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

Thank you, everybody, for joining us, and welcome to SL Green Realty Corp. Second Quarter 2026 Earnings Results Conference Call. This conference call is being recorded. At this time, the company would like to remind listeners that during the call, management may make forward-looking statements. You should not rely on forward-looking statements as predictions of future events as actual results and events may differ from any forward-looking statements that management may make today. All forward-looking statements made by management on this call are based on their assumptions and beliefs as of today. Additional information regarding the risks, uncertainties and other factors that could cause such differences to appear are set forth in the risk factors and MD&A sections of the company's latest Form 10-K and other subsequent subsequent reports filed by the company with the Securities and Exchange Commission. Also, during today's conference call, the company may discuss non-GAAP financial measures as defined by Regulation G under the Securities Act. The GAAP financial measure most directly comparable to each non-GAAP financial measure discussed, and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on both the company's website at www.slgreen.com. by selecting the press release regarding the company's second quarter 2026 earnings and in our supplemental information, including in our current report on Form 8-K relating to our second quarter 2026 earnings. Before turning the call over to Marc Holliday, Chairman and Chief Executive Officer of SL Green Realty Corp., I ask that those of you participating in the Q&A portion of the call to please limit your questions to 2 per person. Thank you. I will now turn the call over to Marc Holliday. Please go ahead, Marc.

Thank you very much. Good afternoon, and thank you all for joining us. It may be the dent is summer, but our team is, of course, hard at work. This is truly when we shine the brightest completely dialed in on our business plan and out working the market. That hustle really showed up this quarter. Much of what we predicted at our investor conference in December is now playing out in ways that directly drive earnings and improved cash flow. We forecasted that the leasing progress we've made over the past 2.5 extraordinary years would become apparent in our economic occupancy, and it certainly did this quarter, up a remarkable 300 basis points as concessions continue to burn off and overall vacancy dwindles. At the same time, we're putting the significant leasing costs associated with the lease-up behind us and leverage and coverage ratios are improving, which we also saw in the second quarter. On the leasing front, the story remains the same, a growing scarcity of premier space in desirable Midtown districts has turned the tables in our favor. We now know that we'll exceed our leasing goals again this year. It's just a question of whether it will be by a wide margin or a really wide margin. We don't have that visibility yet. So it's too soon to reforecast, but the trend continues to move in the right direction. We are also seeing very positive momentum at SUMMIT, both here at One Vanderbilt and on our projects around the world. Even with reduced overall tourism in the city this year, we enjoyed the highest attendance amongst all of our competitors and introduced a number of new ticketed experiences that we expect will continue to drive revenue. We are on track to open Paris next summer in 2027 and in Tokyo in 2030 as we continue to see enormous growth potential for this business. Most importantly, the backdrop to our performance this quarter and moving forward is the extraordinary and prolonged surge in business activity in New York City. Our economy is in a league of its own compared to any other CBD in the country or indeed, even the world, driven by financial services sector performing as well as I've ever seen it. Wall Street profits hit $21 billion in the first quarter alone, the second highest first quarter that has ever been recorded in approximately 40-plus years of tracking this metric. The Big 5 money center banks just reported and second quarter profits are up a whopping 50% year-over-year, and that's coming off a very strong year. Office-using jobs are up by 12,000 year-to-date according to the city's OMB and a strong showing for only 6 months of the year with further growth projected for the balance of the year. We've also seen tech growth driven by AI, and we're obviously getting more than our fair share of those leases, including the lease we announced last night for 100,000 square feet at 11 Madison. It's not just the financial services and tech. It's truly a broad-based growth in demand momentum that we see here in the city. As just one example of the health care sector continues to grow and added 20,000 jobs year-to-date, many of which do land in office space like MSK at 885 Third and the hospital for special surgery at 1520 First, and NYU has a significant -- NYU Medical is a significant footprint at 1 Park. New York City-based companies raised $10.8 billion in venture capital funding in Q2 alone, and that brings it to $21.1 billion year-to-date. Both of those metrics are double the same respective amounts in the measurement periods in 2025. The city is, I think, experiencing one of the largest resurgences I've seen. The tax receipts are very good. The city just passed its budget in June. It's another balanced budget with rainy day reserves. And I feel like we're in very good standing. And this is what all adds up to about 50 million square feet of office space least in the past 4 quarters that has to be a record. It was a very strong quarter. I'm incredibly proud of our team, and I remain very optimistic about the direction of the city and the economic activity that supports our performance. Finally, before we open it up for questions, I want to address our big guidance revision for this quarter. The revision is great news and certainly represents the culmination of efforts not just over the past 3 months, but over the many years leading up to this. We've executed a deliberate strategy to invest what was needed to move our occupancy back towards 95%, and we're now reaching a positive inflection point. This should not be a big surprise since we forecasted this positive momentum back in December. Maybe the magnitude is even more than we expected, but it's obviously a pleasant result. Matt, if you would, please elaborate on the underpinnings of this significant guidance revision.

