All right. Good morning, everyone. Welcome to SL Green's 2018 Investor Conference. We have been working hard all year long with an emphasis on the past few weeks to make sure that we had a presentation that is worthy of your time today. We look forward to keeping you informed and entertained over the next few hours. We've gathered today to end an extraordinary year for New York City, especially for East Midtown, where so much of our portfolio is concentrated. The New York City market is our exclusive home, therefore, a key part of our success. Signs of New York's underlying strength were everywhere this year. J.P. Morgan made headlines with its commitment to demolish its Park Avenue headquarters, and in its place, develop a two and a half million sq ft skyscraper following in the footsteps of One Vanderbilt.
Grand Central led all Midtown sub-districts in leasing volume increases, reaffirming our belief that Greater East Midtown remains the most sought-after address in New York. The city's tech sector is having its moment. With Google dramatically expanding its footprint and Amazon's huge decision to locate its second headquarters in New York City, right in Long Island City, Amazon, Google, so many other companies want to be here. They need to be here because New York continues to attract the best talent from around the country and around the world. That's great news for our business. In this period of intense activity, no one was busier than SL Green. You can see behind me the virtual avalanche of news stories from this year.
We signed over 220 office leases, representing 2.2 million sq ft of space in just 11 months, vastly exceeding our targets for the year and setting the stage for next year. We disposed of non-core and mature assets like Three Columbus Circle, 635 Madison Avenue, 1745 Broadway, and development property in Brooklyn. We moved on great opportunities like Two Herald Square and 245 Park, where we could add value and drive earnings for you, our investors. We succeeded in closing some key retail leases in our high street portfolio. Our DPE business dominated the scene once again this year. The incredible advancement in leasing and construction at One Vanderbilt were followed in the press and in the city on social media.
Most of all, we focused on implementing an aggressive share buyback program that takes advantage of the unprecedented discount in our stock, which continues today and will be a big topic of discussion later on. Look at all this news. This isn't a decade of achievement. It's less than a year. What a testament to the platform we've built. We made sure to end 2018 with a bang. Since Thursday evening, we dropped nine additional announcements on the market, as summarized on the screen behind me, a new record for us, and an indication that we continue to work as hard as ever on your behalf.
Today, we'll talk about each of these announcements from major milestones at One Vanderbilt to fantastic new plans for One Madison, from the remarkable turnaround of Two Herald Square to our expanded role at 245 Park, from the acquisition of a real deal in Hudson Yards to construction in Lower Manhattan, and of course, the continued expansion of our share buyback program. It would have been a great year without any of these latest announcements. It was a monumental year with them. This level of activity shouldn't surprise anyone who has followed SL Green over the past two decades. There is hardly a block of prime commercial office space in Midtown Manhattan that we haven't played a meaningful role in. Everything we currently own, combined with what we previously owned, equals an astonishing 50 million sq ft, evidenced by all of the buildings on this map.
Our DPE and servicing platforms have participated in deals representing another 65 million sq ft of collateral interests. You're not looking at a map of every building in Manhattan. Believe it or not, this is just the buildings that SL Green has invested in over the years. All told, over the course of our history, SL Green's footprint covers a remarkable 115 million sq ft. Just let that number sink in. It's roughly 30% of the Manhattan office inventory has passed through our shop in a meaningful way through investment. Whether you have been with us from the very beginning or joined us along the way, you have benefited from our commitment to excellence and our experienced leadership team that has delivered growth, stability, and solid fundamentals that have always characterized this company.
This year, like every other year, the story of our success begins with the fundamentals of the New York City job market, and they were very strong in 2018. Even before Amazon's big announcement last month, we were feeling quite good about the forecast for continued strength of New York City employment in 2019. All the stats are pointing in the right direction, albeit at a slightly slower rate than we had seen in previous years, but still among the highest rates of growth in the company. On the slide, you see 68,000 private sector jobs expected to be generated in 2018. We're very close to that number as we sit now through November. More importantly, the Office of Management and Budget has increased its forecast for next year's job creation from 54,000 jobs to 61,000 jobs. Upward momentum in the job forecast. Office-using jobs, same trend.
20,000 office-using jobs is what's currently forecasted by OMB for 2018. Next year, they're actually forecasting a higher level of jobs. They've upped the amount from 21,000 to 25,000 new office jobs in New York City in 2019. That represents somewhere between 4 million to 5 million sq ft of new absorption. Where are all these new jobs going? The answer is increasingly East Midtown. The good news is that the city and our industry are moving quickly to accommodate all of this growth. For the past few years, the new supply conversation has been driven by the West Side, but now East Midtown is joining the party in a very big way. Businesses continue to be attracted to the transit-rich nature of what East Midtown has to offer. There's more Fortune 500 companies in East Midtown than any sub-district in the country, and quite possibly, the world.
Investment in East Midtown continues apace. Andrew's going to talk about that momentarily. Most importantly, there's significant investment being made in the transit system and in the public realm system to reinvigorate East Midtown with new office stock and new infrastructure to set the stage for decades to come. This map, what I referred to earlier as our footprint, we're going to rotate it and look at just East Midtown, which is about a 75 or 80 square block area that houses some of the most important businesses and buildings in New York City. The average age of the stock in this section of Manhattan is about 65 years of age or older.
In the past, in order to be competitive with new construction and to keep up with the demands of new tenants, developers or owners like us would have to go through extensive renovations, redevelopments, and re-massings in order to deliver space to the market that was continually being renewed and continually competitive. Here, you see some select ones. Recent examples of ambitious redevelopment projects that were undertaken, usually at a time where the East Midtown rezoning was unavailable for new construction. Our project, the 280 Park. Boston Properties' retrofits of 399 Park and 601 Lex. David Levinson's re-massings of 390 Madison Avenue and 425 Park, both done as of right. Olayan is now considering a major reimagination of 550 Madison once they work through their landmark issues.
This was how we did it in the past, along comes East Midtown rezoning, Vanderbilt Corridor rezoning, all of a sudden, we have the economic ability, the feasibility to capture space, scrape, and build, and that's what we did with One Vanderbilt. It will be a 20-year project from inception to the cutting of the ribbon. These are not easy projects. These are not tax-subsidized projects. Okay? These are full market projects. You got to do this in a way that is exactly right in terms of the product you're building, the construction, the delivery schedule. Not a lot of margin for error, but when you do it right, it's very, very profitable. Following in the heels of One Vanderbilt is J.P.
Morgan, who is going to demolish their headquarter buildings at 270 Park and replace it with a 2.5 million square foot iconic new headquarter building, really flattering One Vanderbilt, and further establishing a trend in this area, where tenants and businesses are showing their desire to be in East Midtown. The future, what does it look like for East Midtown? Well, there's a handful of sites that we sort of monitor, if you will, or that we believe are probably the next generation development sites in East Midtown. Could be others, but these are the ones we focus on. Everything from Pfizer, which is probably most immediately deliverable, and MTA headquarters on Madison, to longer-term projects along Park Avenue, 250 Park, 300 Park, and an assemblage of buildings that could produce a large building at 440 East 52nd and 350 Park.
These sites, if taken in total, would use about 2 million square feet of air rights out of the 3.5 million square feet of air rights that are landmark transferable development rights under East Midtown. 600,000 of those have already been used by J.P. Morgan. 2.9 million remains, 2 million is here. That would leave just 900,000 for the future. Out of this rezoning, I think we'll get a handful of new buildings, but importantly, they will come over time. They will not be put on the market. There'll be no glut. I think this will take decades to build out at best. It'll be measured. It'll be an evolving trend for Midtown, for East Midtown in particular, and it'll be done in the right fashion.
We're very optimistic, all of this planned growth will accommodate continued strength in the New York City leasing market. Tenant demand right now is very strong with real migration to higher quality buildings. We see it and you read about it all the time. Concessions in 2018 leveled off as leasing activity in Manhattan, and Midtown in particular, is up 6%, with Midtown South up a whopping 34%. That's leasing volumes. The leases we announced today, along with Deutsche Bank's 1.4 million square foot lease in the complex we are currently sitting in, will only further serve to increase these Midtown statistics for 2018, when the story is finally told.
Along with the migration to higher quality building and a tightening market comes an increase in the number of tenants that have the ability and willingness to sign triple-digit rental rates, this year should eclipse 2017 when all is said and done. We have about $5,100 and up rents through 2018 third quarter. I think we'll be somewhere in the low to mid-60s when all is said and done. A lot of that's coming out of One Vanderbilt today. You also see another important trend, the size of the tenants that are signing these leases. The average has grown to about 40,000 square foot of tenant for $100 rent and up.
There's, I think, much more acceptance and much more convention now that good space and a state-of-the-art space in this market is routinely $100, $120, $150 a foot and up for the best located properties in the best part of town. An important dynamic we see in the current market is also the relatively limited supply of big block space. Big blocks we've defined as roughly 300,000 feet and over. There's nine such blocks in Midtown that total 4.7 million square feet that are immediately available. I view that as a fairly limited number of options, given the number of tenants that are in the market looking for big block space. You see that there, 44 tenants looking for 12 million square feet in total. By contrast, in SL Green's portfolio, we don't have a single block today of 300,000 feet or up that we could deliver in 2019.
I think that's a fairly big statement about the tightness in this market and our portfolio. You have to look to the under-construction projects, of which there are seven million sq ft, but that's not delivered until 2022, maybe end of 2022. You're talking about four years to absorb that seven million sq ft. Given the current demand in the market and the job growth we expect to occur over those four years, we think it's more than enough to keep that vacancy rate where it is and start to make real gains in net effective rents going forward. Drilling in on that seven million sq ft, this is where the future big blocks of space will arise for the most part. You know these buildings. You've seen this map. It's the Hudson Yards.
There's about 15 million sq ft of space when this phase is completed in 2022. That dates back from 2016 to 2022, 15 million sq ft. The good news is all but 4.5 million sq ft of that space has been leased or pre-sold. There's really a diminishing amount of new supply. I'm not sure people appreciate the fact, really two things. One, there's not a lot of space left in that part of town, and two, the rents that are being asked for in what remains in those buildings is about $110 a sq ft to start, on up to $140 a sq ft, and even $170 a sq ft in the top of the building, I believe at Spiral, at 66 Hudson, or it may be 50 Hudson, I'm not sure which. One of them is at $170 a sq ft.
No longer are these buildings being absorbed at the $80 and $90-a-sq ft range. They're now looking for rents that would have to push up against Midtown, and as a result, we think that impact only puts a real spotlight, if you will, back on Midtown, which has always remained, in our opinion, the market of choice for businesses. Looking out beyond 2022, there's two other buildings that will contribute, in total, 3.8 million sq ft of space. That may sound like a lot, but on a 400-million-sq-ft inventory, it's a very small amount of space that'll be delivered in 2023 and beyond, in our opinion. It really is just enough to accommodate a city that's growing the way New York is. We're seeing what we've been saying for years, that Midtown remains the location of preference for businesses who desire Class A real estate in transit-friendly locations.
If you look at this graph, you'll see that Midtown generated leasing volume gains year-over-year of 38%, and leading the way was Grand Central sub-market, which we happen to have the majority of our portfolio located within. I think I said 67% increase in the Grand Central market, 38% for the year to date. I think those numbers are going to be higher once the year is over because I think there was an acceleration in the fourth quarter. If you contrast that with the West Side, because of what I said, the diminishing amount of supply and the higher rents attached to that supply, you saw a drop in the west markets of 20% year-over-year through the end of the quarter. A very interesting trend that confirms Midtown is the center of gravity.
The question still remains, with all of that leasing and job growth outpacing new supply, why are we not seeing bigger gains in vacancy? The answer is densification. Since 2010, job growth has advanced at a record pace in New York City, while densification, much more so than new supply, has held the vacancy rate relatively in check. It's not bad. I mean, it hasn't backed up on us, but it hasn't advanced the way we wanted it to. Don't take it from me. Hear what Dwight and Jim have to say about it.
Yeah, something just came up. Two minutes. Thank you very much.
Wait, what are you doing?
What?
What are you doing?
Just clearing my desk. I can't concentrate.
It's not on your desk.
It's overlapping. It's all spilling over the edge. One word, two syllables, densification.
You can't do that.
Why not?
Safety violation. I could fall and pierce an organ.
We'll see. See, this is what I call densification.
Doesn't bother me.
Densification. Densification. Yeah, I have no problem with that. I have been recommending densification since I first got here. I even brought it up in my interview. I say, "Bring it on.
Last year, we identified this trend nearing a plateau as we began to see office users reaching the limits of how much space efficiency is truly feasible and tolerable. I still believe the end is in sight. I see that in our portfolio where the trend is reduced. I hear it anecdotally from people who have moved into these more dense layouts, and they're not happy with them. We see it with the architects and designers who are telling us the pendulum is starting to swing back in the other direction. Over the past year, we've seen these news stories, but now we are beginning to see some of the hard data that backs up what we've been feeling and thinking and saying anecdotally.
Study after study shows that we've reached a point where we have become less productive and less happy, for that matter, due to the over-densification of office space. These are four or five studies all done recently, sort of bringing home that point. We're already beginning to see that shift. Small, but it's little seeds of shift in density. In a study that Gensler did, where sanity appears to be prevailing as workspace becomes less dense and companies attempt to restore a level of privacy and actually foster better communication by being less condensed with one another. Interestingly, the firms that you think about as being the most efficient, large finance, media, and tech, their rentable square feet occupied per employee is about 200 a foot-250 a foot, the numbers we've been telling you.
I hear from the market, analysts, shareholders, well, I hear 150 a foot, 175 a foot rentable. It doesn't exist. What may be talked about is usable versus rentable, or it's the workspace without amortizing in fully all the amenity space and the social space and the lounge space and the latte bars or whatever it is. That has to be factored in when you're talking about the totality of rentable square feet. That, at its most efficient, is about 200 a foot-250 a foot, and that's probably a pretty healthy level for the market, although, we may have reached the limits, based on the information from Gensler, who's probably one of the leading interior design and layout firms in the city. As we anticipate a slowing in densification, near-term job growth will have much more of an immediate and strong impact on occupancy gains.
Much of the job growth that we've seen, as well as the dominant market trends like densification, are being driven by the tech sector and New York's emergence as a true tech hub. When the City of New York first announced plans in 2010 to bring an applied sciences graduate school to New York, no one could have argued that New York was in the same league as Silicon Valley or even Boston as a tech center. By the time Cornell Tech opened last year, the landscape had changed dramatically. This heat map shows that many of the biggest names in tech have chosen to establish sizable presences in Manhattan, clustered mainly around Midtown South and Downtown. This has helped to transform these submarkets that were previously looked upon as secondary location and have established these markets now as being amongst the hottest in the country.
New York now boasts the most tech workers of any market in the country. Pretty amazing. 330,000 tech workers in New York enjoying proximity to the global financial center and leveraging off of New York's diverse base of employees and businesses. New York City has also joined the elite ranks of San Francisco and Seattle in terms of being recognized for a deep and talented pool of employees in the technical field. It's no coincidence that these businesses want to establish an East Coast presence in New York, in the space we have, which is fully amenitized, 24-hour cities, and access to this sort of almost limitless pool of talent coming out of the schools and coming out of these other jobs that provide a depth that doesn't exist in many other markets. When there is talent and innovation, there's also venture capital.
