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Good morning. Welcome to the Vornado Realty Trust first quarter 2026 earnings call. My name is Rocco. I will be your operator for today's call. This call is being recorded for replay purposes. All lines are in a listen-only mode. Our speakers will address your questions at the end of the presentation during the question-and-answer session. At that time, please press star then one on your touchtone phone. I will now turn the call over to Mr. Steve Borenstein, Executive Vice President and Corporation Counsel. Please go ahead.

Welcome to Vornado Realty Trust first quarter earnings call. Yesterday afternoon, we issued our first quarter earnings release and filed our quarterly report on Form 10-Q with the Securities and Exchange Commission. These documents, as well as our supplemental financial information package, are available on our website, www.vno.com, under the Investor Relations section. In these documents and during today's call, we will discuss certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in our earnings release, Form 10-Q, and financial supplement. Please be aware that statements made during this call may contain forward-looking statements and actual results may differ materially from these statements due to a variety of risks, uncertainties, and other factors.

Please refer to our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2025 for more information regarding these risks and uncertainties. The call may include time-sensitive information that may be accurate only as of today's date. The company does not undertake a duty to update any forward-looking statements. On the call today from management for our own opening remarks are Steven Roth, Chairman and Chief Executive Officer, and Michael Franco, President and Chief Financial Officer. Our senior team is also present and available for questions. I will now turn the call over to Steven Roth.

Thank you, Steve, and good morning, everyone. Business at Vornado continues to be excellent, and it's getting better and better. We are riding the wave of a strengthening, long-lasting landlord's market. New York is by far and away the strongest real estate market in the country. Michael will get into the details shortly, but today I have different fish to fly, and I will ask the first question. Question: What do you make of the spat between Mayor Mamdani and Ken Griffin, and how will it affect your 350 Park Avenue development? Answer: Let me begin by saying that I do not and cannot speak for Ken, but I do unambiguously stand with him. Notwithstanding the mistakes and bad form of the recent video that went viral, we are pulling for Mayor Mamdani to succeed. Let me establish my credentials.

Vornado is a New York company, and I am a New Yorker, born in Brooklyn and attended DeWitt Clinton High School in the Bronx. Both Vornado and I are lucky to be New Yorkers. My daughter and three granddaughters live in the Bronx, and my son and his family live in Brooklyn. My wife of 56 years and I live and work in Manhattan. We follow the rules, and we pay our fair share. Vornado will pay $560 million in real estate taxes this year, and I'm pretty sure that's in the top three. That doesn't begin to count the personal income taxes that I and our Vornado population pay to the city and state of New York. We work our asses off. We are not boastful. We are very proud of our lifetime of achievements.

We are the company that's investing billions to transform the PENN DISTRICT. New York is a union town, and we are a union shop, employing thousands of hardworking New Yorkers in our buildings and on our construction sites. The ugly, unnecessary video stunt is personal to Ken and sort of personal to me too. You see, Vornado and I are the developers of both 220 Central Park South residential building and the 350 Park Avenue Citadel Tower. We are all shocked that our young mayor would pull this stunt in front of Ken's home and sing him an ultra ridicule. This was both irresponsible and dangerous.

As I said, Vornado is the owner of the 65-year-old building on the Park Avenue block front that will be raised to make way for the Citadel New York headquarters tower, which will employ thousands, further cementing New York as the financial capital of the world, and pay significant taxes and on and on. This building is being designed by the same Foster + Partners architectural team that designed JPMorgan Chase's new headquarters down the block. This is now the if we move forward project. Now, a project of this scale takes years, and we have already worked with two prior city administrations, both of whom have recognized the benefits and have been enthusiastically welcoming and supporting, as evidenced by the rare unanimous ULURP approval for this project. Demolition began literally days ago, and we at Vornado are ready to go.

I must say that I consider the phrase tax the rich, quote, tax the rich, when spit out with anger and contempt by politicians both here and across the country to be just as hateful as some disgusting racial slurs and even the phrase from the river to the sea. What these pols seem to be saying is that the rich are evil or the enemy or the targets or maybe even just suckers. The rich whom the politicians are targeting started with nothing, are the epitome of the American dream. They are our largest employers and largest philanthropists. It is the 1% that pay 50% of New York's income taxes. They are at the top of the great American economic pyramid for a reason. They should be praised and thanked.

Ken, our partner and friend, is the best of the best. Where are we now? As we discussed last quarter, Ken exercised his option to enter our development joint venture and build a new 1.9 million sq ft tower with Citadel as the anchor tenant. We have until the middle of July to try and decide whether to participate with Ken in the venture or to sell to him. It's a good bet that we will go all in. This fence cannot be mended by a short, terse, insincere private apology. What I beg my mayor to do is to begin every day being business welcoming and business friendly as his first priority. That's the only way to get the growth and financial wherewithal to accomplish his programs, some of which, I must say, are interesting and valid.

Public safety, schools, childcare, clean streets, housing affordability, homeless programs, et cetera. The election is over. Now is the time for hard work and management, not showboating. New York is an enormous enterprise with a city budget of $120 billion and a state budget of $250 billion. If there is a $5 billion or $10 billion budget shortfall, surely that money can be found by managing rather than by taxing. It is interesting to note that high tax New York spends more than double per capita than low tax or no tax Florida or Texas. There is a lesson here. Maybe something good could come out of this blunder. Maybe we can draft Ken to become active and lead an effort to educate New York voters and to elect like-minded candidates.

