Marc Holliday – CEO Matthew Diliberto – Chief Accounting Officer & Treasurer Steven Durels – EVP and Director of Leasing Andrew Mathias – President.

James Feldman – BofA Merrill Lynch John Guinee – Stifel, Nicolaus Ross Nussbaum – UBS Vincent Chao – Deutsche Bank Steve Sakwa – ISI Group Brendan Maiorana – Well Fargo Michael Bilerman – Citigroup Alexander Goldfarb – Sandler O’Neill Tayo Okusanya – Jefferies & Company Jordan Saddler – Keybanc Markets Brad Burke – Goldman Sachs Vance Edelson – Morgan Stanley.

Thank you everybody for joining us and welcome to SL Green Realty Corp. Third Quarter 2014 Earnings Results Conference Call. This call is being recorded. At this time the company would like to remind listeners that during the call, management may make forward-looking statements.

Actual results may differ from the forward-looking statements that management may make today. Additional information regarding the factors that could cause such differences appear in the MD&A section of the company’s Form 10-K and other 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 SEC Regulation G.

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 the company’s website at www.slgreen.com, by selecting the press release regarding the company’s third quarter 2014 earnings.

Before turning the call over to Marc Holliday, Chief Executive Officer of SL Green Realty Corp I ask that those of you participating in the Q&A portion of the call please limit your questions to two per person. Thank you. I’ll now turn the call over to Marc Holliday. Please go ahead Marc..

Thank you, and welcome to all of you that have dialed in today. It certainly goes without saying that the easiest and most enjoyable investor conference calls follow earnings releases of the type we posted yesterday.

On many levels the quarterly and year-to-date results illuminate the underlying strength in the New York City economy and the way in which our active management of portfolio and value-add investment strategy is continuing to pay off for our shareholders.

We are generally on or ahead of plan with respect to our core operating metrics and at the moment market fundamentals appear to be improving on an accelerating basis.

Demand for commercial space and resulting office leasing activity in our portfolio and the market at large should really not come as a surprise to those of you who have been dialing in to our calls through the year. We have been emphasizing three major factors contributing to a positive outlook that we’ve maintained on prior calls.

First and foremost is the continuation of a robust job creation environment. Important data shows that New York City is on track for the fourth straight year of plus 2% job creation with 85,000 private sector jobs added just year-to-date.

Notably over 25% of such new employment is in office using job sectors like professional and business services, finance and the [TAM-E] sector. This equates to nearly four million square feet of incremental demand and the year is obviously not over.

A second major leading indicator foreshadowing our substantial leasing results was the extensive pipeline of deals that we discussed throughout the year on prior calls.

Even as our buildings are trending towards full occupancy, we still have 1.1 million square feet of leases in current pipeline of which over 700,000 square feet are either signed or ready in Q4, out for signature or pending in negotiation.

The third significant factor driving space absorption is the relatively limited amount of near term new supply that will be delivered to the market over the next two years.

While larger tenants of 500,000 square feet or more are planning for their space needs many years in advance the bulk of the market is made up of tenants below a 150,000 square feet and focusing mainly in the affordable commercial rent part of the rental spectrum and generally making leasing decisions within a much shorter time frame which bodes quite well for falling vacancy rates through 2016.

Above average job creation and limited near term supply should sustain double digit mark-to-market rental uptick on expiring rents and combined with the debt of SL Green’s leasing pipeline will drive growth in net – operating income now and we think throughout 2015 and on from there.

These were just some of the topics we will delve into in much more depth at our investor conference in December but I wanted to highlight these items in particular here today I believe that our announced results are not an indication of a change in direction of Manhattan fundamentals but rather a continuation of a steady and protracted recovery that began approximately four years ago.

With that we wanted to get right into the Q&A but we – as you noted in our press release last night we did raise guidance.

So before turning over for Q&A we want to have Matt go through some of the major items and components underlying that guidance change and before turning it over to Matt I also want to note that this past Monday the planning department certified that the application for 1 Vanderbilt is complete and ready for public review to the ULURP clauses.

This is a seven month statutory review process that should conclude in May 2015 and we have full intent and hopes of concluding that ULIP process with the issuance of a special permit to go forward with the 1 Vanderbilt development.

So that quite an exciting moment for us after two years of work and design and predevelopment and environmental impact to get to the point of certification. So with that said let me turn it over to Matt..

Thanks Marc. As Marc said we announced last night we have increased our FFO guidance for 2014 to $6.06 to $6.09 from our previous guidance range of $5.90 to $5.96. We are giving [inaudible] related to the $300 million refinancing of 420 Lexington Avenue. This equates to a new NAREIT defined FFO guidance range of $5.82 to $5.85.

The increase in our guidance range is a result of continued strong performance in both the real estate and then preferred equity portfolios through the first nine months of the year and our outlook for the remaining few months.

