SL Green Realty Corp. (SLG) Q3 2026 Earnings Call Transcript

Operator: Thank you everybody for joining us and welcome to SL Green Realty Corp's Third Quarter 26 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 and beliefs as of today. Additional information regarding the risks, uncertainties, and other factors that could cause such differences to appear or set forth in the risk factors and MD and A section of the company's latest form 10 k and other subsequent reports filed by the company with the 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 measures discussed, and a reconciliation of the differences between each non GAAP financial measures and the comparable GAAP financial measures can be found on both the company's website at www.slgreen.com, by selecting the press release regarding the company's third quarter 26 earnings and in our supplemental information included in our current report on Form 8-K relating to our third quarter 26 earnings. Before turning the call over to Marc Holliday, Chairman and Chief Executive Officer of SL Green Realty Corp, I ask those of you participating in the Q and A portion of the call to please limit your questions to 2 per person. Thank you. I will now turn the call over to Marc Holliday. Please go ahead, Marc.

Marc Holliday: Thank you, and thank you all for joining us this afternoon. As we recap another momentous quarter for SL Green. In many ways, this quarter and the year have exceeded expectations as our predictions about the strength of the Manhattan office market have materialized and our performance has been nothing short of spectacular. We took advantage of a very strong leasing market to surpass perhaps the company's most important goal, the leasing of over 2 million square feet year to date as we currently sit bringing our leased occupancy to 95%. And as we predicted, rents are now rising quickly as demand remains strong and our pricing power grows for the limited supply of high quality, well located, Manhattan office buildings. Our greatest strength comes from having a well leased portfolio at rents that are generally exceeding previous rents by, on average, around 15% and driving strong underlying operating performance with more than 4% same store NOI growth. With this trend expected to continue into the fourth quarter, as our pipeline of leasing activity is actually increased over the quarter to 1.3 million square feet, representing both important renewals that we are working on right now along with filling up the remainder of our diminishing vacancy. Our outperformance in the quarter was not limited to operational matters, but also extended into significant capital markets activities where we were able to consummate deals while our competitors largely sat on the sidelines as a number of their deals stalled. We continue to advance our disposition and financing plans this year, with a staggering amount of work already completed. With the successful $2 billion refinancing of 245 Park, we now have completed over $7 billion of our financing plan for 2026, which has helped to generate incremental liquidity strengthen our balance sheet, and extend our debt maturities at fixed rates. With that now behind us, we have very little to do in 2027 from a financing perspective. And therefore allowing us to focus almost entirely on growth opportunities, development projects, and further sales and dispositions of assets and joint venture interests. The third quarter also brought a number of new dispositions including the sales of 110 Green Street and 185 Broadway at really good prices. Those real estate deals you may have seen coming, but at SL Green, we try to surprise you with our creativity, I was especially proud to announce this week that we would sold a portion of our hospitality platform at a $200 million valuation. Bringing $40 million in unbudgeted proceeds. This is part of our platform that most people do not--does not value at all. And that we have monetized at a 20x FFO while the whole of SL Green trades at just 9x FFO. that is a direct credit to how hard our team works. And how we continue to find new ways to bring value to our shareholders. I know there is been some focus in the analyst community on the timing of future dispositions and I do expect that we will have more announcements in 2026 but we have had a staggering amount of success this year in selling. We are JV'ing assets with over a billion dollars of pro-rata value and are working feverishly on additional transactions to ultimately achieve the full $2.5 billion. Some of these deals may be deferred into the first half of 2027, but we are still seeing very good demand. From the institutional investment community for our assets. And last but not least, we celebrated our 10 millionth visitor at Summit 1 Vanderbilt which happened to coincide yesterday with our 5-year anniversary. That business has vaulted over the Empire State Building at the top observation attraction, and 1 of the most sought after attractions of any kind in New York City. That has all translated to our earnings guidance being up more than $2.00 per share from the original estimates last December, which felt pretty good to us until our analysts friends raised their third quarter estimates even higher last week. We appreciate your confidence, but do not think that anyone should say we missed anything. Given the monumental performance this year and quarter. Before we open to questions, let me briefly address the 1 drag on earnings we felt this quarter and throughout the year, which is stubbornly high interest rates. Higher rates impact all real estate businesses and most every industry. And we are talking about a swing of about 150 basis points throughout the year, up from the already elevated levels at the beginning of the year. That, of course, is not something we control. And that we have noted in the earnings release had a $0.25 impact on the back half of the year. However, we can and have aggressively and smartly hedged parts of our liabilities to lock in lower interest rates, So the impact has not been nearly as great as it could have been. And thanks to our incredibly hardworking team, we have continued to operate quite successfully in this context. Advancing dispositions and financings, that no 1 else could have achieved and delivering on creative solutions like the sale of a part of our hospitality business. Thank you, and I am happy to open the line for questions.

Operator: Thank you. And to ask a question, please press 1-1 on your telephone and wait for your name to be announced. And to withdraw your question, please press 1-1 again. Again, please limit your questions to 2 per person. And our first question will come from Nicholas Yulico with Scotiabank. Your line is now open.

Nicholas Yulico: Thanks. Good afternoon. First, I guess, was hoping you could talk about maybe what the leasing pipeline looks like in terms of the mark to market. I know that is been strong, what you have achieved year to date. Any thoughts on how that could sort of trend heading into next year? And whether there was also, you know, any just 1-time comp benefits this year that made that number higher than what it could be next year? Thanks.

