Good morning, and welcome to the Vornado Realty Trust First Quarter 2026 Earnings Call. My name is Rocco, and I will be your operator for today's call. This call is being recorded for replay purposes. All lines are in a listen-only mode. Our speakers will address your questions at the end of the presentation during the question and answer session. At that time, please press star then 1 on your touchtone phone. I will now turn the call over to Mr. Steve Borenstein, Executive Vice President and Corporation Counsel. Please go ahead.

Welcome to Bernardo 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 package, are available on our website, www.bno.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 supplements. Please be aware that statements made during this call may be 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, 2025, 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 remarks are Stephen 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 Stephen Ross.

Thank you, Stephen. Good morning, everyone. Business at Vernado continues to be excellent, and it's getting better and better. We are riding the wave of a strengthening, long-lasting landlord's market, and New York is by far and away the strongest real estate market in the country. Michael will get into the details shortly, but today I have different fish to fly, and I will ask the first question. Question, what do you make of the spat between Mayor Mondami and Ken Griffin, and how will it affect your 350 Park Avenue development? Answer, let me begin by saying that I do not and cannot speak for Ken, but I do unambiguously stand with him. And notwithstanding the mistakes and bad form of the recent video that went viral, we are pulling for Mayor Mondami to succeed. Let me establish my credential. Vernado is a New York company, and I am a New Yorker, born in Brooklyn and attended D. Wood Clinton Public High School in the Bronx. Both Vernado and I are lucky to be New Yorkers. My daughter and three granddaughters live in the Bronx, and my son and his family live in... My wife of 56 years, and I live and work in Manhattan. We follow the rules, and we pay our fair share. Bernado will pay $560 million in real estate taxes this year, and I'm pretty sure that's in the top three. And that doesn't begin to count the personal income taxes that I and our Bernado population pay to the city and state of New York. We work our asses off, and we are not boastful. We are very proud of our lifetime of achievements. We are the company that is investing billions to transform the Penn District. New York is a union town, and we are a union shop. It's one of thousands of hardworking New Yorkers in our building and on our construction sites. The ugly, unnecessary video stunt is personal to Ken and sort of personal to me, too. You see, Renato and I are the developers of both 220 Central Park South Presidential Building and the 350 Park Avenue Citadel Tower. We are all shocked that our young mayor would pull this stunt in front of Kent's home and single them out for ridicule. This was both irresponsible and dangerous. As I said, Renato is the owner of the 65-year-old building on the Park Avenue block front that will be raised to make way for the Citadel, New York, and Curtis Tower, which will employ thousands further cementing New York as the financial capital of the world and pay significant taxes and on and on. This building is being designed by the same foster and partners architectural team that designed JPMorgan Chase's new headquarters down the block. This is now the If We Move Forward project. Now, a project of this scale takes years, and we have already worked with two prior city administrations, both of whom have recognized the benefits and have been enthusiastically welcoming and supporting, as evidenced by the rare, unanimous ULIP approval. The transition began literally days ago, and we at Renato are ready to go. I must say that I consider the phrase, tax the rich, quote, tax the rich, but spit out with anger and contempt by politicians both here and across the country to be just as hateful as some disgusting racial slurs and even the phrase, from the river to the sea. What these Pauls seem to be saying is that the rich are evil or the enemy or the targets or maybe even just suckers. But the rich whom the politicians are targeting, started with nothing, are the epitome of the American dream. They are our largest employers and largest philanthropists. And it is the 1% that made 50% of New York's income taxes. They are at the top of the great American economic pyramid for a reason. They should be praised and thanked. Ken, our partner and friend, is the best of the best. So where are we now? As we discussed last quarter, Ken exercised his option to enter our development joint venture and build a new 1.9 million square foot tower with Citadel as the anchor tenant. We have until the middle of July to decide whether to participate with Ken in the venture or to sell to him. It's a good bet that we will go all in. This fence cannot be amended by a short, terse, insincere private apology. What I beg my mayor to do is to begin every day being business-welcoming and business-friendly as his first priority. That's the only way to get the growth and financial wherewithal to accomplish his programs, some of which, I must say, are interesting and valid. Public safety, schools, child care, clean streets, housing, affordability, homeless programs, etc. The election is over, and now is the time for hard work and management, not showboating. New York is an enormous enterprise with a city budget of $120 billion and a state budget of $250 billion. If there is a $5 or $10 billion budget shortfall, surely that money can be found by managing rather than by taxes. It is interesting to note that high-tax New York spends more than double per capita than low-tax or no-tax Florida or Texas. There is a lesson here. Maybe something good can come out of this blunder. Maybe we can draft Ken to become active and lead an effort to educate New York voters and to elect right-minded candidates. Ken can do it. He's the one who could galvanize the entire business community. Here's an interesting fact to it. Members of the Partnership for New York City alone employ one million voters. Hundreds of our business leaders would lie enough to support Ken. I would be first in that line. I was taught and I believe in an America where after an election, all sides get behind us and support the winning candidate for the greater good. Our mayor is young, smart, and energetic. With a little tweak here and a little tweak there, his leadership could make this great city even greater. He will learn over time that growing a tax base is a winner and raising tax, I will say it again, He will learn over time that a growing tax base is a winner and raising taxes is a loser. And that the hardworking 1% are allies, not enemies. Let's learn from this mistake and move upward. Turning to Renato, we now have a lineup of assets and in-process projects which I am confident will deliver the highest growth in our industry. Executing on all this is now our singular focus. In this year, 2026, we will complete the heavy lifting of leasing at PEN 1 and PEN 2. As Michael and Tom have already been saying, quarter after quarter, our published numbers will reflect all this by the end of 2026 and going into 2026. As part of our focus on enhancing our portfolio and making great deals, we announced last week the acquisition of a 49% interest in Park Avenue Plaza, a 1.2 million-square-foot Class A office building along the prime stretch. This asset is directly across the street from our 350 Park Avenue project. The building is 99% occupied by blue-chip tenants with an 11-year weighted average lease term and rents at a 40% to 50% below market. Prime Park Avenue AAA assets really made an excellent purchase. We're buying the asset at $950 per square foot, which is 65% to 70% discount to replace. And we are inheriting a fixed rate, a sub-3% loan through 2031 to leverage the transaction with the Fisher family, who own the other 51% of the asset. We have a long relationship with the Fisher family. They are a first-class operator who think much like we do. With Park Avenue Plaza, our recent acquisition of 623 Fifth Avenue and the pending development of 350 Park Avenue, we will be adding, call it, 2 million square feet at share of the very highest quality climate and very accretive economics. Speaking of 623 Fifth Avenue, our 383,000 square foot asset, which we are redeveloping to be the premier boutique office building in Manhattan, we are far along in our design and planning. We are receiving outstanding reactions from the market. and already have active tenant interest at or above our underouts. Demand for our retail assets is robust and accelerated. We have a handful of assets for sale in the market. I covered share buybacks in my recently posted shareholder's letter. To date, under our $200 million share buyback program, we have repurchased 7 million common shares at an average of $25.80 per share, totaling $180 million. This week, our Board authorized an additional $300 billion buyback program.

