SLG - NYSE

Thank you, everybody, for joining us, and welcome to SL Green Realties Corp's 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 beliefs as of today. Additional information regarding the risks, uncertainties and other factors that could cause such differences to 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 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 measure 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 in 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.

Okay. Good afternoon, everyone, and welcome to SL Green's earnings call. Thank you for joining us today as we review the first quarter's results and discuss improving trends. We see 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 to 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. However, 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 crisis 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 work day and how we experience our CBDs, transforming them into vibrant 24/7 destinations. Our lives can no longer be neatly separated into work and leisure and entertainment, and 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 work day. There are a number of positive indicators and developing trends that give reason for pragmatic optimism, though clearly to 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 maturing loans. One month SOFR today stands at 501, up from just 25% a year ago. But 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. And 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 silver swap rate of 3.3% by the end of 2024. So 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 signs of significant improvement. The labor market in New York City has shown resiliency as businesses that employ office workers have raised all COVID year losses. There is recent evidence of higher office utilization within our portfolio as physical occupancy regularly exceeds 60% on many workdays, 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. So it's the highest single day ridership since the beginning of pandemic. And during the seven days between April 9 and April 15, Long Island Railroad carried an average of 170,000 daily commuters, the best seven-day average in over three years. So there is an increasing drumbeat of optimism about return to work, and we hear it from more and more companies that are doing business here in the city, but 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 very definitive statements about a recognition that these businesses can be only at their most efficient and best when people are together in purpose-built, collaborative office space and not home or remotely. And I think that's why 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. And that trend is something that we see on the streets, in the buildings, on mass transportation, and we think it's only going to get more and more momentum as this year weighs on because it makes sense. And it makes sense for business, it makes sense for competitiveness. It makes sense for the re-imagination of our CBDs. And it's what people have done and it's how people are at their best. So, we're very optimistic in that regard. It took longer than we expected, but 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. So while other cities are having difficulty getting a handle of crime or some other major cities are having difficulty getting a handle on crime, New York City clearly has a plan that is working. And 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. So 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%, and leasing volume of 504,000 square feet also outperformed our expectations. But 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 square feet, 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 undoubtedly will 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 square feet of space in same-store properties, which would absorb over 300,000 square feet 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, and 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, and 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.

[Operator Instructions] And our first question comes from John Kim from BMO. Your line is now open.

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 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 going to go through the whole $2 billion pipeline. But we're working -- as I mentioned in my speech, I think that we feel pretty good about where we stand right now in terms of completing JV sales and financings that we -- that form a part of the 2023 business plan. 919 financing, I think, is imminent, and we're working hard on the 245 Park, which that development is coming along amazingly well. The plan we have for it, I think, is going to make it among the best non-brand new construction buildings on Park, but we'll be able to lease it at rents that are going to be well into the triple digits. We have a lot of activity there. We're trading paper with a couple of tenants. And our discussions there are good. So we feel good about that. And then, there's obviously, other transactions we're working on. It's still got a long way to go this year. And I think the market is coming around. And I think the assets we've selected are the right ones that we'll be able to either monetize via sale, via joint ventures. They're in the right locations, and 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. And you talked about having a resolution with the lenders. I'm wondering if you could provide any color on what those -- the resolution looks like? And if defaulting on debt is an option for you and or your partners?

Secured debt, which question?

Resolution of secured depositions that were in past maturity. In particular, it was 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, but there was some debt that expired in December, February this year.

111 West 34th Street, are retail -- high street retail positions where we are far from, that we do not control the borrower, and we have basically passive position. 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 were 30% of that position. We don't control it. So, we're getting updates from our partners, but those are investments that we continue to evaluate. And as I said on the prior quarter's calls, lenders are either going to work with us on those assets or they're not.

And John, to Andrew's point, it's Matt. you referenced the December '22 maturity. That was 1552 Broadway. And as you'll note in the supplemental that matured in December, we worked with the lender and just executed an extension through to 2024.

The other one was 650 Fifth Avenue, which expires this month.

Yes. These are tiny -- these are -- we should take it off-line. These are assets which I think have no book. Yes, these are small retail assets in which we either have de minimis ownership, passive interest no consequence to the earnings on the balance sheet of any magnitude that I think. I mean is that what you're referring to or something else?