Steven Durels: Yeah. This is. Let me hit a couple points. So as Marc mentioned, the pipeline is over 1.3 million square feet. Most notable in that pipeline is over almost 840 thousand square feet of which are active leases in negotiation. As opposed to straight term sheets. And the mark to market, as we have experienced throughout all of this year, is very, very healthy I think something north of 20%.

Nicholas Yulico: Okay, great. Thanks. And then I guess second question, maybe for Matthew, in terms of that $0.25 impact now in guidance from higher interest rates, I know some of this is just due to you guys changing, you where rates are or sort of rates coming in higher than where they were planned at the Investor Day but there is also the asset sale issue. And so I was wondering if you could just parse that out a little bit just thinking about, like, how much of that drag you carries into next year and some of it also just go away once the asset sales are completed?

Matthew J. DiLiberto: Yeah. Yeah, your last point's a good 1. I will let Harrison expand a little bit on the asset, disposition program. But, yeah, the timing of those dispositions definitely plays into our revision. Things are taking long in the interest rate environment as we phrase it in the release, covers a lot of areas of the business. So that is in effect. And, yeah, the rates are definitely higher than we projected a year ago. You can look at any of the curves, the SOFR curve, the 5-year curve, the 10-year curve, they are all, you know, up really 100 basis points or more last December to where they are expected to end this coming year. So that combination of effects plus the effect of, you know, if we trip up a JV sale out into 2027. that had fees associated with it, that would also be part of the $0.25 revision lower. Harrison can talk more about the disposition plan and timing.

Harrison Sitomer: Yeah, sure. You know, on the disposition plan, you have heard me talk about it throughout the year about 11 transactions So far, we have announced 6 of those. The 2 most recent asset sales being side street buildings, I think got done at approximately 5.7% cap rates. Looking forward, on the remaining deals, 2 of which those are 2 JV stakes. Those are both in documentation. The smaller of the 2 is near completion. The second 1 we are working hard to complete. By the end of the year. It could slip till early next year, but we are targeting the end of the year. And then 2 of the other deals, we just commenced marketing. you I do expect you there will be some pricing discovery which is to be expected in the rate environment. But deals are being bid, you know, interest is there. Tolerance is being tested by both buyers and sellers. Importantly, for us on the JV executions, which is why you are seeing us get those done so quickly, you know, we have very loyal partners. They put their faith in us. We have performed for them over the years. The brand is very important to us and we protect those investors and that brand. So I feel very good about our disposition plan. The assets we have left to sell are phenomenal. We may we may be a bit more patient than we had originally budgeted. But rest assured these executions will get done as we always do.

Nicholas Yulico: Okay. Thank you.

Operator: Thank you. And the next question will come from Steve Sakwa with Evercore. Your line is open.

Steve Sakwa: Great. Thanks. Maybe just a follow-up on that line of questioning. Marc or Harrison, maybe just talk about like return expectations. And I realize that is a function of rates But, you know. And that may be moving higher, but the offset would also be that rent growth is perhaps stronger than people expected. So, you maybe that is not impacting cap rates at all. But I am just curious how you are sort of thinking about kind of the interplay between the federal rent growth, higher, you know, expectations on sale candidates and the impact on cap rates?

Marc Holliday: Yeah. Well, I. Steve, I mean, I think you hit it. it is you cap rates are not merely a function of interest rates. it is function of interest rates and underlying, you know, growth and profits. Driven by rents. And right now, you have increased rents, but you have substantial--you have increased rates, but substantially increased rents. And I think that you are seeing you investors with a very bullish outlook on where rates are heading in 2027 and 2028 when in this market you are going to have almost 0 new delivery of space. Of new space. In that In that 24-month period, probably 30 month period because it will be well into 2029 before first deliveries hit. And, you with the imbalance of demand that we see in the market, I think the momentum behind anticipated, rent increases, not just in the high end, not even in the medium end, but net effective increases in the affordable range. you know, the $70, $80 a foot properties with shrinking concessions and rising rates is gonna keep cap rates for better assets in prime Midtown locations. In a fairly tight band. you know, in and around 5, 5.5, you max 6%. you may see some deals on the margins or in the periphery go off higher, but we are not seeing that for our prime product. And with rates seemingly, you know, stabilizing at this new level, they are down a bit today. But that does not, you impact in any way the rental growth, which I think is kind of locked in through 2027 and 2028. Given this level of demand, I think you are going to see cap rates trade you in a reasonably tight level close to on top of treasuries, which is not unusual for Manhattan. To be for prime cap rates to be treasuries flat, treasuries plus 50 for prime assets. Great. And then maybe just as a follow-up, just on the development, I mean, I realize you have got 346 sort of in the early stages of taking that building down. To rebuild it back up. Just how are you thinking about any other new development opportunities? And how would those return hurdles, you have to change or compare to kind of your underwriting at, you 346? Well, just so I understand the question. you 346, if there is any question about that is, we are in demolition, drive by the site, you will see it is buildings coming down. We are on track. We are very excited. We will be filing that project. Into ULURP, in December. And, you we have had very good response from the tenant community and, in fact, have you we are. We have an RFP in from 1 tenant with another expected. So you in terms of new development opportunities, I mean, we are always busy you trying to mine new opportunities, assemble other sites. you for, you for prime Midtown you located meaningful site, you know, we and others will be, you pursuing those for sure. Because you have to have seeds planted for future growth and those deals take time as you know. The pricing for those deals, I mean, I just sort of went through that with you. I do not think it is really changed all that much. there is a little bit more debt load for sure. Because of the higher interest rates. So it is more interest costs. But you we are also projecting rents that are much, much higher, you than when we were evaluating these sites just, you a year and a half, 2, 3 years ago. I would say most new development sites in prime locations today are modeling anywhere between, you $240 and $270 per square foot kind of midpoint average, rental range taking on project completion. And are big rents And there are rents that are being signed up. There are rents that I think the tenant community has come to expect in order to, you cover costs, cover interest, and cover profits. So I think that is the new mark. I think these projects underwrite feasibly. it is a matter of you the very complicated process of putting together the assemblages and the entitlements to go big in Midtown Manhattan, which is otherwise a fully built out submarket. Thank you.