Thanks, Marc. It is clear we have had a fantastic first 6 months of 2026, exceeding our expectations on several fronts, including our second quarter reported results. And we are excited to be able to translate these successes into a significant upward FFO guidance revision of $1.20 a share, more than 26%, the vast majority of which is recurring. In the Manhattan office portfolio, revenues benefit from strong leasing, particularly early renewals and the lease are [indiscernible] space, both of which have immediate earnings benefit, along with a conscious effort to accelerate GAAP revenue recognition by delivering space to tenants more rapidly, which is coupled with phenomenal expense containment as always by our operations team to drive $0.20 a share of incremental FFO in 2026 from the real estate portfolio, 10% of which we recognized in the second -- $0.10 of which we recognized in the second quarter. While visibility into the execution of the remainder of our 2026 business plan over the next 6 months, also provides us the opportunity to generate additional fee and other income, which we expect to contribute an additional $0.20 a share of FFO. Now if we had simply increased FFO guidance by $0.40 a share for these operational successes, we would have been thrilled. That equates to about a 9% increase at the midpoint. But because we built one of the most successful and more importantly, profitable buildings in the country here at One Vanderbilt, we're able to add another $0.80 of recurring, not onetime, FFO to our guidance revision. This property has generated so much cash flow that we repatriated all of our invested equity long ago. That cash flow in excess of our share of GAAP net income at the property caused the carrying value of our investment to go negative. GAAP allows you to carry a negative basis, but only up to the value of any known or potential tenant obligations. At the end of the first quarter, our negative basis reached a maximum allowed under GAAP. So starting in the second quarter, One Vanderbilt's incremental FFO contribution is calculated based on the sum of 2 things: first, amortization of the negative carrying value over the term of the related tenant obligations. This amortization component alone is approximately $21 million a year through the early part of 2031, plus the difference between cash distributions we receive from One Vanderbilt and our share of GAAP net income. Going forward, every dollar of cash distribution out of One Vanderbilt that's in excess of GAAP net income is incremental FFO to us. The total of these 2 components contributes an additional $0.80 a share of FFO in '26, $0.35 of which we recorded in the second quarter. And based on current projections, is to contribute -- expected to contribute as much or more to FFO next year. The way I look at it, this is essentially flowing deferred cash profits from the project through earnings and further evidence of the incredible success of One Vanderbilt. More importantly, a testament to the hard work of the best employees in New York real estate that work here. With that, operator, we can open it up for questions.

[Operator Instructions] Our first question will be coming from the line of Nicholas Yulico of Scotiabank.

And maybe we could start on the leasing side, the mark-to-market again, this quarter was strong, above guidance. Can you just talk about what the specific buildings driving that activity submarkets? Or is it actually just sort of a broad-based improvement?