Ken can do it. He's the one who could galvanize the entire business community. Here's an interesting factoid. The members of the Partnership for New York City alone employ 1 million voters. Hundreds of our business leaders would line up to support Ken. I would be first in that line. I was taught, and I believe it in America, where after an election, all sides get behind this and support the winning candidate for the greater good. Our mayor is young, smart, and energetic. With a little tweak here and a little tweak there, his leadership could make this great city even greater. He will learn over time that growing a tax base is a winner, and raising taxes is a loser. I will say it again. He will learn over time that a growing tax base is a winner, and raising taxes is a loser.

That the hardworking 1% are allies, not enemies. Let's learn from this mistake and move upward. Turning to [Renato]. We now have a lineup of assets and in-process projects which I am confident will deliver the highest growth in our industry. Executing on all this is now our singular focus. In this year, 2026, we will complete the heavy lifting of leasing at PENN 1 and PENN 2. As Michael and Tom have already been saying quarter after quarter, our published numbers will reflect all this by the end of 2026 and going into 2027.

As part of our focus on enhancing our portfolio and making great deals, we announced last week the acquisition of a 49% interest in Park Avenue Plaza, a 1.2 million sq ft Class A office building along the prime stretch of Park Avenue. This asset is directly across the street from our 350 Park Avenue project. The building is 99% occupied by blue chip tenants with an 11-year weighted average lease term and rents that are 40%-50% below market. Prime Park Avenue AAA assets rarely trade. We believe we made an excellent purchase. We're buying the asset at $950/sq ft, which is 65%-70% discount to replacement cost.

We are inheriting a fixed rate, a sub 3% loan through 2031 to leverage off and enhance returns. We expect the transaction to be approximately $0.10 accretive on a full year basis in the first year. We are happy to be partnering with the Fisher family, who own the other 51% of the asset. We have a long relationship with the Fisher family. They are a first-class operator who think much like we do. With Park Avenue Plaza, our recent acquisition of 623 Fifth Avenue and the pending development of 350 Park Avenue, we will be adding, call it 2 million sq ft at share of the very highest quality prime assets to our portfolio at very accretive economics.

Speaking of 623 Fifth Avenue, our 383,000 sq ft asset, which we are redeveloping to be the premier boutique office building in Manhattan. We are far along in our design and planning. We are receiving outstanding reaction from the market and already have active tenant interest at or above our underwriter. Demand for our retail assets is robust and accelerating. We have a handful of assets for sale in the market. I covered share buybacks in my recently posted shareholder's letter. To date, under our $200 million share buyback program, we have repurchased 7 million common shares at an average of $25.80/share, totaling $180 million. Last week, our board authorized an additional $300 million buyback program. Now to Michael.

Thank you, Steven. Good morning, everyone. First quarter comparable FFO was $0.52/share compared to $0.63/share for last year's first quarter. This decrease is consistent with our comments from the prior quarters and is primarily due to the reversal of previously accrued PENN 1 ground rent expense in the prior year's first quarter and higher net interest expense, partially offset by higher FFO resulting from the execution of the NYU master lease at 770 in the prior year and strong income growth at PENN 1 and PENN 2.

We have provided a quarter-over-quarter bridge on page two of our earnings release and on page six of our financial supplements. We now expect full year 2026 comparable FFO to be slightly higher than 2025, ramping up each quarter due to GAAP rents coming online, lower interest expense after our June 2026 bonds are repaid, and some seasonality relating to our signing fees. As previously indicated, we expect there to be significant earnings growth in 2027 as the positive impact from PENN 1 and PENN 2 lease-up takes effect, as well as the positive impact of the recent acquisition of Park Avenue Plaza. Turning to leasing. The Manhattan office market is head and shoulders the best in the country and is off to its strongest start to a year in over a decade.

Manhattan leasing volume reached nearly 12 million sq ft, the highest first quarter level since 2014. There's a significant supply-demand imbalance in the 180 million Class A better building market in which we compete, as the availability rate in the prime submarkets in Midtown and the West Side has tightened significantly, and there's little new supply coming for the foreseeable future, given the significant cost and duration to build. This is all resulting in tenants competing for space and rents rising aggressively. The landlord's market we have been long predicting is very much here. While the macro environment we operate in today has gotten even more complicated since our last call, and the geopolitical volatility is as high as we've seen in some time, the U.S. economy just continues to chug along, as does New York's.

While there is a risk that the Middle East conflict lasts much longer and has a greater economic impact, to date, we have not seen any change in tenant behavior. Moreover, while there has been a lot of AI fear-mongering out there, and while we are respectful of the risk, we believe it is overblown. Over the past 50 years, office-using jobs have continually evolved based on new technology. From the computer revolution of the 1980s when personal computers and word processors were introduced, to the 2000s when the internet transformed workflows and the way we communicate, to now with AI improving efficiencies and increasing productivity. In every example, office-using jobs were not reduced, but they shifted from clerical-based functions to knowledge-based roles. Each new revolution spurred productivity and economic growth with new businesses and net positive jobs created.

There will be winners and losers by industry, by job function, and by geography. Make no mistake, New York and San Francisco will be winners as the intellectual and innovation capitals of the country, where talent will continue to aggregate and in the best buildings. At Vornado, we are coming off our second-best leasing year in our company's history, where we leased 3.7 million sq ft, with 960,000 sq ft of New York office in the fourth quarter. Business continues to be very good, and the momentum from last year has continued during the first quarter of 2026. In the first quarter, we leased 426,000 sq ft of office space overall, including 311,000 sq ft in New York. Our metrics were very strong.