Now to Michael. First quarter CONFO FFO was $0.52 per share, compared to $0.63 per share for last year's first quarter. This decrease is consistent with our comments from the prior quarters and is primarily due to the reversal of previously accrued PEN1 ground rent expense and higher net interest expense. FFO resulting from the execution of the NYU master lease at $7.70 in the prior year and strong income growth at $10.1 and $10.2. We have provided a quarter-over-quarter bridge on page 2 of our earnings release and on page 6 of our financial release. We now expect full year 2026 comparable FFO to be slightly higher than 2025, ramping up each quarter due to gap rents coming up for June 2026 bonds to repay and some seasonality really significant earnings growth in 2027, as the positive impact as well as the positive impact over the best in the economy over a decade. Manhattan leasing volume reached nearly the macro environment we operate in today has gotten even more complicated since our last year. Geopolitical volatility is as high as we've seen in some time. The U.S. economy just continues to chug up the rest of the Middle East economic impact. To date, from the computer revolution of the 1980s, when personal computers and word processors were introduced to the 2000s when the internet transport began the question and answer session.

If you have a question, please press star than 1 on your touch-tone phone. If you wish to be removed from the queue, please press star than 2. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star than 1 on your touch-tone phone. Each caller will be allowed to ask a question and a follow-up question before we move on to the next caller. The first question comes from Steve Sackwell at Evercore ISI. Please go ahead.

Yeah, thanks. Good morning, Steve. Thanks for your opening comments on the city and the administration. I guess maybe going to Michael's commentary on just the pipeline and the million feet, I didn't know if Michael or Glenn could maybe expound a little bit on how much of that is for, you know, upcoming lease expirations, how much of that is for kind of vacancy within the portfolio, and, you know, I guess most of that's probably in New York, but, you know, maybe discuss kind of the New York versus Chicago versus San Francisco demand trends.