Well, it's -- let's start with, it's a broad-based improvement. But then within that -- within the portfolio, there's some particularly notable transactions and buildings that are really seeing rent depreciation. Anything on Park Avenue, we've raised rents dramatically. Sixth Avenue, for instance, 11856, rents are up dramatically. And then across the portfolio, we've been consistently raising asking rents throughout the year. So 245 Park Avenue, where we've done a lot of leasing this year. We've got some deals pending to replace some tenants that at OVA rents are going to be up dramatically. So I think what we saw this quarter, we're going to see it again next quarter.

Okay. And then second question is just going back to One Vanderbilt, 100% leased. And as we think about it, I know you've said before there's a significant mark-to-market embedded in that asset. Is there any opportunity to perhaps move an existing tenant to 346 Madison, your new development project, and unlocked some of that mark-to-market in One Vanderbilt built through that process?

Well, less so moving -- it's a little early to talk about 346 Madison since it's 5 years away. But there is -- there are opportunities that we're pursuing for tenants that have either outgrown their space and we're recapturing some of those spaces and then accommodating tenants that need expansion space in the building. So we've got several pending transactions and you'll see those leases I expect to sign this quarter, and the rents will be up to really, I think, illuminates the fact that the building's in place rents are well below current market.

And our next question will be coming from the line of Alexander Goldfarb of Piper Sandler.

Two questions. Mark or Steve, the pace of this office recovery is just -- it's incredible. I mean it's like what the dot-com was, maybe even better. Is it solely just the lack of supply? Or what do you think is causing companies to clamor for so much space so quickly and even be willing -- like it's just -- as I say, it's -- we haven't seen this in decades and just trying to understand if it's lack of supply or something else?

Four things. One, the economy in New York City is doing extremely well. And profits drive growth, growth drives demand for space. It's broad-based, as I mentioned earlier, and there's no sign of abatement right now because things are really just firing on all cylinders across almost all sectors and that is kind of like the tip of the spear, if you will. Second, we just are in a situation where there's almost no addition to space to speak of in a 400 million square foot market, and that's really looking out over the next 5 years or so. And that's because a lot of projects during 2020 and 2024 either got delayed or shelved or changed or whatever. And as a result, you just can't flip a switch and produce that space. It takes a lot of time and effort and money and foresight to be able to open up the inventory. This isn't like one of those borderless markets that are out in other CBDs around the country where you have constant new product replacing old. Here, it's much more delta, especially in a fully built out Midtown. So scarcity, I'd say, is the second major issue. Thirdly, you had companies that were just sitting on the sidelines uncertain as to what direction they were headed, and we had some very lean years back in 2020 through 2023. And then now we've been the beneficiary, especially in '25 and '26 of just companies that have plans for the future that are so ambitious and so affirmative that the issue we face right now is not just delivering space, it's giving tenants confidence that once they lease space, we'll have more growth options for them, either within those buildings or surrounding buildings to satisfy their future growth needs. And it kind of feeds on each other, and it's turned into smart businesses wanting to put away their long-term space plans for 10, 15, 20 years now and not have to deal with the unknown down the road. And I would say fourth major point is convergence. You heard beyond this back in '24. This was something I identified as what I thought was going to be one of the most significant trends in favor of diminishing office supply and sort of a winnowing of secondary and tertiary office space being converted into primary and very attractive residential space and much needed rental apartments. And as a result, you have an inventory that's actually dropping and is bringing up the middle and bottom of the market into rates that become economic for the business. So that's why Steve said earlier, we're experiencing rental growth across all facets of the business. So I think that taken together really should not be surprised because we've been on these themes for months and months, maybe years and years. And I think what you're just seeing is that playing itself out in a very predictable way. And as long as the economy stays robust as it is, we don't see this abating anytime soon.

And then -- so Marc, just on that point on the office to resi conversions, do you see most of that pipeline continuing on? Or is your view that we'll suddenly get a bunch of buildings that were planned to be converted come back to office and maybe that's competition?

