Good morning, and welcome to the Vornado Realty Trust First Quarter 2025 Earnings Call. My name is Nick, and I will be your operator for today's call. This call is being recorded for replay purposes. I will now turn the call over to Mr. Steven Borenstein, Executive Vice President and Corporation Counsel. Please go ahead.

Welcome to Vornado Realty Trust's First Quarter Earnings Call. Yesterday afternoon, we issued our first quarter earnings release and filed our quarterly report on Form 10-Q with the Securities and Exchange Commission. These documents as well as our supplemental financial information packages are available on our website, www.vno.com, under the Investor Relations section. In these documents and during today's call, we will discuss certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in our earnings release, Form 10-Q and financial supplement. Please be aware that statements made during this call may be deemed forward-looking statements, and actual results may differ materially from these statements due to a variety of risks, uncertainties and other factors. Please refer to our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2024, for more information regarding these risks and uncertainties. The call may include time-sensitive information that may be accurate only as of today's date. The company does not undertake a duty to update any forward-looking statements. On the call today from management for our opening comments are Steven Roth, Chairman and Chief Executive Officer; and Michael Franco, President and Chief Financial Officer. Our senior team is also present and available for questions. I will now turn the call over to Steven Roth.

Thank you, Steve, and good morning, everyone. Well, the macro environment in which we operate is certainly different today than when we last spoke 3 months ago. On their calls, a couple of office CEOs didn't think all this would affect their businesses too much, but it will affect our customers, clients and tenants. So of course, this will affect all of us somewhat. I know nothing more than you all do. But the way I see it, the objectives of the tariffs are to introduce symmetry and fairness, but even more so to generate a new revenue stream for the federal government, which at, say, a 10% tariff is large enough to make a big dent in getting our federal budget deficit under control. And notwithstanding the tactics, reducing government load has to be a good thing and will also reduce the deficit. I am agnostic. Whatever the outcome, I believe the best bet is that this global kerfuffle will be resolved, settled and over much more quickly than you think. The basic dynamics that I outlined in my recent annual shareholders' letter that make us so enthusiastic about the future of our business still hold. Our stock performance is at the head of the office class, having increased 49% in 2024 after having increased 36% in 2023. And while year-to-date is down 12%, we are down less than the other CBD office companies. Manhattan continues to be the best real estate market in the country, especially so for office, but also for apartments and retail. In the 180 million square foot Class A better building market in which we compete, demand continues to be robust. Available space is evaporating quickly and with the cost of a new build, i.e., replacement cost at, say, $2,500 per square foot and interest rates at 6% to 7%, no new supply is on the horizon. All this is the very definition of a landlord's market. We've seen this all play out in past cycles, and the story has always been the same. The supply and demand dynamics will push rents higher and existing better buildings will increase in value quite substantially, all good, very good. Here at Vornado, our teams have been very busy building liquidity and doing leases and deals. In January, we completed the UNIQLO sale at 666 Fifth Avenue at a record-breaking $20,000 per square foot. We used the $342 million of net proceeds from the sale to partially redeem our retail joint venture preferred equity on the asset. So $342 million cash to Vornado. We used this cash to pay at maturity our 3.5% $450 million unsecured bonds. Next, last month, we completed a $450 million financing of 1535 Broadway and used the $407 million of net proceeds to partially redeem our retail joint venture preferred equity on the asset. So $407 million cash to Vornado, which increased our cash balances. This financing was done in a very choppy market with skill and relationships by our capital markets team. So all thanks to them. Next, on April 22, we received a favorable ruling on the PENN 1 ground lease rent reset arbitration. The panel determined that the annual ground rent payable for the 25-year period beginning June 17, 2023, will be $15 million. There is pending litigation and the panel's decision provides that if the fee owner prevails in a final judgment, the annual rent for the 25-year term will be $20.2 million retroactive to June 17, 2023. For GAAP, we have been accruing $26.2 million per annum of ground rent. And therefore, as a result of the panel's determination, we reversed $17.2 million of previously over-accrued rent expense in the first quarter. Of note, commencing in the first quarter of 2025, we are now paying $15 million annual rents, and so our GAAP earnings will increase by $11 million annually. By the way, this PENN 1 ground lease as fully extended goes to 2098. Next, in March, we finalized a major 337,000 square foot lease at PENN 2 with Universal Music Group, the world's leading music company — think Taylor Swift and her friends. This important deal brings an exciting tenant to the PENN District and takes the building to approximately 50% leased. More leasing at PENN 2 will follow. Next, yesterday, we finally announced the completion of an important deal with NYU at 770 Broadway, completing a master lease