Good morning and welcome to the Vornado Realty Trust Second Quarter 2024 Earnings Call. My name is Roger 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. Steve Borenstein, Executive Vice President and Corporate Counsel. Please go ahead.

Welcome to Vornado Realty Trust second quarter earnings call. Yesterday afternoon, we issued our second 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, 2023 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. Our business is on plan and continuing to improve month by month. Our primary focus is always on leasing and I can report that PENN 2 is extremely active and further that in the overall portfolio more than two-thirds of the recent vacancies have already been spoken for. Our focus continues to be on enhancing our liquidity, reducing leverage, and of course, taking advantage of opportunities created by the current market dislocation. New York City is as crowded as ever and that’s a good thing. As I predicted over the past couple of years, working at the kitchen table wasn’t an existential threat. We now see building utilization percentages in the ‘70s and that’s just about normal. Tenants are expanding and growing and actively searching for space. We actually competed in a market of over 200 million square feet. And in many of the prime submarkets, good spaces are being leased and rents are rising. It may be that the most important dynamic in our market is that it is almost economically impossible to build new, thereby cutting off new supply. There hasn’t been a new office building of size started in New York in the last five years. If history is a guide, when supply shuts down, it quickly leads to a landlord's market. As Michael will cover in a moment, we are off to a very strong start in our leasing for this year. The Bloomberg renewal and extension of the 947,000 square feet at 731 Lexington Avenue, creating 16 years of term, is the highlight. And we have good activity at all of our assets. As I said, at PENN 2 with the lobbies, common spaces, amenities, and plazas now complete, we are seeing a significant uptick in tenant activity and our pipeline again is strong. Prospective tenants are really appreciating our transformation and that PENN is really an extension of the new ecosystem from Hudson Yards to Manhattan West to PENN. The public space surrounding PENN 1 and PENN 2 is transformational and I encourage all of you to go out and check it out. The district is really bustling with our new food and beverage offerings. We could not be more optimistic. I mentioned on the last call that we have been working on several large monetization transactions. We announced the first one yesterday, the sale of our portion of Uniqlo’s Fifth Avenue flagship to Uniqlo for $350 million. This asset is in our retail joint venture, 52% of which is owned by us. Uniqlo is also acquiring the upper two floors of their store from the office owner. This transaction continues the theme of Fifth Avenue users purchasing their space. Uniqlo’s lease was set to expire in April 2026 and perpetuating their control of this high-volume, prominent Fifth Avenue store was paramount to the tenant. I bet this won’t be the last user purchase on Fifth Avenue. As you will recall, we recapitalized this asset at a 4.5% cap rate as part of our street retail joint venture in 2019. The sale to Uniqlo is at a 4.2% cap rate on in-place NOI and the cap rate on the mark-to-market rent is in the mid to high 3% range. The sale is expected to close in the first quarter of 2025. Importantly, all net proceeds will go towards repaying our preferred equity on this asset. There are a few transactions in our pipeline to repatriate portions of the remaining $1.5 billion of preferred equity, all of which will substantially increase our liquidity. The second transaction, I’ll quickly comment on, which has been moment in the market relates to 770 Broadway. We have reached a handshake deal with a user for a long-term master lease of the entire 1.1 million square foot office component. We will retain the 92,000 square foot Wegmans market. After a difficult four or so years, market dynamics are now reversing and becoming more constructive. There is no new supply on the horizon. Tenants are growing, expanding, and searching for space. And New York continues to be the single best market in the nation. And importantly, our PENN District is finally showing brilliantly. A word about the elephant in the room. The activity in the government bond and stock markets over the last three days is confirmation that the Federal Reserve's fight against inflation has succeeded and likely foretells a significant reversal of interest rates. All this will have a significant positive impact on our numbers and our values. Now over to Michael to cover our financials and the market.