That's an interesting question that we'll have to see play out. I'd say right now, for the projects that have been what I'll call lit and/or have been permitted or about to be permitted, I think you're going to see them all go through as conversions because before I would say the economics were in favor of residential. I'd say office at that segment of the market is closing the gap. And maybe it's getting closer to a push, but you have to remember, aside from just the pure economics of rental value and cost to convert, you still get a pretty strong financing edge with residential where spreads are tighter than office and a stronger cap rate environment to sell into or JV into as you saw on 7 Day, where I think the cap rate was about a 5% or 5.1%. And that's -- I think some projects will command better than that depending on location. So I think the gap is narrowing, but still tills in favor of conversion for a number of these buildings. But that could change in a year or 2, and you may hit equilibrium.

Our next call question will be coming from the line of Steve Sakwa of Evercore ISI.

I know you guys had an ambitious debt refinancing and capital markets transaction program for 26. Could you maybe just kind of give us an update kind of where you are on refinancing and asset sales for the year?

Yes, sure. So just talking about the capital markets more broadly, I would say the shifting macro landscape since the start of the year and the resulting benchmark rate widening, they've tried to interfere with the natural trajectory of the market. But these are moments where New York City shines. Marc always says New York City is the AAA investment of our sector. So despite not having the wind at our back, we continue to see what I would call unending domestic and international demand for quality Midtown Manhattan product. Just this morning, we saw a report that was issued and published in Cranes about Manhattan's investment sales market jumped 50% annually in the first half of the year, which marked the strongest first half of the year since 2022 when interest rates were just starting to rise. So when we look at transactions over this past quarter, the development sector -- we completed our partnership with Maurry Building at 346 Madison. This is our third transaction with Murray Building. Mary is a remarkable partner. They've been -- they're incredible developers and visionaries and we're proud to be able to launch this project with them. We shook hands on our partnership within only a few months of us closing of our acquisition. I think that really speaks volumes to the quality of what we will be building and the trust between our 2 organizations. In the core office sector, we entered into a contract to sell 10 East 53rd Street. That cap rate was approximately 5.7% for a side street building. That sale will complete a successful transaction for SL Green. And notably, it's about a 3.5x multiple on the acquisition of our partner's interest in 2024. And another example is our good friend's purchase of Park Avenue Plaza, which was a highly competitive process, and that's on the heels of their purchase of 623 Fifth. And then in portfolio deals, I assume everyone has seen the rumors in the press regarding a potential transaction for the Hudson Square portfolio. So I would say, most interestingly, much of this quarter's demand was driven by domestic and long-term investors in our sector. Most of those groups were on the sidelines for quite some time. So between availability of debt capital, the strong fundamental performance that you've been hearing on this call and the diversity of investor base that we saw this past quarter, I would say this is one of the better investment sales backdrop we've seen in quite some time. With respect to our program, more specifically, we've completed or in contract on 4 of the 11 deals in the plan. I expect we will be announcing 2 additional deals soon. And then we're going to get started on the remaining 5 deals that are in the plan. As most of you know, our disposition plan this year was weighted to the second half as we strategically launched sales throughout the year, and the team is gearing up to launch on those remaining transactions. We can talk more about the debt capital markets, but I would say specifically to our plan, the next one up in the queue is 245 Park. That one is in advanced stages right now, and I expect that we'll have more to announce and discuss in the coming months.

Great. Marc, I don't know if you could maybe just comment on 1515 Broadway. I know you were disappointed with the casino outcome. But have you guys kind of given more thought to sort of the long-term plans for that building? And if so, when do you think that kind of takes more shape?