for 1.1 million square feet on an as-is triple net basis for a 70-year lease term. Under the terms of the lease, a rental agreement under Section 467 of the Internal Revenue Code, NYU made a prepaid rent payment of $935 million and will also make annual lease payments of $1.3 million during the lease term. NYU has an option to purchase the lease premises in 2055 and at the end of the lease term in 2095. NYU will assume the existing office leases and related tenant income at the property. We used a portion of the prepaid rent payment to repay the $700 million mortgage loan, which previously encumbered the property and $200 million to increase our cash balances. Although this transaction is a lease under GAAP, which can be a little wacky, it is treated as a sale. As such, we will recognize a GAAP financial statement gain of approximately $800 million in the second quarter. We will retain the Wegmans retail condo, which will produce $4.7 million in income this year. The NYU lease absorbs 500,000 square feet currently vacant at the asset. Overall, the transaction is accretive by $25 million annually. If we pro forma leasing the vacancy at market rents with related capital spend, downtime and free rent, it would have been a pro forma push, as you might expect. We are delighted to expand our relationship with NYU and congratulate NYU Board Chair Evan Chesler and President Linda Mills and their teams. We are excited about their ambitions for this project. As I have said before, this is all very good for NYU and is very good for New York. NYU's press release issued yesterday is available at www.nyu.edu. All told so far this year as a result of the above activity, we reduced our debt by $915 million, increased our cash by $500 million and our retail joint venture preferred equity, which is an asset on our balance sheet, which began the year at $1.828 billion is now down to $1.079 billion. Our cash balances are now $1.4 billion and together with our undrawn credit lines of $1.6 billion, we have immediate liquidity of $3 billion. The above transactions will increase GAAP earnings by approximately $36 million, $25 million from the NYU transaction and $11 million from the PENN 1 ground rent reset results. Tom, that would be Tom Cinelli, who all of you know, in a more complete analysis, including debt repayments and the loss of preferred income, calculates $30 million of accretion. I'm happy to defer the talk. In a moment, Michael will review the quarter and the financials, but here are a few headlines of a very good first quarter. Comparable FFO of $0.63 increased by $0.08 versus last year's first quarter and is $0.09 higher than analyst consensus. Our overall GAAP same-store NOI was up 3.5%. We leased 1,039,000 square feet overall, of which 709,000 square feet was New York office at $95 starting rents with mark-to-markets of 6.5% cash and 9.5% GAAP and an average lease term of 14.7 years. In addition to the 337,000 square foot lease with Universal Music at PENN 2, we leased 163,000 square feet at PENN 1. We completed leases totaling 222,000 square feet at our 555 California office tower in San Francisco at $120 starting rents. 555 continues to be the preferred financial services headquarters in San Francisco. And even in this historically soft market, 555 continues to outperform. It is proving that it is the best building in San Francisco. We are big fans of the new San Francisco Mayor Dan Lurie. Our New York leasing pipeline is a robust 2 million square feet. As I said in my annual shareholders' letter released on April 8, the lease-up of PENN 2 and the lease-up of our retail vacancies alone will generate incremental NOI of $125 million and $50 million, respectively, over the next several years. Tom specifies that while NOI for PENN 2 is budgeted to increase by $125 million, FFO is budgeted to increase by $95 million, the difference being capitalized interest. Either way, these are big numbers and with PENN 2 built and ready, this $125 million per year is as close to a short thing as there is. The PENN District, our three-block-long city within a city continues to amaze and receive outstanding reviews. We sit on top of Penn Station adjacent to our good neighbors to the West, Manhattan West and Hudson Yards. The three of us combined are what I call the new booming West side of Manhattan. One of our analysts calls the PENN District one of the largest mixed-use projects in the country; be that as it may, the PENN District will be a growth engine for our company for years to come. As I said in my annual letter, we raised market rents in the PENN District from $50 to $100. Our neighbors to the West are achieving rents of over $150, and I predict that we will do the same in the PENN District in due time. You can all do the math as to what an incremental $50 on 4.3 million square feet will do to our earnings and values. 350 Park Avenue with Citadel as our anchor tenant and Ken Griffin as our 60% partner, has begun the development process to create a grand 1.8 million square foot headquarters tower on the best site on Park Avenue. The new building will stand out as being truly best-in-class. And we have several other assets for sale in the market. We recently filed our very comprehensive sustainability report, which can be found in the sustainability page of our website. Vornado was the first in the nation to achieve 100% LEED certification across our entire portfolio of in-service buildings. The many awards we have achieved can also be found on the sustainability page of our website. Kudos to Lauren Moss and her team. Finally, one other observation I would make is that the majority of our secured loans reflect current market rates, while others are still living off their low-rate loans. As I have said before, there is really no protection against loans that mature into a rising rate market. Now to Michael.

