Thank you everybody for joining us, and welcome to the SL Green Realty Corp. first quarter 2023 earnings results conference call. This conference call is being recorded. At this time, the company would like to remind listeners that during the call management may make forward-looking statements. You should not rely on forward-looking statements as predictions of future events as actual results, and events may differ from any forward-looking statements that management may make today. All forward-looking statements made by management on this call are based on their assumptions and belief as of today. Additional information regarding the risks, uncertainties and other factors that could cause such differences appear are set forth in the Risk Factors and MD&A sections of the company's latest Form 10-K and other subsequent reports filed by the company with Securities and Exchange Commission.
Also, during today's conference call, the company may discuss non-GAAP financial measures as defined by Regulation G under the Securities Act. The GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on both the company's website at www.slgreen.com by selecting the press release regarding the company's first quarter 2023 earnings and our supplemental information included in our current report on Form 8-K relating to our first quarter 2023 earnings. Before turning the call over to Marc Holliday, Chairman and Chief Executive Officer of SL Green Realty, I ask that those of you participating in the Q&A portion of the call to please limit your questions to two per person. Thank you. I will now turn the call over to Marc Holliday. Please go ahead, Marc.
Good afternoon, everyone, and welcome to SL Green's earnings call. Thank Thank you for joining us today as we review the first quarter's results and discuss improving trends we see in New York City as the office sector continues its recovery from the unprecedented three years of a pandemic economy. The commercial real estate sector seems to dominate much of the headlines these days, amplifying messages of doom and gloom and creating what I believe to be an over anxiety in the market that is most acutely felt in New York City, where many of the market opinion makers reside. Overly negative voices are overshadowing some of the positive signs that portend of a slow but steady recovery for a market that offers what employers want most, a highly educated, diverse, youthful and talented workforce.
Midtown Manhattan also offers the most highly commutable office inventory, with many buildings that are highly improved and amenitized and are at the forefront of innovation. It is clear that we are now in another moment of significant change as businesses rethink their office needs and cities around the world adapt to how pandemic has changed central business districts in a way no one could have predicted. One thing we know is that New York is resilient. The city has reinvented its economy time and time again, whether it's responding to crises like 9/11, or identifying trends to attract and accelerate the growth of new industries and sectors like technology and venture capital. We always find a way to remain a global capital, attracting the talent that leading and growing companies need. In times of change, there's no better place to be than here in New York City.
The future of this great city relies on rethinking the arc of the workday and how we experience our CBDs, transforming them into vibrant 24/7 destinations. There's an expectation that people coming into the office will have access to compelling experiences that make the trip worthwhile before, during and after the workday. Our lives can no longer be neatly separated into work and leisure and entertainment. There are a number of positive indicators and developing trends that give reason for pragmatic optimism, though clearly it's a challenging environment. A rapid run-up in interest rates sent a chill through the real estate debt markets as lenders became concerned with decreasing interest coverage and refinance ability of maturing loans. 1 month SOFR today stands at 5.01, up from just 0.25% a year ago.
As the core inflation numbers begin to normalize and the labor market begins to cool, expectations, as evidenced by the forward curve, show one-month term SOFR receding to just 3.11% by the end of 2024. Similarly, the 10-year SOFR swap rate, which peaked at 3.97% just six months ago, has already come in 73 basis points, and the forward curve implies now a 10-year SOFR swap rate of 3.03% by the end of 2024. Clearly moderating interest rates will have a positive impact on the real estate debt and equity capital markets. In the meantime, SL Green has hedged most of its interest rate exposure through strategic debt repayment and the use of derivative instruments like interest rate swaps, caps and collars.
New York City employment is another area that I think is showing, you know, signs of significant improvement. The labor market in New York City has shown resiliency as businesses that employ office workers have erased all COVID era losses. There is recent evidence of higher office utilization within our portfolio as physical occupancy regularly exceeds 60% on many work days, and the MTA announced that Metro-North Railroad reached pandemic era ridership record two days ago with 195,000 riders, or 74% of the pre-pandemic average. It's the highest single-day ridership since the beginning of pandemic. During the seven days between April 9th and April 15th, Long Island Rail Road carried an average of 170,000 daily commuters, the best seven-day average in over three years.
There's an increasing drumbeat of optimism about return to work. We hear it, you know, from, you know, more and more companies that are doing business, you know, here in the city, but, you know, national and global companies that are mandating people come back anywhere between three to five days a week, all within the past three months or so. JPMorgan, Disney, Twitter, Google, Goldman Sachs, Salesforce, Apple, many others have come out with, you know, very definitive statements about, you know, a recognition that, you know, these businesses can be only at their most efficient and best when people are together in, you know, purpose-built, collaborative office space and, you know, not home or remotely.
