7 million of FFO.

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

Marc, I just wanted to follow up on your trip to Asia and dig into the drivers of the increased appetite since foreign investment has been lower over the past few years. Weakness in the dollar has been a big headline over the past few days and weeks. So I hear you on rebalancing domestic versus international exposure for those clients and them searching for higher yields.

But how much of a part of their increased appetite do you think a weaker dollar is playing, if at all? And if that continues? Or are you expecting that to provide you access to additional partners for fund investments or acquisitions? Or does that just mean more competition for assets and just higher values across the market?

The second part of that question, you said with respect to the valuation push, what exactly did you ask?

Yes. Just does that increase appetite for investment in Manhattan? Just -- do you think of that as providing you access to additional partners for fund investments or acquisitions? Or does that just mean more competition for assets and higher values across the market?

Okay. So it's interesting. When the dollar was strengthening and other currencies were weakening, you could have made an argument that maybe U.S. assets would become less attractive, but we didn't experience that. Because at that moment in time, people wanted to get their foreign currency into U.S. currency because they felt that U.S. had great real growth prospects. And once that money is here, I think the intention with a lot of these investors is it stays here and gets reinvested. They're not just rifle-shotting certain asset investments opportunistically, but they're looking to set up investment platforms in domestic markets here in the U.S. And there's -- at that moment in time, there was kind of an intentional directive to diversify some money into, what was in, a strengthening dollar. And I didn't see that hurt our ability to raise money really at all. And plus a lot of these sophisticated investors have hedging strategies that I think mitigates some of that risk.

Now with the dollar depreciating it obviously makes the assets somewhat less expensive. But also remember, that means rates are rising in their home countries. So that relative advantage we had, the U.S. rate versus home country rate is probably narrowing a bit, but still decidedly in favor of U.S. And yes, I think the appetite picks up more with the depreciating dollar, which creates more demand, will certainly push pricing. But nothing pushes pricing as much as interest rates. If you're looking for a push on pricing, maintaining or falling rates, I think, would have an explosive effect on values in the city.

Right now, maintenance of rates, I think it's a fair market and we outcompete in that market. And I think it makes it more attractive for investors to invest. And there was -- there was very little talk about the exchange ratio being a barrier in any way. And in some cases, it was certainly a benefit. So I think it's a good trend, but I don't want to give the implication that if that reverses itself and the dollar started strengthening again, that I would expect a dramatic tapering off. Because I still think there's a diversification play, a global diversification play into markets where they're underrepresented investments. I think that's the number one reason we're seeing these money flows in our direction.

Harry, you have any thoughts on that?

Yes. The only other thing I would add is what you heard me talk about in December and in my intro, which is just the relative value of commercial office properties in New York. A lot of what we're hearing from investors, to Marc's point about waiting is they're heavyweight in data centers and other asset classes that have seen big appreciation in pricing over the past 3 to 4 years. They haven't seen -- we haven't seen that type of appreciation for the past few years in commercial office assets. And that's what's enticing them into this market is the relative value versus other opportunities and other asset classes.

Okay. Very helpful commentary. Second question, you have a significant disposition target for '26 and a solid occupancy trajectory forecast for the year. Can you give us any idea of how much of the occupancy gain is related to selling off under leased buildings? And how much of the gain is related to organic leasing of vacancy throughout the portfolio?

It's Matt. I would say the occupancy objective is very nominally, if at all, affected by asset sales. There are some asset sales that we have in there that are lower occupancy, that we could not consummate and still meet our objective based on the leasing trajectory we're seeing. So will it have an effect, potentially. It was it factored into our objective 94.8%, achieving it or not, yes. So we could do without the disposition plan and likely achieve our targets.

Blaine, I would point you in the direction of a slide we used in the investor conference. I thought it was a pretty impactful slide, which listed, I think, a subset of mostly all our buildings, or all material buildings, if you will, in terms of current occupancy and where we expected to be at the end of the year. And those are same-store, obviously, between '25 and '26. And it showed not only in almost every case, maybe not every case, but the vast majority of cases occupancy gains being projected, which underlie the March forward from 93% to 94%-plus in 2026.

But shows you two stories. One, we're operating at the highest levels, I think, in the market at getting to 95% and above on a major segment of our portfolio. But still, we want to see those properties 100% leased. And people say, well, it's impossible, fictional, whatever. We've got properties that are 99% and 100% leased. And in a tight market, I think 97%-plus is not unachievable. We've achieved it in the past. And every 100 basis points for this company has a dramatic impact on the bottom line. So I just think referring back to that slide will give you a good visualization of where we see the occupancy gains coming from.

And our next question is from the line of Brendan Lynch from Barclays.

Maybe one for Harry. I appreciate the color on the spreads tightening over the past couple of years. What do you think could get us back to the tight spreads of the pre-COVID era? Is that more macro-related or more office sentiment related? And kind of what's the house view on the trajectory and time line of spreads tightening going forward?

Yes. I think it's more macro and relative yield focused. I will say just even through the Park Ave Tower financing, that was tightening like up to the last hour of bidding out those bonds. And I think we're going to continue to see a trajectory over the next 6 to 12 months that the spreads, like you saw us go from 11 Madison into Park Ave Tower, next to One Madison, and then you'll see 245 Park, you'll continue, so long as we stay on the current trajectory, to see those spreads tighten as we go throughout the year. And a lot of that is new entrants coming into the bond market that are recircling.

I met with someone this morning a North American-based investor coming back into the bond market that wasn't there for quite some time. So we're going to continue to see that momentum and that will continue to tighten the spreads.

Great. That's helpful. And maybe another question on the trends within concessions. It looked like the TI packages and free rent ticked up in the second half of the year despite the really strong demand that you guys are seeing. How should we think about those packages going forward?

Broadly speaking, I'd say much of what we saw last year continues today, which is concessions have been very stable. There's been opportunities to tighten them up in certain instances where -- whether it's on certain parts of the market where there's a lot of landlord leverage, particularly on renewals and the sort of, call it, the small- to medium-sized tenants. We're seeing some improvement on the concessions there.

But I think what you'll see this year is free rent will start to come down a little bit. And I think TI will be the last thing to change. Although, again, on the small to midsize and particularly on the renewal side, we've got the leverage to be able to improve -- reduce the amount of TI that we're giving on those transactions. And I think what you saw in this particular quarter is simply a reflection of the complexion of deals. There were a lot of bigger deals, new transactions than those naturally carry the bigger TI packages.

Our next question will come from [indiscernible] from Evercore ISI.

Just wanted to see if we can provide some color on the pipeline, specifically for leasing demand outside of Park Avenue?

The pipeline, despite all of that big leasing in the fourth quarter, we've kept the pipeline full. Over 1 million square feet of pipeline, I think what is most notable, and I think this is important for people to hear. Of the over 1 million square feet of pipeline, 800,000 square feet of that pipeline are leases that are out. So these are not just hoped for transactions that will convert 800 million square feet of leases that are in negotiation and many of them are close to execution form.

Also within that pipeline, there's 900,000 square feet of new tenants as opposed to renewals. And then as far as the types of tenants heavily weighted towards finance, half the pipeline is financial service businesses, the balance being tech and legal tenants.

Got you. And maybe a quick follow-up, just like how would you classify [indiscernible] Avenue or Third Avenue right now like just in that mix?

Sixth Avenue is the new Park Avenue. Park Avenue is the tightest market -- some market in the country, Sixth Avenue posted some really big deals. You're seeing rents rise dramatically on the avenue given the tightening of supply. What we've experienced, in particular, I think, is a really good case study of what the strengthening marketing on Sixth Avenue is.

Many of you have inquired about the vacancy, or the rollover that we had at [indiscernible] over the past couple of years. We had 4 big tenants that rolled out of the building or in one case, one more tenant still to go. Almost 700,000 square feet of that coming 25 floors of space. Since that period, we've leased 434,000 square feet. We have leases out on 135,000 square feet. Deals pending on 131,000 square feet which leaves us only 24,000 square feet to deal with of that almost 700,000 square feet of roll, which I think is an amazing case study to the strengthening of the submarket to say nothing of the strength of the leasing team, of course

Our next question will come from of Ronald Kamdem from Morgan Stanley.

Just two quick ones. On the same-store NOI guide of 4%, I think last year, there were some headwinds from sort of SUMMIT operator. I was just curious if we could sort of [ decompmentalize ] that guide in terms of the benefit from SUMMIT versus occupancy versus other factors? Just to get a sense of that 4%.

I would say SUMMIT has an impact on it, but it's not going to be the main driver of it. Clearly, the driver is occupancy increases. As I said in my earlier commentary, we've driven same-store occupancy from -- up 400 basis points in a period of 3, 7 quarters that starts to flow through. That's why we show economic occupancy as a new metric taking forward with still growth thereafter that translates into, obviously, same-store NOI growth of the 3.5% to 4.5% this year, and 10%-plus in 2027. The SUMMIT effect that it had an effect. So it will be helpful in 2026 clearly to have a sent back up and running and SUMMIT it back on a great footing. But it's not the driver.

Helpful. My second one is just going back to the dividend payout ratio. I appreciate FAD is not the right sort of way to look at it. But I guess my question is, when you think about sort of the cash flow statement, that you guys published [indiscernible] is out, there's always sort of a big delta between the operating cash flow and the dividend payment because you have a lot of JVs.

I guess the question is like how do we think about the recurring cash flow payments of the JVs? And is that something that when the Board is thinking about the dividend payment, is that the right way to sort of think about the consideration versus FAD?

Well, I can -- I look at cash flow, and cash flow is comprised, for this company, of operating cash flow and the gains we take on sales. Because we are an active seller of real estate. This is -- we are just not a buy and hold company. And if you evaluate us and our dividend only from the lens of buy and hold, which I don't -- a nonactive way of managing the real estate, then we'd have to look at different metrics as a Board.

But as a Board, we look at buying things that are -- is like unformed clay in some cases. Breathing new life and goal to buildings, developing new buildings, entering the transactions to create high IRR. And we often will monetize. I think we've sold much more real estate than we currently own, and we own 30 million square feet. So that's saying something.

And to only look at one metric for purposes of total return and dividend, et cetera, coverage, I just would -- my opinion, I think the Board's opinion would be, don't look at it that way, look at it in its totality for all the revenue we generate. Because all of that revenue, which often is taxable, is what goes -- which I think is what Matt is saying is that's our metric, and that's our barometer for setting of the dividend. We don't just occasionally harvest gains.

This year, it's a $2.5 billion plan. Last year was a couple of billion [indiscernible] A year before that, I think it was a $5 billion plan. I mean this is what we do and who we are. You guys know that. You absolutely know Green buys, improves, develops, stabilizes, harvest, move on, does it again. I've been doing here with this company for 27 years. And it has not changed much over the 27 years. The assets have just gotten better. The number is bigger. But the culture and the ethos the same.

So it's not a debate per se. It's just -- this is how we look at it at the board level. And we've been able to keep a good dividend policy, I think, over those years as we possibly could, given the ups and downs of the markets. And we're just going to stay on that theme and keep evaluating it through that telescope of of the different types of businesses we do and the contributory cash flows to that business, the taxes that result there on and the setting of the dividend, we think [indiscernible].

Our next question will come from the line of Peter Abramowitz from Deutsche Bank.

Just wanted to go back, Matt, you had some comments on maintenance costs at SUMMIT in the quarter. Just want to confirm, are those sort of onetime just related to [ Ascent ]? And is there any change in sort of the '26 outlook you gave in December for SUMMIT?

No change in the '26 outlook unique to the fourth quarter.

Okay. Got it. And then I guess, either for Harry or for Marc. You talked about some of the deployment you're starting to look at out of the debt fund. Could you just give us a sense of sort of where you're underwriting returns on some of those initial investments?

Yes. Sure. I mean the -- we given out a slide at the investor conference, that fund targets gross returns of mid-teens.

Okay. And so largely, what you've seen so far is fairly consistent with what you talked about at the Investor Day?

Yes, absolutely. I mean no change in the past few weeks. Mostly focused on [indiscernible] credit for all the reasons I gave in my introduction, and we're still seeing opportunities there to get the capital out in very interesting opportunities.

Our next question will come from the line of Seth Bergey from Citi.

It might be a little early, but just in the context of one of your peers you [indiscernible] the Street announced some pre-leasing. I guess could you talk a little bit about, I know any early indications of the demand for the 346 Madison development site?

Well, advanced demand -- we just debuted it last week. [indiscernible] we closed, I think, in September or October. Somebody can correct me. Within those few months, we conducted a fulsome design competition, went through a range of different designs to get to something that we settled on as being something that we think is really going to be world-class to try and stay within the spirit of doing efficient buildings, or really attractive buildings and [indiscernible], et cetera.

We're excited for this project. We think it's the right project at the right time. I think we just formally availed it last week, and I know Steve, your phone has been ringing and you've had some pre conversations. So where are we at?

Yes. Listen, my only wish is that we had the building built and ready to go today because it would be more than enough demand to fill it. Just to give you a sense of the kind of large tenant demand that's out there, there's 250 tenants that are being tracked in the market right now covering 26 million square feet of tenant demand. Of that, there are 32 tenants with requirements of over 250,000 square feet, and another 37 tenants with requirements between 100,000 and 250,000 square feet.

There is a there is a dearth of supply for high-quality, particularly large block spaces. If you look at the high end of the market, the best of the best part of the market, there's a 3.7% availability rates. And there are no 100,000 square foot blocks in the -- what's considered the best of the best part of the market. So consequently, let's get the building built as we'll fill it like [indiscernible].

Our next question will come from the line of Vikram Malhotra from Mizuho.

I guess just first, you've talked a lot about the leasing pipeline trajectory getting to that occupancy number. One of your peers yesterday said New York on new leasing, you're doing double-digit roll-ups. We can see that in your reported numbers, you see roll ups. I'm just trying to understand as it stands today with the pipeline, like where would you peg your portfolio mark-to-market today?

Well, yes, we gave guidance for our objective for the year back at the investor conference. We don't mark-to-market the portfolio as -- in its entirety because you can't [indiscernible] market this in one shot. But I would say our pipeline reflects the exact range that we gave in December.

[indiscernible]

High single digits.

Okay. Just -- I know I'm not going to like what is FAD. Does it cover your dividend or not? Does it matter? But just one component, given the leasing you've done last year that's commencing and then [indiscernible] spending money, and all the leasing you're doing this year, how should we just think about actual dollars in terms of TIs that are hitting that FAD calculation this year versus last year?

Thank you for leading in by saying you're not going to compare the FAD to the dividend. I appreciate that. As it relates to trajectory, we are still funding as we did in '25, leasing that we've done for the last couple of years. That, though, as volumes slow as we get the portfolio full once you get to -- we're going to get to close to 95% by the end of the year. So volumes will drift lower.

And then we -- Steve is seeing concessions kind of moderate, then that spend goes down. It's kind of the natural progression, and that follows with the NOI growth that we're seeing next year and thereafter.

It's worth noting that over the next 4 years, we have the lowest rollover that I recall in the company's history, typically 900,000 square feet of leases expiring each year over the next 4 years, whereas typically we were [ $1.2 million ] to [ $1.5 million ] or more in certain years.

I think another way to look at it is, I think over the past 2 years, we did 6 million square feet of leasing.

[ 8 million ] in 3 years.

[ 8 million ] in 3 years, [ 6 million ] 2 years. I think our projection for the year is like [ 1.6 million or 1.5 million ], in that range, [ 1.5 million, 1.6 million ]. We don't have a projection for next year, but we -- that we've been public with, we certainly have our own internal projections. And suffice it to say, as we continue to fill these buildings and get towards occupancy, the volume of leasing necessary to generate high occupancy becomes somewhat less capital associated with that becomes less. And the scarcity value allows you to trim in renewal TIs and free rent back to levels that are [indiscernible].

So there's multiple reasons why we would see a big improvement in that FAD number in '27, which is what I was trying to allude to 2 or 3 questions to go on FAD. And -- this is just the reality of 6 million feet of leasing in 2 years. You have to pay the capital to. But now we've got 1.5 million square feet that we're going to lease this year unless we overexceed that.

And the projection for the year after, and the year after as Steve just said, are going to be relatively modest because of the less role and the tightening of the packages. So that's where it is, but it's a good news problem guys. It's a good news reality that we're paying to install a lot of 10, 15, in some cases, 20-year tenancy off at a triple-digit rent. What was our average rent for the quarter, Matt?

Low 90s.

Low 90s. We're in the 90s to hundreds now for average rents in this portfolio, and you can -- that's where you start to make some real margin to cover the concessions and contribute to the cash flow of the company. But it took a lot of work over the past few years to get here. And now we're here, and we're kind of enjoying that. So I think we're 6 or 12 months ahead of, I think, the narrative here, looking out to '27 and beyond, and we see a lot of great recovery there in both FAD and earnings, which will be the subject of discussions in the second half of this year.

No, I just -- I appreciate that. I guess we're just trying to understand you through the 10% same-store number for next year, which is a great acceleration. But just trying to understand whether it's like delayed TI spend, or debt refi, or asset sale impacts, which will -- may or may not be dilutive. But just as we go that how much of that 10% in gets offset so that maybe the FAD growth gets pushed out again 1 year?

That's kind of, I guess -- I'm just trying to [indiscernible] one big piece of it, that's been a headwind in the last 3 years, and you're saying it's going to be a tailwind. But ultimately, I guess we're just trying to understand how much of that 10% next year gets eaten up?

I think Marc gave you all the commentary you need. We have 10% NOI growth and capital should be moderating.

Yes.

That's it. That's the end game.

Our next question will come from the line of Michael Lewis from Truist Securities.

I apologize if I'm just blanking on this, but why is Landmark Square now 733,000 square feet, versus 863,000 square feet a quarter before. Did 130,000 come out of service for something?

Yes. There's -- that's a campus made up of multiple buildings. One of the buildings is under development, so got popped out of the operating property square footage and it's over in the development square footage.

Nice catch.

[indiscernible] Yes, we have some exciting things we're working on, on one of the buildings. Do you want to?

Yes. Got approval last year to convert the [indiscernible] Landmark Square to residential. We just received the approval from the town and now working on capitalizing that deal.

Okay. And then my second question, there were questions about rent and mark-to-market and cash rent spreads. This is one of the things with office, I think that gets confusing. I just tried to do a quick back of the envelope, I looked at the last 5 quarters that you're leasing for rent, term free rent TIs. And then I did the same thing for the trailing 5 quarters in 2019.

And it's not clear to me, rightly -- so TIs and free rent periods are up like 60%, 70% since then. Rents only up like 20%, 25%. It's not clear to me that the total lease economics are better. I just wonder, how do you think about that? First of all, as a signal of strength in the market or what's happening in the market? And also in negotiating, right, because these concessions could get sticky, people get used to them. I don't know, any thoughts on that about the change in [indiscernible]

You got to amortize the TI over the term of the lease to get to -- I mean, yes, it's a nominal onetime number. The upfront TI, but on a 15-year lease, just make sure -- I'm not questioning your math, I'm just saying make sure that when you're comparing a 20% annual rent increase, make sure you're looking at the annual TI increase. It's not 60% annually. It's -- you guys spread over the term of the lease. I mean that's the only thing I would say to that.

But to the more fundamental question...

More leasing being done in new deals right, new tenants coming in as opposed to renewals.

I think you look at the -- where it all comes home to roost is in price per square foot for premium assets. So when you put everything through the rents, and TI, and the free rent and downtime, asset values today for, I'll call it, the top 20% of the market, 25% of the market is, I think, solidly between $1,000 and $2,000 a square foot Below $1,500 a foot for older but well-located renovated product, and probably $1,800 to $2,500 a foot, maybe even $3,000 a foot for the best new product. And so in order to achieve those kind of price per foot, they have to be supported with the net effective increase of rents minus concessions. And certainly, if you look back to '18 or whatever period of time you were looking at, asset values were not there.

So look, the -- there is a part of the market that's still recovering. And I think the story is yet to be told on assets where the average rents are below $100 a foot. And yet, you're right, the TI and free rent is relatively high relative to those leases. But for buildings that are enjoying average rents well north of [ $100 ] a foot, I think the improvement is both nominal and net effective. And so I wouldn't paint the whole market with one brush. There's different categories of buildings that we're referring to and what we're referring to mostly is that upper echelon and building in East Midtown.

The economic occupancy addition, I thought was great and really helpful. It may be kind of a dream of a metric where maybe we could put the whole value of the lease together right?

[indiscernible] himself up off the floor. [indiscernible] himself up off the floor.

And our next question will come from the line of Caitlin Burrows from Goldman Sachs.

Hopefully, two short ones. Just first on the income statement, it showed that 4Q other income was almost $40 million, which was up meaningfully year-over-year. Just wondering what led to that other increase in 4Q and what was included in there?

The fee income, which flows through other income is lumpy, as we said, that causes some quarters to look high in other quarters we -- that's when we see the -- we missed. It's often a function of when transactions close. So we had a couple of transactions like 100 Park and 800 Third and those things closed in the fourth quarter, as well as some other special servicing fees that came through in the fourth quarter that drove that number higher just for the quarter.

Got it. Okay. And then back to those SUMMIT onetime expenses, sorry to bring them up again. I was just wondering, were they shown in the SUMMIT operator expenses line or SL Green's operating expenses? Because it looked like operating expenses were up again in 4Q. But I know last quarter, we talked about AC costs being highest in 3Q. So yes, wondering where those showed up and if it wasn't in the operating expenses, then what drove that?

So the SUMMIT expenses were in SUMMIT operator. Operating expenses, along with other consolidated lines went up in large part because 800 Third became a consolidated asset during the quarter when we bought out our partners.

Operator, is that it.

Yes. This concludes our question-and-answer session. I would now like to turn it back over to Marc Holliday for closing remarks.

Okay. No closing remarks, operator. I think we've been on for quite some time. So thank you to all who stayed with us throughout. Thank you for the questions, and we'll speak to you all again in 3 months.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

Please welcome, Chairman and Chief Executive Officer, Marc Holliday.

I'll wake everybody up. Good morning, everyone, and welcome back to One Vanderbilt. We put together another great program for you this year with lots of substance, lots of transparency and as always, exceptional presentations from our extraordinarily talented team.

I'll wake everybody up. Good morning, everyone, and welcome back to One Vanderbilt. We put together another great program for you this year with lots of substance, lots of transparency and as always, exceptional presentations from our extraordinarily talented team.

For over 25 years, we've gathered with shareholders and analysts to discuss the macro trends affecting our market, review the important accomplishments of the year and put a thoughtful strategic plan together for you that we will elaborate on today. I've had the pleasure and privilege of being a part of each and every one of these investor conferences dating back to 1998, and I'm quite proud truly of the company that SL Green has become. There is nothing ordinary about what we've accomplished, and our path to success was not simple. We fought hard for our shareholders and in doing so, we have created the largest, the best and the most accomplished commercial real estate in New York City [ bar none ]. We didn't achieve these results by playing it safe, but rather by playing it smart. We are consistently successful in exploiting advantages and opportunities through dedication and focus that was once again on display in 2025.

Last year, I opened this conference by saying that we were standing on the precipice of one of the best markets we've ever seen in our careers. And over the past 12 months, the majority of what we envision actually did come to fruition. Our companies expanded, vacancies declined, credit markets improved, rents moved meaningfully higher as demand for the limited supply of quality office space intensified. And for operators like us, with liquidity, credibility and conviction, it was a year filled with great opportunity.

We capitalized on that window again by hitting our leasing goals, closing our first ever discretionary debt fund and leading the investment market with disciplined, high-quality transactions on both the acquisition and disposition side. Harry Sitomer will have a lot more to add to that later on.

But simply put, in every controllable area, SL Green performed. As a result, we will materially outperform our original guidance for the year, while rapidly leasing up the portfolio and commencing new development projects as we complete others, moving the portfolio to new heights.

The one place we fell short was in our pursuit of Caesars Palace Times Square. If you follow social media, you know what my feelings were on that decision. We put all of everything we had into that proposal, but the odds were indeed stacked against us. And all of the Manhattan proposals were not accepted, not approved. They all failed, and it's a great loss for the city, but we're going to move past that and you're going to hear from Brett Herschenfeld later on about our plans to pivot to an equally attractive Plan B at 1515 Broadway and still deliver the benefits we promised to the community in what is the entertainment capital of the world.

The other challenge we had to navigate this year was stubbornly high interest rates, the need for the U.S. to finance its massive deficits that combined with persistent inflation, has kept interest rates about 50 basis points higher than where they were expected to be just 1 year ago and a lot higher than we'd hoped for. As a result, with the higher interest rate expense that overshadowed what was otherwise very strong operating results at SL Green.