Operator: And our next question is going to come from Peter Abramowitz with Deutsche Bank. Your line is open.

Peter Abramowitz: Yes. Thank you for taking the question. Maybe first 1 just for Steven. Wondering if you could comment, give some color on just concessions around the market, maybe whipping around to some of the key submarkets. It seems that they are pretty stable or declining here, but just curious on your latest comments on that.

Steven Durels: Yeah, I think there is a couple of points. What we are seeing is TIs have still been sticky. As far as, you being elevated Free rent, we have started to see come down. But I think, you given the complexion of our pipeline, with you the vast majority of our pipeline, sort of 3 quarters of it, being renewals, the renewal concessions are dramatically lower than new tenant concessions. So our net effectives on the renewal given how much square footage we have out for lease right now on renewals those net effectives are very strong because the rents are up and the renewal concessions are down.

Peter Abramowitz: And then to touch on the capital market side, you have talked about this a little bit already, but maybe to ask the question in a different way. But just wondering if you could kind of is there a bifurcation in expectations around just the outlook for a transaction for something like a 245 Park. Where, obviously, you are pretty much fully leased and have, you know, a pretty main and main location versus something like 63rd where, you it is a good location, a good building, but maybe not as well leased and in demand. I guess just kind of curious, is there much about the divergence in terms of expectations for pricing execution on deals like that across the portfolio?

Harrison Sitomer: Yeah. I mean, I talked about this a bit on the last call. What we. We are seeing in this market right now is a heavy diversity of buyer base and investor base. you have seen that just in the 6 deals that we have gotten done, whether it be family office buyers like 10 Green, institutional buyers like we saw at 10 East 53rd Street, that have been in this market for years. LP Equity that invests in both development projects and in JV interest with us. And so we have a lot of confidence in this market that there is interest across a wide variety of asset types. Some of that you have seen in our disposition plan to date. Some of that you have seen in the market. I mean, just recently, we saw an announcement around the Chrysler Building. We saw announcements around 1.33 thousand Avenue of the Americas. An announcement at 60 3rd Avenue as well. So I think the market today, in a very strong way has a lot of capacity for different buyer base and I think we will continue to see transaction activity. And like I said earlier, the only thing I will add is I do think with interest rate volatility, you will see some pricing discovery. you will see some a little bit of delay in some execution across the market, but I do not think that results in any non-trades. I think it just results in a little bit of pricing discovery and patience.

Peter Abramowitz: Alright. Thanks for the time.

Operator: Thank you. And the next question is gonna come from Alexander Goldfarb with Piper Sandler. Your line is open.

Alexander Goldfarb: Hey. Thank you. Good afternoon down there. 2 questions. First up, Matthew, on the realize we have to wait for guidance. But as we think about that $0.25 and as we think about capitalized interest, the 2 things that are tough to model, 1 is capitalized interest impact that converts to expense interest in 2027 and 2020. In that $0.25 interest rate headwind that you discussed, how much of that is fee income versus just the refinancing we can model, but it is the fee income that can be tricky for us. So can you just help us understand those 2 elements?

Matthew J. DiLiberto: Sure. I appreciate you saying we will give guidance in, in a few weeks because we will. So you I will give I will give a little bit of color, but save the you the real detail for December 7 at the investor conference. But you of the $0.25, I would say call it $0.05 is fee income and the rest is interest expense. Now, you there is an opportunity to maybe claw some of that back. We do turnover every stone looking for fees, but that is, that is what was layered into the 25¢. And, you as to capitalized interest, you know, it is linear to occupancy. So as you look at occupancy coming in on properties that are otherwise capitalized, you the capitalized interest goes down on the same timing that the economic occupancy comes in. So if you are looking at something like a 1 Madison where all the tenants are not in place yet, then as that comes in, the capitalized interest on that asset goes down. So it is, you know, it is a trickier thing to model, but it is something we have all the time. And you it is diminishing because a lot of our development properties are coming online. I think the modeling of it, as I look at the street models, has gotten has gotten better on the capitalized interest side. it is you being fine tuned. But, you the. Looking at the forward curves, is something where, you I think people need to do a little bit more work.