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 going to determine whether there are defaults or not.

Yes. But again, the consequence of that determination, unless I don't want to 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, that's okay.

I'll call that immaterial. In my book, I don't want to -- I'm not trying to undermine the question, John, just saying -- these are -- what Matt said is right, you've highlighted assets, which we sort of look at as carry and look at a zero and have no contribution to earnings. So it's just not the focus of what my commentary is about. That's what I'm saying.

Any commentary on your partners though because you may have to be aligned with them?

Well, we'd rather...

There's no commentary. Yes.

And thank you. And one moment for our next question. And our next question comes from Steve Sakwa from Evercore ISI. Your line is now open.

Great. Marc, or maybe Steve Durels, could you just talk a little bit more about that $1.2 million? I guess what I'm trying to figure out, Marc, is, are these tenants kind of expanding? Are they staying the same? Are they shrinking? 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's the density?

I gave so much disclosure on it. We -- there's like 40 or 50 deals 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 square feet is for vacant space within the same-store portfolio, and there's over 500,000 feet, that's for vacancy within the portfolio generally, same-store and non-same store. Mostly financial tenants some growing, some shrinking, many staying the same, all in line with our projections, probably slightly above in terms of velocity. And clearly, the first quarter we were ahead on mark-to-market in same-store. But there's dozens and -- there's 18 deals alone at Graybar and there's probably -- I don't know how many deals in total on there, but what about -- 40?

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 of renewal deals. Mark talked about what was filling vacancy, both same-store and throughout the entire portfolio. That's 45% of 1.2 million is filling vacant space. And I think to build on what Marc said about the 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. So 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 increasingly -- is rapidly changing. We are seeing more velocity certainly on the proposal stage and tour activity in the more price-sensitive part of the market than we've seen in the past three years. And I think that's a reawakening of the marketplace. I think we're seeing the small and midsized tenants come back to the market. And 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? And I guess, Matt, when you do get the proceeds in from the joint venture partner, how do we think about the applicability of that -- of those proceeds, which I think are just shy of $600 million?

Yes. 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 short-term unsecured facility we put in place last year. And the increment above that, another $150 million or so goes to either the line of credit or other corporate debt.

And thank you. And one moment for our next question. And our next question comes from Alexander Goldfarb from Piper Sandler. Your line is now open.

Matt, maybe just on -- moving on from Steve's question. I think he was -- on the TCO for One Vanderbilt, I think you're getting -- 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 be more at One Madison. There's the condos uptown that you guys are doing. So net, can you just sort of lay out in total? Obviously, the One Vanderbilt is pretty much certainty, correct? But 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?

So I'm going to just correct on the addresses a bit there. The proceeds are coming in from our partners at One Madison on TCO. 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 the last couple of years, and we may or may not do that this year. I don't want to 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 Marc said earlier. And then we have some other assets either wholly owned or outright sales, JV interests, other things that we are working on. But I'm not going to step through every one of those except to say we're focused on trying to get to our $2 billion target, the most significant component, which is 245 Park.

Okay. But that's -- and then you also have the $570 million from One Vanderbilt that's later this year as well, correct?

Yes. That is the only condition of that is completing One Madison, that's obviously happening.

Okay. Great. And then second question is The Real Deal had an article, I don't know, a few weeks ago with the latest on 625 Madison had a little, as they always do, a little extra color. But maybe you guys could just provide us an update where the litigation or negotiation stands, 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. And 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.

So what does that mean impact the value? That's up, down? What does that mean?

It depends on the rent arbitration. It's up to the arbitrator.

Yes. I mean it's a fairly binary outcome. There's a wide disparity of view as to what that rent should be. We've been -- it's been the subject of a disagreement for a while now. And there'll be a conclusion, we think, imminently. And then based on that conclusion, at least with respect to the leasehold, that will clarify for us the direction we're going to go with it, whether it's something we feel we can stay with or whether there -- if you get a rent amount that's...

Non-economic.

Noneconomic, then we'll have to deal with that. But that's an investment that we've had 15-years plus. It's net leased Apollo. We've taken -- we've certainly as Andrew mentioned, with 717, we've redeemed all our capital on that investment.

