Good morning and welcome to the Vornado Realty Trust First Quarter 2021 Earnings Call. My name is Vanessa and I will be your operator for today's call. This call is being recorded for replay purposes. All lines are in a listen-only mode. Our speakers will address your questions at the end of the presentation during the question-and-answer session.

Thank you. Welcome to Vornado Realty Trust first quarter earnings call. Yesterday afternoon, we issued our first quarter earnings release and filed our quarterly report on Form 10-Q with the Securities and Exchange Commission. These documents as well as our supplemental financial information package are available on our website, www.vno.com, under the Investor Relations section. In these documents and during today's call, we will discuss certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in our earnings release, Form 10-Q, and financial supplement. Please be aware that statements made during this call may be deemed forward-looking statements, and actual results may differ materially from these statements due to a variety of risks, uncertainties, and other factors. Please refer to our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2020, for more information regarding these risks and uncertainties. The call may include time-sensitive information that may be accurate only as of today's date. The company does not undertake a duty to update any forward-looking statements. On the call today from management for our opening comments are Steven Roth, Chairman and Chief Executive Officer; and Michael Franco, President and Chief Financial Officer. Our senior team is also present and available for questions. I will now turn the call over to Steven Roth.

Thank you, Cathy, and good morning to everyone. I hope all of you continue to be safe and healthy, and that you're all vaccinated or on your way to being vaccinated. We are full speed ahead on the Penn District and are confident of its success. Farley is well along, we delivered half of Facebook's 730,000 square feet on January 1st, and we will deliver the second half on June 1st just one month from now. At PENN1 we will deliver the 34th Street lobby in July, the building's enormous amenity package in October, and the 33rd Street lobby at year-end. And PENN2 and the Long Island Railroad Concourse developments are now in full-scale construction. This transformation will take over a couple of years to complete. The decision to permanently close the Hotel Pennsylvania will allow us to get this site ready for development in less than two years from now, which is perfect timing for the next phase of our Penn District mega project. I believe that the Hotel Penn site will be the best development site in town.

Thank you, Steve. Good morning, everyone. I do hope you're all safe and healthy and look forward to seeing you again in person soon. Let me start with our first quarter financial results, and I'll end with a few comments on the leasing and capital markets. First quarter comparable FFO as adjusted was $0.65 per share, compared to $0.77 for last year's first quarter, a decrease of $0.12 primarily due to the effects of the COVID shutdown. One change you will note is that the Hotel Pennsylvania results were moved to non-comparable given our decision to permanently close the hotel. The decrease this quarter is reconciled for you in our earnings release on page four and in our financial supplement on page six.

Thank you. And we have our first question from Steve Sakwa with Evercore ISI.

Yes, thanks. Good morning. Michael, I was wondering if you could just spend a little more time on leasing, you gave a lot of detail there, maybe talk about the terms that you're seeing in terms of tenant improvements, free rent, and then length of lease that tenants are sort of looking for in the market?

Steve, can you just repeat? You cut out for about 10 seconds.

Sorry, the question was really around lease term, tenant improvements, leasing commissions, free rent. How are you seeing some of the impacts, not just in face rent, but some of the concessionary items, and then, what are tenants looking for from a length of lease term?

I mean, the first thing I'd tell you is lease term; we're seeing a lot of long-term lease commitments. 10 years, 15 years, we actually completed a lease this quarter for 30 years with the school at 825 7th. So we're seeing lease terms long, we're seeing commitments for sure, we've seen no change in that as we go quarter-to-quarter. Tenant improvements are elevated and free rents are elevated, net effective rents, you know, were up, but I think they stabilized at this point. But right now, if you want to lease space to meet the market, you have to give the tenant improvements to fill this space and that's what we're doing, but they have stabilized over the past, I'd say two to three months, for sure.

Okay. And maybe as a follow-up, I don't know if this is for Michael or somebody else, I know there has been some discussion around the refinancing of 555 California and there was an article recently about a north of a $1 billion new mortgage there. To the extent that you did refinance at that level, how do you think about the excess proceeds, and what would that be used for?