Average starting rents in Manhattan were $103/sq ft, with mark-to-markets of +11.7% GAAP and +9.7% cash, and an average lease term of nine years. Our New York office pipeline is robust and has over 1 million sq ft of leases in negotiation in various stages of proposal. Turning to the capital market. The financing markets continue to be strong and liquid for Class A New York office assets, though pricing has widened a bit given the current geopolitical environment. The investment sales market continues to heat up as well, with a broadening set of buyers keenly focused on New York City. We are very active in the capital markets in the first quarter, most of which we covered on the last call.

Given we've dealt with almost all of our 2026 and 2027 maturities, we don't have any significant financings we need to complete for the next 18 months. We do still have a few loans that we need to work through with lenders over the next two to three years. Finally, our liquidity remains strong at $2.6 billion, which is comprised of cash of $1.2 billion and our undrawn credit lines of $1.4 billion. With that, I'll turn it over to the operator for Q&A.

Thank you. We will now begin the question-and-answer session. If you have a question, please press star then one on your touchtone phone. If you wish to be removed from the queue, please press star then two. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star then one on your touchtone phone. Each caller will be allowed to ask a question and a follow-up question before we move on to the next caller. This first question comes from Steve Sakwa at Evercore ISI. Please go ahead.

Yeah, thanks. Good morning. Steve, thanks for your opening comments on the city and the administration. I guess maybe going to Michael's commentary on just the pipeline and the 1 million ft, I didn't know if Michael or Glen could maybe expound a little bit on how much of that is for, you know, upcoming lease expirations, how much of that is for kind of vacancy within the portfolio. You know, I guess most of that's probably in New York, but, you know, maybe discuss kind of the New York versus Chicago versus San Francisco demand trends?

Good question, Steve.

Hi, Steve. It's Glen. How you doing? You know, our pipeline's extremely well-balanced. Of the 1 million ft, it's right down the middle, 50% new expansion, 50% renewal. The other thing I'll note is on renewals, due to the lack of quality space available in the market, we're seeing many of our tenants coming up to us early on renewals, since they can't find quality alternatives, which is a key indicator of a rising landlord's market.

As it relates city to city, San Francisco is coming on very strong. While we have some vacancy, as you see from the first quarter numbers, we have tremendous activity on all the vacancy. Our deals in the Tower 555 are now north of $160 a foot. Volume in San Francisco overall is strengthening week to week. Certainly everyone out there is feeling a lot better, and deals are happening in a very rhythmic pace. Chicago is starting to come on. Demand is improving. The deals are tough, but there's certainly tenants coming new to the market, and we're seeing a lot more store proposals coming into the market as we go into the second quarter and into the summer.

Great. Thanks. Maybe just as a follow-up, we did notice that, you know, in terms of lease commencements, the Verizon lease kind of had a little bit of a change in status. I'm just wondering if you could maybe talk about kind of what their, I guess, ultimate status is with the building and, you know, did that lease kind of start earlier and is that a benefit to the 2026 earnings growth?

Steve, it's Tom Sanelli. I'll take the first part of it, and then I guess, Glen, you could talk about the status. Because Verizon told us they're not gonna build out their space and they put it on the sublet market, GAAP allows us to start revenue recognition early. You'll see that flow through all of 2026. It started in the first quarter.

On the leasing front, you know, the block of space is excellent. It's 200,000 ft and includes 30,000 ft of outdoor space. We're in a great position. We have a Verizon public parent guarantee for the entire lease to begin with, so great credit. We continue to show the space, as does Verizon. There's very good action. Whatever the outcome, Vornado's in a great spot as it relates to that position.

Thank you. Our next question today comes from John Kim at BMO Capital Markets. Please go ahead.

Thank you. Steve, really appreciate your opening remarks. It really provided a lot of clarity on how you're thinking about moving forward. I wanted to ask you about your statement that you're all in at 350 Park. Are you all in even if Citadel will not commit to the building? How should we think about the put option you have in July?

I didn't hear the last part.

Read that again. How should we think about the put options, is that what you said, John?

Yeah, that's right. Is that something that you'll let pass, or is that something that the date could be extended?

The answer is that Ken exercised to go ahead. We have until the summer to decide whether we are a participant or a seller. I expect that we will take all of that time, which is the smart and correct thing for us to do. There are still some documents and other details to be ironed out. My remarks was that I said where I expect we will be all in. I do expect we will be all in, but that's not a legal commitment at this time yet.

That's all in with or without Citadel's commitment?

Say that-- um.

No.

[audio distortion]

The question is it all in regardless whether Citadel is committed or not from a lease standpoint?

No.

No.

It's just Citadel has to be committed. They will be committed. I mean, this whole deal is based upon the fact that Citadel will be the anchor tenant taking no less than 850,000 sq ft, although we expect more. Ken Griffin is the 60% partner. We are a 36% partner, and the Rudin family is a 4% partner. That's the state of play. This whole thing, Ken has committed to start. This whole thing will all come together and become very clear in the mid-summer.

Okay. Thank you. I wanted to ask about the $200 million of signed leases not commenced figure that you provided last quarter. If there's an update to that figure in terms of dollar volume, timing, and if there's any offsets through known move-outs during that timeframe.

Good morning, John. You know, I would say the number is still in that general neighborhood. It's probably a touch larger today, but it's generally in the same ballpark. You know, I think in terms of thinking about it, you know, probably 10%-12% comes in, you know, per quarter over the next couple of years, from a pacing standpoint. You know, there are some offsets, whether it's expiries, vacancies, you know, et cetera. I think Steve on the last call, you know, sort of said, from a modeling standpoint, you know, assume $0.40 a share flows through, you know, to the bottom line. We're gonna stick with that for now. That'll give you a sense in terms of the pacing of that $200-ish million. That started this first quarter.

