SL Green Realty Corp. (SLG) Earnings Call Transcript & Summary

Please welcome, Chairman and Chief Executive Officer, Marc Holliday.

Good morning, everybody. Come on, it's a good morning. Thank you for joining us this morning at the 2022 SL Green Investor Conference. It's great to see everyone here. Again, full capacity in person, not -- I think we're going to need a larger room next year based on what I'm seeing here. As always, we prepared for you a full engaging content presentation, recapping our year, looking ahead to how we're planning to attack the year to come and providing our best analysis of the broader market trends impacting our business. Last year, at this time, I talked about New York City's resilience and resurgence, a city that was on the comeback trail after 2 very difficult years. And in many ways, our hometown continued its upward trajectory this year with young people and tourists flocking back to New York and office using job employment actually reaching new highs relative to pre-pandemic. But 2022 was also the first year where healthy New York City economy didn't align with the health of the overall office sector, it was rapidly rising interest rates, escalating utility costs and persistent remote work patterns made for a difficult operating environment for us and all other New York City-based commercial owners. New York is a challenging office leasing market right now, characterized by high vacancy and tepid demand as the current uncertainty in the market has caused some tenants to hit the pause button. However, despite that, we had a very successful leasing year. We expect to finish the year with 2.4 million square feet of leases signed and same-store occupancy around 92%, a tremendous achievement that emphasizes the strength of the platform, quality of the portfolio, and commitment of our talented and market-leading leasing management and construction teams. The rapid interest rate increases we experienced in 2022 were disruptive to the real estate debt and equity markets. However, our well-located and fully redeveloped asset base meant that we were still able to source investors, refinance maturing debt and arrange for new acquisition financing. And we did it all on better-than-market terms due to our extensive relationships and our reputation for operational excellence. One might expect that the confluence of economic factors would be indicative of a market with weak on growth and high unemployment. But in fact, the labor market remains historically tight. Employers are still competing for a limited pool of workers and bidding up wages despite an uncertain economic outlook. So it was a year of contradictions, a year where we executed the business plan we set out to achieve but nonetheless didn't realize all of our financial goals due to the significant market headwinds and certain forces that were simply beyond our control. Given this environment, our achievements were truly remarkable. We executed to near perfection on our development and redevelopment projects meeting our major milestones ahead of schedule and under budget, signing big new leases at One Vanderbilt, One Madison and 885 Third. We made several strategic acquisitions to extend our commanding presence in East Midtown, far and away the best-performing sub-district in all of Manhattan. And we managed overall expenses to a 4% increase year-over-year, reflective of our tight controls over property operating expenses and a reduction in G&A in the face of inflationary pressures on wages, more on that from Ed Piccinch later on in the presentation. We introduced the world to New York's amazing new attraction, that is Summit One Vanderbilt and received a Michelin Star at our highly acclaimed Le Pavillon. We reached new levels in our efforts to be guided by environmental, social and governance principles that help us implement our strategy and be a responsible corporate citizen of this great city. We are proud to be Great Place to Work certified, signifying the strength of the SL Green workplace experience. And above all, we protected the balance sheet by maintaining liquidity, managing debt levels, hedging our exposure to rising interest rates, solidifying our global relationships as we continue to transition to an asset management platform. These results reflect the strength of our [ Fortress Holdings ] and the extraordinary work that the SL Green team has done over the years to narrow our focus to the very best buildings in prime Midtown locations. Despite these exceptional efforts, this market is challenging in a way that no one could have predicted pre-COVID. While office-using jobs are now 104% of pre-pandemic levels, there is no denying that day-to-day office occupancy remains stubbornly low, with most days hovering around 60% of pre-pandemic physical occupancy. The hybrid work model has persisted far longer than I expected it to as some business leaders continue to justify remote work as either a cost saving measure or an effective recruiting tool. Their actions to promote hybrid work models are putting extreme pressure on other employers to similarly offer work-from-home options in a self-defeating cycle even in the face of growing evidence that it lowers productivity and savages the work culture. Employees like to think that work-from-home somehow increases their productivity, while managers and business leaders clearly see the negative effects of a remote, disengaged and disconnected workforce and are now beginning to take affirmative measures to bring their workforces back together, back to the office. And as a potential recession looms in 2023, I expect a chorus of managers and business leaders to increasingly call on workers to put in a fulsome and physically present effort to maintain productivity and competitiveness and accelerate return to work. The good news is that every move we've made over the past 5 years has put us in the best possible position to navigate this moment in terms of portfolio quality, quality of rent roll, fully developed and amenitized buildings, selling risk, disposing of suburban assets, reducing our retail footprint, raising our average rental point, harvesting gains early on, partnering with global investors and shrinking our share count. All of those decisions were correct and will help us weather these current market conditions by focusing the asset portfolio on the most commutable locations in Manhattan that is without question, the #1 top criteria for tenants today. The expedited commute, ease of commute and proximity of commute. What I can promise you is that you are investing with the right people. We have a game plan. We will execute. There will be pockets of very significant opportunity coming out of this moment in time and we will emerge even stronger as we've done in the past. So what's our plan for 2023? First, we will continue to invest in our existing portfolio and continue to outperform an increasingly competitive market. With fewer companies in the market and downsizings occurring, the pressure to make buildings reflect what tenants want, what businesses need, commutability, high level of amenity and service is more important now than ever. We believe that we've hit on a formula for success that has helped set us apart and will be critical as we navigate the next part of this cycle. It's no longer enough to simply be a good property manager or a good landlord. That's a foregone conclusion. Our primary mission now is to create safe, healthy, sustainable spaces that enable companies to build human connections, fostering creativity, ingenuity and productivity. Now we must also be providers of exceptional experience, extraordinary hospitality and elevated food and beverage offerings. We innovated this strategy at One Vanderbilt creating a hospitality program that literally runs from the basement of Grand Central to the top of this iconic tower. With the opening of Joji this year, Le Pavillon, [ La Teras ], the [ VandyClub ] and of course, Summit at the top, One Vanderbilt is a model for fully integrating hospitality and amenity in every corner of the building. It is an office leader, an international tourist magnet and a regional-global culinary destination. We prove that this works by fully leasing One Vandy through the pandemic, and we're taking it now to the next level at One Madison. This morning, we announced a new partnership with Chef Daniel Boulud to bring an exciting new French [ market ] and a stylish new steakhouse to One Madison. These new offerings are in addition to the incredible rooftop venue, private dining, a leading-edge health and wellness facility from Chelsea Piers and an exclusive tenant lounge. These aren't just nice amenities for tenants, they represent leading-age curation of experiences that attract New York's best businesses and generate incremental revenues to support the added cost of these great features. Looking ahead to '23, we will take the same approach across more of our portfolio, upgrading existing buildings with the same level of amenity and hospitality we're bringing to our new construction. The industry will ultimately be better off as the post-pandemic forces have caused us yet again to rethink what makes for a successful office building and take the steps to ensure that we are pursuing strategies to achieve highest and best use of build space as we diversify our portfolio. One focus of that effort is the thinking about the levers that the state and the city have available to help alleviate the current oversupply of office space while also addressing New York's dire shortage of affordable housing. An effort is already underway with our industry partners to create a new blueprint for the conversion of existing office to residential. The blueprint must be both physically and economically feasible. So as to incentivize and allow for conversions of tens of millions of square feet of office to residential dwellings and to do so on an expedited basis to help address an ongoing housing crisis. We believe in New York City's future, we expect it to continue to grow as the leading center of culture, entertainment, business and education. But this growth means that we will have an almost endless need for more affordable housing, a need that will hamper our growth, if not addressed quickly and intelligently. Governor Hochul's upcoming state budget plan will be much anticipated in January as she promised a bold and audacious agenda to target zoning policies and other obstacles to implement a coordinated strategy for the increase in housing production. We support her efforts and those of the Adams' administration to create a new framework for transforming obsolete office buildings on the periphery where commercial districts meet residential neighborhoods to create new housing in about half the amount of time that is required of new construction, a 100% win-win-win situation. We'll have more on this later in this presentation. For us, though, the biggest example of thinking outside the box about our assets, which we briefly previewed to you last year is the pursuit of a full gaming license in Times Square. Times Square is a microcosm of the potential in the challenge facing New York City in 2023. Over a period of decades, the public and private sectors work together to transform Time Square into a family-friendly entertainment mecca, a transit-oriented tourist destination and a bustling office district. But the pandemic has taken a significant toll as the neighborhood is now struggling with safety and sanitation issues, we've seen major office and retail tenants leave, and there is a real risk of regression if we do nothing. We must put a strong plan in place for a better Times Square. We believe that a world-class gaming, entertainment, hotel destination in the heart of Times Square, frankly, our building at 1515 Broadway can be the catalyst for revitalizing and reinvigorating New York's and the world's #1 most important tourist destination. We will go into much greater detail about this later this morning and our casino proposal and how we've teamed up with the best names in the business, Caesars Entertainment and Roc Nation in an effort to make the entire district more inviting, exciting, accessible and fun. This is just another example of SL Green's commitment to public-private partnership and to supporting New York's recovery and growth. We did it at One Vanderbilt, bringing an unprecedented amount of public improvements to Grand Central. We did it with Food1st by addressing the city's yawning need for free meals in its food crisis. We did it at Summit by creating a unique experience that awes visitors from around the world and with our Summit foundation. We did it at One Madison with our support of the Madison Park conservancy and we're prepared to do it again in the biggest way possible in Times Square. The last major piece of our 2023 strategy is positioning ourselves to capitalize on monumental opportunities in 2024 and beyond. Given the global network we've amassed and our standing as New York City's leading sharpshooter in distressed real estate opportunities, we will continue to seek out and invest in bailouts, rescues, recaps and special servicing situations and we will capitalize on it. Billions of dollars of new business opportunities will appear over the next 12 to 36 months, and we will have a significant head start on the rest of the market. So in looking ahead to 2024, we are optimistic about a scenario where the markets rightsizes, interest rates settle and we get off the ground capitalizing on new attractive opportunities. Of course, this will happen in the context of many national and global economic and political variables. I want to reflect quickly on the political climate and how it impacts our business. With last month's elections behind us, we feel very good about the political leadership here in New York. We were early supporters of both Governor Kathy Hochul, who won the first full-time last month and Mayor Eric Adams, who is completing his first year in office. We've been in regular contact with city and state administrations about the challenges facing our industry and why the health of the central business district is so important to the future of this great city. I'm confident that we will have their full support as together we navigate a landscape for New York and our industry. The industry also has a friend in Senator Schumer who has emerged as the most powerful and influential leader in the Senate, the first ever Senate majority leader from New York, who has New York's business interest at heart and knows how to deliver in the form of aid for low-income households, funding for ambitious infrastructure projects and cash earmarked for community programs. And representative Hakeem Jeffries of Brooklyn was tapped this year by House Democrats to be the minority leader. His elevation figures to generate benefits for New York, giving the state another powerful advocate to direct federal funding streams to New York State and New York City. The emergence of both Hakeem and Chuck as legislative leaders is a massive win for New York. As ever, we stand ready to partner directly with our government officials to benefit all New Yorkers. As just one example, last month, I was honored to join Mayor Adams at Gracie Mansion to receive on behalf of SL Green Realty Corp, the 2022 Employer of the Year Award presented by the Mayor's fund to advance New York City. The award recognized our leadership in the city's summer youth employment program and our focus on providing enrichment opportunities to New York City's underserved students. 2023, of course, will be challenging even as we execute in the way we do. However, with your continued support, we will once again rise up, work exceedingly hard on your behalf, on behalf of shareholders to overcome the challenges of 2023 and set the table for what should be an exciting opportunity-set yet to come. As we reflect on the past 25 years, we are proud of the tremendous growth SL Green has had and its impact it's had on New York City. We remain at the forefront of the city's revitalization, investing in its future, building long-term value for our shareholders, our tenants, our employees and our community. Looking ahead to the coming years, we are excited to continue forging a path for a sustainable New York, the global capital of commerce and culture and the epicenter of an educated and diverse workforce. New Yorkers will rally to solve the problems facing this great city and shareholders and partners will benefit as we help New York once again reach new highs. Just know that we at SL Green are dedicated to working hard to make that happen. I'd now like to turn it over to our President, my partner of nearly 30 years, Mr. Andrew Mathias.

Thanks, Marc. Good morning, everyone. Last year, I started my presentation with a journey to the Metaverse. This guy had something to say about NFTs and apparently is not a fan of the Bored Ape Yacht Club, which had the predictable effect on that square of the sandbox I showed you last year. Recall the Orange Square was trading for $20,000 last year. This year, didn't fare so well, down 93% to 1,500, still not bad for an Orange Square in the Metaverse. Anyways, fortunately, Manhattan fared much better than the Metaverse, although Mr. Powell hasn't spared this market either, and we've had our share of challenges and detours. Quarters 1 and 2 showed significant strength, then we saw a noticeable moderation in deal activity in the latter half of the year. You can see 22 is the yellow line, 2 quarters of on pace to outpace the last couple of years but then a notable moderation. Digging deeper into the statistics, we saw a more notable divergence between newer and older buildings this year. This may seem obvious, but hasn't necessarily been the case in prior years, as you can see. Tenants are willing to pay up for new or highly redeveloped and amenitized buildings like this one and commodity buildings are suffering mightily from both an occupancy and net effective rent perspective. Buyers are obviously following this trend and focusing their capital on those new buildings, whether there are still net effective rents to be had and there's a real lack of demand for the commodity building stock. Speaking of historically wide spreads, we've never seen an environment where public market cap rates are so divergent from private market cap rates. Office, as you can see in the green text is the widest spread on the page as reprices have been slashed way more severely than private market cap rates would otherwise imply. This larger gap shouldn't persist, and we expect to see this tighten up as terror of the unknown from the Fed gets rung from the system. There's certainly a standoff right now with investors hanging on every economic reading and Fed minute issuance. There's definitely capital waiting on the sidelines and the amount of inquiries we're getting from willing buyers who have capital to spend but can't get financing and they require seller financing as part of their offers are definitely increasing, which is a good leading indicator of a moderation of some of the fear in the market. Some of the other leading indicators are moderating as well, whether it's oil prices, the dollar or the long bond. It remains to be seen whether 2022 -- 2023 will provide that clarity with respect to the short end of the curve that everybody is looking for, buyers, sellers trying to figure out visibility on interest rates. 2022 also saw private capital step in, in a much larger way as our typical institutions that dominate the market pulled back and move to the sidelines. Their share of transaction volume almost doubled as did the activity of user buyers in the market this year, highlighted by our transaction at 885 with Sloan Kettering. A lot of institutional capital that pulled to the sidelines is foreign. This year, we've seen a strong dollar wreak havoc on the international -- certain international players where their currencies weakened significantly. Countries like Japan and the Euro region took a pause towards the middle portion of the year, while the relatively strong currencies of Israel and the dollar pegged Middle Eastern currencies kept those buyers -- buyers from those countries actively shopping in Manhattan. With dollar strength easing, expect to see more activities from the areas that withdrew in the coming year as investors firm up their allocations for 2023. Digging into some of the transactions, we see SL Green's activity highlighted to the left of the screen with 450 Park Avenue and 245 Park Avenue leading the way. Harry Sitomer is going to give you a lot more detail on each of those transactions later in the presentation. Office volume has slowed down measurably in the second half of the year as the financing markets have pulled back, making pricing a bit inconsistent and making assumable in-place financing yet another major driver of value for buyers. Residential has not experienced as much of a lender pullback given continued availability of financing for that asset class. As I mentioned, change of use is a dominant theme in the market today as the city grapples with unprecedented vacancy. Expect to see this continue as long as incentives are still contemplated, residential rents and condo sales continue to hold strong and office softness persists. The only market where you see a healthy volume of office to residential rental conversion is downtown where office rents are markedly depressed as opposed to 609 Fifth, our own deal, which sold for condo conversion in Midtown. However, because of the absence of subsidies, none of the projects on this page have an affordable component as part of their business plan, which is a yawning gap as Marc addressed and which you'll hear about more in the presentation later today as well. In addition to the 3 contemplated deals you see highlighted here, we are in the market now with several additional assets where we believe change of use could be viable. 2022 saw continued outperformance of SL Green sales program versus the Street NAV estimates by over 20% on average, as you can see in the right delta column here. And yet, the gap to the current NAV expanded significantly at 86% less in 2021 versus our current 144% less you see on the bottom of the slide. It's very hard to explain and beyond me, but we'll keep our heads down and keep generating value for our shareholders and hope this gap narrows. As I mentioned, 2022 saw several notable big-ticket residential sales as capital viewed these deals as financeable, offering relative safety and resi's rolling annual leases acting as an inflation hedge. We'll hope to take advantage of this healthy market with our sale of 7 Dey Street in the coming months. Switching to the financing markets. The stats really bear out a market that's a bit frozen at the moment. Early in the year, it looked like commercial banks were going to step in and fill the gap that a lack of CMBS buyers left when they really stepped back in January and February. You can see a plunge in CMBS volume in the latter half of 2022, taking securitization levels for the last 5 months to below pandemic averages. However, this summer, those commercial institutions that had been filling the gap early in the year, tightened their credit policies as well. And we're basically dealing with a wave of extension requests on loans within their own book that slowed their new origination pipelines. Overall, a very challenging environment in the credit markets. For the first time I've put up this slide in many years, there's not a CMBS deal to be found as we survey the market for large office financings. Club deals are the flavor of the day and they're only available for large, well-capitalized sponsors. In these markets, we're thankful for our deep lending relationships as the aforementioned wave of loan extension requests make new originations harder to come by. Ultimately, there will be a great opportunity for nonbank lenders like SLG to step in and fill the void, but we're being extremely patient with our capital and waiting for the right opportunity. As we end the year, the capital markets and liability teams have done a great job managing our loan maturities. They're hard at work already on the 2023 maturities you see here. Digging deeper on our larger loans for 2023, first up is the low leverage loan on 919 Third Avenue, which we're actively in the market talking to lenders about refinancing the position. 7 Dey is on the market for sale, as I mentioned. So we expect to retire the construction loan on that asset as part of the sale and we expect to negotiate a further extension on the loan on the Nike condo at 650 Fifth Avenue. We'll need the continued cooperation of our lenders on that asset until more stability returns to the high-end retail and debt markets. The 100 Church loan, with a syndicate of 4 European lenders which closed in June, is a good template for the financing available to high-grade institutional borrowers in the market. For now, gone are those good old days of low 100 spreads on non-recourse loans fueling the Manhattan market. Special servicing continues to be a highly active area for us as well and one we expect to grow significantly in the coming years. We took on several notable new assignments this year and facilitated some terrific resolutions on behalf of our lender clients. With over $1 trillion of CRE maturities over the next 24 months, we expect to be very active on the servicing and receivership fronts in 2023 and beyond. And with that overview of the market, I'd like to turn it over to Harry Sitomer for a deeper dive into the several of the transactions I discussed. Thank you.