On the positive side of rates, there was more stress in the market for the leverage players, and we took advantage of that. High rates have also helped keep pricing down on high-quality assets. In fact, relative to the strong underlying fundamentals we see in the city, office prices today are simply damn cheap, cheaper than they ought to be given the surging demand that we see in the market. You'll hear a lot about that today. I've never really seen this disconnect between fundamentals and price, interest rates are high, they're not that high.

So I have strong conviction that in 2026. This will be the year in the turnaround where the dynamic will lead to higher office asset prices, increased transaction activity, and that's another reason to go out there and buy SL Green. So in this elevated rate environment, our focus in '26 will be on paying down a significant amount of debt through business plan that Matt DiLiberto will describe during his wrap-up today, fortifying the balance sheet, whether or not we see interest rates fall in 2026.

We have a high degree of confidence in our ability to execute our business plan because New York is and will remain the #1 city in the country for economic growth and attraction to foreign and domestic capital. In fact, New York has created separation from every other major commercial market in America. Many other major cities are struggling and some may never recover to their pre-pandemic market fundamentals.

Right now, New York City's vacancy rate is 10% lower than that of Chicago and 20% lower than that in San Francisco. Despite having leads more square footage to fill than those cities and others combined. Here in Manhattan, a combination of intense demand and severely limited near-term supply is driving rents higher, tightening concessions and supporting long-term pricing power. This trend is unlikely to change anytime soon and only a negligible amount of new construction will be delivered into this market over the next 3 years.

So through 2028, there's less than 1 million square feet of unspoken for space being delivered. More to follow on this later from Steve Durels. But it's important to reflect on why the city has stood out from its peers fundamentally, New York City's economy is as strong as it's ever been. We are leading the nation in new business creation with more than 23,000 businesses started here just in the past year alone. That represents a remarkable 1/8 of all businesses currently operating in New York City.

Rapidly accelerating venture capital investment, driven by AI is fueling the next chapter of tech growth after a fairly long hiatus during COVID. [ D.C. ] Investment through November reached nearly $28 billion already surpassing this time last year, $24 billion, which was in and of itself up 27% over 2023. So proof positive that tech is back.

And the financial services sector is showing unabated demand now making up nearly 40% of all current tenants in the market looking for space 50,000 square feet and over. This shouldn't be a surprise for anyone who is a regular at this conference. As we say each year, New York uniquely has the talent that global companies are looking for.

Our top colleges continue to produce a set of educated, diverse graduates and young people who continue to flock here from around the country and around the world. And why not? It's a great place to live. Quality of life improvements are apparent everywhere. The fears we had a few years ago about safety, security, cleanliness have all been significantly improved, thanks especially to the New York Police Department and its strategic response group. More on this later for Ed Piccinich.

Recent public realm investments have made it easier to get here and more pleasant to be here, except if you were commuting in by training this morning. I heard there were delays, but put that aside. Our airports have rocketed from the absolute bottom of the list to the top of the list, thanks to major investment and unusually good design, thanks to Rick Cotton of the port authority. On the topic of good-looking public improvements, how about side access. This generational investment is a massive upgrade for commuters from Long Island and a fitting expansion to Grand Central Terminal.

For our portfolio, it means over 100,000 more people each and every day right coming to our doorstep through this new Eastside access Madison Grand Central Terminal. And now it's Penn Station's turn. Hopefully, we'll have the political will and be able to muster the money and the vision to make Penn Station safe, attractive transit hub to visit on par with Grand Central.

And the city's Department of Transportation is advancing an effort to transform Park Avenue into a greener, safer and more pedestrian-friendly corridor that will include many enhancements such as wider medians, seating, landscaping and innovative amenities, all up and down Park Avenue, the spine in which the majority of our portfolio sits. These investments together with everything else that I mentioned are aligning the city's broader goals towards reimagining major commercial corridors like Fifth Avenue with expanded public space and improved safety for all users. The list goes on and on.

Our health care is the best in the country. At every level, we have top hospitals, concierge Medical and now longevity centers, a growing industry providing cutting-edge preventative services and many tenants in our portfolio.

And we're heading into a huge year for the hospitality and entertainment sectors with the FIFA World Cup 2026 coming to town, including the final Championship game batch on July 19 at MetLife Stadium. So mark the calendars, this place is going to be bananas. In July, Mayor Adams and governors, Kathy Hochul, and Phil Murphy did a great job of bringing 8 games, 8 FIFA World Cup games, New York, New Jersey, including the final, they should be commended. And during that same month, New York City will be celebrating its 250th anniversary.

The main event right here in New York is going to be something called Sale 4th 250, a 6-day celebration with tall ships and U.S. Navy ships parading up New York Harbor, the way they do around Memorial Day, although this will be much bigger, much more attended. So normally kind of a slow month and period, summertime in New York is going to be rocking here.

So these big moments really just adds to the hospitality industry that's already redefining the social team with explosive growth and innovation in new restaurants, clubs and elevated retail experiences. This is the strongest confluence of positive factors that I can recall. And again, credit must be given to Mayor Eric Adams, his outgoing administration as well as the Governor Kathy Hochul, who I'm pleased to say will be joining us momentarily as our special guests to speak at this conference. Taken together, this is green light go local economy as we enter 2026 and I believe this market backdrop will enable us to execute our ambitious business plan as New York City once again outpaces all other U.S. markets.

Before we can talk about our plan for 2026 we need to take a look back at how we got here. We have completely redefined who we are and how we do the business over the past 5 years. We were a mono market asset-based office company with a fairly undiversified revenue stream. We have deliberately shifted to be more nimble, asset-light and diversified while still maintaining a near singular focus on New York City. How do we do it? First, we had to recognize the power of our greatest asset. It's not One Vanderbilt, it's our people and it's our platform. We have a terrific portfolio with several real estate companies have great buildings. What differentiates us is that we are a fighting unit with an approach that is both replicable and scalable.

So we made a decision to sell our assets, bring on JV partners and ramp up our asset management business all things that go into creating reliable, replicable and recurring cash flows that command a much higher multiple in the market than investments in physical assets do. We are a different company today. Now entering the arena of the top asset management firms in New York City. And it turns out there's a lot of demand for our services. We know how to create value and assets and simply put, people like doing business with us. So we work hard to generate returns for our investors, our clients in deals, in funds, in our company, whatever it is or lenders. We have an unblemished track record that we're going to maintain in '26 and beyond.

As a result of the investments made in our people and our platforms and our systems, we can now generate a fee structure that will grow a lot faster than the NOI in our mostly stabilized buildings. I can tell you, without question, we are not getting an appropriate multiple for the more than $100 million annually in gross fees that we're now generating and I think that can grow to $150 million or $200 million annually over the next few years. And that's where our focus has been and it'll even be more so in 2026.

Looking ahead to the New Year, our game plan has 4 key pillars. We're going to continue developing premier assets. We're going to rapidly expand our asset management business. The groundwork for this is laid with the exponential growth that comes from starting from a small fee base and fee revenues, but have the ability to increase rapidly and exponentially due to adding on much more AUM.

Next, we're going to continue to set trends in hospitality, amenity and experience where I think we excel. We do these things really quite well. And we've now fully interwoven these elements into the arc of the Workday. Tenants expect a premier service and amenity experience and the winners in this business are going to be the firms that can execute this the best.

Finally, we will be opportunistic as ever. When we see deep value, we're going to act decisively and quickly on behalf of shareholders. Yes, this is our plan for '26, but let me be completely clear. We are managing this portfolio for the long term, not quarter to quarter. Markets rise and fall, but investors in SL Green know that you're investing in a portfolio and an approach that can weather high interest rates this environment and substantially outperform when rates drop. Like I hope they do in 2026 and in a better rate environment, the value of this portfolio will be explosive.

Let me close with this. We have the best team in the business, and they delivered again in 2025. Our portfolio has never been better. New York City economy is strong and resilient, tenant demand for well-located, best-in-class office space is exceptionally strong and growing, and supply remains constrained in a way that just cannot be changed in the next few years. I want to thank everyone here for their partnership, your confidence and your support throughout 2025. We look forward to another outstanding year together.

Now I want to shift gears. In a few moments, hopefully, Heidi, time check, maybe 5 or 10 minutes will be joined by Governor Kathy Hochul. We asked her to be here today, and she wanted to be here today because both we and she know that one of the things on everyone's mind is the changing landscape of New York politics with new mayoral administration and a contested gubernatorial election next year.

There is no one better to address these issues and the most powerful person in New York State and Governor Kathy Hochul. While we don't like uncertainty, we've been here before over the past nearly 3 decades, we worked across. Many mayoral administrations on both sides of the aisle have always found common ground in fighting for New York, and I have every confidence that we will be able to find areas to work on together with Mayor-elect Mamdani from housing and affordability to sustainability and promoting growing businesses.

We are in this together. He needs the private sector, and we need him to achieve his goals and ours and to continue contributing to New York's upward trajectory. We'll hear more on this later today from Garrett Armwood, our Head of Government Affairs. But my early read based on key early appointments is that we'll be able to work with this new administration.

So with that said, I would like to shift gears again and move on as the company continues to transition from one generation to the next. It is now my pleasure to welcome up to the stage, Harry Sitomer, Chief Investment Officer, who has continued to help drive the business of the firm and fill, the big shoes left open by Andrew Mathias. Thank you

Thank you, Marc. From the COVID shutdown to the rise of work from home, to the recurring predictions of the doom of New York City, to soaring interest rates that triggered a commercial real estate credit crunch, followed by a brief, brief moment of reprieve and now the latest local political uncertainty I think it's fair to say that we have seen our fair share of headlines these past 5 years. But our team is battle tested, unphased and resilient, and we welcome the volatility in which we thrive.

So what is our secret to managing through such volatility? I'm going to bring up the math I show you every year. As a fully integrated owner of the largest footprint in Manhattan, who has historically owned and operated over 50 million square feet we have a competitive advantage. Currently, our portfolio includes 42 Manhattan assets covering 28.5 million square feet. While the market is investing based on backward-looking CBRE market reports, we are investing based on tenant term sheets and up to the minute live tenant feedback. While the market is investing based on inflation data, we are investing based on the live construction and operations trades.

When our peers are chasing investors that just completed their first deal in New York, we're sitting next to them, celebrating that deal. Our platform is a fully integrated operator gives us an advantage in evaluating the investment landscape at any given moment. So let's play back the tape the past 5 years and evaluate the moves that we have made.

Let's first start with those moments after COVID hit. We experienced the market build with fundamental office weakness as demonstrated by the large increase in Midtown vacancy between 2020 and 2021. But the capital markets were robust and credit was free. A market with fundamental weakness and cheap capital is typically the type of market we try to divest out of.

And with $8 billion of gross sales at a share, a 4.3% cap rate we were able to use that exact capital markets arbitrage to exit positions that were only garnering the prices as a result of cheap short-term capital and not fundamental performance. This list is just a sample of those sales and a status of where those buyers are sitting today once that cheap capital spigot turned off.

Then starting in 2022 as capital markets weakened and leasing fundamentals, specifically around Park Avenue, we're improving rapidly. We shifted gears and started to get acquisitive again. Using our balance sheet and investor relationships to capitalize at a moment with limited competition. Our leasing insights through term sheet activity and tenant feedback allowed us by our estimation to be 6 to 9 months ahead of that sentiment shift. And this head start when the market was disregarding all office assets allowed us to invest into properties that almost never trade, bolstering the portfolio and enhancing our asset base.

Then starting in the beginning of 2024, as a result of a broader and more robust leasing pipeline, we intentionally ramped up our investment activity across multiple strategies. First, we bought out 2 different partnership interests and nearly 50% of the gross joint venture basis or peak valuation while simultaneously negotiating long-term extensions of existing debt. We closed on the interest acquisition of Penny's 53rd Street just after last year's conference, and we closed on our partner's interest in 100 Park earlier this year. Both transactions were entered into at approximately 9% cap rate.

Then this morning, we announced our most recent partner acquisition at 800 Third Avenue. We bought out our 40% partner at a gross valuation of [ $340 ] per square foot and a 7.1% cap rate with vacancy to lease. These opportunities allowed us to increase stakes in assets where we have near perfect information which is now demonstrated by the 97% occupancy at 100 Park and 10 East, less than a year after our acquisitions. We look forward to rolling out a similar success story at 800 Third, later next year, especially as we see a further tightening of Third Avenue as a result of office to resi conversions.

And then we sought out to identify the best value opportunities outside our portfolio. At 590 Madison, which traded earlier this year, we were uncomfortable with the stabilized yield, but successfully made a profitable investment in the debt for our funds, which for us with a better risk-adjusted return on our capital.

At 623 Fifth Avenue, we spent a lot of time with the seller on this one, but ultimately pass at the price that was offered and wish our friends tremendous success. At Paramount, we made a play in the stock earlier this year at approximately $4 per share but we ultimately didn't see our way to the final price, especially given the large transaction costs and those quality of those assets. But we did find our way to making deals at 500 Park Avenue and Park Avenue Power.

And I would focus your attention on a few key metrics pulled right from our underwriting, occupancy, going in yields and stabilized yields. The point being, we passed them the first 3 opportunities I showed you that required 3 to 5 years of substantial work to get the future sub-7% unlevered yields when we were able to buy into 500 Park at a 7.2% unlevered yield and quickly get to a 7% unlevered deal at Park Avenue Tower through simple rent appreciation and minimal lease up.

I think I'm going to take a pause here. Maybe I'm not being told not. So I'll tell you when. There is a special guest coming, and I know you'd like to hear from that. So tell me when.

And then finally, on the development front, we saw an opportunity to sell out of 625 Madison and nearly [ $840 ] per square foot and make a very quick deal over the summer to trade into 346 Madison at less than [ $350 ] per square foot. You'll hear more on this from Rob later today.

So with that history, how we have been navigating your capital through these markets, let's look at the market as we see it right now. First, we are seeing the most investment sales activity since 2019. Notably, this is occurring despite continued elevated interest rates and we believe the market is poised to break out as a result of fundamental performance, and we think the market is predominantly waiting for interest rates to cut further, given the capital-intensive nature of our business.

Investors are also quickly realizing the relative bargain for prime Manhattan office assets at this time. Across the country, assets are trading at multiples of 2019 pricing and they are trading at such elevated levels despite sector fundamentals that in many cases, are hovering not far off 2019 levels. And in some cases, there are no fundamentals. In an annual owe to Andrew Mathias, I've included Bitcoin is the ultimate example. I just have to give them that owe.

Yes, the arbitrage is that when we look at prime office assets, we are still seeing asset trades down from 2019 levels despite enhanced asset performance. Let's take a look at Park Avenue Tower. We were able to buy Park Avenue Tower 22% below the seller's basis, yet in-place NOI is nearly 40% higher than market rent based on our estimation and are 60% higher than when we sell or purchase the building.

And while we may have been the first to recognize the shift, the market is starting to catch on. Just this week, the Wall Street Journal ran a cover story highlighting how cheap the commercial real estate market has become. And even just focusing on New York City and comparing office versus other New York City asset classes, in residential and industrial, we still see a large discrepancy.

So with real assets trading up 2 to 3x and prime New York City office fundamentals significantly increased from 2019 the only remaining variable left to be a catalyst for significant asset appreciation is debt. And with debt usually meeting an 18- to 24-month head start before equity markets catch up, I believe the debt market activity this year laid the groundwork for substantial equity market breakout.

Consistent with my expectations at last year's conference, debt markets are up over 220% year-over-year. This activity was mostly as a result of large bond investors, which are the backbone of our market, pouring back into CMBS transactions.

I'm going to take that actual pause here and pass the mic back to Marc Holliday.

I did not. Sorry about that.

All right. Now it's my great pleasure to introduce someone who has been a true partner to this industry and a real champion for New York City, Governor, Kathy Hochul. Governor Hochul has consistently demonstrated a deep understanding of what it takes to keep this city strong and vibrant. She has been unwavering in her support for the safety and security improvements that are essential to New York's continued success, working to clean up our streets, incarcerating violent criminals, placing the severely mentally ill out of harm's way and helping drive meaningful reductions in subway crime to some of its record low levels.

She has been one of the most forward-thinking leaders on the future of commercial real estate in the state and the governor recognized early the unique opportunity and social benefit of office to residential conversion, something we work with on closely and obviously creating desperately needed new housing while bringing in renewed activity to this part of the city. She understands the importance of commercial markets to the broader economy and she became the architect of the legislation to make this all possible.

On a personal level, it's been a privilege to develop a close and collaborative relationship with the governor over the past several years. downstate. I've had the pleasure of hosting her here at One Vanderbilt on many occasions to support so many of the city initiatives, but also upstate, I've been fortunate to host the governor at my home during the thoroughbred racing season because Governor has also a stance advocate for protecting New York Upstate farms and it's critically important equine industry. And throughout that time, whether privately or publicly, she has consistently held the line against policies that would weaken the business environment or undermine the competitiveness of this great city.

Her leadership has been steady, rational and grounded in what actually works. We are grateful to have a strong principle of voice in Albany, who understand the realities of our industry and the needs o f the city, someone who stands for growth, for investment for a healthier future for all New Yorkers. We look forward to her continued leadership in the years ahead.

So please join me in welcoming the governor of the State of New York, Kathy Hochul.

Good morning, everyone. Good morning, everyone. This is New York City, we're a little more wake than that usually. You may all need another cup of coffee, but it is great to be back in this building, building I frequent many times, Marc, and I think about visionaries in New York City's history, and people will look back at this time, a time of great crisis and a lack of confidence just a few years ago and realized that there were some leaders who never gave up on the city.

And certainly, Marc is one of the greatest because at the time when people are talking about obituary for New York City after being the epicenter of the pandemic, and the place where most people were working remotely. And would they ever come back, we have Marc building things like the summit. And finding this attraction, which I've been to so many times, I've never had a family visit without saying you have to go to the summit because it's a sense of possibility and inspiration from a place that didn't exist until you had a visionary like Marc bring it forth. And so I commend you for having that face and a courageous attitude that is required during the tough times.

It's easy to say, yes, everything is good. Right now, things are great. I hope you believe that. And if you don't, at this meeting, I'm not sure what's wrong because the numbers are incredible. We're in a fantastic place compared to where we were, and I'm not pollyannaish. I recognize a few years ago, we were in trouble. Our city and our state we're in deep trouble coming out of the pandemic when crime was soaring across the nation. It was not just the New York phenomena, but crime was soaring here. And there was this deep sense of insecurity about whether people should even go into their offices anymore and having the advent and the normalization of remote work at the same time when there's a fear, they collided together to create this sense of maybe we'll never come back to what we were. It was a frightening time for those who had invested here and built their lives here and their families here.

So we've come through that, not just by -- through time, but also intentionality, an intentional focus on what is missing, what is it going to take to get people want to be back in these many office buildings that were being built just a few years before. So we had to focus on a few key levels. And one is Marc has mentioned it, we've talked about it safety.

If you don't have that foundation of security when you're going to your office, however you get here, not many, many people travel by public transit here. If you don't have that sense, you're going to find reasons to not be in that environment. You're going to find a way to tell your boss, I can only work from home, I have to work from home. And so that's what we are fighting against. And so I had to change laws in Albany, not an easy thing to do to get legislators to reverse position that they believed in with respect to bail laws and making sure that we don't have this phenomenon of people cycling in and out of the courts because they're not being held when they commit serious crimes. We changed all that after 2 years of hard fought effort.

We also have decided something like a subway, which I'm proud to run the MTA. It was going off a fiscal clip, but I knew if we didn't keep this lifeblood, this main transportation corridor, which makes New York so unique and significant. If we didn't keep that going there was not a future for this region. So we had to stop [ buying other ] revenues. We are going to be focused on -- we have congestion pricing, which is a revenue source, our casinos, 3 new casinos just announced, more building in New York City. That's going to be a financial source for the MTA, but also just building a sense of security and people are riding on it. And one of that comes from my decision a few 1.5 years ago now to put the National Guard in the subway.

Now you hear a lot about National Guard. I want to be clear to the President, I'm the Commander in Chief of New York National Guard that we deploy when I think they need to be deployed. And we're not using them to round up people who call this place their home. But if their presence on a subway station or in a platform, gives people a sense of security like they've told me, and we can calm things down and stop an upward trend in crime on our subways and I'm going to do it, and I did it.

And I also have been paying for subway police officers, NYPD's overtime being paid by the state of New York to make sure we had enough people of that physical presence. And you may have heard this, maybe you don't even believe it, but it's true. We have the lowest crime rates on our subways in decades. We had the safest July, August, September, October, November, in recorded history on our subways. And the phenomenon of encountering people in the throes of a severe mental health crisis was also frightening. It wasn't just a crime, but is there someone there who's going to do harm to me or my family while I'm riding on the subway.

And so we've focused on opening up more hospital beds and requiring hospitals to make sure that people are not discharged without a plan. What does that mean? We have 1,000 people who have been long-term homeless living on our subways that have become a rolling homeless shelter, which I said is no longer going to be the case. 1,000 people and more to come living in supportive housing no longer living on the street.

So those are -- that's the one key area where I feel proud of. I feel proud that we have a police commissioner. Jessica Tisch, when you say her name people go, [ phew ], we're going to be okay, right? And I was involved in ensuring that she remains through the next term -- of the next mayor. That was an intensive conversation I had over a number of meetings, and it paid off because I think this has gone a long way of saying we're not changing New York City. We're still going to be a place that focuses on public safety and quality of life issues and Jessica Tisch an extraordinary leader, we're proud to have her heading into the next term as well.

So we talked about -- we create that foundation. People feel better about coming in. You know we have now? We have more people working, more offices build in our city, which had been beaten down so hard by that pandemic. We're the best in the nation now in terms of filling commercial office space. You could not have predicted it under any state, you all sat here probably 2, 3, 4 years ago, you would not have put that on your list of things likely to happen, and it happened.

So I'm proud of that. We did have to have rather significant changes to our laws because it's maddening to me that we've been paralyzed by regulations and laws that prevent the growth of housing, particularly housing that's affordable for people. And we have New Jersey eating our lunch. I mean they're buying -- they're building more housing. They had more ambition, Connecticut have more ambition. Other states around us broke down berries, we're building housing, and I said this cannot be. We are in New York, we can break through this. And so after a couple of another few hard rounds with the legislature, we were able to get them to see the wisdom of something as simple of office conversions.

Talking to Marc over the last few years, like when we have a space, beautiful space prep in Midtown that's only 30% utilized. Why can't we focus on making Midtown? Yes, fill it with commercial space, job number one. But to the extent that you can't or it doesn't make sense anymore? Why are people living here? Why isn't this a 24/7? People didn't think it could happen in Lower Manhattan, that was all commercial. It never be residential the way it is now. And guess what, people are living there, and they're going to be living in Midtown because we finally got a law change after much resistance that allows the conversion.

And now the Wall Street Journal said this week, we are the #1 location, the epicenter of office conversions leading the way. I'm proud of that because that opens unleashes the market that is so essential for us because people want to be here this is the best news of all. We have the demand for housing at all levels.

Even Fortune Magazine yesterday said the Mamdani effect of everybody selling their luxury condos and homes and penthouses it's going to happen and you'll be flooding the market and your pricing is going to be depressed and sell now before it all happens, it didn't happen. I know it wouldn't happen. But to all the naysayers just keep looking at all these data points as they're adding up luxury how sales are up, people are willing to spend the money because they want to be here because there's no place like New York.

So we'll keep building housing because this is the #1 destination for tech jobs in America today. Do you know that? People coming here. Young people with their graduate degrees coming out of California and Boston and other places, they want to be here. They're not going to Dallas. They're not going to Austin, they're not going to Boston anymore. I love my cities, but they're coming here. And it is simply up to us to find the creative ability and make the investments to unleash the housing market even more because it will be filled up.

I just sat down with the CEO of IBM yesterday, who loves his space at One Madison, loves it. It was a wonderful ribbon cutting there, great celebration. He's telling all the expansion plans he has. There's people who truly believe this company has been around over well over 100 years in New York State, but they believe that this is the place to continue the investments in Quantum Computing in particular.

So we're leaning into the technology of the future. We're attracting the talent. We have the educational institutions that are second to none. And if I can just find a place for them to live there's no stopping us. And that is what we're going to continue working on. And I know you have some headwinds against the industry inflation and interest rates.

