SL Green Realty Corp. 2026 Q3 Earnings Call

Please go ahead, Mark. Thank you, and thank you all for joining us this afternoon as we recap another momentous quarter for SL Green.

In many ways, this quarter and the year have exceeded expectations as our predictions about the strength of the Manhattan office market have materialized and our performance has been nothing short of spectacular. We took advantage of a very strong leasing market to surpass perhaps the company's most important goal, the leasing of over 2 million square feet year to date, as we currently sit, bringing our leased occupancy to 95%. As we predicted, rents are now rising quickly as demand remains strong and our pricing power grows for the limited supply of high quality, well located Manhattan office buildings.

Our greatest strength comes from having a well-leased portfolio at rents that are generally exceeding previous rents by, on average, around 15%, and driving strong underlying operating performance with more than 4% same-store NOI growth. With this trend expected to continue into the fourth quarter as our pipeline of leasing activity has actually increased over the quarter to 1.3 million square feet, representing both important renewals that we're working on right now, along with filling up the remainder of our diminishing vacancy. Our outperformance in the quarter wasn't limited to operational matters, but also extended into significant capital markets activities where we were able to consummate deals while our competitors largely sat on the sidelines as a number of their deals stalled. We continued to advance our disposition and financing plans this year with a staggering amount of work already completed.

With the successful $2 billion refinancing of 245 Park, we now have completed over $7 billion of our financing plan for 2026, which has helped to generate incremental liquidity, strengthen our balance sheet, and extend our debt maturities at fixed rates. With that now behind us, we have very little to do in 2027 from a financing perspective, therefore allowing us to focus almost entirely on growth opportunities, development projects, and further sales and dispositions of assets and joint venture interests. The third quarter also brought a number of new dispositions, including the sales of 110 Greene Street and 185 Broadway at really good prices. Those real estate deals you may have seen coming.

At SL Green, we try to surprise you with our creativity, and I was especially proud to announce this week that we've sold a portion of our hospitality platform at a $200 million valuation, bringing $40 million in unbudgeted proceeds. This is part of our platform that most people doesn't value at all, and that we've monetized at a 20 times FFO, while the whole of SL Green trades at just nine times FFO. That's a direct credit to how hard our team works and how we continue to find new ways to bring value to our shareholders. I know there's been some focus in the analyst community on the timing of future dispositions, and I do expect that we'll have more announcements in 2026.

We've had a staggering amount of success this year in selling or JV-ing assets with over a billion dollars of pro-rata value and are working feverishly on additional transactions to ultimately achieve the full $2.5 billion. Some of these deals may be deferred into the first half of 2027, but we're still seeing very good demand from the institutional investment community for our assets. Last but not least, we celebrated our 10 millionth visitor at Summit One Vanderbilt, which happened to coincide yesterday with our five-year anniversary. That business has vaulted over the Empire State Building as the top observation attraction and one of the most sought-after attractions of any kind in New York City.

That has all translated to our earnings guidance being up more than $2 per share from the original estimates last December, which felt pretty good to us until our analyst friends raised their third quarter estimates even higher last week. We appreciate your confidence, but don't think that anyone should say we missed anything, given the monumental performance this year and quarter. Before we open to questions, let me briefly address the one drag on earnings we felt this quarter and throughout the year, which is stubbornly high interest rates. Higher rates impact all real estate businesses in most every industry, and we're talking about a swing of about 150 basis points throughout the year, up from the already elevated levels at the beginning of the year.

That, of course, is not something we control, and that we've noted in the earnings release, had a $0.25 impact on the back half of the year. However, we can and have aggressively and smartly hedged parts of our liabilities to lock in lower interest rates, so the impact has not been nearly as great as it could have been. Thanks to our incredibly hardworking team, we have continued to operate quite successfully in this context, advancing dispositions and financings that no one else could have achieved, and delivering on creative solutions like the sale of part of our hospitality business. Thank you, and I am happy to open the line for questions.

Thanks. Yeah. Let me hit a couple points.

As Marc mentioned, the pipeline is over 1.3 million square feet. Most notable in that pipeline is almost 840,000 square feet of which are active leases in negotiation as opposed to straight term sheets. The mark to market, as we've experienced throughout all of this year, is very healthy. I think something north of 20%.