I don't think we're going – Steve, it's Steve, I don't think we're going to comment on that, other than just to tell you that, generally speaking, where there's smoke, there's fire. We won't comment on anything about that transaction at the current time.

Okay. Thanks. That's it from me.

And thank you. We have our next question from Manny Korchman with Citi. Please proceed.

Hey, everyone. Good morning. Just wondering what you’re – sort of how progressed the conversations are with tenants at Penn, both for the large blocks available at the current Penn buildings and also for PENN15, and if that drove your decision to take the hotel offline and move forward with the larger redevelopment there?

Hi, it's Glen. So I'll tell you we're in this experience at PENN1 multiple times a day showing all the projects. I will tell you the action at PENN1 from a leasing standpoint is absolutely on fire. We do not have any real large blocks there, but in the tower we have some single and two-floor deals happening at our underwriting. So we're performing very well there. The reception has been excellent. We are also beginning to showcase PENN2 into the market. Also daily a lot of great presentations that are incoming, but we're going to go slow with PENN2. We've just started up on the physical construction and as this thing keeps going on a construction standpoint, and the tenants can see it physically, it will just get better and better in terms of the incomings and people's reception. And yes, on PENN15, we are beginning to show people our plans; the announcement of knocking on the Hotel Penn has brought a lot of incoming calls and emails, we're starting to talk to folks about 10, 15 as well as we get into it.

Thanks, Glen. And I don't know if this one's for you or for Michael, but if we think about the occupancy trajectory through the rest of the year here, do you anticipate that this is sort of the bottom for New York City office occupancy or vacancy, or do you think there is a little bit more to come from a net absorption perspective?

I don't have the exact numbers in front of me, Manny, I can play and move around a bit here or there. I think we're pretty close to the bottom, again, I'm not going to say take a little bit, but I think we're basically there.

Manny, anecdotally, I would tell you that Glen told me that several of the brokerage houses have told their folks and their clients to get into the market now, that this is the bottom and that they expect a turn from a tenant market to a landlord market to happen over the next six months. So that's anecdotal information, but it's important information.

Thanks, everyone.

And thank you. Our next question comes from John Kim with BMO Capital Markets. Please proceed.

Thank you. The announcements in the news flow of New York City reopening is very fluid and even this morning Goldman Sachs announced plans to come back next month. Are there any more details that you could share as far as what's happening in your portfolio today, as far as more details on the proposals? What do you expect to be signed as far as leases in the second and third quarter, and potentially also traffic and your street retail portfolio?

I'll take the office, it's Glen. Michael remarked in the script, in his opening remarks, our pipeline is robust; we have over 300,000 square feet of leases in negotiation. We have another 1.4 million square feet of deals that are in discussion. I'll tell you things are picking up a lot, not a little, so tenants are coming out of the woodwork, many are looking for new space to better quality products. So we're seeing a huge uptick in office leasing activity as we sit here right now. In terms of the utilization in the building, that's also uptick week to week. On a percentage basis, we're now in mid-teens at all of the buildings. Most of our tenants are telling us they are returning starting in June through Labor Day, but certainly the narrative is unwinding quickly. We're feeling it, we're seeing it, and we're hearing it.

In retail, we are seeing a major uptick in conversation, that's primarily due to the fact that the survivors of the pandemic in retail have actually been thriving. New York City is probably the last on the list to be opportunistic because the rest of the country has been booming. New York City is suffering from the lack of our 60 million tourists being on the street, but the smart retailers are now in the market being opportunistic. And I don't think New York retail has ever offered a better value than what it's offering today in terms of the prime spaces at better rents.

That's very helpful. Thank you. My second question is on the tracking stock that Steve, you mentioned in the Chairman's letter. Are there any more details you could share at this time as far as the timing, whether or not you plan to raise capital through it, and will you be stripping out the financials of the Penn redevelopments from Vornado going forward?