You could see here in 2014, New York City lagged quite a bit behind Silicon Valley and New England, Cambridge, in terms of venture capital investment. In the years that ensued, for the past three years, New York City has either led the way or been right on top of Silicon Valley in attracting those dollars to fund startup companies, which is contributing to the vibrancy of the city and the job growth. This deep talent pool and significant investment capital has appealed to some of technology's biggest names and positioned New York as ripe for expansion. At the forefront of this growth is Google.
You can see here, they started in 2002 with just 60,000 sq ft, and in a relatively short period of time, have now grown to 5 million sq ft, owned or leased, on the Lower West Side of Manhattan, Downtown West, where they put a campus together for 7,000 staff, 50% of which are in the technical field. It's a pretty amazing stat. They're not done. Rumors are they're going to be signing a lease and are acquiring a portion of St. John's Terminal, 1.3 million sq ft. Anything they do, they do big. There's no small expansions you can see up on the table, up on the graph. Now comes Amazon.
Celebrate good times, come on. Let's celebrate. Celebrate good times, come on.
We're just as happy about it as the governor and the mayor. Every single major city in the U.S. was desperate to attract Amazon. Over 200 cities put their hat in the ring. It was narrowed down to these 19, mostly clustered along the East Coast. Amazon ultimately ended up splitting the fight between New York City and the D.C. area. Major, major boon to this market. It will bolster our position as the East Coast's number 1 location for tech firms, rapidly expanding technology companies, not only Google, Amazon, but all of those who follow these companies, they co-locate and they thrive off of these companies, will proliferate, in our opinion, as, and I think in everyone's opinion in the city, as they become bigger and more established.
With the good news being that the 4 million square feet that it's been committed to will ultimately grow to 6 or 8 million feet. Over 25,000 employees, possibly up to 40,000 employees, with enormous incremental tax revenues for the city and some benefits that are more derivative, like an increased investment in housing and infrastructure that will follow. Here's a map. You can sort of see the location of the campus, which is comprised of both governmental and private sites that will be built out over a decade or longer. In the interim, they will use space at One Court and other locations to accommodate their needs until these facilities are built. You can see why this site was attractive. It's 1 stop away on the E train from 53rd and Third, East Midtown. 1 stop.
For our dense portfolio on Third and Lex and Park, it's, we think, an enormous benefit because we can deliver affordable space, 1 subway stop, 10 minutes away from Amazon's new campus. A big win for East Midtown. Also, great proximity to the area airports. It will take years for Amazon to develop this headquarters and to fill it. In the interim, they will take space, as I mentioned, at One Court, other facilities, and I expect they'll rely on flexible office space like they already do at Two Herald, which we own, where they are an enterprise tenant of WeWork in a building we own. Many other tech companies have this insatiable need for co-working. Co-working looks like it's here to stay.
It's become an undeniable force in our market and has helped incubate startups and newer firms which didn't have a fit in the traditional leasing market. The new age of co-working space is dynamic, purpose-built and designed, highly amenitized in ways that really appeal to today's worker. It caters more to the entrepreneurial firms and the creative firms than the established companies. Although that's changing as these established companies want to leverage off of that vibe and that level of flexibility. These are the names that have existed for many years in this space. Regus, NYC Office Suites, and HQ, tenants within our portfolio. Now you've got Knotel, Spaces, Convene, Hana, other names that have become household names.
WeWork is sort of the gorilla in the room, with 5 million sq ft of space leased and sort of no end in sight to that sort of insatiable appetite. We think that's a good thing. It's grown to just 3% of the market portfolio for all co-working, so it's a relatively small amount of the inventory. That's a little misleading because when you look at the piece of the pie, they have 18% market share of all new leases over 10,000 sq ft done in 2018, almost 2.5 times what it did last year, and right on par with financial services and TAMI sector. This may come as a surprise to some of you, but we believe not only that co-working is here to stay, but it's actually a good thing for our industry.
I feel there's many benefits to landlords like us, a boosting of rents, significant space absorption, and believe it or not, tenants that want to do direct deals with us and locate in buildings that have some element of flexible working space to accommodate their growth needs in buildings that otherwise are pretty much full up in our portfolio. Brokers could get bypassed in the process by going directly to these providers. That'll have to sort itself out as to the relationship between these providers and the brokers. At the moment, it looks like there's a little bit of risk and jeopardy there. Tenants, on the other hand, it's a mixed bag. They get shorter term lease obligations, flexibility, capital savings, and very well-serviced space, but it comes at a cost.
It is a high cost of occupancy to deliver those benefits, there is a loss of that privity with the landlord, which could come back to be a negative when it comes time to expand or contract or do anything with a lease that you have to otherwise go through your co-working provider. That's sort of a look at the major trends in this market. Let's bring it all together now and see how these various factors are impacting the underlying value of SL Green. NAV. We talk about it a lot. It sort of is the foundation of how we look at this portfolio. What is the spot value of this company at any given point of time, and is what we're doing accretive to that value, which is really predominantly one of our major focuses.
A key factor in this NAV analysis is the expectation that values are very strong in Manhattan. Andrew's going to talk about that. We have enterprise value right now at a $96 closing price on Friday of about $18 billion, okay? Down from last year, mostly because of shrinkage of the company as a result of the share buyback program. When we go through the components that are non-stabilized Manhattan, these other components, we have lease fees and lease interest. We value those property by property, taking into account the lease terms and the lease provisions and fair market revaluations. We get to about a $2 billion value.
High street retail portfolio works out to around a four and a quarter cap, higher than what we've shown in previous years, because a lot of that mark to market that kept that cap rate in the threes, we've realized on through our extraordinary leasing efforts. Residential, we have about 2,000 units, very high performing real estate that we value at around a four cap. That's actually a relatively high cap rate, given the fact that 20% of the portfolio is encumbered either with affordable housing, requirements, rent control, or rent stabilization. Suburban asset value, we have estimated at net liquidation value. Sort of spot market values. I think we have a very good handle on that, $384 million.
Development properties are typically at cost with a modest land markup that is reflective of the marks where we either have or believe we can get ventures done to the extent we wanted to venture those assets. Basically cost, that's $2 billion + $2.5 billion of NAV. Debt and preferred equity, we value at book one time. The portfolio's performed extraordinarily well. There's other assets, mostly balance sheet items, receivables, cash, other items that Matt can sort of explain. We also put promotes and some air rights in there, but not the One Madison air rights, leaving a total implied Manhattan value of $8 billion, which is $610 a foot and six and a half cap rate.
There's no debate in my mind, zero debate, that those are metrics that are anywhere close to the reality of the market we participate in, have participated for 21 years. It's extraordinary how undervalued the Manhattan portfolio is with it. For that reason is why we believe so strongly in the share repurchases. When we put a 4.5% normalized cap rate in this market on a portfolio that keeps getting better and better every year as we re-engineer the portfolio, you see an $876 per square foot implied value and $140 a foot and a 31% discount. That sounds like numbers that any private market participant would absolutely wrap their heads around. We look not to the public markets as arbiters of value, but of the enormous wave of capital that exists in the private markets.
Looking here only at private closed-end funds, which are typically core plus, value add, and opportunistic. They carry financing levels of anywhere between 50%-75%. They're looking for rates of return as low as 6% unlevered to 10% or levered returns of, call it 7.5% to 20%. That's where the market is for value. That's where these funds operate. That's how they capitalize themselves. REITs, on the other hand, are geared at around 30%-35% weighted average debt rates for the office sector. We have all forms of those assets within the portfolio. We're not a fund that just has one category of asset. We have everything. We've got core, we've got value add, we've got development, we've got transitional. It's what we do.
We're expert at all of it. We're trying to operate that business and grow and grow profitably, with the constraints that have been applied to this sector. Very low stock price, big discount to value, so an inability to raise external equity publicly and debt levels that are below our competitors. It's not a commentary or right or wrong, it's just fact. Therefore, we have to be that much better in order to compete, which we are. We do it. There are companies out there that are raising hundreds of billions of dollars of capital. In this market today, Blackstone and Brookfield alone are raising $15 billion-$20 billion a year for investment in the kind of product we invest in. Investors vote with their wallets. It's not a debate, in my opinion. It's not opinion.
It's where's the investment dollars going. Decidedly, the investment dollars are pouring into the private market. Good for us because it forms a stability of value for our portfolio. Why do these repurchases make sense? Why are we so dialed into doing it? Why did we announce another $500 million on Friday? It's because the pillars of our strategy is value creation, earnings accretion, and quality enhancing. Re-engineering the portfolio. When we buy, we're buying more of a better portfolio every time we sell an asset or recap. We're reducing complexity and hedging ourselves naturally because through aggressive selling to buy, we take advantage of today's market rates. That forms a hedge. Buy low, sell high. We have a strong conviction about it. I believe you got to have an opinion. I don't believe in neutrality.
Somebody on this board once said to me, "You got to have an opinion." We do. Our opinion right now is that this makes sense for our company. The way we fund that program, I'll go through this quickly. Joint venture assets back in 2016 provided $550 million of net proceeds. We ramped up in 2017 with JVs and sales, another $600 million of proceeds. Look at 2018. That's a lot of deals. I guess we really ramped up. $1.45 billion of net proceeds generated through all those activities. We still got a month left. That gives you total sources of $2.6 billion. How did we use it? $1.8 billion went to share repurchases since we started this program.
Another $770 went to corporate and other debt repayment and unencumbering. That's in addition to eliminating $1.4 billion of underlying debt as part of those sales. It's the pay down and the elimination of the property level debt. We've executed a very balanced debt neutral way, $2.6 billion raised, $2.6 billion deployed, a lot of debt eliminated so that we've come down at a leverage point to something that is well below our private market peers. In 2019, you're going to see more of the same. Dispositions, additional asset sales, joint ventures, additional sales of One Vanderbilt, a JV of One Madison is our goal in 2019. Suburban dispositions in Stamford and Westchester at the levels that we showed on the NAV slide. Debt and preferred equity is kind of self-funding. We get money. We put the money back out.
Doesn't require any new equity funding. Financings, if we close the JV, we'll get a construction loan for One Madison. How about common equity issuances? I don't think so. Probably not in 2019, I hope so. Hope there's a big rally in the stock. Uses. 460 West 31st, exciting new development, redevelopment candidate that we just went hard on a contract. Andrew's going to talk about that. Development projects like One Madison, 185 Broadway. Seeds for the future. We're growing our FFO as we sit. We're growing our same store NOI, this is for the future. Redevelopment of 609 Fifth, way ahead of schedule. Debt reduction, line of credit cleaned up to zero, share repurchases overriding it all. Where does it sort of come home? Year to date, we are at total return levels as of Friday that we're not happy with by any regard.
You know our single-minded focus in trying to gain absolute level returns. On a relative basis, we've outperformed most of our peers and the index for the year. Yet, that outperformance comes even while our multiple is so cheap, 13.6 times, FFO multiple relative to a peer set that averages 15 and reaches highs of 18 to 19. As long as that continues to exist, I guess we'll probably continue to buy stock. Our goal is not that. Our goal is to create a portfolio that we believe warrants the highest multiple, premium multiple in this market for the talent base we have, the sort of insane focus we put into executing year after year, the value we create in New York's most extraordinary portfolio of assets.
I hope you can see from the presentation so far that our portfolio is in excellent shape, that we are tremendously optimistic about moving forward. Over the next couple of hours, we will be presenting a number of exciting new projects that will produce incremental cash flow and allow us to continue delivering the growth that you've come to trust and expect from SL Green. Of course, Matt DiLiberto will be batting cleanup, talking about our investment-grade balance sheet and our preview for guidance in the coming year. For 20 years, we have delivered enormous value in this market with this world-class team. I think you will find that we've delivered in 2018, we're on track to do it again in 2019. Now it is my pleasure to turn the presentation over to my partner and colleague of 25 years, the ice man himself, Andrew Mathias.
Thanks so much. Good work. Thank you, Mark. Is that for me? Good morning, everybody. Thank you for coming. I'd like to start today by giving my traditional overview of the investment market and then get into some SLG-specific case studies based on our announcements this morning, which I think everybody will find very informative. We sit today in a balanced, competitive, and efficient market with some very positive trends. That balance means strong demand across all three property categories that Mark described: core plus, value add, and opportunistic. The market volumes we're going to look at show no sign of abating, as worldwide capital keeps focusing on the New York City market. Debt markets continue to be extremely efficient, even in the face of rising indexes, and sellers keep an ample supply of properties on the market.
You can see institutional capital popping up in deals anywhere in the five boroughs today, as investors scour the landscape in search of compelling returns. In a telling measure of the market's strength, volume is up this year, and by the end of the third quarter, we've eclipsed all of last year's volume total. The side screens show that in each quarter of this year's totals, sales volume has exceeded that of 2017. The $9.2 billion remaining you see here, we view as highly likely, particularly given the deals SL Green has already closed in Q4, and some of which we announced this morning, account for almost 15% of that total. While volume is up this year, cap rates have trended up a bit in reaction to increasing Treasury rates and modest rent growth.
We believe this is partially a function of traditional core investors shifting their risk tolerance in search of higher returns. Class A pricing in north of $1,000 per foot is still a very healthy market, and the composition of buildings that are sold in any given year can influence this per foot average. The changing yield trends have ushered in some new players in the constantly changing buyer landscape. You can see this core market demonstrated here as U.S. capital steps in to replace Chinese capital as the dominant players. SLG's own Three Columbus and 1745 Broadway show up among the larger trades of the year.
The value add segment saw a notable pickup this year. This volume is not reflected in the market cap rate statistics I showed you earlier, as each of these deals is slated for heavy capital investment and complete repositioning. Oftentimes, these deals are bought at one and two caps. The value add sector was highlighted this year by Brookfield's very aggressive purchase of 666 Fifth Avenue, where they're going to completely reskin that building and try to reset rental levels in that segment of Fifth Avenue. Terminal Stores, which is the second deal here, earned an SLG first United Nations flag as the equity source. A large syndicate of U.S. pensions, a Korean pension fund, and German insurance capital teamed up to fund this bold purchase of a landmarked asset on the Far West Side.
Historically, you would find these players in core deals or in ground-up development in the very core areas of Manhattan. In these players' quest for yields, they've broadened their risk and asset tolerance, funding an aggressive business plan in a developing area of the city. Ground-up development also saw an active year, as Disney sold its Upper West Side campus for residential development and promptly redeployed that capital into land in Hudson Square for a new office and studio building they'll be constructing there. Pfizer's campus traded as well, as they announced their relocation to The Spiral at Hudson Yards, and they sold their site to a group that they've become one of the sites Marc highlighted in the Grand Central redevelopments as Midtown's next wave of development may take place.
In anchoring some of that $9 billion I showed you to come in Q4, you see transactions that are on the market. Even though some of these deals will slip into 2019, you can see the market is robust with investment opportunities in every corner of the city, from core Downtown on the left to SoHo, up the West Side into the Hudson Yards, and on into core Midtown. There are several other large deals we're tracking that are likely to hit the market in January, as 2019 is shaping up to be a very active year in the capital markets. Fueling all this transition activity, Marc spoke to this as well, is $143 billion of dry powder available for North American real estate investment. As if that's not enough, there's another $134 billion of funds in the market, folks.