Thank you. Our next question today comes from Floris van Dijkum with Ladenburg. Please go ahead.

Hey, thanks, guys. Appreciate some more color on that large SNO pipeline. Could you maybe just expand on that a little bit? What percentage of that SNO pipeline is in the PENN DISTRICT, and how much of your does it include retail leases? You've done some leasing on Upper Fifth Avenue in particular. Maybe if you could give us a little bit more color of, you know, the PENN DISTRICT versus other areas in your portfolio?

Morning, Floris. You know, that number is pretty much all office. I can't give you the retail number as we sit here right now. Obviously, the lease with Meta is a big positive. In terms of the $200 million, in terms of PENN versus others, I would say it's probably two-thirds PENN. You know, which should not be surprising given the lease up of PENN 2 and the balance in PENN 1.

Maybe my follow-up question, as it relates to your Park Avenue Plaza acquisition, I mean, what caused that deal to happen? Why did the Fisher Brothers, I guess, you know, sell out? It looks like it's like a six, seven yield on cost, if I'm not mistaken, to get to the $0.10 accretion. That seems pretty attractive. Is that a cash yield or is that a GAAP yield? How much of a mark-to-market or how much more growth in terms of earnings do you expect to get from that property going forward?

I honestly like to remember everything you asked there, Floris. Like, we're thrilled about the acquisition. You know, these types of assets don't trade very often on Park Avenue. It's certainly one of the best assets on Park Avenue. In terms of the yields on a cash basis, you know, given the in-place debt, it's, you know, roughly 8%. On a GAAP basis, it's, you know, well into double digits. As Steve said in his remarks, you know, rents are, you know, well below market here. You know, probably at least $50 a foot below market. You know, over time, you know, things are not static. There's action with tenants. We'll capture that, and that's, you know, and that's without, you know, rents growing.

If rents grow further, that GAAP should widen. We're excited. By the way, the Fishers did not sell out. They remain. They still hold their 51%, and I think their track record of performance on the asset is stellar. It's a blue chip set of tenants. They're leased long term. you know, they're quite effective at signing long-term leases with high-quality tenants, and that's reflected in this asset. And the tenants, you know, some of which we spoke to about their experience, you know, couldn't have raved any more about the quality of the asset, and they have grown, you know, over time there. We're excited about the asset. We think there's tremendous value to be created over time. I think I addressed all your comments, questions.

Thank you. Our next question today comes from Alexander Goldfarb at Piper Sandler. Please go ahead.

Hey. Good morning down there. Steve, yeah, echoing, appreciate your comments, upfront. Just crazy. Thank you for your, for your statements. Michael, just following up on Floris' question, the two items in the 2026 guidance. One, the $0.10 accretion, you know, for Park Avenue, was that the GAAP impact or that's the cash, just as we think about FFO? The second part of that guidance question is there was an item about the master lease changing at 350, and just wanna know how that impacts the earnings for this year. That's my first question.

Park Avenue Plaza, the $0.10 value is a full year run rate. Obviously we're not gonna have that, you know, for 2026. That's a GAAP number. On the 350, you know, the change there was done given, you know, Citadel wanted to kick off the development. They wanted to vacate. We couldn't start demolition without defeasing the old CMBS loan. That loan was defeased, as you saw in our Q. The master lease was modified. There were a number of changes made to the documents. That was a negative to 2026 earnings, which, you know, when we talked about it.

Alex, the deal always contemplated that when Citadel vacated the building so that the building would be demolished, that the rent would be reduced.

Or even go away.

The earnings ding by that reduction, much of it will be made up by capitalizing interest, et cetera. What exactly is gonna happen?

In 2026, you know, for the next few months until we decide whether we're going into the JV, there's a wash. There's no earnings coming out of 350 Park. Once we make that decision, assuming we go into the JV, we're gonna start capitalizing interest and costs. You'll start seeing-

Will that equal or exceed what Or be less than the 36 figure?

It initially will be a little less, and then it eventually, over 2027, 2028, 2029, basically equates to what we were getting.

For five or six months, there's a negative ding given the master lease. Again, that's previously communicated, Alex.

Does that satisfy you, Alex?

That's, that's awesome. Second question, Steve, is big picture. You know, with regard to Citadel and the whole, you know, tension with the mayor. You know, back in 2019, Amazon wanted to open in Queens. They were rebuffed. I don't recall this amount of instant, you know, negativity and political nervousness. Today, it's clearly, you know, escalated a lot quicker. What do you think has changed? I mean, certainly politics have become more left, more progressive here. Why do you think Ken, this time, the politicians seem to be much more eager to make this? Everyone be happy versus Amazon, the city and the state seemed happy. You know, it wasn't even a ripple when Amazon walked from Queens. It doesn't seem that. What's the difference now versus then?

Gee, I don't know. You know, you're correct that the body politics doesn't seem to have any remorse about losing Amazon. On the other hand, the body politics thinks that the digital team is important and an enormous contributor. There is a significant feeling amongst the political leadership and the business leadership that this was a mistake, which I described as a blunder. You know, this is something that should be repaired. We'll see where it goes.

Thank you. Our next question today comes from Dylan Burzinski at Green Street. Please go ahead.

Hi, guys. Thanks for taking the question. Michael, I think you mentioned that pricing has widened given some capital markets volatility associated with the war in Iran. Curious if you can just provide more color on that, and then maybe if you can sort of flavor in some commentary around, I think last quarter you guys mentioned looking to put assets in the market. Just sort of any sort of color you can provide on sort of how that those processes are going.