Two things, 2 variables out of our control. But if you set them aside, and I know your CFO would have trouble setting them aside, but let's deal in the reality of the circumstances we have with them, what we can control, is people believing in the city and investing in the city, people like Marc and others who understand that we have not even hit our full potential here because it has been suppressed for too long.

A couple of other factors that are going to make the young people want to keep coming here not just quality of life and safety and finding a home, but who's taken care of the kids? And I've been around long enough to know that when I worked as an attorney for Senator Moynihan, a long time ago and my babies are born, I had to leave a job I loved because there was no child care. Those babies are now having their own babies, and they're still struggling with child care. And I'm proud to be a grandma, but I'm watching the struggles of my kids and what they're trying to figure out how to get back to work when they have little ones at home.

So that is also another dynamic, which when I was younger it was always well that's your problem. You want to have kids figured out. Now we understand employers know it's their problem as well because they want the talent to be there. The young moms, the young dads, they want them to come there. So if we can continue focusing on affordable child care and wildly available and universal child cares. I've invested $8 billion in child care already, and we'll continue to do so, is another area where I can find collaboration with the mayor, not just on public safety, the incoming mayor, but also on child care. This is something we already had a number of meetings on.

So these are all areas where we take care of that issue, your housing, your safety, education, there's no stop there. There is absolutely no stopping us. And so I have this incredible sense of optimism. Again, based in reality, I'm from Buffalo. We tell it like it is. We talk straight. We love the Buffalo Bills, any Bills' fans here? Didn't think so. That's all right, that's all right. I'm working on converting everybody. If not your favorite team at least your #2. That's -- I'm making progress on that.

But we're going to continue focusing on laws that need to be changed. And I rely on members of this community, the real estate community to let us know what else is a barrier. We've had conversions. We've had the height regulations that were embedded in law since 1970s we broke down that one. We had 421-a, which was expired under a lot of my opposition, but we were able to get a 6-year extension, which unleashed about another 60,000 or 80,000 homes that would not have been built.

And so I'm seeing projects, I'm using state properties. We're converting former psychiatric centers, former prisons, I said I want to know every bit of inventory that the state has control over because I want to build on it. We're transit-oriented development. We're continuing to lean into our transportation networks around the city and Long Island and the Hudson Valley building more there. And we also have some of the largest infrastructure projects in the nation going on right now, gateway tunnel, for example, 15,000 good paying jobs.

Second Avenue Subway, Interborough Express, connecting Queens and Brooklyn for the first time in history through transportation networks, which is exciting to people live in the outer boroughs. And so we're going to keep at it. And I'm happy to be a great partner and I come here for inspiration often and just walk the streets of New York. I live a few blocks from here. This is my neighborhood. And I were a baseball hat and sneakers, you don't know it's me because I benefit from being short and kind of can fit into crowd easily, that's new [indiscernible] around.

And I can feel it. I could not have said this a couple -- I can feel that people want to be here, they're excited. There's this energy, even when I'm going off to meet the Democratic governors at our conference in a couple of hours, every one of them who has adult age kids from whatever state they're from, they're kids live in Brooklyn or Manhattan. So we know this is the place to be, not just for this generation, but the generation to follow because we have this electricity that is second line.

And I'll close on just saying, I spoke about you being a visionary in this sector, this space, other spaces. But what we're doing at the new [ Belmond ] is something that is jaw droppingly spectacular. And the rest of the world is paying attention as we continue to build on our legacy of a place you want to visit as well. If you don't live here, able to live here, people want to come here. And Broadway's numbers are record shattering tourism is way up. It's not just during the holiday season. So I recommend you take public transit for the next couple of weeks because it's crowded here, but also to lean into the legacy industries like horse racing and make it a year-round spectacular venue.

So I thank you to that. We have our casinos coming. I mean there's top place that anybody else should ever want to be other than New York state and New York City. So I congratulate Marc on your success, SL Green, but also to all of you who are either major investors now or deciding to dip your toe in even further. What are you waiting for? This is the smart money right here right now.

Thank you very much, everybody.

Governor of New York can talk about cap rates. I mean the good news is Marc keeps us on a very tight time up there and no time anywhere now, I just got to go free. So I have no shot clock anymore.

So with that, I left you on this page talking about CMBS, and I'll just quickly wrap this piece up by noting that -- but this really is the backbone of our market. This is what drives transaction activity. We've seen this market grow dramatically over these past 12 months. And we're very excited about the pipeline and what we're seeing in the CMBS market, which I think will just further accelerate the equity markets going into '26.

And really now as we form our strategies for next year, we're really always looking for insights into what our investing partners and the equity capital markets and our fund clients are focused on joining us to provide some additional perspective internationally renowned Young Hahn.

Thank you, Harry. For those of you who may not know me, my name is Young Hahn, and I've been with SL Green for 13 years. I started in the operations group and from there through the trenches of the intimate SLG investment pit, I grew into my current role covering investments with a focus on joint ventures and capital markets.

Safe to say I've racked up my miles. And as Governor Hochul mentioned, not so young anymore. As Marc, Harry and I continue to travel globally, meeting with partners and lenders, one message has been very consistent. New York, Manhattan, in particular, continues to stand out as the most compelling market in the United States. Through the first 3 quarters of 2025, transaction volume reached approximately $11.7 billion nearly 5x the national average of $2.5 billion in commercial activity. In line with major headlines, New York continues to rebound with force and clarity.

Let's dive deeper into the buyer composition. It's important to note that in 2019, international investors dominated the market, representing nearly half of Manhattan transactions. Domestic institutions followed at 25%, domestic private buyers at 20%. The most significant change since then is a sharp shift in buyer composition. Direct international activity that dominated in 2019 has largely been placed by domestic institutional and private capital. This reflects a clear pivot over the past few years as international investors stepped away from direct acquisitions and moved into indirect exposure through private equity funds and platform, seeking diversification and lower execution risk.

However, many investors are increasing expressing frustration with a limited deployment through those channels. As pricing stabilizes and confidence improves, my view is that international buying is poised to reemerge with volumes potentially doubling in 2026. And we're already seeing signs of that in those transactions today. International Capital has reasserted itself in Manhattan's real estate commercial market with the level of clarity and conviction that many years haven't seen.

In Europe, the signal is very clear. [ Norge's ] acquisition of 1177 Sixth and Munich Re, full consolidation of 320 Park shows 2 of the continent's most disciplined institutional investors, increasing exposure and scale. Across Asia, momentum is also accelerated. Korean capital was led by Daol's acquisition of 285 Madison, while Japanese institutions advanced their presence through Mori Buildings incremental ownership at our very owned One Vanderbilt Avenue and more a Mori Trust acquisition of the Equinox hotel.

Beyond Europe and Asia, investors from the Gulf, South America and Israel are also expanding their direct participation in midtown assets. International buyers are not simply returning. They're returning with greater conviction, moving with heightened speed and a shared vision that pricing offered a rare entry point into Manhattan Prime office today.

On the debt capital market side, as Harry mentioned, the market is set to deliver the strongest year since 2019. To understand what's driving that momentum, let's take a look at the lender composition. In 2019, the banks led the Manhattan office lending at nearly half the volume, followed by CMBS at 30%. By 2025, the picture shifted dramatically. CMBS now represents 70% of total volume, while banks dropped to 19%.

CMBS has reemerged as a major liquidity source. And while CMBS remains one of the backbones of our markets, it serves one narrow segment, namely stabilized assets, high-quality transitional assets still face maturity walls and capital shortfalls that CMBS simply cannot bridge. That gap between CMBS were CMBS will lend and where borrowers actually need capital remains significantly and highly investable. This is where private capital and where SLG's fully discretionary opportunistic debt fund is designed to operate, targeting the high return structure segment of that gap where speed, creativity and conviction produce outside value.

So let me jump in and give one final update on our discretionary debt funds. We closed on the fund raise last week. The final amount was $1.32 billion, which was actually a little higher than expected due to some increased client allocation at the final close. It's about 30% over our target fundraise. Our goal is to deploy the capital over the next 2 years.

And Young, maybe you can give everyone a breakdown of the composition of our investor base.

Sure. Our LP base is anchored by the United States, Canada, 52%, followed by Asia at 40%. There's additional participation from Middle East and Europe. Across that global mix, pension funds represent 63% followed by insurance companies at 23%. And to maximize alignment SLG's balance sheet and its employees represent 10% of the fund.

I'm also proud to share on a total volume basis, 78% and of our LPs are current or former SLG partners reflecting renewed conviction in our platform. On the investment front, we already have $340 million deployed into this market, averaging over a 17% projected gross IRR and a current pipeline of over $400 million. And with our first fundraise behind us, having been approved by a diverse set of investors and advisers as an active SEC registered investment manager. We look forward to accelerating this asset management platform.

So with that, I will turn it over to the domestically renowned Steve Durels to walk you through the exceptional leasing momentum we're seeing in the market.

Did I see Marc up here dancing? It should be, so should I because the mood related to leasing is nothing but positive. Last year, we reported that 2024 with a recovery year for Manhattan leasing with improved velocity and notable strength at the top end of the market. This year, the market has continued to strengthen with leasing velocity on track to outperform 2024 with broad tenant demand that is 17% greater than the 2019 quarterly average Tenants are active at all rent levels with widening geographic space searches as good quality space becomes increasingly scarce, and landlords have increased pricing power as the availability rate falls and concessions start to trend down.

Yes, I've said it, concessions are starting to tighten. Midtown Trophy buildings covering 68 million square feet, continue to outperform with a direct availability rate of only 4.5%. Tech tenants are back in the market, led by 800,000 square feet of active AI tenant requirements. Sublease availability is at its lowest level since July of 2020, and Midtown remains the dominant location as tenants diversified across industry and building class. Tenants are increasingly finding it difficult to secure their first choice space which has led to solid rent growth in both the top end as well as the mid-price point parts of the market. Rents increases have accelerated not only in our Park Avenue buildings, but we've also enjoyed rent improvement in many of our mid-market buildings such as the Graybar building at 1185 Sixth.

We began this year setting a leasing target of 2 million square feet and have exceeded that by that goal by signing more than 160 leases covering 2.3 million square feet. And we expect to end the year at near 2.6 million square feet, which, of course, means we still have a lot of work to do over the next several weeks.

Most notable were large leases with AI and other technology tenants in our Midtown South buildings such as Harvey AI, Sigma Computing, Coinbase and IBM at One Madison and Pinterest at 11 Madison Avenue. The return of tech and the introduction of AI tenants to the leasing market has helped drive down availability and increase rents in the Midtown South submarket. In addition to outperforming on signed leases, we've also seen successful -- we've been successful at keeping our pipeline full. Currently, we're negotiating 50 new and renewal leases covering almost 850,000 square feet together with another 23 term sheets, which are expected to convert into leases covering another 280,000 square feet for a total pipeline of almost 1.2 million square feet. Tenants in the pipeline are largely financial services, tech and legal firms had a broad range of size and price point.

Across Manhattan, there have been 38 million square feet of leases signed year-to-date, which is more than 13% above the past 5-year average. Midtown leasing continues to outpace both Midtown South and downtown and quarterly leasing numbers have remained elevated throughout the year.

Expectation is that we'll end the year with at least 40 million square feet of sign leases and that number may well grow to about 42 million square feet of some of the big leases that are in negotiations closed in the next couple of weeks, such as Bank of America's 2 million square foot renewal at One Brand Park, American Express new lease for 1 million square feet at 2 World Trade Center, Bloomberg's 500,000 square foot renewal at 120 Park Simpson statures relocation to anchor 570 Fifth Avenue or CV Starr's pending lease for 275,000 square feet at 343 Madison.

Any of those would drive this year to be the third best leasing year over the past 10 years. All this great leasing has put the market on pace to realize 3.5 million square feet of positive absorption for the year. In fact, this is the first year we've had 3 consecutive quarters of positive absorption since 2019 and the full year is on pace to be positive for the first time in over 10 years.

There are more than 28 million square feet of ongoing active tenant searches. This is 3 million square feet more than the same period a year ago, while at the same time, the average size of these searches have grown larger. The majority of tenants are focused on Midtown with 70% of them needing more than 25,000 square feet. And to no surprise, financial services, tech and legal are the dominant industry groups driving demand. And we continue to see some very large requirements driven by tenant growth, such as Blue Owl in the market for 600,000 square feet, Capital One for 850,000 square feet, for Cara Rose 400,000 square feet and Two Sigma Investments for more than 350,000 square feet.

As mentioned, Midtown has been the star of the leasing show. Overall, Manhattan availability has fallen to 16%, while overall Midtown a steadily reduced for 5 consecutive quarters to 14% availability, and Class A availability is down to 12%, which is the lowest point since the third quarter of 2018.

Year-to-date, Midtown has in more than 22 million square feet of leases, which is almost 15% above the prior year and well above the 17 million square foot 10-year average. Rents on 38% of all direct leases signed since the beginning of the third quarter started north of $100 a square foot and 31 of 39 leases covering more than 100,000 square feet of each landed in Midtown.

Midtown trophy base and net effective rents have each continued to increase as tenant demand is frequently led to multiple takers competing for quality space, thereby driving up rental rates. This extraordinary strength has led to concessions beginning to shift downwards. Average TI allowance and trophy buildings has dropped 16% versus a year ago from $163 to $136 a square foot today. The free rent is down on average from 14.5 months to 12.5 months, which is where the market was all the way back in 2019.

We're seeing a sort of trend line of concession stabilization within our own portfolio, and when we focus in on our top 10 buildings, which comprise 70% of the SLG portfolio value, combined new and renewal TI and free rent were flat year-over-year. But more importantly, as we look forward, based upon the economic terms of pending leases within our 1.2 million square foot pipeline, we see average TI reducing from $117 to $105 a square foot and free rent falling from 11 months on average down to 9 months. Once again, it feels good to be in the landlord business.

Finally, last year, we anticipated that leased occupancy would rise to 95% within 14 of our buildings. In fact, we succeeded in getting all 14 buildings safely above 90%. And typically, 90% occupancy is considered to be market neutral with neither the landlord or tenant having greater negotiating leverage to drive lease economics. However, once vacancy dips below 10% then the leverage shifts in favor of the landlord and net effectives start to rise. Significantly, 20 of our buildings have achieved leased occupancy north of 90% with a weighted average occupancy of almost 96% this places the majority of our portfolio in a position to continue raising rents and reducing concessions.

And with that, I'll turn things over to Brett Herschenfeld. He's not only looks good, but he's always entertaining.

Thank you, Steve. Concessions are down. You're finally speaking my language. I want to repeat that, concessions are down. It's great to be back here at Investor Day 2025. It's been one hell of a year. So much has gone on. I want to share what's next for 1515 in Times Square without the casino. But before we dig into that, I want to talk about walking and chewing gum at the same time because there were many extraordinary accomplishments in 2025, while also pursuing the casino.

At Investor Day 2021, I forecasted that the retail market had bottomed. I put up this exact slide in the throes of code. No one was on this message. Hindsight's 2020, but who knew this baby face fortune teller could predict the future, retail was back. And here we are in '25 the New York City store fronts are filled with high-end retailers, new brands from overseas and tons of hospitality concepts following in the footsteps so we're fully back to work office environment.

Our retail portfolio occupancy went from a pre-COVID high of 95.4% to a low of 81.4% in '23 and is now at the highest in the history of the company, 96.5% projected year-end. My mom who's probably listening right now would ask me what happens to the 3.5% so I'm on a mission in 26. A big shout out to my retail leasing partner, [ Sania ], for the hard work and execution.

Turning to DPE. When the market is volatile as it was through the end of '24 into the first half of '25. There's no better opportunistic investment platform than SL Green to take advantage of dislocated New York City credit market, utilizing our proprietary tenant information. Our conviction enabled us to make what are called a legendary trade on 522 Fifth Avenue. You can see here the $224 million mortgage was structured as $168 million SASB security held by a myriad of CMBS bondholders, pari passu with the $55.5 million mortgage note that was held outside the trust.

In August of '24 when the market was on summer break through 4 separate transactions we simultaneously acquired the mortgage note and $112 million of the CMBS securities at a 44% discount. The key feature was that the amount of bonds purchased gave us control of the SASB and the acquisition of the note when combined with our control of the SASB gave us unilateral control of the entire loan.

We were now in the driver's seat and began exercising remedies against the borrower. Over the following 6 months, we executed 6 additional trades, investing another $35 million to acquire 100% of the mortgage for $128.5 million or $48.50 on a total debt claim exceeding $265 million. As the market improved to levels we had anticipated, we executed a settlement agreement with the borrower to pay up the loan for $215 million ultimately occurring through a sale of the asset to Amazon.

In total, the trade generated 139% IRR and $86.5 million in profits over a 9-month period, making it one of the most successful trades in SL Green's $17 billion DPE history. I'm proud of that one. So here's my thoughts on the casino, and Roosevelt couldn't have said it better, and I'll paraphrase a bit. It's not the critic accounts, not the man who points out how the strong men's stumbles. The credit belongs to the man who was actually in the arena, whose face is marred by dust and sweat and blood, and who had the worst if he fails, at least fails while bearing greatly, so that his place shall never be with those cold and timid souls who neither know victory or defeat.

Shareholders at SL Green know, we always have the right foundation to take big swings with needle-moving projects from New York City. Over the casino pursue, we made hundreds of deals, big and small, to get what I still consider far in a way to be the best gaming proposal for Downstate New York. Up until a week from the vote, we thought we had the casino. Unfortunately, political aspirations were put ahead of community benefits. And this was a loss for the city, a real shame not to have it in Manhattan and not to have it in New York's dedicated entertainment district.

For SL Green shareholders, let me be clear, 1515 is an amazing asset. It's one of our first bought in 2002 for $483 million on the heels of 9/11, when nobody had conviction. We took in a partner at a $1.95 billion valuation. It's been essentially 100% leased for a quarter century. Think about that.

And guess what occupancy will be for the next 6 years. Aaron, anyone? Steve? We wish every asset in this portfolio would like this. The property NOI exceeds $96 million per year. The debt is currently $715 million. And by applying all cash flow, we'll amortize to $557 million at loan maturity in 2028. While the refinancing of this size might appear difficult, we still will have 3.5 years remaining on the Skydance lease. If we work with our lender to execute a win-win future extension, sweeping all cash flow to amortization, by the Skydance lease expiration in 2031. The loan balance would be an incredible $182 a foot. This would be the lowest per foot exposure in the entire New York City portfolio.

In fact, NOI from the retail and signage loan in 2031 is expected to be $25 million, which at a 7.2% cap rate would be enough to fully repay the loan and retain the tower unencumbered. This locked in cash flow and loan exposure at 1515 creates the perfect cannabis to explore a new era and entertainment at the property.

In '26 and '27, we have the luxury of time to find a world-class user and we are already in discussions with a great one. Additionally, we have several other concept ideas already passed first phase pace and any one of them would be a global game changer. For sneak-peak at Marc and my meditative thoughts Think about a multi-use entertainment complex with expanded signage, virtual reality, esports, museums, live and virtual performance theaters, family attractions with rides and a hotel with related hospitality uses, you name it. So let's take a look at how this adaptive reuse project will come to life.

The casino showed us how easy it is to convert the 1515 Towers to hotel. Here's the existing office floor plan and note the center core and the tower has legal light in there on all 4 sides, to convert, we wrap a corridor around the core and create standard base for hotel rooms along the current exterior column system. Viola, 32 floors of office becomes 992 hotel rooms. It will have the best hotel views in the city. And I think a hotel in the middle of the world's greatest tourist destination might be a pretty good idea. $1.5 million key, 2 million a key you guys can do the math.

Turning to the podium. Our experience with summit confirmed our belief that people want to be entertained in brick-and-mortar facilities in the moment, not just sitting at home. Imagine we remassed the podium with a greatly expanded box containing multiple levels of ticketed experiential use within. Speaking of Summit, of course, we'll put a Summit Time Square top 1515, which will be wildly popular and the next stop after visiting Summit One Vanderbilt.

For the podium programming, when was the last time any of you visited a theme park and saw the latest and greatest and ride technology. It's all virtual now. It's become so real that you feel like you've traveled the distance of a Coney Island roller coaster, but yet you remain in the confines of a 10,000 square foot room. The floor plates of our podium are 60,000 feet. These technology advancements mean we could put an entire theme park of the future at the base of 1515.

And lastly, the signage expansion alone creates enormous incremental revenue. Take a look at this image of the existing signage. We now control the rights to all the window showing the Lion King advertising. So how can we create enormous value in its place? It's very simple. We use the casino design. All I have to do is reprogram the screens, and we have the best signage at the center of the [indiscernible] and what any outdoor company will tell you is once again the most robust advertising market in the world, Times Square.

The 1515 adaptive reuse project will drive new tourists and consumers to the boat time, uplifting the hundreds of commercial businesses that surround the property. It's the same casino coalition. We all will win together. And just as we did with the casino, it's our privilege as the largest commercial real estate owner in this city to bring community benefits to every development we do.

Through the casino process, we understand the critical needs of this neighborhood in ways in which we can meet them with a monumental package of public investments from public safety to sanitation, public restrooms, traffic mitigation, ambu cycles and streetscape improvements. Casino or not, we are still the home team, and we will always invest in our community with every project we do because that's our DNA. Our vision for the future Times Square is aspirational. Remember, this is still the entertainment capital of the world with 130 million visitors per year.

So how can we create more pedestrian space so that visitors don't feel cramped, but at the same time, preserve critical Seventh Avenue vehicle transportation? The answer is we think 3 dimensional. What if we created elevated pedestrian platforms traversing the [ boats ] like the highlight in New York or one of several districts in Hong Kong vehicles can still travel underneath. And in so doing, you've doubled the amount of ground floor retail in Times Square, both at ground and platform level, and those pay pretty good rents.

And what if we added a monorail to take tourists and commuters around the boat tie and across 42nd Second Street to the Port Authority. Ticket sales would be off the charts. We could solve the MTA's largest capital project, the 42nd Street ADA connection project. And as a result, we can bring in public financing.

And what if 1 ticket to get you access to multiple entertainment venues across the bow tie. Now we have the both of the future, a unified entertainment district. With this bold thinking, any investment we make, whether equity, asset management or cross-marketing partnerships can leverage our Time Square portfolio, amortizing across the series of assets you see here. The benefits of our vision will reach far beyond the walls of 1515. We believe deeply in what this neighborhood means to New York and want to be known for turning around Times Square. Thank you.

And now over to our Head of Development, Rob Schiffer.

Thank you, Swamy Herschenfeld. It's great to be back. It's pretty amazing that it's Brett and I's 22nd Annual Investor Conference here. In August, while the rest of the industry was out in the Hampton drinking Aperol Spritzes. We achieved a key goal and objective for the year, securing our next great development site, the Brooks Brothers site.

Over the last decade, SL Green has cemented its reputation as the premier developer of best-in-class buildings in both the office residential sectors in Manhattan with 4 recent ground-up developments, each of which have not only achieved numerous accolades, but more importantly, the highest ever rents or sales prices in their respective markets.

So how did SL Green, King of the Bees get here? Well, it started over a decade ago when pro business and economic development Mayor Bloomberg failed to rezone East Midtown and progressive socialist Mayor de Blasio successfully entrusted the rezoning of Vanderbilt Corridor, the SL Green and then council member, Garodnick. Look at these young budding developers. And on May 27, 2015, we had our special permit, our One Vanderbilt birth certificate.

Here's what East Midtown looked like in 2015, with an average office building age of 75 years. The Vanderbilt Quarter zoning paved the way for a 100% leased, $5 billion One Vanderbilt designed by Kohn Pedersen Fox. The following Greater East Midtown rezoning paved the way for 270 Park, JPMorgan's headquarters designed by Norman Foster. Next up, under development are 3 additional projects, BXP's 343 Madison, future home of CV Starr, also designed by KPF, 350 Park designed by Foster as well, and Home to Citadel and Rudin 415 Madison. We have sparked a transformation and a rejuvenation as the access of power has swung back to East Midtown with over 7 million square feet of new development, of which 75% is already leased.

Following on the heels of that development, our 4 development sites in the market, each capable of producing new office buildings that range from 800,000 square feet to close to 2 million square feet. But which sites should we target? Well, it starts with tenant demand. It would seem obvious to all of you that we'd be looking to land a big fish. But big fish or fewer number and are hard to find. Further, big floor plates can be risky as they are not adaptable when large tenants are not in the market. On the plus side, though, big tenants do pre-lease space before development has commenced. Our credit and can derisk a project. Small boutique is also risky. While the aggregate rent paid by smaller tenants isn't an issue driving the highest per square foot in the market, these tenants won't sign leases until the building is built.