While the public real estate markets pause and struggle to find their bearings, private capital is racing ahead in all geographies. You can see on the side screens, digging a little deeper into the geographic focus of the funds. The shift to European and Asian opportunities that we often hear about doesn't really bear out in the numbers when you look at North America's dominance versus the rest of the world in fundraising. Real estate as an asset class has benefited greatly from an almost 20% increase in allocation of global AUM over the last six years, implying more than $170 billion of increased real estate investment by worldwide investors. Switching to debt and preferred equity, all this transactional activity translates into a very healthy DPE business for SL Green.
This morning, we ran our traditional tombstone ad in The Wall Street Journal, memorializing some of our notable transactions this year, led by our announcement Friday of the completion of phase II of our 245 Park Avenue preferred equity investment. An extraordinary and highly complex deal that features double-digit returns to SL Green and our assumption of operational control of this flagship asset. You can see other household names on the screen as our borrowers, as our shift to mortgages, which I'll get into in the slide presentation, broadens our borrower universe. You can see folks like Normandy and Invesco, CPP, and Oxford, and others broadening our borrower base and moving it a little bit more institutional. The team has had to work harder than ever to keep the pipeline robust this year and continue to maintain a rigorous credit and underwriting process.
Most deals continue to be pretty heavily equitized on the purchase versus prior cycles, that leads borrowers to lower leverage levels on acquisitions. The market is extremely competitive as new entrants continue to emerge in the sector. All this is against a backdrop of increased fixed and floating rate indexes and spreads that continue to tighten as lenders compete for assets. The re-emergence of the CRE CLO market has helped some of these players hit their target returns in this market context. As they lower spreads, their cost of financing lowers due to cheap CRE CLO money. It allows people to compress their spreads. We definitely see some risk getting mispriced out there in deals which we've studiously tried to avoid. CMBS volume should finish the year around last year's levels, as this slide you see here is through November 30, 2018.
The real story this year is in the explosive growth of the CRE CLO issuances. Recall, these are loan pools that allow non-bank lenders to aggregate both bridge and mezzanine loan collateral that doesn't fit the traditional metrics of CMBS. Some have revolving features and allow these lenders to better match financing term with their underlying assets. Similar to the dynamics I showed you in equity funds and Marc spoke about earlier, record levels of capital are being raised for debt investment funds as well. Much so that 2018 is looking like it'll be a record year for debt investment. Really, we have 20 years up here, but probably ever. It seems like everyone, including a lot of our borrowers, which you see on the side screens, are jumping into the debt game these days.
Turning to our own portfolio of debt, you can see that some of the metrics that prove out our risk mitigation strategy show up in these pie charts. We were predominantly a mortgage lender this year, preferring superior collateral and control over the whole capital structure as we saw mezzanine paper overbid in many situations and avoided those deals. We stuck mostly to floating rate deals, giving Matt a nice balance sheet hedge to our floating rate liabilities and sticking more to transitional business plans, borrowers who are buying, fixing, and either selling or permanently financing assets. Because assets that were stabilized that went out for fixed rate financing typically drew that very aggressive capital, and those yields compressed quite a bit.
The deals were primarily refinancings that we participated in, as those high equity levels in acquisitions I discussed often made that paper too cheap, and we refinanced many of our existing customers. You can see these trends further illuminated in our retained originations for the year, where we have our highest level ever of mortgages as a composition of the paper that we retained. Very healthy levels of over $1 billion too of retained originations this year, and yields that you see trending down a bit as we shift up the risk higher in the risk spectrum, higher in the capital structure, lower in the risk spectrum, and trade off a little bit less yield for more secure positions. Keeping our studious eye on credit at all times. It's worth taking a step back and recapping the program and sort of going through quickly our track record.
We are the lender of choice in the Manhattan market. We are the first call for subordinate financing and increasingly bridge financing. The more complex a deal, the quicker a deal has to execute, the better and more competitive we are. We've originated more than $10 billion of retained originations in the last 21 years. Our track record and sort of the breadth of our experience is unmatched. We maximize risk-adjusted returns. We've generated returns in excess of 10% with realized losses of less than 1% over the life of the program, so less than $100 million.
That comes as a result of both on origination, being very rigorous in terms of the deals we select, and then also we have a very active risk management process where we use our market intelligence and sort of what we're seeing going on with different borrowers in different areas of the city, and have quarterly asset management meetings, establish watch lists, and aggressively shed risk where we don't feel comfortable, we don't think the position is performing to underwriting. Another critical feature of the program is really the equity opportunities it leads to, as we are the first call when we're in a capital structure, as borrowers look to either sell or, in some cases, joint venture assets. With some of the announcements this morning, I'd like to take you through three case studies of assets where they're long lead time type deals.
It takes a long time to put these deals together, but you start to see in some of our announcements this morning the extraordinary returns we can generate from some of those deals. Let me start with 460 West 34th Street. This building sits kind of in an unbelievable location between the new Hudson Yards developments and Manhattan West. It's a very large building. It's a big scale deal, and it was completely off-market the way in which we acquired the deal. A very unique opportunity for us on a big asset, 634,000 feet. Going through kind of the timeline of our acquisition, in October of 2014, four-plus years ago, through three separate transactions, we financed a 34% interest in the deal through a convertible loan that we originated out of our DPE program.
After closing that deal, we had a little tussle over who operationally controlled the asset, two years later, we prevailed in an arbitration which determined who was in control of the asset and what our rights were vis-a-vis the other 66% of the deal. In July of 2017, we executed a letter of intent to acquire a controlling interest in the building, we turned that letter of intent into a contract in December of 2017. In May of 2019, as we cleared sort of the hurdles of that contract and put together our plan for the asset, we had an extraordinary amount of time, almost 18 months, before we had to close on the building. We'll close on the controlling interest in May of 2019. The plan here, we have a great upgrade plan for the property. New lobby. New double-height retail space at street level.
Modernizing the office space upstairs, which I'll show you some renderings of shortly. Completely new environment inside the building with upgraded mechanical systems, new building amenities, making the building competitive with some of the new construction in the surrounding areas. That program we expect will take about two years. In March of 2021, we'll deliver new, upgraded, and tenanted space to the building, and the asset should stabilize. This takes a long time to put together. There's a lot of complexity. It brings in a lot of disciplines of the firm. As you look into sort of what it takes to get a deal below blistering market price these days, you can see that our blended basis in this building is going to be around $528 a foot in May when we close. Our base building capital program, we've outlined around $200 a foot additional.
We'll bring a fully redeveloped building to the market for tenancy at $730 a foot. If you look around that map that I flashed up before with all the new construction in the area, they're delivering those buildings at $1,500-$2,000 a foot. You can easily see how competitive we can be on rents, still very profitably, versus those buildings will be a cheaper alternative, will be a back-office alternative, or will be a tech sort of new media alternative, where those tenants target buildings that look much more like this than new construction. They like sort of the masonry building feel, the aesthetic on the outside, and then you can see in the rendering on the inside, we'll be creating sort of very cool, efficient space. Another $100 a foot or so in leasing costs because we'll have roughly 80% of the building to lease.
Our stabilized basis we expect to be around $840 a foot. Well north of kind of all the comps in the area and a great long-term asset for the company. Now turning to 609 Fifth Avenue, where we got to go way back to 2003 to go our first mezzanine loan on the asset to Jeff Sutton through the DPE program. We converted that mezzanine loan into equity ownership of the asset. We owned this building for quite some time with American Girl and the flagship retail at the base of the building. When it became clear that American Girl was going to vacate and move to Rock Center, we set about on looking at various development schemes for the asset.
We looked at everything from a full residential ground up development, utilizing air rights from Rock Center, which would have required a ULURP approval, an 18-month process, similar to what we did for One Vanderbilt. We talked to people about ground up hotel schemes and an office overbuild where we utilized some existing air rights at the building and some FAR that existed on the block and add on top of the building. All these schemes proved to be very expensive, and when we evaluated the rents and sort of the alternative, which was just a retail repositioning and a re-tenanting of the office upstairs, it didn't seem like the best use of our capital. We went forward with kind of the modest version, if you will. I think the result was terrific and gave us a higher return on our capital.
We took 21 feet of lobby space on Fifth Avenue and converted it to retail, and moved the building's main lobby to the service entrance on the side street. This gave us 53 feet of frontage on Fifth Avenue for a prime retail box, which had not previously existed at this building. The biggest challenge was there was not enough Fifth Avenue frontage. The retail team did an amazing job this year of signing a flagship 15-year lease with Puma for the retail space on Fifth Avenue. I'm happy to announce today, we've leased the balance of the retail space of the building to Vince, who's a clothing company moving out of the floor of Saks Fifth Avenue to street level for the first time, and they'll be operating a clothing store out of 2,900 feet behind the Puma store.
Also this year, we announced WeWork did a net lease for the entire office portion of the building. They'll be investing significant capital upstairs in floors 3 through 13. They'll use the lobby that I described. Looking at kind of the value creation here, for a relatively modest $91 million capital investment versus some of the schemes I showed you earlier, we'll wind up with a fully redeveloped building with Puma, Vince, and WeWork. We'll stabilize this NOI at right around $15 million, which is a 61% increase from NOI before redevelopment of the building. A very attractive incremental yield on our capital. Successful repositioning here. The lease up done way ahead of schedule, and Matt's happy because it'll be an earning asset a lot faster than we had projected with some of the other alternatives.
Moving on to the third DPE case study, if you will, Two Herald Square, which brought in our special servicing group, and used a lot of our experience there. The history of this deal again starts in April 2007. When this asset traded, we structured a very innovative fee and leasehold financing. We wound up retaining the fee interest in this property. The leasehold traded to an entrepreneurial ownership group. We sold that fee interest in the asset in November of 2014 for a very healthy gain, a great return on a fee position in Manhattan. We continued to monitor the asset. In May of 2017, when the 10-year leasehold acquisition financing that the ownership group had put on was maturing, it became clear to us they didn't have the means to refinance the debt, and the debt was likely to default. We jumped into action.
Over the course of a week, we were able to use our proprietary knowledge of the asset. We bought the first mortgage loan on the building, and maturity came, they didn't make the payment, so we were back in court running a foreclosure in Manhattan. This was a first for Mark and I. We've foreclosed on a lot of buildings all over the area. We've never actually completed a mortgage foreclosure in Manhattan. Usually, it's always a negotiated deed in lieu. This one, we actually closed on the courthouse steps. In 12 months' time, which was a remarkably short period of time, May 2018, the gavel dropped, and we got control of the asset. The SLG SWAT team moved in. Ed and his team took over an asset that had been heavily neglected, sorely in need of capital. You had a lot of very angry tenants.
There was a lot of problems at this property that had to be taken control of. The amazing thing was the foreclosure was quick, and in today's kind of short news cycle, we wanted to keep up with that and make it a short investment cycle here. In the words of the great Marvin Gaye.
Oh, mercy me.
This morning, we announced a complete sort of transformation of the asset, not even just recapitalization, but a complete shift in the tenancy and a recapitalization of the capital structure. It started with bringing in a JV partner at a big markup to our basis, for 49% of the asset. We announced the closing of a very attractively priced acquisition loan on the building, at the same time, contemporaneously with that partner coming in. Mercy College, we expanded and extended and leased them some lot former retail space for a new lobby for their school campus. We extended their lease out to 30 years, taking advantage of their tax-exempt status, selling them a leasehold condominium interest in the building. WeWork, we announced an expansion of their lease at the building.
They've had a lot of success with Amazon through their enterprise business, so much so that they were looking for more space in the building. On the retail side, we signed a modification and extension with Victoria's Secret, which settled a rent arbitration that had been ongoing and sort of festering with prior ownership. We changed their signage profile at the building, most importantly, we recaptured some elevators, which we needed to make the Mercy deal. We converted some lobby space that had gone fallow on Sixth Avenue into retail space, income-generating space. We signed a lease with Happy Socks for that space. What's left today is a retail opportunity, which you see kind of the monopoly space on the side screens.
A prime sort of retail flagship store is all we have left to lease at the asset. We got a lot of exciting conversations ongoing about that space. If you look at foreclosure, kind of the numbers of this deal are pretty remarkable. For almost less than $4 million of NOI of foreclosure in May, 80% occupancy, weighted average lease term of 9.2 years. With all the leasing action I just took you through, we're up to $9.6 million of as-leased NOI, 93% occupancy, so 14 points of occupancy increase. We stretched out that lease term by eight years. With the lease-up of that retail flagship, we expect to stabilize this asset in a very short period of time at $18 million to $20 million of stabilized NOI at 100% occupancy. Hopefully, we'll take out the crystal ball, the short news cycle continues.
Brett and the retail team can work some magic this year. In 2019, we could see some crazy headlines, a flagship lease signed, and who knows what else. Transitioning to the redevelopment segment of the presentation. We have some very interesting case studies presented in an interesting, innovative way, I think you'll see. We're going to start with 185 Broadway, which is our Affordable New York project downtown. Go right into an update on One Vanderbilt. Break for an intermission, come back, look at One Madison and some of the unbelievable redevelopment and development that's going on there. Matt will do his thing. First, 185 Broadway. This is an assemblage we've been telling you guys about for quite some time.
Another long timeline here. In August 2015, we bought the first properties directly across from our 180 Broadway development, where we had enormous success leasing that building up to Pace University, Urban Outfitters and TD Bank on the retail. We immediately started scouring the area for other investment opportunities. We managed to assemble another building on the site, 183 Broadway, almost a year later. It takes a long time. Through the last 18 months or so, we've vacated almost 53 tenants at the site, significantly under the budget we'd laid out in order to vacate the buildings. That allowed us to demolish the site over the course of this year. Today, we sit with a site that's fully demolished. We announced this morning, I think, that either Friday or this morning, that we did a deal with the MTA.
We bought some air rights and a light and air easement from the Fulton Street transit entrance that's at the corner. Our site Ls around it, which you'll see in the presentation. We did a deal with the MTA, which was kind of critical to building the footprint building we were looking to build here and bringing very competitive residential apartments to market. We also closed construction financing for this asset. This deal is fully capitalized. Very compelling terms on the construction financing. It'll require a very modest equity investment to get it to stabilization. That's how long it took in sort of the process of getting a fully assembled as of right and capitalized deal.
Now you're going to hear from Dan Kaplan from FXCollaborative, and then Brett Herschenfeld, managing director in our retail group, who really spearheaded the development of this site in an unbelievable way. This is 185 Broadway, folks.
Lower Manhattan was the first European settlement of New York. It was New Amsterdam. The layout of the streets grew from where the topography was, where the edge of the water was, and it always had this quirky sense. It wasn't a rational grid that we think of Manhattan. As Lower Manhattan became the business center of New York, more and more people came, the densities grew up, and you had this interesting combination of a European quirky street grid with very tall buildings. What that does is it creates all these very wonderful opportunities for crafting architecture. 185 is going to be a great addition to Lower Manhattan. It really is in a very critical part of Lower Manhattan. It's where City Hall Park and classic center of Broadway Lower Manhattan meet.
It's where the World Trade Center meets the Fulton Street Transit Hub, and it all comes together at that corner. It's sort of like the 100% corner of Lower Manhattan. This building is right for that site and has been crafted for that site. The design really unlocks the value of the site. There's a commercial podium that has retail and offices, and then on top of that, which is really the majority of the building, is the residential. By creating this podium of commercial, it did two things for us. One is we were able to utilize the full zoning allowable floor area of the site. Two, it lifted the residential up in the air and really gave great light and air to the residences.