In Manhattan our leasing volume is on track to meet the 2 million square feet objective we set out for the year, while the mark-to-market that Steve and his team have been able to achieve is well in excess of our original expectation.

From an earnings perspective the 280,000 square foot lease renewal of [inaudible] provides a meaningful benefit to 2014, given its significant increase in rent which will be straight line to earnings starting now and the leasing commission that we recognized in the third quarter.

The additional revenue from our Manhattan leasing activity is coupled with the operating expense savings we have realized as a result of more moderate temperatures in particular in the third quarter which is traditionally high expense quarter and the continued cost containment measures employed by our operations team.

In the then preferred equity portfolio we saw the balance strength in the third quarter as we received the repayments we projected.

However our new investment activity has been brisk and resulting in an average balance that has trended above our initial expectations throughout the course of the year and more significantly the yields we are achieving on new investments remain in excess of the 8.5% that we originally estimated.

Looking to the balance of 2014 we have a pipeline of debt and preferred equity activity that we expect to close in the fourth quarter but we will also be keeping our eye on repayments in particular one large investment which could potentially repay this year.

On the corporate side with our second investment grade rating which we obtained from Fitch a couple of weeks ago and an attractive treasury yield we will closely evaluate the opportunity to raise more efficient corporate capital to replace higher cost legacy debt.

As you have seen in the first three quarters sometimes these refinancings result in one-time charges. With that brief summary of our guidance revision I want to remind people that our investor conference is being held on Monday December 8 in New York City.

To be added to our email distribution you can email us slg2014@slgreen.com we expect to get invitations out over the next 24 to 48 hours. With that I will turn it back over to Marc..

Okay, thanks Matt and operator we’re ready to open up the lines for questions..

All right, great. (Operator Instructions). Our first question here comes from Jamie Feldman from Bank of America Merrill Lynch..

Hey thank you, good afternoon.

I just hoping to get some more general color on the leasing market, what did you see this quarter that picked up so much and what are you seeing going forward?.

Hey Jamie its Steve. We really saw a continuation of much of what we have seen from the beginning of the year. Just to remind everybody we ended very strong last year.

The market overall last year was a very good year almost close to a record setting as far as velocity goes and that momentum carried through the holiday and certainly didn’t slow down over the weekend.

I think the differentiator between what we are seeing today versus a year ago it’s not just the story about the lower end of the market as far as price point goes but it’s a story about big block deals being 100,000 square foot leases or larger, it’s a story about the high end of the market coming back with a greater number of $100 rents being achieved today than we saw in last year and we continue to see good demand across the board from a wide range of businesses, whether it’s financial services, law firms, accounting firms, business services and Jamie the whole advertising media information services sector is not slowing down by any sense of the imagination.

So it feels like we’ve got very strong momentum that is going to carry us through the balance of the year and going into next year very strong..

Okay, and then I guess to follow-up.

How much are you guys impacted by the change in oil prices in terms of operating cost especially in some of your older buildings? Will you see a benefit from that?.

On the margins we may see a benefit we do pass through a lot of our expenses so whatever benefit we would see is going to be shared with the tenants as well..

I mean clearly the common area charges, it’s really question of where do we see the utility rates headed as a result of the oil drop. And I don’t know if you have an update in yet to make a statement on that. We are in the process of locking in electricity rates for next year and it’s a very good time to do it.

So I think in the summer we didn’t lock in as much as we usually did with the hope that prices would retreat a little bit on advice from our consultants which turned out to be fortuitous because oil has gone down and the price of electricity is we feel close to bottomed out, so we are locking in a lot of those contracts..

Okay great, thank you..

Okay. Our next question comes from John Guinee from Stifel..

Great couple of questions.

First, when you guys are looking at your mark-to-market, if it’s say 10% on a gross basis what is it on a net rent basis? And then second what sort of effect to your NOI that you see from the inevitable property tax increases given a variety of things that are happening in Manhattan?.

Well, let me answer the second question and then we’ll come back to net to the extent we have that number at our fingertips. But the increase over the past probably five or six years I am going to say have been quite substantial.

The mill rate has not increase all that much but our assessments have grown significantly and those increases are phased in, I think typically five years or so.

So the property tax increases we are going to see over the next couple of years are really baked in from years prior at the transitional amounts coming to play but in terms of going forward I think that whatever property tax increases might come into play in future years that they may not be as targeted on the commercial sector as they have been in the past because I think commercial has borne well more than their fair share over the years and we’re hopeful and we’re obviously supportive of efforts to try and have a more equitable allocation of those real estate taxes among all property classes not just commercial so that if there are increases going forward that they would not be any more than they have been in the past and our hope is actually that they will be quite – the increases would be at a much lower rate than in recent past.