Further lease term for these lower credit quality tenants tends to be shorter, creating higher frictional vacancy. The sweet spot is in the middle, midsized tenants. And we know this market well, following our success here at One Vanderbilt and in the tower of One Madison, and we're wildly confident we will land a 200,000 to 250,000 square foot anchor as well as 2 to 4 floor tenants ranging in size from 50,000 to 100,000 square feet.

As Steve said, we're 96% leased at our top 10 buildings. We're busting at the seams here at One Vanderbilt. And so we wouldn't be surprised if there's spillover. So we developed the scorecard to evaluate these opportunities. First, meet demand. We're targeting tenants willing to pay rents that range from $200 per square foot in the podium to $300-plus at the top of the building. The pool of tenants that could anchor the Roosevelt and pay these rents is a mere pod. Fee simple life is too short to develop on a leasehold where capital sources are less efficient unless the counterparty is the city, state or government agency.

We continue to believe our tenants strong preference is for a 1-seat commute. The complexity of developing over operating tracks cannot be understated. Not wildly known, but JPMorgan developed 270 during COVID. The time line and cost to complete that same scope of work today with a fully operational east side access is difficult to quantify. And we need a path to vacant possession. It's critical to expedite development to meet market demand today.

Finally, we know from our own experience that certain site characteristics will be more desirable to our target tenant base. The first of these characteristics is floor plates. Roosevelt works perfectly well for large tenants with dimensional qualities very similar to One Vanderbilt. The 2 Park Avenue opportunities and 346 Madison have side core C-shaped floor plates. We know from the tower at One Madison that, that shape works well for a diverse tenant mix. The key is the rectangle shown in green and the option and the optimal floor plan, which has the highest density of column-free floor space inside that rectangle. All the buildings will have great views at the top and traditional city views at the bottom. The question is, how are the views mid stack. As you can see, Roosevelt is ending in view impaired. Of the remaining 3, 346 Madison with this Wester most position in Midtown East scores the highest. And better yet, its views West are protected by the lower Midtown 15 FAR zoning directly to its west.

So let's tally the scorecard. While it's relatively close across the board between the 3 midsized tenant opportunities, 346 definitely leads by at least a length. But we've yet to factor in the most important number in the scorecard, the price. With 346, we found not only the highest rated site based on our criteria, but also a site we could build to lowest per square foot basis of the group. And so in August, we shot our bow and hit bullseye and the press and analyst feedback has been excellent. And thank you, Mr. Goldfarb the suit does indeed fit.

The site has a rich history, starting back in '19 -- '1818, excuse me, when Henry Brooks opened his haberdashery. His son took over in 1850 and are credited with the first ready-to-wear suit. The site is also a story of transformation. You want to click ahead. There we go. St. Bart's built its second church on the site in 1872, where it stood for quite a while before facing structural demolition as it faces structural issues. In 1915, that building that stands on the site was built. And as you can see, it's been heavily modified from its original form.

So how do we maximize this development opportunity? While we can build a 13.6 FAR development on the site as of right, equating to a 400,000 rentable square foot building. We've chosen to maximize the development through the East Midtown zoning that we helped create, increasing the FAR to 26x and creating a building that will be between 780,000 and 850,000 rentable square feet and we intend to do so using only transit improvements. It's the best thing not only for our portfolio, but for the city.

So we turn to our friends at the MTA to find the next transformational transit improvement scope. And we're proud to announce that we have reached a tentative deal to construct a series of congestion and accessibility improvements in the Fifth Avenue and 42nd Street Prime Park stations servicing customers using the B, D, F, M and 7 subway lines. This scope of work eases the commute providers to the station looking ahead further east exactly where 346 Madison and the majority of our portfolio is located.

In early October, we engaged the most talented and prolific global architects to compete and bring their best ideas for the site and the results surpassed even our expectations. From crystalline forms to classic, clean and modern forms from a single gesture at the top to a collection of stacked or nested volumes and at the ground floor plane from large integrated lobby and amenity spaces, driving from modern Asian and European sky scrapers to more traditional purposeful New York lobby.

The process proved to be very successful for us. We were able to select specific features and establish a baseline that ensures the design not only meets tenant demand, but does so with the most highly designed and curated set of amenities. And with architectural design features at the base in top that harmoniously build on the success of its neighbor across the street in both form and function.

Every new office development in this city will be 100% electric. So we tasked the team to incorporate sustainability features that are not just the best available today, but also the best out on the horizon. And the most cutting edge of these uses energy transfer to optimize efficiency, reduce operating expenses and lighten the load on the city's electric grid.

And now for the big reveal. You can see the amount of effort that went into these 4 incredible designs, a testament to the power and possibility of this site. And so the winner of the competition is...

Survey says...

Well, I guess, as I said, we just launched the competition 45 days ago. And the responses we received really have been nothing less than remarkable. We had hoped to be able to announce a winner, but we're not there yet, and we expect to make an announcement for the end of the year.

So now let's take a quick look at the preliminary financial summary including what some would say is a way too early schedule budget and pro forma. Starting with schedule, our site. Our goal is to get vacant possession before the end of the year. Once we've selected an architect will sprint to get to a design that will enable us to enter into and complete ULIP. ULIP, as you know, is a statutory process. It's also something we excel at. The greatest concentration of construction risk is in the ground, and yet we plan to be in a position to go vertical by the end of Q1 2028. It's a 36-month construction schedule leading us to tenant occupancy before the end of 2031.

Next up, the budget, site acquisition is at our basis. Entitlement costs reflect our projection to execute on the scope of work we've agreed to with the MTA. Hard costs reflect a new high watermark that takes into consideration the potential for tariffs. Leasing concession is appropriate for the top of the market and financing costs for moderate leverage leads to a total development budget of $1.835 billion or $2,350 per rentable square foot. As I said earlier, we'll finance that with moderate leverage, and we're already in discussions with potential partners for a 51-49 joint venture with the right to sell down further if we choose.

And finally, our pro forma, rental range of 190 to 310 per square foot. In today's dollars, which are inflated modestly to reflect our lease-up schedule, operating expense is appropriate for this highly amenitized development, real estate taxes at a level that we've never seen before. All yield an attractive 7% on fee-owned real estate. As Marc always says, the true test of a buy is third-party validation. And we are seeing tenants calling. We have tenant presentations scheduled. Our lenders are chopping at the bit finance us. And as I said, we have equity partners willing to partner at this early stage.

And now I'm going to turn it over to my partner, some named Entertainment Ventures, has become my friend, Kenzo Digital. I think you guys know, Kenzo but he is the artist and designer of the permanent heart installation inside Summit. And unlike my fake reveal, Kenzo was going to reveal for the first time our designs for Paris.

Nice to be with everyone today. I'm Kenzo Digital, Artisan Designer. I'm proud to be part of the Summit team with Marc, Rob and Michael creating the art experience known as Air, the foundational experience at Summit One Vanderbilt and all other locations around the world. Summit One Vanderbilt had another amazing year with over 2.2 million visitors expected for 2025. It's a testament to the brand and the experience that Summit performed so well in a tourism environment that saw fewer visitors to observation decks this year.

Last year, we introduced you to Summit Paris. And this year, I'm happy to reveal only to you in this room, a sneak peek of the actual experience at Tour Triangle. We've been working tirelessly on the design for 1.5 years. We have not shared any of this design before. As an experience, Air will be unique to each location, but will always include 2 key spaces, transcendence, a double-height infinitely reflected space; and affinity, an infinitely reflected space with reflective balloons moving.

The development of Summit in Paris has been a highly complex, massively ambitious undertaking that has required creativity, sophistication and commitment from all disciplines both here in New York and in France. The mission we've exceeded that before, and we intend to do so again in Paris. Paris has a deep cultural history that places the highest value on artistry and sophistication. To succeed in Paris, we must create an Air experience that becomes part of that cultural framework that has bold artistic ambition and beauty. We believe we have done just that. What we're about to show you is a design for Air in Paris that will create an experience of powerful cultural relevance, one that will stand the test of time and become a new successful Parisian institution. We are very proud of this work, and we believe you will be, too.

Tour Triangle is a new prestige tower designed by Herzog & de Meuron, and we have taken the top 4 floors. In 2023, the City of Paris passed the law prohibiting new constructions on buildings above 12 floors, meaning no more new buildings at this height besides Tour Triangle. This will be the last skyscraper in Paris. We believe it has the best view of the Eiffel Tower and Central Paris in the city. You clearly see Sacre-Coeur, [ Montmartre ] and Montparnasse from this vantage point. Similar to New York, we begin with the dark [ palette clean ] space with sparkling lights, similar to those of the Eiffel Tower at night.

As guests enter the elevator, the [ palette ] changes from black and white to dramatic color inspired by the Parisian Sky, with a dynamic light and sound show. Exiting the elevator, guests continue the color light experience, a powerful framing for the reveal of transcendence. Guests enter on the mezzanine level of transcendence, a grand and spectacular space with infinite reflection above and below. In the columns and core wall, guests are introduced the signature feature of the design, curved reflection, which echoes the romantic spirit of Paris and creates a seductive and mesmerizing new experience for guests.

Guests move downstairs and a reflection emerges and expands in the double-height space. Through their direct proximity to the most captivating complex curves of the core wall inspired by the shape of The Seine River, guests experience magnification, [ demagnification ] and distortion, all in one spellbinding flow. Here, our guests experience a form of mass hypnosis connecting them to the romance and seduction of Paris. Paris is the city of light, the amber of the street lamps, the sparkle of the Eiffel at night, the tantalizing canvas. To this end, we've expanded the conceptual integration of lighting and air so that it's now a feature of daytime programming as well, innovating in key technical and creative ways that transform space for guests.

This video gives you a sense of what the experience will look and sound like when you're moving through the space.

[Presentation]

Guests move into an updated version of affinity with fans built into the walls and ceiling to move the balloons around the space, creating an intense participatory immersion. As the balloons move through the space, the reflections in the curved core wall shape shift, expand and contract creating a spellbinding alternate reality in form. The backlit columns provide energy and pattern light movement that reflects off the balloons, curved wall, floor and ceiling [indiscernible] fashion, both day and night.

We believe that this design shows profound evolution in what Air and Summit can be as a singular experience and international brand. The combination of groundbreaking experience and incredible view are the key ingredients of success and we are extremely confident in our approach. We anticipate that Summit will quickly become one of the most sought-after experiences in Paris, and we are projecting over 1.5 million guests annually with gross annual revenues of approximately $50 million. We are incredibly excited about this project and eager for the opening in June of 2027.

We're also thrilled to announce that we've just executed a letter of intent on what we believe is the perfect site in Tokyo, a city I have a deep personal connection to. Rob and I have been pounding the pavement in Tokyo for 3 years, exploring the different neighborhoods for their cultural and social demographic relevance and are incredibly pleased with this location and our partnership with the developer. We believe that this location has the potential to outperform Summit in New York and be a massive leap forward creatively.

The number of conversations we're having right now to bring Summit to other major cities is very exciting, including advanced discussions with Seoul, London and Shanghai. These conversations are complex because they involve the incorporation of a substantial public destination at the top of some of the world's most iconic new developments. We have been all over the world, underwriting neighborhoods and locations and have figured out a formula to make it work for Summit and global developers. There are more announcements to come in 2026, and I very much look forward to seeing you guys again.

Next, I will be introducing Garrett, who heads up political affairs at SL Green, and will be discussing today's political climate. Thank you.

Good morning, everyone. My name is Garrett Armwood, Vice President of Government Affairs at SL Green, and it's a pleasure to join you for my second investor conference in my 2 years with the firm.

When I stood before you last year, Rob and I discussed the new conversion incentive created by Governor Kathy Hochul and the state legislature and how it was allowing us to move forward with our conversion of 750 Third Avenue, which, as many of you saw and the governor just mentioned, received national coverage in the Wall Street Journal earlier this week. This year, I want to focus on how the political environment in New York along with emerging trends in Manhattan's commercial office inventory is shaping the conditions that will matter most for SL Green and for the future of the office market.

Regardless of one's views on the incoming administration, the policies required to fulfill its stated housing goals have direct positive implications for the office sector. And those implications are increasingly relevant to the supply and demand dynamics we track most closely. In 27 days, a new administration will take office. Since election day, many of you have asked a very reasonable question. What does the Mayor elect's agenda mean for real estate and for the office market specifically? Mayor elect, Zohran Mamdani, campaigned on housing affordability and the coalition which elected him expects measurable progress on housing supply. That means the new administration must rely on tools that can actually deliver units and deliver them quickly.

Early signals from the transition reflect a team with operational depth. Dean Fuleihan, who spent nearly half a century navigating mechanics of city and state government including time as Budget Director and first Deputy Mayor who returned as a central figure inside City Hall. Commissioner Jessica Tisch will remain in charge of NYPD's 34,000 uniformed officers. Under her tenure, New York saw some of the lowest crime rates in recorded history and the governor just doubled down on that here. And Elle Bisgaard-Church, the architect of his campaign will serve as Chief of Staff, responsible for policy execution across the administration.

Unless we forget, 2 weeks ago, Mayor-elect Mamdani, met President Trump in the Oval Office and it went better than anyone could have dreamed.

[Presentation]

Regardless of the politics of the moment, the practical point is that both publicly agreed, New York must increase housing production, which is only positive for SL Green and our business. Here is the distinction that matters. New York's housing shortage spans the entire city. But the geography, least capable of supporting new large-scale ground-up construction is Manhattan South of 96th Street. It is a dense, fully built environment with limited development sites, high acquisition costs and substantial neighborhood sensitivities.

Within that context, conversions become the one tool that can reliably produce housing at scale. They repurpose existing structures, minimize community disruption, environmental impact and deliver units far more quickly than ground-up development. They are the optimal solution in the Manhattan Core. This is why the incoming administration's 200,000 unit commitment inevitably runs through the recently approved mechanisms already proving effective, Real Property Tax Law 467-m and the zoning changes that unlock office to residential conversion.

Simply put, if the city expects meaningful housing delivery in Manhattan's prime development area, conversions are the path that will be used, not because of ideology, but because they are the only path that can deliver. And because conversions are already accelerating due to alignment between Governor Hochul, who you heard from today, and Mayor Eric Adams over the last 2 years, the incoming administration inherits a policy foundation primed for expansion. As discussed last year, Albany delivered major tools for conversions. 467-m and the ability to lift the 12 FAR Cap as they previously did for downtown, which our conversion of 750 Third didn't need because the building predates 1961 but dozens of overbuilt underutilized post office towers in midtown will need it. These are the building where the majority of today's vacancy sits.

The Adams administration also delivered City of Yes for housing opportunity to expand the universe of eligible conversions and create 2 new high-density residential districts, R11 an R12 with allowable FARs of 15 and 18. Last year, City Planning Commissioner, Dan Garodnick, Joined us to walk us through those zoning changes and how transformational this will be. And it's happening as we speak. City planning has already begun mapping these denser mixed-use districts. Looking forward, I expect the Mamdani administration to continue mapping R11, R12 districts throughout Manhattan's prime development area to unlock the full conversion pipeline. A key case study is the Midtown South mixed-use plan. Adopted on August 14, MSMX upzoned 42 blocks previously limited to manufacturing and commercial use. A built FAR map shows us most buildings already above the old 12 FAR limit. These lots weren't zoned for housing. But if they had been, it's doubtful they would convert without lifting the cap.

With the upzoning, dozens of Class B and C buildings zoned for manufacturing use can now reposition into housing. MSMX is projected to create 9,700 new homes of which 2,800 will be affordable, supported by $470 million in public infrastructure investments. Evidence of the model is already emerging. Just 2 months after MSMX passed, the first conversion project was announced, 29 West 35th. Marty Burger, formerly of Silverstein and the World Trade Center redevelopment is the first mover in that transformation.

Before MSMX, 29 West 35th wasn't on City Hall's list of conversion candidates, which underscores the potential targeted upzoning has to reshape Manhattan's office sector in the hands of talented developers. Next is the Manhattan plan, a borough-wide framework expected by the end of 2025, and it will map R11 and R12 across much broader sections of the city, including East Midtown, unlocking the remaining B and C class stock. For an administration determined to deliver historic levels of housing supply, this is not optional policy. It's the necessary path in Manhattan. And according to [ Eastfield ] data, Manhattan is already the strongest office to residential conversion market in the United States having converted 159% more units than the next closest city before these districts are fully mapped. We are the national leader. And that gap reflects both the demand for people to live here and the strength of the tools put in place to house them.

So what does this mean for Manhattan's commercial office market? Tightening. Over the last 30 years, Manhattan's office inventory has averaged 444 million square feet, remarkably stable despite economic cycles and waves of conversion in Lower Manhattan, thanks to 421-g. But beginning in 2016, the market began expanding rapidly. 5 million square feet was added in 2017, another 9 million in 2019 and a whopping 12 million in 2021. 24 million square feet of inventory was added in 5 years, predominantly on Manhattan's West Side creating the oversupply peak of 2022. And then came correction, a reduction of 3 million square feet in 2023. 2024 saw 13 million square feet convert downtown because as I noted, there was already a relief from the FAR path. Manhattan is now experiencing the first purposeful net contraction of office inventory in modern history. This has not declined. It is structural rebalancing, removing obsolete supply and strengthening the relative position of high-quality assets.

So how are we doing to date? 5 million came off the market in 2025, thanks to 467-m and the conversion pipeline projects the incentive will convert 18 million more over the next 5 years. Including new office deliveries, we would expect the market to stabilize somewhere around 447 million square feet, a net contraction of 11 million since 2024, but just think when the Manhattan plan maps R11 and R12 districts onto Third Avenue, if 10 more office buildings convert, that could be another reduction of 8 million square feet, bringing the market below the historic average.

Here is the strategic takeaway. A pro housing mayor means more conversion. Conversions reduce office supply. Reduced office supply increases pricing power for top-tier assets, and SL Green's portfolio represents the best asset Manhattan has to offer. Manhattan is not losing its core, it's refining it. The office market is shedding space that no longer competes and elevating space that does. SL Green is exceptionally well positioned for that shift. We are converting where it makes sense, reinvesting where demand is strongest and operating the premier assets that benefit most from a tighter, more disciplined market. In a market defined by quality and scarcity, the winners are already emerging. SL Green is one of them.

Now let's check back in on what President Trump thinks about living in New York City in today's political environment.

[Presentation]

Now it's my pleasure to introduce Amanda Golub, Vice President of People Experience with SL Green to teach you how we retain such an incredible team.

Good morning. I'm Amanda Golub, Vice President of People Experience at SL Green, and I'm thrilled to be back with you this year. As Head of People Experience, I guide everything from benefits and onboarding to compliance and employee relations, ensuring our teams are supported and our culture stays strong.

Last year, I shared our story about youth development. How we're investing in the next generation through the Summer Youth Employment Program, Ladders for Leaders and our mentorship program. I spoke about creating pathways for a student to discover careers in real estate and call this the Green way, nurturing talent, fostering culture and growing from within. That same philosophy extends across the company. Our people are our performance. As a public company, our responsibility is to deliver results for our shareholders. We do that by ensuring the best talent works here.

But what sets SL Green apart? What fuels a relentless drive, effort and pride you see across our teams? How do we extend our ethos beyond our employees to our tenants, our partners and our neighbors? In other words, what's our secret sauce? Our people are the most important part of the SL Green success story. And I'll be honest, it takes a certain kind of person to be here, someone with the drive, grit and commitment to perform at the level that business demands. It's not for everyone. We're in the office 5 days a week because we choose this. We thrive on the pace, the pressure and the pride that comes with delivering at the top of our game.

When we talk about the Green way, it's not just about real estate or numbers on the page, it's about engagement. What keeps 1,200 people motivated, connected and proud to be here? At SL Green, engagement is a business strategy, employee engagement sparks high productivity and innovation. It leads to more successful recruitment and reduces turnover. Each year, we run an engagement survey to get a sense of where we stand and where we can grow. The survey included over 260 employees from our SL Green team and we saw strong results. Overall engagement came in at 86%, 11 points higher than comparable U.S. company. 93% of respondents are proud to work for SL Green and 96% believe the company is positioned to succeed over the next 3 years, a powerful vote of confidence in our strategy and performance.

The results relating to our leadership were similarly strong with 90% of respondents expressing confidence in our leaders, 18 points above benchmark, yet, almost 1/4 of employees told us they want more face time, interaction and communication with our executives, a signal that while trust is high, visibility matters. So we acted launching our executive fireside chat series right here in this room, where Marc, Ed, Harry and others sat down with employees for candid, unscripted conversations driven mostly by employee questions. This wasn't simply a discussion about strategy. It was a chance to see the people behind the titles, their stories, their quirks and the experiences that help shape how they lead. And they didn't just talk, they listened, and we walked away with some terrific suggestions.

The response was exceptional. 2/3 of our employees attended at least one session, nearly all found them valuable and the majority said they left with a clear understanding of our strategy and priorities. Another clear measure of engagement is tenure and turnover. Across SL Green, 32% of employees have been with us 10 years or more. That's 1 in 3 employees and a very impressive metric in the HR world. An S&P Global study in 2024 found that the industry's voluntary turnover rose from 13% in 2020 to about 17% in 2023. In comparison, SL Green's voluntary turnover averaged roughly 10% over 8 years leading up to 2020. We saw a temporary spike during COVID, but today, we're back down to 9%, well below the industry average. That stability strengthens execution, preserves institutional knowledge and delivers lasting value for our shareholders.

We're also focused on helping our people grow through LinkedIn Learning, employees can explore courses to build skills for both today and tomorrow. SLG University provides hands-on operations-focused training and our tuition reimbursement program reflects our commitment to financially support continued education and professional advancement. Together with the performance review process designed to set clear goals, provide meaningful feedback and chart a path forward, we want every employee to see a long-term future here.

When it comes to well-being, we start with what standard, things like a strong health coverage, 401(k) match and employee stock purchase program. But what sets SL Green apart is what we do beyond that. We front-load HSA accounts for immediate flexibility, offer gym subsidies, launch SLG Athletics, featuring our run club, Volleyball and Softball leagues and a pickleball tournament as well as the other benefits you see here. This year, we also introduced a new partnership with One Medical for concierge level care. Even our corporate membership, the New York Botanical Garden, helps employees recharge outside the office. Some of these programs come with costs, others do not, but the return from high retention, corporate knowledge and morale is significant. Our employees feel that SL Green invests in them as individuals, not only as employees.

Our culture is defined by people who show up, lean in and care deeply about their work and one another. That same work ethic extends beyond our walls into philanthropy, community activism and industry leadership. Employees give their time and talent to organizations across the city from local bids like the East Midtown Partnership, the civic and charitable groups such as the FDNY Foundation and many others across health care, religious organizations and security in the art, embodying what it means to be truly invested in our city and its future. Engagement transforms a job into a mission. It connects our people to our city and to skyline we help shape and the communities we serve. And ultimately, it drives results.

And that pride I've discussed doesn't stop with our employees, it radiates outward. You can feel it when someone says, oh, I'm in an SL Green building. Tenants know they're experiencing best-in-class service and a team that takes pride in every square foot. It's on the streets of Paris. This is a random man Rob Schiffer bumped into, and a reminder that even halfway around the world, the SL Green footprint is unmistakable. The same principles that shape how we serve our employees, tenants and customers also guide our civic engagement. Through our developments and community initiatives, we're helping address housing challenges, redefining modern inclusive workplaces and even green spaces for our pets.

Philanthropy is a part of who we are, from corporate gifts, charitable matching to volunteerism, our people give generously. 5 years in, Food1st is still going strong with over 1 million total meals served. At SL Green, we don't just build buildings, we build connections between our people and their purpose, between our tenants and the city they call home, between SL Green and the fabric of New York itself. Our secret sauce isn't a mystery, it's our people. They're behind every lease signed, every project delivered and every partnership sustained. By continuing to invest in their engagement and development, we're building a culture that drives results and resilience because culture drives performance and performance drives value. Thank you.

Almost 10 years ago to the day, this next speaker offered me my first job and mentors like him are why so many of us follow the Green way. Ed Piccinich.

It really was perfect. Pretty inspiring story about Amanda. I was moving my son into Lawrenceville, holding boxes up flights of stairs and like any frantic move-in day. When I finally got a chance to catch my breath, I bumped into her mom, who's sitting on the couch there with me, and she says to me, "I hear you're in real estate. " So I responded, "Yes, I am." I smiled and she said, "well, I have this superstar coming out of Colgate. It was 2016. She's graduating in May. Could I give you her resume?" She also happens to be from Lawrenceville.