What we did at 185 is craft the building to take full advantage of the light and air and really wide open views that we do have up and down Broadway to the northeast, and of course, a very special view down to the west into the World Trade Center, looking onto Santiago Calatrava's beautiful transit center. The sixth floor, there's this wonderful suite of amenities. We created an arrival experience, so when you come off the elevator, there's windows, you see out, it's wonderful, you have light. There's a whole suite of fitness center, party rooms, screening rooms. We've taken the rest of the amenities and put them at the very tippy top, and there are two outdoor spaces.
One is a two-story high loggia that faces Broadway, and from that loggia, you'd be able to see City Hall Park and even all the way up into Midtown. Looking south, you'd be able to see down to the Battery and all the way out to the water. It's going to be magical. The roof of the loggia is another outdoor space. It's more sun-oriented, sun deck, and from there, of course, you'd have wonderful 360-degree views. There's this whole sense of you have wonderfully efficient, well-laid out, well-thought-out residences, and then that is complemented by this really wonderful suite of amenities that really amplify the whole experience of living at 185. I really think it's going to be a great long-term asset for SL Green.
Hi, I'm Brett Hirschenfeld, Managing Director at SL Green. I've been working on 185 Broadway for the past six or seven years, and I'm proud to share with you today the next steps. Our original attraction to this assemblage was its retail potential. The Fulton Transit Center is the epicenter of all Lower Manhattan access. 185 Broadway is catty-corner, and it's the first physical presence when emerging from the transit hall to the street. Its visibility goes three for three on retail consumer segments, tourists, office users, and residents. Additionally, our project delivery timeframe marries up with first-generation lease expirations at the Oculus and Brookfield Place, providing a natural tenant demand pool of retailers that might now want to go back to a traditional high street presence in Lower Manhattan. Our retail design capitalizes on our signage and leasing expertise derived from our many Times Square projects.
We had success leasing the corner at 180 Broadway and feel that the design of 185 on the opposite corner at street level positions us well against competition from other less visible Lower Manhattan retail locations. Shifting to the residential component, we are excited to add another 209 units to the SLG residential portfolio. Upon completion of 185, our total portfolio will contain 3,267 units in a residential market that continues to have solid core fundamentals, including a 1.5% vacancy rate in all of Manhattan. In Lower Manhattan specifically, the vacancy rate has declined year-over-year from 3% to 1.6%, demonstrating the population growth impact from infrastructure to World Trade Center projects continuing to come online.
With SL Green leading the charge, the development and marketing team at 185 Broadway is best in class and consists, among others, Dan Kaplan at FXCollaborative, Douglas Elliman on the residential lease-up. Newmark will be sourcing an office tenant for our commercial space and SLG Retail on the base. I'd like to take you through the timeline for the project development. Demolition of the site is fully complete, and we are eager to break ground in March of 2019. We anticipate completing foundations by next year's investor conference. With the design and schedule locked in, we look forward to cutting the ribbon and welcoming the first tenants to the building in April of 2021. The total sources and uses for the project comes in at $311 million.
SL Green currently has $25 million of equity invested in the deal, and the construction loan, which we announced earlier this morning, allows us to fully fund the project with only $60 million of additional equity on a pari basis with future loan advances. Here's the NOI breakdown. Douglas Elliman provided the comp set of rental properties, which you see here on the slide. Every unit at 185 Broadway is priced on a per-month rental rate relative to this competition. The 30% affordable component is priced according to the city guidelines, and the combination of those two brings you to aggregate revenues in our first year of stabilization from the residential envelope of $11.1 million. Newmark projects $65 a sq ft for the commercial component of the building.
At the midpoint of our retail rental range, we expect to generate $5.6 million for the entire retail flagship and another $500,000 from the signage envelope.
On the expense side of the equation, in exchange for us setting aside 30% of the residential units as affordable, we received a 35-year tax abatement, which makes the Affordable New York Housing Program feasible for both the city and the developers. Our unlevered and levered cash-on-cash yields come in at 6.1% and 14.2% respectively, both incredibly strong in a very tight residential rental market. I want to close by saying how proud I am of what we created here. First, because it represents the true SL Green mantra of off-market acquisitions, agnostically navigating to the highest and best use for a deal, whatever that might be, and delivering market-leading returns. Secondly, I've lived in Lower Manhattan for the last 10 years. I witness every day its vibrant growth, and 185 Broadway will mark a new milestone in its extraordinary future.
We are proud to deliver the first Affordable New York Housing Program project in Lower Manhattan.
Breaking news. Our news team is here in the field and from the newsroom with an update on One Vanderbilt.
October 31st, 2018. Happy Halloween. This is typical. Once a week, I come down, I meet with Kevin and Richie. We do a quick walkthrough. It is easy to talk about all this at meetings and look at drawings and look at schedules. Everything from pre-development, to what we do at meetings, to these walkthroughs, this is where we see how things are getting done, whether they are properly coordinated, so on and so forth. The beast gets fed through here. We have to get all the material through here. We have to be able to pour 200 yards of concrete to make sure you get all this material in before the city wakes up. The city is asleep. Most people are still asleep. We are not. We are here. Let's take you inside. I have said it before and I am saying it again. We are ahead of schedule and under budget.
How do we get here? What makes us different from other developers? It is the efficiency of our execution and the talent of our development team of skilled workers, led by my four pillars of construction, Bob DeWitt, Anthony Schembri, Harry Olsen, and Tom O'Connor. We established aggressive performance and schedule milestone incentives that align the interests of all the key stakeholders, including Hines, Tishman, and a multitude of subcontractors. The project is managed with vigilance, so we are all synchronized. We will be approaching some major construction milestones over the next 12 months, bringing permanent power to the building in preparation for our tenant turnover, erecting steel to the roof, and wrapping up curtain wall installation in early 2020 as we move closer to TCO and our unprecedented project delivery. It is really the team on site that gets it done through the rain or shine.
Early this fall, we hosted a worker appreciation lunch at the site for our tradespeople to share our appreciation for their hard work, day in and day out. The New York City labor market is highly skilled and trained through apprenticeship programs that produce some of the best tradespeople in the world. At the lunch, we distributed buttons, inspiring workers to keep their eye on the prize. What is the prize? It is our new target for construction completion on August 4th, 2020. The site never sleeps. That means it is on all hours of the day, every day of the week, and unfazed by weather. One Vanderbilt is alive. You can feel the energy of the entire team. A few days a week, I take a detour on my early morning run in Central Park and look forward to arriving at One Vanderbilt right before dawn.
While most of the city is hitting the snooze button, workers are already at the top of the deck, climbing to new heights. One of the greatest features of this building that I encourage you all to observe on your tour later this afternoon is the exterior wall. It was designed to allow for maximum daylight penetration while maintaining a good amount of solid facade material. The spandrels in particular consist of a unitized curtain wall module clad in terracotta. The terracotta is shaped into concave ribs, positioned diagonally to echo other prominent diagonal features of the larger building design. From the beginning of the project, we were committed to strengthening the architectural character of the neighborhood. We avoided the typical, boring, shapeless, all-glass building design. The curtain wall, engineered in New York and Venice, and manufactured in Connecticut and Canada, with float material sourced from Spain.
The double coatings on the typical curtain wall glass maximize usable daylight while minimizing solar heat gain. At the top of the building, in the areas dedicated to the observation deck function, the glass has super low reflective properties in order to maximize the views of the city beyond. We focus so heavily on the outward-facing skin of the property because we knew the iconic value of this building. It's not just the curtain wall. It's every element that was treated with a level of care and detail. We traveled across the Atlantic to make sure the stone we sourced is perfect in every way. We handpicked each slab in Italy and had it inspected for the attributes we were trying to achieve on site.
It's of paramount importance that we manage the selection process with our consultants to ensure the consistency and quality for the massive inventory we need before it even makes it to American soil. By the end of the month, we'll be up to the 62nd floor, and we're striving to complete the snorkel ahead of schedule. We used to show off digital simulations when presenting about the project, but now we see it in action.
I personally can't wait to see the American flag waving from above One Vanderbilt as the spire is hoisted into place. It will forever define the skyline of Midtown Manhattan, and it will represent the realization of a dream for so many who relentlessly pursued their vision for this development. Our legacy will be forever engraved in the New York City skyline and is a remarkable achievement for everyone involved.
Hi, I'm Steve Durels, Executive Vice President and Director of Leasing. The numbers are in, and they speak for themselves. Three new leases and one lease expansion signed within the past two weeks, covering 228,778 square feet, on top of three other leases signed earlier this year covering 335,451 square feet, raising One Vanderbilt's pre-construction completion lease up to 52%. We are way ahead on business plan and excited by all the tenant enthusiasm for the building. Additionally, we're actively trading proposals with five tenants covering over 164,000 square feet. Before the end of this month, we're expecting to receive three more proposals covering 167,000 square feet. Although it's unlikely we'll convert all of these proposals into leases, since several of the tenants are vying for the same floors, this flood of activity confirms the strength of tenant demand for best-in-class and well-located new construction.
New tenant leases signed this year include the law firms Greenberg Traurig for 134,000 square feet and McDermott Will & Emery for 116,000 square feet. Each of these two firms were seeking a building where they can make a big statement in order to enhance their employee recruitment and retention. TD Securities inked a lease last week for 119,000 square feet for two and a half podium floors, where they'll operate their trading business. One Vanderbilt's 18-foot column free floors with state-of-the-art infrastructure provides TD Securities with a platform that could not be replicated anywhere else in Midtown. We signed The Carlyle Group for 95,000 square feet on three floors. As one of the financial industry's premier private equity firms, it was a tremendous endorsement of One Vanderbilt and has led to a slew of other high-end financial firms to consider the building.
MFA Financial just leased 30,000 square feet on the 40th floor. This residential REIT is relocating off Park Avenue onto a floor with jaw-dropping views. Additionally, SL Green has signed a lease to relocate our corporate headquarters into 70,000 square feet on the 27th and 28th floors. This one was a personal lease to me, given that with all the leasing activity, we had twice been boxed out by other tenants. The last thing I needed was to tell Marc and Andrew that after 15 years of work on the building, they wouldn't be able to move our headquarters into the company's signature property. We literally grabbed the last two remaining floors in the bottom half of the tower. Lastly, we signed a lease to partner with Daniel Boulud to build and operate a 15,000-square-foot new restaurant.
This will be Daniel's second signature restaurant in New York City, and we're wildly enthusiastic about the restaurant design, which will provide an unexpected dining experience in a soaring room while also maintaining a warm and intimate feel. It's important to note that TD, Greenberg, and McDermott are all expected to lease significant amounts of additional space within the surrounding SL Green portfolio for support personnel. In the case of TD, that amount will likely be 100,000 square feet or more. Pending leases and active proposals are all with tenants within the financial industry. With each passing day, as the building rises higher into the sky, we see more and more tenant demand for what is a one-of-a-kind building at the most commuter convenient location in Manhattan.
Good morning. I'm Rob Schiffer, Managing Director in the Investments Group and Project Executive for One Vanderbilt. Steve walked you through the leasing progress we've made at OVA, Ed summarized the heroic efforts of his team to bring the project ahead of schedule and under budget. Let me bring it all together by rolling forward our underwriting from 2016. Let me say, the numbers look good. The anticipated cost to complete the project is lower, stabilized NOI is on target, and the upsize and modification we announced this morning have increased our and our partners' returns. Let's start with the modification and upsize. This unanticipated opportunity arose out of our structured finance platform, where we saw senior loan spreads compress and senior lenders stretch loan-to-cost and loan-to-value metrics. We approached the co-leads and found broad support for the modification.
In fact, we're oversold on the upsize, and not one of our existing lenders has chosen to exit. The 75 basis point spread reduction results in savings of approximately $22 million over the projected term of the construction loan. The upsize reduces SL Green's equity commitment to the project by $178 million, and therefore, we only have $98 million left to fund and no further equity commitment to the project beyond March 2019. These achievements have increased our underwritten levered returns by 30 basis points, from 11.8% to 12.1%, which enable us, as Marc mentioned earlier, to seek additional third-party equity partners and further reduce our equity stake to approximately $800 million while generating additional fees and promote dollars, and all while retaining a majority 51% interest.
Rolling the pro forma forward, I'll bring up this slide we presented at Citi's 2017 CEO conference. On the left is our 2016 base case underwriting. On the right is the same underwriting, but with a conservative view of office rents. The resulting net operating income range was from $198 million in the base case to $175 million in the conservative case, with cash on cost yields of 7.1% and 6.3% respectively.
Norwood tries to kick his longest ever on grass, 47 yards. No good, wide right.
As we roll forward to today, we're happy to report that unlike Scott Norwood's wide right Super Bowl kick against my New York Football Giants, we've split the uprights. Sorry, Andrew.
It is good. He got it.
Executed leases blend to an average of $123 per square foot, and we're underwriting $170 per square foot for the remaining vacancy in the tower, our best space, resulting in a weighted average rental rate of $147 per square foot, 5% off of 2016's estimated $155. While we can't yet unveil what we have in store for the observation experience, we have increased underwritten net rent from $42 million to $46 million as a result of restructuring the base and percentage rent to optimize for tax efficiency. Operating expenses and real estate taxes are basically flat, resulting in re-underwritten stabilized NOI of $191 million. Deducting our projected project cost savings of $50 million, our development budget, net of JV fees and discretionary owner contingencies, is now $3.122 billion, and our new target stabilized cash on cost is 7%. A project of this scale is hard to estimate and underwrite.
Hitting the left goal post would have been heroic, but we're aiming for Norwood left.
We will now break for intermission. The program will resume in 15 minutes.
[Presentation]
Ladies and gentlemen, please make your way back to your seats. Thank you. Ladies and gentlemen, please make your way back to your seats. The program is going to continue.
Redeemer, redeemer. Redeemer, redeemer. Redeemer, full of culture. Redeemer, redeemer. Redeemer. Redeemer. Full of culture. Redeemer, full of culture.
Ladies and gentlemen, please welcome back Marc Holliday.
I wish it were that easy. I'm going to have to go find that time traveler with that magic crank and see if we can get done in about 90 seconds, which otherwise might take us about 4 years to accomplish. In the end, the result will be the same. That project is going to be magnificent. Our next presentation is one of the most exciting parts of today's show, an extraordinary new development at One Madison Avenue, what will become the premier office building in Midtown South. We've been waiting for this moment for nearly 15 years, ever since we acquired this perfectly located asset.
Over the years, we have developed many plans for the site. Now with Credit Suisse's lease coming due in about 24 months, we have the ability to execute on a extraordinary vision for the property that will be truly amazing and perfect for today's markets and today's tenancy. Timing couldn't be better for us as we prepare to put One Vanderbilt into service in 2020. We'll be able to roll into One Madison and focus that team's efforts on this new project as the future seeds of growth that will come on the heels of One Vanderbilt. The timing couldn't be more perfect. We brought that team back together. KPF has prepared a design that is really truly spectacular. You got a little glimpse of it.
There's some harmony between the sort of historic podium that's gone through many transitions over time, as you can see on the screen. The building was, at one point in time, the tallest building in Manhattan, I think for a day or a week. Now we'll have the opportunity to reimagine that portfolio with a half-a-million-square-foot new tower, a kind of perfect space that will sit on top and be one of a kind in Midtown South area. With that, let me introduce New York's number one leasing talent, Steve Durels.
