SL GREEN REALTY CORP Q3 FY2024 earnings call

• IBM occupied 1 Madison Avenue, with other tenants like Franklin Templeton moving in, and Chelsea Piers, a rooftop, and Daniel Boulud's steakhouse La Tête d'Or adding to the area's vibrancy. • SUMMIT One Vanderbilt is approaching 6 million guests, with plans for global expansion starting with Paris. • Giorgio Armani's boutique and residences on Madison Avenue are open, with residences sold out, boosting luxury retail on the avenue. • Return to DPE business, having invested nearly $110 million in debt and debt-like investments, with a debt fund expected to close in Q4. • Bloomberg's 925,000 square foot renewal and expansion at 919 Third, demonstrating strong leasing momentum in East Midtown renovated Class A buildings. • Projected leasing achievement of over 3 million square feet for the year, with same-store Manhattan occupancy expected to be 92.5% at year-end.

• Expect to close over $500 million of asset monetizations by year-end, which will help pay down debt and position the company well for 2025. • Same-store full year guidance trended better than expected through the third quarter, with fourth quarter trending similarly. • The investor conference on December 9 will provide guidance for 2025.

Q: Congrats on the Bloomberg transaction. Confirm if it was in the pipeline and share economics on the rent and concessions.

A: It was not in the reported pipeline. The deal came quickly. Under an NDA, details can't be shared, but it's a 15-year lease with substantial positive mark-to-market and concessions below replacement cost. Pipeline is heavily weighted towards financial services.

Q: On One Vanderbilt joint venture sale, is it still on track?

A: It's going great and confident of closing in Q4. The transaction affirms One Vanderbilt's position as a premier office tower. The company doesn't have to sell but does it as part of the original business plan to optimize for shareholders.

Q: Comment on DPE market and real estate taxes.

A: Debt and equity liquidity is returning. Real estate taxes and OpEx were lower than modeled, with no unusual items, and operating expenses seasonally fluctuate.

Q: On same-store NOI and Alternative Strategy Portfolio.

A: Same-store full year guidance trended better than expected. The Alternative Strategy Portfolio focuses on assets with potential long-term value, with good results year-to-date from assets like 717 Fifth, 719 Seventh, etc., and market recovery helps in optimizing these assets.

Q: On financing markets and mortgage servicing.

A: Traditional lenders are warming up to lending on commercial real estate. Mortgage servicing business has $5 billion in active assignments and $6.8 billion potential, with fees throwing off substantial income. The business is scalable and sticky.

Q: On mortgage servicing income and JV debt fund.

A: Mortgage servicing income is lucrative, with fees layered into projections. The JV debt fund is going well, with a deal with an anchor investor to close in 45 days, and follow-on investor demand expected to meet the $1 billion goal.

Q: On acquisition funding and real estate conversions.

A: Company will detail 2025 plans in December. Investment is a spectrum of equity and debt, with access to various capital sources, including potential stock issuances. Office to resi conversion is a big opportunity with over 25 million square feet of applications and strong demand for workforce housing.

Q: On Summit OpEx and market recovery concerns.

A: Summit's OpEx trend is due to percentage rent payment in Q3, a yearly occurrence. Market recovery is good, with no major concerns, and rapid recovery could thin opportunity sets, but the company is prepared for various rate scenarios.

Q: On Giorgio Armani units and CMBS investments.

A: Expect to close Giorgio Armani units within the calendar year, with proceeds earmarked for debt paydown. CMBS investments are a different type of investment, $109 million invested, with unique accounting rules.

Q: On DPE growth outlook.

A: DPE business is in a new format, with capital committed fund by fund, expected to be highly profitable with fees, and not the same as prior track record due to new format.

Q: On office move-outs and right-sizing.

A: No significant move-outs, with more renewals than anticipated.

Q: On office to resi conversion and concessions.

A: Accelerated program has ~75 applications with over 25 million sq ft identified. Concessions will tighten, starting with free rent, then TI, as rents rise.

Q: On tech presence and 5 Times Square.

A: Tech presence is increasing with over 6 million sq ft of active searches. 5 Times Square is an ASP asset, with details to be shared later.

Q: On occupancy flow-through and 245 Park redevelopment.

A: Income recognition from leasing up vacancy has a delay of 12 months. 245 Park's redevelopment is on schedule, with improvements including a plaza, lobby, amenities, and leasing momentum, expecting a big lease announcement to take occupancy above 90%.