You know, on the financing markets, you know, financing markets were incredibly strong in the last year, beginning of this year. As tight a spread as we had seen in some time. You know, given the volatility, it's backed off a little bit. Like, there's still depth in the market. Deals still can get done, particularly for high-quality assets. I wouldn't call it a huge impact, the reality is, look, treasuries are probably up 30 basis points or so, and the spreads have widened that a little bit, so that makes the borrowing costs a little wider. You know, not wildly different. You know, just, you know, this is still a very functioning marketplace for high-quality assets. You know, off maybe, 40, 50 basis points in tow.

I'm glad we did what we did, you know, when we did it. You know, we're not, we're not really dealing in today's markets, but again, you can get deals done. You know, on the asset sales side, we're I think Steve referenced, you know, we're working on some asset sales. That is true. You know, when we have summary to announce, we'll announce, the answer is we got a few things that are meaningful in the pipeline. We're in active discussions with potential buyers. I would say the interest in New York City, as I said in my remarks, you know, continues to expand in terms of the type of buyer.

You know, I think there is consensus on, you know, New York being head and shoulders best market. You know, assets are, you know, rents are rising, assets are at a discount to replacement costs. There's a recognition there's not a lot of supply coming. I think global capital has a lot of comfort in it. I think, you know, one of the things we're hearing from capital sources around the world is, you know, the U.S. remains the safest, most liquid market, particularly given everything going on around the world. I think you're gonna continue to see capital emanate from other parts of the world to come into the U.S. I mean, New York City is gonna get a heavily disproportionate share of that. That's, that's what we're seeing. When we have specifics to announce, we'll announce it, but we're encouraged by what we're working on.

Just on the rent growth piece, I think, you know, several quarters ago, I asked, you know, 20%, 25% rent growth, if you saw that over the next five years, you know, how what were your thoughts would be on that? Steve, I think you mentioned, like, while that's good, that would be disappointing given everything you're seeing on the supply and demand imbalance, especially for high-quality office. I mean, can you guys just talk about how far rent growth could go in your mind? Has your thoughts around that 25% cumulative rent growth figure changed at all?

I think we'd still be disappointed in that, Dylan. You know, look, is I think we've said on the last couple of calls, right? The backdrop for office is as favorable as it's been in, you know, a long, long time. It's very difficult to add supply here, which at some point, you know, we're gonna need. You know, there's gonna be a building a year maybe as we get into the next decade. You know, that's very little. At the same time, we have supply coming out of the bottom end of the market. You know, the fundamentals are great. Companies, as we've said, you know, continue to wanna grow here. You know, we're seeing, you know, still significant activity from the financial service sector, law firms, accounting firms.

Frankly, AI has picked up, you know, more recently. I think all that, you know, results in, you know, rents continuing to rise. I don't know that it makes sense to give you a prediction, but we'd be disappointed at 25% over five years. I don't know. You wanna add any comments on what you're seeing from-

I mean, look- Feedback, Dylan?

Tenant's rent sensitivity is not even high on the list right now. Tenants wanna be in the best buildings with the best landlords. If you think about our leasing performance, $100 a foot become the norm for us because of the quality of our product. You know, over the past eight, nine quarters, our average starting rent is $100 a foot. That's a great trend. You know, as we go on here and the way we're shaping the portfolio with the addition of 623 Park Avenue Plaza, the new 350 Park, and we think, you know, rents are gonna continue to spike. The way we're balanced on the west side and now Park Avenue, we're really excited about that. We think we're in perfect position for what's to come on rents and tenant demand.

Thank you. Our next question today comes from Jana Galan with Bank of America. Please go ahead.

Good morning. Thank you. Congrats on the strong start to the year. Michael, appreciate your comments on the 2026 FFO now expected to exceed 2025. Curious if that's primarily from the Park Avenue Plaza closing in 2Q or also from 1Q being slightly ahead and carrying throughout the year.

I'd say it's the latter.

Great. Then maybe on, 555 California, could you give some update on kind of demand leasing and rents there and our AI tenants becoming a bigger part of the pipeline there and in the New York pipeline as well?

Hi, Jana. Thank you. It's Glen. How are you? Rents in San Francisco are rising a lot. As I said earlier, our rents in the tower have now gone north of $160 a foot for substantial leases, 50,000 ft and greater, not small deals. We are leading the market by far at 555 Cal. We're also seeing a lot of really good activity at 350 Montgomery in the campus with more technology, AI-type tenants. Certainly that activity we're seeing at our project, at our complex as well.

You know, other than tech and AI, financial services is growing in San Francisco, something we've kept a very keen eye on, as well as law firms. It isn't just AI, although it's helping a lot as the city improves. The other industry sectors are really coming on strong, and the city overall feels great. I was out there a few months ago, walking the streets, meeting with people. It's really feeling good out there, and people are very positive again in San Francisco.

Thank you. Our next question today comes from Anthony Paolone with JPMorgan. Please go ahead.

Great. Thanks. You talked about having some assets out in the market for sale. If we think about just, you know, whether it's 350, 54th Street, and then Fifth Avenue, some of these projects that are gonna be in the pipeline. How are you thinking about just your pro rata leverage level over the next couple years and whether there's gonna likely be a bigger disposition program or whether you think, you know, you'll just use project financing and take on a bit more leverage?

Morning, Tony. We've got the capital earmarked for all these opportunities in our cash forecast. We've got some asset sales in the works that we obviously have a lot going on between these investments that we've made recently, 623 Park Avenue Plaza, the buybacks, some of the future developments. What I would say about the future developments, something like the 350, the bulk of our equity is coming from our land contribution, right? Any incremental capital is really not required from Vornado for probably close to three years. We've got ample time to plan for that and so forth.