Yes. Look, we shook off the disappointment back, I guess it was last September, I want to say, amazing how time goes so quickly. Too shame because I think we would have been close to open when we all would be walking into the casino. But since then, we've had the opportunity to assess a lot of plans. And what I've come to appreciate even more is that we're in a very good spot, I think, with 1515. One Paramount, I have to be acquired by Skydance and now having an agreement to merge in with -- or acquire Warner Bros to create, I think, one of the most powerful and largest media companies in the world. We good? Okay. One of the most power for media companies in the world puts 1515 kind of squarely back in the mix for longer-term use by that combined entity, I'll call it Skydance for the moment. I don't know that they have their plans all sorted out yet. My guess is not from what the conversations we had and also given that, that merger is not yet closed. But certainly, the combined entity is going to employ, I think, more than 4,000 people. I think a lot of those jobs can and will stay, hopefully, in New York City, and we would expect to be a net beneficiary of that. Now with all that said, you have to remember that the debt is on rapid amortization over there. So at the expiration of the Paramount lease, we have very low debt outstanding on that particular mortgage, which again gives us flexibility to consider other types of conversion options to maximize entertainment uses, which I think is really highest and best for Times Square and for that asset. Signage opportunities far in a way above what currently exists and really make it kind of a mixed-use destination, entertainment, theater, live theater, live music, media, office, capital of Times Square. So I think there's going to be a lot more to say on that. Time-wise, Steve, I think is next year because I think, like I said, until things are clearer with our primary tenant over in that building, or sole tenant in that building, there won't be a lot to do. But I think as soon as that transaction is culminated, we could be very active over there. And I'm very positive on that particular property right now.

And our next question will be coming from the line of Tom Catherwood of BTIG.

Marc, I want to go back to something you said in your prepared remarks when you were talking about the step function in economic occupancy in 2Q. Maybe view it from a different angle. We think of vacancy leasing and how it eventually drives economic occupancy, but there's a good portion of your portfolio that are leases that were signed 2020 to 2023 when tenants were focused on shorter-term renewals. Do you have a sense of kind of for that portion of COVID vintage loans or leases kind of what's the embedded mark-to-market on that, that maybe it's not reflected in economic occupancy right now, but in the next year, 2 years, 3 years, really starts to roll into the numbers?

Yes. I mean, look, I don't have that number, and I'm looking at Steve and Matt, and they're not giving me the [indiscernible] here that they have it. So I'm going to give you a little bit more gut and instinct. I would say I'm going to give you a broad range between 10% and 20%. I think just given based off of our increases in our asking and taking rents that Steve referred to earlier. I have a better sense building by building how we've moved rents up sort of incrementally over the past 2, 2.5 years. And I think typically, the range of increase is minimally 10%, probably as much as 15% or 20%. I mean I don't know, building like One Vanderbilt worth more than that, but that's -- we're fully leased here. So I would say a safe bet is 15%-ish on when those -- what you call COVID year leases come up for renewal. But I'm giving you that more touch and feel than like I don't have the numbers in front of me. but I don't think it's less than that. Steve, do you have anything.

Yes. I think there's a couple of thoughts with regards to it. A lot of the deals that we did during COVID were even shorter term, like we're 5, 6 years past COVID at this point. So a lot of those deals we're doing at that point in time were 3, 4, 5 years, one. Secondly is, if you'll recall, the net effectives may have dropped more than the face rents. Face rents were probably down about 10% from where they were at the end of -- beginning of 2020. And since that time, face rents have dramatically increased throughout the portfolio. And certainly, as our portfolio -- the complexion of our portfolio has changed over the years, you're seeing much bigger rent appreciation on parts of the portfolio, particularly Park and Sixth Avenue buildings. And with the stabilization of concessions over the past 1.5 years, the net effectives -- not only are the face rents going up, the net effectives are going up as well. So I think we're probably past the moment in time where those kick to can deals those leases have probably already come back, and we've attended to them as part of our leasing over the last couple of years. Particularly if you look at our rollover schedule over the next couple of years, we don't have any big chunky expirations. Certainly, nothing of consequence this year that's not already being attended to. And our largest lease next year is like 150,000 square feet, and that's 1 lease. So...