Thank you, Steve, and good morning, everyone. First quarter comparable FFO was $0.63 per share compared to $0.55 per share for last year's first quarter, an increase of $0.08. The increase is primarily due to the impact of the positive ground rent reset determination at PENN 1, higher signage NOI and higher NOI from rent commencements, partially offset by the impact from known move-outs and lower interest and investment income. We have provided a quarter-over-quarter bridge on Page 2 of our earnings release and on Page 5 of our financial supplement. On our last earnings call, we said that we expected 2025 comparable FFO to be slightly lower than 2024 comparable FFO of $2.26 per share. As a result of the lower-than-originally estimated PENN 1 ground rent, we now expect 2025 comparable FFO to be essentially flat compared to last year. Looking beyond that, we expect the lease-up of PENN 1 and PENN 2 to occur with full positive impact in 2027, resulting in significant earnings growth by 2027. Turning to occupancy. As expected, our New York office occupancy decreased this quarter to 84.4% from 88.8% last quarter, which, as previously mentioned, is primarily the result of PENN 2 being placed fully into service. However, with the full building master lease at 770 Broadway now completed, our current office occupancy has increased to 87.4%, and we anticipate it will tick up over the next year or so into the low 90s. The New York office leasing market maintained strong momentum during the first quarter with the strongest quarterly volume since fourth quarter 2019. Availability in the best of the Class A market continues to shrink and with only 500,000 square feet of new construction set to deliver during the next several years and 13 million square feet of office-to-residential conversions in process or announced. We expect the market to continue to tighten, which sets the table for strong rental rate growth. While we are, of course, mindful of companies potentially becoming more cautious in their decision-making given the current market volatility, we do not believe it will impact most tenants' ultimate decisions to lease space, and we remain very constructive on the market and the deal pipeline across our portfolio. The recent major commitments by NYU at 770 Broadway, Deloitte at Hudson Yards and Amazon at 522 Fifth Avenue are perfect examples. During the first quarter, our leasing activity once again led the marketplace. We completed 31 transactions totaling 709,000 square feet at average starting rents of $95 per square foot and 6.5% positive mark-to-market. Our activity was highlighted by the largest new lease done in the market in the quarter, Universal Music Group's 337,000 square foot lease at our new PENN 2, anchoring the base of the building on floors 4 through 7. We are delighted with this transaction and look forward to Universal creating a world-class office and studio production headquarters at PENN 2. The transaction strongly reflects the overall quality of the project's new modern, high-quality workspace and continued attraction to our robust work-life amenity program across the PENN District campus. Leasing at PENN 1 continues at a healthy pace as we leased 163,000 square feet here during the quarter, including a 61,000 square foot lease renewal with Cisco, along with a 36,000 square foot relocation with United Healthcare and a new lease with Dish Networks for 27,000 square feet. Our deal pipeline at PENN 1 and PENN 2 is very strong with a variety of new transactions already in lease documentation or deep in letter of intent stages. Excluding the just completed master lease with NYU at 770 Broadway, our New York pipeline consists of 2 million square feet of leases in negotiation in various stages of proposal. In San Francisco at 555 California Street, we completed 2 large headquarter renewal and expansion deals with Dodge & Cox and Goldman Sachs, both at positive cash mark-to-markets. 555 continues to strongly outperform the market as we have leased 657,000 square feet since 2022. 555 is the city's flagship office tower with world-class tenants and is brilliantly leased in a market which has been one of the more challenging in the country coming out of the pandemic. The market, though, is finally showing signs of improvement. The new mayor is off to a great start, and we are confident that he will help restore the city's health and vibrancy. Lastly, turning to the capital markets. During the first quarter, the CMBS market was wide open for large high-quality assets such as ours, with spreads continuing to tighten. Since the President announced his new tariff policy on April 2, there's been significant volatility in the financing markets with spreads widening out and new issuances being delayed. Despite this volatility, we're able to complete our 1535 Broadway financing. We expect the market to settle near term with high-quality issuers and assets continuing to have access to it. We are hard at work on refinancing or extending our upcoming maturities with many in process. With that, I'll turn it over to the operator for Q&A.