Thank you, Steve, and good morning, everyone. Our overall second quarter FFO was $0.76 per share. This excludes $0.19 of noncomparable items, mostly our share of the gain from the discounted debt extinguishment related to the refinancing of 280 Park Avenue and gains from additional 220 Central South unit sales. Second quarter comparable FFO as adjusted was $0.57 per share compared to $0.72 per share for last year’s second quarter. This decrease was attributable to the known items we previously discussed and consisted of a 7% lower NOI from known move-outs net of rent commencements, $0.07 of termination income in 2023 from a former tenant at 345 Montgomery Street in San Francisco, and $0.03 of higher net interest expense, partially offset by $0.02 of higher NOI from signage and the net impact of other items. We have provided a quarter-over-quarter bridge in our earnings release and in our financial supplement. On our last earnings call, we stated that we expect our 2024 comparable FFO to be down from 2023 comparable FFO and of $2.61 per share, primarily due to higher projected net interest expense of about $0.30 per share and the temporary impact of known vacancies at certain of our properties, primarily at 1290 Avenue of the Americas, 770 Broadway, and 280 Park Avenue of roughly $0.25 to $0.30 per share. This is still a good assumption as these items are expected to have a larger impact during the second half of the year. We already have commitments for about two-thirds of the aforementioned vacant space, assuming the 770 Broadway transaction is finalized, but the GAAP earnings from these leases won’t begin until the latter part of 2025. Thereafter, we expect earnings to increase as income and the lease up of PENN and other vacancies comes online and as rates trend down, partially offset by the reduction of capitalized interest. Now turning to the leasing markets. The overall tone of the New York office leasing market continues to be upbeat as we enter the second half of the year, particularly in Midtown. Private sector employment has reached a historic high reinforcing that New York remains the leading magnet for talent in the U.S. Tenant demand for Class A properties is strong, outpacing 2023, and the mix of leasing is well balanced between financial services, legal, and technology companies. Given the lack of available quality blocks of space in Midtown Manhattan, a dearth of new supply for the foreseeable future, slowing sublease additions, and office conversions gaining momentum, many industry analysts are predicting a tightening of vacancy rates across the site and well-capitalized Class A properties as we head into the second half of 2024 and into 2025. A spike in rental rates, much like what we have seen on Park Avenue and the new West side should naturally follow. All this bodes well for Vornado’s best-in-class collection of high-quality repositioned assets within New York’s most coveted submarkets on the new West Side, Park Avenue, and Sixth Avenue. Our 2024 leasing activity reinforces that tenant demand for top-of-market properties near transit and which provide the type of space and amenities companies desire for employee retention, recruitment, and flexibility remains strong. During the first two quarters, we leased a total of 1.6 million square feet and market-leading average rents of $130 per square foot. This includes our second quarter lease renewal of Bloomberg for the global headquarters at 731 Lexington Avenue, where they will continue to occupy all 947,000 square feet of office space in the building. Excluding the Bloomberg renewal, our transaction volume for the first half of 2024 is 666,000 square feet at starting rents of $95 per square foot with a cash mark-to-market of 9.1%. During the second quarter, we completed many important leases throughout the portfolio in addition to Bloomberg, including 11 leases at PENN 1, totaling 123,000 square feet at an average starting rent of $95 per square foot. The transformation of PENN 1 with its unmatched amenity program continues to attract tenants from all industry sectors who are previously occupying space in other city submarkets and at rents above our original underwriting. We continue to attract leading financial services companies to 280 Park where this quarter, we completed a long-term transaction with Elliott Management for 149,000 square feet in the base of the building. The addition of LA to our tenant roster, where they joined PJT Partners, GIC, Antares, and Investcorp, cements Park as one of Manhattan’s premier financial services properties. Importantly, we have now leased 225,000 square feet of space at 280 during 2024 at an average starting rent of $124 per square foot. Looking forward, our pipeline is roughly 2.6 million square feet, which consists of 1.6 million feet of leases in negotiation and well more than 1 million square feet in some stage of proposal negotiation. The pipeline consists of substantial activity at PENN 2, where we have seen a significant pickup in tenant tour activity and proposals during the second quarter following the recent completion of the project, the opening of our new pedestrian park at Plaza 33, and completion of our expansive district-wide new sidewalk program. Our total pipeline of deals is a 50-50 mix of new tenant deals vying for our current vacancies and important renewals as we continue to work hand-in-hand with our tenants expiring during the next few years. In San Francisco, at 555 California Street, we completed a 10-year lease roll with Jones Day for 62,000 square feet and are currently finalizing a 46,000 square foot renewal expansion with one of our leading financial services tenants in the building. Additionally, we are in late-stage letters of intent with several of our major tenants raising a total of 250,000 square feet with upcoming lease expirations in 2025 and 2026. All these deals have positive mark-to-markets on the rents reflecting 555’s trophy nature. Finally, in Chicago at theMART, we completed a long-term expansion and renewal lease in July with one of our major tenants, which tripled inside to 160,000 square feet. While the Chicago market is challenging, we are benefiting significantly from the quality of our assets with our market-leading work-life amenity program and strong sponsorship, and we have a robust pipeline. Turning to the capital markets now. While the financing markets remain challenging for office and banks remain out for theMART, we are beginning to see some early signs of improvement with the CMBS market open again for selective high-quality assets and even ones that are less straightforward. Rates are beginning to moderate and the forward curve is projected to come down meaningfully over the next year, which should help borrowing rates. We continue to be very active on the capital markets front. In June, we refinanced the loan at 640 Fifth Avenue in our street retail joint venture, eliminating the $500 million recourse obligation to the company. While the rate is higher than we’d like, this financing demonstrates that the market is open again for high-quality retail and office assets. At 731 Lexington Avenue, with the Bloomberg renewal now complete, we’re in the process of refinancing this one as well. We will have then taken care of all of our significant 2024 maturities and are in the process of addressing our 2025 maturities. Our balance sheet remains in very good shape with strong liquidity of $2.7 billion, including $1.1 billion of cash and restricted cash, and $1.6 billion undrawn under our $2.17 billion revolving credit facilities. With that, I’ll turn it over to the operator for Q&A.