So yes, but with that said, we're going to be mining opportunities that are noncontractual. I mean that's really I think you're going to see the growth come from is really 3 things, 4 things. One, nominal face rent increases. Steve, and I just spoke about that; two, stabilized lease concessions for new deals, maybe even slightly contracting; three, a much higher prevalence of renewal to new -- well, renewal to new; fourth, which we're saving considerable. That's where your net effective rents are going to be far higher than 15% to 20% because you're getting that kick on face rent and then you're getting a compounded effect on reduced TI and free rent. And then lastly, we're mining the portfolio for every expiration between now and 2032, I mean, we are out there like 5, 6 years forward, hitting every tenant right now trying to do blend and extend deals early renewals, trying to get blend in rental uptick and defer out some capital costs. And I think you're going to see in the second half of the year, we're going to get some good traction there. And so all of that is what we are busy to work on. I mean, when the -- you got to hit the market when the market is there, and we recognize that. And we're not just focused on the next year or 2, we're focused on the next 5 or 6. And with an intense eye on saving capital dollars and trying to max out face rents.

Got it. I appreciate that color. And then last one for me, maybe, Harry, I just want to touch on the debt fund. You've had success deploying capital there. But how do you see that opportunity set potentially evolving as New York market continues to improve and traditional lenders start to get more comfortable with office? Do you have to focus on a different part of the cap stack or kind of shift strategy in any way?

Yes. Look, so we've done approximately $600 million of deployment through, call it, yesterday. We have a handful of opportunities in the pipeline today that we're working through. And I think these are moments where our team shines. I mean we had obviously a lot of opportunity in front of us last year and the beginning of this year is that capital stack start to tighten. For us, this is now about financial engineering and working with senior lenders trying to get the tightest senior financing, much like the execution you saw us do on our balance sheet years ago at 550 Madison. And this is where we go out, work with our relationships. There's a deal we just closed in the debt fund. We're not disclosing transactions in the debt fund, but there's a deal we adjusted, where we went out, originated the entire stack, syndicated out of senior, syndicated out of a subordinate [indiscernible], and we're able to get to our yield requirements. So for us, this is where our team focuses on our relationships and build capital stacks to get to our yields.

Our next question will be coming from the line of John Kim of BMO Capital Markets.

I wanted to follow up on what drove the $0.20 of operational uplift this year and what surprised you? You didn't raise same-store occupancy guidance. I'm assuming a lot of this is timing and the economic occupancy is moving up, but is it purely just a better renewal rate in terms of retention every tenants and more leasing of prebuilt space? I'm just trying to understand why such a big uplift relative to expectations?

Sure. Yes. I thought I hit that in the opening comments, but it's -- you reiterated the biggest ones, and Steve and Marc highlighted that as a catalyst to what we're seeing renewals and early renewals. If you're looking at NOI, right, we're very focused on GAAP revenue recognition and economic occupancy, renewals and early renewals are instant gratification when it comes to GAAP revenue recognition. And we're doing more of those. We've also made a conscious effort because we talk about turning on GAAP revenue recognition is triggered by the turnover space to tenants. We are working with our tenants and our own team is hustling to try and turn over space even faster so we can turn that earnings picket on. And then just from an expense perspective, we budget very conservatively. We're ahead on expenses. And the combination of those things at $0.10 of the $0.20 we already recognized in the second quarter. That was $0.10 ahead of our expectations just in Q2. So you have $0.10 left for the balance of the year, which is a combination of those handful of items.

Okay. And then I also wanted to follow up on the refinancing plan for the year and in particular, 245 Park. The leasing has been very strong. The redevelopment is underway. But now with the tenure moving up above the assets mortgage rate, how does that impact either the timing of some of the refinancing or sales and the valuation of the asset.