It's been a successful.

And in addition to that lease position, we have our mezzanine interest on the fee position as well, also related to 625 Madison.

And 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 resell arbitration.

And thank you. And one moment for our next question. And our next question comes from Anthony Paolone from JPMorgan. Your line is now open.

I guess first question. On green loan servicing, just wondering like maybe if you could talk about that or how we should be thinking about that? Because it seems like that could be a good business at the moment. I'm 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 find investment opportunities or other 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 interest when we service loans as a third party, as a fiduciary. So it's a good active business. We have a great staff and team that runs that business. And we've been -- we've had a lot of successful resolutions on behalf of our clients and customers there. And we do intend to grow that business for sure, as there's more situations that sort of need servicing and special servicing.

Okay. And then just my second one. I know it's early, but 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. I mean, as it was announced. Credit Suisse is merged with UBS. UBS is going to be the surviving entity. I think we look at that as credit upgrade to the lease, although Credit Suisse was was a good tenant of ours for over 15 years. So I think the merged entity will just be that much stronger. And in terms of what they may or may not do with their space, we don't have any visibility into, but it is -- I don't know what the -- you guys have the aspiration on that?

2037.

It's a lease that expires in -- so I guess another 14 years or so to run. And so therefore, that will be up to them. But the lease is intact, and we think the building is in good shape.

And thank you. And one moment for our next question. And our next question comes from Tom Catherwood from BTIG. Your line is now open.

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 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 -- whatever pause that we saw by tenants got sort of spooked in the fourth quarter with rising interest rates and threatening recession environment and things like that, and they put their searches on hold, that explains kind of the leasing slowdown. But then we came out of it pretty strong. We certainly did in our portfolio, 500,000 square feet in the first quarter, I think, is a significantly -- is a significant print. And I think the growing pipeline is both tenants that have confidence in their business, clarity 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. So we're seeing it both in the small, medium and large tenant marketplace. Financial -- then add to that, financial services, the private equity, hedge fund world still continue to be a driver on leasing. And we're seeing up and down Park Avenue, a lot of demand. I could have easily rationalized another 500,000 to 600,000 square feet of pipeline -- 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. And so I think that's a good harbinger as to where the market's headed.

I appreciate that. Thanks, Steve. And then kind of focusing on a specific asset here. You moved 2 Herald into the redevelopment bucket this quarter. You've talked about WeWork leaving 180,000-plus square feet 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 redevelopment opportunities for the asset right now.

And thank you. And one moment for our next question. And 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 percent, 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? And from your experience of managing overall tenant risk, is there a particular industry mix you envision for the portfolio?

I think our -- yes, I look at our exposure to tech as good exposure. I think it 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. 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 some...

Bloomberg.

Bloomberg, Median Tech over at 919, they expanded, I think, last year, if I'm not mistaken.

Big footprint.

So I think in general, one, I think we have marginally less exposure to tech depending how you define tech than most others in the city. Although we'd welcome more, and we think that 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. 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 solely to marketing like in many other smaller markets around the country. So 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. So, there hasn't been any material showings to date of concern over bodies in the tech world. And even if they -- there is some trimming there, it's been equally made up for by finance and business services. So I don't know if that answers the question, but I think tech has been -- I think tech will grow again. They're going through a rightsizing right now as everybody does after the tens of millions of square feet that they consume in Manhattan. And once that rightsizing occurs, I think growth will happen again, and they'll be -- they're here to stay, and we're excited by that.

Okay. And 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, what I termed over anxiety. We've been -- 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. So we've been here before. This hands a lot of the rhythms of what happens first, the narrative, then the debt markets frees up. Then there's little shoots of deals, generally smaller ones first, bigger ones later. And the market, by most standards, I would consider this 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, rates are much higher than they were, but on absolute terms, they're still relatively low. And lenders seem to be working, by and large, with their borrowers to extend in situations where good borrowers, good properties need another year or two or three to ride things out. We're -- sometimes where there's a servicer, sometimes where there's lenders, sometimes where there's borrower. So we see that as a trend. And so I can't really respond to how people -- what people are pricing and what they're not. But I do think the battery of headlines, the doom and gloom, the pessimism, we think, is overblown just based on our results and our pipeline. I mean that's -- our business is sort of a simple business at the end of the day. We buy space or develop space, we improve it to best of class or as high as we can and we lease it to users. And between that, which we've leased and that which we hope to lease in our pipeline, we think we're getting things done. And hopefully, the debt markets will start to fall a little bit. And once it does, I think you'll see things snap back quickly.