Thank you. Today’s first question comes from Steve Sakwa with Evercore ISI. Please go ahead.

Yes. Thanks, good morning. Steve, you certainly piqued my interest with your 770 Broadway comments. I’m just not sure I fully understand the transaction and discussion because I know that building is about 80% occupied today with a couple of different tenants. So I’m just not exactly sure if this new tenant subleases the space from the old tenant? Or just kind of how that, I guess, I didn’t really quite understand the whole transaction that’s pending.

Steve, I wish I could help you, but I’ve said all that I’m going to say on that topic. It’s an important transaction. We’re under a confidentiality agreement, and that’s how I’m going to say is that there’s an important protection and process. Sorry.

Okay. Maybe switching gears to the PENN 2, and I guess, Michael, the pipeline you talked about sounds quite strong. Can you maybe just provide a little bit more color on the types of tenants that you’re speaking to? And are these tenants that are currently already in the marketplace and more lease expiration-driven or are these kind of new requirements in the market looking at two PENN?

Hi, Steve, it’s Glen. How are you? So it’s a mix of both tenants expiring soon and some tenants expiring in the outer years. But I’ll tell you at PENN 2, we have tenants designed for the same space right now, both in the podium and in the tower. We have technology interests, fashion interests, financial interests, legal interests, academic interests, and media. We have interest from all types of sectors on all the space. We’re in different sorts of paper negotiation with all these tenants. So we’re seeing very, very strong activity as we sit here. Similarly, at PENN 1, we’ve leased about 155,000 feet at PENN 1 this year at rents that are well above where we thought we’d wind up there. The types of tenants keep coming in. We lease out right now with a major pharmaceutical company for two floors and we have other activity coming into PENN 1. And with that, we’re also seeing great activity around the district at PENN 1 and some of the other properties. So I would tell you we’re really seeing a lot of strong demand now in PENN. When you walk the street, it’s really spectacular, everything is looking great. The reception is getting better and better with each passing day. So we’re super excited about what’s to come.

Okay, thanks.

Thank you. Next question today comes from John Kim at BMO Capital Markets. Please go ahead.