All right. Well, as Cranker showed us, we've got a big plan for 1 Madison Avenue. What I'm going to share with you today is the presentation that we have shown seven or eight tenants to date. We've only early days of beginning to market the project, Already we've got several expressions of interest. 1 Madison sits at the single best block in the single best sub-market in Manhattan, bound by 23rd and 24th Streets, Park Avenue South, and Madison Avenue, directly across the street from Madison Square Park. It is the single best location. We sit on top of a subway. We're directly across the street from SL Green's 11 Madison Avenue. We're 1.2 million sq ft today in a 12-story building.
As Marc mentioned, we bought the building almost 15 years ago, knowing at that point in time it's a true diamond in the rough. We couldn't wait to get to the point where we'd be redeveloping it. Since the original acquisitions, we've put together a campus of almost 4 million sq ft, combining 11 Madison Avenue and 304 Park Avenue South, all within one block radius of one another. As good as these buildings are, they still have an opportunity for further improvement. One of our big advantages, though, when you really think about 1 Madison relative to other buildings in the Midtown South sub-market, is its size. Midtown South suffers from a lack of large buildings. Most of the buildings have poor infrastructure. Most of them haven't been heavily renovated.
1 Madison, on the other hand, has true great attributes of transportation, large floor plates, good slab heights. The neighborhood that immediately surround us, we're across the street from Madison Square Park. Eataly, the world-famous Eataly, is directly on the other side of the park. Shake Shack is in the middle of the park. Eleven Madison Park is the number three restaurant in the world, right across the street from us. We share the block with the EDITION Hotel, Ian Schrager's high design hotel. Our corporate neighbors are some of the best in the world. Sony and Credit Suisse are in 11 Madison Avenue. Luxury good retailer Tiffany's across the block, an international advertising firm, Grey Advertising, also one block away. You see some of the other great names on this map that surround the site. There are five key goals as part of the redevelopment.
One, starting with the engagement of Madison Square Park, generating value through adaptive reuse, building efficient column-free floors, and delivering 21st-century infrastructure together with some great indoor/outdoor spaces that I'm going to show you momentarily. As Marc mentioned, we're going to keep the band together. We've got the same development team from One Vanderbilt that'll be assigned to 1 Madison Avenue. As the construction at One Vanderbilt is wrapping up at the end of 2020, the new construction at 1 Madison will begin in 2021. The same players inside SL Green are leading a design team of KPF, Gensler, and our development consultants, Hines, and a best-in-class team of professionals beneath them. Cranker, of course, being the newest member of the team.
Design features of the reimagined 1 Madison Avenue include multiple rooftop terraces, 16 new tower floors comprised of two garden floors with massive outdoor areas, new glazed infill curtain wall replacing the existing punch windows, new storefronts, demoing the upper four floors of about 170,000 sq ft, and then constructing a new glass tower of 470,000 sq ft. The result is an extraordinary blend of new and old. We're design sensitive to the landmark of the clock tower, yet we fit within the context of the neighborhood, and we bring 21st century excitement to the workplace. When you look at this rendering on the Park Avenue side of the building, you see 23rd Street to the bottom of the image, Park Avenue South on the right-hand side, Grand Central Terminal at the northern portion of the roadway, and then the park, Madison Square Park, off to the left-hand side.
You really start to see how the two portions of the building come together, the limestone base of the building and the new glass tower above. In between, two very special floors. At the corner of the building of 23rd and Park Avenue South is number 6 subway. We're one stop away from Grand Central Terminal. When you look at the redeveloped building up close in the podium, you start to understand when I talked about the glass infill, no longer do you see any punch windows. It's floor-to-ceiling glass, so it's a vertical infill of new glazing, top to bottom, and the limestone base. Part of that is also a new glass facade above the Madison Avenue entrance. You see that glass area right above the building's new front door.
That glass facade creates the architectural thread connecting the limestone part of the building to the new glass tower. Then on the lobby side of the building, you see 23rd Street retail of almost 26,000 sq ft, the area on this plan in pink. The building's new lobby, which stretches from Madison Avenue to Park Avenue South. We're double-widening the Madison Avenue side to really emphasize that being the front door of 1 Madison Avenue. You see the new core that's been designed, including 22 new elevators. Important to understand that in order to redevelop this building, we're literally demolishing the entire core of the building. All of the elevators, all of the infrastructure, all of the shafts come out. There'll be a 20,000-foot hole in the middle of the building when we're done.
What goes back in that is this brand-new core with 22 elevators and all new infrastructure. Retaining a couple of key components, though. One is the VIP entrance off to the 24th Street side of the building, which is the perfect place for black car drop-off for our tenants. In the area in orange is an 800-person auditorium. We learned from One Vanderbilt that tenants are starving for large format office meeting space. If you recall, on our amenity floor at One Vanderbilt, we have some very large meeting rooms. That's been an important part of our leasing effort to draw tenants into the building.
In this case, we have an 800-person auditorium, double-height space, column-free, that we think tenants will use it for their holiday parties, for the town hall meetings, for the large format presentations, and maybe even TED Talks, as you see off on the side screen. Probably the most unique feature of the building, though, are the multiple roof terraces. In fact, we have over an acre of outdoor space, creating a virtual park in the sky overlooking Madison Square Park. The 10th floor is our first garden floor. This is a double-height space with 28,000 sq ft of indoor area, complemented by 31,000 sq ft of outdoor space. The 11th floor, equally special, 24,000 sq ft floor with almost 3,000 sq ft of wraparound terrace.
At the top of the building, we have an 8,000 sq ft roof deck served by four new elevators accessing all of the floors in the building. The architectural drama really starts at the connectivity between the limestone podium of the building and the 10th and 11th floors, which are essentially tremendous, unique specialty floors with massive amounts of outdoor area. In this image, you see the new glazing in the base of the building. You see the new facade above the Madison Avenue entrance, as I mentioned earlier, how it connects that thread to the upper and lower portions. The 10th and 11th floors, which are essentially a sculpted connection between the old building and the new building. When you get a little bit closer to those specialty floors, there is nothing like this anywhere in New York City.
These are each 22-foot slab height floors, column-free with the big outdoor spaces that you see in the imagery. When you're standing on one of those floors, in this case, the 10th floor, you can imagine what it's like to be this lushly landscaped outdoor area, big, high ceiling space on the interior, great gathering space for employees during the day or in the evening, used by clients for entertaining. When you step inside, equally special. Soaring ceilings, column-free, perimeter trusses, which create architectural interest. These floors, no doubt, will be the amenity spaces for a large anchor tenant, conference centers, cafeterias, town hall spaces, the true heartbeat for a large footprint tenant. On stack plan, we're 92,000 sq ft on average for the bottom eight floors.
The two specialty floors that are 24,000-27,000 sq ft and the new construction above that are approximately 35,000 sq ft with 14-foot slabs and 10-foot finished ceilings. The base floors of the building, the original building that'll be retained, this is the product that does not exist in Midtown South. Large floors, 12-foot slabs, an opportunity for high-density occupancy. In this case, you see laid out for a TAMI type of a tenant. It's the creative vibe that all these tenants are looking for, whether they're media firms or technology firms, or even financial firms. Everybody in this part of town is looking for that cool creative space. Open plan, likely no finished ceilings, everything will be exposed, and taking advantage of the new large windows that are being installed.
You take out a couple floors of slab, you create a real statement space on these big floors as you see in this imagery. The tower floors, equally one of a kind. These are the single best side core design floors I've seen in the market. 35,000 sq ft each, 60 foot dimension from the core to the perimeter, five-foot mullions around the side, with an occupancy capability of one person to 175 sq ft. Ideal for open plan, but also works well for an office intensive layout as well. I think these tenants go to financial firms, large-scale technology firms, international headquarters businesses. Again, this is a product that you cannot find south of 34th Street. New construction, married with interesting architecture at the base in a neighborhood that has all of the elements of the work, live, play that tenants are looking for.
When you stand on these floors, you start to appreciate what that, like One Vanderbilt, brings to the modern workplace. High ceilings, continuous ribbon of glass around the perimeter, great amount of natural daylight flooding the space. On these floors, maybe the most unique view in the whole building is looking directly across to the clock tower, where you feel you can almost touch the clock. Cranker's work is done. Ours is just beginning. When One Madison Avenue is complete, it will change Midtown South truly the way One Vanderbilt has already changed Grand Central Terminal in the Midtown market. With that, I'd like to turn it over to Matt DiLiberto, here to give you his annual entertainment.
Thank you, Steve. Thanks, everybody, for attending. To get me live, I was asked at the break whether I'm going to be taped, but no, face made for radio, voice made for newsprint, I have to present live. Before we get into the financial portion, we actually wanted to spend a little bit of time on our ESG initiatives. It's an area that's gotten a lot of focus. You have materials on our actual, our sustainability reports on your table in front of you. We're hearing about it in the investor community a lot, almost in all of our meetings. It's an area where we've been focused for a very long time, actually before it was en vogue to do this. We thought it was the perfect opportunity to show off a little bit.
We have one of the most impressive records in the sector when it comes to ESG. Who should present this? Well, you saw him earlier. He was on a mere 40-block detour on his morning jog to One Vanderbilt. 40 blocks is two miles, by the way. He is our tireless COO, needs no introduction. If he wanted one, he would have somebody script it, then he would review it, then he would edit it, then review it again, then he'd give it to me. I didn't allow him to do that. I came up with my own. He defies all medical research that says sleep is required. Tireless, part human, part cyborg, Edward Piccinich.
I'm Ed Piccinich. I'm the Chief Operating Officer at SL Green. I also oversee our ESG program and treat it with the same level of rigor and innovation that I put into every area I'm responsible for. Over the past 20 years, we've developed a management strategy that addresses ESG indicators that measure our non-financial performance in environmental sustainability and social responsibility. Environmental sustainability has been at the forefront of our building operations for years. In an area brimming with new technology, we've capitalized on energy-saving opportunities by investing over $60 million in efficiency projects over the past decade. We're applying these years of experience to our premier development at One Vanderbilt. There are many features that make One Vanderbilt unique, but one of the most innovative is our 1.2 MW cogeneration plant.
Picture a building that can independently produce its own electricity rather than further straining the New York City grid. We're taking it a step further. We're trapping waste heat to power up a 250-ton absorption chiller to generate cold water in the summer and to preheat domestic water in the winter. The best industry measurement of sustainability performance is LEED. Back in 2009, we were among the first owners in New York City to adopt the U.S. Green Building Council's LEED standard at 100 Park. Our current portfolio includes 20 LEED certified buildings. We consider this to be a huge accomplishment because LEED is becoming increasingly difficult to achieve. As the workplace evolves with new technology, tenants are consuming more energy. So we need to respond with operational resourcefulness to offset the growing demand.
We strongly encourage a partnership with our tenants on environmental initiatives to help them achieve their sustainability goals. At 420 Lexington, we provided CohnReznick with a comprehensive energy analysis and helped them to identify savings opportunities. At 220 East 42nd Street, we helped UN Women achieve LEED commercial interior certification in their office space during their renovation. This type of collaboration with our tenants is the cornerstone of SL Green's sustainability program, and it's essential in helping us achieve the Mayor's citywide carbon reduction goal, known as 80x50. We're the biggest commercial office owner in the city, so we've got a lot of skin in the game. When 80x50 was introduced, we partnered with the Mayor's Office of Sustainability and continue to sit on their technical working group as the legislation is being crafted.
I personally sat on the board of Urban Green Council, the organization that was responsible for aiding City Council in developing new legislation. I was there to represent the interests of owners and reinforce our position on balancing environmental goals with financial performance. Our focus on environmental sustainability is only part of the picture. We have an equally important social responsibility. At SL Green, our employees are our greatest asset. Our ESG team, led by Laura Vulaj and Evan Epstein, and Lynne-Courtney Hodges, is representative of the entire firm with diverse cultures, backgrounds, and areas of expertise to ensure we're capturing the priorities of all of our employees. We value the feedback of our employees, and our goal is to introduce meaningful improvements to their work experience.
We may not offer beer kegs or breakfast, and we may never, but we recognize that this innovative approach to the workplace is the way of the future, and we're adapting. Give us a chance. The real estate world may never be akin to Silicon Valley, and I don't know when napping pods will ever reach our offices. Marc, Andrew, and I, we're changing. We're changing with the times. We're bringing a focus on total wellness to our employees and to our tenants. This year, we proudly introduced Living Green. It's a fully amenitized tenant space within our building. We coordinate premier experiences, including yoga, meditation, massages, professional development seminars, and even ping-pong tournaments. We developed a custom app which lets users book rooms, sign up for classes, and even control the music and lighting in the Living Green space.
We're confident that this will be a great retention tool for our portfolio. Living Green is creating a workplace culture that promotes community, productivity, and health. Bigger than our employees and bigger than our tenants is our community. Philanthropy is at the heart of SL Green's ESG efforts. We coordinate volunteer opportunities for our employees and our tenants. Together, we've participated in over 150 community events that touched and inspired over 150,000 New Yorkers. In addition to our community engagement, SL Green made charitable contributions to over 100 different organizations in 2018. We are focused on SL Green's commitment to corporate citizenship now more than ever. Our reputation for integrity is the backbone of the public's faith and trust in our company. As a thought leader in ESG, we continue to devote more time, effort, focus, and resources because we understand its importance.
We want all stakeholders to feel, not only is SL Green the highest performing real estate company in New York City, but it's also keeping ESG at the forefront of its business strategy.
Thank you, Ed. Certainly an impressive group, impressive record, second to none, really. Look, I mess with Ed pretty much every year. He's a fellow firefighter. We have a little bit of a bond. I don't know if people are aware of that among his thousands of other responsibilities. We have a little bit of a bond there. If we were in the firehouse, it'd be probably not as clean. In any case, kicking off the financial portion of the day, looking backward and then a little look forward on our credit profile. Starting with some highlights from 2018. We maintained a fortress balance sheet again this past year while executing on a business plan that, if not done responsibly, could impair a balance sheet, even one of our size. Focus every day on leverage.
We again met our leverage target, keeping consolidated debt to EBITDA at or below seven times on Fitch's math for the entirety of the year. We increased our encumbered asset base by over $1 billion in just two assets, including the recently announced repayment of the mortgage on One Madison, while keeping a substantial amount of liquidity on hand, well north of our $1 billion target. On the financing side, we returned to the bond market with a rather unique offering and executed a very attractive refinancing of the construction facility at One Vanderbilt. As Marc highlighted, we've sold an enormous amount of assets, generating $1.5 billion of proceeds, not only used for share repurchases, but also for debt reduction and investment in our real estate assets. Looking ahead to some of the things we're working on in the coming year.
For those of you that read the Reckson Operating Partnership SEC filings at Christmas time last year to do that, we're going to deregister this entity. We've had it in place since 2007. We're going to simplify the overall organizational structure. Sorry to disappoint you. We're going to sell $1 billion of assets, minimally, generating hundreds of millions of dollars of proceeds and allowing us to increase our liquidity this coming year by at least $500 million. Separate from those sales, we're going to look to bring in additional joint venture partners in properties like One Vanderbilt and One Madison. That'll help build liquidity for redeployment and enhance the returns on our retained positions. In line with the last several years, we'll look to unencumber additional assets to replenish the pool, and ideally, we'll grow that.
