Sl Green Realty Corp Q1 FY2023 Earnings Call

Thank you, everybody, for joining us, and welcome to SL Green Realty Corp's First Quarter 2023 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 2023 earnings and in our supplemental information included in our current report on Form 8-K relating to our first quarter 2023 earnings. Before turning the call over to Marc Holliday, Chairman and Chief Executive Officer of SL Green Realty, I ask that those of you participating in the Q&A portion of the call to please limit your questions to two per person. Thank you. I will now turn the call over to Marc Holliday. Please go ahead, Marc.

Okay. Good afternoon, everyone, and welcome to SL Green's earnings call. Thank you for joining us today as we review the first quarter's results and discuss improving trends. We see New York City as the office sector continues its recovery from the unprecedented three years of a pandemic economy. The commercial real estate sector seems to dominate much of the headlines these days, amplifying messages of doom and gloom and creating what I believe to be an over anxiety in the market that is most acutely felt in New York City, where many of the market opinion makers reside. Overly negative voices are overshadowing some of the positive signs that portend to a slow but steady recovery for a market that offers what employers want most: a highly educated, diverse, youthful and talented workforce. Midtown Manhattan also offers the most highly commutable office inventory with many buildings that are highly improved and amenitized and are at the forefront of innovation. It is clear that we are now in another moment of significant change as businesses rethink their office needs and cities around the world adapt to how the pandemic has changed central business districts in a way no one could have predicted. However, one thing we know is that New York is resilient. The city has reinvented its economy time and time again, whether it's responding to crises like 9/11, or identifying trends to attract and accelerate the growth of new industries and sectors like technology and venture capital. We always find a way to remain a global capital, attracting the talent that leading and growing companies need in times of change. There's no better place to be than here in New York City. The future of this great city relies on rethinking the arc of the workday and how we experience our CBDs, transforming them into vibrant 24/7 destinations. Our lives can no longer be neatly separated into work and leisure and entertainment, and there's an expectation that people coming into the office will have access to compelling experiences that make the trip worthwhile before, during and after the workday. There are a number of positive indicators and developing trends that give reason for pragmatic optimism, though clearly in a challenging environment. A rapid run-up in interest rates sent a chill through the real estate debt markets as lenders became concerned with decreasing interest coverage and refinance-ability of maturing loans. One-month SOFR today stands at 501, up from just 25% a year ago. But as the core inflation numbers begin to normalize and the labor market begins to cool, expectations as evidenced by the forward curve show one-month term SOFR receding to just 3.11% by the end of 2024. And similarly, the 10-year SOFR swap rate, which peaked at 3.97% just six months ago has already come in 73 basis points, and the forward curve implies now a 10-year silver swap rate of 3.3% by the end of 2024. So clearly moderating interest rates will have a positive impact on the real estate debt and equity capital markets. In the meantime, SL Green has hedged most of its interest rate exposure through strategic debt repayment and the use of derivative instruments like interest rate swaps, caps and collars. New York City employment is another area that I think is showing signs of significant improvement. The labor market in New York City has shown resiliency as businesses that employ office workers have raised all COVID year losses. There is recent evidence of higher office utilization within our portfolio as physical occupancy regularly exceeds 60% on many workdays, and the MTA announced that Metro North Railroad reached pandemic-era ridership records two days ago with 195,000 riders or 74% of the pre-pandemic average. So, it's the highest single-day ridership since the beginning of the pandemic. And during the seven days between April 9 and April 15, Long Island Railroad carried an average of 170,000 daily commuters, the best seven-day average in over three years. So, there is an increasing drumbeat of optimism about the return to work, and we hear it from more and more companies that are doing business here in the city, but national and global companies that are mandating people come back anywhere between three to five days a week, all within the past three months or so: JPMorgan, Disney, Twitter, Google, Goldman Sachs, Salesforce, Apple, and many others