Thank you. On the Uniqlo sale, can you just talk about the earnings impact? I think you saw that great price per square foot. But I think your preferred gets redeemed, so might be slightly dilutive in the near-term. And also, you still own five assets on Fifth Avenue in that prime quarter between 51st and 55th Street. Is $20,000 per square foot the right way to value the remaining retail? And do you plan to monetize any further assets there?

Well, there’s a lot in that, John. But so I’ll try to remember your question. If I forget, remind me. But thank you. I think it’s an outstanding execution. And I think if you look at the valuation, Steve talked about the cap rates and the value, the income is actually up a little bit from the 2019 transaction. That would effectively tell you that the retail value that we sold in 2019 is back to those levels. So if you take the preferred and just where the value of the equity was marked at the time, that’s about $16 a share, which I don’t think our stock price reflects. So eventually, people will appreciate the valuation of Fifth Avenue. But on the per square foot, $4,000 is that’s the entire space. I think the most important thing to focus on when you’re looking at Fifth Avenue retail is what’s the amount of frontage, what’s the amount of ground for square footage. And when you take out a small allocation for the second floor given the rents are lower, it’s about $50,000 a square foot for ground square footage. I think that’s a more representative metric for Fifth Avenue retail in terms of the ground space. Every user sale creates more scarcity in terms of what’s remaining on Fifth, which should drive both rental rates as well as valuations for those that want to keep buying. We are pleased that we own a significant portion of the frontage sale. We still own over 20% of the prime Upper Fifth Avenue frontage, which puts us in a good position. Let’s talk about the earnings impact, which I think was your first question. All the proceeds will go to repay our preferred equity, we are owning at 4.75 today. The entire amount – if you remember the original structure of the transaction, the preferred was a proxy for first mortgage financing, so it allowed us to defer any gain. We are going to refinance the preferred; once it gets paid off, that triggers the gain. The entire $340 million will be gained. It will likely close next year. Depending on what transactions we have in terms of losses, we will be able to keep some or all of that cash. We think we will be able to keep a significant portion of that cash, if not all of it. I would say it will be a push in terms of earnings. Hopefully, it will be accretive to the tune of a few million dollars if you assume we redeploy that, if nothing else, just to pay off debt. So, I think I covered everything you asked but if not, tell me.

You covered it all. Thank you. And then my second question is on the timing of MSG moving into that space, as well as the capitalized interest. If you could just remind us of your capitalized interest policy, when do you start expensing that project?

Sure, John, it’s Tom. MSG, we actually delivered some of the space, a portion of that, say, six months early. So, in our second quarter results, you are seeing the impact of that. It gets fully delivered by the fourth quarter. So, our fourth quarter will be a full quarter of MSG rent at the new rent. And then obviously, in 2025, it will be a full year of MSG on the GAAP basis. As it relates to capitalized interest, as we indicated in Michael’s prepared remarks and on previous calls, capitalized interest will roll down in 2025. But most of that will be offset by additional GAAP revenue as it relates to some of the large leasing we did this past year.

And you do that floor-by-floor as it’s delivered or the entire building at once?

It’s going to be a portion of the building because as we have some open development going on, some of that interest will continue to capitalize in 2025.

Okay. Thank you.

Thank you. And our next question today comes from Floris van Dijkum with Compass Point. Please go ahead.

Hi. Good morning, guys. Thanks for taking my question. Obviously, very interesting and bullish news on Fifth Avenue. I also noticed that your rent spreads on your retail portfolio were positive by around 13%. Maybe if you could talk a little bit more about some of the upside potential. Is that what you are seeing in terms of leasing activity? And also, obviously now that Uniqlo owns its space, there is less space to lease in, particularly in the Upper Fifth Avenue quarter. What are your expectations for market rental growth and lease spreads in your portfolio over the next year or so?

