Operator: Thank you. The next question comes from Dylan Burzinski with Green Street. Please go ahead.
Dylan Burzinski: Hi, guys. Thanks for taking the question. I guess, just sort of going back to the acquisition point, is there any desire to — given the lack of debt financing available out there, to sort of go into it from a debt perspective and possibly from a loan to own, or is this purely, as you guys are looking at things, more so looking at things on the equity side today?
Steven Roth: The easiest way to buy a building is through the debt. So, that’s obviously target number-one.
Dylan Burzinski: Got it. And then as you guys think about opportunities, is this purely — I guess, purely focused on office or are there other retail opportunities that you guys think would also make sense?
Steven Roth: We’re open to buy office, obviously, and retail, obviously. So those are the two areas that we specialize in.
Dylan Burzinski: And then, I guess, just a broader capital allocation question. I know in the past, you guys have floated opportunistically selling assets. I guess, is that still on the table or are you guys now more focused on sort of going out and acquiring assets and growing the company on an external growth basis?
Steven Roth: We have, I think, basically, four fairly significant sale transactions that are in various stages of conversation right now as we speak.
Operator: Thank you very much. The next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.
Alexander Goldfarb: Hey, good morning and thank you. So a few — two questions here. And first, Michael, good to hear about the rebound in street retail rents. That’s really amazing, what a journey it’s been. So the first question is, Steve, on the Bloomberg lease, so when we read the Q, the rents that are cited in there are basically a sliding scale, but a negotiation in the future will address. So it’s not as though we take that — the one rent, and then it slides up to the next. It’s that’s the range that the negotiation will be in.
Steven Roth: Alex, you published something that said there was a 25% discount in the rent. I don’t know how you got that math, and that’s incorrect. So the way the — pardon me, the way the deal is structured is, the basic rent on that building is basically net. There’s a very small portion, maybe 50,000 feet out of the 950,000 feet that’s growth. But 900,000 feet of it is net. So, let’s call it a net lease. The lease has a bump between now and 2029. And so, when we get to the end of 2029, where we basically start, the net rent is $98 a foot, which grosses up to — well into the 150s of dollars a foot. So, that’s the starting point. Now, we established — first of all, you recognize that we are renewing and extending a lease five years before the mature — before the lease expires.
And so, you have to take effect of the future — unknown future and the contingencies. So, what we did there was we established what the tenant concessions, TIs, and leasing commissions were. Those are frozen. The starting rent is frozen. And then from there, there is a market-based appraisal as to what the proper market rate would be if we did the renewal at the then expiry of the lease in 2029, taking into account the already established tenant concession. But the color is, though, that it can’t be more than 10% more than the $98 a foot net or 10% less. So we have certainty on the bottom as to what the rent would be and it will be established as the fair rent in the then market, which we think was a very clever — by the way, both tenant and landlord think was a fair deal and a clever way of handling the future.
There’s nothing in this deal whatsoever that contemplates any reduction in the rent. It will be an arbitration based on the market.
Alexander Goldfarb: Steve, thank you. And I apologize for getting that incorrect. That was — my apologies. So, your clarification is that the rent that’s cited…
Steven Roth: Wait a second, Wait a second, I accept your apology. Thank you. That’s very generous of you.
Alexander Goldfarb: Well, I’ve made an — so, basically, in the way the rent is characterized now is the $29 million a quarter is characterized as gross, whereas the rents that are in the queue for the terms are now net. And it sounds like that’s the confusion that I had on my end. Is that correct?
Steven Roth: I won’t get into why you were confused. I’m just happy that you admit that you were confused.
Alexander Goldfarb: Okay, I just — great. The next question is on the rents for this year, to Steve Sakwa’s question, Michael, you mentioned that originally it was down $0.25 to $0.30. Now, it seems to be down $0.55 based on further lease move-outs, what have you. Was there some stuff that fell out of bed that was unexpected or what — or did I not hear correctly? I just want to understand, like, was there stuff that came up and surprised or what drove — what’s driving the additional earnings impact this year?
Michael Franco: Yeah. Yeah. Maybe a little bit more confusion there, Alex. So, on the last call, we talked about it, it was early in the year. I gave clarity on the interest reduction, because a lot of that was baked in with hedges that were going to roll off. We knew those — where those were going to roll off to. And we mentioned that there would be an impact from the known move-outs, right, and cited what those were. But obviously, there’s a lot moving out. So it was — we didn’t quantify what the impact of those numbers were. We’re quantifying that for everybody’s benefit on this call. So, I don’t think — no surprises, right? Just trying to put a little more precision on it now that we’re in May, as opposed to where we were.
And look, there’s going to be more that moves around and that number could be less. But I think in terms of where we sit today, we have a known set between particularly 1290, 770, 280 that drive the bulk of that. Obviously, we talked about re-leasing a lot of that and a lot of those deals have been announced. But just trying to get more precision to just the general statement we made last quarter.
Operator: Thank you. The next question is from Michael Lewis with Truist Securities. Please go ahead.
Michael Lewis: Great. Thank you. I’m just going to follow up on that question about the re-leasing activity on some of the known move-outs. So, I could probably triangulate an occupancy rate on that $0.25 drag. But could you share — maybe just share how much square footage is related to known move-outs this year and how much of that square footage you’ve already addressed?
Michael Franco: Glen, you want to take that, or I want to take that?