So we don’t see that at the moment as an area of risk or unanticipated increase for the company but we’ll keep our eye on it and we actively are involved in trying to make sure that the taxes for our buildings are fairly assessed and reflective of the capital we have to put into it and they can see that do occur from time to time.

So I think we’re okay on property taxes for now but we’ll see what ‘15 brings next fiscal year. As to the net recall that when you are comparing the gross rent on a newly signed lease we’re comparing it to the escalated rent on the previous lease.

So those escalated rents do reflect all the expense increase over let’s say a period of a 10 year lease, that reflects 10 years of expense increases.

So I think it is a proper comparative to look at new gross rents to old escalated expiring rents and look at that delta as reflective of the true real not nominal but real growth in rents, lease over lease for that particular lease.

I can’t necessarily extrapolate for the rest of the portfolio because you just dealing with the sample of leases expiring in any one given quarter but for those leases I think the 17% increase that we posted for this quarter is accurate in terms of where the older leases as escalated for expenses had risen to. Is that okay thank you, John..

Great, perfect. I will get back in the queue. Thanks..

Okay, we’ll speak again..

All right. Our next question comes from [Nick Urico] from UBS..

Hey its Ross Nussbaum here with Nick.

Two questions first is what prompted the decision to sell 180 Maiden Lane versus going through the lease up process and monetizing it after that?.

Well it’s Andrew, Ross.

The short answer is the offer that we received was in our valuation too attractive to hold on to the property and go through the redevelopment because when we ran our financial analysis on the building the capital that we were going to invest and the rents that we projected receiving when we value the building somebody just frankly offered us more than that value.

So we saw an opportunity to take that capital, redeploy it into a higher yielding deal on our valuation and to build Tower 46 on 46 Street and decided to pull the trigger on the sale..

Yes we’ve gotten that question Ross couple of times and I think our shareholders want us to think like that. I mean that’s our – our view is we redevelop a lot of property and it’s sort of easier to just go with the plan, if you will and spend the money and hope you hit the market right but we are in the business of optimization.

That’s why we sell at all forget about why 180 and why sell at all, it’s to basically optimize profits, reinvest in higher yielding deals that we see out there and then do it again and again and again. So we are not really married to any particular deal, 180 Maiden we thought was an excellent property.

I think it will lease well and I think the redevelopment plan we came up with is a smart one that will appeal to this market. With that said we saw less chance of rental uptick on the upside coming out of 180 which had we thought a $45 to $50 price point versus Tower 46 which we think has a price point that that is $90 to $100.

So higher margins, we think higher opportunity for lift in a rising market but 180 is a good building, it’s a good redevelopment plan and we think the buyers will execute and do well. It’s just doing well unfortunately this market for us is not enough, it’s doing – I think that was the, as Andrew that said beauty to the trade if you will..

Okay, I am sure you saw that NYRT is evaluating options.

Do you guys have any thoughts on that one?.

Nothing in particular that we would speak about, just couple of the properties we know well in that portfolio and I would say we get our interest like any other situation would, but nothing more notable then that to discuss..

Okay, I think Nick has a quick one..

Yeah, I just want to go back to the 2 million leasing goal you have the year. I think there was a couple of hundred thousand budgeted for 180 Maiden.

So if you are saying that you still going to feel good about hitting the 2 million leading goal and on reality are you surpassing your goal for the year now?.

Well, is that question to Steven Durels or the rest of us?.

Let me answer it, just let’s not get ahead of ourselves..

Let’s take a vote who says we don’t move the bar on 2 million feet. The show of hands around Nick is unanimous that we keep the bar 2 million feet notwithstanding the reduction of the couple of hundred thousand feet of 180 Maiden..

Just like affirm it’s a quarter of that..

Okay. Just and Steve you mind just providing a little update of 280 Park and Harbor [Column]. Thanks..

Sure, so, 280 park we just closed a couple of small to medium size deals over at the building, one of them was a 30,000 square foot lease for part of the 14th floor with a starting rent of $120 a foot. The capital project is at this point I would say 90 plus percent complete.

We are about ready to open up the mid-portion of the lobby which is – we haven’t been over the building recently is really dramatic space, I think it’s coming up better than any of the [inaudible] that we have shared with people. And we have a large lease that’s in negotiation for about 125,000 square feet.

So I think we are going to end the year very strong on that building at rents that are at or above underwrite. At 10 East 53rd Street the redevelopment work is flying. It’s really going fast. All the windows have been replaced.

The building’s façade has been recolored, the lobby is on track to be completed close to the end to the year, maybe early next year. The tour activity has been very strong. We have got leases out on our four floors which puts us four floors ahead of expectations.

I really don’t think we’d do any leasing into early next year because of the size of the tenants and the rents are on top of our budgeted numbers. So we are feeling like we are in a really good spot with that building. We got a tremendous feedback from the brokerage community..