Good morning, Floris. On your first question, in terms of retail activity, I think we have talked about this on the last couple of calls in terms of just the general market dynamics where the retailers are more active, and we are seeing continued recovery there, both in terms of rents improving and vacancy rates declining, and that certainly continues. I think if you look at our activity this quarter, it wasn’t very meaningful, but it tends to be a little lumpy. But as I look forward at our pipeline, it’s quite active. We probably have close to 160,000 feet in lease negotiations right now and probably another 150,000 feet of deals in various stages of letters of intent. So, a lot of activity, I would say that’s principally focused in PENN as well as in Times Square, where we have space that we have redeveloped in PENN. That’s where the activity is. And I would say the rents are at pretty healthy levels relative to historical, particularly in Times Square. Fifth Avenue, we have one vacancy that comes up later this year. There is activity there. It’s hard to extrapolate exactly just because there’s not a tremendous amount of vacancy and every space is so particular in terms of where users want to be and how much space they want and what not. But rents have recovered pretty significantly there. So, again, we see continued momentum. I think in terms of near-term, we don’t have a lot of role coming up on Fifth near-term. So, I don’t know that really – the near-term is to mark that either way is really relevant. There is duration on most of those leases other than that one small lease that’s coming up at the end of the year.

Thanks, Michael. And maybe my follow-up is if you could talk a little bit about your plans for the $450 million of unsecured debt that matures, I think in January of 2025. You said you are in the market looking at some of those things. Is the idea to refinance that, or will you pay that off with cash, or if you can talk a little bit about your thinking about that?

Yes. Look, as we sit here today, our plan is to pay it off. And we have got significant cash on hand. Obviously, given the announcements in the last 24 hours, we have got more cash coming in. So, that’s the plan. Like as you would expect, we are tuned to the markets and what’s going on with rates trending down, with spreads tightening, and we obviously look at the various financing markets to see where those are and that presents an alternative that’s compelling. We are pleased with the direction of that. But as we sit here today, the plan is to pay it off.

Thanks, Michael.

Thank you. And our next question today comes from Camille Bonnel with Bank of America. Please go ahead.

Good morning. Glenn, I wanted to follow up on the leasing side, given your comments around the improving outlook. Was the handshake deal on 770 Broadway included in the pipeline from last quarter, or did it more recently emerge? And just outside of 770 Broadway discussions, I am curious to get your thoughts on what activity are you seeing specifically around the large office users?

Hi. The 770 transaction was included within Michael’s remarks, in terms of the pipeline. In terms of overall activity, we are really seeing activity throughout the portfolio really everywhere right now. If I look at the list of the action, the leases out and the proposals in, we are really seeing it very well spread out across all the buildings. The one thing I would note is the bread-and-butter tenants, the 10,000-foot, 20,000-foot, 30,000-foot types are really coming into the market more so now than they have in a while. We are seeing that a lot of the properties, particularly in PENN and in Midtown. So I would tell you that the market is as well mixed as it’s been in a long time, with different-sized tenants and different genres of tenants. So, we are really seeing a very good consistent mix which is helping the market and helping the volume. And as you can see in a lot of the reports, New York is clearly leading that charge for space throughout the country.

And for my follow-up, I was wondering if we can get your latest thoughts on how taxable income is trending just following the pickup in dispositions this year. Are we likely to see more distributions paid out, or is it still uncertain given the known move-outs? Thank you.

Still uncertain, Camille, as we get further into the year depending on what ultimately ends up closing or not closing, etc., then we will have a better sense. We have a decent sense, and they can go in a number of different directions still.

Thank you. And our next question today comes from Michael Griffin with Citi. Please go ahead.

Great. Thanks. Wondering if you can give us a sense of how concessions have been trending. I noticed it was, I think notably lower this quarter probably driven by the Bloomberg expansion. But have you seen the concession environment improve at all, or is it pretty steady relative to recent quarters?

Hi Michael, it’s Glen. So, concessions have stabilized. They are stubbornly high, but they have stabilized. They have not gone up in some time. That’s now being somewhat offset by higher rents in certain properties and certain sub-districts in our portfolio. So, we are seeing positive signs in terms of net effective rents in some of our properties. The hope is as the market tightens, it will bring the TIs and free rents down. But certainly, they have stabilized now for a bunch of quarters as we have been stating on these calls.