Alexander Goldfarb: Okay. And then, Harrison, on the activity, and I appreciate the comments on the durability of premium assets office in Manhattan, but still the disruption sounds like it has, as you guys said, delayed things and it. I am sure it takes a while to sort of restart conversations. So just I guess, to the best that you can help us, understand timing, should we think about you these. you mentioned you 2 transactions that likely will close in the fourth, but some other stuff that gets pushed into the New Year. When you say pushed into the New Year, should we think about first quarter closing? Or is this more like second quarter or later? We are just trying to get an understanding of, you how long it takes to restart these things given the volatility that is occurred and how conversations may have changed?

Harrison Sitomer: Yeah. Just to be clear, when I reference delay, I think that is that is more general market commentary. I went deal by deal in the beginning, but just to recap of what is left in the plan. 2 of the 4 deals in the plan 1 of which is fairly imminent, 1 of which we are hoping to get done by the end of the year could slip into early next year. And then the other 2 deals, which you heard me reference a couple weeks ago, I guess that was at Bank of America when we did our talk. We just launched those a few weeks ago. So nothing's delayed. Wanted to get the financing on 245 Park lined up, which we just announced and closed. Right now, we are we are out in the market and the feedback's been great. As I said, we are gonna be patient. you 245 Park, I just wanna that is a home run for this company. I think it represents everything that we have done you what we do well. Whether it was navigating the complex acquisition, redeveloping it, and bringing the amenity plan, bringing in an incredible joint venture partner at a difficult time in the market, getting to 100% occupancy and now stabilizing the asset with the financing. So it is been a great deal for the company. And now, you we are gonna go out and execute on our capital market strategy.

Marc Holliday: Yeah. Alex, I just want to add something. you talk about, you delay or deferment or whatever. In 9.5 months, this company has completed $7 billion of refinancings on many individual deals. And a billion dollars of dispositions. I. that is 9.5 months. I do not know what we are talking about. you this is ferocious performance in my book and I have only been doing it for 35 years. And you there is more to come. We are not throwing in the towel on anything. I mean, like, hang up with you guys. We go right back to work. And we are gonna try and get the, you the remaining, volume done by year end as close as possible. And we feel pretty good about our prospects for getting done everything we set out to get done. you we challenge ourselves by setting ambitious goals we put pressure on ourselves. And, I do not. I mean, look at it for what it is in absolute terms and relative terms to the market. there is there is no pause or delay here. there is nothing but ferocious activity. you cannot do all deals at once. that is an impossibility. Deals have to be sequenced. you or else it appears chaotic. And we are not chaotic. We are orderly. And thoughtful in our approach to this market. We are going to try and get it all done. If it trips into the early part of next year, so be it. But I would not stress it. I should say I would. We are not stressing it on our end. Because we think we are in a really good market, and we have got a lot of demand for our assets. that is what we are I was saying. I think it is what Harrison's saying. Whether it is coming through or not, I do not know. But that is how we see it. that is how we see it. Marc, thank you.

Alexander Goldfarb: Yep.

Operator: Thank you. And our next question comes from Blaine Heck with Wells Fargo. Your line is open.

Blaine Heck: Great. Thanks. So on the opportunistic debt fund, you have deployed $643 million of the $1.3 billion to date. Can you just talk about where you are finding the best risk adjusted returns right now? What kind of levered returns you are underwriting? And whether the opportunity set is more about new originations or buying existing paper at a discount.

Harrison Sitomer: Short answer, all of the above. Our team back there is monitoring every opportunity in this market. There is a deal that we are not trying to turn over or find an edge on. As you said, we deployed a significant amount of capital this past quarter. We have a pretty deep pipeline so I would expect that activity to continue through the end of the year. it is moments of volatility where we excel. And I would say, you where we are seeing the best opportunities today is a combination of loan acquisitions, new origination, and then a third category, which was some component of the activity this quarter, which is extensions and upsizes of existing facilities in lieu of taking out our existing financing, which is great. Gets us more term and gets us more exposure to some really good deals.

Blaine Heck: Very helpful. And then just touching on Summit. The operating loss widened pretty meaningfully year over year. Can you just comment on what drove the expense increase, whether that is preopening or marketing spend tied to the international expansion? And when you would expect that business to get back to kind of a normalized margin?

Matthew J. DiLiberto: Yes. there is 2 factors in the third quarter. The biggest thing is they pay some pays its percentage rent in the third quarter of every year. So every year, if you look historically, the third quarter expenses are high because they are year, the year on which their percentage rate is calculated runs from October to October. So the clock is reset. Fiscal year runs, you October, they just celebrate their 5-year openings, October 21. That starts the year of measurement for percentage rent, and then they eclipse the threshold and pay it in the third quarter. So that makes every third quarter's operating expenses higher than the others. you will not see that again in fourth. And, also, now we do have expense related to Paris. Until such time as the, facility opens and generates revenue, now it is we are building out the space in anticipation of opening in the middle of next year. We have to run the rent for Summit through the operating expenses on the financials.

Marc Holliday: Yeah. I mean, we are in full throttle in Paris right now. Active development. I expect the build out to be completed in May. I expect the facility to be open in June. Of 2027. We are built. We have built out our, organization in Paris. We continue to build it out, but we have, you many, employees onboarded now working on prelaunch, premarketing, staffing, construction of the of the entertainment experience. I. I have the mock ups are nothing short of phenomenal. I think that it is gonna be, I hope 1 of the great new attractions for Paris. We are on track. We are on budget. But it is heavy lift between now and June 2027, until we open doors to public to get it open. And then I hope, you we will be rewarded. And I hope, Paris and visitors in Paris will have a great new attraction to see and enjoy.