I think, you know, that's why, you know, there has been this experiment over the past three years. Clearly, the major companies that span all different office sectors have concluded that the experiment is not working and thus requiring their people to come back, as I said, anywhere between three to five days a week. That trend is something that, you know, we see on the streets, in the buildings, on mass transportation, and we think it's only gonna get, you know, you know, more and more momentum as this year weighs on, because it makes sense. It makes sense for business, it makes sense for competitiveness, it makes sense for the reimagination of our CBDs, and it, you know, it's what people have done, and it's how people are at their best.
We're very optimistic in that regard. You know, took longer than we expected, but, you know, we now feel like things are coming around in the right direction. In terms of safety, New York City is becoming safer with crime stats heading in the right direction, including declines in overall crime and violent crime in the first few months of 23. We're also anticipating that there'll be some level of additional bail reform to be included in the state budget, which will give judges clearer discretion over the imposition of bail. While other cities are having difficulty getting a handle on crime or, you know, some other major cities are having difficulty getting a handle on crime, New York City clearly has a plan that is working.
You know, for 23, New York City is on track to welcome 63 million visitors, including more than 10 million international travelers. That puts projected tourism within 5% of the prior peak in 2019, which represents a remarkable recovery. SUMMIT's high attendance and first quarter results, which eclipsed our projections for the first quarter, certainly demonstrates that domestic and foreign tourism is back in a big way with the prime travel months still ahead of us. Perhaps one of the most important developments of the year is the completion of East Side Access, now known as Grand Central Madison. Long Island commuters now have access on a direct basis into Grand Central. The new terminal spans 43rd to 48th Street along Park and Madison Avenue corridors, where much of the SL Green portfolio is situated.
With all that, I'm pleased with the start to the year we are having. Our results for the quarter were ahead of our expectations in several key areas. mark-to-market rents and same-store NOI were both in excess of 5%. Our same-store office occupancy was slightly ahead of what we internally forecasted at just over 90%. Leasing volume of 504,000 sq ft also outperformed our expectations. The real highlight is forward-looking as we are building leasing pipeline at a steady pace. The pipeline of leases now stands at 1.2 million sq ft, which is up 70% from our earnings call just three months ago. I think it was end of January.
And to give you a flavor for the pipeline and preempt what I know will undoubtedly be someone's question later on, the pipeline is 80% financial services, includes 18 individual deals that we are working on at Graybar, and includes 1 million sq ft of space in same-store properties, which would absorb over 300,000 sq ft of space of vacancy in those same properties. While overall vacancy sublet and availability is not yet declining in Manhattan overall, our leasing results and current pipeline is indicative of the fact that the Park Avenue East Midtown corridor is highest performing in Manhattan, and tenants are responding to our well-located, repositioned, and highly amenitized buildings in a very positive way.
We are also benefiting from brokers and tenants who are scrutinizing much more carefully the financial wherewithal of landlords and the stability of the capital stacks in individual buildings that tenants want to locate in. These are areas where SL Green shines the most. In the investment marketplace, there are signs that demand is forming for high-quality commercial assets in Midtown, and we expect to see transactions announced over the next two quarters. Initially, these transactions will be for the well-located assets, some with financing in place and some with financing that will be arranged and generally involve buildings that are already fully repositioned and amenitized or are in the process of doing so. There is also more activity than usual in the user buyer market, as evidenced by the recent sales totaling over $725 million to users like Hyundai, Dyson, and Memorial Sloan Kettering.
We are aware of several other pending transactions for purchase or long-term capital leases by users. Taken together, these developing trends bode well for our 2023 business plan. We are working hard to execute on a series of sales, joint ventures, and financings. With that, I'd like to open it up for questions.
Thank you. One moment please. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. We would like to remind you to limit your questions to two questions, please. Limit yourself to two questions. One moment for our first question. Our first question comes from John Kim from BMO. Your line is now open.
Thank you. Good afternoon. I was wondering if you could provide an update on the $2 billion of dispositions that you have planned this year, highlighted by 245 Park. I know that, you know, it's top of mind for a lot of people on this call, but any update that you can provide on those kind of conversations right now?
Well, I mean, I don't think we're gonna go through the whole $2 billion pipeline. You know, I, as I mentioned, in my speech, I think that, we feel, you know, pretty good about where we stand right now in terms of, you know, completing, JV sales and financings that we, you know, that form a part of the 2023 business plan. 919 financing, I think, is imminent, we're working hard on 245 Park, which, you know, that development is coming along amazingly well.
The plan we have for it, I think is gonna make it, you know, among the best, you know, non-brand new construction buildings on Park. You know, we'll be able to, you know, lease it at rents that are gonna be, you know, well into the triple digits. We have a lot of activity there. We're trading paper with a couple of tenants. Our discussions there are, you know, are good. You know, we, you know, we feel good about that. You know, then there's obviously other transactions we're working on. It's still got a long way to go this year.