I really don't think it's appropriate to comment on this. We are working very hard on it. It's a very, very exciting project that we're very excited about. I mean, we're targeting hopefully year-end. Other than that, I don't think it would be premature to get into any details, but I'll give you a little bit of what our thinking is. And, by the way, a tracking stock is something that has been used very successfully by folks like John Malone at Liberty and his sidekick Greg Maffei and Barry Diller, for example. Generally, when it's used is where you have a business inside of your core which is different and which has a different rate of growth and different characteristics. So we feel that the Penn District mega project that we have is different than our core assets and we feel that investors would benefit enormously by being able to invest in the Penn District and its characteristics. By the way, do remember it's a development company, for better or for worse, and our core assets. So the differentiating aspects of the Penn District are that it is at what we consider to be the epicenter of the new New York; it's directly on top of the major transportation hub, which means all of the subways and all of the railroads, all of them come into that hub, and that's an extraordinary statement because you can get in and out of Penn Station no matter where you are in the New York City region on one ride. The most interesting part of it, I think from my point of view and Glen's point of view, is it's a cluster of buildings that are interconnected generally underground. So what that means is that a tenant who has a 300,000 square feet requirement who comes into a 500,000 square foot building is locked in; there is no place to go, but a 300,000 square feet tenant in our 5 million growing to 10 million, growing to 50 million square foot complex has enormous opportunities to grow should they want to in the same building or in adjacent buildings. So I believe that a strategy which involves a cluster of buildings in a campus, which also will allow for an enormous series of amenities that somebody who has even a giant million foot building can afford to do, makes us totally unique. We are seeing very much the same thing down in Northern Virginia where our SpinCo JBG Smith has this enormous concentration of buildings and land, et cetera, in the Crystal City complex that Vornado contributed to that company when we did the spin in 2017. We've now attracted Amazon HQ2 there mainly because of the concentration of assets that we have, and obviously because it's a great labor market. The same is true of our New York Penn District. So what we're trying to do and the objective is to take businesses which are different, meaning the Penn District is different than a corner office building on even Park Avenue, and allows investors to have the choice. So we're very excited about it. It's a very important work in process, and more details will be coming as we advance it and when we announce it. I think somebody said in their reports last night that it was not well received by investors, which is troublesome to me because that's totally contrary to my feelings about it and our company's feelings about it. And so, if that's the case, then we have some work to do to talk to our investors and make everybody understand exactly what we're thinking about, but we couldn't be more excited. And I think that's it for now.

When you list some of the key attributes invested in Vornado, arguably Penn District will come up as number one. So have you gotten feedback that this really isn't that different to the reason to invest in the company?

I don't understand the question, John.

I guess your point that you're stripping out something that's different, where in reality, it's just a redevelopment of the existing assets that is the key reason for investment renewed today. I'm just wondering why you think it's different?

Well, I can say what I said for the last five minutes all over again. But the answer is, and it's totally different in many, many ways. It's real estate, but it's totally different. The other thing is, when you think about stock performance, we don't think that our stock could go with or without - we're getting no credit in the Vornado stock trading price for the Penn District or basically anything else. So what will happen is that we think that the corpus of Vornado, the price of Vornado will be unaffected or rise hopefully, whereas the Penn District stock will get to its true value, but we don't agree with you, we think it's totally different.

And we have our next question from Alexander Goldfarb with Piper Sandler. Please go ahead.

Hey. Good morning, Steve, morning, Michael. So I'm going to take a different tack with my question this quarter. I'm going to focus on two what I perceive to be positive in your portfolio. Steve, in your news – in your Chairman's letter, you outlined your Netflix bringing, and the fact that studios are now on your radar. It would seem that the JCPenney space at Manhattan Mall and the Penn district redevelopment, both of those assets have huge loading docks, huge amounts of potential space that they can be carved out. Obviously, being in the city is incredibly convenient for studios versus people having to truck out to Queens or some of the outer boroughs. What are your thoughts on converting either of those two assets or some of your other existing that have those sorts of attributes to studios?