In deference to those winning patiently in the queue we are going to have to go for a ruling on whether two people from the same firm aggregate to four questions. We will come back with that ruling shortly. But thank you and next question, operator..

All right. Our next question comes from Vincent Chao from Deutsche Bank..

Hey, yeah, good afternoon.

Just wondered if there is any additional color you can share with about the announcement from this morning about the Brooklyn site?.

Sure, we purchased in partnership with Kushner organization and entrepreneurial Brooklyn operator called the LIVWRK which incidentally there was some confusion is not the same as We Work. This is a business that buys and renovates buildings in Brooklyn and it’s a not fractional office provider.

So there is no fractional office plan at the site as of now just to clarify any confusion. It is a prime site in Gowanus, which is an area we have heard from a lot of retailers we speak to, is sort of very target market for them. So we have an enormous amount of bulk.

It is a very large site and the existing zoning, we have a very interesting as of right plan and a potential upside plan if we do decide to take the site through we can a rezone.

So we are going through those discussions internally now and sort of deciding what ultimately how much bulk we want to put on the site but the development there will be retail-oriented primarily and then there are interesting commercial and residential opportunities combined with community uses for the building depending on how much bulk we put on the site..

Got you.

And just on the [inaudible] side of things I mean do you have a general sense of the size of the development in terms of dollar value?.

It’s 280,000 square feet as of now, so you will be looking at a $150 million to $200 million development as of now..

Okay, thanks.

And just one question on the ULURP process you mentioned the seven months process at 1 Vanderbilt, is it just sort of radio science for now until then or is there other benchmarks we should be looking for between now and May?.

Well, this is the seven month is the beginning of public process.

So this project will be reviewed by the community boards, department planning, planning commission and ultimately the city council as well as other stake holders like [inaudible] I think you will see a lot of discussion and the discussion has been extremely positive to-date from all different constituencies, [inaudible], the labor unions, community and city administration, so I think you will see a lot of discussion and but it will be basically presenting more formally that which has already been presented..

All right, great. And just as a reminder folks please limit your questions to two per person. And our next question does come from Steve Sakwa from ISI Group..

Hi, it’s just one person, I’ll just ask my two questions..

Hi..

I guess for Steven Durels, could you maybe just comment a little bit about sub-market performance, kind of you are seeing the greatest demand in terms of the portfolio? Where are you seeing the best pricing power, is it kind of the Midtown South, is it Grand Central, is it the 6th Avenue Corridor or just as you kind of look around the portfolio where are you seeing the best rents?.

Well, a couple of things you know the Midtown South Corridor is still on fire, lots of demand but still too small to really satisfy the overall market demand. I think the rent stay higher there because more over stock of building are going through repositionings.

But I am not certain there as time goes by that market is going to continue to escalate with rental growth beyond where the market kind of top outright now maybe go a little bit but I don’t think it’s – we are not going to go from reposition building being at $80 a foot to the average being $100 rents.

I think there is a lot of Midtown rent growth that’s going on right now.

We have seen good demand in the Grand Central sub markets, there was a lot of commentary at the end of last year that Grand Central was particularly slow, and there was a lot of inventory that hit the market last year on Sixth Avenue and we said at the Investor Conference a year ago that our feeling was that both those sub-markets would come back strong this year, in fact they have.

Sixth Avenue has sort of returned to its historical norm as far availability and there has been a lot of deals in the Grand Central area.

The renewal that we did just a couple of weeks ago extend the Schulte release for 300,000 square feet I think is a very good testimonial to the fact that tenants still want to be on the East side, they still want to be in Midtown and they are willing to pay rents that are commensurate with some of the best buildings that are out there.

So I think as an opportunity and an expectation as to where there will be more proportionate increase in rents I think it’s going to be the Midtown and the East side of Midtown in particular over the next 12 to 24 months..

Okay, and then I guess Marc just in terms of kind of looking for opportunities I know the market is highly competitive as you kind of look over the next year, do you think the best opportunities will be in residential, retail or office? I mean are you focusing on any particular area or do you feel there are more opportunities in one versus the other?.

Well, I would say two things first, I would think going forward we’ll have to look and feel very much of what we’ve done this year, which was quite voluminous, we think in many cases quite opportunistic but also quite varied, high ticket retail, down to middle retail, couple of big three big office deals and a little bit of resi, but some resi in pipeline as well.

So I don’t know that you’re going to see any heavy emphasis on one versus the other.

I’ll have to say generally our experience has been and probably continues to be that pound for pound if you can buy the right retail projects at, not a reasonable cost because there is like nothing reasonable but at a cost where you can make your returns with a potential to make outside returns by working the tenancy more aggressively than your pro forma that’s where the largest mark-to-markets are.