You know, I think the market is coming around, and I think the assets we've selected are the right ones that will be able to, you know, either, you know, monetize and be a sale, be a joint ventures. They're in the right locations and, you know, we're working hard to get it all done.
Okay. My second question is on some of your secured debt that recently expired. It remains on your books. They were on their last quarter as well. You talk about having a resolution with the lenders. I'm wondering if you could provide any color on what the resolution looks like, and if defaulting on debt is an option for you and/or your partners?
What's the question? Secured debt?
Yeah.
What's the question?
Resolution of secured debt positions that were in past maturity.
Which ones in particular?
717 Fifth, and 11 West 34th Street. Yes, John.
Which ones, John, which pieces are you talking about so we can hit it?
I apologize. I've gone through the supplement. There was some debt that expired in December, February this year, April.
Both 717 and 11 West 34th Street are high street retail positions where we are far from that. We do not control the borrower, and we have basically passive positions. 717, as you know, we have taken all of our investment and profit out of the asset. We have a 10% passive position in that, and 11 West, we're thirty-
30%.
30% of that position. We don't control it. You know, we're getting updates from our partners, but those are, you know, those are investments that we continue to evaluate. You know, as I said on the prior quarters calls, lenders are either gonna work with us on those assets or they're not.
John, to Andrew's point, Matt, you referenced the December 2022 maturity. That was 1552 Broadway, and as you'll note in supplemental, that matured in December. We worked with the lender and just executed an extension through to 2024.
The other one was 655 Fifth Avenue, which expires this month.
Yeah. These are tiny... You know, we should take it offline. These are assets which I think have no book-
They're non-core assets.
Yeah. These are small retail assets, in which we either have de minimis, ownership, passive interest, no consequence to the earnings of the balance sheet of any magnitude that I, that I think. I mean, Matt, is that accurate?
No. That's the right-.
Is that what you're referring to or something else?
When you asked about if defaulting is an option.
It's really up to the lender in these situations, which I said last quarter, and I'll reiterate again. The lenders are gonna determine whether there are defaults or not.
Yeah, again, the consequence of that determination, I don't wanna understate it, Matt, is not material.
There's no NAV, there's no book value, there's no earnings from the assets.
From your perspective, it's okay.
I call that immaterial in my book. You know, I'm not trying to undermine the question, John. I'm just saying these are, you know, if what Matt said is right, you've highlighted assets which we sort of look at as carry and look at as zero and have no contribution to earnings. It's just not the focus of what my commentary is about. That's all I'm saying.
Any commentary on your partners, though, 'cause it, you know, you may have to be aligned with them?
No.
Well, we'd rather, you know, that's...
We have no commentary on our partners.
Yeah.
Okay. Thank you.
Thank you. One moment for our next question. Our next question comes from Steve Sakwa from Evercore ISI. Your line is now open.
Great, thanks. Good afternoon. Mark or maybe Steven Durels, could you just talk a little bit more about that 1.2 million? I guess what I'm trying to figure out, Mark, is, are these tenants kind of expanding? Are they staying the same? Are they shrinking? If, if they come into your portfolio, that's great. I'm trying to just think about the impact on the overall market and just trying to get a sense for how these tenants are thinking about space needs and what the density is.
I gave so much disclosure on it. There's like 40 or 50 deals, you know, in there. There's a lot of expansions, there's a lot that are staying the same, there are a lot that are less. I mentioned that over 300,000 sq ft is for vacant space within the same-store portfolio, and there's over 500,000 feet that's for vacancy within the portfolio generally, you know, same-store and non-same-store. Mostly financial tenants, some growing, some shrinking, many staying the same. you know, all in line with our projections, probably slightly above in terms of velocity. Clearly, the first quarter we were ahead on mark-to-market and same-store. you know, there's dozens and...
You know, there's 18 deals alone at Graybar and you know, I don't have any deals in total on there, but what about 40?
Well, look, it's, of the 1,200,000 square feet, just to give you a sense of it, Steve, 900,000 square feet are new deals, 274,000 square feet are renewal deals. Marc talked about what was filling vacancy, both same-store and throughout the entire portfolio. That's 45% of the 1,200,000 is filling vacant space. I think to build on what Marc said about Graybar, that I think is as big a news as anything. What we're seeing is a broad diversity of tenant sizes at all price points. The, you know, the narrative of all the leasing activity now taking place or previously taking place being at the very top end of the market, I think is rapidly changing.
We're seeing more velocity, certainly on the proposal stage and tour activity, in the more, you know, price-sensitive part of the market than we've seen in the past three years. I think that's a reawakening of the marketplace. I think we're seeing the small and the mid-sized tenants come back to the market and, you know, to have a healthy 400 million square foot market. That's what we need, and it's a good news day to be able to say that.