And your first question today will come from Steve Sakwa with Evercore ISI.

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

Steve, why don't you start off and then I'll shift in.

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

And just, I guess, confidence level around kind of getting to that 80% mark by the end of the year at PENN 2?

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

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

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

Steve, our disclosure on the details that you just asked about is very robust. Go back and read the 10-K and the press release. I think that will be the best way to do it.

And your next question today will come from Dylan Burzinski with Green Street.

Congrats on closing the NYU transaction. I guess, Steve, I think you mentioned now after all the transactions closed subsequent to quarter end that you have about $1.4 billion of cash on the balance sheet. I guess, can you guys just talk about what some of those proceeds might be earmarked for?

Sure. First of all, I want to commend you on your report you published. I think you nailed 770 better than anybody. So kudos to you and the team. In terms of the cash, look, we're obviously pleased with what we've done. I think we've done quite a bit. These are all large substantial transactions. And if you think about it, we've been able to delever the balance sheet meaningfully and yet still have that significant cash balance. So we're in a very good spot. What are our plans? In an environment like this, where there's clearly a little bit more volatility, having more cash provides flexibility. We hope and expect that's going to lead to some opportunity to deploy some of that cash in new investments. We're looking. At the same time, we have some higher cost debt that we might either pay down or pay off. So I think you'll see a combination of, one, leaving in cash as is our history to make sure we have an appropriate buffer for anything; two, tackle some of the debt; and then three, hopefully deploy that into new opportunities we see.

Taking it a little bit further. We are loading in cash to pay off an unsecured bond that comes due in a year at a fraction. We are loading in cash because we are going to have a robust development program, both at 350 Park and at the PENN District and perhaps one other site that we control. And so the cash is a good thing, and we're going to be using it to grow the company.