Thanks Glen. Appreciate that. And then Steve, just on your kind of macro comments about the interest rate environment and the Fed’s fight against inflation. Obviously, I think lower interest rates are better for office overall. But just given the chatter that we have heard around recessionary fears, how do you balance the more favorable outlook for interest rates mixed with what could be a recessionary scenario that would probably negatively impact the office sector?

The biggest driver, I mean our biggest cost is the cost of capital. So, the real estate industry has very, very strong and increased in value as interest rates are trending down. The expectations of most market buyers are that we are on the other side of the interest rate cycle, and interest rates will be coming down. We are certainly not planning the business for interest rates to go down to the zero levels that they were, but hopefully, they will stabilize at a normalized level, and we will see how it all works out.

Thanks. That’s it for me. Thanks for the time.

Thank you.

And the next question today comes from Dylan Burzinski with Green Street. Please go ahead.

Hi guys. Thanks for taking the question. Excuse me, I appreciate the comments on street retail activity picking up, but as we look at the portfolio today, I think you ended the quarter at high 70% occupancy, which is still well below where it was pre-COVID. I guess as you think about that business, do you envision that eventually getting back to where it was pre-COVID, or do you see an environment where things are improving?

Good morning. Look, I think the number you referenced on the occupancy, I think we got to put a big asterisk next to that, which is it’s really that lower number is driven by Manhattan Mall, right. So, JCPenney went bankrupt, vacated that store, and that caused about 10 points of occupancy decline there. Now, we have been given everything else we are doing in PENN, evaluating what to do with that space, not necessarily wanting to lock it up long-term. We have been doing a number of temporary deals. In fact, we have one with Netflix that’s opening right now and that’s probably the plan. We don’t actually include that in occupancy. In fact, maybe just considering that service, because by and large, it’s really not a focus of us to lease it long-term unless we can secure a robust rent. So, you can take the Manhattan Mall out of that 77%, and it would go to like 87% and we have got the other vacancy that we are working on. So, the answer is, yes, we believe the number is going to get back up to the levels we had historically. But keep in mind there is a 10-point frictional or structural vacancy that is due to Manhattan Mall.

Thank you. And the next question today comes from Connor Mitchell, Piper Sandler. Please go ahead.

Hey. Good morning. Thanks for taking my question. So, there has been a lot of talk about High Street retail and how the whole environment is rebounding in terms of that area. We have seen it from rent coming back, retailers requiring spaces, or leasing. But just thinking about one particular example — there have been articles about Sephora recently negotiating their rents down by two-thirds on Madison. I guess I just wonder if you guys can help us think about the juxtaposition between some of the metrics we see recently versus your comments and specific transactions such as the Sephora one.

On this Sephora deal you mentioned at 520 Madison, I wouldn’t pull out a market transaction, it was a very short-term deal, a result for 1 year or 2 years at the most. So, I wouldn’t take that as indicative of the market dynamics for what’s going on in that corridor.

I would add on to that, but I think we need to define High Street. I don’t know what I would characterize 520 Madison as High Street. It’s, yes, it’s Madison Avenue, but that’s not the prime stretch of Madison Avenue. The prime stretch of Madison Avenue is from 57th to probably 64th, which is where you see rents that are generally north of $1,000 a square foot. Retail that is not prime is recovering, but it’s not seeing the same level of recovery as prime properties. And you have got that prime stretch in Times Square, and you have got that prime stretch of Madison. The beauty of our retail locations is that they are all prime High Street properties.

Alright. Very helpful. Appreciate the color. And then maybe just one more quick one. You said a lot of financing activity in the quarter obviously. And then a fixed rate that was refinanced said a fixed rate of 7.50. Just curious if that’s a good rate that we should think about for some upcoming maturities such as 731 or any others moving forward?

That’s probably, as we sit here today, it’s probably 50 basis points higher would be if we did it today, just given this happened in 10-year or in the future, 5 years. So, obviously the base rate matters, spreads matter, etc. But, 731, I think you will see get done much tighter than that reflected in the long-term lease that we executed last quarter. In general, the markets continue to heal. I think you will see those rates trend down to some extent that just by the fact that base rates are down.

Thank you.