You know, when you look at our sort of capital needs, if you will, over the next few years, you know, it's fairly well laddered. You know, at the same time, you know, as we execute, hopefully on some of these asset sales, that's gonna give us some additional firepower, frankly, beyond just, you know, we're talking about in terms of these developments.

Okay.

If you look at our history, with respect to capital planning, we have three or four things that we have historically done. Number one, we generally hold billion-dollar-plus cash balances. The second is that we almost always pre-fund well in advance of our capital needs. For example, we loaded in, I don't know, $2 billion, $2.5 billion of capital two years before we started the PENN 1 and PENN 2 development. That notwithstanding the fact that the capital markets got a little bit rough and volatile when we were actually building, we had the capital on our balance sheet. That's what you can look at for what we do. The other thing is that we like to operate with lower rather than higher debt levels for the obvious reasons.

The last is that our philosophy is that we like non-recourse project-level debt as opposed to unsecured credit, which basically makes the entire corpus, I guess you could say personally liable. We like non-recourse project-level debt, which is the majority of the way we finance our business.

Okay, got it. Just a follow-up question on the leasing side. I think there's about 600,000 sq ft in the fourth quarter that comes up. Is there anything larger in there that's a known vacate? I just can't remember if there's any big deals in that mix to watch out for.

It's Glen, hi. There's two larger tenants expiring in the second half of this year, and we believe both will renew their leases, and we feel good about our expiration for the remainder of 2026. As you would expect, we're all over the 2027, 2028 expirations as well. 2026, we're pretty well taken care of. We feel good about what's gonna happen.

Thank you. Our next question today comes from Vikram Malhotra with Mizuho. Please go ahead.

Morning. Thanks for taking the question. I guess first one, you know, given all the kind of activity you've had with all the PENN assets, any update on Hotel Penn and Manhattan Mall in terms of, you know, users, monetization, et cetera?

No update.

Okay. Just on the earnings side, you mentioned 2027 FFO, nice pickup. I'm wondering, you know, two things. One, are there any offsets we should be thinking about for 2027? In particularly FAD, given the, you know, ramp in FFO, I'm assuming there's still gonna be elevated TI into 2027. Should we think about FAD really, you know, perhaps picking up only in 2028? Thanks.

Yeah. Good morning, Vikram.

Hey, hey, Vikram, I would make one comment, okay? I can't wait for the free rent to burn off. That's when this business will get to be real fun and will generate substantial positive cash. That happens over the next year or two. I can't wait for that. Go ahead, Michael.

So, so, uh-

By the way, Glen, take note of what I say.

On the FAD side, Vikram, you know, your comment is right? There'll be continued elevated TIs this year, next year. You know, even on deals we've committed this year, you know, tenants sometimes don't call those for a while. That'll go into next year. Then 2028, you know, we expect to see that drop, you know, materially and cash flow, you know, be much higher. I think your general direction is accurate. On the earnings side, you know, there's always ins and outs. There's always offsets. I can't tell you specifically what those are, but in the history of Vornado, I think we've given you as much guidance as we can give you with respect to next year in terms of what the bottom line's gonna be.

Thank you. Our next question today comes from Nick Yulico at Scotiabank. Please go ahead.

Thanks. I just wanted to go back to 350 Park and just be clear on a couple things. One, in terms of the, you know, the new $16 million annual rent versus the old rent, did that already happen in the first quarter? Is that a second quarter, you know, accounting impact? I also want to be clear on that new rent that's being paid, what is the maturity on that lease? Is that concurrent with the debt, the new mortgage that matures next year, or does it extend beyond that?

Morning, Nick. On your first question, new rent started I mean, there are a few days in March where it started, but, you know, by and large, it'll be second quarter. I don't know, maybe there are 15 days in the first quarter where the new rent was reflected.

The new rent is co-terminous with the execution of the new mortgage. I don't know what that date is, but it's a couple of weeks or three weeks ago, whatever.

Yeah. That new lease runs until early 2027. You know, your question is, you know, why is that? Because, you know, there'll be a resolution one way or the other. Either the venture will be formed, we'll put the asset, you know, something will happen prior to that maturity.

Okay. The rent, that new rent, is only in place until the point at which the mortgage matures. There's no rent being paid beyond that date-

Right.

Under the new agreement.

Correct. There'll be a, you know, there'll be a resolution, door A or door B, before that, which, you know, the rent would have gone away anyway.

There's no building.

Okay.

There's no building for the tenant to pay rent for.

Got it. Okay. I just wanted to be clear on that. I guess second question is, you know, obviously, I mean, you've talked a lot about You've given some of the breadcrumbs on 2027 and how to think about that. You know, it is also 2027 FFO is a piece of the executive comp, you know, per the proxy plan. I guess I'm just wondering, like, if you've any new thoughts on this, Steve, about, you know, finally giving earnings guidance? It's, you know, you're at the point now where the tide is turning. You're being, you know, measured by that from a comp standpoint. Why not give formal FFO guidance at some point?

Oh, Lord. How do I answer that question? You know, the two sides of it is that, you know, we have a simple business which has complexity, and the numbers are moving. It's very I mean, we find it that it's sort of difficult to guide and counterproductive. Warren Buffett, who's not a friend of mine, but an acquaintance of mine, he didn't guide for his whole career, that's one thing, and the big bank guy, he doesn't guide either. But all of our competitors seem to be able to guide, what's wrong with us? But right now we have no plan to guide, other than the snippets that we put in these calls here and there, which I think, I hope you find or find hopeful, helpful.