So while office is great, office rents have been up for us about 15% mark-to-market over expiring leases. Retail rents you can generally measure as a 100% of more mark-to-market, when they expire for the kinds of deals with low embedded rents that we’re finding.

So those are probably on average the highest return deals that we’re buying today but that doesn’t mean the other sectors that we’re focusing on aren’t also high returns in themselves with debt and preferred equity being a good example of that, the portfolio originations for the quarter were in excess of 10% return on core product in New York City and that is something that we continue to have fairly high volumes originations, such that the balances at the end of the December are likely to going up above where our current balances were at the end of the third quarter..

Our next question comes from Brendan Maiorana from Wells Fargo..

Thanks good afternoon.

There certainly been a very – even the bids for assets in the city, particularly office have accelerated through the this year, lots of foreign capital and even seems like maybe JV deals are priced as aggressively or even maybe more so in some cases then simple outlet sales which seems like a sort of fits right in the wheel house of what [inaudible] does well.

So how do you guys think about maybe monetizing some additional assets, do you feel like maybe look to do more given the strong bids for prices?.

In terms of fee versus leasehold?.

No just overall answer it just in terms of thinking about where – how prices have accelerated this year, do you think about monetizing more to harvest some of the gains that you have within the portfolio and then maybe realize some of the embedded growth in the stock price relative to NAV?.

I think we’ve had a very active year on the sales front and I think you’ll see that continue in the fourth quarter. It is definitely our intention to monetize some of the value we’ve created in some of our longer-term holds and a couple of our shorter term holds. You’ve seen us putting some very large gains thus far this year on our sales.

We still have the sale of 2 Herald closing in the fourth quarter and we intend to keep selling. We’re just limited in terms of taxable gains and our goal which has been to retain as much capital as possible..

Yeah there are different philosophies out there about what you should be selling into this kind of market. Our stated philosophy has been this way for many, many years has been in this kind of market the cap rates for non-core and core compress to where they’re almost on top of each other.

So our view is that’s a bit of an arbitrage, in bad markets they gap out and cores maybe a 100 basis points or more inside of non-core but in a tight market they are on top of each other. So we like to buy core in bad markets and sell non-core in good markets.

And I think that for us we prefer to retain those core holdings, in some cases do joint ventures, to kind of optimize or maximize our equity but where we see core holdings that have still a significant amount of NOI upside whether it’s mark-to-market or re-development potential we want to keep as much of that for the REIT as possible and we’ll continue to hold those assets which we think have the highest ongoing earnings velocity but non-core profit has generally bought redeveloped leased and sold to act as our currency for future growth and that’s nothing new that I’m saying there.

That’s been our ammo I don’t think you’ll see any different in this market. So we will accelerate sales. Those sales will typically be of non-core assets, maybe some joint venturing of some of the higher quality core assets but we’ll have to sort of see how that plays out because we’re looking for cap rate differentiation to justify those moves.

But right now there’s not as much quality differentiation we see from that..

Okay that’s great, helpful.

And then just can you guys give some color on the Gem Tower in terms of timing of when you think you can stabilize the asset and then return outlook or yield outlook?.

Well, I think we’re pretty embolden right now by the fact that we haven’t even closed on the building and we already have two offers there on space. We’re expecting a third offer. The types of tenants that we’re showing the building to are exactly in line with what we expected, which are financial services and law firm tenants.

So I think we’re expecting to do more leasing sooner than what we underwrote.

We had a pretty sizable amount of downtime in our underwrite, given the fact that the building needs to be repositioned and really re-introduced to the market because it’s a bit of an unknown product to the brokerage community but I think we’ll probably have more on that hopefully by Investor Day to give an update as to progress made..

Hi, this is [Isaac]. Once that leasing is done I think the anticipated stabilized yields are in the low 6% range in our total return basis. We’re targeting IRR’s on this deal probably in the 12% to 15% range so that’s those are the expectations on this particular asset..

Great, thank you..

Our next question comes from Michael Bilerman from Citi..

Great good afternoon. Steve a question for you just on the Schulte lease with the tenant having expiration 2021.

I got to assume that they were out in the market place and I’m just curious if you can share a little bit how aggressive sort of Westside and downtown developers are in terms of targeting tenants, in terms of what sort of incentives they are offering and the improvement packages and then conversely and keeping the tenant and signing the extensions starting 2021 can you share a little bit about how the 73.50 will compare to what the fully escalated rent is in 2021 because I think the 73.50 charge then and $60 is in the stock is the current cash rent.

So just trying to understand how you thought about economics and de-risking out the future?.

Their rent will escalate a great deal between now and what would the expiration would have otherwise been because there are fewer pass-through on buildings operating expenses real estate taxes. So maybe it escalates another five or six bucks above the escalated rent today. As how the deal unfolded it’s pretty interesting.