Great to see everyone today. As Andrew said, I'm Harrison Sitomer, Chief Investment Officer of SL Green. I spent the past 10 years working on the investment team here at SL Green, and I'm excited to be up here today for the first time in my new role as CIO. I would like to start off my presentation today the same way I start most of our LP meetings. The map that you see behind me, which may be familiar to some of you, is not a map of New York City, but rather a map of our current and previous investment holdings. Over 124 million square feet right here in Manhattan, a footprint that is unrivaled in the marketplace representing a 25-year track record of dominance and outperformance. To our team of hungry investment professionals, this map represents information and data. And our team is applying this intelligence towards a strategic thesis that reduces unknown variables and increases internal accountability. And while we've spent the past 3 years shedding 24 non-core assets with a gross valuation at share north of $5 billion, we've also developed a very focused investment approach to grow our portfolio through strategic acquisitions. And that focus on growth this year has been narrowly targeted towards acquiring premier, well-located office assets on Park Avenue that are highly sought after by tenants, attractive to international LPs and importantly, priced at a discount to pre-COVID trade. So why are we so focused on the Park Avenue [ spine ]. First, this has been and continues to be in the center of our backyard. Second, it's where everyone wants to be. Park Avenue's recognition as the premier commercial submarket was further enhanced this year with the ongoing development of JPMorgan's 2.3 million square foot headquarters at 270 Park, Blackstone's lease extension at 345 Park and the nearly completed deal with a major financial institution at 350 Park. And with the city of options, why are we all choosing Park? Look, first, the most important amenity and neighborhood has to offer, its restaurants. You will recognize a few of our well-known spots, including Joji Sushi, Michelin Star Le Pav and Fasano. Further, the neighborhood offers residences, social clubs and hotels like the Aman and 432 Park. No other market offers a suite of amenities like this for New York City's business community. And our portfolio continues to benefit from these well-established offerings, and we are proud to announce 2 additions to this portfolio this year at 450 Park and 245 Park. First, let's talk about 450. 450 is located on the southwest corner of 57th and Park. The asset is a boutique trophy building that provides financial service and luxury tenants with a best-in-class presence. With its 65,000 square feet of vacancy at closing, the deal provided us the opportunity to add value through our high-touch management approach. What made this acquisition even more exciting was the significant $100 million plus pricing discount to the 2 previous trades before us. Accordingly, we signed up the deal in March, locking 2 partners from Korea and Israel and financing from a consortium of 5 banks, all at or better than the underwrite and close on the acquisition this summer. We're excited to see this asset stabilize per the business plan in the next 12 to 18 months. But not every deal moves as quickly as 450 did. We've been jocking to control 245 for over 5 years now. The building features blue chip investment-grade tenants, is a super block adjacent to Grand Central with direct connectivity and it's across the street from JPMorgan's headquarters. Additionally, the building provides an incredible repositioning opportunity with 30% vacancy that is well suited for enhancement. Let me take you guys through the time line of this deal. 245 Park came on the market in 2016. The asset traded to HNA for a price above where we identified value. However, we did see an opportunity for our DPE program and originated $55 million of mezzanine financing, demonstrating our commitment to seeking the best risk-adjusted return. A year after closing with our foot in the door through that loan and HNA's financial distress back in China, HNA has sought us out to provide them $185 million pref equity investment, which was over $400 million inside of their basis. Knowing this could potentially be headed into problems down the road, we made the investment with full legal protections, guarantees and day-to-day management authority. Despite HMA's continued management roadblocks, we were still able to get close to 500,000 square feet in leasing done at the building. A testament to Ed, Megan, Steve and their teams as well as the quality of the real estate and the location. But all the success of the building couldn't prevent HNA from getting out of their own way and escaping their corporate problems and filling almost all of their assets worldwide into bankruptcy, including 245. Feeling confident that we would ultimately prevail in acquiring the asset out of the bankruptcy, our biggest focus is we're protecting the collateral from HNA, expediting the process to keep costs down and reinstating the attractive 4.3% all-in fixed rate debt through 2027 in an unreliable financing market. We immediately got to work on all 3 items. But we knew with multiple sophisticated lenders with the right to renegotiate terms pursuant to that bankruptcy, we are in for a fight. Not to mention HNA was acting nefariously along the way, trying to constantly delay and sabotage our well-intentioned plans. Despite that behavior from HNA, one by one, we signed up the lenders to reinstate their debt on the same terms. It's in volatile markets like these where our thorough business plans, repositioning experience and deep relationships prove to be extremely valuable. With all that debt in place, we closed on the acquisition this September. The acquisition was completed inclusive of all costs on a basis still $400 million inside of HNA's basis. Not to mention, we did retain a $185 million judgment against HNA, which we will continue to pursue and expect to receive some proceeds here in the future. Now that we own the asset, what is the plan? Our strategy is to deploy efficient and value maximizing capital into the building. The program which we have developed with Kohn Pedersen Fox, the same architectural team from OVA and OMA, will allow us to manage our all-in basis while also attracting the highest caliber tenants on Park Avenue. Let's take a look at a few of these images. First, you will see the Park Avenue entry of the building with an overclad terracotta facade and an extensively upgraded and enhanced public plaza on the Avenue. We are only overcladding the facade on Park and extending the overclad return on 46th and 47th to 4 base. As we walk into the Park Avenue entry, you will notice a bright and sophisticated lobby, which will feature never before seen lift connectivity between the Park and Lexington entrances. Further, the lobby will feature direct state -- direct access to a state-of-the-art amenity program featuring a new gym, a new wellness center and F&B run by Daniel Boulud. As we make our way to the top of the house, you will see the brand-new rooftop amenity, which will serve all tenants in the building and serve as a source of ancillary income for the asset. With a total base building budget of $171 million and the SLG management team at the helm, we are well suited to push rents, lease out vacancy and retain existing tenants. After completion of this transformative base building program, 245 will be one of the top 3 renovated assets on Park Avenue in a peer-set with Seagrams and Lever House with an expected all-in basis before leasing costs at approximately $1,200 a foot. Simply underwriting the base, the lease-up of the vacancy at a 10% premium to the rents achieved in the current occupied space will result in a minimum mid-teens IRR for an unbelievably well located Park Avenue trophy asset. As Steve and Bob get to work on implementing the capital and leasing plan, Young and the team have hit the road looking to raise equity to partner with us on the deal in 2023. We received a very warm reception from international LPs seeking 49% to 75% of the asset at our basis, which even at the low end of the range will result in us not having to invest any incremental dollars into the asset and appease mass interest in getting the debt off the balance sheet. More on this to come in 2023. Finally, I want to take you guys on a quick trip up to our project at 760 Madison Avenue where very few lucky Park Avenue executives may soon reside and shop. As a reminder, here is a nice symmetric shot of the building, outlining the flagship retail space on the 1st through 3rd floors, the residential entrance on 65th Street, amenities on the 1st and 3rd floor and tenant residences on the 4th through 12th floors. Given the supply-constrained dynamics for luxury boutique condos on the Upper East Side, we believe this project will command top-of-the-market pricing. We expect to sign up contracts in Q1 of 2023 and closings in Q3 and Q4 of 2024. We could expect net proceeds here in a range of approximately $150 million to $175 million. Given the property has no financing, these proceeds will be applied directly to liquidity for the company in 2024. In addition to that residential offering, we look forward to Giorgio Armani's rent kicking in at delivery in September 2023, with earnings kicking in, in 2024 when Giorgio Armani opens. With the retail also unencumbered and wholly owned, this asset may serve as a further source of liquidity through a JV or a financing. Thank you guys for your time today. We have a great speaker up next, Basha. Conversion of commercial uses into residential use is one of the most important topics that we will be champing over the coming months and years, as they're a win-win for both the affordable housing in the city and the least competitive office inventory in New York City. There's a coordinated effort going on right now between the state and the city to make these conversions a reality. And to elaborate on this is Basha Gerhards, the SVP of Planning at REBNY. Thank you.

Hello. I am Basha Gerhards, Senior Vice President of Planning for the Real Estate Board of New York. At REBNY, I oversee our work on land use, zoning, development and housing policy. Prior to joining REBNY, I served as then Borough President, Gale Brewer Senior [ Randy's ] advisor, which followed my time at the Department of City Planning. I hold a Masters in Urban Planning and a B.F.A. in Historic Preservation. So I really love zoning and old buildings. So I am pleased to be here today to discuss the challenges and opportunities presented by the adaptive reuse or conversions of obsolete office stock to residential. New York City leads the country in office square footage. But when it comes to housing production, we are sorely behind when compared to peer cities and to the need here. Next slide, please. A report by AKRF estimated that 560,000 apartments are needed by 2030, a combination of replacing derelict units, addressing our deficit in production over the last several decades and ensuring we have enough for continued job and population growth. To underscore how behind we are in production, in 2010, the city estimated our population would grow to nearly 9 million people by 2030. Yet here we are in 2022, we have almost met that growth target, putting us way ahead of schedule. So we are 10 years ahead in population growth and at least 10 years behind in housing supply. Our greatest need for production is rental housing, especially affordable. We are a city of renters, 2/3 of the population rents, a higher share of renters than in any other city. And unfortunately, half of those renters are rent burdened, and 1 out of 4 renters are severely rent-burdened, meaning they pay more than 50% of their income in rent. So by every metric, production rates, rent burden, homelessness, New York City is in a housing crisis exasperated by a lack of supply. Without creative solutions to scale up housing production like a conversions program for obsolete office space, that crisis will continue. New York City has a long history of adaptive reuse of allowing its neighborhoods and buildings to change and flex to the needs of a dynamic city. The pandemic showed us the value of mixed-use neighborhoods with lower vacancy rates and associated [ retail ] corridors, higher spending and more vibrant street life. Office conversion solved the problem of excess supply of an obsolete good, create an opportunity for much-needed housing, but can also contribute a multitude of positive to the public good as outlined on the slide. As both Marc and Harrison have said a win, win, win. So on the next slide, we'll talk about the state of the office stock. An important segment of the vast Manhattan market of 400 million square feet is in crisis with [ VC ] office space facing extended vacancies at nearly 20% with asking rents nearly 15% lower than normal. There has been no improvement in net absorption as job growth continues and more square footage is estimated to become available over the next year. This has negative implications for the city's tax base and neighborhood vibrancy. So that brings us to the opportunity. Our functionally obsolete buildings provide an amazing opportunity to create housing in one of the hardest, most expensive places to do so. But we need the right public policy intervention, so the levers Marc referenced. Otherwise, we can anticipate the current pace of conversions to continue as it has for the last 10 years with 1 to 3 projects starting a year to deliver an average of 500 apartments, nowhere near enough to make a dent in our supply problem. If regulatory changes are done at the state level with the state Multiple Dwelling Law and to the local zoning resolution, and I'll speak more about what those changes could be in a moment. Given the state of the marketplace, that would be a value add of market rate apartments given our supply deficit. The ability to provide affordable housing in high opportunity neighborhoods with access to jobs, schools and proximity to world-class open space is an established fare housing goal for the city that has lacked in implementation plan. If the public policy calibration is done well, we could see thousands of affordable apartments in Manhattan below 59th Street as a result of 20 million square feet or more of office space converting. However, as I describe in the forthcoming slides, these changes are not easy or straightforward. It is helpful to break out the functionally obsolete office market stock into typologies in order to determine the regulatory barriers and challenges with conversion. Generally speaking, as you go up in building size and enter what I refer to as the newer-older buildings, so 1970s, 1980s, you encounter more regulatory and financial challenges than considering a smaller building that predates 1961. The decision to convert is highly individualized to 4 key factors on a building-by-building basis: location of the building and whether it is on a struggling commercial corridor or not, proximity to a transit station or not; the floor plate size and if there is a large podium; timing, which refers to both time to comply with regulations and to empty a building; and the facade with curtain walls adding extra cost. Smaller, older buildings have an easier time meeting these barriers while larger floor plate buildings from the modern architecture era do not. Regulatory hurdles must be tackled as part of a successful conversions program. These different levers will determine how much of the obsolete office space can come off-line. They can be classified into 3 buckets. First, the state Multiple Dwelling Law or MDL, which was adopted in 1929 to replace the Tenement Act, control what New York City can do or not do in its own zoning. New York City is the only city in New York state and the country to have the state mandate a residential floor area cap, further limiting our housing supply. The MDL also establishes light and air standards and places an age limit on which buildings may convert. The MDL can only be amended by the state Senate, state assembly, and those changes must be signed into law by the governor. Second, the zoning resolution as authorized by the state MDL further restricts the geography in which conversions may occur. Lastly, the building code presents challenges to conversion, especially for multiple uses and a stage gate requirement for operable windows for living spaces. So let's look at a floor plan for a podium post 1961 building to demonstrate where these challenges lie. These types of buildings tend to have curtain walls with no operable windows, so the replacement or hard costs are much higher for these structures. This makes buildings larger than 500,000 square feet the hardest to convert. A key part of today's rules is the inability to have a living space without an operable window with access to light and air which precludes the ability to place bedrooms further into the interior. This is purposeful. The MDL was adopted to prevent the substandard housing inclusive of windowless bedrooms of the tenement time. With today's MDL requirements and zoning rules, you can't utilize much of the interior space, resulting in a significant efficiency loss despite advances in installation and fire suppression, which I believe this slide will show you in a moment. There we go. Even with MDL and zoning amendments, these types of buildings would still need financial incentives as compromised units will command lower rental rates, and we'll bring those up in a moment so you can see how much of the typical apartment layout you would lose due to these different rules. So everything that attached basically is your efficiency loss due to the MDL and zoning rules related to light and air. So it's helpful to look at what has been done in the past in terms of determining what type of public policy levers we can pull and what the different incentives need to look like. So let's move on to historical incentive known as 421-g. A tax tool is absolutely necessary for the private sector to build and maintain affordable or income-restricted housing as they represent a permanent loss in revenue. For example, a 60% AMI unit, so this is area median income, that rent is set at $23 per square foot versus market rate rents commanding in Manhattan right now are upwards to $90 per square foot. It is instructed to look at past and current tax programs and thinking through how best to convert the highest number of obsolete office space given the broader public policy gains. Lower Manhattan in the early 1990s was in crisis with vacancy rates over 20% for over a decade and building boarded up. In response, 421-g was created by the state in coordination with the city and changes to the state MDL and zoning resolution were done to provide greater flexibility for conversions. This program is credited with creating over 10,000 apartments in a decade, and the program had a very rich benefit and also permitted owners to utilize other programs, including Liberty bonds and Historic Tax Credit. I will note the program had no affordability requirements and, therefore, would be politically untenable today. Moving on to 421-a. This was a 50-year tax tool used for housing production and over the last decade was responsible for nearly 70% of new construction. Unfortunately, this program expired in June. While not a conversions program, it is useful to note the length of the exemption and abatement period as compared to 421-g, it was significantly longer. However, this program also had significant affordability requirements as a share of each project in addition to wage standards and the related complicated reporting requirements. Currently, we have HONDA, the Housing our Neighbors with Dignity Act was passed in 2020 to facilitate the conversions of obsolete commercial office and hotel buildings by the state assembly and Senate. Honda has very onerous requirements as compared to other programs, down to requirements around refrigerator sizing to the cubic square foot and can only be used for the creation of 100% affordable or supportive housing. This is functionally useless to the private sector and I would also note that not a single project has moved forward since adoption for the not-for-profit sector either. This is what happens with no private sector stakeholder involvement and a program that falls short on delivering much-needed affordable housing. So the political landscape is as complicated as changes to the MDL and the zoning resolution. Figuring out the right calibration of flexibility in the MDL and zoning and the right abatement value to spur affordability is ultimately influenced by many stakeholders debating on several key issues. First, this is not a real estate-only issue. Doing nothing with Class B office space is a public policy fail given the housing crisis, the need for tenants to have affordable options and the adverse impact of allowing these buildings to further drop in tax revenue value to the city. One of the challenges in the public policy conversation will be around affordability. Affordability means different things to different stakeholders and the appropriate AMI or area median income ban, the percent share of a project that should be affordable and the duration of that affordability are all hot button issue. A second challenge is wage standards. In many ways, this is a math problem, not an ideological one, but higher wages do bring increased costs. Those increased costs in combination with the permanent or even semi-permanent reduced revenue as a result of an affordability requirement will require a financial incentive to make projects feasible. There is an important broader question around housing supply that is occurring as well. And conceptually, there are a number of key stakeholders who support conversions as part of the answer. On the city side, you have Mayor Adams, who have consistently voiced the need for more housing and conversions as a path to doing this in his public remarks. The City Council adopted a local law to create a task force to examine office adaptive reuse and consider a financial tool for the creation of affordable housing. The task force involves multiple city agencies inclusive of OMV, who need to determine whether such a tax tool is worth it to the city's tax revenue. Any zoning changes must be adopted by the City Council as part of the land use review process. Governor Hochul has also expressed consistent support for conversions as recently as last week, stressing this would be one of many tools to address the housing crisis, which will include the state housing agency. However, this is not as simple as governor's support. Ultimately, it is the Senate and the assembly that must first pass statutory changes to the MDL that will authorize the city to make the zoning changes that task force will be recommending. With that, I'm happy to answer a few questions.