What I think you're saying is that if our earnings are gonna explode upwards, why don't we just take a pat on the back for that and guide to that? That's something that I'm gonna put under my pillow and think about because that sounds like maybe it's a good idea. As of right now, our policy is we selectively and in a limited way guide. We don't give full guidance. I think you can probably guess that that's gonna continue for the, you know, for the, you know, for the future. Tom, what do you think?

I agree.

Tom's saying he's happy he doesn't have to guide.

Thank you. Our next question today comes from Seth Bergey at Citi. Please go ahead.

Hi. Thanks for taking my question. In the annual shareholder letter, you kind of referenced, you know, the no sacred cows policy again. It sounds like the New York office trans market is improving. You mentioned possible kind of inflows, you know, given it's a liquid market, and the U.S. is just safety. How do you kind of think about, you know, potential asset sales? Should we think about those being more non-core dispositions or any core asset sales that you're kind of thinking about?

Summarize the question for me.

You mentioned your letter, the no sacred cows. Is that just New York, or is that some other assets we should think about non-core dispositions?

I mean, I don't wanna shock you, basically, I'm in it for the money. Therefore, there are no sacred cows. There are assets that are critical to the business. There are assets that are important to the business. There are assets that we love more than other assets. Based upon price, economics, and business strategy, there are no sacred cows. What does that mean? There's a handful of assets that we actually have already determined that we don't want in the business mix, and those assets are for sale. Our intensivity, if that's a word, to liquidate those assets rises and falls with the market. Over a short period of time, there's a handful of assets that will not be part of our portfolio.

Now getting to the rest of it, there are assets that we hold near and dear that we think are very valuable, that we underwrite as being much more valuable than apparently the stock market underwrites it. Even those assets, if I think Sam Zell said the phrase, "A godfather bid," if some, you know, very aggressive bid came in for one of those important assets, we would execute on that because that would be the right thing to do. That's the right thing for us, for the management to do, more importantly, it's the right thing for the shareholder to do. There are no sacred assets. There are prices that are critical, in terms of whether we would execute on selling something, it's all a function of what the price is.

Great. Thank you. For my second question, I guess, how do you think about kind of incremental, you know, potential acquisitions versus accelerating the share buyback and balancing that versus your current leverage levels?

There's three things inherent in that question. There's acquisitions versus stock acquisition and leverage levels. The answer to that is that we think, No, let me rephrase that. We are certain that we can basically do all three. We are certain that we can buy selectively important assets that come up in the bullseye location of our heartland. We are certain that we have the capital to buy back our stock in a measured way. We are also certain that we are able to keep our leverage in a to a measured and under control level. We think we can do all of that. We have some things that are in process that will augment all of that.

Our two most recent acquisitions of 623 Fifth Avenue, which we think, I mean, I've written about that, and we think is a terrific deal. The Park Avenue Plaza acquisition that we just announced a couple of weeks ago, we think is an equally terrific deal. Then we think buying back our stock at $30 a share is a terrific deal as well. We're doing all of that. I hope that answers your question.

Thank you. Our next question today comes from Caitlin Burrows at Goldman Sachs. Please go ahead.

Hi. Good morning, everyone. Maybe just on the pricing side, I realize the reported leasing spreads are only on a subset of second-generation space. First, I was just wondering if you can go through your expectation today of portfolio mark-to-market across New York, San Francisco, and the Mart? Whether you expect that portion that gets included in the spreads to increase, as in, like, could downtime become smaller?

Good morning. It's Glen. On the question of mark to markets, we expect, you know, to continue the performance we've had over the past, you know, a couple years, which are positive, and positive. You know, during the last two years, we've only had one quarter negative, which we like, and we expect to continue. You know, many have been in the double-digit positives. We expect free rent to continue to reduce, and even TIs are starting to come down, so we're working hard on that piece, of course.

San Francisco is the same. You know, with the rents we're achieving, the mark-to-markets will continue to improve. Chicago, as I said, is still most challenging, although demand is picking up. You know, rents are staying firm. Concessions are high in Chicago. Those have yet to break, you know, downwards, demand is certainly improving.

I mean, think about just economics 101 or macroeconomics. Focusing on New York for the moment, I mean, you know, we've said, and I've written about, that we compete in a subset of better building Class A space, which is under 200 million ft. The fact that there may be 400 million ft in New York is irrelevant, because we really compete in a market which is about half that size.

The availability of space in that market is evaporating very quickly. I mean, somebody used the analogy of an ice cube in a microwave. I mean, we know that because we are a key factor in the market. We know that because the incoming calls from brokers looking for space for their clients are starting to get more anxious and even more desperate. As this availability of space shrinks, obviously the price goes up. There's something else going on which is equally important, and that is the cost of a new building has gone from whatever to somewhere around, pick a number, $2,500 a foot. Interest rates and the cost of capital has gone from, you know, 0% and 2% to 5%, 6% and 7%.

The rents that have to be achieved to make a new building economic are, you know, well into the $200 a foot and even touching $300 a foot. That's never happened before. Obviously, rents on older buildings, which are still great buildings and great locations, are going up because scarcity and because of the cost of new supply coming on the market. This is just basic economics 101. The next part of it is that I believe, and I, you know, my team can speak for themselves. I believe that we are in a long, long, long-term landlord's market where these dynamics will continue. Why is that?

There's nothing in the short term that can change that other than if interest rates dip down to 2% or something like that, which, you know, you can make your own judgment whether that might or might not happen. If that happens, basically, I'm not in a big rush to rent space at today's prices, because I think tomorrow's prices are going to be higher and maybe even a fair, a lot higher. Thanks.

I guess maybe just to follow up on that last point. I know leasing volume in the first quarter was relatively low. Would you just say that that's lumpy? Is it more about that you're not in a rush because rents could be rising or something else?