I certainly do see the potential for us to get back into the bond markets again. It's a market we like, and we've certainly set ourselves up to return. So diving a bit deeper into some of these areas and bringing back one of the most impactful analyses of leverage that I think we ever put out, Professor Holliday came up with this a few years ago. It's the great debate as to whether debt to EBITDA is the best measure of leverage. Certainly, the easy math for everybody in the room, but is it the most appropriate measure of leverage for companies operating in a low cap rate environment? These are two companies here, one with debt to EBITDA of seven times, one with debt to EBITDA of five times. Very different markets, very different asset values, as indicated by the cap rates.
In a New York City market that has a four-and-a-half cap, the same $1 billion of EBITDA is worth substantially more than a lesser quality market that has a seven cap. As such, a company with seemingly higher leverage on the simple math debt to EBITDA, in reality, is more highly levered on an LTV basis, and therefore at greater risk if asset values go lower. This is only looking at assets that generate EBITDA. There are plenty of assets that don't generate EBITDA, like development properties. Do those assets have no value? Well, that's what debt to EBITDA would tell you. We look at LTV, a far more appropriate measure for real estate, in addition to debt to EBITDA. This is how we stack up on both measures over the last five years.
While the reduction in debt to EBITDA is dramatic since 2015, I want to focus on the fact that our consolidated debt to EBITDA is actually lower since our stock buyback program was announced in the middle of 2016. Maintaining debt to EBITDA at or below seven times is very challenging when you're selling EBITDA and shrinking the equity base because that calculation doesn't capture the NAV accretion you get from selling your assets at market and buying the equity cheap. While debt to EBITDA is trending up slightly in 2019, that's not driven by the share repurchase program at all. It's exclusively the result of funding projects that don't generate EBITDA, like One Vanderbilt and the redevelopment project at 460 West 34th Street, which for accounting purposes will be a consolidated joint venture.
Focusing on LTV and using the NAV of a certain West Coast research firm, probably here, that has a sell rating on the stock, so conservative, we continue to be virtually dead flat to where we were five years ago at 43%-44%. That's on an LTV basis. While the rest of the New York City REIT peer set, particularly the two largest, have actually been materially increasing their leverage, their LTV, over that same period of time. Confident in saying, obviously, if you use our NAV, our LTV would be even lower. An LTV in the low 40s provides an extraordinary amount of equity cushion, particularly for a company that is operating in a market that has some of the most resilient asset values in the world.
Given the negative impact of debt to EBITDA on debt to EBITDA of projects like One Vanderbilt or 460 that don't generate EBITDA, we think it's relevant to look at what that metric would be, excluding just those two projects. Not surprisingly, it drops dramatically lower and indicates that leverage on the rest of the portfolio is actually coming down on a consolidated basis and is up only slightly on a combined basis. Does this mean we shouldn't do One Vanderbilt or 460? I don't think anybody here would say that. It just means that the view of SL Green being highly levered based on a leverage metric that clearly has flaws is completely inappropriate.
We continue to believe that we are prudently levered, both on a standalone basis and relative to our peers, and we're going to remain vigilant in managing our leverage at these levels as we move ahead with our business plan. With regard to our unencumbered asset base, because we hold most of our wholly owned assets unlevered, looking for efficient debt to repay in order to replenish or increase our unencumbered asset base can be challenging. This past year, we elected to repay $727 million of debt and unencumbered two assets with value of about a billion and a quarter dollars. Now that's just book value. Obviously, real asset value is much higher than that. The mortgage at 220 East 42nd Street was freely pre-payable, and we targeted repaying that in our original guidance.
In the case of One Madison, we had excess liquidity from asset sales and felt strongly that incurring a $14 million charge to relieve the company and the property of this debt was extremely beneficial. That charge is going to run through the fourth quarter FFO and was the cause of our FFO guidance revision this morning to 2018. Moving into 2019, we'll continue to look for more debt to repay to manage the unencumbered asset base. We've stated in the past that we believe a company of our size should have at least $1 billion of liquidity on hand at all times, both for the safety and security it provides and to allow us to be opportunistic. Over the last four years, that trend has actually been closer to $2 billion, even while investing very accretively into our stock and our real estate portfolio.
Having excess liquidity also allows us to execute on things like the strategic debt repayment at One Madison, which drove our near-term liquidity lower, but you actually see it building back up in 2019 by almost $700 million. How are we building it back up? Marc touched on some of these earlier. On the sources side, operating cash flow and potential asset dispositions combine to generate over $1.4 billion alone. Supplementing those sources is the use of targeted secured debt and construction facilities to fund the major projects like One Vanderbilt and One Madison. Finally, we expect an overall reduction in the size of our debt book by just over $100 million. On the uses side, our operating cash flow will fund our new dividend of $3.40 a share, as well as second cycle capital and debt amortization.
We use the proceeds from our construction facilities to fund development and redevelopment, leaving all of the proceeds from asset dispositions for new investments, including share repurchases, as well as to replenish our stockpile of liquidity. With regard to the bond market, we continue to see public bonds as an attractive source of capital, and the support that we're getting in the fixed income community is continuing to grow. We returned to the bond market with a rather unique offering, particularly for a REIT, driven by our desire to maintain maximum flexibility in the capital structure, as well as a significant reverse inquiry resulting from a real lack of short-duration paper in the markets. The deal was very well received and gives us another opportunity to return to the bond markets again in 2019, as we ultimately look forward to achieving our serial issuer status.
Concluding the discussion of our credit profile with our debt maturities, heading into 2019, we have virtually nothing to attend to. Obviously, very proud of that. As always, we'll strive to extend this maturity profile out where we can. We need to do it efficiently, of course. Another bond deal in 2019 could do that, or we can start knocking off some 2020 and 2021 maturities, attending to those maturities early, like we do with our lease expirations. Looking more specifically at some of the most significant maturities over the next three years, the first one on the list could very easily be attended to if we elect to sell 521 Fifth. If not, we'll simply refinance it. Looking further out, all you really see are the seven and three-quarter bonds in 2020, and the full duration of our recently issued notes in 2021.
I wouldn't be surprised if we took care of one or both of those early. After that, we have a handful of things that we can address, likely refinance. Moving into guidance. The one thing we should have videoed ahead of time, I have to make a statement from the attorneys. As I go through this, I may be using some non-GAAP financial measures, so you should look to our SEC filings, including the 8-K filed this morning, for any comparable GAAP financial measures and required reconciliations. First, we're going to take a quick look back at 2018.
Recall, we started the year at a guidance midpoint of $670, increased that to a midpoint of $675 in January, notwithstanding an incredible amount of activity that we executed during the year, we expect to be right on top of that $675 before we take that elective non-cash charge that I'm going to layer on in a second. An NOI shortfall, primarily driven by asset sales, is more than offset by accretive share repurchases, as well as outperformance in the debt book and incremental other income. On the expense side, certainly worth noting that we expect to outperform on the G&A side by almost $7 million. We layer in the $0.15 prepayment penalty for 1 Madison, and you get to the new midpoint of our guidance range of $660 for 2018.
Let's move ahead to 2019 and set the stage for our projected weighted average diluted share count. As you've heard, if current market conditions persist, you should expect to see us complete what's left of our $2 billion previous share repurchase authorization, and utilize a portion of the additional $500 million of authorization this coming year. How much, when, at what price? Dependent on the timing of our asset sales, as well as the share price, of course. Based on our current assumptions, I would expect to see our diluted share count decrease by about 6 million shares next year, contributing to a reduction or equity base of over 17% in just 2 years. In the real estate portfolio, GAAP NOI is projected to be just short of $860 million.
In the retained portfolio, there are meaningful pickups in NOI of properties that have been at lease up or are coming out of redevelopment, partially offset by a couple of properties where we have known lease expirations. Extraordinary amount of credit to Ed, his head of operations, Meghann Gill, and the entire team on the expense side. Operating expenses projected to increase by around 1%, again, in 2019. Truly remarkable cost containment. That small increase is primarily due to labor laws that increase the minimum wage, as well as other adjustments related to collective bargaining agreements which are outside of our team's control. While in real estate taxes, unfortunately, it's another here we go again year, going up 5.1%, unfortunately consistent with growth rates in recent years.
Turning to the components of that real estate NOI, $753 million of GAAP NOI in Manhattan reflects the impact of selling all or a portion of five assets, while obtaining just one, Two Herald. At the recently unencumbered 220 East 42nd Street, VNS is in the old Omnicom space for the full year, and the property ends the year at 99.2% occupancy, driving an increase of about $12 million in NOI. At 45 Lex, re-leasing of the vacated Citi space has taken a bit longer than we expected, but we plan to be done in 2019. NOI is up over $8 million this coming year, with more runway in 2020. Finally, the redevelopment of 10 East 53rd was a spectacular success, and 2019 sees that asset fully stabilized.
On the other side of the coin, as every year, we have ordinary course expirations, some of which have already been attended to. At 1185 Avenue of the Americas, 83,000 of the 165,000 square feet that RSM McGladrey vacated this past July has already been pre-leased. While at 100 Park, J. & W. Seligman expires in January out of about 100,000 feet as we move them to another property in the portfolio. In the suburbs, after selling more suburban assets this year, only a handful remain for some portion of 2019, as the remainders are either all out to market or will be in short order. All told, we enjoyed a great deal of success with this portfolio since we acquired in 2007.
It always wildly outperformed the markets in which they operated, generated a lot of free cash flow, and recently served the repurchase program very well by generating cash proceeds and tax protection. The portfolio that currently runs that team is truly second to none. In the high street retail portfolio, GAAP NOI of $55 million is up by $13 million, or a whopping 32%, and that portfolio is now 99% occupied. Credit to Brett and his retail team. This is driven in part by the recent leasing of 1552 Broadway. That was really the only vacancy we had left as we held that space off of the market. Of particular note, both Nike at 655 and Caudalie at 719 Seventh, both of which just opened, will be in occupancy for all of 2019.
For those of you who hadn't had the opportunity to go yet to 650 Fifth to see Nike's store, I highly encourage you to do it. It's a standout global flagship among flagships on Fifth Avenue. In the residential portfolio, we expect GAAP NOI to increase by over $2 million. This is inclusive of the fantastic success we've seen at Sky at 605 West 42nd Street. In 2019, it's a fully stabilized project and joins Olivia as our trophy residential holdings. Just a little housekeeping. These are the properties that are being added to the same store pool in 2019. That happens on January 1st. Notably, 1515 Broadway back in the same-store pool as it's been an unconsolidated JV property for the entire year.
That doesn't seem significant, but I'm going to show you in a second how significant it is, along with 1515 Worldwide Plaza and Tower 46 come on board. What does all this mean for same-store NOI growth? I'm going to do this in two ways. What you see here is how we expect to report same-store GAAP and cash NOI during 2019. I know jumping off the page is the big red down arrow on the cash side. This is specifically driven by $65 million of free rent that Viacom is entitled to receive in 2019, $37 million of which is our share. That was part of their long-term lease done back in 2012. Obviously, that's a matter of timing, not an indication of the performance of the rest of the portfolio.
I'm going to adjust for that, excluding 1515's free rent, we expect 2%-3% same-store cash NOI growth, and roughly the same on the GAAP side. That's consistent with, if not slightly ahead of our expectations, and consistent with historical trends coming off a year where we saw 5% same-store NOI growth and sold several same-store properties like 3 Columbus. On the positive side, as I highlighted earlier, the lease up of 220 East 42nd Street and 45 Lex are big contributors, while the burn off of free rent at 10 East 53rd increases cash NOI there by about $3 million. Offsetting these pickups are lease expirations at 1185 and 100 Park that I touched on.
In our debt and preferred equity portfolio, I said earlier, I expect the balance to decrease in 2019 by over $100 million, that's after giving consideration to $145 million of future funding on our existing investments. Repayments we expect, or sales for that matter, will offset our expected new originations. Recognize this reduction is not a statement on the market or the attractiveness of the business. We're simply acknowledging that we have to think about the size of this portfolio relative to the overall size of the company, and we are a smaller company. Consistent with past years, we have projected an eight and three-eighths yield on our speculative originations. That has proven to be a pretty conservative assumption.
All right, moving to other income, I'm going to apologize in advance to those, I think there's one analyst in particular, who don't like to see us generate these incremental fees. We do expect other income to go up in 2019, driven in large part by increased fees from new and existing joint ventures, including the additional joint venture interest in One Vanderbilt and a JV partner in One Madison. JV fees totaling $34 million net of costs across all of our ventures reward us for our best-in-class operating and leasing platforms and provides us a much higher yield on our smaller equity investment in these projects. In addition to the fees, we have layered in an expectation of promote income of $5 million-$10 million. It's certainly nice to see that income stream come back in.
Lease termination income is $12 million, a little higher than our average of eight over time, but that's reflective of ongoing discussions with one tenant for a significant portion of that amount. In interest expense, while rates are rising, our overall debt load is lower, and we have either repaid or refinanced some pretty expensive debt over the last several years, thus mitigating the increase to just $12 million. The cause of this increase is really LIBOR, inclusive of the 50-basis-point cushion that we use on top of the forward curve for forecasting purposes. Average LIBOR at 3.39% is 125 basis points higher than it was this past year. That said, we have a very measured approach to our use of floating rate debt.
We manage the fixed floating composition to a very specific level based on our business and have a proven track record of targeted use of swaps and caps, those are outlined in our SEC filings, as well as the natural hedge that Andrew highlighted, provided by our debt and preferred equity portfolio. Just one recent example of our use of derivatives, we've executed a cap on LIBOR for the entire new OVA facility. Exclusively using fixed rate debt in our business, we believe is not only inefficient, but can also impair our ability to recap or sell some of these assets. Netted against interest expense is about $67 million of capitalized interest across these development and redevelopment properties. On the right-hand side, you see 460 West 34th Street.
The redevelopment kicks off after we close on the acquisition in the second quarter, and that's going to be capitalized for a partial year. What you don't see here is One Madison. That will clearly be a large redevelopment, but the redevelopment does not commence until CS vacates, which will not be in 2019. Finally, on to G&A, and I've done this very specifically to exclude the new lease accounting for internal leasing costs because it's otherwise going to mask a very important trend in our G&A. The plans we're executing to drive shareholder value are very time-consuming and complicated, involving all disciplines of the firm, but we continue to do more with less. So after reductions in G&A in both 2017 and 2018, we're going to reduce G&A again in 2019 by about $1.2 million or 1.3%.
Part of this reduction comes via restructured executive employment agreements that decrease the guaranteed amounts and increase components that require specific performance to receive awards. This provides greater alignment with the shareholder base, as well as reduced overall expense to the company. Now I'm going to bring these side screens to center, showing a summary of our 2019 FFO guidance, $13 a share of income offset by just under $6 a share of expenses. In any other year, it would be more than $7 of FFO. Of course, the accounting for internal leasing costs are changing for no real good reason, and it has precisely zero impact on the business, but it knocks $0.11 off our FFO, bringing us to our midpoint of $6.90 a share. Do you want to hold while you guys finish your pictures?