[indiscernible] questions for Basha, won't be sticking around to the end of the presentation, just on the limited issue of office-to-resi conversions. First time we presented in this format. Thank you, Basha. It was a tremendous job. And if anyone has questions, we can take 1 or 2 now on this or if not, that's fine, but if anyone does just show your hand.

I was just going to ask about the likelihood you think of getting through all those political hurdles and maybe time frame as well.

So this is the third legislative session that a governor has talked about putting forward a conversions plan. Governor Hochul will put forward a conversions program last legislative session as the state budget. The previous governor also put forward a conversions program in his budget language. So I want to be cautiously optimistic. Unlike prior years, you have the mayor and the governor aligned on the fact that we have a housing crisis, and that conversions should be part of an overall plan for how to deal with that. You also have alignment from the City Council in the sense that they are the ones who created that local task force explicitly to look at office adaptive reuse with provisions for affordable housing and the financing necessary. So in terms of the major players, we have everyone expressing public interest and a grasp of what the technical or financial challenges may be for success in generating such a program.

Do you have an idea of how much office space in Manhattan could feasibly be converted, like a square footage amount?

So of the 400 million square feet in Manhattan, I think it's safe to say about 20% of that is in the functionally obsolete range. We referenced that -- we think approximately, conservatively 20 million to 22 million square feet could convert. When 421-g was implemented, at the time the real estate Board was going to be happy if there were 2 million square feet that converted and ended up being 13 million square feet. So don't quote me.

Yes. And I don't know if this is a question for Marc, but when you think about the economics, I mean, each cost basis is different for each owner and the cost to convert is different for each building. Can you just help us think through the economics of that conversion process and kind of whether the cost basis in today's owners work? Or how much do building values have to come down?

We'll take that question at the end. I'm going to have a combination of Rob Schiffer really addressed that, who's done all the financial work in our portfolio and in the market about looking at what different types of buildings or different basis are convertible. The easiest to convert, obviously, require less capital in. And if you can achieve the higher rents based on where those buildings are located, then the threshold is higher. So it's -- we'll step through that. I mean, the bottom line is, with the tax incentive and with the zoning changes, this is highly feasible. Period. We've -- I think there's no question to speak for Basha. But we think it's highly feasible. I think 20 million is a minimum estimate. I talked about tens of millions. So I mean accurate, but I put that at the low end. If it's done right, if it's done with the right incentives, there's an 80 million square foot potential pool that Basha identified. And the city is full of economic animals. So if the incentives are right, it's a very quick lever to create new housing. I think that the government is all over this right now because there really is almost no opponents to this other than trying to figure out what the right set of economic financial incentives are to make it happen, make it happen quickly. But we'll go into more of that in Q&A.

I would just add that other cities when they've tackle these programs, always match regulatory relief with financial incentives. Chicago recently announced their program, they're looking for 30% affordable, but they are providing very rich abatements in order to do that because, again, there seems to be a general understanding that affordable housing has a permanent reduction on revenue, and you need to be able to offset that. The other thing that's important to keep in mind with a conversions project versus new construction is the timing. Typically conversions can happen on a much faster time line than new construction, especially in New York City with the permitting process, and we believe this also represents cost savings on the hard cost side as well as you are working within an existing building. So it sounds like you'll have more detailed answers later on. But again, this is from what examples we've seen across the country, this is typically less expensive than new construction, and there's a lot of added public policy wins in doing this work.

Just a quick one. In the standing assembly, who are the major players there? And if they changed in the election and how do they view this issue?

The players have not changed drastically. Democrats control both houses. Again, I think the biggest political risk may be that there wasn't really drastic changes within both houses. You have a significant component of both houses that are considered very progressive, number of actual DSA backed candidates and they may not be interested in private sector involvement or incentives for private sector when it comes to housing more affordable housing production. This is going to be part of a much broader housing supply conversation as the Governor alluded to in her speech last week.

Please welcome Executive Vice President, Director of Leasing and Real Property, Steven Durels.

Nice job, Basha. May you live in interesting times, an ancient Chinese saying, which wasn't in reference to New York City commercial real estate. Nonetheless, rapid changes in our market do make this an interesting time. I've worked in New York City leasing for almost 40 years. And throughout that time, I've experienced numerous market disruptions caused by high interest rates and higher inflation, the savings and loan crisis, and oversupply of new construction in the early '90s, the tech rec, 911, super storm Sandy and the great recession. And now here we go again. It's become cliche to say the pandemic accelerated changes that were already emerging, but it's absolutely true. De-densification, employee mobility and emphasis on health and sustainability, the introduction of amenities and hospitality and tenant desires for new construction were all things we began to see before COVID. However, the pandemic accelerated each of those trends. How tenants use their space, and what they expect from their landlord is driving change and landlords are competing for a smaller number of tenants and tenants are uncertain about the economy and their own future real estate needs. I'm convinced our portfolio will come out on the winning side as our buildings are well located near major transit hubs, and we've invested in them to provide amenities, high-quality service and a healthy workplace. The good news is that fear of COVID is no longer a tenant discussion topic. We're responding to the current market much the same way we did in 2008 in order to keep our buildings full. We're laser focused and have a solid proactive game plan. But before we look forward, let's first look at where we outperformed during what was otherwise a tough 2022. We signed leases at One Madison Avenue with Franklin Templeton for 347,000 square feet, in IBM for another 328,000 square feet bringing leased occupancy to 55% 12 months prior to construction completion. We signed a 414,000 square foot lease with Memorial Sloan Kettering, which will convert to a 21-floor condo sale at 885 Third Avenue. We signed 0.25 million square feet with AlphaSights at 100 Park Avenue, and we signed 7 leases at One Vanderbilt Avenue raising occupancy to 99%. In total, we've signed 135 leases covering 2.1 million square foot year-to-date and have another 23 leases being negotiated for more than 430,000 square feet, which puts us on track to far exceed our initial projections, a significant achievement by any measure. The overall market remains unsettled. But there are areas of opportunity. Most projections indicate that Manhattan should end the year with about 32 million square feet of leasing activity. That's roughly 10% above last year, but on the low end of the 5-year pre-COVID average. Leasing velocity has, in fact, slowed over the past 3 months, and current demand is primarily driven by lease expirations and tenant sentiment has shifted to be more defensive than it was this time last year, leading more short-term lease extensions. However, this will change as tenants gain better clarity on the direction of the economy. On the positive side, new and legacy trophy buildings continue to be in high demand. Eastside access is scheduled to open by the end of the year, which will divert 50% of Long Island Rail Road trains away from Penn Station and bring 160,000 Long Island commuters directly into Grand Central Terminal. That is a game changer for the Grand Central submarket. Recently, we've seen more small- and medium-sized tenants engaged in the Tier 2 part of the market. These are buildings which are step below new and trophy class buildings. And if this continues, it's an equally big positive since this has been the weakest part of the market for a significant part of the time. There are presently 318 active tenant searches being tracked, covering almost 19 million square feet, 2/3 of which are in the FIRE and TAMI sectors. Looking forward, there's 85 million square feet of lease expirations over the next 5 years or about an average of 17 million square feet per year as compared to only 14 million square feet in 2022 and 9% of expiring leases between 2023 to 2027 or 0.25 million square feet or larger, and the majority of those are between 10,000 and 100,000 square feet. Our portfolio is particularly well positioned to capture those larger tenants given that we have 4 of our best buildings with contiguous blocks of high-quality space. 2 of the 9 Midtown submarkets are within 100 bps of equilibrium, supply has tightened in the Park and Sixth Avenue submarkets where many of our buildings are located. And as mentioned earlier, leasing activity in the Tier 2 buildings is on the rise. There's been 10.7 million square feet or almost 50% of year-to-date leasing done in Tier 2 buildings. That should lead us to well exceed the prior 2 years for this essential part of the market. Through the third quarter, the most active part of the Tier 2 leasing market has been in the Grand Central submarket. Additionally, 6 in Park Avenue have exceeded leasing activity compared to the year prior to the pandemic. However, on the other hand, downtown remains exceptionally slow. There are large blocks of space downtown that can't be leased at any reasonable rent. Leasing and Tier 2 buildings is dominated by small to medium-sized tenants with over 60% of recent leasing being done with tenants smaller than 25,000 square feet. And it may come as a surprise for you to learn that 25% of the Tier 2 leasing is with financial service tenants, which I think many people assume only go to Tier 1 buildings. Our goal for 2023 is to maintain portfolio occupancy of not less than 90%. Almost 15 million square feet or 50% of the portfolio is long-term leased with a weighted average occupancy of approximately 96%. We have 8 buildings which are under redevelopment. 625 Madison is well located for new construction or a change of use. We expect to finalize the ongoing ground rent arbitration early next year and then evaluate the site for a variety of possible strategies. We have 29,000 square feet of office space at 185 Broadway, which is the office portion of the combined resi-office tower 7 Dey Street. This newly constructed residential tower is well leased and will be marketed for sale earlier in the year. The majority of 750 Third Avenue is currently vacant, and the building mid-rise and tower floors are shallow center-core design, which, as you heard from Basha, make them ideal for residential conversion. Consequently, this building too is a sales candidate. At 2 Herald Square, we expect WeWork to surrender its 184,000 square foot lease and pay us the full amount of its security deposit and corporate guarantee. Thankfully, this now ends our limited exposure to WeWork. Because the building has uniquely shallow floors with many windows, we expect to convert the space for either residential or extended stay use or possibly expand the existing dormitory use that is already there. And as Harry covered earlier, 245 Park Avenue undergoing an exciting redevelopment program, which is already generating inbound tenant inquiries. And then another of our recent acquisitions, 450 Park Avenue, we have a plan to renovate the existing lobby and install luxury tenant-only wellness facility, which I think will set a new high-end standard for this type of building amenity. We're in active dialogue with several full-floor tenants and hope for some early day success. One Madison is scheduled for completion in the fourth quarter of next year and like One Vanderbilt, it will redefine what it means for an office building to provide an exceptional workplace experience. We have 2 pending tower floor leases and are on course to finalize an extraordinary combination of amenities, which you'll learn more about from Rob and Chef Daniel Boulud. My goal is to finalize those pending leases and then secure a second anchor tenant for the podium of the building where IBM is located. And finally, 5 Times Square is a big undertaking. We recently acquired a 31% interest in the building, which is of like new construction quality. As part of the acquisition, we've taken over responsibility for leasing and are in the process of implementing a new marketing program to reintroduce the building into the marketplace. Like marketing new construction, this will be a comprehensive undertaking, which first starts with educating the brokerage community followed by presentations to the tenant community. It would be great to land an anchor tenant right out of the gates, but I think it's more realistic to expect that most of 2023 will be setting the table for leases to sign in 2024. We'll be replacing all of the building's super signage with new static and state-of-the-art LED. And we're also finalizing a redesign of the building's hospitality program which will include 64,000 square feet of conferencing and an amenity floor designed by world-class architect, David Rockwell. We have a long road ahead of us, and we've recently seen an uptick in tourists as we begin to get our message out onto the street and as you'll see from our design, it is a best-in-class execution. Let me quickly take you through the building with these renderings starting in the lobby. Then going on to the amenity floor beginning at the concierge's reception, into the club lounge to the grab-and-go and a beautifully designed wellness center. The office floors are equal in quality to new building construction with super-efficient floor place and 13.5 foot ceiling heights. And you can easily see how the floors work for any type of business, whether it be financial services, legal or the creative industries. The balance of the portfolio is where we suffered the greatest impact from the pandemic. These buildings are working their way back to full occupancy and they will be the biggest beneficiary from the return to market of the small to midsized tenants. We've completed recent upgrades with new lobbies or amenities at 919 Third, 100 Park, 461 Fifth, and 420 Lexington Avenue. Other buildings like 1185, [indiscernible] and 810 Seventh will compete by aggressively meeting the market with competitive rents. We do, in fact, live in an interesting time and we're hyper-focused on continuing to work harder than any other real estate team and executing a winning strategy to outperform the market. And with that, I'll turn it over to Brett Herschenfeld.

Thank you, Steve. Are you guys ready to take a little break from real estate and talk casino? First things first, the title change. Marc and I have been hard at work on this project for over 2 years now, and it's exciting to finally reveal some details for our shareholders and why we'll do so much for SL Green and New York. The title for our project is not the project itself, but one that celebrates SL Green's overall mission, which is to deliver extraordinary real estate projects that do great things for our neighbors and community. In this case, that community is Times Square. The center of global entertainment and our project will create an even greater long-term tourist attraction as well as reinvite New Yorkers back to Times Square. Let's get right into it with some images of the project. Here's the existing view of 1515 Broadway. And here is what it will become. You can see, this is not a Las Vegas image. This is a design that fits in Times Square, a New York project. We lead with Broadway entertainment on the ground floor and on the left side, a Broadway theater interactive map showing up to the second ticket opportunities. Time Square has always been the leader in signage technology. The first illuminated sign was located here. The first interactive sign was located here. Remember the Camel smoking sign? The first moving sign was here and the first digital sign. But now other cities, for example, cities within Asia have new 3D signage technology or images leap off the screen and are tourist attractions in and of themselves. The signs you see here will take that technology to the next level and be the largest combination of 3-dimensional signage in the world. Times Square will be on top once again. Here's the existing view facing south. Here, you see it recreated as Caesars Palace Times Square. Once again, it fits into the context of the district. Moreover, it elevates it. Here's the current image of Shubert Alley on the west side of 1515 and here's the entrance of the hotel on 45th Street, a completely upgraded and beautified Shubert Alley with fountains and lighting enhancements worthy of this prolific location. Lastly, here is the hero image. The tallest building in the Bow Tie, Caesars Palace Times Square. Oh, have I got your attention now. Our gaming partner in this project is Caesars Entertainment. Tom Reeg, the CEO of Caesars will be joining us to discuss his plans shortly. I can tell you this will be operated as a Caesars Palace brand, the only other Caesars Palace in the world next to Las Vegas. The hotel will be a 5-star hotel, which is an objective set of criteria for quality of operation. We chose to partner with Caesars for many reasons, but to highlight a few, they are publicly traded institutional company, and they share our belief that urban gaming done right can have significant positive economic impact on surrounding businesses. Caesars is the North American gaming leader in number of properties, number of rooms, annual revenues and annual entertainment shows. They're already vetted and licensed by the New York State Gaming Commission and perhaps most importantly, is Caesars Rewards program, which gives our project access to a database of over 60 million rewards customers. Tom will share more on Caesars Rewards later. We are beyond excited and I think the world really took note this morning when we introduced our entertainment partner for the project, Roc Nation. Roc Nation is the world's preeminent entertainment company founded by Jay-Z. Jay and the CEO, Desiree Perez are New York City ambassadors. They share our mission in delivering world-class projects that have a positive impact on the neighborhood in which they are cited, creating jobs and boosting local businesses. Roc will work to reimagine arts and entertainment in Times Square in a way that will not only bring tourists but also cause New Yorkers to return to the Bow Tie and check out a highly curated entertainment environment with a new energy that only Jay-Z can bring. Let's now go through the project. Remember, SL Green has invested in over 12 million square feet of real estate in Times Square. Our properties and you, our shareholders, will benefit most from a project that greatly enhances the neighborhood. There's no better location in New York space for a mixed-use casino than Times Square. It's the world's top tourist attraction and our casino will generate over 7 million net new visitors. Those new consumers have real disposable income, and will not only spend money gaming at Caesars Palace Times Square but we'll also spend money at local retailers, restaurants, hotels and Broadway. The revenues we generate from gaming operations will allow us to invest back in Times Square in the form of a public-private partnership to greatly enhance quality of life and attract office users, retailers and other businesses to lease space in Times Square. Lastly, from a city planning standpoint, the intent of Times Square is to bring large-format entertainment, amusement, signage and light. This is where a casino belongs. I'm going to share a first cut of numbers with you. We'll drill further into these numbers in the months to come, but this is a hot-off-the-press look at the economic impact that the project will have. First, the halo effect. No other competitive gaming site fitting for a license will come remotely close to our project in terms of the economic impact on surrounding businesses. Because we are space constrained and can only accommodate about 1/3 of the projected hotel room night demand inside our facility, the remaining 2/3 of net new demand will go to other hotels in and around Times Square driving 636,000 room nights per year to our hotel neighbors. That also creates jobs. Because we can only accommodate about 10% of the dining demand within our facility, the vast majority of visitors to Caesars Palace Times Square will eat at restaurants outside of the venue. 7 million new meals will be purchased at local restaurants as a result of our project and jobs. SL Green is perhaps the largest owner of retail in Times Square. AKRF predicts $166 million in new retail purchases outside the casino because of our development. It's going to be the catalyst for national retailers to pour back into Times Square and lease spaces in our buildings. Non-Broadway entertainment will be the beneficiary of $55 million in annual spending. Transportation. I have to believe the MTA loves hearing that there will be $95 million annually in additional public transit spending because Times Square has the largest subway hub in New York City. We will use that mass transit to bring people from all over Times Square in an environmentally friendly way that also helps one of our most crucial city agencies. And Broadway. Because we are developing Caesars Palace Times Square, AKRF projects 400,000 net new Broadway tickets will be purchased every year. That's just the halo effect. Additionally, the casino will commit to directly invest in Broadway to the tune of $117 million over a 10-year period. Since the largest, most successful theater owner has publicly stated, Broadway is doing perfectly fine. Those funds will be geared towards Broadway workers, actors, stage hands, musicians and smaller theater owners and producers who have told us they need the support. They will go to purchase tickets for children and families in underserved communities to come to a Broadway show, for daycare to support Broadway parents, mental health awareness programs and for educational uses. We love Broadway, and we're happy to give back in a massive way to reciprocate all the industry has done for Times Square. On-site job creation is massive during development. It's $2.1 billion in economic activity. And once we are open, there will be over 3,000 on-site job positions from a wide range of occupations, paying real living wages that will be offered to our surrounding communities throughout Manhattan and New York City. And lastly, just a little teaser to close this out. When you combine revenues from the project operations with the economic impact outside of the casino, we project over $3.2 billion in annual economic activity on an ongoing basis. But we want to do more. There's an opportunity to take revenues from the project's operations and invest in the neighborhood to deliver higher quality of life. Public-private partnerships, much like SL Green's investments in and around One Vanderbilt in coordination with the Grand Central partnership are the way forward to greatly upgrade our city. We will work with the Times Square Live, our security consultant [indiscernible], city organizations, homeless outreach programs like Breaking Ground and others to fund needed investments that will uplift Times Square and make it a community that will thrive for decades to come. We've heard a lot of chatter about congestion. We want to be clear. A solution to congestion is not to tell businesses that will bring foot traffic not to [ cut ]. The goal of commercial neighborhoods is to increase foot traffic and use proven mitigation methods from around the world to reduce congestion. It starts with safety investments that we are committed to, so that consumers utilize mass transit. We'll invest in lighting and street beautification to encourage pedestrian travel in between mass transit centers. We will commit to drop-off zones on the perimeter of Times Square grid, much like as done at stadiums, airports and large entertainment venues. This is environmentally friendly because for-hire cars will no longer sit idle in traffic for hours at a time within the Bow Tie. And through NYC OMNY technology, our patrons will receive incentives to ride the subway system, not just trip credits but also rewards for doing so. Examining peak hours of traffic in Times Square from 5 to 7 p.m. Because Times Square is already an entertainment district with complementary uses to a casino, AKRF projects only an incremental 9% increase to congestion as a result of the casino. And when we implement all of our mitigation solutions, traffic comes down to nearly half of the existing congestion that exists in the Bow Tie today. And we get all of the positive impacts that our project will have on the community. That's traffic mitigation done the right way. I want to close out by talking about early supporters for our project in Times Square. This is a group of key businesses and stakeholders that have personally met with us, learned about our project and recognized how beneficial it will be to their livelihoods. It's a combination of restaurants, retailers, landlords, labor organizations, hotels and Broadway organizations like Actors' Equity and Local 802. Don't forget, there is no other competitive bid that will receive this type of support from surrounding businesses because other gaming bids will be geared to bring customers inside and not let them out. Our bid is the opposite. It's a New York bid, and we're proud of what it will do for the community. Here's a series of quotes from local supporters that you can read online, but I want to highlight one from a labor union discussing why they support our project over others given all projects will bring labor. Chaz Rakowitz, from Local 79 points out that yes, his union gets a scaled construction project to work on. But as a result of that project being located in a commercial entertainment area, other locations being proposed for a casino project can be developed for housing, affordable housing, schools and parks and his members will not only have a place to work, but will also have a place to live nearby rather than be forced to find housing in the suburbs. That's the right way for New York to approach this decision on where is appropriate for a gaming license. This is why Times Square is the best location in all of the [ Empire State ] for a casino done the right way and by New Yorkers. It's the most responsible from a planning standpoint. It will do the most for local businesses. It has the infrastructure in place and can be generating revenues for the city and state years ahead of other bids. And for New York, Times Square must remain the crossroads of the world for the next century. The support is growing every single day. Can you imagine a world-class gaming destination in the center of Times Square? We can, and we're going all in to make those New York City dreams a reality. We look forward to sharing more in the coming days on Caesars Palace Times Square. Once again, Tom Reeg is the CEO of Caesars Entertainment, and we appreciate him taking the time to be here today to speak with you. Thank you.