It started with a conversation of hey one of our clients happens to be one of the partners on Hudson Yards and they really want us to move over there and we’re like, great let’s sit down and talk about renewal. And they went back and forth.

They looked at the market, they kicked the tires, they understood exactly the kind of deal they can make on the far West side and the partnership overwhelmingly voted to stay on the East side, and that ultimately what drove their decision and the economics were basically looking at where we saw the value of a big block of space which has a slightly different values versus smaller spaces in the overall market because the big blocks are tightening out and for a 3,000 square foot tenant we saw that as sort of high $50s maybe $60 rents today and then put on a growth factor over the next several years.

We netted up some of the concessions and ended at a starting rent of 73.50 a foot with $50 in TI and no free rent and we think that’s a very fair number.

Obviously tenants endorsed that but I think as if you stack that rent up against the deals that are being signed around town particularly some of them on the far west side or downtown and some of the newer product for delivery in 2020 or 2021 that 992 is a very good building and the rents reflect that value..

That’s helpful. And then I don’t know if Andrew or Marc can talk a little bit about 605 West 42nd in terms of the total construction cost and sort of the capital structure I think there is about a $540 million senior construction loan U.S.

50 and mez, I wasn’t sure if there was other sources of capital outside of just pure equity and how much equity is being contributed into the project?.

Sure this is David. This was a project that the Moinian Group’s owned for a long time. So when we invested they already had a couple of hundred million of equity in the deal. The construction loan is $539 million. About a 100 we took out existing land loan, there is about $430 million of hard and soft cost that are needed to complete the project.

We invested an additional $50 million in the deal really to cover any overrun in those GMP on the deal. So likely our money will only even be needed for the project, goes for more security. I think we got into the project well past foundation when they were already a couple of stories vertical.

So they are probably going to top it off in the next maybe 12 or so months, so it – we’re kind of well through the construction project we started and all of the equity was already invested..

And your 20% option cost you what in terms of further capital if you exercise it?.

Well we can’t give you specific number at this point other than to say we’ve negotiated for a kind of a present day number that escalates pursuant to a formula based on additional contributed capital and cost to a number where in the future we will have a look at kind of the final capitalization of the deal and the market at that time, and the leasing projects at that time and decide whether or not to exercise that option.

Sitting here today I would assume that option gets exercised because we think it’s a great deal Joe has been a very good partner for us, it’s a very good project it’s an ability for us to get a bigger footprint in midtown multifamily. With that said we really won’t cross that bridge for some time.

So there is really no decisions to make at the moment..

Thank you..

Okay our next question comes from [Jed Regan from Green Street Advisors]..

Hi guys. So you got the good pricing on 180 Maiden, in fact you were able to kind of shift your redevelopment focus there to another project.

Just wondering if that good execution kind of makes you reconsider the game plan for a project like 10 East 53rd and that sort of put a quick flip on the table for that asset?.

No, I think it’s a bit of an apples and orange comparison. The profile tenants that was going to 180, the rents that the market would support, the amount of capital had to be invested are two different animals.

10 East is a very high project quite essential boot seek building going to high priced tenants who are in a sub market where there is limited supply. So it’s a different repositioning exercise with an entirely different kind of redevelopment plan.

And if we could find three more 10 East 53rd Street I think we would be all over it’s a great, great opportunity..

It’s Andrew Joe I would just add [Inaudible] flip offers for 10 East 53rd which we have rejected. Again we see the returns on that project significantly exceeding the offers we received..

Okay that makes sense.

And also you guys and some of your competitors getting more interested in the outer boroughs and just wondering if you could see a Brooklyn or Queens becoming a material portion of your portfolio overtime or you think it’s going to continue to be just kind of smaller one-offs at this point?.

Well I think with $28 million feet Manhattan, I don’t know that was much of anything we could do that will become a material portion of the portfolio overtime but I guess the question of whether we are going to expand our footprint in other markets, outer boroughs Brooklyn in particularly Andrew could address that..

Yes I mean look we’ve had terrific success with our residential project in Williamsburg and our office building at 16 Court. So based on those successes we are definitely actively looking in those markets for additional opportunities. The scale of the deal size is obviously significantly smaller than Manhattan.

So both by dollar volume and by square footage as Marc points out I don’t think we are never going to get a critical mass say the structure finance program in Manhattan but we are definitely actively in those markets looking for additional opportunities..

Okay, thanks guys..

We have one, two, three, four more, five more. So we’ll take five more questions it looks like and try and end at around 3 O’clock because I know a lot of people on the call have a lot other calls they got to jump on to. So we try and finish up in the next 10-15 minutes with these next five calls..

Okay. And our next question comes from Alexander Goldfarb from Sandler O’Neill..

Great, thank you. Two questions.