Blaine Heck: Great. Thanks a lot, guys.

Operator: Thank you. And our next question comes from John Kim with BMO Capital Markets. Your line is open.

John Kim: Thank you. The $200 million valuation for the F&B business came out of the blue for us. Congratulations on getting that done. But I was wondering if you could comment on what this business is exactly. And where this set in your NAV build out last year if it was part of the other assets of, like, $559 million? And then if I could just add on to that, how the $40 million of proceeds translates into $1.10 of incremental FFO for this year.

Marc Holliday: Okay. Well, look, I mean, we have got a big diverse set of revenue generating hospitality activities. Across the whole portfolio that we have built out over the last 10 years. And you now we were able to package and monetize it because it is it is it is run very successfully. it is profitable. it is everything from big events business at L'Avenue at Saks, sur Madison, 72nd floor at SUMMIT 1 Vanderbilt, In addition to our F&B and events, at all of our amenity spaces, rooftops. And, you to be clear, it does not include Summit or any physical real estate. So this is really just our pure hospitality and F&B business. it is become a big business. I meet weekly on this with a team of about 15 people. We have internally that run this business. it is growing. Fairly significantly, which is why you see that kind of multiple. there is an expectation of additional growth into 2027 and beyond. And, you it also flatters the buildings, and it is a great add on for our tenants. So it is a win all around. Was not a surprise for us. I imagine it might have been for shareholders, but something we have been working on for a while. And it is just 1 example of ways in which we are trying to diversify our activities throughout the city. In ways that enhance the real estate but create some value for shareholders.

Matthew J. DiLiberto: And as to your other questions, John, the it was included in the other assets category in our NAV illustration. Just at cost. And this translates into a significant gain because under GAAP, you take a gain on the piece you sold as well as the piece that you retained. So you mark up the retained piece to the equivalent value at which you sold the 20%.

John Kim: Okay. And then, Matthew, on the $0.20 headwind that you are seeing on interest rates environment ex the JV fees, That still seems like a lot for 1 quarter. And I am wondering how much of that is in relation to 245 Park Avenue. I know a successful financing, but the timing of that impact your guidance for this year? And how did the valuation of the asset compare to what you were expecting?

Matthew J. DiLiberto: Yeah. Let Harrison touch on valuation dollars $2.45 was nominal impact. We had been tracking that obviously. There had been an execution on our radar for the year. So it ended up higher than what you expected you a year ago or almost a year ago. But we had been factoring that in along the way. So that was a nominal impact. The impact of the, you the $0.20, remember, that is that is for third and fourth quarter. Not just fourth. you there was an impact of the higher rates on the quarter that we just printed last night. And that is, you basically just running a higher line balance than we expected at that rate. And that, very quickly gets to that 20%, or $0.20. Sorry.

Harrison Sitomer: As to valuation, We are unable to comment on valuation, obviously, for competitive reasons as we are in the market.

John Kim: Okay. Thank you.

Operator: Thank you. And our next question comes from Anthony Paolone with JPMorgan. Your line is open.

Anthony Paolone: Yes. Thanks. Just 2 quick ones. First, Matthew, on OVA, is there any change to the $0.80 in accounting income this year from that change last quarter?

Matthew J. DiLiberto: No, no change from last quarter. It is not linear though. I will answer a question you did not ask. Because it is now based largely on distributions. You know, the amount we took in the third quarter is substantially larger than we will take in the fourth. It was about $0.40 for the third quarter will be substantially less in the fourth because we get that percentage rent that I talked about earlier on the call from Summit in the third quarter gives us excess distributable cash. We distribute out of our JVs at the end of every quarter. And at the end of the fourth quarter, we do not have the percentage rent. And, also, we hold back distributions because we need to pay, real estate taxes on January 1. Okay. Got it.

Anthony Paolone: Thanks. And then just the second 1. I think I got a little bit lost in the answer on the Summit. Question. Is. So is the guidance for the full year still intact? Or did that come down because of the OpEx?

Matthew J. DiLiberto: It has come down. It has come down. Marc touched on how successful we have been certainly on a relative basis we are below our initial expectations. So, and you have seen that through the first 3 quarters of the year. So we are off a bit, but, you we are mitigating what revenue loss we are seeing reduced attendance, through, cost containment. And, the team's doing a really, really good job at that.

Anthony Paolone: Okay. Thank you.

Operator: Thank you. And the next question will come from Caitlin Burrows with Goldman Sachs. Your line open.

Caitlin Burrows: Good afternoon, everyone. you mentioned earlier the 1 million square feet in the leasing pipeline. I was wondering if you could go through how you would category what is new leasing versus renewals. And then on those renewals, talk a little bit more about what is maybe normal course timing versus earlier than you would have otherwise expected?