Thanks, Brett. As Brett said, I'm Tom Reeg, I'm the CEO of Caesars Entertainment. For those of you who are not familiar with us, I want to give you a little bit of background on Caesars. We are the largest domestic gaming company. We have 51 properties in 16 states and Canada, over $10 billion of revenue. Our market cap is over $10 billion, and our enterprise value is over $30 billion. We've got a proven track record of development, and development in urban areas. As an example, right now, we're in the middle of a $400 million plus expansion of our project in -- our property in New Orleans that is adjacent to the French Quarter. So we have experience in operating and developing in urban environments, which is going to be important here. We also have the largest database program in the casino business. Caesars started what was then Total Rewards 2 decades ago, developed it as a hub-and-spoke system similar to your airline frequent flyer programs, unique in the casino business. And because of the scale of Caesars, that database has grown to over 60 million people. So if you think about the way that operates, we have properties across the country where customers go on a frequent basis, multiple times a month, they generate points in the program and they use those points primarily for destination trips. And in our current network, that's Las Vegas, Lake Tahoe, New Orleans, Atlantic City. Caesars Palace Times Square will certainly be a crown jewel in our network. We're also already an existing player in New York, known to the state, licensed in the state, a top 3 player in digital sports betting today. Those of you in New York know that you saw thousands -- tens of thousands of Caesars sports advertisements last year with J.B. Smoove. So we're very well known in the state. We have existing partnerships with MSG, with the Knicks, with the Rangers and with the Bills. And if you -- in terms of where we were coming from here, we were kind of a free agent, did not have a partnership, didn't really know where we're going to pursue a New York license. There's a lot involved in pursuing a project of this size and scale in New York and we wanted it to be the perfect opportunity for us. So we talked to a number of potential partners, some of which now have others, some of which had buildings that they wanted to show us. There was nothing close to what SL Green has at 1515 Broadway. As someone who worked early in my career in Manhattan office buildings, when I was going out to see the building, I was expecting the columns everywhere, very difficult to imagine it turning into a casino. And I can tell you that the spaces here are really what got us super excited about the project. You can really see what we can do here. As Brett said, this is going to be entertainment facing on the ground floor, the casino will be second floor and up. But we can create experiences and you saw in the picture, the renderings that Brett showed we -- as an example, we can create a separate entrance for our highest volume players, our most valuable players, send them up to a private gaming salon and then out to a terrace that overlooks the Bow Tie, overlooks the Ball Drop on New Year's Eve. These are the types of experiences that we want to create for our customers. The latest we've done is we've got Adele in Las Vegas, who started a couple of weeks ago, that's the type of experience that you can only get with Caesars, and Caesars Palace Times Square fits right into that. And then I'll finish with this is clearly a competitive process. So what's going to be important to the state in our opinion, we've worked through a lot of these horse races in the past. What's important to the state? How quickly can you get open? Brett talked about the zoning that we've got here. This is already in entertainment district. You're not looking for a zoning change, you've got an existing building that we're converting. This is not a greenfield brand-new construction from the ground up. Those allow us to get open quicker than a lot of our competition. Why is that important to the state? They start earning their tax revenues quicker as well. The connection to the city is important. Obviously, you have SL Green. All of you know their commitment and activity in New York. We've added Roc Nation with Jay-Z and Desiree, that is New York through and through. We're an existing partner in the city, also important. So we set up well from that standpoint. New York is going to as it should, we'll have social responsibility, the social aspects of a casino front of mind. Caesars 3 decades ago, started the first responsible gaming program in the industry as the largest and most developed. We've got a litany of corporate social awards, and we have a well-developed CSR program. We just published our latest CSR report. There is no one in this industry that has a better CSR story to tell as well. So -- and then it's can we get it done? We have $3 billion of current liquidity, as I said, we're over $30 billion enterprise value. You know SL Green's resources, now we bring in Roc Nation. There's no question that we are well positioned to be the right choice here. And as Caesars, we are super, super excited to get going on this. And with that, I'll turn it back to Brett.

Please welcome Executive Vice President, Robert Schiffer.

Well, I'll say that Caesars Palace Times Square is a hard act to follow. Good morning. In 2022, I leaned into 3 things: first, transitioning my role in Summit to Michael Williams, completing the development job I started some 17 years ago. Michael, who you'll hear from shortly, has expertly overseen what has become a global phenomenon. So global, in fact, that we have had inbound inquiries and guests from around the world ask us to bring Summit to their city. So I spent the second half of '22, traveling to major cultural destination cities around the world to kick off what we're calling Summit Global and I'm pleased to report that we're having meaningful discussions with our top targets in those cities. Finally, when I'm not on a plane, I've been helping our SVP of Construction, Bob DeWitt, where I can on One Madison, a project that I've been deeply involved with since 2017. We're in great shape at One Madison as the one Vanderbilt band that never fully broke up, relabeled themselves under Bob's tireless leadership. Let's take a closer look at the construction progress. [Presentation]

Sorry, go back one. This is where we were at last year's investor conference. We demolished floors 10 to 16 and the core of the historic structure, and we were deep in the hole excavating bedrock and preparing to go vertical. After an incredible effort by the team, this is where we are today. Overseen by John Krush on a day-to-day basis, a world-class team that includes Hines, Tishman, KPF, [ Bocon ] and dozens of other consultants is hard at work delivering a product under budget and ahead of schedule that in many ways will rival the award-winning One Vanderbilt, because this is what we do, raising the bar is in our DNA. This is the tenth floor, IBM's amenity floor with the signature architectural feature of the building, the truss that converts the load path of the tower to the beefed-up column grid of the podium. This is the 11th floor. Franklin Templeton and [indiscernible] floor. Already clearing the neighboring buildings, providing expansive views with its massive 22-foot slab-to-slab height and column-free interior space, it will serve as FT's hub for its consolidated headquarters. Here's a typical tower floor with views over Madison Square Park. Some of you might remember our guest speaker from last year, Robbie Schiffer, Head of Real Estate for a forward-thinking Fast 50 fictional company called Technion. They still haven't made a dollar but they're spending real time on One Madison, and Robbie has been circling around one of our last available tower floors. One Madison checks all of his boxes. Robbie, I think we're going to need to see some updated financial statements. Our completely reimagined podium floors with the new 81-foot square windows and the new curtain wall above the reinvigorated Madison Avenue entrance. Moving down to the lobby, you see where we have removed floor slab to create the eventual home of the tenant-only amenity space, what we call the commons, shown there. The reimagined Madison Avenue entrance with the park just beyond. And finally, this photo taken last week, which is essentially a live feed of the site as the team is eagerly preparing for topping out. Let's take a look at the path to TCO. In 2022, the critical path of the project ran through the core of the building. The concrete core structure rose out of the bedrock through the podium ahead of this deal. We completed podium window installation and commenced directing the steel structure. As the steel frame for each floor was completed, we poured the concrete floor slab and fireproofed its steel members. Now the concrete core is complete. And by the end of the year, the steel superstructure will top out and we'll celebrate that milestone with a beam signing and a trade appreciation day on December 13 for the hundreds of [indiscernible] people who have helped us build the project. As we look forward, the completion of the steel structure installation allows us to proceed with curtain wall installation and MEP installation. As that is completed and lubes are installed, we make final connections to the MEP system, all the while elevator installation is ongoing. It's an incredible number of workers working on various different trades simultaneously. And as the fall approaches, the team will be on overdrive to accelerate our TCO date from November to October. Quick recap on the budget and funding sources. We currently stand at 75% of the $2.3 billion project committed, 65% of which has already been spent and the balance will be funded by our $1.25 billion construction facility. We're happy to report our trades are 100% bought out and that 20% of our trades were awarded to minority, to women-owned businesses, surpassing our goal of 15%. Recall at TCO, our JV partners will fund us the balance of their required equity commitments totaling $577 million, bringing the total third-party equity invested in the project to $761 million. Finally, we expect to finish the project with total savings of $60 million, a portion of which will be reinvested into the amenity program that we will discuss later on in this presentation. Now let's turn to leasing progress. As Steve already walked through, we announced Chelsea Piers in October of last year, our first lease for 72,000 square feet. In March, we announced IBM, 328,000 square feet. And in September, we announced FT for 347,000 square feet, bringing us to 54% leased. We are currently in negotiation with 2 single-floor users for the 26th and 27th floors as well as a pending expansion by Franklin Templeton of 7,000 square feet on the B2 level. And we're also really close to signing a lease with a retail restaurant destination. In 2023, we'll look to sign leases for Floors 3 and 4 that would bring us to an occupancy of almost 73% by the end of the year, along with our TCO and will put us in a great shape to execute a refinancing of our construction facility midyear 2024. After taking into consideration the encumbrance of IBM and FT's option floors, at TCO, we really will only have one unencumbered podium floor and one unencumbered tower floor left to lease. And finally, we have our amenity program, the crown jewel of which is a rooftop addition. One Vanderbilt has set the stage for building amenitization. The amenity program is a proof of concept that an elegantly designed and curated set of third spaces, managed by dedicated professional hospitality team can greatly enhance the office experience. So a rich ecosystem of dining options, Le Pav, Joji, [ Latera ], all of which provide a counterbalance to the various meeting spaces here, such as the space we're currently in. But given our DNA at One Madison, we're going to exceed what we've built here. We're going to improve the global standard with a more robust offering. As we look at the floor plan of One Madison, you can quickly see, we have all 4 corners of the block covered on 24th in Madison across the street from 11 Madison Park since the Edition hotel, home to Stephen Starr's Clocktower restaurant. The retail destination will anchor the Northeast corner of the block on 24th and Park Avenue South. Chelsea Piers anchors the Southeast corner of the block, and with Eataly across Madison Square Park, this area of town will remain New York City's epicurean center. Together with the commons, had we stopped there, we probably would have the most amenities building in the city, but we didn't. The balance of the spaces you see here reflect this morning's announcements. And to reveal our ideas for those spaces, I'd like to welcome our partners, Chef Daniel Boulud and CEO of the Dinex Group, Sebastien Silvestri. Chef Boulud is widely celebrated as one of America's leading culinary authorities and restaurateurs. Since arriving in the U.S., he has continually evolved his cuisine and expanded his reach while winning multiple awards for his achievements and building a significant media and social media presence. Sebastien has been the CEO of Dinex since 2019, joining the company with over 25 years' experience in the hospitality industry. His focus is on defining the next era of the group, collection of restaurants and brands expanding the brand portfolio, all while maintaining the excellence of his existing operations. Together, their Dinex Group is one of the premier fine dining restaurant groups in the world. And Mr. Boulud and Mr. Silvestri have grown Dinex from one location in New York to multiple owned and licensed venues around the world. Chefs and Sebastien?

Hello. Good morning. All right. Thank you, Rob, for the kind introduction. We're honored to be here today. I'm here with Chef Daniel. And for us, it's an exciting time because we're presenting something very special to you today and that's something that we have been working on for the past year. So I'm going to turn it to Daniel. Daniel talk to us about One Madison market and the inspiration.

Well, first, good morning and usually I'm [ downstair ] here at the second floor, of course, cooking at the Pavillon. My -- of course, my partnership with SL Green, Marc Holliday and Andrew Mathias started 5 years ago. And when we started to work on the Pavillon and all that, and we have opened to great success and now we are looking at our next venture, so it's very exciting. And as many of you know, I am a New Yorker for quite a while, a couple of decades. And -- but I'm originally French. And of course, I grew up in Lyon, a city known for its greatest food markets there in the world. And at One Madison Avenue, there will be a new type of market, something new to offer to the city. I think we're not in short of opportunity to go shopping, to go eating, to go -- but I think we are -- we want to create a market with that as culinary delight. It's all freshest products, seafood that we often get in our restaurants that we want to be able to also share in that market and there's big goods and fine meats from either local farm or fine ranches around the country, chocolate and pastries. From morning to night, basically, there'll be an offering all day, and they'll also be -- it becomes really a central meeting place, a true heart in the city, and that's what is the true heart in my city in France. But also in Europe, it's really -- this market is part of the essence of a neighborhood. And so I'm very excited to be involved with that. I've been doing retail before. I've been doing a retail with Épicerie Boulud for more than 15 years now. And so I understand also that portion. I have a catering company. So besides being a chef in a restaurant, then we -- I may have cook for you in the past. I think I'm very excited to also be involved in this project as well. So the opportunity with that is also to work besides working with local suppliers is to be able to create all kinds of dining opportunity within the space by having sort of what we call [ cuisine the contrary ], which is counter dining. It's affordable, it's delicious. It's very fresh. It's in and out. It's -- and there is a large portion of a cafe also inside. And so Sebastian...

Yes, let me talk to you a little bit about the format. So you saw the beautiful market hall, but the format is 7 foot kiosk. One central cafe that is kind of the highlight of the room. And all the 7 different kiosks is going to be active. So it's a living, ever-changing marketplace, will showcase freshness, seasonality, artisanal tradition, culinary creativity and the idea is for the market to be as diverse as what New York is. So Daniel talk to us about the look and feel and the design.

Well, we want the market to really feel lively, bustling and we choose a designer that -- architect and designer, David Rockwell who is a long-time friend, a long-time professional in the hospitality industry and the food industry and so we feel that with David, we can create a real sense of welcoming in the space, but of a sense of circulation that creates liveliness but also it's comfortable shopping and yet it's not a supermarket. It's not at all a food gros either. It's a combination of many togethers that make you feel like it's the perfect place to -- we want with David to really create a sense of hospitality within a shopping and dining space.

Thank you, Daniel. Here is a rendering of the market today, so you see the activation and all the different stations on the plan, and I'm going to take you through pretty much all of them so you have a better idea exactly of what we're going to be preparing there. So one of the first one is La Poissonnerie. So think about it almost as a fish market. People can sit there, they can have oysters, they can have lobsters, they can have [indiscernible], but they can also take things home with them that they can prepare themselves or they can get some dish that is already prepared. So that will be one of the first station. Another one, classic French brought to One Madison [indiscernible] in the [indiscernible] so artisanal cheese, [indiscernible], same thing. People can see the [indiscernible]. They can order different type of cheeses, we'll serve some bread that have been baked in-house.

And also a lot of sandwiches and things around those products as well. So between prepared and eating and to-go and take home is all in one.