The first question is, on 1 Vanderbilt, can you just comment on the $210 million of infrastructure that’s being discussed that you guys would fund can you discuss how this impacts the yield? Just because obviously you guys don’t get the tax incentives that the far West Side gets, so just curious how this affects the yield..

No that’s something we haven’t discussed yet and probably won’t be getting to that level of detail until after we know we have the approvals at the end of this ULURP process because it will be premature without the approvals, we don’t go forward with deal.

So I think step one is obtaining the approval, step two is we will talk about capitalization of project and then three will be far enough along we will have greater visibility into the rents and the projected rents that we will be able to pass along some return data.

But I can tell you that the scope of the MTA project is something we’ve been working on for quite some time and the cost have been included in the overall budget.

So it’s not something that adding to or taking away from our development returns it’s part of the project it’s known and it is there is a lot of complexity to the project a lot of cost and as you know there is no subsidy.

So we have to do this completely right but I would say to-date we feel like we have a great design it’s the right kind of transit oriented development sitting right next Grand Central station right at its doorstep essentially.

So we are very happy with the project we’re going to take it incrementally in terms of the kinds of questions you were asking..

Okay. And then the second question is, on the Gowanus deal, between the three partners, you guys obviously bring a lot of experience and financial. Kushner has a lot of real estate experience obviously. The LIVWRK guys, they’ve done the Domino Sugar site and the Mercedes so they understand that challenges of it.

Can you just help us understand how the three of you guys are going to work together? Is there one driving partner or is it all three working together, or each entity has a specific focus and capital contribution?.

I think it’s going to be a collaborative between the three I mean I think we are the dominant equity player given relative scale but in terms of day to day Rob Schiffer spearheads it from the SL Green side. And he is working closely with Jared and Asher on the development plan and you know we are going to approach it collaboratively..

Okay, thank you..

Our next question comes from Tayo Okusanya from Jeffries..

Yes, good afternoon. Just some news hitting the rides recently about JP Morgan considering moving to Manhattan West in the next few years.

Just wondering you know if you can kind of give us any color on that and what that could potentially mean for kind of classic Central Midtown if that happens?.

Well I don’t think we have any color then we could share with you on the JP Morgan’s intentions or they are not attendants of our about us or what ultimately happens there I mean Tayo every every significant tenant of size over the past three-four years has checked the tires on Midtown and Manhattan West, Downtown we went through that with 5 common city group as you may recall and you know time and time again I think it’s been shown that if you have the right building in the right location retained tenants we have done that very successfully so I don’t know what JPMorgan’s intentions are going to be or not going to you know what we have been what we have heard that is that if they were to pull out and relocate that’s something where the vacancy impact of that would not be felt until early to middle of 2020 it’s possible is 2025..

Okay..

For the full impact of their vacancy. So you are talking very long-term.

I mean I am really focused on four million square feet or more of net absorption over the next two to three years or so maybe we will [inaudible] 12 million square feet of demand over the next two to three years that hopefully is going to focused right in our real house and will always be you know sort of watching decisions and preferences about where they want to be but you have to assume by necessity if New York City is creating a 100,000 private sector jobs a year the city’s inventory will have to grow.

We don’t want to lose tenants.

So the question is going to be over the next five or ten years where can that growth can occur and then clearly each Midtown which is being considered to come back on the board to put to allow for more development in and around Grand Central as well as having options on the west side makes a lot of sense and we will see how that plays out.

But I think you should assume any big tenant of a couple of square million feet or more going to looking at very option in the city and sometimes outside the city..

That’s very helpful color. Thank you..

Our next question comes from Jordan Saddler from Keybanc Markets..

Thanks. I just wanted to bring it back to office fundamentals at Manhattan real quick.

Marc I mean you characterized this is recovery that has been taking place over the last four years and I can relate to that, I guess but the 15 plus percent mark-to-market year-to-date feels significantly better than kind of what we were led to believe might happen last December.

So it feels kind of like it’s surprise to the upside and I am just I am curious on thoughts in terms of how things are shaping up as we look forward or things just continuing to get better in our rent headed significant higher?.

No, I think our contention has been since the end of last year, yes.

There was – we saw one cycle of growth from 2010 to 2012 and then we kind of saw the second cycle – of and that was almost getting back to even let’s say you are getting close to even and then there is this second cycle of growth which I think you saw at the beginning of this year and we think will take rent to new heights you know next year and I don’t think there has an normally given that this growth has been steady for the last years, but you are seeing the mark-to-market now, because for the first several years you were kind of recouping losses and filling vacancy, remember office vacancy got as high 13%-14% now it’s down around 10%.

So a part of that growth was filling space and couldn’t really drive rent but when you start to get to rent 10% and clearly at 9% at the low then you will see that reflected in rent which are appropriate. I mean there has been expenses increase there has been cost of construction increase there has been valuation increase.