Sure. So just I spoke earlier about equity capital markets and a bit on 245, but let me just talk about the credit markets more generally. We continue to be encouraged by the strength of what we're seeing in the credit markets. We've seen approximately $11 billion of CMBS originations year-to-date. That figure, same period last year was about $8.5 billion. The 2 biggest deals that got done this past quarter was the $1.9 billion financing of 2 Manhattan West, I see the $1.8 billion financing of 9 West 57th Street. And I think what's -- one of the best data points that we've seen out there is really this tightening of the AAA spreads. We're now seeing AAAs tight in sub-100 and overall spreads on the deals that are getting done are in the mid- to high 100s depending on last hour LTV. And I would say, interestingly, when you compare it across all asset classes, spreads on single borrower CMBS AAAs for trophy office are now trading in line and in some cases, inside of what we're seeing for spreads on industrial, multifamily and self-storage. So I think the bond market is starting to appreciate what we're seeing in the trophy office asset class. We're going to be big beneficiaries of that on 245 Park financing. That's in process now. And I think you'll see a lot more illumination on that as we launch the rating agencies and data becomes public. But I would say from a spread perspective, we're very confident in the execution that we're seeing. Of course, the benchmark, as you noted, is not cooperating with us, that's obviously outside of our control. But Matt can speak to some of the hedging that we're putting in, in place to ensure that we have protections at the right times in the market.

Yes. As has been customary for the last few years in this rate environment, we are maintaining a very cautious stance when it comes to rates. We're hedging out well ahead of time financings like 245 to protect against rising rates. The bulk of our debt remains hedged as well. We were, at one point, 70-30 fixed to flow. We remain more like 90-10. So hedging existing and hedging forward for the foreseeable future.

And our next question will be coming from the line of Blaine Heck of Wells Fargo.

Sorry if I missed this, but just on the leasing pipeline, I think it stood at 900,000 square feet last quarter. Can you give us an update there, the mix between new and renewal and how much of the renewal activities pull forward renewals?

Well, there's a 900,000 square foot pipeline. It's roughly 50% new, 50% renewal. And of that 900,000 square feet, 400,000 square feet of it are leases that are in active negotiation and essentially very far advanced negotiations, I'll say, and the balance are term sheets, which we expect to convert over to leases. As far as the renewals, most of the renewals are, I would -- I don't have a perfect answer to it, but they're near-term renewals. They're not early renewals for the majority of that square footage.

Great. And then second question, just a follow-up for Harrison or Marc. Can you just walk us through the thought process you all went through kind of 346 Madison. Was there any consideration of either selling a smaller stake or waiting for some leasing activity to potentially push the valuation a little higher? Did you just see this as something you wanted to do for timing or relationship reasons?

Well, I mean, we did it first and foremost for business reasons. I love fully capitalized deals, development deals. You never want to take for granted a moment in the market. And we do have very special relationships with many of our JV partners, Murrey Building on 346 Madison, certainly, certainly among them. And we've gotten to a point with many of our co-investors where it's a symbiotic relationship where we count on their partnership and they count on our delivery of opportunities in this city, which are the good ones are few and far between. We were able to get our standard package, if you will, of JV enhancements for being the ones to source and execute the deal. But in the case of Murray Building, they're also a really good codeveloper. I mean these are folks that have built as much as anybody in Tokyo, [indiscernible] Badal Hills, Toranomon Hills, [indiscernible] Hills. These are fabulous investments. I think there'll be opportunities for us each ways, both opportunities for us and for them. We had their commitment early on. There's a lot of planning that needs to happen and happen early. And having a good partner like Morry together with us at the early stage makes the entire development go much easier. We reserved enough that we plan in the future to probably syndicate equity further down the line, maybe when we sign our first leases or maybe when the project is completed or maybe when it's recapitalized, that will be for a later date. But the combination of derisking through capitalization day 1, getting the kind of economic deal we set out for and then some, Point 2, and the solidification of relationship Point 3, and on we go to the next one. I mean, this is -- we are a volume shop. And while developments are bespoke and long term and they get a lot of our senior level attention, there's lots more deals for this company to do in this market, both long term and opportunistic. And we want to be flush with capital to take advantage of this market. And I think we've proven our ability to do so over our decades in the business, but certainly over, I would say, the past 3 to 5 years. And we're happy with how it turned out.