Amanda did the rest. She went through the process, started in an entry-level role, earned every step up, ultimately rising to what she does today, really leading our HR group. So with great grace and real talent. Thank you, Amanda.

So you all know me by now, Ed Piccinich, Chief Operating Officer. I oversee 10 verticals, and these are the people behind the scenes that make it happen, each a subject matter expert, as depicted on the side of their headshot. You've heard from Amanda, from People Experience, Meghann Gill with our Property Management Team, Laura Vulaj has our sustainability and hospitality arm. Constructions led by Bob DeWitt, Underwriting by Greg McManus and Engineering by Kevin Reade. To round out the team. We have John Mathews overseeing IT, and Michael Williams managing our Summit operations.

This morning, I want to focus on our security and life safety program led by Tony Iaquinto, a subject that's drawn increased attention following the tragic incident that occurred at a commercial building in the Midtown Manhattan area this past July. We've heard from our shareholders, tenants and the media, and I want to reaffirm safety across our portfolio remains mission-critical. The items I'll outline today have either been in place or under evaluation in our portfolio. Being in an SL Green building means being in one of the safest, most well-protected environments in the city.

Some of you may recognize this slide from a few years ago, overlaid here on our SL Green stock price are some major events in our country's history, some of which fed into economic breakdown at the time and tested our resilience. As a company, while we pursue growth through investment activity, we must also ensure that our portfolio is resilient to operational and external shocks. Oh, that's where my team steps in. Between physical attacks at the World Trade Center during 9/11, natural disasters like Superstorm Sandy or more recently with the challenges of COVID. These events triggered changes in security, technology and bringing operations to what we consider normal today, everything from access control, to turnstiles, to bollards, you name it. Throughout every unexpected change, I've led an expanding team anticipating this change and preparing diligently and responding decisively to future proof and protect our assets.

Before we get into the details of our program, I want to put our security and life safety strategy in the context. This video represents best-in-class security program across our portfolio, and I'm tremendously proud of our security professionals that are on the front lines each and every day. In addition to our robust procedures and physical hardening elements, their vigilance helps us identify, mitigate and prevent threats before they impact our tenants and our assets. In particular, we're laser-focused on specific dangers or risks like the ones you see here, circulating on the screen, including loitering, vagrancy and vandalism to broader safety concerns like trespassing and burglary. Our objective is straightforward to ensure every building in our portfolio remains a safe, secure and a welcoming environment.

This is a high-level overview of our portfolio, which includes technology, critical infrastructure, physical security and vertical transportation. Let me walk you through some of the stats.

We have 2,300 cameras, some of which feed into 3 security operation centers that serve as the command hub for building security. We also have active shooter buttons in our portfolio, which at their core functionality immediately call 911 and alert security and property management team. Each building has an emergency response closet stocked with essential supplies, including but not limited to, first aid kits, radios, stop the bleed kits and protective gear. And while technology and systems are important, nothing replaces the team and tenants who are trained and aware. As required by FDNY, we offer fire safety and emergency action plan drills for building staff and tenants. We also have a strong visible presence of nearly 400 trained guards across our managed portfolio. Complementing this, we have 24 armed personnel for another layer of protection. Our program is built on a foundation of human expertise strategically amplified by cutting-edge technology.

And this 3D diagram of 1 Madison. I'd like to walk you through the standard building like safety system. If it looks busy, it's because it is. Buildings are inherently equipped with systems to keep occupant safe from various threats to life safety. We have the sprinkler system in blue, the egress system in green, access control in orange and fire alarm devices and connections shown in red, which tie back to the fire command center in the lobby. Some buildings are equipped with active shooter and duress buttons, which call 911 upon activation and some have elevated programs to go into sleep mode and decelerate to the next [ floor ] with the doors remaining closed.

I want to now turn your attention to other layers of our program. On the screen here are 5 components that are the minimum requirements to meet building and fire code compliance. Everything you see after this is above and beyond. Each icon now on the screen represents the 19 key security components in place at all of our properties exceeding code and expectations ranging from access control and visitor management to guard deployment and mass notification system. This level of investment ensures business continuity and, of course, peace of mind for every occupant. Collectively, these form the foundation of our multilayer security strategy, integrating technology, personnel and procedures for all our properties. The second ring builds on the core framework outlined previously, demonstrating how our program is tailored to each building's risk profile. Depending on factors like location, tenant mix, and operational complexity, our program can be scaled with different layers of protection from armed guards and NYPD pay detail to security operation centers and video analytics. Elevator lockdown active, shooter buttons and armed guards are being evaluated for broader deployment across our portfolio. Our internal cross-functional team continues to assess where expenses can be mitigated or shared with tenants to ensure strategic investments. By adapting to the need of each asset, our approach enhances safety, operational efficiency and overall portfolio strength.

This last ring highlights an opportunity identified alongside our industry-leading risk consultants to further strengthen our security playbook as the landscape shifts. In light of recent events, we've accelerated our evaluation of a Global Security Operations Center or GSOC, to enhance our portfolio of security posture. The GSOC will act as our epicenter and will provide unified real-time oversight of more than 2,300 camera feeds across our assets and global Summit brand. This will add 24/7 365 remote layer real-time monitoring and response with integrated AI camera analytics connected to our building systems. We're currently evaluating an ideal undisclosed location outside of Manhattan, designed for security and operational continuity. This will be our very own mini Pentagon with resilience and redundancy in mind. To support the live camera monitoring in the GSOC, cameras throughout our portfolio will leverage advanced AI analytics to enhance situational awareness and accelerate response.

On the screen, you'll see examples of how this technology identifies potential incidents in real time, powered by advanced vision AI modules, enabling detection of everything from weapons and anomalies to loitering, falls, intrusions and crowds, along with other threats mentioned earlier. The highlighted outline within each square here pinpoints the areas of focus and what these analytics are capable of detecting. Of course, this is only a fraction of the possible detection capability. These algorithms outperform existing solutions, processing video feeds up to 1,000x faster, converting surveillance into proactive threat mitigation. We also leverage trusted third parties to provide security intelligence, enhancing our situational awareness, enabling real-time insight into potential emerging threats. Tony Iaquinto and his team maintained an extensive network of partnerships with local and federal law enforcement grounded in long-standing trust, operational awareness and a shared commitment to safety and preparedness.

Within my group, I also have formal law enforcement professionals, including 2 U.S. Marshals, Marine, a special agent in charge from the IRS a naval officer, and nearly 2 dozen retired NYPD officers. Building on that, I sit on the Board of the New York City Police Foundation as a trustee, no different than my partner, Matt DiLiberto's involvement with the FDNY Foundation. Together, this dual perspective, and firsthand intel from the FDNY and NYPD enhances our decision-making, safety awareness, teamwork and community relations.

Now it's no surprise that our portfolio includes some of the most security-conscious tenants in the market who rightfully demand safe and responsive buildings. Our systems need to meet and exceed those standards. We are now enhancing a high-impact mass notification system called Regroup. In the event of active or potential emerging threats like the ones you see appearing on the screen, whether it be a civil disturbance, fire condition or nearby dangerous individuals, Regroup will enable us to send alerts in seconds through an e-mail, text or phone to all subscribed tenants from our 50,000 tenant employee population, supporting synchronized awareness and response. While all scenarios results in different actions, an example use case scenario is shown on the screen.

For instance, a bomb threat could occur across the street, whereby the Life Safety Director would likely advise building occupants to shelter in place through an old building announcement and Regroup message. Alternatively, this platform can also provide advanced notification for awareness only such as for severe weather events. Ultimately, Regroup serves as a powerful tool to inform our occupants to make smart decisions. We conducted a comprehensive market suite of our peers, publication, data sources and bucketize these security measures into 3 categories: high adoption, medium adoption and those in the pipeline. I'm not going to unpack all of this right now. But in summary, some are being adopted at a higher rate than others like AI analytics and NYPD paid detail, whereas others are still being evaluated by the majority of the industry.

As I've heard consistently from Steve Durels and Brett Herschenfeld, security and life safety remains a high priority for tenants. Even against these market comparables, I can say with confidence that our portfolio continues to have one of the most comprehensive programs for both physical and technological security, giving us a distinct advantage in attracting and retaining tenants, ultimately enhancing our leasing velocity.

Thank you for your attention. And now I hand it over to a guy that treats every dollar we spend, like it's a hostage negotiation. Our very own Matt DiLiberto. He's been warming up in the back for you all.

Thanks, Ed. Clearly, nobody better to oversee the safety and security of our portfolio and our tenants than Ed. He's quite passionate about it. Rumor is he's hoping to supplement our in-place security team, some of whom are here with AI-enhanced highly intelligent, very well-dressed cyber robo heads.

The real question is, was that a prototype? As to whether that was me actually doing jumping jacks, it was not. Real firefighters do [ push ups ]. Good afternoon, everybody, this afternoon. We're running a little long. Thank you all for being here for our first ever and hopefully, last ever, Friday Investor Conference. Thank you [ NAREIT ] for messing with our schedule. I personally can't think of any better way to spend a Friday during the holidays and to be here with all of you.

Over the past few months, I've received quite a bit of feedback, some spirited on where I should focus my discussion this year and where not to. So I've made some changes to streamline my content to what I believe is most important for the entire investor community beginning with the financing initiatives that we will embark on in the coming months amid the backdrop of a significantly more constructive financing market that Harrison and Young detailed earlier.

Rewinding back to 12 months ago, execution of what we called the $5 billion plan in 2024 set us up very nicely coming into 2025, even better after removing the debt on ASP assets where our strategy is different than for our operating properties. Moving ahead to where we expect to end this year. Throughout the course of the year, we remain very active in the financing markets, extending maturities and maintaining a bias towards fixed-rate financings in the current interest rate environment. So with no significant maturities to address in the coming year, the focus of our $7 billion financing plan for 2026 will be on maturities in 2027 and beyond, where we have already started our work.

Including on our best-in-class credit facility, which I expect to recast in the first half of the year, extending the maturity out to 2031. This facility was last recast 4 years ago, which was fortuitous as the unsecured bank market presented some tough sledding for office companies over the past few years. Had we come to market, we may have had to downsize. Now I am confident that we will be able to maintain the current size if we choose to. As Marc mentioned earlier, paying down the term loan component of this facility in the near term is a focus of our continued strategy to reduce corporate unsecured debt over time. So we may downsize it at closing or we will pay it down soon after with the proceeds of an unencumbered asset sale.

On the secured debt side, we're negotiating extensions on a few assets but are most focused on the largest financings like at 245 Park, which is the prime example of what our investment strategy and this platform can bring to bear. Since acquiring the asset in 2022 through a preferred equity investment, we're on the verge of completing a comprehensive redevelopment. We've leased over 800,000 square feet and brought the assets almost 97% leased. So the debt is perfect to bring to the CMBS market for a 5-year fixed rate execution ahead of the sale of a 25% JV interest in the second half of the year.

At 1 Madison, it's time to replace the legacy construction financing with at least $1.6 billion of fresh 5-year debt, and we're on track to close that in the first quarter. And we will look at maturities beyond the next 24 months. Recent leasing successes at 420 Lex provide us the opportunity to refinance the high-cost in-place debt that doesn't mature until 2040 at much lower cost while generating incremental proceeds.

Along with extending the maturity profile, reducing costs and generating proceeds, our financing plan also allows us to evaluate the sale of assets in whole or in part with the new financing in place, eliminating the risk of a pending maturity, which can affect price. Previewing a little bit of our 2026 business plan, these are a few assets that we anticipate selling outright. We're selling a JV interest in after the debt has been addressed.

So rewinding back to what our maturity profile looks like going into 2026 and now after execution of the $7 billion plan and several asset sales, our maturity profile has been pushed out significantly and leaves us in a great position for the next several years. And it probably won't surprise you to know that we already have a plan for our largest maturity in 2027, the $450 million mortgage in [ mez ] at 45 Lex.

Continuing the trend of reducing leverage that started back in 2023, the incremental proceeds generated by refinancing stabilized core assets, coupled with the proceeds from our asset sale program to reduce corporate unsecured debt by over $700 million and total debt by almost $1.2 billion. This good news story has just one stubborn factor, the weighted average interest rate. Personally, I think it's pretty impressive that we will continue to maintain a rate of less than 5% in this environment. That said, this is 100 basis points higher than the rate at the end of 2019. To put that in context, 100 basis points of incremental interest rate on that amount of debt is over $81 million of FFO dilution, over $1 a share. Interest rate relief can't come soon enough because we can target liquidity to reduce leverage, which saves interest expense but it crowds out the capital that could be used for more accretive activities like new real estate or debt investments or even share buybacks.

And one of the primary reasons we've been able to maintain an average interest rate below 5% is because of our aggressive hedging strategy over the past few years. I've [ touted ] the incredible volume of fixed rate hedging we did to mitigate the effect of rising rates, and there's no doubt those hedges benefited us. Now with some visibility into reducing rates, I expect we will increase our floating rate debt exposure to almost 10% next year, still very low compared to our historical average, but that will trend higher over time.

Moving on to earnings guidance with a word from our sponsors, actually, just our attorneys. The following may include non-GAAP financial measures. So you should look to our SEC filings for any comparable GAAP financial measures and required reconciliations.

Looking back at 2025, I proudly see a platform that can make money in very, very unique ways. Look at the impact of the huge wins at 522 Fifth and the restructuring of 1552 Broadway, which included a significant DPO gain. These bigger ticket wins were supported by the real estate portfolio, where almost all property types outperformed our original GAAP NOI guidance. Unfortunately, these successes were largely offset by interest expense that came in higher than we originally projected due to persistently high rates and asset sales that we specifically delayed or deferred. And undoubtedly, the biggest disappointment of the year, a true head scratcher, the abrupt and questionable end to our 4-year pursuit of a casino license in Times Square. This outcome disappointed us as much as it disappointed the rest of New York and ultimately caused us to write off $12 million of costs related to the process. Were it not for this specific unforeseen events, it would actually be at the upper end of our guidance range.

Onward we push, flipping the calendar to 2026, beginning with the heart and soul of the company, our real estate portfolio where NOI grows to $855 million before the effect of asset sales of full $72 million or more than 9% higher than 2025. This reflects more than 6 million square feet of leasing and 300 basis points of occupancy increase in the Manhattan office portfolio in just 2 years. After giving consideration to a business plan that includes a number of asset sales across various property types, our guidance includes $808 million of GAAP NOI, still $24 million higher than this past year. And that has even more gas in the tank for 2027 because of the underappreciated delay between when a lease signs and when it runs through earnings. I'll do a little GAAP reminder here. Before we can recognize revenue on a tenant space, the space needs to be built and ready for, this is technical, it's intended use or the tenant needs to start paying rent. If we're building out the space, that time line can be shorter. If the tenant is building out the space, that time line can be much longer. That delay of 12 to 24 months is frustrating for us like it is for you, but it's GAAP. So it is what it is.

Now here's where some of the feedback I talked about earlier comes into play. We're going to take a deeper dive into our Manhattan office portfolio NOI, similar to what we did a few years ago, beginning with the assets that comprise the Grand Central portfolio. Larger, older vintage buildings like 420 Lex and 220 East 42nd, complemented by the high-end boutique buildings at 461 Fifth and 10 East 53rd. While we have some known tenant vacates at 3 of these properties, at Graybar, a large pre-war building with literally hundreds of smaller tenants, leased occupancy increases to almost 97% from COVID lows in the mid-80s and economic occupancy approaches 95%. It's quite a testament to where today's market is. And I know what you're asking, what is economic occupancy? Well, it's our new occupancy measure and probably the most relevant when it comes to appreciating the difference between when a tenant signs a lease and when a lease flows through earnings. It's based on the percentage of tenants where we are recognizing revenue. So when you see a portfolio like this, within an occupancy -- a leased occupancy over 91 and economic occupancy below 89, you have what I call the kindling for future growth.

The Third Avenue corridor has clearly benefited from the strength of the Manhattan leasing market extending out from Park Avenue as well as a significant number of office to residential conversions. This first benefited 919 Third, which is full, thanks to the large extension renewal and expansion with Bloomberg and the recent lease with the State of New York. Next year, we see those benefits flow through to 711 and 885 Third where occupancy is distinctly on the rise. While GAAP and cash NOI are both increasing, you've seen even more pronounced disparity in this portfolio between the average economic occupancy and year-end leased occupancy, especially at 919 Third, which is 100% leased, but revenue recognition is only projected to begin for Bloomberg on June 1 of next year. That's almost 2 years after the lease was signed.

Park Avenue, clearly the bell of the Manhattan leasing [ bull ] that's well documented and obvious here where virtually all of our assets are full by the end of next year. Growth in both GAAP and cash NOI is driven in part by our new acquisition of Park Avenue Tower coupled with the benefits of enormous leasing successes at 245 Park and 100 Park. The tenants are now completing their space and they're finally moving in. But you still have average economic occupancy numbers meaningfully below leased occupancy. So even after big NOI growth next year as reduced for 2 JV interest sales, there's a lot of economic growth left in this portfolio.

On the West side, truthfully a little tougher sledding, quite frankly. This is the reason we leave the West side to others, and we focus our efforts on Midtown East and the Grand Central area, especially Park Avenue, Midtown East is just a far, far better market. That said, there are green shoots on the West side. Brett showcased earlier that we're in phenomenal shape of 1515 Broadway and the broadening strength of the Manhattan leasing market shows up at 810 Seventh and particularly 1185 Sixth where Steve and his team have done an incredible job stemming the tide of the well-telegraphed exit of King & Spalding last month. While KPMG is vacating 112,000 square feet at 1350, we expect that the leasing momentum on Sixth Avenue will set us up nicely to backfill that vacancy as well. 555 West 57th, look, it was a hugely profitable asset for many decades but it sits on 11th Avenue. And in this market, it often screens as just too far west.

And concluding the deep dive with what we call our Midtown South portfolio, you have to suspend reality a little bit because this goes pretty far south. Midtown South is a hot market, especially around Madison Square Park. The surging market results in 2 key takeaways. First, both 1 Madison and 11 Madison achieved fully leased status by the end of next year, a remarkable accomplishment for 2 of our most valuable assets. Second, the benefits of those leasing successes aren't fully evident next year. Look at 1 Madison with average economic occupancy of just under 72%, as tenants continue to build their space, they say, patience is a virtue. I have virtually none of it. But if you can muster some up, look at the NOI growth potential in this portfolio, a gap of nearly 12% between leased and economic occupancy, this portfolio is set up to be an NOI, one of Marc's favorite words, [ geyser ].

Looking beyond the Manhattan office portfolio, the high street retail portfolio benefits from the triumphant return of 1552 Broadway from the ASP portfolio, following the restructuring of the ground lease and resolution of the debt. This allows us to recognize income on this asset for the first time in many years. We are also evaluating a big ticket sale out of the retail portfolio next year. I have heard repeatedly that the value of 760 Madison is underappreciated in our stock price. That's an understatement, and whatever the stock price is right now, it's on a long list of such assets. So we're going to pursue illuminating the true value of the spectacular retail asset in the private market instead.

The residential portfolio that includes legacy assets at 15 Beekman and [ 7 Dey ] Street, along with a property that returned to the SL Green portfolio this past year, we took control of the Olivia on West 33rd back in September, after the group we sold it to in 2020 said they couldn't make it work. Given the opportunity to monetize residential assets in this market, if we can get the right price, only 15 Beekman will remain 12 months from now as we expect to bring both [ 7 Dey ] and Olivia out to market next year.

In the suburban portfolio, Landmark Square in Stamford stands as our last suburban asset after selling out of that portfolio over several years. The properties we had there were some of the best in the markets where we had them, and we exited at the right time. It's just not our core. So next year, our plan is to completely exit the suburbs and bring Landmark Square to market as well. And finally, our development and redevelopment portfolio, which includes just 2 true development assets at 346 Madison, 750 Third, that aren't generating any revenue once the final tenant moves out of 750 Third in early 2026.

Bringing the NOI from the ASP portfolio, the bulk of which still comes from 650 Fifth, 2 Herald and Worldwide Plaza and you have the full view of our real estate portfolio. This is one of everybody's favorite housekeeping slides, the changes to our same-store portfolio, where we welcome in the soon to be fully leased, 1 Madison as well as 500 Park, which we bought last January, exiting same-store a roster of high-quality assets we're planning to bring to market for potential sale. The successes of the incredible leasing over the past few years shows up in same-store NOI, this critical growth metric. With tenants moving in, free rent periods burning off and expenses well contained by Ed Piccinich's operations team, we project meaningful full year same-store NOI growth of 3.5% to 4.5% on a cash basis and 4% to 5% on a GAAP basis but this is not just one year of growth. I discussed the extraordinary amount of NOI kindling that was sitting in the Manhattan office properties that remain at the end of next year.

With this kindling ignited, I expect to see same-store NOI growth, cash NOI growth of more than twice the amount you're seeing in 2026 and 2027, north of 10%. This is where that patience pays off. This team at SL Green, most of you don't have the pleasure of knowing, has worked extremely hard over the past few years to set this portfolio and the company up for success. And make no mistake, we will be successful.

Moving on to investment income. Gone are the days of a $2.3 billion debt and preferred equity portfolio that sat on our balance sheet and generated over $220 million of revenue. The future of our debt investment platform is the opportunistic debt fund and debt funds that come thereafter. The team's focus now is to put out the more than $1.3 billion that was raised into a market that's full of pipeline investment opportunities while legacy DPE book burns down to just $100 million by the end of this year with any increase next year based on identifying opportunities to co-invest with the fund.

Now if the real estate portfolio is the heart and soul of SL Green, the fee income that this platform generates is the adrenaline. Don't let the term other income fool you. In fact, I'm toying with the idea of changing the line item caption to focus on this income so that it actually gets the attention it deserves. What you see here and Marc alluded to earlier is an exciting, high-margin, diversified stream of recurring and growing cash flow that perfectly complements our real estate business and utilizes the deep pool of talent that this platform brings to bear.

Next year, these revenue streams generate more than $131 million of revenue equating to $96 million of FFO contribution after giving effective tax and allocated operating expenses. Because income from the fund appears in several places on the income statement, thanks to GAAP, I included this simple summary to better dimension the full FFO contribution. Remember, we are not just the GP, but are also a meaningful investor in the fund. By the end of next year, Harrison and his team expect to have deployed over $1 billion, a rapid deployment given the 3-year investment period. This deployment allows us to recognize over $6 million of investment income in addition to the nearly $8 million of fees we earn as a GP with meaningful growth in the years to come.

And the final component of the revenue side of our guidance equation is the income from the Summit operator. I am very pleased to report that Ascent, a premium experience at Summit, which was closed for most of 2025 for upgrades has reopened. It reopened on November 13, and sales have been outstanding. With Ascent up and running and total attendance exceeding 2.2 million visitors, Summit is expected to generate revenues of almost $145 million and huge profit of $64 million before the rent that pays to One Vanderbilt, which flows through NOI.

Moving on to interest expense. The governor referenced it. This is undoubtedly the most frustrating line item. While we remain optimistic that rates will eventually come down, the pace of that decrease is anything but predictable. So we will rely on our strategy of reducing overall debt and increasing floating rate exposure to bring interest expense down over time. What's the payoff of that strategy, I expect 2027 interest expense to be $33 million lower than 2026 based on our current business plan and the current forward curve. If that curve came in by another 100 basis points, that would reduce 2027 interest expense by an additional $19 million.

Looking at the components of next year's interest expense, which you see are 3 primary drivers of the overall increase. Cash interest, where you see the effect of higher rates and higher debt balances in the first half of the year prior to the closing of the bulk of our asset sales, less capitalized interest, which I'll touch on in a second, and increased financing costs directly related to the execution of the $7 billion plan.

Heading into the weeds for those who wanted to dive deep into the exciting world of capitalized interest. The development and redevelopment projects at the 245 Park and 1 Madison are entering their twilight years from a capitalization perspective, tenants are moving into their spaces and interest capitalization is burning off in tandem. At the same time, project at 750 Third and 346 Madison, where we anticipate selling JV interests are creating a new pipeline of development and redevelopment.

And finally, G&A, where we expect a less than 2% increase and maintain a trend well below our 10-year average. Now I heard somewhere recently that our G&A screens as high, and I actually am not really sure where that comes from. Overall, it continues to be meaningfully down from peak years, representing just 5% of revenues and [indiscernible] 40 basis points of AUM. In comparison to other real estate companies, particularly private ones actually screens as very, very low.