Great question, Dave. Hi, Dave. How are you doing? So, you know, our pipeline is extremely well balanced. Of the million feet, it's right down the middle, 50% new expansion, 50% renewal. The other thing I'll note is on renewals, due to the lack of quality states available in the market, we're seeing many of our tenants coming to us early on renewals, since they can't find quality alternatives, which is a key indicator of a rising landlord's market. As it relates city to city, San Francisco is coming on very strong. While we have some vacancy, as you see from the first quarter numbers, we have tremendous activity on all the vacancy. Our deals in the tower at 555 are now north of 160 a foot. Volume in San Francisco overall is strengthening week to week. And certainly everyone out there is feeling a lot better. And deals are happening in a very rhythmic pace. Chicago is starting to come on. Demand is improving. The deals are tough, but there's certainly tenants coming new to the market, and we're seeing a lot more foreign proposals coming in at the March as we go into the second quarter and into the summer.

Great, thanks. And then maybe just as a follow-up, we did notice that in terms of lease commencements, the Verizon lease kind of had a little bit of a change in status, and I'm just wondering if you could maybe talk about kind of what their ultimate status is with the building, and did that lease kind of start earlier, and is that a benefit to the 26 earnings growth?

Steve, it's Thompson. I'll take the first part of it, and I guess, Glenn, you could talk about the status. So, because Verizon told us they're not going to build out their space and they put them in the sublet market, GAAP allows us to start revenue recognition early. So, you'll see that flow through all of 2026.

It started in the first quarter.

On the leasing front, you know, the block this space is excellent. It's 200,000 feet and includes 30,000 feet of outdoor space. We're in a great position. We have a Verizon public parent guarantee for the entire week to begin with, so great credit. We continue to show the space, as does Verizon. There's very good action, and whatever the outcome, Vernado's in a great spot as it relates to that position.

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

Thank you. Steve, really appreciate your opening remarks and really provide a lot of clarity on how you're thinking about moving forward. But I wanted to ask you about your statement that you're all in at 350 Park. Are you all in even if Citadel will not commit to the building? And how should we think about the the put option you have in July?

I didn't hear the last part of it, but how should we think about the put options, are you saying, John?

Yes, that's right. Is that something that you'll let pass or is that something that could be, that the date could be extended?

The answer is, is that can exercise to go ahead the summer to decide whether we are a participant or a seller and I expect that we will take all of that time, which is the smart and correct thing for us to do. There are still some documents and other details to be ironed out, but my remark was that I say where I do expect we will be all in, but that's not a legal commitment at this time yet.

And that's all in with or without Citadel's commitment?

No. The answer is, the question is, is it all in regardless of whether Citadel is committed or not?

Citadel has to be committed. I mean, this whole deal is based upon the fact that we'll be the anchor tenant taking no less than $850. And Griffin is a 36% bond there.

Okay, thank you. And then I wanted to ask about the $200 million of signed lease-does-not-commenced figure that you provided last quarter. if there's an update to that figure in terms of dollar volume, timing, and if there's any offsets through known moveouts during that time frame.

Good morning, John. You know, I would say the number is still in that general neighborhood. It's probably a touch larger today, but it's generally in the same ballpark. And, you know, I think in terms of thinking about it, you know, probably 10% to 12% comes in, you know, per quarter over the next couple of years. From a pacing standpoint, you know, there are some offsets, frees, vacancies, you know, et cetera. I think Steve on the last call, you know, sort of said from a modeling standpoint, you know, assume 40 cents a share flows through, you know, to the bottom line. So we're going to stick with that for now, but that will give you a sense in terms of the pacing of that 200-ish million dollars. And that started this first quarter.

Our next question today comes from Flores Van Dyken with Lynn Ladenburg. please go ahead.

Hey, thanks, guys. Appreciate some more color on that large S&O pipeline. Could you maybe just expand on that a little bit? What percentage of that S&O pipeline is in the Penn District, and how much of your – does it include retail leases? You've done some leasing on Upper Fifth Avenue in particular. Maybe if you give us a little bit more color, you know, the Penn District versus other areas in your portfolio?

Morning, Flores. You know, that number is pretty much all office, so I can't give you the retail number as we sit here right now. Obviously, the lease with Meta is a big positive. And in terms of the 200, in terms of Penn versus others, I would say it's probably two-thirds Penn, You know, it should not be surprising given the lease off of PIN 2 and the balance in PIN 1.

And maybe my follow-up question, as it relates to your Park Avenue Plaza acquisition, I mean, what caused that deal to happen? Why did the Fisher Brothers, I guess, you know, sell out? It looks like it's like a 6-7 yield on cost, if I'm not mistaken, to get to the $0.10 accretion. That seems pretty attractive. Is that a cash yield or is that a gap yield? And how much of a mark-to-market, how much more growth in terms of earnings do you expect to get from that property going forward?