Okay, great. Maybe just moving on to One Madison. Are you still expecting the TCO in the fourth quarter? I guess, Matt, when you do get the proceeds in from the joint venture partner, you know, how do we think about the applicability of that, those proceeds, which I think are just shy of $600 million?
Yeah. We are getting $577 million from our partners down at One Madison. When we get TCO, we are running ahead of schedule on the construction there, so we had it slated for fourth quarter, hopefully early fourth quarter. Those proceeds immediately go to pay down corporate debt. The first $425 million goes to pay down a short-term unsecured facility we put in place last year. The increment above that, another, you know, $150 million or so, goes to either the line of credit or other corporate debt.
Great. Thank you.
Thank you. One moment for our next question. Our next question comes from Alexander Goldfarb from Piper Sandler. Your line is now open.
Thank you. Good afternoon. Matt, maybe just moving on from Steve's question. I think he was on the TCO for One Vanderbilt, I think you just mentioned that the sort of $570 million, but you guys also have potential for JVs, I think, further. Well, JVs at 245 Park. I think you may or may not do more at One Madison. There's the condos uptown that you guys are doing. Net, can you just sort of lay out in total? Obviously, the SUMMIT One Vanderbilt is pretty much certainty, correct? What the potential of cash proceeds that you guys are looking at taking in this year, potentially through the different JV sales or outright condo sales that are contemplated.
I'm gonna just correct on the addresses a bit there. You know, where the proceeds are coming in from our partners at One Madison on TCO.
Okay. Sorry, sorry.
There's no other contemplated partners down at One Madison, and we had talked about potentially an additional partner at One Vanderbilt. We talked about it for the last couple of years, and we may or may not do that this year. I don't wanna step through every component of our business plan, and that business plan obviously changes over time. 245 is the most significant, and we are working hard on that, as Mark said earlier. Then we have some other assets, either, you know, wholly owned or outright sales, JV interests, other things that we are working on. You know, I'm not gonna step through every one of those, except to say, you know, we're focused on trying to get to our $2 billion target, the most significant component of which is 245 Park.
You also have the $570 from One Vanderbilt that's later this year as well, correct?
Yes. That is-
Okay.
The only condition of that is completing One Madison. That's obviously happening.
Okay, great. Then the second question is, The Real Deal had an article, I don't know, a few weeks ago, with the latest on, you know, 625 Madison had a little, you know, as they always do, a little extra color. Maybe you guys could just provide us an update where the litigation or negotiation stands. You know, what any pending resolution, any sort of update that you can provide.
Well, with respect to the leasehold position there, we expect the rent reset arbitration to conclude imminently. As we've discussed in prior quarters, we may update our business strategy for that leasehold position following the resolution of that rental reset process. If we ultimately decide to adopt a different strategy for that leasehold position, that could impact the carrying value of that leasehold position going forward, obviously.
What does that mean, impact the value? That's up, down? What does that mean?
It depends on the rent arbitration. You know, it's up to the arbitrator.
Yeah, I mean, Alex-
Okay.
We. It's a fairly binary outcome. You know, there's a wide disparity of view as to what that rent should be. You know, it's been the subject of a disagreement for a while now, and there'll be a conclusion, we think, imminently. Based on that conclusion, you know, at least with respect to the leasehold, that'll, you know, clarify for us the direction we're gonna go with it, whether it's something, you know, we feel, you know, we can stay with or whether there, you know, if you get a rent amount that's.
Noneconomic.
Noneconomic. We'll have to deal with that. You know, that's an investment that we've had, you know, 15 years plus. It's net leased to Polo. We've taken, you know, we've certainly As Anthony Paolone mentioned with 717, we've, you know, redeemed all our capital on that investment.
It's been a successful investment.
You know, in addition to that leasehold position, we have, you know, our mezzanine interests, on the fee position, as well, also related to 625 Madison asset.
Okay.
That's a different investment, and we don't anticipate any impact on the value of that investment based on the outcome of the rent reset arbitration.
Okay, cool. Listen, thank you.
Thank you. One moment for our next question. Our next question comes from Anthony Paolone from JPMorgan. Your line is now open.
Great. Thank you. Good afternoon. I guess first question, on Green Loan Services, just wondering, like, maybe if you could talk about that or how we should be thinking about that, 'cause it seems like that could be a good business at the moment. Wondering if you think about that as just a fee generator or if there's something more strategic in terms of that potentially helping you know, find investment opportunities or other, you know, strategic benefits?
No. I think it's primarily a fee generator. Obviously, we have to service every loan to the servicing standards, so we can't sort of consider our own interests when we service loans as a third party, as a fiduciary. It's a good active business. We have a great staff and team that runs that business. You know, we've had a lot of successful resolutions on behalf of our clients and customers there, and we do intend to grow that business, you know, for sure as there's more situations that sort of need servicing and special servicing.