Steven Durels: Sure. So there is a million 3 in the pipeline, of which 840 thousand square feet are leases out. Of the renewals, there is about 300 thousand square feet of renewal transactions versus over a million square feet of I am sorry, 300 thousand square feet of new transactions versus over a million square feet of renewals. And what we are seeing is that the larger tenants are clearly engaging the market sooner. Certainly, compared to you in my recollection, even prior cycles when the market got was on the upswing. We are seeing some of our larger tenants engage the market that could be 3, 4, 5 years in advance. And I think that is largely because you as those tenants think about their opportunities, in the future for finding high quality space, in desired locations and better buildings that supply is tight as a drum, and there is no relief in the future because there is really no material new supply coming on the market. it is just the opposite with you with the conversion. With the amount of conversions of office to resi. The inventory particularly in Midtown is rapidly declining. So, I mean, at this. you know, as we see today and as we look into the future, we are in a really strong position, and desirous of doing as many renewals as we can early.

Caitlin Burrows: Got it. And then separately, I think going into 2026, I remember you guys saying some of the disposition plan was being driven by the cost of debt being so high. And as you mentioned, that is more expensive than it was as of last Investor Day. So, realizing you have not given guidance, as we think of, like, the drivers of dispositions, like, should we think that 2027 dispositions could be similar to 2026 Or, yeah, what would drive disposition plans in 2027 to be similar or different than this year?

Marc Holliday: Well, the disposition plan as you are putting it really falls into 2 camps. there is assets we think we have mined most of what we can get out of it, and we choose to sell and move on and put into somebody else's hands? Or you JV assets for core long term holds where we still see you recurring and replicable upside that we wanna be a part of. So you every year, we go through the entire portfolio of assets, and we have them in, you keepers and ones we wanna sell in that generally what we consider to be sort of the you around 5 to 10% of the portfolio. Wanna say at the bottom of the portfolio because they are great assets. They are just assets that we think, you we are ready to move on in the in the life cycle and monetize. And then joint venture is really a form of optimization and financing for us. And building up our fee management, you fee asset management business and fee generating business, which has been very successful. As you it is over a $100 million I think $110 million or so third party fee income, and we are looking to grow that measurably. So you will see, some outright sales, I am sure, in 27. you there is a diminishing supply of outright sales because the assets we tend to retain at this point are of the highest quality and a lot of them have embedded growth well beyond you what the current escalated in place rents in are in these buildings. Because rents are rising. So substantially right now. So there is a lot of embedded growth. In certain of these buildings in mark to market sense, especially over the next 3 years. So I think you will see it a little bit more weighted towards joint ventures next year. Than outright sales. And, you that will all get illuminated in December because we are kinda going through the process right now. Thank you.

Operator: Thank you. And the next question is gonna come from Jana Gallen with Bank of America Securities. Your line is open.

Analyst: Thank you. Good afternoon, and congrats on great operating results. I appreciated the update on 346 Madison. I was wondering if you could provide any update on the timeline or financing plan for the 750 3rd Avenue redevelopment?

Marc Holliday: what is the question? 750 3rd? Yeah. If you do not mind, was it on 346 or on 750? 750? 750 is the project, as you we are doing. We are far along with. it is a conversion of a 800-and-some-odd-thousand square foot office building on 3rd Avenue to approximately 750 multifamily units. it is a--it is, you know, for me, I think it is like a signature project for this company because it really shows the ability to adapt a building that, you was a strong office performer since our acquisition back in, I think, 2003 or so into you what will become an even better multifamily project. And, you we have had full physical possession. We have done the interior demolition. I think we have done most or all of the internal column strengthening successfully and without incident. And we are about to commence on active construction and conversion into the apartment buildings. We pulled the permit at a time where maximum tax advantage benefits were obtained before the June sunset. Now if you pull a permit now, the tax benefits are not for as long a period of time. So we have vested our rights into a--the longest possible tax abatement period. We derisked the project. And we have financing ready to close I think, on a timeline by year end, Harry. Right? I mean, we are looking at, I think, a December close for that construction loan. And it is about a $500 million construction loan, I wanna say. That will enable us to--but, you know, we will fund most or all of the remaining capital necessary to build out the project, which we should be delivering to the market in 2029. it is very highly amenitized. I think it is going to get top of market rents in this Midtown East area. I think it is quickly gonna become sort of a blueprint for a lot of other conversions to follow.

Analyst: Great. Thank you so much.

Operator: Thank you. And the next question is gonna come from Tom with U. S. Bancorp. Your line is open.

Analyst: Thanks so much, and good afternoon. Steven, maybe going back to Caitlin's question before about the leasing pipeline. Given that your Park Avenue and Madison Square buildings are effectively full at this point, What are your expectations for leasing in your Third Avenue and Sixth Avenue portfolios as well as 6th Avenue? How much progress can you make there in the near term?

Steven Durels: Well, a lot of progress. I mean, we are--you take buildings like 803rd or 420 Lexington Avenue. Those buildings are enjoying significant rent increases. Matter of fact, at 803rd, we just raised the rents. Another $5 a foot, a week ago. there is a lot of leasing velocity at Grabar, which is 1 of our, you bigger prewar buildings. you know? And the rents there are--I have been involved with that building for almost 40 years, and the rents are at the highest level I have ever enjoyed. So as we look up and down the avenue, east of Grand Central, you are seeing a lot of velocity, you are seeing a lot of tenant demand. And part of it is boosted by a diminishing amount of supply because of the office to resi conversions for the projects that similar to what Marc was describing.