And our next question today comes from Ronald Kamdem with Morgan Stanley. Please go ahead.

Yes. Can you hear me now?

Yes.

Okay. Great. Just two quick ones from me. Going back to the 2.6 million square feet pipeline, can you break out how much of that relates to PENN-2 and you the 24 that you mentioned on PENN-1, that’s out for lease, is that on vacant space?

The PENN 1 deal making is on vacant space. I really don’t want to get into much more detail than I have already on PENN 2, but a good amount of the pipeline is PENN 2 with the plethora of deals growing as we speak in different parts of negotiations, but rather, I’ll get into this very much detail as well at this point.

Sure. Thanks. And if I could just sneak in a quick one, can you sort of comment on any updated plans for the former Hotel Penn site given all the leasing activity you are seeing on PENN 1 and PENN 2?

Look, I think we have talked about in the past, the cost of construction financing, lack of availability makes it difficult to build right now. It’s a prime site, arguably the best site left in the city, but we have not come to any decisions yet.

Thank you. And our next question today comes from Caitlin Burrows at Goldman Sachs. Please go ahead.

Hi, good morning. Earlier you mentioned how the leases you were doing at 555 California all had positive mark-to-market. So I guess, could you talk about that a little bit more? How long do you think those positive spreads at 555 can last for? And I guess given the occupancy there, how would you characterize market rents there? Like do you have the ability to push more or to what extent does vacancy in the market or submarket limit the pricing side?

I think what we are seeing in 555 is that it is the best building in San Francisco. Our tenants have all remained and are ones that have held very strong. So, this building is very inflated from the overall market and what you are seeing statistically in the city. Without getting into much detail on the negotiations that are going on with our tenants, we are seeing a lot of strength. We are even seeing growth in the deals expansion with these tenants. Historically, rents at our building have kept going up. We feel very good about the rental rates we are achieving right now. We are ahead of the market, and we expect to continue to be ahead of the market as we move on.

Okay, got it. And then back in the prepared remarks, you gave some color on the outlook for ‘25, I think suggesting that with the leasing that’s been completed and PENN 2 coming online, late ‘25 could see maybe an improvement in earnings. I guess first, is that the right takeaway? And second, when you think about all of the moving parts, are there additional 2025 large lease expirations we should be aware of, and do you have any insight into those tenants' thoughts at this point?

We have a modest expiration schedule in ‘25. We are obviously speaking to all the tenants expiring during that period. But generally speaking between 280, 770, and 1290, we’ve seen the real positive explorations now and as we go to ‘25 and forward, we are seeing the coming of those big expirations.

Okay. Thanks.

Thank you. And our next question today comes from Anthony Paolone with JPMorgan. Please go ahead.

Yes, thanks.

Pardon the interruption here. Mr. Paolone, your line is coming in very poorly. I am going to disconnect your line. I am going to move on; you can dial back in and we can get you right back into the queue. Our next question today comes from Nick Yulico with Scotiabank. Please go ahead.

Thanks. Yes, I know you talked about some of the leasing underway already this year. I guess, can you give us a feel for how occupancy might trend for the back half of the year in the office portfolio?

Yes. We are about 893 today. We know that’s going to trend down a bit next quarter, given that Meadows vacated 275,000 square feet at 770 Broadway. Obviously, if we complete the 770 deal with the user, that’s going to have a significant positive impact. But in terms of near-term, certainly going into the next quarter, we have a bunch of things in the queue. I think we end up the year basically where we are at now, possibly 20-30 basis points lower, or higher. I mean it all depends on timing, right? But I think just in terms of where we end this year, I think that’s a decent number and there are some things in the works that could take that number up a couple of hundred basis points. But again, it’s all fine. I think just in terms of near-term next quarter or two that should give you what you wanted.

Yes, that’s helpful. Thanks. And then just going back to PENN 2, can you give us a feel for maybe the types of tenants looking at the space and from the standpoint of is it tenants that would be new to that market? Anything else you could just talk about whether these are lease expiration-driven where you are trying to capture some market share?