And there is not a French market or European market without a bakery and that's [indiscernible]. So all the baked goods will be baked in-house. So some baguettes in the morning, we'll do croissant, we'll do different danishes, [indiscernible] sandwiches like Daniel says, [indiscernible] out of the bakery. The next one will be [ Le Potager ], Daniel?

Which will be focused on vegetable as well, a lot of vegetarian options and a lot of healthy things, salads and smoothie and juices and -- and I -- at Le Pavillon, we purposely created a menu that was 50% seafood, 40% vegetable, 10% meat. And it really works very well. A lot of people appreciate that in their sort of daily life of nutrition and diet. And so that will work very well. And those also, you can also take some very specific vegetables like during the season of white asparagus, we will peel the asparagus for you, but you can take home the asparagus and you can take the sauce, and you can feel like you're cooking, you boil water, you cook the asparagus and you eat it warm and -- with our store. So it's all things like that where many dishes might come in a kit that you can finish at home and we'll give you the instruction, the recipes. And also, it's very important that you feel very comfortable coming for many opportunities in the store. And coming for coffee and leaving with a full bag.

Thank you, Daniel. I think it is getting you hungry by now. The next slide is [ La Patisserie ]. So the idea here is to have -- I don't know -- [ La Patiserrie ]. So all the desserts, something we have our corporate patisserie chef, our patisserie chef team making all the desserts there. Same thing. People can just sit there, enjoy the desserts and the patisserie or take the patisserie, the ice cream, the [indiscernible] home. And another great thing about the market at One Madison is we'll make also crepe to order to the guests.

And we know that today, family love to take their children to this type of place because I think it's part of the real community in a way. And that will be with the sweets for sure the kids go crazy.

The next station, [indiscernible]. So not only a pasta station but a lot of grains, a lot of flat bread, I will have a wood over there. So you can see our chef making the fresh pasta or making some grains, some risotto.

And that's also the seasonality going into it as well. We cook very seasonally. And so -- of course, they'll be simple, easy, but to order kind of made food. So even if you want to eat and go to the park, to One Madison Park and to the park and eat lunch, at least it will be freshly baked for you.

[ La Butchery ], which is the butcher shop, so same idea, finer selections of meat for people to take home or either to sit there at one of the counter, and we can prepare the steak, we can prepare Daniel's famous db burgers and a lot of other things that we'll have.

For each store, we'll have a booklet that you can have, if you become, let's say, a member -- a preferred member to the store, you'll have a booklet of recipe for every station that when you buy something, you know what to do with it. It's very important.

Moving on to the cafe. So traditional French cafe, and that's a place that is going to be activated all day long. In the morning, it's coffee, cappuccino, croissant and then evolve throughout the day where you can have an [indiscernible] or cocktails and it's really a central point, not only for the tenants, but for the people of New York that want to come to the market and experience this experience, this European market experience here. And here's a rendering of the market, so beautiful, stunning.

So I think -- yes, it's old class Europe but in a very -- picture a market in Lyon, [indiscernible] in London, I mean very European in a way of the plan of the offering, but also the blend of the feel of the place, I think.

Moving to another super exciting project at One Madison will be the new steak concept by Chef Daniel. So Daniel, how did you come to work with that?

Well, of course, it's not because we wanted to focus on seafood and vegetables and [indiscernible], we didn't neglect the meat and I love meat, and we are getting better and better at getting the finest meat in America in the sense of it don't matter if it's beef, chicken, lamb, we have amazing farmers, amazing growers as well and ranchers. And so I always wanted to have the opportunity to create a Steak house. I mean, since I'm here, I love steak house. I love the classic, classic takeout. I go to Kings, I go to Luger. I go to Wolfgang and all that. And -- but I think it's always like how can we extend the experience. And here, we are looking at creating a French-American steakhouse. We're not going to get you lost on the fact that you are going to a steakhouse and you can't get your steak the way you like it. But there'll be all kind of perks around that, that also will create from the vegetable, from the appetizers to also the sauces, which is very important. The seasoning of the steak, the techniques of cooking the steak, which we are looking at that. We want to add also some wood fire or charcoal fire to the cooking. So there'll be a very Euro-American, I would say. And sometimes even why not a little bit of such of Italian or South American into a steak that I want to really not make it a global feel on the food, but really exciting and something personal as well, like every one of our restaurants.

Very good. Some imagery to give you a little bit of a concept and the atmosphere that you can experience in the steakhouse. And the idea, the layout of the space design that -- if you see the [indiscernible] right now is every table is a good table. That was kind of the idea in mind. We have a very comfortable and buying lounge for the people that are in the building, for the tenant, but for the people that also wants to come to the steakhouse. And then the space transition with a beautiful dining room and all the tables are good tables overlooking somehow the kitchen, open kitchen, open flames. So there is a lot of entertainment when you're sitting there. And in the element, it's warm wood, rich colors, mixed metal and our plan is to create this all enveloping experience that really transport the guests and enjoy the finer steak and seafood and cocktails. And...

And we...

We are rendering.

Yes.

More rendering of the space, the operation.

And I think the location, when Marc and Andrew approached us to work together on this project at One Madison Avenue, I really felt the location is -- this is the epicenter of New York. I thought One Vanderbilt was, but this one is where really midtown, mid downtown, the sort of downtown, active, cultural life and the midtown business are really the central point there. So I think it's exciting to put a restaurant like a steakhouse. And we have done our study. There's not too many people around it there that have a good steakhouse. So...

Thank you, Daniel. So that is like a steakhouse. And listen, we're reaching the last piece that to me is like creme de la creme, the One Madison Rooftop. As you can see, this is something pretty spectacular. You can see the video in front of you, the views are from both indoor and outdoor are amazing. David Rockwell designed it. And really, the idea for the tenant is almost you own exclusive private club that can convert into an event space. So we'll be creating the food and beverage options. Obviously, we want to accompany the tenants for the day, their meetings, their needs through casual meal, cocktail events. And honestly, I believe this amenity is truly above anything beyond what tenant can find anywhere else. We're all committed to delivering that next-level experience for the tenants. And beyond that, of course, there are endless opportunity to use the space for private events, corporate events, on the evening, on the weekend when the tenants are necessarily not using it. The idea is to match exceptional cuisine with its exceptional space. And in this case, we really could not ask for anything better than this. I believe this will meet or even exceed the kind of experience we offered. We work with a lot of luxury brands like Four Seasons and Ritz and Rosewood. And I think what we've developed there is above and beyond. So look, we cannot wait to welcome the tenant at One Madison and Daniel -- with Daniel. And we...

And I want to say also one big thank you to Marc Holliday, Andrew Mathias, but also Mr. Green, because Mr. Green is a little bit like me. He's always in the store. He's always in one of front of the stores. We see each other a lot, and I'm very proud to be your partner. And I'm looking forward to the new venture we have together. Because if there is one company that is committed to quality, to excellence and to bring something new for the community, I think it's Marc, Andrew and SL Green. They are really -- and as long as I've been in New York, it's the first time that I really did in partnership, something like that. And it has been the most rewarding thing. So thank you, gentlemen.

Thank you very much.

Thanks. Thank you.

Thank you. Please welcome General Manager and Managing Director Summit One Vanderbilt, Michael Williams.

Good morning. We're going to start with a question. Stop and ask yourselves, how many times in your career -- actually, how many times in your life are you given the opportunity to be part of something, to help lead something that will forever change the landscape of the greatest city in the world like New York City? That's the question that I was first asked by Marc Holliday. When we first started talking, I was brought on board to be with SUMMIT and run the exceptional team that we have in place. My name is Michael Williams and I am the General Manager, Managing Director. I'm very fortunate to lead a tremendous, very passionate, very driven team of individuals that oversee SUMMIT every single day. I've had tremendous and very fortunate experience to work for some of the greatest brands in the world from Disney to the NFL, the Formula One, just to name a few. And it's that experience, everything in each of those different venues, in each of those different verticals that have ultimately brought me to the opportunity here today to run this global destination. So when you think of SUMMIT and you think of what it offers, it truly is unique, and the journey itself is something that's different than anywhere else you're going to find in the world. People go to other places to see it. They literally go up and they see it, they look out. At SUMMIT, people come to SUMMIT to feel it. Everyone's journey is personal and unique amongst themselves. When you have people walk away and say they feel like they were in a glass jewelry box or dreaming in a kaleidoscope, well, quite frankly, you know you've done something right. How many have you been up to SUMMIT? So everybody here knows exactly what I'm talking about. For those of you who haven't been up there to SUMMIT, I'm going to give you guys a little look at what you've been missing. Can you show the video, please. [Presentation]

It never ever gets old. To steal a line from Willy Wonka, at SUMMIT, we are the music makers. We are the dreamers of dreams. So let me set the tone, if you would, because a lot has happened, but take us back a year, last October, while does the country and New York City was facing new mandates, the second wave of the global pandemic, vaccine checks, mask mandates, everything else being put in place. We came forward and we forecasted 1.5 million guests coming through the doors with $91 million basically being generated revenue. Well, we not only met those goals. We exceeded them. Under those circumstances, that's pretty remarkable. Understandably, news of SUMMIT spread all across -- all different media outlets across the globe, from print to TV. There's one thing for sure. Everyone knew that there was a must-do destination on the scene, SUMMIT One Vanderbilt. We quickly became one of the top things to do in New York City. And even more incredible, when you stop and think, in an area where social media is king and content is that, that goes across all different platforms, being named one of the top and most Instagrammable location in the world definitely has its perks. We've had people from all 50 United States come through SUMMIT. And even though a lot of folks may visit us from the Tri-State area, the fact is, is we have people from all across the country that make sure it's a point to come to visit SUMMIT when they come to this city. The UN recognizes over 190 countries in the world as of right now. And of that, we've had over 130 different ambassadors from different countries come through our doors, all of them leaving away with a sense of all. The fact is, whether you say it in French, Korean, Portuguese, German or English, one thing is the same for everyone. SUMMIT transcends all languages and it turns every single person into a storyteller. In a world where celebrities and influencers are not easily impressed, and we all see it, the fact of the matter is SUMMIT offers something special, unique, an opportunity to share something authentic and magical. The content they create on their own has been generating excitement and driving awareness for SUMMIT across all different areas of the globe to the tunes of millions and millions of people. Athletes, musicians, entertainers, movie stars, all of them, all of them have one thing in common, they love to be seen. But what makes this unique is they all want to be seen at SUMMIT. Other brands usually have to pay for this sort of endorsement, this involvement, if you would. One of the things we have to deal with daily is just managing the constant flow of request that come in to our staff. From concept to execution, when you're building out a brand, part of that that's so incredibly important is that organic growth, especially being involved with a vested and engaged community. Take Instagram, for instance, one of the biggest platforms in the marketplace right now. While other New York observation decks who have had accounts for 10-plus years, within 1 month, 30 days of opening our account, we surpassed almost all the social communities throughout all the different New York observation decks. And when you consider our unique content that no one else can do and our current upward trajectory, we expect to be at the top of that social media mountain in no time. In total, SUMMIT has been featured in over 1,500 placements across the world in media outlets, reaching 62 different countries. Over 700 celebrities and influencers have come through -- by the way, which we paid for, none of them, that's never heard of. No one else does that. How do you do this? How do you deal -- what does that mean? It's about reach. In our instance, we talk about impressions, 27 billion of them, pretty exceptional, pretty remarkable. That's from all around the world. And all the buzz about SUMMIT has done a couple of things for us. It's created an incredible amount of awareness, 42% of awareness within New York City DMA, within a year. And for those of you who live here in this market, you know it, it's crowded, it's expensive, and it's noisy. To break through that noise is an accomplishment in itself. To do a 42% awareness is even a bigger accomplishment. And even more, when you talk research for people coming from all around the world, when they talk about coming to the city, we have 28% domestic awareness from those people. When they come to New York, they've not only heard of SUMMIT, but they want to come here. You want to know what else? As positive as that is, we haven't even really hit our stride yet. We haven't even really started going at this point. It's easy to stay up here and tell you about all the great things that happened within SUMMIT, but the point is, life's also about the journey, from concrete whiteboards, starting at the very beginning, to open our doors a year ago, the amount of work that has been done here to bring SUMMIT to life is nothing short of exceptional. It's no coincidence that SUMMIT actually runs more streamlined and more efficiently than other destinations worldwide. And that, in those examples, those people have been doing it for years, in some cases decades, but they don't run with the same seamlessness or diligent efficiencies that we do here after only 1 year. We are only going to continue to get better. We worked to make sure that we have the right pricing strategies in place. We do this for multiple reasons. One, we want to increase demand, optimize conversion and make sure we encourage people to revisit every time slot, everything you come through, no matter what the day, the weather and/or the incident which you come through, SUMMIT is so much more than just a tall building with a great view. You come through an exceptionally in-personal experience. It's also extremely important for us that anyone who comes through our doors has a great time, anyone. We've worked with a select group of individuals who have offered us accessibility partnerships and programs to make sure everyone has a great time, no matter what their background is, who they are or where they come from. It starts and stops with training. The staff that we have are the best in the business. It all starts with them from that guest -- that public-facing guest experience, if you would. We've not only learned from the best, bringing in folks such as Disney, et cetera, but we've also devoted our own proprietary materials, allowing our team to take ownership of what it is that they're doing and anticipate those guest needs. We've established different dynamic staffing models. It's not just the same group every single time. So as you can see from the light sort of flashing on here, depending on the floor plan, depending on the day, depending on the projected attendance, we are able to optimally fluctuate the number of team members in the areas, in the floors, in those experiences to do 2 things: one, to deliver a better guest experience; but then two, also improve labor costs. We have a strong process in place to make sure that we are able to communicate and listen to all of our guests that come through the space across multiple channels, depending on what their preference is. Timely, courteous, consistent. What our guest tells us matter, and we listen. We look at every single thing that we hear as an opportunity to improve, to get better with every guest that comes through our doors. Data, data and data. We know everything that's happening within our space. We drill down on key efficiencies, looking for efficiencies across everything that happens. We piloted our own technology. They've helped us learn how to optimize the travel of guests as they're coming through the space, reducing wait times, but also increasing the throughput, higher visitation satisfaction, monitoring and measuring everything. That equals positive growth across all the different verticals that we have within SUMMIT. To our third-party and other brand extensions, if you would, we're making improvements to our menu, our photo opportunities, our merchandise, all of which are extensions of our brand. We're doing this based on consumer insights, but also purchasing patterns. We do this so that we can continue to grow our revenue as we head into '23. How do you market something like this? Well, we've had 2 phases now. So first of all, how do you market something that's different than anything else anywhere in the world. So we did just that. When we rolled out our Reimagine campaign, it accomplished what we're looking to do by educating the market on SUMMIT before we opened, but also creating intrigue, creating and teasing an opportunity in the market itself. Now where do you go from that? You go forward. You go forward with the opportunity to take the genesis of creativity, of innovation, of all the things that happen within the marketplace, but you do that by then taking a step further, not by what we say, by what our guests say. For that, I'd like to show you the new direction we're heading with our marketing. If you would, let's roll that video, please. [Presentation]

There sure is a certain brilliance and beauty that comes with marketing a space such as SUMMIT. When you can have guests that come through your space evangelize your brand for you, you've had a whole new plateau, a whole new height, if you would, because it's not just what we're telling you. It's what they are -- they in turn are becoming brand ambassadors. They are the ones that are carrying the message for us when we do that. A multi-central campaign where the foundation of the message itself is grounded in what our guests say after they go through. It felt like it allows us to captivate audiences, not only with stunning visuals, but strategically connect with them in the platforms and the messages that they write, that they like and they ultimately then evangelize for us in the marketplace. It effectively communicates the breadth of what SUMMIT is and what -- how different we are from everything else, allowing us to reach a whole new set of diverse audiences. But we do a lot more than that. Public-facing efforts are important. They absolutely are, but it shouldn't overshadow some of the things we do on the philanthropic and community outreach side as well. And for that, we created SUMMIT Foundation. We look at it as another further extension of what we do on the brand side to give back to the community, give back to those areas within New York. For this reason, we've committed to donating 1% of all gross ticket sales to local charities throughout the New York marketplace. Because we are New Yorkers, we want to make sure that we give back where it's needed. There's so much more for the future of SUMMIT. If you think that's exciting, what we've talked about so far, you can't even imagine what the future holds. It's going to be quite incredible. When you stop and think, the visitation for New York isn't even back to where it needs to be. But guess what? It's coming. Going into '24, we know that levels of inbound tourism is going to be back to where they were prior to pre-pandemic limit levels, and we're ready. Next year, we're projected to do over $100 million in revenue, and we're going to welcome over 1.7 million guests. And by the way, that surpasses our original revenue projections, but with a lower guest count. Why is that important? Because to us, unlike other destinations, we're focused on the experience, maximizing the experience where every single person that goes through, not just driving a number, not just driving attendance. Importantly, as you see here, more and more markets open up, we're going to opportunistically spend money where we know it's going to drive results, going out and specifically talking about specific chosen markets internationally, when those things are coming available, because we know those and -- those people are going to come to New York. And when they come to New York, they're going to want to see SUMMIT. Lastly, you heard Rob say there was an overwhelming amount of interest coming from people all around the world who have an interest in bringing SUMMIT here. Well, we're ready. We strategically built the brand and the infrastructure of SUMMIT to make sure that we can translate what we do to all new locations. Agile, learning-oriented. We have the processes, technology and the right team to be able to springboard into this, to accelerate that global growth. I started with one quote. We're going to end with another by someone who knows a little bit about experiences of magic, Walt Disney. "It's kind of fun to do the impossible." I appreciate your time today. Next, I'm going to turn it over to Ed Piccinich, Chief Operating Officer and Executive Vice President. Thank you.