And thank you. And one moment for our next question. And our next question comes from Blaine Heck from Wells Fargo. Your line is now open.

Great. Just following up on the asset recycling front. Is there any color you can give on the pricing of some of these 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 going to go through pricing, asset by asset. That's -- we're shooting for best execution. We think everything we set out for in the year is very reasonable. I would say, historically, yes, 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 pretty attractive levels. I mean, we've all been doing the rounds traveling domestically and overseas. There's a lot of interest in New York City. I don't know if that's something that the market definitely feels or appreciates. But 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 good entry point. We've got reasonable expectations on everything that we're looking to accomplish. We don't set unrealistic expectations. We set things where we think our market clearing levels and it's up to us to execute.

So following up on that, Marc, 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, wealth funds and maybe private equity.

I'd rather do it with when the deals are done. There's no reason to spec. I mean, we have a firm handle on where we think that market is. So let us go execute and then it'll all be illuminated.

And thank you. And one moment for our next question. And our next question comes from Derek Johnston from Deutsche Bank.

And I guess this may be for Andrew. Can we get a sense of the mark-to-market value, or perhaps fair value of the PPE book? And secondly, what percentage of the loans in the book are coming due over the next two years?

I mean, Derek, in terms of mark-to-market, I would say it's our carrying value for the loans. We make that evaluation with the accounts quarterly. The DPE book, obviously, as you know, is paid down pretty significantly to a couple of large positions, 625 being -- Madison being the largest of it. It's residential and office assets. And the -- the second part was -- value, and then what did you say?

I was hoping to just understand, given this environment, what percentage of the book is -- or the loans are coming due over the next two years?

There's a maturity table in the supplemental, Derek, that has all of the maturities, most of them.

I mean it's all short term.

Short term.

DPE has always been a short term, so one to three years. So I'd say over next two years, the majority will.

Yes. We have one large pref equity position, which is February 27. We have a $20 million residential position, which is December 29 and then the balance are in the relatively near term.

And Derek, it's Matt. I just want to make -- expand on the mark-to-market question. Accounting doesn't require us to mark-to-market the 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.

And thank you. And one moment for our next question. And our next question comes from Tayo Okusanya from Credit Suisse. Your line is now open.

Yes. Good afternoon, everyone. Thanks to all the color around just 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, 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 from alternative source of capital. Like can you just kind of help us think through what Plan B would be?

Tayo, we're focused on Plan A. The skepticism in the market is like evident on this call. It's -- I mean, we feel like we're going to get stuff done. So I mean, sure, there's plan B, Cs, where. But I think what you're hearing from us now is we're going to -- we've got -- I mean it's not like -- I'd say we have eight months, but we have whatever time we need. I mean maybe we'll get this stuff done in the next three or four months, five or six months or eight months, it could be nine months. But whatever it is, we have premier assets that have a lot of institutional, domestic and foreign attraction. And we're keeping them well leased. They're highly improved. And what you're hearing from us is there's a market for that. And it's up to us to go out there and do it. So we'll do whatever we have to do to get things done. And that's where we're going. But when you say a plan B that sort of implies that there's no plan A or plan A, doesn't -- and that's what we're focused on right now. So 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. But we're very simple about this. We have certain assets we're going to 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. And then I think we have one financing. Is it just I mean it's just one financing, which I said in my commentary, we thought it was imminent. So I can't really give more color than that, other than that one financing, I think is imminent. So there's no plan B for that, but let's -- yes, we'll regroup in three months, and we'll give you a further update on these things. Hopefully, we'll have a couple of announcements between now and then, and we're going to keep going.

And thank you. And one moment for our next question. And our next question comes from Peter Abramowitz from Jefferies. Your line is now open.

I just wanted to ask about 919. I know you probably can't speak in any detail, but I guess, how is the pricing kind of coming out relative to what you were expecting?