Analyst: that is great. Thanks for that, Steven. And then last 1 for me, Marc. Maybe going back to comments that you made on fee income and generating more than $100 million on that platform. There are parts of that fee income business that we tend to think of as countercyclical. This is, you know, like your special servicer, like, kind of the platform you have for debt fund investments. If rates remain elevated, kind of how much more can those lines of business special servicer, debt funds and others, how much more can they contribute to the bottom line?

Marc Holliday: Well, so that is a question very specific to the special servicing business because the asset management fees we are generating, I think, have longevity to them and replicability to them. And, you our goal is to be in the business of working for institutional owners, that have, you 5 to 10 year hold horizons to reposition and optimize assets they take back And, you we are having great success there. So the portion of the business that is servicing related, it is somewhat countercyclical, but, you know, it. Good and bad markets, you have got servicing opportunities. I mean, it is a business that. that is always in demand. I think that you looking at the rates, the refinancing rates today and some of the big SASB deals that have been paused, I think you are getting to a point where deals that have already been extended for a year, 2, 3 are gonna get to a point of, no further extension. And we are gonna be very active in 2027 and 2028 at these at these rate levels probably realizing on many of these assets, taking them in, becoming long term asset managers, you which is a natural progression of this servicing business. Is to go from special servicer to asset manager for assets that become REO. And there is, you a good proportion of which that I think that might occur, not just in New York, but around the country. So, you I would say, we have an upward--you know, we will have upward guidance on that business in, December when we have our investor conference. But Harry, you wanna add something to that?

Harrison Sitomer: Yeah. 1 piece I think is very important is how diverse the asset base is within our special servicing business. We are now as I have mentioned in previous calls, now the largest active SASB servicer in the country. We have exposure to not only office but retail data centers, hotel, life science. And so that exposure across a diverse asset base not only serves as a countercyclical financial impact to our benefit. But also just gets us, you maintains that business will stay busy for a while. you 1 thing that Marc just hit is becoming asset manager as well. Just in this past quarter alone, we have picked up over 2 million square feet within Green Property Services with Asset Management. So through that business line, that is really our first foray into that business. you will see us earning new leasing commissions, new property management fees, new construction management fees, and I. I would expect that to be a part of the growth story into 2027.

Analyst: that is very helpful for the call, everybody.

Operator: Thank you. And the next question will come from Brendan Lynch with Barclays. Your line is open.

Analyst: Hi. Thank you for taking the question. This is Annabel on for Brendan. Maybe as a follow-up to your comment about larger tenants looking 3 to 5 years out for renewals. What is your strategy when thinking about signing an early renewal now versus waiting for potentially better lease economics down the road?

Marc Holliday: You know, it is philosophically, we are not big believers in waiting. you know, if the opportunity presents itself, and the economics are attractive, you put the deal to bed. you this. it is rolling the dice and playing the gamble of, waiting for even better returns in the future is kind of a fool's errand. you are better off locking in the rent roll, taking these moments in time where we have a strong market, raising the rents, extending the lease terms, being critical as to opportunities to improve the credit of our tenant base, And using the leverage that we have, to reduce concessions so we lock in great net effective rents.

Analyst: Okay. Great. And can you provide some more details on tenant demand in 346, Madison? And what are the next milestones that we should be focusing on?

Steven Durels: Well, you know, it is early days in that process We do not seal the building until. We do not complete construction until fourth quarter of 2030. Notwithstanding that, we are actively presenting the opportunity to the market, to the brokerage community, to prospective tenants. As Marc mentioned, we are already, in term sheets discussion with a large perspective tenant. that is not to suggest that we will go to lease with that tenant, but it is a good indicator of tenants are--you know, love the building, love the presentation, love the opportunity. As a matter of fact, obviously, in a presentation this morning with the CEO of a prospective quarter million square foot tenant for that for that project. So, you know, we are firing on all cylinders. The construction's moving forward. And the moment is ripe because there is no new product coming on online. Great.

Analyst: Thank you.

Marc Holliday: Great.

Operator: Thank you. And our next question will come from Ronald Kamdem with Morgan Stanley. Your line is open.

Ronald Kamdem: Great. Just 2 quick ones. On the same store NOI, in the quarter and thinking about potential acceleration from here, I think the Investor Day last year, you talked about maybe double digits in 2027. Just curious if we can get some updated thoughts given that you maybe occupancies commence even faster and rents are moving in your direction? Thanks.

Matthew J. DiLiberto: Yep. That, 10% is still our objective for 2027 even in the face of 2 things, 2026 performing better, which has since set the hurdle that much higher. And inflationary pressures on operating expenses. you our operations team does not get enough credit for how good a job they do of, of containing expenses in this environment where cost of pretty much everything are going up. But in the face of both of those things, I would still expect, 2027 same store NOI, cash NOI north of 10%.

Ronald Kamdem: Helpful. And then my second 1 is just on leasing CapEx and updated thoughts there. Just I think there was some conversations about that is gonna start to roll off. Obviously, as occupancy sort of commences and so forth. Just any quick takes on what the run rate has been for this year and how that could improve as you sort of flip the calendar and so forth so much?

Matthew J. DiLiberto: Yeah. The trajectory over the next few years should be lower. We have said that and we are on that trajectory. The unpredictability of the TI component of capital spend that is the thing that is the most challenging, because the bulk of the TI capital is in the control of the tenants. Not the landlord. This year, we are trending ahead, and I would love to see that continue into 2027 and 2028. We will have a better look at that coming up, in early December.

