Brett Herschenfeld: The high-end rental market was really being driven by Madison Avenue to start. We had the likes of Valentino and Jimmy Choo and Dior and McQueen, Van Cleef, all sign big leases on Madison Avenue in the past year. Fifth Avenue is right behind and starting to pick up, and that will be nice to see 717 filled on Fifth Avenue. In terms of investors, I mean, related in their acquisition of 625 Madison, a big part of that transaction is value recognition of the retail and they are an investor, and obviously, not a user. So there are more behind that, but we’ll be sharing that in the months to come.
Unidentified Analyst: Okay. And Matt, can you talk to how you’re thinking about your floating rate exposure today? Guidance that was set out in December look to reduce your exposure down to single digits by year-end ’23. Has anything changed on this front? And would you be comfortable operating at the current levels or higher?
Matthew DiLiberto: No, I think we’re on the path. We expect it to be on most of the fixed rate debt that we have today is fixed even beyond the end of the year. So there’s not much we can do with that. As to the other floating rate debt, a lot of that is what we expect to take out as we reduce debt over the course of the year. infecting 717 reduces our floating rate exposure by itself, taking down the revolver addresses the rest. And we still want to protect ourselves, even though the rate environment has gotten a little bit more constructive and the forward curve looks to be coming down. We want to be prudent and protective. We put a hedge on late last year, forward starting hedge. That’s what’s flowing through earnings. Rates were higher than they are today, which is why we had a negative mark-to-market, but it’s a protective exercise for something we expect to execute at the end of the year.
It’s protecting the balance sheet. We, at this point, again, are optimistic about where the rate environment is headed, but we still want to be prudent and keep that floating rate debt fairly low.
Operator: And our next question is going to come from the line of Blaine Heck with Wells Fargo.
Blaine Heck: So we’re hearing that the Park Avenue corridor has gotten really tight at this point given the strong tenant interest in that submarket, are you seeing a spillover effect in any specific submarkets or maybe buildings within your portfolio that are now seeing more interest since that kind of Tier 1 space is getting leased up?
Steven Durels: Yes, I don’t think it’s unique to Park Avenue. But you’re right, Park Avenue’s got an availability that’s like something like 9.4%. So by historical standards, you would say it’s at least at equilibrium, if not tilting more back to the landlord having more leverage on transactions because of the limited supply and lack of big blocks expected to come on the market anytime in the near future. But take it to a different level, which is you’ve seen with the absence of any new construction coming online in the short term, you’ve seen a lot of the new buildings in newer or heavily renovated buildings filling up. So the beneficiary of that has been Park Avenue, 6th Avenue, Rock Center. And anything around the Grand Central Terminal is all seeing more tenant demand.
So I think it’s more tenants are being forced to shop various parts of Midtown. But Clearly, the tenant drive is for the majority of tenants to focus their attention on the Midtown market as opposed to the far west side market or certainly the downtown market. And we’re seeing that spill over in all parts of our portfolio.
Blaine Heck: Great. And then the second one, just a quick one with respect to Herald Square. As it stands now, does the NOI at that asset cover the ground lease payments?
Unidentified Company Representative: I’m sorry, can you repeat that? Does the NOI and what.
Blaine Heck: The Harold, does that cover the ground lease payment that you guys have there?
Matthew DiLiberto: No, no, it doesn’t in its current occupancy, Blaine. Part of the reason in the ASP portfolio.
Operator: And our next question comes from the line of Peter Abramowitz with Jefferies.
Peter Abramowitz: So I think the EPS guidance raise was $1.38 in the range there and the FFO guidance range was $1 on the node. So I think you said it was mostly related to gains on the debt extinguishment, but just wondering if there’s any offsetting items or any other moving pieces in there that causes the difference in the magnitude of the rate between those two?
Matthew DiLiberto: Yes, the guidance adjustment for FFO is purely the gain of the 2 Herald discounted debt extinguishment as offset by taking out the generic $20 million gain we had in there. So that math works out to exactly $1. The difference between the $1 of FFO and $1.38, I think, of net income is the gain we’ll recognize on that asset did not have a basis on the books. And so it’s essentially all gain.
Peter Abramowitz: Okay. Got it. And then one other question on 2 Harold. So I think you guys kind of cover everything from a lender’s perspective, I guess from your partners’ perspective, I mean could you talk about the motivation for them. It seems like it was just a situation where they wanted to walk away from the asset. So you’re taking over almost full control for — I think it said no consideration in the press release. So you just kind of covered that and what the motivation was and the reason was from their perspective.
Unidentified Company Representative: Yes. I appreciate the question. I don’t want to speak for our partner on this call and what their motivations were. So unfortunately, not much I can get into there, but we’ll continue to update you on 2 Harold as we go on throughout the rest of the year.
Peter Abramowitz: Right. I guess put another way, anything that it’s obviously a very favorable resolution for you. Anything specific to the situation that influence that, I guess.