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

So I think I said this in my letter. I signaled in a very subtle way that some of the buildings that are outside of New York might be for sale at the right price. That continues to be true. And these are a couple of very large assets. So that will depend on market interest. In Manhattan, we have a couple of noncore buildings that are in the for-sale market now. And I think as I said in my letter, there are no sacred cows. The other thing is we have shown a willingness to sell some of these important retail assets when we get a buyer that is willing to pay an appropriate price. That continues to be the case. The interesting thing is it's not just the retailers that are buying these assets. For example, Amazon is coming in and buying significant assets in Midtown Manhattan. So there are lots of examples of some of these larger companies which are switching their strategy from leasing to buying, and that's a good thing. We know that that's happening in New York. I'm not aware of whether that's true in the rest of the country. But for New York and for the New York real estate market, that's a very good thing.

And your next question today will come from John Kim with BMO Capital Markets.

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

Sure.

John, I would add that if you look at what we've done to date, I don't know that any of these assets were broadly 'on the market.' We're being targeted, opportunistic about the right counterparty. I think what the cycle validates is that great assets command great prices. The best is always the best and may be out of favor for a little bit of time. But if you're patient, you weather the storm, then that's going to recover, and that clearly was the case in street retail. I think that's going to be the case with the financings and the implied values for New York office and certainly the trophy assets in San Francisco. So the best is generally always the best.

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

That's great color. On the leasing pipeline, which increased pretty significantly from last quarter, can you describe how much of that is on your in-service portfolio or leases that could drive occupancy over the next couple of years versus maybe 350 Park or an early renewal that won't drive FFO?

A very significant portion of the pipeline will increase occupancy without a doubt. A lot of it's absorption, a lot of new deals, a lot of expansion. There's a lot of expansion in New York in our properties right now. So a lot of our significant activity will absorb vacant space over the next 9 to 12 months without a doubt.

This is the first time on this call that the word occupancy came up. So will somebody cover occupancy because the occupancy number that we reported is aberrantly low. Let's see if we can get an accurate portrayal of what our expected occupancy is into this call.

So John, to follow Steve's comment, we had telegraphed in the last couple of quarters that our occupancy was going to go down when we brought PENN 2 in service, which we did fully this quarter. We published 84.4%. We talked about pro forma what it is when you add in 770, which goes to 87.4%. I said in my prepared remarks that we expect it to be 90% plus in the next 12 months or so. A lot of that's driven by PENN 2. If we lease up PENN 1 and PENN 2 fully, and let's say that happens in the next 24 months with a couple of things here and there, we're going to be at about 94% occupancy. So I can't tell you exactly when that's going to happen. But if you just think about it, if we execute on PENN 1, PENN 2, a little bit of space at 1290 and 280, we're going to be at that 94% level, and we love that position. From our standpoint in terms of driving growth, we have our best assets that have some holes in them today. There's fewer options in the market. We've just deployed a significant amount of capital in these assets. Glen talked about how the rents are rising, not just in the market, but specifically at these assets. And so that's all going to translate into growth. As we've said in the last couple of calls, that really kicks in in 2027. We feel good about the position. Historically we've run the business around 95% to 96%. When we get a couple of years out, our expectation is we're going to get back there.

The most significant thing to keep in your mind is that as occupancy rises, earnings rise, and they rise significantly. That's a very interesting factor.

And your next question today will come from Floris Van Dijkum with Compass Point.

Getting back to your comment on the PENN District being one of the most valuable mixed-use projects in the country, the $300 million of NOI once PENN 1 and PENN 2 are stabilized is pretty impressive. But one of the things we noticed this quarter, and I suspect it's going to be the case for the next couple of quarters, is the gap — there's roughly a $20 million gap between GAAP NOI and cash NOI, presumably as free rents in PENN 2 as that comes online before you actually get the cash. How long is that going to last? And at some point, are you going to see — when do you think you're going to inflect and see cash NOI actually be stronger than your GAAP NOI going forward?

Floris, that's a great question. Most of that is going to happen in the later years. As I indicated, we start seeing 2027 earnings really pop. So that's probably the years you're going to see the inflection. That's something we should probably take offline in more detail.

