Michael Griffin: Great. Thanks. Michael, I wanted to go back to your comments around concessions being stubbornly high. I mean, I imagine that’s the case for the market overall, but if you look at maybe better-off submarkets like Park Avenue or even some of your properties on the West Side, the PENN District, how are you seeing concessions there, given that the environment seems to have improved?
Michael Franco: Glen, you want to hit that?
Glen Weiss: Yeah, sure. Hi, it’s Glen. Yeah, I would tell you, no matter the submarket, on new leases, TIs are somewhere between 140, 150 a foot and free rent is somewhere in the 13-month, 15-month range. I think as it relates to submarket specific, it’s really about the rent. So, in some of the submarkets, we are seeing an uptick in rent where supply is tightening, as you would expect.
Michael Griffin: Got you. That’s helpful. I mean, and maybe just some color on lease expirations this year. It looks like there’s a big one in the second quarter, about 3% of the overall rent. The space to rent there right now seems pretty high. What’s the likelihood of renewing or backfilling the space, or is this one of those known move-outs that you described earlier?
Glen Weiss: It’s the Meta space that comes back to us in June that we spoke about on our last earnings call. That’s the lease you’re pertaining to.
Michael Griffin: And in terms of potential of backfilling or renewing the space, what’s demand looking like on it?
Glen Weiss: We have action on this space that’s part of our pipeline that we described. We feel very good about the asset and very good about backfilling that space. It’s the most unique asset in Midtown South. We feel good about it.
Michael Griffin: Great. That’s it for me. Thanks for the time.
Operator: Thank you. The next question is from Floris van Dijkum with Compass Point. Please go ahead.
Floris van Dijkum: Thanks for taking my question. Rather than get into the details on the leasing, which obviously is very important as well, but I wanted to ask a question on sort of the market and get Steve and Michael’s view on the opportunity that’s going to be represent — or presenting itself, I think, when the $200 billion of office loans mature over the next — actually in ’24, as well as the other $100 billion next year. What do you see happening with — some of those, obviously, are unlikely to be refinanced. And so, where do you see Vornado in that situation? Do you have — can you play a role in maybe buying some assets? And maybe does that help cause some of the bullishness in Steve’s tone on the outlook for the year — for the next two years?
Michael Franco: Good morning, Floris. So, look, I think in terms of the debt rolling over, which is significant over the next few years, as we all know, the capital markets are not there to support refinancing the vast majority of that. And so, I think what happens there is going to take one of a few forms. It depends on the quality of the asset, the sponsor of the asset, and what its future looks like. And we’ve seen some examples where, the older, obsolete buildings where debt rolls doesn’t have a future as an office building or certainly with that sponsor and the lenders have taken it back or there’s been a consensual sale of some of those assets. Something like a 1740 Broadway would be a recent example. So I think we’ll see a fair amount of that on some of those older buildings.
Then there’s a category where they just over-leverage where there is a future. And again, I think the lender will assess whether the sponsor has the wherewithal and the capability to either re-tenant or support the asset. And in some cases, they will; in many cases they won’t. We’re talking to the lenders about that. And I think they’ll look for solutions, right? I think lenders in general know that taking back assets and offering them certainly in the office space is not a winning strategy. Value deteriorates fairly quickly. Tenants don’t want to go into those buildings. So, we do think there’s going to be opportunity to work with existing lenders, be a solutions provider. We have a leading operating platform. We expect to deploy capital there.
And I think it could be in either one of those buckets. It could be buildings that are — that with our capabilities can be leased back up, stabilized, value could be created or it could be assets that can be repurposed from office to residential potentially. So, the answer is we are actively looking. We expect to play in that. And I think we’re still at the beginning stages.
Floris van Dijkum: And I know it’s early in terms of what transactions would look like. But presumably, for you to utilize part of your significant cash hordes, which, again, sets you apart from some of your peers, you would have to have, I would imagine, returns that are in excess of the 7%-plus financing rates that you would have to pay today if you were to theoretically get assets. Is that the right way to think about it? Your returns are somewhere [indiscernible]
Michael Franco: Yeah. I mean, look, I think our objective of deploying cash is not to invest in real estate, it’s going to generate core returns, right? I mean, this is an opportunity that is, by the way, not for the faint of heart, right? I mean, you’re taking risk and you want to get rewarded for that. So, the returns need to be attractive. So yes, I think the stabilized yields, I think it depends a little bit on the nature of the asset and where you think ultimate cap rates settle out for particular assets. But no question that the required yields are in the neighborhood that you mentioned.
Floris van Dijkum: Great. Maybe — and one follow-up. In terms of your retail segment, again, particularly your Fifth Avenue, which is, again, as you highlight unique, where do you think market rents are today? And I know you have 92%, I think is your occupancy rate in your Times Square JV, sorry, your Fifth Avenue and Times Square JV. But if you were to sign rent today in — on Fifth Avenue, where would you say market rents are for that space?
Michael Franco: I think it’s been a — there’s been a couple transactions that we signed probably, I guess, last year. And that would indicate that rents at the time were in the mid-to-high $2,000 per square foot, all right? Now, maybe there was a tick where they bottom in the $1,000, $1,500 neighborhood. But I think realistically, it’s back into that mid-2s, maybe even low-3s depending on the situation. And I think for luxury, given there’s such a scarcity, it could be higher. So it — Fifth Avenue, it’s hard to paint a broad brush. It’s a very scarce asset class. And for the right situation, you can command rents that are not too far off the peak. For the wrong asset, with retailers, don’t think it configures well, you can’t achieve that. So look, I think rents have recovered quite a bit. They’re continuing to recover. Obviously, the Times Square lease we signed recently, I think, is evidence of that. And so, we expect that to continue.