This all began with the two things. Number one, all of this should become network - Netflix addicts. And number two, we have incoming from entities that are in the sound stage business or that need sound stages. And so, what's happened is that the streaming business and the entertainment business have become an unbelievably powerful, dynamically growing business and are consolidating. The companies that are in that business are huge financial entities and they all have a handling and even a strong desire to be in New York. Apparently, there is a significant, mainly even dominant concentration of talent in New York. So, it's really basically they stay in three places, New York, Southern California, and I guess one of the European cities. The point being is that there is a tremendous amount of unserved demand. And so we're responding to incoming, and so we have assets that could service that demand. Now, I could make a way too aggressive statement that says the Penn District could become Hollywood East, so I don't take that to the bank, by the way. But there is a great deal of interest in some of our assets that we are working on.

Okay…

Nothing imminent; we are just responding to where we see pockets of unique demands in the marketplace.

Look, that's good. Obviously, it's something new and it would seem to be something that's good to repurpose, especially large blocks of space that have come back to you.

And we feel we have assets that could be adapted to those kinds of uses.

Okay. The second question, Steve, is going back to Penn Station. You guys for over two decades have been talking about Penn Station. We all know the issues about the streetscape and the neighborhood and the desire to see that improve. When you look at Grand Central that area is already there, Eastside Access is clearly going to siphon a huge chunk of Long Island commuters and you guys have 350 Park. It would seem that 350 is almost the better site than Hotel Penn, just given that the neighborhood is already there, and there are a lot more people being excited by the commuter hub and you have East Side access coming in the next few years. So what are your thoughts on accelerating 350 and where does that fit in your pipeline as you guys are flat market anchoring Hotel Penn versus getting tenants to anchor at 350?

We are an equal opportunity employer; wherever the tenants want to go, that's where we want to put them. We have - obviously, we have an enormous amount of respect for our 350 Park Avenue asset; it's a great asset and it's kind of like bite-sized. It's a 500,000 square feet asset. It's obviously a candidate for teardown and rebuild. But a teardown and rebuild is a combination and we can grow the site too, by the way, as speculated in the press. So we could grow it so that it's more than a 2 million square foot building if we wanted to just focus on our own site without growing it, which would be a million square foot building. That is an immense financial undertaking which would require record rents, which we have talked to several tenants about, and we may do that, but the likelihood is we will not do that. The more likely outcome is that we will rent up the existing 350 Park Avenue at very favorable rents and so it would like postpone it for a cycle while retaining the option of doing a new build on it or continuing to rent the existing building over time. So it's more likely that we will not do a teardown on that site and rent it out for one more cycle and focus our efforts on the Penn Station district. That's the more likely outcome, although we couldn't be more delighted. By the way, if we decided that we wanted to sell that asset with all of its optionality in terms of the new build or whatever, we think we can get an extraordinary price for it, but that's not something that's high on our agenda right now.

Okay. Thank you, Steve.

Thanks, Alex.

And thank you. We have our next question from Jamie Feldman with Bank of America. Please proceed.

Thank you and good morning. Steve, I want to go back to a comment you made at the onset of the call where you said major tech companies plan to continue growing their office footprint in New York City. Can you talk more about exactly what you're seeing? I think our understanding is that a lot of the big leases have been signed, but I'm curious if there is a lot more behind it.

The answer is, I'm really not going to comment on our confidential conversations with our customers whom we cherish and respect their confidences. We deal with all of these folks, you know, we obviously have them all in our portfolio, all the way from Facebook to Apple to Amazon. We can only tell you that this is first-hand information; they love New York and for most of these folks, New York is the second largest outpost and center. What they love about New York is, first of all, their employees love New York. There is a very, very large and, very importantly, a diverse workforce and that's very important to these clients. So, they have their fingers on the pulse of New York; they follow the real estate in New York as closely as we do, and they all have very professional real estate organizations that we are in contact with frequently, almost daily, and they - so the answer is that I stand by my statement. They are very aggressively interested in New York; their interest in New York continues unabated. That's a very exciting thing. By the way, their interest in New York is basically almost exclusively to the west side of New York. That's where their employees want to be and that's where their culture says they want to be. So we think we're very well-positioned for that. And we think that bodes very well for the future of New York and for the future of Vornado.