Yeah. Glen is in the business of renting space as quickly and aggressively and as, and as hungry as he can be. If there is any fall off in volume, it's not because I directed Glen to get out of the market. Glen's in the market every day working his ass off. Thank you, Glen.

Thank you. Our next question today comes from Ronald Kamdem at Morgan Stanley. Please go ahead.

Can't respond to that, no.

Hey, two quick, if you wanna respond, I could wait.

Go ahead, Ronald. Go ahead.

Okay, great. Just two quick ones, and thanks for taking the questions. Number one, I think, you know, I think last call you talked about some guideposts for occupancy over the next 12-18 months, and, you know, thinking sort of mid-90s on a leased basis. Wondering if you could provide any update both on the, on a leased and on a physical occupied basis, what that occupancy target to look like over the next 12-18 months again. Thanks.

Yeah, look, we've historically, you know, run our portfolio in the mid to high 90s. You know, we expect to get back there. You know, that probably is over a couple year period. You know, that's. Again, I think given all the dynamics that Steve alluded to and we've talked about in the market, and the lack of space availability, you know, that's gonna happen. Obviously leasing up PENN is a key part of that. You know, and I think one of the analysts picked up this quarter, you know, that our occupancy actually went up 70 basis points, not the 40, because we took 350 Park out of service. That's what we expect to get. I can't tell you exactly what quarter it's gonna be, but, you know, over the next, you know, couple years or so, that's where we expect to get back to.

There's a couple of things to focus on. There is a couple of buildings that we are not renting. Why is that? Because they are over-leveraged and underwater. It's uneconomic for us to rent spaces in those buildings, which really, they're almost owned by the banks. If we put TI into those buildings, it's basically burning money. We have chosen, I don't know whether this is a good decision or not. We've chosen to leave those in the aggregate statistics, where some of the folks in our industry have taken those buildings out of the numbers, which makes their occupancy higher. If you take those numbers out, those buildings out of our numbers, our occupancy goes to what? 94%, something like that, 95%.

94%.

94%. We know that number, although we don't publish that number, and maybe we should, although right now I'm publishing that number. That's the first thing. The second thing is that I look upon in a landlord's market like this, I look upon vacancy and available space as an asset because that will As we rent that space, and we will with 100% certainty, will grow our earnings. When you think about investing, maybe the best company to invest in is the company that does have available space in this market as opposed to a company that has all space already rented. You can make out of that what, you know, whatever you will. Thanks.

Really helpful color. My second one, if I may, was just on a lot of the footnotes in the supplement. Just on, I guess on PENN 1, any idea when that litigation will be just in terms of timing? Obviously, you can't comment either way. Just in terms of timing, is that something that can be done this year? Also, the change in retail from the base of the office buildings being put in the office segment, just the thinking there. Thanks.

I'll take the litigation. I have absolutely no comment on anything having to do with that litigation, other than I'm optimistic. What about the retail?

Yeah. We didn't change our segment reporting. Obviously, we have two segments, New York and other. This is a subsegment. Ronald, what we did here is we tried to align the subsegment more on how we view the assets. We grouped all the retail assets together and the office assets. The base of 1290 retail is now included in office as opposed to being in retail. Any ancillary office space that's in a retail building is obviously in the retail subsegment. It's all disclosed obviously in the supplement, and we give you the exact buildings that are in each subsegment, so you could follow along. I think this is the better way of looking at it, as opposed to the way we were doing it previously.

Thank you. Our next question today comes from Brendan Lynch at Barclays. Please go ahead.

Great. Good morning. Thanks for taking my questions. First one on Sunset Pier Studio. Is there any interest in the current short-term tenants in converting to longer-term leases? Just an update on that.

Hi, it's Glen. There's great interest in Sunset and the studios. You know, we're leased right now. Place is great. Unbelievably great. You know, I would say best in [the Bay]. In a great location. We have very good activity. Long-term folks looking, short-term folks looking. We expect to continue to fill up the project once this year's leases expire. It's off the charts. The reception's been A+. We expect to do really good things there on the leasing.

A direct answer to your question, I would definitely prefer to be in the long-term leasing business with that asset rather than in the, you know, month-by-month leasing in that asset. The answer is the ownership of that asset prefers to be in the long-term leasing if the market gives us that opportunity.

Okay. Thank you. That's helpful. A follow-up on the Verizon space at PENN 2. Can you just walk us through if they find a subtenant versus you finding a tenant and how we should think about potential termination fees, and any accounting around the TIs that you might still be responsible for, if it's just a sublease instead of a cancellation and new lease?

Glen prefers that I don't talk about it. Go ahead.

As I said earlier, you know, we're in great spot no matter how it comes out. We will only be opportunistic to make money on the space. We have a very good lease position, and we'll see how it plays out, but that's as much as I think I wanna talk about it for now.

What do we have? It's basically a 19 or a 20-year lease. We have a long-term lease with a super credit. We will never terminate that lease under any conditions. The only thing that might happen is around the dynamics of a subtenant coming in because Verizon wants to reduce their liability. But we don't have anything to say, other than that long-term credit lease really is not something that we are going to terminate or monkey with.

Thank you. There are no further questions at this time, so I'd like to hand it back to Steven Roth for any closing remarks.

Thank you all very much. I mean, as the, I think the team and I are delighted with our activity over the last three, four, six months. We are excited. I did make the statement in my remarks this morning that I am certain that over the next year or two, we will have the highest growth performance of any company in our sector. We're excited about that. We've got a lot of great stuff going on. Thank you for participating. We'll see you next quarter.

Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.