And this is other than stock-based comp because we can’t control the stock price. But we can’t control our performance in joint ventures. It’s only payable out of third-party development fees, not development fees that Vornado would be paying. And we think it’s highly appropriate. We probably made a mistake. We did a good job of socializing the June comp plan. We sort of didn’t do it with this development top plan because we thought it was very small, we thought shareholders would get it. And frankly, I made a mistake. We should have — to our shareholder base what we were going to do. I myself have — hang on, I, myself, I’m extremely unhappy to get any negative comments about that. And — but there it is. We think it’s right. We think it’s a good way of comping our people.
We don’t — I think our people are underpaid, certainly at the highest level and at the highest level. And by the way, doing a 2 million square foot building in New York City is backbreaking work. It’s nice since weekends, it’s backbreaking work. And we think that the team deserves it.
Alexander Goldfarb: Steve but to that point, if it’s a small amount, it would seem like something that’s just part of the annual comp committee, like, hey, you, guys, did a great job as part of your bonus for your 2023 or 2024. We’re rewarding. So if it’s a small number, it doesn’t seem like that much of an incremental incentive. And two, it just seems like ordinary course that management is expected to do to drive value for shareholders and would be part of their regular course compensation. It’s not clear why it would be a stand-alone.
Steven Roth: Obviously, I don’t want to agree with you. But this is — I would like to agree with you. I would like you to agree with me but I’d like you to agree with me rather than me agree with you. But anyway, this land is paid unless it goes through the comp committee of the Board and they take all certain tenses [ph] into account. So there you have it.
Alexander Goldfarb: Okay. Let me switch. Glen, on PENN 2, I believe you guys switched brokers from your original one to a new one. Just curious, the progress that you, guys, had on PENN 1 seemed pretty good. You toured us last year of the project, it certainly seemed to impress what you guys have done with PENN 1. It seemed like leasing was going well. What happened with PENN 2 that you found it necessary to switch brokers and is that sort of a repositioning of the asset, different tenants? Or was there something else that you learned through the process that caused you to switch brokers on PENN 2?
Glen Weiss: So we did not switch brokers. The Cushman & Wakefield team additive to my team. Something we do not do often, as you know but here, we decided to do it to cover the entire market, both regionally, locally and nationally. We brought in a great team. The team had just done all leasing over in Manhattan West, so it’s additive, not a switch. PENN 1 remains the Vornado team and that was the reasoning for doing the PENN 2 and of Cushing and Wakefield but no switch, no change, normal course of business.
Steven Roth: Alex, I’m confident that the gold medal team of Glen and the rest of his team in-house has the strength and the ability, the franchise to do the job. But we’re in the no stone unturned business. And so we thought that adding Cushman to have that extra, look into the marketplace was a good piece of insurance and it’s working out.
Operator: The next question comes from Keith Libero [ph] of Goldman Sachs.
Julien Blouin: This is Julien Blouin on for Caitlin. Steve, regarding the dividend and adding to Alex’s question, last quarter, you provided a really helpful breakdown of your 2023 expected taxable income. I was wondering if you could provide the same for 2024. And should we assume that the fourth quarter dividend will be again at sort of the minimum required taxable income level?
Steven Roth: The answer to that is that we have a broad idea of what the 2024 taxable income will be as you would expect. But it is not a number that we are comfortable enough with disclosing publicly. So that’s the first one. The second point is, at this time, it’s a financial policy of our Board to pay out the minimum dividend because from a capital allocation point of view, that’s the right decision. We have had, as I said before, numerous investors, shareholders, analysts, peers tell us that’s the right decision. The dividend, the most interesting part of the dividend, however, will likely be gains on asset sales because all of our assets have very low basis. So if we choose to sell an asset of 2 or 3 or 4 in ’24, that will determine more than anything, what the dividend would be.
Julien Blouin: That’s really helpful. And then maybe switching gears. To PENN 1, the ground lease renewal. I think you mentioned at the beginning of last year, you thought the final number could come in lower than the original $26 million estimate just based on evolving sort of market conditions. Is that still your expectation? And I guess what is the latest update on that process?
Steven Roth: Well, that’s absolutely my expectation but there’s somebody on the other side that disagrees with that. So we’re in the middle of the process, the arbitration process to determine what the number will be. And that’s something we can’t speculate on.