If you think about the tech business, right, you'd start with the big four or five, it's stunning the earnings that they recently posted, the growth rates they continue to have, and the aspirations they continue to have. Then you have a whole segment of companies that have now either gone public and graduate at a point where they're mid-cap companies or large companies in New York. These companies have got significant ambition. They need people to execute on those ambitions; they need to be in person, right, huge amount of engineering talent, collaboration acquired, et cetera. And so, both from our own tenants and others that are in the market that are continuing to expand obviously, we just bought, for example, FuboTV, which just went public into our portfolio. These companies have significant aspirations on growing their business. And as Steve said, New York is a central aspect of that, and I think that's very positive for this marketplace.

Michael brings up a very important point, and that is, the newbies and the aspirants who are high growth people, they want to be in the same cluster and in the same neighborhood as the established huge tech tenants are. What Glen likes the best about the new tenants is they are enormous growers and they look to locate in clusters and buildings which have the potential where they can add 50,000 feet and 100,000 feet. When we started with Facebook - when we started Facebook 7, 8 years ago?

2010.

They started with a couple hundred thousand and then they grew to 700,000 feet over a 3 to 4-year period. That's the kind of client that Glen loves, and that's the kind of occupancy that we see.

Thank you. That's very helpful. The 1.4 million square feet of pipeline, how would you divide that up by those types of growing tech tenants versus kind of upgrade relocations, or if there is any other meaningful category you would put that into?

I'll tell you, Jamie, very diverse industry sector mix and a very good mix of renewal, important renewal transactions as we look toward our explorations in the next three to four years, along with very good new tenant activity, a lot in the Penn District but also throughout our other assets. So it's a very healthy mix of new renewals, some expansions, every type of industry sector. The one industry that's really leading the charge right now is financial tenants; they're busier than I've ever seen it. So our financial-oriented buildings are really busy. We have backed up deals on deals at 888 Seventh, 280 Park; they are leading the charge, but in terms of the mix, we feel really good about covering everyone out there right now in that pipeline we talked about.

Okay. Could you quantify how much of that is renewals of the 14?

I'd rather not get into the exact mix of the numbers.

Okay, that's fair. And then, I guess, another question for you, Steve. You had commented on the boom, I'm just curious what your thoughts are on the benefit to New York City from the Biden plan and the outcome. I know it's still early, but the mayoral race, what should we be thinking about either the risk or the rewards based on who is in the game?

So let's see. Your question is how will New York benefit from the boom, and then, what's going on with the mayoral races? Is that correct?

Well, just what are your thoughts on the Biden plan and how you think that will really trickle through to New York? And then, how should we be thinking about either the risks or the benefits from the mayoral race?

So first, I mean, I think it's pretty clear the country is in a boom. The only thing that I am uncomfortable talking about is that the consensus feeling among almost everybody - so consensus is something to be concerned about. Normally, I'd like to be on the other side of that, but it is the consensus that is also what I believe, and I think it's happening. You go to other places around the country which have not been as shut down as New York, it's happening now. You go to Texas, et cetera, where they have been more lenient in the restrictions, you can’t - you go into a Target store and the shelves are empty; you go into some of the luxury retailers across the country and the shelves are empty, but the demand is amazing. They can't build enough houses, et cetera. So I think that's pretty clear. The Biden's policies together with the fact that the majority leader of the Senate is from New York, there is a significant and fair distribution, by the way, in terms of the programs across the nation; there is a significant amount of financial benefit coming to New York in terms of the stimulus package, first in terms of closing the budget deficits for the city and state, which is a universal program across the country, but it's good that we are getting it and other benefits to our population. So we think that the stimulus will be an enormous benefit to New York, and I think that's proving out. With respect to the mayoral race, that's a different kettle of fish. The oddity about politics in New York is that more than two-thirds, more than 75% of the registered voters are Democrats in the city, and so, therefore, the mayoral race is not the election; it's the primary. So almost invariably whoever wins the Democratic primary is elected mayor in the general election. There is a double-digit number of candidates, but interestingly, there is really no candidate which has a defining lead. We also have ranked choice voting for the first time. So nobody really quite knows how that works. So the first – the two or three or four leading candidates are certainly all in the race. I'm hopeful that the candidates will all believe in a couple of principles that I think we believe in. First, that the quality of life is, if not the single biggest issue, the biggest issue; and that is safe streets, clean streets, for example; the homeless situation has to be handled, and so quality of life issues are very important; they're number one on my list. On my list, the second is that we need to be a growing city with growing employment, which I think everybody subscribes to, which means we have to be a business-friendly city. And so, every once in a while we have flunked on that; the Amazon disaster a couple of years ago in Long Island City is probably the number one example of that. So the quality of life, safe cities, the homeless situation, being business-friendly are my number one and two. We then have income inequality, racial inequality; we have to be a fair city. And so, those are the major issues, I think, in the campaign, and I believe that the three or four candidates who look like they have the best chance of being elected are all well-qualified in that regard. I think one of the very interesting things about elections is that this is a time when the political leadership or the political experts, they listen to the population. I think that the message that I just said is the universal message that's going from the voters to the politicians. It may be some groups of voters, they say income inequality and racial inequality are more important, others may say business-friendly and quality of life, but those four major points are the issues, I think, in our city, the great city probably in the world right now. I'm very hopeful that we will get a mayor among the two, three, or four leading candidates that will be well-qualified in that regard.