Good morning, everyone. I'm Ed Piccinich, Chief Operating Officer. And this year, I celebrated my 20th anniversary with SL Green. I usually have the coolest presentations, with videos, Venn models, all the bells and whistles, but I must be on Santa's naughty list because my topic won't be nearly as flashy as what you've seen. So when I was asked to present on expenses, a boatload of diligence items came to mind, along with the pressure realizing I would be challenging killer Matt for his title belt for one of the driest presentation topics ever. It's a pretty substantial topic to say the least. And because of the market we're in, it cleared the way for me to highlight our historic thoroughness and, in short order, demonstrates how and why our approach is of seminal importance. I've been in this business for nearly 4 decades and experienced major events that tested our resilience. Laid here on our SL Green stock price are some notable periods in our nation's history, some of which fed into economic breakdown at the time. Whether it's physical attack to our buildings or the 6 who died in 1993 who worked just down the hall from me at the old World Trade Center or when I was called out for an impromptu meeting in California, the day before 9/11, only to learn I would lose 100 more friends. These tragic events triggered changes in security technology and building operations to what we consider normal today, everything from access controls to turnstiles, to bollards, you name it. We can look back more recently to points of financial recession. In 2008, we achieved credit and lacks lending fuel of the housing bubble in 2009. Regardless of the situation, I've led an ever-growing team of professionals who take pride in preparing for anything that comes our way and quickly respond when this business needed us the most. It's always something and it's never what you expect it to be, now today's crisis is inflation, an iceberg that our strong planning has prevented us from hitting head on. The fact of the matter is, New York has been here before and has pulled through economic turmoil, coming out of it bigger and better than ever. We got this, and I'll show you how. You've seen high-level versions of this data in the past, but now allow me to bring a more detailed perspective into the fold. This pie chart shows our 2023 pro rata share of operating expenses as $477 million, nearly half or $193 million is influenced by our powerful containment measures. The remaining 59%, $284 million, shown in gray, are relatively fixed expenses. And although assumed uncontrollable, trust me, we do our part to actively manage them as well. I'm confident you will soon have a better understanding of the management muscle and exceptional results behind this nearly $200 million that falls under my responsibility annually. We have a toolbox in place to maintain our costs across all expense categories as shown here on this grid, but I will only touch on a few. Under payroll, we directly hire cleaners to save on sales tax that would otherwise be charged by third-party cleaning contractors. We are actively involved and collected bargaining agreement negotiations, which covers the lion's share of our building employees and provides us with a greater degree of wage predictability and accurate budgeting. Our collective influence as owners under the Realty Advisory Board umbrella further strengthens our effectiveness. For R&M, we trained and deployed our in-house skilled labor to complete work, steering clear of contractor overhead and markups, thereby avoiding major capital expenditures. Moving to contracts. We leverage the scale of our portfolio through bundling opportunities for both construction and R&M projects, realizing material savings and benefiting from these discounts. Hats off to Meghann Gill and Bob DeWitt, who run our operations and construction groups, respectively, for leading this charge. Our intense bidding process across all lines of business allows us to partner with preferred vendors and execute multiyear service contracts with attractive locked-in rates. And under utilities, while portfolios aggregate electric load provides competitive pricing during the RFP process. We also audit building consumption, strategically invest in energy efficiency projects and implement energy curtailment events like nobody's business. So here's how this master plan is performing with the actual results. Building payroll is the largest expense line, accounting for 15% and sees regular year-over-year increases. The right margin details exactly what's included in each category. We extrapolated our pro rata share over the past 5 years, projecting into 2023, for our same-store portfolio, excluding One Vanderbilt. We've simulated a normalized projection at a 1.7% inflation rate using a stabilized year, 2019, with physical occupancy hovered around 80%. 2020, '21 and 2022 were non-normal years because of the effects of COVID and low tenant population. We were one of the first companies to reduce staff in line with occupancy levels, which drove the large reduction in payroll during those periods. Next year, 2023, performance is expected to be well below the historical trend of 1.7% and significantly below the current 7.7% CPI. Our goal is always to outperform our budget by making vital decisions during the year to mitigate financial exposure and protect our bottom line. The R&M prong, which is 5% of our OpEx pool, includes repairs and maintenance outside of capital expenditures. In other words, we may not be replacing a cooling tower, but we may change some of its parts to bring it back to its former glory. In this line, there are no significant year-over-year savings compared to payroll, given occupancy is not a major driver for R&M. Instead, it is dependent upon the makeup of our mechanical equipment, typical HVAC parts of supplies, interior and exterior repairs and telecom. In 2020, we deferred several R&M projects and further bolstered the use of our in-house labor market, rather than outsourcing it. Our engineering [indiscernible] currency and our extremely talented local 94 engineers have been a huge part in managing these expenses. In 2020, we elected to suspend several cleaning contracts due to the decrease in foot traffic. Metal, marble maintenance and window cleaning weren't as crucial. And we carried this forward into 2021 without compromising our ability to deliver best-in-class services. Although we budgeted the 70% occupancy in 2023, we will make necessary adjustments to scopes of work and frequencies to better align with tenant and building profiles. What's amazing to see is that in almost every case, the story is the same, 2019 and 2023 are nearly equal. While it may look like our expenses are up year-over-year when compared to a normal year, there has been little to no increase. One of the largest components in service contracts is the security officers who are overseen by our Director of Security, Ari Mahairas, a 25-year FBI veteran. Unfortunately, we've seen a high turnover with our army of guards, post COVID, mostly driven by pay disparity. Many employees are shopping and comparing their perspective employers' rates and benefits or leaving the security business entirely for higher-paying jobs. So in order to attract and retain high-quality labor, we, along with other owners in the city, have had to increase our minimum wage rates by roughly 13%. We may be up in this category, but we will never compromise tenant safety. Our buildings are known as the most secure in the city, and this is an area where we will not cut corners. Moving on to commodities, which has been a hot topic this year. The impact has been visible at the pump and on your home utility bills. Steam and water accounts less than 30% of our utility costs and are paid to the provider based on market pricing. The natural gas and electric, half of our expense is transmission and distribution, which is a fixed cost controlled by the Public Service Commission, earmark for infrastructure upgrades. We actively manage the supply portion of these utilities by executing long-term 12- to 24-month locked-in rate contracts. In some cases like 2019 and 2020, for electric, we paid slightly more on supply than if we were charged market rates. But over the 5-year period, we actually saved nearly $2.5 million across both gas and electric. We developed a comprehensive program taken into consideration external drivers such as weather, geopolitical policies, natural gas reserves, base building energy efficiency projects, occupancy and building profile. A shout out to [ Alicia ] who drive these pivotal decisions with input from our market-leading energy consultant and [indiscernible] ESG team. Although this year, we had to renew in an energy market that wasn't in anyone's favor, the good news is we are locked in for 2023, and expect to remain relatively flat in 2024, and we'll continue our energy saving efforts reducing consumption and creating efficiencies wherever possible. Here is a summary of all the categories I detailed, but rolled up on a per square foot basis. We are passing expenses through to tenants in accordance with lease terms to maximize recoveries and have entered into multiyear contracts taking advantage of preferred pricing. My team knows I am an unsatisfied optimist when it comes to our results, and we're determined to press forward on all fronts. They are like a platoon fighting a guerilla war in the jungle when it comes to our expenses. They know culture eats strategy for breakfast every time. Bottom line is that the people implementing the plan are the ones that make all the difference in the world. All right, ladies and gentlemen, you can all wake up now don't press the snooze button because I present to you the one and only welterweight champion of the world of boring topics, Matthew DiLiberto. They're awake. They're all yours.

Thank you. All right. Thank you, Ed. Historically very accurate introduction. I don't think there's anybody here that's going to dispute you've got the belt. That was mind numbing. Very informational, but you walked around to at least show you're human, there's no plugs, USB ports or anything like that, but step it up next year and do something on like the science of paint drying or take it up a notch. Thank you all for joining us here. One Vanderbilt has run it all along. That's typical for us. I would say in person, but Steve, you're sitting so close to me, it's like face-to-face. So we're doing kind of one-on-one meetings here. 25th year in a row in person. So I appreciate you all being here. I'm going to start with a discussion of liquidity and liability management. Obviously, 2 topics that are always front and center for us, but particularly so in this environment. Starting with liquidity, 1 year ago, I showed you our plans to maintain at least $1 billion of liquidity in 2022, which we did successfully achieve, albeit in different ways than we might have expected a year ago and the backdrop of a more challenging financial market, complementing over $300 million of FAD dispositions that generated nearly $1 billion, headlined by the sale of vacant condo at 885/3. the successful financings that generated nearly $600 million, particularly the upsized mortgage at 100 Church that Andrew talked about and our new unsecured bank term loan. This cash was directed primarily to $1.1 billion of debt repayment, including all $800 million of our public bonds as well as $200 million of share repurchases and unit redemptions, slightly less than we originally expected as we pivoted capital from share repurchase to debt repayment. And then we spent around $150 million, a little more on acquisitions, which given all that we acquired is actually our nominal amount. Rolling that forward to 2023, we'll be bolstering that liquidity stockpile even further over the course of the year because in this environment, in particular, liquidity is not only our best protection, but our best ammunition. As has been the case for several years, we expect to be very active on the dispositions front, generating over $2.4 billion through a combination of outright in JV sales, the most significant of which is the 75% JV of 245 Park Avenue. We'll also be receiving, as Rob said earlier, almost $600 million from our partners at One Madison when we get TCO in the fourth quarter. With that liquidity, we'll get back to opportunistically buying back stock at a steep discount, expecting to complete our $3.5 billion of current authorization while executing on the largest debt reduction in the company's history in any one year. So I'm going to touch on that more in a second. After all of that activity and funding, our reduced development of first-generation capital, we'll end the year with almost $1.6 billion of liquidity. As to our debt levels in the second quarter of 2022, primarily in response to rising rates, we pivoted our capital allocation strategy away from buybacks and PPE investing to debt repayment, particularly corporate debt. We used the proceeds from asset sales to pay off $300 million of bonds that matured in October. Then we repaid another $500 million of bonds in October -- sorry, $300 million in September, $500 million in October, with bank financing, not a new bond issuance as I originally telegraphed last year. That leaves us with no public bonds outstanding. Now we do believe public bonds will be a fundamental part of our capital structure going forward. But in this environment, particularly as a short duration financing tool, they simply aren't efficient. At that point, we are on a path to reducing our debt by about $360 million. Then we took on these 2 assets, strategically acquired, very high quality, both of which have been levered prior to us taking an interest in them, that had the effect of increasing our total combined debt. So in 2023, our plan is to dramatically reduce the debt load. The most impactful part of that plan is obviously the 75% JV interest sale at 245 Park, which alone would reduce combined property level debt by $1.3 billion. We sell at 75%. In addition, the funding from One Madison has been earmarked entirely for debt repayment. That will help bring our revolving credit facility balance down to 0 where we always prefer it to be. And the execution of this plan will not only bring our combined debt balance by -- down by $2.4 billion over this past year, but $750 million lower than it was at the end of 2021. And turning our attention to the most talked about topic this past year and before Sandbank and [ Freed ] and the world's richest man buying his favorite video game took the headline, interest rates. This is the curve today as compared to what it was presented 1 year ago, 360 basis points higher at the end of this year than it was projected to be when we presented this 1 year ago. We had to take swift action to mitigate the effects of this curve. The capital allocation pivot to debt repayment was part of that plan. It also involves an extraordinary hedging activity, starting with $1.8 billion of current or forward starting swaps, these have terms that generally match the depth that they hedge and go as far out as January of 2028. If we were to enter these swaps today, some of the rates that you see here would actually be 100 basis points higher than when we locked them in. Based on the forward curve, this saves us about $17 million of cash interest expense next year. Then we did $1.5 billion of LIBOR and sulfur caps, primarily on JV floating rate debt. All these rates have been hit or will be hit by the end of the year, making this debt fixed for as long as the curve remains above the cap rate. And we may -- we plan to maintain these caps all the way through 2024. These caps save us an additional $40 million of interest expense after factoring in the upfront cost to put them in place, which has gotten a lot of attention. This debt repayment plan and all that hedging activity leave us just $800 million of projected floating rate debt at the end of this year, going down to $500 million at the end of next year, equating to only 6% of our total debt after factoring in the hedging factor for our floating rate DPE positions, well below our typical target range of where I would say 15% to 20%. Note this is what's left of our primarily JV positions. We don't unilateral control the hedging strategy. Suffice it to say that if we did, these would likely be fixed as well. Moving on to earnings guidance, which was issued in an 8-K this morning. So if you haven't seen any reconciliations, you can go back to that. Looking back at 2022 to start, given all that's transpired in a year of incredible volatility, it's quite a testament that we still expect to maintain or expect to remain within our original guidance range, albeit at the low end of that range. Just the rising rate drag alone cost us almost $50 million compared to our original guidance. We also have reduced PPE income and a higher share count as a result of that capital allocation pivot away from new originations and share repurchases to debt repayment. These drags were offset primarily by incremental other income, which again shows our ability to source ancillary income streams that take advantage of the scalability of our platform as well as lower G&A resulting from reduced executive compensation. Moving on to 2023 and building up the components after completing just $200 million of share repurchases and unit redemptions this past year, before we paused the program. We've assumed that we will opportunistically get back to buying stock to close out our $3.5 billion authorization using just the proceeds from asset sales. Given the extraordinary discount to NAV, I expect that when we expand this program we will be back considering an expansion of the program further. In the real estate portfolio, GAAP NOI of $751 million, reflective of occupancy that lags in the office portfolio in the first half of the year, while positioning the portfolio in this market allows us to improve in the second half. This occupancy drag comes as we swim against the -- swim upstream against rising expenses, the dynamics of which Ed just took you through, real estate taxes that are again on the rise, 3% in the same-store portfolio, excluding One Vanderbilt, that is obviously going up by a lot more. Specific to Manhattan office portfolio, that's over 94% of our GAAP NOI these days. One Vanderbilt is expected to move into the same-store portfolio, GAAP NOI increasing to $122 million at our share, while cash NOI increases more dramatically at our share to $105 million. This gives effect to the 10% to 15% potential JV interest sale that could happen sometime over the next year. And we expect to finally get our hands on previously reserved receivables that I had telegraphed we would get in 2022. We were unable to, because it's in a court process. While on the downside, we have the impact of those increasing operating expenses, as well as the drag of larger lease expirations that caused our same-store occupancy to hover around 90% in the first half of the year while recovering in the back half. The Debevoise space at 919 Third Avenue expires in February. That's 47% pre-leased, but the new tenants don't generate revenue in '23. The NHL space expired just a couple of days ago at the end of November, that 1185. And Amazon expires in April at 1350 Avenue of the Americas. Both of these spaces are in the process of being leased up. Now because Manhattan office generates 94% of GAAP NOI, I don't need to do the buildup as I typically did of all the smaller yet material components of our operating portfolio. We don't have much beyond office now, so I'll just use the table. In the development and redevelopment portfolio, we generate cash NOI -- I'm sorry, GAAP NOI from 750 Third and 625 Madison, but the entire portfolio taken as a whole generates negative cash NOI. In the high street retail portfolio, this is really 2 assets, 650 Fifth and 1552, they generate virtually all of the retail revenue these days, the retail NOI. That's ahead of 760 Madison coming online with revenue recognition expected in 2024. Suburban residential portfolios, top column of portfolio, we only have one of each. There's an uptick in NOI as a result of 7-day coming online during the year ahead of its expected sale later in the year. Some housekeeping on the same-store portfolio, 2 assets coming in. One Vanderbilt enters the pool with significant growth as tenants continue to take occupancy and 220 East 42nd Street makes an appearance again after it was removed following a 49% JV interest sale in 2021. While on the other side of the coin, most of the assets that we expect to bring to market for sale are not within the current same-store pool, 110 Greene and 719 Seventh are exceptions. Recall 719 Seventh is currently vacant and does not generate any NOI. And 2 Herald moves into an alternative use redevelopment strategy after WeWork expected early termination of 184,000 square feet of office space. In same-store NOI following a strong year in 2022, north of 4% growth. We see moderation next year to 2.5% to 3.5%, driven by One Vanderbilt's enormous growth, along with the Suntory lease at 11 Madison signed back in 2021 that now generates cash rent, offset by the same-store occupancy I've talked about a couple of times that drifts lower. In the first half of the year, it's around 90%, driven by the tenant rollout at 919, 1185 and 1350, along with the effect of rising operating expenses. And we also have a comparability difference because we recovered some operating expenses in 2022 that are not replicated in 2023. Same-store GAAP NOI, the tenant rollouts have a more dramatic effect driving the larger negative. Moving on to other components. Over the last several years, we have strategically reduced the debt, and preferred equity portfolio, it's the lowest it's been since 2011, trend slightly lower next year. We expect the repayment of a $60 million position with no new originations although, we are looking at a lot of new deals, I would expect maybe a stretch goal to maybe do some originations, but we have not projected any in our guidance. That gets our DPE income down from a high of $213 million back in 2016 to just $44 million next year. Now we have the ability to scale this portfolio to whatever size we want it to be based on where we are in the cycle and the opportunities we see in the market. The subordinate lending business is a competitive advantage for us. It gives us an immense amount of access to information on the market along with access to some of the best assets in the market as you saw with 245 Park and 5 Times Square. So do we see this business growing again? Definitely. In other income, our ability to consistently generate and grow high-quality ancillary income streams is now clearly proven. These are not one-timers, stop backing them out. And then -- and in 2023, that number is expected to grow to $82 million. Recall in 2022 we expect the number to be around $40 million, and it grew to $68 million. We're growing that number to $82 million next year. The asset management model continues to generate more third-party management, leasing and construction fees. We're sourcing more special servicing assignments, keeps the asset management team very, very busy. And SUMMIT, you heard from Michael, hitting its stride. The operator entity next year contributes over $12 million, several million more than this year, and that's after paying substantial rent for One Vanderbilt, which shows up in NOI. Layer on top of all that, lease termination income of around $17 million, $11 million of which we have already identified. And interest expense, I'm not going to spend a lot of time because I already walked you through the efforts we have taken to mitigate the effects of rising rates, including an extraordinary amount of hedging activity, but the overall cost of debt, be it fixed or floating coupled with higher debt levels in the first half of the year before we reduced in the back half of the year, contribute to an expected increase in interest expense of over $1 a share. This is net of $148 million of capitalized interest on our development and redevelopment projects. So where do we capitalize interest? Down from 9 properties, just 8 next year. The projects at One Vanderbilt and 7 Dey are completed, so they come out. We also sold 609 and 2/3 of 885 Third. They were in redevelopment and capitalized in 2022. They come out. We add 5 Times Square, 245 Park and 2 Herald to the list. While it's a shorter list of properties, it's higher capitalized interest next year as a result of higher rates on the property level debt that's capitalized as well as an increase in the average consolidated debt cost of the company that's what's used to capitalize debt on the equity investment in these projects. Finally, in G&A, the $3 million of savings we achieved in 2022 by making substantial cuts to both cash and noncash executive compensation carries through to next year, along with other cost containment measures. We have a rather austere investor conference these days compared to what we did many years ago. That's part of the cost cutting, sorry. We have almost a 10-year low in G&A achieved next year. That's even after the inflationary pressures on wages and a material increase in our office occupancy cost. Because in this space where we don't own 100% of the building, we do pay rent. Rolling up the components, we get to a projected FFO midpoint of $5.45 a share. It's a year-over-year reduction that reflects a more conservative view of the leasing environment as well as historically high increases in expenses, along with a lower contribution from our DPE portfolio and most impactful, of course, a dramatic increase in interest expense. All things considered, we weathered what we believe to be a reset year in 2023 really well. And more importantly, what you've heard throughout the day today, we feel very good about how we are set up moving forward. That $5.45 midpoint helps us establish our guidance range, 30% range, $5.30 at the low end to $5.60 at the high end, which, of course, we look to build on in the years to come. And finally, everybody's favorite, FAD, which is what most people consider to be operating cash flow. It also so happens to be the benchmark for our newly established dividend level. Our conservative view of FFO, coupled with increased second cycle capital spend as we fund 2 years of enormous second-generation leasing, but we have taken a hatchet to other discretionary projects at the properties, we cut back like we did in 2020, all nonessential work at the properties to retain as much cash flow as possible. This is a reference slide for later. These slides do live on in static form on our website. If you want to look at them later, hopefully minimize calls to me, here are the -- some of the larger fundamental assumptions in our guidance range. Notice I said to limit the calls to me. And concluding with -- I get to make an introduction. So I have a spectacular team that works with me every day. We have a new addition to that team, our Senior Vice President and Tax Director, Laura Jackson. She's going to discuss the dividend in more detail. She's going to tell you a little bit about herself. We were thrilled to have her join us. She is one of the masterminds behind our very complicated intricate profitable tax strategies over the years. She led the SL Green tax team at FTI for almost 2 decades, and we're thrilled to have her join us on the other side of the table. With that, Laura?