Formally announcing our 2019 FFO guidance range, $6.85-$6.95 a share, published in the SEC filing this morning, an increase over this past year, even while executing on a super tax-efficient business plan that incorporates a credible amount of activity to create shareholder value and drive earnings per share. Moving on to FAD, some highlights are reduced G&A expense continues to be primarily non-cash at-risk stock-based comp. I have to call out again the Viacom free rent, $37 million roughly at our share, which actually rivals the impact of the non-cash adjustments to the rest of the company. Second cycle capital of $160 million is down by $40 million over this past year because the portfolio is well leased. Now you can take out your binoculars or your phone, whatever, just to take a quick picture of this.
It's a summary of some of the more significant assumptions in our 2019 guidance. I'm not going to go through this. I put this here for reference after the conference is over. I'll just move on to our dividend, as we always conclude with, increased last week to $3.40 a share, the highest per-share dividend in our history, bringing the CAGR of our dividend over the last 22 years since IPO to 4.1%. On today's share price, actually Friday's share price, $3.40 dividend is a 3.5% dividend yield on a low-leverage, investment-grade New York City real estate company. Almost doesn't seem possible. Again, credit to our tax team, the rocket scientists that are back there. This increase takes into consideration all of the activity, investment, and dispositions that we have planned for 2019.
This keeps up our extraordinary record of executing on billions of dollars of asset dispositions without the need for a special dividend, instead retaining that cash flow for reinvestment. With that, I conclude the financial portion. I'd like to ask Andrew Mathias to put his dress shoes back on and join Marc Holliday back up at the podiums here as we can go through our scorecard for 2018.
Well done. Good job.
We're going to try and make up just a little bit of time. We're almost on time, but I'd like to finish up with the scorecard and goals and objectives for next year. I guess we'll start first with how we did in 2018. Lots taken place during the year, starting with leasing. Signed leases turned out to be well in excess of the $1.6 million we had projected, in part due to One Vanderbilt excess leasing, in part due to some of that advanced leasing we talked about for 2019 and 2020. Let's see if we can disclose that. That's a thumbs up with 2.2 million sq ft leased as of today. More expected in December because that's only through November. Same-store occupancy nosed out right at 96%.
Sure. We have met now and expect to meet by month's end that goal. Office mark to market, a little shy at the low end of the guidance range, but still a 6% number. We were happy to end there, just given all the dynamics in the market and hoping for some more growth next year. Andrew, you want to take the next couple?
Sure. On the investment side, we had a goal to participate half of the Two Herald Square equity. As we announced this morning, we closed 49% JV of that asset. Share repurchases of greater than $500 million. This, given all the asset sales we were able to achieve, that's a big thumbs up with over $900 million of share repurchases. Acquisitions and disposition goals, specifically, acquisitions greater than $250 million with 460 West 34th Street and some of the other development assemblage deals we made. We met that goal. Dispositions of $500 million. Marc showed you we shattered that goal at $1.3 billion of dispositions. Suburban dispositions of greater than $100 million, we met that goal almost double it, in fact, with $193 million of dispositions.
Debt and preferred equity is kind of a funny one in terms of how we grade it. The goal was to keep it flat. We reduced it, I think, by $50 million or so, thereabouts. I don't know if that's a positive or a negative because half the people want to see it go up, half want to go down. The reality is it's down about $50 million, so we give it a sideways. Income, we just hurdled the $200 million of income at around $203 million for the year. On One Vanderbilt.
Steel to the 39th floor, that is tracking well ahead of goal. As you saw, we accelerated the building's projected opening to August 4th, 2020. That's partially a function of progress on construction. We're at the 46th construction floor today, which you'll see on the tour today. Raised $200 million of EB-5 financing. EB-5 market crapped out, this looked like a downward thumb, we closed the debt restructuring that we announced this morning with the bank group and raised proceeds incrementally and got this money a lot cheaper and on a lot better terms than EB-5 would've provided it from our existing bank group. We'll give ourselves an upward thumb on that one with a $250 million loan upsize. Leasing, 37% leased by year-end. This turned out to be a conservative goal.
With the announcement of TD Securities, MFA, SL Green's lease, and an expansion by McDermott Will & Emery, we were able to hit 52%, which we announced this morning. We also laid out there to obtain construction financing for 185 Broadway. We closed that loan, we can give ourselves thumbs up there with the $225 million loan that'll fund the building that you saw in the presentation.
On financial performance, same store cash NOI, you may recall on prior calls, Matt talked about the fact that there may be some risk to the downside here, mostly because we were selling mature assets that were contributing to same-store cash NOI. I think 3 Columbus probably being the biggest contributor. We missed it, and it's 4.7%, on a same-store basis, I think we would've been closer or in excess. We missed it. Unencumbered, $300 million of assets. We unencumbered more than that, $1.25 billion, as I said, we hurdled that by just a little bit. I guess that's the news building, Matt.
One Madison
One Madison, which we did at the end of the year. That was a big boost to the unencumbered asset pool. 7.0 debt to EBITDA or better on a consolidated basis, that's exactly where we will end the year, is at 7.0 times. It's a little bit of a symphony to try and make all this. You saw that list of transactions we did and the press releases and the news items. Get it all there and still nail that debt to EBITDA. Kudos to the finance group and Matt for making that happen. S&P rating upgrade to triple B, didn't quite get there. I guess their time period has been extended beyond this year for consideration. I think they want to see mostly how One Vanderbilt turns out, and I think it's turning out well.
I can understand from a rating agency perspective, a little more leasing and whatever else they're going to look at as part of a potential ratings upgrade in the future. Index-eligible bonds, Matt already spoke about the fact that we got a $300 million deal off. 300 or 350, Matt?
350.
$350 million deal off. Thumbs down, we're going to turn that up as well because, while it wasn't index eligible, it was a $350 million issuance at grade terms, and we felt that that was the sweet spot of the market in which to issue. Lastly, total return. I guess this is a mixed bag this year. We made some progress. On an absolute basis, I showed you the absolute returns earlier, and we were down 2% or something as of Friday. We clearly didn't meet the first hurdle. As it relates to the MSCI index, we're a fair bit ahead of that for the office index by 370 basis points. Mixed bag on a relative basis, we did relatively okay.
All right, turning to 2019 goals and objectives. Going through, we'll populate the categories.
Leasing, Manhattan signed office leases. We have about $1.2 million budgeted for 2019, but for good measure, we put another quarter million square feet on for 1.5 million square feet of leasing, which would be all of what we expect to do for the 2019 rolls, and then a quarter million more into 2020 and beyond. Manhattan same-store occupancy, we're going to try and raise that 20 basis points to 96.2. Very hard to move this needle between 96 and 97 on 30 million feet, but we think we have a path to getting there. Manhattan office mark to market, we're going to put that at 2%-4%.
There are a couple of big deals out there that, on a relatively small mark to market pool, if we make one or two of them, we could be in excess of that, maybe well in excess of that. Based on our budget right now, it's 2%-4%.
On the investment side, One Madison, we decided to put in a One Madison specific goal. We want to close a joint venture for the redevelopment of One Madison, help us fund that project, take some of the funding burden off the REIT's balance sheet. On share repurchases, $400 million of additional repurchases. That'll, as Matt said, finish out the existing $2 billion authorization and start moving into the new $500 million that we announced Thursday night or Friday morning. Acquisitions of greater than $250 million. Again, we still want to remain active in this market. As I showed you earlier, it takes 5-10 years in some cases to pull these deals together. When they ripen, when they come in off market, they're good. We want to take advantage of them. Dispositions greater than $750 million.
We're going to continue funding the share buyback program through dispositions in a very receptive capital market. The suburbs, we hope to sell the remainder of that portfolio, complete the wind down of the suburban portfolio.
DPE balance for the year, we're projecting that to decrease about another $75 million based on our current budgets. A sequential year-over-year, slightly downward trend in the balance, which is consistent with the overall balance sheet of the company. Therefore, investment income, on that smaller amount, will be about $190 million as compared to a little over $200 million this year. On a relative basis, the income not quite down as much as the portfolio balance, reflecting hopefully the ability to generate some excess yield in 2019.
All right, on One Vanderbilt, bring in an additional JV partner. We sit today at, we have a 27% partner and then a 2% partner, so 29% total JV'd to the outside world. We're going to take that up to between 44%-49% this year, as we've sort of proven out the leasing, we've proven out the construction, and we did this amazing refinancing recapitalization. We want to try and bring in an additional partner to try to recognize some of the value we've created there. Topping out steel in December. We're trending ahead. We want to keep the team focused on meeting the August 4th, 2020 date. We're looking to top out the steel superstructure by December, and 65% leased by year-end.
We expect Steve to capitalize on some of the great momentum we've had at the end of this year, continue that into next year, and start chipping away at those higher floors, those higher rent floors, smaller one-floor deals. You likely won't see the 100,000-plus foot deals we've announced to date as we get higher up in the building.
Take this one.
Development, 185 Broadway also. Here, we're going to pour the foundation this year. The site's clear, as Brett and I showed you earlier. The financing is done. It's sort of capitalized. It's ready to go. We've got to put a shovel on the ground starting January, complete that foundation next year.
Financial performance, same-store cash NOI. We have 2%, or greater than 2%, I should say, so two plus. That's excluding the Viacom, I guess, free rent that was deferred from when we cut that lease several years ago, four or five years ago. Unsecured bonds, greater than $300 million. As Matt said, a goal of being a serial issuer in the market would have us returning to the market this year for a similarly sized bond offering. Debt to EBITDA may be up just a touch, 7.3 times or better. That's really just the impact of more fundings under One Vanderbilt and 460, I think primarily. 460, I guess, even to a larger extent. Also the equity that we're putting into One Vanderbilt without a commensurate return until those projects are put in service. That makes it drift up a touch.
TRS and MSCI, same goal as last year. Hopefully, this time, we can hit both.
On the ESG side, we asked the team to come up with some goals for the year, include this for the first time as part of the company's broader goals. GRESB, which is a green index, basically. We're going to try to get the GRESB Green Star Award. MSCI ESG Index, which is really an overall measure of a company's ESG policies. We hope to, this year, get a BBB rating on that index. Two interesting lofty goals on the ESG side as well.
All right. There's 2019 in a nutshell. There's a lot of stuff not up there that goes into making all that happen. Clearly, on the heels of all the announcements from Thursday, Friday, and today, we'll take maybe a day to catch our breath and get right to work on 2019 and start chipping away meaningfully at these goals. With that, I think we're going to move to a Q&A section. We're, like I said, maybe 15 minutes behind. We'll take questions this year from the audience, which either has been pre-sent, but we'll also have live mics for whoever just wants to ask on the spot. We're going to bring up chairs for our executive team to come on up. You guys, ready to do that? We'll sort it out as applicable.
I've got the questions in front of me. We'll start with the ones that were sent in, we'll go to live mic as soon as everybody gets up. Okay.
You want to swing over here?
Sure. Why don't you?
All right. First question that came in through the web: Based on the market trends described regarding the disconnect between private and public markets, why aren't we seeing more privatization of REITs?
Matt, do you want to tackle that one?
There are, I think, a number of privatization of REITs. I think it's a question of in what area. I think, in that $2 billion-$4 billion of market cap, those deals are sort of more readily capitalizable, if you will, and there have been a number of deals done. I think if the dislocation continues and the debt markets remain solid and private investors have an abundance of equity capital, I think you'll see more of the same in 2019. I think when you get to the larger companies with equity market caps of, I guess, $8 billion and above, those deals become very challenging. Typically, for single deals, those are large equity checks. When we go out to capitalize deals like One Vanderbilt, soon-to-be One Madison, those equity checks are $500 million-$1 billion. Those are big deals.
If you're trying to single source it, even if you want to club it, raising more than $2 billion-$4 billion is quite a feat. I think part of it is there's just a limited universe of people out there who have the wherewithal to do M&A on some of the larger cap REITs. Second, you have these frictional costs, which, depending on how much they are and what markets you operate in, that make it sometimes more challenging to get done on a basis where shareholders still feel like they're being rewarded as part of a privatization process with a significant enough premium on top of whatever the frictional costs are. Where that happens, you see deals get done.
Where that doesn't happen, I can think of one case in particular where a process was started and kind of pulled back from for those two reasons. All right, next question. We got a bunch of questions about co-working and WeWork. I'll start, and then we can try to have Steve follow on, please further discuss your thoughts on the sustainability and rapid growth of WeWork/the co-working sector. I think we've obviously become a little more active this year in leasing to WeWork at 609 Fifth Avenue and Two Herald Square. Knotel is in our portfolio in SoHo. I think we're watching the sector closely, both the company's capacities to raise capital, also really a shift in their business plans.
As you see, we see really these companies becoming more sales-oriented in terms of relationships with big tenants who are their customers, and a little bit less catering to sort of the entrepreneurial guy who wants to buy a seat on a desk and try to start a business, and sort of see what happens. As they become more sales-oriented organizations, WeWork employs thousands of people who are calling on big corporate customers trying to drum up their enterprise business. It becomes more of an interesting model for us, even maybe a little more competitive with our pre-built program. Also these are companies that'll invest their own capital into our space, and they have a customer base that's more of a credit customer base, more akin to what we're seeing in our own portfolios.
They're drifting a little bit to be more competitive, really with kind of the traditional brokerage industry in Manhattan, who we're normally paying to source tenants into our portfolio. It's starting to feel a little bit more like that business model on the enterprise side. Where they have enterprise customers, where they have good relationships, and they can bring in good credit quality tenants like Amazon at Two Herald and invest their own capital into the space, we see it as a positive overall, and we've done a couple of those deals. It's still a very small portion of our portfolio. On the corporate side, we have our own Emerge212 business line, which is more of a traditional fractional office provider. That business continues to do well within our portfolio as well. Steve, I don't know if you have
Well, I'll add a little bit to that. It's interesting if you wind the tape back a little bit on co-working, which most of us remember co-working in its infancy, as Janet was talking about, which started off with these individual members, customers, where a couple people rented a desk or seat at the table, and where it's morphed over to now more in the enterprise model, which is really roughly defined as companies with 1,000 employees or more. That's where a lot of the emphasis is currently being placed, or larger businesses to handle their entire headquarters operation. The next iteration that we're getting to see is an attempt by the co-working tenants out there to joint venture with landlords to partner up to manage the space.
You've really got to ask yourself, at the end of the day, given the meteoric growth of these businesses and the capital-intensive nature of them, at the end of the day, aren't they really just going to become a service provider? I think that'll be very interesting to see as the years go forward. Are they competitors of ours? Are they tenants of ours? Are they service providers to the tenant community at large and their ever-changing role in the real estate business? It's an industry to watch. It's not going away. As Marc Holliday spoke to earlier, we're starting to see, with a little bit of frequency, tenants actually inquiring whether or not there's a co-working facility in some of our buildings as an opportunity to provide a little bit of that amenity, that release valve for short-term growth space.
We're looking at it closely, where the opportunity is right, we'll take advantage of it.
All right. NAV was $141 a share at a four and a half cap last year, now showing $139 a share. Given share repurchases, why did NAV not grow?
Well, I think some of the suburban sales that we've been accelerating were done at prices below the valuation we had last year. I think that probably accounts for the entire spread, if not more than that. Offhand, I would say the combination of a more rapid disposition of the suburban portfolio at numbers that are not material off, but somewhat off of what we had posted last year, combined with some markdowns in the retail portfolio. Every year where a lot of the office portfolio is up, the share count is down. The retail sector has definitely gone through a period of repricing, not only of rents, but of values. There's a period of time until, it kind of feels like we reached that stabilization point now. But certainly since 2015, sequentially 2016, 2017, 2018, we saw down.