Great. And then the other thing — I think you guys sometimes do yourselves a service by being as transparent as you are with occupancy. Have you ever thought about showing what your core occupancy is or in-service properties? Because obviously, you've got a couple of assets that you're keeping vacant right now, particularly in your retail portfolio, which impact your stated occupancy level significantly.

We have thought about that, Floris, and your comment makes us think a bit harder about whether we should do that. We have kept certain assets offline and continue to do that pending either redevelopment or, in a case or two, a workout. That's a fair comment.

And your next question today will come from Alexander Goldfarb with Piper Sandler.

Steve, a question for you. Looking at the Deloitte deal, pretty impressive, 800,000 square feet to anchor a new development. How does the math behind that project compare to what you guys would need for PENN 15? Just trying to understand if we're getting closer where a $2 million-plus project can pencil or if the market is still limited to, call it, $1 million to $1.2 million type developments?

Alex, before we get into that, you wrote a piece that came out yesterday. I think you did a good job on that. Regarding your question, correcting two things: Number one, we will not use our cash to pay down the 731 retail loan. We're not doing that. And number two, we are not merging Alexander's into Vornado. Beyond that, look, we were shown as the most ideal of the developers in town. We think we have the best vacant piece of land on the west side of Manhattan. I've said frequently that I think it's the second-best piece of land in town, the first best being our Park Avenue site. The deal that was made was very aggressive for the tenant. The pricing was very tight. We're not bashful to say no to a deal that doesn't give us the financial results that we think our shareholders are entitled to. So we're getting there. I think we're on the foothills of a landlord's bull market, and we think that values, prices and transactions are going to go up. We think that the number of new builds will be very scarce. So we're in a pretty good spot. We are patient. If you just look at what happened with the Alexander's deal, which was a long time ago, we let deal after deal pass by until we did the deal with Bloomberg, which turned out to be extraordinary. So we're getting there, and we're very happy with our position. The interesting thing is that a lot of this comes from our financial strength. We can be relatively patient because of our financial strength. The PENN 15 lot has no debt on it. The PENN 1 building has no debt on it. The PENN 2 building has no debt on it. The Farley Meta building has no debt on it. So that's a pretty good spot to be in. We're basically a secured lender in the way we structure our business. Those assets have no debt, and that's a great place to be.

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

When you have the kind of assets we have in the PENN District, you have to consider both office — we're principally an office company. We like the dynamics of the office business, and they are improving. But you cannot disregard that over past decades, apartments have created more value than office. The apartment market is less volatile over long periods. Nonetheless, the political overtone of the apartment business is more complicated than the office business. There will be a mix: we will be building some apartments in the PENN District but it will not be a total apartment development project. We've said that we are focused on doing a small apartment project on 8th Avenue and 34th Street on a smallish piece of land we own there. Otherwise, we will announce development starts when they start. We're not going to pregame the mix today. Also, remember, we're not paying off that loan with cash.

And your next question today will come from Jana Galan with Bank of America.

Congrats on a strong start to the year. It seems like a recent big trend in New York City is owner-occupiers, both in office and retail. I was just curious if you could comment on what you're seeing in particular with some of the dispositions you may be looking to do.

Thanks, Jana. On owner-occupiers: we've talked about this over the last year. You saw activity first in retail with Prada, Kering, UNIQLO, and there continues to be interest on Fifth Avenue and in SoHo. Look at Ralph Lauren and Dyson in SoHo, which paid significant amounts for stores. These retailers want to be in these forever spots — Fifth Avenue, SoHo, Madison Avenue, Times Square. Their sales volumes are multiples of what they do elsewhere, so they want to own. On the office side, you've seen some owner-user activity as well. This is driven by talent wanting to be in New York. Employers have no issue getting their employees in the office. Many of these companies borrow cheaper than real estate companies and are using that capital to buy. In Amazon's case, they want to be here long term and will deploy substantial capital in the assets. NYU didn't buy the building from us, but they committed to lease it for a long term so they can amortize capital they will deploy. Is this something we'll see every week? Probably not, but I don't think this will be the last of those given companies that have significant capital and can deploy it cost effectively.