All right. That’s really helpful color. Thank you.

And thank you. Our next question is from Vikram Malhotra with Morgan Stanley.

Thanks so much for taking the question. Good morning, everyone. Maybe just first one, obviously there is a lot of activity on the development front and future development. I'm just wondering, in the past you've made comments about the right time to buy, and I know the stress has not been plentiful. But given the bullish view on office over a multi-year period, can you maybe walk us through how you're thinking about value-added opportunities in the New York area?

As I think you have heard today and over the years, we are extremely bullish on New York; we are, as they say, loaded up on New York, and we think we like our position. I am disappointed that there has not been in this period unique opportunities to add value by buying distressed properties, which is something that we have been able to do in past cycles, but that's not the way this has worked out. So this has been kind of a weird period. We've gone through a recession, a COVID-caused recession. It really didn't hurt our main businesses in terms of our occupancies, but it did nick our income by $200 million because certain of our businesses were shut down, like signage and garages, et cetera. On the other hand, and the other benefit of that is, interest rates are historically low, chronically low, and looks like they're going to be low forever, which is something I think we have to be a little bit thoughtful about before we subscribe to that. But there really hasn't been very much in terms of distress that we've been able to buy; we've been looking very hard, so I'm disappointed in that. But what I do believe is that the best opportunity that we have in our business by far and away is investing in the Penn District, which I think if one has a five and even the 10-year view, is going to be one of the great investments and one of the great developments out there. So that's my view.

Okay, thank you. Two more real quick ones. Just on street retail and particularly the vacancies on 5th Avenue. Talk to us about where we are specifically on 5th and just a more premium corridor, where we are in terms of rent levels that are low enough to attract retailers to really come back and start signing leases? Just wondering how do you start to fill up some of the vacancy that you have in the portfolio?

As Haim said a couple of minutes ago, this is a market cycle that we've been through many times. I think we can almost predict how these cycles go. There is a - by the way, this is a very difficult cycle because in addition to everything else, we have the secular change from brick and mortar retailers to Internet shopping, which is a secular change that sort of makes the cycle much steeper. Nonetheless, it's the cycle. So there's lots of vacancies. The first thing that happens is that the vacancies are scooped up by a group of tenants who realize the value and who have business models that can operate and thrive with reasonable risk. When the vacancy is thought to get to be absorbed, the rents rise and during the whole process, the highest quality space commands rents and highest demand. So that's beginning to happen now, and as Haim said a few months ago, the retailers that have thrived are beginning to recognize that this is the bottom and have begun to recognize that they want to add, and even in New York, aggressively add at this price point the unique important scarce sites. An example of that is that we did a deal with Fendi on Madison Avenue and 57th Street recently. We extended the lease with Tod's on Madison Avenue and 60th Street recently, and there are multiple other examples of that. So what's going to happen is I wouldn't focus on the spot rents today; that's meaningless. That rent will disappear in a year. So what's happening is the smart players, the players around business models that were - are beginning to absorb a good space and that will cause the market to shift, and in a year or 18 months or so, you will see a totally different market and in three years from now, you'll see a monumentally different market, which will be thriving with much higher rents.