While we were adjusting our NAVs down, I don't think we or anybody in the sector were adjusting fast enough to keep up with rental declines that were probably 35%+. If you get rental declines of 35%+, well, your values are tracking that, maybe more than that if they're leveraged. I would say it's sort of amazing that we're right at about the same NAV we were a year ago, notwithstanding the declines in the retail portfolio and some of the
Value adjustments we took on sale in the suburban portfolio is offset against, in many cases, the office portfolio that's risen. All right. Current cost of capital spread between JV equity versus issuing $96 common stock. Wow. Matt? Is he here?
There's a lot in that. Look, the illustration that we do, our NAV illustration, because that's an illustration, shows you right there. The simplest way to look at it is 200, 300 basis points. If you look at simply what we're selling our assets for, that's JV, and what is implied in our New York City assets and our share price, 6.5 cap. 4.5, 6.5 is 200. You're also missing in that the intangibles of some tangible and intangible in bringing in JV partners. On the tangible side, we've said how much incremental return we get off of bringing in a JV partner. It's not just selling an asset at market or part of an asset at market.
We are getting incremental fees like at One Vanderbilt, One Madison, for our leasing and management acumen of Steve and Ed's group. That is enhancing the returns, which are in those projects, were already very good to be even better through the JV partner. You're not getting any of that enhancement by issuing any equity. On the baseline, 200 to 300 basis points better, then you get even more better. Terrible grammar. You get better with more fees.
All right. Have you considered building additional floors on 11 Madison? The building was built for 100 floors.
Rob?
Rob?
It's a great question, and if you've seen the illustration of the building as it was originally designed in the Eleven Madison Park restaurant, it's really a beautiful building. We would love to, but unfortunately, there are restrictions on doing so. The city imposes through a cap on floor area ratio on the site, so the building is actually overbuilt.
How do you think about the opportunities to grow your presence in Long Island City or the Lower West Side, where larger tech and media tenants have planted their flags for long-term growth?
Who's going to take that? Isaac?
Isaac.
I think you saw earlier, obviously, we've already planted a flag at 460 West 34th Street, so we're very excited about that. We look throughout the entire city. There's no area of the city that we don't try to target, and if there are opportunities to buy at the right basis and the appropriate risk-adjusted returns, then we're clearly going to look for opportunities on the West Side, Long Island City, downtown, wherever it may be. I think you'll see now, though, you see a little bit of pricing growth in Long Island City for sure, given what's happened recently with Amazon.
How should we think about total expected cost and ultimate return on the company's existing and future investment in One Mad? Are there any regulatory hurdles to build what you want? Rob?
Sure. To answer the second question first, there are no specific regulatory hurdles that we need to clear. We need to go through the regular Department of Buildings program for a building alteration of this size and scale. That is a very custom process.
No ULURP though?
No ULURP.
As of right.
As of right. In terms of the total expected cost basis, it's a little early to say. I think we're probably looking at an approximately $2.3 billion total project budget. We are targeting returns in the low 6% cash-on-cost basis.
Okay, just a little further clarity on that $2.3 billion budget. That includes land, obviously, our cost in the deal, which is approaching $1 billion of that $2.3.
Correct.
Incrementally 1.3, thereabout?
Correct.
That's, again, total. A lot of people just quote construction costs, hard costs, or hard and soft. That's everything. Deficit ops, financing, TI, leasing, all of that. Just like we set it forth on One Vanderbilt, I think the returns will be probably similar to what we've modeled a lot of at One Vanderbilt. Maybe a touch inside only because I think the location is even more of 100% location, and the podium exists. There's no governmental process. There's no excavation that needs to be done. We're renovating substantially a building in place and doing the overbuild. That's One Madison. All right. What is the plan for 625 Madison? I'll take a shot at this. I think there was an article in Crain's last week, which was wrong, and which inaccurately characterized the situation there. The reporter knew it was wrong but still ran the article.
Polo has announced they're going to consolidate at Starrett-Lehigh. We'll go about re-tenanting that space the way we would re-tenant any other space in the portfolio. The building, Polo's been in the building since almost 20 years, and the building hasn't had serious capital investment other than the retail where we redid a lot of the retail space and successfully leased that up. The vacancy will give us an opportunity to make some cosmetic improvements to the building and re-tenant it. We do not think we'll have an issue with leasing the building to third-party tenants, given the rental situation there, where we have a rent revaluation like we've had in many other leasehold situations in the past. The fee owner can kind of speculate, I guess, whatever they want in terms of the amount of the rent.
We'll be re-tenanting that building and are not overly concerned about the rent revaluation.
The next question deals with our investment in 245 Park as it relates to HNA's purchase price and stabilized basis. Isaac, you can just sort of give a brief synopsis of the highlights of the investment, because it's not exactly a pari passu purchase, so the two measures aren't exactly comparable. We've made a preferred equity investment.
As Mark mentioned, we made a preferred equity investment. I think Andrew touched on this earlier. We're targeting total returns in the low double digits. HNA's purchase price, as I'm sure you all know, is in the $2.2 billion-plus range. Mark alluded to this earlier. East Midtown is back and better than ever, and this building sits in the heart of that. You have 270 Park across the street. You have 425 Park to the north, 1 Vanderbilt to the south. We're excited about working with HNA going forward. I'm sure Steve and Ed are both excited about us operating and leasing another Park Avenue asset.
It's a true hybrid investment, which is kind of unique, where it is a preferred position, we do manage, we do lease, and we have joint decision rights on major decisions. We are truly equity, but we're also in a preferred position. From our standpoint, that was kind of the best place for us to be in that investment at a relatively high rate of return with fees on top. Most importantly, is us working together with HNA to untap a lot of opportunity in that building. I think it's 1.8 million square feet. It's going to be located right across the street from JP Morgan's headquarters. We have a major seat at that table, with limited downside and potentially big upside.
We're very happy to have gotten that second phase of the investment done with HNA, we'll spend the next probably 6-12 months coming up with some interesting plans for the building. Probably not as aggressive as those other buildings I showed you in the East Midtown areas that went through what I called ambitious redevelopments, nonetheless, something that will really position that building well to benefit from the demand.
Okay. Can you talk about the competition you're seeing in the DPE business, types of financing and loan terms? How are peers underwriting, do they have similar ability to take back the assets or more of financial players looking for spread? David?
Sure. I think we have two general business lines in the lending. One is the transitional mortgage, the other is the subordinate. On the transitional mortgage, the competition is really from the funds, the Blackstones, the Apollos, the Starwoods. As Andrew said, you can see that they're raising a lot of capital to finance. A lot of the reason the spreads are compressing is not their overall yields are going down that much. They're using very cheap leverage and kind of solving for a retained yield. We really don't lever the debt business. We run it with maybe 10%-15% leverage. A lot of times on mortgages, you're going to see these guys running with three to four, maybe even higher times leverage, which allows them to lend at low two hundreds over and kind of get retained yields that are high single digits.
We won't do that. We're really looking to compete in spaces where we understand the real estate better, or we have a relationship, we can get in early and get a deal done before these guys can compete because we can tie deals up quicker. We do on a couple of deals use repo, it's very sparingly because at the end of the day, it just goes into overall corporate leverage. On the subordinate side, there's a lot of competition from Japanese investors, they can't compete on a timing basis with us. Also a lot of pensions like Oxford and CPP. I would say a lot of the guys in the debt space, though, are more traditional yield lenders.
I'm not sure they're fully set up to take back properties, there's a lot of stuff we've seen in the last year that we've actually passed on because we're being much more conservative on underwriting than they are, kind of keeping the mantra of risk-adjusted return that we've always focused on.
All right. What could new rents potentially be for 1 Madison versus Credit Suisse's rent in the low $60s? Steve?
Well, let's put it into gross rent basis, because I'm sure that question was framed on a net rent, which is what we're currently getting from Credit Suisse. I think rents in 1 Madison are north of $100 a square foot on those large podium floors. I think for the new construction above that, we're in the $135 to $175 range. I think those are maybe conservative. Those are late 2023, early 2024 rents. As we sit here in 2018, they're in line with rents that we're easily obtaining at 1 Vanderbilt. This is a product that is a one-of-a-kind product in the best submarket in the country.
Yeah. The point I wanted to make earlier, it just escaped me on 1 Madison, there was a question previously on 1 Madison cost, I think. The cost per foot of 1 Madison, fully stabilized and loaded, is a couple of hundred dollars a foot below that of 1 Vanderbilt, which is reflective of our pretty decent basis in that project, along with the fact that we're unlocking air rights, and that was kind of mentioned. We actually have 400 and some odd thousand of air rights, some as of right, some that would have to go through a ULURP process. We elected to utilize about 200 and some odd thousand, 240,000, 250,000 of those as-of-right air rights, which are, for us, free. Helps average down that basis.
Sort of leave void for right now the balance of those air rights, which we never put in the NAV to begin with because that was really part of a ULURP process we never envisioned undertaking. Our cost basis in the asset is very good. The rents, we think are completely achievable. Maybe we'll exceed them. We'll put up more specific numbers next year, like we did with One Vanderbilt, about costs and returns and capitalization, all that, once we have a final design plan and we go out and get some numbers back on pricing.
All right. What is your outlook for rent growth? Does the 2%-4% mark to market in 2019 imply zero or negative growth?
Steve?
Steve, you want to talk about?
Well, let's start by the premise of trying to compare mark to market against market rent growth is a little bit of apples and oranges. It's always been a frustration for me, I think, that when people look at our mark to market, which is influenced by the new rent that we're leasing the space of compared to the escalated rent that may be burning off. That escalated rent could be a component of base rent, real estate taxes, operating expenses, and frequently, annual base rent increases. If you think about tenant, we sign a lease today, and we have an escalator that contractually grows at 3% a year plus a pass-through in taxes, that escalated rent gets to a very high number.
You come back and say, "Well, if market growth is growing at 2% or 3%, why isn't your new mark to market rent on the relets in line with that?" Well, because obviously the leases that we're signing are growing faster than market, even though market rents have been growing at a 3%-4% rate. I think that we expect to see more of that next year, that it'll be modest growth in the overall market rents of 3%-4%. I think you'll see other pockets where we do better than that, particularly on the lower price point buildings where I think there's an opportunity to push up rents higher.
Just for the sake of time now, let's try and knock these questions out. It's getting a higher volume than usual, which I think is good. The question is, how does incremental leasing at OVA next year factor into your leasing goal of one and a half million square feet?
Part of it.
Well, it's just quantitatively, how much is it?
It's 13% up. It's 52% leased now. It's going to 65% leased. That's 13% on 1.7 million.
Which is like 186,000 square feet or something like that?
That sounds very close, yeah.
Okay. In the one five for the year is probably close to 175,000 square feet-185,000 square feet of leasing at One Vanderbilt, and that puts us ahead of our timeline still, and is incorporated in the one five.
What percentage of One Madison would you JV? I think this would likely follow form with One Vanderbilt, which would be 49%, I think, likely. It kind of depends on the offers, the amount of structure we're able to impose on bidders for that equity interest. I think initially, our plan is 49%.
Yeah, I think the preliminary conversations Andrew and I have had with capital sources lead us to believe this is a very achievable goal for next year. This is the reaction to this. Did you guys like the images that you saw? I mean, pretty cool development. That is years of work to figure out the massing and how to fit within the envelope as of right and come up with that design, which knits together quite well with the podium, and also has some special features that celebrate the park, and I think we've done it. Obviously, that will still continue to evolve over time, but it'll just get sharper and sharper, and we are really proud of that design and looking forward to that development.
The tenants and capital sources we've shown this project to on a preliminary basis, I would say the reception has been excellent. This is something that's very exciting. Up to half the equity, I guess, is something we would consider joint venturing. That's all of the submitted questions. Does anybody have a question?
We have live mics if anybody has a question.
Another question
live questions. Michael? They want to get to One Vanderbilt, the property side.
As you think about the conviction and having an opinion, Marc, you talked about buying back the stock, given this vast difference between where you think it's worth and where the stock's trading. You've been very aggressive at selling assets, repositioning the portfolio, and buying back stock. If the stock doesn't reflect that value-
what are the next steps that you can take? What's up your sleeve to try to narrow that disconnect?
Well, everything we're doing is with a goal of making it the best company possible and creating the most value. To that, and we're doing it. I'm very happy with where we are on that program. Stock price may not reflect it, and that's something that we hope will correct itself in 2019. We think there's every reason that it should, so far it hasn't. Everything we're looking to achieve, we're doing and then some. I think we're kind of ahead of plan. We'll keep doing that. To your point, at the end of the day, the shareholders have to realize that benefit and the storehouse of value we're creating. I guess one step further, which I think would be on the table, would be to consider sales and special dividends. At the end of the day, we own the value, right?
That's the beauty of owning real estate. The stock may go up, the stock may go down, and it may be mispriced. The value we own, those assets are ours, and we can illuminate value via sales and JVs and either reinvest in real estate, stock, debt paydown, or just distribute it back to shareholders, which I think would be very much on the table if we can't otherwise figure out a way to return value to shareholders. Because the value's there. We touch it every time we sell an asset. We're meeting or exceeding. I mentioned earlier, a little bit down on retail and suburbs, but the office product, which more and more is the largest percentage of the portfolio, we're spot on or conservative. The market is deep with demand. Andrew went through that.
We'll just keep at it, and like I said, that value doesn't go away. We can come up with ways to monetize it and put it to work or return it. Okay. We'll take one last one, only because we've got a lot of questions, and we do have a great tour set up at One Vanderbilt, and I hope everyone's going.
A lot of pressure on the last question. On the DPE portfolio, could you talk about the shift into doing more mortgages? It seems like it's lower risk, but also you could be less opportunistic going forward. Why not shrink the DPE book more than $50 million or $70 million?
Dave?
I think we're really just looking at where we're seeing the most value. Obviously, everything's just return on capital. It's immensely scalable. If we saw a better opportunity, all this stuff is completely liquid. We could sell it kind of in a day, a week, two weeks. We're not really restricting our flexibility to do things with the capital. By putting the money out, we have the optionality. You can see the billions and billions of money being raised in this space. We could sell down the portfolio whenever we wanted. I'd say we're keeping the balances where they are. It's almost more giving us optionality than kind of letting them run off.
In terms of doing mortgages, just it seems to be a better business that we think from a risk-adjusted basis, where people are really stretching for yield. We don't think on the lower end of the spectrum, getting paid the right returns on all these mezzanine loans. We want to kind of price things right and put out money where we think the best return is.
Okay. Well, I think we're going to do a very quick wrap-up. Went to a very sentimental wrap-up other than to thank you all for being here today. It's an understatement. They say it takes a village. I think this took a city to put together. We put a lot of pride and effort thanks to the team that's here, the team that's up there. Not just in preparing this, but in doing everything necessary throughout the year to enable us to come up here and present to you what we presented today. The people in the background, Image Media, Atlantic Productions, Gillette Consulting, Industrious, and folks at BerlinRosen, thank you for a lot of late hours, long days, and hope everyone found it entertaining and informative. That's what I set forth at the outset, was our promise to you. Enjoy the tour of One Vanderbilt.