have come out with very definitive statements about a recognition that these businesses can be only at their most efficient and best when people are together in purpose-built, collaborative office space and not home or remotely. And I think that's why there has been this experiment over the past three years. Clearly, the major companies that span all different office sectors have concluded that the experiment is not working and thus requiring their people to come back, as I said, anywhere between three to five days a week. And that trend is something that we see on the streets, in the buildings, on mass transportation, and we think it's only going to get more momentum as this year weighs on because it makes sense. It makes sense for business, it makes sense for competitiveness. It makes sense for the re-imagination of our CBDs. And it's what people have done and it's how people are at their best. So, we're very optimistic in that regard. It took longer than we expected, but we now feel like things are coming around in the right direction. In terms of safety, New York City is becoming safer with crime stats heading in the right direction, including declines in overall crime and violent crime in the first few months of '23. We're also anticipating that there'll be some level of additional bail reform to be included in the state budget which will give judges clearer discretion over the imposition of bail. So while other cities are having difficulty getting a handle on crime, some other major cities are having difficulty getting a handle on crime, New York City clearly has a plan that is working. And for '23, New York City is on track to welcome 63 million visitors, including more than 10 million international travelers. That puts projected tourism within 5% of the prior peak in 2019, which represents a remarkable recovery. Summit's high attendance and first quarter results, which eclipsed our projections for the first quarter, certainly demonstrate that domestic and foreign tourism is back in a big way with the prime travel months still ahead of us. Perhaps one of the most important developments of the year is the completion of East Side Access, now known as Grand Central Madison. Long Island commuters now have direct access into Grand Central. The new terminal spans 43rd to 48th Street along Park and Madison Avenue corridors where much of the SL Green portfolio is situated. So with all that, I'm pleased with the start to the year we are having. Our results for the quarter were ahead of our expectations in several key areas. Mark-to-market rents and same-store NOI were both in excess of 5%. Our same-store office occupancy was slightly ahead of what we internally forecasted at just over 90%, and leasing volume of 504,000 square feet also outperformed our expectations. But the real highlight is forward-looking as we are building a leasing pipeline at a steady pace. The pipeline of leases now stands at 1.2 million square feet, which is up 70% from our earnings call just three months ago, I think it was the end of January. And to give you a flavor for the pipeline and preempt what I know undoubtedly will be someone's question later on, the pipeline is 80% financial services and includes 18 individual deals that we are working on at Graybar and includes 1 million square feet of space in same-store properties, which would absorb over 300,000 square feet of space of vacancy in those same properties. While overall vacancy sublet and availability is not yet declining in Manhattan overall, our leasing results and current pipeline is indicative of the fact that the Park Avenue East Midtown corridor is the highest performing in Manhattan, and tenants are responding to our well-located, repositioned and highly amenitized buildings in a very positive way. We are also benefiting from brokers and tenants who are scrutinizing much more carefully the financial wherewithal of landlords and the stability of the capital stacks in individual buildings that tenants want to locate in. These are areas where SL Green shines the most. In the investment marketplace, there are signs that demand is forming for high-quality commercial assets in Midtown, and we expect to see transactions announced over the next two quarters. Initially, these transactions will be for the well-located assets, some with financing in place and some with financing that will be arranged and generally involve buildings that are already fully repositioned and amenitized or are in the process of doing so. There is also more activity than usual in the user buyer market as evidenced by the recent sales totaling over $725 million to users like Hyundai, Dyson and Memorial Sloan Kettering, and we are aware of several other pending transactions for purchase or long-term capital leases by users. Taken together, these developing trends bode well for our 2023 business plan, and we are working hard to execute on a series of sales, joint ventures and financings. With that, I'd like to open it up for questions.