Okay. And then, just one quick clarification on Facebook. Can you maybe remind us the GAAP contribution that's there this year; is some of that already recognized in the numbers? And just how does that ramp over the next 6 to 12 months?

We're not going to comment on the details of the Facebook lease, other than to say we are so pleased with our relationship, and they are pleased with us. The most recent deal that we did with Facebook, which covers 730,000 square feet is at the very height of the pandemic, to give you a feel for the courage that it takes for even somebody with scale to sign a lease, a multi-multi multi-hundred million dollar financial commitment. In the summer, if you remember the Facebook lease which covers 730,000 square feet in hand and in Farley is totally unique space that we believe and I think they believe is unique across the country for where it is in the City of New York, the scale of it being a low-rise with a 150,000 square foot floor plan. So we anecdotally talk to some of their occupiers, their engineers; they are very excited; they can't wait to get into this space. Other than that, we're not going to comment on the financial details.

Thank you.

Thank you.

We have our next question from Daniel Ismail with Green Street.

Great. Glenn, I believe you mentioned the stabilization and office concessions. I was just curious, is that a reference to concessions maintaining their current level or a return to pre-COVID levels?

For now, my reference is stabilizing as of - during the pandemic, not pre; we're not back to pre-for sure. The goal is to get back to pre; we're not there yet, but they have stopped rising, for sure. So I'm talking about in the current environment during the pandemic. Then, the same comment about markets; the market has to tighten up a little bit, when the market tightens up the concessions will tighten up as well.

Got it. And then just a quick question from me on PENN, any update on the ground lease at PENN 1?

No.

Got it. And then a bigger picture question on a few of the non-office assets; you mentioned in the annual, how do you view non-office opportunities like studios, gaming, et cetera, as a percentage of the overall company? How big can some of these non-office opportunities be?

That's a question without a clear answer. I included that information because I believe our shareholders would like to learn about some underlying developments, even if they are not immediate. For instance, gaming is a noteworthy topic. Anyone following New York is aware that there are three gaming licenses yet to be issued under the state legislation, which are aimed for development downstate. There has been significant news about this, so it's common knowledge among those tracking the New York landscape, not just our company. These three licenses are set to be granted in 2023, but there is considerable media speculation that this could happen sooner due to budgetary pressures. The urgency might be influenced by how the government is addressing its deficits, but it's uncertain. We hold one of the largest portfolios in this space and have received numerous inquiries from gaming operators interested in those licenses. The interest has come from properties in Manhattan, where there seems to be a consensus that our assets are among the best suited for this type of activity. However, the enabling legislation from several years ago prohibits gaming in Manhattan, creating a disconnect; why are so many inquiries directed at our assets despite this prohibition? The market seems to suggest that this restriction might not be sensible. Given that three licenses will be released, it makes sense for two of them to be in the eastern Long Island area and one in Westchester. For the third license, competing directly with the other two doesn’t make much sense, indicating that Manhattan could be the ideal location for generating revenue for our schools and other services. Predicting the outcome is challenging, but we have numerous assets and growing interest from operators. This political process is complex, and while we see encouraging interest, it's best to consider it a low-probability event for forecasting. If it does come to fruition, it would have financial implications. We aren't aiming to enter the gaming industry; we focus on real estate. Similarly, with the sound stage business, we are not trying to break into Hollywood, though some among us might enjoy a small role. We are responding to interest from the booming streaming industry, which is keen on establishing a presence in Manhattan due to its talent pool. I highlighted these emerging ideas because I believe it's important for our shareholders to be aware of ongoing developments, even if they won't become major components of our business. It's worth contemplating, as seen with PENN, that the area could become a hub for entertainment, making it an intriguing possibility.

Daniel, all these things that Steve referenced are, I think to me, the key point for you guys, shareholders et cetera, is our job to maximize the value of our assets, right. We look under every rock how to do that. And you got the streaming business which is booming, Steve just talked about the gaming dynamics. So our objective, every day, how do we maximize the value of our assets and look in every different direction, and so anything we may do here would be accretive to what we have today, and that's what we do on every asset. A lot can be repurposed but some things can be.