It’s Glen. As I said earlier, a very, very good mix of all different industry sector type tenants, technology, fashion, legal, media, academia, it’s a very good mix. Yes, there are new entrants to the district. Really, that’s all due to the great product that we’re delivering and even more so, the new streetscape, all the new improvements that we’ve made. So it’s all positive in terms of new entrants and new types of sectors that are looking at the space. That’s the mix of the activity.

One thing I would just add, Nick, is that access to transit is critical. We are the most connected sub-market, and when you look at some of the tenants and where they are attracting their employees from, that access plays an important role. That’s why you hear the excitement in Glenn’s voice, and it’s why the pipeline is building so significantly.

Thanks.

Thank you. And our next question today is a follow-up from John Kim of BMO Capital Markets. Please go ahead.

Thank you. I just wanted to get back to 770 Broadway, I understand you’re under a confidentiality agreement. But just to help us understand the market dynamics and demand a little bit better. Can you share what industry the tenant or users in, whether or not it’s a tech user and if this includes expansionary space in Manhattan?

I’m very sorry, but we can’t say anything more than we’ve already said.

Okay. But it is a lease, right, not a sale?

I’d reiterate what I stated earlier.

Thank you. And our next question today comes from Dylan Burzinski with Green Street. Please go ahead.

Steve, I think in your prepared remarks, you mentioned potential transactions to repatriate more portions of the preferred equity in the Times Square joint venture. Are you able to share any details on what this is? Is this potential sales or other recapitalizations?

Both of those are in play. The answer is, first of all, we will end up with about $1.5 billion of preferred after the Uniqlo sale completes. First, the instrument is dollar good, supported by very valuable collateral. Secondly, it is a source of liquidity for us either through sales or refinancing, both of which we are in the process of working on for portions of that $1.5 billion.

And then I don’t think you guys touched on this yet, but curious about your appetite for share repurchases given where the shares are today.

I was very excited about the incredible value still. But in terms of our capital allocation at the price of the shares today, that’s not our primary objective. We have spent handle; we have other capital allocation priorities. Right now, the program is dormant.

Thank you. And our next question comes from Brendan Lynch with Barclays. Please go ahead.

Great. Thank you for taking my question. If I recall correctly, a few quarters ago, you engaged an expanded group of brokers to pull in demand to the PENN District from other markets around the country. Can you discuss how that initiative is contributing to leasing year-to-date and how it’s impacting the pipeline now?

We brought in Cushman & Wakefield at the beginning of this year. They’ve been a very good addition to our team. It certainly has strengthened our outreach across the country in the city. We’ve been pleased with them and their additive performance to our team.

Great. Thank you. That was my only question.

Thank you. And just as a reminder, the questions to be raised during Q&A should be directed to the operator.

Yes. Thanks. Just one follow-up. I think last quarter, you guys had talked about earnings probably bottoming in '24 and then moving higher in '25. I know there’s a lot of moving pieces, and interest rates will play a big factor. Is that still the case? Or is it possible that maybe with timing of lease to PENN and capitalized interest burning off that earnings could still be down next year with more of an inflection point late in '25 into '26?

Steve, it’s honestly early to give you much visibility there. I mean, I think our comments still hold. But as you can tell from these quotes, there are a lot of moving pieces going on right now. And those are the only things we’ve talked about, so to give you that view is too preliminary based on some of those things as they may impact whatever I tell you now. So I think that’s a good working assumption, and we just have to wait as we get closer to the end of the year.

Thank you. And this concludes our question-and-answer session. I’d like to turn the call back over to Steven Roth for closing remarks.

Thank you all for participating. I think you could tell from the call, the questions, and the numbers that we published a large emphasis on leasing. Leasing is very, very healthy in New York. We feel that we’re on the foothills of a very, very good market, and we’re very excited. The PENN project, especially, is number one on our hit parade. If you all haven’t been down there recently, you should go down, take a walk around what’s going on, and what we’ve done. That will give you a reason for why tenant activity is increasing geometrically. Thanks very much.

Thank you. Ladies and gentlemen, this concludes today’s conference. Thank you for your participation. You may now disconnect your lines and have a wonderful day.