Your next question today will come from Seth Berge with Citi.

It sounds like demand has improved and your leasing pipeline has grown. What types of behavior are you seeing change from tenants? Are you seeing any improvement on concessions or early renewal activity in addition to the rent growth that you're seeing?

Certainly, we're seeing rent growth. That's the first discussion. Rents are going up and tenants realize rents are going up. We're starting to see a reduction in the free rent packages. On tenant improvements, the TIs have stubbornly stayed basically at the same levels. So I would say rents are improving and free rents are starting to come down. As part of early renewals, we're seeing people come to us earlier now because they're concerned about where the market is going, moving more toward a landlord's market. We have some larger deals in this pipeline related to early renewals. The takeaway is expansions: expansions in New York are happening across submarkets and definitely in our portfolio. There's a lot of growth in New York across sectors — financials, tech, law firms, consulting, media and entertainment, such as the Universal deal.

That's helpful. For a follow-up, you commented about the capital intensiveness of office buildings versus apartments. Does that change how you think about investing in the portfolio over the longer term?

You want to own high-quality buildings — those are the buildings experiencing demand where you can push rents the most and tighten concessions. Capital is not going to be avoided: every time you turn these spaces over every 10 to 15 years, if a tenant leaves, there's meaningful capital required. To be an appropriate investment, rents have to rise, which orients you toward higher-quality buildings. We've reshaped our portfolio in recent years, selling assets we viewed as not best positioned and creating a portfolio we think is well positioned for the future. Are we 100% there? No, but we're pretty close and feel good about it.

A couple of things: we expect rents to rise and free rent to start to come in as the market tightens. We don't believe that cash TIs will decline materially because tenants are spending a lot to develop the space. So face rents and free rents will improve; cash TIs will likely remain. With respect to the mix between apartments and office, we're an office company. In major development activities we'll develop office; in the PENN District we'll sprinkle in a not insignificant amount of apartments. I don't believe we'll be a buyer of existing apartment buildings; we'll be developers of apartments but reluctant buyers.

And your next question today will come from Anthony Paolone with JPMorgan.

Following up on PENN District and apartments versus office: what do you think is the next project Vornado pursues in the PENN District — is it apartments because it's smaller versus PENN 15? Also, your thoughts on federal government involvement in planning Penn Station and how that might impact you?

We're not going to pregame projects by announcing the mix today. We'll do that when we start real projects. We've already said we're focused on a small apartment project on 8th Avenue and 34th Street. Otherwise, we'll announce development starts as they begin. With respect to the federal government getting involved with Penn Station, we think that's great. I'll turn that over to Barry.

As you're aware, we've spent a lot of time over the last several years working on several public-private partnerships to make Penn Station better, whether the Moynihan Train Hall, the Long Island Rail Road 33rd Street Concourse, or new initiatives working with the government on Seventh Avenue. Anyone that wants to keep investing in Penn Station and continuing the work to improve it, we support that.

When was the last time you walked through the PENN District?

Last weekend.

Good. I think you'll agree the PENN District is no longer a sloppy district. What we've done on Seventh Avenue, the granite on the sidewalks, Moynihan Train Hall, the Long Island Railroad Concourse — the PENN District looks very different today than five years ago, and we're proud of that. Anybody who wants to help finish the job below ground, we're in favor; we own the above ground, while the government and railroads own the below ground.

And your next question today will come from Caitlin Burrows with Goldman Sachs.

You mentioned in the prepared remarks that you didn't think the uncertainty in the macro would impact leasing. What gives you that confidence? Any more specific detail you can give on trends through 1Q and April and now into May?