Okay. Then just, my second one, I know it's early, any thoughts on Credit Suisse and their space at 11 Madison and what I guess UBS may ultimately do with that, like or how you're thinking about it?
Well, I mean, it's a long-term lease. You know, I mean, as it was announced, Credit Suisse is merging with UBS. UBS is gonna be the surviving entity. I think we look at that as credit upgrade, you know, to the lease, although, you know, Credit Suisse was a good tenant of ours for over 15 years, so I think the merged entity will just be, you know, that much stronger. You know, in terms of, you know, what they may or may not do with their space, we don't have any visibility into, but, you know, it is. I don't know. Do you guys have the expiration on that?
2037.
It's a lease that expires in 2037, so I guess another, you know, 14 years or so to run. You know, that'll be up to them. You know, the lease is intact, and we think, you know, we think the building's in good shape.
Okay. Thank you.
Thank you. One moment for our next question. Our next question comes from Tom Catherwood from BTIG. Your line is now open.
Thank you. Good afternoon, everyone. For Steve, maybe just pivoting back to the leasing pipeline. I think in the second half of last year, you had talked about some deals coming off the market as tenants were kind of evaluating the economic situation and evaluating their businesses. Is some of this jump up in pipeline since, you know, earning January, let's call it, is that the 2022 deals reengaging with the market or do you have a sense that this is kind of incremental new leasing above and beyond that?
I think it's both. I think there's clearly, you know, whatever pause that we saw by tenants who got sort of spooked in the fourth quarter with rising interest rates and threatening recession environment, things like that, and they put their searches on hold. That explains kind of the leasing slowdown. you know, we came out of it pretty strong. We certainly did in our portfolio, 500,000 sq ft in the first quarter, I think is a significant print. I think the growing pipeline is both tenants that have confidence in their business, clarity on the, on the overall economic situation, and add to that, the return to the office.
I mean, that narrative is prevalent today, whether you're a small business or you're taking your cue from the leaders of major businesses across the country. We're seeing it both in the small, medium, and large tenant marketplace. Financial You know, add to that financial services, the private equity hedge fund world still continues to be a driver on leasing. We're seeing up and down Park Avenue, a lot of demand. You know, I could have easily rationalized another 500,000-600,000 sq ft of pipeline, you know, addition to that pipeline based upon term sheets that we're exchanging, but are just too early in the process to really have clarity on. I think that's a, you know, a good harbinger as to where the market's headed.
Appreciate that. Thanks, Steve. Then kind of focusing on a specific asset here, you moved 2 Herald Square into the redevelopment bucket this quarter. You've talked about WeWork leaving, you know, 180,000+ sq ft there and potentially looking at either extended stay or dormitory use. Can you talk to the timing of the expected vacancy there and any updates on the redevelopment?
As to vacancy, WeWork is out. They vacated earlier in the first quarter, and we're evaluating the, you know, redevelopment opportunities for the asset right now.
Got it. Thanks, everyone.
Thank you. One moment for our next question. Our next question comes from Camille Bonnel from Bank of America. Your line is now open.
More of a big picture question. On a lease %, your exposure to tech is growing. Just given this industry has been accelerating layoffs and pushing to bring employees back into the office, but it continues to lag. How do you think about your overall exposure to this industry? From your experience of managing overall tenant risk, is there a particular industry mix you envision for the portfolio?
You know, I look at our exposure to tech as good exposure. You know, I think it's, has been and continues to be a big positive within our portfolio, and I assume the question is within the portfolio as opposed to market wide. You know, IBM is a great example of a recent deal we did over at One Madison. Kyndryl is a deal we did over here at One Vanderbilt. Steve, we got.
Bloomberg at.
Bloomberg, you know, media and tech over at 919. You know, they expanded, I think, last year...
Mm-hmm
If I'm not mistaken.
Yeah. They have a big footprint.
I think in general, you know, one, I think we have marginally less exposure to tech, depending how you define tech, than most others in the city. Although, you know, we'd welcome more, and we think that, you know, that sector went from literally nothing, about a decade ago, to being a major player in the city, right up there with business services and financial. You know, now, obviously, they're taking a pause.
There are announced layoffs, but I think those global national announcements tend to hit Manhattan less so than other markets that they've expanded into because this workforce, I think, is more the type of workforce that they'll be retaining and engineering, et cetera, and less so skewed, you know, solely to marketing, like in many other smaller markets, you know, around the country. I think that so far, when you look at the jobs picture in New York, I mentioned it earlier, we're at 1.5 million office using jobs. Tech falls into that category, information services. There hasn't been any material showings to date of, you know, of concern over, you know, bodies in the tech world.
you know, even if there is some trimming there, it's been equally made up for by finance and business services. you know, I don't know if that answers the question, but I think, you know, tech's been, you know, I think tech will grow again. They're going through a right sizing right now, as everybody does after the tens of millions of sq ft that they consume in Manhattan. you know, once that right sizing occurs, you know, I think growth will happen again and they'll be, you know, they're here to stay, and we're excited by that.
