Vornado Realty Trust BofA NY Global Real Estate Conference

I'm just going to give a brief comment or two, and then let's jump right into Q&A. Everybody generally knows Vornado. What I would just say is, I think if you look at where we as a company are now after the last few years, we're as optimistic and well-positioned as we've ever been. We own about 28 million square feet. We have reshaped the portfolio to continue to add, upgrade the portfolio from a quality standpoint, adding assets like Park Avenue Plaza, 623 Fifth Avenue. We're about to do a 350 Park. We think we have the premier portfolio in New York City, both office and street retail. We'll talk about market fundamentals. They're arguably as good as they've ever been in my 37-year career. Certainly, they're better than they've been in 20 plus years, and why it's going to stay that way.

We have de-levered our balance sheet over the last several years, continuing to make progress there. We bought stock back. We'll talk about that as well, if you want. I think we've taken a number of positive steps. The stock has performed a little bit. It's retrenched here recently. I think that it's sort of shocking given the fundamental backdrop, where certainly New York City office stocks are trading. Why don't we jump into Q&A? The only other thing I'd say is hopefully all of you have been over to the Penn District, seen what we've done there over the last six, seven years, transforming that area of the city. I think it's remarkable. The results, I think, speak to the transformation. We're still in the early innings there.

There's a lot more to come in terms of what those assets are going to produce and future opportunities coming out of Penn, and we couldn't be any more excited about owning that entire campus, which gives us the ability of unique things that you don't get by owning one or two buildings in a sub-market. Jana, with that, turn it over to you.

Let me start, and then Glen should jump in here. I think it all starts with where does talent want to be, right? Talent, particularly young talent, wants to be in New York City at a disproportionate level relative to every other city, and that gap has widened post-COVID. I do not know how many of you have college-aged kids or know people who have college-aged kids. I happen to have two that have graduated. I bet 80% of their friends that were not from New York now work in New York City, and that is generally the case with almost everybody. That does not mean they stay their entire lives, but they build their careers here. Many times do stay. Talent wants to be here. Companies recognize that, and you are seeing as a result of that strong, broad-based demand.

I would say as we sit here today, financial services, legal, accounting, tech, media, every sector is active and is growing, right? Driven by talent here, and therefore, the companies need to be here. You overlay that with, for those companies to attract talent, they have to be in higher quality space in the right locations. That is generally around the two main transit hubs in New York, Grand Central and Penn Station. They want to be in amenitized buildings. Out of that, I think we have said a couple times, 180 million sq ft. You are looking at a vacancy rate now that is tight, particularly in the Plaza District, mid-single digits. You have tight vacancy, you have strong demand. Rents are rising. There is limited new supply, and it is extremely hard to build in this city, both from a cost standpoint, from a time standpoint.

This is not Atlanta, this is not Charlotte, where you can slab up a building in two years, right? We know with certainty what is coming over the next seven years, and it is not much, right? If the demand stays reasonably strong, by definition, you have to see meaningful rental rate growth, right? That is why we are so bullish. Why do you tack on in terms of what else you are seeing?

No, look, I think Michael hit it all. I have also never experienced this market in my career, and I have been at this for three decades also. Just on the street, tenants are growing exponentially, and there is no space. We are seeing huge growth within our buildings. We are seeing tenants in our buildings growing into other buildings we own because they cannot grow where they are. CEOs want to be in New York, period. As Michael said, the talent is here. We track the better building segment, which is about 180 million feet, which is Class A trophy, Class A, and new trophy. That vacancy rate is only 6%. If you think about that vacancy rate in the upper half of the buildings, the towers, it is even less. I do not know the exact number, but it is probably 3% or 4%. There is really no space.

We're all of a sudden seeing tenants battling for space in all of our buildings. One thing we love about our portfolio specifically is our mix, where we have really done a great job expanding the Park Avenue sub-district with a real stranglehold now with 623 Fifth Avenue and 350 coming. The dominant Penn District portfolio, where rents are rising daily. The rents are just out of control up there now in a great way for us. 1290 has been an excellent performer, best building on Sixth Ave. We feel great about where we're sitting. We are working nonstop. It was the busiest August of my life. We'll go to the next one.

It was bad, right? Yeah, exactly.

Actually, Todd can kind of react.

We've seen no change in behavior at all. We haven't lost any leases based on what John is saying. Nothing so far. It's out there in the ether, so to speak. Everyone thinks about it, but so far, nothing at all that we're seeing on the ground.