All right, let me see. I can remember everything you asked here, Flores. Look, we're thrilled about the acquisitions. You know, these types of assets don't trade very often on Park Avenue. It's certainly one of the best assets on Park Avenue. um and uh you know in terms of the yields on a on a cash basis um you know given the the in-place debt it's you know roughly eight percent on a gap basis it's you know well into double digits and as steve said in his remarks you know rents are you know well below market here you know probably uh at least fifty dollars a foot below market so you know over time you know things are not static. There's action with tenants. We'll capture that. And that's without rents growing. So if rents grow further, that gap should widen. So we're excited. By the way, the fishers did not sell out. They remain. They still hold their 51%. And I think their track record of performance on the asset is stellar. It's a blue chip set of tenants. They're leased long-term. They're quite effective at signing long-term leases with high-quality tenants, and that's reflected in this asset. And the tenants, some of which we spoke to about their experience, couldn't have raved anymore about the quality of the asset, and they have grown over time there. So we're excited about the asset. We think there's tremendous value to be created over time. And so I think I'd rest all your comments.

Our next question today comes from Alexander Goldfarb at Piper Sandler. Please go ahead.

Hey, good morning down there. And, Steve, yeah, echoing, appreciate your comments up front. Just crazy. But thank you for your statements. Michael, just following up on Flores' question, the two items in the 26 guidance, One, the $0.10 accretion for Park Avenue, is that the gap impact or that's the cash, just as we think about FFO? And then the second part of that guidance question is, there was an item about the master lease changing at $3.50, and just want to know how that impacts the earnings for this year. That's my first question.

Park Avenue implies that the $0.10 is a full-year run rate, so obviously we're not going to have that for $0.26. That's a gap number. And on the 350, you know, the change there was done given to kick off the development. They wanted to vacate. We couldn't start demolition without defacing the old CMBS loan. And so that loan was defeased, as you saw in our queue. The master lease was modified. There were a number of changes made in the documents. And so that was a negative to 26 earnings, which, you know, when we talked about it, we've given our comments.

Alex, the deal always contemplated that when Citadel vacated the building so that the building would be demolished, that the rent would be reduced. Being, by that reduction, much of it will be made up by capitalizing interest, et cetera. So while the earnings, Tom, what exactly is going to happen?

So in 2026, you know, for the next few months until we decide whether we're going into the JV, there's a wash. There's no earnings coming out of $350. Once we make that decision, assuming we go into the JV, we're going to start capitalizing interest and cost.

Will that equal, exceed, or be less than the 36 figure?

Initially it would be a little less and then eventually over 27, 28, 29 basically equates to what we were getting.

For five or six months, there's a negative thing given the mass release.

But again, that's awesome. Second question, Steve, is big picture. You know, with regard to Citadel and the whole, you know, tension with the mayor, you know, back in 2019, Amazon wanted to open in Queens. They were rebuffed. But I don't recall this amount of instant, you know, negativity and political nervousness it's clearly you know escalated a lot quicker what do you think has changed i mean certainly politics have become more left more progressive here but why do you think ken this time the politicians seem to be much more eager to make this everyone be happy versus amazon the city and the state seemed happy yeah it wasn't even a ripple when amazon walked from queens it doesn't seem that. What's the difference now versus then?

Gee, I don't know, but you're correct that the body politics doesn't seem to have any remorse about losing Amazon. On the other hand, the body politics thinks that the Citadel is important, an enormous contributor, and there is a significant feeling amongst the political leadership and the business leadership that this was a mistake, which I described as a blunder, and, you know, this is something that should be repaired. And we'll see where it goes.

Thank you. Our next question today comes from Dylan Brzezinski at Green Street. Please go ahead.

Hi, guys. Thanks for taking the question. Michael, I think you mentioned that pricing has widened given some capital markets volatility associated with the war in Iran. I'm curious if you can just provide more color on that, and then maybe if you can sort of flavor in some commentary around, I think, last quarter you guys mentioned, looking to put assets in the market. Just sort of any sort of color you can provide on sort of how those processes are going.