And our first question comes from John Kim from BMO. Your line is now open.

I was wondering if you could provide an update on the $2 billion of dispositions that you have planned this year, highlighted by 245 Park? I know that it's top of mind for a lot of people on this call, but any update that you can provide on those kind of conversations right now?

I don't believe we will complete the entire $2 billion pipeline. However, we are optimistic about our current position regarding the completion of joint venture sales and financings that are part of our 2023 business plan. The financing for 919 is on the horizon, and we are making great progress on the 245 Park development. Our plans for that project are set to position it as one of the top non-brand new construction buildings on Park, and we expect to lease it at rates reaching into the triple digits. There is a considerable amount of activity there, as we are engaging with several tenants, and our discussions are progressing positively. We are also pursuing other transactions, and there is still much to accomplish this year. The market appears to be improving, and we believe the assets we have chosen are the right ones for monetization through sales or joint ventures. They are situated in prime locations, and we are committed to making it all happen.

My second question is about your secured debt that recently expired, which still appears on your balance sheet, just like it did last quarter. You mentioned a resolution with the lenders, and I would like to know what that resolution entails. Additionally, is defaulting on the debt a possibility for you or your partners?

Secured debt, which question?

Resolution of secured depositions that were in past maturity. In particular, it was 717 Fifth and 11 West 34th Street, yes, John.

Which ones, John, which pieces are you talking about, so we can hit it?

I apologize I've gone through the supplement, but there was some debt that expired in December and February this year.

111 West 34th Street consists of high street retail positions that we do not control, and we maintain a passive role in these investments. At 717, we have extracted all our investment and profit from the asset, holding a 10% passive position, and at 11 West, we have 30% of that position. We lack control over these assets, so we receive updates from our partners, but we continue to assess these investments. As I mentioned in previous quarter calls, lenders will either collaborate with us on these assets or they will not.

And John, to Andrew's point, it's Matt. You referenced the December '22 maturity. That was 1552 Broadway. And as you'll note in the supplemental that matured in December, we worked with the lender and just executed an extension through to 2024.

The other one was 650 Fifth Avenue, which expires this month.

Yes. These are small retail assets in which we have minimal ownership and a passive interest that does not significantly impact our earnings on the balance sheet. Is that what you're referring to, or is it something else?

If defaulting is an option, it's really up to the lender in these situations, which I said last quarter, and I'll reiterate again. The lenders are going to determine whether there are defaults or not.

Yes. But again, the consequence of that determination, unless I don't want to understate it, Matt, is not material.

There's no NAV. There's no book value. There's no earnings from the assets.

From your perspective, that's okay.

I consider that to be immaterial. I don’t wish to undermine your question, John, but what Matt pointed out is accurate. You’ve mentioned assets that we view in terms of carry and see as having no impact on earnings. Thus, it's not the main focus of my comments. That's my point.

Any commentary on your partners though because you may have to be aligned with them?

Well, we'd rather...

There's no commentary. Yes.

And thank you. And one moment for our next question. And our next question comes from Steve Sakwa from Evercore ISI. Your line is now open.

Great. Marc, or maybe Steve Durels, could you just talk a little bit more about that $1.2 million? I guess what I'm trying to figure out, Marc, is, are these tenants kind of expanding? Are they staying the same? Are they shrinking? If they come into your portfolio, that's great. I'm trying to just think about the impact on the overall market. And just trying to get a sense for how these tenants are thinking about space needs? And what's the density?

I provided a lot of information on this topic. There are around 40 to 50 deals involved, with many expansions, some remaining the same, and a few decreasing. I noted that over 300,000 square feet is currently vacant in the same-store portfolio, while there is more than 500,000 square feet of vacancy across the entire portfolio, including both same-store and non-same-store properties. Most of the tenants are financial entities, with some increasing their space, others decreasing, and many maintaining their current levels, all in alignment with our expectations and possibly slightly exceeding our velocity projections. In the first quarter, we performed well on mark-to-market pricing in the same-store category. Specifically, there are 18 deals at Graybar alone, and while I am not certain of the total number of deals, I think it could be around 40.

Out of the 1,200,000 square feet, 900,000 square feet are from new deals and 274,000 square feet are from renewals. Mark discussed how we are filling vacancies in both same-store and the overall portfolio, which amounts to 45% of 1.2 million in occupied space. Additionally, Marc highlighted that the Graybar news is significant. We are observing a wide variety of tenant sizes at different price points. The previous trend of leasing activity primarily occurring at the top end of the market is changing rapidly. We are noticing an increase in proposal and tour activity in the more price-sensitive segments, which we haven't seen in the last three years. This indicates a revival in the marketplace, with small and midsized tenants returning. For a healthy 400 million square foot market, this is essential, and it's encouraging to report this.

Okay, great. Maybe just moving on to One Madison. Are you still expecting the TCO in the fourth quarter? And I guess, Matt, when you do get the proceeds in from the joint venture partner, how do we think about the applicability of those proceeds, which I think are just shy of $600 million?

Yes. We are getting $577 million from our partners down at One Madison when we get TCO. We are running ahead of schedule on the construction there. So we had it slated for the fourth quarter, hopefully, early fourth quarter. Those proceeds immediately go to pay down corporate debt. The first $425 million goes to pay down short-term unsecured facility we put in place last year. And the increment above that, another $150 million or so goes to either the line of credit or other corporate debt.