Okay. For my second question, you've made good progress versus your initial targets on the leasing and revenue front, but like you mentioned, it doesn't seem like investors are willing to attribute any credit to this performance. Wanted to get your thoughts on what you think is being priced into the equity markets today, and at these valuation levels, do you see potential for equity to equity consolidation in this backdrop?
Well, I said earlier, I do think that there's, you know, what I term over anxiety, you know? You know, As a company, we've been at this for 26 years, and many of us have been in it for 30, 35 years, almost all of it in New York. We've been here before. This has a lot of the, you know, rhythms of, you know, what happens. First, the narrative, then the debt markets, freeze up. You know, then, you know, there's little shoots of deals, generally smaller ones first, bigger ones later. You know, the market, you know, by most standards, I would consider this, you know, a relatively good market because we've got the jobs.
We still have good occupancy, at least within our portfolio, and I'd say within the better buildings and better submarkets of Manhattan. You know, rates are much higher than they were, but on absolute terms, they're still relatively low. Lenders seem to be working by and large with their borrowers to extend in situations where, you know, good borrowers, good properties need another year or two or three to, you know, to ride things out. We, you know, we, you know, sometimes we're there as servicer, sometimes we're there as lenders, sometimes we're there as borrower. You know, we see that as a trend. You know, so I can't really, you know, respond to what people are pricing, what they're not.
I do think, you know, that the battery of headlines, the doom and gloom, the pessimism, you know, we think is overblown just based on our results and our pipeline. I mean, that's, you know, our business is sort of a simple business at the end of the day. We, you know, we buy space or develop space. We improve it to best of class or as high, you know, as high-end as we can, and we lease it to, you know, to users. Between that which we've leased and that which, you know, we hope to lease in our pipeline, you know, we think we're getting things done. You know, hopefully the debt markets will start to thaw a little bit.
You know, once it does, I think you'll see things snap back quickly.
Thank you.
Thank you. One moment for our next question. Our next question comes from Blaine Heck from Wells Fargo. Your line is now open.
Great. Thanks, good afternoon. Just following up on the asset recycling front, is there any color you can give on the pricing of some of those sales that you're looking at for this year? Has your expected pricing on the sales, especially 245 Park, changed at all in the last kind of few months?
I don't think we're gonna go through pricing asset by asset. You know, we're shooting for, you know, best execution. You know, we think everything we set out for in the year is very reasonable. I would say historically low, you know? I mean, compared to where pricing was a year or two ago. I think there's a lot of equity out there that is looking at this moment in time as a way to enter or reenter Manhattan at, you know, pretty attractive levels. I mean, you know, we've all been doing the rounds, traveling domestically and overseas. There's a lot of interest in New York City.
You know, I don't know if that's something that, you know, the market definitely feels or appreciates, but, you know, in terms of investing within the U.S., there's a lot of foreign capital that, I think, and domestic capital that is looking at today's environment like a, you know, good entry point. We've got, you know, reasonable expectations on everything that we're that we're looking to accomplish. We don't set unrealistic expectations. You know, we set things, you know, where we think are market clearing levels and, you know, it's up to us to execute.
Following up on that, Mark, and just based on your conversations that you guys are having, can you talk about kind of the return hurdles that those foreign capital entities.
Yeah, I'd rather-
Sovereign wealth funds, and maybe even the private equity.
I'd rather, you know, do it with, you know, when the deals are done. You know, there's no reason to spec-- I mean, we have a firm handle on where we think that market is. You know, let us go execute and then, you know, it'll all be illuminated.
All right. Fair enough. Thanks, guys.
Thank you. One moment for our next question. Our next question comes from Derek Johnston from Deutsche Bank. Your line is now open.
Hi, everyone. Thanks for taking the question. I guess this may be for Andrew. You know, can we get a sense of the mark-to-market value or perhaps fair value of the DPE book? You know, secondly, you know, what percentage of the loans in the book are coming due over the next 2 years?
I mean, Hey, Derek. In terms of mark-to-market, I would say it's our carrying value for the loans. You know, we make that evaluation with the accounts quarterly. The DPE book obviously, as you know, is paid down pretty significantly to, you know, a couple of large positions, 625 Madison being the largest of it. It's, you know, residential and office assets. You know, the second part was.
What was the second part, sorry?
Carrying value, and then what did you say? The...
I was hoping to just understand, you know, given this environment, you know, what percentage of the book is or the loans are coming due over the next two years?
I think.
There's a maturity table in the supplemental, Derek, that has all of the maturities.
I mean, it's all short-term.
are short term.
DPE is always been a short-term book, one to three years. I'd say next two years, the majority will. Yeah.
Yeah.
Yeah.
We have one large pref equity position, which is February 27. We have a $20 million residential position, which is December 29. Then the balance are, you know, in the relatively near term.
Derek, it's Matt. I just wanna, you know, make, you know, expand on the mark-to-market question. You know, accounting doesn't require us to mark to market to book, so the carrying value is representative of accounting carrying values, but the mark to market is pretty close to the carrying value of the debt position.
Okay. Thanks, Matt. That's helpful. That would be it for me, guys. Thank you.
Thank you.
Thank you. One moment for our next question. Our next question comes from Tayo Okusanya from Credit Suisse. Your line is now open.
Yes. Good afternoon, everyone. Thanks for all the color around just, you know, how you're progressing with the asset sales. I'm just curious, I mean, if credit markets remain tough, if it's hard for anyone to get financing to kind of pull this off, I mean, how do you kind of think about, if I may use the word plan B, in regards to trying to either delever the balance sheet, kind of looking for an alternative source of capital? Like, how can you just kinda help us?
Well, I.
think through what plan B would be?
I'd say we're, Tayo, we're focused on plan A. Yeah, the skepticism in the market is, like, evident on this call. We feel like we're gonna get stuff done. I mean, sure, there's plan B, C is aware, you know. I think what you're hearing from us now is we're gonna, you know, we've got, you know. I mean, it's not like I'd say we have eight months, but we have whatever time we need, you know. I mean, maybe we'll get this stuff done in the next three or four months, five or six months, seven, eight months, or it could be nine months. Whatever it is, we have premier assets that have a lot of institutional, domestic, and foreign attraction.
You know, we're keeping them well-leased. They're highly improved. What you're hearing from us is, you know, there's a market for that. It's up to us to go out there and, you know, and do it. We'll do whatever we have to do to get, you know, things done. You know, that's what we're. You know, when you say a plan B, that sort of implies that, you know, there's no plan A or plan A doesn't. That's what we're focused on right now. I mean, there's a myriad or countless amount of, other plans or strategies or capital or forms of capital that one could avail themselves on. You know, we're very, you know, simple about this.
We have certain assets we're gonna look to sell like we do every year and have done for 25 years. We have other ones, great core holdings, long-term holdings for us that we will look to JV with premier partners. You know, I think we have 1 financing. No? Is it just 9? I mean, it's just 1 financing, which I said in my commentary we thought was imminent. I can't really give more color than that other than that 1 financing I think is imminent. There's no plan B for that. You know, let's. Yeah, we will regroup in 3 months, and we'll give you a further update on these things. Hopefully, we'll have a couple announcements between now and then, and we're gonna keep going.
Fair enough. Thank you, gentlemen.
Thank you.
Thank you. One moment for our next question. Our next question comes from Peter Abramowitz from Jefferies. Your line is now open.
Thank you. Just wanted to ask about 919. I know you probably can't speak in any detail, but I guess how's the pricing kind of coming out relative to what you were expecting?
Well, you know, that sort of goes back to the question I was asked earlier about parameters and pricing. As soon as we have something to announce, you'll have the announcement and the pricing.
Okay.
It's just, it's not typical for us to talk about transactions in the market that we're working. We've never done it, and I wouldn't do it now.
Sure.
There's just no reason for it. You know, as soon as we announce it, which is imminent, you'll have the pricing.
Right. I guess curious to kind of what you were planning for and what you're hoping for. You know, I don't think you have to give a number, but relative to... Have you learned anything through the process, relative to what you thought of the market before, I guess, is the question?
You know, I'd say if we have a successful conclusion, you know, what we'll, you know, learn or reaffirm is that, you know, for good sponsors, good assets, good locations, with relatively low LTVs, there's a market to consummate that deals. That's, you know. I wouldn't say we've learned that, I'd say that would just maybe be confirmatory if we can get that done.
Sure. I guess just in general, how are lenders thinking about LTV, in general, just over the last, you know...
I think, you know, the lenders are probably in about, you know, 5 to 10 percentage points from, you know, let's call it the peak of the liquid market. You know, much more in that 50%-55% LTV range.
Got it. That's helpful. That's all for me. Thanks.
Thank you.
Thank you. One moment for our next question. Our next question comes from Ronald Kamdem from Morgan Stanley. Your line is now open.
Great. A couple quick ones. The quarter had a lot of sort of moving pieces. You know, the $0.29 judgment proceeds, the $0.10 in loss reserves. You know, you mentioned in the press release that it was $0.13 ahead of expectations. I know you don't really update, haven't commented on updated guidance, but when you're thinking about that guidance you put out for the year, is there any other sort of takeaways that we should think about all these moving pieces and how that changes your views or doesn't change your views at all? Should we view this as sort of a $0.13 raise essentially?
Let's talk about the quarter real quick. You know, we had a couple things we highlighted in there. The resolution and situation with Victoria's Secret is a huge win, a huge positive. You know, that's $20 million into the cash coffers. $0.13 of that was not in guidance. Offsetting that though was $0.10 of reserves, also not in our guidance. You see your net 3 positive there. The remainder of the beat for the quarter is the best quality beat you can have. It's all out of NOI. Our properties significantly outperformed expectations. You saw that in same-store cash NOI.
You saw that in earnings, that's on the revenue side, and also, even more significantly on the operating expense side, where our operations team did a spectacular job saving on overhead costs, and we also benefited from lower utilities. All that said, we were, you know, ahead of our expectations for the quarter, but we give a $0.30 range for guidance. We sit within that range. We're still, you know, watching very closely the forward curve. We only have, you know, 10%, less than 10% floating rate debt at this point, so it's not as impactful, but we're very, you know, focused on it. That's why we keep our range as wide as we do when we launched at the beginning of the year.
Three months in, we're not gonna touch that. We'll reevaluate in 3 months.
Okay. Is there a way to figure out if you're getting closer to the higher end or the lower end, or you're just keeping the whole range?
Um-
That's what ranges are for.
Keeping the whole range.
All righty. The next question was, you know, I had a question on 919 Third Avenue as well, but maybe I'll, since you can't comment if it's imminent, just a broader sort of thought in terms of the refinancing environment. Any sense we can get some specific numbers in terms of rates, you know, LTVs that's, I think you touched on a little bit before, potentially more collateral, just any sort of color what the environment looks like and how it's changed over the past month or two would be helpful.
Well, it feels like we're sort of the same territory. You know, look, banks had breakout earnings, you know, earlier this week or last week. Yeah, I think, you know, it's all iterative. You know, first, the leasing is a big I think is gonna be a big help. I think the fact that the banks, at least, you know, the bigger banks that, you know, provide a lot of the liquidity, at least here in, you know, Manhattan for Manhattan deals, having, you know, big top line is very positive. I think, you know, eventually, and not too distant, they'll be back, you know, buying the Triple A's, Double A's, all the, you know, all the secure-est tranches of the debt.
I think, you know, the liquidity dries up quickly, it comes back quickly. We've seen it, you know, just time and time again. You know, it's gonna change weekly, The only thing I can say to you is you're looking for trend direction is I think it's headed in the right direction. You know, hopefully, we've seen, you know, the worst of the pause. I do think as deals get done, they set marks, and then more deals get done, and before you know it, we're back, you know, to, you know, to, you know, to an equilibrium market. You know, we'll see.
I mean, I think what you're hearing is let's wait another three months and reassess on the next call, and hopefully we'll be able to give you a lot more specific data.
Helpful. If I could sequence quick. Any update on sort of the casino license? I don't think it's been asked, where that stands, how you guys are thinking about it. Thanks so much.
Well, I mean, look, we're, you know, we're as I mentioned on other calls, there's really no update from the last call, which I think is mostly what you're asking about. You know, we are, you know, pursuing it vigorously, full gaming license in Times Square. We firmly believe that a world-class gaming entertainment hotel destination like we've planned in the heart of Times Square is everybody's benefit. You know, everybody. Businesses, residents and Broadway would benefit from, you know, the type of multi-billion dollar development that's planned, us in conjunction with Caesars Entertainment and Roc Nation. It would be an enormous catalyst for revitalizing and reinvigorating, you know, what's New York's and I'd argue the world's number one most important tourist destination.
You know, we've got the support of an ever-growing coalition of small businesses, labor, restaurants. We've got hotels. We've got many local residents. I feel we're in, you know, we're in a good position to compete for one of those three licenses. Where the process stands, you know, we've, you know, in the process of the request for applications. Questions were submitted, I wanna say back in February. You know, we're, you know, I think everyone is awaiting state feedback on next steps.
Thanks so much. Helpful.
Thanks.
Thank you.
I think we're gonna take one more.
Well, well, I'm actually showing no further questions.
Okay, perfect.
I would now like to go ahead and turn the call back over to Marc Holliday for closing remarks.
Okay. Well, you know, wanna thank all of you who, you know, made it to the end here and of the call. You know, looking forward more than most to getting on the call the next three months from now. You know, hopefully, a lot of what you're hearing now we'll be able to, you know, speak about in more detail then. You know, appreciate the continued support of our shareholders. Thanks.
This concludes today's conference call. Thank you for participating. You may now disconnect.