Financing markets, you know, financing markets were incredibly strong in the last year, beginning of this year. Given the volatility, it's backed off a little bit. There's still depth in the market. Deals still can get done, particularly for high-quality assets. I wouldn't call it a huge impact, but the reality is, look, treasuries are probably up 30 basis points or so, and spreads have widened out a little bit, so that makes the bar, but, you know, not wildly different. You know, just, you know, this is still a very functioning marketplace for, but, you know, off maybe 40, 50 basis points. I'm glad we did what we did, you know, when we did it. So, you know, we're not really dealing in today's markets, but, again, you can get deals done. You know, on the asset sales side, we're, I think Steve referenced, you know, we're working on some asset sales. And that is true. But the answer is we've got a few things that are meaningful in the pipeline. We're in active discussions with potential buyers. I would say the interest in New York City, as I said in my remarks, continues to expand in terms of the type of buyer. I think there is consensus on New York being head and shoulders, best market. Rents are rising, assets are at a discount or placement cost. There's a recognition there's not a lot of supply coming. And so I think global capital has a lot of comfort. And I think, you know, one of the things we're hearing from capital sources around the world is, you know, the U.S. remains the safest, most liquid market, particularly given everything going on around the world. And I think you're going to continue to see capital emanate from other parts of the world to come into the U.S. I mean, New York City is going to get a heavily disproportionate share of that. So that's what we're seeing. And when we have specifics to announce, we'll announce it. But we're encouraged by...

And then just on the rent growth piece, I think, you know, several quarters ago I asked, you know, 20%, 25% rent growth. If you saw that over the next five years, you know, what were your thoughts would be on that? Steve, I think you mentioned, like, while that's good, that would be disappointing given everything you're seeing on the supply and demand imbalance, especially for high-quality office. I mean, can you guys just talk about how far rent growth could go in your mind? And has your thoughts around that 25% cumulative rent growth figure changed at all?

Isn't that, Dylan? The backdrop for offering is as favorable as it's been in a long, long time. And it's very difficult to add supply, which at some point we're going to need. So there's going to be a building in a year maybe as we get into the next decade. But that's very little. At the same time, we have supply coming out of the bottom end of the market. So, you know, the fundamentals are great. Companies, as we've said, you know, continue to want to grow here. You know, we're seeing, you know, still significant activity from the financial service sector, law firms, accounting firms. You know, frankly, AI has picked up, you know, more recently. So, I think all that, you know, results in, you know, rents continuing to rise. So, you know, I don't know that it makes sense to give you a prediction, but we'd be disappointed at 25% of it.

I mean, look, rent sensitivity is not even high on the list right now. Tenants want to be in the best building with the best landlords. And if you think about our leasing performance, $100 a foot has become the norm for us because of the quality of our product. Over the past eight, nine quarters, our average starting rate is $100 a foot. That's a great trend. And so as we go on here and the way we're shaping the portfolio with the addition of 623 Park Avenue Plaza, the new 350 Park, we think rents are going to continue to spike. And the way we're balanced on the west side and now Park Avenue, we're really excited about that. We think we're in the perfect position for what's to come on rent and tenant demand.

Thank you. Our next question today comes from Yana Gowan with Bank of America. Please go ahead.

Good morning. Thank you, and congrats on the strong start to the year. Michael, appreciate your comments on the 2026 FFO now expected to exceed 25. Just curious if that's primarily from the Park Avenue Plaza closing in 2Q or also from 1Q being slightly ahead and carrying throughout the year.

I'd say it's the latter.

Great. And then maybe on 555 California, if you could give some update on kind of demand, leasing, and rents there, and our AI tenants becoming a bigger part of the pipeline there and in the New York pipeline as well.

All right. How are you? So rents in San Francisco are rising a lot. As I said earlier, our rent in the Tower have now gone north of $106 a foot for substantial leases, 50,000 feet and greater, not small deals. So we are leading the market by far at 555 Cal. We're also seeing a lot of really good activity at 315 Montgomery in the campus with more technology, AI-type tenants. So certainly that activity we're seeing at our project at our complex as well. But, you know, other than tech and AI, financial services is growing in San Francisco, something we've kept a very keen eye on, as well as law firms. You know, it isn't just AI, although it's helping a lot as the city improves. But the other industry sectors are really coming on strong, and the city overall feels great. I was out there a few months ago walking the street, meeting with people. It's really feeling good out there, and people are already positive again in San Francisco.

Thank you. Our next question today comes from Anthony Paolone with J.P. Morgan. Please go ahead.

Great. Thanks. You talked about having some assets out in the market for sale, but if we think about just whether it's 350, 54th Street, and then Fifth Avenue, some of these projects that are going to be in the pipeline, how are you thinking about just your pro rata leverage level over the next couple of years and whether there's going to likely be a bigger disposition program or whether you think you'll just use project financing and take on a bit more leverage?