And concluding our view of 2026 with a simple roll forward of our year-end weighted average diluted share count, nothing really out of the ordinary here unless the stock becomes more reasonably priced, so we can use it as a source of capital or we decide to start buying it back. Like in G&A, you see the continued use of equity as a meaningful portion of our employees' compensation, putting us side by side with you and the investor community. In years like 2023 and 2024, that is a great retention tool. In years like this, a heavy use of equity hits hard as both G&A and the diluted share count are burdened by equity plans that are of little to no value to the recipients. It goes without saying, we all want the stock price to go higher and everything we're doing here is our effort to make that happen.

Bringing it all together into what some of you may want to call a core FFO. The execution of an aggressive business plan results in a platform that is comprised of even higher quality well-leased portfolio that is set up for future growth, has lower leverage, that will bring interest rate expense down over time and it's complemented by a substantial recurring fee business. If there is one benefit to the frustrating interest rate environment, it has allowed us to generate over $270 million of discounted debt gains over the last 2 years. These are real cash gains and every nickel of those gains is NAV-accretive. Because we have line of sight into a couple more of these opportunities, we've included a conservative $20 million into our reported FFO guidance having substantially exceeded that number in each of the last 2 years. I'm going to be over and bet that the team can beat that number again next year. Which brings us to our 2026 FFO guidance range, $4.40 to $4.70 a share, at the midpoint, a substantial increase over the FFO run rate that we printed in the third quarter of 2025.

And I'll conclude with the more significant baseline assumptions feeding next year's guidance, including our return to a more typical quarterly dividend payment after we moved to a monthly payment back in COVID. For many peers, what you see here on this slide is a decade of work. For us, it's just the next 12 months.

Now I'd like to bring back our fearless leader, the one who leads us into battle every day. He's going to clearly illustrate the value of this company, and he loves nothing more than proving the naysayers wrong, our boss, Marc Holliday.

[indiscernible] to wrap up both. Thank you for your extended attention today. I think we're roughly on time, but I'll try and finish up quick, although I don't want to race through this part because I think getting a good handle on net asset value is, to me, what -- is how we run our business and it's what it's all about.

I'd like to have a point of view every single day what the portfolio is worth. I don't look at the stock price, no disrespect to the people here. I look to the market. And I think we have a very good pulse on the market. And all that feedback is coming from domestic and international, institutional and noninstitutional investors. And when you're in the market as much as we are every day buying and selling, I think that is the best barometer of current market. Maybe there's a better one but I don't know. But that's what we use. And we use that to decide what to buy, what to sell, what to JV, when to buy back our stock and when to issue stock.

And it's a formula that I think works, but it's a formula that sometimes is very much dislocated from where the market is being the market for REIT equities. And like we'll be getting on a plane tonight going to Europe, we'll be there tomorrow, and we're going to spend the next 4 days fundraising, JVing, selling, buying. We could be there 4 or 5 days on the heels of this because we were not tired out enough from putting this show on. How good was that show from these guys, by the way. Come on. I mean that was tight. This group here was amazing. But we're going to get Friday night and we'll keep it going through the weekend, race to year end to get everything done. And what I'd like to do now is just sort of take you through our view of how we look at the different components and value of the portfolio. We start with share price, which is no longer $43.59, but we're $69, but was, I guess, as of this morning's open. And that gives us total market enterprise value of $13.4 billion. That's debt and equity combined implied by that share price as of this morning.

Then we take out the debt associated with the alternative strategy portfolio. Recall in '23, we established a small class of assets called the alternative strategy portfolio. It was a portfolio that had a fair amount of leverage associated with it, but assets that contributed not meaningfully to value or to FFO. So we grouped it into alternative strategy. There's negligible recourse associated with any of this $1.7 billion of debt. And our share of that debt is $573 million to start the year.

I'm happy to report that 1552 is another one in a line of successful ASP assets that we restructured with the lender. There was a fairly significant DPO associated with that asset, we talked about on the last conference call. And as a result, that asset is now pulled out of ASP back into performing assets, and we think it's going to be quite profitable in the long term for this company. So we're happy with that resolution. It reduces our debt at share in ASP to $4.78. So we deduct that out of the $13.4 billion, and we get to a net number of $12.9 billion or $13 billion of adjusted total enterprise value.

We then take out the value of our fees and leasehold. 711 fees is the only fee interest we own at a 5% cap. We think that's conservatively valued and leaseholds at a 10 cap. We think that's conservatively valued. That consists of Graybar, 711, 1185.

And so we then take out the high street retail, only 3 assets at this point remaining in that portfolio, 690 Fifth Madison -- sorry, 690 Madison, got a lot of retail. 690 Madison, 760 Madison and one I'm forgetting, but it's in the footnotes.

And then our residential properties, also, which we have many taken out. So that's at a 5 cap for those lowest cap assets, retail and residential. We think that's a fair representation on in-place income, and that's $1.2 billion adjustment to the total enterprise value.

Suburban portfolio, 2 assets, Landmark Square and Galleria. That's all that remains in the portfolio, valued at NPV, which we think is conservatively valued at $114 million, coming out of the total enterprise.

Summit, we held this number constant from last year. Just FYI, this only represents Summit One Vanderbilt. Nothing to do with SEV, Summit Entertainment Ventures, which is our global platform to include Tokyo, Paris and everything else that you heard, that is not carried yet in any metric into this NAV analysis because those sites have not opened yet. So Summit One Vanderbilt, which produces $64 million of EBITDAR, EBITDA before rent and $19 million of EBITDA after rent. We value at $250 million, which I think is conservative.

Development properties, we have 346 Madison, we value at cost. We just bought the property for $160 million. And then 750 Third Avenue, which we will be converting to residential. We are very close to completing a venture on that building, and we put that at the mark in that deal essentially at FMV.

One Vanderbilt, we held pretty much constant year-over-year. And I think our latest interest sale sort of proves out that value had held constant. Can argue that maybe it increased a bit in value because of the expanding mark-to-market in this building. It's becoming increasingly below market in-place rents, but we held the value relatively constant.

And then you got restricted cash and debt and preferred equity portfolio with a couple of interest remaining that are not in the fund. We carry those at 90% of book, and that's about $100 million.

And then some other assets, which is about the same level we had last year, $560 million of air rights, promotes, fees at a low multiple, et cetera. And that brings us to a residual enterprise value of $6.3 billion, $6.4 billion that applies only to what I'll call the stabilized office portfolio, which is the bulk of our portfolio. That portfolio is projected to produce $545 million of NOI at share in 2026. Matt, I assume you just went through that, correct? And that's the number. That's an implied cap rate today of 8.5% and implied value per foot $4.50 per foot, which is kind of like land value.

So to me, it seems absurd. And to me, it's a very simple analysis. But that's me because I live it and I breathe it, and I know every asset and every value and every growth rate, et cetera. It may not be so obvious to see it in this format like this, but that's a really low valuation.

And our Board, who is represented here today, thank you for coming, is very vigilant in making sure that any time we're transacting, buy or sell, that we're right on our NAVs, not within 10%, not within 5%, within like 1% or 2%. If we're off by more than 2%, I feel like something went wrong. And it's a good guide, and it's a good test that we always prove out. And obviously, these implied numbers here at $43 and change stock price doesn't reflect to the way we run the business. And sometimes we may be off by a bit, but it's rare. We've got a pretty good pulse on current value.

Last year, same analysis at $75 a share at the last IC conference, had the portfolio with much less NOI, obviously, $430 million of, call it, projected '25 NOI, resulting in a 6.5% cap and $5.63 a foot, still low but closer. But the concept that over the past year, this portfolio has declined 25% in value.

When it's more leased, when the inventory in New York City is far less, when vacancy levels have dropped, when the balance sheet is better, when we just closed our debt fund, when we got so much done during the year, it's unimaginable to me how we could be from a core value standpoint, 25% less than we were last year. It doesn't make any sense to me.

Certainly, when we go to Asia in January, I spent a couple of weeks out there, okay, we're going to be looking at last year's values and increasing that, not decreasing 25%. So that's the disconnect, if you will. I'd like to sort of stay true to our totem pole and look at value in a range of, let's call it, 5.5% to 6.5% cap rates on our stabilized Manhattan-only office NOI for 2026, and that will produce stock price implications that are $70 to $90 a share with a midpoint around $79. I think that's a lot more interesting a number than $43. If you have any questions, I can take it in Q&A, but that is that for 2025 leading into '26.

So now I think we're going to go into scorecard. Let's go. I got the hurry up sign from [indiscernible] back up, remember hurry up. I thought that was important. I thought it was an important section.

Leasing, we got 7 categories here. Scorecard, we always like to put ourselves out there, reach goals. We never intend to hit all of them. Anybody who thinks that a few misses is a negative, it's not. If we made every stretch goal, you should accuse us of sandbagging. So we don't sandbag. We expect to meet a majority of the stretch goals and hopefully, a vast majority, let's see how we did this year.

In leasing, we had projected 2 million feet. We announced this morning, we're at 2.3 million feet year-to-date, and we intend to be at around 2.6 million square feet at the end of this year. So implying 300,000 more to go in the next like 15 days. Let's get them.

Manhattan same-store occupancy, I think we are going to nose it right at 93.2%. I mean that's good shooting. We could be 10 basis points above or below. We'll see. But if we have everything as projected, the 2.6 million, we'll be right at 93.2%.

Manhattan office mark-to-market, happy to see green there, positive falls within the range.

Investments, we missed on dispositions. There was one -- we got done what we wanted to get done. One deal looks like it's going to trip over into Q1, that's 750 Third Avenue. We can't always control timing, and that's why we call the stretch goals. We try to hustle, but there's a reality to the pace of the deal. So if you pull out the 753rd disposition, we missed by about 30% there.

Acquisitions, we far exceeded 100 Park JV interest, 800 Third JV interest, 346 Madison development site and 500 Park to name a few of the assets we acquired this year.

Large-scale development site, happy, happy to report 346 is now in-house, and we are like lightning speed want to deliver that to market. Rob Schiffer did an amazing job, I think, presenting that deal to you, showing you the merits of the deal and the exciting design opportunities that we're going to have there to play off of One Vanderbilt together.

750, I mentioned, we wanted to fully capitalize that project by year-end. I think right now, we're looking at the Q1 event. So we gave ourselves a little bit of a yellow there. I wouldn't call it quite a miss, but we certainly didn't make the timing.

One Madison projected greater than 90%. We're at 92.2% and rising.

Downstate casino license, nothing more I can really say there. You heard from Brett a lot on our thoughts there, but we wuz robbed, and there's no other way to put it.

Summit, Rob, 2 sites. Tokyo, we got significant letter of intent signed there. We're going to close that out in Q1. You got a couple of other major cities that we're deep in conversation with that we'll try to close out in '26.

Same-store cash NOI. Matt always says every year, here's the same store. I always say, great, make it better. And for the last 2 years, we missed it, close, but we were not able to squeeze out, but you did see that -- what was that 10%, Matt? 10%. So that's exciting.

Discounted debt gains, we used our money to -- on a more than one-for-one basis to reduce our overall indebtedness by not only paying down the debt, but also getting forgiveness along the way on certain assets.

Special servicing. Harry and the team, [ Bill Bosson ] and Andrew Falk, who really runs that asset management platform consisting a lot of servicing, man, $21 billion under management and a lot of fees coming off of that and growing. So good job there.

Total return, I don't know what to say. I mean, no one's more disappointed than we are because individually, we hold the stock. And so it's a big hit. It's down, and we feel it, and we come here every day trying to reverse that trend. But then I look at the NAV, and I say, we did a good job of expanding asset value this year. So we can only hope and trust that, that will correct itself in '26.

And Amanda talked about new hires for SYEP, Summer Youth Employment Program. We said we're going to hire 4 full times. We hired 8 part times. There's actually more hours that we pay for 8 part-time than 4 full times because part-time is 30, full time is 40. So we exceeded hourly, if you will, in that regard, and we have 8 great new employees from intercity youth who now work for SL Green and Summit. So that's '25.

Let's go to '26. And I think we added a category. We have 8 categories that we're going to look at for the year. These are the stretch goals. This is not Matt's guidance. Sometimes there's a little confusion there. This is -- we take Matt's guidance and then we say, here's what we're going to tune it up to, to try and get some outperformance.

Manhattan office signed leases 1.7 million square feet. That is higher than what's in Matt's model by a fair margin, but I think totally achievable if we do the right job there.

Manhattan same-store occupancy, 94.8%, okay? That's getting to territory as high as it's ever been and probably it's ever been on a portfolio as large as we have today. That's 160 basis points of accretion. That's over 10 basis points a month. So we've got a lot of work to do there, but we think we can hit that.

Manhattan office mark-to-market, 7.5% to 12.5%. We're expecting significant mark-to-market this year. It's not the full population of leases, it's same-store leases, correct, Matt? But that's a big universe of our leasing, same-store leases, same-store assets that have been vacant for, I think, a year or so or less. And we think we'll be looking at double-digit average returns there or increases there mark-to-market.

Investment acquisitions, we have a little running head start. Park Avenue Tower is going to close during the year. We expect to exceed that. So we're going to say over $1 billion of new acquisition, but $2.5 billion of dispositions. So we're going along $2.5 billion. That is both outright sales and joint ventures. There's a lot there. We're going to have to close a lot of deals here, but there's a lot of demand for New York City assets right now and to be partners with SL Green and some of these great assets.

Summit, we're going to go back for the 2 for Rob, okay? You've got Tokyo sort of in the pocket, I hope, and then one other. So hopefully, we're back here next year with one new exciting add to. And Summit Entertainment is going to become pretty meaningful after we get these 3, 4, 5 locations up and running.

The fund deployment, Harry and Young and Scott Kocis, you guys did an amazing job closing out the fund last year at over $1 billion. And this year, we want to deploy that cash. I think Harry talked earlier about the goals on deployment, over $1 billion. That means we've got a lot of work to do there, but we have a good pipeline. And we want to do a new fund, right?

These investors now have fully vetted. We have this great asset management that's fully qualified among some of the best anchors in the world. And they want to invest more with us, equity, resi, office to resi conversions, office equity, new debt strategies and all of that's on the table and more to come on that in '26.

Special servicing, $25 billion is what we're looking at, which is for a company like us when we're up against some of the biggest financial institutions in the world, it's not obvious, but the inbound is just astronomical right now because we do a good job at this. We're very good on enforcement collection, restructuring. And because of that, we're getting more than our fair share of that business.

Fee income, I mentioned earlier, said over $100 million, $110 million projected for the year. It's not projected. That's the stretch goal. It's projected a little less, but that's the stretch goal.

And on development, 753rd, obviously, I'm not going to put up the same as last year. We got to get that capitalization done. But more importantly, we got to get the GMP locked in at or below our budget, and that's not such an easy feat with all the inflation and the tariffs and everything else out there to be able to not only deliver it, but deliver at the number we showed you last year. I'm going to go long. What was it? $800 million, $810 million, $805 million. Anybody remember? Rob?

Yes.

$800 million, okay? That was a year ago. You think there'd be a little inflation in there, but we're going to get it done $800 million above, and we get GMP signed at the end -- during this year.

346, we're going to secure a JV partner. I think that's a major next step for bringing that building to full fruition.

Financial performance, same-store NOI growth, 4% to 5%. And that dovetails with your commentary, Matt, yes. Higher than the guidance. Debt reduction, $1.2 billion. So remember back in '24, I think it was, we had '23, '24 massive debt reduction. This is kind of massive debt reduction, then we pile on assets. Now we're going to go massive debt reduction again. $1.2 billion is, we think, within range, probably a little higher than guidance. And we're going to extend or modify the $7 billion plan. I wouldn't put it up here if we think we can get it done.

Discounted debt gains, an additional $50 million is what we're working on in terms of not just reducing debt by $50 million, but the extra power of getting liquefying certain lenders who are looking to repatriate capital and recycle out of one sector into another, and we think there are some more discounted debt gains to be had there in certain situations.

TRS, let's go with something completely new. I mean if we can't be up 15% off these levels, then I'll be bravely disappointed considering the dividend we pay and you back into what that means in terms of incremental stock price. Appreciation over the year in light of what I view as a significantly higher NAV. So we're going to go along and say we're going to deliver greater than 15% TRS this year. And it's the least controllable of the stretch goals up there, but hopefully, the market will be with us.

And voluntary employee turnover, you heard from Amanda earlier, did a great job talking about how we keep retention and tenured employees happy and satisfied. So we want to keep this below 9% for the year, notwithstanding we are a 5-day a week work from home, no exception shop, and plus weekends.

So that is it. That is our stretch goals for the year. I think for now, we're going to take some Q&A, [ Heidi ]. That's it. So thank you for that. Why don't we just keep everyone there and pass the mic? Is that do you want people to come up? Come on up.

All right. And if there's anyone has a question that's not up here, we'll pass the mic. All right. These have been sent in?

Yes.

Okay. At what point would you consider initiating a share buyback program and what threshold would you trigger it?

It's a great question. If all things equal today, with that said, we have a game plan. That game plan is always how are we going to allocate incremental dollars and those incremental dollars come from executing that '26 game plan because we're not going to borrow to buy back stock. So whether we -- whenever we buy back stock, it's coming from repatriation of equity via the $2.5 billion of dispositions. So $1.2 billion of that, I already said, is earmarked for debt, and that will take precedence because that's our plan is to reduce debt.

I would say anything above that or beyond that more accurately is fair game for this. And I would love nothing more to be buying the stock at these levels after we execute on disposition program and achieve our debt goals, then it's a fair game. And I would say there's no better opportunity that I see today in this market than buying our stock relative to any other real property opportunity we're presented with.

Next question. Is there next question? I'm sorry, that's the only one sent in? Okay.

Yes, sir.

Sorry, please.

Ron Kamdem from Morgan Stanley. It's special to have the governor here as well. Just a quick two-parter. Just one on the new economic occupancy disclosure. Any sort of historical data of where that peaked would be number one.

And then the second part is the presentation is kind of hinting on 2027, you talked about basically same-store NOI over 10%, interest costs potentially coming down with the forward curve. That's sort of suggesting that earnings will be up more than 10% and maybe even significantly more than that. Just am I sort of reading that correct?

Matt?

Yes. Well, look, part of highlighting '27 is because I think there's some very fundamental things that are being lost when people are looking at the portfolio, right? At the end of the day, people want to hear, well, what's the real estate portfolio doing? We got the fee income. We got all that. What's the portfolio doing? And it's been leasing the lights out, but I think people have been frustrated by, well, when does that flow through to earnings.

So we added economic occupancy. So people would appreciate sometimes it's 2 years, 2 years after lease signs before we can recognize revenue from an earnings perspective. So it's -- I figured people would look at '26 and say, "Well, I would expect it to be higher because of all the leasing you've done." Well, then I got to set the stage for what '27 is going to bear out as this economic occupancy closes in on leased occupancy.

So Marc made the point, leased occupancy, we set a target of 94.8%. Once you get above 95%, you're talking about frictional vacancy, structural vacancy. So economic occupancy will catch up to that. You say where did it peak? Well, if leased occupancy peaked in, call it, 95%, 96% -- at 95% or 96%, economic occupancy would be somewhere in there, too, it trails. So we'd love to get back there.

But the purpose of 2027, I only highlight a couple of things because one thing I was definitely not going to do was give any 2027 guidance. So I'm giving you some things to nibble on. People are going to say interest expense is too high, frustrating. The governor recognized that I'm frustrated by interest expense. It's high, but we have a plan to bring that down. NOI, it's coming, just got to be a little patient as these tenants move in.

Sorry, Marc, Matt, so two-parter. One, it doesn't sound like the dividend is getting reduced based on what you said about the 15% total return and your focus on the yield. And Matt, you didn't mention anything about dividend reduction.

Second is you threw a lot of numbers for '26. Clearly, debt gains are down -- are way down from '25. Is it just the asset sales that are really impacting FFO? Or are there other things that are on that bridge from '25 to '26?

Matt, you answer the second one first.

Second one first. Well, you can see where some of that diminution from sales comes, right? This is going to come back to interest expense, right? It's frustrating. We're selling assets, losing NOI to fight against interest rates that are too high. So had we not sold anything, NOI would be up, I think it was just short of $860 million. We have just short of $810 million because we're selling that NOI to pay down debt. That's frustrating. It costs us earnings. It costs us earnings.

Yes. I mean it's frustrating, but we're also selling assets at really good prices, which is why we sell. And...

Yes. But we'd rather -- I did make the point, which is an important one. We're not for rates and having to pay down debt. We're not coming into this feeling like we're overlevered, where we're at. We're simply paying down debt because it's expensive. It's not a leverage thing. It's only expensive. It takes away capital. We could sell these assets at a great price and buy back $1.2 billion of stock. Love nothing more than that. We can't because we have to fight the stem of high rates.

So on dividends, there's my Board. I don't free up my Board. They make the call on dividends. Whether the commentary leaves one to assume where it will be during the year, I think it's largely dictated by taxable income. We've always said that. We'll take a measure throughout the year as we always do. It used to be monthly, now it's going to be quarterly. We changed that, I think, in the past day or 2?

An hour.

An hour?

Yes.

And just we'll play that out quarter-to-quarter as it should be based on taxable. But we feel like it's going to be a great year in '26. I mean if that wasn't obvious in this commentary, we're going in with a full head of steam, and we hope we can -- now it's on us to execute. Next.

What is the FAD guidance that you've got in...

There is none. We dropped it because we're the only office company who provides it, and it was being -- it was to our detriment to provide it. So because it's a very finicky number, which is probably why nobody else provides it, that's not in our control because it's largely driven by when tenants request their capital. So I put out a FAD number last year. And I don't think we've ever been on our FAD number. It's always better or worse depending on how a tenant requests it. And when we did the scoping of the entire office sector, nobody provides it. And based on my conversations, that's exactly why.

And then do you mind just giving us with all the strong leasing pipeline, would you venture to say what Manhattan high-quality rent growth would be for next year?

Well, I think rents are definitely accelerating across the board next year. A lot of the commentary that we've had and you've read in the market reports over the past couple of years talked about various submarkets with its Park Avenue and currently Sixth Avenue, Rock Center, where rents have accelerated more than the rest of the market.

I think what we're experiencing is a broadening out of that rent growth to a broad geographic in a broader class of buildings. So I'm not certain that putting an exact percentage on it is practical, but I'll give you a couple of examples. I raised rents in Graybar yesterday to -- into the low 70s. I've worked on Graybar for 40 years. The asking rents in Graybar have never been in the 70s. That is a commodity building with 200 tenants of all sizes. And if that building is going from rents what was 2.5 years ago in the mid-50s, now into the 70s in 2.5 years, that is as good an indicator of where the rest of the market is trending for all of next year.

What do you think on the, let's call it, the top 1/3 of the portfolio? What would you do?

Well, I'll give you another example. So 245 Park Avenue. Those rents are up over the past 24 months, easily 40%. 40%, nobody talks about rent growth of 40% over 2 years. It's 3%, 4% and anybody's financial projection. I think you're going to see the top end of the market continue to accelerate because there's sustained tenant demand and the supply of that 68 million square foot better quality in the market that I put up there, that's 4.5% today on a direct lease basis. So that's simple economics, the rents on my guess are up at least 10%, and that's probably conservative.

Yes. And I don't know if this isn't -- to me, it's a correction. There was -- the rents and the concessions were imbalanced and the business was uneconomic for a few years because we had a lot of vacancy. And so now it's kind of rightsized where the concessions are shrinking and the rents are rising and the net effectives are coming up to levels that are supportive of the prices in which the global market assesses to assets.

Take a look at Paramount, PGRE. I mean, I think this year, that stock was trading as low as under $4. I mean $3.90, right? That deal got done at what, [ $6.60 ]?

Yes, $6.70.

$3.90, $6.70. Am I wrong in thinking that 70%? I mean, can the stock -- can the equity -- can real estate equities be that off where -- not you guys, but someone out there is pricing it at $3.90 and a holder of capital priced at $6.60, and is that 70%? Somebody? I think it is -- can that really -- I mean, I don't get that. I can tell you something. When we go on the road, everybody's valuation levels for any asset, we're looking to buy seller JV is within 2% to 5%. 71% is pretty good, pretty damn good.

Still got it. Congrats on that.

I do that for the young kids. 70%, can you be that wrong? I mean no dispersion on it, that's wrong, $3.90 and $6.60, I mean that's for sure. That's wrong. $3.90 could be $4, maybe even $4.10, but that's it. It can't be $6.60 or $6.70. So the point is the business is getting economic again. I think the global capital markets recognize that, which is why everybody is pounding into New York City equities right now. And hopefully, our stock catches up. Next question. Steve?