We have not seen an impact on our leasing as of yet. We're mindful of it and paying attention, but to date we have had no impact on our leasing.

Caitlin, to add to Glen, if you look at the Amazon announcement, the Deloitte announcement, the NYU announcement — these are all made in the last couple of weeks. Companies and tenants are aware of macro events and still making decisions and proceeding. That's not to say every deal will proceed, but there's a bias to continue. On the retailer side, those that source product overseas have seen more dramatic impacts and may pause until they see exact effects. So far, not much impact on our leasing, but we are monitoring closely.

You mentioned NOI and earnings coming on over the next couple of years and that there will be some refi headwinds. Regarding 2025 and early 2026 maturities, any guideposts on the amount of refi headwinds? Should we assume similar spreads in place or that spreads go up as well?

The team is hard at work on everything that's maturing. Pricing has widened a bit with recent volatility, but the market is open and you can execute. We have a number of things in process we hope to get done this quarter. Generally, many loans can be refinanced at par, and whether we choose to do that will depend on pricing. Market is supportive of proceeds levels. Asset by asset, some will roll over close to where they are today; others, like Independence Plaza which comes off a 4.25% fixed-rate loan, will see coupon expansion. Overall, there will be a little increase in interest, but not dramatic — that's baked into our guidance.

Our next question today will come from Ronald Kamdem with Morgan Stanley.

Two quick ones. First, should we expect same-store NOI to also accelerate through to 2027 as occupancy does, or are there other considerations? Second, can you remind us of your capital allocation waterfall between development, redevelopment, buybacks, etc., and any update on the Hotel Pennsylvania site and that potential sale?

In terms of 2027, absolutely — as assets get leased up, you'll see NOI follow that trajectory. This year will be relatively flat as we discussed. On capital allocation, we look at all opportunities and decide where to best deploy capital. Development is a long process, so capital is spent over years. Stock buybacks are not front of mind today; we still see value but our focus is investing in our existing business, whether new development or paying down debt. We're also looking at external opportunities but it's hard to put probabilities on those yet.

And your next question today will come from Nick Yulico with Scotiabank.

On the NYU transaction: you said it's accretive by $25 million annually. Paying off the mortgage looks like a $35 million benefit. Can you walk us through what's the offset from that? Also on the NOI side, any difference on the cash versus GAAP treatment going forward there?

I can take that. If you include the swap that we have at the corporate level, that's part of the $35 million figure you referenced. Excluding the swap, interest expense on that asset is $47 million. Current NOI is around $49.5 million, so that gets you to roughly flat on current NOI. Looking forward and including the payment we'll get from NYU plus the Wegmans condo income, plus the interest on the $200 million we're retaining, that gets you to about $29 million of net benefit — that's the $25 million to $26 million Steve referenced in the prepared remarks.

That's very helpful. Second question: you gave the leased number for PENN 2 at around 50%. Is it possible to get the leased number for PENN 1? I know occupancy is 88% — is the lease number higher than that?

It's the same number.

And your final question today will come from Alexander Goldfarb of Piper Sandler with a follow-up.

Steve, I realize you're probably not going to give intimate details of the ground rent litigation. But from a big-picture perspective, the arbitration panel agreed to $15 million, but now there's litigation pursuing $20 million. How does that work? I would have thought the arbitration panel was the final determinant.

Alex, the arbitration panel determined the base case annual rent of $15 million. There's litigation pending and appeals that could extend. If the fee owner prevails in final judgment, the annual rent for the 25-year term could be $20.2 million retroactive to June 17, 2023. We think we have a very good position, but the litigation will run its course. The arbitration handled the reset; depending on the litigation outcome the $15 million could become $20 million. We're in a pretty good spot; values have been established in either outcome.

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

Thank you, everyone. We've had a very robust conversation this morning. The first quarter was very active, very constructive with lots of good stuff. We look forward to seeing you at the next call, which will be August 5. Have a good summer so far.

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