Good morning, Tony. You know, we've got, you know, the capital earmarked for all these opportunities, you know, in our cash forecast. You know, we've got some asset sales in the works that, like, we obviously have a lot going on between these investments that we've made recently, you know, 623, Park Avenue Plaza, the buybacks, some of the future development. You know, what I would say about the future developments, something like the 350, you know, the bulk of our equity is coming from our land contribution, right? So any incremental capital is really not required from Bornado for probably close to three years. So we've got, you know, ample time to plan for that and so forth. So, you know, when you look at our sort of capital needs, if you will, over the next few years, you know, it's fairly well laddered. And, you know, as we execute, hopefully, on some of these asset sales, that's going to give us some additional firepower, frankly, beyond just, you know, what we're talking about in terms of these.

If you look at our history, if you look at our history, capital planning, we have three or four things that we generally hold billion dollar plus. The second is, is that we almost always pre-fund well in advance. And, for example, we loaded in, I don't know, $2, $2.5 billion of capital two years before the development, so that notwithstanding the fact that the capital markets got a little bit rough and volatile when we were actually building, we had the capital to look at for what we do. The other thing is that we like lower non-recourse priority of the way we do.

And then just a follow-up question on the leasing side. I think there's about 600,000 square feet in the fourth quarter that comes up. Is there anything larger in there that's a known vacate? I just can't remember if there's any big deals in that mix to watch out for.

There's it's going high. There is two larger tenants in the second half of this year, and we believe both will renew their leases, and we feel good about our exploration for the remainder of 26. And as you would expect, we're all over the 27, 28 expirations as well. But 26, we're pretty well taken care of. We feel good about what's going to happen.

Thank you. Our next question today comes from Victor Malhotra with Mizuho. Please go ahead.

Morning. Thanks for getting the question. I guess first one, you know, given all the kind of activity you've had with all the PEN assets, any update on Hotel PEN and Manhattan Mall in terms of, you know, users, monetization, et cetera? no update okay and then um just on the earning side you mentioned 2027 ffo uh nice pickup i'm wondering you know two things one are there any offsets we should be thinking about for 27 and then in particularly fad uh given the you know ramp in uh ffo i'm assuming they're still going to be elevated ti into 27 so should we think about fad really you know perhaps picking up only in 28

Good morning, Vikram.

Hey, Vikram, I would make one comment, okay? I can't wait for the free rent to burn off. That's when this business will get to be real fun and will generate substantial positive cash. That happens over the next year or two. I can't wait for that. Now go ahead, Michael. By the way, Glenn, take note of what I say.

You know, your comment is right, right? There will be continued elevated PIs this year, next year, you know, even on deals we've committed this year. You know, tenants and I don't call those for a while. So that will go on the next year. And then 28, you know, we expect to see that drop, you know, materially and cash flow, you know, be much higher. So I think your general direction is accurate. On the earnings side, you know, there's always ins and outs. I think we've given you as much guidance as we can give you with respect to next year in terms of what the bottom line is going to be.

Thank you. Our next question today comes from Nick Ulico at Scotiabank. Please go ahead.

Thanks. I just wanted to go back to 350 Park and just be clear on a couple things. One, in terms of the new $16 million annual rent versus the old rent, did that already happen in the first quarter? Is that a second quarter accounting impact? And then I also want to be clear on that new rent that's being paid. What is the maturity on that lease? Is that concurrent with the debt, the new mortgage that matures next year, or does it extend beyond that?

Good morning, Nick. So on your first question, new rent started, I mean, there are a few days in March where it started, but, you know, by and large it will be second quarter. So, I don't know, maybe there were 15 days in the first quarter where the new rent was reflected.

The new rent is coterminous with the date is, but it's a couple of weeks.

It at least runs until early 27. And, you know, your question is, you know, why is that? Because, you know, there will be a resolution one way or the other. The venture will be formed. We'll put the asset, you know, something will happen prior to that maturity.

Okay, so the rent, that new rent, is only in place until the point at which the mortgage matures. There's no rent being paid beyond that date on the new agreement.

Correct. But there'll be a resolution, door A or door B before that, which the rent has gone away anyway.

There's no building for the tenant to pay rent for.

Got it. I just wanted to be clear on that. And then I guess second question is, you know, obviously, I mean, you've talked a lot about you getting some of the breadcrumbs on 2027 and how to think about that. You know, it is also 2027 FFO is a piece of the executive comp, you know, per the proxy plan. So I guess I'm just wondering, like, any new thoughts on this, Steve, about, you know, finally getting earnings guidance? You know, you're at the point now where the tide is turning. You're being, you know, measured by that from a comp standpoint. Why not give formal SFO guidance at some point?