Thanks, Matt. So great to be up here. As I'm sure you can imagine, when I got the call to join this impressive leadership team, it was impossible to say no. As Matt mentioned, prior to joining SL Green, I spent almost 20 years working at FTI Consulting focused on complicated tax structures and tax compliance for REIT funds, family office and most importantly, for SL Green. I co-led the FTI tax team of 90-plus individuals, had a seat on the FTI Women's Global Steering Committee for the women's initiative and served as ambassador for the diversity, inclusion and belonging Group. I spent my limited fair time focused on DEI initiatives, which is a selling point joining SL Green as Marc, Andrew and the team are so passionate about New York City community involvement and philanthropy. I witnessed this firsthand through the support I received when I explained to Marc and Matt this year that I wanted to work with She Builds, the group of women in real estate that I founded to convert a vacant plot of land in the Bronx into a community garden to address the food and security our Bronx neighbors are facing. And now I lead our tax group, and I'll be covering the dividend today. As was announced this morning, we'll be reducing our annual ordinary dividend 13% from $3.73 to $3.25 per share. The dividend will be paid all in cash and we'll be continuing our popular monthly payment cadence. Our objective continues to be providing investors with a meaningful sustainable ordinary dividend while maintaining substantial liquidity and paying down debt in a rising interest rate environment. The 2023 dividend of $3.25 per share aligns with our current business plan, representing a 100% distribution of projected 2023 FAD and a 60% distribution of projected 2023 FFO. While we ran various scenarios reflecting a lower percentage distribution of FAD comparable to prior years, our decision to move the dividend to 100% of FAD was a balance of parent cash management with a projected 2023 taxable income, which might require a special dividend. Based on our closing share price on December 2, the dividend results in a yield of 8%. You may be wondering about the correlation between distributing FAD and the REIT requirement to distribute taxable income. So I'll walk you through that now. By law, REIT must distribute 90% of taxable income. But practically, REIT distribute 100% of taxable income as otherwise, the remaining 10% would be subject to tax. As Matt already walked you from FFO to FAD earlier, we'll start walking through FAD. To get from FAD to taxable income, we first reduced for cost recovery deductions such as depreciation. We adjust for our tax entity structure such as activity included in the taxable REIT subsidiary. And we adjust for differences in capitalization between GAAP and tax. And lastly, we add capital gains generated by assets sold to arrive at REIT's taxable income, the amount that has to be distributed. While we've established our new dividend based on projected FAD, if we successfully execute our current business plan for 2023, and we wouldn't be presenting it to you, we didn't expect to achieve it. Our ordinary dividend will need to be paired with a special dividend to distribute 100% of taxable income and cover the additional capital gains generated from asset sales. So how does our dividend yield stack up against our office REIT peer set? You'll see here the current dividend yield of our office REIT peer set utilizing the 2022 dividend. And after factoring in our new dividend of $3.25 per share, we have one of the highest dividend yields in the office REIT sector, which is partly reflective of our undervalued and underappreciated stock price. One of our peers has explicitly said they will lower their 2023 dividend. And if other peers follow suit, the chart may look very different. And if you compare directly to our New York City office peers, our dividend yield is at the high end of the range. which again does not reflect any dividend cuts that our New York City office REIT peers are planning. And now I'd like to welcome Marc and Andrew to cover our annual scorecard. Thank you.

Thank you, Laura. Welcome to the team and your first investor conference presentation. Well done. All right. So now, we got through made the presentation we're going to wrap up, as we always do with a look at scorecard and 2023 goals and objectives. Score -- try to make up a little bit of time so we can get some Q&A. Scorecard we adhere to these stretch goals every year. I think this year, we had 20 different stretch goals that we set out for ourselves back in December and tough market, as you heard, but we had a good year and met as many as we could, notwithstanding changing market conditions. So we'll go through them in detail. Here's the -- I guess, the reveal of the full scorecard in terms of where we succeeded, where we missed and ones we're going to leave to your discretion. Those are the yellow ones. In leasing, we -- you heard from Steve Durels earlier that we've signed over 2 million square feet already. We expect to end the year at 2.4 million square feet. Unfortunately, even with all that leasing, wasn't enough to hit our growth goal of 94.3% for same-store occupancy. We expect to be between 91%, 92% by year-end. I think we're at 92% at the moment. And we, I think, did reasonably well at holding the line on rents, which were down is like 6%, but outside of our goal of keeping them relatively flat. On share repurchases, we announced earlier in the year our pivot from investing dollars actively to more retirement of debt. You saw the effects of that when Matt went through the balance sheet but we did not deploy $250 million or more into share repurchases. Acquisitions, obviously, Harry walked you through some major investments we made at 245 and 450 Park Avenue. So there, we easily exceeded our goal there. And on the disposition front, we were very active again. 885 Third Avenue was a welcome opportunity that came up that was not in our plan for the year. So we'll close over $900 million of dispositions this year. On the DPE front, along with the share repurchase as we pivoted away from DPE and made no new originations this year. On One Madison, we exceeded our goal by quite a bit signing not 1 but 2 anchor leases, totaling 675,000 square feet of commercial office putting us ahead of schedule, and we feel very good heading into this year 2023 to be able to meet what will be our stretch goals coming up shortly. We not only commenced steel erection above the tenth floor by November 22. But as you saw, we're going to be topping it out, I think, December 13, which is an amazing achievement, well, well ahead of schedule. Testament to the team, the planning, the execution everything. 7-day, 95% leased overall was the goal. We're at 95.7% overall and it would be closer to 100, but the process and the paperwork of getting those 60-odd affordable units leased up with the various city and state agencies, tough and so there's no lag on a demand basis, it's oversubscribed. On a processing basis with the affordables, we are over 95% will shortly be at 100 in the next couple of months. And then obtaining permanent financing on 7 days. As I mentioned, given that we're putting the asset in the market for sale, we didn't lock in rates on the asset, we'll give a buyer maximum flexibility there are some all-cash buyers out there for residential, so we didn't want to encumber the property and then have to go through the cost of unencumbering it. 760 Madison our goal was to obtain a New York State Attorney General approval and launch marketing of condos, which comes after that approval. That approval was submitted last week. It was delayed a bit by some change in plans requested by the tenants and some optimization of the residential layouts, but we're highly confident we're going to find a lot of demand for that product in 2023. And then on community, we're going to reach 1 million meals served by Food1st. That goal was achieved by a team did an amazing job reaching out and helping a lot of the food insecure New Yorkers. On -- I guess what we call it match performance. Same-store cash NOI growth was projected to be 4.5, man, we almost made it, which actually pretty extraordinary, came up just 0.5 point short, 4%, but to sort of the goal line. We're going to issue $100 million of unsecured bonds. We didn't issue any unsecured bonds, but rather, as Andrew says, pivoted towards issuing half that amount through a very good bank facility that Matt was able to put together and not only put it together enduring acceptable economic terms for us. And he walks you through the rest of the debt plan and how we're going to pivot around that. But as it turned out, that was more than sufficient for what we needed this year, although we fell short of the total financing goal and TRS let's say, probably stands out as the source pulling for us of anything up here on the screen, the metrics are all very meaningful to us, but this one stands out the most. We're all management stays shoulder to shoulder with shareholders. On total return, it was kind of a disastrous here, if you will, for all New York City-based commercial landlords, which, on the one hand, is very disappointing. On the other hand, makes me very optimistic for the gains that I think we can make going forward from here. On ESG, GRESB score 92, this one, again, a little tough because we improved our score on every metric from year-to-year, but there were 20% new participants. So the scaling was such that most companies went down by 1 point. We stayed at the 89. So even though we gained in all the subcategories, our overall score as weighted and scaled didn't meet the 92 that we hope to get, but we did improve in all areas. Last diversity maybe?

Further diversify the board. We added Carol Brown. It's been a terrific resource on the Board of Directors, had some great insight this year. So we did achieve that goal, and then obtaining the downstate casino license. The state has not yet issued its RFPs for those licenses. That's expected to happen, I think, in the first quarter of '23 now, right? they're not...

Yeah.

[indiscernible] but should be out shortly. And as you heard earlier from Brett and the team, we're very teed up with our group and ready to compete aggressively for this license.

Okay. So that brings us to 23 goals and objectives. We put our necks out there with some stretch goals that stretch beyond the budgets and the assumptions that Matt has taken you through, which form the basis of today's guidance similar categories, but not all the same leasing. We are looking at stretching the amounts that were in -- submitted by Steve to 1.7 million square feet of leasing, which will hopefully drive occupancy above where it is today. So net gain for the portfolio for the year, 92.4% same-store and again, do it at a mark-to-market that we're stretching and saying we can keep the rents roughly flat year-over-year, and we would look at increased occupancy and holding the line on rents and big volume is collectively a very good job for the year. On the investment front, I think as we complete our liquidity goals, we should be able to complete the share repurchase this year. So that's $122 million remaining on that program before we consider going to the Board and seeking additional authorization for share repurchases to take advantage of what I showed you earlier is a very depressed stock price versus the sale prices we're achieving and Street NAVs. Acquisitions and dispositions, we don't really have any acquisition targets on the horizon. But as you saw this year, things do pop up. So we put a modest goal of $200 million for acquisitions and dispositions, we intend to have a very active year with $2 billion of dispositions, helping fund that big deleveraging that Matt spoke about. And then on the DPE front originations, as I mentioned, the market is ripe for nonbank lenders right now, and we hope to put out $100 million at 12%, which is reflective of a 150% increase in expected return from an 8% sort of average on our program to what we think now has moved out to 12% or so. And on One Madison, just to kind of bring this project home, we look to -- you saw there were 2 floors of podium leasing we look to sign on a stretch basis, 265,000 square feet of leasing, we bring this almost to 75% if we can get that done. And Rob alluded to it earlier that we -- notwithstanding years ago through said before COVID and interest rates and supply chain and everything set a target TCO date of November 2023. It looks like we're going to get that done in October 2023 and so one month for what could have been a 6-month delay. So an incredible achievement to not only complete on time but accelerate. 760 Madison, we're going to turn over the retail space to Armani so we can then start the clock on a very substantial lease that we did there several years ago. We think we will get that done Q4 '23, so that's a '23 event, and we hope to be in contract for at least half the units by the end of the year, hopefully more, but half would be ahead of our original projections.

245 Park Avenue, Mr. Sitomer and [indiscernible] have been canvassing the globe and have a very busy first quarter ahead. We hope to sell 50% to 75% of that asset. We put here selling a 75% JV interest in '23. And on 15 Beekman, we delivered the commercial space or the classroom space at the base of the building, the pace actually within the last couple of weeks. The balance of the building is dormitory, which is heavily under construction now. We're targeting turning over that space to pace, getting rent started there in the third quarter of 2023. On financial performance, same-store cash NOI growth of 3% so returning to positive growth there and reduction of debt, Matt talked about the largest reduction of debt in the company's history taking $2.5 billion off the balance sheet this year in 2023. TRS, our goals do not change. We hope to deliver a 10% total return to shareholders. And we hope to exceed the Dow Jones U.S. real estate office index by 250 basis points as we do each year.

So on GRESB, we're going to take another run head it because we think we can. We think there's a little bit more room to squeeze out. We're already at the top of the peer set, and there are diminishing returns. But Laura [indiscernible] team were unhappy. We didn't get that number increase. So they came back and said we're going to get 90 this year, which would put us in the five star category, which we're already in. From a community standpoint, this year, the community is the casino. It's not a bid really on behalf of SL Green and Caesars Roc Nation. It's going to be a bid on behalf of all the Time Square stakeholders. That's how we're going to structure it. We're going to have investors, we're going to have beneficiaries, direct beneficiaries, indirect beneficiaries, halo effect. We want all of Time Square in on this bid. So we look back 5 years plus from now. And just appreciate all the good that a project can do of this scale to help really transform a neighborhood in a positive direction. And that would be, in our estimation, one of our great gift to the city. And lastly, Summit. You heard Mike Williams. We already seeded our attendance estimates for last year, and we're going to go up by more than 10% for this year with $1.8 million in attendance. We can do more capacity-wise, but you heard Mike earlier, we're not looking to maximize attendance. We're going to maximize experience. And we think this $1.8 million is the right balance between above-average revenue generation profitability and still no diminution experience. And hopefully, we'll be standing here next year and able to identify one or more global locations for next summits. So with that, that brings us to the end of the presentation portion. We have some time for Q&A. I'll just take a moment now to thank the entire team. We're allied up in the boardroom over there, it's probably 50, 60 people. who had a hand in helping to prepare everything you saw today, a team that was flawless. We executed, I know you're all listening back there, well done. Thank you. And I guess you can either ask for the mic, submit the questions in this way, we'll take as many as we can do. After this, there's lunch. And I know 90-or-so you're going to pulse through in groups and go see Summit. Have fun. It should be a great time. And appreciate all the attention.

Let's have all our presenters up from today. No questions. I'm going to [indiscernible].

Okay. We have everybody up who is the first question. It looks like this gentleman on my left.

Thank you all for the deep dive again today and every year. My question is more of what kind of economic scenario is built into the 2023 guidance in terms of mild recession or anything of that nature?

Well, let's hit rents, we'll hit interest rates, Matt, first on interest rates. What's built in.

Forward curve. I mean, the forward curve says it all. It's $1 a share of interest drag. We mitigated as much as we could. And mercy, we don't have a lot of debt maturities this year. We have one significant one. [indiscernible] we've budgeted that the rate on that goes up pretty significantly. But otherwise, it's a forward curve, so a steep rise.

But I mean we tend to be view neutral, as everybody knows, on interest rates and economic forecast model the curve on rents, Steve, how would you I know it's a bit of a broad question because it gets district-specific and property specific. But in general, what are we expecting for this year?

No, we think the rents are going to stay stable. We think, as I said in my presentation, there's a bit of a defensive nature by tenants right now because they're looking at what's going on in the broader economy. But the commentary from a lot of those tenants is if I hit the pause button, I actually expect to be back in the market by second quarter of next year. So I view that as most people saying, I'm uncertain, but I'm sure we're leading more towards we're going to get through this without a whole lot of damage, and we're back into a good spot by midyear.

Andrew, the debt markets acquisition.

DPE, we have zero acquisitions and zero DPE in the budget. Obviously, the goal is I put up for stretch goals of $200 million of acquisitions and $100 million of DPE but those are not in our base budget. Those will be opportunity based.

Is that covered or -- okay. Next.

Ron Kamdem from Morgan Stanley. Just following up on the $2 billion of disposition plan for next year. Can you just provide a little bit more detail in terms of pricing? Obviously, some of those assets are vacant. Is there a timing that we should be thinking about as you're putting through your assumptions?