And thank you. And one moment for our next question. And our next question comes from Alexander Goldfarb from Piper Sandler. Your line is now open.

Matt, moving on from Steve's question, I believe he was referring to the total cost of ownership for One Vanderbilt, which you mentioned is around $570 million. You also have potential joint ventures, particularly at 245 Park, and possibly at One Madison. Additionally, there are the condos in uptown that you are developing. Could you provide an overview of the total potential cash proceeds you are expecting to receive this year from the various joint venture sales or outright condo sales you have planned? One Vanderbilt seems like a sure thing, correct?

So I'm going to just correct on the addresses a bit there. The proceeds are coming in from our partners at One Madison on TCO. There's no other contemplated partners down at One Madison. And we had talked about potentially an additional partner at One Vanderbilt; we talked about it the last couple of years, and we may or may not do that this year. I don't want to step through every component of our business plan. And that business plan obviously changes over time. 245 is the most significant, and we are working hard on that, as Marc said earlier. And then we have some other assets either wholly owned or outright sales, JV interests, other things that we are working on. But I'm not going to step through every one of those except to say we're focused on trying to get to our $2 billion target, the most significant component, which is 245 Park.

Okay. You also have the $570 million from One Vanderbilt scheduled for later this year, correct?

Yes. That is the only condition of that is completing One Madison, that's obviously happening.

Okay, great. My second question is about an article from The Real Deal a few weeks ago regarding 625 Madison, which included some additional details. Could you provide us with an update on the status of the litigation or negotiation, including any pending resolution or any other updates you can share?

Well, with respect to the leasehold position there, we expect the rent reset arbitration to conclude imminently. As we've discussed in prior quarters, we may update our business strategy for that leasehold position following the resolution of that rental reset process. And if we ultimately decide to adopt a different strategy for that leasehold position, that could impact the carrying value of that leasehold position going forward, obviously.

So what does that mean impact the value? That's up, down? What does that mean?

It depends on the rent arbitration. It's up to the arbitrator.

Yes. It's a straightforward situation with differing opinions on what the rent should be. This has been a point of contention for some time, and we expect a resolution soon. Once we have that decision, it will guide our future actions regarding the leasehold, either confirming our ability to maintain it or indicating if we need to consider a different rent amount.

Non-economic.

Noneconomic, then we'll have to deal with that. But that's an investment we've had for over 15 years. It's net leased to Apollo. As Andrew mentioned, with 717, we've redeemed all our capital on that investment.

It's been successful.

And in addition to that lease position, we have our mezzanine interest on the fee position as well, also related to 625 Madison.

And that's a different investment and we don't anticipate any impact on the value of that investment based on the outcome of the rent reset arbitration.

And thank you. And one moment for our next question. And our next question comes from Anthony Paolone from JPMorgan. Your line is now open.

I guess first question. On green loan servicing, just wondering like maybe if you could talk about that or how we should be thinking about that? Because it seems like that could be a good business at the moment. I'm wondering if you think about that as just a fee generator, or if there's something more strategic in terms of that potentially helping you find investment opportunities or other strategic benefits?

No, I think it's primarily a fee generator. We must service every loan to the servicing standards and cannot prioritize our own interests when servicing loans as a fiduciary. It is a strong active business, supported by a great staff and team that manages it. We have successfully resolved many issues on behalf of our clients and customers and definitely plan to grow that business as more situations arise that require servicing and special servicing.

Okay. And then just my second one. I know it's early, but any thoughts on Credit Suisse and their space at 11 Madison and what, I guess, UBS may ultimately do with that, like or how you're thinking about it?

It's a long-term lease. As announced, Credit Suisse has merged with UBS, with UBS as the surviving entity. We see this as a credit upgrade to the lease, even though Credit Suisse was a reliable tenant for over 15 years. The merged entity is expected to be even stronger. However, we do not have any visibility into their plans for the space. What are your thoughts on that?

2037.

It's a lease that expires in about 14 years. Therefore, the decision will be up to them. The lease is intact, and we believe the building is in good condition.

And thank you. And one moment for our next question. And our next question comes from Tom Catherwood from BTIG. Your line is now open.