And our next question will be coming from the line of Peter Abramowitz of Deutsche Bank.

First one is just, in relation to the guidance raise and this kind of expected ramp in NOI and fee income may be faster than you were expecting at the beginning of the year, just wanted to ask, how does that sort of impact when you think you'll start to see an inflection in FAD? I think previously, you've kind of messaged that the expectation would be end of '27 or early 2028. But just curious for any updated thoughts on that in relation to the guidance raise?

Yes, I would say we're -- the trajectory that we're on is slightly ahead, but '27 into '28, with the breakeven point in '28 is still the path that we are on at this point.

Okay. And then a second one, just on SUMMIT. I think Marc, you had some commentary around tourism, maybe being a little bit weaker in the city this year. Just on SUMMIT, I'm kind of curious, was there any noticeable impact from World Cup travelers in the second quarter and into the third? Sort of how are you thinking about that impact as it relates to the full year results?

Yes. Well, look, I mean, the FIFA games, there were 8 of them, including the much-watched finals. And there was definitely a bump that I think all hospitality got from those events. It's hard for me to course how much of that was FIFA-driven versus we're in the heat of the summer right now, and sum typically does very well June, July, August. And certainly, I look at the numbers daily, and the past, I would say, 4 weeks in particular, have been very strong. Ticket sales -- daily ticket sales exceeding 400 and some-odd thousand a day is fairly typical. So that's -- those are like end of year holiday numbers, so I'm happy with that. People love SUMMIT. It's all ages, all walks of life, domestic tourism, tri-state residents, foreign tourism. People love going. They repeat, they go back. I think our year-over-year attendance numbers are down a few points, but really modest because most of that was in the more challenging beginning of this year when we're up against weather and other issues. But I would say, since May, numbers have been sort of right back to where we had them. And I'm hoping and expecting that through the ability to manage variable operating expense and also have a big second half of the year that we'll finish up right on our numbers, which are market leading. They're well ahead of the other observatory attractions, both in terms of average ticket price and attendance because it is a very special experience that I'm now excited to be bringing to major cities like Paris and Tokyo and more to come. We've got a lot in the queue and maybe more on that in December because always like to hold something back for December. But we're hard at work trying to bring SUMMIT to everyone around the world for people who can't get here. And I think it's going to be -- it will just the momentum we'll build and the experience will get even better and where the team is very excited about the future.

And our next question will come from the line of Anthony Paolone of JPMorgan.

Maybe give us a sense of cap rates and what to expect on your dispositions over the balance of the year, maybe and maybe even bucket them depending on whether it's things like maybe a 245 Park stake or resi or something like that?

Look, for competitive purposes, obviously, we wouldn't want cap rates on any specific transactions out there. I think the best data points to look at right now are what we completed. We just announced 10 East 53rd Street. That's a core office building on a side street and that got done at a 5.7% cap rate. We announced 7 Day. That's a core residential asset that got done at -- residential and retail, forgive me. that got done in 5.0%. And I think you'll continue to see assets trade in those types of ranges, but I don't think we'll go along any specific number or tied to any specific asset at this point.

Okay. And then just my other question on 750 Third third and 346 Madison, you obviously had the incident with the other conversion close by on 750 53rd and then there's some press on 346 Madison that maybe a neighboring properties delaying you or something. Just can you comment on just the progress on those 2 deals and whether anything gets interrupted on either of those in terms of time line or plans?

Okay. Let us make sure the question is 750...