Oh, Lord, how do I answer that question? You know, the two sides of it is that, you know, we have a simple business which has complexity. And the numbers are moving. It's very – I mean, we find it that it's sort of difficult to guide and counterproductive. So Warren Buffett, who's not a friend of mine but an acquaintance of mine, he didn't guide for his whole career. So that's one thing. And the big bank guy, he doesn't guide either. But all of our competitors seem to be able to guide. So what's wrong with us? But right now we have no plan to guide. other than the snippets that we put in these calls here and there, which I think I hope you all find helpful. Now, what I think you're saying is that if our earnings are going to explode upwards, why don't we just take it? So that's something that I'm going to put under my pillow and think about because that sounds like maybe it's a good idea. But as of right now, our policy is we selectively and a limited weight guide, But we don't give full guidance. And I think you can probably guess that that's going to continue for the future. Tom, what do you think? I agree. Tom's saying he's happy he doesn't have the guide.

Thank you. And our next question today comes from Seth Berge at Citi. Please go ahead.

Hi, thanks for taking my question. In the annual shareholder letter, you kind of referenced, you know, the no sacred cows policy again. It sounds like the New York office trans market is improving. You mentioned possible kind of inflows, you know, given it's a liquid market in the U.S. is just safety. How do you kind of think about, you know, potential asset sales? Should we think about those being more non-core dispositions or any core asset sales that you're kind of thinking about?

You mentioned your letter, no sacred cows. Is that just New York, or do you think about non-court dispositions?

I mean, I don't want to shock you, but basically I'm in it for the money, and so therefore there are no sacred cows. There are assets that are critical to the business. There are assets that are important to the business. There are assets that we love more than other assets, but based upon price, economics, and business strategy, there are no sacred cows. Now, what does that mean? There are a handful of assets that we actually have already determined that we don't want in the business mix, and those assets are intensivity, if that's a word. to liquidate those assets, rises and falls with the market, but over a short period of time, there's a handful of assets that will not be part of it. Now, getting to the rest of it, a whole near and dear that we think are very valuable, that we, even those assets, if I think Sam Zell said the phrase a godfather bid, if some very aggressive bid came in for one of those, Thank you.

And then for my second question, I guess, how do you think about kind of incremental, you know, potential acquisitions versus accelerating the share buyback and balancing that versus your current leverage levels?

So there's three things inherent in that question. There's acquisitions versus stock acquisition and leverage levels. So the answer to that is that we think – no, let me rephrase that. We are certain that we can basically do all three. We are certain that we can buy selectively important assets that come up in the bullseye location of our heartland. We are certain that we have the capital to buy back our stock in a measured way. We're also certain that we are able to keep a measured and under-control level. So we think we can do all of that. And we have some things that are in process that will augment all of that. Decent acquisition at Fifth Avenue, which we think, I mean, I've written about that, and we think it's a terrific deal. And the Park Avenue plowder acquisition that we just announced a couple of weeks ago, we think it's an equally terrific deal. And we think buying back our stock at $30 a share is a terrific deal as well. So we're doing all of that.

Our next question today comes from Caitlin Burroughs at Goldman Sachs. Please go ahead.

Hi, good morning, everyone. Maybe just on the pricing side, I realize the reported leasing spreads are only on a subset of second-generation space. So, first, I was just wondering if you can go through your expectations today of portfolio mark-to-market across New York, San Francisco, and the mark, and then also whether you expect that portion that gets included in the spreads to increase, as in, like, could downtime become smaller?

Good morning. So on the question of market-to-markets, we expect to continue the performance we've had over the past couple of years, which are positive, positive, and positive. During the last two years, we've only had one quarter negative, which we like, and we expect to continue. Many have been in the double-digit positive. We expect free rent to continue to reduce, and even TIs are starting to come down. So we're working hard on that piece, of course. And San Francisco is the same. With the rents we're achieving, the market will continue to improve. Chicago, as I said, is still most challenging, although demand is picking up. Rents are staying firm. Concessions are high in Chicago. Those have yet to break downwards, but demand is certainly improving.

I mean, think about just Economics 101 or macroeconomics. Focusing on New York for the moment, I mean, you know, we've said, and I've written about, that we compete in a subset of better-building Class A space, which is under 200 million feet. So the fact that there may be 400 million feet in New York is irrelevant, because we really compete in a market which is about half that size. The availability of space in that market is evaporating very quickly. I mean, somebody used the analogy of an ice cube at a microwave. We are getting, I mean, we know that because we are a key factor in the market. We know that because the incoming calls from more action.

I guess maybe just to follow up on that last point, I know leasing volume in the first quarter was relatively low. So would you just say that that's lumpy? Is it more about that you're not in a rush because rents could be rising or something else?