For Steve, maybe just pivoting back to the leasing pipeline, I think in the second half of last year, you had talked about some deals coming off the market as tenants were kind of evaluating the economic situation and evaluating their businesses. Is some of this jump up in pipeline since earning January, let's call it. Is that the 2022 deals reengaging with the market? Or do you have a sense that this is kind of incremental new leasing above and beyond that?

I think it's both. There was a clear pause by tenants in the fourth quarter due to rising interest rates and concerns about a recession, which led them to halt their searches, contributing to the leasing slowdown. However, we rebounded strongly. In our portfolio, we recorded 500,000 square feet in the first quarter, which is a significant achievement. The increasing pipeline reflects both tenants' confidence in their businesses and better clarity on the overall economic situation, along with the trend of returning to the office. This sentiment is widespread, affecting small businesses as well as larger corporations. Additionally, financial services, private equity, and hedge funds continue to drive leasing activity. We are noticing high demand along Park Avenue, and I could have justified adding another 500,000 to 600,000 square feet to our pipeline based on the term sheets we're currently exchanging, although it's still too early to have complete clarity on those. Overall, this is a positive indicator of where the market is headed.

I appreciate that. Thanks, Steve. And then kind of focusing on a specific asset here. You moved 2 Herald into the redevelopment bucket this quarter. You've talked about WeWork leaving 180,000-plus square feet there, and potentially looking at either extended stay or dormitory use. Can you talk to the timing of the expected vacancy there? And any updates on the redevelopment?

As to vacancy, WeWork is out. They vacated earlier in the first quarter, and we're evaluating the redevelopment opportunities for the asset right now.

And thank you. And one moment for our next question. And our next question comes from Camille Bonnel from Bank of America. Your line is now open.

More of a big picture question. On a lease percent, your exposure to tech is growing. Just given this industry has been accelerating layoffs and pushing to bring employees back into the office, but it continues to lag, how do you think about your overall exposure to this industry? And from your experience of managing overall tenant risk, is there a particular industry mix you envision for the portfolio?

I believe our exposure to tech is beneficial. It has been a significant advantage in our portfolio and continues to be so. I assume the question pertains to our portfolio rather than the broader market. A recent example is our deal with IBM at One Madison. Additionally, we secured a deal with Kyndryl at One Vanderbilt.

Bloomberg.

I believe that we have slightly less exposure to the tech sector compared to others in the city, although we would welcome more. Over the past decade, tech has become a significant player in the city alongside business services and finance. While there are currently announced layoffs, these global and national announcements tend to affect Manhattan less than other markets, as the workforce here is more inclined to retain roles in engineering rather than marketing, which is more common in smaller markets. So far, the job situation in New York remains strong, with 1.5 million office-using jobs, including tech and information services. There haven't been significant signs of concern in the tech sector, and any job reductions have been balanced by growth in finance and business services. I believe tech will see growth again after they adjust their workforce following the large amount of office space they occupy in Manhattan. Once this adjustment is complete, I expect growth to resume, and I'm confident they will remain a vital part of the landscape.

Okay. And for my second question, you've made good progress versus your initial targets on the leasing and revenue front. But like you mentioned, it doesn't seem like investors are willing to attribute any credit to this performance. Wanted to get your thoughts on what you think is being priced into the equity markets today. And at these valuation levels, do you see potential for equity to equity consolidation in this backdrop?

I mentioned earlier that I believe there is a level of overexcitement. As a company, we've been in this industry for 26 years, with many of us having over 30 or 35 years of experience, mostly in New York. We have faced similar situations before. The typical pattern is first the narrative, then the debt markets improve, followed by an influx of deals starting with smaller ones and gradually moving to larger ones. By most measures, I would say this is a relatively favorable market, given we have jobs and solid occupancy rates, especially in our portfolio. In the top buildings and submarkets of Manhattan, rates are significantly higher than before, but when looked at in absolute terms, they remain relatively low. Lenders are generally cooperating with borrowers, especially those with strong properties that need a bit more time to stabilize. We observe this as a prevailing trend. While I cannot comment on specific pricing or market behavior, I believe the pervasive negative narratives are exaggerated when considering our results and pipeline. Our business model is straightforward; we acquire or develop spaces, enhance them to a high standard, and lease them to users. Between what we've already leased and our upcoming opportunities, we believe we are making progress. We hope to see some improvement in the debt markets, and when that occurs, I expect a rapid recovery.