The biggest one of those is 245 Park. So I don't want to steal Harrison thunder down there. But as Andrew said, he and his team already circling the globe, they started a few weeks ago trying to get that lined up. Our goal is 75%, whether it happens in one tranche early or 2 tranches space out over the year. We'll see the reception has been good. In fact, I think Harrison is here and about to go to a meeting after this to discuss 245 Park. So the reception has been great. That's the biggest we model kind of a mid- to late year execution, which is why I say debt loads are higher in the first half of the year and then reduce in the latter half of the year. The other executions are -- they run the gamut. They're smaller assets vacant like 719 Seventh to some 750 Third has been out that's a potential conversion opportunity. So there are quite a few assets out running a gamut. I don't want to give per foot because it would be generalizing on a pretty wide variety of assets that we're going to have out next year.

Generally, transactions are taking longer because financing is taking people longer to line up, source the lenders and really structure the package.

I would just add that on current trading, our implied cap rate, I think, it is over 12%. We think this is a market that's anywhere from 4.5% to 5.5%, 5.75%, depending on asset quality, depending on location for stable assets, not for development deals. And so there's -- it's kind of hard to -- we think we'll be able to transact for buildings like that unless it's a change of use kind of situation. Andrew says a lot of buildings that are trading change of use right now, whether it's health care or resi conversion or life science or whatever it is, those will be pressed more dollars per foot kind of pricing. We're trading at an implied I can't see me what is [indiscernible] a foot, which I'm confident to say we're going to significantly eclipse all that in the deals that we have lined up for next year's dispositions.

We have a tax question.

What's the plan for 625 Madison Avenue?

Well, we're a leaseholder there. We continue to be in rent arbitration with our leasehold position. And then we have our debt position. That position matures in June of this year. So I think there'll be a lot more news on this asset after June to see what the borrower under the debt who is the fee owner is able to accomplish on a refinancing and we should have the results of the rent arbitration we hope in the first quarter of this year or late -- sorry, early second quarter. It's not up to us. It's in the hands of an arbitrator. So a lot more clarity, sorry, if that's murky, but again, there's a little bit of a situation that continues to evolve, and it's tough to really elaborate on any specific plan until we have a couple of those inputs straightened out.

Tony Paolone, JPMorgan. How much does the pursuit of the gaming license cost? And what's the order of magnitude of investment to get what you showed on the renderings?

What was the second question, Tony.

How much does it cost?

How much does [indiscernible] cost and what is the cost to generate what's on the rendering? What's the cost?

Pursuit cost is don't quite know yet. It depends how long this goes and how much we have to put in it. But between us and our partners, we'll be sharing those costs. And we've allotted in our budget for a certain amount of pursuit cost that I think are a fraction of what others are spending that I mean a fraction based on what we hear about the expenditures of other. I put it in the 3-ish million total category before splitting amongst partners. So I would almost call it nonmaterial to us because, again, the building exists. The team has made. We know the plan, and we are already developing images. So...

And the infrastructure exists as well. Yes. new location, transportation, mass trends and all the things that would have to go into literally building a new city.

So I don't want to minimize those costs. It's maybe $3 million, $3.5 million, $4 million in that range, I think others may spend $10 million, $20 million, $30 million, pursuing if that's not our style. And it's not necessary, I think, because we have the best location, the best plan, the best partners and so our view is let that speak for itself. And so hopefully, we can keep it contained within that model. Second question, what is the cost to -- it's a little early, Tony. I mean if we get this award, it would be sometime around midyear next year or longer, we have budgets, we're not prepared to go along yet on what our view is of total cost for the project because the total cost includes not only the cost of what you see up on the screen, but it also includes what will be a bid license fee that's going to be one of the material financial economic items in the RFP, you're bidding upfront license fee, you're bidding tax rate. So more to come on that. But suffice it to say that our cost to convert 1550 for change of use is once again a fraction of what it will cost others to create resort-style casinos not on a 75,000 square foot footprint, but on a 10-, 20-, 30-acre footprint which is what some of these are going to be more like a resort sprawl, if you will, as opposed to what we're all about, which is vertical, dense, efficient carbon-friendly casino in a compact but completely sufficient amount of space that's serviced by more mass transit than probably all the other sites combined. Next question.

We have another text question, but also there is a microphone on the far side of the...

I'll take the one on the screen here. Any thoughts on increased demand for SLG assets from increased east side access. Well, they're projecting. MTA is projecting anywhere between 100,000 and 160,000 incremental riders a day. It's seismic. It's like right here. And yet if I ask average person on the street, 1 in 3 even though about the fact that the Long Island railroad is going to start to have direct service to Grand Central Station starting supposedly in January of next year. They're going to start running some trains. I don't think they're fully operational but they've committed to running trends. And whether that's Jan, February, March, the point is in 2023, we're going to have that direct access and anywhere between $100,000, 160,000 passengers, commuters who used to go to Penn Station are now going to come to Grand Central. That's their projections. It's an enormous benefit to our portfolio, it's enormous benefit to this district and to commuters from Long Island because it will cut estimated 40 to 55 minutes a day off people's commute who used to commute into Penn Station work on the side.

John Kim at BMO. Can I ask you about the mechanics of the $570 million payment you expect to receive from your partners at One Madison. And how does the rising rate environment impact the final payments here?

Who's got the mechanics?

We present them with evidence of TCO, and I believe it's a 10-day window. That's it.

TCO 10 days. I mean it's...

10 days. It's not a fact that -- the number is committed. The number was committed back when they made the initial [indiscernible] they got the deferred upfront purchase price. There's no variability. It was based on an agreed upon amount back in 2021. [indiscernible]

So it was done at cost. There's – that money coming in. I mean the -- our partners are thrilled beyond thrilled with their investments in One Vanderbilt and One Madison, as many of you come in early. I'm just kidding.

Blaine Heck from Wells Fargo. Can you just talk about what gives you guys confidence in the flat mark-to-market this year given that you were negative in 2022? And does that assume some sort of some level of market rent growth?

Okay. I blew it. I forgot to mention. You do it.

Put it in context that, even though we showed a thumbs down for our mark-to-market this year, and we did [ 135 ] leases or what it was. If you spread out one big lease that move the needle, we would have been well within our targeted goal, roughly flat mark-to-market. So and I think that's as good a barometer about where the current market is and where we see the market sort of on a stabilized basis as we look forward. And that's what gives us the confidence to hit that number.

Well, I just wanted to -- that's a stretch goal. I want to -- that's a stretch goal. I mean everyone gets -- those are stretch goals. That's -- it's what we have in the model that forms the basis of the guidance and that which this team is going to have to try to achieve. So I just don't want -- don't confuse those too. We model more conservatively in arranging for our earnings guidance, fair guidance and we'll get there. Earnings guidance and basically our dividend but then we try to overachieve. And what you're referring to is an overachievement number of flat. Another question?

Connor Mitchell, Piper Sandler. So I have 2 separate questions. First, regarding the Times Square redevelopment, the casino license. If you guys don't happen to win the license, then would you still go through with an entertainment redevelopment. And then second question, unrelated, why would private apartment development in landlords step up given the appearance of changes from the 2019 rent law as the consequences of that any government incentives will be used later against the private owners?

Okay. First question. We're in this to win it. So your question of what do we do if we lose, we don't talk about that much. But I would say that a lot of what we're developing as part of this bid, most of it contingent on the casino because the casino is the funding source, the private -- public -- the private funding source to work with that public-private partnership to make a lot of this happen. And it's also the economic generation in that halo effect of bringing something seismic into Times Square that can help lift up all stakeholder businesses. So without that, more challenging, but that's not to say that the work we're doing on traffic mitigation and safety in particular, in sanitation we couldn't work with the alliance and the alliance is already on this, but work with the alliance with some of these new concepts and ideas or concepts they previously considered, but now maybe we'll have more support to try and enact it with some private funding that would come from other than the casino. But...

You have a -- and studying a big signage plan because we get the rights to all frontage going up to the top of the podium with or without the casino to put something brand new, dynamic, interactive, all those rights come back to us starting in '24 so that's being studied right now and we would do that in either scenario.

The asset is fully leased. So in the absence of the casino, it just continues as a stabilized asset.

Right. But I think we would still try to help improve the area we could. But again, let's stay positive. We're going to get this thing and we're going to really put full effort into it. What was the second question again?

Second question was on residential. They are very aggressive buyers out there who still view Manhattan residential given how well rents are holding up and the annual lease roll as a great inflation hedge and a great sort of protector against different market conditions. So I showed you some of the major institutions that are out there still buying residential. There's been a lot of trades recently and it's still relatively financeable. Commercial banks are still financing residential more aggressively than office and the government agencies are still financing residential, albeit at higher rates than it sort of like the peak of low rates last year. So I don't think the governmental regulation or the 2019 rent regs have cooled that market. And I think landlords can still run residential very profitably, which is why you see it trading so actively.

We're going to go to a text question. Can you please clarify why not cut the dividend more. We could cut it more, but we didn't feel the need to, and we thought it was prudent to do it where it was. I think for stated the dynamic between targeting FAD and also preparing for expected -- significant expected tax gains as we embark on this disposition program. Matt, do you want to add more to that?

The reality is you could ask the same question, why not leave it as it is? Because if we execute on our business plan, as Laura said, [ $3.25 ] is not enough to cover taxable income. So we do have to distribute more. So the debate became where do we set it? We settled on FAD. That's seemingly everybody's benchmark for operating cash flow, it's ours as well. We figured we traditionally paid somewhere around 80%. We're going to 100%, which is a stretch for us, but prudent given the measure of operating cash flow will not be sufficient if we execute our business plan. So we debated both, got more, leave as is. Leave as is solves more of the taxable income situation we will ultimately have if we execute our plan or said it right. We wouldn't put the business plan out there, which feeds the guidance if we didn't think we execute on it.

Question here in the audience.

Julian [indiscernible] from Goldman Sachs. This feels like the kind of environment where maybe we would expect you to accelerate share repurchases and DPE originations versus recent years? In order to seek out best risk-adjusted returns on capital allocated are projects like 245 Park, your acquisition of 450 Park and your redevelopment projects you're talking about really superior on a risk-adjusted return basis.

Well, on a risk-adjusted basis, we feel they're on par. 245, we think, is going to be extremely profitable transaction. But remember, our approach to that asset and 450, is that of kind of an asset management -- assets under management program where we're bringing in substantial third-party capital to make the property returns and fee enhance as well as wanting to have our money working in those deals because we feel that the potential upside on those deals on Park could be very significant. It was just a year or 2 ago, there were probably $2,000 foot assets. This building was sitting in the year today is a $3,000 foot asset. We're going to be all in on 245 at 1,200 foot carry that we set. And I don't know the corresponding number on 450, but -- so there's a lot of runway on those assets. It's what we do -- we feel very confident in our ability to execute it, and we have great partners to invest shoulder-to-shoulder with this on those assets. As we go through the dispositions throughout the year and generate hopefully a lot of net additional liquidity, a lot of it is going to be oriented towards kind of a onetime rightsizing, if you will, under today's environment with increased interest rates, of the debt book down to the levels Matt talked about and all incremental, whether it's this year or second half -- I'm sorry, whether it's '23 or second half of '23 or '24, there will be money that we will put into stock buyback and DPE. That was something I mentioned is not I want to be clear on that. We're -- those are both stretch goals for next year and fully intended for '24, whether it's the 13th month or the 9th month, or the 8th month when we see it, don't know we're not going to be doing necessarily tomorrow just because we have a priority of things that we need to do. And two, we have to get these dispositions done. It's more timing of disposition as much as anything. More questions?

So your commentary on potential opportunities in 2024 with distress or conversions or putting capital to work. There was an article today about Silverstein looking to raise $1.5 billion fund. They were quoted as saying there's $10 billion of potential conversion opportunities. I mean how do you think about the potential scale of that in '24 and beyond -- and then what's your desired capital structure for those kind of deals? I mean, is it mostly partner money?

I'll let Harry sort of address the structure and how we're going to attack it. I always think people expect in New York in times like this that is going to just be unlimited amount of opportunity. I don't think we usually see that or feel that way because this market is so resilient. And there is so much capital that wants to be here at all times. Even right now, this is I mean these guys have spent the past 3 months just meeting with global capital investors almost like a constant basis. All of whom are expressing interest in putting money to work in this environment. So I would temper, I don't think things ever get really as distressed as people think they might. Other parts of the country maybe. I don't think you'll see that here. Plus of all those opportunities, we're going to be hyper selective. We're not just -- it's not a volume shop. We're going to look to pick out strategically our best opportunities to maximize return on capital, make sure our partners make out well and we make out well. So will be -- we are always amongst the most active in that space. I think we'll continue to be. But I don't think it's unlimited and I don't think it's going to be something that we can't accommodate within our corporate capital structure, along with some partner equity. Can you give mic to Harry, please?

I mean, in terms of structure, look at 450 Park is the perfect model or an ideal model for what we believe we can accomplish to echo Marc's point, the inbounds that we get when capital partners come to New York, it's almost like endless. The brand, we may be a New York company, but the brand is really known everywhere, whether that's Middle East or investors, whether that's Asian investors with a particular focus on Korea but as we did with 450, that was a 50% Korean partner, 25% Israeli, 25% SL Green that was a mid-teens IRR type deal with several hundred basis points of accretion for us through management fees, promotes and leasing commissions as well. So I think that's an ideal candidate to look at and something we'll try to emulate at 245 as well.

Take one off the screen, what happens if we win the casino license, the existing in-place tenancy, we'll -- not prepare to talk about that now. We obviously have a plan, and we'll share that as when the time becomes relevant. But as shareholders in the company, which I hope most of you are, I would hope you can sort of lean with us in respect that we're putting 100% more than information out there now than any of our competitors in that casino bid have and are doing. We do it because we want to keep new up to speed with what we're doing. We want the market to know what we're doing. But some of this stuff has to unfold over time. This is probably 3 to 6 months more of work and activity before we might get to a decision and so more to come. What's next?

Anthony Powell, Barclays. 2 questions. Number one, on the casino license, if you win it, are you pretty happy with the current orgastructure? Would you bring in a partner like a casino REIT to maybe monetize that further? And two, on cap rates, where have they gone broadly? I know you're pretty confident in your cap rates where you're selling, but obviously cap rates have expanded broadly. So where do you think the average Class A and Class B and Class C building in Manhattan would trade it right now?

Well, I don't think it's linear. So I think on what we'll call Class A and trophy assets and/or new construction are highly redeveloped. I think they've had the smallest movement in cap rates from what routinely was sub 4%, 4%, 4.25%, maybe at 50 basis points, 75 basis points max, something I mentioned on my -- on the last earnings call as it relates to well called top-tier properties. As you move down the spectrum, I think we're modeling those cap rates out 75 to 100 basis points in both our internal projections of net asset value and as we evaluate the market. But our goal is always to have individual asset by asset, estimates evaluation that we have a high degree of confidence in -- so when we go to the market, we're meeting or exceeding those numbers, which I think Andrew mentioned we did throughout 2022, we expect it in 2023. And obviously, those numbers dramatically exceed the implied valuations with our stock where it is today. The first question was capitalization. Brett, do you want to talk about that?

There's a lot of structures that are out there as it pertains to property and operations as well. We're evaluating all of them. We've had inbounds from all the major players in the property REIT space, asking and saying, not only are we in this space and there is New York great, but oh my gosh, this real estate as far as superior to everyone else. On the OpCo side, there's inbounds all the time. It's obviously a very highly sought after license to have. So there's going to be a multitude of offerings that are out there. We're speaking to everybody. There's no stone that will go uncovered and we'll be more to come.

We're going to start to wrap it. We'll take a few more, but we're going to start to wrap it up.

Michael Griffin with Citi. Matt, you explained in one of your slides about the other income streams. Now that's growing and the market may not give it enough credit. How far do you see that growing if we're talking a couple of years from now? And why do you think those cash flows are more stable, and we should be giving it more credit.

Well, I mean, it's part of the asset management pivot, right? I mean the growth in that stream is directly correlated to the pivot -- the moves we're making. We're expanding our JV platform, 245 Park is now going to come into that 75% JV if that. Full year effect of that in 2024, we'll grow that line item. Special Servicing, we toyed around with setting a goal for all the special servicing assignments we get in 2023 because we're getting so many that income stream will grow. We're obviously not embedded in the share price, getting value for owning 50% or 100% of the assets that we typically did. We're making more money on less invested capital in the asset management model. We're just going that route. So we set the stage for it last year. We executed on it this year. We're expanding on it in '23. Likely to continue it to '24. So you're going to continue to see that line item go up. I make the joke about it being onetime, ask everyone to look at other income as onetime. If it's management income, construction management, whatever it might be leasing income on the assets, we own an interest in. It's not onetime. It's our bread and butter. That line item will continue to grow.

Question here?

Yes. Can you maybe just talk about renewals over the next couple of years and how those conversations are going with tenants on either expansions or downsizing?

Well, I mean, we've as we sit here right at this moment, I think we're seeing tenants default more the decision to do short-term renewals right now more frequently. What that means it can be anywhere from a 1 to a 5-year deal depending on the size of the tenant and what they're thinking broadly beyond that. We've had a lot of success on retaining tenants in our portfolio. There's no doubt that there's a continuing trend of tenants as they reassess how much space they need. And if I can say uniformly, I don't think there's a tenant out there that really knows what their ultimate footprint is going to be. Like there is freight of having too much space as they are at the rate of having not enough space. So I think it's very much a fluid situation and that story still needs to be fully written.

The financials -- financial tenant generally renew -- expanding.

Financial tenants are continue to be a strong part of the market. They are growing. They are active in the market, and we're seeing it throughout our portfolio with a lot of very good examples. I mean, we have 280 Park Avenue [indiscernible] Park Avenue and I'm certain 245 Park Avenue is going to have a big year this coming year.

Time for maybe a couple more if there are more? That it? Okay. All right. Well, that's a wrap for this year. Thank you. We actually have a lot of work to do between now and the end of the year. But this is -- a big effort goes into this. We hope it was met your expectations. We got a lot of work cut out for us in '23. And for those of you going, I hope you enjoy trips in the summit today and don't miss your opportunity grab a little Joji sushi on the way out. Thank you.