Ronald Kamdem: Thank you.

Operator: Thank you. And our next question will come from Seth Berge with Citi. Your line is open.

Seth Berge: Hey, thanks for taking my questions. I guess the first 1, it sounds like the market for kind of core Midtown product is still healthy and maybe there is some price discovery out there. Has there been any kind of change in the number of potential bidders out there or the types of capital that are looking to invest in office?

Harrison Sitomer: Not really. I hit this in a question earlier. Just within our own sale disposition, execution to date, we have seen the 31 buyer, the institutional buyer, the domestic LP We have seen international LPs So they are really. We have not seen any specific pullback of any 1 of those segments of the investor pool. Will hit as part of that just what we saw also in the debt markets I know that question's on equity, but I think it is important with 245 done, we had over 40 distinct investors in that 45 book. The largest SASB office transaction since January of 2025 at a at a moment in time, or like a 2 or 3 day window in time when there was tremendous volatility in the market? And I think that just speaks to how strong New York performs, you know, at these moments of volatility. So interesting data I got earlier was same as in 2025, the office sector, is on top of the leaderboard of U.S. SASB issuance in 2026. And interestingly, 70% of the U.S. office SASB activity was New York City office. So that puts New York City office well ahead of the entire U.S. SASB multifamily market. it is bigger than the entire data center. Self storage and life science market combined. And that is really why we love New York. I mean, you know, in these moments, we continue to see tremendous amount of capital inflows both across debt and equity. I think that is most mathematically proven in the US SASB debt market and CMBS market.

Seth Berge: Thanks. And then just maybe going back to Summit, it sounds like in your answer to another question, that it is kind of below your expectations for the year. Kind of what levers do you have to pull to kind of improve performance with Summit, and how much of that is just kind of a more challenging macro environment?

Marc Holliday: Well, it is I think what we are experiencing is what many attractions in New York are experiencing right now, which is a year where the tourism just did not measure up to what it was expected and projected to be, in a very odd and unexpected way the FIFA World Cup finals turned out to be somewhat of a negative for hotels and destination experiential. Because there was this narrative of getting out of the city for what was perceived to be kind of an onslaught of activity and I do not congestion, I guess. And you the games were great and went off without a hitch and were well enjoyed. But you the city was on a bit of lockdown in terms of the ability to get around and there was sort of some discouragement almost, if you will, to what I would say, really get out there and you and participate and celebrate and enjoy in a way that I think would have been you perhaps more lucrative for a lot of the attractions in and around New York City for the months of, you let's call it June, July, August. So that is in the past. We have seen a definite uptick in return in Q3 and Q4. We are kind of revamping our very targeted marketing programs to a lot of domestic tourism, lot of New York City you residents, tri state residents, and you the markets where tourism is still quite strong, which, you is ever changing. So I am confident that you Summit will retain its leadership status amongst this destination observation and where looking forward to, I think, a very robust end of season year, which is where we make our most money like most, you hospitality venues. And then we are going to launch into you 2027, you which I, you hope and expect will be a be a great year.

Seth Berge: Great. Thank you.

Operator: Thank you. And our last question will come from Michael Lewis with Truist Securities. Your line is open.

Michael Lewis: Great. Thank you for hanging in there for me. My question goes back to the food and beverage hospitality business. Did you share how much income that business generates? I am just thinking how much recurring income goes away with a 20% sale, kind of what the yield on sale is there.

Matthew J. DiLiberto: Yeah. That was, it generated about $2 million of full-year FFO. So we sold it at a 20x FFO multiple.

Michael Lewis: Okay. Gotcha. And then when I look at the mortgage maturities in the next year or so, I think Landmark Square and the Olivia are disposition candidates. And then do you intend to refinance 485 Lex, 220 East 42nd and Worldwide Plaza? Or could those be potential dispositions as well?

Harrison Sitomer: I would you have to parse all of those out separately there is a category of those assets where I would say we are focused on refinancing opportunities. For strategic reasons, I am not gonna give you the. Which go into which bucket. And then there is 1 that you referenced that I will point out which is Worldwide Plaza which sits in ASP. I would not expect a--or I would not model at the moment a refinancing of that next year. But on the balance of the assets, rest assured, like we tackled our full $7 billion plan as we sit in October, we are already well ahead on the 2027 financing plan but I would also add just as we think about financings next year, with not a lot that needs to get done, we will either be financing opportunistically and continue our DPO plan. I expect us to announce 2 DPOs in our portfolio by the end of the year. 1 of which I would expect to close in 2026. And 1 I would expect to in 2027. Okay.

Michael Lewis: Great. Thank you.

Operator: Thank you. I will now turn the call back over to Marc for closing remarks.

Marc Holliday: Okay. Well, if there is anyone still on, it was a great call. Appreciate the questions. I am happy we are able to sort of condense it into the hour allotted, so well done. And most importantly, I have a message from my CFO, Matthew DiLiberto. Look forward to seeing everybody on December 7 for our annual investor conference. I think this is our 29th investor conference, December 7, here in New York. Doors open 08:30. Presentation begins at 9:00. If you cannot make it in person, it is webcast. Thank you all for joining us. We will speak to you in December.

Operator: This concludes today's conference call. Thank you for participating and you may now disconnect.