And thank you. And one moment for our next question. And our next question comes from Blaine Heck from Wells Fargo. Your line is now open.

Great. Just following up on the asset recycling front. Is there any color you can give on the pricing of some of these sales that you're looking at for this year? Has your expected pricing on the sales, especially 245 Park, changed at all in the last kind of few months?

I don't think we'll go through the pricing for each asset individually. Our goal is to achieve the best execution. We believe that everything we aimed for this year is quite reasonable. Historically, compared to where pricing was a year or two ago, there's a significant amount of equity currently looking to enter or re-enter Manhattan at attractive levels. We've been traveling both domestically and internationally, and there’s substantial interest in New York City. I'm not sure if the market fully recognizes this. However, regarding investments in the U.S., both foreign and domestic capital view today's environment as a favorable entry point. We have reasonable expectations for everything we plan to accomplish. We avoid setting unrealistic expectations and instead focus on what we think our market clearing levels are, and it's our responsibility to execute effectively.

So following up on that, Marc, and just based on your conversations that you guys are having, can you talk about kind of the return hurdles that those foreign capital entities, wealth funds and maybe private equity.

I'd rather do it when the deals are done. There's no reason to spec. I mean, we have a firm handle on where we think that market is. So let us go execute and then it'll all be illuminated.

And thank you. And one moment for our next question. And our next question comes from Derek Johnston from Deutsche Bank.

And I guess this may be for Andrew. Can we get a sense of the mark-to-market value, or perhaps fair value of the PPE book? And secondly, what percentage of the loans in the book are coming due over the next two years?

In terms of mark-to-market, I would say it's our carrying value for the loans. We evaluate this with the accounts quarterly. The DPE book has been paid down significantly to a couple of large positions, with 625 being the largest, Madison. What was the second part regarding value?

I was hoping to understand what percentage of the loans are due over the next two years.

There's a maturity table in the supplemental, Derek, that has all of the maturities, most of them.

I mean it's all short term.

Short term.

DPE has always been a short term, so one to three years. So I'd say over the next two years, the majority will.

Yes. We have one large pref equity position, which is February 27. We have a $20 million residential position, which is December 29 and then the balance are in the relatively near term.

And thank you. And one moment for our next question. And our next question comes from Tayo Okusanya from Credit Suisse. Your line is now open.

Yes. Good afternoon, everyone. Thanks to all the color around just how you're progressing with the asset sales. I'm just curious, I mean, if credit markets remain tough, if it's hard for anyone to get financing to kind of pull this off, how do you kind of think about, if I may use the word, Plan B in regards to trying to either delever the balance sheet and kind of looking from an alternative source of capital. Like can you just kind of help us think through what Plan B would be?

Tayo, we are concentrating on our primary strategy. The skepticism evident in the market is clear on this call. We believe we will achieve our goals. While there are alternative plans, our focus is solidly on execution. We have sufficient time, possibly completing our objectives within the next few months or even extending to nine months if necessary. We possess top-tier assets that attract substantial institutional interest, both domestically and internationally, and we are ensuring they are well-leased and highly improved. The demand is there, and it is up to us to act. We will do whatever is necessary to achieve results. The mention of a Plan B suggests a lack of commitment to Plan A, which is not the case for us right now. Although there are numerous other strategies or forms of capital we could explore, we are straightforward about our approach. We aim to sell certain assets as we do each year and have done for 25 years. Additionally, we will consider joint ventures with top partners for our core assets. Currently, we have one financing opportunity that we believe is imminent. I can't provide further details beyond this single financing, but we will reconvene in three months to share more updates. We hope to have some announcements to make before that time as we continue our efforts.

And thank you. And one moment for our next question. And our next question comes from Peter Abramowitz from Jefferies. Your line is now open.

I just wanted to ask about 919. I know you probably can't speak in any detail, but I guess, how is the pricing kind of coming out relative to what you were expecting?

That relates back to the earlier question I was asked about pricing. As soon as we have something to share, it will be announced in the press. It's not our usual practice to discuss market transactions we are involved in. We have never done that, and we won’t do it now. There’s no reason to. However, once we make the announcement, which is coming soon, you will see it in the press.

I'm curious about your plans and what you hope to achieve. You don't need to provide a specific number, but have you gained any insights from this process compared to your previous market experiences? I'm essentially asking what you are planning for.