Operator: The next question comes from Nick Yulico of Scotiabank.
Nick Yulico: Just first, a question on PENN 1, based on the incremental yield you gave last quarter in the sup [ph], I know it’s now in the, I guess, more stabilized pool. But it looks like there was eventually $59 million of future NOI, I assume there on a cash basis. Can you just let us know like how — any of that’s already been captured yet and just how to think about the impact of any of that dividend if there’s any of that benefit assumed for this year?
Michael Franco: Nick, it’s Michael. I can’t give you the exact numbers off hand. The answer is some of that is back in ’24 but this is a rolling program and — and so it will continue to come in next year as well. Obviously, there’s vacancy there as that gets leased up, that will come online as well. So the answer is some of that there. I can tell you is and it’s not in the development yields anymore this project is done. But our — the last one we had published, we’re confident in terms of hitting that and hopefully exceeding it. But we can sort of circle up and get to lower specifics. But some of that’s in ’24 but it will roll in over the next year or two as well.
Steven Roth: I’d like to make a couple of comments. The first is that all of us focus on what the initial yield is on an asset. I think it’s a very interesting exercise to say what can that asset produce in terms of revenue 3, 5, 7 years out. So we believe, for example, in the Penn District, we believe in the west side of Manhattan. We believe that when you combine Penn District with Manhattan West and Hudson Yards, I mean that’s a hell of enablement. Highly sought after and whatever. So we believe that these assets will return a very satisfactory return at the get-go and will grow from there as we continue to own them over the next period of time; so there’s that. We also believe that — I mean there’s some question about which is more important, Penn or Grand Central.
Well, the answer is obviously, Grand Central is at the foot of Park Avenue. So that’s very important. And I think everybody considers Park Avenue the principal business boulevard in the country, maybe even in the world. We have a representation of multiple assets on Park Avenue too. But it’s interesting to note that New Jersey Transit comes into only Penn Station. And New Jersey is the growing suburb of New York. So we are very, very happy with our position.
Nick Yulico: Okay. Just second question is on PENN 1 and PENN 2. you, guys, give only the occupancy numbers in South and I’m just wondering if there’s any way that you can give us a feel for like a lease rate for those assets or even think about how much of the leasing you’ve achieved so far of what your ultimate plan is on getting to these stabilized cash yields you talk about for the projects.
Steven Roth: So much going to go to how much lease.
Glen Weiss: I mean, as Michael said, PENN 1 is a multiyear program. When we set out on the project, there were over 200 tenants in the property which we’re rolling over the next, call it, 5, 6, 7 years. We’ve leased a considerable amount of space in PENN 1 to date and we continue to cycle through with these tenants expire year-to-year. And it’s been very successful. We’ve leased over 8,000 [ph] feet this year, it rents north of 90%, we have a lot of action in the pipeline now. Similarly, at PENN 2, we talked about the pipeline, we have deals coming to 4 at PENN 2 as we speak. And you could stay tuned on that activity as we roll into the first, second quarter of ’24.
Nick Yulico: Okay. Yes. And I appreciate all the commentary on the re-leasing. It’s just honestly a little bit hard to understand where you guys are at in terms of the re-leasing of those projects? And at what point you’re getting the NOI benefit because there’s no like bridge provided anymore about the rolling out and the rolling in of NOI. So it’s honestly very difficult to quantify what the benefit to the company is going to be over the next couple of years.
Michael Franco: I mean I would say, Nick, let’s go through it, right? PENN 2 we’ve got $1.2 million [ph] to lease, okay? PENN 1, we’ve probably taken care of. I’m going to rough guess and half the square footage to date, right? So there’s probably another to go in terms of rolling that up market that to market, right? Between those 2 assets, in a short period of time and let’s call it — let’s use the asset, 3 years, right? There’s going to be an incremental $200 million that comes from an NOI that comes from those assets, maybe a little less from PENN 2 [ph] to in terms of remaining retail. But the bulk of that is on PENN 2. That’s probably a net capitalized interest, another $150 million, right? So that’s as crisp as I can give it to you, whether I’m a little bit early, a little bit late on the timing. That’s the magnitude and it’s going to happen.