So I mean the fact that rents are finally catching up if you will in my mind is really nothing more than that, a catch-up to get back to normalized and I think you will see that this year and next and because we have some low embedded rents in our portfolio that is going equate to mark-to-market but on the demand side I don’t think we have seen a large year-to-year variation.

You are just seeing the effect of inventory getting to a point where the next effective rents can start to be like….

And as we look forward into next year you think we’ll cross the threshold back toward sort of more of the landlord dominant market sort of sub 9% vacancy?.

I don’t know about sub 9% but that will be a big move but I would say it’s sub 10% and that will be a healthy – I mean we are not looking for extraordinary rental moves.

People are underwriting that because remember we lend to a lot of these folks and we see there is a lot of people have some pretty lofty growth projections in their numbers, we try to be a little bit more restrained that.

I think it’s best overall for the city to have stead growth I suppose to spiking growth and that’s what we have experience to-date.

Hopefully that steady growth continues into ‘15, that is what we see, for the reasons some which I had communicated earlier and we are on track with that but if that changes I think we are the leading indicators to see when that change occurs and if so communicate that to shareholders.

But at the moment 2015 is shaping up to be what we think is one of the better years..

As a quick follow-up does the structure finance book is that exclusively focused on New York still these days or would you look to the outer boroughs or otherwise to sort of maintain the origination at these yields?.

And we do consider that as part of the New York, for the record..

[inaudible] this in New York..

We are sympathetic to all boroughs but I would say if the [inaudible] is billion well, no I think we own a very small retail piece of property in queens you know that will worth a couple of million bucks but so I would say the building outstanding the vast majority is Manhattan.

Yeah we probably have some positions, yeah a couple of positions spoken..

Okay, thank you..

Great. Our next question comes from Brad Burke from Goldman Sachs..

Hey guys, just one question follow-up on structured finance.

The investments that you made or yielding over 10% which is you noted better than the 8.5% you guided this to and this is not an environment where we are seeing the interest rates compress, we are seeing credit spreads compress so I am just hoping you give us some color how you are still able to get these really strong yields and whether we should expect it to stay near these levels on the new originations you are making going forward?.

I think the quarter was a skewed a little bit because the 605 was 42nd Street investment is an extraordinary yield and yield that was really reflective of us assembling that entire capital stack for the borrower.

We continue to take advantage of tightening debt markets on the senior side to level up our yields on the subordinate paper and that’s how we have been able to beat our estimates and our expectations a bit but overall the market has tightened and continues to tighten and we still think average of 8.5 going forward is reasonable in the right expectation..

I appreciate it, thank you..

Thanks. Okay, we have time for one last question operator..

Right. Our next question comes from Vance Edelson from Morgan Stanley..

Terrific, thanks I’m under the wire, could you just follow just following-up on the earlier question strength by sub-market could you give us some feel for the variability around the pricing on the 42 office leases signed at Manhattan, the 17% overall mark-to-market on replacement where they notably lower markets in some sub-markets maybe south of 10% being offset by even greater strength, maybe north of 20% or 25% in other or is it generally a tighter range than that throughout Manhattan..

It’s because the mark-to-market is really compared against the rents of the prior leases, escalated rents, I don’t think we can really comment as to whether it’s driven by sub market per se, just happens to be what you are dealing with for the last lease coming off.

It’s not particularly good as an indicator of the strength of any of the overall sub markets. I can tell you that my sense is where we have the greatest rent appreciation and no surprises where the rents have been beaten down the farthest, so Grand Central we’ve seen the rents are really good indicator of that, is the Graybar Building.

Graybar Building has now got availability of 1% for this building.

This building has got 300 tenants, with tenants that are leasing from 300 square feet to 300,000 square feet and the rents that we are citing today are the deals that are in the pipeline, I would say almost typically are $58, $59 starting rents as compared to a year and a half, two years ago, where they would have been $38 to $40 dollars.

So as a percentage increase Grand Central beaten down, Graybar being a good barometer and there are some hard [inaudible] to where we have seen, we have experienced rent appreciation..

Okay, that’s very helpful. And then just one last one on the structured finance.

Could you comment on the level of new debt and preferred equity investments brought on board, just a little bit lower this quarter than the past two anything driving that or is just naturally lump and do you think it could pick up going forward?.

I think it’s naturally lumpy and I think we’re probably ahead of where we projected to be at the end of last year. It’s just the nature of other people closing those deals kind of makes is lumpy. We have a robust pipeline and we are adaptable..

Great thanks..

All right, that’s all the time we have..

Thank you everyone and I guess we will – we look forward to seeing hopefully all of you in little over a month’s time at the investor conference. Thank you..

Great, that concludes today’s conference, you can disconnect and have a great day..