I don't know. There's one on the board. Regarding increased demand from tech tenants, including AI, how do you think about underwriting the credit for those tenants? How much exposure to tech are you willing to take on? Harry, why don't you address that?

Sure. Yes. I mean when we're looking at any tenant in our portfolio, 800 tenants, the investment team is always working very closely with Steve and his team on underwriting and putting together a package of the credit on each of those tenants. Obviously, some of those like IBM are very easy to underwrite. And then when we get into the world of AI and other tenants that are a little bit more explosive in their growth, we're spending a lot of time not just looking at their balance sheet, but also speaking to VCs, speaking to hedge funds, private equity, understanding those that are investing in those companies, how they're getting comfortable with those valuations.

And then it's a collaborative process between the investment team and the leasing team to determine the appropriate letters of credit, cash security, the right entity to have on that lease and the guarantee and really working with those that are not only in the real estate field, but more specifically in the investment field of those tenants. And that's a process that we're doing day in and day out. And there have been tenants that Steve has come to us with that just didn't meet the muster. And Steve doesn't want to hear that, but sometimes that's not the right way...

In terms of the amount of exposure, the AI is never really true exposure because Governor Hochul mentioned a lot of the growth in IBM was coming via AI or the other area that you mentioned, which I'm forgetting at the moment. So a lot of the AI growth is coming through credit. And so if you're really just drilling down to AI-only specific kind of start-up, I would say 3% to 5% max.

And I don't think we'll even get to those levels. I look at it almost -- I mean, it's just -- remember, it's 32 million feet. So 5%, that's 1.5 million feet of pure AI, that doesn't exist in the market, pure.

Now as part of the big 7 and some of these big companies, that's different. AI is fueling a lot of that. But whoever asked that question in terms of like literal AI exposure, a few percentage points...

Add to that the fact that we don't have any inventory after we do the last lease at One Madison for the kind of building in the right part of town to attract that kind of industry.

Yes, it's not our market to begin with, and that's a good point. It's -- we're not downtown landlords. So we're much more oriented to a diversified base, and that's that. Steve, why don't you...

20 is in guidance.

20 in guidance, which is the same as we've done for the last 2 years. We had 20 in guidance coming out, set a goal of 50, that's a stretch goal. The last year as we beat that goal, we figured, well, we'll just set the same thing. So putting the same 20 in guidance, we'll put 50...

I'd be disappointed if it was only 20. Did that answers your question?

Yes. And then just any other kind of onetime gains that maybe happened in '24 that maybe are not part of guidance, but have a chance to run...

'25, you mean?

Sorry, '25 into '26.

Well, a onetime gain. I mean it's like I don't have this debate. You can have...

Security gains...

That's not one, that's not onetime. Gains in debt is not onetime, Steve. I don't want to have to debate here. But any notion, I would just say, look back at our 27-year track record, where we have a 14% IRR, 14% fully vetted audited IRR on like close to $20 billion of investment that comes either in yield or very often discount to purchase price, which the Street may look at as a gain, but the market doesn't. So I wouldn't call CMBS gain or even DPE gains onetime in nature. They are replicable. We may have other onetime gains, but I wouldn't agree on DPE. Are there other onetimers?

No, to that point. So there were larger CMBS gains in 2025, right? We had to increase guidance over the course of the year. And were it not for the write-off of the cost, we would have been at the upper end of that. $522, I highlighted 2 big gains that caused us to increase guidance over the course of the year. When 522 Fifth, which Houston got repaid, we had a lot of incremental interest that was paid back with that above our cost. 1552's DPO gain was that. So the only thing I have wired in -- right, the only thing I have wired in for 2026 is $20 million of DPO.

How do you plan on combating interest expense?

Well, I don't know. We just -- I think we -- Matt went through the, what I'll call, $1.2 billion debt reduction plan. And I think that is a massive blow to -- did you quantify the amount of reduction in interest expense we're expecting as a result of that?

Yes. Well, that's the difference...

I know what I'm just...

Well, so the interest expense in '26, relatively flat to '25. '27, it goes down more because we're presenting this -- we're pushing interest expense down at $33 million lower in '27 than '26 based on the forward curve. If that curve comes by another $100 million, it's another $19 million, but it could be like $50 million less.

The answer to the question is it happens over the term of the year. But after we pay down this $1.2 billion of debt, there is a commensurate and significant reduction in interest rate at today's curve.

And then coupled with that, we will be increasing floating rate debt exposure. So we locked it up to protect against rising rates continuing to rise. They're now on the downtrend. We're going to revert back to we were typically 20%, 25% floating. I expect that to get back.

I'd add one more piece to that, which is just spreads are tightening. I mean we are still seeing, as Marc noted, we're not where we expected at the end of this year, the 5-year treasury to be and rate cuts to be. But in just the past 2 months, especially in the CMBS market, we're seeing a big compression of spreads. We're pricing right now Park Avenue Tower and pricing is coming in week-over-week until we get to that final closing. So I would expect over the next few months, especially to see a big compression of spreads. We'll see that just in comparing 11 Madison financing, which we did in September, the PAT in January.

Next question, okay, you got one from the table.

Marc, I was wondering if you can clarify your stance on reducing leverage because it sounds like it's a temporary phenomenon, you expect to pick up leverage again. Why not make that more permanent? And then for Matt, the $2.5 billion of dispositions next year, what's the timing of that? Because it could have an impact in '27 earnings?

Again, the taking down of leverage is purely to get interest expense in line, I hope temporarily with the rest of our operations. And I expect our operations to increase in '26 and '27, and I hope interest expense indices decrease and spreads tighten.

On a mark-to-market basis, we're 50% to 60% borrowers period on the store. I mean that's where we borrow. That's every CM -- we just did $1.4 billion on 11 Madison -- one Madison -- 11 Madison, excuse me, on 11 Madison.

On your valuations, that's like 98% leverage. On the market's valuations, having gone through rigorous rating agency and very smart bond buyers, that was like, I don't know, 58%.

Sub-60%, correct.

Sub-60%. So that's why we're not -- we're just not going to agree on that. I'm saying that we're not -- there's no issue driving our debt reduction related to leverage levels. There's leverage cost, and we want to reduce that, but that's elective. Leverage levels on -- we either have unencumbered assets or assets we lever 50% to 60% at market period. There is no 70%, 80%, 90% leverage in the company.

We have ASP, and we would hope and advise you take the ASP debt, nonrecourse debt and just deduct it out. If you do, if you don't, you don't. A lot of those ASP assets, we put back into full operation, not just 1552, but over the year, 690 Madison. There were others.

There were others.

Sorry, there were others. But the question about will we lever up, we're always going to be an amount of unencumbered assets to support our credit facility and then on our secured business in that 50% to 60% range. And we're not levering up. We're not levering down. It's just always in that range. We think that's the optimal. We think above 60%, debt gets too expensive and below 50%, you're leaving money on the table.

You asked about timing of dispositions, largely back half, 750 Third because we're in the final stages of it. Hopefully, it could be earlier in the year. A lot of that was kind of June or later.

Quick question. You guys -- on the Port Avenue Tower, you talk about a 7% stabilized yields on cost. You think your implied cap rate is based on your calculations, 8.5%. Why would you make investments in buildings that return less than -- or how do you think about your cost of capital going forward given where the market is pricing your stock right now?

Well, we look at that asset as one in which, one, we're going to go in, execute a light capital program. There is a lot of mark-to-market. That 7 or whatever is in place. That building has had a lot of mark-to-market, which we're going to go in there and farm it to get that NOI up both based on the repositioning, but it's modest and on market.

And then go out and take advantage of very aggressive debt markets and go find a partner at some point where we make an extra 300 to 500 basis points of yield when we deliver that to market based on fees and promotes. And that's the -- it's that number we look at when we decide to make an investment like that. And that number is a significant our view return on equity. So I mean I don't know if that answer the question or..

Maybe 2 quick ones. Matt, is there a GAAP cap rate for the sales? It's hard to kind of triangulate with the timing and you gave us?

No, it's very sensitive about putting out prices. We're marketing these assets. So we have an assumption in there, but I'm not going to give out new price discovery live with the group.

They would tend to be consistent with our view of market cap rates, it's not the implied cap rates. I mean if that helps.

We also have a diversity of asset sales. You'll see on that assumption page where we have suburban assets, residential assets, office assets, interest in development assets. We're covering that...

It doesn't sound like outsized that's like massively dilutive, like some big high cap rate stuff.

Big high cap rate stuff. No, I mean the...

We don't want you to think about less of us.

And then just on the dividend, you usually declare the monthly one, I think, like in the third week. So will there be -- like will we kind of get a sense as to where the dividend for 2026 will be like in a few weeks here or that...

Next dividend declaration is in March for April payment. So we've reverted -- we paid our dividend or declared our dividend payment for December. The next one is in March for April.

Okay. So more December dividend declaration. Got it.

Not on the -- careful because GC will go live for the press. On the comment, press, yes, we're...

We could put that one back up. I don't know what it was. There was one on the screen. Appreciate those.

New mayor's agenda, how it could help the office market, the housing mayor. We love that. There's no quicker, easier way to create housing to take existing product and convert it, plain and simple as compared to zoning and new development. So we love that. And anything he does to pile on what's already been laid in terms of the Manhattan Plain City guest, 467-m, et cetera, is welcome to encourage more conversion of secondary and tertiary office product from office because, one, that's not really our target market; and b, there's still a lot of tenants in those buildings. I mean people are not converting empty buildings. They're converting buildings and they're vacating the tenants and those tenants wind up filling up other space.

So it's like a double benefit. One, you're taking that inventory offline, which is being converted. And two, you're taking all the tenants in that building and putting them into other buildings and raising the vacancy rate -- the occupancy rate. So I think that, that is how it would help the market, and we're optimistic in that regard. And will the conversions pencil with rent control agenda, there, again, you got to be a little careful because there is rent control and rent stabilized apartments that I think is the -- that's the pool of apartments that are controlled by the rent guidelines board. That has nothing to do with anything we're talking about here today. So let's start with that. Rob, do you want to...

Yes. I mean it has a small impact.

99%, not what we're talking about here today.

Correct. For those projects that are going to submit to the 467-m program, you're setting 25% of your units aside for affordable units at 80% of AMI, which will be stabilized and governed by the Rent Control Guidelines Board. You have to look to history, Mayor De Blasio back in 2017 or '18, froze rents for 2- or 3-year straight. I don't know if [ Garrett ], you know 3 years straight, following which the control guidelines Board increased stabilized rent by 5% per year for 2 years to catch up.

So even if there is a freeze, most likely the guidelines Board will allow for a catch-up because maintenance and operation of multifamily buildings that are stabilized needs to maintain the right type of living environment for the residents of those buildings. So history will tell you that the guidelines boards will catch up even if there is a rent freeze and the overall impact on the pro forma for conversion is really minorly impacted.

But anything that's converted from office to resi, that's market rate is unaffected by rent freeze. So a lot of downtown are just pure office to market rentals, unaffected. And then 467-m, 75% is office to market rental, unaffected. And then there's the 25% Rob talked about, which is a very modest sliver of the overall housing in New York City, and it tends to catch up.

And one last thing on that, just remember, the mayor is supported by many unions in the city. And the only way the unions really get wage increases, living wage is for the unions that work within residential buildings is if the rent goes up. If the rent is frozen, then you really have to freeze the expense. That means freeze the tax, and that means freeze the labor wages. That's not very popular. So let's see how it plays out, but we're not looking at that at the moment as we think we can work our way through that.

What assumptions are driving the 2027 same-store NOI estimate of greater than 10%? How much is from signed leases for spec leases? I don't know...

I don't know the answer to the second part. That's very technical. What assumptions? It's that business plan. I haven't layered anything spectacular on it. It's the estimates that drive NAV. So when you look at what's NOI in 2027, it's exactly the things that we fine-tune to do our NAVs. It's building by building, lease by lease, that guy's assumptions and nothing more and then execution of our '26 business plan. That's it. And it's higher than 10% I haven't done anything crazy with market rents or expense reductions or it is steady state after execution of the '26 business.

Time for 1 or 2 more questions. I don't think there's any more on the board.

Maybe just a follow-up to the mayor question. You painted a picture of the places you're relatively positive about security, commission of police. Where do you think your efforts will be? Where will you spend the most time and effort trying to make things better? What are you most concerned about with the new mayor?

Well, I mean, it's not concerned about new mayor per se, but what am I concerned about would be any kind of material increase in personal income taxes. I mean I think that is the something that I don't view as a win in any regard. I don't think it's something that the governor supports, but time will tell. And I think that's something that's proven to be kind of regressive, not progressive in terms of the impact of taking an already high tax city like New York and increasing personal income taxes further. So that's one thing that we'll be watching, and I don't think that would be helpful or additive and hopefully doesn't come to play, but that would be a good example. One more question. We'll end here. I'm sorry, 1 or 2 more.

You kind of laid out your view of the private market cap rates and the implied cap rate of where the stock is today and the business plan for next year. I guess what other steps would you kind of take to kind of close that gap and the cap rate? Would you be willing to step up kind of disposition to kind of prove out that value or just other things you're thinking about?

Dispositions and buy back stock, 100%. I mean that's without question. You may have to revise the business plan.

I'm all for it.

Okay. Thank you, everyone. Appreciate you coming out today and have a great holiday, and thanks for being part of the SL Green family.

Thank you all for joining us today for SL Green's Annual Investor Conference. For those of you joining the property tour Up Park Avenue, please head down to the lobby across 42nd Street to 41st in Park and gather in the lobby of 100 Park Avenue, where lunch is available and the tour will commence. Thank you.

Thank you, everybody, for joining us, and welcome to SL Green Realty Corp.'s Third Quarter 2025 Earnings Results Conference Call. This conference call is being recorded. At this time, the company would like to remind listeners that during the call, management may make forward-looking statements. You should not rely on forward-looking statements as predictions of future events as actual results and events may differ from any forward-looking statements that management may make today.

All forward-looking statements made by management on this call are based on their assumptions and beliefs as of today. Additional information regarding the risks, uncertainties and other factors that could cause such differences to appear are set forth in the Risk Factors and MD&A section of the company's latest Form 10-K and other subsequent reports filed by the company with the Securities and Exchange Commission.

Also during today's conference call, the company may discuss non-GAAP financial measures as defined by Regulation G under the Securities Act. The GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and the reconciliation of differences between each non-GAAP financial measures and the comparable GAAP financial measures can be found on both the company's website at www.slgreen.com. By selecting the press release regarding the company's third quarter 2025 earnings and in our supplemental information included in our current report on Form 8-K relating to our third quarter 2025 earnings.

Before turning the call over to Marc Holliday, Chairman and Chief Executive Officer of SL Green Realty Corp., I ask that those of you participating in the Q&A portion of the call to please limit your questions to 2 per person. Thank you. I will now turn the call over to Marc Holliday. Please go ahead, Marc.

Thank you for joining us this afternoon to recap what was undoubtedly a very busy and a very productive quarter. As the Wall Street Journal reported just this week, the New York office market is roaring back, and you can see it across every aspect of our business. We have now signed more than 1.9 million square feet of leases to date just this year, and we are trading paper on leases that will take us well over 2 million square feet with 2.5 months of the year still to go. These are extraordinary numbers coming on the heels of such a big leasing year in 2026. It was over 3 million square feet of leasing and one of our highest leasing years ever. So back-to-back years extraordinary results. And as a result, we've increased our occupancy significantly quarter-over-quarter, climbing above 92% as of the end of September, and we're on track to hit our goal of 93.2% by the end of this year. .

I'm especially proud of the incredible momentum at 1 Madison where 3 huge leases this quarter have brought occupancy over 91% on that development project, and we're on track to reach 93% leased by end of year, at which point we expect to have just a single available floor left to lease, putting us in a position to execute a significant upside refinancing in 2026. And the market outlook for the remainder of the year is good with the strong pace of leasing we saw in Midtown Manhattan during Q3, expected to continue on into Q4 and beyond.

Accelerating office to residential conversions combined with limited new construction is creating a scarcity dynamic in the high-end space market, which is expected to drive market vacancy rates lower and net effective rents higher. With tenant demand and rents continuing to rise, particularly in the Park Avenue corridor. Last night, we announced the acquisition of Park Avenue Tower for $730 million. This is a very targeted market play, acquiring a well-leased asset with rents considerably under market and where we see significant near-term upside from rapidly increasing rents.

We add Park Avenue Tower to our growing collection of premier Park Avenue assets, One Vanderbilt, 500 Park, 450 Park, 280 Park, 245 Park, 125 Park, 100 Park. Not to mention all those just off a park. No one can come close to this concentration of premier properties along our Park Avenue Spine nor our track record of profitable acquisitions over the past 5 years. We saw the heightened demand for well-located Park Avenue and Grand Central assets long before the competition and now it's truly paying off.

Earlier in the quarter, we delivered on our goal of identifying a major new development site, acquiring 346 Madison Avenue and 11 East 44. Across the street from One Vanderbilt, this is the perfect place to build the next great building on the heels of what we accomplished at OVA and OMA. At a time, there is very little new quality office inventory being delivered in Midtown over the next 5 years. So this is the exact right time we want to be launching on this office development project. We think we can get this done by 2030, delivering right behind 2 projects we expect will be completed and fully leased well before our delivery date, Extell's 575th [indiscernible] BXP's 343 Madison Ave both of which are in advanced negotiations with [indiscernible] tenants covering much of the space they have available in those buildings. And that basically leaves little to no competition for what we'll be delivering on our new project in 2030.

We're looking at a smaller floor plate building than One Vanderbilt gear to boutique financial tenants paying on average over $200 per square foot, we'll have more on this project in December when hopefully, we see many of you at our annual investor conference. I should note that we were very busy in the third quarter also in our debt business and particularly with our SLG opportunistic debt fund, where closings now stand at $1 billion, with additional closings expected in November before we finally closed the fund to new investment.

I'm also pleased to report that we've commenced deployments out of the fund, which amount to about $220 million as we speak, which is anticipated to rise to over $400 million by the end of this year. We are also beginning to plan for additional fundraising strategies for 2026 that we'll discuss in more detail at our December investor conference. And finally, we successfully completed a $1.4 billion refinancing at 11 Madison with our joint venture partner, PGIM, at a rate of approximately 5.6%, which we were very happy with that outcome and it's reflective of a deep pool of buyers for sizable quality Manhattan office SASB financings.

I'd be remiss if I didn't mention the disappointment we felt in not advancing in the state process for a gaming license. You know we put our heart and soul into Caesars Palace Times Square, and it was an enormous loss for New York City and for the large coalition of community stakeholders that stood to gain so much from this project. Despite the outcome, we cannot be prouder of the enormous effort that the entire company put behind this proposal -- from the start of the project, it reflected SL Green at our best, Bold, community-minded and rooted in New York.

It would have improved Times Square, created thousands of good jobs and served as an economic engine for every business in the area for generations to come. We truly did leave it all on the field and I have no regrets whatsoever about our proposal but many regrets about the outcome of a process that puts so much power in the hands of so few. There should be at least 1 casino in Manhattan. I think that's obvious and Times Square was the exact right location, but the process was designed to make that impossible, at least for the time being.

The positive outcome is that we know we have an extremely valuable asset of 1515 Broadway, whether its future is as office or as an entertainment and hospitality use. We have plenty of time to sort that out since the building is fully leased through 2031, and you'll be hearing more about that in the near future. Before I open the line for questions, I just want to say that this is an incredibly exciting time in the city at the doorstep of the AI industrial revolution and especially exciting time in our company housing, the companies that are the new frontier of demand, both in tech and financial services, you can see that we are executing our business plan for the year with ruthless efficiency, taking advantage of dislocations in the market and reaping the rewards of an ideally located portfolio of properties expertly assembled over the years.

I know you've heard this from us before, but it's increasingly undeniable. Demand for amenitized core Midtown assets is literally off the charts and the lack of supply is driving up rents for the foreseeable future.

With that, I'd like to open it up for questions.

[Operator Instructions] And our first question is going to come from the line of Steve Sakwa with Evercore ISI.

Maybe just starting on the leasing front, Mark, or Steve. Just maybe can you comment on the activity from big tech. I guess there's been some just discussions about them maybe picking up their activity levels, and you guys definitely signed some tech firms down at OMA in the quarter, but just maybe what are you seeing from the large tech firms in the city today.

I think -- and you've heard me say this for the past couple of earnings calls, I think tech is back in a big way, driven largely by AI. We've seen some big AI requirements. As a matter of fact, one of the 92,000 square foot leases we signed was with an AI firm. So we're feeling we're feeling that, that demand is here to stay and the driving absorption and the driving rents and particularly in the Midtown South market.

Okay. Maybe a follow-up, just on the transaction, Marc. Obviously, you guys announced Park Avenue Tower, but I think it was pretty well known that a number of public companies and private took a look at another public office company, which wasn't successful by any REIT. And I'm just curious, when you sort of look at the 2 deals in the underwriting, I guess, how did you sort of think about the large public M&A deal versus kind of the one-off deal where you were successful?

Well, I mean, everything we're looking at is always a relative analysis of where we're going to deploy our capital. So clearly, we were -- we had in our sights at the time, looking at 623 Fifth, Paramount REIT, the 346 development site. And just the beginnings of Park Avenue Tower that was kind of like on the late stages of our decision matrix there and 590 Madison. So I mean there was a lot on the market in a very short period of time.

I think what's interesting to note is it all cleared. So whether your perception, Steve, is that something went cheap or something went full or whatever, we looked at every one of those deals hard. And we made our decision of where to plant our flag, and that was 3 and that was Park Avenue Tower and I'm extremely happy with the outcome, both of what we got and what we passed on. So any deal you can always reach and try and win it if you have the resources to, but I'd like to think after 28 years of this group being at the leadership of this company, we exert a lot of discipline, and we target the deals we like and where we think there's relative value, and we constrain ourselves in deals where we do. So I don't know if that answers your question, but that's how I look at those deals.

Yes. I mean I can follow up off-line.

What was the question. See, if I didn't hit it. What was the question? .

Well, I guess I'm just trying to maybe dig a little deeper on just maybe the opportunity set and like I guess I would have maybe thought that a public company could do better merging with another public company and squeeze more synergies than a private equity firm might [indiscernible] platform and.

Steve, when you say a public company, the public company was a compilation of 6 assets. So you got to evaluate the 6 assets and put a value on them. And and then figure out what all the frictional cost of transfer are versus a stand-alone single asset. So we did all that. And I think the issue is not so much whether you think one went cheap and one went expensive. I think the issue is, like I said, billions and billions of dollars clear, that's probably close to $10 billion of product there. in -- that all cleared the pipe in at probably relatively good market terms. So I think that's the big story, Steve, is that not why did I don't know why did a public company trades 1 and a private company trade to an individual asset trade to a REIT.

From our perspective, it's where we saw the most value period. I don't care if we're buying -- I don't get if I'm buying debt or assets or a public company or whatever it is, we want to buy relatively good risk-adjusted returns. Our going in cap rate on Park Avenue is about 6%. Our levered returns are well into the mid-teens. And it's a rock solid rent roll. It's under market. We're going to lease the hell out of the portfolio and perform some upgrades. And I think people will be -- make the building as part of the SL Green family of Park Avenue buildings and make it very desirable and enviable.

Blackstone did a very good job putting -- investing in the project over the years, but time flies and some of those improvements are already a bit dated, and you have to revisit and do it again, which we will do. But fortunately, there's -- the building is in pretty good shape, and I think we made a really good buy on that project. That's it.

One moment for our next question. Next question is going to come from the line of John Kim with BMO Capital Markets.

I had a question on -- a 2-part question on cash lease spreads. Basically, just what drove it to be slightly negative this quarter. And also, we noticed this quarter that less than half of the leases signed are part of your mark-to-market calculation. And can you just remind us on the methodology and why you include in replacement leases a time frame rather than just the prior rents on that space.

John, it's Matt. So I'll kind of go in reverse order and then Steve can talk about the quarter itself. Yes, mark-to-market, the way we do it. So let's talk about how we do it is benchmarked based on, first, it's space that was occupied within the last 12 months. So if a tenant expired in August of last year, and we retenant the space this year. It's not in mark-to-market even though August of last year feels like yesterday. And the comparison is fully escalated rents, meaning if it's at least done 10 years ago, it's the base rent plus the expense escalations that happened over that term as against the day one cash rent of the new lease.