Well, that sort of goes back to the question I was asked earlier about [Technical Difficulty] pricing. As soon as we have something to announce, you'll have the announcement in the press. 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 we wouldn't do it now. There's no reason. But as soon as we announced it, which is imminent, you'll have the press.

Right, but I guess curious to kind of what you're planning for and what you're hoping for. I don't think you have to give a number, but relative to -- have you learned anything through the process relative to what you've done in the market before? I guess the question that getting what we plan for.

I'd say if we have a successful conclusion, then what will learn or reaffirm is that for good sponsors, good assets, good locations with relatively low LTVs, there's a market to consummate that deal. Yes, I would say we've learned that. I'd say that we just maybe be confirmatory if we can get that done.

Sure. And then I guess just in general, how are lenders thinking about LTV in general, just over the last...

The lenders are probably in about 5 to 10 percentage points from, let's call it, the peak of the liquid market. So much more in that 50% to 55% LTV range.

And thank you. And one moment for our next question. And our next question comes from Ronald Kamdem from Morgan Stanley. Your line is now open.

Great. A couple of quick ones. So the quarter had a lot of sort of moving pieces. The $0.29 judgment proceeds, $0.10 in loss reserves, you mentioned in the press release that it was $0.13 ahead of expectations. So, I know you don't really update -- haven't commented on updated guidance. But is there -- 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, about all these moving pieces and how that changes your views or doesn't change your view, if at all? And should we view this as sort of a $0.13 raise essentially?

So, let's talk about the quarter real quick. We had a couple of things we highlighted in there. The resolution of the situation with Victoria's Secret is a huge win, a huge positive. 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. So, your net three 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. So all that said, we were ahead of our expectations for the quarter, but we give a $0.30 range for guidance. So we sit within that range. We're still watching very closely the forward curve. We only have 10% -- less than 10% floating rate debt at this point. So it's not as impactful, but we're very focused on it. And so that's why we keep our range as wide as we do when we launched the beginning of the year. And three months in, we're not going to touch that. We'll reevaluate in three months.

Okay. But 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?

That's what ranges are for.

Keeping the whole range.

All right. So the next question was -- I had a question on 919 3rd Avenue as well. But maybe 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, LTV? I think you touched on a little bit before, potentially more collateral. Just any sort of color on what the environment looks like and how it changed over the past month or two would be helpful.

It feels like we're sort of the same territory. But look, banks had breakout earnings earlier this week or last week. So yes, I think it's all iterative. First, the leasing is a big -- I think it's going to be a big help. I think the fact that the banks -- at least the bigger banks that provide a lot of liquidity, at least here in Manhattan for Manhattan deals, having a big top line is very positive. And I think eventually, in not too distant, they'll be back buying the AAA, AA, all the securest tranches of the debt. And I think the liquidity drives up quickly, it comes back quickly. We've seen it just time and time and time again. So it's going to change weekly. But the only thing I can say to you is you look for trend direction is, I think it's headed in the right direction. Hopefully, we've seen the worst of the pause. And I do think as deals get done, they set marks. And then more deals get done, before you know it, we're back to an equilibrium market. So 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 sneak one quick. And 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?

Well, I mean, look, we're -- as I mentioned on the call, there's really no update from the last call, which I think is mostly what you're asking about. But we are 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 to everybody's benefit. Everybody. Businesses, residents and Broadway would benefit from the type of multibillion-dollar development that's planned us in conjunction with Caesars Entertainment and Roc Nation. It would be an enormous catalyst for revitalizing and reinvigorating what's New York, and I'd argue the world's number one most important tourist destination. And 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. And I feel we're in a good position to compete for one of those three licenses. Now where the process stands, we are -- we've in the process of the request for applications, questions were submitted. I want to say, back in February. And we're -- I think everyone is awaiting state feedback on next steps. I think we're going to take one more.

Well, I'm actually showing no further questions. So I would now like to go ahead and turn the call back over to Marc Holliday for closing remarks.

Okay. Well, I want to thank all of you who made it to the end here of the call, and looking forward more than most you on the call the next three months from now. And hopefully, a lot of what you're hearing now will be able to speak about it in more detail then, and appreciate the continued support of our shareholders. Thanks.