I'd say if we have a successful conclusion, then what will learn or reaffirm is that for good sponsors, good assets, good locations with relatively low LTVs, there's a market to consummate that deal. Yes, I would say we've learned that. I'd say that we just maybe be confirmatory if we can get that done.

Sure. And then I guess just in general, how are lenders thinking about LTV in general, just over the last...

The lenders are probably in about 5 to 10 percentage points from, let's call it, the peak of the liquid market. So much more in that 50% to 55% LTV range.

And thank you. And one moment for our next question. And our next question comes from Ronald Kamdem from Morgan Stanley. Your line is now open.

Great. A couple of quick questions. The quarter included various factors, such as the $0.29 judgment proceeds and $0.10 in loss reserves, with a note in the press release indicating it was $0.13 above expectations. While I understand you haven't provided updated guidance, as you consider your yearly guidance, are there any additional insights you could share regarding these factors and their impact on your outlook? Should we interpret this essentially as a $0.13 increase?

Let's discuss the quarter briefly. We highlighted a few key points. The resolution with Victoria's Secret is a significant achievement, contributing $20 million to our cash reserves. Out of that, $0.13 was unexpected, although we also had $0.10 in reserves that was not included in our guidance. Therefore, the net positive impact is $0.03. The rest of our strong performance this quarter comes from high-quality improvements in our net operating income. Our properties greatly exceeded expectations, which is evident in our same-store cash NOI and earnings, particularly on the revenue front and even more noticeably on the operating expense side, where our operations team excelled in reducing overhead costs. We also gained from lower utility expenses. Overall, we surpassed our expectations for the quarter and confirmed our $0.30 guidance range, staying within that limit. We're closely monitoring the forward curve, as we currently have less than 10% floating rate debt. While this factor isn't pressing, we remain attentive to it. This is why we maintain a broader guidance range, as we did when we started the year. After three months, we will reassess our strategy.

Okay. But is there a way to figure out if you're getting closer to the higher end or the lower end, or you're just keeping the whole range?

That's what ranges are for.

Keeping the whole range.

The next question was about 919 3rd Avenue. Since you can't comment on whether it's imminent, could you provide some broader insights regarding the refinancing environment? Specifically, are there any numbers available concerning rates and LTV? You mentioned potential for more collateral earlier. Any additional details on the current environment and its changes over the past month or two would be appreciated.

It seems we're in a similar situation. However, banks reported strong earnings earlier this week or last week, which I believe is important. Leasing will be a significant factor in improving things. The larger banks that provide substantial liquidity for Manhattan deals having a strong top line is very encouraging. I anticipate that they will soon return to purchasing the safest tranches of debt. Liquidity tends to recover quickly, and we have witnessed this pattern repeatedly. The market fluctuations will happen weekly, but the upward trend seems promising. Hopefully, we have seen the worst of the slowdown. As deals are completed, they establish benchmarks, and with more transactions, we'll return to a balanced market before we know it. We'll have to see how things develop; I believe we should wait about three months to reassess on the next call, and I hope we can provide more detailed information then.

Helpful. If I could sneak one quick. And any update on sort of the casino license? I don't think it's been asked, where that stands? How you guys are thinking about it?

There is no new information since our last call, which I believe is what you're asking about. However, we are actively pursuing a full gaming license in Times Square. We strongly believe that establishing a world-class gaming entertainment hotel destination in the heart of Times Square will benefit everyone, including businesses, residents, and Broadway. This multibillion-dollar development, in partnership with Caesars Entertainment and Roc Nation, would significantly contribute to revitalizing New York, which I would argue is the world's most important tourist destination. We have support from a growing coalition of small businesses, labor groups, restaurants, hotels, and many local residents. I believe we are well-positioned to compete for one of the three licenses. Currently, we are in the process of submitting requests for applications; questions were sent in back in February, and everyone is now waiting for feedback from the state on the next steps. We anticipate taking one more action.

Well, I'm actually showing no further questions. So I would now like to go ahead and turn the call back over to Marc Holliday for closing remarks.

Okay. Well, I want to thank all of you who made it to the end here of the call, and looking forward more than most of you on the call the next three months from now. And hopefully, a lot of what you're hearing now will be able to speak about it in more detail then, and appreciate the continued support of our shareholders. Thanks.

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