Glenn is in the business of renting space so it's quickly and aggressively directed Glenn to get out of the market. Glenn's in the market every day working his ass off.

Thank you. Our next question today comes from Ronald Camden at Morgan Stanley. Please go ahead. I can't respond to that.

Hey, too quick. If you want to respond, I could wait. Go ahead, Ronald. Great. Just two quick ones, and thanks for taking the questions. Just, number one, I think, you know, I think last call you talked about some guideposts for occupancy over the next 12 to 18 months and mid-90s. If you could provide an update both on the least and on a physical currency target to look like over the next 12 to 18 months again.

Thank you. Well, look, we've historically, you know, run our portfolio in the mid to high 90s, and, you know, we expect to get back there. So, you know, that probably is over a couple-year period. But, you know, that's – and, again, given all the dynamics that Steve alluded to and we've talked about in the market and the lack of space availability, you know, that's going to happen. So, obviously, leasing up 10 is a key part of that. But, you know, and I think one of the analysts picked up this quarter, you know, that our occupancy actually went up 70 basis points, not to 40, because we took 350 parks out of service. I can't tell you exactly what core it's going to be, but over the next couple of years or so, that's where we expect to get back to. But there's a couple of things to focus on.

There is a couple of buildings that we are not renting. Why is that? because they are over-leveraged and underwater. It's uneconomic for us to rent spaces in those buildings, which really, they're almost owned by the banks. And if we put TI into those buildings, it's basically burning money. So if you take those few, and we have chosen, I don't know whether this is true or not, we've chosen to leave those in the aggregate statistics where some of the folks in our industry have taken those, which makes their occupancy higher. So if you take those numbers out, those buildings out of our numbers, that's 94%. 94%. So we know that number, although we don't publish that number, and maybe we should, although right now I'm publishing that number.

Helpful color. And then my second one, if I may, was just a lot of the footnotes and the supplement. Just on, I guess, on PEN 1, any idea when that litigation will be, just in terms of timing? Obviously, you can't comment either way, but just in terms of timing, is that something that could be done this year? And also, the change in retail from the base of the office buildings being put in the office segment?

The litigation.

We didn't change our segment reporting. Obviously, we have two segments, New York and other. This is a sub-segment. Ronald, what we did here is we tried to align the subsegment more on how we view the assets. So we grouped all the retail assets together and the office assets. So the base of 1290 Retail is now included in office as opposed to being in retail. And any ancillary office space that's in a retail building is obviously in the retail subsegment. And it's all disclosed, obviously, in the supplement. And we give you the exact buildings that are in each subsegment so you can follow along. I think this is the better way of looking at it, as opposed to the way we would do in the previous one.

Thank you. Our next question today comes from Brendan Lynch at Barclays. Please go ahead.

Great. Thanks for taking my questions. First one on Sunset Pier Studio. Is there any interest in the current short-term tenants in converting to longer-term leases? Just an update on that.

Hi, it's Glenn. There's great interest in Sunset and the studios. you know we're released right now place is great unbelievably great you know I would say best in the country great in a great location we have very good activity long-term folks looking short-term folks looking so we expect to continue to fill up the project once this year's leases expire but it's off the charts the reception's been eight plus when we expect to do really good things are on the leasing.

But a direct answer to your question, I definitely prefer to be in the long-term leasing business with that asset rather than in, you know, month by month leasing in that asset. So the answer is if the market...

Okay, thank you. That's helpful. And then a follow-up on the Verizon space at PEN2. Can you just walk us through if they find a subtenant versus you finding a tenant and how we should think about potential termination fees and any accounting around the TIs that you might still be responsible for if it's just a sublease instead of a cancellation and a new lease?

Glenn prefers that I don't talk about it.

As I said earlier, we're in great spot no matter how it comes out, and we will only be opportunistic to make money on this space. We have a very good lease position, and we'll see how it plays out, but that's as much as I think I want to talk about it for now.

What do we have? It's basically a 19- or 20-year lease. So we have a long-term lease with a super credit. That lease, we will never terminate that lease under any conditions. So the only thing that might happen is around the dynamics of a subtenant coming in because Verizon wants to reduce their liability. But we don't have anything to say. That long-term crisis.

Thank you. There are no further questions at this time, so I'd like to hand it back to Stephen Roth for any closing remarks.

Thank you all very much. I mean, the team and I are delighted with our activity over the last three, four, six months. We are excited. We think we – and I did make the statement in my – that – That concludes today's conference call.

We thank you all for attending today's presentation.