Great. I appreciate the color. And then a very quick follow-up if I may, you mentioned the budget deficit, Steve. Is there any potential given the fiscal concerns to potentially getting further density at or around PENN Station?

There is a General Positive Plan, which was introduced by the State Economic Development Commission, which would take the assets that circle PENN Station and supply more densities than that. This is a pending initiative, which has been promulgated by the state. Two things sort of involved in that. The first is that everybody is in favor of improving PENN Station from a logistics point of view, from a traffic point of view, from a usability point of view, and from an aesthetic point of view. The state government and the railroads are actively involved in multiple attempts to do that, which involves public money. In addition, it's a totally accepted land planning principle that the most density in any city should be at and surrounding the transit hub. That's us. So that's in process now; it's going through community common periods, et cetera. There is a lot going on in that regard.

Great. Thanks, everyone.

And thank you. We have our last question in queue. It is from Alexander Goldfarb with Piper Sandler.

Hey, thank you. Thank you, Steve. I just want to go back, you mentioned about Penn Station and the mayoral, I think it was Jamie, who asked about the mayoral situation, but when you look to all the just passed $4 billion in taxes on the wealthy, which are really the business leaders and those are the people who are leaving. At the same time, SALT repeal doesn't look likely. So Steve, how do you, do you think about Penn Station, and you mentioned that there is some pushback on the tracking stock, how do you think about putting billions of dollars of investment into the PENN Station area when Albany seems to be – and you couple that with the Amazon fiasco a few years ago seems to almost be encouraging people to relocate. How do you sort of reconcile that?

My children want me to go to Puerto Rico. Look, New York there will always be New York; New York will always be great; New York will always be a high tax place to live, and it will continue to be the center of commerce and New York will continue to be the business capital of the United States. Now I agree with you that the folks in various governments, by the way, the price they come out of Washington in terms of taxation, Albany may be a second runner here, but the point is that the loss of some very high earners, who are at retirement age by the way, is something that is happening. It's happening all around the country; it's more - it's happening more aggressively in California, by the way; California folks that flee to Texas and New York folks flee to Florida. What I'm saying basically is the backbone of New York is not the 20 or 30 hedge fund billionaires who are going to Florida; the backbone of New York is the 3, 5, or 100,000 even $1 million earning management people in their prime and their 40s who are raising families, et cetera, whose jobs can - who are not the heads of the businesses and can live anywhere, whose jobs and future depend upon being in the New York where they can do three times better than they can do anywhere else. As long as that holds, New York will be fine. And as we see it, people like JPMorgan Chase building new headquarters buildings, etcetera, the businesses that are - I'm not talking about the entrepreneurs who can live anywhere; they are a very small number of people, although they are very financially powerful; the mass of the talent that New York has pretty much is staying in New York, has to stay in New York, wants to stay in New York, loves to live in New York, and has to live in New York because that's where these unique jobs are.

Yeah, but. Steve, when you look at New York's share of GDP it was 11% two decades ago, now it's down to 7%. So it's clear that the economic growth elsewhere is outpacing, and that just seems to be something where New York depends on its historic laurels, that seems to be the biggest risk here.

Well, the answer to that is that New York is not growing as fast as some of these other smaller places are growing, but it's certainly not contracting, and we still think there will be a demand for our product. I'm going to set you up and get you a date to go Albany and talk to all my friends at Albany because I think you have a lot to say.

That's why we like writing in print. Listen, Steve. Thank you.

Thanks, Alex.

And thank you. I will now turn the call over to Mr. Steven Roth for closing remarks.

Thanks, everybody. We appreciate your participation. We appreciate your interesting and provocative questions, and we certainly appreciate your interest in our company. When is the next quarterly call?

Tuesday, August 3.

So, we will see you. If we don't see you before, we're dying to see you in person and break bread with you and talk about all of the interesting things that are going on. And our next quarterly call is?

Tuesday, August 3rd.

Tuesday, August 3rd at 10 o'clock. We'll see you then. Thank you.

And thank you. Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect.