I think we'll get started now. My name is Camille Bonnel. I'm the office and industrial analyst on the BofA REITs team. I am joined by Jeff Spector, who heads our team, as well as Rachel Hu. We welcome you to our afternoon roundtable session with Vornado Realty Trust. Joining us from Vornado, in the middle, we have Michael Franco, President and CFO. We have Glenn Weiss on the left, EVP of Office Leasing and Co-Head of Real Estate. We also have Thomas Sanelli, EVP, Finance and Chief Administrative Officer. Lastly, we are joined by Gary Hansen, SVP of Investor Relations. We're asking the companies to present a 5 minute-1 0 minute introduction to the company and any operational updates before diving into Q&A.
Okay, great. Good afternoon, everybody. Nice to see everybody here. I see a number of familiar faces and also happy to see some new faces. Maybe I'll kick it off, and I'll turn it over to Glenn to talk about some of the other activities. But in terms of Vornado, I think hopefully everybody's familiar with Vornado. We are a company that is predominantly focused on New York City. 85%-90% of our EBITDA comes out of New York City, largely from the office business and a portion from the high street retail business. We've got franchise assets in San Francisco and Chicago.
You know, I would tell you that, you know, as we sit here today, while, you know, the economy is certainly not as strong as it was in 2021, and there's more volatility in the marketplace, just given what's going on in terms of rates, supply chain, et cetera. You know, the overall New York City market is actually pretty good right now. Job growth has been good. We're back to pre-pandemic levels. We've got a healthy tenor in the leasing market, which Glenn will talk about. I would say I think unquestionably, we own the best portfolio of assets here in the city. I think the performance reflects that.
I would say the same about, you know, the building we own in San Francisco as well, where we continue to, I think, have a unique level of leasing activity there. You know, we're in an environment where we've talked about flight to quality for a period of time. I think that's never been more true. It'll continue to be true. There'll be some component of the office sector that will just, over time, I think, not be attractive to most tenants. This flight to quality will continue. It'll favor strong sponsors, strong balance sheet players, and those that own assets in the right locations, and that have the right qualities, which, I think we do in spades.
You know, we've talked a lot over the last few years, and in particular, the last couple of years as we've kicked off our Penn District development. That's a portfolio of assets of roughly 10 million sq ft today. We are in the middle of redeveloping half of that portfolio between Farley, Penn 1, Penn 2, which I'm gonna let Glenn talk about, and making a number of district improvements, which I think by the end of 2023, that area of the city is gonna be transformed by what we're doing, and that's gonna have a catalytic effect on everything else that's gonna follow. The state approved the general project plan recently, which will ultimately facilitate additional development in the district. A number of those sites we control.
You know, as that market continues to improve from what we're doing, we think that'll pave the way for additional development opportunities and growth over time from development. We're excited about that. We think that is a unique opportunity, a significant growth to come out of what we're doing just on the initial three assets that we've been redeveloping. Maybe with that, well, let me spend one more minute, and then I'm gonna turn it to Glenn to expand. The last thing I'll touch on, just coming back to retail. You know, the retail market in the city has definitely bottomed. You know, we're definitely seeing improved retailer interest and leasing activity is picking up. You know, rents have clearly bottomed.
In some submarkets it's picking up, but I wouldn't say in general, rents have picked up meaningfully yet. We are seeing tenant interest, I would say across all submarkets. You know, there's some deals in the works, which is encouraging. You know, Times Square, I actually read a stat yesterday that I think from a tourist count is at 95% of pre-pandemic level. If you now try to go through there. By the way, I would say today is actually the busiest day I've seen in the city in some time. The traffic in the city, you know, feels better. You know, I think the retailers are seeing that, and that's manifesting itself in that increased level of dialogue.
I'm gonna turn it over to Glenn to talk about what specifically is happening in the Penn District, and then we can field some Q&A.
Sure. Hi, everybody. Before I get to Penn specifically, I think as it relates to Vornado and our business, it's important to talk about the composition of our portfolio in Manhattan. I mean, everyone's very focused on Penn, as you should be. If you think about our 20 million sq ft, we really cover all the bases that you should care about. We have Penn, which is the 10 million sq ft target that we're all focused on, which is becoming more and more a, I call it technology tenant corridor every day that we live in there. Obviously bookended by Facebook, who moved in yesterday to Farley, and by Apple, who has now moved into Penn 11 as of two weeks ago. A lot of our activity at Penn 1 is also technology laden, and Penn 2 will probably be a mix of technology and financial.
As you go uptown in our Midtown portfolio, I think one thing that people are not focused on enough is the great mix of the product we have in Midtown. If you think of what we've done over time in those 10 million sq ft, whether it's the Neuberger Berman's at 1290, a redeveloped building, the PwC's at 90 Park Avenue. The financial buildings are very busy where we have financial tenants, the 888 Seventh Avenue, the 1290 Avenue of the Americas, the 640 Fifth Avenue, the 350 Park Avenue, the 280 Park Avenue.
If you think about our portfolio, we think not only is it a best in class from a quality standpoint, but as we speak to it, we think we have matched tenant demand grade with those buildings, whether it's in Midtown Penn or Midtown South, all the way down to 770, which is also where Facebook is. We like our straddling of the city, and I think that's something, you know, everyone needs to focus on more so than I think everyone has been the last few years, to be quite frank. As it relates to Penn, we're running on all cylinders. The chapters that we have written are working very well for us. At Penn 1, specifically, rents have now risen into the triple digits as we had predicted.
What's most interesting about our Penn activity. Every tenant who walks through our door at Penn 1 or Penn 2 is either coming from Hudson Yards in Manhattan West or going after us to Manhattan West and Hudson Yards. We are competing with new buildings. If you think about what we've done at Penn 1 and Penn 2, which those buildings are 50, 60 years old. Most of you have been to Penn 1, you know, we've turned the building on its head. We created this campus amenities center for the entire district, 200,000 sq ft. It's not just about the amenities, it's about the authenticity of the product, the feel of it, the way people feel being in there, whether it's the fitness, the conferencing, the food, the whole logistical orientation we created. People are loving it, not liking it.
It's going to be even more so at Penn 2 when that completes in about 15 months. You know, we're feeling good about Penn. We're feeling good about the portfolio. You know, at the same time, you know, we all know what's happening from a macro level. Some companies are hesitant to pull the trigger on space. Some are reducing in size, some are expanding in size. You know, we're not fooling ourselves. We're still in a challenging point of time, certainly feeling a lot better than we have since this pandemic has started. You know, office using jobs in New York are at or above now pre-pandemic levels. New York feels good. I think if you know, coming down here this afternoon, New York's busy. Certainly we still have a lot of wood to chop.
We, you know, I don't think this work from home pandemic hybrid is gonna take a long time still to figure out. Quite frankly, we're keeping our heads down. We're going after all the tenants who are in the market and trying to make matches with our portfolio. That's our job. Instead of complaining about it and whining about it, we're just doing our jobs. That's really where we're at right now from a leasing standpoint.
Jeff, last thing, Camille, the last thing I'd say for turning over to you guys for Q&A is, you know, paramount importance to us, as it always has been, is our balance sheet, right? Making sure we have liquidity to weather any storm, making sure that our maturity schedule is well laddered, that you know, nothing is going to you know, cause any threat to the company or have any major issues. I think we've done a very good job of terming out our debt, having significant liquidity.
You know, we sleep well at night, and be fine.
That's great. Thank you. Again, we want to make this interactive, so if anyone has questions, just, you may raise your hand. Camille, did you wanna kick things off, or did you want me to?
Well, we can start with, you know, big question that we've been hearing in a lot of these discussions with how demand's been trending. If you can provide a little bit more color on how those conversations are going, particularly within the smaller leasing and the bigger lease sizes as well.
Sure. I would say, you know, the small to medium-sized tenants are very active right now, particularly in the financial services. Very active. Our Midtown activity, our pipeline is deep in that realm. As it relates to the big headquarters pipeline, it's not as strong as it was, say, six, nine months ago. There are tenants out there. You know, a lot of them have now landed, you know, whether, you know, in a lot of the new buildings on the West Side or downtown. But I do think there's very good momentum in the small to medium-sized category, as we sit here. We're doing a lot of presentations for tenants, you know, big tenants who are coming out with expirations, you know, call it two, three, four years from now, even longer.
A lot of them looking at, you know, our new product in Penn, whether that's Penn 2 or Penn 15, the Hotel Penn site, etc. Certainly, there's action. If you look, you know, at our portfolio. We don't have a lot of huge spaces that are vacant. We have kind of pockets. Some of those are at Penn 1, and other buildings in Penn. We don't have any huge blocks. You know, in terms of the action, we're, you know, we're policing small, medium, and that's what I would say is 50,000-footers and less. I'd say that's the bread and butter right now in the market.
What is that much like from a lease? When you look at your what you're focusing on leasing, like how much do you have a percent of by square foot like means like, are you leasing mainly to those smaller sizes now or, you know, like, can you break that out for us somehow?
I don't have it broken out. You know, we have a couple of very large deals happening. I mean, it's a potpourri, as it always is. I don't think that's much different. Again, we don't have a lot of big vacancies, big block vacancies. You know, we have our vacancy is about 8% right now, and it's just these pockets. We always have some big discussions going on and otherwise the normal bread and butter, I would say. I don't think the mix is that much different.
I mean, I'd say, you know, we went from a period where, you know, last couple of years, I think big tech was probably the biggest driver, right? The big deals. Now, we're still seeing some of the small medium tech players. You know, the big guys are pausing, they're digesting, as Glenn said, you know, some of them are now just moving into their space. Some of the smaller tech players are still active. I think we've seen a shift to the financial sector being more active, particularly in the, I call it the investment management, asset management space, where, you know, the big keep getting bigger, they're growing their businesses aggressively.
you know, there's some large transactions in the works with some of those players right now, both with us and with other landlords. I think that's an encouraging sign, you know, for the city.
Just to ask, because everyone likes to compare it to kind of pre-COVID in terms of volumes and tours and visits like, I don't know, is it? Are you able to compare, you know, how busy you are versus pre-COVID? I don't know if you could break that out.
I mean, I would tell you pre this summer, it started to feel like pre-COVID. With what's gone on in the capital markets, it's now slower. I would, you know, tell you that. Certainly we're touring, we're in proposals, but it was definitely busier, you know, May, June compared to now. I would say that on the street in terms of the tenant.
Okay. August was a high leasing month. We did a call with Frank from Colliers last week.
Mm-hmm.
So, um-
Those were signed deals. If you think about it, all those deals were in action in the spring.
Okay.
Right? They all got kinda signed then, and, you know, that's just how this works. Those four to five month lag.
Lagging.
That lagging stat.
Okay.
That's why I'm saying that makes total sense to what I, you know.
Yeah.
What I'm, you know, describing, which is spring was busy, busy. All of a sudden, inflation, macro picture, things got, you know.
Okay.
Here we are. That doesn't mean there's not action, but there's definitely less, I'd say, less action on the streets now than there was then. I would say that.
Okay. I guess bottom line over the coming months, that data, the leasing volume by month, well, it sounds like it's gonna be up and down.
Look, year to date, there's been 21 million sq ft of space leased from Manhattan. Same time in 2019, there was 27 million sq ft. That gives you the stat you're probably looking for year to date.
Relative to last year, that would be what?
It's above last year by 2 million feet or so. Half the activity, by the way, is in Midtown. Of that 21.
That's what he focused on.
Yeah.
new.
I mean, look, the flight to quality is certainly there strengthening, whether it's the new buildings or the redeveloped buildings. The commodity buildings are quiet as they've ever been. That, the flight to quality theme's here. I don't see it going away, that's for sure.
You know, both you and Michael said you guys have the highest quality portfolio. How do you define that versus, you know, some of your peers? Like, you know, how do you say Vornado's portfolio is higher quality than some of your other New York City office peers?
I mean, I think, you know, when we say that it's across all 20 million sq ft, it's a consistent product type. If you walk into any of our buildings, I think pound for pound, the quality is better than the rest. I also think you have to talk about the service in those buildings as well. We think the way we do things in the buildings, the way we serve our customers, the way we treat people, the way we build our buildings, I think you walk into all of our lobbies in our 20 million sq ft versus the competition, I think we stand tall.
Jeff, I don't, you know, we say we have the best portfolio. We're not saying that.
I think-
As Glenn says, when you go, you know, if you started ranking buildings by portfolio, I think you can pretty quickly say that our highest quality buildings, you know, exceed anybody else's, right? I think that's manifested itself in the average starting rent if you look at, you know, us compared to others over the last, you know, several quarters. I think what we're doing at Penn in terms of, you know, the post redevelopment, what we're starting to achieve there as well is reflective of that because, you know, I don't know whether you've walked through it yet, but, you know, what we're doing there, what we've done, you know, I think is really, you know, it's totally unique for tenants.
You know, when you're a tenant there, you know, when you're a CEO who wants to have their employees in the office, it's an easier sell, I think, than anywhere else, right? To have this, you know, you're on top of transit, you have this amenity package that's really second to none in the city. You know, I think we've done. Like, we are long-term owners. We've invested with that mindset. I think our buildings have always been technologically and cosmetically top of the line. You know, I think the tenants that are within the buildings are reflective of the quality and rents are as well.
Just, you know, from, you know, kind of negatives, positives, you know, do you feel from a company standpoint whether, you know, it was floating rate debt or I think last year the market was surprised there was a rally that was coming due. Like, are we past kind of some of the? Is there anything on the horizon we should be focusing on that might be hitting the numbers in the next year, let's say?
Look, I mean, you know, I think the biggest issue for all companies is just what's the macroeconomic environment, right? I think that's the most important thing. That's gonna drive leasing velocity and rents and so forth. Like we talked on the last call, we had, you know, we benefited from a number of years from, you know, floating rate debt. You know, now we're getting hit, you know, going the other way. You know, we're probably, I think even since the call, we've swapped a little. We're probably at a 70/30 ratio of fixed floating now. You know, and I don't think we're ever gonna be 100/0, right?
We wanna maintain flexibility, whether it's to sell assets, recap assets, you know, whatever it is we wanna do. You know, I mean, even within ventures, you can't do certain things, right? We're more protected, but I don't think that protects you fully anyway, right? Whenever you refinance assets, you could be fixed for five or 10 years, then you roll off and you're in an environment where if you have to finance today, it's not a great market to finance in. That helps you on an interim basis, but I don't know that it. Ultimately, the macro, what's the absolute level of rates, what's the absolute level of economic growth, I think drives everything.
Look, we still have to go through the Penn 1 ground rent reset. We've put a marker out there, you know, publicly. You know, that dialogue will kick off in earnest at some point later this year. You know, we'll solve it, you know, my guess is at some point next year, if not, you know, by the reset date in June. You know, beyond that, you know, I don't know that there's much that's, you know, other than ordinary core stuff that's gonna happen, either good or bad.
You know, investors wanna see earnings growth. I guess, can you talk about earnings growth from here? You know, just your thoughts on, you know, delivering FFO growth this year. Or just as you're thinking about your three-year or five-year plan, you know, how do you think about the, you know, earnings profile?
Yeah. Look, I think, you know, this year, I mean, you know, to some extent it does depend on what happens with rates, right? And you know, we've got some deals in the works that could swing things, you know, frankly a few cents either direction. So our expectation is we're going to still have growth this year over last year. You know, next year is harder to predict, just as we sit here. You know, just it wouldn't make sense to get that granular just 'cause we've gotta rebudget everything and see where we're at. I don't wanna predict 2023. I think if we look out beyond that, right, we just think about what's the impact from finishing leasing up the retail at Farley, leasing up Penn 2, rolling over Penn 1.
You know, we think that's gonna add significant, you know, income over time, right? That's probably a, you know, let's say a next three, four year type activity, you know, predominantly, right? When it actually starts, whether it's GAAP or when it actually cash pays, depending on when you're talking about. You know, Penn's gonna add, like we talked about the last time, you know, somewhere in that $250 million-$300 million neighborhood of growth. You know, some of that's in the numbers already with Farley. You know, we think there's a lot of growth to come out of Penn and, you know, knock on wood, some things we're working on will add to that as well. That's sort of the longer, you know, three, four year program, right?
A little bit this year, we think up over last year, and then next year, too early to tell yet until we, you know, go through a reforecast.
Any questions? I guess, you know, just to confirm, but you are focused on trying to grow earnings.
We are focused on growing earnings. Yeah.
Okay.
Yeah. If that was it, all in questions, yeah. It's good day. We wanna grow earnings. You know, we wanna have asset value fairly. We want all that to occur.
Stock pricing.
You know, like stock to go up. Exactly. Look, we, you know, we thought we would have significant growth this year. We still think we'll have a little bit of growth, but it's not gonna be, you know, what we wanted. Most of that's due to, you know, to rates going up and a couple operational things that went against us. We absolutely wanna drive earnings growth.
I guess the latest on Penn and the potential spin or when people are, you know, thinking about that earnings
The tracker?
Yeah.
Yeah, look, the tracking stock remains in the forefront of our mind, and I think it's something that we are, you know, it's you know, we are actively evaluating again. You know, we paused it for a couple reasons. You know, we're actively thinking about it again. We think the merits of it, you know, still make sense. You know, that's a longer term project in terms of its, you know, development cycle. You know, I think as we look at our stock today, there's clearly no value being given even to the growth that's coming on near term from the redevelopments. Then you overlay everything else that's gonna come beyond that and coming out of, you know, the general project plan approval that we can execute.
There's just a dichotomy in how we think the market's valuing. There's some investors that very much just wanna play that, right? They've told us that. Love Penn, really don't want to invest in anything else. Is there some way you could create that for us? Then other investors, you know, have a mixed view of that or a negative view of that. We think, you know, and if you like both, you can continue to hold both. Fundamentally, we do think that it is a different play, and that over time, you know, that'll get recognized. It's, you know, it's under active consideration and, you know, we're not doing it for sport.
We're doing it because we think that it will attract a different investor base, and ultimately, you know, one plus one, you know, will equal three after a period of time of stabilizing.
Just to put in, how long of a period of time is Penn? Think about that.
You know, I think you're gonna have this period where everything that we are doing right now, you know. You know, you think about the timeline, right. Penn 2 will be finished by the end of 2023. When it's actually leased up cash paying, let's say it's 2025, 2026, right? Penn 1 is just a constant roll. That's got average 10-year, probably five, six years left. That's just gonna come over that period of time. You know, again, the rents Glenn talked about, you know, we're triple digits there. You know, the yields we published, you know, in our supplement are definitely not triple digits, right?
As tenants get to see it, experience it, right, everything's better when you actually get to see and touch, you know, what it is. We think those rents will continue to march up, and we'll mark those to market. Beyond that, you know, we've got other existing assets that are gonna benefit from everything we're doing, right? If you think about the 330 West 34th and the Penn 11s and so on, right? That's gonna get a natural uplift as we finish everything else. The next phase will be, you know, development, right? That'll be, you know, that'll start kicking off, you know, we'll see. The Hotel Penn site will be down by the end of next year. We've got a site on Eighth Avenue that's ready to go.
It'll be market dependent as to whether that gets going in 2024. It's beyond that. There will be some residential in there, so that obviously can, you know, that can happen, you know, as soon as that's actually ready. You know, the office is more dependent on where the market is and, you know, finding a good tenant, or say a Hotel Penn. It'll, I would say, come in that 2024-2034 timeframe, right? Maybe sooner, just depending on market conditions. How much is resi versus office and, you know, we're still working through that.
Thank you.
Feels pretty good, right? Yeah. Where do you live? Boston. Okay. Well, I think yes, our chairman did coin that market's tilting south. I think we have the best portfolio for that. Is it perfect? You know, nothing's ever perfect, but I think we are very well positioned for that. That really was the thesis on continuing to accumulate product around Penn Station. Then it was a matter of waiting for the right time to begin to execute the redevelopment, right? It was really when Hudson Yards was developed and Manhattan West was developed, where, you know, the Penn District went from being the furthermost western part of the city to now being, you know, in the center, right?
We can command rents of, you know, triple digits in those buildings, and if they're going further west and paying more, that's less convenient from a transit standpoint. Maybe the product's new, but, you know, we have a better amenity package, et cetera. You know, we're very well positioned. We've got product up and down the West Side, whether it's in Chelsea Meatpacking, near NYU with 770. You know, 85 Tenth. I mean, I think, you know, if you think about some of the large institutional quality office buildings up and down the West Side, I think we've got more of those, certainly in the public markets, than anybody, maybe anybody collectively, right? You know, I think our portfolio is well positioned. At the same time, Midtown's not going away.
Park Avenue is absolutely having a renaissance, kicked off by JP Morgan's headquarters redevelopment. You've now got between that One Vanderbilt, 425 Park. There's another building that's gonna get built. You know, there's probably two or three other things in the works that'll happen in the next, you know, three to five years. You know, Park Avenue absolutely is gonna come back and be, you know, the highest priced district in the city, you know, driven by the financial tenants. But in our portfolio, we feel very good about where it is. We think it's positioned for that south and west. Being on top of transit, I think, has never been more important, which is where Penn Station is and everything we have around it.
You know, all the government investment infrastructure, whether it's on the railroad, whether it's, you know, the new train hall at Moynihan, which we redeveloped, which if you guys have not been in, you really should stop in. It's world-class. It's something New York, I think, as a city, you know, should have had. You know, it matches up with anything as you go around the world. I think we feel good about it.
Back to leasing, I guess everyone's trying to figure out, Glenn, you know, when we may have some more visibility, I guess, you're talking to your leasing team or just your thoughts like, I mean, is there an answer on that or just, you know, still unclear?
It's not a one-size-fits-all answer. It's tenant-specific and industry-specific and city-specific. I don't think, you know, you're gonna have clarity on it. I'm not sure when. It's gonna take time. I think every tenant, I mean, we've had, like, 4 calls with different tenants today. They all gave us a different answer.
I'm shrinking, I'm growing, I'm thinking, I don't know, you know. You have a lot of that going on. I think it's very, very situational. There's not one answer for this whole thing. I mean, think about it. I mean, we've never faced anything like this in anyone's lifetime sitting in this room. Think about waiting, right? I mean, we just went through this 30-month cycle. Have you ever seen this in your life? Well, we're still sitting here, we're leasing space, we're building jobs, and, you know, we're keeping our heads down, but it's so. Every discussion is different. That also goes to, you know, what kind of space do I need?
More common, more communal, more office, in an office tower, I mean, it's just across the board, different discussions going on with everybody right now, and they're all trying to figure it out. You know, the CEOs are sitting there, they're trying to figure it out. They're trying to figure out how to mandate people to get back, how to deliver that message, when they come back, how their space is gonna feel. Should I move to create a new culture? Should I stay? You know, there's all these. It's a puzzle for these CEOs. They're trying to figure it out, and we're speaking to all of them in our portfolio.
Where do we stand on tenant allowances and free rent? Has that stabilized?
Yeah, that's all stabilized. Absolutely. You know, rents have held firm, by the way. I mean, if you look at rents quarter to quarter over the past 12 months, they've held very nicely. In some segments, they've increased, actually. Concessions have certainly stabilized. I still hate them, but they've stabilized.
They're probably not coming up.
You know, the TIs are big. Look, it costs more to build space, and the tenants are expecting us to partake more in the buildup. That's the game. You know, if you want to play, you got to do it. You know, we'll see where that goes.
Glenn, obviously, the tenants that have committed, I think we've leased over 4.5 million sq ft over the last 2+ years, and the average lease term is 11 years. It's even more than it was in 2018 and 2019. They've definitely committed to a longer term.
Back on retail, I guess, can we just talk about that a little bit more? Not sure if, you know, everyone realized that you're saying, you know, you feel like at least where your position is in New York, it's, you know, stabilized.
Years ago, they would've been a little looser with where they would've been, right? You know, a lot of parts of downtown got built out. They just failed, right? Now they realize, okay, I want to be in the city. I want to be in, you know, these four or five locations. You know, you're seeing that flight to quality, I think, is starting with the smaller commitments, right? Soho started to come back first, right? Because the dollar commitments were the smallest, right? Smaller stores. At the same time, you know, you're seeing large format players like a Wegmans come in and say, "This is our time to come in New York, right? There's some availability.
It's cheaper than would have been five, 10 years ago, and we're gonna pounce, right?" We did the deal at 770, and, you know, they're interested more, and there's other players like that that are looking in the city. You know, we're seeing a mix of new retailers. We're seeing a mix of existing retailers that, you know, that are looking to expand. I would say that there's pretty good activity throughout the city. Times Square is starting to see more activity. Even Fifth starting to see some activity. That's probably the sort of laggard in terms of coming back, just because the dollar commitments are so large there, but there is activity there now. You know, Madison, we really sold out, other than Fuller, which we kept because it's sort of the bull's-eye at 57.
You know, I think Madison, you know, I think has changed and there's a little more activity. That market, you know, I think the rents have not recovered, and we think that's a longer cycle. You know, in general, there's definitely more activity. And, you know, it feels just like, you know, the rental levels have firmed and you know, the discussions are, you know, are more encouraging. You know, we're optimistic there. You know, I know we've given some guidance specifically on retail a number of times, including recently. You know, we continue to feel good about the guidance we've given.
Great. I think we're out of time. We have three.
That was quick.
It was quick.
It was quick.
Are we out of time?
Yeah.
I think it's working. I think we have three rapid fire questions.
Yeah. Just to start, first question, which of the following is the greatest macro challenge facing US public REITs today? A, risk of higher rates, B, risk of recession, or C, the rise of private equities and non-traded REITs?
Rising rates.
Okay.
You agree with that?
Probably would've said recession, but rising rates are a good answer, too.
Is that for all stocks, rising rates? I think that's set up. I don't think that's a REIT issue. I don't think that's a REIT needs.
Second question is, which of the following is the greatest sector-specific risk? One, labor issues, two, supply, or three, liquid capital markets.
Talk about that a lot. You could argue any of those, but labor has been a top of mind discussion in our internal chat rooms for sure. I think that goes for, you know, our tenants, too. We're getting a lot of feedback about labor right now.
Yeah. I'm sorry. I was gonna say from a tenant standpoint.
From a tenant standpoint, labor.
It seems like there's a consensus there. Finally, are you seeing any signposts of weakening demand? Yes or no.
Of what? I didn't hear signposts of weakening demand.
I don't think so. I mean, I think I described it before, you know. There definitely was more demand earlier this year, less now, but I don't think it's gonna get weaker from here, you know. I don't think so.
Great. Thank you.
Good.
Be safe.
Good. You too, guys.