Now I've heard that maybe that's too conservative to punishing a way to do the math, but that is the way we do it. And it's only on -- for every quarter, fraction of the space. You made the point that it's only 300,000 feet, which is about 1% of our entire portfolio in any quarter. Clearly, that can be then swayed by any one lease in any one building in that given quarter. And with that, I'll turn it over to you just to talk about the third quarter itself.

Yes. It's not a calculation because it's not indicative of the market. And just to drill a point into it is we signed 54 leases in the third quarter, and our mark-to-market was driven by the anomaly of 2 single leases. If not for those 2 leases, we would have shown a positive mark-to-market. So it shows you how little relevance the mark-to-market calculation is as an indicator of the overall health of the marketplace.

My second question is for Mark on 1515 Broadway. Just based on your commentary, is the provision of obtaining a casino at this property completely dead. One of the remaining proposals has come to life. And when do you think you'll make a decision as far as potentially converting this into a different use.

Yes. No, I don't think, by any means, it's to use your term is completely dead. I think the whole process and the outcome is still unknown. How many bidders will there be? How many licenses will be awarded -- and whether, if any are held back, there'll be another shot for casinos in Manhattan or otherwise to come into play. So I think this is still a process playing out. But we are evaluating all options from our current situation with our existing tenant which has just gotten financially much stronger through its buyout from Skydance and the subsequent strength in both business announcements and stock price movement as well as what we uncovered through this multiyear process of repositioning unearthing pockets of opportunity, we think are very interesting as it relates to immersive destination entertainment uses, combined with hotel and hospitality offerings in the tower, the building converts perfectly and obviously, keeping alive a hope for the future of a possible casino if a license remains available.

So we're going to evaluate all options. The beautiful thing is right now we've got so much flexibility because our debt per square foot is, I think, like $3.75 a foot or thereabouts. So we have complete financial flexibility. The buildings net leased through, I think, the middle of 2031 and the cash flow is significant from the property. And that's a good scenario for us to sort of look at all options, commence multiple negotiations and try and end up in the best place.

I think the debt yield on the debt currently is like 13% is probably the highest in our portfolio.

Our next question comes from the line of Anthony Paolone with JPMorgan.

Great. My first question is when you think about 346 and even like the north of $200 rents you're getting it at OVA just talk about like depth to market at that rental price point versus kind of where the rest of like out of Park Avenue is and Park Avenue Tower down in the low 100s?

Well, I don't Steve can chime in with rents, but I don't want to go through rent by rent by rent. But I would not say Park Avenue as low 100s. Park Avenue has decidedly I would say, mid-100s or even higher on average. So Steve can sort of address Park Avenue generally. But new building rents in or around Park Avenue is kind of rare inventory. And I do think today, one, those deals are going to have to underwrite 2, 2.25 a foot or higher on average relative to new costs. I think we bought 346 Madison well enough that we have some room and cushion there to go forward with the site that we've acquired and the ability to max out the zoning pursuant to Midtown East rezoning and also through Landmark owning.

So -- so we feel -- I feel very good about our basis on 346. It's not a big building. [indiscernible] about depth of demand, there's like 25 million plus or minus tenants in the market looking for a space kind of like this. the building at 346 will be about 800,000 square feet. So it's -- I think things are decidedly tilted in the supply and demand metric in favor of having the space being able to deliver the space and meeting the market at those rents. But if you want to compare -- it's a little apples and oranges if we want to compare those rents with, let's call it, Park Avenue rents and buildings built in the 50s, 60s and 70s. Steve, you can answer that.

Well, just a couple of points. If you look at the buildings within our own portfolio, whether they're 40-, 50-year-old buildings like a 245 Park, at 280 Park Avenue. We're seeing massive rent appreciation in those buildings. We're doing deals today, 20% higher rents than we were doing at the beginning of this year. So that's 10 months of rent appreciation.

The other point, I guess, what you're trying to inquire is like what's the level of tenant demand, as Mark said, is actually 27 million square feet of tenant activity in the marketplace, but most notable about that, there's 72 tenants that are being tracked right now, that requirements of more than 100,000 square feet. So there's not nearly enough supply to support the tenant demand that's out there as we sit here at this moment in time.

Okay. Got it. And then.

You said are over 50,000. .

There's 72 requirements of over 100,000 square feet.

Right. And how many square feet is at and on the total at -- but the point is we need like 5 of those 10, not 72.

Got it. And then just second one for me on Park Avenue Tower. Can you just talk about just how you plan to finance it? And just you talked about the debt fund a little bit, but just what's the appetite for equity to partner up with you all at this point?

Well, just working through the capital stack -- on the credit side, I'll tell you that in the past 12 hours, I've been inundated with lenders reaching out both bond buyers, balance sheet lenders, banks, all trying to get their hands on financing this. Pricing is getting very tight, just again, in the past 12 hours based on inbounds we've received. And I would expect to see us finance this through either, again, bank execution or through and we'll make that decision in the next couple of weeks. And then on the -- in terms of size of debt, roughly around $475 million against the purchase price. -- which is roughly around 65% of the purchase price.

And then on the equity side, plan is to close this through the balance sheet. We've already gotten inbounds just like on the debt side from equity investors looking to discuss this project. And I'll also note, we've gotten similar inbounds from equity investors on 346 Madison as well. We'll evaluate those options and make sure that we're not leaving any money on the table by bringing in partners too soon into these projects.

Our next question will come from the line of Nicholas Yulico with Scotiabank.

Just going back to Park Avenue Tower. Can you just talk a little bit more about where the occupancy of the asset is? What's -- and then also in-place rents first market, just a feel for sort of how big that gap is.

Yes, sure. So in-place occupancy today is 95%. And there was a lease that actually signed a day of contract signing that brought it to 95% -- and there's a pending lease out there right now with a hedge fund tenant that will bring it to just over 96%. And in terms of in-place rents, their in-place rents today are about $125 a foot blended. I'll let Steve speak to market and the amount of appreciation we see in those rents, but I think a critical component of this is, this is a cash flowing asset, building needs very limited capital. Mark talked about some refreshing that we'll do to really brand it through the Segren platform. But Blackstone did a great job with this asset, and this is really investment focused on appreciation that we're going to see in the Park Avenue corridor over the coming years, and I'll let Steve speak to that.

A lot of the building -- in certainly the bottom t3 of the properties put the bed for the next 5 or 6 years at least. So where there's opportunity, which is the mid rise to the tower of the building, those rents are easily in the mid-150 to well over $200 a square foot depending on the [indiscernible] that you're on. And that's as we sit today and if we continue to see the kind of appreciation in rents, the way we've experienced throughout this year, then it's easy to see where those rents are headed in the not-too-distant future.

Okay. That's helpful. Second question, I guess, is for Matt. Just in terms of FFO, which I know it's a quarterly issue where there's maybe some noise in the numbers and you talked about last quarter, I think that you could have a larger-than-expected debt extinguishment gain. It happened in the quarter, yet the guidance I think you change. So just maybe you could just sort of walk through some of the pieces of that and thinking about versus original guidance, kind of where you're standing on FFO? And any items we should be thinking about for the fourth quarter? .

Sure. Sure. Yes. I mean you start off with the right theme every quarter. has its puts and takes, a champion of eliminating quarterly reporting as a result. But as to FFO, we did have an incremental gain above and beyond our $20 million DPO gain over $15.52. That, of course, was offset by the transaction costs of about $0.17 that charge that we took in the third quarter. .

And then the other side of that in the third quarter and into the fourth, we do have a feature up at Summit called Ascent that is down for maintenance. It was down for the entirety of the third quarter that hit the numbers that hit same-store results as a result of percentage rent that it pays. We expect that to come on in the fourth quarter, but it is still going to be down for a year to the fourth quarter. And as a result of some sales that we have delayed or deferred, we are carrying more line balance for longer in the year than we originally anticipated. So interest expense is up and fee income is a little behind where we expected.

Interest expense, probably $0.20 over the course of the third and fourth quarters as against what we expected the vast majority of that being as a result of carrying a higher line balance.

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

Just following up on the leasing market. Given the tightness that's emerged in some of your key submarkets, are you seeing any moderation on the concession side, whether that's lower TIs or free rent?

Yes. We're starting to see that some early tightening in concessions, certainly, on the top end of the market, where you're seeing sort of that disproportionate base rent increase -- you're also seeing some tightening of the concessions. So I would say we're seeing examples where the TI is down $5 to $10 a square foot, where the free rent has been brought in if you said the high watermark was 18 months a month of free rent. Now it's down at 14 to 15, 16 months of free rent. And that's kind of new news over the past, I would say, 3 months or so, where it's more common than it is an anomaly. And it's probably -- the top 1/3 of the market is where it's most pronounced.

Great. That's helpful. And then second question, can you comment on the King & Spalding lease that's expiring this month at [indiscernible]. Are there any subtenants there that you're working with to go direct? Or any commentary on potential tenant interest in backfilling that lease? And maybe also where you think the market rents are relative to what [indiscernible] paying?

Yes. Well, they subleased a little bit of their space, and we're in discussions with some of those subtenants, but we're also in -- with leases out on a couple of the floors with replacement tenants, it's new tenants to the portfolio. Rents have been rising in that part of the building. It's a better part of the building. So I would say rents are -- we've seen probably a 10% to 15% rise in our taking rents in that building over the past 6 months. .

Having said that, the mark-to-market on it will be down, King is falling rolled off of a heavy rents, but that's reflective of the fact that it's escalated over a lot of years, not does not indicate the good news of how we've seen the rents over the past 12 months, rising that building.

Our next question will be from the line of Alexander Goldfarb with Piper Sandler.

Marc. So 2 questions here. First, Marc, just going back to your comments on the casino. You guys have done a lot of public-private. One Vanderbilt, of course, you were with the MTA in the city. Would you say the casino experience is a one-off? Or is your view that the way the city is doing public-private partnerships has changed and therefore, may make you a little bit more cautious next time there's something similar that comes along.

Well, look, I still have a lot of faith in our ability to work with certainly this current administration and City Council to get things done, it's usually a win-win situation. I think this is more of an anomaly where it needed a leader. You needed someone to stand up for what's right. And to sort of do the right thing and sort of not given to the pressure of the vocal minority. I think many in our elected government do, both at the city and state level. I think in general, we have very good leaders, very good legislators at the state level. very good counsel people who are thoughtful in Manhattan, which is the universe we deal with, in particular.

I would not call this extrapolatable or it doesn't diminish our desire to want to do the things we do in terms of breathing new life into older buildings, rehabilitating landmarks, developing new properties, providing market rate and affordable housing supporting all the charities and philanthropies we do, most notably food first, for the food needy. I mean we are in New York and New York has been good to us, and we want to return the favor. I think this was more of a one-off example, of some misguided few on that CAC community that just didn't get it. And as a result, it will remain in a sort of a time bubble for the time being until we take another run at the goal line maybe with others trying to come up with something transformational for Times Square, which should be something that is an iconic asset for the city, not just for tourists that want to go through and take pictures. But for people who -- including locals and people from the city and around the boroughs who want to shop there, dine there, stay there, go to Broadway and go to other forms of entertainment there. I think there's more work to be done.

Okay. And second question is, Steve, obviously, we talked -- you gave a good discussion of lease spreads as it's presented. But just curious, as you're mapping out your rents given that there's dwindling availability, no supply for the next 5 years or so, are you seeing faster escalations, meaning in prior cycles where you had a starting rent and the finishing rent, are you seeing that pace accelerate now where there's much more growth over the course of the lease or has there been no change despite the market tightening in the pace of growth between the starting rent and the final rent of the term?

Well, remember, the how the rent grows over the term of the lease is really a function of a pass-through and escalations of operating and tax increases. So that's not really a base rent increase -- that's just what gives priority for the landlord to stay neutral to his numbers on day one. We do get a base rent increase midterm typically, and that can be anywhere from to $20 a foot, depending on what the face run is. But I don't think that's -- those increases are necessarily driven by an improving market. Where we're seeing, I think consistent with where we've seen other market recoveries over the years past, these things tend to move very quickly so that when the market recovers and starts to go up, it's it doesn't go up in small little 2%, 3% a year. It goes up in big moves of 7%, 8%, 10% a year. And that's what we're seeing in the market right now.

Started off on Park Avenue, started to spread over to sixth Avenue Rock Center and now you're seeing the overflow come on to Fifth and Madison. And even if you can believe it, Third Avenue is now seeing rent appreciation. So I think we're in the early days of significant rent increases because of the lack of supply and strong tenant demand. And we see no reason why that's going to abate over the foreseeable future.

Our next question comes from the line of Ronald Kamden with Morgan Stanley.

Just my first one was just going back, I think you mentioned the Ascent as sort of a headwind to same-store. But now I see same-store down 1.6% year-to-date. I think at the Investor Day, I think you were looking for 1% to 2%. Just wondering, was that all the ascent to Delta? Or what else is going into that number? And how do we think about as you're rolling into 2026, how factors to consider?

Yes. Just our guidance for same-store cash NOI was 0.5% up to 1.5% down. So we're only 0.1% below the bottom end of our range. remember, guidance and goals are different, right? We stretch our goals to try and get above the guidance range. We actually would be squarely within the guidance range if it wasn't for Ascent being off-line and again, they pay percentage rent. And then uniquely, we had a tenant of fairly significant size, convert TI to free rent, which is an option in their lease rarely taken advantage of. They did and that impacts -- it's no incremental dollars out of our pocket, but it's a change in the treatment of those dollars, and it hits cash NOI. Otherwise, we'd be squarely within our guidance range.

Got it. So what was baked into the goals that maybe is not materializing?

Nothing baked into the goals. The goals are hey, let to outperform our guidance. .

Okay. My second question, if I may, just on the sort of the development. Obviously, you bought the land and so forth. Any sort of incremental color on just the amount of capital needs and again, funding because I know you also have -- are managing sort of the balance sheet leverage as well.

Ryan, can you get that question 1 more time.

Sorry about that. On the asset that you bought that you're planning to do a development on just thoughts on cost and funding and potential impact on the balance sheet?

So you're talking about 346 Madison. We'll do a deeper dive on 346 once we get out to the investor conference, talking about plans and cost of returns and the like. As a general matter, as you've seen us do on Vanderbilt and One Madison, likely capitalization would involve construction financing and a JV partner. So as we sit today, that's our funding strategy. We'll give you more detail when we get out to December. .

Our next question comes from the line of Seth Bergey with Citi.

Just given the leasing activity to date kind of at the 1.9 million square foot and you've done or announced an incremental 390,000 square foot center last leasing update. Do you have a sense of kind of where you could get to by the end of the year?

We're not -- we don't give quarterly guidance on leasing. I mean we have 1 million square foot pipeline. So I would sort of be guided by that. You know what that translates into. I don't want to get caught in what's going to close by December 31, what's going to close Jan 5. We're going to vastly exceed million feet. I mean that's clear. I mean will we exceed 2.5 million, 2.5 million feet that's to be seen. I mean we generally run at a clip any, let's call it, average 500,000 feet a quarter. if you miss by a week or 2, it could be a little less if you accelerate by a week or 2, it could be in the 6s plus. But if we're at $1.5 million now, then I would think for the quarter, we should be on something close to $0.5 million run rate. And I'd be sort of guided, but we can't give any detailed guidance for the next 2.5 months. But we're going to be 20%, plus or minus ahead of our original projections.

Okay. That's helpful. And then you mentioned 2 rents per 20% buyer in some spaces than they were at the beginning of the year. Do you have a sense of how much of the portfolio is kind of at below market rents or an overall portfolio mark-to-market?

No. I mean not at our fingertips. We'd have to go through and do a real granular calculation building by building and space by space. But that's not something that we do. Generally speaking, I can tell you there's where we have a lot of leasing activity or where we've done a lot of leasing activity, whether it be Park Avenue, Sixth Avenue or even some of the Third Avenue and Graybar Building examples, that's just where we happen to have a lot of activity. We've seen rents generally up somewhere between 10% to 20%, depending on the building that we're talking about over the last 10 months. .

Our next question is going to come from the line of Michael Lewis with Truist Securities.

Great. On 1515 Broadway, has Paramount already determined it will move out in 2031? Or is it possible that just becomes a renewal? I don't know if that makes sense for them or for you?

I don't think there's any determination that I'm aware of that's been made. We had dialogue and negotiations in connection with the casino, but that's completely different and apart from the steady-state situation now. And I have no reason to believe one way or the other. They're going to stay or go at the end of 2031. They're happy with the building. And I mean like 2031, I think in the realm of planning for these guys is E.ON, the way they just bought the company, so I think they're going to have to go through and figure out what are they doing maybe with Werner, maybe not with Warner rumor to be in dialogue with them. How big in New York City footprint will they maintain and how big will be on the West Coast. .

But -- on the one hand, I don't think anything set in stone there, certainly that I'm aware of at this moment. I think having just acquired the company less than 2 months ago, I can't imagine there's anything definitive on their end yet. With that said, this is a big valuable block of space and whether we keep it long term as office use, or we now know it converts, I mean, seamlessly into solid hotel use -- we've got the plans to revamp those signs into state-of-the-art signage where we can increase substantially the revenues we're getting from those older signs that serve their purpose, but are past useful life. And Viacom doesn't pay a big rent. [indiscernible] them from the old days. Skydance Paramount doesn't pay a big rent. I don't have it in front of me. I don't know, but the escalated rent in place, I think, is in the 70s at most, like low 70s. So you've got a big block of space they're not paying a big rent. Like I said, they like the building. It's well located, but it also has flexibility of use. So -- and we have low debt on the property. So I think it's a perfect storm for us to keep forging forward with our plans and try and do something really transformational with the building, which could include doing a early renewal deal with with [indiscernible] if they choose to.

Okay. Great. And then my last question, you obviously have continued to have very strong leasing volume. There's been a lot of talk on this call about very high rents and optimism for where rents are going. I wanted to ask about OpEx overhead CapEx because I look at the 3Q results, your NOI margin, I see 54%, your G&A 10% of total revenue, give or take, and then obviously CapEx. If we backed out the debt extinguishment gain, it looks like your FAD would be well below your dividend, and I understand quarter-to-quarter and count this and don't count that. I'm just -- I guess the question is, is there any concern not with leasing volume and rents, but with office real estate profitability? Does that make sense?

Well, I mean what you're saying, I understand the question, the way we position ourselves is how we combat that issue by focusing in on the buildings that have the highest net effective rents. And I've said this before, I'll say again, the TIs, the physical cost of construction are relatively fixed. So if you're doing business at the high end of the market with $150 rents or $125 to -- on upwards to $250 or higher. That's where there is a lot of margin in the business, first generation and even more so in second generation. And we just need to let all of that bleed through into the numbers.

I think what you're focusing in on is due in part to the way we do the business, which is as soon as something gets to stabilization, we tend to seller JV. And as a result, you put all the working on the front end, and we realize and monetize what you would be looking at as, call it, FAD. We monetize it in profit, and we have significant profits that we bring in when we JV an asset. I mean look at what we just did with our sale of 5% to more at a $4.7 billion valuation on a project where our basis was under $3 billion. So we lose that coverage, but we get that, in that case, $80-something million. And we have that for reinvestment and into new projects and capital.

So it's a little bit of a different game plan, but I think the business we're doing is very profitable. We do cover our dividend, but we cover it in a holistic way with roofed and through our harvesting, which you know we've been -- we do year in, year out for 28 years.

Our next question will come from the line of Vikram Mahotra with Mizuho.

Just I guess 2 clarifications. One on the recent transaction, Park Tower. You mentioned sort of the cap rate. I just want to clarify, does that include believe you mentioned that took the occupancy up. And could you just sort of clarify the value creation you kind of highlighted what's the capital you need to put in and the time line to sort of get a decent terms of building to that 200 rent level?

Well, I think with both leases, the cap rate is actually like 6.2%, I rounded to 6%. I think if you're looking for a precise number, the number I saw with both the lease just done and the lease pending was 6.2%. So I don't know if -- does that answer the question? Or is that -- what was the second part of that question?

Yes. Just the -- you mentioned the value creation, the 125 rents, you hope to get it up to 200 this. I'm just trying to get a sense of the value creation from where you bought it today, I guess, for cap rate wise,

What I said in the first part of this call was -- this is really a market play, more than -- this is not a redevelopment project, like a 245 Park or like a 750 Third. We have capital allocated for what I'll call, refreshing or updating the amenities probably expanding the amenities as well, bringing in some newer and I would say, better, higher elevated food and beverage, which I think we've gotten quite good at. And and also doing something with the entry experience at the Plaza, which right now, I think, is okay, but I think we can improve it. So these are not big capital in the context of a $730 million loan investment, I think the capital devoted to those uses in total, including infrastructure is like less than $50 million, might even be less than like like in the high 20s or something. I don't have it in front of but in that range of, let's call it, $25 million to $40 million. And that's over time.

That's over -- that plan would be a 5-, 6-year plan. So -- it's not a big capital intensive. All the capital will be leasing oriented capital TIs and commissions. We'll try and minimize that because there's not a lot of lease up. So we're going to try to -- you make your money, how we say, on second-generation deals, retaining tenants, renewals, et cetera, play the Park Avenue scarcity market, where I think rents could be up 20% to 25% over the next 4 to 5 years. I think that's completely within reach, given the dynamics between sort of ever-expanding space needs right now by New York's larger, growing tenants and just no real space delivery in and around Park Avenue, at least not for the foreseeable future.

So it's really a market positioning and rental play. It's a cash flowing deal right out of the blocks. So it's different than a lot of what we do. We're going to get good financial leverage because there's going to be good competition for this debt, and we'll hit our underwriting on our spreads. And maybe down the road, we'll consider a JV and then you throw in an extra 30 basis points of yield for fee and promote income. But that's -- I think we have some work to do on the front end over the next 12, 18 months and then revisit that situation down the road, which is how we typically do.

Okay. I mean just maybe building upon that, you mentioned Park Avenue rents could be up 20% over the next few years.

I'd say 25% over 4 to 5 years. I just want to be clear, 20% to 25% over the next 4 to 5 years. I think that for this slice of the market, I think that's completely within reason.

Okay. I guess just like in the past, like you mentioned you've done a lot of other deals more -- those more specific basis play or you bought the debt, and you've eventually converted. So it's been much more value or I guess, basis oriented. This one is different. I get it. But the opportunity set going forward, given what you just said about rent growth, is your acquisition pipeline? Is it more just tower type deal? Do you think -- or is it more kind of your historical you buy it at a much, much lower basis and it's more of an NAV play than just a rental play or a marketplace.

I would say our pipeline is opportunistic and doesn't have any one. We -- it could be a deal like this, which is rental rate driven. It could be 346, which is development driven. It could be opportunistic debt like 522 Fifth it could be a complete wholesale redevelopment play like 245 Park. I mean it's -- the only thing symmetrical about the business we do is that it's all in Midtown Manhattan. So that's a good bet.

But beyond that, if you're trying to characterize the nature of the opportunity set I think it's all over the place where we're looking for risk-adjusted returns generally on a debt-neutral leverage basis in the mid-teens. -- for Midtown Manhattan high-quality assets, that's a very good return historically and today.

Okay. And then sorry, just last clarification. You mentioned, again, the rent growth, the strengthening of the broader markets spilling over into a lot of submarkets. So I'm just wondering, as you look into '26, you said you don't have a mark-to-market. But I guess historically, you have had some sense whether it's 5%, 10%. But given the strength you're seeing into next year spilling across markets, I mean would you venture a high-level guess, like where do you see rents going -- market rents going next year and where is your portfolio today?

Here's what I would suggest. I'm going to save you a front row seat at December investor conference. We will have Front row. We will have all the information. What you're asking for is completely reasonable, but it requires a substantial amount of work which we do in preparation for our 3-hour full portfolio granular asset-by-asset review, it's just -- it's not like an earnings call thing for us. and I'm not -- I'm very optimistic about what those numbers will show because the rents are generally for most of the buildings in the portfolio, on a rapidly rising trend, and we're starting to see the concessions come in.

So it's -- there's a story to tell there, we will tell the story. I think what Steve said earlier, and I'll have to reiterate, we just can't do that right now. And I don't want to ballpark it or back of the envelope it, we're going to have -- like you've been to these before. You know the drill. -- we're going to have complete illumination in December of what we think '26 looks like, where the opportunities are, how we're going to drive our earnings, et cetera. But at this exact moment in time, -- we just don't have that number in front of us.

[Operator Instructions]